# QumulusAI (QMLS) S-1 SEC filing
- Filed: Dec 31, 2025, 4:06 PM EST
- Accession: 0001437749-25-039073
- OpenCapital page: https://www.opencapital.sh/filings/0001437749-25-039073
- Markdown URL: https://www.opencapital.sh/filings/0001437749-25-039073.md
- Official SEC filing index: https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/0001437749-25-039073-index.htm
## Filing documents
- [S-1 (quma20251223_s1.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/quma20251223_s1.htm)
- [EXHIBIT 10.7 (ex_902140.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902140.htm)
- [EXHIBIT 10.9 (ex_902141.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902141.htm)
- [EXHIBIT 10.10 (ex_902142.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902142.htm)
- [EXHIBIT 10.11 (ex_902143.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902143.htm)
- [EXHIBIT 10.12 (ex_902144.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902144.htm)
- [EXHIBIT 10.13 (ex_902145.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902145.htm)
- [EXHIBIT 10.14 (ex_902244.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902244.htm)
- [EXHIBIT 10.15 (ex_902146.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902146.htm)
- [EXHIBIT 10.17 (ex_902147.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902147.htm)
- [EXHIBIT 10.18 (ex_902223.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902223.htm)
- [EXHIBIT 10.19 (ex_902224.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902224.htm)
- [EXHIBIT 10.20 (ex_902225.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902225.htm)
- [EXHIBIT 10.21 (ex_902226.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902226.htm)
- [EXHIBIT 10.22 (ex_902227.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902227.htm)
- [EXHIBIT 10.23 (ex_902228.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902228.htm)
- [EXHIBIT 10.24 (ex_902229.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902229.htm)
- [EXHIBIT 10.25 (ex_902230.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902230.htm)
- [EXHIBIT 10.26 (ex_902231.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902231.htm)
- [EXHIBIT 10.27 (ex_902232.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902232.htm)
- [EXHIBIT 10.28 (ex_902233.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902233.htm)
- [EXHIBIT 10.29 (ex_902234.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902234.htm)
- [EXHIBIT 10.30 (ex_902235.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902235.htm)
- [EXHIBIT 10.31 (ex_902236.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902236.htm)
- [EXHIBIT 10.32 (ex_902237.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902237.htm)
- [EXHIBIT 10.33 (ex_902238.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902238.htm)
- [EXHIBIT 10.34 (ex_902239.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902239.htm)
- [EXHIBIT 10.35 (ex_902240.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902240.htm)
- [EXHIBIT 10.36 (ex_902241.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902241.htm)
- [EXHIBIT 10.37 (ex_902242.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902242.htm)
- [EXHIBIT 10.38 (ex_902243.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902243.htm)
- [EXHIBIT 10.40 (ex_903269.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903269.htm)
- [EXHIBIT 10.41 (ex_903158.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903158.htm)
- [EXHIBIT 10.42 (ex_903159.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903159.htm)
- [EXHIBIT 10.43 (ex_903160.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903160.htm)
- [EXHIBIT 23.1 (ex_903268.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903268.htm)
- [EXHIBIT 23.2 (ex_903278.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903278.htm)
- [EXHIBIT FILING FEES (ex_903142.htm)](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903142.htm)
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## S-1
SEC source: [quma20251223_s1.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/quma20251223_s1.htm)
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 58 |
**PROSPECTUS SUMMARY**
*This summary highlights certain information about us, this offering and selected information contained in this prospectus. This summary is not complete and does not contain all of the information that you should consider before deciding whether to invest in our common stock. You should read the entire prospectus carefully, including the sections titled* “*Risk Factors,*” “*Unaudited Pro Forma Condensed Combined Financial Information,*” “*Management*’*s Discussion and Analysis of Financial Condition and Results of Operations*” *and our financial statements and the related notes included in this prospectus, before making an investment decision. Some of the statements in this prospectus constitute forward-looking statements.* *Some of the statements in this prospectus constitute forward-looking statements. See the* “*Cautionary Note Regarding Forward-Looking Statements.*”
**Company Background**
QumulusAI is a cloud infrastructure company specializing in rapid deployment of graphics processing unit (“GPU”)-powered solutions for artificial intelligence (“AI”) applications, serving a critical market that is often overlooked by large-scale cloud providers (“hyperscalers”), which operate massive, standardized computing infrastructures primarily serving the largest enterprises. Our platform delivers flexible, competitively priced, and customizable solutions for underserved small and mid-market customers—including machine learning teams, AI infrastructure startups, and research institutions—while also supporting the scale and complexity requirements of large enterprises, such as long-term deployments or supplemental on-demand compute capacity.
The Company traces its origins to WAHA Technologies, Inc. (“WAHA”) and WAHA, Inc. (renamed SPRE Commercial Group, Inc., or “SPRE”), both incorporated in 2019. SPRE focused on data center assets and operations, while WAHA specialized in blockchain managed services. In December 2022, the two entities completed a corporate roll-up to form Global Digital Holdings, Inc. and remain wholly owned subsidiaries of the Company. In April 2025 (after a substantial minority investment in October 2023), Global Digital Holdings, Inc. acquired The Cloud Minders, Inc. (a company focused on GPU-as-a-Service (“GPUaaS”) assets and operations), now a wholly owned subsidiary, and rebranded the combined operations as QumulusAI. Please see “*Unaudited Pro Forma Condensed Combined Financial Information*” and “*Management*’*s Discussion and Analysis of Financial Condition and Results of Operations* – *Recent Developments*” for additional information regarding our acquisition of The Cloud Minders, Inc. On August 18, 2025, Global Digital Holdings, Inc. changed its name to QumulusAI, Inc.
Today, we distinguish ourselves by deploying, activating and producing revenue from GPU infrastructure within approximately 90 days. We do so across a distributed network of sales channel and platform partners and the strategic use of stranded colocation facilities, enabling us to connect with thousands of developer clients with an expedited path from procurement to revenue generation. Traditional infrastructure providers, by comparison, can take up to 12 to 24 months to activate new capacity.
As of December 1, 2025, QumulusAI is headquartered in Marietta, Georgia. Here, we operate more than 800 GPUs across two colocation data centers, plus one in Kansas City, Missouri. We have secured rights of first refusal for 30 megawatts (“MW”) of information technology (“IT”) load capacity space for our GPU equipment and we are actively planning for expansion exceeding 120 MW of total IT load across our platform with potential to support over 90,000 NVIDIA B200/B300 GPUs (among the latest generation GPUs purpose-built for foundation model training), or as many as 1,500,000 GPUs optimized for AI inference at scale.
Additionally, in the aggregate, we operate approximately 60 MW of grid power with immediate access to more than 40 MW of additional grid power in Watonga, Oklahoma; Tulsa, Oklahoma; and Denton, Texas where we manage blockchain assets. These sites serve as foundational assets for power-intensive compute deployments and provide strategic flexibility for future infrastructure repurposing.
At present, the majority of the Company’s active power capacity is allocated to blockchain asset management rather than high-performance computing (“HPC”). As of the date of this filing, the Company operates approximately 10 MW of blockchain load in Watonga, Oklahoma, and supports approximately 50 MW of blockchain load in Tulsa, Oklahoma through its joint venture with T20 Mining Group, LLC (“T20”). By comparison, the Company’s HPC business currently utilizes approximately 1.5 MW of IT load (approximately 2.1 MW total power load), supporting approximately 1,100 GPUs, including 800 GPUs currently deployed and an additional 300 GPUs in the process of being delivered and deployed.
Although blockchain currently represents the majority of deployed power, the Company’s growth strategy is focused on HPC. In 2026, the Company expects, for the first time, revenue generated from HPC compute services to exceed revenue generated from blockchain operations, reflecting the higher revenue density of HPC workloads relative to blockchain.
Looking ahead to 2026, the Company expects its HPC operations to support approximately 11.0 MW of total HPC IT load (approximately 15.4 MW total power load), inclusive of approximately 1,100 GPUs deployed in 2025 and the planned deployment of over 5,800 additional GPUs, consisting of an estimated mix of approximately 80% B200 and B300 data center GPUs and approximately 20% RTX Pro 6000–class servers.
With respect to blockchain operations, the Company expects to continue operating approximately 10 MW of blockchain load in Watonga, Oklahoma on an ongoing basis. The T20 joint venture, which currently supports approximately 50 MW of blockchain load in Tulsa, Oklahoma, is subject to a letter of intent and ongoing definitive documentation review for a potential sale targeted for January 2026, with proceeds expected to be used to fund expansion of the Company’s HPC business. Following this transaction, the Company expects that approximately 10 MW of blockchain load in Denton, Texas, will remain scheduled, resulting in approximately 20 MW of total blockchain operations inclusive of the Watonga facility. Separately, the Company has approximately 9 MW of on-grid power availability in Watonga, which it plans to allocate toward HPC data center expansion, representing approximately 6 MW of additional HPC IT load (approximately 8.4 MW total power load).
As a result of these planned deployments and portfolio changes, the Company expects that by the end of 2026, a greater portion of its active power capacity will be allocated to HPC compute workloads than to blockchain asset management. While the Company currently expects to have approximately 20 MW allocated or otherwise activated for blockchain operations and approximately 23.8 MW allocated or otherwise activated for HPC compute workloads by that time, actual allocations may vary based on deployment timing, customer demand, power availability, and execution. In addition, the Company is actively evaluating opportunities to secure additional powered land for future HPC data center construction and to expand its data center colocation footprint, although there can be no assurance as to the timing or scale of any such expansion.
**Implications of Being an Emerging Growth Company and a Smaller Reporting Company**
As a company with less than $1.235 billion of revenue during our last fiscal year, we qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We may remain an emerging growth company for up to five years from the date of our direct listing, or until such earlier time as we have more than $1.235 billion in annual revenue, the market value of our stock held by non-affiliates is more than $700 million as of the final day of our second fiscal quarter, in which case we would cease to be an “emerging growth company” as of the following final day of our fiscal year, or we issue more than $1 billion of non-convertible debt over a three-year period.
1
For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period under the JOBS Act. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards.
We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during our most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. For so long as we remain a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure and other requirements that are applicable to other public companies that are not smaller reporting companies, such as providing only two years of audited financing statements.
**Summary of Risk Factors**
Below is a summary of material factors that make an investment in our common stock speculative or risky. This summary may not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under the section titled “*Risk Factors*” in this prospectus. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should carefully consider the risks and uncertainties described under the section titled “*Risk Factors*” as part of your evaluation of an investment in our common stock:
- Our recent growth may not be indicative of our future growth, and if we do not effectively manage our future growth, our business, operating results, financial condition, and future prospects may be adversely affected.
- Our blockchain mining operations expose us to risks that could materially adversely affect our business, operating results, financial condition, and future prospects.
- We have a limited number of suppliers for significant components of the equipment we use to build and operate our platform and provide our solutions and services. Any disruption in the availability of these components could delay our ability to expand or increase the capacity of our infrastructure or replace defective equipment.
- Our business would be harmed if we were not able to access sufficient power or by increased costs to procure power, prolonged power outages, shortages, or capacity constraints.
- Our long-term power agreements are currently subject to non-binding letters of intent, and there is no assurance that definitive agreements will be executed on favorable terms or at all.
- If our data center facilities experience damage, interruption, or a security breach, our ability to provide access to our infrastructure and maintain the performance of our network could be negatively impacted.
- A substantial portion of our hosting revenue is driven by a limited number of our customers, and the loss of, or a significant reduction in, spend from one or a few of our top customers would adversely affect our business, operating results, financial condition, and future prospects.
- A substantial portion of our current GPU-as-a-Service (“GPUaaS”) revenue is generated through a single channel partner, and the loss or deterioration of this relationship would adversely affect our business.
- If we fail to efficiently enhance our platform and develop and sell new solutions and services and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements, or preferences, our platform may become less competitive.
- The broader adoption, use, and commercialization of AI technology, and the continued rapid pace of developments in the AI field, are inherently uncertain. Failure by our customers to continue to use our platform to support AI use cases in their systems, or our ability to keep up with evolving AI technology requirements and regulatory frameworks, could have a material adverse effect on our business, operating results, financial condition, and future prospects.
- Our operations require substantial capital expenditures, and we will require additional capital to fund our business and support our growth, and any inability to generate or obtain such capital on acceptable terms, if at all, or to lower our total cost of capital, may adversely affect our business, operating results, financial condition, and future prospects.
2
- Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.
- We face intense competition and could lose market share to our competitors, which would adversely affect our business, operating results, financial condition, and future prospects.
- A network or data security incident against us, or our third-party providers, whether actual, alleged, or perceived, could harm our reputation, create liability and regulatory exposure, and adversely impact our business, operating results, financial condition, and future prospects.
- We have a history of generating net losses as a result of the substantial investments we have made to grow our business and develop our platform, anticipate increases in our operating expenses in the future, and may not achieve or, if achieved, sustain profitability. If we cannot achieve and, if achieved, sustain profitability, our business, operating results, financial condition, and future prospects will be adversely affected.
- We make substantial investments in our technology and infrastructure and unsuccessful investments could materially adversely affect our business, operating results, financial condition, and future prospects.
- Our platform is complex and performance problems or defects associated with our platform may adversely affect our business, operating results, financial condition, and future prospects.
- Any failure of our IT systems or those of one or more of our IT service providers, business partners, vendors, suppliers, or other third-party service providers, or any other failure by such third parties to provide services to us may negatively impact our relationships with customers and harm our business.
- We have a limited operating history at our current scale, which makes it difficult to evaluate our current business and future prospects and increases the risks associated with investment in our common stock.
- We have a limited history selling access to our platform under our current business model and are continuing to scale our operations and evolve our go-to-market strategy, which may make it difficult to evaluate our business and prospects and increase the risks associated with an investment in our common stock.
- If we are unable to attract new customers, retain existing customers, and/or expand sales of our platform, solutions, and services to such customers, we may not achieve the growth we expect, which would adversely affect our business, operating results, financial condition, and future prospects.
- We rely on our management team and other key employees and will need additional personnel to grow our business, and the loss of one or more key employees or our inability to attract and retain qualified personnel, including members of our Board of Directors, could harm our business.
- Failure to obtain, maintain, protect, or enforce our intellectual property and proprietary rights could enable others to copy or use aspects of our platform without compensating us, which could harm our brand, business, operating results, financial condition, and future prospects.
- We are subject to laws, regulations, and industry requirements related to data privacy, data protection and information security, and user protection across different markets where we conduct our business and such laws, regulations, and industry requirements are constantly evolving and changing. Any actual or perceived failure to comply with such laws, regulations, and industry requirements, or our privacy policies, could harm our business.
- There is uncertainty regarding our ability to continue as a going concern.
- We will incur significant increased costs and management resources as a result of operating as a public company.
- Our substantial indebtedness could materially adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry, our ability to meet our obligations under our outstanding indebtedness and could divert our cash flow from operations for debt payments, and we may still incur substantially more indebtedness in the future.
- Our listing differs significantly from an initial public offering conducted on a firm-commitment basis.
- The direct listing process differs from an initial public offering underwritten on a firm-commitment basis and the impact of awareness of our brand and investor recognition of our Company on the demand for our common stock is unpredictable and our marketing and brand development efforts may not be successful.
- Limitations on investors’ ability to trace their shares to this registration statement may preclude claims under Sections 11 and 12 of the Securities Act, potentially reducing our liability exposure and limiting investors’ remedies.
- Our shares of common stock currently have no public market. An active trading market may not develop or continue to be liquid and the market price of our shares of common stock may be volatile.
**Corporate Information**
The address of our principal executive office is 1130 Powers Ferry Pl SE, Marietta, Georgia 30067 and our telephone number is (877) 420-9242. Our website can be found at *www.qumulusai.com*. The information contained on our website is not a part of this prospectus, nor is such content incorporated by reference herein, and should not be relied upon in determining whether to make an investment in our shares of common stock. With prior operations from its wholly owned subsidiaries—incorporated July 15, 2019 (WAHA) and July 18, 2019 (SPRE)—the Company was incorporated on December 9, 2022 in the State of Georgia under the name of Global Digital Holdings, Inc., which we later updated to QumulusAI, Inc.
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**Summary Historical Financial and Other Data**
The following tables set forth our summary of historical financial data as of September 30, 2025 and December 31, 2024 and 2023.
The summary statements of operations data for the periods ended September 30, 2025 and 2024 are derived from our unaudited interim financial statements and notes that are included elsewhere in this prospectus. The summary statements of operations data for the periods ended December 31, 2024 and 2023 are derived from our audited financial statements and notes that are included elsewhere in this prospectus.
Our Board of Directors and our shareholders each approved the conversion of all outstanding series of preferred stock into common stock (the “Conversion”) and a 1-for-3 reverse stock split of our common stock issued and outstanding thereafter (the “Reverse Stock Split”). On September 30, 2025, we filed amended and restated articles of incorporation with the State of Georgia to immediately effect the Reverse Stock Split. All share and per share information is presented on a post-Conversion and post-Reverse Stock Split basis.
We have prepared the audited financial statements in accordance with the U.S. generally accepted accounting principles (“GAAP”). Our historical results are not necessarily indicative of our results in any future period. Results from our interim period may not necessarily be indicative of the entire year’s results.
| Line item | For the Nine Months Ended September 30, 2025 | Year Ended December 31, 2024 | Year Ended December 31, 2023 |
| --- | --- | --- | --- |
| Statement of Operations Data: | | | |
| Revenue | $8,057,476 | $8,095,672 | $5,124,934 |
| Cost of revenue | $4,245,448 | $5,371,049 | $3,582,377 |
| General and administrative expenses | $6,320,009 | $3,346,547 | $2,009,427 |
| Loss from operations | $(5,866,060) | $(7,785,958) | $(8,177,885) |
| Net income (loss) | $831,828 | $(13,184,374) | $(12,425,544) |
| Statement of Cash Flows Data: | | | |
| Cash flows from operating activities | $(2,526,814) | $(2,021,408) | $(905,884) |
| Cash flows from investing activities | $2,808,437 | $(1,871,322) | $(63,631) |
| Cash flows from financing activities | $13,985,705 | $7,231,852 | $114,981 |
| Cash, end of period | $14,267,328 | $3,970,466 | $631,344 |
| Balance Sheet Data: | September 30, 2025 | December 31, 2024 | December 31, 2023 |
| --- | --- | --- | --- |
| Total assets | $81,857,396 | $20,345,894 | $21,095,015 |
| Total liabilities | $22,662,172 | $18,903,993 | $16,385,340 |
| Total mezzanine equity | $0 | $2,032,561 | $2,032,561 |
| Total stockholders' equity (deficit) | $59,195,224 | $(590,660) | $2,677,114 |
4
**RISK FACTORS**
*Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, before making a decision to invest in our common stock. If any of the following risks occur, our business, operating results, financial condition and future prospects could be materially and adversely affected. In that event, you could lose all or a part of your investment. This prospectus also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below. See the section titled* “*Cautionary Note Regarding Forward-Looking Statements*” *for more information.*
**Risks Related to Our Business and Industry**
***Our recent growth may not be indicative of our future growth, and if we do not effectively manage our future growth, our business, operating results, financial condition, and future prospects may be adversely affected.***
We were founded in 2022 and have experienced significant growth in a short period of time. Our revenue was $5,124,934 and $8,095,672 for the years ended December 31, 2023 and 2024, respectively. Investors should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. Even if our revenue continues to increase, our revenue growth rate is expected to decline in the future as a result of a variety of factors, including the maturation of our business. Overall growth of our revenue will depend on a number of factors, including but not limited to our ability to:
- operate our cloud infrastructure, including due to supply chain limitations and data center or power availability;
- compete with other companies in our industry, including those with greater financial, technical, marketing, sales, and other resources;
- continue to develop new solutions and services and new functionality for our platform and successfully further optimize our existing infrastructure, solutions, and services;
- retain existing customers and increase sales to existing customers, as well as attract new customers and grow our customer base;
- successfully expand our business;
- generate sufficient cash flow from operations and raise additional capital, including through indebtedness, to support continued investments in our platform to maintain our technological leadership and the security of our platform;
- strategically expand our direct sales force and leverage our existing sales capacity;
- introduce and sell our solutions and services to new markets and verticals;
- recruit, hire, train, and manage additional qualified personnel for our research and development activities;
- maintain our existing, and enter into new, more cost-efficient, financing structures; and
- successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our platform.
In addition to the factors discussed above, our revenue growth may also be impacted by industry-specific factors, particularly the continued development of AI, including advancements in AI technology that may lead to further compute efficiencies, the broader adoption, use, and commercialization of AI and any impacts of the developing AI regulatory environment.
5
As many of these factors are beyond our control, it is difficult for us to accurately forecast our future operating results. If the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, we may be unable to maintain consistent revenue or revenue growth, the value of our stock could be volatile, and it may be difficult to achieve and, if achieved, maintain profitability. In addition, changes in the macroeconomic environment, including actual or perceived global banking and finance related issues, labor shortages, supply chain disruptions, volatile interest rates and inflation, trade restrictions such as tariffs, spending environments, geopolitical instability, warfare and uncertainty, including the effects of the conflicts in the Middle East and Ukraine and tensions between China and Taiwan, weak economic conditions in certain regions, or a reduction in AI spending regardless of macroeconomic conditions may impact our growth.
In addition, as we have grown, our number of customers has also increased, and we have increasingly managed more complex deployments of our infrastructure in more complex computing environments. The rapid growth and expansion of our business places a significant strain on our management, operational, engineering, and financial resources. To manage any future growth effectively, we must continue to improve and expand our infrastructure, including IT and financial infrastructure, our operating and administrative systems and controls, and our ability to manage headcount, capital, and processes in an efficient manner. If we do not manage future growth effectively, our business, operating results, financial condition, and future prospects would be harmed.
If we continue to experience rapid growth, we may not be able to successfully implement or scale improvements to our systems, processes, and controls in an efficient, timely, or cost-effective manner. As we grow, our existing systems, processes, and controls may not prevent or detect all errors, omissions, or fraud. Any future growth will continue to add complexity to our organization and require effective coordination throughout our organization. Failure to manage any future growth effectively could result in increased costs, cause difficulty or delays in deploying our platform to new and existing customers, reduce demand for our platform, and cause difficulties in introducing new solutions and services or other operational difficulties, and any of these difficulties would adversely affect our business, operating results, financial condition, and future prospects.
***Our blockchain mining operations expose us to risks that could materially adversely affect our business, operating results, financial condition, and future prospects.***
Although our primary focus is building infrastructure for AI and high-performance computing, we continue to operate a limited portfolio of bitcoin mining and hosting assets. These operations carry unique risks and are highly cyclical in nature, with a market downturn on average every three to four years. Bitcoin mining requires substantial upfront and ongoing investment in specialized hardware (application-specific integrated circuits (“ASICs”)), which can become obsolete quickly as newer, more efficient models are introduced. Profitability is highly volatile and depends on factors outside of our control, including the market price of bitcoin, the availability and cost of electricity, and network mining difficulty. Our mining facilities consume significant amounts of power, exposing us to the risk of higher energy costs, curtailment during peak demand, or pressure from regulators and communities regarding environmental and noise concerns. Furthermore, if our mining operations fail to remain competitive with larger or more efficient miners, or if regulatory changes impose restrictions on proof-of-work mining, we may experience lower returns or be forced to scale back this business line. Because our blockchain mining activities represent a non-core but ongoing part of our operations, adverse developments in this area could still impact our financial results and reputation.
***We have a limited number of suppliers for significant components of the equipment we use to build and operate our platform and provide our solutions and services. Any disruption in the availability of these components could delay our ability to expand or increase the capacity of our infrastructure or replace defective equipment.***
We do not manufacture the components we use to build the technology infrastructure underlying our platform. We have a limited number of suppliers that we use to procure and configure significant components of the technology infrastructure that we use to operate our platform and provide our solutions and services to our customers. For example, there is a limited number of original equipment manufacturers that build servers in significant scale with the latest generation GPUs. These consist primarily of Super Micro Computer, Inc., Dell Technologies Inc., Hewlett Packard Enterprise Company, Lenovo Group Limited, and Gigabyte Technology Co., Ltd. As of today, the manufacture of GPUs is dominated by NVIDIA Corporation with only Advanced Micro Devices, Inc. and Intel Corporation currently as viable contenders. Additionally, with respect to power infrastructure, cooling infrastructure to power and properly maintain the equipment we use our datacenters has a similarly limited number of manufacturers of key supplies, such as transformers, computer room air conditioner/computer room air handler units, chillers, cooling towers, in-row cooling units, rear door heat exchangers, direct-to-chip liquid cooling, immersion cooling systems, pumps and manifolds, air handling units, containment systems, microchips and sensors and controls. Supporting equipment such as networking and storage systems have a limited number of manufacturers that produce equipment at the requisite level of performance. Utilizing a limited number of suppliers of the components for our technology infrastructure exposes us to risks, including:
- asymmetry between component availability and contractual performance obligations, including where specified components are required;
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- shifts in market-leading technologies away from those offered by our current suppliers that could impact our ability to offer our customers the solutions and services that they are seeking;
- reduced control over production costs and constraints based on the then current availability, terms, and pricing of these components, including any delays in our supply chain;
- limited ability to control aspects of the quality, performance, quantity, and cost of our infrastructure or of its components;
- the potential for binding price or purchase commitments with our suppliers at higher than market rates;
- reliance on our suppliers to keep up with technological advancements at the same pace as our business and customer demands, including their ability to continue to deliver next generation components that are substantially better than the prior generation;
- consolidation among suppliers in our industry, which may harm our ability to negotiate and obtain favorable terms from our suppliers and the third-party suppliers that our suppliers rely on;
- labor and political unrest at facilities we do not operate or own;
- geopolitical disputes disrupting our or any of our suppliers’ supply chains;
- business, legal compliance, litigation, and financial concerns affecting our suppliers or their ability to manufacture and ship components in the quantities, quality, and manner we require;
- impacts on our supply chain from adverse public health developments, including outbreaks of contagious diseases or pandemics; and
- disruptions due to floods, earthquakes, storms, and other natural disasters, particularly in countries with limited infrastructure and disaster recovery resources, or regional conflicts.
Our technology infrastructure components suppliers fulfill our supply requirements on the basis of individual purchase orders, which we often place on a just-in-time basis. We currently have no long-term contracts or arrangements with our suppliers that guarantee capacity or the continuation of any particular payment terms. Accordingly, our suppliers are not obligated to continue to fulfill our supply requirements, and the prices we are charged for their products and, if applicable, services could be increased on short notice. Further, because we often submit purchase orders to our suppliers on a just-in-time basis, any delay from our suppliers may result in our inability to provide our infrastructure and platform to our customers on a timely basis and fulfill our contractual requirements under our customer contracts. If we are required to change suppliers, our ability to meet our obligations to our customers, including scheduled compute access, could be adversely affected and our solutions may not be as performant, which could cause the loss of sales from existing or potential customers, delayed revenue, or an increase in our costs, which could adversely affect our margins. Any production or shipping interruptions for any reason, such as a natural disaster, epidemics, pandemics, capacity shortages, quality problems, or strike or other labor disruption at one of our supplier locations or at shipping ports or locations, could adversely affect sales of our solution and services offerings.
In addition, we are continually working to expand and enhance our infrastructure features, technology, and network and other technologies to accommodate substantial increases in the computing power required by more compute-intensive workloads on our platform, the amount of data we host, and our overall number of total customers. We may be unable to project accurately the rate or timing of these increases or to allocate resources successfully to address such increases and may underestimate the data center capacity needed to address such increases. Our limited number of suppliers, in turn, may not be able to quickly respond to our needs, which would have a negative impact on customer experience and contractual performance. In the future, we may be required to allocate additional resources, including spending substantial amounts, to build, purchase, or lease or license data centers and equipment and upgrade our technology and network infrastructure in order to handle increased customer usage, and our suppliers may not be able to satisfy such requirements. In addition, our network or our suppliers’ networks might be unable to achieve or maintain data transmission capacity high enough to effectively deliver our services. We may also face constraints on our ability to deliver our platform, solutions, and services if there is limited power supply. Our failure, or our suppliers’ failure, to achieve or maintain high data transmission capacity and sufficient electrical services would impact our ability to meet customer needs and could significantly reduce consumer demand for our services. Such reduced demand and resulting loss of compute, cost increases, or failure to upgrade our equipment or adapt to new technologies would harm our business, operating results, financial condition, and future prospects.
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Moreover, our suppliers themselves rely on a complex network of third-party suppliers for semiconductor manufacturing, hardware components, and other critical inputs, which introduces additional risks to our supply chain. Any disruption in the operations of these upstream suppliers, whether due to equipment failures, geopolitical factors such as the potential for military conflict between China and Taiwan, or supply chain constraints, could affect our suppliers’ ability to supply the significant components of the equipment we use to operate our platform and provide our solutions and services to our customers, which would, in turn, affect the availability of our solutions and services, as well as lead times.
In addition, to the extent any of our suppliers’ businesses are impacted by business, legal compliance, litigation, and financial concerns, including regulatory scrutiny and export controls, our business, operating results, financial condition, and future prospects may be adversely affected. For example, increasing use of tariffs, economic sanctions and export controls has impacted and may in the future impact the availability and cost of GPUs and other components of our platform. The current U.S. presidential administration has imposed broad-based tariffs on imported goods, which may increase costs associated with components of our infrastructure and other products we use. For example, we occasionally order replacement parts from China and are charged by U.S. Customs for import taxes. To mitigate such costs, we have directed purchases to U.S. suppliers when possible, although we may not always be able to find appropriate alternatives. Further, the former U.S. presidential administration had released new export controls targeting semiconductor manufacturing equipment and other items related to advanced integrated circuits. It is possible that these and additional restrictions could impede the supply chain in this industry. Additional export restrictions imposed on components of our technologies by the U.S. government may also provoke responses from foreign governments that negatively impact our supply chain, increase the costs for affected imported goods, or limit our ability to obtain additional hardware components, which would also substantially reduce our ability to provide or develop our platform, solutions, and services.
In the event of a supplier unavailability, component shortage, including, in particular, anticipated microchip shortages, or supply interruption, we may not be able to secure alternate sources in a timely manner. Securing alternate sources of supply for these components or services may be time-consuming, difficult, and costly and we may not be able to source these components or services on terms that are acceptable to us, or at all, which may undermine our ability to fill our orders in a timely manner. Any interruption or delay in the supply of any of these components or services, or the inability to obtain these components or services from alternate sources at acceptable prices and within a reasonable amount of time, would harm our ability to meet the demand of our customers, which in turn would have an adverse effect on our business, operating results, financial condition, and future prospects.
***Our business would be harmed if we were not able to access sufficient power or by increased costs to procure power, prolonged power outages, shortages, or capacity constraints.***
We depend on being able to secure power, which powers our data center facilities, in a cost-effective manner. Our inability to secure sufficient power or any power outages, shortages, supply chain issues, capacity constraints, or significant increases in the cost of securing power could have an adverse effect on our business, operating results, financial condition, and future prospects.
We rely on third parties, third-party infrastructure, governments, and global suppliers to provide a sufficient amount of power to maintain our leased or licensed data center facilities and meet the needs of our current and future customers. We may experience insufficient power to service a customer’s project. For example, we previously held a contract with Washington, Georgia, which provided for power at a fixed rate. We received notice that the city could no longer honor the contract rate as it would bankrupt the city, contrary to state law. This rendered continued operations at that location commercially impractical and led us to sell the site to another company. Similar municipal and state rules could cause other contracts to become null and void, which may cause us to have access to insufficient power, which may prevent us from serving our customers.
Any limitation on the delivered energy supply would limit our ability to operate our platform. These limitations would have a negative impact on a given data center or limit our ability to grow our business which could negatively affect our business, operating results, financial condition, and future prospects. Limitations on generation, transmission, and distribution may also limit our ability to obtain sufficient power capacity for potential expansion sites in new or existing markets. Power providers, including in particular Public Service Utility of Oklahoma, other participants in the power market, and those entities that regulate it may impose onerous operating conditions to any approval or provision of power or we may experience significant delays and substantial increased costs to provide the level of electrical service required by our current or future leased or licensed data centers, or any data centers we may choose to construct in the future. Our ability to find appropriate sites for expansion, including existing sites to lease or license, will also be limited by access to power.
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Our data center facilities are affected by problems accessing electricity sources, such as planned or unplanned power outages and limitations on transmission or distribution of power. Unplanned power outages, including, but not limited to those relating to large storms, earthquakes, fires, tsunamis, cyberattacks, physical attacks on utility infrastructure, war, and any failures of electrical power grids more generally, and planned power outages by public utilities, could harm our customers and our business. Further, our data center facilities are located in leased buildings where, depending upon the lease requirements and number of tenants involved, we may or may not control some or all of the infrastructure, including generators and fuel tanks. As a result, in the event of a power outage, we could be dependent upon the landlord, as well as the utility company, to restore the power. Even if we attempt to limit our exposure to system downtime by using backup generators, which are in turn supported by onsite fuel storage and through contracts with fuel suppliers, these measures may not always prevent downtime or solve for long-term or large-scale outages. Any outage or supply disruption could adversely affect our customer experience, as well as our business, operating results, financial condition, and future prospects.
The global energy market is currently experiencing inflation and volatility pressures. Various macroeconomic and geopolitical factors are contributing to the instability and global power shortage, including the war in Ukraine, severe weather events, governmental regulations, government relations, and inflation. We expect the cost for power to continue to be volatile and unpredictable and subject to inflationary pressures, which could materially affect our financial forecasting, business, operating results, financial condition, and future prospects.
***Our long-term power agreements are currently subject to non-binding letters of intent, and there is no assurance that definitive agreements will be executed on favorable terms or at all.***
We have entered into non-binding letters of intent (“LOIs”) for certain long-term power supply arrangements that we expect to support our operations, including agreements for primary gas power, Direct-to-Chip cooling, and gas generation capacity. These LOIs are preliminary in nature and do not create binding obligations on the counterparties to proceed with the transactions or to finalize definitive agreements. There is no assurance that we will enter into definitive agreements on the terms currently contemplated, on favorable terms, or at all. If we are unable to secure these power supply arrangements as planned, or if the terms of any definitive agreements are less favorable than expected, our ability to operate and expand our infrastructure could be materially adversely affected, which in turn could have a material adverse effect on our business, operating results, financial condition, and future prospects.
***If our data center facilities experience damage, interruption, or a security breach, our ability to provide access to our infrastructure and maintain the performance of our network could be negatively impacted.***
We lease space located in the United States. Our business is reliant on these data center facilities. Our data center facilities and network infrastructure are vulnerable to damage or interruption from a variety of sources including earthquakes, floods, fires, power loss, system failures, computer and other cybersecurity vulnerabilities, physical or electronic break-ins, human error, malfeasance or interference, including by employees, former employees, or contractors, as well terrorist acts and other catastrophic events. We and the data center facilities we lease have in the past experienced, and may in the future experience, disruptions, outages, and other performance problems due to a variety of factors, including availability or sufficiency of power, infrastructure changes, and capacity constraints, occasionally due to an overwhelming number of customers accessing our infrastructure simultaneously. For example, we have in the past experienced temporary power disruptions and have voluntarily curtailed operations in certain locations in response to extreme weather conditions and grid availability constraints. We may elect to take similar actions in the future if similar conditions arise. Our data centers and network infrastructure may also be subject to cybersecurity attacks, including supply chain attacks, due to the actions of outside parties or human error, malfeasance, insider threats, system errors or vulnerabilities, insufficient cybersecurity controls, a combination of these, or otherwise, which may cause service outages and otherwise impact our ability to provide our solutions and services. While we review the security measures of our third-party data centers, we cannot ensure that these measures will be sufficient to prevent a cybersecurity attack or to protect the continued operation of our platform in the event of a cybersecurity attack, and any impact to our solutions and services may also impact our business, operating results, financial condition, and future prospects. Data center facilities housing our network infrastructure may also be subject to local administrative actions, changes to legal or permitting requirements, labor disputes, litigation to stop, limit, or delay operations, and other legal challenges, including local government agencies seeking to gain access to customer accounts for law enforcement or other reasons. In addition, while we have entered into various agreements for the lease of data center space, equipment, maintenance, and other services, those third parties could fail to deliver on their contractual obligations under those agreements, including agreements to provide us with certain data, equipment, and utilities information required to run our business. Furthermore, we may require the data centers we lease to have certain highly specific attributes in order to effectively run our business. For example, our state-of-the art data centers may also require networking equipment, high-speed interconnects, enhanced access to power, and liquid cooling infrastructure. In some cases, these third-party data centers are required to undergo extensive retrofitting and improvement efforts, including to incorporate novel developments in our industry, which are time consuming, expensive, and less efficient than if we were to lease from spaces already designed for our operations, and which may not ultimately be successful in meeting all of our requirements. If third parties fail to successfully deliver on such performance requirements, our ability to maintain the performance of our network would be negatively impacted.
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Other factors, many of which are beyond our control, that can affect the delivery, performance, and availability of our platform include:
- the development, maintenance, and functioning of the infrastructure of the internet as a whole;
- the performance and availability of third-party telecommunications services with the necessary speed, data capacity, and security for providing reliable internet access and services;
- the success or failure of our redundancy systems;
- the success or failure of our disaster recovery and business continuity plans;
- decisions by the owners and operators of the data center facilities where our infrastructure is installed or by global telecommunications service provider partners who provide us with network bandwidth to terminate our contracts, discontinue services to us, shut down operations or facilities, increase prices, change service levels, limit bandwidth, declare bankruptcy, breach their contracts with us, or prioritize the traffic of other parties;
- our ability to enter into data center agreements and leases according to our business needs and on terms and with counterparties acceptable to us; and
- changing sentiment by government regulators relating to data center development, including in response to public concerns regarding environmental impact and development, which may result in restrictive government regulation or otherwise impact the future construction of additional data centers.
In addition, many of the leases we have entered into for data centers have multi-year terms and fixed capacity. If we do not accurately anticipate the data center capacity required by our customers, including if they use less or more of our infrastructure than expected, we would incur additional costs due to leasing more capacity than is used and paid for by our customers or, alternatively, in seeking additional data center capacity to fulfill unexpected demand on terms that may not be economically reasonable or acceptable to us, if we are able to lease additional capacity at all. We may also need to seek additional data center capacity in the event any leases with third parties are terminated or not renewed, which we may be unable to do on reasonable terms or at all.
The occurrence of any of these factors, or our inability to efficiently and cost-effectively fix such errors or other problems that may be identified, could damage our reputation, negatively impact our relationship with our customers, or otherwise materially harm our business, operating results, financial condition, and future prospects.
***A substantial portion of our hosting revenue is driven by a limited number of our customers, and the loss of, or a significant reduction in, spend from one or a few of our top customers would adversely affect our business, operating results, financial condition, and future prospects.***
A substantial portion of our hosting revenue is driven by a limited number of customers. Hosting revenue represented 48% and 15% of our total revenue for the years ended December 31, 2024 and 2023, respectively, and the remaining portion was derived from our cryptocurrency mining activities. We recognized an aggregate of approximately 99% and 90% of our hosting revenue from three customers for the year ended December 31, 2024 and two customers for the year ended December 31, 2023, respectively. Any negative changes in demand from these customers, in their ability or willingness to perform under their contracts with us, in laws or regulations applicable to them or the regions in which they operate, or in our broader strategic relationship with these customers would adversely affect our business, operating results, financial condition, and future prospects. We anticipate that we will continue to derive a significant portion of our revenue from a limited number of customers for the foreseeable future for hosting revenue, and in some cases, the portion of our revenue attributable to certain customers may increase in the future. The composition of our customer base, including our top customers, may fluctuate from period to period given that our customer composition has evolved and is expected to continue to evolve significantly as our business continues to evolve and scale and as the use cases for AI continue to develop. However, we may not be able to maintain or increase revenue from our top customers for a variety of reasons, including the following:
- customers may develop their own infrastructure that may compete with our services;
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- some of our customers may redesign their systems to require fewer of our services with limited notice to us and may choose not to renew or increase their purchases of our platform, solutions, and services; and
- our customers may have pre-existing or concurrent relationships with, or may be, current or potential competitors that may affect such customers’ decisions to purchase our platform, solutions, and services.
Customer relationships often require us to continually improve our platform, which may involve significant technological and design challenges, and our customers may place considerable pressure on us to meet tight development and capacity availability schedules. Accordingly, we may have to devote a substantial amount of our resources to our strategic relationships, which could detract from or delay our completion of other important development projects. Delays in making capacity available could impair our relationships with our customers and negatively impact forecasted sales of the services under development. Moreover, it is possible that our customers may develop their own infrastructure that may compete with our services or adopt a competitor’s infrastructure for services that they currently buy from us. If that happens, our revenue would be adversely impacted and our business, operating results, financial condition, and future prospects would be materially and adversely affected.
***A substantial portion of our current GPUaaS revenue is generated through a single channel partner, and the loss or deterioration of this relationship would adversely affect our business.***
A majority of our GPUaaS revenue is generated through our relationship with RunPod Inc. (“RunPod”), our largest channel partner. RunPod manages orchestration and customer acquisition for our servers on its platform, and revenue from these customers is shared on an 80% QumulusAI / 20% RunPod basis under RunPod’s standard service terms. RunPod accounted for 100% of the GPUaaS revenue of The Cloud Minders, Inc. (“TCM”) in 2023, 95% in 2024, and 99% for the first quarter of 2025. After TCM was acquired by QumulusAI, RunPod accounted for 88% of GPUaas revenue for the second quarter of 2025. If our relationship with RunPod were to terminate, be renegotiated on less favorable terms, or if RunPod were to experience operational or financial difficulties, our business, operating results, financial condition, and future prospects would be materially adversely affected. While we are working to diversify our sales channels and increase the proportion of direct enterprise customers, there is no assurance that we will be able to do so in a timely manner or at all.
***If we fail to efficiently enhance our platform and develop and sell new solutions and services and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements, or preferences, our platform may become less competitive.***
The market in which we compete is relatively new and subject to rapid technological change, evolving industry standards and regulatory changes, as well as changing customer needs, requirements, and preferences. The success of our business will depend, in part, on our ability to, predict, adapt, and respond effectively to these changes on a timely basis. If we are unable to develop and sell new solutions and services that satisfy and are adopted by new and existing customers and provide enhancements, new features, and capabilities to our infrastructure that keep pace with rapid technological and industry change, our business, operating results, financial condition, and future prospects could be adversely affected. Further, prospective or existing customers may influence our product roadmap by requiring features optimal for their particular use case. If we are unable to adapt to meet customers’ requirements, they may use competitive offerings or internal solutions that eliminate reliance on third-party providers, and our business, operating results, financial condition, and future prospects could be adversely affected. Moreover, prioritizing development of such features may require significant engineering resources and may not be compatible with the requirements of other customers, which could impact overall adoption of our platform. If new technologies emerge that limit or eliminate reliance on AI cloud platform providers like us, or that enable our competitors to deliver competitive services at lower prices, more efficiently, more conveniently, or more securely, such technologies could adversely impact our ability to compete. If our solutions do not allow us or our customers to comply with the latest regulatory requirements, sales of our platform, solutions, and services to existing customers may decrease and new customers will be less likely to adopt our platform.
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Our future growth is dependent upon our ability to continue to meet the needs of new customers and the expanding needs of our existing customers as their use of our platform, solutions, and services grows. As sales of our platform grow, we will need to devote additional resources to expanding, improving, and maintaining our infrastructure and integrating with third-party applications. In addition, we will need to appropriately scale our internal business systems and our services organization, including customer support, to serve our growing customer base, and to improve our IT and financial infrastructure, operating and administrative systems, and our ability to effectively manage headcount, capital and processes, including by reducing costs and inefficiencies. Any failure of, or delay in, these efforts could result in impaired system performance and reduced customer satisfaction, which would negatively impact our revenue growth and our reputation. We may not be successful in developing or implementing these technologies. In addition, it takes a significant amount of time to plan, develop, and test improvements to our technologies and infrastructure, and we may not be able to accurately forecast demand or predict the results we will realize from such improvements. In some circumstances, we may also determine to scale our technology through the acquisition of complementary businesses and technologies rather than through internal development, which may divert management’s time and resources. To the extent that we do not effectively scale our operations to meet the needs of our growing customer base and to maintain performance as our customers expand their use of our services, we will not be able to grow as quickly as we anticipate, our customers may reduce or terminate use of our platform and we will be unable to compete as effectively and our business, operating results, financial condition, and future prospects will be adversely affected.
We continually work to upgrade and enhance our platform, solutions, and services in response to customer demand and to keep up with technological changes. Part of this process entails cycling out outdated components of our infrastructure and replacing them with the latest technology available. This requires us to make certain estimates with respect to the useful life of the components of our infrastructure and to maximize the value of the components of our infrastructure, including our GPUs, to the fullest extent possible. We cannot guarantee that our estimates will be accurate or that our attempts at maximizing value will be successful. Any changes to the significant assumptions underlying our estimates or to the estimates of our components’ useful lives, or any inability to redeploy components of our existing infrastructure to extend past their contracted life could significantly affect our business, operating results, financial condition, and future prospects.
Our platform must also integrate with a variety of network, hardware, storage, and software technologies, and we need to continuously modify and enhance the capabilities of our platform to adapt to changes and innovation in these technologies. If our customers widely adopt new technologies, we may need to redesign parts of our platform to work with those new technologies. These development efforts may require significant engineering, marketing, and sales resources, all of which would affect our business, operating results, financial condition, and future prospects. Any failure of our infrastructure’s capabilities to operate effectively with future technologies and software platforms could reduce the demand for our platform. If we are unable to respond to these changes in a cost-effective manner, our platform may become less marketable and less competitive or obsolete, and our business may be harmed.
As part of adapting to these technology shifts, our future infrastructure strategy contemplates the use of immersion cooling for our GPU and blockchain equipment. While immersion cooling offers potential efficiency and density gains, it is an emerging technology with limited industry standards or regulatory frameworks. Variability in fluid chemistry, enclosure design, and safety protocols could create reliability, safety, or compliance risks. Dielectric fluids used in immersion cooling can degrade or become contaminated, potentially damaging hardware and reducing cooling efficiency. Not all GPUs, ASICs, or motherboards are designed or warranted for immersion environments, and modifying hardware for such use may void warranties or accelerate component failure. In addition, immersion cooling requires specialized operational expertise, and errors in handling or system maintenance could result in downtime, asset damage, or safety hazards. Although dielectric fluids are generally fire-resistant, improper handling or system failure could still create environmental or fire risks, which may not be fully covered by existing insurance policies. Furthermore, the limited availability of proprietary fluids and components presents potential supply chain constraints. Any of these factors could increase costs, reduce reliability, or impair our ability to deliver consistent performance to customers.
In addition, we must also continue to effectively manage our capital expenditures by maintaining and expanding our data center capacity, servers and equipment, grow in geographies where we currently have limited or no presence, and ensure that the performance, features, and reliability of our services and our customer service remain competitive in a rapidly changing technological environment. If we fail to manage our growth, the quality of our platform may suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers and employees.
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***The broader adoption, use, and commercialization of AI technology, and the continued rapid pace of developments in the AI field, are inherently uncertain. Failure by our customers to continue to use our platform to support AI use cases in their systems, or our ability to keep up with evolving AI technology requirements and regulatory frameworks, could have a material adverse effect on our business, operating results, financial condition, and future prospects.***
As part of our growth strategy, we seek to attract and acquire customers requiring high-performance computing, such as AI, machine learning, and automated decision-making technologies, including proprietary AI algorithms and models (collectively, “AI Technologies”).
AI has been developing at a rapid pace, and continues to evolve and change. As demand continues for AI services, AI providers, including our customers, have sought increased compute capacity to enable advancements in their AI models and service the demands of end users. We cannot predict whether additional computing power will continue to be required to develop larger, more powerful AI models, or if the practical limits of AI technology will plateau in the future regardless of available compute capacity. Further, there have been recent advancements in AI technology, including open-source AI models, that may lead to compute and other efficiencies that may impact the demand for AI services, including our platform, solutions, and services, which may adversely impact our revenue and profitability. In the event that existing scaling laws do not continue to apply as they have in the past, demand by our customers for compute resources, including our solutions and services, may not continue to increase over time, or may decrease if overall demand for AI is impacted by a lack of further technological development. If we are unable to keep up with the changing AI landscape or in developing services to meet our customers’ evolving AI needs, or if the AI landscape does not develop to the extent we or our customers expect, our business, operating results, financial condition, and future prospects may be adversely impacted.
Additionally, we may incur significant costs and experience significant delays in developing new solutions and services or enhancing our current platform to adapt to the changing AI landscape, and may not achieve a return on investment or capitalize on the opportunities presented by demand for AI solutions. Moreover, while AI adoption is likely to continue and may accelerate, the long-term trajectory of this technological trend is uncertain. Further, market acceptance, understanding, and valuation of solutions and services that incorporate AI Technologies are uncertain and the perceived value of AI Technologies used and/or provided by our customers could be inaccurate. If AI is not broadly adopted by enterprises to the extent we expect, or if new use cases do not arise, then our opportunity may be smaller than we expect. Further, if the consumer perception and perceived value of AI Technologies is inaccurate this could have a material adverse effect on our customers, which in turn could have a material adverse effect on our business, operating results, financial condition, and future prospects.
Concerns relating to the responsible use by our customers of new and evolving technologies, such as AI, which are supported by our platform, may result in collateral reputational harm to us. AI may pose emerging ethical issues and if our platform enables customer solutions that draw controversy due to their perceived or actual impact on society, we may experience brand or reputational harm, competitive harm, or legal liability.
Furthermore, the rapid pace of innovation in the field of AI has led to developing and evolving regulatory frameworks globally, which are expected to become increasingly complex as AI continues to evolve. Regulators and lawmakers around the world have started proposing and adopting, or are currently considering, regulations and guidance specifically on the use of AI. Regulations related to AI Technologies have been introduced in the United States at the federal level and are also enacted and advancing at the state level. Additional regulations may impact our customers’ ability to develop, use and commercialize AI Technologies, which would impact demand for our platform, solutions, and services and may affect our business, operating results, financial condition, and future prospects.
AI and related industries, including cloud services, are under increasing scrutiny from regulators due to their concerns about market concentration, anti-competitive practices, and the pace of partnerships and acquisitions involving generative AI startups. As the industry continues to grow, transactions and business conduct will likely continue to draw scrutiny from regulators. Our customers may become subject to further AI regulations, including any restrictions on the total consumption of compute technology, which could cause a delay or impediment to the commercialization of AI technology and could lead to a decrease in demand for our customers’ AI infrastructure, and may adversely affect our business, operating results, financial condition, and future prospects.
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***Our operations require substantial capital expenditures, and we will require additional capital to fund our business and support our growth, and any inability to generate or obtain such capital on acceptable terms, if at all, or to lower our total cost of capital, may adversely affect our business, operating results, financial condition, and future prospects.***
We require substantial capital expenditures to support our growth and respond to business challenges. We have made significant financial investments in our business, and we intend to continue to make such investments in the future, including expenditures to procure components for, maintain, upgrade, and enhance our platform, including costs related to obtaining third-party chips and leasing and maintaining, enhancing, and expanding our data centers. While we have historically been able to fund capital expenditures from cash generated from operations, equity and debt financings, and borrowings under our term loan facilities, factors outside of our control, including those described in this “*Risk Factors*” section, and particularly those under “—*Risks Related to Our Indebtedness*,” could materially reduce the cash available from operations, impede our ability to raise additional capital, or significantly increase our capital expenditure requirements, which may result in our inability to fund the necessary level of capital expenditures to maintain and expand our operations. Additionally, we have in the past and may in the future have more immediate expansion opportunities than we have capital to fund. These factors could adversely affect our business, operating results, financial condition, and future prospects.
Additional financing may not be available on terms favorable to us, if at all. If adequate financing is not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, financial condition, and future prospects. If we raise additional funds through equity or convertible debt issuances, our existing shareholders may suffer significant dilution and these securities could have rights, preferences, and privileges that are superior to those of holders of our common stock. If we obtain additional funds through debt financing, we may not be able to obtain such financing on terms favorable to us. Further, the current global macroeconomic environment could make it more difficult to raise additional capital on favorable terms, if at all. Such terms may involve restrictive covenants making it difficult to engage in capital raising activities and pursue business opportunities, including potential acquisitions. The trading prices of recently-public companies have been highly volatile as a result of multiple factors including, the conflicts in the Middle East and Ukraine and tensions between China and Taiwan, inflation, trade restrictions such as tariffs, interest rate volatility, actual or perceived instability in the banking system, and market downturns, which may reduce our ability to access capital on favorable terms or at all. In addition, a recession, depression, or other sustained adverse market event could adversely affect our business and the value of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired and our business may be adversely affected, requiring us to delay, reduce, or eliminate some or all of our operations. Even if we are able to raise such capital, we cannot guarantee that we will deploy it in such a fashion that allows us to achieve better operating results or grow our business.
Moreover, in order to fund investments in our infrastructure, we have pioneered and scaled innovative financing structures that have enabled us to grow our business through timely and flexible access to capital, such as our guidance facility with Permian Labs described under “*Management*’*s Discussion and Analysis of Financial Condition and Results of Operations*—*Recent Developments*.” While we expect our cost of capital to continue declining as we benefit from economies of scale and access new forms of financing, including asset backed securitizations and rated parent-level debt, our ability to lower our cost of capital depends upon a number of factors, many of which are beyond our control, including broader macroeconomic conditions. If we are unable to continue lowering our cost of capital, our ability to effectively compete, especially with larger competitors that have greater financial and other resources, as well as our operating results, financial condition, and business, may be adversely impacted.
***Our operating results may fluctuate significantly, which could make our future results difficult to predict and could cause our operating results to fall below expectations.***
Our operating results have varied significantly from period to period in the past, and we expect that our operating results will continue to vary significantly in the future such that period-to-period comparisons of our operating results may not be meaningful. In addition, in future periods, we may experience fluctuations in remaining performance obligations, given the nature of our committed contract business, the size of those contracts, and period-to-period variation in new business signed and revenue recognized from existing contracts. This could adversely affect our business, operating results, financial condition, and future prospects. Accordingly, our financial results in any one quarter should not be relied upon as indicative of future performance. Fluctuations in quarterly results may negatively impact the trading price of our common stock. Our quarterly financial results may fluctuate as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including, without limitation:
- the amount and timing of operating costs and capital expenditures related to the expansion of our business;
- any power outages, shortages, supply chain issues, capacity constraints, or significant increases in the cost of securing power;
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- general global macroeconomic and political conditions that could impact some or all regions where we operate, including global economic slowdowns, actual or perceived global banking and finance related issues, increased risk of inflation, trade restrictions such as tariffs, potential uncertainty with respect to the federal debt ceiling and budget and government shutdowns related thereto, interest rate volatility, supply chain disruptions, labor shortages, increases in energy costs and potential global recession;
- the impact of natural or man-made global events on our business, including wars and other armed conflict, such as the conflicts in the Middle East and Ukraine and tensions between China and Taiwan;
- changes in our legal or regulatory environment, including developments in regulations relating to AI and machine learning;
- our ability to attract new and retain existing customers, increase sales of our platform, or sell additional solutions and services to existing customers;
- the budgeting cycles, seasonal buying patterns, and purchasing practices of customers;
- the timing and length of our sales cycles;
- changes in customer requirements or market needs;
- changes in the growth rate of the cloud infrastructure market generally;
- the timing and success of new solution and service introductions by us or our competitors or any other competitive developments, including consolidation among our customers or competitors;
- any disruption in our strategic relationships;
- our ability to successfully expand our business domestically and internationally;
- equity or debt financings and the capital markets environment, including interest rate changes;
- our ability to reduce our cost of capital over time;
- decisions by organizations to purchase specialized AI cloud infrastructure from larger, more established vendors;
- our ability to successfully and timely deliver our solutions and services to customers under our committed contracts, including due to data center lead times;
- our ability to successfully and timely deploy launches of additional data centers;
- the timing and success of the integration of new infrastructure, including new GPU generations, into our platform;
- changes in our pricing policies or those of our competitors;
- insolvency or credit difficulties confronting our customers, including bankruptcy or liquidation, due to individual, macroeconomic, and regulatory factors, including those specifically impacting early-stage AI ventures, affecting their ability to purchase or pay for our platform;
- significant security breaches of, technical difficulties with, or interruptions to, the use of our platform or other cybersecurity incidents;
- extraordinary expenses such as litigation or other dispute-related settlement payments or outcomes, taxes, regulatory fines or penalties;
- the timing of revenue recognition and revenue deferrals;
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- future accounting pronouncements or changes in our accounting policies or practices;
- negative media coverage or publicity; and
- increases or decreases in our expenses due to supply chain availability and tariffs, among other factors.
Any of the above factors, individually or in the aggregate, could result in significant fluctuations in our financial condition, cash flows, and other operating results from period to period.
***We face intense competition and could lose market share to our competitors, which would adversely affect our business, operating results, financial condition, and future prospects.***
The market for AI cloud infrastructure and software is intensely competitive and is rapidly evolving, characterized by changes in technology, customer requirements, industry standards, regulatory developments, and frequent introductions of new or improved solutions and services. Key competitors that offer general purpose cloud computing as part of a broader, diversified product portfolio include Amazon (AWS), Google (Google Cloud Platform), IBM, Microsoft (Azure), and Oracle, a number of which are concurrent providers of high-performance computing (“HPC”) resources to our customers. We also compete with emerging infrastructure providers focused on AI, including Coreweave, Crusoe and Lambda. We expect to continue to face intense competition from current competitors, including as our competitors complete strategic acquisitions or form cooperative relationships and/or customer requirements evolve, as well as from new entrants into the market. If we are unable to anticipate or react to these challenges, our competitive position could weaken, and we would experience a decline in revenue or reduced revenue growth, and loss of market share that could adversely affect our business, operating results, financial condition, and future prospects.
Our ability to compete effectively depends upon numerous factors, many of which are beyond our control, including, but not limited to:
- changes in customer or market needs, requirements, and preferences and our ability to fulfill those needs, requirements, and preferences;
- our ability to expand and augment our platform, including through infrastructure and new technologies, or increase sales of our platform;
- any power outages, shortages, supply chain issues, capacity constraints, or significant increases in the cost of securing power;
- our ability to attract, train, retain, and motivate talented employees;
- our ability to retain existing customers and increase sales to existing customers, as well as attract and retain new customers;
- the budgeting cycles, seasonal buying patterns, and purchasing practices of our customers, including any slowdown in technology spending due to U.S. and general global macroeconomic conditions;
- price competition;
- stagnation in the adoption rate or changes in the growth rate of AI and AI cloud infrastructure sectors, including due to emerging AI technologies, which may lead to further compute efficiencies;
- the timing and success of new solution and service introductions by us or our competitors, including new competing technologies that may displace cloud infrastructure, or any other change in the competitive landscape of our industry, including consolidation among our competitors or customers and strategic partnerships entered into by and between our competitors;
- changes in our mix of solution and services sold, including changes in the average contracted usage of our platform;
- our ability to successfully and continuously expand our business;
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- our ability to secure necessary funding;
- deferral of orders from customers in anticipation of new or enhanced solutions and services announced by us or our competitors;
- significant security breaches or, technical difficulties with, or interruptions to the use of our platform, including data security;
- the timing and costs related to the development or acquisition of technologies or businesses or entry into strategic partnerships;
- our ability to execute, complete, or efficiently integrate any acquisitions that we may undertake;
- increased expenses, unforeseen liabilities, or write-downs and any impact on our operating results from any acquisitions we consummate;
- our ability to increase the size and productivity of our sales teams;
- decisions by potential customers to purchase cloud infrastructure and associated services from larger, more established technology companies;
- insolvency or credit difficulties confronting our customers, which could increase due to U.S. and global macroeconomic issues and which would adversely affect our customers’ ability to purchase or pay for our platform in a timely manner or at all;
- the cost and potential outcomes of litigation, regulatory investigations or actions, or other proceedings, which could have a material adverse effect on our business;
- future accounting pronouncements or changes in our accounting policies;
- increases or decreases in our expenses caused by due to supply chain availability and tariffs, among other factors;
- our ability to comply with applicable domestic and international regulations and laws and to obtain the necessary licenses to conduct our business;
- general global macroeconomic and political conditions that could impact our operations, including global economic slowdowns, actual or perceived global banking and finance related issues, increased risk of inflation, trade restrictions such as tariffs, potential uncertainty with respect to the federal debt ceiling and budget and government shutdowns related thereto, interest rate volatility, supply chain disruptions, labor shortages, and potential global recession; and
- the impact of natural or man-made global events on our business, including outbreaks of contagious diseases or pandemics and wars and other armed conflicts, such as the conflicts in the Middle East and Ukraine and the tensions between China and Taiwan.
Many of our competitors have greater financial, technical, marketing, sales, and other resources, greater name recognition, longer operating histories, and a larger base of customers than we do. Our competitors may be able to devote greater resources to the development, promotion, and sale of their solutions and services than we can, and they may offer lower pricing than we do or bundle certain competing solutions and services at lower prices. Our competitors may also have greater resources for research and development of new technologies, customer support, and to pursue acquisitions, and they have other financial, technical, or other resource advantages. Our larger competitors have substantially broader and more diverse solution and service offerings and more mature distribution and go-to-market strategies, which allows them to leverage their existing customer relationships and any distributor relationships to gain business in a manner that discourages potential customers from purchasing our platform. Further, our current and future competitors may include our customers and suppliers, if any of these customers or suppliers were to cease purchasing services from us or supplying us with components as a result, our business, operating results, financial condition, and future prospects could be adversely affected.
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Conditions in our market could change rapidly and significantly as a result of technological advancements, including but not limited to increased advancements and proliferation in the use of AI and machine learning, partnerships between or acquisitions by our competitors, or continuing market consolidation, including consolidation of potential or existing customers with our competitors. Some of our competitors have recently made or could make acquisitions of businesses or have established cooperative relationships that may allow them to offer more directly competitive and comprehensive solutions and services than were previously offered and adapt more quickly to new technologies and customer needs. These competitive pressures in our market or our failure to compete effectively may result in price reductions, fewer orders, reduced revenue and operating margin, increased net losses, and loss of market share.
Even if there is significant demand for specialized AI cloud infrastructure like ours, if our competitors include functionality that is, or is perceived to be, equivalent to or better than ours in legacy solutions and services that are already generally accepted as necessary components of an organization’s operational architecture, we may have difficulty increasing the market penetration of our platform. Furthermore, even if the functionality offered by other cloud infrastructure providers is different and more limited than the functionality of our platform, organizations may elect to accept such limited functionality in lieu of purchasing our solutions and services. If we are unable to compete successfully, or if competing successfully requires us to take aggressive action with respect to pricing or other actions, our business, operating results, financial condition, and future prospects would be adversely affected.
***A network or data security incident against us, or our third-party providers, whether actual, alleged, or perceived, could harm our reputation, create liability and regulatory exposure, and adversely impact our business, operating results, financial condition, and future prospects.***
Companies are subject to an increasing number, and wide variety, of attacks on their networks on an ongoing basis. Traditional computer “hackers,” malicious code (such as viruses and worms), phishing attempts, ransomware, account takeover, business email compromise, employee fraud or bad actors, theft or misuse, denial of service attacks, misconfigurations, bugs, or other vulnerabilities in commercial software that is integrated into our (or our suppliers’ or service providers’) IT systems, and sophisticated nation-state sponsored actors engage in cyber intrusions and attacks that create risks for our infrastructure and the data, including personal information, which it hosts and transmits. State-supported and geopolitical-related cyberattacks may rise in connection with regional geopolitical conflicts such as the conflicts in the Middle East and Ukraine and tensions between China and Taiwan. Moreover, the ongoing war in Ukraine and associated activities in Russia as well as in the Middle East, have increased the risk of cyberattacks on various types of infrastructure and operations. Additionally, bad actors are beginning to utilize AI-based tools to execute attacks, creating unprecedented cybersecurity challenges. We may be a valuable target for cyberattacks given the critical data which we host and transmit.
Although we have implemented security measures designed to prevent such attacks, including a review of our third-party providers’ measures, we cannot guarantee that such measures will operate effectively to protect our and our third-party providers’ infrastructure, systems, networks, and physical facilities from breach due to the actions of outside parties or human error, malfeasance, insider threats, system errors or vulnerabilities, insufficient cybersecurity controls, a combination of the foregoing, or otherwise, and as a result, an unauthorized party may obtain access to our, our third-party providers’ or our customers’ systems, networks, or data. The techniques used to obtain unauthorized access to systems or sabotage systems, or disable or degrade services, change frequently and are often unrecognizable until launched against a target, and therefore we may be unable to anticipate these techniques and implement adequate preventative measures. Our servers may be vulnerable to computer viruses or physical or electronic break-ins that our security measures may not detect. Protecting our own assets has become more expensive and these costs may increase as the threat landscape increases, including as a result of use by bad actors of AI. We may face difficulties or delays in identifying or otherwise responding to any attacks or actual or potential security breaches or threats. These risks are exacerbated by developments in generative AI. A breach in our or our third-party providers’ data security or an attack against our platform could and have impacted our infrastructure and systems, creating system disruptions or slowdowns and providing access to malicious parties to information hosted and transmitted by our infrastructure, resulting in data, including the data of our customers, being publicly disclosed, misused, altered, lost, or stolen, which could subject us to liability and reputational harm and adversely affect our financial condition. While to date no incidents have had a material impact on our operations or financial results, we cannot guarantee that material incidents will not occur in the future. If compromised, our own systems could be used to facilitate or magnify an attack. Further, the increase in remote work by companies and individuals in recent years has generally increased the attack surface available to bad actors for exploitation, and as such, the risk of a cybersecurity incident potentially occurring has increased.
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Any actual, alleged, or perceived security breach in our third-party providers’ or partners’ systems or networks, or any other actual, alleged or perceived data security breach that we or our third-party providers or partners suffer, could result in damage to our reputation, negative publicity, loss of customers and sales, loss of competitive advantages over our competitors, increased costs to remedy any problems and otherwise respond to any incident, regulatory investigations and enforcement actions, fines and penalties, costly litigation (including class actions), and other liability. We would also be exposed to a risk of loss or litigation and potential liability under laws, regulations, and contracts that protect the privacy and security of personal information. For a description of the privacy and security laws, regulations and other industry requirements to which our business is subject, see the risk factor below “—*We are subject to laws, regulations, and industry requirements related to data privacy, data protection and information security, and user protection across different markets where we conduct our business and such laws, regulations, and industry requirements are constantly evolving and changing. Any actual or perceived failure to comply with such laws, regulations, and industry requirements, or our privacy policies, could harm our business*.”
Due to concerns about data security and integrity, a growing number of legislative and regulatory bodies have adopted breach notification and other requirements in the event that information subject to such laws is accessed by unauthorized persons and additional regulations regarding security of such data are possible. We may need to notify governmental authorities and affected individuals with respect to such incidents. For example, laws in the United States may require businesses to provide notice to individuals whose personal information has been disclosed as a result of a data security breach. Complying with such numerous and complex regulations in the event of a data security breach can be expensive and difficult, and failure to comply with these regulations could subject us to regulatory scrutiny and additional liability. In addition, certain of our customer agreements, as well as privacy laws, may require us to promptly report security incidents involving our systems or those of our third-party partners that compromise the security, confidentiality, or integrity of certain processed customer data. Regardless of our contractual protections, these mandatory disclosures could be costly, result in litigation, harm our reputation, erode customer trust, and require significant resources to mitigate issues stemming from actual or perceived security breaches.
We are in the process of finalizing our cybersecurity insurance, which will be effective January 2026; however, there can be no guarantee that any or all costs or losses incurred will be partially or fully recouped from such insurance, or that such insurance will be available on economically reasonable terms or will adequately address all potential losses.
We may also incur significant financial and operational costs to investigate, remediate, eliminate, and put in place additional tools and devices designed to prevent actual or perceived security breaches and other security incidents, as well as costs to comply with any notification obligations resulting from any security incidents. Any of these negative outcomes could adversely affect the market perception of infrastructure and customer and investor confidence in our company, and would adversely affect our business, operating results, financial condition, and future prospects.
Further, from time to time, government entities (including law enforcement bodies) may in the future seek our assistance with obtaining access to our customers’ data. Although we strive to protect the privacy of our customers, we may be required from time to time to provide access to customer data to government entities. In light of our privacy commitments, although we may legally challenge law enforcement requests to provide access to our systems or other customer content, we may nevertheless face complaints that we have provided information improperly to law enforcement or in response to non-meritorious third-party complaints. We may experience adverse political, business, and reputational consequences, to the extent that we do not provide assistance to or comply with requests from government entities in the manner requested or challenge those requests publicly or in court or provide, or are perceived as providing, assistance to government entities that exceeds our legal obligations. Any such disclosure could significantly and adversely impact our business and reputation.
***We have a history of generating net losses as a result of the substantial investments we have made to grow our business and develop our platform, anticipate increases in our operating expenses in the future, and may not achieve or, if achieved, sustain profitability. If we cannot achieve and, if achieved, sustain profitability, our business, operating results, financial condition, and future prospects will be adversely affected.***
We incurred net losses of $13,184,374 and $12,425,544 for the years ended December 31, 2024 and 2023, respectively, and we may not achieve or, if achieved, sustain profitability in the future. As of September 30, 2025, we had an accumulated deficit of $32,425,045. While we have experienced significant growth in revenue from 2023 to 2024, we cannot predict whether we will maintain this level of growth or when we will achieve profitability. We also expect our operating expenses to increase in the future, including our general and administrative expenses as a result of increased costs associated with operating as a public company and as we continue to invest for our future growth, including expanding our research and development function to drive further development of our platform, continuing to invest in the technology infrastructure underlying our platform and data center expansion, expanding our sales and marketing activities, developing the functionality to expand into adjacent markets, and reaching customers in new geographic locations and new verticals, which will negatively affect our operating results if our total revenue does not increase.
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Our operating efficiencies may decrease as we scale, and our revenue growth may slow as we grow. Our revenue could also decline for a number of other reasons, including reduced demand for our offerings, increased competition, a decrease in the growth or reduction in size of our overall market, or if we cannot capitalize on growth opportunities, including acquisitions and through new and enhanced solutions and services. Furthermore, to the extent our anticipated cash payback period is longer than we expect, or if we fail to maintain or increase our revenue to offset increases in our operating expenses or manage our costs as we invest in our business, including if we do not maintain or improve our operating efficiencies, we may not achieve or sustain profitability, and if we cannot achieve and sustain profitability, our business, operating results, financial condition, and future prospects will be adversely affected.
***We make substantial investments in our technology and infrastructure and unsuccessful investments could materially adversely affect our business, operating results, financial condition, and future prospects.***
The industry in which we compete is characterized by rapid technological change, changes in customer requirements, frequent new product and service introductions and enhancements, short product cycles, and evolving industry standards. In order to remain competitive, we have made, and expect to continue to make, significant investments in our technology and infrastructure. For the years ended December 31, 2024 and 2023, technology and infrastructure investments had been made in HPC and joint ventures of $8,657,615 and $7,739,631, respectively. If we fail to further develop our platform or develop new and enhanced solutions, services, and technologies, if we focus on technologies that do not become widely adopted, or if new competitive technologies or industry standards that we do not support become widely accepted, demand for our solutions and services may be reduced. Increased investments in technology and infrastructure or unsuccessful improvement efforts could cause our cost structure to fall out of alignment with demand for our solutions and services, which would have a negative impact on our business, operating results, financial condition, and future prospects.
***Our platform is complex and performance problems or defects associated with our platform may adversely affect our business, operating results, financial condition, and future prospects.***
It may become increasingly difficult to maintain and improve our platform performance, especially during peak demand spikes and as our customer base grows and our platform becomes more complex. If our platform is unavailable or if our customers are unable to access our platform within a reasonable amount of time or at all, we could experience a loss of customers, lost or delayed market acceptance of our platform, delays in payment to us by customers or issuance of credits to impacted customers, injury to our reputation and brand, warranty and legal claims against us, significant cost of remedying these problems, and the diversion of our resources. For example, in the past, we have experienced insufficient power to service a customer’s project and have been required to provide service credits to that customer due to resulting performance issues. Additionally, we previously held a contract with Washington, Georgia, which provided for power at a fixed rate. We received notice that the city could no longer honor the contract rate as it would bankrupt the city, contrary to state law. This rendered continued operations at that location commercially impractical and led us to sell the site to another company. Similar municipal and state rules could cause other contracts to become null and void, which may cause us to have access to insufficient power, which may prevent us from serving our customers. In addition, to the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business, operating results, financial condition, and future prospects, as well as our reputation, may be adversely affected.
Further, the hardware and software technology underlying our platform is inherently complex and may contain material defects or errors, particularly when new solutions and services are first introduced or when new features or capabilities are released. We have from time to time found defects or errors in our platform, and new defects or errors may be detected in the future by us or our customers. We cannot ensure that our platform, including any new solutions and services that we release, will not contain defects. Any real or perceived errors, failures, vulnerabilities, or bugs in our platform could result in negative publicity or lead to data security, access, retention, or other performance issues, all of which could harm our business. We also rely on third-party suppliers for the most significant components of the equipment we use to operate our infrastructure. These third-party suppliers may also experience defects or errors in the products that we utilize in our platform, which would impact our platform and may result in performance problems or service interruptions. The costs incurred in correcting any such defects or errors, including those in third-party components, may be substantial and could harm our business. Moreover, the harm to our reputation and legal liability related to such defects or errors may be substantial and could similarly harm our business.
In addition, most of our customer agreements and terms of service contain service level commitments. If we are unable to meet the stated service level commitments due to performance problems or defects, we may be contractually obligated to provide the affected customers with service credits or refunds, which could significantly affect our revenue in the periods in which any issues occur and the credits or refunds are applied. As a result of degradation of service and interruptions to our platform, we have provided, and may continue to provide, service credits and/or refunds to certain of our affected customers with whom we had service level commitments. We could also face customer terminations with refunds of prepaid amounts, which could significantly affect both our current and future revenues. Any service level failures could harm our business.
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***Any failure of our IT systems or those of one or more of our IT service providers, business partners, vendors, suppliers, or other third-party service providers, or any other failure by such third parties to provide services to us may negatively impact our relationships with customers and harm our business.***
Our business depends on various IT systems and outsourced IT services. We rely on third-party IT service providers, business partners, vendors, and suppliers to provide critical IT systems, corporate infrastructure, and other services and are, by necessity, dependent on them to adequately address cybersecurity threats to, and other vulnerabilities, defects, or deficiencies of or in their own systems. This includes infrastructure such as electronic communications, finance, marketing, and recruiting platforms and services such as IT network development and network monitoring, and third-party data center hosting of our systems for our internal and customer use. We do not own or control the operation of the third-party facilities or equipment used to provide such services. Our third-party vendors and service providers have no obligation to renew their agreements with us on commercially reasonable terms or at all. If we are unable to renew these agreements on commercially reasonable terms, including with respect to service levels and cost, or at all, we may be required to transition to a new provider, and we may incur significant costs and possible service interruption in connection with doing so. In addition, such service providers could decide to close their facilities or change or suspend their service offerings without adequate notice to us. Moreover, any financial difficulties, such as bankruptcy, faced by such vendors, the nature and extent of which are difficult to predict, may harm our business. Since we cannot easily switch vendors without making other business trade-offs, any disruption with respect to our current providers would impact our operations and our business may be harmed. Furthermore, our disaster recovery systems and those of such third parties may not function as intended or may fail to adequately protect our business information in the event of a significant business interruption, Any termination, failure, or other disruption of any of such systems or services of our third-party IT providers, business partners, vendors, and suppliers could lead to operating inefficiencies or disruptions, which could harm our business, operating results, financial condition, and future prospects.
***We have a limited operating history at our current scale, which makes it difficult to evaluate our current business and future prospects and increases the risks associated with investment in our common stock.***
We have a relatively short history operating our business at our current scale and have grown rapidly during that time. We were founded on December 9, 2022 in connection with the corporate roll-up of WAHA Technologies, Inc. and WAHA Inc., which launched a blockchain platform in 2019. We began operating our GPUaaS platform in 2023 through the acquisition of a stake in The Cloud Minders, Inc., whose operational history dates back to 2021 and which we subsequently acquired on April 1, 2025. Our limited operating history, including our limited history of selling our cloud infrastructure offering, the dynamic and rapidly evolving market in which we sell our platform, and the concentration of our revenue from a limited number of customers, as well as numerous other factors beyond our control, may make it difficult to evaluate our current business, future prospects and other trends. We have encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries and sectors, such as the risks and uncertainties described herein. Any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable or established market. If our assumptions regarding these risks and uncertainties are incorrect or change due to fluctuations in our markets, any material reduction in AI or machine learning spending, changes in demand for specialized AI cloud infrastructure, or otherwise, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business, operating results, financial condition, and future prospects would be adversely affected. We cannot ensure that we will be successful in addressing these and other challenges we may face in the future. The risks associated with having a limited operating history may be exacerbated by current macroeconomic and geopolitical conditions discussed herein.
***We have a limited history selling access to our platform under our current business model and are continuing to scale our operations and evolve our go-to-market strategy, which may make it difficult to evaluate our business and prospects and increase the risks associated with an investment in our common stock.***
We have a limited history selling access to our AI infrastructure and proprietary managed software and application services through our platform and we are continuing to scale our operations and evolve our strategy. We currently sell access to our platform either through committed contracts, which are take-or-pay, or on-demand, which are pay-as-you-go. There is no guarantee that in the future customers will continue to be willing to enter into, and that the industry will continue to support, a take-or-pay model, and any move towards a pay-as-you-go model will impact our ability to forecast our expected cash flows and operating results, impact our margins, and affect our business, operating results, financial condition, and future prospects. Moreover, our committed contracts typically include a prepayment from our customers prior to them receiving any of our services. The level of prepayments we receive from customers may fluctuate over time as we continue to scale our operations and evolve our go-to-market strategy, customer base, and the use cases for our platform. Moreover, any changes in the timing or level of customer payments, including prepayments, would impact our cash flows. Furthermore, scaling our operations and evolving our strategy may take more time and require more effort to implement than anticipated and may have results that are difficult to predict which could result in decreased revenue from our customers. Our business and pricing models have not been fully proven, and we have only a limited operating history with our current business and pricing models to evaluate our business and future prospects, which subjects us to a number of uncertainties, including our ability to plan for and model future growth. Moreover, our historical revenue growth should not be considered indicative of our future performance.
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***If we are unable to attract new customers, retain existing customers, and/or expand sales of our platform, solutions, and services to such customers, we may not achieve the growth we expect, which would adversely affect our business, operating results, financial condition, and future prospects.***
In order to grow our business, we must continue to attract new customers in a cost-effective manner and enable these customers to realize the benefits associated with our platform. We may experience difficulties demonstrating to customers the value of our platform and any new solutions and services that we offer. As we develop and introduce new solutions and services and add new and upgraded components of our platform (such as next-generation NVIDIA GPUs), we face the risk that customers may not value or be willing to adopt these newer offerings, and may forgo adopting one or more newer generations of our existing offerings. Regardless of the improved features or superior performance of the newer offerings, customers may be unwilling to adopt our platform due to design or pricing constraints, among other reasons. Even if customers choose to adopt our platform or new solutions and services that we develop, they may be slow to do so. Because of the extensive time and resources that we invest in research and development, if we are unable to sell new solutions and services, our revenue may decline and our business, operating results, financial condition, and future prospects could be negatively affected. Historically, we have used an internal sales team that is focused on responding to inbound inquiries, outbound prospecting targeting specific customers, expanding sales of our platform to existing customers, and expanding our revenue in specific markets to drive revenue growth. If our sales team is not successful at growing our customer base, our future growth will be impacted.
In addition, we must persuade potential customers that our platform offers significant advantages over those of our competitors. As our market matures, our solutions and services evolve, and competitors introduce lower cost and/or differentiated solutions or services that are perceived to compete with our platform, our ability to maintain or expand sales of our platform, solutions, and services could be impaired. Even if we do attract new customers, the cost of new customer acquisition, implementation of our platform, and ongoing customer support may prove higher than anticipated, thereby adversely impacting our profitability.
Other factors, many of which are out of our control, may now or in the future impact our ability to retain existing customers, attract new customers, and expand sales of our platform, solutions, and services to such customers in a cost-effective manner, including:
- potential customers’ commitments to existing solutions or services or greater familiarity or comfort with other solutions or services;
- our ability to secure sufficient power for our platform and solutions;
- decreased spending on specialized AI cloud infrastructure or AI or machine learning development generally;
- deteriorating general economic and geopolitical conditions;
- future governmental regulation, which could adversely impact growth of the AI sector;
- negative media, industry, or financial analyst commentary regarding our platform, AI, and the identities and activities of some of our customers;
- our ability to expand, retain, and motivate our sales, customer success, cloud operations, and marketing personnel;
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- our ability to obtain or maintain industry security certifications for our platform;
- the perceived risk, commencement, or outcome of litigation; and
- increased expenses associated with being a public company following this offering.
Some of our customer contracts are on-demand and based on our terms of service, which do not require our customers to commit to a specific contractual period, and which permit the customer to terminate their contracts or decrease usage of our services with limited notice. Any service terminations could cause our operating results to fluctuate from quarter to quarter. Our customer retention may decline or fluctuate as a result of a number of factors, including our customers’ satisfaction with the security, performance, and reliability of our platform, our prices and usage plans, our customers’ AI development and use and related budgetary restrictions, the perception that competitive solutions and services provide better or less expensive options, negative public perception of us or our customers, and deteriorating general economic conditions.
Our future financial performance also depends in part on our ability to expand sales of our platform, solutions, and services to our existing customers. In order to expand our commercial relationship with our customers, existing customers must decide that the increased cost associated with additional purchases of our platform, solutions, and services is justified by the additional functionality. Our customers’ decision whether to increase their purchase is driven by a number of factors, including customer satisfaction with the security, performance, and reliability of our platform, the functionality of any new solutions and services we may offer, general economic conditions, and customer reaction to our pricing model. If our efforts to expand our relationship with our existing customers are not successful, our business, operating results, financial condition, and future prospects may materially suffer.
***If we are unable to successfully build, expand, and deploy our sales organization in a timely manner, or at all, or to successfully hire, retain, train, and motivate our sales personnel, our growth and long-term success could be adversely impacted.***
We have grown, and may continue to grow, our direct sales force and our sales efforts have historically depended on the significant direct involvement of our senior management team. The successful execution of our strategy to increase our sales to existing customers, identify new potential customers, expand our customer base, and enter new markets will depend, among other things, on our ability to successfully build and expand our sales organization and operations. We have and plan to continue to dedicate significant resources to sales and marketing programs and to expand our sales and marketing capabilities to target additional potential customers and achieve broader market adoption of our platform, but there is no guarantee that we will be successful in attracting and maintaining additional customers. Moreover, identifying, recruiting, training, and managing sales personnel requires significant time, expense, and attention, including from our senior management and other key personnel, which could adversely impact our business, operating results, financial condition, and future prospects in the short and long term.
In order to successfully scale our current top-down sales model and as AI use cases expand, we may need to increase the size of our direct sales force while preserving the cultural and mission-oriented elements of our company. If we do not hire a sufficient number of qualified sales personnel, our future revenue growth and business could be adversely impacted. It may take a significant period of time before our sales personnel are fully trained and productive, particularly in light of our current sales model, and there is no guarantee we will be successful in adequately training and effectively deploying our sales personnel. In addition, we have invested, and may need to continue investing, significant resources in our sales operations to enable our sales organization to run effectively and efficiently, including supporting sales strategy planning, sales process optimization, data analytics and reporting, and administering incentive compensation arrangements. Our business would be adversely affected if our efforts to build, expand, train, and manage our sales organization are not successful. We periodically make adjustments to our sales organization in response to market opportunities, competitive threats, management changes, product introductions or enhancements, acquisitions, sales performance, increases in sales headcount, cost levels, and other internal and external considerations. Any future sales organization changes may result in a temporary reduction of productivity, which could negatively affect our rate of growth. In addition, any significant change to the way we structure and implement the compensation of our sales organization may be disruptive or may not be effective and may affect our revenue growth. If we are unable to attract, hire, develop, retain, and motivate qualified sales personnel, if our new sales personnel are unable to achieve sufficient sales productivity levels in a reasonable period of time or at all, if our marketing programs are not effective or if we are unable to effectively build, expand, and manage our sales organization and operations, our sales and revenue may grow more slowly than expected or materially decline, and our business, operating results, financing condition, and future prospects may be significantly harmed.
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***If we do not or cannot maintain the compatibility of our platform with our customers***’ ***existing technology, including third-party technologies that our customers use in their businesses, our business may be adversely affected.***
The functionality and popularity of our platform depends, in part, on our ability to integrate our platform with our customers’ existing technology, including other third-party technologies that our customers use in their businesses. Our customers, or the third parties whose solutions and services our customers utilize, may change the features of their technologies, restrict our access to their technologies, or alter the terms governing use of their technologies in a manner that makes our platform incompatible with their technologies, and which would adversely impact our ability to service our customers. Such changes could functionally limit or prevent our ability to use these third-party technologies in conjunction with our platform, which would negatively affect adoption of our platform and harm our business. If we fail to integrate our platform with our customers’ technologies and with third-party technologies that our customers use, we may not be able to offer the functionality that our customers want or need, which could adversely impact our business.
***If we are not able to maintain and enhance our brand, our business, operating results, financial condition, and future prospects may be adversely affected.***
We believe that maintaining and enhancing our brand and our reputation is critical to continued market acceptance of our platform, our relationship with our existing customers and our ability to attract new customers. The successful promotion of our brand will depend on a number of factors, including our ability to continue to provide reliable solutions and services that continue to meet the needs of our customers at competitive prices, our ability to successfully differentiate our platform from those of competitors, and the effectiveness of our marketing efforts. Further, industry standards continue to evolve and there is no consensus around performance benchmarks applied to us and our competitors, which may impact our ability to promote our platform and our brand. Although we believe it is important for our growth, our brand promotion activities may not be successful or yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, our business, operating results, financial condition, and future prospects may be harmed.
In addition, independent industry and research firms often evaluate our offerings and provide reviews of our platform, as well as the solutions and services of our competitors, and perception of our platform in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive as compared to those of our competitors’ solutions and services, our brand may be adversely affected. Our offerings may experience capacity and operational issues for a number of reasons that may or may not be related to the efficacy of our offerings in real world environments. To the extent potential customers, industry analysts, or research firms believe that the occurrence of capacity or computing issues is a flaw or indicates that our platform does not provide significant value, we may lose such potential customer opportunities, and our reputation, business, operating results, financial condition, and future prospects may be harmed.
***As we expand our customer base, we may become further subject to counterparty credit risk, which would adversely impact our business, operating results, financial condition, and future prospects.***
We intend to increase the number of our customers over time, including customers in their early stages and/or private companies who may have increased risk of insolvency, bankruptcy, or other issues impacting their creditworthiness. Our business is, and may in the future be, subject to the risks of non-payment and non-performance by these customers, which risk is heightened given that a substantial portion of our revenue is currently, and is expected for the foreseeable future to be, driven by a limited number of customers. We manage our exposure to credit risk through receipt of prepayments under our committed contracts, credit analysis and monitoring procedures, and may use letters of credit, prepayments, and guarantees. However, these procedures and policies cannot fully eliminate customer credit risk, and to the extent our policies and procedures prove to be inadequate, it could negatively affect our business, operating results, financial condition, and future prospects. In addition, some of our customers may be highly leveraged and subject to their own operating and regulatory risks and, even if our credit review and analysis mechanisms work properly, we may experience risks of non-payment and non-performance in our dealings with such parties. In such event, we may remain responsible for expenditures for components, infrastructure, and data center leases and build-outs, as well as related financing that we have undertaken for which we may not receive corresponding revenue. We do not currently maintain credit insurance to insure against customer credit risk. If our customers fail to fulfill their contractual obligations, it may have an adverse effect on our business, operating results, financial condition, and future prospects.
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***The United States market may become saturated, and our long-term success may depend, in part, on our ability to expand the sale of our platform to customers located outside of the United States, and any international expansion of our operations exposes us to risks that could have a material adverse effect on our business, operating results, financial condition, and future prospects.***
If the United States market becomes saturated, our long-term success may depend, in part, on our ability to expand the sale of our platform to customers located outside of the United States. Expanding our business outside of the United States and conducting our business activities in various foreign countries, where we have limited experience and where the challenges of conducting our business can be significantly different from those we have faced, may create internal control risks including:
- slower than anticipated demand for AI and machine learning solutions offered by existing and potential customers outside the United States and slower than anticipated adoption of specialized AI cloud-based infrastructures by international businesses;
- fluctuations in foreign currency exchange rates, which could add volatility to our operating results;
- limitations within our debt agreements that may restrict our ability to make investments in our foreign subsidiaries;
- new, or changes in, regulatory requirements, including with respect to AI;
- tariffs, export and import restrictions, restrictions on foreign investments, sanctions, and other trade barriers or protection measures;
- exposure to numerous, increasing, stringent (particularly in the European Union), and potentially inconsistent laws and regulations relating to privacy, data protection, and information security;
- costs of localizing our platform;
- lack of acceptance of localized solutions and services;
- the need to make significant investments in people, solutions, and infrastructure, typically well in advance of revenue generation;
- challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits, and compliance programs;
- difficulties in maintaining our corporate culture with a dispersed and distant workforce;
- treatment of revenue from international sources, evolving domestic and international tax environments, and other potential tax issues, including with respect to our corporate operating structure and intercompany arrangements;
- different or weaker protection of our intellectual property, including increased risk of theft of our proprietary technology and other intellectual property;
- economic weakness or currency-related disparities or crises;
- compliance with multiple, conflicting, ambiguous or evolving governmental laws and regulations, including employment, tax, data privacy, anti-corruption, import/export, antitrust, data transfer, storage and protection, and industry-specific laws and regulations, including regulations related to AI;
- generally longer payment cycles and greater difficulty in collecting accounts receivable;
- our ability to adapt to sales practices and customer requirements in different cultures;
- the lack of reference customers and other marketing assets in regional markets that are new or developing for us, as well as other adaptations in our market generation efforts that we may be slow to identify and implement;
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- dependence on certain third parties, including third-party data center facility providers;
- natural disasters, acts of war, terrorism, or pandemics, including the armed conflicts in the Middle East and Ukraine and tensions between China and Taiwan;
- actual or perceived instability in the global banking system;
- cybersecurity incidents;
- corporate espionage; and
- political instability and security risks in the countries where we are doing business and changes in the public perception of governments in the countries where we operate or plan to operate.
***Our business could be materially and adversely affected by geopolitical instability, armed conflicts, international trade restrictions, or disruption to the global semiconductor supply chain, including risks related to China and Taiwan.***
Our operations and growth are exposed to significant risks arising from global geopolitical instability, trade policy shifts, and supply chain concentration in critical regions. These risks could have a material adverse effect on our business, financial condition, and results of operations. Specific risks include:
- disruption of semiconductor supply chains due to geopolitical instability, particularly any conflict in or around Taiwan or restrictions affecting manufacturers in China;
- changes in U.S. or foreign trade policy, including the imposition of tariffs, sanctions, or export and import controls affecting advanced chips, energy inputs, or other critical resources;
- escalation of existing conflicts in regions such as Ukraine or the Middle East, or new armed conflicts elsewhere, which may affect global energy prices, financing conditions, and investor sentiment;
- volatility in foreign currency exchange rates and evolving international tax regimes;
- restrictions on foreign investment or heightened review of cross-border technology transactions; and
- broader political or economic instability, including instability in global banking and capital markets.
These risks may raise our acquisition costs for GPUs and related infrastructure, constrain our access to advanced technology, or impair our ability to serve international customers effectively. For example, new tariffs on semiconductors, networking equipment, or energy-related inputs could materially increase our cost base, limit our pricing flexibility, and reduce demand for our services. While we seek to mitigate these risks through diversified sourcing, strategic partnerships, and long-term power and technology agreements, many of these factors remain outside our control.
***Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense.***
Our go-to-market strategy targets AI developers’ implementation and acceleration needs through multiple sales channels. We use top-down sales for enterprise decision makers and bottom-up approaches for developers with varied requirements. Our channels include digital sales, reseller partnerships, and customer aggregation through machine learning operations shops that connect clients with reliable infrastructure providers. Customers often view the purchase of our platform as a significant strategic decision and, as a result, frequently require considerable time to evaluate, test, and qualify our platform prior to entering into or expanding a relationship with us. Large enterprises in particular, often undertake a significant evaluation process that further lengthens our sales cycle.
Our direct sales team develops relationships with our customers, and works on account penetration, account coordination, sales, and overall market development. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce a sale. Cloud infrastructure capacity purchases are frequently subject to budget constraints, multiple approvals, and unanticipated administrative, processing, and other delays. As a result, it is difficult to predict whether and when a sale will be completed. The failure of our efforts to secure sales after investing resources in a lengthy sales process would adversely affect our business, operating results, financial condition, and future prospects.
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***The sales prices of our offerings may decrease, which may reduce our margins and adversely affect our business, operating results, financial condition, and future prospects.***
We have limited experience with respect to determining the optimal prices for our platform. As the market for cloud infrastructure and AI and machine learning solutions mature, or as new competitors introduce new infrastructure solutions or services that are similar to or compete with ours, we may be unable to effectively optimize our prices through increases or decreases or attract new customers at our offered prices or based on the same pricing model as we have used historically. Further, competition continues to increase in the market segments in which we participate, and we expect competition to further increase in the future, thereby leading to increased pricing pressures. Larger competitors with more diverse offerings may reduce the price of any offerings that compete with ours or may bundle them with other solutions and services. This could lead customers to demand greater price concessions or additional functionality at the same price levels. As a result, in the future we may be required to reduce our prices or provide more features and services without corresponding increases in price, which would adversely affect our business, operating results, financial condition, and future prospects.
***Existing and future acquisitions, strategic investments, partnerships, or alliances could be difficult to identify and integrate, divert the attention of key management personnel, disrupt our business, dilute shareholder value, and adversely affect our business, operating results, financial condition, and future prospects.***
We may make investments in and/or acquire complementary companies, services, products, technologies, or talent. All acquisitions and venture investments are subject to a risk of partial or total loss of investment capital. Our ability as an organization to acquire and integrate other companies, services, or technologies in a successful manner is not guaranteed.
In the future, we may not be able to find suitable acquisition candidates, and we may not be able to complete such acquisitions on favorable terms, if at all. Our due diligence efforts may fail to identify all of the challenges, problems, liabilities, or other shortcomings involved in an acquisition. Further, current and future changes to the U.S. and foreign regulatory approval process and requirements related to acquisitions may cause approvals to take longer than anticipated, not be forthcoming or contain burdensome conditions, which may prevent the transaction or jeopardize, delay or reduce the anticipated benefits of the transaction, and impede the execution of our business strategy. If we do complete acquisitions, we may not ultimately strengthen our competitive position or ability to achieve our business objectives, and any acquisitions we announce or complete could be viewed negatively by our customers or investors.
In addition, if we are unsuccessful at integrating future acquisitions, or the technologies and personnel associated with such acquisitions into our company, the business, operating results, financing condition, and future prospects of the combined company could be adversely affected. Any integration process may require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, causing unanticipated write-offs or accounting (including goodwill) charges. Additionally, integrations could take longer than expected, or if we move too quickly in trying to integrate an acquisition, strategic investment, partnership, or other alliance, we may fail to achieve the desired efficiencies.
We have, and may in the future have, to pay cash, incur debt, issue equity securities or provide computing services, to pay for any such acquisition, each of which could adversely affect our financial condition and the market price of our common stock. The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our shareholders, which, depending on the size of the acquisition, may be significant. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede our ability to manage our operations.
Furthermore, our ability to make acquisitions and finance acquisitions through the sale of equity or issuance of debt is limited by certain restrictions contained in our debt agreements.
Additional risks we may face in connection with acquisitions, including our recent acquisition of The Cloud Minders, Inc., include:
- diversion of management’s time and focus from operating our business to addressing acquisition integration challenges;
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- the inability to coordinate research and development and sales and marketing functions;
- the inability to integrate solution and service offerings;
- retention of key employees from the acquired company;
- changes in relationships with strategic partners or the loss of any key customers or partners as a result of acquisitions or strategic positioning resulting from the acquisition;
- cultural challenges associated with integrating employees from the acquired company into our organization;
- integration of the acquired company’s accounting, customer relationship management, management information, human resources, and other administrative systems;
- the need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures, and policies;
- unexpected security risks or higher than expected costs to improve the security posture of the acquired company;
- higher than expected costs to bring the acquired company’s IT infrastructure up to our standards;
- additional legal, regulatory, or compliance requirements;
- financial reporting, revenue recognition, or other financial or control deficiencies of the acquired company that we do not adequately address and that cause our reported results to be incorrect;
- liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities;
- failing to achieve the expected benefits of the acquisition or investment; and
- litigation or other claims in connection with the acquired company, including claims from or against terminated employees, customers, current and former shareholders, or other third parties.
Our failure to address these risks or other problems encountered in connection with acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities, and harm our business generally.
***Our estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business could fail to grow at similar rates, if at all.***
The estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate. Market opportunity estimates and growth forecasts included in this prospectus, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate, including the risks described herein. Even if the markets in which we compete achieve the forecasted growth, our business could fail to grow at similar rates, if at all. Further, if AI is not broadly adopted by enterprises to the extent we expect, or if new use cases do not arise, then our opportunity may be smaller than we expect.
The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of addressable customers covered by our market opportunity estimates will purchase our platform at all or generate any particular level of revenue for us. Any expansion in the markets in which we operate depends on a number of factors, including the cost, performance, and perceived value associated with our platform and those of our competitors. Even if the markets in which we compete meet the size estimates and growth forecast, our business could fail to grow at similar rates, if at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, our forecasts of market growth included in this prospectus should not be taken as indicative of our future growth.
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***We have in the past, and may in the future, enter into collaborations or strategic alliances with third parties. If we are unsuccessful in establishing or maintaining strategic relationships with these third parties or if these third parties fail to deliver certain operational services, our business, operating results, financial condition, and future prospects could be adversely affected.***
We have in the past, and may in the future, enter into collaborations or strategic alliances with third parties in connection with the development, operation, and enhancements to our platform and the provision of our solutions and services. Identifying strategic relationships with third parties, and negotiating and documenting relationships with them, may be time-consuming and complex and may distract management. Moreover, we may be delayed, or may not be successful, in achieving the objectives that we anticipate as a result of such strategic relationships. In evaluating counterparties in connection with collaborations or strategic alliances, we consider a wide range of economic, legal, and regulatory criteria depending on the nature of such relationship, including the counterparties’ reputation, operating results, and financial condition, operational ability to satisfy our and our customers’ needs in a timely manner, efficiency and reliability of systems, certifications costs to us or to our customers, and licensure and compliance status. Despite this evaluation, third parties may still not meet our or our customers’ needs which may adversely affect our ability to deliver solutions and services to customers and may adversely impact our business, operating results, financial condition, and future prospects. Counterparties to any strategic relationship may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals, and may subject us to additional risks to the extent such third party becomes the subject of negative publicity, faces its own litigation or regulatory challenges, or faces other adverse circumstances. Conflicts may arise with our strategic partners, such as the interpretation of significant terms under any agreement, which may result in litigation or arbitration which would increase our expenses and divert the attention of our management. If we are unsuccessful in establishing or maintaining strategic relationships with third parties, our ability to compete or to grow our revenue could be impaired and our business, operating results, financial condition, and future prospects could be adversely affected.
***The anticipated benefits of potential joint ventures may not be fully realized or take longer to realize than expected. In addition, our joint venture investments could expose us to risks and liabilities in connection with the formation of the new joint ventures, the operation of such joint ventures without sole decision-making authority, and our reliance on joint venture partners who may have economic and business interests that are inconsistent with our business interests.***
We may enter into joint ventures in the future, including to develop and operate data centers. Certain sites that are intended to be utilized in joint ventures require investment for development. The success of these joint ventures will also depend, in part, on the successful development of the data center sites, and we may not realize all of the anticipated benefits. Such development may be more difficult, time-consuming, or costly than expected and could result in increased costs, decreases in the amount of expected revenues, and diversion of management’s time and energy, which could materially impact our business, operating results, financial condition, and future prospects. Additionally, if it is determined these sites are no longer desirable for the joint ventures, we would need to adapt such sites for other purposes.
The success of any joint ventures will depend, in part, on the successful relationship between us and our joint venture partners. A failure to successfully partner, or a failure to realize our expectations for the joint ventures, including any contemplated exit strategy from a joint venture, could materially impact our business, operating results, financial condition, and future prospects. These joint ventures could also be negatively impacted by inflation, supply chain issues, an inability to obtain financing on favorable terms or at all, an inability to fill the data center sites with customers as planned, and development and construction delays.
Further, in the future, we may co-invest with other third parties through partnerships, joint ventures, or other entities in the future. These joint ventures could result in our acquisition of non-controlling interests in, or shared responsibility for, managing the affairs of a property or portfolio of properties, partnership, joint venture, or other entity. We may be subject to additional risks, including:
- we may not have the right to exercise sole decision-making authority regarding the properties, partnership, joint venture, or other entity;
- if our partners become bankrupt or fail to fund their share of required capital contributions, we may choose to or be required to contribute such capital;
- our partners may have economic, tax, or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our interests or objectives;
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- our joint venture partners may take actions that are not within our control, which could require us to dispose of the joint venture asset or purchase the partner’s interests or assets at an above-market price;
- our joint venture partners may take actions unrelated to our business agreement but which reflect poorly on us because of our joint venture relationship;
- disputes between us and our partners may result in litigation or arbitration that would increase our expenses and prevent our management from focusing their time and effort on our day-to-day business;
- we may in certain circumstances be liable for the actions of our third-party partners or guarantee all or a portion of the joint venture’s liabilities, which may require us to pay an amount greater than its investment in the joint venture;
- we may need to change the structure of an established joint venture or create new complex structures to meet our business needs or the needs of our partners which could prove challenging; and
- a joint venture partner’s decision to exit the joint venture may not be at an opportune time for us or in our business interests.
Each of these factors may result in returns on these investments being less than we expect or in losses, and business, operating results, financial condition, and future prospects may be adversely affected.
***Future acquisitions could include real property and subject us to the general risks associated with the ownership of real property.***
We currently lease all of our data centers and office locations. However, we could in the future make acquisitions that include real property, which would most likely be one or more data centers. As a result of any such acquisition, we would directly own real property and become subject to the general risks associated with the ownership of real property, including:
- changes in governmental laws and regulations, including the Americans with Disabilities Act and zoning ordinances, and the related costs of compliance;
- increased upfront costs of purchasing real property;
- the ongoing need for repair, maintenance and capital improvements;
- natural disasters, including earthquakes, floods and other natural disasters, and acts of war or terrorism;
- general liability, property and casualty losses, some of which may be uninsured;
- liabilities for clean-up of undisclosed environmental contamination; and
- liabilities incurred in the ordinary course of business.
***If negative publicity arises with respect to us, our employees, former employees, founders, investors, affiliates, third-party suppliers, service providers, or our partners, our business, operating results, financial condition, and future prospects could be adversely affected, regardless of whether the negative publicity is true.***
Negative publicity about our company or our platform, solutions, or services, even if inaccurate or untrue, could adversely affect our reputation and the confidence in our platform, solutions, or services, which could harm our business, operating results, financial condition, and future prospects. Harm to our reputation can also arise from many other sources, including employee misconduct, which we have experienced in the past, and misconduct by our partners, contractors, suppliers, and outsourced service providers. Additionally, negative publicity with respect to our partners or service providers could also affect our business, operating results, financial condition, and future prospects to the extent that we rely on these partners or if our customers or prospective customers associate our company with these partners.
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***Our ability to maintain customer satisfaction depends in part on the quality of our customer support and cloud operations services. Our failure to maintain high-quality customer support and cloud operations services could have an adverse effect on our business, operating results, financial condition, and future prospects.***
We believe that the successful use of our platform requires a high level of support and engagement for many of our customers. In order to deliver appropriate customer support and engagement, we must successfully assist our customers in deploying and continuing to use our platform, resolve performance issues, address interoperability challenges with the customers’ existing IT infrastructure, and respond to security threats and cyber-attacks and performance and reliability problems that may arise from time to time. Increased demand for customer support and cloud operations services, without corresponding increases in revenue, could increase our costs and adversely affect our business, operating results, financial condition, and future prospects.
Furthermore, there can be no assurance that we will be able to hire sufficient support personnel as and when needed, particularly if our sales exceed our internal forecasts. We expect to increase the number of our customers, and that growth may put additional pressure on our customer support and cloud operations services teams. Our customer support and cloud operations services teams may need additional personnel to respond to customer demand. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for services. To the extent that we are unsuccessful in hiring, training, and retaining adequate support resources, our ability to provide high-quality and timely support to our customers will be negatively impacted, and our customers’ satisfaction and their purchase of our infrastructure could be adversely affected.
In addition, if we grow our operations and expand outside of the United States, we need to be able to provide efficient services that meet our customers’ needs globally at scale, and our customer support and cloud operations services teams may face additional challenges, including those associated with operating the platforms and delivering support, training, and documentation in languages other than English and providing services across expanded time-zones. If we are unable to provide efficient customer support services globally at scale, our ability to grow our operations may be harmed, and we may need to hire additional services personnel which could increase our expenses, and negatively impact our business, financial condition, operating results, and future prospects.
**Risks Related to our People**
***We rely on our management team and other key employees and will need additional personnel to grow our business, and the loss of one or more key employees or our inability to attract and retain qualified personnel, including members of our Board of Directors, could harm our business.***
Our future success is dependent, in part, on our ability to hire, integrate, train, manage, retain, and motivate the members of our management team and other key employees throughout our organization as well as members of our Board of Directors (the “Board”). The loss of key personnel, particularly Michael Maniscalco, our Chief Executive Officer; Scott Krosnowski, our Chief Financial Officer; Ankur Chatterjee, our Chief Integration Officer; Ryan DiRocco, our Chief Technology Officer; or Stephen Hunton, our Chief Marketing Officer – as well as key marketing, sales, finance, support, network development, or technology advisors and personnel – could disrupt our operations and have an adverse effect on our ability to grow our business.
Mr. Maniscalco, Mr. DiRocco, and Mr. Hunton were recently appointed to their positions. Transitions in executive leadership may result in strategic business and operational changes, shifts in personnel priorities and/or uncertainty among employees, customers or investors. Any failure to effectively manage these transitions could impact continuity, delay initiatives, or reduce morale. Such turnover can also disrupt long-term customer relationships, strategic execution, or internal governance.
Competition for highly skilled personnel is intense, and we may not be successful in hiring or retaining qualified personnel to fulfill our current or future needs. More generally, the technology industry, and the cloud infrastructure industry more specifically, is also subject to substantial and continuous competition for engineers with high levels of experience in designing, developing, and managing infrastructure and related services. Moreover, the industry in which we operate generally experiences high employee attrition. We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. In recent years, recruiting, hiring, and retaining employees with expertise in the AI computing industry has become increasingly difficult as the demand for AI computing infrastructure has increased as a result of the increase in AI and machine learning development, deployment, and demand. We may be required to provide more training to our personnel than we currently anticipate. Further, labor is subject to external factors that are beyond our control, including our industry’s highly competitive market for skilled workers and leaders, cost inflation, overall macroeconomics, and workforce participation rates. Should our competitors recruit our employees, our level of expertise and ability to execute our business plan would be negatively impacted. Moreover, many of the companies with which we compete for experienced personnel have greater resources than we have. Our competitors also may be successful in recruiting and hiring members of our management team, sales team, or other key employees, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms, or at all.
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In addition, job candidates and existing employees often consider the value of the equity awards and other compensation they receive in connection with their employment. If the perceived value of our compensatory package declines or is subject to significant value fluctuations, it may adversely affect our ability to attract and retain highly skilled employees. We may also change the composition of our compensation package to employees, including the amount or ratio of cash and equity compensation. Any increases to the amount of cash compensation will increase our cash expenditures, which may impact our business, operating results, financial condition, and future prospects. Further, our competitors may be successful in recruiting and hiring members of our management team or other key employees as well as directors, and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms, or at all. In recent years, the increased availability of hybrid or remote working arrangements has expanded the pool of companies that can compete for our employees and employment candidates. We have extended offer letters to certain key employees; however, these arrangements are on an “at-will” basis, meaning they may terminate their employment with us at any time, and we do not have employment agreements in place with all key employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects would be severely harmed.
***Our senior management team has limited experience managing a public company, and regulatory compliance may divert our attention from the day-to-day management of our business.***
The individuals who constitute our senior management team have limited experience managing a publicly traded company and limited experience complying with the increasingly complex laws pertaining to public companies. Our senior management team may not successfully or efficiently manage a public company subject to significant regulatory oversight and reporting obligations under United States securities laws. In particular, these obligations require substantial attention from our senior management team and could divert their attention from the day-to-day management of our business.
***We believe that our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity, and teamwork fostered by our culture, and our business may be harmed.***
We believe that our corporate culture has been, and will continue to be, a key contributor to our success. If we do not continue to maintain our corporate culture, which includes our focus on our customers, as we grow and evolve, including as we continue to grow in headcount, it could harm our ability to foster the drive, innovation, inclusion, creativity, and teamwork that we believe is important to support our growth. As we implement more complex organizational structures, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture, which could negatively impact our future success.
**Risks Related to Our Intellectual Property**
***Failure to obtain, maintain, protect, or enforce our intellectual property and proprietary rights could enable others to copy or use aspects of our platform without compensating us, which could harm our brand, business, operating results, financial condition, and future prospects.***
We rely on a combination of trademark, copyright, trade secret, unfair competition, and other related laws in the United States, as well as confidentiality agreements and contractual provisions with our customers, vendors, employees, and contractors to protect our technology and intellectual property rights. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our platform or obtain and use information that we regard as proprietary. In particular, protecting software-level innovations and process-oriented intellectual property presents inherent complexities. Unlike tangible assets, software and methodologies are often difficult to safeguard through traditional patent frameworks due to their intangible, dynamic, and iterative nature. We are unable to predict or assure that:
- our intellectual property rights will not lapse or be invalidated, circumvented, challenged, or, in the case of third-party intellectual property rights licensed to us, be licensed to others;
- our intellectual property rights will provide competitive advantages to us;
- rights previously granted by third parties to intellectual property licensed or assigned to us, including portfolio cross-licenses, will not hamper our ability to assert our intellectual property rights or hinder the settlement of currently pending or future disputes;
- any of our pending or future trademark applications will be issued or have the coverage originally sought;
- we will be able to enforce our intellectual property rights in certain jurisdictions where competition is intense or where legal protection may be weak; or
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- we have sufficient intellectual property rights to protect our solutions and services or our business.
We customarily enter into appropriate agreements with our employees, contractors, vendors, customers, and other partners, including but not limited to confidentiality and project-specific agreements, and we make significant efforts to protect and control access to our proprietary and other sensitive information. However, such agreements may not be enforceable in full or in part in all jurisdictions and any breach could negatively affect our business and our remedy for such breach may be limited. The contractual provisions that we enter into may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or intellectual property rights. Lastly, the measures we employ to limit the access and distribution of our proprietary information may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property. As such, we cannot guarantee that the steps taken by us will prevent infringement, violation, or misappropriation of our technology.
We pursue the registration of our trademarks, service marks, and domain names in the United States. These processes are expensive and may not be successful in all jurisdictions or for every such application, and we may not pursue such protections in all jurisdictions that may be relevant, for all our goods or services or in every class of goods and services in which we operate. As such, policing unauthorized use of our technology or platform is difficult. The loss of trade secret protection, for example, could make it easier for third parties to compete with our platform by copying functionality. Any changes in, or unexpected interpretations of, the trade secret and employment laws may compromise our ability to enforce our trade secret and intellectual property rights. In addition, we believe that the protection of our trademark rights is an important factor in product recognition, protecting our brand and maintaining goodwill and if we do not adequately protect our rights in trademarks from infringement, any goodwill that we have developed in those trademarks could be lost or impaired, which could harm our brand and our business. The legal systems of certain countries do not favor the enforcement of trademarks trade secrets, and other intellectual property and proprietary protection, which could make it difficult for us to stop the infringement, misappropriation, dilution, or other violation of our intellectual property or marketing of competing platforms, solutions, or services in violation of our intellectual property rights generally. Any changes in, or unexpected interpretations of, intellectual property laws may compromise our ability to enforce our intellectual property rights. If we fail to maintain, protect and enhance our intellectual property rights, our business, operating results, financial condition, and future prospects may be harmed.
In addition, defending our intellectual property rights through litigation might entail significant expense. Such litigation could result in substantial costs and diversion of resources and could negatively affect our business, operating results, financial condition, and future prospects. If we are unable to protect our proprietary rights, we could find ourselves at a competitive disadvantage to others who need not incur the additional expense, time, and effort required to create our platform and other innovative offerings that have enabled us to be successful to date. Moreover, we may need to expend additional resources to defend our intellectual property rights in foreign countries, and our inability to do so could impair our business or adversely affect our international expansion.
***Third parties may claim that our platform infringes, misappropriates, or otherwise violates their intellectual property rights, and such claims could be time-consuming or costly to defend or settle, result in the loss of significant rights, or harm our relationships with our customers or reputation in the industry.***
Third parties may in the future claim that our current or future offerings infringe their intellectual property rights, and such claims may result in legal claims against us, our third-party partners, and our customers. These claims may be time consuming, costly to defend or settle, damage our brand and reputation, harm our customer relationships, and create liability for us. Contractually, we are expected to indemnify our partners and customers for these types of claims. We expect the number of such claims (whether warranted or not) to increase, particularly as a public company with an increased profile and visibility, as the level of competition in our market grows, as the functionality of our offerings overlap with that of other cloud infrastructure companies, and as the volume of issued hardware and software patents and patent applications continues to increase. We generally agree in our customer and partner contracts to indemnify customers for certain expenses or liabilities they incur as a result of third-party intellectual property infringement claims associated with our platform. To the extent that any claim arises as a result of third-party technology we have licensed for use in our platform, we may be unable to recover from the appropriate third party any expenses or other liabilities that we incur.
Companies in the cloud infrastructure and technology industries, including some of our current and potential competitors, may own large numbers of patents, copyrights, trademarks, and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. In addition, many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, patent holding companies, non-practicing entities, and other adverse patent owners that are not deterred by our existing intellectual property protections have sought, and may in the future seek, to assert patent claims against us. From time to time, third parties, including certain of these leading companies, may invite us to license their patents and may, in the future, assert patent, copyright, trademark, or other intellectual property rights against us, our third-party partners, or our customers. We may in the future receive notices that claim we have misappropriated, misused, or infringed other parties’ intellectual property rights, and, to the extent we gain greater market visibility, we face a higher risk of being the subject of intellectual property infringement claims.
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There may be third-party intellectual property rights that cover significant aspects of our technologies or business methods and assets. In the event that we engage software engineers or other personnel who were previously engaged by competitors or other third parties, we may be subject to claims that those personnel inadvertently or deliberately incorporate proprietary technology of third parties into our platform or have improperly used or disclosed trade secrets or other proprietary information. We may also in the future be subject to claims by our third-party manufacturing partners, employees, or contractors asserting an ownership right in our intellectual property as a result of the work they performed on our behalf. In addition, we may lose valuable intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to develop, market, and support potential offerings and platform enhancements, which could severely harm our business.
Any intellectual property claims, with or without merit, could be very time-consuming, could be expensive to settle or litigate, and could divert our management’s attention and other resources. These claims could also subject us to significant liability for damages, potentially including treble damages if we are found to have willfully infringed patents or copyrights, and may require us to indemnify our customers for liabilities they incur as a result of such claims. These claims could also result in our having to stop using technology found to be in violation of a third party’s rights. We might be required to seek a license for the intellectual property, which may not be available on reasonable terms or at all. Even if a license were available, we could be required to pay significant royalties, which would increase our operating expenses. Alternatively, we could be required to develop alternative non-infringing technology, which could require significant time, effort, and expense, and may affect the performance or features of our platform. If we cannot license or develop alternative non-infringing substitutes for any infringing technology used in any aspect of our business, we would be forced to limit or stop sales of our platform and may be unable to compete effectively. Moreover, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Any of these results would adversely affect our business, operating results, financial condition, and future prospects.
***We license technology from third parties for the development of our solutions, and our inability to maintain those licenses could harm our business.***
We currently incorporate, and will in the future incorporate, technology that we license from third parties, including software, into our offerings. If we are unable to continue to use or license these technologies on reasonable terms, or if these technologies become unreliable, unavailable, or fail to operate properly, we may not be able to secure adequate alternatives in a timely manner or at all, and our ability to offer our solutions and remain competitive in our market would be harmed. Further, licensing technologies from third parties exposes us to increased risk of being the subject of intellectual property infringement and vulnerabilities due to, among other things, our lower level of visibility into the development process with respect to such technology and the care taken to safeguard against risks. We cannot be certain that our licensors do not or will not infringe on the intellectual property rights of third parties or that our licensors have or will have sufficient rights to the licensed intellectual property in all jurisdictions in which we may sell our platform. Some of our agreements with our licensors may be terminated by them for convenience, or otherwise provide for a limited term. If we are unable to continue to license technology because of intellectual property infringement claims brought by third parties against our licensors or against us, or if we are unable to continue our license agreements or enter into new licenses on commercially reasonable terms, our ability to develop and sell our platform containing or dependent on that technology would be limited, and our business, including our financial condition, cash flows, and operating results could be harmed.
Additionally, if we are unable to license technology from third parties, we may be forced to acquire or develop alternative technology, which we may be unable to do in a commercially feasible manner, or at all, and may require us to use alternative technology of lower quality or performance standards. This could limit or delay our ability to offer new or competitive offerings and increase our costs. Third-party software we rely on may be updated infrequently, unsupported, or subject to vulnerabilities that may not be resolved in a timely manner, any of which may expose our solutions to vulnerabilities. Any impairment of the technologies or of our relationship with these third parties could harm our business, operating results, financial condition, and future prospects.
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***Some of our technology stack incorporates*** “***open-source***” ***software, and failure to comply with the terms of the underlying open-source software licenses could adversely affect our business, results of operations, financial condition, and future prospects.***
We use open-source software in our solutions and services and may continue to do so in the future. In particular, we use open-source components in certain observability and deployment tools, such as Netbox, Observium, Zabbix, Ansible, Prometheus, and Docker. Certain open-source licenses contain requirements that we make available source code for modifications or derivative works we create. If we combine our proprietary software with open-source software in a certain manner, we could, under certain open-source licenses, be required to release the source code of our proprietary software to the public on unfavorable terms or at no cost. Any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract may allow our competitors to create similar products with lower development effort and time and, ultimately, could result in a loss of sales for us.
The use and distribution of open-source software may entail greater risks than the use of third-party commercial software, as open-source licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the code, which they are not typically required to maintain and update, and they can change the license terms on which they offer the open-source software. Although we believe that we have complied with our obligations under the applicable licenses for open-source software, it is possible that we may not be aware of all instances where open-source software has been incorporated into our proprietary software or used in connection with our solutions or our corresponding obligations under open-source. We take steps to monitor our use of open-source software in an effort both to comply with the terms of the applicable open-source licenses and to avoid subjecting our platform to conditions we do not intend, but there are risks associated with use of open-source software that cannot be eliminated and could negatively affect our business. We rely on multiple software programmers to design our proprietary software and, while we take steps to vet software before it is incorporated into our proprietary software and monitor the software incorporated into our proprietary software, we cannot be certain that our programmers have not incorporated open-source software into our proprietary software that we intend to maintain as confidential or that they will not do so in the future. In addition, the wide availability of source code used in our offerings could expose us to security vulnerabilities. Such use, under certain circumstances, could materially adversely affect our business, operating results, financial condition, and future prospects, as well as our reputation, including if we are required to take remedial action that may divert resources away from our development efforts.
On occasion, companies that use open-source software have faced claims challenging their use of open-source software or compliance with open-source license terms. There is evolving legal precedent for interpreting the terms of certain open-source licenses, including the determination of which works are subject to the terms of such licenses. The terms of many open-source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in ways that could impose unanticipated conditions or restrictions on our ability to commercialize any offerings incorporating such software. Moreover, we cannot ensure that our processes for controlling our use of open-source software in our platform will be effective. From time to time, we may face claims from third parties asserting ownership of, or demanding release of, the open-source software or derivative works that we developed using such software (which could include our proprietary source code), or otherwise seeking to enforce the terms of the applicable open-source license. These claims, regardless of validity, could result in time consuming and costly litigation, divert management’s time and attention away from developing the business, expose us to customer indemnity claims, or force us to disclose source code. Litigation could be costly for us to defend, result in paying damages, entering into unfavorable licenses, have a negative effect on our business, operating results. financial condition, and future prospects, or cause delays by requiring us to devote additional research and development resources to change our solution.
**Risks Related to Legal and Regulatory Matters**
***We are subject to laws, regulations, and industry requirements related to data privacy, data protection and information security, and user protection across different markets where we conduct our business and such laws, regulations, and industry requirements are constantly evolving and changing. Any actual or perceived failure to comply with such laws, regulations, and industry requirements, or our privacy policies, could harm our business.***
Various local, state, federal, and international laws, directives, and regulations apply to our collection, use, retention, protection, disclosure, transfer, and processing of personal information. These data protection and privacy laws and regulations are subject to uncertainty and continue to evolve in ways that could adversely impact our business. These laws have a substantial impact on our operations and compliance with new and existing laws may result in significant costs due to implementation of new processes, which could ultimately hinder our ability to grow our business by extracting value from our data assets.
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In the United States, state and federal lawmakers and regulatory authorities have increased their attention on the collection and use of user data. For example, in California, the California Consumer Privacy Act of 2018 (as amended, the “CCPA”) requires companies that hit certain broad revenue or data processing related thresholds to, among other things, provide new disclosures to California users, and affords such users new privacy rights such as the ability to opt-out of certain processing of personal information and expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used, and shared. The CCPA provides for civil penalties for violations, as well as a private right of action for security breaches that may increase security breach litigation. In addition, other states have enacted laws that contain obligations similar to the CCPA that have taken effect or will take effect in coming years and many others continue to propose similar laws, or are considering proposing similar laws. We cannot fully predict the impact of recently proposed or enacted laws or regulations on our business or operations, but compliance may require us to modify our data processing practices and policies incurring costs and expense. Further, to the extent multiple state-level laws are introduced with inconsistent or conflicting standards, it may require costly and difficult efforts to achieve compliance with such laws. Our failure or perceived failure to comply with state or federal privacy laws or regulations passed in the future could have a material adverse effect on our business, including how we use personal information, our business, operating results, financial condition, and future prospects and could expose us to regulatory investigations or possible fines.
Additionally, many foreign countries and governmental bodies, including the European Union, United Kingdom and Canada, have laws and regulations concerning the collection, use, processing, storage, and deletion of personal data obtained from their residents or by businesses operating within their jurisdiction. These laws and regulations often are more restrictive than those in the United States. Such laws and regulations may require companies to implement new privacy and security policies, permit individuals to access, correct, and delete personal information stored or maintained by such companies, inform individuals of security breaches that affect their personal information, require that certain types of data be retained on local servers within these jurisdictions, and, in some cases, obtain individuals’ affirmative opt-in consent to collect and use personal information for certain purposes. The increased focus on data sovereignty and data localization requirements around the world could also impact our business model with respect to the storage, management, and transfer of data.
We may become subject to the European Union’s General Data Protection Regulation and the United Kingdom’s General Data Protection Regulation (collectively, the “GDPR”), which comprehensively regulate our use of personal data, including cross-border transfers of personal data out of the European Economic Area (“EEA”) and the U.K. The GDPR imposes stringent privacy and data protection requirements and could increase the risk of non-compliance and the costs of providing our services in a compliant manner. A breach of the GDPR could result in regulatory investigations, reputational damage, fines and sanctions, orders to cease or change our processing of our data, enforcement notices, or assessment notices (for a compulsory audit).
Additionally, the European Union has recently adopted the EU AI Act, which establishes a comprehensive regulatory framework for the development, deployment, and use of artificial intelligence systems within the EU. Although the precise scope and requirements of the EU AI Act are still being clarified, it is expected to impose significant obligations on providers and users of AI systems, including risk assessments, transparency requirements, human oversight, and potential restrictions on certain high-risk AI applications. As we expand our operations or offer services to customers in the European Union, we may be required to comply with the EU AI Act and related regulations. Compliance may require us to implement new processes, invest in additional resources, or modify our AI-powered solutions, which could increase operational costs, delay product launches, or limit our ability to offer certain services in the EU. Failure to comply with the EU AI Act could result in substantial fines, regulatory investigations, and reputational harm.
We are also subject to evolving privacy laws governing cookies, tracking technologies, and e-marketing. In the United States, plaintiffs are increasingly making use of existing laws such as the California Invasion of Privacy Act to litigate use of tracking technologies. This could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, negatively impact our efforts to understand users, adversely affect our margins, increase costs, and subject us to additional liabilities.
There is a risk that as we expand, we may assume liabilities for breaches experienced by the companies we acquire. Additionally, there are potentially inconsistent world-wide government regulations pertaining to data protection and privacy. Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection, and information security, it is possible that our practices, offerings, or platform could fail, or be alleged to fail to meet applicable requirements. For instance, there are changes in the regulatory landscape relating to new and evolving technologies, such as generative AI. Changes to existing regulations, their interpretation or implementation, or new regulations could impede any potential use or development of AI Technologies, which could impair our competitive position and result in an adverse effect on our business, operating results, financial condition, and future prospects. Our failure, or the failure by our third-party providers or partners, to comply with applicable laws or regulations and to prevent unauthorized access to, or use or release of personal information, or the perception that any of the foregoing types of failure has occurred, even if unfounded, could subject us to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, severe criminal, or civil sanctions, damage our reputation, or result in fines or proceedings by governmental agencies and private claims and litigation, any of which could adversely affect our business, operating results, financial condition, and future prospects.
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***Our business is subject to a wide range of laws and regulations, and our failure to comply with those laws and regulations could harm our business.***
Our business is subject to regulation by various federal, state, local, and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety and environmental laws, including those related to energy usage and energy efficiency requirements, privacy and data protection laws, AI, financial services laws, anti-bribery laws, sanctions, national security, import and export controls, anti-boycott, federal securities laws, and tax laws and regulations.
For example, governmental authorities have in the past sought to restrict data center development based on environmental considerations and have imposed moratoria on data center development, citing concerns about energy usage, requiring new data centers to meet energy efficiency requirements. We may face higher costs from any laws requiring enhanced energy efficiency measures, changes to cooling systems, caps on energy usage, land use restrictions, limitations on back-up power sources, or other environmental requirements.
***We are subject to laws and regulations, including governmental export and import controls, sanctions, and anti-corruption laws, that could impair our ability to compete in our markets and subject us to liability if we are not in full compliance with applicable laws.***
We are subject to laws and regulations, including governmental export and import controls, that could subject us to liability or impair our ability to compete in other markets. Our platform and related technology are subject to U.S. export controls, including the U.S. Department of Commerce’s Export Administration Regulations (also known as “EAR”), and we and our employees, representatives, contractors, agents, intermediaries, and other third parties are also subject to various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control and other U.S. government agencies. Changes to sanctions, tariffs, and other export or import restrictions in the jurisdictions in which we operate could further impact our ability to do business in certain parts of the world and to do business with certain persons and entities, which could adversely affect our business, operating results, financial condition, and future prospects. In particular, we are continuing to monitor recent and forthcoming developments in export controls with respect to the semiconductor industry and their impact on our sourcing of equipment for our computing infrastructure.
We are also subject to the United States Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), and other anti-corruption, sanctions, anti-bribery, anti-money laundering, and similar laws. Anti-corruption and anti-bribery laws, which have been enforced aggressively and are interpreted broadly, prohibit companies and their employees, agents, intermediaries, and other third parties from promising, authorizing, making, or offering improper payments or other benefits to government officials and others in the public, and in certain cases, private sector. We cannot ensure that our policies and procedures to address compliance with FCPA and other anti-corruption, sanctions, anti-bribery, anti-money laundering, and similar laws, will be effective, or that all of our employees, representatives, contractors, partners, agents, intermediaries, or other third parties have not taken, or will not take actions, in violation of our policies and applicable law, for which we may be ultimately held responsible. Noncompliance with these laws could subject us to investigations, severe criminal or civil sanctions, settlements, prosecution, loss of export privileges, suspension or debarment from U.S. government contracts, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, whistleblower complaints, adverse media coverage, and other consequences. Any investigations, actions, or sanctions could harm our reputation, business, operating results, financial condition, and future prospects.
***We may become involved in litigation that may adversely affect us.***
From time to time, we may be subject to claims, suits, and other proceedings. Regardless of the outcome, legal proceedings can have an adverse impact on us because of legal costs and diversion of management attention and resources, and could cause us to incur significant expenses or liability, adversely affect our brand recognition, or require us to change our business practices. The expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change, and could adversely affect our business, operating results, financial condition, and future prospects. It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines, and penalties that would adversely affect our business, consolidated financial condition, operating results, or cash flows in a particular period. These proceedings could also result in reputational harm, sanctions, consent decrees, or orders requiring a change in our business practices. Because of the potential risks, expenses, and uncertainties of litigation, we may, from time to time, settle disputes, even where we have meritorious claims or defenses, by agreeing to settlement agreements. Because litigation is inherently unpredictable, we cannot ensure that the results of any of these actions will not have a material adverse effect on our business, operating results, financial condition, and prospects. Any of these consequences could adversely affect our business, operating results, financial condition, and future prospects.
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**Risks Related to Financial and Accounting Matters**
***There is uncertainty regarding our ability to continue as a going concern.***
Our independent registered public accounting firm included an explanatory paragraph in its report on our consolidated financial statements as of and for the year ended December 31, 2024, which stated that there is substantial doubt about our ability to continue as a going concern. As discussed in Note 1 to our condensed consolidated financial statements for the nine months ended September 30, 2025, we have recurring losses since inception resulting in an accumulated deficit of $32,425,045 as of September 30, 2025. Our plans in regard to these matters are also described in Note 1 to our consolidated financial statements. As a result of the uncertainty regarding our ability to continue as a going concern, there is increased risk that you could lose the entire amount of your investment in us. The financial statements included in this report do not include any adjustments that might result from the outcome of this uncertainty.
***We have identified material weaknesses in our internal control over financial reporting and cannot provide assurances that these weaknesses will be effectively remediated or that additional material weaknesses will not occur in the future.***
If our internal control over financial reporting or its disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, which may cause investors to lose confidence in our reported financial information and, once listed, may lead to a decline in our stock price.
Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of an evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the audit of our consolidated financial statements for the fiscal years ended December 31, 2024 and December 31, 2023, we identified certain control deficiencies in the design and implementation of our internal control over financial reporting that constituted material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We additionally identified significant deficiencies that did not amount to material weaknesses.
The material weaknesses we identified were (1) a lack of a formalized control environment and oversight of controls over financial reporting; (2) a lack of proper accounting for significant or non-recurring transactions, including in particular warrant evaluation and equity-related transactions; and (3) a lack of appropriate segregation of duties to permit appropriate review of accounting transactions and/or accounting treatment by multiple qualified individuals and to prevent one individual from being able to override the internal control environment by initiating, authorizing, and completing transactions. These material weaknesses, if not remediated, could result in a material misstatement of one or more disclosures in our annual or interim financial statements that would not be prevented or detected in a timely manner. In addition to the foregoing material weaknesses, we identified significant deficiencies in our accounting treatment of stock-based compensation expense and our lack of an enterprise resource planning system (“ERP”).
Our management is implementing measures designed to improve our internal control over financial reporting to remediate the identified material weaknesses. The remediation actions we are taking, and expect to take, to correct the lack of a formalized control environment and oversight of controls over financial reporting include the following: (1) in September 2025, we hired Michael Maniscalco as our Chief Executive Officer, Ryan DiRocco as our Chief Technology Officer, and Stephen Hunton as our Chief Marketing Officer, and appointed Stacy Kenworthy, Michael Mulica, David Rench and Barry Schwartz as independent directors of the Board to provide a foundation for a formal approval and control process; and (2) we are in the process of implementing an ERP and an accounts payable payment platform with a go-live planned for the first quarter of 2026. To correct the lack of proper accounting for significant or non-recurring transactions, we implemented Board approval on all warrant issuances and monthly recording of awards based on the latest 409(a) valuation, which policy will be updated once the direct listing is completed to instead be based on the Company’s stock price as reported by Nasdaq. The remediation actions we are taking, and expect to take, to correct the lack of appropriate segregation of duties include the following: (1) in September 2025, we hired a Senior Vice President, Finance; (2) we are in the process of implementing an ERP and an accounts payable platform, which will be placed into production in January 2026; (3) we have engaged Baker Tilly US, LLP to support Sarbanes-Oxley Act compliance beginning in 2026; and (4) we plan to hire a corporate controller in the first quarter of 2026. To resolve the significant deficiencies, in addition to the implementation of an ERP and an accounts payable platform, our Chief Financial Officer and Senior Vice President, Finance are reviewing option grants and stock-based compensation with the monthly close. We expect to incur approximately annual expenses of $675,000 to $825,000 in connection with all remediation activities.
While we are taking steps to remediate the material weaknesses and significant deficiencies, we cannot provide any assurance that such remedial measures, or any other remedial measures we take, will be effective. If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report our financial results, which may, among other adverse consequences, cause investors to lose confidence in our reported financial information and lead to a decline in our stock price. In addition, a material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively.
***We will incur significant increased costs and management resources as a result of operating as a public company.***
As a public company, we will incur significant legal, accounting, compliance, and other expenses that we did not incur as a private company. Our management and other personnel will need to devote a substantial amount of time and incur significant expense in connection with compliance initiatives. For example, in anticipation of becoming a public company, we will adopt additional internal controls and disclosure controls and procedures, retain a transfer agent, and adopt an insider trading policy. As a public company, we will bear all of the internal and external costs of preparing and distributing periodic public reports in compliance with our obligations under the securities laws.
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In addition, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act, and the related rules and regulations implemented by the SEC have increased legal and financial compliance costs and will make some compliance activities more time-consuming. We intend to invest resources to comply with evolving laws, regulations, and standards, and this investment will result in increased general and administrative expenses and may divert management’s time and attention from our other business activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, and our business may be harmed. In connection with this offering, we intend to increase our directors’ and officers’ insurance coverage, which will increase our insurance cost. In the future, it may be more expensive or more difficult for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain and maintain the same or similar coverage. These factors would also make it more difficult for us to attract and retain qualified members of our Board, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
***The unaudited pro forma financial information included in this prospectus is presented for illustrative purposes only and should not be viewed as a forecast of our financial condition or results of operations following our acquisition of The Cloud Minders, Inc.***
The unaudited pro forma financial information has been derived from the historical financial statements of the Company and TCM, and certain adjustments and assumptions have been made regarding the Company after giving effect to the acquisition. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with complete accuracy. Moreover, the unaudited pro forma financial information does not reflect all costs that may be incurred or savings to be achieved in connection with the acquisition. For example, neither the impact of any incremental costs incurred in integrating TCM’s operations into the Company, nor any potential cost savings is reflected in the unaudited pro forma financial information. As a result, the actual financial condition and results of operations of the Company following the acquisition will likely not be consistent with, may not be evident from, and may differ materially from, the unaudited pro forma financial information. In addition, the assumptions used in preparing the unaudited pro forma financial information may not prove to be accurate, and other factors may affect our financial conditions or results of operations following the acquisition. Shareholders should not place undue reliance on the pro forma financial information. Please refer to the section entitled “*Unaudited Pro Forma Condensed Combined Financial Information*” for more information.
***We could be subject to additional tax liabilities, and United States federal and global income tax reform could adversely affect us.***
We are subject to U.S. federal, state, and local income taxes, sales, and other taxes in the United States. Significant judgment is required in evaluating our tax positions and our provision for income taxes. During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination is uncertain. In addition, our future income tax obligations could be adversely affected by changes in, or interpretations of, tax laws in the United States or in other jurisdictions in which we may operate.
For example, the United States tax law legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”) significantly reformed the U.S. Internal Revenue Code of 1986, as amended (the “Code”), reducing U.S. federal tax rates, making sweeping changes to rules governing international business operations, and imposing significant additional limitations on tax benefits, including the deductibility of interest and the use of net operating loss (“NOL”) carryforwards. Effective for taxable years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act also required capitalization of research and certain software development expenses and amortization of such expenses over a period of five years if incurred in the United States and fifteen years if incurred outside the United States. On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted into law. The IRA contains certain tax measures, including a corporate alternative minimum tax of 15% on some large corporations and an excise tax of 1% on certain corporate stock buy-backs taking place after December 31, 2022.
On July 4, 2025, the U.S. enacted a budget reconciliation package known as the One Big Beautiful Bill Act of 2025 (“OBBBA”). The OBBBA includes the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act described above, modifications to the international tax framework and the restoration and continuation of favorable tax treatment for certain business provisions, including immediate expensing for domestic research expenditures paid or incurred beginning January 1, 2025. Additionally, the OBBBA allows accelerated tax deductions for qualified property by making permanent the 100% first-year bonus depreciation deduction that previously existed for purchases of tangible personal property with a recovery period of 20 years or less and allowing a similar 100% deduction for certain “qualified production property” that did not previously qualify for an immediate deduction. The OBBBA introduces other legislative changes, including the restoration of deductible net business interest expense under Code Section 163(j) to 30% of earnings before interest, taxes, depreciation and amortization (“EBITDA”) and again allowing an addback of depreciation and amortization in the calculation of the interest deduction limitation. The OBBBA also provides that certain capitalized interest will now be treated as a business interest expense subject to the Section 163(j) limitation. The OBBBA enacted the repeal or acceleration of the sunset of certain tax credits under the IRA and elimination of certain penalties for violations of certain regulatory credit programs. The OBBBA also makes significant changes to international tax provisions, including provisions addressing the global intangible low-taxed income (“GILTI”), foreign-derived intangible income (“FDII”), base erosion anti-abuse tax (“BEAT”) and controlled foreign corporation (“CFC”) rules. The Company is currently assessing the impact of the OBBBA on its consolidated financial statements. Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and may increase our effective tax rate, increase the amount of taxes imposed on our business, and harm our financial position. Such changes may also apply retroactively to our historical operations and result in taxes greater than the amounts estimated and recorded in our financial statements.
***Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.***
As of December 31, 2024, we had aggregate U.S. federal and state NOL carryforwards of $22,988,528 and $20,294,014, respectively, which may be available to offset future taxable income for U.S. income tax purposes. All NOLs were generated after the enactment of the Tax Cuts and Jobs Act and, as such, are carried forward indefinitely but can only be utilized to offset up to 80% of taxable income in any given year. Realization of these net operating loss depends on our future taxable income.
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In addition, under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% cumulative change (by value) in ownership by “5 percent shareholders” over a rolling three-year period, the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes, such as research and development credits, to offset its post-change income or taxes may be limited. We may experience ownership changes as a result of shifts in our stock ownership, including as a result of the offering. As a result, if we earn net taxable income, our ability to use our pre-change U.S. NOL carryforwards and other tax attributes to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. Similar provisions of state tax law may also apply to limit our use of accumulated state tax NOLs. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase our state income tax liabilities. As a result of the foregoing, even if we attain profitability, we may be unable to use all or a material portion of our NOLs and other tax attributes, which could adversely affect our future cash flows.
***We could be required to collect additional sales, use, value added, digital services, or other similar taxes or be subject to other liabilities with respect to past or future sales, that may increase the costs our customers would have to pay for our solutions and adversely affect our business, operating results, financial condition, and future prospects.***
We do not collect sales and use, value added, or similar taxes in all jurisdictions in which we have sales because we have determined in consultation with our advisors that our sales in certain jurisdictions are not subject to such taxes. Sales and use, value added, and similar tax laws and rates vary greatly by jurisdiction and the application of such laws is subject to uncertainty. Jurisdictions in which we do not collect such taxes may assert that such taxes apply to our sales and seek to impose incremental or new sales, use, value added, digital services, or assert other tax collection obligations on us, which could result in tax assessments, penalties, and interest, to us or our customers for past sales, and we may be required to collect such taxes in the future. If we are unsuccessful in collecting such taxes from our customers, we could be held liable for such costs, which may adversely affect our operating results.
Further, an increasing number of U.S. states have considered or adopted laws that attempt to impose tax collection obligations on out-of-state companies. A successful assertion by one or more U.S. states requiring us to collect taxes where we presently do not do so, or to collect more taxes in a jurisdiction in which we currently collect such taxes, could result in substantial liabilities, including taxes on past sales, as well as interest and penalties. Furthermore, certain foreign jurisdictions have enacted or proposed to enact a digital services tax, which is generally a tax on gross revenue generated from users or customers located in those jurisdictions, and other jurisdictions are considering enacting similar laws. A successful assertion by a U.S. state or local government or a foreign jurisdiction that we should have been or should be collecting additional sales, use, value added, digital services, or other similar taxes could, among other things, result in substantial tax payments, create significant administrative burdens for us, discourage potential customers from using our platform due to the incremental cost of any such sales or other related taxes, or otherwise harm our business.
***If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our operating results could be adversely affected.***
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as discussed in the section titled “*Management*’*s Discussion and Analysis of Financial Condition and Results of Operations*—*Critical Accounting Estimates*.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include but are not limited to those related to the identification of performance obligations in revenue recognition, the valuation of stock-based awards, the valuation of derivatives and warrants, and accounting for leases, property and equipment, income taxes and variable interest entities. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of industry or financial analysts and investors, resulting in a potential decline in the market price of our common stock.
Additionally, we regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. As a result of new standards, changes to existing standards, and changes in their interpretation, we might be required to change our accounting policies, alter our operational policies, and implement new or enhance existing systems so that they reflect new or amended financial reporting standards, or we may be required to restate our published financial statements. Such changes to existing standards or changes in their interpretation may have an adverse effect on our reputation, business, financial condition, and profit, or cause an adverse deviation from our revenue and operating profit target, which may adversely affect our financial results.
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**Risks Related to Our Indebtedness**
***Our substantial indebtedness could materially adversely affect our financial condition, our ability to raise additional capital to fund our operations, our ability to operate our business, our ability to react to changes in the economy or our industry, our ability to meet our obligations under our outstanding indebtedness and could divert our cash flow from operations for debt payments, and we may still incur substantially more indebtedness in the future.***
We have a substantial amount of debt, which requires significant interest and principal payments. As of September 30, 2025, our total indebtedness was $21,027,081. In addition to our substantial debt, we lease all of our data centers and certain equipment under lease agreements, some of which are accounted for as operating leases. As of September 30, 2025, we recorded operating lease liabilities of $1,613,104, which represents our obligation to make lease payments under those lease arrangements. We may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could increase. Specifically, our high level of debt could have important consequences, including the following:
- it may be difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt;
- our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions, or other general corporate purposes may be impaired;
- a substantial portion of cash flow from operations are required to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities, and other purposes;
- we could be more vulnerable to economic downturns and adverse industry conditions and our flexibility to plan for, or react to, changes in our business or industry is more limited;
- our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, may be compromised due to our high level of debt and the restrictive covenants in the agreements that govern our indebtedness;
- our ability to borrow additional funds or to refinance debt may be limited; and
- it may cause potential or existing customers to not contract with us due to concerns over our ability to meet our financial obligations under such contracts.
Our ability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial and operating performance, which in turn is affected by general and regional economic, financial, competitive, business and other factors, all of which are beyond our control, including the availability of financing in the banking and capital markets. We cannot ensure that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to service our debt, to refinance our debt or to fund our other liquidity needs. If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. Further, any refinancing or restructuring of our indebtedness could be at higher interest rates, may cause us to incur debt extinguishment costs, and may require us to comply with more onerous covenants that could further restrict our business operations. Moreover, in the event of a default, the holders of our indebtedness could elect to declare such indebtedness be due and payable. Financing through debt has historically been an important source of additional capital for us, and we may require additional financing to sustain our operations in the future, without which we may not be able to continue operations, and the terms of subsequent financings may adversely impact our stockholders.
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***Our indebtedness may impose significant operating and financial restrictions on us and our subsidiaries, which may prevent us from capitalizing on business opportunities.***
Our debt arrangements impose significant operating and financial restrictions on us, and future debt arrangements we may enter into may include similar restrictions. These restrictions may limit our ability and/or the ability of our subsidiaries to, among other things, sell, offer to sell or otherwise transfer collateral with out the lender’s prior written consent; pledge, mortgage, encumber or otherwise permit collateral to be subject to any lien, security interest, encumbrance or charge; or engage in any transactions that would constitute a change of control. These restrictions may prevent us from engaging in and capitalizing on business opportunities that may arise from time to time.
**Risks Related to this Direct Listing and Ownership of Our Common Stock**
***Our listing differs significantly from an initial public offering conducted on a firm-commitment basis.***
This is not an initial public offering of common stock conducted on a firm-commitment underwritten basis. This listing of our common stock on the Nasdaq Global Market tier of the Nasdaq Stock Market (“Nasdaq”) differs from a firm-commitment underwritten initial public offering in several significant ways, which include, but are not limited to, the following:
- There are no underwriters engaged on a firm-commitment basis. Consequently, prior to the opening of trading on Nasdaq, there will be no traditional book building process and no price at which underwriters initially sold shares to the public to help inform efficient and sufficient price discovery with respect to the opening trades on Nasdaq. Therefore, buy and sell orders submitted prior to and at the opening of trading of our common stock on Nasdaq will not have the benefit of being informed by a published price range or a price at which the underwriters initially sold shares to the public, as would be the case in an initial public offering underwritten on a firm-commitment basis. Moreover, there will be no underwriters engaged on a firm-commitment underwritten basis assuming risk in connection with the initial resale of shares of our common stock. In an initial public offering underwritten on a firm-commitment basis, the underwriters may engage in “covered” short sales in an amount of shares representing the underwriters’ option to purchase additional shares. To close a covered short position, the underwriters purchase shares in the open market or exercise the underwriters’ option to purchase additional shares. In determining the source of shares to close the covered short position, the underwriters typically consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the underwriters’ option to purchase additional shares. Purchases in the open market to cover short positions, as well as other purchases underwriters may undertake for their own accounts, may have the effect of preventing a decline in the market price of shares. Given that there will be no underwriters’ option to purchase additional shares and no underwriters engaging in stabilizing transactions, there could be greater volatility in the public price of our common stock during the period immediately following the listing.
- There is not a fixed number of securities available for sale. Therefore, there can be no assurance that any Registered Shareholders or other existing shareholders will sell any or all of their common stock and there may initially be a lack of supply of, or demand for, our common stock on Nasdaq. Alternatively, we may have a large number of Registered Shareholders or other existing shareholders who choose to sell their common stock in the near term resulting in an oversupply of our common stock, which could adversely impact the public price of our common stock once listed on Nasdaq.
- Other than our directors, officers and greater than 10% shareholders, none of our Registered Shareholders or other existing shareholders have entered into contractual lock-up agreements or other contractual restrictions on transfer that are applicable to the Direct Listing. Our directors, named executive officers and certain other shareholders are additionally subject to restrictions as to the number of shares of common stock each may dispose of in any given period. In a firm-commitment underwritten initial public offering, it is customary for an issuer’s officers, directors, and most of its other shareholders to enter into a 180-day contractual lock-up arrangement with the underwriters to help promote orderly trading immediately after listing. Consequently, any of our shareholders, with the exception of our directors, officers and greater than 10% shareholders, may sell any or all of their common stock at any time (subject to any restrictions under applicable law), including immediately upon listing. The shares being registered herein may be freely sold in market transactions following the listing and upon effectiveness of this registration statement, shares issued upon the exercise of the warrants may be freely sold upon effectiveness of a subsequent registration statement covering such shares, such shares may be freely sold in reliance on an exemption from registration subject to Rule 144 (“Rule 144”) under the Securities Act of 1933, as amended (the “Securities Act”). All the shares of common stock subject to stock options outstanding and reserved for issuance under the Global Digital Holdings, Inc. 2022 Option Plan (as amended, the “2022 Plan”) and the QumulusAI, Inc. 2025 Equity Incentive Plan (the “2025 Plan”) are expected to be registered on Form S-8 under the Securities Act and such shares are eligible for sale in the public markets, subject to the limitations applicable to affiliates under Rule 144. If such sales were to occur in significant quantities, it may result in an oversupply of our common stock in the market, which could adversely impact the public price of our common stock. See “*Our shares of common stock currently have no public market. An active trading market may not develop or continue to be liquid and the market price of our shares of common stock may be volatile*.” None of our shareholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Sales of substantial amounts of our common stock in the public markets by our founders, affiliates, or non-affiliates, or the perception that such sales might occur, could reduce the price that our common stock might otherwise attain and may dilute your voting power and your ownership interest in us.
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- We will not conduct a traditional “roadshow” with underwriters prior to the opening of trading on Nasdaq. Instead, we may host an investor day, as well as engage in certain other investor education meetings. In advance of the investor day, we will announce the date for such day over financial news outlets in a manner consistent with typical corporate outreach to investors. We will prepare an electronic presentation for this investor day, which will have content similar to a traditional roadshow presentation, and make one version of the presentation publicly available, without restriction, on a website. There can be no guarantees that the investor day and other investor education meetings will have the same impact on investor education as a traditional “roadshow” conducted in connection with a firm-commitment underwritten initial public offering. As a result, there may not be efficient price discovery with respect to our common stock or sufficient demand among investors immediately after our listing, which could result in a more volatile public price of our common stock.
Such differences from a firm-commitment underwritten initial public offering could result in a volatile market price for our common stock and uncertain trading volume and may adversely affect your ability to sell your common stock.
***The direct listing process differs from an initial public offering underwritten on a firm-commitment basis and the impact of awareness of our brand and investor recognition of our Company on the demand for our common stock is unpredictable and our marketing and brand development efforts may not be successful.***
As stated elsewhere in this prospectus, we will not conduct a traditional “roadshow” with underwriters prior to the opening of trading of our common stock on Nasdaq. Instead, we may engage in certain investor presentations and educational meetings to enhance our brand awareness and investor recognition of our Company. In advance of any investor presentation or educational meeting, we will announce the date for such presentation or meeting through financial news outlets in a manner consistent with typical corporate outreach to investors. We will prepare an electronic presentation for any investor presentation or educational meeting that we hold, and will make the presentation publicly available, without restriction, on a website.
There can be no assurance that any investor presentations or other educational meetings that we hold will have the same impact on awareness of our brand and investor recognition of our Company as a traditional “roadshow” conducted in connection with a firm-commitment underwritten initial public offering. As a result, there may not be efficient price discovery with respect to our common stock or sufficient demand among investors immediately following our listing, which could result in a more volatile public price of our common stock.
***Limitations on investors***’ ***ability to trace their shares to this registration statement may preclude claims under Sections 11 and 12 of the Securities Act, potentially reducing our liability exposure and limiting investors***’ ***remedies.***
Historically, shareholders who purchase securities pursuant, or “traceable,” to a registration statement filed in connection with an underwritten public offering have had standing to assert claims against the issuer and others under the Securities Act. However, due to the different structure and mechanics of a direct listing, investors may be unable to “trace” their shares to this registration statement, which may preclude claims under Sections 11 and 12 of the Securities Act. The U.S. Court of Appeals for the Ninth Circuit ruled in *Pirani v. Slack Technologies, Inc.*, No. 20-16418 (9th Cir. 2021) (the “Slack Standing Case”) that investors in a direct listing do have standing to sue under the Securities Act, rejecting the contrary argument that investors cannot trace their securities to the registration in a direct listing and thus lack standing to bring claims under the Securities Act. Thereafter, the U.S. Supreme Court heard an appeal of the Slack Standing Case, and issued its opinion on June 1, 2023 in *Slack Technologies LLC, FKA Slack Technologies, Inc. v. Pirani, et al.*, Case No. 22-200. The U.S. Supreme Court held that Section 11 of the Securities Act “requires a plaintiff to plead and prove that he purchased shares traceable to the allegedly defective registration statement,” as opposed to unregistered shares. The U.S. Supreme Court then remanded the case to the U.S. Court of Appeals for the Ninth Circuit to decide whether the plaintiff’s pleadings satisfy Section 11(a) of the Securities Act. The Supreme Court also declined to resolve the parties’ dispute regarding the viability of claims under Section 12 of the Securities Act. The U.S. Court of Appeals for the Ninth Circuit, in its 2025 opinion on remand, confirmed that the tracing requirement applies in the context of direct listings and that tracing shares to a registration statement is particularly difficult where registered and unregistered shares begin trading at the same time. Accordingly, if you purchase our common stock in the open market following this direct listing, you may not be able to assert claims under Section 11 or Section 12(a)(2) of the Securities Act for any material misstatements or omissions in this registration statement or related prospectus. This limitation may reduce the potential remedies available to investors, limit recovery in the event of a violation of the federal securities laws, and adversely affect the market price of our common stock. Moreover, because our potential liability under the Securities Act may be reduced as compared to a traditional initial public offering, investors may face greater risk in the event of inaccurate or incomplete disclosures.
***Our shares of common stock currently have no public market. An active trading market may not develop or continue to be liquid and the market price of our shares of common stock may be volatile.***
We expect our shares of common stock to be listed and traded on Nasdaq. We will not be involved in the price setting process and the Registered Shareholders will not be involved in the price setting process. Additionally, the price of our shares in prior private transactions may have little or no relation to the opening price and subsequent public price of our stock on Nasdaq. We have engaged a third-party firm to conduct a valuation pursuant to Nasdaq’s listing qualification rules and requirements. Prior to the listing on Nasdaq, there has not been a public market for our shares of common stock, and an active market for our shares of common stock may not develop or be sustained after the listing, which could depress the market price of our shares of common stock and could affect the ability of our shareholders to sell our shares of common stock. In the absence of an active public trading market, investors may not be able to liquidate their investments in our shares of common stock. An inactive market may also impair our ability to raise capital by selling our shares of common stock, our ability to motivate our employees through equity incentive awards and our ability to acquire other companies, products or technologies by using our shares of common stock as consideration.
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In addition, we cannot predict the prices at which our shares of common stock may trade on Nasdaq following the listing of our shares of common stock, and the market price of our shares of common stock may fluctuate significantly in response to various factors, some of which are beyond our control. In particular, as this listing is taking place through a novel process that is not a firm-commitment underwritten initial public offering, there will be no traditional book building process and no price at which traditional underwriters initially sold shares to the public to help inform efficient price discovery with respect to the opening trades on Nasdaq. On the day that our shares of common stock are initially listed on Nasdaq, Nasdaq will begin accepting, but not executing, pre-opening buy and sell orders and will begin to continuously generate the indicative Current Reference Price (as defined below) on the basis of such accepted orders. The Current Reference Price is calculated each second and, during a 10-minute “Display Only” period, is disseminated, along with other indicative imbalance information, to market participants by Nasdaq on its NOII and BookViewer tools. Following the “Display Only” period, a “Pre-Launch” period begins, during which Chardan, in its capacity as our financial advisor, must notify Nasdaq that our shares are “ready to trade.” Once Chardan has notified Nasdaq that our shares of common stock are ready to trade, Nasdaq will confirm the Current Reference Price for our shares of common stock, in accordance with the Nasdaq rules. If Chardan then approves proceeding at the Current Reference Price, the applicable orders that have been entered will be executed at such price and regular trading of our shares of common stock on Nasdaq will commence, subject to Nasdaq conducting validation checks in accordance with Nasdaq rules. Chardan will determine when our shares of common stock are ready to trade and approve proceeding at the Current Reference Price primarily based on considerations of volume, timing and price. In particular, Chardan will determine, based primarily on pre-opening buy and sell orders, when a reasonable amount of volume will cross on the opening trade such that sufficient price discovery has been made to open trading at the Current Reference Price. If Chardan does not approve proceeding at the Current Reference Price (for example, due to the absence of adequate pre-opening buy and sell interest), Chardan will request that Nasdaq delay the open until such a time that sufficient price discovery has been made to ensure a reasonable amount of volume crosses on the opening trade. For more information, see “*Plan of Distribution*.”
Additionally, prior to the opening trade, there will not be a price at which underwriters initially sold shares of common stock to the public as there would be in a firm-commitment underwritten initial public offering. The absence of a predetermined initial public offering price could impact the range of buy and sell orders collected by Nasdaq from various broker-dealers. Consequently, upon listing on Nasdaq, the public price of our common stock may be more volatile than in a firm-commitment underwritten initial public offering and could decline significantly and rapidly.
Furthermore, because of our novel listing process on the Nasdaq Global Market, Nasdaq’s rules for ensuring compliance with its initial listing standards, such as those requiring a valuation or other compelling evidence of value, are untested. In the absence of a prior active public trading market for our common stock, if the price of our common stock or our market capitalization falls below those required by Nasdaq’s eligibility standards, we may not be able to satisfy the ongoing listing criteria and may be required to delist.
In addition, because of our novel listing process, individual investors, retail or otherwise, may have greater influence in setting the opening public price and subsequent public prices of our common stock on Nasdaq and may participate more in our initial trading than is typical for a firm-commitment underwritten initial public offering. These factors could result in a public price of our common stock that is higher than other investors (such as institutional investors) are willing to pay, which could cause volatility in the trading price of our common stock and an unsustainable trading price if the price of our common stock significantly rises upon listing and institutional investors believe our common stock is worth less than retail investors, in which case the price of our common stock may decline over time. Further, if the public price of our common stock is above the level that investors determine is reasonable for our common stock, some investors may attempt to short our common stock after trading begins, which would create additional downward pressure on the public price of our common stock. To the extent that there is a lack of consumer awareness among retail investors, such a lack of consumer awareness could reduce the value of our common stock and cause volatility in the trading price of our common stock.
The public price of our common stock following the listing also could be subject to wide fluctuations in response to the risk factors described in this prospectus and others beyond our control, including:
- the number of shares of our common stock publicly owned and available for trading;
- overall performance of the equity markets and/or publicly-listed companies that offer competing services and products;
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- actual or anticipated fluctuations in our revenue or other operating metrics;
- our actual or anticipated operating performance and the operating performance of our competitors;
- changes in the financial projections we provide to the public or our failure to meet these projections;
- failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet the estimates or the expectations of investors;
- any major change in our Board, management, or key personnel;
- the economy as a whole and market conditions in our industry;
- rumors and market speculation involving us or other companies in our industry;
- announcements by us or our competitors of significant innovations, new products, services, features, integrations or capabilities, acquisitions, strategic investments, partnerships, joint ventures, or capital commitments;
- new laws or regulations or new interpretations of existing laws or regulations applicable to our business, in the U.S. or globally;
- lawsuits threatened or filed against us;
- other events or factors, including those resulting from war, incidents of terrorism, or responses to these events and
- sales or expected sales of our common stock by us and our officers, directors and principal shareholders.
In addition, stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Stock prices of many companies have fluctuated in a manner often unrelated to the operating performance of those companies. These fluctuations may be even more pronounced in the trading market for our common stock shortly following the listing of our common stock on Nasdaq as a result of the supply and demand forces described above. In the past, shareholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and harm our business, results of operations and financial condition.
***Sales of substantial amounts of our common stock in the public markets by our directors, officers and substantial shareholders, or the perception that such sales might occur, could reduce the price that our common stock might otherwise attain.***
Sales of substantial amounts of our common stock in the public market by our directors, officers and substantial shareholders following our listing, or the perception that such sales may occur, could adversely affect the public price of our common stock and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate. As of September 30, 2025, we had 30,607,228 shares of common stock outstanding, [
- ] of which are “restricted securities” as that term is defined under Rule 144 of the Securities Act. Our directors, officers and greater than 10% shareholders have entered into contractual lock-up agreements with respect to an aggregate of [
- ] shares of common stock. Pursuant to the lock-up agreements, signatories irrevocably agree that, from the date thereof until 180 days following the date the common stock is first listed for trading on the Nasdaq Global Market in connection with the direct listing, the signatory will not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of any common stock or securities convertible, exchangeable or exercisable into shares of common stock beneficially owned, held or acquired by the signatory. Substantially all of the remaining shares may be immediately sold either by the Registered Shareholders pursuant to this prospectus or by our other existing shareholders under Rule 144 since such common stock will have been beneficially owned by non-affiliates who beneficially owned such common stock for at least one year. Moreover, once we have been a reporting company subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for 90 days and assuming the availability of certain public information about us, (i) a non-affiliate who has beneficially owned common stock for at least six months may rely on Rule 144 to sell their common stock, and (ii) an affiliate who has beneficially owned common stock for at least six months, including certain of the common stock covered by this prospectus to the extent not sold hereunder, would be entitled to sell within any three-month period a number of shares of common stock that does not exceed the greater of either of the following: (a) 1% of the number of common stock then outstanding, and (b) the average weekly reported volume of trading of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
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***Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans or otherwise will dilute all other shareholders.***
We expect to issue additional capital stock in the future that will result in dilution to all other shareholders. We expect to grant equity awards to employees, directors and consultants under the QumulusAI, Inc. 2025 Equity Incentive Plan. We may also raise capital through equity or convertible debt financings in the future. As part of our business strategy, we may acquire or make investments in companies, products or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause shareholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.
***We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.***
We do not intend to pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of the Board. Accordingly, you may need to rely on sales of our common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.
***In making your investment decision, you should understand that we and our advisors have not authorized any other party to provide you with information concerning us or this offering, and you should not rely on information in public media that is published by third parties, and you should rely only on statements made in this prospectus in determining whether to purchase our common stock following our listing.***
You should carefully evaluate all of the information in this prospectus. We may receive media coverage, including coverage that is not directly attributable to statements made by our officers and employees, that incorrectly reports on statements made by our officers or employees, or that is misleading as a result of omitting information provided by us, our officers or employees. We cannot confirm the accuracy of such coverage. We and our advisors have not authorized any other party to provide you with information concerning us or this offering. As a result, you should carefully evaluate all of the information in this prospectus and rely only on the information contained in this prospectus in determining whether to purchase our common stock following our listing.
***If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common stock, our stock price and trading volume could decline.***
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our common stock price may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our common stock price or trading volume to decline and our common stock to be less liquid.
***We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.***
As a company with less than $1.235 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. Therefore, we may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. As a result, if we elect not to comply with such reporting and other requirements, in particular the auditor attestation requirements, our investors may not have access to certain information they may deem important.
**General Risk Factors**
***Adverse global macroeconomic conditions, geopolitical risks, or reduced spending on AI and machine learning or on cloud infrastructure could adversely affect our business, operating results, financial condition, and future prospects.***
Our business depends on the overall demand for and adoption of AI and machine learning and cloud infrastructure and on the economic health of our current and prospective customers. In addition, the purchase of our platform is often discretionary and may involve a significant commitment of capital and other resources. Weak global and regional economic conditions, including United States and global macroeconomic issues, actual or perceived global banking and finance related issues, labor shortages, supply chain disruptions, rising interest rates and inflation, trade restrictions such as tariffs, spending environments, geopolitical instability, warfare and uncertainty, including the effects of the conflicts in the Middle East and Ukraine, and tensions between China and Taiwan, weak economic conditions in certain regions or a reduction in business spending, including spending on developing AI and machine learning capabilities and on cloud infrastructure, regardless of macroeconomic conditions, could adversely affect our business, operating results, financial condition, and future prospects, including resulting in longer sales cycles, a negative impact on our ability to attract and retain new customers, increase sales of our platform, or sell additional solutions and services to our existing customers, lower prices for our solutions and services, and slower or declining growth. Deterioration in economic conditions in any of the countries in which we do business could also cause slower or impaired collections on accounts receivable, which may adversely impact our business, operating results, financial condition, and future prospects.
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Geopolitical risks, including those arising from trade tension and/or the imposition of trade tariffs, terrorist activity, or acts of civil or international hostility, are increasing. Similarly, the potential for military conflict between China and Taiwan could have negative impacts on the global economy, including by affecting the supply of semiconductors from Taiwan, contributing to higher energy prices and creating uncertainty in the global capital markets. While we do not currently have employees or direct operations in Taiwan, our suppliers rely heavily on semiconductors supplied by Taiwan which are an important component of our platform and any reduction in that supply could materially disrupt our operations.
***We may be adversely affected by natural disasters, pandemics, and other catastrophic events, and by man-made problems such as war and regional geopolitical conflicts around the world, that could disrupt our business operations, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.***
Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce, and the global economy, and thus could have an adverse effect on us. Our business operations are also subject to interruption by fire, power shortages, flooding, and other events beyond our control. In addition, our global operations expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause our operating results to suffer. Further, acts of war, armed conflict, terrorism and other geopolitical unrest, such as the conflicts in the Middle East and Ukraine and tensions between China and Taiwan, could cause disruptions in our business or the businesses of our partners or the economy as a whole.
In the event of a natural disaster, including a major earthquake, blizzard, or hurricane, or a catastrophic event such as a fire, power loss, cyberattack, or telecommunications failure, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in development of our platform, lengthy interruptions in service, breaches of data security, and loss of critical data, all of which could have an adverse effect on our future operating results. Climate change could result in an increase in the frequency or severity of such natural disasters. Moreover, any of our office locations or data centers may be vulnerable to the adverse effects of climate change. These events can, in turn, have impacts on inflation risk, food security, water security, and on our employees’ health and well-being. Additionally, all the aforementioned risks will be further increased if we do not implement an effective disaster recovery plan or our partners’ disaster recovery plans prove to be inadequate.
***Investors***’ ***expectations of our performance relating to environmental, social, and governance factors may impose additional costs and expose us to new risks.***
There is an increasing focus from certain regulators, investors, employees, users, and other stakeholders concerning corporate responsibility, specifically related to environmental, social, and governance (“ESG”) matters. Some investors may use these non-financial performance factors to guide their investment strategies and, in some cases, may choose not to invest in us if they believe our policies and actions relating to corporate responsibility are inadequate. Further, there is particular focus on concerns relating to AI and its impact on the environment, including the power-intensive nature of the industry, high consumption of water, and reliance on critical minerals and rare elements, and we are focused on sustainability goals and initiatives to mitigate the environmental impacts of our operations. We may experience heightened scrutiny from our stakeholders and potential investors around these issues. We may also face reputational damage in the event that we do not meet the ESG standards set by various constituencies or fail, or are perceived to fail, in our achievement of our sustainability goals, initiatives, or commitments. Additionally, different stakeholder groups have divergent views on ESG matters, which increases the risk that any action or lack thereof with respect to ESG matters may be perceived negatively by at least some stakeholders and adversely impact our reputation and business.
Our sustainability initiatives, goals, or commitments could be difficult to achieve or costly to implement. If our competitors’ corporate social responsibility performance is perceived to be better than ours, potential, or current investors may elect to invest with our competitors instead. Our business may face increased scrutiny related to these activities and our related disclosures, including from the investment community, and our failure to achieve progress or manage the dynamic public sentiment and legal landscape in these areas on a timely basis, or at all, could adversely affect our reputation, business, and financial performance.
***We could be subject to securities class action litigation.***
In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which could adversely affect our business, operating results, or financial condition. Additionally, the dramatic increase in the cost of directors’ and officers’ liability insurance may cause us to opt for lower overall policy limits and coverage or to forgo insurance that we may otherwise rely on to cover significant defense costs, settlements, and damages awarded to plaintiffs, or incur substantially higher costs to maintain the same or similar coverage. These factors could make it more difficult for us to attract and retain qualified executive officers and members of our Board.
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**USE OF PROCEEDS**
The Registered Shareholders may, or may not, elect to sell shares of our common stock covered by this prospectus. To the extent any Registered Shareholder chooses to sell shares of our common stock covered by this prospectus, we will not receive any proceeds from any such sales of our common stock.
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**CAPITALIZATION**
The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2025.
This table should be read in conjunction with, and is qualified in its entirety by, reference to “*Summary Historical Financial and Other Data*,” “*Management*’*s Discussion and Analysis of Financial Condition and Results of Operations*” and our financial statements and related notes appearing elsewhere in this prospectus.
_As of September 30, 2025_
| | |
| --- | --- |
| Cash and cash equivalents | $18,237,794 |
| Shareholders’ equity: | |
| Common stock - no par value; 500,000,000 shares authorized, 30,624,990 shares issued and outstanding as of September 30, 2025 | 86,231,643 |
| Additional paid-in capital | 5,388,626 |
| Accumulated deficit | (32,425,045) |
| Total shareholders’ equity | 59,195,224 |
| Total capitalization | $77,433,018 |
The number of shares of our common stock reflected in the information set forth in the table above excludes:
- 691,859 shares of common stock issuable upon the exercise of warrants as of September 30, 2025, with a weighted average exercise price of $3.20 per share;
- 1,183,508 shares of common stock issuable upon the exercise of stock options under the 2022 Plan as of September 30, 2025, with a weighted average exercise price of $1.92 per share; and
- 1,461,307 shares of common stock reserved for issuance under the 2022 Plan as of September 30, 2025.
All the shares of common stock subject to stock options outstanding under the 2022 Plan are expected to be registered on Form S-8 under the Securities Act, and such shares are eligible for sale in the public markets, subject to Rule 144 under the Securities Act limitations applicable to affiliates.
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**UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**
**Summary of Transaction**
On April 1, 2025 (the “Effective Date”), the Company entered into Contribution and Exchange Agreements, as amended (together, the “Acquisition Agreement”), with shareholders of The Cloud Minders, Inc. (“TCM”), pursuant to which each TCM shareholder contributed all outstanding equity securities in TCM to the Company in exchange for equity securities of the Company. As a result, TCM became a wholly owned subsidiary of the Company, with 75% of the Company’s capital stock held by Company shareholders and 25% of the Company’s capital stock held by former TCM shareholders (the “Acquisition”). The Acquisition formally closed on the Effective Date.
**Pro Forma Information**
The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2025 and year ended December 31, 2024 combine the historical consolidated statements of operations of the Company and TCM, giving effect to the Acquisition as if it had occurred on January 1, 2024.
The following unaudited pro forma condensed combined financial information presents the combination of the financial information of the Company and TCM adjusted to give effect to the Acquisition. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by Release No. 33-10786, “*Amendments to Financial Disclosures about Acquired and Disposed Businesses*.”
The historical financial information of the Company was derived from the unaudited condensed financial statements of the Company for the nine months ended September 30, 2025 and the audited financial statements for the year ended December 31, 2024, included in this prospectus. The historical financial information of TCM was derived from the audited financial statements for the year ended December 31, 2024, included in this prospectus. This information should be read together with the Company’s and TCM’s financial statements and related notes and other financial information included elsewhere in this registration statement.
The Acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations” (“ASC 805”). The pro forma information has been prepared using the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America. The acquisition method of accounting is dependent upon certain valuations that are provisional and subject to change. The pro forma adjustments are based on the assumptions and information as of the date of this prospectus. The Company will finalize the acquisition accounting within the required measurement period, but no later than March 31, 2026.
The unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the integration of the two companies, if any. The unaudited pro forma condensed combined financial information is preliminary and has been prepared for informational purposes only and is not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had the Company and TCM been a combined company during the specified period.
The pro forma information should be read in conjunction with the accompanying notes to the pro forma information. The pro forma information is not necessarily indicative of what the financial position or results of operations would have been had the Acquisition occurred as of the dates indicated nor does it project the future financial position or operating results of the combined company.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025
| Line item | Qumulus | TCM | Pro Forma Adjustments | Pro Forma Condensed Combined |
| --- | --- | --- | --- | --- |
| Revenue | $8,057,476 | $1,341,079 | — | $9,398,555 |
| Costs and expenses: | | | | |
| Cost of revenue | 4,245,448 | 383,222 | — | 4,628,670 |
| General and administrative expenses | 6,320,009 | 1,596,378 | (23,542) | 7,892,845 |
| Depreciation and amortization expense | 3,358,079 | 509,201 | 44,241 | 3,911,521 |
| Total costs and expenses | 13,923,536 | 2,488,801 | 20,699 | 16,433,036 |
| Operating loss | (5,866,060) | (1,147,722) | (20,699) | (7,034,481) |
| Other income (expenses) | | | | |
| Income from equity method investments | 1,043,937 | — | 562,143 | 1,606,080 |
| Gain on remeasurement of investment in TCM | 14,549,536 | — | (14,549,536) | — |
| Change in fair value of warrant liability | (5,536,816) | — | — | (5,536,816) |
| Change in fair value of digital assets | 81,919 | — | — | 81,919 |
| Gain on disposal of property and equipment | 462 | — | — | 462 |
| Loss on settlement of lease liability | (692,837) | — | — | (692,837) |
| Loss on extinguishment of debt | (1,037,501) | — | — | (1,037,501) |
| Other income (expense), net | 24,771 | (433,759) | — | (408,988) |
| Interest expense, net | (1,450,812) | — | — | (1,450,812) |
| Total other income (expenses), net | 6,982,659 | (433,759) | (13,987,393) | (7,438,493) |
| Income (loss) before income tax expense | 1,116,599 | (1,581,481) | (14,008,092) | (14,472,974) |
| Income tax expense | 284,771 | — | — | 284,771 |
| Net income (loss) | 831,828 | (1,581,481) | (14,008,092) | (14,757,745) |
| Less deemed dividend on conversion of preferred stock | 89,386,947 | — | — | 89,386,947 |
| Net loss attributable to common stockholders | $(88,555,119) | $(1,581,481) | $(14,008,092) | $(104,144,692) |
| Net loss per share attributable to common stockholders, basis and diluted | $(5.36) | | | $(6.00) |
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2024
| Line item | Qumulus AI | TCM | Pro Forma Adjustments | Pro Forma Condensed Combined |
| --- | --- | --- | --- | --- |
| Revenue | $8,095,672 | $2,682,805 | — | $10,778,477 |
| Costs and expenses: | | | | |
| Cost of revenue | 5,371,049 | 3,486,147 | — | 8,857,196 |
| General and administrative expenses | 3,346,547 | 1,232,361 | 23,542 | 4,602,450 |
| Depreciation and amortization expense | 7,164,034 | 472,411 | 176,964 | 7,813,409 |
| Total costs and expenses | 15,881,630 | 5,190,919 | 200,506 | 21,273,055 |
| Operating loss | (7,785,958) | (2,508,114) | (200,506) | (10,494,578) |
| Other income (expenses): | | | | |
| (Loss) income from equity method investments | (274,270) | — | 1,279,268 | 1,004,998 |
| Gain on sale of equity method investments | 835,046 | — | — | 835,046 |
| Gain on sale of investment in joint venture | 155,286 | — | — | 155,286 |
| Change in fair value of warrant liability | (2,566,552) | — | — | (2,566,552) |
| Change in fair value of digital assets | 188,682 | — | — | 188,682 |
| Loss on disposal of property and equipment | (2,525,408) | — | — | (2,525,408) |
| Loss on extinguishment of debt | (83,757) | — | — | (83,757) |
| Other expenses, net | (7,947) | (1,007,992) | — | (1,015,939) |
| Interest expense, net | (1,119,496) | — | — | (1,119,496) |
| Total other income (expenses), net | (5,398,416) | (1,007,992) | 1,279,268 | (5,127,140) |
| Loss before income tax expense | (13,184,374) | (3,516,106) | 1,078,762 | (15,621,718) |
| Income tax expense | — | (541,064) | 541,064 | — |
| Net loss | $(13,184,374) | $(2,975,042) | 537,698 | $(15,621,718) |
| Net loss per share, basic and diluted | $(0.32) | | | $(0.95) |
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**NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION**
### **Note 1.** **Description of Transaction**
On April 1, 2025, the Company entered into the Acquisition Agreement with shareholders of TCM, pursuant to which each TCM shareholder contributed all outstanding equity securities in TCM to the Company in exchange for equity securities of the Company. As a result, TCM became a wholly owned subsidiary of the Company, with 75% of the Company’s capital stock held by Company shareholders and 25% of the Company’s capital stock held by former TCM shareholders. The Acquisition formally closed on the Effective Date. The Company expects TCM’s operations to diversify the Company’s revenue base beyond bitcoin mining and hosting. The addition of GPU-based infrastructure is anticipated to generate more stable, recurring revenue streams aligned with demand for high-performance computing resources across AI, machine learning, and data analytics sectors.
### **Note 2.** **Basis of Presentation**
*Pro Forma Presentation*
The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2025 and year ended December 31, 2024 combine the historical consolidated statements of operations of the Company and TCM, giving effect to the Acquisition as if it had occurred on January 1, 2024.
The unaudited pro forma condensed combined financial information (“pro forma information”) is based on, and should be read in conjunction with, the Company’s unaudited historical condensed consolidated financial statements for the nine months ended September 30, 2025 and the historical audited consolidated financial statements for the year ended December 31, 2024.
The historical consolidated financial information has been adjusted in the pro forma information to give effect to pro forma events that are directly attributable to the Acquisition, factually supportable, and with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the results of operations of the combined company of more than one year.
The Acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with ASC 805. The pro forma information has been prepared using the acquisition method of accounting in accordance with accounting principles generally accepted in the United States of America. Under the acquisition method of accounting, the Acquisition is accounted for by recognizing the acquired assets, including separately identifiable intangible assets, and assumed liabilities at their acquisition-date fair values. Any excess of the purchase consideration over the acquisition-date fair values of these identifiable assets and liabilities is recognized as goodwill. The pro forma adjustments are based upon the assumptions and information available at the time of the preparation as of the date of this prospectus and may be subject to change. The Company will finalize the acquisition accounting within the required measurement period, but no later than March 31, 2026. Differences between these estimates of fair value and the final acquisition accounting may occur, and those differences could have a material impact on the pro forma information and the combined company’s future results of operations and financial position. As of the date of this prospectus, the Company does not expect material changes to the assets acquired or liabilities assumed.
The unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the integration of the two companies, if any. The unaudited pro forma condensed combined financial information is preliminary and has been prepared for informational purposes only and is not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had the Company and TCM been a combined company during the specified period.
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*Accounting policies*
As part of preparing these unaudited pro forma condensed combined financial statements, certain reclassifications were made to align the Company and TCM’s financial statement presentation. Upon consummation of the Transaction, management performed a comprehensive review of the two entities’ accounting policies and concluded that the differences between the accounting policies of the two companies are not material. The accounting policies used in the presentation of the pro forma information are those disclosed in the Company’s unaudited condensed consolidated financial statements for the nine months ended September 30, 2025 and year ended December 31, 2024, respectively.
### **Note 3.** **Estimated Fair Value of Assets Acquired and Liabilities Assumed**
The unaudited pro forma condensed combined financial information includes various assumptions, including those related to the preliminary purchase price allocation of the assets acquired and liabilities assumed from TCM based on management’s best estimates of fair value. The final purchase price allocation may vary based on final valuations and analyses of the fair value of the acquired assets and assumed liabilities. Accordingly, the pro forma adjustments are preliminary.
The following table shows the preliminary allocation of the purchase price for TCM to the acquired identifiable assets, assumed liabilities and pro forma goodwill.
| Description | Fair Value |
| --- | --- |
| Total purchase price | $39,350,572 |
| Estimated fair value of assets acquired: | |
| Cash | $2,449,036 |
| Prepaid expenses | 96,029 |
| Property and equipment | 7,136,180 |
| Customer relationships | 411,700 |
| Trade name | 148,080 |
| In-process research & development (“IPR&D”) | 6,777,020 |
| Finance right-of-use assets, net | 5,820,225 |
| Total assets acquired | $22,838,270 |
| Estimated fair value of liabilities assumed: | |
| Accounts payable | 172,255 |
| Current portion of convertible note payable | 1,716,657 |
| Current portion of notes payable - related party | 104,713 |
| Accrued expenses and other current liabilities | 555,888 |
| Finance lease liabilities | 6,078,929 |
| Long-term notes payable, net of current portion | 6,268,321 |
| Total liabilities assumed | 14,896,763 |
| Goodwill | $31,409,066 |
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The pro forma condensed combined financial information does not include estimates of the impact of income taxes on net deferred tax assets or any related impacts to the Company’s valuation allowance. The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the combined company filed consolidated income tax returns during the periods presented.
### **Note 4.** **Adjustments to Unaudited Pro Forma Condensed Combined Financial Information**
The pro forma adjustments were based on the preliminary information available at the time of the preparation of the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined financial information, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the separate historical audited and unaudited financial statements of QumulusAI and TCM, as filed with the SEC and included elsewhere in this prospectus.
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Acquisition and has been prepared for informational purposes only. The Company includes transaction accounting adjustments in the unaudited pro forma condensed combined statements of operations as if they had occurred as of the earliest period presented, January 1, 2024.
***Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations***
The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2025 are as follows:
**A** Adjustments to remove the Company’s share of TCM’s net loss of $562,143 included in the Company’s statement of operations during the nine months ended September 30, 2025.
**B** Adjustments for the amortization of intangible assets of $44,241.
**C** Elimination of direct, incremental transaction costs of the Acquisition totaling $23,542 incurred by the Company during the nine months ended September 30, 2025.
**D** Elimination of gain on remeasurement of investment in TCM of $14,549,536. Prior to the acquisition of TCM, the Company owned a non-controlling stake in TCM and accounted for it as an equity method investment. When the Company acquired the remaining equity interests of TCM, the Company consolidated the entity as a wholly owned subsidiary and no longer accounted for it as an equity method investment. The Company marked the value of its investment in TCM to fair value immediately prior to the acquisition and recognized a gain of $14,549,536. This gain is non-recurring.
The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2024 are as follows:
**A** Adjustments to remove the Company’s share of TCM’s net loss of $1,279,268 included in the Company’s statement of operations during the year ended December 31, 2024.
**B** Adjustments for the amortization of intangible assets of $176,964.
**C** Adjustment to recognize direct, incremental transaction costs of the Acquisition totaling $23,542 incurred by the Company as if the Acquisition had occurred on January 1, 2024.
**D** Elimination of TCM tax benefit of $541,064. The TCM deferred tax asset will be offset by the Company’s valuation allowance.
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### **Note 5.** **Net Loss per Share**
The components of basic and diluted earnings per share were as follows:
| Line item | For the Nine Months Ended September 30, 2025 (1) | For the Year Ended December 31, 2024 (1) |
| --- | --- | --- |
| Numerator: | | |
| Pro forma net loss attributable to common stockholders | $(104,144,692) | $(15,621,718) |
| Denominator: | | |
| Weighted average shares outstanding - basic and diluted | 17,361,293 | 16,371,497 |
| Net loss per share: | | |
| Pro forma net loss per share - basic and diluted | $(6.00) | $(0.95) |
- *(1)* *Pro forma net loss attributable to common stockholders includes the related pro forma adjustments as referred to within the section* “*Unaudited Pro Forma Condensed Combined Financial Information.*”
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**Forward-Looking Statements**
*The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes to those statements that are included elsewhere in this prospectus. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as anticipate, estimate, plan, project, continuing, ongoing, expect, believe, intend, may, will, should, could, and similar expressions to identify forward-looking statements. See* “*Cautionary Note Regarding Forward-Looking Statements.*”
**Overview**
QumulusAI is a cloud infrastructure company specializing in rapid deployment of graphics processing unit (“GPU”)-powered solutions for artificial intelligence (“AI”) applications, serving a critical market that is often overlooked by large-scale cloud providers (“hyperscalers”), which operate massive, standardized computing infrastructures primarily serving the largest enterprises. Our platform delivers flexible, competitively priced, and customizable solutions for underserved small and mid-market customers—including machine learning teams, AI infrastructure startups, and research institutions—while also supporting the scale and complexity requirements of large enterprises, such as long-term deployments or supplemental on-demand compute capacity.
Originally established as a crypto-focused data center and power infrastructure company, we have evolved into a full-stack platform purpose-built for high-throughput, enterprise-grade compute. Leveraging our operational heritage in constructing and managing over 100 megawatts (“MW”) of high-density data center capacity, we are repurposing infrastructure previously used for cryptocurrency mining to meet accelerating AI demand while continuing to operate managed services for crypto mining infrastructure as a complementary, revenue-generating load management capability.
As of December 1, 2025, QumulusAI is headquartered in Marietta, Georgia. Here, we operate more than 800 GPUs across two colocation data centers, plus one in Kansas City, Missouri. We have secured rights of first refusal for 30 MW of information technology (“IT”) load capacity space for our GPU equipment and we are actively planning for expansion exceeding 120 MW of total IT load across our platform with potential to support over 90,000 NVIDIA B200/B300 GPUs (among the latest generation GPUs purpose-built for foundation model training), or as many as 1,500,000 GPUs optimized for AI inference at scale.
Additionally, in the aggregate, we operate approximately 60 MW of grid power with immediate access to more than 40 MW of additional grid power in Watonga, Oklahoma; Tulsa, Oklahoma; and Denton, Texas where we manage blockchain assets. These sites serve as foundational assets for power-intensive compute deployments and provide strategic flexibility for future infrastructure repurposing.
QumulusAI’s competitive edge lies in its end-to-end control of the infrastructure stack, encompassing:
- High-Performance Computing (“HPC”) Cloud Services
- Data Center Infrastructure and Hosting
- Power and Energy Integration
This vertically integrated model enables greater reliability, tighter cost control, and superior performance—advantages not easily matched by traditional providers that rely on fragmented supply chains.
The Company serves a broad range of customers, including enterprise machine learning teams, AI infrastructure startups, and research institutions. Use cases span training of foundation models, deployment of inference application programming interfaces (“APIs”), and long-horizon experimentation requiring predictable performance at scale.
QumulusAI reaches customers through a dual-channel approach. Marketplace provider partners (RunPod Inc. (“RunPod”), for example) manage orchestration and customer acquisition in exchange for a share of the total transaction value. When we sell through RunPod, we recognize 80% of the total transaction value as revenue and RunPod retains 20% under their standard service terms. Additionally, QumulusAI’s direct sales team engages enterprise clients through a self-service portal and technical onboarding support. This hybrid model optimizes utilization and enables both rapid scale and deep customer relationships.
**Full-Stack AI Infrastructure**
QumulusAI operates a fully integrated infrastructure platform designed to deliver efficient, scalable compute services with long-term cost predictability. Its three-layer model includes:
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***HPC Cloud Services***
At the heart of the business is a HPC platform engineered for AI and machine learning workloads. Powered by a rapidly expanding fleet of NVIDIA GPUs, QumulusAI provides on-demand compute through both direct and marketplace channels.
Unlike traditional providers that rent cloud capacity or depend on hyperscale backends, QumulusAI retains complete control over its compute stack. This allows for faster provisioning, more consistent performance, and enterprise-grade security. Marketplace partnerships drive high-volume usage, while the direct channel caters to technically advanced clients seeking custom infrastructure solutions.
***Data Center Infrastructure & Hosting***
QumulusAI’s infrastructure spans both long-term leased facilities and strategic co-location agreements. Our co-location agreements are with providers such as CoreSite, H5, and NOCIX. This hybrid deployment strategy supports geographic flexibility, rapid scale-up, and localized latency control.
In addition to powering its own HPC platform, QumulusAI generates recurring revenue by offering crypto-focused hosting services through its strategic holdover blockchain business. This diversified workload mix strengthens the Company’s revenue base and provides insulation from sector-specific volatility.
***Power & Energy Integration***
Energy strategy is central to QumulusAI’s model. Rather than relying on third-party utilities, the company integrates power procurement directly into its operations through power purchase agreements and dedicated infrastructure projects.
This approach enhances margin stability, ensures energy availability for high-density workloads, and supports uptime across its sites. As ESG concerns and sustainability metrics grow in importance, QumulusAI’s energy-layer control positions it to meet the evolving standards of enterprise clients.
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**History and Timeline**
Our businesses began in 2019 under WAHA Technologies, Inc. and WAHA, Inc. (renamed SPRE Commercial Group, Inc.) with the activation of 1 MW of data center hosting in Georgia. In 2020, our business expanded to 10 MW of data center infrastructure and hosting and secured our first round of venture funding. In 2021, we acquired our HPC business and expanded to 40 MW of data center infrastructure and hosting. In 2022, we raised $50 million in debt and equity rounds, expanded to 86 MW, sold a facility to CleanSpark Inc. (Nasdaq: CLSK), and launched HPC solutions for AI, machine learning, blockchain, and other applications. 2022 concluded with a corporate roll-up to consolidate all shareholders under a single cap table, forming Global Digital Holdings, Inc. (which was renamed QumulusAI, Inc. on August 18, 2025).
Since its founding in December 2022, QumulusAI has undergone a purposeful transformation—from a regional hosting and power operator into a vertically integrated AI infrastructure platform. In 2023, we developed 30 MW of new data centers in North Carolina and Oklahoma, invested over $10 million into HPC-as-a-service, and listed with Runpod, the leading GPU-as-a-service marketplace. In 2024, we activated over 200 HPC GPUs, added sales channel partners, expanded to 60 MW of infrastructure, and sold a 12 MW data center. In 2025, we have been working to develop a 20 MW data center in Texas, have ordered approximately 1,100 GPUs in a phased activation. Each milestone marks a strategic step in that journey: from scaling data center capacity and beginning GPU deployment, to launching AI services via both marketplace and enterprise channels.
As of 2025, the Company operates across multiple U.S. regions with over 60 MW of active capacity and a growing fleet of GPUs. With new infrastructure builds and energy integration projects underway, QumulusAI is focused and well positioned to deliver scalable, cost-efficient compute to meet the accelerating demands of AI workloads through 2026 and beyond.
**Recent Developments**
***Reverse Stock Split***
Our Board of Directors and our shareholders each approved the conversion of all outstanding series of preferred stock into common stock (the “Conversion”) and a 1-for-3 reverse stock split of our common stock issued and outstanding thereafter (the “Reverse Stock Split”). On September 30, 2025, we filed amended and restated articles of incorporation with the State of Georgia to immediately effect the Reverse Stock Split. All share and per share information in this “*Management*’*s Discussion and Analysis of Financial Statements and Results of Operations*” is presented on a post-Conversion and post-Reverse Stock Split basis.
***Credit Facility***
On September 19, 2025, we entered into a credit facility with a third party on behalf of the USD.AI Protocol (“USD.AI”), an on-chain, decentralized finance protocol that treats GPUs as a financeable commodity. Pursuant to this arrangement, USD.AI will provide a $500 million guidance facility to the Company to support the scalable deployment of GPU infrastructure. The facility is structured as a programmatic series of 70% loan-to-cost, non-recourse financings, with each individual GPU deployment subject to the third party’s underwriting and approval process. Accordingly, the Company will be able to borrow stablecoins against up to 70% of its approved GPU deployments. The Company is under no obligation to draw financing, and USD.AI has no obligation to provide financing other than through its standard per deployment underwriting process. Each GPU deployment at an approved data center will be treated as a separate financing under the facility. After each deployment, the Company will issue a warehouse receipt for the GPUs and ancillary networking equipment, in exchange for which the third party will issue GPU Warehouse Receipt Tokens, which will subsequently be posted as collateral for borrowing stablecoin-based credit on the USD.AI protocol. Upon completion of this process, funding is distributed to the Company immediately. To date, the Company has not completed any deployments or received any funding under this facility.
***Acquisition of The Cloud Minders, Inc. (***“***TCM***”***)***
On April 1, 2025, the Company entered into Contribution and Exchange Agreements, as amended, with shareholders of TCM, pursuant to which each TCM shareholder contributed all outstanding equity securities in TCM to the Company in exchange for equity securities of the Company. As a result, TCM became a wholly owned subsidiary of the Company, with 75% of the Company’s capital stock held by Company shareholders and 25% of the Company’s capital stock held by former TCM shareholders. The total acquisition consideration was $39,350,572, which was comprised of 2,574,711 shares of the Company’s common stock and 1,423,182 shares of the Company’s Series D Preferred Stock (with a total fair value of $20,250,013), options to purchase 668,392 shares of the Company’s common stock to replace TCM options (with a total fair value of $1,883,995), and the fair value of the Company’s prior investment in TCM (with a total fair value of $17,216,604). Management expects TCM’s operations to diversify the Company’s revenue base beyond bitcoin mining and hosting. The addition of GPU-based infrastructure is anticipated to generate more stable, recurring revenue streams aligned with demand for high-performance computing resources across AI, machine learning, and data analytics sectors. Please refer to the section entitled “*Unaudited Pro Forma Condensed Combined Financial Information*” for more information.
***Expansion of GPU-Based Infrastructure***
In connection with the expansion of its GPU-based infrastructure, the Company entered into a license agreement with hosted.ai to provide software that manages and coordinates how GPU resources are allocated, scheduled, scaled, and accessed across multiple users, applications, or workloads in cloud and multi-tenant environments.
**Financial Operations Overview**
The following discussion sets forth certain components of the Company’s statements of operations as well as factors that impact those items.
***Revenues***
Revenues are derived from bitcoin mining, mining hosting services, and compute power. The Company participates in a third-party operated mining pool. As a participant in the third-party operated mining pool, the Company earns revenue by providing computing power to the mining pool. The Company’s enforceable right to compensation begins when, and lasts as long as, the Company provides computing power to the mining pool operator.
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In addition to mining for its own account, the Company also hosts mining equipment owned by third parties across its operational sites. This hosting model allows the Company to generate more stable, recurring income by leveraging its existing infrastructure. The Company also generates revenue from providing compute power to a marketplace, but in some instances provides power directly to end users. The compute power is maintained by the Company and made available to customers for large-scale cloud processing.
During 2024 and through September 30, 2025, the Company strategically shifted its revenue mix by expanding its hosting services. As a result, self-mining declined from 65% of total revenue during the nine months ended September 30, 2024 to approximately 6% for the six months ended September 30, 2025, with the remainder coming from hosting and compute power activities.
The Company evaluates the performance of its bitcoin mining operations through a combination of operational and market-based metrics that directly influence revenue. These include the number of bitcoin earned per day, the efficiency and uptime of deployed miners as measured by terahash performance, the total number of active miners, bitcoin network difficulty, and the market price of bitcoin. Together, these metrics determine the Company’s mining yield, operating efficiency, and overall revenue potential during a given period.
*Key Definitions*
Bitcoin Mining: The process by which new bitcoin are created and transactions are validated on the Bitcoin Network. Miners compete to solve complex cryptographic problems, and the first to solve each block earns a reward in bitcoin (the “block reward”) plus transaction fees. The probability of earning rewards depends on a miner’s computational power, or hashrate, relative to the total network hashrate.
Hashrate (TH/s): A measure of computational speed, representing the number of trillions of cryptographic calculations (“hashes”) performed per second. Higher hashrate increases the likelihood of earning bitcoin rewards.
Network Difficulty: A measure of how hard it is to find a valid block. Difficulty automatically adjusts roughly every two weeks to keep global block times near ten minutes. When difficulty rises, more hashrate is required to maintain the same level of bitcoin output.
Block Reward and Halving: The block reward is the amount of bitcoin awarded for successfully mining a block. Approximately every four years, this reward is cut in half in an event known as the halving, reducing the rate of new bitcoin entering circulation and directly impacting miner economics.
***Cost of Revenues***
Cost of revenues reflect direct costs associated with the delivery of the Company’s products and services to its customers. These costs primarily include electricity and infrastructure expenses associated with operating the Company’s mining facilities. Additionally, as a result of the acquisition of TCM, which occurred during the nine months ended September 30, 2025, cost of revenues also includes colocation and hosting costs related to GPU-based high-performance computing data centers, as well as lease payments for TCM’s GPU assets.
***General and administrative expenses***
General and administrative expenses include salaries, benefits and other costs of departments serving administrative functions, such as executives, finance and accounting, and human resources. In addition, general and administrative expense includes non-personnel costs, such as professional fees, legal fees, accounting and finance advisory fees and other supporting corporate expenses not allocated to cost of revenues, product and development or sales and marketing.
***Depreciation and amortization expense***
Depreciation and amortization relates to long-lived assets and intangible assets used in the Company’s business. Depreciation expense relates primarily to buildings and improvements, miners, and mining related equipment. Amortization expense relates primarily to customer relationships and trade names.
***Other income (expense), net***
Other income (expense), net consists of non-operating income and expenses not directly related to our core operations. This includes income (expense) from non-consolidating joint ventures, warrant liabilities, digital assets held at fair value, interest earned and paid, loss on extinguishment of debt, and gain on remeasurement on investment in TCM during the nine months ended September 30, 2025. It also includes amortization of certain non-revenue-generating assets.
***Joint Ventures***
Joint ventures include infrastructure projects in which QumulusAI holds a non-controlling ownership interest and participates in the operational and financial results. These arrangements typically involve large-scale hosting or mining facilities that are jointly developed and operated with strategic partners. We account for these investments using the equity method of accounting and recognize our proportionate share of net income or loss within the consolidated financial statements. We have and may in the future also enter into joint ventures in which we control and consolidate for financial reporting purposes. Joint ventures allow QumulusAI to expand its infrastructure footprint while maintaining capital efficiency and operational flexibility.
***Change in Fair Value of Warrant Liability***
Change in fair value of warrant liability represents periodic unrealized gains or losses resulting from the remeasurement of outstanding warrant instruments classified as liabilities. These changes reflect fluctuations in the estimated fair value of warrants due to factors such as the Company’s equity valuation, time to maturity, and volatility assumptions. Adjustments are recorded in the consolidated statements of operations and do not impact cash flow.
***Conversion of note payable***
Conversion of note payable reflects the settlement of outstanding debt through the issuance of equity. When the fair value of the equity issued is less than the carrying amount of the debt, the Company records a non-cash loss on extinguishment of debt in the consolidated statements of operations.
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***Change in Fair Value of Digital Assets***
Change in fair value of digital assets represents periodic adjustments to the carrying value of bitcoin and other digital assets held by the Company, based on changes in market price relative to the value recorded at the time of acquisition or mining. These unrealized gains or losses are recognized to reflect the fair value of digital assets as of the reporting date. This adjustment impacts reported earnings but does not result in realized gains or losses unless the assets are sold.
***Loss on Disposals, Loans, and Other Investments***
Loss on disposals, loans, and other investments includes realized losses related to the sale, abandonment, or write-off of equipment or other long-lived assets, as well as losses associated with uncollectible loans and impairments of non-core investments. These items are recognized when it becomes evident that the carrying value of an asset or receivable is not recoverable and are reported outside of operating income due to their non-recurring and non-operational nature.
***Gain on Sale of Equity Method Investments***
Gain on sale of investments includes realized gains related to the sale of equity method investments. When the carrying value of the Company’s investment is less than the consideration received for the sale, the Company records a non-cash gain on sale of equity method investments in the consolidated statements of operations.
***Loss on Extinguishment of Debt***
Loss on extinguishment of debt reflects the partial settlement of outstanding debt through the issuance of equity. When the fair value of the equity issued is more than the carrying amount of the debt, the Company records a non-cash loss in the consolidated statements of operations.
***Gain on Remeasurement of Investment in TCM***
Gain on remeasurement of investment in TCM represents the difference in the carrying value of TCM immediately prior to the date the Company acquired the remining interest in TCM, and TCM’s fair value as of that date, which is April 1, 2025.
***Interest Expense, Net***
Interest expense, net includes interest incurred on finance leases, loans, and other debt arrangements, as well as the amortization of original issue discounts, debt issuance costs, and undrawn commitment fees. This amount is presented net of capitalized interest associated with qualifying assets under construction.
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**Results of Operations for the Nine Months Ended September 30, 2025 and 2024**
The following table summarizes the results of operations for the periods indicated:
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | For the Nine Months Ended September 30, / % Change |
| --- | --- | --- | --- | --- |
| Revenue | $8,057,476 | $6,153,285 | $1,904,191 | 31% |
| Cost of revenue | 4,245,448 | 4,115,987 | 129,461 | 3% |
| General and administrative expenses | 6,320,009 | 2,173,724 | 4,146,285 | 191% |
| Depreciation and amortization expense | 3,358,079 | 5,753,430 | (2,395,351) | (42 |
| Total costs and expenses | 13,923,536 | 12,043,141 | 1,880,395 | 16% |
| Operating Loss | (5,866,060) | (5,889,856) | 23,796 | — |
| Income (loss) from equity method investments | 1,043,937 | (305,728) | 1,349,665 | (441 |
| Gain on sale of equity method investments | — | 835,046 | (835,046) | (100 |
| Gain on remeasurement of investment in TCM | 14,549,536 | — | 14,549,536 | — |
| Change in fair value of warrant liability | (5,536,816) | (288,376) | (5,248,440) | 1820% |
| Change in fair value of digital assets | 81,919 | 733,552 | (651,633) | (89 |
| Gain (loss) on disposal of property and equipment | 462 | (2,094,030) | 2,094,492 | — |
| Loss on settlement of lease liability | (692,837) | — | (692,837) | — |
| Loss on extinguishment of debt | (1,037,501) | (46,774) | (990,727) | 2118% |
| Interest expense, net | (1,450,812) | (894,684) | (556,128) | 62% |
| Other income, net | 24,771 | 50,950 | (26,179) | (51 |
| Total other income (expenses), net | 6,982,659 | (2,010,044) | 8,992,703 | (447 |
| Income (loss) before income tax expense | 1,116,599 | (7,899,900) | 9,016,499 | 114% |
| Income tax expense | 284,771 | — | 284,771 | — |
| Net income (loss) | $831,828 | $(7,899,900) | $8,731,728 | 111% |
**Comparison of the Nine Months Ended September 30, 2025 and 2024**
***Revenue***
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | For the Nine Months Ended September 30, / % Change |
| --- | --- | --- | --- | --- |
| Revenue from cryptocurrency mining | $507,604 | $3,995,442 | $(3,487,838) | (87 |
| Revenue from mining hosting services | 4,794,821 | 2,157,843 | 2,636,978 | 122% |
| Revenue from compute power | 2,755,051 | — | 2,755,051 | — |
| | $8,057,476 | $6,153,285 | $1,904,191 | 31% |
Revenue for the nine months ended September 30, 2025 was $8,057,476, representing an increase of $1,904,191, or approximately 31%, as compared to $6,153,285 for the nine months ended September 30, 2024. The increase was primarily driven by the acquisition of TCM and the revenue from compute power which contributed $2.8 million from April 1, 2025 to September 30, 2025, or approximately 34.2% of gross revenue. Mining hosting services in 2025 represented 59.5% of gross revenue, an increase of 35.1% compared to 2024, attributed to the Company’s shift in 2024 from self-mining to hosting services. By the end of 2024, the Company had four hosting clients under contract representing 28 MWs combined. Self-mining contributed $4.0 million for the nine months ended September 30, 2024 as compared to $508 thousand for the nine months ended September 30, 2025, further illustrating the shift to hosting services.
During the nine months ended September 30, 2025, the Company’s bitcoin mining operations were influenced by changes in network difficulty, fleet utilization, and overall market pricing compared to the nine months ended September 30, 2024. Average bitcoin per day declined from 0.26 bitcoin to 0.02 bitcoin, average terahash decreased from 91.93 TH/s to 71.26 TH/s, active miners decreased from 2,448 to 447, and revenue decreased from $4.00 million to $0.51 million, while average bitcoin price increased from $59,990 to $102,115 and network difficulty rose from 83 trillion to 121 trillion during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.
Management attributes the decrease in bitcoin mined primarily to higher network difficulty, which reduced yield per unit of hashrate, and continues to emphasize fleet efficiency, power optimization, and uptime performance. Additionally, the April 2024 bitcoin halving, which reduced the block reward from 6.25 bitcoin to 3.125 bitcoin per block, further constrained industry-wide mining output and contributed to reduced production volumes.
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***Cost of Revenue***
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | For the Nine Months Ended September 30, / % Change |
| --- | --- | --- | --- | --- |
| Cost of revenue | | | | |
| Hosting expenses | $553,532 | $2,915,358 | $(2,361,826) | (81 |
| Electricity | 2,819,191 | 1,134,799 | 1,684,392 | 148% |
| Contract labor | 872,725 | 65,830 | 806,895 | 1226% |
| Total cost of revenue | $4,245,448 | $4,115,987 | $129,461 | 3% |
Cost of revenue for the nine months ended September 30, 2025 was $4,245,448, representing a decrease of $129,461 as compared to $4,115,987 for the nine months ended September 30, 2024. Prior to the Company’s acquisition of power sources such as T20 Mining Group, LLC (“T20”), FCNC Venture, LLC (“FCNC”), and SPRE Watonga, OK, LLC, the Company operated as a hosted client under third-party providers to activate its mining fleet. These hosted arrangements carried significantly higher power cost margins, resulting in elevated cost of revenues. In 2024, the Company transitioned to utilizing its owned infrastructure, significantly reducing reliance on third-party providers, and improving cost efficiency. April 2024 was the last month that the Company utilized third-party providers to host miners. April 2024 was also the start of the shift to reduce self-mining and increase hosted services. Totals for the nine months ended September 30, 2025 represents the full six months of electricity costs at the Watonga site, whereas it was only partially operational for two months in the first half of 2024 (May and June 2024). For the nine months ended September 30, 2025, the increase in contract labor costs was driven by the inclusion of six months of TCM’s colocation costs.
***General and Administrative Expenses***
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | For the Nine Months Ended September 30, / % Change |
| --- | --- | --- | --- | --- |
| Stock-based compensation | $799,823 | $257,598 | $542,225 | 210% |
| Wages and salaries | 1,811,841 | 450,136 | 1,361,705 | 303% |
| Taxes and other expenses | 101,220 | 63,538 | 37,682 | 59% |
| Utilities | 35,170 | 9,974 | 25,196 | 253% |
| Rent and lease expense | 213,225 | 203,779 | 9,446 | 5% |
| Professional fees | 2,469,174 | 405,611 | 2,063,563 | 509% |
| Insurance | 316,248 | 254,134 | 62,114 | 24% |
| Travel, meals, and entertainment | 53,193 | 16,978 | 36,215 | 213% |
| Supplies and software | 131,941 | 121,124 | 10,817 | 9% |
| Other general and administrative expenses | 388,174 | 390,852 | (2,678) | (1 |
| Total general and administrative expenses | $6,320,009 | $2,173,724 | $4,146,285 | 191% |
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General and administrative expenses for the nine months ended September 30, 2025 were $6,320,009, an increase of $4,146,285 as compared to $2,173,724 for the nine months ended September 30, 2024. The increase was primarily due to the acquisition of TCM, consulting costs associated with public readiness, and growth in anticipation of rapid scaling in HPC and compute services. Professional fees increased $2,063,563 which represents audit, legal, and consulting costs related to public readiness. Wages and salaries increased $1,361,705 in the first nine months of 2025 compared to 2024. $283,000 was directly associated with the TCM acquisition and the remaining $1,078,705 reflects increases in personnel.
***Depreciation and Amortization Expense***
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | |
| --- | --- | --- | --- | --- |
| Depreciation and amortization expense | $3,358,079 | $5,753,430 | $(2,395,351) | ) % |
Depreciation and amortization expense for the nine months ended September 30, 2025 was $3,358,079, a decrease of $2,395,351 as compared to $5,753,430 for the nine months ended September 30, 2024. The decrease was primarily due to the contribution of miners to the T20 expansion and the subsequent reduction in depreciation expense associated with the transfer of fixed assets to T20 offset by the amortization of intangible assets acquired in the acquisition of TCM.
***Joint Ventures***
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | For the Nine Months Ended September 30, / % Change |
| --- | --- | --- | --- | --- |
| Income (loss) from equity method investments | $1,043,937 | $(305,728) | $1,349,665 | (441 |
| Gain on sale of equity method investments | — | 835,046 | (835,046) | (100 |
| Total other income: JV Investments | $1,043,937 | $529,318 | $514,619 | 97% |
Joint venture other income consists of the Company’s non-controlling equity interests in TCM (prior to April 1, 2025), T20, and FCNC. Joint venture other income for the nine months ended September 30, 2025 was $1,043,937, an increase of $514,619 as compared to $529,318 for the nine months ended September 30, 2024. In 2024 the sale of a 10% interest in T20 resulted in a one-time gain of $835,046. During the nine months ended September 30, 2025 the 29 MW expansion of T20 resulted in a $1,349,665 increase in investment income as compared to the nine months ended September 30, 2024.
***Change in Fair Value of Warrant Liability***
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | For the Nine Months Ended September 30, / % Change |
| --- | --- | --- | --- | --- |
| Change in fair value of warrant liability | $(5,536,816) | $(288,376) | $(5,248,440) | 1820% |
Change in fair value of warrant liability for the nine months ended September 30, 2025 resulted in a loss of $5,536,816, an increase of $5,248,440 as compared to the $288,376 loss resulting from the change in fair value of warrant liability for the nine months ended September 30, 2024. The amount represents the increase in fair value of type 1 warrants from 2024 to 2025 due to the increased market price of the Company’s stock per its 409A valuation.
***Change in Fair Value of Digital Assets***
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | |
| --- | --- | --- | --- | --- |
| Change in fair value of digital assets | $81,919 | $733,552 | $(651,633) | )% |
Change in fair value of digital assets for the nine months ended September 30, 2025 was $81,919, a decrease of $651,633 as compared to the $733,552 gain resulting from the change in fair value of digital assets for the nine months ended September 30, 2024. The decrease is driven by the decrease in market value for bitcoin at each of the defined period close dates. The Company held 0.05 and 3.81 bitcoin on September 30, 2025 and 2024, respectively.
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***Gain on Remeasurement of Investment in TCM***
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | For the Nine Months Ended September 30, / % Change |
| --- | --- | --- | --- | --- |
| Gain on remeasurement of investment in TCM | $14,549,536 | — | $14,549,536 | — |
Gain on remeasurement of investment in TCM for the nine months ended September 30, 2025 was $14,549,536, an increase of $14,549,536 as compared to $0 for the nine months ended September 30, 2024. The expense is the difference in the carrying value of TCM immediately prior to the date the Company acquired the remaining interest in TCM, and TCM’s fair value as of that date recorded in connection with acquisition of TCM, which was April 1, 2025.
***Loss on Extinguishment of Debt***
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | For the Nine Months Ended September 30, / % Change |
| --- | --- | --- | --- | --- |
| Loss on extinguishment of debt | $(1,037,501) | $(46,774) | $(990,727) | 2118% |
Loss on extinguishment of debt for the nine months ended September 30, 2025 was $1,037,501, an increase of $990,727 as compared to a loss of $46,774 for the nine months ended September 30, 2024. The expense is primarily driven by the retirement of a convertible note immediately prior to the TCM acquisition and the issuance of preferred stock for the partial conversion of TCM’s convertible note in May and September 2025.
***Interest Expense, Net***
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 | For the Nine Months Ended September 30, / $ Change | For the Nine Months Ended September 30, / % Change |
| --- | --- | --- | --- | --- |
| Interest expense, net | $(1,450,812) | $(894,684) | $(556,128) | 62% |
Interest expense, net for the nine months ended September 30, 2025 was $1,450,812, an increase of $556,128 as compared to $894,684 for the nine months ended September 30, 2024. The increase is driven by an overall increase in Notes Payable to $10,169,879 as of September 30, 2025, as compared to $8,962,155 as of September 30, 2024.
**Results of Operations for the Fiscal Years Ended December 31, 2024, and 2023**
The following table summarizes the results of operations for the periods indicated:
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | For the Years Ended December 31, / % Change |
| --- | --- | --- | --- | --- |
| Revenue | $8,095,672 | $5,124,934 | $2,970,738 | 58% |
| Cost of revenue | 5,371,049 | 3,582,377 | 1,788,672 | 50% |
| General and administrative expenses | 3,346,547 | 2,009,427 | 1,337,120 | 67% |
| Depreciation expense | 7,164,034 | 7,711,015 | (546,981) | (7 |
| Total costs and expenses | 15,881,630 | 13,302,819 | 2,578,811 | 19% |
| Operating Loss | (7,785,958) | (8,177,885) | 391,927 | (5 |
| (Loss) income from equity method investments | (274,270) | (166,466) | (107,804) | 65% |
| Gain on sale of equity method investments | 835,046 | — | 835,046 | — |
| Gain on sale of investment in joint venture | 155,286 | — | 155,286 | — |
| Gain on conversion of note payable | — | 105,464 | (105,464) | 100% |
| Change in fair value of warrant liability | (2,566,552) | (1,557,234) | (1,009,318) | 65% |
| Change in fair value of digital assets | 188,682 | 28,760 | 159,922 | 556% |
| Loss on sale of loans receivable | — | (104,197) | 104,197 | 100% |
| Loss on disposal of property and equipment | (2,525,408) | (369,407) | (2,156,001) | 584% |
| Loss on extinguishment of debt | (83,757) | — | (83,757) | — |
| Loss on other investments | — | (258,000) | 258,000 | 100% |
| Other expenses, net | (7,947) | (49,079) | 41,132 | (84 |
| Interest expense, net | (1,119,496) | (1,246,375) | 126,879 | (10 |
| Total other income (expenses), net | (5,398,416) | (3,616,534) | (1,781,882) | 49% |
| Loss before income tax expense | (13,184,374) | (11,794,419) | (1,389,955) | 12% |
| Income tax expense | — | 631,125 | (631,125) | (100 |
| Net loss | $(13,184,374) | $(12,425,544) | $(758,830) | 6% |
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**Comparison of Years Ended December 31, 2024 and 2023**
***Revenue***
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | For the Years Ended December 31, / % Change |
| --- | --- | --- | --- | --- |
| Revenue from cryptocurrency mining | $4,184,239 | $4,367,695 | $(183,456) | (4 |
| Revenue from mining hosting services | 3,911,433 | 757,239 | 3,154,194 | 417% |
| | $8,095,672 | $5,124,934 | $2,970,738 | 58% |
Revenue for the year ended December 31, 2024 was $8,095,672, representing an increase of $2,970,738, or approximately 58%, compared to $5,124,934 for the year ended December 31, 2023. The increase was primarily driven by the activation of 10 MW at our Watonga facility, which commenced operations in May 2024 and contributed approximately $2 million in revenue during the year ended December 31, 2024.
In 2024, the Company’s bitcoin mining operations were influenced by changes in network difficulty, fleet utilization, and overall market pricing compared to 2023. Average bitcoin network difficulty increased 68% from 51.9 trillion to 87.3 trillion, while the Company maintained average per-miner efficiency of 91.6 TH/s compared to 91.7 TH/s in 2023. The average number of active miners changed from 2,118 to 1,941, resulting in average daily bitcoin production decreasing from 0.38 bitcoin to 0.20 bitcoin. The reduction in bitcoin mined was partially offset by a 129% increase in the average bitcoin price (from $28,750 to $65,776), leading to total revenue of $4.18 million compared to $4.37 million in 2023.
Management attributes the decrease in bitcoin mined primarily to higher network difficulty, which reduced yield per unit of hashrate, and continues to emphasize fleet efficiency, power optimization, and uptime performance. Additionally, the April 2024 bitcoin halving, which reduced the block reward from 6.25 bitcoin to 3.125 bitcoin per block, further constrained industry-wide mining output and contributed to reduced production volumes.
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In 2023, the average price of bitcoin was approximately $30,000, compared to $65,000 in 2024. Bitcoin halving is a scheduled event that cuts the block reward for miners in half, reducing the rate at which new bitcoins are created and tightening supply every four years. The halving event occurred in April 2024, reducing mining rewards by 50%, and partially offsetting the benefit of the higher market price. In response, the Company shifted its strategy to reduce exposure to bitcoin price volatility by expanding its hosting services. By the end of 2024, the Company had hosting clients under contract representing 28 MWs combined. As a result, self-mining contributed 52% of total revenue in 2024, down from 85% in 2023, with the balance attributable to hosting activities. Self-mining was not fully operational at the start of 2023 but reached full capacity by the second quarter as we began to bring new sites online. The Company then began tapering self-mining in the third quarter of 2024 as it shifted focus toward hosting services to generate more stable and predictable revenue streams.
***Cost of Revenue***
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | For the Years Ended December 31, / % Change |
| --- | --- | --- | --- | --- |
| Cost of revenue | | | | |
| Hosting expenses | $3,063,949 | $3,582,377 | $(518,428) | (14 |
| Electricity | 2,026,022 | — | 2,026,022 | — |
| Contract labor | 125,484 | — | 125,484 | — |
| Shipping and postage | 155,594 | — | 155,594 | — |
| Total cost of revenue | $5,371,049 | $3,582,377 | $1,788,672 | 50% |
Cost of revenue for the year ended December 31, 2024 was $5,371,049, representing an increase of $1,788,672 compared to $3,582,377 for the year ended December 31, 2023. The increase was primarily attributable to the operational launch of 10 MW at our Watonga facility in May 2024, which incurred approximately $2 million in electricity costs.
In early 2023, prior to the Company’s acquisition of power sources such as T20, FCNC, and SPRE Watonga, OK, LLC, the Company operated as a hosted client under third-party providers to activate its mining fleet. These hosted arrangements carried significantly higher power cost margins, resulting in elevated cost of revenues. In 2024, the Company transitioned to utilizing its owned infrastructure, significantly reducing reliance on third-party providers, and improving cost efficiency.
***General and Administrative Expenses***
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | For the Years Ended December 31, / % Change |
| --- | --- | --- | --- | --- |
| Stock-based compensation | $313,640 | $(872) | $314,512 | 36,068% |
| Wages and salaries | 627,657 | 993,752 | (366,095) | (37 |
| Taxes and other expenses | 90,408 | 80,849 | 9,559 | 12% |
| Utilities | 13,446 | 841 | 12,605 | 14,988% |
| Rent and lease expense | 261,341 | 40,779 | 220,562 | 541% |
| Professional fees | 1,202,456 | 558,919 | 643,537 | 115% |
| Insurance | 320,388 | 143,333 | 177,055 | 124% |
| Travel, meals, and entertainment | 33,442 | 52,359 | (18,917) | (36 |
| Supplies and software | 149,686 | (59,168) | 208,854 | 353% |
| Other general and administrative expenses | 334,083 | 198,635 | 135,448 | 68% |
| Total general and administrative expenses | $3,346,547 | $2,009,427 | $1,337,120 | 67% |
General and administrative expenses for the year ended December 31, 2024 were $3,346,547, an increase of $1,337,120 compared to $2,009,427 for the year ended December 31, 2023. The increase was primarily due to the adjustment of stock-based compensation valuations for options during 2024 totaling approximately $313,000 and recognition of type 2 warrants granted for professional services totaling approximately $664,000. In addition, the activation of 10 MW at our Watonga facility contributed approximately $344,000 in general and administrative expenses related to facility operations. Wages and salaries decreased by approximately $366,000 in 2024, primarily due to a payroll reimbursement from TCM for shared personnel costs. Other general and administrative costs remained stable between 2023 and 2024.
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***Depreciation Expense***
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | |
| --- | --- | --- | --- | --- |
| Depreciation expense | $7,164,034 | $7,711,015 | $(546,981) | )% |
Depreciation expense for the year ended December 31, 2024 were $7,164,034, a decrease of $546,981 compared to $7,711,015 for the year ended December 31, 2023. The decrease was primarily due to the contribution of miners to the T20 expansion and the subsequent reduction in depreciation expense associated with the transfer of fixed assets.
***Joint Ventures***
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | For the Years Ended December 31, / % Change |
| --- | --- | --- | --- | --- |
| Other (expense) income: JV Investments | | | | |
| (Loss) income from equity method investments | $(274,270) | $(166,466) | $(107,804) | 65% |
| Gain on sale of equity method investments | 835,046 | — | 835,046 | — |
| Gain on sale of investment in joint venture | 155,286 | — | 155,286 | — |
| Total other (expense) income: JV Investments | $716,062 | $(166,466) | $882,528 | (530 |
Joint venture other income consists of Company interests in TCM, T20, and FCNC entities. Joint venture other income (expense) for the year ended December 31, 2024 were $716,062, an increase of $882,528 compared to $(166,466) for the year ended December 31, 2023. The increase is driven primarily by the sale of 10% interest in the T20 entity which resulted in a $835,046 gain and the divestiture of the FCNC location which resulted in a $155,286 gain for the Company.
***Conversion of note payable***
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | |
| --- | --- | --- | --- | --- |
| Gain on conversion of note payable | — | $105,464 | $(105,464) | )% |
Gain on conversion of note payable for the year ended December 31, 2023 was $105,464. The amount in 2023 represents Preferred Stock – Series A amortization of the discount for the year. There were no transactions in 2024.
***Change in Fair Value of Warrant Liability***
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | For the Years Ended December 31, / % Change |
| --- | --- | --- | --- | --- |
| Change in fair value of warrant liability | $(2,566,552) | $(1,557,234) | $(1,009,318) | 65% |
Change in fair value of warrant liability for the year ended December 31, 2024 was $2,566,552, an increase of $1,009,318 compared to $1,557,234 for the year ended December 31, 2023. The amount represents the increase in fair value of type 1 warrants from 2024 to 2023 due to the increased share price of the Company.
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***Change in Fair Value of Digital Assets***
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | For the Years Ended December 31, / % Change |
| --- | --- | --- | --- | --- |
| Change in fair value of digital assets | $188,682 | $28,760 | $159,922 | 556% |
Change in fair value of digital assets for the year ended December 31, 2024 was $188,682, an increase of $159,922 compared to $28,760 for the year ended December 31, 2023. The increase is driven by the increase in market value for bitcoin at each of the defined period close dates. The Company held 5.39 bitcoins on December 31, 2024 and 2.47 bitcoins on December 31, 2023. The Company has sold all bitcoin as of July 2025.
***Loss on Disposals, Loans, and Other Investments***
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | For the Years Ended December 31, / % Change |
| --- | --- | --- | --- | --- |
| Other (expense) income: loss on disposals, loans, other investments | | | | |
| Loss on disposal of property and equipment | $(2,525,408) | $(369,407) | $(2,156,001) | 584% |
| Loss on extinguishment of debt | (83,757) | — | (83,757) | — |
| Loan on sale of loans receivable | — | (104,197) | 104,197 | 100% |
| Loss on other investments | — | (258,000) | 258,000 | 100% |
| Other expenses, net | (7,947) | (49,079) | 41,132 | (84 |
| Total other (expense) income: loss on disposals, loans, other investments | $(2,617,112) | $(780,683) | $(1,836,429) | 235% |
Other income (expense) related to disposals, loans, and other investments for the year ended December 31, 2024 was $2,617,112, an increase of $1,836,429 compared to a loss of $780,683 for the year ended December 31, 2023. The expense is primarily driven by the contribution of miners to T20, which resulted in a loss of $2,525,408 for 2024.
***Interest Expense, Net***
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 | For the Years Ended December 31, / $ Change | |
| --- | --- | --- | --- | --- |
| Interest expense, net | $(1,119,496) | $(1,246,375) | $126,879 | )% |
Interest expense, net for the year ended December 31, 2024 was $1,119,496, a decrease of $126,879 compared to $1,246,375 for the year ended December 31, 2023. The decrease is driven by a decrease in notes payable from $5,068,999 for the year ended December 31, 2024 compared to $6,216,217 for the year ended December 31, 2023.
**Non-GAAP Financial Measures**
In this registration statement, we have provided a non-GAAP measure, which we define as financial information that has not been prepared in accordance with U.S. GAAP. The non-GAAP financial measure provided herein is earnings before interest, taxes, non-cash and other items (“Adjusted EBITDA”). Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, net income or loss calculated in accordance with U.S. GAAP (referred to below as “Net loss”).
We believe that the presentation of Adjusted EBITDA is useful to investors in their analysis of our results because it helps facilitate investor understanding of decisions made by management in light of the performance metrics used in making those decisions. In addition, as more fully described below, we believe that providing Adjusted EBITDA, together with a reconciliation of net loss to Adjusted EBITDA, helps investors make comparisons between our Company and other companies that may have different capital structures, different effective income tax rates and tax attributes, different capitalized asset values, and/or different forms of employee compensation. However, Adjusted EBITDA is not intended as a substitute for comparisons based on net loss. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding U.S. GAAP measures provided by each company under applicable SEC rules.
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***Limitations on the use of non-GAAP financial measures***
There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with U.S. GAAP and may be different from non-GAAP financial measures provided by other companies.
The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which items are adjusted to calculate our non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a U.S. GAAP basis as well as a non-GAAP basis and also by providing U.S. GAAP measures in our public disclosures.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure to evaluate our business and to view our non-GAAP financial measures in conjunction with the most directly comparable U.S. GAAP financial measures.
The following tables reconciles the specific items excluded from U.S. GAAP metrics in the calculation of non-GAAP metrics for the periods shown below:
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| Revenue | $8,057,476 | $6,153,285 |
| Net Income (loss) | 831,828 | (7,899,900) |
| Depreciation and amortization (inclusive of ROU amortization) | 3,358,079 | 5,753,430 |
| Interest expense, net | 1,450,812 | 894,684 |
| Income tax expense | 284,771 | — |
| Stock based compensation | 799,823 | 257,598 |
| Change in fair value of warrant liability | 5,536,816 | 288,376 |
| Change in fair value of digital assets | (81,919) | (733,552) |
| Gain on sale of equity method investments | — | (835,046) |
| (Gain) loss on disposal of property and equipment | (462) | 2,094,030 |
| Loss on settlement of lease liability | 692,837 | — |
| Loss on extinguishment of debt | 1,037,501 | 46,774 |
| Gain on remeasurement of investment in TCM | (14,549,536) | (2,094,030) |
| Adjusted EBITDA | $(639,450) | $(2,227,636) |
Adjusted EBITDA for the nine months ended September 30, 2025 was a loss of $639,450 as compared to a loss of $2,227,636 for the nine months ended September 30, 2024, an improvement of $1,588,186. The improvement is driven primarily by increased revenues partially offset by operating costs associated with public readiness and personnel growth.
| Line item | For the Year Ended December 31, 2024 | For the Year Ended December 31, 2023 |
| --- | --- | --- |
| Net loss | $(13,184,374) | $(12,425,544) |
| Depreciation and amortization (inclusive of ROU amortization) | 7,164,034 | 7,711,015 |
| Interest expense | 1,119,496 | 1,246,375 |
| Income tax expense | — | 631,125 |
| Stock-based compensation | 313,640 | (872) |
| Change in fair value of warrant liability | 2,566,552 | 1,557,234 |
| Change in fair value of digital assets | (188,682) | (28,760) |
| Loss on disposal of property and equipment | 2,525,408 | 369,407 |
| Adjusted EBITDA | $316,074 | $(940,020) |
Adjusted EBITDA for the year ended December 31, 2024 was income of $316,074 compared to a loss of $940,020 for the year ended December 31, 2023, an increase of $1,256,094. The increase is primarily caused by higher non-cash adjustments such as fair value remeasurement of warrant liabilities, stock based compensation, and a one-time loss tied to asset contributions to T20.
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**Going Concern, Liquidity and Capital Resources**
***Comparison of the Nine Months ended September 30, 2025 and 2024***
The Company has incurred recurring losses since inception resulting in an accumulated deficit of $32,425,045 as of September 30, 2025. For the nine months ended September 30, 2025, the Company had operating cash outflows of $2,526,814 and had an operating loss of $5,866,060. The Company’s operations have been funded partially through the issuance of debt. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these condensed consolidated financial statements.
In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. At September 30, 2025, the Company had cash of $18,237,794. The Company’s plans to alleviate the substantial doubt include raising approximately $28 million through the sale of common stock, of which $21.4 million has already been funded, and obtaining a $500 million credit facility with a third party, as described under “*Recent Developments*”. Management concludes these plans will alleviate the substantial doubt about the Company’s ability to continue as a going concern for the one-year period extending from the date of issuance of these financial statements.
***Comparison of the Years ended December 31, 2024 and 2023***
The Company has incurred recurring losses since inception resulting in an accumulated deficit of $33,256,873 as of December 31, 2024. For the year ended December 31, 2024, the Company had operating cash outflows of $2,021,408 and had an operating loss of $7,785,958. The Company’s operations have been funded partially through the issuance of debt. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these consolidated financial statements.
In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. At December 31, 2024, the Company had cash of $3,970,466. The Company’s plans to alleviate the substantial doubt at December 31, 2024 included the acquisition of TCM, expansion of the operations of T20 and Watonga, and acquisition of more high performance computers to increase revenues and improve gross margin. Accordingly, at December 31, 2024, management concluded these plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date of the consolidated financial statements.
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**Cash Flows for the Nine Months Ended September 30, 2025 and 2024**
The following table sets forth a summary of cash flows for the periods presented:
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| Net cash used in operating activities | $(2,526,814) | $(870,153) |
| Net cash provided by (used in) investing activities | 2,808,437 | (1,821,427) |
| Net cash provided by financing activities | 13,985,705 | 3,847,122 |
| Net change in cash | $14,267,328 | $1,155,542 |
***Net Cash Used In Operating Activities***
Net cash used in operating activities of $2,526,814 increased by $1,656,661 for the nine months ended September 30, 2025 as compared to cash used in operating activities of $870,153 for the nine months ended September 30, 2024. The increase was driven by costs incurred with public readiness and increased personnel costs associated with the Company’s growth..
***Net Cash Provided By (Used In) Investing Activities***
Net cash provided by investing activities of $2,808,437 increased by $4,629,864 for the nine months ended September 30, 2025 as compared to cash used in investing activities of $1,821,427 for the nine months ended September 30, 2024. This is primarily due to $2,441,275 of cash acquired on April 1, 2025 as part of our acquisition of TCM and an increase of distributions from T20, an equity method investment, of $1,557,000.
***Net Cash Provided By Financing Activities***
Net cash provided by financing activities of $13,985,705 increased by $10,138,583 for the nine months ended September 30, 2025 as compared to cash provided by financing activities of $3,847,122 for the nine months ended September 30, 2024. This is primarily due to proceeds from sale of common stock of $21,355,080, offset by repayments on debt of $5,978,462 and repayments on finance lease obligations of $1,289,600.
**Cash Flows for the Years Ended December 31, 2024 and 2023**
The following table sets forth a summary of cash flows for the years presented:
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 |
| --- | --- | --- |
| Net cash used in operating activities | $(2,021,408) | $(905,884) |
| Net cash used in investing activities | (1,871,322) | (63,631) |
| Net cash provided by financing activities | 7,231,852 | 114,981 |
| Net change in cash | $3,339,122 | $(854,534) |
***Net Cash Used In Operating Activities***
Net cash used in operating activities of $2,021,408 increased by $1,115,524 for the year ended December 31, 2024 compared to cash used in operating activities of $905,884 for the year ended December 31, 2023. The increase was driven by the loss on the disposal of contributed assets related to the expansion of our Tulsa, Oklahoma facility and the increase in operating expenses associated with the activation of our Watonga, Oklahoma facility in May 2024. These increases were partially offset by increases in digital asset mining and the partial sale of equity in the Tulsa, Oklahoma facility.
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***Net Cash Used In Investing Activities***
Net cash used in investing activities of $1,871,322 increased by $1,807,691 for the year ended December 31, 2024 compared to cash used in investing activities of $63,631 for the year ended December 31, 2023. The increase was driven by deposits paid on transformers for future expansion and property, plant, and equipment purchases for the Watonga, Oklahoma facility. These increases were partially offset by equity method investment income associated with the Tulsa, Oklahoma facility.
***Net Cash Provided By Financing Activities***
Net cash provided by financing activities of $7,231,852 increased by $7,116,871 for the year ended December 31, 2024 as compared to cash provided by financing activities of $114,981 for the year ended December 31, 2023. This is primarily due to net proceeds from issuance of Series D Preferred Stock of $8,603,000, offset by repayments of debt, including a line of credit and notes payable.
**Seasonality**
We believe there is some seasonality in our business. In January and February, when temperatures are cool, miners are more efficient. We typically generate more revenue during this period. On the other hand, in July and August, when the power grid is operating at full capacity due to peak power demand, we occasionally shut down certain operations for short durations (typically a few hours) to sell power back to the grid. Our revenue is typically lower during this period. Similarly, we typically see a slight decline in HPC utilization rates in the summer months and over holidays.
**Critical Accounting Estimates**
Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s Consolidated Financial Statements that have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
On an on-going basis, the Company evaluates its estimates, including those related to revenues, stock-based compensation, income taxes, contingencies, and litigation.
The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The Company believes the following critical accounting estimates used in the preparation of its Consolidated Financial Statements affect its more significant judgments and estimates.
***Business Combinations***
The Company accounts for business acquisitions using the acquisition method of accounting, in accordance with ASC 805, under which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair value of the consideration paid is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed.
The Company’s management exercises significant judgments in determining the fair value of assets acquired and liabilities assumed, as well as intangibles and their estimated useful lives. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows and appropriate discount rates used in computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to the fair value of assets and liabilities made after the end of the measurement period are recorded within the Company’s operating results.
***Revenue***
The Company utilizes judgment to determine whether performance obligations in a contract are distinct and whether they are delivered at a point in time or over time. Judgment is also necessary to assess revenue recognized under variable revenue arrangements.
***Revenue from Cryptocurrency Mining***
The Company participates in a third-party operated mining pool. As of April 2025, the pool operator is Luxor Technology Corporation. Prior to April 2025, the pool operator was Fortitude Mining LLC (formerly Foundry Digital). As a result of the change in pool operator, the Company updated its accounting policy to change the end of its contract period from 16:00:00 coordinated universal time (“UTC”) to 23:59:59 UTC. As a participant in the third-party operated mining pool, the Company provides a service to provide computing power to the third-party operated mining pool. The Company’s enforceable right to compensation begins when, and lasts as long as, the Company provides computing power to the mining pool operator.
**Step 1**: The Company has identified the third-party mining pool operator as its customer. The Company enters into a contract with the customer to provide its computing power to the customer’s mining pool. The contracts are terminable without penalty at any time by either party, and thus the contract term is shorter than a 24-hour period and the contracts are continuously renewed.
Applying the criteria per Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606-10-25-1, the contract arises at the point that the Company provides computing power to the customer's mining pool, which is considered contract inception, because customer consumption is in tandem with delivery of the computing power.
**Step 2**: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
- The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
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- The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified a single performance obligation of providing computing power to the mining pool operator. The continuous renewal options do not represent material rights because they do not provide the customer with the right to purchase additional goods or services at a discount. Specifically, the contract is renewed at the same terms, conditions, and rate as the current contract which is consistent with market rates, and there are no upfront or incremental fees in the initial contract.
**Step 3**: The Company receives non-cash consideration in the form of bitcoin, the fair value of which the Company measures at 23:59:59 UTC and 16:00:00 UTC on the date of contract inception using the Company’s principal market for bitcoin, Bitcoin Reference Rate, when the pool operator is Luxor and Foundry, respectively. The contract renews continuously throughout the day, and thus the value of the consideration should be assessed continuously throughout the day, and the Company has concluded to use the 23:59:59 UTC and 16:00:00 UTC bitcoin price each day when the pool operator is Luxor and Foundry, respectively. Revenue is recognized on the same day that control of the services transfers to the customer, which is the same day as contract inception. According to the customer contract, daily settlements are made to the Company by the customer based on the computing power provided over the contract periods occurring over a 24-hour period and the payout is made the following day. There are no other forms of variable considerations, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items.
The Company earns non-cash consideration based on the Full-Pay-Per-Share (“FPPS”) payout method set forth by the customer in the form of bitcoin. The amount of bitcoin the Company is entitled to for providing hash calculations to the customer’s mining pool under the FPPS payout method is made up of block rewards and transaction fees less mining pool fees determined as follows:
- The non-cash consideration calculated as a block reward over the continuously renewed contract periods is based on the total blocks expected to be generated on the Bitcoin Network for the daily 24-hour period beginning 00:00:00 UTC and 16:00:01 UTC and ending 23:59:59 UTC and 16:00:00 UTC when the pool operator is Luxor and Foundry, respectively, in accordance with the following formula: the computing power that the Company provides to the customer as a percent of the Bitcoin Network’s total computing power, multiplied by the total Bitcoin Network block rewards expected to be generated for the same period.
- The non-cash consideration calculated as transaction fees paid by transaction requestors is based on the share of total actual fees paid over the continuously renewed contract periods beginning 00:00:00 UTC and 16:00:01 UTC and ending 23:59:59 UTC and 16:00:00 UTC when the pool operator is Luxor and Foundry, respectively, in accordance with the following formula: total actual transaction fees generated on the Bitcoin Network during the contract period as a percent of total block rewards the Bitcoin Network actually generated during the same period, multiplied by the block rewards the Company earned for the same period noted above.
- The sum of the block reward and transaction fees earned by the Company is reduced by mining pool fees charged by the customer for operating the mining pool based on a rate schedule per the mining pool contract. The fee charged during the nine months ended September 30, 2025 and 2024 was 0.57% and 0.43%, respectively, and the fee charged during the most recent fiscal year ended was 0.43%. The mining pool fee is only incurred to the extent the Company provides computing power and generates revenue in accordance with the customer’s payout formula during the continuously renewed contract periods beginning 00:00:00 UTC and 16:00:01 UTC and ending 23:59:59 UTC and 16:00:00 UTC daily, when the pool operator is Luxor and Foundry, respectively.
**Step 4**: There is a single performance obligation (i.e., to provide computing power to the customer) for the contract; therefore, all consideration from the customer is allocated to this single performance obligation.
**Step 5**: The Company’s performance is completed over time as the customer obtains control of the computing power. The performance obligation of computing power is fulfilled over time, as opposed to a point in time, because the Company provides the computing power throughout the contract period and the customer simultaneously obtains control of the service and uses it to produce bitcoin.
There is no deferred revenue or other liability obligations recorded by the Company since there are no payments in advance of the performance, and there are no remaining performance obligations after providing computing power.
***Revenue from Mining Hosting Services***
The Company has also entered into hosting contracts where it operates mining equipment owned by third parties within its facilities in exchange for a fee or reimbursement of electricity cost including a markup.
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**Step 1**: The Company has identified the third-party mining equipment owners as its customer. The Company enters into a contract with the customer to host its miners on the Company’s network. The contracts are terminable without penalty at any time if the termination is agreed upon by both parties, and thus the contract term is the stated term.
**Step 2**: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
- The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
- The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified one performance obligation of hosting the mining equipment. The service the Company provides also includes monitoring, active troubleshooting, and various maintenance levels for the mining equipment.
**Step 3**: The Company receives non-cash consideration in the form of US Digital Coin (“USDC”). The Company uses a spot rate on of the date of payment from the customer to convert USDC to U.S. dollars.
The Company’s hosting contracts can contain service level agreement clauses, which guarantee a certain percentage of time the power will be available to its customer. In the rare case that the Company may incur penalties under these clauses, the Company recognizes the payment as variable consideration and a reduction of the transaction price and, therefore, of revenue, when not in exchange for a good or service from the customer.
Customer contracts can include advance payment terms in the form of monthly cash prepayments and/or upfront cash payments at contract inception. Advance payments are recorded as deferred revenue and recognized over time (generally, the month of hosting service to which they relate) as the customer simultaneously receives and consumes the benefits of the Company’s performance. There is no significant financing component in these transactions due to the short-term nature of the payments.
**Step 4**: No allocation of transaction price is required as there is only one performance obligation in each contract.
**Step 5**: The Company recognizes variable hosting revenue each month as the uncertainty related to the consideration is resolved, hosting services are provided to its customer, and its customer utilizes the hosting service (the customer simultaneously receives and consumes the benefits of the Company’s performance). The Company’s performance obligation related to these services is satisfied over time.
***Revenue from Compute Power***
The Company generates revenue primarily from providing compute power to a marketplace, but in some instances provides power directly to end users. Our largest sale channel by revenue, RunPod operates as a third-party marketplace and sales channel through which the Company makes its deployed compute power capacity available to end users. Under these arrangements, RunPod contracts directly with end users, sets end-user pricing, and is responsible for customer onboarding, billing, and collections. The Company does not have a direct contractual relationship with end users accessing compute services through the RunPod platform. Instead, RunPod purchases compute capacity from the Company and resells access to that capacity to its customers, retaining approximately 20% of end-user revenue as a marketplace fee under its standard service terms. Accordingly, RunPod is the Company’s direct customer in these marketplace compute power arrangements. This structure is generally consistent with the manner in which the Company utilizes other third-party marketplaces as sales and distribution channels The compute power is maintained by the Company and made available to customers for large-scale cloud processing.
Marketplace provider partners (RunPod, for example) manage orchestration and customer acquisition in exchange for a revenue share. In RunPod’s case, currently 80% of revenue is shared to the Company and 20% to RunPod under RunPod’s standard service terms.
**Step 1**: In arrangements with a marketplace provider partner, the Company has identified the marketplace as its customer. In arrangements entered into directly with end users, the end user is the customer.
The Company has entered into agreements which are structured around ongoing service delivery, with compute power provided on a usage basis. The contract is enforceable and includes defined terms for service levels, pricing, and revenue sharing. The contract is continuously active and renewed, with no penalties for termination, and services are delivered daily based on actual usage.
Applying the criteria per ASC 606-10-25-1, the contract arises at the point the Company begins providing compute power through its bare metal servers. This marks contract inception, as the customer’s consumption of compute power is simultaneous with the Company’s delivery of the service. The contract supports continuous usage-based billing, and the Company’s enforceable right to compensation begins and continues as long as compute power hours are delivered and consumed by customers.
**Step 2**: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
- The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
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- The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified a single performance obligation to provide compute power to customers. The continuous renewal options do not represent material rights because they do not provide the customer with the right to purchase additional goods or services at a discount. Specifically, the contract is renewed at the same terms, conditions, and rate as the current contract, which is consistent with market rates, and there are no upfront or incremental fees in the initial contract.
**Step 3**: In arrangements with a marketplace provider partner, the transaction price is based on net revenue shared by the marketplace to the Company. In arrangements entered into directly with end users, the transaction price is based on revenue received directly from end users for compute power. There is no non-cash consideration involved, and all payments are made in U.S. dollars. The contract does not include other forms of variable consideration such as rebates, penalties, or bonuses, except for service credits tied to uptime performance, which are treated as variable consideration and reduce the transaction price when applicable.
**Step 4**: There is a single performance obligation (i.e., to provide compute power) for the contract; therefore, all consideration from the customer is allocated to this single performance obligation.
**Step 5**: The Company’s performance is completed over time as compute power is delivered and consumed. The performance obligation of computing power is fulfilled over time, as opposed to a point in time, because the Company provides the compute power throughout the contract period and the customer simultaneously obtains control of the service and integrates it into its platform offerings.
There are no deferred revenues or remaining obligations once compute power is delivered.
***Stock-based compensation***
Under the fair value recognition provision, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the requisite service period. The Company makes certain assumptions to value and expense its various share-based payment awards. The fair value is determined using an option pricing model. The cost of awards of equity instruments is recognized on a straight-line basis over the vesting period, which is the requisite service period, and is recorded as stock-based compensation expense.
***Income Taxes***
The Company utilizes judgment and estimates in assessing the need for the valuation allowance related to deferred tax assets, including net operating loss carry-forwards. In the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.
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***Recently Issued Accounting Pronouncements*** – ***Adopted***
In August 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-05, *Business Combinations*—*Joint Venture Formations (Topic 805): Recognition and Initial Measurement.* This standard addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statements. The new requirements are effective for all joint ventures within the ASU’s scope that are formed on or after January 1, 2025. The Company adopted this standard on January 1, 2025. The Company is in the process of evaluating the impact of ASU 2023-09 on the Company’s consolidated financial statements, which will be reflected in the December 31, 2025 consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, *Improvements to Income Tax Disclosures*, a final standard on improvements to income tax disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard applies to all entities subject to income taxes and is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024. The Company adopted this standard on January 1, 2025. The adoption of this standard is reflected in the Company’s condensed consolidated financial statements.
***Recently Issued Accounting Pronouncements*** – ***Not Yet Adopted***
In November 2024, the FASB issued ASU 2024-03, *Income Statement*—*Reporting Comprehensive Income*—*Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses*. This guidance requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently evaluating the impact of ASU 2024-03 on its condensed consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-04, *Debt*—*Debt with Conversion and Other Options (Topic 470).* This guidance clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The ASU is effective on a prospective basis, with the option for retrospective application, for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. The Company is currently evaluating the impact of ASU 2024-04 on its condensed consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, *Financial Instruments*—*Credit Losses (Topic 326).* This guidance contains amendments that provide decision-useful information to investors and other financial statement users while reducing the time and effort necessary to analyze and estimate credit losses for current accounts receivable and current contract assets. The amendments will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the impact of ASU 2025-05 on its condensed consolidated financial statements and related disclosures.
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**BUSINESS**
**Overview**
QumulusAI is a cloud infrastructure company specializing in rapid deployment of graphics processing unit (“GPU”)-powered solutions for artificial intelligence (“AI”) applications, serving a critical market that is often overlooked by hyperscale providers focused on the largest enterprises. Our platform delivers flexible, competitively priced, and customizable solutions for underserved small and mid-market customers—including machine learning teams, AI infrastructure startups, and research institutions—while also supporting the scale and complexity requirements of large enterprises, such as long-term deployments or supplemental on-demand compute capacity.
Today, we distinguish ourselves by deploying, activating and producing revenue from GPU infrastructure within approximately 90 days. We do so across a distributed network of sales channel and platform partners and the strategic use of stranded colocation facilities, enabling us to connect with thousands of developer clients with an expedited path from procurement to revenue generation. Traditional infrastructure providers, by comparison, can take 12 to 24 months to activate new capacity.
As of December 1, 2025, QumulusAI is headquartered in Marietta, Georgia. Here, we operate more than 800 GPUs across two colocation data centers, plus one in Kansas City, Missouri. We have secured rights of first refusal for 30 MW of information technology (“IT”) load capacity space for our GPU equipment and we are actively planning for expansion exceeding 120MW of total IT load across our platform with potential to support over 90,000 NVIDIA B200s (among the latest generation GPUs purpose-built for foundation model training), or as many as 1,500,000 GPUs optimized for AI inference at scale.
The majority of our revenue derives from flexible consumption models that align with evolving customer needs. According to an International Data Corporation report, 43% of enterprises now split their compute usage between on-demand and reserved/commitment-based instances—highlighting that less than half of workloads are committed long-term (*AI Computing Resources Rental Market Report*. PW Consulting Information & Electronics Research Center. Published 05/13/2025. https://pmarketresearch.com/it/ai-computing-resources-rental-market/).
In 2023, a S&S Insider report found 69% of GPU as a Service revenue came from pay-per-use (on demand) pricing models, demonstrating a strong preference for flexibility over reserved pricing (*GPU As A Service Market Size, Share & Segmentation By Pricing Model (Pay-per-use, Subscription-based Plans), By Deployment Model, By Enterprise Type, By Application, By Region, And Global Forecast 2024-2032,* S&S Insider, February 2025. https://www.snsinsider.com/reports/gpu-as-a-service-market-5782).. Our platform capitalizes on this market preference by offering multiple engagement models—from pay-as-you-go to reserved instances—enabling us to capture premium pricing while maintaining high utilization across our infrastructure.
Our QumulusAI cloud compute ecosystem combines proprietary software and cloud services, developed in collaboration with technology partners, to optimize AI workflows at scale. This ecosystem approach enables us to deliver comprehensive solutions that extend beyond raw compute power, incorporating orchestration, automation, and monitoring capabilities that reduce operational complexity for our customers. Our platform currently powers varied AI use cases and is trusted by leading AI and high-performance computing (“HPC”) infrastructure platforms and marketplaces, including RunPod Inc., Shadeform, Hydra Host, Inc., and Vast.ai Inc.
We are in the process of establishing collaborations and relationships across the AI ecosystem—including with leading chipmakers, original equipment manufacturers, value-added resellers, and software vendors—enabling rapid procurement and deployment of critical infrastructure components. To date, we have formalized our relationship with hosted.ai. The exclusive partnership enables us to build a next-generation multi-tenant inference cloud. hosted.ai software-defined GPU technology allows for elastic resource provisioning and GPU overcommitment capabilities, meaning we can serve more customers per GPU while maintaining optimal performance.
Industry research indicates that, in conventional environments where customers are granted exclusive access to specific GPUs, effective hardware-level utilization is often materially below theoretical capacity due to workload intermittency, scheduling inefficiencies, and software and system-level constraints. For example, SemiAnalysis has noted that, “In practice, Nvidia GPUs typically achieve only about a small portion of their theoretical peak once communication overhead, memory stalls, power limits, and other system effects are factored in. A good rule of thumb for training is ~30%… with utilization varying heavily by workload” (*TPUv7: Google Takes a Swing at the Inference Market, SemiAnalysis*. 11/28/2025. https://newsletter.semianalysis.com/p/tpuv7-google-takes-a-swing-at-the). Even when all available GPU hours are sold, these factors can result in meaningful portions of deployed hardware capacity remaining idle or underutilized.
Through our collaboration with hosted.ai, whose software platform is currently in an early (alpha) stage of development, we intend to deploy a software abstraction and orchestration layer designed to enable dynamic workload placement, elastic resource provisioning, and the sharing of GPU capacity across multiple customers over time. Rather than assigning exclusive access to specific physical GPUs, this approach is intended to allow workloads to be scheduled across available capacity, enabling physical GPU resources to support multiple customers depending on demand.
Our agreement with hosted.ai establishes a strategic collaboration to jointly commercialize an integrated AI compute and GPU-as-a-Service offering. Under the arrangement, hosted.ai licenses its software stack to us for deployment on our infrastructure, subject to agreed-upon governance, licensing, exclusivity, revenue-sharing, and intellectual property provisions. While we believe this architecture has the potential to increase sustained fleet-level GPU utilization under certain operating conditions compared to traditional deployment approaches, actual utilization levels will depend on customer demand, workload characteristics, system maturity, and execution, and may vary materially over time. There can be no assurance that any particular utilization level will be achieved.
Additionally, through our largest channel partner, RunPod Inc. (“RunPod”), we have access to a customer base of over 10,000 AI developers and organizations utilizing the RunPod marketplace. Our servers deployed on the RunPod platform host up to approximately 2,000 monthly active users (“MAUs”), based on information provided to us by RunPod. For purposes of this estimate, RunPod defines an MAU as a unique, billable end-user account or system account that consumes compute resources on the RunPod platform during a given calendar month. RunPod operates as a third-party marketplace and sales channel and maintains the direct contractual relationship with end users accessing compute services through its platform. Under the operational and contractual parameters of the RunPod marketplace, RunPod controls user authentication, account creation, billing, and usage monitoring. The Company does not have direct access to end-user-level data and does not independently determine or verify user uniqueness using identifiers such as IP addresses, know-your-customer (“KYC”) processes, or other attribution mechanisms. Accordingly, the Company relies on aggregated usage and activity information reported by RunPod.
As a result, the reported MAU figure represents an estimate and may be subject to significant variability from day to day and month to month, depending on customer demand, workload patterns, and how end users utilize and scale their workloads on the platform. The Company does not make representations regarding the precision of this estimate beyond the information provided by RunPod.
Revenue generated from compute services accessed through the RunPod marketplace is shared on an 80% QumulusAI / 20% RunPod basis under RunPod’s standard service terms, as described below under “—*Our Customers*.” Because the Company’s contractual relationship is with RunPod rather than individual end users, the Company does not have visibility into whether any individual end user or entity accounts for a material portion of the activity reflected in the MAU estimate. Any concentration of usage or revenue at the end-user level is therefore not directly observable by the Company.
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These marketplace users rely on QumulusAI to provision, operate, and maintain the underlying compute infrastructure, while RunPod provides the marketplace and performs customer acquisition, sales, billing, and related customer management functions.
We have also accumulated a portfolio of over 60 MW of active grid power capacity. We have secured non-binding letters of intent for long-term power agreements, including a minimum of 50 MW of primary gas power at our Watonga, Oklahoma facility.
Our historical operations include the construction and management of over 100 MW of data center capacity, supporting some of the largest participants in the blockchain ecosystem. This experience provides us with proven capabilities in power procurement, data center operations, and infrastructure scaling that directly translate to our AI-focused offerings. As we strategically taper our blockchain offerings and repurpose our power portfolio for HPC workloads, we are uniquely positioned to address the growth in demand for AI infrastructure against the backdrop of constrained power availability and rising electricity costs.
Our strategic holdover business—managed services for crypto mining infrastructure—serves as both a valuable revenue generator and a critical component of our infrastructure strategy. We currently participate in all Demand Response and Curtailment programs offered by the utility providers. This enables us to turn our power off safely within minutes to support power needed by the grid, thus creating additional revenue. Unlike passive battery storage systems that provide no economic value until discharged, our managed crypto mining infrastructure generates continuous revenue while offering the same grid-balancing capabilities. We can scale power consumption to near-capacity within minutes or instantly curtail operations to return energy to the grid during peak demand periods, generating additional operating profits. This dynamic load flexibility enables us to secure large blocks of low-cost base power capacity and positions our strategic holdover business to function as both an active revenue generator and a scalable energy asset. Demand Response and Curtailment revenue and credits for the period of November 2024 through September 2025 were $325,000 at our Watonga facility and $1.9 million for the period of February 2024 through September 2025 at T20. The revenue and credits were applied against the facility power costs and resulted in a $0.004 and $0.006 reduction in dollars per kilowatt hours at Watonga and T20, respectively.
We currently receive bitcoin from mining and liquidate it daily. We have liquidated our reserves and currently do not hold any other digital assets. In the future, we may additionally hold USDC to satisfy the payment of loans pursuant to our guidance facility with Permian Labs described under “*Management*’*s Discussion and Analysis of Financial Condition and Results of Operations* – *Recent Developments*,” which requires payments to be made in USDC. Our mining pool automatically sweeps all bitcoin earnings from the prior 24 hours once per day to NYDIG Trust Company LLC (“NYDIG”), which serves as the Company’s exchange and custodian. Pursuant to our agreement with NYDIG, we pay an annual fee ranging between 0.10% and 0.25% of the per annum depending on the amount of the custodied digital assets, subject to a minimum fee of $2,500 per quarter. This agreement has a one-year term, renews automatically for additional one-year terms thereafter, and may be terminated by either party upon 30 days’ written notice. Upon receipt, NYDIG liquidates the bitcoin to U.S. dollars within approximately 30 minutes, minimizing exposure to price volatility. As a result, bitcoin is held only briefly—first in the mining pool’s wallet and then in NYDIG’s custodial account prior to conversion. We do not retain digital assets for speculative purposes, do not maintain material balances, and have no other exchange relationships beyond NYDIG, which employs institutional-grade security and custody protocols.
**Company History**
***Early Operations (2019***–***2021)***
The Company traces its origins to WAHA Technologies, Inc. (“WAHA”) and WAHA, Inc. (renamed SPRE Commercial Group, Inc., or “SPRE”), both incorporated in 2019. SPRE focused on data center assets and operations, while WAHA specialized in blockchain managed services. In December 2022, the two entities completed a corporate roll-up to form Global Digital Holdings, Inc. and remain wholly owned subsidiaries of the Company. In April 2025 (after a substantial minority investment in October 2023), Global Digital Holdings, Inc., acquired The Cloud Minders, Inc. (a company focused on GPU-as-a-Service (“GPUaaS”) assets and operations), now a wholly owned subsidiary, and rebranded the combined operations as QumulusAI. See “*Unaudited Pro Forma Condensed Combined Financial Information*” and “*Management*’*s Discussion and Analysis of Financial Condition and Results of Operations* – *Recent Developments*” for additional information regarding our acquisition of The Cloud Minders, Inc. On August 18, 2025, Global Digital Holdings, Inc. changed its name to QumulusAI, Inc.
***Formation of Global Digital Holdings and Data Center Expansion (2022***–***2024)***
In December 2022, WAHA Technologies and SPRE completed a corporate roll-up to consolidate all shareholders under a single cap table, forming Global Digital Holdings, Inc. (“GDH”). In August 2022, SPRE sold the original Washington, Georgia facility, and WAHA Technologies sold 10 MW of ASIC miners to Cleanspark. GDH activated its next 12 MW facility in March 2023 in Forest City, North Carolina, under FCNC Venture, LLC, and sold this facility in December 2024. In March 2023, GDH formed a joint venture, T20 Mining Group, LLC, in Tulsa, Oklahoma, activating 20 MW in August 2023 and an additional approximately 25 MW in January 2025, both currently operational. In June 2024, GDH created SPRE Watonga, OK LLC, activating approximately 12 MW in Watonga, Oklahoma, which remains active. In August 2023, GDH formed SPRE Denton TX, LLC and won a 20 MW RFP with Denton Municipal Electric (“DME”), with plans to permit in the fourth quarter of 2025 and activate in the first half of 2026.
***Acquisition of The Cloud Minders and Rebranding as QumulusAI (2025)***
In October 2023, GDH acquired a 49% interest in The Cloud Minders, Inc. (“TCM”), a provider of GPUaaS infrastructure for artificial intelligence and high-performance computing workloads. GDH completed the acquisition of the remaining 51% of TCM in April 2025, as described under “*Management*’*s Discussion and Analysis of Financial Condition and Results of Operations* – *Recent Developments*.” Following this transaction, the combined operations were officially rebranded as QumulusAI, Inc. on August 18, 2025 and now operate as an integrated platform primarily focused on AI/HPC infrastructure, with blockchain managed services and data center assets as secondary operations. Our platform powers some of the most compute-intensive projects underway today, and we’ve experienced rapid growth since the launch of our GPUaaS business line, all of which is generated through TCM. GPUaaS revenue grew from approximately $1.0 million in 2023 to $2.7 million in 2024, an increase of over 170%, driven largely by marketplace demand from partners such as RunPod Inc. (our relationship with which is managed by TCM). During the nine months ended September 30, 2025, GPUaaS generated an estimated $2.75 million in revenue—matching its total revenue for all of 2024.
***Operating and Financial Performance History***
GDH revenue grew from approximately $5.1 million in 2023 to $8.1 million in 2024, nearly doubling year-over-year as the firm expanded crypto-focused hosting operations and deepened relationships with long-term customers seeking stable, scalable infrastructure.
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During this period of continued growth and infrastructure expansion, we made significant investments in both our HPC business, TCM—in which we held a 49% ownership interest prior to the April 2025 acquisition—and our digital asset data center and hosting platform. TCM generated positive net income of approximately $190,000 in 2023 before scaling operations significantly in 2024, resulting in a net loss of approximately $2.9 million. GDH, which carries the majority of our fixed infrastructure and power-related expenses, reported net losses of approximately $12.4 million in 2023 and $13.2 million in 2024.
On August 18, 2025, Global Digital Holdings, Inc. changed its name to QumulusAI, Inc.
**Industry Background**
Over the last fifty years, technology has undergone several fundamental shifts that have dramatically boosted productivity across industries.
1. During the 1960s, the advent of mainframe computers introduced large-scale computing and data storage capabilities to numerous organizations, enabling innovations like high-volume transaction processing in the banking sector.
2. The 1980s saw the rise of client-server architecture, which significantly lowered computing costs and sparked the personal computer revolution—making personal computers (“PCs”) widely accessible and driving major productivity improvements.
3. In the 1990s, the internet reshaped how people worked, communicated, shopped, and learned, altering daily life and business practices.
4. The following decades, spanning the 2000s and 2010s, were defined by the rapid adoption of mobile technologies and cloud computing. This introduced unparalleled flexibility in computing resources and unlocked new experiences for customers and developers alike, giving rise to millions of innovative digital products and services.
5. Beginning in 2009, blockchain technology introduced decentralized computing and cryptographic verification methods, enabling digital assets and distributed applications. From 2010 through 2020, advances in AI—driven by breakthroughs in algorithms, large-scale datasets, and high-performance compute—expanded adoption across industries.
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Building on this historical trajectory, AI has emerged as the next transformative wave in technology, with the potential to exceed the impact of previous revolutions. Generative AI is being adopted faster than any major technology in recent history. Research shows that within two years of ChatGPT’s launch, 39.4% of working-age Americans had adopted generative AI—approximately twice the adoption rate of personal computers or the internet at similar stages in their development (Bick, A., Blandin, A., & Deming, D. “The Rapid Adoption of Generative AI.” NBER Working Paper 32966, September 2024). Looking ahead, Gartner forecasts that by 2026, more than 80% of enterprises will have used generative AI APIs, models, or deployed AI-enabled applications in production environments—up from less than 5% in 2023 (Gartner, “Gartner Says More Than 80% of Enterprises Will Have Used Generative AI APIs or Deployed Generative AI-Enabled Applications by 2026,” Published 10/11/23. https://www.gartner.com/en/newsroom/press-releases/2023-10-11-gartner-says-more-than-80-percent-of-enterprises-will-have-used-generative-ai-apis-or-deployed-generative-ai-enabled-applications-by-2026). Moreover, since 2012, the computational power deployed for leading AI model training has been growing at an exponential rate, roughly doubling every three to four months (*AI and compute*. OpenAI. Published 05/16/2018. https://openai.com/index/ai-and-compute/). This surge in computing capability “may prove almost as transformative to the economy as the Industrial Revolution” say many industry analysts—with AI expected to foster productivity gains, enable new products, influence traditional industries, and enable organizations to operate more efficiently (*Does the Rise of AI Compare to the Industrial Revolution?* ‘*Almost,*’ *Research Suggests*. Columbia Business School Research in Brief. Published 04/16/2024. https://business.columbia.edu/research-brief/research-brief/ai-industrial-revolution).
Artificial intelligence represents a pivotal driver of technological progress, with recent research substantially increasing economic impact projections. McKinsey's 2024 analysis projects that AI software and services could generate total economic potential of $15.5 trillion to $22.9 trillion annually by 2040, with generative AI alone contributing $2.6 trillion to $4.4 trillion annually (*AI Could Generate Up To $23 Trillion Annually by 2040*. McKinsey. Published 11/05/24. https://www.marketingaiinstitute.com/blog/mckinsey-ai-economic-impact; *Generative AI can add up to $4.4 trillion in productivity annually*. Consultancy.eu. Published October 9, 2023. https://www.consultancy.eu/news/9358/generative-ai-can-add-up-to-44-trillion-in-productivity-annually). According to industry analysts, global spending on AI infrastructure, including training and inference systems, workload orchestration, high-performance storage, and networking, is projected to approach $337 billion in 2025 and rise to $749 billion by 2028 (*CIOs to spend ambitiously on AI in 2025* — *and beyond*. CIO. Published 11/24/2025. https://www.cio.com/article/3601606/cios-to-spend-ambitiously-on-ai-in-2025-and-beyond.html).
**Demand- and Supply-Side Factors Enabling AI**
We believe that a combination of demand and supply side factors is enabling the massive and unprecedented growth of AI and powering the new industrial revolution.
***Demand-Side Drivers***
- *AI Capabilities Have Evolved Rapidly*
The field of AI has seen substantial advancement, enabling a wide range of new applications. What began as systems built on simple predictions and pattern recognition has now evolved into large-scale foundational models capable of complex reasoning and decision-making. Beyond generative AI—focused on content generation—we’re now entering the era of agentic AI, which may proactively assist, advise, and take actions across a broad spectrum of tasks and industries.
- *AI Delivers Tangible Value to Individuals and Enterprises*
AI is transforming how people and businesses interact with technology in a variety of sectors, including pharmaceuticals, education, software development, and customer engagement. Furthermore, AI is addressing productivity challenges in high-skill fields by automating routine functions and amplifying human expertise. McKinsey research characterizes AI as a transformative technology that amplifies human capabilities, with the potential to automate activities involving expertise increasing by 34 percentage points, fundamentally changing knowledge work across professions (*Superagency in the workplace: Empowering people to unlock AI*’*s full potential*. McKinsey. Published 01/18/25. https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/superagency-in-the-workplace-empowering-people-to-unlock-ais-full-potential-at-work). .
- *AI is Becoming Part of Enterprise Strategy*
Organizations are increasingly viewing AI not just as a tool but as a driver of competitive advantage. Leadership teams are fundamentally reshaping IT budgets and strategic plans to prioritize AI. PwC reports that 49% of technology leaders have fully integrated AI into their core business strategy (*2025 AI Business Predictions*. PWC. https://www.pwc.com/us/en/tech-effect/ai-analytics/ai-predictions.html). We believe the integration of AI into business models and workflows is becoming increasingly important for maintaining relevance and gaining market share in a rapidly evolving technological landscape.
***Supply-Side Drivers***
- *Widespread Sophistication of Foundational Models*
We believe the boom in both proprietary and open-source foundational models has opened the door for more organizations to build and deploy AI-driven tools. These models have gained strength through scale and investment, yet they depend heavily on efficient, high-performance cloud infrastructure to unlock their full potential.
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- *Data Volume Is Exploding*
AI’s growth is sustained by a massive and growing data pool—from proprietary enterprise data to public repositories and rapidly emerging synthetic datasets. Harnessing that data for practical AI applications demands extensive compute power and storage infrastructure.
- *AI-Specific Infrastructure Is Rapidly Improving*
Infrastructure systems have evolved dramatically to match the needs of modern AI workloads. For instance, analysis of GPU performance shows that floating-point operations (“FLOPS”) for machine learning-specific workloads have doubled every 2.3 years (*The computational performance of machine learning hardware has doubled every 2.3 years.* Epoch AI. Published 10/23/2024. https://epoch.ai/data-insights/peak-performance-hardware-on-different-precisions). These sustained improvements in cost-efficiency and speed are lowering barriers to entry and fueling innovation.
**Returns Beyond ROI**
While return on investment (“ROI”) is often used as the primary lens for evaluating AI adoption, industry observers note that organizations frequently pursue AI initiatives for reasons that extend well beyond short-term profitability. These motivations—spanning competitive dynamics, capability development, and geopolitical strategy—underscore the multifaceted nature of AI’s strategic value. As summarized by GenInnov (The Strategic Calculus of AI: Returns Beyond ROI. GenInnov. Published 08/20/2025. https://www.geninnov.ai/blog/the-strategic-calculus-of-ai-returns-beyond-roi), motivations include:
***Survival Against Disruption***: Established firms invest in AI to avoid being displaced by AI-native competitors who can deliver the same functions more efficiently and at lower cost.
***Geopolitical Competition and Sovereignty***: Nations and industries invest in AI infrastructure to maintain global influence, protect economic security, and ensure relevance in the emerging technology race—particularly where reliance on foreign technology is viewed as a strategic vulnerability.
***Attracting and Retaining Talent***: Cutting-edge AI projects act as magnets for top technical talent, creating long-term innovation advantages even if near-term returns are uncertain.
***Building Internal Capabilities***: Even projects that fail to deliver immediate ROI contribute by developing infrastructure, processes, and expertise that strengthen future efforts.
***High-Risk, High-Reward Investment***: Many organizations treat AI investment like venture capital: broad experimentation may yield losses, but a single breakthrough can create transformative value.
***Strategic Ecosystem Leverage***: Companies may offer AI tools at low or negative margins if doing so drives adoption of other profitable products or locks users into their broader ecosystems.
***Data Advantage***: AI deployments can generate proprietary datasets that compound in value over time, creating barriers to entry that competitors cannot easily replicate.
***Reducing Vendor Dependence***: Developing in-house AI capabilities can reduce reliance on external providers that may later raise prices or control critical infrastructure.
***Strategic Positioning Risk***: Organizations often invest in AI simply to avoid being perceived as falling behind competitors—where missing a critical partnership or breakthrough could risk long-term irrelevance.
***Economic and Social Development***: Governments and public entities support AI development to stimulate broader economic growth and create downstream private-sector opportunities.
***Influencing Industry Standards***: Defining or shaping technical standards can generate long-lasting lock-in effects and secure competitive advantage for years.
***Signaling Future Value***: Announcing AI initiatives can enhance investor confidence and perceived enterprise value, even before measurable financial results are realized.
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These dynamics illustrate that the rationale for AI investment often extends beyond direct financial return, encompassing competitive positioning, long-term capability development, and geopolitical considerations. Such factors may influence the pace of AI adoption and, consequently, demand for specialized infrastructure such as ours.
**Infrastructure as the Foundation of AI Advancement**
We believe the future of AI depends on progress in three key areas: model design, data accessibility, and scalable, high-performance computing infrastructure tailored to AI workloads.
Purpose-built compute infrastructure allows organizations to train AI models, run inference at scale, and shorten development timelines. Better model outcomes are linked to robust computing resources—including FLOPs, training cycles, and inference runtimes. Over the past few years, leading-edge models from companies like OpenAI, Anthropic, Google DeepMind, and Meta have required dramatically increasing computing power relative to earlier generations to unlock performance breakthroughs. For example, an expanded AI model database from Epoch AI reveals that training compute for frontier models has grown by 4–5x per year between 2010 and 2024. (*Training compute of frontier AI models grows 4-5x per year*. Epoch AI. Published 05/28/2024. https://epoch.ai/blog/training-compute-of-frontier-ai-models-grows-by-4-5x-per-year).
As foundational models grow more sophisticated, we anticipate that the demand for computational power will continue to surge. Research on AI scaling laws, such as the findings in Scaling Laws for Neural Language Models, supports the idea that increased compute power correlates with better performance—during both model training and inference (*Scaling Laws for Neural Language Models.* Cornell University. Published 01/23/2020. https://arxiv.org/abs/2001.08361).
For AI-driven companies to stay competitive, they must invest in infrastructure that delivers not just power, but efficiency and reliability, ensuring maximum utilization of every component in the system. One important measure of efficiency is Power Usage Effectiveness (“PUE”), which reflects how much of a facility’s total power consumption goes directly to computing versus non-revenue-generating functions like cooling and other operations. QumulusAI targets a low PUE, with certain co-location sites allowing a substantial proportion of total power to be used for compute workloads.
**Building High-Performance AI Infrastructure Is Exceptionally Difficult**
Building AI infrastructure at scale requires fundamentally different architectural approaches than traditional cloud workloads, but achieving hyperscale AI infrastructure demands even more specialized capabilities. While general-purpose cloud platforms excel at distributed applications, AI training and inference require sustained, tightly-coupled compute with microsecond-level synchronization across thousands of accelerators. At larger scales—where clusters span tens of thousands of GPUs—this architectural complexity intensifies exponentially. For instance, a GPU cluster with 16,384 units can require over 7,000 meters of fiber optic cabling and tens of thousands of fiber connections, spanning multiple network layers to support high-bandwidth, low-latency communication essential for training large-scale AI models.
Assembling this level of infrastructure involves navigating complex supply chains and deploying components in data centers built specifically for high-density computing. These facilities must include specialized features like liquid cooling, heat exchangers, and structural designs to accommodate high-power racks—highlighting the level of engineering sophistication required just to operate at baseline functionality.
**Specialized Software Unlocks Infrastructure Potential**
AI supercomputers are intricate and require tailored software to manage and optimize performance. From initial validation of hardware components to provisioning and runtime orchestration, the software stack is critical to reducing downtime and maximizing throughput. Complex AI jobs often necessitate multiple orchestration systems and significant engineering oversight to ensure stable performance.
Once operational, the infrastructure faces enormous strain—AI workloads are resource-intensive and prone to causing system failures. These disruptions can halt training entirely or severely impact inference accuracy, especially in foundational model development where one failed component can jeopardize the entire cluster. Monitoring and mitigating these risks is crucial to maintaining high uptime and cost efficiency. We believe that this creates significant barriers to entry and opportunities for purpose-built AI infrastructure providers to capture premium pricing through superior performance and efficiency.
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**Closing the Efficiency Gap: The MFU Challenge**
Managing large-scale AI infrastructure involves not only building and maintaining it, but also optimizing how workloads are scheduled and resources are used. A major challenge is improving the “Model FLOP Utilization” (“MFU”), which measures actual compute performance relative to the theoretical peak. In practice, a significant portion of GPU capacity goes underused—studies suggest real-world MFU hovers between 35% and 45% (*Wanted: A handy metric for gauging if GPUs are being used optimally*. The Register. Published 05/20/2025. https://www.theregister.com/2025/05/20/gpu_metric/).
Bridging this gap to approach 100% utilization represents a major opportunity for improving the cost-effectiveness and performance of AI systems. However, as GPU clusters grow larger and more complex, maximizing MFU becomes increasingly difficult. Ensuring high utilization rates at scale requires highly specialized operational expertise and intelligent infrastructure design—factors that directly influence the quality and capabilities of AI models.
**Deep Technical Partnerships**
We pursue a collaborative partnership approach designed to expand our technical capabilities by aligning with companies that share our commitment to accelerating innovation across the AI landscape. These strategic alliances are integral to the way we develop and deliver our products and services. By working closely with partners, we’re able to tap into advanced functionalities higher up the technology stack and broaden our access to end users who ultimately operate on our infrastructure. These collaborations have enabled meaningful advancements in areas like automated server management, resource optimization, real-time monitoring, alerts, data validation and verification pipelines, and the creation of tailored data solutions. Our strategy also includes close coordination with high-volume-value-added-resellers and key hardware vendors such as Super Micro Computer, Inc., Dell Technologies Inc., Hewlett Packard Enterprise Company, Lenovo Group Limited, and Gigabyte Technology Co., Ltd., whose systems integrate GPUs from NVIDIA with optimized efficiency and performance. Additionally, we work together with data center operators like Coresite, H5, and Nocix to deploy AI-ready infrastructure that incorporates cutting-edge thermal and architectural designs tailored to the unique demands of machine learning workloads.
**Customer Experience**
We are actively expanding and strengthening our Customer Experience teams to support our AI-driven solutions with increasing depth and expertise. Continuously evolving and refining these capabilities is central to who we are. We remain committed to building a customer-focused organization that understands the complexities of AI compute, networking, and storage, and that grows alongside our clients’ evolving needs.
Our evolving Customer Experience structure includes:
- **Customer Success and Support Engineering**: Dedicated specialists in this area work closely with customers to facilitate deployment, scaling, and optimization of workloads. By providing personalized guidance and 24/7 technical support, this team is designed to empower customers to fully leverage our solutions and achieve their goals efficiently.
- **Infrastructure Operations Team**: This team focuses on the health and resilience of large-scale compute and network environments, ensuring smooth performance across our customer deployments. The team operates with a focus on proactive monitoring and a goal of rapid issue resolution to maintain robust and reliable infrastructure.
- **Technical Enablement and Documentation**: Complementing the support teams, this group develops and maintains comprehensive technical resources and documentation, designed to equip customers, sales, and marketing teams with the knowledge they need.
***Solutions Architects***
Our solutions architects collaborate closely with engineering teams to optimize customer infrastructure, with a goal of ensuring it operates at its highest potential. They play a vital role throughout the customer journey—engaging early in pre-sales activities such as proof-of-concept demonstrations and architecture planning, and continuing their support post-sale during implementation, transitions to updated systems, and ongoing deployment management. Their focus is to help customers fully leverage our platform’s capabilities and assist with performance tuning to achieve optimal results.
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***Security Commitment***
Security is embedded into every layer of our platform to safeguard system stability, availability, and data confidentiality. We maintain a rigorous, ongoing program to identify and address potential security risks, leveraging automated vulnerability assessments alongside dedicated teams focused on penetration testing, vulnerability management, and securing our applications. Additionally, our Security Operations center provides round-the-clock monitoring of security events, enabling proactive detection and rapid response to threats at any time.
**Owned and Colocation Data Center Infrastructure**
Our data center strategy leverages both owned facilities and strategic colocation partnerships to deliver GPU infrastructure rapidly and at scale. By utilizing existing colocation facilities, we can deploy HPC servers significantly faster than building purpose-built data centers for each deployment. We work closely with our colocation partners to ensure these facilities meet our high operational and security standards for AI workloads.
Our diversified footprint includes over one MW of colocation capacity across Marietta, Georgia and Kansas City, Missouri, with 150 additional colocation megawatts available across the U.S. This is complemented by legacy blockchain facilities in Tulsa, Oklahoma (50 MW active, over 10 MW available), Watonga, Oklahoma (10MW active, 9 MW available), and Denton, Texas (activating 20 MW first half of 2026), which we operate under long-term land leases and where we control the site operations. Currently, the power available to us exceeds our computing resources.
All of our HPC facilities utilize designs focused on maximizing performance for AI workloads, with cooling systems engineered for high thermal densities and power delivery architectures that support continuous operation. This combined approach of owned and colocation assets provides operational flexibility, rapid scalability, and the foundation customers need to run demanding AI workloads across multiple regions.
**Tailored Infrastructure Solutions**
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At the core of our approach is a commitment to delivering customized and optimally sized infrastructure solutions that align precisely with each customer’s unique requirements and budget. Rather than relying on a one-size-fits-all model, we continuously evaluate and integrate the most suitable hardware, networking, and cooling technologies to create cost-effective, high-performance environments specifically engineered for AI workloads.
Our data centers are designed with adaptability and efficiency in mind. We carefully select components and configurations that maximize compute density and operational efficiency without compromising reliability or scalability. By leveraging advanced cooling techniques, including but not limited to liquid cooling systems, we reduce power utilization and our physical footprint, enabling denser compute clusters that can handle power-intensive tasks more efficiently. This holistic design philosophy extends to the physical layout and infrastructure, ensuring each facility is optimized to support the chosen technology stack and customer needs.
Our geographically distributed network of data centers is strategically placed near major hubs to reduce latency and improve access for users. This footprint allows us to offer flexible capacity that can rapidly scale up or down in response to fluctuating demand, supported by high-speed interconnectivity between locations. The agility of this network empowers customers to burst workloads seamlessly across regions, delivering the performance and scalability required for complex AI applications.
Security is an integral part of our infrastructure strategy. We uphold rigorous standards, and a zero-trust framework, to protect data integrity, availability, and privacy. Physical and cyber security protocols are continually refined to address evolving threats, ensuring a resilient and trustworthy platform for our customers.
Beyond physical infrastructure, we invest in innovative software and operational tools that simplify management and maximize resource utilization. This enables customers to focus on their AI workloads without the burden of infrastructure oversight.
As of December 1, 2025, our active power capacity is, in the aggregate, approximately 60 megawatts of grid power with immediate access to more than 40 megawatts of additional grid power across more than six data centers in the United States, with additional expansions underway. This capacity supports both large-scale deployments and modular growth, giving customers the flexibility to scale their infrastructure in line with business objectives.
**Our Customers**
We serve a broad spectrum of organizations—from large AI-driven enterprises to fast-growing venture-backed startups. These include model builders, platform enablers, and businesses embedding AI into their core products or internal systems. A significant portion of our current GPUaaS revenue is generated through customers reached via our largest channel partner, RunPod Inc.
In 2023, our significant hosting clients were Cerberus Digital, LLC and MegaDM 1, LLC. In 2024, our significant hosting clients were Fortitude Mining LLC (formerly Foundry Digital), MegaDM, LLC, and Cerberus Digital, LLC. During the nine months ended September 30, 2025, our significant HPC clients were RunPod, Hydra Host, Inc., and Procon Analytics, LLC, and our significant hosting clients were MegaDM 1, LLC, Cerberus Digital, LLC, and Fortitude Mining LLC.
Our relationship with RunPod is managed by our wholly owned subsidiary, TCM. We are subject to RunPod’s standard terms of service, pursuant to which we may receive service on an ongoing basis, and pursuant to which RunPod may terminate such terms or access to the service at any time without cause upon notice. Revenue is shared on an 80% QumulusAI / 20% RunPod basis under RunPod’s standard terms of service. There are no minimum purchase requirements under this arrangement.
Our amended and restated hosting services agreement with Cerberus Digital, LLC, dated April 24, 2024, terminates on August 1, 2026. The agreement may be renewed by Cerberus Digital, LLC for one additional term of two years or terminated upon not less than 60 days’ notice to us. The agreement may be terminated by Cerberus Digital, LLC for cause in the event utilization is below 95%. The parties may additionally terminate the agreements for cause or without cause through a writing executed by both parties. The agreement provides that Cerberus Digital, LLC will make a $600,000 equity investment in QumulusAI, which will include 10% warrant coverage.
Our miner hosting agreement with MegaDM 1, LLC was in effect for an initial term of two years from August 30, 2023 to August 30, 2025. The agreement terminated in accordance with its terms when MegaDM 1, LLC provided a notice of non-renewal and contained no minimum purchase requirements.
Our marketplace agreement with Hydra Host, Inc., dated May 9, 2025, provides for an initial term of 12 months and automatically renews on an annual basis unless either party notifies the other of the intention not to renew at least 30 days prior to expiration. Either party may terminate the agreement for cause if the other party terminates its business operations, materially breaches the agreement, or has a default by insolvency. Revenue is shared on a 97% QumulusAI / 3% Hydra Host, Inc. basis. There are no minimum purchase requirements under this agreement.
Our customer agreement with Procon Analytics, LLC, dated May 7, 2025, operates on a month-to-month basis and continues until Procon Analytics, LLC provides 30 days’ notice of intent not to renew. Either party may terminate the agreement for cause if the other party terminates its business operations, materially breaches the agreement, or has a default by insolvency. Procon Analytics, LLC pays a monthly service fee for all hours available on the servers used during each monthly term.
Our miner hosting agreements with Fortitude Mining LLC (formerly Foundry Digital), were entered into on April 17, 2024 and August 19, 2024, respectively. The April 17, 2024 agreement has an initial term of one year, and the August 19, 2024 agreement has an initial term of two years. The initial term of each agreement may be renewed by Fortitude Mining LLC, and each agreement may be terminated by Fortitude Mining LLC for cause in the event utilization is below 95%. The parties may additionally terminate the agreements for cause or without cause upon providing proper notice. The agreements contain no minimum purchase requirements.
We also continue to serve certain cryptocurrency-focused customers from our legacy digital asset operations. What unites these customers is a need for high-performance infrastructure, fast deployment timelines, and reduced operational complexity.
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Our competitive edge comes from providing highly specialized AI compute infrastructure that is production-ready within an accelerated timeframe. This enables our customers to optimize time-to-value, reduce total cost of ownership, and offload the operational burden of infrastructure management. As a result, our users can focus on building and refining models, serving inference workloads, or innovating their products—rather than worrying about managing GPUs, cooling, and capacity planning.
**Flexible & Tailored Compute Engagements**
We offer a diverse range of usage plans to meet our customers where they are—whether through pay-as-you-go, on-demand, or short reserved terms (one, three, and six months, with one-year and multi-year contracts available when appropriate). The majority of current customer agreements are for terms of three months or less, with customers typically continuing on an on-demand basis after the initial term, paying based on actual infrastructure usage. These options are mostly delivered through our global sales channel partnerships, including platforms like RunPod Inc., Hydra Host, Inc., and Vast.ai Inc. We’ve intentionally designed this pricing model to optimize flexibility and cost efficiency for a large, distributed customer base while retaining the opportunity to extend commitments as customer workloads mature.
Short-term contractual commitments yield a meaningful revenue premium relative to multi-year agreements. This premium more than offsets the potential downside associated with roll risk and market-based pricing compression over time. Our diversified customer base—comprising thousands of end users with varying and often unpredictable compute demands—enables us to effectively distribute this risk across a broad portfolio. Moreover, the relatively smaller average deployment size per customer allows us to efficiently manage onboarding and offboarding activities with minimal disruption to overall platform utilization, ensuring sustained levels of billable compute capacity. Our model enables customers to spin up compute on their own timelines, experiment with new workloads, and scale quickly—without being locked into rigid, multi-year commitments.
This flexibility is particularly important to small and midsize businesses and emerging AI teams, which often operate under quarterly or discretionary operational expenditure budgets. These customers typically can’t justify long-term infrastructure commitments—especially when a project’s success is uncertain or when budgeting cycles don’t align with multi-year contract obligations.
**Market Behavior: Why Most Customers Avoid Long-Term Commitments**
There is increasing evidence that organizations across industries face significant cloud cost management challenges. Flexera’s 2025 State of the Cloud Report found that 84% of organizations cite managing cloud spend as their top challenge, with cloud budgets exceeding limits by an average of 17% (*New Flexera Report Finds that 84% of Organizations Struggle to Manage Cloud Spend*. Flexera. Published 03/19/2025. https://www.flexera.com/about-us/press-center/new-flexera-report-finds-84-percent-of-organizations-struggle-to-manage-cloud-spend). Additionally, organizations continue to waste approximately 27% of cloud spend, driving increased adoption of financial operations teams and managed service providers to regain control over spending (*State of the Cloud Report*. Flexera. Published March 2025. https://info.flexera.com/CM-REPORT-State-of-the-Cloud?lead_source=Organic+Search).
Simultaneously, there’s increasing evidence that organizations across industries are deliberately avoiding long-term cloud infrastructure contracts due to budget constraints, operational unpredictability, and concerns about return on investment. Industry benchmarks show that organizations waste approximately 30% of cloud compute spending—highlighting systemic inefficiencies in how cloud resources are provisioned and managed (*How to Identify and Reduce Cloud Waste. ProsperOps*. Updated March 2025. https://www.prosperops.com/blog/how-to-identify-and-prevent-cloud-waste). This underlines the importance of optimizing both usage and rate—particularly when considering the value of long-duration commitment discounts, which can be misaligned with actual workload needs.
These dual pressures—overspending on budgets and underutilizing commitments—are driving teams toward just‑in‑time infrastructure, autoscaling, serverless, and more dynamic resource management strategies. At the same time, data security concerns add another layer of hesitation, particularly when customers fear their proprietary information could be repurposed by large model-training providers.
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We believe that the following factors play a key role:
- **Project Uncertainty**: Many AI projects begin as experiments, pilots, or proofs of concept. We have found that committing to one- to four-year contracts without clarity on scale or longevity is financially impractical for companies.
- **Budget Structures**: Operational expenditure budgets are often planned on a quarterly basis, especially for startups and midsize companies. Long-term contracts introduce capital expenditure-style friction that clashes with how teams manage cost centers.
- **Overcommitment Risk**: According to a16z, many companies deliberately under commit their cloud spend—often reserving capacity equivalent to only their baseline workloads—to avoid the financial risk of overcommitting. This typically results in committed spend being approximately 20% lower than actual usage, with some companies reporting an additional spending of up to two times their committed spend. This suggests some firms prefer to maintain flexibility through elastic, short-term resources (*The Cost of Cloud, a Trillion Dollar Paradox*. Andreessen Horowitz. Published 03/27/2021. https://a16z.com/the-cost-of-cloud-a-trillion-dollar-paradox).
**Designed for Agility and Growth**
Our pricing structure and platform architecture reflect a deep understanding of these customer realities. By prioritizing short terms, dynamic scaling options, and modular pricing, we align directly with the way modern organizations adopt and consume compute. This model empowers both large and small teams to move faster, make smarter infrastructure decisions, and extract more value from their AI initiatives—while maintaining financial and operational agility.
**Go-to-Market Strategy**
***Overview***
Our go-to-market organization consists of sales, marketing, partnerships, and customer experience teams operating as a lean, disciplined organization with a clear vision of AI market trajectory, ideal customer profiles, and growth drivers. This approach enables us to maintain operational agility while executing an effective multi-channel distribution strategy that has established brand recognition within an industry historically dominated by large-scale competitors. Our go-to-market strategy has evolved to address the diverse needs of AI workloads through three complementary channels: Provider Partners, Developer Partners, and direct offerings. This channel segmentation enables us to serve customers across the entire AI development lifecycle—from initial experimentation to production-scale deployment—while maintaining operational efficiency and preventing channel conflicts.
***Multi-Channel Distribution Strategy***
*Provider Partners:*
Our Provider Partners consist of strategic relationships with leading GPU marketplaces and brokers, including RunPod Inc., Cudo Compute, Hydra Host, Inc., and Vast.ai Inc. Under these arrangements, the partner manages orchestration, customer acquisition, and billing for workloads running on QumulusAI infrastructure, and we receive a contracted share of the revenue generated from those workloads. These agreements are generally structured under standard service terms, with most customer usage occurring on short-term or on-demand commitments. Our services reach over 10,000 end customers via our Provider Partners. We believe these partnerships position QumulusAI as a trusted infrastructure provider powering premium marketplace offerings while generating higher per-GPU revenue compared to traditional long-term agreements.
*Preferred Provider Program:*
QumulusAI is developing a Preferred Provider Program designed to offer enhanced partnerships for select Provider Partners who engage more deeply with our platform. Under the proposed program, Preferred Provider Partners could receive priority access to new GPU models, inclusion in hardware roadmap discussions, dedicated infrastructure allocations, and co-marketing opportunities. In return, participating partners could commit to structured contract terms (such as minimum utilization thresholds and margin-sharing arrangements), creating mutually beneficial relationships intended to maximize utilization. While we are actively pursuing this strategy, we have not yet entered into Preferred Provider Program agreements with any partners.
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*Developer Partner Program:*
Our Developer Partner Program targets AI consultancies and machine learning operations platforms that build solutions on QumulusAI infrastructure. These partners co-market and sell QumulusAI HPC cloud infrastructure alongside their custom solutions to their clients, providing us with consistent capacity utilization and market validation.
Developer Partners receive joint marketing opportunities, dedicated infrastructure allocations with guaranteed capacity, priority technical support, product roadmap influence, and custom service-level agreement development. This program creates deep technical partnerships that extend beyond transactional relationships to strategic technical collaboration, while helping us maintain optimal resource utilization across our platform ecosystem.
**Competition**
The AI infrastructure market is experiencing rapid evolution and complexity, with a wide range of providers vying to serve various customer segments. While hyperscalers like AWS, Azure, Google Cloud, IBM, and Oracle dominate with vast, general-purpose clouds, their offerings are not easily sized or customized to all customer needs when it comes to purpose-built AI platforms. In many cases, the same customers of the hyperscalers buy compute through our sales channel partners to fill gaps in their own AI portfolios—highlighting our distinct value proposition in delivering dedicated, AI-optimized infrastructure for demanding workloads.
***Not Just Hyperscalers***—***Neocloud Competitors Too***
The rise and success of AI-native clouds such as CoreWeave (Nasdaq: CRWV) and Lambda Labs further underscores the competitive intensity. These companies compete aggressively for large-scale, GPU-intensive workloads, but are more directly competing with the hyperscalers than the customer segments that we are pursuing.
***Our Distinctive Position***
We serve an entirely different set of needs and customers:
- We specialize in meeting demands from a single GPU to clusters of tens to hundreds of nodes at most, not the mega-fleets of thousands.
- In addition to optimized and shared GPU access, our platform delivers true bare-metal access as well, latest-gen GPUs, high-bandwidth storage, and ultra-low-latency networks in an integrated stack.
- We include access to behind-the-meter power generation, tiered reliability, and off-grid resiliency that provide greater cost savings and consistent service—features seldom offered by hyperscalers or even Neocloud peers.
- Our team works closely with each customer to custom-design and optimize infrastructure, rather than offering only one-size-fits-all compute pools.
***Why Customers Choose Us***
We stand apart thanks to a blend of operational excellence and customer-centric design:
- **Performance & Reliability**: Our HPC infrastructure is proven at scale, engineered for high-density AI workloads.
- **Efficiency & Cost Control**: With integrated power generation and transparent pricing, our infrastructure delivers competitive total cost of ownership.
- **Rapid Access to Hardware**: Early deployment of cutting-edge GPUs ensures customers stay ahead in training and inference.
- **Automation & Health Resilience**: We reduce operational overhead with proactive monitoring, remediation, and managed infrastructure services.
- **Security & Compliance**: Enterprise-grade safeguards are embedded throughout our stack.
- **Customization & Support**: We tailor solutions—whether optimizing storage or fine-tuning GPU configurations—and back them up with personalized customer service.
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- **Focused Customer Experience**: Our direct-sales model emphasizes flexibility in contract duration (three to 36 months or simple pay-as-you-go OnDemand), and our support teams partner closely with engineers, with a goal of ensuring agile deployment and scale.
***Competing Where It Matters***
Where hyperscalers sell broad compute platforms and neoclouds like CoreWeave and Lambda chase massive-scale use cases, we excel at serving teams that require precision-engineered AI infrastructure, close collaboration, and fast turnaround—whether deploying in the hundreds of teraflops or scaling out new model trials. With our integrated stack—HPC cloud, AI-first data centers, and behind-the-meter power—our value proposition is built from the ground up for AI innovation
**Key Performance Factors**
QumulusAI’s growth is driven by a combination of strategic, technical, and operational advantages that enable the company to scale rapidly, serve compute-intensive workloads, and deliver differentiated value in the AI infrastructure market.
***Speed of Deployment***
With a modular and standardized deployment approach, QumulusAI can bring new GPU infrastructure online within three months—significantly faster than traditional cloud or colocation providers. This agility allows the company to respond quickly to surging AI demand and customer-specific capacity needs.
***Infrastructure Control and Integration***
By owning and operating key layers of the stack—from energy procurement to data center operations and HPC orchestration—QumulusAI reduces external dependencies, enhances reliability, and maintains tighter cost control. This vertically integrated model supports long-term scalability and margin efficiency.
***Energy Strategy and Operational Efficiency***
QumulusAI’s infrastructure is designed for high target power efficiency and supported by a mix of owned and contracted power resources, including behind-the-meter natural gas infrastructure. This strategy mitigates energy market volatility and ensures stable operating economics at scale.
***High-Performance Compute Options***
QumulusAI delivers both direct, bare-metal access and virtualized environments powered by top-tier NVIDIA GPUs tailored for both training and inference workloads. Bare-metal deployments avoid virtualization overhead and deliver consistent, low-latency performance for the most demanding AI research and production workloads, while our virtualization offerings enable flexible resource allocation and multi-tenant access for clients with dynamic scaling needs.
***Dual Go-to-Market Strategy***
QumulusAI combines marketplace reach with enterprise intimacy. Channel partners like RunPod drive high-volume utilization through orchestration layers, while a direct sales team supports technically advanced clients via a self-service portal and collaborative deployment planning.
***Customer Alignment and Pricing Transparency***
With clear pricing, term-based discounts, and white-glove support, QumulusAI offers a compelling alternative to legacy cloud providers. This customer-centric model supports longer contract durations, customer retention, recurring revenue, and improved forecasting visibility.
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**Intellectual Property**
Intellectual property (“IP”) remains a critical pillar of our business, underpinning our ability to sustain a competitive advantage in the rapidly evolving AI landscape. However, protecting software-level innovations and process-oriented IP presents inherent complexities. Unlike tangible assets, software and methodologies are often difficult to safeguard through traditional patent frameworks due to their intangible, dynamic, and iterative nature. Additionally, the fast-paced development cycles and the open collaboration culture within the AI ecosystem mean that maintaining exclusive control over all facets of innovation is both impractical and inefficient for any single organization.
Recognizing these realities, we adopt a strategic approach to intellectual property that emphasizes collaboration and integration. Instead of attempting to internally develop and protect every innovation, we actively seek partnerships and licensing agreements with best-in-class technology providers. This enables us to leverage proven advancements while minimizing the risks associated with developing proprietary solutions in isolation. Furthermore, we pursue targeted acquisitions of entities that bring authentic innovations to the AI domain, strengthening our portfolio and accelerating our market impact.
To safeguard the IP that is fundamental to our operations, we enforce rigorous confidentiality and proprietary rights protocols. We control access to sensitive information through comprehensive internal and external safeguards, including confidentiality agreements, licensing arrangements, and intellectual property assignment contracts with employees, contractors, and partners. While these legal and procedural measures provide essential protection, we acknowledge that IP rights, particularly in software and process domains, are susceptible to challenges, circumvention, and unauthorized use.
Our philosophy embraces these challenges by fostering a flexible, partnership-driven IP ecosystem that balances protection with agility—ensuring we remain at the forefront of innovation without compromising operational efficiency.
***Trademarks***
We have filed to register the trademarks “QumulusAI” and “Qumulus.” These applications are pending with the United States Patent and Trademark Office.
***Licenses***
In addition, we have entered into a license agreement with hosted.ai to provide software that manages GPU resource allocation, scheduling, scaling, and access across multiple users, applications, and workloads. The license has an initial two-year term with fees that scale based on the number of GPUs deployed on the hosted.ai platform. Under the agreement, fees begin at $10,000 per month for up to 64 NVIDIA B200 level GPUs and increase in tiers up to $168,000 per month if 256 or more NVIDIA B200 level GPUs are deployed, or after 12 months from the effective date, whichever occurs first. If the 256-unit threshold is reached earlier than 12 months, the $168,000 monthly fee applies immediately and continues through the end of the initial two-year term. Renewal fees are based on the number of GPUs on the system but are capped at no more than double the maximum fee from the prior term in any one-year renewal period.
**Government Regulation and Compliance Landscape**
As a company operating at the intersection of advanced infrastructure and next-generation technologies, QumulusAI is subject to a broad and evolving array of global laws and regulatory frameworks. These govern key areas of our business—including AI, digital infrastructure, and crypto-enabled services—and span domains such as intellectual property, taxation, import/export controls, anti-corruption statutes, economic sanctions, national security regulations, data privacy, consumer protection, labor law, and environmental standards.
Our operations and the delivery of infrastructure and services across borders are increasingly influenced by regulatory scrutiny, particularly in sectors like AI, high-performance computing, and digital asset infrastructure. For example, regulatory frameworks such as the U.S. Export Administration Regulations (“EAR”) and evolving guidelines under the Foreign Investment Risk Review Modernization Act (“FIRRMA”) impact the flow of sensitive technologies, including compute-intensive hardware and services, across international borders. The recent expansion of the U.S. Department of Commerce’s Entity List and increased scrutiny by the Committee on Foreign Investment in the United States (“CFIUS”) reflect a broader geopolitical shift that could affect our ability to engage with certain international customers, partners, or suppliers.
Similarly, global data governance is undergoing a rapid transformation. Regional privacy frameworks such as the California Consumer Privacy Act (“CCPA”), the European Union’s General Data Protection Regulation (“GDPR”), and China’s Personal Information Protection Law (“PIPL”) impose complex compliance requirements on companies that process personal data across jurisdictions. These rules increasingly intersect with AI ethics and algorithmic accountability policies, which may become more prescriptive over time. A growing number of jurisdictions—such as the EU through its AI Act—are moving toward enforceable, risk-based regulatory models that could materially shape how AI-powered infrastructure must be developed, deployed, and governed.
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To date, the costs of compliance with these regulatory regimes have not had a material impact on our capital expenditures or operating results. However, the pace and unpredictability of regulatory change—particularly in trade policy, AI governance, and cross-border technology transfer—introduce potential risks to our global competitiveness. While we do not currently anticipate significant near-term expenditures directly tied to compliance obligations, we continue to monitor regulatory developments closely. In particular, we recognize that future regulatory shifts—especially in export controls, sanctions policy, or national security reviews—could materially affect our access to markets or critical partnerships.
As such, we maintain robust internal controls, conduct regular regulatory reviews, and engage with external counsel and trade compliance advisors to proactively manage risk. Our governance practices are designed to ensure alignment with applicable laws and evolving best practices across the jurisdictions where we operate.
For more detailed discussion of regulatory risks, refer to the Risk Factors titled:
- *“We are subject to laws and regulations, including governmental export and import controls, sanctions, and anti-corruption laws, that could impair our ability to compete in our markets and subject us to liability if we are not in full compliance with applicable laws*,”
- *“We are subject to laws, regulations, and industry requirements related to data privacy, data protection and information security, and user protection across different markets where we conduct our business and such laws, regulations, and industry requirements are constantly evolving and changing. Any actual or perceived failure to comply with such laws, regulations, and industry requirements, or our privacy policies, could harm our business*,” and
- *“Our business is subject to a wide range of laws and regulations, and our failure to comply with those laws and regulations could harm our business*.”
**Human Capital Management**
Our mission is to break AI’s biggest barriers—the infrastructure constraints, cost limitations, and complexity challenges that prevent organizations from pushing the boundaries of what’s possible with artificial intelligence. We deliver flexible, cost-efficient HPC cloud infrastructure that enables breakthrough AI outcomes. This mission is guided by our operating principle: C.L.O.U.D. —Challenge Limits of Understanding Directly.
We challenge the limits of understanding both through the technology we build and through our company culture, where we break down communication barriers and challenge assumptions with directness born of genuine care.
We believe the most powerful AI breakthroughs emerge when rigorous technical infrastructure combines with an environment where people communicate honestly to ensure the best ideas prevail regardless of hierarchy.
We embrace core principles that embody C.L.O.U.D. in our daily actions:
- **Challenge Assumptions**: We question conventional thinking and push boundaries, believing that intellectual rigor and healthy debate lead to better solutions. Every idea can be improved through thoughtful challenge.
- **Learn with Urgency**: We move fast while staying rigorous, acknowledging what we don’t know and rapidly iterating based on client feedback and market demands. Speed and precision drive breakthrough solutions.
- **Operate with Directness**: We communicate candidly because we care. Clear, honest feedback—delivered with respect—breaks down internal barriers and helps us all improve faster.
- **Unite Around Excellence**: We hold ourselves and each other to exceptional standards. Diverse perspectives combined with shared commitment to quality creates our competitive edge.
- **Deliver Impact**: We measure success by the barriers we help clients overcome. Our infrastructure empowers others to achieve AI breakthroughs they couldn’t reach before, and we take that responsibility seriously.
As of December 1, 2025, our global workforce numbers 26 full time-employees, one part-time employee, and two independent contractors, along with a 13-member advisory team that contributes on a volunteer basis. We strive to maintain competitive compensation and cultivate a strong culture that differentiates us in the industry and drives sustained business success.
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**Sustainability**
AI continues to accelerate innovation across nearly every sector—but its infrastructure demands are immense and growing. As we scale to meet this demand, we believe long-term resilience requires a sustainability strategy grounded not only in environmental stewardship, but also in infrastructure stability, energy efficiency, and risk mitigation. Our goal is to ensure our platform remains dependable, cost-effective, and responsibly operated over time, even as energy markets tighten and usage intensifies.
Our sustainability strategy is built around five pillars: Electricity Pricing Certainty, Energy Efficiency, Resource Responsibility, Sustainable Supply Chain Engagement, and ESG.
***Electricity Pricing Certainty***
A critical and often overlooked pillar of long-term infrastructure sustainability is energy price stability and power reliability. Unlike many cloud providers that rely entirely on grid-delivered power, we are actively pursuing access to behind-the-meter and alternative energy strategies—including the co-location of our HPC infrastructure with facilities capable of generating power directly, such as through natural gas-fired plants with the ability to lock in long-term fuel supply contracts.
This strategy is intended to help reduce our exposure to volatile electricity markets, support pricing predictability for customers, and enable us to design systems with greater redundancy and uptime assurance. For new site builds, we plan to pair HPC data centers with equivalent-capacity bitcoin mining and hosting facilities, allowing us to generate revenue from idle backup power while maintaining readiness to meet peak HPC demand.
According to BloombergNEF, AI and cryptocurrency datacenters may drive U.S. power demand “will more than double by 2035.” (BloombergNEF*, Power for AI: Easier Said Than Built.* Published 04/15/25. https://about.bnef.com/insights/commodities/power-for-ai-easier-said-than-built/.) Meanwhile, The Wall Street Journal reports widespread tension between surging data-center power needs and power-grid capacity limits (The Wall Street Journal, ‘*Three New York Cities*’ *Worth of Power: AI Is Stressing the Grid*, Published 09/28/2024.).
Unlike many hyperscale operators, we are not constrained to a one-to-one relationship between physical GPUs and customer workloads. Through our license agreement with hosted.ai, we can virtualize and allocate GPU resources across multiple users and applications. This allows us to deliver higher utilization from the same capital base and power footprint—meaning the incremental demand we place on the grid is materially lower than if each customer required dedicated hardware. In effect, we are decoupling growth in customer adoption from equivalent growth in electricity consumption, enabling a more efficient scaling model than is often assumed in public discussions about AI infrastructure demand.
By proactively pursuing power autonomy and long-term pricing contracts, we’re building infrastructure that not only supports environmental goals, but also shields our platform and customers from rising energy costs and supply chain risks—creating a more resilient foundation for AI innovation.
***Energy Efficiency***
Efficiency remains a core tenet of our infrastructure strategy. As AI model sizes continue to grow, the power density of modern compute hardware requires smarter approaches to cooling, hardware utilization, and data center design. We are investing in new technologies and best practices—from liquid cooling systems to intelligent workload orchestration—to maximize the performance-per-watt of our deployments.
Our goal is to drive meaningful reductions in energy waste across the compute stack, and to improve metrics like Power Usage Effectiveness over time, while maintaining the elasticity and performance our customers expect.
***Resource Responsibility***
Beyond power, we take a broader view of responsible resource use. This includes the efficient use of water in cooling systems, responsible e-waste management, and exploring the feasibility of heat reuse strategies that can redirect thermal output into secondary applications, such as district heating or industrial processes.
Where feasible, we will seek out partners and vendors who share our commitment to minimizing the environmental footprint of supporting next-generation compute.
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***Sustainable Supply Chain Engagement***
Our infrastructure relies on a vast network of vendors, partners, and providers. As we grow, we are embedding sustainability into our supplier evaluation framework—encouraging transparency around energy sourcing, carbon intensity, and environmental performance.
This ensures we’re not only building a sustainable platform for ourselves, but also reinforcing better practices across the broader ecosystem to which we belong.
***ESG***
We believe strong governance is essential to delivering on any sustainability ambition. We are taking steps to incorporate ESG risk management into our enterprise strategy, with clear ownership from internal sustainability leaders and oversight at the Board level. This includes identifying material environmental risks, aligning with reporting standards as we scale, and continuously refining our goals to reflect both business needs and global sustainability priorities.
**Properties**
As of December 1, 2025, QumulusAI is headquartered in Marietta, Georgia. Here, we operate more than 800 GPUs across two colocation data centers, plus one in Kansas City, Missouri. We have secured rights of first refusal for 30 MW of IT load capacity space for our GPU equipment and we are actively planning for expansion exceeding 120 MW of total IT load across our platform with potential to support over 90,000 NVIDIA B200/B300 GPUs (among the latest generation GPUs purpose-built for foundation model training), or as many as 1,500,000 GPUs optimized for AI inference at scale. In support of our strategic holdover business, which includes managed crypto infrastructure operations, we also maintain long-term land lease agreements in Watonga, Oklahoma; Tulsa, Oklahoma; and Denton, Texas. These sites serve as foundational assets for power-intensive compute deployments and provide strategic flexibility for future infrastructure repurposing.
**Legal Proceedings**
From time to time, we may become involved in legal or regulatory proceedings as part of the ordinary course of our business operations. At present, we are not a party to any litigation that, in management’s opinion, is likely to result in a material adverse impact on our business, financial condition, cash flows, or operating results, either individually or in the aggregate. However, we may, in the future, be subject to claims from third parties, including allegations of intellectual property infringement or other legal challenges. Responding to and defending against such matters can be both time-consuming and costly, placing demands on management resources and personnel. Moreover, while we aim to defend our interests vigorously, interim rulings may not always be favorable, and there can be no guarantee of a positive outcome in any given proceeding.
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**MANAGEMENT**
**Executive Officers and Directors**
The following table provides information regarding our executive officers and directors as of December 1, 2025:
| Name | Age | Position(s) |
| --- | --- | --- |
| Michael Maniscalco | 46 | Chief Executive Officer, Director |
| Scott Krosnowski | 53 | Chief Financial Officer |
| Ankur Chatterjee | 45 | Chief Integration Officer |
| Ryan DiRocco | 44 | Chief Technology Officer |
| Stephen Hunton | 46 | Chief Marketing Officer |
| Patrick Gahan | 45 | SVP, Capital Markets, Director |
| Steve Gertz | 50 | Chairman |
| Stacy Kenworthy(1)(2) | 59 | Lead Independent Director |
| Michael Mulica(1)(2)(3) | 62 | Director |
| David Rench(1)(2)(3) | 48 | Director |
| Barry Schwartz(2)(3) | 49 | Director |
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating and Corporate Governance Committee.
***Michael Maniscalco*** has served as our Chief Executive Officer and a member of our Board since September 2025, bringing a rare fusion of operational excellence and relevant AI infrastructure expertise. Previously, in August 2025, he served as a member of our Advisory Board. As the former Chief Technology Officer of Applied Digital Corporation (NASDAQ: APLD), a digital infrastructure innovator, a role he served in from July 2023 to January 2025, Mr. Maniscalco drove significant revenue growth over consecutive quarters and year-over-year, while transitioning the company’s focus from blockchain data center development and operations to HPC data centers and GPUaaS. He played a key role in securing major customer contracts and oversaw the deployment of cutting-edge facilities to meet surging AI compute demands. These efforts led to a strategic expansion into high-growth AI verticals, including the rapid development of a large-scale GPU cloud business and the successful closing of multi-billion-dollar data center contracts for AI factories. Before his role as Chief Technology Officer, Mr. Maniscalco was a consultant, followed by EVP of Technology at Applied Digital beginning in September 2021. Starting in February 2018 and running concurrently with his other professional appointments, Mr. Maniscalco has served as president of Pytheas Enterprises, a strategic consulting and fractional CXO services firm focusing on technology, product, AI, and innovation. Mr. Maniscalco has founded and exited multiple ventures including those in chronic disease management, Internet of Things (“IoT”) and remote systems management, and intelligent building systems. His prior product experience includes launching several award-winning software solutions. Additional roles include entrepreneur-in-residence at StanleyX, product development, and engineering leadership positions spanning the AI, IoT, smart home, blockchain, and healthcare spaces. He holds a B.S. in Computer Science from Georgia Tech, is an emerging early-stage technology investor, keynote speaker, and actively mentors startups through programs that include TechStars and FAU Tech Runway. We believe Mr. Maniscalco is qualified to serve on our Board due to his proven ability to execute in high-growth technology markets, expertise and track record in AI infrastructure and high-performance computing, and history of driving shareholder value at both public and private companies.
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***Scott Krosnowski*** has served as our Chief Financial Officer since February 2025 and brings over 25 years of financial leadership to QumulusAI. In this role, he is responsible for overseeing the company’s financial operations, including strategic financial planning, risk management, and capital allocation, ensuring alignment with QumulusAI’s mission to deliver cutting-edge AI-driven computing solutions. Previously, from October 2023 to February 2025, Mr. Krosnowski served as Senior Vice President, Finance, of private equity-backed go-to-market advisory firm, SBI Growth Advisory (Sales Benchmark Index, Inc.), where he supported M&A growth strategies and had oversight of all financial management functions. From May 2022 to October 2023, Mr. Krosnowski served as Chief Financial Officer of WAHA Technologies, Inc., a subsidiary of QumulusAI, and from January 2016 to May 2022, he served as Chief Financial Officer of Arch Amenities Group (WTS International, Inc.), global leisure management and consulting firm, where as a minority owner and Chief Financial Officer, he helped grow and sell the firm as a platform company in 2019. Mr. Krosnowski stayed on as Chief Financial Officer and led infrastructure restructuring while supporting organic and M&A rapid growth from 100 locations to over 300 locations in less than 2.5 years. He also served as a member of our Board from September 2022 to August 2025. Mr. Krosnowski received his B.S.B.A. from American University.
***Ankur Chatterjee*** has served as our Chief Integration Officer since April 2023 and leads our HPC strategy and operations. Mr. Chatterjee plays a pivotal role in architecting and executing the company’s compute and data center initiatives, including the deployment and management of GPU-intensive environments that underpin our AI infrastructure-as-a-service offerings. His leadership is central to QumulusAI’s ability to deliver scalable, low-latency, high-throughput systems that support our most demanding artificial intelligence workloads. Mr. Chatterjee brings over two decades of experience in technology infrastructure, systems integration, and operational leadership. Prior to joining QumulusAI, he held significant positions in the technology sector over more than 20 years, including serving as the President at StayOnline, LLC, a provider of scalable power connectivity and distribution solutions to the data center and enterprise IT sectors, where he spearheaded the development of scalable power path solutions, from April 2021 to April 2023. His career spans multiple ventures across private equity, cloud infrastructure, and edge computing, where he consistently focused on enabling growth through innovation in high-performance, distributed systems. Mr. Chatterjee received his B.S. in Management with a Minor in Information Systems from the Georgia Institute of Technology.
***Ryan DiRocco*** has served as our Chief Technology Officer since September 2025. He is a seasoned technology executive previously serving as Chief Technology Officer at Performive, LLC, a leading VMware-focused managed multicloud provider, from June 2007 to October 2024. With over 20 years of expertise in IT, virtualization, enterprise networking, and managed services, he has built and guided high-performing engineering teams to ensure robust, global infrastructure operations. In his role, Mr. DiRocco oversees the strategic direction of QumulusAI’s technical stack, aligning product development with customer-centric needs while optimizing performance, security, and operational efficiency. He is instrumental in steering the company’s AI initiatives, helping clients transition toward models with minimal disruption and maximum return on investment.
***Stephen Hunton*** has served as our Chief Marketing Officer since September 2025, bringing over 20 years of integrated marketing leadership experience enabling Fortune 500 brands like Visa, ServiceNow, IBM, Google, and YouTube to engage prospects across digital channels. Prior to his role as Chief Marketing Officer, Stephen joined QumulusAI’ advisory board in October of 2024. From September 2017 to March 2023, he served as Vice President of Global Social & Content Experience of IBM, a technology corporation, leading a team of over 50 professionals responsible for digital engagement, thought leadership content, and building operating models that created millions of customer touch-points annually. He built IBM’s centralized social advocacy and influencer relations capabilities and co-created content with top tech analysts for one of the most followed business-to-business tech brands globally, demonstrating his passion for driving business outcomes through digital marketing. Prior to IBM, from June 2012 to September 2017, Mr. Hunton served as Senior Vice President & Partner at FleishmanHillard Inc., a public relations and marketing agency, building global innovation capabilities and driving strategic development for iconic brands. Mr. Hunton’s expertise spans executive leadership, integrated marketing, content strategy, and organizational transformation, with a proven track record of implementing scalable marketing operations that fuel growth and optimize performance across global markets. Mr. Hunton received his BA in Communications from the University of Arkansas.
***Patrick Gahan*** has served as a member of our Board since January 2021 and as our SVP, Capital Markets since September 2025. From February 2025 to August 2025, Mr. Gahan served as our Chief Executive Officer. A seasoned leader in the national security and intelligence sector, Mr. Gahan’s career spans key roles in government consulting, defense contracting, and entrepreneurial ventures supporting the U.S. intelligence community. Mr. Gahan began his career at Booz Allen Hamilton, a management consulting company, from January 2002 to September 2003, providing strategic consulting to national security clients. He then moved to Lockheed Martin Corporation, an aerospace and defense company, where he held leadership roles in signal intelligence, surveillance technologies, and classified program management from October 2003 to March 2004. Leveraging this experience, in March 2004, Mr. Gahan co-founded Seismic LLC, a technology and analytics firm specializing in signals intelligence and real-time situational awareness that served intelligence and defense customers. In 2009, Seismic was acquired by Applied Signal Technology, which was later acquired by Raytheon (now RTX Corporation). Today, Mr. Gahan is recognized for building high-performing teams at the intersection of technology and national security. Mr. Gahan received his B.S. in Computer Science from The Johns Hopkins University. We believe Mr. Gahan is qualified to serve on our Board because of his extensive executive leadership experience in the technology sector, including founding and scaling multiple innovative companies, as well as his deep understanding of strategic operations, capital markets, and corporate governance.
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***Steve Gertz*** has served as the Chairman of our Board since February 2025. He has served as the founder of Rhythmic Ventures, a growth acceleration firm with a portfolio of high performing companies, since February 2017. He was also a co-founder of 11|TEN Innovation Partners, a healthcare focused ecosystem and strategy consulting firm, from January 2017 to April 2024. With over 25 years of experience, he has built high-impact partnerships across private equity, venture-backed companies, and large enterprises. From January 2007 to February 2017, he was Partner with Joe Gibbs at Joe Gibbs Driven Investors, Inc., the investment arm of the NFL Hall of Fame coach and NASCAR team owner, where he led a portfolio of high-growth investments. Mr. Gertz invested early in QumulusAI, secured additional strategic capital, sourced key talent, and fostered a diverse customer ecosystem. We believe Mr. Gertz is qualified to serve on our Board of Directors because he drives strategic vision by attracting key executive leadership, curating growth capital, and attracting a diverse mix of customers.
***Stacy Kenworthy*** has served as a member of our Board since January 2021. He also serves as our Lead Independent Director. Mr. Kenworthy has served as the Founder and Chairman of Asylum Venture, a venture firm, since June 2021. At Asylum Venture, he has established a significant presence in the finance and investment sectors. With over 30 years of experience in finance and technology, he has held various senior management positions, demonstrating expertise in these fields. In addition to his role at Asylum Venture, Mr. Kenworthy is also recognized for his leadership at Motus Nova, Inc. a neurorehabilitation robotics company, where he has served as Chairman since October 2013. Throughout his career, he has founded and served as Chief Executive Officer of multiple technology companies starting in 1995, with strategic involvement at the chip level in data processing unit and GPU design and technology. His professional background includes a strong foundation in finance and accounting, and he maintains an extensive IP portfolio with numerous patents in hardware acceleration, system integration, and data-centric computing solutions. Mr. Kenworthy received his MBA from Emory University and an undergraduate degree in accounting from Georgia State University. We believe Mr. Kenworthy is qualified to serve on our Board because of his extensive experience and leadership in both finance and technology-driven businesses, particularly his deep expertise in next-generation computing architectures and innovation in hardware acceleration technologies.
***Michael Mulica*** has served as a member of our Board since September 2025. His experience includes serving on the board of directors of Sonim Technologies (Nasdaq: SONM) since April 2021, where he became Chairman in November 2023. With three decades of experience scaling companies in mobile communications and internet platforms, his leadership spans executive roles at Phone.com / Openwave Systems, Inc., where he served as Senior Vice President from September 1999 to December 2003; Openwave / Unwired Planet, where he served as Chief Executive Officer from October 2011 to June 2014; RealNetworks, Inc., where he served as President from June 2014 to May 2016; Actility, where he served as Chief Executive Officer from May 2016 to August 2018; and AlefEdge, where he served as Executive Chairman and Chief Executive Officer from March 2018 to June 2024. Mr. Mulica has also advised growth-stage companies through Mulica Consulting since 2005 and has served as an Operating Partner at Avataar Venture Partners (Avataar Capital Management Ltd.) since 2019. Mr. Mulica earned his MBA from the Kellogg School of Management at Northwestern University and his B.S. in Finance from Marquette University. We believe Mr. Mulica is qualified to serve on our Board because of his extensive platform experience and the strategic vision he has demonstrated throughout the Internet revolution and the mobile revolution. He has a proven track record of success leading organizations through periods of industry transformation. Now, Mr. Mulica sees QumulusAI as his entrée into the AI revolution, leveraging his wealth of executive experience to help shape the future of artificial intelligence.
***David Rench*** has served as a member of our board since September 2025. He has served as the Chief Financial Officer of Applied Digital Corporation (Nasdaq: APLD), a digital infrastructure innovator, since March 2021. In this role, he has overseen the company’s financial strategy during a period of significant growth and transformation in the digital infrastructure sector. Prior to joining Applied Digital, Mr. Rench co-founded Ihiji, a software startup company, in 2010 and served as its Vice President of Finance and Operations until its acquisition by Control4 in 2017. Following the acquisition, he served as Chief Financial Officer of Hirzel Capital, an investment management company, from 2017 to 2020. Mr. Rench holds a B.B.A. from the Neeley School of Business at Texas Christian University and an M.B.A. from the Cox School of Business at Southern Methodist University. We believe he is qualified to serve on our Board due to his significant expertise in financial leadership, long-term growth planning, and operational efficiency, with deep experience across accounting, budgeting, financial analysis, and IT strategy.
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***Barry Schwartz*** has served as a member of our Board since September 2025, having served on our Board of Advisors since March 2025. Mr. Schwartz is a career entrepreneur and business leader, with a focus at the intersection of risk, compliance, and technology. In 2002, he co-founded ACA Group, formerly ACA Compliance Group, one of the largest governance, risk and compliance practices in the financial services industry. Serving on the Management Committee, he led the company through a series of private equity-sponsored transactions and multiple acquisitions of competing and complimentary enterprises. In addition to advising many of the largest institutional and alternative investment managers, Mr. Schwartz launched ACA’s key initiatives in regulatory technology, outsourced managed services, and comprehensive solutions for broker-dealers and commodity pool operators/commodity trading advisors. Before co-founding ACA, Mr. Schwartz served in Washington at the U.S. Securities and Exchange Commission – Division of Examinations, where he was awarded the SEC’s Examination Award of Excellence. He has been quoted frequently in the press and has lectured at major industry events, universities, and for other regulatory bodies. Starting in January 2019, Mr. Schwartz has served on the Executive Board of ADA Site Compliance LLC, a boutique provider of digital accessibility solutions. His efforts led to the September 2024 acquisition of the company by AudioEye, Inc. (Nasdaq: AEYE) ending his tenure with the company. In May 2020, he co-founded an investment fund, Five Founders Investment Fund LLC, designed to accelerate growth for a select group of private companies through the deployment of intellectual and financial capital. He also regularly volunteers in competition support for the PGA Tour, LPGA, PGA Tour Champions, and NCAA. Mr. Schwartz graduated with honors from The American University, Washington, DC, with a B.S. in International Finance. We believe Mr. Schwartz is qualified to serve on our Board due to his regulatory compliance experience, track record of successful entrepreneurship, and expertise in capital formation and deployment.
***Advisory Board***
QumulusAI’s Advisory Board is a powerhouse of senior executives and strategic leaders from enterprise technology, intelligence, digital infrastructure, capital markets, and digital sectors. Drawing expertise from organizations such as Cisco Systems, Applied Digital, VMware, Zscaler, IBM, and the U.S. Department of Defense, the Advisory Board is deeply embedded within the intelligence community and capital markets, maintaining relationships with influential financial, government, and technology stakeholders.
Beyond their credentials, the Advisory Board’s true value lies in their ability to open doors, shape strategy, and accelerate execution. They provide QumulusAI with:
- Direct access to decision-makers in commercial enterprises and government agencies.
- Strategic guidance on navigating regulatory, security, and market-entry challenges.
- Accelerated partnership opportunities with organizations critical to scaling AI infrastructure.
- Market intelligence drawn from their ongoing engagement with capital markets and technology thought leaders.
Their influence extends beyond advice — they actively connect QumulusAI to high-value opportunities, champion the company within their networks, and help secure early adoption in priority markets. This ensures QumulusAI can move faster, compete more effectively, and capture market share in both public and private sector AI infrastructure ecosystems. With this advisory board’s backing, QumulusAI has a strategic advantage that translates directly into business growth and market leadership.
**Family Relationships**
There are no family relationships among any of our executive officers or directors.
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**CORPORATE GOVERNANCE**
**Corporate Governance Guidelines**
In connection with this direct listing, our Board will adopt Corporate Governance Guidelines, which will be available under the “Investor Relations⸺Corporate Governance” section of our corporate website *www.qumulusai.com* after completion of the direct listing. Among the topics addressed in our Corporate Governance Guidelines are:
- Board size, composition and qualifications
- Retirement and resignation policy
- Selection of directors
- Stock ownership guidelines
- New director orientation
- Procedures for directors who receive less than a majority vote
- Board leadership
- Change of principal occupation; limits on board memberships
- Chief Executive Officer succession planning
- Board compensation
- Board committees
- Stock ownership by directors and executive officers
- Board and committee meetings
- Loans to directors and executive officers
- Executive sessions of independent directors
- Chief Executive Officer evaluation
- Meeting attendance by directors and non-directors
- Board and committee evaluation
- Appropriate information and access
- Director continuing education
- Ability to retain advisors
- Succession planning
- Conflicts of interest and director independence
- Related person transactions
- Board interaction with corporate constituencies
- Communications with directors
- Retirement and term limits
- Duty of loyalty and confidentiality
**Board Leadership Structure**
Under our Corporate Governance Guidelines, the office of Chairman of the Board and Chief Executive Officer may or may not be held by one person. The Board believes it is best not to have a fixed policy on this issue and that it should be free to make this determination based on what it believes is best under the circumstances. However, the Board strongly endorses the concept of an independent director being in a position of leadership. Under our Corporate Governance Guidelines, if at any time the Chief Executive Officer and Chairman of the Board positions are held by the same person, or if the Chairman of the Board is also not an independent director, the Board will elect an independent director as a lead independent director. The lead independent director will provide leadership to our Board if circumstances arise in which the role of Chief Executive Officer and Chairman of the Board may be, or may be perceived to be, in conflict, or if there are other perceived conflicts due to the Chairman of the Board not being an independent director, and perform such additional duties as the Board may otherwise determine and delegate.
Mr. Maniscalco currently serves as our Chief Executive Officer, and Mr. Gertz currently serves as the Chairman of our Board. However, because Mr. Gertz is not an independent director, we have appointed Mr. Kenworthy as the Lead Independent Director. We believe this leadership structure is in the best interests of the Company and our shareholders at this time and strikes the appropriate balance between the Chief Executive Officer’s responsibility for the strategic direction, day-to-day-leadership and performance of the Company and the Chairman’s and Lead Independent Director’s responsibility to provide oversight of the Company’s corporate governance and guidance to our Chief Executive Officer and to set the agenda for and preside over Board meetings.
**Director Independence**
In connection with this direct listing, we have applied to list our common stock on the Nasdaq Stock Market. Nasdaq’s listing standards require that a majority of the members of a listed company’s board of directors be independent within a specified period following the completion of the direct listing. Additionally, Nasdaq rules mandate that, subject to limited exceptions, only independent directors may serve on the audit, compensation, and nominating and corporate governance committees.
For purposes of Nasdaq’s independence requirements, a director must not have any relationship that, in the judgment of our Board, would interfere with the exercise of independent judgment in fulfilling the responsibilities of a director. Further, members of the compensation committee must be free of any material relationship with the company that would impair their ability to remain independent from management in the performance of their duties.
Audit committee members must also meet the enhanced independence standards under Rule 10A-3 of the Exchange Act. In particular, they may not accept, directly or indirectly, any consulting, advisory, or compensatory fees from the company or its subsidiaries (other than in their capacity as a board or committee member), nor may they be considered affiliated persons of the company or its subsidiaries. We intend to be in full compliance with these requirements upon the completion of this direct listing.
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Our Board has conducted a thorough review of the independence of each director, considering both Nasdaq’s standards and relevant SEC rules. As a result of this assessment, the Board has determined that Mr. Kenworthy, Mr. Mulica, Mr. Schwartz and Mr. Rench, qualify as independent. In making these determinations, the Board considered all relevant facts and circumstances, including each director’s business and personal affiliations with the company and its management, stock ownership, and any transactions described in the section titled “*Certain Relationships and Related Party Transactions*.”
**Committees of the Board**
In connection with this direct listing, our Board will maintain an Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, each of which will have the composition and responsibilities described below. Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee will operate under a written charter adopted by the Board, which will be available on the “Investor Relations⸺Corporate Governance” section of our corporate website *www.qumulusai.com* after completion of the direct listing.
***Audit Committee***
Our Audit Committee will be composed of Stacy Kenworthy, Michael Mulica, and David Rench. Mr. Kenworthy will serve as the Chair of our Audit Committee. The members of our Audit Committee meet the independence requirements under Nasdaq and SEC rules. Each member of our Audit Committee is financially literate. In addition, our Board has determined that Mr. Kenworthy is an “audit committee financial expert” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. This designation does not, however, impose on him any supplemental duties, obligations, or liabilities beyond those that are generally applicable to the other members of our Audit Committee and Board.
The Audit Committee will provide assistance to the Board in fulfilling its responsibilities for oversight, for quality and integrity of the accounting, auditing, reporting practices, systems of internal accounting and financial controls, the annual independent audit of our financial statements, and the legal compliance and ethics programs of QumulusAI as established by management. The Audit Committee’s primary responsibilities will include:
- overseeing our financial reporting process, internal control over financial reporting and disclosure controls and procedures on behalf of the Board;
- having sole authority to appoint, retain and oversee the work of our independent registered public accounting firm and establish the compensation to be paid to the firm;
- reviewing and pre-approving all audit services and permissible non-audit services to be provided to QumulusAI by our independent registered public accounting firm;
- establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;
- overseeing the establishment and administration of (including the grant of any waiver from) a written code of business conduct and ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions;
- receiving periodic updates from senior management on QumulusAI’s policies, processes, procedures and any significant developments related to the identification, mitigation and remediation of cybersecurity risks and reviewing the cybersecurity disclosures required to be included in QumulusAI’s SEC filings; and
- coordinating with the Nominating and Corporate Governance Committee in that committee’s primary oversight over QumulusAI’s ESG activities.
The Audit Committee will have the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties or responsibilities.
***Compensation Committee***
Our Compensation Committee will be composed of David Rench, Stacy Kenworthy, Michael Mulica, and Barry Schwartz. Mr. Rench will serve as the Chair of our Compensation Committee. The members of our Compensation Committee meet the independence requirements under Nasdaq and SEC rules. Each member of the Compensation Committee is also a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act.
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The Compensation Committee will provide assistance to the Board in fulfilling its oversight responsibility relating to compensation of our Chief Executive Officer and other executive officers and administers our equity compensation plans. The Compensation Committee’s primary responsibilities will include:
- recommending to the Board for its determination the annual salaries, incentive compensation, long-term compensation and any and all other compensation applicable to our executive officers;
- establishing and, from time to time, reviewing and revising corporate goals and objectives with respect to compensation for our executive officers and establishing and leading a process for the full Board to evaluate the performance of our executive officers in light of those goals and objectives;
- administering our equity compensation plans and recommending to the Board for its determination grants of options or other equity-based awards for executive officers, employees and independent contractors under our equity compensation plans;
- reviewing our policies with respect to employee benefit plans;
- establishing and, from time to time, reviewing and revising processes and procedures for the consideration and determination of executive compensation;
- overseeing and periodically reviewing QumulusAI’s culture and policies and strategies related to human capital management and reviewing the human capital management disclosures included in QumulusAI’s annual reports on Form 10-K; and
- coordinating with the Nominating and Corporate Governance Committee in that committee’s primary oversight over QumulusAI’s ESG activities.
The Compensation Committee will have the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities, and prior to doing so, assesses the independence of such experts and advisors from management.
***Nominating and Corporate Governance Committee***
Our Nominating and Corporate Governance Committee will be composed of Barry Schwartz, Michael Mulica, and David Rench. Mr. Schwartz will serve as the Chair of our Nominating and Corporate Governance Committee. The members of our Nominating and Corporate Governance Committee meet the independence requirements under Nasdaq and SEC rules.
Our nominating and corporate governance committee’s principal functions will include:
- identifying individuals qualified to become members of the Board;
- recommending director nominees for each annual meeting of our shareholders and director nominees to fill any vacancies that may occur between meetings of shareholders;
- making recommendations to the Board regarding director diversity (which may include diversity of age, gender, race, ethnicity, education, skills, professional experience, knowledge, backgrounds and viewpoints), retirement age, tenure and refreshment policies;
- being aware of best practices in corporate governance matters;
- developing and overseeing an annual Board and committee evaluation process;
- establishing and leading a process for determination of the compensation applicable to the non-employee directors on the Board;
- overseeing QumulusAI’s ESG activities and coordinating with and soliciting input from the Compensation Committee and the Audit Committee in formulating the approach to QumulusAI’s ESG activities.
The Nominating and Corporate Governance Committee will have the authority to engage the services of outside experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.
**Role of Board in Risk Oversight**
The Board as a whole has responsibility for risk oversight, with more in-depth reviews of certain areas of risk being conducted by the relevant committees that report on their deliberations to the full Board. The oversight responsibility of the Board and its committees is enabled by management reporting processes that are designed to provide information to the Board about the identification, assessment and management of critical risks and management’s risk mitigation strategies. The areas of risk that we focus on include operational, financial (accounting, credit, liquidity and tax), legal, compensation, competitive, cybersecurity, health, safety, environmental, economic, political and reputational risks.
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The standing committees of the Board will oversee risks associated with their respective principal areas of focus. The Audit Committee’s role will include a particular focus on the qualitative aspects of financial reporting, on our processes for the management of business and financial risk, our financial reporting obligations and for compliance with significant applicable legal, ethical and regulatory requirements. The Audit Committee, along with management, will also be responsible for developing and participating in a process for review of important financial and operating topics that present potential significant risk to QumulusAI. The Compensation Committee will be responsible for overseeing risks and exposures associated with our executive compensation programs and arrangements. The Nominating and Corporate Governance Committee will oversee risks relating to our corporate governance matters, director compensation programs and director succession planning.
We recognize that a fundamental part of risk management is understanding not only the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for QumulusAI. The involvement of the full Board each year in establishing our key corporate business strategies and annual fiscal budget is a key part of the Board’s assessment of management’s appetite for risk and also a determination of what constitutes an appropriate level of risk for QumulusAI.
We believe the current leadership structure of our Board is appropriate and helps ensure proper risk oversight for QumulusAI for a number of reasons, including: (1) general risk oversight by the full Board in connection with its role in reviewing our key business strategies and monitoring on an on-going basis the implementation of our key business strategies; (2) more detailed oversight by our standing committees that are currently comprised of and chaired by our independent directors, and (3) the focus of our Chairman on allocating appropriate Board agenda time for discussion regarding the implementation of our key business strategies and specifically risk management.
**Code of Business Conduct and Ethics**
Our Board will adopt a Code of Business Conduct and Ethics, which applies to all of our directors, executive officers, including our Chief Executive Officer and Chief Financial Officer, and other employees, and meets the requirements of the SEC and the Nasdaq Stock Market. Our Code of Business Conduct and Ethics will be available on the “Investor Relations⸺Corporate Governance” section of our corporate website *www.qumulusai.com* after completion of the direct listing.
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**EXECUTIVE COMPENSATION**
We are an “emerging growth company” under applicable SEC rules and are providing disclosure regarding our executive compensation arrangements pursuant to the rules applicable to emerging growth companies, which means that we are not required to provide a compensation discussion and analysis and certain other disclosures regarding our executive compensation.
Our named executive officers as of December 31, 2024, were:
- Robert C. Bissell, former President and former Chief Executive Officer; and
- Houston Aderhold, Senior Vice President of Infrastructure and Construction.
**Summary Compensation Table**
The following table presents summary information regarding the total compensation for services rendered in all capacities that was awarded to, earned by, or paid to our named executive officers for the years ended December 31, 2024 and 2023.
| Name and Principal Position | Year | Salary ($) | Total ($) |
| --- | --- | --- | --- |
| Robert C. Bissell, | 2024 | 245,500(1) | 245,500 |
| Former President and Former Chief Executive Officer | 2023 | 100,500(1) | 100,500 |
| Houston Aderhold, | 2024 | 175,500(2) | 175,500 |
| Senior Vice President of Infrastructure and Construction | 2023 | 100,500(2) | 100,500 |
(1) Salary includes $50,000 paid as compensation for Mr. Bissell’s role as former President and former Chief Executive Officer pursuant to a consulting agreement with Chalin Inc.
(2) Salary includes $50,000 paid as compensation for Mr. Aderhold’s role as Senior Vice President of Infrastructure and Construction pursuant to a consulting agreement with MHA Technologies Inc.
**Narrative to Summary Compensation Table**
***Base Salaries***
Our named executive officers receive a base salary to provide a fixed component of compensation reflecting the executive’s skill set, experience, role, and responsibilities.
***Other Elements of Compensation***
We provide health, dental, vision, life, and disability insurance benefits to our named executive officers, on the same terms and conditions as provided to all other eligible employees.
We also sponsor a broad-based 401(k) plan intended to provide eligible employees with an opportunity to defer eligible compensation up to certain annual limits. As a tax-qualified retirement plan, contributions (if any) made by us are deductible by us when made, and contributions and earnings on those amounts are generally not taxable to the employees until withdrawn or distributed from the 401(k) plan. Our named executive officers are eligible to participate in our employee benefit plans, including our 401(k) plan, on the same basis as our other employees. During the year ended December 31, 2024, we did not make matching contributions for our named executive officers.
**Executive Compensation Arrangements**
Our named executive officers did not enter into offer letters with QumulusAI regarding their employment. As noted in the Summary Compensation Table, each named executive officer did receive a portion of their compensation pursuant to a consulting agreement with their respective consulting entity, although neither of these agreements contained any employment terms. We currently do not have employment agreements or offer letters with any named executive officers. All of our named executive officers are employed on an at-will basis, with no fixed term of employment.
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**Global Digital Holdings, Inc. 2022 Option Plan**
We believe that our ability to grant equity-based awards is a valuable compensation tool that enables us to attract, retain, and motivate our employees, consultants, and members of our Board by aligning their financial interests with those of our shareholders. The principal features of our 2022 Plan are summarized below. This summary is qualified in its entirety by reference to the actual text of the 2022 Plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.
On December 12, 2022, we adopted our 2022 Plan. The purposes of the 2022 Plan are to (a) enable the Company to attract, retain and motivate the types of employees, consultants and directors who will contribute to the Company’s long range success; (b) provide incentives that align the interests of employees, consultants and directors with those of the shareholders of the Company; and (c) promote the success of the Company’s business.
*Administration*. Our 2022 Plan is administered by a committee of members of the Board appointed by the Board to administer the 2022 Plan, referred to herein as the “Committee.” Subject to the terms of the 2022 Plan, the Committee has the authority to, among other things, construe and interpret the 2022 Plan and apply its provisions; to promulgate, amend, and rescind rules and regulations relating to the administration of the 2022 Plan; to determine when awards are to be granted under the 2022 Plan and the applicable grant date; and to determine the number of shares of common stock to be made subject to each award. The Committee may modify awards subject to the terms of the 2022 Plan subject to certain limitations.
*Shares Authorized*. As of December 1, 2025, we had 1,333,334 shares of our common stock reserved for issuance pursuant to grants under our 2022 Plan of which 96,853 shares remained available for grant. As of December 1, 2025, options to purchase 22,703 shares had been exercised and options to purchase 1,012,020 shares remained outstanding, with a weighted-average exercise price of $1.74 per share.
*Adjustments*. In the event of changes in the outstanding common stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the grant date of any award, awards granted under the 2022 Plan and any award agreements, the exercise price of options and the maximum number of shares of common stock subject to awards may be equitably adjusted or substituted, as to the number, price or kind of a share of common stock or other consideration subject to such awards to the extent necessary to preserve the economic intent of such award.
*Eligible Participants*. The persons eligible to receive awards under the 2022 Plan are the employees, consultants and directors of the Company and its affiliates. In order to receive an award and become a participant in the 2022 Plan, such employee, consultant or director must be selected by the Committee to receive an award.
*Stock Options*. Awards that may be granted under the 2022 Plan include: (a) incentive stock options and (b) non-qualified stock options. Incentive stock options may be granted to “employees” (within the meaning of Treasury Regulation Section 1.421-7(h)) of the Company or any “subsidiary corporation” with respect to the Company for purpose of Section 424(f) of the Code only. Awards other than incentive stock options may be granted to employees, consultants and directors. Subject to limited exceptions, the exercise price of each option may not be less than 100% of the fair market value of the common stock subject to the option on the grant date.
*Termination of Employment or Other Service*. Unless otherwise provided in an award agreement or in an employment agreement, the terms of which have been approved by the Committee, in the event an option holder’s continuous service terminates (other than upon the option holder’s death or disability), the option holder may exercise his or her option (to the extent that the option holder was entitled to exercise such option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months following the termination of the option holder’s continuous service or (b) the expiration of the term of the option as set forth in the award agreement; provided, however, that if the termination of continuous service is by the Company for cause, all outstanding options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after termination, the option holder does not exercise his or her option within the time specified in the award agreement, the option shall terminate.
Unless otherwise provided in an award agreement, in the event that an option holder’s continuous service terminates as a result of the option holder’s disability, the option holder may exercise his or her option (to the extent that the option holder was entitled to exercise such option as of the date of termination), but only within such period of time ending on the earlier of (a) the date 12 months following such termination or (b) the expiration of the term of the option as set forth in the award agreement. If, after termination, the option holder does not exercise his or her option within the time specified herein or in the award agreement, the option shall terminate.
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Unless otherwise provided in an award agreement, in the event an option holder’s continuous service terminates as a result of the option holder’s death, then the option may be exercised (to the extent the option holder was entitled to exercise such option as of the date of death) by the option holder’s estate, by a person who acquired the right to exercise the option by bequest or inheritance or by a person designated to exercise the option upon the option holder’s death, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration of the term of such option as set forth in the award agreement. If, after the option holder’s death, the option is not exercised within the time specified herein or in the award agreement, the option shall terminate.
*Forfeiture and Recoupment*. Unless the Committee provides otherwise, if a participant materially violates any confidentiality, non-solicitation, development, or noncompetition agreement with the Company or an affiliate, if the participant’s employment is terminated for cause, or upon such other events as determined by the Committee in its sole discretion, the Company may in its sole discretion (a) repurchase (and the participant shall sell) any shares of common stock acquired by the participant (or by a permitted transferee of the participant) pursuant to awards granted hereunder for a price equal to the purchase price paid (if any) by the participant under the award, or if less, the fair market value of the shares of common stock on the date of repurchase, or (b) cause the participant to (and the participant shall) reimburse the Company the amounts received (either directly or indirectly with respect to amounts that were withheld for tax purposes) by the participant pursuant to awards granted and exercised hereunder for a price equal to the excess of the fair market value of the shares of common stock on the date of exercise over the option exercise price for the respective shares of common stock. In the event a clawback event has occurred but is not discovered until a later time, the Company may either repurchase shares of common stock as described above (and the participant shall sell), or require the participant to (and the participant shall) reimburse the Company pursuant to the foregoing.
*Effect of Change in Control*. In the event that we are subject to (a) an acquisition of more than 50% of the total fair market value or total voting power of our stock; (b) an acquisition during a 12-month period of ownership of our stock possessing 30% or more of the total voting power of our stock; (c) the replacement of a majority of the members of our Board during a 12-month period whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election; or (d) an acquisition during a 12-month period of assets from the company that have a total gross fair market value equal to more than 40% of the total gross fair market value of all of the assets of the Company immediately before such acquisition, the 2022 Plan gives the Committee discretion to accelerate, cancel, substitute or provide notice of termination of outstanding awards.
*Term, Termination and Amendment*. The term of the 2022 Plan is 10 years. The Board at any time, and from time to time, may amend or terminate the 2022 Plan, subject to certain limitations. The Board may also suspend or terminate the 2022 Plan.
**QumulusAI, Inc. 2025 Equity Incentive Plan**
In connection with this direct listing, we intend to adopt the QumulusAI, Inc. 2025 Equity Incentive Plan (the “2025 Plan”) to replace the 2022 Plan. The Purpose of the 2025 Plan is to advance the interests of the Company and our shareholders by enabling us to attract and retain qualified individuals to perform services, provide incentive compensation for such individuals in a form that is linked to the growth and profitability of our Company and increases in shareholder value, and provide opportunities for equity participation that align the interests of participants with those of our shareholders.
*Administration*. The Board and the Compensation Committee will administer the 2025 Plan. Subject to certain limitations, the plan administrator has broad authority under the terms of the 2025 Plan to take certain actions under the plan.
*Delegation*. To the extent permitted by applicable law, the Board or Compensation Committee may delegate to one or more of its members or to one or more officers of the Company such administrative duties or powers as it may deem advisable. The Board or Compensation Committee may authorize one or more directors or officers of the Company to designate employees, other than officers, non-employee directors, or 10% shareholders of the Company, to receive awards under the plan and determine the size of any such awards, subject to certain limitations.
*No Re-pricing*. The Board may not, without prior approval of our shareholders, effect any re-pricing of any previously granted “underwater” option or stock appreciation right (“SAR”) by: (i) amending or modifying the terms of the option or SAR to lower the exercise price or grant price; (ii) canceling the underwater option or SAR in exchange for (A) cash; (B) replacement options or SARs having a lower exercise price or grant price; or (C) other awards; or (iii) repurchasing the underwater options or SARs and granting new awards under the 2025 Plan. An option or SAR will be deemed to be “underwater” at any time when the fair market value of the common stock is less than the exercise price of the option or the grant price of the SAR.
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*Shares Authorized*. Subject to adjustment (as described below), the maximum number of shares of our common stock that will be able for issuance under the 2025 Plan will be [
- ] shares. No more than [
- ] total shares may be granted as incentive stock options.
Shares that are issued under the 2025 Plan or that are subject to outstanding awards will be applied to reduce the maximum number of shares remaining available for issuance under the 2025 Plan only to the extent they are used; provided, however, that the full number of shares subject to a stock-settled SAR or other stock-based award will be counted against the shares of common stock authorized for issuance under the 2025 Plan, regardless of the number of shares actually issued upon settlement of such SAR or other stock-based award. Any shares withheld to satisfy tax withholding obligations on awards issued under the 2025 Plan, any shares withheld to pay the exercise price or grant price of awards under the 2025 Plan, and any shares not issued or delivered as a result of the “net exercise” of an outstanding option or settlement of a SAR in shares will be counted against the shares authorized for issuance under the 2025 Plan and will not be available again for grant under the 2025 Plan. Shares subject to awards settled in cash will again be available for issuance pursuant to awards granted under the 2025 Plan. Any shares repurchased by the Company on the open market using the proceeds from the exercise of an award will not increase the number of shares available for future grant of awards. Any shares of common stock related to awards granted under the 2025 Plan that terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of the shares will be available again for grant under the 2025 Plan. To the extent permitted by applicable law, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by the Company or a subsidiary or otherwise will not be counted against shares available for issuance pursuant to the 2025 Plan. The shares available for issuance under the 2025 Plan may be authorized and unissued shares or treasury shares.
*Non-Employee Director Compensation Limit*. The 2025 Plan limits total non-employee director compensation such that the sum of any cash compensation, or other compensation, and the value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of awards granted to a non-employee director as compensation for services as a non-employee director during any fiscal year of the Company may not exceed $400,000 (increased to $600,000 with respect to any non-employee director serving as chairman of the Board or lead independent director or in the fiscal year of a non-employee director’s initial service as a non-employee director). Any compensation that is deferred will count towards this limit for the year in which the compensation is first earned, and not a later year of settlement.
*Adjustments*. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin off), or other similar change in the corporate structure or shares of our common stock, the Board will make the appropriate adjustment or substitution. These adjustments or substitutions may be to the number and kind of securities and property that may be available for issuance under the 2025 Plan. In order to prevent dilution or enlargement of the rights of participants, the Board may also adjust the number, kind, and exercise price of securities or other property subject to outstanding awards.
*Eligible Participants*. Awards may be granted to employees, non-employee directors, and consultants of the Company or any of our subsidiaries. A “consultant” for purposes of the 2025 Plan is one who renders services to the Company or its subsidiaries that are not in connection with the offer and sale of our securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for our securities.
*Types of Awards*. The 2025 Plan permits the grant of non-statutory and incentive stock options, SARs, restricted stock awards, restricted stock units (“RSUs”), deferred stock units (“DSUs”), performance awards, non-employee director awards, and other stock-based awards. Awards may be granted either alone or in addition to or in tandem with any other type of award.
*Stock Options*. Stock options entitle the holder to purchase a specified number of shares of our common stock at a specified price, which is called the exercise price, subject to the terms and conditions of the stock option grant. The 2025 Plan permits the grant of both non-statutory and incentive stock options. Incentive stock options may be granted solely to eligible employees of the Company or its subsidiary. Each stock option granted under the 2025 Plan must be evidenced by an award agreement that specifies the exercise price, the term, the number of shares underlying the stock option, the vesting, and any other conditions. The exercise price of each stock option granted under the 2025 Plan must be at least 100% of the fair market value of a share of our common stock as of the date the award is granted to a participant. Fair market value under the plan means, unless otherwise determined by the Board, the closing price of our common stock, as reported on Nasdaq, on the immediately prior trading day. The Board fixes the terms and conditions of each stock option, subject to certain restrictions, such as a ten-year maximum term.
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*Stock Appreciation Rights*. A SAR is a right granted to receive payment of cash, stock, or a combination of both equal to the difference between the fair market value of shares of our common stock and the grant price of such shares. Each SAR granted must be evidenced by an award agreement that specifies the grant price, the term, and such other provisions as the Board may determine. The grant price of a SAR must be at least 100% of the fair market value of our common stock on the date of grant. The Board fixes the term of each SAR, but SARs granted under the 2025 Plan will not be exercisable more than 10 years after the date the SAR is granted
*Restricted Stock Awards, Restricted Stock Units, and Deferred Stock Units*. Restricted stock awards, RSUs, and/or DSUs may be granted under the 2025 Plan. A restricted stock award is an award of common stock that is subject to restrictions on transfer and risk of forfeiture upon certain events, typically including termination of service. RSUs are similar to restricted stock awards except that no shares are actually awarded to the participant on the grant date. DSUs permit the holder to receive shares of common stock or the equivalent value in cash or other property at a future time as determined by the Board. The Board will determine, and set forth in an award agreement, the period of restriction, the number of shares of restricted stock awards or the number of RSUs or DSUs granted, and other such conditions or restrictions.
*Performance Awards*. Performance awards, in the form of cash, shares of common stock, other awards, or a combination of both, may be granted under the 2025 Plan in such amounts and upon such terms as the Board may determine. The Board will determine, and set forth in an award agreement, the amount of cash and/or number of shares or other awards, the performance goals, the performance periods, and other terms and conditions. The extent to which the participant achieves his or her performance goals during the applicable performance period will determine the amount of cash and/or number of shares or other awards earned by the participant. The Board retains discretion to adjust performance awards either upward or downward, either on a formula or discretionary basis or any combination, as the Board determines.
*Non-Employee Director Awards*. The Board at any time and from time to time may approve resolutions providing for the automatic or other grant of awards under the 2025 Plan to non-employee directors. Such awards may be granted singly, in combination, or in tandem, and may be granted pursuant to such terms, conditions, and limitations as the Board may establish in its sole discretion consistent with the provisions of the 2025 Plan. The Board may permit non-employee directors to elect to receive all or any portion of their annual retainers, meeting fees, or other fees in restricted stock, RSUs, DSUs, or other stock-based awards in lieu of cash.
*Other Stock-Based Awards*. Consistent with the terms of the plan, other stock-based awards may be granted to participants in such amounts and upon such terms as the Board may determine.
*Dividend Equivalents*. With the exception of stock options, SARs, and unvested performance awards, awards under the 2025 Plan may, in the Board’s discretion, earn dividend equivalents with respect to the cash or stock dividends or other distributions that would have been paid on the shares of our common stock covered by such award had such shares been issued and outstanding on the dividend payment date. However, no dividends may be paid on awards until they are vested. Such dividend equivalents will be converted to cash or additional shares of our common stock by such formula and at such time and subject to such limitations as determined by the Board.
*Termination of Employment or Other Service*. The 2025 Plan provides for certain default rules in the event of a termination of a participant’s employment or other service. These default rules may be modified in an award agreement or an individual agreement between the Company and a participant. If a participant’s employment or other service with the Company is terminated for cause, then all outstanding awards held by such participant will be terminated and forfeited. In the event a participant’s employment or other service with the Company is terminated by reason of death, disability, or retirement, then:
- All outstanding stock options (excluding non-employee director options in the case of retirement) and SARs held by the participant will, to the extent exercisable, remain exercisable for a period of one year after such termination, but not later than the date the stock options or SARs expire;
- All outstanding stock options and SARs that are not exercisable and all outstanding restricted stock will be terminated and forfeited; and
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- All outstanding unvested RSUs, performance awards, and other stock-based awards held by the participant will terminate and be forfeited. However, with respect to any awards that vest based on the achievement of performance goals, if a participant’s employment or other service with the Company or any subsidiary is terminated prior to the end of the performance period of such award, but after the conclusion of a portion of the performance period (but in no event less than one year), the Board may, in its sole discretion, cause shares to be delivered or payment made with respect to the participant’s award, but only if otherwise earned for the entire performance period and only with respect to the portion of the applicable performance period completed at the date of such event, with proration based on the number of months or years that the participant was employed or performed services during the performance period.
In the event a participant’s employment or other service with the Company is terminated by reason other than for cause, death, disability, or retirement, then:
- All outstanding stock options (including non-employee director options) and SARs held by the participant that then are exercisable will remain exercisable for three months after the date of such termination, but will not be exercisable later than the date the stock options or SARs expire;
- All outstanding restricted stock will be terminated and forfeited; and
- All outstanding unvested RSUs, performance awards, and other stock-based awards will be terminated and forfeited. However, with respect to any awards that vest based on the achievement of performance goals, if a participant’s employment or other service with the Company or any subsidiary is terminated prior to the end of the performance period of such award, but after the conclusion of a portion of the performance period (but in no event less than one year), the Board may, in its sole discretion, cause shares to be delivered or payment made with respect to the participant’s award, but only if otherwise earned for the entire performance period and only with respect to the portion of the applicable performance period completed at the date of such event, with proration based on the number of months or years that the participant was employed or performed services during the performance period.
*Modification of Rights upon Termination*. Upon a participant’s termination of employment or other service with the Company or any subsidiary, the Board may, in its sole discretion (which may be exercised at any time on or after the grant date, including following such termination) cause stock options or SARs (or any part thereof) held by such participant as of the effective date of such termination to terminate, become, or continue to become exercisable or remain exercisable following such termination of employment or service, and restricted stock, RSUs, DSUs, performance awards, non-employee director awards and other stock-based awards held by such participant as of the effective date of such termination to terminate, vest, or become free of restrictions and conditions to payment, as the case may be, following such termination of employment or service, in each case in the manner determined by the Board; provided, however, that no stock option or SAR may remain exercisable beyond its expiration date. Any such action by the Board adversely affecting any outstanding award will not be effective without the consent of the affected participant, except to the extent the Board is authorized by the 2025 Plan to take such action.
*Forfeiture and Recoupment*. If a participant is determined by the Board to have taken any action while providing services to the Company or within one year after termination of such services that would constitute “cause” or an “adverse action,” as such terms are defined in the 2025 Plan, all rights of the participant under the 2025 Plan and any agreements evidencing an award then held by the participant will terminate and be forfeited. The Board has the authority to rescind the exercise, vesting, issuance, or payment in respect of any awards of the participant that were exercised, vested, issued, or paid and require the participant to pay to the Company, within 10 days of receipt of notice, any amount received or the amount gained as a result of any such rescinded exercise, vesting, issuance, or payment. The Company may defer the exercise of any stock option or SAR for up to six months after receipt of notice of exercise in order for the Board to determine whether “cause” or “adverse action” exists. The Company is entitled to withhold and deduct future wages or make other arrangements to collect any amount due.
In addition, awards under the 2025 Plan shall be subject to any automatic forfeiture or voluntary compensation “clawback,” forfeiture or recoupment provisions under applicable law and any compensation “clawback,” forfeiture or recoupment policy of the Company, as in effect from time to time, and such forfeiture and/or penalty conditions or provisions as determined by the Board and set forth in the applicable award agreement.
*Effect of Change in Control*. Generally, a change in control will mean:
- The acquisition, other than by the Company, by any individual, entity, or group of beneficial ownership of 50% or more of the then outstanding shares of common stock;
- The consummation of a reorganization, merger, or consolidation of the Company with respect to which all or substantially all of the individuals or entities who were the beneficial owners of common stock and voting securities immediately prior to the transaction do not, following the transaction, beneficially own more than 50% of the outstanding shares of common stock of the corporation resulting from the transaction; or
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- A complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company.
Subject to the terms of the applicable award agreement or an individual agreement between the Company and a participant, upon a change in control, the Board may, in its discretion, determine whether some or all outstanding options shall become exercisable in full or in part, whether the restriction period and performance period applicable to some or all outstanding restricted stock awards and RSUs shall lapse in full or in part, and whether the performance measures applicable to some or all outstanding awards shall be deemed to be satisfied. The Board may further require that shares of stock of the corporation resulting from such a change in control, or a parent corporation thereof, be substituted for some or all of our shares of common stock subject to an outstanding award and that any outstanding awards, in whole or in part, be surrendered to us by the holder, to be immediately cancelled by us, in exchange for a cash payment, shares of capital stock of the corporation resulting from or succeeding us, or a combination of both cash and such shares of stock.
*Term, Termination and Amendment*. Unless sooner terminated by the Board, the 2025 Plan will terminate at 11:59 p.m. on [
- ], 2035. No award will be granted after termination of the 2025 Plan, but awards outstanding upon termination of the 2025 Plan will remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the 2025 Plan.
Subject to certain exceptions, the Board has the authority to suspend or terminate the 2025 Plan or terminate any outstanding award agreement and the Board has the authority to amend the 2025 Plan or amend or modify the terms of any outstanding award at any time and from time to time. No amendments to the 2025 Plan will be effective without approval of the Company’s shareholders if: (a) shareholder approval of the amendment is then required pursuant to Section 422 of the Code, the rules of the primary stock exchange on which the common stock is then traded, applicable U.S. state and federal laws or regulations, and the applicable laws of any foreign country or jurisdiction where awards are, or will be, granted under the 2025 Plan; or (b) such amendment would: (i) modify the re-pricing provisions of the 2025 Plan; (ii) increase the aggregate number of shares of common stock issued or issuable under the 2025 Plan; (iii) modify the eligibility requirements for participants in the 2025 Plan; or (vi) reduce the minimum exercise price or grant price as set forth in the 2025 Plan. No termination, suspension, or amendment of the 2025 Plan shall adversely affect any outstanding award previously granted under the 2025 Plan without the written consent of the participant holding such award.
**Clawback Policy**
In connection with this direct listing, we will adopt a Nasdaq-compliant clawback policy pursuant to which we will be required to recover erroneously paid compensation from current or former executive officers in the event of certain financial restatements as provided under the Nasdaq rules. In addition, our 2022 Plan, 2025 Plan and related award agreements include “clawback” mechanisms, as described above.
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**DIRECTOR COMPENSATION**
**Summary of Cash and Other Compensation**
In the year ended December 31, 2024, our Board was comprised of six directors: Patrick Gahan, Chairman; Houston Aderhold, Assistant Chairman; Robert C. Bissell; Scott Krosnowski; Stacy Kenworthy; and Todd Jones. Mr. Kenworthy and Mr. Jones were non-employee members of our Board. Mr. Kenworthy was the only non-employee director compensated and received $6,000 in cash in 2024.
**Non-Employee Director Compensation Policy**
Before this direct listing, we did not have a formal policy to provide any cash or equity compensation to our non-employee directors for their service on our Board. In connection with this direct listing, our Board intends to approve a non-employee director compensation policy, pursuant to which our non-employee directors will be eligible to receive certain cash retainers and equity awards for service on our Board and committees of our Board.
Employee directors will receive no additional cash compensation for their service as a director, but additional equity compensation is paid to all directors, including those who are employees.
*Cash Compensation*
Beginning January 1, 2026, each non-employee director will be entitled to receive the annual cash compensation set forth below, payable in four equal quarterly installments in arrears and prorated for partial quarters of service.
- General Board Service Fee: $50,000.
- Chairman of the Board Fee (additional): $50,000.
We anticipate allowing our non-employee directors to elect, on an annual basis, to convert all of his or her earned cash fees into a number of equity grants under the current Equity Compensation Plan, which will be fully vested on the date of grant.
*Equity Compensation*
*Initial Grant*. Each non-employee director who joins our Board of Directors is eligible to receive $56,250 in the form of RSUs or non-qualified stock options. The Chairman of the Board is eligible to receive an additional $56,250 in the form of RSUs or non-qualified stock options under the 2025 Plan. One-third of such award will vest on the one-year anniversary of the grant date, and the remaining two-thirds will vest in equal quarterly installments over the following eight quarters.
*Catch-Up Grants*. In consideration for each non-employee director’s service during fiscal year 2025, each non-employee director will be eligible to receive $56,250 in the form of RSUs or non-qualified stock options on the date the 2025 Plan becomes effective in connection with the direct listing. The Chairman of the Board is eligible to receive an additional $56,250 in the form of RSUs or non-qualified stock options on the date the 2025 Plan becomes effective in connection with the direct listing. Such award shall vest in full on October 1, 2026.
*Annual Grants*. Each non-employee director, other than a director who will not stand for re-election at the next annual meeting, is eligible to receive $56,250 in the form of RSUs or non-qualified stock options on October 1 of each fiscal year beginning in 2026. The Chairman of the Board is eligible to receive an additional $56,250 in the form of RSUs or non-qualified stock options on October 1 of each fiscal year beginning in 2026. Such award shall vest in full on the one-year anniversary of the grant date.
All equity awards granted to non-employee directors will be granted under the 2025 Plan or any future shareholder-approved equity-based compensation plan and will be subject to the discretion and approval of the Board. The number of shares of common stock underlying RSUs or non-qualified stock options will be determined based on the grant date fair market value of such awards. The exercise price of any non-qualified stock options will be equal to the fair market value of a share of the Company’s common stock on the grant date.
*Expense Reimbursement*
All non-employee directors will be reimbursed for travel expenses for attending meetings and other miscellaneous out-of-pocket expenses incurred in performing their Board functions.
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**CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS**
**Related Party Transactions Policy**
Our Board will adopt a written policy on transactions with related persons in connection with the completion of this direct listing that will provide that the Board or its authorized committee will review on at least a quarterly basis all transactions with related persons that are required to be disclosed under SEC rules and, when appropriate, initially authorize or ratify all such transactions. In the event that the Board or its authorized committee considers ratification of a transaction with a related person and determines not to so ratify, the written policy on transactions with related persons will provide that our management will make all reasonable efforts to cancel or annul the transaction.
The written policy on transactions with related persons will provide that, in determining whether or not to recommend the initial approval or ratification of a transaction with a related person, the Board or its authorized committee should consider all of the relevant facts and circumstances available, including (if applicable) but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party and the extent of the related person’s interest in the transaction and whether entering into the transaction would be consistent with the written policy on transactions with related persons.
Under the Related Party Transactions Policy, a related party transaction will include any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which:
- we or any of our subsidiaries are or will be a participant;
- the aggregate amount involved will or may be expected to exceed $120,000 in any fiscal year; and
- any related party has or will have a direct or indirect material interest.
Related parties will include any person who is or was (since the beginning of the last fiscal year, even if such person does not presently serve in that role) an executive officer, director or nominee for director of QumulusAI, Inc., any shareholder owning more than 5% of any class of our voting securities or an immediate family member, as defined in the Related Party Transactions Policy, of any such person.
The written policy on transactions with related persons described above will be adopted in connection with the completion of this direct listing and, therefore, the transactions described below were not reviewed under such policy.
**Related Party Transactions Since January 1, 2023**
***Agreements with Alder Entities***
As described below, we are party to certain transactions with affiliate entities of Patrick Gahan’s family office, Alder Capital Partners (collectively, the “Alder Entities”). Craig Heiser serves as a manager of certain Alder Entities, including ALDER Opportunity, LP; ALDER Opportunity II, LLC; and ALDER Funding Partners, and controls all voting and investment decisions of ALDER Opportunity, LP. Through this involvement, Craig Heiser beneficially owns more than 5% of the Company’s common stock. Both Patrick Gahan, who served as Chairman of the Board in 2023 and 2024 and served as our Chief Executive Officer from February 2025 to August 2025, and Ankur Chatterjee, our current Chief Integration Officer and former Chief Operating Officer, have membership stakes in these entities.
*Alder Mortgage Group, LLC Loan*
On April 14, 2022, WAHA Technologies, Inc. entered into a $5,000,000 interest only balloon note and a security agreement with Alder Mortgage Group, LLC, which is wholly owned by Window Macaroni Group, LLC, an entity owned by Patrick Gahan and his spouse. This loan was modified on October 18, 2022 and amended and restated on July 1, 2024. The maturity date is December 31, 2025 and interest is payable at a rate of 12% per annum. Since January 1, 2023, the largest aggregate amount of principal outstanding was $2,000,000, and we have made principal payments of $1,763,155 and interest payments of $503,724. As of December 1, 2025, $236,845 was outstanding.
*Equipment Leases and Profit Share Agreements with ATFP Entities*
From November 1, 2023 to January 30, 2025, TCM Cloud 1, LLC, a subsidiary of TCM, entered into several equipment lease agreements with ATFP Cloud SPV I, LP; ATFP Cloud SPV II, LP; ATFP Cloud SPV III, LP; and ATFP Cloud SPV IV, LP (together, the “ATFP LP Entities”) and Alder Technology Funding Partners, LLC as the GP of ATFP Cloud SPV I, LP and ATFP Cloud SPV II, LP, Fluent ATFP, LLC as the GP of ATFP Cloud SPV III, LP, and SGCA ATFP, LLC as the GP of ATFP Cloud SPV IV, LP (together, the “ATFP GP Entities,” and together with the ATFP LP Entities, the “ATFP Entities”). Under these agreements, we lease certain technology infrastructure, including servers and data center cabinets. Patrick Gahan, Ankur Chatterjee, and Steve Gertz, our current Chairman of the Board, are members of the ATFP Entities. ATFP Cloud SPV 1, LP was paid off on January 21, 2025, in the amount of $6,454,466 via a loan from CommerceOne Bank. ATFP Cloud SPV II, LP was paid off on August 1, 2025 in the amount of $1,754,596. Monthly payments pursuant to the remaining leases, which have an aggregate value of approximately $5,000,000, have ranged from $54,939 to $97,928.
ATFP Cloud SPV II, LP continued to release additional lease schedules and fundings to TCM for the purchase of GPUs. Patrick Gahan was a $1.25 million funder of the most recent $1.75 million lease schedule via Window Macaroni Group, LLC.
ATFP Cloud SPV I, LP continued to release additional lease schedules and fundings to TCM for the purchase of GPUs. ALDER Technology Funding Partners, LLC, Window Macaroni Group, LLC and Slim Mint Group, LLC, an entity owned by Patrick Gahan and his spouse, were participants in the funding.
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In connection with these equipment lease agreements, TCM Cloud 1, LLC also entered into a profit share agreement with certain of the ATFP Entities on November 1, 2023. We amended and restated this agreement on December 12, 2024. To date, we have made payments of $24,650 under this agreement.
ATFP Cloud SPV III, LP and ATFP Cloud SPV IV, LP had their earlier lease schedules and associated profit-share agreement paid off as of October 17, 2025 via a loan from CommerceOne Bank. In consideration of an early payoff and in accordance with the terms of the profit share agreement, these entities received 17,335 and 25,003 warrants, respectively.
ATFP Cloud SPV I, LP has continued to deploy capital via new lease schedules. This arrangement has a 60-month term with a 12% cost of capital. Alder Technology Funding Partners, LLC receives 10% of the revenue associated with the equipment purchased and deployed via its consulting agreement; provided, however, the revenue share to Alder Technology Funding Partners, LLC is pro rata adjusted down based on the remaining principal balance on each lease schedule at the time of each monthly close-out payment calculation to Alder Technology Funding Partners, LLC.
ATFP Cloud SPV II has continued to deploy capital via new lease schedules. This arrangement has a 24-month term with 23 months of interest only payments. Full return of principal and interest is made in the final month. The cost of capital pursuant to this arrangement is 18%. Alder Technology Funding Partners receives a flat $2,500 per month fee per $1 million deployed via its consulting agreement.
*Consulting Agreement*
On January 30, 2025, TCM entered into a consulting agreement with Alder Technology Funding Partners, LLC, of which Patrick Gahan and Ankur Chatterjee are members, pursuant to which Alder Technology Funding Partners, LLC organized investors to buy and lease equipment and provided ongoing management services. To date, we have made payments of $24,650 under this agreement.
*Service Agreement*
On September 1, 2023, TCM entered into a service agreement with Alder Technology, LLC, pursuant to which Alder Technology, LLC provided funding to test the deployment of GPUs and received a negotiated share of profits in return. Patrick Gahan and Ankur Chatterjee are members of Alder Technology, LLC, and Robert C. Bissell, our current Advisory Board Chairman, former President and former Chief Executive Officer, and his son, Chase Bissell, are participant funders of Alder Technology, LLC. Concurrently, Alder Technology, LLC and Gratus Holdings, LLC, an entity owned and controlled by Robert C. Bissell, entered into a participation agreement, pursuant to which a portion of the investment made by Alder Technology, LLC under the service agreement was transferred to Gratus Holdings, LLC.
On June 1, 2024, TCM entered into an assignment and assumption of participation interest agreement with Alder Technology, LLC, Gratus Holdings, LLC, Rabalais Investments, LLC, and ASIC Juice, LLC. Pursuant to this assignment agreement, a percentage interest in the service agreement described above was assigned to TCM in exchange for issuing an aggregate of 140,000 shares of TCM preferred stock to the assignors. We made profit share payments of $224,000 under this agreement.
On May 21, 2025, TCM entered into a second assignment and assumption of participation interest agreement with Gratus Holdings, LLC and Chase Bissell and a Bill of Sale with Alder Technology, LLC. Pursuant to this second assignment agreement, the remaining percentage interest in the service agreement described above was assigned to TCM, together with title to the entirety of the equipment governed by the service agreement, in exchange for $67,502.
*Alder Hold Co, LLC Stock Option Assumption and Exchange Agreement*
On December 13, 2022, we entered into a contribution and exchange agreement with Patrick Gahan, Ankur Chatterjee, and Alder Hold Co, LLC, of which Patrick Gahan and Ankur Chatterjee are members, pursuant to which Alder Hold Co, LLC was issued 209,716 shares of our Series B preferred stock and a non-qualified stock option for the purchase of 2,849 shares of our common stock, in each case without giving effect to the Conversion or the Reverse Stock Split.
***Agreements with Focus Partners GP***
As described below, we, directly or through WAHA Technologies, Inc., are party to certain transactions with Trailhead Growth, LP and Trailhead Income, LP, and GC Opportunities 2 Private Fund, LP, limited partners of Focus Partners, GP, of which Todd Jones, a former member of our Board, serves as Chief Investment Officer and member.
*Trailhead Growth, LP Loan*
On September 29, 2023, we entered into a loan and security agreement and collateralized line of credit for $300,000 with Trailhead Growth, LP. Interest under this loan was payable at a rate of 12% per annum. This line of credit was never used.
On April 26, 2024, we entered into an amended and restated loan and security agreement and amended and restated collateralized line of credit for $700,000 with Trailhead Growth, LP. Interest under this loan was payable at a rate of 6% per annum. As consideration, on April 26, 2024, we issued a warrant to purchase stock with a value of $28,000 as of that date. Since April 26, 2024, the largest aggregate amount of principal outstanding was $648,262, and we made principal payments of $648,262 and interest payments of $25,063. This loan was paid in full in March 2025 and matured on April 26, 2025, and no amounts remained outstanding as of April 26, 2025.
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*Trailhead Income, LP Loan*
On September 1, 2021, WAHA Technologies, Inc. entered into a $4,000,000 interest only balloon note and a security agreement with Trailhead Income LP. This loan was modified on October 4, 2022, and $2,000,000 of the principal was converted to equity. On June 19, 2025, the maturity date was extended from September 1, 2025 to October 1, 2026. Interest under this loan is payable at a rate of 12% per annum. Since January 1, 2023, the largest aggregate amount of principal outstanding was $2,000,000, and we have made principal payments of $0 and interest payments of $580,000. As of December 1, 2025, $2,000,000 in principal and $370,000 in deferred interest was outstanding.
*GC Opportunities 2 Private Fund, LP Loan*
On February 15, 2022, WAHA Technologies, Inc. entered into a $1,850,000 interest only balloon note and loan and security agreement with GC Opportunities 2 Private Fund, LP. This loan was modified on October 4, 2022. The maturity date is February 15, 2026 and interest is payable at a rate of 12% per annum. Since January 1, 2023, the largest aggregate amount of principal outstanding was $1,850,000, and we have made principal payments of $0 and interest payments of $536,469. As of December 1, 2025, $1,850,000 in principal and $231,235 in deferred interest was outstanding.
***Hosting Agreement***
On April 1, 2023, FCNC Venture, LLC, a joint venture between our subsidiary, SPRE Commercial Group, Inc., and 1617 Digital, LLC entered into a bitcoin miner hosting agreement, pursuant to which FCNC Venture, LLC agreed to provide certain cryptocurrency mining hosting services. This agreement was subsequently amended on December 1, 2023, and we assumed the hosting obligations thereunder. Robert C. Bissell, our current Advisory Board Chairman, former President and former Chief Executive Officer, and Houston Aderhold, our Senior Vice President of Infrastructure and Construction, are managing directors of FCNC Venture, LLC. Under this agreement, which has terminated, we received payments of $73,361.
***Master Service Agreement***
On October 31, 2023, TCM entered into a master service agreement with Performive LLC, pursuant to which we have leased certain office space, data center cabinets, and other equipment. Ryan DiRocco, who became an advisor to our Board in 2025, founded Performive LLC and served as its Chief Executive. To date, we have made payments of $1,659,334 under this agreement.
***Loan from Founder***
On December 31, 2021, TCM entered into an $800,000 line of credit agreement with Ian Gerard, a founder of TCM. This agreement was subsequently amended on December 18, 2024. Interest under this loan was payable at a rate of 5.00% per annum. Since January 1, 2023, the largest aggregate amount of principal outstanding was $859,923, and we made principal payments of $495,582 and interest payments of $364,341. The remaining balance was converted to equity, and the accrued interest was forfeited.
***TCM Acquisition***
On April 1, 2025, the Company entered into Contribution and Exchange Agreements, as amended, with shareholders of TCM, pursuant to which each TCM shareholder contributed all outstanding equity securities in TCM to the Company in exchange for equity securities of the Company. As a result, TCM became a wholly owned subsidiary of the Company, with 75% of the Company’s capital stock held by Company shareholders and 25% of the Company’s capital stock held by former TCM shareholders. The total acquisition consideration was $39,350,572. The following related parties participated in this transaction and received equity securities of the Company in exchange for their TCM equity securities valued as indicated: Ian Gerard ($8,015,656); Carlos Rincon, a founder of TCM ($2,986,096); Mark Jackson, a founder of TCM ($1,467,997); Ankur Chatterjee ($525,550); Slim Mint Group, LLC($303,760); Window Macaroni Group, LLC ($303,760); Adam Brown, an employee of the Company ($271,205); Patrick Gahan ($219,408); Gratus Holdings, LLC ($214,192); Gahan LTC SPE, LLC, of which Patrick Gahan serves as manager ($50,627); Steve Gertz ($45,869); ALDER Technology, LLC ($40,501); ALDER Opportunity II, LP, a significant shareholder of the Company, as described under “*Principal Shareholders*” ($33,752); ATFP Cloud SPV I, LP ($25,986); Alder Technology Funding Group, LLC, an entity affiliated with the Alder Entities ($6,497); and certain other employees and affiliates who participated at de minimis amounts.
***Warrants***
Steve Gertz and Patrick Gahan managed the previous $10 million equity raise (commencing December 2023 and closing March 2025) and were issued 12% warrant coverage on equity raised. Steve Gertz received an aggregate of 115,125 warrants, JGS Partners, LLC, of which Steve Gertz is the sole member, received 33,000 warrants, and Alder Technology Funding Partners, LLC, of which Patrick Gahan is a member, received an aggregate of 539,145 warrants.
***Independent Contractor Agreements***
On April 1, 2025, TCM entered into an independent contractor agreement with Rhythmic Ventures, LLC, of which Steve Gertz, our current Chairman of the Board, is a member. Pursuant to this agreement, Mr. Gertz manages our sales activities. To date, there have been no payments for services rendered and commissions under this agreement.
We have made payments to Robert C. Bissell’s company, Chalin Inc., for services Mr. Bissell rendered as our former President and former Chief Executive Officer. Since January 1, 2023, we have made payments of $100,000 under this arrangement. Please see “*Executive Compensation* – *Summary Compensation Table*” for additional information.
We have made payments to Houston Aderhold’s company, MHA Technologies Inc., for services Mr. Aderhold rendered as our Senior Vice President of Infrastructure and Construction. Since January 1, 2023, we have made payments of $100,000 under this arrangement. Please see “*Executive Compensation* – *Summary Compensation Table*” for additional information.
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***Indemnification Agreements***
Our Fourth Amended and Restated Articles of Incorporation (“Charter”), which we intend to adopt in connection with the direct listing, will provide that, to the full extent that the Georgia Business Corporation Code, as it exists or may be amended, permits the limitation or elimination of the liability of directors, directors of the Company shall not be liable to the Company or its shareholders for monetary damages for conduct as a director. Our Amended and Restated Bylaws (“Bylaws”), which we intend to adopt in connection with the direct listing, will further provide that any person, their heirs, executors, or administrators, may be indemnified or reimbursed by the Company to the fullest extent of the Georgia Business Corporation Code for reasonable expenses actually incurred in connection with any action, suit or proceeding, civil or criminal, to which such person shall be made a party by reason of the fact that such person is or was a director, trustee, officer, employee, or agent of the Company, or that such person is or was serving, at the request of the Company, as a director, trustee, officer, employee, or agent of any other enterprise.
In addition, we intend to enter into separate indemnification agreements with our directors and certain officers. Each indemnification agreement will provide, among other things, for indemnification to the fullest extent permitted by law and our Bylaws against any and all expenses, judgments, fines, penalties and amounts paid in settlement of any claim. The indemnification agreements will provide for the advancement or payment of all expenses to the indemnitee and for the reimbursement to us if it is found that such indemnitee is not entitled to such indemnification under applicable law, our Charter or our Bylaws.
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**PRINCIPAL SHAREHOLDERS**
**Security Ownership of Certain Beneficial Owners and Management**
The following table sets forth the beneficial ownership of our common stock that, upon the consummation of the direct listing, will be owned by:
- each shareholder who is known to us to own beneficially 5% or more of our outstanding common stock;
- each of our directors;
- each of our named executive officers;
- all of our directors and executive officers as a group; and
- the Registered Shareholders.
The shareholders include substantially all holders of our common stock, including (i) affiliates of the Company and certain other shareholders with “restricted securities” (as defined in Rule 144 under the Securities Act) who, because of their status as affiliates pursuant to Rule 144 or because they acquired their common stock from an affiliate or the Company within the prior 12 months, would be unable to sell their securities pursuant to Rule 144 until the Company has been subject to the reporting requirements of Section 13 or Section 15(d) the Exchange Act for a period of at least 90 days and (ii) our employees. The shareholders may, or may not, elect to sell their common stock through transactions on Nasdaq at prevailing market prices. As such, the Company will have no input if and when any shareholder may, or may not, elect to sell their common stock or the prices at which any such sales may occur. See “*Plan of Distribution*.”
Information concerning the shareholders may change from time to time and any changed information will be set forth in supplements to this prospectus, if and when necessary. Because the shareholders may sell all, some, or none of the common stock covered by this prospectus, we cannot determine the number of shares of common stock that will be sold by the shareholders, or the amount or percentage of shares of common stock that will be held by the shareholders upon consummation of any particular sale. In addition, the shareholders listed in the table below may have sold, transferred, or otherwise disposed of, or may sell, transfer, or otherwise dispose of, at any time and from time to time, our common stock in transactions exempt from the registration requirements of the Securities Act, after the date on which they provided the information set forth in the table below.
The shareholders are not entitled to any registration rights with respect to the common stock. However, we currently intend to use our reasonable efforts to keep the registration statement effective for a period of 90 days after the effectiveness of the registration statement. We are not party to any arrangement with any shareholder or any broker-dealer with respect to sales of common stock by the shareholders. See “*Plan of Distribution*.”
The amounts and percentage of shares of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, common stock subject to options, warrants or other securities convertible into common stock held by that person that are currently exercisable or exercisable within 60 days of the date of this prospectus, if any, are deemed outstanding for computing the percentage of the class beneficially owned by the person holding such securities, but are not deemed outstanding for computing the percentage ownership of any other person. Except as indicated by footnote, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable.
Other than described below under “*Material Relationships Between Selling Shareholders and QumulusAI*” and in the sections titled “*Management*” and “*Certain Relationships and Related Party Transactions,*” the shareholders have not, nor have they within the past three years had, any position, office, or other material relationship with us, other than as disclosed in this prospectus. The business address of each shareholder is c/o QumulusAI, Inc., 1130 Powers Ferry Pl SE, Marietta, Georgia 30067, unless otherwise indicated below.
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| Title of Class | Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class(2) | Shares of Common Stock Being Registered |
| --- | --- | --- | --- | --- |
| 5% Shareholders: | | | | |
| Common Stock | Robert C. Bissell(3) | 5,886,916 | 18.8% | 5,886,916 |
| Common Stock | Houston Aderhold(4) | 5,683,073 | 18.2% | 5,683,073 |
| Common Stock | Craig Heiser(5) | | | |
| | Alder Opportunity LP | | | |
| | 3600 Dallas Highway, Suite 230-350 | | | |
| | Marietta, Georgia 30064 | 1,856,079 | 5.9% | 1,856,079 |
| Common Stock | Focus Partners, GP(6) | | | |
| | 3535 Piedmont Road NE | | | |
| | Building 14, 5th Floor | | | |
| | Atlanta, Georgia 30305 | 1,804,648 | 5.8% | 1,804,648 |
| Common Stock | Robert C. Bissell(3) | 5,886,916 | 18.8% | 5,886,916 |
| Common Stock | Houston Aderhold(4) | 5,683,073 | 18.2% | 5,683,073 |
| Common Stock | Michael Maniscalco | — | — | — |
| Common Stock | Patrick Gahan(7) | 720,979 | 2.3% | 671,890 |
| Common Stock | Steve Gertz(8) | 200,175 | * | 135,043 |
| Common Stock | Stacy Kenworthy | 13,334 | * | 13,334 |
| Common Stock | Michael Mulica | 4,630 | * | 4,630 |
| Common Stock | David Rench(9) | 47,000 | * | 47,000 |
| Common Stock | Barry Schwartz(10) | 86,397 | * | 85,186 |
| Common Stock | All current directors and executive officers as a group (12 persons) | 2,100,082 | 6.6% | 1,457,116 |
| Common Stock | Non-Executive Officer Employees, Consultants and Service Providers | [•] | [•] | [•] |
| Common Stock | Chardan Capital Markets LLC | — | — | — |
| Common Stock | Affiliates or Other Insiders | [•] | [•] | [•] |
| Common Stock | All Other Shareholders | [•] | [•] | [•] |
| Common Stock | Total Number of Shares Being Registered | [•] | 100% | [•] |
\* Less than 1% of outstanding shares of common stock.
(1) Includes for the persons listed below the following shares subject to warrants and options held by that person that are currently exercisable or become exercisable within 60 days of December 8, 2025.
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| Name | Warrants | Options |
| --- | --- | --- |
| Craig Heiser | | |
| Focus Partners, GP | | |
| Robert C. Bissell | 0 | 0 |
| Houston Aderhold | 0 | 0 |
| Michael Maniscalco | 0 | 0 |
| Patrick Gahan | 4,737 | 44,352 |
| Steve Gertz | 49,375 | 0 |
| Stacy Kenworthy | 0 | 0 |
| Michael Mulica | 0 | 0 |
| David Rench | 0 | 0 |
| Barry Schwartz | 0 | 1,211 |
| All current directors and executive officers as a group (12 persons) | 54,112 | 588,855 |
| Non-Executive Officer Employees, Consultants and Service Providers | [•] | [•] |
| All Other Shareholders | [•] | [•] |
(2) Percent of class is based on 31,260,907 shares of our common stock outstanding as of December 8, 2025.
(3) Mr. Bissell beneficially owns 4,101,908 shares through Gratus Holdings, LLC and 316,919 shares through Chalin, Inc., over which he has sole voting and investment power.
(4) Mr. Aderhold beneficially owns 96,293 shares through MHA Technologies LLC, over which he has sole voting and investment power.
(5) Mr. Heiser beneficially owns 1,856,079 shares through Alder Opportunity, LP, in which he serves as a manager and has sole voting and investment power.
(6) Includes 838,227 shares held of record by Trailhead Growth, LP and 966,420 shares held of record by Trailhead Income, LP. Focus Partners, GP is the general partner of Trailhead Growth, LP and Trailhead Income, LP. By virtue of such relationships, Focus Partners, GP may be deemed to have voting and investment power with respect to the securities held by Trailhead Growth, LP and Trailhead Income, LP as noted above and as a result may be deemed to have beneficial ownership over such securities. Focus Partners, GP exercises its voting and investment power through a committee comprised of three members, including Todd Jones, a former member of our Board.
(7) Mr. Gahan and his wife hold 103,488 shares and warrants to purchase 1,595 shares through Slim Mint Group LLC and 212,391 shares and warrants to purchase 2,845 shares through Window Macaroni Group LLC. Mr. Gahan holds 39,458 shares and warrants to purchase 297 shares through Gahan LTC SPE, LLC, over which he has sole voting and investment power. His children hold a total of 11,926 shares. Mr. Gahan holds 19,765 shares in his trust.
(8) Mr. Gertz beneficially owns 83,333 shares and warrants to purchase 11,000 shares through JGS Partners LLC, of which he is the sole member. Mr. Gertz holds 31,945 shares in his trust.
(9) Mr. Rench beneficially owns 47,000 shares through WOOO-YES! LP, over which he has sole voting and investment power.
(10) Mr. Schwartz beneficially owns 85,185 shares and options that may be exercised for 1,211 shares through his living trust.
**Material Relationships Between Selling Shareholders and QumulusAI**
Craig Heiser serves as a manager of ALDER Opportunity, LP; ALDER Opportunity II, LLC; and ALDER Funding Partners. Mr. Heiser is also the in-house managerial accountant across the Alder Entities, including ALDER Opportunity, LP; ALDER Opportunity II, LLC; and ALDER Funding Partners, which have entered into transactions with the Company, as described above under “*Certain Relationships and Related Party Transactions*.”
The following shareholders are also members of ALDER Opportunity, LP; ALDER Opportunity II, LLC; and ALDER Funding Partners as well as Alder Technology Funding Partner, LLC; Fluent ATFP, LLC; and SGCA ATFP, LLC: Brad Noonan, Suketu Sonecha, Jonathan Lyman, Tom Rainey, Ankur Chatterjee, and Lisa Kolb.
Focus Partners, GP is the general partner of Trailhead Growth, LP, Trailhead Income, LP, and GC Opportunities 2 Private Fund, LP. Each of these entities has made certain investments in the Company, as described above under “*Certain Relationships and Related Party Transactions*.” In connection with these investments and among certain other rights and preferences included in the Company’s Second Amended and Restated Articles of Incorporation (which have been amended and restated to, among other things, eliminate these rights and preferences) and the Company’s Bylaws (which will be amended and restated in connection with the direct listing to, among other things, eliminate these rights and preferences), the Company agreed to designate a Series A Preferred Stock Board seat and appointed Todd Jones as a director. Mr. Jones resigned from the Board in September 2025.
Robert C. Bissell currently serves as our Advisory Board Chairman, previously served as our President from January 2025 to September 2025, and previously served as the Chief Executive Officer of WAHA, and subsequently GDH, from July 2019 to January 2025. Mr. Bissell served on the Board and as the Chairman of our Advisory Board. For additional details regarding certain related party transactions Mr. Bissell is party to directly or indirectly, see “*Certain Relationships and Related Party Transactions*.”
Houston Aderhold served as our Executive Vice President of Infrastructure and Construction from September 2019 to September 2025. Mr. Aderhold currently serves as our Senior Vice President – Blockchain Core Infrastructure. Mr. Aderhold additionally served as the Assistant Chairman of our Board until September 2025. For additional details regarding certain related party transactions Mr. Bissell is party to directly or indirectly, see “*Certain Relationships and Related Party Transactions*.”
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**DESCRIPTION OF SECURITIES**
The following description, together with the additional information we include in any applicable prospectus supplement, summarizes the material terms and provisions of our common stock and does not purport to be complete. It is subject to and qualified in its entirety by reference to the provisions of our Fourth Amended and Restated Articles of Incorporation and our Amended and Restated Bylaws, which we intend to adopt in connection with the direct listing, and each of which are filed as exhibits to the registration statement that includes this prospectus and are incorporated by reference herein. We encourage you to read our Charter, Bylaws, and the applicable provisions of the Georgia Business Corporation Code (“GBCC”) for additional information.
**Authorized and Outstanding Capital Stock**
Our Charter provides that we have authority to issue [
- ] shares of common stock, [
- ] of which are issued and outstanding as of [
- ], and [
- ] shares of preferred stock, no par value per share (“preferred stock”), none of which are issued and outstanding as of [
- ], 2025. As of December 1, 2025, in the aggregate, we had outstanding warrants to purchase 2,123,806 shares of our common stock. In addition, we had outstanding stock options to purchase 3,583,576 shares of our common stock under the 2022 Plan, and [
- ]shares available for issuance under the 2025 Plan.
We may amend from time to time our Charter to increase the number of authorized shares of common stock. Any such amendment would require the approval of the holders of two-thirds of the voting power of the shares entitled to vote generally in the election of directors.
**Common Stock**
***Voting Rights***
Each holder of our common stock is entitled to one vote per share on each matter submitted to a vote at a meeting of shareholders, including in all elections of directors. Shareholders are not entitled to cumulative voting in the election of directors. Subject to applicable law and the rights of the holders of outstanding shares of any series of preferred stock, holders of our common stock are entitled to vote on all matters on which shareholders are generally entitled to vote.
Our shareholders may vote either in person or by proxy. At all meetings of shareholders for the election of directors at which a quorum is present, a plurality of the votes cast shall be sufficient to elect. All other elections and questions presented to the shareholders at a meeting at which a quorum is present shall, unless otherwise provided by our Charter, our Bylaws, the rules or regulations of any stock exchange applicable to us or applicable law or pursuant to any regulation applicable to us or our securities, be decided by the affirmative vote of the holders of a majority of the shares of stock present in person or represented by proxy at a meeting at which a quorum is present. The affirmative vote of the holders of at least two-thirds of all the votes entitled to be cast by shareholders generally in the election of directors voting together as a single voting group is required to remove directors and to alter, amend or repeal any provision of the Bylaws.
**PLAN OF DISTRIBUTION**
The shares covered in this registration statement represent 100% of the Company’s currently issued and outstanding common stock. Subject to the restrictions described below, all such shares being registered under this prospectus may be freely sold upon effectiveness of this registration statement, and the shares of common stock beneficially owned by the Registered Shareholders covered by this prospectus may be offered and sold from time to time by the Registered Shareholders. The term “Registered Shareholders” includes donees, pledgees, transferees or other successors in interest selling securities received after the date of this prospectus from a Registered Shareholder as a gift, pledge, partnership distribution or other transfer. We will not receive any of the proceeds from the sale of the securities by the Registered Shareholders. The Registered Shareholders will not be involved in Nasdaq’s price-setting mechanism, including any decision to delay or proceed with trading, nor will they control or influence the advisor in carrying out its role as a financial adviser. We will not be involved in the price setting process. Additionally, the price of our shares in prior private transactions may have little or no relation to the opening price and subsequent public price of our stock on Nasdaq. The Registered Shareholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. The Registered Shareholders may offer, sell or distribute all or a portion of the securities hereby registered publicly at prevailing market prices. Other than as described below, we are not party to any arrangement with any Registered Shareholder or any broker-dealer with respect to sales of shares of common stock by the Registered Shareholders. As such, we do not anticipate receiving notice as to if and when any Registered Shareholder may, or may not, elect to sell their shares of common stock or the prices at which any such sales may occur, and there can be no assurance that any Registered Shareholders will sell any or all of the shares of common stock covered by this prospectus.
Our directors, officers and greater than 10% shareholders have entered into contractual lock-up agreements with respect to an aggregate of [
- ] shares of common stock. Pursuant to the lock-up agreements, signatories irrevocably agree that, from the date thereof until 180 days following the date the common stock is first listed for trading on the Nasdaq Global Market in connection with the direct listing, the signatory will not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of any common stock or securities convertible, exchangeable or exercisable into shares of common stock beneficially owned, held or acquired by the signatory. Substantially all of the remaining shares may be immediately sold either by the Registered Shareholders pursuant to this prospectus or by our other existing shareholders under Rule 144 since such common stock will have been beneficially owned by non-affiliates who beneficially owned such common stock for at least one year. Moreover, once we have been a reporting company subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for 90 days and assuming the availability of certain public information about us, (i) a non-affiliate who has beneficially owned common stock for at least six months may rely on Rule 144 to sell their common stock, and (ii) an affiliate who has beneficially owned common stock for at least six months, including certain of the common stock covered by this prospectus to the extent not sold hereunder, would be entitled to sell within any three-month period a number of shares of common stock that does not exceed the greater of either of the following: (a) 1% of the number of common stock then outstanding, and (b) the average weekly reported volume of trading of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
On the day that our shares of common stock are initially listed on Nasdaq, Nasdaq will begin accepting, but not executing, pre-opening buy and sell orders and will begin to continuously generate the indicative Current Reference Price (as defined below) on the basis of such accepted orders. The Current Reference Price is calculated each second and, during a 10-minute “Display Only” period, is disseminated, along with other indicative imbalance information, to market participants by Nasdaq on its NOII and BookViewer tools. Following the “Display Only” period, a “Pre-Launch” period begins, during which the Chardan, in its capacity as our financial advisor, must notify Nasdaq that our shares are “ready to trade.” Once Chardan has notified Nasdaq that our shares of common stock are ready to trade, Nasdaq will confirm the Current Reference Price for our shares of common stock, in accordance with the Nasdaq rules. If Chardan then approves proceeding at the Current Reference Price, the applicable orders that have been entered will then be executed at such price and regular trading of our shares of common stock on Nasdaq will commence, subject to Nasdaq conducting validation checks in accordance with the Nasdaq rules.
Under the Nasdaq rules, the Current Reference Price means: (i) the single price at which the maximum number of orders to buy or sell can be matched; (ii) if there is more than one price at which the maximum number of orders to buy or sell can be matched, then it is the price that minimizes the imbalance between orders to buy or sell (i.e. minimizes the number of shares that would remain unmatched at such price); (iii) if more than one price exists under (ii), then it is the entered price (i.e. the specified price entered in an order by a customer to buy or sell) at which our shares of common stock will remain unmatched (i.e. will not be bought or sold); and (iv) if more than one price exists under (iii), a price determined by Nasdaq in consultation with Chardan in its capacity as our financial advisor. In the event that more than one price exists under (iii), Chardan will exercise any consultation rights only to the extent that it can do so consistent with the anti-manipulation provisions of the federal securities laws, including Regulation M, or applicable relief granted thereunder.
In determining the Current Reference Price, Nasdaq’s cross algorithms will match orders that have been entered into and accepted by Nasdaq’s system. This occurs with respect to a potential Current Reference Price when orders to buy shares of common stock at an entered bid price that is greater than or equal to such potential Current Reference Price are matched with orders to sell a like number of shares of common stock at an entered asking price that is less than or equal to such potential Current Reference Price. To illustrate, as a hypothetical example of the calculation of the Current Reference Price, if Nasdaq’s cross algorithms matched all accepted orders as described above, and two limit orders remained — a limit order to buy 500 shares of common stock at an entered bid price of $10.01 per share and a limit order to sell 200 shares of common stock at an entered asking price of $10.00 per share — the Current Reference Price would be selected as follows:
- Under clause (i), if the Current Reference Price is $10.00, then the maximum number of additional shares that can be matched is 200. If the Current Reference Price is $10.01, then the maximum number of additional shares that can be matched is also 200, which means that the same maximum number of additional shares would be matched at the price of either $10.00 or $10.01.
- Because more than one price under clause (i) exists, under clause (ii), the Current Reference Price would be the price that minimizes the imbalance between orders to buy or sell (i.e. minimizes the number of shares that would remain unmatched at such price). Selecting either $10.00 or $10.01 as the Current Reference Price would create the same imbalance in the limit orders that cannot be matched, because at either price 300 shares would not be matched.
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- Because more than one price under clause (ii) exists, under clause (iii), the Current Reference Price would be the entered price at which orders for shares of common stock at such entered price will remain unmatched. In such case, choosing $10.01 would cause 300 shares of the 500 share limit order with the entered price of $10.01 to remain unmatched, compared to choosing $10.00, where all 200 shares of the limit order with the entered price of $10.00 would be matched, and no shares at such entered price remain unmatched. Thus, Nasdaq would select $10.01 as the Current Reference Price, because orders for shares at such entered price will remain unmatched. The above example (including the prices) is provided solely by way of illustration.
Chardan will determine when our shares of common stock are ready to trade and approve proceeding at the Current Reference Price primarily based on considerations of volume, timing and price. In particular, Chardan will determine, based primarily on pre-opening buy and sell orders, when a reasonable amount of volume will cross on the opening trade such that sufficient price discovery has been made to open trading at the Current Reference Price. If Chardan does not approve proceeding at the Current Reference Price (for example, due to the absence of adequate pre-opening buy and sell interest), Chardan will request that Nasdaq delay the opening until such a time that sufficient price discovery has been made to ensure that a reasonable amount of volume crosses on the opening trade. Further, in the highly unlikely event that Nasdaq consults with Chardan as described in clause (iv) of the definition of Current Reference Price, Chardan would request that Nasdaq delay the opening to ensure a single opening price within clauses (i), (ii) or (iii) of the definition of the Current Reference Price. The Registered Shareholders will not be involved in Nasdaq’s price-setting mechanism, and will not coordinate or be in communication with Chardan including with respect to any decision by Chardan to delay or proceed with trading.
Similar to a Nasdaq-listed firm-commitment underwritten initial public offering, in connection with the listing of our shares of common stock, buyers and sellers who have subscribed will have access to Nasdaq’s Order Imbalance Indicator (the “Net Order Imbalance Indicator”), a widely available, subscription-based data feed, prior to submitting buy or sell orders. Nasdaq’s electronic trading platform simulates auctions every second to calculate a Current Reference Price, the number of shares of common stock that can be paired off the Current Reference Price, the number of shares of common stock that would remain unexecuted at the Current Reference Price and whether a buy-side or sell-side imbalance exists, or whether there is no imbalance, to disseminate that information continuously to buyers and sellers via the Net Order Imbalance Indicator data feed.
Pursuant to the terms of our engagement with Chardan, for a period of 12 months beginning on the date this registration statement is effective, we have granted Chardan the right of first refusal to act as exclusive underwriter and book running manager, exclusive placement or sales agent, or our exclusive advisor, as applicable, in connection with any and all public offerings of our securities on a US stock exchange, private placement of our securities or other such financing during such 12 month period. Such right of first refusal is subject to our termination of our engagement with Chardan for gross negligence, willful misconduct or an uncured material breach of our engagement with Chardan.
However, because this is not an initial public offering being conducted on a firm-commitment underwritten basis, there will be no traditional book building process. Moreover, prior to the opening trade, there will not be a price at which underwriters initially sold shares of common stock to the public, as there would be in a firm-commitment underwritten initial public offering. The lack of an initial public offering price could impact the range of buy and sell orders collected by Nasdaq from various broker-dealers. Consequently, the public price of our shares of common stock may be more volatile than in an initial public offering underwritten on a firm-commitment basis and could, upon being listed on Nasdaq, decline significantly and rapidly. See “*Risk Factors*— *Risks Related to this Direct Listing and Ownership of Our Common Stock*— *Our shares of common stock currently have no public market. An active trading market may not develop or continue to be liquid and the market price of our shares of common stock may be volatile*.”
In addition, to list on Nasdaq, we are also required to have at least three registered and active market makers. We expect that Chardan will act as a registered and active market maker and will engage other market makers.
In addition to sales made pursuant to this prospectus, the shares of common stock covered by this prospectus may be sold by the Registered Shareholders in private transactions exempt from the registration requirements of the Securities Act.
Under the securities laws of some states, shares of common stock may be sold in such states only through registered or licensed brokers or dealers.
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If any of the Registered Shareholders utilize a broker-dealer in the sale of the shares of common stock being offered by this prospectus, such broker-dealer may receive commissions in the form of discounts, concessions or commissions from such Registered Shareholder or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal.
We have engaged Chardan as our financial advisor to advise and assist us with respect to certain matters relating to our listing. The services expected to be performed by Chardan will include providing advice and assistance with respect to defining objectives, analyzing, structuring and planning the listing and developing and assisting with our investor communication strategy in relation to this listing.
However, Chardan will not be engaged to otherwise facilitate or coordinate price discovery activities or sales of shares of our common stock in consultation with us, and will not be permitted to, and will not be instructed by us to, plan or actively participate in any investor education activities, except as described herein.
Prior to the financial advisory services provided by Chardan to the Company in connection with the listing of our securities, neither Chardan nor any affiliates of Chardan have provided services of any kind to the Company. However, Chardan is a full service financial institution engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Chardan and its affiliates may, from time to time, perform financial advisory and investment banking services for us, for which they would receive customary fees, discounts and customary payments including but not limited to certain expense reimbursements.
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**SHARES ELIGIBLE FOR FUTURE SALE**
Prior to the listing of our common stock on Nasdaq, there has been no public market for our common stock. Sales of a substantial number of shares our common stock in the public market following our listing on Nasdaq, or the perception that such sales could occur, could adversely affect the public price of our common stock and may make it more difficult for you to sell your shares at a time and price that you deem appropriate. We will have no input if and when any shareholders may, or may not, elect to sell their shares or the prices at which any such sales may occur.
Upon our registration, a total of [
- ] shares of common stock will be outstanding, and [
- ] shares will be registered under this registration statement, constituting substantially all of our outstanding shares of common stock. Any shares not registered hereunder will be “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act, including, but not limited to, the shares registered hereunder, or if they qualify for an exemption from registration, including under Rules 144 or 701 under the Securities Act, which are summarized below. Restricted securities also may be sold outside of the United States to non-U.S. persons in accordance with Rule 904 of Regulation S. With the exception of shares owned by our directors, officers and certain shareholders, substantially all of our common stock may be sold after our initial listing on Nasdaq, either by the Registered Shareholders pursuant to this prospectus or by our other existing shareholders in accordance with Rule 144 of the Securities Act.
**Rule 144**
In general, under Rule 144 as currently in effect, once we have been subject to and in compliance with public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, an eligible shareholder is entitled to sell such shares without complying with the manner of sale, volume limitation, or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. To be an eligible shareholder under Rule 144, such shareholder must not be deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares of common stock proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates. If such a person has beneficially owned the shares of common stock proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then such person is entitled to sell such shares without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our affiliates or persons selling common stock on behalf of our affiliates are entitled to sell shares 90 days after we become a reporting company. Within any three-month period, such shareholders may sell a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after our registration; or
- the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.
Sales under Rule 144 by our affiliates or persons selling shares of common stock on behalf of our affiliates also are subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
As described herein, substantially all of our outstanding shares of our common stock will be registered under this registration statement and need not be sold under Rule 144.
**Rule 701**
Rule 701 generally allows a shareholder who was issued shares under a written compensatory plan or contract and who is not deemed to have been an affiliate of our Company during the immediately preceding 90 days, to sell these shares in reliance on Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of our Company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after we become a reporting company before selling those shares under Rule 701.
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As described herein, substantially all of our outstanding shares of our common stock will be registered under this registration statement and need not be sold under Rule 701.
**Registration Statements on Form S-8**
We intend to file one or more registration statements on Form S-8 under the Securities Act to register shares of our common stock subject to outstanding stock options under the 2022 Plan and shares of our common stock reserved for issuance under the 2025 Plan as soon as permitted under the Securities Act. Such registration statements will automatically become effective upon filing with the SEC. However, shares registered on Form S-8 may be subject to the volume limitations and the manner of sale, notice, and public information requirements of Rule 144.
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**SALE PRICE HISTORY OF COMMON STOCK**
We intend to apply to list our common stock on Nasdaq. Prior to the initial listing, no public market existed for our common stock. Our common stock has a limited history of trading in private transactions. Most recently, beginning in May 2025, we issued shares of our common stock to investors in a private placement at a price of $3.60 per share. While Chardan is expected to consider this price in connection with setting the opening public price of our common stock, this information may have little or no relation to broader market demand for our common stock and thus the opening public price and subsequent public price of our common stock on Nasdaq. As a result, you should not place undue reliance on this historical private sale price as it may differ materially from the opening public price and subsequent public price of our common stock on Nasdaq. See “*Risk Factors*—*Risks Related to this Direct Listing and Ownership of Our Common Stock*.”
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**MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS**
The following discussion is a summary of the material U.S. federal income tax considerations applicable to Non-U.S. Holders (as defined below) with respect to their acquisition, ownership and disposition of shares of our common stock issued pursuant to this direct listing. This summary does not provide a complete analysis of all potential U.S. federal income tax considerations relating thereto. The information provided below is based upon provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder, administrative rulings, and judicial decisions currently in effect. These authorities may change at any time, possibly retroactively, or the Internal Revenue Service (the “IRS”) might interpret the existing authorities differently. In either case, the tax considerations of owning or disposing of our common stock could differ from those described below. As a result, we cannot assure you that the tax consequences described in this discussion will not be challenged by the IRS or will be sustained by a court if challenged by the IRS.
This summary does not address the tax considerations arising under the laws of any non-U.S., state or local jurisdiction, or under U.S. federal gift and estate tax laws, except to the limited extent provided below. In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:
- banks, insurance companies or other financial institutions;
- partnerships or entities or arrangements treated as partnerships or other pass-through entities for U.S. federal tax purposes (or investors in such entities);
- corporations that accumulate earnings to avoid U.S. federal income tax;
- persons subject to the alternative minimum tax or Medicare contribution tax on net investment income;
- tax-exempt organizations or tax-qualified retirement plans;
- controlled foreign corporations or passive foreign investment companies;
- dealers in securities or currencies;
- traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;
- persons that own, or are deemed to own, more than 5% of our capital stock (except to the extent specifically set forth below);
- certain former citizens or former long-term residents of the United States;
- persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction;
- persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, for investment purposes); or
- persons deemed to sell our common stock under the constructive sale provisions of the Code.
In addition, if a partnership or entity classified as a partnership for U.S. federal income tax purposes is a beneficial owner of our common stock, the tax treatment of a partner in the partnership or an owner of the entity will depend upon the status of the partner or other owner and the activities of the partnership or other entity. Accordingly, this summary does not address tax considerations applicable to partnerships that hold our common stock, and partners in such partnerships should consult their tax advisors.
INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES OF FOREIGN, STATE OR LOCAL LAWS, AND TAX TREATIES.
**Non-U.S. Holder Defined**
For purposes of this summary, a Non-U.S. Holder is any beneficial owner of our common stock, other than a partnership, that is not:
- an individual who is a citizen or resident of the United States;
- a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state therein or the District of Columbia;
- a trust if it (i) is subject to the primary supervision of a U.S. court and one of more U.S. persons have authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or
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- an estate whose income is subject to U.S. income tax regardless of source.
If you are a non-U.S. citizen that is an individual, you may, in many cases, be treated as a resident alien, as opposed to a non-resident alien, by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For these purposes, all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year are counted. Resident aliens are subject to U.S. federal income tax as if they were U.S. citizens. Such an individual is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the ownership or disposition of our common stock.
**Dividends**
As discussed under “*Dividend Policy*” above, we do not currently expect to declare or pay dividends to our common shareholders in the foreseeable future. In the event that we do make distributions of cash or other property on our common stock, those distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital, which will first reduce a Non-U.S. Holder’s adjusted tax basis in shares of our common stock, but not below zero. Any remaining excess will be treated as gain realized on the sale or other disposition of our common stock and will be treated as described below under “⸺*Gain on Sale or Other Taxable Disposition of Our Common Stock*.” Any such distribution will also be subject to the tax treatment described below under the heading “*Foreign Account Tax Compliance Act*.”
Subject to the discussion below on effectively connected income, dividends paid to a Non-U.S. Holder of our common stock that is not effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States will generally be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable or successor form) certifying the Non-U.S. Holder’s qualification for the lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty. If the Non-U.S. Holder holds the stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to the agent. The holder’s agent will then be required to provide certification to us or our paying agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty, you may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for a refund with the IRS in a timely manner.
If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States.
Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
**Gain on Sale or Other Taxable Disposition of Our Common Stock**
Subject to the discussion below under “⸺*Information Reporting and Backup Withholding*” and “⸺*Foreign Account Tax Compliance Act*,” a Non-U.S. Holder will generally not be subject to U.S. federal income tax on any gain realized upon the sale, exchange, or other taxable disposition of our common stock unless:
- the gain (i) is effectively connected with the conduct by the Non-U.S. Holder of a U.S. trade or business, and (ii) if required by an applicable income tax treaty between the United States and the Non-U.S. holder’s country of residence, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States (in which the special rules described below apply);
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- the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the sale, exchange or other disposition of our common stock, and certain other requirements are met (in which case the gain would be subject to a flat 30% tax, or such reduced rate as may be specified by an applicable income tax treaty, which may be offset by certain U.S. source capital losses, even though the individual is not considered a resident of the United States); or
- the rules of the Foreign Investment in Real Property Tax Act (“FIRPTA”) treat the stock as a “U.S. real property interest” as defined in Section 897 of the Code.
The FIRPTA rules may apply to a sale, exchange or other disposition of our Common Stock if we are, or were within the shorter of the five-year period preceding the disposition and the Non-U.S. Holder’s holding period, a “U.S. real property holding corporation” (a “USRPHC”), as defined in Section 897 of the Code. In general, we would be a USRPHC if interests in U.S. real estate comprised at least half of the value of our business assets. We do not believe that we are a USRPHC and we do not anticipate becoming one in the future. Even if we become a USRPHC, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if beneficially owned by a Non-U.S. Holder that actually or constructively owned more than 5% of our outstanding common stock at sometime within the five-year period preceding the disposition.
If any gain from the sale, exchange or other disposition of our common stock (1) is effectively connected with a U.S. trade or business conducted by a Non-U.S. Holder, and (2) if required by an applicable income tax treaty between the United States and the Non-U.S. Holder’s country of residence, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States, then the gain generally will be subject to U.S. federal income tax at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. If the Non-U.S. Holder is a corporation, under certain circumstances, that portion of its earnings and profits that is effectively connected with its U.S. trade or business, subject to certain adjustments, generally would be subject also to a “branch profits tax.” The branch profits tax rate is 30% unless reduced by applicable income tax treaty.
Non-U.S. Holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
**U.S. Federal Estate Tax**
The estates of non-resident alien individuals generally are subject to U.S. federal estate tax on property with a U.S. situs. Because we are a U.S. corporation, our common stock will be U.S. situs property and therefore will be included in the taxable estate of a non-resident alien decedent, unless an applicable estate tax treaty between the United States and the decedent’s country of residence provides otherwise.
**Informational Reporting and Backup Withholding**
The Code and the Treasury regulations require those who make specified payments to report the payments to the IRS. Among the specified payments are dividends and proceeds paid by brokers to their customers. The required information returns enable the IRS to determine whether the recipient properly included the payments in income. This reporting regime is reinforced by “backup withholding” rules. These rules require the payors to withhold tax from payments subject to information reporting if the recipient fails to cooperate with the reporting regime by failing to provide his taxpayer identification number to the payor, furnishing an incorrect identification number, or failing to report interest or dividends on his returns. The backup withholding tax rate is currently 24%. The backup withholding rules do not apply to payments to corporations, whether domestic or foreign, provided they establish such exemption.
Payments to Non-U.S. Holders of dividends on our common stock generally will not be subject to backup withholding, and payments of proceeds made to Non-U.S. Holders by a broker upon a sale of common stock will not be subject to information reporting or backup withholding, in each case so long as the Non-U.S. Holder certifies its status as a Non-U.S. Holder (and we or our paying agent do not have actual knowledge or reason to know the holder is a U.S. person or that the conditions of any other exemption are not, in fact, satisfied) or otherwise establishes an exemption. The certification procedures to claim treaty benefits described under “⸺*Distributions*” will generally satisfy the certification requirements necessary to avoid the backup withholding tax. We must report annually to the IRS any dividends paid to each Non-U.S. Holder and the tax withheld, if any, with respect to these dividends. Copies of these reports may be made available to tax authorities in the country where the Non-U.S. Holder resides. Under the applicable Treasury regulations, information returns are required to be filed with the IRS in connection with any dividends on our common stock paid to a Non-U.S. Holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the beneficial owner certifies, under penalties of perjury, among other things, its status as a Non-U.S. Holder (and the broker does not have actual knowledge or reason to know the holder is a U.S. person) or otherwise establishes an exemption. The payment of proceeds from the disposition of shares of our common stock by a Non-U.S. Holder made to or through a non-U.S. office of a broker generally will not be subject to backup withholding and information reporting, except as noted below. Information reporting, but not backup withholding, will apply to a payment of proceeds, even if that payment is made outside of the United States, if you sell our common stock through a non-U.S. office of a broker that is:
- a U.S. person (including a foreign branch or office of such person);
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- a “controlled foreign corporation” for U.S. federal income tax purposes;
- a foreign person 50% or more of whose gross income from certain periods is effectively connected with a U.S. trade or business; or
- a foreign partnership if at any time during its tax year (a) one or more of its partners are U.S. persons who, in the aggregate, hold more than 50% of the income or capital interests of the partnership or (b) the foreign partnership is engaged in a U.S. trade or business, unless the broker has documentary evidence that the beneficial owner is a Non-U.S. Holder and certain other conditions are satisfied, or the beneficial owner otherwise establishes an exemption (and the broker has no actual knowledge or reason to know to the contrary).
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS. Non-U.S. holders should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them.
**Foreign Account Tax Compliance Act**
Sections 1471 through 1474 of the Code, the U.S. Treasury Regulations promulgated thereunder and other applicable guidance, commonly referred to as “FATCA,” generally impose a U.S. federal withholding tax of 30% on dividends on stock in a U.S. corporation paid to (i) a foreign financial institution (as specifically defined by the applicable rules) unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) and (ii) a non-financial foreign entity unless such entity provides the withholding agent with either a certification that it does not have any substantial direct or indirect U.S. owners or provides information regarding direct and indirect U.S. owners of the entity. The 30% federal withholding tax described in this paragraph cannot be reduced under an income tax treaty with the United States or by providing an IRS Form W-8BEN or similar documentation. The withholding tax described above will not apply if the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from the rules and certifies as such on a Form W-8BEN-E (or any successor of such form). U.S. Treasury Regulations proposed in December 2018 (and upon which taxpayers and withholding agents are entitled to rely) eliminate possible FATCA withholding on the gross proceeds from any sale or other disposition of shares of stock of a U.S. corporation, previously scheduled to apply beginning January 1, 2019. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. Holders should consult with their own tax advisors regarding the possible implications of the withholding described herein. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph.
THE PRECEDING DISCUSSION OF MATERIAL U.S. FEDERAL TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
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**LEGAL MATTERS**
The validity of the shares of our common stock being offered by this prospectus will be passed upon for us by Fox Rothschild LLP, Minneapolis, Minnesota.
**INTERESTS OF NAMED EXPERTS AND COUNSEL**
No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the securities was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.
**EXPERTS**
The audited financial statements of QumulusAI, Inc., formerly known as Global Digital Holdings, Inc., as of and for the years ended December 31, 2024 and 2023 included in this prospectus and in the registration statement have been so included in reliance upon the report of WithumSmith+Brown, PC, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.
The audited financial statements of The Cloud Minders, Inc., as of and for the years ended December 31, 2024 and 2023 included in this prospectus and in the registration statement, have been so included in reliance upon the report of BPS & Associates, LLC, independent auditors, upon the authority of said firm as experts in accounting and auditing.
**WHERE YOU CAN FIND MORE INFORMATION**
We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the shares of common stock being offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement.
Immediately upon the effectiveness of the registration statement of which this prospectus forms a part, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements and other information with the SEC through its website at *www.sec.gov*. We also maintain a website at *www.qumulusai.com*. Upon the effectiveness of the registration statement of which this prospectus forms a part, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
**DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITY**
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
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- **Financial Statements:**
- Balance Sheets as of December 31, 2024 and 2023 F-90
- Statements of Income (Loss) for the years ended December 31, 2024 and 2023 F-92
- Statements of Changes in Stockholders’ and Members’ Equity for the years ended December 31, 2024 and 2023 F-93
- Statements of Cash Flows for the years ended December 31, 2024 and 2023 F-94
- Notes to Financial Statements F-96
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**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
**Condensed Consolidated Balance Sheets**
_(Unaudited) · (As restated)_
| Line item | September 30, 2025 | December 31, 2024 |
| --- | --- | --- |
| ASSETS | | |
| Current assets: | | |
| Cash | $18,237,794 | $3,970,466 |
| U.S. dollar coin | — | 391,584 |
| Accounts receivable, net | 34,017 | 42,781 |
| Digital assets | 30,186 | — |
| Loans receivable, net - related party | — | 95,698 |
| Due from related party | — | 82,213 |
| Prepaid expenses and other current assets | 506,767 | 203,241 |
| Total current assets | 18,808,764 | 4,785,983 |
| Property and equipment, net | 9,960,081 | 2,737,019 |
| Operating right-of-use assets, net | 1,468,937 | 1,548,502 |
| Finance right-of-use assets, net | 4,384,476 | — |
| Digital assets, net of current portion | — | 511,376 |
| Equity method investments | 4,727,694 | 8,657,615 |
| Loans receivable, net of current portion - related party | — | 136,754 |
| Deposits | 641,844 | 641,844 |
| Deposits on power equipment | 3,193,255 | 1,326,801 |
| Goodwill | 31,416,827 | — |
| Intangible assets, net | 7,255,518 | — |
| Total assets | $81,857,396 | $20,345,894 |
| LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT) | | |
| Current liabilities: | | |
| Accounts payable | $1,484,211 | $803,407 |
| Dividend payable | 359,188 | 395,947 |
| Accrued expenses and other current liabilities | 2,794,243 | 2,314,089 |
| Current portion of notes payable | 1,183,576 | 46,088 |
| Current portion of notes payable - related party | 4,372,919 | 1,111,921 |
| Current portion of convertible note payable, net of discount - related party | — | 3,008,474 |
| Operating lease liabilities - current portion | 87,403 | 62,035 |
| Finance lease liabilities - current portion | 1,135,837 | — |
| Deferred tax liability | 284,771 | — |
| Due to related party | — | 547,484 |
| Line of credit | — | 292,659 |
| Total current liabilities | 11,702,148 | 8,582,104 |
| Long-term notes payable, net of current portion | 4,613,384 | 62,075 |
| Long-term notes payable, net of current portion - related party | — | 3,848,915 |
| Operating lease liabilities, net of current portion | 1,525,701 | 1,595,009 |
| Finance lease liabilities, net of current portion | 3,185,848 | — |
| Warrant liability | 1,635,091 | 4,815,890 |
| Total long-term liabilities | 10,960,024 | 10,321,889 |
| Total liabilities | $22,662,172 | $18,903,993 |
*See accompanying notes to condensed consolidated financial statements.*
F-1
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
### Condensed Consolidated Balance Sheets
| Commitments and contingencies (Note 22) / Mezzanine Equity | | |
| --- | --- | --- |
| Series A Redeemable Preferred stock, 0 and 5,453,876 shares authorized as of September 30, 2025 and December 31, 2024, respectively, 0 and 729,448 shares issued and outstanding as of September 30, 2025 and December 31, 2024 | — | 811,049 |
| Series B Redeemable Preferred stock, 0 and 5,856,097 shares authorized as of September 30, 2025 and December 31, 2024, respectively, 0 and 634,132 shares issued and outstanding as of September 30, 2025 December 31, 2024 | — | 1,221,512 |
| Total mezzanine equity | — | 2,032,561 |
| Stockholders' Equity (Deficit) | | |
| Preferred stock - no par value; 0 and 25,000,000 shares authorized as of September 30, 2025 and December 31, 2024, respectively | | |
| Series A Preferred stock, 0 and 5,453,876 shares authorized as of September 30, 2025 and December 31, 2024, respectively, 0 and 4,713,515 shares issued and outstanding as of September 30, 2025 and December 31, 2024 | — | 5,224,127 |
| Series B Preferred stock, 0 and 5,856,097 shares authorized as of September 30, 2025 and December 31, 2024, respectively, 0 and 5,205,630 shares issued and outstanding as of September 30, 2025 and December 31, 2024 | — | 10,027,471 |
| Series C Preferred stock, 0 and 3,690,027 shares authorized as of September 30, 2025 and December 31, 2024, respectively, 0 and 3,663,841 shares issued and outstanding as of September 30, 2025 and December 31, 2024 | — | 5,990,371 |
| Series D Preferred stock, 0 and 10,000,000 shares authorized as of September 30, 2025 and December 31, 2024, 0 shares issued and outstanding as of September 30, 2025; and 9,089,000 shares issued and outstanding as of December 31, 2024 | — | 9,008,512 |
| Common stock - no par value; 500,000,000 shares authorized, 30,624,990 shares issued and outstanding as of September 30, 2025; and 75,000,000 authorized and 12,835,535 shares issued and outstanding as of December 31, 2024 | 86,231,643 | 408,505 |
| Additional paid-in capital | 5,388,626 | 2,007,227 |
| Accumulated deficit | (32,425,045) | (33,256,873) |
| Total stockholders' equity (deficit) | 59,195,224 | (590,660) |
| Total liabilities, mezzanine equity and stockholders' equity (deficit) | $$81,857,396 | 20,345,894 |
*See accompanying notes to condensed consolidated financial statements.*
F-2
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
### Condensed Consolidated Statements of Operations
_(Unaudited)_
| Line item | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| Revenue | | |
| Revenue from cryptocurrency mining | $507,604 | $3,995,442 |
| Revenue from mining hosting services | 4,794,821 | 2,157,843 |
| Revenue from compute power | 2,755,051 | — |
| Total revenue | 8,057,476 | 6,153,285 |
| Costs and expenses: | | |
| Cost of revenue | 4,245,448 | 4,115,987 |
| General and administrative expenses | 6,320,009 | 2,173,724 |
| Depreciation and amortization expense | 3,358,079 | 5,753,430 |
| Total costs and expenses | 13,923,536 | 12,043,141 |
| Operating loss | (5,866,060) | (5,889,856) |
| Other income (expenses) | | |
| Income (loss) from equity method investments | 1,043,937 | (305,728) |
| Gain on sale of equity method investments | — | 835,046 |
| Gain on remeasurement of investment in TCM | 14,549,536 | — |
| Change in fair value of warrant liability | (5,536,816) | (288,376) |
| Change in fair value of digital assets | 81,919 | 733,552 |
| Gain (loss) on disposal of property and equipment | 462 | (2,094,030) |
| Loss on settlement of lease liability | (692,837) | — |
| Loss on extinguishment of debt | (1,037,501) | (46,774) |
| Other income, net | 24,771 | 50,950 |
| Interest expense, net | (1,450,812) | (894,684) |
| Total other income (expenses), net | 6,982,659 | (2,010,044) |
| Income (loss) before income tax expense | 1,116,599 | (7,899,900) |
| Income tax expense | 284,771 | — |
| Net income (loss) | $831,828 | $(7,899,900) |
| Less deemed dividend on conversion of preferred stock | 89,386,947 | — |
| Net loss attributable to common stockholders | $(88,555,119) | $(7,899,900) |
| Net loss per share, basic and diluted | $(5.36) | $(0.57) |
| Weighted-average common stock outstanding, basic and diluted | 16,512,498 | 13,796,789 |
*See accompanying notes to condensed consolidated financial statements.*
F-3
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
### Condensed Consolidated Statements of Stockholders' Equity (Deficit)
_(Unaudited)_
| Line item | Series A Preferred Stock / Shares | Series A Preferred Stock / Amount | Series B Preferred Stock / Shares | Series B Preferred Stock / Amount | Series C Preferred Stock / Shares | Series C Preferred Stock / Amount | Series D Preferred Stock / Shares | Series D Preferred Stock / Amount | Common Stock / Shares | Common Stock / Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Equity (Deficit) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at January 1, 2025 (as restated) | 4,713,515 | $5,224,127 | 5,205,630 | $10,027,471 | 3,663,841 | $5,990,371 | 9,089,000 | $9,008,512 | 12,835,535 | $408,505 | $2,007,227 | $(33,256,873) | $(590,660) |
| Issuance of common stock, net of issuance cost | — | — | — | — | — | — | — | — | 2,451,154 | 21,219,598 | 135,482 | — | 21,355,080 |
| Issuance of common stock for settlement of lease liability | — | — | — | — | — | — | — | — | 151,574 | 1,749,516 | — | — | 1,749,516 |
| Issuance of common stock for exercise of warrants | — | — | — | — | — | — | — | — | 843,385 | 8,790,274 | — | — | 8,790,274 |
| Issuance of common stock for exercise of options | — | — | — | — | — | — | — | — | 52,956 | 112,600 | — | — | 112,600 |
| Reissuance of common stock to TCM founders for shares previously forfeited | — | — | — | — | — | — | — | — | 22,703 | — | — | — | — |
| Redemption of preferred stock for cash | — | — | — | — | — | — | (266,749) | (293,742) | — | — | — | — | (293,742) |
| Deemed dividend on conversion of preferred stock of $89,386,947 | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Issuance of preferred stock | — | — | — | — | — | — | 14,000 | — | — | — | — | — | — |
| Issuance of preferred stock upon partial conversion of convertible note | — | — | — | — | — | — | 514,592 | 1,711,837 | — | — | — | — | 1,711,837 |
| Issuance of warrants for settlement of lease liability | — | — | — | — | — | — | — | — | — | — | 387,621 | — | 387,621 |
| Issuance of warrants to purchase equipment | — | — | — | — | — | — | — | — | — | — | 104,854 | — | 104,854 |
| Issuance of warrants for services | — | — | — | — | — | — | — | — | — | — | 69,663 | — | 69,663 |
| Issuance of Common Stock and Series D Preferred Stock for the acquisition of TCM | — | — | — | — | — | — | 1,432,182 | 3,195,139 | 2,574,718 | 17,054,874 | — | — | 20,250,013 |
| Exchange of TCM stock options resulting in issuance of stock options in acquisition | — | — | — | — | — | — | — | — | — | — | 1,883,956 | — | 1,883,956 |
| Conversion of preferred stock to common stock | (4,713,515) | (5,224,127) | (5,205,630) | (10,027,471) | (3,663,841) | (5,990,371) | (10,783,025) | (13,621,746) | 11,692,965 | 36,896,276 | — | — | 2,032,561 |
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | 799,823 | — | 799,823 |
| Net income | — | — | — | — | — | — | — | — | — | — | — | 831,828 | 831,828 |
| Balance at September 30, 2025 | — | — | — | — | — | — | — | — | 30,624,990 | $86,231,643 | $5,388,626 | $(32,425,045) | $59,195,224 |
| Balance at January 1, 2024 (as restated) | 4,713,515 | $5,224,127 | 5,205,630 | $10,027,471 | 3,663,841 | $5,990,371 | 500,000 | $475,113 | 12,835,535 | $408,505 | $624,026 | $(20,072,499) | $2,677,114 |
| Issuance of preferred stock, net of issuance cost | — | — | — | — | — | — | 4,365,000 | 4,187,419 | — | — | 37,581 | — | 4,225,000 |
| Issuance of warrants for services | — | — | — | — | — | — | — | — | — | — | 40,500 | — | 40,500 |
| Issuance of warrants for extinguishment of debt | — | — | — | — | — | — | — | — | — | — | 154,687 | — | 154,687 |
| Issuance of warrants as a deemed contribution to equity method investment | — | — | — | — | — | — | — | — | — | — | 111,664 | — | 111,664 |
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | 257,598 | — | 257,598 |
| Net loss | — | — | — | — | — | — | — | — | — | — | — | (7,899,900) | (7,899,900) |
| Balance at September 30, 2024 | 4,713,515 | $5,224,127 | 5,205,630 | $10,027,471 | 3,663,841 | $5,990,371 | 4,865,000 | $4,662,532 | 12,835,535 | $408,505 | $1,226,056 | $(27,972,399) | $(433,337) |
*See accompanying notes to condensed consolidated financial statements.*
F-4
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
### Condensed Consolidated Statements of Cash Flows
_(Unaudited)_
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | |
| Net income (loss) | $831,828 | $(7,899,900) |
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | | |
| Depreciation and amortization expense | 2,554,911 | 5,753,430 |
| Amortization of loan origination costs | 23,513 | 27,476 |
| Amortization of discount on convertible note | 135,334 | 218,701 |
| Amortization of premium on loan receivable | (16,281) | — |
| Non-cash interest expense | 6,418 | — |
| Recovery of credit losses | (36,921) | (26,658) |
| Amortization of right-of-use assets | 882,733 | 66,759 |
| Interest expense under finance lease obligations | 268,356 | — |
| (Income) loss from equity method investments | (1,043,937) | 305,728 |
| Gain on sale of equity method investments | — | (835,046) |
| Gain on remeasurement of investment in TCM | (14,549,536) | — |
| Change in fair value of warrant liability | 5,536,816 | 288,376 |
| Change in fair value of digital assets | (81,919) | (733,552) |
| Change in deferred taxes | 284,771 | — |
| Stock-based compensation | 799,823 | 257,598 |
| Issuance of warrants for services | 69,663 | 40,500 |
| Gain (loss) on disposal of property and equipment | (462) | 2,094,030 |
| Loss on extinguishment of debt | 1,037,501 | 46,774 |
| Loss on extinguishment of lease liability | 692,837 | — |
| Changes in operating assets and liabilities: | | |
| Accounts receivable | 8,764 | 194,798 |
| Due from related party | 82,213 | 4,348 |
| Prepaid expenses and other current assets | (207,498) | 34,864 |
| Proceeds from sale of digital assets | 3,045,949 | 4,123,239 |
| Deposits | — | (331,843) |
| Mining of digital assets | (2,876,300) | (4,079,314) |
| Accounts payable | 508,549 | 168,049 |
| Accrued expenses | 114,685 | 1,071,581 |
| Operating lease liabilities | (43,940) | 49,909 |
| Intangible assets | (7,200) | — |
| Due to related party | (547,484) | (1,010,000) |
| Other non-current liabilities | — | (700,000) |
| Net cash used in operating activities | (2,526,814) | (870,153) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | |
| Purchase of property and equipment | (1,226,323) | (1,085,247) |
| Proceeds from disposal of property and equipment | 4,000 | — |
| Proceeds from collections of loans receivable | 285,654 | 106,819 |
| Deposits on power equipment | (1,866,454) | (1,326,801) |
*See accompanying notes to condensed consolidated financial statements.*
F-5
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
### Condensed Consolidated Statements of Cash Flows
_(Unaudited)_
| Proceeds from sale of digital asset reserve | 393,460 | — |
| --- | --- | --- |
| Proceeds from sale of U.S. dollar coin | 391,584 | — |
| Cash acquired as part of business acquisition | 2,441,275 | — |
| Dividends paid on common stock | (36,759) | — |
| Distributions from equity method investments | 2,422,000 | 865,000 |
| Investment in equity method investments | — | (381,198) |
| Net cash provided by (used in) investing activities | 2,808,437 | (1,821,427) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | |
| Proceeds from issuance of Series D Preferred stock, net of issuance costs | — | 4,225,000 |
| Proceeds from sale of common stock, net of issuance costs | 21,355,080 | — |
| Redemption of preferred stock | (293,742) | — |
| Repayments on finance lease obligations | (1,289,600) | — |
| Proceeds from notes payable - related party | 7,170 | — |
| Proceeds from exercise of warrants | 72,659 | — |
| Proceeds from exercise of options | 112,600 | — |
| Proceeds from line of credit | — | 648,262 |
| Repayment of line of credit | (299,077) | (179,704) |
| Repayments of notes payable | (579,999) | (34,002) |
| Repayments of notes payable - related party | (722,838) | (812,434) |
| Repayments of convertible notes payable | (1,150,000) | — |
| Repayments of convertible note payable - related party | (3,226,548) | — |
| Net cash provided by financing activities | 13,985,705 | 3,847,122 |
| NET CHANGE IN CASH | 14,267,328 | 1,155,542 |
| CASH, beginning of period | 3,970,466 | 631,344 |
| CASH, end of period | $$18,237,794 | 1,786,886 |
| SUPPLEMENTAL CASH FLOW INFORMATION | | |
| Cash paid for income taxes | — | — |
| Cash paid for interest | $$907,788 | 620,074 |
| Non-cash financing and investing activities | | |
| Issuance of warrants for extinguishment of debt | — | 107,913 |
| Issuance of warrants as a deemed contribution to equity method investment | — | 111,664 |
| Issuance of warrants for property and equipment | $$104,854 | — |
| Issuance of warrants as offering costs | $$135,482 | — |
| Issuance of preferred stock, net of issuance cost | — | 37,581 |
| Issuance of common stock for settlement of lease liability | $$1,444,300 | — |
| Conversion of preferred stock to common stock | $$36,896,276 | — |
| Non-cash contribution to equity method investment | $$115,210 | — |
| Issuance of Common Stock and Series D Preferred Stock for the acquisition of TCM | $$20,250,013 | — |
| Exchange of TCM stock options resulting in issuance of stock options in acquisition | $$1,883,956 | — |
*See accompanying notes to condensed consolidated financial statements.*
F-6
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
### Condensed Consolidated Statements of Cash Flows
_(Unaudited)_
| Issuance of preferred stock upon partial conversion of convertible note | 1,711,837 | — |
| --- | --- | --- |
| Forgiveness of FCNC loan receivable | $— | $22,294 |
| Transfer of leased assets to property and equipment upon lease buyout | $1,340,882 | $— |
| Acquisition of right-of-use asset in exchange for lease obligations | $6,528,526 | $1,641,673 |
| Lease liabilities arising from obtaining right-of-use assets | $6,787,230 | $1,621,672 |
*See accompanying notes to condensed consolidated financial statements.*
F-7
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
**Notes to Condensed Consolidated Financial Statements**
### **Note 1. Organization and Nature of Operations**
***The Company***
WAHA Technologies, Inc. ("WAHA") was organized in the state of Georgia in 2019 and is primarily engaged in bitcoin mining hosting services. WAHA buys and maintains digital asset mining equipment and the required infrastructure in order to mine bitcoin.
SPRE Commercial Group, Inc. ("SPRE") was organized in the state of Georgia in 2019 for the purpose of owning and leasing land, buildings, and digital assets mining facilities.
QumulusAI, Inc. (formerly known as Global Digital Holdings, Inc.) ("QumulusAI") (collectively, the "Company") was organized in the state of Georgia in 2022 to serve as the holding Company for WAHA and SPRE. On October 10, 2022, the Board of Directors of WAHA and SPRE approved the decision to merge all equity of WAHA and SPRE to the Company, with the Company directly owning WAHA and SPRE. Effective December 13, 2022, the shareholders of WAHA and SPRE entered into a contribution and exchange agreement with the Company, in which all their outstanding equity securities and ownership rights in WAHA and SPRE were contributed to the Company in exchange for shares and ownership rights in the Company.
SPRE Watonga OK, LLC ("Watonga") was organized in the state of Georgia in 2024 as an entity for one of the Company's main operating sites, which opened in the same year. The entity is primarily engaged in mining of digital currency and in digital currency mining hosting services. The Company will also serve as a holding company for Watonga.
On April 1, 2025, the Company acquired 100% of The Cloud Minders, Inc. ("TCM"). See Note 3 - Business Combinations for additional information.
Effective August 18, 2025, the Company changed its corporate name to QumulusAI.
***Reverse Stock Split***
The Company effected a 1-for-3 reverse stock split (“Reverse Stock Split”) on September 30, 2025, pursuant to which every three shares of the Company’s issued and outstanding common stock were combined into one share of common stock. The Reverse Stock Split had no impact on the par value of the Company’s no par value common stock or the authorized number of shares of common stock. Unless otherwise indicated, all share and per share information prior to the Reverse Stock Split date of September 30, 2025 in these unaudited condensed consolidated financial statements are retroactively adjusted to reflect the Reverse Stock Split, prior to the rounding of any fractional shares. Any fractional share resulting from the Reverse Stock Split were rounded up to the next whole number of shares.
***Going Concern***
Pursuant to Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2014-15, *Presentation of Financial Statements-Going Concern* (Subtopic 205-40), management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. Management’s evaluations are based on relevant conditions and events that are known and reasonably knowable as of the date the financial statements were available to be issued.
F-8
The Company has incurred recurring operating losses since inception resulting in an accumulated deficit of $32,425,045 as of September 30, 2025. For the nine months ended September 30, 2025, the Company has operating cash outflows of $2,526,814 and had an operating loss of $5,866,060. The Company’s operations have been funded partially through the issuance of debt. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these condensed consolidated financial statements.
In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. At September 30, 2025, the Company had cash of $18,237,794. The Company’s plans to alleviate the substantial doubt include raising approximately $30 million through sale of common stock, of which $25.7 million has already been funded, and obtaining a $500 million credit facility. See Note 24 - Subsequent Events. Management concluded these plans will alleviate the substantial doubt about the Company’s ability to continue as a going concern for the one-year period extending from the date of issuance of these financial statements.
### **Note 2. Summary of Significant Accounting Policies**
***Principles of Consolidation***
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, WAHA, SPRE, Watonga, and TCM. The Company uses the equity method to account for investments in other companies if the investment provides management with the ability to exercise significant influence over the operating and financial policies of the investee. The condensed consolidated net income (loss) includes the Company’s proportionate share of the net income or loss of these companies. Management's judgment regarding the level of influence over each equity method investee includes considering key factors, such as ownership interest, representation on the board of directors and participation in policy-making decisions. All significant intercompany transactions and balances have been eliminated in consolidation. For financial and income tax reporting purposes, the Company has adopted a calendar year-end.
***Basis of Presentation***
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes and financial information that are normally required under U.S. GAAP can be condensed or omitted. The consolidated balance sheet as of December 31, 2024, was derived from audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. The information included in this interim report should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company for the year ended December 31, 2024.
In the opinion of management, these unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and notes thereto of the Company and include all adjustments, consisting only of normal recurring adjustments considered necessary for the fair presentation of the Company’s financial position and operating results. The results for the nine months ended September 30, 2025 and 2024 are not necessarily indicative of the operating results for the year ending December 31, 2025 and 2024, or any other interim or future periods.
The FASB establishes these principles to ensure financial condition, results of operations, and cash flows are consistently reported. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP included in the Accounting Standards Codification (“ASC”) and ASU issued by the FASB.
F-9
***Correction of an Immaterial Error in Prior Period Financial Statements***
The Company received $14,000 during the year ended December 31, 2024 for 14,000 shares of Series D Preferred Stock that were not issued until 2025. The Company recorded the issuance of the shares in the consolidated statements of stockholders' equity for the nine months ended September 30, 2025. The $14,000 was already recorded in Series D Preferred Stock on the consolidated balance sheets as of December 31, 2024.
***Reclassifications***
Certain reclassifications have been made to the prior period financial statements to conform to the current period financial statement presentation. U.S. Dollar Coin (“USDC”) that was previously classified as digital assets, net was reclassified to its own caption on the consolidated balance sheets.
***Use of Estimates***
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Management's estimates and assumptions include, but are not limited to, estimating the fair value of consideration of acquisitions, the accounting for business combinations and allocating purchase price, valuation and estimating the useful life of identifiable intangible assets, valuation of goodwill, estimates used for forecast in business combinations, allowance for credit losses, financial instruments recorded at a fair value on a recurring basis, revenue recognition from digital asset mining, collectability of accounts receivable and loans receivable, valuation of convertible note payable, fair value of consideration transferred for equity method investments and joint ventures, fair value of assets and liabilities assumed in acquisitions, valuation of stock-based awards, salvage values and estimated useful lives of property and equipment, valuation of deferred taxes and uncertain tax positions, valuation of common stock and warrant liabilities, and other assumptions used to measure stock-based compensation, calculation of incremental borrowing rate, and estimates for transfers of investments and valuation of assets. Management's estimates and assumptions are derived from and are continually evaluated based upon available information, judgment, and experience.
***Concentration of Credit Risk***
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable.
The Company maintains cash balances in various financial institutions. At times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limit. As of September 30, 2025 and December 31, 2024, interest-bearing accounts and non-interest bearing accounts were insured by the Federal Deposit Insurance Corporation up to $250,000 per financial institution. In lieu of insurance, the financial institution may collateralize the commercial paper with U.S. government securities, in which case they become repurchase agreements. The Company has not experienced any losses in such accounts and monitors the credit worthiness of the financial institutions with which they conduct business. Management believes that the Company is not exposed to significant credit risk with respect to its cash balances.
The Company is exposed to counterparty risk through the deposits it places with suppliers of mining and mining related equipment to secure orders and delivery dates. The risk of a supplier failing to meet its contractual obligations may result in late deliveries or mining prepayments that are not realized. The Company attempts to mitigate this risk by procuring mining hardware from larger, more established suppliers and those whom the Company has existing relationships and knowledge of their reputation in the market.
F-10
During the nine months ended September 30, 2025, the Company had three customers that accounted for approximately 84% of the Company's total revenues. During the nine months ended September 30, 2024, the Company had four customers that accounted for approximately 100% of the Company's total revenues. For each significant customer, revenue as a percentage of total revenue are as follows:
| Customers | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| Customer A | 40% | 9% |
| Customer B | 32% | — |
| Customer C | 12% | 16% |
| Customer D | — | 65% |
| Customer E | — | 10% |
***Cash***
For purposes of the condensed consolidated balance sheets and condensed consolidated statements of cash flows, the Company considers cash in operating bank accounts and cash on hand as cash.
***U.S. Dollar Coin***
U.S. Dollar Coin (“USDC”) is a stablecoin digital asset that is backed by U.S. dollars or other liquid assets and accounted for as a financial instrument. USDC can be redeemed for one U.S. Dollar.
***Digital Assets***
*Crypto Assets*
The Company accounts for crypto assets in accordance with ASU 2023-08, *Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets*, which requires entities to measure certain crypto assets at fair value with changes recognized in the condensed consolidated statement of operations for each reporting period. The Company’s crypto assets, Bitcoin and Ethereum Classic, which have not been determined to be stablecoins or derivatives, are within the scope of ASU 2023-08. The Company has deemed the price of crypto assets to be a Level 1 input under ASC 820 hierarchy as these were based on observable quoted prices in the Company’s principal market for identical assets. The Company’s crypto assets are received in exchange for services transferred to a customer and are converted to cash daily. Cash proceeds from the sale of digital assets are classified within operating activities in the Company’s consolidated statements of cash flows.
The Company acquires crypto assets through its network operations and holds these crypto assets. Each crypto asset acquisition is considered its own “lot” with its own cost basis based on the crypto asset-to-USD conversion price from the Company’s principal market at time of acquisition. Any realized gain/loss on the disposition of crypto assets is calculated on a weighted-average basis.
F-11
*Principal Market and Fair Value Determination*
To determine which market is the Company’s principal market (or in the absence of a principal market, the most advantageous market) for purposes of determining fair value of individual digital assets, the Company follows ASC 820, *Fair Value Measurement,* which outlines the application of fair value accounting. ASC 820 determines fair value to be the price that would be received for digital assets in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820 requires the Company to assume that the digital asset is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.
The Company transacts in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets, each as defined in the FASB Master Glossary (collectively, "Digital Asset Markets"). In determining which of the eligible Digital Asset Markets is the Company’s principal market, the Company reviews these criteria in the following order:
- First, the Company determines which Digital Asset Markets for the relevant digital asset are accessible to the Company.
- Second, the Company sorts the remaining Digital Asset Markets from high to low by market-based volume of the digital asset traded on each Digital Asset Markets in the trailing twelve months.
- Third, the Company then selects a Digital Asset Market as its principal market based on the highest market-based volume in comparison to the other Digital Asset Markets on the list.
The Company determines its principal market (or in the absence of a principal market, the most advantageous market) annually to determine (i) if there have been recent changes to each Digital Asset Market’s trading volume in the trailing twelve months, (ii) if any Digital Asset Markets have developed that the Company has access to, or (iii) if recent changes to each Digital Asset Market’s price stability have occurred that would materially impact the selection of the principal market and necessitate a change in the Company’s determination of its principal market.
The Company’s Bitcoin and Ethereum Classic ("ETC") is recorded at fair value, as determined using the period-end closing price at 16:00:00 UTC of Bitcoin and ETC on the Company’s principal market, New York Digital Investment Group and Coinbase (the “Principal Markets”), and changes in fair value are recognized change in fair value of digital assets on the condensed consolidated Statements of Operations.
***Fair Value Measurements***
Fair value is defined as the price that would be received to sell an asset in the principal or most advantageous market for the asset in an orderly transaction between market participants on the measurement date. Fair value should be based on assumptions market participants would use when pricing an asset. U.S. GAAP provides a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Assets and liabilities that are required to be recorded at fair value on the balance sheet are categorized based on the inputs to valuation techniques as follows:
- Level 1. These are assets and liabilities where values are based on unadjusted quoted prices for identical assets in an active market the Company has the ability to access.
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- Level 2. These are assets and liabilities where values are based on similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active, and model derived prices whose inputs are observable or whose significant value drivers are observable.
- Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The fair values of financial instruments including cash, accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities approximate their respective the carrying values due to the short maturities of those instruments. The fair value of notes payable approximates the carrying value, principally because of the maturity dates and the current terms applicable to the notes payable.
***Financial Instruments*** — ***Credit Losses (ASU 2016-13)***
Under the current expected credit loss ("CECL") impairment model, the Company develops and documents its allowance for credit losses on its accounts receivables based on two portfolio segments: Bitcoin mining trade receivables and Bitcoin mining hosting trade receivables. The determination of portfolio segments is primarily based on customer type, while also taking into account factors that may influence credit risk, such as macroeconomic conditions, industry trends, and the geographic location of customers and mining facilities. The Company develops and documents the allowance for credit losses on its loans receivable based on debtor type, while also taking into account factors that may influence credit risk, such as macroeconomic conditions and liquidity risks.
The Company's quantitative allowance for credit loss estimates under CECL was determined using the loss rate method for trade receivables and the Probability of Default and Loss Given Default Methods ("PD method" and "LGD method") for loans receivables. In addition to the quantitative allowance for credit losses, the Company also incorporates qualitative adjustments that may relate to unique risks, changes in current economic conditions that may not be reflected in quantitatively derived results, or other relevant factors to further inform the Company's estimate of the allowance for credit losses.
***Accounts Receivable, Net***
Accounts receivable are stated at the amount management expects to collect from balances outstanding at year-end. Accounts receivable are due 30 days after issuance of the invoice. Accounts receivable past due more than 90 days are considered delinquent. If amounts become uncollectible, they will be charged to operations when that determination is made. Under ASC 326, the Company determines its allowance by applying a peer-based loss rate method to the Company’s trade receivables.
The following table represents the impact of the CECL allowance on accounts receivable:
| Line item | Balance as of January 1, 2024 | Provision for credit losses | Recoveries collected | Balance as of December 31, 2024 |
| --- | --- | --- | --- | --- |
| Provision for credit losses | $1,903 | $1,714 | — | $3,617 |
| Line item | Balance as of January 1, 2025 | Provision for credit losses | Recoveries collected | Balance at September 30, 2025 |
| --- | --- | --- | --- | --- |
| Provision for credit losses | $3,617 | — | $(3,064) | $553 |
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***Loans Receivable, Net***
Loans receivable, net are loans that are carried at unpaid principal and interest balances, less the allowance for expected credit losses on loans receivable and write-offs, if any. Under ASC 326, the Company determines its allowance by multiplying the probability the asset will default within a given time frame (“PD”) by the percentage of the asset not expected to be collected due to default (“LGD”) and applying to the Company’s loan receivables. The PD/LGD method is based on market data on current and past default credit ratings. The Company also considers reasonable and supportable current information in determining its estimated loss rates, such as external forecasts, macroeconomic trends or other factors including customers’ credit risk and historical loss experience. All past and current debtors are concentrated in the U.S., are in the digital assets industry, and are not known to be in bankruptcy or other serious financial difficulty.
During 2024, the Company advanced a loan receivable in the original amount of $298,062 as a part of the Company's sale of its investment in the FCNC Venture, LLC ("FCNC") joint venture. The loan receivable carries interest of 0.1%, and requires 24 consecutive monthly principal and interest payments of $12,432. The loan was fully paid off in January 2025.
The CECL allowance related to the principal loans receivables outstanding are presented within, “Loans receivable, net - related party” in the Company’s condensed consolidated balance sheets. Account balances are written off after all means of collection are exhausted and the balance is deemed uncollectible. Subsequent recoveries are credited to the allowance. Changes in the allowance are recorded as adjustments to bad debt expense in the period incurred.
The following table represents the activity in of the CECL allowance:
| Line item | Balance as of January 1, 2024 | Provision for credit losses | Recoveries collected | Balance as of December 31, 2024 |
| --- | --- | --- | --- | --- |
| Provision for credit losses | $30,062 | $6,859 | — | $36,921 |
| Line item | Balance as of January 1, 2025 | Provision for credit losses | Recoveries collected | Balance at September 30, 2025 |
| --- | --- | --- | --- | --- |
| Provision for credit losses | $36,921 | — | $(36,921) | — |
***Property and Equipment, Net***
Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for additions, improvements, betterments, if material, and individual purchases are generally capitalized. Minor replacements, maintenance, and repairs that do not improve or extend the lives of the assets are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.
The useful life of the Company’s mining related equipment, consisting of pods and transformers, is five years. Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed.
Management reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of property and equipment may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of property and equipment. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property and equipment is used, and the effects of obsolescence, demand, competition, and other economic factors. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods, generally, Modified Accelerated Cost Recovery System, for income tax purposes. These differences in depreciation methods result in related deferred taxes.
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*Digital Asset Machines*
Management assesses and adjusts the estimated useful lives of its digital asset machines (miners) when there are indicators that productivity of the mining assets are higher or lower than the assigned estimated useful life. The rate at which the Company generates digital assets and, therefore, consumes the economic benefits of its transaction verification servers, is influenced by a number of factors including the following:
- The complexity of the transaction verification process which is driven by the algorithms contained within the Bitcoin open source software;
- The general availability of appropriate computer processing capacity on a global basis (commonly referred to in the industry as hashing capacity which is measured in petahash units); and
- Technological obsolescence reflecting rapid development in the transaction verification server industry such that more recently developed hardware is more economically efficient to run in terms of digital assets generated as a function of operating costs, primarily power costs, i.e., the speed of hardware evolution in the industry is such that later hardware models generally have faster processing capacity combined with lower operating costs and a lower cost of purchase. The Company operates in an emerging industry for which limited data is available to make estimates of the useful economic lives of specialized equipment. To the extent that any of the assumptions underlying management’s estimate of useful life of its transaction verification servers are subject to revision in a future reporting period, either as a result of changes in circumstances or through the availability of greater quantities of data then the estimated useful life could change and have a prospective impact on depreciation expense and the carrying amounts of these assets.
***Equity Method Investments***
The Company holds investments accounted for under the equity method. The Company also uses the equity method to account for investments in joint ventures. Under the equity method, investments are carried at cost and increased or decreased by the Company’s pro rata share of the investee earnings or losses. The carrying cost of this investment is also increased or decreased to reflect additional contributions or distributions of capital. Any difference in book equity and the Company’s pro rata share of the net assets of the investment will be reported as gain or loss at the time of the liquidation of the investment. It is the Company’s policy to record losses in excess of the investment if the Company is committed to provide financial support to the investee.
At acquisition, any excess of the acquisition cost over the total fair value of the net assets acquired constitutes equity method goodwill. Equity method goodwill is included in the balance of equity method investments and is not reported separately as goodwill on the Company’s condensed consolidated balance sheet. Equity method goodwill is not reviewed for impairment; however, the equity method investment is reviewed for impairment.
***Business Combinations***
The Company accounts for business acquisitions using the acquisition method of accounting, in accordance with ASC 805, under which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair value of the consideration paid is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed.
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The Company’s management exercises significant judgments in determining the fair value of assets acquired and liabilities assumed, as well as intangibles and their estimated useful lives. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows and appropriate discount rates used in computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to the fair value of assets and liabilities made after the end of the measurement period are recorded within the Company’s operating results.
***Long-Lived Assets, Including Definite-Lived Intangible Assets***
The Company reviews for the impairment of long-lived assets annually and whenever events and or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Such indicators include, among others, the nature of the asset, the projected future economic benefit of the asset, historical and future cash flows and profitability measurements. Definite-lived intangible assets primarily consist of customer relationships and trade names. An impairment loss would be recognized when the value of the undiscounted estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than the carrying value. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value. There were no impairment losses recognized during the for the nine months ended September 30, 2025 and 2024.
***Goodwill***
Goodwill, which represents the excess of purchase price over the fair value of net assets acquired in business combinations, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. Goodwill represents the excess of the purchase price in a business combination over the fair value of net assets acquired. Goodwill is not amortized but tested annually for impairment or when indicators of impairment are present. The test for goodwill impairment involves a qualitative assessment of impairment indicators. If indicators are present, a quantitative test of impairment is performed. Goodwill impairment, if any, is determined by comparing the reporting unit’s fair value to its carrying value. An impairment loss is recognized in an amount equal to the excess of the reporting unit’s carrying value over its fair value, up to the amount of goodwill allocated to the reporting unit. The Company's policy is to review goodwill for impairment on an annual basis as of the last day of the Company’s fiscal year or more frequently, unless a triggering event requires an analysis sooner. There was no goodwill impairment for the nine months ended September 30, 2025.
***Revenue and Cost Recognition***
*Overview*
The Company generates revenue from the following sources: (1) cryptocurrency mining, (2) mining hosting services and (3) compute power.
In accordance with ASC 606, *Revenue Recognition,* the Company recognizes revenue from contracts with customers using a five-step model, which is described as follows:
- identify the customer contract;
- identify performance obligations that are distinct;
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- determine the transaction price;
- allocate the transaction price to the distinct performance obligations; and
- recognize revenue as the performance obligations are satisfied.
*Revenue from Cryptocurrency Mining*
The Company participates in a third-party operated mining pool. As of April 2025, the pool operator is Luxor. Prior to April 2025, the pool operator was Foundry. As a result of the change in pool operator the Company updated its accounting policy to change the end of its contract period from 16:00:00 UTC to 23:59:59 UTC. As a participant in the third-party operated mining pool, the Company provides a service to provide computing power to the third-party operated mining pool. The Company’s enforceable right to compensation begins when, and lasts as long as, the Company provides computing power to the mining pool operator.
**Step 1**: The Company has identified the third-party mining pool operator as its customer. The Company enters into a contract with the customer to provide its computing power to the customer's mining pool. The contracts are terminable without penalty at any time by either party, and thus the contract term is shorter than a 24-hour period and the contracts are continuously renewed.
Applying the criteria per ASC 606-10-25-1, the contract arises at the point that the Company provides computing power to the customer's mining pool, which is considered contract inception, because customer consumption is in tandem with delivery of the computing power.
**Step 2**: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
- The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
- The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified a single performance obligation of providing computing power to the mining pool operator. The continuous renewal options do not represent material rights because they do not provide the customer with the right to purchase additional goods or services at a discount. Specifically, the contract is renewed at the same terms, conditions, and rate as the current contract which is consistent with market rates, and there are no upfront or incremental fees in the initial contract.
**Step 3**: The Company receives non-cash consideration in the form of bitcoin, fair value of which the Company measures at 23:59:59 UTC and 16:00:00 UTC on the date of contract inception using the Company's principal market for bitcoin, Bitcoin Reference Rate, when the pool operator is Luxor and Foundry, respectively. The contract renews continuously throughout the day, and thus the value of the consideration should be assessed continuously throughout the day, and the Company has concluded to use the 23:59:59 UTC and 16:00:00 UTC bitcoin price each day when the pool operator is Luxor and Foundry, respectively. Revenue is recognized on the same day that control of the services transfers to the customer, which is the same day as contract inception. According to the customer contract, daily settlements are made to the Company by the customer based on the computing power provided over the contract periods occurring over a 24-hour period and the payout is made the following day. There are no other forms of variable considerations, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items.
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The Company earns non-cash consideration based on the Full-Pay-Per-Share (“FPPS”) payout method set forth by the customer in the form of bitcoin. The amount of bitcoin the Company is entitled to for providing hash calculations to the customer's mining pool under the FPPS payout method is made up of block rewards and transaction fees less mining pool fees determined as follows:
- The non-cash consideration calculated as a block reward over the continuously renewed contract periods is based on the total blocks expected to be generated on the Bitcoin Network for the daily 24-hour period beginning 0:00:00 UTC and 16:00:01 UTC and ending 23:59:59 UTC and 16:00:00 UTC when the pool operator is Luxor and Foundry, respectively, in accordance with the following formula: the computing power that the Company provides to the customer as a percent of the Bitcoin Network’s total computing power, multiplied by the total Bitcoin Network block rewards expected to be generated for the same period.
- The non-cash consideration calculated as transaction fees paid by transaction requestors is based on the share of total actual fees paid over the continuously renewed contract periods beginning 0:00:00 UTC and 16:00:01 UTC and ending 23:59:59 UTC and 16:00:00 UTC when the pool operator is Luxor and Foundry, respectively, in accordance with the following formula: total actual transaction fees generated on the Bitcoin Network during the contract period as a percent of total block rewards the Bitcoin Network actually generated during the same period, multiplied by the block rewards the Company earned for the same period noted above.
- The sum of the block reward and transaction fees earned by the Company is reduced by mining pool fees charged by the customer for operating the mining pool based on a rate schedule per the mining pool contract. The fee charged during September 30, 2025 and 2024 end was 2.50% 0.43%, respectively. The mining pool fee is only incurred to the extent the Company provides computing power and generates revenue in accordance with the customer’s payout formula during the continuously renewed contract periods beginning 0:00:00 UTC and 16:00:01 UTC and ending 23:59:59 UTC and 16:00:00 UTC daily, when the pool operator is Luxor and Foundry, respectively.
**Step 4**: There is a single performance obligation (i.e., to provide computing power to the customer) for the contract; therefore, all consideration from the customer is allocated to this single performance obligation.
**Step 5**: The Company’s performance is completed over time as the customer obtains control of the computing power. The performance obligation of computing power is fulfilled over time, as opposed to a point in time, because the Company provides the computing power throughout the contract period and the customer simultaneously obtains control of the service and uses it to produce bitcoin.
There is no deferred revenue or other liability obligations recorded by the Company since there are no payments in advance of the performance, and there are no remaining performance obligations after providing computing power.
*Revenue from Mining Hosting Services*
The Company has also entered into hosting contracts where it operates mining equipment owned by third parties within its facilities in exchange for a fee or reimbursement of electricity cost at a markup.
**Step 1**: The Company has identified the third-party mining equipment owners as its customer. The Company enters into a contract with the customer to host its miners on the Company’s network. The contracts are terminable without penalty at any time if the termination is agreed upon by both parties, and thus the contract term is the stated term.
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**Step 2:** In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
- The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
- The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified one performance obligation of hosting the mining equipment. The service the Company provides also includes monitoring, active troubleshooting, and various maintenance levels for the mining equipment.
**Step 3**: The Company receives non-cash consideration in the form of US Digital Coin (“USDC”). The Company uses a spot rate on of the date of payment from the customer to convert USDC to USD.
The Company’s hosting contracts can contain service level agreement clauses, which guarantee a certain percentage of time the power will be available to its customer. In the rare case that the Company may incur penalties under these clauses, the Company recognizes the payment as variable consideration and a reduction of the transaction price and, therefore, of revenue, when not in exchange for a good or service from the customer.
Customer contracts can include advance payment terms in the form of monthly cash prepayments and/or upfront cash payments at contract inception. Advance payments are recorded as deferred revenue and recognized over time (generally, the month of hosting service to which they relate) as the customer simultaneously receives and consumes the benefits of the Company’s performance. There is no significant financing component in these transactions due to the short-term nature of the payments.
**Step 4**: No allocation of transaction price is required as there is only one performance obligation in each contract.
**Step 5**: The Company recognizes variable hosting revenue each month as the uncertainty related to the consideration is resolved, hosting services are provided to its customer, and its customer utilizes the hosting service (the customer simultaneously receives and consumes the benefits of the Company's performance). The Company's performance obligation related to these services is satisfied over time.
*Revenue from Compute Power*
The Company generates revenue primarily from providing compute power to a marketplace, but in some instances provides power directly to end users. The compute power is maintained by the Company and made available to customers for large-scale cloud processing.
Marketplace provider partners (RunPod Inc., for example) manage orchestration and customer acquisition in exchange for a revenue share. In RunPod’s case, currently 80% of revenue is shared to QumulusAI and 20% to RunPod under RunPod’s standard service terms.
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**Step 1**: In arrangements with a marketplace provider partner, the Company has identified the marketplace as its customer. In arrangements entered into directly with end users, the end user is the customer.
The Company has entered into agreements which are structured around ongoing service delivery, with compute power provided on a usage basis. The contract is enforceable and includes defined terms for service levels, pricing, and revenue sharing. The contract is continuously active and renewed, with no penalties for termination, and services are delivered daily based on actual usage.
Applying the criteria per ASC 606-10-25-1, the contract arises at the point the Company begins providing compute power through its bare metal servers. This marks contract inception, as the customer’s consumption of compute power is simultaneous with the Company’s delivery of the service. The contract supports continuous usage-based billing, and the Company’s enforceable right to compensation begins and continues as long as compute power hours are delivered and consumed by customers.
**Step 2**: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
- The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
- The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified a single performance obligation to provide compute power customers. The continuous renewal options do not represent material rights because they do not provide the customer with the right to purchase additional goods or services at a discount. Specifically, the contract is renewed at the same terms, conditions, and rate as the current contract which is consistent with market rates, and there are no upfront or incremental fees in the initial contract.
**Step 3**: In arrangements with a marketplace provider partner, the transaction price is based on net revenue shared by the marketplace to the Company. In arrangements entered into directly with end users, the transaction price is based on revenue received directly from end users for compute power. There is no non-cash consideration involved, and all payments are made in U.S. dollars. The contract does not include other forms of variable consideration such as rebates, penalties, or bonuses, except for service credits tied to uptime performance, which are treated as variable consideration and reduce the transaction price when applicable.
**Step 4**: There is a single performance obligation (i.e., to provide compute power) for the contract; therefore, all consideration from the customer is allocated to this single performance obligation.
**Step 5**: The Company’s performance is completed over time as compute power is delivered and consumed. The performance obligation of computing power is fulfilled over time, as opposed to a point in time, because the Company provides the compute power throughout the contract period and the customer simultaneously obtains control of the service and integrates it into its platform offerings.
There are no deferred revenues or remaining obligations once compute power is delivered.
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***Income Taxes***
The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and income tax basis of assets and liabilities, and for operating losses and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which those items are expected to be realized. Tax law and rate changes are recorded in the period such changes are enacted. The Company establishes a valuation allowance when it is more likely than not that certain deferred tax assets will not be realized.
The Company recognizes a tax benefit from any uncertain tax positions only if they are more likely than not to be sustained upon examination based on the technical merits of the position. The amount of the accrual for which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.
The “One Big Beautiful Bill Act” (“OBBBA”) was signed into law in the United States on July 4, 2025, which is considered the enactment date under U.S. GAAP. Key tax provisions under OBBBA include the restoration of 100% bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to the interest limitations in Section 163(j) of the U.S. Internal Revenue Code (the “Code”), updates to Global Intangible Low Taxed Income and Foreign-Derived Intangible Income rules, and expanded aggregation requirements under Section 162(m) of the Code.
Under U.S. GAAP, the effect of changes in tax laws are recognized in the period in which the new law is enacted. Accordingly, the impact of OBBBA was reflected in the Company’s financial statements for the third quarter of 2025. The OBBBA did not have a material effect on the Company's financial statements.
***Leases***
The Company accounts for leases in accordance with ASC Topic 842, *Leases* (“ASC 842”). The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating and finance leases are presented as right-of-use (“ROU”) assets and the corresponding lease liabilities are included in operating or finance lease liabilities, current and operating or finance lease liabilities on the Company’s condensed consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset, and lease liabilities represent the Company's obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.
ROU assets and lease liabilities are recognized at commencement date and determined using the present value of the future minimum lease payments over the lease term. For leases in which the rate is not implicit in the lease, the Company uses a discount rate based on a benchmark approach to derive an appropriate incremental borrowing rate to discount remaining lease payments. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived imputed rates for a lease term length of 10 years. Some leases include multiple year renewal options. The Company’s decision to exercise these renewal options is based on an assessment of its current business needs and market factors at the time of the renewal. Currently, the Company has certain leases for which the option to renew is reasonably certain, and therefore, options to renew were factored into the calculation of its right-of-use asset and lease liability as of September 30, 2025. In addition, the Company does not recognize short-term leases that have a term of twelve months or less as ROU assets or lease liabilities for all asset classes. The Company recognizes operating lease expense on a straight-line basis over the lease term.
The Company has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component for all asset classes when the payments are fixed. As such, variable lease payments, including those not dependent on an index or rate, such as real estate taxes, common area maintenance, and other costs that are subject to fluctuation from period to period are not included in lease measurement.
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***Segment Reporting***
In November 2023, the FASB issued ASU No. 2023-07, *Improvements to Reportable Segment Disclosures* (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. See Note 21 - Segment Reporting for additional disclosures
***Net Income (Loss) per Share***
The calculation of earnings per share is based on the weighted average number of common shares or common stock equivalents outstanding during the applicable period. The dilutive effect of common stock equivalents is excluded from basic earnings per share and is included in the calculation of diluted earnings per share, unless their impact is antidilutive. Convertible notes, employee stock options and similar equity instruments granted by the Company are treated as potential ordinary shares outstanding in computing diluted earnings per share. Diluted shares outstanding are calculated using the if converted method for convertible notes and the treasury stock method for other potentially dilutive securities. Under the if converted method, the dilutive impact of securities is calculated as if conversion occurred at the beginning of the reporting period. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized and the amount of benefits that would be recorded in common shares when the award becomes deductible for tax purposes are assumed to be used to repurchase shares.
On September 30, 2025, the Company affected the conversion of all authorized and issued shares of Preferred Stock into Common Stock. The transaction was accounted for as an extinguishment of preferred stock and the difference between the initial carrying amount of the preferred stock extinguished and the fair value of the common stock issued is accounted for as a deemed dividend. The deemed dividend was included within the net loss attributable to common stockholders.
***Loan Origination Costs***
Costs incurred in connection with securing loans payable have been capitalized and are being amortized as a component of interest expense over the term of the respective debt using the effective interest method. The unamortized balance of loan origination costs are reflected on the condensed consolidated balance sheets as a direct deduction of the outstanding balance owed on the long-term debt.
***Stock Issuance Costs***
Stock issuance costs represent incremental costs incurred that are directly attributable to the sale of securities. The costs are charged against the gross proceeds of the respective sale and recorded as a reduction to equity.
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***Distinguishing Liabilities from Equity***
The Company relies on the guidance provided by ASC Topic 480, *Distinguishing Liabilities from Equit*y, and ASC 815-40, *Derivatives and Hedging: Contracts in Entity*’*s Own Equity,* to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.
Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“mezzanine equity”). The Company will determine mezzanine equity classification if the redemption of the financial instrument is outside the control of the Company (i.e., at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.
***Stock-Based Compensation***
The Company measures the cost of employee and non-employee services in exchange for awards of equity instruments based on the grant-date fair value of the award. The fair value is determined using an option pricing model. The cost of awards of equity instruments is recognized on a straight-line basis over the vesting period, which is the requisite service period, and is recorded as stock-based compensation expense together with a corresponding increase in paid-in capital. The Company has elected to account for forfeitures of awards as they occur.
***Variable Interest Entities ("VIEs")***
The Company evaluates its interests in VIEs and will consolidate any VIE in which the Company has a controlling financial interest and are deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (1) the power to direct the activities of the VIE that most significantly impact its economic performance; and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could be significant to the VIE. If both of the characteristics are met, the Company is considered to be the primary beneficiary and therefore will consolidate that VIE into its condensed consolidated financial statements. See Note 9 - Equity Method Investments for additional disclosures.
***Recently Issued Accounting Pronouncements - Adopted***
In August 2023, the FASB issued ASU 2023-05, *Business Combinations - Joint Venture Formations (Topic 805): Recognition and Initial Measurement.* This standard addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statements. The new requirements are effective for all joint ventures within the ASU's scope that are formed on or after January 1, 2025. The Company adopted this standard on January 1, 2025. The adoption of this standard is reflected in the Company's condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, *Improvements to Income Tax Disclosures*, a final standard on improvements to income tax disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard applies to all entities subject to income taxes and is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024. The Company has adopted this standard effective January 1, 2025. The Company is in the process of evaluating the impact of ASU 2023-09 on the Company’s condensed consolidated financial statements which will be reflected in the December 31, 2025 financial statements.
F-23
***Recently Issued Accounting Pronouncements - Not Yet Adopted***
In November 2024, the FASB issued ASU 2024-03, *Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses*. This guidance requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently evaluating the impact of ASU 2024-03 on its condensed consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-04, *Debt - Debt with Conversion and Other Options (Topic 470).* This guidance clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The ASU is effective on a prospective basis, with the option for retrospective application, for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. The Company is currently evaluating the impact of ASU 2024-04 on its condensed consolidated financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, *Financial Instruments*—*Credit Losses (Topic 326).* This guidance contains amendments that provide decision-useful information to investors and other financial statement users while reducing the time and effort necessary to analyze and estimate credit losses for current accounts receivable and current contract assets. The amendments will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the impact of ASU 2025-05 on its condensed consolidated financial statements and related disclosures.
Other recent accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or future condensed consolidated financial statements.
### **Note 3. Business Combination**
On April 1, 2025 (the “Effective Date”), the Company entered into Contribution and Exchange Agreements, as amended (together, the “Acquisition Agreement”), with shareholders of The Cloud Minders, Inc. (“TCM”), pursuant to which each TCM shareholder contributed all outstanding equity securities in TCM to the Company in exchange for equity securities of the Company. As a result, TCM became a wholly owned subsidiary of the Company, with 75% of the Company’s capital stock held by Company shareholders and 25% of the Company’s capital stock held by former TCM shareholders (the “Acquisition”). The Acquisition formally closed on the Effective Date.
F-24
| Line item | Common | Series D |
| --- | --- | --- |
| Total Number of TCM Shares Exchanged | 8,505,783 | 1,577,085 |
| Conversion Ratio | 0.9081 | 0.9081 |
| Fair Value per Share (Controlling Interest) | $2.21 | $2.23 |
| Fair Value | $17,054,874 | $3,195,139 |
| Total Fair Value Shares Exchanged | $20,250,013 | |
| Total Number of TCM Shares Held By the Company | 8,966,981 | |
| Company Fair Value per Share (Non-Controlling) | $1.92 | |
| Fair Value Company's Investment in TCM | $17,216,604 | |
| Fair Value Replacement Options | $1,883,955 | |
| Total Purchase Price | $39,350,572 | |
The following table summarizes the preliminary estimated fair value of the consideration and the preliminary estimated fair value of assets acquired and liabilities assumed associated with the Acquisition:
| Description | Fair Value |
| --- | --- |
| Total purchase price | $39,350,572 |
| Estimated fair value of assets acquired: | |
| Cash | $2,441,275 |
| Prepaid expenses | 96,029 |
| Property and equipment | 7,136,180 |
| Customer relationships | 411,700 |
| Trade name | 148,080 |
| In-process research & development ("IPR&D") | 6,777,020 |
| Finance right-of-use assets, net | 5,820,225 |
| Total assets acquired | $22,830,509 |
| Estimated fair value of liabilities assumed: | |
| Accounts payable | 172,255 |
| Current portion of convertible note payable | 1,716,657 |
| Current portion of notes payable - related party | 104,713 |
| Accrued expenses and other current liabilities | 555,888 |
| Finance lease liabilities | 6,078,929 |
| Long-term notes payable, net of current portion | 6,268,321 |
| Total liabilities assumed | 14,896,763 |
| Goodwill | $31,416,827 |
F-25
| Intangible Assets | Estimated Fair Value | Estimated Useful Life |
| --- | --- | --- |
| Customer relationships | $411,700 | 4 |
| Trade name | 148,080 | 2 |
| IPR&D | 6,777,020 | N/A |
| | $7,336,800 | |
The Company has applied the acquisition method of accounting in accordance with ASC 805 and recognized assets acquired and liabilities assumed of TCM at their fair value as of the date of acquisition, with the excess purchase consideration recorded to goodwill. As the Company finalizes the estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments to the amount of goodwill may be necessary.
The preliminary purchase price allocation has not been finalized as of September 30, 2025 due to the final assessment of the fair values of the intangible assets, fair value estimates of assets acquired and liabilities assumed and is pending the completion of various items, including obtaining further information regarding the identification and valuation of all assets acquired and liabilities assumed. The Company recorded $23,542 of acquisition related costs within general and administrative expenses. Any adjustments to the estimates of purchase price allocation will be made in the periods in which the adjustments are determined, and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the acquisition date. The Company expects to finalize the purchase price allocation within 12 months from the acquisition date.
*Unaudited Pro Forma Financial Information*
The following table represents the revenue, net loss and net loss per share effect of the acquired company, as reported on a pro forma basis as if the acquisition occurred on January 1, 2024. These pro forma results are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the first day of the period presented, nor does the pro forma financial information purport to represent the results of operations for future periods.
| Line item | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| Revenues | $9,398,555 | $7,520,105 |
| Net loss | (14,757,745) | (8,260,789) |
| Net loss attributable to common stockholders | (104,144,692) | (8,260,789) |
| Basic and diluted net loss per share – on a pro forma basis (unaudited) | $(6.00) | $(0.50) |
F-26
### **Note 4. Revenue and Cost Recognition**
The following table provides the Company’s revenue disaggregated by revenue stream:
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| Revenue | | |
| Revenue from cryptocurrency mining | $507,604 | $3,995,442 |
| Revenue from mining hosting services | 4,794,821 | 2,157,843 |
| Revenue from compute power | 2,755,051 | — |
| | $8,057,476 | $6,153,285 |
In accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. Due to the nature of the Company’s contracts, these reporting requirements are not applicable, because the majority of the Company’s remaining contracts meet certain exemptions as defined in ASC 606-10-50-14 through 606-10-50-14A, including (i) performance obligation is part of a contract that has an original expected duration of one year or less and (ii) the right to invoice practical expedient.
### **Note 5. Fair Value of Financial Instruments**
The Company accounts for certain assets and liabilities at fair value and classify these assets and liabilities within the fair value hierarchy (Level 1, Level 2, or Level 3). The Company's other current assets and other current liabilities have fair values that approximate their carrying values.
| Description | Level | September 30, 2025 | December 31, 2024 |
| --- | --- | --- | --- |
| Assets: | | | |
| Digital assets | 1 | $30,186 | $511,376 |
| Liabilities: | | | |
| Warrant liability | 3 | $1,635,091 | $4,815,890 |
The Company accounts for its consideration transferred for the Company’s equity method investments and investment in joint venture at fair value. The consideration transferred includes leased mining equipment, which is fair valued using Level 3 inputs under the fair value hierarchy as there are unobservable and significant inputs that provide asset value.
There were no financial liabilities that were transferred out of a Level 3 category.
F-27
### **Note 6. Property and Equipment, Net**
The major classifications of property and equipment, including their estimated useful lives, are summarized as follows at the balance sheet dates:
| Line item | Estimated Useful Life (years) | September 30, 2025 | December 31, 2024 |
| --- | --- | --- | --- |
| Buildings and improvements | 40 | $1,393,557 | $961,539 |
| Miners | 3 | 9,597,138 | 9,452,284 |
| Mining related equipment | 5 | 2,074,733 | 2,126,123 |
| Transportation equipment | 7 | — | 11,426 |
| Server equipment | 3 | 9,037,186 | — |
| Other equipment and furniture | 7 | 131,764 | 1,402 |
| Property and equipment, gross | | 22,234,378 | 12,552,774 |
| Less: Accumulated depreciation | | (12,274,297) | (9,815,755) |
| | | $9,960,081 | $2,737,019 |
For the nine months ended September 30, 2025 and 2024, depreciation expense relating to property and equipment amounted to $2,466,429 and $5,753,430, respectively.
### **Note 7. Digital Assets, Net**
The following table summarizes units held, cost basis and fair value of crypto assets held as of September 30, 2025:
| Asset | Symbol | Quantity of Digital Assets Held | Price | Cost Basis | Fair Value of Crypto assets |
| --- | --- | --- | --- | --- | --- |
| Bitcoin | BTC | 0.26 | $117,273.33 | $27,634 | $30,186 |
| | | | | $27,634 | $30,186 |
The following table summarizes units held, cost basis and fair value of crypto assets held as of December 31, 2024:
| Asset | Symbol | Quantity of Digital Assets Held | Price | Cost Basis | Fair Value of Crypto assets |
| --- | --- | --- | --- | --- | --- |
| Bitcoin | BTC | 5.39 | $93,970.45 | $298,122 | $506,230 |
| Ethereum Classic | ETC | 187.66 | 27.42 | 9,913 | 5,146 |
| | | | | $308,035 | $511,376 |
Changes in the Company’s digital assets for the nine months ended September 30, 2025 and year ended December 31, 2024, were as follows:
| Line item | September 30, 2025 | December 31, 2024 |
| --- | --- | --- |
| Balance as of January 1 | $511,376 | $109,615 |
| Additions of digital assets | 2,876,300 | 4,561,953 |
| Sales of digital assets | (3,439,409) | (4,348,874) |
| Change in fair value of digital assets | 81,919 | 188,682 |
| Ending balance | $30,186 | $511,376 |
F-28
### **Note 8. Intangible Assets, Net**
As of September 30, 2025, intangible assets were comprised of the following:
| Line item | Estimated Useful Life (Years) | Gross Carrying Amount at September 30, 2025 | Accumulated Amortization | Net Book Value at September 30, 2025 |
| --- | --- | --- | --- | --- |
| Customer relationships | 4 | $411,700 | $51,462 | $360,238 |
| Trade name | 2 | 148,080 | 37,020 | 111,060 |
| IPR&D | N/A | 6,777,020 | — | 6,777,020 |
| Capitalized Software | N/A | 7,200 | — | 7,200 |
| | | $7,344,000 | $88,482 | $7,255,518 |
IPR&D and capitalized software are not amortized until the assets are substantially complete and ready for their intended use.
Amortization expense for the nine months ended September 30, 2025 and 2024 was $88,482 and $—, respectively.
As of December 31, 2024, the Company had no intangible assets.
The estimated future amortization expense for the next five years and thereafter is as follows:
| Line item | Future Amortization Expense |
| --- | --- |
| 2025 (Remaining) | $44,242 |
| 2026 | 176,965 |
| 2027 | 121,435 |
| 2028 | 102,925 |
| 2029 | 25,731 |
| Total | $471,298 |
The weighted average remaining amortization period for the Company’s intangible assets as of September 30, 2025 was 3.03 years.
### **Note 9. Equity Method Investments**
*T20 Mining Group, LLC*
In March 2023, the Company entered into a Limited Liability Company Interest Purchase Agreement with Turn Key Mountain, LLC and 913 Hero, LLC ("T20 Purchase Agreement") to acquire a 50.01% ownership interest in T20 Mining Group, LLC (“T20”). Under the terms of the T20 Purchase Agreement, the Company leases certain equipment to T20 and promised to contribute $450,090 to T20 for the development of its digital asset mining operations. The Company determined that T20 is a VIE as the Company has a variable interest in T20 and T20 relies on funding from the Company, Turn Key Mountain, LLC, and 913 Hero, LLC to sustain its operations. The Company has determined that it is not the primary beneficiary of T20 as power to direct or control its significant activities related to the bitcoin mining hosting is shared with Turn Key Mountain, LLC and 913 Hero, LLC. Accordingly, the Company has not consolidated T20’s results of operations and financial position. As the entity is not consolidated, it is accounted for as an equity method investment. The initial investment in T20 amounted to $1,677,197. The Company is entitled to 50.01% of the profits and losses of T20.
F-29
In April 2024, the Company entered into a subsequent Limited Liability Company Interest Purchase Agreement with Bishops Bowl Capital, LLC ("Bishops Bowl Purchase Agreement"), whereby the Company sold 10.01% of its ownership interest in T20 to Bishops Bowl for consideration of $1,000,000. As the Company retained significant influence in T20 following its execution of the Bishops Bowl Purchase Agreement, the Company reduced the carrying amount of its equity method investment for the proportion sold in the amount of $164,954 and also recognized a gain of $835,046 related to the difference between the proceeds received and the carrying amount of the equity method investment sold. The Company will continue to account for its retained ownership interest of 40% under the equity method. During the second half of the year ended December 31, 2024, the Company and Bishops Bowl contributed equipment to T20 for the expansion of its digital asset mining operations. The Company increased the carrying amount of its equity method investment for the fair value of the assets contributed in the amount of $926,240 and also recognized a loss of $2,094,030 on the contribution of the assets. In February 2025, the Company contributed additional assets in the amount of $115,210. The additional contributions were made such that each partner’s ownership percentages remained the same, with the Company and Bishops Bowl continuing to own 40% and 60%, respectively, of T20. The Company will continue to account for its retained ownership interest of 40% under the equity method.
During the nine months ended September 30, 2025 and 2024, the Company received distributions of $2,422,000 and $865,000 from T20, respectively. During the nine months ended September 30, 2025 and 2024, the Company's share of net income in T20 amounted to $1,606,080 and $827,718, respectively, which is included within income from equity method investments in the Company's condensed consolidated statements of operations. As of September 30, 2025 and December 31, 2024, the Company’s investment in T20 amounted to $4,727,694 and $5,428,404, respectively, and is included in the balance of equity method investments in the accompanying condensed consolidated balance sheets.
Summarized financial information for T20 as of and for the nine months ended September 30, 2025 and year ended December 31, 2024 is as follows:
| Line item | September 30, 2025 | December 31, 2024 |
| --- | --- | --- |
| Total assets | $12,387,564 | $5,620,420 |
| Total liabilities | $2,567,980 | $1,888,902 |
For the nine months ended September 30, 2025 and 2024, T20 had net income of $3,002,750 and $1,866,577, respectively.
*The Cloud Minders LLC*
On November 1, 2023, the Company acquired an interest in TCM, a partnership that is involved in graphics processing unit cloud hosting services. The Company is initially entitled to 43% of the profit and losses from the investee. The acquisition cost totaled $4,300,000 and consisted of the issuance of the Company's common stock via a convertible note payable with TCM for $3,300,000 (see Note 15 - Convertible Note Payable) and a payable to TCM totaling $1,000,000 to be repaid over 12 months at no interest. Payments commence on January 1, 2024, and continue on the first of each subsequent month, in exchange for an additional 19,608 (approximately 6%) membership interest to the Company over the twelve months. TCM specializes in high-performance computing and artificial intelligence infrastructure within the cloud computing industry and offers graphics processing unit server hosting, equipped with the latest hardware for deep learning, data science, graphics rendering, and scientific research applications. Its services include configuration, reliability assurance, testing and validation, security measures, installation, and hardware rental for monetization. Accordingly, the Company has not consolidated TCM’s results of operations and financial position. As the entity is not consolidated as of December 31, 2024, but the Company has significant influence over the investee, it is accounted for as an equity method investment.
F-30
During the nine months ended September 30, 2024, the Company’s share of net loss in TCM amounted to $1,138,320, which is included within income from equity method investments in the Company’s condensed consolidated statements of operations. As of December 31, 2024, the Company’s investment in TCM amounted to $3,229,211 and is included in the balance of equity method investments in the accompanying condensed consolidated balance sheets. On April 1, 2025, the Company acquired 100% of TCM. Therefore, as of April 1, 2025, the Company does not account for TCM as an equity method investment as the entity is consolidated. See Note 3 - Business Combinations for additional details on the acquisition. From January 1, 2025 to the acquisition on April 1, 2025 the Company's share of net loss in TCM was $562,143. On April 1, 2025, the Company marked the value of its investment in TCM to its fair value of $17,216,604 immediately prior to the acquisition and recognized a gain of $14,549,536.
Summarized financial information for TCM as of and for the year ended December 31, 2024 is as follows:
_December 31, 2024_
| | |
| --- | --- |
| Total assets | $14,479,018 |
| Total liabilities | $11,679,962 |
From January 1, 2025 to the acquisition on April 1, 2025, TCM had a net loss of $1,307,308. For the nine months ended September 30, 2024, TCM had a net loss of $2,647,256.
*FCNC Venture, LLC*
In January 2023, the Company entered into a joint venture agreement with Blokbuster, LLC (“Blokbuster”) to form FCNC. The Company has determined that it does not control the joint venture, as the Company’s ownership is less than 50% and all major decisions of the joint venture require unanimous consent with Blokbuster. Accordingly, the Company has not consolidated the entity’s results of operations and financial position. As the entity is not consolidated, it is accounted for as an equity method investment. The initial investment in FCNC amounts to $531,395, which was composed of $500,000 in cash and a promissory note for $31,395. The Company is entitled to 33% of the profit and losses and distributions of the entity. During the nine months ended September 30, 2024, the Company’s share of net income in the joint venture amounted to $4,874, which is included within income from equity method investments in the Company’s condensed consolidated statements of operations.
During the second half of 2024, the Company sold its equity interest in FCNC. As of December 31, 2024, the balance of the Company’s investment in the joint venture was $—.
### **Note 10. Deposits on Power Equipment**
The Company makes deposits that represent prepayments made to premier suppliers and manufacturers to purchase compute power and related equipment at a preset price. The prepayments are applied to the purchase price when the vendor ships the equipment. As of September 30, 2025 and December 31, 2024, the Company had outstanding deposits for power equipment totaling $3,193,255 and $1,326,801, respectively.
F-31
### **Note 11. Transactions with Related Parties**
As of and for the nine months ended September 30, 2025 and 2024, the Company had the following related party transactions:
- As of September 30, 2025 and December 31, 2024, the Company had an outstanding loan payable due to a related affiliate of one of the stockholders in the amounts of $2,316,680 and $2,967,109, respectively.
- As of September 30, 2025 and December 31, 2024, the Company had an outstanding loan payable due to one of the stockholders in the amount of $2,000,000 and $2,000,000, respectively.
- As of September 30, 2025 and December 31, 2024, the Company had an outstanding loan payable due to various stockholders in the amount of $— and $20,000, respectively.
- As of September 30, 2025 and December 31, 2024, the Company had an outstanding loan payable due to one of the stockholders in the amount of $59,476 and $—, respectively.
- As of September 30, 2025 and December 31, 2024, the Company had an outstanding line of credit due to a related affiliate in the amount of $— and $292,659, respectively.
- As of September 30, 2025 and December 31, 2024, the Company had an outstanding loan payable due to an advance to the buyer of its investment in joint venture, FCNC, in the amount of the outstanding balance of the loan receivable amounted to $— and $232,452, respectively.
- As referenced on Note 9 - Equity Method Investments, the Company owed $1,000,000 to TCM as a result of the cost to acquire an interest in TCM. As of September 30, 2025 and December 31, 2024, the balance outstanding on this payable was $— and $900,000, respectively.
- During the nine months ended September 30, 2024, the Company recognized bitcoin mining operating expenses in the amounts of $259,656 and $963,833 from FCNC and T20, respectively. As of December 31, 2024, amounts payable to these entities totaled $68,008 and are included in accounts payable on the Company’s condensed consolidated balance sheets.
- During the nine months ended September 30, 2025, the Company recognized bitcoin mining operating expenses in the amounts of $— and $531,438 from FCNC and T20, respectively. As of September 30, 2025, amounts payable to these entities totaled $49,565 and are included in accounts payable on the Company’s condensed consolidated balance sheets.
- During the nine months ended September 30, 2025 and 2024, the Company recognized equipment rental income totaling $— and $23,705 from FCNC and T20, respectively. At September 30, 2025 and December 31, 2024, amounts receivable from these entities totaled $23,924 and $28,597 and are included in accounts receivable on the Company’s condensed consolidated balance sheets.
- As referenced in Note 9 – Equity Method Investments, during 2023, the Company acquired an interest in TCM. As part of the acquisition consideration, the Company issued a convertible promissory note (the “Note”) to TCM, in the principal amount of $3,900,000. Refer to Note 15 - Convertible Note Payable for further information regarding the Company’s accounting for the Note at issuance and as of September 30, 2025. As of September 30, 2025 and December 31, 2024, the balance outstanding on this loan was $— and $2,314,089, respectively.
- The Company is party to finance lease agreements with four entities in which a stockholder holds a capital interest. Additional details related to these lease agreements are provided in Note 23 - Leases.
F-32
### **Note 12. Line of Credit**
During September 2023, the Company secured a line of credit with Trailhead Growth, LP with a maximum principal amount of $300,000 at an interest rate of 12%. The line of credit was collateralized by a blanket lien on certain assets and was guaranteed by certain of the Company's stockholders. The line of credit had a maturity date of October 1, 2024.
During April 2024, the Company amended its line of credit agreement with Trailhead Growth, LP with a maximum principal amount of $700,000 at an interest rate of 6%. The line of credit has a maturity date of 360 days following the first principal advance under the line of credit.
During May 2024, the Company made its first advance on the line of credit in the amount of $648,262, in which $6,418 of this amount is related to line of credit origination fees as a result of the advance. The line of credit had a maturity date of May 15, 2025. The line of credit was repaid in full on March 31, 2025. At September 30, 2025 and December 31, 2024, the Company had an outstanding balance of $— and $292,659, respectively. Interest expense for the nine months ended September 30, 2025 and 2024 related to the line of credit was $9,955 and $9,040, respectively.
### **Note 13. Accrued Expenses**
Accrued expenses were comprised of the following:
| Line item | September 30, 2025 | December 31, 2024 |
| --- | --- | --- |
| Accrued interest | $662,179 | $647,162 |
| Sales tax payable | 502,063 | 484,869 |
| Accrued hosting fees | 583,116 | 810,818 |
| Accrued payroll | 133,335 | 139,295 |
| Accrued bonus | 76,333 | — |
| Other accrued expenses | 837,217 | 231,945 |
| Accrued expenses | $2,794,243 | $2,314,089 |
### **Note 14. Notes Payable**
On March 19, 2021, the Company entered into a $2,000,000 convertible balloon note with Trailhead Income, LP. The note bears interest at 12% and matures on September 1, 2025. The note is secured by certain mining equipment. Interest-only payments are due on a quarterly basis through the maturity date. As of September 30, 2025 and December 31, 2024, the outstanding principal balance on the note was $2,000,000.
On April 14, 2022, the Company entered into a $5,000,000 balloon note with Alder Mortgage Group. The note bears interest at 12% and had an initial maturity date of May 1, 2023. The maturity date was extended to December 31, 2025. The note is secured by certain mining equipment. Interest-only payments are due on a monthly basis through the maturity date. On October 18, 2022, the Company made a principal payment of $450,000 and the note maturity date was extended to December 31, 2025. As of September 30, 2025 and December 31, 2024, the outstanding principal balance was $466,791 and $1,117,221, respectively.
F-33
On May 10, 2024, the Company entered into a $385,000 note with various lenders. The loan bears interest of 12% and matures on December 1, 2025. The note was repaid in full during the year ended December 31, 2024.
On February 15, 2022, the Company entered into a $1,849,888 balloon note with GC Opportunities 2 Private Fund. The note bears interest at 12% and matures on February 15, 2026. The note is secured by certain mining equipment. The note was amended on October 4, 2022 to provide a onetime waiver of payment default for unpaid monthly interest due for July 15, 2022, August 15, 2022 and September 2022, and to defer interest due for six months from July 2022 to December 2022, until maturity. As of September 30, 2025 and December 31, 2024, the outstanding principal balance was $1,849,888.
On September 15, 2022, the Company entered into a note payable with Technogistics. The note bears interest at 12% and matures on May 15, 2024. The note is secured by certain mining equipment. During the year ended December 31, 2024, the remaining principal balance of $700,000 was converted to equity.
On April 11, 2022, the Company entered into two notes with Caterpillar Financial Services Corporation for an aggregate of $228,314. The notes bear interest at 1.49% and mature on April 11, 2027. The notes are secured by track loaders. Payments of principal and interest are due on a monthly basis through maturity. As of September 30, 2025 and December 31, 2024, the outstanding principal balance was $74,135 and $108,638, respectively.
On December 31, 2021, the Company entered into a $344,000 note with Gratus Holdings. The note bears interest at 8% and had an original maturity date of December 31, 2022. The Company repaid the loan in full during September 2025. As of September 30, 2025 and December 31, 2024, the outstanding principal balance was $—.
On April 1, 2025, the Company acquired a loan from TCM as part of the acquisition. In January 2025 TCM, prior to termination of its largest finance lease, purchased the equipment leased under the agreement for a purchase price of $6,454,466. The Company financed the equipment purchase with a loan payable to a commercial bank in the amount of $6,450,000 at prime, subject to a 5% floor. The loan calls for principal and interest payments totaling $129,552 beginning in March 2025, and matures in January, 2030. As of September 30, 2025, the outstanding principal balance was $5,722,825.
On April 1, 2025, the Company acquired a loan from TCM as part of the acquisition. During 2024, TCM entered into a loan with a principal balance of $104,713. The loan bear interest at 0% and has a maturity date of March 16, 2026. As of September 30, 2025, the outstanding principal balance was $59,476.
F-34
Notes payable at September 30, 2025 and December 31, 2024 consisted of the following:
| Line item | September 30, 2025 | December 31, 2024 |
| --- | --- | --- |
| Note payable with interest at current prime rate, subject to 5% floor, maturing January 2030 | $5,722,825 | — |
| Balloon notes payable with monthly interest payments of 12%, secured by certain specified mining equipment, maturities ranging from 2023 to 2026 - related party | 4,316,679 | 4,967,109 |
| Note payable on demand with monthly interest at 8%, unsecured - related party | — | 20,000 |
| Notes payable with interest ranging from 0% to 1.49%, monthly payments of principal and interest, secured by track loaders, maturing 2027 | 74,135 | 108,638 |
| Note payable with 0% interest, maturing March 2026 - related party | 59,476 | — |
| Unamortized loan origination costs | (3,236) | (26,748) |
| | 10,169,879 | 5,068,999 |
| Less: Current maturities | (5,556,495) | (1,158,009) |
| Notes payable, net of current maturities | $4,613,384 | $3,910,990 |
Maturities of notes payable are as follows:
| Remainder of 2025 | 2,789,460 |
| --- | --- |
| 2026 | 3,103,218 |
| 2027 | 1,290,885 |
| 2028 | 1,373,987 |
| 2029 | 1,482,796 |
| Thereafter | 132,769 |
| Total | $10,173,115 |
### **Note 15. Convertible Note Payable**
On November 1, 2023, the Company entered into a Convertible Promissory Note Agreement (the "Note") with TCM at a face value of $3,900,000. Upon issuance, the Note was entered into at a discount of $600,000 and a fair value of $3,300,000. The Note bears interest at a rate of 0.1% per annum and matures on November 1, 2025. No scheduled payments are due under the Note, and the Note permits early partial or full prepayment under the Note at any time without any prepayment penalty.
Upon the occurrence of an event or events of default under the Note, including bankruptcy, an uncured material breach of the Note Agreement, or a board adopted resolution for liquidation, dissolution or winding-up of the Company, all accrued expenses, accrued interest, and all principal outstanding under the Note shall become immediately due and payable in full.
The Note provides for automatic conversion of the amount of any unpaid principal balance of the Note upon maturity into that number of shares of common stock by dividing such remaining principal balance by the conversion price of $1.00 per share. At maturity, all interest accrued and owing with respect to the remaining principal balance shall be forgiven by TCM.
F-35
The Company evaluated the embedded call and put features in accordance with ASC 815-15-25. The embedded puts are clearly and closely related to the debt host instrument and therefore are not required to be bifurcated and separately measured at fair value. The Company additionally determined that the embedded conversion feature did not meet the definition of a derivative under ASC 815 and therefore did not require bifurcation from the host debt instrument.
The Note was initially recorded at fair value, as it was issued as consideration in the acquisition of an equity method investment in TCM (see Note 9 for information regarding the Company’s equity method investment). The Company reflected a discount of $600,000 on the Note at issuance to recognize at fair value at issuance. Subsequently, the Company amortizes the Note discount to interest expense over the period from issuance through the maturity date, at an effective interest rate of 8.5%. For the nine months ended September 30, 2025 and 2024, the Company recognized $135,334 and $218,701 as interest expense, respectively.
For the nine months ended September 30, 2025 and 2024, the Company recorded accrued interest of $612 and $612, respectively.
Immediately prior to the acquisition of TCM, the Company repaid the principal balance of the Note and accrued interest in full on March 31, 2025. Upon the repayment of the note, the Company recognized a loss on extinguishment of $153,834 in the condensed consolidated statements of operations.
As part of its acquisition of TCM, the Company assumed convertible promissory notes to various investors with an aggregate principal amount of $3,000,000. The convertible notes were issued between May 10, 2024 and June 11, 2024, bear interest at 35% per annum, compounded annually, and mature on December 1, 2025, unless earlier converted or repaid.
The notes contain embedded and redemption features subject to bifurcation and separate accounting as derivative liabilities under FASB ASC 815, Derivatives and Hedging. In accordance with ASC 815, the Company evaluated the terms of the notes and determined that the financial impact derived from the embedded and redemption features was immaterial to the Company’s financial position and results of operations. As such, no separate liability resulting from bifurcation has been recorded.
On July 1, 2024, $1,283,343 of principal balance was converted to TCM preferred stock at a conversion price of $1.00 per share. In May and September 2025, the Company settled $566,657 in principal through the issuance of 514,592 shares of the Company’s Series D Preferred Stock. The fair value of the Series D Preferred Stock was $1,711,837 and recognized a loss on extinguishment of $883,667. On September 5, 2025, the Company paid off $1,150,000 in principal and $519,055 in accrued interest. As of September 30, 2025, the aggregate outstanding balance of the convertible promissory notes amounted to $— with related accrued interest payable of $—.
The carrying amount of the convertible notes as of September 30, 2025 and December 31, 2024 is summarized as follows:
| Line item | September 30, 2025 | December 31, 2024 |
| --- | --- | --- |
| Outstanding principal | — | $3,226,548 |
| Unamortized amount | — | (218,074) |
| Net carrying value | — | $3,008,474 |
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### **Note 16. Income Taxes**
The following table summarizes the Company’s effective tax rate for the periods indicated:
| Line item | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| Reported income tax expense rate | 25.5% | — |
The change in the effective tax rates for the nine months ended September 30, 2025 as compared to the same period in the prior year is caused by recording a deferred tax liability for identified intangibles acquired in the TCM acquisition (See Note 3 - Business Combination). This identified an intangible deferred tax liability that will not be fully offset by the Company’s existing deferred tax assets. Accordingly, a partial valuation allowance was recorded as part of the opening balance sheet for the acquisition. The Company will continue to assess its position in future periods to determine the appropriate amount of valuation allowance.
### **Note 17. Stockholders' Equity (Deficit)**
*Preferred Stock*
On September 30, 2025, the Company affected the conversion of all authorized and issued shares of Preferred Stock into Common Stock, as agreed to by all holders of Preferred Stock. Accordingly, there are no shares of Preferred Stock authorized or outstanding as of September 30, 2025. As a result, there is no liquidation preference as of September 30, 2025. The transaction was accounted for as an extinguishment of preferred stock. The difference of $89,386,947 between the initial carrying amount of the preferred stock extinguished and the fair value of the common stock issued is accounted for as a deemed dividend in accordance with ASC 260-10-S99-2.
Prior to September 30, 2025, the Company has designated a portion of the authorized shares of preferred stock as Series A, Series B, Series C and Series D Preferred stock, and the issuance of total designated shares cannot exceed the aggregate number of preferred stock shares authorized for issuance. As of December 31, 2024, the authorized number of shares of Series A, Series B, Series C, and Series D Preferred stock were 5,453,876, 5,856,097, 3,690,027 and 10,000,000. In connection with the acquisition of TCM, the Company issued 1,432,182 Series D Preferred Stock on April 1, 2025.
All shares of Series A, Series B, Series C and Series D Preferred stock will, with respect to dividend rights, redemption rights and rights upon the liquidation, dissolution or winding-up of this corporation, rank on parity with all other series of Preferred Stock and senior to common stock. Each holder of Series A, Series B, Series C, and Series D Preferred stock shall be entitled to one vote for each share of stock held. Except as required by applicable law, the holders of Series A, Series B, Series C, and Series D Preferred stock and the holders of all other series of preferred stock and of common stock shall vote together as a single voting group on all matters submitted to a vote by the Company. Each share of Preferred Stock held by a particular holder shall automatically, without any further action, convert into one (1) fully paid and nonassessable share of common stock upon a transfer of such share or upon the preferred capital account of such holder of such Preferred Stock being paid in its entirety.
F-37
One holder of 729,448 shares of Series A Preferred stock and 634,132 shares of Series B Preferred stock held a non-contingent redemption right, therefore these shares are classified within mezzanine equity on the balance sheet as of December 31, 2024. The remaining shares of Series A and B Preferred stock did not contain this redemption right and are classified in permanent equity.
Below is a summary of activity of Preferred Stock historically classified within mezzanine equity:
| Line item | Series A Preferred Stock / Shares | Series A Preferred Stock / Amount | Series B Preferred Stock / Shares | Series B Preferred Stock / Amount |
| --- | --- | --- | --- | --- |
| Balance at January 1, 2024 | 729,448 | $811,049 | 634,132 | $1,221,512 |
| Balance at December 31, 2024 | 729,448 | $811,049 | 634,132 | $1,221,512 |
| Balance at September 30, 2025 | — | — | — | — |
*Common Stock*
The Company is authorized to issue up to 500,000,000 shares of common stock, without any par value per share.
Each holder of common stock is entitled to one vote for each share held of record on all matters to be voted on by such holders. Holders of common stock are entitled to receive dividends, if declared. Upon liquidation, dissolution or winding-up, holders of common stock are entitled to share ratably in the net assets legally available for distribution after payment of all debts and other liabilities. During the nine months ended September 30, 2025, the Company paid $36,759 to holders of common stock related to dividends declared during 2021 which had been recorded on the consolidated balance sheet as dividends payable.
### **Note 18. Warrants**
*Type 1 Warrants*
The warrants were issued during the year ended December 31, 2022 in conjunction with Series A Preferred Stock in satisfaction of outstanding debt. The warrants were not considered indexed to the issuer’s stock pursuant to ASC 815, as the warrants are subject to vesting upon the thirty-six (36) mensiversaries of the issuance date, at a rate of one thirty-sixth (1/36th) per month. At the option of the Company, the Company can return to the holder any cash it previously received from the holder. Upon the occurrence of such return of capital, the vesting schedule recasts based on amount return and remaining time period to vest. As this contingency is based on the underlying capital account of the warrant holder it violates the fixed-for-fixed option pricing model. As such, the Company recorded the Warrants as liabilities initially measured at fair value with subsequent changes in fair value recognized in earnings each reporting period. 961,256 of the warrants are pre-funded warrants.
The Type 1 warrants are "penny warrants", meaning they have an exercise price of $0.01 ($0.03 after the Reverse Stock Split). The fair value of these penny warrants was calculated as the Company's stock price less the exercise price of $0.01 ($0.03 after the Reverse Stock Split) (i.e., intrinsic value). The grant date fair value of the Type 1 Warrants were $692,103. The fair value of the warrants as of September 30, 2025 and December 31, 2024 was $1,635,091 and $4,815,890, respectively.
F-38
*Type 2 Warrants*
Various individuals performed professional services for the Company during the nine months ended September 30, 2025 and 2024 and were issued warrants as payment for the services. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance. The grant date fair value of these Warrants issued during the nine months ended September 30, 2025 and 2024 was estimated to be $69,663 and $40,500, respectively, upon issuance. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. As the Warrants vest immediately, the fair value of these warrants was recognized in operating expenses in the Company's consolidated statements of operations during the nine months ended September 30, 2025 and 2024.
*Type 3 Warrants*
The warrants were issued in conjunction with the private placement of Series D Preferred Stock and common stock. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price, exercise price, term, volatility, risk-free rate, and expected dividend rate).
In connection with issuances of common stock during the nine months ended September 30, 2025 and preferred stock during the nine months ended September 30, 2024, the Company issued warrants for common stock of the Company to placement agents, debt holders and Series D Preferred stock holders. The warrants entitle holders to purchase 50,000 shares of common stock at a purchase price of $9.00 per share and 20,000 shares of common stock at a purchase price of $3.00 per share. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. The warrants were reflected as a reduction to additional paid-in capital as of the issuance date based on relative fair value, with $135,482 and $37,581 recognized during the nine months ended September 30, 2025 and 2024, respectively.
*Type 4 Warrants*
The warrants were issued in conjunction with the modification of certain loans. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price, exercise price, term, volatility, risk-free rate, and expected dividend rate).
In connection with modifications of certain loans during the nine months ended September 30, 2024, the Company issued warrants for common stock of the Company to debt holders. The warrants entitle holders to purchase 76,718 shares of common stock at a purchase price of $3.00 per share. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. The fair value of the warrants of $154,687 has been recognized as a loss on extinguishment in the Company's condensed consolidated statements of operations during the nine months ended September 30, 2024.
*Type 5 Warrants*
The warrants were issued in conjunction with certain investors' investment in TCM. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price, exercise price, term, volatility, risk-free rate, and expected dividend rate).
F-39
In connection with certain investors' investments in TCM during the nine months ended September 30, 2024, the Company issued warrants exercisable into common stock of the Company. The warrants entitle holders to purchase 55,500 shares of common stock at a purchase price of $3.00 per share. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. The grant of these warrants did not result in an increase of the Company’s ownership in TCM. As the Company is paying a cost on behalf of TCM, the fair value of the warrants of $111,664 has been recognized in general and administrative expense in the Company's condensed consolidated statements of operations during the nine months ended September 30, 2024.
*Type 6 Warrants*
The warrants were issued in connection with the purchase of mining equipment. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price, exercise price, term, volatility, risk-free rate, and expected dividend rate).
In connection with the purchase of mining equipment, the Company issued the seller warrants exercisable into common stock of the Company. The warrants entitle holders to purchase 13,334 shares of common stock at a purchase price of $10.80 per share. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. The fair value of the warrants of $104,854 has been recognized in property and equipment, net in the Company's condensed consolidated balance sheet as of September 30, 2025.
*Type 7 Warrants*
The warrants were issued in connection with the settlement of lease liabilities. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price, exercise price, term, volatility, risk-free rate, and expected dividend rate).
In connection with the settlement of certain finance lease liabilities, the Company issued warrants exercisable into common stock of the Company. The warrants entitle holders to purchase 85,941 shares of common stock at a purchase prices ranging from $3.00 to $10.80 per share. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. The fair value of the warrants of $387,621 has been recognized in loss on settlement of lease liability in the Company's condensed consolidated statements of operations during the nine months ended September 30, 2025.
F-40
The summary of stock warrant activity is as follows:
| Line item | Number of Warrants | Weighted Average Exercise price ($) | Weighted Average Grant-Date Fair Value ($) | Weighted Average Remaining Contractual Life (in Years) |
| --- | --- | --- | --- | --- |
| Warrants outstanding as of January 1, 2024 | 1,004,964 | 0.12 | 1.59 | 2.26 |
| Granted | 434,998 | 3.00 | 2.01 | |
| Warrants outstanding as of December 31, 2024 | 1,439,962 | 1.02 | 1.72 | 2.31 |
| Granted | 95,270 | 8.80 | 7.67 | |
| Exercised | (843,373) | 0.22 | 1.74 | |
| Warrants outstanding as of September 30, 2025 | 691,859 | 3.20 | 2.73 | 3.29 |
| Warrants exercisable as of September 30, 2025 | 684,757 | 3.27 | 2.76 | 3.34 |
The total fair value of warrants granted during the nine months ended September 30, 2025 and 2024 amounted to $697,620 and $361,833, respectively. The Black-Scholes model utilized the following inputs to value the warrants granted:
| Line item | September 30, 2025 | September 30, 2024 |
| --- | --- | --- |
| Warrant Valuation Assumptions: | | |
| Risk-free interest rate | - | - |
| Expected term (years) | - | - |
| Expected volatility | - | - |
| Expected dividend yield | —% | —% |
### **Note 19. Stock-Based Compensation**
WAHA and SPRE sponsor stock-based compensation plans known as the 2021 Option Plan and 2022 Plan, respectively (the “Plans”). The number of shares of common stock authorized for issuance under the Plans, prior to the merger into the Company, was 74,000. Pursuant to the contribution and exchange agreement with the Company, the total number of shares of common stock authorized for issuance are 1,461,307 shares.
The Plans allow the Company to grant incentive stock options and non-qualified stock options. The persons eligible to receive awards are the employees, consultants and directors of the Company and its affiliates. Other than incentive stock options that are granted to a stockholder who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or affiliates (a “Ten Percent Stockholder”), stock options are exercisable for up to ten years from the grant date, at an option price per share not less than the fair market value on the date the option is granted. A Ten Percent Stockholder shall not be granted an incentive stock option unless the option exercise price is at least 110% of the fair market value of the common stock at the grant date and the option is not exercisable after the expiration of five years from the grant date. Incentive stock options may be granted to employees of the Company or any subsidiary corporation. Awards other than incentive stock options may be granted to employees, consultants and directors. The option vesting schedule for options granted is determined at the time of the grant. The Plans provide for accelerated vesting of unvested options in the event of a change in control.
F-41
Pursuant to the contribution and exchange agreement, the number of options outstanding as of the date of the agreement were converted in accordance with the Company's conversion ratio. The following is a summary of stock option activity during the nine months ended September 30, 2025 and 2024, effective for the conversion:
| Line item | Number of Options | Weighted Average Exercise price ($) | Weighted Average Grant- Date Fair Value ($) | Weighted Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value |
| --- | --- | --- | --- | --- | --- |
| Options outstanding as of January 1, 2024 | 342,839 | 2.49 | 2.01 | 9.2 | $238,210 |
| Granted | 245,332 | 1.50 | 2.08 | | |
| Options outstanding as of December 31, 2024 | 588,171 | 1.92 | 2.04 | 8.8 | $1,976,425 |
| Granted | 693,692 | 1.79 | 1.71 | | |
| Exercised | (52,951) | (1.93) | (1.60) | | |
| Canceled | (45,404) | (0.69) | (1.69) | | |
| Options outstanding as of September 30, 2025 | 1,183,508 | 1.92 | 1.25 | 8.9 | $11,998,903 |
| Options exercisable as of September 30, 2025 | 1,045,593 | 1.69 | 0.80 | 6.4 | |
For the nine months ended September 30, 2025 and 2024, the total fair value of the options granted amounted to $3,489,371 and $207,585, respectively. The Black-Scholes model utilized the following inputs to value the options granted during the nine months ended September 30, 2025 and 2024:
| Line item | September 30, 2025 | September 30, 2024 |
| --- | --- | --- |
| Option Valuation Assumptions: | | |
| Risk-free interest rate | - | - |
| Expected term (years) | - | - |
| Fair value of underlying common stock | - | $2.37 |
| Exercise price | - | - |
| Expected volatility | - | - |
| Expected dividend yield | —% | —% |
The Company recognized $799,823 and $257,598 in stock-based compensation during the nine months ended September 30, 2025 and 2024, respectively, in connection with issued stock options. As of September 30, 2025, non-vested outstanding options totaled 166,117 and the Company expects to recognize $790,668 of stock-based compensation for the non-vested options over the remaining weighted-average contractual period of 1.5 years. Stock-based compensation is recorded in general and administrative expenses in the Company's condensed consolidated statements of operations.
F-42
### **Note 20. Earnings (Net Loss) per Share**
The following table sets forth the computation of the basic and diluted net loss per share:
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| Net loss attributable to common stockholders | $(88,555,119) | $(7,899,900) |
| Net loss per share attributable to common stockholders, basic and diluted | $(5.36) | $(0.57) |
| Weighted-average common stock outstanding, basic and diluted | 16,512,498 | 13,796,789 |
The table below sets forth all outstanding potentially dilutive securities which were not included in the calculation of diluted earnings per share because their impact would have been antidilutive.
| Line item | September 30, 2025 | September 30, 2024 |
| --- | --- | --- |
| Potentially dilutive securities: | | |
| Warrants | 540,040 | 215,926 |
| Stock options | 1,183,508 | 442,839 |
| Convertible note | — | 3,564,898 |
| Series A Preferred Stock | — | 4,713,515 |
| Series B Preferred Stock | — | 5,205,630 |
| Series C Preferred Stock | — | 3,663,841 |
| Series D Preferred Stock | — | 4,865,000 |
| Total | 1,723,548 | 22,671,649 |
### **Note 21. Segment Reporting**
As of September 30, 2025, the Company operates in one reporting segment. The Company’s hosting services and Bitcoin mining are located in the United States, and the Company views these operations as one reporting segment as the CEO, as the Company's CODM manages and allocates resources to the operations of the Company on a consolidated basis. This enables the CEO to assess the Company's overall level of available resources and determine how best to deploy these resources across service offerings and research and development projects in line with long-term company-wide strategic goals. As part of the Acquisition, (See Note 3 - Business Combination), the Company acquired a new revenue stream, “Revenue from compute power” (See Note 2). The new revenue stream is currently viewed as part of the Company’s single reporting segment. The Company appointed a new CEO in September 2025 and is currently evaluating the impacts of the new decision maker along with evaluating how to manage and allocate resources to the operations of the combined Company.
The accounting policies of the reportable segment is the same as those described in the “Summary of Significant Accounting Policies” for the Company. All costs, operating expenses, depreciation, and corporate overhead assets are fully allocated to the Company’s one segment.
The CODM uses various financial metrics, including gross profit, operating income and net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into specific service offerings within the segment, such as for entering into significant contracts, hiring of key management or executive personnel, or making significant capital investment decisions.
F-43
The following table outlines the level of disaggregation reviewed by the CODM for the nine months ended September 30, 2025 and 2024:
| Line item | Nine Months Ended September 30, 2025 | Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| Revenue: | | |
| Revenue from cryptocurrency mining | $507,604 | $3,995,442 |
| Revenue from mining hosting services | 4,794,821 | 2,157,843 |
| Revenue from compute power | 2,755,051 | — |
| Total revenue | 8,057,476 | 6,153,285 |
| Cost of revenue | | |
| Hosting expenses | 553,532 | 2,915,358 |
| Electricity | 2,819,191 | 1,134,799 |
| Contract labor | 872,725 | 65,830 |
| General and administrative | | |
| Stock-based compensation | 799,823 | 257,598 |
| Wages and salaries | 1,811,841 | 450,136 |
| Taxes and other expenses | 101,220 | 63,538 |
| Utilities | 35,170 | 9,974 |
| Rent and lease expense | 213,225 | 203,779 |
| Professional fees | 2,469,174 | 405,611 |
| Insurance | 316,248 | 254,134 |
| Travel, meals, and entertainment | 53,193 | 16,978 |
| Supplies and software | 131,941 | 121,124 |
| Other general and administrative expenses | 388,174 | 390,852 |
| Depreciation and amortization expense | 3,358,079 | 5,753,430 |
| Operating loss | (5,866,060) | (5,889,856) |
| Other (expense) income | | |
| Income from equity method investments | 1,043,937 | (305,728) |
| Gain on sale of equity method investments | — | 835,046 |
| Gain on remeasurement of investment in TCM | 14,549,536 | — |
| Change in fair value of warrant liability | (5,536,816) | (288,376) |
| Change in fair value of digital assets | 81,919 | 733,552 |
| Gain on disposal of property and equipment | 462 | (2,094,030) |
| Loss on extinguishment of lease liability | (692,837) | — |
| Loss on extinguishment of debt | (1,037,501) | (46,774) |
| Interest expense, net | (1,450,812) | (894,684) |
| Other income, net | 24,771 | 50,950 |
| Income tax expense | (284,771) | — |
| Net income (loss) | $831,828 | $(7,899,900) |
F-44
### **Note 22. Commitments and Contingencies**
In the normal course of business, the Company is at times subject to pending and threatened legal actions. In management’s opinion, any potential loss resulting from the resolution of these matters will not have a material effect on the results of operations, financial position or cash flows of the Company.
As of September 30, 2025 and December 31, 2024. the Company had no outstanding litigation.
The Company has various ground leases for bitcoin mining in Oklahoma and Texas that expire on varying dates through 2034 and various equipment leases. For additional information see Note 23.
### **Note 23. Leases**
*Operating Leases*
The Company entered into two lease agreements in Oklahoma and Texas for land during the year ended December 31, 2024. Both leases expire during 2034. Certain lease arrangements include renewal options and escalation clauses.
Future minimum lease payments included in the measurement of operating lease liabilities on the condensed consolidated balance sheet as of September 30, 2025, were as follows:
| Line item | Operating Lease |
| --- | --- |
| Remainder of 2025 | $57,540 |
| 2026 | 257,660 |
| 2027 | 260,160 |
| 2028 | 260,160 |
| 2029 | 315,160 |
| Thereafter | 1,319,080 |
| Total minimum lease payments | 2,469,760 |
| Less: Imputed interest | (856,656) |
| Present value of future minimum lease payments | 1,613,104 |
| Less: Current portion | (87,403) |
| Lease liabilities, net of current portion | $1,525,701 |
Total operating lease expense was $209,925 and $171,667 for the nine months ended September 30, 2025 and 2024, respectively. Operating lease expense is recorded in general and administrative expenses in the Company's condensed consolidated statements of operations. The weighted-average discount rate and remaining lease term in years as of September 30, 2025 was 10.32% and 8.38, respectively. Total amortization expense for the ROU asset was $79,565 and $66,759 for the nine months ended September 30, 2025 and 2024, respectively.
Supplemental cash flow information and non-cash activity related to leases are as follows:
| Line item | For the Nine Months Ended September 30, 2025 | For the Nine Months Ended September 30, 2024 |
| --- | --- | --- |
| Operating cash flows for operating leases | $(43,940) | $49,909 |
| Amortization of right-of-use assets | $882,733 | $66,759 |
| Financing cash flows from finance leases | $(1,289,600) | — |
| Acquisition of right-of-use asset in exchange for lease obligations | $6,528,526 | $1,641,673 |
| Supplemental non-cash amounts of lease liabilities arising from obtaining right-of-use assets | $6,787,230 | $1,621,672 |
F-45
*Finance Leases*
The Company leases computer equipment under finance lease agreements with four related party entities. See Note 11 - Transactions with Related Parties for additional information. These leases were acquired through the TCM acquisition on April 1, 2025. The lease obligations mature on various dates from 2027 through 2030.
Future minimum lease payments included in the measurement of finance lease liabilities on the condensed consolidated balance sheet as of September 30, 2025, were as follows:
| Line item | Finance Lease |
| --- | --- |
| Remainder of 2025 | $387,373 |
| 2026 | 1,549,492 |
| 2027 | 1,344,960 |
| 2028 | 1,225,734 |
| 2029 | 659,267 |
| Thereafter | 219,756 |
| Total minimum lease payments | 5,386,582 |
| Less: Imputed interest | (1,064,897) |
| Present value of future minimum lease payments | 4,321,685 |
| Less: Current portion | (1,135,837) |
| Lease liabilities, net of current portion | $3,185,848 |
The components of finance lease expense for the nine months ended September 30, 2025 are as follows. The Company did not incur any finance lease expenses for the nine months ended September 30, 2024.
_For the Nine Months Ended September 30, 2025_
| | |
| --- | --- |
| Finance lease cost: | |
| Amortization of ROU assets | $803,168 |
| Interest on lease liabilities | 216,649 |
| Total lease cost | $1,019,817 |
The weighted-average discount rate and remaining lease term in years as of September 30, 2025 was 12.31% and 3.92, respectively.
### **Note 24. Subsequent Events**
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to December 30, 2025, which is the date that the financial statements were issued.
TCM and Me Luna Qumulus LLC (“Moonshot”) entered into a joint venture entity named QAI Moon, LLC (“QAI Moon”), effective October 1, 2025, wherein (i) TCM is a member holding a 51% percentage interest, and (ii) Moonshot is a member holding a 49% percentage interest. The Company contributed $3,000,000 to the joint venture on October 1, 2025. Moonshot has a credit facility that allows the Company to be provided up to 85% financing towards the purchase of HPC equipment.
QAI Moon, TCM and DAC Consulting LLC (“DAC”) entered into a joint venture entity named SPRE NKC MO, LLC, effective October 1, 2025, wherein (i) QAI Moon is a member holding a 30% percentage interest, (ii) TCM is a member holding a 35% percentage interest, and (iii) DAC is a member holding a 35% percentage interest. QAI Moon is the manager of the joint venture and owns all of the voting shares.
During October and November 2025, the Company issued approximately 530,000 shares of common stock at price of $10.80 per share for gross proceeds of approximately $5.7 million.
F-46
**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
Board of Directors and Shareholders
QumulusAI, Inc., formerly Global Digital Holdings Inc. and Subsidiaries
**Opinion on the Consolidated Financial Statements**
We have audited the accompanying consolidated balance sheets of QumulusAI, Inc., formerly Global Digital Holdings Inc. and Subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, shareholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
**Going Concern**
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company has had recurring losses and negative operating cash flows, an accumulated deficit as of December 31, 2024 and 2023, and insufficient cash and cash equivalents as of December 31, 2024, to fund operations for twelve months from the date of this report. All of these matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
**Emphasis of the Matter** – **Restatement of Consolidated Financial Statements**
As disclosed in Note 3 to the consolidated financial statements, the Company has restated its consolidated financial statements as of and for the years ended December 31, 2024 and 2023 to correct certain misstatements.
**Emphasis of Matter** – **Uncertainties Related to Digital Assets**
As disclosed in Note 2 to the consolidated financial statements, the recorded amounts of digital assets on the consolidated balance sheets as of December 31, 2024 and 2023, representing approximately 4% and 1% of total assets, respectively.
**Basis for Opinion**
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ WithumSmith+Brown, PC
We have served as the Company's auditor since 2025.
Whippany, New Jersey
June 30, 2025, except for the effects of the name change as disclosed in Note 1, the restatement disclosed in Note 3 to the consolidated financial statements, as to which the date is August 28, 2025, and the effect of the reverse stock split disclosed in Note 1 to the consolidated financial statements, as to which the date is December 30, 2025.
F-47
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
**Consolidated Balance Sheets**
_(as restated) · (as restated)_
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| ASSETS | | |
| Current assets: | | |
| Cash | $3,970,466 | $631,344 |
| U.S. dollar coin | 391,584 | 110,000 |
| Accounts receivable, net | 42,781 | 196,929 |
| Loans receivable, net - related party | 95,698 | 125,373 |
| Due from related party | 82,213 | 4,348 |
| Prepaid expenses and other current assets | 203,241 | 38,674 |
| Total current assets | 4,785,983 | 1,106,668 |
| Property and equipment, net | 2,737,019 | 11,829,101 |
| Right-of-use assets, net | 1,548,502 | — |
| Digital assets, net | 511,376 | 109,615 |
| Equity method investments | 8,657,615 | 7,296,960 |
| Investment in joint venture | — | 442,671 |
| Loans receivable, net of current portion - related party | 136,754 | — |
| Deposits | 641,844 | 310,000 |
| Deposits on mining equipment | 1,326,801 | — |
| Total assets | $20,345,894 | $21,095,015 |
| LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY (DEFICIT) | | |
| Current liabilities: | | |
| Accounts payable | $803,407 | $910,435 |
| Dividend payable | 395,947 | 395,947 |
| Accrued expenses | 2,314,089 | 1,557,206 |
| Current portion of notes payable | 46,088 | 159,415 |
| Current portion of notes payable - related party | 1,111,921 | 760,708 |
| Current portion of convertible note payable, net of discount - related party | 3,008,474 | — |
| Operating lease liabilities - current portion | 62,035 | — |
| Due to related party | 547,484 | 1,010,000 |
| Line of credit | 292,659 | — |
| Total current liabilities | 8,582,104 | 4,793,711 |
| Long-term notes payable, net of current portion | 62,075 | — |
| Long-term notes payable, net of current portion - related party | 3,848,915 | 5,296,094 |
| Operating lease liabilities, net of current portion | 1,595,009 | — |
| Warrant liability | 4,815,890 | 2,249,338 |
| Convertible note payable, net of discount - related party | — | 3,346,197 |
| Other non-current liabilities | — | 700,000 |
| Total liabilities | 18,903,993 | 16,385,340 |
| Commitments and contingencies (Note 20) | | |
| Mezzanine Equity | | |
| Series A Redeemable Preferred stock, 5,453,876 shares authorized, 729,448 shares issued and outstanding as of December 31, 2024 and 2023 | 811,049 | 811,049 |
| Series B Redeemable Preferred stock, 5,856,097 shares authorized, 634,132 shares issued and outstanding as of December 31, 2024 and 2023 | 1,221,512 | 1,221,512 |
| Total mezzanine equity | 2,032,561 | 2,032,561 |
| Stockholders' Equity (Deficit) | | |
| Preferred stock - no par value; 25,000,000 shares authorized as of December 31, 2024 and 2023 | | |
| Series A Preferred stock, 5,453,876 shares authorized, 4,713,515 shares issued and outstanding as of December 31, 2024 and 2023 | 5,224,127 | 5,224,127 |
| Series B Preferred stock, 5,856,097 shares authorized, 5,205,630 shares issued and outstanding as of December 31, 2024 and 2023 | 10,027,471 | 10,027,471 |
| Series C Preferred stock, 3,690,027 shares authorized, 3,663,841 shares issued and outstanding as of December 31, 2024 and 2023 | 5,990,371 | 5,990,371 |
| Series D Preferred stock, 10,000,000 shares authorized, 9,089,000 shares issued and outstanding as of December 31, 2024; and 500,000 shares issued and outstanding as of December 31, 2023 | 9,008,512 | 475,113 |
| Common stock - no par value; 75,000,000 shares authorized, 12,835,535 shares issued and outstanding as of December 31, 2024 and 2023 | 408,505 | 408,505 |
| Additional paid-in capital | 2,007,227 | 624,026 |
| Accumulated deficit | (33,256,873) | (20,072,499) |
| Total stockholders' equity (deficit) | (590,660) | 2,677,114 |
| Total liabilities, mezzanine equity and stockholders' equity (deficit) | $20,345,894 | $21,095,015 |
*See accompanying notes to consolidated financial statements.*
F-48
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
**Consolidated Statements of Operations**
_(as restated) · (as restated)_
| Line item | Years Ended December 31, 2024 | Years Ended December 31, 2023 |
| --- | --- | --- |
| Revenue | $8,095,672 | $5,124,934 |
| Costs and expenses: | | |
| Cost of revenue | 5,371,049 | 3,582,377 |
| General and administrative expenses | 3,346,547 | 2,009,427 |
| Depreciation expense | 7,164,034 | 7,711,015 |
| Total costs and expenses | 15,881,630 | 13,302,819 |
| Operating loss | (7,785,958) | (8,177,885) |
| Other income (expenses) | | |
| (Loss) income from equity method investments | (274,270) | (166,466) |
| Gain on sale of equity method investments | 835,046 | — |
| Gain on sale of investment in joint venture | 155,286 | — |
| Change in fair value of warrant liability | (2,566,552) | (1,557,234) |
| Change in fair value of digital assets | 188,682 | 28,760 |
| Gain on conversion of note payable | — | 105,464 |
| Loss on sale of loans receivable | — | (104,197) |
| Loss on disposal of property and equipment | (2,525,408) | (369,407) |
| Loss on extinguishment of debt | (83,757) | — |
| Loss on other investments | — | (258,000) |
| Other expenses, net | (7,947) | (49,079) |
| Interest expense, net | (1,119,496) | (1,246,375) |
| Total other income (expenses), net | (5,398,416) | (3,616,534) |
| Loss before income tax expense | (13,184,374) | (11,794,419) |
| Income tax expense | — | 631,125 |
| Net loss | $(13,184,374) | $(12,425,544) |
| Net loss per share, basic and diluted | $(0.96) | $(0.90) |
| Weighted-average common stock outstanding, basic and diluted | 13,796,790 | 13,796,790 |
*See accompanying notes to consolidated financial statements.*
F-49
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
### Consolidated Statements of Stockholders' Equity (Deficit)
| Line item | Series A Preferred Stock / Shares | Series A Preferred Stock / Amount | Series B Preferred Stock / Shares | Series B Preferred Stock / Amount | Series C Preferred Stock / Shares | Series C Preferred Stock / Amount | Series D Preferred Stock / Shares | Series D Preferred Stock / Amount | Common Stock / Shares | Common Stock / Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Equity (Deficit) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at January 1, 2023 | 4,692,193 | $5,217,091 | 5,205,630 | $10,027,471 | 3,663,841 | $5,990,371 | — | — | 12,835,535 | $408,505 | $464,951 | $(7,536,299) | $14,572,090 |
| Adjustment for adoption of ASU 2016-13 | — | — | — | — | — | — | — | — | — | — | — | (110,656) | (110,656) |
| Issuance of preferred stock, net of issuance cost | — | — | — | — | — | — | 500,000 | 475,113 | — | — | 24,887 | — | 500,000 |
| Issuance of preferred stock upon conversion of related party note payable | 21,322 | 7,036 | — | — | — | — | — | — | — | — | — | — | 7,036 |
| Issuance of stock options to settle other liabilities | — | — | — | — | — | — | — | — | — | — | 79,960 | — | 79,960 |
| Issuance of warrants as a deemed contribution to equity method investment | — | — | — | — | — | — | — | — | — | — | 55,100 | — | 55,100 |
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | (872) | — | (872) |
| Net loss | — | — | — | — | — | — | — | — | — | — | — | (12,425,544) | (12,425,544) |
| Balance at December 31, 2023 (as restated) | 4,713,515 | 5,224,127 | 5,205,630 | 10,027,471 | 3,663,841 | 5,990,371 | 500,000 | 475,113 | 12,835,535 | 408,505 | 624,026 | (20,072,499) | 2,677,114 |
| Issuance of preferred stock, net of issuance cost | — | — | — | — | — | — | 8,589,000 | 8,533,399 | — | — | 69,601 | — | 8,603,000 |
| Issuance of warrants for services | — | — | — | — | — | — | — | — | — | — | 188,352 | — | 188,352 |
| Issuance of stock options for partial payment on convertible note payable | — | — | — | — | — | — | — | — | — | — | 180,776 | — | 180,776 |
| Issuance of warrants for extinguishment of debt | — | — | — | — | — | — | — | — | — | — | 154,687 | — | 154,687 |
| Issuance of warrants as a deemed contribution to equity method investment | — | — | — | — | — | — | — | — | — | — | 476,145 | — | 476,145 |
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | 313,640 | — | 313,640 |
| Net loss | — | — | — | — | — | — | — | — | — | — | — | (13,184,374) | (13,184,374) |
| Balance at December 31, 2024 (as restated) | 4,713,515 | $5,224,127 | 5,205,630 | $10,027,471 | 3,663,841 | $5,990,371 | 9,089,000 | $9,008,512 | 12,835,535 | $408,505 | $2,007,227 | $(33,256,873) | $(590,660) |
*See accompanying notes to consolidated financial statements.*
F-50
**QUMULUSAI, INC. (formerly known as GLOBAL DIGITAL HOLDINGS, INC.) AND SUBSIDIARIES**
**Consolidated Statements of Cash Flows**
_(as restated) · (as restated)_
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 |
| --- | --- | --- |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | |
| Net loss | $(13,184,374) | $(12,425,544) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | |
| Depreciation | 7,164,034 | 7,711,015 |
| Amortization of loan origination costs | 36,159 | 49,467 |
| Amortization of discount on convertible note | 286,500 | 46,197 |
| Bad debt expense | 6,859 | 30,062 |
| Amortization of right-of-use assets | 93,171 | — |
| Loss (income) from equity method investments | 274,270 | 166,466 |
| Gain on sale of investment in joint venture | (155,286) | — |
| Gain on sale of equity method investments | (835,046) | — |
| Change in fair value of warrant liability | 2,566,552 | 1,557,234 |
| Change in fair value of digital assets | (188,682) | (28,760) |
| Gain on conversion of notes payable | — | (105,464) |
| Increase in deferred income taxes | — | 631,125 |
| Stock-based compensation | 313,640 | (872) |
| Issuance of warrants for services | 188,352 | — |
| Issuance of stock options to settle other liabilities | — | 79,960 |
| Loss on disposal of property and equipment | 2,525,408 | 369,407 |
| Loss on extinguishment of debt | 83,757 | — |
| Loss on other investments | — | 258,000 |
| Loss on sale of loans receivable | — | 104,197 |
| Changes in operating assets and liabilities: | | |
| Accounts receivable | 261,594 | (196,929) |
| Due from related party | (77,865) | (4,348) |
| Prepaid expenses and other current assets | (76,655) | 409,406 |
| Proceeds from sale of digital assets | 4,348,874 | 4,374,939 |
| Deposits | (331,844) | (286,321) |
| Mining of digital assets | (4,843,537) | (4,560,306) |
| Accounts payable | (107,028) | 356,319 |
| Accrued expenses | 756,883 | 548,866 |
| Operating lease liabilities | 35,372 | — |
| Due to related party | (462,516) | 10,000 |
| Other non-current liabilities | (700,000) | — |
| Net cash used in operating activities | (2,021,408) | (905,884) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | |
| Purchase of property and equipment | (1,523,600) | (503,236) |
| Proceeds from disposal of property and equipment | — | 241,736 |
| Proceeds from sale of loans receivable | — | 905,948 |
| Proceeds from collections of loans receivable | 145,549 | 468,099 |
| Advances of loans receivable | — | (300,000) |
| Deposits on mining equipment | (1,326,801) | — |
| Proceeds from sale of joint venture | 227,463 | — |
| Investment in joint venture | — | (442,671) |
| Distributions from equity method investments | 1,250,000 | — |
| Investment in equity method investments | (643,933) | (433,507) |
| Net cash used in investing activities | (1,871,322) | (63,631) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | |
| Proceeds from issuance of Series D Preferred stock, net of issuance costs | 8,603,000 | 500,000 |
| Proceeds from line of credit | 648,262 | — |
| Repayment of line of credit | (355,603) | — |
| Repayments of notes payable | (159,417) | (385,019) |
| Repayments of notes payable - related party | (1,023,960) | — |
| Repayments of convertible note payable | (480,430) | — |
| Net cash provided by financing activities | 7,231,852 | 114,981 |
| NET CHANGE IN CASH | 3,339,122 | (854,534) |
| CASH, beginning of year | 631,344 | 1,485,878 |
| CASH, end of year | $3,970,466 | $631,344 |
| SUPPLEMENTAL CASH FLOW INFORMATION | | |
| Cash paid for income taxes | — | — |
| Cash paid for interest | $19,617 | — |
| Non-cash financing and investing activities | | |
| Issuance of preferred stock upon conversion of related party note payable | — | $112,500 |
| Equity method securities obtained in exchange for convertible note payable | — | $3,300,000 |
| Equity method securities obtained in exchange for due to related party | — | $1,000,000 |
| Deposits of mining equipment transferred to property and equipment and placed in operations | — | $425,671 |
| Non-cash contribution to equity method investment | $926,240 | $2,674,819 |
| Issuance of warrants in connection with Series D Preferred Stock | $69,601 | $24,887 |
| Issuance of stock options for partial payment on convertible note payable | $180,776 | — |
| Issuance of warrants as a deemed contribution to equity method investment | $476,145 | $55,100 |
| Forgiveness of FCNC loan receivable | $22,294 | — |
| Acquisition of right-of-use asset in exchange for lease obligations | $1,641,673 | — |
*See accompanying notes to consolidated financial statements.*
F-51
### **Note 1. Organization and Nature of Operations**
***The Company***
WAHA Technologies, Inc. ("WAHA") was organized in the state of Georgia in 2019 and is primarily engaged in mining of digital currency, particularly bitcoin and in bitcoin mining hosting services. WAHA buys and maintains digital asset mining equipment and the required infrastructure in order to mine bitcoin.
SPRE Commercial Group, Inc. ("SPRE") was organized in the state of Georgia in 2019 for the purpose of owning and leasing land, buildings, and digital assets mining facilities.
QumulusAI, Inc. (formerly known as Global Digital Holdings, Inc.) ("QumulusAI") (collectively, the "Company") was organized in the state of Georgia in 2022 to serve as the holding Company for WAHA and SPRE. On October 10, 2022, the Board of Directors of WAHA and SPRE approved the decision to merge all equity of WAHA and SPRE to QumulusAI, with QumulusAI directly owning WAHA and SPRE. Effective December 13, 2022, the shareholders of WAHA and SPRE entered into a contribution and exchange agreement with QumulusAI, in which all their outstanding equity securities and ownership rights in WAHA and SPRE were contributed to QumulusAI in exchange for shares and ownership rights in QumulusAI.
SPRE Watonga OK, LLC ("Watonga") was organized in the state of Georgia in 2024 as an entity for one of QumulusAI's main operating sites, which opened in the same year. The entity is primarily engaged in mining of digital currency and in digital currency mining hosting services. QumulusAI will also serve as a holding company for Watonga.
Effective August 18, 2025, the Company changed its corporate name to .
***Reverse Stock Split***
The Company effected a 1-for-3 reverse stock split (“Reverse Stock Split”) on September 30, 2025, pursuant to which every three shares of the Company’s issued and outstanding common stock were combined into one share of common stock. The Reverse Stock Split had no impact on the par value of the Company’s no par value common stock or the authorized number of shares of common stock. Unless otherwise indicated, all share and per share information prior to the Reverse Stock Split date of September 30, 2025 in these audited consolidated financial statements are retroactively adjusted to reflect the Reverse Stock Split, prior to the rounding of any fractional shares. Any fractional share resulting from the Reverse Stock Split were rounded up to the next whole number of shares.
***Going Concern***
Pursuant to Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2014-15, *Presentation of Financial Statements-Going Concern* (Subtopic 205-40), management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Management’s evaluations are based on relevant conditions and events that are known and reasonably knowable as of the date the financial statements were available to be issued.
The Company has incurred recurring losses since inception resulting in an accumulated deficit of $33,256,873 as of December 31, 2024. For the year ended December 31, 2024, the Company has operating cash outflows of $2,021,408 and had an operating loss of $7,785,958. The Company’s operations have been funded partially through the issuance of debt. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these consolidated financial statements.
In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. At December 31, 2024, the Company had cash of $3,970,466. The Company’s plans to alleviate the substantial doubt include the acquisition of TCM, expansion of the operations of T20 and Watonga, acquisition of more high performance computers to increase revenues and improve gross margin, and extension of a $2,000,000 note payable that was set to mature in February 2026 to October 2026. However, there is no assurance that these plans will be successfully implemented or generate the expected results. Accordingly, management concluded these plans do not alleviate the substantial doubt about the Company’s ability to continue as a going concern for the one-year period extending from the date of issuance of these financial statements. No adjustments have been made to the presented consolidated financial statements as a result of this uncertainty.
F-52
### **Note 2. Summary of Significant Accounting Policies**
***Principles of Consolidation***
The accompanying consolidated financial statements include the accounts of QumulusAI and its wholly owned subsidiaries, WAHA, SPRE, and Watonga. The Company uses the equity method to account for investments in other companies if the investment provides management with the ability to exercise significant influence over the operating and financial policies of the investee. The consolidated net income includes the Company’s proportionate share of the net income or loss of these companies. Management's judgment regarding the level of influence over each equity method investee includes considering key factors, such as ownership interest, representation on the board of directors and participation in policy-making decisions. All significant intercompany transactions and balances have been eliminated in consolidation. For financial and income tax reporting purposes, the Company has adopted a calendar year-end.
***Basis of Presentation***
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The FASB establishes these principles to ensure financial condition, results of operations, and cash flows are consistently reported. Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative U.S. GAAP included in the Accounting Standards Codification (“ASC”) and ASU issued by the FASB.
***Use of Estimates***
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Management's estimates and assumptions include, but are not limited to, revenue recognition from digital asset mining, collectability of accounts receivable and loans receivable, valuation of convertible note payable, fair value of consideration transferred for equity method investments and joint ventures, valuation of stock-based awards, salvage values and estimated useful lives of property and equipment, valuation of deferred taxes and uncertain tax positions, valuation of common stock and warrant liabilities, and other assumptions used to measure stock-based compensation, calculation of incremental borrowing rate, and estimates for transfers of investments and valuation of assets. Management's estimates and assumptions are derived from and are continually evaluated based upon available information, judgement, and experience.
***Concentration of Credit Risk***
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable.
The Company maintains cash balances in various financial institutions. At times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limit. As of December 31, 2024 and 2023, interest-bearing accounts and non-interest bearing accounts were insured by the Federal Deposit Insurance Corporation up to $250,000 per financial institution. In lieu of insurance, the financial institution may collateralize the commercial paper with U.S. government securities, in which case they become repurchase agreements. The Company has not experienced any losses in such accounts and monitors the credit worthiness of the financial institutions with which they conduct business. Management believes that the Company is not exposed to significant credit risk with respect to its cash balances.
F-53
The Company is exposed to counterparty risk through the deposits it places with suppliers of mining and mining related equipment to secure orders and delivery dates. The risk of a supplier failing to meet its contractual obligations may result in late deliveries or mining prepayments that are not realized. The Company attempts to mitigate this risk by procuring mining hardware from larger, more established suppliers and those whom the Company has existing relationships and knowledge of their reputation in the market.
During the year ended December 31, 2024, the Company had four customers that accounted for approximately 100% of the Company's total revenues. During the year ended December 31, 2023, the Company had two customers that accounted for approximately 95% of the Company's total revenues. For each significant customer, revenue as a percentage of total revenue are as follows:
| Customers | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 |
| --- | --- | --- |
| Customer A | 52% | 85% |
| Customer B | 21% | — |
| Customer C | 17% | 10% |
| Customer D | 10% | — |
***Cash***
For purposes of the consolidated balance sheets and consolidated statements of cash flows, the Company considers cash in operating bank accounts and cash on hand as cash.
***U.S. Dollar Coin***
U.S. Dollar Coin (“USDC”) is a stablecoin digital asset that is backed by U.S. dollars or other liquid assets and accounted for as a financial instrument. USDC can be redeemed for one U.S. Dollar.
***Digital Assets, Net***
*Crypto Assets*
The Company accounts for crypto assets in accordance with ASU 2023-08, *Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets*, which requires entities to measure certain crypto assets at fair value with changes recognized in the condensed consolidated statement of operations for each reporting period. The Company’s crypto assets, bitcoin and Ethereum Classic, which have not been determined to be stablecoins or derivatives, are within the scope of ASU 2023-08. The Company has deemed the price of crypto assets to be a Level 1 input under ASC 820 hierarchy as these were based on observable quoted prices in the Company’s principal market for identical assets. The Company’s crypto assets are received in exchange for services transferred to a customer and are converted to cash daily. Cash proceeds from the sale of digital assets are classified within operating activities in the Company’s consolidated statements of cash flows.
The Company acquires crypto assets through its network operations and holds these crypto assets. Each crypto asset acquisition is considered its own “lot” with its own cost basis based on the crypto asset-to-USD conversion price from the Company’s principal market at time of acquisition. Any realized gain/loss on the disposition of crypto assets is calculated on a weighted-average basis.
*Principal Market and Fair Value Determination*
To determine which market is the Company’s principal market (or in the absence of a principal market, the most advantageous market) for purposes of determining fair value of individual digital assets, the Company follows ASC 820, *Fair Value Measurement,* which outlines the application of fair value accounting. ASC 820 determines fair value to be the price that would be received for digital assets in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820 requires the Company to assume that the digital asset is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.
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The Company transacts in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets, each as defined in the FASB Master Glossary (collectively, "Digital Asset Markets"). In determining which of the eligible Digital Asset Markets is the Company’s principal market, the Company reviews these criteria in the following order:
- First, the Company determines which Digital Asset Markets for the relevant digital asset are accessible to the Company.
- Second, the Company sorts the remaining Digital Asset Markets from high to low by market-based volume of the digital asset traded on each Digital Asset Markets in the trailing twelve months.
- Third, the Company then selects a Digital Asset Market as its principal market based on the highest market-based volume in comparison to the other Digital Asset Markets on the list.
The Company determines its principal market (or in the absence of a principal market, the most advantageous market) annually to determine (i) if there have been recent changes to each Digital Asset Market’s trading volume in the trailing twelve months, (ii) if any Digital Asset Markets have developed that the Company has access to, or (iii) if recent changes to each Digital Asset Market’s price stability have occurred that would materially impact the selection of the principal market and necessitate a change in the Company’s determination of its principal market.
The Company’s Bitcoin and Ethereum Classic ("ETC") is recorded at fair value, as determined using the period-end closing price at 16:00:00 UTC of Bitcoin and ETC on the Company’s principal market, New York Digital Investment Group and Coinbase (the “Principal Markets”), and changes in fair value are recognized change in fair value of digital assets on the consolidated Statements of Operations.
***Fair Value Measurements***
Fair value is defined as the price that would be received to sell an asset in the principal or most advantageous market for the asset in an orderly transaction between market participants on the measurement date. Fair value should be based on assumptions market participants would use when pricing an asset. U.S. GAAP provides a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Assets and liabilities that are required to be recorded at fair value on the balance sheet are categorized based on the inputs to valuation techniques as follows:
Level 1. These are assets and liabilities where values are based on unadjusted quoted prices for identical assets in an active market the Company has the ability to access.
Level 2. These are assets and liabilities where values are based on similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active, and model derived prices whose inputs are observable or whose significant value drivers are observable.
Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The fair values of financial instruments including cash, accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities approximate their respective the carrying values due to the short maturities of those instruments. The fair value of notes payable approximates the carrying value, principally because of the maturity dates and the current terms applicable to the notes payable.
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***Financial Instruments*** — ***Credit Losses (ASU 2016-13)***
In June 2016, the FASB issued ASU 2016-13, *Financial Instruments - Credit Losses* (ASC 326). The amendments in this update introduce a new accounting model to measure credit losses for financial assets measured at amortized cost. The FASB has also issued additional ASUs to clarify the scope and provide additional guidance for ASU 2016-13. Credit losses for financial assets measured at amortized cost should be determined based on the total current expected credit losses over the life of the financial asset or group of financial assets. In effect, the financial asset or group of financial assets should be presented at the net amount expected to be collected. Credit losses will no longer be recorded under the current incurred loss model for financial assets measured at amortized cost. The amendments also modify the accounting for available-for-sale debt securities whereby credit losses will be recorded through an allowance for credit losses rather than a write-down to the security’s cost basis, which allows for reversals of credit losses when estimated credit losses decline. Credit losses for available-for-sale debt securities should be measured in a manner similar to current U.S. GAAP.
The amendments are effective on January 1, 2023 for the Company, and must be applied using a modified retrospective approach with a cumulative-effect adjustment through retained earnings as of the beginning of the fiscal year upon adoption as required. While the standard modifies the measurement of the allowance for credit losses, it does not alter the credit risk of trade or unbilled receivables.
Prior to January 1, 2023, the Company did not maintain an allowance for doubtful accounts. At the adoption date, the Company recorded an allowance for credit losses of $110,656 as it relates to the Company’s loans receivables. No allowance was recorded on accounts receivable because the Company had an accounts receivable balance of $0 on January 1, 2023.
Under the current expected credit loss ("CECL") impairment model, the Company develops and documents its allowance for credit losses on its accounts receivables based on two portfolio segments: Bitcoin mining trade receivables and Bitcoin mining hosting trade receivables. The determination of portfolio segments is primarily based on customer type, while also taking into account factors that may influence credit risk, such as macroeconomic conditions, industry trends, and the geographic location of customers and mining facilities. The Company develops and documents it allowance for credit losses on its loans receivable based on debtor type, while also taking into account factors that may influence credit risk, such as macroeconomic conditions and liquidity risks.
The Company's quantitative allowance for credit loss estimates under CECL was determined using the loss rate method for trade receivables and the Probability of Default and Loss Given Default Methods ("PD method" and "LGD method") for loans receivables. In addition to the quantitative allowance for credit losses, the Company also incorporates qualitative adjustments that may relate to unique risks, changes in current economic conditions that may not be reflected in quantitatively derived results, or other relevant factors to further inform the Company's estimate of the allowance for credit losses.
***Accounts Receivable, Net***
Accounts receivable are stated at the amount management expects to collect from balances outstanding at year-end. Accounts receivable are due 30 days after issuance of the invoice. Accounts receivable past due more than 90 days are considered delinquent. If amounts become uncollectible, they will be charged to operations when that determination is made. Under ASC 326, the Company determines its allowance by applying a peer-based loss rate method to the Company’s trade receivables.
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The following table represents the impact of the CECL allowance on accounts receivable:
| Line item | Balance as of January 1, 2023 | Provision for credit losses | Recoveries collected | Balance as of December 31, 2023 |
| --- | --- | --- | --- | --- |
| Provision for credit losses | — | $1,903 | — | $1,903 |
| Line item | Balance as of January 1, 2024 | Provision for credit losses | Recoveries collected | Balance as of December 31, 2024 |
| --- | --- | --- | --- | --- |
| Provision for credit losses | $1,903 | $1,714 | — | $3,617 |
***Loans Receivable, Net***
Loans receivable, net are loans that are carried at unpaid principal and interest balances, less the allowance for expected credit losses on loans receivable and write-offs, if any. Under ASC 326, the Company determines its allowance by multiplying the probability the asset will default within a given time frame (“PD”) by the percentage of the asset not expected to be collected due to default (“LGD”) and applying to the Company’s loan receivables. The PD/LGD method is based on market data on current and past default credit ratings. The Company also considers reasonable and supportable current information in determining its estimated loss rates, such as external forecasts, macroeconomic trends or other factors including customers’ credit risk and historical loss experience. All past and current debtors are concentrated in the U.S., are in the digital assets industry, and are not known to be in bankruptcy or other serious financial difficulty.
During 2023, the Company advanced a loan receivable to a related party in the original amount of $250,000 as a part of the Company's investment in the FCNC joint venture. The loan receivable carries interest of 6%, and requires 18 consecutive monthly principal and interest payments of $14,558. As of December 31, 2023, the outstanding balance of the loan receivable amounts to $155,435. The Company recorded credit losses in the amount of $30,062 as of December 31, 2023. The Company deemed the borrower to have strong credit quality measures, noting that the borrower was the Company's partner in the FCNC joint venture, and that the Company had control over assets the at the location, in addition to managing the site. The loan receivable was fully paid during 2024.
During 2024, the Company advanced a loan receivable in the original amount of $298,062 as a part of the Company's sale of its investment in the FCNC Venture, LLC ("FCNC") joint venture. The loan receivable carries interest of 0.1%, and requires 24 consecutive monthly principal and interest payments of $12,432. As of December 31, 2024, the outstanding balance of the loan receivable amounts to $269,373. The Company recorded credit losses in the amount of $36,921 as of December 31, 2024. The Company considered the borrower to have strong credit quality due to established preexisting relationships between the Company and the borrower, as well as the assurance that the Company would repossess control of the FCNC site in the event of borrower default.
The CECL allowance related to the principal loans receivables outstanding are presented within, “Loans receivable, net - related party” in the Company’s consolidated balance sheets. Account balances are written off after all means of collection are exhausted and the balance is deemed uncollectible. Subsequent recoveries are credited to the allowance. Changes in the allowance are recorded as adjustments to bad debt expense in the period incurred.
The following table represents the activity in of the CECL allowance:
| Line item | Balance as of January 1, 2023 | Provision for credit losses | Recoveries collected | Balance as of December 31, 2023 |
| --- | --- | --- | --- | --- |
| Provision for credit losses | $110,656 | $(80,594) | — | $30,062 |
| Line item | Balance as of January 1, 2024 | Provision for credit losses | Recoveries collected | Balance as of December 31, 2024 |
| --- | --- | --- | --- | --- |
| Provision for credit losses | $30,062 | $6,859 | — | $36,921 |
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***Property and Equipment, Net***
Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for additions, improvements, betterments, if material, and individual purchases are generally capitalized. Minor replacements, maintenance, and repairs that do not improve or extend the lives of the assets are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.
During 2023, management determined that the useful life of the Company’s mining related equipment, consisting of pods and transformers, should be reduced from seven years to five years. The change in useful life resulted in an increase in depreciation expense of approximately $227,000 during the year ended December 31, 2023. Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed.
Management reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of property and equipment may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of property and equipment. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property and equipment is used, and the effects of obsolescence, demand, competition, and other economic factors. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods, generally, Modified Accelerated Cost Recovery System, for income tax purposes. These differences in depreciation methods result in related deferred taxes.
*Digital Asset Machines*
Management assesses and adjusts the estimated useful lives of its digital asset machines (miners) when there are indicators that productivity of the mining assets are higher or lower than the assigned estimated useful life. The rate at which the Company generates digital assets and, therefore, consumes the economic benefits of its transaction verification servers, is influenced by a number of factors including the following:
- The complexity of the transaction verification process which is driven by the algorithms contained within the Bitcoin open source software;
- The general availability of appropriate computer processing capacity on a global basis (commonly referred to in the industry as hashing capacity which is measured in petahash units); and
- Technological obsolescence reflecting rapid development in the transaction verification server industry such that more recently developed hardware is more economically efficient to run in terms of digital assets generated as a function of operating costs, primarily power costs, i.e., the speed of hardware evolution in the industry is such that later hardware models generally have faster processing capacity combined with lower operating costs and a lower cost of purchase. The Company operates in an emerging industry for which limited data is available to make estimates of the useful economic lives of specialized equipment. To the extent that any of the assumptions underlying management’s estimate of useful life of its transaction verification servers are subject to revision in a future reporting period, either as a result of changes in circumstances or through the availability of greater quantities of data then the estimated useful life could change and have a prospective impact on depreciation expense and the carrying amounts of these assets.
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***Long-Lived Asset Impairment***
The Company reviews for the impairment of long-lived assets annually and whenever events and or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Such indicators include, among others, the nature of the asset, the projected future economic benefit of the asset, historical and future cash flows and profitability measurements. An impairment loss would be recognized when the value of the undiscounted estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than the carrying value. There were no impairment losses recognized during the years ended December 31, 2024 or 2023.
***Equity Method Investments***
The Company holds investments accounted for under the equity method. The Company also uses the equity method to account for investments in joint ventures. Under the equity method, investments are carried at cost and increased or decreased by the Company’s pro rata share of the investee earnings or losses. The carrying cost of this investment is also increased or decreased to reflect additional contributions or distributions of capital. Any difference in book equity and the Company’s pro rata share of the net assets of the investment will be reported as gain or loss at the time of the liquidation of the investment. It is the Company’s policy to record losses in excess of the investment if the Company is committed to provide financial support to the investee.
At acquisition, any excess of the acquisition cost over the total fair value of the net assets acquired constitutes equity method goodwill. Equity method goodwill is included in the balance of equity method investments and is not reported separately as goodwill on the Company’s consolidated balance sheet. Equity method goodwill is not reviewed for impairment; however, the equity method investment is reviewed for impairment.
***Other Investments***
As of December 31, 2022, the Company had a balance in other investments that amounted to $258,000 and consisted of equity securities without readily determinable fair value in a privately held third-party company. Pursuant to ASU 2016-01, *Financial Instruments - Overall*, the Company has chosen to measure equity securities without readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes for underlying transactions for identical or similar investments of new issues. All gains and losses on equity securities, realized or unrealized, are recorded through gains or losses on other investments on the consolidated statements of operations. The privately held third party was a client of the Company's that participated in a hosting contract in exchange for common stock in the investment. During the year ended December 31, 2022, with the downturn in the digital assets market, the Company terminated the hosting contract and wrote off 50% of the investment as 50% of the common stock's vesting conditions was contingent on the hosting contract not being terminated. During the year ended December 31, 2023, the Company’s investment in equity securities was not considered to be recoverable and the remaining balance of other investments was written off as the remaining 50% of common stock after further negotiations with management.
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***Revenue and Cost Recognition***
*Overview*
The Company generates revenue from the following sources: (1) bitcoin mining and (2) mining hosting services.
In accordance with ASC 606, *Revenue Recognition,* the Company recognizes revenue from contracts with customers using a five-step model, which is described as follows:
- identify the customer contract;
- identify performance obligations that are distinct;
- determine the transaction price;
- allocate the transaction price to the distinct performance obligations; and
- recognize revenue as the performance obligations are satisfied.
*Revenue from Bitcoin Mining*
The Company participates in a third-party operated mining pool. As a participant in the third-party operated mining pool, the Company provides a service to provide computing power to the third-party operated mining pool. The Company’s enforceable right to compensation begins when, and lasts as long as, the Company provides computing power to the mining pool operator.
**Step 1**: The Company has identified the third-party mining pool operator as its customer. The Company enters into a contract with the customer to provide its computing power to the customer's mining pool. The contracts are terminable without penalty at any time by either party, and thus the contract term is shorter than a 24-hour period and the contracts are continuously renewed.
Applying the criteria per ASC 606-10-25-1, the contract arises at the point that the Company provides computing power to the customer's mining pool, which is considered contract inception, because customer consumption is in tandem with delivery of the computing power.
**Step 2**: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
- The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
- The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified a single performance obligation of providing computing power to the mining pool operator. The continuous renewal options do not represent material rights because they do not provide the customer with the right to purchase additional goods or services at a discount. Specifically, the contract is renewed at the same terms, conditions, and rate as the current contract which is consistent with market rates, and there are no upfront or incremental fees in the initial contract.
**Step 3**: The Company receives non-cash consideration in the form of bitcoin, fair value of which the Company measures at 16:00:00 UTC on the date of contract inception using the Company's principal market for bitcoin, Bitcoin Reference Rate. The contract renews continuously throughout the day, and thus the value of the consideration should be assessed continuously throughout the day, and the Company has concluded to use the 16:00:00 UTC bitcoin price each day. Revenue is recognized on the same day that control of the services transfers to the customer, which is the same day as contract inception. According to the customer contract, daily settlements are made to the Company by the customer based on the computing power provided over the contract periods occurring over a 24-hour period and the payout is made the following day. There are no other forms of variable considerations, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items.
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The Company earns non-cash consideration based on the Full-Pay-Per-Share (“FPPS”) payout method set forth by the customer in the form of bitcoin. The amount of bitcoin the Company is entitled to for providing hash calculations to the customer's mining pool under the FPPS payout method is made up of block rewards and transaction fees less mining pool fees determined as follows:
- The non-cash consideration calculated as a block reward over the continuously renewed contract periods is based on the total blocks expected to be generated on the Bitcoin Network for the daily 24-hour period beginning 16:00:01 UTC and ending 16:00:00 UTC in accordance with the following formula: the computing power that the Company provides to the customer as a percent of the Bitcoin Network’s total computing power, multiplied by the total Bitcoin Network block rewards expected to be generated for the same period.
- The non-cash consideration calculated as transaction fees paid by transaction requestors is based on the share of total actual fees paid over the continuously renewed contract periods beginning 16:00:01 UTC and ending 16:00:00 UTC in accordance with the following formula: total actual transaction fees generated on the Bitcoin Network during the contract period as a percent of total block rewards the Bitcoin Network actually generated during the same period, multiplied by the block rewards the Company earned for the same period noted above.
- The sum of the block reward and transaction fees earned by the Company is reduced by mining pool fees charged by the customer for operating the mining pool based on a rate schedule per the mining pool contract. The mining pool fee is only incurred to the extent the Company provides computing power and generates revenue in accordance with the customer’s payout formula during the continuously renewed contract periods beginning 16:00:01 UTC and ending 16:00:00 UTC daily.
**Step 4**: There is a single performance obligation (i.e., to provide computing power to the customer) for the contract; therefore, all consideration from the customer is allocated to this single performance obligation.
**Step 5**: The Company’s performance is completed over time as the customer obtains control of the computing power. The performance obligation of computing power is fulfilled over time, as opposed to a point in time, because the Company provides the computing power throughout the contract period and the customer simultaneously obtains control of the service and uses it to produce bitcoin.
There is no deferred revenue or other liability obligations recorded by the Company since there are no payments in advance of the performance, and there are no remaining performance obligations after providing computing power.
*Revenue from Mining Hosting Services*
The Company has also entered into hosting contracts where it operates mining equipment owned by third parties within its facilities in exchange for a fee or reimbursement of electricity cost at a markup.
**Step 1**: The Company has identified the third-party mining equipment owners as its customer. The Company enters into a contract with the customer to host its miners on the Company’s network. The contracts are terminable without penalty at any time if the termination is agreed upon by both parties, and thus the contract term is the stated term.
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**Step 2:** In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
- The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
- The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified one performance obligation of hosting the mining equipment. The service the Company provides also includes monitoring, active troubleshooting, and various maintenance levels for the mining equipment.
**Step 3**: The Company receives non-cash consideration in the form of US Digital Coin (“USDC”). The Company uses a spot rate on of the date of payment from the customer to convert USDC to USD.
The Company’s hosting contracts can contain service level agreement clauses, which guarantee a certain percentage of time the power will be available to its customer. In the rare case that the Company may incur penalties under these clauses, the Company recognizes the payment as variable consideration and a reduction of the transaction price and, therefore, of revenue, when not in exchange for a good or service from the customer.
Customer contracts can include advance payment terms in the form of monthly cash prepayments and/or upfront cash payments at contract inception. Advance payments are recorded as deferred revenue and recognized over time (generally, the month of hosting service to which they relate) as the customer simultaneously receives and consumes the benefits of the Company’s performance. There is no significant financing component in these transactions due to the short-term nature of the payments.
**Step 4**: No allocation of transaction price is required as there is only one performance obligation in each contract.
**Step 5**: The Company recognizes variable hosting revenue each month as the uncertainty related to the consideration is resolved, hosting services are provided to its customer, and its customer utilizes the hosting service (the customer simultaneously receives and consumes the benefits of the Company's performance). The Company's performance obligation related to these services is satisfied over time.
***Income Taxes***
The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and income tax basis of assets and liabilities, and for operating losses and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which those items are expected to be realized. Tax law and rate changes are recorded in the period such changes are enacted. The Company establishes a valuation allowance when it is more likely than not that certain deferred tax assets will not be realized.
The Company recognizes a tax benefit from any uncertain tax positions only if they are more likely than not to be sustained upon examination based on the technical merits of the position. The amount of the accrual for which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.
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***Leases***
The Company accounts for leases in accordance with ASC Topic 842, *Leases* (“ASC 842”). The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating leases are presented as right-of-use (“ROU”) assets and the corresponding lease liabilities are included in operating lease liabilities, current and operating lease liabilities on the Company’s consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset, and lease liabilities represent the Company's obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.
ROU assets and lease liabilities are recognized at commencement date and determined using the present value of the future minimum lease payments over the lease term. The Company uses a discount rate based on a benchmark approach to derive an appropriate incremental borrowing rate to discount remaining lease payments. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived imputed rates for a lease term length of 10 years. Some leases include multiple year renewal options. The Company’s decision to exercise these renewal options is based on an assessment of its current business needs and market factors at the time of the renewal. Currently, the Company has certain leases for which the option to renew is reasonably certain, and therefore, options to renew were factored into the calculation of its right-of-use asset and lease liability as of December 31, 2024. In addition, the Company does not recognize short-term leases that have a term of twelve months or less as ROU assets or lease liabilities for all asset classes. The Company recognizes operating lease expense on a straight-line basis over the lease term.
The Company has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component for all asset classes when the payments are fixed. As such, variable lease payments, including those not dependent on an index or rate, such as real estate taxes, common area maintenance, and other costs that are subject to fluctuation from period to period are not included in lease measurement.
***Segment Reporting***
In November 2023, the FASB issued ASU No. 2023-07, *Improvements to Reportable Segment Disclosures* (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the ASU should be applied retrospectively to all prior periods presented in the consolidated financial statements. Early adoption was permitted.
The Company adopted this ASU for the year ended December 31, 2024. In adopting, the Company has disclosed how the CODM utilizes the key measures of segment profitability as well as how these measures are disclosed and quantified, and key segment expenses are disclosed and reconciled to consolidated loss before income taxes. See Note 20 - Segment Reporting for all segment disclosures the years ended December 31, 2024 and 2023.
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***Net Loss per Share***
The Company calculates basic net loss per share by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. A net loss cannot be diluted so when the Company is in a net loss position, basic and diluted loss per common share are the same. If, in the future, the Company achieves profitability, the denominator of a diluted earnings per common share calculation will include both the weighted-average number of shares outstanding and the number of common stock equivalents, if the inclusion of such common stock equivalents would be dilutive. Anti-dilutive common stock equivalents excluded from the computation of diluted net loss per share include convertible notes, warrants, stock options, and preferred stock.
***Loan Origination Costs***
Costs incurred in connection with securing loans payable have been capitalized and are being amortized as a component of interest expense over the term of the respective debt using the effective interest method. The unamortized balance of loan origination costs are reflected on the consolidated balance sheets as a direct deduction of the outstanding balance owed on the long-term debt.
***Distinguishing Liabilities from Equity***
The Company relies on the guidance provided by ASC Topic 480, *Distinguishing Liabilities from Equit*y, and ASC 815-40, *Derivatives and Hedging: Contracts in Entity*’*s Own Equity,* to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.
Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“mezzanine equity”). The Company will determine mezzanine equity classification if the redemption of the financial instrument is outside the control of the Company (i.e., at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.
***Stock-Based Compensation***
The Company measures the cost of employee and non-employee services in exchange for awards of equity instruments based on the grant-date fair value of the award. The fair value is determined using an option pricing model. The cost of awards of equity instruments is recognized on a straight-line basis over the vesting period, which is the requisite service period, and is recorded as stock-based compensation expense together with a corresponding increase in paid-in capital. The Company has elected to account for forfeitures of awards as they occur.
***Variable Interest Entities ("VIEs")***
The Company evaluates its interests in VIEs and will consolidate any VIE in which the Company has a controlling financial interest and are deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (1) the power to direct the activities of the VIE that most significantly impact its economic performance; and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could be significant to the VIE. If both of the characteristics are met, the Company is considered to be the primary beneficiary and therefore will consolidate that VIE into its consolidated financial statements. See Note 8 - Equity Method Investments for additional disclosures.
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***Recently Adopted Accounting Pronouncements - Adopted***
In November 2023, the FASB issued ASU 2023-07, *Segment Reporting (Topic 280)* - *Improvements to Reportable Segment Disclosures*, to provide enhanced segment disclosures. The standard will require disclosures about significant segment expense categories and amounts for each reportable segment, for all periods presented. Additionally, the standard requires public entities to disclose the title and position of the CODM in the consolidated financial statements. These enhanced disclosures are required for all entities on an interim and annual basis, effective for fiscal years beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. See Note 20 - Segment Reporting for all segment disclosures the years ended December 31, 2024 and 2023.
In December 2023, the FASB issued ASU 2023-08, *Accounting for and Disclosure of Crypto Assets (Topic 350).* This guidance requires entities to subsequently measure certain digital assets at fair value, with changes in fair value recorded in net income in each reporting period. In addition, entities are required to provide additional disclosures about the holdings of certain digital assets. These enhanced disclosures are effective for fiscal years beginning after December 15, 2024, including interim periods within those years. The Company has elected to early adopt this standard as of January 1, 2023. The adoption of this standard is reflected in the Company's consolidated financial statements.
***Recently Adopted Accounting Pronouncements - Not Yet Adopted***
In August 2023, the FASB issued ASU 2023-05, *Business Combinations - Joint Venture Formations (Topic 805): Recognition and Initial Measurement.* This standard addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statements. The new requirements are effective for all joint ventures within the ASU's scope that are formed on or after January 1, 2025. Early adoption is permitted. The adoption of this standard is reflected in the Company's consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, *Improvements to Income Tax Disclosures*, a final standard on improvements to income tax disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard applies to all entities subject to income taxes and is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2024. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. The adoption of this standard is reflected in the Company's consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, *Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses*. This guidance requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-04, *Debt - Debt with Conversion and Other Options (Topic 470).* This guidance clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The ASU is effective on a prospective basis, with the option for retrospective application, for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. The Company is currently evaluating the impact of ASU 2024-04 on its consolidated financial statements and related disclosures.
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Other recent accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
### **Note 3. Restatement**
The Company identified the complete population of certain assets contributed to its T20 Mining Group, LLC equity method investment in 2023 (see Note 8 – Equity Method Investments) were not derecognized as fixed assets in the Company’s financial statements. The assets contributed continued to be depreciated in 2023 and 2024. Therefore, the Company overstated property and equipment, overstated depreciation expense and understated the equity method investment. As a result, the Company restated its previously issued audited financial statements for the years ended December 31, 2023 and December 31, 2024.
The Company accounted for the restatement as a correction of an error under ASC 250. The tables below set forth the effect on the various financial statement captions including the balances originally reported and the restated balances as of December 31, 2023 and December 31, 2024.
_December 31, 2023_
| Balance Sheet | As Previously Reported | Adjustments | As Restated |
| --- | --- | --- | --- |
| Property and equipment, net | $12,745,242 | $(916,141) | $11,829,101 |
| Equity method investments | 6,101,262 | 1,195,698 | 7,296,960 |
| Total assets | 20,815,458 | 279,557 | 21,095,015 |
| Accumulated deficit | (20,352,056) | 279,557 | (20,072,499) |
| Total stockholders' equity (deficit) | 2,397,557 | 279,557 | 2,677,114 |
| Total liabilities, mezzanine equity and stockholders' equity (deficit) | $20,815,458 | $279,557 | $21,095,015 |
_Year Ended December 31, 2023_
| Statement of Operations | As Previously Reported | Adjustments | As Restated |
| --- | --- | --- | --- |
| Depreciation expense | $8,165,087 | $(454,072) | $7,711,015 |
| Total costs and expenses | 13,756,891 | (454,072) | 13,302,819 |
| Operating loss | (8,631,957) | 454,072 | (8,177,885) |
| (Loss) income from equity method investments | 60,341 | (226,807) | (166,466) |
| Loss on disposal of property and equipment | (421,699) | 52,292 | (369,407) |
| Total other income (expenses), net | (3,442,019) | (174,515) | (3,616,534) |
| Loss before income tax expense | (12,073,976) | 279,557 | (11,794,419) |
| Net loss | $(12,705,101) | $279,557 | $(12,425,544) |
| Net loss per share, basic and diluted | $(0.92) | $0.02 | $(0.90) |
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_December 31, 2023_
| Line item | Accumulated Deficit / As Previously Reported | Accumulated Deficit / Adjustments | Accumulated Deficit / As Restated | Total Stockholders' Equity (Deficit) / As Previously Reported | Total Stockholders' Equity (Deficit) / Adjustments | Total Stockholders' Equity (Deficit) / As Restated |
| --- | --- | --- | --- | --- | --- | --- |
| Net loss | $(12,705,101) | $279,557 | $(12,425,544) | $(12,705,101) | $279,557 | $(12,425,544) |
| Balance at December 31, 2023 | $(20,352,056) | $279,557 | $(20,072,499) | $2,397,557 | $279,557 | $2,677,114 |
_Year Ended December 31, 2023_
| Statement of Cash Flows | As Previously Reported | Adjustments | As Restated |
| --- | --- | --- | --- |
| Net loss | $(12,705,101) | $279,557 | $(12,425,544) |
| Depreciation | 8,165,087 | (454,072) | 7,711,015 |
| Loss (income) from equity method investments | (60,341) | 226,807 | 166,466 |
| Loss on disposal of property and equipment | 421,699 | (52,292) | 369,407 |
| Non-cash contribution to equity method investment | 1,252,314 | 1,422,505 | 2,674,819 |
_December 31, 2024_
| Balance Sheet | As Previously Reported | Adjustments | As Restated |
| --- | --- | --- | --- |
| Property and equipment, net | $3,093,279 | $(356,260) | $2,737,019 |
| Equity method investments | 7,707,629 | 949,986 | 8,657,615 |
| Total assets | 19,752,168 | 593,726 | 20,345,894 |
| Accumulated deficit | (33,850,599) | 593,726 | (33,256,873) |
| Total stockholders' equity (deficit) | (1,184,386) | 593,726 | (590,660) |
| Total liabilities, mezzanine equity and stockholders' equity (deficit) | $19,752,168 | $593,726 | $20,345,894 |
_Year Ended December 31, 2024_
| Statement of Operations | As Previously Reported | Adjustments | As Restated |
| --- | --- | --- | --- |
| Depreciation expense | $7,723,915 | $(559,881) | $7,164,034 |
| Total costs and expenses | 16,441,511 | (559,881) | 15,881,630 |
| Operating loss | (8,345,839) | 559,881 | (7,785,958) |
| (Loss) income from equity method investments | (28,558) | (245,712) | (274,270) |
| Loss on disposal of property and equipment | (2,525,408) | — | (2,525,408) |
| Total other income (expenses), net | (5,152,704) | (245,712) | (5,398,416) |
| Loss before income tax expense | (13,498,543) | 314,169 | (13,184,374) |
| Net loss | $(13,498,543) | $314,169 | $(13,184,374) |
| Net loss per share, basic and diluted | $(0.98) | $0.02 | $(0.96) |
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_December 31, 2024_
| Line item | Accumulated Deficit / As Previously Reported | Accumulated Deficit / Adjustments | Accumulated Deficit / As Restated | Total Stockholders' Equity (Deficit) / As Previously Reported | Total Stockholders' Equity (Deficit) / Adjustments | Total Stockholders' Equity (Deficit) / As Restated |
| --- | --- | --- | --- | --- | --- | --- |
| Net loss | $(13,498,543) | $314,169 | $(13,184,374) | $(13,498,543) | $314,169 | $(13,184,374) |
| Balance at December 31, 2024 | $(33,850,599) | $593,726 | $(33,256,873) | $(1,184,386) | $593,726 | $(590,660) |
_Year Ended December 31, 2024_
| Line item | As Previously Reported | Adjustments | As Restated |
| --- | --- | --- | --- |
| Net loss | $(13,498,543) | $314,169 | $(13,184,374) |
| Depreciation | 7,723,915 | (559,881) | 7,164,034 |
| Loss (income) from equity method investments | 28,558 | 245,712 | 274,270 |
### **Note 4. Revenue and Cost Recognition**
The following table provides the Company’s revenue disaggregated by revenue stream:
| Line item | Years Ended December 31, 2024 | Years Ended December 31, 2023 |
| --- | --- | --- |
| Revenue | | |
| Revenue from cryptocurrency mining | $4,184,239 | $4,367,695 |
| Revenue from mining hosting services | 3,911,433 | 757,239 |
| | $8,095,672 | $5,124,934 |
In accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. Due to the nature of the Company’s contracts, these reporting requirements are not applicable, because the majority of the Company’s remaining contracts meet certain exemptions as defined in ASC 606-10-50-14 through 606-10-50-14A, including (i) performance obligation is part of a contract that has an original expected duration of one year or less and (ii) the right to invoice practical expedient.
### **Note 5. Fair Value of Financial Instruments**
The following table provides the financial liabilities measured on a recurring basis and reported at fair value on the consolidated balance sheets as of December 31, 2024 and **2023**, and indicates the fair value of the valuation inputs the Company utilized to determine such fair value. There were no financial liabilities that were transferred out of a Level 3 category.
| Description | Level | December 31, 2024 | December 31, 2023 |
| --- | --- | --- | --- |
| Liabilities: | | | |
| Warrant liability | 3 | $4,815,890 | $2,249,338 |
| Convertible note payable | 3 | $3,008,474 | $3,346,197 |
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The Company accounts for its consideration transferred for the Company’s equity method investments and investment in joint venture at fair value. The consideration transferred includes leased mining equipment, which is fair valued using Level 3 inputs under the fair value hierarchy as there are unobservable and significant inputs that provide asset value.
The Company has deemed the price of digital assets to be a Level 1 input under the ASC 820 – Fair Value Measurement hierarchy as these were based on observable quoted prices in the Company’s principal market for identical assets.
| Description | Level | December 31, 2024 | December 31, 2023 |
| --- | --- | --- | --- |
| Assets: | | | |
| Digital assets | 1 | $511,376 | $109,615 |
### **Note 6. Property and Equipment**
The major classifications of property and equipment, including their estimated useful lives, are summarized as follows at the balance sheet dates:
_(as restated) · (as restated)_
| Line item | Estimated Useful / Life (in years) | December 31, 2024 | December 31, 2023 |
| --- | --- | --- | --- |
| Land | N/A | — | $170,000 |
| Buildings and improvements | 40 | 961,539 | 9,385 |
| Miners | 3 | 9,452,284 | 21,372,753 |
| Mining related equipment | 5 | 2,126,123 | 2,381,985 |
| Transportation equipment | 7 | 11,426 | 11,426 |
| Other equipment and furniture | 7 | 1,402 | 1,402 |
| Property and equipment, gross | | 12,552,774 | 23,946,951 |
| Less: Accumulated depreciation | | (9,815,755) | (12,117,850) |
| | | $2,737,019 | $11,829,101 |
For the years ended December 31, 2024 and 2023, depreciation expense relating to property and equipment amounted to $7,164,034 and $7,711,015, respectively.
During the year ended December 31, 2024, the Company recorded a loss on disposal of property and equipment of $2,525,408 related to the partial sale of T20 Mining Group, LLC. During the year ended December 31, 2023, the Company recorded a loss on disposal of property and equipment of $369,407 due to a fire.
### **Note 7. Digital Assets, Net**
The following table summarizes units held, cost basis and fair value of crypto assets held as of December 31, 2024:
| Asset | Symbol | Quantity of Digital Assets Held | Price | Cost Basis | Fair Value of Crypto assets |
| --- | --- | --- | --- | --- | --- |
| Bitcoin | BTC | 5.39 | $93,970.45 | $298,122 | $506,230 |
| Ethereum Classic | ETC | 187.66 | 27.42 | 9,913 | 5,146 |
| | | | | $308,035 | $511,376 |
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The following table summarizes units held, cost basis and fair value of crypto assets held as of December 31, 2023:
| Asset | Symbol | Quantity of Digital Assets Held | Price | Cost Basis | Fair Value of Crypto assets |
| --- | --- | --- | --- | --- | --- |
| Bitcoin | BTC | 2.47 | $42,708.13 | $82,542 | $105,507 |
| Ethereum Classic | ETC | 187.66 | 21.89 | 9,913 | 4,108 |
| | | | | $92,455 | $109,615 |
Changes in the Company’s digital assets for the years ended December 31, 2024 and 2023, were as follows:
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Balance as of January 1 | $109,615 | $5,488 |
| Additions of digital assets | 4,561,953 | 4,450,306 |
| Sales of digital assets | (4,348,874) | (4,374,939) |
| Change in fair value of digital assets | 188,682 | 28,760 |
| Balance as of December 31 | $511,376 | $109,615 |
### **Note 8. Equity Method Investments**
*T20 Mining Group, LLC*
In March 2023, the Company entered into a Limited Liability Company Interest Purchase Agreement with Turn Key Mountain, LLC and 913 Hero, LLC ("T20 Purchase Agreement") to acquire a 50.01% ownership interest in T20 Mining Group, LLC (“T20”). Under the terms of the T20 Purchase Agreement, the Company leases certain equipment to T20 and promised to contribute $450,090 to T20 for the development of its digital asset mining operations. The Company determined that T20 is a VIE as the Company has a variable interest in T20 and T20 relies on funding from the Company, Turn Key Mountain, LLC, and 913 Hero, LLC to sustain its operations. The Company has determined that it is not the primary beneficiary of T20 as power to direct or control its significant activities related to the bitcoin mining hosting is shared with Turn Key Mountain, LLC and 913 Hero, LLC. Accordingly, the Company has not consolidated T20’s results of operations and financial position. As the entity is not consolidated, it is accounted for as an equity method investment. The initial investment in T20 amounted to $1,677,197. The Company is entitled to 50.01% of the profits and losses of T20. During the year ended December 31, 2023, the Company received distributions of $25,000 from T20. During the year ended December 31, 2023, the Company’s share of net loss in T20 amounted to $286,221, which is included within (loss) income from equity method investments in the Company’s consolidated statements of operations. As of December 31, 2023, the Company’s investment in T20 amounted to $2,788,481 and is included in the balance of equity method investments in the accompanying consolidated balance sheets.
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In April 2024, the Company entered into a subsequent Limited Liability Company Interest Purchase Agreement with Bishops Bowl Capital, LLC ("Bishops Bowl Purchase Agreement"), whereby the Company sold 10.01% of its ownership interest in T20 to Bishops Bowl for consideration of $1,000,000. As the Company retained significant influence in T20 following its execution of the Bishops Bowl Purchase Agreement, the Company reduced the carrying amount of its equity method investment for the proportion sold in the amount of $164,954 and also recognized a gain of $835,046 related to the difference between the proceeds received and the carrying amount of the equity method investment sold. The Company will continue to account for its retained ownership interest of 40% under the equity method. During the second half of the year ended December 31, 2024, the Company and Bishops Bowl contributed equipment to T20 for the expansion of its digital asset mining operations. The additional contributions were made such that each partner’s ownership percentages remained the same, with the Company and Bishops Bowl continuing to own 40% and 60%, respectively, of T20. The Company increased the carrying amount of its equity method investment for the fair value of the assets contributed in the amount of $926,240 and also recognized a loss of $2,094,030 on the contribution of the assets. The Company will continue to account for its retained ownership interest of 40% under the equity method. During the year ended December 31, 2024, the Company received distributions of $1,225,000 from T20. During the year ended December 31, 2024, the Company's share of net income in T20 amounted to $1,008,559, which is included within (loss) income from equity method investments in the Company's consolidated statements of operations. As of December 31, 2024, the Company’s investment in T20 amounted to $5,428,404 and is included in the balance of equity method investments in the accompanying consolidated balance sheets.
Summarized financial information for T20 as of and for the years ended December 31, 2024 and 2023 is as follows:
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Total assets | $5,620,420 | $3,948,466 |
| Total liabilities | $1,888,902 | $2,026,842 |
| Net income (loss) | $2,373,079 | $(584,646) |
*The Cloud Minders LLC*
On November 1, 2023, the Company acquired an interest in The Cloud Minders LLC ("TCM"), a partnership that is involved in graphics processing unit cloud hosting services. The Company is initially entitled to 43% of the profit and losses from the investee. The acquisition cost totaled $4,300,000 and consisted of the issuance of QumulusAI common stock via a convertible note payable with TCM for $3,300,000 (see Note 14 - Convertible Note Payable) and a payable to TCM totaling $1,000,000 to be repaid over 12 months at no interest. Payments commence on January 1, 2024, and continue on the first of each subsequent month, in exchange for an additional 19,608 (approximately 6%) membership interest to the Company over the twelve months. TCM specializes in high-performance computing and artificial intelligence infrastructure within the cloud computing industry and offers graphics processing unit server hosting, equipped with the latest hardware for deep learning, data science, graphics rendering, and scientific research applications. Its services include configuration, reliability assurance, testing and validation, security measures, installation, and hardware rental for monetization. Accordingly, the Company has not consolidated TCM’s results of operations and financial position. As the entity is not consolidated but the Company has significant influence over the investee, it is accounted for as an equity method investment. During the year ended December 31, 2023, the Company’s share of net income in TCM amounted to $208,479, which is included within (loss) income from equity method investments in the Company’s consolidated statements of operations. As of December 31, 2023, the Company’s investment in TCM amounted to $4,508,479 and is included in the balance of equity method investments in the accompanying consolidated balance sheets.
During the year ended December 31, 2024, the Company’s share of net loss in TCM amounted to $1,279,268. As of December 31, 2024, the Company’s investment in TCM amounted to $3,229,211 and is included in the balance of equity method investments in the accompanying consolidated balance sheets.
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Summarized financial information for TCM as of and for the years ended December 31, 2024 and 2023 is as follows:
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Total assets | $14,479,018 | $8,011,549 |
| Total liabilities | $11,679,962 | $8,616,353 |
| Net income (loss) | $(2,975,042) | $484,836 |
*FCNC Venture, LLC*
In January 2023, the Company entered into a joint venture agreement with Blokbuster, LLC (“Blokbuster”) to form FCNC. The Company has determined that it does not control the joint venture, as the Company’s ownership is less than 50% and all major decisions of the joint venture require unanimous consent with Blokbuster. Accordingly, the Company has not consolidated the entity’s results of operations and financial position. As the entity is not consolidated, it is accounted for as an equity method investment. The initial investment in FCNC amounts to $531,395, which was composed of $500,000 in cash and a promissory note for $31,395. The Company is entitled to 33% of the profit and losses and distributions of the entity. During the year ended December 31, 2023, the Company’s share of net loss in the joint venture amounted to $88,724, which is included within (loss) income from equity method investments in the Company’s consolidated statements of operations. As of December 31, 2023, the investment in FCNC amounted to $442,671 and is included in the balance of equity method investments in the accompanying consolidated balance sheets.
During 2024, the Company sold its equity interest in FCNC and recognized a gain of $155,286, which is included within gain on sale of equity method investments in the Company's consolidated statements of operations. During the year ended December 31, 2024, the Company’s share of net loss in the joint venture amounted to $3,561, which is included within income from equity method investments in the Company’s consolidated statements of operations. As of December 31, 2024, the balance of the Company’s investment in the joint venture amounted to $0.
Summarized financial information for FCNC as of and for the year ended December 31, 2023 is as follows:
_December 31, 2023_
| | |
| --- | --- |
| Total assets | $1,254,841 |
| Total liabilities | $929,336 |
| Net loss | $(268,680) |
### **Note 9. Deposits on Mining Equipment**
The Company makes deposits that represent prepayments made to premier suppliers and manufacturers to purchase mining and mining related equipment at a preset price. The prepayments are applied to the purchase price when the vendor ships the mining equipment. As of December 31, 2024 and 2023, the Company had outstanding deposits for miners and mining related equipment totaling $1,326,801 and $0, respectively.
### **Note 10. Transactions with Related Parties**
As of and for the years ended December 31, 2024 and 2023, the Company had the following related party transactions:
- As of December 31, 2024 and 2023, the Company had an outstanding loan payable due to a related affiliate of one of the stockholders in the amounts of $2,967,109 and $3,737,388, respectively.
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- As of December 31, 2024 and 2023, the Company has an outstanding loan payable due to a related affiliate in the amounts of $0 and $253,681, respectively.
- As of December 31, 2024 and 2023, the Company had an outstanding loan payable due to one of the stockholders in the amount of $2,000,000 and $2,000,000, respectively.
- As of December 31, 2024 and 2023, the Company had an outstanding loan payable due to various stockholders in the amount of $20,000 and $20,002, respectively.
- During 2024, the Company made its first advance on its line of credit due to a related affiliate. As of December 31, 2024, the Company had an outstanding balance in the amount of $292,659.
- During 2023, the Company advanced a loan to FCNC. As of December 31, 2023, the outstanding balance of the loan receivable amounted to $125,373. The loan receivable was fully paid during 2024.
- During 2024, the Company advanced a loan to the buyer of its investment in joint venture, FCNC. As of December 31, 2024, the outstanding balance of the loan receivable amounted to $232,452.
- As referenced on Note 8 - Equity Method Investments, the Company owed $1,000,000 to TCM as a result of the cost to acquire an interest in TCM. As of December 31, 2024 and 2023, the balance outstanding on this payable was $0 and $900,000, respectively.
- During the year ended December 31, 2023, the Company recognized bitcoin mining operating expenses in the amounts of $1,441,275 and $552,496 from FCNC and T20, respectively. As of December 31, 2023, amounts payable to these entities totaled $443,363 and are included in accounts payable on the Company’s consolidated balance sheets.
- During the year ended December 31, 2024, the Company recognized bitcoin mining operating expenses in the amounts of $248,139 and $1,104,330 from FCNC and T20, respectively. As of December 31, 2024, amounts payable to these entities totaled $68,008 and are included in accounts payable on the Company’s consolidated balance sheets.
- During the years ended December 31, 2024 and 2023, the Company recognized equipment rental income totaling $23,705 and $37,532 from FCNC and T20, respectively. At December 31, 2024 and 2023, amounts receivable from these entities totaled $36,071 and $28,083 and are included in accounts receivable on the Company’s consolidated balance sheets.
- During 2023, the Company sold a loan receivable to one of the stockholders at a discount. The outstanding balance of the loan receivable at the time of sale amounted to $1,010,145 and the loss on sale amounted to $104,197.
- As referenced in Note 8 – Equity Method Investments, during 2023, the Company acquired an interest in TCM. As part of the acquisition consideration, the Company issued a convertible promissory note (the “Note”) to TCM, in the principal amount of $3,900,000. Refer to Note 14 - Convertible Note Payable for further information regarding the Company’s accounting for the Note at issuance and as of December 31, 2024. As of December 31, 2024 and 2023, the balance outstanding on this loan was $2,314,089 and $3,346,197, respectively.
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### **Note 11. Line of Credit**
During September 2023, the Company secured a line of credit with Trailhead Growth, LP with a maximum principal amount of $300,000 at an interest rate of 12%. The line of credit was collateralized by a blanket lien on certain assets and was guaranteed by certain of the Company's stockholders. The line of credit had a maturity date of October 1, 2024. At December 31, 2023, the Company did not have any outstanding borrowings against the line of credit.
During April 2024, the Company amended its line of credit agreement with Trailhead Growth, LP with a maximum principal amount of $700,000 at an interest rate of 6%. The line of credit has a maturity date of 360 days following the first principal advance under the line of credit.
During May 2024, the Company made its first advance on the line of credit in the amount of $648,262, in which $6,418 of this amount is related to line of credit origination fees as a result of the advance. At December 31, 2024, the Company had an outstanding balance of $292,659. The line of credit has a maturity date of May 15, 2025. Interest expense for the years ended December 31, 2024 and 2023 related to the line of credit was $15,108 and $0, respectively.
### **Note 12. Accrued Expenses**
Accrued expenses were comprised of the following:
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Accrued interest | $647,162 | $703,751 |
| Sales tax payable | 484,869 | 295,310 |
| Accrued hosting fees | 810,818 | 182,900 |
| Accrued payroll | 139,295 | 251,363 |
| Other accrued expenses | 231,945 | 123,882 |
| Accrued expenses | $2,314,089 | $1,557,206 |
### **Note 13. Notes Payable**
On March 19, 2021, the Company entered into a $2,000,000 convertible balloon note with Trailhead Income, LP. The note bears interest at 12% and matures on September 1, 2025. The note is secured by certain mining equipment. Interest-only payments are due on a quarterly basis through the maturity date. As of December 31, 2024 and 2023, the outstanding principal balance on the note was $2,000,000.
On February 23, 2021, the Company entered into a note payable with Alder Mortgage Group. The note bears interest at 15% and matures on July 1, 2024. The note is secured by certain mining equipment. Payments of principal and interest are due on a quarterly basis through maturity. Payment of outstanding principal and interest were paid at the loan maturity date. As of December 31, 2024 and 2023, the outstanding principal balance was $0 and $253,681, respectively.
On April 14, 2022, the Company entered into a $5,000,000 balloon note with Alder Mortgage Group. The note bears interest at 12% and had an initial maturity date of May 1, 2023. The maturity date was extended to December 31, 2025. The note is secured by certain mining equipment. Interest-only payments are due on a monthly basis through the maturity date. On October 18, 2022, the Company made a principal payment of $450,000 and the note maturity date was extended to December 31, 2025. As of December 31, 2024 and 2023, the outstanding principal balance was $1,117,221 and $1,887,500, respectively.
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On May 10, 2024, the Company entered into a $385,000 note with various lenders. The loan bears interest of 12% and matures on December 1, 2025. The note was repaid in full during the year ended December 31, 2024.
On February 15, 2022, the Company entered into a $1,849,888 balloon note with GC Opportunities 2 Private Fund. The note bears interest at 12% and matures on February 15, 2026. The note is secured by certain mining equipment. The note was amended on October 4, 2022 to provide a onetime waiver of payment default for unpaid monthly interest due for July 15, 2022, August 15, 2022 and September 2022, and to defer interest due for six months from July 2022 to December 2022, until maturity. As of December 31, 2024 and 2023, the outstanding principal balance was $1,849,888.
On September 15, 2022, the Company entered into a note payable with Technogistics. The note bears interest at 12% and matures on May 15, 2024. The note is secured by certain mining equipment. During the year ended December 31, 2024, the remaining principal balance of $700,000 was converted to equity. As of December 31, 2024 and 2023, the outstanding principal balance was $0 and $113,997, respectively
On April 11, 2022, the Company entered into two notes with Caterpillar Financial Services Corporation for an aggregate of $228,314. The notes bear interest at 1.49% and mature on April 11, 2027. The notes are secured by track loaders. Payments of principal and interest are due on a monthly basis through maturity. As of December 31, 2024 and 2023, the outstanding principal balance was $108,638 and $154,057, respectively.
On December 31, 2021, the Company entered into a $344,000 note with Gratus Holdings. The note bears interest at 8% and had an original maturity date of December 31, 2022. As of December 31, 2024 and 2023, the outstanding principal balance was $20,000.
Notes payable at December 31, 2024 and 2023 consisted of the following:
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Notes payable on demand with monthly interest payments ranging from 12% to 17%, secured by certain specific mining equipment - related party | — | $253,681 |
| Balloon notes payable with monthly interest payments of 12%, secured by certain specified mining equipment, maturities ranging from 2023 to 2026 - related party | 4,967,109 | 5,737,387 |
| Note payable on demand with monthly interest at 8%, unsecured - related party | 20,000 | 20,002 |
| Notes payable with interest ranging from 0% to 1.49%, monthly payments of principal and interest, secured by track loaders, maturing 2027 | 108,638 | 154,057 |
| Balloon note payable with interest of 12%, quarterly payments of principal and interest, secured by certain specified mining equipment, maturing 2024 | — | 113,997 |
| Unamortized loan origination costs | (26,748) | (62,907) |
| | 5,068,999 | 6,216,217 |
| Less: Current maturities | (1,158,009) | (920,123) |
| Notes payable, net of current maturities | $3,910,990 | $5,296,094 |
F-75
Maturities of notes payable are as follows:
| Line item | December 31, |
| --- | --- |
| 2025 | $1,183,311 |
| 2026 | 3,896,670 |
| 2027 | 15,766 |
| 2028 | — |
| Total | $5,095,747 |
### **Note 14. Convertible Note Payable**
On November 1, 2023, the Company entered into a Convertible Promissory Note Agreement (the "Note") with TCM at a face value of $3,900,000. Upon issuance, the Note was entered into at a discount of $600,000 and a fair value of $3,300,000. The Note bears interest at a rate of 0.1% per annum and matures on November 1, 2025. No scheduled payments are due under the Note, and the Note permits early partial or full prepayment under the Note at any time without any prepayment penalty.
Upon the occurrence of an event or events of default under the Note, including bankruptcy, an uncured material breach of the Note Agreement, or a board adopted resolution for liquidation, dissolution or winding-up of the Company, all accrued expenses, accrued interest, and all principal outstanding under the Note shall become immediately due and payable in full.
The Note provides for automatic conversion of the amount of any unpaid principal balance of the Note upon maturity into that number of shares of common stock by dividing such remaining principal balance by the conversion price of $1.00 per share. At maturity, all interest accrued and owing with respect to the remaining principal balance shall be forgiven by TCM.
The Company evaluated the embedded call and put features in accordance with ASC 815-15-25. The embedded puts are clearly and closely related to the debt host instrument and therefore are not required to be bifurcated and separately measured at fair value. The Company additionally determined that the embedded conversion feature did not meet the definition of a derivative under ASC 815 and therefore did not require bifurcation from the host debt instrument.
The Note will be initially recorded at fair value, as it was issued as consideration in the acquisition of an equity method investment in TCM (see Note 8 for information regarding the Company’s equity method investment). The Company reflected a discount of $600,000 on the Note at issuance to recognize at fair value at issuance. Subsequently, the Company will amortize the Note discount to interest expense over the period from issuance through the maturity date, at an effective interest rate of 8.5%. For the years ended December 31, 2024 and 2023, the Company recognized $294,260 and $46,865 as amortization expense, respectively. At December 31, 2024, the unamortized discount on the Note was $217,111.
As of December 31, 2024 and 2023, the Company recorded accrued cash interest of $612 and $652, respectively.
During the year ended December 31, 2024, the Company made certain prepayments on the Note under its optional prepayment right. In aggregate, the Company repaid $480,430 in principal in cash and recognized a proportional amount of the unamortized debt discount as a loss on extinguishment (totaling $35,583). In addition, in December 2024, the Company settled $193,022 in principal through the issuance of an option to purchase 78,667 shares of the Company’s common stock at $1.11 per share. The Company estimated the fair value of the option using the Black-Scholes model to be $180,776 and recognized a loss on extinguishment of $1,399 (including a proportional amount of the unamortized debt discount, totaling $13,646).
F-76
The carrying amount of the Note as of December 31, 2024 and 2023 is summarized as follows:
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Outstanding principal | $3,226,548 | $3,900,000 |
| Unamortized amount | (218,074) | (553,803) |
| Net carrying value | $3,008,474 | $3,346,197 |
Subsequently, the Company will amortize the Note discount to interest expense over the period from issuance through the maturity date. For the years ended December 31, 2024 and 2023, the Company recognized $286,500 and $46,197 as amortization expense, respectively. During the year ended 2024, the Company made principal payments in the amount of $480,430. At December 31, 2024 and 2023, the unamortized discount on the Note was $218,074 and $553,803, respectively. The outstanding balance of the note as of December 31, 2024 and 2023, was $3,008,474 and $3,346,197, respectively.
### **Note 15. Income Taxes**
The components of the income tax expense were as follows:
| Current / Federal / State / Total current expense | For the Years Ended December 31, 2024 / $ | For the Years Ended December 31, 2024 / — | For the Years Ended December 31, 2023 / — |
| --- | --- | --- | --- |
| Deferred | | | |
| Federal | | — | 622,632 |
| State | | — | 8,493 |
| Valuation Allowance | | — | — |
| Total deferred expense | | — | 631,125 |
| Total income tax expense | $ | — | $631,125 |
F-77
The following table reconciles the income tax expense based on the U.S. federal and state statutory rates with actual income tax expense:
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 |
| --- | --- | --- |
| Tax expense (benefit) at federal statutory rate (21%) | $(2,822,472) | $(2,535,535) |
| Increase (decrease) resulting from: | | |
| State income taxes, net of federal income tax benefit | (152,024) | (108,554) |
| Change in tax rate | 64,518 | 9,689 |
| Permanent differences | 639,425 | 319,002 |
| Deferred adjustment | 139,118 | (84,352) |
| Change in valuation allowance | 2,131,435 | 3,030,875 |
| Income tax expense | — | $631,125 |
The significant components of the Company’s deferred tax assets and liabilities were as follows:
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Deferred tax assets: | | |
| Accrual to cash | $446,232 | $406,990 |
| Loss on deposits on mining equipment | — | 442,462 |
| Cumulative net operating loss carryforwards | 4,896,576 | 4,525,217 |
| Depreciation | 111,340 | — |
| Amortization | 2,722 | 5,644 |
| Stock-based compensation | 125,448 | 8,063 |
| Other | 26,074 | 52,763 |
| Total deferred tax assets | 5,608,392 | 5,441,139 |
| Valuation allowance | (5,162,310) | (3,030,875) |
| Net deferred tax assets | 446,082 | 2,410,264 |
| Deferred tax liabilities: | | |
| Depreciation | — | (2,043,679) |
| Investments | (446,082) | (366,585) |
| Total deferred tax liabilities | (446,082) | (2,410,264) |
| Net deferred tax assets (liabilities) | — | — |
As of December 31, 2024, the Company had $22,988,528 and $20,294,014 of federal and state gross Net Operating Losses (“NOLs”), respectively, that may be available to offset future taxable income. As of December 31, 2023, the Company had $20,749,126 and $14,551,122 of gross federal and state tax NOLs, respectively. All NOLs were generated after the enactment of the Tax Cuts and Jobs Act, and as such are carried forward indefinitely, but can only be utilized to offset up to 80% of taxable income in any given year.
As of December 31, 2024, the Company continued to maintain a full valuation allowance against deferred tax assets based on its cumulative operating results as of December 31, 2024 and the three-year cumulative loss. The Company evaluated all evidence, both positive and negative, in assessing the likelihood of realizability and the Company determined it was not more likely than not it would be able to realize the deferred tax assets. As of December 31, 2024 and 2023, the Company had a total valuation allowance of $5,162,310 and $3,030,875, respectively, and the net change in the valuation allowance was $2,131,435.
F-78
As of December 31, 2024 and 2023, the Company had no unrecognized tax benefits.
The Company files income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. Due to the NOL carryforward, tax years 2019 through 2024 remain open to examination by the major taxing jurisdictions to which the Company is subject. There are no open examinations that would have a meaningful impact to the Company's consolidated financial statements.
The utilization of the Company’s net operating losses may be subject to a substantial limitation in the event of any significant future changes in its ownership structure under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carryforwards before their utilization. We have not conducted any studies to determine annual limitations, if any, that could result from such changes in ownership.
### **Note 16. Stockholders' Equity (Deficit)**
*Preferred Stock*
The Company has designated a portion of the authorized shares of preferred stock as Series A, Series B, Series C and Series D Preferred stock, and the issuance of total designated shares cannot exceed the aggregate number of preferred stock shares authorized for issuance. As of December 31, 2024 and 2023, the authorized number of shares of Series A, Series B, Series C, and Series D Preferred stock were 5,453,876, 5,856,097, 3,690,027, and 10,000,000, respectively.
All shares of Series A, Series B, Series C and Series D Preferred stock will, with respect to dividend rights, redemption rights and rights upon the liquidation, dissolution or winding-up of this corporation, rank on parity with all other series of Preferred Stock and senior to common stock. Each holder of Series A, Series B, Series C, and Series D Preferred stock shall be entitled to one vote for each share of stock held. Except as required by applicable law, the holders of Series A, Series B, Series C, and Series D Preferred stock and the holders of all other series of preferred stock and of common stock shall vote together as a single voting group on all matters submitted to a vote by the Company. Each share of Preferred Stock held by a particular holder shall automatically, without any further action, convert into one (1) fully paid and nonassessable share of common stock upon a transfer of such share or upon the preferred capital account of such holder of such Preferred Stock being paid in its entirety. One holder of 729,448 shares of Series A Preferred stock and 634,132 shares of Series B Preferred stock has a non-contingent redemption right, therefore these shares are classified within mezzanine equity on the balance sheet. The remaining shares of Series A and B Preferred stock do not contain this redemption right and are classified in permanent equity.
In the event of any distributions pursuant to the liquidation, dissolution or winding-up of the Company, the proceeds will be paid as follows:
i. First, pay to the holders of preferred stock, regardless of series, one times any remaining preferred capital account balance that has not been returned via distribution, plus any and all accrued and declared but unpaid dividends on each share of Series A Preferred stock; and
ii. Thereafter, the holders of preferred stock shall participate ratably with the common stock on an as-converted basis.
F-79
Liquidation values of the outstanding capital preferred stock will be as follows:
i. $5,937,155 to the holders of shares of Series A Preferred stock with a liquidation preference of $1.25 per share;
ii. $10,923,379 to the holders of shares of Series B Preferred stock with a liquidation preference of $2.98 per share;
iii. $5,932,864 to the holders of shares of Series C Preferred stock with a liquidation preference of $1.62 per share; and
iv. $9,089,000 paid ratably to the holders of shares of Series D Preferred stock with a liquidation preference of $1.00 per share.
Below is a summary of activity of Preferred Stock classified within mezzanine equity:
| Line item | Series A Preferred Stock / Shares | Series A Preferred Stock / Amount | Series B Preferred Stock / Shares | Series B Preferred Stock / Amount |
| --- | --- | --- | --- | --- |
| Balance at January 1, 2023 | 729,448 | $811,049 | 634,132 | $1,221,512 |
| Balance at December 31, 2023 | 729,448 | $811,049 | 634,132 | $1,221,512 |
| Balance at December 31, 2024 | 729,448 | $811,049 | 634,132 | $1,221,512 |
*Common Stock*
The Company is authorized to issue up to 75,000,000 shares of common stock, without any par value per share.
Each holder of common stock is entitled to one vote for each share held of record on all matters to be voted on by such holders. Holder of common stock are entitled to receive dividends, if declared. Upon liquidation, dissolution or winding-up, holders of common stock are entitled to share ratably in the net assets legally available for distribution after payment of all debts and other liabilities, subject to any preferential rights of the holders of Preferred Stock, if any.
### **Note 17. Warrants**
*Type 1 Warrants*
The warrants were issued during the year ended December 31, 2022 in conjunction with Series A Preferred Stock in satisfaction of outstanding debt. The warrants were not considered indexed to the issuer’s stock pursuant to ASC 815, as the warrants are subject to vesting upon the thirty-six (36) mensiversaries of the issuance date, at a rate of one thirty-sixth (1/36th) per month. At the option of the Company, the Company can return to the holder any cash it previously received from the holder. Upon the occurrence of such return of capital, the vesting schedule recasts based on amount return and remaining time period to vest. As this contingency is based on the underlying capital account of the warrant holder it violates the fixed-for-fixed option pricing model. As such, the Company recorded the Warrants as liabilities initially measured at fair value with subsequent changes in fair value recognized in earnings each reporting period. 961,255 of the warrants are pre-funded warrants.
The Type 1 warrants are "penny warrants", meaning they have an exercise price of $0.01 ($0.03 after the Reverse Stock Split). The fair value of these penny warrants was calculated as the Company's stock price less the exercise price of $0.01 ($0.03 after the Reverse Stock Split) (i.e., intrinsic value). The grant date fair value of the Type 1 Warrants were $692,104. The fair value of the warrants as of December 31, 2024 and 2023 was $4,815,890 and $2,249,338, respectively.
F-80
*Type 2 Warrants*
Various individuals performed professional services for the Company during the year ended December 31, 2024 and were issued 94,188 warrants as payment for the services. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance. The grant date fair value of these Warrants issued during 2024 was estimated to be $188,352 upon issuance. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. As the Warrants vest immediately, the fair value of these warrants was recognized in operating expenses in the Company's consolidated statements of operations during the year ended December 31, 2024.
*Type 3 Warrants*
The warrants were issued in conjunction with the private placement Series D Preferred Stock. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price, exercise price, term, volatility, risk-free rate, and expected dividend rate).
In connection with issuances of preferred stock during the years ended December 31, 2024 and 2023, the Companies issued warrants for common stock of QumulusAI to debt holders and Series D Preferred stock holders. The warrants entitle holders to purchase 51,550 shares of common stock at a purchase price ranging from $1.50 to $3 per share. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. The warrants were reflected as a reduction to additional paid-in capital as of the issuance date based on relative fair value, with $69,601 and $24,887, respectively, recognized during the years ended December 31, 2024 and 2023.
*Type 4 Warrants*
The warrants were issued in conjunction with the modification of certain loans. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price, exercise price, term, volatility, risk-free rate, and expected dividend rate).
In connection with modifications of certain loans during the year ended December 31, 2024, the Company issued warrants for common stock of QumulusAI to debt holders. The warrants entitle holders to purchase 76,718 shares of common stock at a purchase price of $3 per share. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. The fair value of the warrants of $154,687 has been recognized as a loss on extinguishment in the Company's consolidated statements of operations during the year ended December 31, 2024.
*Type 5 Warrants*
The warrants were issued in conjunction with certain investors' investment in TCM. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price, exercise price, term, volatility, risk-free rate, and expected dividend rate).
In connection with certain investors' investments in TCM during the years ended December 31, 2024 and 2023, the Company issued warrants exercisable into common stock of QumulusAI. The warrants entitle holders to purchase 265,590 shares of common stock at a purchase price of $3 per share. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. The grant of these warrants did not result in an increase of the Company’s ownership in TCM. As the Company is paying a cost on behalf of TCM, the fair value of the warrants of $55,100 and $476,145 has been recognized in general and administrative expense in the Company's consolidated statements of operations during the years ended December 31, 2024 and 2023, respectively.
F-81
The summary of stock warrant activity is as follows:
| Line item | Number of Warrants | Weighted Average Exercise price ($) | Weighted Average Grant- Date Fair Value ($) | Weighted Average Remaining Contractual Life (in Years) |
| --- | --- | --- | --- | --- |
| Warrants outstanding as of January 1, 2023 | 937,845 | 0.03 | 1.59 | 3.0 |
| Granted | 67,119 | 1.50 | 1.32 | |
| Warrants outstanding as of December 31, 2023 | 1,004,964 | 0.12 | 1.59 | 2.26 |
| Granted | 434,998 | 3.00 | 2.01 | |
| Warrants outstanding as of December 31, 2024 | 1,439,962 | 1.02 | 1.72 | 2.31 |
| Warrants exercisable as of December 31, 2024 | 1,290,119 | 1.14 | 1.74 | 2.43 |
The total fair value of warrants granted during the years ended December 31, 2024 and 2023 amounted to $888,532 and $116,611, respectively. The Black-Scholes model utilized the following inputs to value the warrants granted:
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Warrant Valuation Assumptions: | | |
| Risk-free interest rate | 4.5% | 3.8% to 4.3% |
| Expected term (years) | 5.00% | 5.00 |
| Expected volatility | 131.0% | 129.0% to 133.0% |
| Expected dividend yield | —% | — |
### **Note 18. Stock-Based Compensation**
WAHA and SPRE sponsor stock-based compensation plans known as the 2021 Option Plan and 2022 Plan, respectively (the “Plans”). The number of shares of common stock authorized for issuance under the Plans, prior to the merger into QumulusAI, was 74,000. Pursuant to the contribution and exchange agreement with QumulusAI, the total number of shares of common stock authorized for issuance are 1,461,307 shares.
The Plans allow the Company to grant incentive stock options and non-qualified stock options. The persons eligible to receive awards are the employees, consultants and directors of the Company and its affiliates. Other than incentive stock options that are granted to a stockholder who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or affiliates (a “Ten Percent Stockholder”), stock options are exercisable for up to ten years from the grant date, at an option price per share not less than the fair market value on the date the option is granted. A Ten Percent Stockholder shall not be granted an incentive stock option unless the option exercise price is at least 110% of the fair market value of the common stock at the grant date and the option is not exercisable after the expiration of five years from the grant date. Incentive stock options may be granted to employees of the Company or any subsidiary corporation. Awards other than incentive stock options may be granted to employees, consultants and directors. The option vesting schedule for options granted is determined at the time of the grant. The Plans provide for accelerated vesting of unvested options in the event of a change in control.
F-82
Pursuant to the contribution and exchange agreement, the number of options outstanding as of the date of the agreement were converted in accordance with the QumulusAI conversion ratio. The following is a summary of stock option activity during the years ended December 31, 2024 and 2023, effective for the conversion:
| Line item | Number of Options | Weighted Average Exercise price ($) | Weighted Average Grant-Date Fair Value ($) | Weighted Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value |
| --- | --- | --- | --- | --- | --- |
| Options outstanding as of January 1, 2023 | 273,947 | 3.00 | 1.95 | 10.1 | — |
| Granted | 118,513 | 0.36 | 0.66 | | |
| Exercised | — | — | — | | |
| Canceled | (49,621) | (3.00) | (1.47) | | |
| Options outstanding as of December 31, 2023 | 342,839 | 2.49 | 2.01 | 9.2 | $238,210 |
| Granted | 245,332 | 1.50 | 2.08 | | |
| Exercised | — | — | — | | |
| Canceled | — | — | — | | |
| Options outstanding as of December 31, 2024 | 588,171 | 1.92 | 2.04 | 8.8 | $1,976,425 |
| Options exercisable as of December 31, 2024 | 578,974 | 1.65 | 1.89 | 8.6 | |
For the years ended December 31, 2024 and 2023, the total fair value of the options granted amounted to $510,178 and $79,960, respectively. The Black-Scholes model utilized the following inputs to value the options granted during the years ended December 31, 2024 and 2023:
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Option Valuation Assumptions: | | |
| Risk-free interest rate | 4.6% | 4.5% |
| Expected term (years) | to 5.00 | 4.29 |
| Fair value of underlying common stock | $2.37 | $0.75 |
| Exercise price | $3.00 | $0.36 |
| Expected volatility | 133.0% | 134% |
| Expected dividend yield | —% | — |
The Company recognized $313,640 and $(872) in stock-based compensation during the years ended December 31, 2024 and 2023, respectively, in connection with issued stock options. As of December 31, 2024, non-vested outstanding options totaled 15,741 and the Company expects to recognize $32,824 of stock-based compensation for the non-vested options over the remaining weighted-average contractual period of 1.4 years. Stock-based compensation is recorded in general and administrative expenses in the Company's consolidated statements of operations.
F-83
### **Note 19. Net Loss per Share**
The following table sets forth the computation of the basic and diluted net loss per share:
_(as restated) · (as restated)_
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Net loss attributable to common stockholders | $(13,184,374) | $(12,425,544) |
| Net loss per share attributable to common stockholders, basic and diluted | $(0.96) | $(0.90) |
| Weighted-average common stock outstanding, basic and diluted | 13,796,790 | 13,796,790 |
The table below sets forth all outstanding potentially dilutive securities which were not included in the calculation of diluted earnings per share because their impact would have been antidilutive to the Company’s “control number,” which is loss from continuing operations.
| Line item | December 31, 2024 | December 31, 2023 |
| --- | --- | --- |
| Potentially dilutive securities: | | |
| Warrants | 478,713 | 43,708 |
| Stock options | 588,171 | 224,326 |
| Convertible note | — | 3,346,197 |
| Series A Preferred Stock | 4,713,515 | 4,713,515 |
| Series B Preferred Stock | 5,205,630 | 5,205,630 |
| Series C Preferred Stock | 3,663,841 | 3,663,841 |
| Series D Preferred Stock | 9,089,000 | 500,000 |
| Total | 23,738,870 | 17,697,217 |
### **Note 20. Segment Reporting**
As of December 31, 2024, the Company operates in one reporting segment. The Company’s hosting services and Bitcoin mining are located in the United States, and the Company views these operations as one reporting segment as the CEO, as the Company's CODM manages and allocates resources to the operations of the Company on a consolidated basis. This enables the CEO to assess the Company's overall level of available resources and determine how best to deploy these resources across service offerings and research and development projects in line with long-term company-wide strategic goals.
The accounting policies of the reportable segment is the same as those described in the “Summary of Significant Accounting Policies” for the Company. All costs, operating expenses, depreciation, and corporate overhead assets are fully allocated to the Company’s one segment.
The CODM uses various financial metrics, including gross profit, operating income and net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into specific service offerings within the segment, such as for entering into significant contracts, hiring of key management or executive personnel, or making significant capital investment decisions.
F-84
The following table outlines the level of disaggregation reviewed by the CODM for the years ended December 31, 2024 and 2023:
_(as restated) · (as restated)_
| Line item | Years Ended December 31, 2024 | Years Ended December 31, 2023 |
| --- | --- | --- |
| Revenue | $8,095,672 | $5,124,934 |
| Cost of revenue | | |
| Hosting expenses | 3,063,949 | 3,582,377 |
| Electricity | 2,026,022 | — |
| Contract labor | 125,484 | — |
| Shipping and postage | 155,594 | — |
| General and administrative | | |
| Stock-based compensation | 313,640 | (872) |
| Wages and salaries | 627,657 | 993,752 |
| Taxes and other expenses | 90,408 | 80,849 |
| Utilities | 13,446 | 841 |
| Rent and lease expense | 261,341 | 40,779 |
| Professional fees | 1,202,456 | 558,919 |
| Insurance | 320,388 | 143,333 |
| Travel, meals, and entertainment | 33,442 | 52,359 |
| Supplies and software | 149,686 | (59,168) |
| Other general and administrative expenses | 334,083 | 198,635 |
| Depreciation expense | 7,164,034 | 7,711,015 |
| Operating loss | (7,785,958) | (8,177,885) |
| Other (expense) income | | |
| (Loss) income from equity method investments | (274,270) | (166,466) |
| Gain on sale of equity method investments | 835,046 | — |
| Gain on sale of investment in joint venture | 155,286 | — |
| Gain on conversion of note payable | — | 105,464 |
| Change in fair value of warrant liability | (2,566,552) | (1,557,234) |
| Change in fair value of digital assets | 188,682 | 28,760 |
| Loss on disposal of property and equipment | (2,525,408) | (369,407) |
| Loss on extinguishment of debt | (83,757) | — |
| Loss on sale of loans receivable | — | (104,197) |
| Loss on other investments | — | (258,000) |
| Interest expense, net | (1,119,496) | (1,246,375) |
| Other expenses, net | (7,947) | (49,079) |
| Income tax expense | — | (631,125) |
| Net loss | $(13,184,374) | $(12,425,544) |
F-85
### **Note 21. Commitments and Contingencies**
In the normal course of business, the Company is at times subject to pending and threatened legal actions. In management’s opinion, any potential loss resulting from the resolution of these matters will not have a material effect on the results of operations, financial position or cash flows of the Company.
As of December 31, 2024 and 2023, the Company had no outstanding litigation.
The Company has various ground leases for bitcoin mining in Oklahoma and Texas that expire on varying dates through 2034. For additional information see Note 22.
### **Note 22. Leases**
*Operating Leases*
The Company entered into two lease agreements in Oklahoma and Texas for land during the year ended December 31, 2024. Both leases expire during 2034. Certain lease arrangements include renewal options and escalation clauses.
Future minimum lease payments included in the measurement of lease liabilities on the consolidated balance sheet as of December 31, 2024, were as follows:
| Years ending December 31: | Operating Lease |
| --- | --- |
| 2025 | $230,160 |
| 2026 | 257,660 |
| 2027 | 260,160 |
| 2028 | 260,160 |
| 2029 | 315,160 |
| Thereafter | 1,307,320 |
| Total minimum lease payments | 2,630,620 |
| Less: Imputed interest | (973,576) |
| Present value of future minimum lease payments | 1,657,044 |
| Less: Current portion | (62,035) |
| Lease liabilities, net of current portion | $1,595,009 |
Total operating lease expense was $254,179 for the year ended December 31, 2024. Operating lease expense is recorded in general and administrative expenses in the Company's consolidated statements of operations. The weighted-average discount rate and remaining lease term in years as of December 31, 2024 was 10.32% and 9.13%, respectively. Total amortization expense for the ROU asset was $93,171 for the year ended December 31, 2024.
Supplemental cash flow information and non-cash activity related to leases are as follows:
| Line item | For the Years Ended December 31, 2024 | For the Years Ended December 31, 2023 |
| --- | --- | --- |
| Operating cash flows for operating leases | $(35,371) | — |
| Supplemental non-cash amounts of lease liabilities arising from obtaining right-of-use assets | $1,621,672 | — |
F-86
### **Note 23. Subsequent Events**
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to June 30, 2025, which is the date that the financial statements were available to be issued.
On January 1, 2025, the Company adopted a qualified retirement plan for its employees.
On April 1, 2025, the Company entered into an agreement and plan of merger with TCM to form one corporation between the two entities. After the merger, the capitalization of the public corporation between the parties shall be 75% to the Company's shareholders and 25% to TCM shareholders.
On June 19, 2025, the Company modified the terms of its convertible balloon note with Trailhead Income, LP to extend the maturity date to October 1, 2026.
F-87
**INDEPENDENT AUDITOR**’**S REPORT**
**To the Board of Directors and Management**
**The Cloud Minders, Inc.**
**Opinion**
We have audited the accompanying financial statements of The Cloud Minders, Inc. (a Delaware corporation), which comprise the balance sheets as of December 31, 2024 and 2023, and the related statements of income (loss), changes in stockholders’ and members’ equity, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Cloud Minders, Inc. as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
**Basis for Opinion**
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of The Cloud Minders, Inc. and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
**Emphasis of Matter**
As discussed in Note 14 to the financial statements, the Company has suffered losses from operations and has a net working capital deficiency. Management’s evaluation of the events and conditions and management’s plans to mitigate those matters are also described in Note 14. Our opinion is not modified with respect to that matter.
**Responsibilities of Management for the Financial Statements**
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about The Cloud Minders, Inc.’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
**Auditor**’**s Responsibilities for the Audit of the Financial Statements**
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
- Exercise professional judgment and maintain professional skepticism throughout the audit.
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
F-88
- Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of The Cloud Minders, Inc.’s internal control. Accordingly, no such opinion is expressed.
- Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
- Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about The Cloud Minders, Inc.’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
/s/ BPS & Associates, LLC
July 3, 2025
F-89
**THE CLOUD MINDERS, INC.**
**BALANCE SHEETS**
**DECEMBER 31, 2024 AND 2023**
| ASSETS | 2024 | 2023 |
| --- | --- | --- |
| Current Assets | | |
| Cash and cash equivalents | $371,114 | $98,993 |
| Accounts receivable | - | 96,250 |
| Accrued revenues | 64,894 | 6,376 |
| Current portion of subscription receivables | 3,226,548 | - |
| Total Current Assets | 3,662,556 | 201,619 |
| Property and Equipment, Net | 1,556,917 | 385,912 |
| Other Assets | | |
| Internally developed software | 473,844 | - |
| Right of use assets - finance leases | 8,244,637 | 7,424,018 |
| Deferred tax asset | 541,064 | - |
| Total Other Assets | 9,259,545 | 7,424,018 |
| Total Assets | $14,479,018 | $8,011,549 |
*See Independent Auditor*’*s Report.*
*The accompanying notes are an integral part of these financial statements.*
F-90
**THE CLOUD MINDERS, INC.**
**BALANCE SHEETS**
**DECEMBER 31, 2024 AND 2023**
| LIABILITIES AND STOCKHOLDERS’ AND MEMBERS’ EQUITY | 2024 | 2023 |
| --- | --- | --- |
| Current Liabilities | | |
| Current portion of finance lease obligations | $4,068,248 | $1,721,243 |
| Current portion of long-term debt | 78,615 | - |
| Accounts payable | 63,679 | 63,931 |
| Accrued interest payable | 301,237 | 53,658 |
| Convertible notes payable | 1,716,657 | - |
| Loan payable - member | - | 859,923 |
| Total Current Liabilities | 6,228,436 | 2,698,755 |
| Long-Term Liabilities | | |
| Finance lease obligations, net of current portion | 5,425,428 | 5,917,598 |
| Long-term debt, net of current portion | 26,098 | - |
| Total Long-Term Liabilities | 5,451,526 | 5,917,598 |
| Stockholders’ and Members’ Equity | | |
| Series A Preferred stock - $1.00 par value; 3,000,000 shares authorized, 1,283,343 shares issued and outstanding as of December 31, 2024; and no shares authorized, issued and outstanding as of December 31, 2023 | 1,283,343 | - |
| Common stock - no par value; 20,000,000 shares authorized, 18,300,006 shares issued and outstanding as of December 31, 2024; and no shares authorized, issued and outstanding as of December 31, 2023 | - | - |
| Additional paid-in capital | 5,282,259 | - |
| Members’ equity (deficit) | - | 4,916,700 |
| Subscription receivables | (70,000) | (4,800,000) |
| Retained earnings (deficit) | (3,696,546) | (721,504) |
| Total Stockholders’ and Members’ Equity | 2,799,056 | (604,804) |
| Total Liabilities and Stockholders’ and Members’ Equity | $14,479,018 | $8,011,549 |
F-91
**THE CLOUD MINDERS, INC.**
**STATEMENTS OF INCOME (LOSS)**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
| Line item | 2024 / Amount | 2024 / % To Earned Revenues | 2023 / Amount | 2023 / % To Earned Revenues |
| --- | --- | --- | --- | --- |
| Revenues | $2,682,805 | 100.0 | $1,062,906 | 100.0 |
| Operating expenses | 3,486,147 | 129.9 | 536,210 | 50.4 |
| Gross profit (loss) from operations | (803,342) | (29.9) | 526,696 | 49.6 |
| General and administrative expenses | 1,704,772 | 63.6 | 254,258 | 23.9 |
| Operating profit (loss) | (2,508,114) | (93.5) | 272,438 | 25.7 |
| Other income (expenses) | (1,007,992) | (37.6) | (81,642) | (7.7) |
| Income (loss) before income taxes | (3,516,106) | (131.1) | 190,796 | 18.0 |
| Provision (benefit) for income taxes | (541,064) | (20.2) | - | - |
| Net income (loss) | $(2,975,042) | (110.9) | $190,796 | 18.0 |
*See Independent Auditor*’*s Report.*
*The accompanying notes are an integral part of these financial statements.*
F-92
**THE CLOUD MINDERS, INC.**
**STATEMENTS OF CHANGES IN STOCKHOLDERS**’ **AND MEMBERS**’ **EQUITY FOR**
**THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
| Line item | Preferred Stock / Shares | Preferred Stock / Amount | Common Stock / Shares | Common Stock / Amount | Members’ Equity / (Deficit) | Retained Earnings / (Deficit) | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Beginning balance at January 1, 2023 | - | - | - | - | $$7,200 | $$(912,300) | $(905,100) |
| Net income (loss) | - | - | - | - | - | 190,796 | 190,796 |
| Members’ contributions, net | - | - | - | - | 4,909,500 | - | 4,909,500 |
| Subscription receivables issued | - | - | - | - | - | - | (4,900,000) |
| Subscription receivables repaid | - | - | - | - | - | - | 100,000 |
| Ending balance at December 31, 2023 | - | - | - | - | $$4,916,700 | $$(721,504)) | $(604,804) |
| Net income (loss) | - | - | - | - | - | (2,975,042) | (2,975,042) |
| Members’ contributions, net | - | - | - | - | 365,559 | - | 365,559 |
| Members’ equity converted to common stock | - | - | - | - | (5,282,259) | - | - |
| Subscription receivables repaid | - | - | - | - | - | - | 1,503,452 |
| Subscription receivables transferred to assets | - | - | - | - | - | - | 3,226,548 |
| Common stock issued | - | - | 18,300,006 | - | - | - | - |
| Preferred stock issued | 1,283,443 | 1,283,343 | - | - | - | - | 1,283,343 |
| Ending balance at December 31, 2024 | 1,283,443 | $1,283,343 | 18,300,006 | - | - | $$(3,696,546)) | $2,799,056 |
*See Independent Auditor*’*s Report.*
*The accompanying notes are an integral part of these financial statements.*
F-93
**THE CLOUD MINDERS, INC.**
**STATEMENTS OF CASH FLOWS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
| Line item | 2024 | 2023 |
| --- | --- | --- |
| Cash Flows From Operating Activities: | | |
| Net income (loss) | $(2,975,042) | $190,796 |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Depreciation | 472,411 | 101,991 |
| Amortization of finance ROU assets | 2,093,938 | 157,958 |
| Impairment of fixed assets | 40,238 | - |
| Decrease in deferred income taxes | (541,064) | - |
| Loss on disposal of fixed assets | - | 9,494 |
| Interest expense under finance lease obligations | 745,129 | 56,865 |
| (Increase) decrease in operating assets: | | |
| Accounts receivable | 96,250 | (95,114) |
| Accrued revenues | (58,518) | (6,376) |
| Increase (decrease) in operating liabilities: Accounts payable | (252) | 63,931 |
| Accrued interest payable | 247,579 | 25,961 |
| Net Cash Provided (Used) by Operating Activities | $120,669 | $505,506 |
*See Independent Auditor*’*s Report.*
*The accompanying notes are an integral part of these financial statements.*
F-94
**THE CLOUD MINDERS, INC.**
**STATEMENTS OF CASH FLOWS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
| Line item | 2024 | 2023 |
| --- | --- | --- |
| Net Cash Provided (Used) by Operating Activities | $120,669 | $505,506 |
| Cash Flows from Investing Activities: | | |
| Purchase of fixed assets | (1,543,654) | (384,262) |
| Costs incurred on internally developed software | (473,844) | - |
| Loan receivable - other | - | 3,900 |
| Collection of loan receivable | 385,000 | - |
| Net Cash Provided (Used) by Investing Activities | (1,632,498) | (380,362) |
| Cash Flows from Financing Activities: | | |
| Members’ contributions | 1,218 | 9,500 |
| Collection of subscription receivables | 1,310,430 | 100,000 |
| Advances on long-term debt | 104,713 | - |
| Advances on convertible notes payable | 2,475,000 | - |
| Repayments on finance lease obligations | (1,611,829) | - |
| Repayments of loan to member | (495,582) | (156,537) |
| Net Cash Provided (Used) by Financing Activities | 1,783,950 | (47,037) |
| Net increase (decrease) in cash and cash equivalents | 272,121 | 78,107 |
| Cash and cash equivalents at the beginning of year | 98,993 | 20,886 |
| Cash and cash equivalents at the end of year | $371,114 | $98,993 |
*See Independent Auditor*’*s Report.*
*The accompanying notes are an integral part of these financial statements.*
F-95
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 1 - Summary of Significant Accounting Policies**
**Organization and Nature of Business**
The Cloud Minders, LLC (“the Company”) was organized in the State of Delaware in 2021 as a limited liability company. On May 10, 2024, the Company was incorporated in the state of Delaware and changed its name to The Cloud Minders, Inc.
The Company provides GPU (Graphics Processing Unit) cloud hosting services to organizations that require high-performance computing resources. Its platform delivers GPU-accelerated compute power for artificial intelligence (AI), machine learning (ML), data analytics, scientific simulations, rendering, and other compute-intensive workloads.
The Company offers access to its services through a proprietary cloud interface, supporting both virtualized and bare-metal GPU infrastructure. Customers may provision GPU instances on an on-demand basis or via reserved capacity agreements. The Company serves enterprise clients, research institutions, media production firms, and independent developers. For financial and income tax reporting purposes, the Company has adopted the calendar year.
**Adoption of New Accounting Standards**
In accordance with Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements, the Company adopted Topic 326 effective January 1, 2023 using the modified retrospective method. Topic 326 introduces a new model for recognizing credit losses on financial assets based on expected credit losses. There was no significant impact upon the adoption of Topic 326 to the Company’s financial statements.
**Use of Estimates**
The presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management’s estimates and assumptions include, but are not limited to, productive lives of finance right of use assets, collectability of accounts receivable, and salvage values and estimated useful lives of property and equipment. Management’s estimates and assumptions are derived from and are continually evaluated based upon available information, judgment, and experience.
**Cash and Cash Equivalents**
For purposes of the statements of cash flows, the Company considers cash in operating bank accounts, demand deposits, cash on hand, and highly liquid debt instruments purchased with an original maturity of three months or less as cash and cash equivalents.
*See Independent Auditor*’*s Report.*
F-96
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 1 - Summary of Significant Accounting Policies (Continued)**
**Accounts Receivable**
Accounts receivable are stated at the amount management expects to collect from balances outstanding at year-end. Accounts receivable are due 30 days after issuance of the invoice. Accounts receivable past due more than 90 days are considered delinquent. An allowance for credit losses is provided when necessary and is based upon management’s evaluation of outstanding accounts receivable at year-end, historical collection information, and existing economic conditions. The Company considers all accounts receivable to be collectible; accordingly, no allowance for credit losses is recorded. If amounts become uncollectible, they will be charged to operations when that determination is made.
**Property and Equipment**
Property and equipment are recorded at cost. Expenditures for additions, improvements, betterments, if material, and individual purchases over $2,500 are generally capitalized. Minor replacements, maintenance, and repairs that do not improve or extend the lives of the assets are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.
Management reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of property and equipment may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of property and equipment. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property and equipment is used, and the effects of obsolescence, demand, competition, and other economic factors. During 2024, the company acquired equipment in the amount of $140,000, which was financed with the issuance of convertible notes payable. Management reviewed the carrying value of the equipment for impairment and determined that the estimated cash flows resulting from the equipment was exceeded by its carrying value. As such, management recorded an impairment loss on fixed assets in the amount of $40,238 during the year ended December 31, 2024.
Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods, generally, Modified Accelerated Cost Recovery System (MACRS), for income tax purposes. These differences in depreciation methods result in deferred income and related deferred taxes.
*See Independent Auditor*’*s Report.*
F-97
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 1 - Summary of Significant Accounting Policies (Continued)**
**Internally Developed Software**
The Company capitalizes certain costs related to the development of internal-use software in accordance with FASB Accounting Standards Codification (ASC) 350-40, Internal-Use Software. Costs incurred during the preliminary project stage and post-implementation stages are expensed as incurred. Costs incurred during the application development stage, including external direct costs of materials and services and payroll costs for employees directly associated with the project, are capitalized.
Capitalized software development costs that are not yet ready for their intended use are included in Other Assets on the balance sheets. These costs are not amortized until the software is substantially complete and ready for its intended use. As of December 31, 2024 and 2023, the Company had capitalized $473,844 and $0, respectively, related to internal-use software development projects that were still in progress.
**Revenue and Cost Recognition**
The Company recognizes revenue in accordance with ASC, Topic 606, Revenue from Contracts with Customers.
Revenue is generated from contracts with customers. Revenue is recognized when control of the promised services is transferred to the customer in the amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services.
Revenue recognition is determined through the application of the following steps:
- Identification of the contract, or contracts, with a customer;
- Identification of the performance obligations in the contract;
- Determination of the transaction price;
- Allocation of the transaction price to the performance obligations in the contract;
- Recognition of revenue when, or as, the Company satisfies a performance obligation.
This guidance only applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including the consideration of whether it is probable the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations; the assessment includes the evaluation of whether each promised good or service is distinct within the context of the contract. Under Topic 606, the Company recognizes revenue separately for performance obligations that are distinct. Performance obligations are considered to be distinct if (a) the customer can benefit from the goods or services either on its own or together with other resources that are readily available to the customer, and (b) the promise to transfer the goods or services is separately identifiable from other promises in the contract. If a good or service is not individually distinct, the Company combines the goods or services with other promised goods or services until the Company identifies a bundle of goods or services that together are distinct.
*See Independent Auditor*’*s Report.*
F-98
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 1 - Summary of Significant Accounting Policies (Continued)**
**Revenue and Cost Recognition (Continued)**
The Company identifies the following performance obligations:
- **Compute Usage Services**
○ Revenue is recognized over time as compute resources are consumed by customers on a usage-based (hourly) or subscription basis.
○ For usage-based services, revenue is recognized in the period in which the service is provided, based on actual consumption.
- **Enterprise and Support Services**
○ Revenue from professional support, onboarding, or consulting is recognized over the period in which the services are delivered.
○ If services are billed on a fixed-fee basis, revenue is recognized over the performance period using a time-based measure of progress.
The Company does not typically incur significant contract acquisition costs. In limited cases, such costs are capitalized and amortized over the expected contract term, if material.
For the year ended December 31, 2024, revenue derived from compute usage services and from enterprise support services amounted to $2,408,634 and $274,171, respectively. For the year ended December 31, 2023, substantially all of the Company’s revenue was derived from enterprise and support services.
*See Independent Auditor*’*s Report.*
F-99
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 1 - Summary of Significant Accounting Policies (Continued)**
**Leases**
At lease inception, the Company determines whether an arrangement is or contains a lease. At the lease commencement date, leases are classified as either operating leases or finance leases.
In the accompanying financial statements, finance leases are reported as “Right of use assets - finance leases” and related liabilities are reported as current portion of finance lease obligations and long-term finance lease obligations. Finance ROU assets are amortized over the lower of their lease terms or their estimated productive lives.
ROU assets represent the Company’s right to use the underlying leased assets over the term of the lease and the related lease liabilities represent the Company’s contractual obligation to make lease payments over the lease term. At the lease commencement date, the capitalized value of the ROU asset and corresponding value of lease obligation are determined based on the present value of the lease payments over the lease term. For finance ROU assets and corresponding lease obligations, the Company uses the interest rate implicit in the lease. Lease terms may include renewal or extension options to the extent they are reasonably certain to be exercised. The assessment of whether renewal or extension options are reasonably certain to be exercised is made at lease commencement. Factors considered in determining whether an option is reasonably certain of exercise include, but are not limited to, the value of leased assets, the value of renewal rates compared to market rates, and the presence of factors that would cause a significant economic penalty to the Company if the option were not exercised.
To the extent a lease arrangement includes both lease and non-lease components, the Company has elected to account for the components as a single lease component.
The Company has elected not to recognize a ROU asset and obligation for leases with an initial term of twelve months or less (short-term leases). The expense associated with short-term leases is recognized on a straight-line basis over the lease term and is included in general and administrative expenses in the accompanying statements of income (loss).
After lease commencement, the finance lease liability is measured on an amortized cost basis and increased to reflect interest on the liability and decreased to reflect the lease payment made during the period. Interest on the lease liability is determined each period during the lease term as the amount that results in a constant period discount rate on the remaining balance of the liability. The ROU asset is subsequently measured at its original capitalized value, less any accumulated amortization and any accumulated impairment losses. Amortization on the ROU asset is recognized over the period from the commencement date to the earlier of the end of the useful life of the ROU asset or the end of the lease term.
*See Independent Auditor*’*s Report.*
F-100
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 1 - Summary of Significant Accounting Policies (Continued)**
**Subscription Receivables**
The Company accounts for receivables obtained for issuance of its equity (“subscription receivables”) in accordance with ASC 505-10, Equity – Overall. Pursuant to this standard, subscription receivables are presented as a reduction of stockholders’ and members’ equity in the balance sheets. The standard also provides an exception for circumstances in which there is substantial evidence for collections within a reasonably short period of time, in which case, the subscription receivables may be reported as an asset.
**Convertible Debt**
The Company may issue debt instruments that are convertible into equity securities of the Company, either mandatorily or at the option of the holder. The Company accounts for convertible debt instruments in accordance with FASB ASC 470-20, Debt - Debt with Conversion and Other Options. Convertible debt instruments that may be settled in cash or shares at the option of the holder or issuer are assessed to determine whether they contain embedded features that require bifurcation and separate accounting under ASC 815, Derivatives and Hedging. Pursuant to ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40), embedded conversion features are not separated from convertible debt unless they are required to be accounted for as derivatives under ASC 815.
**Income Taxes**
The Cloud Minders, Inc. has adopted the “accrual” method of accounting for income tax reporting purposes. Accelerated depreciation is used for tax reporting and straight-line depreciation is used for financial statement reporting. As a result, significant deferred income in the form of temporary differences exist between income reported on income tax returns and the income reported on the financial statements as well as the tax bases of assets and liabilities and their reported amount in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB ASC 740, Accounting for Income Taxes. As changes in the tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. Deferred taxes are classified as non-current.
For the year ended December 31, 2023 and for the period January 1, 2024 through May 9, 2024, the Company was taxed as a Partnership. Consequently, as a result of its pass through tax status, for those periods the Company’s taxable income or loss was allocated to members in accordance with their respective ownership and no income tax provision (benefit) and liability (asset) for taxable income (loss) or deferred income (loss) were recorded in the accompanying financial statements.
*See Independent Auditor*’*s Report.*
F-101
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 1 - Summary of Significant Accounting Policies (Continued)**
**Income Taxes (Continued)**
As of May 10, 2024, the Company changed its tax status and elected to be taxed as a “C” Corporation (a tax paying entity). As a result of the Company’s change in tax status, the Company will file partnership tax return for the period January 1, 2024 through May 9, 2024 and a “C” corporation tax return for the period May 10, 2024 through December 31, 2024. The deferred tax assets as of December 31, 2024, shown in the balance sheets amounts to $541,064. Income tax benefit in the amount of $541,064, shown in the statements of income (loss), consists of the recognition of deferred tax assets arising from May 10, 2024, through December 31, 2024, which is the period in which the Company was taxed as a “C” corporation.
Business tax credits, if any, are accounted for by the flow-through method which recognizes the credits as reductions to current provision for federal income taxes in the year utilized.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment.
**Uncertain Tax Positions**
FASB ASC 740, Income Taxes, prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return as well as guidance on de-recognition, classification, interest and penalties, and financial statement reporting disclosures. For those benefits to be recognized, a tax position must be more likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company has considered its income tax positions, including any positions that may be considered uncertain by the relevant tax authorities in the jurisdictions in which the Company operates. As of December 31, 2024 and 2023, the Company has not identified any uncertain tax positions or unrecognized tax benefits.
Since tax matters are subject to some degree of uncertainty, there can be no assurance that the Company’s tax return will not be challenged by the taxing authorities and that the Company will not be subject to additional tax, penalties, and interest as a result of such challenge. The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. No interest or penalties have been incurred for the years ended December 31, 2024 and 2023. Generally, the Company’s tax return remain open for federal and state income tax examinations for three years after they are filed.
*See Independent Auditor*’*s Report.*
F-102
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 1 - Summary of Significant Accounting Policies (Continued)**
**Advertising Costs**
Advertising costs, except for the costs associated with direct-response advertising, if any, are charged to operations when incurred. The costs of direct-response advertising are capitalized and amortized over the period during which future benefits are expected to be received. Advertising expense for the years ended December 31, 2024 and 2023 was $131,970 and $0, respectively.
### **Note 2 - Fair Value of Financial Instruments**
The fair values of financial instruments including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities approximate the carrying values, principally because of the short maturity of those items. The fair values of notes and finance leases payable approximate the carrying values, principally because of the current terms applicable to each item.
### **Note 3 - Property and Equipment**
The major classifications of property and equipment, including their estimated useful lives, are summarized as follows at the balance sheet dates:
| Line item | Estimated Useful Life | 2024 | 2023 |
| --- | --- | --- | --- |
| Office equipment | 3 years | $10,000 | $10,000 |
| Machinery and equipment | 3 years | 2,173,591 | 543,367 |
| | | 2,183,591 | 553,367 |
| Less: Accumulated depreciation | | (626,674) | (167,455) |
| | | $1,556,917 | $385,912 |
For the years ended December 31, 2024 and 2023, depreciation expense relating to property and equipment amounted to $472,411 and $101,991, respectively, and is included in operating expenses in the accompanying statements of income (loss).
*See Independent Auditor*’*s Report.*
F-103
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 4 - Leases**
The Company leases computer equipment under finance lease agreements with four related party entities. The leases started on various dates between November 2023 through December 2024. See Note 5 - Transactions With Related Parties for additional information. All leases have terms of 48 months with automatic month-to-month extensions at $1.00 per month until the equipment purchase option is exercised, which can take place after the fifth anniversary of the first full month that the equipment generates profits. The Company has agreed to accelerate rental payments due to the lessor whereby the Company is required to make additional variable lease payments in amounts based on the Company's usage of the underlying assets. Pursuant to ASU 2016-02, Leases (Topic 842), future lease obligations do not contain variable lease payments that are linked to performance. The leases require minimum monthly payments ranging from $18,598 to $164,241. Amortization of finance ROU assets is included in operating expenses in the accompanying statements of income (loss). In addition, the Company leases its administrative offices under a month-to-month lease.
The components of lease expense for the years ended December 31, are as follows:
| Line item | 2024 | 2023 |
| --- | --- | --- |
| Finance lease cost: | | |
| Amortization of ROU assets | $2,093,938 | $157,958 |
| Interest on lease liabilities | 745,129 | 56,865 |
| Short-term lease cost | 58,196 | 52,443 |
| Total lease cost | $2,897,263 | $267,266 |
Supplemental finance lease information as of December 31, is as follows:
| Line item | 2024 | 2023 |
| --- | --- | --- |
| Weighted average remaining lease term | 4.44 years | 4.92 years |
| Weighted average discount rate | 9.00% | 9.00% |
*See Independent Auditor*’*s Report.*
F-104
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 4 - Leases (Continued)**
At December 31, 2024, future minimum payments for finance leases are payable as follows:
| December 31, | 2024 | 2023 |
| --- | --- | --- |
| 2025 and 2024, respectively | $4,068,248 | $1,721,243 |
| 2026 and 2025, respectively | 3,158,610 | 3,040,791 |
| 2027 and 2026, respectively | 2,968,130 | 2,285,776 |
| 2028 and 2027, respectively | 634,613 | 2,095,296 |
| 2029 and 2028, respectively | - | 11 |
| Total | 10,829,601 | 9,143,117 |
| Less: Interest | (1,335,925) | (1,504,276) |
| Total lease liability | $9,493,676 | $7,638,841 |
### **Note 5 - Transactions With Related Parties**
As of and for the years ended December 31, 2024 and 2023, the Company had the following related party transactions:
- As of December 31, 2023, the Company had a loan payable to its founding member with an outstanding balance amounting to $859,923 and accrued interest payable totaling $53,658. During the year ended December 31, 2024, $495,582 of the loan was repaid, the remaining unpaid balance, in the amount of $364,341, was converted to equity, and the accrued interest was forfeited.
- During 2024, the Company entered into a non-interest bearing note payable with two related parties in which a preferred stockholder holds a capital interest. The original principal amount of the note was $104,713. The note payable requires monthly payments of $8,735 starting in April 2025.
- The Company is party to finance lease agreements with four entities in which a preferred stockholder holds a capital interest. Additional details related to these lease agreements are provided in Note 4 - Leases.
- During the years ended December 31, 2024 and 2023, the Company paid $189,441 and $69,370, respectively, to certain of its members for consulting services.
*See Independent Auditor*’*s Report.*
F-105
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 6 - Convertible Notes Payable**
During 2024, the Company issued convertible promissory notes to various investors with an aggregate principal amount of $3,000,000. The convertible notes were issued between May 10, 2024 and June 11, 2024, bear interest at 35% per annum, compounded annually, and mature on December 1, 2025, unless earlier converted or repaid.
On July 1, 2024, $1,283,343 of principal balance was converted to Series A Preferred Stock at a conversion price of $1.00 per share, and as of December 31, 2024, the aggregate outstanding balance of the convertible promissory notes amounted to $1,716,657 with related accrued interest payable of $301,237.
Under the terms of the notes:
- There are no scheduled payments due.
- The outstanding principal is automatically convertible into equity securities on or before the calendar day immediately preceding the maturity date, at the conversion price of $1.00 per share.
- All accrued interest outstanding in respect to the outstanding principal upon conversion shall be deemed forgiven.
- The Company may make partial prepayment(s), provided however the principal portion of such prepayment(s) do not exceed two-thirds of the original principal amount, unless expressly approved by the holder of the note.
- The notes are unsecured and subordinate to senior debt, if any.
The notes contain embedded and redemption features subject to bifurcation and separate accounting as derivative liabilities under FASB ASC 815, Derivatives and Hedging. In accordance with ASC 815, the Company evaluated the terms of the notes and determined that the financial impact derived from the embedded and redemption features was immaterial to the Company’s financial position and results of operations. As such, no separate liability resulting from bifurcation has been recorded.
*See Independent Auditor*’*s Report.*
F-106
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 7 - Long-Term Debt**
Long-term debt at December 31, 2024, consisted of the following:
| Note payable in monthly installments totaling $8,735, unsecured | 104,713 |
| --- | --- |
| Less: Current maturities | (78,615) |
| Long-term debt, net of current maturities | $26,098 |
Maturities of long-term debt are as follows:
| December 31, | |
| --- | --- |
| $2025 | $78,615 |
| 2026 | 26,098 |
| | $104,713 |
As of December 31, 2023, the Company had no long-term debt outstanding.
### **Note 8 - Subscription Receivables**
In November 2023, the Company obtained receivables totaling $4,900,000 as contributions to its equity (collectively referred to as “subscription receivables”). The subscription receivables consisted of a $1,000,000 non-interest bearing loan receivable, to be repaid in 12 equal installments commencing in January 2024, and a $3,900,000 note receivable, with interest at 0.10%, and maturing in November 2025. No scheduled payments are due under the note receivable, and, upon maturity, any unpaid principal automatically converts to shares of common stock of the issuer at a conversion price of $1.00 per share. As of December 31, 2024 and 2023, $4,800,000 and $3,296,548 of these subscription amounts, respectively, remained unpaid. Subsequent to December 31, 2024, the Company collected $3,226,548 in cash proceeds as repayment for the subscription receivables, and therefore, in connection with FASB ASC 505, this amount is recorded as a current asset as of December 31, 2024. The remaining uncollected portion, or $70,000, is classified as a deduction from stockholders’ and members’ equity. As of December 31, 2023, $4,800,000 is presented as a deduction from stockholders’ and members’ equity.
*See Independent Auditor*’*s Report.*
F-107
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 9 - Equity Conversion**
On May 10, 2024, the Company completed a legal conversion from a partnership to a C corporation. Prior to the conversion, the Company operated as a partnership, with capital accounts maintained for each member. Pursuant to the conversion, the total number of shares of capital stock the Company is authorized to issue is 23,000,000, consisting of 20,000,000 shares of common stock with no par value and 3,000,000 shares of nonvoting preferred stock with a par value of $1.00. As of December 31, 2024, there were 18,300,006 shares of common stock and 1,283,343 shares of preferred stock issued and outstanding, respectively. The Company has designated the authorized shares of preferred stock as Series A Preferred stock. As part of the conversion, all membership interests were exchanged for shares of common stock of the newly formed corporation at an exchange rate of $93.33 per member’s interest.
The conversion was accounted for as a reorganization of the capital structure with no change in the carrying value of the net assets. Accordingly, the historical basis of the Company’s assets and liabilities was retained, and the partnership capital accounts were reclassified to common stock and additional paid-in capital in accordance with the terms of the conversion.
At the effective date of the conversion:
- 18,300,006 shares of voting common stock with no par value were issued to the former members in exchange for their membership interests.
- The equity section of the balance sheet as of December 31, 2024 reflects the corporate form, with members’ capital eliminated and replaced with common stock and additional paid-in capital.
This transaction qualified as a tax-free exchange under Internal Revenue Code Section 351.
*See Independent Auditor*’*s Report.*
F-108
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 10 - Income Taxes**
Provision has been made on the accompanying financial statements for deferred income taxes applicable to the timing differences between financial statement income and tax basis income (Note 1). The deferred taxes will not become payable until such time that the timing differences reverse themselves and the tax basis income equals or exceeds the GAAP basis financial statement income.
The significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024, were as follows:
| Deferred tax assets: | |
| --- | --- |
| Temporary differences | $334,008 |
| State decoupling adjustments | 39,165 |
| Cumulative net operating loss carryforwards | 375,456 |
| Total deferred tax assets | 748,629 |
| Deferred tax liabilities: | |
| Depreciation | (207,565) |
| Total deferred tax liabilities | (207,565) |
| Net deferred tax assets (liabilities) | $541,064 |
*See Independent Auditor*’*s Report.*
F-109
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 10 - Income Taxes (Continued)**
As of December 31, 2024, the Company had $1,787,889 and $1,398,481 of federal and state net operating losses (NOLs), respectively, that may be available to offset future taxable income. Under the Tax Cuts and Jobs Act, NOLs are carried forward indefinitely, but may be limited in utilization to 80% of taxable income of the immediate preceding year.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. As of December 31, 2024, a valuation allowance was not considered necessary.
The provision (benefit) for federal and state income taxes during the year ended December 31, 2024, for the period the Company was taxed as a “C” Corp, is as follows:
| Current payable (refundable) | - |
| --- | --- |
| Deferred provision (benefit) | (541,064) |
| Income tax expense (benefit) | $(541,064) |
### **Note 11 - Other Income (Expenses)**
Other income and expenses for the years ended December 31, consisted of the following:
| Line item | 2024 | 2023 |
| --- | --- | --- |
| Other Income | | |
| Interest income | $21,961 | - |
| Miscellaneous income | 61,650 | 20,829 |
| | 83,611 | 20,829 |
| Other Expenses | | |
| Interest expense | 1,046,367 | 82,827 |
| Impairment of fixed assets | 40,238 | - |
| Loss on disposal of fixed assets | - | 9,494 |
| Charitable contributions | 4,998 | 10,150 |
| | 1,091,603 | 102,471 |
| | $(1,007,992) | $(81,642) |
*See Independent Auditor*’*s Report.*
F-110
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 12 - Supplemental Disclosure of Cash Flow Information**
**Cash Paid (Received) for Interest and Income Taxes**
Cash paid (received) for interest and income taxes for the years ended December 31, consisted of the following:
| Line item | 2024 | 2023 |
| --- | --- | --- |
| Interest (net) | $1,024,406 | $82,827 |
| Income taxes | - | - |
**Non-Cash Financing and Investing Activities**
The Company had the following non-cash financing and investing transactions for the years ended December 31:
| Line item | 2024 | 2023 |
| --- | --- | --- |
| Equipment purchase with issuance of convertible notes payable | $140,000 | - |
| Members’ equity converted to common stock and additional paid-in capital | $5,282,259 | - |
| Right of use assets obtained in exchange for new finance lease liabilities | $2,914,557 | $7,581,976 |
| Notes payable converted to preferred stock | $1,283,343 | - |
| Capital issued in exchange for repayment on loan payable - member | $364,341 | - |
| Equity acquired with subscription receivables | - | $4,900,000 |
| Loan receivable obtained in exchange for issuance of convertible notes payable | $385,000 | - |
| Finance lease obligation curtailment in exchange for repayment on subscription receivables | $193,022 | - |
*See Independent Auditor*’*s Report.*
F-111
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 13 - Concentrations**
**Credit Risk**
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable.
The Company maintains its cash balances in various financial institutions. At times, such balances may be in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit. As of December 31, 2024 and 2023, interest-bearing accounts and non-interest bearing demand deposit accounts were insured by the FDIC up to $250,000 per financial institution. At December 31, 2024 and 2023, the Company’s bank balances were fully insured by the FDIC.
**Concentrations of Customers**
For the year ended December 31, 2024, 95% of the Company’s revenues was attributed to one customer. There were no concentrations of revenues from a single customer for the year ended December 31, 2023.
### **Note 14 - Going Concern Considerations**
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
The Company provides GPU cloud hosting services to organizations that require high-performance computing infrastructure for artificial intelligence, machine learning, data analytics, and other compute-intensive applications. As of December 31, 2024, the Company had an accumulated deficit of $849 thousand and incurred a net loss of $2.975 million. These factors initially raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued.
Management identified the following primary risks contributing to this uncertainty:
- Dependence on continued access to specialized GPU hardware, which is subject to supply constraints;
- Exposure to competition from larger cloud infrastructure providers with greater scale;
- Customer concentration risk from reliance on a small number of enterprise clients;
- Capital-intensive operations requiring sustained investment in data center infrastructure;
- Cybersecurity and compliance risk associated with hosting sensitive customer workloads.
*See Independent Auditor*’*s Report.*
F-112
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 14 - Going Concern Considerations (Continued)**
In response to these risks, management developed and began executing a plan intended to mitigate the conditions giving rise to substantial doubt about the Company’s ability to continue as a going concern, including the following:
- Refinance and/or restructure the amount of finance lease obligations coming due within one year from the date these financial statements are available to be issued. See Note 15 for additional information on subsequent event transactions.
- Exploring strategic partnerships to enhance market reach and capacity utilization. See Note 15 for additional information on subsequent event transactions.
- Accelerate the timing for collection of the Company’s subscription receivables. See Note 15 for additional information on subsequent event transactions.
As a result of these actions, management has concluded that the substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued has been alleviated. Accordingly, the financial statements have been prepared on a going concern basis, and no adjustments have been made to the carrying amounts or classification of assets and liabilities that might result from the outcome of this uncertainty.
### **Note 15 - Subsequent events**
Subsequent to December 31, 2024, the Company collected $3,226,548 in cash proceeds towards repayment of its subscription receivables, which had a balance outstanding totaling $3,296,546 as of December 31, 2024, leaving $70,000 as the remaining unpaid portion.
In April 2025, the Company entered into a finance lease agreement for additional computer equipment. The lease has a term of 60 months and requires minimum monthly rental payments of $58,435. In connection with the purchase, the Company recorded a finance ROU asset and corresponding lease obligation in the amount of $2,340,797. As of lease effective date, the current portion of the finance lease obligations amounted to $642,780.
In January 2025 the Company, prior to termination of its largest finance lease, purchased the equipment leased under the agreement for a purchase price of $6,454,466. The carrying value of the purchased finance ROU assets and corresponding finance liability amounted to $4,629,126 and $5,423,543, respectively. The Company financed the equipment purchase with a loan payable to a commercial bank in the amount of $6,450,000 at prime, subject to a 5% floor. The loan calls for principal and interest payments totaling $129,552 beginning in March 2025, and matures in January, 2030. As a result of this transaction, the Company’s current portion of finance lease obligations was reduced. As of the date of purchase, the current portion of the purchased finance lease obligation amounting to $2.485 million was replaced with the current portion of the loan payable to a commercial bank totaling $1.123 million.
*See Independent Auditor*’*s Report.*
F-113
**THE CLOUD MINDERS, INC.**
**NOTES TO FINANCIAL STATEMENTS**
**FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023**
### **Note 15 - Subsequent events (Continued)**
In March 2025, the Company entered into a severance agreement with its founding member. The agreement calls for a lump sum severance payment in the amount of $100,000, conversion of the founding member’s outstanding capital balance, amounting to $296,742 as of the severance agreement date, to 293,712 shares of Series A Preferred stock. The agreement also calls for the issuance of a short-term $5,000 promissory note payable by the founding member to the Company.
In March 2025, the Company’s Board of Directors and stockholders approved the decision to enter into a contribution and exchange agreement with its largest common stockholder, Global Digital Holdings, Inc. (GDH). Effective April 1, 2025, the Company’s stockholders entered into a contribution and exchange agreement (the “Agreement”) with GDH, in which all their outstanding equity securities and ownership rights in The Cloud Minders, LLC equity were contributed to GDH in exchange for shares and ownership rights in GDH. Pursuant to the agreement, each share of The Cloud Minders, LLC stock and equity instrument was converted to 0.9216278851273 shares of GDH.
The Company evaluates events or transactions that occur subsequent to year end for potential recognition or disclosure in the financial statements through the date on which the financial statements are available to be issued. Subsequent events have been evaluated as of July 03, 2025, which is the date the financial statements were available to be issued.
*See Independent Auditor*’*s Report.*
F-114
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**QUMULUSAI, INC.**
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**PROSPECTUS**
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**Shares of Common Stock**
**, 2025**
Through and including , 2025, 25 days after the date of this prospectus, all dealers that effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.
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**PART II** — **INFORMATION NOT REQUIRED IN PROSPECTUS**
**Item 13. Other Expenses of Issuance and Distribution**
The following table sets forth all expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the sale of our common stock being registered. All the amounts shown are estimates except the SEC registration fee and the listing fee for the Nasdaq Global Market.
| Line item | Amount to be paid | Amount to be paid |
| --- | --- | --- |
| SEC registration fee | $ | $48,335 |
| Nasdaq listing fee | | 25,000 |
| Accounting fees and expenses | | 95,000 |
| Legal fees and expenses | 400,000 | |
| Miscellaneous | — | |
| Total | 568,335 | |
**Item 14. Indemnification of Directors and Officers**
***Georgia Business Corporation Code***
Subsection (a) of Section 14-2-851 of the Georgia Business Corporation Code (the “GBCC”) provides that a corporation may indemnify or obligate itself to indemnify an individual made a party to a proceeding because he or she is or was a director against liability incurred in the proceeding if such individual conducted himself or herself in good faith and such individual reasonably believed, in the case of conduct in an official capacity, that such conduct was in the best interests of the corporation and, in all other cases, that such conduct was at least not opposed to the best interests of the corporation and, in the case of any criminal proceeding, such individual had no reasonable cause to believe such conduct was unlawful. Subsection (d) of Section 14-2-851 of the GBCC provides that a corporation may not indemnify a director in connection with a proceeding by or in the right of the corporation except for reasonable expenses incurred if it is determined that the director has met the relevant standard of conduct, or in connection with any proceeding with respect to conduct under Section 14-2-851 of the GBCC for which he was adjudged liable on the basis that personal benefit was improperly received by him or her, whether or not involving action in his or her official capacity.
Section 14-2-852 of the GBCC provides that to the extent that a director has been wholly successful, on the merits or otherwise, in the defense of any proceeding to which he was a party, because he or she is or was a director of the corporation, the corporation shall indemnify the director against reasonable expenses incurred by the director in connection with the proceeding.
Pursuant to Section 14-2-854 of the GBCC, a court may order a corporation to indemnify a director or advance expenses if such court determines that the director is entitled to indemnification under the GBCC or that the director is fairly and reasonably entitled to indemnification or advance of expenses in view of all the relevant circumstances, whether or not such director met the standard of conduct set forth in subsections (a) and (b) of Section 14-2-851 of the GBCC, failed to comply with Section 14-2-853 of the GBCC or was adjudged liable as described in paragraph (1) or (2) of subsection (d) of Section 14-2-851 of the GBCC.
Section 14-2-856 of the GBCC permits our articles of incorporation, bylaws, a contract, or resolution approved by the shareholders, to authorize us to indemnify a director against claims to which the director was a party, including claims by us or in our right (e.g., shareholder derivative action). However, we may not indemnify the director for liability to us for any appropriation of a corporate opportunity, intentional misconduct or knowing violation of the law, unlawful distributions or receipt of an improper benefit.
Section 14-2-857 of the GBCC provides that a corporation may indemnify and advance expenses to an officer of the corporation who is a party to a proceeding because he or she is an officer of the corporation to the same extent as a director and if he or she is not a director to such further extent as may be provided in its articles of incorporation, bylaws, resolution of its board of directors or contract except for liability arising out of conduct specified in Section 14-2-857(a)(2) of the GBCC. Section 14-2-857 of the GBCC also provides that an officer of the corporation who is not a director is entitled to mandatory indemnification under Section 14-2-852 and is entitled to apply for court ordered indemnification or advances for expenses under Section 14-2-854, in each case to the same extent as a director. In addition, Section 14-2-857 provides that a corporation may also indemnify and advance expenses to an employee or agent who is not a director to the extent, consistent with public policy, that may be provided by its articles of incorporation, bylaws, action of its board of directors or contract.
II-1
Section 14-2-858 of the GBCC permits us to purchase and maintain insurance on behalf of our directors and officers against liability incurred by them in their capacities or arising out of their status as our directors and officers, regardless of whether we would have the power to indemnify or advance expenses to the director or officer for the same liability under the GBCC.
***Charter***
The Company’s Charter provides that, to the full extent that the GBCC permits the limitation or elimination of the liability of directors, a director of the Company shall not be liable to the Company or its shareholders for monetary damages for conduct as a director.
***Bylaws***
The Company’s Bylaws provide that any person, their heirs, executors, or administrators, may be indemnified or reimbursed by the Company to the fullest extent of the GBCC for reasonable expenses actually incurred in connection with any action, suit or proceeding, civil or criminal, to which such person shall be made a party by reason of the fact that such person is or was a director, trustee, officer, employee, or agent of the Company, or that such person is or was serving, at the request of the Company, as a director, trustee, officer, employee, or agent of any other enterprise.
***Indemnification Agreements***
We intend to enter into separate indemnification agreements with our directors and certain officers. Each indemnification agreement will provide, among other things, for indemnification to the fullest extent permitted by law and our Bylaws against any and all expenses, judgments, fines, penalties and amounts paid in settlement of any claim. The indemnification agreements will provide for the advancement or payment of all expenses to the indemnitee and for the reimbursement to us if it is found that such indemnitee is not entitled to such indemnification under applicable law, our Charter or our Bylaws.
***Insurance Policies***
We currently maintain a private D&O insurance policy and intend to purchase a public D&O insurance policy in connection with the direct listing that will insure our directors and officers against certain liabilities incurred by them in the discharge of their functions as directors and officers.
The foregoing description of the GBCC, our Charter and our Bylaws is only a summary and is qualified in its entirety by the full text of each of the foregoing.
We have been advised that it is the position of the SEC that insofar as the foregoing provisions may be invoked to disclaim liability for damages arising under the Securities Act, that such provisions are against public policy as expressed in the Securities Act and are therefore unenforceable.
**Item 15. Recent Sales of Unregistered Securities**
During the past three years, we issued unregistered securities as outlined below. Unless otherwise specifically noted, no commissions were paid in connection with the issuances described below and each issuance was effected pursuant to Section 4(a)(2) of the Securities Act, as a transaction by an issuer not involving any public offering, and/or Regulation D promulgated thereunder. In all issuances described below, the Company took appropriate measures to restrict transfer of the securities.
(1) In December 2022, QumulusAI issued 12,586,580 shares of common stock at a price of $3.00 per share, after giving effect to the Reverse Stock Split, and 14,946,566 shares of preferred stock, at a price of $1.00 per share, which was not impacted by the Reverse Stock Split, to all shareholders in connection with the WAHA Technologies, Inc. and SPRE Commercial Group, Inc. contribution-exchange. Investors with no capital accounts balances received common stock, and investors that had invested capital received preferred stock.
(2) In November 2023 and continuing to December 2024, QumulusAI issued 9,089,000 shares of preferred stock at a price of $1.00 per share to accredited investors.
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(3) In March 2024, TCM issued a $3 million convertible note to accredited investors, which converted into three million shares of preferred stock. On July 1, 2024, a portion of the convertible note converted into 1,356,676 shares of TCM preferred stock. The remainder will convert at maturity, as adjusted for any portion of the note paid.
(4) In April 2025, the Company entered into Contribution and Exchange Agreements, as amended, with shareholders of TCM, pursuant to which each TCM shareholder contributed all outstanding equity securities in TCM to the Company in exchange for equity securities of the Company. As a result, TCM became a wholly owned subsidiary of the Company, with 75% of the Company’s capital stock held by Company shareholders and 25% of the Company’s capital stock held by former TCM shareholders. As adjusted to give effect to the Conversion or the Reverse Stock Split, the total acquisition consideration was $39,350,572, which was comprised of 2,574,711 shares of QumulusAI’s common stock and 1,423,182 shares of QumulusAI’s Series D Preferred Stock (with a total fair value of $20,250,013), options to purchase 668,392 shares of the Company’s common stock to replace TCM options with an exercise price of $0.23 per share that vest according to individual vesting schedules (with a total fair value of $1,883,995), and the fair value of the Company’s prior investment in TCM (with a total fair value of $17,216,604).
(5) From January 2025 through September 2025, the Company issued 514,592 shares of Series D Preferred Stock for the partial conversion of convertible notes previously issued to accredited investors.
(6) From July 2025 through December 2025, as adjusted to give effect to the Reverse Stock Split, QumulusAI issued 2,558,566 shares of common stock at a price of $10.80 per share to accredited investors.
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**Item 16.** **Exhibits and Financial Statement Schedules**
***(a)*** ***Exhibits***
| Exhibit No. | Description |
| --- | --- |
| 3.1* | Fourth Amended and Restated Articles of Incorporation of QumulusAI, Inc. |
| 3.2* | Amended and Restated Bylaws of QumulusAI, Inc. |
| 4.1* | Form of Common Stock Certificate of QumulusAI, Inc. |
| 5.1* | Opinion of Fox Rothschild LLP |
| 10.1* | Amended and Restated Hosting Service Agreement between SPRE Watonga OK, LLC and Cerberus Digital, LLC dated April 24, 2024 |
| 10.2* | Bitcoin Miner Hosting Agreement between SPRE Watonga OK, LLC and Fortitude Mining LLC (formerly Foundry Digital), a subsidiary of Digital Currency Group dated April 17, 2024 |
| 10.3* | Bitcoin Miner Hosting Agreement between SPRE Watonga OK, LLC and Fortitude Mining LLC (formerly Foundry Digital), a subsidiary of Digital Currency Group dated August 19, 2024 |
| 10.4* | Miner Hosting Agreement between T20 Mining Group, LLC and OK 1 Mining LLC dated July 26, 2023 |
| 10.5* | Amendment No.1 to Miner Hosting Agreement between T20 Mining Group, LLC and OK 1 Mining LLC dated July 26, 2023, as amended on January 30, 2024. |
| 10.6* | QumulusAI Marketplace Agreement between The Cloud Minders Inc. and Hydra Host, Inc. dated May 9, 2025. |
| 10.7 | QumulusAI Customer Agreement between The Cloud Minders Inc. and Procon Analytics, LLC dated May 7, 2025. |
| 10.8* | Digital Asset Custodial Terms and Conditions between NYDIG Trust Company LLC and WAHA Technologies, Inc. dated September 25, 2023. |
| 10.9 | Master Service Agreement between The Cloud Minders, Inc. and Performiv LLC dated October 31, 2023 |
| 10.10 | Demand Response Services Agreement between T20 Mining Group, LLC and NuEnergen, LLC dated March 1, 2023 |
| 10.11 | Demand Response Service Agreement between SPRE Watonga OK, LLC and NuEnergen, LLC dated February 1, 2024 |
| 10.12 | ASIC Mining Data Center Field Services Agreement between SPRE Watonga OK, LLC and PaerTree Inc. dated August 14, 2024 |
| 10.13 | Amended and Restated Operating Agreement of T20 Mining Group, LLC dated March 15, 2023 |
| 10.14 | Electric Service Will Serve Agreement between SPRE Watonga OK, LLC and Oklahoma Gas and Electric Company dated February 14, 2024 |
| 10.15 | Contract for Electric Service between T20 Manufacturing LLC and Public Service Company of Oklahoma dated June 26, 2024 |
| 10.16* | Power Purchase Agreement between City of Denton, Texas, DBA Denton Municipal Electric and SPRE Denton TX, LLC dated September 1, 2024 |
| 10.17 | Equipment Lease Agreement between The Cloud Minders Inc. and ATFP Cloud SPV I, LP dated January 30, 2025 |
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| Exhibit No. | Description |
| --- | --- |
| 10.18 | Equipment Lease Agreement between TCM Cloud 1, LLC and ATFP Cloud SPV IV, LP dated December 12, 2024 |
| 10.19 | Equipment Lease Agreement between TCM Cloud 1, LLC and ATFP Cloud SPV III, LP dated September 9, 2024 |
| 10.20 | First Amended and Restated Equipment Lease Agreement between TCM Cloud 1, LLC and ATFP Cloud SPV I, LP dated September 9, 2024 |
| 10.21 | First Amended and Restated Equipment Lease Agreement between TCM Cloud 1, LLC and ATFP Cloud SPV II, LP dated September 9, 2024 |
| 10.22 | Second Amended and Restated Profit Share Agreement among ATFP Cloud SPV I, LP, ATFP Cloud SPV II, LP, ATFP Cloud SPV III, LP, ATFP Cloud SPV IV, LP and TCM Cloud 1, LLC dated December 12, 2024 |
| 10.23 | Service Agreement by and between The Cloud Minders and Alder Technology, LLC, dated September 1, 2023 |
| 10.24 | Parking Area Lease between 5555 Property Developers, LLC and T20 Mining Group, LLC, dated December 1, 2022 |
| 10.25 | First Amendment to Parking Area Lease between 5555 Property Developers, LLC and T20 Mining Group, LLC, dated December 1, 2022, as amended on February 27, 2023 |
| 10.26 | Second Amendment to Parking Area Lease between 5555 Property Developers, LLC and T20 Mining Group, LLC, dated December 1, 2022, as amended on May 12, 2023 |
| 10.27 | Third Amendment to Parking Area Lease between 5555 Property Developers, LLC and T20 Mining Group, LLC, dated December 1, 2022, as amended on May 29, 2024 |
| 10.28 | Surface Lease Agreement between TOM-STACK, LLC and SPRE WATONGA OK, LLC, effective January 12, 2024 |
| 10.29 | Lease Agreement between City of Denton and SPRE Denton TX, LLC, dated September 1, 2024 |
| 10.30 | Master Services Agreement, by and between The Cloud Minders, Inc. and H5 Data Centers, LLC, dated December 9, 2024 |
| 10.31 | Amended and Restated Collateralized Line of Credit between Trailhead Growth, LP and Global Digital Holdings, dated April 26, 2024 |
| 10.32 | Amended and Restated Loan and Security Agreement between Trailhead Growth, LP and Global Digital Holdings, dated April 26, 2024 |
| 10.33 | Global Digital Holdings, Inc. Convertible Promissory Note between Global Digital Holdings, Inc. and The Cloud Minders, LLC, dated November 1, 2023 |
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| Exhibit No. | Description |
| --- | --- |
| 10.34 | Loan and Security Agreement 1-B between WAHA Technologies, Inc. and GC Opportunities 2 Private Fund, LP, dated February 15, 2022, as modified on October 4, 2022 |
| 10.35 | Loan Modification Agreement between WAHA Technologies, Inc. and GC Opportunities 2 Private Fund, LP, dated October 4, 2022 |
| 10.36 | Interest Only Balloon Note between WAHA Technologies, Inc. and Alder Mortgage Group, LLC, dated April 14, 2022 |
| 10.37 | Line of Credit Agreement between Ian Gerard and The Cloud Minders, Inc. dated December 31, 2021 |
| 10.38 | Amendment No. 1 to Line of Credit Agreement between Ian Gerard and The Cloud Minders, Inc. dated December 18, 2024 |
| 10.39* | Form of Lock-Up Agreement |
| 10.40 | Global Digital Holdings, Inc. 2022 Option Plan |
| 10.41 | Amendment No. 1 to Global Digital Holdings, Inc. 2022 Option Plan |
| 10.42 | Form of Non-Qualified Stock Option Agreement under the Global Digital Holdings, Inc. 2022 Option Plan, as amended |
| 10.43 | Form of Incentive Stock Option Agreement under the Global Digital Holdings, Inc. 2022 Option Plan, as amended |
| 10.44* | QumulusAI, Inc. 2025 Equity Incentive Plan |
| 10.45* | Form of Non-Employee Director Restricted Stock Unit Award Agreement under the QumulusAI, Inc. 2025 Equity Incentive Plan |
| 10.46* | Form of Employee Restricted Stock Unit Award Agreement under the QumulusAI, Inc. 2025 Equity Incentive Plan |
| 10.47* | Form of Employee Performance Stock Unit Award Agreement under the QumulusAI, Inc. 2025 Equity Incentive Plan |
| 10.48* | Form of Employee Incentive Stock Option Award Agreement under the QumulusAI, Inc. 2025 Equity Incentive Plan |
| 10.49* | Form of Employee Non-Qualified Stock Option Award Agreement under the QumulusAI, Inc. 2025 Equity Incentive Plan |
| 10.50* | Compensation Agreement between QumulusAI, Inc. and Michael Maniscalco, dated September 1, 2025 |
| 10.51* | Compensation Agreement between QumulusAI, Inc. and Scott Krosnowski, dated September 1, 2025 |
| 10.52* | Compensation Agreement between QumulusAI, Inc. and Ankur Chatterjee, dated September 1, 2025 |
| 10.53* | Compensation Agreement between QumulusAI, Inc. and Ryan DiRocco, dated September 1, 2025 |
| 10.54* | Compensation Agreement between QumulusAI, Inc. and Stephen Hunton, dated September 1, 2025 |
| 10.55* | Compensation Agreement between QumulusAI, Inc. and Patrick Gahan, dated September 1, 2025 |
| 21.1* | Subsidiaries of QumulusAI, Inc. |
| 23.1 | Consent of Independent Registered Public Accounting Firm, WithumSmith+Brown, PC |
| 23.2 | Consent of Independent Auditors, BPS & Associates, LLC |
| 23.3* | Consent of Fox Rothschild LLP (included in Exhibit 5.1) |
| 24.1 | Power of Attorney (included on signature page) |
| 107 | Filing Fee Table |
---
* To be filed by amendment.
***(b)*** ***Financial Statement Schedules***
Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.
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**Item 17. Undertakings**
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) (§230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Filing Fee Tables” or “Calculation of Registration Fee” table, as applicable, in the effective registration statement.
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
Provided, however, that Paragraphs (a)(1)(i), (ii), and (iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to section 13 or section 15(d) of the Exchange Act that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act to any purchaser: If the registrant is subject to Rule 430C (§230.430C of this chapter), each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§230.424 of this chapter);
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
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(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(e) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(f) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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**SIGNATURES**
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Marietta, State of Georgia, on December 31, 2025.
- **QUMULUSAI, INC.**
- By: */s/ Michael Maniscalco*
- Name: Michael Maniscalco
- Title: Chief Executive Officer
**POWER OF ATTORNEY**
We, the undersigned officers and directors of QumulusAI, Inc., a Georgia corporation, hereby constitute and appoint Michael Maniscalco and Scott Krosnowski, and each of them individually, as the true and lawful agent and attorney-in-fact of the undersigned with full power and authority in said agent and attorney-in-fact to sign for the undersigned and in their respective names as an officer/director of the Company, any and all amendments (including post-effective amendments) to this registration statement on Form S-1 (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act) and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, and with full power of substitution, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
**Signature** **Capacity** **Date**
*/s/ Michael Maniscalco* Chief Executive Officer and Director December 31, 2025
Michael Maniscalco (Principal Executive Officer)
*/s/ Scott Krosnowski* Chief Financial Officer December 31, 2025
Scott Krosnowski (Principal Financial and Accounting Officer)
*/s/ Patrick Gahan* SVP, Capital Markets and Director December 31, 2025
Patrick Gahan
*/s/ Steve Gertz* Chairman of the Board of Directors December 31, 2025
Steve Gertz
*/s/ Stacy Kenworthy* Director December 31, 2025
Stacy Kenworthy
*/s/ Michael Mulica* Director December 31, 2025
Michael Mulica
*/s/ David Rench* Director December 31, 2025
David Rench
*/s/ Barry Schwartz* Director December 31, 2025
Barry Schwartz
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---
## EXHIBIT 10.7
SEC source: [ex_902140.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902140.htm)
**Exhibit 10.7**
**QUMUMLUSAI CUSTOMER AGREEMENT**
This QumulusAI Customer Agreement (“Agreement”) is a binding agreement between The Cloud Minders Inc., a Delaware corporation operating under the trademark QumulusAI (“QumulusAI”), and you or the entity you represent (“Customer”) (collectively, the “Parties”). This Agreement is effective when executed by QUMULUSAI and Customer (the “Effective Date”).
**1.** **Access to the Equipment and Services**
1.1 **Services**. QUMULUSAI will make available certain bare metal servers (the “Equipment”) for high-speed computing (the “Services”) as set forth in this Agreement and any signed statement of work or amendment set forth in writing and executed by the Parties (an “SOW”). Customer may only use the Services in accord with this Agreement or any SOW.
1.2 **License**. QUMULUSAI owns all right, title, and interest in and to the Equipment and Services and all accompanying intellectual property rights. QUMULUSAI grants Customer a limited, royalty-free, revocable, non-exclusive, non-sublicensable, non-transferrable license to use the Services in accordance with this Agreement during the Term. QUMULUSAI does not grant, nor does Customer obtain, any other right to the Services or Equipment.
1.3 **Service Levels and Availability**. QUMULUSAI will use commercially reasonable efforts to provide reliable access to its Services, and QUMULUSAI does not guarantee uninterrupted or error-free operation. Services and Equipment are provided AS IS on a “best efforts” basis unless otherwise agreed in writing.
1.4 **Access Protocols**. Upon written request by Customer, QUMULUSAI will provide Customer with the credentials, IP address(es), access codes, technical specifications, connectivity standards or protocols, or other relevant procedures, necessary to enable Customer to access the Services.
1.5 **Software and Script**. QUMULUSAI may provide certain software or executable configure scripts, which, QUMULUSAI may modify or update from time to time in QUMULUSAI’s sole discretion (the “Script”), and Customer shall run the Script on the Equipment in accordance with QUMULUSAI’s instructions and documentation at all times during the Term.
1.6 **Notice of Changes to the Services**. QUMULUSAI may change or discontinue any of the Services from time to time. QUMULUSAI will provide Customer at least thirty (30) days prior notice before discontinuing a material functionality of the Services. QUMULUSAI will not be obligated to provide such notice under this Section if the discontinuation is necessary to (a) address an emergency, or risk of harm to the Services, Equipment, QUMULUSAI, or its affiliates, (b) respond to claims, litigation, or loss of license rights related to third party intellectual property rights, or (c) comply with law, but should any of the preceding occur QUMULUSAI will provide Customer with as much prior notice as is reasonably practicable under the circumstances.
**2.** **Customer Responsibilities and Restrictions**
2.1 **Customer Accounts**. Customer will comply with the terms of this Agreement and all laws, rules and regulations applicable to its use of the Services. Except to the extent caused by a QUMULUSAI breach of this Agreement, (a) Customer is solely responsible for all activities that occur under its account, regardless of whether the activities are authorized by it or undertaken by the Customer, its employees, or a third party (including contractors, agents or any third party to whom Customer provides products or services that utilize the Services or Equipment (“End User(s)”), and (b) QUMULUSAI is not responsible for unauthorized access to Customer accounts.
2.2 **Customer Content**. Customer retains all right, title, and interest in and to any data, information, or other materials provided, uploaded, or submitted in the course of using the Services (the “**Customer Content**”), including all intellectual property rights therein. Customer is responsible for all Customer Content, and Customer will not violate any applicable law, this Agreement and the License contained herein, or any other policy set forth by QUMULUSAI. QUMULUSAI may review Customer Content to ensure compliance with this Agreement and the security and integrity of its Services.
2.3 **Restrictions**. Neither Customer nor any End User will use the Services in any manner except as expressly permitted by this Agreement and License. Neither Customer nor any End User will, or will attempt to (a) reverse engineer, disassemble, or decompile the Services or apply any other process or procedure to derive the source code of any software included in the Services (except to the extent applicable law doesn’t allow this restriction), (b) access or use the Services in a way intended to avoid incurring fees or exceeding usage limits or quotas, or (c) resell the Services.
2.4 **Customer Obligations**. Customer will notify QUMULUSAI of any material or reoccurring issues or errors related to the Services or Equipment, and the support, maintenance, implementation, and use thereof. Customer further agrees to provide QUMULUSAI with such information as is necessary to enable QUMULUSAI to recreate any such issues or errors, or as otherwise deemed reasonably necessary by QUMULUSAI.
**3.** **Fees and Payment**
3.1 **Service Fees**. QUMULUSAI will calculate and bill fees and charges related to the Services on a monthly, and Customer shall pay QUMULUSAI by the 15th of each month for the previous month’s fee for the agreed upon Services. QUMULUSAI may bill more frequently for fees accrued if there is a reasonably suspicion that the Customer account is fraudulent or at risk of non-payment. Customer will pay QUMULUSAI the applicable fees and charges for the Services using one of the payment methods QUMULUSAI supports. If there is a problem charging Customer’s default payment method, QUMULUSAI may charge any other valid payment method associated with Customer’s account. All amounts payable by Customer under this Agreement will be paid to QUMULUSAI without setoff or counterclaim, and without any deduction or withholding. Fees and charges for any new Service or Equipment may be offered to Customer or posted on http://thecloudminders.com (and any successor or related locations designated by QUMULUSAI), as may be updated from time to time (the “QUMULUSAI Site”). QUMULUSAI may increase or add new fees and charges for any existing Services in use by giving at least 30 days’ prior notice.
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3.2 **Taxes**. Each party will be responsible, as required under applicable law, for identifying and paying all taxes and other governmental fees and charges (and any penalties, interest, and other additions thereto) that are imposed on that party upon or with respect to the transactions and payments under this Agreement.
3.3 **Late Payment**. If the payment is not made by Customer within fifteen (15) days following the close of each calendar month, interest shall immediately begin accrue at 1.5% per month or the highest rate allowable by law, and QUMULUSAI may suspend Customer’s access to the Services and Equipment. If payment is thirty (30) days overdue, QUMULUSAI may terminate this Agreement and reallocate Services and Equipment at its sole discretion.
**4.** **Term and Termination**
4.1 **Term**. Unless set forth otherwise in a Statement of Work, this Agreement shall commence on the Effective Date and, unless earlier terminated as provided herein, the initial term shall be for twelve (12) months from the Effective Date (the “Initial Term”). Thereafter, this Agreement shall automatically renew on an annual basis from the Effective Date unless either party notifies the other of the intention not to renew at least thirty (30) days prior to the expiration of the then-current term (“Renewal Term”).
4.2 **Termination**. Either party may terminate this Agreement for cause immediately if (a) the other party ceases to do business, or otherwise terminates its business operations (except upon a transfer to a successor to substantially all of party’s stock, assets, or business), (b) the other party materially breaches any provision of this Agreement and fails to fully cure such breach within thirty (30) days of written notice from the non-breaching party describing the breach, or (c) the other party has a Default by Insolvency. Default by Insolvency means an event of default by the Insolvent Party under this Agreement: (i) such party, whether voluntarily or involuntarily, becomes subject to proceedings under any bankruptcy or debtor’s relief law, if such a proceeding is not fully stayed, dismissed or vacated within sixty (60) days after filing; (ii) such party is liquidated or dissolved without a successor-in-interest; or (iii) such party terminates its ongoing business obligations without a successor-in-interest.
4.3 **Effect of Termination**. QUMULUSAI will allow Customer to retrieve its Content only if and when all amounts due under this Agreement are paid. All provisions of this Agreement which by their nature should survive termination shall survive termination, including, without limitation, confidentiality obligations, non-interference obligations, payment obligations, ownership provisions, warranty disclaimers, indemnity, and limitations of liability.
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**5.** **Temporary Suspension**.
5.1 **Generally**. QUMULUSAI may suspend Customer or any End User’s right to access or use any portion or all of the Services and Equipment immediately upon notice to Customer if QUMULUSAI reasonably determines that Customer or an End User’s use of the Services:
**(a)** For any illegal or fraudulent reason;
**(b)** To violate the rights of others;
**(c)** To threaten, incite, promote or encourage violence, terrorism, or other serious harm;
**(d)** Poses a risk or liability to or could adversely impact QUMULUSAI, our affiliates, customers, the Services, QUMULUSAI Content, Equipment, or any third party or third party system;
**(e)** could subject QUMULUSAI, our affiliates, or any third party to liability;
**(f)** Customer or any End User is in material breach of this Agreement;
**(g)** Customer is in breach of its payment obligations; or
**(h)** Customer has ceased to operate in the ordinary course, made an assignment for the benefit of creditors or similar disposition of its assets, or become the subject of any bankruptcy, reorganization, liquidation, dissolution or similar proceeding.
5.2 **Effect of Suspension**. If QUMULUSAI suspends Customer’s right to access or use any portion or all the Services, Customer will be responsible for all fees and charges incurred during such period. QUMULUSAI has no obligation to reinstitute Services.
**6.** **Confidentiality**.
6.1 **Definition**. QUMULUSAI Confidential Information means all nonpublic information disclosed by QUMULUSAI, its affiliates, business partners, or our or their respective employees, contractors or agents that is designated as confidential or that, given the nature of the information or circumstances surrounding its disclosure, reasonably should be understood to be confidential. QUMULUSAI Confidential Information includes: (a) nonpublic information relating to QUMULUSAI or QUMULUSAI affiliates or business partners’ technology, customers, business plans, promotional and marketing activities, finances, SOWs, and other business affairs; (b) third-party information that QUMULUSAI is obligated to keep confidential; and (c) the nature, content and existence of any discussions or negotiations between the Parties. QUMULUSAI Confidential Information does not include any information that: (i) is or becomes publicly available without breach of this Agreement; (ii) can be shown by documentation to have been known by Customer at the time of receipt from QUMULUSAI; (iii) is received from a third party who did not acquire or disclose the same by a wrongful or tortious act; or (iv) can be shown by documentation to have been independently developed by you without reference to the QUMULUSAI Confidential Information.
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6.2 **Restriction**. You may use QUMULUSAI Confidential Information only in connection with your use of the Services or Equipment as permitted under this Agreement. You will not disclose QUMULUSAI Confidential Information during the Term or at any time during the five (5) year period following the end of the Term. Customer will take all reasonable measures to avoid disclosure, dissemination or unauthorized use of QUMULUSAI Confidential Information, including, at a minimum, those measures Customer takes to protect its own confidential information of a similar nature. In addition, Customer shall (a) give access to such Confidential Information solely to those employees with a need to have access thereto for purposes of this Agreement. Nothing in this Agreement prevents the Customer from disclosing the Confidential Information pursuant to any judicial or governmental order, provided that the Customer gives QUMULUSAI reasonable prior notice of such disclosure to allow QUMULUSAI to contest such order.
**7.** **IP Ownership; Feedback**
7.1 **Customer IP**. As between the parties, Customer retains all right, title, and interest in and to the all its own software, products, works, and other IP rights related thereto or created or used, including copies and derivative works.
7.2 **QUMULUSAI IP**. As between the parties, QUMULUSAI retains all right, title, and interest in and to the Services, Equipment, and all software, products, works, and other IP rights related thereto or created, used, or provided by QUMULUSAI for the purposes of this Agreement, including any copies and derivative works of the foregoing. No rights or licenses are granted except as expressly and unambiguously set forth in this Agreement or any SOW.
7.3 **Feedback**. Customer may provide suggestions, comments, or other feedback to QUMULUSAI (“**Feedback**”). Feedback, even if designated as confidential by the Customer, shall not create any confidentiality obligation for QUMULUSAI, and Customer shall, and hereby does, grant to QUMULUSAI a nonexclusive, worldwide, perpetual, irrevocable, transferable, sublicensable, royalty-free, fully paid-up license to use and exploit the Feedback for any purpose.
**8.** **Representations and Warranties; Warranty Disclaimer**
8.1 **Representations and Warranties**. Each party represents and warrants that (a) it has all necessary rights to enter into this Agreement, and (b) it shall comply with all applicable laws, regulations, and orders, writs, judgments, injunctions, decrees, and stipulations of any governmental authority, including but not limited to GDPR, CCPA, and any applicable data protection regulations.
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8.2 **DISCLAIMER**. QUMULUSAI PROVIDES THE SERVICES AND EQUIPMENT “AS IS WITH ALL FAULTS.” EXCEPT TO THE EXTENT PROHIBITED BY LAW, OR TO THE EXTENT ANY STATUTORY RIGHTS APPLY THAT CANNOT BE EXCLUDED, LIMITED OR WAIVED, QUMULUSAI AND OUR AFFILIATES AND LICENSORS (A) MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE REGARDING THE SERVICES OR QUMULUSAI CONTENT OR THE THIRD-PARTY CONTENT, AND (B) DISCLAIM ALL WARRANTIES, INCLUDING ANY IMPLIED OR EXPRESS WARRANTIES (I) OF MERCHANT ABILITY, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT, OR QUIET ENJOYMENT, (II) ARISING OUT OF ANY COURSE OF DEALING OR USAGE OF TRADE, (III) THAT THE SERVICES OR QUMULUSAI CONTENT OR THIRD-PARTY CONTENT WILL BE UNINTERRUPTED, ERROR FREE OR FREE OF HARMFUL COMPONENTS, AND (IV) THAT ANY CONTENT WILL BE SECURE OR NOT OTHERWISE LOST OR ALTERED.
**9.** **Indemnification**.Customer will defend, indemnify, and hold harmless QUMULUSAI and affiliates, and each of their respective employees, officers, directors, and representatives from and against any Losses arising out of or relating to any third-party claim concerning: (a) Customer or any End Users’ use of the Services (including any activities and use by its employees and personnel); (b) breach of this Agreement or violation of applicable law by Customer, End Users, or Customer Content; (c) a dispute between Customer and any End User; (d) any data breach notification obligations related to Customer’s use of the Services or Equipment; and (e) any claim alleging that any of the Customer, End User, or Customer Content infringes or misappropriates a third-party’s intellectual property rights, in which case Customer will further pay the amount of any adverse final judgment or settlement and reimburse QUMULUSAI for reasonable attorneys’ fees, as well as our employees’ current hourly rate and contractors’ time and materials spent responding to any third-party subpoena or other compulsory legal order or process associated with third party claims.
**10.** **Force Majeure**. Except for payment obligations, neither party nor any of their affiliates will be liable for any delay or failure to perform any obligation under this Agreement where the delay or failure results from any cause beyond its reasonable control, including acts of God, labor disputes or other industrial disturbances, electrical or power outages, utilities or other telecommunications failures, earthquake, storms or other elements of nature, blockages, embargoes, riots, acts or orders of government, acts of terrorism, or war.
**11.** **Limitation of Liability**.
11.1 **Liability Disclaimer**. EXCEPT FOR PAYMENT OBLIGATIONS OR BREACH OF INTELLECTUAL PROPERTY RIGHTS HEREUNDER (OR AN OBLIGATION ARISING FROM SUCH BREACH), NEITHER QUMULUSAI OR CUSTOMER, NOR ANY OF THEIR AFFILIATES OR LICENSORS, WILL HAVE LIABILITY TO THE OTHER UNDER ANY CAUSE OF ACTION OR THEORYOFLIABILITY,EVENIF APARTYHASBEEN ADVISED OF THE POSSIBILITY OF SUCH LIABILITY, FOR (A) INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, (B) THE VALUE OF CUSTOMER CONTENT, (C) LOSS OF PROFITS, REVENUES, CUSTOMERS, OPPORTUNITIES, OR GOODWILL, OR (D) UNAVAILABILITY OF THE SERVICES OR QUMULUSAI CONTENT.
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11.2 **Damages Cap**. EXCEPT FOR PAYMENT OBLIGATIONS OR BREACH OF INTELLECTUAL PROPERTY RIGHTS HEREUNDER (OR AN OBLIGATION ARISING FROM SUCH BREACH), THE AGGREGATE LIABILITY UNDER THIS AGREEMENT OF EITHER QUMULUSAI OR CUSTOMER, AND ANY OF THEIR RESPECTIVE AFFILIATES OR LICENSORS, WILL NOT EXCEED THE AMOUNTS PAID BY CUSTOMER TO QUMULUSAI UNDER THIS AGREEMENT FOR THE SERVICES THAT GAVE RISE TO THE LIABILITY DURING THE 12 MONTHS BEFORE THE LIABILITY AROSE; EXCEPT THAT NOTHING IN WILL LIMIT CUSTOMER OBLIGATION TO PAY QUMULUSAI FOR THE SERVICES OR ANY OTHER PAYMENT OBLIGATIONS UNDER THIS AGREEMENT.
**12.** **Dispute Resolution**. If any dispute arises related to this Agreement, or the breach thereof, both parties shall designate a disinterested representative to directly negotiate with the other. If the dispute cannot be settled through direct discussions by a disinterested representative, the parties agree to endeavor first to settle the dispute by mediation administered under the American Arbitration Associations’ (AAA) Commercial Mediation Procedures before resorting to arbitration. Further, the parties agree that any unresolved controversy or claim arising out of or relating to this Agreement, or the breach thereof shall be settled by arbitration administered in accordance with AAA’s Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. In any action or proceeding to enforce rights under this Agreement, the prevailing party shall be entitled to recover costs and attorneys’ fees. The Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, excluding its conflicts of law rules, and the parties’ consent to exclusive jurisdiction and venue in Marietta, GA.
**13.** **Miscellaneous**. This Agreement represents the entire agreement between Customer and QUMULUSAI with respect to the subject matter hereof and supersedes all prior or contemporaneous communications and proposals (whether oral, written, or electronic) between Customer and QUMULUSAI with respect thereto. Except as otherwise provided herein, this Agreement may be amended only by a writing executed by both parties. Neither party may assign any of its rights or obligations hereunder without the other’s consent; provided, however, that either party may assign this Agreement without such consent to any affiliate or to a successor to substantially all of its stock, assets, or business to which this Agreement relates. No agency, partnership, joint venture, or employment relationship is created as a result of this Agreement and neither party has any authority of any kind to bind the other in any respect. If any provision of this Agreement is held to be unenforceable for any reason, such provision shall be reformed only to the extent necessary to make it enforceable. The failure of either party to act with respect to a breach of this Agreement by the other party shall not constitute a waiver and shall not limit such party’s rights with respect to such breach or any subsequent breaches. All notices under this Agreement shall be in writing and shall be deemed to have been duly given when received, if personally delivered or sent by certified or registered mail, return receipt requested; when receipt is electronically confirmed if transmitted by e-mail; or the day after it is sent if sent for next-day delivery by recognized overnight delivery service. Notices must be sent to the contacts for each party as set forth in the respective signature blocks, except either party may update its address set forth above by giving notice in accordance with this Section 13.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.
| The Cloud Minders Inc. / By: / Name: / Title: | The Cloud Minders Inc. / /s/ James Marino / James Marino / Sales Director | Customer / By: / Name: / Title: | Customer / /s/ Sam Balooch / Sam Balooch / CIO |
| --- | --- | --- | --- |
| Date: | 05/07/2025 | Date: | 05/07/2025 |
| Address: | 3600 Dallas Highway | Address: | 17361 armstrong, irvi, |
| Email: | | Email: | |
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EXHIBIT A: STATEMENT OF WORK
Equipment
- 2x Hl00 GPUs (the “Servers”)
Hourly Rates: $2.50 per hour per Server (the “Hourly Rate(s)”)
Monthly Service Fee
- Customer shall purchase one hundred percent (100%) of the hours available for the Servers (the “Expected Monthly Service Fee”) during the Term, and the Customer and QUMULUSAI agree that the amount is $3,650 per month for the Servers.
- At least fourteen (14) days prior to the Go Live Date, Customer shall pay for the first month of the Expected Monthly Service Fee.
- During the Term, Customer shall make each monthly payment five (5) days prior to the monthly period of Services starting.
Month to Month Term
- Customer agrees to a month-to-month agreement for the Servers at the Hourly Rates set forth above and contained in the Quote provided to the Customer by QUMULUSAI (“Term”).
- QUMULUSAI and Customer agree that the date to commence Term is Monthly (“Go Live Date”).
- The Customer shall provide thirty (30) days’ notice to QUMULUSAI of its intent not to renew (“Non-renewal Intent”) otherwise this Agreement will continue on a month-to-month basis.
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---
## EXHIBIT 10.9
SEC source: [ex_902141.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902141.htm)
**Exhibit 10.9**
**MASTER SERVICE AGREEMENT**
**PERFORMIVE LLC**
**(**“**PERFORMIVE**”**)**
Performive
1130 Powers Ferry Place
Marietta, Georgia 30067 **AND**
**(**“**Customer**”**)**
The Cloud Minders
Customer Name: Ian Gerard
Address 1: 185 Faro Court
Address 2: Unit 2
City: Shepherdsville
State/Zip: KY, 40165
Telephone:
Fax:
Web:
This Master Services Agreement is made between PERFORMIVE and Customer as of the latter-dated signature below (the “**Effective Date**”) and consists of the general terms and conditions set forth on the following pages and all current and future schedules attached hereto or which will subsequently be added as provided herein. The general terms below together with the Schedules and all other related Schedules, Order Forms, agreements, amendments and attachments between PERFORMIVE and Customer collectively are the “**Agreement**.”
NOW, THEREFORE, the parties hereto agree as follows:
**1** **Definitions****. Capitalized terms used but not defined elsewhere in this Agreement will have the meanings set forth below:**
“**Acceptable-Use** Policy” means the PERFORMIVE Acceptable-Use Policy that appears on PERFORMIVE’s website (incorporated herein by reference and as may be modified occasionally by PERFORMIVE, in its sole discretion).
“**Affiliate**” means, as to any Person, any Subsidiary of such Person and any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person and includes each officer or director or general partner of such Person, and each Person who is the beneficial owner of 5% or more of any class of voting Stock of such Person. For the purposes of this definition, “control” means the possession of the power to direct or cause the direction of management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
“**Colocation Service**” is a PERFORMIVE product that includes a license to use space within the Colocation Area located in the PERFORMIVE Data Center. The Colocation Service is ideal for customers wishing to install their own equipment in the PERFORMIVE Data Center.
“**Customer Software**” means any software, other than PERFORMIVE Software, required to perform the Services. Customer Software includes Third- party Software.
“**Deliverables**” means code, documents or other materials created by PERFORMIVE and required to be delivered to Customer pursuant to a Schedule or Order Form. “Deliverables” does not include Software.
“**Facilities**” are Property owned or leased by PERFORMIVE and used to deliver Service, including terminal and other equipment, wires, lines, ports, routers, switches, channel service units, data service units, cabinets, racks, private rooms and the like.
“**Fully Implemented Date**” means the date on which PERFORMIVE notifies Customer (including, without limitation, by e-mail) that Customer’s Services and/or application has been implemented.
“**Governmental Authority**” means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
“**Hardware**” means servers, telecommunications and other equipment that are listed in an exhibit to this Agreement and that are to be supplied either by PERFORMIVE (“**PERFORMIVE Hardware**”) or Customer (“**Customer Hardware**”), as set forth in such exhibit, for the purpose of rendering the Services.
“**Person**” means an individual, partnership, corporation (including, without limitation, a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity or a Governmental Authority.
“**Professional Services**” means Services provided to Customers pursuant to a professional-services Schedule.
“**Order Form**” means the document describing the Services to be provided by PERFORMIVE to Customer pursuant to a Schedule under this Agreement, the pricing for such Services and the term during which such Services are to be provided to Customer.
“**Schedule**” means any present or future attachment to this AGREEMENT (including, without limitation, an Order Form) that describes at least (a) the Services to be performed, (b) the Software and Hardware to be provided by each party in connection with the Services, (c) each party’s responsibilities with respect to the Services to be provided and the fees associated with such Services, Software or Hardware.
“**Services**” means the services (excluding PERFORMIVE Software and Hardware, unless otherwise set forth in the applicable Schedule) to be provided to Customer by PERFORMIVE, as described in a Schedule.
“**SLA**” means a service-level agreement attached to the applicable Schedule setting forth the credits available to the Customer for any failure to deliver a Covered Service. PERFORMIVE reserves the right to modify or amend the specific SLA within reasonable discretion.
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“**Software**” means PERFORMIVE Software and Customer Software, including, without limitation, software applications, database software, operating system software, and/or remote access software.
“**Stock**” means shares of capital stock, beneficial or partnership interests, participations or other equivalents (regardless of how designated) of or in a corporation or equivalent entity, whether voting or non-voting and includes, without limitation, common stock and preferred stock.
“**Subsidiary**” means, with respect to any Person, any corporation, partnership or other business entity of which an aggregate of 50% or more of the outstanding Stock having ordinary voting power to elect a majority of the board of directors, managers, trustees or other controlling persons, is, at the time, directly or indirectly, owned or controlled by such Person and/or one or more Subsidiaries of such Person (irrespective of whether, at the time, Stock of any other class or classes of such entity shall have or might have voting power by reason of the happening of any contingency).
“**Term**” means the term set forth in a Schedule, whether such term is entered into as of the Effective Date of this Agreement or subsequently thereto, and that may be amended or extended by subsequent Schedules.
“**Third-Party Software**” means any Software that is owned by a third party and licensed by Customer either from a third-party vendor or through PERFORMIVE pursuant to a separate agreement, Schedule or a Software Schedule, as applicable, and excludes PERFORMIVE Software.
“**PERFORMIVE**” means Performive, LLC, a Georgia limited liability company, together with any Affiliate, subsidiary, or division.
“**PERFORMIVE Software**” means software provided by PERFORMIVE as specified on a Schedule or Order Form and that may be accessed by Customer solely in connection with the use of the Services, but that is not licensed to Customer.
**2** **ORDER FORMS, SCHEDULE, AND SERVICES**
2.1 **Submission of an Order Form or Schedule**. To order any Service, Customer shall submit an Order from or Schedule, requesting Service. The Order Form, Schedule, and its backup detail must include a description of the Service, the nonrecurring charges and monthly recurring charges for Services and as well as the Term and/or any commitment.
2.2 **Acceptance by PERFORMIVE**. Upon receipt of an Order Form or Schedule, PERFORMIVE shall determine (in its sole discretion) whether to accept the Order Form or Schedule. Upon Acceptance, PERFORMIVE will notify the Customer of its acceptance and the expected Fully Implemented Date for the Services to become available for Customer use.
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2.3 **Credit Approval and Deposits**. All orders for Services are subject to credit approval. Customer shall provide PERFORMIVE with information to demonstrate acceptable credit before delivery of Goods and/or Service under any Customer Service Order. Upon execution of this Agreement, Customer may be required to pay PERFORMIVE a security payment for Customer’s obligations, as indicated on a Schedule. PERFORMIVE shall not be obligated to segregate or to pay any interest on any portion of the Security Payment. Upon termination of this Agreement without renewal, any remaining portion of the Security Payment will, at PERFORMIVE’s option, either be returned to Customer or applied to its final invoice to the extent that, in each case, the Security Payment has not previously been applied to Customer’s account as a result of any default or breach of this Agreement by Customer.
2.4 **Annual Price Escalator**. Customer agrees that all prices set out in the applicable Order Form or Schedule shall increase by six percent (6%) annually. The parties may enter into a separate and optional pricing agreement that sets out limitations or exceptions to the annual increase that is set out in this section 2.4.
2.5 **Facilities**. Except as otherwise agreed, title to all Facilities shall remain with PERFORMIVE. PERFORMIVE will provide and maintain the Facilities in good working order. Customer shall not, and shall not permit others to, rearrange, disconnect, remove, attempt to repair, or otherwise tamper with any Facilities without the prior written consent of PERFORMIVE. The Facilities shall not be used for any purpose other than that for which PERFORMIVE provides them. Customer shall not take any action that causes the imposition of any lien or encumbrance on the Facilities. In no event will PERFORMIVE be liable to Customer or any other person for interruption of Service or for any other loss, cost or damage caused or related to improper use or maintenance of the Facilities by Customer or third parties provided access to the Facilities by Customer in violation of these Terms, and Customer shall reimburse PERFORMIVE for any damages incurred as a result thereof.
2.6 **Customer-Provided Equipment**. PERFORMIVE may install certain Customer-provided communications equipment upon installation of Service in the licensed space. Still, PERFORMIVE shall not be responsible for the operation or maintenance of any Customer- provided communication equipment unless otherwise agreed to in a Customer Service Order. PERFORMIVE undertakes no obligations and accepts no liability for the configuration, management, performance, or any other issues relating to Customer’s servers, routers or other Customer-provided equipment used for access to or the exchange of traffic in connection with the Service unless specifically agreed to in a Customer Service Order. Customer may at any time purchase PERFORMIVE On Demand services at prevailing rates from PERFORMIVE to gain assistance with Customer-Provided Equipment.
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**3** **GOODS, SERVICES AND LICENSES.**
3.1 **Scope**. PERFORMIVE will perform the Services, deliver the Deliverables, provide access to the PERFORMIVE Software and/or distribute, license, or sublicense the Third-Party Software acquired through PERFORMIVE as specified in a Schedule. Other than as expressly set forth in the relevant Schedule, Customer may not resell, lease or sublicense the Services or PERFORMIVE Software or use the Services or PERFORMIVE Software in a commercial-service-bureau environment or to process third-party data without the express written approval of PERFORMIVE.
3.2 **Access to Facilities and Information**. Customer will provide PERFORMIVE reasonable access to hardware, equipment, tools, supplies, software, utilities, information and facilities of Customer that, in each case, PERFORMIVE reasonably determines necessary to enable it to perform any Services. Customer agrees to cooperate with PERFORMIVE and respond in a timely manner to all reasonable requests for access to Customer’s Service environment and/or information to facilitate PERFORMIVE’s delivery of Services. If Customer fails to cooperate with any such request, PERFORMIVE shall have no liability for any damage or injury that may arise as a result.
3.3 **Change of Scope or Additional Services**. Either party may request a change in the scope of the Services or request additional Services by submitting to the other party a written description of the same. If the parties agree upon a change or additional Services request, the parties will execute a new Schedule. PERFORMIVE retains the right to refuse to provide any additional Services for any reason. A Services request will not be binding on either party unless agreed to in writing by both parties.
3.4 **Goods**. Goods shall be defined as any products, including hardware software or any other products or services purchased by Customer from PERFORMIVE, including firmware or software licenses sold, licensed or otherwise provided to Customer. Title to Goods sold to Customer shall pass upon full payment. Title to all other equipment and/or facilities furnished by PERFORMIVE shall remain with PERFORMIVE. To return Goods, the Customer must obtain a return material authorization from PERFORMIVE’s Purchasing Department. PERFORMIVE agrees to provide and Customer agrees to purchase the Goods set forth on the Order Form.
**4** **FEES AND PAYMENT**.
4.1 **Fees and Charges**. Customer and PERFORMIVE shall agree upon the applicable fees and specify them in each Schedule. The customer agrees to pay PERFORMIVE for the Services and Third-Party Software acquired through PERFORMIVE in accordance with the applicable Schedule customer agrees to pay PERFORMIVE for the Services in accordance with the payment terms in Section 4.3 below.
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4.2 **Reimbursement of Expenses**. In addition to the payment of applicable fees, as specified in each Schedule, Customer shall reimburse PERFORMIVE for all reasonable out-of-pocket costs advanced and expenses incurred that are directly related to the performance of the Services, including, without limitation, non-standard or recurring expenses incurred at the written request of Customer (such as airfare, hotel accommodations, business meals, miscellaneous travel expenses, and mileage). Upon request, PERFORMIVE will provide copies of supporting documentation as may be reasonably appropriate for Customer to confirm the nature and amount of any such expenses.
4.3 **Payment**. Customer shall pay PERFORMIVE all fees as specified in any Schedule. All amounts payable under this Agreement and not disputed in writing and in good faith shall, unless otherwise specifically set forth in the applicable Schedule, be payable in full as set out in the applicable invoice, in United States Dollars, at the PERFORMIVE address set forth at the beginning of this AGREEMENT or as directed in the applicable invoice. Fees for initial set-up, non-recurring fees and other one-time fees will be billed upon acceptance of the Schedule. Recurring fees will be billed one month in advance beginning on the acceptance of the Schedule, which is the Fully Implemented Date of Services. The parties may agree to a specific Fully Implemented Date of the Services. Failure by Customer to execute its acceptance of the environment within (10) ten business days after notification by PERFORMIVE of the Fully Implemented Date (as set forth herein) shall be deemed to be acceptance by Customer of the environment. Acceptance by Customer of the environment may also be deemed to have been communicated to PERFORMIVE by Customer’s usage of any of the Services (e.g., space, power, and bandwidth). If PERFORMIVE has completed the installation of a portion of the Customer environment and PERFORMIVE’s provision of Services under this Agreement depends on the completion of any further actions by Customer, PERFORMIVE may, at its discretion, invoice Customer for that portion of the Services already installed and provided by PERFORMIVE, and Customer shall be obligated to pay such invoice(s) in accordance with this Section. Where cooperation of Customer necessary for the completion of the Customer environment is not provided on a timely basis, PERFORMIVE may, at its discretion, commence billing for the full environment as set forth in the next sentence. With the exception of all initial set-up fees and other one-time fees, which shall be invoiced upon execution of this Agreement, and unless otherwise set forth in a signed Schedule, billing shall commence upon Customer’s acceptance of the environment but not later than 60 days following the date of execution of the signed Schedule, whichever occurs earlier. Except with respect to metered services (*i.e*., bandwidth, backups, and exchange), all fees owed under this Agreement shall be prorated if the Fully Implemented Date is after the first day of the month.
4.4 **Right to Suspend**. PERFORMIVE may suspend access or any or all Service forthwith in the event that: (i) Customer fails to comply with any provision of this Agreement, (ii) customer violates the PERFORMIVE AUP, (iii) Customer has failed to pay for Service as required, or (iv) PERFORMIVE is entitled to terminate this Agreement (including, without limitation, by reason of a breach, fault or omission by Customer hereunder) or (v) Customer consumes Services in an amount that materially exceeds Customer’s credit limit and Customer, after demand, has not provided sufficient security for payment. Any PERFORMIVE Suspension shall not be a waiver of any right of termination. If Service has been suspended other than for Customer’s breach, Service shall be restored as soon as reasonably possible and the applicable Service charges shall be ratably abated. If Service has been suspended for any other reason and Customer requests that Service be restored, PERFORMIVE may restore Service after satisfaction of conditions and imposition of charges as PERFORMIVE reasonably requires.
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4.5 **Late Fees/Interest**. PERFORMIVE reserves the right to charge a late fee of 1.5% per month (18% per annum), or the highest rate allowed by applicable law, whichever is lower, calculated from the date such fee(s) were due, if payment in full is not received within 30 days of the date due. Customer shall pay any costs of collection (including reasonable legal and professional fees) incurred in collecting any amounts due hereunder. Notwithstanding anything in this Agreement to the contrary, if any invoice or portion thereof is past due and not disputed in writing and in good faith by Customer, PERFORMIVE may, in addition to receiving the above late-fee payments and any other remedies available under this Agreement or applicable law, (a) restrict Customer’s access to the Facilities, (b) refuse to provide any new additional Services requested by Customer and (c) suspend the provision of any of the Services to Customer. If PERFORMIVE ceases providing Services to Customer pursuant to this Section, PERFORMIVE will resume said Services as soon as commercially reasonable and PERFORMIVE may charge Customer a reasonable reinstatement fee equal based on the Services to be restored.
4.6 **Waiver/Acceptance**. The acceptance and deposit by PERFORMIVE of any payment from Customer or its Affiliates, by check, wire transfer or any other means, which payment contains reference of any type that such payment constitutes ‘payment in full’ or ‘in full satisfaction,’ shall not constitute an accord and satisfaction or a waiver by PERFORMIVE of any rights it possesses, in law or equity, to collect payment in full from Customer for any and all services provided to Customer under this Agreement.
4.7 **Taxes**. Customer shall pay PERFORMIVE for any taxes and duties (excluding taxes on PERFORMIVE’s net income) that are required to be collected or paid by PERFORMIVE.
**5** **COLOCATION SERVICES**.
5.1 This Section 5 sets forth the terms and conditions of Customer’s use of Colocation Services within a PERFORMIVE data center. For purposes of the provision of colocation Services, the following definitions shall apply:
“**Customer Space**” means the server racks, cabinets and cages, and the space contained therein, to be provided by PERFORMIVE at a Data Center for the installation of the Equipment and the delivery of Services.
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“**Customer Equipment**” means Equipment supplied by Customer.
“**Data Center**” means the facility used by PERFORMIVE to provide the Services.
“**Equipment**” means any and all computer hardware, operating systems and other system-level software used in the delivery of Services.
“**PERFORMIVE Equipment**” means the Equipment provided by PERFORMIVE for use by Customer.
“**NOC**” means the PERFORMIVE network operations center.
“**Order Form**” means an executed order, received from Customer for the provisioning of Services.
“**Services**” means any services to be performed by PERFORMIVE under an Order Form or the Agreement.
5.2 **Grant of license**. During the term designated on any Order Form or Schedule, PERFORMIVE grants to Customer the right and non- exclusive license (“License”) to use the Customer Space identified in the Order Form solely for the Permitted Uses (as defined below). The Customer Space is delivered to Customer on an “as-is, where-is” basis. Customer may not assign or sublicense the Customer Space or allow any other person or entity to use the Customer Space, without first obtaining the prior written consent of PERFORMIVE. This License is revocable subject to changes in PERFORMIVE’s underlying lease agreement(s). Customer agrees that it does not have, has not been granted and will not have any real property interest in the Customer Space or the Data Center; that Customer is a licensee and not a tenant of the Customer Space; and that Customer does not have any of the rights, privileges or remedies that a tenant would have under a lease agreement.
5.3 **Change in Customer Space**. PERFORMIVE may relocate, change or otherwise substitute space in the general region where the space is located for the Customer Space at another location at any time during the term of the Agreement, provided that (i) the replacement space is substantially similar in size and configuration to the original Customer Space, (ii) PERFORMIVE gives Customer at least ninety (90) days written notice of such relocation (except that no notice is required in the event of an emergency), and (iii) PERFORMIVE will provide the labor necessary to assist Customer with the move. PERFORMIVE may access the Customer Space at any time and for any reason, including, without limitation, to perform maintenance and repairs, to inspect Equipment, to measure power draw and to perform contracted Services. Neither Customer nor any of its officers, employees, technicians, agents, representatives, subcontractors or visitors shall make any alterations, additions or improvements to the Customer Space without PERFORMIVE’s prior written consent.
5.4 **Delivery and Storage of Equipment**. PERFORMIVE will accept delivery of and store Customer Equipment in accordance with the guidelines below. Due to limited storage space in the Data Center, PERFORMIVE, in its sole discretion, may deny or limit the amount of storage space and storage time to customers. PERFORMIVE reserves the right to modify or adjust the remote hands fees applicable to the receipt, acceptance, and storage of Customer Equipment and packages.
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1. **Scheduling**. All deliveries shall be scheduled in advance by registering each shipment within the PERFORMIVE customer portal 48 hours prior to the delivery of each shipment. If PERFORMIVE has not been notified in advance of Equipment arrival, PERFORMIVE will deny acceptance of shipment. When scheduling, Customer shall describe the Equipment being delivered to PERFORMIVE. For deliveries too large to be accommodated in accordance with normal freight procedures for the Data Center, Customer will work with PERFORMIVE and the landlord or building manager of the Data Center to ensure delivery. Deliveries of any oversized items shall occur outside of normal business hours of the building in which the Data Center is located. Customer shall be responsible for any applicable charges imposed by the landlord or building manager.
2. **Third Party Deliveries**. If Customer Equipment is delivered by a third party, PERFORMIVE facility personnel will receive it on behalf of Customer, provided that Customer scheduled the delivery with PERFORMIVE as described above. Customer must include in the PERFORMIVE customer portal shipment registration: Customer’s name, Customer order number, Data Center address, Customer cabinet or case number, and any special instructions and any shipment identification information. Customer shall prepay all shipments, freight, packages, etc. PERFORMIVE will not accept shipments that require any payment whatsoever. Customer is responsible for all shipping and freight claims. Upon receipt of Customer Equipment, PERFORMIVE will:
- Verify that the shipment is for the correct Data Center.
- Visually inspect external packaging for possible damage.
- Verify that the carton count matches the shipping receipt.
- Place the Customer Equipment in the Customer Space or other secured area of the Data Center until the Customer Space is ready or available.
- Notify Customer of receipt of all shipments and damages or shortages, if any.
In the event of damaged external packaging, PERFORMIVE will accept the Customer Equipment, indicate “damaged shipment/freight” on the shipping receipt and request the delivery driver to countersign acknowledging delivery of “damaged shipment/freight.” In the event of a discrepancy, PERFORMIVE will accept the shipment and indicate “short shipment/freight” on the shipping receipt and request the delivery driver to countersign acknowledging delivery of “short shipment/freight.
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3. **Storage**. If Customer Equipment can be locked in the Customer Space, no storage charges will apply. However, upon completion of initial build, no spare equipment may be stored in cardboard boxes within the confines of the Customer Space or any portion of the floor. If there is not enough storage area in the Customer Space, PERFORMIVE will store Customer Equipment in a designated and secure storage area if there is space to do so, at the sole discretion of the site operations manager. Customer will have 15 days in which to retrieve its Equipment from the storage area from the date the Equipment was delivered, after which storage fees will apply. All Equipment left in PERFORMIVE storage areas for more than 45 days will be shipped to a Customer-specified location at Customer’s sole cost and expense. PERFORMIVE is not responsible for loss or damage to Customer Equipment stored in the Data Center or in transit if returned to Customer.
4. **Inventory of Equipment**. Customer shall give PERFORMIVE an inventory of Customer Equipment upon execution of hereof or upon installation. PERFORMIVE may affix “Customer-Owned Equipment” tags to Customer Equipment. Customer shall notify PERFORMIVE of any significant changes in the Customer Equipment, including, without limitation, additions, upgrades, reconfigurations and deinstallations. PERFORMIVE may conduct, upon reasonable advance notice to Customer, periodic inventory of Customer Equipment and configurations during the term of the Agreement.
5.5 **Installation**.
1. **Plan Approval**. Prior to installing any Customer Equipment, Customer shall submit written installation plans to PERFORMIVE and obtain PERFORMIVE’s prior written consent of same. PERFORMIVE may reasonably limit the type, size and location of Customer Equipment located in the Data Center. Customer agrees that all Customer Equipment will only blow air towards the “hot aisle” as designed by PERFORMIVE. No Customer Equipment will blow hot air in any direction other than towards the hot aisle. Additional fees may be required for Customer installation of Equipment that significantly differs from that specified in an installation plan or that does not fit into the Customer Space footprint. PERFORMIVE retains ownership of all PERFORMIVE Equipment.
2. **Fixed Equipment**. Customer shall not install any Equipment that cannot be securely affixed or bolted into a cabinet or rack in a manner reasonably acceptable to PERFORMIVE. Any and all Equipment that is too large or heavy for a rack or cabinet (including, without limitation, large servers) shall be fastened, securely affixed or bolted directly to the floor by a PERFORMIVE technician. Customer shall not stack or rest any Equipment on any other Equipment. In addition, nothing that may restrict the airflow through the PERFORMIVE facility may be mounted on cage walls.
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5.6 **Maintenance/Removal**. Customer shall safely configure, operate and maintain Equipment in the Customer Space, including by appropriate engineering and designing equipment systems in adherence to manufacturer specifications. Failure to comply with these safety measures can result in an order to remedy or shut down unsafe Equipment. Customer shall remove all Customer Equipment upon expiration or termination of this Agreement and repair any damage to the Data Facility upon such removal.
5.7 **Power**. PERFORMIVE shall exclusively provide any AC or DC power circuits for the Customer Space in accordance with the Order Form. It shall be Customer’s responsibility to manage the power draw on each circuit and each fuse, and PERFORMIVE shall not be liable for any outage or damage to Customer Equipment or applications should Customer exceed the circuit or fuse rating. Customer shall use only electric outlets from PERFORMIVE-provided power strips. Customer-provided power strips used for remote control or other additional functionality must be approved for use in advance by PERFORMIVE. Dedicated power circuits are standard for most Customer space. Shared power circuits are standard for 1u colocation space . Five power-strip outlets are provided for half-cabinet service, and three power-strip outlets are provided for quarter-cabinet service. Customer may purchase additional dedicated power services as required.
Cage size is determined in part by the power density and the amount of power purchased by Customer. If Customer chooses to add power circuits to its environment, PERFORMIVE may, in its sole and reasonable discretion, require that Customer’s cage be enlarged to accommodate the additional power circuits or that the rate per square foot and quantity of square feet be adjusted to ensure that the maximum recommended wattage density per square foot of the applicable data center, as determined by PERFORMIVE in its sole reasonable discretion, is not exceeded.
The Data Center utilizes an uninterruptible power supply (“**UPS**”) system that receives power from both a local commercial power utility and from standby generators to provide continuous conditioned power to the Data Center’s power-distribution units (“**PDUs**”). In case of a failure in the commercial power source, the UPS battery system continues to provide conditioned electric power. For extended commercial outages, the generators act as the primary source of power to the UPS system. For PDU redundancy, Customer may optionally purchase additional diverse power circuits. Customer has the option to purchase redundant power delivery to the Customer space which includes the PERFORMIVE power SLA service. Power SLA is limited only to Customers that purchase the redundant power delivery.
Power provided will be based solely on accepted Equipment configurations as set forth on any applicable executed service contract. Additional power required for Equipment reconfigurations, additions or upgrades must be approved by the site operations manager.
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All individual power runs are to be installed and maintained by PERFORMIVE only. All Equipment must meet the standards of Underwriters Laboratory, Inc. (UL), or a similarly recognized governing board. Any electrical work that requires any contact with any PERFORMIVE infrastructure must be performed by PERFORMIVE, PERFORMIVE-employed contractors or PERFORMIVE- approved contractors.
Customers may not install any batteries in the Data Center without the prior approval of the site operations manager.
Customer must inform PERFORMIVE immediately upon discovery of any worn, frayed or cut cables by opening a ticket within the PERFORMIVE customer portal and immediately alerting the onsite NOC. No soldering or open flames are allowed in the Data Center.
By code, the load on any AC circuit should not exceed 80% of its maximum rating or exceed 70% on any DC circuit. To ensure the safety of the PERFORMIVE facility, there are restrictions on the maximum total power provided to any individual cabinet, rack or cage installed in the facility. For example, no individual cabinet or rack may exceed six (6) kilowatts of power for standard density service, and twelve (12) kilowatts for the high-capacity service. The site operations manager must approve all specific Customer power requirements that exceed this threshold.
PERFORMIVE Customer may only use outlets from PERFORMIVE-provided (or -approved) power strips. If Customer plugs in additional power strips into the PERFORMIVE-provided or approved power strips (i.e., daisy-chains multiple strips together), PERFORMIVE SLAs are no longer in effect. PERFORMIVE reserves the right to demand the removal of the additional power strips, and Customer must remove them immediately on demand.
Redundant AC circuits for fail-over may also be purchased. Customer must use a redundant circuit for fail-over only and may not use it as a primary power feed. The actual combined power draw on a primary/redundant circuit pair may not exceed 80% of the primary circuit’s maximum draw. If Customer’s actual power requirement exceeds 80% of the primary circuit’s maximum draw (for example, 16A on a 20A/120V circuit), Customer must purchase additional primary power circuits. PERFORMIVE will periodically review Customer’s usage of primary and redundant circuits to verify that Customer is not overloading the circuit or using redundant circuit as a primary power source. Customer will be charged the current monthly fee for a primary circuit for any redundant circuits used as a source of primary power or contributing to actual draw in excess of the primary circuit’s maximum draw. PERFORMIVE shall have the right to invoice Customer for electric power overages at the rate of 250% of the KW pricing set out in the applicable Schedule and to add additional power services and charges to Customer’s account as an addition to Customer’s services.
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PERFORMIVE may, with 24 hours’ notice, temporarily remove from service any individual DC power feed for maintenance of the power infrastructure.
5.8 **Access to Space**. PERFORMIVE will provide physical access by Customer to the Customer Space 24 hours a day, 7 days a week, except in the event of an emergency situation in the Data Center; provided, however, that PERFORMIVE may restrict Customer’s physical access to the Data Center if Customer is in breach of any payment obligation set forth in the Agreement and further provided that the Data Center landlord reserves the right to restrict access to any person who poses an unreasonable security risk to the building in which the Data Center is located. To ensure the availability of PERFORMIVE personnel to accommodate Customer access, Customer must provide PERFORMIVE with at least 24 hours prior notice of its intent to enter the Customer Space. No unescorted persons may enter the Colocation Space under any circumstances. PERFORMIVE retains the right to access the Customer Space at any time and for any reason, including, without limitation, to perform maintenance and repairs, to inspect Equipment, to measure power draw, and to perform contracted Services.
5.9 **Access List**. Customer shall provide to PERFORMIVE a list of Customer employees or agents authorized by Customer to enter the Data Center on Customer’s behalf with minimal 24 hours advance notice. The Customer’s responsible for keeping such personnel information updated at all times by contacting the NOC with any changes. All badges are the property of PERFORMIVE and shall remain at the Data Center where issued.
5.10 **Security**. The Data Center is secure with a 24x7x365 main entrance that is monitored by camera. All visitors at the Data Center must sign in and state their affiliation to a PERFORMIVE Customer. Customer may not prop open any doors within the Data Center. No one may shield his or her face in any manner from any camera within the building or the Data Center.
5.11 **Customer-Space Permitted Uses**. Customer shall use the Customer Space solely for the purposes of installation, maintenance, and operation and removal of the Customer Equipment in the Customer Space, as defined on an Order Form (collectively, the “Permitted Uses”). Unless otherwise agreed by PERFORMIVE in writing, Customer shall perform the Permitted Uses at its sole cost and expense.
5.12 **Customer-Related Third Parties**. Customer will ensure that its officers, employees, technicians, agents, representatives, subcontractors and visitors who are involved in the installation and maintenance of the Equipment or who are granted access to the Customer Space, comply with all policies and procedures contained in the Agreement and with all Requirements of Law (expressly including, without limitation, the standards of the Occupational Safety and Health Administration). Customer will be responsible for any damages caused by its officers, employees, technicians, agents, representatives, subcontractors and visitors.
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5.13 **Rules and Regulations**. Customer agrees to abide by the rules and regulations of the building, third party data center or other building operated by a third party where Customer Equipment may be located. Furthermore, Customer agrees not to: (a) eat, drink or smoke within the Data Center or the building, except in areas designated by PERFORMIVE or the building management; (b) bring any weapons—including guns, knives or mace—alcohol or drugs within the Data Center or the building; (c) photograph or film any areas in the Data Center or the entrances to the Data Center or the building; (d) touch, access, tamper or interfere with another customer’s Space or Equipment without such customer’s written authorization, even if Customer owns Equipment within another PERFORMIVE customer’s Space; (e) loiter or solicit within the Data Center or the building in which the Data Center is located. PERFORMIVE reserves the right to exclude or expel from the Data Center any person who, in PERFORMIVE’s judgment, is violating any of these Rules and Regulations or is intoxicated or under the influence of alcohol or drugs. Customer shall notify PERFORMIVE immediately of any conditions within the Data Center of which Customer is aware (e.g., loose ladder racks, slick floors or electrical issues).
5.14 **Waste**. Customer shall maintain the Customer Space in an orderly and clean manner and in good repair and condition, satisfactory to PERFORMIVE. Customer shall keep the Customer Space free of litter, cartons, packing materials or packaging and related items (collectively, “Waste”). PERFORMIVE does not provide, and is not responsible for providing, receptacles for Customer Waste. Customer must remove all Waste, and under no circumstances shall Customer leave Waste in the Data Center or the building in which the Data Center is located without the prior approval of the site operations manager. In the event PERFORMIVE is required to clean up Customer Waste or provide any disposal of garbage or other cleaning activities, Customer shall be charged for this service as a part of the remote hands services.
5.15 **Power Pricing**. Pricing for power is subject to review and change on each annual anniversary or renewal of this Agreement. However, pricing for power is subject to a quarterly adjustment based on increases of utility or service provider costs of 1.5% or more realized by PERFORMIVE in the preceding quarter or 3% within any 12-month period. PERFORMIVE will provide notice to Customer in the billing period prior to making the adjustment, but in no case will the notice be less than 20 days prior to the effective date of such adjustment, and PERFORMIVE will provide Customer with copies of utility invoices demonstrating such utility-rate increase.
**6** **DEDICATED SERVER SERVICES**
6.1 This Section 6 sets forth the terms and conditions of Customer’s use of dedicated server Services within a PERFORMIVE data center (the “**Dedicated Server**”), which includes server computers and hardware, operating system, software as well as monitoring, maintenance, and management services (collectively, the “**Dedicated Services**”).
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6.2 **Dedicated Server Set-Up and Management**. PERFORMIVE will configure the Dedicated Server, to be reachable over the internet at the time of service delivery to the Customer. Customer will be solely responsible for providing, updating, uploading, securing, and maintaining Customer’s server content and all supporting data files and data structures (collectively, “**Customer Data**”) onto the Dedicated Server computers. At no point will PERFORMIVE be responsible for Customer Data residing on the Dedicated Server. Customer is ultimately and solely responsible for the backup, security, and management of all of Customer Data stored on Customer’s Dedicated Server, and Customer bears full risk of loss and damage to Customer Data. In no event will PERFORMIVE have any liability to Customer or any other person for loss, damage, or destruction of any of Customer Data. Upon termination of this Agreement, Customer will be responsible for moving Customer Data off the Dedicated Server.
6.3 **Availability of Service**. PERFORMIVE will provide connection of the Dedicated Server to the Internet, including all telecommunications equipment and connections for the Dedicated Server to provide the Dedicated Services on a 24-hour-a-day, 7-day-a-week basis; provided, however, that the Dedicated Services from time to time may be inaccessible or inoperable for any reason, including, without limitation, equipment malfunctions; periodic maintenance procedures or repairs, or causes beyond PERFORMIVE’ control caused by, for example, acts of nature, third-party equipment or transmission failures, or security breaches. In addition, the Dedicated Services may be inaccessible from time to time for scheduled upgrades or downgrades to the Dedicated Server.
6.4 **Maintenance Services**. PERFORMIVE will perform periodic maintenance services as PERFORMIVE determines reasonably necessary to maintain the continuous operation of the Dedicated Server. PERFORMIVE will provide prior notice of the maintenance downtime, except when circumstances beyond its control limit its ability to do so.
6.5 **Domain Names and IP Addresses**. Customer is responsible for the registration, renewal and control of Customer’s domain names. PERFORMIVE may provide Customer with IP Addresses as set out in the applicable Schedule. Customer will not own and cannot take any IP addresses with Customer after the termination of this Agreement. As a normal course of its business, PERFORMIVE may find it necessary to migrate its servers, in which event Customer may be assigned different IP numbers and addresses. PERFORMIVE maintains and controls ownership of all IP numbers and addresses that may be assigned to Customer, and PERFORMIVE reserves, in its sole discretion, the right to change or remove any and all IP numbers and addresses.
6.6 **Hardware, Equipment and Software**. Customer is responsible for and must provide all telephone, computer, hardware and software equipment and services necessary to access the Dedicated Services. PERFORMIVE makes no representations, warranties, or assurances that Customer’s equipment will be compatible with the Dedicated Services.
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6.7 **Server Software**. PERFORMIVE owns or has licensed some or all server software that are part of the Dedicated Server Services and hereby licenses same to Customer on a non-exclusive basis. In the event that PERFORMIVE elects, at its option, to provide custom software to Customer, this software will be licensed to Customer for Customer’s use only on the Dedicated Server on a non-exclusive, royalty-free, fully paid basis according to the terms of this Agreement.
6.8 **Customer Support**. PERFORMIVE will provide Customer with reasonable customer support during PERFORMIVE’ standard customer support hours via PERFORMIVE customer portal.
6.9 **Compliance with Law**. Customer shall comply with all applicable state, municipal and federal laws in the use and operation of the Dedicated Server, including laws governing technology, software and trade secrets. Customer agrees to comply with rules and regulations of Customer’s domain name registrars and other Internet authorities.
6.10 **Customer Data**. Customer Data shall not contain any content, materials, data, work, trade or service mark, trade name, link, advertising, or services that actually or potentially violate any applicable law or regulation or infringe or misappropriate any proprietary, intellectual property, contract or tort right of any person. Customer shall own all Customer Data and all proprietary or intellectual property rights therein or have express written authorization from the owner thereof to copy, use, and display the content on and within Customer’s server account. In no event shall the server content being hosted by PERFORMIVE be used in connection with any illegal activity.
6.11 **Use of Dedicated Server**. Customer shall be responsible for ensuring there is no excessive overloading of the Dedicated Server. In the event Customer exceeds Customer’s allotted bandwidth and thereby overloads PERFORMIVE’ servers, Customer shall be assessed any and all fees, costs, and penalties associated with such overloading. Customer agrees that Customer’s used of the Dedicated Server will be in conformance with the PERFORMIVE Acceptable Use Policy as may be amended from time to time.
**7** **BANDWIDTH SERVICES**.
7.1 This Section 7 sets forth the terms and conditions pursuant to which PERFORMIVE will provide Customer with Internet connectivity, IP Addresses, and Internet traffic services at selected points of presence (collectively, the “**Bandwidth Service**”).
7.2 **Availability of Service**. PERFORMIVE will provide the Bandwidth Service, at the quality of service level indicated on the Order Form, on a 24hour-a-day, 7-day-a-week basis; provided, however, that the Bandwidth Service from time to time may be inaccessible or inoperable for any reason, including, without limitation, equipment malfunctions; periodic maintenance procedures or repairs, or causes beyond PERFORMIVE control caused by, for example, acts of nature, third-party equipment or transmission failures, or security breaches. PERFORMIVE will provide reasonable prior notice of any anticipated interruptions in service within PERFORMIVE’s control.
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7.3 **Equipment Compatibility**. Availability of the Bandwidth Service is dependent on the compatibility of Customer’s equipment (as determined by PERFORMIVE) and the existence of a suitable network transport from PERFORMIVE equipment to Customer’s equipment.
7.4 **Maintenance Services**. PERFORMIVE will perform periodic maintenance services as PERFORMIVE determines reasonably necessary to maintain the continuous operation of PERFORMIVE equipment. In addition, the Bandwidth Service may be inaccessible from time to time for scheduled upgrades or downgrades to PERFORMIVE equipment. PERFORMIVE will provide prior notice of the scheduled downtime, except when circumstances beyond its control limit its ability to do so.
7.5 **Domain Names**. Customer is responsible for the registration, renewal and control of Customer’s domain names.
7.6 **IP Addresses**. PERFORMIVE may provide Customer with IP addresses as set out in the applicable Schedule. Customer will not own and cannot take any IP addresses with Customer after the termination of this Agreement. As a normal course of its business, PERFORMIVE may find it necessary to migrate its servers, in which event Customer may be assigned different IP numbers and addresses. PERFORMIVE maintains and controls ownership of all IP numbers and addresses that may be assigned to Customer, and PERFORMIVE reserves, in its sole discretion, the right to change or remove any and all IP numbers and addresses.
7.7 **Hardware, Equipment and Software**. Customer is responsible for and must provide all telephone, computer, hardware and software equipment and services necessary to access the Bandwidth Service. In addition, it is Customer’s responsibility to ensure that Customer’s equipment is configured properly and can be connected to PERFORMIVE equipment. PERFORMIVE makes no representations, warranties, or assurances that Customer’s equipment will be compatible with PERFORMIVE equipment.
7.8 **Customer Support**. PERFORMIVE will provide Customer with reasonable customer support during PERFORMIVE standard customer support hours via the PERFORMIVE customer portal.
7.9 **Monthly Bandwidth Service Fee**. Customer will pay PERFORMIVE a monthly bandwidth service fee pursuant to a “Fixed Rate” and/or a “Variable Rate” basis, as indicated on the Order Form. Customer may request a change to the billing options for each port at which the Bandwidth Service is provided. Any requests for a change in billing option shall be evidenced by a new Order Form executed by both parties and will not take effect until the start of the following billing cycle. The monthly service fee will be measured as of the last day of each billing service period and billed to Customer and charged each month automatically to Customer’s credit card on file, unless Customer discontinues service with PERFORMIVE prior to renewal. The service fee is subject to prospective adjustment at any time by PERFORMIVE upon thirty (30) days’ notice to Customer.
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7.10 **Compliance with Law**. Customer shall comply with all applicable state, municipal and federal laws in the use and operation of PERFORMIVE equipment, including laws governing technology, software and trade secrets. Customer agrees to comply with rules and regulations of Customer’s domain name registrars and other Internet authorities.
7.11 **Customer Data**. Customer data shall not contain any content, materials, data, work, trade or service mark, trade name, link, advertising, or services that actually violate any applicable law or regulation or infringe or misappropriate any proprietary, intellectual property, contract or tort right of any person. Customer shall own all Customer data and all proprietary or intellectual property rights therein or have express written authorization from the owner thereof to copy, use, and display the content utilizing the Bandwidth Service. In no event shall the Bandwidth Services be used in connection with any illegal activity.
7.12 **Use of PERFORMIVE Equipment**. Customer shall be responsible for ensuring there is no excessive overloading of PERFORMIVE Equipment. In the event Customer exceeds Customer’s allotted bandwidth and thereby overloads PERFORMIVE’ servers, Customer shall be assessed any and all actual verifiable fees, costs, and penalties associated with such overloading. Customer agrees that Customer’s used of the Dedicated Server will be in conformance with the PERFORMIVE Acceptable Use Policy as may be amended from time to time.
**8** **CLOUD SERVER SERVICES**.
8.1 This Section 8 sets forth the terms and conditions of Customer’s use of server space within a PERFORMIVE data center (the “**Cloud Server**”), server computers and hardware, operating system as well as software monitoring, maintenance, and management services: (collectively, the “Cloud Services”).
8.2 **Cloud Server Set-Up and Management**. PERFORMIVE will configure the Cloud Server, to be reachable over the internet at the time of service delivery to the client. Customer will be solely responsible for providing, updating, uploading, securing, and maintaining Customer’s server content and all supporting data files and data structures (collectively, “**Customer Data**”) onto the Cloud Server computers. PERFORMIVE. At no point will PERFORMIVE be responsible for Customer Data residing on the Cloud Server. Customer is ultimately and solely responsible for the backup, security, and management of all of Customer Data stored on Customer’s Cloud Server, and Customer bears full risk of loss and damage to Customer Data. In no event will PERFORMIVE have any liability to Customer or any other person for loss, damage, or destruction of any of Customer Data. Upon termination of this Agreement, Customer will be responsible for moving Customer Data off the Cloud Server.
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8.3 **Availability of Service**. PERFORMIVE will provide connection of the Cloud Server to the Internet, including all telecommunications equipment and connections for the Cloud Server to provide the Cloud Services on a 24-hour-a-day, 7-day-a-week basis; provided, however, that the Cloud Services from time to time may be inaccessible or inoperable for any reason, including, without limitation, equipment malfunctions; periodic maintenance procedures or repairs, or causes beyond PERFORMIVE’ control caused by, for example, acts of nature, third-party equipment or transmission failures, or security breaches. In addition, the Cloud Services may be inaccessible from time to time for scheduled upgrades or downgrades to the Cloud Server.
8.4 **Maintenance Services**. PERFORMIVE will perform periodic maintenance services as PERFORMIVE determines reasonably necessary to maintain the continuous operation of the Cloud Server. PERFORMIVE will provide prior notice of the maintenance downtime, except when circumstances beyond its control limit its ability to do so.
8.5 **Domain Names and IP Addresses**. Customer is responsible for the registration, renewal and control of Customer’s domain names. PERFORMIVE may provide Customer with IP Addresses as set out in the applicable Schedule. Customer will not own and cannot take any IP addresses with Customer after the termination of this Agreement. As a normal course of its business, PERFORMIVE may find it necessary to migrate its servers, in which event Customer may be assigned different IP numbers and addresses. PERFORMIVE maintains and controls ownership of all IP numbers and addresses that may be assigned to Customer, and PERFORMIVE reserves, in its sole discretion, the right to change or remove any and all IP numbers and addresses.
8.6 **Hardware, Equipment and Software**. Customer is responsible for and must provide all telephone, computer, hardware and software equipment and services necessary to access the Cloud Services. PERFORMIVE makes no representations, warranties, or assurances that Customer’s equipment will be compatible with the Cloud Services.
8.7 **Server Software**. PERFORMIVE owns or has licensed all server software that are part of the Cloud Server Services and hereby licenses same to Customer on a non-exclusive basis. In the event that PERFORMIVE elects, at its option, to provide custom software to Customer, this software will be licensed to Customer for Customer’s use only on the Cloud Server on a non-exclusive, royalty-free, fully-paid basis according to the terms of this Agreement.
8.8 **Customer Support**. PERFORMIVE will provide Customers with 24x7x365 customer support via Performive’s Support ticket management platform with appropriate escalation process. And during standard business hours via email, and live online chat.
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**9** **SMARTHANDS AND REMOTE HANDS SERVICES**. At Customer’s request, PERFORMIVE technicians are available to assist Customer in performing light duties or troubleshooting and thus provide “Smarthands Services” as well as general remote hands services. Typical activities provided by Smarthands includes, without limitation, reconfiguration of non-restricted cables with push-on type connectors, correction of minor problems such as circuit problems, cooperating with Customer and/or third party provider to locate and correct circuit problems, and set up hardware on Customer’s behalf. Remote Hands services would include a variety of tasks that are not Smarthands tasks. If Customer requests such services and PERFORMIVE provides the same, Customer shall pay to PERFORMIVE for such services in accordance with PERFORMIVE’s stated rates then in effect. Although PERFORMIVE technicians are skilled with respect to a variety of equipment, prior knowledge of, or training on, a particular system utilized by Customer cannot be guaranteed. PERFORMIVE shall not be liable for any losses or damages due to any failure of the Equipment or for any loss of data or damages resulting from Smarthands Services. Customer understands that prices for Smarthands Services and remote hands services varies based on the location where the Smarthands Services are to be performed and are subject to change without notice. Customer understands that Smarthands Services may also include tiered response time charges based on the urgency of the response required by Customer. PERFORMIVE may provide a Smarthands Services rate card, but Customer understands that said prices are subject to change without notice.
**10** **PROPRIETARY RIGHTS/CCONFIDENTIAL INFORMATION**.
10.1 **Proprietary Rights**. PERFORMIVE and Customer will continue to own or license all copyrights, patents, trademarks, service marks, trade secrets and other proprietary rights that such party owned or licensed immediately prior to this Agreement. PERFORMIVE owns all right, title, and interest in and to all materials, tangible or intangible, developed by PERFORMIVE, alone or jointly with others, during the term of this Agreement. Upon payment of PERFORMIVE’s fees for the Services, PERFORMIVE grants Customer a non-exclusive, perpetual, fully-paid license to use, only in the ordinary course of Customer’s internal business, PERFORMIVE- owned works that are incorporated into, or embodied within, a Deliverable, provided that Customer is in compliance with its obligations under this Agreement. Customer owns all right, title and interest in and to all data and other information that it stores on PERFORMIVE systems.
10.2 **Trademark Rights**. During the term of this Agreement, Customer does not grant PERFORMIVE the right (a) to use Customer’s logo and name on PERFORMIVE’s website in connection with Customer’s use of PERFORMIVE Services and (b) to issue a press release announcing the Customer relationship and identifying the general type of Services purchased by Customer. Customer shall have the right to require PERFORMIVE to terminate such use at any time by written notice.
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10.3 **Indemnification Obligations for Violations of Proprietary Rights**. Each party shall hold harmless, indemnify, and defend the other against any third-party claim alleging that any Hardware, Software, data or other material provided by the other party (a) pursuant to this Agreement constitutes an infringement or misappropriation of any third party’s copyright, United States patent, trade secret, trademark or similar proprietary right or (b) is not properly licensed for the use contemplated by this Agreement. Pursuant to the foregoing, Customer shall provide such indemnification to PERFORMIVE for Customer Software and PERFORMIVE shall provide such indemnification to Customer for PERFORMIVE Software and Deliverables. All such claims will be handled as follows: The party providing the allegedly infringing material will defend or settle such claim at its sole expense and indemnify the other party against any damages and costs awarded by a court of final jurisdiction in an action relating to such claim or pursuant to a settlement agreement, provided that the other party notifies the indemnifying party promptly in writing of the claim, permits the indemnifying party to control the defense or settlement and cooperates fully with the indemnifying party in such defense and settlement. Neither party will have an obligation for any claim of infringement arising solely by reason of compliance with any written instructions of the other party. Neither party will indemnify the other party or be liable for claims to the extent based upon the use of software, hardware or other technology provided by the indemnifying party with software, hardware, data, or other technology supplied by the indemnifying party or modifications to any software, hardware or other technology that were not performed by the indemnifying party.
10.4 **Restrictions**. Customer agrees that the PERFORMIVE Software contains trade secrets and other proprietary information owned by PERFORMIVE and/or its third-party licensors. Customer shall use the PERFORMIVE Software solely for the purpose of utilizing the Services provided hereunder. PERFORMIVE agrees that Customer Software contains trade secrets and other proprietary information owned by Customer and/or its third-party licensors. PERFORMIVE shall use Customer Software solely for the purpose of rendering the Services to Customer in conformity with the applicable Schedules and not for any other purpose.
10.5 **Customer Data**. All Customer data received, computed, developed, used or stored pursuant to this Agreement shall be the exclusive property of Customer and shall be considered Confidential Information (defined below) owned by Customer. Customer is solely responsible for the adequacy and accuracy of Customer data. PERFORMIVE may access such data solely for the purpose of delivering the Services. Where applicable, PERFORMIVE shall perform a data export and provide Customer with a copy of Customer data at Customer’s expense upon request.
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10.6 **Confidential Information**. “**Confidential Information**” means any information and data, including in tangible, electronic or other form, of PERFORMIVE or Customer that is identified as confidential or proprietary at the time of disclosure or that should be understood to be confidential by the nature of the information or the circumstances of the disclosure. Confidential Information shall include, without limitation, Services, products, product configurations, Customer data, business plans, strategies, technology, software, documentation, methodologies, know-how, technical information, pricing, pricing mechanisms, financial information, information regarding each party’s operations, business relationships and the terms of this Agreement. Confidential Information shall not include any information that (a) is known to the receiving party prior to receipt hereunder from a source other than one having an obligation of confidentiality to the disclosing party, (b) becomes lawfully known (independently of disclosure by the disclosing party) to the receiving party from a source other than one having an obligation of confidentiality to the disclosing party, (c) becomes publicly known or otherwise ceases to be secret or confidential, except through a breach of this Agreement, or (d) is independently developed by the receiving party without use of the Confidential Information. The receiving party agrees that it will not use the Confidential Information of the disclosing party in any way, for its own account or the account of any third party, except for the purpose of performing this Agreement, nor will the receiving party disclose the Confidential Information of the disclosing party to any third party except as required by law. The receiving party will take reasonable precautions to protect the confidentiality of such Confidential Information. If either party is required by law to make any disclosure of any Confidential Information by subpoena, judicial or administrative order or otherwise, such party must first give written notice of such requirement to the other party, permit such other party to intervene in any relevant proceedings to protect its interests in the Confidential Information and provide full cooperation and assistance in seeking to obtain such protection, all at the disclosing party’s cost and expense.
10.7 **Indemnification Obligations Related to Customer Data**. Customer shall hold harmless, indemnify and defend PERFORMIVE against any third party claim related to (a) any data provided or stored by Customer on a PERFORMIVE system or (b) any violations of the Acceptable-Use or Privacy Policies.
**11** **REPRESENTATIONS, WARRANTIES, DISCLAIMERS AND LIMITATION OF REMEDIES.**
11.1 **By Customer**. Customer represents and warrants to PERFORMIVE that (a) the execution, delivery and performance by Customer of this Agreement and the consummation of the transactions contemplated hereby (i) are within Customer’s corporate or analogous powers, (ii) have been duly authorized by all necessary corporate or other action, (iii) do not and will not (A) violate any applicable federal, state and local laws, rules and regulations, and all orders, judgments, decrees or other determinations of any Governmental Authority (collectively, “**Requirements of Law**”) or arbitrator that are applicable to, or binding upon, such Person or any of its property or to which such Person or any of its property is subject, or (B) conflict with or result in the breach of, or constitute a default under, or result in or permit the termination or acceleration of, any contractual obligation of Customer, and (iv) do not require the consent of, authorization by, approval of, notice to, or filing or registration with, any Governmental Authority or any other Person, other than those that have been obtained or made and copies of which have been delivered to PERFORMIVE, and each of which on the date hereof is in full force and effect; (b) this Agreement has been— and any Schedule to which Customer is a party, upon delivery thereof, will have been—duly executed and delivered by Customer; (c) this Agreement is—and any Schedule to which Customer is or becomes a party, upon delivery thereof, will be—the legal, valid and binding obligation of Customer, enforceable against Customer in accordance with its terms; (d) Customer will use the Services and PERFORMIVE Software in compliance with all Requirements of Law and in accordance with this Agreement and the Acceptable- Use Policy; (e) Customer has the right and authority to provide PERFORMIVE with the Customer Software, Customer Hardware and other materials supplied by Customer for the purpose of enabling PERFORMIVE to deliver the Services; and (f) Customer will not market, solicit, enable or sell, or attempt to market, solicit, enable or sell, any service also offered by PERFORMIVE to any other PERFORMIVE customers or partners located in any facility in which PERFORMIVE provides any Services without PERFORMIVE’s prior written consent.
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11.2 **By PERFORMIVE**. PERFORMIVE represents and warrants to Customer that (a) PERFORMIVE will comply with all applicable laws, rules and regulations in delivering the Services (including, without limitation, any privacy and computer laws), and (b) PERFORMIVE has the right and authority to use and provide Customer with access to the PERFORMIVE Software in rendering the Services hereunder.
11.3 **DISCLAIMER**. Except as expressly set forth in this Agreement or a Schedule, PERFORMIVE makes no warranties, express or implied. PERFORMIVE expressly disclaims all other warranties, including, without limitation, any implied warranties of merchantability, accuracy, security, fitness for a particular purpose, noninfringement or arising from a course of dealing, usage or trade practice. PERFORMIVE disclaims all warranties and indemnities with regard to third-party maintenance services. Customer is solely responsible for, and PERFORMIVE expressly disclaims, all representations, warranties and liabilities of any kind relating to the Customer Software and Customer Hardware. If Customer acquires Third-Party Software through PERFORMIVE, any representations or warranties applicable to such Software shall be included in a click-wrap, shrink-wrap or similar type of license agreement included with the Third-Party Software or set forth in a Software Schedule. PERFORMIVE does not and cannot control the flow or complete security of data to or from its network and other portions of the Internet. Such flow and security depend in large part on the performance of Internet services provided or controlled by third parties. At times, actions or inactions of such third parties (including other PERFORMIVE customers) can impair or disrupt Customer’s connections to the Internet (or portions thereof) or the security of Customer’s data. Although PERFORMIVE will use commercially reasonable efforts to take all actions it deems appropriate to remedy and avoid such events, PERFORMIVE cannot guarantee that such events will not occur. Accordingly, PERFORMIVE disclaims any and all liability resulting from or related to such events.
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11.4 **Limitation of Remedies**. If PERFORMIVE breaches its obligations under this Agreement, as Customer’s sole and exclusive remedy, (a) PERFORMIVE, upon receipt of written notice from Customer specifying the nature of the default in reasonable detail, shall work diligently to cure the default at PERFORMIVE’s expense as soon as commercially reasonable, and, in any case, PERFORMIVE shall commence such cure within 5 days of receipt of the default notice from Customer or such lesser time as specified in the SLA or a Professional Services Schedule, (b) Customer shall have the service-credit remedies as specified in the applicable SLA, if any, so long as Customer is in good standing with no past due amount owed to PERFORMIVE under this Agreement, (c) Customer shall have the indemnification remedies specified in this AGREEMENT and (d) Customer shall have the termination rights specified in this AGREEMENT.
11.5 **PERFORMIVE Hardware or Software**. Except with respect to any express warranties for Services related to PERFORMIVE Hardware or Software, Customer acknowledges and agrees that its use and possession of the PERFORMIVE Hardware and Software shall be subject to, and controlled by, the terms of any manufacturer’s or, if appropriate, supplier’s warranty, and Customer agrees to look solely to the manufacturer or, if appropriate, supplier with respect to all mechanical, service and other claims, and the right to enforce all warranties made by said manufacturer are hereby, to the extent PERFORMIVE has the right, assigned to Customer solely during the term of any applicable Schedule.
**12** **TERMINATION**.
12.1 **Expiration Date**. Notwithstanding anything to the contrary herein, Customer shall duly execute a Schedule, agreement, amendment or attachment related hereto no later than the date that is 10 business days (the “**Expiration Date**”) after the date on which PERFORMIVE executes such document. PERFORMIVE reserves the right to withdraw any offer contained therein after the Expiration Date and before Customer executes such document.
12.2 **Term**. Unless terminated earlier pursuant to the terms hereof, this Agreement shall commence on the Effective Date and continue and/or be in effect so long as there is a Schedule in effect. The term of any Schedule shall commence in the first month of billing for the monthly recurring fees or the Fully Implemented Date, whichever is later, and continue for the period set forth in such Schedule.
12.3 **Renewal**. Unless renegotiated and agreed to by both parties, All Schedules shall automatically renew for successive terms (each a “**Renewal Term**”) equal in length to the then-current term with an annual increased rate of 0% or then current market rates, whichever is higher. , either party may give notice of nonrenewal or desire to renegotiate terms by providing the other party with written notice 90 days prior to the last day of such term. In the event Customer provides notice of termination but does not in fact terminate at the end of the renewal term, the Schedule terminated shall automatically renew for a full term as if no notice of termination was received.
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12.4 **Termination of this Agreement**. Either party may terminate a particular Schedule or this Agreement by written notice to the other party (a) if the other party breaches or fails to observe or perform any material term or condition of such Schedule or this Agreement and does not cure such breach or failure within 30 days after written demand (5 days in the case of late payment of fees) by the non-breaching party specifying the nature of the breach in reasonable detail and stating such party’s intention to terminate; provided however, that such written demand must be sent within 30 days of the event or such right to terminate shall be deemed waived unless such breach is continuing, or (b) otherwise as expressly provided in the SLA, Schedule, Acceptable Use Policy or this Agreement. The failure to pay amounts owed under a Schedule when due shall be considered a material breach.
12.5 **Effect of Termination**. Upon termination of this Agreement or a Schedule, all rights and obligations of the parties under such terminated Agreement or Schedule shall cease, except for those rights and obligations that, by the terms of this Agreement or the applicable Schedule or the nature of the right or obligation, survive termination. Termination will not relieve either party of any obligations that arose prior to the effective date of the termination. Upon termination of this Agreement, (a) Customer must cease using, and PERFORMIVE will cease providing, any terminated Services and PERFORMIVE Software, (b) each party will return to the other party any Confidential Information of the other, (c) each party will make available to the other party any Hardware, Software or other property of such other party in its possession, *provided* that Customer may not access the Customer Hardware in PERFORMIVE’s facilities until Customer has fully satisfied its payment obligations to PERFORMIVE, and provided further that PERFORMIVE shall store the Customer Hardware in PERFORMIVE’s secured facilities and at Customer’s sole expense until the date that is the earlier of (i) 60 days after the effective termination date, after which PERFORMIVE may (A) sell or otherwise dispose of such Customer Hardware in a manner it deems appropriate and (B) keep any proceeds resulting therefrom, and (ii) 15 days after the date on which Customer has fully satisfied its payment obligations to PERFORMIVE, and provided further that each party shall release and hold the other party harmless from and against any liability for damage of any kind whatsoever that may be caused by such party’s equipment during such migration, (d) PERFORMIVE shall remove all copies of Customer data from PERFORMIVE’s systems and property and (e) PERFORMIVE will provide, at Customer’s expense, reasonable termination/expiration assistance requested by Customer to facilitate the orderly transfer of Services and migration of Customer’s data and Customer Software to Customer or another third-party provider, for a period not to exceed 30 days, unless otherwise set forth in a separate Schedule executed by the parties.
PERFORMIVE is not obligated to retain or back up any Customer data following the termination of this Agreement or a Schedule. If Customer utilizes any of PERFORMIVE’s data-backup Services, Customer has the option to purchase a copy of all of Customer’s data, which copy shall be made after this Agreement has been terminated. In order for this backup to take place, (a) Customer must make a written request 30 days before the end of this Agreement and (b) a Schedule must be executed by Customer and PERFORMIVE for the performance of the backup Services, which Schedule shall set forth the names and locations of the specific folders to be backed up. Using HP Data Protector or similar software, PERFORMIVE shall archive such folders to a series of magnetic tapes and send them overnight using a commercial courier service to Customer. PERFORMIVE shall not be responsible for encrypting such tapes. After such backup has been performed and tested, PERFORMIVE shall dispose of the Customer data remaining within PERFORMIVE facilities pursuant to PERFORMIVE’s standard data-disposal procedures.
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Within 10 days of the effective date of any termination of this Agreement or a Schedule, Customer shall pay PERFORMIVE all amounts owed under the terminated Schedules through such effective date of termination. In addition, and notwithstanding anything to the contrary in this Agreement, **if Customer terminates a Schedule or this Agreement other than as expressly permitted hereunder, or if PERFORMIVE terminates a Schedule or this Agreement as a result of an uncured material breach or default by Customer, that, as just and reasonable compensation, Customer shall be obligated to pay any and all fees arising under such Schedule(s) or this Agreement through the end of the then-current term under the terminated Schedule(s)**; *provided* that, with regard to Professional Services, such amount will be based upon the estimated cost of the Professional Services. The parties herein agree that the above-mentioned compensation to PERFORMIVE, is a fair and actual calculation required to make PERFORMIVE whole and Customer specifically agrees that this payment is not a penalty.
**13** **INDEMNIFICATION AND LIMITATION OF LIABILITY**.
13.1 **Bodily Injury, Death and Property Damage**. Each party agrees to indemnify the other party against any losses, liabilities, damages, costs or expenses (including reasonable attorneys’ fees) arising from a third-party claim for bodily injury, death or property damage (excluding intellectual-property claims) caused by the gross negligence or willful misconduct of the indemnifying party. To the extent that either party is liable for any damage to, or loss of, property for any reason, such liability will be limited solely to the then-current replacement value of the equipment, excluding lost data or software. The party seeking indemnification shall provide prompt written notice of a claim to the other party, allow the indemnifying party to control the defense and/or settlement of the claim and fully cooperate with the indemnifying party. If the holder of a lien on any Customer Hardware exercises its right to remove such Hardware, PERFORMIVE shall be (a) indemnified and held harmless by Customer for any damages that such lienholder claims to have suffered from the improper removal of such hardware, (b) indemnified and held harmless from any and all claims resulting from the interruption or degradation of Services caused, directly or indirectly, by the removal of Customer Hardware and (c) entitled to liquidated damages in accordance with Section 6.6 and to any and all fees then owing.
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13.2 **LIMITATION OF LIABILITY**. Except with respect to Customer’s obligation under Section 4.7 (Indemnification Obligations Related to Customer Data), in no event shall either party be liable for any indirect, consequential, incidental, special or punitive damages— including, without limitation, loss of use, interruption of business, loss of data or loss of profits—arising out of, or in any way connected with, this Agreement, the Services, any PERFORMIVE or Customer Software or Third-Party Software even if each party has been advised of the possibility of such damages. Except with respect to each party’s obligations under Section 13.1 (bodily injury, death and property damage) and Customer’s obligations under Section 4.3 (Payment), Section 10.7 (Indemnification Obligations Related to Customer Data), and Section 12.5 (Effect of Termination), in no event will either party have liability in the aggregate under this Agreement, regardless of the form of the action, for any amount in excess of the total amount paid by Customer under the applicable Schedule during the preceding 12 months.
13.3 **Basis of the Bargain; Failure of Essential Purpose**. The parties acknowledge that (a) PERFORMIVE has set its prices, and the parties have entered into this Agreement, in reliance upon the limitations of liability and the disclaimers of warranties and damages set forth in this Agreement and (b) the same form an essential basis of the bargain between the parties. The parties agree that the limitations and exclusions of liability and disclaimers specified in this Agreement will survive and apply even if this Agreement is found to have failed its essential purpose.
**14** **INSURANCE**.
14.1 **PERFORMIVE Minimum Levels**. PERFORMIVE agrees to keep in full force and effect during the term of this Agreement (a) commercial general liability insurance in an amount not less than $1,000,000 per occurrence for bodily injury and property damage and (b) workers’ compensation insurance in an amount not less than that required by applicable law. PERFORMIVE agrees that it will ensure and be solely responsible for ensuring that its contractors and subcontractors maintain insurance coverage at levels no less than those required by applicable law and customary in PERFORMIVE’s and its agents’ industries.
14.2 **Customer Minimum Levels**. In the event that Customer wants to have regular physical access to the Facilities operated by PERFORMIVE and equipment owned by third parties, PERFORMIVE’s insurers require PERFORMIVE to ensure that PERFORMIVE customers maintain adequate insurance coverage. In furtherance thereof, Customer agrees to keep in full force and effect, during the term of this Agreement, (a) commercial general-liability insurance in an amount not less than $1,000,000.00 per occurrence and $2,000,000.00 in the aggregate for bodily injury and property damage and (b) workers’ compensation insurance in an amount not less than that required by applicable law. Customer agrees that it will ensure, and be solely responsible for ensuring, that its agents (including contractors and subcontractors) maintain insurance coverage at levels no less than those required by applicable law and customary in Customer’s and its agents’ industries.
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**15** **GENERAL**.
15.1 **Conflict**. In the event of a conflict between this Agreement and a Schedule or Order Form, the terms of the Schedule or Order Form shall control.
15.2 **Relationship of Parties**. Nothing in this Agreement will be construed to imply a joint venture, partnership or agency relationship between the parties, and PERFORMIVE will be considered an independent contractor when performing Services under this Agreement.
15.3 **Assignment**. The rights and liabilities of the parties hereto will bind and inure to the benefit of their permitted successors and assigns. Customer shall not have the right to assign this Agreement without the prior written consent of PERFORMIVE; *provided* that Customer shall be obligated to assign this Agreement to a successor in interest in the event of a change of control resulting from a merger, sale of stock or sale of all or substantially all of the assets of Customer relating to the Services. PERFORMIVE shall have the right to assign any and all agreements between the Customer and PERFORMIVE.
15.4 **Affiliates and Contractors**. Customer may extend the benefits of this Agreement only to its Affiliates; *provided, however*, that, in such event, Customer shall be obligated to pay PERFORMIVE any additional fees based on the number of users, changes to requirements for the hosting environment, as further specified in an SLA, or other changes to requirements that increase the cost of delivery of Services by PERFORMIVE. Customer shall ensure that its Affiliates and authorized third-party contractors comply with the terms and conditions of this Agreement, and Customer shall be liable for the acts and omissions of such parties. PERFORMIVE may use subcontractors in delivering the Services.
15.5 **Complete Understanding; Modification**. This Agreement constitutes the entire agreement between the parties relating to its subject matter, supersedes all prior agreements and understandings between the parties, oral or written, with respect to its subject matter and may not be changed unless mutually agreed upon in writing by both parties.
15.6 **Severability**. If any provision of this Agreement is held to be invalid, illegal or unenforceable, the remaining provisions shall remain in full force and effect.
15.7 **Schedules**. A Schedule or amendment to this AGREEMENT may add new or additional terms and conditions. Except as provided above, in the event of any conflict or inconsistency between the provisions of this AGREEMENT and those of a Schedule, the Schedule shall prevail.
15.8 **Notices**. Except where expressly stated otherwise in this Agreement, all notices, requests and demands expressly contemplated by this Agreement shall be in writing and shall be deemed to have been duly given (a) when hand-delivered to the addressee, (b) when transmitted by confirmed facsimile or e-mail, (c) one business day after being given to an overnight courier with a reliable system for tracking delivery or (d) 3 business days after the day of mailing, when mailed by United States mail, registered or certified mail, return receipt requested, postage prepaid. All notices shall be sent to the addresses and directed to the attention of the parties set forth on the first page of this AGREEMENT. Customer agrees to provide to PERFORMIVE the name, address, phone number, fax number and email address of a contract administrative contact and to provide updates or changes to same Each party shall promptly notify the other party in writing of a change of address.
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15.9 **Counterparts; Facsimile and Electronic Signatures**. This Agreement may be executed in counterparts. For purposes of this Agreement, a facsimile, PDF or other electronic version of a party’s signature shall be deemed an original signature.
15.10 **Headings**. Section headings in this Agreement are for convenience of reference only, do not form a part of this Agreement and shall not affect the meaning or interpretation of this Agreement.
15.11 **GOVERNING LAW; CONSENT TO JURISDICTION**. **This Agreement shall be deemed to be a contract made under, and shall be construed in accordance with, the laws of the State of Georgia, excluding its conflict-of-law rules. In addition, each party, on behalf of itself and its successors and assigns, agrees that the State of Georgia shall be the exclusive venue (to the extent that subject-matter jurisdiction exists) for all causes of action arising out of this Agreement. This consent shall not be deemed a waiver of the right to remove any litigation to a federal court in Georgia. PERFORMIVE and Customer agree that the United Nations Convention on Contracts for the International Sale of Goods does not apply to this Agreement.**
15.12 **Force Majeure**. Except with respect to any payment obligations, neither party will be liable for any failure or delay in its performance under this Agreement due to causes beyond its reasonable control, and, except as otherwise provided in a Schedule, will be entitled to a reasonable extension of time to remedy any such delay or failure to perform. A “**Force Majeure Event**” means the occurrence of:
a. an act of war (whether declared or not), hostilities, invasion, act of foreign enemies, terrorism or civil disorder;
b. a strike or strikes or other industrial action or blockade or embargo or any other form of civil disturbance (whether lawful or not), in each case affecting on a general basis the industry related to the affected Services and which is not attributable to any unreasonable action or inaction on the part of the Company or any of its Subcontractors or suppliers and the settlement of which is beyond the reasonable control of all such persons;
c. specific incidents of exceptional adverse weather conditions in excess of those required to be designed for in this Agreement which are materially worse than those encountered in the relevant places at the relevant time of year during the twenty (20) years prior to the Effective Date;
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d. tempest, earthquake or any other natural disaster of overwhelming proportions; pollution of water sources resulting from any plane crash.
e. discontinuation of electric or water supply;
f. pandemic or other illness such as SARS, MERS, or the novel coronavirus Covid 19 or any other new or unknown illness or virus.
g. any other unforeseeable circumstances beyond the control of the Parties against which it would have been unreasonable for the affected party to take precautions and which the affected party cannot avoid even by using its best efforts.
In each case where a Force Majeure Event directly causes PERFORMIVE to be unable to comply with all or a material part of its obligations under this Agreement, the parties agree as follows:
1. PERFORMIVE shall not be in breach of its obligations under this Agreement or be responsible for any suspension or cancellation of a Service. PERFORMIVE shall not incur any liability for losses or damages of any nature whatsoever incurred or suffered by Customer if and to the extent that PERFORMIVE is prevented from carrying out its obligations by, or such losses or damages are caused by, a Force Majeure Event.
2. PERFORMIVE shall take all reasonable steps within its respective powers and consistent with Good Operating Practices (but without incurring unreasonable additional costs). Will comply with its obligations under this Agreement that are consistent with the laws and regulations regarding such Force Majeure Event.
3. PERFORMIVE will not refund any money paid as a result of a Force Majeure Event. You further agree that PERFORMIVE shall not be obligated or required to issue a refund or credit as a result of any Force Majeure Event.
15.13 **Waiver or Failure to Act**. No waiver will be effective unless documented in a writing signed by an authorized representative of the party against which enforcement of the waiver is sought. The failure of either party to insist upon strict performance of any of the terms or provisions of this Agreement, or the exercise of any option, right or remedy contained herein, shall not be construed as a waiver of any future application of such term, provision, option, right or remedy, and such term, provision, option, right or remedy shall continue and remain in full force and effect.
15.14 **Time is of the essence of this Agreement**. Both parties agree to review all terms and resolve any redlines within 3 business days.
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15.15 **No-Hire Clause**. (a) During the term of this Agreement, and for a period of 12 months thereafter, neither party nor any of its Affiliates will (i) employ or hire, nor engage as a consultant or subcontractor, any employee of the other party or any of its Affiliates, (ii) solicit any employee of the other party or any of its Affiliates to become an employee of, or consultant or subcontractor to, the other party or any of its Affiliates or (iii) recommend or suggest to any other person or entity that it solicit, employ, hire, or engage any such employee of the other party; *provided, however*, that neither party shall be deemed to be in violation of this Section 15.15 if an employee, consultant or subcontractor of one party is hired by the other party as a result of the response by such employee, consultant or contractor to an advertisement made to the general public by the hiring party.
If there is a breach of the foregoing provisions, the non-breaching party shall be entitled to be paid, on-demand, as liquidated damages and not as a penalty, an amount equal to the annualized base salary and other regular compensation being paid to such employee as of the date of the termination of his or her employment with such party or its Affiliate. The amount of damages that would be suffered as a result of a breach of the foregoing provisions of this Section 15.15 would be difficult to measure, and such payment amount constitutes reasonable liquidated damages for such breach.
(*Signatures to follow on the next page*)
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**IN WITNESS WHEREOF**, the parties have executed this AGREEMENT by their duly authorized representatives.
| PERFORMIVE, LLC | Customer: |
| --- | --- |
| /s/ Mark Mercado | /s/ Robert C. Bissell |
| Signature | Signature |
| Mark Mercado | Ian Gerard |
| Printed Name | Printed Name |
| SVP Sales | CEO |
| Title | Title |
| 10/31/2023 | 10/31/2023 |
| Date | Date |
| /s/ Mike Margagliotti | |
| Client Success Manager | |
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---
## EXHIBIT 10.10
SEC source: [ex_902142.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902142.htm)
**Exhibit 10.10**
Page | 1
**DEMAND RESPONSE SERVICES AGREEMENT**
This Agreement made effective as of **March 1, 2023** (“Effective Date”) between **NuEnergen, LLC** (“NuEnergen”) having an address at **10 Bank Street, White Plains, NY 10606**, and **T20 Mining Group LLC** (“Client”), having an address of **7030 South Yale Avenue, Suite 504, Tulsa, OK 74136**.
WHEREAS, Client desires to retain NuEnergen to assist Client for the properties owned and managed by Client and listed on the attached Schedule A subject to the following;
**1.** **PROVIDED SERVICES**
**A.** **SPP - Ancillary Services - Operating Reserves** ☒ **(10-Minute Advance Notification program)**
NuEnergen agrees to manage the participation by the Client in SPP’s Operating Reserves (“Reserves”) in accordance with the rules established by SPP. NuEnergen will register the Client in the program and manage all aspects related to bidding, monitoring, testing, communications, events, and payments. Client herby designates NuEnergen as its sole Market Participant (“MP”) tor for the purposes of conducting Reserves on its behalf.
**1)** **Payment Calculation** -will be calculated based on the rules outlined in the SPP Tariffs and Manuals minus any adjustments for Event or Test underperformance.
**2)** **Acceptance Testing** -the Client will work with NuEnergen to prove Client capability at each facility, including steps needed to meet SPP requirements, prior to NuEnergen completing registration of each facility in SPP.
**3)** **Bid / Nomination Adjustments** - Client agrees that NuEnergen may adjust the bid / nominated kW in the future, based upon actual test and/or event performance, changes in facility operations, program rules or other regulation changes.
**4)** **EnerTrac Dashboard** - Client will have access to the Demand Response portal within the NuEnergen “EnerTrac” on-line dashboard at no-charge for all resources that are participating in the program.
**5)** **Notifications** - NuEnergen will provide Client an “Immediate Activation Notification” upon receipt of an Activation Notice from SPP.
**6)** **Dispatch System** - Client agrees that NuEnergen can install a Dispatch System that consists of hardware and software stipulated by SPP to meet Program requirements.
Page | 2
**2.** **CLIENT REQUIREMENTS**
**A.** **Emergency Generators** - If Emergency Generators are used in conjunction with reducing load to participate in any of the above programs, Client must comply with all Federal, State and Local laws regarding such permitting for use in the programs. Additionally, Client must maintain all records that are required by all Federal, State and Local laws for the installation and use of Emergency Generators in any of the programs.
**B.** **Interval Meter** - Client must have a Utility Grade Interval Meter to participate in the program. Client agrees to engage the local Utility to ensure the Interval Meter is functional and communicating hourly interval data to the local Utility in a timely manner. Incorrect or incomplete interval data during an enrollment period may result in performance de rates and/or retroactive disqualification of the enrollment. Client agrees that if a suitable meter is not currently installed, NuEnergen will install an approved meter and that the costs of the meter will be deducted from the Client payments. Client also agrees that any monthly costs associated with a phone line for the Interval Meter will be paid for by the Client.
**C.** **Material Changes in Load** - Client agrees to notify NuEnergen when it expects the daytime peak kW load to decrease by 25% or more and remain at the decreased level for more than 30 days. Failure to notify NuEnergen in a timely manner of such decreases in load may result in retroactive disqualification of the enrollment during the months in which the site remained at the decreased load level.
**D.** **Smart Grid RTM** - NuEnergen offers and recommends that all resources enrolled in Demand Response have a Real Time meter installed to monitor electricity usage in real-time. With Clients approval, NuEnergen will install its Smart Grid RTM for monitoring purposes. A separate services agreement is required for all Smart Grid services.
**E.** **Contacts** - Client agrees to provide a minimum of two (2) contacts at the site for any and all communications related to tests and/or event communications on “Schedule B” attached.
**F.** **Dispatch System Installation** - In the event that a Dispatch System needs to be installed, Client will provide NuEnergen personnel, or their designee, with access to meters and/or equipment at facilities listed on Schedule A in order to install the Dispatch System.
**3.** **GENERAL TERMS**
**A.** **Payments** - NuEnergen will pay Client **72.5%**, of the Payment Calculation for the mutually agreed upon enrolled capacity.
**B.** **Payment Timing** - NuEnergen will pay client within 45 days of the close of the period. For Contingency Reserves payments will be made monthly, within 45 days of the close of each calendar month.
Page | 3
**C.** **Term and Termination** - This Agreement is in effect for a period of three (3) years from the effective date above, or, if applicable, to the completion date of any active enrollments the period stipulated previously, whichever occurs later. The Term shall automatically renew for additional and successive 6-month terms unless either party provides the other written notice of its intent to terminate this Agreement at least sixty (60) days prior to the expiration of the Term.
**D.** **Governing Law** - This Agreement and performance hereunder shall be governed by and construed in accordance with the laws of the State of Texas without reference to its choice of law principles.
**E.** **Confidentiality** - NuEnergen and Client agree to hold in strictest confidence all information and material which is related to the other party’s business, which is designated as proprietary and confidential, or which is related to the performance by the other party of its obligations under this Agreement. Proprietary and confidential information includes but is not limited to the terms of this Agreement, information related to research, development, pricing, trade secrets, lists, meter data collected by NuEnergen or business affairs of the parties to this Agreement.
**F.** **Force Majeure** - Neither party hereto shall be responsible for any failure or delay in the performance of any obligation hereunder, if such failure or delay is due to a cause beyond the party’s reasonable control, including, but not limited to acts of God, flood, fire, volcano, war, third-party suppliers, labor disputes or governmental acts.
**G.** **Assignment** - Neither party may assign this Agreement without the prior written consent of the other party, except that either party may, without the consent of the other, may assign the Agreement to a controlled subsidiary of that party or a purchaser of all or substantially all of the party’s assets used in connection with performing this Agreement, provided the assigning party guarantees the performance of and causes the assignee to assume in writing all obligations of the assignor under this Agreement.
**INTENDING TO BE BOUND**, the authorized representatives of each party has executed this Agreement and Client authorizes NuEnergen to commence the Services described in this Agreement.
*/s/ Kevin A. Hamilton* */s/ Jeremy Henshaw* Mar 27, 2023
Authorized Signature Authorized Signature Date
Kevin A. Hamilton, CEO Jeremy Henshaw
Printed Name & Title Printed Name & Title
Mar 27, 2023 7020 S Yale Ave, STE 504, Tulsa, OK 74136
Date Address
---
## EXHIBIT 10.11
SEC source: [ex_902143.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902143.htm)
**Exhibit 10.11**
Page | 1
**DEMAND RESPONSE SERVICES AGREEMENT**
This Agreement made effective as of **2/1/2024** (“Effective Date”) between **NuEnergen, LLC** (“NuEnergen”) having an address at **10 Bank Street, White Plains, NY 10606**, and **SPRE WATONGA OK, LLC** (“Client”), having an address of **2146 Roswell Rd, #108- 851, Marietta, GA, 30062**.
WHEREAS, Client desires to retain NuEnergen to assist Client for the properties owned and managed by Client and listed on the attached Schedule A subject to the following;
**1.** **PROVIDED SERVICES**
**A.** **Southwest Power Pool (**“**SPP**”**)** – **Ancillary Services** – **Operating Reserves** ☒ **(10-Minute Advance Notification program)**
NuEnergen agrees to manage the participation by the Client in SPP’s Operating Reserves (“Reserves”) in accordance with the rules established by SPP. NuEnergen will register the Client in the program and manage all aspects related to bidding, monitoring, testing, communications, events, and payments. Client herby designates NuEnergen as its sole Market Participant (“MP”) tor for the purposes of conducting Reserves on its behalf.
**1)** **Payment Calculation** – will be calculated based on the rules outlined in the SPP Tariffs and Manuals minus any adjustments for Event or Test underperformance.
**2)** **Acceptance Testing** –the Client will work with NuEnergen to prove Client capability at each facility, including steps needed to meet SPP requirements, prior to NuEnergen completing registration of each facility in SPP.
**3)** **Bid / Nomination Adjustments** – Client agrees that NuEnergen may adjust the bid / nominated kW in the future, based upon actual test and/or event performance, changes in facility operations, program rules or other regulation changes.
**4)** **EnerTrac Dashboard** – Client will have access to the Demand Response portal within the NuEnergen “EnerTrac” on-line dashboard at no-charge for all resources that are participating in the program.
**5)** **Notifications** – NuEnergen will provide Client an “Immediate Activation Notification” upon receipt of an Activation Notice from SPP.
**6)** **Dispatch System** – Client agrees that NuEnergen can install a Dispatch System that consists of hardware and software stipulated by SPP to meet Program requirements. Client agrees to a one-time enablement fee in an amount not to exceed $25,000 without written consent of the Client, which will be deducted from the demand response payment.
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**2.** **CLIENT REQUIREMENTS**
**A.** **Emergency Generators** – If Emergency Generators are used in conjunction with reducing load to participate in any of the above programs, Client must comply with all Federal, State and Local laws regarding such permitting for use in the programs. Additionally, Client must maintain all records that are required by all Federal, State and Local laws for the installation and use of Emergency Generators in any of the programs.
**B.** **Interval Meter** – Client must have a Utility Grade Interval Meter to participate in the program. Client agrees to engage the local Utility to ensure the Interval Meter is functional and communicating hourly interval data to the local Utility in a timely manner. Incorrect or incomplete interval data during an enrollment period may result in performance de- rates and/or retroactive disqualification of the enrollment. Client agrees that if a suitable meter is not currently installed, NuEnergen will install an approved meter and that the costs of the meter will be deducted from the Client payments. Client also agrees that any monthly costs associated with a phone line for the Interval Meter will be paid for by the Client.
**C.** **Material Changes in Load** – Client agrees to notify NuEnergen when it expects the daytime peak kW load to decrease by 25% or more and remain at the decreased level for more than 30 days. Failure to notify NuEnergen in a timely manner of such decreases in load may result in retroactive disqualification of the enrollment during the months in which the site remained at the decreased load level.
**D.** **Smart Grid RTM** – NuEnergen offers and recommends that all resources enrolled in Demand Response have a Real- Time meter installed to monitor electricity usage in real-time. With Clients approval, NuEnergen will install its Smart- Grid RTM for monitoring purposes. A separate services agreement is required for all Smart Grid services.
**E.** **Contacts** – Client agrees to provide a minimum of two (2) contacts at the site for any and all communications related to tests and/or event communications on “Schedule B” attached.
**F.** **Dispatch System Installation** – In the event that a Dispatch System needs to be installed, Client will provide NuEnergen personnel, or their designee, with access to meters and/or equipment at facilities listed on Schedule A in order to install the Dispatch System.
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**3.** **GENERAL TERMS**
**A.** **Payments** – NuEnergen will pay Client 72.5%, of the Payment Calculation for the mutually agreed upon enrolled capacity.
**B.** **Payment Timing** – NuEnergen will pay client within 45 days of the close of the period. For Contingency Reserves payments will be made quarterly, within 45 days of the close of each calendar quarter.
**C.** **Term and Termination** – This Agreement is in effect for a period of five (5) years from the effective date above, or, if applicable, to the completion date of any active enrollments the period stipulated previously, whichever occurs later. The Term shall automatically renew for additional and successive 6-month terms unless either party provides the other written notice of its intent to terminate this Agreement at least sixty (60) days prior to the expiration of the Term.
**D.** **Governing Law** – This Agreement and performance hereunder shall be governed by and construed in accordance with the laws of the State of Oklahoma without reference to its choice of law principles.
**E.** **Confidentiality** – NuEnergen and Client agree to hold in strictest confidence all information and material which is related to the other party’s business, which is designated as proprietary and confidential, or which is related to the performance by the other party of its obligations under this Agreement. Proprietary and confidential information includes but is not limited to the terms of this Agreement, information related to research, development, pricing, trade secrets, lists, meter data collected by NuEnergen or business affairs of the parties to this Agreement.
**F.** **Force Majeure** – Neither party hereto shall be responsible for any failure or delay in the performance of any obligation hereunder, if such failure or delay is due to a cause beyond the party’s reasonable control, including, but not limited to acts of God, flood, fire, volcano, war, third-party suppliers, labor disputes or governmental acts.
**G.** **Assignment** – Neither party may assign this Agreement without the prior written consent of the other party, except that either party may, without the consent of the other, assign the Agreement to a controlled subsidiary of that party or a purchaser of all or substantially all of the party’s assets used in connection with performing this Agreement, provided the assigning party guarantees the performance of and causes the assignee to assume in writing all obligations of the assignor under this Agreement.
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**INTENDING TO BE BOUND**, the authorized representatives of each party has executed this Agreement and Client authorizes NuEnergen to commence the Services described in this Agreement.
NuEnergen, LLC SPRE WATONGA OK, LLC
*/s/ Kevin A. Hamilton*
Authorized Signature */s/ Houston Aderhold*
Authorized Signature Feb 1, 2024
Date
Kevin A. Hamilton, CEO
Printed Name & Title
Feb 1, 2024
Date Houston Aderhold, Manager
Printed Name & Title
2146 Roswell Rd., #108-851, Marietta
GA 30062
Address
---
## EXHIBIT 10.12
SEC source: [ex_902144.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902144.htm)
**Exhibit 10.12**
INDEPENDENT CONTRACTOR – ASIC MINING DATA CENTER FIELD SERVICES AGREEMENT
THIS AGREEMENT is effective as of the 8/14/2024 , **by and between PaerTree Inc**, a Delaware corporation, (hereinafter referred to as “Independent Contractor,” and SPRE Watonga OK, LLC, (hereinafter referred to as “Company”).
WHEREAS, Company; and
WHEREAS, Independent Contractor has expertise that Independent Contractor and Company believe may be applicable to the development and/or commercialization of Company’s products and services;
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants contained in this Agreement, Company and Independent Contractor agree as follows:
1. Terms
1.1 Services. Independent Contractor shall provide services to the Company including:
- On-Site Staffing: PaerTree will furnish two (2) on-site ASIC Technician for **eight (8) hours per day, five (5) days per week (Monday through Friday)**, to perform the tasks outlined in the attached Appendix A: “Scope of Work.” PaerTree will also assign an Operations Manager with a budgeted **twenty (20) hours per month** of labor and services for oversight and support.
- Work Schedule: Base Services will be performed between **7:00 am and 5:00 pm**, **Monday through Friday**. Adjustments to the work schedule may be considered on a case-by-case basis with written approval from both parties.
- Materials and Equipment: PaerTree may procure parts and materials necessary for Base Services with prior written approval from the Client. The Client will be responsible for reimbursing PaerTree for the costs of and overhead required to procure such approved materials. The client may optionally provide a pre-authorized monthly stipend for regular purchases.
- Off-Site Work: Base Services may include, but are not limited to, off-site logistics and overhead activities, such as equipment receiving, shipping, deliveries, coordination meetings, and training.
- On-Call Services: PaerTree can provide one (1) on-call ASIC Technician available for emergency field service within approximately 1-1.5 hours outside of Base Service hours. On-Call Services require a 25% premium on the agreed-upon hourly billing rate, as outlined in Appendix B, “Optional Additional Services” for the ASIC Technician. On-call time may be applied towards Base Service hours, but the 25% billing premium will still apply.
**REFER TO APPENDIX A: SCOPE OF WORK FOR BASIC VS. ADVANCED REPAIRS*
**REFER TO SECTION 6 FOR PERFORMANCE, QUALITY, AND UPTIME GOALS*
Independent Contractor and the Company may agree, orally or in writing, on additional services or development tasks that are to be performed under this Agreement. Any change in compensation, or the term of the agreement, must be in writing. Optional services can be engaged on a case-by-case basis, with mutual consent, without modification of this agreement are outlined in Appendix B, “Optional Additional Services.”
The Independent Contractor reserves the right to adjust billing rates annually by no more than 5% to account for inflation and labor cost increases. Billing rates for optional additional services shall be outlined in Appendix B, “Optional Additional Services.”
1.2 Time and Manner of Performance. Independent Contractor shall devote such time as is required to providing services under this Agreement. Independent Contractor shall be available for telephone and personal consultation and assistance on a reasonable basis consistent with the needs of the Company and the necessary performance of the services described in section 1.1 above. All services hereunder shall be performed in accordance with good professional practice. Government holidays or any other conflicts of schedule shall be handled on a case-by-case basis with good professional practice.
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1.3 Fee and Term. As full and complete compensation for Contractor’s services and all rights granted or assigned to Company by Contractor under this Agreement, Independent Contractor shall be compensated at the rate:
**$13, 600 per month, as compensation for the services outlined in section 1.1. Paid monthly on the 1st. An additional fee for optional services, reimbursement of any kind, or additional incurred costs will be added on a case-by-case basis.**
1.4 Length of Agreement. The initial term of the agreement will remain valid for twelve (12) months with options to extend for additional twelve (12) month periods, without Trial Periods, upon written mutual agreement.
2. Confidentiality
2.1 “Confidential [Company] Information” means all of [Company]’s system architecture, planning, marketing, financing, and other proprietary know-how (except that excluded herein), whether or not the know-how is the subject of a pending patent application or is a patentable invention. Confidential [Company] Information may be contained in oral communications, as well as in any tangible expressions referring or relating to [Company]’s systems and business practices, including, without limitation, software and hardware, manuals, notes, documentation, technical information, drawings, diagrams, specifications, formulas, industry contacts, and know-how related to any of [Company]’s services; any information regarding products and services incorporating the technology of other companies; and any other information that is clearly marked as confidential or proprietary, or which under the circumstances should in good faith be treated as confidential. In addition, all text, writings, materials, and information developed, created or produced by Independent Contractor for [Company] shall constitute Confidential [Company] Information. Source materials, information and technology developed by Independent Contractor under this Agreement shall also be deemed Confidential [Company] Information upon its conception. Confidential [Company] Information does not include any information that: (i) was known to it prior to its receipt from [Company]; (ii) was received by Independent Contractor from a third party without violation of a nondisclosure obligation of that third party; (iii) is independently developed by or for Independent Contractor without using Confidential [Company] Information; or (iv) is or becomes a part of the public domain through no violation of this Agreement. [Company] shall have the burden in any dispute of showing that information is Confidential [Company] Information.
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2.2 Ownership by [Company]. All Confidential [Company] Information disclosed by [Company], all materials referring or relating to Confidential [Company] Information, any software, hardware, equipment or devices incorporating any Confidential [Company] Information are and shall remain the sole and exclusive property of [Company] and, except as set forth in this Agreement, Independent Contractor shall have no interest in or rights to use or disclose Confidential [Company] Information.
2.3 Use of Confidential [Company] Information. Independent Contractor agrees that all Confidential [Company] Information disclosed to Independent Contractor is subject to this Agreement and will be received and held in confidence by Independent Contractor. Independent Contractor will take all necessary steps to prevent disclosure of Confidential [Company] Information to others and will not use or disclose Confidential [Company] Information except as set forth in this Agreement or with the express prior written consent of [Company].
2.4 Employee and Third Party Agreements. Independent Contractor agrees that Confidential [Company] Information disclosed to it under this Agreement and any plans, contacts, software, hardware, equipment or devices incorporating any Confidential [Company] Information may be disclosed or delivered to third parties only with the prior written consent of [Company]. Independent Contractor shall be responsible for ensuring that any permitted third-party recipients of Confidential [Company] Information have signed a Confidential Disclosure and Non-Use Agreement satisfactory to [Company] having obligations of non-disclosure and non-use at least equivalent to those contained in this Agreement.
2.5 [Company] Materials. Independent Contractor will safeguard and return to [Company] when my engagement ends, or sooner if [Company] requests, all documents and property in care, custody or control relating to the engagement or [Company]’s business, including without limitation any documents that contain [Company]’s confidential information. Independent Contractor shall also furnish, on request, to [Company] a certificate from an officer of Independent Contractor verifying that all records relating to Confidential [Company] Information have been destroyed or returned to [Company].
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2.6 Proprietary Notices. Independent Contractor shall not remove, obscure or alter any notice of patent, copyright, trade secret or proprietary right on any Confidential [Company] Information without [Company]’s prior written authorization.
2.7 Notification of Unauthorized Disclosure. Independent Contractor shall immediately notify [Company] of any actual or suspected unauthorized use or disclosure of Confidential [Company] Information, and will cooperate with [Company] in obtaining injunctive or other equitable relief and in any suit for damages. If Independent Contractor of any permitted third-party recipients of Confidential [Company] Information receives a subpoena or other legal process seeking disclosure of the Confidential [Company] Information, Independent Contractor shall immediately notify [Company] and cooperate fully with [Company] in contesting such disclosure.
2.8 Continuing Duty. Independent Contractor’s agreement to protect [Company]’s confidential information apply both while Independent Contractor is engaged by [Company] and after the engagement by [Company] ends, regardless of the reason it ends.
2.9 Non-raiding of Employees. So long as Independent Contractor is engaged by [Company] and for twenty-four (24) months after my engagement ends, regardless of the reason it ends, [Company] will not on [Company]’s behalf or on behalf of a client of [Company] directly or indirectly solicit any employee to leave his or her employment with the Independent Contractor. This includes that [Company] will not (a) disclose to any third party the names, backgrounds or qualifications of any employees of the Independent Contractor or otherwise identify them as potential candidates for employment; (b) personally or through any other person approach, recruit or otherwise solicit employees of Independent Contractor to work for any other employer; or (c) participate in any pre-employment interviews with any person who was employed by the Independent Contractor while Independent Contractor was engaged by [Company].
3. Independent Contractor Covenants and Agrees:
3.1 Independent Contractor Representations and Warranties. Independent Contractor represents and warrants that (a) Independent Contractor has the full power and authority to enter into and to fulfill the terms of this Agreement and to grant the rights described herein; (b) Independent Contractor has not entered and will not enter into any agreements or activities that will or might interfere or conflict with the terms hereof; (c) the Work is and will be wholly original with Independent Contractor and not copied in whole or in part from any other work except materials in the public domain or supplied to Independent Contractor by Company; and (d) neither the Work nor the use thereof infringes upon or violates any right of privacy or publicity of, or constitutes a libel, slander or any unfair competition against, or infringes upon or violates the copyright, trademark rights or other intellectual property rights of any person or entity.
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3.2 Indemnity. Independent Contractor agrees to indemnify and hold [Company] harmless against any losses, damages or costs, including attorney’s fees, arising from the unauthorized disclosure or use of Confidential [Company] Information or by third parties to whom Independent Contractor has without [Company] permission disclosed or delivered Confidential [Company] Information or any software, hardware, equipment or devices incorporating any Confidential [Company] Information.
3.3 Independent Contractor’s Performance of Services. Independent Contractor shall perform the Services in a professional manner in accordance with the level of care and skill ordinarily exercised by members of the profession currently practicing under similar conditions. Independent Contractor warrants that the Services performed by Independent Contractor, and any permitted third parties over whom Independent Contractor has legal and/or actual control or supervisory authority (including, without limitation, any agents, employees, or other Independent Contractors) shall be conducted in strict accordance with this Agreement. Independent Contractor furthermore warrants that Independent Contractor shall not use any materials without proper authorization during performance of the Services, and warrants that all services provided under this Agreement shall be original. Independent Contractor shall perform the Services within the time and at the cost provided above.
3.4 Confidentiality of Others. Independent Contractor acknowledges it is [Company]’s policy not to improperly obtain or use confidential, proprietary or trade secret information that belongs to third parties, including others who have employed or engaged Independent Contractor or who have entrusted confidential information to Independent Contractor. Independent Contractor will not use for [Company]’s benefit or disclose to [Company] confidential, proprietary or trade secret information that belongs to others, unless Independent Contractor advises [Company] that the information belongs to a third party and both [Company] and the owners of the information consent to the disclosure and use.
6
3.5 Non-raiding of Employees. So long as Independent Contractor is engaged by [Company] and for twenty-four (24) months after my engagement ends, regardless of the reason it ends, Independent Contractor will not on Independent Contractor’s behalf or on behalf of a client of Independent Contractor directly or indirectly solicit any employee to leave his or her employment with [Company]. This includes that Independent Contractor will not (a) disclose to any third party the names, backgrounds or qualifications of any [Company] employees or otherwise identify them as potential candidates for employment; (b) personally or through any other person approach, recruit or otherwise solicit employees of [Company] to work for any other employer; or (c) participate in any pre-employment interviews with any person who was employed by [Company] while Independent Contractor was engaged by [Company].
3.6 No Disparagement or Interference. Independent Contractor will not disparage [Company] or its business or products and will not interfere with [Company]’s relationships with its customers, employees, vendors, bankers or others. This applies both while Independent Contractor engaged by [Company] and after this engagement by [Company] ends, regardless of the reason it ends.
3.7 Reasonableness of Terms. Independent Contractor acknowledges that the terms of this agreement are reasonably necessary to protect [Company]’s legitimate business interests and acknowledges that when this engagement with [Company] ends Independent Contractor’s experience and capabilities are such that Independent Contractor can obtain other engagements or employment that does not violate this agreement, and that an injunction to enforce this agreement will not prevent Independent Contractor from earning a reasonable livelihood.
3.8 No Conflicting Agreements. Independent Contractor is not a party to any agreements, such as confidentiality or noncompetition agreements, that limit Independent Contractor’s ability to perform duties for [Company].
3.9 Compliance with Law. Independent Contractor shall perform the Services in accordance with and shall comply with all applicable laws, ordinances, requirements, directions, rules, statutes, regulations and lawful order.
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3.10 Restricted Publication. Any publication by Independent Contractor of information based upon information provided to or provided by [Company] shall be subject to the prior review and written approval of [Company].
3.11 Confidentiality by Employees and Others. [Company] hereby authorizes Independent Contractor to disclose Confidential [Company] Information, on a need-to-know basis, to employees of Independent Contractor or any persons contracting for services to Independent Contractor, who will be performing services in accordance with this agreement. Such employees will execute this agreement and in so doing, agree to be bound by the terms here of as if they were Independent Contractor.
3.12 Agreement Confidential. Except as an authorized representative of [Company] may otherwise consent in writing, Independent Contractor will not disclose the nature of any work that Independent Contractor has performed under this Agreement, or any information regarding [Company]’s products, services, processes, inventions, or materials.
4. Intellectual Property Rights
4.1 [Company] Ownership of Intellectual Property Rights. Independent Contractor agrees and acknowledges that [Company] owns all intellectual property rights in materials or information developed by [Company]. Independent Contractor shall regularly and promptly disclose information and technology developed by Independent Contractor that relates in any way to or is based on Confidential [Company] information to [Company].
4.2 Prior Inventions and Materials. The Company expects Independent Contractor to make use of all resources available to Independent Contractor to complete the services and development tasks set forth herein. Inventions, innovations and writings shall be considered general knowledge or skill of the Independent Contractor and shall become the property of [Company] to the extent utilized by Independent Contractor in providing services hereunder, as set forth in section 4.1 of this Agreement. Independent Contractor shall not disclose to [Company] any information subject to claims or confidential agreements between the Independent Contractor and any third parties. Inventions and proprietary material that shall remain in the possession of either party shall be documented and provided to each party. Neither party shall have no claim to these inventions or materials.
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4.3 Protection. Nothing in this Agreement shall be deemed to prevent the Independent Contractor from preparation and prosecution of applications for and the procurement, issuance, maintenance, enforcement and defense of patents, trademarks, service marks, and/or copyrights, throughout the world, based on inventions, and/or subject matter or combinations thereof, disclosed under this Agreement.
4.4 Limitation. Notwithstanding any terms of this Agreement appearing to be to the contrary, this agreement does not apply to any Invention or Work of Independent Contractor for which no equipment, supplies, facilities or trade secret information of [Company] was used and which was developed entirely by the Independent Contractor.
5. Miscellaneous Provisions
5.1 Relationship Between the Parties. Nothing contained in this Agreement shall be construed as creating any partnership or joint venture between Independent Contractor and [Company]. Independent Contractor undertakes to perform under the terms of this Agreement as an independent contractor. Independent Contractor has no authority to create any obligation, express or implied, on behalf of, or to bind [Company], except as specifically authorized in this Agreement. Independent Contractor is solely responsible for the payment of all income, social security, employment-related, or other taxes incurred as a result of the performance of the Services by Independent Contractor under this Agreement, and for all obligations, reports, and timely notifications relating to those taxes. Company has no obligation to pay or withhold any sums for those taxes.
5.2 Entire Agreement; Waiver; Assignment. This Agreement, contains the entire understanding of the parties with respect to its subject matter and supersedes all other agreements and offers with respect to such subject matter. This Agreement may not be assigned by Independent Contractor without the prior written consent of [Company]. The provisions of this Agreement may not be waived or changed except by a writing signed by the party against whom enforcement of the waiver or change is sought. No waiver of any breach shall constitute a subsequent waiver of any subsequent breach. This Agreement shall be binding on and inure to the benefit of the parties” successors and permitted assigns.
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5.3 Breach of Agreement. In the event of an actual or alleged breach of this Agreement by Company, or under any other circumstances whatsoever, any rights and remedies Independent Contractor may have against Company or its successors or assigns will be limited to the right to recover actual damages, if any, in an action at law.
5.4 Acknowledgment of Irreparable Harm. Independent Contractor acknowledges that the Confidential [Company] Information contains trade secrets and other proprietary information, and that any disclosure or use of the Confidential Information other than as expressly permitted herein will cause irreparable harm to [Company]. Independent Contractor therefore agrees to the entry of temporary, preliminary and permanent injunctions by any court of competent jurisdiction to prevent breach, or to compel performance, of this Agreement. This remedy is in addition to any other remedy available to [Company].
5.5 Notices. Any notice required or permitted to be given under this Agreement shall be in writing or and may be personally delivered or sent by courier service or email, and shall be deemed given when delivered or sent to the address or email given at the outset of this Agreement, or as subsequently changed by notice.
5.6 Governing Law; Dispute Resolution. This Agreement shall he governed by and interpreted in accordance with the laws of the State of Oklahoma. Independent Contractor and [Company] agree that venue and jurisdiction for purposes of resolving any dispute that arises in connection with this Agreement shall lie only in courts located in Watonga, Oklahoma and they agree to bring all such actions in Watonga, Oklahoma.
5.7 Changes. No cancellation, modification, amendment, or other change in this Agreement or any provision hereof, or waiver of any right or remedy herein provided, shall be effective for any purpose unless specifically set forth in writing signed by both parties. No waiver of any right or remedy in respect of any occurrence or event on one occasion shall be deemed a waiver of such right or remedy in respect of such occurrence or event on any other occasion.
5.8 Opportunity for Legal Review. Each party has had the opportunity to review the terms of this contract with legal counsel and to negotiate the terms hereof.
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5.9 Fees and Costs. If any action to enforce or interpret this Agreement is taken by [Company] or Independent Contractor against the other, then the substantially prevailing party in such action will be entitled to recover from the other its costs and expenses incurred in taking or defending such action, including reasonable fees of attorneys, the fees of experts and other technical advisors, and costs incurred and inclusive of any appeal.
5.10 Severability. If any provision of this Agreement is held to be invalid, void or unenforceable as written, such provision shall be interpreted so as to apply and be enforced to the maximum extent permitted by law, and the remaining provisions of this Agreement shall continue in full force and effect without being impaired or invalidated in any way.
6. Performance
6.1 Miner Uptime. PaerTree will use commercially reasonable efforts to maintain ASIC miner uptime of at least 95%, consistent with the uptime requirements outlined in Client’s hosting contracts. Effort to maintain uptime target applies refers to efforts within PaerTree’s agreed-upon working hours (defined in Section 1.1 of this Agreement).
6.2 Excusable Downtime. PaerTree will not be held liable for downtime caused by events beyond their reasonable control, including:
- Acts of God or Natural Disasters: Events such as floods, earthquakes, hurricanes, or other natural phenomena that prevent PaerTree from performing its duties.
- Force Majeure: Unforeseen circumstances that make performance of the Agreement impossible, illegal, or commercially impracticable. This could include war, terrorism, labor strikes, or government regulations.
- ASIC Miner Failures/Repairs (Beyond Section 1.c): Downtime resulting from hardware failures or repairs exceeding the scope of routine maintenance covered under Section 1.c of this Agreement.
- Electrical or Telecommunication Systems Failures: Outages or disruptions in the power grid or internet connectivity that impact miner operation.
- Utility Outages: Power outages or other utility disruptions beyond PaerTree’s control.
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- Other External Failures/Factors: Any other unforeseen event or circumstance outside PaerTree’s reasonable control that significantly hinders their ability to maintain miner uptime.
6.3 Staffing. PaerTree will provide qualified, trained, and prepared personnel to perform all tasks included within their scope of work as defined in Appendix A of this Agreement. All work performed shall be completed in a timely, professional, and high-quality manner.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date indicated above.
**PaerTree, Inc.**
INDEPENDENT CONTRACTOR
By: */s/ Tristan Lucy*
Printed Name: Tristan Lucy
Title: CEO
Date: 8/14/2024
Email: **SPRE Watonga OK, LLC**
COMPANY
By: */s/ Chris Bissell*
Printed Name: Chris Bissell
Title: Mr.
Date:8/14/2024
Email:
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Appendix A: Scope of Work
1. **ASIC Management**
a. Monitor ASIC miners via Client provided foreman.mn subaccount to identify poorly performing or malfunctioning ASIC miners.
b. Conduct routine visual inspections of the site for signs of overheating, damage, or malfunction.
c. Perform routine cleaning and dust removal of mining fleet.
d. Basic repairs and diagnostics for all malfunctioning miners. Basic repairs shall be defined on a case-by-case basis, and approximately include firmware flashing, cable reseating, control or hashboard replacement, fan and grill replacement / repair, and PSU replacement. Any repair requiring detailed analysis of integrated circuits, soldering, or software upgrades beyond firmware flashing shall be deemed Advanced Repairs.
e. Log and track ASIC miner issues per Client request and systems.
f. Configure and monitor foreman.mn pickaxe computers to agreed client standards.
2. **Systems & Site Management**
a. Perform preventative maintenance tasks, as outlined by infrastructure manufacturer (Digital Shovel), Client, and PaerTree recommendations.
b. Perform routine cleaning and dust removal from site.
c. Routinely swap/change intake air filters as required and indicated by excessive dust build-up. Set a fixed schedule by the end of the trial period.
d. Routinely inspect all electrical, mechanical, and telecommunications systems for defects, signs of wear, or malfunction. Replace or repair on a case-by-case basis. Should necessary skills required to fix be beyond ASIC Technician, coordinate with owner.
e. Manage and maintain LAN, VPN, Gateway, and all other networking systems to Client defined standards.
f. Comply with and/or establish site safety standards for site staff.
3. **Coordination**
a. Assist client in maintaining MRO or spare parts as needed or required.
i. By default under the Base Services, Client is responsible for quantizing, maintaining inventory, and purchasing parts required for MRO supply
b. Attend weekly, bi-weekly, or monthly status meetings with the client to discuss site performance, concerns, and status per client preference.
c. Provide high-level monthly service report detailing site and ASIC fleet performance and issues.
d. Coordinate with client to facilitate onboarding of new ASIC miners and offboarding of existing miners.
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---
## EXHIBIT 10.13
SEC source: [ex_902145.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902145.htm)
**Exhibit 10.13**
**AMENDED AND RESTATED OPERATING AGREEMENT OF**
**T20 MINING GROUP, LLC**
**an Oklahoma limited liability company**
This Amended and Restated Operating Agreement (“***Agreement***”) of T20 MINING GROUP, LLC, an Oklahoma limited liability company (the “***Company***”), is made as of the 15th day of March, 2023, by and between Tum Key Mountain, LLC, a Wyoming limited liability company (“***Turn Key***”), 913 HERO, LLC, an Oklahoma limited liability company (“***913HERO***”), and SPRE TULSA OK, LLC, a Georgia limited liability company (“***SPRE***’).
**RECITALS**
WHEREAS, the Articles of Organization of the Company were filed with the Office of the Secretary of State of Oklahoma on September 21, 2022;
WHEREAS, prior to the date hereof, the Company was governed by that certain Operating Agreement dated November 11, 2022 (the “***Previous LLC Agreement***”) executed by the Company and Tum Key and 913HERO;
WHEREAS, the Tum Key, 913HERO, and SPRE entered into that certain Limited Liability Company Interest Purchase Agreement dated as of March 15, 2023 (as the same may be amended, modified or supplemented from time to time, the “***Purchase Agreement***”), pursuant to which Tum Key and 913HERO agreed to sell, and SPRE agreed to purchase, a portion of the membership interests in the Company as more fully set forth therein; and
WHEREAS, in connection with the transactions contemplated by the Purchase Agreement, the Members desire to amend and restate the Previous LLC Agreement on the terms and conditions herein set forth.
**AGREEMENT**
NOW, THEREFORE, in consideration of the promises and covenants contained herein, the parties hereto agree as follows:
**ARTICLE I**
**Organizational Matters**
**Section 1.01** Formation. The Company shall be formed as a limited liability company pursuant to the provisions of the Act (as hereinafter defined). The rights and obligations of the Members, and the affairs of the Company, shall be governed first by the mandatory provisions of the Act, second by the Company’s Articles of Organization, third by this Amended and Restated Agreement and fourth by the optional provisions of the Act. In the event of any conflict among the foregoing, the conflict shall be resolved in the order of priority set forth in the preceding sentence.
**Section 1.02** Name. The name of the Company shall be T20 MINING GROUP, LLC.
**Section 1.03** Principal Office and Registered Agent. The principal office of the Company in the State of Oklahoma shall be located at 7030 S. Yale Ave., STE 504, Tulsa, OK 74136. The name of its resident agent is Registered Agents, Inc., 9905 S. Pennsylvania Ave Ste A, Oklahoma City, OK 73159. The Company may also maintain offices at such other place or places as the Members deem advisable.
**Section 1.04** Term. The Company shall commence upon the filing for record of the Company’s Articles of Organization with the Oklahoma Secretary of State, and shall be perpetual, unless terminated as herein provided.
**ARTICLE II**
**Definitions**
**Section 2.01** Definitions. For purposes of this Amended and Restated Agreement, the following terms shall have the following meanings.
“Act” means the Oklahoma Limited Liability Company Act, codified at Chapter 29, as it may be amended from time to time, and any successor to such act.
“Additional Business” means the business of the Company, or any of its Members or their respective affiliates.
“Affiliate” means any Person that directly or indirectly controls, is controlled by, or is under common control with, such Person. As used in this definition of “Affiliate”, the term “control” means either (i) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise or (ii) a direct or indirect equity interest often percent (10%) or more in the entity.
“Amended and Restated Agreement” means this Amended and Restated Operating Agreement, as it may be amended or supplemented from time to time.
“Articles of Organization” means the articles of organization, as amended from time to time, filed by the Company under the Act.
“Assignee” means a Person to whom one or more Units have been transferred, by transfer or assignment or otherwise, in a manner permitted under this Amended and Restated Agreement, and who has agreed to be bound by the terms of this Amended and Restated Agreement but who has not become a Substitute Member.
“Board of Managers” or “Board” means those individuals who have been appointed by the Voting Members to serve as the Board of Managers of the Company as defined herein.
“Business Day” means Monday through Friday of each week, except legal holidays recognized as such by the Government of the United States or the State of Oklahoma.
“Capital Account” means each capital account maintained for a Member pursuant to Section 4.03.
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“Capital Contributions” means the sum of the total amount of cash and the total fair market value of property contributed (net of liabilities secured by any contributed property that the Company is considered to assume or take subject to under Section 752 of the code) or services rendered, or a promissory note or other binding obligation to contribute cash or property or to perform services contributed to the Company by all Members, or any one Member, as the case may be (or the predecessor holders of any Units of any such Members).
“Capital Gain” means the Company’s allocable share of gain from the disposition by the Company of a capital asset as defined in the Code (including any portion of such gain treated as ordinary income).
“Cash Available for Distribution” means, with respect to any period, all cash receipts and funds received by the Company (except for Capital Contributions and proceeds of loans) minus (i) all cash expenditures and (ii) the Company’s cash management fund representing working capital or other reserves.
“Change of Control” means a change in excess of fifty percent (50%) of the actual or voting control of either the Company or any Member.
“Code” means the Internal Revenue Code of 1986, as amended, as in effect from time to time.
“Company” means the limited liability company formed by the filing of the Company’s
Articles of Organization with the Oklahoma Secretary of State.
“Company Property” means all property owned, lease or acquired by the Company from time to time.
“Disqualified Member” has the meaning specified in Section 12.01. “Event of Dissolution” has the meaning specified in Section 12.01.
“Income” or “Loss” mean an amount equal to the Company’s taxable income or loss for each taxable year, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments:
A. Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Income or loss shall be added to such Income or Loss;
B. Any expenditures of the Company described in Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the Code expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Income or Loss, shall be subtracted from such Income or Loss; and,
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C. Upon the distribution of property by the Company to a Member, gain or loss attributable to the difference between the fair market value of the property and its basis shall be treated as recognized.
“Mandatory Provisions of the Act” means those provisions of the Act which may not be waived by the Members acting unanimously or otherwise.
“Member” means those Persons executing this Amended and Restated Agreement as Members of the Company on the signature pages hereto.
“Officers of the Company” has the meaning set forth in Article V.
“Opinion of Counsel” means a written opinion of counsel (who shall be regular counsel to the Company).
“Outstanding” means the number of Units issued by the Company as shown on the Company’s books and records, less any Units held by the Company.
“Person” means a natural person, partnership, domestic or foreign limited partnership, domestic or foreign limited liability company, trust, estate association or corporation.
“Record Holder” means the Person in whose name such Unit is registered on the books and records of the Company as of the close of business on the particular Business Day.
“Substitute Member” means a transferee of a Unit who is admitted as a Member to the Company pursuant to Section 11.01 in place of and with all the rights of a Member.
“Tax Item” means each item of income, gain, loss, deduction, or credit of the Company for federal tax purposes, as separately stated and calculated pursuant to the Code.
“Tax Matters Partner” means the Person designated pursuant to Section 9.02. “Unanimous Vote of the Voting Members” means the affirmative vote of the holders of all of the outstanding Units, including fractional Units, held by the Voting Members. The voting rights of the members are determined by each member’s interest in the Company (Units allocated to that member) set forth on Exhibit “A” as a percentage of the total number of Units issued by the Company.
“Unit” means a Unit representing an interest in the Company, which may be a fractional number.
“Voting Members” shall mean those Members holding Voting Units entitling them to vote on all Company matters as set forth herein.
Terms not otherwise defined herein shall have their plain and ordinary meaning unless either the context or the use of the term within the cryptocurrency mining industry indicates otherwise.
**ARTICLE III**
**Purpose**
**Section 3.01** Purpose of the Company. The Company may engage in any lawful business permitted by the Act or the laws of any jurisdiction in which the Company may be authorized to do business. The Company shall have the authority to do all thing necessary or convenient to accomplish its purpose and operate its business to be located in Oklahoma (the “Business”) and such other locations as shall be determined by the Company.
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**ARTICLE IV**
**Capital Contributions**
**Section 4.01** Units. There shall be an aggregate of 1000 authorized Units in the Company, with each unit having no par value.
a. Common Voting Units: The holders of the Units possess all voting powers for all purposes, including by way of illustration and not of limitation, the election of the Board of Managers.
b. In the event of a voluntary or involuntary winding up or dissolution or liquidation or partial liquidation of the Company, the holders of the Units shall participate equally pro-rata in the distribution of assets of the Company.
c. To the extent of any conflict between the terms and conditions of this Section 4.01 and the terms and conditions elsewhere contained in this Amended and Restated Agreement, the terms and conditions of this Section 4.01 shall, to the extent possible control.
**Section 4.02** Capital Contributions. Each Member shall contribute to the Company the sum of money or property in exchange for the number of initially issued Units all as set forth in Exhibit “A” attached hereto. Such Capital Contributions are set forth in the Contribution Agreement executed on the 15th day of March, 2023 (“***Contribution Agreement***”).
**Section 4.03** Capital Accounts.
A. The Company shall maintain for each Member a separate Capital Account. The term “Capital Account” shall mean as to any Member and as to any Units held by that Member the amount of the initial Capital Contribution attributable to the Units held by that Member, which amount shall be (i) increased by subsequent Capital Contributions by such Member, Income allocated to such Member pursuant to Section 5.02, and (ii) decreased by distributions to such Member pursuant to Section 5.01 and Losses allocated to such Member pursuant to Section 5.02. Distributions shall be debited to Capital Accounts in the year containing the record date for such distribution.
B. Contributions may take the form of cash or property or services. In the event any in kind contributions or contributions in the form of services are ever made, the Capital Account of the Member shall be increased by the fair market value of the property or services contributed by such Member.
C. The foregoing definition of Capital Account and certain other provisions of this Amended and Restated Agreement are intended to comply with Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with that regulation. Such regulation contains additional rules governing maintenance of Capital Accounts that have not been addressed in this Amended and Restated Agreement.
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D. An assignee of a Unit will succeed to the Capital Account relating to the Unit transferred.
E. At such times as may be permitted or required by Treasury Regulations issued pursuant to Section 704 of the Code, the Capital Accounts shall be revalued and adjusted to reflect the then fair market value of Company Property and the Capital Accounts shall be maintained to comply with Treasury Regulations Section 1.704-1(b)(2)(iv)(f). All allocations of gain resulting from such revaluation shall be made consistently with that regulation; and to that extent not inconsistent therewith, the Income allocation provisions of Section 5.02 hereof.
**Section 4.04** Interest. No interest shall be paid by the Company on Capital Contributions, on balances in a Member’s Capital Account or on any other funds distributed or distributable under this Amended and Restated Agreement.
**Section 4.05** No Withdrawal. Except as otherwise required under any Mandatory Provisions of the Act, no Member shall without the written consent of all remaining Voting Members of the Company have (i) any right to resign voluntarily or otherwise to withdraw from the Company, or (ii) any right to the withdrawal or reduction of any part of his Capital Contribution.
**Section 4.06** Loans. Loans by a Member to the Company may be considered Capital Contributions upon the approval by unanimous consent and shall be upon terms and conditions approved by the Voting Members.
**Section 4.07** Additional Capital Contributions. Additional Capital Contributions are set forth in the Contribution Agreement. Additionally, in the event that the Members determine by a Unanimous Vote of the Voting Members that additional capital contributions by the Members are required to pay current operating expenses, current indebtedness and current installments of long term indebtedness of the Company when due and in adequate time to obtain all discounts available by reason of prompt payment, each Member shall contribute in cash to the capital of the Company an amount equal to his pro rata share of the aggregate additional Capital Contribution called for (according to the number of Voting Units held by each, with all Outstanding Voting Units being treated alike), in the time and manner determined by a Unanimous Vote of the Voting Members. In the event a Member shall fail to make the required additional Capital Contribution, the other Members shall have the right, but not the obligation, to make the contribution which would otherwise have been made by the non-contributing Member. The amount of any additional contribution shall be added to the Capital Account of the contributing Member and the non contributing Members interest in the Company shall be reduced accordingly.
**ARTICLE V**
**Allocations and Distributions**
**Section 5.01** Distribution of Cash Available for Distribution. Distributions of all Cash Available for Distribution shall be made as determined by a Unanimous Vote of the Members. Any distribution of property shall be treated as a distribution of cash in the amount of the fair market value of such property. Distribution shall be made to the Members by the Company pro rata, according to the number of Units held by each, with all Outstanding Units being treated alike. Until such time as determined by Unanimous Vote of the Voting Members, all available distributions of cash shall first be applied to the reduction of any outstanding loan or line of credit in the following order:
1. The payment of any note or loan secured by a first mortgage in favor of any non-Member;
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2. The payment in reduction of any lien or credit note or mortgage in favor of any non-Member; and,
3. The payment of any note or loan secured by any property of the Company in favor of any Member or Affiliate of any Member.
At the end of each fiscal year of the Company, the Company shall, to the extent of available cash, after consideration of the Company’s obligations, make a minimum cash distribution sufficient to satisfy the respective tax liabilities of the members, attributable to their respective Membership Interests in the Company.
**Section 5.02** Allocation of Income and Loss.
A. All Tax Items shall be allocated to all Members and Assignees in accordance with their respective Units in the Company. All outstanding Units shall be treated equally.
B. Notwithstanding anything to the contrary in this Section 5.02, if there is a net decrease in “minimum gain” (within the meaning of Treasury Regulations Section 1.704-1(b)(4)(iv)(c) during a fiscal year, all Members with a deficit balance in their Capital Accounts at the end of that year (excluding items described in Treasury Regulations Section 1.704-1(b)(4)(iv)[e]) shall be allocated, before any other allocations of Company items for such fiscal year, items of Income and gain for such year (and if necessary, subsequent years), in an amount and in the proportions necessary to eliminate such deficits as quickly as possible. The foregoing sentence is intended to be a “minimum gain charge back” provision as described in Treasury Regulations Section 1.704- l(B)(4)(iv)(e), and shall be interpreted and applied in all respects in accordance with that regulation.
C. If during any fiscal year of the Company, any Member unexpectedly receives an adjustment, allocation or distribution of the type described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), that Member shall be allocated items of Income in an amount and manner sufficient to eliminate that Member’s deficit Capital Account balance as quickly as possible.
D. Under regulations prescribed by the Secretary of the Treasury pursuant to Section 704(c) of the Code, items of Capital Gain, Income and Loss with respect to property contributed to the Company by a Member shall be shared among Members so as to take account of the variation between the basis of the property to the Company and its fair market value at the time of contribution. The Members shall have the power to make such elections, adopt such conventions, and allocate Capital Gain, Income and Loss as each of them deems appropriate to comply with Section 704(c) of the Code and any Treasury Regulations promulgated thereunder and to preserve, to the extent possible, uniformity of the Units. Any items allocated under this Section 5.02.D shall not be debited or credited to Capital Accounts to the extent that item is already taken into account (upon formation or otherwise) in determining a Member’s Capital Account.
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E. Upon the transfer of a Unit, Income, Capital Gain and Loss attributable to the transferred Unit shall, for federal income tax purposes, be allocated to the owners of such Unit on the basis of the Income or Loss for each month that such Person was the owner of such Units, determined on an interim closing of the books method. The Members may, by Unanimous Vote, revise, alter, or otherwise modify the method of allocation as they determine necessary to comply with Section 706 of the Code and the regulations or rulings promulgated thereunder.
F. If, and to the extent that, any Member is deemed to recognize Income as a result of any transaction between the Member and the Company pursuant to Sections 482, 483, 1272-1274, or 7872 of the Code, or any similar provision now or hereafter in effect, any corresponding resulting Loss or deduction of the Company shall be allocated to the Member who was charged with that Income.
G. All tax credits for federal or state income tax purposes shall be allocated in the same manner as Income.
H. Notwithstanding anything to the contrary contained herein, the distribution and allocation provisions set forth above are allocated solely on the basis of all manner of operations of the Company wholly within the United States (“US Business”). If a determination is made by the Company to conduct business outside of the United State (“Foreign Business”) the allocation of profits and losses and distributions as set forth in Article IV shall be adjusted as set forth in Exhibit “A”
**ARTICLE VI**
**Management and Operation of Business**
**Section 6.01** Management by Board of Managers.
A. Subject to authority and approval by a Unanimous Vote of the Members, the business affairs of the Company shall be managed by a Board of Managers, who shall have the authority to make any and all decisions by Unanimous Vote, concerning the day-to-day business of the Company as specifically provided herein or as delegated to them by the Members. The Members shall have the sole authority, by Unanimous Vote, to elect and/or terminate a member of the Board of Managers with or without cause at any time.
B. The Board of Managers shall exercise the powers and perform the duties assigned to the Board as set forth herein. The Act of a Unanimous Vote of the Board of Managers present at a meeting of the Board at which a quorum is present shall be the act of the Board unless otherwise specified in the Amended and Restated Agreement.
**Section 6.02** Board of Managers.
A. Term. There shall be Four (4) initial Board Members (“Board Members”) elected to the Board of Managers (the “Board”) by the Members, initially composed as follows:
1. Robert C. Bissell
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2. M. Houston Aderhold
3. James Morreale
4. Jeremy Henshaw
The initial Board Members of the Board of Managers shall serve for an initial term of three (3) years; upon which time their successors will be elected by the Members to serve the next three (3) year term pursuant to Subsection G below.
B. Resignation. Any Board Member may resign from the Board at any time.
C. Vacancies. If a position on the Board is vacant for any reason, including, without limitation, the resignation or removal of a Board Member, the Members may, by Unanimous Vote, elect a member to the Board of Managers to fulfill said vacancy. The Members of the Company shall have the right, upon Unanimous Vote, with or without cause, for any reason or at any time, to remove any member of the Board of Managers, including, but not limited to failure to attend three (3) consecutive meetings of the Board of Managers, unless such failure of attendance is permitted by the Members.
D. Meetings. Meetings of the Board of Managers shall be held at least quarterly and shall be held on such dates, at such times and at such places as may be established by and noticed to all members of the Board of Managers and the Voting Members.
E. Quorum and Voting of Managers. All actions taken by the Board of Managers shall be a result of a Unanimous Vote in favor of such action. At any meeting of the Board of Managers, all of the Board Members elected shall constitute a quorum for all purposes. If a quorum fails to attend any meeting, the President or a majority of the Board of Managers present may adjourn the meeting to another date, time and place with notice to the Board of Managers given. In the event of any vote that is not a Unanimous Vote among the Board of Managers, such deadlock shall be broken by the accounting firm then overseeing the accounting matters of the Company. Said accounting firm shall appoint, in good faith, a fifth manager, who may be an employee of said accounting firm, specifically and only for the purpose of casting the deciding vote. Said appointed “fifth manager” shall be reasonably knowledgeable of and suited to resolve the relative deadlock and shall have no additional powers, duties, or responsibilities, other than casing in good faith said deciding vote. The Board of Managers is authorized to, and shall if required, pay reasonable fees to the appointed “fifth manager” and/or the accounting firm with respect to their relative effort(s) to cast such deciding vote. The Company agrees to hold harmless the accounting firm and the appointed “fifth manager” for any damages caused by the tie-breaking vote, with the exception of any damage caused by fraud, collusion, or other intentional tortious conduct on the part of the accounting firm and/or the appointed “fifth manager.” **Notwithstanding any other provision of this Agreement, the vote cast by the appointed** “**fifth manager**” **shall be effective as if the matter under question was decided by a Unanimous Vote for any decision the Board of Managers is authorized to act upon.**
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F. Participation by Conference, Telephone or Proxy. The Board of Managers may, at a properly called meeting, participate in a meeting by means of conference, telephone, electronic, video or other similar communications equipment that enables all of the Board of Managers participating in the meeting to hear each other. Such participation constitutes presence in person at the meeting.
G. Officers of the Board of Managers. The Board of Managers shall elect a President, three (3)Vice Presidents, Secretary and Treasurer and such other officers, as the Board shall deem proper, each for a three (3) year term. The Board of Managers may, at any time, and from time to time, remove any officer and any officer may resign at any time. The Board of Managers shall appoint, from time to time, such other officers as the Board of Managers determines to be appropriate or advisable.
H. President. The President, as appointed by the Members in this Amended and Restated Agreement and then subsequently by the Board of Managers, who may be a Board Member, shall serve as the Chief Officer of the Board of Managers. Subject to the control of the Board of Managers, the President shall supervise and control generally all the business and affairs of the Company, including:
(i) Serving as a member of each committee.
(ii) Sign or countersign, as may be necessary, all such bills, notes, checks, contracts and other instruments as may pertain to the ordinary course of the Company’s business as specifically approved by the Members.
(iii) Annually submit a complete report to the Board of Managers and Members of the operations of the Company’s affairs as existing at the close of each year and report to the Board of Managers, from time to time all such matters coming to the attention of the Board of Managers.
(iv) Have all other powers and duties as are specifically prescribed by the Board of Managers.
I. Vice-Presidents. The Vice Presidents shall, in order determined by the Board of Managers, shall, in the absence or disability of the President, perform such other duties and shall have such powers as the Board of Managers may from time to time prescribe.
J. Secretary. The Secretary shall attend all meetings of the Board of Managers and all meetings of the Members and record all the proceedings of the meetings of the Company and the Board of Managers in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the Members, if there be one and regular and special meetings of the Board of Managers, and shall perform such other duties as may be prescribed by the Board of Managers.
K. Treasurer. The Treasurer, if one is chosen or, if not, the Secretary, shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Managers.
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**Section 6.03** Authority of Board. The Board of Managers may exercise those powers of the Company as delegated to them by a Unanimous Vote of the Members.
**Section 6.04** Duties of Board of Managers. The duties of the Board of Managers shall include, but not be limited to, upon a Unanimous Vote of the Board of Managers, the following:
(i) implementing the decisions of the Members,
(ii) Establish and promote the philosophy and objectives for the Company in a manner that ensures continuous development.
(iii) Develop and monitor strategic planning objectives.
(iv) Provide quality personnel, facilities, equipment, and supplies necessary for the care of the clients.
(v) Ensure safety of clients and staff and the maintenance and operation of the facility.
(vi) Ensure that the administration and operations of the Company
(vii) is in compliance with (a) applicable federal, state and local laws and rules; (b) applicable state, county and city, licenses, permits and approvals; and (c) accreditation standards.
(viii) actively marketing the Business on behalf of the Company in accordance with any approved Marketing Plan,
(ix) providing management information systems support services;
**Section 6.05** Limitations on Authority of Members. The Members shall have the authority to take the following action or to adopt the following proposals, only upon the written approval of a Unanimous Vote of all of the Members:
(i) The sale, exchange, lease, mortgage, pledge, or other transfer of all or substantially all of the assets of the Company;
(ii) The acquisition by purchase, lease, development or other contractual arrangement of any additional businesses;
(iii) A change in the nature of the Company’s Business; and
(iv) Any other action or proposal specifically requiring the unanimous Member approval under the terms hereof.
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**Section 6.06** Election of Officers and Term. The initial officers are appointed by the Members and their terms begin upon the execution of this Amended and Restated Agreement. The officers shall serve for an initial term of three (3) years each and shall subsequently be elected by the Board of Managers. The initial Officers shall be:
President: James Morreale
Vice-President: Jeremy Henshaw
Vice-President: M. Houston Aderhold
Vice-President: Robert C. Bissell
Treasurer: Scott Krosnowski
Secretary: Scott Krosnowski
**Section 6.07** Company Funds. The funds of the Company shall be deposited in an account or accounts designated by the Members and shall not be commingled with any other funds, except to the extent such funds are deposited in either operating or escrow accounts pursuant to an approved Management Agreement. All withdrawals from or charges against these accounts shall be made by authorized officers or agents of the Company.
**Section 6.08** Outside Activities. Each Member and such Member’s Affiliates may have business interests and engage in business activities in addition to those relating to the Company, but shall not engage in any activity directly competitive with the Company within the Centergate Business Park currently operated by 5555 Property Developers and located at 5555 S. 129th Avenue E Tulsa, OK 74134 (the “Mining Site”); provided, however, that nothing in this Section 6.07 shall be construed to prohibit the Company from entering into any agreement with Waha Technologies, Inc, a Georgia profit corporation (“Waha”), an Affiliate of SPRE Tulsa OK, LLC, for the use of electricity, for crypto-mining for its own purposes, and/or to enter into a contract with Waha for management services at the site.
**Section 6.09** Compensation. The Officers of the Company shall be compensated as agreed by a Unanimous Vote of the Voting Members. All employees shall be entitled to such other benefits of employment as shall be provided by Company and approved by all Voting Members. Managers shall keep all other members informed as to any substantial differences in actual operations as compared to the budget or pro forma.
**ARTICLE VII**
**Rights and Obligations of the Members**
**Section 7.01** Limitation of Liability. Anything herein to the contrary notwithstanding, except as otherwise expressly agreed in writing, a Member shall not be personally liable for any debts, liabilities or obligations of the Company, whether to the Company, to any of the other Members, or to creditors of the Company, beyond the Capital Account of the Member, together with the Member’s share of the assets and undistributed profits of the Company.
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**Section 7.02** Rights of Member Relating to the Company.
A. Subject to the restrictions of Section 7.03, this Amended and Restated Agreement may be amended in any material manner only by a Unanimous Vote of the Voting Members.
B. In addition to other rights provided by this Amended and Restated Agreement or by applicable law, a Member shall have the right upon demand and at such Member’s own expense:
(i) To obtain any and all information regarding the status of the business and financial condition of the Company;
(ii) Promptly after becoming available, to obtain a copy of the Company’s federal, state and local income tax returns for each year;
(iii) To have furnished to it a current list of the name and last known business, residence or mailing address of each Member;
(iv) To obtain information regarding the Capital Contributions made by each Member;
(v) To have furnished to it a copy of this Amended and Restated Agreement and the Articles of Organization and all amendments hereto and thereto, together with copies of any powers of attorney pursuant to which this Amended and Restated Agreement, the Articles of Organization and all amendments hereto and thereto have been executed; and
(vi) To inspect and copy any of the Company’s books and records and obtain such other information regarding the affairs of the Company.
**Section 7.03** Restrictions of Powers. Except as otherwise provided herein or by the Mandatory Provisions of the Act, a Member shall not have the authority or power to act on behalf of, or to bind, the Company, or any other Member, and a Member shall not have the right or power to take any action which would change the Company to a general partnership, change the limited liability of a Member, or otherwise affect the status of the Company for federal income tax purposes.
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**Section 7.04** Indemnification.
A. Company Indemnity. To the maximum extent permitted by law, the Company shall indemnify and hold harmless all Members, their respective Affiliates, and the employees and agents of the Company (each, an “Indemnitee”) from and against any and all losses, claims, demands, costs, damages, liabilities, joint and several, expenses of any nature (including attorneys’ fees and disbursements), judgments, fines, settlements, penalties and other expenses actually and reasonably incurred by the Indemnitee in connection with any and all claims, demands, actions, suits, or proceedings, civil, criminal, administrative or investigative, in which the Indemnitee may be involved, or threatened to be involved, as a party or otherwise, by reason of the fact that the Indemnitee is or was a Member of the Company or is or was an employee or agent of the Company, including Affiliates of the foregoing, arising out of or incidental to the business of the Company, provided (i) the Indemnitee’s conduct did not constitute willful misconduct or recklessness, (ii) the action is not based on breach of this Amended and Restated Agreement, (iii) the Indemnitee acted in good faith and in a manner he, she or it reasonably believed to be in, or not opposed to, the best interests of the Company and within the scope of such Indemnitee’s authority and (iv) with respect to a criminal action or proceeding, the Indemnitee had no reasonable cause to believe its conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, in and of itself, create a presumption or otherwise constitute evidence that the Indemnitee acted in a manner contrary to that specified above.
B. Advancement of Expenses. Expenses incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding subject to this Section 7.04 may, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified as authorized in this Section 7.04.
C. Non-Exclusivity. The indemnification provided by this Section 7.04 shall be in addition to any other rights to which the Indemnitee may be entitled under any agreement, vote of the Voting Members, as a matter of law or equity, or otherwise, and shall inure to the benefit of the successors, assignees, heirs, personal representatives and administrators of the Indemnitee.
D. Insurance. The Company may purchase and maintain insurance, at the Company’s expense, on behalf of any Indemnities against any liability that may be asserted against or expense that may be incurred by an Indemnitee in connection with the activities of the Company regardless of whether the Company would have the power to indemnify such Indemnitee against such liability under the provisions of this Amended and Restated Agreement.
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**ARTICLE VIII**
**Book, Records, Accounting and Reports**
**Section 8.01** Books and Records. Appropriate books and records with respect to the Company’s Business, including, without limitation, all books and records necessary to provide to the Member any information, lists and copies of documents required to be provided pursuant to Section 7.02, shall at all times be kept at the principal office of the Company or at such other places as agreed to by the Members. Without limiting the foregoing, the following shall be maintained at the Company’s principal office: (i) a current list of the full name and last known business address of each Member, (ii) copies of records that would enable a Member to determine the relative voting rights of the Members, (iii) a copy of the Articles of Organization, and any amendments thereto, (iv) copies of the Company’s federal, state and local income tax returns and reports, if any, for the three (3) most recent years and (v) copies of any financial statements of the Company for the three most recent fiscal years. Any records maintained by the Company in the regular course of its Business may be kept on, or be in the form of, magnetic tape, photographs or any other information storage device, provided that the records so kept are convertible into clearly legible written form within a reasonable period of time.
**Section 8.02** Accounting. The books of the Company for regulatory and financial reporting purposes shall be maintained on a cash basis of accounting or such other basis a deemed proper by the Company. The Company books for purposes of maintaining and determining Capital Accounts shall be maintained in accordance with the provisions of this Amended and Restated Agreement, Section 704 of the Code and, to the extent not inconsistent therewith, the principles described above for financial reporting and regulatory purposes.
**Section 8.03** Fiscal Year. The fiscal year of the Company shall be the calendar year, unless otherwise determined by Unanimous Vote of the Voting Members.
**ARTICLE IX**
**Tax Matters 16**
**Section 9.01** Taxable Year. The taxable year of the Company shall be the calendar year, unless otherwise determined by Unanimous Vote of the Voting Members.
**Section 9.02** Tax Controversies. Subject to the provisions hereof, Emile Buccola Jr., is designated the “Tax Matters Representative” (as defined in Section 6223 of the Code), and is authorized and required to represent the Company, at the Company’s expense, in connection with all examinations of the Company’s affairs by tax authorities, including resulting administrative and judicial proceedings. Each Member agrees to cooperate with the Tax Matters Representative, and to do or refrain from doing any or all things reasonably required by the Tax Matters Representative to conduct such proceedings.
**Section 9.03** Taxation as a Corporation. The Company shall elect to be treated as a corporation for tax purposes pursuant to Subchapter S of the Internal Revenue Code.
**ARTICLE X**
**ARTICLEX Transfer of Units**
**Section 10.01** Transfer.
A. The term “transfer”, when used in this Article X with respect to a Unit, shall be deemed to refer to a transaction by which the Member assigns all or a portion of its Units, or any interest therein, to another Person, or by which the holder of a Unit assigns the Unit to another Person as Assignee, and includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage, transfer by will or intestate succession, exchange or any other disposition. For purposes of this Amended and Restated Agreement “transfer” shall not mean a transfer to an entity or trust in which the Member maintains control. Control shall mean the ownership of at least a fifty-one percent (51%) interest in the entity or trust.
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B. No Units shall be transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article X. Any transfer or purported transfer of any Units not made in accordance with this Article X shall be null and void. If for any reason any such transfer is not null and void, then the Assignee shall not be a Substitute Member, and shall have no right to participate in Company’s affairs as a Member thereof, but instead shall be entitled to receive only the share of profits or other compensation by way of income and the return of contributions to which the transferring Member would otherwise be entitled at the time said transferring Member would be entitled to receive the same.
**Section 10.02** Transfer of Units by a Member.
A. Except as provided in Section 10.03 hereto or in the case that a proposed transfer to another entity that is and remains controlled by the Member transferor, no Units may be transferred by a Member unless the following conditions are first satisfied:
(i) A Unanimous Vote of all Voting Members approving the transfer has been obtained, such approval to be evidenced by a written instrument, dated and signed by the Members;
(ii) The transferee and each Member execute and file all documents necessary for the transferee to be a Substitute Member and be bound by the terms hereof and such transferee is admitted as a Substitute Member; and
(iii) The Company receives an Opinion of Counsel that such transfer would not materially adversely affect the classification of the Company as a partnership for federal and state income tax purposes.
(iv) A written notice of a Member’s intention to transfer an interest must be submitted to the Tax Matters Partner at least fourteen (14) days, including Saturdays and Sundays, prior to a meeting by the Members.
(v) Upon an Unanimous Vote of approval of the members, the transfer will become effective no earlier than seven (7) days, including Saturdays and Sundays, thereafter.
B. The transfer restrictions on Company Units shall be conspicuously noted m an appropriate legend on any Unit certificates issued.
C. In no event shall any Unit be transferred to a minor or any incompetent except by will or intestate succession.
D. The Company need not recognize, for any purpose, any transfer of all or any fraction of a Unit unless there shall have been filed with the Company and recorded on the Company’s books a duly executed and acknowledged counterpart of the instrument of assignment and such instrument evidences the written acceptance by the Assignee of all of the terms and provisions of this Amended and Restated Agreement and represents that such assignment was made in accordance with all applicable laws and regulations.
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E. Any holder of a Unit (including a transferee thereof) shall be deemed conclusively to have agreed to comply with and be bound by all terms and conditions of this Amended and Restated Agreement, with the same effect as if such holder had executed an express acknowledged thereof, whether or not such holder in fact had executed such an express acknowledgment.
**Section 10.03** Transfer Upon Death, Bankruptcy or Divorce of Member. Upon the death, divorce or bankruptcy of any Member, the surviving Members shall have the option, but not the obligation of (a) permitting such deceased Member’s estate or any person to whom his or her interest has been bequeathed to continue as a Member in the Company, or in the case of a divorced or bankrupt Member, the party ultimately obtaining ownership of such Units, or (b) redeeming such deceased, divorced or bankrupt Member’s interest in the Company. Whether the Company will permit the deceased Member’s estate or legatee or such third party to continue as a Member of the Company or whether the Company will redeem the deceased, divorced or bankrupt Member’s interest in the Company, will be determined by a Unanimous Vote of the surviving Voting Members, and the Company will notify the personal representative of the deceased Member of its election within thirty (30) days after the date of such Member’s death. In the event the Company exercises its option to redeem the deceased Member’s interest or third party’s interest in the Company, the redemption price thereof shall be as set forth in paragraph 10.05.
**Section 10.04** Voluntary Transfer. A Member shall not voluntarily assign, sell or transfer an interest in the Company except as provided herein. A Member desiring to sell, assign or transfer an interest in the Company (offering Member) shall first offer such interest to the Company in a written notice containing all of the terms and conditions of the offer (including the name and address of an unrelated third party purchaser, if applicable). The company shall have twenty (20) days in which to accept or reject such offer in writing to the offering Members. If accepted by the Company, the offering Member and Company shall close upon the terms so agreed. If rejected, the offering Member shall offer the interest to the other Members (non-offering Members) pro rata. The non-offering Members shall have thirty (30) days in which to accept or reject such offer in writing to the offering Member. If not accepted by part or all of the non-offering Members, the offering Member shall have the right to sell such interest to an unrelated third party purchaser only upon approval by a Unanimous Vote of all other Members, excluding the offering Member or as otherwise agreed by all Members.
**Section 10.05** Computation of Purchase Price. Unless and until changed as provided herein, it is agreed that for the purpose of determining the purchase price to be paid for the Units of a Member, the value of such interest shall be determined as follows: By an independent appraisal of the Company by a person qualified to appraise the business of the Company. If the “Selling Party” is not satisfied with the value so determined, then such “Selling Member” may have the right at his sole cost to reappraise the value by both the Company and the Selling Member selecting an appraiser and the two so selected, selecting a third appraiser. The value so determined shall be binding upon all parties. However, upon the Divorce of a Member the Company shall have the right to purchase and the divorcing or divorced Member shall sell the Units held by such Member, at a price equal to the then Capital Account of such Member, which such divorcing or divorced Member agrees is fair and reasonable.
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**Section 10.06** Continuation of Company Business. In the event one or more of the Units of a Member is transferred pursuant to provisions of Article X hereof, the Company business shall not terminate but shall continue, as of the effective date of transfer, after an appropriate adjustment is made in the Capital Accounts, the Company Capital Accounts and the percentage interests of the profits and losses shared by the remaining or surviving Members, as the case may be, in accordance with the provisions hereof.
**Section 10.07** Restrictions on Transfer. Notwithstanding the other provisions of this Article X, no transfer of any Unit of any Member in the Company shall be made if the transfer (i) would violate applicable federal and state securities laws or rules and regulations of the Securities and Exchange Commission, any state securities commission or any other governmental authority with jurisdiction over the transfer, (ii) would materially adversely affect the classification of the Company as a partnership for federal or state income tax purposes or (iii) would affect the Company’s qualification as a limited liability company under the Act.
**Section 10.08** Issuance of Certificates. The Company may issue one or more Certificates in the name of the Member evidencing the number of Units issued. Upon the transfer of a Unit in accordance with Article X, the Company shall, if certificates have been issued, issue replacement Certificates. All Certificates shall contain legends required by this Amended and Restated Agreement or otherwise required by law.
**Section 10.09** Lost, Stolen or Destroyed Certificates. The Company shall issue a new Certificate in place of any Certificate previously issued if the Record Holder of the Certificate: (i) makes proof by affidavit that a previously issued Certificate has been lost, stolen, or destroyed; (ii) requests the issuance of a new Certificate before the Company has notice that the Units evidenced by such Certificate have been acquired by a purchaser for value in good faith and without notice of an adverse claim; and (iii) if required by the Company, delivers to the Company a bond with surety or sureties acceptable to the Company, to identify the Company against any claim that may be made on account of the alleged loss, destruction or theft of the Certificate. The Company shall be entitled to treat each Record Holder as the Member or Assignee in fact of any Units and, accordingly, shall not be required to recognize any equitable or other claim or interest in or with respect to the Units on the part of any other Person, regardless of whether it has actual or other notice thereof.
**ARTICLE XI**
**Admission of Substitute and Additional Members**
**Section 11.01** Admission of Substitute Members.
A. Upon a transfer of a Unit by a Member in accordance with Article X (but not otherwise), the transferor shall have the power to give, and by transfer of any Certificate issued shall be deemed to have given, the transferee the right to apply to become a Substitute Member with respect to the Unit acquired, subject to the conditions of and in the manner permitted under this Amended and Restated Agreement. A transferee of a Certificate representing a Unit shall be an Assignee with respect to the transferred Unit (whether or not such transferee is a Member or Substitute Member with respect to other previously acquired Units) unless and until all of the following conditions are satisfied:
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(i) The instrument of assignment sets forth the intentions of the assignor that the Assignee succeed to the assignor’s interest as a Substitute Member in his place;
(ii) The assignor and Assignee shall have fulfilled all other requirements of this Amended and Restated Agreement;
(iii) The Assignee shall have paid all reasonable legal fees and filing costs incurred by the Company in connection with his substitution as a Member; and,
(iv) (iv)The Voting Members shall have unanimously approved such substitution in writing, which approval may be granted or withheld by each Member in its sole and absolute discretion and may be arbitrarily withheld, and the books and records of the Company have been modified to reflect the admission.
The admission of an Assignee as a Substitute Members with respect to a transferred Unit shall become effective on the date the Voting Members give their unanimous written consent to the admission and the books and records of the Company have been modified to reflect such admission. Any Member who transfers all of his Units with respect to which it had been admitted as a Member shall cease to be a Member of the Company upon a transfer of such Units in accordance with Article X and the execution of a counterpart of this Amended and Restated Agreement by the transferee and shall have no further rights as a Member in or with respect to the Company (whether or not the Assignee of such former Member is admitted to the Company as a Substitute Member).
**Section 11.02** Admission of Additional Members. Additional Units may be authorized and issued by the Company upon such terms and conditions as may be approved by a Unanimous Vote of all Voting Members. Upon the proposed issuance of any such additional Units, each existing Voting Member shall have the preemptive right, but not the obligation, to purchase such portion of the newly issued Units as the ratio of the number of Units or percentage of interest then held by such Member bears to the total number of Units held by Members and Outstanding before the issuance of the new Units, together with such Member’s proportionate share of the other newly issued Units as to which other Members fail to exercise their preemptive rights.
**ARTICLE XII**
**Dissolution and Liquidation**
**Section 12.01** Disqualification of Member. Upon the incapacity, resignation, expulsion, bankruptcy, dissolution or change in control of a Member (such Member being hereinafter sometimes referred to as a “Disqualified Member”), or the occurrence of any other event which terminates the continued membership of a Member in the Company (any of such events being referred to herein as an “Event of Dissolution”), the Company shall dissolve and its affairs shall be wound up. The Company shall thereafter conduct only activities necessary to wind up its affairs, unless there is at least one (1) remaining Member and within one (1) year after the occurrence of an Event of Dissolution, all the remaining Voting Member(s) by Unanimous vote agree to continue the Company. If any election to continue the Company is made, then:
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A. The remaining Member(s) may elect, within ninety (90) days of the decision to continue the Company, to purchase the Disqualified Member’s Units upon such terms and conditions as the remaining Members and the Disqualified Member or the legal representative of the Disqualified Member, may agree. In the event the remaining Members and the Disqualified Member (or such legal representative) do not agree upon terms and conditions for a purchase of the Units of the Disqualified Member, the remaining Members shall have an option (to be exercised within one (1) year after the occurrence of the Event of Dissolution, by giving notice to the Disqualified Member, or such legal representative) to purchase the Units for a cash purchase price determined as set forth in Section 10.04.
B. The Company shall continue until the expiration of the term for which it was formed or until the occurrence of another Event of Dissolution, in which event any remaining Voting Members shall again elect whether to continue the Company pursuant to this Section 12.1.
**Section 12.02** Dissolution and Liquidation. The Company shall be dissolved and its affairs shall be wound up upon the occurrence of any of the following: (i) the term of the Company stated in Articles of Organization, if any, expires; (ii) there are fewer than one (1) Member; (iii) if, upon the occurrence of an Event of Dissolution, the remaining Voting Members fail to continue the Company pursuant to Section 12.01; or (iv) all Voting Members vote to dissolve the Company.
**Section 12.03** Method of Winding Up. Upon dissolution of the Company pursuant to Section 12.02, the Company shall immediately commence to liquidate and wind up its affairs. The Members shall continue to share profits and losses during the period of liquidation and winding up in the same proportion as before commencement of winding up and dissolution. The proceeds from the liquidation and winding up shall be applied in the following order of priority.
A. To creditors, including Members who are creditors, to the extent permitted by law, in satisfaction of liabilities of the Company other than liabilities to Members on account of their Capital Contributions or on account of a Member’s withdrawal from the Company or pursuant to a withdrawal of capital; and
B. The balance, to Members in accordance with their Capital Accounts. Unless the Voting Members shall unanimously determine otherwise, all distributions will be made in cash, and none of the Company Property will be distributed in kind to the Members. Provided, however, that this shall not mean the transfer, sale or assignment of partial interests to family members.
**Section 12.04** 12.04 Filing Articles of Dissolution. Upon the completion of the distribution of Company Property as provided in Section 12.02, Articles of Dissolution shall be filed as required by the Act, and each Member agrees to take whatever action may be advisable or proper to carry out the provisions of this Section.
**Section 12.05** Return of Capital. The return of Capital Contributions shall be made solely from Company Property.
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**ARTICLE XIII**
**Amendment of Agreement; Meetings; Record Date**
**Section 13.01** Amendments. All Amendments to this Amended and Restated Agreement shall require a Unanimous Vote of the Voting Members.
**Section 13.02** Limitation on Amendments. Notwithstanding any other provision of this Amended and Restated Agreement, no amendment to this Amended and Restated Agreement may without the Unanimous Vote of all Voting Members (i) enlarge the obligations of any Member under this Amended and Restated Agreement or (ii) amend this Section 13.02, Section 13.01, or Section 7.03.
**Section 13.03** Meetings. Meetings may be called by any two (2) Voting Members or Board Members, by giving at least two (2) business days prior notice of the time, place and purpose of the meeting to all Members. Special meetings for the purpose of approval of a transfer of a Member may be held only on the 1st or 15th day of the month, or if either of these days falls on a Saturday, Sunday, or legal Holiday, on the first day thereafter.
**Section 13.04** Adjournment. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment shall be for more than forty five (45) days. At the adjourned meeting, the Company may transact any business which might have been transacted at the original meeting. If the adjournment is for more than forty-five (45) days, a notice of the adjourned meeting shall be given in accordance with this Section 13.04.
**Section 13.05** Waiver of Notice; Consent to Meeting; Approval of Minutes. The transactions of any meeting of the Company, however called and noticed, and whenever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the Members entitled to vote, but not present in person or by proxy, approves by signing a written waiver of notice or a consent or approval to the holding of the meeting or an approval of the minutes thereof. All waivers, consents, and approvals shall be filed with the Company records or made a part of the minutes of the meeting. Attendance of a Member at a meeting, which attendance may either be in person, by proxy or telephone or video conference technology, shall constitute a waiver of notice of the meeting, except when such Member objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened; and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required to be included in the notice of the meeting, but not so included, if the objection is expressly made at the meeting.
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**Section 13.06** Quorum and Voting of Members. Since all decisions by Members require a Unanimous Vote of the members, only attendance of all Members entitled to vote, whether represented in person or by proxy, shall constitute a quorum at a meeting of Members. In the absence of a quorum, any meeting of Members may be adjourned from time to time by a Unanimous Vote of the Members in attendance, either in person or by proxy entitled to vote, but no other matters may be proposed, approved or disapproved, except as provided in Section 13.04. In the event of a vote that is not a Unanimous Vote, such deadlock shall be broken by the accounting firm then overseeing the accounting matters of the Company. Said accounting firm shall appoint, in good faith, an “Ad Hoc Member”, who may be an employee of said accounting firm, specifically and only for the purpose of casting the deciding vote. Said appointed “Ad Hoc Member” shall be reasonably knowledgeable of and suited to resolve the relative deadlock and shall have no additional powers, duties, or responsibilities, other than casting in good faith said deciding vote on the question(s) presented. The Members are authorized to, and shall if required, pay reasonable fees to the appointed “Ad Hoc Member” and/or the accounting firm with respect to their relative effort(s) to cast such deciding vote. The Company agrees to hold harmless the accounting firm and the appointed “Ad Hoc Member” for any damages caused by the tie-breaking vote, with the exception of any damage caused by fraud, collusion, or other intentional tortious conduct on the part of the accounting firm and/or the appointed “Ad Hoc Member.” **Notwithstanding any other provision of this Agreement, the vote cast by the appointed** “**Ad Hoc Member**” **shall be effective as if the matter under question was decided by a Unanimous Vote for any decision the Managers are authorized by this Amended and Restated Operating Agreement to act upon.**
**Section 13.07** Action Without a Meeting. Any action that may be taken by any vote of the Members may be taken without a meeting if a consent or resolution authorizing such action is signed by Members holding one hundred percent (100%) of the Units that would be necessary to authorize or take such action at a meeting at which all Units entitled to vote thereon were present and voted. Prompt notice of the taking of any action without a meeting shall be given to those all Members in writing. Meetings may be held by e-mail or telephonically.
**ARTICLE XIV**
**Mediation and Arbitration**
**Section 14.01** Mediation-Arbitration. With the exception of the appointment of a “Ad Hoc Member” to resolve a non-Unanimous Vote, all disputes between the parties related to this Amended and Restated Agreement shall first be resolved by Mediation if at all possible, pursuant to the rules of the Oklahoma Mediation Association. If Mediation does not resolve the dispute, the matter will be resolved by final binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The proceedings shall be governed by the Federal Arbitration Association. The proceedings shall be governed by the Federal Arbitration Act and the award may be enforced in any court of competent jurisdiction. In the event the dispute involves a claim in excess of $50,000, two arbitrators shall be employed and the arbitrators employed shall, to the extent it is possible to do so, have the following qualifications: (a) One arbitrator with at least ten years’ experience in the practice of law; (b) One arbitrator with at least ten years’ experience in the mid-stream oil and gas business.
In any dispute, no discovery depositions shall be taken but each party shall be entitled to make reasonable requests for documents and information, to which responses shall be due in twenty days.
This Amended and Restated Agreement creates a relationship whereby a party may require emergency judicial relief pending final resolution of the dispute by arbitration. In such an event, the parties consent to stay the judicial proceeding immediately at the conclusion of the emergency proceeding in order to allow final resolution by arbitration.
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To the extent that public policy permits, the parties agree that the award shall not include consequential or punitive damages but shall only award the aggrieved party the actual damages sustained.
All administrative costs of the arbitration shall be split evenly between the parties. Each party shall be responsible for paying its own attorney fees, expert fees and litigation expenses and not those of the adversary. The arbitration hearing shall be conducted in Oklahoma City, Oklahoma.
**ARTICLE XV**
**General Provisions**
**Section 15.01** Notices. Any notice, demand, request or report required or permitted to be given or made to a Member under this Amended and Restated Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class mail to the Member at the address set forth on Exhibit A. Any notice, payment or report to be given or sent to a Member hereunder shall be deemed conclusively to have been given or sent, upon mailing of such notice, payment, or report to the address shown on the records of the Company, regardless of any claim of any Person who may have an interest in the Unit by reason of an assignment or otherwise.
**Section 15.02** Captions. All article and section captions in this Amended and Restated Agreement are for convenience only. They shall not be deemed part of this Amended and Restated Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof. Except as specifically provided otherwise, references to “Articles and “Sections” are to Articles and Sections of this Amended and Restated Agreement.
**Section 15.03** Pronouns and Plurals. Whenever the context may require, any pronoun used in this Amended and Restated Agreement shall include the corresponding masculine, feminine or neuter forms and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.
**Section 15.04** Further Action. The parties to this Amended and Restated Agreement shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Amended and Restated Agreement.
**Section 15.05** Binding Effect. This Amended and Restated Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, legal representatives and permitted assignees.
**Section 15.06** Integration. This Amended and Restated Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.
**Section 15.07** Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Amended and Restated Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.
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**Section 15.08** Counterparts. This Amended and Restated Agreement may be executed in counterparts, all of which together shall constitute an agreement binding on all the parties hereto notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Amended and Restated Agreement immediately upon affixing its signature hereto, independently of the signature of any other party.
**Section 15.09** Applicable Law. This Amended and Restated Agreement shall be construed in accordance with and governed by the laws of the State of Oklahoma, without regard to its principles of conflict of laws.
**Section 15.10** Invalidity of Provisions. If any provision of this Amended and Restated Agreement is or becomes invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained herein shall not be affected thereby.
**Section 15.11** Conveyances. All of the assets of the Company shall be held in the name of the Company, unless the Voting Members shall determine that any Member may hold title to any property as nominee for the Company. Any deed, bill of sale, mortgage, lease, contract of sale or other instrument purporting to convey or encumber the interest of the Company or all or any portion of the assets of the Company shall not be sufficient unless signed by a Unanimous Vote of the Voting Members. No person shall be required to inquire into the authority of any individual to sign any instrument which is executed pursuant to the provision of this Section 15.11.
[THIS SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Agreement effective as of the 15th day of March 2023.
MEMBERS:
SPRE TULSA OK, LLC
By: */s/ Robert C. Bissell*
Name: Robert C. Bissell
Its: Manager
913 HERO, LLC
By: */s/ Jeremy Henshaw*
Name: Jeremy Henshaw
Its: Managing Member
TURN KEY MOUNTAIN, LLC
By: */s/ Loren Redd*
Name: Loren Redd
Its: Managing Member
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---
## EXHIBIT 10.14
SEC source: [ex_902244.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902244.htm)
**Exhibit 10.14**
**ELECTRIC SERVICE WILL**
**SERVE AGREEMENT**
THIS WILL SERVE AGREEMENT including all exhibits, schedules, addenda or any other attachment hereto (“Agreement”) is made and entered into by and between the **OKLAHOMA GAS AND ELECTRIC COMPANY** (hereinafter called “Company”) and **SPRE WATONGA OK, LLC**, (hereinafter called “Consumer”). Company and Consumer may each be referred to as “Party” and together the “Parties”.
WHEREAS Consumer has requested electrical service from Company for use in connection with CRYPTOCURRENCY, at 81435 N 2660 RD SUITE B, WATONGA, OK (“Service Location”).
WHEREAS Company has agreed to sell Consumer electricity at the Service Location, however, before Company can deliver the electricity requested at the Service Location, it will need to perform engineering, design, procurement and/or construction work (“Work”).
WHEREAS, in consideration for the costs associated with the Work, Consumer is agreeing to purchase electrical service from Company pursuant to the terms and conditions of this Agreement.
Therefore, Parties agree as follows:
1. **Physical Address Required**. Consumer already possess or is required to enter into a binding and enforceable lease or purchase agreement within thirty (30) days for the Service Location with the address and location identified in this Agreement as a precondition to entering into this Agreement. In the event that Consumer fails to enter into a purchase agreement or binding and enforceable lease during this period, this Agreement shall terminate unless Company, in its sole discretion, decides to extend this thirty (30) day deadline in writing.
2. **Requested Electrical Service**. The electric service to be delivered to Consumer under this Agreement is for a maximum demand requirement of **17000** kilowatts (kW) and will be of a character commonly known as **12500** volts, **3** phases 4**-**wire solidly grounded wye of approximately **60** hertz (with reasonable variation in voltage and frequency in either direction allowed) (“the Maximum Demand”). The service will be billed as Service Level **2**.
a. In determining ability and cost to serve the Service Location, the Company is relying upon this maximum amount of Maximum Demand.
b. Prior to an increase to Consumer’s Maximum Demand, Consumer will make a written request to the Company. Company will review the request and may require additional information about the Consumer, further review and/or studies, additional contract documents, additional financial obligations and/or impose additional technical and operational requirements of Consumer. An increase to Maximum Demand is not guaranteed. Requests to increase the Maximum Demand require at least sixty (60) days to review. If Company agrees to increase Consumer’s Maximum Demand, Parties will enter into additional contract documents to reflect the amended relationship.
i. Consumer shall be responsible for damage to any equipment caused by or related to an unauthorized increase in Maximum Demand or resulting from any misrepresentation of identity or facts for the purpose of obtaining service. If there is an increase in the amount of electricity being used at the Service Location beyond the Maximum Demand, Company may disconnect service. According to the Rules on Electricity, OAC 165:35, disconnection will be taken to avoid an adverse effect of the unauthorized increase in Load on the service of other Company customers and to correct a condition that is posing a safety hazard to the equipment of Company.
Reconnection of service following disconnection for an unauthorized increase in Maximum Demand may require the payment of a service fee pursuant to Company’s Standard Terms and Conditions of Service. Furthermore, repeated unauthorized increases in Maximum Demand may lead to permanent disconnection of service.
c. If Consumer’s highest billed demand remains below seventy-five percent (75%) of the Maximum Demand for any six (6) consecutive month period, Company may, at its sole discretion, reduce the Maximum Demand requirement to the highest billed demand level within the six (6) consecutive month period and inform Consumer in writing of the change. The reduced demand level communicated to Consumer shall become the new Maximum Demand.
d. The obligations under this section shall survive the termination of this Agreement and shall continue for so long as Consumer has an active account associated with the Service Location.
3. **Description of Amount and Nature of Consumer**’**s Load**. Cryptocurrency mining operation to total 17 MW. SPRE will have one primary meter at the substation. SPRE will terminate customer cables to the primary meter. This is required to be completed by a supervised OG&E substation crew.
4. **Billed Rates**. So long as Consumer is receiving electric service from Company, Consumer shall be billed in accordance with the Tariff and/or classification of service in effect at the time electrical service is delivered, and Consumer agrees to pay such amount billed. Should a change occur, Company shall, upon the effective date thereof, bill Consumer in accordance with the revised Tariff and/or classification of service.
5. **Technical and Operational Requirements**.
a. Consumer agrees to satisfy any and all Technical and Operational Requirements (defined below) of the Company or from any applicable filed and approved Tariff (as defined by OAC 165:35-1-2), or Company’s classifications of service including any modifications or new Tariffs/classifications of services.
i. Operational Requirements are defined as essential capabilities, associated requirements, performance measurements, generational requirements (including the cost to add generation), and any process or series of actions required to affect desired results, requirements, or capabilities.
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ii. Technical Requirements are defined as standards that a system or software must follow. This includes security, architectural and functionality requirements.
b. Consumer shall be responsible for providing, owning, installing, and maintaining their electrical system, equipment, and process designed to operate and conform with all applicable standards and codes including, but not limited to, IEEE-519-2014, and any successor IEEE standards. In addition, The Consumer will operate its equipment to meet IEEE-1453-2012 guidelines as measured with an IEEE compliant flicker meter at the point of common coupling (“PCC”).
c. In consideration for Company’s cost required to serve the Service Location, except as when used as a back-up source for electric services during an emergency or outage, Consumer shall not use or engage behind-the-meter generation for more than ten percent (10%) of the Service Location’s energy needs for the duration of this Agreement.
d. The obligations under this section shall survive the termination of this Agreement and shall continue for so long as Consumer has an active account associated with the Service Location.
6. **Conditions for Construction/Installation**. If Consumer fails to satisfy any conditions or requirements given to Consumer by Company for construction and/or installation of Company owned equipment, Company reserves the right to immediately stop-work until such time as the deficiency is resolved. Consumer shall also be responsible for any damages or harm incurred by Company because of Consumer’s failure to abide by any provided conditions or requirements. The obligations under this paragraph six (6) shall survive the termination of this Agreement and shall continue for so long as Consumer has an active account associated with the Service Location.
7. **Load Connection Study**. As part of the Work, the Southwest Power Pool (“SPP”) may require a confirming load connection study to be completed to determine if any transmission system upgrades are needed before official permission can be given to serve a future load that exceeds what has been included in the growth projections for the area of the Service Location. Projects are typically reviewed, and a decision made by the SPP, within approximately sixty (60) days for routine requests and up to one hundred and twenty (120) or more days for non-routine requests. Any associated upgrade costs resulting from the SPP connection study will be the Consumer’s responsibility and may require parties to enter into additional contract documents and may require a contribution in aid of construction payment from Consumer.
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8. **Rights of Way**. The performance of this Agreement is contingent upon Company being able to secure the necessary rights of way to the Service Location for its facilities at a cost which, in its sole judgment, is reasonable. In the event the cost of the right of way is, in Company’s sole opinion, not acceptable, Consumer shall be required to pay any costs in excess of that amount which Company determines to be acceptable.
9. **Additional Contract Documents**. The purpose of this Agreement is to allow Company to perform Work to provide electrical service to the Service Location (“Purpose”). Once the Purpose has been achieved, and before electrical service may be delivered to Consumer at the Service Location, Parties may be required to execute additional contract documents to reflect the terms and conditions of receiving electrical service. Unless otherwise agreed to by Company, Consumer’s failure to execute any additional contracts within thirty (30) days of receipt will be deemed a termination of this Agreement by the Consumer.
10. **New Electric Consuming Facilities**. So long as Consumer has an active account with the Company, Consumer will grant Company first right of refusal for any other new electric consuming facilities Consumer will own and/ or operates in Company’s service territory provided the location of the new electric consuming facilities is in a competitive area. Competitive area is defined as a location in Company’s service area within an unincorporated area where a new electric consuming facility having a connected load for initial full operation of 1,000 kW or larger is located.
11. **Load Reduction Program**. *Select as applicable*.
**Yes** - Consumer is electing to participate in the Standard Pricing Schedule: LR: Load Reduction Rider.
☐ Consumer is electing to participate in Company’s Direct Load Control Program available under the Standard Pricing Schedule: LR: Loan Reduction Rider. **Eligibility requirements exist.
☐ Consumer is **not** participating in Load Reduction.
*Consumer may, in the future, participate pursuant to the terms and conditions of the Standard Pricing Schedule: LR: Load Reduction Rider or other applicable Tariff(s).
12. **Term & Termination**.
a. Subject to Company’s Terms and Conditions of Service and rules and regulations of any regulatory authority having jurisdiction, this Agreement shall remain in full force and effect for an initial term of 5 years from the effective date of this Agreement (the “Initial Term”). Following expiration of the Initial Term Consumer will continue to receive service under applicable Tariffs and those provisions of this Agreement that by their nature are intended to survive termination of this Agreement.
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b. If Consumer, at any time, is unable to proceed in a timely manner with the work or process necessary to establish electrical service at the Service Location, including, but not limited to the execution of any other contractual document required, Company reserves the right to cancel this Agreement following a thirty (30) day notice to cure. While Company’s right to cancel may be executed at its sole discretion pursuant to this subsection, Company shall refrain from exercising its right herein so long as Consumer is utilizing commercially reasonable efforts.
c. **Effect of Termination**.
i. If Consumer elects to terminate this Agreement at any time for any reason or does not make an application for an account with Company within three months of service from the date Permanent Electric Service (defined below) has been made available by Company to the Service Location, Consumer will reimburse Company for all actual expenses associated with the Work required to serve Consumer’s facility located at the Service Location described in this Agreement. These expenses include but are not limited to the engineering costs, costs of obtaining easements, material costs, material cancellation costs, and construction labor.
1. Permanent Electric Service means Company has completed all design and construction of electrical facilities necessary to make available electric service to Consumer’s point of interconnection.
ii. If Company elects to cancel this Agreement, Consumer will be responsible for any actual expense Company has incurred prior to the effective date of cancellation.
iii. Termination of the Agreement shall not affect Company’s exclusive right to provide electrical service to Consumer at the Service Location for any future electrical service needs using its Tariffs.
iv. In addition to those obligations with express survival language, upon expiration or termination of the Agreement, the obligations which by their nature are intended to survive expiration or termination of the Agreement shall survive.
13. **Title & Ownership**. Company shall retain all right, title and interest to any items associated with the expansion of Company’s electric system as contemplated in the Agreement including but not limited to materials, services, easements purchased, acquired or obtained by Company in connection with this Agreement. In addition, ownership, and control of all such items of expansion shall at all times remain with Company and Company shall have the right to use the same for the purpose of serving Company’s other customers.
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14. **Service Levels**.
a. Consumer will follow all Tariff requirements for the service level applicable to the Service Location however, for Service 1 and Service Level 2 the following additional requirements will apply.
i. Should Consumer elect **Service Level 1**, service from a Consumer-owned substation, the point of delivery under this Agreement shall be the point at which the electric facilities of Company will connect to the electric facilities of Consumer, typically at Consumer-owned dead end structure in Consumer’s substation. Consumer is obligated to modify the substation in the future as Company’s transmission continues to evolve. When deemed necessary by Company changes in Consumer’s substation may be needed to conform to industry standards, transmission system characteristics, and Company practices, or to take advantage of technological advances which will maintain the reliability of the substation. The billing metering will be on the low side of Consumer-owned transformer. Consumer shall install Company-owned and provided potential and current transformers used for metering per Company specifications. Consumer shall also install raceway from the potential and current transformers to a Company-owned but Consumer installed meter base. Company will adjust for transformer losses when calculating the bill. Consumer shall provide reasonable access to the metering equipment for maintenance and testing.
ii. Should Consumer elect **Service Level 2**, service from an onsite substation, Company will be responsible for the design and construction of any facilities needed and Consumer will reimburse for any and all costs that exceed the allowable expenditure. The location of the pad will be on Consumer’s property at a mutually agreeable location. Consumer shall grant, at no cost to Company easements for:(i) the new substation to be constructed; (ii) the transmission and distribution infrastructure; and (iii) ingress and egress access to the substation and transmission and distribution infrastructure. All such easements shall be in a form that is acceptable to and approved by Company and such easements shall include, as a material term, the right of Company to extend the rights granted to Company under the easements to third parties for purposes including, but not limited to, allowing such third parties to access the substation for their electric service needs or area load growth needs. Consumer will identify any environmental permitting exemptions, authorizations, and/or existing permits that apply to current or anticipated construction and operations. These may include, but are not limited to, areas such as, stormwater discharges, spill control and countermeasure plans, waste management, temporary generators, air emissions, or endangered species. The acquisition of such permits or authorizations, as well as the development of related control and implementation plans, will be identified and coordinated between the Parties in a timely manner so as not to impact a project plan that is mutually agreeable to the Parties.
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b. For a Service Location outside of the Company’s certified territory, Consumer is responsible for installing a connected load of 1,000 kW or greater for initial full operation. If, after service is initiated and it is determined that the actual connected load for initial full operation is under 1,000 kW, Consumer will be required to obtain service from the incumbent retail electric service provider and will reimburse Company for all actual expenses associated with the construction and design of the electrical system required to serve Consumer’s facility located at the Service Location described in this Agreement.
15. **Governing Law and Authority**.
a. To protect the reliability and resiliency of its electrical system, Company reserves its right to limit service or disconnect service in the event that Consumer breaches this Agreement.
b. This Agreement shall be governed and construed in accordance with the laws of the State of Oklahoma excepting its laws regarding conflicts of law. Any suit, claim or legal proceeding arising out of or relating to this Agreement shall be brought exclusively in the state or federal courts located in Oklahoma County, Oklahoma. The Parties hereby agree to the exclusive jurisdiction of and venue in such courts and the Parties expressly and irrevocably waive any objections to such exclusive jurisdiction and venue. In the event of any dispute relating to this Agreement, the Parties agree that they shall first attempt to resolve the dispute via informal negotiations before initiating any legal proceeding. THE PARTIES EXPRESSLY, KNOWINGLY AND VOLUNTARILY WAIVE THEIR RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING FROM OR RELATING TO THIS AGREEMENT.
c. Nothing contained herein shall be construed as affecting in any way the right of Company to unilaterally make application to the Corporation Commission of Oklahoma and/or the Arkansas Public Service Commission or to any other regulatory agency having jurisdiction, as applicable, for a change in rates, charges, classification, service, Term and Conditions of Service or any rule, regulation or contact relating thereto, during the term of this Agreement, Company shall, upon the effective date of any order or rule resulting from such application, bill Consumer on the basis of such change and Consumer agrees to pay such amount billed reflecting such change.
d. Parties agree to abide by all applicable provisions and respective amendments of Federal and State laws, rules and regulations, ordinances, judicial decisions, and executive orders, in performance of this Agreement.
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16. **Notice**. All notices or communications relating to this Agreement shall be in writing and sent to the addresses identified by the Parties below via internationally recognized delivery service or certified United States mail with delivery confirmation for all such methods. Either Party may change its notice address by providing written notice of such change to the other Party.
17. **Miscellaneous**.
a. The person signing this Agreement on behalf of a Party represents and warrants that that he or she is a duly authorized representative of that Party and that he or she has express authority to sign this Agreement on behalf of that Party.
b. The Parties have caused this Agreement to be signed by their duly authorized officers. This Agreement may be executed in counterparts each of which so executed shall be deemed an original and constitute one and the same agreement.
c. Consumer shall remain subject to Company’s Tariffs and Terms and Conditions of Service, however, this Agreement constitutes the entire agreement between the Parties with respect to the subject matter contained herein and supersedes all prior or contemporaneous oral or written agreements, conditions, or representations. Should a conflict arise between this Agreement and any Tariff, or Terms and Conditions of Service it will be resolved in favor of this Agreement. This Agreement is deemed to include all schedules and exhibits attached, which are made a part of this Agreement by this reference.
d. Unless specifically defined herein, capitalized terms shall have the meanings assigned to them under the applicable Tariff or Company’s Standard Terms and Conditions of Service and in the event of a conflict or inconsistency with any defined terms the applicable Tariff and/or Company’s Standard Terms and Conditions of Service will apply.
e. The rights and obligations of the Consumer under this Agreement may not be sold, assigned, or otherwise transferred without written approval from the Company.
[Signature page to follow]
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This Agreement shall not be binding or effective nor shall it constitute or be deemed to evidence a contract, agreement, arrangement or understanding between the Parties unless and until this Agreement has been executed by the Company.
**SPRE WATONGA OK, LLC**
By: */s/ Robert C. Bissell*
Signature (Authorized Representative)
Date: 1/5/24
Print Name: Robert C. Bissell
Title: CEO
Address: 2246 Roswell Road #108-851 Marietta, GA 30062 **OKLAHOMA GAS AND ELECTRIC COMPANY**
By: */s/ Keith Erickson*
Signature (Authorized Representative)
Date: 2/13/24
Print Name: Keith Erickson
Title: Vice President
Address: 321 W. Harvey, Oklahoma Cit, OK 73102
OG&E Internal Use Only:
Account Exec All, Exp. CTS Service Level
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---
## EXHIBIT 10.15
SEC source: [ex_902146.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902146.htm)
**Exhibit 10.15**
Contract No: **951020887-2** **Jeremy Ambrose**
Company Representative
**PUBLIC SERVICE COMPANY OF OKLAHOMA**
**GENERAL OFFICE** – **TULSA, OKLAHOMA**
**CONTRACT FOR ELECTRIC SERVICE**
This Contract made and entered into on **June 26, 2024**, by and between **Public Service Company of Oklahoma** (“Company”) and **T20 Manufacturing LLC** (“Customer”).
For Valuable Consideration, Customer and Company agree as follows:
1. **Sale and Purchase of Electricity Term:** Subject to the terms and conditions of this contract, Company shall sell and deliver to Customer and Customer shall receive and pay for electric service for an initial period of no more than 3 months (“Commissioning Period”), beginning on the date Service is made available, followed consecutively by an initial term of 12 months (“Term”) for the operation of a(n) **Data Center** located at **5555 S. 129th E. Ave. Tulsa, OK 74134**, with point of delivery of electric service at the **Load side of Primary Metering Cabinet near GPS (36.081, -95.830)**.
If Customer continues to take service after the expiration of the Term, this Contract shall continue in full force and effect year to year thereafter until terminated by notice from Customer or Company to the other thirty (30) days prior to the end of the month on which termination is desired. This Contract supersedes all prior agreements between the Customer and the Company for the service specified herein.
2. **Rate Schedule:** Each month Customer agrees to pay Company for all electrical service furnished by Company during the preceding month an amount determined in accordance with rate schedule **Large Power and Light - Primary Substation Service** provided at Company’s website until and unless said rate schedule is superseded by another applicable rate schedule either by order of the Oklahoma Corporation Commission or requested by Customer and approved by Company. The minimum monthly billing demand shall be as provided in the rate schedule unless otherwise provided in the Special Terms and Conditions in Paragraph 12 below.
3. **Metering of Service:** Company shall install and maintain, at a suitable location on the premises of Customer, or at other suitable location, meters and metering equipment necessary to determine the capacity required and the energy used by Customer, and applicable billing for electric service shall be determined by the registration of these meters.
4. **Payment of Bills:** If Customer fails to perform any of its contractual obligations, including the prompt payment of monthly bills, but not limited thereto, Company retains the right to pursue, at its own discretion, any or all of the following actions: notification of Customer’s tenants and/or other entity having a financial interest in said Customer’s delinquent account, and suspension of the delivery of energy. Company shall not be liable in any manner for loss or damage arising through such suspension. No such suspension shall interfere with the enforcement by Company of any other legal right or remedy, nor relieve Customer from liability to pay the minimum charge during any such suspension. No delay by Company in enforcing any of its rights shall be deemed a waiver of such rights nor shall waiver by Company of any default by Customer be deemed a waiver of any other or subsequent default; however, in case a fire or other casualty shall occur whereby Customer’s premises are rendered wholly unfit for the continued operation of Customer’s plant or business, billing for electric service shall be suspended until such time as the plant or premises have been reconditioned, and reoccupied by Customer for purpose of his business.
5. **Incorporation of Rules and Regulations:** This Contract and the service rendered under this Contract shall in all respects be subject to the rules, regulations and orders of all governmental authorities having jurisdiction of the subject matter of this Contract and shall be subject to the rules and regulations of Company governing terms and conditions of service, now or hereafter in effect and filed with the Oklahoma Corporation Commission. These rules and regulations shall be deemed a part of this Contract as if set out fully in this Contract. Copies of the rules and regulations may be obtained from Company at no charge. The rules and regulations include, without limitation, provisions regarding Customer’s use of service, Customer’s wiring and equipment, Company’s metering of service, Company’s rights in the event Customer fails to pay amounts due under this Contract, and Company’s rights of access and entry.
6. **Notices:** Any notice under this Contract that either Customer or Company may desire to give to the other shall be in writing and mailed by certified or personal mail delivered to the post office address of the other, as follows:
Public Service Company of Oklahoma **T20 Manufacturing LLC**
P.O. Box 201 **7030 South Yale Suite 504**
Tulsa, OK 741002-0201 **Tulsa, OK 74136**
Attention: Manager, Customer Services
Or to other such address as either Customer or Company shall designate by written notice to the other. Notice shall be deemed given upon actual receipt or upon refusal of receipt.
7. **Severability:** If any provision of this Contract is declared null and void by a court or regulatory body of competent jurisdiction, such determination shall not affect the remaining terms and conditions which shall remain in full force and effect.
8. **Service:** Service shall be furnished as 60-cycle alternating current at a nominal voltage of **7,620/13,200 volts, 3-Phase (Wye), 4-Wire**, with a capacity during the Term of approximately **25,000 kVA**. Service shall be metered at **7,620/13,200 volts, 3- Phase (Wye)**. After the expiration of the Term, the capacity will be the lower of the capacity in the Term or on 125% of the highest demand established in the previous 12 months. On receipt of written request from Customer for a change of service capacity, Company shall use commercially reasonable efforts to meet Customer’s additional capacity provided this increase in electrical usage does not constitute a material change in Company’s facilities. When additional facilities are required to provide service to Customer, Company shall not be bound under the terms and conditions of this Contract and a new contract setting out the changed conditions, rates and terms shall be mutually agreed upon by Customer and Company.
9. **Limitation of Company**’**s Liability:** Company shall not be liable for loss or damage caused by interruption or failure of service or delay in commencing service to accident or breakdown to plant, lines or equipment, strike, riot, act of God, or causes reasonably beyond Company’s control or due to shutdowns for reasonable periods to make repairs to generating or distributing equipment.
10. **Indemnification:** Each party agrees to and shall defend and indemnify and hold harmless the other party, that indemnified party’s parent company and all related or affiliated companies, and all officers, directors, shareholders, associates, employees, servants and agents of each, from and against all claims, losses, expenses, including attorney’s fees and costs, damages, demands, judgments, claims, causes of actions or suits which arise out of or relate to this agreement due to the negligent act or omission, willful misconduct, other fault of any nature of the indemnifying, its employees, agents, or subcontractors.
11. **Successors, Assigns:** This Contract shall bind and benefit the successors and assigns of Company and may be assigned by Customer with prior written consent of Company.
12. **Special Terms and Conditions:** Special terms and conditions as agreed upon by Customer and Company are as follows:
**In consideration of Customer**’**s requested capacity and in lieu of a cash contribution-in-aid-of-construction for the cost required to provide Service, Customer agrees to pay a monthly Rate Schedule billing amount (**“**Minimum Bill**”**) of $161,300.00 during the Term of the Contract for a total amount of not less than the number of months in the contract times the Minimum Bill amount. Upon written request from the Customer, Company may reduce the number of months in the Commissioning Period and start the Term of the Contract, beginning no sooner than the next billing period following Customer**’**s request. Prior to the expiration of the Term and pursuant to this Contract, if Customer elects to cancel this Contract for any reason, Customer shall pay to Company an amount equal to the Minimum Bill amount multiplied by the number of months remaining in the Term at the time of Contract termination. In the event Customer elects to cancel this Contract prior to the start of the Commissioning Period, it is agreed that Customer will reimburse the Company, within 60 days of the issuance of an invoice from Company, for all costs, both internal and external, incurred by Company, less the costs of any equipment or materials that Company agrees can be utilized by it for other customers or infrastructure improvements. After the expiration of the Term of this Contract, the monthly billing will be based on metered quantities and determined in accordance with the applicable rate schedule.**
**Pursuant to this contract, Customer agrees to provide a financial assurance of $1,935,600.00 (**“**Performance Guaranty**”**) to the Company in the form of cash or by either a surety bond or irrevocable bank letter of credit in a form acceptable by the Company. Upon request by the Customer on an annual basis, the Performance Guaranty shall be reduced as Customer meets the financial obligation of this Contract until it reaches a minimum amount of no less $1,842,000.00 where it shall be used as the security deposit. The Company reserves the right to use the Performance Guaranty if the Customer fails to meet any financial obligation with the Company. A Performance Guaranty secured in cash and held for at least 30 days will also earn interest at a rate established annually that is based on the U.S. Treasury security rates.**
**Company will initiate a project to make Service available upon the delivery of a new substation circuit switcher and two new breakers to be installed at PSO**’**s Ford Glass substation. The circuit switcher was ordered in 2023 and delivery is expected in September of 2024. After the installation, Company shall make commercially reasonable efforts to make Service available.**
**IN WITNESS WHEREOF**, Company and Customer have caused this Contract to be executed by their duly authorized representatives all as of the day and year first above written.
| Public Service Company of Oklahoma | T20 Manufacturing LLC |
| --- | --- |
| 6/27/2024 | 6/26/24 |
| (Date) | (Date) |
| Scott Ritz | Jeremy Henshaw |
| Director, Customer Services and Marketing | Partner |
Contract No: **951020887-2** **Jeremy Ambrose**
PSO Representative
**PUBLIC SERVICE COMPANY OF OKLAHOMA**
**GENERAL OFFICE** – **TULSA, OKLAHOMA**
**ADDENDUM TO CONTRACT FOR ELECTRIC SERVICE**
**FOR VOLTAGE FLICKER AND HARMONIC DISTORTION**
This Addendum is entered into on **June 26, 2024**, by and between Public Service Company of Oklahoma (“Company”) and **T20 Manufacturing LLC** (“Customer”), or his or its heirs, successors or assigns, hereafter called the Customer.
WHEREAS, the Company’s terms and conditions of service contained in the applicable tariffs indicate that the Customer shall not use the electrical service in a manner detrimental to other customers or in such a way as to impose unacceptable voltage fluctuations or harmonic distortions, and the parties hereby agree as follows:
1. **POINT OF COMPLIANCE:** The point where the Customer’s electric system connects to the Company’s electric system will be the point where compliance with the voltage flicker and harmonic distortion requirements are evaluated.
2. **VOLTAGE FLICKER CRITERIA:** The Company’s standards require that the voltage flicker occurring at the Point of Compliance shall remain below the Border Line of Visibility curve contained in clause 10.5 of IEEE Standard 519-1992: Figure 10-3--Maximum Permissible Voltage Fluctuations.
Notwithstanding these criteria, the Company agrees to permit the Customer to operate above the Border Line of Visibility curve unless and until the Company receives complaints from other customers or other operating problems arise for the Company, provided that the voltage flicker does not exceed the Border Lines of Irritation curve shown on Figure 10-3--Maximum Permissible Voltage Fluctuations in clause 10.5 of IEEE Standard 519-1992, whether or not complaints or operating problems occur. By so agreeing, the Company does not waive any rights it may have to strictly enforce its established voltage flicker criteria as measured/calculated in the future. All measurements shall be determined at the Point of Compliance and compliance with these criteria shall be determined solely by the Company.
If the Customer is operating above the Border Line of Visibility curve and complaints are received by the Company or other operating problems arise, or should the Customer’s flicker exceed the Border Lines of Irritation curve, the Customer agrees to take action, at the Customer’s expense, to comply with the Voltage Flicker Criteria. Corrective measures could include, but are not limited to, modifying production methods/materials or installing voltage flicker mitigation equipment necessary to bring the Customer’s operations into compliance with the Voltage Flicker Criteria.
If the Customer fails to take corrective action within a time deemed reasonable by Company (which may be immediately, depending upon the severity of the interference) after notice by the Company, the Company shall have such rights as currently provided for under its tariffs, which may include discontinuing service, until such time as the problem is corrected.
3. **HARMONIC DISTORTION CRITERIA:** The Customer shall design and operate its facility in compliance with the harmonic distortion criteria contained in IEEE Standard 519-1992.
The Customer agrees that if the operation of motors, appliances, devices or apparatus results in harmonic distortions in excess of the Company’s Harmonic Distortion Criteria, it will be the Customer’s responsibility to take action, at the Customer’s expense, to comply with such Criteria. If the Customer fails to take corrective action within a time deemed reasonable by Company (which may be immediately depending upon the severity of the interference) after notice by the Company, the Company shall have such rights as currently provided for under its tariffs, which may include discontinuing service, until such time as the problem is corrected.
| Public Service Company of Oklahoma | T20 Manufacturing LLC |
| --- | --- |
| 6/27/2024 | 6/26/24 |
| (Date) | (Date) |
| Scott Ritz | Jeremy Henshaw |
| Director, Customer Services and Marketing | Partner |
---
## EXHIBIT 10.17
SEC source: [ex_902147.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902147.htm)
**Exhibit 10.17**
**EQUIPMENT LEASE AGREEMENT**
THIS EQUIPMENT LEASE AGREEMENT (this “Lease”), entered into effective as of January 30, 2025 (the “Effective Date”), is by and between **ATFP CLOUD SPV I, LP**, a Georgia limited partnership (“Lessor”), with an address for notice hereunder at 3600 Dallas Highway, Suite 230-350, Marietta, Georgia 30064, and **THE CLOUD MINDERS INC.**, a Delaware profit corporation (“Lessee”), having an address for notice hereunder at 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165.
**1.** **LEASE AGREEMENT**. Lessor hereby leases to Lessee and Lessee hereby leases from Lessor all of the chattel property (the “Equipment”) described in one or more schedules attached hereto from time to time (collectively, the “Schedules”), which shall be sequentially numbered and, when attached hereto, shall be considered incorporated herein by this reference thereto. Each such Schedule must be made in writing and executed by both Lessor and Lessee, and each may be mutually updated and/or supplemented in writing from time to time upon execution by Lessor and Lessee. Whenever reference is made herein to the “Lease,” such reference shall be deemed to include each of the various Schedules identifying all items of Equipment, all of which, when taken together, constitute one undivided Lease of the Equipment.
**2.** **DELIVERY OF EQUIPMENT; ACCEPTANCE**. Lessor shall purchase the respective items of Equipment on or before the Commencement Date, as hereinafter defined, of each Schedule from vendors approved by Lessee; provided, however, that Lessor and Lessee may agree, from time to time, for Lessor to transfer to Lessee the purchase capital relating to certain items of Equipment and, in such an event, Lessee shall promptly purchase therewith such relevant items of Equipment, as agreed upon by the parties, and provide to Lessor proof of payment to the relevant vendor(s) of such Equipment within fifteen (15) calendar days following Lessee’s receipt of the respective purchase capital. Lessor agrees to turn over to Lessee all aspects of logistical control of vendor management with respect to the delivery and receipt of the Equipment to Lessee (and/or Lessee’s designee) in preparation for deployment at the location specified in Section 10, and Lessee shall be responsible for ensuring the delivery and receipt of the Equipment in all respects. Lessee agrees to inspect the Equipment and to execute and deliver to Lessor an “Acknowledgment and Acceptance of Equipment by Lessee” notice, in a form suitable to Lessor, in Lessor’s sole reasonable determination, after the Equipment has been delivered to Lessee (and/or Lessee’s designee) and after Lessee is satisfied that the Equipment is satisfactory in every respect, in Lessee’s sole reasonable determination. Lessee expressly acknowledges that the Equipment is being leased to Lessee solely for commercial or business purposes and not for personal, family or household purposes. Lessee hereby authorizes Lessor to insert in the Schedules serial numbers or other identifying data with respect to the Equipment.
**3.** **INSTALLATION OF EQUIPMENT**. Lessee agrees to have Lessee’s customization center(s) deliver the Equipment, at Lessee’s sole expense, to the location specified in Section 10, and to properly install, in accordance with manufacturer’s guidelines and any local state, county and/or city ordinance, the Equipment promptly upon delivery. If the Equipment fails to function properly when tested, Lessee agrees to take all necessary action(s), at its sole expense, to repair any Equipment failures or faults so that the Equipment is fully operational after installation or have such Equipment returned to the manufacturer to obtain properly operating Equipment.
EQUIPMENT LEASE AGREEMENT
Page 1 of 8
**4.** **ASSIGNMENT BY LESSEE PROHIBITED**. Without Lessor’s prior written consent, Lessee shall not (i) assign its interest in this Lease, (ii) pledge, encumber or otherwise transfer its interest in this Lease, (iii) sublease the Equipment (or any interest therein), (iv) cause or permit any lien to be placed upon the Equipment (or any interest therein), or (v) dispose of the Equipment.
**5.** **ASSIGNMENT BY LESSOR LIMITED**. Lessor may not assign this Lease Agreement to any party other than its Senior Creditor, as hereinafter defined, without the written consent of Lessee. Subject to the foregoing, this Lease inures to the benefit of and is binding upon the successors in interest and/or permitted assigns of the Lessor.
**6.** **COMMENCEMENT; RENTAL PAYMENTS; TERM**.
**(a)** **Commencement**. This Lease shall commence on the Effective Date upon proper execution and deliver hereof by Lessor and Lessee.
**(b)** **Rental Payment**. The “Monthly Payment Amount,” in the amount respectively provided in each of the Schedules, shall be paid in on a monthly basis commencing on the “Commencement Date,” as respectively provided in each of the Schedules, and shall continue on the first (1st) day of each subsequent calendar month until the “Final Payment Date,” as respectively provided in each of the Schedules, subject to any Schedule extensions provided under Section 6(d).
**(c)** **Term**. The term of this Lease shall commence on the Effective Date and shall continue until duly terminated in accordance with Section 13.
**(d)** **Schedule Extensions**. Following payment of the final payment due pursuant to each Schedule respectively, the term of each such Schedule shall automatically be extended on a month-to-month basis unless and until (i) the respective Purchase Option, as defined in Section 6(e) has been exercised by Lessee, in accordance with Section 6(e), (ii) Lessee declines to affect its then available Purchase Option, in accordance with Section 6(f), or (iii) this Lease is otherwise terminated in accordance with Section 13; provided, however, that the Monthly Payment Amount for each such renewal period shall be reduced to One & 00/100 U.S. Dollars (U.S. $1.00).
**(e)** **Purchase Option**. With respect to each Schedule, once Lessee has completed five (5) years’ worth of Monthly Rental Payments, Lessee may elect, at its sole option, to purchase the Equipment set forth on such Schedule (each, a “Purchase Option”) by paying to Lessor an amount equal to the then fair market value of the Equipment relating to such Schedule. Upon payment of the Purchase Option amount, title in and to all Equipment relating to such Schedule shall transfer from Lessor to Lessee, and the Parties shall enter into any and all agreements and/or instruments reasonably required to affect and/or evidence such transfer (e.g., without limitation, a bill of sale).
**(f)** **Purchase Option Declination**. With respect to each Schedule, once Lessee has completed five (5) years’ worth of Monthly Rental Payments, Lessee may elect, at its sole option, to decline its Purchase Option relating to such Schedule and respectively terminate such Schedule. Upon such declination, Lessee shall make arrangements, at its sole expense (i.e., including, without limitation, disassembly, packing, preparation for shipping, insuring and shipping), to surrender and return to Lessor the Equipment relating to such Schedule, and Lessee shall, in such an event, be responsible for the Equipment until it is delivered to and accepted by Lessee.
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**7.** **SECURITY DEPOSIT**. Lessor hereby agrees to waive any requirement that Lessee place and/or maintain a security deposit for the Equipment.
**8.** **LIMITED PREARRANGED AMENDMENTS; SPECIFIC POWER OF ATTORNEY**. Anything provided in this Lease to the contrary notwithstanding, in the event it is necessary to amend the terms of this Lease or the terms of any Schedule to reflect a change in one or more items of the Equipment, Lessee agrees that any such amendment shall be described in a letter from Lessor to Lessee, and unless, within fifteen (15) calendar days after the date of such letter, Lessee objects thereto in a writing delivered to Lessor, this Lease and any affected Schedules shall be deemed amended and such amendments shall be incorporated herein/therein as if originally set forth herein/therein. Further, Lessee authorizes Lessor or its designee to file a Uniform Commercial Code financing statement listing Lessee as debtor/lessee without Lessee’s signature, in form and content and from time to time as accurately reflects the Equipment. Lessee further grants to Lessor a specific power of attorney for Lessor to sign, endorse or negotiate any instrument representing proceeds from any policy of insurance covering the Equipment, as more particularly provided under Section 14.
**9.** **LESSEE**’**S REPRESENTATION**. Lessee represents that its exact legal name, state of formation, location of its primary business office have been correctly identified herein to Lessor; further, Lessee hereby covenants and agrees to promptly notify Lessor of any change to any of the foregoing.
**10..** **USE; EQUIPMENT LOCATION**. Lessee shall use the Equipment in a careful manner for its manufacturer-intended purposes, shall comply with all laws relating to its possession, use and maintenance, and shall not make any alterations, additions or improvements to the Equipment not contemplated under this Lease without Lessor’s prior written consent. The Equipment shall be kept at Lessee’s facility located at 1130 Powers Ferry Place, Marietta GA 30067 and shall not be removed without Lessor’s prior written consent.
**11.** **OWNERSHIP; PERSONALITY**. The Equipment is, and shall remain, the property of Lessor, and Lessee shall have no right, title or interest therein or thereto except as expressly set forth in this Lease. The Equipment shall remain chattel property even though it may be installed in or attached to real property.
**12.** **SURRENDER**. By this Lease, Lessee acquires no ownership rights in the Equipment, subject only to its future Purchase Option to purchase same. Upon the expiration or termination of any Schedules or this Lease, provided that Lessee has not exercised its Purchase Option, Lessor, at its expense, shall arrange for the removal of the equipment to include any disassembly, packing and preparation for shipping and shipping. In the event of any default pursuant to Section 20, Lessor shall make arrangements but Lessee shall pay, at its sole expense, including, without limitation, disassembly, packing, preparation for shipping, insuring and shipping, for the surrender and return the Equipment to Lessor, and Lessee shall, in such an event, be responsible for the Equipment until it is delivered to and accepted by Lessee.
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**13.** **TERMINATION**.
**(a)** Following the one (1) year anniversary of the Effective Date, Lessee may, at its sole option, terminate this Lease by paying to Lessor a “Termination Fee” in an amount that, when added together with the sum of all Monthly Payment Amounts paid to Lessor under all of the Schedules to this Lease, produces a twelve percent (12%) extended internal rate of return (“XIRR”) to Lessor through the date on which such Termination Fee is paid**.** For clarity and the avoidance of doubt, the XIRR calculation shall be used for the internal rate of return calculation required under this Section 13(a); XIRR is a financial metric that calculates the annualized rate of return for investments with irregular cash flows, as such, it is the same calculation that Microsoft Excel uses within its XIRR function. Upon payment of the Termination Fee, title in and to all Equipment shall transfer from Lessor to Lessee, and the Parties shall enter into any and all agreements and/or instruments reasonably required to affect and/or evidence such transfer (e.g., without limitation, a bill of sale).
**(b)** This Lease shall be considered terminated upon each and every Schedule relating to this Lease expiring and all Equipment is either (i) purchased by Lessee pursuant to its Purchase Options under Section 6(e), and/or (ii) returned to Lessor in accordance with Section 6(f)**.**
**(c)** Anything contained in this Section 13 to the contrary notwithstanding, the Parties may agree, in writing, (i) that, at the expiration of the Term, this Lease may be continued on such terms as the Parties may hereafter agree, or (ii) that this Lease shall be terminated prior to the expiration of the Term**.**
**14.** **LOSS AND DAMAGE; INSURANCE**.
**(a)** Property Insurance**.** Lessee shall bear the entire risk of loss, theft, damage or destruction of the Equipment from any cause whatsoever. Lessee shall provide and maintain insurance policy(ies) against loss, theft, damage or destruction of the Equipment in an amount not less than the full replacement value of the Equipment, under which Lessor shall be named as the primary loss payee under each such policy’s loss payee endorsement. For the avoidance of doubt, any such loss does not relieve Lessee of any obligation under this Lease. In the event of damage to or loss of any item of Equipment, Lessee shall immediately notify Lessor, in writing. If insurance proceeds are used to fully comply with the Lessee’s obligations under this Lease, any balance of any such proceeds shall thence go to Lessee upon satisfaction if full of such Lessee obligations.
**(b)** Liability Insurance**.** Lessee shall also provide and maintain comprehensive general all-risk liability insurance, including, without limitation, product liability coverage, insuring Lessee, and Lessor as an additional insured with a severability of interest endorsement or its equivalent, against any and all loss or liability for damages either to persons or otherwise, which might result from or happen in connection with the condition, use or operation of the Equipment, with such limits and with an insurer as are satisfactory to Lessor, in Lessor’s sole reasonable opinion. Each such policy shall expressly provide that said insurance as to Lessee and its assigns shall not be invalidated by any act, omission or neglect of Lessor and cannot be canceled without thirty (30) days’ prior written notice to Lessor.
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**(c)** Certificates of Insurance; Force Placement. As to each policy required under this Section 14, Lessee shall furnish to Lessor a certificate of insurance from the insurer, which certificate shall evidence the insurance coverage required by this Section 14 and shall designate Lessor as loss payee and/or additional insured, as applicable. Lessor shall have no obligation to ascertain the existence or adequacy of insurance, or to provide any insurance coverage for the Equipment or for Lessee’s benefit. Lessor’s lack of insistence on Lessee’s compliance with this Section 14(c), with respect to providing such certificates to Lessor, shall not relieve Lessor of its obligations under this Section 14. If Lessee fails to procure or maintain said insurance, Lessor shall have the right, but shall not be obligated, to affect such insurance. If Lessor makes such insurance payment, it shall notify Lessee of such payment, and Lessee shall repay to Lessor the amount thereof with thirty (30) calendar days after such notice is provided to Lessee or interest at a rate of eighteen percent (18%) per annum shall begin accruing on such amounts until paid in full by Lessee, and Lessee shall further owe to Lessor such additional amounts under this Lease.
**15.** **LIENS; TAXES**. Except for its first-position lienholder (the “Senior Creditor”), if any, Lessor shall keep the Equipment free and clear of all levies, liens and encumbrances; provided, however, that Lessee shall be responsible for timely payment of all taxes and fees (local, state and federal) that may now or hereafter be placed on the leasing, rental, sale, possession or use of the Equipment, including, all taxes on or measured by Lessee’s net income. Lessee shall pay any chattel/personal property tax owed on the Equipment. If Lessor is billed for such charges or taxes or if Lessee fails to pay such charges or taxes, Lessor may, in its sole discretion, make payment in respect thereof. If Lessor makes such tax payment, it shall notify Lessee of such payment, and Lessee shall repay to Lessor the amount thereof with thirty (30) calendar days after such notice is provided to Lessee or interest at a rate of eighteen percent (18%) per annum shall begin accruing on such amounts until paid in full by Lessee, and Lessee shall further owe to Lessor such additional amounts under this Lease.
**16.** **INDEMNITY**. Lessee shall indemnify Lessor against any claims, actions, damages or liabilities, including, without limitation, all attorneys’ fees, arising out of or connected with its transportation and use of, and/or lease interest in the Equipment. Such indemnification shall survive the expiration, cancellation or termination of this Lease. Lessee waives any immunity Lessee may have under any industrial insurance act with regard to its indemnification obligation hereunder.
**17.** **GUARANTY**. Intentionally omitted.
**18.** **SERVICE CHARGES**. Lessor agrees that the Equipment is leased without any additional service charges or fees, unless otherwise expressly set forth in this Lease.
**19.** **TIME OF ESSENCE**. Time is of the essence with respect to each provision of this Lease, and this provision shall not be impliedly waived by the acceptance on occasion of late or defective performance, as more particularly provided, without exclusion, under Section 25.
**20.** **DEFAULT**. Lessee shall be in default of this Lease if:
**(a)** Lessee fails to perform, keep and/or observe any of the obligations, covenants, terms, conditions and agreements of this Lease (including each and every Schedule attached hereto) to be performed, kept and/or observed by Lessee under this Lease, and such failure shall continue for a period of ten (10) calendar days after the date Lessee (including its officers and directors) knew or reasonably should have known of such failure;
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**(b)** the Equipment, or any part thereof, shall be subject to any lien, levy, seizure, assignment, transfer, bulk transfer, encumbrance, application, attachment, execution, sublease or sale, without prior written consent of Lessor; and/or
**(c)** Lessee fails to perform, keep and/or observe any of the obligations, covenants, terms, conditions and agreements of the Consulting Agreement, as incorporated herein by reference thereto, to be performed, kept and/or observed by Lessee under said agreements, and such failure shall continue for a period of ten (10) calendar days after the date Lessee (including its officers and directors) knew or reasonably should have known of such failure**.**
**21.** **REMEDIES**. No right or remedy conferred upon or reserved to Lessor is exclusive of any other right or remedy herein, by law or by equity, each as provided or permitted, but each shall be cumulative of every other right or remedy provided herein or by law, by equity, by statute or otherwise, whether now existing or hereafter arising, and may be enforced concurrently therewith or from time to time. No single or partial exercise by Lessor of any such right(s) or remedy(ies) shall preclude any other or further exercise of any other right(s) or remedy(ies). If Lessee is in default, Lessor, with or without notice to Lessee, shall have the right to exercise any one or more of the following remedies, concurrently or separately, and without any election of remedies being deemed to have been made:
**(a)** Lessor may seek an injunction or other equitable relief; and/or
**(b)** Lessor may recover from Lessee (and/or Guarantor) direct, incidental, consequential and/or special damages, plus any and all reasonable costs incurred in respect of the enforcement of such remedy(ies), including, without limitation, attorneys’ fees**.**
**22.** **NOTICES**. Each and every notice required or permitted to be given under this Agreement must be given in writing, and shall be deemed given when (i) personally delivered, (ii) on the third (3rd) business day after mailing by USPS registered or certified mail, postage prepaid, with return receipt requested, (iii) on the immediately following business day after confirmation of delivery from any nationally recognized overnight courier (e.g., without limitation, FedEx or UPS), or (iv) on the immediately following business day after being sent via electronic mail (unless receipt thereof is sooner acknowledge by the recipient via reply email). Notice to any party hereto is valid if sent to it at such party’s address (mailing or electronic mail, as applicable) set forth on the signature page hereof; provided, that, each party hereto may change its address for notice hereunder by giving written notice to the other party hereto in accordance with the provisions of this Section 22.
**23.** **SEVERABILITY**. If any provision of this Lease is held by a court of competent jurisdiction to be invalid or unenforceable, for any reason, the remaining provisions hereof shall continue to be valid and enforceable to the maximum extent permitted under applicable laws. Further, if any court of competent jurisdiction finds that any provision of this Lease is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written as so limited, shall thereafter be construed and enforced as such.
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**24.** **NEUTRAL INTERPRETATION**. Any rule of law or legal decision that would require interpretation of any ambiguities in this Lease against a particular party hereto is not applicable to this Lease and is hereby expressly waived. The provisions of this Lease shall be interpreted in a reasonable, neutral manner to affect the intentions of the parties hereto and the purposes of this Lease.
**25.** **ENTIRE AGREEMENT; AMENDMENT**. This Lease is intended to constitute a valid and enforceable legal instrument. This Lease, together with the Schedules and each agreement and/or other attachment incorporated herein by reference, constitutes the entire agreement between Lessor and Lessee with respect to the Equipment and the subject matter of this Lease. No provision of this Lease shall be amended unless in writing signed by a duly authorized representative of Lessor and Lessee.
**26.** **WAIVER**. Lessor’s failure, entirely or from time to time, to insist on compliance or enforcement of any provision of this Lease shall not affect its validity or enforceability or constitute a waiver, by Lessor, of future enforcement of that provision or of any other provision of this Lease at a later time.
**27.** **CHOICE OF LAW; JURISDICTION**. This Lease shall not be effective until signed by Lessor at its offices in Marietta, Georgia. This Lease shall be considered to have been made in the state of Georgia and shall be interpreted under and construed in accordance with the laws and regulations of the state of Georgia, without respect to its conflict of law principles. Lessee agrees to jurisdiction in the state of Georgia in any action, suit or proceeding arising out of this Lease, and concedes that it transacted business in the state of Georgia by entering into this Lease. In the event of legal action to enforce this Lease, Lessee agrees that venue may be laid in either Cobb or Fulton County, Georgia, as elected by Lessor, and waives any and all defenses in respect of and hereby agrees not to contest choice of law, jurisdiction and venue provisions of this Section 27.
**28.** **EXECUTION; EFFECTIVENESS**. This Lease may be executed in any number of, and by different parties hereto on, separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall collectively constitute one and the same agreement. Any signature delivered by a party hereto to the other party hereto via facsimile, electronic mail or similar electronic transmission shall be deemed to be an original signature hereto. Further, this Lease may be executed electronically or digitally and, in such event, shall serve as a binding original as if executed by hand.
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IN WITNESS WHEREOF, each of the undersigned, first intending to be legally bound, has duly executed and delivered this Agreement as of the Effective Date.
Lessor:
**ATFP CLOUD SPV I, LP**
By ALDER TECHNOLOGY FUNDING PARTNERS, LLC, its General Partner
By: */s/ Patrick Gahan*
**Patrick Gahan, Manager**
- Address for notice hereunder: 3600 Dallas Hwy #230-350, Marietta, GA 30064;
- Attn: Patrick Gahan
- E-mail address for notice hereunder:
Lessee:
**THE CLOUD MINDERS INC.**
By: */s/ Ian Gerard* [Corporate Seal]
**Ian Gerard, Director & CEO**
- Address for notice hereunder: 185 Faro Court, Unit 2, Shepherdsville
- Kentucky 40165;
- Attn: Ian Gerard
- E-mail address for notice hereunder:
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---
## EXHIBIT 10.18
SEC source: [ex_902223.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902223.htm)
**Exhibit 10.18**
**EQUIPMENT LEASE AGREEMENT**
THIS LEASE AGREEMENT (this “Lease”), entered into effective as of December 12, 2024 (the “Effective Date”), is by and between **ATFP CLOUD SPV IV, LP**, a Georgia limited partnership (“Lessor”), with an address for notice hereunder at 3600 Dallas Highway, Suite 230- 350, Marietta, Georgia 30064, and **TCM CLOUD 1, LLC**, a Georgia limited liability company (“Lessee”), having an address for notice hereunder at 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165 (and, additionally, the Guarantor, as hereinafter defined and provided).
**1.** **LEASE AGREEMENT**. Lessor hereby leases to Lessee and Lessee hereby leases from Lessor all of the chattel property (the “Equipment”) described in one or more schedules attached hereto from time to time (collectively, the “Schedules”), which shall be sequentially numbered and, when attached hereto, shall be considered incorporated herein by this reference thereto. Each such Schedule must be made in writing and executed by both Lessor and Lessee, and each may be mutually updated and/or supplemented in writing from time to time upon execution by Lessor and Lessee. Whenever reference is made herein to the “Lease,” such reference shall be deemed to include each of the various Schedules identifying all items of Equipment, all of which, when taken together, constitute one undivided Lease of the Equipment.
**2.** **DELIVERY OF EQUIPMENT; ACCEPTANCE**. Lessor shall purchase the respective items of Equipment on or before the Commencement Date, as hereinafter defined, of each Schedule from vendors designated by Lessee, as provided in Schedule V, and Lessor agrees to turn over to Lessee all aspects of logistical control of vendor management with respect to the delivery and receipt of the Equipment to the Lessee (and/or Lessee’s designee) in preparation for deployment at the location specified in Section 10, and Lessee shall be responsible for ensuring the delivery and receipt of the Equipment in all respects. Lessee agrees to inspect the Equipment and to execute and deliver to Lessor an “Acknowledgment and Acceptance of Equipment by Lessee” notice, in a form suitable to Lessor, in Lessor’s sole reasonable determination, after the Equipment has been delivered to Lessee (and/or Lessee’s designee) and after Lessee is satisfied that the Equipment is satisfactory in every respect, in Lessee’s sole reasonable determination. Lessee expressly acknowledges that the Equipment is being leased to Lessee solely for commercial or business purposes and not for personal, family or household purposes. Lessee hereby authorizes Lessor to insert in the Schedules serial numbers or other identifying data with respect to the Equipment.
**3.** **INSTALLATION OF EQUIPMENT**. Lessee agrees to have Lessee’s customization center(s) deliver the Equipment, at Lessee’s sole expense, to the location specified in Section 10, and to properly install, in accordance with manufacturer’s guidelines and any local state, county and/or city ordinance, the Equipment promptly upon delivery. If the Equipment fails to function properly when tested, Lessee agrees to take all necessary action(s), at its sole expense, to repair any Equipment failures or faults so that the Equipment is fully operational after installation.
**4.** **ASSIGNMENT BY LESSEE PROHIBITED**. Without Lessor’s prior written consent, Lessee shall not (i) assign its interest in this Lease, (ii) pledge, encumber or otherwise transfer its interest in this Lease, (iii) sublease the Equipment (or any interest therein), (iv) cause or permit any lien to be placed upon the Equipment (or any interest therein), or (v) dispose of the Equipment.
EQUIPMENT LEASE AGREEMENT Schedule V
**5.** **ASSIGNMENT BY LESSOR LIMITED**. Lessor may not assign this Lease Agreement to any party other than its Senior Creditor, as hereinafter defined, without the written consent of Lessee. Subject to the foregoing, this Lease inures to the benefit of and is binding upon the successors in interest and/or permitted assigns of the Lessor.
**6.** **COMMENCEMENT; RENTAL PAYMENTS; TERM**.
**(a)** **Commencement**. This Lease shall commence on the Effective Date upon proper execution and deliver hereof by Lessor and Lessee.
**(b)** **Rental Payment**. The “Monthly Rental Payment” with respect to each of the Schedules shall be paid in arears commencing on the first (1st) calendar day of the calendar month immediately following the third mensiversary of each “Commencement Date,” as respectively provided in each of the Schedules, in the amount per calendar month respectively set forth in the Schedules. The Monthly Rental Payment shall thereafter be made on each mensiversary of the respective initial Monthly Payment due date for the immediately following forty-seven (47) calendar months. Anything to the contrary provided in this Section 6(b) notwithstanding, the accelerated Lease payment obligations provided under that certain Second Amended and Restated Profit Share Agreement, dated effective as of December 12, 2024, by and among Lessee, Lessor and the several other ATFP parties (as may have been and/or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Profit Share Agreement”) (e.g., without exclusion, Section 2 thereof) shall control and take precedence over any deferred Monthly Rental Payment provisions provided herein.
**(c)** **Term**. The term of this Lease (the “Term”) shall commence on the Effective Date and shall continue until the forty-eighth (48th) mensiversary of the first payment due for each Commencement Date set forth on the Schedules, subject to all renewal(s) of the Term provided under Section 6(d).
**(d)** **Term Extensions**. Following the final calendar day of the Term, as provided under Section 6(c), the Term shall automatically be extended on a month-to-month basis unless and until (i) all Purchase Options have been exercised by Lessee, in accordance with Section 6(e), or (ii) this Lease is otherwise terminated Lessor, in accordance with Section 13; provided, however, that the Monthly Rental Payment for each such renewal period shall be reduced to One & 00/100 U.S. Dollars (U.S. $1.00).
**(e)** **Purchase Option**. With respect to each Schedule of Equipment, once the Lessee has completed five (5) years of Profit sharing, in accordance with the Profit Share Agreement, Lessee may elect, at its sole option, to purchase the Equipment set forth on such Schedule (each, a “Purchase Option”) by paying to Lessor an amount equal to the greater of (i) a one-time payment that, when combined with the aggregate Profit share distributions made by Lessee under the Profit Share Agreement over and above the Monthly Rental Payments required under this Lease as of such date, is equal to the then fair market value, or (ii) a one-time payment equal to fifty percent (50%) of the aggregate of the Monthly Rental Payments (inclusive of any future modification thereto) for the Equipment set forth on such Schedule. Upon Lessee’s exercise of a Purchase Option, Lessor shall no longer have rights to any further Profit Share Distributions under the Profit Share Agreement with respect to such purchased Equipment.
**7.** **SECURITY DEPOSIT**. Lessor hereby agrees to waive any requirement that Lessee place and/or maintain a security deposit for the Equipment.
**8.** **LIMITED PREARRANGED AMENDMENTS; SPECIFIC POWER OF ATTORNEY**. Anything provided in this Lease to the contrary notwithstanding, in the event it is necessary to amend the terms of this Lease or the terms of any Schedule to reflect a change in one or more items of the Equipment, Lessee agrees that any such amendment shall be described in a letter from Lessor to Lessee, and unless, within fifteen (15) calendar days after the date of such letter, Lessee objects thereto in a writing delivered to Lessor, this Lease and any affected Schedules shall be deemed amended and such amendments shall be incorporated herein/therein as if originally set forth herein/therein. Further, Lessee authorizes Lessor or its designee to file a Uniform Commercial Code financing statement without Lessee’s signature, in form and content and from time to time as Lessor deems proper, in Lessor’s sole discretion, listing Lessee as debtor/lessee. Lessee further grants to Lessor a specific power of attorney for Lessor to sign, endorse or negotiate for Lessor’s benefit any instrument representing proceeds from any policy of insurance covering the Equipment, as more particularly provided under Section 14.
**9.** **LESSEE**’**S REPRESENTATION**. Lessee represents that its exact legal name, state of formation, location of its chief executive office and/or its place of residence (as applicable) have been correctly identified herein to Lessor; further, Lessee hereby covenants and agrees to promptly notify Lessor of any change to any of the foregoing.
**10.** **USE; EQUIPMENT LOCATION**. Lessee shall use the Equipment in a careful manner for its manufacturer-intended purposes, shall comply with all laws relating to its possession, use and maintenance, and shall not make any alterations, additions or improvements to the Equipment not contemplated under this Lease without Lessor’s prior written consent. The Equipment shall be kept at Lessee’s facility located at 5555 S. 129th E. Avenue, Tulsa, OK 74134 and shall not be removed without Lessor’s prior written consent.
**11.** **OWNERSHIP; PERSONALITY**. The Equipment is, and shall remain, the property of Lessor, and Lessee shall have no right, title or interest therein or thereto except as expressly set forth in this Lease. The Equipment shall remain chattel property even though it may be installed in or attached to real property.
**12.** **SURRENDER**. By this Lease, Lessee acquires no ownership rights in the Equipment, subject only to its future Purchase Option to purchase same. Upon the expiration or termination of any Schedules or this Lease, provided that Lessee has not exercised its Purchase Option, Lessor, at its expense, shall arrange for the removal of the equipment to include any disassembly, packing and preparation for shipping and shipping. In the event of any default pursuant to Section 20, Lessor shall make arrangements but Lessee shall pay, at its sole expense, including, without limitation, disassembly, packing, preparation for shipping, insuring and shipping, for the surrender and return the Equipment to Lessor, and Lessee shall, in such an event, be responsible for the Equipment until it is delivered to and accepted by Lessee.
**13.** **TERMINATION**.
**(a)** Following the one (1) year anniversary of the Effective Date, Lessee may, at its sole option, terminate this Lease by paying to Lessor an amount equal to (x) the sum of all remaining Monthly Rental Payments due under each Schedule to this Lease (through the initial “Schedule Expiration Date” set forth on each Schedule, respectively), plus (y) a “Termination Fee” that, when added together with the sum of all Monthly Rental Payments paid to Lessor under all of the Schedules to this Lease, produces a twenty-two and (1/2) percent (22.5%) internal rate of return to Lessor through the date on which such Termination Fee is paid. For clarity and the avoidance of doubt, the extended internal rate of return calculation (“XIRR”) shall be used for the internal rate of return calculation required under this Section 13(a); XIRR is a financial metric that calculates the annualized rate of return for investments with irregular cash flows, as such, it is the same calculation that Microsoft Excel uses within its XIRR function.
**(b)** At the expiration of the Term, as may be duly extended pursuant to Section 6(d) and provided Lessee declines to affect the entirety of its then available Purchase Options in accordance with Section 6(e), Lessor may provide notice to Lessor of its intent to terminate this Lease. Thereafter, Lessee shall make arrangements, at its sole expense, including, without limitation, disassembly, packing, preparation for shipping, insuring and shipping, to surrender and return the Equipment to Lessor, and Lessee shall, in such an event, be responsible for the Equipment until it is delivered to and accepted by Lessee.
**(c)** Anything contained in this Section 13 to the contrary notwithstanding, the Parties may agree, in writing, (i) that, at the expiration of the Term, this Lease may be continued on such terms as the Parties may hereafter agree, or (ii) that this Lease shall be terminated prior to the expiration of the Term.
**14.** **LOSS AND DAMAGE; INSURANCE**.
**(a)** **Property Insurance**. Lessee shall bear the entire risk of loss, theft, damage or destruction of the Equipment from any cause whatsoever. Lessee shall provide and maintain insurance policy(ies) against loss, theft, damage or destruction of the Equipment in an amount not less than the full replacement value of the Equipment, under which Lessor shall be named as the primary loss payee under each such policy’s loss payee endorsement. For the avoidance of doubt, any such loss does not relieve Lessee of any obligation under this Lease. In the event of damage to or loss of any item of Equipment, Lessee shall immediately notify Lessor, in writing. Lessee shall have five (5) business day following such event of damage or loss to either repair or, if the Equipment is not repairable, replace the damaged Equipment at Lessee’s sole expense. If insurance proceeds are used to fully comply with the Lessee’s obligations under this Lease, any balance of any such proceeds shall thence go to Lessee upon satisfaction if full of such Lessee obligations.
**(b)** **Liability Insurance**. Lessee shall also provide and maintain comprehensive general all-risk liability insurance, including, without limitation, product liability coverage, insuring Lessee, and Lessor as an additional insured with a severability of interest endorsement or its equivalent, against any and all loss or liability for damages either to persons or otherwise, which might result from or happen in connection with the condition, use or operation of the Equipment, with such limits and with an insurer as are satisfactory to Lessor, in Lessor’s sole reasonable opinion. Each such policy shall expressly provide that said insurance as to Lessee and its assigns shall not be invalidated by any act, omission or neglect of Lessor and cannot be canceled without thirty (30) days’ prior written notice to Lessor.
**(c)** **Certificates of Insurance; Force Placement**. As to each policy required under this Section 14, Lessee shall furnish to Lessor a certificate of insurance from the insurer, which certificate shall evidence the insurance coverage required by this Section 14 and shall designate Lessor as loss payee and/or additional insured, as applicable. Lessor shall have no obligation to ascertain the existence or adequacy of insurance, or to provide any insurance coverage for the Equipment or for Lessee’s benefit. Lessor’s lack of insistence on Lessee’s compliance with this Section 14(c), with respect to providing such certificates to Lessor, shall not relieve Lessor of its obligations under this Section 14. If Lessee fails to procure or maintain said insurance, Lessor shall have the right, but shall not be obligated, to affect such insurance. If Lessor makes such insurance payment, it shall notify Lessee of such payment, and Lessee shall repay to Lessor the amount thereof with thirty (30) calendar days after such notice is provided to Lessee or interest at a rate of eighteen percent (18%) per annum shall begin accruing on such amounts until paid in full by Lessee, and Lessee shall further owe to Lessor such additional amounts under this Lease.
**15.** **LIENS; TAXES**. Except for its first-position lienholder (the “Senior Creditor”), if any, Lessor shall keep the Equipment free and clear of all levies, liens and encumbrances; provided, however, that Lessee shall be responsible for timely payment of all taxes and fees (local, state and federal) that may now or hereafter be placed on the leasing, rental, sale, possession or use of the Equipment, including, all taxes on or measured by Lessee’s net income. Lessee shall pay any chattel/personal property tax owed on the Equipment. If Lessor is billed for such charges or taxes or if Lessee fails to pay such charges or taxes, Lessor may, in its sole discretion, make payment in respect thereof. If Lessor makes such tax payment, it shall notify Lessee of such payment, and Lessee shall repay to Lessor the amount thereof with thirty (30) calendar days after such notice is provided to Lessee or interest at a rate of eighteen percent (18%) per annum shall begin accruing on such amounts until paid in full by Lessee, and Lessee shall further owe to Lessor such additional amounts under this Lease.
**16.** **INDEMNITY**. Lessee shall indemnify Lessor against any claims, actions, damages or liabilities, including, without limitation, all attorneys’ fees, arising out of or connected with its transportation and use of, and/or lease interest in the Equipment. Such indemnification shall survive the expiration, cancellation or termination of this Lease. Lessee waives any immunity Lessee may have under any industrial insurance act with regard to its indemnification obligation hereunder.
**17.** **GUARANTY**. THE CLOUD MINDERS, INC., a Delaware profit corporation (the “Guarantor”), does hereby absolutely, unconditionally and irrevocably guarantee to Lessor, as if the Guarantor was the Lessee, the full, faithful and prompt performance of all obligations imposed on Lessee by the terms of this Lease, including, without limitation, (i) payment of any and all Monthly Rent Payments and other amounts whatsoever payable by Lessee under this Lease and/or the Profit Share Agreement, and (ii) performance and observance of all the covenants, terms, conditions and agreements of this Lease and the Profit Share Agreement to be performed and observed by Lessee hereunder and/or thereunder. The guaranty created hereby shall be enforceable by Lessor in an action against Guarantor without the necessity of any suit, action or proceeding by Lessor of any kind or nature whatsoever against Lessee or other co-guarantor, if any, without the necessity of any notice to Guarantor of Lessee’s default or breach under this Lease or the Profit Share Agreement, and without the necessity of any other notice or demand to Guarantor to which Guarantor might otherwise be entitled, all of which notice Guarantor hereby expressly waives. Guarantor hereby agrees that the validity of the guaranty created hereby and the obligations of Guarantor hereunder shall not be terminated, affected, diminished or impaired by reason of the assertion or the failure to assert by Lessor against Lessor or other co-guarantor, if any, any of the rights or remedies reserved to Lessor pursuant to the provisions of this Lease or the Profit Share Agreement, or any other remedy or right that Lessee may have at law or in equity or otherwise. The obligations of Guarantor hereunder shall in no way be affected, modified or diminished by reasons of any assignment, renewal, modification or extension of this Lease or the Profit Share Agreement, none of which shall require the permission of Guarantor. All of Lender's rights and remedies under this Lease (including the guaranty created hereby) or the Profit Share Agreement are intended to be distinct, separate and cumulative, and no such right or remedy herein or therein is intended to be the exclusion of or a waiver of any other.
**18.** **SERVICE CHARGES**. Lessor agrees that the Equipment is leased without any additional service charges or fees, unless otherwise expressly set forth in this Lease.
**19.** **TIME OF ESSENCE**. Time is of the essence with respect to each provision of this Lease, and this provision shall not be impliedly waived by the acceptance on occasion of late or defective performance, as more particularly provided, without exclusion, under Section 25.
**20.** **DEFAULT**. Lessee shall be in default of this Lease if:
**(a)** Lessee fails to perform, keep and/or observe any of the obligations, covenants, terms, conditions and agreements of this Lease (including each and every Schedule attached hereto) to be performed, kept and/or observed by Lessee under this Lease, and such failure shall continue for a period of ten (10) calendar days;
**(b)** the Equipment, or any part thereof, shall be subject to any lien, levy, seizure, assignment, transfer, bulk transfer, encumbrance, application, attachment, execution, sublease or sale, without prior written consent of Lessor; and/or
**(c)** Lessee fails to perform, keep and/or observe any of the obligations, covenants, terms, conditions and agreements of the Profit Share Agreement, as incorporated herein by reference thereto, to be performed, kept and/or observed by Lessee under said agreements, and such failure shall continue for a period of ten (10) calendar days.
**21.** **REMEDIES**. No right or remedy conferred upon or reserved to Lessor is exclusive of any other right or remedy herein, by law or by equity, each as provided or permitted, but each shall be cumulative of every other right or remedy provided herein or by law, by equity, by statute or otherwise, whether now existing or hereafter arising, and may be enforced concurrently therewith or from time to time. No single or partial exercise by Lessor of any such right(s) or remedy(ies) shall preclude any other or further exercise of any other right(s) or remedy(ies). If Lessee is in default, Lessor, with or without notice to Lessee, shall have the right to exercise any one or more of the following remedies, concurrently or separately, and without any election of remedies being deemed to have been made:
**(a)** Lessor may seek an injunction or other equitable relief; and/or
**(b)** Lessor may recover from Lessee (and/or Guarantor) direct, incidental, consequential and/or special damages, plus any and all reasonable costs incurred in respect of the enforcement of such remedy(ies), including, without limitation, attorneys’ fees.
**22.** **NOTICES**. Each and every notice required or permitted to be given under this Agreement must be given in writing, and shall be deemed given when (i) personally delivered, (ii) on the third (3rd) business day after mailing by USPS registered or certified mail, postage prepaid, with return receipt requested, (iii) on the immediately following business day after deposit with any nationally recognized overnight courier (e.g., without limitation, FedEx or UPS), or (iv) on the immediately following business day after being sent via electronic mail (unless receipt thereof is sooner acknowledge by the recipient via reply email). Notice to any party hereto is valid if sent to it at such party’s address (mailing or electronic mail, as applicable) set forth on the signature page hereof; provided, that, each party hereto may change its address for notice hereunder by giving written notice to the other party hereto in accordance with the provisions of this Section 22. Any notice made to Guarantor in respect of this Lease shall be made to Lessee in accordance with this Section 22, and Lessee hereby agrees to accept such notice on behalf of Guarantor and promptly deliver the same to Guarantor.
**23.** **SEVERABILITY**. If any provision of this Lease is held by a court of competent jurisdiction to be invalid or unenforceable, for any reason, the remaining provisions hereof shall continue to be valid and enforceable to the maximum extent permitted under applicable laws. Further, if any court of competent jurisdiction finds that any provision of this Lease is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written as so limited, shall thereafter be construed and enforced as such.
**24.** **NEUTRAL INTERPRETATION**. Any rule of law or legal decision that would require interpretation of any ambiguities in this Lease against a particular party hereto is not applicable to this Lease and is hereby expressly waived. The provisions of this Lease shall be interpreted in a reasonable, neutral manner to affect the intentions of the parties hereto and the purposes of this Lease.
**25.** **ENTIRE AGREEMENT; AMENDMENT**. This Lease is intended to constitute a valid and enforceable legal instrument. This Lease, together with the Schedules and each agreement and/or other attachment incorporated herein by reference, constitutes the entire agreement between Lessor and Lessee with respect to the Equipment and the subject matter of this Lease. No provision of this Lease shall be amended unless in writing signed by a duly authorized representative of Lessor and Lessee.
**26.** **WAIVER**. Lessor’s failure, entirely or from time to time, to insist on compliance or enforcement of any provision of this Lease shall not affect its validity or enforceability or constitute a waiver, by Lessor, of future enforcement of that provision or of any other provision of this Lease at a later time.
**27.** **CHOICE OF LAW; JURISDICTION**. This Lease shall not be effective until signed by Lessor at its offices in Marietta, Georgia. This Lease shall be considered to have been made in the state of Georgia and shall be interpreted under and construed in accordance with the laws and regulations of the state of Georgia, without respect to its conflict of law principles. Lessee agrees to jurisdiction in the state of Georgia in any action, suit or proceeding arising out of this Lease, and concedes that it transacted business in the state of Georgia by entering into this Lease. In the event of legal action to enforce this Lease, Lessee agrees that venue may be laid in either Cobb or Fulton County, Georgia, as elected by Lessor, and waives any and all defenses in respect of and hereby agrees not to contest choice of law, jurisdiction and venue provisions of this Section 27.
**28.** **EXECUTION; EFFECTIVENESS**. This Lease may be executed in any number of, and by different parties hereto on, separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall collectively constitute one and the same agreement. Any signature delivered by a party hereto to the other party hereto via facsimile, electronic mail or similar electronic transmission shall be deemed to be an original signature hereto. Further, in accordance with the federal Electronic Signatures in Global and National Commerce Act (the “E-SIGN Act”), 15 U.S.C.A. §§ 7001-7031 (Supp. 2001), this Lease may be executed electronically or digitally and, in such event, shall serve as a binding original as if executed by hand.
[THIS SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, each of the undersigned, first intending to be legally bound, has duly executed and delivered this Agreement as of the Effective Date.
Lessor:
**ATFP CLOUD SPV III, LP**
By FLUENT ATFP, LLC, its General Partner
By:*/s/ Patrick Gahan*
**Patrick Gahan, Manager**
- Address for notice hereunder: 3600 Dallas Hwy #230-350, Marietta, GA 30064;
- Attn: Patrick Gahan
- E-mail address for notice hereunder:
Lessee:
**TCM CLOUD 1, LLC**
By: THE COULD MINDERS, INC., its Manager
By: */s/ Ian Gerard* [Corporate Seal]
**Ian Gerard, Director & CEO**
- Address for notice hereunder: 185 Faro Court, Unit 2, Shepherdsville
- Kentucky 40165;
- Attn: Ian Gerard
- E-mail address for notice hereunder:
*Acknowledged and agreed to by Guarantor*
**THE CLOUD MINDERS, INC.**
By:*/s/ Ian Gerard* [Corporate Seal]
**Ian Gerard, Director & CEO**
---
## EXHIBIT 10.19
SEC source: [ex_902224.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902224.htm)
**Exhibit 10.19**
**EQUIPMENT LEASE AGREEMENT**
THIS LEASE AGREEMENT (this “Lease”), entered into effective as of September 09, 2024 (the “Effective Date”), is by and between **ATFP CLOUD SPV III, LP**, a Georgia limited partnership (“Lessor”), with an address for notice hereunder at 3600 Dallas Highway, Suite 230- 350, Marietta, Georgia 30064, and **TCM CLOUD 1, LLC**, a Georgia limited liability company (“Lessee”), having an address for notice hereunder at 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165 (and, additionally, the Guarantor, as hereinafter defined and provided).
**1.** **LEASE AGREEMENT**. Lessor hereby leases to Lessee and Lessee hereby leases from Lessor all of the chattel property (the “Equipment”) described in one or more schedules attached hereto from time to time (collectively, the “Schedules”), which shall be sequentially numbered and, when attached hereto, shall be considered incorporated herein by this reference thereto. Each such Schedule must be made in writing and executed by both Lessor and Lessee, and each may be mutually updated and/or supplemented in writing from time to time upon execution by Lessor and Lessee. Whenever reference is made herein to the “Lease,” such reference shall be deemed to include each of the various Schedules identifying all items of Equipment, all of which, when taken together, constitute one undivided Lease of the Equipment.
**2.** **DELIVERY OF EQUIPMENT; ACCEPTANCE**. Lessor shall purchase the respective items of Equipment on or before the Commencement Date, as hereinafter defined, of each Schedule from vendors designated by Lessee, as provided in Schedule V, and Lessor agrees to turn over to Lessee all aspects of logistical control of vendor management with respect to the delivery and receipt of the Equipment to the Lessee (and/or Lessee’s designee) in preparation for deployment at the location specified in Section 10, and Lessee shall be responsible for ensuring the delivery and receipt of the Equipment in all respects. Lessee agrees to inspect the Equipment and to execute and deliver to Lessor an “Acknowledgment and Acceptance of Equipment by Lessee” notice, in a form suitable to Lessor, in Lessor’s sole reasonable determination, after the Equipment has been delivered to Lessee (and/or Lessee’s designee) and after Lessee is satisfied that the Equipment is satisfactory in every respect, in Lessee’s sole reasonable determination. Lessee expressly acknowledges that the Equipment is being leased to Lessee solely for commercial or business purposes and not for personal, family or household purposes. Lessee hereby authorizes Lessor to insert in the Schedules serial numbers or other identifying data with respect to the Equipment.
**3.** **INSTALLATION OF EQUIPMENT**. Lessee agrees to have Lessee’s customization center(s) deliver the Equipment, at Lessee’s sole expense, to the location specified in Section 10, and to properly install, in accordance with manufacturer’s guidelines and any local state, county and/or city ordinance, the Equipment promptly upon delivery. If the Equipment fails to function properly when tested, Lessee agrees to take all necessary action(s), at its sole expense, to repair any Equipment failures or faults so that the Equipment is fully operational after installation.
**4.** **ASSIGNMENT BY LESSEE PROHIBITED**. Without Lessor’s prior written consent, Lessee shall not (i) assign its interest in this Lease, (ii) pledge, encumber or otherwise transfer its interest in this Lease, (iii) sublease the Equipment (or any interest therein), (iv) cause or permit any lien to be placed upon the Equipment (or any interest therein), or (v) dispose of the Equipment.
**5.** **ASSIGNMENT BY LESSOR LIMITED**. Lessor may not assign this Lease Agreement to any party other than its Senior Creditor, as hereinafter defined, without the written consent of Lessee. Subject to the foregoing, this Lease inures to the benefit of and is binding upon the successors in interest and/or permitted assigns of the Lessor.
**6.** **COMMENCEMENT; RENTAL PAYMENTS; TERM**.
**(a)** **Commencement**. This Lease shall commence on the Effective Date upon proper execution and deliver hereof by Lessor and Lessee.
**(b)** **Rental Payment**. The “Monthly Rental Payment” for the Term, as hereinafter defined, shall be paid in arears commencing on the first (1st) calendar day of the calendar month immediately following each “Commencement Date” provided in the Schedules in the amount(s) per calendar month set forth in the Schedules; provided, that (i) payment of the first three (3) Monthly Rental Payments (i.e., Monthly Rental Payments one, two and three) shall be deferred until the ninth (9th) mensiversary of the Effective Date, at which time payment of three (3) Monthly Rental Payments shall be due and payable by Lessee to Lessor, and (ii) payment of the immediately following (5) Monthly Rental Payments (i.e., Monthly Rental Payments four, five, six, seven and eight) shall be deferred until the twelfth (12th) mensiversary of the Effective Date, at which time payment of five (5) Monthly Rental Payments shall be due and payable by Lessee to Lessor; (iii) payment of the immediately following five (5) Monthly Rental Payments (i.e., Monthly Rental Payments nine, ten, eleven, twelve and thirteen) shall be deferred until the fifteenth (15th) mensiversary of the Effective Date, at which time payment of five (5) Monthly Rental Payments shall be due and payable by Lessee to Lessor; and (iv) payment of the immediately following five (5) Monthly Rental Payments (i.e., Monthly Rental Payments fourteen, fifteen, sixteen, seventeen and eighteen) shall be deferred until the eighteenth (18th) mensiversary of the Effective Date, at which time payment of five (5) Monthly Rental Payments shall be due and payable by Lessee to Lessor. One (1) Monthly Rental Payment shall otherwise be made on each mensiversary of the Effective Date for the Term. Anything to the contrary provided in this Section 6(b) notwithstanding, the accelerated Lease payment obligations provided under that certain First Amended and Restated Profit Share Agreement, dated effective as of September 09, 2024, by and among Lessee, Lessor and the several other ATFP parties (as may have been and/or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Profit Share Agreement”) (e.g., without exclusion, Section 2 thereof) shall control and take precedence over any deferred Monthly Rental Payment provisions provided herein.
**(c)** **Term**. The term of this Lease (the “Term”) shall commence on the Effective Date and shall continue until the forty-eighth (48th) mensiversary of the latest Commencement Date set forth on the Schedules, subject to all renewal(s) of the Term provided under Section 6(d).
**(d)** **Term Extensions**. Following the final calendar day of the Term, as provided under Section 6(c), the Term shall automatically be extended on a month-to-month basis unless and until (i) all Purchase Options have been exercised by Lessee, in accordance with Section 6(e), or (ii) this Lease is otherwise terminated Lessor, in accordance with Section 13; provided, however, that the Monthly Rental Payment for each such renewal period shall be reduced to One & 00/100 U.S. Dollars (U.S. $1.00).
**(e)** **Purchase Option**. With respect to each Schedule of Equipment, once the Lessee has completed five (5) years of Profit sharing, in accordance with the Profit Share Agreement, Lessee may elect, at its sole option, to purchase the Equipment set forth on such Schedule (each, a “Purchase Option”) by paying to Lessor an amount equal to the greater of (i) a one-time payment that, when combined with the aggregate Profit share distributions made by Lessee under the Profit Share Agreement over and above the Monthly Rental Payments required under this Lease as of such date, is equal to the then fair market value, or (ii) a one-time payment equal to fifty percent (50%) of the aggregate of the Monthly Rental Payments (inclusive of any future modification thereto) for the Equipment set forth on such Schedule. Upon Lessee’s exercise of a Purchase Option, Lessor shall no longer have rights to any further Profit Share Distributions under the Profit Share Agreement with respect to such purchased Equipment.
**7.** **SECURITY DEPOSIT**. Lessor hereby agrees to waive any requirement that Lessee place and/or maintain a security deposit for the Equipment.
**8.** **LIMITED PREARRANGED AMENDMENTS; SPECIFIC POWER OF ATTORNEY**. Anything provided in this Lease to the contrary notwithstanding, in the event it is necessary to amend the terms of this Lease or the terms of any Schedule to reflect a change in one or more items of the Equipment, Lessee agrees that any such amendment shall be described in a letter from Lessor to Lessee, and unless, within fifteen (15) calendar days after the date of such letter, Lessee objects thereto in a writing delivered to Lessor, this Lease and any affected Schedules shall be deemed amended and such amendments shall be incorporated herein/therein as if originally set forth herein/therein. Further, Lessee authorizes Lessor or its designee to file a Uniform Commercial Code financing statement without Lessee’s signature, in form and content and from time to time as Lessor deems proper, in Lessor’s sole discretion, listing Lessee as debtor/lessee. Lessee further grants to Lessor a specific power of attorney for Lessor to sign, endorse or negotiate for Lessor’s benefit any instrument representing proceeds from any policy of insurance covering the Equipment, as more particularly provided under Section 14.
**9.** **LESSEE**’**S REPRESENTATION**. Lessee represents that its exact legal name, state of formation, location of its chief executive office and/or its place of residence (as applicable) have been correctly identified herein to Lessor; further, Lessee hereby covenants and agrees to promptly notify Lessor of any change to any of the foregoing.
**10.** **USE; EQUIPMENT LOCATION**. Lessee shall use the Equipment in a careful manner for its manufacturer-intended purposes, shall comply with all laws relating to its possession, use and maintenance, and shall not make any alterations, additions or improvements to the Equipment not contemplated under this Lease without Lessor’s prior written consent. The Equipment shall be kept at Lessee’s facility located at 5555 S. 129th E. Avenue, Tulsa, OK 74134 and shall not be removed without Lessor’s prior written consent.
**11.** **OWNERSHIP; PERSONALITY**. The Equipment is, and shall remain, the property of Lessor, and Lessee shall have no right, title or interest therein or thereto except as expressly set forth in this Lease. The Equipment shall remain chattel property even though it may be installed in or attached to real property.
**12.** **SURRENDER**. By this Lease, Lessee acquires no ownership rights in the Equipment, subject only to its future Purchase Option to purchase same. Upon the expiration or termination of any Schedules or this Lease, provided that Lessee has not exercised its Purchase Option, Lessor, at its expense, shall arrange for the removal of the equipment to include any disassembly, packing and preparation for shipping and shipping. In the event of any default pursuant to Section 20, Lessor shall make arrangements but Lessee shall pay, at its sole expense, including, without limitation, disassembly, packing, preparation for shipping, insuring and shipping, for the surrender and return the Equipment to Lessor, and Lessee shall, in such an event, be responsible for the Equipment until it is delivered to and accepted by Lessee.
**13.** **TERMINATION**.
**(a)** Following the one (1) year anniversary of the Effective Date, Lessee may, at its sole option, terminate this Lease by paying to Lessor an amount equal to (x) the sum of all remaining Monthly Rental Payments due under each Schedule to this Lease (through the initial “Schedule Expiration Date” set forth on each Schedule, respectively), plus (y) a “Termination Fee” that, when added together with the sum of all Monthly Rental Payments paid to Lessor under all of the Schedules to this Lease, produces a twenty-five percent (25%) internal rate of return to Lessor through the date on which such Termination Fee is paid. For clarity and the avoidance of doubt, the extended internal rate of return calculation (“XIRR”) shall be used for the internal rate of return calculation required under this Section 13(a); XIRR is a financial metric that calculates the annualized rate of return for investments with irregular cash flows, as such, it is the same calculation that Microsoft Excel uses within its XIRR function.
**(b)** At the expiration of the Term, as may be duly extended pursuant to Section 6(d) and provided Lessee declines to affect the entirety of its then available Purchase Options in accordance with Section 6(e), Lessor may provide notice to Lessor of its intent to terminate this Lease. Thereafter, Lessee shall make arrangements, at its sole expense, including, without limitation, disassembly, packing, preparation for shipping, insuring and shipping, to surrender and return the Equipment to Lessor, and Lessee shall, in such an event, be responsible for the Equipment until it is delivered to and accepted by Lessee.
**(c)** Anything contained in this Section 13 to the contrary notwithstanding, the Parties may agree, in writing, (i) that, at the expiration of the Term, this Lease may be continued on such terms as the Parties may hereafter agree, or (ii) that this Lease shall be terminated prior to the expiration of the Term.
**14.** **LOSS AND DAMAGE; INSURANCE**.
**(a)** Property Insurance. Lessee shall bear the entire risk of loss, theft, damage or destruction of the Equipment from any cause whatsoever. Lessee shall provide and maintain insurance policy(ies) against loss, theft, damage or destruction of the Equipment in an amount not less than the full replacement value of the Equipment, under which Lessor shall be named as the primary loss payee under each such policy’s loss payee endorsement. For the avoidance of doubt, any such loss does not relieve Lessee of any obligation under this Lease. In the event of damage to or loss of any item of Equipment, Lessee shall immediately notify Lessor, in writing. Lessee shall have five (5) business day following such event of damage or loss to either repair or, if the Equipment is not repairable, replace the damaged Equipment at Lessee’s sole expense. If insurance proceeds are used to fully comply with the Lessee’s obligations under this Lease, any balance of any such proceeds shall thence go to Lessee upon satisfaction if full of such Lessee obligations.
**(b)** Liability Insurance. Lessee shall also provide and maintain comprehensive general all-risk liability insurance, including, without limitation, product liability coverage, insuring Lessee, and Lessor as an additional insured with a severability of interest endorsement or its equivalent, against any and all loss or liability for damages either to persons or otherwise, which might result from or happen in connection with the condition, use or operation of the Equipment, with such limits and with an insurer as are satisfactory to Lessor, in Lessor’s sole reasonable opinion. Each such policy shall expressly provide that said insurance as to Lessee and its assigns shall not be invalidated by any act, omission or neglect of Lessor and cannot be canceled without thirty (30) days’ prior written notice to Lessor.
**(c)** Certificates of Insurance; Force Placement. As to each policy required under this Section 14, Lessee shall furnish to Lessor a certificate of insurance from the insurer, which certificate shall evidence the insurance coverage required by this Section 14 and shall designate Lessor as loss payee and/or additional insured, as applicable. Lessor shall have no obligation to ascertain the existence or adequacy of insurance, or to provide any insurance coverage for the Equipment or for Lessee’s benefit. Lessor’s lack of insistence on Lessee’s compliance with this Section 14(c), with respect to providing such certificates to Lessor, shall not relieve Lessor of its obligations under this Section 14. If Lessee fails to procure or maintain said insurance, Lessor shall have the right, but shall not be obligated, to affect such insurance. If Lessor makes such insurance payment, it shall notify Lessee of such payment, and Lessee shall repay to Lessor the amount thereof with thirty (30) calendar days after such notice is provided to Lessee or interest at a rate of eighteen percent (18%) per annum shall begin accruing on such amounts until paid in full by Lessee, and Lessee shall further owe to Lessor such additional amounts under this Lease.
**15.** **LIENS; TAXES**. Except for its first-position lienholder (the “Senior Creditor”), if any, Lessor shall keep the Equipment free and clear of all levies, liens and encumbrances; provided, however, that Lessee shall be responsible for timely payment of all taxes and fees (local, state and federal) that may now or hereafter be placed on the leasing, rental, sale, possession or use of the Equipment, including, all taxes on or measured by Lessee’s net income. Lessee shall pay any chattel/personal property tax owed on the Equipment. If Lessor is billed for such charges or taxes or if Lessee fails to pay such charges or taxes, Lessor may, in its sole discretion, make payment in respect thereof. If Lessor makes such tax payment, it shall notify Lessee of such payment, and Lessee shall repay to Lessor the amount thereof with thirty (30) calendar days after such notice is provided to Lessee or interest at a rate of eighteen percent (18%) per annum shall begin accruing on such amounts until paid in full by Lessee, and Lessee shall further owe to Lessor such additional amounts under this Lease.
**16.** **INDEMNITY**. Lessee shall indemnify Lessor against any claims, actions, damages or liabilities, including, without limitation, all attorneys’ fees, arising out of or connected with its transportation and use of, and/or lease interest in the Equipment. Such indemnification shall survive the expiration, cancellation or termination of this lease. Lessee waives any immunity Lessee may have under any industrial insurance act with regard to its indemnification obligation hereunder.
**17.** **GUARANTY**. THE CLOUD MINDERS, INC., a Delaware profit corporation (the “Guarantor”), does hereby absolutely, unconditionally and irrevocably guarantee to Lessor, as if the Guarantor was the Lessee, the full, faithful and prompt performance of all obligations imposed on Lessee by the terms of this Lease, including, without limitation, (i) payment of any and all Monthly Rent Payments and other amounts whatsoever payable by Lessee under this Lease and/or the Profit Share Agreement, and (ii) performance and observance of all the covenants, terms, conditions and agreements of this Lease and the Profit Share Agreement to be performed and observed by Lessee hereunder and/or thereunder. The guaranty created hereby shall be enforceable by Lessor in an action against Guarantor without the necessity of any suit, action or proceeding by Lessor of any kind or nature whatsoever against Lessee or other co-guarantor, if any, without the necessity of any notice to Guarantor of Lessee’s default or breach under this Lease or the Profit Share Agreement, and without the necessity of any other notice or demand to Guarantor to which Guarantor might otherwise be entitled, all of which notice Guarantor hereby expressly waives. Guarantor hereby agrees that the validity of the guaranty created hereby and the obligations of Guarantor hereunder shall not be terminated, affected, diminished or impaired by reason of the assertion or the failure to assert by Lessor against Lessor or other co-guarantor, if any, any of the rights or remedies reserved to Lessor pursuant to the provisions of this Lease or the Profit Share Agreement, or any other remedy or right that Lessee may have at law or in equity or otherwise. The obligations of Guarantor hereunder shall in no way be affected, modified or diminished by reasons of any assignment, renewal, modification or extension of this Lease or the Profit Share Agreement, none of which shall require the permission of Guarantor. All of Lender's rights and remedies under this Lease (including the guaranty created hereby) or the Profit Share Agreement are intended to be distinct, separate and cumulative, and no such right or remedy herein or therein is intended to be the exclusion of or a waiver of any other.
**18.** **SERVICE CHARGES**. Lessor agrees that the Equipment is leased without any additional service charges or fees, unless otherwise expressly set forth in this Lease.
**19.** **TIME OF ESSENCE**. Time is of the essence with respect to each provision of this Lease, and this provision shall not be impliedly waived by the acceptance on occasion of late or defective performance, as more particularly provided, without exclusion, under Section 25.
**20.** **DEFAULT**. Lessee shall be in default of this Lease if:
**(a)** Lessee fails to perform, keep and/or observe any of the obligations, covenants, terms, conditions and agreements of this Lease (including each and every Schedule attached hereto) to be performed, kept and/or observed by Lessee under this Lease, and such failure shall continue for a period of ten (10) calendar days;
**(b)** the Equipment, or any part thereof, shall be subject to any lien, levy, seizure, assignment, transfer, bulk transfer, encumbrance, application, attachment, execution, sublease or sale, without prior written consent of Lessor; and/or
**(c)** Lessee fails to perform, keep and/or observe any of the obligations, covenants, terms, conditions and agreements of the Profit Share Agreement, as incorporated herein by reference thereto, to be performed, kept and/or observed by Lessee under said agreements, and such failure shall continue for a period of ten (10) calendar days.
**21.** **REMEDIES**. No right or remedy conferred upon or reserved to Lessor is exclusive of any other right or remedy herein, by law or by equity, each as provided or permitted, but each shall be cumulative of every other right or remedy provided herein or by law, by equity, by statute or otherwise, whether now existing or hereafter arising, and may be enforced concurrently therewith or from time to time. No single or partial exercise by Lessor of any such right(s) or remedy(ies) shall preclude any other or further exercise of any other right(s) or remedy(ies). If Lessee is in default, Lessor, with or without notice to Lessee, shall have the right to exercise any one or more of the following remedies, concurrently or separately, and without any election of remedies being deemed to have been made:
**(a)** Lessor may seek an injunction or other equitable relief; and/or
**(b)** Lessor may recover from Lessee (and/or Guarantor) direct, incidental, consequential and/or special damages, plus any and all reasonable costs incurred in respect of the enforcement of such remedy(ies), including, without limitation, attorneys’ fees.
**22.** **NOTICES**. Each and every notice required or permitted to be given under this Agreement must be given in writing, and shall be deemed given when (i) personally delivered, (ii) on the third (3rd) business day after mailing by USPS registered or certified mail, postage prepaid, with return receipt requested, (iii) on the immediately following business day after deposit with any nationally recognized overnight courier (e.g., without limitation, FedEx or UPS), or (iv) on the immediately following business day after being sent via electronic mail (unless receipt thereof is sooner acknowledge by the recipient via reply email). Notice to any party hereto is valid if sent to it at such party’s address (mailing or electronic mail, as applicable) set forth on the signature page hereof; provided, that, each party hereto may change its address for notice hereunder by giving written notice to the other party hereto in accordance with the provisions of this Section 22. Any notice made to Guarantor in respect of this Lease shall be made to Lessee in accordance with this Section 22, and Lessee hereby agrees to accept such notice on behalf of Guarantor and promptly deliver the same to Guarantor.
**23.** **SEVERABILITY**. If any provision of this Lease is held by a court of competent jurisdiction to be invalid or unenforceable, for any reason, the remaining provisions hereof shall continue to be valid and enforceable to the maximum extent permitted under applicable laws. Further, if any court of competent jurisdiction finds that any provision of this Lease is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written as so limited, shall thereafter be construed and enforced as such.
**24.** **NEUTRAL INTERPRETATION**. Any rule of law or legal decision that would require interpretation of any ambiguities in this Lease against a particular party hereto is not
applicable to this Lease and is hereby expressly waived. The provisions of this Lease shall be interpreted in a reasonable, neutral manner to affect the intentions of the parties hereto and the purposes of this Lease.
**25.** **ENTIRE AGREEMENT; AMENDMENT**. This Lease is intended to constitute a valid and enforceable legal instrument. This Lease, together with the Schedules and each agreement and/or other attachment incorporated herein by reference, constitutes the entire agreement between Lessor and Lessee with respect to the Equipment and the subject matter of this Lease. No provision of this Lease shall be amended unless in writing signed by a duly authorized representative of Lessor and Lessee.
**26.** **WAIVER**. Lessor’s failure, entirely or from time to time, to insist on compliance or enforcement of any provision of this Lease shall not affect its validity or enforceability or constitute a waiver, by Lessor, of future enforcement of that provision or of any other provision of this Lease at a later time.
**27.** **CHOICE OF LAW; JURISDICTION**. This Lease shall not be effective until signed by Lessor at its offices in Marietta, Georgia. This Lease shall be considered to have been made in the state of Georgia and shall be interpreted under and construed in accordance with the laws and regulations of the state of Georgia, without respect to its conflict of law principles. Lessee agrees to jurisdiction in the state of Georgia in any action, suit or proceeding arising out of this Lease, and concedes that it transacted business in the state of Georgia by entering into this Lease. In the event of legal action to enforce this Lease, Lessee agrees that venue may be laid in either Cobb or Fulton County, Georgia, as elected by Lessor, and waives any and all defenses in respect of and hereby agrees not to contest choice of law, jurisdiction and venue provisions of this Section 27.
**28.** **EXECUTION; EFFECTIVENESS**. This Lease may be executed in any number of, and by different parties hereto on, separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall collectively constitute one and the same agreement. Any signature delivered by a party hereto to the other party hereto via facsimile, electronic mail or similar electronic transmission shall be deemed to be an original signature hereto. Further, in accordance with the federal Electronic Signatures in Global and National Commerce Act (the “E-SIGN Act”), 15 U.S.C.A. §§ 7001-7031 (Supp. 2001), this Lease may be executed electronically or digitally and, in such event, shall serve as a binding original as if executed by hand.
[THIS SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, each of the undersigned, first intending to be legally bound, has duly executed and delivered this Agreement as of the Effective Date.
Lessor:
**ATFP CLOUD SPV III, LP**
By FLUENT ATFP, LLC, its General Partner
By: */s/ Patrick Gahan*
**Patrick Gahan, Manager**
Address for notice hereunder: 3600 Dallas Hwy #230-350, Marietta, GA 30064;
Attn: Patrick Gahan and Steve Gertz
E-mail address for notice hereunder:
Lessee:
**TCM CLOUD 1, LLC**
By THE CLOUD MINDERS, INC., its Manager
By: */s/ Ian Gerard* [Corporate Seal]
**Ian Gerard, Director & C.E.O.**
Address for notice hereunder: 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165;
Attn: Ian Gerard
E-mail address for notice hereunder:
*Acknowledged and agreed to by Guarantor:*
**THE CLOUD MINDERS, INC.**
By: */s/ Ian Gerard* [Corporate Seal]
**Ian Gerard, Director & C.E.O.**
---
## EXHIBIT 10.20
SEC source: [ex_902225.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902225.htm)
**Exhibit 10.20**
**FIRST AMENDED AND RESTATED**
**EQUIPMENT LEASE AGREEMENT**
THIS FIRST AMENDED AND RESTATED LEASE AGREEMENT (this “Lease”), entered into effective as of September 09, 2024 (the “Effective Date”), is by and between **ATFP CLOUD SPV I, LP**, a Georgia limited partnership (“Lessor”), with an address for notice hereunder at 3600 Dallas Highway, Suite 230-350, Marietta, Georgia 30064, and **TCM CLOUD 1, LLC**, a Georgia limited liability company (“Lessee”), having an address for notice hereunder at 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165 (and, additionally, the Guarantor, as hereinafter defined and provided).
**1.** **LEASE AGREEMENT**. Lessor hereby leases to Lessee and Lessee hereby leases from Lessor all of the chattel property (the “Equipment”) described in one or more schedules attached hereto from time to time (collectively, the “Schedules”), which shall be sequentially numbered and, when attached hereto, shall be considered incorporated herein by this reference thereto. Each such Schedule must be made in writing and executed by both Lessor and Lessee, and each may be mutually updated and/or supplemented in writing from time to time upon execution by Lessor and Lessee. Whenever reference is made herein to the “Lease,” such reference shall be deemed to include each of the various Schedules identifying all items of Equipment, all of which, when taken together, constitute one undivided Lease of the Equipment.
**2.** **DELIVERY OF EQUIPMENT; ACCEPTANCE**. Lessor shall purchase the respective items of Equipment on or before the Commencement Date, as hereinafter defined, of each Schedule from vendors designated by Lessee, as provided in Schedule V, and Lessor agrees to turn over to Lessee all aspects of logistical control of vendor management with respect to the delivery and receipt of the Equipment to the Lessee (and/or Lessee’s designee) in preparation for deployment at the location specified in Section 10, and Lessee shall be responsible for ensuring the delivery and receipt of the Equipment in all respects. Lessee agrees to inspect the Equipment and to execute and deliver to Lessor an “Acknowledgment and Acceptance of Equipment by Lessee” notice, in a form suitable to Lessor, in Lessor’s sole reasonable determination, after the Equipment has been delivered to Lessee (and/or Lessee’s designee) and after Lessee is satisfied that the Equipment is satisfactory in every respect, in Lessee’s sole reasonable determination. Lessee expressly acknowledges that the Equipment is being leased to Lessee solely for commercial or business purposes and not for personal, family or household purposes. Lessee hereby authorizes Lessor to insert in the Schedules serial numbers or other identifying data with respect to the Equipment.
**3.** **INSTALLATION OF EQUIPMENT**. Lessee agrees to have Lessee’s customization center(s) deliver the Equipment, at Lessee’s sole expense, to the location specified in Section 10, and to properly install, in accordance with manufacturer’s guidelines and any local state, county and/or city ordinance, the Equipment promptly upon delivery. If the Equipment fails to function properly when tested, Lessee agrees to take all necessary action(s), at its sole expense, to repair any Equipment failures or faults so that the Equipment is fully operational after installation.
**4.** **ASSIGNMENT BY LESSEE PROHIBITED**. Without Lessor’s prior written consent, Lessee shall not (i) assign its interest in this Lease, (ii) pledge, encumber or otherwise transfer its interest in this Lease, (iii) sublease the Equipment (or any interest therein), (iv) cause or permit any lien to be placed upon the Equipment (or any interest therein), or (v) dispose of the Equipment.
**5.** **ASSIGNMENT BY LESSOR LIMITED**. Lessor may not assign this Lease Agreement to any party other than its Senior Creditor, as hereinafter defined, without the written consent of Lessee. Subject to the foregoing, this Lease inures to the benefit of and is binding upon the successors in interest and/or permitted assigns of the Lessor.
**6.** **COMMENCEMENT; RENTAL PAYMENTS; TERM**.
**(a)** **Commencement**. This Lease shall commence on the Effective Date upon proper execution and deliver hereof by Lessor and Lessee.
**(b)** **Rental Payment**. The “Monthly Rental Payment” for the Term, as hereinafter defined, shall be paid in arears commencing on the first (1st) calendar day of the calendar month immediately following each “Commencement Date” provided in the Schedules in the amount(s) per calendar month set forth in the Schedules; provided, that (i) payment of the first three (3) Monthly Rental Payments (i.e., Monthly Rental Payments one, two and three) shall be deferred until the sixth (6th) mensiversary of the Effective Date, at which time payment of three (3) Monthly Rental Payments shall be due and payable by Lesse to Lessor, and (ii) payment of the second three (3) Monthly Rental Payments (i.e., Monthly Rental Payments four, five and six) shall be deferred until the ninth (9th) mensiversary of the Effective Date, at which time payment of four (4) Monthly Rental Payments shall be due and payable by Lesse to Lessor. One (1) Monthly Rental Payment shall otherwise be made on each mensiversary of the Effective Date for the Term. Anything to the contrary provided in this Section 6(b) notwithstanding, the accelerated Lease payment obligations provided under that certain First Amended and Restated Profit Share Agreement, dated effective as of September 09, 2024, by and among Lessee, Lessor and the several other ATFP parties (as may have been and/or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Profit Share Agreement”) (e.g., without exclusion, Section 2 thereof) shall control and take precedence over any deferred Monthly Rental Payment provisions provided herein.
**(c)** **Term**. The term of this Lease (the “Term”) shall commence on the Effective Date and shall continue until the forty-eighth (48th) mensiversary of the latest Commencement Date set forth on the Schedules, subject to all renewal(s) of the Term provided under Section 6(d).
**(d)** **Term Extensions**. Following the final calendar day of the Term, as provided under Section 6(c), the Term shall automatically be extended on a month-to-month basis unless and until (i) all Purchase Options have been exercised by Lessee, in accordance with Section 6(e), or (ii) this Lease is otherwise terminated Lessor, in accordance with Section 13; provided, however, that the Monthly Rental Payment for each such renewal period shall be reduced to One & 00/100 U.S. Dollars (U.S. $1.00).
**(e)** **Purchase Option**. With respect to each Schedule of Equipment, once the Lessee has completed five (5) years of Profit sharing, in accordance with the Profit Share Agreement, Lessee may elect, at its sole option, to purchase the Equipment set forth on such Schedule (each, a “Purchase Option”) by paying to Lessor an amount equal to the greater of (i) a one-time payment that, when combined with the aggregate Profit share distributions made by Lessee under the Profit Share Agreement over and above the Monthly Rental Payments required under this Lease as of such date, is equal to the then fair market value, or (ii) a one-time payment equal to fifty percent (50%) of the aggregate of the Monthly Rental Payments (inclusive of any future modification thereto) for the Equipment set forth on such Schedule. Upon Lessee’s exercise of a Purchase Option, Lessor shall no longer have rights to any further Profit Share Distributions under the Profit Share Agreement with respect to such purchased Equipment.
**7.** **SECURITY DEPOSIT**. Lessor hereby agrees to waive any requirement that Lessee place and/or maintain a security deposit for the Equipment.
**8.** **LIMITED PREARRANGED AMENDMENTS; SPECIFIC POWER OF ATTORNEY**. Anything provided in this Lease to the contrary notwithstanding, in the event it is necessary to amend the terms of this Lease or the terms of any Schedule to reflect a change in one or more items of the Equipment, Lessee agrees that any such amendment shall be described in a letter from Lessor to Lessee, and unless, within fifteen (15) calendar days after the date of such letter, Lessee objects thereto in a writing delivered to Lessor, this Lease and any affected Schedules shall be deemed amended and such amendments shall be incorporated herein/therein as if originally set forth herein/therein. Further, Lessee authorizes Lessor or its designee to file a Uniform Commercial Code financing statement without Lessee’s signature, in form and content and from time to time as Lessor deems proper, in Lessor’s sole discretion, listing Lessee as debtor/lessee. Lessee further grants to Lessor a specific power of attorney for Lessor to sign, endorse or negotiate for Lessor’s benefit any instrument representing proceeds from any policy of insurance covering the Equipment, as more particularly provided under Section 14.
**9.** **LESSEE**’**S REPRESENTATION**. Lessee represents that its exact legal name, state of formation, location of its chief executive office and/or its place of residence (as applicable) have been correctly identified herein to Lessor; further, Lessee hereby covenants and agrees to promptly notify Lessor of any change to any of the foregoing.
**10.** **USE; EQUIPMENT LOCATION**. Lessee shall use the Equipment in a careful manner for its manufacturer-intended purposes, shall comply with all laws relating to its possession, use and maintenance, and shall not make any alterations, additions or improvements to the Equipment not contemplated under this Lease without Lessor’s prior written consent. The Equipment shall be kept at Lessee’s facility located at 5555 S. 129th E. Avenue, Tulsa, OK 74134 and shall not be removed without Lessor’s prior written consent.
**11.** **OWNERSHIP; PERSONALITY**. The Equipment is, and shall remain, the property of Lessor, and Lessee shall have no right, title or interest therein or thereto except as expressly set forth in this Lease. The Equipment shall remain chattel property even though it may be installed in or attached to real property.
**12.** **SURRENDER**. By this Lease, Lessee acquires no ownership rights in the Equipment, subject only to its future Purchase Option to purchase same. Upon the expiration or termination of any Schedules or this Lease, provided that Lessee has not exercised its Purchase Option, Lessor, at its expense, shall arrange for the removal of the equipment to include any disassembly, packing and preparation for shipping and shipping. In the event of any default pursuant to Section 20, Lessor shall make arrangements but Lessee shall pay, at its sole expense, including, without limitation, disassembly, packing, preparation for shipping, insuring and shipping, for the surrender and return the Equipment to Lessor, and Lessee shall, in such an event, be responsible for the Equipment until it is delivered to and accepted by Lessee.
**13.** **TERMINATION**.
**(a)** Following the one (1) year anniversary of the Effective Date, Lessee may, at its sole option, terminate this Lease by paying to Lessor an amount equal to (x) the sum of all remaining Monthly Rental Payments due under each Schedule to this Lease (through the initial “Schedule Expiration Date” set forth on each Schedule, respectively), plus (y) a “Termination Fee” that, when added together with the sum of all Monthly Rental Payments paid to Lessor under all of the Schedules to this Lease, produces a twenty-five percent (25%) internal rate of return to Lessor through the date on which such Termination Fee is paid. For clarity and the avoidance of doubt, the extended internal rate of return calculation (“XIRR”) shall be used for the internal rate of return calculation required under this Section 13(a); XIRR is a financial metric that calculates the annualized rate of return for investments with irregular cash flows, as such, it is the same calculation that Microsoft Excel uses within its XIRR function.
**(b)** At the expiration of the Term, as may be duly extended pursuant to Section 6(d) and provided Lessee declines to affect the entirety of its then available Purchase Options in accordance with Section 6(e), Lessor may provide notice to Lessor of its intent to terminate this Lease. Thereafter, Lessee shall make arrangements, at its sole expense, including, without limitation, disassembly, packing, preparation for shipping, insuring and shipping, to surrender and return the Equipment to Lessor, and Lessee shall, in such an event, be responsible for the Equipment until it is delivered to and accepted by Lessee.
**(c)** Anything contained in this Section 13 to the contrary notwithstanding, the Parties may agree, in writing, (i) that, at the expiration of the Term, this Lease may be continued on such terms as the Parties may hereafter agree, or (ii) that this Lease shall be terminated prior to the expiration of the Term.
**14.** **LOSS AND DAMAGE; INSURANCE**.
**(a)** Property Insurance. Lessee shall bear the entire risk of loss, theft, damage or destruction of the Equipment from any cause whatsoever. Lessee shall provide and maintain insurance policy(ies) against loss, theft, damage or destruction of the Equipment in an amount not less than the full replacement value of the Equipment, under which Lessor shall be named as the primary loss payee under each such policy’s loss payee endorsement. For the avoidance of doubt, any such loss does not relieve Lessee of any obligation under this Lease. In the event of damage to or loss of any item of Equipment, Lessee shall immediately notify Lessor, in writing. Lessee shall have five (5) business day following such event of damage or loss to either repair or, if the Equipment is not repairable, replace the damaged Equipment at Lessee’s sole expense. If insurance proceeds are used to fully comply with the Lessee’s obligations under this Lease, any balance of any such proceeds shall thence go to Lessee upon satisfaction if full of such Lessee obligations.
**(b)** Liability Insurance. Lessee shall also provide and maintain comprehensive general all-risk liability insurance, including, without limitation, product liability coverage, insuring Lessee, and Lessor as an additional insured with a severability of interest endorsement or its equivalent, against any and all loss or liability for damages either to persons or otherwise, which might result from or happen in connection with the condition, use or operation of the Equipment, with such limits and with an insurer as are satisfactory to Lessor, in Lessor’s sole reasonable opinion. Each such policy shall expressly provide that said insurance as to Lessee and its assigns shall not be invalidated by any act, omission or neglect of Lessor and cannot be canceled without thirty (30) days’ prior written notice to Lessor.
**(c)** Certificates of Insurance; Force Placement. As to each policy required under this Section 14, Lessee shall furnish to Lessor a certificate of insurance from the insurer, which certificate shall evidence the insurance coverage required by this Section 14 and shall designate Lessor as loss payee and/or additional insured, as applicable. Lessor shall have no obligation to ascertain the existence or adequacy of insurance, or to provide any insurance coverage for the Equipment or for Lessee’s benefit. Lessor’s lack of insistence on Lessee’s compliance with this Section 14(c), with respect to providing such certificates to Lessor, shall not relieve Lessor of its obligations under this Section 14. If Lessee fails to procure or maintain said insurance, Lessor shall have the right, but shall not be obligated, to affect such insurance. If Lessor makes such insurance payment, it shall notify Lessee of such payment, and Lessee shall repay to Lessor the amount thereof with thirty (30) calendar days after such notice is provided to Lessee or interest at a rate of eighteen percent (18%) per annum shall begin accruing on such amounts until paid in full by Lessee, and Lessee shall further owe to Lessor such additional amounts under this Lease.
**15.** **LIENS; TAXES**. Except for its first-position lienholder (the “Senior Creditor”), if any, Lessor shall keep the Equipment free and clear of all levies, liens and encumbrances; provided, however, that Lessee shall be responsible for timely payment of all taxes and fees (local, state and federal) that may now or hereafter be placed on the leasing, rental, sale, possession or use of the Equipment, including, all taxes on or measured by Lessee’s net income. Lessee shall pay any chattel/personal property tax owed on the Equipment. If Lessor is billed for such charges or taxes or if Lessee fails to pay such charges or taxes, Lessor may, in its sole discretion, make payment in respect thereof. If Lessor makes such tax payment, it shall notify Lessee of such payment, and Lessee shall repay to Lessor the amount thereof with thirty (30) calendar days after such notice is provided to Lessee or interest at a rate of eighteen percent (18%) per annum shall begin accruing on such amounts until paid in full by Lessee, and Lessee shall further owe to Lessor such additional amounts under this Lease.
**16.** **INDEMNITY**. Lessee shall indemnify Lessor against any claims, actions, damages or liabilities, including, without limitation, all attorneys’ fees, arising out of or connected with its transportation and use of, and/or lease interest in the Equipment. Such indemnification shall survive the expiration, cancellation or termination of this Lease. Lessee waives any immunity Lessee may have under any industrial insurance act with regard to its indemnification obligation hereunder.
**17.** **GUARANTY**. THE CLOUD MINDERS, INC., a Delaware profit corporation, and GLOBAL DIGITAL HOLDINGS, INC., a Georgia profit corporation (each, jointly and severally, the “Guarantor”), each does hereby absolutely, unconditionally and irrevocably guarantee to Lessor, as if the Guarantor was the Lessee, the full, faithful and prompt performance of all obligations imposed on Lessee by the terms of this Lease, including, without limitation, (i) payment of any and all Monthly Rent Payments and other amounts whatsoever payable by Lessee under this Lease and/or the Profit Share Agreement, and (ii) performance and observance of all the covenants, terms, conditions and agreements of this Lease and the Profit Share Agreement to be performed and observed by Lessee hereunder and/or thereunder. The guaranty created hereby shall be enforceable by Lessor in an action against Guarantor, jointly and severally, without the necessity of any suit, action or proceeding by Lessor of any kind or nature whatsoever against Lessee or other co-guarantor, without the necessity of any notice to Guarantor of Lessee’s default or breach under this Lease or the Profit Share Agreement, and without the necessity of any other notice or demand to Guarantor to which Guarantor might otherwise be entitled, all of which notice Guarantor hereby expressly waives. Guarantor hereby agrees that the validity of the guaranty created hereby and the obligations of Guarantor hereunder shall not be terminated, affected, diminished or impaired by reason of the assertion or the failure to assert by Lessor against Lessor or other co-guarantor, if any, any of the rights or remedies reserved to Lessor pursuant to the provisions of this Lease or the Profit Share Agreement, or any other remedy or right that Lessee may have at law or in equity or otherwise. The joint and several obligations of Guarantor hereunder shall in no way be affected, modified or diminished by reasons of any assignment, renewal, modification or extension of this Lease or the Profit Share Agreement, none of which shall require the permission of Guarantor. All of Lender's rights and remedies under this Lease (including the guaranty created hereby) or the Profit Share Agreement are intended to be distinct, separate and cumulative, and no such right or remedy herein or therein is intended to be the exclusion of or a waiver of any other.
**18.** **SERVICE CHARGES**. Lessor agrees that the Equipment is leased without any additional service charges or fees, unless otherwise expressly set forth in this Lease.
**19.** **TIME OF ESSENCE**. Time is of the essence with respect to each provision of this Lease, and this provision shall not be impliedly waived by the acceptance on occasion of late or defective performance, as more particularly provided, without exclusion, under Section 25.
**20.** **DEFAULT**. Lessee shall be in default of this Lease if:
**(a)** Lessee fails to perform, keep and/or observe any of the obligations, covenants, terms, conditions and agreements of this Lease (including each and every Schedule attached hereto) to be performed, kept and/or observed by Lessee under this Lease, and such failure shall continue for a period of ten (10) calendar days;
**(b)** the Equipment, or any part thereof, shall be subject to any lien, levy, seizure, assignment, transfer, bulk transfer, encumbrance, application, attachment, execution, sublease or sale, without prior written consent of Lessor; and/or
**(c)** Lessee fails to perform, keep and/or observe any of the obligations, covenants, terms, conditions and agreements of the Profit Share Agreement, as incorporated herein by reference thereto, to be performed, kept and/or observed by Lessee under said agreements, and such failure shall continue for a period of ten (10) calendar days.
**21.** **REMEDIES**. No right or remedy conferred upon or reserved to Lessor is exclusive of any other right or remedy herein, by law or by equity, each as provided or permitted, but each shall be cumulative of every other right or remedy provided herein or by law, by equity, by statute or otherwise, whether now existing or hereafter arising, and may be enforced concurrently therewith or from time to time. No single or partial exercise by Lessor of any such right(s) or remedy(ies) shall preclude any other or further exercise of any other right(s) or remedy(ies). If Lessee is in default, Lessor, with or without notice to Lessee, shall have the right to exercise any one or more of the following remedies, concurrently or separately, and without any election of remedies being deemed to have been made:
**(a)** Lessor may seek an injunction or other equitable relief; and/or
**(b)** Lessor may recover from Lessee (and/or Guarantor) direct, incidental, consequential and/or special damages, plus any and all reasonable costs incurred in respect of the enforcement of such remedy(ies), including, without limitation, attorneys’ fees.
**22.** **NOTICES**. Each and every notice required or permitted to be given under this Agreement must be given in writing, and shall be deemed given when (i) personally delivered, (ii) on the third (3rd) business day after mailing by USPS registered or certified mail, postage prepaid, with return receipt requested, (iii) on the immediately following business day after deposit with any nationally recognized overnight courier (e.g., without limitation, FedEx or UPS), or (iv) on the immediately following business day after being sent via electronic mail (unless receipt thereof is sooner acknowledge by the recipient via reply email). Notice to any party hereto is valid if sent to it at such party’s address (mailing or electronic mail, as applicable) set forth on the signature page hereof; provided, that, each party hereto may change its address for notice hereunder by giving written notice to the other party hereto in accordance with the provisions of this Section 22. Any notice made to Guarantor in respect of this Lease shall be made to Lessee in accordance with this Section 22, and Lessee hereby agrees to accept such notice on behalf of Guarantor and promptly deliver the same to Guarantor.
**23.** **SEVERABILITY**. If any provision of this Lease is held by a court of competent jurisdiction to be invalid or unenforceable, for any reason, the remaining provisions hereof shall continue to be valid and enforceable to the maximum extent permitted under applicable laws. Further, if any court of competent jurisdiction finds that any provision of this Lease is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written as so limited, shall thereafter be construed and enforced as such.
**24.** **NEUTRAL INTERPRETATION**. Any rule of law or legal decision that would require interpretation of any ambiguities in this Lease against a particular party hereto is not applicable to this Lease and is hereby expressly waived. The provisions of this Lease shall be interpreted in a reasonable, neutral manner to affect the intentions of the parties hereto and the purposes of this Lease.
**25.** **ENTIRE AGREEMENT; AMENDMENT**. This Lease is intended to constitute a valid and enforceable legal instrument. This Lease, together with the Schedules and each agreement and/or other attachment incorporated herein by reference, constitutes the entire agreement between Lessor and Lessee with respect to the Equipment and the subject matter of this Lease. No provision of this Lease shall be amended unless in writing signed by a duly authorized representative of Lessor and Lessee.
**26.** **WAIVER**. Lessor’s failure, entirely or from time to time, to insist on compliance or enforcement of any provision of this Lease shall not affect its validity or enforceability or constitute a waiver, by Lessor, of future enforcement of that provision or of any other provision of this Lease at a later time.
**27.** **CHOICE OF LAW; JURISDICTION**. This Lease shall not be effective until signed by Lessor at its offices in Marietta, Georgia. This Lease shall be considered to have been made in the state of Georgia and shall be interpreted under and construed in accordance with the laws and regulations of the state of Georgia, without respect to its conflict of law principles. Lessee agrees to jurisdiction in the state of Georgia in any action, suit or proceeding arising out of this Lease, and concedes that it transacted business in the state of Georgia by entering into this Lease. In the event of legal action to enforce this Lease, Lessee agrees that venue may be laid in either Cobb or Fulton County, Georgia, as elected by Lessor, and waives any and all defenses in respect of and hereby agrees not to contest choice of law, jurisdiction and venue provisions of this Section 27.
**28.** **EXECUTION; EFFECTIVENESS**. This Lease may be executed in any number of, and by different parties hereto on, separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall collectively constitute one and the same agreement. Any signature delivered by a party hereto to the other party hereto via facsimile, electronic mail or similar electronic transmission shall be deemed to be an original signature hereto. Further, in accordance with the federal Electronic Signatures in Global and National Commerce Act (the “E-SIGN Act”), 15 U.S.C.A. §§ 7001-7031 (Supp. 2001), this Lease may be executed electronically or digitally and, in such event, shall serve as a binding original as if executed by hand.
[THIS SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW.]
IN WITNESS WHEREOF, each of the undersigned, first intending to be legally bound, has duly executed and delivered this Agreement as of the Effective Date.
Lessor:
**ATFP CLOUD SPV I, LP**
By ALDER TECHNOLOGY FUNDING PARTNERS, LLC, its General Partner
By: */s/ Patrick Gahan*
**Patrick Gahan, Manager**
Address for notice hereunder: 3600 Dallas Hwy #230-350, Marietta, GA 30064;
Attn: Patrick Gahan and Jonathan Lyman
E-mail address for notice hereunder:
Lessee:
**TCM CLOUD 1, LLC**
By THE CLOUD MINDERS, INC., its Manager
By: */s/ Ian Gerard* [Corporate Seal]
**Ian Gerard, Director & C.E.O.**
Address for notice hereunder: 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165;
Attn: Ian Gerard
E-mail address for notice hereunder:
[SIGNATURES CONTINUE ON FOLLOW PAGE.]
*Acknowledged and agreed to by Guarantor:*
**THE CLOUD MINDERS, INC.**
By: */s/ Ian Gerard* [Corporate Seal]
**Ian Gerard, Director & C.E.O.**
**GLOBAL DIGITAL HOLDINGS, INC.**
By: */s/ Robert C. Bissell* [Corporate Seal]
**Robert C. Bissell, Director & C.E.O.**
---
## EXHIBIT 10.21
SEC source: [ex_902226.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902226.htm)
**Exhibit 10.21**
**FIRST AMENDED AND RESTATED**
**EQUIPMENT LEASE AGREEMENT**
THIS FIRST AMENDED AND RESTATED LEASE AGREEMENT (this “Lease”), entered into effective as of September 09, 2024 (the “Effective Date”), is by and between **ATFP CLOUD SPV II, LP**, a Georgia limited partnership (“Lessor”), with an address for notice hereunder at 3600 Dallas Highway, Suite 230-350, Marietta, Georgia 30064, and **TCM CLOUD 1, LLC**, a Georgia limited liability company (“Lessee”), having an address for notice hereunder at 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165 (and, additionally, the Guarantor, as hereinafter defined and provided).
**1.** **LEASE AGREEMENT**. Lessor hereby leases to Lessee and Lessee hereby leases from Lessor all of the chattel property (the “Equipment”) described in one or more schedules attached hereto from time to time (collectively, the “Schedules”), which shall be sequentially numbered and, when attached hereto, shall be considered incorporated herein by this reference thereto. Each such Schedule must be made in writing and executed by both Lessor and Lessee, and each may be mutually updated and/or supplemented in writing from time to time upon execution by Lessor and Lessee. Whenever reference is made herein to the “Lease,” such reference shall be deemed to include each of the various Schedules identifying all items of Equipment, all of which, when taken together, constitute one undivided Lease of the Equipment.
**2.** **DELIVERY OF EQUIPMENT; ACCEPTANCE**. Lessor shall purchase the respective items of Equipment on or before the Commencement Date, as hereinafter defined, of each Schedule from vendors designated by Lessee, as provided in Schedule V, and Lessor agrees to turn over to Lessee all aspects of logistical control of vendor management with respect to the delivery and receipt of the Equipment to the Lessee (and/or Lessee’s designee) in preparation for deployment at the location specified in Section 10, and Lessee shall be responsible for ensuring the delivery and receipt of the Equipment in all respects. Lessee agrees to inspect the Equipment and to execute and deliver to Lessor an “Acknowledgment and Acceptance of Equipment by Lessee” notice, in a form suitable to Lessor, in Lessor’s sole reasonable determination, after the Equipment has been delivered to Lessee (and/or Lessee’s designee) and after Lessee is satisfied that the Equipment is satisfactory in every respect, in Lessee’s sole reasonable determination. Lessee expressly acknowledges that the Equipment is being leased to Lessee solely for commercial or business purposes and not for personal, family or household purposes. Lessee hereby authorizes Lessor to insert in the Schedules serial numbers or other identifying data with respect to the Equipment.
**3.** **INSTALLATION OF EQUIPMENT**. Lessee agrees to have Lessee’s customization center(s) deliver the Equipment, at Lessee’s sole expense, to the location specified in Section 10, and to properly install, in accordance with manufacturer’s guidelines and any local state, county and/or city ordinance, the Equipment promptly upon delivery. If the Equipment fails to function properly when tested, Lessee agrees to take all necessary action(s), at its sole expense, to repair any Equipment failures or faults so that the Equipment is fully operational after installation.
**4.** **ASSIGNMENT BY LESSEE PROHIBITED**. Without Lessor’s prior written consent, Lessee shall not (i) assign its interest in this Lease, (ii) pledge, encumber or otherwise transfer its interest in this Lease, (iii) sublease the Equipment (or any interest therein), (iv) cause or permit any lien to be placed upon the Equipment (or any interest therein), or (v) dispose of the Equipment.
**5.** **ASSIGNMENT BY LESSOR LIMITED**. Lessor may not assign this Lease Agreement to any party other than its Senior Creditor, as hereinafter defined, without the written consent of Lessee. Subject to the foregoing, this Lease inures to the benefit of and is binding upon the successors in interest and/or permitted assigns of the Lessor.
**6.** **COMMENCEMENT; RENTAL PAYMENTS; TERM**.
**(a)** **Commencement.** This Lease shall commence on the Effective Date upon proper execution and deliver hereof by Lessor and Lessee.
**(b)** **Rental Payment.** The “Monthly Rental Payment” for the Term, as hereinafter defined, shall be paid in arears commencing on the first (1st) calendar day of the calendar month immediately following each “Commencement Date” provided in the Schedules in the amount(s) per calendar month set forth in the Schedules; provided, that (i) payment of the first three (3) Monthly Rental Payments (i.e., Monthly Rental Payments one, two and three) shall be deferred until the sixth (6th) mensiversary of the Effective Date, at which time payment of three (3) Monthly Rental Payments shall be due and payable by Lesse to Lessor, and (ii) payment of the second three (3) Monthly Rental Payments (i.e., Monthly Rental Payments four, five and six) shall be deferred until the ninth (9th) mensiversary of the Effective Date, at which time payment of four (4) Monthly Rental Payments shall be due and payable by Lesse to Lessor. One (1) Monthly Rental Payment shall otherwise be made on each mensiversary of the Effective Date for the Term. Anything to the contrary provided in this Section 6(b) notwithstanding, the accelerated Lease payment obligations provided under that certain First Amended and Restated Profit Share Agreement, dated effective as of September 09, 2024, by and among Lessee, Lessor and the several other ATFP parties (as may have been and/or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Profit Share Agreement”) (e.g., without exclusion, Section 2 thereof) shall control and take precedence over any deferred Monthly Rental Payment provisions provided herein.
**(c)** **Term**. The term of this Lease (the “Term”) shall commence on the Effective Date and shall continue until the forty-eighth (48th) mensiversary of the latest Commencement Date set forth on the Schedules, subject to all renewal(s) of the Term provided under Section 6(d).
**(d)** **Term Extensions**. Following the final calendar day of the Term, as provided under Section 6(c), the Term shall automatically be extended on a month-to-month basis unless and until (i) all Purchase Options have been exercised by Lessee, in accordance with Section 6(e), or (ii) this Lease is otherwise terminated Lessor, in accordance with Section 13; provided, however, that the Monthly Rental Payment for each such renewal period shall be reduced to One & 00/100 U.S. Dollars (U.S. $1.00).
**(e)** **Purchase Option**. With respect to each Schedule of Equipment, once the Lessee has completed five (5) years of Profit sharing, in accordance with the Profit Share Agreement, Lessee may elect, at its sole option, to purchase the Equipment set forth on such Schedule (each, a “Purchase Option”) by paying to Lessor an amount equal to the greater of (i) a one-time payment that, when combined with the aggregate Profit share distributions made by Lessee under the Profit Share Agreement over and above the Monthly Rental Payments required under this Lease as of such date, is equal to the then fair market value, or (ii) a one-time payment equal to fifty percent (50%) of the aggregate of the Monthly Rental Payments (inclusive of any future modification thereto) for the Equipment set forth on such Schedule. Upon Lessee’s exercise of a Purchase Option, Lessor shall no longer have rights to any further Profit Share Distributions under the Profit Share Agreement with respect to such purchased Equipment.
**7.** **SECURITY DEPOSIT**. Lessor hereby agrees to waive any requirement that Lessee place and/or maintain a security deposit for the Equipment.
**8.** **LIMITED PREARRANGED AMENDMENTS; SPECIFIC POWER OF ATTORNEY**. Anything provided in this Lease to the contrary notwithstanding, in the event it is necessary to amend the terms of this Lease or the terms of any Schedule to reflect a change in one or more items of the Equipment, Lessee agrees that any such amendment shall be described in a letter from Lessor to Lessee, and unless, within fifteen (15) calendar days after the date of such letter, Lessee objects thereto in a writing delivered to Lessor, this Lease and any affected Schedules shall be deemed amended and such amendments shall be incorporated herein/therein as if originally set forth herein/therein. Further, Lessee authorizes Lessor or its designee to file a Uniform Commercial Code financing statement without Lessee’s signature, in form and content and from time to time as Lessor deems proper, in Lessor’s sole discretion, listing Lessee as debtor/lessee. Lessee further grants to Lessor a specific power of attorney for Lessor to sign, endorse or negotiate for Lessor’s benefit any instrument representing proceeds from any policy of insurance covering the Equipment, as more particularly provided under Section 14.
**9.** **LESSEE**’**S REPRESENTATION**. Lessee represents that its exact legal name, state of formation, location of its chief executive office and/or its place of residence (as applicable) have been correctly identified herein to Lessor; further, Lessee hereby covenants and agrees to promptly notify Lessor of any change to any of the foregoing.
**10.** **USE; EQUIPMENT LOCATION**. Lessee shall use the Equipment in a careful manner for its manufacturer-intended purposes, shall comply with all laws relating to its possession, use and maintenance, and shall not make any alterations, additions or improvements to the Equipment not contemplated under this Lease without Lessor’s prior written consent. The Equipment shall be kept at Lessee’s facility located at 5555 S. 129th E. Avenue, Tulsa, OK 74134 and shall not be removed without Lessor’s prior written consent.
**11.** **OWNERSHIP; PERSONALITY**. The Equipment is, and shall remain, the property of Lessor, and Lessee shall have no right, title or interest therein or thereto except as expressly set forth in this Lease. The Equipment shall remain chattel property even though it may be installed in or attached to real property.
**12.** **SURRENDER**. By this Lease, Lessee acquires no ownership rights in the Equipment, subject only to its future Purchase Option to purchase same. Upon the expiration or termination of any Schedules or this Lease, provided that Lessee has not exercised its Purchase Option, Lessor, at its expense, shall arrange for the removal of the equipment to include any disassembly, packing and preparation for shipping and shipping. In the event of any default pursuant to Section 20, Lessor shall make arrangements but Lessee shall pay, at its sole expense, including, without limitation, disassembly, packing, preparation for shipping, insuring and shipping, for the surrender and return the Equipment to Lessor, and Lessee shall, in such an event, be responsible for the Equipment until it is delivered to and accepted by Lessee.
**13.** **TERMINATION**.
**(a)** Following the one (1) year anniversary of the Effective Date, Lessee may, at its sole option, terminate this Lease by paying to Lessor an amount equal to (x) the sum of all remaining Monthly Rental Payments due under each Schedule to this Lease (through the initial “Schedule Expiration Date” set forth on each Schedule, respectively), plus (y) a “Termination Fee” that, when added together with the sum of all Monthly Rental Payments paid to Lessor under all of the Schedules to this Lease, produces a twenty-five percent (25%) internal rate of return to Lessor through the date on which such Termination Fee is paid. For clarity and the avoidance of doubt, the extended internal rate of return calculation (“XIRR”) shall be used for the internal rate of return calculation required under this Section 13(a); XIRR is a financial metric that calculates the annualized rate of return for investments with irregular cash flows, as such, it is the same calculation that Microsoft Excel uses within its XIRR function.
**(b)** At the expiration of the Term, as may be duly extended pursuant to Section 6(d) and provided Lessee declines to affect the entirety of its then available Purchase Options in accordance with Section 6(e), Lessor may provide notice to Lessor of its intent to terminate this Lease**.** Thereafter, Lessee shall make arrangements, at its sole expense, including, without limitation, disassembly, packing, preparation for shipping, insuring and shipping, to surrender and return the Equipment to Lessor, and Lessee shall, in such an event, be responsible for the Equipment until it is delivered to and accepted by Lessee.
**(c)** Anything contained in this Section 13 to the contrary notwithstanding, the Parties may agree, in writing, (i) that, at the expiration of the Term, this Lease may be continued on such terms as the Parties may hereafter agree, or (ii) that this Lease shall be terminated prior to the expiration of the Term**.**
**14.** **LOSS AND DAMAGE; INSURANCE**.
**(a)** Property Insurance. Lessee shall bear the entire risk of loss, theft, damage or destruction of the Equipment from any cause whatsoever. Lessee shall provide and maintain insurance policy(ies) against loss, theft, damage or destruction of the Equipment in an amount not less than the full replacement value of the Equipment, under which Lessor shall be named as the primary loss payee under each such policy’s loss payee endorsement. For the avoidance of doubt, any such loss does not relieve Lessee of any obligation under this Lease. In the event of damage to or loss of any item of Equipment, Lessee shall immediately notify Lessor, in writing. Lessee shall have five (5) business day following such event of damage or loss to either repair or, if the Equipment is not repairable, replace the damaged Equipment at Lessee’s sole expense. If insurance proceeds are used to fully comply with the Lessee’s obligations under this Lease, any balance of any such proceeds shall thence go to Lessee upon satisfaction if full of such Lessee obligations.
**(b)** Liability Insurance. Lessee shall also provide and maintain comprehensive general all-risk liability insurance, including, without limitation, product liability coverage, insuring Lessee, and Lessor as an additional insured with a severability of interest endorsement or its equivalent, against any and all loss or liability for damages either to persons or otherwise, which might result from or happen in connection with the condition, use or operation of the Equipment, with such limits and with an insurer as are satisfactory to Lessor, in Lessor’s sole reasonable opinion. Each such policy shall expressly provide that said insurance as to Lessee and its assigns shall not be invalidated by any act, omission or neglect of Lessor and cannot be canceled without thirty (30) days’ prior written notice to Lessor.
**(c)** Certificates of Insurance; Force Placement. As to each policy required under this Section 14, Lessee shall furnish to Lessor a certificate of insurance from the insurer, which certificate shall evidence the insurance coverage required by this Section 14 and shall designate Lessor as loss payee and/or additional insured, as applicable. Lessor shall have no obligation to ascertain the existence or adequacy of insurance, or to provide any insurance coverage for the Equipment or for Lessee’s benefit. Lessor’s lack of insistence on Lessee’s compliance with this Section 14(c), with respect to providing such certificates to Lessor, shall not relieve Lessor of its obligations under this Section 14. If Lessee fails to procure or maintain said insurance, Lessor shall have the right, but shall not be obligated, to affect such insurance. If Lessor makes such insurance payment, it shall notify Lessee of such payment, and Lessee shall repay to Lessor the amount thereof with thirty (30) calendar days after such notice is provided to Lessee or interest at a rate of eighteen percent (18%) per annum shall begin accruing on such amounts until paid in full by Lessee, and Lessee shall further owe to Lessor such additional amounts under this Lease.
**15.** **LIENS; TAXES**. Except for its first-position lienholder (the “Senior Creditor”), if any, Lessor shall keep the Equipment free and clear of all levies, liens and encumbrances; provided, however, that Lessee shall be responsible for timely payment of all taxes and fees (local, state and federal) that may now or hereafter be placed on the leasing, rental, sale, possession or use of the Equipment, including, all taxes on or measured by Lessee’s net income. Lessee shall pay any chattel/personal property tax owed on the Equipment. If Lessor is billed for such charges or taxes or if Lessee fails to pay such charges or taxes, Lessor may, in its sole discretion, make payment in respect thereof. If Lessor makes such tax payment, it shall notify Lessee of such payment, and Lessee shall repay to Lessor the amount thereof with thirty (30) calendar days after such notice is provided to Lessee or interest at a rate of eighteen percent (18%) per annum shall begin accruing on such amounts until paid in full by Lessee, and Lessee shall further owe to Lessor such additional amounts under this Lease.
**16.** **INDEMNITY**. Lessee shall indemnify Lessor against any claims, actions, damages or liabilities, including, without limitation, all attorneys’ fees, arising out of or connected with its transportation and use of, and/or lease interest in the Equipment. Such indemnification shall survive the expiration, cancellation or termination of this Lease. Lessee waives any immunity Lessee may have under any industrial insurance act with regard to its indemnification obligation hereunder.
**17.** **GUARANTY**. THE CLOUD MINDERS, INC., a Delaware profit corporation, and GLOBAL DIGITAL HOLDINGS, INC., a Georgia profit corporation (each, jointly and severally, the “Guarantor”), each does hereby absolutely, unconditionally and irrevocably guarantee to Lessor, as if the Guarantor was the Lessee, the full, faithful and prompt performance of all obligations imposed on Lessee by the terms of this Lease, including, without limitation, (i) payment of any and all Monthly Rent Payments and other amounts whatsoever payable by Lessee under this Lease and/or the Profit Share Agreement, and (ii) performance and observance of all the covenants, terms, conditions and agreements of this Lease and the Profit Share Agreement to be performed and observed by Lessee hereunder and/or thereunder. The guaranty created hereby shall be enforceable by Lessor in an action against Guarantor, jointly and severally, without the necessity of any suit, action or proceeding by Lessor of any kind or nature whatsoever against Lessee or other co-guarantor, without the necessity of any notice to Guarantor of Lessee’s default or breach under this Lease or the Profit Share Agreement, and without the necessity of any other notice or demand to Guarantor to which Guarantor might otherwise be entitled, all of which notice Guarantor hereby expressly waives. Guarantor hereby agrees that the validity of the guaranty created hereby and the obligations of Guarantor hereunder shall not be terminated, affected, diminished or impaired by reason of the assertion or the failure to assert by Lessor against Lessor or other co-guarantor, if any, any of the rights or remedies reserved to Lessor pursuant to the provisions of this Lease or the Profit Share Agreement, or any other remedy or right that Lessee may have at law or in equity or otherwise. The joint and several obligations of Guarantor hereunder shall in no way be affected, modified or diminished by reasons of any assignment, renewal, modification or extension of this Lease or the Profit Share Agreement, none of which shall require the permission of Guarantor. All of Lender's rights and remedies under this Lease (including the guaranty created hereby) or the Profit Share Agreement are intended to be distinct, separate and cumulative, and no such right or remedy herein or therein is intended to be the exclusion of or a waiver of any other.
**18.** **SERVICE CHARGES**. Lessor agrees that the Equipment is leased without any additional service charges or fees, unless otherwise expressly set forth in this Lease.
**19.** **TIME OF ESSENCE**. Time is of the essence with respect to each provision of this Lease, and this provision shall not be impliedly waived by the acceptance on occasion of late or defective performance, as more particularly provided, without exclusion, under Section 25.
**20.** **DEFAULT**. Lessee shall be in default of this Lease if:
**(a)** Lessee fails to perform, keep and/or observe any of the obligations, covenants, terms, conditions and agreements of this Lease (including each and every Schedule attached hereto) to be performed, kept and/or observed by Lessee under this Lease, and such failure shall continue for a period of ten (10) calendar days;
**(b)** the Equipment, or any part thereof, shall be subject to any lien, levy, seizure, assignment, transfer, bulk transfer, encumbrance, application, attachment, execution, sublease or sale, without prior written consent of Lessor; and/or
**(c)** Lessee fails to perform, keep and/or observe any of the obligations, covenants, terms, conditions and agreements of the Profit Share Agreement, as incorporated herein by reference thereto, to be performed, kept and/or observed by Lessee under said agreements, and such failure shall continue for a period of ten (10) calendar days**.**
**21.** **REMEDIES**. No right or remedy conferred upon or reserved to Lessor is exclusive of any other right or remedy herein, by law or by equity, each as provided or permitted, but each shall be cumulative of every other right or remedy provided herein or by law, by equity, by statute or otherwise, whether now existing or hereafter arising, and may be enforced concurrently therewith or from time to time. No single or partial exercise by Lessor of any such right(s) or remedy(ies) shall preclude any other or further exercise of any other right(s) or remedy(ies). If Lessee is in default, Lessor, with or without notice to Lessee, shall have the right to exercise any one or more of the following remedies, concurrently or separately, and without any election of remedies being deemed to have been made:
**(a)** Lessor may seek an injunction or other equitable relief; and/or
**(b)** Lessor may recover from Lessee (and/or Guarantor) direct, incidental, consequential and/or special damages, plus any and all reasonable costs incurred in respect of the enforcement of such remedy(ies), including, without limitation, attorneys’ fees**.**
**22.** **NOTICES**. Each and every notice required or permitted to be given under this Agreement must be given in writing, and shall be deemed given when (i) personally delivered, (ii) on the third (3rd) business day after mailing by USPS registered or certified mail, postage prepaid, with return receipt requested, (iii) on the immediately following business day after deposit with any nationally recognized overnight courier (e.g., without limitation, FedEx or UPS), or (iv) on the immediately following business day after being sent via electronic mail (unless receipt thereof is sooner acknowledge by the recipient via reply email). Notice to any party hereto is valid if sent to it at such party’s address (mailing or electronic mail, as applicable) set forth on the signature page hereof; provided, that, each party hereto may change its address for notice hereunder by giving written notice to the other party hereto in accordance with the provisions of this Section 22. Any notice made to Guarantor in respect of this Lease shall be made to Lessee in accordance with this Section 22, and Lessee hereby agrees to accept such notice on behalf of Guarantor and promptly deliver the same to Guarantor.
**23.** **SEVERABILITY**. If any provision of this Lease is held by a court of competent jurisdiction to be invalid or unenforceable, for any reason, the remaining provisions hereof shall continue to be valid and enforceable to the maximum extent permitted under applicable laws. Further, if any court of competent jurisdiction finds that any provision of this Lease is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written as so limited, shall thereafter be construed and enforced as such.
**24.** **NEUTRAL INTERPRETATION**. Any rule of law or legal decision that would require interpretation of any ambiguities in this Lease against a particular party hereto is not applicable to this Lease and is hereby expressly waived. The provisions of this Lease shall be interpreted in a reasonable, neutral manner to affect the intentions of the parties hereto and the purposes of this Lease.
**25.** **ENTIRE AGREEMENT; AMENDMENT**. This Lease is intended to constitute a valid and enforceable legal instrument. This Lease, together with the Schedules and each agreement and/or other attachment incorporated herein by reference, constitutes the entire agreement between Lessor and Lessee with respect to the Equipment and the subject matter of this Lease. No provision of this Lease shall be amended unless in writing signed by a duly authorized representative of Lessor and Lessee.
**26.** **WAIVER**. Lessor’s failure, entirely or from time to time, to insist on compliance or enforcement of any provision of this Lease shall not affect its validity or enforceability or constitute a waiver, by Lessor, of future enforcement of that provision or of any other provision of this Lease at a later time.
**27.** **CHOICE OF LAW; JURISDICTION**. This Lease shall not be effective until signed by Lessor at its offices in Marietta, Georgia. This Lease shall be considered to have been made in the state of Georgia and shall be interpreted under and construed in accordance with the laws and regulations of the state of Georgia, without respect to its conflict of law principles. Lessee agrees to jurisdiction in the state of Georgia in any action, suit or proceeding arising out of this Lease, and concedes that it transacted business in the state of Georgia by entering into this Lease. In the event of legal action to enforce this Lease, Lessee agrees that venue may be laid in either Cobb or Fulton County, Georgia, as elected by Lessor, and waives any and all defenses in respect of and hereby agrees not to contest choice of law, jurisdiction and venue provisions of this Section 27.
**28.** **EXECUTION; EFFECTIVENESS**. This Lease may be executed in any number of, and by different parties hereto on, separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall collectively constitute one and the same agreement. Any signature delivered by a party hereto to the other party hereto via facsimile, electronic mail or similar electronic transmission shall be deemed to be an original signature hereto. Further, in accordance with the federal Electronic Signatures in Global and National Commerce Act (the “E-SIGN Act”), 15 U.S.C.A. §§ 7001-7031 (Supp. 2001), this Lease may be executed electronically or digitally and, in such event, shall serve as a binding original as if executed by hand.
[THIS SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW.]
IN WITNESS WHEREOF, each of the undersigned, first intending to be legally bound, has duly executed and delivered this Agreement as of the Effective Date.
Lessor:
**ATFP CLOUD SPV II, LP**
By: ALDER TECHNOLOGY FUNDING PARTNERS, LLC, its General Partner
By: */s/ Patrick Gahan*
**Patrick Gahan, Manager**
Address for notice hereunder: 3600 Dallas Hwy #230-350, Marietta, GA 30064;
Attn: Patrick Gahan and Jonathan Lyman
E-mail address for notice hereunder:
Lessee:
**TCM CLOUD 1, LLC**
By: THE CLOUD MINDERS, INC., its Manager
By: */s/ Ian Gerard* [Corporate Seal]
**Ian Gerard, Director & CEO**
Address for notice hereunder: 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165;
Attn: Ian Gerard
E-mail address for notice hereunder:
[SIGNATURES CONTINUE ON FOLLOW PAGE.]
*Acknowledged and agreed to by Guarantor:*
**THE CLOUD MINDERS, INC.**
By: */s/ Ian Gerard* [Corporate Seal]
**Ian Gerard, Director & CEO**
**GLOBAL DIGITAL HOLDINGS, INC.**
By: */s/ Robert C. Bissell* [Corporate Seal]
**Robert C. Bissell, Director & C.E.O.**
---
## EXHIBIT 10.22
SEC source: [ex_902227.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902227.htm)
**Exhibit 10.22**
**SECOND AMENDED AND RESTATED PROFIT SHARE AGREEMENT**
THIS SECOND AMENDED AND RESTATED PROFIT SHARE AGREEMENT (this “Agreement”), dated effective as of December 12, 2024 (the “Effective Date”), is by and among ATFP CLOUD SPV I, LP; ATFP CLOUD SPV II, LP; ATFP CLOUD SPV III, LP; and ATFP CLOUD SPV IV, LP each a Georgia limited partnership (collectively, “ATFP”), and TCM CLOUD 1, LLC, an Oklahoma limited liability company (“TC1”); ATFP and TC1 may hereinafter be referred to, individually, as a “Party” and, collectively, as the “Parties.”
RECITALS:
WHEREAS, this Agreement relates to certain Equipment, as aggregately defined and set forth in (i) those two (2) certain Equipment Lease Agreements, each dated November 01, 2023, by and between TC1 and each ATFP CLOUD SPV I, LP and ATFP CLOUD SPV II, LP, respectively, (ii) that certain Equipment Lease Agreement, dated September 09, 2024, by and between TC1 and ATFP CLOUD SPV III, LP, and (iii) that certain Equipment Lease Agreement, dated December 12, 2024, by and between TC1 and ATFP CLOUD SPV IV, LP (as may have been and/or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, collectively, the “Leases”), which are each incorporated herein by this reference thereto;
WHEREAS, ATFP purchased the Equipment and TC1 acquired a leasehold interest in the Equipment from ATFP pursuant to the Leases, and the Parties desire to accelerate the Monthly Rental Payments contemplated under the Leases in accordance with the terms hereof;
WHEREAS, TC1 expects to produce revenue utilizing the Equipment by way of providing enterprise cloud, artificial intelligence and other hosted services to its customers at that certain facility located at 1130 Powers Ferry Place, Marietta, GA 30037 USA, or such other facility as the Parties may, from time to time, otherwise agree upon (the “Venture”);
WHEREAS, this Agreement is being entered into to govern the relationship between the Parties with respect to certain expense allocations of the Venture permitted in order to determine the Profits, as hereinafter defined, which are anticipated to be generated by the Venture through the utilization of the Equipment, and to govern the Profit Share Distributions, as hereinafter defined, resulting therefrom; and
WHEREAS, any capitalized term utilized in this Agreement but not particularly defined herein shall have the meaning ascribed to it under the Leases.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, first intending to be legally bound, do hereby agree to the following provisions.
PROFIT SHARE AGREEMENT Schedule A
AGREEMENT:
**ARTICLE I**
Expenses of the Venture
**1.** **TC1 Operating Expenses****.** The expenses of TC1 incurred in respect of the Venture provided under this Section 1 are referred to hereinafter as “Operating Expenses” and all such Operating Expenses allocations shall be governed as hereinafter provided.
**(a)** All Operating Expenses set forth below relate to each Five Million & 00/100 U.S. Dollar (U.S. $5,000,000.00) tranche of Equipment purchased in respect of the Leases and shall be increased or decreased, pro rata, for any different dollar amount of Equipment.
**(b)** All such Operating Expenses shall be the only allowable expenses of TC1, such that the monthly revenue produced by the Equipment minus the Operating Expenses shall be the “Profits.”
**(c)** Once the Equipment has been deployed by or on behalf of TC1 in operational status with services being sold to TC1 customers for a full calendar month, TC1 shall be permitted to include monthly Operating Expenses; provided, however, that there shall be only the following minimum and maximum allowable expenses comprising the Operating Expenses (for each Five Million & 00/100 U.S. Dollar (U.S. $5,000,000.00) tranche of Equipment):
| Line item | Electricity | Payroll * | The Leases | All Other Expenses † |
| --- | --- | --- | --- | --- |
| Minimum | $13,340.00 | $53,670.00 | $124,425.21 | $0.00 |
| Maximum | $64,060.00 | $142,870.00 | ‡ | $33,170.00 |
* including W-2 labor, 1099 labor, employee benefits and payroll taxes.
† e.g., licenses, internet, network services, repairs, maintenance, insurance, rent, etc.
‡ the aggregate of all remaining Monthly Rental Payments that Lessee is obligated to pay during the initial Terms of all Leases.
(i) Without the prior written consent of AFTP, electricity and/or the hosting rate relating to operation of the Equipment shall not exceed Zero & 09/100 U.S. Dollars (U.S. $0.09) per kilowatt hour (kWh) for Equipment deployed in an immersion tank.
(ii) Monthly allowable amounts for payroll shall be determined by multiplying the monthly gross revenue generated by twenty-five and one-half percent (25.5%) but, in each case, shall be subject to the minimums and maximums in the table above.
(iii) No other expenses shall be considered Operating Expenses nor be allowable in the monthly Profit calculation without the prior written consent of AFTP.
**2.** **Profit Share Distributions****.**
**(a)** Within ten (10) calendar days following the final calendar day of each calendar month, TC1 shall provide to ATFP a report of the monthly revenue produced by the Venture during such calendar month, subtract an itemized listing of Operating Expenses (the difference returned representing the Profits for each such period of time), and distribute one hundred (100%) of the Profits to ATFP within five (5) calendar days thereafter (each, a “Profit Share Distribution”). Each such Profit Share Distribution shall be applied upon receipt by ATFP towards the Leases (proportionally in accordance with Schedule A, as provided in Section 2(b)) until the entirety of the Monthly Rental Payments scheduled for the entirety of the initial Term of each of the Leases have been satisfied in full (there shall be no discounts applied for early payment). With respect to each Schedule of Equipment under each of the Leases, once all of the Monthly Rental Payments have been satisfied in full in respect of such Schedule, TC1 shall thereafter be required to pay seventy percent (70%) of the Profits from the related Equipment to ATFP until the fifth (5th) anniversary the first (1st) calendar day of the first (1st) full calendar month that such Equipment began generating Profits.
**(b)** All Profit Share Distributions required under this Agreement are to be made by TC1 to ATFP (or its designee) in accordance with proportions set forth on Schedule A, attached hereto and incorporated herein by this reference thereto, as such schedule may be duly updated from time to time by ATFP. All Profit Share Distributions shall be made via electronic funds transfer of good and immediately available currency of the United States to the account(s) specified in writing from time to time by ATFP.
**(c)** Other Expenses Matters. Any action to be taken in respect of the Operating Expenses not expressly addressed herein shall only be taken upon mutual written agreement of the Parties.
**ARTICLE II**
Sales and Transfers
**1.** **General Restrictions****.** Except as required by ATFP’s Senior Creditor(s), no Party (or any Party acting on behalf of any Party ) may sell or transfer any of such Party’s interest in this Agreement, whether presently owned or hereafter acquired and/or whether presently existing or hereafter arising without the prior written consent of the other Party. Any attempted sale or transfer that violates the terms of this Agreement, shall be void and shall not be binding upon, or recognized by, the Venture or the Parties. For the purposes of this Agreement, the phrase “sale or transfer” includes any sale, pledge, hypothecation, encumbrance, gift, devise, bequest or other transfer by any Party of any of its interest in this Agreement, whether or not the transfer would be made (i) for value or not for value, or (ii) voluntarily or involuntarily (by operation of law or otherwise).
**ARTICLE III**
Miscellaneous Provisions
**1.** **Notices****.** Each and every notice required or permitted to be given under this Agreement must be given in writing, and shall be deemed given when (i) personally delivered, (ii) on the third (3rd) business day after mailing by USPS registered or certified mail, postage prepaid, with return receipt requested, (iii) on the immediately following business day after deposit with any nationally recognized overnight courier (*e.g*., without limitation, FedEx or UPS), or (iv) on the immediately following business day after being sent via electronic mail (unless receipt thereof is sooner acknowledge by the receiving Party via reply email). Notice to any Party is valid if sent to it at such Party’s address (mailing or electronic mail, as applicable) set forth on the signature page hereof; provided, that, each Party may change its address for notice hereunder by giving written notice to the other Party in accordance with the provisions of this Article VI.1. All parties comprising ATFP may be noticed by TC1 collectively under one notice in respect of any matter required or permitted to be given under this Agreement.
**2.** **Assignment****.** No Party shall be entitled to assign, cede, sub-contract, delegate or in any other manner transfer any benefit, rights and/or obligations in terms of this Agreement, without the prior written consent of all other Parties.
**3.** **No Third-Party Beneficiaries****.** None of the provisions of this Agreement, or any agreement or document contemplated hereby, is intended to grant any right or benefit to any natural person or legal entity who or which is not a Party under this Agreement.
**4.** **Cross-Default****.** Any event of default under this Agreement shall constitute an event of default under the Lease, and vice versa.
**5.** **Governing Law****.** This Agreement shall be governed by and construed in accordance with the laws of the state of Georgia, without giving effect to its conflict of laws principles. Any and all disputes between any, or among all of the Parties shall be resolved in accordance with the relevant dispute resolution provisions of the Profit Share Agreement.
**6.** **Entire Agreement; Neutral Interpretation****.** This Agreement, together with each agreement and/or attachment incorporated herein by reference, constitutes the entire agreement among the Parties regarding the subject matter hereof and supersedes all prior agreements regarding such subject matter. Further, this Agreement has been negotiated at arm’s length and between persons sophisticated and knowledgeable in the subject matter of this Agreement. Additionally, each Party has been, or has been afforded the opportunity to have been, represented by experienced and knowledgeable legal counsel. Accordingly, any rule of law or legal decision that would require interpretation of any ambiguities in this Agreement against a particular Party is not applicable to this Agreement and is hereby expressly waived. The provisions of this Agreement shall be interpreted in a reasonable, neutral manner to affect the intentions of the Parties and the purposes of this Agreement.
**7.** **Amendment****.** This Agreement may only be amended by written agreement of the Parties. Additionally, this Agreement is intended to amend and supplant in the entirety that certain Profit Share Agreement, dated September 09, 2024, by and between ATFP CLOUD SPV I, LP and ATFP CLOUD SPV II, LP, ATFP CLOUD SPV III, LP and TC1 (as said agreement may have been amended, modified, supplemented, extended, renewed, restated or replaced).
**8.** **Severability****.** If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, for any reason, the remaining provisions hereof shall continue to be valid and enforceable to the maximum extent permitted under applicable laws. Further, if any court of competent jurisdiction finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision shall be deemed to be written as so limited, shall thereafter be construed and enforced as such.
**9.** **Termination****.** This Agreement shall terminate immediately upon the date all of the Leases have been duly terminated in accordance with the terms thereof, unless sooner terminated through mutual written agreement of the Parties.
**10.** **Waiver****.** Any Party’s failure, entirely or from time to time, to insist on compliance or enforcement of any provision of this Agreement shall not affect its validity or enforceability or constitute a waiver, by such Party or any other Party , of future enforcement of that provision or of any other provision of this Agreement at a later time.
**11.** **Survival.** Each provision of this Agreement that by its nature is intended to survive the termination of this Agreement shall survive such termination, regardless of the cause of termination.
**12.** **Binding Effect****.** This Agreement shall be binding upon and enforceable by and against the Parties and their respective executors, administrators, legal representatives, heirs, beneficiaries, successors in interest and permitted assigns.
**13.** **Execution; Effectiveness****.** This Agreement may be executed in any number of, and by different Parties on, separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall collectively constitute one and the same agreement. Any signature delivered by a Party to the other Parties via facsimile, electronic mail or similar electronic transmission shall be deemed to be an original signature hereto. Further, in accordance with the federal Electronic Signatures in Global and National Commerce Act (the “E-SIGN Act”), 15 U.S.C.A. §§ 7001-7031 (Supp. 2001), this Agreement may be executed electronically or digitally and, in such event, shall serve as a binding original as if executed by hand.
[THIS SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW.]
IN WITNESS WHEREOF, each Party, first intending to be legally bound, has duly executed and delivered this Agreement as of the Effective Date.
AFTP:
**ATFP CLOUD SPV I, LP**
By ALDER TECHNOLOGY FUNDING PARTIES, LLC, its General Partner
By: */s/ Patrick Gahan*
**Patrick Gahan, Manager**
Address for notice hereunder: 3600 Dallas Hwy #230-350, Marietta, GA 30064;
Attn: Patrick Gahan and Jonathan Lyman
Lyman E-mail address for
notice hereunder:
**ATFP CLOUD SPV II, LP**
By ALDER TECHNOLOGY FUNDING PARTIES, LLC, its General Partner
By: */s/ Patrick Gahan*
**Patrick Gahan, Manager**
Address for notice hereunder: 3600 Dallas Hwy #230-350, Marietta, GA 30064;
Attn: Patrick Gahan and Jonathan Lyman
Lyman E-mail address for
notice hereunder:
**ATFP CLOUD SPV III, LP**
By FLUENT ATFP, LLC, its General Partner
By: */s/ Patrick Gahan*
**Patrick Gahan, Manager**
Address for notice hereunder: 3600 Dallas Hwy #230-350, Marietta, GA 30064;
Attn: Patrick Gahan and Steve Gertz
Lyman E-mail address for
notice hereunder:
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
**ATFP CLOUD SPV IV, LP**
By ATFP SGCA, LLC, its General Partner
By: */s/ Patrick Gahan*
**Patrick Gahan, Manager**
Address for notice hereunder: 3600 Dallas Hwy #230-350, Marietta, GA 30064;
Attn: Patrick Gahan and Steve Gertz
Lyman E-mail address for
notice hereunder:
TC1:
**TCM CLOUD 1, LLC**
By THE CLOUD MINDERS, INC., its Manager
By: */s/ Ian Gerard*
**Ian Gerard, Director & C.E.O.**
Address for notice hereunder: 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165;
Attn: Ian Gerard
Lyman E-mail address for
notice hereunder:
*Acknowledged by Lease Guarantor:*
**THE CLOUD MINDERS, INC.**
By: */s/ Ian Gerard*
**Ian Gerard, Director & C.E.O.**
---
## EXHIBIT 10.23
SEC source: [ex_902228.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902228.htm)
**Exhibit 10.23**
***SERVICE AGREEMENT***
This Contract for Services is made effective as of September 01, 2023, by and between Alder Technology, LLC a Georgia limited liability company of 3600 Dallas Hwy #230-350, Marietta, Georgia 30064 (the “Recipient”), and The Cloud Minders, a Delaware limited liability company of 185 Faro Court, Unit 2, Shepherdsville, KY, 40165 (the “Provider”).
**1.** **DESCRIPTION OF SERVICES.** Beginning on September 01, 2023, The Cloud Minders will provide to Alder Technology, LLC the following services (collectively, the “Services”):
Provider will receive, install, set up, and manage GPUs, and ancillary equipment (as described below). Provider will set up equipment with Provider’s custom software to facilitate access to the marketplace for generating revenue through the sale of the processing power to perform Artificial Intelligence and related services to the general market. Such marketplace sales of processing power will be managed by the Provider.
Description of Equipment (the “**Equipment**”)
| Item | Description | Unit Cost | Units Needed | Total GPUs | Subtotal |
| --- | --- | --- | --- | --- | --- |
| 8x V100 | 8x V100 server | $4,692 | 4 | 32 | $18,768 |
| 8x A4000 | 8x A4000 server | $5,092 | 10 | 80 | $50,920 |
| 8x ADA4000 | 8x ADA4000 server | $10,292 | 10 | 80 | $102,920 |
| Server Chassis | AsRock 3U8G+ 30A 240V - Derated to | $1,200 | 24 | 192 | $28,800 |
| 240v Circuits | 5.7kW | $1,250 | 22 | | $27,500 |
| SFP Switch | | $400 | 4 | | $1,600 |
| SFP Router | | $1,300 | 2 | | $2,600 |
| PDUs | | $375 | 22 | | $8,250 |
| Provider Contribution | | | | | ($1,358) |
| Total | | | | | $240,000 |
Service Provider will cause the following portion of the Profits generated by the Equipment to be paid to the Recipient.
1. Month 1: No payment (due to lead times/setup/onboarding).
2. Months 2-18: Fixed payments of $14,000/month.
3. Months 19-36: Fixed payments to recipient of $11,100/month.
4. Month 37 thru the full lifespan of the Equipment: 25% of Net Profits generated by the Equipment
**2.** **PAYMENT.** Payment shall be made to Provider in the total amount of $240,000.00 upon execution of this Contract.
Payment shall be for the purchase of the Equipment and shall remain the property of the Recipient at all times.
In addition to any other right or remedy provided by law, if Alder Technology, LLC fails to pay for the Services when due, The Cloud Minders has the option to treat such failure to pay as a material breach of this Contract, and may cancel this Contract and/or seek legal remedies.
**3.** **TERM.** The end of the useful life of the Equipment, when the Equipment can no longer generate sufficient revenue to produce a profit (the “Useful Life”).
**4.** **WORK PRODUCT OWNERSHIP.** Any copyrightable works, ideas, discoveries, inventions, patents, products, or other information (collectively the “Work Product”) developed in whole or in part by Provider in connection with the Services will be the exclusive property of Provider. Upon request, Recipient will execute all documents necessary to confirm or perfect the exclusive ownership of Provider to the Work Product.
**5.** **CONFIDENTIALITY.** Provider, and its employees, agents, or representatives will not at any time or in any manner, either directly or indirectly, use for the personal benefit of Provider, or divulge, disclose, or communicate in any manner, any information that is proprietary to Recipient. Provider and its employees, agents, and representatives will protect such information and treat it as strictly confidential. This provision will continue to be effective after the termination of this Contract. Any oral or written waiver by Recipient of these confidentiality obligations which allows Provider to disclose Recipient’s confidential information to a third party will be limited to a single occurrence tied to the specific information disclosed to the specific third party, and the confidentiality clause will continue to be in effect for all other occurrences.
Upon termination of this Contract, Provider will return to Recipient all records, notes, documentation and other items that were used, created, or controlled by Provider during the term of this Contract.
**6.** **INDEMNIFICATION**. Provider agrees to indemnify and hold Recipient harmless from all claims, losses, expenses, fees including attorney fees, costs, and judgments that may be asserted against Recipient that result from the acts or omissions of Provider and/or Provider’s employees, agents, or representatives.
**7.** **WARRANTY.** Provider shall provide its services and meet its obligations under this Contract in a timely and workmanlike manner, using knowledge and recommendations for performing the services which meet generally acceptable standards in Provider’s community and region, and will provide a standard of care equal to, or superior to, care used by service providers similar to Provider on similar projects.
**8.** **DEFAULT.** The occurrence of any of the following shall constitute a material default under this Contract:
a. The failure to make a required payment when due.
b. The insolvency or bankruptcy of either party.
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c. The subjection of any of either party’s property to any levy, seizure, general assignment for the benefit of creditors, application or sale for or by any creditor or government agency.
d. The failure to make available or deliver the Services in the time and manner provided for in this Contract.
**9.** **ATTORNEYS**’ **FEES AND COLLECTION COSTS.** If there is dispute relating to any provisions in this Contract, the prevailing party is entitled to, and the non-prevailing party shall pay, the costs and expenses incurred by the prevailing party in the dispute, including but not limited to all out-of-pocket costs of collection, court costs, and reasonable attorney fees and expenses.
**10.** **REMEDIES**. In addition to any and all other rights a party may have available according to law, if a party defaults by failing to substantially perform any provision, term or condition of this Contract (including without limitation the failure to make a monetary payment when due), the other party may terminate the Contract by providing written notice to the defaulting party. This notice shall describe with sufficient detail the nature of the default. The party receiving such notice shall have 30 days from the effective date of such notice to cure the default(s). Unless waived in writing by a party providing notice, the failure to cure the default(s) within such time period shall result in the automatic termination of this Contract.
**11.** **FORCE MAJEURE.** If performance of this Contract or any obligation under this Contract is prevented, restricted, or interfered with by causes beyond either party’s reasonable control (“Force Majeure”), and if the party unable to carry out its obligations gives the other party prompt written notice of such event, then the obligations of the party invoking this provision shall be suspended to the extent necessary by such event. The term Force Majeure shall include, without limitation, acts of God, plague, epidemic, pandemic, outbreaks of infectious disease or any other public health crisis, including quarantine or other employee restrictions, fire, explosion, vandalism, storm or other similar occurrence, orders or acts of military or civil authority, or by national emergencies, insurrections, riots, or wars, or strikes, lock-outs, work stoppages or other labor disputes, or supplier failures. The excused party shall use reasonable efforts under the circumstances to avoid or remove such causes of non-performance and shall proceed to perform with reasonable dispatch whenever such causes are removed or ceased. An act or omission shall be deemed within the reasonable control of a party if committed, omitted, or caused by such party, or its employees, officers, agents, or affiliates.
**12.** **DISPUTE RESOLUTION.** The parties will attempt to resolve any dispute arising out of or relating to this Agreement through friendly negotiations amongst the parties. If the matter is not resolved by negotiation within 30 days, the parties will resolve the dispute using the below Alternative Dispute Resolution (ADR) procedure.
Any controversies or disputes arising out of or relating to this Agreement will be resolved by binding arbitration under the rules of the American Arbitration Association. The arbitrator’s award will be final, and judgment may be entered upon it by any court having proper jurisdiction.
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**13.** **ENTIRE AGREEMENT.** This Contract contains the entire agreement of the parties, and there are no other promises or conditions in any other agreement whether oral or written concerning the subject matter of this Contract. This Contract supersedes any prior written or oral agreements between the parties.
**14.** **SEVERABILITY.** If any provision of this Contract will be held to be invalid or unenforceable for any reason, the remaining provisions will continue to be valid and enforceable. If a court finds that any provision of this Contract is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision will be deemed to be written, construed, and enforced as so limited.
**15.** **AMENDMENT.** This Contract may be modified or amended in writing by mutual agreement between the parties, if the writing is signed by the party obligated under the amendment.
**16.** **GOVERNING LAW.** This Contract shall be construed in accordance with the laws of the State of Georgia.
**17.** **NOTICE.** Any notice or communication required or permitted under this Contract shall be sufficiently given if delivered in person or by certified mail, return receipt requested, to the address set forth in the opening paragraph or to such other address as one party may have furnished to the other in writing.
**18.** **WAIVER OF CONTRACTUAL RIGHT.** The failure of either party to enforce any provision of this Contract shall not be construed as a waiver or limitation of that party’s right to subsequently enforce and compel strict compliance with every provision of this Contract.
**19.** **ATTORNEY**’**S FEES TO PREVAILING PARTY.** In any action arising hereunder or any separate action pertaining to the validity of this Agreement, the prevailing party shall be awarded reasonable attorney’s fees and costs, both in the trial court and on appeal.
**20.** **CONSTRUCTION AND INTERPRETATION.** The rule requiring construction or interpretation against the drafter is waived. The document shall be deemed as if it were drafted by both parties in a mutual effort.
**21.** **ASSIGNMENT.** Neither party may assign or transfer this Contract without the prior written consent of the non-assigning party, which approval shall not be unreasonably withheld.
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written.
Service Recipient:
Alder Technology, LLC
By: */s/ Brad Noonan* Date: 8/30/2023
Brad Noonan
Service Provider:
The Cloud Minders, LLC
By: */s/ Ian Gerard* Date: 8/30/2023
Ian Gerard
5
---
## EXHIBIT 10.24
SEC source: [ex_902229.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902229.htm)
**Exhibit 10.24**
**PARKING AREA LEASE**
This Parking Area Lease (“Lease”) is entered into as of this 1st day of December, 2022 (the “Effective Date”), between **5555** **Property Developers, LLC** (“Landlord”) **T20** **Mining Group, LLC**. (“Tenant”).
**Recitals**
A. Landlord is the fee owner of real property situated at 5555 S 129th E Avenue, Tulsa County, Tulsa, Oklahoma.
B. Tenant desires to lease a portion of the Property from Landlord, and Landlord desires to lease a portion of the Property to Tenant.
**Agreement**
1. Term. The term of this Lease shall commence on the Effective Date (the “Commencement Date”) and shall proceed for three (3) months (the “Lease Term”) ending on the last day of the third (3rd) full calendar month after the Commencement Date (the “Expiration Date”).
2. Monthly Rent. Tenant agrees to pay Landlord, without prior notice or demand, rent (the “Base Rent”) for Tenant’s use of the Parking Area, defined below, during the Lease Term as follows:
**Time Period** **Total Base Rent**
**Months 1** – **3** **$36,000.00**
3. Parking Area. Landlord leases to Tenant and Tenant leases from Landlord a portion of the Property as indicated on the attached Exhibit “A,” consisting of approximately 3.9 acres (“Parking Area”) together with full and unimpaired access to Parking Area at all times from the north.
4. Security Deposit. Upon execution of this Lease, Tenant shall pay to Landlord a security deposit (the “Security Deposit”) in the amount of $15,000.00. Such Security Deposit shall be held by Landlord, and no interest shall accrue thereon to the benefit of the Tenant. If at any time during the Term of the Lease, Tenant shall be in default of performance of any provision of this Lease and shall fail to remedy or cure such default within the time period allowed for curing the same, then Landlord may, at Landlord’s option, apply all or any portion of the Security Deposit as partial or full satisfaction of such default or declare such Security Deposit to be forfeited. Within thirty (30) days after termination of the Lease, Landlord shall refund the remaining portion of the Security Deposit to Tenant without interest.
5. Permitted Use. The Parking Area shall be used by the Tenant for the operation of mobile data centers for cryptocurrency mining operations. Tenant shall not make any other use of the Parking Area without Landlord’s prior written consent. Tenant agrees not to stack the mobile data centers more than one (1) high at any given time during either storage or installation. Tenant shall not use the Parking Area, or permit anything to be done in or about the Parking Area, which will in any conflict with any law, statute, zoning restriction, ordinance or governmental rule or regulation. Tenant shall not commit, or suffer to be committed, any waste or any nuisance in or about the Parking Area. Tenant shall not (i) make, or permit to be made, any use of the Parking Area that emits or permits the emission of an unreasonable amount of dust, sweepings, dirt, cinders, fumes or odors into the atmosphere, grounds or any body of water, (ii) create, or permit to be created, any sound level in violation of any city code or ordinance, (iii) transmit, receive or permit to be transmitted or received any electromagnetic microwave or other radiation that is harmful or hazardous to any person or property, or that interferes with the operation of any electrical, electronic, telephonic or other equipment wherever located, (iv) create, or permit to be created, any ground vibration that is discernable outside the Parking Area, or (v) produce, or permit to be produced, any intense glare, light or heat except within an enclosed area and then only in such manner that the glare, light or heat shall not be discernable outside the Parking Area.
6. Condition of Parking Area. Tenant accepts the Parking Area in as-is condition. Landlord makes no representation or warranty of any kind with respect to the Leased Premises, including the habitability or fitness or suitability of the Leased Premises for any particular purpose.
7. Repair and Maintenance. Tenant shall (i) keep the Parking Area clean and free of rubbish, grease, oil and other substances (ii) maintain the Parking Area grounds, including but not limited to lawn mowing and landscaping, and (iii) shall promptly notify Landlord of any unsafe conditions in the Parking Area or adjacent areas. No vehicle shall be permitted to occupy the Parking Area if it leaks oil, gasoline or other fluid deemed offensive by Landlord. If Tenant damages any portion of the Parking Area, Tenant shall, at Tenant’s sole cost and expense, repair such damage in a workmanlike manner by contractors approved by Landlord pursuant to the specifications provided to Tenant by Landlord. If Tenant fails to maintain the Parking Area as required under this Lease, Landlord shall have the right to enter the Parking Area and perform Tenant’s obligations under this Lease. Any costs incurred by Landlord to maintain the grounds, remove, clean or otherwise repair any damage or stain shall be the reimbursed by the Tenant within thirty (30) days of receipt of invoices from Landlord. At termination of the Lease, Tenant shall surrender the Parking Area in as good condition as received, normal wear and tear excepted and, at Landlord’s option, remove any fencing installed by Tenant. Tenant acknowledges that it has inspected the Parking Area and that the Tenant is not relying on any representations or warranties made by Landlord, or Landlord’s agents, regarding the Parking Area, except as expressly set forth herein. Tenant’s obligations under this Paragraph shall survive the expiration or other termination of this Lease.
8. Alterations. Tenant shall not make any alterations other than the Tenant Improvements, as defined below, to the Parking Area without first procuring Landlord’s written consent, such consent which shall not be unreasonably withheld, conditioned or delayed. Such alterations shall be accomplished in a good, workmanlike manner and in compliance with all local ordinances, codes and regulations. Landlord, in its sole discretion, may require Tenant to remove any alterations at the expiration or earlier termination of this Lease. Tenant, at Tenant’s sole cost and expense, shall make certain improvements (the “Tenant Improvements”) to the Parking Area as described below:
- Install precast mat foundations without piers (the “Data Center Foundations”) on which the mobile data centers will be installed.
- Gravel the Parking Area except for the Data Center Foundations.
- Construct underground powerlines as depicted on the attached Exhibit B. Landlord will not provide a permanent easement to PSO for the installation of the underground powerlines.
2
- Install an 8’ chain link fence and screen around the perimeter of the Parking Area.
9. Utilities. Tenant shall pay all charges incurred for any utility services separately metered to the Parking Area and shall cause all utility services provided specifically for the Parking Area to be placed in Tenant’s name. The cost of all meters, infrastructure and the installation, maintenance and repair thereof shall be paid for by Tenant.
10. Taxes. Landlord shall pay before delinquency all taxes, assessments, license fees, and other charges (“Taxes”) that are levied and assessed against the Property. Such Taxes shall be included in Operating Costs, as defined below.
Operating Expenses. Tenant agrees to pay to Landlord, as Additional Rent, Tenant’s pro rata share of the maintenance, repairs and operating costs (collectively, the “Operating Costs”) incurred by Landlord for maintaining the grounds within the CenterGate Business Park Association (the “Grounds”) during each calendar year. Such Operating Costs shall include Taxes, landscaping and grounds maintenance, maintenance and repairs to driveways and parking areas, security services, and any other property maintenance expenses which may be required from time to time in maintaining the Grounds in a prudent manner together with a property management fee equal to four percent (4%) of Tenant’s Annual Base Rent. Tenant’s pro rata share of the Operating Costs shall be 3%. Landlord shall provide Tenant with a Reconciliation Report on or before April 1st of the following calendar year. Payment shall be made by Tenant within thirty (30) days after receipt of Reconciliation Report.
11. Indemnity and Waiver of Claims. Tenant shall defend, indemnify and hold harmless Landlord from and against all claims, liens, costs, damages or expenses arising out of any damage to any person or property occurring at the Parking Area, except for any damage caused by the gross negligence or intentional acts of Landlord or its authorized representatives. To the extent permitted by law, Landlord shall not be liable for, any Tenant releases Landlord from and Tenant waives all claims for, damages to persons or property sustained by Tenant or Tenant’s agents, contractors, employees or invitees, resulting from any accident or incident in or about the Parking Area, or resulting directly or indirectly from any act of Landlord or of Tenant, unless resulting from the gross negligence or willful misconduct of Landlord or its authorized representatives.
12. Public Liability and Property Damage Insurance. Tenant, at its sole cost, shall maintain public liability and property damage insurance with liability limits of not less than $500,000.00 per person and $1,000,000.00 per occurrence, and property damage limits of not less than $250,000.00 per occurrence, with an aggregate coverage of $500,000.00 insuring against liability of Tenant and person authorized under this Lease to use the Parking Area. Landlord shall be named as an additional insured and Tenant shall provide Landlord with a certificate of insurance evidencing such coverage on or before the Commencement Date.
13. Assignment or Sublease. Tenant shall not voluntarily assign or sublease all or any part of the Parking Area, or allow any other person or entity (except as otherwise authorized herein) to occupy or use all or any part of the Parking Area, without first obtaining Landlord’s prior written consent. Notwithstanding the foregoing, Tenant shall be allowed to assign or sublease to any subsidiary or affiliate, or to any company which controls, is controlled by, or is under common controlled by, or is under similar control with Tenant, or in the event of a merger, third party not yet known, in the event of a merger, acquisition, or sale of all or substantially all of its assets. Furthermore, Tenant shall be allowed to assign or sublease to **U.S.** **Blockchain Company, LLC** without obtaining Landlord’s prior written consent. No transfer, assignment or sublease permitted by this Section, whether with or without Landlord’s consent, shall release Tenant or change Tenant’s primary liability to pay the Rent and perform all other obligations under this Lease.
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14. Tenant’s Default. The occurrence of any of the following shall constitute a default by Tenant.
a. Failure to pay rent when due, if the failure continues for five (5) days after written notice has been given to Tenant.
b. Failure to perform any other provision of this Lease if the failure to perform is not cured within ten (10) days after written notice has been given to Tenant.
Notice given under this Section 15 shall specify the alleged default and the applicable lease provisions. In the event Tenant fails to cure any alleged default within the applicable period of time, Landlord shall have the right to terminate this Lease and Tenant’s right to possession of the Parking Area. Tenant shall be responsible for all unpaid rents through the date of Termination.
15. Attorney’s Fees. If either party commences an action against the other party arising out of this Lease, the prevailing party shall be entitled to have and recover from the losing party reasonable attorneys’ fees and costs of suit.
16. Renewal Options. Provided there has been no default by Tenant throughout the Lease Term, Tenant shall have two (2) options to renew the Lease for an additional five (5) years (the “Option Period”) by providing Landlord one (1) month advanced written notice for the first (1st) Option Period and six (6) months’ advanced written notice for the second (2nd) Option Period. Base Rent during the first (1st) Option Period shall be:
| Time Period | Monthly Base Rent |
| --- | --- |
| Months 1 – 24 | $12,000.00 |
| Months 25 – 36 | $13,000.00 |
| Months 37 – 48 | $14,000.00 |
| Months 49 - 60 | $15,000.00 |
Base Rent during the second (2nd) Option Period shall be fair market value.
17. Sound Barrier.
In the event Tenant receives a violation from any governing authority related to the sound level created from Tenant’s operations and it is determined that Tenant is in violation of any city code or ordinance, and it is deemed by the governing authority that a sound barrier will remedy the violation, Landlord agrees to reimburse Tenant for twenty-five percent (25%) of the cost to install a sound barrier around the premises, not to exceed $75,000.00; provided that Landlord and Tenant enter into a lease amendment that extends the Lease Term for an additional five (5) years from the date of the substantial completion of such action at the same rate as the current Monthly Base Rent schedule with six percent (6%) annual escalations.
4
18. Successors. The Lease shall be binding on and inure to the benefit of the parties and their successors.
19. Exhibits. All exhibits referred to are attached to this Lease and incorporated by reference.
20. Severability. If any clause or provision of this Lease is illegal, invalid, or unenforceable under present or future laws effective during the Term, it is the intention of Landlord and Tenant that the remainder of this Lease shall not be affected thereby.
21. Removal of Tenant’s Property. Tenant shall, at Tenant’s sole cost and expense, be required to remove Data Center Foundations installed on the Parking Area and replace with gravel at the expiration or earlier termination of the Lease. If Tenant shall fail to remove all effects or property from the Parking Area upon the termination or abandonment thereof, for any cause whatsoever, Landlord, at Landlord’s option, may remove the same in any manner that Landlord shall choose, and store such effects without liability to Tenant for loss thereof. Tenant agrees to pay Landlord on demand for any and all expenses incurred in such removal, including court costs, attorney’s fees, and storage charges on such effects or property.
22. Governing Law. This Lease shall be governed by and enforced in accordance with the State of Oklahoma without regard to conflict laws and rules. Each party hereby irrevocably consent and agrees that any legal action, suit or proceeding arising out of or in any way in connection with this Lease must be instituted or brought in all federal and state courts located in Tulsa County, State of Oklahoma.
23. Counterparts. This Lease may be executed in multiple counterparts, including facsimile or PDF counterparts, each of which shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument.
***(Signatures on next page)***
5
**LANDLORD:** **TENANT:**
**5555 PROPOERTY DEVELOPERS, LLC** **T20 MINING GROUP, LLC**
| By: / Name: / Title: | /s/ Rob Stephens / Rob Stephens / Manager | By: / Name: / Title: | /s/ Jeremy Henshaw / Jeremy Henshaw / Partner |
| --- | --- | --- | --- |
| Date: | 12/5/2022 | Date: | 11/29/2022 |
- Address: Address:
- 111 S Elgin, Tulsa, OK 74120 PO Box 703105, Tulsa, OK 74170
- Attn: Rhonda Williams Attn: Jeremy Henshaw
---
## EXHIBIT 10.25
SEC source: [ex_902230.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902230.htm)
**Exhibit 10.25**
**FIRST AMENDMENT TO LEASE**
This First Amendment To Lease (“Amendment”) is made and entered into this 27th day of February, 2023 (“Effective Date”), by and between **5555 PROPERTY DEVELOPERS, LLC** (“Landlord”), and **T20 MINING GROUP, LLC** (“Tenant”).
**RECITALS**
A. Landlord and Tenant previously entered into that certain lease agreement dated December 1, 2022 (“Lease”) for the parking area identified as a portion of the property located at 5555 S 129th E Avenue, Tulsa, Oklahoma, consisting of approximately 3.9 acres.
**AGREEMENTS**
**NOW THEREFORE**, in consideration of mutual covenants contained herein and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease as follows:
1 **LEASE TERM:** The Lease Term shall be extended five (5) years, commencing on March 1, 2023 and ending on February 29, 2028.
2 **BASE RENT:** The Base Rent shall be payable monthly by Tenant during the Extended Term as follows:
| Rental Time Period | Monthly Base Rental Rate |
| --- | --- |
| 3/1/2023 – 2/28/2025 | $12,000.00 |
| 3/1/2025 – 2/28/2026 | $13,000.00 |
| 3/1/2026 – 2/28/2027 | $14,000.00 |
| 3/1/2027 – 2/29/2028 | $15,000.00 |
3 **TENANT IMPROVEMENTS:** Tenant, at Tenant’s sole cost and expense, shall make certain improvements (the “Tenant Improvements”) to the Parking Area as described below:
- Install precast mat foundations without piers (the” Data Center Foundations”) on which the mobile data centers will be installed.
- Gravel the Parking Area except for the Data Center Foundations.
- Construct underground powerlines from the substation to the Parking Area as depicted on the attached Exhibit A. Landlord will not provide a permanent easement to PSO for the installation of the underground powerlines.
- Tenant may install up to six (6) poles not to exceed eighteen feet four inches (18’ 4”) in height on the Parking Area.
- Install an 8’ chain link fence and screen around the perimeter of the Parking Area.
All work must be done in a good and workmanlike manner, using licensed contractors where applicable, and meeting all city and governmental codes.
1
Except as specifically provided for herein, the remaining terms and provisions of the Lease shall continue to be in full force and effect. The Lease, and any amendments thereto including this Amendment, shall collectively be known as the Lease.
**IN WITNESS WHEREOF**, this Amendment is executed as evidenced below to be effective as of the Effective Date specified herein.
**LANDLORD:**
**5555 PROPERTY DEVELOPERS LLC**
By: */s/ Rob Stephens*
Name: Rob Stephens
Its: Manager **TENANT:**
**T20 MINING GROUP, LLC**
By: */s/ Jeremy Henshaw*
Name: Jeremy Henshaw
Its: Managing Partner
2
---
## EXHIBIT 10.26
SEC source: [ex_902231.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902231.htm)
**Exhibit 10.26**
**SECOND AMENDMENT TO LEASE**
This Second Amendment to Lease (“Amendment”) is made and entered into this 12th day of May, 2023 (“Effective Date”), by and between **5555 PROPERTY DEVELOPERS, LLC** (“Landlord”), and **T20 MINING GROUP, LLC** (“Tenant”).
**RECITALS**
A. Landlord and Tenant previously entered into that certain lease agreement dated December 1, 2022, as amended by that certain First Amendment to Lease dated February 27, 2023 (collectively, the “Lease”) for the parking area identified as a portion of the property located at 5555 S 129th E Avenue, Tulsa, Oklahoma, consisting of approximately 3.9 acres.
B. Landlord and Tenant desire to further amend the Lease as set forth below.
**AGREEMENTS**
**NOW THEREFORE**, in consideration of mutual covenants contained herein and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease as follows:
1 **EASEMENT:** Landlord shall grant an underground utility easement across the Parking Area to Public Service Company of Oklahoma as depicted on the attached **Exhibit A.** Tenant consents to the granting of such easement across the Parking Area.
2 **MISCELLANEOUS.** Except as specifically provided for herein, the remaining terms and provisions of the Lease shall continue to be in full force and effect. The Lease, and any amendments thereto including this Amendment, shall collectively be known as the Lease.
**IN WITNESS WHEREOF**, this Amendment is executed as evidenced below to be effective as of the Effective Date specified herein.
**LANDLORD:**
**5555 PROPERTY DEVELOPERS, LLC**
By: */s/ Rob Stephens*
Name: Rob Stephens
Its: Manager **TENANT:**
**T20 MINING GROUP, LLC**
By: */s/ Jeremy Henshaw*
Name: Jeremy Henshaw
Its: Manager
1
---
## EXHIBIT 10.27
SEC source: [ex_902232.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902232.htm)
**Exhibit 10.27**
**THIRD AMENDMENT TO LEASE**
This Third Amendment to Lease (“Amendment”) is made and entered into this 29th day of May, 2024 (“Effective Date”), by and between **5555 PROPERTY DEVELOPERS, LLC** (“Landlord”), and **T20 MINING GROUP, LLC** (“Tenant”).
**RECITALS**
A. Landlord and Tenant previously entered into that certain lease agreement dated December 1, 2022, as amended by that certain First Amendment to Lease dated February 27, 2023 and by that certain Second Amendment to Lease dated May 12, 2023 (collectively, the “Lease”) for the parking area identified as a portion of the property located at 5555 S 129th E Avenue, Tulsa, Oklahoma, consisting of approximately 3.9 acres.
B. Landlord and Tenant desire to further amend the Lease as set forth below.
**AGREEMENTS**
**NOW THEREFORE**, in consideration of mutual covenants contained herein and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease as follows:
1. **PREMISES**: The Leased Premises (“Parking Area”) shall be expanded to approximately 4.9 acres as shown on the attached Exhibit A.
2. **LEASE TERM**: The Lease Term shall be extended ten (10) years, commencing on July 1, 2024 and ending on June 30, 2034 (“Expiration Date”).
3. **BASE RENT**: The Base Rent shall be payable monthly by Tenant during the Extended Term as follows:
| Rental Time Period | Monthly Base Rental Rate |
| --- | --- |
| July 1, 2024 – June 30, 2025 | $15,000.00 |
| July 1, 2025 – June 30, 2026 | $15,750.00 |
| July 1, 2026 – June 30, 2027 | $16,537.50 |
| July 1, 2027 – June 30, 2028 | $17,364.38 |
| July 1, 2028 – June 30, 2029 | $18,232.59 |
| July 1, 2029 – June 30, 2030 | $19,144.22 |
| July 1, 2030 – June 30, 2031 | $20,101.43 |
| July 1, 2031 – June 30, 2032 | $21,106.51 |
| July 1, 2032 – June 30, 2033 | $22,161.83 |
| July 1, 2033 – June 30, 2034 | $23,269.92 |
4. **RENEWAL OPTION**: Provided Tenant is not in default of the Lease, Tenant shall have one (1) option to extend the Term for ten (10) years by providing six (6) months’ advance written notice to Landlord. All of the terms and conditions of the Lease shall apply during the renewal term, except that the monthly rent shall be at 100% of the then fair market value. If notice is not given within the time specified, this option shall expire.
5. **TENANT IMPROVEMENTS**: Tenant, at Tenant’s sole cost and expense, shall be required to fence and screen the entire Premises. All work must be completed in a good and workmanlike manner, using licensed contractors where applicable, meeting all city and governmental building codes, and shall require the approval of the Landlord’s representative upon completion.
**IN WITNESS WHEREOF**, this Amendment is executed as evidenced below to be effective as of the Effective Date specified herein.
**LANDLORD:**
**5555 PROPERTY DEVELOPERS, LLC**
By: */s/ Rob Stephens*
Name: Rob Stephens
Its: Manager **TENANT:**
**T20 MINING GROUP, LLC**
By: */s/ Jeremy Henshaw*
Name: Jeremy Henshaw
Its: Managing Partner
2
---
## EXHIBIT 10.28
SEC source: [ex_902233.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902233.htm)
**Exhibit 10.28**
**SURFACE LEASE AGREEMENT**
This Surface Lease Agreement (“Agreement”) is entered into by and between TOM-STACK, LLC, a Delaware limited liability company (“Lessor”), and SPRE WA TONGA OK, LLC, a Georgia limited liability company (“Lessee”).
WITNESSETH:
WHEREAS, Lessor is the owner of a certain parcel of land described/depicted on Exhibit “A” attached hereto and forming a part hereof (the “Property”);
WHEREAS, Lessee desires to lease from Lessor the surface of a tract of land included within the Property and measuring approximately ten and fifty-seven one hundredths (10.57) acres and being more particularly described/depicted as the “LEASED PREMISES” on Exhibit “B” attached hereto and made a part hereof (the “Leased Premises”), for the sole purpose of constructing, operating, and maintaining a data processing facility;
WHEREAS, Lessee desires to utilize the area included within the Property described/depicted as the “ELECTRIC USE AREA” on Exhibit “B” (the “Electric Use Area”), for the sole purpose of constructing, operating, and maintaining electric facilities for use in the operation of Lessee’s data processing facility;
WHEREAS, Lessee desires to utilize the area included within the Property described/depicted as the “WATER PIPELINE USE AREA” on Exhibit “B” (the “Water Pipeline Use Area”), for the sole purpose of constructing, operating, and maintaining a pipeline for the transportation of water only for use in the operation of Lessee’s data processing facility;
WHEREAS, Lessor desires to lease the Leased Premises to Lessee, and permit the non-exclusive use of the Electric Use Area and Water Pipeline Use Area, on the terms and conditions set forth herein.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. **Leased Premises**. Lessor does hereby lease, let, and demise unto the Lessee the Leased Premises.
2. **Use of Leased Premises**. The Leased Premises shall be used by Lessee solely for the purpose of constructing, operating, and maintaining a data processing facility.
3. **Water Well**. Subject to any other party’s rights in and to such groundwater, and provided Lessee delivers to Lessor an initial payment of Ten Thousand and No/100 dollars($ 10,000.00), which payment must be made to Lessor upon full execution of this Agreement, Lessee may drill one (1) water well (“Water Well”) on the Leased Premises, in such area approved in advance by Lessor, and extract and produce groundwater from the Leased Premises solely for Lessee’s use in connection with the construction, operation, and maintenance of a data processing facility on the Leased Premises. In addition, for continued use of the Water Well and extraction and production of groundwater from the Leased Premises following expiration of the Initial Term, during such times this Agreement remains in effect, Lessee shall make an annual payment to Lessor of Two Thousand Five Hundred and No/100 dollars ($2,500.00), without demand, deduction or offset, at Lessor’s address set forth herein or at such other place as Lessor shall designate in writing from time to time, with each such annual payment being due on or before the expiration of the Initial Term and each subsequent anniversary thereof. In no event may Lessee at any time (a) sale or transfer, or permit the sale or transfer of, groundwater extracted or produced from the Leased Premises, (b) use, or permit to be used, any groundwater extracted or produced from the Leased Premises in connection with any use or operation other than Lessee’s construction, operation, and maintenance of a data processing facility on the Leased Premises, or (c) transport, or permit to be transported, any groundwater extracted or produced from the Leased Premises to any location not located on the Leased Premises. Lessee is responsible for obtaining and maintaining all local, state, and federal approvals and/or permits for drilling the Water Well on the Leased Premises and the extraction and production of groundwater from the Leased Premises. Upon termination of this Agreement, or Lessee’s earlier cessation of use of the Water Well, notwithstanding anything herein to the contrary, Lessee shall, at Lessor’s election (in Lessor’s sole discretion), (a) transfer ownership of the Water Well to Lessor, at no cost to Lessor, or (b) plug and abandon the Water Well in accordance with all laws, rules, regulations, and ordinances.
4. **Electric**. Lessor does hereby grant unto the Lessee the non-exclusive right to use and access the Electric Use Area solely for the purpose of constructing, operating, and maintaining electric facilities solely for the purpose of providing electricity to the Leased Premises. Without limiting any other provision of this Agreement, the design, construction, operation, testing, protection, and maintenance of Lessee’s electric facilities shall be in strict compliance with all rules, requirements, regulations, guidance, and/or recommendations of NFPA 70, NFPA 70E, the Institute of Electronic and Electrical Engineers, and the National Electrical Testing Association. Lessee assumes all risk and liability arising from its electric facilities and/or the construction, operation, and maintenance thereof.
5. **Water Pipeline**. Lessor does hereby grant unto the Lessee the non-exclusive right to use and access the Water Pipeline Use Area solely for the purpose of constructing, operating, and maintaining a pipeline (“Water Pipeline”) for the sole purpose oftranspo1ting water only to the Leased Premises. Lessee shall buy and maintain the Water Pipeline at a depth of at least forty eight inches (48”) below the surface of the ground. Lessee assumes all risk and liability arising from the Water Pipeline and/or the construction, operation, and maintenance thereof.
6. **Shop Warehouse**. Lessor does hereby grant unto the Lessee the non-exclusive right to use and access the area depicted as “SHOP WAREHOUSE” on Exhibit “B” (the “Shop Warehouse”), for the sole purpose of utilizing the bathroom and breakroom areas of the Shop Warehouse. Lessee’s use of said Shop Warehouse shall comply in all respects with the rights and obligations of Lessee with respect to the Leased Premises. Lessee’s right to use the Shop Warehouse is revokable at any time, and Lessor may, at any time, with or without cause, revoke Lessee’s right to use the Shop Warehouse. Lessee shall, upon termination of Lessee’s right to use the Shop Warehouse, surrender and return the Shop Warehouse to Lessor in as good condition as when received. Lessor shall have no obligation to repair, or provide any supplies with respect to, the Shop Warehouse. Lessee shall provide all supplies utilized by Lessee and its agents, employees, contractors, and invitees with respect to the Shop Warehouse.
7. **Use of Equipment**. Lessee shall have the right to use the equipment identified on Exhibit “C” attached hereto and forming a part hereof (the “Equipment”). **LESSEE ACCEPTS THE EQUIPMENT IN ITS** “**AS IS**” **AND** “**WHERE IS**” **CONDITION AND ACKNOWLEDGES THAT NO REPRESENTATIONS OR WARRANTY, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, HAS BEEN MADE BY LESSOR WITH RESPECT TO THE CONDITION OF THE EQUIPMENT OR ITS SUITABILITY FOR ANY USE OR PURPOSE AND LESSOR SHALL HAVE NO OBLIGATION TO REPAIR OR REPLACE ANY OF THE EQUIPMENT AT ANY TIME, AND LESSEE WA IVES AND RELEASES LESSOR FOR ANY AND ALL CLAIMS, DAMAGES, LOSSES, COSTS AND LIABILITIES ARISING FROM OR OUT OF THE EQUIPMENT**. Lessee shall not create or permit any liens or security interests to attach to the Equipment and shall cause any lien or security interest claim with respect to the Equipment to be immediately released. Lessee shall not alter or remove the Equipment from the Property. Lessee shall maintain the Equipment in good condition and repair (reasonable wear and tear only excepted) and shall repair any damage to the Equipment. Upon the expiration or earlier termination of this Agreement, Lessee shall surrender the Equipment to Lessor in the same condition existing on the date such Equipment is delivered to Lessee (reasonable wear and tear only excepted). If Lessee fails to surrender the Equipment to Lessor in such condition, then, Lessee shall reimburse Lessor on demand for any expense which Lessor may incur placing the Equipment in the same condition existing on the date such Equipment is delivered to Lessee (reasonable wear and tear only excepted).
8. **Access**. Lessee shall only access the Leased Premises, Electric Use Area, the Water Pipeline Use Area, and the Shop Warehouse over and along the same and along the routes identified and depicted as the “ACCESS ROUTE” on Exhibit “B” (“Access Route”). Lessee shall maintain and repair, to Lessor’s reasonable satisfaction, the Access Route in good and operating condition. Lessee and its agents, employees, contractors, and invitees shall have no right to access any portion of the Property not located within the Leased Premises, Electric Use Area, Water Pipeline Use Area, the Access Route, or the Shop Warehouse.
9. **Lessee**’**s Activities**. Lessee’s construction, operation, and maintenance of the data processing facility, its electric facilities, the Water Well, and the Water Pipeline, and all other activities and operations permitted hereunder, must be performed in a safe and workmanlike manner in strict compliance with: (a) accepted industry standards and practices; (bl all applicable federal, state, and local environmental, health, and safety laws, rules, regulations, and ordinances; and (c) all other applicable federal, state, and local statutes, laws, rules, regulations, and ordinances.
Lessee is responsible for obtaining and maintaining all local, state, and federal approvals and/or permits for its operations and its obligations set forth herein.
All facilities located in the Leased Premises, Electric Use Area, and Water Pipeline Use Area, including, but not limited to, the data processing facility, Lessee’s electric facilities, and the Water Pipeline shall be maintained in good condition by Lessee.
Lessee will keep the Property free and clear of all debris, trash, and litter that may emanate from Lessee’s operations under this Agreement, and if it does not, Lessee will pay Lessor’s reasonable costs of picking up such debris, trash, and litter.
Lessee will not permit its agents, employees, contractors, and invitees to bring firearms, alcoholic beverages, illegal drugs, or contraband of any kind onto the Property or any other land of Lessor.
Lessee and its employees, agents and contractors shall comply, at all times during their presence on the Property or other land of Lessor, with all of Lessor’s safety and personal protection requirements, policies and procedures, as the same may be amended or changed from time to time. Lessee shall notify Lessor at least seventy-two (72) hours in advance of initiating its initial activities on the Property. In the event Lessor’s representative, in such representative’s good faith discretion, determines that Lessee’s operation poses a safety hazard or risk, Lessee shall cease its operation at the discretion and direction of Lessor’s representative without delay or question and may not continue until and unless Lessor’s representative determines that the safety hazard or risk has been remedied and such representative authorizes continuation of the operation, which authorization to continue shall not be unreasonably delayed or conditioned.
After completing construction of its facilities, Lessee shall provide to Lessor with an “as-built” survey showing the Lessee’s underground improvements (water and electrical) related to the data processing facility, its electric facilities, the Water Well, and the Water Pipeline showing the exact location of Lessee’s facilities on the Prope11y.
10. **No Warranties by Lessor**. LESSEE ACCEPTS THE LEASED PREMISES, ELECTRIC USE AREA, WATER PIPELINE USE AREA, ACCESS ROUTE, SHOP WA REHOUSE, EQUIPMENT, AND UTILITIES (IF ANY) “AS IS” AND “WHERE IS” WITH ALL FAULTS AND DEFECTS, LATENT AND PATENT. LESSEE ACKNOWLEDGES AND AGREES THAT LESSOR HAS NOT MADE, DOES NOT MAKE, AND SPECIFICALLY DISCLAIMS ANY REPRESENTATIONS, WARRANTIES (INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO ANY REPRESENTATION OR DESCRIPTION), PROMISES, COVENANTS, AGREEMENTS, OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO THE NATURE, QUALITY, OR CONDITION OF THE LEASED PREMISES, ELECTRIC USE AREA, WATER PIPELINE USE AREA, ACCESS ROUTE, SHOP WAREHOUSE, EQUIPMENT, AND/OR UTILITIES (IF ANY). LESSEE, HAVING BEEN GIVEN THE OPPORTUNITY TO INVESTIGATE AND INSPECT THE LEASED PREMISES, ELECTRIC USE AREA, WATER PIPELINE USE AREA, ACCESS ROUTE, SHOP WAREHOUSE, EQUIPMENT, AND UTILITIES (IF ANY) IS REL YING SOLELY ON ITS OWN INSPECTION AND INVESTIGATION AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY OR ON BEHALF OF LESSOR OR ANY STATEMENT, REPRESENTATION, ASSERTION, OR NON-ASSERTION MADE BY OR ON BEHALF OF LESSOR.
11. **Term**. This Agreement shall be effective for five (5) years commencing on February 1, 2024, and terminating on January 31, 2029 (the “Initial Tenn”). Lessee shall have the option to renew and extend this Agreement for one (1) additional term of five (5) years (the “Renewal Term”), provided (a) Lessee provides written notice to Lessor of such election to renew at least sixty (60) days prior to the expiration of the Initial Term, and (b) at the commencement of the Renewal Term Lessee is not in beach of any term of this Agreement. All terms of the Renewal Tenn will be the same as the Initial Term, except the rental fees for the Renewal Term will be as set forth in Section 12 below.
Notwithstanding anything herein to the contrary, this Agreement shall automatically terminate upon the removal from the Leased Premises of all of Lessee’s equipment and facilities, which renders Lessee’s operations at the Leased Premises non-functional.
12. **Rental Fees**. Subject to the conditional abatement of rental fees, during the Initial Term, Lessee shall pay to Lessor monthly rental fees as shown below:
| Dates | Monthly Rental Fees |
| --- | --- |
| February 1, 2024 - July 31, 2024 | $10,000.00 |
| August 1, 2024 -January 31, 2026 | $17,500.00 |
| February I, 2026 - January 31, 2029 | $20,000.00 |
| February 1, 2029 - January 31, 2034 (if Renewal Term is exercised) | $25,000.00 |
The monthly rental fees shall be conditionally abated from February 1, 2024 through March 31, 2024. Commencing on April 1, 2024, Lessee shall make the monthly rental fee payments as set forth in this Agreement.
Lessee shall pay the monthly rental fee to Lessor, in advance, without demand, deduction or offset, beginning on February 1, 2024 (subject to the conditional abatement set forth above) and continuing on the first calendar day of each calendar month thereafter, via electronic funds transfer (pursuant to instructions provided by Lessor) of good and immediately available currency of the United States of America or via check at Lessor’s address set forth herein or at such other place as Lessor shall designate in writing from time to time. If the termination of this Agreement occurs on a day other than the last day of a calendar month, the monthly rental fee for such partial month shall be prorated on a daily basis based on the actual calendar days within such calendar month.
Upon its execution of this Agreement, Lessee shall pay to Lessor an amount equal to $20,000 (“Prepaid Rental Fee”), which Prepaid Rental Fee shall be credited against the monthly rental fees payable hereunder on April 1, 2024 through May 31, 2024. Lessee shall not be afforded any beneficial occupancy under this Agreement and Lessee’s rights to occupy the Leased Premises shall commence on February 1, 2024, subject to its advance payment of the Prepaid Rental Fee.
In no event, including early termination, will Lessee be entitled to a return of any portion of the rental fees, including, but not limited to, the Prepaid Rental Fee, paid to Lessor.
13. **Restoration**. Prior to the termination of this Agreement, Lessee will remove all of its equipment, facilities, improvements, and alterations, and restore the Leased Premises, Electric Use Arca, Water Pipeline Use Area, Shop Warehouse, and all other areas impacted by Lessee’s operations or activities to its/their original condition; provided, however, notwithstanding the foregoing, at Lessor’s election (in Lessor’s sole discretion), Lessor may require Lessee to abandon its electric facilities and/or the Water Pipeline, or any portion thereof, in place, in which event Lessee shall (a) transfer ownership of such electric facilities and/or the Water Pipeline to Lessor, at no cost to Lessor. If Lessee fails to remove its equipment, facilities, improvements, alterations, and related property from the Leased Premises, Electric Use Area, Water Pipeline Use Area, and Shop Warehouse, except to the extent abandoned in place in accordance with the preceding sentence, and restore the Leased Premises, Electric Use Area, Water Pipeline Use Area, Shop Warehouse, and all other areas impacted by Lessee’s operations or activities in accordance with the provisions of this Agreement within thirty (30) days from the termination of this Agreement, Lessor shall be entitled to remove Lessee’s equipment, facilities, improvements, and alterations, and related property from the Property, without any liability to Lessee, and restore the Leased Premises, Electric Use Area, Water Pipeline Use Area, Shop Warehouse, and all other areas impacted by Lessee’s operations or activities to its/their original condition or contract with a third party to conduct such work. Lessee shall, within thirty (30) days following Lessee’s receipt of an invoice or statement from Lessor, reimburse Lessor for any removal and restoration costs included by Lessor in connection with satisfying Lessee’s removal and restoration obligations under this Agreement.
14. **Holding Over**. In the event Lessee holds over with or without the consent of Lessor beyond the term of this Agreement, such holding over shall be on a month-to-month basis terminable at any time by either party upon providing thirty (30) calendar days’ advance written notice to the other party. The monthly rental fee for any such holdover period shall be double the monthly rental fee applicable to the Renewal Term.
15. **Ownership of Lessee**’**s Equipment**. All equipment installed by Lessee shall be the property of Lessee. Lessee at its expense, and without damage to the Property, shall remove its equipment at or prior to the expiration or termination of this Agreement; provided, however, notwithstanding the foregoing, at Lessor’s election (in Lessor’s sole discretion), Lessor may require Lessee to abandon its electric facilities and the Water Pipeline, or any portion thereof, in place, in which event Lessee shall transfer ownership of such electric facilities and/or the Water Pipeline to Lessor, at no cost to Lessor.
16. **Interference**. Lessee shall not use, nor shall Lessee permit its employees, invitees or agents to use, any portion of the Property in any way, which interferes with the operations of Lessor or of other licensees or permittees of Lessor at the Property outside of the Leased Premises. Any such interference outside of the permitted use of the Leased Premises provided under Section 2 shall be deemed a material breach of this Agreement by Lessee, and Lessee shall have the responsibility to immediately terminate said interference. Lessee shall obtain the prior written consent of Lessor to any proposed change in Lessee’s use. Lessor shall have the immediate right to unilaterally terminate any interfering use by Lessee. In the event of said termination, Lessor and Lessee shall cooperate to restore Lessee’s use without interference. Any adjustments and/or costs required to restore service shall be the sole responsibility of Lessee.
17. **Indemnity**. **LESSEE, ITS PERMITTED SUCCESSORS AND ASSIGNS, AGREE TO INDEMNIFY, DEFEND, AND HOLD HARMLESS LESSOR, ITS PARENT, SUBSIDIARIES, AND AFFILIATES, AND EACH OF THEIR DIRECTORS, OFFICERS, AGENTS, AND EMPLOYEES (THE** “**LESSOR GROUP**”**), FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES, CLAIMS, DEMANDS, AND SUITS (AND ALL REASONABLE ATTORNEYS**’ **FEES AND COURT COSTS) (COLLECTIVELY,** “**CLAIMS**”**) BY REASON OF, IN CONNECTION WITH, OR ARISING OUT OF (A) THE LEASED PREMISES, (B) LESSEE**’**S EXERCISE OF RIGHTS UNDER THIS AGREEMENT, (C) LESSEE**’**S USE OR OCCUP ANY OF THE PROPERTY, (D) THE EQUIPMENT, OR (E) LESSEE**’**S PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ANY CLAIMS FOR INJURIES TO OR LOSS OF LIFE OF ANY PERSON, OR FOR DAMAGES TO OR LOSS OF ANY PROPERTY. LESSEE, ITS PERMITTED SUCCESSORS AND ASSIGNS, FURTHER AGREE TO INDEMNIFY, DEFEND, AND HOLD HARMLESS LESSOR AND THE LESSOR GROUP FROM AND AGAINST ANY AND ALL ACTUAL OR ALLEGED VIOLATIONS OF LOCAL, STATE, OR FEDERAL LAWS, RULES, REGULATIONS, OR ORDERS THAT ARISE FROM OR RELATE TO THIS AGREEMENT OR LESSEE**’**S USE OF THE LEASED PREMISES, THE PROPERTY, THE ELECTRIC USE AREA, THE WATER PIPELINE USE AREA, THE ACCESS ROUTE, THE SHOP WAREHOUSE, OR EQUIPMENT.** **THE PROVISIONS OF THIS SECTION SHALL APPLY WITH RESPECT TO ANY CLAIM CAUSED, IN WHOLE OR IN PART, BY THE NEGLIGENCE OF LESSOR OR ANY MEMBER OF THE LESSOR GROUP, BUT SHALL NOT APPLY TO THE EXTENT ANY CLAIM ARISES FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LESSOR OR ANY MEMBER OF THE LESSOR GROUP****.**
18. **Compliance with Environmental Laws****. By its exercise of its rights hereunder, Lessee will not (i) cause or permit the Leased Premises, nor will it cause the Property, to be in violation of Applicable Environmental Laws (as hereinafter defined); or (ii) do anything or permit anything to be done by Lessee, its contractors, subcontractors, agents or employees that will result in any contamination of soils, ground water, surface water, or natural resources on or adjacent to the Property resulting from Lessee**’**s operations, including, but not limited to, spills or leaks of oil, gasoline, hazardous materials, hazardous wastes, or other chemical compounds, or will subject the Property or adjacent lands to any remedial obligations under applicable laws pertaining to health or the environment (such laws as they now exist or are hereafter enacted and/or amended are hereinafter sometimes collectively called** “**Applicable Environmental Laws**”**), including, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, hereinafter called** “**CERCLA**”**), the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called** “**RCRA**”**), as each of said laws may be amended from time to time. Lessee agrees to obtain any permits, licenses or similar authorizations required for its operations by reason of any Applicable Environmental Laws that concern or result from the use of the Property. Lessee will promptly notify Lessor in writing of any existing or pending investigation or inquiry by any governmental authority in connection with any Applicable Environmental Laws concerning Lessee**’**s operations on Lessor**’**s property and/or Lessee**’**s use of the Property, Lessee will not cause or permit its operations to dispose of or otherwise release any hazardous substance or solid waste on or to the property of Lessor. Lessee covenants and agrees to keep or cause (a) the Leased Premises to be kept free of such hazardous substance or solid waste and (b) the Property to be kept free of such hazardous substance or solid waste associated with Lessee**’**s operations, and to remove the same in accordance with applicable law (or if removal is prohibited by law, to take whatever action is required by law) promptly upon discovery, at Lessee**’**s sole cost and expense.**
**The terms** “**hazardous substance**” **and** “**release**” **as used herein have the meanings specified in CERCLA, and the terms** “**solid waste**” **and** “**disposal**” **(or** “**disposed**”**) shall have the meanings specified in RCRA; provided, that if either CERCLA or RCRA is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply hereunder subsequent to the effective date of such amendment and provided further, to the extent that any other federal or state law establishes a meaning for** “**hazardous substance**”**,** “**release**”**,** “**solid waste**”**, or** “**disposal**” **that is broader than that specified in either CERCLA or RCRA, such broader meaning shall apply.**
**If Lessee fails to comply with or perform any of the foregoing covenants and obligations, Lessor may (at Lessor**’**s option without any obligation, express or implied), remove, in accordance with applicable law, any hazardous substance or solid waste from the Property which may be caused by Lessee or its contractors, subcontractors, agents or employees (or if removal is prohibited by law, take whatever action is required by law) and the cost of the removal or such other action shall be reimbursed by Lessee to Lessor.**
Environmental Indemnity. LESSEE, ITS PERMITTED SUCCESSORS AND ASSIGNS, AGREE TO INDEMNIFY, DEFEND, AND HOLD HARMLESS LESSOR AND LESSOR GROUP FROM AND AGAINST ANY AND ALL CLAIMS BY REASON OF, IN CONNECTION WITH, OR ARISING OUT OF (A) THE FAILURE OF LESSEE TO PERFORM ANY OBLIGATION HEREIN REQUIRED TO BE PERFORMED BY LESSEE REGARDING APPLICABLE ENVIRONMENTAL LAWS, (B) ANY VIOLATION OF A PROVISION IN ANY APPLICABLE ENVIRONMENTAL LAWS BY LESSEE, ITS CONTRACTORS, SUBCONTRACTORS, AGENTS OR EMPLOYEES, (C) THE REMOVAL, IN ACCORDANCE WITH APPLICABLE ENVIRONMENTAL LAWS, OF HAZARDOUS SUBSTANCES OR SOLID WASTES THAT RES UL TS FROM THE USE OF ANY PORTION OF THE PROPERTY BY LESSEE, ITS CONTRACTORS, SUBCONTRACTORS, AGENTS OR EMPLOYEES (OR IF REMOVAL IS PROHIBITED BY APPLICABLE ENVIRONMENTAL LAWS, THE TAKING OF WHATEVER ACTION IS REQUIRED BY SUCH LAWS), AND (D) ANY ACT, OMISSION, OR EVENT IN VIOLATION OF A PROVISION IN ANY APPLICABLE ENVIRONMENTAL LAWS OCCURRING WHILE LESSEE OCCUPIES ANY PORTION OF THE PROPERTY (INCLUDING, WITHOUT LIMITATION, THE PRESENCE OR RELEASE OF HAZARDOUS SUBSTANCES OR SOLID WASTES DISPOSED OF OR OTHERWISE RELEASED IN CONNECTION WITH OR RESULTING FROM THE LESSEE’S OPERATIONS HEREUNDER, EXCEPT TO THE EXTENT THE SAME IS DISPOSED OF OR OTHERWISE RELEASED BY LESSOR, ANY MEMBER OF THE LESSOR GROUP, OR ANY OF THEIR RESPECTIVE CONTRACTORS OR SUBCONTRACTORS), REGARDLESS OF WHETHER THE ACT, OMISSION, OR EVENT CONSTITUTED A VIOLATION OF ANY APPLICABLE ENVIRONMENTAL LAW AT THE TIME OF ITS EXISTENCE OR OCCURRENCE. NOTHING IN THIS SECTION OR ELSEWHERE IN THIS AGREEMENT SHALL LIMIT OR IMPAIR ANY RIGHTS OR REMEDIES OF LESSOR AGAINST LESSEE OR ANY THIRD PARTY UNDER APPLICABLE ENVIRONMENTAL LAWS, INCLUDING, WITHOUT LIMITATION, ANY RIGHTS OF CONTRIBUTION AVAILABLE THEREUNDER. THE PROVISIONS OF THIS SECTION SHALL APPLY WITH RESPECT TO ANY CLAIM CAUSED BY THE NEGLIGENCE OF LESSOR OR ANY MEMBER OF THE LESSOR GROUP, BUT SHALL NOT APPLY TO THE EXTENT ANY CLAIM ARISES FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LESSOR, ANY MEMBER OF THE LESSOR GROUP, OR ANY OF THEIR RESPECTIVE CONTRACTORS OR SUBCONTRACTORS.
19. **Claims; Lessee**’**s Agents**. Lessee, at its sole risk and expense, will be responsible for all claims, demands, liabilities, losses, or other charges or damages (a) occurring in or around the Leased Premises or (b) in connection with, arising from, or related to (i) Lessee’s exercise of rights under this Agreement or (ii) Lessee’s use of the Electric Use Area, Water Pipeline Use Area, Access Route, Shop Warehouse, or Equipment. Lessor will in no event be liable to Lessee or any other patty for any injury to Lessee’s agents, employees, contractors, or invitees or for any damage to or loss of property of Lessee or its agents, employees, contractors, or invitees.
20. **Taxes**. Lessee shall pay any taxes and all other fees and assessments attributable to the Equipment and/or Lessee’s equipment, facilities, or improvements located on the Property before such become delinquent. Lessee shall be responsible for the payment of any ad valorem taxes, including real property taxes or similar taxes, attributable to the Leased Premises. In the event the Leased Premises and/or the Equipment and/or Lessee’s equipment, facilities, or improvements located on the Property are assessed and taxed with the other property of Lessor, Lessee shall pay to Lessor its share of such taxes within ninety (90) days after delivery to Lessee by Lessor of a statement in writing setting forth the amount of such taxes.
21. **No Services; Utility Charges**. Lessee will pay or cause to be paid promptly when due all charges for water, electricity, gas, telephone, internet, and any other utility services furnished to the Property. **LESSOR WILL NOT BE REQUIRED TO PROVIDE ANY SERVICES, EQUIPMENT, FACILITIES, CONSTRUCTION, MAINTENANCE, REPAIRS, OR OTHER ACTIONS. ANY SERVICES, FACILITIES, OR EQUIPMENT, INCLUDING, BUT NOT LIMITED TO, ELECTRICITY OR ELECTRIC SERVICE OR CONNECTIONS, PROVIDED BY LESSOR IS PROVIDED** “**AS IS, WHERE IS**” **AND AT LESSEE**’**S SOLE RISK, COST, AND EXPENSE**.
Except for the Water Well in accordance with Section 3 above, Lessee shall not drill any well without the prior express written consent of Lessor.
22. **Lessor**’**s Reservation of Rights**. Lessor hereby reserves to itself, its agents, successors, lessees and assigns, the right to use all portions of the Property in any manner and for any and all purposes, including, though not by way of limitation, (a) constructing such structures, buildings, and other improvements, (b) making such excavations, and (c) laying, constructing, operating, repairing and removing such pipeline or pipelines, as it should deem necessary and proper, and without any liability whatsoever to Lessee for any acts done by it in carrying out such purposes and in performing any acts incidental to same; provided, however, that such use, occupation and enjoyment shall not prevent or materially interfere with the exercise of Lessee’s rights granted herein.
23. **Assignment**. Lessee may not assign, sub-lease, encumber, or otherwise transfer this Agreement, any interest herein, or any rights or obligations hereunder without first obtaining the express written consent of Lessor. Any attempted assignment or sub-lease without Lessor’s prior express written consent shall be deemed null and void. In the event Lessor consents to an assignment, such assignment will not be binding on Lessor until Lessee furnishes Lessor a true copy of the instrument evidencing the assignment. Moreover, unless Lessor provides otherwise as part of its written consent, Lessee’s assignment of this Agreement will not relieve Lessee of its obligations hereunder.
24. **Late Payments**. In addition to any remedy available to Lessor hereunder or at law or equity, delinquent amounts owing for rental fees or any other sums due to Lessor shall accrue interest at a rate of ten percent (10%) per annum or the maximum rate allowed by applicable law, whichever is lesser, from the date payment was due until the date payment is made and received. Following the dishonor of any check presented for payment, Lessor shall have the right, at Lessor’s option, to require all further payments to be made by wire transfer, certified check, or money order. The accrual of interest will not prejudice any other remedies which may be available to Lessor under this Agreement or at law or equity.
25. **Modification; Waiver**. This Agreement shall not be altered, changed or amended except by an instrument in writing executed by both parties. The failure of either party to enforce at any time any provision of this Agreement will not be construed to be a waiver of such provision nor will it in any way affect the validity of this Agreement or either party’s right thereafter to enforce each and every other provision. No waiver of any right in or breach of this Agreement by either party will be held to constitute a waiver of any other right or subsequent breach.
26. **Default/Remedies**.
A. The following events shall be deemed to be events of default by Lessee under this Agreement:
i. Lessee shall fail to pay, within five (5) calendar days following the date it is due, any rental fee or any other sum payable by Lessee under this Agreement;
ii. Lessee shall fail to comply with any other term, provision or covenant of this Agreement within thirty (30) days after written notice from Lessor to Lessee specifying wherein Lessee has failed to comply; or
iii. Lessee shall permit to be done, or not do, anything that creates a lien upon any property of Lessor (real or personal) and/or Lessee fails to take all actions to have any lien created or caused by Lessee’s operations to be removed or bonded after written notice thereof from Lessor to Lessee.
B. Upon occurrence of any event of default by Lessee not cured as provided for in this Agreement, all amounts abated under this Agreement shall be immediately due and payable to Lessor and Lessor may enforce the provisions of this Agreement in any manner provided by law or in equity, including, without limitation, any one or more of the following, in each case, without further notice or demand whatsoever.
i. In the event of Lessee’s default, Lessor may terminate this Agreement and re-enter upon the Leased Premises, and, in such event, Lessee shall immediately surrender the Leased Premises to Lessor and Lessee’s right to use any portion of the Property shall immediately terminate. If Lessee fails to immediately surrender the Leased Premises, Lessor may enter upon and take possession of the Leased Premises by any lawful means, and lock out, expel, or remove Lessee from the Property without being guilty of any manner of trespass, without liability for any damage or loss occasioned thereby, and without prejudice to any remedies available to Lessor. Lessor may require that Lessee comply with Section 13 above regarding restoration. Lessee agrees to pay to Lessor the amount of loss and damage which Lessor may suffer by reason of such termination, including the following: any unpaid rental fees and other sums payable under this Agreement that accrued prior to the termination of this Agreement; plus all other damages suffered by Lessor, including without limitation, court costs, reasonable attorneys’ fees and other costs incurred in connection with the termination of this Agreement and reasonable expenses of repossession.
ii. In the event of Lessee’s default, Lessor may, without terminating this Agreement, enter upon and take possession of the Leased Premises by any lawful means, and lock out, expel, or remove Lessee from the Property until such time Lessee has cured all defaults, without being guilty of any manner of trespass, without liability for any damage or loss occasioned thereby, and without prejudice to any remedies available to Lessor. Lessee agrees to pay to Lessor all damages suffered by Lessor, including without limitation, court costs, reasonable attorneys’ fees and other costs incurred, in connection with Lessee taking such action.
iii. In the event of Lessee’s default, Lessor may carry out Lessee’s obligations under this Agreement, and, if necessary, enter upon the Leased Premises by any lawful means, including by picking or changing the locks if necessary, without being guilty of any manner of trespass and without liability for any damage or loss occasioned thereby, and without prejudice to any of Lessor’s remedies, to carry out such obligations. Lessee agrees to reimburse to Lessor reasonable amounts expended by Lessor, including reasonable attorneys’ fees, costs of litigation and all com1 costs in effecting compliance with Lessee’s obligations under this Agreement.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedy provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rental fee or other sums due to Lessor hereunder or of any damages occurring to Lessor by reason of the violation of any of the terms, provision, and covenants herein contained. Lessor’s acceptance of any rental fee following an event of default hereunder shall not be construed as Lessor’s waiver of such event of default.
No payment by Lessee or receipt by Lessor of any amount less than the amounts due by Lessee hereunder shall be deemed to be other than on account of the amounts due by Lessee, nor shall any endorsement or statement on any check or document accompanying any payment be deemed an accord and satisfaction.
27. **Attorneys**’ **Fees**. In the event that either party hereto defaults in its performance of any of the terms in this Agreement, and if the other party places the enforcement of this Agreement or the collection of any amount due, the recovery of the possession of the Leased Premises, or expulsion of Lessee from the Property, in the hands of an attorney, the prevailing party shall be entitled to recover reasonable attorneys’ fees and court costs, including appeals, if any.
28. **Loss/Damage**. Lessor shall not be liable to Lessee for any loss or damage to the Property, or Lessee’s use of its equipment, facilities, or improvements, due to fire, other casualty, the state of repair of the Property or any electric or other equipment, power surge, unavailability or provision of electricity or any other utility, the bursting or leakage of any pipes, or theft or any other act or neglect.
29. **Insurance**. At all times during the term of this Agreement, or Lessee is otherwise conducting activities on the Property, Lessee will, at its sole cost and expense, maintain with an insurance company or companies authorized to do business in the State of Oklahoma and possessing an AM Best rating of A or higher, or alternatively acquired from underwriters at Lloyds of London or the Member Companies of the Institute of London Underwriters, insurance coverages of the kinds and in the minimum amounts indicated below:
A. Workers’ Compensation, including Employer’s Liability Insurance, covering all employees in compliance with all applicable state and federal laws. The workers’ compensation insurance will not be less than the applicable statutory limits and the employer’s liability insurance will not be less than One Million Dollars ($1,000,000) per employee disease and One Million Dollars ($1,000,000) disease policy limit;
B. Commercial General Liability Insurance, on an “Occurrence” form unless otherwise agreed to in writing by Lessor, including operations of independent contractors, contracts liability, including contractual liability coverage for the indemnity obligations contained in Sections 17 and 19 above, with a combined single limit for bodily injury, personal injury, and property damage liability in an amount not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate;
C. Automobile Liability Insurance covering all owned, non-owned, and hired vehicles with a combined single limit for bodily injury and property damage liability in an amount not less than One Million Dollars ($1,000,000) per accident; and
D. Umbrella and/or Excess Liability Insurance in excess of the limits required in subsections A., B., and C. above, with a combined limit of not less than Ten Million Dollars ($10,000,000) per occurrence.
All policies (except Worker’s Compensation and Employer’s Liability) shall include Lessor and the Lessor Group as additional insureds. Such insurance coverages shall specifically provide that they apply separately to each insured against which claim is made or suit is brought, except with respect to the limits of the insurer’s liability. Lessee hereby waives, and shall cause its insurers of the policies required above to waive, all rights of subrogation against Lessor and the Lessor Group. The insurance coverages required by Lessee hereunder shall be primary over any coverages maintained by Lessor. Lessee agrees to provide thirty (30) days written notice of cancellation of or material change to the required insurance coverage. The policy limits specified above are minimum requirements and not limits of liability and shall not be construed in any way as Lessor’s acceptance of responsibility for financial liabilities in excess of such limits. Lessee shall pay all deductibles and self-insured retentions, including defense costs, applicable to the insurance. Prior to commencement of any activities at the Property, Lessee shall furnish Lessor with Cetiificates of Insurance, which document that all coverages and endorsements required by this Agreement have been obtained.
If Lessee employs contractors or subcontractors ( of any tier) to perform any work at or on the Property, Lessee must require such contractors and subcontractors to obtain, maintain, and document to Lessee and Lessor the existence of insurance coverage equivalent to that which such contractors and subcontractors would have been required to furnish to Lessor had they executed this Agreement as Lessee. Prior to any contractor or subcontractor providing any work at or on the Property, and upon request, Lessee will make available to Lessor the insurance documentation relating to its contractors and subcontractors.
30. **No Recordation**. Neither party will record this Agreement; provided, however, following written request, Lessor will provide to Lessee a Memorandum of this Agreement (in form and substance reasonably acceptable to Lessor) for recordation in the real property records of Blaine County, Oklahoma. Within thirty (30) days following expiration, or earlier termination, of this Agreement, Lessee will record a notice of termination of this Agreement in the real property records of Blaine County, Oklahoma, and, if Lessee fails to record a notice of termination prior to the expiration of such 30-dey period, Lessor may file such notice on behalf of Lessee.
31. **Notices**. Any notices provided for or permitted in this Agreement shall be made by certified United States Mail, postage prepaid, or by delivering of same in person or via reputable overnight delivery courier, as follows:
Lessor: TOM-STACK, LLC Attn: Land Department 1722 Routh Street, Ste. 1300 Dallas, TX 7520 I
Lessee: SPRE WATONGA OK, LLC Attn: Cathy Holbrook 2146 Roswell Road, Suite 108-851 Marietta, GA 30062
Either party may change its address for notice by notifying the other party in writing in accordance with the provisions of this Section 31 of such new address.
32. **Binding Effect**. This Agreement shall be binding upon and shall inure to the benefit of Lessor and Lessee and their respective permitted successors and assigns.
33. **Entire Agreement**. This Agreement constitutes the entire Agreement and understanding of the parties with respect to the subject matter and supersedes all offers, negotiations and other Agreements, whether oral or written, relating to such subject matter. There are no representations or understandings of any kind not set forth herein.
34. **Applicable Law**. This Agreement shall be governed by the laws of the State of Oklahoma. All the terms and provisions of this Agreement are hereby expressly made subject to all federal, state and local laws and to all laws, orders, rules, regulations and standards issued thereunder by all duly constituted political sub-divisions and agencies having jurisdiction, as currently existing and this Agreement shall ipso facto be considered supplemented and/or amended accordingly to make this Agreement subject thereto, and Lessee hereby warrants that it will comply with same.
35. **Prior Conveyances**. This Agreement shall be subject to (a) any and all contracts, conveyances, liens, encumbrances, leases, and rights-of-way affecting the Property, which have been disclosed to Lessee prior to the Effective Date and/or which are apparent in the public records, (b) any and all matters that are visible or apparent on the ground, and ( c) the reservations and provisions provided herein.
36. **Severability**. The provisions of this Agreement are severable, and, in the event that any one or more provisions is deemed invalid, illegal, or otherwise unenforceable by a com1 of competent jurisdiction, such finding will not affect the other provisions of this Agreement or the Agreement as a whole, but such provision will be deemed modified to the extent necessary to render such provision enforceable, and the rights and obligations of the parties will be construed and enforced accordingly, preserving to the fullest permissible extent the intent and agreement of the pat1ies as set forth herein.
37. **Construction of Agreement**. The pat1ies acknowledge that they have had an adequate opportunity to review each and every provision contained in this Agreement and to submit the same to legal counsel for review and comment. Based on said review and consultation, the parties agree with each and eve1y provision contained in this Agreement. Accordingly, the parties agree that the rule of construction that a contract be construed against the drafter, if any, will not be applied in the interpretation and construction of this Agreement.
38. **Headings and Captions**. All headings and captions used in this Agreement are for guidance and convenience only and will have no significance, nor will same be considered a part of or affect the construction or interpretation of any provision of this Agreement.
39. **Survival**. The following Sections will survive the termination of this Agreement: Sections 4, 8, 9, 10, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, and any other Section that by its nature is intended to survive the termination of this Agreement.
40. **Counterparts**. This insttu111ent may be executed in any number of counterpa11s and each counterpart shall be deemed to be an original instrument, but all such counterparts shall constitute but one instrument.
[signatures on following page]
IN WITNESS WHEREOF, the parties hereto have affixed their signatures on the respective date set forth below, but effective as of January 12, 2024 (“Effective Date”).
- **LESSOR:**
- **TOM-STACK, LLC,**
a Delaware limited liability company
- By: */s/ Walter Pinto*
- Name: Walter Pinto
- Title: EVP & COO
- Date: 01/24/2024
- **LESSEE:**
- **SPRE WATONGA OK, LLC,**
an Georgia limited liability company
- By: */s/ Robert C. Bissell*
- Name: Robert C. Bissell
- Title: Manager
- Date: 1/12/24
---
## EXHIBIT 10.29
SEC source: [ex_902234.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902234.htm)
**Exhibit 10.29**
**LEASE AGREEMENT**
**between**
**CITY OF DENTON**
**and**
**SPRE DENTON TX, LLC**
**dated as of September 1, 2024**
**TABLE OF CONTENTS**
**Page No.**
| Article I LEASE OF LEASED PROPERTY; TERM | 2 |
| --- | --- |
| Lease of Leased Property. | 2 |
| Lease Term. | 2 |
| Holding Over; Rights at Expiration. | 2 |
| Inspection of Leased Property; Access to Books and Records. | 3 |
| Ownership of Leased Property. | 3 |
| Article II RENTAL | 3 |
| Rent. | 3 |
| Time and Place of Payments. | 4 |
| Delinquent Rent. | 4 |
| Article III OCCUPANCY, USE AND CONDITIONS OF LEASED PROPERTY | 4 |
| Condition of Leased Property. | 4 |
| Project Construction and Ownership of Improvements. | 4 |
| Access; Staging Areas. | 5 |
| Use of Leased Property and Compliance with all Laws and Regulations. | 6 |
| No Unauthorized Use. | 7 |
| Permits and Licenses. | 7 |
| Payment of Taxes. | 7 |
| No Liens. | 8 |
| Article IV REPRESENTATIONS AND WARRANTIES | 8 |
| Representations by City. | 8 |
| Representations by Lessee. | 8 |
| Article V OBLIGATIONS OF LESSEE | 8 |
| Plans and Specifications; Re-Zoning. | 8 |
| Operations and Maintenance. | 9 |
| Utilities. | 9 |
| Signs. | |
| Security. | 9 |
| Hazardous Materials. | 9 |
| Trash, Garbage, and Other Refuse. | 10 |
| Article VI INDEMNIFICATION AND INSURANCE | 11 |
| Insurance. | 11 |
| Indemnification and Duty to Pay Damages. | 11 |
i
| Article VII DEFAULT AND REMEDIES | 12 |
| --- | --- |
| Lessee’s Default. | 12 |
| Default by City. | 12 |
| Remedies for Failure to Pay Rent. | 12 |
| Remedies for Breach of Agreement. | 13 |
| Cross Default. | 13 |
| Survival. | 13 |
| Article VIII ASSIGNMENT AND SUBLEASING | 13 |
| Assignment by Lessee. | 13 |
| Assignment by City. | 14 |
| Encumbrances. | 14 |
| Article IX MISCELLANEOUS PROVISIONS | 14 |
| Waiver of Exemption. | 14 |
| Addresses. | 14 |
| No Waiver. | 14 |
| Lessee’s Subordination. | 15 |
| Additional Charges as Rent. | 15 |
| Non-Interference With Operation of the RD Wells Sub Station. | 15 |
| Interpretation. | 15 |
| Force Majeure. | 16 |
| Governing Law and Venue. | 16 |
| Amendments and Waivers. | 16 |
| Severability. | 16 |
| Merger. | 16 |
| Relationship of Parties. | 17 |
| Further Assurances. | 17 |
| Counterparts. | 17 |
ii
**LEASE AGREEMENT**
THIS LEASE AGREEMENT (this “Agreement”) effective as of this 1st day of September, 2024, by and between the CITY OF DENTON, a Texas home-rule municipal corporation (“City”), and SPRE DENTON TX, LLC, a Texas limited liability company (“Lessee” and, together with City, the “Parties” and each a “Party”).
**RECITALS**
WHEREAS, City is the owner of the property described in **Exhibit A** located in Denton, Texas (the “Property”):
WHEREAS, Lessee is a company specializing in high efficiency computing centers;
WHEREAS, City has the right, title and interest in and to the real property located in and around RD Wells Sub Station depicted on **Exhibit A**, together with the facilities, rights, and privileges hereinafter granted, (collectively referred to herein as the “Leased Property”) and has full power and authority to enter into this Agreement in respect thereof;
WHEREAS, in and around Lease Property, City owns that certain real property described and depicted on **Exhibit A**, attached hereto and made part hereof, consisting of a single site referred to on Exhibit A as Site One, that together total approximately 4 acres more or less (such real property, together with all rights, privileges, easements (temporary and permanent), and appurtenances benefiting or encumbering such real property and all preexisting improvements, as hereafter defined, are collectively referred to herein as the ·Leased Property”);
WHEREAS, Lessee plans to develop a high efficiency computing center project on the Leased Property, subject to the terms set forth herein (the “Project”);
WHEREAS, City desires to develop and permit uses of the Leased Property that are beneficial to the City and the general public;
WHEREAS, City has determined that the Project on the Leased Property will be beneficial to the City and serve a public purpose providing for additional electric sales and associated ROI and Franchise Fees to the City; and
WHEREAS, Lessee is qualified, willing and able to undertake such commercial development and use, and the City is willing to lease the Leased Property to Lessee for such activities;
WHEREAS, on or about the effective date of this Agreement, City and Lessee have entered into or will enter into a Power Purchase Agreement for the purchase by Lessee from City of electric power to support the Project to be located on the Leased Property (the “PPA”); and
WHEREAS, the Parties hereto wish to memorialize their agreement with respect to the Leased Property herein.
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\_\_\_\_\_ CITY \_\_\_\_\_ LESSEE
NOW, THEREFORE, in consideration of the foregoing Recitals, which by this reference are hereby incorporated into this Agreement, and the mutual covenants contained in this Agreement, and for other good and valuable consideration, the sufficiency of which is acknowledged by the Parties, the Parties hereto agree as follows:
**ARTICLE I**
**LEASE OF LEASED PROPERTY; TERM**
Section 1.1 Lease of Leased Property.
A. City hereby leases to Lessee, and Lessee hereby rents from City for its exclusive use the Leased Property and any preexisting improvements (as defined herein), and all herein described rights incident thereto, for and during the Lease Term (hereafter defined) and upon and subject to the terms, provisions and conditions herein set forth. All improvements preexisting in, on or under the Leased Property as of the Commencement Date, as hereafter defined, shall be referred to herein as “Preexisting Improvements”. The “Leased Property” shall be deemed to include the Preexisting Improvements and the Interconnection Improvements-, as hereafter defined.
Section 1.2 Lease Term. The term of this Agreement shall be for an initial term commencing on September 1, 2024 (the “Commencement Date”) and continuing until the end of the tenth (I 0th) “Contract Year” as defined below (the “Initial Term”), unless sooner terminated pursuant to the provisions of this Agreement or the PPA. “Contract Year” means a calendar year period, with the first (1st) Contract Year commencing on January 1 of the calendar year following the Commercial Operation Date of Phase I of the Seller’s Interconnection Facilities (as such terms are defined in the PPA) and the second (2nd) and each subsequent Contract Year commencing sequentially on each January 1 thereafter. Upon mutual consent of the Parties and approval by the Denton City Council, the Initial Term may be extended contemporaneously with any extensions of the PPA and consistent with the terms of the PPA for up to ten (10) additional years, the “Extension Term” (collectively, the Initial Term and the Extension Term are referred to herein as the “Lease Term”). However, the foregoing shall not preclude the Parties from entering into a new lease to be effective after the expiration of the Lease Term. If the PPA is terminated for any reason, this Agreement shall also automatically terminate, and City and Lessee shall have no further obligations or liabilities hereunder except as otherwise stated herein. Except as provided in Section 9.8, if during the Lease Term electric retail products are unable to be provided to the Leased Property, Lessee may terminate this Agreement by providing City with at least thirty (30) days’ prior written notice of such termination.
Section 1.3 Holding Over; Rights at Expiration.
A. If Lessee retains all or any portion of the Leased Property after the expiration or termination of the Lease Term by lapse of time or otherwise, such holding over shall constitute the creation of a month-to-month tenancy with respect to such retained portion, terminable by City at any time upon thirty (30) days prior written notice to Lessee. Under such month-to-month tenancy, all provisions of this Agreement shall remain in full force and effect during such holdover period except that monthly Rent (as hereafter defined) shall be equal to one hundred fifty percent (150%) of the monthly Rent that was in effect immediately prior to the expiration or termination.
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B. Lessee further agrees that, upon the expiration or termination of the Lease Term, the Leased Property will be delivered to City in good working order and condition, reasonable wear and tear and matters covered by insurance excepted, and the Improvements, as hereafter defined, will be delivered to City in as good a condition as when such Improvements were constructed, located, installed, placed or erected in, upon or under the Leased Property, reasonable wear and tear and matters covered by insurance excepted.
C. Except as otherwise expressly set forth elsewhere herein, Lessee shall have no rights with respect to any improvements made to the Leased Property during the Lease Term that are not otherwise required to be removed by City.
Section 1.4 Inspection of Leased Property; Access to Books and Records. City, through its duly authorized agents, shall have at any reasonable time the right to enter the Leased Property and the Improvements, as hereafter defined in Section 3.2.A., for the purpose of periodic inspection for fire protection, maintenance and to investigate compliance with the terms of this Agreement; provided, however, that except in the case of emergency, Lessee shall have no less than forty-eight (48) hours’ notice and an opportunity to have an employee or agent present. City agrees that any entry pursuant to this Section 1.4 will not unreasonably interfere with Lessee’s construction or operations. Lessee agrees to provide any documents that may be reasonably requested by City to determine compliance with this Agreement within thirty (30) days of such request.
Section 1.5 Ownership of Leased Property. City and Lessee intend and hereby agree that the Leased Property shall be and remain the property of City during the entire term of this Agreement and thereafter.
**ARTICLE II**
**RENTAL**
Section 2.1 Rent.
A. ln consideration for the use of the Leased Property herein granted, Lessee shall pay to City the following rental amounts (the “Rent”). The monthly rent shall be in the sum of ONE THOUSAND SIX HUNDRED EIGHTY AND NO/100 DOLLARS ($1680.00) per month (sales tax included). On or prior to the Commencement Date, Lessee shall pay City a sum equal to the first month’s Rent, which shall be applied to the first month’s Rent due under this Agreement. All other Rent payments will be due in advance on or before the first day of the month to which the Rent payment relates. Failure to receive an invoice reflecting Rent in a timely manner does not absolve Lessee from its obligation to pay the monthly Rent on or before the first day of the month to which the Rent payment relates. If the Commencement Date or a termination date occurs on a day other than the first day of a calendar month, Rent for the first and last partial months will be prorated on the basis of the number of actual days in such month.
B. The Rent for the Leased Property shall be increased, but not decreased, at the end of the fifth year of the initial Lease Term, the first adjustment occurring on the first day of the sixth (6th) year of the initial Lease Term. If the Lease is extended pursuant to Section 1.2, the Rent for the Lease Property shall be increased, but not decreased, with the first adjustment occurring on the first day of the month of any such Lease Term extensions. Adjustments to the rent shall be on the basis of the proportion that the then current and available month United States Consumer Price Index for all urban consumers (“CPI-U”) for the Dallas-Fort Worth Bureau of Labor Statistics bears to the January 2024 index.
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Section 2.2 Time and Place of Payments. The Rent, shall be payable by wire transfer monthly.
Section 2.3 Delinquent Rent. In the event Rent due pursuant to Section 2.1 or any other amounts payable by Lessee hereunder shall not be paid by Lessee on or before thirty (30) days after the due date thereof (the “Grace Period”), Lessee shall pay to City as additional Rent, an interest charge equal to the lower of (i) the annual rate equal to the Prime Rate (as defined herein) then in effect plus two percent (2%) and (ii) the maximum percentage allowed by law, multiplied by the amount due for each full calendar month of delinquency, computed as simple interest. Interest shall be computed and assessed from the due date. The “Prime Rate’ means the interest rate (sometimes referred to as the ‘‘base rate”) for large commercial loans to creditworthy entities announced from time to time by Citibank, N.A. (New York), or its successor bank, or, if such rate is not announced. the rate published in The Wall Street Journal as the “Prime Rate” from time to time (or, if more than one rate is published, the arithmetic average of such rates), in either case determined as of the date the obligation to pay interest arises.
**ARTICLE III**
**OCCUPANCY, USE AND CONDITIONS OF LEASED PROPERTY**
Section 3.1 Condition of Leased Property. Lessee accepts the Leased Property in its present “as is” condition. **LESSEE RELEASES CITY AND HOLDS CITY AND CITY**’**S OFFICERS, DIRECTORS, ELECTED AND APPOINTED OFFICIALS, EMPLOYEES, AND AGENTS HARMLESS FOR ANY CLAIMS ARISING OUT OF OR RELATED TO ANY CONDITION OF THE LEASED PROPERTY**.
Section 3.2 Project Construction and Ownership of Improvements.
A. The Parties agree that this Agreement is entered into specifically with the understanding that Lessee will build, construct, and complete the Project at its own expense in accordance with the requirements of the Denton Development Code and Denton Municipal Electric’s (DME)’s specifications unless this Agreement is sooner terminated pursuant to the terms herein. Any and all buildings, structures, fixtures, appurtenances, site work, site utilities, or other improvements to be located or constructed on the Leased Property by Lessee during the Lease Term shall be known as “Improvements”. Improvements shall not include any Preexisting Improvements, Lessee Personal Property or Interconnection Improvements, as hereafter defined. Those improvements made by City or Lessee to enable the delivery of electric energy from City to the equipment of Lessee will be referred to herein as the “Interconnection Improvements”. “Lessee Personal Property” shall mean any structures including electrical equipment beyond the Seller’s side of the Delivery Point (as defined in PPA) (e.g., transformers and circuit breakers), from which the Project business will be conducted that are placed on the Leased Property by Lessee during the Lease Term that can be disassembled and removed from the Leased Property without causing material damage unable to be reasonably repaired, such repairs to be at the sole cost to Lessee, to the Leased Premises. Lessee Personal Property will not be considered part of the Leased Premises. Lessee agrees to commence construction of the Project upon obtaining necessary governmental approvals and permits after the Commencement Date and to complete the Project in accordance with all governmental requirements and specifications and to obtain a Certificate of Occupancy, and/or such other evidence of completion as may be applicable, as soon as practicable after the Commencement Date. Lessee shall not construct, locate, install, place or erect any improvements, other than the Improvements and Interconnection Improvements, at, upon or under the Leased Property without the express prior written consent of City, which consent shall not be unreasonably withheld or delayed.
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B. Lessee will own, operate, and maintain the Interconnection Improvements from the Primary Meter(s) during the Lease Term. The Primary Meter(s) shall be the point of interconnection of the DME’s R.D. Wells substation to the Project. Effective upon the expiration or termination of this Agreement, the Interconnection Improvements from the Primary Meter(s) shall be removed by Lessee without material damage to the Leased Property by the date of expiration or termination of this Agreement. The Lessee Personal Property and any other personal property of Lessee that can be removed by Lessee without material damage to the Leased Property or to the Improvements, Preexisting Improvements or Interconnection Improvements may remain the personal property of Lessee and may be removed by Lessee at any time on or before the end of the Lease Term. In connection with the expiration or termination of this Agreement, City reserves the right to require Lessee to remove the Lessee Personal Property from the Leased Property by the date of expiration or termination of this Agreement. If so required, Lessee shall remove the Lessee Personal Property from the Leased Property by the date of expiration or termination of this Agreement. Lessee shall, in removing any such Lessee Personal Property or other personal property, repair all damage to the Leased Property, Improvements, Preexisting Improvements, and Interconnection Improvements caused by such removal. Any Lessee Personal Property or any other property, of any kind or type, left or remaining on the Leased Property at the expiration or termination of this Agreement shall be deemed abandoned property and, without liability of any kind to City and without payment of consideration of any kind to Lessee, at City’s option may be removed, retained, stored, destroyed, or disposed of by City or its contractors, all at Lessee’s expense. Lessee shall remove from property any and all hazardous or environmentally sensitive materials that are located upon or may accumulate or otherwise be placed on the Property (“Hazardous Material”) and dispose of same in accordance with all applicable statutes, regulations, rules, orders, and ordinances. It is expressly stipulated that Hazardous Material shall be deemed at all times the property of Lessee; and City may remove, retain, store (at Lessee’s expense), destroy, or dispose of any personal property and any other property, of any kind or type, left or remaining on the Property at the termination of the Lease, without liability of any kind to the City. Preexisting Improvements are and shall continue to be owned by City. The rights and obligations provided in this Section 3.2.B shall survive any expiration or termination of this Agreement.
Section 3.3 Access; Staging Areas. City agrees that if Lessee is not in breach of this Agreement beyond any applicable notice and cure period, Lessee and Lessee’s employees, officers, directors, sublessees (that are approved by City pursuant to this Agreement), Project employees, contractors, subcontractors, suppliers, agents, invitees, and other representatives (‘‘Lessee’s Associates”) are authorized to enter, exit and transit across the existing roads in the non-controlled access areas of the Property on a non-exclusive basis for purposes of ingress and egress to the extent reasonably necessary in connection with Lessee’s construction of the Project authorized by City, Lessee’s construction of the Interconnection Improvements, and for Lessee’s use, occupancy, and operations at the Leased Property. If one or more of the unimproved existing roads in the non-controlled access areas of the Property require improvement or modification, if approved in writing in advance by City, Lessee may undertake such road improvement or modification at Lessee’s expense. If in connection with any construction authorized hereunder, Lessee wishes (i) to use or access the City’s utility poles for purposes of attaching any telecommunications lines or cables, Lessee may do so only with City’s prior approval pursuant to a written Pole Attachment Agreement signed by the Parties, or (ii) to temporarily stage any construction materials or equipment, Lessee may do so only at those locations in the non-controlled access areas of the Property authorized by City in writing and only in the manner, and for the duration, permitted by City. Lessee shall, at its expense, in connection with any of the activities described in this Section 3.3 or elsewhere in this Agreement, repair or restore any and all damage to the Property, Leased Property, Improvements, Preexisting Improvements, and Interconnection Improvements caused by or resulting from the acts or omissions of Lessee or any of Lessee’s Associates. Lessee and Lessee’s Associates agree to comply with the reasonable security and safety policies, procedures and practices of the City at all times.
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Section 3.4 Use of Leased Property and Compliance with all Laws and Regulations. Lessee agrees that it shall use the Leased Property and the Improvements only for its reasonable business purposes authorized by City from time to time in its sole discretion, which City authorized business purposes include the construction and operation of Project facilities. Lessee and Lessee’s Associates shall comply at all times, at Lessee’s sole cost, with any and all laws and regulations (as amended or otherwise modified from time to time) that are applicable to Lessee’s business or to Lessee’s construction of the Improvements or Interconnection Improvements, including any applicable laws or regulations pertaining to the construction of buildings or other improvements on public property, and that are applicable to Lessee’s use, occupancy, or operations at the Leased Property, the Improvements or, to the limited extent provided herein, the Property (the “Laws and Regulations”), which include, but are not limited to, all laws, statutes, ordinances, regulations, rules, orders, writs, judgments, decrees, injunctions, directives, rulings, guidelines, standards, codes, policies, common law, and other pronouncements of any kind having the effect of law that may be applicable at any time during the term of this Agreement including, but not limited to, master plans and zoning codes, and all Laws and Regulations pertaining to the environment (the “Environmental Laws”); any and all plans and programs developed in compliance with such requirements; and all lawful, reasonable, and nondiscriminatory City policies and other requirements, including but not limited to restrictions on noise, dust and light spillover and any current or future agreements to which the City is a party restricting noise, dust, light spillover or operations on the RD Wells Sub Station Property. Lessee shall provide all required notices under the Laws and Regulations with respect to the Leased Property or the Improvements. If requested by City in writing, Lessee will verify, within a reasonable time frame, compliance with any Laws and Regulations. Further, in its use of the Leased Property and the Improvements, Lessee shall comply with the following:
A. Address. Lessee shall file with Denton Municipal Electric (“DME”) and keep current its mailing and email addresses, landline telephone and cell phone numbers, and contacts where it can be reached in an emergency.
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B. List of Sublessees. At least quarterly, Lessee shall file with DME and keep current a list of any sublessees and a list of all Improvements and Interconnection Improvements on the Leased Property.
Section 3.5 No Unauthorized Use. Lessee and Lessee’s Associates shall use the Leased Property, the Improvements and, to the limited extent provided herein only for purposes that are expressly authorized by this Agreement and shall not engage in any unauthorized use of the same. Unauthorized uses include, but are not limited to, restricting access on any road or other area that Lessee does not lease; placing waste materials on or around the Leased Property or disposing of such materials in violation of any Laws and Regulations; any use that would constitute a public or private nuisance or adversely impact adjacent landowners; parking outside of the Leased Property or using automobile parking areas outside of the Leased Property, unless authorized by DME in writing; use of automobile parking areas within the Leased Property in a manner not authorized by this Agreement or City; any use that would interfere with any operation at the RD Wells Sub Station or that would decrease the Sub Station’s effectiveness (as determined by City in its sole discretion); and any use that would be prohibited by or would impair coverage under either Party’s insurance policies or would cause an increase in the existing rate of insurance upon the Leased Premise.
Section 3.6 Permits and Licenses. Lessee shall obtain and maintain in current status all permits and licenses that are required under any Laws and Regulations in connection with Lessee’s construction of Improvements or Interconnection Improvements and the use, occupancy, or operations at the Leased Property or of the Improvements. Those permits and licenses include, but are not limited to, (i) all contractors doing work on the Leased Property, including work on or for the Improvements or Interconnection Improvements, must be licensed by the State of Texas, (ii) if applicable, prior to commencing construction of any Improvements or Interconnection Improvements, a permit must be obtained from the City and a copy of the permit must be furnished to DME, and (iii) if applicable, clearance must be obtained from the responsible health department or other agency. In the event that Lessee receives notice from any governmental entity that Lessee lacks, or is in violation of, any such permit, license or other requirement, Lessee shall provide City with timely written notice of the same and Lessee shall diligently pursue the resolution of any such issues.
Section 3.7 Payment of Taxes. Lessee shall pay (before their respective due dates) all taxes, including ad valorem taxes, and all fees, charges, assessments, and levies that relate to Lessee’s use, occupancy, or operations at the Leased Property or the Improvements and all other obligations for which a lien may be created relating thereto (including, but not limited to, utility charges and work for any Improvements or Interconnection Improvements). During the Lease Term, Lessee shall be responsible for any and all taxes generated by the Denton County Tax Assessor I Collector. With respect to the Leased Property and the Improvements, such taxes shall be prorated between Lessee and City on a daily basis for the tax years in which the Lease Term commences and expires or terminates. City shall either forward tax bills for the Leased Property to Lessee, or cause the taxing authority to mail the bills directly to Lessee.
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Section 3.8 No Liens. No liens related to Lessee or Lessee’s use, occupancy or operations may be placed upon the Leased Property. Within thirty (30) days, Lessee shall pay all lawful claims made against City and discharge all liens filed or which exist against the Leased Property to the extent such claims arise out of or in connection with, whether directly or indirectly, the failure to make payment for work done or materials provided by Lessee its contractors, subcontractors, or materialmen. However, Lessee shall have the right to contest the amount or validity of any such claim or lien without being in default under this Agreement upon furnishing security in form acceptable to City, in an amount equal to one hundred percent (100%) of such claim or lien, which insures that such claim or lien will be properly and fully discharged forthwith in the event that such contest is finally determined against Lessee or City. City shall give timely notice to Lessee of all such claims and liens of which it becomes aware. When contracting for any work in connection with the Leased Property, Improvements or Interconnection Improvements, Lessee shall include in such contract a provision prohibiting the contractor or any subcontractor or supplier from filing a lien or asserting a claim against City’s real property or any interest therein. Lessee is solely responsible for ensuring that all requirements are met such that such lien waivers are effective and enforceable (such as filing such contracts, if necessary). Furthermore, when completed, the Improvements and Interconnection Improvements on the Leased Property shall be free from all construction liens.
**ARTICLE IV**
**REPRESENTATIONS AND WARRANTIES**
Section 4.1 Representations by City. City represents and warrants that it has the right, power, and legal capacity to enter into and perform its obligations under this Agreement, has duly executed and delivered this Agreement, and that this Agreement constitutes a legal, valid, and binding obligation of City.
Section 4.2 Representations by Lessee. Lessee represents and warrants that it has the right, power, and legal capacity to enter into and perform its obligations under this Agreement, has duly executed and delivered this Agreement, and that this Agreement constitutes a legal, valid, and binding obligation of Lessee.
**ARTICLE V**
**OBLIGATIONS OF LESSEE**
Section 5.1 Plans and Specifications; Re-Zoning. With respect to any Improvements and Interconnection Improvements, Lessee shall select qualified architects and engineers to prepare and, if applicable, submit for approval, prior to construction or on a phased basis during construction, any architectural, site, structural, civil, mechanical, and/or electrical drawings and specifications for the Improvements and Interconnection Improvements in the form and with the content required by the appropriate local planning and zoning authorities and pursuant to all applicable Laws and Regulations and this Agreement (collectively, the “Plans and Specifications”).
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Section 5.2 Operations and Maintenance. Lessee shall maintain the Leased Property and all Improvements in a condition that is clean, free of debris, safe, sanitary, and in good repair and shall not accumulate or permit the accumulation of any trash, refuse, debris, or anything that is unsightly, creates a fire hazard or nuisance, or causes inconvenience to adjoining properties. Lessee shall at its own expense create, execute, and maintain a comprehensive landscaping, tree canopy, and irrigation plan for the Leased Property in accordance with relevant local development and landscaping codes. Lessee shall perform all work in accordance with Laws and Regulations and in a good and workmanlike manner. Lessee shall promptly remedy any condition that fails to meet this standard. Without limiting the foregoing obligations, Lessee shall not store on the Leased Property any inoperable equipment, excess, discarded or unsightly materials, or materials likely to create a hazard; shall not use areas outside of enclosed buildings for storage; and shall store trash in covered metal receptacles. Any substance or material that is regulated by any Environmental Law (“Hazardous Materials”) shall be governed by Section 5.6. In addition, Lessee agrees to comply with all applicable provisions of City’s Texas Pollutant Discharge Elimination Multi Sector General Permit.
Section 5.3 Utilities. City represents that there are water, sewer, and electrical lines accessible within the general vicinity of the Leased Property. Lessee shall be responsible, at Lessee’s sole cost and expense, for obtaining all utility connections at or for the Leased Property, Improvements and Lessee Personal Property. Further, Lessee shall pay for telecommunications, television, internet, gas, light bulbs, electricity, water, sewer, and garbage and trash removal services provided to or used by Lessee and shall make such deposits as are required to secure service. Lessee shall be responsible for any water or sewer impact fees incurred by Lessee’s and Lessee’s Associates’ use of the Leased Property. Any repairs of the Interconnection Improvements or other utility lines, other than those which are the responsibility of the utility service, are the responsibility of Lessee.
Section 5.4 Signs. Lessee shall not place, or cause to be placed, any sign or signs on the Leased Property or the Improvements unless otherwise agreed to in writing by City.
Section 5.5 Security. Lessee is responsible to comply (at Lessee’s sole cost) with all security measures that City, the United States Department of Homeland Security (“Homeland Security”), the National Electric Regulatory Commission (“NERC”), the Texas Reliability Entity (“TRE”), or any other governmental entity having jurisdiction may require now or in the future in connection with the Lessee’s activities and operations on the Leased Property, including, but not limited to, any access credential and escort requirements, and any civil penalty obligations and other costs arising from a breach of security requirements caused or permitted by Lessee or Lessee’s Associates. Lessee shall protect and preserve security at the Leased Property.
Section 5.6 Hazardous Materials.
A. No Violation of Environmental Laws. Lessee shall not cause or permit any Hazardous Materials to be used, produced, stored, transported, brought upon, or released on, under, or about the Leased Property by Lessee or Lessee’s Associates in violation of applicable Environmental Laws. Lessee is responsible for any such violation as provided by Section 7.1.
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B. Response to Violations. Lessee agrees that in the event of a release or threat of release of any Hazardous Material by Lessee or Lessee’s Associates at the Leased Property, Lessee shall provide City with prompt notice of the same. Lessee shall respond to any such release or threat of release in accordance with applicable Laws and Regulations. If City has reasonable cause to believe that any such release or threat of release has occurred, City may request, in writing, that Lessee conduct reasonable testing and analysis (using qualified independent experts reasonably acceptable to City) to show that Lessee is complying with applicable Environmental Laws. City may conduct the same at Lessee’s expense if Lessee fails to respond in a reasonable manner. Lessee shall cease any or all of Lessee’s activities as City determines necessary, in its sole and absolute discretion, in connection with any investigation, cure, or remediation. If Lessee or Lessee’s Associates violate any Environmental Laws at the Leased Property (whether due to the release of a Hazardous Material or otherwise) or directly or indirectly cause the release of any Hazardous Material to the environment, Lessee, at Lessee’s sole expense, shall have the following obligations, which shall survive any expiration or termination of this Agreement: (i) promptly remediate such violation in compliance with applicable Environmental Laws; (ii) submit to City a written remediation plan, and City reserves the right to approve such plan (which approval shall not be unreasonably withheld) and to review and inspect all work; (iii) work with City and other governmental authorities having jurisdiction in connection with any violation; and (iv) promptly provide City copies of all documents pertaining to any environmental concern that are not subject to Lessee’s attorney-client privilege.
C. Obligations upon Termination and Authorized Transfers. Upon any expiration or termination of this Agreement or any change in possession of the Leased Property authorized by City, Lessee shall demonstrate to City’s reasonable satisfaction that Lessee has removed any Hazardous Materials, addressed any releases to the environment, and is in compliance with applicable Environmental Laws. Such demonstration may include, but is not limited to, independent analysis and testing to the extent that facts and circumstances warrant analysis and testing, such as evidence of past violations or specific uses of the Leased Property. If the site is contaminated during Lessee’s possession, Lessee shall bear all costs and responsibility for the required clean up, and shall hold City, its officers, elected and appointed officials, employees, and agents harmless therefrom unless such contamination was caused directly by the City. Notwithstanding anything to the contrary, the obligations of this Section 5.6.C. shall survive any termination of this Agreement.
D. City’s Environmental Representation. City covenants, and represents, that as of the Commencement Date, to City’s knowledge, the Leased Property and Preexisting Improvements do not contain Hazardous Materials that would constitute a violation of any Environmental Law. If Lessee discovers any Hazardous Materials during construction, Lessee shall (i) notify City immediately, (ii) stop all construction activities, (iii) perform any required investigation to determine the extent of such Hazardous Materials, and (iv) perform any required remediation of the Leased Property. Alternatively, Lessee may unilaterally terminate the Agreement and Power Purchase Agreement. Nothing contained in this Section 5.6 D is intended to, nor shall it, waive or limit the City’s governmental immunity, or any defenses related thereto or under any local, state or federal law, rule, or ordinance.
Section 5.7 Trash, Garbage, and Other Refuse. Lessee shall pick up and provide for a complete and proper arrangement for the adequate sanitary handling and disposal of trash, garbage and other refuse, away from the Property through the City. Lessee is responsible for contacting the refuse hauler and arranging for such waste management, handling and disposal services and for payment of such services. Lessee shall provide and use suitable covered metal receptacles for all such garbage, trash, and other refuse on the Leased Property. Lessee shall not pile boxes, cartons, barrels, pallets, debris, or similar items in an unattractive or unsafe manner, on or about the Leased Property.
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**ARTICLE VI**
**INDEMNIFICATION AND INSURANCE**
Section 6.1 Insurance. Lessee agrees to purchase at their own cost and maintain the minimum insurance coverage as provided in Exhibit E of the PPA, with additional insurance requirements indicated below. Lessee shall provide satisfactory certificate(s) of insurance, including any applicable endorsements to the City no less than thirty (30) days prior to the scheduled program date.
All Risk Property Insurance covering Lessee’s buildings, including improvements and betterments with insured value equal to 80% replacement cost. Covered perils shall include, but not be limited to, Fire, Extended Coverage, and Vandalism & Malicious Mischief.
Section 6.2 Indemnification and Duty to Pay Damages.
A. **LESSEE SHALL INDEMNIFY AND HOLD CITY AND CITY**’**S OFFICERS, ELECTED AND APPOINTED OFFICIALS, EMPLOYEES, AND AGENTS EXEMPT AND HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, SUITS, JUDGMENTS, COSTS, AND EXPENSES ASSERTED BY ANY PERSON OR PERSONS (INCLUDING AGENTS OR EMPLOYEES OF CITY, LESSEE, OR SUBLESSEE) BY REASON OF DEATH OR INJURY TO PERSONS OR LOSS OF OR DAMAGE TO PROPERTY RESULTING FROM (I) LESSEES BREACH OR OTHER VIOLATION OF THIS AGREEMENT, OR AND (II) LESSEES ACTMTIES, INCLUDING BUT NOT LIMITED TO CONSTRUCTION ACTIVITIES BY LESSEE OR BY ANY OF LESSEE**’**S ASSOCIATES, OR OPERATIONS, OR ANYTHING DONE OR OMITTED BY LESSEE OR BY ANY OF LESSEES ASSOCIATES, UNDER THIS AGREEMENT EXCEPT TO THE EXTENT THAT SUCH CLAIMS, DEMANDS, SUITS, JUDGMENTS, COSTS, AND EXPENSES MAY BE ATTRIBUTED TO THE SOLE NEGLIGENCE OF CITY, ITS AGENTS, ITS EMPLOYEES.**
B. Intentionally Omitted.
C. City shall not be liable to Lessee for any damage by or from any act or negligence of any tenant or other occupant by any owner or occupant of adjoining or contiguous property.
D. Lessee agrees to pay for all damages to the Leased Property, the Improvements, the Preexisting Improvements, the Interconnection Improvements, and any related apparatus or appurtenances caused by Lessee’s misuse or neglect thereof.
E. Lessee shall be responsible and liable for its conduct and the conduct of Lessee’s Associates in, on and around the Leased Property, including but not limited to under or around any transmission lines.
F. The provisions of this Section 6.2 and the remedies and rights provided in this Section 6.2 shall survive any expiration or termination of this Agreement.
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**ARTICLE VII**
**DEFAULT AND REMEDIES**
Section 7.1 Lessee’s Default. The occurrence of any of the following events shall constitute a default by Lessee under this Agreement unless cured within thirty (30) days following written notice of such violation from City: (i) Lessee fails to timely pay any Rent; (ii) Lessee or Lessees Associates violate any requirement under this Agreement (including, but not limited to, abandonment of the Leased Property); (iii) Lessee assigns or encumbers any right in this Agreement, delegates any performance hereunder, or subleases any part of the Leased Property except as expressly permitted in this Agreement; (iv) Lessee files a petition in bankruptcy or has a petition filed against Lessee in bankruptcy, insolvency, or for reorganization or appointment of a receiver or trustee which is not dismissed within sixty (60) days; (v) Lessee petitions for or enters into an arrangement for the benefit of creditors, or suffers this Agreement to become subject to a writ of execution and such writ is not released within thirty (30) days; (vi) Lessee defaults in constructing any Improvements that are required to be constructed under this Agreement; (vii) Lessee dissolves or dies; (viii) Lessee is in default under the terms of the PPA; or (ix) the PPA terminates or expires. Notwithstanding the foregoing, with respect to clause (ii) of the previous sentence, if the nature of Lessee’s requirement is such that more than thirty (30) days are reasonably required for performance or cure of such requirement, Lessee shall not be in default if Lessee commences performance within such 30-day period and thereafter diligently pursues the same to completion.
Section 7.2 Default by City. City shall not be in default under this Agreement unless City fails to perform an obligation required of City under this Agreement within thirty (30) days after written notice by Lessee to City. If the nature of City’s obligation is such that more than thirty (30) days are reasonably required for performance or cure, City shall not be in default if City commences performance within such thirty (30) day period and thereafter diligently pursues the same to completion.
Section 7.3 Remedies for Failure to Pay Rent. If any Rent required by this Agreement shall not be paid when due, and City has provided Lessee with the required notice and opportunity to cure as set forth in Section 7.1, City shall have the option to:
A. Terminate this Agreement, take possession of the Improvements, resume possession of the Leased Property for its own account, and recover immediately from Lessee the differences between the Rent and the fair rental value of the Property for the Lease Term, reduced to present worth; or
B. Terminate this Agreement and the PPA, take possession of the Leased Property, resume possession of the Leased Property, re-lease the Leased Property for the remainder of the Lease Term for the account of Lessee, and recover from Lessee, at the end of the Lease Term or at the time each payment of Rent comes due under this Agreement as City may choose, the difference between the Rent and the rent received on the re-leasing or renting of the Leased Property.
In an event of default by Lessee, City shall also recover all reasonable and documented expenses incurred by reason of an event of default, including reasonable attorneys’ fees.
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Section 7.4 Remedies for Breach of Agreement. If Lessee breaches or fails to perform any provision of this Agreement other than the agreement of Lessee to pay Rent, City shall provide written notice to Lessee identifying the breach or specifying the performance required. If Lessee fails to remedy the breach within the required notice and cure period set forth in Section 7.1 City may terminate this Agreement or take any such action it is legally entitled to take, including instituting litigation to compel performance of this Agreement. Should litigation be filed by City and it is the prevailing party in that litigation, Lessee shall be liable for all reasonable and documented expenses related to such litigation, including City’s reasonable attorneys’ fees.
Section 7.5 Cross Default. Any event of default under the PPA (or under any of the other agreements referenced therein or executed in connection therewith) by either City or Lessee shall be an event of default hereunder.
Section 7.6 Survival. The provisions of this Article VII and the remedies and rights provided in this Article VII shall survive any expiration or termination of this Agreement.
**ARTICLE VIII**
**ASSIGNMENT AND SUBLEASING**
Section 8.1 Assignment by Lessee.
A. Except as otherwise set forth in Section 8.l(B) of this Agreement, Lessee shall not assign any of its rights under this Agreement, including, but not limited to, rights in any Improvements, (whether such assignment is voluntarily or involuntarily, by consolidation, dissolution, change in control, or any other manner), and shall not delegate any performance under this Agreement, except with the prior written consent of City to any of the same, in City’s sole discretion. As a condition of obtaining such consent, the City reserves the right to require the transferee receiving any such rights from Lessee to (i) provide its financial statements or other financial or credit information to City for review, (ii) provide replacement insurance certificates for the insurance required under this Agreement prior to the effective date of the transfer or assignment, (iii) provide a security deposit or letter of credit in the manner and form acceptable to City securing payment and other obligations under this Agreement, and/or (iv) execute a new lease agreement provided by City. Regardless of City’s consent, Lessee shall not be released from any obligations for matters arising during the time when this Agreement was in effect. Any purported assignment or delegation of rights or delegation of performance in violation of this section is void.
B. Notwithstanding anything to the contrary contained in this Article VIII, an assignment or transfer of this Agreement (each a “Transfer”): (i) to a successor to Lessee by merger, consolidation or reorganization or in connection with the sale of all or substantially all of the assets of Lessee (a Successor); or (ii) to an entity which is controlled by, controls, or is under common control with Lessee, shall not require City’s consent. Lessee shall notify City of any such Transfer and promptly supply City with any documents or information reasonably requested by City regarding such Transfer or such entity, and further provided that no uncured event of default exists. “Control, as used in this Section, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person or entity, whether by the ownership of voting securities, by contract or otherwise.
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C. Upon the expiration or termination of this Agreement with respect to the Improvements and upon construction or installation with respect to the Interconnection Improvements, Lessee hereby grants, assigns, transfers, and conveys to City, without warranty, the following: as built plans that detail any work performed by Lessee at the Leased Property(City has the non-exclusive right to use the as-builts and is hereby assigned a non-exclusive license to any copyright interests therein); and the right to enforce, in Lessees own name as a proper party, any subcontracts related to the Improvements or other maintenance or services contracts in force with respect to the Leased Property or Improvements and any warranties arising under any of them or in connection with the performance thereof, as the case may be.
Section 8.2 Assignment by City. City shall have the right, in City’s sole discretion, to assign any of its rights under this Agreement (and in connection therewith, shall be deemed to have delegated its duties), and upon any such assignment, Lessee agrees that Lessee shall perform its obligations under this Agreement in favor of such assignee.
Section 8.3 Encumbrances. Lessee shall not encumber or permit the encumbrance of the Leased Property or any of Lessee’s rights under this Agreement. Any purported encumbrance of rights in violation of this Section 8.3 is void.
**ARTICLE IX**
**MISCELLANEOUS PROVISIONS**
Section 9.1 Waiver of Exemption. Any constitutional or statutory exemption of Lessee of any property usually kept on the Leased Property, from distress or forced sale, is waived.
Section 9.2 Addresses. All notices given under this Agreement to City shall be sent to the City in care of General Manager, Denton Municipal Electric, at 1659 Spencer Road, Denton Texas, 76205, with a copy to the City Attorney, City of Denton, at 215 E. McKinney, Denton, Texas 76201, or such other place as City shall specify in writing. All notices given under this Agreement to Lessee shall be sent to:
Name: SPRE DENTON TX, LLC
Address 2146 Roswell Rd., #108-851
City, State, ZIP: Marietta, GA, 30062
Telephone Number:
E-mail address:
Notices given under this Agreement to the Lender, if any, shall be sent to the address provided by the Lender to City in writing. Any notice properly mailed by registered mail, postage and fee prepaid, shall be deemed delivered when mailed, whether received or not, and all notices sent via overnight delivery service or email shall be deemed delivered when received.
Section 9.3 No Waiver. The waiver by City in writing of any breach of any term, covenant, or condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant, or condition herein contained. The subsequent acceptance of Rent hereunder by City shall not be deemed to be a waiver of any preceding breach by Lessee of any term, covenant, or condition of this Agreement, other than the failure of Lessee to pay the particular Rent so accepted, regardless of City’s knowledge of such preceding breach at the time of acceptance of such Rent.
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Section 9.4 Lessee’s Subordination. Lessee hereby subordinates and makes this Agreement inferior to all existing and future mortgages, trust indentures or other security interest of City or City’s successor in interest. Lessee shall execute and deliver to City any documents required to evidence and perfect such subordination.
Section 9.5 Additional Charges as Rent. Any charges assessed against Lessee by City for services or for work done on the Leased Property or the Improvements by order of Lessee or otherwise accruing under this Agreement shall be considered as Rent due.
Section 9.6 Non-Interference With Operation of the RD Wells Sub Station. Lessee expressly agrees for itself, its successors, and assigns that Lessee and its successors and assigns will not conduct operations in or on the Leased Property or the Improvements in a manner that in the reasonable judgment of City, (i) interferes or might interfere with the reasonable use or operation of the RD Wells Sub Station or RD Wells Sub Station Property by the City, including Denton Municipal Electric; (ii) hinders or might hinder police, fire fighting, or other emergency personnel in the discharge of their duties; (iii) would or would be likely to constitute a hazardous condition at the RD Wells Sub Station or RD Wells Sub Station Property; (iv) would or would be likely to increase the premiums for insurance policies maintained by City; (v) is in contradiction to any rule, regulation, directive, or similar restriction issued by agencies having jurisdiction over the RD Wells Sub Station or RD Wells Sub Station Property; or (vi) would involve any illegal purposes. In the event this covenant is breached, City reserves the right, after prior written notice to Lessee, to enter upon the Leased Property and the Improvements and cause the abatement of such interference at the expense of Lessee. In the event of a breach in RD Wells Sub Station security caused by Lessee, resulting in fine or penalty, such fine or penalty will be considered and charged to Lessee as Rent.
Section 9.7 Interpretation.
A. References in the text of this Agreement to articles, sections, or exhibits pertain to articles, sections, or exhibits of this Agreement, unless otherwise specified.
B. The terms “hereby,” “herein,” “hereof,” “hereto,” “hereunder,” and any similar terms used in this Agreement refer to this Agreement. The term “including” shall not be construed in a limiting nature, but shall be construed to mean “including, without limitation.”
C. Words importing persons shall include firms, associations, partnerships, trusts, corporations, and other legal entities, including public bodies, as well as natural persons.
D. Any headings preceding the text of the articles and sections of this Agreement, and any table of contents or marginal notes appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this Agreement, nor shall they affect the meaning, construction or effect of this Agreement.
E. Words importing the singular shall include the plural and vice versa. Words of the masculine gender shall be deemed to include correlative words of the feminine and neuter genders.
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F. Capitalized terms in this Agreement that are used throughout this Agreement and in any Annexes, Exhibits and Schedules hereto shall have the meaning or definition ascribed to it herein. Absent such meaning or definition in this Agreement, such term shall have the meaning or definition ascribed to it in the PPA between the Parties.
Section 9.8 Force Majeure. No act or event, whether foreseen or unforeseen, shall operate to excuse Lessee from the prompt payment of rent or any other amounts required to be paid under this Agreement. If City (or Lessee in connection with obligations other than payment obligations) is delayed or hindered in any performance under this Agreement by a force majeure event, such performance shall be excused to the extent so delayed or hindered during the time when such force majeure event is in effect, and such performance shall promptly occur or resume thereafter at the expense of the Party so delayed or hindered. A “force majeure event” is an act or event, whether foreseen or unforeseen, that prevents a Party in whole or in part from performing as provided in this Agreement, that is beyond the reasonable control of and not the fault of such Party, and that such Party has been unable to avoid or overcome by exercising due diligence, and may include, but is not limited to, acts of nature, war, riots, strikes, accidents, fire, epidemics, pandemics, viruses, diseases, quarantines, acts of government, public health emergencies and changes in law. Lessee hereby releases City and City’s officers, elected and appointed officials, employees, and agents from any and all liability, whether in contract or tort (including strict liability and negligence) for any loss, damage, or injury of any nature whatsoever sustained by Lessee, its employees, agents, or invitees during the Lease Term, including, but not limited to, loss, damage, or injury to the Leased Property or the personal property of Lessee that may be located or stored in, on or under the Leased Property or the Improvements due to a force majeure event.
Section 9.9 Governing Law and Venue. This Agreement has been made in and will be construed in accordance with the laws of the State of Texas. In any action initiated by one Party against the other, exclusive venue and jurisdiction will be in the appropriate state courts in and for Denton County, Texas.
Section 9.10 Amendments and Waivers. No amendment to this Agreement shall be binding on City or Lessee unless reduced to writing and signed by both Parties. No provision of this Agreement may be waived, except pursuant to a writing executed by the Party against whom the waiver is sought to be enforced.
Section 9.11 Severability. If any provision of this Agreement is determined to be invalid, illegal, or unenforceable, the remaining provisions of this Agreement shall remain in full force and effect if both the economic and legal substance of the transactions that this Agreement contemplates are not affected in any manner materially adverse to any Party. If any provision of this Agreement is held invalid, illegal, or unenforceable, the Parties shall negotiate in good faith to modify this Agreement to fulfill as closely as possible the original intents and purposes of this Agreement.
Section 9.12 Relationship of Parties. This Agreement does not create any partnership, joint venture, employment, or agency relationship between the Parties. Nothing in this Agreement shall confer upon any other person or entity any right, benefit, or remedy of any nature.
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Section 9.13 Further Assurances. Each Party shall execute any document or take any action that may be necessary or desirable to consummate and make effective a performance that is required under this Agreement.
Section 9.14 The Lessee hereby represents that (i) it does not engage in business with Iran, Sudan or any foreign terrorist organization and (ii) it is not listed by the Texas Comptroller under Section 2252.153, Texas Government Code, as a company known to have contracts with or provide supplies or services to a foreign terrorist organization. As used in the immediately preceding sentence, “foreign terrorist organization” shall have the meaning given such term in Section 2252.151, Texas Government Code.
Section 9.15 Texas Local Government Code 2274.0102 Certification
The Lessee hereby represents that SPRE Denton TX, LLC is not: (A) owned by, or the majority of stock or other ownership interest in SPRE Denton TX, LLC is not held or controlled by:
(i) individuals who are citizens of China, Iran, North Korea, Russia, or a designated country under Section 2274.0102, Texas Government Code; or
(ii) a company or other entity, including a governmental entity, that is owned or controlled by citizens of or is directly controlled by the government of China, Iran, North Korea, Russia, or a designated country; or
(B) headquartered in China, Iran, North Korea, Russia, or a designated country.
Section 9.15 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which, together, shall constitute one and the same instrument. A signed copy of this Agreement delivered by facsimile, e-mail, or other means of electronic transmission (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
Section 9.16 When Lessee conducts any construction, alteration, or repair of an improvement to the Leased Premises, Lessee must require their contractor to execute a payment bond and performance bond in accordance with Government Code 2252.909. The bonds shall be executed by a corporate surety authorized to do business in Texas in accordance with Chapter 2253 of the Texas Government Code, shall be on the City’s standard form, and shall contain a local resident agent for service of process. Lessee must provide a notice of commencement in accordance with Government Code 2252.909. Lessee must require their contractor to provide copies of the required bonds to all subcontractors not later than the fifth (5th) day after such subcontract is executed.
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Section 9.17 Lessee acknowledges that in accordance with Chapter 2274 of the Texas Government Code, City is prohibited from entering into a contract with a company for goods or services unless the contract contains written verification from the company that it (1) does not have a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association; and (2) will not discriminate during the term of the contract against a firearm entity or firearm trade association. The terms “discriminate against a firearm entity or firearm trade association, “firearm entity” and ·firearm trade association"” shall have the meanings ascribed to those terms in Chapter 2274 of the Texas Government Code. ***By signing this agreement, Lessee certifies that Lessee***’***s signature provides written verification to the City that Lessee: (1) does not have a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association; and (2) will not discriminate during the term of the contract against a firearm entity or firearm trade association***. Failure to meet or maintain the requirements under this provision will be considered a material breach.
Section 9.18 Lessee acknowledges that in accordance with Chapter 2276 of the Texas Government Code, City is prohibited from entering into a contract with a company for goods or services unless the contract contains written verification from the company that it (I) does not boycott energy companies; and (2) will not boycott energy companies during the term of the contract. The terms “boycott energy company” and “company” shall have the meanings ascribed to those terms in Section 809.00 I of the Texas Government Code. ***By signing this agreement, Lessee certifies that Lessee***’***s signature provides written verification to the City that Lessee: (1) does not boycott energy companies; and (2) will not boycott energy companies during the term of the agreement.*** Failure to meet or maintain the requirements under this provision will be considered a material breach.
Section 9.19 Lessee acknowledges that in accordance with Chapter 2271 of the Texas Government Code, City is prohibited from entering into a contract with a company for goods or services unless the contract contains a written verification from the company that it: (1) does not boycott Israel; and (2) will not boycott Israel during the term of the contract. The terms “boycott Israel” and “company” shall have the meanings ascribed to those terms in Section 808.001 of the Texas Government Code. ***By signing this agreement, Lessee certifies that Lessee***’***s signature provides written verification to the City that Lessee: (1) does not boycott Israel; and (2) will not boycott Israel during the term of the agreement.*** Failure to meet or maintain the requirements under this provision will be considered a material breach.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the 23rd day of August, 2024.
- CITY OF DENTON
- By: */s/ Sara Hensley*
- Sara Hensley, City Manager
- ATTEST: THIS AGREEMENT HAS BEEN BOTH
- Lauren Thoden, City Secretary REVIEWED AND APPROVED
- as to financial and operational obligations
- By: */s/ Lauren Thoden* and business terms.
- Signature
- APPROVED AS TO LEGAL FORM:
- Mack Reinwand, City Attorney Title
- Department
- Date Signed
- By: */s/ Mack Reinwand*
**ACKNOWLEDGMENT**
THE STATE OF TEXAS §
COUNTY OF DENTON §
This instrument was acknowledged before me on the 23rd day of August, 2024, by Sara Hensley, City Manager of the City of Denton, on behalf of said municipality.
*/s/ Karisa Leigh Richards*
NOTARY PUBLIC, STATE OF TEXAS
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- SPRE DENTON TX , LLC, LESSEE
- By: */s/ Houston Aderhold*
- Name: Houston Aderhold
- Title: CTO
**LESSEE NOTARY**
THE STATE OF Florida §
COUNTY OF Orange §
This instrument was acknowledged before me on the 16 day of August, 2024, by Michael Aderhold, on behalf of said company.
*/s/ Barbara Anne Foley*
NOTARY PUBLIC, STATE OF FLORIDA
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---
## EXHIBIT 10.30
SEC source: [ex_902235.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902235.htm)
**Exhibit 10.30**
**MASTER SERVICES AGREEMENT**
This Master Services Agreement (together with all exhibits hereto, and amendments and addenda executed hereunder, the “MSA”) is made between the Data Center Licensor (as defined below), and THE CLOUD MINDERS, INC., a DELAWARE COMPANY (“Customer”), and is effective as of DECEMBER 9, 2024. H5 Data Centers, LLC, a Delaware limited liability company (“H5”), is signing this MSA for and on behalf of each Data Center Licensor and it is authorized to do so. This MSA describes the terms and conditions under which Data Center Licensor will provide all colocation and related services to Customer at the applicable Data Center Licensor data center (the “Data Center”) and shall apply to every Data Center Licensor who is or becomes a party to this MSA. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the applicable Data Center Licensor and Customer agree as follows:
Section 1. Data Center Licensor. H5 is signing this agreement for and on behalf of each Data Center Licensor, each of which is an affiliated entity to H5 and to each other. Each Data Center Licensor is the unique owner and/or operator of a Data Center and as such, each Data Center Licensor bears sole responsibility and liability for any agreements entered into for the particular Data Center for which it is the owner and/or operator. Customer shall be contracting for Services at a minimum of one (1) Data Center and so shall be contracting with each specific Data Center Licensor which is the owner and/or operator of the specific Data Center or Data Centers.
Therefore, a “Data Center Licensor” is the H5 affiliate named in a particular SOF (as defined below) as the Data Center Licensor thereunder, which is the party responsible for the provision of Services to Customer pursuant to the SOF in question. A particular Data Center Licensor shall only be responsible for each SOF relating to such Data Center Licensor and shall not be responsible for any other SOF (or this MSA as it relates thereto), as further described in Section 2 below.
H5’s signature on this MSA shall have the same force and effect as the signature of each Data Center Licensor on this MSA, and H5’s signature on an SOF, as the case may be, shall have the same force and effect as the signature of the applicable Data Center Licensor on such SOF, and each Data Center Licensor shall be deemed to have executed this MSA or such SOF, as the case may be. For the avoidance of doubt, a party that is a Data Center Licensor need not be a Data Center Licensor at the time this MSA is executed; once such party signs an SOF, as a Data Center Licensor, or H5 signs an SOF for and on behalf of such party as a Data Center Licensor, such Data Center Licensor shall be deemed to have signed this MSA as a Data Center Licensor.
Section 2. Multiple Data Center Licensors. Customer acknowledges and agrees that a Data Center Licensor shall only be responsible for its own particular SOFs, and this MSA shall only apply to a particular party that is a Data Center Licensor with respect to an SOF under which such party is the Data Center Licensor. Accordingly, notwithstanding anything to the contrary in this MSA, (a) a party that is a Data Center Licensor shall not have any responsibilities, obligations or liabilities whatsoever with respect to any SOF for which it is not the owner and/or operator; (b) the liability of each Data Center Licensor shall be several, and not joint and several, and Customer shall only look to a party that is the actual Data Center Licensor named in the SOF in question, and (c) Customer shall not have or bring any claim or other action whatsoever against any Data Center Licensor that is not the Data Center Licensor under the SOF that is the subject of the claim and/or action in question.
Notwithstanding anything to the contrary in this MSA, although H5 is signing this MSA for and on behalf of each Data Center Licensor, and may, from time to time, sign SOFs for and on behalf of a particular Data Center Licensor, H5 shall not have any responsibilities, obligations or liabilities whatsoever under or in connection with this MSA and/or any SOF, it being understood that H5 is only signing this MSA or an SOF, as applicable, in order to bind each applicable Data Center Licensor as a party to this MSA, or in order to bind a particular Data Center Licensor as a party to an SOF, as the case may be, and Customer shall not have or bring any claim (or other action) whatsoever against H5.
Section 3. Services. Data Center Licensor shall, directly or through subcontractors or agents, provide Customer with those colocation and related services (“Services”) identified on one (1) or more service order forms executed by Customer and Data Center Licensor hereunder (each, a “Service Order Form,” or “SOF”), subject to the terms and conditions of this MSA and such SOF which, upon mutual execution, shall become part of this MSA. Data Center Licensor will provision the Services identified on any mutually-executed SOF following credit approval, receipt of any security deposit as set forth in Section 6 below, and payment of all other amounts due under this MSA and each such SOF. Data Center Licensor will perform the Services in accordance with the service level agreement attached hereto as Exhibit A or, alternatively, any service level agreement attached and applicable to any SOF (the “SLA”).
Section 4. MSA and SOF Term. The term of this MSA shall commence on the Commencement Date and shall continue for the Term (as each are identified on the applicable SOF) or until terminated pursuant to Section 14 below. Data Center Licensor shall use commercially reasonable efforts to deliver the Services under the applicable SOF by the Commencement Date; provided, however, if Data Center Licensor fails to deliver such Services to Customer by the Commencement Date, Data Center Licensor shall not be subject to any liability, and such failure shall not affect the validity of this MSA nor the obligations of the parties under this MSA; the date that Data Center Licensor is able to deliver, and delivers, the Services of such SOF shall thenceforth be the Commencement Date (and, in such event, the length of Term of such SOF shall not be reduced thereby, and the scheduled expiration date shall be extended, if necessary, to provide for the full Term of such SOF). Unless either party notifies the other in writing not less than thirty (30) days prior to the expiration of the original or any renewal SOF Term that it intends to not renew any SOF, or unless earlier terminated pursuant to Section 14 below, the SOF will automatically renew for successive one (1) year periods pursuant to the same terms and conditions, unless otherwise expressly specified in any SOF. Where multiple SOFs are in existence, each SOF has an SOF Term.
Section 5. Invoicing and Payment
5.1 Initial Charges. One-time installation, set-up or non-recurring fees, the first month’s monthly service charges, and any security deposit required by Data Center Licensor, all as set forth on the SOF(s), are due and payable upon execution of the SOF by Customer.
5.2 Monthly Service Charges. Monthly service charges are billed in advance of the month in which Customer will receive Services, provided, however, that any usage and/or consumption-based charges, including but not limited to payments for burstable bandwidth services, are invoiced in arrears. Except as set forth in Section 5.1, payment with respect to Data Center Licensor invoices for non-usage and/or consumption-based charges is due and payable within thirty (30) days of the invoice date, without any right of set off. Payment with respect to usage and/or consumption-based charges is due and payable within ten (10) days of the invoice date. After providing five (5) business days’ written notice, if all service and other charges then due are not paid in full: (i) Customer shall pay interest on the past due amounts in the amount of one and one- half percent (1.5%) per month (or, if less, the maximum interest rate permitted by applicable law); (ii) Customer shall pay all costs of collection, including reasonable attorneys’ fees, court costs and collection agency fees; (iii) Data Center Licensor may suspend any and all Services (including access to the data center or Customer’s space in the data center) and require a fee to restart Services; and (iv) Data Center Licensor may exercise all other remedies available to it under this MSA and applicable law. The monthly service charges that are not usage and/or consumption-based charges, including but not limited to payments for burstable bandwidth services, shall be subject to a cumulative annualized three percent (3%) escalation, including during any renewal SOF term pursuant to Section 4 above.
5.3 Billing Disputes. Customer may withhold any disputed portion of an invoice provided that Customer submit to Data Center Licensor, within thirty (30) calendar days of the invoice date, a written statement providing adequate evidence of the billing error. Data Center Licensor will determine in good faith if there is an invoice error and will issue a credit to Customer if it confirms the error.
5.4 Taxes and Fees. Service charges are exclusive of applicable sales, use, and transaction privilege taxes, and taxes charged by a governmental entity against Data Center Licensor or Customer based on any determination that Data Center Licensor is providing, or has in the past provided a lease or license of real estate to Customer, which, if applicable, shall be paid by Customer upon demand and no later than fifteen (15) days after invoicing by Data Center Licensor. Customer shall be liable for and shall pay at least ten (10) days before delinquency (and Customer shall indemnify, defend and hold Data Center Licensor harmless for, from and against any claims arising out of, in connection with, or in any manner related to, all governmental fees, taxes, tariffs and other charges levied directly or indirectly against any personal property, fixtures, machinery, equipment, apparatus, systems, connections, interconnections and appurtenances located in or used by Customer or its clients in or in connection with the Services. If any such taxes for which Customer or its clients are liable are levied or assessed against Data Center Licensor or Data Center Licensor’s property, and if Data Center Licensor elects to pay the same, Customer shall reimburse such amounts to Data Center Licensor, within ten (10) days of Data Center Licensor’s demand therefor. Customer agrees that notwithstanding anything to the contrary in this MSA, Data Center Licensor may identify Customer and its clients by name and address as an individual or entity having assets at the Data Center to any governmental authority having jurisdiction over the collection of property taxes relating to equipment installed in Customer’s colocation space or lease-taxes based on the colocation Services.
5.5 Modification of Services/Pricing. In the event that, during the term of this MSA or any SOF Term, there is a utility rate plan increase, Data Center Licensor shall have the right, effective immediately upon written notice, to increase Customer’s price for power Services, but only to such an extent to reasonably cover the additional cost to Data Center Licensor resulting from such utility rate plan increase. In addition, in the event that, during the term of this MSA or any SOF Term, any regulatory requirement, tax, or similar cost beyond the control of Data Center Licensor increases the cost of Services, Data Center Licensor shall provide Customer with notice of such price increase and Customer shall, within thirty (30) days after receipt of such notice, have the right to terminate the affected Service without payment of early termination charges. Upon notice to Customer, Data Center Licensor may modify or suspend Customer’s Services as necessary to comply with any law or regulation as reasonably determined by Data Center Licensor. In the event that it becomes necessary to relocate Customer’s equipment to another customer area within the Data Center, Customer agrees to cooperate in good faith with Data Center Licensor to facilitate such relocation and Data Center Licensor agrees to be responsible for any direct, out-of-pocket costs and expenses incurred by Customer in connection with any such relocation. Data Center Licensor will use commercially reasonable efforts to minimize and avoid any interruption to Customer’s Services in the event of such a relocation.
Section 6. Security Deposits. Data Center Licensor shall have the right to require Customer to make the security deposits identified on the applicable SOF as a condition of Data Center Licensor’s provision of Services, which deposit or deposits will be held by Data Center Licensor as security for payment of Customer’s charges for Services. No interest shall be earned on deposits, unless required by applicable state law. At such time as the provision of Service is terminated, the amount of the deposit will be credited to Customer’s account and any credit balance will be refunded.
Section 7. Customer Obligations
7.1 Customer’s Representations and Warranties. Customer represents and warrants that: (i) it is a corporation or other business entity authorized to do business pursuant to applicable law or an individual eighteen (18) years or older with full right and authority to enter into, execute, and perform its obligations under this MSA and that no pending or threatened claim or litigation known to it would have a material adverse impact on its ability to perform as required by this MSA.
7.2 Customer Obligations. Customer agrees that: (i) it will not sublease, sublicense, sell, resell, or offer for resale, any space in a rack, cabinet or cage or the Services in any manner, except as provided in Section 9 below; (ii) it will comply with all applicable laws, regulations and codes and will not use the Services in any manner which is in violation of any law, code, governmental regulation; (iii) all equipment, materials, cabling or other items placed or deployed by Customer or its clients will be installed and used in compliance with all applicable laws, regulations and manufacturer specifications; (iv) Customer will not permit any mechanic’s, material men’s or other liens to be filed against all or any part of the Data Center, its equipment or its facilities, for any labor or material furnished to Customer or its clients in connection with work of any kind performed at the Data Center or at the direction of Customer or its clients; (v) Customer’s Data (as defined below) will not violate or infringe the rights of others, including, without limitation, any patent, copyright, trademark, trade dress, trade secret, privacy, publicity, or other personal or proprietary right, or constitute a defamation or libel of Data Center Licensor or any third party; and (vi) Customer’s Data will not violate any laws to which Customer or Data Center Licensor may be subject or constitute a defamation or libel of Data Center Licensor or any third party and will not result in the obligation of Data Center Licensor to make payment of any third party licensing fees. “Customer’s Data” means the text, data, images, videos, sounds, photographs, illustrations, graphics, programs, code and other materials transmitted or stored by Customer, Customer’s clients and/or persons under Customer’s control through any Service provided hereunder.
7.3 Colocation Services. Colocation Services consist of: (i) Data Center Licensor granting Customer a nonexclusive right to install, operate and maintain Customer’s equipment in a space within the Data Center designated by Data Center Licensor for Customer’s use, as more particularly described on a SOF; and (ii) the provision of power and other services to such colocation space, as more particularly described on a SOF. Customer acknowledges that the Data Center is a shared space and that such shared space, other than Customer’s designated space, is not secure from others with authorized access to the Data Center. Customer will use Customer’s colocation space in a manner that will not disturb or interfere with the occupancy or use of any portion of the Data Center other than Customer’s space. Customer will not use any colocation space or the Data Center as a business location or work site by, among other things, housing personnel or receiving mail. Customer is responsible for ensuring that the manufacturer’s rated amperage for all equipment on any given electrical circuit does not exceed the amperage size of that circuit, and that the total running amperage per circuit, as measured by Data Center Licensor, does not exceed eighty percent (80%) of the amperage size for that circuit. Customer shall connect its equipment to any redundant power circuit Services ordered by Customer in a redundant manner and Customer’s electrical consumption for any pair of redundant power circuits, as determined by Data Center Licensor, shall at no time collectively exceed the capacity of one of such circuits in the redundant pair. If Customer violates this obligation, Customer shall not have any right to make any claim against Data Center Licensor for any credits under the SLA. Further, upon five (5) days' written notice, Data Center Licensor may, in addition to all other remedies herein, invoice Customer for secondary circuits as primary circuits for the remainder of the SOF Term for the Services at issue. Customer shall have no right or ability to provide its own power or power distribution other than as provided by Data Center Licensor to the space, as set forth in the applicable SOF. Unless Customer is in default of this MSA, Data Center Licensor will provide Customer with 24x7 key card access to the Data Center. Key cards will be issued in accordance with Data Center Licensor’s policies and procedures in effect from time to time, at Customer’s cost.
7.4 Compliance with Data Center Licensor Policies. Customer agrees to comply at all times with Data Center Licensor’s policies and procedures, including but not limited to its Acceptable Use Policy, its Data Center Facility Rules and Regulations, and other security procedures in place from time to time as available at Data Center Licensor’s website which is currently www.H5DataCenters.com. Customer shall be liable for any loss or damage to Data Center Licensor’s equipment, the Data Center, or other parties’ equipment due to its failure to follow such policies and procedures. In the event of Customer’s failure to comply with such policies, Data Center Licensor may suspend Customer’s access to the Service, in addition to such other remedies as Data Center Licensor may have at law or pursuant to this MSA, and all of the SLA shall be invalidated and Customer shall not be entitled to any credits that would otherwise be provided thereunder. Neither this MSA nor any Data Center Licensor policy requires that Data Center Licensor take any action against Customer or any other customer for violating the Acceptable User Policy, the Data Center Facility Rules and Regulations or any other policy, but Data Center Licensor is free to take any such action it sees fit.
7.5 Customer’s Equipment and Data. Customer, at its own cost and expense, shall protect and maintain its colocation space and the equipment placed in the Data Center pursuant to the Services, including its equipment and the equipment of its clients, and shall ensure that neither Customer nor its employees, agents, contractors or invitees damage any part of the Data Center, Customer’s colocation space, or any equipment located in or about the Data Center. Customer shall ensure at all times that empty rack units are covered by blanking panels, and if Customer does not comply with this policy, in addition to all other remedies, Data Center Licensor may, at Customer’s expense (labor and materials) with or without notice, install such blanking panels. Furthermore, Customer’s violation of this provision shall invalidate the SLA as it relates to temperature and humidity. At all times, Customer shall use data center cabling best practices and maintain the cabling in its colocation space in a first- class manner. Customer agrees that Data Center Licensor is not responsible for the installation, performance, compatibility, maintenance, or monitoring of equipment placed by Customer or its clients in the Data Center. Customer shall not allow any debris or supplies to be left in Customer’s colocation space or any common space in the Data Center at any time. Customer agrees to reimburse Data Center Licensor for any costs incurred for the removal of such items. Customer shall not maintain or permit any nuisances or violations of governmental laws, rules, regulations or ordinances with respect to the Data Center and shall ensure that its employees, agents or invitees shall not permit any explosive, flammable or combustible material or any hazardous or toxic materials, as defined under state, federal or local laws or regulations, to be located in or about the Data Center. Customer is solely responsible for Customer’s Data and the data that passes to Customer over the Internet via the Services, and Customer agrees that Data Center Licensor has no control over and no responsibility for all such data, whether it passes through Data Center Licensor’s network or not. Data Center Licensor shall have no liability to Customer for any breach of network security by any-third party action and/or any resulting transfer of Customer’s Data.
7.6 Bandwidth Services. If applicable, the specific bandwidth and, therefore, the speed or rate at which Customer may transmit and receive data via its Internet connection, is specified in the applicable SOF or SOFs. Customer acknowledges that incremental usage in excess of the bandwidth purchased is subject to available bandwidth on Data Center Licensor’s network. If specified in the applicable SOF or SOFs, Data Center Licensor will, on Customer’s behalf and expense, use commercially reasonable efforts secure IP address space for Customer. Unless otherwise agreed to in writing, IP addresses assigned to Customer by Data Center Licensor (including usernames and email addresses) will remain the property of Data Center Licensor or its provider, which Data Center Licensor or its provider may alter, reclaim or replace at any time, as it deems necessary. Customer agrees to provide to Data Center Licensor information as requested, regarding usage of IP address space assigned to Customer by Data Center Licensor. Estimated dates of completion are often dependent on parties other than Data Center Licensor, including local exchange carriers; therefore, such dates are provided on a “reasonable efforts” basis, but Data Center Licensor makes no guarantees regarding such dates. You agree and understand that the bandwidth services do not include any digital subscriber line service. This MSA does not include or contemplate the provision of local telephone access. Customer agrees to pay all burstable bandwidth service fees based upon Customer’s actual usage using the 95th percentile method.
Data Center Licensor or its third-party providers may interrupt bandwidth service during non-peak periods, as determined by Data Center Licensor or its third-party providers, to perform routine preventive maintenance. Data Center Licensor will use its best efforts to inform Customer before interrupting service to ensure that access loss is minimized. Bandwidth services are backed by the SLA. In the event of any interruption, outage, packet loss, or similar issue affecting bandwidth services, then Customer’s sole and exclusive remedy for such failure will be any credits provided for in the SLA.
Section 8. Data Center Licensor Equipment and Intellectual Property. Title to all equipment and goods provided to Customer for Customer’s use by Data Center Licensor in connection with provision of the Services shall remain with Data Center Licensor at all times and shall not be used by Customer for any purpose other than as intended in connection with provision of the Services. Customer shall not, and shall not permit others to tamper with, remove, alter, connect to, or disconnect, any Data Center Licensor equipment. To the extent that at any time during the term of this MSA, Data Center Licensor provides access, through the Internet, to Data Center Licensor’s computer software on Data Center Licensor servers, for the purposes of monitoring and/or otherwise managing the Services (“Data Center Licensor Software”), Customer acknowledges and agrees that such access is provided to Customer only for its internal business purposes related to the Services, and that Data Center Licensor retains all right, title, and interest in and to the Data Center Licensor Software, and this MSA does not grant Customer any intellectual property rights in or to the Data Center Licensor Software or any of its components. Without limiting the foregoing, Customer will not: (i) modify, create derivative works from, distribute, publicly display or perform, or sublicense the Data Center Licensor Software; (ii) use the Data Center Licensor Software in any way to allow third parties to use or exploit the Data Center Licensor Software; or (iii) reverse engineer, decompile, disassemble, or otherwise attempt to derive any of the Data Center Licensor Software’s source code. Data Center Licensor shall retain all right, title and interest in any intellectual property right provided to Customer in connection with the Services, including all trademarks, trade names, service marks, copyrights, software, documentation, inventions, designs, concepts or other intellectual property rights.
Section 9. Resale of Colocation Services. Notwithstanding Section 7.2 above, Customer may resell colocation Services to one or more clients of Customer during the term of such Services in accordance with the provisions of this Section 9 and upon written notice to Data Center Licensor. Customer agrees and acknowledges that it shall be fully liable to Data Center Licensor for its use and the use by each client of Customer of the Services and Customer’s colocation space at the Data Center. In this regard, Customer agrees that actions of each of its clients shall be deemed to be actions by Customer, and that the term Services as used in this MSA includes the resold Services. Customer will provide any necessary training with regard to the requirements of this MSA to those whom it allows to enter the Data Center. Customer shall, upon written request by Data Center Licensor, provide the identities of all clients of Customer with equipment collocated in Customer’s colocation space. Nothing in this Section 9 alters the way that Data Center Licensor charges Customer for Services or alters Customer’s obligations to pay for the Services as set forth in this MSA and all SOFs. Data Center Licensor will not bill any client of Customer directly for Services and Customer is solely responsible to pay for all of the Services, whether or not Customer receives any payment from its client(s) for the resold Services. No client of Customer shall have any right to receive any Services directly from Data Center Licensor under this MSA, nor shall any client of Customer have any right to make any claim against Data Center Licensor for any credits under the SLA. Customer’s permission to resell Services under this Section 9 is conditioned upon Customer receiving the written agreement of each client purchasing resold Services to abide by all restrictions placed upon Customer, and obligations undertaken by Customer, in this MSA and any applicable SOF, and each client of Customer complying with all such restrictions and obligations. No client of Customer shall have the right to sublease, sublicense, sell, resell, or offer for resale, any space in a rack, cabinet or cage or the Services in any manner without the written consent of Data Center Licensor.
Section 10. Disclaimer of Warranties
10.1 Agreement on Risk Allocation. Customer acknowledges and agrees that Data Center Licensor has set its prices and entered into this MSA in reliance on the warranties, limitations and disclaimers set forth herein which reflect an allocation of risk between the parties and forms an essential basis of the bargain between the parties.
10.2 DISCLAIMER OF WARRANTIES. CUSTOMER’S SERVICES ARE PROVIDED ON AN “AS IS” BASIS AND DATA CENTER LICENSOR EXCLUDES AND CUSTOMER HEREBY WAIVES ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, ARISING BY OPERATION OF LAW OR OTHERWISE, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, AND TITLE, AS WELL AS ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICE. DATA CENTER LICENSOR DOES NOT WARRANT OR GUARANTY THAT THE SERVICES WILL WORK WITHOUT FAULT, ERROR OR INTERRUPTION AND CUSTOMER’S SOLE REMEDY FOR SERVICES NOT IN CONFORMANCE WITH THE SLAs SHALL BE THE SERVICE CREDITS SET FORTH THEREIN. CUSTOMER ACKNOWLEDGES THAT THE DATA CENTER IS A SHARED SPACE AND CUSTOMER ACCEPTS THAT SUCH SHARED SPACE IS NOT SECURE FROM OTHERS WITH ACCESS TO THE DATA CENTER.
Section 11. LIMITATION OF LIABILITY
IN NO EVENT WILL DATA CENTER LICENSOR OR ITS AFFILIATES, OR EITHER OF THEIR OFFICERS, DIRECTORS, MEMBERS, EMPLOYEES, AGENTS, SUBCONTRACTORS, REPRESENTATIVES, MANAGERS, LANDLORDS AND/OR MORTGAGEES BE LIABLE TO CUSTOMER OR ANY AFFILIATE OR CLIENT OF CUSTOMER, AND CUSTOMER HEREBY WAIVES ANY CLAIMS AGAINST DATA CENTER LICENSOR FOR DAMAGES, DIRECT OR INDIRECT, ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, THE SERVICES PROVIDED BY A THIRD PARTY SERVICE PROVIDER CONTRACTED FOR DIRECTLY OR INDIRECTLY BY CUSTOMER RELATING TO THE SPACE OR THE DATA CENTER OR CUSTOMER’S SERVICES, CUSTOMER’S DATA, OR CUSTOMER’S USE OF CUSTOMER’S SPACE AND THE DATA CENTER, INCLUDING BUT NOT LIMITED TO DAMAGES RELATING TO SERVICE INTERRUPTIONS, DELAYS, TORTIOUS CONDUCT, ERRORS, DEFECTS, THE FAILURE TO FURNISH SERVICE, SOFTWARE DEFECTS, AND EQUIPMENT DEFECTS OR MALFUNCTIONS, PROVIDED HOWEVER, THAT DATA CENTER LICENSOR SHALL EXTEND SUCH CREDIT ALLOWANCES TO CUSTOMER AS DUE UNDER ANY APPLICABLE SLA.
NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES (INCLUDING BUT NOT LIMITED TO DAMAGES FOR LOST PROFITS OR LOST REVENUES), WHETHER CAUSED BY THE ACTS OR OMISSIONS OF A PARTY’S EMPLOYEES OR REPRESENTATIVES, NEGLIGENCE, OR WILLFUL MISCONDUCT, AND REGARDLESS OF WHETHER SUCH PARTY HAS BEEN INFORMED OF THE LIKELIHOOD OF SUCH DAMAGES.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS MSA OR ANY SOF, DATA CENTER LICENSOR’S MAXIMUM AGGREGATE LIABILITY TO CUSTOMER FOR ANY DAMAGES, LOSSES AND CAUSES OF ACTIONS WHETHER IN CONTRACT OR TORT (INCLUDING NEGLIGENCE OR OTHERWISE) ARISING OUT OF, RELATED TO OR IN CONNECTION WITH THIS MSA OR THE SERVICES WILL BE LIMITED TO THE TOTAL AMOUNT OF MONTHLY RECURRING CHARGES PAID BY CUSTOMER TO DATA CENTER LICENSOR FOR THE TWELVE (12) MONTH PERIOD PRIOR TO THE EVENT OR EVENTS GIVING RISE TO SUCH LIABILITY.
Section 12. Indemnification by Customer. Customer will indemnify, defend, and hold the Indemnified Parties harmless against any Indemnified Claim, provided Data Center Licensor gives Customer prompt notice of such Indemnified Claim. Customer’s obligations set forth in the preceding sentence include, without limitation, retention and payment of attorneys and payment of court costs, as well as settlement at Customer’s expense, payment of judgments, or both. The “Indemnified Parties” are Data Center Licensor and its managers, officers, directors, shareholders, parents, subsidiaries, agents, insurers, successors, and assigns. An “Indemnified Claim” is any third-party claim (including but not limited to claims by Customer’s clients), suit, or proceeding against the Indemnified Parties arising out of, related to, Customer’s negligence or the negligence of its clients, Customer’s breach of this MSA, or the use of the Services by Customer or its clients.
Section 13. Insurance. Customer shall maintain the following insurance coverage: (i) Commercial General Liability insurance in an amount not less than TWO MILLION ($2,000,000) DOLLARS per occurrence/TWO MILLION ($2,000,000) DOLLARS aggregate which policy shall insure the hazards of the Data Center and Customer’s operations and the operations of its independent contractors thereon and contractual liability (including covering Customer’s indemnity obligation contained in this MSA); and (ii) standard form all-risk property insurance in an amount equal to the replacement cost of all equipment and other property and trade fixtures owned by Customer or a client of Customer, for which Customer is legally liable, or that was installed by Customer, on Customer’s behalf, or by a client of Customer or on that client’s behalf, and which is located in the Data Center. Customer shall furnish Data Center Licensor with a Certificate of Insurance evidencing such coverages and naming Data Center Licensor as an additional insured. Such insurance shall be primary and non-contributory with any insurance carried by Data Center Licensor. Further, if required by law, Customer shall also maintain Worker’s Compensation Insurance an amount not less than the statutory requirements in the state in which the Data Center is located. Customer will be solely responsible for ensuring that its agents (including consultants, contractors and subcontractors) maintain separate insurance at levels no less than those required herein above. Customer shall maintain insurance described in this paragraph throughout the term of this MSA and during any period during which any claims arising from or out of this MSA are or may be outstanding.
Section 14. Termination
14.1 Termination for Cause; Suspension. Data Center Licensor may suspend any and all services and/or terminate this MSA and any SOFs hereunder for cause in the event of Customer’s failure to pay amounts when due after five (5) business days' notice and failure to cure, or upon Customer’s insolvency, filing for bankruptcy or reorganization, failure to discharge an involuntary petition for bankruptcy within sixty (60) days after filing, or general assignment for the benefit of creditors. Either party may terminate this MSA and SOF(s) hereunder for cause in the event of material breach by the other party after thirty (30) days' notice and failure to cure. Notwithstanding the foregoing and without waiving any other right or remedy that Data Center Licensor may have under this MSA, in the event of a material breach by Customer that, in Data Center Licensor’s reasonable determination, is causing interference or damage to Data Center Licensor’s property, Data Center Licensor may suspend services immediately and terminate this MSA if the default is not cured by Customer within twenty-four (24) hours of notice.
14.2 Termination for Convenience. Either party may terminate this MSA for any reason or no reason upon thirty (30) days' notice provided that all Services have been provided and payments made pursuant to all SOFs and no SOFs are in effect. Customer may terminate any SOF for convenience upon thirty (30) days' notice, provided however, that on the effective date of such termination for convenience of a SOF, Customer will pay Data Center Licensor all amounts then due under such SOF plus the early termination charges provided in Section 14.3, unless expressly provided otherwise in the SOF being terminated. Data Center Licensor may terminate this MSA upon reasonable notice to Customer without constituting a breach upon any regulatory decision or governmental order requiring Data Center Licensor to suspend Service(s).
14.3 Early Termination Charges. If Customer terminates any Service prior to the end of any initial or renewal SOF Term, or Data Center Licensor terminates this MSA for cause pursuant to Section 14.1, Customer agrees to pay Data Center Licensor a termination charge for each open SOF equal to Customer’s monthly recurring charges for such SOF multiplied by the number of months remaining in the SOF term. The parties specifically agree that the damages which Data Center Licensor would incur arising from any breach or early termination of this MSA or any SOF by Customer are based upon future facts and conditions which are difficult for the parties to presently predict, anticipate, ascertain or calculate. The parties further agree that such liquidated damages, as determined herein, are based upon the best efforts of the parties to estimate the nature and amount of Data Center Licensor’s actual damages, are not penal in nature, and are intended to place Data Center Licensor in the same position it would have achieved, had this MSA and each SOF been fully performed by the parties according to the original terms.
14.4 Effects of Termination. Upon termination of this MSA (at which time all SOFs hereunder shall automatically terminate), or upon termination of any SOF hereunder, any and all payment obligations of Customer under this MSA and all terminated SOFs shall become immediately due and payable, and Data Center Licensor shall discontinue providing the related Services. Customer shall, at its expense, remove its equipment and will restore Customer’s colocation space to the condition existing at the commencement of the terminated Services and any equipment or property not removed within thirty (30) days will be removed and disposed of by Data Center Licensor at Customer’s expense, including costs incurred to repair or restore Customer’s colocation space. Under no circumstances will Data Center Licensor be liable for any loss or damage to Customer’s equipment or other property resulting from such removal and disposal. Customer agrees that in the event that Customer fails to pay any amounts owed to Data Center Licensor under this MSA or any SOF, in addition to any remedy available to it under this MSA or applicable law, Data Center Licensor may, without liability but upon notice, take possession of any Customer equipment and store it, at Customer’s expense until taken as full or partial satisfaction of any judgment or lien, or liquidate such equipment in a commercially reasonable manner and apply the proceeds of such liquidation to any and all amounts due under this MSA. The following provisions will survive termination of this MSA or any SOF: (i) any obligation of the Customer to pay for Services; (ii) Sections 5, 8, and 10 through 16 of this MSA; and (iii) any other provision of this MSA or any SOF that must survive termination to fulfill its essential purpose.
Section 15. Subordinate Agreement. Customer accepts that this MSA is subject and subordinate to any mortgage, deed of trust, or ground lease or master lease of Licensor and to any renewals, modifications, consolidation, refinancing, and extensions thereof. It is understood that the term “master lease” includes any lease by Data Center Licensor of space or services in the building where the Data Center resides from the owner of the building, and that Data Center Licensor’s interest in the Data Center may be that of lessee rather than owner. This provision is hereby declared to be self-operative and no further instrument shall be required to effect such subordination of this MSA; provided, however, Customer shall, within ten (10) days after Data Center Licensor’s written request therefor, execute, acknowledge and deliver any documents reasonably requested by Data Center Licensor to assure the subordination of this MSA and any SOF to any of the same.
Section 16. Miscellaneous
16.1 Force Majeure. Except with respect to accrued payment obligations, neither party shall be liable for any failure of performance due to causes beyond such party’s reasonable control, including, but not limited to: acts of God, fire, flood or other catastrophes; any law, order, regulation, or governmental action; national emergencies, insurrections, riots, acts of terrorism or wars; unavailability of rights-of-way; or strikes (collectively a “Force Majeure Event”), provided however, the affected party shall use commercially reasonable efforts to eliminate such event.
16.2 Confidential Information; Marketing. The parties acknowledge that they will have access to certain confidential information of the other concerning business, plans, customers, technology, and products ("Confidential Information"). Each party agrees that it will not use in any way, for its own account or the account of any third party, nor disclose to any third party, any of the other’s Confidential Information and will take reasonable precautions to protect the confidentiality of such information, provided however, that Customer agrees that Data Center Licensor may refer to Customer and may briefly describe Customer’s business and presence in the Data Center in its marketing materials its website and Customer grants Data Center Licensor a limited, revocable license to use its trade names and trademarks only for this purpose. The provisions of this Section 16.2 shall not apply, however, to any information that: (i) is already in the public domain or becomes available to the public through no breach of this MSA by the receiving party; (ii) was lawfully in the receiving party’s possession prior to receipt from the disclosing party; (iii) is received independently from a third party free to lawfully disclose such information to the receiving party; (iv) is subsequently independently developed by the receiving party; (v) is required to be disclosed in order to not commit a violation of law, provided that the disclosing party must promptly notify the other party in writing prior to such disclosure; (vi) is disclosed pursuant to Section 5.4 hereto.
16.3 Non-Solicitation. During the term of this MSA and continuing for one (1) year after termination or expiration of this MSA, neither party shall knowingly directly or indirectly, solicit or attempt to solicit for employment, any persons employed by the other party.
16.4 No Lease; Lease Taxes. This MSA is for Service(s) only and is neither intended to nor does it constitute a lease, sublease, assignment, easement or other agreement relating to real property and gives Customer no right of title or ownership in Data Center Licensor’s real or personal property. Customer acknowledges and agrees that (i) it has been granted only a non-exclusive revocable license as set forth above, and (ii) it has no rights as a tenant or otherwise under any real property or landlord/tenant theory, laws, regulations, or ordinances. Notwithstanding the foregoing, in the event that any local, county or state governmental taxing authorities charge any lease-based taxes with respect to Customer’s presence in the Data Center, Customer agrees to pay such taxes upon invoice by Data Center Licensor or such authority.
16.5 Assignment or Transfer. Neither party may transfer or assign this MSA, or any of its rights or obligations hereunder without the other’s prior written consent, which will not be unreasonably withheld. Each party shall remain liable for nonpayment by its respective assignee or transferee. Notwithstanding the foregoing, Data Center Licensor may assign or transfer this MSA without notice to an affiliate or in connection with a sale of all or substantially all of its assets or line of business or location.
16.6 Notice. Notice shall be in writing to the address set forth on the applicable SOF and properly given: (i) immediately, if delivered in person, or electronic mail; (ii) after one (1) day, if sent by overnight courier; or (iii) after three (3) days, when sent by first class U.S. Mail.
16.7 Amendments. Any amendments to this MSA or any SOF must be in writing and executed by both parties.
16.8 Relationship of Parties. The parties are independent contractors and this MSA does not establish any partnership, joint venture, employment, franchise or agency relationship between them.
16.9 Severability. Should any provision of this MSA be held to be void, invalid, or inoperative, the remaining provisions of this MSA shall not be affected and shall continue in effect and the invalid provision shall be deemed modified to the least degree necessary to remedy such invalidity and maintain the parties’ original intent.
16.10 No Waiver; All Rights Cumulative. Failure to enforce any provision of this MSA shall not be construed as a waiver. The parties’ rights shall be deemed cumulative, such that the exercise of one shall not preclude the exercise of others.
16.11 Third Party Beneficiaries. The parties do not intend any provision of this MSA to be enforceable by or to benefit any third party.
16.12 Headings. The titles and headings of the sections and subsections in this MSA are intended solely for convenience of reference and are not intended for any other purpose whatsoever, or to explain, modify or place any construction upon or on any of this MSA’s provisions.
16.13 Governing Law, Jurisdiction and Attorneys’ Fees. This MSA shall be governed by the laws of the state in which the Data Center is located. The jurisdiction and venue for actions related to this MSA shall be the State and Federal Courts located in the County in which the Data Center is located. The prevailing party in any action or proceeding in court or in a mutually agreed upon arbitration proceeding arising out of or related to this MSA shall be entitled to receive its reasonable attorneys’ fees and related costs from the other party.
16.14 Entire Agreement; Conflicts. This MSA and any other related documents executed hereunder, constitute the parties’ entire understanding and supersede any oral representations, understandings and offers related to the subject matter hereof. The terms contained in any SOF are incorporated into this MSA. To the extent that the terms of any SOF are inconsistent with the terms of this MSA, the SOF shall control.
16.15 Counterparts. This MSA may be executed in counterparts, including facsimile transmissions and/or electronic signatures, each of which shall be deemed an original against any party whose signature appears on such counterpart and all of which together shall constitute one and the same agreement.
16.16 Site-Specific Provision. At the applicable Data Center Licensor’s Phoenix data center located at 2600 W. Germann Rd., Chandler, AZ (the “Phoenix Data Center”), Customer may be entitled to a sales and use tax exemption for certain Customer equipment installed in the space by Customer (the “Arizona Sales Tax Exemption”), if, and only if, (1) Customer commits to at least 500 kW and (2) Customer participates in the program. Irrespective of Customer’s kW commitment at the Phoenix Data Center, Customer hereby agrees to provide Data Center Licensor with information and documentation regarding Customer’s capital investment at the Phoenix Data Center, including any capital leases involving equipment at the Phoenix Data Center related to the Arizona Sales Tax Exemption Program. Notwithstanding the foregoing or anything to the contrary herein, Data Center Licensor does not make any guaranty, representation or warranty whatsoever regarding the Arizona Sales Tax Exemption or the ability to qualify for or receive the same and Customer acknowledges and agrees that it may ultimately not receive the Arizona Sales Tax Exemption and Customer shall not have any rights or remedies whatsoever if Customer does not qualify for or receive the Arizona Sales Tax Exemption.
IN WITNESS WHEREOF the parties have executed this Agreement by their duly authorized representatives effective as of the date first written above.
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- **H5 Data Centers, LLC** **Customer**
- By: */s/ David Dunn* By: */s/ Ankur Chatterjee*
- Name: David Dunn Name: Ankur Chatterjee
- Title: COO Title: Chief Operating Officer
- Date:12/9/2024 Date:12/09/2024
---
## EXHIBIT 10.31
SEC source: [ex_902236.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902236.htm)
**Exhibit 10.31**
Loan No. 23091501R
**AMENDED AND RESTATED**
**COLLATERALIZED LINE OF CREDIT**
Fixed Rate | 1-Year Term
**THIS LOAN HAS A BALLOON FEATURE AND IS NOT FULLY AMORTIZED. AT MATURITY, BORROWER MUST REPAY THE ENTIRE REMAINING PRINCIPAL BALANCE OF THE LOAN AND ANY UNPAID FEES/CHARGES AND ACCRUED INTEREST THEN DUE. HOLDER IS UNDER NO OBLIGATION TO REFINANCE THIS LOAN AT THAT TIME. THEREFORE, BORROWER WILL BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS OWNED OR WILL HAVE TO FIND A LENDER, WHICH MAY BE THE HOLDER UNDER THIS NOTE, WILLING TO LEND THE NECESSARY FUNDS. IF BORROWER REFINANCES THIS LOAN AT MATURITY, BORROWER MAY HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN, EVEN IF REFINANCING IS OBTAINED FROM THE SAME HOLDER.**
**April 26, 2024**
(“Effective Date”)
**GLOBAL DIGITAL HOLDINGS, INC.**, a Georgia profit corporation
(“Borrower”)
**1.** **PRINCIPAL**
In return for a collateralized line of credit that Borrower has been extended by TRAILHEAD GROWTH, LP, a Delaware limited partnership (“Holder”), in the maximum amount of Seven Hundred Thousand & 00/100 U.S. Dollars (U.S. $700,000.00) (the “Principal”), by this promissory instrument (this “Note”) Borrower promises to pay all advanced Principal, plus any and all fees/charges and accrued interest thereon, each as hereinafter provided, to Holder. Upon Borrower’s written request to Holder (utilizing and in accordance with the form of Principal Advance Request, attached hereto as Exhibit A), Holder will advance to Borrower the Principal, or an appropriate portion thereof (each, a “Principal Advance”), from time to time as the case may be, beginning on the Effective Date until the date which is ninety (90) calendar days following the Effective Date, at which time Holder will no longer have any obligation to advance to Borrower any then unadvanced Principal. The amount of each Principal Advance and the date thereof shall be set forth on Schedule 1, attached hereto and incorporated herein by reference thereto, which may be properly updated, from time to time, by Holder.
**2.** **INTEREST**
Interest will begin accruing on advanced Principal on the date Holder advances to Borrower such Principal, from time to time as the case may be, as set forth on Schedule 1. Interest will be charged on all advanced, unrepaid Principal under this Note at an annual rate of six percent (6.000%) until the full amount of such Principal has been repaid. Interest will not be charged on any unadvanced Principal available for advance under this Note. The rate of interest required by this Section 2 above is the rate Borrower will pay before any default described in this Note and/or any other Loan Documents; after any such default, Borrower will pay default interest at an annual rate of eighteen percent (18.000%). Interest under this Note will be calculated on the basis of a 360-day year, consisting of twelve (12) months of thirty (30) days each (*i.e.*, a 30/360 basis); any and all proration calculations under this Note will be based on the 360-day per diem multiplied by the actual number of days elapsed during the period measured.
**3.** **PAYMENTS**
**(A)** **Time, Amount and Manner of Payments**
Payments comprised of Principal and interest will be due from Borrower under this Note beginning sixty (60) calendar days following the initial Principal Advance by Holder to Borrower, as shall be evidenced by Principal Advance Request #1, and will continue on the final business day of every consecutive thirty (30) calendar day period for the duration of this Note. Said payments due under this Note shall be paid in arears for and corresponding to the immediately preceding thirty (30) calendar day period, and shall be calculated in respect of each such payment based on the outstanding Principal balance as of the final calendar day of such period immediately preceding the due date of each such payment, at a full amortization of such outstanding Principal balance beginning as of the due date of each such payment and ending on the Maturity Date. A schedule of the fully amortized monthly payments made and due in respect of this Note, reflecting the Principal and interest portions thereof, shall be attached hereto as Schedule 2 and incorporated herein by this reference thereto, which may be properly updated, from time to time, by Holder. Borrower will make any and all payments under this Note, which includes any Prepayments and final payment due upon the Maturity Date of this Note, in the form of electronic funds transfer, certified check or money order payable to Holder at the address set forth in Section 7(B) of this Note, or at a different place if directed by Holder in writing.
**(B)** **Loan Maturity**
If on the date which is three hundred and sixty (360) calendar days following the first Principal Advance under this Note (the “Maturity Date”) Borrower still owes any amounts under this Note, Borrower will immediately pay all such amounts to Holder, for the benefit of Holder.
**4.** **PREPAYMENTS**
A payment of Principal only is known as a “Prepayment.” Borrower has the right to make payments of Principal at any time before they are due without paying any Prepayment charge. When Borrower makes a Prepayment, Borrower must notify Holder in writing of Borrower’s intent to prepay. Holder will use any and all such Prepayment(s) to reduce the amount of Principal that Borrower then owes under this Note; provided, however, Holder may apply any such Prepayment(s) to the accrued and unpaid fees/charges and interest before applying the Prepayment to reduce the Principal amount due under this Note. Unless otherwise agreed to in writing by Holder, no Prepayment will alter the date of any future payment due under this Note.
**5.** **FAILURE TO PAY**
**(A)** **Late Charge for Overdue Periodic Payments**
If any monthly payment due under this Note is not received by Holder within ten (10) calendar days after its due date, Borrower shall pay to Holder a “Late Charge” equal to five percent (5.000%) of the total amount of each such past-due monthly payment.
**(B)** **Defaults and Remedies**
**(1) Events of Default**. Each of the following shall constitute an event of default under this Note (an “Event of Default”):
**(i)** **Covenants**. A default by Borrower in the performance of any term, obligation, covenant or condition contained in this Note, the Security Instruments, as hereinafter defined, or any other agreement or document that relates in any manner to the loan evidenced by this Note that is executed by Borrower (including any Guarantor, Surety or Endorser of this Note) and/or any other natural persons or entities associated therewith (collectively, the “Loan Documents”); and
**(ii)** **Payments**. Failure of Borrower to make timely payment of any amounts due under the Loan Documents, it being expressly understood that time is of the essence under the Loan Documents with respect to Borrower’s payments required thereunder.
**(2)****Remedies**. Upon the occurrence of an Event of Default, in addition to all other rights and remedies available to Holder under the Loan Documents and applicable law (and in equity), Holder shall particularly have the following rights and remedies:
**(i)** **Acceleration**. Holder, in its sole discretion and without notice or demand, may declare the entire Principal balance outstanding under this Note, plus accrued interest hereunder and all other amounts owed, immediately due and payable, and reference is hereby made to the Loan Documents for further and additional rights on the part of Holder to declare the entire Principal balance outstanding under this Note, plus accrued interest and all other amounts owed, immediately due and payable; and
**(ii)** **Default Interest Rate**. Holder, in its sole discretion and without notice or demand, may raise the rate of interest accruing on the Principal balance outstanding under this Note to the lesser of (a) the rate of interest set forth in Section 2 of this Note, or (b) the maximum rate of interest that Holder may charge under applicable law, independent of whether Holder elects to accelerate the Principal balance outstanding under this Note.
**(C)** **No Waiver by Holder**
Even if, at a time when Borrower is in default, Holder does not require Borrower to pay immediately in full or does not charge the default interest rate, as described above, Holder will still have the right to do so if Borrower is in default at a later time.
**6.** **OBLIGATIONS OF PERSONS AND/OR ENTITIES UNDER THIS NOTE**
If more than one natural person and/or entity signs this Note, each is fully and individually obligated to keep all of the promises made in this Note, including, without limitation, the promise to pay the full amount owed; such parties being jointly and severally liable under this Note. Any person and/or entity who, under this Note or by virtue of executing an associated guaranty, surety or endorsement of this Note, thereby respectively becoming a “Guarantor,” “Surety” and/or “Endorser” of this Note, is also obligated to do these things, as such terms shall be interchangeable with Borrower as used herein. Any person and/or entity who takes over these obligations, including the obligations of Borrower, and/or any Guarantor, Surety or Endorser, is also obligated to keep all of the promises made in respect of this Note. Holder may enforce its rights under this Note against each such natural person and/or legal entity individually or against all such parties together. This means that any one of such parties may be required to pay all of the amounts owed under this Note, whether a natural person or legal entity.
**7.** **GIVING OF NOTICES**
**(A)** **Notice to Borrower**
Unless applicable law requires a different method, any notice that must or may be given to Borrower under this Note will be given to GLOBAL DIGITAL HOLDINGS, INC., Attn: Cathy Holbrook at 2146 Roswell Road, Suite 108-851, Marietta, GA 30062, or at a different address if Borrower gives Holder written notice of a different address in accordance with this Section 7.
**(B)** **Notice to Holder**
Unless applicable law requires a different method, any notice that must or may be given to Holder under this Note will be given to Holder TRAILHEAD GROWTH, LP, Attn: Todd Jones at 108 West 13th Street, New Castle, DE 19801, or at a different address if Holder gives Borrower written notice of a different address in accordance with this Section 7.
**8.** **GOVERNING LAW AND LOAN CHARGES**
This Note shall be governed by and construed in accordance with the applicable laws of the State of Georgia, without regard to its conflict of laws principles. If a law, which applies to this Note and which sets maximum loan charges and/or fees, is finally interpreted so that the interest or other loan charges and/or fees collected or to be collected in connection with this Note exceed the permitted limits, then: (a) any such loan charge and/or fee shall be reduced by the amount necessary to reduce such charges and/or fees to the permitted limit; and (b) any sums already collected from Borrower that exceeded permitted limits will be refunded to Borrower. Holder may choose to make such refund by reducing the Principal Borrower owes under this Note or by making a direct payment to Borrower. If a refund reduces Principal, the reduction will be treated as a partial Prepayment per Section 4 of this Note.
**9.** **WAIVERS**
Borrower and any other natural person and/or entity that has obligations under this Note waive the rights of Presentment and Notice of Dishonor. “Presentment” means the right to require Holder to demand payment of amounts due. “Notice of Dishonor” means the right to require Holder to give notice to other persons and/or entities that amounts due have not been paid.
**10.** **SECURED NOTE**
This Note is a secured instrument. In addition to the protections given to Holder under this Note, one or more of a security deed, deed to secure debt, deed of trust, mortgage, guaranty agreement, loan agreement, security agreement, collateralization agreement, pledge agreement, hypothecation agreement and/or similar security instrument (collectively, the “Security Instruments”), executed in favor of Holder, protects Holder from possible losses that might result if Borrower does not keep the promises made in the Loan Documents. Further, this Note is intended to amend, restate and supplant in the entirety that certain Collateralized Line of Credit, dated effective as of September 15, 2023 and having a loan number of 23091501, made by Borrower in favor of Holder.
**IN WITNESS WHEREOF**, Borrower has signed, sealed and delivered this Note as of the Effective Date first set forth above.
Borrower:
**GLOBAL DIGITAL HOLDINGS, INC.**
By: */s/ Robert C. Bissell* [Seal]
**Robert C. Bissell, Director & C.E.O.**
---
## EXHIBIT 10.32
SEC source: [ex_902237.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902237.htm)
**Exhibit 10.32**
**AMENDED AND RESTATED**
**LOAN AND SECURITY AGREEMENT**
THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) , effective as of April 26, 2024, is by and between **GLOBAL DIGITAL HOLDINGS, INC.**, a Georgia profit corporation (“Debtor”), and **TRAILHEAD GROWTH, LP**, a Delaware limited partnership (“Secured Party”).
For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Debtor grants to Secured Party a continuing security interest in the Collateral, whether now owned or existing or (except in the case of commercial tort claims) hereafter acquired or arising and wheresoever located to secure the Secured Obligations (as hereinafter defined) and agrees that Secured Party shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rights that Secured Party may have by law. The parties further agree as follows:
**1.** **DEFINITIONS.** The following terms shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code as in effect in the State of Georgia. All references to dollar amounts shall mean amounts in lawful money of the United States of America.
**1.1** **Agreement.** The word “Agreement” means this Loan and Security Agreement, as may be amended or modified from time to time by written agreement of the Secured Party and Debtor, together with any and all exhibits and/or schedules attached hereto from time to time, as the case may be; this Agreement is intended to amend, restate and supplant in the entirety that certain Loan and Security Agreement, dated effective as of September 15, 2023 and associated with loan number of 23091501, made by Debtor in favor of Secured Party.
**1.2** **Collateral.** The word “Collateral” means all of the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever located:
(a) All items of chattel property set forth in Exhibit “A”, attached hereto and incorporated herein by reference, in respect of Debtor and as may be further evidenced by a UCC-1 Financing Statement(s) encumbering the same.
**1.3** **Debtor.** The word “Debtor” means GLOBAL DIGITAL HOLDINGS, INC., a Georgia profit corporation, together with its successors and/or permitted assigns; Debtor also may be referred to as “Borrower” elsewhere in the Loan Documents.
**1.4** **Event of Default.** The words “Event of Default” mean and include any of the Events of Default set forth below in the Section 5, together with those set forth elsewhere in the Loan Documents.
**1.5** **Loan Documents.** The words “Loan Documents” shall collectively carry the definition set forth in the Note (as hereinafter defined) and shall more particularly, without exclusion, refer to the following:
(a) Amended and Restated Collateralized Line of Credit;
(b) Loan and Security Agreement;
(c) UCC-1 Financing Statement; and
(d) Such other documents and information as Lender’s counsel reasonably requires.
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
**1.6** **Note.** The word “Note” means that certain Amended and Restated Collateralized Line of Credit, of even date herewith, in the maximum principal amount of Seven Hundred Thousand & 00/100 U.S. Dollars (U.S. $700,000.00), made by Debtor in favor of Secured Party, as may be amended from time to time by written agreement of the parties thereto; whereas, the word “Loan” means the principal advanced by Secured Pary to Debtor, from time to time in varying amounts, in respect of the Note.
**1.7** **Secured Obligations.** The words “Secured Obligations” mean the entire amounts owed by Debtor to Secured Party, at any particular time, collectively under the Loan Documents.
**1.8** **Secured Party.** The words “Secured Party” means TRAILHEAD GROWTH, LP, a Delaware limited partnership, together with its successors and/or assigns, as their interests may appear; Secured Party also may be referred to as “Lender” and/or “Holder” elsewhere in the Loan Documents.
**2.** **OBLIGATIONS OF DEBTOR.** Debtor warrants and covenants to Secured Party as follows:
**2.1** **Perfection of Security Interest.** Debtor hereby authorizes Secured Party to execute or record (or both) such UCC-1 Financing Statements, Security Instruments (as defined in the Note) and to take whatever other actions are deemed reasonably necessary or advisable by Secured Party to perfect and continue Secured Party’s security interest in the Collateral. Upon request of Secured Party, Debtor will deliver to Secured Party any and all documents evidencing or constituting the Collateral, and Debtor will note Secured Party’s interest upon any and all chattel paper if not delivered to Secured Party for possession by Secured Party. Debtor hereby appoints Secured Party as its irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue the security interest granted in this Agreement. Secured Party may, at any time and without further authorization from Debtor, file a carbon, photographic, or other reproduction of any financing statement or of this Agreement for use as a financing statement. Debtor will reimburse Secured Party for all filing fees incurred for the perfection and the continuation of the perfection of Secured Party’s security interest in the Collateral. Debtor promptly will notify Secured Party before any change in Debtor’s name, including any change to the assumed business names of Debtor.
**2.2** **Reporting, Access and Reserves.** Debtor shall provide monthly reportings to Secured Party by the fifth (5th) day of each calendar month, to include all then-current inventory, receivables and cash deposits. Additionally, Debtor shall provide Lender access to any and all financial statements, pertinent bank accounts and filesharing platforms of Debtor as Secured Party requires, from time to time, in its sole reasonable determination; it being an express intent of this provision to: (a) provide real-time access to all of Debtor’s transactions that have closed and that are in process; and (b) to facilitate Secured Party’s fluid determination as to the financial conditions of Debtor. It is expressly agreed by the parties hereto that Secured Party’s decision not to strictly enforce the requirements under this Section 2.2, from time to time, shall not serve as a waiver of Debtor’s obligation to satisfy said requirements.
**2.3** **Maintenance of Insurance.** Debtor shall maintain insurance coverage required hereunder, and under the Loan Documents, at all applicable times, in form and substance satisfactory to Secured Party, in its sole reasonable discretion, and shall provide Secured Party all certificates of insurance policies and/or endorsements naming Lender as loss payee. Debtor shall maintain such insurance coverage in substantially similar amounts and types as it presently carries in its due course of business, including, without limitation, replacement coverage of any and all structures affixed to any Collateral real properties, credit insurance on all foreign and domestic receivables and insurance on all inventory of which the Debtor takes possession and/or has risk of loss or damage while in transit or storage.
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
**2.4** **Maintenance and Inspection of Collateral.** Debtor shall maintain all tangible Collateral in good condition and repair. Debtor will not commit or permit damage to or destruction of the Collateral or any part of the Collateral. Only for so long as there remains an uncured Event of Default (as hereinafter defined), Secured Party and its designated representatives and agents shall have the right at all reasonable times to examine, inspect, and audit the Collateral wherever located at Secured Party’s expense. Debtor will establish and maintain a system to assure and monitor continued compliance with all applicable environmental laws, which system shall include periodic reviews of such compliance and Debtor shall respond promptly to any hazardous discharge or environmental complaint and take all necessary action in order to safeguard the health of any Person and to avoid subjecting the Collateral to any lien, charge, claim or encumbrance.
**2.5** **Removal of Collateral.** Debtor shall keep the Collateral (or to the extent the Collateral consists of intangible property such as accounts, the records concerning the Collateral) at Debtor’s places of business or such other locations as are acceptable to Secured Party. Except in the ordinary course of its business, as applicable, Debtor shall not remove the Collateral from its existing locations without the prior written consent of Secured Party.
**2.6** **Enforceability of Collateral.** To the extent the Collateral consists of Contractual Rights, General Intangibles, accounts or chattel paper; the Collateral is enforceable in accordance with its terms, is genuine and complies with applicable laws concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have authority and capacity to contract and are in fact obligated as they appear to be on such Collateral.
**2.7** **Transactions Involving Collateral**. Except for inventory sold or accounts collected in the ordinary course of Debtor’s business, or the retirement or replacement of equipment; Debtor shall not sell, offer to sell or otherwise transfer or dispose of the Collateral without Secured Party’s prior written consent, which Secured Party will not unreasonably withhold. Debtor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance or charge, except as otherwise provided for in this Agreement, without Secured Party’s prior written consent, which Secured Party will not unreasonably withhold.
**2.8** **Title.** Debtor represents and warrants to Secured Party that it holds good and marketable title to the Collateral, free and clear of all liens and encumbrances except for the lien of this Agreement and any presently perfected liens on the real property Collateral. Debtor shall defend Secured Party’s rights in the Collateral against the claims and demands of any and all natural persons, parties and entities.
**2.9** **Taxes, Assessments, and Liens.** Debtor will pay when due all taxes, assessments, and liens upon the Collateral, its use or operation, upon this Agreement, or upon the Note evidencing the Secured Obligations. Debtor may withhold any such payment or may elect to contest any lien if Debtor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Secured Party’s interest in the Collateral is not jeopardized in Secured Party’s sole opinion. If the Collateral is subjected to a lien which is not discharged within fifteen (15) days, Debtor shall deposit cash with a third party escrow agent selected by Debtor (which escrow agent shall be a licensed attorney in the state of Georgia), or furnish a sufficient corporate surety bond or other security satisfactory to Secured Party, in an amount adequate to provide for the discharged of the lien plus any interest, costs, attorney’s fees or other charges that could accrue as a result of foreclosure or sale of the Collateral. In any contest, Debtor shall defend itself and Secured Party and shall satisfy any final adverse judgment before enforcement against the Collateral. Debtor shall name Secured Party as an additional obligee under any surety bond furnished in the contest proceedings.
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
**2.10** **No Violation.** The execution and delivery of this Agreement will not violate any law or agreement governing Debtor or to which Debtor is a party, and its certificate or operating agreement do not prohibit any term or condition of this Agreement.
**2.11** **Compliance with Governmental Requirements.** Debtor shall comply promptly with all laws, ordinances and regulations, and/or all governmental authorities applicable with the production, disposition or use of the Collateral. Debtor may contest in good faith any such law, ordinance or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Secured Party’s interest in the Collateral, in Secured Party’s sole opinion, is not jeopardized.
**2.12** **Use of Loan Proceeds.** Without the prior written approval of Secured Party, Debtor shall utilize the Loan proceeds solely for the purpose of depositing in escrow with the electric service provider the security deposit required for the establishment of electric power service at Debtor’s Watonga, Oklahoma hosted data services facility.
**2.13** **Origination Charge.** Debtor shall owe to Secured Party an origination charge equal to one percent (1.000%) of each Principal Advance made to Debtor under the Note. Each such origination charge shall be netted from the disbursement of the respective origination charge made to Debtor by Secured Party.
**2.14** **Principal Advance Requests.** Debtor shall make all Principal Advance Requests to Secured Party utilizing and pursuant to the form of Principal Advance Request attached to the Note; provided, however, that Secured Party shall be under no obligation to disburse any of such requested Principal that is requested by Debtor after the date which is ninety (90) calendar days following the Effective Date. Each capitalized term used in Section 2.13 and this Section 2.14 that is not particularly defined in this Agreement shall have the meaning ascribed to it under the Note.
**3.** **DEBTOR**’**S RIGHT TO POSSESSION.** Until an Event of Default occurs hereunder, Debtor may have possession of the tangible property and beneficial use of all the Collateral and may use the same in any lawful manner not inconsistent with this Agreement. If Secured Party at any time has possession of any Collateral, whether before or after an Event of Default, Secured Party shall exercise reasonable care in the custody and preservation of such Collateral.
**4.** **EXPENDITURES BY SECURED PARTY.** If not discharged or paid when due, Secured Party may (but shall not be obligated to) discharge or pay any amounts required to be discharged or paid by Debtor under this Agreement, including, without limitation, all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Collateral. Secured Party also may (but shall not be obligated to) pay all costs of insuring, maintaining and preserving the Collateral. All such expenditures incurred or paid, inclusive of attorney’s fees, by Secured Party for such purposes will then bear interest at the rate of eighteen percent (18.000%) per annum from the date incurred by Secured Party to the date of repayment by Debtor. All such expenses shall become a part of the Secured Obligations and, at Secured Party’s option, will be payable on demand. This Agreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Secured Party may be entitled upon the occurrence of an Event of Default.
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
**5.** **EVENTS OF DEFAULT.** Each of the following shall constitute an Event of Default under this Agreement.
**5.1** **Default of Secured Obligations.** Failure of Debtor to pay timely any amounts due and owing under the Note, and/or other Loan Documents; it being expressly understood that time is of the essence with regard to such payments by Debtor to Secured Party.
**5.2** **Other Defaults.** Failure of Debtor or any Guarantor of the Note to comply with or to perform any other term, obligation, covenant or condition contained in the Loan Documents, or in any other agreement between Secured Party and Debtor or any Guarantor of the Note (or all of them); more particularly, without limitation, failure of Debtor to comply with those Obligations of Debtor set forth in Section 2 of this Agreement.
**5.3** **Defective Collateralization.** This Agreement or the Note ceases to be in full force and effect (including failure of any collateral documents to create a valid and perfected security interest or lien) at any time and for any reason, unless such failure is through no fault of Debtor, and such failure has not been remedied (unless otherwise stated herein) within thirty (30) days after the earlier of: (a) the date any Member of Debtor or any Guarantor becomes or reasonably should have become aware of such event; or (b) notice thereof is given to Debtor by Secured Party, unless such failure is through no fault of Debtor. Further, an Event of Default shall occur if there is a material adverse change in the Collateral in Secured Party’s sole reasonable determination.
**5.4** **Insolvency.** The adjudicated insolvency of Debtor, the appointment of a receiver for any part of Debtor’s property, any assignment for the benefit of creditors or the commencement of a proceeding under bankruptcy or insolvency laws by or against Debtor, unless dismissed within ninety (90) days.
**5.5** **Creditor or Forfeiture Proceedings.** Commencement of a lawsuit, foreclosure or forfeiture proceedings, whether by judicial proceedings, arbitration, litigation, mediation, self-help, non-judicial sale, repossession or any other method, by any creditor of Debtor’s (including, without limitation, Secured Party), or by any governmental agency against the Collateral or any other property (real or chattel) owned by Debtor or any endorser, guarantor or co-maker of the Note.
**5.6** **Cessation of Business.** Debtor suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business for a period exceeding fourteen (14) calendar days.
**5.7** **Change of Control.** A change of control shall be deemed to have occurred if any person or group of persons (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934) together with its affiliates, excluding employee benefit plans of Debtor, is or becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of securities of Debtor representing 50.000% or more of the combined voting power of Debtor’s then outstanding shares by class.
**5.8** **False Statements.** If any warranty, representation or statement made or furnished to Secured Party by or on behalf of Debtor or any guarantor of the Note under any document, agreement or instrument related (directly or indirectly) thereto is false, misleading or fraudulent in any material respect, either now or at the time made or furnished.
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
**5.9** **Cross-Default and Cross-Collateralization.** An Event of Default under this Agreement shall constitute an event of default under each and every other note, security instrument and loan agreement, and *vice versa*, to Secured Party from Debtor, or from any corporation, partnership, trust or other legal entity in which either Debtor is an officer, director, principal, shareholder, partner or beneficiary, or of which any officer, director, principal, shareholder, partner or beneficiary of Debtor is an officer, director, principal, shareholder, partner or beneficiary. Upon the occurrence of such a default, Secured Party may, at its sole discretion and option, declare any or all such notes and security instruments in default, accelerate the indebtedness evidenced or secured thereby as immediately due and payable and exercise any and all remedies set forth in such documents that have been accelerated pursuant to this provision.
**6.** **RIGHTS AND REMEDIES ON DEFAULT.** If an Event of Default occurs under this Agreement, at any time thereafter, Secured Party shall have all the rights of a secured party under the Georgia Uniform Commercial Code and/or under other applicable law, and all other legal and equitable rights to which Secured Party may be entitled. In addition, and without limitation, Secured Party may exercise any one or more of the following rights and remedies:
**6.1** **Accelerate Secured Obligations.** Secured Party may declare the entire amounts due under the Note, and/or the other Loan Documents, immediately due and payable, without prior notice to Debtor.
**6.2** **Assemble Collateral.** Secured Party may require Debtor to deliver to Secured Party all or any portion of the Collateral and any and all certificates of title and other documents relating to the Collateral. Secured Party may require Debtor to assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party. Secured Party also shall have full power to enter upon the property of Debtor to take possession of and remove the Collateral. If the Collateral contains other goods not covered by this Agreement at the time of repossession, Debtor agrees Secured Party may take such other goods, provided that Secured Party makes reasonable efforts to return them to Debtor after repossession. All reasonable expenses relating to the foregoing shall become a part of the Secured Obligations secured by this Agreement and shall be payable on demand, with interest at the rate of eighteen percent (18.000%) per annum from date of expenditure until repaid. Additionally, Secured Party may immediately proceed with the exercise of its foreclosure rights and powers of sale under those certain Security Deeds, executed contemporaneously herewith.
**6.3** **Sell the Collateral.** Secured Party shall have full power to sell, lease, transfer or otherwise deal with the Collateral or proceeds thereof in its own name or that of Debtor. Secured Party may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, Secured Party will give Debtor reasonable notice of the time after which any private sale or any other intended disposition of the Collateral is to be made unless Debtor has signed, after an Event of Default occurs, a statement renouncing or modifying Debtor’s right to notification of sale. The requirements of reasonable notice shall be met if such notice is given at least seven (7) days before the time of the sale or disposition. All reasonable expenses relating to the disposition of the Collateral, including, without limitation, the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall become a part of the Secured Obligations secured by this Agreement and shall be payable on demand, with interest at the rate of eighteen percent (18.000%) per annum from date of expenditure until repaid.
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
**6.4** **Collect Revenues, Apply Accounts.** Secured Party, either itself directly or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Secured Party may at any time in its discretion transfer any Collateral into its own name or that of its nominee and receive the payments, rents, income, and revenues therefrom and hold the same as security for the Secured Obligations or apply it to payment of the Secured Obligations in such order of preference as Secured Party may determine. Insofar as the Collateral consists of accounts, accounts receivable, general intangibles, insurance policies, instruments, chattel paper, choses in action or similar property, Secured Party may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize on the Collateral as Secured Party may determine, whether or not Secured Obligations or Collateral is then due. For these purposes, Secured Party may, on behalf of and in the name of Debtor, receive, open and dispose of mail addressed to Debtor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitate collections, Secured Party may notify account debtors and obligors on any Collateral to make payments directly to Secured Party.
**6.5** **Setoff.** Secured Party shall have the right to immediately seize the Collateral for its own account and place the Collateral under its control by transfer to account(s) at Secured Party (or any other place) if an Event of Default shall have occurred and be continuing. After doing so, Secured Party shall be entitled, at its option, to reduce the accelerated amount due under the Note.
**6.6** **Obtain Deficiency.** If Secured Party chooses to sell any or all of the Collateral, Secured Party may obtain a judgment against Debtor for any deficiency remaining on the Secured Obligations due to Secured Party after application of all amounts received from the exercise of the rights provided in this Agreement. Debtor shall be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper.
**6.7** **Confession of Judgment**. To the extent permitted by applicable law, Debtor authorizes any attorney designated by Secured Party or any clerk of any court of record to appear for Debtor and confess judgment against Debtor in favor of Secured Party for the full amounts due under the Note (including Principal, accrued interest, default interest, penalties, charges and fees), plus court costs, plus attorneys’ fees equal to eighteen percent (18.000%) of the amounts due, all without prior notice or opportunity of Debtor for prior hearing, without stay of execution or right of appeal, and expressly waiving the benefit of all exemption laws and any irregularity or error in entering any such judgment. No single exercise of the power to confess judgment granted herein shall exhaust the power, regardless of whether such exercise is ruled invalid, void or voidable by any court, nor shall the Note, Secured Party’s right to attorneys’ fees in the amount described herein or any other obligation hereunder or under any of the Loan Documents merge into any such judgment. The power to confess judgment granted in this paragraph may be exercised from time to time as often as Secured Party may elect. Debtor acknowledges that the actual amount of attorneys’ fees incurred by Secured Party would be impossible to calculate at the time judgment by confession is entered, as all such fees would not yet have been incurred. Accordingly, Debtor agrees that attorneys’ fees equal to eighteen percent (18.000%) of the amount due is reasonable.
**6.8** **Appoint Receiver.** To the extent permitted by applicable law, Secured Party shall have the following rights and remedies regarding the appointment of a receiver: (a) Secured Party may have a receiver appointed as a matter of right; (b) the receiver may be an employee of the Secured Party and may serve without bond; and (c) all reasonable fees of the receiver and his or her attorney shall become part of the Secured Obligations secured by this Agreement and shall be payable on demand, with interest at the rate of eighteen percent (18.000%) per annum from date of expenditure until repaid.
**6.9** **Other Rights and Remedies.** Secured Party shall have all the rights and remedies of a secured creditor under the provisions of the Georgia Uniform Commercial Code, as may be amended from time to time. In addition, Secured Party shall have and may exercise any or all other rights and remedies it may have available at law, in equity, or otherwise.
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
**6.10** **Cumulative Remedies.** All of Secured Party’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Secured Party to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Debtor under this Agreement, after failure to perform, shall not affect Secured Party’s right to declare a default and to exercise its remedies.
**7.** **MISCELLANEOUS PROVISIONS.**
**7.1** **Debtor Representations.** Debtor is a limited liability company duly organized and existing under the laws of the state of Tennessee and is authorized to conduct the business in which it presently engages and to enter into this Agreement. All assets of Debtor given as Collateral hereunder are free and clear of any and all liens and encumbrances. Debtor hereby represents that any and all information relating to Debtor provided to Secured Party in relation to matters contemplated herein were and, as of the effective date of this Agreement, remain true and accurate in all material respects.
**7.2** **Amendments.** This Agreement, together with the other Loan Documents representing all Secured Obligations, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
**7.3** **Applicable Law.** This Agreement has been delivered to Secured Party and accepted by Secured Party in the state of Georgia. Georgia law shall apply to this Agreement (without giving effect to its conflicts of law principles). If there is a lawsuit, Debtor agrees, upon Secured Party’s request, to submit to the jurisdiction of the courts of Fulton County, state of Georgia, and expressly waive all defenses whatsoever thereto.
**7.4** **Caption Headings.** Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.
**7.5** **Notices.** All notices required to be given under this Agreement shall be given in writing and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address reflected in the Note. Any party may change its address for notices under this Agreement, as set forth in the Note, by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. To the extent permitted by law, if there is more than one Debtor, notice to any Debtor will constitute notice to all Debtors. For notice purposes, Debtor agrees to keep Secured Party informed at all times of Debtor’s current address(es).
**7.6** **Power of Attorney.** Debtor hereby appoints Secured Party as its true and lawful attorney-in-fact, irrevocably with full power of substitution to do the following: (a) to demand, collect, receive, receipt for, sue and recover all sums of money or other property which may now or hereafter become due, owing, or payable from the Collateral; (b) to execute, sign, and endorse any and all claims, instruments, receipts, checks, drafts or warrants issued in payment for the Collateral; (c) to settle or compromise any and all claims arising under the Collateral, and in the place and stead of Debtor, to execute and deliver its release and settlement for the claim; and (d) to file any claim or claims or to take any action or institute or take part in any proceedings, either in its own name or in the name of Debtor, or otherwise, which in the discretion of Secured Party may seem to be necessary or advisable. This power (a) is given as security for the Secured Obligations, and the authority hereby conferred is and shall be irrevocable and shall remain in full force and effect until renounced by Secured Party (by and through a termination statement or otherwise) and (b) may not be exercised until an Event of Default has occurred.
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
**7.7** **Preference Payments.** Any monies Secured Party pays because of an asserted preference claim in Debtor’s bankruptcy will become a part of the Secured Obligations and shall be payable by Debtor as provided above in Section 4.
**7.8** **Severability.** If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstances, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provisions cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable.
**7.9** **Successor Interests.** Subject to the limitations set forth above on transfer of the Collateral, this Agreement shall be binding and inure to the benefit of the parties, their successors, and/or assigns.
**7.10** **Waiver.** Secured Party shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by the Secured Party. No delay or omission on the part of Secured Party in exercising any right shall operate as a waiver of such right or any other right. A waiver of Secured Party of a provision of this Agreement shall not prejudice or constitute a waiver of Secured Party’s right otherwise to demand strict compliance with that provision or any other provisions of this Agreement. No prior waiver of Secured Party, nor any course of dealing between Secured Party and Debtor, shall constitute a waiver of any of Secured Party’s rights or of any Debtor’s obligations as to any future transaction. Whenever the consent of Secured Party in any instance shall not constitute continuing consent to subsequent instance where such consent is required in and all cases such consent may be granted or withheld in the sole discretion of Secured Party, unless otherwise stated herein.
**7.11** **Neutral Interpretation.** This Agreement constitutes the product of negotiation of the Parties hereto and in the enforcement hereof shall be interpreted in a neutral manner, and not more strongly for or against either Party based upon the source of the draftsmanship hereof. Whenever the context so requires, the masculine gender shall include the feminine or neuter, the singular shall include the plural, and vice versa.
**7.12** **Counterparts.** This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all such counterparts together shall constitute one and the same instrument. Further, this Agreement, and/or any other applicable Loan Documents, my be executed electronically and carry full force and affect as if it had been signed by hand, pursuant to the Federal Electronic Signatures in Global and National Commerce Act of 2000.
**7.13** **Termination.** This Agreement shall terminate upon repayment in full of the Debtor’s indebtedness governed by this Agreement and the Loan Documents and not sooner.
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
**7.14** **Waiver of Jury Trial.** THE DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. IT FURTHER WAIVES ANY RIGHT IT MAY HAVE TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. FURTHER, THE DEBTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF LENDER, NOR THE LENDER’S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. THE DEBTOR ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO LENDER’S EXECUTION AND ACCEPTANCE OF THIS AGREEMENT AND/OR THE OTHER LOAN DOCUMENTS.
[THIS SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
DEBTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS SECURITY AGREEMENT, AND DEBTOR AGREES TO ITS TERMS.
**IN WITNESS WHEREOF**, the Debtor and Secured Party have each signed, sealed and delivered this Agreement as of the Effective Date hereof.
Debtor:
**GLOBAL DIGITAL HOLDINGS, INC.**
By: */s/ Robert C. Bissell* [Seal]
Robert C. Bissell, Director & C.E.O.
Secured Party:
**TRAILHEAD GROWTH, LP**
By: */s/ Brendan W. Lake* [Seal]
Brendan W. Lake, Managing Member of General Partner
LOAN AND SECURITY AGREEMENT EXHIBIT “A”
---
## EXHIBIT 10.33
SEC source: [ex_902238.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902238.htm)
**Exhibit 10.33**
**GLOBAL DIGITAL HOLDINGS, INC.**
**CONVERTIBLE PROMISSORY NOTE**
*NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE* **“*ACT*”***), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THIS NOTE AND SUCH SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THIS NOTE AND ANY SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS.*
Principal Amount: U.S. $3,900,000.00 Effective Date: November 01, 2023
Subject to the terms and conditions of this Note, for value received, GLOBAL DIGITAL HOLDINGS, INC., a Georgia profit corporation (**“*Borrower*”**), with a principal office address at 2146 Roswell Road. Suite 108-851, Marietta, Georgia 30062, hereby promises to pay to THE CLOUD MINDERS, LLC, a Delaware limited liability company (**“*Holder*”**), with a principal office address at 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165, the principal sum set forth above (the **“*Principal Amount*”**), together with all interest accrued on unpaid principal at the Applicable Rate, as hereinafter defined. The following is a statement of the rights of Holder and the terms and conditions to which this Note is subject, and to which Holder hereof, by the acceptance of this Note, agrees:
**ARTICLE I.** **DEFINITIONS.**
The following definitions shall apply for all purposes of this Note:
**“*Affiliate*”** has the meaning ascribed to it in Rule 144.
**“*Balance*”** means, at the applicable time of measurement, the sum of the Principal Balance, all interest then accrued but unpaid, and all other amounts (including fees and expenses) then accrued but unpaid under this Note.
**“*Borrower*”** shall include, in addition to Borrower identified in the preamble of this Note, any Person which succeeds to Borrower’s obligations under this Note, whether by permitted assignment, merger or consolidation, operation of law, or otherwise.
**“*Business Day*”** means a weekday on which Borrower’s primary bank is open for general banking business.
**“*Common Stock*”** means the common stock duly authorized to be issued by the Borrower under its articles of incorporation and pursuant to its bylaws, each as the same may be hereinafter supplemented, modified, amended and/or restated.
**“*Conversion Price*”** means One & 00/100 U.S. Dollars per share of Conversion Stock.
**“*Conversion Stock*”** means Common Stock of the Borrower; further, the term “Conversion Stock” shall include the stock and other securities and property that are receivable or issuable upon such conversion of this Note in accordance with its terms.
**“*Event of Default*”** has the meaning set forth in Article V hereof.
**“*Financing Document*”** means each of this Note and any document entered into, executed or delivered under or in connection with, or for the purpose of amending, any of such documents.
**“*Highest Lawful Rate*”** means the maximum non-usurious rate of interest, as in effect from time to time, which may be charged, contracted for, reserved, received or collected by Holder in connection with this Note under applicable law.
**“*Maturity Date*”** means November 01, 2025.
**“*Note*”** means this Convertible Promissory Note.
**“*Notes*”** means a series of convertible promissory notes before, on, or after the date hereof issued by Borrower, of which this Note is one, each such note containing substantially identical terms and conditions as this Note.
**“*Person*”** means any individual, partnership, corporation, trust, estate, cooperative association, government or governmental subdivision or agency or other legally recognized entity.
**“*Principal Balance*”** means, at the applicable time of measurement, all then outstanding principal of this Note.
**“*Rule 144*”** has the meaning set forth in Section 10.7 hereof.
**ARTICLE II.** **INTEREST; PAYMENTS.**
**2.1** **Interest**. Interest shall accrue on the outstanding Principal Balance of this Note at an annual rate of zero and one-tenth percent (0.1%) (the **“*Applicable Rate*”**). Anything provided herein to the contrary notwithstanding, if, during any period for which interest is computed hereunder, the amount of interest computed on the basis provided for in this Note, together with any fees, charges and other payments that are treated as interest under applicable law, as provided for herein or in any other document executed in connection herewith, would exceed the amount of such interest computed on the basis of the Highest Lawful Rate, then Borrower shall not be obligated to pay, and Holder shall not be entitled to charge, collect, receive, reserve or take, interest in excess of the Highest Lawful Rate, and during any such period the interest payable hereunder shall be computed on the basis of the Highest Lawful Rate.
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**2.2** **Payments**. There are no scheduled payments due under this Note. Any of the Principal Balance of this Note that has not been paid prior to the Maturity Date shall automatically convert to shares of Conversion Stock, as provided in Article VI hereof. Any payments Borrower elects to make to Holder under this Note (i.e., permitted prepayments) shall be made via electronic transfer, to the account specified by Holder from time to time in writing, of good and immediately available lawful currency of the United States of America.
**ARTICLE III.** **PREPAYMENTS.**
Borrower may make full or partial prepayment(s) under this Note without paying to Holder any prepayment charge.
**ARTICLE IV.** **APPLICATION OF PREPAYMENTS.**
If Borrower makes a prepayment pursuant to Article III, Borrower shall contemporaneously therewith notify Holder in writing (which may be made via electronic mail) setting forth (i) the portion of the Principal Amount being prepaid in respect of such prepayment and (ii) the amount of interest that has accrued as of the corresponding prepayment date on the Principal Balance amount provided under the immediately preceding clause (i). For clarity and the avoidance of doubt, each such prepayment shall thence be made by Borrower in the sum amount of clauses (i) and (ii) of this Article IV and applied by Holder to the outstanding principal and interest portions of the Balance of this Note accordingly.
**ARTICLE V.** **EVENTS OF DEFAULT.**
Each of the following events shall constitute an **“*Event of Default*”** hereunder:
**5.1** A receiver is appointed for any material part of Borrower’s property, Borrower makes a general assignment for the benefit of creditors, or Borrower becomes a debtor or alleged debtor in a case under the U.S**.** Bankruptcy Code or becomes the subject of any other bankruptcy or similar proceeding for the general adjustment of its debts or for its liquidation;
**5.2** Borrower breaches any material obligation, or materially breaches any representation or warranty, to Holder under this Note or under any other Financing Document and does not cure such breach within thirty (30) calendar days after written notice thereof has been given by or on behalf of Holder to Borrower; or
**5.3** Borrower’s board of directors or shareholders adopt a resolution for the liquidation, dissolution or winding up of Borrower**.**
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Upon the occurrence of any Event of Default, all accrued but unpaid expenses, accrued but unpaid interest, all principal and any other amounts outstanding under this Note shall (i) in the case of any Event of Default under Section 5.1, become immediately due and payable in full without further notice or demand by Holder and (ii) in the case of any Event of Default other than under Section 5.1, become immediately due and payable upon written notice by or on behalf of the affected Holder(s) to Borrower but only if such notice is given with the prior written consent of the Holder.
**ARTICLE VI.** **CONVERSION.**
**6.1** **Conversion**. The entire remaining Principal Balance that has not been prepaid, subject to the limitations provided under Article III, on or before the calendar day immediately preceding the Maturity Date shall automatically be cancelled and converted into that number of shares of Conversion Stock obtained by dividing (x) such remaining Principal Balance by (y) the Conversion Price (the **“*Total Number of Shares*”**), and all interest accrued and owing in respect to such remaining Principal Balance, pursuant to Article II, shall be considered forgiven by Holder. Such conversion shall be deemed to occur under this Section 6.1 as of the Maturity Date, without regard to whether Holder has then delivered to Borrower this Note (or appropriate lost Note documentation, where applicable) evidencing the satisfaction hereof.
**6.2** **Termination of Rights**. Except for the right to obtain certificates representing the Conversion Stock under Article VII hereof, all rights with respect to this Note shall terminate upon the effective conversion of the entire Balance of the Note as provided in Article VI hereof. The foregoing notwithstanding, Holder agrees to surrender this Note to Borrower (or appropriate lost Note documentation, where applicable) as soon as practicable after said conversion.
**6.3** **Further Assurances; Power of Attorney**. Holder hereby agrees to execute and deliver to Borrower, within five (5) calendar days after the Holder receives the request therefor from Borrower, such agreements and instruments as Borrower deems reasonably necessary or advisable in order to affect the conversion provisions of this Note; further, Holder hereby grants to Borrower an irrevocable power of attorney to execute the same on behalf of Holder, in Borrower’s stead, should Holder fail to timely comply with the foregoing provisions of this Section 6.3.
**ARTICLE VII.** **CERTIFICATES; NO FRACTIONAL SHARES.**
Subject to Article VI hereof, as soon as practicable after conversion of this Note pursuant to Article VI hereof, Borrower, at its expense, will register such shares of Conversion Stock in Borrower's register of shareholders in the name of the respective Holder and will cause to be issued in the name of Holder and to be delivered to Holder, a certificate or certificates for the number of shares of Conversion Stock to which Holder shall be entitled upon such conversion (bearing such legends as may be required by applicable state and federal securities laws in the opinion of legal counsel of Borrower, by Borrower’s Articles of Incorporation and Bylaws and by any agreement between Borrower and Holder), together with any other securities and property to which Holder is entitled upon such conversion under the terms of this Note. No fractional shares shall be issued upon conversion of this Note. If upon any conversion of this Note (and after aggregating the amounts of all other Notes held by the same Holder which are converted at the same time as this Note), a fraction of a share would otherwise be issued, then, in lieu of such fractional share, Borrower shall pay to Holder an amount in cash equal to such fraction of a share multiplied by the applicable Conversion Price.
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**ARTICLE VIII.** **PROVISIONS RELATING TO SHAREHOLDERS RIGHTS.**
This Note does not entitle Holder to any voting rights or other rights as a shareholder of Borrower, unless and until (and only to the extent that) this Note is actually converted into shares of Borrower’s capital stock in accordance with its terms. In the absence of conversion of this Note into Conversion Stock, no provisions of this Note, and no enumeration herein of the rights or privileges of Holder, shall cause Holder to be a shareholder of Borrower for any purpose.
**ARTICLE IX.** **REPRESENTATIONS AND WARRANTIES OF BORROWER.**
Borrower hereby represents and warrants to Holder, as of the effective date hereof, that the following Sections are all true and complete:
**9.1** **Organization, Good Standing and Qualification**. Borrower has been duly incorporated and organized, and is validly existing in good standing, under the laws of the state of Georgia. Borrower has the corporate power and authority to own and operate its properties and assets and to carry on its business as currently conducted.
**9.2** **Due Authorization**. All corporate action on the part of Borrower’s board of directors and shareholders necessary for the authorization, execution, delivery of, and the performance of all obligations of Borrower under this Note has been taken prior to the date hereof. This Note constitutes a valid and legally binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies.
**9.3** **Corporate Power**. Borrower has the corporate power and authority to issue, execute and deliver this Note and to carry out and perform all its obligations under this Note.
**ARTICLE X.** **REPRESENTATIONS AND WARRANTIES OF HOLDER.**
Holder hereby represents and warrants to, and agrees with Borrower as follows.
**10.1** **Authorization**. This Note constitutes Holder’s valid and legally binding obligations, enforceable against Holder in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies. Holder represents and warrants to Borrower that Holder has full power and authority to enter into this Note.
**10.2** **Purchase for Own Account**. This Note and the Conversion Stock (*i.e.*, the Common Stock issuable by Borrower upon conversion of such Conversion Stock) (collectively, the **“*Securities*”**) are being and will be acquired for investment for Holder’s own account, not as a nominee or agent, and not with a view to the public resale or distribution thereof within the meaning of the Act, and Holder has no present intention of selling, granting any participation in, or otherwise distributing the same.
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**10.3** **No Solicitation**. At no time was Holder presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Securities.
**10.4** **Disclosure of Information**. Holder has received or has had full access to all the information Holder considers necessary or appropriate to make an informed investment decision with respect to the Securities. Holder further has had an opportunity to ask questions and receive answers from Borrower regarding the terms and conditions of the offering of the Securities and to obtain additional information (to the extent Borrower possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder had access. The foregoing, however, does not in any way limit or modify the representations and warranties made by Borrower in Article IX hereof.
**10.5** **Investment Experience**. Holder understands that the purchase of the Securities involves substantial risk. Holder (i) has experience as a Holder in securities of companies in the development stage and acknowledges that Holder is able to fend for itself, can bear the economic risk of Holder’s investment in the Securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of this investment in the Securities and protecting Holder’s own interests in connection with this investment in the Securities or (ii) has a preexisting personal or business relationship with Borrower and certain of its officers, directors or controlling Persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such Persons. Holder acknowledges that any investment in the Securities involves a high degree of risk, and represents that it is able, without materially impairing its financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of its investment.
**10.6** **Accredited Investor Status**. Holder is familiar with the definition of, and qualifies as, an “accredited investor” within the meaning of Regulation D promulgated under the Act.
**10.7** **Restricted Securities**. Holder understands that the Securities are characterized as “restricted securities” under the Act and Rule 144 promulgated thereunder (**“*Rule 144*”**) since they are being acquired from Borrower in a transaction not involving a public offering, and that under the Act and applicable regulations thereunder the Securities may be resold without registration under the Act only in certain limited circumstances. Holder further understands that Borrower is under no obligation to register the Securities, and Borrower has no present plans to do so. Furthermore, Holder is familiar with Rule 144, as presently in effect, and understands the limitations imposed thereby and by the Act on resale of the Securities without such registration. Holder understands that, whether or not the Securities may be resold in the future without registration under the Act, no public market now exists for any of the Securities and that it is uncertain whether a public market will ever exist for the Securities.
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**10.8** **Further Limitations on Disposition**. Without in any way limiting the representations set forth above, Holder further agrees not to make any disposition of all or any portion of the Securities unless and until:
(a) there is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such effective registration statement; or
(b) (i) Holder shall have notified Borrower of the proposed disposition and shall have furnished Borrower with a detailed statement of the circumstances surrounding the proposed disposition and, (ii) if requested by Borrower, Holder shall have furnished Borrower with an opinion of counsel, reasonably satisfactory to Borrower that such disposition will not require registration of such shares under the Act. It is agreed that Borrower will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances.
Notwithstanding the provisions of paragraphs 10.8(a) and 10.8(b) above, no such registration statement or opinion of counsel shall be necessary for a transfer by a Holder that is a partnership to a partner of such partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner or the transfer by gift, will or intestate succession of any partner to his or her spouse or to the siblings, lineal descendants or ancestors of such partner or his or her spouse, if the transferee agrees in writing to be subject to the terms hereof to the same extent as if they were the original Holder hereunder.
**10.9** **Legends**. Holder understands and agrees that the certificates evidencing the Securities will bear a legend similar to that set forth below, in addition to any other legend that may be required by applicable law, Borrower’s Articles of Incorporation or Bylaws, this Agreement or any other agreement between Borrower and Holder:
“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.”
**ARTICLE XI.** **GENERAL PROVISIONS.**
**11.1** **Waivers**. Borrower and all endorsers of this Note, if any, hereby waive notice, presentment, protest and notice of dishonor.
**11.2** **Attorneys**’ **Fees**. If any party hereto is required to engage the services of an attorney for the purpose of enforcing this Note, or any provision thereof, the prevailing party shall be entitled to recover its reasonable expenses and costs in enforcing this Note, including attorneys’ fees.
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**11.3** **Transfer**. Neither this Note nor any of the rights or obligations of Holder hereunder may be assigned, conveyed or transferred, in whole or in part, without Borrower’s prior written consent, which Borrower may withhold in its sole discretion; provided, however, that this Note may be assigned, conveyed or transferred without the prior written consent of Borrower to any Affiliate of Holder who: (i) executes and delivers an acknowledgement that such transferee agrees to be subject to, and bound by, all the terms and conditions of this Note, (ii) makes the representations and warranties to Borrower that are set forth in Article X hereof and (iii) (if requested by Borrower) delivers to Borrower an opinion of legal counsel, reasonably satisfactory to Borrower, that such transfer complies with state and federal securities laws. Neither this Note nor any of the rights or obligations of Borrower hereunder may be assigned, by operation of law or otherwise, in whole or in part, by Borrower without the prior written consent of Holder. Subject to the foregoing, the rights and obligations of Borrower and Holder under this Note and the other Financing Documents shall be binding upon and benefit their respective permitted successors, assigns, heirs, administrators and transferees.
**11.4** **Governing Law**. This Note shall be governed by and construed under the internal laws of the state of Georgia, without giving respect to its principles of conflict of laws or choice of laws.
**11.5** **Headings**. The headings and captions used in this Note are used only for convenience and are not to be considered in construing or interpreting this Note. All references in this Note to any “Article,” “Section,” “paragraph” or “clause” shall, unless otherwise provided, refer to such portions of this Note.
**11.6** **Notices**. All notices required or permitted to be given to a party pursuant to this Note will be in writing and will be effective and deemed to provide such party sufficient notice under this Note on the earliest of the following: (i) at the time of personal delivery; (ii) one (1) Business Day after deposit with an express overnight courier nationally recognized in the United States of America; or (iii) three (3) Business Days after deposit in the United States Postal Service by certified mail (return receipt requested). All notices for delivery outside the United States will be sent by express courier with delivery tracking capabilities and will be effective and deemed to provide such party sufficient notice under this Note on the date such express courier reflects the delivery thereof. All notices not delivered personally will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at, in the case of Borrower, at 185 Faro Court, Unit 2, Shepherdsville, Kentucky 40165, U.S.A., Attention: Chief Executive Officer, or at, in the case of Holder, the address set forth on Holder’s corresponding suitability questionnaire, or at such other address as any party may designate by giving seven (7) calendar days’ advance written notice to all other party(ies) hereto.
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**11.7** **Amendments and Waivers**. This Note may be amended, and any provisions under this Note may be waived, by the written consent of the Holder and Borrower. Notwithstanding the foregoing, this Note and all other Notes may not be amended and the observance of any term of this Note and all other Notes may not be waived, with respect to any Holder without the written consent of such Holder, unless such amendment or waiver, by its express, facial terms, applies to all holders of Notes in the same fashion. Any amendment or waiver effected in accordance with this Section 11.7 shall be binding upon each holder of Notes then outstanding, each future holder of Notes and Borrower. Except as provided above with respect to waivers by Borrower, no waiver or consent with respect to this Note will be binding or effective unless it is set forth in writing and signed by the party against whom such waiver is asserted. No course of dealing between Borrower and Holder will operate as a waiver or modification of any party’s rights or obligations under this Note. No delay or failure on the part of either party in exercising any right or remedy under this Note will operate as a waiver of such right or any other right. A waiver given on one occasion will not be construed as a bar to, or as a waiver of, any right or remedy on any future occasion.
**11.8** **Severability**. If one or more provisions of this Note are held to be unenforceable under applicable law, then such provision(s) shall be excluded from this Note to the extent they are held to be unenforceable and the remainder of the Note shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.
[THIS SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]
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**IN WITNESS WHEREOF**, Borrower has caused this Convertible Promissory Note to be signed in its name as of the date first written above.
**Borrower:**
GLOBAL DIGITAL HOLDINGS, INC.
By: */s/ Robert C. Bissell*
Name: Robert C. Bissell
Title: Director & C.E.O.
*Agreed and acknowledged by:*
**Holder:**
THE CLOUD MINDERS, LLC
By: */s/ Ian Gerard*
Name: Ian Gerard
Title: Authorized Manager
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---
## EXHIBIT 10.34
SEC source: [ex_902239.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902239.htm)
**Exhibit 10.34**
**LOAN AND SECURITY AGREEMENT 1-B**
THIS LOAN AND SECURITY AGREEMENT, effective as of **February 15, 2022** (this “Agreement”), by and between **WAHA TECHNOLOGIES, INC**, a Georgia profit corporation (“Debtor”), and **GC OPPORTUNITIES 2 PRIVATE FUND, LP**, a Delaware limited partnership (“Secured Party”).
For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Debtor and Pledgor grant to Secured Party a continuing security interest in the Collateral, whether presently owned or existing or hereafter acquired or arising, to secure the Secured Obligations (as defined below) and agrees that Secured Party shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rights which Secured Party may have by law. The parties further agree as follows:
**1.** **DEFINITIONS**. The following words shall have the following meanings when used in this Agreement. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code as in effect in the State of Georgia. All references to dollar amounts shall mean amounts in lawful money of the United States of America.
**1.1** **Agreement**. The word “Agreement” means this Loan and Security Agreement, as may be amended or modified from time to time by written agreement of the parties hereto, together with any and all exhibits and/or schedules attached hereto from time to time, as the case may be.
**1.2** **Collateral**. The word “Collateral” particularly includes all the following, whether presently owned or hereafter acquired, whether now existing or hereafter arising:
**(a)** All items set forth in Exhibit “A”, attached hereto and incorporated herein by reference, as may be duly updated and/or supplemented by Secured Party from time to time, as provided in Section 3 of this Agreement, as may be further evidenced by a UCC Financing Statement encumbering the same (also referred to as the “Equipment”).
**1.3** **Debtor**. The word “Debtor” means WAHA TECHNOLOGIES, INC, a Georgia profit corporation, together with its successors and/or permitted assigns; also referred to herein as “Pledgor” or “Borrower” in the other Loan Documents.
**1.4** **Event of Default**. The words “Event of Default” mean and include any of the Events of Default provided in the Section 6 of this Agreement and those described in the other Loan Documents.
**1.5** **Intercreditor Agreement**. The words “Intercreditor Agreement” means that certain agreement amongst Debtor, Secured Party and various other creditors of Debtor, dated May 26, 2021, with TURNING ROCK FUND I-IX, LLC acting as “Credit Agreement Agent” thereunder.
EXHIBIT “A” to LOAN AND SECURITY AGREEMENT
**1.6** **Loan Documents**. The words “Loan Documents” shall collectively refer to the following:
**(a)** Interest Only Balloon Note;
**(b)** Settlement Statement;
**(c)** UCC Financing Statement; and
**(d)** Such other documents and information as Secured Party reasonably requires.
**1.7** **Note**. The word “Note” means that certain Interest Only Balloon Note 1-B, of even date herewith, in the amount of One Million Eight Hundred Forty-Nine Thousand Eight Hundred Eighty-Eight & 20/100 U.S. Dollars (U.S. $1,849,888.20), made by Debtor in favor of Secured Party, as may be modified from time to time by written agreement of the parties hereto or as may be updated and/or supplemented by Secured Party from time to time, as provided in Section 3 of this Agreement.
**1.8** **Secured Obligations**. The words “Secured Obligations” mean the entire amounts owed by Debtor to Secured Party, at any particular time, collectively under the Loan Documents.
**1.9** **Secured Party**. The words “Secured Party” means GC OPPORTUNITIES 2 PRIVATE FUND, LP, a Delaware limited partnership, together with its successors and/or permitted assigns, as their interests may appear; also referred to as “Holder” in the other Loan Documents.
**2.** **OBLIGATIONS OF DEBTOR**. Debtor warrants and covenants to Secured Party as follows:
**2.1** **Perfection of Security Interest**. Debtor hereby authorizes Secured Party to execute or record (or both) such UCC Financing Statements or partial assignment and to take whatever other actions are deemed reasonably necessary or advisable by Secured Party to perfect and continue Secured Party’s security interest in the Collateral. Upon request of Secured Party, Debtor will deliver to Secured Party any and all documents evidencing or constituting the Collateral. Debtor hereby appoints Secured Party as its irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue the security interest granted in this Agreement. Secured Party may, at any time and without further authorization from Debtor, file a carbon, photographic or other reproduction of any financing statement or of this Agreement for use as a financing statement. Debtor will reimburse Secured Party for all filing fees incurred for the perfection and the continuation of the perfection of Secured Party’s security interest in the Collateral. Debtor promptly will notify Secured Party before any change in Debtor’s name, including any change to the assumed business names of Debtor.
**2.2** **Maintenance of Insurance**. Debtor shall maintain insurance coverage required hereunder, and under the Loan Documents, at all applicable times, in form and substance satisfactory to Secured Party in its sole reasonable discretion and shall provide Secured Party all certificates of insurance policies and/or endorsements naming Secured Party as loss payee. Debtor shall maintain such insurance coverage in substantially similar amounts and types as it presently carries in its due course of business, including, without limitation, credit insurance on all foreign and domestic receivables and insurance on all inventory of which the Debtor takes possession and/or has risk of loss or damage while in transit.
**2.3** **Maintenance, Inspection and Valuation of Collateral**. Debtor shall maintain all tangible Collateral in good condition and repair, ordinary wear and tear excepted. Debtor shall not commit or permit damage to or destruction of the Collateral or any part of the Collateral, ordinary wear and tear excepted, other than any damage or destruction outside of Debtor’s reasonable control, including, without limitation, any damage or destruction caused by act of nature. Debtor shall establish and maintain a system to assure and monitor continued compliance with all applicable environmental laws, which system shall include periodic reviews of such compliance, and Debtor shall respond promptly to any hazardous discharge or environmental complaint and take all necessary action in order to safeguard the health of any Person and to avoid subjecting the Collateral to any lien, charge, claim or encumbrance arising therefrom. Further, pursuant to the reporting requirement under Section 2.11(b) below, Debtor shall provide Secured Party a valuation of the Equipment using recent invoices and the then current cost/TH and/or recently quoted broker price opinion providing the cost/TH for currently available equipment on the market, as reasonably agreed upon by the parties hereto. If, pursuant to any such valuation, the ratio of (i) the principal balance of the Note, divided by (ii) the most recent such valuation of the Equipment, exceeds eighty percent (80%), Debtor shall, within sixty (60) days after any such determination, post additional equipment collateral or paydown the principal balance of the Note to achieve a ratio of eighty percent (80%) under aforesaid calculation. The foregoing notwithstanding, for so long as there remains an uncured Event of Default (as hereinafter defined), Secured Party and its designated representatives and agents shall have the right at all reasonable times to examine, inspect and audit the Collateral, wherever located, at Secured Party’s expense.
**2.4** **Removal of Collateral**. Debtor shall keep the Collateral (or to the extent the Collateral consists of intangible property such as accounts, the records concerning the Collateral) at Debtor’s places of business or such other locations as are acceptable to Secured Party. Except in the ordinary course of its business, Debtor shall not remove the Collateral from its existing locations without the prior written consent of Secured Party.
**2.5** **Enforceability of Collateral**. To the extent the Collateral consists of Contractual Rights, General Intangibles, accounts or chattel paper; the Collateral is enforceable in accordance with its terms, is genuine and complies with applicable laws concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have authority and capacity to contract and are in fact obligated as they appear to be on such Collateral.
**2.6** **Transactions Involving Collateral**. Debtor shall not sell, offer to sell or otherwise transfer or dispose of the Collateral without Secured Party’s prior written consent. Further, Debtor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance or charge.
**2.7** **Title**. Debtor represents and warrants to Secured Party that it holds good and marketable title to the Collateral presently owned, free and clear of all liens and encumbrances except for the lien of this Agreement or liens permitted under this Agreement.
**2.8** **Taxes, Assessments and Liens**. Debtor will pay when due all taxes, assessments, and liens upon the Collateral, its use or operation, upon this Agreement, or upon any promissory note or notes evidencing the Secured Obligations. Debtor may withhold any such payment or may elect to contest any lien if Debtor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Secured Party’s interest in the Collateral is not jeopardized in Secured Party’s sole opinion. If the Collateral is subjected to a new lien which is not discharged within fifteen (15) days, Debtor shall deposit cash with a third party escrow selected by Debtor (which escrow shall be licensed as such with the State of Georgia), or furnish a sufficient corporate surety bond or other security satisfactory to Secured Party, in an amount adequate to provide for the discharged of the lien plus any interest, costs, attorney’s fees or other charges that could accrue as a result of foreclosure or sale of the Collateral. In any contest Debtor shall defend itself and Secured Party and shall satisfy any final adverse judgment before enforcement against the Collateral. Debtor shall name Secured Party as an additional oblige under any surety bond furnished in the contest proceedings.
**2.9** **No Violation**. The execution and delivery of this Agreement will not violate any law or agreement governing Debtor or to which Debtor is a party, particularly the Intercreditor Agreement, and its articles and bylaws do not prohibit any term or condition of this Agreement. The parties hereto understand and agree to take any such actions as are required by the Credit Agreement Agent to ensure this Agreement is and remains in compliance with the Intercreditor Agreement.
**2.10** **Compliance with Governmental Requirements**. Debtor shall comply promptly with all laws, ordinances, and regulations and/or all governmental authorities applicable with the production, disposition, or use of the Collateral. Debtor may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Secured Party’s interest in the Collateral, in Secured Party’s sole opinion, is not jeopardized.
**2.11** **Reporting Requirements**. Debtor shall provide, or cause to be provided, to Secured Party certain reportings within sixty (60) days of the dates set forth below, as follows:
**(a)** beginning April 01, 2022, a quarterly net asset valuation of Debtor
**(b)** beginning April 01, 2022, a quarterly capital account statement showing principal balance, interest paid and accrued interest;
**(c)** beginning March 01, 2023, a semi-annual collateral value reporting; and
**(d)** beginning January 01, 2023, an annual corporate financial reporting and IRS Form 1099.
**3.** **LOAN FUNDING**. As of the effective date hereof, Secured Party shall make, or cause to be made, a gross cash advance to Debtor in an amount equal to the “Principal” amount provided under the Note, being in the particular amount of One Million Eight Hundred Forty-Nine Thousand Eight Hundred Eighty-Eight & 20/100 U.S. Dollars (U.S. $1,849,888.20); provided, however, Secured Party shall net fund this Loan, reserving (i) an origination charge equal to one percent (1.000%) of the Principal amount of the Note, plus (ii) an amount sufficient to satisfy one- half of all amounts owed as of the effective date hereof under that certain Convertible Interest Only Balloon Note, dated March 08, 2021, between the Borrower and ALDER MORTGAGE GROUP, LLC, a Georgia limited liability company, in the latter’s capacity as the servicing Holder (and the underlying Participants in the entirety, being EMERALD ACQUISITIONS 2013, LLC, EMERALD ACQUISITIONS 2014, LLC, EMERALD ACQUISITIONS 2015, LLC and EMERALD ACQUISITIONS 2016, LLC, each a Georgia limited liability company), plus (iii) an amount sufficient to satisfy one-half of the Purchase Option Amount owed as of the effective date hereof for all cryptocurrency miners leased to Borrower under that certain Master Lease Agreement, dated July 01, 2021, between Borrower and MAVERICK LEASING PARTNERS, LLC, a Delaware limited liability company. The foregoing shall be further detailed in a settlement statement relating to the loan funding and disbursement relating hereto (the “Settlement Statement”).
**4.** **DEBTOR**’**S RIGHT TO POSSESSION**. Until default, Debtor may have possession of the tangible property and beneficial use of all the Collateral and may us it in any lawful manner not inconsistent with this Agreement. If Secured Party at any time has possession of any Collateral, whether before or after an Event of Default, Secured Party shall exercise reasonable care in the custody and preservation of the Collateral.
**5.** **EXPENDITURES BY SECURED PARTY**. If not discharged or paid when due, Secured Party may (but shall not be obligated to) discharge or pay any amounts required to be discharged or paid by Debtor under this Agreement, including, without limitation, all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Collateral. Secured Party also may (but shall not be obligated to) pay all costs of insuring, maintaining and preserving the Collateral. All such expenditures incurred or paid, inclusive of attorney’s fees, by Secured Party for such purposes will then bear interest at the rate of twenty percent (20.000%) per annum from the date incurred by Secured Party to the date of repayment by Debtor. All such expenses shall become a part of the Secured Obligations and, at Secured Party’s option, will be payable on demand. This Agreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Secured Party may be entitled upon the occurrence of an Event of Default.
**6.** **EVENTS OF DEFAULT**. Each of the following shall constitute an Event of Default under this Agreement.
**6.1** **Default of Secured Obligations**. Failure of Debtor to pay timely any amounts due and owing under the Note, and/or other Loan Documents; it being expressly understood that time is of the essence with regard to such payments by Debtor to Secured Party.
**6.2** **Other Defaults**. Other than something which would fall within the foregoing Section 6.1, failure of Debtor or Pledgor to comply with or to perform any other term, obligation, covenant or condition contained in the Loan Documents, or in any other agreement between Secured Party and Debtor or Pledgor (or all of them); more particularly, without limitation, failure of Debtor to comply with those Obligations of Debtor set forth in Section 2 of this Agreement; in each case, which failure is not cured within thirty (30) days of the earlier to occur of (i) the date Debtor and/or Pledgor has actual knowledge of such failure or (ii) the date of Debtor’s and/or Pledgor’s receipt of written notice of such failure from Secured Party reasonably specifying such failure.
**6.3** **Defective Collateralization**. This Agreement or the Note ceases to be in full force and effect (including failure of any collateral documents to create a valid and perfected security interest or lien) at any time and for any reason, unless such failure is through no fault of Debtor, and such failure has not been remedied (unless otherwise stated herein) within thirty (30) days of the earlier to occur of (i) the date Debtor and/or Pledgor has actual knowledge of such failure or (ii) the date of Debtor’s and/or Pledgor’s receipt of written notice of such failure from Secured Party reasonably specifying such failure, unless such failure is through no fault of Debtor. Further, an Event of Default shall occur if there is a material adverse change in the Collateral in Secured Party’s sole reasonable determination.
**6.4** **Insolvency**. The adjudicated insolvency of Debtor, the appointment of a receiver for any part of Debtor’s property, any assignment for the benefit of creditors or the commencement of a proceeding under bankruptcy or insolvency laws by or against Debtor, unless dismissed within ninety (90) days.
**6.5** **Creditor or Forfeiture Proceedings**. Commencement of a lawsuit, foreclosure or forfeiture proceedings, whether by judicial proceedings, arbitration, litigation, mediation, self-help, non- judicial sale, repossession or any other method, by any creditor of Debtor’s (including, without limitation, Secured Party), or by any governmental agency against the Collateral or any other property (real or chattel) owned by Debtor or Pledgor, or any endorser, guarantor or co-maker of the Note.
**6.6** **Cessation of Business**. Debtor suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business for a period exceeding fourteen (14) days.
**6.7** **Change of Control**. A change of control shall be deemed to have occurred if any person or group of persons (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934) together with its affiliates, excluding employee benefit plans of Debtor, the shareholders of Debtor as of the effective date hereof, and Secured Party, is or becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934) of securities of Debtor representing 50.000% or more of the combined voting power of Debtor’s then outstanding shares by class.
**6.8** **False Statements**. If any warranty, representation or statement made or furnished to Secured Party by or on behalf of Debtor or Pledgor under any document, agreement or instrument related (directly or indirectly) thereto is false, misleading or fraudulent in any material respect, either now or at the time made or furnished.
**7.** **RIGHTS AND REMEDIES UPON DEFAULT**. If an Event of Default occurs and is continuing under this Agreement, Secured Party shall have all the rights of a secured party under the Georgia Uniform Commercial Code and/or under other applicable law, and all other legal and equitable rights to which Secured Party may be entitled. In addition, and without limitation, Secured Party may exercise any one or more of the following rights and remedies:
**7.1** **Accelerate Secured Obligations**. Secured Party may declare the entire amounts due under the Note, and/or the other Loan Documents, immediately due and payable, upon providing prior written notice and demand to Debtor.
**7.2** **Assemble Collateral**. Secured Party may require Debtor to deliver to Secured Party all or any portion of the Collateral and any and all certificates of title and other documents relating to the Collateral. Secured Party may require Debtor to assemble the Collateral and make it available to Secured Party at a place to be designated by Secured Party. Secured Party also shall have full power to enter upon the property of Debtor to take possession of and remove the Collateral. If the Collateral contains other goods not covered by this Agreement at the time of repossession, Debtor agrees Secured Party may take such other goods, provided that Secured Party makes reasonable efforts to return them to Debtor after repossession.
**7.3** **Sell the Collateral**. Secured Party shall have full power to sell, lease, transfer or otherwise deal with the Collateral or proceeds thereof in its own name or that of Debtor. Secured Party may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, Secured Party will give Debtor reasonable notice of the time after which any private sale or any other intended disposition of the Collateral is to be made unless Debtor has signed, after an Event of Default occurs, a statement renouncing or modifying Debtor’s right to notification of sale. The requirements of reasonable notice shall be met if such notice is given at least seven (7) days before the time of the sale or disposition. All reasonable expenses relating to the disposition of the Collateral, including, without limitation, the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall become a part of the Secured Obligations secured by this Agreement and shall be payable on demand, with interest at the rate of twenty percent (20.000%) per annum from date of expenditure until repaid. Upon any such sale, once the Secured Obligations are fully satisfied, Secured Party will remit the remaining proceeds to Debtor.
**7.4** **Collect Revenues, Apply Accounts**. Secured Party, either itself directly or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Secured Party may at any time in its discretion transfer any Collateral into its own name or that of its nominee and receive the payments, rents, income, and revenues therefrom and hold the same as security for the Secured Obligations or apply it to payment of the Secured Obligations in such order of preference as Secured Party may determine. Insofar as the Collateral consists of accounts, accounts receivable, general intangibles, insurance policies, instruments, chattel paper, choses in action or similar property, Secured Party may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize on the Collateral as Secured Party may determine, whether or not Secured Obligations or Collateral is then due. For these purposes, Secured Party may, on behalf of and in the name of Debtor, receive, open and dispose of mail addressed to Debtor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitate collections, Secured Party may notify account debtors and obligors on any Collateral to make payments directly to Secured Party.
**7.5** **Setoff**. Secured Party shall have the right to immediately seize Collateral of a value reasonably determined to be equal to, but not significantly greater than, the total amounts then owed Secured Party by Debtor under the Note and associated Loan documents for its own account and place the Collateral under its control by transfer to account(s) at Secured Party (or any other place) if an Event of Default shall have occurred and be continuing for thirty (30) days from the earlier to occur of (i) the date Debtor and/or Pledgor has or reasonably should have had knowledge of such failure or (ii) the date of Debtor’s and/or Pledgor’s receipt of written notice of such failure from Secured Party reasonably specifying such failure. After doing so, Secured Party shall reduce the accelerated amount due under the Note commensurate to the value of such seized Collateral.
**7.6** **Obtain Deficiency**. If Secured Party chooses to sell any or all of the Collateral, Secured Party may obtain a judgment against Debtor for any deficiency remaining on the Secured Obligations due to Secured Party after application of all amounts received from the exercise of the rights provided in this Agreement. Upon any such sale, once the Secured Obligations are fully satisfied, Secured Party will remit the remaining proceeds to Debtor.
**7.7** **Appoint Receiver**. To the extent permitted by applicable law, Secured Party shall have the following rights and remedies regarding the appointment of a receiver: (a) Secured Party may have a receiver appointed as a matter of right; (b) the receiver may be an employee of the Secured Party and may serve without bond; and (c) all reasonable fees of the receiver and his or her attorney shall become part of the Secured Obligations secured by this Agreement and shall be payable on demand, with interest at the rate of twenty percent (20.000%) per annum from date of expenditure until repaid.
**7.8** **Other Rights and Remedies**. Secured Party shall have all the rights and remedies of a secured creditor under the provisions of the Georgia Uniform Commercial Code, as may be amended from time to time. In addition, Secured Party shall have and may exercise any or all other rights and remedies it may have available at law, in equity, or otherwise.
**7.9** **Cumulative Remedies**. All of Secured Party’s rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Secured Party to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Debtor under this Agreement, after failure to perform, shall not affect Secured Party’s right to declare a default and to exercise its remedies.
**8.** **MISCELLANEOUS PROVISIONS**.
**8.1** **Amendments**. This Agreement, together with the other Loan Documents representing all Secured Obligations, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
**8.2** **Applicable Law**. This Agreement has been delivered to Secured Party and accepted by Secured Party in the state of Georgia. Georgia law shall apply to this Agreement (without giving effect to its conflicts of law principles). If there is a lawsuit, Debtor agrees, upon Secured Party’s request, to submit to the jurisdiction of the courts of Cobb County, State of Georgia.
**8.3** **Caption Headings**. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.
**8.4** **Notices**. All notices required to be given under this Agreement shall be given in writing and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the addresses provided in the Note. Any party may change its address for notices under this Agreement, as set forth in the Note, by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. To the extent permitted by law, if there is more than one Debtor, notice to any Debtor will constitute notice to all Debtors. For notice purposes, Debtor agrees to keep Secured Party informed at all times of Debtor’s current address(es).
**8.5** **Power of Attorney**. Debtor hereby appoints Secured Party as its true and lawful attorney- in-fact, irrevocably with full power of substitution to do the following: (a) to demand, collect, receive, receipt for, sue and recover all sums of money or other property which may now or hereafter become due, owing, or payable from the Collateral; (b) to execute, sign, and endorse any and all claims, instruments, receipts, checks, drafts or warrants issued in payment for the Collateral; (c) to settle or compromise any and all claims arising under the Collateral, and in the place and stead of Debtor, to execute and deliver its release and settlement for the claim; and (d) to file any claim or claims or to take any action or institute or take part in any proceedings, either in its own name or in the name of Debtor, or otherwise, which in the discretion of Secured Party may seem to be necessary or advisable. This power (a) is given as security for the Secured Obligations, and the authority hereby conferred is and shall be irrevocable and shall remain in full force and effect until renounced by Secured Party (by and through a termination statement or otherwise) and (b) may not be exercised until an Event of Default has occurred.
**8.6** **Preference Payments**. Any monies Secured Party pays because of an asserted preference claim in Debtor’s bankruptcy will become a part of the Secured Obligations and shall be payable by Debtor as provided above in the “EXPENDITURES BY SECURED PARTY” paragraph.
**8.7** **Severability**. If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstances, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances. If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provisions cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable.
**8.8** **Successor Interests**. Subject to the limitations set forth above on transfer of the Collateral, this Agreement shall be binding and insure to the benefit of the parties, their successors, and/or assigns. Notwithstanding the foregoing, Secured Party may only assign this Agreement or its rights hereunder in connection with any assignment of the Note.
**8.9** **Waiver**. Secured Party shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by the Secured Party. No delay or omission on the part of Secured Party in exercising any right shall operate as a waiver of such right or any other right. A waiver of Secured Party of a provision of this Agreement shall not prejudice or constitute a waiver of Secured Party’s right otherwise to demand strict compliance with that provision or any other provisions of this Agreement. No prior waiver of Secured Party, nor any course of dealing between Secured Party and Debtor, shall constitute a waiver of any of Secured Party’s rights or of any Debtor’s obligations as to any future transaction. Whenever the consent of Secured Party in any instance shall not constitute continuing consent to subsequent instance where such consent is required in and all cases such consent may be granted or withheld in the sole discretion of Secured Party, unless otherwise stated herein.
**8.10** **Neutral Interpretation**. This Agreement constitutes the product of negotiation of the Parties hereto and in the enforcement hereof shall be interpreted in a neutral manner, and not more strongly for or against either Party based upon the source of the draftsmanship hereof. Whenever the context so requires, the masculine gender shall include the feminine or neuter, the singular shall include the plural, and vice versa.
**8.11** **Counterparts**. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all such counterparts together shall constitute one and the same instrument. Further, this Agreement, and/or any other applicable Loan Documents, may be executed electronically and carry full force and affect as if it had been signed by hand, pursuant to the Federal Electronic Signatures in Global and National Commerce Act of 2000, as amended and/or supplemented to date.
**8.12** **Termination**. This Agreement shall terminate upon repayment in full of the Debtor’s indebtedness governed by this Agreement and the Loan Documents and not sooner.
**8.13** **Force Majeure**. Notwithstanding anything to the contrary contained herein, neither party shall be liable for any delays or failures in performance under this Agreement and/or the Note resulting from acts beyond its reasonable control including, without limitation, acts of God, acts of war or terrorism, sabotage, civil unrest, supply chain disruption, and/or interruptions or malfunction of computer facilities, mechanical difficulties or other loss of functionality due to power failures. Notwithstanding the foregoing, in the event of such an occurrence, each party agrees to make a good faith effort to perform its obligations hereunder.
**8.14** **Waiver of Jury Trial**. THE DEBTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREIN OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. IT FURTHER WAIVES ANY RIGHT IT MAY HAVE TO SEEK TO CONSOLIDATE ANY SUCH LITIGATION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. FURTHER, THE DEBTOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF SECURED PARTY, NOR THE SECURED PARTY’S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SECURED PARTY WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. THE DEBTOR ACKNOWLEDGES THAT THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT TO SECURED PARTY’S EXECUTION AND ACCEPTANCE OF THIS AGREEMENT AND/OR THE OTHER LOAN DOCUMENTS.
[THIS SECTION INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
DEBTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AND SECURITY AGREEMENT AND AGREES TO ITS TERMS.
**IN WITNESS WHEREOF**, Debtor has signed, sealed and delivered this Agreement as of the effective date first set forth above.
Debtor:
**WAHA TECHNOLOGIES, INC,**
a Georgia profit corporation
By: */s/ Robert C. Bissell* [Corporate Seal]
**Robert C. Bissell, Chairperson**
**of the Board of Directors & C.E.O.**
SECURED PARTY ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AND SECURITY AGREEMENT AND AGREES TO ITS TERMS.
**IN WITNESS WHEREOF**, Secured Party has signed, sealed and delivered this Agreement as of the effective date first set forth above.
Secured Party:
**GC OPPORTUNITIES 2 PRIVATE FUND, LP**,
a Delaware limited partnership
By: */s/ Brendan W. Lake* [Seal]
**Brendan W. Lake,**
**Managing Member of General Partner**
---
## EXHIBIT 10.35
SEC source: [ex_902240.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902240.htm)
**Exhibit 10.35**
**LOAN MODIFICATION AGREEMENT**
This **LOAN MODIFICATION AGREEMENT** (this “Agreement”) is made and entered into as of this 4th day of October, 2022 (the “Effective Date”), by and between **WAHA TECHNOLOGIES, INC.**, a Georgia corporation (“Borrower”), and **GC OPPORTUNITIES 2 PRIVATE FUND, LP**, a Delaware limited partnership (“Lender” and, together with the Borrower, the “Parties”).
**Recitals**
A. Lender previously made a loan to Borrower in the principal amount of $1,849,888.20 (“Loan”), which loan is evidenced and secured by, among other things, (i) that certain Loan and Security Agreement 1-B entered into by and between Borrower and Lender dated effective as of February 15, 2022 (the “Loan Agreement”), and (ii) that certain Interest Only Balloon Note 1-B executed by Borrower in favor of Lender in the principal amount of $1,849,888.20 dated February 15, 2022 (the “Note” and, together with the Loan Agreement and all other documents, agreements, and instruments executed or delivered in connection with, or evidencing, securing, guaranteeing or relating to, the Loan, together with any and all extensions, revisions, modifications, amendments or restatements at any time made to any of the foregoing, are referred to herein collectively as the “Loan Documents”). All capitalized terms used but not otherwise defined herein shall have the meanings ascribed such terms in the Loan Agreement.
B. Borrower is in default under the Note and other Loan Documents for having failed to pay the monthly installments of interest that were due and owing to Lender on July 15, 2022, August 15, 2022 and September 15, 2022 (the “Payment Default”).
C. Borrower has requested that Lender (the “Borrower Requests”) (1) provide a one- time waiver of the Payment Default, and (2) agree to defer the monthly installments of interest that were due and owing on July 15, 2022, August 15, 2022 and September 15, 2022, along with the monthly installments of interest that will be due and owing on October 15, 2022, November 15, 2022, and December 15, 2022 (such six (6) monthly installments being referred to herein, collectively, as the “Deferred Interest Payments”) until the Maturity Date of the Loan on February 15, 2026—which Lender has agreed to subject to the terms and conditions set forth in this Agreement.
D. Borrower acknowledges and agrees that Lender’s agreement to the Borrower Requests on the terms and conditions set forth herein, shall result in a direct and tangible benefit to Borrower.
**Agreement**
NOW, THEREFORE, in consideration of the above Recitals, each of which the Parties acknowledge are true and correct and each of which are incorporated into and made an integral part of this Agreement, and the agreements and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the Parties hereto, the Parties hereby agree as follows:
1. Acknowledgment by Borrower. Borrower acknowledges and agrees as follows:
a. That the Recitals to this Agreement are true, accurate and complete in all material respects, and are contractual and incorporated by reference and made a part of this Agreement. The Loan is in default as a result of the Payment Default, and subject to the agreement of Lender set forth herein, Lender is free to exercise any and all of its rights and remedies under the Loan Documents and applicable law.
b. That as of September 29, 2022, (i) the outstanding principal balance owing under the Note is $1,849,888.20, and the outstanding accrued but unpaid interest owing under the Note is $65,512.83 (with a per diem of $616.63). Borrower acknowledges and agrees that the foregoing amounts remain outstanding and unpaid and are not subject to offset, deduction or counterclaim of any kind or character whatsoever, and are subject to increase as a result of any and all interest, fees and other charges which are or shall become due and payable to Lender under the terms of the Note and other Loan Documents.
c. That in accordance with the terms of the Loan Documents, Borrower is also liable for the payment of all of Lender’s fees and expenses incurred in insuring, maintaining and preserving the Collateral, which fees and costs, whether incurred before or after the Effective Date, constitute additional indebtedness owing under the Loan Documents and secured by the Collateral pledged to Lender under the Loan Documents.
d. That, as of the Effective Date, the Lender’s security interests in and liens on the collateral pledged to Lender under the Loan Documents, and any and all proceeds relating thereto or arising therefrom, are in full force and effect.
2. Waiver of Payment Default. Upon execution hereof by all Parties and Borrower’s satisfaction of the Conditions Precedent (as said term is defined below), Lender hereby grants Borrower a one-time limited waiver solely as to the Payment Default, including the default interest to be charged to Borrower pursuant to Section 2 of the Note (the “Payment Default Waiver”), provided, however, Lender is not waiving the Late Fee (as said term is defined in Section 6(A) of the Note) resulting from the Payment Default in the aggregate amount of $5,549.67, being three (3) Late Fees each in the amount of $1,849.89, which Borrower shall pay to Lender on or before January 15, 2023.
3. Deferred Interest Payments. Upon the Parties’ execution hereof and Borrower’s timely and complete satisfaction of the Conditions Precedent, the Note and other Loan Documents are amended such that Borrower shall not have to pay the Deferred Interest Payments as and when owing under the Note. Borrower shall instead be responsible for paying the Deferred Interests Payments to Lender in a lump sum payment in full on the Maturity Date, in addition to all other indebtedness owing to Lender under the Note and Loan Documents.
4. Collateral Value Reporting. Upon the Parties’ execution hereof, Borrower agrees that the semi-annual collateral valuation reporting required pursuant to Section 2.11(c) of the Loan Agreement, along with any corresponding true-up obligations owing by Borrower to Lender in Section 2.3 of the Loan Agreement on account of such valuation, shall commence on January 1, 2023 (and not March 1, 2023). In conjunction herewith, the Parties acknowledge and agree that the current reference to “Section 2.11(b)” in Section 2.3 of the Loan Agreement is a typo, and agree that “Section 2.11(b)” in Section 2.3 of the Loan Agreement is hereby deleted and replaced with “Section 2.11(c)”.
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5. No Other Modifications; Liabilities Continue in Full and Effect. Except as expressly amended hereby, the terms of the Note and the other Loan Documents (including but not limited to the defaults, Defaults, events of default, or Events of Defaults set forth therein and the rights and remedies of Lender upon the occurrence thereof), and all indebtedness, liabilities and obligations of Borrower to Lender under the Loan Documents, shall remain in full force and effect, shall continue to be secured by (among other things) the Collateral, and shall not be released, impaired, diminished or in any other way modified or amended as a result of the execution and delivery of this Agreement or by the agreements and undertakings of the Parties contained herein. By granting the Payment Default Waiver and the Deferred Interest Payments as provided herein, Lender is not in any other way waiving or releasing the Loan Documents or any obligations owing by Borrower thereunder, and granting the Payment Default Waiver and the Deferred Interest Payments as provided herein shall not establish a course of dealing or otherwise indicate any willingness on behalf of Lender to waive any other or future Default or Event of Default or defer any other or future obligations under the terms of the Loan Documents.
6. Collateral.
a. Grant/Re-Grant of Lien; Further Assurances. Borrower acknowledges, agrees and ratifies that **Exhibit** “**A**” attached hereto is part of Exhibit “A” as referenced in Section 1.2 of the Loan Agreement setting forth the Equipment that serves as part of the Collateral pledged by Borrower to Grantor as security for the Loan. Borrower hereby grants, bargains, sells, transfers, assigns, sets over, conveys, re-grants, re-bargains, re-sells, re-transfers, re-assigns, re-sets over and re-conveys to Lender, its successors and assigns, a lien and security interest in all of Borrower’s right, title and interest in and to the Collateral as security for the indebtedness and obligations owing under the Loan Documents. Borrower agrees to execute, or cause to be executed, any documents that Lender deems necessary, in Lender’s sole and complete discretion, to perfect or continue Lender’s security interests in and to the Collateral.
b. No Transfer of Collateral. Except as expressly provided herein or in any of the other Loan Documents, no legal or equitable title or interest in any Collateral shall be transferred, conveyed, pledged, or otherwise assigned until all obligations of Borrower to Lender have been fully paid and satisfied, unless Lender shall consent in writing prior to such transfer.
c. Access to Collateral. Borrower agrees to provide Lender with immediate access to the Collateral within two (2) business days of receiving written request for such access by Lender, for purposes of appraisals, inspection, or any other purpose. Without limiting the foregoing, if at any time Lender in its sole discretion believes in good faith that (i) the market value of the Collateral may have declined below the appraised value utilized by Lender at the time of the original loan closing date or any renewal thereof, or (ii) any applicable law or regulation requires Lender to obtain a current appraisal, Lender may obtain at Borrower’s sole cost and expense, a current appraisal of the Collateral to be ordered by Lender from an appraiser designated by Lender, which shall be in a form and containing the content required by Lender. Borrower shall cooperate fully with each such appraiser and provide all documents and information as such appraiser may request in connection with such appraiser’s performance and preparation of its appraisal. Without limiting any other provision herein, Borrower’s failure to promptly and fully comply with Lender’s requirements under this paragraph shall, without further notice, constitute a default, Default, event of default, and Event of Default under this Agreement and all other Loan Documents.
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7. Conditions Precedent. Notwithstanding anything to the contrary herein, the obligations of Lender hereunder and the enforceability of the terms and conditions of this Agreement against Lender are conditioned expressly upon the satisfaction of the following conditions on or before the Effective Date (collectively, the “Conditions Precedent”):
a. Borrower shall have delivered, or caused to be delivered, to Lender:
i. this Agreement duly executed by Borrower;
ii. evidence satisfactory to Lender, in Lender’s sole discretion, that Borrower has been released of all indebtedness and obligations owing by Borrower to Turning Rock Fund I-IX LLC (and the lender parties on whose behalf it acts/acted as administrative agent), including, without limitation, all indebtedness and obligations owing by Borrower pursuant to that certain Credit Agreement entered into by and between Borrower, the lender parties thereto, and Turning Rock Fund I-IX LLC, as administrative agent, dated May 26, 2021, as the same may have been amended or modified from time to time, and that all UCC-1 Financing Statements filed by Turning Rock Fund I-IX LLC in connection therewith (including, without limitation, Georgia Filing No. 0332021-02308) have been released and terminated;
iii. evidence satisfactory to Lender, in Lender’s sole discretion, that the UCC-1 Financing Statements filed by Maverick Leasing Partners, LLC (Filing Nos. 157- 2021-000195 and 0332021-02934) have been released and terminated;
iv. an Acknowledgment of Lien Priority and Subordination in form attached hereto as **Exhibit** “**B**” duly executed by Alder Opportunity, LP and Alder Mortgage Group, LLC, on behalf of themselves and all lender parties for which they serve as administrative agent or servicer, recognizing that Lender has a first-priority lien in and to the Collateral and, for the avoidance of doubt, subordinating any and all liens they may have in and to the Collateral to Lender’s liens on the Collateral (the “Alder Acknowledgment”);
v. such other evidence, as determined by Lender in its sole discretion, demonstrating that Lender has a first-priority, perfected security interest in the Collateral; and
vi. an incumbency certificate signed on behalf of Borrower authenticating and attaching resolutions signed by all directors of Borrower, which authorize the execution, delivery, and performance of this Agreement and all other documents required to be executed by Borrower under the terms and conditions of this Agreement; and
b. Borrower shall have paid to Lender the attorneys’ fees and costs incurred by Lender in the amount of $2,935.25 as a result of Borrower’s default;
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c. All documents and instruments executed and delivered in connection with this Agreement shall be satisfactory in form and substance to Lender and its counsel (at Lender’s sole discretion); and
d. All representations and warranties of Borrower to Lender set forth in this Agreement and the other Loan Documents shall be accurate and complete in all material respects on and as of the Effective Date, and the Borrower shall be in full compliance with all covenants contained in this Agreement and the other Loan Documents on and as of the Effective Date (with the sole exception of the Payment Default as addressed herein).
8. Reaffirmation of Loan Documents and Loan Obligations. Subject only to the modifications provided for in this Agreement, no action of Lender under this Agreement or otherwise shall act to release Borrower from any obligations to Lender under any of the Loan Documents, and the Loan Documents and obligations thereunder are hereby ratified and affirmed the same as if repeated on this date, and Borrower hereby acknowledges and agrees that no defenses or offsets exist with respect to said obligations. Borrower hereby ratifies and confirms that, except to the extent modified according to the terms of this Agreement, all terms and conditions of the Loan Documents remain in full force and effect and constitute the legal, valid and binding obligations of Borrower enforceable in accordance with the terms stated therein. Borrower promises and agrees to pay the indebtedness evidenced by the Note in accordance with the terms thereof and agrees to perform all of the requirements, conditions and obligations under the terms of the Note and all other Loan Documents (as amended hereby).
9. No Set-offs, Counterclaims, etc. Borrower acknowledges and agrees that there are no offsets or defenses to payment of the obligations evidenced by the Note and the other Loan Documents, as each are hereby amended, and hereby waives any defense, claim or counterclaim of the Borrower regarding the obligations of the Borrower under the Note and the other Loan Documents, as each are hereby amended.
10. Representations and Warranties. Except for the Payment Default, Borrower represents and warrants to Lender that there are no conditions of default or facts or consequences which will or could lead to a default under the obligations due from Borrower under the Note and the other Loan Documents, as each are amended hereby. Borrower further represents and warrants to Lender that all representations of Borrower in the Note and the other Loan Documents are true and correct on the Effective Date, as if made on the Effective Date.
11. One-Time Waiver of Payment Default; No Waiver of any Other Present or Future Defaults. Upon Borrower’s timely and complete satisfaction of the Conditions Precedent, Lender agrees to a one-time waiver of the Payment Default. With the sole exception of Lender’s one-time waiver of the Payment Default upon Borrower’s timely and complete satisfaction of the Conditions Precedent, Borrower acknowledges and agrees that Lender is in no way waiving any existing or future defaults, Defaults, events of default, or Events of Default under the Loan Documents, nor its rights to exercise its remedies under the Loan Documents in case of such defaults, Defaults, events of default, or Events of Default. Without limiting the foregoing, no delay or failure on the part of Lender in the exercise of any right, power or privilege granted under the Loan Documents, or available at law or in equity, shall impair any such right, power or privilege or be construed as a waiver of any default, Default, event of default, or Event of Default under the Loan Documents, or acquiescence therein; and no single or partial exercise of such right, power or privilege shall preclude the further exercise of such right, power or privilege. No waiver shall be valid against Lender unless made in writing and signed by Lender, and then only to the extent expressly specified therein.
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12.**Release****. In consideration of the Lender entering into this Agreement, and without any contingency, precondition or condition subsequent, Borrower, for itself and on behalf of its agents, representatives, employees, contractors, attorneys, members, directors, officers, trustees, affiliates, parents, subsidiaries, successors and assigns (collectively, the** “**Borrower Releasors**”**), hereby jointly and severally and fully and forever releases, relinquishes, discharges, settles, and compromises any and all claims, cross-claims, counterclaims, causes, damages and actions of every kind and character, and all suits, costs, damages, expenses, compensation and liabilities of every kind, character and description, whether direct or indirect, known or unknown, disclosed or hidden, in law or in equity, which Borrower or any of the Borrower Releasors had, have or will have against the Lender and/or the Lender**’**s past, present and future agents, representatives, employees, contractors, attorneys, directors, officers, trustees, affiliates, parents, subsidiaries, general partners, limited partners, stockholders, successors and assigns (collectively, the** “**Lender Releasees**”**), on account of, arising, or resulting from, or in any manner incidental to, any and every thing or event occurring or failing to occur at any time in the past up to and including the Effective Date, including, without limitation, any claims relating to the Loan, this Agreement, the Note and the other Loan Documents (as each are hereby amended), any act or event relating to the Lender**’**s administration of the Loan, and/or any other transaction contemplated by this Agreement, the Note or any other Loan Document (as each are hereby amended). The provisions of this paragraph shall be binding upon Borrower and its successors and assigns, and shall inure to the benefit of Lender and its successors and assigns. In addition to, and without limiting the foregoing, Borrower, on behalf of itself and its successors and assigns, hereby absolutely, unconditionally and irrevocably, covenants and agrees not to sue (at law, in equity, in any regulatory proceeding or otherwise) Lender or any other party released in this paragraph on the basis of any claim released, remised and/or discharged pursuant to this paragraph. The provisions of this paragraph shall survive the payment and satisfaction of the obligations owing on the Loan and under the Loan Documents.**
13. Attorneys’ Fees and other Expenses of Lender. If and to the extent not provided for in the Note and other Loan Documents, Borrower acknowledges and agrees that Borrower shall be liable for the payment of all of Lender’s reasonable attorneys’ fees and expenses and other collection costs incurred in connection with the enforcement of the Loan Documents. Borrower further acknowledges and agrees that all such fees, costs and expenses shall be immediately due and owing to Lender as and when incurred, shall constitute additional indebtedness owing under the Loan Documents, and shall be secured by the Collateral.
14. Financial Statements. In addition to complying with all reporting requirements contained in the Loan Documents, commencing November 1, 2022, and continuing on the same day of each month thereafter until all indebtedness owing under the Loan Documents has been paid, Borrower shall provide current and updated financial statements to Lender, including, without limitation, profit and loss statements, cash flow statements, and balance sheets. Without limitation of the foregoing, Borrower shall deliver to Lender such financial information as Lender may reasonably request from time to time, including, without limitation, updated financial statements, tax returns and other information pertaining to Borrower’s financial condition, and such information shall be true, complete, and accurate and in form and substance satisfactory to Lender at its sole and complete discretion.
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15. No Further Commitment or Course of Dealing. Borrower expressly acknowledges and agrees that (a) Lender has not made and is not making any commitment for, and that there is no understanding, explicit or implicit, relating to or affecting, financing for any time beyond the Effective Date, (b) Lender has made no commitment with respect to, and there is no understanding, explicit or implicit, relating to or affecting the terms of any future reinstatement, extension or modification of the Loan or the Loan Documents, and (c) no course of dealing exists that would require the Lender to extend the obligations set forth in this Agreement or the other Loan Documents.
16. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the parties hereto.
17. Governing Law. This Agreement shall be subject to the same the laws of the State of Georgia, without giving effect to its conflicts of law principles.
18.**Waiver of Jury Trial****. Each Party hereby irrevocably and unconditionally waives any and all right to trial by jury in any action, suit or counterclaim arising in connection with, out of or otherwise relating to this Agreement, the Loan, the Note and other Loan Documents (as each are hereby amended), and the performance of the provisions hereof and thereof, whether sounding in contract, tort or otherwise.**
19. Counterparts. This Agreement may be executed in any number of counterparts, with PDF or facsimile signatures, with the same effect as if all of the Parties hereto had signed the same document. All counterparts shall be construed together and shall constitute one agreement. Absent an original signature, it is hereby understood and agreed that a PDF or facsimile signature shall be binding upon the Parties and otherwise admissible under the Best Evidence Rule.
20. Advice of Counsel. Borrower represents to Lender that it has discussed this Agreement with counsel, or has had the opportunity to discuss this Agreement with counsel and has elected not to do so, and that it fully understands the terms hereof, and that it has not relied upon any representation or statement of Lender in regards thereto.
21. Construction. Each Party acknowledges that it has participated in the negotiation of this Agreement and no provision of this Agreement shall be construed against or interpreted to the disadvantage of any Party hereto by any court or other governmental or judicial authority by reason of such Party having or being deemed to have structured, dictated or drafted such provision. All terms of this Agreement were negotiated at arms-length, and this Agreement was prepared and executed without fraud, duress, undue influence or coercion of any kind exerted by any of the Parties upon the other. The execution and delivery of this Agreement is the free and voluntary act of the Parties.
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22. Subheadings. Paragraph or other headings contained in this Agreement are for reference purposes only and are not intended to affect in any way the meaning or interpretation of this Agreement.
23. Entire Agreement. This Agreement constitutes the entire agreement of the Parties with respect to the subject matter hereof and contains all of the terms agreed upon among the Parties with respect to the subject matter hereof. This Agreement supersedes all prior oral and written (and all contemporaneous oral) negotiations, discussions, writings and agreements relating to the subject matter of this Agreement as a complete and final integration thereof. This is a fully integrated agreement. This Agreement may not be altered or modified by oral agreement or representation or otherwise, except by a writing of subsequent date hereto signed by all parties in interest at the time of the alteration or modification.
24. Authority of Borrower. Borrower represents and warrants to Lender that: (i) Borrower is a corporation organized, validly existing, and in good standing under the laws of the State of Georgia; (ii) there have been no changes in the organization, composition, ownership structure or formation documents of the Borrower or its direct or indirect members since the closing of the Loan, and Borrower has the power and authority to execute, deliver and perform this Agreement, and all other documents required to be executed by Borrower under this Agreement, and the same have been duly executed and delivered by Borrower; (iii) this Agreement, and all other Loan Documents to which Borrower is a party, constitute valid and legally binding obligations of Borrower, enforceable in accordance with the respective terms stated therein; (iv) the execution, delivery and performance by Borrower of this Agreement and all other Loan Documents to which Borrower is a party, will not and did not, violate, conflict with, or constitute any default under any law (including laws relating to usury), government regulation, or any other agreement or instrument binding upon Borrower; and (v) no approval, authorization or other action by, or filing with, any governmental official, board or authority is required in connection with the execution and delivery of this Agreement, or any of the other Loan Documents to which Borrower is a party, and the performance of the provisions thereof, except such approvals and authorizations as have been received, such actions as have been taken, and such filings as have been made.
**[SIGNATURES FOLLOW ON THE NEXT PAGE]**
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**IN WITNESS WHEREOF**, Lender and Borrower have caused this Agreement to be executed by their respective duly authorized representatives, all as of the date first set forth above.
**BORROWER:**
**WAHA TECHNOLOGIES, INC.**, a Georgia
corporation
- By: */s/ Robert C. Bissell*
- Name: Robert C. Bissell
Title: Authorized Officer
**LENDER:**
**GC OPPORTUNITIES 2 PRIVATE FUND,**
**LP**, a Delaware limited partnership
By: */s/ Todd Jones*
Name: Todd Jones Title: CIO
---
## EXHIBIT 10.36
SEC source: [ex_902241.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902241.htm)
**Exhibit 10.36**
**INTEREST ONLY BALLOON NOTE**
Fixed Rate | 1-Year Term
**THIS LOAN HAS A BALLOON FEATURE AND IS NOT FULLY AMORTIZED. AT MATURITY, BORROWER MUST REPAY THE ENTIRE REMAINING PRINCIPAL BALANCE OF THE LOAN AND ANY UNPAID INTEREST THEN DUE. LENDER IS UNDER NO OBLIGATION TO REFINANCE THIS LOAN AT THAT TIME. THEREFORE, BORROWER WILL BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS OWNED OR WILL HA VE TO FIND A LENDER, WHICH MAY BE THE LENDER UNDER THIS NOTE, WILLING TO LEND THE MONEY. IF BORROWER REFINANCES THIS LOAN AT MATURITY, BORROWER MAY HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN, EVEN IF REFINANCING IS OBTAINED FROM THE SAME LENDER.**
**April 14, 2022**
(the “Effective Date”)
**WAHA TECHNOLOGIES, INC**,
a Georgia profit corporation
(“Borrower”)
**1.** **PRINCIPAL**
Borrower hereby makes this Interest Only Balloon Note (this “Note”) in return for a loan Borrower has received in the amount **Five Million & 00/100** U.S. Dollars (U.S. **$5,000,000.00**) (the “Principal”). Borrower promises to pay all Principal, plus any and all fees/charges and accrued interest thereon, each as hereinafter provided, to ALDER MORTGAGE GROUP, LLC, a Georgia limited liability company (“Holder”).
Borrower acknowledges that Holder is acting as servicer of this Note, and the Principal will be provided by one or more co-lenders. Holder may enter into any agreements with such co-lenders as Holder, in its sole discretion, determines to be necessary and/or desired. Further, Borrower acknowledges that servicer may transfer the servicing rights in this Note to any person(s) or entity(ies) upon providing thirty (30) days’ prior written notice thereof to Borrower; provided, however, Holder may not transfer the servicing rights in this Note to any person or entity who or which is or could reasonably be expected to conduct business relating to the cryptocurrency market or any person or entity who or which provides or could reasonably be expected to provide products and/or services that are competitive with those provided by Borrower, or any affiliate of any of the foregoing, in Holder’s sole reasonable determination.
**2.** **INTEREST**
Interest will begin accruing on advanced Principal on the date Holder advances to Borrower such Principal, or any portion thereof, from time to time as the case may be, as set forth on Exhibit “A” being attached hereto and incorporated herein by reference thereto. Interest will be charged at an annual rate of **twelve percent (12.000%)** on all advanced Principal until such Principal has been paid. Interest under this Note will be calculated on the basis of a 360-day year, consisting of twelve (12) months of thirty (30) days each (“30/360 Basis”); any and all proration calculations under this Note will be based on the 360-day per diem multiplied by the actual number of days elapsed.
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The rate of interest required by this Section 2 of this Note is the rate Borrower will pay before any default described in this Note and/or any other Loan Documents. After any such default, Borrower will pay default interest at an annual rate of twenty-four percent (24.000%).
**3.** **PAYMENTS**
**(A)** **Time, Amount and Place**
Monthly interest only payments will be due from Borrower under this Note in arears beginning **June 01, 2022** and will continue monthly on the **first (1st)** day of each subsequent month for the duration of this Note.
Borrower will make any and all payments under this Note, which includes any Prepayments and final balloon payment due upon the Maturity Date of this Note, in the form of electronic funds transfer, certified check or money order payable to Holder at **3600 Dallas Highway, Suite 230-350, Marietta, GA 30064**, or at a different place if directed by Holder in writing.
**(B)** **Loan Maturity**
If on **May 01, 2023** (the “Maturity Date”) Borrower still owes any amounts under this Note, Borrower will immediately pay all such amounts to Holder, for the benefit of Holder, in the form of a final balloon payment.
**4.** **PREPAYMENT**
A payment of Principal only is known as a “Prepayment.” Borrower has the right to make payments of Principal at any time before they are due without paying any Prepayment charge. When Borrower makes a Prepayment, Borrower must notify Holder in writing of Borrower’s intent to prepay.
Holder will use any such Prepayment(s) to reduce the amount of Principal that Borrower then owes under this Note. However, Holder may apply any such Prepayment(s) to the accrued and unpaid fees/charges and interest before applying the Prepayment to reduce the Principal amount due under this Note. Unless agreed to in writing by Holder, no Prepayment will alter the date of any future payment due under this Note.
**5.** **FAILURE TO PAY AS REQUIRED**
**(A)** **Late Charge for Overdue Payments**
If any monthly payment due under this Note is not received by Holder within **ten (10)** calendar days after its due date, Borrower shall pay to Holder a “Late Charge” equal to **ten percent (10.000%)** of each such past-due monthly interest only payment.
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**(B)** **Defaults and Remedies**
(1) **Events of Default**. Each of the following shall constitute an event of default under this Note (an “Event of Default”):
(i) **Covenants**. A default by Borrower in the performance of any term, obligation, covenant or condition contained in this Note or any other agreement or document executed by Borrower, and/or any Guarantor, and/or any other natural persons or entities associated therewith, for the benefit of Holder (collectively, the “Loan Documents”); and
(ii) **Payments**. Failure of Borrower to make timely payment of any amounts due under the Loan Documents, it being expressly understood that time is of the essence under the Loan Documents with respect to Borrower’s payments required thereunder.
(2) **Remedies**. Upon the occurrence of an Event of Default, in addition to all other rights and remedies available to Holder under the Loan Documents and applicable law, Holder shall particularly have the following rights and remedies:
(i) **Acceleration**. Holder, in its sole discretion and without notice or demand, may declare the entire Principal balance outstanding under this Note, plus accrued interest hereunder and all other amounts owed, immediately due and payable, and reference is hereby made to the Loan Documents for further and additional rights on the part of Holder to declare the entire Principal balance outstanding under this Note, plus accrued interest and all other amounts owed, immediately due and payable; and
(ii) **Default Interest Rate**. Holder, in its sole discretion and without notice or demand, may raise the rate of interest accruing on the Principal balance outstanding under this Note to the lesser of (a) the rate of interest set forth in Section 2 of this Note, or (b) the maximum rate of interest that Holder may charge under applicable law, independent of whether Holder elects to accelerate the Principal balance outstanding under this Note.
**(C)** **No Waiver by Holder**
Even if, at a time when Borrower is in default, Holder does not require Borrower to pay immediately in full as described above, Holder will still have the right to do so if Borrower is in default at a later time.
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**6.** **OBLIGATIONS OF PERSONS AND/OR ENTITIES UNDER THIS NOTE**
If more than one natural person and/or entity signs this Note, each is fully and individually obligated to keep all of the promises made in this Note, including, without limitation, the promise to pay the full amount owed; such parties being jointly and severally liable under this Note. Any person and/or entity who, under this Note or by virtue of an associated guaranty, surety or endorsement of this Note, becomes a Guarantor, Surety and/or Endorser of this Note, is also obligated to do these things, as such terms shall be interchangeable with Borrower as used herein. Any person and/or entity who takes over these obligations, including the obligations of Borrower, a Guarantor, Surety or Endorser of this Note, is also obligated to keep all of the promises made in this Note. Holder may enforce its rights under this Note against each person and/or entity individually or against all such parties together. This means that any one of such parties may be required to pay all of the amounts owed under this Note, whether a natural person or an entity.
**7.** **GIVING OF NOTICES**
Unless applicable law requires a different method, any notice that must be given to Borrower under this Note will be given to Borrower to **WAHA TECHNOLOGIES, INC, Attn: Cathy Holbrook at 2146 Roswell Road, #108-851, Marietta, GA 30062**, or at a different address if Borrower gives Holder written notice of a different address.
Any notice that must be given to Holder under this Note will be given to Holder at the notice address provided in Section 3(A) of this Note, or at a different address if Holder gives Borrower written notice of a different address.
**8.** **GOVERNING LAW AND LOAN CHARGES**
This Note shall be governed by and construed under the applicable laws of the State of Georgia, without regard to choice of law principles. If a law, which applies to this Note and which sets maximum loan charges and/or fees, is finally interpreted so that the interest or other loan charges and/or fees collected or to be collected in connection with this Note exceed the permitted limits, then: (a) any such loan charge and/or fee shall be reduced by the amount necessary to reduce such charges and/ or fees to the permitted limit; and (b) any sums already collected from Borrower that exceeded permitted limits will be refunded to Borrower. Holder may choose to make such refund by reducing the Principal Borrower owes under this Note or by making a direct payment to Borrower. If a refund reduces Principal, the reduction will be treated as a partial Prepayment per Section 4 of this Note.
**9.** **WAIVERS**
Borrower and any other natural person and/or entity that has obligations under this Note waive the rights of Presentment and Notice of Dishonor. “Presentment” means the right to require Holder to demand payment of amounts due. “Notice of Dishonor” means the right to require Holder to give notice to other persons and/or entities that amounts due have not been paid.
**10.** **SECURED NOTE**
This Note is a secured instrument. In addition to the protections given to Holder under this Note, one or more of a Security Deed, Deed of Trust, Mortgage, Limited Warranty Deed, Guaranty Agreement, Loan Agreement, Security Agreement, Collateralization Agreement and/or Pledge Agreement (each a “Security Instrument;” collectively, the “Security Instruments”), executed in favor of Holder and/or Holder, protects Holder from possible losses that might result if Borrower does not keep the promises made in the Loan Documents.
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**IN WITNESS WHEREOF**, Borrower has signed, sealed and delivered this Note as of the Effective Date first set forth above.
Borrower:
**WAHA TECHNOLOGIES, INC.**
By: */s/ Robert C. Bissell* [Corp. Seal]
**Robert C. Bissell, Director & C.E.O.**
[*Sign Original Only*]
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---
## EXHIBIT 10.37
SEC source: [ex_902242.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902242.htm)
**Exhibit 10.37**
Agreement between Ian Gerard and The Cloud Minders, LLC
LINE OF CREDIT AGREEMENT
THIS AGREEMENT is made this 31st day of December 2021, by and between Ian Gerard (hereinafter “Lender”) and The Cloud Minders, LLC (hereinafter “Borrower”).
1. LINE OF CREDIT
Subject to the terms and conditions of this Agreement, Lender agrees to extend a line of credit to Borrower up to the maximum principal amount of eight hundred thousand Dollars ($800,000). The borrower may borrow, repay, and re-borrow amounts under this line of credit, at any time and from time to time, provided that the total outstanding principal amount at any time shall not exceed the maximum principal amount.
2. INTEREST
The outstanding principal amount of the line of credit shall bear interest at a rate of five percent (5%) per annum.
3. REPAYMENT
Borrower shall repay the outstanding principal amount of the line of credit, and any accrued and unpaid interest thereon, on or before December 31st, 2024.
4. DEFAULT
If Borrower fails to repay the line of credit as required by this Agreement, Lender may declare the entire outstanding principal amount of the line of credit, and any accrued and unpaid interest thereon, to be immediately due and payable.
5. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of the state of Kentucky.
IN WITNESS WHEREOF, the parties have executed this Line of Credit Agreement as of the date first above written.
*/s/ Ian Gerard* */s/ Ian Gerard*
Ian Gerard
Lender Ian Gerard
CEO
The Cloud Minders, Inc.
Borrower
---
## EXHIBIT 10.38
SEC source: [ex_902243.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_902243.htm)
**Exhibit 10.38**
**Amendment 1 to Line of Credit Agreement between Ian Gerard and The Cloud Minders, Inc**
This Amendment 1 (“**Amendment 1**”) is made and entered into on December 18, 2024, by and between Ian Gerard (“**Lender**”) and The Cloud Minders, Inc (“**Borrower**”), collectively referred to as the “Parties”.
**WHEREAS**, the Parties entered into a Line of Credit Agreement dated December 31, 2021 (the “Agreement”); and
**WHEREAS**, the Parties wish to amend the Agreement to extend its term and provide for potential further extensions;
**NOW, THEREFORE**, in consideration of the mutual covenants and agreements hereinafter set forth, the Parties agree as follows:
1. **Extension of Agreement Term**
Section 3 of the Agreement is hereby amended and restated in its entirety as follows:
**“3. REPAYMENT**
Borrower shall repay the outstanding principal amount of the line of credit, and any accrued and unpaid interest thereon, on or before March 31, 2025 (the “**Extended Term**”).”
2. **All Other Terms Remain in Effect**
Except as expressly modified by this Amendment 1, all other terms and conditions of the original Agreement shall remain in full force and effect.
3. **Entire Agreement**
This Amendment 1 and the original Agreement constitute the entire understanding between the Parties with respect to the subject matter hereof.
**IN WITNESS WHEREOF**, the Parties have executed this Amendment 1 as of the date first above written.
*/s/ Ian Gerard* */s/ Ian Gerard*
Ian Gerard
Lender Ian Gerard
CEO
The Cloud Minders, Inc.
Borrower
---
## EXHIBIT 10.40
SEC source: [ex_903269.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903269.htm)
**Exhibit 10.40**
**GLOBAL DIGITAL HOLDINGS, INC.**
**2022 OPTION PLAN**
1.**Purpose and Term**. The name of this plan is the Global Digital Holdings, Inc. 2022 Option Plan (the “**Plan**”). The purposes of the Plan are to (a) enable Global Digital Holdings, Inc., a Georgia corporation (the “**Company**”), to attract, retain and motivate the types of Employees, Consultants and Directors who will contribute to the Company’s long range success; (b) provide incentives that align the interests of Employees, Consultants and Directors with those of the shareholders of the Company; and (c) promote the success of the Company’s business. The term of this Plan shall be ten (10) years from the Effective Date, after which time, no further Awards may be granted under this Plan.
2.**Definitions**.
“**Affiliate**” means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company (within the meaning of the Exchange Act).
“**Applicable Laws**” means the requirements related to or implicated by the administration of the Plan under applicable state corporate law, United States federal and state securities laws, the Code and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.
“**Award**” means any right granted under the Plan, including an Incentive Stock Option or a Non-Qualified Stock Option.
“**Award Agreement**” means a written agreement, contract, certificate or other instrument or document evidencing the terms and conditions of an individual Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically to any Participant. Each Award Agreement shall be subject to the terms and conditions of the Plan.
“**Board**” means the Board of Directors of the Company, as constituted at any time.
“**Cause**” means, unless the applicable Award Agreement provides otherwise:
(a) with respect to any Employee or Consultant:
(i) if the Employee or Consultant is a party to an employment or service agreement with the Company or an Affiliate and such agreement provides for a definition of “cause,” then the definition contained therein; or
(ii) if no such agreement exists, or if such agreement does not define “cause,” the occurrence of any of the following events:
(A) commission of, or plea or guilty or no contest to, a felony or a crime involving fraud, dishonesty, moral turpitude under the laws of the United States or any state thereof or the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or an Affiliate;
(B) failure to perform duties as reasonably requested by the Board;
(C) material breach of any agreement with the Company or an Affiliate, or a material violation of the Company’s or an Affiliate’s code of conduct or other written policy;
(D) unauthorized use or disclosure of the Company’s or an Affiliate’s confidential or proprietary information or trade secrets;
(E) use of illegal drugs or abuse of alcohol that materially impairs the Participant’s ability to perform his or her duties to the Company;
(F) gross negligence or willful misconduct with respect to the Company or an Affiliate;
(G) fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion; or
(H) any other conduct or act determined to be materially injurious, detrimental or prejudicial to any interest of the Company or any of its Affiliates, as determined by the Committee in its sole discretion; or
(b) with respect to any Director, a determination by a majority of the disinterested Board members that the Director has engaged in any of the following:
(i) malfeasance in office;
(ii) gross misconduct or neglect;
(iii) false or fraudulent misrepresentation inducing the Director’s appointment;
(iv) willful conversion of corporate funds; or
(v) repeated failure to participate in Board meetings on a regular basis despite having received proper notice of the meetings in advance.
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The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant has been discharged for Cause. Any determination by the Company that a Participant’s status as a service provider was terminated by reason of dismissal without Cause for the purpose of Awards granted hereunder shall have no effect upon any determination of the rights or obligations of the Company, any Affiliate or such Participant for any other purpose.
“**Change in Control**” means:
(a) One Person (or more than one Person acting as a group) acquires ownership of stock of the Company that, together with the stock held by such Person or group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company; provided, that, a Change in Control shall not occur if any Person (or more than one Person acting as a group) owns more than fifty percent (50%) of the total fair market value or total voting power of the Company’s stock and acquires additional stock;
(b) One Person (or more than one Person acting as a group) acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition) ownership of the Company’s stock possessing thirty percent (30%) or more of the total voting power of the stock of such corporation;
(c) A majority of the members of the Board is replaced during any twelve-month period by Directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election; or
(d) One Person (or more than one Person acting as a group), acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition) assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the Company immediately before such acquisition(s).
Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless such transaction qualifies as a Change in Control event within the meaning of Section 409A. Further, and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the jurisdiction of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the Persons who held the Company’s securities immediately before such transaction.
“**Clawback Event**” has the meaning given to such term in Section 10.6.
“**Code**” means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.
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“**Committee**” means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with Section 3.4 and Section 3.5; *provided, however,* that if no Committee has been appointed by the Board, the “Committee” shall be the Board.
“**Common Stock**” means the common stock of the Company.
“**Company**” has the meaning set forth in Section 1.
“**Consultant**” means any individual who is engaged by the Company or any Affiliate to render consulting or advisory services, whether or not compensated for such services.
“**Continuous Service**” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Consultant or Director, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Participant renders such service, *provided, however,* that there is no interruption or termination of the Participant’s Continuous Service; *provided further* that if any Award is subject to Section 409A, this sentence shall only be given effect to the extent consistent with Section 409A. For example, a change in status from an Employee of the Company to a Director of an Affiliate will not constitute an interruption of Continuous Service. The Committee or its delegate, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal or family leave of absence.
“**Director**” means a member of the Board.
“**Disability**” means, unless otherwise provided in an Award Agreement, a Participant being considered “disabled” within the meaning of Code Section 409A(a)(2)(C) and the regulations thereunder.
“**Disqualifying Disposition**” has the meaning set forth in Section 6.11.
“**Effective Date**” shall mean the date as of which this Plan is adopted by the Board.
“**Employee**” means any person, including an officer or Director, employed by the Company or an Affiliate; *provided, however,* that for purposes of determining eligibility to receive Incentive Stock Options, an Employee shall mean an employee of the Company or a parent or subsidiary corporation within the meaning of Code Section 424. Mere service as a Director or payment of a Director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
“**Exchange Act**” means the Securities Exchange Act of 1934, as amended, and any successor thereto.
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“**Fair Market Value**” means, on a given date, (a) if there is a public market for the shares of Common Stock on such date, the closing price of the shares as reported on such date on the principal national securities exchange on which the shares are listed or, if no sales of shares have been reported on any national securities exchange, then the immediately preceding date on which sales of the shares have been so reported or quoted, and (b) if there is no public market for the shares of Common Stock on such date, then the fair market value shall be the fair market value of such shares as determined by the Committee in its discretion, and to the extent deemed appropriate by the Committee, based upon a recent transaction price per share or third-party valuation of the Common Stock and, to the extent necessary, shall be determined in a manner consistent with Section 409A and Treasury Regulation 1.409A-1(b)(5)(iv), as well as any successor regulation or interpretation.
“**Grant Date**” means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award to a Participant that specifies the key terms and conditions of the Award or, if a later date is set forth in such resolution, then such date as is set forth in such resolution.
“**Incentive Stock Option**” means an Option intended to qualify as an incentive stock option within the meaning of Code Section 422 and the regulations thereunder.
“**Involuntary Transfer**” means a transfer of a Participant’s Common Stock by operation of law including, without limitation, as a result of (a) a sale or other disposition by a trustee or debtor in possession appointed or retained in a bankruptcy case, (b) a sale at any creditors’ or judicial sale, or (c) a transfer arising out of a divorce or separation proceeding.
“**Non-Qualified Stock Option**” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
“**Option**” means an Incentive Stock Option or a Non-Qualified Stock Option granted pursuant to the Plan.
“**Option Exercise Price**” means the price at which a share of Common Stock may be purchased upon the exercise of an Option.
“**Optionholder**” means a Person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
“**Participant**” means an eligible Person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.
“**Person**” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).
“**Plan**” has the meaning set forth in Section 1.
“**Section 409A**” means Code Section 409A.
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“**Shareholders**’ **Agreement**” means the Shareholders’ Agreement by and among the Company and its shareholders, as may be in effect from time to time.
“**Ten Percent Shareholder**” means a Person who owns (or is deemed to own pursuant to Code Section 424(d)) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.
3.**Administration**.
3.1**Authority of Committee**. The Plan shall be administered by the Committee. Subject to the terms of the Plan, the Committee’s charter and Applicable Laws, and in addition to other express powers and authorization conferred by the Plan, the Committee shall have the authority:
(a) to construe and interpret the Plan and apply its provisions;
(b) to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;
(c) to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;
(d) to delegate its authority to one or more officers of the Company;
(e) to determine when Awards are to be granted under the Plan and the applicable Grant Date;
(f) from time to time to select, subject to the limitations set forth in this Plan, those Participants to whom Awards shall be granted;
(g) to determine the number of shares of Common Stock to be made subject to each Award;
(h) to determine whether each Option is to be an Incentive Stock Option or a Non-Qualified Stock Option;
(i) to prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment and vesting provisions, and to specify the provisions of the Award Agreement relating to such grant;
(j) to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding Award; *provided, however*, that if any such amendment impairs a Participant’s rights or increases a Participant’s obligations under his or her Award or creates or increases a Participant’s federal income tax liability with respect to an Award, such amendment shall also be subject to the Participant’s consent;
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(k) to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Company’s employment policies;
(l) to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments;
(m) to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; and
(n) to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the Plan.
3.2**Acquisitions and Other Transactions**. The Committee may, from time to time, assume outstanding awards granted by another entity, whether in connection with an acquisition of such other entity or otherwise, by either (a) granting an Award under the Plan in replacement of or in substitution for the award assumed by the Company, or (b) treating the assumed award as if it had been granted under the Plan if the terms of such assumed award could be applied to an Award granted under the Plan. Such assumed award shall be permissible if the holder of the assumed award would have been eligible to be granted an Award hereunder if the other entity had applied the rules of this Plan to such grant. The Committee may also grant Awards under the Plan in settlement of or in substitution for outstanding awards or obligations to grant future awards in connection with the Company or an Affiliate acquiring another entity, an interest in another entity, or an additional interest in an Affiliate whether by merger, stock purchase, asset purchase or other form of transaction.
3.3**Committee Decisions Final**. All decisions, determinations, and interpretations made by the Committee pursuant to the provisions of the Plan shall be final and binding on the Company, the Participants, and any other holder of an Award.
3.4**Delegation**. The Committee shall have the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Committee shall thereafter be to the committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. The members of the Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable.
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3.5**Committee Composition**. Except as otherwise determined by the Board, the Committee shall consist solely of two or more Persons appointed to the Committee from time to time by the Board.
3.6**Indemnification**. In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by Applicable Laws, the Committee shall be indemnified by the Company against the reasonable expenses, including attorney’s fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the Committee may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the Committee in settlement thereof (*provided, however*, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee did not act in good faith and in a manner which such Person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; *provided, however*, that within 60 days after institution of any such action, suit or proceeding, such Committee shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.
4.**Shares Subject to the Plan**.
4.1 Subject to adjustment in accordance with Section 8, a total of one million five hundred thousand (1,500,000) shares of Common Stock shall be available for the grant of Awards under the Plan; *provided, however,* that no more than one million five hundred thousand (1,500,000) shares of Common Stock may be granted as Incentive Stock Options. During the terms of the Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards.
4.2 Shares of Common Stock available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares.
4.3 Any shares of Common Stock subject to an Award that is canceled, forfeited or expires prior to exercise or realization, either in full or in part, shall again become available for issuance under the Plan. Notwithstanding anything to the contrary contained herein, shares subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if such shares are (a) shares tendered in payment of an Option or (b) shares delivered or withheld by the Company to satisfy any tax withholding obligation.
4.4 If the Committee authorizes the assumption of awards pursuant to Section 3.2 or Section 9.1 hereof, the assumption will reduce the number of shares available for issuance under the Plan in the same manner as if the assumed awards had been granted under the Plan.
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5. **Eligibility and Awards**.
5.1**Eligible Award Recipients**. The Persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates. In order to receive an Award and become a Participant, such Employee, Consultant or Director must be selected by the Committee to receive an Award. In selecting who may receive an Award, and determining the amount of Awards to be granted under the Plan, the Committee shall consider any and all factors that it deems relevant or appropriate.
5.2**Available Awards**. Awards that may be granted under the Plan include: (a) Incentive Stock Options and (b) Non-Qualified Stock Options. Incentive Stock Options may be granted to “employees” (within the meaning of Treasury Regulation Section 1.421-7(h)) of the Company or any “subsidiary corporation” with respect to the Company for purposes of Code Section 424(f) only. Awards other than Incentive Stock Options may be granted to Employees, Consultants and Directors.
5.3**Determination of Awards**. The Committee shall determine the terms and conditions of all Awards granted to Participant in accordance with its authority under Section 3. The terms and conditions of all Awards under the Plan will be specified by the Committee and will be set forth in individual Award Agreements.
5.4**Ten Percent Shareholders**. A Ten Percent Shareholder shall not be granted an Incentive Stock Option unless the Option Exercise Price is at least 110% of the Fair Market Value of the Common Stock at the Grant Date and the Option is not exercisable after the expiration of five years from the Grant Date.
6.**Option Provisions**.
6.1**General**. Each Option granted under the Plan shall be evidenced by an Award Agreement. Each Option so granted shall be subject to the conditions set forth in this Section 6, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options shall be separately designated Incentive Stock Options or Non-Qualified Stock Options at the time of grant. Notwithstanding the foregoing, the Company shall have no liability to any Participant or any other person if an Option designated as an Incentive Stock Option fails to qualify as such at any time or if an Option is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the terms of such Option do not satisfy the requirements of Section 409A. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the provisions set forth in the remainder of this Section 6.
6.2**Term**. Subject to the provisions of Section 5.4 regarding Ten Percent Shareholders, no Incentive Stock Option shall be exercisable after the expiration of 10 years from the Grant Date. The term of a Non-Qualified Stock Option granted under the Plan shall be determined by the Committee; *provided, however*, no Non-Qualified Stock Option shall be exercisable after the expiration of 10 years from the Grant Date.
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6.3**Exercise Price of an Incentive Stock Option**. Subject to the provisions of Section 5.4 regarding Ten Percent Shareholders, the Option Exercise Price of each Incentive Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another Option in a manner satisfying the provisions of Code Section 424(a).
6.4**Exercise Price of a Non-Qualified Stock Option**. The Option Exercise Price of each Non-Qualified Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, a Non-Qualified Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another Option in a manner satisfying the provisions of Section 409A.
6.5**Method of Exercise**. The Option Exercise Price shall be paid, to the extent permitted by Applicable Laws, either (a) in cash or by certified or bank check at the time the Option is exercised or (b) in the discretion of the Committee, upon such terms as the Committee shall approve: (i) by delivery to the Company of other shares of Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Option Exercise Price (or portion thereof) due for the number of shares being acquired**; (ii) by a** “**net exercise**” **procedure effected by withholding the minimum number of shares of Common Stock otherwise issuable in respect of an Option that are needed to pay the Option Exercise Price;** (iii) by any combination of the foregoing methods; or (iv) in any other form of legal consideration that may be acceptable to the Committee. Unless otherwise specifically provided in the Option, the Option Exercise Price that is paid by delivery to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of Common Stock that have been held for more than six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes).
6.6**Vesting of Options**. Unless otherwise provided in an Award Agreement, twenty-five percent (25%) of each Option shall vest and become exercisable on the first anniversary of the Grant Date of such Option. Thereafter, an additional one-thirty-sixth (1/36) of each Option shall vest on each subsequent monthly anniversary of the Grant Date so that one hundred percent (100%) of the Option is fully vested on the fourth anniversary of the Grant Date. Each Option may be subject to such other terms and conditions as the Committee may deem appropriate. No Option may be exercised for a fraction of a share of Common Stock. The Committee may, but shall not be required to, provide for an acceleration of vesting and exercisability in the terms of any Option upon the occurrence of a specified event.
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6.7**Termination of Continuous Service**. Unless otherwise provided in an Award Agreement or in an employment agreement the terms of which have been approved by the Committee, in the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months following the termination of the Optionholder’s Continuous Service or (b) the expiration of the term of the Option as set forth in the Award Agreement; *provided, however,* that if the termination of Continuous Service is by the Company for Cause, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Award Agreement, the Option shall terminate.
6.8**Disability of Optionholder**. Unless otherwise provided in an Award Agreement, in the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (a) the date 12 months following such termination or (b) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein or in the Award Agreement, the Option shall terminate.
6.9**Death of Optionholder**. Unless otherwise provided in an Award Agreement, in the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a Person who acquired the right to exercise the Option by bequest or inheritance or by a Person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Award Agreement, the Option shall terminate.
6.10**Incentive Stock Option $100,000 Limitation**. No Incentive Stock Option shall be granted to a Participant as a result of which the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time in any calendar year under the Plan and any other stock option plans of the Company or any subsidiary or parent corporation, would exceed $100,000, determined in accordance with Code Section 422(d). This limitation shall be applied by taking Options into account in the order in which granted.
6.11**Disqualifying Dispositions**. Any Participant who shall make a “disposition” (as defined in Code Section 424) of all or any portion of shares of Common Stock acquired upon exercise of an Incentive Stock Option within two years from the Grant Date of such Incentive Stock Option or within one year after the issuance of the shares of Common Stock acquired upon exercise of such Incentive Stock Option (a “**Disqualifying Disposition**”) shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such shares of Common Stock.
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6.12**Termination for Cause**. Unless otherwise provided in an Award Agreement, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable on the date on which an Optionholder is terminated for Cause.
6.13**Violation of Employment Agreement****.** Unless otherwise provided in an Award Agreement, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable as of the date on which the Committee determines in its sole discretion that a Participant has materially violated any confidentiality, non-solicitation, development, or noncompetition agreement with the Company or an Affiliate.
7.**Miscellaneous**.
7.1**Acceleration of Exercisability and Vesting**. The Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.
7.2**Shareholder Rights**. Except as provided in the Plan or an Award Agreement, no Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to an Award unless and until such Participant has satisfied all requirements for exercise or settlement of the Award pursuant to its terms (including any obligation to execute the Shareholders’ Agreement) and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date such Common Stock certificate is issued, except as provided in Section 8 hereof.
7.3**Use of Proceeds from Stock**. Proceeds from the sale of Common Stock pursuant to Awards, or upon the exercise thereof, shall constitute general funds of the Company.
7.4**No Employment or Other Service Rights**. Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate (a) the employment of an Employee with or without notice and with or without Cause or (b) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
7.5**Transfer; Approved Leave of Absence**. For purposes of the Plan, no termination of employment by an Employee shall be deemed to result from either (a) a transfer of employment to the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another, or (b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the Employee’s right to reemployment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing, in either case, except to the extent inconsistent with Section 409A if the applicable Award is subject thereto.
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7.6**Withholding Obligations**. Each Participant shall be responsible for payment of any taxes or similar charges required by law to be paid or withheld from an Award or an amount paid in satisfaction of an Award. Any required withholdings shall be paid by the Participant on or prior to the payment or other event that results in taxable income in respect of an Award. In addition to the methods described in this Plan, the Award Agreement may specify the manner in which the withholding obligation shall be satisfied with respect to the particular type of Award. Without limiting the foregoing, if the Company or any Affiliate determines in its sole discretion that under the requirements of applicable taxation laws or regulations of any governmental authority whatsoever it is obliged to withhold for remittance to a taxing authority any amount upon the grant or exercise of an Award, the exercise of the Call Right, the other disposition or deemed disposition by a Participant of an Award or any Common Stock, or the provision of any other benefit under this Plan, the Company or any of its Affiliates, on its own behalf or on behalf of any third party purchaser of the Award or any Common Stock held by the Participant, may take any steps it considers necessary or appropriate in the circumstances in connection therewith, including, without limiting the generality of the foregoing:
(a) requiring the Participant to pay the Company or any Affiliate such amount as the Company or any Affiliate is obliged to remit to such taxing authority in respect thereof, with any such payment, in any event, being due no later than the date as of which any such amount first becomes included in the gross income of the Participant for tax purposes (and further provided that, in the case of an Option, such payment shall be made in the same manner as payment of any applicable exercise price or in any other manner that may be designated by the Committee);
(b) issuing any Common Stock issued pursuant to an Award to an agent on behalf of the Participant and directing the agent to sell a sufficient number of such shares on behalf of the Participant to satisfy the amount of any such withholding obligation, with the agent paying the proceeds of any such sale to the Company or any Affiliate for this purpose; or
(c) to the extent permitted by law, deducting the amount of any such withholding obligation from any payment of any kind otherwise due to the Participant.
8.**Adjustments Upon Changes in Stock**. In the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Grant Date of any Award, Awards granted under the Plan and any Award Agreements, the exercise price of Options and the maximum number of shares of Common Stock subject to Awards stated in Section 4 may be equitably adjusted or substituted, as to the number, price or kind of a share of Common Stock or other consideration subject to such Awards to the extent necessary to preserve the economic intent of such Award. In the case of adjustments made pursuant to this Section 8, unless the Committee specifically determines that such adjustment is in the best interests of the Company or its Affiliates, the Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under this Section 8 will not constitute a modification, extension or renewal of the Incentive Stock Options within the meaning of Code Section 424(h)(3) and in the case of Non-Qualified Stock Options, ensure that any adjustments under this Section 8 will not constitute a modification of such Non-Qualified Stock Options within the meaning of Section 409A.
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9.**Effect of Change in Control**.
9.1 In the event of a Change in Control, the Committee may, but shall not be obligated to:
(a) accelerate, vest or cause the restrictions to lapse with respect to all or any portion of any Award;
(b) cancel Awards and cause to be paid to the holders of vested Awards the value of such Awards, if any, as determined by the Committee, in its sole discretion, it being understood that in the case of any Option with an Option Exercise Price that equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee may cancel the Option without the payment of consideration therefor;
(c) provide for the issuance of substitute Awards or the assumption or replacement of such Awards; or
(d) provide written notice to Participants that for a period of at least ten (10) days prior to the Change in Control, such Awards shall be exercisable, to the extent applicable, as to all shares of Common Stock subject thereto and upon the occurrence of the Change in Control, any Awards not so exercised shall terminate and be of no further force and effect.
9.2 The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company and its Affiliates, taken as a whole.
10.**Amendment of the Plan and Awards**.
10.1**Amendment of the Plan**. The Board at any time, and from time to time, may amend or terminate the Plan. However, except as provided in Section 8 relating to adjustments upon changes in Common Stock and Section 10.3, no amendment shall be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy any Applicable Laws. At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on shareholder approval.
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10.2**Shareholder Approval**. The Board may, in its sole discretion, submit any other amendment to the Plan for shareholder approval.
10.3**Contemplated Amendments**. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees, Consultants and Directors with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified deferred compensation provisions of Section 409A and/or to bring the Plan and/or Awards granted under it into compliance therewith.
10.4**No Impairment of Rights**. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
10.5**Amendment of Awards**. The Committee at any time, and from time to time, may amend the terms of any one or more Awards; *provided, however*, that the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under any Award unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
10.6**Clawback Rights**. Unless the Committee provides otherwise, if a Participant materially violates any confidentiality, non-solicitation, development, or noncompetition agreement with the Company or an Affiliate, if the Participant’s employment is terminated for Cause, or upon such other events as determined by the Committee in its sole discretion (each a “**Clawback Event**”), the Company may in its sole discretion (a) repurchase (and the Participant shall sell) any shares of Common Stock acquired by the Participant (or by a permitted transferee of the Participant) pursuant to Awards granted hereunder for a price equal to the purchase price paid (if any) by the Participant under the Award, or if less, the Fair Market Value of the shares of Common Stock on the date of repurchase, or (b) cause the Participant to (and the Participant shall) reimburse the Company the amounts received (either directly or indirectly with respect to amounts that were withheld for tax purposes) by the Participant pursuant to Awards granted and exercised hereunder for a price equal to the excess of the Fair Market Value of the shares of Common Stock on the date of exercise over the Option Exercise Price for the respective shares of Common Stock. In the event a Clawback Event has occurred but is not discovered until a later time, the Company may either repurchase shares of Common Stock as described above (and the Participant shall sell), or require the Participant to (and the Participant shall) reimburse the Company pursuant to the foregoing provisions.
11.**General Provisions**.
11.1**Restrictions on Transfer**. Awards under the Plan shall not be assignable or transferable by a Participant, except by will or by the laws of descent and distribution, and shall not be subject in any manner to assignment, alienation, pledge, encumbrance, or charge. Notwithstanding the foregoing, in the event of the death of a Participant while employed by the Company, except as otherwise provided by the Committee in an Award Agreement, an outstanding Award may become payable to a Participant’s beneficiary as designated by such Participant in the manner prescribed by the Committee or, in the absence of an authorized beneficiary designation, by a legatee or legatees of such Award under the Participant’s last will, or by such Participant’s executors, personal representatives, or distributees of such Award in accordance with the Participant’s will of the laws of descent and distribution.
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11.2**Forfeiture**. The Committee may specify in an Award Agreement at the time of the Award that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events shall include, but shall not be limited to, termination for Cause, violation of material Company policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company. Unless otherwise provided by the Committee and set forth in an Award Agreement, if a Participant’s employment with the Company or any Affiliate shall be terminated for Cause, such Participant’s rights, payments and benefits with respect to an Award shall be subject to cancellation, forfeiture, and/or recoupment. In addition, if the Company shall reasonably determine that a Participant has committed or may have committed any act which could constitute the basis for a termination of such Participant’s employment for Cause, the Company may suspend the Participant’s rights to exercise any option, receive any payment, or vest in any right with respect to any Award pending a determination by the Company of whether an act has been committed which could constitute the basis for a termination for Cause.
11.3**Shareholders**’ **Agreement**. In connection with the grant, vesting and/or exercise of any Award under the Plan, the Committee may require a Participant to execute and become a party to the Shareholders’ Agreement as a condition of such grant, vesting and/or exercise. In such event, the Participant shall be bound by, and the Company shall have all rights set forth in, the Shareholders’ Agreement in addition to the terms of this Plan and any Award Agreement.
11.4**Unfunded Plan**. The adoption of the Plan and any reservation of shares of Common Stock or cash amounts by the Company to discharge its obligations hereunder shall not be deemed to create a trust or other funded arrangement. Except upon the issuance of Common Stock pursuant to an Award, any rights of a Participant under the Plan shall be those of a general unsecured creditor of the Company, and neither a Participant nor the Participant’s permitted transferees or estate shall have any other interest in any assets of the Company by virtue of the Plan. Notwithstanding the foregoing, the Company shall have the right to implement or set aside funds in a grantor trust, subject to the claims of the Company’s creditors or otherwise, to discharge its obligations under the Plan.
11.5**Recapitalizations**. Each Award Agreement shall contain provisions required to reflect the provisions of Section 8.
11.6**Delivery**. Upon exercise of a right granted under this Plan, the Company shall issue Common Stock or pay any amounts due within a reasonable period of time thereafter. Subject to any statutory or regulatory obligations the Company may otherwise have, for purposes of this Plan, 30 days shall be considered a reasonable period of time.
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11.7**No Fractional Shares**. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Committee shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional shares of Common Stock or whether any fractional shares should be rounded, forfeited or otherwise eliminated.
11.8**Plan Binding on Transferees**. The Plan shall be binding upon the Company, its transferees and assigns, and the Participant, the Participant’s executor, administrator, and permitted transferees and beneficiaries.
11.9**Other Provisions**. The Award Agreements authorized under the Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the exercise of the Awards, as the Committee may deem advisable.
11.10**Section 409A**. The Plan is intended to comply with Section 409A to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Participant’s termination of Continuous Service shall instead be paid on the first payroll date after the six-month anniversary of the Participant’s separation from service (or the Participant’s death, if earlier). In the event that any provision of the Plan or an Award Agreement is determined by the Committee to not comply with the applicable requirements of Section 409A, the Committee shall have the authority to take such actions and to make such changes to the Plan or an Award Agreement as the Committee deems necessary to comply with such requirements, provided that no such action shall adversely affect any outstanding Award without the consent of the affected Participant Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any additional tax or penalty on any Participant under Section 409A and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.
11.11**No Guarantee of Tax Consequences**. Neither the Company, the Board, the Committee, nor any other person make any commitment or guarantee that any Federal, state, local, or foreign tax treatment will apply or be available to any Participant or any other person hereunder.
11.12**Beneficiary Designation**. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries by whom any right under the Plan is to be exercised in case of such Participant’s death. Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by the Committee and shall be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime.
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11.13**Expenses**. The costs of administering the Plan shall be paid by the Company.
11.14**Severability**. If any of the provisions of the Plan or any Award Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
11.15**Plan Headings**. The headings in the Plan are for purposes of convenience only and are not intended to define or limit the construction of the provisions hereof.
11.16**Non-Uniform Treatment**. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among Persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Committee shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements.
11.17**Construction**. The following rules of construction will apply to the Plan: (a) the word “or” is disjunctive but not necessarily exclusive and (b) words in the singular include the plural, words in the plural include the singular, and words in the neuter gender include the masculine and feminine genders and words in the masculine or feminine genders include the opposite gender and the neuter gender. The headings of sections and subsections are included solely for convenience of reference, and if there is any conflict between such headings and the text of this Plan, the text shall control. All references to Sections herein are intended to be references to sections of this Plan, unless otherwise indicated.
12.**Termination or Suspension of the Plan**. The Plan shall terminate automatically on December 31, 2032. No Award shall be granted pursuant to the Plan after such date, but Awards theretofore granted may extend beyond that date. The Board may suspend or terminate the Plan at any earlier date pursuant to Section 10.1 hereof. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
13.**Choice of Law**. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Georgia, other than its law respecting choice of laws, and applicable federal law. Venue shall be in, and subject to the jurisdiction of, the courts of the State of Georgia or a Federal Court located in the State of Georgia (as may be appropriate).
As adopted by the Board of Directors of Global Digital Holdings, Inc. on **December 12, 2022**.
As approved by the shareholders of Global Digital Holdings, Inc. on **December 12, 2022**.
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## EXHIBIT 10.41
SEC source: [ex_903158.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903158.htm)
**Exhibit 10.41**
**AMENDMENT NO. 1 TO OPTION PLAN**
THIS AMENDMENT NO. 1 TO OPTION PLAN (this “Amendment”) is entered into by and among GLOBAL DIGITAL HOLDINGS, INC., a Georgia profit corporation (the “Company”), the board of directors of the Company (the “Board”), and the shareholders of the Company constituting a majority thereof (such majority of shareholders, collectively, the “Shareholders”). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the Option Plan, as hereinafter defined.
WHEREAS, the Company has entered into a series of contribution and exchange agreements with the shareholders of THE CLOUD MINDERS INC., a Delaware profit corporation (“TCM”), pursuant to which the Company is acquiring all of the capital stock (and options and warrants to acquire the same) of TCM in exchange for issuing such TCM shareholders certain capital stock in GDH;
WHEREAS, on December 12, 2022, the Board and the Shareholders both resolved to create that certain GDH 2022 Stock Option Plan (the “Option Plan”) and thereby allocated one million five hundred thousand (1,500,000) shares of Common Stock of GDH to the Option Plan;
WHEREAS, the Company has requested an increase in the number of shares of Common Stock of GDH allocated to the Option Plan to (i) account for the options to purchase shares of TCM common stock pursuant to Section 8 of TCM’s existing option plan and (ii) provide for additional incentives for members of GDH’s advisory committee to the Board and other key personnel required to progress the business of GDH and its subsidiaries;
WHEREAS, the Board and the Shareholders each agree and desire to increase the number of shares of Common Stock of GDH allocated to the Option Plan on the terms hereinafter provided; and
WHEREAS, pursuant to, without limitation, Section 10.1 of the Option Plan, in order to affect the amendments to the Option Plan contemplated by this Amendment, this Amendment must be approved by the Board and the Shareholders.
NOW THEREFORE, in consideration of the foregoing and the mutual agreements and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendments. Subject to the terms and conditions hereof, effective as of the Amendment No. 1 Effective Date, as hereinafter defined, Section 4.1 of the Option Plan is hereby amended so as to be supplanted in its entirety with the following:
“4.1 Subject to adjustment in accordance with Section 8, a total of Four Million (4,000,000) shares of Common Stock shall be available for the grant of Awards under the Plan; provided, however, that no more than Four Million (4,000,000) shares of Common Stock may be granted as Incentive Stock Options. During the terms of the Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards.”
SECTION 2. Conditions Precedent. This Amendment shall only become effective as of April 01, 2025 (the “Amendment No. 1 Effective Date”) upon (i) the Company receiving counterparts of this Amendment, duly authorized, executed and delivered by the Board and the Shareholders, and (ii) the consummation of the TCM contribution and exchange transaction contemplated hereinabove.
SECTION 3. Effect of this Amendment; Ratification.
(a) Except as expressly set forth herein, no other amendments, consents, changes or modifications to the Option Plan are intended or implied, and in all other respects the Option Plan are hereby specifically ratified and confirmed by all parties hereto as of the Amendment No. 1 Effective Date and neither the Company nor any other party (including any third-parties) shall be entitled to any other or further amendment by virtue of the provisions of this Amendment or with respect to the subject matter of this Amendment.
(b) The Option Plan and this Amendment shall be read and construed as one agreement.
(c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any party under the Option Plan (which rights, powers and remedies are expressly reserved), nor constitute a consent to or waiver of any past, present or future violations of any provision of the Option Plan.
SECTION 4. Governing Law. This Amendment shall be deemed to be a contract made under, governed by and interpreted pursuant to the internal laws (and not the law of conflicts) of the state of Georgia.
SECTION 5. Binding Effect. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and permitted assigns.
SECTION 6. Captions. The captions in this Amendment are intended for convenience only and do not constitute and shall not be interpreted as part of this Amendment.
SECTION 7. Counterparts. This Amendment may be executed in any number of and by different parties hereto on separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile or electronic transmission (including email transmission of a PDF image, or Docusign or similar platform) shall be deemed to be an original signature hereto.
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## EXHIBIT 10.42
SEC source: [ex_903159.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903159.htm)
**Exhibit 10.42**
**Non-Qualified Stock Option Agreement**
This Stock Option Agreement (this “**Agreement**”) is made and entered into as of **[DATE]** by and between QumulusAI, Inc., a Georgia corporation formerly known as Global Digital Holdings, Inc. (the “**Company**”), and **[PARTICIPANT NAME]** (the “**Participant**”).
Grant Date: _____________________________________
Exercise Price per Share: __________________________
Number of Option Shares: _________________________
Expiration Date: _________________________________
1. Grant of Option.
1.1 Grant; Type of Option. The Company hereby grants to the Participant an option (the “**Option**”) to purchase the total number of shares of Common Stock of the Company equal to the number of Option Shares set forth above, at the Exercise Price set forth above. The Option is being granted pursuant to the terms of the Global Digital Holdings, Inc. 2022 Option Plan (the “**Plan**”). The Option is intended to be a Non-Qualified Stock Option and *not* an Incentive Stock Option within the meaning of Code Section 422.
1.2 Consideration; Subject to Plan. The grant of the Option is made in consideration of the services to be rendered by the Participant to the Company and is subject to the terms and conditions of the Plan. Capitalized terms used but not defined herein will have the meaning ascribed to them in the Plan.
2. Vesting and Exercisability.
2.1 Vesting and Exercisability of Option. **[Twenty-five percent (25%) of the Option shall vest and become exercisable on the first anniversary of the Grant Date of the Option. Thereafter, an additional one-thirty-sixth (1/36) of each Option shall vest on each subsequent monthly anniversary of the Grant Date so that one hundred percent (100%) of the Option is fully vested on the fourth anniversary of the Grant Date. No Option may be exercised for a fraction of a share of Common Stock.]**1
2.2 Expiration. The Option will expire on the Expiration Date set forth above, or earlier as provided in this Agreement or the Plan.
3. Exercisability of Options Following Termination of Continuous Service.
3.1 Forfeiture of Unvested Options. In the event of the Participant’s Termination of Continuous Service for any reason, any unvested Options shall immediate terminate and cease to be exercisable.
---
1 Note to Company: This is the default vesting conditions and matches what is currently in the Plan. However, the Plan gives the Committee/Board the power to assign different vesting conditions.
3.2 Exercisability of Vested Options Following Termination of Continuous Service.
(a) If the Participant’s Continuous Service is terminated for any reason other than Cause, death, or Disability, the Participant may exercise the vested portion of the Option, but only within such period of time ending on the earlier of (a) the date that is three months following the termination of the Participant’s Continuous Service or (b) the Expiration Date.
(b) If the Participant’s Continuous Service is terminated on account of the Participant’s death or Disability, the Participant or the Participant’s executor, administrator, heir or legatee, as applicable, may exercise the vested portion of the Option, but only within such period of time ending on the earlier of (a) the date that is twelve months following the termination of the Participant’s Continuous Service or (b) the Expiration Date.
3.3 Termination for Cause. If the Participant’s Continuous Service is terminated for Cause, the Option (whether vested or unvested) shall immediately terminate and cease to be exercisable.
3.4 Extension of Termination Date. If, following the Participant’s termination of Continuous Service for any reason the exercise of the Option is prohibited because the exercise of the Option would violate any registration requirements, any other state or federal securities law or the rules of any securities exchange or interdealer quotation system, then the expiration of the Option shall be tolled until the date that is thirty (30) days after the end of the period during which the exercise of the Option would be in violation of such registration or other securities requirements.
4. Manner of Exercise.
4.1 Election to Exercise. To exercise the Option, the Participant (or, in the case of exercise after the Participant’s death or incapacity, the Participant’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company a notice of exercise in the manner designated by the Committee. If someone other than the Participant exercises the Option, then such Person must submit documentation reasonably acceptable to the Company verifying that such Person has the legal right to exercise the Option.
4.2 Payment of Exercise Price. The entire Exercise Price of the Option shall be payable in full at the time of exercise to the extent permitted by applicable statutes and regulations, either:
(a) in cash or by certified or bank check at the time the Option is exercised; or
(b) in the discretion of the Committee, upon such terms as the Committee shall approve:
(i) by delivery to the Company of other shares of Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Exercise Price (or portion thereof) due for the number of shares being acquired;
2
(ii) by a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise issuable in respect of an Option that are needed to pay the Option Exercise Price;
(iii) by any combination of the foregoing methods; or
(iv) in any other form of legal consideration that may be acceptable to the Committee.
4.3 Withholding. Prior to the issuance of Option Shares upon the exercise of the Option, the Participant must make arrangements satisfactory to the Company to pay or provide for any applicable federal, state and local withholding obligations of the Company. The Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise of the Option by any of the following means:
(a) tendering a cash payment;
(b) issuing any Common Stock issued pursuant to any Award to an agent on behalf of the Participant and directing the agent to sell a sufficient number of such shares on behalf of the Participant to satisfy the amount of any such withholding obligation, with the agent paying the proceeds of any such sale to the Company or any Affiliate for this purpose; or
(c) to the extent permitted by law, deducting the amount of any such withholding obligation from any payment of any kind otherwise due to the Participant.
5. Restrictions on Transfer. This Option shall not be assignable or transferable by the Participant, except by will or by the laws of descent and distribution, and shall not be subject in any manner to assignment, alienation, pledge, encumbrance, or charge. Notwithstanding the foregoing, in the event of the Participant’s death while employed by the Company, proceeds from the exercise of the Option may become payable to the Participant’s beneficiary as designated by the Participant in the manner prescribed by the Committee or, in the absence of an authorized beneficiary designation, by a legatee or legatees of such Award under the Participant’s last will, or by the Participant’s executors, personal representatives, or distributees of the Option in accordance with the Participant’s will of the laws of descent and distribution.
6. No Right to Continued Service; No Rights as Shareholder. Neither the Plan nor this Agreement shall confer upon the Participant any right to continue to serve the Company or an Affiliate in the capacity then in effect at the time this Agreement was entered into or shall affect the right of the Company or an Affiliate to terminate (a) the Participant’s service with or without notice and with or without Cause. The Participant shall not have any rights as a shareholder with respect to any Option Shares prior to the date of exercise of the Option.
3
7. Change in Control.
7.1 Acceleration of Vesting. In the event of a Change in Control, the Committee may, but shall not be obligated to:
(a) accelerate, vest or cause the restrictions to lapse with respect to all or any portion of this Option;
(b) cancel the Option and cause to be paid to the Participant the value of the vested portion of the Option, if any, as determined by the Committee, in its sole discretion, it being understood that in the case of any Option with an Option Exercise Price that equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee may cancel the Option without the payment of consideration therefor;
(c) provide for the issuance of substitute Awards or the assumption or replacement of such Awards; or
(d) provide written notice to the Participant that for a period of at least ten (10) days prior to the Change in Control, the Option shall be exercisable, to the extent applicable, as to all shares of Common Stock subject thereto and upon the occurrence of the Change in Control, any portion of the Option not so exercised shall terminate and be of no further force and effect.
7.2 The obligations of the Company under the Plan and this Option shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company and its Affiliates, taken as a whole.
8. Adjustments. The Option Shares may be adjusted or terminated in any manner as contemplated by Section 8 of the Plan.
9. Clawback Rights. The Option Shares are subject to the Company’s Clawback Rights under Section 10.6 of the Plan.
10. Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“**Tax-Related Items**”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (a) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or exercise of the Option or the subsequent sale of any Option Shares; and (b) does not commit to structure the Option to reduce or eliminate the Participant’s liability for Tax-Related Items.
4
11. Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Company at the Company’s principal corporate offices. Any notice required to be delivered to the Participant under this Agreement shall be in writing and addressed to the Participant at the Participant’s address as shown in the records of the Company. Either party may designate another address in writing (or by such other method approved by the Company) from time to time.
12. Choice of Law. The validity, construction and effect of the Plan, this Agreement and any rules and regulations relating to the Plan or this Agreement shall be determined in accordance with the laws of the State of Georgia, other than its law respecting choice of laws, and applicable federal law. Venue shall be in, and subject to the jurisdiction of, the courts of the State of Georgia or a Federal Court located in the State of Georgia (as may be appropriate).
13. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Participant or the Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Participant and the Company.
14. Options Subject to Plan. This Agreement is subject to the Plan as approved by the Company’s shareholders. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
**15.** **[****Shareholders**’ **Agreement****. Notwithstanding anything in this** **Agreement** **to the contrary, and in accordance with Section 11.3 of the Plan, as a condition to the receipt of** **Option** **Shares, the Participant shall execute and become a party to the Shareholders**’ **Agreement** **which shall set forth certain restrictions on the transferability of the** **Option** **Shares, including [a right of first refusal of the Company with respect to** **Option** **Shares, the right of the Company to re-purchase** **Option** **Shares after a Participant**’**s termination of Continuous Service, and drag-along rights of the Company and certain investors] and such other terms as the Board or Committee shall from time to time establish.]2**
16. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Participant and the Participant’s beneficiaries, executors, administrators and the Person(s) to whom the Option may be transferred by will or the laws of descent or distribution.
17. Severability. If any of the provisions of the Plan or this Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
---
2 Note to Company: The Plan gives the Committee/Board the discretion to require the Participant to become a party to a Shareholder’s Agreement. This provision may be thus included, with the appropriate description of the restrictions, if the Company desires on a case-by-case basis.
5
18. Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled or terminated by the Company at any time, in its discretion. The grant of the Option in this Agreement does not create any contractual right or other right to receive any Options or other Awards in the future. Future Awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Participant’s employment with the Company.
19. Amendment. The Committee at any time, and from time to time, may amend the terms of this Agreement; *provided, however*, that the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under any Award unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
20. No Impact on Other Benefits. The value of the Participant’s Option is not part of his or her normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit.
21. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
22. Acceptance. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions thereof, and accepts the Option subject to all of the terms and conditions of the Plan and this Agreement. The Participant acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the Option Shares and that the Participant should consult a tax advisor prior to such exercise or disposition.
[*S**ignature Page Follows*]
6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
- **QUMULUSAI, INC.**
- By:
- Name:
- Title:
- **PARTICIPANT**
- By:
- Name:
*Please complete the following as applicable:*
**Acknowledgment and Agreement of Spouse**
The undersigned spouse of the Participant acknowledges that he or she has read this Agreement and agrees to be bound by its terms to the extent that the Participant has executed such document.
Name:
**OR**
**Declaration of Unmarried Status**
The Participant hereby declares that he or she is not married as of the date hereof.
Name:
---
## EXHIBIT 10.43
SEC source: [ex_903160.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903160.htm)
**Exhibit 10.43**
**Incentive Stock Option Agreement**
This Stock Option Agreement (this “**Agreement**”) is made and entered into as of **[DATE]** by and between QumulusAI, Inc., a Georgia corporation formerly known as Global Digital Holdings, Inc. (the “**Company**”), and **[EMPLOYEE NAME]** (the “**Participant**”).
Grant Date:
Exercise Price per Share:
Number of Option Shares:
Expiration Date:
1. Grant of Option.
1.1 Grant; Type of Option. The Company hereby grants to the Participant an option (the “**Option**”) to purchase the total number of shares of Common Stock of the Company equal to the number of Option Shares set forth above, at the Exercise Price set forth above. The Option is being granted pursuant to the terms of the Global Digital Holdings, Inc. 2022 Option Plan (as amended, the “**Plan**”). The Option is intended to be an Incentive Stock Option within the meaning of Code Section 422, although the Company makes no representation or guarantee that the Option will qualify as an Incentive Stock Option. To the extent that the aggregate Fair Market Value (determined on the Grant Date) of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portion thereof which exceeds such limit (according to the order in which they were granted) shall be treated as Non-Qualified Stock Options.
1.2 Consideration; Subject to Plan. The grant of the Option is made in consideration of the services to be rendered by the Participant to the Company and is subject to the terms and conditions of the Plan. Capitalized terms used but not defined herein will have the meaning ascribed to them in the Plan.
2. Vesting and Exercisability.
2.1 Vesting and Exercisability of Option. **[Twenty-five percent (25%) of the Option shall vest and become exercisable on the first anniversary of the Grant Date of the Option. Thereafter, an additional one-thirty-sixth (1/36) of the Option shall vest on each subsequent monthly anniversary of the Grant Date so that one hundred percent (100%) of the Option is fully vested on the fourth anniversary of the Grant Date. No Option may be exercised for a fraction of a share of Common Stock.]**1
---
1 Note to Company: This is the default vesting conditions and matches what is currently in the Plan. However, the Plan gives the Committee/Board the power to assign different vesting conditions.
2.2 Expiration. The Option will expire on the Expiration Date set forth above, or earlier as provided in this Agreement or the Plan.
3. Exercisability of Options Following Termination of Continuous Service.
3.1 Forfeiture of Unvested Options. In the event of the Participant’s Termination of Continuous Service for any reason, any unvested Options shall immediate terminate and cease to be exercisable.
3.2 Exercisability of Vested Options Following Termination of Continuous Service.
(a) If the Participant’s Continuous Service is terminated for any reason other than Cause, death, or Disability, the Participant may exercise the vested portion of the Option, but only within such period of time ending on the earlier of (a) the date that is three months following the termination of the Participant’s Continuous Service or (b) the Expiration Date.
(b) If the Participant’s Continuous Service is terminated on account of the Participant’s death or Disability, the Participant or the Participant’s executor, administrator, heir or legatee, as applicable, may exercise the vested portion of the Option, but only within such period of time ending on the earlier of (a) the date that is twelve months following the termination of the Participant’s Continuous Service or (b) the Expiration Date.
3.3 Termination for Cause. If the Participant’s Continuous Service is terminated for Cause, the Option (whether vested or unvested) shall immediately terminate and cease to be exercisable.
3.4 Extension of Termination Date. If, following the Participant’s termination of Continuous Service for any reason the exercise of the Option is prohibited because the exercise of the Option would violate any registration requirements, any other state or federal securities law or the rules of any securities exchange or interdealer quotation system, then the expiration of the Option shall be tolled until the date that is thirty (30) days after the end of the period during which the exercise of the Option would be in violation of such registration or other securities requirements.
4. Manner of Exercise.
4.1 Election to Exercise. To exercise the Option, the Participant (or in the case of exercise after the Participant’s death or incapacity, the Participant’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company a notice of exercise in the manner designated by the Committee. If someone other than the Participant exercises the Option, then such Person must submit documentation reasonably acceptable to the Company verifying that such Person has the legal right to exercise the Option.
2
4.2 Payment of Exercise Price. The entire Exercise Price of the Option shall be payable in full at the time of exercise to the extent permitted by applicable statutes and regulations, either:
(a) in cash or by certified or bank check at the time the Option is exercised; or
(b) in the discretion of the Committee, upon such terms as the Committee shall approve:
(i) by delivery to the Company of other shares of Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Exercise Price (or portion thereof) due for the number of shares being acquired;
(ii) by a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise issuable in respect of an Option that are needed to pay the Option Exercise Price;
(iii) by any combination of the foregoing methods; or
(iv) in any other form of legal consideration that may be acceptable to the Committee.
4.3 Withholding. Prior to the issuance of Option Shares upon the exercise of the Option, the Participant must make arrangements satisfactory to the Company to pay or provide for any applicable federal, state and local withholding obligations of the Company. The Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise of the Option by any of the following means:
(a) tendering a cash payment;
(b) issuing any Common Stock issued pursuant to any Award to an agent on behalf of the Participant and directing the agent to sell a sufficient number of such shares on behalf of the Participant to satisfy the amount of any such withholding obligation, with the agent paying the proceeds of any such sale to the Company or any Affiliate for this purpose; or
(c) to the extent permitted by law, deducting the amount of any such withholding obligation from any payment of any kind otherwise due to the Participant.
5. Restrictions on Transfer. This Option shall not be assignable or transferable by the Participant, except by will or by the laws of descent and distribution, and shall not be subject in any manner to assignment, alienation, pledge, encumbrance, or charge. Notwithstanding the foregoing, in the event of the Participant’s death while employed by the Company, proceeds from the exercise of the Option may become payable to the Participant’s beneficiary as designated by the Participant in the manner prescribed by the Committee or, in the absence of an authorized beneficiary designation, by a legatee or legatees of such Award under the Participant’s last will, or by the Participant’s executors, personal representatives, or distributees of the Option in accordance with the Participant’s will of the laws of descent and distribution.
3
6. No Right to Continued Employment; No Rights as Shareholder. Neither the Plan nor this Agreement shall confer upon the Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time this Agreement was entered into or shall affect the right of the Company or an Affiliate to terminate (a) the employment of the Participant with or without notice and with or without Cause. The Participant shall not have any rights as a shareholder with respect to any Option Shares prior to the date of exercise of the Option.
7. Change in Control.
7.1 Acceleration of Vesting. In the event of a Change in Control, the Committee may, but shall not be obligated to:
(a) accelerate, vest or cause the restrictions to lapse with respect to all or any portion of this Option;
(b) cancel the Option and cause to be paid to the Participant the value of the vested portion of the Option, if any, as determined by the Committee, in its sole discretion, it being understood that in the case of any Option with an Option Exercise Price that equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee may cancel the Option without the payment of consideration therefor;
(c) provide for the issuance of substitute Awards or the assumption or replacement of such Awards; or
(d) provide written notice to the Participant that for a period of at least ten (10) days prior to the Change in Control, the Option shall be exercisable, to the extent applicable, as to all shares of Common Stock subject thereto and upon the occurrence of the Change in Control, any portion of the Option not so exercised shall terminate and be of no further force and effect.
7.2 The obligations of the Company under the Plan and this Option shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company and its Affiliates, taken as a whole.
8. Adjustments. The Option Shares may be adjusted or terminated in any manner as contemplated by Section 8 of the Plan.
9. Clawback Rights. The Option Shares are subject to the Company’s Clawback Rights under Section 10.6 of the Plan.
4
10. Tax Liability and Withholding. Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“**Tax-Related Items**”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (a) makes no representation or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or exercise of the Option or the subsequent sale of any Option Shares; and (b) does not commit to structure the Option to reduce or eliminate the Participant’s liability for Tax-Related Items.
11. Qualification as an Incentive Stock Option. It is understood that this Option is intended to qualify as an incentive stock option as defined in Code Section 422 to the extent permitted under Applicable Laws. Accordingly, the Participant understands that in order to obtain the benefits of an incentive stock option, no sale or other disposition may be made of shares for which incentive stock option treatment is desired within one (1) year following the date of exercise of the Option or within two (2) years from the Grant Date. The Participant understands and agrees that the Company shall not be liable or responsible for any additional tax liability the Participant incurs in the event that the Internal Revenue Service for any reason determines that this Option does not qualify as an incentive stock option within the meaning of the Code.
12. Disqualifying Disposition. If the Participant disposes of the shares of Common Stock prior to the expiration of either two (2) years from the Grant Date or one (1) year from the date the shares are transferred to the Participant pursuant to the exercise of the Option, the Participant shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such shares of Common Stock. The Participant also agrees to provide the Company with any information concerning any such dispositions as the Company requires for tax purposes.
13. Notices. Any notice required to be delivered to the Company under this Agreement shall be in writing and addressed to the Company at the Company’s principal corporate offices. Any notice required to be delivered to the Participant under this Agreement shall be in writing and addressed to the Participant at the Participant’s address as shown in the records of the Company. Either party may designate another address in writing (or by such other method approved by the Company) from time to time.
14. Choice of Law. The validity, construction and effect of the Plan, this Agreement and any rules and regulations relating to the Plan or this Agreement shall be determined in accordance with the laws of the State of Georgia, other than its law respecting choice of laws, and applicable federal law. Venue shall be in, and subject to the jurisdiction of, the courts of the State of Georgia or a Federal Court located in the State of Georgia (as may be appropriate).
15. Interpretation. Any dispute regarding the interpretation of this Agreement shall be submitted by the Participant or the Company to the Committee for review. The resolution of such dispute by the Committee shall be final and binding on the Participant and the Company.
16. Options Subject to Plan. This Agreement is subject to the Plan as approved by the Company’s shareholders. The terms and provisions of the Plan as it may be amended from time to time are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
5
**17.** **[****Shareholders’ Agreement****. Notwithstanding anything in this** **Agreement** **to the contrary, and in accordance with Section 11.3 of the Plan, as a condition to the receipt of** **Option** **Shares, the Participant shall execute and become a party to the Shareholders**’ **Agreement** **which shall set forth certain restrictions on the transferability of the** **Option** **Shares, including [a right of first refusal of the Company with respect to** **Option** **Shares, the right of the Company to re-purchase** **Option** **Shares after a Participant**’**s termination of Continuous Service, and drag-along rights of the Company and certain investors] and such other terms as the Board or Committee shall from time to time establish.]2**
18. Successors and Assigns. The Company may assign any of its rights under this Agreement. This Agreement will be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement will be binding upon the Participant and the Participant’s beneficiaries, executors, administrators and the Person(s) to whom the Option may be transferred by will or the laws of descent or distribution.
19. Severability. If any of the provisions of the Plan or this Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
20. Discretionary Nature of Plan. The Plan is discretionary and may be amended, cancelled or terminated by the Company at any time, in its discretion. The grant of the Option in this Agreement does not create any contractual right or other right to receive any Options or other Awards in the future. Future Awards, if any, will be at the sole discretion of the Company. Any amendment, modification, or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Participant’s employment with the Company.
21. Amendment. The Committee at any time, and from time to time, may amend the terms of this Agreement; *provided, however*, that the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under any Award unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
22. No Impact on Other Benefits. The value of the Participant’s Option is not part of his or her normal or expected compensation for purposes of calculating any severance, retirement, welfare, insurance or similar employee benefit.
---
2 Note to Company: The Plan gives the Committee/Board the discretion to require the Participant to become a party to a Shareholder’s Agreement. This provision may be thus included, with the appropriate description of the restrictions, if the Company desires on a case-by-case basis.
6
23. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. Counterpart signature pages to this Agreement transmitted by facsimile transmission, by electronic mail in portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
24. Acceptance. The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. The Participant has read and understands the terms and provisions thereof, and accepts the Option subject to all of the terms and conditions of the Plan and this Agreement. The Participant acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the Option Shares and that the Participant should consult a tax advisor prior to such exercise or disposition.
[*Signature Page Follows*]
7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
**QUMULUSAI, INC.**
By:
Name:
Title:
- **PARTICIPANT**
- By:
- Name:
*Please complete the following as applicable:*
**Acknowledgment and Agreement of Spouse**
The undersigned spouse of the Participant acknowledges that he or she has read this Agreement and agrees to be bound by its terms to the extent that the Participant has executed such document.
Name:
**OR**
**Declaration of Unmarried Status**
The Participant hereby declares that he or she is not married as of the date hereof.
Name:
---
## EXHIBIT 23.1
SEC source: [ex_903268.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903268.htm)
**Exhibit 23.1**
**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
We hereby consent to the use in the Prospectus constituting a part of this Registration Statement on Form S-1 of QumulasAI, Inc., formerly Global Digital Holdings Inc. and Subsidiaries, of our report dated June 30, 2025, except for the effects of the name change as disclosed in Note 1, the restatement disclosed in Note 3 to the consolidated financial statements, as to which the date is August 28, 2025, and the effect of the reverse stock split disclosed in Note 1 to the consolidated financial statements, as to which the date is December 30, 2025, relating to the consolidated financial statements of QumulusAI, Inc. as of and for the years ended December 31, 2024 and 2023, which is contained in that Prospectus. We also consent to the reference to our firm under the caption “Experts” in the Prospectus.
/s/ WIthumSmith+Brown, PC
Whippany, New Jersey
December 30, 2025
---
## EXHIBIT 23.2
SEC source: [ex_903278.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903278.htm)
**Exhibit 23.2**
**BPS & Associates, LLC**
**6021 University Blvd Ste. 470**
**Ellicott City, MD 21043**
**Tel:** **(443) 973-6892**
**Fax:** **(443) 973-6897**
***Certified Public Accountants***
**CONSENT OF INDEPENDENT AUDITORS**
We consent to the inclusion in this Registration Statement on Form S-1 (the “Registration Statement”) of QumulusAI, Inc. of our report dated July 3, 2025, relating to the financial statements of The Cloud Minders, Inc. as of December 31, 2024 and 2023 and for the years then ended, which report appears in the Registration Statement.
We also consent to the reference to our firm under the heading “Experts” in this Registration Statement.
/s/ BPS & Associates, LLC
Ellicott City, Maryland
December 30, 2025
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## EXHIBIT FILING FEES
SEC source: [ex_903142.htm](https://www.sec.gov/Archives/edgar/data/2084026/000143774925039073/ex_903142.htm)
- **Calculation of Filing Fee Tables**
- **S-1**
- **QumulusAI, Inc.**
**Table 1: Newly Registered and Carry Forward Securities** ☐Not Applicable
| Line item | Security Type | Security Class Title | Fee Calculation or Carry Forward Rule | Amount Registered | Proposed Maximum Offering Price Per Unit | Maximum Aggregate Offering Price | Fee Rate | Amount of Registration Fee | Carry Forward Form Type | Carry Forward File Number | Carry Forward Initial Effective Date | Filing Fee Previously Paid in Connection with Unsold Securities to be Carried Forward |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Newly Registered Securities | | | | | | | | | | | | |
| Fees to be Paid | Equity | Common Stock, no par value per share | 457(a) | 0 | $ 0.00 | $ 350,000,000.00 | 0.0001381 | $ 48,335.00 | | | | |
| Fees Previously Paid | | | | | | | | | | | | |
| Carry Forward Securities | | | | | | | | | | | | |
| Carry Forward Securities | | | | | | | | | | | | |
| | | Total Offering Amounts: | | | | $ 350,000,000.00 | | $ 48,335.00 | | | | |
| | | Total Fees Previously Paid: | | | | | | $ 0.00 | | | | |
| | | Total Fee Offsets: | | | | | | $ 0.00 | | | | |
| | | Net Fee Due: | | | | | | $ 48,335.00 | | | | |
**Offering Note**
- 1 (1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(a) of the Securities Act of 1933, as amended. Given that there is no proposed maximum offering price per share of common stock, the registrant calculates the proposed maximum aggregate offering price by analogy to Rule 457(f)(2) based on the book value of the common stock the registrant registers, which will be calculated from its unaudited balance sheet as of September 30, 2025. Given that the registrant's shares of common stock are not traded on an exchange or over-the-counter, the registrant did not use the market prices of its common stock in accordance with Rule 457(c).
- ---
**Table 2: Fee Offset Claims and Sources** ☑Not Applicable
Registrant or Filer Name Form or Filing Type File Number Initial Filing Date Filing Date Fee Offset Claimed Security Type Associated with Fee Offset Claimed Security Title Associated with Fee Offset Claimed Unsold Securities Associated with Fee Offset Claimed Unsold Aggregate Offering Amount Associated with Fee Offset Claimed Fee Paid with Fee Offset Source
**Rules 457(b) and 0-11(a)(2)**
Fee Offset Claims N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Fee Offset Sources N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
**Rule 457(p)**
Fee Offset Claims N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Fee Offset Sources N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
**Table 3: Combined Prospectuses** ☑Not Applicable
**Security Type** **Security Class Title** **Amount of Securities Previously Registered** **Maximum Aggregate Offering Price of Securities Previously Registered** **Form Type** **File Number** **Initial Effective Date**
N/A N/A N/A N/A N/A N/A N/A N/A