BUDZ RISK DISCLOSURE STATEMENT

Document ID: BUDZ-RISK-001

Version: 2.2

Effective Date: December 13, 2025

Last Updated: December 18, 2025

Governing Document: Terms of Service (BUDZ-LEGAL-TOS-2025-001)

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RELATED DOCUMENTS

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WARNING: PLEASE READ CAREFULLY THIS RISK DISCLOSURE STATEMENT DESCRIBES IMPORTANT RISKS ASSOCIATED WITH PARTICIPATING IN BUDZ. PARTICIPATION IN BUDZ INVOLVES SIGNIFICANT RISKS, INCLUDING BUT NOT LIMITED TO THE PERMANENT LOSS OF ALL FUNDS SPENT. BY USING THE PLATFORM, YOU ACKNOWLEDGE THAT YOU HAVE READ, UNDERSTOOD, AND ACCEPTED ALL RISKS DESCRIBED HEREIN.

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TABLE OF CONTENTS

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SECTION 1: INTRODUCTION

1.1 Purpose

This Risk Disclosure Statement is designed to provide you with clear, comprehensive information about the risks associated with using the BUDZ platform. It is incorporated by reference into the Terms of Service (BUDZ-LEGAL-TOS-2025-001) and constitutes a material part of your agreement with GamesOnChain LLC.

1.2 Scope

This disclosure covers risks related to:

(a) Gameplay mechanics and plant care;

(b) NFT ownership and trading;

(c) Blockchain technology and smart contracts;

(d) Financial volatility and market conditions;

(e) Regulatory developments;

(f) Platform operations;

(g) Third-party services and integrations.

1.3 No Exhaustive List

This document does not and cannot describe all possible risks. New risks may emerge that are not currently foreseeable. You should carefully consider your individual circumstances and risk tolerance before participating.

1.4 Not Financial Advice

IMPORTANT NOTICE NOTHING IN THIS DOCUMENT OR ON THE BUDZ PLATFORM CONSTITUTES FINANCIAL, INVESTMENT, LEGAL, OR TAX ADVICE. BUDZ IS A GAME, NOT AN INVESTMENT OR FINANCIAL OPPORTUNITY. CONSULT QUALIFIED PROFESSIONALS BEFORE MAKING ANY FINANCIAL DECISIONS.

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SECTION 2: GAME-SPECIFIC RISKS

2.1 Plant Death Risk

CRITICAL WARNING VIRTUAL PLANTS CAN DIE PERMANENTLY. PLANT DEATH RESULTS IN: - Complete loss of your seed purchase (0.0001-0.0005 ETH) - Complete loss of all nutrient purchases made during the Growing Cycle - Permanent burning of the Plant NFT - No ability to recover the plant or purchase cost - NO REFUNDS under any circumstances

Causes of Plant Death:

Recovery Not Possible: Dead plants cannot be revived. There is no "undo" feature. All blockchain actions are final.

2.2 Difficulty Level Risks

Higher difficulty levels offer greater potential rewards but significantly increased risk of plant death. Expert mode requires daily attention and precise care.

2.3 Quality Uncertainty

Your Bud NFT Grade is determined by your care throughout the 65-day Growing Cycle:

Risk: Even with dedicated care, factors including on-chain randomness may affect final outcomes. There is no guarantee of achieving a specific Grade.

2.4 Clone Risks

2.5 Time Commitment

The 65-day Growing Cycle requires consistent attention:

Risk: Missing care windows can result in plant decline or death. Life circumstances (travel, illness, etc.) may interfere with care requirements.

2.6 Randomness and Luck

Certain game elements are determined by on-chain randomness:

(a) Strain Assignment: When purchasing a seed, strain is randomly assigned;

(b) Angelic Trait: Rare trait probability varies by difficulty (1/1,000 Beginner, 1/500 Advanced, 1/100 Expert);

(c) Breeding Outcomes: Offspring traits involve probabilistic inheritance.

Results are cryptographically verifiable but ultimately unpredictable.

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SECTION 3: BLOCKCHAIN AND TECHNOLOGY RISKS

3.1 Smart Contract Risks

HIGH RISK WARNING SMART CONTRACTS ARE EXPERIMENTAL SOFTWARE. Despite audits and testing, smart contracts may contain: - Undiscovered bugs or vulnerabilities - Logic errors that cause unexpected behavior - Exploitable flaws that could result in loss of funds - Upgrade risks when contracts are modified

The Company cannot guarantee that smart contracts are free from defects.

3.2 Private Key Risks

CRITICAL WARNING IF YOU LOSE YOUR PRIVATE KEYS OR SEED PHRASE, YOUR ASSETS ARE PERMANENTLY LOST. - The Company CANNOT recover your private keys - The Company CANNOT reverse transactions - The Company CANNOT restore access to your wallet - There is NO password reset or account recovery

Your wallet security is entirely your responsibility.

3.3 Network Risks

3.4 Bridge and Layer 2 Risks

BUDZ operates on Base (Ethereum Layer 2):

(a) Bridge Risks: Moving assets to/from Base involves bridge smart contracts that may have vulnerabilities;

(b) Sequencer Risks: Base sequencer outages may delay transaction finality;

(c) Exit Risks: Forced withdrawals to Ethereum Mainnet may take time;

(d) Rollup Risks: Layer 2 security depends on underlying Ethereum security.

3.5 Irreversibility of Transactions

All blockchain transactions are:

(a) Final: Once confirmed, transactions cannot be undone;

(b) Immutable: Historical records cannot be altered;

(c) Public: Visible to anyone with blockchain access;

(d) Permanent: Recorded forever on the blockchain.

Mistakes (wrong address, wrong amount) cannot be corrected after confirmation.

3.6 Oracle and Data Feed Risks

The Protocol may rely on external data sources (oracles). Risks include:

(a) Oracle manipulation or attacks;

(b) Incorrect or delayed data;

(c) Oracle downtime;

(d) Dependencies on third-party data providers.

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SECTION 4: FINANCIAL AND MARKET RISKS

4.1 Cryptocurrency Volatility

VALUE DISCLAIMER ETH AND NFT VALUES ARE EXTREMELY VOLATILE. You may experience: - Significant gains or losses in short periods - Complete loss of purchase value - Inability to sell at desired prices - Market illiquidity at critical times

Historical performance does not guarantee future results.

4.2 NFT Value Uncertainty

4.3 Total Loss Risk

You may lose 100% of your purchase, including:

(a) All ETH spent on seeds;

(b) All ETH spent on nutrients, CO2, and clones;

(c) All value of NFTs held;

(d) Gas fees spent on transactions.

Only spend what you can afford to lose completely.

4.4 Liquidity Risks

4.5 No Guaranteed Returns

IMPORTANT NOTICE GAME NFTs (BUD NFTs, WEIGHT NFTs) DO NOT ENTITLE HOLDERS TO: - Dividends or profit distributions - Revenue sharing from the Protocol - Any financial return based on token holdings - Investment returns of any kind Treasury funds are for community purposes only, not member distributions.

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SECTION 5: REGULATORY AND LEGAL RISKS

5.1 Regulatory Uncertainty

Cryptocurrency, NFT, and DAO regulations are evolving rapidly:

Future regulations may:

(a) Classify NFTs as securities;

(b) Impose licensing requirements;

(c) Restrict or ban certain activities;

(d) Require identity verification (KYC);

(e) Impose tax reporting obligations.

5.2 Securities Law Risks

Although BUDZ NFTs are designed as utility tokens for gameplay—not financial instruments—regulators may classify them differently:

(a) SEC Scrutiny: U.S. Securities and Exchange Commission may view tokens as securities;

(b) Howey Test: Tokens may fail securities law tests in some jurisdictions;

(c) Enforcement Actions: Regulatory enforcement could affect Platform operations;

(d) Compliance Costs: Future compliance requirements may be costly.

5.3 Tax Implications

Participating in BUDZ may have tax consequences:

(a) NFT Purchases: May be taxable events;

(b) NFT Sales: Capital gains or ordinary income taxes may apply;

(c) Airdrops/Rewards: May be taxable as income;

(d) Cross-Border Issues: International tax obligations may apply;

(e) Reporting Requirements: Tax reporting for crypto varies by jurisdiction.

Consult a qualified tax professional for guidance.

5.4 Cannabis-Related Content Risks

LEGAL NOTICE BUDZ IS A VIRTUAL GAME. No actual cannabis, THC, CBD, or any controlled substance is involved. However: - Cannabis-themed content may be restricted in some jurisdictions - Employers or institutions may have policies regarding such content - Some platforms may restrict cannabis-related NFT content - Future regulations may affect cannabis-themed games

5.5 LLC Legal Status

Wyoming LLC status provides certain protections, but:

(a) LLC legal recognition and liability protection varies by jurisdiction;

(b) Other jurisdictions may have different LLC rules;

(c) Liability protection may not apply in all circumstances;

(d) Legal treatment of blockchain platforms is evolving.

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SECTION 6: OPERATIONAL RISKS

6.1 Platform Availability

The Platform may be unavailable due to:

6.2 Protocol Changes

The Protocol may change through Founder decisions:

(a) Game mechanics and parameters;

(b) Fee structures;

(c) NFT functionality;

(d) Platform rules;

(e) Smart contract implementations.

Platform changes are binding on all users.

6.3 Team and Development Risks

6.4 Competition Risks

BUDZ operates in a competitive market:

(a) Competing games may emerge with better features;

(b) User attention is limited and may shift;

(c) Technology may become outdated;

(d) First-mover advantages may erode.

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SECTION 7: THIRD-PARTY RISKS

7.1 Wallet Provider Risks

7.2 Infrastructure Dependencies

BUDZ depends on third-party services:

7.3 Marketplace Risks

When trading on external marketplaces:

(a) Smart contract risks of marketplace;

(b) Royalty bypass or enforcement issues;

(c) Listing scams and impersonation;

(d) Marketplace policy changes;

(e) Platform shutdowns or restrictions.

7.4 Cross-Platform Risks

Interoperability with other protocols involves:

(a) Bridge vulnerabilities;

(b) Token standard compatibility;

(c) Third-party smart contract risks;

(d) Oracle dependencies.

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SECTION 8: RISK MITIGATION STRATEGIES

8.1 Security Best Practices

Wallet Security:

Operational Security:

8.2 Spending Guidelines

(a) Only Invest What You Can Afford to Lose: Treat all BUDZ purchases as entertainment expenses, not financial instruments;

(b) Diversification: Do not concentrate all assets in BUDZ;

(c) Research: Understand the game mechanics before spending;

(d) Start Small: Begin with minimal spending to learn;

(e) No Leverage: Do not borrow money to spend on BUDZ.

8.3 Game Strategy

(a) Start with Beginner: Learn mechanics before advancing;

(b) Consistent Care: Set reminders for plant care;

(c) Read Documentation: Understand all game mechanics;

(d) Community Engagement: Learn from experienced players;

(e) Accept Losses: Plant death is part of the game.

8.4 Staying Informed

(a) Follow official BUDZ channels for updates;

(b) Monitor platform announcements that affect you;

(c) Stay aware of regulatory developments;

(d) Keep informed about security best practices;

(e) Engage with the community.

8.5 No Expectation of Profit

You acknowledge and agree that:

(a) Seed NFTs and Bud NFTs are digital collectibles for gameplay, not investment instruments, securities, or financial products;

(b) You are purchasing the right to participate in a game, not acquiring a security, investment contract, or financial instrument;

(c) Any rewards received are gameplay incentives earned through active, skill-based participation, not investment returns or passive income;

(d) The Company makes no representations regarding future value, reward amounts, or monetary outcomes;

(e) You should not participate if your primary motivation is financial return rather than entertainment.

8.6 Skill-Based Gameplay

Game outcomes in digiBUDS depend predominantly on:

(a) Player Knowledge: Understanding game mechanics, growth stages, and care requirements;

(b) Consistent Care: Daily attention to watering, feeding, and environmental controls;

(c) Strategic Decision-Making: Optimal timing for actions, light schedules, and harvest windows;

(d) Time Commitment: Active participation throughout the 65-day Growing Cycle;

(e) Learning and Adaptation: Improving techniques based on experience.

Random elements (strain assignment, certain trait probabilities) add variety but do not determine overall success. Skilled, attentive players consistently outperform passive or inattentive players, demonstrating the skill-based nature of gameplay.

SKILL VS. CHANCE While random number generation determines certain initial traits (such as strain assignment), the quality of your final harvest—and thus any rewards—depends almost entirely on your consistent care and skill over 65 days. A player who tends their plant diligently will consistently produce higher-quality buds than one who neglects their plant, regardless of initial random traits.

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SECTION 9: RISK SUMMARY MATRIX

9.1 Risk Categories

9.2 Risk/Reward Assessment

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SECTION 10: ACKNOWLEDGMENT

10.1 Your Acknowledgment

By using the BUDZ Platform, you acknowledge and agree that:

10.2 Continuing Acceptance

Your continued use of the Platform constitutes ongoing acceptance of these risks. If you do not accept these risks, do not use the Platform.

10.3 Updates

This Risk Disclosure Statement may be updated. Material changes will be communicated through the Platform. Your continued use after updates constitutes acceptance of the updated disclosures.

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VERSION HISTORY

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This Risk Disclosure Statement is part of the BUDZ legal framework and is incorporated by reference into the Terms of Service (BUDZ-LEGAL-TOS-2025-001).

Legal Inquiries: binarydrool@protonmail.com

Security Reports: binarydrool@protonmail.com

Related Documents: Terms of Service (BUDZ-LEGAL-TOS-2025-001), Platform Operations (BUDZ-OPS-001)