NFT & Digital Asset Terms

Terms governing the creation, ownership, transfer, and redemption of compressed NFTs (cNFTs) and other digital assets on the Phygitals platform.

1. Overview

These NFT & Digital Asset Terms ("NFT Terms") govern the creation, ownership, transfer, sale, and redemption of non-fungible tokens ("NFTs") and other digital assets on the Phygitals platform (the "Service"). These NFT Terms are part of and incorporated into the Phygitals Terms of Service. Capitalized terms not defined herein shall have the meanings ascribed to them in the Terms of Service.

Phygitals operates a hybrid physical-digital collectibles platform where each digital NFT corresponds to a real, physical trading card stored in a professional vault facility. The NFTs on our platform serve as verifiable digital certificates of ownership for the underlying physical assets. By purchasing, holding, transferring, or otherwise interacting with NFTs on the Service, you agree to be bound by these NFT Terms.

The digital asset landscape is evolving rapidly, and regulatory frameworks vary by jurisdiction. It is your responsibility to understand and comply with all laws and regulations applicable to your purchase, ownership, and transfer of digital assets in your jurisdiction.

2. What Are Compressed NFTs (cNFTs)

Digital assets on the Phygitals platform are implemented as compressed NFTs (cNFTs) on the Solana blockchain. Compressed NFTs are a specific type of non-fungible token created using the Metaplex Bubblegum protocol, which leverages concurrent Merkle trees to store NFT data in a highly cost-efficient manner while maintaining the security and verifiability guarantees of the Solana blockchain.

Key technical characteristics of cNFTs on Phygitals:

• Blockchain: All cNFTs are minted and exist on Solana mainnet-beta. Phygitals does not operate on any other blockchain;

• Protocol: cNFTs are created using the Metaplex Bubblegum program, which is the standard for compressed NFTs on Solana;

• Token Standard: Assets conform to the SPL Token standard with Metaplex Token Metadata;

• Compression: Unlike traditional NFTs where each token requires its own on-chain account, cNFTs store data in compressed Merkle trees, significantly reducing costs while preserving provability and ownership verification;

• Metadata: Each cNFT contains metadata including the card's image, name, grading information, grader identity, collection, category, and other attributes. Metadata is stored off-chain with on-chain verification;

• Immutability: Once minted, the core attributes of a cNFT (representing the authenticated, graded physical card) are immutable and verifiable by anyone on the Solana blockchain.

cNFTs are functionally equivalent to standard NFTs for purposes of ownership, transfer, and marketplace trading. They can be viewed in compatible Solana wallets, listed on Solana NFT marketplaces that support compressed NFTs, and transferred between Solana wallets.

3. Ownership Rights

When you acquire a cNFT on the Phygitals platform - whether through a pack purchase, marketplace transaction, Pack Party, or any other means - you receive the following:

• Digital Token Ownership: You own the specific cNFT token as recorded on the Solana blockchain. Ownership is determined solely by the blockchain record associated with your wallet address;

• Right to the Physical Card: Ownership of the cNFT entitles you to claim the corresponding physical trading card from vault storage, subject to the Claim process and conditions described in the Terms of Service and Shipping & Redemption documentation;

• Right to Transfer: You may transfer, sell, or otherwise dispose of the cNFT through the Phygitals marketplace, compatible third-party marketplaces, or direct wallet-to-wallet transfer on the Solana blockchain;

• Right to Display: You may display the digital image associated with your cNFT for personal, non-commercial purposes.

Ownership of a cNFT does NOT grant you:

• Any intellectual property rights in the underlying card imagery, brand names, logos, or content (e.g., Pokemon, Yu-Gi-Oh!, Dragon Ball, One Piece, or sports league trademarks);

• Any right to reproduce, distribute, create derivative works from, or commercially exploit the card imagery or metadata;

• Any equity, ownership stake, or governance rights in Phygitals, Inc. or any associated entity;

• Any right to future revenue, dividends, royalties, or distributions from Phygitals;

• Any guarantee of value, liquidity, or appreciation of the digital asset.

Phygitals reserves the right to charge marketplace fees, royalties, or other fees on transfers and sales of cNFTs, as disclosed at the time of transaction.

Not a Security: cNFTs on the Phygitals platform represent digital certificates of ownership for physical collectible cards. They do not represent equity, debt, revenue share, governance rights, or any form of investment contract in Phygitals, Inc. or any other entity. cNFTs are not securities and are not marketed, offered, or sold as securities. Phygitals does not offer securities of any kind. You should not purchase cNFTs with the expectation of profit derived from the efforts of Phygitals or any third party.

4. Minting & Tokenization

The process of creating a cNFT on the Phygitals platform is called "minting" or "tokenization." Minting occurs in the following scenarios:

• Platform Inventory: Phygitals acquires physical trading cards through its vault partners (PSA, Fanatics, Alt) and other sources. These cards are professionally authenticated, graded, and photographed. The card data is then used to mint corresponding cNFTs on the Solana blockchain;

• User Submissions: Users may submit their own physical trading cards to Phygitals for tokenization. Upon receipt, authentication, and grading by our vault partners, the cards are minted as cNFTs. The Submit process is subject to Phygitals' acceptance criteria and applicable fees;

• Pack Contents: Cards within digital packs are minted (or allocated from existing minted inventory) and revealed to the purchaser upon pack opening.

Each minted cNFT is linked to a specific, individually identifiable physical card. The card's metadata - including its image, grade, grading authority, collection, set, and other attributes - is embedded in the token's metadata at the time of minting. Phygitals makes commercially reasonable efforts to ensure the accuracy of metadata but does not warrant that metadata is free from errors.

The minting process is performed by Phygitals or its authorized agents. Users do not directly mint cNFTs on the blockchain; rather, the platform handles the minting process and delivers the resulting tokens to the user's Solana wallet.

5. Wallet & Custody

Digital assets on the Phygitals platform are held in Solana wallets. Depending on your account configuration, your wallet may be:

• Embedded Wallet: An embedded Solana wallet automatically created and managed through Privy. Embedded wallets are generated for users who do not connect an external wallet at the time of registration. Private keys for embedded wallets are managed by Privy using secure, distributed key management infrastructure;

• External Wallet: A self-custody Solana wallet that you control independently (e.g., Phantom, Solflare, Backpack, Ledger, or other compatible wallets). When you connect an external wallet, you retain full control of your private keys.

Important considerations regarding custody:

• Phygitals does not have direct access to your wallet's private keys, whether embedded or external;

• All blockchain transactions (purchases, sales, transfers) require your explicit approval via wallet signing. Phygitals does not perform automated debits from your wallet;

• If you use an embedded wallet, the security and availability of your wallet are dependent on Privy's infrastructure and services. Phygitals is not responsible for any failure, disruption, or security breach related to the authentication provider's wallet management services;

• If you use an external wallet, you are solely responsible for safeguarding your private keys and seed phrases. Loss of your private keys will result in permanent, irreversible loss of access to your digital assets;

• Phygitals cannot reverse, cancel, or modify blockchain transactions once they are submitted and confirmed on the Solana network.

The supported currencies for transactions on the Phygitals platform are USDC (primary), USDT, and SOL, all on the Solana blockchain. The platform covers gas (transaction) fees for withdrawals to external wallets.

6. Blockchain Risks

By using the Service and interacting with digital assets, you acknowledge and accept the inherent risks associated with blockchain technology and digital assets:

• Network Risks: The Solana blockchain is a decentralized network that may experience congestion, downtime, forks, or other disruptions that could affect the availability, speed, or cost of transactions. Phygitals has no control over the Solana network and is not responsible for network issues;

• Smart Contract Risks: cNFTs are created and managed through smart contracts (including the Metaplex Bubblegum program). Smart contracts may contain bugs, vulnerabilities, or be subject to exploits that could result in loss of assets. While Phygitals uses established, audited protocols, no smart contract can be guaranteed to be free from vulnerabilities;

• Irreversibility: Blockchain transactions are irreversible once confirmed. If you send a cNFT or cryptocurrency to the wrong address, or if a transaction is executed due to a compromise of your wallet, Phygitals cannot reverse or recover the transaction;

• Regulatory Risks: The legal and regulatory landscape for NFTs and digital assets varies by jurisdiction and is rapidly evolving. Changes in laws or regulations may affect your ability to purchase, hold, transfer, or sell digital assets. It is your responsibility to comply with applicable laws;

• Technology Risks: Changes to the Solana blockchain protocol, the Metaplex standard, or related infrastructure could affect the functionality, interoperability, or value of cNFTs;

• Wallet Security: Your digital assets are only as secure as your wallet. Compromise of your wallet credentials (private keys, seed phrases, or embedded wallet account) could result in theft or permanent loss of your assets;

• Third-Party Platform Risks: If you transfer cNFTs to third-party marketplaces or wallets, those platforms may have their own terms, limitations, or risks. Phygitals is not responsible for the acts or omissions of third-party platforms.

PHYGITALS DISCLAIMS ALL LIABILITY FOR LOSSES ARISING FROM BLOCKCHAIN RISKS, INCLUDING BUT NOT LIMITED TO NETWORK FAILURES, SMART CONTRACT VULNERABILITIES, HACKING, REGULATORY CHANGES, OR USER ERROR IN MANAGING WALLETS OR TRANSACTIONS.

7. No Guarantee of Value

Digital assets, including cNFTs on the Phygitals platform, are subject to market forces and their value may fluctuate significantly. Phygitals makes no representations, warranties, or guarantees regarding:

• The current or future monetary value of any cNFT or digital asset;

• The liquidity or marketability of any cNFT;

• The accuracy of Fair Market Value (FMV) estimates displayed on the platform, which are sourced from third-party pricing providers and are provided for informational purposes only;

• The continued operation of the marketplace or any secondary market for cNFTs;

• The value, condition, or authenticity of the underlying physical card beyond the initial professional grading and authentication performed by our vault partners.

The value of trading cards and their corresponding digital assets is influenced by numerous factors outside of Phygitals' control, including but not limited to market demand, collector sentiment, card condition, rarity, the performance of athletes (for sports cards), the popularity of franchises, macroeconomic conditions, and regulatory developments.

Digital assets are speculative in nature. You should not purchase digital assets as an investment and should be prepared for the possibility that your assets may lose some or all of their value. Phygitals does not provide investment, financial, or tax advice.

The buyback feature, where available, provides a time-limited offer to repurchase recently pulled cards at the applicable buyback rate as displayed at the time of the pack opening. Buyback rates vary by pack tier and are subject to change at Phygitals' discretion. The buyback feature is not a guarantee of ongoing value or liquidity.

8. Transfer & Sale

You may transfer or sell your cNFTs through the following mechanisms:

• Phygitals Marketplace: The integrated marketplace, powered by marketplace infrastructure on the Solana blockchain, allows you to list cards for sale, make and accept offers, and execute purchases. Marketplace transactions are subject to applicable fees as disclosed at the time of transaction;

• Direct Transfer: You may transfer cNFTs directly from your Solana wallet to another Solana wallet address. Direct transfers are peer-to-peer blockchain transactions and are not facilitated or monitored by Phygitals;

• Third-Party Marketplaces: cNFTs may be listed and traded on third-party Solana NFT marketplaces that support compressed NFTs. Transactions on third-party platforms are governed by those platforms' terms and conditions.

Important transfer and sale considerations:

• All marketplace transactions are executed on the Solana blockchain and are final and irreversible;

• When you sell a cNFT, ownership of both the digital token and the right to claim the corresponding physical card transfers to the buyer;

• Marketplace fees and any applicable royalties are deducted automatically at the time of sale;

• You are responsible for ensuring the accuracy of wallet addresses when initiating transfers. Phygitals cannot recover assets sent to incorrect addresses;

• You are solely responsible for any tax obligations arising from the sale or transfer of digital assets;

• Phygitals reserves the right to restrict marketplace access or freeze assets if it suspects fraudulent activity, market manipulation, or violations of the Terms of Service.

9. Burning & Redemption

"Burning" refers to the process of permanently destroying a cNFT on the blockchain. On the Phygitals platform, burning occurs primarily in the context of physical card redemption (the Claim process):

• Claim (Digital to Physical): When you redeem a cNFT for the corresponding physical card, the cNFT is burned (permanently removed from the blockchain) upon successful processing of the claim. This ensures that the digital token cannot continue to circulate while the physical card is being shipped to you. The burn is irreversible - once a cNFT is burned, it cannot be restored or re-minted;

• Physical Fulfillment: Following the burn, the corresponding physical card(s) are shipped from the applicable vault facility (PSA, Fanatics, or Alt) to the shipping address you provided. Delivery timelines vary by vault partner and destination;

• Re-Tokenization: If you wish to re-digitize a physical card that was previously claimed, you may do so through the Submit process, which requires sending the card back to a Phygitals vault for re-authentication, re-grading (if applicable), and re-minting as a new cNFT.

You acknowledge that the Claim process involves coordination between Phygitals, its vault partners, and shipping carriers, and that delays may occur due to factors outside of Phygitals' control. Phygitals is not responsible for loss, damage, or delay during shipping. Please refer to our Shipping & Redemption documentation for complete details on the Claim process, shipping timelines, and liability.

Voluntary Burning: You should not burn a cNFT unless you are initiating a Claim. Burning a cNFT outside of the Claim process will result in the permanent loss of both the digital token and your ability to claim the corresponding physical card. Phygitals is not responsible for assets that are burned voluntarily or accidentally outside of the Claim process.

10. Contact Information

If you have questions about these NFT & Digital Asset Terms, the technical implementation of cNFTs, or your digital assets on the Phygitals platform, please contact us:

Phygitals, Inc. 1111B S Governors Ave STE 34931 Dover, DE 19904, United States Email: [email protected] Support: [email protected]