# Interactive Strength, Inc.: Form 10-Q for the period ended Jun 30, 2025

- Company: [Interactive Strength, Inc.](/companies/trnr.md) (CIK 1785056)
- Form: 10-Q
- Filed: 2025-08-14
- Accepted by EDGAR: Aug 14, 2025, 20:27 ET
- Period: 2025-06-30
- Accession: 0000950170-25-108949
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1785056/000095017025108949/trnr-20250630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1785056/000095017025108949/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-04-01 to 2025-06-30 | $1.2m | us-gaap:Revenues |
| Revenue | 6 months, 2025-01-01 to 2025-06-30 | $2.6m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2025-04-01 to 2025-06-30 | $1.4m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2025-01-01 to 2025-06-30 | $3.1m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2025-04-01 to 2025-06-30 | −$194.0k | us-gaap:GrossProfit |
| Gross profit | 6 months, 2025-01-01 to 2025-06-30 | −$497.0k | us-gaap:GrossProfit |
| Research and development | 3 months, 2025-04-01 to 2025-06-30 | $779.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2025-01-01 to 2025-06-30 | $2.0m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2025-04-01 to 2025-06-30 | −$5.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2025-01-01 to 2025-06-30 | −$12.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-04-01 to 2025-06-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2025-01-01 to 2025-06-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-04-01 to 2025-06-30 | −$2.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2025-01-01 to 2025-06-30 | −$8.8m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2025-04-01 to 2025-06-30 | −$2.13 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2025-01-01 to 2025-06-30 | −$12.49 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-04-01 to 2025-06-30 | −$2.13 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2025-01-01 to 2025-06-30 | −$12.49 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-04-01 to 2025-06-30 | 1,022,140 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2025-01-01 to 2025-06-30 | 703,048 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2025-01-01 to 2025-06-30 | −$5.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2025-06-30 | $582.0k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-06-30 | $15.0m | us-gaap:AssetsCurrent |
| Total assets | at 2025-06-30 | $86.2m | us-gaap:Assets |
| Current liabilities | at 2025-06-30 | $22.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-06-30 | $70.0m | us-gaap:Liabilities |
| Long-term debt | at 2025-06-30 | $55.1m | us-gaap:LongTermDebt |
| Current portion of debt | at 2025-06-30 | $10.0m | us-gaap:DebtCurrent |
| Shareholders' equity | at 2025-06-30 | $16.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 61,189 characters.

*The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information included in Part I, Item 1. of this Form 10-Q, and together with our audited condensed consolidated financial statements and the related notes and other information for the year ended December 31, 2024. Historic results are not necessarily indicative of future results.*

### Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. Forward-looking statements include, but are not limited to, statements regarding:

- our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses including changes in research and development, sales and marketing, and general and administrative expenses (including any components of the foregoing), and our ability to achieve and maintain future profitability;
- our business model, growth strategy, and our ability to effectively manage our growth, the factors which may affect our performance and the potential impact thereof and the potential significance and indicators and impact of our key operational and business metrics;
- anticipated trends, growth rates, and challenges in our business and in the markets in which we operate;
- our market opportunity, including our potential or anticipated growth of the fitness and wellness industry, including the smart home gym and connected fitness sector of this industry;
- market acceptance of our connected fitness hardware and services;
- beliefs and objectives for future operations, products, and services;
- our ability to maintain and increase sales of our CLMBR and FORME Studio equipment, increase memberships to the CLMBR and Forme platform, and expand our product and service offerings;
- our ability to attract and retain qualified trainers, including personal trainers, and to contract with fitness instructors and other content production personnel;
- our expectations regarding potential changes to our membership or pricing models or to our products and services;
- our plans to expand our commercial and corporate wellness customer base;
- our ability to develop new content, features, equipment, and other services to integrate with or complement the CLMBR and FORME platform and bring them to market in a timely manner;
- our expectations regarding content costs included in our products and services;
- the effects of seasonal trends on our results of operations;
- our expectations concerning relationships with third-party manufacturers, suppliers, content providers, ecosystem partners, and other third parties, as well as current and potential strategic relationships;
- our expectations regarding our manufacturing and supply chain, including any defects or warranty claims;
- our ability to maintain, protect, and enhance our intellectual property;
- our international expansion plans and ability to continue to expand internationally;
- the effects of increased competition in our markets and our ability to compete effectively;
- our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
- economic and industry trends, projected growth, or trend analysis;
- our liquidity position, capital requirements and need for additional financing;
- our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act and as a smaller reporting company; and
- the imposition of new tariffs or changes in existing tariff rates.

These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include those discussed below and under Item 1A. Risk Factors, as well as the risks discussed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements set forth in this Quarterly Report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. Forward-looking statements set forth in this Quarterly Report speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law. You should carefully read the “Risk Factors” section to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

### Overview

Interactive Strength Inc. is the parent company of two leading brands serving the commercial and at-home markets with specialty fitness equipment and virtual training: CLMBR and FORME. CLMBR manufactures vertical climbing equipment and provides a unique digital and on-demand training platform. FORME is a hardware manufacturer and digital fitness service provider that combines award-winning smart gyms with live 1:1 personal training (from real humans) to deliver an immersive experience. The combination of technology with expert training leads to better outcomes for both consumers and trainers alike. CLMBR and FORME offer unique fitness solutions for both the commercial and at-home markets

Key milestones in our growth history include:

- May 2017 – Interactive Strength Inc. founded
- July 2021 – Commenced commercial delivery of FORME Studio (fitness mirror), our first connected fitness hardware product
- July 2022 – Live 1:1 personal training service launched
- August 2022 – Commenced commercial delivery of FORME Studio Lift (fitness mirror and cable-based digital resistance)
- April 2023 – Interactive Strength went public on NASDAQ with ticker TRNR
- February 2024 – Acquired substantially all of the assets of CLMBR, Inc.

Our revenue is primarily generated from the sale of our connected fitness hardware products and associated recurring membership revenue. As we launched our first connected fitness hardware product in July 2021, we began generating revenue from sales of our products starting in the second half of 2021.

During the three and six months ended June 30, 2025 and 2024, we generated total revenue of $1.2 million and $0.6 million and $2.6 million and $1.0 million, respectively, and incurred net losses of $(2.18) million and $(10.6) million and $(8.8) million and $(22.0) million, respectively. As we generated recurring net losses and negative operating cash flow during the research and development stage of the FORME Studio and FORME Studio Lift products, we have funded our operations primarily with gross proceeds from the sales of our redeemable convertible preferred stock, the sale of our SAFE notes, the issuance of convertible notes, the issuance of promissory notes, and the issuance of common stock.

### Business Model and Growth Strategy

### Acquire complementary businesses that generate attractive synergies

We acquired CLMBR, Inc. in February 2024 and Wattbike (Holdings) Limited (“Wattbike”), a UK-based indoor-performance bike business, on July 1, 2025 (See FN 23. Subsequent Events) and we believe that there are other compelling businesses to be acquired. We expect that we will be able to acquire revenue-generating businesses, which would generate higher earnings and cashflow through synergies with our existing business. Our team has significant experience in M&A and we are one of the few companies in our industry with a public currency, which we believe makes us an attractive acquiror.

### Leverage well established equipment distributors to scale in commercial channels

We have high value partnerships with distributors, including Woodway, to sell CLMBR and FORME products into a variety of commercial environments. These relationships allow us to leverage the sales knowledge, relationships and specialization of third parties to accelerate our sales initiatives. Importantly, this construct allows us to make the vast majority of our sales related expenses variable, as we typically pay commissions only when units are sold.

### Expand into new geographies

We intend to expand the international reach of our product and service offerings. We are currently working with Sportstech Brands Holding GmbH, a direct-to-consumer fitness brand in Germany and across Europe, towards a possible acquisition or a partnership. We plan to continue to pursue disciplined international expansion by targeting countries with high fitness penetration and spend, as well as the presence of boutique fitness, and where we believe both CLMBR, FORME and Wattbike’s value propositions will resonate.

### Increase uptake of add-on services through compelling member experience

We intend to increase the uptake of our add-on memberships and services by providing compelling member experience focused on introducing our members to the variety of services available on our platform and specifically, the value-added benefits of our coaching and personal training offering. We believe our ability to provide service offerings at a number of price points will serve as a valuable lever for growth by increasing overall service revenues over time.

### Reduce the cost of personal training and expand addressable market without sacrificing quality

We intend to continue to explore ways to leverage our products, technology, and proprietary trainer education platform to bring the cost of coaching down incrementally, while maintaining an unwavering focus on the quality of the coaching experience we deliver to our members. This strategy is key to our medium- to long-term objectives, as we believe we can expand the addressable market for coaching services by reducing the per session cost and increasing accessibility of expert coaching services through our hardware and mobile experiences.

### Build out partnership ecosystem

We intend to continue to build our strategic partner ecosystem with a focus on relationships that enable us to extend our platform to new audiences. We are pursuing opportunities in a number of attractive verticals, including sports, physical therapy and rehabilitation, and telemedicine. We are continuously identifying and evaluating opportunities to apply our coaching know-how in new and innovative ways to expand our reach and impact.

### Expand corporate wellness

We intend to expand our recently launched corporate wellness initiative. Historically, corporate wellness programs were generally one-size-fits-all solutions for employees, such as corporate gyms. The rise of the hybrid workforce has made robust corporate wellness both an imperative and a challenge for many companies. We believe our comprehensive product portfolio makes us a better fit for modern corporate wellness programs than many existing alternatives. Our solution enables corporations to provide all of their employees with a coaching platform regardless of whether they work from home, in the office, or both. Our multi-pronged service offering also provides a new level of customization that can be adapted to employees at virtually all levels of tenure.

### Digital Asset Treasury Strategy

On June 10, 2025, the Company and the Treasury Subsidiary sold and, on the June 13th closing date, issued, for $50 million, the June 2025 Convertible Exchangeable Notes which are both (a) convertible into shares of Common Stock and (b) exchangeable into the utility tokens and key medium of exchange on the Fetch.ai network (“FET”). As of June 30, 2025, the Company had used approximately $20 million of the proceeds from the sale of the June 2025 Convertible Exchangeable Notes to purchase FET, $25.0 million of the proceeds to purchase Tether, a stablecoin, and $2.25 million remained in restricted cash, which must be used to purchase FET in the future, for the benefit of the Treasury Subsidiary. In addition, each investor in the Notes transaction has the right to require the Company and the

Treasury Subsidiary to issue additional senior secured convertible exchangeable notes, up to an aggregate principal amount of an additional $444.4 million. Asset appreciation of the FET could be a future source of Company revenue.

### Factors Affecting Our Performance

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following:

- We have a limited operating history; and our past financial results may not be a reliable indicator of our ability to successfully establish our product and service offerings in the marketplace, or of our future performance, and our revenue growth rate is likely to slow as our business matures.
- We derive a significant majority of our revenue from sales of our CLMBR, FORME Studio and FORME Studio Lift equipment and if sales of our CLMBR, FORME Studio and FORME Studio Lift equipment decline, it would materially and negatively affect our future revenue and results of operations.
- Our membership revenue is largely dependent on our ability to sell our CLMBR, FORME Studio equipment and if sales of our FORME Studio equipment decline, our membership revenue would decline, and it would materially and negatively affect our future revenue and results of operations. Similarly, we may be unable to attract and retain members, which could have an adverse effect on our business and rate of growth.
- If we fail to compete successfully against existing and future competitors, we may fail to obtain a meaningful market share, which in turn would harm our business, financial condition, and results of operations.
- Increases in component and equipment costs, long lead times, supply shortages, and supply changes could disrupt our supply chain and negatively impact our business, financial condition, and results of operations.
- The sufficiency of our liquidity and capital resources, and our ability to obtain additional funding as needed for our operations and to execute on our strategy.
- Our ability to execute or realize the anticipated benefits of any strategic acquisition or transaction.
- If the FET does not rise in value, it would materially and negatively affect our results of operations.

We have experienced, and expect to continue to experience, some disruptions to parts of our supply chain, including procuring necessary components or parts in a timely fashion, with suppliers increasing lead times or placing products on allocation and raising prices. In addition, disruptions to commercial transportation infrastructure have increased delivery times for materials and components or parts of our fitness equipment, and has impacted, and could in the future impact, our ability to timely deliver our products to customers. These supply chain disruptions have not materially affected our business outlook and goals or our operating results, including our sales, revenue, or liquidity or capital resources, and we have not implemented any mitigation efforts to date as a result. However, we cannot predict the impact to us of any future or prolonged supply chain disruptions or any mitigation efforts we may take going forward. For example, as a result of these supply chain disruptions, we may be required to increase customer order lead times and place some products on allocation. In addition, we may consider additional or alternative third-party manufacturing and logistics providers or suppliers. Such mitigation efforts may result in cost increases and any attempts to offset such increases with price increases may result in reduced sales, increased customer dissatisfaction, or otherwise harm our reputation. Further, if we were to elect to transition or add manufacturing or logistics providers or suppliers, it may result in temporary or additional delays in product delivery or risks related to consistent product quality or reliability. This in turn may limit our ability to fulfill customer orders and we may be unable to satisfy all of the demand for our products. We may in the future also purchase components further in advance, which in return can result in less capital being allocated to other activities such as marketing and other business needs. We cannot quantify the impact of such disruptions at this time or predict the impact of any mitigation efforts we may take in response to supply chain disruptions on our business, financial condition, and results of operations.

In addition, customer demand for our products may be impacted by weak economic conditions, inflation, weak growth, recession, equity market volatility, or other negative economic factors in the United States or other nations. The United States has recently experienced historically high levels of inflation. If the inflation rate continues to increase, it will likely affect our expenses, including, but not limited to, employee compensation expenses, increased manufacturing and supplier costs, and increasing market prices of certain components, parts, supplies, and commodity raw materials, which are incorporated into our products or used by our suppliers to manufacture our products. These components, parts, supplies, and commodities may from time to time become restricted, or general market factors and conditions may affect pricing of such components, parts, supplies and commodities, such as inflation or supply chain constraints. Given our limited operating history, we cannot predict how ongoing or increasing recessionary or inflationary pressures may impact our business, financial condition, and results of operations in the future.

### Components of Our Operating Results

**We generate revenue from sales of our connected fitness products, membership revenue, and personal training revenue. We identify our reportable segment based on the information used by management to monitor performance and make operating decisions. See Note 2. of the notes to our condensed consolidated financial statements included elsewhere in this report for additional information regarding our reportable segment.**

### Revenue

#### Connected Fitness Product

Connected Fitness Product revenue consists of sales of our connected fitness products and related accessories, delivery and installation services, and extended warranty agreements offered through a third-party. Fitness Product revenue is recognized at the time of delivery, except for extended warranty revenue which is recognized over the warranty period. For the third-party extended warranty service sold along with the connected fitness products, we do not obtain control of the warranty before transferring it to the customers. Therefore, we account for revenue related to the fees paid to the third-party extended warranty provider on a net basis, by recognizing only the net commission we retain. Connected fitness product revenue represented 77% and 77% and 42% and 32% of total revenue for the three and six months ended June 30, 2025 and 2024, respectively.

#### Membership

Membership revenue consists of revenue generated from our monthly Connected Fitness membership. Membership revenue represented 13% and 13% and 33% and 37% of total revenue for the three and six months ended June 30, 2025 and 2024, respectively.

#### Training

Training revenue consists of sales of our personal training services delivered through our connected fitness products and third-party mobile devices. Training revenue is recognized at the time of delivery. Training revenue represented 10% and 10% and 25% and 32% of total revenue for the three and six months ended June 30, 2025 and 2024, respectively.

### Cost of Revenue

#### Connected Fitness Product

Connected Fitness Product cost of revenue consists of CLMBR and Studio and Studio Lift and accessories product costs, including manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement costs, fulfillment costs, warehousing costs, and certain allocated costs related to management and facilities expenses associated with supply chain logistics.

#### Membership

Membership cost of revenue includes costs associated with personnel related expenses, filming and production costs, hosting fees, music royalties, and amortization of capitalized software development costs.

#### Training

Training cost of revenue includes costs associated with personnel related expenses and rent expense.

### Operating Expenses

#### Research and Development

Research and development expense primarily consists of personnel and facilities-related expenses, engineering costs, consulting and contractor expenses, tooling and prototype materials, and software platform expenses. We capitalize certain qualified costs incurred in connection with the development of internal-use software and software to be sold or marketed which may also cause research and development expenses to vary from period to period.

#### Sales and Marketing

Sales and marketing expense consists of performance marketing media spend, asset creation, and other brand creative, all showroom expenses and related lease payments, payment processing fees incurred in connection with the sale of our connected fitness products, and sales and marketing personnel-related expenses.

#### General and Administrative

General and administrative expenses include personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal, human resources, and IT functions. General and administrative expenses also include fees for professional services principally comprised of legal, audit, tax and accounting services, and insurance.

We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance and reporting obligations of public companies, and increased costs for insurance, investor relations expenses, and professional services. As a result, we expect that our general and administrative expenses will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue, but we expect to leverage these expenses over time as we grow our revenue and member base.

### Other (Expense) Income, Net

Other (expense) income, net consists of unrealized currency gains and losses, expenses related to equity line of credit commitment, loss on exchange of warrants for equity, and fair value of issuance of Loss Restoration Agreement derivative.

### Interest Expense

Interest expense consists of interest associated with the related party loans, term loans, promissory notes and convertible notes.

### Interest Income

Interest income consists of interest associated with the loan receivable.

### (Gain) loss upon extinguishment of debt and accounts payable

(Gain) loss on debt extinguishment was a result of conversion of promissory loans, convertible notes and senior secured debt into convertible notes.

### Change in Fair Value of Convertible Notes

The change in fair value of convertible notes consists of the change in the fair value of the outstanding convertible notes since issuance date and the previous reporting period.

### Change in Fair Value of Derivatives

The change in fair value of derivatives consists of the change in the fair value of the outstanding derivatives since the previous reporting period.

### Change in Fair Value of Digital Assets

Change in fair value of digital assets consists of the subsequent remeasurement of our digital assets measured at fair value based on quoted prices on active exchanges pursuant to ASC 350-60.

### Change in Fair Value of Warrants

The change in fair value of warrants consists of the change in the fair value of the outstanding warrants notes since the previous reporting period.

### Provision for Income Taxes

The provision for income taxes consists primarily of income taxes related to foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred assets will not be utilized.

### Results of Operations

The following tables set forth our condensed consolidated results of operations in dollars and as a percentage of total revenue for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.

*(in thousands)*

*(in thousands)*

*(in thousands)*

*(in thousands)*

| Revenue: | Three Months Ended June 30, 2025 | 2024 | Change Amount% |  | Six Months Ended June 30, 2025 | 2024 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Fitness product revenue | $937 | $258 | $679 | 263% | $1,988 | $311 | $1,677 | 539% |
| Membership revenue | 164 | 207 | (43) | (21%) | 340 | 362 | (22) | (6%) |
| Training revenue | 118 | 156 | (38) | (24%) | 248 | 311 | (63) | (20%) |
| Total revenue | 1,219 | 621 | 598 | 96% | 2,576 | 984 | 1,592 | 162% |
| Cost of revenue: |  |  |  |  |  |  |  |  |
| Cost of fitness product revenue (2) | (696) | (347) | (349) | 101% | (1,613) | (726) | (887) | 122% |
| Cost of membership (2) | (420) | (982) | 562 | (57%) | (843) | (2,000) | 1,157 | (58%) |
| Cost of training | (297) | (172) | (125) | 73% | (617) | (337) | (280) | 83% |
| Total cost of revenue | (1,413) | (1,501) | 88 | (6%) | (3,073) | (3,063) | (10) | 0% |
| Gross loss | (194) | (880) | 686 | (78%) | (497) | (2,079) | 1,582 | (76%) |
| Operating expenses: |  |  |  |  |  |  |  |  |
| Research and development (1) | 779 | 2,474 | (1,695) | (69%) | 2,050 | 4,497 | (2,447) | (54%) |
| Sales and marketing (1) (2) | 211 | 112 | 99 | 88% | 461 | 368 | 93 | 25% |
| General and administrative (1) (2) | 4,640 | 4,416 | 224 | 5% | 9,126 | 10,378 | (1,252) | (12%) |
| Total operating expenses | 5,630 | 7,002 | (1,372) | (20%) | 11,637 | 15,243 | (3,606) | (24%) |
| Loss from operations | (5,824) | (7,882) | 2,058 | (26%) | (12,134) | (17,322) | 5,188 | (30%) |
| Other income (expense), net: |  |  |  |  |  |  |  |  |
| Other (expense) income, net: | (927) | (1,109) | 182 | (16%) | (1,038) | (1,533) | 495 | (32%) |
| Interest expense | (4,490) | (2,919) | (1,571) | 54% | (6,254) | (4,919) | (1,335) | 27% |
| Interest income | 229 | — | 229 | 100% | 387 | — | 387 | 100% |
| Gain (loss) upon extinguishment of debt and accounts payable | 1,423 | (666) | 2,089 | (314%) | 4,459 | (1,732) | 6,191 | (357%) |
| Change in fair value of convertible notes | 7,202 | — | 7,202 | 100% | 6,629 | (316) | 6,945 | (2,198%) |
| Change in fair value of earn out | — | 1,300 | (1,300) | (100%) | — | 1,300 | (1,300) | (100%) |
| Change in fair value of derivatives | (462) | (809) | 347 | (43%) | (1,949) | (755) | (1,194) | 158% |
| Change in fair value of digital assets | 125 | — | 125 | 100% | 125 | — | 125 | 100% |
| Change in fair value of warrants | 544 | 1,448 | (904) | (62%) | 993 | 3,246 | (2,253) | (69%) |
| Total other income (expense), net | 3,644 | (2,755) | 6,399 | (232%) | 3,352 | (4,709) | 8,061 | (171%) |
| Loss before provision for income taxes | (2,180) | (10,637) | 8,457 | (80%) | (8,782) | (22,031) | 13,249 | (60%) |
| Income tax benefit (expense) | — | — | — | - | — | — | — | - |
| Net loss | $(2,180) | $(10,637) | $8,457 | (80%) | $(8,782) | $(22,031) | $13,249 | (60%) |

(1) Includes stock-based compensation expense as follows:

*(in thousands)*

*(in thousands)*

*(in thousands)*

*(in thousands)*

|  | Three Months Ended June 30, 2025 | 2024 | Change Amount% |  | Six Months Ended June 30, 2025 | 2024 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $373 | $1,090 | $(717) | (66%) | $1,072 | $2,321 | $(1,249) | (54%) |
| Sales and marketing | — | (82) | 82 | (100%) | — | (7) | 7 | (100%) |
| General and administrative | 2,431 | 1,917 | 514 | 27% | 3,821 | 3,977 | (156) | (4%) |
| Total stock-based compensation expense | $2,804 | $2,925 | $(121) | (4%) | $4,893 | $6,291 | $(1,398) | (22%) |

For the three and six months ended June 30, 2025 and 2024, $0.1 million and $(0.07) million and $0.5 million and $0.2 million of stock-based compensation was capitalized as software costs, respectively.

(2) Includes depreciation and amortization expense as follows:

*(in thousands)*

*(in thousands)*

*(in thousands)*

*(in thousands)*

|  | Three Months Ended June 30, 2025 | 2024 | Change Amount% |  | Six Months Ended June 30, 2025 | 2024 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Cost of membership | $421 | $976 | $(555) | (57%) | $842 | $1,993 | $(1,151) | (58%) |
| Cost of fitness product revenue | 137 | 62 | 75 | 121% | 295 | 103 | 192 | 186% |
| General and administrative | 202 | 676 | (474) | (70%) | 502 | 1,388 | (886) | (64%) |
| Sales and marketing | 131 | 139 | (8) | (6%) | 262 | 231 | 31 | 13% |
| Total depreciation and amortization expense | $891 | $1,853 | $(962) | (52%) | $1,901 | $3,715 | $(1,814) | (49%) |

51

### Comparison of the three and six months ended June 30, 2025 and 2024

### Revenue

*(in thousands)*

*(in thousands)*

| Revenue: | Three Months Ended June 30, 2025 | 2024 | Change Amount% |  | Six Months Ended June 30, 2025 | 2024 | Amount | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Fitness product | $937 | $258 | $679 | 263% | $1,988 | $311 | $1,677 | 539% |
| Membership | 164 | 207 | (43) | (21%) | 340 | 362 | (22) | (6%) |
| Training | 118 | 156 | (38) | (24%) | 248 | 311 | (63) | (20%) |
| Total revenue | 1,219 | 621 | 598 | 96% | 2,576 | 984 | 1,592 | 162% |
| Percentage of revenue |  |  |  |  |  |  |  |  |
| Fitness product | 77% | 42% |  |  | 77% | 32% |  |  |
| Membership | 13% | 33% |  |  | 13% | 37% |  |  |
| Training | 10% | 25% |  |  | 10% | 31% |  |  |
| Total | 100% | 100% |  |  | 100% | 100% |  |  |

Fitness product revenue increased $0.7 million or 263% and $1.7 million or 539% for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024, respectively. The increase in Fitness Product revenue was the result of the acquisition of CLMBR, Inc. in February 2024 and increased units sold through distribution agreement signed with Woodway in February 2024.

Membership revenue decreased $0.04 million or 21% and $0.02 million or 6% for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024, respectively. The decrease is a result of acquisition of the CLMBR business and the evolution of the FORME business where they Company is now primarily selling to commercial customers ("B2B") through Woodway.

Training revenue decreased $0.04 million or 24% and $0.06 million or 20% for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024, respectively. The decrease was a result of a decrease in Live 1:1 training sessions.

### Cost of Revenue and Gross Loss

*(in thousands)*

*(in thousands)*

| Cost of Revenue: | Three Months Ended June 30, 2025 | 2024 | Change Amount% |  | Six Months Ended June 30, 2025 | 2024 | Amount | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Fitness product | $696 | $347 | $349 | 101% | $1,613 | $726 | $887 | 122% |
| Membership | 420 | 982 | (562) | (57%) | 843 | 2,000 | (1,157) | (58%) |
| Training | 297 | 172 | 125 | 73% | 617 | 337 | 280 | 83% |
| Total cost of revenue | 1,413 | 1,501 | (88) | (6%) | 3,073 | 3,063 | 10 | 0% |
| Gross Loss: |  |  |  |  |  |  |  |  |
| Fitness product | 241 | (89) | 330 | (371%) | 375 | (415) | 790 | (190%) |
| Membership | (256) | (775) | 519 | (67%) | (503) | (1,638) | 1,135 | (69%) |
| Training | (179) | (16) | (163) | 1019% | (369) | (26) | (343) | 1319% |
| Total gross loss | (194) | (880) | 686 | (78%) | (497) | (2,079) | 1,582 | (76%) |
| Gross Margin: |  |  |  |  |  |  |  |  |
| Fitness product | 26% | (34%) |  |  | 19% | (133%) |  |  |
| Membership | (156%) | (374%) |  |  | (148%) | (452%) |  |  |
| Training | (152%) | (10%) |  |  | (149%) | (8%) |  |  |
| Total | (16%) | (142%) |  |  | (19%) | (211%) |  |  |

Fitness product cost of revenue increased $0.3 million or 101% and $0.9 million or 122% for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024, respectively. The increase is mostly due to the increase in sales related to the acquisition of CLMBR, Inc. in February 2024 and increase in units sold through distribution agreement signed with Woodway in February 2024.

Membership cost of revenue decreased $0.6 million or 57% and $1.2 million or 58% for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024, respectively. The decrease is primarily related to the decrease in content amortization offset by increase in amortization of intangible assets from the acquisition of CLMBR, Inc.

Training cost of revenue increased $0.1 million or 73% and $0.3 million or 83% for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024, respectively. The increase is primarily attributable to the acquisition of CLMBR, Inc. with addition of in-training studio expenses including rent expense million

Our gross loss decreased by $0.7 million or 78% and $1.6 million or 76% for the three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024, respectively, mostly due the increase in fitness product sales from the acquisition of CLMBR, Inc. and increase in units sold through distribution agreement signed with Woodway in February 2024 and decrease in content amortization.

### Operating Expenses

*(in thousands)*

*(in thousands)*

| Operating Expenses: | Three Months Ended June 30, 2025 | 2024 | Change Amount% |  | Six Months Ended June 30, 2025 | 2024 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Research and development | $779 | $2,474 | $(1,695) | (69%) | $2,050 | $4,497 | $(2,447) | (54%) |
| Sales and marketing | 211 | 112 | 99 | 88% | 461 | 368 | 93 | 25% |
| General and administrative | 4,640 | 4,416 | 224 | 5% | 9,126 | 10,378 | (1,252) | (12%) |
| Total operating expenses | 5,630 | 7,002 | $(1,372) | (20%) | $11,637 | $15,243 | $(3,606) | (24%) |

#### Research and Development

Research and development decreased $1.7 million or 69% and decreased $2.5 million or 54% for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, respectively, primarily due to a decrease in personnel-related costs of $0.6 million and $0.7 million, a decrease in stock-based compensation expense of $0.7 million and $1.3 million, and a decrease of $0.3 million and $0.6 million in software and subscriptions, respectively.

#### Sales and Marketing

Sales and marketing expense increased $0.1 million or 88% and $0.09 million or 25% for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, respectively, driven by increase in demo units of $0.02 million and $0.1 million, and increase in stock-based compensation of $0.1 million and $0.01 million with the remaining difference due to change in other miscellaneous expenses.

#### General and Administrative

General and administrative expense increased $0.2 million or 5% and decreased $1.3 million or 12% for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, respectively. The changes were driven by an increase of $0.1 million and a decrease of $0.4 million in consulting, a decrease of $0.5 million and $0.9 million in depreciation and amortization, and decrease in personnel related expenses of $0.03 million and $0.6 million, offset by increase in software and subscriptions of $0.2 million and of $0.4 million, and increase of $0.5 million and decrease of $0.2 million in stock-based compensation expense with the remaining difference due to change in other miscellaneous expenses.

### Other Income (Expense), net

*(in thousands)*

*(in thousands)*

| Other income (expense), net | Three Months Ended June 30, 2025 | 2024 | Change Amount% |  | Six Months Ended June 30, 2025 | 2024 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Other (expense) income, net: | $(927) | $(1,109) | $182 | (16%) | $(1,038) | $(1,533) | $495 | (32%) |
| Interest expense | (4,490) | (2,919) | (1,571) | 54% | (6,254) | (4,919) | (1,335) | 27% |
| Interest income | 229 | — | 229 | 100% | 387 | — | 387 | 100% |
| Gain (loss) upon extinguishment of debt and accounts payable | 1,423 | (666) | 2,089 | (314%) | 4,459 | (1,732) | 6,191 | (357%) |
| Change in fair value of convertible notes | 7,202 | — | 7,202 | 100% | 6,629 | (316) | 6,945 | (2198%) |
| Change in fair value of earn out | — | 1,300 | (1,300) | (100%) | — | 1,300 | (1,300) | (100%) |
| Change in fair value of derivatives | (462) | (809) | 347 | (43%) | (1,949) | (755) | (1,194) | 158% |
| Change in fair value of digital assets | 125 | — | 125 | 100% | 125 | — | 125 | 100% |
| Change in fair value of warrants | 544 | 1,448 | (904) | (62%) | 993 | 3,246 | (2,253) | (69%) |
| Total other income (expense), net | $3,644 | $(2,755) | $6,399 | (232%) | $3,352 | $(4,709) | $8,061 | (171%) |

53

#### Other Income (Expense), net

Other income (expense), net consists of unrealized currency gains and losses and issuance costs related to the June 2025 Convertible Exchangeable Notes for the three and six months ended June 30, 2025 and fair value of warrants issued in connection with Registered Direct Offering for the three and six months ended June 30, 2024.

#### Interest Expense

Interest expense increased $1.6 million and $1.3 million for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024. The increase in interest expense was attributable to an increase of $4.0 million and $5.1 million in amortization and interest expense from the January 2025 and March 2025 convertible notes and interest on vendor settlements of $0.1 million and $0.7 million, offset by decrease in interest from December 2023 convertible note of $1.0 million and $1.4 million, decrease in interest from Term Loan of $0.1 million and $0.5 million, decrease in interest from February 2024 convertible note of $1.4 million and $2.2 million, and decrease in interest expense attributable to Equity Line of Credit of $0.0 million and $0.2 million.

#### Interest Income

Interest income increased $0.2 million and $0.4 million for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024, as a result of loan agreement entered into with Sportstech in January 2025.

#### Gain (loss) on extinguishment of debt and accounts payable

Gain (loss) on extinguishment of debt and accounts payable was a result of gain on conversion of convertible notes of $1.4 million and $4.5 million and gain on settlement of loss restoration agreement of $0.0 million and $0.2 million for the three and six months ended June 30, 2025 compared to a loss of $0.7 million and $1.7 million from conversion of debt and accounts payable to Series A Preferred Stock for the three and six months ended June 30, 2024.

#### Change in Fair Value of Derivatives

Change in fair value of derivatives for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024, was a result of change in fair value of loss restoration agreements of $0.2 million and $2.8 million offset by change in fair value of derivatives from the January 2025, March 2025 and June 2025 convertible notes of $0.6 million and $1.7 million.

#### Change in Fair Value of Digital Assets

Change in fair value of digital assets consists of the subsequent remeasurement of the Company's digital assets measured at fair value based on quoted prices on active exchanges pursuant to ASC 350-60. For the three and six months ended June 30, 2025, we recognized a $0.1 million gain related to the change in fair value.

#### Change in Fair Value of Convertible Notes and Change in Fair Value of Warrants

Change in fair value of convertible notes and warrants for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024 were due to change in fair value of these financial instruments.

### Liquidity and Capital Resources

In accordance with Accounting Standards Update ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), or ASU 205-40, management evaluated whether there are certain conditions and 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 accompanying condensed consolidated financial statements were issued.

As an emerging growth company, the Company is subject to certain inherent risks and uncertainties associated with the development of an enterprise. In this regard, since the Company’s inception, substantially all of management’s efforts have been devoted to making investments in research and development including the development of revenue generating products and services and the development of a commercial organization, all at the expense of short-term profitability.

As of the date the accompanying condensed consolidated financial statements were issued (the “issuance date”), management evaluated the following adverse conditions and events present at the Company in accordance with ASU 205-40:

- The Company has incurred significant operating losses and used net cash flows in its operations since its inception. In this regard, the Company incurred a net operating loss of $12.1 million and used net cash in its operations of $5.7 million during the six months ended June 30, 2025, and had an accumulated deficit of $212.0 million as of June 30, 2025.
- In order to execute its emerging growth strategy, the Company has been heavily dependent on financing from lenders and capital from private and public investors (collectively “outside capital”) since its inception and expects to remain heavily dependent on outside capital for the foreseeable future until such time that the Company’s operations reach a scale of profitability that allows it to fund its obligations primarily with cash inflows from operations. However, management can provide no assurance the Company will ever be able to generate sufficient cash inflows to reduce or eliminate its reliance on outside capital.
- The Company’s available liquidity to fund its operations over the next twelve months beyond the issuance date was limited to approximately $0.1 million of unrestricted cash and cash equivalents. However, based on the Company’s anticipated liquidity needs, the foregoing available liquidity will not be sufficient to fund the Company’s obligations as they become over the next year beyond the issuance date due absent management’s ability to secure additional outside capital.
- A potential source of non-dilutive funding resides in our investment in digital assets, subject to market conditions. Based on quoted market prices, the market value of our ownership in digital assets was $45.1 million as of June 30, 2025.
- While the Company is actively seeking to secure additional outside capital (and has historically been able to successfully secure such capital), no additional outside capital has been secured or was deemed probable of being secured as of the issuance date. In addition, management can provide no assurance the Company will be able to secure additional outside capital or on acceptable terms.
- Included in the Company’s anticipated liquidity needs is a substantial amount of outstanding debt that is scheduled to mature over the next twelve months beyond the issuance date. As disclosed in Notes 11 and 21, the Company had total outstanding debt, including convertible notes, of approximately $55.1 million as of the issuance date, of which approximately $10.0 million is scheduled to mature over the next twelve months beyond the issuance date, for which the Company does not have sufficient liquidity to repay if a cash settlement is required. In the event the Company is unable to refinance its outstanding debt, settle some or all of the debt with shares of the Company’s common or preferred stock, secure additional outside capital, and/or secure amendments or waivers from its lenders to defer or modify the repayment terms, management will be required to seek other strategic alternatives to settle this indebtedness, which may include, among others, a significant curtailment of the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code.
- In the past, the Company has been unable to remain in compliance with certain qualifications required by the Nasdaq Capital Markets in order for the Company’s common stock to remain listed on the Nasdaq. These requirements include a minimum stockholders’ equity balance of $2.5 million, a minimum of 500,000 publicly held shares, and a minimum trading price of $1.00 per share for a sustained period of time (collectively the “Rules”). The Company received two notices from the Listing Qualifications staff of the Nasdaq (the “Staff”) with respect to the Company’s noncompliance with these requirements, as follows:
- The first notice dated August 22, 2023, notified the Company that it did not comply with the minimum $2.5 million stockholders’ equity requirement for continued listing set forth in Nasdaq Listing Rule 5550(b)(1) (the “Rule 1”) but was granted a period of time to regain compliance. On November 25, 2024, the Company received a letter from the Staff stating that the Company has demonstrated compliance with Rule 1. The letter also stated that the Company will be subject to a Mandatory Panel Monitor for a period of one year from the date of the letter in accordance with the requirements of Nasdaq Listing Rule 5815(d)(4)(B). If, within that one-year monitoring period, the Staff finds that the Company failed to remain in compliance with Rule 1, the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency, the Staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, and the Company will not be afforded an applicable cure or compliance period. Instead, the Staff will issue a Delist Determination Letter and the Company will have an opportunity to request a new hearing with the Panel. While the Company will have the opportunity to present to the Panel, no assurance can be provided that the Staff will grant the Company a compliance plan and allow the Company’s securities to remain listed on the Nasdaq.
- The second notice dated November 13, 2024 notified the Company that it did not comply with the minimum 500,000 publicly held shares requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(4) (“Rule 2”) but was granted a period of time to regain compliance. On December 23, 2024, the Company received a letter from the Staff confirming that the Company has demonstrated compliance with Rule 2. The letter also stated that the Company will be subject to a Mandatory Panel Monitor for a period of one year from the date of the letter in accordance with the requirements of Nasdaq Listing Rule 5815(d)(4)(B). If, within that one-year monitoring period, the Staff finds that the Company failed to remain in compliance with Rule 2, the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency, the Staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, and the Company will not be afforded an applicable cure or compliance period. Instead, the Staff will issue a Delist Determination Letter and the Company will have an opportunity to request a new hearing with the Panel.

While the Company will have the opportunity to present to the Panel, no assurance can be provided that the Staff will grant the Company a compliance plan and allow the Company’s securities to remain listed on the Nasdaq.

As of June 30, 2025 and through the issuance date, the Company was in compliance with the Rules. However, management can provide no assurance that the Company will be able to remain in compliance with the Rules over the next twelve months beyond the issuance date and, if compliance is not maintained, the Staff will not require the Company’s securities to be delisted from the Nasdaq. If a delisting occurs, the Company will be faced with a number of material adverse consequences, including limited availability of market quotations for its common stock; limited news and analyst coverage; decreased ability to obtain additional financing; limited liquidity for the Company’s stockholders due to thin trading; and a potential loss of confidence by investors, employees and other third parties who do business with the Company.

These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

### Cash Flows

### Comparison of the six months ended June 30, 2025 and 2024

*(in thousands)*

|  | 2025 | 2024 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(5,743) | $(5,160) |
| Net cash used in investing activities | (50,967) | (1,407) |
| Net cash provided by financing activities | 59,304 | 6,673 |
| Effect of exchange rate on cash | 100 | 50 |
| Net Change In Cash and Cash Equivalents and Restricted Cash | $2,694 | $156 |

### Operating Activities

Net cash used in operating activities of $5.7 million for the six months ended June 30, 2025, was primarily due to a net loss of $8.8 million, gain on extinguishment of debt and accounts payable of $4.5 million, interest income on loan receivable of $0.4 million, change in the fair value of warrants of $1.0 million and change in fair value of convertible notes of $6.6 million offset by depreciation and amortization of $1.7 million, inventory step up amortization of $0.2 million, stock-based compensation of $4.9 million, amortization of debt discount and non cash interest of $6.2 million, change in fair value of derivatives of $1.9 million, loss on settlement of accounts payable of $0.6 million.

Net cash used in operating activities of $5.1 million for the six months ended June 30, 2024, was primarily due to a net loss of $22.0 million offset by depreciation and amortization of $3.7 million, stock-based compensation of $6.3 million, amortization of debt discount and interest of $4.9 million, change in fair value of convertible notes of $0.3 million, loss on extinguishment of debt of $1.7 million, common stock issued to lender in connection with equity line of credit $0.4 million, warrants issued to service providers $1.1 million, change in fair value of derivatives of $0.8 million, non cash lease expense of $0.1 million, loss on exchange of warrants for equity of $0.4 million, an increase in operating assets and liabilities of $1.8 million due to an increase in accrued expenses and other current liabilities partially offset by change in the fair value of warrants of $3.2 million and change in fair value of earn out of $1.3 million.

### Investing Activities

Net cash used in investing activities of $51.0 million for the six months ended June 30, 2025 related to acquisition of digital assets of $45.0 million, software and content of $0.4 million and loan with Sportstech of $4.3 million and Wattbike of $1.2 million.

Net cash used in investing activities of $1.4 million for the six months ended June 30, 2024 related to acquisition of software and content offset by the acquisition of CLMBR, Inc. net of cash acquired.

### Financing Activities

Net cash provided by financing activities of $59.3 million for the six months ended June 30, 2025 was primarily from proceeds from the exercise of incremental warrants and issuance of convertible notes, net of issuance and offering costs of $55.9 million, proceeds from issuance of promissory notes of $1.8 million, and At the Market Offering proceeds of $1.6 million.

Net cash provided by financing activities of $6.6 million for the six months ended June 30, 2024 was primarily from the issuance of convertible notes of $4.8 million, proceeds from loans and related party loans of $1.7 million, proceeds from issuance of common stock from equity line of credit $0.4 million, proceeds from common stock offering net of issuance costs of $0.7 million, At the Market Offering proceeds of $0.4 million offset by the payment of loans and related party loans of $1.2 million.

### Contractual Obligations and Other Commitments

### Off-Balance Sheet Arrangements

In accordance with ASC 718, when a nonrecourse note is used to fund the exercise of a stock option, the stock option is not considered “exercised” for accounting purposes until the employee repays the loan. Prior to repayment of a nonrecourse loan, the outstanding shares received in exchange for the loan are excluded from the denominator of basic earnings per share. Additionally, the nonrecourse loan itself is not recorded on the Company’s condensed consolidated balance sheet since the arrangement is, in substance, a stock option.

In 2022, the sale of the shares of common stock to several employees was completed in the form of issuances of Secured Partial Recourse Promissory Notes (the “Note(s)”) by the respective employee to the Company.

The Notes were in the aggregate amount of $154,875 and 2 shares as of June 30, 2025 and December 31, 2024. The Notes are secured by a pledge of collateral, representing the shares of stock sold. Interest is charged at the mid-term Applicable Federal Rate as of the date of the Note and compounded annually. Per the terms of the Notes, 51% of the initial amounts of the outstanding principal balances plus any accrued and unpaid interest, represent a full recourse note, and 49% of the initial amounts represent a nonrecourse note. The Company analyzed the terms of the Notes and concluded that the recourse portion of the notes are nonrecourse in nature as the Company does not have intention to seek repayment beyond the shares issued despite the recourse legal terms, and thus will be treated the same as the nonrecourse portion of the Notes. All Notes are outstanding as of June 30, 2025, and are not recorded on the condensed consolidated balance sheet.

### Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the condensed consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders’ equity/deficit, revenue, expenses, and related disclosures. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions. The critical accounting policies that reflect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements include those noted below.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Form 10-K and in Note 2. to our consolidated financial statements included in our Form 10-K. As disclosed in Note 2. to our consolidated financial statements included in our Form 10-K, the preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. During the period covered by this Quarterly Report, there were no material changes to our critical accounting policies from those discussed in our Form 10-K other than those disclosed in Note 2. of this Quarterly Report.

### Emerging Growth Company and Smaller Reporting Company Status

Under Section 107(b) of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, an “emerging growth company” can delay the adoption of new or revised accounting standards until such time as those standards would apply to private companies. We have elected this exemption to delay adopting new or revised accounting standards until such time as those standards apply to private companies. Where allowable we have early adopted certain standards as described in Note 2. of our condensed financial statements included elsewhere in this report. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We will continue to remain an “emerging growth company” until the earliest of the following: (i) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (ii) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the 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 $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. 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. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

## Market risk

As filed, 2,416 characters.

### Foreign Currency Risk

To date, all of our inventory purchases have been denominated in U.S. dollars. A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates. In addition, our suppliers incur many costs, including labor and supply costs, in other currencies. While we are not currently contractually obligated to pay increased costs due to changes in exchange rates, to the extent that exchange rates move unfavorably for our suppliers, they may seek to pass these additional costs on to us, which could have a material impact on our gross margins. Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. However, we believe that the exposure to foreign currency fluctuation from operating expenses is relatively small at this time as the related costs do not constitute a significant portion of our total expenses. To date, we have not entered into derivatives or hedging transactions, as our exposure to foreign currency exchange rates has historically been partially hedged as our foreign currency denominated inflows have covered our foreign currency denominated expenses. However, we may enter into derivative or hedging transactions in the future if our exposure to foreign currency should become more significant.

### Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and operating results.

### Tariff Risk

One of the Company's manufacturing partners used in the manufacture of our products is located in China and we face risks associated with geopolitical conditions including new tariffs on imports. To date, the tariffs have not had a material effect on our business, financial condition or results of operations. The tariffs could increase the cost to us of finished goods we import and we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and operating results.

## Controls and procedures

As filed, 10,567 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision, and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in connection with the period ending June 30, 2025. Based on that evaluation, management has concluded that as of the respective period, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below.

Notwithstanding the material weaknesses in our internal control over financial reporting, management has concluded that the condensed consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

### Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act for the Company. Management assessed the effectiveness of internal control over financial reporting as of the six months ended June 30, 2025. In making this assessment, our management used the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of June 30, 2025, because of the material weaknesses described below.

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm, as allowed by the SEC.

#### Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis.

Management concluded that material weaknesses existed as of the six months ended June 30, 2025. Specifically, management identified deficiencies in the principles associated with the control environment, risk assessment, control activities, information and communication and monitoring components of internal control, based on the criteria established by the COSO Framework, that constitute material weaknesses, either individually or in the aggregate.

- Control Environment: The Company lacked appropriate policies and resources to develop and operate effective internal control over financial reporting, which contributed to the Company’s inability to properly analyze, record and disclose accounting matters accurately and timely. This was further impacted by the lack of sufficient complement of qualified technical accounting and financial reporting personnel. This material weakness contributed to additional material weaknesses further described below.
- Risk Assessment: The Company did not have a formal process to identify, update, and assess risks, including risks around the accounting for complex transactions, that could significantly impact the design and operation of the Company’s control activities.
- Control Activities: The Company did not design and implement effective control activities and identified the following material weaknesses:
- The lack of a sufficient number of trained professional with the expertise to design, implement, and execute a formal risk assessment process and formal accounting policies, procedures, and control over accounting and financial reporting to ensure the timely and accurate recording of financial transactions while maintaining a segregation of duties. This, coupled with management’s accounting software system has certain system limitations that do not allow for an effective control environment and the absence of sufficient other mitigating controls, created segregation of duties deficiencies.
- The lack of a sufficient number of trained professionals with the appropriate U.S. GAAP technical expertise to identify, evaluate, and account for complex transactions and review valuation reports prepared by external specialists.
- The Company failed to design and implement adequate internal controls over the recording of stock-based compensation expense including a precise review and procedures to ensure the proper accounting for stock based compensation expenses, and the recording of those expenses completely and accurately in the appropriate period.
- Information and Communication: The Company did not have adequate processes and controls for communicating information among the relevant parties.
- Monitoring Activities: The Company did not appropriately select, develop, and perform ongoing evaluations to ascertain whether the components of internal controls are present and functioning. The Company did not evaluate and communicate internal control deficiencies in a timely manner to those parties responsible for taking corrective action, including senior management and the board of directors.

These material weaknesses could result in a misstatement of the account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or timely detected.

### Inherent Limitations on Effectiveness of Controls

Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

### Remediation Plan and Status

We are committed to remediating the control deficiencies that constituted the above material weakness by implementing changes to our internal control over financial reporting. We are in the process of implementing measures designed to improve our internal control over financial reporting to remediate these material weaknesses, including formalizing our processes and internal control documentation and strengthening supervisory reviews by our financial management; hiring additional qualified accounting and finance personnel and engaging financial consultants to enable the implementation of internal control over financial reporting and segregating duties amongst accounting and finance personnel. In addition, we are planning on implementing an accounting software system with the design and functionality to segregate incompatible accounting duties, which we currently expect will be fully implemented in our 2025 fiscal year.

While we are implementing these measures, we cannot assure you that these efforts will remediate our material weaknesses and significant deficiencies in a timely manner, or at all, or prevent restatements of our financial statements in the future. In particular, our material weakness related to our accounting software was not fully remediated for the six months ended June 30, 2025 or the six months ended June 30, 2024, as we expect to implement new software in 2025. If we are unable to successfully remediate our material weaknesses, or identify any future significant deficiencies or material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports, and the market price of our common stock may decline as a result.

### Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the period ended June 30, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

### Attestation Report of the Independent Registered Public Accounting Firm

This Quarterly Report on Form 10-Q does not include a report of management’s assessment regarding our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or an attestation report of our independent registered accounting firm due to a transition period established by rules of the SEC for newly public companies. Additionally, our independent registered accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the JOBS Act.

## Risk factors

As filed, 11,199 characters.

*Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our most recent Annual Report on Form 10-K and in our other filings with the SEC, the occurrence of any one of which could have a material adverse effect on our actual results. Except as set forth below, there have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K. The Company is supplementing the risk factors previously disclosed in our Annual Report on Form 10-K with the following risk factor.*

***Significant developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition can have an adverse effect on our business and financial statements.***

Significant developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition, including laws and policies in areas such as trade, manufacturing, government purchasing, healthcare, intellectual property, regulatory enforcement and investment/development, can adversely affect our business and financial statements. The U.S. has announced and/or implemented significant new tariffs on imports from a wide range of countries, which has prompted retaliatory tariffs by a number of countries and a cycle of retaliatory tariffs by both the U.S. and other countries. In early April 2025, actions were taken by the U.S. and certain other countries to delay the effective date of certain of these tariffs, but as of the date of this report a number of new tariffs remain in effect, including significant tariffs between the U.S. and China. Collectively, these tariffs increase the cost to us of finished goods we import, which can increase the cost to our customers of certain of our finished goods, which can adversely impact demand for our products and our competitive positioning; could adversely impact the availability to us of certain products in certain countries and disrupt our supply chains, with related impacts to our operations; and could exacerbate inflation, diminish investment and result in broader negative impacts, economic instability and capital markets dislocation that may adversely impact demand for our products. In addition, whenever we are unable to fully recover higher costs, or whenever there is a time delay between the increase in costs and our ability to recover these costs, our margins and profitability can decline. The U.S. may implement additional tariffs and other measures, further retaliatory tariffs and other retaliatory actions may follow and the risks and adverse effects noted above may increase. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the impact of these tariffs. The full impact of these tariffs and other actions on the Company and on our business partners remains highly uncertain and subject to rapid change.

All of the risks identified in this risk factor can adversely affect our business and financial statements.

***Investing in and holding FET tokens involves significant risks, many of which are inherent to cryptocurrency and decentralized AI technologies.***

Investing in and holding FET tokens involves significant risks, many of which are inherent to cryptocurrency and decentralized AI technologies, including the following:

*Extreme Volatility and Price Fluctuations*: The price of FET tokens is highly volatile and has experienced significant fluctuations in the past. This volatility is influenced by factors such as overall cryptocurrency market trends, regulatory developments, technological advancements within the AI and blockchain sectors, and specific developments within the Artificial Superintelligence Alliance ecosystem. There is no assurance that the value of FET tokens will increase, and their value could decline significantly or become worthless.

*Regulatory Uncertainty*: The regulatory landscape for cryptocurrencies and digital assets, including utility tokens like FET, is still evolving and varies significantly across jurisdictions. New regulations or governmental actions in the United States or other countries could adversely affect the legality, market price, or liquidity of FET tokens, potentially leading to a prohibition on their use or ownership.

*Competition and Market Adoption*: The decentralized AI and blockchain sectors are highly competitive. The success and value of FET tokens depend on the widespread adoption and utilization of the Fetch.ai platform and its AI agents. Competition from other projects or technologies could limit the growth and utility of the FET ecosystem.

*Technology Risks and Security Vulnerabilities*: The Fetch.ai platform relies on complex blockchain and AI technologies, which may contain undiscovered bugs, vulnerabilities, or errors. Exploits of such vulnerabilities could lead to loss of FET tokens, disruption of the network, or other adverse effects. The underlying smart contracts and blockchain infrastructure are also subject to security risks, including hacking, cyberattacks, and consensus attacks.

*Limited Liquidity and Market Manipulation*: While FET tokens are traded on various exchanges, there may be periods of limited liquidity, making it difficult to buy or sell large quantities without significantly impacting the price. Furthermore, the cryptocurrency market is susceptible to manipulation, including "pump and dump" schemes and other illicit activities, which could artificially inflate or deflate the price of FET tokens.

*Dependence on Key Personnel and Community Support*: The development and ongoing success of the Artificial Superintelligence Alliance ecosystem are heavily reliant on its core development team, community engagement, and strategic partnerships. The departure of key personnel or a decline in community support could negatively impact the project's progress and the value of FET tokens.

*Loss of Private Keys and Custody Risks*: The security of FET tokens depends on the owner's ability to securely manage their private keys. If private keys are lost, stolen, or compromised, the FET tokens associated with those keys may be irrevocably lost. Custody arrangements, while designed to be secure, are not without risk, and any failure in our custody provider's systems could result in a loss of our FET holdings.

*Uncertainty of Future Development and Utility*: While Fetch.ai has outlined various use cases for FET, the actualization and broad adoption of these functionalities are subject to numerous uncertainties, including technological hurdles, market acceptance, and the ability to attract developers and users to the ecosystem. If the envisioned utility does not materialize as expected, the value of FET tokens could suffer.

***Our treasury strategy exposes us to various risks associated with the digital asset market.***

Our treasury strategy exposes us to various risks associated with the digital asset market, including the following:

*Digital Asset Market Risk*: Our treasury strategy is highly exposed to the inherent volatility and speculative nature of the digital asset market. The value of FET tokens, and by extension, our treasury, can fluctuate wildly and rapidly due to various factors, including market sentiment, technological developments, regulatory changes, macroeconomic conditions, and unexpected events. We may incur significant losses if the market price of FET tokens declines, which could materially and adversely impact our financial condition and operating results.

*Concentration Risk in FET*: Our treasury strategy currently involves significant concentration in a single digital asset, FET. While we believe in the long-term potential of Fetch.ai, this concentration amplifies the impact of any adverse developments specific to the FET token or the Fetch.ai ecosystem. A decline in the perceived value, utility, or adoption of FET could have a disproportionately negative effect on our treasury.

*Custody Risk*: Although we utilize a reputable institutional custodian, BitGo, there is always a risk that our digital assets could be lost, stolen, or become inaccessible due to a security breach, operational failure, or other unforeseen events at the custodian. While insurance may provide some coverage, it may not cover all potential losses.

*Regulatory Scrutiny and Future Restrictions*: Governments and regulatory bodies worldwide are increasingly scrutinizing digital asset activities. Our treasury strategy could be adversely affected by new laws, regulations, or interpretations that restrict or prohibit the holding, trading, or use of digital assets, including FET. Such regulatory changes could render our holdings illiquid or subject to significant restrictions, potentially impairing our ability to realize value from our investment.

*Accounting and Tax Complexity*: The accounting treatment and tax implications of holding digital assets as treasury reserves are complex and subject to evolving guidance. Changes in accounting standards or tax laws could require us to revalue our digital asset holdings or incur significant tax liabilities, which could adversely affect our financial statements and profitability.

*Reputational Risk*: Negative public perception or unforeseen events related to the broader cryptocurrency industry or specific to Fetch.ai could damage our reputation and adversely affect our business and stock price.

***Our issuance of convertible debt exposes us to various risks on dilution of our existing stockholders, downward pressure on stock price, impact on future financing and investor confidence.***

Our issuance of convertible debt exposes us to various risks, including the following:

*Dilution Risk to Existing Shareholders*: Our issuance of convertible debt, which may be converted into shares of our common stock, poses a significant risk of dilution to our existing shareholders. Upon conversion, new shares will be issued, increasing the total number of outstanding shares and potentially decreasing the voting power of current shareholders. The extent of dilution will depend on the conversion price and the amount of debt converted.

*Downward Pressure on Stock Price*: The potential for future dilution from the conversion of debt can create downward pressure on our stock price. Investors may anticipate the increased supply of shares, leading to a negative impact on market valuation.

*Impact on Future Financing*: The existence of convertible debt on our balance sheet, and the potential for future dilution, may make it more difficult or expensive for us to raise additional capital through equity or debt offerings in the future. Potential investors may be wary of the existing conversion rights or the perceived debt burden.

*Market Perception and Investor Confidence*: The market's perception of our financial health and growth prospects can be influenced by our capital structure, including the amount and terms of our convertible debt. Negative perceptions could impact investor confidence and our stock valuation.

Filed Aug 14, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-108949. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.