Empery Digital Inc.: Form 10-Q for the period ended Jun 30, 2026

The following discussion and analysis is intended as a review of significant factors affecting the Company’s financial condition and results of operations for the periods indicated. This discussion and analysis should be read in conjunction with the financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K, which contains audited financial statements of the Company as of and for the year ended December 31, 2025, previously filed with the Securities and Exchange Commission. Results for the three and six months ended June 30, 2026 are not necessarily indicative of results for the year ending December 31, 2026 or any future period.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “expect,” “plan,” “could,” “may,” “believe,” “estimate,” “forecast,” “goal,” “potentially,” “project,” and other words of similar meaning. All statements, other than statements related to present facts or current conditions or historical facts, contained in this Quarterly Report on Form 10-Q are forward-looking statements, including statements regarding our strategy, future operations, future financial position, including, but not limited to, statements relating to:, the Company’s expectations regarding financial metrics and trends for the remainder of fiscal year 2026, the Company’s digital asset-treasury strategy, the Company’s ability to efficiently manage its BTC portfolio and reposition its powersports business, the Company’s ability to increase Bitcoin per share to drive stockholder value, the Company’s ability to generate income through derivatives on BTC through the use of short-term put and call contracts, repurchases under the Company’s share repurchase program and financing arrangements related thereto; the Company’s strategic partnership with Cardinal Power LLC (“Cardinal”), the ability of the Company and Cardinal to execute on its shared vision for AI infrastructure and to identify, fund and execute on future opportunities, and the realization of the expected benefits therefrom; closing under the definitive agreement by EMHU, LLC, a Delaware limited liability company (“EMHU” or the “Partnership”) to purchase 100% of the equity interests of the current holder of a fee simple title to a property in the Midwest and the timing thereof; the proposed conversion of the Midwest property into an AI data center and the potential to increase its power capacity; EMHU or its affiliate executing a definitive lease agreement with respect to the Midwest property and the terms thereof, including the expected total net lease payments that may be realized in connection therewith; the Company’s plans for future data center-related opportunities; the Company’s plans for future capital allocation; Cardinal Data Power Inc.’s (“CDP”) proposed data center campus in West Texas and the letter of intent associated therewith;the expected outcome or impact of pending or threatened litigation and the anticipated insurance recoveries associated therewith; and the ability of the Company to generate positive net interest income from financing of inventory purchases.

Each forward-looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. Applicable risks and uncertainties include the risks and uncertainties regarding, among other things: our ability to keep pace with new technology and changing market needs; changes in business, market, financial, political and regulatory conditions; reduced demand for data centers or decreases in information technology spending; increased competition or available supply of data center capacity; delays or disruptions in connectivity or availability of power; deterioration in the relationship between the Company and Cardinal or CDP, or between EMHU or CDP and their potential data center tenants; the Company’s operations and business, including the highly volatile nature of the price of Bitcoin and other cryptocurrencies; the Company’s stock price may be highly correlated to the price of the digital assets that it holds; increased competition in the industries in which the Company operates; significant legal, commercial, regulatory and technical uncertainty regarding digital assets generally; the treatment of crypto assets for U.S. and foreign tax purpose; the Company’s ability to generate revenues from sales and generate cash from financing of inventory, sale of its products and Bitcoin derivatives; significant decrease in the market value of the Company’s Bitcoin holdings; the Company’s ability to obtain additional financing through equity or debt offerings, obtain borrowings from financing arrangements or generate cash from the sale of Bitcoin and the competitive environment of our business. Other risks and uncertainties include those identified under the heading “Risk Factors” contained in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 27, 2026, (as amended by Form 10-K/A filed with the SEC on April 21, 2026, and in any subsequent filings with the SEC.

As a result of these and other factors, we may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q reflect our views as of the date hereof. We do not assume and specifically disclaim any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Our business is subject to substantial risks and uncertainties, including those referenced above. Investors, potential investors, and others should give careful consideration to these risks and uncertainties.

Overview

Digital Asset Treasury Strategy

On July 17, 2025, the Company announced its entry into securities purchase agreements with certain institutional and accredited investors in private placements for the purchase and sale of 44,414,189 shares of common stock of the Company, par value $0.00001 per share and pre-funded warrants to purchase up to an aggregate of 5,728,662 shares of common stock with an exercise price of $0.00001, at a price of $10.00 per share, for aggregate gross proceeds of approximately $501.0 million which includes payment in Bitcoin (“BTC” or “Bitcoin”) of $28.0 million, before deducting placement agent fees and other offering expenses (the “Private Placements”). The Private Placements closed on July 21, 2025. The Company has used the net proceeds of $452.0 million from the Private Placements (excluding the $28.0 million of BTC received) to purchase or otherwise acquire BTC and for the establishment of the Company’s cryptocurrency treasury operations. In connection with the announcement of the Private Placements, the Company announced the launch of its digital asset treasury strategy, pursuant to which the Company plans to pursue a number of strategic initiatives to acquire additional BTC and potentially other digital assets.

The key component of the digital asset strategy is to optimize the Company’s capital structure to increase BTC per share to drive stockholder value. This includes issuing equity when market conditions allow us to raise capital at a premium to net asset value (“NAV”), defined as the value of BTC holdings plus cash, minus debt, divided by adjusted outstanding shares, which includes common stock outstanding plus all pre-funded warrants outstanding. The Company may repurchase shares when shares trade below NAV.

The Company has an ATM program in place pursuant to which it can sell up to $1.0 billion of common stock and since the inception of the digital asset treasury strategy through of August 6, 2026 has sold 136,053 shares of common stock for $1.5 million, including commissions, at an average price of $10.90. On June 2, 2026, the Company entered into Amendment No. 2 and Waiver to the At-The-Market Issuance Sales Agreement with Aegis which, among other matters, extended the term of the ATM program, such that, unless earlier terminated by one of the parties thereto, it will automatically terminate upon the issuance and sale of all of the shares authorized thereunder.

The Company has a share repurchase program that allows it to repurchase up to $200.0 million of common stock and through August 6, 2026 has bought 26,244,657 shares of common stock for $149.7 million, including commissions, at an average price of $5.71. The Company has used proceeds of $105.0 million from two borrowing arrangements that allowed for borrowings of up to $150.0 million as well as proceeds received from the sale of BTC, to fund these share repurchases. Some of our BTC is held by these lenders as collateral for outstanding borrowings. On March 31, 2026, the Company repaid $50.0 million of borrowings on a term loan from proceeds received from the sale of BTC and proceeds from the March 2026 equity offering noted above. As of August 6, 2026, the Company has $35.0 million outstanding under its $100.0 million credit facility. See Note 6 to the condensed consolidated financial statements for further discussion of these borrowing arrangements.

The Company may also complete other equity or convertible debt issuances if it determines market conditions are appropriate.

Additionally, a significant component of the digital asset treasury strategy is to reduce costs across the Company so that cash generated from operations can be used to pay operating expenses and any excess cash generated can be used to purchase more BTC or repurchase shares of our common stock. We also generated, and may continue to generate income through buying and selling derivatives on BTC, including the use of short-term put and call contracts. Since the inception of our digital asset strategy through August 6, 2026, the Company generated income of $2.0 million from trading these derivatives, which is recorded in Other income in the condensed consolidated statement of operations.

The Company also recognizes the risk that digital assets pose with respect to digital wallets being compromised and the Company uses institutional-grade custodians to hold its BTC in wallets, some of which are isolated from the internet, referred to as cold storage, to minimize this risk. We view our BTC as long-term holdings, although there are no restrictions on selling BTC that is not held as collateral by our lenders. As of August 6, 2026 we have 1,279 BTC, of which 954 are restricted by lenders as collateral for outstanding loan balances.

The BTC market has been characterized by significant volatility in price, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks that are, or may be, inherent in its entirely electronic, virtual form and decentralized network. For example, since the implementation of our digital asset treasury strategy through August 6, 2026, BTC has traded at a high of $126,279 and a low of $57,742.

Losses on digital assets significantly contributed to our results of operations for the six months ended June 30, 2026. The loss on digital assets of $106.3 million was recorded, representing 87%, of our operating expenses for the six months ended June 30, 2026.

Data Center Infrastructure Investments

On June 30, 2026, the Company announced a strategic relationship with Hunt Properties, the goal of which is to originate, evaluate, and acquire powered land properties with secured tenants suitable for artificial intelligence and high-performance computing data center development.

On June 26, 2026, the Company, through its wholly-owned subsidiary, Volcon Epowersports LLC (“VEPS”) formed EMHU with TexStack Infrastructure, LLC (“TexStack”), a wholly-owned subsidiary of Cardinal, entered into an Amended and Restated Limited Liability Company Agreement of EMHU LLC (the “LLC Agreement”) setting forth the terms relating to the Partnership. Pursuant to the LLC Agreement, VEPS made an initial capital contribution of $2.9 million for 25% of the common units of EMHU and committed to making a further capital contribution of $62.1 million upon the contemplated closing of the Property Acquisition (as defined below). See Note 3 to the condensed consolidated financial statements for further discussion of the EMHU. TexStack holds the remaining 75% equity interest in EMHU and made an initial capital contribution of $2.5 million.

On June 29, 2026, EMHU entered into a definitive agreement (the “Property PSA”)to purchase 100% of the equity interests of the current holder of a fee simple title to the Property that, upon closing, is intended to be converted into an AI data center, for an aggregate purchase price of approximately $230.0 million (the “Property Acquisition”). The closing of the Property Acquisition is subject to certain closing conditions, including the Partnership’s completion of its due diligence and the expiration of a review period contemplated to end on August 14, 2026, which review period may be extended under the Property PSA. The Partnership exercised its option to extend the review period to August 13, 2026 and has the option to extend it an additional 15 days. While the Company anticipates the Property Acquisition to close during the third quarter of 2026, there can be no assurance that it will occur. In addition to the satisfaction by both the Partnership and the Property Seller of any closing conditions, TexStack is the managing member of the Partnership and, as such, has full discretion to make any decisions on behalf of the Partnership with respect to (i) its satisfaction relating to ongoing due diligence with respect to the Property, (ii) the Partnership’s decision whether or not to close the Property Acquisition, and (iii) any decision whether or not to extend the Review Period and/or the closing date and, if so, how often.

The Property has operated as a power-intensive industrial facility for the past three years and includes an owned substation and associated infrastructure for the approximately 150 MW of currently available capacity under an existing power agreement with a local utility. A recent load study confirmed the facility’s potential to almost double the available power to approximately 300 MW to support artificial intelligence workloads. Additionally, Cardinal has executed a non-binding letter of intent (the “LOI”) with a leading provider of compute (the “LOI Parties”). The LOI contemplates a triple net lease agreement between the Partnership and the LOI Parties that, subject to negotiation and execution of a definitive lease agreement, would potentially produce an aggregate of up to $1.0 billion in net lease payments and contemplates the ability to double the lease payments to the extent the power upgrade is completed.

As part of its strategic relationship with Hunt Properties and the Company’s strategy to allocate capital to opportunities in digital infrastructure, on July 20, 2026, the Company entered into a definitive agreement to purchase $20.0 million of CDP’s Series A-1 preferred stock, representing an approximately 8% ownership stake in CDP (the “CDP Investment”). The CDP Investment closed on July 20, 2026. CDP is a private developer of behind-the-meter powered data center campuses. The CDP Investment was part of an approximately $70.0 million Series A financing by CDP, intended to support CDP’s inaugural data center campus in West Texas, in connection with which CDP has entered into a letter of intent for a 750 MW Phase I data center campus.

The Company intends to evaluate additional data center infrastructure investment opportunities through and with Cardinal due to the significant investment and demand for these facilities due to the growth in artificial intelligence.

Electric Vehicles

The Company began its operations as an all-electric, off-road powersports vehicle business. Beginning in 2021, we began efforts to sell off-road powersports vehicles beginning with an electric two-wheeled motorcycle that we discontinued in March 2025. In 2022 we introduced an E-Bike, the Brat, and continue to sell this product. In late 2024 we began selling the HF1 UTV, the MN1 Adventurer and MN1 Tradesman UTV, along with a line of upgrades and accessories. As discussed below, in October 2025, we sold the HF1 and MN1 product lines.

Venom Asset Purchase Agreement

On October 15, 2025, the Company entered into the Venom APA with Venom to divest the Volcon brand in exchange for a non-dilutable 10% equity position in Venom’s reorganized Delaware corporation on a fully-diluted basis. The Company transferred all Volcon IP, including all Volcon intellectual property, brand assets, trademarks, sales and distribution networks and engineering documentation associated with the Volcon IP other than its E-Bike, the Brat. The Company will have the right to appoint one director to Venom’s board. In the event that Venom did not complete its corporate reorganization within six months, with a 60 day grace period, the Company had the option to repurchase the Volcon IP for a nominal amount. While Venom did not complete the reorganization within this time period the Company has not elected to repurchase the Volcon IP.

The Company expects that this agreement will reduce Empery Digital’s future product liability exposure by transferring ownership of Volcon’s four-wheel vehicle business to Venom. The Company also plans to expand its vehicle financing operations for Ebikes, golf carts and UTVs to generate positive cash flow by leveraging the spread between the Company’s cost of capital and interest income from vehicle financing. The Company has been transitioning its powersports dealers to Venom but will continue ongoing warranty support through the remaining warranty period of vehicles the Company sold within these channels.

The Company’s decision to sell these assets represents a strategic shift in operations as the Company does not currently plan to sell any four-wheel products after 2025. Therefore, in accordance with applicable accounting guidance, the results of the four-wheel product lines are presented as discontinued operations in the Condensed Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for all periods presented in this Quarterly Report on Form 10-Q. All amounts, and disclosures for all periods presented in this Quarterly Report on Form 10-Q reflect only the continuing operations unless otherwise noted. See Note 13 to the condensed consolidated financial statements for further discussion.

Venom Supply Agreement

On February 24, 2025, we entered into the Venom Supply Agreement with Venom to supply Venom with certain golf carts. The Venom Supply Agreement was amended and restated on April 25, 2025. The Venom Supply Agreement allows Venom to purchase up to $2.0 million of golf carts with payment terms of the earlier of 100 days from the date the golf carts are shipped from the manufacturer’s facility or upon sale to Venom’s dealers or to consumers. These golf carts were purchased through a manufacturer specified in the Venom Supply Agreement and we received consideration of the cost of the golf carts plus a five percent margin.

On October 29, 2025, the Venom Supply Agreement was amended to increase the available amount to purchase by $0.7 million and Venom agreed to purchase the remaining 138 MN1 units ordered by the Company under the Super Sonic Distribution Agreement discussed below. The original payment terms were the earlier of 60 days from receipt or upon sale by Venom. The agreement was modified in April 2026 to extend the payment terms to the earlier of an additional 90 days or upon sale by Venom. All of these units were received by Venom by January 2026.

On November 17, 2025, the Venom Supply Agreement was amended to increase the amount by $2.5 million (for a total of $4.5 million excluding the October 29, 2025 amendment). Payment terms are the earlier of 60 days from receipt of inventory by Venom or upon sale by Venom. As of June 30, 2026, Venom has outstanding $2.1 million of financing receivables.. Subsequent to June 30, 2026 through August 6, 2026, the Company has not paid any additional amounts to the manufacturer for orders placed by Venom and additional payments due to be paid for orders placed by Venom as of August 6, 2026, are $309,280.

In July 2026, the Company was informed by Venom that it would not be able to repay the amounts the Company has financed as of June 30, 2026, including any partial payments made for inventory not yet completed by the manufacturer. The Company has reserved $2,026,087 for financing receivables owed by Venom and $96,450 for inventory deposits paid to the manufacturer for Venom inventory in the three and six months ended June 30, 2026. The Company has a security interest in the inventory and intends to exercise its rights to retain the inventory. Any recovery of amounts reserved, if any, will be recognized when the Company receives payment from Venom or from the sale of this inventory.

We are actively in discussions for the opportunities to fund inventory purchases with other companies that sell Ebikes.

Two-Wheeled Products

We began selling the Grunt off-road motorcycle in September 2021 and the Grunt EVO off-road motorcycle replaced the Grunt in September 2023. Due to the manufacturing cost of the Grunt EVO, we terminated the manufacturing contract for it in December 2024. As of March 31, 2025, we sold all of the remaining Grunt EVO units.

Beginning in the second quarter of 2024, we began evaluating other potential electric motorcycle offerings. We are determining what features and specifications would be included for new offerings including considering a street legal version that would be dual purpose as an on-road/off-road motorcycle (not highway legal). We have identified one new model which we are working on developing with a third-party manufacturer. We received prototypes in February 2025 and we are testing them to evaluate the feasibility to have them manufactured at a reasonable cost and sell them for an acceptable profit. In April 2026, we received our second prototype units and continue to evaluate and test these units. Provided testing is successful and whether the product cost, including tariffs, allow for us to sell this product, we expect to start selling this product in the second half of 2026.

In the fourth quarter of 2022, we began selling an E-Bike, the Brat which is manufactured by a third-party. The Brat is a class 2 E-Bike and can be used on-road or off-road. We have developed a line of accessories for the Brat that include color panels, headlight cowl, and seat, among other things. We are also developing a new model of the Brat that will incorporate some of these accessories in the base model.

Following the divestiture of the four-wheel products noted above, the Company expects to concentrate on its two-wheel business, including the launch of new products in European markets in the second half of 2026. We expect to continue to evaluate other potential two-wheel product offerings in 2026.

Customers

Dealers

Prior to the divestiture of our four-wheel product lines, we sold our products through powersports dealers, bicycle retailers, and golf cart dealers. We expect to continue to expand our bicycle dealers.

International Distributors

We also sell our two-wheel products internationally through importers. Each importer buys vehicles and accessories and sells them to local dealers or directly to consumers. Payment for vehicle orders is required in advance of shipment. Local dealers or the importer will provide warranty and repair services for vehicles purchased in their country and we will reimburse them for any parts or labor incurred for warranty repairs. As of May 7, 2026, we have one importer in Mexico and one for the Caribbean Region to sell our two-wheel vehicles and accessories in their assigned countries/markets.

Consumers

Consumers can purchase the Brat from our website and have it delivered to a location of their choosing in the continental U.S.

Manufacturers

We outsource the manufacturing of all our two-wheel products and accessories to an international third-party manufacturer, Huaian PX Intelligent Manufacturing Co., Ltd (“PXID”). The estimated fulfillment of all two-wheeled orders we have received, or will receive, assumes that PXID can successfully meet our order quantities and deadlines. In the past we have experienced delays due to PXID being unable to timely meet our order deadlines, and there is no assurance that we will not experience delays in the future until such time as we are able to source products from multiple manufacturers or from larger, more established manufacturers. If the manufacturer is unable to satisfy orders on a timely basis, our customers may cancel their orders. Also, due to the Company currently only having PXID manufacture our two-wheel products, if they experience financial hardship and cannot manufacture our products, our customers may cancel their orders which will harm our sales. Due to new and increased tariffs and other trade policies introduced or threatened by the U.S. government since the beginning of 2025, the cost of our products increased, but we also expect to see a decrease in manufacturing costs for new products ordered. We may see further increases if additional changes in import laws or tariffs occur. We could also experience delays in receiving shipments of our products if there are delays in getting carriers to ship our products or delays at the port of entry.

Results of Operations

The following financial information is for the three and six months ended June 30, 2026 and 2025.

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Revenue

Revenue for the three months ended June 30, 2026 was $80,019 which represents financing income of $30,796, sales of Brats of $14,397, and accessories and parts of $34,533.

Revenue for the six months ended June 30, 2026 was $305,721 which represents financing income of $176,025, sales of Brats of $70,796, and accessories and parts of $57,585.

Revenue for the three months ended June 30, 2025 was $190,173 which represents sales of Brats of $202,998 and accessories and parts of $18,522 offset by $43,944 for the return of one Stag.

Revenue for the six months ended June 30, 2025 was $652,505 which primarily represents sales of Grunt EVOs of $304,905, Brats of $302,456, and accessories and parts of $36,787 offset by $43,944 for the return of one Stag.

For the remainder of 2026 we expect our sales to decrease compared to 2025 due to the sale of our four-wheel products to Venom, our transition to financing inventory purchases for other companies and lower Brat sales as we develop the next version of the Brat and other Ebike models.

Cost of Goods Sold

Cost of goods sold for the three months ended June 30, 2026 was $148,203, including payroll costs of $32,869 for employees and $34,438 for third party contractors performing product fulfillment, logistics management, and service and warranty, and facilities costs of $45,696. Inventory adjustments were $72,637 primarily due to the write off of Grunt and Grunt EVO parts transferred to a third party who will complete service and warranty obligations on these products. These costs are offset by a benefit of $83,318 due to the expiration of product warranties and the resulting reversal of warranty accrual. Product costs were, $28,481 for Brat and Brat parts.

Cost of goods sold for the six months ended June 30, 2026 was $310,827, including payroll costs of $83,843 for employees and $46,285 for third party direct labor contractors performing product fulfillment, logistics management, and service and warranty and facilities costs of $109,889. Inventory adjustments were $84,011 primarily due to the write off of Grunt and Grunt EVO parts transferred to a third party who will complete service and warranty obligations on these products. These costs are offset by a benefit of $129,176 due to the expiration of product warranties and the resulting reversal of warranty accrual. Product costs were $18,789 for Grunt EVO parts, and $82,811 for Brat and Brat parts.

Cost of goods sold for the three months ended June 30, 2025 was $387,271, including payroll costs of $91,520 for employees performing product fulfillment, logistics management, and service and warranty and facilities costs of $121,279. Inventory adjustments were $76,573 and warranty expense was a benefit of $61,394 due to the expiration of product warranties and the resulting reversal of warranty accrual. Product costs were $41,339 for Grunt EVOs, $190,072 for Brats, $60,908 of Stag costs due to the return of one unit and a reduction in shipping costs of $23,118.

Cost of goods sold for the six months ended June 30, 2025 was $891,863, including payroll costs of $160,085 for employees performing product fulfillment, logistics management, and service and warranty and facilities costs of $245,143. Inventory adjustments were $84,822 offset by a benefit of $61,394 due to the expiration of product warranties and the resulting reversal of warranty accrual. Product costs were $265,620 for Grunt EVOs, $309,861 for Brats, $60,908 of costs due to the return of one Stag that was written off and a reduction in shipping costs of $81,854.

For the remainder of 2026, we expect cost of goods sold to decrease as compared to 2025 due to lower revenue from product sales as noted above and a reduction in our Texas warehouse facility when our lease ends in August 2026.

Sales and Marketing Expense

Sales and marketing expenses relate to costs to increase exposure and awareness of our digital asset strategy, for our products and developing our network of U.S. dealers and international distributors.

Sales and marketing expenses were $2,382,844 for the three months ended June 30, 2026 and were primarily related to bad debt expense of $2,122,537 relating to the write off of Venom accounts receivable and prepaid financing deposits, expenses associated with promoting our products and brand of $146,091, employee payroll costs of $36,867, and professional fees of $27,025 for fees paid to a third party distributor, third party sales consultants and legal fees.

Sales and marketing expenses were $2,706,480 for the six months ended June 30, 2026 and were primarily related to bad debt expense of $2,122,537 relating to the write off of Venom accounts receivable and prepaid financing deposits, expenses associated with promoting our products and brand of $300,343 employee payroll costs of $93,399, and professional fees of $87,908 for fees paid to a third party distributor, third party sales consultants and legal fees. Travel expenses were $20,182 and software fees were $37,639.

Sales and marketing expenses were $368,718 for the three months ended June 30, 2025 and were primarily related to expenses associated with promoting our products and brand of $185,088, employee payroll costs of $90,414, and professional fees of $46,703 for fees paid to a third party distributor, third party sales consultants and legal fees.

Sales and marketing expenses were $664,942 for the six months ended June 30, 2025 and were primarily related to expenses associated with promoting our products and brand of $255,812 employee payroll costs of $169,537, and professional fees of $69,133 for fees paid to a third party distributor, third party sales consultants and legal fees and travel expenses were $48,278.

For the remainder of 2026, we expect sales expenses to decrease compared to 2025 due to our transition away from selling four-wheeled products to financing inventory purchases. We expect marketing expenses to remain consistent as we develop the Empery Digital brand.

Product Development Expense

Product development expenses relate to development of our products and process to manufacture these products.

Product development expenses were $170,505 for the three months ended June 30, 2026 and were primarily related to expenses associated with employee payroll costs of $112,786, and prototype expense of $28,701.

Product development expenses were $295,451 for the six months ended June 30, 2026 and were primarily related to expenses associated with employee payroll costs of $207,183, prototype expenses of $33,708 and facilities costs of $20,164.

Product development expenses were $69,250 for the three months ended June 30, 2025 and were primarily related to expenses associated with employee payroll costs of $28,410, and facilities costs of $31,682.

Product development expenses were $303,902 for the six months ended June 30, 2025 and were primarily related to expenses associated with employee payroll costs of $151,269, depreciation expense of $36,432 and facilities costs of $72,714.

For the remainder of 2026 we expect product development costs related to employee costs to decrease compared to 2025 due to lower headcount as fewer products are in development compared to 2025, partially offset by an increase for product prototype costs for purchases of samples of new E-Bike products being considered for sale.

General and Administrative Expense

General and administrative expenses relate to costs for our finance, accounting and administrative functions to support the operations, development, marketing and sales of our products.

General and administrative expenses were $11,533,608 for the three months ended June 30, 2026, and were primarily related to costs of $9,858,130 for legal, advisory and consulting fees, primarily associated with the stockholder litigation matter, employee payroll costs of $410,862, stock-based compensation of $92,788 for a share-based award granted to Gemini, BTC custody fees with a cost of $23,705, professional fees of $378,872 (including auditor fees of $25,750, legal fees of $320,429 and consulting fees of $32,693), software costs of $70,167, insurance costs of $314,418 travel expenses of $36,370 and facilities expense of $61,646. Annual meeting costs in preparation of the annual meeting of $97,760 and Board compensation expense of $82,500.

General and administrative expenses were $16,105,390 for the six months ended June 30, 2026, and were primarily related to costs of $10,850,451 for legal, advisory and consulting fees, primarily associated with the stockholder litigation matter, employee payroll costs of $834,128, stock-based compensation of $1,797,041 for share-based awards granted to employees and to Gemini, BTC custody fees of $33,270, professional fees of $1,114,938 (including auditor fees of $158,607, legal fees of $877,804 and consulting fees of $78,527), software costs of $147,706, insurance costs of $635,835, travel expenses of $68,747 and facilities expense of $166,917. Annual meeting costs in preparation of the annual meeting of $97,760 and Board compensation expense of $165,000.

General and administrative expenses were $2,844,661 for the three months ended June 30, 2025, and were primarily related to expenses associated with employee payroll costs of $541,424, stock-based compensation of $1,125,802 for share-based awards granted to employees, professional fees of $190,954 (including auditor fees of $23,175, legal fees of $127,135 and consulting fees of $40,644), software costs of $121,655, insurance costs of $454,371 and travel expenses of $34,402. Public company expense costs of $123,147, annual meeting costs of $74,450 and Board compensation expense of $50,000.

General and administrative expenses were $4,393,941 for the six months ended June 30, 2025, and were primarily related to expenses associated with employee payroll costs of $1,091,826, stock-based compensation of $1,125,802 for share-based awards granted to employees, professional fees of $450,122 (including auditor fees of $100,425, legal fees of $184,813 and consulting fees of $164,884), software costs of $245,284, insurance costs of $904,759, and travel expenses of $34,402. Public company expense costs of $123,147, annual meeting costs of $74,450 and Board compensation expense of $100,000.

For the remainder of 2026, we expect general and administrative expenses to remain elevated due to legal and other professional fees associated with stockholder activist and other related matters, partially offset by reimbursement by our insurance carrier for legal fees above our $5.0 million deductible and a reduction in our facility cost when our Round Rock, Texas office and warehouse leases expire in August 2026.

Loss on Digital Assets

The Company’s digital assets are initially recorded at cost and are measured at fair value as of each reporting period. The Company determines the fair value of its Bitcoin based on quoted (unadjusted) prices on the Gemini exchange, the active exchange that the Company has determined is its principal market for BTC. The Company recognized a loss on digital assets of $27,913,227 and $106,267,263 for the three and six months ended June 30, 2026, respectively.

Interest and Other Expenses

Other income/expenses for the three months ended June 30, 2026 was a net expense of $966,066. This includes interest expense of $1,062,659 primarily on the borrowings to repurchase our common stock and interest expense on vendor settlement liabilities that were recorded on a discounted cash flow basis, interest income of $44,725 primarily from interest earned on cash held in a money market account and a certificate of deposit, net income of $31,751 and a gain on the change in derivative liabilities of $20,117.

Other income/expenses for the six months ended June 30, 2026 was a net expense of $3,058,292. This includes interest expense of $3,120,694 primarily on the borrowings to repurchase our common stock and interest expense on vendor settlement liabilities that were recorded on a discounted cash flow basis, interest income of $87,264 primarily from interest earned on cash held in a money market account and a certificate of deposit, other income of $585,180 primarily generated from BTC derivative contracts, a loss of $568,142 on repayment of a credit facility and loss on the change in derivative liabilities of $41,900.

Interest and other income/expenses for the three and six months ended June 30, 2025 was insignificant.

For the remainder of 2026, we expect interest expense to decrease compared to the quarter ended June 30, 2026 due to the repayment of amounts borrowed from the delayed draw credit facility unless we borrow additional amounts under this facility to make additional repurchases of our common stock. If market conditions allow, the Company may issue equity or sell Bitcoin to repay outstanding loans or obtain other loan facilities with lower interest rates that could reduce interest expense in the future.

Net Loss

Net loss for the three and six months ended June 30, 2026 was $43,034,434 and $128,437,982, respectively.

Net loss from continuing operations for the three and six months ended June 30, 2025 was $3,507,818 and $5,584,193, respectively.

As discussed above, the increase in net loss for the three and six months ended June 30, 2026 is primarily related to the losses on BTC and costs incurred for the shareholder litigation matter as there were no such losses in the three and six months ended June 30, 2025.

Liquidity and Capital Resources

On June 30, 2026, we had cash, cash equivalents and restricted cash of $3.6 million, including $0.1 million of restricted cash, and we had a working capital deficit of $5.6 million. Since inception we have funded our operations from proceeds from debt and equity sales.

Cash used in operating activities

Net cash used in operating activities was $10.4 million for the six months ended June 30, 2026 and includes all of our operating costs, except non-cash costs of depreciation and amortization, loss on change in derivative financial liabilities all of which were insignificant for the period, stock-based compensation of $1.8 million, bad debt expense of $2.2 million relating to the write off of Venom accounts receivable and inventory financing deposits, and loss on Bitcoin of $106.3 million. Significant uses/contributions of cash used in operating activities includes an increase in accounts receivable of $1.9 million, an increase in related party payable of $7.8 million due to the legal invoices related to the shareholder litigation matter in the amount of $7.8 million, a decrease in prepaid assets of $1.5 million due to the financing prepayments.

Net cash used in operating activities was $7.2 million for the six months ended June 30, 2025 and includes all of our operating costs, except non-cash costs of depreciation and amortization, loss on change in derivative financial liabilities all of which were insignificant for the period and stock-based compensation of $1.1 million. Significant uses/contributions of cash used in operating activities includes an increase of $0.2 million in inventory and inventory deposits, a decrease of $0.2 million in accounts payable, and a decrease of $1.5 million in accrued liabilities primarily due to payments on vendor settlements, $0.2 million used to pay our lease liabilities and $0.2 million for fulfillment of sales where customers had previously placed deposits.

For the remainder of 2026, we expect net cash used in operating activities will increase compared to the six months ended June 30, 2026 due to an increase in legal and professional fees related to stockholder activism matters, partially offset by a decrease in expenses such as rent in connection with our anticipated wind down of our Texas facilities.

Cash provided by (used in) investing activities

Net cash provided by investing activities was $79.2 million for the six months ended June 30, 2026, consisting of proceeds from the sale of Bitcoin of $80.1 million, proceeds from the maturity of a certificate of deposit of $2.1 million, offset by an investment in EMHU of $2.9 million.

Net cash used in investing activities was $2.2 million for the six months ended June 30, 2025, primarily consisting of the purchase of a certificate of deposit $2.0 million as collateral for our dealer floor plan financing and $0.2 million for purchases of equipment and tooling.

Cash (used by) provided by financing activities

Cash used in financing activities for the six months ended June 20, 2026, was $74.2 million and was primarily related to net proceeds of $24.8 million from the sale of common stock units and pre-funded warrant units from the March 2026 offering, proceeds of $15.0 million from borrowing on the delayed draw credit facility, offset by share repurchases of $54.0 million, repayment of the term loan $50.0 million and a payment made on the delayed draw credit facility of $10.0 million.

Cash provided by financing activities for the six months ended June 30, 2025, was $19.0 million and was primarily related to proceeds of $8.8 million from the sale of our common stock from the At the Market offering, proceeds of $10.7 million from the sale of common stock units and pre-funded warrant units, partially offset by share repurchases of $0.5 million.

As of June 30, 2026, we had incurred an accumulated deficit of $444.8 million since inception. Management anticipates that our cash on hand as of June 30, 2026, plus cash expected to be generated from operations and the borrowing available under the delayed draw credit facility and proceeds that could be received from the sale of Bitcoin will be sufficient to fund planned operations beyond one year from the date of the issuance of the financial statements as of and for the six months ended June 30, 2026.

JOBS Act Accounting Election

The Jumpstart our Business Startups Act of 2012, as amended, (the “JOBS Act”) provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

We have implemented all new accounting pronouncements that are in effect and may impact our financial statements and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.

Critical Accounting Policies

None.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Evaluation of Disclosure Controls and Procedures

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) are designed to ensure that information required to be disclosed by us in reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the appropriate time periods, and that such information is accumulated and communicated to one of our Co-Chief Executive Officers, one of which serves as our principal executive officer, and our Chief Financial Officer, who serves as our principal financial officer, as appropriate, to allow timely discussions regarding required disclosure. We, under the supervision of and with the participation of our management, including our Co-Chief Executive Officers and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures.

Based on that evaluation, our Co-Chief Executive Officers and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures were not effective as of June 30, 2026 to provide assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management as appropriate, to allow timely decisions regarding disclosures as we have previously missed filing certain forms timely and we have not implemented and tested controls and procedures to conclude that we have remediated this deficiency. Notwithstanding this conclusion, we believe that our unaudited condensed consolidated financial statements contained in this Quarterly Report fairly present our financial position, results of operations and cash flows for the periods covered thereby in all material respects. Management is working to identify corrective actions for the weakness and will periodically re-evaluate the need to add personnel and implement improved review procedures.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting during the three months ended June, 2026, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 27, 2026 (as amended by Form 10-K/A filed with the SEC on April 20, 2026), (each of which is accessible on the SEC’s website at www.sec.gov (http://www.sec.gov)) and as set forth below.

Risks Related to Our Data Center Infrastructure Investments Strategy

Our AI and data center infrastructure investments strategy may not perform as planned.

We believe the potential for AI and data center infrastructure investments complements our current business model with potential for stable, long-term and high margin income. However, the success of this strategy may not develop as anticipated and may be affected by factors such as the reliability and timing of power supply, future demand for data center infrastructure, the ability of our partners to execute on proposed development plans, regulatory developments with respect to the development and operation of data centers and technological developments. A failure to successfully implement our AI and data center infrastructure investments strategy may adversely affect our business, prospects, or operations.

Further, our business expansion into the AI and data center infrastructure industry may be capital intensive and is expected to shift the timing of cash inflows relative to capital outlays. Our AI and data center infrastructure investments require substantial up-front capital expenditures, which may temporarily reduce liquidity. This business expansion introduces uncertainties that could impact our liquidity and capital resources.

Our capital allocation strategy, including decisions relating to our allocation of capital between our Bitcoin strategy, our e-bike and inventory financing business strategy, our data center infrastructure investments strategy and other initiatives may not be effective at enhancing stockholder value, or providing other benefits we expect.

Our capital allocation decisions, including the amounts allocated to stock repurchases, Bitcoin holdings, e-bike and inventory financing and data center infrastructure investments, may not deliver the anticipated benefits to our shareholders and could adversely affect our business, financial condition, and results of operations. Decisions regarding the repurchases of our common stock, purchases and sales of Bitcoin, e-bike and inventory financing and data center infrastructure investments are based on numerous factors, including our financial performance, cash flow, amount of cash and short-term investment balances, capital requirements, market conditions, and the judgment of our management and Board of Directors. There can be no assurance that any such decisions will be effective in enhancing long-term shareholder value. If we do not properly allocate our capital, we may fail to produce optimal financial results and experience a reduction in stockholder value.

Our expansion into data center and AI infrastructure investments may divert resources from our Bitcoin strategy and e-bike and inventory financing operations and introduce operational complexity.

While we intend to continue our Bitcoin strategy and e-bike and inventory financing operations, the allocation of resources to support our data center development may reduce the capital, personnel and infrastructure available for these operations. In addition, expanding into AI and data center infrastructure investments may increase operational complexity and place additional demands on our management team, which could negatively affect our overall performance, strategic execution and profitability.

Our data center infrastructure investments strategy depends upon the demand for data centers, which may not develop as anticipated.

We have made a number of indirect investments in powered land properties intended to be converted or developed into data centers facilities and intend to evaluate additional data center infrastructure investment opportunities, including through our strategic partnership with Hunt Properties, due to the significant investment and demand for these facilities driven by the growth in artificial intelligence. The market for data centers, AI and high-performance computing is rapidly evolving and highly competitive and demand for the data center infrastructure assets into which we have or may in the future invest may not develop as anticipated.

While we have targeted, and intend to continue to target, data center investments with the potential for long-term secured leases with creditworthy tenants, a reduction in the demand for data center assets, power or connectivity may have a material and adverse effect on our business and financial condition. General economic slowdowns, as well as adverse developments in the data center, internet, AI and data communications and broader technology industries, among other things, could lead to reduced demand for data center assets. In addition, changes in industry practice or in technology could reduce demand for the physical data center assets in which we have indirectly invested. Our data center investments may not achieve sufficient utilization rates or pricing to recover our investments. Technological developments, including more advanced or cost- or power-efficient alternatives, may reduce the competitiveness or useful life of the data center infrastructure in which we have indirectly invested. In addition, tenants or prospective tenants for the properties and facilities in which we, EMHU or CDP have invested, may choose to develop new data centers or expand their own existing data centers or consolidate into data centers in which we, EMHU or CDP do not have an interest.

If any of these risks materialize, we may incur delays, cost overruns, reduced revenues, asset impairments, or losses. Any of these outcomes could materially adversely affect our business, financial condition, and results of operations.

Our strategic data center investments are made via private companies, including EMHU and CDP, which are illiquid and subject to significant valuation uncertainty, and we may not realize a return on these investments.

We have made, and expect to continue to make, strategic investments in private companies as part of our data center infrastructure investment strategy. For example, in June 2026, we made an initial capital contribution of $2.9 million for 25% of the common units of EMHU and committed to making a further capital contribution of $62.1 million upon the contemplated closing of a property acquisition. In addition, in July 2026 we purchased $20 million of CDP’s Series A-1 preferred stock, representing an approximately 8% ownership stake in CDP. These investments are in privately held companies whose securities are not traded on any public exchange and for which no established trading market exists. In addition, subject to certain limited exceptions, we must obtain the prior approval of TexStack, as managing member of EMHU, for any transfer of any of our equity interest in EMHU to third parties. As a result, these investments are inherently illiquid, and we may be unable to sell or otherwise dispose of these interests at favorable prices, or at all, if we require liquidity or wish to reallocate capital. Because these investments lack readily determinable fair values, the carrying values reflected on our balance sheet may not accurately represent the amounts that could be realized upon sale or liquidation. Adverse developments affecting such entities, including development delays, difficulties in securing long-term leases, declines in revenue, failure to achieve business and development milestones, competitive pressures, regulatory changes, or general economic conditions, could result in a partial or total impairment of our investment. Any such impairment would reduce the value of our balance sheet and could materially and adversely affect our financial condition and results of operations.

We hold minority, non-controlling interests in EMHU and CDP and have limited ability to influence their operations, governance, or strategic direction.

Our investments in EMHU and CDP represent minority, non-controlling, equity interests, and we have only limited ability to exercise significant influence over the operating or financial policies of these entities. For example, through VEPS, we hold 25% of the common units of EMHU while TexStack serves as managing member holding the remaining 75% and broad discretionary authority, including over capital calls, distributions, and deemed liquidation events. For example, as managing member under the EMHU operating agreement, TexStack may make mandatory capital calls on a pro rata basis and the Company has agreed to irrevocably guarantee such additional capital contributions of VEPS, and distributions from EMHU may be made at the sole discretion of TexStack, as managing member, on a pro rata basis and subject to certain limitations and conditions. Further, subject to certain limited exceptions, we must obtain the prior approval of TexStack for any transfer of any of our equity interests in EMHU to third parties.

As we continue to pursue our data center infrastructure strategy through EMHU and similar arrangements, we do not have the right to exercise sole decision-making authority over these investments, and TexStack’s or CDP’s interests may not always align with ours. For example, if TexStack fails to fund its share of required capital contributions, including in connection with the pending Property Acquisition, or if disputes arise between us and TexStack or Cardinal regarding the development or operation of the underlying data center infrastructure or the negotiation of a binding lease with a prospective tenant, we could be required to contribute unplanned capital, our interest could be diluted, or we could become involved in costly litigation or arbitration, any of which could adversely affect our business, financial condition, and results of operations.

Consequently, we are in large part dependent on TexStack and the management teams and controlling stockholders of CDP, respectively, to make decisions that are in our interest as a minority investor in each of EMHU and CDP. These companies may take actions - including issuing additional equity that could dilute our ownership interest if we do not exercise participation rights or exercise consent rights available to us, entering into related-party transactions, making strategic decisions with which we disagree, or failing to pursue business opportunities - that could adversely affect the value of our investment. We also may have limited legal remedies in the event of disputes with majority holders or management of CDP. Any of the foregoing could materially and adversely affect the value of our strategic investments and our financial condition.

The success of our AI and data center infrastructure investments depends, among other things, on the ability to negotiate and execute definitive long-term leases on commercially acceptable terms.

The success of our investments in EMHU and CDP are materially dependent upon EMHU and CDP executing long-term definitive leases or their data center facilities with creditworthy hyperscaler or enterprise tenants on commercially acceptable terms. For example, we may not realize the anticipated benefits of our investment in CDP if CDP does not achieve tenant adoption at the pace required for its data center campus to be commercially viable. In July 2026, we invested $20.0 million in CDP’s Series A-1 Preferred Stock, representing an approximately 8% ownership interest in CDP, as part of a $70 million Series A financing by CDP to support its inaugural data center campus in West Texas. While CDP has entered into only a non-binding letter of intent for a 750 MW Phase I data center campus with a prospective tenant, there is no guarantee that CDP will enter into a definitive lease with this or any other tenant, or that any definitive lease, if executed, will be on the terms contemplated by the letter of intent. If CDP fails to achieve tenant adoption at the pace or on the terms necessary for the campus to be commercially viable, the value of our investment in CDP could be impaired, which could adversely affect our business, financial condition, and results of operations.

Similarly, EMHU has entered into a definitive agreement to, subject to certain closing conditions, purchase 100% of the equity interests of the current holder of a fee simple title to a property in the Midwest that, upon closing, is intended to be converted into an AI data center, for an aggregate purchase price of approximately $230 million. Cardinal has executed a non-binding letter of intent which contemplates a triple net lease agreement between EMHU and the prospective tenant. However there is no guarantee that Cardinal or EMHU will be able to execute a definitive lease with this or any other tenant, or that any definitive lease, if executed, will be on the terms contemplated by the letter of intent. If EMHU is unable to negotiate and execute a long-term definitive lease on terms as favorable as those contemplated by the letter of intent, or at all, the Property Acquisition may not close or the value of our investment in EMHU could be impaired, which could adversely affect our business, financial condition, and results of operations.

Our partners may experience delays or other impediments in the development of proposed data centers, which may impact the return on our investments.

The development of new data centers and the retrofitting or expansion of existing facilities are highly complex, capital-intensive and multi-phase projects that typically involve extensive planning, engineering, permitting, procurement and construction processes. As a result, there could be significant delays between the time of our indirect investments in AI and data center infrastructure assets and the time by which such investments provide a return. Our investments in EMHU and CDP depend on the ability of Cardinal and CDP, respectively, to secure sufficient power and, directly or indirectly, and either deliver the property in condition for a data center to be built or complete construction of data center infrastructure suitable for artificial intelligence and high-performance computing tenants. We do not control Cardinal’s or CDP’s ability to secure sufficient power supply for these facilities, and difficulties in securing contracted energy or obtaining adequate power capacity could delay development, increase costs, or limit the ability of these facilities to attract or retain tenants, particularly as evolving technologies such as artificial intelligence increase power requirements. The Property Acquisition underlying our investment in EMHU also remains subject to completion of due diligence and other closing conditions, and any delay in satisfying, or failure to satisfy, these conditions could delay the development of AI and high-performance computing infrastructure on the property. Any such power constraints or construction and closing delays could impair the value of our investments in EMHU and CDP and adversely affect our business, financial condition, and results of operations.

Risks Related to Our E-Bike and Inventory Financing Business Strategy

We have a limited history of financing inventory purchases and parties to inventory financing agreements have defaulted and may in the future default on amounts owed to us which could materially adversely affect our business, results of operations or financial condition.

We have a limited history of financing inventory purchases. On April 17, 2025, we entered into the Venom Supply Agreement to finance inventory purchases with Venom to finance Venom’s golf cart and accessory purchases from their international third-party supplier. The Venom Supply Agreement allowed Venom to purchase up to $2.0 million of golf carts with payment terms of earlier of 100 days from the date the golf carts leave the supplier’s facility or upon sale of the inventory by Venom and the Company would receive a 5% fee for the total cost of inventory ordered by Venom. Inventory purchased by Venom under the Venom Supply Agreement is collateral for the amount financed by the Company. The Venom Supply Agreement was amended on October 29, 2025 (“Amendment 1”) to increase the amount of inventory purchases by $700,000 with payment terms of the earlier of 60 days from when the inventory was received by Venom or upon sale of the inventory. Amendment 1 was completed to allow Venom to purchase MN1 Tradesman and MN1 Adventurers that the Company ordered but had not received from Super Sonic prior to the Venom APA being signed. The Venom Supply Agreement was further amended on November 17, 2025 to increase the amount of inventory purchases by $2.5 million.

In July 2026, Venom informed the Company that it is unable to repay the amounts the Company has financed as of June 30, 2026, including any partial payments made for inventory not yet completed by the manufacturer. Although the Company has a security interest in the inventory and intends to exercise its rights to retain the inventory, the Company does not have a dealer network or access to Venom’s dealer network to sell the inventory immediately. The Company has reserved $2,026,087 for financing receivables owed by Venom and $96,450 for inventory deposits paid to the manufacturer for Venom inventory in the three and six months ended June 30, 2026. The Company may not be able to recover the amounts all or any of the amounts it has reserved, which could have a material adverse effect on our business, results of operations or financial condition.

We are evaluating other opportunities to finance inventory purchases from other vendors, some of which may not be in an industry or for products which we have experience with, however such financing arrangements may not be available with favorable terms to us, or at all. Default by customers on inventory purchases financed by us, including Venom’s failure to repay amounts owed to us, could have a material adverse effect on our business, results of operations or financial condition.

Risks Related to Our Common Stock

Anti-takeover provisions in our governing documents may discourage, delay or prevent a change of control of our company.

Our certificate of incorporation and bylaws contain certain provisions that may discourage, delay or prevent a change in our management or change of control, including that they, collectively: authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; provide that, subject to the special rights of the holders of one or more series of preferred stock, special meetings of the stockholders may be called only by or at the direction of the Board of Directors, the Chairperson of the Board of Directors, the Chief Executive Officer or President, and shall not be called by any other person or persons. prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders; and establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders.

These provisions in our certificate of incorporation and bylaws could prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Their impact that delays, deters, renders more difficult or prevents a change in our control in a takeover attempt may not be in the best interests of our stockholders. Even in the absence of a takeover attempt, the existence of these provisions could adversely affect the prevailing market price of our common stock if their impact is perceived by investors as detrimental. Also, they could make it more difficult for stockholders to replace or remove our management and thus facilitate management entrenchment.

We have been and may in the future be subject to material litigation. These matters include individual and class action lawsuits, as well as investigations and enforcement actions by regulators and governmental authorities. These matters are often expensive and time consuming, and, if resolved adversely, could harm our business, financial condition, and operating results.

We have been may in the future become subject to claims, arbitrations, individual and class action lawsuits with respect to a variety of matters, including employment, consumer protection, advertising, securities and stockholder activists. In addition, we may from time to time become subject to government and regulatory investigations, inquiries, actions or requests, other proceedings and enforcement actions alleging violations of laws, rules, and regulations, both foreign and domestic. The scope, determination and impact of claims, lawsuits, government and regulatory investigations, enforcement actions, disputes and proceedings to which we are subject cannot be predicted with certainty, and have and may result in:

• substantial payments to satisfy judgments, fines, or penalties;
• substantial outside counsel, advisor and consultant fees and costs;
• additional compliance and licensure requirements;
• loss or non-renewal of existing licenses or authorizations, or prohibition from or delays in obtaining additional licenses or authorizations required for our business;
• loss of productivity and high demands on employee time;
• criminal sanctions or consent decrees;
• termination of certain employees, including members of our executive team;
• barring of certain employees from participating in our business in whole or in part;
• orders that restrict our business or prevent us from offering certain products or services;
• changes to our business model and practices;
• an inability to deliver on our strategy;
• delays to planned transactions, product launches, or improvements; and
• damage to our brand and reputation.

For example, on April 2, 2026, a stockholder filed a complaint with the Court of Chancery of the State of Delaware against the Company and its Board alleging that the Company’s board took actions to reject the stockholders’ purported nominations in breach of their fiduciary duties. See Note 14 to the condensed consolidated financial statements for further discussion of this matter, as well as Management’s Discussion and Analysis – General Administrative Expenses regarding significant costs incurred in connection with defending the Company against the allegations.

Regardless of the outcome, any such matters can have an adverse impact, which may be material, on our business, operating results, or financial condition because of legal costs, diversion of management resources, reputational damage, and other factors. Due to our business activities, including our bitcoin treasury strategy, it is possible that in the future we may be subject to investigations and inquiries by U.S. federal and state regulators and foreign regulators, many of which have broad discretion to audit and examine our business. The complexity of U.S. federal and state and international regulatory and enforcement regimes, coupled with the evolving global regulatory environment, could result in a single event prompting a large number of overlapping investigations and legal and regulatory proceedings by multiple government authorities in different jurisdictions. Any of the foregoing could, individually or in the aggregate, harm our reputation, damage our brand and business, and adversely affect our operating results and financial condition.