DVLT 10-K & 10-Q changes, risk factors and insider trading

Investing in our common stock involves a high degree of risk. Before making an investment decision, you should carefully consider the risks described below before deciding whether to invest in our common stock. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary Note Regarding Forward-Looking Statements”, you should carefully consider the specific risks set forth herein. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.

Risk Factor Summary

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC before making an investment decision regarding our common stock.

Risks Related to Our Growth and Financial Condition

We have a history of operating losses and may not be profitable in the future.

We have incurred net losses since inception and had an accumulated deficit of approximately $377.4 million as of December 31, 2025. As discussed below, while we have experienced revenue growth in recent periods, we are not certain whether or when we will obtain a high enough volume of sales to sustain or increase our growth or to achieve profitability in the future. We also expect our costs and expenses to increase in future periods, which could negatively affect our future results of operations if our revenue does not increase. In particular, we intend to continue to expend significant funds to further develop our platform, including by introducing new products and functionality, and to expand our inside and field sales teams and customer success team to drive new customer adoption, expand use cases and integrations, and support international expansion. We will also face increased compliance costs associated with growth and the expansion of our customer base. Our efforts to grow our business may be costlier than we expect, or the rate of our growth in revenue may be slower than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications or delays, and other unknown events. If we are unsuccessful in implementing any initiatives to improve our revenues to achieve profitability, it will have a material adverse impact on our business, prospects, operating results and financial condition. There can be no assurance that the revenue that we generate will be able to support our operations or meet our working capital needs.

Our recent growth may not be indicative of our future growth. Our growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

Our revenue was $39.1 million and $2.7 million for the years ended December 31, 2025 and 2024, respectively. Even if our revenue continues to increase, we expect that our revenue growth rate may decline in the future as a result of a variety of factors, including the maturation of our business. Overall growth of our revenue depends on a number of factors, including our ability to:

Additional factors that may impact the growth of our revenue are described under Part I - Item 1. Business in this Annual Report on Form 10-K.

We may not successfully accomplish any of these objectives, and as a result, it is difficult for us to forecast our future results of operations. If the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, or if we are unable to maintain consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth.

In addition, we expect to continue to expend substantial financial and other resources on:

These investments may not result in increased revenue growth in our business. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. In future periods if our revenue growth does not meet our expectations or increase at a rate sufficient to offset the expected increase in our costs, our business, financial position and results of operations may be harmed, and we may not maintain profitability in the future.

We need financing in the near term to support our ongoing operations. If we do not raise sufficient capital in the short term, we may be forced to cease operations, liquidate our assets and possibly seek bankruptcy protection or engage in a similar process.

We are currently operating at a loss and our cash position is insufficient to fund operations in the near term. As such, we need additional financing to implement our business plan and to service our ongoing operations. We believe that current cash on hand is not sufficient to fund our immediate operational needs. If we are unable to obtain additional financing in the short term, we will be required to divest all or a portion of our business or otherwise liquidate, wind-up, restructure or curtail our operations and product development timeline. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, operating results, and financial condition. If we incur additional debt, the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interests.

The terms of the CSI Convertible Notes place restrictions on our operating and financial flexibility.

On May 20, 2025, we completed our asset purchase (the “CSI Asset Purchase”) of technology assets, customer contracts, trademarks, and other intellectual property from CSI. In connection with the CSI Asset Purchase, we issued to CSI certain convertible promissory notes in an aggregate principal amount of $15.0 million (the “CSI Convertible Notes”), each due on the second anniversary (the “CSI Maturity Date”) of the closing (the “CSI Closing”) of the CSI Asset Purchase.

In the event we have cash on hand (inclusive of available revolving line(s) of credit and/or other similar instruments) of at least $30,000,000 on any last business day of any calendar month after the six-month anniversary of the CSI Closing, we will be required to repay $5,000,000 of the principal outstanding under the CSI Convertible Notes, and any accrued but unpaid interest thereon. Additionally, in the event we have cash on hand (inclusive of available revolving line(s) of credit and/or other similar instruments) of at least $30,000,000 on any last business day of any calendar month after the nine-month anniversary of the CSI Closing, we will be required to repay $5,000,000 of the principal outstanding under the CSI Convertible Notes, and any accrued but unpaid interest thereon.

The CSI Convertible Notes include customary event of default provisions. Upon the occurrence of an event of default, the CSI Convertible Notes and all amounts due thereunder shall become immediately due and payable in cash without notice. Additionally, upon the occurrence of an event of default, CSI is entitled, if permitted by applicable law, to do one or both of the following: (a) increase the rate of interest on the aggregate outstanding principal balance and any other amounts then owing by Company to CSI to 10% per annum, compounded annually, until paid in full; and (b) add any unpaid accrued interest to principal, and such sum shall bear interest therefrom until paid in full at 10% per annum, compounded annually.

Our outstanding indebtedness and any future indebtedness we may incur, combined with our other financial obligations, could increase our vulnerability to adverse changes in general economic, industry and market conditions, limit our flexibility in planning for, or reacting to, changes in our business and the industry and impose a competitive disadvantage compared to our competitors that have less debt or better debt servicing options. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt.

Our ability to make scheduled payments of the principal of, to pay special interest, if any, on or to refinance the Convertible Notes depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate sufficient cash flow from operations to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance the Convertible Notes will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations.

Our results of operations may vary based on the impact of unfavorable changes in our industry or the global economy on us or our customers and potential customers. Unfavorable conditions in the economy both in the United States and abroad, including conditions resulting from changes in gross domestic product growth in the United States or abroad, financial and credit market fluctuations, fluctuating inflation and interest rates, international trade relations, political turmoil, natural catastrophes, outbreaks of contagious diseases, warfare and terrorist attacks on the United States, Europe, the Asia Pacific region or elsewhere, such as the war in Ukraine and conflicts in the Middle East, could cause a decrease in business investments, including spending on information technology, disrupt the timing and cadence of key industry events, and negatively affect the growth of our business and our results of operations. Such catastrophic and disruptive events have and may adversely affect workforces, economies and financial markets globally, leading to a reduction in the ability of, or the inability of, customers, partners, suppliers, vendors or other parties to meet their contractual obligations, and for a period of time, a reduction in customer spending on technology, and such conditions have and may reoccur in the future. The war in Ukraine, conflicts in the Middle East and related political and economic responses such as sanctions imposed on Russia, may also exacerbate these issues and trends especially in these regions. In addition interest rates remain elevated, which may dampen economic growth and cause companies to moderate spending on information technology. These types of unfavorable conditions could disrupt the timing of and attendance at key industry events, which we rely upon in part to generate sales of our products. If those events are disrupted, our marketing investments, sales pipeline and ability to generate new customers and sales of our products could be negatively and adversely affected. Our competitors, many of which are larger and have greater financial resources than we do, may respond to challenging market conditions by lowering prices in an attempt to attract our customers and may be less dependent on key industry events to generate sales for their products. The increased pace of consolidation in certain industries may result in reduced overall spending on our products and solutions. We cannot predict the timing, strength, or duration of any economic slowdown, instability, or recovery, generally or how any such event may impact our business.

Risks Related to Our Business, Operations and Industry

A small number of customers represent a significant percentage of our revenue, so any loss of key customers could have a material adverse effect on our business.

A small number of our customers represent a significant percentage of our revenue. Although we may have agreements with these customers, these agreements typically do not require any minimum purchases and do not prohibit customers from using competing technologies or customers from purchasing products and services from competitors. Because many of our markets are rapidly evolving, customer demand for our technologies and products can shift quickly.

As of December 31, 2025, the Company had two customers accounting for 65% and 32% of accounts receivable. As of December 31, 2024, the Company had three customers accounting for 68%, 12% and 11% of accounts receivable. The Company had two customers accounting for 51% and 26% of its net revenue for the year ended December 31, 2025. The Company had four customers accounting for 29%, 19%, 18% and 10% of its net revenue for the year ended December 31, 2024.

A loss of any of our key customers could have a material adverse effect on our business and results of operations.

We have entered into transactions, and may in the future enter into further transactions, with related parties, potentially exposing us to heightened regulatory scrutiny, corporate governance risks, and reputational concerns.

We have entered into transactions, and may in the future enter into further transactions, with related parties. Related-party transactions create the possibility of conflicts of interest with regard to management, including that: (i) our executive officers and directors that hold positions of responsibility with related parties may be aware of certain business opportunities that are appropriate for presentation to us as well as to such other related parties and may present such business opportunities to such other parties and (ii) our executive officers and directors that hold positions of responsibility with related parties may have significant duties with, and spend significant time serving, other entities and may have conflicts of interest in allocating time. Such conflicts could cause such executive officer or director to seek to advance his or her economic interests or the economic interests of certain related parties above ours. Further, the appearance of conflicts of interest created by related-party transactions could impair the confidence of our investors. Our board of directors (the “Board”) and the audit committee of our Board (the “Audit Committee”) regularly review these transactions. Notwithstanding this, it is possible that a conflict of interest could have a material adverse effect on our business, financial condition and results of operations.

Certain of our license agreements and other agreements were negotiated between related parties. Consequently, their terms, including fees payable to us, may not be as favorable to us as if they had been negotiated exclusively with an unaffiliated third party. There can be no assurance that our agreements with related parties will be viewed as fair or reasonable by investors, regulators, or other stakeholders. If these arrangements are challenged, renegotiated, terminated, or found to be inconsistent with applicable laws, accounting standards, or stock exchange requirements, we could incur financial losses, operational disruptions, or be required to restate financial results.

If we are unable to attract new customers, our business, financial condition and results of operations will be adversely affected.

To increase our revenue, we must continue to attract new customers. Our success will depend to a substantial extent on the widespread adoption of our platform and products as an alternative to existing solutions. Further, the adoption of SaaS business software may be slower in industries with heightened data security interests or business practices requiring highly-customizable application software. In addition, as our market matures, our products evolve, and competitors introduce lower cost or differentiated products that are perceived to compete with our platform and products, our ability to sell subscriptions for our products could be impaired. Similarly, our subscription sales could be adversely affected if customers or users within these organizations perceive that features incorporated into competitive products reduce the need for our products or if they prefer to purchase other products that are bundled with solutions offered by other companies that operate in adjacent markets and compete with our products. As a result of these and other factors, we may be unable to attract new customers, which may have an adverse effect on our business, financial condition and results of operations.

We rely on the cooperation of our customers to install our modules in their audio products.

Our modules are sold to our customers who are consumer electronics companies. Our customers install the modules into their products. Our customers’ audio products are sold to the public who must then install the audio system into their homes or businesses. We do not oversee installation of our products and therefore have no control over the result. If a module is not installed correctly in a customer product or an end consumer does not install their audio system correctly, our technology may not work properly, which could result in customer dissatisfaction or have a material adverse impact on our reputation, our business and our financial results.

We expect fluctuations in our financial results, making it difficult to project future results, and if we fail to meet the expectations of securities analysts or investors with respect to our results of operations, our stock price could decline.

Our results of operations have fluctuated in the past and may continue to fluctuate in the future due to a variety of factors, many of which are outside of our control. As a result, our past results may not be indicative of our future performance. In addition to the other risks described herein, factors that may affect our results of operations include the following:

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, fluctuating inflation and interest rates, and uncertainty about economic stability. For a discussion of certain of these economic, political, regulatory, and market risks, see “Risks Related to our Growth and Financial Condition-Unfavorable conditions in our industry or the global economy, or reductions in information technology spending, could limit our ability to grow our business and negatively affect our results of operations”. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, or do not improve, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Increased inflation rates can adversely affect us by increasing our costs, including personnel costs.

Any of these and other factors, or the cumulative effect of some of these factors, may cause our results of operations to vary significantly. If our quarterly results of operations fall below the expectations of investors and securities analysts who follow our stock, the price of our common stock could decline substantially, and we could face costly lawsuits, including securities class action suits.

Our sales are subject to fluctuation as a result of our customers’ new product introduction timelines and end-user adoption of our customers’ retail products, both of which are outside of our control.

We, in conjunction with our customers, are launching a new technology to the retail and consumer market. The consumer adoption rate at retail is a critical component of our financial success and is currently an unknown component of our financial plans. The variability and unpredictability of these and other factors could result in our failing to meet or exceed financial expectations for a given period. As a result of these factors, our financial results for any single quarter or for periods of less than a year are not necessarily indicative of the results that may be achieved for a full fiscal year.

We depend on the timely delivery of products from our vendors and purchases from our partners and customers.

We depend on manufacturers and component customers to deliver and purchase hardware and consumer electronics in quantities sufficient to meet customer demand. In addition, we depend on these manufacturers and customers to introduce new and innovative products and components to drive industry sales. Any material delay in the introduction or delivery, or limited allocations of products or offerings could result in reduced sales by us, which could have a material adverse impact on our financial results. Any reduction in allocation of components or new hardware platforms or other technological advances by vendors or our customers (in which our technology is part of their hardware offering) to third parties such as big box retailers, could also have a material adverse impact on our financial results.

We are reliant on module manufacturers to produce the modules which we then sell to our customers and any change in their management or business could have a negative effect on our operations.

Our revenue from the sale of modules to consumer electronics and speaker companies depends in large part upon the availability of our modules that implement our technologies. Our manufacturers incorporate our technologies into these modules, which are then incorporated in consumer entertainment products. We do not manufacture these modules, but rather depend on manufacturers to produce the modules which we then sell to our customers. We do not control the manufacturers. While we have a longstanding relationship with our manufacturers, there can be no assurance that our manufacturers will continue to timely produce our modules. Change in management of our manufacturers or a change in their operations could negatively affect our production and cause us to seek other manufacturers which we may not be able to obtain on the same or similar terms as our current manufacturers. This could have a negative effect on our operations.

We currently rely on semiconductor manufacturers to manufacture our semiconductors, and our failure to manage our relationship with our semiconductor manufacturers successfully could negatively impact our business.

We rely on a single contractor in Japan for the production of our transmit semiconductor chip and a single contractor in China for the production of our receive semiconductor chip. Our reliance on these semiconductor manufacturers reduces our control over the manufacturing process, exposing us to risks, including increase production costs and reduced product supply. If we fail to manage our relationships with these manufacturers effectively, or if a contract manufacturer experiences delays, disruptions, or decides to end-of-life components that it manufactures for us, our ability to ship products to our end-user customers could be impaired and our competitive position and reputation could be harmed. In addition, any adverse change in our manufacturers’ financial or business condition could disrupt our ability to supply quality products to our end-user customers. If we are required to change manufacturers, we may lose revenue, incur increased costs and damage our customer relationships. In addition, qualifying a new semiconductor manufacturer and commencing production can be an expensive and lengthy process. As a result of any of these aforementioned disruptions, we would experience a delay in our order fulfillment, and our business, operating results and financial condition would be adversely affected.

We may not be able to successfully manage our growth, and if we are not able to grow efficiently, our business, financial condition and results of operations could be harmed.

As usage of our products and services grows, we will need to devote additional resources to improving and maintaining our infrastructure and integrating with third-party applications. In addition, we will need to appropriately scale our internal business systems and our services organization, including customer support and professional services, to serve our growing customer base. Any failure of or delay in these efforts could result in impaired system performance and reduced customer satisfaction, resulting in decreased sales to new customers, lower dollar-based net retention rates or, the issuance of service credits or requested refunds, which would hurt our revenue growth and our reputation. Additionally, we have experienced inorganic growth through various acquisitions and may experience additional inorganic growth through future acquisitions. This growth may place a strain on our employees, management systems, operational, financial, and other resources. Further, any failure in optimizing our spend on third-party cloud services as we scale could negatively impact our gross margins. Even if we are successful in our expansion efforts, they will be expensive and complex, and require the dedication of significant management time and attention. We could also face inefficiencies or service disruptions as a result of our efforts to scale our internal infrastructure. We cannot be sure that the expansion of and improvements to our internal infrastructure will be effectively implemented on a timely basis, if at all, and such failures could harm our business, financial condition and results of operations.

Our ability to forecast our future results of operations is subject to a number of uncertainties, including our ability to effectively plan for and model future growth. We may encounter risks and uncertainties frequently experienced by growing companies in rapidly changing industries. If we fail to achieve the necessary level of efficiency in our organization as it grows, or if we are not able to accurately forecast future growth, our business, financial condition, and results of operations would be harmed.

We rely upon third-party providers of cloud-based infrastructure to host our products. Any disruption in the operations of these third-party providers, limitations on capacity or interference with our use could adversely affect our business, financial condition and results of operations.

We outsource substantially all of the infrastructure relating to our cloud solution to third-party hosting services. Customers of our cloud-based products need to be able to access our platform at any time, without interruption or degradation of performance, and we provide them with service-level commitments with respect to uptime. Our cloud-based products depend on protecting the virtual cloud infrastructure hosted by third-party hosting services by maintaining its configuration, architecture, features and interconnection specifications, as well as the information stored in these virtual data centers, which is transmitted by third-party internet service providers. Any limitation on the capacity of our third-party hosting services could impede our ability to onboard new customers or expand the usage of our existing customers, which could adversely affect our business, financial condition and results of operations. In addition, any incident affecting our third-party hosting services’ infrastructure that may be caused by cyber-attacks, natural disasters, fire, flood, severe storm, earthquake, power loss, telecommunications failures, outbreaks of contagious diseases, terrorist or other attacks, and other similar events beyond our control could negatively affect our cloud-based products. A prolonged service disruption affecting our cloud-based solution for any of the foregoing reasons would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the third-party hosting services we use.

In the event that our service agreements with our third-party hosting services are terminated, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our cloud solution for deployment on a different cloud infrastructure service provider, which could adversely affect our business, financial condition and results of operations.

Failure to stay on top of technology innovation could harm our business model.

Our revenue growth will depend upon our success in new and existing markets for our technologies. The markets for our technologies and products are defined by:

Our future success depends on our ability to enhance our technologies and products and to develop new technologies and products that address the market needs in a timely manner. Technology development is a complex, uncertain process requiring high levels of innovation, highly skilled engineering and development personnel, and the accurate anticipation of technological and market trends. We may not be able to identify, develop, acquire, market, or support new or enhanced technologies or products on a timely basis, if at all.

The competitive position of our technology depends in part on its ability to operate with third-party products and services, and if we are not successful in maintaining and expanding the compatibility of our technology with such third-party products and services, our business, financial condition, and results of operations could be adversely impacted.

The competitive position of our technology depends in part on its ability to operate with products and services of third parties, technology services, and infrastructure, including but not limited to, in connection with our strategic partnerships and collaborations and other similar arrangements where applicable. Our customers may change the features of their technologies and audio systems may advance technologically. As such, we must continuously modify and enhance our technology to adapt to changes in, or to be integrated or otherwise compatible with, hardware, technology, networking, browser, and database technologies. In the future, one or more technology companies may choose not to support the operation of their hardware, technology, or infrastructure, or our technology may not support the capabilities needed to operate with such hardware, technology, or infrastructure. In addition, to the extent that a third-party were to develop technology or services that compete with ours, that provider may choose not to support one or more of our offerings. We intend to facilitate the compatibility of our technology with various third-party hardware, technology, and infrastructure by maintaining and expanding our business and technical relationships. If we are not successful in achieving this goal, our business, financial condition, and results of operations could be adversely impacted.

Our use and development of, and investment in, AI and blockchain technologies may not be successful and may present business, legal and reputational risks.

We are making investments in AI and blockchain products, technologies and companies to, among other things, develop new products and processes or features for our existing products and processes, which is costly. As AI and blockchain are highly complex and rapidly evolving technologies in the early stages of commercial use, there are significant risks involved in the development and use of, and investment in, AI and blockchain, and there can be no assurance that our development or use of, or investment in, AI or blockchain technologies (including potentially for use in digital asset trading in the future) will be successful, gain market acceptance, enhance our products or services or augment our business or results of operations. Additionally, our competitors may be developing their own AI and blockchain products and technologies, which may be superior in features, functionality or cost to our offerings.

General and administrative expenses for the year ended December 31, 2025 were $35.1 million, an increase of $25.4 million compared to expenses of $9.7 million for the year ended December 31, 2024. The increase in general and administrative expenses is primarily driven by higher amortization of intangibles assets of $10.2 million related to the DV Asset Acquisition (as defined below) that closed on December 31, 2024 and intellectual property acquisitions from Turner Global Media LLC and Web Access LLC closed in July 2025, an increase in headcount resulting in increased salaries and wages, commissions, benefits and stock-based compensation of $4.4 million, increased consulting expenses of $3.3 million, increased legal settlement accrual expense of $0.9 million, increased legal and accounting fees of $2.4 million and $0.4 million, respectively, and an increase in investor relations expenses of $2.7 million.

Change in Fair Value of Convertible Notes

Change in fair value of convertible notes measured at fair value increased to $20.6 million for the year ended December 31, 2025 compared to none for the year ended December 31, 2024 due to the issuance of the senior secured convertible notes issued in 2025 and recording the issuance fair value of $20.6 million, including the original issue discount of $3.0 million and fees of $2.3 million.

Change in Fair Value of Convertible Notes – Related Party

Change in fair value of convertible note to a related party measured at fair value increased to a gain of $0.1 million for the year ended December 31, 2025 compared to none for the year ended December 31, 2024.

Debt extinguishment expense for the year ended December 31, 2025 was $5.8 million due to the extinguishment of senior secured convertible notes issued on April 3, 2025 in an aggregate principal amount of $5.5 million and May 20, 2025, in an aggregate principal amount of $11.1 million (collectively, the “Q2 2025 Notes”). The Company recognized the pre-modification fair value and the post modification incremental fair value change in the Q2 2025 Notes due to the decrease in the alternative conversion feature and recorded $2.1 million in expense and the exchange of 30,738,449 outstanding warrants held by the holders of the Q2 2025 Notes for common stock for which the Company recognized the incremental fair value of $3.7 million. During the year ended December 31, 2024, the Company recorded a loss on debt extinguishment of $0.

During the year ended December 31, 2025, the Company had no deemed dividend activity.

We have historically financed our operations primarily through the sale and issuance of equity securities, proceeds from the exercise of common stock purchase warrants, and the sale and issuance of convertible debt securities. In November 2025, we completed the closing of an equity investment from Scilex Holding Company for $150 million of BTC, which we consider to be highly liquid. In April 2025, May 2025, August 2025 and September 2025, we received $4.5 million, $9.2 million, $5.5 million and $6.0 million, respectively, in proceeds from the issuance of the senior secured convertible notes. In February 2025, we received aggregate gross proceeds of approximately $5.4 million in a registered direct offering. In January 2024, we received gross proceeds of $600,000 from the sale and issuance of promissory notes and common stock purchase warrants to certain accredited investors. In February 2024, we received gross proceeds of approximately $10.0 million from a public offering of 1,025,600 units, with each unit consisting of one share of common stock (or a pre-funded warrant in lieu thereof) and one warrant to purchase one share of common stock. In March 2024, we received gross proceeds of approximately $2.3 million from the issuance of shares of common stock, pre-funded warrants, and warrants to purchase common stock.

While we have historically relied on capital raising activities to finance operations, based on current liquidity levels and projected operating results, we do not currently anticipate the need to raise additional capital to fund operations within the next twelve months. The Company may, however, seek additional equity or debt financing in the future to support strategic initiatives, product development, acquisitions, or other growth opportunities. There can be no assurance that additional financing, if sought, will be available on favorable terms or at all.

Our consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business.

The Company has incurred NOLs in prior periods and may continue to incur operating losses in the foreseeable future as it invests in research and development activities, expands its product portfolio, and grows its market presence. As of December 31, 2025, the Company had approximately $129.1 million of liquid assets, consisting of $2 million in cash, $92.2 million of unrestricted crypto assets, and $32.6 million of accounts receivable (including related party receivables) expected to be collected in the normal course of business.

The Company has no debt maturities within the next twelve months and no covenant compliance requirements or contractual commitments expected to materially impact liquidity during the evaluation period. Management prepared internal operating forecasts covering the twelve-month period from the issuance date of these financial statements and considered potential adverse scenarios, including reductions in projected revenues and declines in digital asset values.

Based on current liquidity levels and projected operating results, management believes the Company has sufficient liquidity to meet its obligations as they become due for at least twelve months from the issuance date of these consolidated financial statements. Accordingly, management has concluded that substantial doubt about the Company’s ability to continue as a going concern has been alleviated.

However, the Company’s future capital requirements will depend on many factors, including the rate of revenue growth, gross margin performance, digital asset market conditions, and the timing and extent of expenditures for product development and market expansion. While the Company may seek additional capital in the future to support strategic initiatives, there can be no assurance that the Company’s projections of capital requirements or future revenues will prove to be accurate.

We have a history of operating losses and may not be profitable in the future.

We have incurred net losses since inception and had an accumulated deficit of approximately $377.4 million as of December 31, 2025. For the six months ended June 30, 2026, we incurred a net loss of $145.0 million and used $80.0 million of cash in operating activities. As of June 30, 2026, we had $1.4 million in cash and cash equivalents, compared to $2.0 million at December 31, 2025.

While we have experienced revenue growth in recent periods, we are not certain whether or when we will obtain a high enough volume of sales to sustain or increase our growth or to achieve profitability in the future. We also expect our costs and expenses to increase in future periods, which could negatively affect our future results of operations if our revenue does not increase. In particular, we intend to continue to expend significant funds to further develop our platform, including by introducing new products and functionality, and to expand our inside and field sales teams and customer success team to drive new customer adoption, expand use cases and integrations, and support international expansion. We will also face increased compliance costs associated with growth and the expansion of our customer base. Our efforts to grow our business may be costlier than we expect, or the rate of our growth in revenue may be slower than we expect, and we may not be able to increase our revenue enough to offset our increased operating expenses. We may incur significant losses in the future for a number of reasons, including the other risks described herein, and unforeseen expenses, difficulties, complications or delays, and other unknown events. If we are unsuccessful in implementing any initiatives to improve our revenues to achieve profitability, it will have a material adverse impact on our business, prospects, operating results and financial condition. There can be no assurance that the revenue that we generate will be able to support our operations or meet our working capital needs.

On May 5, 2026, we entered into a short-term loan agreement in the amount of $2.0 million with an effective interest rate of approximately 183.5% per annum. The loan is guaranteed by both our Chief Executive Officer and our Chief Financial Officer in their personal capacities. The terms of this borrowing, including the extremely high effective interest rate and the requirement of personal officer guarantees, reflect our limited ability to access conventional credit markets and capital on commercially reasonable terms. Our reliance on such high-cost, short-term borrowings may accelerate cash depletion, reduce funds available for operations, and signal financial distress to investors, business partners and potential counterparties. In addition, the personal guarantees by our Chief Executive Officer and Chief Financial Officer create potential conflicts of interest, as these officers may have personal financial incentives related to the Company’s ability to service or repay this debt that differ from or compete with the interests of our stockholders. While we believe the loan was entered into on the best terms available to the Company at the time, there can be no assurance that the existence of such guarantees will not influence management decision-making in ways that are not aligned with stockholder interests.

We may continue to need to rely on similar high-cost financing arrangements in the future if our cash resources are insufficient to fund operations and we are unable to access the capital markets on more favorable terms. Any future borrowings on similar or more onerous terms would further increase our cost of capital and reduce the resources available for our business.

We are subject to a securities class action lawsuit that could result in substantial costs and divert management’s attention from our business.

On August 5, 2026, a class action lawsuit was filed against the Company and certain of its current officers in the Eastern District of Pennsylvania, by plaintiff Carla Aramouni seeking to represent a class of all persons who purchased the Company’s securities between September 4, 2024 and October 30, 2025, alleging violations of Sections 10(b) and 20(a) of the Exchange Act. The matter is styled Aramouni v. Datavault AI Inc., et al., Case No. 2:26-cv-05548-JS (E.D. Pa Aug. 5, 2026). The complaint alleges that the Company made false and/or misleading statements and/or failed to disclose material information about the Company’s business, customer contracts, operations, and commercialization prospects in its public statements and SEC filings. The plaintiff seeks unspecified monetary damages on behalf of a purported class of stockholders plus attorneys’ fees and costs. The Company believes the claims asserted in the complaint are without merit and intends to vigorously defend against them. The matter is in its early stages, and the Company is unable to predict the outcome of the litigation or to reasonably estimate the range of possible loss, if any, that may result from the matter. However, securities class action litigation is often expensive and time-consuming, regardless of the outcome. We may be required to expend significant resources to defend ourselves, which could divert management’s attention from our business operations. Any adverse determination could result in substantial monetary damages that are not covered, or not fully covered, by our directors’ and officers’ liability insurance. In addition, the pendency of the litigation may adversely affect the market price of our common stock and our ability to raise capital.

Additionally, similar lawsuits could be filed against us and our officers and directors, which would increase costs and management distraction. The outcome of this litigation is inherently uncertain, and we are unable to predict the outcome or reasonably estimate the range of possible losses, if any, that may result from this matter.

We have committed to pay $25.0 million in non-refundable transaction fees in connection with a proposed financing that may not be consummated, and amounts paid to date are subject to significant risk of total loss.

On May 30, 2026, we entered into a term sheet with Helmex Global LLP and certain affiliated parties in connection with a proposed financing transaction for an aggregate investment of up to $2.0 billion. In connection with the proposed initial tranche, we agreed to fund $25.0 million of administrative, operational, and structuring costs associated with establishing the investment fund and facilitating the proposed financing. As of June 30, 2026, we had paid $5.0 million toward this commitment.

The proposed financing remains subject to significant conditions, including: (i) completion of due diligence satisfactory to both parties; (ii) negotiation and execution of definitive agreements; (iii) receipt of required regulatory and stockholder approvals, including antitrust clearance and any required clearance from the Committee on Foreign Investment in the United States (CFIUS); (iv) completion and acceptance of an independent valuation of the preferred units; and (v) our determination that we will be able to monetize the preferred units received in the transaction. There can be no assurance that these conditions will be satisfied or that the proposed financing will be completed on the contemplated terms or at all.

All amounts paid toward the transaction fee are non-refundable regardless of whether the proposed financing is consummated. Accordingly, if the proposed financing is not completed, we will lose the entirety of any amounts paid toward the $25.0 million fee, which would have a material adverse effect on our already limited cash resources and financial condition. The commitment to pay additional amounts under the fee obligation may further strain our liquidity at a time when our cash resources are severely limited.

We have entered into several term sheets and a letter of intent relating to proposed strategic transactions, but we may not execute definitive agreements with respect to one or more of such transactions, and any such transaction may not be completed on the terms contemplated by such term sheets or at all.

Since March 31, 2026, we have entered into several term sheets relating to proposed strategic transactions, including (i) a binding term sheet with Scilex Holding Company (“Scilex”), a significant stockholder of the Company and a related party, dated April 26, 2026, regarding a proposed $120.0 million cash contribution by Scilex to us and a revenue participation arrangement pursuant to which Scilex would be entitled to a specified percentage of the gross revenues we recognize attributable exclusively to our Quantum-Edge Network, (ii) a binding term sheet with Scilex, dated June 24, 2026, regarding our proposed sale to Scilex of 837 Bitcoin for an aggregate purchase price of $50.0 million, payable to us in multiple tranches through December 31, 2028, and (iii) a term sheet with Helmex, dated May 30, 2026, regarding a proposed financing transaction for an aggregate investment in the Company of up to $2.0 billion through four successive tranches of $500.0 million each (the term sheets referenced in the preceding clauses (i) through (iii), collectively, the “Term Sheets” and the transactions contemplated thereby, the “Proposed Transactions”). See Note 8, Commitments and Contingencies, to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the Helmex term sheet, and the risk factor above for a description of the non-refundable transaction fee we have committed to pay in connection with the proposed Helmex financing.

The Term Sheets contemplate the execution of definitive agreements with respect to the applicable transactions, which are expected to include customary representations, warranties, covenants, indemnification provisions and closing conditions for transactions of their type. The Proposed Transactions remain subject to further negotiation, the completion of due diligence, receipt of required regulatory, corporate and, in certain cases, stockholder approvals, market conditions and other customary conditions outside our control. As of the date of this Quarterly Report on Form 10-Q, no definitive agreement for any of the Proposed Transactions has been entered into, and there can be no assurance that definitive agreements for such transactions will be executed or that the Proposed Transactions will be consummated on the terms set forth in the applicable Term Sheet or at all.

Datavault AI Inc. (“Datavault,” the “Company,” “us,” “our,” or “we”) is an artificial intelligence platform ("AIP") company focused on transforming data and real-world assets into monetizable digital assets. The Company is developing an integrated licensing and technology ecosystem that combines artificial intelligence, blockchain, data valuation, tokenization, cybersecurity, high-performance computing and exchange infrastructure to support the lifecycle of data and digital assets..

Part of the Datavault platform is an AI-driven inference layer that operates beneath the Company’s user-facing applications, exchanges and monetization technologies. This inference layer is designed to analyze and contextualize data, identify relationships and patterns, generate insights, establish attributes and valuation signals, and support automated decision-making across the platform.

The Company’s proprietary technologies include AI-driven agents and patented technologies designed to enable data ownership, observability, valuation and monetization. These technologies are intended to work together rather than operate as independent products, creating an integrated ecosystem through which enterprises, institutions and other asset owners can identify previously underutilized data, establish its value and ownership, protect it, create digital representations of the underlying rights or assets, and access mechanisms for commercialization. Datavault has two synergistic platforms-Data Sciences and Acoustic Sciences.

Our Data Sciences division is focused on the delivery of cyber-secure AIP, privacy-protected data management and monetization technologies, which include artificial intelligence-driven agents branded as Data Vault®, DataValue®, DataScore®, and Data Vault Bank®. The Company’s cybersecurity capabilities are intended to provide security across this architecture, protecting data and digital assets as they move through the lifecycle from ingestion and inference through valuation, tokenization and exchange. The Company’s exchange technologies are designed to provide the commercialization layer of the platform. These technologies are intended to connect asset and data owners with markets through which digitally represented assets, rights and data may ultimately be transacted, licensed or otherwise monetized.

Datavault also operates an Acoustic Sciences platform that combines the Company’s patented audio and data-over-sound technologies with its events and experiential media business. The Acoustic Sciences platform includes WiSA®, ADIO® and related technologies designed for wireless audio transmission, spatial and immersive audio experiences, data-over-sound applications and digital engagement. The division also includes the Company’s live event capabilities, including CompuSystems, Inc. (“CSI”), operating under the Event Citadel brand, and API Media Innovations Inc. (“API Media”). Event Citadel provides event registration, lead retrieval, data analytics and related services for trade shows, conferences and other live events, while API Media provides media infrastructure, on-site media capture, data collection and digital engagement services for sporting events, entertainment venues and other large-scale experiential activations. The Company believes its events business provides both an established commercial revenue base and a real-world environment in which Datavault technologies can be deployed. By integrating event registration, audience engagement, media infrastructure and experiential data with technologies such as ADIO®, the Company believes it can capture and authenticate interactions occurring at physical events and venues and connect those interactions to its broader Data Sciences platform. This integration is designed to transform event-generated data into potentially monetizable digital assets while creating additional opportunities for audience engagement, credentialing, data analytics and tokenization.

Together, these capabilities form an integrated artificial intelligence platform designed to connect data, intelligence, value and markets. The Company is building infrastructure intended to support the complete lifecycle of digital assets, with its AI inference layer providing the underlying intelligence that connects the Company’s data, valuation, security, tokenization and monetization technologies.

Revenue for the six months ended June 30, 2026 was $10.1 million, an increase of $7.7 million or 329% compared to the revenue for the six months ended June 30, 2025 of $2.4 million. The increase was primarily a result of the acquisition of CSI and API Media along with an increase in patent license revenue. The CSI acquisition generated approximately $4.1 million in revenue and the API Media acquisition generated approximately $1.2 million in revenue for the six months ended June 30, 2026.

Gross profit for the six months ended June 30, 2026 was $3.0 million compared to a gross profit of $0.1 million for the six months ended June 30, 2025. The gross profit as a percent of sales was 30% for the six months ended June 30, 2026, compared to the gross profit of 4% for the six months ended June 30, 2025. The increase in gross profit is due to the inclusion of higher-margin revenue as a result of the acquisition of API Media, an increase in higher margin audio product sales, and an increase in high-margin patent license sales.

Research and development expenses for the six months ended June 30, 2026 were $13.0 million, an increase of $6.4 million, compared to the research and development expenses for the six months ended June 30, 2025 of $6.6 million. The increase in research and development expenses is primarily driven by IBM Watsonx AI and SanQtum AI subscription licenses of $6.2 million and higher legal expenses of $0.5 million.

Sales and marketing expenses for the six months ended June 30, 2026 were $13.8 million, an increase of $10.6 million compared to the sales and marketing expenses for the six months ended June 30, 2025 of $3.2 million. The increase in sales and marketing expenses is primarily related to an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $3.6 million, an increase in advertising and sponsorship projects of $4.9 million and legal and consulting expenses of $0.8 million.

General and administrative expenses for the six months ended June 30, 2026 were $33.6 million, an increase of $21.4 million compared to general and administrative expenses for the six months ended June 30, 2025 of $12.2 million. The increase in general and administrative expenses is primarily driven by higher headcount, resulting in additional salaries, wages, commissions, benefits, and stock-based compensation of $7.8 million; legal and consulting expenses of $6.8 million; higher amortization of intangibles assets of $1.5 million related to the CSI acquisition closed on May 20, 2025, the IP acquisitions from Turner Global Media LLC and Web Access LLC closed in July 2025, the IP acquisition closed on January 04, 2026 the API acquisition closed on January 22, 2026, and the Saleri acquisition closed in Q2 2026. The increase also reflects higher acquisition-related expenses, investor relations costs, and lease expense of $1.5 million, $0.6 million and, $0.9 million, respectively.

Interest expense, net for the six months ended June 30, 2026 was $2.1 million, a decrease of $15.2 million compared to the interest expense, net for the six months ended June 30, 2025 of $17.3 million. Interest expense decreased due to an overall decrease in borrowings.

Crypto Assets

Loss on crypto assets was $8.1 million for the three months ended June 30, 2026, compared to no loss for the three months ended June 30, 2025. For the six months ended June 30, 2026, loss on crypto assets was $25.1 million, compared to no loss for the six months ended June 30, 2025. The losses during the 2026 periods were primarily attributable to decreases in the fair value of the Company’s crypto asset holdings resulting from fluctuations in market prices. The Company did not hold crypto assets during the comparable 2025 periods.

Impairment of Investments in Non-Marketable Securities

Impairment of investment in marketable security for the six months ended June 30, 2026 was $58.9 million compared to none for the six months ended June 30, 2025. This impairment increase was primarily due to the decline in value of our investment in Vivasor, Inc.

Other Income and Expense, net

Other income, net for the three months ended June 30, 2026 was $31,000 income compared to $3,000 expense for the three months ended June 30, 2025.

Other income, net for the six months ended June 30, 2026 was $186,000 income compared to $32,000 expense for the six months ended June 30, 2025.

In addition to our ongoing operating requirements, we have significant contractual and other commitments that may require substantial cash resources over the next twelve months. These obligations include approximately $20.0 million of remaining transaction fee commitments related to the Helmex transaction, remaining purchase commitments under our agreements with IBM, potential earnout payments to EOS, and weekly payment obligations under our May 5, 2026 short-term loan. In addition, in August 2026, we entered into a definitive agreement to acquire CyberCatch Holdings, Inc. in an all-cash transaction. Based on approximately 26.8 million CyberCatch common shares outstanding and consideration of $3.22 per share, approximately $86.2 million of cash consideration would be payable to holders of CyberCatch common shares, in addition to amounts that may be payable in respect of outstanding options and warrants, subject to the terms of the arrangement agreement. The CyberCatch acquisition remains subject to shareholder, court, regulatory and other customary closing conditions. We expect to fund our operating requirements and these commitments through existing cash and cash equivalents and other available resources, together with additional capital raised through equity and/or debt financings. Our ability to satisfy these obligations and continue to fund operations will depend, in part, on our ability to obtain additional financing on acceptable terms.

On July 17, 2026, we entered into a guarantee in connection with a bridge loan facility provided to NYIAX, Inc. Under the guarantee, we may be required to satisfy NYIAX's obligations under the bridge loan facility in the event NYIAX fails to perform its repayment obligations, subject to a maximum guaranteed amount of approximately $0.8 million. Accordingly, the guarantee represents a contingent obligation of the Company. As of the date of this Quarterly Report, no amounts have been paid by the Company pursuant to the guarantee.

Critical Accounting Estimates

The preparation of our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates. We consider an accounting policy or estimate to be critical when it requires significant judgment or estimation and when changes in the underlying assumptions or estimates could have a material effect on our consolidated financial statements.

Business Combinations

We account for acquisitions that meet the definition of a business using the acquisition method of accounting. The application of acquisition accounting requires significant judgment in determining the fair value of consideration transferred and the identifiable assets acquired and liabilities assumed. The determination of fair value may involve the use of significant estimates and assumptions, including projected revenues and cash flows, expected growth rates, customer attrition rates, royalty rates, discount rates and the estimated useful lives of acquired intangible assets. The excess of the purchase consideration over the fair value of identifiable net assets acquired is recorded as goodwill. Changes in the assumptions and estimates used in determining the fair values of acquired assets and liabilities could materially affect the amounts recognized in connection with a business combination and subsequent periods.

Goodwill and Intangible Assets

Our intangible assets primarily consist of acquired technology, patents and patent rights, customer relationships, trademarks and other acquired intellectual property. Intangible assets with finite useful lives are amortized over their estimated useful lives and are reviewed for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable. Determining the useful lives and recoverability of intangible assets requires management to make judgments regarding the expected period over which the assets will generate economic benefits and estimates of future cash flows attributable to those assets.

Goodwill is not amortized but is evaluated for impairment at least annually and whenever events or circumstances indicate that its carrying value may not be recoverable. Our impairment assessments require management to make significant estimates and assumptions regarding future operating performance, revenue growth, cash flows, discount rates and other market and economic factors. Changes in these assumptions or deterioration in expected operating results could result in the recognition of an impairment charge.

Revenue Recognition – Percentage of Completion

For certain arrangements for which revenue is recognized over time, we measure progress toward satisfaction of the performance obligation using an input method based on costs incurred relative to total estimated costs required to complete the performance obligation. Revenue recognized under this method is dependent upon estimates of total expected contract costs and the extent of progress toward completion.

The estimation of total contract costs requires significant management judgment and is affected by a variety of factors, including the nature and complexity of the work to be performed, labor and other resource requirements, project timelines, changes in scope and other contractual or operational factors. We review our estimates of contract performance and total expected costs on an ongoing basis and recognize changes in estimates in the period in which they become known. Accordingly, revisions to estimated costs to complete or the estimated measure of progress could result in increases or decreases to revenue and earnings recognized in a particular period.