EMPD 10-K & 10-Q changes, risk factors and insider trading
Empery Digital Inc. · Nasdaq · Finance Services · CIK 1829794 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Our operating results, revenues, and expenses may fluctuate significantly, which could have an adverse effect on the market price of our common stock.”
New heading “Our expenses are fixed and we have a limited ability to adjust expenses.”
New heading “A significant decrease in the market value of our Bitcoin holdings could adversely affect our ability to satisfy our financial obligations or liquidity needs and could have an adverse effect on the market price of our common stock.”
New heading “Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to continue repurchasing our common stock under the repurchase programs or to pay amounts due under our indebtedness and our cash needs may increase in the future.”
New heading “Risks Related to Our Bitcoin Strategy and Holdings”
New heading “Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our holding of digital assets. Accordingly, it may be difficult to evaluate the Company’s business and future prospects, and the Company may not be able to achieve or maintain profitability in any given period.”
New heading “The concentration of our Bitcoin holdings enhances the risks inherent in our Bitcoin strategy.”
New heading “The Company’s repurchases of its common stock may not be successful in increasing NAV per share.”
New heading “Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under our debt instruments when they come due.”
New heading “The Company has in the past and may in the future use the net proceeds from any sales under its ATM program to purchase or otherwise acquire Bitcoin, the price of which has been, and will likely continue to be, highly volatile. The Company’s operating results and share price may significantly fluctuate, including due to the highly volatile nature of the price of Bitcoin and erratic market movements.”
New heading “Bitcoin and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty, which could materially adversely affect the Company’s financial position, operations and prospects.”
New heading “Due to the unregulated nature and lack of transparency surrounding the operations of many digital asset trading venues, digital asset trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in digital asset trading venues and adversely affect the value of digital assets, and the Company’s financial position, operations and prospects.”
New heading “Digital asset holdings are less liquid than cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.”
New heading “The Company faces risks relating to the custody of its digital assets. If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our digital assets, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.”
New heading “The irreversibility of digital asset transactions exposes us to risks of theft, loss and human error, which could negatively impact our business.”
New heading “The lack of legal recourse and insurance for digital assets increases the risk of total loss in the event of theft or destruction.”
New heading “We are subject to significant competition in the growing digital asset industry and the Company’s business, operating results, and financial condition may be adversely affected if the Company is unable to compete effectively.”
New heading “The emergence or growth of other digital assets, including those with significant private or public sector backing, including by governments, consortiums or financial institutions, could have a negative impact on the price of Bitcoin and adversely affect the Company’s securities.”
New heading “The availability of spot exchange-traded products for Bitcoin and other digital assets may adversely affect the market price of our common stock and our ability to execute our Bitcoin strategy.”
New heading “Our Bitcoin strategy exposes us to risk of non-performance by counterparties.”
New heading “Digital asset lending arrangements may expose us to risks of borrower default, operational failures and cybersecurity threats.”
New heading “We may have exposure to greater than anticipated tax liabilities.”
New heading “Unrealized fair value gains on our Bitcoin holdings could cause us to become subject to the corporate alternative minimum tax under the Inflation Reduction Act of 2022.”
New heading “The Company’s Bitcoin strategy subjects the Company to enhanced regulatory oversight and could have accounting, regulatory and other impacts.”
New heading “Changes in regulatory interpretations could require us to register as a money services business or money transmitter, leading to increased compliance costs or operational shutdowns.”
New heading “If Bitcoin or any of the digital assets that we may purchase are classified as a security, we may be subject to extensive regulation, which could result in significant costs or force us to cease operations.”
New heading “The classification of Bitcoin that we hold, or any digital asset we may purchase in the future, as a commodity could subject us to additional CFTC regulation, resulting in significant compliance costs or the cessation of certain operations.”
New heading “We are not subject to legal and regulatory obligations that apply to investment companies such as mutual funds and exchange-traded funds, or to obligations applicable to investment advisers.”
New heading “Intellectual property disputes related to the open-source structure of digital asset networks exposes us to risks related to software development, security vulnerabilities and potential disruptions to digital asset technology could threaten our ability to operate.”
New heading “Risks Related to Our E-Bike and Inventory Financing Business Strategy”
New heading “Our third-party manufacturer operates outside of the U.S., subjecting us to risks of international operations.”
New heading “We are dependent on our third-party manufacturer, who is dependent on their suppliers, some of which could be single-source suppliers. The inability of these suppliers to deliver necessary components for our vehicles according to our schedule and at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage this third-party manufacturer and their suppliers has in the past and could in the future have a material adverse effect on our financial condition and operating results.”
New heading “We are subject to risks associated with our reliance on foreign manufacturing, suppliers and imports for our products.”
New heading “Our third-party manufacturer may be unable to meet our growing sales and delivery plans, which could harm our business and prospects.”
New heading “Increased tariffs or a global trade war could increase the costs of products for the customers we finance inventory purchases, and could increase the costs of our products, which could adversely impact the competitiveness of theirs or our products and our financial results.”
New heading “Anti-takeover provisions in our governing documents and a stockholder rights plan adopted in February 2026 may discourage, delay or prevent a change of control of our company.”
New heading “Our business and operations could be negatively affected if we become subject to stockholder activism, which could cause us to incur significant expense, hinder execution of our business and growth strategy, and impact our stock price.”
New heading “We have in the past failed to maintain compliance with all applicable continued listing requirements of the Nasdaq Global Select Market, and if we fail to maintain compliance with all applicable continued listing requirements of the Nasdaq Global Select Market in the future, we will not be afforded traditional cure periods under Nasdaq rules and our common stock will be delisted from Nasdaq, which could have an adverse impact on the liquidity and market price of our common stock.”
New heading “We may be subject to material litigation, including 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.”
Removed heading “Our transition to an outsourced manufacturing, design and development business model may not be successful, which could harm our ability to deliver products and recognize revenue.”
Removed heading “Our third party manufacturers may be unable to meet our growing sales and delivery plans, which could harm our business and prospects.”
Removed heading “We are dependent on our third party manufacturers, who are dependent on their suppliers, some of which could be single-source suppliers. The inability of these suppliers to deliver necessary components for our vehicles according to our schedule and at prices, quality levels and volumes acceptable to us, or our inability to efficiently manage these third party manufacturers and their suppliers has in the past and could in the future have a material adverse effect on our financial condition and operating results.”
Removed heading “Our third party manufacturers operate outside of the U.S., subjecting us to risks of international operations.”
Removed heading “We are an early-stage company and we have delivered a limited number of vehicles to customers.”
Removed heading “The conflict with Russia and the Ukraine could have an impact on the availability of components used in the manufacturing of lithium ion batteries that we use to power our vehicles.”
Removed heading “In the first quarter of 2024, we entered into a distribution agreement with Super Sonic and a golf cart supply agreement with Venom company. We may be required to issue shares of our common stock, a warrant and provide Super Sonic the right to appoint a director to our board of directors if certain order thresholds are met and we may be required to issue shares of our common stock to Venom if certain sales thresholds are met. We may not realize significant sales or gross margin from these agreements.”
Removed heading “The markets in which we operate are in their infancy and highly competitive, and we may not be successful in competing in these industries as the industry further develops. We currently face competition from new and established competitors and expect to face competition from others in the future, including competition from companies with new technology.”
Removed heading “Increased tariffs or a global trade war could increase our costs and could further increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results.”
Removed heading “Orders for vehicles are cancellable and there can be no assurance that all orders will result in revenue being recognized.”
Removed heading “We have limited experience servicing our vehicles, we intend to primarily utilize third parties to service our vehicles, and if we are unable to address the service requirements of our customers, our business could be materially and adversely affected.”
Removed heading “Our success is dependent upon the success of the off-road vehicle industry and upon consumers’ willingness to adopt electric vehicles.”
Removed heading “Higher inflation and interest rates, volatile financial markets, unemployment and consumer confidence may cause consumers to defer or not purchase our products.”
Removed heading “We currently operate in an area of the vehicle sector that is not heavily regulated, and future changes in government oversight may subject us to increased regulations, which may increase our expenses.”
Removed heading “We are party to certain agreements with a founder of the Company and certain executive officers that may create a conflict of interest for our board of directors in evaluating a potential change of control transaction.”
Removed heading “If securities or industry analysts do not publish research or reports about us, or if they adversely change their recommendations regarding our common stock, then our stock price and trading volume could decline.”
Removed heading “We are currently not in compliance with the continued listing requirements of the Nasdaq Capital Market, we have in the past failed to maintain compliance with all applicable continued listing requirements of the Nasdaq Capital Market, and if we fail to maintain compliance with all applicable continued listing requirements of the Nasdaq Capital Market in the future, we will not be afforded traditional cure periods under Nasdaq rules and our common stock will be delisted from Nasdaq, which could have an adverse impact on the liquidity and market price of our common stock.”
Removed heading “In an effort to regain compliance with Nasdaq listing rules, we completed reverse stock splits during 2024. We cannot predict whether we will need to complete an additional reverse stock split and the effect that such reverse stock split will have on the market price for shares of our common stock.”
Largest changes
“We may be subject to material litigation, including 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.”see in full comparison
“We are currently not in compliance with the continued listing requirements of the Nasdaq Capital Market, we have in the past failed to maintain compliance with all applicable continued listing requirements of the Nasdaq Capital Market, and if we fail to maintain compliance with all applicable continued listing requirements of the Nasdaq Capital Market in the future, we will not be afforded traditional cure periods under Nasdaq rules and our common stock will be delisted from Nasdaq, which could have an adverse impact on the liquidity and market price of our common stock.”see in full comparison
“We have in the past failed to maintain compliance with all applicable continued listing requirements of the Nasdaq Global Select Market, and if we fail to maintain compliance with all applicable continued listing requirements of the Nasdaq Global Select Market in the future, we will not be afforded traditional cure periods under Nasdaq rules and our common stock will be delisted from Nasdaq, which could have an adverse impact on the liquidity and market price of our common stock.”see in full comparison
“Our third-party manufacturer, PXID, operates outside of the U.S. and as a result we are increasingly exposed to the challenges and risks of doing business outside the U.S., which could reduce our revenues or profits, increase our costs, result in significant liabilities or sanctions, or otherwise disrupt our business. These challenges include: (1) compliance with complex and changing laws, regulations and policies of governments that may impact our operations, such as foreign ownership restrictions, import and export controls, tariffs, and trade restrictions; (2) compliance with U.S. …”see in full comparison
“Our third party manufacturers operate outside of the U.S. and as a result we are increasingly exposed to the challenges and risks of doing business outside the U.S., which could reduce our revenues or profits, increase our costs, result in significant liabilities or sanctions, or otherwise disrupt our business. These challenges include: (1) compliance with complex and changing laws, regulations and policies of governments that may impact our operations, such as foreign ownership restrictions, import and export controls, tariffs, and trade restrictions; (2) compliance with U.S. …”see in full comparison
“The Company faces risks relating to the custody of its digital assets. If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our digital assets, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.”see in full comparison
Full comparison: every changed paragraph (233)
Risks Related to
Our theBusiness Company’sin Business, Operations, and IndustryGeneral
Our losses from operations could continue to raise substantial
doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern requires that we obtain sufficient
funding to finance our operations.
Management anticipates that our cash on hand as of December 31, 2025, plus cash expected to be generated from operations and net proceeds from derivative trading, cash available from borrowings available on our credit facility and the cash received from the sale of Bitcoin will be sufficient to fund planned operations and repay borrowings.
Subsequent to December 31, 2024 through February 5, 2025, the Company received net proceeds of $8.8 million from the sale of 1,764,113
shares of its common stock from our At The Market (“ATM”) offering. On February 6, 2025, the Company received net
proceeds of $10.7 million from the sale of 430,000 common stock units, which consisted of 430,000 shares of common stock and 430,000
warrants to purchase the Company’s common stock at $2.00 per share, and 5,570,000 pre-funded warrant units, which consisted of
5,570,000 pre-funded fully exercisable warrants with an exercise price of $0.00001 and 5,570,000 warrants to purchase the Company’s
common stock at $2.00 per share. See Note 10 in the accompanying financial statements for further discussion of this offering.
Management anticipates that our cash on hand as
of December 31, 2024 plus the cash expected to be generated from operations, and the cash received from the ATM and February 6, 2025 equity
offering will not be sufficient to fund planned operations and maintain required cash balances for the Convertible Notes beyond one year
from the date of the issuance of the financial statements as of and for the year ended December 31, 2024. There can be no assurance that
we will not require additional funding to support our operations. There can be no assurance that such additional funding, if needed, would
be available to the Company on acceptable terms, or at all. These factors raise substantial doubt regarding our ability to continue as
a going concern.
TheWe have not remediated the material weaknesses
in our internal control over financial
reporting identified in our 2020 audit have not been remediated.audit. If we are unable to remediate these material weaknesses or we or our
auditor identify additional material weaknesses
in the future or otherwise fail to maintain an effective system of internal controls,
we may not be able to accurately or timely report
our financial condition or results of operations, which may adversely affect our business
and stock price.
In addition to hiring more finance and accounting personnel
personnel in 2021 to improve our segregation of duties, through 2024, we have made further progress towards remediating these material
weaknesses. We have hired
more experienced accounting and finance personnel. We have prepared some formal written policies and procedures
for accounting, IT, and
financial reporting and record keeping. We have also started the process of documenting our internal controls.
However, we have not fully completed documentation or testing of these policies, procedures, and internal controls.
While we believe these efforts have improved the internal
internal control over financial reporting during 2024,reporting, they did not fully remediate the material weaknesses as we have not fully documented
all of our policies
or procedures and we have not performed any testing of our internal controls.
Our operating results, revenues, and expenses may fluctuate significantly, which could have an adverse effect on the market price of our common stock.
Our operating results, revenues, and expenses have varied in the past and may vary significantly in the future from period to period. These fluctuations could have an adverse effect on the market price of our common stock.
Our operating results may fluctuate, in part, as a result of:
Our expenses are fixed and we have a limited ability to adjust expenses.
Many of our expenses, such as interest expense on our debt, insurance costs, facility leases and certain personnel costs, are relatively fixed. We do not expect the cash generated by our E-Bike, inventory financing operations and net proceeds from derivative trading of Bitcoin to be sufficient to cover such expenses during 2026, and we expect to use proceeds from equity or debt financings, or sale of Bitcoin to pay our expenses and satisfy our liquidity needs that are in excess of our operating cash flows. If we are unable to secure equity or debt financing in a timely manner, on favorable terms, or if the price of Bitcoin declines, we may not be able to satisfy our financial obligations. Such actions could cause significant variation in our operating results in any quarter.
A significant decrease in the market value of our Bitcoin holdings could adversely affect our ability to satisfy our financial obligations or liquidity needs and could have an adverse effect on the market price of our common stock.
Bitcoin’s market value has fluctuated significantly since the inception of our digital asset treasury strategy. For example, a decline in the price of Bitcoin at September 30, 2025 from the weighted average price we paid for purchasing Bitcoin when we implemented our digital asset treasury strategy in July 2025 resulted in our experiencing a $14.1 million unrealized loss on digital assets for the quarter ended September 30, 2025, while decrease in the price of Bitcoin at December 31, 2025 from the price at September 30, 2025 resulted in our experiencing a $108.6 million unrealized loss on digital assets for the quarter ended December 31, 2025. Additionally, it is possible that additional declines in Bitcoin may occur and the market price of our common stock may decline further.
As of March 25, 2026, our outstanding indebtedness was $95.0 million ($50.0 million of which is due in August 2026) with a weighted average interest rate of 7.98%. Collateral for this outstanding indebtedness is 2,891 Bitcoin. If the value of Bitcoin declines to certain levels, a margin call will occur and we will be required to provide additional Bitcoin to our lender as collateral. If we do not have sufficient Bitcoin to meet the margin call or if we miss the deadline to provide the additional Bitcoin (twelve hours), the lender may liquidate some of the Bitcoin held as collateral to repay the principal and interest due at the time of the margin call.
As part of our Bitcoin strategy, we expect to incur or continue to incur additional indebtedness and fixed charges. For the year ended December 31, 2025, our vehicle and inventory financing business and our Bitcoin derivative trades did not generate positive cash flow from operations, and we do not expect our E-Bike sales, inventory financing business and Bitcoin derivative trades to generate sufficient cash flow from operations to satisfy our financial obligations or liquidity needs over the next twelve months. If our E-Bike and inventory financing business and Bitcoin derivative trades do not generate cash flows in future periods sufficient to satisfy our financial obligations and liquidity needs, including repayment of principal and payment of interest on our debt, we intend to fund such payments using cash proceeds from equity or debt financings and sale of our Bitcoin. Our ability to obtain equity or debt financing may, in turn, depend on, among other factors, the value of our Bitcoin holdings, investor sentiment and the general public perception of Bitcoin, our strategy and our value proposition. Accordingly, a significant decline in the market value of our Bitcoin holdings or a negative shift in these other factors may create liquidity and credit risks as such a decline or such shifts may adversely impact our ability to secure sufficient equity or debt financing and sell our Bitcoin to satisfy our financial obligations and liquidity needs.
As Bitcoin constitutes the vast majority of assets on our balance sheet, if we are unable to secure equity or debt financing in a timely manner, on favorable terms, or at all, we may be required to sell Bitcoin to satisfy our financial obligations or liquidity needs, and we may be required to make such sales at prices below our cost basis or on terms that are otherwise unfavorable. For the period from January 1, 2026 to March 25, 2026, we sold 722 Bitcoin for proceeds of $50.0 million and realized a loss of $3.2 million. Any future sales of Bitcoin may have a material adverse effect on our operating results and financial condition and could impair our ability to secure additional equity or debt financing in the future. Our inability to secure additional equity or debt financing in a timely manner, on favorable terms or at all, or to sell our Bitcoin in amounts and at prices sufficient to satisfy our financial obligations or liquidity needs, including our debt service, could cause us to default under such obligations. Any default on our current or future indebtedness could have a material adverse effect on our financial condition. See “Risks Related to Our Outstanding and Potential Future Indebtedness” for additional details about the risks which may impact us if we are unable to satisfy our debt service and cash dividend obligations.
Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to continue repurchasing our common stock under the repurchase programs or to pay amounts due under our indebtedness and our cash needs may increase in the future.
We cannot guarantee that we will be able to implement our share repurchase programs or that they will achieve their objectives.
Our Board of Directors has authorized a share repurchase program. We plan to fund repurchases under this program from our future cash flow generation, as well as from additional potential sources of cash. For example, we have in the past entered into master repurchase agreements pursuant to which we have incurred indebtedness to fund share repurchases and may in the future incur additional indebtedness to fund share repurchases. Under this program, share repurchases may be made at our discretion from time to time in open market transactions, privately negotiated transactions, or other means. This program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares of our common stock. The actual timing, number and value of shares repurchased under the program will be determined by management at its discretion and will depend on a number of factors, including the market price of the common stock, general market and economic conditions, applicable legal requirements and the Company’s efforts to increase Bitcoin per share of common stock. Our Board of Directors will review this program periodically and may authorize adjustments of its terms, as it may deem appropriate. As a result, there can be no guarantee around the timing or volume of our share repurchases. This program could affect the price of our common stock, increase volatility and diminish our cash reserves. This program may be suspended or terminated at any time and, even if fully implemented, may not be effective in enhancing long-term stockholder value or increase the Bitcoin per share of common stock.
Risks Related to Our Bitcoin Strategy and Holdings
Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our holding of digital assets. Accordingly, it may be difficult to evaluate the Company’s business and future prospects, and the Company may not be able to achieve or maintain profitability in any given period.
Our historical financial statements do not fully reflect the potential variability in earnings that we may experience in the future from holding or selling digital assets. The price of digital assets generally has historically been subject to dramatic price fluctuations and is highly volatile. As a result, volatility in our earnings may be significantly more than what we experienced in prior periods.
The concentration of our Bitcoin holdings enhances the risks inherent in our Bitcoin strategy.
As of March 25, 2026, we held approximately 3,359 Bitcoin that were acquired at an aggregate purchase price of $395.4 million and we intend to purchase additional Bitcoin and increase our overall holdings of Bitcoin in the future by generating proceeds from the sale of our common stock or additional indebtedness. The concentration of our Bitcoin holdings limits the risk mitigation that we could achieve if we were to purchase a more diversified portfolio of assets, and the absence of diversification enhances the risks inherent in our Bitcoin strategy. Any future significant declines in the price of Bitcoin would have a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.
The Company’s repurchases of its common stock may not be successful in increasing NAV per share.
The Company has adopted a strategy to increase NAV per share by repurchasing shares of its common stock when its shares of common stock trade at a discount to NAV per share, and to leverage its balance sheet, including reducing its Bitcoin holdings, to fund such share repurchases and potentially repay additional portions of outstanding borrowings. Despite such efforts to increase NAV per share, the Company’s shares of common stock currently trade at a discount to NAV per share and the Company’s future share repurchases and other efforts to increase NAV per share may be unsuccessful.
Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under our debt instruments when they come due.
The Company has incurred indebtedness pursuant to a number of borrowing arrangements and facilities. For example, in October 2025, the Company entered into the MLA, which was amended on February 10, 2026, pursuant to which the Company may borrow an aggregate principal amount of up to $100.0 million collateralized with a security interest in the Bitcoin that we post as collateral. On September 26, 2025, the Company entered into a Master Repurchase Agreement and related transaction confirmation (together, the “Repo Facility”) with a third-party lender, providing for $50.0 million in cash advances to the Company in exchange for purchased securities in the form of Bitcoin. As of March 25, 2026, we have $95.0 million outstanding under these borrowing arrangements.
We may also incur additional indebtedness to meet future financing needs. Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:
The Company has in the past and may in the future use the net proceeds from any sales under its ATM program to purchase or otherwise acquire Bitcoin, the price of which has been, and will likely continue to be, highly volatile. The Company’s operating results and share price may significantly fluctuate, including due to the highly volatile nature of the price of Bitcoin and erratic market movements.
We have in the past and intend in the future to use the net proceeds from future sales pursuant to our ATM program, if any, when market conditions allow the Company to issue equity at a premium to NAV per share to purchase or otherwise acquire Bitcoin. Bitcoin generally is a highly volatile asset. In addition, Bitcoin does not pay interest or other returns and so the ability to generate a return on investment from the net proceeds of any capital raises will depend on whether there is appreciation in the value of Bitcoin following our purchases of Bitcoin with the net proceeds from such capital raisings. Future fluctuations in Bitcoin trading prices may result in our converting Bitcoin into cash with a value substantially below what we paid for such Bitcoin.
Bitcoin and other digital assets are novel assets, and are subject to significant legal, commercial, regulatory and technical uncertainty, which could materially adversely affect the Company’s financial position, operations and prospects.
Bitcoin and other digital assets are relatively novel and are subject to significant uncertainty, which could adversely impact their price. The application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of Bitcoin or other digital assets.
The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of Bitcoin or the ability of individuals or institutions such as us to own or transfer Bitcoin. For example, the U.S. executive branch, SEC, the European Union’s Markets in Crypto Assets Regulation, among others, have been active in recent years, and in the U.K., the Financial Services and Markets Act 2023, or FSMA 2023 became law. It is not possible to predict whether, or when, any of these developments will lead to Congress granting additional authorities to the SEC, Commodity Futures Trading Commission (“CFTC”), or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally and Bitcoin specifically. The consequences of increased regulation of digital assets and digital asset activities could adversely affect the market price of Bitcoin and in turn adversely affect the market price of our common stock.
Moreover, the risks of engaging in a digital asset treasury strategy are relatively novel and have created, and could continue to create complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
The growth of the digital assets industry in general, and the use and acceptance of Bitcoin in particular, may also impact the price of Bitcoin and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of Bitcoin may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to Bitcoin, institutional demand for Bitcoin as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for Bitcoin as a means of payment, and the availability and popularity of alternatives to Bitcoin. Even if growth in Bitcoin adoption occurs in the near or medium-term, there is no assurance that Bitcoin usage will continue to grow over the long-term.
Because Bitcoin has no physical existence beyond the record of transactions on the Bitcoin blockchain, a variety of technical factors related to the Bitcoin blockchain could also impact the price of Bitcoin. For example, malicious attacks by miners, inadequate mining fees to incentivize validating of Bitcoin transactions, hard “forks” of the Bitcoin blockchain into multiple blockchains, and advances in digital computing, algebraic geometry, and quantum computing could undercut the integrity of the Bitcoin blockchain and negatively affect the price of Bitcoin. The liquidity of Bitcoin may also be reduced and damage to the public perception of Bitcoin may occur, if financial institutions were to deny or limit banking services to businesses that hold Bitcoin, provide Bitcoin-related services or accept Bitcoin as payment, which could also decrease the price of Bitcoin. Similarly, the open-source nature of the Bitcoin blockchain means the contributors and developers of the Bitcoin blockchain are generally not directly compensated for their contributions in maintaining and developing the blockchain, and any failure to properly monitor and upgrade the Bitcoin blockchain could adversely affect the Bitcoin blockchain and negatively affect the price of Bitcoin.
The liquidity of Bitcoin may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for Bitcoin and other digital assets.
Due to the unregulated nature and lack of transparency surrounding the operations of many digital asset trading venues, digital asset trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in digital asset trading venues and adversely affect the value of digital assets, and the Company’s financial position, operations and prospects.
Digital asset trading venues are relatively new and, in many cases, unregulated. Furthermore, there are many digital asset trading venues that do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in digital asset trading venues, including prominent exchanges that handle a significant volume of such trading and/or are subject to regulatory oversight, in the event one or more digital asset trading venues cease or pause for a prolonged period the trading of digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.
Negative perception, a lack of stability in the broader digital asset markets and the closure, temporary shutdown or operational disruption of digital asset trading venues, lending institutions, institutional investors, institutional miners, custodians, or other major participants in the digital asset ecosystem, due to fraud, business failure, cybersecurity events, government-mandated regulation, bankruptcy, or for any other reason, may result in a decline in confidence in digital assets and the broader digital asset ecosystem and greater volatility in the price of digital assets. The price of our listed securities may be affected by the value of our future digital asset holdings, and the failure of a major participant in the ecosystem could have a material adverse effect on the market price of our listed securities.
Digital asset holdings are less liquid than cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the digital asset market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our digital assets at favorable prices or at all. As a result, digital asset holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Further, digital assets we hold with our custodians and transact with our trade execution partners does not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered digital assets or otherwise generate funds using our digital asset holdings, including in particular during times of market instability or when the price of digital assets has declined significantly. If we are unable to sell our digital assets, enter into additional capital raising transactions, including capital raising transactions using Bitcoin as collateral, or otherwise generate funds using our Bitcoin holdings, or if we are forced to sell our digital assets at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
The Company faces risks relating to the custody of its digital assets. If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our digital assets, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.
We expect our primary counterparty risk with respect to our Bitcoin will be custodian performance obligations under the custody arrangements we enter into. A series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, SEC enforcement actions against other providers, or placement into receivership or civil fraud lawsuit against digital asset industry participants have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading. Legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings.
While our custodians are subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially-held Bitcoin will not become part of the custodian’s insolvency estate if one or more of our custodians enters bankruptcy, receivership or similar insolvency proceedings. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our Bitcoin holdings, we would become subject to additional counterparty risks. We need to carefully evaluate market conditions, including price volatility as well as service provider terms and market reputations and performance, among others, prior to implementing any such strategy, all of which could affect our ability to successfully implement and execute on any such future strategy. These risks, along with any significant non-performance by counterparties, including in particular the custodian or custodians with which we custody substantially all of our Bitcoin, could have a material adverse effect on our business, prospects, financial condition, and operating results.
The irreversibility of digital asset transactions exposes us to risks of theft, loss and human error, which could negatively impact our business.
Digital asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on that digital asset network. Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of digital assets or a theft of digital assets generally will not be reversible, and we may not be capable of seeking compensation for any such transfer or theft.
Although we plan to regularly transfer digital assets to or from vendors, consultants and services providers, it is possible that, through computer or human error, or through theft or criminal action, such assets could be transferred in incorrect amounts or to unauthorized third parties.
To the extent we are unable to seek a corrective transaction to identify the third-party which has received our digital assets through error or theft, we will be unable to revert or otherwise recover the impacted digital assets, and any such loss could adversely affect our business, results of operations and financial condition.
The lack of legal recourse and insurance for digital assets increases the risk of total loss in the event of theft or destruction.
Digital assets that we acquire will not be insured against theft, loss or destruction. If an event occurs where we lose our digital assets, whether due to cyberattacks, fraud or other malicious activities, we may not have any viable legal recourse or ability to recover the lost assets. Unlike funds held in insured banking institutions, our digital assets are not protected by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. If our digital assets are lost under circumstances that render another party liable, there is no guarantee that the responsible party will have the financial resources to compensate us. As a result, we and our stockholders could face significant financial losses.
We are subject to significant competition in the growing digital asset industry and the Company’s business, operating results, and financial condition may be adversely affected if the Company is unable to compete effectively.
The Company operates in a competitive environment and competes against other companies and other entities with similar strategies, including companies with significant holdings in Bitcoin and other digital assets, and the Company’s business, operating results, and financial condition may be adversely affected if the Company is unable to compete effectively.
The emergence or growth of other digital assets, including those with significant private or public sector backing, including by governments, consortiums or financial institutions, could have a negative impact on the price of Bitcoin and adversely affect the Company’s securities.
As a result of our Bitcoin strategy, our assets are concentrated in Bitcoin holdings. Accordingly, the emergence or growth of digital assets other than Bitcoin may have a material adverse effect on our financial condition. As of December 31, 2025, Bitcoin was the largest digital asset by market capitalization. However, there are numerous alternative digital assets and many entities, including consortiums and financial institutions, are researching and investing resources into private or permissioned blockchain platforms or digital assets that do not use proof-of-work mining like the Bitcoin network. For example, in late 2022, the Ethereum network transitioned to a “proof-of-stake” mechanism for validating transactions that requires significantly less computing power than proof-of-work mining. The Ethereum network has completed another major update since then and may undertake additional updates in the future. If the mechanisms for validating transactions in Ethereum and other alternative digital assets are perceived as superior to proof-of-work mining, those digital assets could gain market share relative to Bitcoin.
Other alternative digital assets that compete with Bitcoin in certain ways include “stablecoins,” which are designed to maintain a constant price related to or based on some other asset or traditional currency because of, for instance, their issuers’ promise to hold high-quality liquid assets (such as U.S. dollar deposits and short-term U.S. treasury securities) equal to the total value of stablecoins in circulation. In July 2025, the “GENIUS Act” was passed, which established a federal framework for “payment stablecoins,” treating them as payment systems, not securities, and mandating fiat-backed reserves, monthly disclosures, anti-money laundering safeguards, and similar measures. Stablecoins have grown rapidly as an alternative to Bitcoin and other digital assets as a medium of exchange and store of value, particularly on digital asset trading platforms, and their use as an alternative to Bitcoin could expand further if the GENIUS Act is enacted as law. As of June 30, 2025, two of the seven largest digital assets by market capitalization were U.S. dollar-pegged stablecoins.
Additionally, central banks in some countries have started to introduce digital forms of legal tender. For example, China’s central bank digital currency (“CBDC”) project was made available to consumers in January 2022, and governments including the United States, the United Kingdom, the European Union, and Israel have been discussing the potential creation of new CBDCs. Whether or not they incorporate blockchain or similar technology, CBDCs, as legal tender in the issuing jurisdiction, could also compete with, or replace, Bitcoin and other digital assets as a medium of exchange or store of value. As a result, the emergence or growth of these or other digital assets could cause the market price of Bitcoin to decrease, which could have a material adverse effect on our business, prospects, financial condition, and operating results.
Management's Discussion & Analysis (MD&A)
New heading “Digital Asset Treasury Strategy”
New heading “Electric Vehicles”
New heading “Venom Asset Purchase Agreement”
New heading “Super Sonic Distribution Agreement”
New heading “Two-Wheeled Products”
New heading “International Distributors”
New heading “Unrealized Loss on Digital Assets”
New heading “Income tax benefit”
New heading “Net Loss From Continuing Operations”
Removed heading “You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.”
Removed heading “Distribution and Supplier Agreements”
Removed heading “Exclusive Distribution Agreement”
Largest changes
“You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.”see in full comparison
“Management anticipates that our cash on hand as of December 31, 2024 plus the cash raised from the ATM subsequent to December 31, 2024, net proceeds from the February 6, 2025 equity offering discussed above, and cash expected to be generated from operations will not be sufficient to fund planned operations beyond one year from the date of the issuance of the financial statements as of and for the year ended December 31, 2024. …”see in full comparison
“We outsource the manufacturing of all our two-wheel products and accessories to an international third-party manufacturer, 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. …”see in full comparison
“Net cash used in operating activities was $29.6 million for the year ended December 31, 2023 and includes all of our operating costs except stock-based compensation of $2.6 million, write-down of inventory of $4.3 million, depreciation and amortization of $0.2 million, non-cash interest expense for the amortization of debt issuance costs and accretion of principal on Convertible Notes and May 2023 Notes of $5.0 million, gain on change in derivative financial liabilities of $13.5 million, loss on extinguishment of Convertible Notes of $22.3 million, bad debt expense of $0.1 million. …”see in full comparison
“In January 2025, we entered into the Super Sonic Distribution Agreement with Super Sonic, a golf cart manufacturer, to supply golf carts to other companies in the U.S. who sell golf carts. On September 18, 2025, we received a notice of termination from Super Sonic pursuant to which Super Sonic terminated this distribution agreement. …”see in full comparison
“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 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. …”see in full comparison
Full comparison: every changed paragraph (95)
The following discussion and analysis of our financial condition and results of operations 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 Annual Report on Form 10-K, which contains audited financial statements of the Company as of and for the year ended December 31, 2025, Results for the year ended December 31, 2025 are not necessarily indicative of results for the year ending December 31, 2026 or any future period. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from management’s expectations as a result of various factors. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the “Special Note Regarding Forward-Looking Statements” section and in the “Risk Factors” section in this Annual Report on Form 10-K.
You should read the following discussion and
analysis of our financial condition and results of operations in conjunction with the financial statements and the related notes appearing
elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations
that involve risks and uncertainties. Actual results and the timing of events could differ materially from those discussed in our forward-looking
statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this Annual Report
on Form 10-K.
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 BTC of $28.0 million, before deducting placement agent fees and other offering expenses. 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 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. Pursuant to the ATM Sales Agreement with Aegis, the Company can sell up to $1.1 billion of common stock under the ATM program, and since the inception of the digital asset treasury strategy through March 25, 2026, the Company has sold 136,053 shares of common stock for $1.5 million, including commissions, at an average price of $10.90. The Company may also complete other equity or convertible debt issuances if it determines market conditions are appropriate.
In addition, our strategy includes repurchasing our common stock when market conditions allow, when our common stock is trading below NAV per share. The Company also has a share repurchase program that allows it to repurchase up to $150.0 million of common stock as of December 31, 2025, which was expanded to $200.0 million on February 2, 2026 and through March 25, 2026 has bought 23,114,391 shares of common stock for $135.6 million, including commissions, at an average price of $5.87. Share repurchases have been funded with proceeds from two borrowing arrangements, that allow for borrowings of up to $150.0 million, of which $95.0 million has been drawn as of March 25, 2026, and sales of BTC. Some of our BTC is held by these lenders as collateral for outstanding borrowings which we may repay with future equity offerings or by selling BTC. See Note 7 to the consolidated financial statements for further discussion of these borrowing arrangements.
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 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 March 25, 2026, the Company generated income of $2.0 million from trading derivative contracts, which is recorded in Other income in the 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 March 25, 2026 we have 3,359 BTC, of which 2,891 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 March 25, 2026, BTC has traded at a high of $126,117 and a low of $60,019 on the Gemini exchange.
Unrealized losses on digital assets significantly contributed to our results of operations for the year ended December 31, 2025. The unrealized loss on digital assets of $122.7 million was recorded, representing 79.3%, of our operating expenses for the year.
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.
We are an all-electric, off-road powersports vehicle
company selling and developing Volcon electric two-wheeled E-Bikes and motorcycles, four-wheeled utility terrain vehicles, or UTVs, also
known as side-by-sides, and golf carts, along with a line of upgrades and accessories. In January 2025, we also entered into a distribution
agreement with a golf cart manufacturer, Super Sonic Company Ltd. (“Super Sonic”) located in Vietnam, and a subsidiary of
Odes Industry, to supply golf carts to other companies in the U. S. who sell golf carts.
Distribution and Supplier Agreements
Exclusive Distribution Agreement
In January 2025, we signed an
exclusive Distribution Agreement with Super Sonic to act as their exclusive distributor of certain of their golf cart products (the “Products”),
in the U. S.. Super Sonic agreed to recommend to all customers the sole use of us for all Products. Super Sonic has the right to sell
non-Volcon branded Products to other customers and shall pay 5% of the order price to us. Before the end of June 2025, we agreed to provide
a procurement plan, and if we fail to meet the minimum purchase requirement described in the procurement plan for two consecutive months,
Super Sonic shall have the right to immediately terminate the Distribution Agreement. During the term of the Distribution Agreement, to
the extent we sell any Volcon-branded products (the “Volcon Products”) that are similar to the Products, we agreed to provide
Super Sonic with a right of first refusal to manufacture the Volcon Products. As more fully discussed in Note 15 of the accompanying financial
statements, we may be required to issue our common stock, warrants to purchase our common stock and the right to appoint a director to
our board of directors if certain golf cart sales volumes are attained.
Venom Supply Agreement
On February 24, 2025, we entered
into athe Venom Supply
Agreement with Venom-EV LLC (“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 $3$2.0 million of golf carts with payment terms of 90the earlier of 100 days from the
date the golf carts are deliveredshipped from the manufacturer’s facility or upon sale to Venom’s facility.
dealers or to consumers. These golf
carts will be purchased through a manufacturer specified in the Venom Supply Agreement and we will receive consideration of the cost of
of the golf carts plus a threefive percent margin. We received an initial order from Venom for $2.4$2.0 million of golf carts. At the end of each
calendar quarter, we agreed to issue Venom shares of Company common stock based on the number of golf carts purchasedand paid a deposit to the
manufacturer of $0.6 million on May 2, 2025 and paid $0.8 million in September 2025 for the golf carts, which were shipped in September
2025. The remaining $0.6 million was paid in the fourth quarter of 2025. All units were shipped by Venom during
the quarter as follows: for each 1,000 Units sold in 2025manufacturer to VenomVenom, by us, we shall issueand Venom
paid aall numberamounts ofdue shareson equalthis to 1% of our outstanding
shares of common stockpurchase as of theDecember last31, day of such quarter that the 1,000 Units were sold for no additional consideration.2025.
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. Payment terms are the earlier of 60 days from receipt or upon sale by Venom. All of these units were received by Venom by January 30, 2026 and payment is due by March 31, 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). Subsequent to December 31, 2025 through March 25, 2026, the Company has paid $0.9 million to the manufacturer for orders placed by Venom and additional payments due to be paid for orders placed by Venom as of March 25, 2026, are $1.4 million. Payment terms are the earlier of 60 days from receipt of inventory by Venom or upon sale by Venom.
We expect that we will complete additional financing transactions for Venom under the Venom Supply Agreement and we are actively in discussions for the opportunity to fund inventory purchases with other companies that sell golf carts and UTVs.
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 and may continue to finance Venom’s inventory purchases. In the event that Venom does not complete its corporate reorganization within six months, the Company will have the option to repurchase the Volcon IP for a nominal amount.
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 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 Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for all periods presented in this Annual Report on Form 10-K. All amounts, and disclosures for all periods presented in this Annual Report on Form 10-K reflect only the continuing operations unless otherwise noted. See Note 18 to the consolidated financial statements for further discussion.
Super Sonic Distribution Agreement
In January 2025, we entered into the Super Sonic Distribution Agreement with Super Sonic, a golf cart manufacturer, to supply golf carts to other companies in the U.S. who sell golf carts. On September 18, 2025, we received a notice of termination from Super Sonic pursuant to which Super Sonic terminated this distribution agreement. The termination, which was effective upon receipt of the notice from Super Sonic, was affected pursuant to the terms of the Super Sonic Distribution Agreement on the grounds that the Company has failed to meet the minimum purchase requirement under the Super Sonic Distribution Agreement for two consecutive months, which gave Super Sonic the right to immediately terminate the Super Sonic Distribution Agreement. The termination also eliminates any obligation of the Company to issue equity to Super Sonic pursuant to the terms of the Super Sonic Distribution Agreement. The Company is not subject to any early termination penalties related to the termination of the Super Sonic Distribution Agreement.
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 have 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. Provided testing is successful and whether the product cost, including tariffs, allows 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 will 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 utilize our bicycle dealers. We are transitioning our powersports and golf cart dealers to Venom but will continue to support these dealers for service and warranty obligations for products sold to them.
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 March 25, 2026, we have one importer in Mexico, one for the Caribbean Region and one in New Zealand 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, 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. We have experienced delays in the past due to other third-party manufacturers 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 PXID is unable to satisfy orders on a timely basis, our customers may cancel their orders. Also, due to the Company currently only having PXID for design, development and manufacturing of 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 will increase without a decrease in manufacturing costs and may increase further 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.
Venom currently sources its golf cart and accessory purchases from one international third-party manufacturer. Risks related to future purchases of their products from this manufacturer are similar to those of our two-wheel products noted above and could result in delays in ordering and receiving products that could impact the amount of inventory purchases that Venom may finance through the Company.
Due to recurring losses, there is no provision for income taxes for
any period presented.
Revenue
for the year ended December 31, 2024,2025 was $4,037,191 $974,977
which represents sales of Brats of $1,561,555, Grunt EVOs of $1,280,739,$302,841, Stagswhich of
$371,552,were Volcondiscontinued Youthin March 2025, Brats of $286,680 (which we stopped selling as of June 30, 2024), MN1s of $31,225, HF1s of $22,500$437,144 and accessories and
parts of
$116,009. $264,338.The RevenueCompany also increasedrealized due$98,448 toof finance revenue where the reversalCompany provided the financing services for the purchase of unclaimed dealer rebates and price adjustment credits in the amount of
$350,093 offset by discounts due to various promotions in the amount of $125,859.inventory.
Revenue for the year ended December 31, 2024, was $3,983,466 which represents sales of Brats of $1,561,555, Grunt EVOs of $1,280,739, Stags of $371,552 (which we stopped selling in the third quarter of 2024), Volcon Youth of $286,680 (which we stopped selling as of June 30, 2024), and accessories and parts of $264,338. Revenue during 2024 was also higher due to the reversal of unclaimed dealer rebates and price adjustment credits in the amount of $350,093 offset by discounts due to various promotions in the amount of $125,859.
In 2026 we expect our sales to decrease due to the sale of our four-wheel products to Venom, discontinuing the Grunt EVO motorcycle and our transition to financing inventory purchases for other golf cart and four-wheel product companies.
Revenue for the year ended December 31, 2023, was
$3,260,988 which represents sales of Brats of $2,341,097, Grunt EVO motorcycles of $465,438, Grunt motorcycles of $129,117, Volcon Youth
and Torrot motorcycles of $498,160 and accessories and parts of $261,663 offset by $436,333 for rebates and dealer discounts.
Cost of goods sold for the year ended December 31, 2025 was $1,337,595, including payroll costs of $297,244 for employees performing product fulfillment, logistics management, and service and warranty and facilities costs of $430,426. Inventory adjustments were $129,289 offset by a benefit from the reversal of our warranty accrual of $199,957 due to the expiration of product warranties. Product costs were $235,147 for Grunt EVOs and $459,449 for Brats.
Cost
of goods sold for the year ended December 31,
2024 were $18,168,288$17,987,951 including payroll costs of $274,801$268,745 for employees performing product
fulfillment, logistics management, and service
and warranty, partially offset by a stock-based compensation benefit of ($11,827) for the
reversal of previously recognized stock-based
compensation on stock options that did not vest due to employee terminations. Product costs
for Brats and Grunt EVOs sold during the period
were $1,523,053 and $1,427,562, (before the finished goods inventory write down discussed
below), respectively. Volcon Youth product costs
were $186,813 before the additional expense of $81,911 for the write down of all Volcon
Youth inventory as the Company could no longer
sell Volcon Youth motorcycles or parts after June 30, 2024. MN1 and HF1 product costs were
$34,491 and $125,550 respectively.
The Company
recorded a loss on disposal of assets of
$817,736 primarily tooling related to Stag, Grunt EVO and Runt. The Company also recorded $175,000
as an offset to expenses for the partial
recovery of a previously written off prepaid inventory deposit. Facilities costs for the
year ended December 31, 2024 were $408,217 for
our warehouse facility and third partythird-party warehousing costs.
In 2026 we expect cost of goods sold to decrease due to lower revenue from product sales as noted above.
Cost of goods sold for the year ended December
31, 2023 were $11,391,040, including payroll costs of $1,200,098 and stock-based compensation of $211,981 for employees performing warehouse
and logistics management and quality control testing. Product costs for Brats, Grunt EVOs, and Volcon Youth motorcycles sold during the
period were $1,674,987, $711,807 and $3,236,773, respectively. We recorded a write down of $2,674,352 for Volcon Youth motorcycles to
reduce their costs to the expected net realizable value. We also recorded an expense of $2,070,000 for the termination of the Torrot agreement.
We recorded an expense of $450,282 related to fees paid to cancel purchase orders to reduce raw material quantities. The Company also
recorded an expense of $1,401,490 to write off inventory contributed to our third party manufacturer of the Grunt EVO in return for a
credit that would be provided for each unit purchased up to 900 units.
Facilities costs for the year ended December 31,
2023 were $509,360 for our warehouse facility and third party warehousing costs. Accrued warranty
costs were $205,069 offset by a reversal of the accrued warranty liability in the amount of $472,978 for the
Grunt where the one year warranty for defects had expired and claims were not as high as estimated.
In 2025 we expect revenue
and cost of goods sold to increase due to the expected increase in sales of the Brat, MN1 and HF1 products. Additional
cost savings may be realized if the third party manufacturer for these vehicles can source or manufacture parts at a lower cost.
Sales and marketing expenses relate to costs to increase
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 $1,458,006 for the year ended December 31, 2025 and were primarily related to expenses associated with promoting our products and promoting the Empery Digital brand after the announcement of our digital asset treasury strategy and name change in July 2025 of $753,643, employee payroll costs of $250,787, and professional fees of $182,376 for fees paid to a third-party distributor, third-party sales consultants and legal fees. Travel expenses were $81,748, facilities expenses were $73,657, and software fees were $88,216.
For 2026 we expect sales expenses to decrease as we 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 and increase awareness of our digital asset strategy.
Sales and marketing expenses were $7,405,705 for
the year ended December 31, 2023 and were primarily related to expenses associated with promoting our products and brand of $2,889,421,
employee payroll costs of $2,789,652, stock-based compensation of $693,559 for share-based awards granted to employees and consultants,
and travel costs of $294,323 primarily related to costs incurred for travel to build our dealer and distributor network and to attend
events to promote our products. Facilities costs were $168,000. Bad debt expense was $105,687 and professional fees in the amount of $201,125,
mainly related to legal fees in the amount of $74,090 related to entering into international distribution agreements and sales consultant
fees in the amount of $73,132.
We
expect sales expenses to increase as we begin expanding our international distributors and selling commissions to increase sales of Brats,
MN1s and HF1s. We expect marketing expenses to increase to promote the MN1 and HF1 products and to launch the two-wheel motorcycle that
will replace the Grunt EVO.
Product
development expenses were $2,668,330
$398,605 for the year ended December 31, 20242025 and were primarily related to expenses associated with employee
payroll costs of $1,515,900,$177,480,
depreciation stock-based compensationexpense of $126,337$49,864 for share-based awards granted to employees,and facilities costs of $242,677,
prototype costs of $252,147 and software fees related to product development in the amount of $77,837, travel expenses of $163,669 and
depreciation expense of $100,782.$96,978.
What changed in the latest 10-Q
Risk Factors
New heading “Risks Related to Our Data Center Infrastructure Investments Strategy”
New heading “Our AI and data center infrastructure investments strategy may not perform as planned.”
New heading “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.”
New heading “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.”
New heading “Our data center infrastructure investments strategy depends upon the demand for data centers, which may not develop as anticipated.”
New heading “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.”
New heading “We hold minority, non-controlling interests in EMHU and CDP and have limited ability to influence their operations, governance, or strategic direction.”
New heading “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.”
New heading “Our partners may experience delays or other impediments in the development of proposed data centers, which may impact the return on our investments.”
New heading “Risks Related to Our E-Bike and Inventory Financing Business Strategy”
New heading “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.”
New heading “Risks Related to Our Common Stock”
New heading “Anti-takeover provisions in our governing documents may discourage, delay or prevent a change of control of our company.”
New heading “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.”
Largest changes
“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.”see in full comparison
“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. …”see in full comparison
“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.”see in full comparison
“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. …”see in full comparison
“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.”see in full comparison
“Our AI and data center infrastructure investments strategy may not perform as planned.”see in full comparison
Full comparison: every changed paragraph (37)
You should carefully review
and and
consider the information regarding certain factors that could materially affect our business, financial condition or future results
included 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) 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:
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.
Management's Discussion & Analysis (MD&A)
New heading “Data Center Infrastructure Investments”
Largest changes
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 efficientlysee in full comparisonbuildmanage 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,therepurchases under the Company’s share repurchase program and financing arrangements relatedthereto, the real time updates onthereto; the Company’swebsitestrategic 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.
Net cash used in operating activities wassee in full comparison$3.5$10.4 million for thethreesix months endedMarchJune31,30, 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 theperiod andperiod, stock-based compensation of$1.7$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$78.4$106.3 million. Significant uses/contributions of cash used in operating activities includes an increase in accounts receivable of$2.2$1.9million primarily due to inventory financing,million, an increase inaccountsrelated party payable of$3.1$7.8 millionprimarilydue to the legalclassificationinvoicesof a negative balance in one of our bank balances of $2.8 million duerelated to thetimingshareholder litigation matter in the amount ofshare$7.8repurchasesmillion,funded from this bank account, an increase of $0.1 million in inventory and inventory deposits,a decrease in prepaid assets of$0.5$1.5 million due to thereclassification of inventoryfinancingprepayments to accounts receivable as the Company invoiced Venom based on the financing terms, and an increase of $0.2 million in accrued liabilities primarily due to an increase in accrued legal fees of $0.9 million for legal fees offset by payments on vendor settlements of $0.4 million.prepayments.
“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. …”see in full comparison
“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 …”see in full comparison
General and administrative expenses weresee in full comparison$1,549,280$11,533,608 for the three months endedMarchJune31,30,2025,2026, and were primarily related toexpensescosts of $9,858,130 for legal, advisory and consulting fees, primarily associated with the stockholder litigation matter, employee payroll costs of$550,402,$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$259,168$378,872 (including auditor fees of$77,250,$25,750, legal fees of$57,678$320,429 and consulting fees of$124,240$32,693), software costs of$123,629,$70,167, insurance costs of$450,388,$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$50,000.$82,500.
Full comparison: every changed paragraph (73)
The following discussion
and and
analysis is intended as a review of significant factors affecting the Company’s financial condition and results of operations
for for
the periods indicated. This discussion and analysis should be read in conjunction with the financial statements and related notes
appearing 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 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 MarchJune 31,30, 2026 are not necessarily indicative of results for the year ending December 31, 2026
or any future period.
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 buildmanage 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, the repurchases under the Company’s
share repurchase program and financing arrangements
related thereto, the real time updates onthereto; the Company’s websitestrategic 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.
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 May 7, 2026 has sold 136,053 shares of common stock for $1.5 million, including commissions, at an
average price of $10.90. The Company may also complete other equity or convertible debt issuances if it determines market conditions
are appropriate.
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.
In addition, the Company’s
strategy includes repurchasing the Company’s common stock when the Company’s common stock is trading below NAV per share.
The Company has a share repurchase
program that allows it to repurchase up to $200.0 million of common stock and through MayAugust 7,6, 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,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 56 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 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 MayAugust 7,6, 2026, the Company generated income of $1.4$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 the
risk that digital assets pose with respect to digital wallets being compromised and the Company uses institutional-grade custodians
to 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 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 May
7,6, 2026 we have 2,9141,279 BTC, of which 1,353954 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
MayAugust 7,6, 2026, BTC has closedtraded at a high of $126,279 and a low of $60,033.$57,742.
Losses
on digital assets significantly contributed to our results of operations for the threesix months ended MarchJune 31,30, 2026. The loss on digital assets
assets of $78.4$106.3 million was recorded, representing 94%, 87%,
of our operating expenses for the threesix months ended MarchJune 31,30, 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.
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 corporation
on a fully-diluted basis. The Company transferred all Volcon IP, including all Volcon intellectual property, brand assets,
trademarks, 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 and may continue to finance Venom’s inventory purchases. board.
In the
event that Venom doesdid not complete its corporate reorganization within six months, with a 60 day grace period, the Company will havehad 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.
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 MarchJune 31,30, 2026, Venom
has outstanding $2.4$2.1 million of financing receivables, of which $1.7 million has been paid through May 7, 2026.receivables.. Subsequent to MarchJune 31,
30, 2026 through MayAugust 7,6, 2026, the Company has not paid $0.5any
additional millionamounts to the manufacturer for orders placed by Venom and additional payments due
to be paid for orders placed by Venom as
of MayAugust 7,6, 2026, are $0.7 million.$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 expect that we will complete additional financing transactions
for Venom under the Venom Supply Agreement and we are actively in discussions
for the opportunityopportunities to fund inventory purchases with other
companies that sell golf carts and UTVs.Ebikes.
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 have sold all of the remaining
Grunt EVO units.
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 utilizeexpand our
bicycle dealers. We are transitioning our powersports and golf cart dealers to Venom but will continue to support these dealers for service
and warranty obligations for products we sold to them.
We also sell our two-wheel
products products
internationally through importers. Each importer buys vehicles and accessories and sells them to local dealers or directly to
consumers. consumers.
Payment for vehicle orders is required in advance of shipment. Local dealers or the importer will provide warranty and repair
services 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,Mexico and one for the Caribbean Region, and one in New ZealandRegion to sell our two-wheel vehicles and accessories
in their assigned
countries/markets.
Venom currently sources its golf cart and accessory
purchases from one international third-party manufacturer. Risks related to future purchases of their products from this manufacturer
are similar to those of our two-wheel products noted above and could result in delays in ordering and receiving products that could impact
the amount of inventory purchases that Venom may finance through the Company.
The following financial information
is for the three and six months ended MarchJune 31,30, 2026 and 2025.
Revenue for the
three months ended March 31, 2026 was $225,702 which represents sales of Brats of $56,399 and accessories and parts of $23,152. The Company
also realized $145,229 of finance revenue where the Company provided the financing services for the purchase of inventory.
Revenue for the three months
ended ended
MarchJune 31,30, 20252026 was $462,332$80,019 which represents financing income of $30,796, sales of Grunt EVOs of $304,905, Brats of $99,458,$14,397, and accessories and parts of $18,265.
$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 andVenom, our transition
to financing inventory
purchases for other golf cartcompanies and four-wheellower productBrat companies.sales as we develop the next version of the Brat and other Ebike models.
Cost
of goods sold for the
three months ended MarchJune 31,30, 2026 was $162,624,$148,203, including payroll costs of $50,975$32,869 for employees and $34,438 for third party contractors
performing product
fulfillment, logistics management, and service and warrantywarranty, and facilities costs of $64,193,$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 from the reversal of
our warranty accrual of $45,857$83,318 due to the expiration of product warranties.warranties and the resulting
reversal of warranty accrual. Product costs werewere, $54,331$28,481 for Brats.Brat and Brat parts.
Cost
of goods sold for the three
six months ended MarchJune 31,30, 20252026 was $504,592,$310,827, including payroll costs of $68,565$83,843 for employees and $46,285 for third party direct labor
employeescontractors performing product fulfillment, logistics management, and service and warranty and facilities costs of $123,863.$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 $224,281$18,789 for Grunt EVOs,EVO parts, and $119,789$82,811 for Brats.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.
Sales
and marketing expenses were $323,636 for the three months ended March 31, 2026 and were primarily related to expenses associated with
promoting our products and promoting the Empery Digital brand after the announcement of our digital asset treasury strategy and name change
in July 2025 of $154,252, employee payroll costs of $56,532, and professional fees of $60,883 for fees paid to third-party sales consultants.
Sales and marketing expenses
were were
$296,224$2,382,844 for the three months ended MarchJune 31,30, 20252026 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 $70,724 $146,091,
employee payroll costs of $79,123,$36,867, and professional fees of $22,430$27,025 for fees paid to a third party distributor, third-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 and increase awareness of our digital
asset strategy.brand.
Product development
expenses were $124,946 for the three months ended March 31, 2026 and were primarily related to expenses associated with employee payroll
costs of $94,397.
Product development expenses
were were
$234,652$170,505 for the three months ended MarchJune 31,30, 20252026 and were primarily related to expenses associated with employee payroll costs of
$112,786, $122,859,
and facilitiesprototype costsexpense of $41,032.$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.
General
and administrative expenses were $4,571,782 for the three months ended March 31, 2026, and include expenses associated with employee payroll
costs, excluding stock-based compensation, of $423,265. The Company recognized $1,704,252 of stock-based compensation including $677,665
for share-based awards for inducement stock options granted to three new employees upon completion of the Private Placements and $1,026,587
for the warrants granted to Gemini based on the fair value and derived service period of these equity awards (see Notes 9 and 10 to the
condensed consolidated financial statements for further discussion). Period expenses also include professional fees of $1,606,077 (including
auditor fees of $132,857, and legal fees of $1,549,385, which includes legal fees of $992,321 for stockholder activist matters), software
costs of $77,540, insurance costs of $321,418, and facilities costs of $105,271. Additionally, the period includes Board compensation
expense of $82,500.
General and administrative
expenses were $1,549,280$11,533,608 for the three months ended MarchJune 31,30, 2025,2026, and were primarily related to expensescosts of $9,858,130 for legal, advisory
and consulting fees, primarily associated with the stockholder litigation matter, employee payroll
costs of $550,402,$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 $259,168$378,872 (including
auditor fees of $77,250,$25,750, legal fees of $57,678$320,429 and consulting fees of $124,240$32,693),
software costs of $123,629,$70,167, insurance costs of $450,388,$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 $50,000.$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 increaseremain elevated due to legal and other professional fees due to certain corporate governance
and stockholder engagement matters, including fees associated with stockholder
activist activistand 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 currentRound Rock, Texas office leaseand expireswarehouse leases expire in August 2026.
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. Based on the price as of March 31, 2026 of $68,216 per BTC, theThe Company recognized a loss
on digital assets of $78.4$27,913,227 million.and $106,267,263 for the three and six months
ended June 30, 2026, respectively.
The
Company also sold BTC in the three months ended March 31, 2026 and realized a loss of $53.3 million based on the original
cost of the BTC sold.
Net
Interest and otherOther income/expenses for
the three months ended MarchJune 31,30, 2026 was a net expense of $2,092,226.$966,066. This includes interest expense
of $2,058,035$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 $42,539$44,725 primarily from interest earned on cash held in a money market account
and a certificate of deposit, net income
of $553,429 primarily generated from BTC derivative contracts$31,751 and the loss of $568,142 on repayment
of a credit facility and lossgain on the change in derivative liabilities of $62,017.$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 MarchJune 31,30, 2025 was insignificant.
EMPD insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 2 Form 4 filings (1 insider, 3 trade dates, 1,900,000 shares, about $5.9M) and open-market sales in 0 filings. Net open-market shares: 1,900,000 (purchases minus sales); net value about $5.9M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-01 | Empery Asset Management, Lp |
Open-market purchase | 500,000 | $3.59 | $1.8M |
| 2026-08-13 | Empery Asset Management, Lp |
Open-market purchase | 750,000 | $2.98 | $2.2M |
| 2026-08-12 | Empery Asset Management, Lp |
Open-market purchase | 650,000 | $2.82 | $1.8M |
| 2026-05-15 | Woodmont Investing Llc |
Option exercise | 100,000 | $2.99 | $299.0K |
Well-known investors holding EMPD (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 553,034 | $2.0M | 0.0% | Reduced 34% |
| D. E. Shaw & Co. | 2026-06-30 | 19,432 | $82.2K | — | Sold out |