# Empery Digital (EMPD) 10-Q SEC filing - Q1 FY2026
- Filed: May 8, 2026, 4:06 PM EDT
- Fiscal quarter: Q1 FY2026
- Calendar quarter: Q1 2026
- Accession: 0001683168-26-003608
- OpenCapital page: https://www.opencapital.sh/filings/0001683168-26-003608
- Markdown URL: https://www.opencapital.sh/filings/0001683168-26-003608.md
- Official SEC filing index: https://www.sec.gov/Archives/edgar/data/1829794/000168316826003608/0001683168-26-003608-index.htm
## Filing documents
- [10-Q (empery_i10q-033126.htm)](https://www.sec.gov/Archives/edgar/data/1829794/000168316826003608/empery_i10q-033126.htm)
---
## 10-Q
SEC source: [empery_i10q-033126.htm](https://www.sec.gov/Archives/edgar/data/1829794/000168316826003608/empery_i10q-033126.htm)
**UNITED STATES**
**SECURITIES AND EXCHANGE COMMISSION**
**Washington, D.C. 20549**
**FORM 10-Q**
**(Mark One)**
**☒** **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
**For the quarterly period ended March 31, 2026**
**OR**
☐ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
**For the transition period from ________ to__________**
**Commission file number: 001-40867**
**Empery Digital Inc.**
(Exact Name of Registrant as Specified in Its Charter)
**Delaware** **84-4882689**
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
| 3121 Eagles Nest Street, Suite 120, Round Rock, TX | 78665 |
| --- | --- |
| (Address of Principal Executive Offices) | (Zip Code) |
**(512) 400-4271**
(Registrant’s Telephone Number, Including Area
Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock EMPD The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant: (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒
No ☐
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See
definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ Accelerated Filer ☐
Non-Accelerated Filer ☒ Smaller Reporting Company ☒
Emerging Growth Company ☒
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The registrant had 28,110,111 shares of common
stock outstanding at May 7, 2026.
**TABLE OF CONTENTS**
| | | Page |
| --- | --- | --- |
| [PART I — FINANCIAL INFORMATION](#q1_003) | | |
| Item 1. | [Financial Statements](#q1_004) | 4 |
| | [Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025 (unaudited)](#q1_005) | 4 |
| | [Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 2025 (unaudited)](#q1_006) | 5 |
| | [Condensed Consolidated Statements of Stockholders Equity for the Three Months Ended March 31, 2026 and 2025 (unaudited)](#q1_007) | 6 |
| | [Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025 (unaudited)](#q1_008) | 8 |
| | [Notes to the Condensed Consolidated Financial Statements (unaudited)](#q1_009) | 10 |
| Item 2. | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#q1_010) | 32 |
| Item 3. | [Quantitative and Qualitative Disclosures About Market Risk](#q1_011) | 40 |
| Item 4. | [Controls and Procedures](#q1_012) | 41 |
| [PART II — OTHER INFORMATION](#q1_013) | | |
| Item 1. | [Legal Proceedings](#q1_014) | 42 |
| Item 1A. | [Risk Factors](#q1_015) | 42 |
| Item 2. | [Unregistered Sales of Equity Securities and Use of Proceeds](#q1_016) | 43 |
| Item 3. | [Defaults Upon Senior Securities](#q1_017) | 43 |
| Item 4. | [Mine Safety Disclosures](#q1_018) | 43 |
| Item 5. | [Other Information](#q1_019) | 43 |
| Item 6. | [Exhibits](#q1_020) | 44 |
| [Signatures](#q1_022) | | 46 |
2
**WHERE YOU CAN FIND MORE INFORMATION**
Investors and others should note that we announce material
financial information to our investors using our investor relations website, which can be found at https://ir.EmperyDigital.com, as well
as press releases, our filings with the Securities and Exchange Commission, SEC, and public conference calls and webcasts. We also use
other mediums, including the following social media channels as a means of disclosing information about the company, our products, our
planned financial and other announcements and attendance at upcoming investor and industry conferences, and other matters and for complying
with our disclosure obligations under Regulation FD:
**Website Homepage**: https://www.emperydigital.com/
**Treasury Dashboard**: https://www.emperydigital.com/treasury-dashboard
**X (f/k/a Twitter) Account**: https://x.com/EMPD_BTC
**Instagram Account**: https://www.instagram.com/empd_btc
**YouTube Account**: https://www.youtube.com/@emperydigital
These channels may be updated from time to time on
our investor relations website. The information we post through these channels may be deemed material. Accordingly, investors should monitor
them in addition to following our investor relations website, press releases, SEC filings, and public conference calls and webcasts. This
list may be updated from time to time. The information we post through these channels is not a part of this Quarterly Report on Form 10-Q.
3
**PART I — FINANCIAL INFORMATION**
## ITEM 1. FINANCIAL STATEMENTS
**EMPERY DIGITAL INC.**
**CONDENSED CONSOLIDATED BALANCE SHEETS**
**AS OF MARCH 31, 2026 AND DECEMBER 31, 2025**
**(Unaudited)**
| Line item | March 31, 2026 | December 31, 2025 |
| --- | --- | --- |
| ASSETS | | |
| Current assets: | | |
| Cash and cash equivalents | $5,702,409 | $8,963,856 |
| Restricted cash | 105,000 | 105,000 |
| Certificate of deposit | 2,070,558 | 2,049,413 |
| Financing receivable | 2,436,983 | – |
| Accounts receivable, net of allowance for doubtful accounts of $78,840 and $71,869 at March 31, 2026 and December 31, 2025, respectively | 63,318 | 312,106 |
| Inventory and inventory deposits | 396,589 | 346,175 |
| Prepaid expenses and other current assets | 2,063,494 | 2,479,310 |
| Total current assets | 12,838,351 | 14,255,860 |
| Long-term assets: | | |
| Digital assets | 129,132,431 | 126,926,895 |
| Digital assets restricted by lenders as collateral for loans | 74,794,125 | 230,048,488 |
| Property and equipment and intangible assets, net | 280,719 | 271,560 |
| Other long-term assets | 99,666 | 155,056 |
| Right-of-use assets - operating leases | 673,918 | 778,235 |
| Total assets | $217,819,210 | $372,436,094 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | |
| Current liabilities: | | |
| Accounts payable | $3,824,669 | $745,466 |
| Accrued liabilities | 1,391,122 | 560,761 |
| Vendor settlements - short-term | 728,839 | 1,189,184 |
| Term loan | – | 49,890,972 |
| Right-of-use operating lease liabilities - short-term | 230,309 | 322,103 |
| Other current liabilities | 136,882 | 76,177 |
| Total current liabilities | 6,311,821 | 52,784,663 |
| Long-term loan | 44,952,897 | 49,945,046 |
| Notes payable, net of current portion | 18,326 | 20,485 |
| Right-of-use operating lease liabilities - long-term | 453,322 | 471,683 |
| Total liabilities | 51,736,366 | 103,221,877 |
| COMMITMENTS AND CONTINGENCIES | – | |
| Stockholders’ equity: | | |
| Preferred stock: $0.00001 par value, 5,000,000 shares authorized, 100,000 shares designated as Series A, no shares issued and outstanding as of March 31, 2026 and December 31, 2025 | – | – |
| Common stock: $0.00001 par value, 250,000,000 shares authorized, 29,326,650 shares outstanding as of March 31, 2026 and 33,800,951 shares outstanding as of December 31, 2025 | 535 | 475 |
| Treasury stock: 24,200,757 shares as of March 31, 2026 and 13,771,094 shares as of December 31, 2025 | (140,501,869) | (96,282,082) |
| Additional paid-in capital | 708,356,659 | 681,864,757 |
| Accumulated deficit | (401,772,481) | (316,368,933) |
| Total stockholders’ equity | 166,082,844 | 269,214,217 |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $217,819,210 | $372,436,094 |
*The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.*
4
**EMPERY DIGITAL INC.**
**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**
**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(Unaudited)**
| Line item | March 31, 2026 | March 31, 2025 |
| --- | --- | --- |
| Revenue: | $225,702 | $462,332 |
| Cost of goods sold | (162,624) | (504,592) |
| Gross margin | 63,078 | (42,260) |
| Operating expenses: | | |
| Sales and marketing | 323,636 | 296,224 |
| Product development | 124,946 | 234,652 |
| General and administrative expenses | 4,571,782 | 1,549,280 |
| Loss on digital assets | 78,354,036 | – |
| Total operating expenses | 83,374,400 | 2,080,156 |
| Loss from operations | (83,311,322) | (2,122,416) |
| Other income, net | 553,429 | 54,021 |
| Loss on repayment of term loan | (568,142) | – |
| Gain (loss) on change in fair value of financial liabilities | (62,017) | 28,432 |
| Interest income | 42,539 | 52,771 |
| Interest expense | (2,058,035) | (89,183) |
| Total other expense | (2,092,226) | 46,041 |
| Loss from continuing operations before provision for income taxes | (85,403,548) | (2,076,375) |
| Provision for income taxes | – | – |
| Loss from continuing operations | (85,403,548) | (2,076,375) |
| Loss from discontinued operations | – | (384,055) |
| Net loss | $(85,403,548) | $(2,460,430) |
| Earnings per common share | | |
| Loss from continuing operations per common share - basic | $(2.59) | $(6.13) |
| Loss from continuing operations per common share - diluted | $(2.59) | $(6.13) |
| Loss from discontinued operations per common share - basic | – | $(1.14) |
| Loss from discontinued operations per common share - diluted | – | $(1.14) |
| Net loss per common share – basic | $(2.59) | $(7.27) |
| Net loss per common share – diluted | $(2.59) | $(7.27) |
| Weighted average common stock outstanding – basic | 33,022,103 | 338,235 |
| Weighted average common stock outstanding – diluted | 33,022,103 | 338,235 |
*The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.*
5
**EMPERY DIGITAL INC.**
**CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’
EQUITY**
**FOR THE THREE MONTHS ENDED MARCH 31, 2026**
**(Unaudited)**
| Line item | Common stock / Number of Shares | Common stock / Amount | Treasury stock / Number of Shares | Treasury stock / Amount | Additional / paid-in capital | Accumulated deficit | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at January 1, 2026 | 33,800,951 | $475 | 13,771,094 | $(96,282,082) | $681,864,757 | $(316,368,933) | $269,214,217 |
| Issuance of common stock for exercises of pre-funded warrants | 3,396,940 | 34 | – | – | (3) | – | 31 |
| Issuance of common stock and pre-funded warrants, net of issuance costs of $212,322 | 2,558,422 | 26 | – | – | 24,787,653 | – | 24,787,679 |
| Repurchases of common stock for treasury stock | (10,429,663) | – | 10,429,663 | (44,219,787) | – | – | (44,219,787) |
| Stock-based compensation | – | – | – | – | 1,704,252 | – | 1,704,252 |
| Net loss | – | – | – | – | – | (85,403,548) | (85,403,548) |
| Balance at March 31, 2026 | 29,326,650 | $535 | 24,200,757 | $(140,501,869) | $708,356,659 | $(401,772,481) | $166,082,844 |
*The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.*
6
**EMPERY DIGITAL INC.**
**CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’
EQUITY**
**FOR THE THREE MONTHS ENDED MARCH 31, 2025**
**(Unaudited)**
| Line item | Common stock / Number of Shares | Common stock / Amount | Treasury stock / Number of Shares | Treasury stock / Amount | Additional / paid-in capital | Accumulated deficit | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at January 1, 2025 | 78,859 | – | – | – | $166,357,208 | $(166,316,447) | $40,761 |
| Issuance of common stock for exercises of pre-funded warrants | 176,116 | 2 | – | – | (2) | – | – |
| Issuance of common stock from the At the Money offering, net of issuance costs of $320,867 | 220,515 | 3 | – | – | 8,846,758 | – | 8,846,761 |
| Issuance of common stock and pre-funded warrants, net of issuance costs of $1,296,118 | 53,750 | 1 | – | – | 10,703,881 | – | 10,703,882 |
| Stock-based compensation | – | – | – | – | 10,052 | – | 10,052 |
| Repurchases of common stock for treasury stock | (47,886) | – | 47,886 | (401,806) | – | – | (401,806) |
| Net loss | – | – | – | – | – | (2,460,430) | (2,460,430) |
| Balance at March 31, 2025 | 481,354 | $6 | 47,886 | $(401,806) | $185,917,897 | $(168,776,877) | $16,739,220 |
*The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.*
7
**EMPERY DIGITAL INC.**
**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**
**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(Unaudited)**
| Line item | March 31, 2026 | March 31, 2025 |
| --- | --- | --- |
| Cash flow from operating activities: | | |
| Net loss | $(85,403,548) | $(2,460,430) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | |
| Loss on digital asset | 78,354,036 | – |
| Loss (gain) on change in fair value of financial liabilities | 62,017 | (28,432) |
| Noncash interest income on certificate of deposit | (21,145) | – |
| Stock-based compensation | 1,704,252 | 10,052 |
| Loss on write down of inventory and inventory deposits | 11,374 | 17,992 |
| Write-off of unamortized issuance costs on repayment of term loan | 68,142 | – |
| Bad debt expense | 6,970 | 16,397 |
| Non-cash interest expense | 48,737 | – |
| Amortization of right-of-use assets | 104,317 | 103,855 |
| Depreciation and amortization | 14,588 | 40,754 |
| Changes in operating assets and liabilities: | | |
| Financing and accounts receivables | (2,195,165) | (32,549) |
| Inventory and inventory deposits | (61,788) | 376,290 |
| Prepaid assets and other current assets | 471,206 | (449,845) |
| Accounts payable | 3,079,203 | (163,969) |
| Accrued liabilities and vendor settlements | 370,016 | (726,467) |
| Right-of-use liabilities - operating leases | (110,155) | (106,502) |
| Other current liabilities | (1,545) | (169,034) |
| Net cash used in operating activities | (3,498,488) | (3,571,888) |
| Cash flow from investing activities: | | |
| Purchase of property and equipment | (23,744) | (201,841) |
| Proceeds from sale of digital assets | 74,694,788 | – |
| Net cash provided by (used in) investing activities | 74,671,044 | (201,841) |
| Cash flow from financing activities: | | |
| Repayment of term loan | (50,000,000) | – |
| Payment on credit facility | (10,000,000) | – |
| Proceeds from issuance of common stock units and pre-funded warrant units from March 2026 offering, net of issuance costs of $212,322 | 24,787,679 | – |
| Proceeds from issuance of common stock from pre-funded warrant exercises | 31 | – |
| Proceeds from borrowings on credit facility | 5,000,000 | – |
| Proceeds from issuance of common stock units and pre-funded warrant units from February 2025 public offering, net of issuance costs of $1,296,118 | – | 10,703,882 |
| Proceeds from the issuance of common stock issued from the At the Market Offering, net of issuance costs of $320,867 | – | 8,846,761 |
| Repayments on notes payable | (1,926) | (1,719) |
| Repurchase of common stock | (44,219,787) | (401,806) |
| Net cash (used in) provided by financing activities | (74,434,003) | 19,147,118 |
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (3,261,447) | 15,373,389 |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | 9,068,856 | 2,298,573 |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $5,807,409 | $17,671,962 |
*The accompanying notes are an integral part of
these consolidated financial statements.*
8
**EMPERY DIGITAL INC.**
**CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (continued)**
**FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(Unaudited)**
**SUPPLEMENTAL CASH FLOW INFORMATION**
| Line item | 2026 | 2025 |
| --- | --- | --- |
| Supplemental disclosure of cash flow information: | | |
| Cash paid for interest | $2,008,200 | $88,208 |
| Cash paid for income taxes | – | – |
| Non-cash transactions | | |
| Issuance of common stock for exercise of pre-funded warrants | $3 | $14 |
| Transfer of inventory to property & equipment | – | $59,175 |
| Transfer of digital assets from lender for repayment of loans outstanding | $142,699,201 | – |
| Transfer of digital assets from lender for reduction in collateral requirement | $38,529,097 | – |
| Transfer of digital assets to lender for margin call | $73,686,505 | – |
| Transfer of digital assets to lender for collateral for borrowings | $13,032,157 | – |
*The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.*
9
**EMPERY DIGITAL INC.**
### **NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
**(Unaudited)**
### **NOTE 1 – ORGANIZATION, NATURE OF OPERATIONS AND GOING CONCERN**
*Organization and Nature of Operations*
Empery Digital Inc. (“Empery Digital”
or the “Company”) was formed on February 21, 2020, as a Delaware corporation, under the name Frog ePowersports, Inc. The Company
was renamed Volcon, Inc. on October 1, 2020. The Company was renamed Empery Digital Inc. on July 30, 2025, and changed its Nasdaq ticker
symbol from VLCN to EMPD.
On January 5, 2021, the Company created Volcon ePowersports,
LLC (“Volcon LLC”), a Colorado wholly-owned subsidiary of the Company, to sell the Company’s vehicles and accessories
in the United States (“U.S.”). Since 2023 Volcon LLC has not been used.
Effective as of July 17, 2025, the Company adopted
a digital asset treasury strategy with the goal of becoming a leading, low cost, capital efficient, globally trusted aggregator of Bitcoin
(“BTC” or “Bitcoin”). Empery Digital Inc. was founded as the first all-electric powersports company sourcing high-quality
and sustainable electric vehicles for the outdoor community. Going forward the Company intends to operate the powersports brand under
the brand name Empery Mobility.
As discussed in Note 13, on October 15, 2025, the
Company entered into an asset purchase agreement with Venom EV, LLC (“Venom”) (the “Venom APA”), 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.
*Going Concern*
The accompanying interim condensed consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. The Company has recurring losses and has generated
negative cash flows from operations since inception.
As discussed in Notes 4, 5 and 9, the Company
has raised proceeds to implement its digital asset treasury strategy including purchasing Bitcoin, repurchasing the Company’s common
stock under the Company’s common stock repurchase program, repaying outstanding debt and funding operations.
Management anticipates that our cash on hand as of March 31, 2026, plus cash expected to be generated from operations and premium 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 to repay borrowings due beyond one year from the date of the issuance of the financial statements
as of and for the three months ended March 31, 2026.
*Impact of Tariffs on Imported Goods from China and Vietnam*
On April 2, 2025, the U.S. imposed reciprocal tariffs on imports
from various countries including China and Vietnam starting with a 10% baseline tariff. On April 9, 2025, China-specific tariffs
increased significantly, while Vietnam’s tariffs were deferred for an initial 90-day period. That pause was later extended to August 1, 2025,
and then to August 7, 2025, maintaining Vietnam’s tariff at the baseline 10% during such extension.
10
Following ongoing negotiations, a tentative trade
deal with Vietnam was reached on July 2, 2025. U.S. tariffs on Vietnamese goods would be set at 20%, while goods deemed to be Chinese
in origin but routed through Vietnam (transshipments) would be subject to a 40% tariff. This replaces the originally stated 46% rate.
The 20% rate became effective August 7, 2025.
On July 31, 2025, the U.S. administration issued a formal Executive Order
modifying the reciprocal tariff regime under the International Emergency Powers Act (“IEEPA”). For example, after announcing
proposed blanket tariff rates of 46% on imports from Vietnam in April 2025, the U.S. and Vietnam governments announced a trade deal between
the countries that imposes 20% tariffs on all products imported to the U.S. from Vietnam. The 20% rate became effective August 7, 2025,
under the aforementioned Executive Order and is currently in force.
China remains subject to an additional 30% tariff
(down from the temporary increase, effective mid-May) under the continued reciprocal framework. That rate is in effect through August 12, 2025,
pending further amendment. On August 11, 2025, the U.S. extended the existing tariff truce with China by 90 days to November 10, 2025,
maintaining the 30% tariff rate during such extension.
On February 20, 2026, the U.S. Supreme Court
ruled that the IEEPA does not authorize the U.S. administration to impose tariffs. The tariffs paid by importers under the Executive
order are subject to refund. The Company is currently following the process apply for a refund of amounts previously paid and will
record such amounts, if any, when received. The U.S. administration has indicated that it intends to impose a 10% global tariff under Section 122 of the Trade Act of 1974.
Tariffs imposed by the current U.S. administration
continue to impact the Company’s cost for vehicles and parts manufactured in China. The Company remains actively evaluating strategic
alternatives, including U.S. assembly or shifting production as well as potentially adjusting selling prices to offset elevated import
costs.
### **NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
**Interim Unaudited Financial Information**
The accompanying interim condensed consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) and should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K
for the year ended December 31, 2025, which was filed with the Securities and Exchange Commission (“SEC”) on March 27, 2026.
Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with U.S.
GAAP have been omitted from this report on Form 10-Q pursuant to the rules and regulations of the SEC.
Results for the interim periods in this report are
not necessarily indicative of future financial results and have not been audited by our independent registered public accounting firm.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary
to present fairly our interim condensed consolidated financial statements as of March 31, 2026, and for the three months ended March 31,
2026 and 2025. These adjustments are of a normal recurring nature and are consistent with the adjustments recorded to prepare the annual
audited consolidated financial statements as of December 31, 2025.
**Basis of Presentation**
The accompanying condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All intercompany accounts, transactions and balances have been eliminated in
consolidation.
The Company completed a 1-for-8 reverse stock split on June 11, 2025. All
share and per share amounts previously disclosed have been updated to reflect the impact of this reverse split. See Note 9 for further
discussion.
11
Per the terms of the 1-for-8 reverse stock split completed on November
8, 2024, the Company agreed that no fractional shares would be issued in connection with the reverse stock split and that it would issue
one full share of the post-reverse stock split common stock to any stockholder who would have been entitled to receive a fractional share
as a result of the process. On November 19, 2024, the Company received notice from DTCC on behalf of the brokerage firms that hold the
shares of Company common stock held in “street name” that in connection with the foregoing rounding of shares the Company
would need to issue 23,617 shares of common stock. The Company did not believe the number of shares being requested was correct based
on the historical number of stockholders of its common stock and is aware of similar occurrences for other companies completing a reverse
stock split. As such, the Company made inquiries into the calculations set forth in the request. The Company concluded that the information
requested was not going to be provided and therefore on May 5, 2025, these shares were issued (see Note 11 for further discussion of impact
to basic and diluted net loss per share).
As discussed in further detail in Note 13, on October
15, 2025, the Company entered into the Venom APA with Venom to divest the Volcon brand other than the Brat in exchange for a non-dilutable
10% equity position in Venom’s reorganized Delaware corporation on a fully-diluted basis. The Company has reclassified all revenue
and costs associated with the HF1 and MN1 products to loss from discontinued operations.
**Digital Assets**
The Company accounts for its digital assets, which
are composed solely of Bitcoin, including Bitcoin restricted by lenders as collateral for borrowings, as non-current indefinite-lived
intangible assets in accordance with ASC 350, *Intangibles—Goodwill and Other* (“ASC 350”) and ASU 2023-08. 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 in accordance with ASC 820, *Fair Value Measurement,* based on quoted (unadjusted) prices
on the Gemini exchange, the active exchange that the Company has determined is its principal market for Bitcoin (Level 1 inputs). Changes
in fair value are recognized as incurred within “Loss on digital assets”, within operating expenses in the Company’s
Condensed Consolidated Statement of Operations. Bitcoin restricted by lenders as collateral for borrowing are separately classified from
digital assets due to the restrictions imposed on this Bitcoin until the underlying borrowings are repaid.
**Concentration Risk**
As of March 31, 2026, the Company holds $203.9 million of Bitcoin. See
Note 4 for further discussion.
The Company outsources certain portions of product design and development
for its vehicles to third-parties. In addition, the Company has outsourced the manufacturing of all of its vehicles to third-party manufacturers.
On December 6, 2024, the Company
entered into a Settlement Agreement and Mutual Release (“Agreement”) with GLV, the manufacturer of the Stag and Grunt EVO,
pursuant to which the Company and the manufacturer agreed to terminate the Supplier Agreement dated March 11, 2022 for the development
and engineering of the Volcon Stag vehicle prototypes; the Supplier Agreement dated May 29, 2022 for the manufacturing of the Volcon Grunt
EVO motorcycle; and the Supplier Agreement dated August 11, 2022 for the manufacturing of the Volcon Stag vehicle (collectively, the “Supplier
Agreements”). Pursuant to the Agreement, among other items, the Company and the manufacturer agreed to indemnify each other with
respect to certain outstanding vendor payables and the Company agreed to pay GLV a termination fee of $125,000 per month for a period
of twenty-two months. The remaining payments for this agreement of $728,839 are classified
as a short-term liability as they are due to be paid by September 2026.
12
**New
Accounting Pronouncements**
In November 2024, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, “Income Statement—Reporting Comprehensive
Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires
companies to disclose disaggregated amounts relating to (a) inventory purchases; (b) employee compensation; (c) depreciation; (d) intangible
asset amortization; and (e) depreciation, depletion, and amortization. Further, this guidance will require companies to include certain
amounts that are already required to be disclosed under current U.S. GAAP in the same disclosure as the other disaggregation requirements,
disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively
and disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.
The standard is intended to benefit investors by providing more detailed expense disclosures that would be useful in making capital allocation
decisions. This guidance is effective for public business entities for annual reporting periods beginning after December 15, 2026, and
interim reporting periods beginning after December 15, 2027 but early adoption is permitted. ASU 2024-03 should be applied on a prospective
basis, but retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance
on its consolidated financial statements and related disclosures.
### **NOTE 3 –SEGMENT REPORTING**
In November 2023, the Financial Accounting Standards
Board issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), requiring
public companies to disclose information about their reportable segments’ significant expenses and other segment items on an interim
and annual basis. Public companies with a single report segment were required to apply the disclosure requirements in ASU 2023-07, as
well as all existing segment disclosures and reconciliation requirements of ASU 2023-07 during the year ended December 31, 2024.
Subsequent to the implementation of the Company’s
digital asset treasury strategy, the Company continues to operate as one operating segment and the Company’s Co-CEOs are the chief
operating decision makers (“CODMs”). The “Corporate & Other” category presented in the following tables is
not considered an operating segment. It consists primarily of costs and expenses related to executing the Company’s Bitcoin strategy
and includes the loss on digital assets, other third party costs associated with the Company’s Bitcoin holdings, and net interest
expense primarily related to debt obligations, the net proceeds of which were primarily used to repurchase the Company’s common
stock. Beginning in July 2025, the Company has dedicated certain corporate resources to its Bitcoin strategy. These costs, including related
share-based compensation expense, are included within the “Corporate” and the “Share-based compensation expense”
segment expense line items to better align with their activities and utilization. The following tables present (for the operating segment
and the corporate & other category, and on a consolidated basis) the Company’s revenues and significant expenses regularly provided
to the CODMs, reconciled to net income (loss) for each of the periods presented.
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| Schedule of segment information / Three Months Ended March 31, 2026 | Operating Segment | Corporate & Other | Total |
| --- | --- | --- | --- |
| Revenue | $225,702 | – | $225,702 |
| Cost of goods sold | (162,624) | – | (162,624) |
| Gross margin | 63,078 | – | 63,078 |
| Operating expenses: | | | |
| Sales and marketing | 323,636 | – | 323,636 |
| Product development | 124,946 | – | 124,946 |
| General and administrative | 1,640,192 | – | 1,640,192 |
| Corporate | – | 1,217,772 | 1,217,772 |
| Digital asset custody fee | – | 9,566 | 9,566 |
| Share-based compensation expense | – | 1,704,252 | 1,704,252 |
| Loss on digital assets | – | 78,354,036 | 78,354,036 |
| Total operating expenses | 2,088,774 | 81,285,626 | 83,374,400 |
| Other income | – | 553,429 | 553,429 |
| Loss on repayment of term loan | – | (568,142) | (568,142) |
| Loss on change in fair value of financial liabilities | – | (62,017) | (62,017) |
| Interest income | – | 42,539 | 42,539 |
| Interest expense | – | (2,058,035) | (2,058,035) |
| Net loss | $(2,025,696) | $(83,377,852) | $(85,403,548) |
Prior to the implementation of the Company’s
digital asset treasury strategy in July 2025, the Company operated as one operating segment, and the Company’s chief operating decision
maker was the CEO, who used the consolidated statement of operations to assess financial performance. For the three month period ended
March 31, 2025 see the condensed consolidated statement of operations above.
### **NOTE 4 – DIGITAL ASSETS**
As of March 31, 2026, the Company’s investment
in digital assets comprises 2,989.4 Bitcoin, including 1,893.0 Bitcoin with a carrying value of $129,132,431 and 1,096.4
Bitcoin with a carrying value of $74,794,125 restricted by lenders as collateral for
borrowing arrangements. Bitcoin restricted by lenders as collateral for borrowing arrangements will remain restricted until the underlying
borrowings are repaid or until the value of such collateral increases to the Collateral Refund Level (as defined below) (see Note 5 for
further discussion of the borrowing arrangements, collateral requirements, and repayment provisions).
14
The following table summarizes the Company’s
digital assets held as of March 31, 2026, and related activity for the three months ended March 31, 2026.
| Schedule of digital asset purchases | |
| --- | --- |
| Bitcoin at March 31, 2026 | 2,989.4 |
| Beginning balance – January 1, 2026 | $356,975,383 |
| Bitcoin used to pay fees | (3) |
| Bitcoin sold | (74,694,788) |
| Loss on Bitcoin | (78,354,036) |
| Total Bitcoin carrying value at March 31, 2026 | 203,926,556 |
| Less fair value of Bitcoin restricted by lenders as collateral for loans | (74,794,125) |
| Digital assets | $129,132,431 |
During the three months ended March 31, 2026,
the Company sold 1,092 BTC for proceeds of $74,694,788 resulting in a realized loss of
$53,260,259 based on the original cost of the BTC sold. BTC is a digital asset, which is a novel asset class that is subject to
significant legal, commercial, regulatory and technical uncertainty. Holding BTC does not generate any cash flows and involves
custodial fees and other costs. Additionally, the price of BTC has historically experienced significant price volatility, and a
significant decrease in the price of BTC would adversely affect the Company’s financial condition and results of operations.
The Company’s strategy of acquiring and holding BTC also exposes it to counterparty risks with respect to the custody of its
BTC, cybersecurity risks, and other risks inherent to holding a digital asset. In particular, the Company is subject to the risk
that, if its private keys with respect to its digital assets are lost or destroyed or other similar circumstances or events occur,
the Company may lose some or all of its digital assets, which could materially adversely affect the Company’s financial
condition and results of operations. To mitigate this risk, the Company utilizes multiple custodians in order to limit the
concentration of holding its digital assets within one custodian.
The Company from time to time also enters into short-term
put and call contracts for Bitcoin to generate income on its Bitcoin holdings. As of March 31, 2026, there were no such outstanding contracts.
During the three months ended March 31, 2026, the Company generated income of $548,301 from trading these put and call contracts, which
is recorded in other income in the condensed consolidated statement of operations.
In the period from April 1, 2026 to May 7, 2026, the
Company sold 75 BTC and received proceeds of $5,369,291. As discussed in Note 5, during this period the Company also borrowed proceeds
of $10.0 million and transferred 257 BTC as collateral for the additional borrowing.
### **NOTE 5 – BORROWINGS FOR SHARE REPURCHASES**
***Credit Facility and Term Loan***
On August 15, 2025, the Company entered into a Master
Repurchase Agreement and related commitment letter (together the “MRA”) with a third-party pursuant to which the Company could
borrow up to $25.0 million. Upon entry into the MRA the Company paid a commitment fee of $150,000 in connection with the MRA, which the
Company had recorded as loan issuances costs and amortized this amount, plus legal fees associated with the MRA, over the 90 day term
of the borrowings. Upon the initial borrowing date, the Company was required to place a minimum of $15,625,000 of BTC in a custody account
with an affiliate of the third-party, which was required to be retained through the term of the agreement. The interest on all borrowings
under the MRA was 11.0% per annum, which was payable monthly.
On September 18, 2025, the Company and the third-party
lender amended the MRA and increased the available borrowings by an additional $10.0 million which also required the Company to increase
the amount of Bitcoin in the custody account to a total of $21,875,000. All other provisions of the MRA remained the same. The Company
borrowed the full $35.0 million available under the MRA, as amended, as of September 22, 2025, and used the proceeds to repurchase its
common stock, including any brokerage commissions under the Company’s common stock repurchase program.
15
On September 26, 2025, the Company and the third-party
lender under the MRA entered into a new Master Repurchase Agreement and related transaction confirmation (together the “Repo Facility”)
with a maturity date of August 31, 2026 and providing for $50.0 million in cash advances to the Company in exchange for purchased securities
in the form of Bitcoin. Upon entry into the Repo Facility, the Company paid a commitment fee of $125,000, which was recorded as loan issuance
costs which, with legal fees incurred for the Repo Facility, were being amortized through August 31, 2026, the due date for any outstanding
borrowings. The interest rate for borrowings under the Repo Facility is 8.5% per annum. The first $35.0 million borrowed under the Repo
Facility was used to repay all outstanding borrowings under the MRA and there was no early prepayment penalty. In addition, borrowings
under the Repo Facility were used to pay accrued interest for borrowings outstanding under the MRA of $165,917, and the $125,000 commitment
fee. The remaining proceeds of $14.7 million were deposited into one of the Company’s bank accounts and the Company used the proceeds
to repurchase its common stock, including commissions due to the placement agent, under the Company’s common stock repurchase program,
as discussed further in Note 9 below. The Repo Facility has an early prepayment fee of 2% if repaid within six months of the agreement
date and 1% if paid after six months but before August 31, 2026.
The Company recognized a loss on the repayment of
the MRA totaling $125,377 for the unamortized issuance costs, which includes the commitment fee and legal fees, as of the repayment date.
On March 31, 2026 the Company repaid the outstanding
balance under the Repo Facility in full, including interest through the repayment date, which terminated the MRA. The Company recognized
a loss on the repayment of the Repo Facility totaling $568,142 for the unamortized issuance costs as of the repayment date, and the 1%
prepayment fee paid. Upon repayment the lender released 1,795 Bitcoin which was held as collateral for the Repo Facility. For the three
months ended March 31, 2026, the Company recognized $1,050,695 of interest expense for the Repo Facility.
***Delayed
Draw Term Loans***
On October 12,
2025, the Company entered into a Master Loan Agreement (the “MLA”) with a lender to obtain additional capital in the
form of delayed draw term loans. Under the MLA, the Company may borrow, an aggregate principal
amount of up to $100.0 million, through October 9, 2026 (subject to the extension referenced
below), at which date, all such loans, together with any accrued and unpaid interest and related obligations, shall become due and payable
in their entirety. The Company had the option, in its sole discretion, to
extend the due date of all such loans for one additional year, to October 9, 2027 and the Company exercised this option on October
29, 2025. Further, the MLA was not subject to any commitment fees and borrowings can be repaid early
without any prepayment penalty or premium. Prior to the amendment discussed below, the interest rate applicable to all outstanding loans
was 6.50% per annum payable monthly.
The MLA initially
required the Company to provide the Lender collateral of BTC equal to 250% of any amount borrowed (the “Initial Collateral Rate”). If the value of BTC held by the lender as collateral decreased below 175% of the aggregate borrowings outstanding (“Collateral
Call Level”), the Company is required to provide additional BTC to increase the value back to 250% of the aggregate borrowings outstanding.
If the value of BTC increased to over 345% of the total aggregate outstanding borrowings (the “Collateral Refund Level”),
the lender is required to return BTC to the Company until the collateral equals 250% of the aggregate outstanding borrowings. If the value
of BTC decreased below 150% of the aggregate borrowings outstanding (the “Liquidation Level”) the Company was required to
provide additional BTC to increase the value back to 250% within 24 hours or the lender may liquidate collateral equal to the amount to
repay the aggregate outstanding borrowings and return any remaining collateral to the Company.
On February 4, 2026, the value of BTC decreased below
the Collateral Call Level and the Company provided the lender 576 BTC to bring the value of the collateral back to the Initial Collateral
Level.
16
On February 10, 2026, the MLA was amended and the
Initial Collateral Rate was reduced to 174%, the Collateral Call Level was reduced to 153%, the Collateral Refund Level was reduced to
217% and the Liquidation Level was reduced to 143%. The lender returned 490 BTC to the Company as a result of this amendment. The amendment
also increased the interest rate applicable to all outstanding loans to 7.5% and reduced the time period for the Company to provide collateral
for the Liquidation Level to 12 hours.
During the three months ended March 31, 2026, the
Company borrowed $5 million and repaid $10 million. As of March 31,2026, the Company has borrowings outstanding under the MLA totaling
$45.0 million and provided 1,096 BTC with a fair value of $74,794,125 to the MLA lender as collateral. For the three months ended March 31, 2026, the Company recognized $929,028 of interest expense. In the period from April 1, 2026 to May
7, 2026, the Company borrowed an additional $10.0 million under the MLA.
### **NOTE 6 – NOTE PAYABLE**
In March 2023, the Company entered into a financing
arrangement to purchase a vehicle with an interest rate of 11.44% and a monthly payment of $908 until February 2029. The vehicle is collateral
for this arrangement. The short-term balance of $8,280 as of March 31, 2026 is presented in other current liabilities in the condensed
consolidated balance sheet. In April 2026, the loan balance was fully paid.
### **NOTE 7 – WARRANT LIABILITIES**
***Series A Warrants***
The Company issued Series A warrants (the “Series
A Warrants”) in connection with the sale of common units and pre-funded warrant units. Under the terms of the Series A Warrants,
the number and exercise price are subject to adjustment if the Company completes certain transactions specified in applicable warrant
agreements. In addition, the Series A Warrants have a cashless exercise provision, which would allow holders to cashless exercise one
warrant for three shares of the Company’s common stock. Such adjustment provisions of the Series A Warrants were initially subject
to stockholder approval, which was received on January 12, 2024. The Company initially determined that these warrants should be classified
as liabilities and used a Monte Carlo simulation to estimate the fair value until stockholder approval of the cashless exercise provision
was completed.
Subsequent to the approval by stockholders of the
cashless exercise provision of the Series A Warrant, the fair value of each Series A Warrant is the value of three shares of the Company’s
common stock. Based on the closing price of the Company’s common stock on March 31, 2026 of $4.23, the fair value of each Series
A Warrant is $12.69 and based on the total number of warrants outstanding of 10,008, the warrant liability for Series A Warrants is $127,002 at March 31, 2026.
The following represents the activity associated with
the Series A Warrants for the three months ended March 31, 2026:
| Schedule of derivative liability | |
| --- | --- |
| Fair value on January 1, 2026 | $64,985 |
| Loss on change in fair value | 62,017 |
| Balance at March 31, 2026 | $127,002 |
The balance is classified in other current liabilities
in the condensed consolidated balance sheet.
17
### **NOTE 8 – RELATED PARTY TRANSACTIONS**
***Gemini***
On July 13, 2025, the Company entered into a Strategic
Digital Assets Services Agreement with Gemini NuStar, LLC (“Gemini”) (the “Gemini Agreement”), pursuant to which
Gemini will provide non-discretionary execution and digital asset-related informational services. These services may include market commentary,
protocol updates, or other general insights as directed by the Company. Gemini does not act as an advisor, fiduciary, or investment manager
to the Company, and all trading and investment decisions remain solely under the Company’s control. In connection with the Gemini
Agreement, upon the closing of the Private Placement, the Company issued a warrant to Gemini to purchase up to 901,542 shares of common
stock, discussed further in Note 9.
Also on July 13, 2025, the Company entered into a
Custodial Services Agreement (together with the Gemini Agreement, the “Gemini Agreements”) with Gemini Trust Company, LLC
(“Gemini Trust”), pursuant to which the Company has engaged Gemini Trust to provide custody services of the Company’s
digital asset holdings. The Company pays a monthly custodial fee as a percentage of the digital assets held in the Company’s custodial
accounts at Gemini at month end. For the three months ended March 31, 2026, the Company has recognized no custodial fee expense.
Mr. Rohan Chauhan, a member of the Company’s
board of directors (the “Board”), was the Director of Strategy at Gemini until December 23, 2025.
***Board of Directors***
On July 17, 2025, in connection with the Private Placements,
the Company’s four existing independent members of the Board prior to the Private Placements received an aggregate payment from
the Company of $600,000 in cash, with each individual amount based on their board tenure as payment for equity awards that could not be
issued previously as part of their compensation for being on the Company’s Board. Each existing independent director also received
a grant of 10,000 stock options from the Company’s 2025 Stock Plan to purchase the Company’s common stock at $10 per share
with a ten-year term, regardless of service being provided and only forfeitable in the event Board service is terminated for cause as
defined in the stock option agreements (the “Forfeiture Clause”). These stock options vest in 20% installments based upon
the achievement of milestones tied to the daily VWAP of the Company’s common stock trading price with the first 20% vesting at $10.00
and each installment increasing in $5.00 increments, and all stock options fully vesting if the daily VWAP reaches $30.00 (the “Applicable
Vesting Schedule”). Pursuant to the Applicable Vesting Schedule, 80% of these options had vested as of March 31, 2026. These stock
options are not exercisable until the 2025 Stock Plan and shares to be issued under the 2025 Stock Plan are approved by the Company’s
stockholders (the “Approval Requirement”). These Board members collectively purchased 60,000 shares of the Company’s
common stock for $600,000 in the Private Placements.
In connection with the Private Placements, the Board
elected Ryan Lane, Ian Read, Rohan Chauhan and Matthew Homer to serve on the Board until director elections are held at the Company’s
next stockholder meeting. In connection with the appointment of each of Messrs. Read, Homer and Chauhan as directors, each: (a) signed
an offer letter with the Company pursuant to which they each will be entitled to an annual fee of $40,000 plus a $10,000 fee for any committees
on which they serve, both of which will be paid quarterly; and (b) was granted 298,802 stock options from the Company’s 2025 Stock
Plan to purchase the Company’s common stock at $10.00 per share with a ten-year term, and subject to the Forfeiture Clause. These
stock options vest in accordance with the Applicable Vesting Schedule and are subject to the Approval Requirement.
18
In connection with the Private Placements, Mr. Lane
was also appointed to serve as both Chairman of the Board and Co-Chief Executive Officer (“Co-CEO”) of the Company. Mr. Lane
signed an employment agreement with the Company, dated July 17, 2025, and his annual salary is $225,000. Mr. Lane was also paid a signing
bonus of $225,000 and was granted 1,792,812 stock options from the Company’s 2025 Stock Plan to purchase the Company’s common
stock at $10.00 per share with a ten-year term, and subject to the Forfeiture Clause. These stock options vest in accordance with the
Applicable Vesting Schedule and are subject to the Approval Requirement. Mr. Lane is a founder and principal of Empery Asset Management
LP (“EAM”), an investor in the Company, and will continue to provide services to EAM while also being employed by the Company.
Mr. Lane also purchased 100,000 shares of the Company’s common stock for $1.0 million and funds controlled by EAM purchased 2,500,000 shares of the Company’s common stock for $25.0 million in the Private Placements. As of March 31, 2026, funds controlled by EAM
own 2,930,345 shares of the Company’s common stock, and the following warrants to purchase the Company’s common stock i) 4,323 pre-funded warrants with an exercise price of $0.00001, ii) 340,626 pre-funded warrants with an exercise price of $0.00008, iii) 493,751 warrants with an exercise price of $16.00, iv) 804 warrants with an exercise price of $1,856.00.
All Board members, other than Mr. Lane and Mr. John
Kim, also Co-CEO and director, receive an annual fee of $40,000 payable quarterly plus an additional fee of $10,000 for each committee
of the Board on which each director serves, if any.
In March 2025, the Company entered into a consulting
agreement with ThankYou Studios, an entity owned by Orn Olason, a member of the Company’s Board. ThankYou Studios completed a marketing
and brand assessment for the Company and the total fees were $45,000.
***Existing Officers***
***Chief Executive Officer***
On January 30, 2024, John Kim, formerly an independent Board member
of the Company, signed an employment agreement with the Company to become the CEO effective February 3, 2024. Mr. Kim’s salary was
$800,000 and he had an annual bonus of $250,000. Mr. Kim would also receive 5% of the gross proceeds or other consideration if the Company
completes a sale of substantially all of its assets or otherwise enters into a change of control transaction. Mr. Kim would also be entitled
to an equity award equal to 10% of the Company’s fully diluted equity, subject to stockholder approval. The Company’s stockholders
approved stock options to purchase 180,375 shares of the Company’s common stock at $4.56 per share at the annual stockholders’
meeting held on May 30, 2025. These stock options are fully vested and expire on May 30, 2035.
The above employment agreement was terminated upon
execution of a new employment agreement in conjunction with the Private Placements, following which Mr. Kim became Co-CEO and remained
on the Board. His annual salary under the new employment agreement is $225,000 and he received a bonus of $225,000 payable upon signing
of the new employment agreement with no further bonuses due to Mr. Kim. Mr. Kim was granted 1,494,010 stock options from the Company’s
2025 Stock Plan to purchase the Company’s common stock at $10.00 per share with a ten-year term, and subject to the Forfeiture Clause.
These stock options vest in accordance with the Applicable Vesting Schedule and are subject to the Approval Requirement. Mr. Kim also
agreed to modify his previously granted stock options in May 2025 to increase the exercise price from $4.56 to $10.00 per share upon completion
of the Private Placements. Mr. Kim also purchased 22,500 shares of the Company’s common stock for $225,000 in the Private Placements.
***Chief Financial Officer***
On January 30, 2024, Greg Endo, the Company’s
Chief Financial Officer, signed a new employment agreement with the Company. Mr. Endo’s salary was increased to $300,000 and he
would have an annual bonus of up to 50% of his salary as determined by the compensation committee of the Board. The Board approved the
full amount of Mr. Endo’s 2024 bonus. Mr. Endo would also receive 5% of the gross proceeds or other consideration if the Company
completes a sale of substantially all of its assets or otherwise enters into a change of control transaction. Mr. Endo would also be entitled
to an equity award equal to 4% of the Company’s fully diluted equity, subject to stockholder approval. The Company’s stockholders
approved a grant to Mr. Endo of stock options to purchase 72,150 shares of the Company’s common stock at $4.56 per share at the
annual stockholders’ meeting held on May 30, 2025. These stock options are fully vested and expire on May 30, 2035.
19
The above employment agreement was terminated upon
execution of a new employment agreement in conjunction with the Private Placements. Mr. Endo remains as the Company’s Chief Financial
Officer and his annual salary under the new employment agreement is $300,000 and he received a bonus of $150,000 payable upon signing
of the new employment agreement with no further bonuses due to Mr. Endo. Mr. Endo was granted 747,005 stock options from the Company’s
2025 Stock Plan to purchase the Company’s common stock at $10.00 per share with a ten-year term, and subject to the Forfeiture Clause.
These stock options vest in accordance with the Applicable Vesting Schedule and are subject to the Approval Requirement. Mr. Endo also
agreed to modify his previously granted stock options to increase the exercise price from $4.56 to $10.00 per share upon completion of
the Private Placements. Mr. Endo also purchased 20,000 shares of the Company’s common stock for $200,000 in the Private Placements.
The Company accrued the above-mentioned bonuses payable
to Mr. Kim and Mr. Endo under their employment agreements prior to the Private Placements in accrued liabilities as of December 31, 2024,
and these were paid in April 2025. The bonuses payable upon signing of the new employment agreements were paid in July 2025.
***Other Executive Officer Appointments***
In connection with the Private Placements, the Board
appointed Timothy Silver and Brett Director to serve on the Company’s management team. Mr. Silver serves as Chief Operating Officer
and Mr. Director serves as Vice President of Legal. Mr. Silver and Mr. Director signed employment agreements, and their annual salaries
are $150,000 and $200,000, respectively. Mr. Silver and Mr. Director were also granted 597,604 and 298,802 inducement stock options, respectively,
to purchase the Company’s common stock at $10.00 per share with a ten-year term, subject to the Forfeiture Clause. These stock options
vest in accordance with the Applicable Vesting Schedule. Mr. Silver and Mr. Director are also employees of EAM and will continue to provide
services to EAM while also being employees of the Company. Mr. Silver purchased 2,500 shares of the Company’s common stock for $25,000 and Mr. Director purchased 10,000 shares of the Company’s common stock for $100,000 in the Private Placements.
***Highbridge Consultants, LLC***
On August 28, 2020, the Company entered into a consulting
agreement (as amended on or about March 25, 2021) (the “Highbridge Consulting Agreement”) with Highbridge Consultants, LLC
(“Highbridge”), an entity controlled by Mr. Adrian James, a co-founder of the Company, pursuant to which Mr. James provided
the Company with services in exchange for warrants. The Highbridge warrants were fully exercised on a cashless basis in 2021.
In addition, pursuant to the Highbridge Consulting
Agreement, upon the occurrence of a Fundamental Transaction (as defined), Mr. James would have been eligible for additional compensation
based on specified market capitalization thresholds. On July 11, 2025, the Company entered into a release and termination agreement (the
“Consultant Termination Agreement”) with Highbridge pursuant to which the parties agreed to terminate and mutually release
all of the parties’ rights and obligations under the Highbridge Consulting Agreement, including the release of the Company’s
obligation to make certain market capitalization milestone payments to Highbridge, in exchange for the payment by the Company of a termination
fee in an aggregate amount of $2.0 million, which was paid and expensed in the year ended December 31, 2025.
***New York Office Lease***
On August 28, 2025, the Company entered into an
assignment and assumption of a lease agreement with EAM whereby the Company agreed to assume half of the lease obligation of the New
York City office lease of EAM since three of EAM’s executives and one additional employee became Company employees in
conjunction with the Private Placement as these individuals will continue to work in the New York City office. The Company, EAM and
the landlord for the facility entered into a Consent to Assignment Agreement whereby the Company and EAM are jointly and severally
liable for payment of the rent to the landlord. In the event that either EAM or the Company do not make their respective payments,
then the other entity will be liable for the full rent payment to the landlord and the paying entity can seek recourse from the
non-paying entity under the contribution agreement between them. The Company’s portion of its lease obligation to the landlord
is $9,617 per month through June 2029, subject to adjustment for changes in property taxes assessed to the landlord on the facility.
EAM signed an extension with the landlord of the lease beyond June 2029. The Company will have the option to opt out of this lease
extension by providing EAM notice on or prior to June 1, 2029.
20
### **NOTE 9 – STOCKHOLDERS’ EQUITY**
The Company is authorized to issue 250,000,000 shares
of common stock and 5,000,000 shares of preferred stock both with a par value of $0.00001. The specific rights of the preferred stock,
when so designated, shall be determined by the Board.
On June 11, 2025, the Company completed a 1-for-8
reverse stock split. Any stockholders with fractional shares as a result of the reverse stock split were paid cash (without interest)
equal to such fractional shares multiplied by the average closing sales prices of the Company’s common stock during regular trading
hours for the five consecutive trading days immediately preceding the reverse stock split. A total of $941 was paid for the satisfaction
of fractional shares.
***Common Stock***
***March 2026 Offering***
On March 24, 2026, the Company consummated a
registered direct offering pursuant to which it received net proceeds of $24,787,679 from the sale of 2,558,422 common stock units, which consisted of 2,558,422 shares of common stock and 2,558,422 fully exercisable four-year warrants to purchase the Company’s common stock at $6.27 per share (the “March 2026 Warrants”),
and 2,079,797 pre-funded warrant units, which consisted of 2,079,797 pre-funded fully exercisable warrants with an exercise price of $0.00001 and 2,079,797 March 2026 Warrants. Through March 31, 2026, 100,000 pre-funded warrants were exercised and for the period from April 1, 2026 to May 7, 2026, 892,709 pre-funded warrants were exercised. No March
2026 Warrants have been exercised through May 7, 2026.
***July 2025 Private Placements***
On July 17, 2025, the Company entered into (i) a securities
purchase agreement (the “Cash Purchase Agreement”), and (ii) a securities purchase agreement, (the “BTC Purchase Agreement”
and, together with the Cash Purchase Agreement, the “Purchase Agreements”) by and among the Company and each purchaser party
thereto pursuant to which the Company issued an aggregate 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. The Company received aggregate gross
proceeds of $501.0 million, before deducting cash expenses including placement agent fees and other transaction related expenses of approximately
$21.0 million, which excludes the value of the warrants issued to the placement agents as discussed below. Gross proceeds included payment
of 235.8 BTC pursuant to the BTC Purchase Agreement with a value of $28.0 million.
The unfunded exercise price of each pre-funded warrant
is equal to $0.00001 per underlying pre-funded warrant share. The exercise price and the number of shares of common stock issuable upon
exercise of each pre-funded warrant is subject to appropriate adjustment in the event of certain stock dividends, stock splits, stock
combinations, or similar events affecting the common stock. The pre-funded warrants are exercisable in cash or by means of a cashless
exercise and will not expire until the date the pre-funded warrants are fully exercised. The pre-funded warrants may not be exercised
if the aggregate number of shares of common stock beneficially owned by the holder thereof (together with its affiliates) immediately
following such exercise would exceed a specified beneficial ownership limitation; provided, however, that a holder may increase or decrease
the beneficial ownership limitation by giving notice to the Company (61 days notice for increases), but not to any percentage in excess
of 9.99%. As of March 31, 2026, 5,457,013 of the pre-funded warrants issued in the Private Placements were exercised. There were no exercises
of these pre-funded warrants in the period from April 1, 2026 through May 7, 2026.
Concurrent
with the Purchase Agreements, the Company and the Purchasers entered into a Registration Rights Agreement, dated July 17, 2025 (the “Registration
Rights Agreement”), providing for the registration for resale of the common shares and the pre-funded warrant shares sold in the
Private Placements and the shares underlying the Gemini Warrants, the Placement Agent Warrants and the consultant warrant issued concurrent
with the Private Placements that are not then registered on an effective registration statement, pursuant to a registration statement
(the “Registration Statement”) to be filed with the SEC no later than August 16, 2025. The Company filed the Registration
Statement on August 15, 2025 and it became effective on August 18, 2025 and has remained effective through the date of issuance of the
financial statements as of and for the three months ended March 31, 2026.
21
The Company has agreed to use reasonable best efforts
to cause the Registration Statement to be declared effective no later than 60 days after closing of the Private Placements, and to keep
the Registration Statement continuously effective from the date on which the SEC declares the Registration Statement to be effective until
(i) the date on which the Purchasers shall have resold all the Registrable Securities (as such term is defined in the Registration Rights
Agreement) covered thereby, or (ii) the date on which the Registrable Securities may be resold by the Purchasers without registration
and without regard to any volume or manner-of-sale limitations by reason of Rule 144 as promulgated by the SEC under the Securities Act
of 1933, as amended (the “Securities Act”), without the requirement for the Company to be in compliance with the current public
information requirement under Rule 144 or any other rule of similar effect.
The Company granted the Purchasers customary indemnification
rights in connection with the Registration Rights Agreement. The Purchasers also granted the Company customary indemnification rights
in connection with the Registration Rights Agreement.
***February 2025 Offering***
On February 6, 2025, the Company consummated an underwritten
public offering pursuant to which it received net proceeds of $10,703,882 from the sale of 53,750 common stock units, which consisted
of 53,750 shares of common stock and 53,750 fully exercisable five-year warrants to purchase the Company’s common stock at $16.00
per share, and 696,250 pre-funded warrant units, which consisted of 696,250 pre-funded fully exercisable warrants with an exercise price
of $0.00008 and 696,250 fully exercisable five-year warrants to purchase the Company’s common stock at $16.00 per share (the “February
2025 Warrants”). As of March 31, 2026, 355,626 pre-funded warrants have been exercised and no pre-funded warrants were exercised
from April 1, 2026 to May 7, 2026. As of March 31, 2026, 111,500 February 2025 Warrants were exercised, and no February 2025 Warrants
were exercised from April 1, 2026 to May 7, 2026.
***At the Market Program***
In 2024, the Company established an At the Market
Program (“ATM”) with Aegis Capital Corp. (“Aegis”) as placement agent, pursuant to which it can sell up to $100.0
million of its common stock and is subject to a fee payable to Aegis Capital Corp. (“Aegis”) of 3%. During the three months
ended March 31, 2025, the Company has received aggregate net proceeds of $8,846,761 for the sale of 220,515 shares of common stock through
the ATM.
On July 17, 2025, the Company entered into Amendment
No.1 to the At-The-Market Issuance Sales Agreement (the “ATM Amendment Sales Agreement”) with Aegis which, among other matters,
(i) increases the maximum capacity of the program by $1.0 billion and (ii) adjusts the fee Aegis will be paid as sales agent to 1% of
gross proceeds of sales under the At-The-Market Issuance Sales Agreement for such additional amount. The Company filed a shelf registration
statement to register the shares underlying such agreement on July 30, 2025, which was amended on March 26, 2026 and March 30, 2026. No shares have been sold under the ATM during 2026.
***Common Stock Repurchase Programs***
On March 21, 2025, the Company’s Board approved
a common stock repurchase program whereby the Company could repurchase up to $2.0 million of common stock subject to a limitation that
at least 500,000 shares of common stock must be outstanding to meet Nasdaq compliance rules. As of March 31, 2026, the Company has repurchased65,348 shares of common stock at an average purchase price of $7.82 per share with cash of $510,907, including commissions paid of $17,045,
under the March 2025 stock repurchase program.
On July 24, 2025, the Board approved a $100.0 million common stock repurchase
program (increased by the Board to $150.0 million on October 10, 2025 and increased to $200.0 million on February 2, 2026) which terminated
the March 2025 repurchase program. The authorization is effective through July 24, 2027, subject to extension or earlier termination by
the Board at any time. The shares of common stock may be repurchased from time to time in open market transactions at prevailing market
prices not to exceed $20.00 per share, in privately negotiated transactions, or by other means in accordance with federal securities laws.
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 and applicable legal
requirements. The repurchase program does not obligate the Company to purchase any particular number of shares of common stock.
22
As of March 31, 2026, the Company has
repurchased 24,135,409 shares of common stock under the new repurchase program at an average purchase price of $5.80 per share with
cash of $139,990,849, including commissions paid of $1,366,680. For the period from April 1, 2026 to May 7, 2026, the Company has
repurchased 2,109,248 shares of common stock at an average purchase price of $4.62 per share with cash of $9,750,633, including
commissions paid of $96,541. These repurchases were funded from amounts borrowed under the borrowing agreements discussed in Note 5
above and from proceeds from the sale of Bitcoin discussed in Note 4.
The shares repurchased under both repurchase programs
and cash paid are presented as treasury stock in the condensed consolidated balance sheet as of March 31, 2026.
***Stockholder Rights Plan***
On February 3, 2026, the Board of Directors of the Company declared a dividend
of one preferred share purchase right (a “Right”), payable on February 13, 2026, for each share of common stock, par value
$0.00001 per share, of the Company outstanding on February 13, 2026 (the “Record Date”) to the stockholders of record on that
date. In connection with the distribution of the Rights, the Company entered into a Rights Agreement (the “Rights Agreement”),
dated as of February 3, 2026, between the Company and Computershare Trust Company, N.A., as rights agent. Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $0.00001 per share (the “Preferred
Shares”), of the Company at a price of $15.00 per one one-thousandth of a Preferred Share represented by a Right, subject to adjustment.
Unless the Rights are earlier redeemed or exchanged by the Company, the Rights Plan will expire at the close of business on February 2,
2027.
The Rights are not exercisable until the Distribution Date, which is the
earlier of (i) the Close of Business on the 10th day following a public announcement, or the public disclosure of facts indicating, that
a Person or group of affiliated or associated Persons has become an “Acquiring Person” (or, in the event the Board of Directors
determines to effect an exchange in accordance with Section 24 of the Rights Agreement and the Board of Directors determines that a later
date is advisable, then such later date) or (ii) the Close of Business on the 10th Business Day (or such later date as may be determined
by action of the Board of Directors prior to such time as any Person becomes an “Acquiring Person”) following the commencement
of a tender offer or exchange offer the consummation of which would result in a Person or group becoming an “Acquiring Person.”
An “Acquiring Person” means any person who becomes the beneficial owner of 12.5% or more of the outstanding shares of
common stock of the Company, subject to certain specified exceptions set forth in the Rights Plan. Initially, the Rights are attached
to all common stock certificates and no separate certificates evidencing the Rights (“Right Certificates”) were issued. As
soon as practicable after the Distribution Date, unless the Rights are recorded in book-entry or other uncertificated form, the Company
will prepare and cause the Right Certificates to be sent to each record holder of common stock as of the Distribution Date.
If the Rights become exercisable, all holders of Rights (other than the
Acquiring Person and its affiliates and associates, whose Rights would become void) will be entitled to acquire common stock having a
value equal to two times the exercise price of the Right. In the event of a merger, consolidation, or sale of 50% or more of the Company’s
assets following a person becoming an Acquiring Person, each Right would instead entitle the holder to purchase common stock of the acquiring
company at the same two-times-value ratio. Alternatively, the Board may exchange each Right held by non-Acquiring Person holders for one
share of common stock per Right. The Rights Plan also includes a “qualifying offer” provision under which the Rights will
automatically expire if an all-shares, same-consideration tender or exchange offer is accepted for more than two-thirds of the outstanding
common stock on a fully diluted basis, subject to a minimum 90 business-day period following commencement of the offer. The Board may
redeem all of the Rights at a price of $0.00001 per Right at any time before a person becomes an Acquiring Person and may amend the terms
of the Rights without holder consent, except that no amendment after a person becomes an Acquiring Person may adversely affect the interests
of Rights holders.
***Series A Convertible Preferred Stock***
In connection with the Stockholder Rights
Agreement implemented on February 3, 2026, the Company designated 100,000 shares of Preferred Stock as Series A with a par value of $0.00001 per share.
23
**Warrants**
***Series A Warrants***
Each Series A Warrant had an initial exercise price
per share equal to $158,400, was immediately exercisable upon issuance, and expires on the five-year anniversary of the original issuance
date, or November 17, 2028. As of March 31, 2026, there are 10,008 Series A Warrants outstanding with an exercise price of $3.56.
*Cashless Exercise*
If at the time a holder exercises its Series A Warrants,
a registration statement registering the issuance of the shares of common stock underlying the Series A Warrants under the Securities
Act is not then effective or available and an exemption from registration under the Securities Act is not available for the issuance of
such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate
exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common
stock determined according to a formula set forth in the Series A Warrants.
Conditioned upon the receipt of the Warrant Stockholder
Approval at a required Special Meeting, a holder of Series A Warrants may also provide notice and elect an “alternative cashless
exercise” pursuant to which they would receive an aggregate number of shares equal to the product of (x) the aggregate number of
shares of common stock that would be issuable upon a cash exercise of the Series A Warrant and (y) 3.0. Approval of this adjustment by
the stockholders was made on January 12, 2024.
*Share Combination Event Adjustments*
If a share split, share dividend,
share combination, recapitalization or other similar transaction involving the Company’s common stock (collectively a “Share
Event”) and the lowest daily VWAP during the five consecutive trading days prior to the date of such event and the five consecutive
trading days after the date of such event is less than the exercise price then in effect, then the exercise price of the Series A Warrant
shall be reduced to the lowest daily VWAP during such period and the number of warrant shares issuable shall be increased such that the
aggregate exercise price payable thereunder, after taking into account the decrease in the exercise price, shall be equal to the aggregate
exercise price on the date of issuance. Approval of this adjustment by the stockholders was made on January 12, 2024.
Since issuance, the number of Series
A Warrants have been adjusted under the Share Event provisions. See Note 7 for further discussion
of the fair value of these warrants.
***Other Warrants***
As discussed in Note 8 above, the Company issued warrants
to purchase up to 901,542 shares of common stock to Gemini or its designees (the “Gemini Warrants”) with an exercise price
of $10.00 per share and a 10-year term. The Gemini Warrants began vesting and became exercisable on July 21, 2025 in accordance with the
Applicable Vesting Schedule. Based on the highest VWAP of the Company’s common stock from July 21, 2025, 360,618 warrants have vested
as of March 31, 2026.
The Company issued 163,929 warrants to purchase shares
of common stock to the placement agents of the Private Placements (the “Placement Agent Warrants”) with an exercise price
of $10.00 per share and a five-year term. The Placement Agents Warrants began vesting and became exercisable on July 21, 2025 based on
the Applicable Vesting Schedule. Based on the highest VWAP of the Company’s common stock since July 21, 2025, 65,573 warrants have
vested as of March 31, 2026.
24
The Company
has determined that the Gemini Warrants and the Placement Agent Warrants should be classified as equity. Since the first 20% of these
warrants vest if the Company’s daily VWAP is $10.00 and the Private Placements priced at $10.00, the Company concluded that the
first tranche was certain to vest at the time of grant, which was the same day the Purchase Agreements were executed by investors for
the Private Placements and used a Black-Scholes option pricing model. Since the daily VWAP beyond $10.00 was uncertain, the Company used
Monte Carlo simulation to estimate the value of the remaining tranches of these warrants.
The following
assumptions were used in the Black Scholes option pricing models and Monte Carlo simulations:
| Schedule of assumptions | |
| --- | --- |
| Company stock price on valuation date | $10.00 |
| Volatility | 143.85% |
| Risk free interest rate - 5 years | 3.94% |
| Risk free interest rate - 10 years | 4.43% |
| Dividend yield | 0.00% |
Based on the above inputs, the following fair values
and derived service periods were calculated:
| Schedule of fair values and derived service periods | Daily VWAP $10 | Daily VWAP $15 | Daily VWAP $20 | Daily VWAP $25 | Daily VWAP $30 |
| --- | --- | --- | --- | --- | --- |
| Fair value - 5 year service period | $9.03 | $9.02 | $9.02 | $9.02 | $9.01 |
| Derived service period - years | N/A | 0.20 | 0.38 | 0.56 | 0.69 |
| Fair value - 10 year service period | $9.82 | $9.80 | $9.80 | $9.80 | $9.80 |
| Derived service period - years | N/A | 0.20 | 0.40 | 0.58 | 0.73 |
The Company’s highest VWAP in the period from
July 21, 2025 to March 31, 2026 was $18.77. Therefore the first two tranches vested and the Company recognized all of the expense for
these tranches as of March 31, 2026. The Company recognized expense on the remaining unvested tranches based on the derived service periods
and number of days vesting in the period ended March 31, 2026. The Company recognized total expense of $1,478,640 for the Placement Agent
Warrants and recorded this as offering costs related to the Private Placements. The Company recognized total expense of $1,026,587 in
general and administrative expense for the Gemini warrants for the three months ended March 31, 2026. Remaining expense to be recognized
for the Placement Agent Warrants and Gemini Warrants are $0 and $92,789, respectively, which will be recognized over the remaining derived
service periods for each tranche unless the daily VWAP exceeds the vesting price for the tranche, in which case the expense will be recognized
immediately.
In addition, concurrent with the closing of the Private
Placements, the Company issued fully vested warrants to a consultant to purchase up to 25,000 shares of common stock with an exercise
price of $10.00 per share of common stock and a ten-year term. The Company valued these warrants using a
Black-Scholes option pricing model using the same ten-year inputs noted above. The Company recognized expense of $249,413 in general and
administrative expense for the three months ended September 30, 2025.
25
The following is the activity related to pre-funded
common stock warrants during the three months ended March 31, 2026:
| Schedule of pre-funded common stock warrants | Pre- Funded Common Stock Warrants / Shares | Pre- Funded Common Stock Warrants / Weighted Average Exercise Price | Pre- Funded Common Stock Warrants / Weighted Average Remaining Life in years(1) | Pre- Funded Common Stock Warrants / Intrinsic Value |
| --- | --- | --- | --- | --- |
| Outstanding at January 1, 2026 | 3,913,538 | $0.00002 | | |
| Purchased | 2,079,797 | $0.00001 | | |
| Exercised | (3,396,940) | $0.00001 | | |
| Outstanding at March 31, 2026 | 2,596,395 | $0.00002 | – | $10,982,701 |
| Exercisable at March 31, 2026 | 2,596,395 | $0.00002 | – | $10,982,701 |
(1) Pre-funded warrants expire only upon exercise
The following is the activity related to all common
stock warrants, excluding pre-funded warrants, during the three months ended March 31, 2026:
| Schedule of warrants activity | Other Common Stock Warrants / Shares | Other Common Stock Warrants / Weighted Average Exercise Price | Other Common Stock Warrants / Weighted Average Remaining Life in years | Other Common Stock Warrants / Intrinsic Value |
| --- | --- | --- | --- | --- |
| Outstanding at January 1, 2026 | 1,735,349 | $47.66 | | |
| Granted/purchased | 4,643,487 | $6.26 | | |
| Expired | (2) | $2,571,840 | | |
| Outstanding at March 31, 2026 | 6,378,834 | $16.72 | 4.73 | $6,705 |
| Exercisable at March 31, 2026 | 5,739,551 | $18.58 | 4.73 | $6,705 |
### **NOTE 10 – STOCK-BASED COMPENSATION**
***2025 Stock Plan***
As discussed in Note 9, in conjunction with the digital
asset treasury strategy and Private Placements, on July 16, 2025, the Company’s Board adopted the 2025 Stock Plan (the “2025
Plan”) and granted stock options to certain employees, Board members and a consultant. A total of 5,681,381 stock options were granted
to purchase the Company’s common stock at $10.00 per share with a ten-year term, regardless of service being provided and only forfeitable
in the event employment is terminated for cause as defined in the stock option agreement. These stock options vest based on the Applicable
Vesting Schedule. The Company’s highest VWAP in the period from July 17, 2025 to March 31, 2026 was $29.86, and accordingly the
first four tranches vested. Since these stock options are not exercisable until the 2025 Stock Plan and shares to be issued under the
2025 Stock Plan are approved by the Company’s stockholders, the Company has not recorded any share-based compensation expense for
these stock options as there is no measurement date since stockholder approval is uncertain. If stockholder approval is obtained, the
Company will value these options and recognize share-based compensation for any vested awards and any unvested awards based on the derived
service period.
26
***Inducement Stock Options***
Also in connection with the Private Placements, the
Board approved 1,045,807 inducement stock option grants to purchase the Company’s common stock with an exercise price of $10.00 to two executives (see Note 8 above) and one employee. These stock options have a ten-year term regardless of continued employment with
the Company, provided that the employee is not terminated for cause. These stock options vest based on the Applicable Vesting Schedule.
The Company used a Black Scholes option pricing model and Monte Carlo simulation to value these stock options consistent with the Placement
Agent Warrants (see Note 9) since the Company determined the expected life of these options is approximately 5 years. Based on the highest
VWAP of the Company’s common stock since the Private Placements, 836,648 stock options have vested as of March 31, 2026. For the
three months ended March 31, 2026, the Company recognized expense of $677,665 in general and administrative expense for these inducement
stock options and there is no remaining expense to be recognized.
In August 2024, as part of the compensation package for the Company’s
Chief Sales Officer (“CSO”), the Company granted 782 stock options outside of the 2021 Plan with an exercise price of $104.32.
In June 2025, the Company cancelled these stock options and paid $4,252 to the CSO. The Company recognized a net benefit of $30,932 for
the share-based compensation expense previously recognized on the unvested stock options less the cash paid.
***2021 Stock Plan***
In January 2021, the Company’s Board of Directors
adopted the Volcon, Inc. 2021 Stock Plan, (the “2021 Plan”). The 2021 Plan is a stock-based compensation plan that provides
for discretionary grants of stock options, stock awards, and restricted stock unit (“RSU”) awards to employees, members of
the Board of Directors and consultants (including restricted stock units issued prior to the adoption of the plan as further discussed
below). The Company has reserved 39 shares of the Company’s common stock for issuance under the 2021 Plan. To the extent that an
award, if forfeitable, expires, terminates or lapses, or an award is otherwise settled in cash without the delivery of shares of common
stock to the participant, then any unpaid shares subject to the award will be available for future grant or issuance under the 2021 Plan.
There are no shares available for issuance under the 2021 Plan as of March 31, 2026. Awards vest according to each agreement and as long
as the employee remains employed with the Company or the consultant continues to provide services in accordance with the terms of the
agreement.
***Other***
As discussed in Note 8 above, fully vested stock options
were granted to one of the Company’s Co-CEOs and CFO to purchase a total of 252,525 shares of the Company’s common stock at
$4.56 per share. The Company recognized share-based compensation of $1,125,802 related to these stock options in the year ended December
31, 2025. On July 17, 2025, the Co-CEO and CFO amended these stock options to reset the exercise price to $10.00 per share. There was
no impact to share-based compensation for this modification as the fair value immediately after the modification was less than the fair
value immediately before the modification.
The following summarizes activity relating to common
stock options to employees and consultants for services during the three months ended March 31, 2026:
| Schedule of stock options activity | Common Stock Options / Shares | Common Stock Options / Weighted Average Exercise Price | Common Stock Options / Weighted Average Remaining Life in years | Common Stock Options / Intrinsic Value |
| --- | --- | --- | --- | --- |
| Outstanding at January 1, 2026 | 1,298,366 | $76.25 | | – |
| Granted | – | – | | |
| Forfeited | (30) | $2,077,665.88 | | |
| Canceled | – | – | | |
| Outstanding at March 31, 2026 | 1,298,336 | $21.85 | 9.25 | – |
| Exercisable at March 31, 2026 | 1,089,177 | $24.12 | 9.25 | – |
27
Total stock-based compensation recorded for the three
months ended March 31, 2026 and 2025 for all stock-based compensation awards, including warrants, has been recorded as follows:
| Schedule of stock-based compensation expense / Cost of Goods Sold | Three Months Ended March 31, 2026 / – | Three Months Ended March 31, 2025 / – |
| --- | --- | --- |
| Sales and Marketing | – | 10,052 |
| Product Development | – | – |
| General and Administrative | 1,704,252 | – |
| Total | $1,704,252 | $10,052 |
### **NOTE 11 – LOSS PER COMMON SHARE**
The basic net loss per common share is calculated
by dividing the Company’s net loss available to common stockholders by the weighted average number of Common Stock during the three
months ended March 31, 2026 and 2025. The diluted net loss per common share is calculated by dividing the Company’s net loss available
to common stockholders by the diluted weighted average number of Common Stock outstanding during the year. The diluted weighted average
number of Common Stock outstanding is the basic weighted number of Common Stock adjusted for any potentially dilutive debt or equity.
Diluted net loss per common share is equal to basic net loss per share due to the Company’s net loss and any potentially issuable
shares are anti-dilutive.
| Schedule of basic loss per common share | Three Months Ended / March 31, 2026 | Three Months Ended / March 31, 2025 |
| --- | --- | --- |
| Numerator: | | |
| Loss from continuing operations | $(85,403,548) | $(2,076,375) |
| Loss from discontinued operations | – | $(384,055) |
| Net loss | $(85,403,548) | $(2,460,430) |
| Denominator: | | |
| Denominator for basic and diluted net loss per common share - weighted average of common shares | $33,022,103 | $338,235 |
| Basic and diluted loss from continuing operations per common share | $(2.59) | $(6.13) |
| Basic and diluted loss from discontinued operations per common share | – | $(1.14) |
| Basic and diluted net loss per common share | $(2.59) | $(7.27) |
28
As discussed in Note 2 above, the Company received
notice from DTCC on behalf of the brokerage firms that hold the shares of Company common stock held in “street name” that
in connection with the foregoing rounding of shares the Company would need to issue 23,617 shares of common stock which are not included
in the amounts above. If these shares had been issued as of November 19, 2024 when notice from DTCC was received, the amounts for basic
and diluted net loss per common share for the three months ended March 31, 2025 would be as follows:
| Schedule of loss per common share / Denominator: | |
| --- | --- |
| Denominator for basic and diluted net loss per common share - weighted average of common shares | 361,861 |
| Basic and diluted loss from continuing operations per common share | $(5.74) |
| Basic and diluted loss from discontinued operations per common share | $(1.06) |
| Basic and diluted net loss per common share | $(6.80) |
Common shares consisting of shares potentially dilutive as of March 31, 2026 and 2025 are as follows:
| Schedule of common shares consisting of shares potentially dilutive | March 31, 2026 | March 31, 2025 |
| --- | --- | --- |
| Warrants | 8,975,229 | 1,297,998 |
| Stock options | 1,298,336 | 786 |
| Total | 10,273,565 | 1,298,784 |
### **NOTE 12 – INCOME TAXES**
Due to losses since inception and for all periods
presented, no income tax benefit or expense has been recognized as a full valuation allowance has been established for any tax benefit
that would have been recognized for the loss in any period presented.
The Company has recorded no liability for income taxes
associated with unrecognized tax benefits at the date of adoption and has not recorded any liability associated with unrecognized tax
benefits. Accordingly, the Company has not recorded any interest or penalty in regard to any unrecognized benefit.
### **NOTE 13 – DISCONTINUED OPERATIONS**
As discussed in Note 1 above, 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, which reorganization has not occurred as of May 7, 2026 and
will be recognized by the Company once completed. The Company transferred all Volcon IP, including all intellectual property, brand assets,
trademarks, sales and distribution networks and engineering documentation associated with the Volcon brand (the “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 concluded that it would shift its business
operations in the fourth quarter after the implementation of the digital asset treasury strategy. The Company expects that by selling
the four-wheel product business, which includes the HF1 UTV, MN1 Tradesman UTV and MN1 Adventurer UTV products (collectively the “Divested
Products”), it will reduce the Company’s future product liability exposure. Although the Company may continue to finance Venom’s
inventory purchases and obtain a seat on Venom’s board of directors, the Company has concluded that it does not have significant
ongoing involvement in the products sold in the Venom APA. The revenue and expenses associated with the Divested Products are presented
as discontinued operations. Expenses also include certain allocated costs such as salaries, benefits, travel, marketing and consulting
costs which are allocated based on actual costs or estimated time that individuals worked on these products.
29
Following this divestiture, the Company will concentrate
on its two-wheel business, including the launch of new products in the U.S. and Europe. The Company also plans to expand its inventory
financing operations to generate positive cash flow by leveraging the spread between the Company’s cost of capital and interest
income. Revenues and expenses for the two-wheel business and inventory financing business will be presented in the loss from continuing
operations. Although the Company transferred the tradenames, design patents and engineering drawings for the Grunt, Grunt EVO and Stag
in the Venom APA, the Company had discontinued the sale of these products before the shift in operations therefore revenues and costs
associated with these products are also presented in the loss from continuing operations.
The following table presents the carrying amount
of the major classes of assets and liabilities included in the consolidated balance sheet that are related to discontinued operations:
_December 31, 2025_
| Schedule of assets and liabilities included discontinued operations | |
| --- | --- |
| ASSETS | |
| Accounts receivable | $256,459 |
| Inventory | 11,654 |
| Total assets | $268,113 |
| LIABILITIES | |
| Accounts payable | $76,290 |
| Accrued liabilities | 16,732 |
| Total liabilities | $93,022 |
The following table presents the major classes
of line items representing the loss on discontinued operations:
| Schedule of loss on discontinued operations | March 31, | March 31, |
| --- | --- | --- |
| | 2025 | |
| Revenue | $ | $273,717 |
| Cost of goods sold | | (276,791) |
| Sales and marketing | | (214,733) |
| Product development | | (153,871) |
| General and administrative | | (12,377) |
| Loss from discontinued operations | $ | $(384,055) |
The impact to the balance sheet as of March
31, 2026 and statement of cash flows for discontinued operations was not material for any period presented.
30
### **NOTE 14 – SUBSEQUENT EVENTS**
On February
26, 2026, a stockholder submitted a nomination notice purportedly naming nine candidates for election to the Company’s Board. On
March 26, 2026, the Company sent this stockholder a letter notifying such stockholder that its purported nominations were invalid based
on various matters and deficiencies identified in connection with the nomination notice.
On April 2, 2026, this
stockholder filed a complaint with the Court of Chancery of the State of Delaware (the “Court”) against the Company and its
Board alleging that the Company’s Board took actions to reject the stockholder’s purported nominations in breach of their
fiduciary duties (the “Complaint”). The Complaint alleges, among other things, the following:
- the Board inappropriately rejected the stockholder’s director nominees;
- the Company improperly made a dilutive issuance of common stock when the Company completed the March 2026 equity offering (the “March Equity Offering”) (see Note 9) with a stockholder who the complainant believes is aligned with the Board, which the stockholder believes will impact any proxy fight in the Company’s favor, and;
- the Company’s Board improperly adopted the Stockholder Rights Plan with a 12.5% ownership trigger (see Note 9) in response to the rapid accumulation of the Company’s stock by this stockholder.
The stockholder’s
Complaint requests, among other items, that the Court find that (a) the defendants breached their financial duties, (b) undo the Company’s
rejection of the stockholder’s nominations for the Company’s Board so that the stockholder’s nominees can be included
on the ballot for potential election at the Company’s upcoming 2026 annual meeting, (c) prohibit holders of shares issued in connection
with March Equity Offering from being eligible to vote such shares for directors at the Company’s upcoming 2026 annual meeting,
and (d) award damages and other monetary relief for the harm caused by the March 2026 equity issuance, together with pre-judgment and
post-judgment interest.
Discovery
for this matter has begun and a tentative trial date has been scheduled to start on June 30, 2026. The Company intends to vigorously defend
itself and the Board against the Complaint for the benefit of the stockholders.
31
## ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS**
*The following discussion and
analysis is intended as a review of significant factors affecting the Company’s financial condition and results of operations for
the periods indicated. This discussion and analysis should be read in conjunction with the financial statements and related notes appearing
elsewhere in this Quarterly Report on Form 10-Q and the Company’s Annual Report on Form 10-K, which contains audited financial statements
of the Company as of and for the year ended December 31, 2025, previously filed with the Securities and Exchange Commission. Results for
the three months ended March 31, 2026 are not necessarily indicative of results for the year ending December 31, 2026 or any future period.*
**Special Note Regarding Forward-Looking Statements**
This Quarterly Report on Form
10-Q contains forward-looking statements. These forward-looking statements generally can be identified by the use of words such as “anticipate,”
“expect,” “plan,” “could,” “may,” “believe,” “estimate,” “forecast,”
“goal,” “potentially,” “project,” and other words of similar meaning. All statements, other than statements
related to present facts or current conditions or historical facts, contained in this Quarterly Report on Form 10-Q are forward-looking
statements, including statements regarding our strategy, future operations, future financial position, including, but not limited to,
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 build 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 on the Company’s website 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; 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, and in any subsequent filings with
the SEC.
As a result of these and other
factors, we may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place
undue reliance on our forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q reflect
our views as of the date hereof. We do not assume and specifically disclaim any obligation to update any forward-looking statements, whether
as a result of new information, future events or otherwise, except as required by law. Our business is subject to substantial risks and
uncertainties, including those referenced above. Investors, potential investors, and others should give careful consideration to these
risks and uncertainties.
32
**Overview**
***Digital Asset Treasury Strategy***
On July 17, 2025, the Company
announced its entry into securities purchase agreements with certain institutional and accredited investors in private placements for
the purchase and sale of 44,414,189 shares of common stock of the Company, par value $0.00001 per share and pre-funded warrants to purchase
up to an aggregate of 5,728,662 shares of common stock with an exercise price of $0.00001, at a price of $10.00 per share, for aggregate
gross proceeds of approximately $501.0 million which includes payment in Bitcoin (“BTC” or “Bitcoin”) of $28.0
million, before deducting placement agent fees and other offering expenses (the “Private Placements”). The Private Placements
closed on July 21, 2025. The Company has used the net proceeds of $452.0 million from the Private Placements (excluding the $28.0 million
of BTC received) to purchase or otherwise acquire BTC and for the establishment of the Company’s cryptocurrency treasury operations.
In connection with the announcement of the Private Placements, the Company announced the launch of its digital asset treasury strategy,
pursuant to which the Company plans to pursue a number of strategic initiatives to acquire additional BTC and potentially other digital
assets.
The key component of the digital asset strategy is to optimize the Company’s capital structure to increase BTC per share
to drive stockholder value. This includes issuing equity when market conditions allow us to raise capital at a premium to net asset value
(“NAV”), defined as the value of BTC holdings plus cash, minus debt, divided by adjusted outstanding shares, which includes
common stock outstanding plus all pre-funded warrants outstanding. The Company may repurchase shares when shares trade below NAV. The
Company has an ATM program in place pursuant to which it can sell up to $1.0 billion of common stock and since the inception of the digital
asset treasury strategy through of 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.
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 May 7, 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, 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.
See Note 5 to the condensed 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,
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 May 7, 2026, the Company generated income of $1.4 million from trading these
derivatives, which is recorded in Other income in the condensed consolidated statement of operations.
The Company also recognizes the
risk that digital assets pose with respect to digital wallets being compromised and the Company uses institutional-grade custodians to
hold its BTC in wallets, some of which are isolated from the internet, referred to as cold storage, to minimize this risk. We view our
BTC as long-term holdings, although there are no restrictions on selling BTC that is not held as collateral by our lenders. As of May
7, 2026 we have 2,914 BTC, of which 1,353 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
May 7, 2026, BTC has closed at a high of $126,279 and a low of $60,033.
Losses
on digital assets significantly contributed to our results of operations for the three months ended March 31, 2026. The loss on digital
assets of $78.4 million was recorded, representing 94%, of our operating expenses for the three months ended March 31, 2026.
33
***Electric Vehicles***
The Company began its operations as an all-electric,
off-road powersports vehicle business. Beginning in 2021, we began efforts to sell off-road powersports vehicles beginning with an electric
two-wheeled motorcycle that we discontinued in March 2025. In 2022 we introduced an E-Bike, the Brat, and continue to sell this product.
In late 2024 we began selling the HF1 UTV, the MN1 Adventurer and MN1 Tradesman UTV, along with a line of upgrades and accessories. As
discussed below, in October 2025, we sold the HF1 and MN1 product lines.
***Venom Asset Purchase Agreement***
On October 15, 2025, the Company entered into the Venom
APA with Venom to divest the Volcon brand in exchange for a non-dilutable 10% equity position in Venom’s reorganized Delaware corporation
on a fully-diluted basis. The Company transferred all Volcon IP, including all Volcon intellectual property, brand assets, trademarks,
sales and distribution networks and engineering documentation associated with the Volcon IP other than its E-Bike, the Brat. The Company
will have the right to appoint one director to Venom’s board and may continue to finance Venom’s inventory purchases. In the
event that Venom does not complete its corporate reorganization within six months, with a 60 day grace period, 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 Condensed
Consolidated Statements of Income and, as such, have been excluded from both continuing operations and segment results for all periods
presented in this Quarterly Report on Form 10-Q. All amounts, and disclosures for all periods presented in this Quarterly Report on Form
10-Q reflect only the continuing operations unless otherwise noted. See Note 13 to the condensed consolidated financial statements for
further discussion.
***Venom Supply Agreement***
On February 24, 2025, we entered into the Venom Supply
Agreement with Venom to supply Venom with certain golf carts. The Venom Supply Agreement was amended and restated on April 25, 2025. The
Venom Supply Agreement allows Venom to purchase up to $2.0 million of golf carts with payment terms of the earlier of 100 days from the
date the golf carts are shipped from the manufacturer’s facility or upon sale to Venom’s dealers or to consumers. These golf
carts were purchased through a manufacturer specified in the Venom Supply Agreement and we received consideration of the cost of the golf
carts plus a five percent margin.
On October 29, 2025, the Venom Supply Agreement was
amended to increase the available amount to purchase by $0.7 million and Venom agreed to purchase the remaining 138 MN1 units ordered
by the Company under the Super Sonic Distribution Agreement discussed below. The original payment terms were the earlier of 60 days from
receipt or upon sale by Venom. The agreement was modified in April 2026 to extend the payment terms to the earlier of an additional 90
days or upon sale by Venom. All of these units were received by Venom by January 2026.
On November 17, 2025, the
Venom Supply Agreement was amended to increase the amount by $2.5 million (for a total of $4.5 million excluding the October 29, 2025
amendment). Payment terms are the earlier of 60 days from receipt of inventory by Venom or upon sale by Venom. As of March 31, 2026, Venom
has outstanding $2.4 million of financing receivables, of which $1.7 million has been paid through May 7, 2026. Subsequent to March 31,
2026 through May 7, 2026, the Company has paid $0.5 million to the manufacturer for orders placed by Venom and additional payments due
to be paid for orders placed by Venom as of May 7, 2026, are $0.7 million.
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.
34
***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.
In April 2026, we received our second prototype units and continue to evaluate and test these units. Provided testing is successful and
whether the product cost, including tariffs, allow for us to sell this product, we expect to start selling this product in the second
half of 2026.
In the fourth quarter of 2022, we began selling an
E-Bike, the Brat which is manufactured by a third-party. The Brat is a class 2 E-Bike and can be used on-road or off-road. We have developed
a line of accessories for the Brat that include color panels, headlight cowl, and seat, among other things. We are also developing a new
model of the Brat that will incorporate some of these accessories in the base model.
Following the divestiture of the four-wheel products
noted above, the Company expects to concentrate on its two-wheel business, including the launch of new products in European markets in
the second half of 2026. We expect to continue to evaluate other potential two-wheel product offerings in 2026.
**Customers**
*Dealers*
Prior to the divestiture of our four-wheel product
lines, we sold our products through powersports dealers, bicycle retailers, and golf cart dealers. We expect to continue to 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 we 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 May 7,
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.
35
**Manufacturers**
We outsource the manufacturing of all our two-wheel
products and accessories to an international third-party manufacturer, Huaian PX Intelligent Manufacturing Co., Ltd (“PXID”).
The estimated fulfillment of all two-wheeled orders we have received, or will receive, assumes that PXID can successfully meet our order
quantities and deadlines. In the past we have experienced delays due to PXID being unable to timely meet our order deadlines, and there
is no assurance that we will not experience delays in the future until such time as we are able to source products from multiple manufacturers
or from larger, more established manufacturers. If the manufacturer is unable to satisfy orders on a timely basis, our customers may cancel
their orders. Also, due to the Company currently only having PXID manufacture our two-wheel
products, if they experience financial hardship and cannot manufacture our products, our customers may cancel their orders which will
harm our sales. Due to new and increased tariffs and other trade policies introduced or threatened by the U.S. government since the beginning
of 2025, the cost of our products increased, but we also expect to see a decrease in manufacturing costs for new products ordered. We
may see further increases if additional changes in import laws or tariffs occur. We could also experience delays in receiving shipments
of our products if there are delays in getting carriers to ship our products or delays at the port of entry.
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.
**Results of Operations**
The following financial information
is for the three months ended March 31, 2026 and 2025.
| Line item | Three Months Ended / March 31, 2026 | Three Months Ended / March 31, 2025 |
| --- | --- | --- |
| Revenue | $225,702 | $462,332 |
| Cost of goods sold | (162,624) | (504,592) |
| Gross margin | 63,078 | (42,260) |
| Operating expenses: | | |
| Sales and marketing | 323,636 | 296,224 |
| Product development | 124,946 | 234,652 |
| General and administrative | 4,571,782 | 1,549,280 |
| Loss on digital assets | 78,354,036 | – |
| Total operating expenses | 83,374,400 | 2,080,156 |
| Loss from operations | (83,311,322) | (2,122,416) |
| Interest and other income (expense) | (2,092,226) | 46,041 |
| Loss from continuing operations before taxes | (85,403,548) | (2,076,375) |
| Tax benefit | – | – |
| Loss from continuing operations | (85,403,548) | (2,076,375) |
| Loss from discontinued operations | – | (384,055) |
| Net loss | $(85,403,548) | $(2,460,430) |
36
*Revenue*
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
March 31, 2025 was $462,332 which represents sales of Grunt EVOs of $304,905, Brats of $99,458, and accessories and parts of $18,265.
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 and our transition
to financing inventory purchases for other golf cart and four-wheel product companies.
*Cost of Goods Sold*
Cost
of goods sold for the three months ended March 31, 2026 was $162,624, including payroll costs of $50,975 for employees performing product
fulfillment, logistics management, and service and warranty and facilities costs of $64,193, offset by a benefit from the reversal of
our warranty accrual of $45,857 due to the expiration of product warranties. Product costs were $54,331 for Brats.
Cost
of goods sold for the three months ended March 31, 2025 was $504,592, including payroll costs of $68,565 for
employees performing product fulfillment, logistics management, and service and warranty and facilities costs of $123,863. Product
costs were $224,281 for Grunt EVOs, and $119,789 for Brats.
For the remainder
of 2026, we expect cost of goods sold to decrease as compared to 2025 due to lower revenue from product sales as noted above and a reduction
in our Texas warehouse facility when our lease ends in August 2026.
*Sales and Marketing Expense*
Sales and marketing
expenses relate to costs to increase exposure and awareness of our digital asset strategy, for our products and developing our network
of U.S. dealers and international distributors.
Sales
and marketing expenses were $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
$296,224 for the three months ended March 31, 2025 and were primarily related to expenses associated with promoting our products and brand
of $70,724 employee payroll costs of $79,123, and professional fees of $22,430 for fees paid to a third party distributor, third- party
sales consultants and legal fees.
For the remainder
of 2026, we expect sales expenses to decrease 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.
37
*Product Development Expense*
Product development
expenses relate to development of our products and process to manufacture these products.
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
$234,652 for the three months ended March 31, 2025 and were primarily related to expenses associated with employee payroll costs of $122,859,
and facilities costs of $41,032.
For the remainder
of 2026 we expect product development costs related to employee costs to decrease compared to 2025 due to lower headcount as fewer products
are in development compared to 2025, partially offset by an increase for product prototype costs for purchases of samples of new E-Bike
products being considered for sale.
*General and Administrative Expense*
General and administrative
expenses relate to costs for our finance, accounting and administrative functions to support the operations, development, marketing and
sales of our products.
General
and administrative expenses were $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 for the three months ended March 31, 2025, and were primarily related to expenses associated with employee payroll
costs of $550,402, professional fees of $259,168 (including auditor fees of $77,250, legal fees of $57,678 and consulting fees of $124,240),
software costs of $123,629, insurance costs of $450,388, and Board compensation expense of $50,000.
For the remainder of 2026, we expect general and administrative
expenses to increase due to legal and other professional fees due to certain corporate governance
and stockholder engagement matters, including fees associated with stockholder activist matters, partially offset by a reduction in our
facility cost when our current office lease expires in August 2026.
*Loss on Digital Assets*
The
Company’s digital assets are initially recorded at cost and are measured at fair value as of each reporting period. The Company
determines the fair value of its Bitcoin based on quoted (unadjusted) prices on the Gemini exchange, the active exchange that the Company
has determined is its principal market for BTC. Based on the price as of March 31, 2026 of $68,216 per BTC, the Company recognized a loss
of $78.4 million.
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.
38
*Interest and Other Expenses*
Net
Interest and other income/expenses for the three months ended March 31, 2026 was net expense of $2,092,226. This includes interest expense
of $2,058,035 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 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 and the loss of $568,142 on repayment
of a credit facility and loss on the change in derivative liabilities of $62,017.
Interest and other income/expenses
for the three months ended March 31, 2025 was insignificant.
For the remainder of 2026, we expect
interest expense to decrease compared to the quarter ended March 31, 2026 due to the repayment of the term loan unless we borrow additional
amounts under the delayed draw credit facility to make additional repurchases of our common stock. If market conditions allow, the Company
may issue equity or sell Bitcoin to repay outstanding loans or obtain other loan facilities with lower interest rates that could reduce
interest expense in the future.
*Net Loss*
Net loss for the three months
ended March 31, 2026, was $85,403,548 compared to a net loss of $2,460,430. As discussed above, the increase in net loss for the three
months ended March 31, 2026 is primarily related to the losses on BTC as there were no such losses in the three months ended March 31,
2025.
**Liquidity and Capital Resources**
On March 31, 2026, we had
cash and restricted cash of $5.8 million, including $0.1 million of restricted cash, and we had a working capital of $6.5 million. Since
inception we have funded our operations from proceeds from debt and equity sales.
*Cash used in operating activities*
Net
cash used in operating activities was $3.5 million for the three months ended March 31, 2026 and includes all of our operating costs,
except non-cash costs of depreciation and amortization, loss on change in derivative financial liabilities all of which were insignificant
for the period and stock-based compensation of $1.7 million and loss on Bitcoin of $78.4 million. Significant uses/contributions of cash
used in operating activities includes an increase in accounts receivable of $2.2 million primarily due to inventory financing, an increase
in accounts payable of $3.1 million primarily due to the classification of a negative balance in one of our bank balances of $2.8 million
due to the timing of share repurchases funded from this bank account, an increase of $0.1 million in inventory and inventory deposits,
a decrease in prepaid assets of $0.5 million due to the reclassification of inventory financing prepayments 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.
Net cash used in operating
activities was $3.6 million for the three months ended March 31, 2025 and includes all of our operating costs, except non-cash costs of
depreciation and amortization, loss on change in derivative financial liabilities and stock-based compensation, all of which were insignificant
for the period. Significant uses/contributions of cash used in operating activities includes a decrease of $0.4 million in inventory and
inventory deposits, an increase of $0.4 million in prepaid assets, a decrease of $0.2 million in accounts payable, and a decrease of $0.7
million in accrued liabilities primarily due to payments on vendor settlements, $0.1 million used to pay our lease liabilities and $0.2
million for fulfillment of sales where customers had previously placed deposits.
For the remainder of 2026,
we expect net cash used in operating activities will increase compared to the three months ended March 31, 2026 due to an increase in
legal and professional fees related to stockholder activism matters, partially offset by a decrease in expenses such as rent in connection
with our anticipated wind down our Texas facilities.
39
*Cash provided by (used in) investing activities*
Net cash provided
by investing activities was $74.7 million for the three months ended March 31, 2026, consisting of proceeds from the sale of Bitcoin of
$74.7 million
Net cash used in investing activities
was $0.2 million for the three months ended March 31, 2025, primarily consisting of purchases of equipment and tooling.
*Cash (used by) provided by financing activities*
Cash
used in financing activities for the three months ended March 31, 2026, was $74.4 million and was primarily related to net proceeds of
$24.8 million from the sale of common stock units and pre-funded warrant units from the March 2026 offering, proceeds of $5.0 million
from borrowing arrangements, offset by share repurchases of $44.2 million, repayment of the term loan $50.0 million and a payment made
on the delayed draw credit facility of $10.0 million.
Cash provided by financing activities
for the three months ended March 31, 2025, was $19.1 million and was primarily related to proceeds of $8.8 million from the sale of our
common stock from the At the Market offering, proceeds of $10.7 million from the sale of common stock units and prefunded warrant units,
partially offset by share repurchases of $0.4 million.
As
of March 31, 2026, we had incurred an accumulated deficit of $401.8 million since inception. Management anticipates that our cash on hand
as of March 31, 2026, plus cash expected to be generated from operations and the borrowing available under the delayed draw credit facility
and proceeds that could be received from the sale of Bitcoin will be sufficient to fund planned operations beyond one year from the date
of the issuance of the financial statements as of and for the three months ended March 31, 2026.
**JOBS Act Accounting Election**
The Jumpstart our Business Startups
Act of 2012, as amended, (the “JOBS Act”) provides that an “emerging growth company” can take advantage of the
extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.
In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and,
as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for
other public companies.
We have implemented all new
accounting pronouncements that are in effect and may impact our financial statements and we do not believe that there are any other new
accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
**Critical Accounting Policies**
None.
## ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company
as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
40
## ITEM 4. CONTROLS AND PROCEDURES
**Evaluation of Disclosure Controls and Procedures**
Our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e)) are designed to ensure that information required to be disclosed by us in reports we file
or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the appropriate
time periods, and that such information is accumulated and communicated to one of our Co-Chief Executive Officers, one of which serves
as our principal executive officer, and our Chief Financial Officer, who serves as our principal financial officer, as appropriate, to
allow timely discussions regarding required disclosure. We, under the supervision of and with the participation of our management, including
our Co-Chief Executive Officers and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures.
Based on that evaluation, our
Co-Chief Executive Officers and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures
were not effective as of March 31, 2026 to provide assurance that information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms
of the SEC, and that such information is accumulated and communicated to management as appropriate, to allow timely decisions regarding
disclosures as we have previously missed filing certain forms timely and we have not implemented and tested controls and procedures to
conclude that we have remediated this deficiency. Notwithstanding this conclusion, we believe that our unaudited condensed consolidated
financial statements contained in this Quarterly Report fairly present our financial position, results of operations and cash flows for
the periods covered thereby in all material respects. Management is working to identify corrective actions for the weakness and will periodically
re-evaluate the need to add personnel and implement improved review procedures.
**Changes in Internal Control over Financial Reporting**
There were no changes to our internal
control over financial reporting during the three months ended March 31, 2026, that have materially affected, or are reasonably likely
to materially affect, our internal controls over financial reporting.
41
**PART II — OTHER INFORMATION**
## ITEM 1. LEGAL PROCEEDINGS
On
February 26, 2026, a stockholder submitted a nomination notice purportedly naming nine candidates for election to the Company’s
Board. On March 26, 2026, the Company sent this stockholder a letter notifying such stockholder that its purported nominations were invalid
based on various matters and deficiencies identified in connection with the nomination notice.
On
April 2, 2026, this stockholder filed a complaint with the Court of Chancery of the State of Delaware (the “Court”) against
the Company and its Board alleging that the Company’s Board took actions to reject the stockholder’s purported nominations
in breach of their fiduciary duties (the “Complaint”). The Complaint alleges, among other things, the following:
- the Board inappropriately rejected the stockholder’s director nominees;
- the Company improperly made a dilutive issuance of common stock when the Company completed the March 2026 equity offering (the “March Equity Offering”) (see Note 9) with a stockholder who the complainant believes is aligned with the Board, which the stockholder believes will impact any proxy fight in the Company’s favor, and;
- the Company’s Board improperly adopted the Stockholder Rights Plan with a 12.5% ownership trigger (see Note 9) in response to the rapid accumulation of the Company’s stock by this stockholder.
The
stockholder’s Complaint requests, among other items, that the Court find that (a) the defendants breached their financial duties,
(b) undo the Company’s rejection of the stockholder’s nominations for the Company’s Board so that the stockholder’s
nominees can be included on the ballot for potential election at the Company’s upcoming 2026 annual meeting, (c) prohibit holders
of shares issued in connection with March Equity Offering from being eligible to vote such shares for directors at the Company’s
upcoming 2026 annual meeting, and (d) award damages and other monetary relief for the harm caused by the March 2026 equity issuance, together
with pre-judgment and post-judgment interest.
Discovery
for this matter has begun and a tentative trial date has been scheduled to start on June 30, 2026. The Company intends to vigorously defend
itself and the Board against the Complaint for the benefit of the stockholders.
From time to time in the ordinary
course of our business, we may be involved in other legal proceedings, the outcomes of which may not be determinable. The results of litigation
are inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation,
require significant amounts of management time and result in diversion of significant resources. We are not able to estimate an aggregate
amount or range of reasonably possible losses for those legal matters for which losses are not probable and estimable. We have insurance
policies covering potential losses where such coverage is cost effective.
## ITEM 1A. RISK FACTORS
You should carefully review and
consider the information regarding certain factors that could materially affect our business, financial condition or future results included
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 27, 2026 (as amended by Form
10-K/A filed with the SEC on April 20, 2026).
42
## ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Except as previously reported
on Current Reports on Form 8-K filed by the Company with the SEC, we did not sell any equity securities during the period covered by the
report that were not registered under the Securities Act.
The
following table provides information relating to the Company’s purchases of our common stock during the three months ended March
31, 2026 in accordance with Item 703 of Regulation S-K:
| Period | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1) | (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Program |
| --- | --- | --- |
| January 1, 2026 – January 21, 2026 | 336,252 | 52,614,838 |
| February 1, 2026 – February 28, 2026 | 4,643,727 | 84,005,685 |
| March 1, 2026 – March 31, 2026 | 5,449,684 | 60,009,152 |
| Three Month period ended March 31, 2026 | 10,429,663 | $60,009,152 |
(1) On July 24, 2025, the Board approved a $100 million common stock repurchase program effective through July 24, 2027, which was increased by the Board to $150 million on October 10, 2025, and further increased by the Board to $200 million on February 2, 2026), subject to extension or earlier termination by the Board at any time. Total repurchase authority remaining under the stock repurchase program was $50.3 million as of May 7, 2026.
## ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
## ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
## ITEM 5. OTHER INFORMATION
During
the quarter ended March 31, 2026, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or
non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.
43
## ITEM 6. EXHIBITS
**INDEX TO EXHIBITS**
| Exhibit Number | Description |
| --- | --- |
| 3.1 | Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to exhibit 3.1 of the Form 8-K filed October 8, 2021) |
| 3.2 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to exhibit 3.1 of the Form 8-K filed June 15, 2023) |
| 3.3 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to exhibit 3.1 of the Form 8-K filed October 16, 2023) |
| 3.4 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to exhibit 3.1 of the Form 8-K filed February 5, 2024) |
| 3.5 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to exhibit 3.1 of the Form 8-K filed June 7, 2024 |
| 3.6 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to exhibit 3.1 of the Form 8-K filed November 8, 2024) |
| 3.7 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to exhibit 3.1 of the Form 8-K filed June 12, 2025) |
| 3.8 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to exhibit 3.1 of the Form 8-K filed July 29, 2025) |
| 3.9 | Third Amended and Restated Bylaws of the Registrant (incorporated by reference to exhibit 3.2 of the Form 8-K filed July 29, 2025) |
| 3.10 | Certificate of Designations designating Series A Preferred Stock of Empery Digital Inc., as filed with the Delaware Secretary of State on February 3, 2026 (incorporated by reference to Exhibit 3.1 of the Form 8-K filed on February 3, 2026) |
| 4.1 | Rights Agreement, dated as of February 3, 2026, between Empery Digital Inc. and Computershare Trust Company, N.A., as rights agent (incorporated by reference to Exhibit 4.1 of the Form 8-K filed on February 3, 2026) |
| 4.2 | Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 of the Form 8-K filed on March 23, 2026) |
| 4.3 | Form of Common Warrant (incorporated by reference to Exhibit 4.2 of the Form 8-K filed on March 23, 2026) |
44
| 10.1 | Rights Agreement, dated as of February 3, 2026, between Empery Digital Inc. and Computershare Trust Company, N.A., as rights agent (incorporated by reference to Exhibit 4.1 of the Form 8-K filed on February 3, 2026) |
| --- | --- |
| 10.2 | Amendment No. 1 to Master Loan Agreement, dated February 10, 2026, between the Company and Two Prime Lending Limited (incorporated by reference to Exhibit 10.1 of the Form 8-K filed on February 11, 2026) |
| 10.3 | Securities Purchase Agreement, dated March 23, 2026, by and between the Company and the investors named therein (incorporated by reference to Exhibit 10.1 of the Form 8-K filed on March 23, 2026) |
| 31.1* | Certification of the Co-Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 |
| 31.2* | Certification of the Co-Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 |
| 31.3* | Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 |
| 32.1*(1) | Certification of the Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2*(1) | Certification of the Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.3*(1) | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted in inline XBRL, and included in exhibit 101). |
\* Filed herewith.
(1) The certifications on Exhibit 32 hereto are deemed not “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
45
**SIGNATURES**
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
**EMPERY DIGITAL INC.**
**SIGNATURE** **TITLE** **DATE**
/s/ Ryan Lane Co-Chief Executive Officer and Director May 8, 2026
Ryan Lane (principal executive officer)
/s/ John Kim Co-Chief Executive Officer and Director May 8, 2026
John Kim
/s/ Greg Endo Chief Financial Officer May 8, 2026
Greg Endo (principal financial and accounting officer)
46