EMPD 10-Q
Empery Digital Inc. (EMPD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in Its Charter)
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(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices) | (Zip Code) |
(
(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 |
| The |
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.
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).
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 ☐ |
| 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 shares of common stock outstanding at November 10, 2025.
TABLE OF CONTENTS
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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.
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PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMPERY DIGITAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2025 AND DECEMBER 31, 2024
(Unaudited)
September 30, 2025 | December 31, 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Certificate of deposit | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||
| Inventory | ||||||||
| Inventory deposits | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Long-term assets: | ||||||||
| Digital assets | ||||||||
| Digital assets restricted by lenders as collateral for loans | ||||||||
| Property, equipment, and intangible asset, net | ||||||||
| Other long-term assets | ||||||||
| Right-of-use assets - operating leases | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Vendor settlements - short-term | ||||||||
| Term loan | ||||||||
| Current portion of notes payable | ||||||||
| Warrant liabilities | ||||||||
| Right-of-use operating lease liabilities - short-term | ||||||||
| Customer deposits | ||||||||
| Total current liabilities | ||||||||
| Notes payable, net of current portion | ||||||||
| Vendor settlements - long-term | ||||||||
| Right-of-use operating lease liabilities - long-term | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock: $ par value, shares authorized, shares designated, shares issued and outstanding as of September 30, 2025 and December 31, 2024 | ||||||||
| Common stock: $ par value, shares authorized, shares issued and outstanding as of September 30, 2025 and shares issued and outstanding as of December 31, 2024 | ||||||||
| Treasury stock | ( | ) | ||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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EMPERY DIGITAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2025 AND 2024
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gross margin | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Product development | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Unrealized loss on digital assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense), net | ( | ) | ||||||||||||||
| Loss on repayment of credit facility | ( | ) | ( | ) | ||||||||||||
| Loss on conversion and extinguishment of Convertible Notes | ( | ) | ||||||||||||||
| Loss on repayment of May 2024 Notes | ( | ) | ( | ) | ||||||||||||
| Gain (loss) on change in fair value of financial liabilities | ( | ) | ||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share – basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share – diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding – basic | ||||||||||||||||
| Weighted average common shares outstanding – diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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EMPERY DIGITAL INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025
(Unaudited)
| Common stock | Treasury stock | Additional | ||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | paid-in capital | Accumulated deficit | Total | ||||||||||||||||||||||
| Balance at January 1, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Issuance of common stock for exercises of pre-funded warrants | – | ( | ) | |||||||||||||||||||||||||
| Issuance of common stock from the At the Money offering, net of issuance costs of $ | – | |||||||||||||||||||||||||||
| Issuance of common stock and pre-funded warrants, net of issuance costs of $ | – | |||||||||||||||||||||||||||
| Issuance of common stock for disputed shares from November 2024 reverse stock split (see Note 2) | – | |||||||||||||||||||||||||||
| Purchase fractional shares | ( | ) | – | ( | ) | ( | ) | |||||||||||||||||||||
| Exchange of common stock for pre-funded warrants | ( | ) | – | |||||||||||||||||||||||||
| Issuance of common stock and pre-funded warrants, net of issuance costs of $ | – | |||||||||||||||||||||||||||
| Issuance of common stock for exercises of warrants | – | |||||||||||||||||||||||||||
| Stock-based compensation | – | – | ||||||||||||||||||||||||||
| Repurchases of common stock for treasury stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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EMPERY DIGITAL INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024
(Unaudited)
Series A Convertible Preferred Stock | Common stock | Additional | ||||||||||||||||||||||||||
| Number of Shares | Amount | Number Shares | Amount | paid -in capital | Accumulated deficit | Total | ||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Issuance of common stock for exercise of pre-funded warrants | – | |||||||||||||||||||||||||||
| Issuance of common stock for exercise of Series A warrants | – | |||||||||||||||||||||||||||
| Proceeds received for exercise of buydown warrants | – | |||||||||||||||||||||||||||
| Common stock issued for conversion of convertible notes | – | |||||||||||||||||||||||||||
| Conversion of Convertible Notes | – | |||||||||||||||||||||||||||
| Conversion of Preferred Stock for common stock | ( | ) | ||||||||||||||||||||||||||
| Issuance of common stock for exercise of Series B Warrants | – | |||||||||||||||||||||||||||
| Reclassification of warrant liability to equity | – | – | ||||||||||||||||||||||||||
| Proceeds received for Issuance of warrants with May 2024 Notes, net of issuance costs of $ | – | – | ||||||||||||||||||||||||||
| Issuance of common stock and pre-funded warrants, net of issuance costs of $ | – | |||||||||||||||||||||||||||
| Stock-based compensation | – | – | ||||||||||||||||||||||||||
| Common stock issued for reverse stock split due to rounding | – | |||||||||||||||||||||||||||
| Net loss | – | – | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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EMPERY DIGITAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025
AND 2024
(Unaudited)
| September 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Cash flow from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Unrealized loss on digital assets | ||||||||
| Loss on repayment of credit facility | ||||||||
| Loss on repayment of May 2024 Notes | ||||||||
| Loss on extinguishment of convertible notes | ||||||||
| (Gain) loss on change in fair value of financial liabilities | ( | ) | ||||||
| Noncash interest income on certificate of deposit | ( | ) | ||||||
| Loss on conversion of notes to common stock | ||||||||
| Stock-based compensation | ||||||||
| Loss on write down of inventory and inventory deposits | ||||||||
| Loss on sale/write off of property & equipment | ||||||||
| Bad debt (recovery) expense | ( | ) | ||||||
| Non-cash interest expense | ||||||||
| Amortization of right-of-use assets | ||||||||
| Depreciation and amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Inventory deposits | ( | ) | ( | ) | ||||
| Prepaid assets and other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities and vendor settlements | ( | ) | ||||||
| Right-of-use liabilities - operating leases | ( | ) | ( | ) | ||||
| Customer deposits | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flow from investing activities: | ||||||||
| Purchases of digital assets | ( | ) | ||||||
| Proceeds paid for website development | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from sale of property and equipment | ||||||||
| Proceeds from insurance settlement | ||||||||
| Purchase of certificate of deposit | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flow from financing activities: | ||||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Proceeds from credit facility, net of issuance costs of $ | ||||||||
| Repayment of credit facility | ( | ) | ||||||
| Proceeds from term loan, net of issuance costs of $ | ||||||||
| Proceeds from issuance of common stock units and pre-funded warrant units from February 2025 public offering, net of issuance costs of $ | ||||||||
| Proceeds from issuance of common stock and pre-funded warrants from July 2025 private placement, net of issuance costs of $ | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from the issuance of common stock issued from the At the Market Offering, net of issuance costs of $ | ||||||||
| Repurchase of common stock | ( | ) | ||||||
| Repurchase of fractional shares | ( | ) | ||||||
| Proceeds from issuance of common stock units and pre-funded warrant units from July 2024 public offering, net of issuance costs of $ | ||||||||
| Repayment of May 2024 Notes | ( | ) | ||||||
| Proceeds from issuance of May 2024 Notes and warrants, net of issuance costs of $ | ||||||||
| Proceeds from exercise of Series B Warrants | ||||||||
| Proceeds from exercise of buy down warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | ||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | $ | ||||||
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SUPPLEMENTAL CASH FLOW INFORMATION
| 2025 | 2024 | |||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash transactions | ||||||||
| Issuance of common stock for exercise of pre-funded warrants | $ | $ | ||||||
| Issuance of common stock for digital assets | $ | $ | ||||||
| Transfer of inventory to property & equipment | $ | $ | ||||||
| Transfer of digital assets to lender for collateral | $ | $ | ||||||
| Recognition of right of use asset and liability - operating lease | $ | $ | ||||||
| Conversion of Convertible Notes for common stock | $ | $ | ||||||
| Exchange of Convertible Notes for Preferred Stock | $ | $ | ||||||
| Reclassification of warrant liability to equity for cashless exercise of Series A Warrants | $ | $ | ||||||
| Reclassification of warrant liability to equity for modification of Series B Warrants | $ | $ | ||||||
| Exchange of property & equipment in lieu of payments due for inventory purchases | $ | |||||||
| Exchange of finished goods inventory with vendor for raw materials inventory | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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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.
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. 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.
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 for selling vehicles and accessories. The Company intends to rename Volcon LLC in the future.
Going Concern
The accompanying interim 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.
In February and March 2024, certain holders of
the convertible notes issued by the Company in May 2023 (the “May 2023 Convertible Notes”) converted approximately $
As discussed further in Note 8 below, on May 22,
2024, the Company issued Senior Notes with an aggregate principal amount of $
On July 12, 2024, the Company sold shares
of the Company’s common stock at a purchase price of $233.60 per share and pre-funded warrants to purchase shares of common
stock at $233.60 per pre-funded warrant. The Company received net proceeds of $
In October 2024, the Company established an At
the Market equity offering program (the “ATM”) whereby the Company can sell up to $
On February 6, 2025, the Company sold common
stock units (each composing of one share of common stock and one common warrant to purchase one share of common stock) and pre-funded
warrant units (each comprising of one pre funded warrant to purchase one share of common stock and one common warrant to purchase one
share of common stock) at $ per unit in an underwritten public offering (each as adjusted for the Company’s
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On July 21, 2025 the Company completed private
placements with certain institutional and accredited investors (“Private Placements”) for the sale of shares of
its common stock at a price of $ per share, and pre-funded warrants to purchase an aggregate of
Management anticipates that our cash on hand as of September 30, 2025, plus cash expected to be generated from operations and premium from derivative trading and the cash received from the Private Placements 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 nine months ended September 30, 2025.
Nasdaq Compliance
On July 5, 2023, the Company received a notice from The Nasdaq Stock Market LLC (“Nasdaq”) that it was not in compliance with Nasdaq’s Listing Rule 5550(b)(2), which requires that it maintain a market value of listed securities (“MVLS”) of at least $35 million. MVLS is calculated by multiplying the Company’s shares outstanding by the closing price of its common stock. On December 19, 2023, the Company received a notice from Nasdaq that it was not in compliance with Nasdaq’s Listing Rule 5550(a)(2), as the minimum bid price of its common stock had been below $1 per share for 30 consecutive business days.
On December 26, 2023, the Company was notified by Nasdaq that it was not in compliance with Nasdaq’s Listing Rule 5810(c)(3)(A)(iii) as the closing bid price of our common stock had been below $0.10 for ten consecutive trading days from December 11, 2023 through December 22, 2023 and was subject to delisting on January 2, 2024. On January 4, 2024, the Company received notice from Nasdaq that it did not meet the MVLS requirement and it was subject to delisting. The Company submitted a hearing request to Nasdaq’s Hearings Department for both of these matters, which stayed the suspension of the Company’s common stock. The Company participated in a hearing with Nasdaq’s Hearings Department on March 26, 2024 and on April 2, 2024, they informed the Company that the Company had until June 24, 2024 to regain compliance with the above listing rules.
On June 11, 2024, the Company received a notice from Nasdaq that the Company no longer met the minimum 500,000 publicly held shares requirement for Nasdaq and, as such, it no longer complied with Listing Rule 5550(a)(4). Furthermore, the notice indicated that this matter would serve as an additional basis for delisting the Company’s securities from Nasdaq, that the Panel would consider this matter in their decision regarding the Company’s continued listing on Nasdaq, and that the Company should present its views with respect to this additional deficiency to the Panel in writing no later than June 18, 2024. On June 18, 2024, the Company submitted a letter to Nasdaq notifying them that the Company was in compliance with Listing Rule 5550(a)(4) due to the issuance of additional shares of common stock from the conversion of preferred stock to common stock by certain Preferred Stockholders.
On July 17, 2024, Nasdaq informed the Company that it had regained compliance with the above listing rules but will continue to be monitored for ongoing compliance.
On May 13, 2025, the Company received a notice from Nasdaq that it was not in compliance with Nasdaq’s Listing Rule 5550(a)(2), as the minimum bid price of its common stock had been below $1 per share for 30 consecutive business days. The Company submitted a hearing request to Nasdaq’s Hearings Department for this matter, which stayed the suspension of the Company’s common stock. On June 11, 2025, the Company completed a 1-for-8 reverse stock split. The Company participated in a hearing with Nasdaq’s Hearings Department on June 24, 2025.
On July 17, 2025, Nasdaq informed the Company that it had regained compliance with the above listing rules but will need to continue to remain in compliance with the minimum bid price rule through November 10, 2025 in order to avoid delisting. Through November 10, 2025, the Company has remained in compliance with the minimum bid price rule.
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, 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.
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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
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.
Tariffs imposed by the current U.S. administration continue to impact the Company’s cost for vehicles and parts manufactured in China, Thailand and Vietnam. With the expected Vietnam tariff rate of 20%, the Company can continue sourcing from Vietnam, though it would likely result in a modest reduction in margins and a corresponding increase in retail pricing. 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 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, 2024, which was filed with the Securities and Exchange Commission (“SEC”) on March 31, 2025. 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 consolidated financial statements include all adjustments necessary to present fairly our interim consolidated financial statements as of September 30, 2025, and for the three and nine months ended September 30, 2025 and 2024. 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, 2024.
Basis of Presentation
The accompanying 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.
On June 11, 2025, the Company completed a 1-for-8 reverse stock split. All share and per share amounts previously disclosed have been
updated to reflect the impact of this reverse split. See Note 11 for further discussion.
Per the terms of the
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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 “Unrealized loss on digital assets”, within operating expenses in the Company’s 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
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 January 8, 2024, the Company notified the manufacturer
of the Volcon Youth motorcycles that it was terminating the co-branding and distribution agreement with them due to lower than anticipated
sales of these units. In March 2024, the Company agreed to allow the manufacturer to keep all fully paid for units manufactured and held
by the manufacturer, cease selling the Volcon Youth motorcycles as of June 30, 2024, and pay cash of $
The settlement was recorded in the financial statements
for the year ended December 31, 2023. On October 2, 2024, the Company and the manufacturer amended the settlement agreement and the Company
agreed to pay the manufacturer $
In June 2024, the Company was notified by the
manufacturer of a suspension component for the Stag utility terrain vehicle (“UTV”) that due to the Company’s initial
production forecast provided by the third party manufacturer of the Stag, the vendor had acquired raw materials to fulfill several months’
worth of this component needed for the forecast. Although the Company had provided updated forecasts to the third party manufacturer of
the Stag, the revised forecasts were not provided timely to this vendor. The Company entered into an agreement to pay for the excess raw
materials by making weekly payments of $13,791 through February 2026 and to purchase remaining finished goods. The
Company recorded an expense of $
On December
6, 2024, the Company entered into a Settlement Agreement and Mutual Release (“Agreement”) with 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 the manufacturer a termination
fee of $
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption.
| 13 |
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 2023-7”), 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 operating segment and the Company’s Co-CEOs are the 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 unrealized gain or 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 resources” 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.
| Three Months Ended September 30, 2025 | ||||||||||||
| Operating Segment | Corporate & Other | Total | ||||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of goods sold | ( | ) | ( | ) | ||||||||
| Gross margin | ( | ) | ( | ) | ||||||||
| Operating expenses: | ||||||||||||
| Sales and marketing | ||||||||||||
| Product development | ||||||||||||
| General and administrative | ||||||||||||
| Corporate | ||||||||||||
| Digital asset custody fee | ||||||||||||
| Share-based compensation expense | ||||||||||||
| Unrealized loss on digital assets | ||||||||||||
| Total operating expenses | ||||||||||||
| Other income | ||||||||||||
| Loss on repayment of credit facility | ( | ) | ( | ) | ||||||||
| Gain on change in fair value of financial liabilities | ||||||||||||
| Interest income | ||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| 14 |
| Nine Months Ended September 30, 2025 | ||||||||||||
| Operating Segment | Corporate & Other | Total | ||||||||||
| Revenue | $ | $ | $ | |||||||||
| Cost of goods sold | ( | ) | ( | ) | ||||||||
| Gross margin | ( | ) | ( | ) | ||||||||
| Operating expenses: | ||||||||||||
| Sales and marketing | ||||||||||||
| Product development | ||||||||||||
| General and administrative | ||||||||||||
| Corporate | ||||||||||||
| Digital asset custody fee | ||||||||||||
| Share-based compensation expense | ||||||||||||
| Unrealized loss on digital assets | ||||||||||||
| Total operating expenses | ||||||||||||
| Other income | ||||||||||||
| Loss on repayment of credit facility | ( | ) | ( | ) | ||||||||
| Gain on change in fair value of financial liabilities | ||||||||||||
| Interest income | ||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
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 (“CODM”) was the CEO, who used the consolidated statement of operations to assess financial performance. For the three and nine month periods ended September 30, 2024, see the condensed consolidated statement of operations above.
NOTE 4 – DIGITAL ASSETS
As of September 30, 2025, the
Company’s investment in digital assets comprises
The following table summarizes the Company’s digital assets held as of September 30, 2025, and related activity for both the three and nine months ended September 30, 2025.
| Bitcoin at September 30, 2025 | ||||
| Beginning Balance | $ | |||
| Cost of Bitcoin purchased | ||||
| Bitcoin received from sales of common stock or pre-funded warrants | ||||
| Unrealized loss on Bitcoin | ( | ) | ||
| Total Bitcoin carrying value at September 30, 2025 | ||||
| Less fair value of Bitcoin restricted by lenders as collateral for loans | ( | ) | ||
| Digital Assets | $ |
| 15 |
The majority of the Company’s assets are concentrated in its Bitcoin holdings, including Bitcoin restricted by lenders for borrowing arrangements. Bitcoin is a digital asset, which is a novel asset class that is subject to significant legal, commercial, regulatory and technical uncertainty. Holding Bitcoin does not generate any cash flows and involves custodial fees and other costs. Additionally, the price of Bitcoin has historically experienced significant price volatility, and a significant decrease in the price of Bitcoin would adversely affect the Company’s financial condition and results of operations. The Company’s strategy of acquiring and holding Bitcoin also exposes it to counterparty risks with respect to the custody of its Bitcoin, 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 is evaluating which custodians it should utilize in order to limit the concentration of holding its digital assets within one or a few custodians. As of September 30, 2025, the Company has two custodians including one holding the majority of the Company’s Bitcoin in an account that is not digitally connected to the internet, also known as cold storage.
The Company also enters into short-term put and
call contracts for Bitcoin to generate income on its Bitcoin holdings. As of September 30, 2025, there were no such outstanding contracts.
During the three and nine months ended September 30, 2025, the Company generated income of $
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 $
On September 18, 2025, the Company and the third
party lender amended the MRA and increased the available borrowings by an additional $
| 16 |
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
The Company recognized a loss on the repayment
of the MRA totaling $
Uncommitted Revolving Credit Agreement
On September 7, 2025, the Company entered into
an uncommitted revolving credit agreement with a different third party pursuant to which the Company may borrow either in U.S. dollars
or digital currency in an aggregate notional amount not to exceed $
No borrowings were made by the Company on the Revolving Credit Facility and the Company terminated this agreement on October 29, 2025.
See Note 15 for discussion of an additional loan agreement entered into on October 12, 2025.
NOTE 6 – NOTES PAYABLE
In March 2023, the Company entered into a financing
arrangement to purchase a vehicle with an interest rate of
The following table provides the maturities of notes payable as of September 30, 2025:
| Remainder of 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total future payments | ||||
| Less: Interest | ( | ) | ||
| Total notes payable | ||||
| Less current portion | ( | ) | ||
| Long-term notes payable | $ | |||
| 17 |
NOTE 7 - CONVERTIBLE NOTES
On May 24, 2023, the Company issued Senior Convertible Notes (the “New Notes”) with an aggregate principal amount of $
The holders of the New Notes also received fully
vested warrants (the “New Warrants”) to purchase
Concurrent with the issuance of the New Notes,
the Company exchanged the Convertible Notes into two new notes, Series A Notes and Series B Notes both due February 24, 2024 (collectively
the “Exchange Notes” and collectively with the New Notes the “May 2023 Notes”). The aggregate principal amount
of Series A Notes was $
Events of default for the May 2023 Notes were defined in the note agreements and the Company was in compliance with all covenants until the May 2023 Notes were exchanged for Series A Convertible Preferred Stock (“Preferred Stock”) on March 4, 2024 as discussed below.
The Company recognized interest expense of $
The Company also exchanged the Note Warrants with an exercise price of $4,104,000 per share issued with the Convertible Notes in August 2022 for warrants which had an initial exercise price of $1,569,600 per share (the “Exchange Warrants”) and was adjusted to $1,080,000 per share upon stockholder approval received on August 3, 2023. The Exchange Warrants expire on August 24, 2027.
The conversion prices of the Exchange Notes, and the exercise prices of the New Warrants and Exchange Warrants (collectively the “May 2023 Warrants”) were subject to further adjustment in the event that the Company issues additional common stock, stock options, warrants or convertible notes with prices below the exercise price in effect at the time of issuance, or completes a stock split, reverse stock split or recapitalization where the lowest day’s VWAP of the Company’s stock price is below the then exercise price in the five days following the stock split with a floor of $0.22 per share.
In September 2023, the Company and the holders
of the Exchange Warrants entered into a warrant inducement agreement whereby the Exchange Warrant holders agreed to exercise Exchange
Warrants at a reduced exercise price of $504,000 per share. The Company issued the holders two warrants (“Reload Warrants”)
with an initial exercise price of $
The May 2023 Warrants and Reload Warrants contained certain conversion limitations, providing that a holder thereof may not exercise such warrants to the extent that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such exercise.
During the three months ended March 31, 2024,
$
| 18 |
As a result of the exchange for Preferred Stock
in March 2024, the May 2023 Notes are no longer outstanding. The May 2023 Warrants exercise price was reduced to $
NOTE 8 - MAY 2024 SENIOR NOTES
On May 22, 2024, the Company issued Senior Notes
with an aggregate principal amount of $
NOTE 9 - WARRANT LIABILITIES
Series A and Series B Warrants
As discussed in Note 11 below, the Company issued Series A and Series B Warrants (the “November 2023 Warrants”) in connection with the sale of common units and pre-funded warrant units. Under the terms of the November 2023 Warrants, the number and exercise price are subject to adjustment if the Company completes certain transactions specified in these warrant agreements. In addition, the Series A Warrants have a cashless exercise provision, if approved by stockholders, which would allow holders to cashless exercise one warrant for three shares of the Company’s common stock. Such adjustments were 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. In the three months ended March 31, 2024, the Company recognized a loss of $
In the nine months ended September 30, 2024, the
Company recognized a loss of $
The following represents the activity associated with the Series A Warrants for the nine months ended September 30, 2025:
| Fair value on January 1, 2025 | $ | |||
| Gain on change in fair value | ( | ) | ||
| Balance at September 30, 2025 | $ | |||
| 19 |
NOTE 10 – 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
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 and nine months ended September 30, 2025, the Company has recognized custodial fee expense
of $
Mr. Rohan Chauhan, a member of the Company’s board of directors (the “Board”), is the Director of Strategy at Gemini.
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 $
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 $
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 $
| 20 |
All Board members, other than Mr. Lane and Mr.
John Kim, also Co-CEO and director, receive an annual fee of $
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 $
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 $
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 $
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 $
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 $
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.
| 21 |
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 $
Former Employees
On January 13, 2024, the Company’s former
Chief Executive Officer (“CEO”), Jordan Davis, resigned his employment with the Company effective February 2, 2024. The Company
entered into a 30-day consulting agreement with Mr. Davis and paid him $
On February 23, 2024, Katherine Hale resigned
her position as Chief Marketing Officer. Ms. Hale was provided a severance amount of $
In December 2022, the Company entered into an
employment agreement with Christian Okonsky, one of the Company’s founders and former Chairman of the Board, whereby Mr. Okonsky
became an employee on January 2, 2023 as Chief Technology Officer with an annual salary of $
In March 2024, the Company entered into a consulting
agreement with Mr. Okonsky pursuant to which he was entitled to a monthly fee of $
Highbridge Consultants, LLC
On August 28, 2020, the Company entered into a consulting agreement (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 below) for an aggregate gross sales price of $100 million or more, the entity will receive a cash payment equal to 1% of such gross sales price. For the purposes of the Highbridge Consulting Agreement, “Fundamental Transaction” means any of the following: (i) a consolidation or merger involving the Company if the holders of the voting securities of the Company that are outstanding immediately prior to the consummation of such consolidation or merger do not, immediately after the consummation of such consolidation or merger, hold voting securities that collectively possess at least a majority of the voting power of all the outstanding securities of the surviving entity of such consolidation or merger or such surviving entity’s parent entity; (ii) a transfer or issuance (in a single transaction or series of related transactions) by one or more of the Company and its stockholders to one person or to any group of persons acting in concert, of shares of the Company’s capital stock then collectively possessing 50% or more of the voting power of all then outstanding shares of the Company’s capital stock (computed on an as-converted to common stock basis); or (iii) any sale, license, lease, assignment or other disposition of all or substantially all of the assets of the Company. Furthermore, commencing upon the completion of the Company’s initial public offering of the shares of our common stock, if the Company’s market capitalization exceeds $300 million for a period of 21 consecutive trading days, the entity will receive an additional cash payment equal to $15 million; provided that the Company will have the right, in its sole discretion, to make the foregoing $15 million payment by the issuance of shares of the Company’s common stock. The foregoing amounts will be payable to the entity if the above milestones occur any time prior to the ten year anniversary of the original Highbridge Consulting Agreement, or August 28, 2030.
| 22 |
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, (as amended on or about March 25, 2021), 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 million, which was paid and expensed in the three and nine months ended September 30, 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 $
NOTE 11 – STOCKHOLDERS’ EQUITY
The Company is authorized to issue shares of common stock and shares of preferred stock both with a par value of $. The specific rights of the preferred stock, when so designated, shall be determined by the Board.
On June 11, 2025, the Company completed a
Common Stock
On July 12, 2024, the Company consummated a registered
direct offering pursuant to which it offered and sold shares of the Company’s common stock at a purchase price of $
per share and pre-funded warrants to purchase shares of common stock at $ per pre-funded warrant. The Company received net
proceeds of $
On October 15, 2024, the Company and a holder of the Company’s common stock reached an agreement for the return by the holder of shares of common stock to the Company. The holder had exceeded the percentage of shares that they were permitted to hold of the Company’s common stock. In exchange for the return of the shares the Company issued a pre-funded warrant for shares. These pre-funded warrants were exercised as of February 2025.
On February 6, 2025, the Company consummated
an underwritten public offering pursuant to which it received net proceeds of $
On June 24, 2025, the Company and certain EAM entities who hold the Company’s common stock reached an agreement for the return by the holders of shares of common stock to the Company. In exchange for the return of the shares, the Company issued these EAM entities pre-funded warrants for shares of common stock.
| 23 |
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 shares of common stock of the Company,
par value $ per share and pre-funded warrants to purchase up to an aggregate of
The unfunded exercise price of each pre-funded
warrant is equal to $
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 November 10, 2025.
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 (“Rule 144”), 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.
At the Market Program
As discussed above, on October 18, 2024, the
Company established the ATM under which it can sell up to $
During the nine months ended September 30, 2025,
the Company received net proceeds of $
| 24 |
Common Stock Buy Back Programs
On March 21, 2025, the Company’s Board approved
a stock buyback program whereby the Company could repurchase up to $
On July 24, 2025, the Board approved a $
Through September 30, 2025, the Company has repurchased
shares of common stock under the new repurchase program at an average purchase price of $7.53 per share with cash of $
The shares repurchased under both buyback programs and cash paid are presented as treasury stock in the condensed consolidated balance sheet as of September 30, 2025.
Series A Convertible Preferred Stock
On March 4, 2024, the Company designated
shares of Preferred Stock as Series A Convertible Preferred Stock with a par value of $ per share and exchanged the remaining May
2023 Notes (principal of $
The Preferred Stock conversion price per share
is subject to adjustment in the event of a stock split based on the lowest 5-day daily VWAP in the five days subsequent to the completion
of a stock split. As a result of the reverse stock split completed on June 6, 2024, the conversion price of the Preferred Stock was adjusted
to $
As of December 31, 2024, all of the Preferred
Stock (
Warrants
November 2023 Common Units and Pre-Funded Warrant Units
On November 17, 2023, the Company sold (i) common units (“Common Units”), each consisting of one share of the Company’s common stock, a Series A warrant to purchase one share of common stock at an initial exercise price of $158,400 per share or pursuant to an alternative cashless exercise option (described below), which warrant will expire on the five-year anniversary of the original issuance date (the “Series A Warrants”) and a Series B warrant to purchase one share of common stock at an initial exercise price of $241,920 per share, which warrant will expire on the five-year anniversary of the original issuance date (the “Series B Warrants” and together with the Series A Warrants, the “Warrants”); and (ii) pre-funded units (the “Pre-funded Units” and together with the Common Units, the “Units”), each consisting of one pre-funded warrant to purchase one share of common stock (the “Pre-funded Warrants”), a Series A Warrant and a Series B Warrant. The purchase price of each Common Unit was $120,960, and the purchase price of each Pre-Funded Unit was $120,957.12. The Pre-Funded Warrants were immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. All of the Pre-Funded Warrants were exercised by January 9, 2024.
| 25 |
In addition, the Company granted the underwriter a 45-day option to purchase additional shares of common stock and/or Pre-Funded Warrants, representing up to 15% of the number of common stock and Pre-Funded Warrants sold in the Public Offering, and/or additional three Series A Warrants representing up to 15% of the Series A Warrants sold in the Public Offering, and/or additional three Series B Warrants representing up to 15% of the Series B Warrants sold in the Public Offering solely to cover over-allotments, if any. The underwriter partially exercised its over-allotment option with respect to three Series A Warrants and Series B Warrants. A total of each of Series A and B Warrants were issued in the transaction.
Series A Warrants
Each Series A Warrant had an initial exercise
price per share equal to $
Share Combination Event Adjustments
Conditioned upon the receipt of the Warrant Stockholder Approval at a required special meeting of stockholders (“Special Meeting”), if at any time on or after the date of issuance there occurs any 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.
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.
The number of Series A Warrants were adjusted
for the closing of the Private Placements on July 21, 2025, reverse stock split completed on June 11, 2025 and as a result of the February
6, 2025 common stock unit and pre-funded warrant unit offering in accordance with the Share Event provision noted above. As of September
30, 2025,
Series B Warrants
Each Series B Warrant offered had an initial exercise
price per share equal to $
The number of Series B Warrants and exercise prices were adjusted for the reverse stock split completed on February 2, 2024 and when the Company exchanged the May 2023 Notes for Series A Convertible Preferred Stock in accordance with the Share Event provisions of the Series B Warrants.
| 26 |
On May 17, 2024, the Company entered into separate warrant amendment agreements (collectively, the “Warrant Amendment”) with the holders of a majority-in-interest of the holders of the Company’s Series B warrants issued November 2023. Pursuant to the Warrant Amendment, all outstanding Series B Warrants were amended to delete the following sections: (i) a provision providing for the adjustment of the exercise price and number of shares issuable pursuant to the Series B Warrants if the Company completed a future offering at a price per share less the exercise price of the Series B Warrants then in effect; and (ii) a provision providing for the adjustment of the exercise price and number of shares issuable pursuant to the Series B Warrants if price of the Company’s common stock after the completion of a share split, share dividend, share combination, recapitalization or other similar transaction is less the exercise price of the Series B Warrants then in effect. In addition, the Warrant Amendment provides that the holders may also exercise the Series B Warrants on a cashless basis and receive an aggregate number of shares equal the product of the aggregate number of shares of common stock that would be issuable upon exercise of the Series B Warrants by means of a cashless exercise rather than a cash exercise, multiplied by 0.81.
On May 17, 2024, after giving effect to the Warrant
Amendment, the Company and certain holders of Series B Warrants agreed to purchase an aggregate of
As of September 30, 2025,
Other Warrants
As discussed in Note 10 above, the Company issued
warrants to purchase up to
The Company issued
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 $ and the Private Placements priced at $, 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 $ 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:
| Company stock price on valuation date | $ | ||
| Volatility | % | ||
| Risk free interest rate - 5 years | % | ||
| Risk free interest rate - 10 years | % | ||
| Dividend yield | % |
Based on the above inputs, the following fair values and derived service periods were calculated:
| Daily VWAP $10 | Daily VWAP $15 | Daily VWAP $20 | Daily VWAP $25 | Daily VWAP $30 | ||||||
| Fair value - 5 year service period | $ | $ | $ | $ | $ | |||||
| Derived service period - years | N/A | |||||||||
| Fair value - 10 year service period | $ | $ | $ | $ | $ | |||||
| Derived service period - years | N/A |
| 27 |
The Company’s highest VWAP in the period
from July 21, 2025 to September 30, 2025 was $. Therefore the first two tranches vested and the Company recognized all of the expense
for these tranches as of September 30, 2025. The Company recognized expense on the remaining unvested tranches based on the derived service
periods and number of days vesting in the period ended September 30, 2025. The Company recognized total expense of $
In addition, concurrent with the closing of the
Private Placements, the Company issued fully vested warrants to a consultant to purchase up to
As discussed in Note 7, the Company issued the
Note Warrants, which were fully vested, to purchase seven shares of the Company’s common stock at an initial exercise price of $
In May 2023, all of the Note Warrants to purchase
shares of the Company’s common stock were exchanged for Exchange Warrants to purchase shares of the Company’s common
stock with an initial exercise price of $1,569,600 per share (which was adjusted to $1,080,000 per share upon stockholder approval which
was received on August 3, 2023). The Exchange Warrants expire
Also in May 2023, in connection with the issuance of the New Notes, the Company also issued New Warrants (together with the Exchange Warrants the “May 2023 Warrants”) to purchase shares of common stock at an initial exercise price of $1,569,600 (which was adjusted to $1,080,000 per share upon stockholder approval which was received on August 3, 2023). Subsequent to the adjustment of the exercise price for the reverse splits and issuance of Preferred Stock discussed above, on November 8, 2024 the holder of these warrants notified the Company that it was forfeiting these warrants.
As noted below, two of the Exchange Warrants were
exercised at a price of $504,000 per share and two Reload Warrants were issued with an exercise price of $
Warrant Inducements
As discussed in Note 7, the Company issued the
May 2024 Note Warrants on May 22, 2024, which are fully vested, to purchase shares of the Company’s common stock at an exercise
price of $
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The following is the activity related to pre-funded common stock warrants during the nine months ended September 30, 2025:
| Pre- Funded Common Stock Warrants | ||||||||||||||||
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Life in years(1) | Intrinsic Value | |||||||||||||
| Outstanding at January 1, 2025 | $ | |||||||||||||||
| Purchased | $ | |||||||||||||||
| Exercised | ( | ) | $ | |||||||||||||
| Outstanding at September 30, 2025 | $ | – | $ | |||||||||||||
| Exercisable at September 30, 2025 | $ | – | $ | |||||||||||||
| (1) |
The following is the activity related to all common stock warrants, excluding pre-funded warrants, during the nine months ended September 30, 2025:
| Other Common Stock Warrants | ||||||||||||||||
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Life in years | Intrinsic Value | |||||||||||||
| Outstanding at January 1, 2025 | $ | |||||||||||||||
| Granted/purchased | $ | |||||||||||||||
| Exercised | ( | ) | $ | |||||||||||||
| Outstanding at September 30, 2025 | $ | $ | ||||||||||||||
| Exercisable at September 30, 2025 | $ | $ | ||||||||||||||
2025 Stock Plan
As discussed in Note 10, 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 stock options were granted to purchase the Company’s common stock at $ per share with a -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 September 30, 2025 was $,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. Once 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.
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Inducement Stock Options
Also in connection with the Private Placements,
the Board approved inducement stock option grants to purchase the Company’s common stock with an exercise price of $
to two executives (see Note 10 above) and one employee. These stock options have a -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 11) since the Company determined the expected life of these options is approximately years. Based on the highest
VWAP of the Company’s common stock since the Private Placements, stock options have vested as of September 30, 2025. The
Company recognized total expense of $
In August 2024, as part of the compensation package
for the Company’s Chief Sales Officer (“CSO”), the Company granted stock options outside of the 2021 Plan with
an exercise price of $. In June 2025, the Company cancelled these stock options and paid $
2021 Stock Plan
In January 2021, the Company’s Board 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 awards to employees, members of the Board and consultants (including restricted stock units issued prior to the adoption of the plan as further discussed below). The Company has reserved 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 shares available for issuance under the 2021 Plan as of September 30, 2025. 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 10 above, fully vested stock options were granted to one of the Company’s Co-CEOs and CFO to purchase a total of shares of the Company’s common stock at $ per share. The Company recognized share-based compensation of $ related to these stock options in the nine months ended September 30, 2025. On July 17, 2025, the Co-CEO and CFO amended these stock options to reset the exercise price to $ 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, which excludes the options granted under the 2025 Stock Plan noted above, for services during the nine months ended September 30, 2025:
| Common Stock Options | ||||||||||||||||
| Shares | Weighted Average Exercise Price | Weighted Average Remaining Life in years | Intrinsic Value | |||||||||||||
| Outstanding at January 1, 2025 | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Forfeited | ||||||||||||||||
| Canceled | ( | ) | $ | |||||||||||||
| Outstanding at September 30, 2025 | $ | |||||||||||||||
| Exercisable at September 30, 2025 | $ | $ | ||||||||||||||
| 30 |
Total stock-based compensation recorded for the three and nine months ended September 30, 2025 and 2024 for all stock-based compensation awards, has been recorded as follows:
Three Months September 30, 2025 | Three Months September 30, 2024 | Nine Months September 30, 2025 | Nine Months September 30, 2024 | |||||||||||||
| Cost of goods sold | $ | $ | $ | $ | ( | ) | ||||||||||
| Sales and marketing | ( | ) | ||||||||||||||
| Product development | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
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 shares during the year. 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 shares outstanding during the year. The diluted weighted average number of common shares outstanding is the basic weighted number of common shares 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.
| Three months | Three months | Nine months | Nine months | |||||||||||||
September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Denominator for basic and diluted net loss per common share - weighted average of common shares | ||||||||||||||||
| Basic and diluted net loss per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
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 shares of common stock which were issued on May 5, 2025. 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 nine months ended September 30, 2025 would be as follows:
| Denominator: | ||||
| Denominator for basic and diluted net loss per common share - weighted average of common shares | ||||
| Basic and diluted net loss per common share | $ | ) | ||
| 31 |
Common shares consisting of shares potentially dilutive as of September 30, 2025 and 2024 are as follows:
| September 30, 2025 | September 30, 2024 | |||||||
| Warrants | ||||||||
| Stock options | ||||||||
| Total | ||||||||
NOTE 14 – 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 15- SUBSEQUENT EVENTS
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, the proceeds of which shall be applied towards share repurchases by the Company. Under the MLA, the Company may borrow, in one or more draws of minimum increments of $5 million, an aggregate principal amount of up to $100 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 has 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. The interest rate applicable to all outstanding loans will be 6.50% per annum payable monthly. The Company must initially provide the Lender with BTC equal to 250% of any amount borrowed as collateral, which is subject to additional margin calls or return of collateral based on the change in BTC’s price over the term of the outstanding loans. As of November 10, 2025, the Company has taken draw term loans totaling $30 million.
On October 15, 2025, the Company entered into an agreement with Venom EV, LLC (“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 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 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. Following this divestiture, the Company will concentrate on its two-wheel business, including the launch of new products in
European markets and homologation of the Brat in Japan. The Company also plans to expand its vehicle financing operations to generate
positive cash flow by leveraging the spread between the Company’s cost of capital and interest income from vehicle financing.
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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, 2024, previously filed with the Securities and Exchange Commission. Results for the three and nine months ended September 30, 2025 are not necessarily indicative of results for the year ending December 31, 2025 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 the Company's plans to pursue a number of strategic initiatives to acquire Bitcoin and other digital assets, the Company's plans to efficiently build its BTC portfolio and reposition its powersports business, the Company’s ability and plans to increase Bitcoin per share to drive shareholder value, the Company’s ability and plans to generate income through derivatives on BTC through the use of short-term put and call contracts, the plans with respect to repurchases under the Company’s share repurchase program and financing arrangements related thereto, the proposed real time updates on the Company’s website, the Company's ability to successfully maintain the listing of our common stock on the Nasdaq Stock Market, the ability of the Company to generate positive net interest income from financing of inventory purchases, and the approval of the Company's 2025 Stock Plan.
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 change the direction of the Company; our ability to keep pace with new technology and changing market needs; the digital assets to be held by the Company; the Company’s successful implementation of its digital asset treasury strategy; changes in business, market, financial, political and regulatory conditions; risks relating to the Company’s operations and business, including the highly volatile nature of the price of Bitcoin and other cryptocurrencies; the risk that the Company’s stock price may be highly correlated to the price of the digital assets that it holds; risks related to increased competition in the industries in which the Company does and will operate; risks relating to significant legal, commercial, regulatory and technical uncertainty regarding digital assets generally; risks relating to the treatment of crypto assets for U.S. and foreign tax purpose 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, 2024, as filed with the SEC on March 31, 2025 (as amended by Form 10-K/A filed with the SEC on April 29, 2025, as amended further by Form 10-K/A filed with the SEC on April 30, 2025), our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025 and June 30, 2025, filed with the SEC on May 9, 2025 and August 12, 2025, respectively, 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.
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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 per share, for aggregate gross proceeds of approximately $501 million which includes payment in Bitcoin (“BTC”) of $28 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 million from the Private Placements (excluding the $28 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 shareholder 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 where it can sell up to $1.1 billion of common stock and since the inception of the digital asset treasury strategy through of November 10, 2025 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 and has a $1 billion shelf registration statement available to complete such offerings.
The Company also has a share repurchase program that allows it to repurchase up to $150 million of common stock and through November 10, 2025 has bought 11,082,834 shares of common stock for $81.5 million, including commissions, at an average price of $7.36. The Company has used proceeds of $80 million from two borrowing arrangements, that allow for borrowings of up to $150 million, to fund these share repurchases. Some of our BTC is held by these lenders as collateral for outstanding borrowings which we intend to repay with future equity offerings. 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. We also intend to generate income through buying and selling derivatives on BTC, including the use of short-term put and call contracts. Through September 30, 2025, the Company generated income of $287,095 from trading these put and call contracts, 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 reduce this risk. We view our BTC as long-term holdings and, although there are no restrictions to selling BTC that are not held as collateral by our lenders, we currently do not expect to sell BTC, but rather accumulate BTC when we have excess cash to deploy. As of November 10, 2025 we acquired 4,081 BTC, of which 1,980 are restricted by lenders as collateral for outstanding loan balances.
The BTC market historically has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks that are, or may be, inherent in its entirely electronic, virtual form and decentralized network. If we were required to sell BTC, we may not be able to sell our BTC at the market price as reported on the Gemini exchange (our principal market) on the date of sale, or at all.
Unrealized (gains) losses on digital assets significantly contributed to our results of operations for the three and nine months ended September 30, 2025. During these periods, unrealized loss on digital assets of $14.1 million was recorded, representing 40.9% and 34.8%, of our operating expenses for the three and nine months ended September 30, 2025, respectively.
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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.
In January 2025, we also entered into a distribution agreement with a golf cart manufacturer, Super Sonic Company Ltd. (“Super Sonic”) located in Vietnam, and a subsidiary of Odes Industry, to supply golf carts to other companies in the U. S. who sell golf carts. On September 18, 2025, we received a notice of termination from Super Sonic pursuant to which Super Sonic terminated this distribution agreement. The termination, which was effective upon receipt of the notice from Super Sonic, was affected pursuant to the terms of the Super Sonic Agreement on the grounds that the Company has failed to meet the minimum purchase requirement under the Super Sonic Agreement for two consecutive months, which gave Super Sonic the right to immediately terminate the Super Sonic Agreement. The termination also eliminates any obligation of the Company to issue equity to Super Sonic pursuant to the terms of the Super Sonic Agreement. The Company is not subject to any early termination penalties related to the termination of the Super Sonic Agreement.
On October 15, 2025, the Company entered into an agreement with Venom EV, LLC (“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 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 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 is currently transitioning its powersports dealers to Venom but will continue ongoing warranty support through the remaining warrant period of vehicles sold within these channels.
Two-Wheeled Products
We began selling the Grunt off-road motorcycle in September 2021 and the Grunt EVO off-road motorcycle replaced the Grunt in September 2023. Due to the manufacturing cost of the Grunt EVO, we terminated the manufacturing contract for it in December 2024. As of March 31, 2025, we have sold all of the remaining Grunt EVO units.
Beginning in the second quarter of 2024, we began evaluating other potential electric motorcycle offerings. We are determining what features and specifications would be included for new offerings including considering a street legal version that would be dual purpose as an on-road/off-road motorcycle (not highway legal). We have identified one new model which we are working on developing with a third party manufacturer. We received prototypes in February 2025 and we are testing them to evaluate the feasibility to have them manufactured at a reasonable cost and sell them for an acceptable profit. Provided testing is successful and whether the product cost, including tariffs, allow for us to sell this product we expect to start selling this product in 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.
Following the divestiture noted above, the Company will concentrate on its two-wheel business, including the launch of new products in European markets and homologation of the Brat in Japan. We will continue to evaluate other potential two-wheel product offerings through the remainder of 2025 and into 2026.
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Utility Terrain Vehicles (UTVs)
Beginning in the second quarter of 2024, the Company began discussions with various third party manufacturers of electric UTVs to identify models that we could purchase. These models would be primarily used for utility purposes, have two or three passenger options, a dump bed or flatbed for hauling cargo, with speeds up to 30 miles per hour. These models may also include an enclosed cab with optional air conditioning.
During 2024, we signed an agreement with a manufacturer to distribute one of these utility UTV models, the VLCN HF1 in North America for five years, which includes a royalty agreement with the manufacturer for them to distribute the vehicle outside of North America. Royalties would commence in the third year of this agreement.
We also signed another agreement with Super Sonic to distribute other light UTV models, the VLCN MN1 in the U. S. The VLCN MN1 has two models, the MN1 Adventurer, a golf cart style product, which has four seats with a fold down rear seat to accommodate light cargo and the MN1 Tradesman which has two seats with a dump bed for utility purposes. As noted above, this agreement was terminated and the Company will complete a purchase of 138 additional MN1 units that were previously in process before Super Sonic terminated the agreement. The Company does not expect to have any sales of four wheel products beyond the fourth quarter of 2025.
Supply Agreement
On February 24, 2025, we entered into a supply agreement with Venom-EV LLC (“Venom”) to supply Venom with certain golf carts. This agreement was amended and restated on April 25, 2025 (the “Supply Agreement”). The Supply Agreement allows Venom to purchase up to $2 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 will be purchased through a manufacturer specified in the Supply Agreement and we will receive consideration of the cost of the golf carts plus a five percent margin. We received an initial order from Venom for $2 million golf carts and paid a deposit to the manufacturer of $0.6 million on May 2, 2025. The Company paid $0.8 million in September 2025 for the golf carts which were shipped in September, 2025. The remaining $0.6 million will be paid as golf carts are completed and ready for shipment which is expected to be in the fourth quarter of 2025. On October 29 , 2025, the supply agreement was amended to increase the available purchase amount to $2.7 million and Venom has agreed to purchase the remaining 138 MN1 units ordered by the Company under the Super Sonic agreement discussed above.
We expect that we will complete additional financing transactions for Venom under this supply agreement and we are actively in discussions for the opportunity to fund inventory purchases with other companies that sell golf carts and UTVs.
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 will continue to utilize our bicycle dealers whereas as of November 10, 2025, we have 23 active dealers. We are transitioning our powersports and golf cart dealers to Venom but will continue to support these dealers for service and warranty obligations during the transition.
Consumers
Consumers can purchase the Brat from our website and have it delivered to a location of their choosing in the continental U.S.
International Distributors
We also sell our two-wheel products internationally through importers. Each importer buys vehicles by the container and sells vehicles and accessories to local dealers or directly to consumers. Payment for orders is required in advance of shipment, except in a few limited instances. Local dealers or the importer will provide warranty and repair services for vehicles purchased in their country. As of November [ ], 2025, we have signed agreements with six importers in Latin America, one importer for the Caribbean Region, collectively referred to herein as the LATAM importers, and one importer each in New Zealand, Australia and Japan to sell our two-wheel vehicles and accessories in their assigned countries/markets.
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Manufacturers
We outsource the manufacturing of all our vehicles and accessories to third party manufacturers and suppliers. The estimated fulfillment of all two-wheeled orders we have received, or will receive, assumes that our third party manufacturers can successfully meet our order quantities and deadlines. We have experienced delays due to our third party manufacturers being unable to timely meet our order deadlines, and there is no assurance that we will not experience delays in the future until such time as we are able to source products from multiple manufacturers or from larger, more established manufacturers. If they are unable to satisfy orders on a timely basis, our customers may cancel their orders. Also, due to the limited number of third party manufacturers who manufacture our products, if any one of them experiences financial hardship and cannot manufacture our products, our customers may cancel their orders which will harm our sales. All of our products are manufactured internationally. Due to new and increased tariffs and other trade policies introduced or threatened by the U.S. government since the beginning of 2025, we expect that the cost of our products will increase and may increase further if additional changes in import laws or tariffs occur. We could also experience delays in receiving shipments of our products if there are delays in getting carriers to ship our products or delays at the port of entry.
Results of Operations
The following financial information is for the three and nine months ended September 30, 2025 and 2024.
| Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2025 | September 30, 2024 | September 30, 2025 | September 30, 2024 | |||||||||||||
| Revenue | $ | 198,301 | $ | 1,075,864 | $ | 1,637,286 | $ | 3,050,275 | ||||||||
| Cost of goods sold | (291,602 | ) | (10,294,720 | ) | (1,924,461 | ) | (15,029,729 | ) | ||||||||
| Gross margin | (93,301 | ) | (9,218,856 | ) | (287,175 | ) | (11,979,454 | ) | ||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 699,843 | 470,692 | 1,833,572 | 1,774,927 | ||||||||||||
| Product development | 181,671 | 528,352 | 791,352 | 2,148,847 | ||||||||||||
| General and administrative expenses | 19,400,760 | 1,916,712 | 23,841,753 | 6,005,020 | ||||||||||||
| Unrealized loss on digital asset | 14,106,222 | – | 14,106,222 | – | ||||||||||||
| Total operating expenses | 34,388,496 | 2,915,756 | 40,572,899 | 9,928,794 | ||||||||||||
| Loss from operations | (34,481,797 | ) | (12,134,612 | ) | (40,860,074 | ) | (21,908,248 | ) | ||||||||
| Interest and other expenses | (73,504 | ) | (1,503,866 | ) | (55,554 | ) | (18,384,692 | ) | ||||||||
| Net loss | $ | (34,555,301 | ) | $ | (13,638,478 | ) | $ | (40,915,628 | ) | $ | (40,292,940 | ) | ||||
Revenue
Revenue for the three months ended September 30, 2025 was $198,301 which represents sales of Brats of $70,491, MN1-Adventurers of $6,797, MN1-Tradesman of $6,299, offset by the return of one HF1 which decreased revenue by $14,999. The Company also realized $69,624 of finance revenue from the first shipment of golf carts from a manufacturer to its customer where the Company provided the financing of the inventory purchase.
Revenue for the nine months ended September 30, 2025 was $1,637,286 which represents sales of Grunt EVOs of $307,336, Brats of $372,947, HF1s of $434,320, MN1-Adventurers of $172,975, MN1-Tradesman of $163,982, and accessories and parts of $98,544 . The Company also realized $69,624 of finance revenue from the first shipment of golf carts from a manufacturer to its customer where the Company provided the financing of the inventory purchase.
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Revenue for the three months ended September 30, 2024, was $1,075,864, which represents sales of Brats of $361,978, Grunt EVOs of $346,189, Stags of $144,901, MN1s of $24,000 and accessories and parts of $137,722.
Revenue for the nine months ended September 30, 2024, was $3,050,275 which represents sales of Brats of $1,135,534, Grunt EVOs of $959,953, Stags of $379,787, Volcon Youth of $286,680, MN1s of $24,000 and accessories and parts of $224,522.
We expect revenue to decrease in the three months ended December 31, 2025 as we transition our business to provide golf cart inventory financing and develop new E-Bike products.
Cost of Goods Sold
Cost of goods sold for the three months ended September 30, 2025 was $291,602, including payroll costs of $121,188 for employees performing product fulfillment, logistics management, and service and warranty and facilities costs of $101,470. Warranty expense was a benefit of $75,856 due to the expiration of product warranties and resulting reversal of warranty accrual. Product costs were $81,749 for Brats, $25,122 for HF1s, and $12,097 for MN1s.
Cost of goods sold for the nine months ended September 30, 2025 was $1,924,461, including payroll costs of $329,857 for employees performing product fulfillment, logistics management, and service and warranty and facilities costs of $346,840. Inventory adjustments were $93,510 offset by a benefit from the reversal of our warranty accrual of $150,040 due to the expiration of product warranties. Product costs were $267,724 for Grunt EVOs, $391,610 for Brats, $357,907 for HF1s and $368,721 for MN1s.
Cost of goods sold for the three months ended September 30, 2024 were $10,294,720, including payroll costs of $56,996 for employees performing product fulfillment, logistics management, and service and warranty. Product costs for Brats, MN1s, and Grunt EVOs sold during the period were $300,880 (before the write down of inventory as discussed below), $22,900, and $878,633, respectively. Stag product costs were $224,784 before the write off of Stag inventory and prepaid deposits. As discussed above in “Overview – Utility Terrain Vehicles (UTVs)”, the Company wrote off all Stag parts inventory, including prepaid inventory deposits resulting in expense of $8,712,644. The Company also wrote down the Grunt EVO finished goods inventory by $535,013 due to the Company lowering the sales price to dealers and distributors. Offsetting expenses includes an adjustment of $136,121 to the vendor settlement for Stag suspension components recorded in the three months ended June 30, 2024 after auditing the inventory quantities and costs. The Company also recorded $175,000 as an offset to expenses for the partial recovery of a previously written off prepaid inventory deposit. Facilities costs related to operations were $98,254. Loss on disposal of Runt tooling and other equipment was $195,635.
Cost of goods sold for the nine months ended September 30, 2024 were $15,029,729 including payroll costs of $211,955 for employees performing product fulfillment, logistics management, and service and warranty. Product costs for Brats and Grunt EVOs, sold during the period were $1,105,054 and $1,515,175 (before the finished goods inventory write down discussed below), respectively. Volcon Youth product costs were $186,813 before the additional expense of $81,911 for the write down of all Volcon Youth inventory as the Company could no longer sell Volcon Youth motorcycles or parts after June 30, 2024. Stag product costs were $944,299, which includes an expense of $112,168 for the already delivered and future delivery of vehicles to a customer where the Company agreed to provide additional units at a sales price less than the manufactured cost of the units. As noted above, the Company also wrote off all Stag parts inventory and prepaid inventory deposits resulting in an expense of $8,712,644. The Company also recognized an expense of $976,420 for a settlement agreement with a vendor who supplies certain suspension components for the Stag. The Company also wrote down the Grunt EVO finished goods inventory by $535,013 due to the Company lowering the sales price to dealers and distributors. The Company recorded a loss on disposal of assets of $817,736 primarily related to Stag, Grunt EVO and Runt tooling. The Company also recorded $175,000 as an offset to expenses for the partial recovery of a previously written off prepaid inventory deposit.
For the remainder of 2025 we expect cost of goods sold to decrease due to lower revenue from product sales.
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Sales and Marketing Expense
Sales and marketing expenses relate to costs to increase exposure and awareness for our products and developing our network of U.S. dealers and international distributors.
Sales and marketing expenses were $699,843 for the three months ended September 30, 2025 and were primarily related to expenses associated with promoting the Empery Digital brand after the announcement of our digital asset treasury strategy and name change in July 2025 of 256,959, sales employee payroll costs of $119,699, and professional fees of $96,587 for fees paid to a third party distributor, third party sales consultants and other consulting fees and depreciation expense of $92,917 primarily for demonstration vehicles used to promote our products.
Sales and marketing expenses were $1,833,572 for the nine months ended September 30, 2025 and were primarily related to expenses associated with promoting our products and promoting the Empery Digital brand after the announcement of our digital asset treasury strategy and name change in July 2025 of $618,000, employee payroll costs of $485,337, and professional fees of $228,207 for fees paid to a third party distributor, third party sales consultants and legal fees. Travel expenses were $112,545 and depreciation expense of $196,473 primarily for demonstration vehicles used to promote our products.
Sales and marketing expenses were $470,692 for the three months ended September 30, 2024 and were primarily related to expenses associated with promoting our products and brand of $161,625, employee payroll costs of 91,684, which includes stock-based compensation expense of $10,053. Professional fees for legal and consulting services were $62,850.
Sales and marketing expenses were $1,774,927 for the nine months ended September 30, 2024 and were primarily related to expenses associated with promoting our products and brand of $570,398, employee payroll costs of $677,993, including $112,500 for severance costs for our former Chief Marketing Officer and stock-based compensation of $21,983. Travel expenses related to roadshows showcasing the Stag and EVO were $68,671, facilities costs were $77,041, professional fees for legal and consulting services were $147,186 and depreciation expense was $93,810.
For the remainder of 2025 we expect sales expenses to decrease as we transition away from selling four wheeled products to financing inventory purchases.
Product Development Expense
Product development expenses relate to the development and testing of our products and process to manufacture these products.
Product development expenses were $181,671 for the three months ended September 30, 2025 and were primarily related to expenses associated with employee payroll costs of $109,690.
Product development expenses were $791,352 for the nine months ended September 30, 2025 and were primarily related to expenses associated with employee payroll costs of $499,566, depreciation expense of $47,398 and facilities costs of $134,154.
Product development expenses were $528,352 for the three months ended September 30, 2024 and were primarily related to expenses associated with employee payroll costs of $387,976, facilities costs of $59,952, and travel expenses of $40,331.
Product development expenses were $2,148,847 for the nine months ended September 30, 2024 and were primarily related to expenses associated with employee payroll costs of $1,345,848, including stock-based compensation of $126,337 for share-based awards granted to employees, facilities costs of $184,019, prototype costs of $203,287 and professional fees related to product development in the amount of $64,581, travel expenses of $126,921 and depreciation expense of $85,646.
For the remainder of 2025 we expect product development costs related to employee costs to decrease due to lower headcount as fewer products are in development subsequent to September 30, 2025 partially offset by an increase for product prototype costs for purchases of samples of new E-Bike products being considered for sale.
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General and Administrative Expense
General and administrative expenses relate to costs to execute the digital asset treasury strategy, our finance and accounting and administrative functions to support the development and sales of our products and support the financing of inventory purchases for golf cart companies.
General and administrative expenses were $19,400,760 for the three months ended September 30, 2025 including expenses associated with employee payroll costs of $844,052, including bonuses of $375,000 paid to the Company’s existing CEO and CFO prior to the Private Placements under new employment agreements signed concurrent with the Private Placements and a $225,000 signing bonus for the new Co-CEO. All bonuses were used by these individuals to purchase common stock sold in the Private Placements. The Company also recognized $13,754,360 of stock-based compensation including $8,072,716 for inducement stock options granted to three new employees upon completion of the Private Placements, $249,413 for warrants granted to a consultant for the Private Placements and $5,432,230 for vesting of some of the warrants granted to Gemini under the Strategic Digital Assets Services Agreement discussed in Note 10 of the condensed consolidated financial statements. In July 2025, the Company entered into a settlement agreement with High bridge Consultants LLC (“High bridge”) for $2,000,000. Company costs also include professional fees of $502,319 (including auditor fees of $23,175, legal fees of $423,871), software costs of $132,398, insurance costs of $464,711. Additionally, the period includes Board compensation expense of $692,500, which includes $600,000 paid to the Company’s board prior to the Private Placements in place of stock awards that could not be granted for past services. All bonuses were used by these individuals to purchase common stock sold in the Private Placements. The remaining Board compensation represents fees paid quarterly.
General and administrative expenses were $23,841,753 for the nine months ended September 30, 2025, and include expenses associated with employee payroll costs of $1,935,878, including the $225,000 signing bonus paid to the new Co-CEO, and bonuses of $375,000 paid to the Company’s existing CEO and CFO, as noted above. The Company also recognized $14,880,161 of stock-based compensation including $1,125,802 for share-based awards granted to the Company’s CEO and CFO in May 2025, $8,072,716 for inducement stock options granted to three new employees upon completion of the Private Placements, $249,413 for warrants granted to a consultant for the Private Placements and $5,432,230 for vesting of some of the warrants granted to Gemini as discussed above. In July 2025, the Company entered into a settlement agreement with High bridge for $2,000,000. Period expenses also include professional fees of $938,336 (including auditor fees of $123,600 and legal fees of $609,703), software costs of $377,683, insurance costs of $1,369,471, and travel expenses of $138,721. Additionally, the period includes Board compensation expense of $792,500, which includes $600,000 paid to the Company’s Board as noted above. The remaining Board compensation represents fees paid quarterly. The Company also had other public company costs of $163,209 for transfer agent and other miscellaneous services, and annual meeting costs of $74,450.
For the three months ended
September 30, 2024, general and administrative expenses were $1,916,712 and were primarily related to expenses associated with employee
payroll costs of $543,084, professional fees of $260,447 (which includes legal fees of $143,197), software costs of $129,404, travel costs
of $52,121, facilities costs of $53,530 and insurance costs of $664,457.
For the nine months ended September 30, 2024, general and administrative expenses were $6,005,020 and were primarily related to expenses associated with employee payroll costs of $1,808,888, including stock-based compensation of $159,388 for share-based awards granted to employees, professional fees of $863,220 (including legal fees of $434,292, tax and accounting fees of $77,155 and audit fees of $193,275), software costs of $423,018, insurance costs of $1,983,672, annual and special shareholder meeting costs of $133,531 and other public company expense costs of $243,342.
For the remainder of 2025 we expect general and administrative expenses to decrease when compared to the three months ended September 30, 2025 as we have substantially established our digital asset strategy and do not expect to incur certain one-time costs such as the $2,000,000 settlement with Highbridge, bonuses of $600,000 paid to management, $600,000 fees paid to independent existing independent Board members in connection with the July 2025 Private Placements. We also expect our insurance costs related to product liability, property and general liability to decrease by over $400,000 and although we have several underutilized facilities the Company currently leases through August 2026, we are actively working with our real estate broker to sublease these facilities and we do not plan to renew these leases at expiration. We also expected lower stock-based compensation for inducement stock awards granted to new employees as 80 percent of the awards are vested as of September 30, 2025. We also anticipate a reduction in legal fees since we incurred fees related to the implementation of our digital asset strategy which is substantially complete.
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Unrealized Loss on Digital Assets
The Company’s digital assets are initially recorded at cost and are measured at fair value as of each reporting period. The Company determines the fair value of its Bitcoin based on quoted (unadjusted) prices on the Gemini exchange, the active exchange that the Company has determined is its principal market for BTC. The Company’s average BTC purchase price was $117,516 for all BTC purchased by the Company in the three and nine months ended September 30, 2025, including the BTC received as payment in the Private Placements. Based on the price as of September 30, 2025 of $114,061, the Company recognized an unrealized loss of $14,106,222.
Interest and Other Expenses
Net interest and other income/expenses for the three months ended September 30, 2025 was a net expense of $73,504 . This includes interest expense $361,464 primarily from borrowings to repurchase our common stock, interest income of $84,134 primarily earned on cash held in a money market account, a gain of $39,534 for the change in the fair value of the Series A warrants that are classified as derivative liabilities, and income of $287,095 from trading BTC put and call contracts and a loss on the repayment of a credit facility of $125,377 for the write off of unamortized issuance costs.
Net Interest and other income/expenses for the nine months ended September 30, 2025 was a net income of $55,554. This includes interest expense of $525,111 primarily from 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 $241,426 primarily from interest earned on cash held in a money market account, net income generated from BTC derivative contracts as noted above and the loss on repayment of a credit facility noted above.
Interest and other income/expenses for the three months ended September 30, 2024 was $1,503,866. We recognized a loss of $1,470,554 when we repaid the outstanding principal of the May 2024 Notes with the proceeds received from our July 2024 equity offering. Non-cash interest expense of $55,146 was recognized for the amortization of debt issuance costs and accretion of principal on the May 2024 Notes until they were repaid. We recorded a gain on the change in the estimated fair value of the Series A Warrant liability of $53,724.
Interest and other income/expenses for the nine months ended September 30, 2024 was $18,384,692. Non-cash interest expense of $314,838 was recognized for the amortization of debt issuance costs and accretion of principal on the May 2023 Notes through the date these notes were exchanged for Preferred Stock in March 2024. We recorded a loss on the conversion of some of these notes of $333,544 and a loss from the exchange of these notes for Preferred Stock of $1,314,065. We recognized a loss of $1,470,554 when we repaid the outstanding principal of the May 2024 Notes with the proceeds received from our July 2024 equity offering. Non-cash interest expense of $238,965 was recognized for the amortization of debt issuance costs and accretion of principal on the May 2024 Notes until they were repaid. We recorded a loss on the change in the estimated fair value of the Series A and Series B Warrant liabilities of $14,839,326 which was partially offset by a gain of $165,355 from the exercise of some of the Series B Warrants.
For the remainder of 2025, we expect interest expense to increase due to increased borrowings on our term loan and delayed draw credit facility for common stock repurchases. If market conditions allow, the Company may issue equity or obtain other loan facilities with lower interest rates that could reduce interest expense in the future.
Net Loss
Net loss for the three and nine months ended September 30, 2025 was $34,555,301 and $40,915,628, respectively.
Net loss for the three and nine months ended September 30, 2024, was $13,638,478 and $40,292,940, respectively.
Liquidity and Capital Resources
On September 30, 2025, we had cash, cash equivalents and restricted cash of $18.9 million, including $0.1 million of restricted cash, and we had a working capital deficit of $28.9 million. Since inception we have funded our operations from proceeds from debt and equity sales.
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Cash used in operating activities
Net cash used in operating activities was $14.9 million for the nine months ended September 30, 2025 and includes all of our operating costs, except non-cash costs of depreciation and amortization, loss on change in derivative financial liabilities all of which were insignificant for the period and stock-based compensation of $14.9 million and unrealized loss on Bitcoin of $14.1 million. Significant uses/contributions of cash used in operating activities includes an increase in accounts receivable of $1.5 million due to the invoicing of a golf cart order to a customer who financed the purchase from its manufacturer through the Company, a decrease of $0.5 million in inventory and inventory deposits, an increase in prepaid assets of $0.9 million primarily from the renewal of the Company’s director and officer liability insurance policy, and a decrease of $2 million in accrued liabilities primarily due to payments on vendor settlements.
Net cash used in operating activities was $12.3 million for the nine months ended September 30, 2024 and includes all of our operating costs except depreciation and amortization of $0.3 million, write down of Stag, Grunt EVO and Volcon Youth inventory and inventory deposits of $9.1 million, non-cash interest expense for the amortization of debt issuance costs and accretion of principal on the May 2023 Notes and May 2024 Notes of $0.6 million, loss on change in derivative financial liabilities of $14.8 million, losses on conversion and exchange of Convertible Notes of $1.6 million, $1.5 million loss on repayment of the May 2024 Notes, $0.8 million from the loss on disposal of fixed assets, and stock based compensation of $0.3 million. Cash used in operating activities includes an increase in accounts receivable of $0.1 million due to sales to our U.S. dealers, an increase of $1 million in prepaid inventory deposits primarily for purchases of Stag raw materials, a decrease of $0.6 million in accounts payable, and an increase of $0.5 million in accrued liabilities primarily due to the vendor settlement noted above and $0.6 million used to pay our lease liabilities. As of September 30, 2024, we have a decrease of $0.3 million in customer deposits, primarily due to orders being fulfilled for two of our Latin American distributors for shipments of Brats and Grunt EVOs paid for previously.
For the remainder of 2025, we expect net cash used in operating activities will decrease compared to the three months ended September 30, 2025 due to a decrease in non-recurring expenses incurred in this period and expected collection of accounts receivable for amounts provided from golf cart financing.
Cash used in investing activities
Net cash used in investing activities was $453.8 million for the nine months ended September 30, 2025, primarily consisting of the purchase of Bitcoin of $451.6 million, the purchase of a certificate of deposit of $2 million as collateral for our dealer floor plan financing and $0.2 million for purchases of equipment and tooling.
Net cash used in investing activities was $0.2 million for the nine months ended September 30, 2024, primarily consisting of $0.3 million of purchases of equipment and tooling offset by $0.1 million received from an insurance settlement for a vehicle that was totaled in the period.
Cash provided by financing activities
Cash provided by financing activities for the nine months ended September 30, 2025, was $485.3 million and was primarily related to proceeds of $452.3 million from the sale of common stock and prefunded warrants from the Private Placements, proceeds of $10.3 million from the sale of common stock under the Company’s At the Market program, proceeds of $10.7 million from the sale of common stock units and pre-funded warrant units, proceeds of $50 million from a term loan facility, proceeds of $1.8 million from warrant exercises, partially offset by share repurchases of $39.4 million.
Cash provided by financing activities for the nine months ended September 30, 2024, was $10.2 million and was primarily related to the net proceeds from the issuance of common stock and pre funded warrants in July 2024 for net proceeds of $10.8 million and net proceeds from the issuance May 2024 Senior Notes and May 2024 Note Warrants of $2.3 million offset by the repayment of the May 2024 Senior Notes of $2.9 million.
As of September 30, 2025, we had incurred an accumulated deficit of $207.2 million since inception.
Management anticipates that our cash on hand as of September 30, 2025, plus cash expected to be generated from operations and the borrowing available under the delayed draw credit facility 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 nine months ended September 30, 2025.
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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.
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, who 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 September 30, 2025 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 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 September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time in the ordinary course of our business, we may be involved in 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, 2024, filed with the SEC on March 31, 2025 (as amended by Form 10-K/A filed with the SEC on April 29, 2025, as amended further by Form 10-K/A filed with the SEC on April 30, 2025), our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025 and June 30, 2025, filed with the SEC on May 9, 2025 and August 12, 2025, respectively, (each of which is accessible on the SEC’s website at www.sec.gov) and as set forth below.
We are subject to risks associated with our reliance on foreign manufacturing, suppliers and imports for our products.
We procure the majority of our vehicles from suppliers located in Asia, including China and Vietnam. As a result, our business highly depends on global trade, as well as trade and other factors that impact the specific countries where our suppliers’ and partners’ manufacturing facilities are located. Our future success will depend in large part upon our ability to maintain our existing foreign supplier and partner relationships and to develop new ones based on the requirements of our business and any changes in trade dynamics that might dictate changes in the locations for sourcing of products.
Events that have in the past and could in the future cause disruptions to our supply chain include but are not limited to, the imposition of additional trade laws or regulations; public health crises; political instability, international conflicts, acts of terrorism or natural disasters; the imposition of additional duties, tariffs and other charges on imports and exports; foreign currency fluctuations; theft; and restrictions on the transfer of funds. The occurrence of any of the foregoing could materially increase the cost and reduce or delay the supply of our products, which could materially and adversely affect our business, financial condition, results of operations, liquidity and stock price.
All of our vehicles imported into the U. S. and are subject to import taxes or costs, including new or increased tariffs, or similar duties, some of which could be applied retroactively, and modification to or withdrawal from free trade agreements or trade relationships, could increase the cost of the products that we distribute. For example, Since the beginning of 2025, the U.S. government has announced several different measures regarding tariffs, including the imposition of new tariffs on products imported into the U.S. from a number of countries, including Vietnam, and China, and could propose additional tariffs or increases to those already in place. 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. These tariffs, as well as a government’s adoption of “buy national” and similar policies or retaliation by another government against such tariffs or policies could introduce significant uncertainty into the market and may affect the prices of and supply of the products available to us. Tariffs also can impact our or our suppliers’ ability to source product efficiently or create other supply chain disruptions. We may not be able to fully or substantially mitigate the impact of these or future tariffs, pass price increases on to our customers or secure adequate alternative sources of vehicles, which would have a material adverse effect on our business, operating results and financial performance.
We also face uncertainty in the interpretation of new tariffs and their applicability, including with respect to customs valuation, product classification and country-of-origin determinations. Although we and our vendors seek to comply with applicable customs laws and regulations, the application of rules regarding new tariffs can be subject to varying interpretations or future re-interpretations. It is possible that U.S. Customs and Border Protection or other relevant authorities could, upon review or audit, disagree with the valuation, rules of origin or classification methods applied to certain merchandise. Any such disagreement could result in the retroactive assessment of additional duties with interest, the imposition of penalties, or other enforcement actions without the ability to mitigate such penalties, thereby adversely affecting our operations or financial results.
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The Company has used the net proceeds from the Private Placements to purchase Bitcoin, the price of which has been, and will likely continue to be, highly volatile. The Company’s operating results and share price may significantly fluctuate due to the highly volatile nature of the price of such digital assets and erratic market movements.
We have used the net proceeds from the Private Placements to purchase Bitcoin and for the establishment of the Company’s cryptocurrency treasury operations. Digital assets generally are highly volatile assets. In addition, digital assets do not pay interest or other returns and so the ability to generate a return on investment from the net proceeds of any capital raises will depend on whether there is appreciation in the value of digital assets following our purchases of digital assets with the net proceeds from such capital raisings. Future fluctuations in digital asset trading prices may result in our converting digital assets into cash with a value substantially below what we paid for such digital assets.
The Company’s Bitcoin strategy subjects the Company to enhanced regulatory oversight and could have accounting, regulatory and other impacts.
We have pledged a portion of our Bitcoin holdings as collateral pursuant to a number of debt arrangements and may in the future incur additional indebtedness or enter into other financial instruments that may be collateralized by our digital asset holdings. For example, we have pledged Bitcoin as collateral to delayed draw term loan borrowings pursuant to the Master Loan Agreement (the “MLA”) the Company entered into on October 12, 2025. As of September 30, 2025, the Company held 1,146.8 Bitcoins with a carrying value of approximately $130.8 million, as collateral by lenders for borrowing arrangements. We may in the future also consider pursuing strategies to create income streams or otherwise generate funds using our Bitcoin holdings. These types of Bitcoin-related transactions are the subject of enhanced regulatory oversight. These and any other Bitcoin-related transactions we may enter into, beyond simply acquiring and holding Bitcoin, may subject us to additional regulatory compliance requirements and scrutiny, including under federal and state money services regulations, money transmitter licensing requirements and various commodity and securities laws and regulations. In addition, fluctuations in the price of Bitcoin may result in additional holding of Bitcoin to be pledged as collateral pursuant to such debt agreements, which could impact the accounting treatment and classification of our Bitcoin on our balance sheet.
Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under our debt instruments when they come due.
The Company has incurred indebtedness pursuant to a number of borrowing arrangements and facilities. For example, in October 2025, the Company entered into the MLA, pursuant to which the Company may borrow, in one or more draws of minimum increments of $5 million, an aggregate principal amount of up to $100 million collateralized with a security interest in the Bitcoin that we post as collateral. On September 26, 2025, the Company entered into a Master Repurchase Agreement and related transaction confirmation (together, the “Repo Facility”) with a third party lender, providing for $50 million in cash advances to the Company in exchange for purchased securities in the form of Bitcoin.
We may also incur additional indebtedness to meet future financing needs. Our indebtedness could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:
| · | increasing our vulnerability to adverse economic and industry conditions; | |
| · | limiting our ability to obtain additional financing on acceptable terms or at all; | |
| · | requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; | |
| · | limiting our flexibility to plan for, or react to, changes in our business; and | |
| · | placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital. |
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Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves to pay amounts due under our indebtedness and our cash needs may increase in the future.
We cannot guarantee that our share repurchase programs will be fully implemented or that they will enhance long-term stockholder value.
Our Board of Directors has authorized a share repurchase program. We plan to fund repurchases under this program from our future cash flow generation, as well as from additional potential sources of cash. For example, we have in the past entered into master repurchase agreements pursuant to which we have incurred indebtedness to fund share repurchases and may in the future incur additional indebtedness to fund share repurchases. Under this program, share repurchases may be made at our discretion from time to time in open market transactions, privately negotiated transactions, or other means. This program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares of our common stock. The actual timing, number and value of shares repurchased under the program will be determined by management at its discretion and will depend on a number of factors, including the market price of the common stock, general market and economic conditions, applicable legal requirements and the Company’s efforts to increase the Bitcoin per share of common stock. Our Board of Directors will review this program periodically and may authorize adjustments of its terms, as it may deem appropriate. As a result, there can be no guarantee around the timing or volume of our share repurchases. This program could affect the price of our common stock, increase volatility and diminish our cash reserves. This program may be suspended or terminated at any time and, even if fully implemented, may not enhance long-term stockholder value or increase the Bitcoin per share of common stock.
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 purchases of our common stock during the three months ended September 30, 2025 in accordance with Item 703 of Regulation S-K:
| Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) ($) | (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 | ||||||||||||
| July 1, 2025 – July 30, 2025 | – | – | – | 1,492,875 | ||||||||||||
| August 1, 2025 – August 31, 2025 | 1,009,115 | 7.29 | 1,009,115 | 92,642,729 | ||||||||||||
| September 1, 2025 – September 30, 2025 | 4,159,703 | 7.58 | 4,159,703 | 61,104,625 | ||||||||||||
| Three Month period ended September 30, 2025 | 5,168,818 | 5,168,818 | $ | 61,104,625 | ||||||||||||
| (1) | On March 17, 2025, the Company’s Board of Directors adopted a stock repurchase program of up to $2 million of shares of its outstanding common stock. This repurchase program was set to expire on March 7, 2026. On July 24, 2025, the Board approved a $100 million common stock repurchase program effective through July 24, 2027 (increased by the Board to $150 million on October 10, 2025), subject to extension or earlier termination by the Board at any time. The March 2025 repurchase program was terminated upon the approval of the July 2025 repurchase program. |
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During
the quarter ended September 30, 2025 no director or officer
ITEM 6. EXHIBITS
INDEX TO EXHIBITS
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______________
| * | 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. |
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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 | ||
|
|
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| /s/ Ryan Lane | Co-Chief Executive Officer and Director | |||
| Ryan Lane | (principal executive officer) | November 10 , 2025 | ||
| /s/ John Kim | Co-Chief Executive Officer and Director | November 10, 2025 | ||
| John Kim | ||||
| /s/ Greg Endo | Chief Financial Officer | November 10, 2025 | ||
| Greg Endo | (principal financial and accounting officer) |
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