Volcon(VLCN) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements and detailed notes for periods ended June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets Total assets increased from $6.2 million to $17.9 million, driven by cash, while liabilities decreased and equity surged | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Cash and cash equivalents | $11,793,028 | $2,193,573 | | Total current assets | $16,549,821 | $5,066,152 | | Total assets | $17,936,815 | $6,226,503 | | Total current liabilities | $3,632,039 | $4,636,803 | | Total liabilities | $4,116,916 | $6,185,742 | | Total stockholders' equity | $13,819,899 | $40,761 | Condensed Consolidated Statements of Operations Net loss improved significantly for the six months ended June 30, 2025, to $6.4 million, despite decreased revenue, due to reduced costs | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $702,936 | $940,863 | $1,438,985 | $1,974,411 | | Cost of goods sold | $(851,476) | $(3,113,429) | $(1,632,859) | $(4,735,009) | | Gross margin | $(148,540) | $(2,172,566) | $(193,874) | $(2,760,598) | | Loss from operations | $(3,871,806) | $(5,529,301) | $(6,378,277) | $(9,773,636) | | Net loss | $(3,899,897) | $(606,418) | $(6,360,327) | $(26,654,462) | | Net loss per common share – basic | $(7.57) | $(96.59) | $(14.88) | $(7,085.18) | Condensed Consolidated Statements of Stockholders Equity Stockholders' equity dramatically increased to $13.8 million by June 30, 2025, primarily from over $19.5 million in common stock issuances | Item | January 1, 2025 | June 30, 2025 | | :--- | :-------------- | :------------ | | Common Stock (Shares) | 78,859 | 533,008 | | Common Stock (Amount) | $1 | $6 | | Treasury Stock (Shares) | – | 65,348 | | Treasury Stock (Amount) | – | $(510,907) | | Additional Paid-in Capital | $166,357,207 | $187,007,574 | | Accumulated Deficit | $(166,316,447) | $(172,676,774) | | Total Stockholders' Equity | $40,761 | $13,819,899 | - Issuance of common stock from At the Market offering generated net proceeds of $8,846,761[15] - Issuance of common stock and pre-funded warrants generated net proceeds of $10,703,882[15] Condensed Consolidated Statements of Cash Flows Net cash increased by $9.6 million for the six months ended June 30, 2025, driven by $19.0 million in financing activities | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(7,230,924) | $(8,198,103) | | Net cash used in investing activities | $(2,204,927) | $(182,539) | | Net cash provided by financing activities | $19,035,306 | $2,344,471 | | NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | $9,599,455 | $(6,036,171) | | CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $11,898,028 | $2,157,175 | - Financing activities were significantly boosted by $10.7 million from public offering of common stock and pre-funded warrants, and $8.8 million from At the Market offering[20] - Investing activities included a $2.0 million purchase of a certificate of deposit[20] Notes to the Condensed Consolidated Financial Statements Detailed explanations of financial position, operations, and cash flows, including Bitcoin strategy, going concern, and financing NOTE 1 – ORGANIZATION, NATURE OF OPERATIONS AND GOING CONCERN Company renamed Empery Digital Inc., adopted a Bitcoin treasury strategy, and addressed Nasdaq compliance and tariff impacts - Company renamed Empery Digital Inc. on July 30, 2025, and changed Nasdaq ticker from VLCN to EMPD[22] - Adopted a Bitcoin treasury strategy effective July 17, 2025, with the goal of becoming a leading, low-cost, capital-efficient aggregator of Bitcoin[23] - Management anticipates cash on hand plus proceeds from Private Placements will be sufficient to fund operations beyond one year[32] - Nasdaq compliance issues regarding minimum bid price were regained on July 17, 2024, and again on July 17, 2025, after a 1-for-8 reverse stock split on June 11, 2025[36][37] - Tariffs on imports from Vietnam are set at 20%, and China at 30%, impacting product costs and potentially reducing margins[39][40][41] NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unaudited interim statements, retroactive 1-for-8 reverse stock split, and concentration risk from outsourced manufacturing - Interim consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP[42] - On June 11, 2025, the Company completed a reverse 1-for-8 stock split, with all share and per share amounts updated to reflect this[44] - The Company outsources product design, development, and manufacturing to third parties, leading to concentration risk[46] - Settlement agreements with manufacturers resulted in a $700,000 reduction of expense in 2024 and a recorded expense of $1,091,308 for excess raw materials[48][49] NOTE 3 – SEGMENT REPORTING The company operates as a single segment, with Co-CEOs as chief operating decision makers - The Company operates as one operating segment[52] - Co-CEOs are the chief operating decision makers, using consolidated statements of operations to assess financial performance and allocate resources[52] NOTE 4 – NOTES PAYABLE Total notes payable of $32,225 as of June 30, 2025, primarily from vehicle financing | Maturity Period | Amount | | :-------------- | :----- | | Remainder of 2025 | $5,450 | | 2026 | $10,898 | | 2027 | $10,898 | | 2028 | $10,898 | | 2029 | $1,816 | | Total future payments | $39,960 | | Less: Interest | $(7,735) | | Total notes payable | $32,225 | | Less current portion | $(7,602) | | Long-term notes payable | $24,623 | NOTE 5 - CONVERTIBLE NOTES Remaining $24.7 million principal of May 2023 Convertible Notes exchanged for Series A Preferred Stock in March 2024 - In March 2024, $7,414,025 of May 2023 Notes principal converted into 622 shares of common stock, resulting in a $333,544 loss[63] - On March 4, 2024, the remaining $24,716,118 principal of May 2023 Notes was exchanged for 24,698 shares of Series A Convertible Preferred Stock, leading to a $1,314,065 loss on exchange[63] NOTE 6 - MAY 2024 SENIOR NOTES $2.9 million Senior Notes issued in May 2024, fully repaid in July 2024, resulting in a $1.5 million loss on extinguishment - Issued Senior Notes with $2,942,170 principal on May 22, 2024, for net proceeds of $2,255,851[65] - Notes were fully repaid on July 12, 2024, resulting in a $1,470,554 loss on early extinguishment[65] NOTE 7 - WARRANT LIABILITIES Warrant liability for Series A Warrants is $146,468, with Series B Warrants reclassified to equity in May 2024 | Metric | Amount | | :----- | :----- | | Fair value on January 1, 2025 | $111,658 | | Loss on changes in fair value | $34,810 | | Balance at June 30, 2025 | $146,468 | - Series B Warrants were reclassified to equity on May 17, 2024, after an amendment introduced a cashless exercise provision, with a fair value of $3,405,662[68] NOTE 8 – RELATED PARTY TRANSACTIONS Engaged in consulting agreements, executive employment, and terminated a Highbridge agreement for a $2.0 million fee - Paid $45,000 to ThankYou Studios, an entity owned by Board member Orn Olason, for marketing and brand assessment[70] - CEO John Kim's salary was $800,000 with a $250,000 annual bonus and 10% equity award (approved 180,375 stock options)[72] - CFO Greg Endo's salary was $300,000 with up to 50% bonus and 4% equity award (approved 72,150 stock options)[73] - Terminated Highbridge Consulting Agreement on July 11, 2025, for a $2.0 million termination fee, releasing obligations for potential future milestone payments[78][79] NOTE 9 – STOCKHOLDERS' EQUITY Executed a 1-for-8 reverse stock split, repurchased shares, and raised significant capital through ATM and public offerings - Completed a 1-for-8 reverse stock split on June 11, 2025[81] - Repurchased 65,348 shares of common stock for $510,907 under a stock buyback program through June 30, 2025[87] - Raised net proceeds of $8,846,761 from the sale of 220,515 shares of common stock through the ATM program during the six months ended June 30, 2025[84] - Received net proceeds of $10,703,882 from an underwritten public offering of 53,750 common stock units and 696,250 pre-funded warrant units on February 6, 2025[85] Common Stock Warrants | Warrant Type | Outstanding at Jan 1, 2025 | Granted | Exercised | Outstanding at June 30, 2025 | Weighted Average Exercise Price at June 30, 2025 | | :----------- | :------------------------- | :------ | :-------- | :--------------------------- | :--------------------------------------------- | | Common Stock Warrants | 25,067 | 1,456,527 | (226,117) | 1,255,477 | $58.69 | NOTE 10 – STOCK-BASED COMPENSATION Recognized $1.1 million in stock-based compensation for six months ended June 30, 2025, primarily for CEO and CFO options - Recognized $1,100,670 in total stock-based compensation for the six months ended June 30, 2025[114] - Fully vested stock options granted to CEO and CFO to purchase 252,525 shares at $4.56 per share resulted in $1,125,802 in share-based compensation for the six months ended June 30, 2025[111] - No shares are available for issuance under the 2021 Plan as of June 30, 2025[110] Stock Option Activity | Stock Option Activity | Shares | Weighted Average Exercise Price | | :-------------------- | :----- | :---------------------------- | | Outstanding at January 1, 2025 | 816 | $14,203.20 | | Granted | 252,525 | $4.56 | | Canceled | (782) | $104.32 | | Outstanding at June 30, 2025 | 252,559 | $576.03 | NOTE 11 – LOSS PER COMMON SHARE Basic and diluted net loss per common share improved to $(14.88) for six months ended June 30, 2025, due to more shares outstanding | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(3,899,897) | $(606,418) | $(6,360,327) | $(26,654,462) | | Weighted average common shares outstanding – basic | 515,490 | 6,278 | 427,361 | 3,762 | | Basic and diluted net loss per common share | $(7.57) | $(96.59) | $(14.88) | $(7,085.18) | Potentially Dilutive Shares | Potentially Dilutive Shares | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Warrants | 1,255,477 | 1,708 | | Stock options | 252,559 | 34 | | Preferred Stock | – | 988,069 | | Total | 1,508,036 | 989,811 | NOTE 12 – INCOME TAXES No income tax benefit or expense recognized due to recurring losses, with a full valuation allowance established - No income tax benefit or expense recognized due to recurring losses since inception[118] - A full valuation allowance has been established for any tax benefit[118] NOTE 13 - SUBSEQUENT EVENTS Post-quarter, company entered Gemini agreements, completed $501 million private placements, and approved new stock options and buyback program - Entered into Strategic Digital Assets Services Agreement and Custodial Services Agreement with Gemini on July 13, 2025[120][121] - Completed Private Placements on July 21, 2025, raising over $501 million gross proceeds (including $28 million in Bitcoin), with net proceeds of $481 million[123] - Intends to use net proceeds from Private Placements to purchase Bitcoin under its treasury strategy; purchased approximately $472 million in Bitcoin through August 8, 2025[130] - Appointed new directors (Ryan Lane, Ian Read, Rohan Chauhan, Matthew Homer) and executive officers (Ryan Lane as Co-CEO, Timothy Silver as COO, Brett Director as VP Legal)[131][132] - Approved stock option grants for 6,727,188 shares at $10.00 exercise price under the 2025 Stock Plan (subject to shareholder approval), with 80% vested as of August 8, 2025[134] - Increased ATM program capacity by $1 billion and approved a $100 million common stock repurchase program effective through July 24, 2027[135][136] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Reviews financial condition, operations, liquidity, and capital resources, emphasizing the digital asset strategy Special Note Regarding Forward-Looking Statements Report contains forward-looking statements subject to risks, including digital asset strategy and market volatility, with no obligation to update - Forward-looking statements are subject to risks and uncertainties, including the ability to change company direction, keep pace with technology, successful implementation of digital asset strategy, and highly volatile cryptocurrency prices[139] - Company disclaims any obligation to update forward-looking statements, except as required by law[140] Overview Company pivoted to a digital asset treasury strategy while continuing its electric powersports vehicle business, facing tariff and supply chain challenges - Company launched a digital asset treasury strategy, using $501 million from Private Placements to acquire Bitcoin and other digital assets[141] - Operates an all-electric, off-road powersports vehicle business, selling E-Bikes (Brat) and UTVs (HF1, MN1 Adventurer/Tradesman)[142][146][150] - Discontinued Grunt EVO off-road motorcycle manufacturing due to cost and sold all remaining units by March 31, 2025[144] - Signed exclusive distribution agreement with Super Sonic for golf carts in the U.S. and a supply agreement with Venom-EV LLC for up to $2.0 million in golf carts[152][153] - Outsourcing all vehicle and accessory manufacturing to third-party international manufacturers, leading to potential delays and increased costs due to tariffs[157] Digital Asset Treasury Strategy Launched digital asset treasury strategy, using $501 million from private placements to acquire Bitcoin and establish crypto operations - Launched digital asset treasury strategy to acquire Bitcoin and other digital assets[141] - Used net proceeds from $501 million Private Placements to purchase Bitcoin and establish cryptocurrency treasury operations[141] Electric Vehicle Operates an all-electric, off-road powersports vehicle business, selling E-Bikes and UTVs, and entered a golf cart distribution agreement - Operates an all-electric, off-road powersports vehicle business[142] - Sells E-Bike (Brat) and UTVs (HF1, MN1 Adventurer/Tradesman)[142] - Entered distribution agreement with Super Sonic Company Ltd. for golf carts in January 2025[143] Two-Wheeled Products Discontinued Grunt EVO, continues Brat E-Bike sales, and is developing a new electric motorcycle for 2026 - Discontinued Grunt EVO off-road motorcycle manufacturing in December 2024 due to cost, with all remaining units sold by March 31, 2025[144] - Continues to sell the Brat E-Bike, a Class 2 E-Bike for on-road or off-road use[146] - Developing a new electric motorcycle model with prototypes received in February 2025, with expected sales in 2026[145] Utility Terrain Vehicles (UTVs) Distributes VLCN HF1 and MN1 UTVs, which are subject to tariffs due to foreign manufacturing - Distributes VLCN HF1 UTV in North America under a five-year agreement[149] - Distributes VLCN MN1 UTV models (Adventurer and Tradesman) in the United States[150] - UTVs manufactured outside the U.S. are subject to potential tariffs, leading the company to evaluate international sales through distributors[151] Distribution and Supplier Agreements Signed exclusive distribution agreement for golf carts with Super Sonic and a supply agreement with Venom-EV LLC - Signed exclusive distribution agreement with Super Sonic in January 2025 for golf carts in the U.S., requiring a procurement plan by June 2025 (not yet provided as of August 8, 2025)[152] - Entered supply agreement with Venom-EV LLC in February 2025 to supply up to $2.0 million of golf carts with a 5% margin[153] Customers Sells through 93 powersports dealers, 23 bicycle retailers, 16 golf cart dealers, direct-to-consumer, and international importers - Sells products through 93 active powersports dealers, 23 active bicycle dealers, and 16 golf cart dealers[154] - Offers 30-90 day payment terms for qualified dealers and floor plan financing of $3.5 million[154] - Sells two-wheel products internationally through importers in Latin America, the Caribbean, New Zealand, Australia, and Japan, with plans to expand global sales to include four-wheel products[156] Manufacturers Relies entirely on third-party international manufacturers, facing supply chain delays, tariff costs, and financial hardship risks - Outsourcing all vehicle and accessory manufacturing to third-party international manufacturers[157] - Faces risks of supply chain delays, increased costs due to tariffs, and potential sales harm if manufacturers experience financial hardship[157] Results of Operations Revenue decreased, but gross margin improved, and operating losses reduced due to lower cost of goods sold, with G&A increasing | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $702,936 | $940,863 | $1,438,985 | $1,974,411 | | Cost of goods sold | $(851,476) | $(3,113,429) | $(1,632,859) | $(4,735,009) | | Gross margin | $(148,540) | $(2,172,566) | $(193,874) | $(2,760,598) | | Loss from operations | $(3,871,806) | $(5,529,301) | $(6,378,277) | $(9,773,636) | | Net loss | $(3,899,897) | $(606,418) | $(6,360,327) | $(26,654,462) | Revenue Decreased by 25.3% for Q2 2025 and 27.1% for six months, primarily due to lower finished goods inventory | Product | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2024 | | :------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Brats | $202,998 | $302,456 | $240,750 | $773,556 | | HF1s | $307,198 | $449,319 | – | – | | MN1-Adventurers | $74,461 | $166,178 | – | – | | MN1-Tradesman | $123,884 | $157,683 | – | – | | Grunt EVOs | – | $304,905 | $284,147 | $613,764 | | Stags | – | – | $194,887 | $234,886 | | Volcon Youth | – | – | $192,924 | $286,680 | | Accessories & Parts | $26,992 | $51,337 | $52,696 | $86,800 | | Total Revenue | $702,936 | $1,438,985 | $940,863 | $1,974,411 | - Expects revenue to decrease in Q3 2025 due to lower finished goods inventory[162] Cost of Goods Sold Significantly decreased by 72.7% for Q2 2025 and 65.5% for six months, driven by lower product costs and inventory adjustments | Metric | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Cost of Goods Sold | $(851,476) | $(1,632,859) | $(3,113,429) | $(4,735,009) | | Payroll costs | $122,415 | $208,668 | $72,466 | $166,786 | | Facilities costs | $121,279 | $245,143 | $104,976 | $210,926 | | Inventory adjustments | $76,573 | $84,822 | – | – | | Warranty expense (benefit) | $(69,371) | $(74,184) | – | – | | Product costs (Grunt EVOs) | $41,339 | $265,620 | $292,561 | $636,542 | | Product costs (Brats) | $190,072 | $309,861 | $221,624 | $804,174 | | Product costs (HF1s) | $206,684 | $332,785 | – | – | | Product costs (MN1s) | $225,186 | $356,623 | – | – | | Loss on disposal of Stag tooling | – | – | $466,481 | $466,481 | | Loss on disposal of Grunt EVO tooling | – | – | – | $155,621 | | Settlement with vendor (Stag suspension) | – | – | $1,117,429 | $1,117,429 | | Youth finished goods write-off | – | – | $57,262 | $57,262 | - Expects cost of goods sold to decrease for the remainder of 2025 due to lower expected revenue[167] Sales and Marketing Expense Increased by 14.5% for Q2 2025 but decreased by 13.1% for six months, with future increases expected for brand promotion and stock options | Metric | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Sales and marketing expenses | $622,772 | $1,133,729 | $543,671 | $1,304,235 | | Brand promotion | $259,524 | $361,041 | $193,344 | $408,773 | | Employee payroll costs | $167,318 | $365,637 | $121,187 | $574,378 | | Professional fees | $59,069 | $131,620 | $64,412 | $84,336 | | Depreciation expense | $92,511 | $103,555 | $27,674 | $49,935 | | Stock-based compensation (benefit) | $(35,184) | $(25,132) | $67,001 | $11,930 | - Expects sales and marketing expenses to increase for the remainder of 2025 due to increased spending on the Empery Digital brand and stock-based compensation for new grants[173] Product Development Expense Decreased significantly by 72.5% for Q2 2025 and 62.4% for six months due to lower payroll and prototype costs | Metric | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Product development expenses | $221,159 | $609,681 | $805,550 | $1,620,495 | | Employee payroll costs | $140,522 | $389,876 | $394,632 | $831,534 | | Facilities costs | $47,432 | $104,214 | $60,212 | $124,067 | | Prototype costs | – | – | $114,781 | $206,706 | | Stock-based compensation | – | – | $83,733 | $126,337 | - Expects product development employee costs to decrease due to fewer products in development, offset by an increase in stock-based compensation for new grants[178] General and Administrative Expense Increased by 43.4% for Q2 2025 and 8.6% for six months, driven by stock-based compensation, insurance, and professional fees | Metric | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | General and administrative expenses | $2,879,335 | $4,440,993 | $2,007,514 | $4,088,308 | | Employee payroll costs | $541,424 | $1,091,826 | $527,052 | $1,106,415 | | Stock-based compensation | $1,125,802 | $1,125,802 | $138,203 | $159,390 | | Professional fees | $190,954 | $451,142 | $190,059 | $602,774 | | Insurance costs | $454,371 | $904,759 | $656,288 | $1,319,215 | - Expects general and administrative expenses to increase for the remainder of 2025 due to stock-based compensation for new grants and increased legal/professional fees related to the digital asset strategy[184] Interest and Other Expenses Insignificant for 2025 periods, contrasting with significant gains/losses in 2024 from warrant liabilities and convertible notes - Interest and other income/expenses were insignificant for the three and six months ended June 30, 2025[185][186] - For Q2 2024, interest and other income/expenses was $4,922,883, including a $5,111,291 gain on change in fair value of Series A and B Warrant liabilities[187] - For the six months ended June 30, 2024, interest and other income/expenses was $(16,880,826), including a $(14,727,696) loss on change in fair value of Series A and B Warrant liabilities and losses on conversion/exchange of convertible notes totaling $1,647,609[188] Net Loss Net loss for six months ended June 30, 2025, was $6.4 million, a significant improvement from $26.7 million in 2024 | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(3,899,897) | $(606,418) | $(6,360,327) | $(26,654,462) | Liquidity and Capital Resources Cash and equivalents were $11.9 million, with $19.0 million from financing activities, and post-quarter private placements raised $481 million net proceeds | Metric | June 30, 2025 | | :----- | :------------ | | Cash, cash equivalents and restricted cash | $11.9 million | | Working capital | $13.0 million | | Accumulated deficit | $172.7 million | | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(7.2 million) | $(8.2 million) | | Net cash used in investing activities | $(2.2 million) | $(0.2 million) | | Net cash provided by financing activities | $19.0 million | $2.3 million | - Post-quarter, Private Placements generated $481 million in net proceeds, intended for Bitcoin purchases and funding operations[199] - Management anticipates sufficient liquidity to fund planned operations beyond one year[200] JOBS Act Accounting Election Irrevocably elected not to use the extended transition period for new accounting standards under the JOBS Act - Irrevocably elected not to use the extended transition period under the JOBS Act for new accounting standards[201] - Adopts new or revised accounting standards on the same dates as other public companies[201] Critical Accounting Policies No critical accounting policies to discuss in this section - No critical accounting policies to report[203] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk[205] Item 4. Controls and Procedures Addresses effectiveness of disclosure controls, concluding ineffectiveness due to past missed filings, but no material changes to internal control Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures were ineffective as of June 30, 2025, due to past missed filings, but financial statements are fairly presented - Co-Chief Executive Officers and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of June 30, 2025[207] - Deficiency attributed to past missed timely filings and unaddressed control implementation/testing[207] - Management believes unaudited consolidated financial statements fairly present financial position, results of operations, and cash flows in all material respects[207] Changes in Internal Control over Financial Reporting No material changes to internal control over financial reporting during the three months ended June 30, 2025 - No material changes to internal control over financial reporting during the three months ended June 30, 2025[208] PART II — OTHER INFORMATION Item 1. Legal Proceedings Company may be involved in ordinary course legal proceedings with unpredictable outcomes, and cannot estimate potential losses - Company may be involved in ordinary course legal proceedings with unpredictable outcomes[209] - Cannot estimate aggregate amount or range of reasonably possible losses for matters where losses are not probable and estimable[209] Item 1A. Risk Factors Faces significant risks including Nasdaq delisting, reliance on foreign manufacturing, tariffs, and high volatility/regulatory uncertainty of digital asset strategy - Risk of delisting from Nasdaq if minimum bid price compliance is not maintained through November 10, 2025[212] - High reliance on foreign manufacturing and imports from Asia (China, Vietnam) exposes the company to risks from trade laws, tariffs (e.g., 20% for Vietnam, 30% for China), and supply chain disruptions[214][216] - Digital asset treasury strategy exposes the company to highly volatile Bitcoin prices, with potential for significant fluctuations in operating results and share price[218] - Significant legal, commercial, regulatory, and technical uncertainty surrounds Bitcoin and other digital assets, including potential classification as securities or commodities, which could lead to increased compliance costs or operational shutdowns[219][228][233] - Risks related to custody of digital assets, including security breaches, loss of private keys, and counterparty risk with custodians, could lead to total loss of assets[244] - Digital asset transactions are irreversible, exposing the company to risks of theft, loss, and human error without legal recourse or insurance[243][246] - Faces significant competition in the digital asset industry and risks from the emergence or growth of other digital assets (e.g., stablecoins, CBDCs) that could negatively impact Bitcoin's price[250][251][252][253] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales, repurchased 65,348 shares, and later expanded stock repurchase program to $100 million - No unregistered equity securities sold during the period, except as previously reported[254] | Period | Total Shares Purchased | Average Price Paid per Share ($) | Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plan or Program | | :----- | :--------------------- | :------------------------------- | :-------------------------------------------------------- | :----------------------------------------------------------- | | April 1, 2025 – April 30, 2025 | – | – | – | 1,598,194 | | May 1, 2025 – May 31, 2025 | 17,463 | 6.25 | 17,463 | 1,492,875 | | June 1, 2025 – June 30, 2025 | – | – | – | 1,492,875 | | Three Month period ended June 30, 2025 | 65,348 | N/A | 65,348 | $1,492,875 | - On July 24, 2025, the Board approved a $100 million common stock repurchase program, effective through July 24, 2027[254] Item 3. Defaults Upon Senior Securities No defaults upon senior securities - No defaults upon senior securities[255] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[256] Item 5. Other Information No director or officer adopted or terminated any Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025 - No director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025[257] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including various amendments to the Certificate of Incorporation, Bylaws, and agreements, along with certifications required by the Securities Exchange Act - Includes various amendments to the Certificate of Incorporation and Bylaws[260] - Contains certifications from Co-Chief Executive Officers and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) and 18 U.S.C. Section 1350[260] Signatures Signatures The report is signed by Ryan Lane (Co-Chief Executive Officer and Director), John Kim (Co-Chief Executive Officer and Director), and Greg Endo (Chief Financial Officer) on August 12, 2025 - Report signed by Ryan Lane (Co-CEO), John Kim (Co-CEO), and Greg Endo (CFO) on August 12, 2025[264]