EMPD

Empery Digital Inc. (EMPD) - 10-Q Summary for Period Ended June 30, 2025

Business Context and Reporting Period

This Quarterly Report on Form 10-Q covers the period ended June 30, 2025. Empery Digital Inc. (formerly Volcon, Inc.) operates as a smaller reporting company and emerging growth company. The Company is transitioning from an all-electric powersports manufacturer (brands include Volcon, Brat, HF1, and MN1) to a digital asset treasury company. Effective July 17, 2025, the Company adopted a Bitcoin treasury strategy. The Company trades on the NASDAQ under the symbol EMPD.

Key Financial Metrics

Note: Gross margin was negative in both periods due to high costs of goods sold relative to revenue, though the loss narrowed significantly in 2025.

Material Changes vs. Prior Period

• Revenue Decline: Revenue decreased by approximately 27% year-over-year to $1.44 million, driven by the discontinuation of the Grunt EVO motorcycle and lower inventory levels while awaiting new shipments.
• Improved Profitability: Net loss decreased significantly from $26.65 million in the prior year to $6.36 million. The prior year loss was heavily impacted by a $14.7 million loss on the change in fair value of financial liabilities (warrants) and a $1.6 million loss on extinguishment of convertible notes.
• Liquidity Improvement: Cash and cash equivalents increased from $2.19 million to $11.79 million, primarily due to financing activities including an At-The-Market (ATM) offering and a public offering of common stock units.
• Balance Sheet Strength: Total assets grew from $6.23 million to $17.94 million, while total liabilities decreased from $6.19 million to $4.12 million, resulting in a positive stockholders' equity of $13.82 million (up from $40,761).

Guidance, Outlook, and Subsequent Events

Strategic Pivot: The Company has launched a digital asset treasury strategy to acquire Bitcoin. Management anticipates that cash on hand plus proceeds from subsequent private placements will fund operations for more than one year.

Subsequent Events (Post-June 30, 2025):

• Private Placements: On July 21, 2025, the Company completed private placements raising gross proceeds of over $501 million (including $28 million in Bitcoin). Net cash proceeds were approximately $481 million.
• Bitcoin Acquisition: As of August 8, 2025, the Company has purchased Bitcoin totaling approximately $472 million.
• Leadership Changes: Ryan Lane was appointed Co-CEO and Chairman. New board members and executive officers were appointed in connection with the private placements.
• Stock Repurchase Program: The Board approved a new $100 million common stock repurchase program effective July 24, 2025.
• ATM Expansion: The At-The-Market issuance program capacity was increased by $1 billion.

Risks: The Company faces risks related to Nasdaq compliance (minimum bid price), volatility of Bitcoin prices, regulatory uncertainty regarding digital assets, and reliance on foreign manufacturing subject to tariffs.

Investor Verification Checklist

• Bitcoin Holdings: Verify the exact quantity of Bitcoin purchased with the $472 million in proceeds and the custody arrangements (Gemini Trust).
• Nasdaq Compliance: Confirm the Company maintains the minimum bid price of $1.00 through November 10, 2025, to avoid delisting.
• Internal Controls: Note that management concluded disclosure controls and procedures were not effective as of June 30, 2025, due to missed filings and lack of remediation testing.
• Revenue Sustainability: Assess the timeline for new product launches (expected 2026) and the impact of tariffs on current UTV and motorcycle margins.
• Dilution: Review the impact of the 44.4 million shares issued in the private placement and the 6.7 million stock options granted to executives and directors.