What changed in this filing

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Item 1. Financial Statements

2025-11-14 compared with 2025-08-19 · 630 added, 364 removed, 960 unchanged (51% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, 2025

September 30, 2025

December 31, 2024

3 unchanged sentences

Unbilled accounts receivable

Crypto assets

Prepaid expenses and other current assets

2 unchanged sentences

Intangible assets

Investments in non-marketable securities

Deposit for business combination

3 unchanged sentences

Accrued liabilities

Convertible note payable, net, related party, current

Short-term convertible notes

Short-term convertible note payable, related party

Short-term promissory notes

Total current liabilities

1 unchanged sentence

Convertible notes

Convertible Notes to CSI shareholders

Other long term note payable

Warrant liabilities

4 unchanged sentences

375,000 shares authorized;

0 and 38,335 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively

0 and 0 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively

Stockholders’ Equity:

1 unchanged sentence

300,000,000 shares authorized;

86,661,219 and 52,034,060 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively

217,201,387 and 52,034,060 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively

Additional paid-in capital

1 unchanged sentence

Total stockholders’ equity

Total liabilities, convertible preferred stock and stockholders’ equity

Total liabilities, redeemable convertible preferred stock and stockholders’ equity

(1) The condensed consolidated balance sheet as of December 31, 2024 was derived from the audited consolidated balance sheet as of that date.

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and six months ended June 30, 2025 and 2024

For the three and nine months ended September 30, 2025 and 2024

(in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue

Gross profit (deficit)

Operating Expenses:

5 unchanged sentences

Interest expense, net

Change in fair value of 2025 Notes measured at fair value

Change in fair value of 2025 and Q3 2025 notes measured at fair value

Change in fair value of convertible note to related party measured at fair value

Change in fair value of warrant liabilities

Other expense, net

Extinguishment of debt

Other income, net

Loss before provision for income taxes

1 unchanged sentence

Deemed dividend on conversion of Series B preferred for common stock and repurchase of Series B preferred stock

Deemed dividend on issuance of common stock and warrants in connection with amendment to warrants to purchase common stock

Net loss attributable to common stockholders

4 unchanged sentences

DATAVAULT AI INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the three and six months ended June 30, 2025 and 2024

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the three and nine months ended September 30, 2025 and 2024

(in thousands, except share and per share data)

3 unchanged sentences

Paid-in Capital

Equity (Deficit)

Balance as of December 31, 2024

6 unchanged sentences

Issuance of common stock in connection with warrant exercise

Issuance of common stock for conversions

Issuance of common stock for conversions of 2025 Notes

Issuance of common stock with NYIAX transaction

3 unchanged sentences

Balance as of June 30, 2025

Stock-based compensation

Issuance of common stock for the 2025 notes and Q3 notes conversions

Issuance of common stock in connection with Scilex investment

Issuance of common stock in connection with EOS conversion

Issuance of common stock for the acquisition of intangible assets

Exchange of warrants for common stock with the 10% notes extinguishment

Shares issued in connection with NYIAX transaction

Equity issuance costs

Balance as of September 30, 2025

Convertible Preferred Stock

21 unchanged sentences

Balance as of June 30, 2024

Stock-based compensation

Issuance of common stock in connection with warrant amendment

Issuance of common stock in connection with warrant exercise

Restricted stock awards cancelled

Issuance of common stock to vendors

Balance as of September 30, 2024

Share and per share amounts have been retroactively adjusted to reflect the impact of a 1-for-150 reverse stock split effected in April 2024, as discussed in Note 1.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended June 30, 2025 and 2024

For the nine months ended September 30, 2025 and 2024

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization

Amortization of debt discounts

Amortization of debt discounts and paid-in-kind interest

Change in fair value of convertible debt

Fair value of equity warrants in interest expense

Accreted interest on CSI Convertible Notes

Shares payable to NYIAX

Accreted interest on convertible notes

Change in fair value of crypto currency

Change in fair value of warrant liability

Debt extinguishment

Changes in operating assets and liabilities:

9 unchanged sentences

Purchases of property and equipment

Cash paid for acquisition of CSI, net

Acquisition of business, net

Net cash used in investing activities

3 unchanged sentences

Proceeds from issuance of common stock in connection with warrant exercise

Proceeds from issuance of common stock and warrants, net of offering costs

Proceeds from issuance of common stock, prefunded warrants and warrants, net of issuance costs

Proceeds from issuance of short-term loan, net of issuance costs

Proceeds from exercise of warrants

Proceeds from exercise of Series B preferred stock warrants

Repurchase of Series B preferred stock warrants

1 unchanged sentence

Repurchase of common stock warrants

Repayment of convertible notes principal and accrued interest

Repayment of notes principal

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents as of beginning of period

3 unchanged sentences

Issuance of warrant liability in connection with financing

Deemed dividend on conversion of Series B preferred stock and repurchase of Series B preferred stock

Unpaid financings issuance costs

Repurchase of Series B preferred stock

Repurchase of Series B preferred stock warrants

Cashless exercise of warrants

3 unchanged sentences

Capitalized acquisition costs

CSI Convertible Notes issued for CSI acquisition

Convertible notes issued for CSI acquisition

Non cash common shares issued in CSI acquisition

Shares issued for Scilex investment in exchange for Bitcoin

Deposit paid in December 2024 used in CSI acquisition closing

1 unchanged sentence

Reclass liability warrant to equity

May 2025 10% note conversions

Issuance of common stock from non-cash conversion of convertible notes

Common stock issued for intangible asset acquisitions

Issuance of common stock to NYIAX

Share and per share amounts have been retroactively adjusted to reflect the impact of a 1-for-150 reverse stock split effected in April 2024, as discussed in Note 1.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies

5 unchanged sentences

CSI is a provider of registration, data analytics, and lead management services for live events, offering customer support to clients in the trade, association, corporate, and government event markets.

The results of operations of CSI are included in the unaudited condensed consolidated financial statements of the Company for the three and six months ended June 30, 2025 since the date of acquisition.

The results of operations of CSI are included in the unaudited condensed consolidated financial statements of the Company for the three and nine months ended September 30, 2025 since the date of acquisition.

Nasdaq Compliance

15 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

7 unchanged sentences

If the Company does not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Common Stock will be subject to delisting from the Nasdaq Capital Market.

Nasdaq Compliance Regained October 10, 2025

On October 10, 2025, the Company received a letter (the “Letter”) from Nasdaq confirming that the Company has regained compliance with Nasdaq Listing Rule 5550(a)(2), which requires a minimum bid price of $1.00 per share for the Company’s common stock.

As previously disclosed, on May 6, 2025, the Company received notice from Nasdaq that it was not in compliance with the minimum bid price requirement.

The Letter states that for 10 consecutive business days from September 26, 2025 through October 9, 2025, the closing bid price of the Company’s common stock was at least $1.00 per share.

Accordingly, the Company has regained compliance with Nasdaq Listing Rule 5550(a)(2), and this matter is now closed.

Reverse Stock Split

5 unchanged sentences

Unless otherwise indicated, the information presented in this Quarterly Report on Form 10-Q (this “Report”) gives effect to the April 2024 Reverse Stock Split.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Basis of Presentation

4 unchanged sentences

All intercompany balances and transactions are eliminated.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Use of Estimates

5 unchanged sentences

These reclassifications did not result in any change in previously reported net income (loss), total assets or stockholders’ deficit.

During the three months ended September 30, 2025, the Company recorded an out-of-period adjustment to correct misstatements related to the accounting for its investment in NYIAX Inc.

within the financial statements for the period ended June 30, 2025.

In the three months ended September 30, 2025, the Company issued 2,530,000 shares of common stock to NYIAX that was contractually required to be issued on April 9, 2025 at the closing date.

The Company incorrectly omitted $ 4.3 million in assets consisting of $ 1.8 million investment and $ 2.5 million in note receivable, understated additional paid-in capital by $ 4.9 million, and overstated research and development expense by $ 0.5 million resulting in a corresponding decrease in net loss and pre-tax loss for the three months ended June 30, 2025.

The Company recorded a $ 4.3 million investment in NYIAX in the three months ended September 30, 2025 to recognize the fair value of the shares received from NYIAX, $ 1.8 million of which was received in the three months ended June 30, 2025 and properly stated in the three months ended September 30, 2025.

Research and development expense was decreased in the three months ended September 30, 2025 by $ 0.5 million to properly reflect expense associated with recognizing the intellectual property received from NYIAX.

The correction is non-cash in nature and had no impact on revenue, operating cash flows, or compliance with any debt covenants.

Management evaluated the impact of the error both qualitatively and quantitatively and determined that it was not material to the financial statements for the quarter ended June 30, 2025, or the current reporting period.

Concentration of Credit Risk and Other Risks and Uncertainties

5 unchanged sentences

The Company performs credit evaluations of its customers’ financial condition and may, in certain circumstances, require full or partial payment in advance of shipping.

As of June 30, 2025 and December 31, 2024, there was no allowance for credit losses.

As of June 30, 2025, the Company had two customers accounting for 25 % and 13 % of accounts receivable.

As of September 30, 2025 and December 31, 2024, there was no allowance for credit losses.

As of September 30, 2025, the Company had two customers accounting for 29 % and 17 % of accounts receivable.

As of December 31, 2024, the Company had three customers accounting for 68 %, 12 % and 11 % of accounts receivable.

The Company had two customer accounting for 18 % and 10 % of its net revenue for the three months ended June 30, 2025.

The Company had two customers accounting for 13 % and 10 % of its net revenue for the six months ended June 30, 2025.

The Company had four customers accounting for 33 %, 27 %, 20 % and 11 % of its net revenue for the three months ended June 30, 2024.

The Company had four customers accounting for 28 %, 27 %, 19 % and 10 % of its net revenue for the six months ended June 30, 2024.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

The Company had one customer accounting for 19 % of its net revenue for the three months ended September 30, 2025.

The Company had one customer accounting for 12 % of its net revenue for the nine months ended September 30, 2025.

The Company had one customer accounting for 56 % of its net revenue for the three months ended September 30, 2024.

The Company had three customers accounting for 38 %, 15 % and 12 % of its net revenue for the nine months ended September 30, 2024.

The Company’s future results of operations involve a number of risks and uncertainties.

9 unchanged sentences

The Company exercises judgment when determining the adequacy of these reserves as it evaluates historical bad debt trends and changes to customers’ financial conditions.

No allowance for credit losses was deemed necessary as of June 30, 2025 or December 31, 2024.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

No allowance for credit losses was deemed necessary as of September 30, 2025 or December 31, 2024.

Fair Value of Financial Instruments

6 unchanged sentences

At the point of loss recognition, a new lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in the new cost basis.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Deferred Offering Costs

2 unchanged sentences

In the event that an offering is terminated, deferred offering costs will be expensed.

As of June 30, 2025 and December 31, 2024, the Company had capitalized no deferred offering costs.

As of September 30, 2025 and December 31, 2024, the Company had capitalized $ 243,000 and no deferred offering costs, respectively.

Property and Equipment, Net

10 unchanged sentences

Debt discounts under these arrangements are amortized to interest expense using the interest method over the earlier of the term of the related debt or their earliest date of redemption.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Warrants for Common Shares, Convertible Redeemable Preferred Shares, and Derivative Financial Instruments

6 unchanged sentences

The Company will continue to assess if there should be a warranty accrual going forward.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Revenue Recognition

17 unchanged sentences

The Company uses the input method of labors hours expended as it provides the best depiction of the transfer of services to the client.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company for Consumer Audio Products and Components from a customer and deposited with the relevant government authority, are excluded from revenue.

7 unchanged sentences

If a customer pays consideration, or the Company has a right to an amount of consideration that is unconditional before we transfer a good or service to the customer, those amounts are classified as contract liabilities which are included in other current liabilities when the payment is made or it is due, whichever is earlier.

During the three and six months ended June 30, 2025 and 2024, net revenue consisted of the following:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

During the three and nine months ended September 30, 2025 and 2024, net revenue consisted of the following:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in thousands)

5 unchanged sentences

Accounts receivables are recorded when the right to this consideration becomes unconditional.

The Company has $ 356,000 and $ 109,000 of contract assets as of June 30, 2025 and December 31, 2024, respectively, which are recorded in Prepaids and other current assets on the condensed consolidated balance sheets.

The Company expects to collect 100 % of the contract assets as of June 30, 2025 in the next twelve months.

During the six months ended June 30, 2025, the Company recognized $ 53,000 of revenue that was included in the contract liabilities balance as of December 31, 2024.

The Company has $ 719,000 and $ 109,000 of contract assets as of September 30, 2025 and December 31, 2024, respectively, which are recorded in the current assets section on the condensed consolidated balance sheets.

The Company expects to collect 100 % of the contract assets as of September 30, 2025 in the next twelve months.

During the nine months ended September 30, 2025, the Company recognized $ 54,000 of revenue from contract liabilities that were included in accrued liabilities on the condensed consolidated balance sheets as of December 31, 2024.

September 30,

(in thousands)

3 unchanged sentences

Since we operate in one segment, all financial segment and product line information can be found in the condensed consolidated financial statements.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Practical Expedients and Exemptions

6 unchanged sentences

The Company measures and recognizes the compensation expense for restricted stock units and restricted stock awards granted to employees and directors based on the fair value of the award on the grant date.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Restricted stock units give an employee an interest in Company stock but they have no tangible value until vesting is complete.

3 unchanged sentences

Compensation cost for restricted stock units and restricted stock awards is recognized using the straight-line method over the requisite service period.

Crypto Assets

We hold crypto assets primarily for operational purposes and to support short-term liquidity needs within our normal operating cycle.

These crypto assets are received and used in the ordinary course of business, including to settle vendor payments or facilitate customer-related transactions.

We reasonably expect to convert such assets to cash or utilize them in operations within a short period of time, typically within one year.

All of our crypto assets are held in Bitcoin.

Consistent with this intent and realization pattern, we have classified all crypto assets as current assets in our consolidated balance sheets in accordance with ASC 210-10 and ASC 350-60.

We do not hold crypto assets for long-term investment, speculative, or collateral purposes, and we do not engage in trading or financing activities involving crypto assets.

Our crypto asset holdings are considered less liquid than cash and cash equivalents and may not serve as an equivalent source of liquidity during periods of market stress.

Research and Development

2 unchanged sentences

Advertising costs are charged to sales and marketing expenses as incurred.

Advertising costs for the three and six months ended June 30, 2025 were $ 29,000 and $ 175,000 respectively.

Advertising costs for the three and six months ended June 30, 2024 were $ 117,000 and $ 264,000 , respectively.

Advertising costs for the three and nine months ended September 30, 2025 were $ 72,000 and $ 247,000 respectively.

Advertising costs for the three and nine months ended September 30, 2024 were $ 201,000 and $ 465,000 , respectively.

Comprehensive Loss

1 unchanged sentence

Accordingly, comprehensive loss may include certain changes in equity that are excluded from net loss.

For the three and six months ended June 30, 2025 and 2024, the Company’s comprehensive loss is the same as its net loss.

For the three and nine months ended September 30, 2025 and 2024, the Company’s comprehensive loss is the same as its net loss.

Foreign Currency

5 unchanged sentences

Cumulative gains and losses from the translation of these operations’ financial statements are reported as a separate component of stockholders’ equity, while foreign currency transaction gains or losses, resulting from re-measuring local currency to the U.S.

dollar are recorded in the condensed consolidated statement of operations in other income (expense), net and were not material for the three and six months ended June 30, 2025 and 2024.

dollar are recorded in the condensed consolidated statement of operations in other income (expense), net and were not material for the three and nine months ended September 30, 2025 and 2024.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

8 unchanged sentences

Net loss is adjusted for any deemed dividends to preferred stockholders to compute income available to common stockholders.

For the six months ended June 30, 2025, warrants to purchase 31,232,173 shares of common stock, 12 shares underlying shares of restricted stock units, 1,200,000 shares underlying shares of restricted stock units issued under an inducement grant, 10,108,368 shares underlying restricted stock awards and 564,183 shares under two grants of restricted stock under inducement grants have been excluded from the calculation of net loss per common share because the inclusion would be antidilutive.

For the six months ended June 30, 2024, warrants to purchase 9,793,531 shares of common stock, 260,441 shares of restricted stock, 16 shares of restricted stock issued under an inducement grant and 14 shares underlying restricted stock units have been excluded from the calculation of net loss per common share because the inclusion would be antidilutive.

For the nine months ended September 30, 2025, warrants to purchase 31,232,173 shares of common stock, 12 shares underlying shares of restricted stock units, 1,150,000 shares underlying shares of restricted stock units issued under an inducement grant, 8,595,182 shares underlying restricted stock awards and 500,000 shares under two grants of restricted stock under inducement grants have been excluded from the calculation of net loss per common share because the inclusion would be antidilutive.

For the nine months ended September 30, 2024, warrants to purchase 9,375,730 shares of common stock, 698,279 shares of restricted stock, 70,016 shares of restricted stock issued under an inducement grant and 14 shares underlying restricted stock units have been excluded from the calculation of net loss per common share because the inclusion would be antidilutive.

Deferred taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences, and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences.

1 unchanged sentence

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is “more-likely-than-not” that some portion or all of the deferred tax assets will not be realized.

The Company has recognized valuation allowances against its deferred tax assets as of June 30, 2025 and December 31, 2024.

The Company has recognized valuation allowances against its deferred tax assets as of September 30, 2025 and December 31, 2024.

Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

4 unchanged sentences

The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense.

As of June 30, 2025 and December 31, 2024, the Company recognized no interest and penalties.

As of September 30, 2025 and December 31, 2024, the Company recognized no interest and penalties.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Costs to Fulfill Contracts

The Company capitalizes certain pre-show indirect costs that are incurred to fulfill customer contracts when those costs relate directly to the contract, generate or enhance resources that will be used to satisfy future performance obligations, and are expected to be recoverable.

Capitalized costs primarily include indirect pre-show setup activities, such as venue deposits, equipment preparation, design and technical pre-production efforts, and other pre-show fulfillment activities.

The Company expenses all direct costs related to the execution of the show and all post-show costs as incurred, as those activities do not meet the criteria for capitalization under ASC 340-40.

Capitalized pre-show costs are amortized on a systematic basis that is consistent with the transfer of the related services to the customer, which the Company determines based on the percentage of completion of each contract.

For example, if a contract is 20% complete as of the reporting date, 20% of the associated capitalized indirect pre-show costs are amortized.

Amortization of costs to fulfill a contract is recorded in cost of sales in the condensed consolidated statements of operations.

At September 30, 2025, the balance of capitalized costs to fulfill contracts was $ 273,000 , all of which is classified as a current asset.

During the three months ended September 30, 2025, the Company recognized $ 170,000 of amortization related to capitalized contract fulfillment costs.

No impairment losses were recognized during the period.

Recently Adopted Accounting Pronouncements

4 unchanged sentences

The Company has adopted this standard as of January 1, 2025 and does not expect the adoption to have a material impact on its condensed consolidated financial statements.

In December 2023, the FASB issued ASU No.

2023-08, Accounting for and Disclosure of Crypto Assets (Subtopic 350-60) (“new crypto assets standard”).

The new crypto assets standard requires certain crypto assets to be measured at fair value separately on the balance sheet with changes reported in the statement of operations each reporting period.

The new crypto assets standard also enhances the other intangible asset disclosure requirements by requiring the name, cost basis, fair value, and number of units for each significant crypto asset holding.

The Company first received crypto assets during the third quarter of 2025 and therefore adopted ASU 2023-08 as of that date.

Because the Company had no crypto asset holdings prior to that period, no retrospective application or recast of prior-period financial statements was required.

The adoption did not have an impact on previously reported results.

Recently Issued and Not Yet Adopted Accounting Pronouncements

ASU 2025-06 Internal-use software issued in September 2025, ASU 2025-06 updates guidance in Subtopic 350-40 to streamline accounting for internal-use software, particularly for agile development methods.

This change was a priority for stakeholders who found it difficult to differentiate project stages for capitalizing development costs in iterative environments.

ASU 2025-05 Measurement of credit losses published in July 2025, this ASU improves guidance for measuring credit losses on accounts receivable and contract assets.

It offers optional guidance to address challenges entities faced applying Topic 326 to these assets.

This update aims to simplify the process for entities, such as private companies, that found it complex to develop reasonable forecasts for credit loss estimation.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

ASU 2024-04 Debt—Debt with Conversion and Other Options (Subtopic 470-20):

3 unchanged sentences

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

The Company is currently evaluating the impact of the adoption of this standard on its condensed consolidated financial statements.

ASU 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

7 unchanged sentences

The Company has reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the consolidated financial statements as a result of future adoption.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Going Concern

The condensed consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business.

As of June 30, 2025, the Company had cash and cash equivalents of $ 0.7 million and reported net cash used in operations of $ 12.8 million during the six months ended June 30, 2025.

As of September 30, 2025, the Company had cash and cash equivalents of $ 1.7 million and reported net cash used in operations of $23.0 million during the nine months ended September 30, 2025.

The Company expects operating losses to continue in the foreseeable future because of additional costs and expenses related to research and development activities, plans to expand its product portfolio, and increase its market share.

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Business Combination and Asset Purchase

19 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Business Combination and Asset Purchase, continued

5 unchanged sentences

Internal use technology

The goodwill recorded in the CSI acquisition is not deductible for tax purposes.

Transaction related expenses were $ 186,000 and $ 438,000 for the three and six months ended June 30, 2025 are included in general and administrative expenses in the unaudited condensed consolidated statements of operations.

Transaction related expenses were $ 475,000 for the nine months ended September 30, 2025 and are included in general and administrative expenses in the condensed consolidated statements of operations.

Other Intangible Asset Acquisitions

In the three months ended September 30, 2025, the Company acquired additional patents for an aggregate fair value of $ 3.5 million and a useful life of 10 years , based on expected future economic benefit, in exchange for the issuance of 5,500,000 shares of common stock.

The Company recorded amortization expense of $ 73,000 for the three months ended September 30, 2025.

EOS Asset Acquisition

4 unchanged sentences

See Note 11 Related Parties for further details.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Business Combination and Asset Purchase, continued

Second Asset Purchase Agreement Amendment

6 unchanged sentences

The parties also updated the schedules describing the transferred assets and transferred liabilities.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Business Combination and Asset Purchase, continued

Earnout Agreement

5 unchanged sentences

The Earnout Agreement was not assigned a fair value at the purchase date as it was not deemed likely that any payments will be made as of December 31, 2024.

There is no change as of June 30, 2025.

There is no change as of September 30, 2025.

The Company accounted for the Asset Purchase Agreement as an asset purchase in accordance with ASC 805, Business Combinations (the “Screen Test”).

As such, the aggregate consideration of approximately $ 92.0 million plus capitalized fees of $ 575,000 were recorded to the intangible assets acquired of patents and trademarks for $ 2.4 million and $ 90.1 million, respectively, with useful weighted average remaining lives of ten years in each case .

For the three and six months ended June 30, 2025, the amortization expense related to intangible assets was approximately $ 2.3 million and $ 4.6 million, respectively.

For the three and nine months ended September 30, 2025, the amortization expense related to intangible assets was approximately $ 2.3 million and $ 7.0 million, respectively.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Balance Sheet Components

Inventories (in thousands):

September 30,

Raw materials

3 unchanged sentences

Property and equipment, net (in thousands):

September 30,

Machinery and equipment

3 unchanged sentences

Property and equipment, net

Depreciation and amortization expense for the three months ended June 30, 2025 and 2024 were approximately of $ 26,000 and $ 28,000 , respectively.

Depreciation and amortization expense for the six months ended June 30, 2025 and 2024 were approximately $38,000 and $ 48,000 , respectively.

As of June 30, 2025, the future amortization of the intangibles acquired is as follows:

Depreciation and amortization expense for the three months ended September 30, 2025 and 2024 were approximately of $ 43,000 and $ 11,000 , respectively.

Depreciation and amortization expense for the nine months ended September 30, 2025 and 2024 were approximately $82,000 and $ 59,000 , respectively.

As of September 30, 2025, the future amortization of the intangibles acquired is as follows:

2025 remainder

Intangible assets, net consisted of the following at June 30, 2025.

Intangible assets, net consisted of the following at September 30, 2025.

Gross Carrying

2 unchanged sentences

Internal use technology

The Company recognized amortization expense related to intangibles of $ 2.7 million and $ 7.5 million for the three and nine months ended September 30, 2025, respectively.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Balance Sheet Components, continued

Notes receivable

On April 9, 2025, the Company advanced $ 450,000 note receivable to NYIAX as part of the NYIAX transaction described in Note 10 Commitments and Contingencies.

The Company derecognized the asset due to probability of non-payment and expensed to the line item research and development in the condensed consolidated statement of operations for the six months ended June 30, 2025.

On April 9, 2025, the Company advanced $ 450,000 to NYIAX as part of the NYIAX transaction described in Note 10 Commitments and Contingencies.

The Company derecognized the asset due to probability of non-payment and expensed to research and development in the condensed consolidated statement of operations for the nine months ended September 30, 2025.

On June 13, 2024, the Company entered into a Senior Secured Promissory Note and Security Agreement (“Promissory Note and Security Agreement”) with EOS Holdings (“the Borrower”).

25 unchanged sentences

On December 31, 2024, the Borrower and the Company agreed to amend the December 2024 Note maturity date to the latter of the maturity date of the DV Convertible Note of December 31, 2027 or a qualified subsequent financing as determined by the DV Convertible Note Promissory agreement.

The above notes receivable are netted on the condensed consolidated balance sheet in “convertible note payable, net related party” as of June 30, 2025 as there is a right of offset included in the DV Convertible Note and the four amended note receivable agreements above.

The above notes receivable were netted on the condensed consolidated balance sheet in “convertible note payable, net related party” as there is a right of offset included in the DV Convertible Note and the four amended note receivable agreements above.

On February 14, 2025, $ 136,000 was paid off as a result of the February 2025 Offering (defined below) in which a portion of proceeds in the 2025 Offering (defined below) were used to satisfy principal on the EOS note receivables.

The proceeds from the financings in April 2025 and May 2025 (See Note 5 for details on the 2025 Offerings) were netted with the note receivable balance in the three months ended June 30, 2025 and as a result the balance is no longer outstanding as of June 30, 2025.

At June 30, 2025, the Company had recognized approximately $ 5,000 of interest income on the Notes Receivable.

The proceeds from the financings in April 2025 and May 2025 (See Note 5 for details on the 2025 Offerings) were netted with the note receivable balance in the nine months ended September 30, 2025 and as a result the balance is no longer outstanding as of September 30, 2025.

At September 30, 2025, the Company had recognized approximately $ 5,000 of interest income on the Notes Receivable.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Balance Sheet Components, continued

4 unchanged sentences

Accrued liabilities (in thousands):

Customer advance

September 30,

Contract liability

Accrued compensation

Accrued lease liability, current portion

Accrued escrow liability

Accrued legal fees

Accrued vacation

Accrued audit fees

Accrued payable to NYIAX

Accrued interest payable

Accrued lease liability, current portion

Accrued other

1 unchanged sentence

January 2024 Short-Term Loan Agreement

On January 19, 2024, the Company issued promissory notes in the aggregate principal amount of $ 1,000,000 (the “January 2024 Promissory Notes”) and common stock purchase warrants to purchase up to an aggregate of 66,665 shares (the “January 2024 Warrant Shares”) of the Company’s common stock, at an initial exercise price of $ 22.23 per share with four accredited investors (each an “Investor” and together the “Investors”).

On January 19, 2024, the Company issued promissory notes in the aggregate principal amount of $ 1.0 million (the “January 2024 Promissory Notes”) and common stock purchase warrants to purchase up to an aggregate of 66,665 shares (the “January 2024 Warrant Shares”) of the Company’s common stock, at an initial exercise price of $ 22.23 per share with four accredited investors (each an “Investor” and together the “Investors”).

In connection with the January 2024 Promissory Notes, the Company received gross proceeds of $ 600,000 , before fees and other expenses associated with the transaction.

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Borrowings, continued

In connection with the issuance of the January 2024 Warrant Shares (see Note 6 – Fair Value Measurements), the fair value of the warrants and the original issue discount for interest were recorded as debt discounts totaling $ 1,260,000 .

The debt discounts were to be amortized to interest expense over the respective term using the effective interest method.

In connection with the full repayment of the January 2024 Promissory Notes, the Company recognized $ 1,260,000 of interest expense in the six months ended June 30, 2024.

In connection with the full repayment of the January 2024 Promissory Notes, the Company recognized $ 1.3 million of interest expense in the nine months ended September 30, 2024.

DV Convertible Note

In connection with the DV Closing, the Company issued the DV Convertible Note in a principal amount of $ 10,000,000 due on the third anniversary of the DV Closing on December 31, 2027.

In connection with the DV Closing, the Company issued the DV Convertible Note in a principal amount of $ 10.0 million due on the third anniversary of the DV Closing on December 31, 2027.

The Company agreed to pay interest to EOS Holdings on the aggregate unconverted and then outstanding principal amount of the note at the rate of five and twelve hundredths percent ( 5.12 %) per annum, accruing from the DV Closing.

14 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Borrowings, continued

On February 14, 2025, the Company paid a portion of principal and interest of $ 406,000 , net, as a result of the February 2025 Public Offering (defined below in Note 7).

On April 2, 2025 and May 20, 2025 in connection with the 2025 Notes financing, the Company paid an aggregate of $ 675,000 in principal balance and the balance as of June 30, 2025 and December 31, 2024 was $ 8.8 million and 10.0 million.

The fair value was $ 7.3 million as of June 30, 2025.

On April 2, 2025 and May 20, 2025 in connection with the 2025 Notes financing, the Company paid an aggregate of $ 675,000 in principal balance.

On August 6, 2025, in connection with the Q3 2025 financing, the Company paid $ 250,000 and on September 26, 2025 the Company paid $ 725,000 .

For the nine months ended September 30, 2025, the Company paid an aggregate of $ 2.5 million in cash payments of $ 2.1 million and through offsetting against the note receivable of $ 0.4 million.

See Note 6 fair value measurements for further disclosures.

On September 7, 2025 the Company extinguished a portion of the principal and interest of $ 3.2 million in an Amendment and Conversion Agreement with the EOS for 10,000,000 shares.

The balance as of September 30, 2025 and December 31, 2024 was $ 4.5 million and $ 10.0 million.

The fair value was $ 4.5 million as of September 30, 2025.

The DV Convertible Note was netted with the notes receivable from EOS Holdings in “convertible note payable, net, related party” on the condensed consolidated balance sheets as of December 31, 2024 as EOS Holdings agreed to offset the outstanding balance on the DV Convertible Note with the notes receivable at maturity or at a qualifying capital raising or financing transaction noted above.

The notes receivable from EOS Holdings was fully paid off in the three months ended June 30, 2025 due to the financing activity noted above.

Securities Purchase Agreement

The notes receivable from EOS Holdings was fully paid off in the nine months ended September 30, 2025 due to the financing activity noted above.

April Securities Purchase Agreement

On April 3, 2025, the Company completed the initial closing of its previously announced transaction (the “April 2025 Offerings”) in which, pursuant to a securities purchase agreement (the “April 2025 Purchase Agreement”) between the Company and certain institutional investors (the “April 2025 Purchasers”), dated March 31, 2025, the April 2025 Purchasers agreed to purchase from the Company (a) in a registered direct offering, senior secured convertible notes having an aggregate principal amount of $ 5.5 million (the “Initial Notes”) for an aggregate purchase price of $ 5.0 million and senior secured convertible notes having an aggregate principal amount of $ 11.1 million (the “Additional Notes”, and together with the Initial Notes, the (“2025 Notes”) for an aggregate purchase price of $ 10.0 million upon satisfaction of certain closing conditions applicable to the Initial Notes and Additional Notes, respectively and (b) in a concurrent private placement, common stock purchase warrants (“2025 Warrants”) to purchase up to 19,346,101 shares of common stock of the Company, of which warrants to purchase up to 6,448,700 shares of common stock were issued in connection with the issuance of the Initial Notes (the “April 2025 Initial Warrants”) and warrants to purchase up to 12,897,401 shares of common stock will be issued in connection with the issuance of the Additional Notes (the “Additional Warrants”).

4 unchanged sentences

Pursuant to the April 2025 Purchase Agreement, until the date that is 18 months after the date on which the 2025 Notes are no longer outstanding, the April 2025 Purchasers have the right, but not the obligation, to participate in any issuance by the Company of any debt, preferred stock, shares of common stock or securities convertible into shares of common stock (a “Subsequent Financing”) up to a maximum of 65 % of such Subsequent Financing on the same terms, conditions and price provided to other investors in such Subsequent Financing.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Borrowings, continued

2025 Convertible Notes

5 unchanged sentences

The conversion price of the 2025 Notes is subject to a floor price of $ 0.1794 (the “Floor Price”).

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Borrowings, continued

In the event the Alternate Conversion Price would be lower than the Floor Price, the Company is required to compensate the holders of the 2025 Notes by paying the holders in cash an amount (the “Alternate Conversion Floor Amount”) equal to the product obtained by multiplying (A) the VWAP on the day the holder delivers the applicable conversion notice and (B) the difference obtained by subtracting (I) the number of shares of common stock delivered (or to be delivered) to the holder on the applicable share delivery date with respect to such Alternate Conversion from (II) the quotient obtained by dividing (x) the applicable conversion amount that the holder has elected to be the subject of the applicable Alternate Conversion, by (y) the applicable Alternate Conversion Price without being limited by the Floor Price.

5 unchanged sentences

Accordingly, the Company recorded in interest expense a charge of $ 6.5 million to mark the 2025 Notes to fair value in the condensed consolidated statement of operations.

The original issue discount of $ 1.7 million and fees of $ 1.3 million were expensed in interest expense in the condensed consolidated statement of operations for the three and six months ended June 30, 2025.

In the three months ended June 30, 2025, the 2025 Notes were partially converted for 1,111,111 principal and 1,845,945 shares of common stock in cashless conversions.

The fair value of the 2025 Notes converted was $ 1.6 million and was recorded to additional paid in capital on the condensed consolidated balance sheets and was estimated used inputs of the level 3 hierarchy.

The fair value of the 2025 Notes at June 30, 2025 was $ 21.0 million also estimated using inputs from the level 3 hierarchy.

See Note 6 fair value measurements for further disclosures.

The original issue discount of $ 1.7 million and fees of $ 1.3 million were expensed in interest expense in the condensed consolidated statement of operations for the three and nine months ended September 30, 2025.

In the three months ended September 30, 2025, the remaining balance of the 2025 Notes were fully converted for $ 15.6 million principal and 64,442,462 shares of common stock in cashless conversions.

For the nine months ended September 30, 2025, the 2025 Notes were fully converted for $ 16.7 million principal and 66,288,407 shares of common stock in cashless conversions.

The fair value of the 2025 Notes converted in the three and nine months ended September 30, 2025 was $ 20.9 million and $ 22.5 million, respectively, and was recorded to additional paid in capital on the condensed consolidated balance sheets and was estimated used inputs of the level 3 hierarchy.

The 2025 Notes were fully converted at September 30, 2025.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Borrowings, continued

Security Agreement and Guarantee

5 unchanged sentences

Under the Placement Agency Agreement, for a period of nine (9) months from the Initial Closing, the Company will pay the Placement Agent a cash fee equal to 7.0 % of the gross proceeds of any capital raising activity received by the Company from the Purchasers in the Offerings.

August Securities Purchase Agreement

On August 4, 2025, the Company, entered into a Securities Purchase Agreement (the “August Purchase Agreement”) with certain institutional investors (the “August Purchasers”), pursuant to which the August Purchasers agreed to purchase from the Company in a registered direct offering (the “August Offering”), senior secured convertible notes having an aggregate principal amount of $ 6.7 million (the “August Initial Notes”) for an aggregate purchase price of $ 6.0 million and senior secured convertible notes having an aggregate principal amount of $ 6.7 million (the “September Additional Notes”, and together with the August Initial Notes, the “Q3 2025 Notes”) for an aggregate purchase price of $ 6.0 million upon satisfaction of certain closing conditions applicable to the August Initial Notes and September Additional Notes, respectively.

The closing of August Initial Notes (the “August Initial Closing”) occurred on August 6, 2025.

Additional Closing

The closing of the September Additional Notes (the “September Additional Closing,” and together with the August Initial Closing, the “August and September Closings”) occurred, and the September Additional Notes were issued, on September 30, 2025.

Obligations Under the Purchase Agreement

The Company agreed, (i) not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of shares of common stock or securities convertible into shares of common stock until 45 days after the date of each August and September Closing, and (ii) not to issue certain securities if the issuance would constitute a variable rate transaction until no August Purchasers holds any Q3 2025 Notes.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Borrowings, continued

Until the date that is 18 months after the date on which the Q3 2025 Notes are no longer outstanding, the August Purchasers have the right, but not the obligation, to participate in any issuance by the Company of any debt, preferred stock, shares of common stock or securities convertible into shares of common stock (a “Subsequent Financing”) up to a maximum of 65 % of such Subsequent Financing on the same terms, conditions and price provided to other investors in such Subsequent Financing.

Q3 2025 Notes

The Q3 2025 Notes carry a 10 % original issue discount, and mature 18 months from the date of issuance.

No interest accrues during the term of the Q3 2025 Notes, unless an event of default occurs, in which case interest will accrue at a rate of 12 % per annum.

The obligations under these Q3 2025 Notes rank senior to all other existing indebtedness and equity of the Company.

The Q3 2025 Notes are convertible at any time at the option of the holders thereof, in whole or in part, into such number of shares of common stock (the “Q3 2025 Conversion Shares”) at an initial conversion price equal to $ 1.00 per share (the “Q3 2025 Conversion Price”).

Alternatively, the Q3 2025 Notes are convertible at the holder’s election, at a price (the “Q3 2025 Alternate Conversion Price”) equal to the greater of (x) the floor price (as defined below) and (y) 80 % of the lowest volume weighted adjusted price of the shares of Common Stock (the “VWAP”) in the twenty (20) trading days prior to the applicable conversion date (“Alternate Conversions”).

The conversion price of the Notes is subject to a floor price of $ 0.1019 (the “Q3 2025 Floor Price”).

In the event the Q3 2025 Alternate Conversion Price would be lower than the Q3 2025 Floor Price, the Company is required to compensate the holders of the Q3 2025 Notes by paying the holders in cash an amount (the “Q3 2025 Alternate Conversion Floor Amount”) equal to the product obtained by multiplying (A) the VWAP on the day the holder delivers the applicable conversion notice and (B) the difference obtained by subtracting (I) the number of shares of common stock delivered (or to be delivered) to the holder on the applicable share delivery date with respect to such Q3 2025 Alternate Conversion from (II) the quotient obtained by dividing (x) the applicable conversion amount that the holder has elected to be the subject of the applicable Q3 2025 Alternate Conversion, by (y) the applicable Q3 2025 Alternate Conversion Price without being limited by the Q3 2025 Floor Price.

Under the Q3 2025 Notes, the Company is required to use up to 20 % of the proceeds from future financings to redeem the Q3 2025 Notes in an amount equal to the aggregate principal amount of the Q3 2025 Notes being redeemed from such proceeds multiplied by 105 %.

The Q3 2025 Notes contain 4.99 / 9.99 % beneficial ownership limitations and customary provisions regarding events of defaults and negative covenants.

The Q3 2025 Notes are secured by all of the assets of the Company pursuant to a security agreement and guaranteed by a subsidiary of the Company pursuant to a subsidiary guarantee, both of which were entered into on August 6, 2025.

The Company elected the fair value option to account for the Q3 2025 Notes.

The fair value on issuance of the Q3 2025 Notes was $ 21.6 million which exceeded the proceeds of $ 11.5 million by $ 10.1 million for which the Company recorded a day one loss.

The financing terms were deemed reasonable due to the Company’s liquidity position.

Accordingly, the Company recorded in interest expense a charge of $ 7.8 million to mark the Q3 2025 Notes to fair value in the condensed consolidated statement of operations.

The original issue discount of $ 1.3 million and fees of $ 1.0 million were expensed in interest expense in the condensed consolidated statement of operations for the three and nine months ended September 30, 2025.

In the three months ended September 30, 2025, the Q3 2025 Notes were partially converted for $ 6.7 million principal and 31,064,393 shares of common stock in cashless conversions.

The fair value of the Q3 2025 Notes converted was $ 12.3 million and was recorded to additional paid in capital on the condensed consolidated balance sheets and was estimated used inputs of the level 3 hierarchy.

The fair value of the Q3 2025 Notes at September 30, 2025 was $ 12.2 million also estimated using inputs from the level 3 hierarchy.

See Note 6 fair value measurements for further disclosures.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Borrowings, continued

In connection with the Q3 2025 Notes, the Company agreed to exchange outstanding warrants of 30,738,449 million in exchange for the issuance of 30,738,449 shares of common stock.

The incremental change in fair value of $ 3.7 million, representing losses recognized in connection with the modification and exchange of the convertible notes, is included in extinguishment expense on the condensed consolidated statement of operations.

In addition, in connection with the Q3 2025 Notes, the Company agreed to modify the 2025 Notes to a lower Alternate Conversion Price.

This resulted in an incremental fair value loss of $ 2.1 million, representing losses recognized in connection with the modification and exchange of the convertible notes, which is included in extinguishment expense on the condensed consolidated statement of operations.

Bridge Financing

For the three months ended September 30, 2025, the Company entered into two financing arrangements in September 2025 and received proceeds of $ 0.9 million.

We incurred origination fees of $ 65,000 and interest fees of $ 146,000 .

Both financings were paid in full in October 2025.

The Company was in non-compliance with the Q3 2025 Notes for permitted indebtedness in excess of $ 200,000 as of September 30, 2025 as a result of the above financing arrangements.

The non-compliance was cured as of October 1, 2025.

For further details, see Note 13 Subsequent Events.

No further covenant violations are on-going.

CSI Convertible Notes

9 unchanged sentences

The entire outstanding principal and accrued interest shall automatically be converted into shares of common stock on the Maturity Date at the Conversion Price.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Borrowings, continued

The Company evaluated the agreement under ASC 815 Derivatives and Hedging (“ASC 815”).

3 unchanged sentences

Refer to Note 3 for more details.

The CSI Convertible Notes carrying value at June 30, 2025 was $ 10.1 million, net of a discount of $ 5.1 million.

Discount accretion of $ 0.2 million was recorded in the three and six months ended June 30, 2025.

The CSI Convertible Notes carrying value at September 30, 2025 was $ 10.5 million, net of a discount of $ 4.6 million.

Discount accretion expense was $ 0.5 million and $ 0.7 million for the three and nine months ended September 30, 2025, respectively.

Fair Value Measurements

5 unchanged sentences

The Company does not adjust for or apply any additional assumptions or estimates to the pricing information received from its advisors.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Fair Value Measurements, continued

● Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment.

1 unchanged sentence

The determination of fair value for Level 3 instruments involves the most management judgment and subjectivity.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024 by level within the fair value hierarchy, are as follows:

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024 by level within the fair value hierarchy, are as follows:

(in thousands)

June 30, 2025

September 30, 2025

Quoted prices

1 unchanged sentence

Warrant liabilities

A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s 2025 Notes that are categorized within Level 3 of the fair value hierarchy as of June 30, 2025 is as follows:

June 30, 2025

Initial valuation

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Fair Value Measurements, continued

September 30, 2025

Conversion price

$ 1.00 - $ 0.179

Conversion discount

Volatility (annual)

101.71 % - 185.14 %

91.15 % - 183.12 %

Risk-free rate

3.82 % - 4.19 %

4.9 % - 4.12 %

Dividend rate

1 unchanged sentence

Estimated future financing amount

$ 150 million

Discount rate

A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s DV Note that are categorized within Level 3 of the fair value hierarchy as of June 30, 2025 is as follows:

June 30, 2025

September 30, 2025

Conversion price

4 unchanged sentences

Estimated future financing amount

$ 150 million

Discount rate

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Fair Value Measurements, continued

4 unchanged sentences

Warrant liabilities

There were no transfers between Level 1, 2 or 3 during the three and six months ended June 30, 2025 or 2024.

There were no transfers between Level 1, 2 or 3 during the three and nine months ended September 30, 2025 or 2024.

Warrant Liabilities

4 unchanged sentences

In connection with this reclassification the Company reclassed approximately $ 41.9 million from warrant liabilities to additional paid in capital.

The following table includes a summary of changes in fair value of the Company’s warrant liabilities measured at fair value using significant unobservable inputs (Level 3) as of June 30, 2025 and 2024.

For June 30, 2025, the fair value of the common warrants was determined using the Black-Scholes Model based on the following key inputs and assumptions:

For September 30, 2025, the fair value of the common warrants was determined using the Black-Scholes Model based on the following key inputs and assumptions:

common stock price of $ 1.09 ;

3 unchanged sentences

risk-free interest rate of 3.68 % and expected life of 2.2 to 2.3 years.

For the six months ended June 30,

For the nine months ended September 30,

(in thousands)

8 unchanged sentences

The Company uses level 3 inputs to measure the fair value in subsequent periods.

The Company recorded a $ 1.4 million gain on the DV Convertible Note for the six months ended June 30, 2025.

As described in Note 5, the Company elected the fair value option on the 2025 Convertible Notes issued in the three months ended June 30, 2025 and recorded a net loss of $ 8.8 million.

The Company recorded a $ 1.1 million loss and a $ 0.2 million gain on the DV Convertible Note for the three and nine months ended September 30, 2025, respectively.

As described in Note 5, the Company elected the fair value option on the 2025 Convertible Notes and Q3 2025 Convertible Notes and recorded a net loss of $ 10.8 million and $ 19.6 million for the three and nine months ended September 30, 2025, respectively.

The Company uses level 3 inputs to measure the fair value in subsequent periods.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Fair Value Measurements, continued

The following table includes a summary of changes in fair value of the Company’s convertible notes.

For the six months ended June 30,

For the nine months ended September 30,

(in thousands)

1 unchanged sentence

Change in fair value recorded in interest expense

Payment on DV note

Amounts settled on DV note

Debt extinguishment

Partial conversion on DV note

Conversion of 10% notes

Ending balance

Fair Value of Crypto Assets

The following table summarizes Crypto assets held for operations (in thousands, except units):

September 30, 2025

December 31, 2024

The Bitcoin remains contractually restricted and cannot be used or converted until the restriction period ends without permission from the September Purchaser (defined below), which restriction period is expected to end in November 2025.

Convertible Redeemable Preferred Stock and Stockholders’ Equity

5 unchanged sentences

The total of deemed dividends (as discussed in this section, the Conversion of Series B Preferred Stock and February 2024 Series B Preferred Stock and Series B Preferred Stock Warrants Repurchase sections above) amounted to $ 5.8 million for the year ended December 31, 2024 and was recorded as an adjustment to net loss available to common stockholders on the Company’s consolidated statement of operations.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

February 2024 Issuance of Common Stock and Pre-Funded Common Stock Warrants

7 unchanged sentences

The remaining issuance cost of $ 630,000 was allocated to the February Common Warrants and was expensed on the date of issuance as such warrants were recorded at fair value.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

March 2024 Issuance of Common Stock, Prefunded Common Stock Warrants and Common Stock Warrants

8 unchanged sentences

The Initial 2024 Registered Direct Offering and Concurrent Private Placement closed on April 19, 2024 and the Company received gross proceeds of approximately $ 750,000 before deducting placement agent fees and other offering expenses of approximately $ 159,000 .

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

On April 19, 2024, the Company entered into a securities purchase agreement with certain accredited investors, pursuant to which the Company agreed to issue and sell to such investors (i) in a registered direct offering, 361,904 shares of common stock at $ 5.25 per share, and (ii) in a concurrent private placement, common stock purchase warrants exercisable for an aggregate of up to 542,856 shares of common stock, at an initial exercise price of $ 5.06 per share (the “Second April 2024 Registered Direct Offering and Concurrent Private Placement”).

2 unchanged sentences

The Third 2024 Registered Direct Offering and Concurrent Private Placement closed on April 30, 2024 and the Company received gross proceeds of approximately $ 2.4 million before deducting placement agent fees and other offering expenses of approximately $ 298,000 .

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

May 2024 Issuances of Common Stock and Common Stock Warrants

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The shares of common stock will be issued in July 2024.

Exchange Agreements

On September 10, 2024, the Company entered into exchange agreements (each, an “Exchange Agreement”) with certain holders (the “Holders”) of common stock purchase warrants exercisable for an aggregate of up to 5,135,182 shares of common stock, originally issued on February 13, 2024 and having a then-current exercise price of $ 1.83 (such warrants, the “February 2024 Warrants”).

Pursuant to the Exchange Agreements, the Holders agreed to exchange their February 2024 Warrants for newly issued common stock purchase warrants exercisable for an aggregate of up to 5,135,182 shares of common stock, at an exercise price of $ 2.21 per share (such warrants, the “Exchange Warrants”, and such shares of common stock issuable upon exercise thereof, the “Exchange Warrant Shares”).

The Exchange Warrants are immediately exercisable.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

Warrant Side Letter Agreements

Also on September 10, 2024, following completion of the transactions contemplated by the September 2024 Warrant Inducement (see below), the Company entered into side letter agreements (each, a “Side Letter Agreement”) with the Holders with respect to (i) those certain common stock purchase warrants of the Company, originally issued to the Holders on March 27, 2024, as amended (the “March 2024 Warrants”), (ii) those certain common stock purchase warrants of the Company, originally issued to the Holders on April 19, 2024, as amended (the “1st April 2024 Warrants”), (iii) those certain common stock purchase warrants of the Company, originally issued to the Holders on April 23, 2024 (the “2nd April 2024 Warrants”), (iv) those certain common stock purchase warrants of the Company, originally issued to the Holders on April 30, 2024 (the “3rd April 2024 Warrants”), (v) those certain common stock purchase warrants of the Company, originally issued to the Holders on May 15, 2024 (the “1st May 2024 Warrants”), and (vi) those certain common stock purchase warrants of the Company, originally issued to the Holders on May 17, 2024 (the “2nd May 2024 Warrants”, and collectively with the March 2024 Warrants, the 1st April 2024 Warrants, the 2nd April 2024 Warrants, the 3rd April 2024 Warrants, and the 1st May 2024 Warrants, the “Original Warrants”), which Holders are also parties to (i) that certain securities purchase agreement, dated as of March 26, 2024 (the “March 2024 Purchase Agreement”), (ii) that certain securities purchase agreement, dated as of April 17, 2024 (the “1st April 2024 Purchase Agreement”), (iii) that certain securities purchase agreement, dated as of April 19, 2024 (the “2nd April 2024 Purchase Agreement”), (iv) that certain securities purchase agreement, dated as of April 26, 2024 (the “3rd April 2024 Purchase Agreement”), (v) that certain securities purchase agreement, dated as of May 13, 2024 (the “1st May 2024 Purchase Agreement”), and (vi) that certain securities purchase agreement, dated as of May 15, 2024 (the “2nd May 2024 Purchase Agreement”, and collectively with the March 2024 Purchase Agreement, the 1st April 2024 Purchase Agreement, the 2nd April 2024 Purchase Agreement, the 3rd April 2024 Purchase Agreement, and the 1st May Purchase Agreement, the “Original Purchase Agreements”) with the Company.

Pursuant to the Side Letter Agreements, (a) the Holders agreed to (i) amend the “Fundamental Transaction” provisions in the Original Warrants, so that the “Black Scholes Value” clauses in such provisions will be removed in their entirety, effective immediately following receipt of stockholder approval of (a) the issuance of the New Warrant Shares (as defined below) and (b) the issuance of shares of common stock pursuant to the alternative cashless exercise provisions of the 1st April 2024 Warrants, the 2nd April 2024 Warrants, the 3rd April 2024 Warrants, the 1st May 2024 Warrants, and the 2nd May 2024 Warrants, (ii) remove the “Stockholder Meeting” provisions in the March 2024 Purchase Agreement, effective immediately, (iii) amend the “Stockholder Meeting” provisions in the remaining Original Purchase Agreements such that the Company is first obligated to call a stockholder meeting to approve the issuance of the shares of common stock issuable upon exercise of the Original Warrants no later than December 31, 2024, and thereafter, to re-call a stockholder meeting, if necessary, every six months until such stockholder approval is obtained, and (iv) remove the “Subsequent Equity Sales” and “Registration Statement” provisions in the March 2024 Purchase Agreement;

and (b) as inducements to and in consideration for each Holder’s agreement to amend the Original Warrants and the Original Purchase Agreements in accordance with the applicable Side Letter Agreement, the Company agreed to issue to the Holders an aggregate of 887,356 shares of common stock (the “New Shares”) and common stock purchase warrants (each, a “New Warrant”, and collectively, the “New Warrants”) exercisable for up to an aggregate of 5,391,747 shares of common stock (the “New Warrant Shares”), such New Shares to be issued upon execution of the Side letter Agreements, and such New Warrants to be issued upon the receipt of stockholder approval referred to in (a)(i) above.

The New Warrants will have a per share exercise price equal to $ 2.21 , will contain 4.99 / 9.99 % beneficial ownership limitations, will be exercisable at any time on or after the Stockholder Approval Date (as defined in the New Warrants) and will expire five years thereafter.

Once exercisable, the New Warrants may be exercised, in certain circumstances, on a cashless basis pursuant to the formula contained in the New Warrants.

The holder of a New Warrant may also effect an “alternative cashless exercise” commencing on the Stockholder Approval Date.

In such event, the aggregate number of shares of common stock issuable in such alternative cashless exercise pursuant to any given notice of exercise electing to effect an alternative cashless exercise shall equal the product of (x) the aggregate number of shares of common stock that would be issuable upon exercise of the New Warrant in accordance with the terms of the New Warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 1.0 .

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

The fair value of the 887,356 shares of common stock was calculated to be approximately $ 2.1 million, based on the common stock price of the date of issuance of $ 2.40 .

The incremental fair value of the Exchange Warrants was calculated to be approximately $ 123,000 and was determined using the Black-Scholes Model based on the following weighted average assumption:

common stock price on the date of the exchange of $ 2.40 ;

expected yield of 0.0 % ;

expected volatility of 143 % ;

risk-free interest rate of 3.43 % and expected life of 5 years.

The fair value of approximately $ 2.3 million, which is the combination of the issuance of 887,356 common shares and the Exchange Warrants were treated as equity instruments.

The approximately $ 2.3 million is considered a deemed dividend for the three and nine months ended September 30, 2024 and was recorded as an adjustment to net loss available to common stockholders on the Company’s condensed consolidated statement of operations.

For the three months ended September 30, 2024, the Company’s board of directors approved the issuance of a total of 100,000 shares of common stock to one vendor for financial advisory services.

The fair value of such common shares was calculated to be $ 240,000 and was recorded to other assets and additional paid in capital.

The fair value of such shares will be amortized over the service period of 12 months .

The shares of common stock were issued in July 2024.

Warrants for Common Shares

A summary of the warrant activity and related information for the three and six months ended June 30, 2025 and 2024 is provided as follows.

A summary of the warrant activity and related information for the three and nine months ended September 30, 2025 and 2024 is provided as follows.

In connection with the January 2024 Promissory Notes, the Company issued common stock purchase warrants to investors to purchase up to 66,665 shares of the Company’s common stock, at an initial exercise price of $ 22.23 per share.

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risk-free interest rate of 4.21 % and expected life of 5 years.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

In connection with the Initial April 2024 Registered Direct Offering and Concurrent Private Placement, the Company issued Common Stock Purchase Warrants to investors to purchase up to 225,834 shares of the Company’s common stock, at an initial exercise price of $ 3.196 per share.

The grant date fair value of such warrant was $ 1,255,000 , which was recorded as equity.

The grant date fair value of such warrant was $ 1.3 million, which was recorded as equity.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

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risk-free interest rate of 4.63 % and expected life of 5 years.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

In connection with the Second April 2024 Registered Direct Offering and Concurrent Private Placement, the Company issued Common Stock Purchase Warrants to investors to purchase up to 542,856 shares of the Company’s common stock, at an initial exercise price of $ 5.06 per share.

The grant date fair value of such warrant was $ 2,595,000 , which was recorded as equity.

The grant date fair value of such warrant was $ 2.6 million, which was recorded as equity.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

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In connection with the Third April 2024 Registered Direct Offering and Concurrent Private Placement, the Company issued Common Stock Purchase Warrants to investors to purchase up to 418,845 shares of the Company’s common stock, at an initial exercise price of $ 5.60 per share.

The grant date fair value of such warrant was $ 2,048,000 , which was recorded as equity.

The grant date fair value of such warrant was $ 2.0 million, which was recorded as equity.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

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In connection with the Initial May 2024 Registered Direct Offering and Concurrent Private Placement, the Company issued Common Stock Purchase Warrants to investors to purchase up to 785,000 shares of the Company’s common stock, at an initial exercise price of $ 3.18 per share.

The grant date fair value of such warrant was $ 2,453,000 , which was recorded as equity.

The grant date fair value of such warrant was $ 2.5 million, which was recorded as equity.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

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In connection with the Second May 2024 Registered Direct Offering and Concurrent Private Placement, the Company issued Common Stock Purchase Warrants to investors to purchase up to 675,000 shares of the Company’s common stock, at an initial exercise price of $ 3.48 per share.

The grant date fair value of such warrant was $ 1,944,000 , which was recorded as equity.

The grant date fair value of such warrant was $ 1.9 million, which was recorded as equity.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

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The Company recognized a gain of $ 8,000 as a result of reclassifying the warrants to equity.

July 2023 Warrant Inducement

On July 26, 2023, the Company entered into warrant exercise inducement offer letters (the “July Inducement Letters”) with holders of the May Inducement Warrants pursuant to which the Company agreed to issue new inducement warrants (the “July Inducement Warrants”) to purchase a number of shares of common stock equal to 100 % of the number of shares of common stock received upon exercise of the May Inducement Warrants during the period provided for in the July Inducement Letters, with such July Inducement Warrants to be issued on substantially the same terms as the May Inducement Warrants.

The holders exercised 3,400 May Inducement Warrants pursuant to certain of the July Inducement Letters, and the Company received aggregate gross proceeds of approximately $ 678,000 from such exercises.

In exchange for the exercises of the May Inducement Warrants, the Company issued July Inducement Warrants exercisable for an aggregate of up to 3,400 shares of common stock at an initial exercise price of $ 193.50 per share.

Each July Inducement Warrant was immediately exercisable upon issuance and will expire on the fifth anniversary of its issuance.

The exercise price of the July Inducement Warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock.

The July Inducement Warrants are callable by the Company at a redemption price of $ 75.00 per July Inducement Warrant, provided that the resale of the shares of common stock underlying the July Inducement Warrants are then registered or may be resold under Rule 144 under the Securities Act.

During the three months ended March 31, 2023, 18 warrants to purchase common stock were exercised for cash, resulting in proceeds of approximately $ 32,000 .

In addition, during the three months ended March 31, 2023, 7,454 warrants were exercised using an alternative cashless exercise provision, resulting in the issuance 5,705 shares of common stock.

The grant date fair value of such warrant was $ 860,000 , which was recorded as a liability with the offset recorded to additional paid-in capital on the condensed consolidated balance sheets.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

common stock price on the date of grant of $ 15.99 ;

expected yield of 0.0 %;

expected volatility of 119 %;

risk-free interest rate of 4.31 % and expected life of 5 years.

In connection with February 2024 Public Offering, the Company issued common stock purchase warrants to investors to purchase up to 1,025,600 shares of the Company’s common stock, at an initial exercise price of $ 9.75 per share.

The grant date fair value of such warrant was $ 6.3 million, which was recorded as a liability with the offset recorded to additional paid-in capital on the condensed consolidated balance sheets.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

common stock price on the date of grant of $ 7.62 ;

expected yield of 0.0 %;

expected volatility of 119 %;

risk-free interest rate of 4.31 % and expected life of 5 years.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

In connection with March 2024 Offering, the Company issued common stock purchase warrants to investors to purchase up to 511,175 shares of the Company’s common stock, at an initial exercise price of $ 6.00 per share.

The grant date fair value of such warrant was $ 1.2 million, which was recorded as a liability with the offset recorded to additional paid-in capital on the condensed consolidated balance sheets.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

common stock price on the date of grant of $ 3.18 ;

expected yield of 0.0 %;

expected volatility of 119 %;

risk-free interest rate of 4.21 % and expected life of 5 years.

On March 26, 2024, the Company entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) with certain holders of (i) the New Common Stock Warrants, (ii) the common stock purchase warrants dated January 23, 2024 (the “January 2024 Warrants”), and (iii) the February Common Warrants (together with the New Common Stock Warrants and the January 2024 Warrants, the “Original Warrants”), whereby the holders agreed to (i) amend the New Common Stock Warrants and the January 2024 Warrants so such warrants shall not be exercisable until one or more certificates of amendment to the Company’s certificate of incorporation, as amended, are filed with the Secretary of State of the State of Delaware to effectuate an increase in authorized shares of capital stock of the Company and a reverse stock split of the Company’s outstanding shares of common stock;

and (ii) remove certain exercise price reset, right to reprice and/or share adjustment provisions in the Original Warrants, to be effective following the first adjustments following the April 2024 Reverse Stock Split.

The grant date fair value of such warrant was $ 1.3 million, which was recorded as equity.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

common stock price on the date of grant of $ 6.06 ;

expected yield of 0.0 %;

expected volatility of 135 %;

risk-free interest rate of 4.63 % and expected life of 5 years.

The grant date fair value of such warrant was $ 2.6 million, which was recorded as equity.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

common stock price on the date of grant of $ 5.39 ;

expected yield of 0.0 %;

expected volatility of 135 %;

risk-free interest rate of 4.63 % and expected life of 5 years.

The grant date fair value of such warrant was $ 2.1 million, which was recorded as equity.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

common stock price on the date of grant of $ 5.54 ;

expected yield of 0.0 %;

expected volatility of 135 %;

risk-free interest rate of 4.63 % and expected life of 5 years.

The grant date fair value of such warrant was $ 2.5 million, which was recorded as equity.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

common stock price on the date of grant of $ 3.50 ;

expected yield of 0.0 %;

expected volatility of 137 %;

risk-free interest rate of 4.35 % and expected life of 5 years.

The grant date fair value of such warrant was $ 1.9 million, which was recorded as equity.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

common stock price on the date of grant of $ 3.26 ;

expected yield of 0 %;

expected volatility of 137 %;

risk-free interest rate of 4.35 % and expected life of 5 years.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

September 2024 Warrant Inducement

On September 10, 2024, the Company entered into warrant exercise inducement offer letters (the “September 2024 Inducement Letters”) with holders of the Exchange Warrants pursuant to which the Company agreed to issue new inducement warrants (the “September 2024 Inducement Warrants”) to purchase a number of shares of common stock equal to 65 % of the number of shares of common stock received upon exercise of the Exchange Warrants during the period provided for in the September 2024 Inducement Letters, with such September 2024 Inducement Warrants to be issued on substantially the same terms as the Exchange Warrants.

The holders exercised 1,193,721 Exchange Warrants pursuant to the September 2024 Inducement Letters, and the Company received aggregate gross proceeds of approximately $ 2.6 million from such exercises.

In exchange for the exercises of the Exchange Warrants, the Company issued September 2024 Inducement Warrants exercisable for an aggregate of up to 775,920 shares of common stock at an exercise price of $ 2.21 per share.

Each September 2024 Inducement Warrant is subject to shareholder approval and will expire on the fifth anniversary of such approval.

As amended, the inducement offering period is set to close at 5:00 p.m.

ET on November 30, 2024.

The grant date fair value of the 775,920 warrants was approximately $ 1,574,000 , which were treated as equity instruments.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

common stock price on the date of grant of between $ 1.71 and $ 2.40 ;

expected yield of 0 %;

expected volatility of 143 %;

risk-free interest rate of between 3.43 % and 3.52 % and expected life of 5 years.

February 2025 Registered Direct Transaction

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The February 2025 Warrants may be exercised, in certain circumstances, on a cashless basis pursuant to the formula contained in the February 2025 Warrants.

The grant date fair value of the 4,757,126 warrants was approximately $ 5,257,000 , which were treated as equity instruments.

The grant date fair value of the 4,757,126 warrants was approximately $ 5.3 million, which were treated as equity instruments.

The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

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The warrants met the requirements for equity classification and the fair value upon issuance was recorded to interest expense on the condensed consolidated statement of operations for $ 16.7 million due to the fair value of the 2025 Convertible Notes exceeding proceeds on issuance.

During the six months ended June 30, 2025, three holders of warrants executed their right under the “alternative cashless exercise” provision to effect a cashless exercise of a total of 6,235,998 shares of common stock.

Warrants exercisable as of June 30, 2025 exclude warrants to purchase 1 share of common stock issued to a marketing firm, which vest upon the achievement of certain milestones, warrants to purchase 475,713 shares of common stock issued to the Placement Agents (defined below in Note 13), and warrants to purchase 12,068 shares of common stock issued to investors that participated in the February 2024 Public Offering that requires shareholder approval prior to the warrants being exercisable.

During the nine months ended September 30, 2025, three holders of warrants executed their right under the “alternative cashless exercise” provision to effect a cashless exercise of a total of 6,235,998 shares of common stock.

Securities Purchase Agreement

On September 25, 2025, the Company entered into a Securities Purchase Agreement (the “September Purchase Agreement”) with Scilex Holding Company, a Delaware corporation (the “September Purchaser), to sell in a registered offering, (a) 15,000,000 shares (the “September Shares”) of common stock of the Company, and (b) a pre-funded warrant (the “Pre-Funded Warrant”) to purchase 263,914,094 shares (the “Pre-Funded Warrant Shares”) of common stock, for an aggregate purchase price of $ 150.0 million in the native currency of the Bitcoin blockchain (“BTC”) upon satisfaction of certain closing conditions applicable to the September Shares and Pre-Funded Warrant, respectively.

The BTC to be paid to the Company in both Closings (as defined below) will be valued at the spot exchange rate for BTC as published by Coinbase.com at 8:00 p.m.

(New York City time) on the trading day immediately prior to the September Initial Closing Date (as defined below).

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

Information regarding warrants for common stock outstanding and exercisable as of June 30, 2025 is as follows:

The closing with respect to the September Shares (the “September Initial Closing”) took place on September 26, 2025 (the date of the Initial Closing, the “September Initial Closing Date”).

The closing with respect to the Pre-Funded Warrant (the “Pre-Funded Warrant Additional Closing,” and together with the September Initial Closing, the “BTC Closings”), subject to the satisfaction of certain additional closing conditions, will take place on the trading day (the date of the immediate after the Company receives the approval of its stockholders (i) as required by Nasdaq rules with respect to the transactions contemplated by the September Purchase Agreement including with respect to issuance of all of the Pre-Funded Warrant Shares and (ii) with respect to an amendment to the Company’s certificate of incorporation to increase the number of shares of common stock authorized for issuance to up to 1,500,000,000 (or such greater amount as is necessary to issue the Pre-Funded Warrant Shares to the September Purchaser).

On the September Initial Closing, the Company received approximately 71 BTC with an aggregate fair value of $ 7.8 million at the date of receipt.

As of September 30, 2025, the fair value of the BTC was $ 8.1 million and is recorded in Crypto assets on the condensed consolidated balance sheets.

The gain of $ 0.3 million is recorded in Other income, net on the condensed consolidated statement of operations.

The Pre-Funded Warrant will be issued in the Pre-Funded Warrant Additional Closing, will be immediately exercisable upon issuance without any beneficial ownership limitation at an exercise price of $ 0.0001 per share, and will remain exercisable until exercised in full.

As a result, no amounts were recorded for the Pre-Funded Warrants as of September 30, 2025.

As a condition to the September Initial Closing, the Company was required to obtain stockholder support agreements (the “Voting Agreements”) from stockholders holding an aggregate of 38,000,000 shares of common stock, pursuant to which each such stockholder will agree to vote their shares of common stock in favor of the proposals for the stockholder approval at any stockholder meeting held for that purpose.

Additionally, each of the directors and executive officers of the Company, pursuant to lock-up agreements, agreed not to sell or transfer any of the Company securities which they hold, subject to certain exceptions, until the Pre-Funded Warrant Additional Closing Date.

Obligations Under the September Purchase Agreement

The Company agreed in the September Purchase Agreement (i) not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of shares of common stock or securities convertible into shares of common stock until 45 days after the September Initial Closing Date, and (ii) not to issue certain securities if the issuance would constitute a variable rate transaction until the Pre-Funded Warrant Additional Closing Date.

Within 25 days of the September Initial Closing Date, the Company is required to file with the SEC a preliminary proxy statement for the purpose of obtaining the stockholder approval, and obtain such approval within 75 days of the September Initial Closing Date at a meeting of stockholders.

In the event that the stockholder approval is not obtained on or prior to such deadline, the Company is required to hold another stockholder meeting within 45 days , and continue to hold an additional stockholder meeting every fourth month thereafter until the Stockholder Approval is obtained.

The Company agreed, until and including the Pre-Funded Warrant Additional Closing Date and without the prior written consent of the September Purchaser, not to use, offer, sell or otherwise dispose of or announce the offering of, any BTC paid to the Company in the September Initial Closing or publicly announce any intention to do any of the foregoing.

Purchaser Rights

The September Purchaser has the right, until the Pre-Funded Warrant Additional Closing Date, but not the obligation, to participate in any issuance by the Company of any debt, preferred stock, shares of common stock or securities convertible into shares of common stock (a “Subsequent Placement”) up to a maximum of 20 % of such Subsequent Placement on the same terms, conditions and price provided to other investors in such Subsequent Placement.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

Upon the September Initial Closing, (i) for so long as the September Purchaser beneficially owns an aggregate of at least 10 % of the issued and outstanding shares of common stock, the September Purchaser may designate two directors to the board of directors of the Company, and (ii) for so long as the September Purchaser beneficially owns at least 5 % but no more than 10 % of the issued and outstanding shares of common stock, the September Purchaser may designate one director to the board of directors of the Company.

Warrants exercisable as of September 30, 2025 exclude warrants to purchase 1 share of common stock issued to a marketing firm, which vest upon the achievement of certain milestones, purchase warrants for 475,713 awarded to the Placement Agent, and warrants to purchase 12,068 shares of common stock issued to investors that participated in the February 2024 Public Offering that requires shareholder approval prior to the warrants being exercisable.

Information regarding warrants for common stock outstanding and exercisable as of September 30, 2025 is as follows:

Weighted Average

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Exercisable as of

June 30, 2025

September 30, 2025

$ 0.86 - $ 2.21

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* Weighted average

** Refer to Note 13 Subsequent Events for details on the exchange of 30,738,449 million warrants to common stock on October 2, 2025.

Information regarding warrants for common stock outstanding and exercisable as of December 31, 2024 is as follows:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Stock-Based Compensation

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As a result of this change, the maximum number of shares of common stock that may be subject to equity awards is limited to 15 % of the shares of common stock outstanding, which calculation is made using the number of common stock outstanding as of the first trading day of each fiscal quarter.

As of June 30, 2025, up to 2,890,815 shares of common stock are available for grants to participants under the LTIP.

A summary of activity related to restricted stock awards with service-based vesting conditions for the six months ended June 30, 2025 is presented below:

As of September 30, 2025, up to 24,045,590 shares of common stock are available for grants to participants under the LTIP.

A summary of activity related to restricted stock awards with service-based vesting conditions for the nine months ended September 30, 2025 is presented below:

Weighted-Average

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Non-vested as of January 1, 2025

Non-vested as of June 30, 2025

A summary of activity related to restricted stock awards with performance-based vesting conditions for the six months ended June 30, 2025 is presented below:

( 2,476,129 )

Non-vested as of September 30, 2025

A summary of activity related to restricted stock awards with performance-based vesting conditions for the nine months ended September 30, 2025 is presented below:

Weighted-Average

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Non-vested as of January 1, 2025

Non-vested as of June 30, 2025

Non-vested as of September 30, 2025

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Stock-Based Compensation, continued

As of June 30, 2025, the unamortized compensation costs related to the unvested restricted stock awards with service based vesting conditions was approximately $ 7.1 million which is to be amortized on a straight-line basis over a weighted-average period of approximately 2.45 years.

As of June 30, 2025, the unamortized compensation costs related to the unvested restricted stock awards with performance based vesting criteria was $ 1.7 million which is to be amortized on a straight-line basis over a weighted-average period of approximately 2 years.

As of September 30, 2025, the unamortized compensation costs related to the unvested restricted stock awards with service based vesting conditions was approximately $ 6.0 million which is to be amortized on a straight-line basis over a weighted-average period of approximately 2.12 years.

As of September 30, 2025, the unamortized compensation costs related to the unvested restricted stock awards with performance based vesting criteria was $ 1.4 million which is to be amortized on a straight-line basis over a weighted-average period of approximately 1.39 years.

These performance awards vest upon the achievement of the Company’s aggregate revenue equaling or exceeding $ 40.0 million over a trailing 12 calendar month period ending on or prior to the date that is 5 years from the grant date.

The performance awards are assigned a 100% probability to achieve the performance conditions.

For the three and six months ended June 30, 2025, 57,089 shares of restricted stock awards were released under the LTIP with an intrinsic value of $ 47,081 .

For the three and nine months ended September 30, 2025, 748,817 and 805,906 shares of restricted stock awards were released under the LTIP with an intrinsic value of $ 297,280 and $ 344,361 .

Acceleration of Grants

In the three months ended September 30, 2025, certain employees terminated and received accelerated vesting for all unvested awards.

The Company recorded $ 1.4 million in additional stock-based compensation expense in the three and nine months ended September 30, 2025.

Inducement Grants

On September 13, 2021, Eric Almgren joined the Company as Chief Strategist and was issued 21 shares of restricted common stock as an inducement grant (“September 2021 Inducement Grant”).

As of June 30, 2025, all compensation cost related to the September 2021 Inducement Grant was expensed.

As of June 30, 2025, 16 shares are unvested.

As of September 30, 2025, all compensation cost related to the September 2021 Inducement Grant was expensed.

As of September 30, 2025, 16 shares are unvested.

On September 30, 2024, the Company issued 70,000 shares of restricted common stock at a fair value per share of $ 1.77 , to Stanley Mbugua, the Company’s Chief Accounting Officer, as an inducement grant (“September 2024 Inducement Grant”) pursuant to an inducement award agreement dated as of the same date.

Due to the Company closing the acquisition of Data Vault on December 31, 2024, the September 2024 Inducement Grant vesting was fully accelerated due to the change in control that occurred.

As of June 30, 2025, there is no unamortized compensation cost related to the September 2024 Inducement Grant.

As of September 30, 2025, there is no unamortized compensation cost related to the September 2024 Inducement Grant.

On January 2, 2025, the Company issued 1,200,000 units of restricted stock at a fair value per share of $ 2.04 , to Nathaniel Bradley, the Company’s Chief Executive Officer, as an inducement grant (“Bradley Inducement Grant”) pursuant to an inducement award agreement dated December 31, 2024.

Of this grant, 600,000 units have service-based conditions and vest in 3 -month equal installments over a 36 -month period, while the other 600,000 units have performance-based condition and vest upon the Company’s aggregate revenue equaling or exceeding $ 40,000,000 over trailing 12 calendar month period ending on or prior to the date that is 5 years from the grant date.

As of June 30, 2025, the unamortized compensation cost related to the Bradley Inducement Grant was approximately $ 1,958,000 which is being amortized on a straight-line basis over a period of 2.15 years.

Of this grant, 600,000 units have service-based conditions and vest in 3 -month equal installments over a 36 -month period, while the other 600,000 units have performance-based condition and vest upon the Company’s aggregate revenue equaling or exceeding $ 40,000,000 over the trailing 12 calendar month period ending on or prior to the date that is 5 years from the grant date.

As of September 30, 2025, the unamortized compensation cost related to the Bradley Inducement Grant was approximately $ 1.7 million which is being amortized on a straight-line basis over a period of 1.92 years.

On May 20, 2025, the Company issued 500,000 units of restricted stock at a fair value per share of $ 0.97 , to Mark LoGuirato, as an inducement grant (“LoGuirato Inducement Grant”) pursuant to an inducement award agreement dated May 20, 2025.

Of this grant, 250,000 awards have service-based conditions and vest in 3 -month equal installments over a 36 -month period, while the other 250,000 awards have performance-based condition and vest upon the Company’s CSI revenue equaling or exceeding $ 25,000,000 over trailing 12 calendar month period ending on or prior to the date that is 5 years from the grant date.

As of June 30, 2025, the unamortized compensation cost related to the LoGuirato Inducement Grant was approximately $ 459,000 which is being amortized on a straight-line basis over a period of 2.25 years.

As of September 30, 2025, the unamortized compensation cost related to the LoGuirato Inducement Grant was approximately $ 401,000 which is being amortized on a straight-line basis over a period of 2.50 years.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Stock-Based Compensation, continued

A summary of activity related to restricted stock units under the Company’s Technical Team Retention Plan of 2022 (the “2022 Plan”) for the six months ended June 30, 2025 is presented below:

A summary of activity related to restricted stock units under the Company’s Technical Team Retention Plan of 2022 (the “2022 Plan”) for the nine months ended September 30, 2025 is presented below:

Weighted-Average

1 unchanged sentence

Non-vested as of January 1, 2025

Non-vested as of June 30, 2025

As of June 30, 2025, the unamortized compensation cost related to the unvested restricted stock units was approximately $ 46,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 0.97 years.

For the six months ended June 30, 2025, no shares of restricted stock units were released under the 2022 Plan.

For the six months ended June 30, 2024, 3 shares of restricted stock units were released under the 2022 Plan.

The Company recorded no provision for income taxes for the six months ended June 30, 2025 and 2024.

Non-vested as of September 30, 2025

As of September 30, 2025, the unamortized compensation cost related to the unvested restricted stock units was approximately $ 46,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 0.97 years.

For the nine months ended September 30, 2025, no shares of restricted stock units were released under the 2022 Plan.

For the nine months ended September 30, 2024, 3 shares of restricted stock units were released under the 2022 Plan.

The Company recorded no provision for income taxes for the nine months ended September 30, 2025 and 2024.

For interim periods, the Company estimates its annual effective income tax rate and applies the estimated rate to the year-to-date income or loss before income taxes.

1 unchanged sentence

The Company also recognizes the effect of changes in enacted tax laws or rates in the interim periods in which the changes occur.

As of June 30, 2025 and December 31, 2024, the Company retains a full valuation allowance on its deferred tax assets.

As of September 30, 2025 and December 31, 2024, the Company retains a full valuation allowance on its deferred tax assets.

The realization of the Company’s deferred tax assets depends primarily on its ability to generate taxable income in future periods.

The amount of deferred tax assets considered realizable in future periods may change as management continues to reassess the underlying factors it uses in estimating future taxable income.

The provision for income taxes for the six months ended June 30, 2025 and 2024 was calculated on a jurisdiction basis.

The provision for income taxes for the nine months ended September 30, 2025 and 2024 was calculated on a jurisdiction basis.

Commitments and Contingencies

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Commitments and Contingencies, continued

The following table reflects our lease assets and our lease liabilities at June 30, 2025 and December 31, 2024 (in thousands):

The following table reflects our lease assets and our lease liabilities at September 30, 2025 and December 31, 2024 (in thousands):

September 30,

Operating lease right-of-use assets

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating lease cost

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Total lease cost

As of June 30, 2025, the maturity of operating lease liabilities was as follows (in thousands):

As of September 30, 2025, the maturity of operating lease liabilities was as follows (in thousands):

Payments due in:

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Lease Term and Discount Rate:

June 30, 2025

September 30, 2025

Weighted-average remaining lease term (in years)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Commitments and Contingencies, continued

2 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2025

Nine Months Ended

September 30, 2025

Operating cash outflows from operating leases

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The Exchange Agreement closed on April 9, 2025.

Pursuant to the Exchange Agreement, as full consideration for the sale, assignment, transfer and delivery of the NYIAX Shares by NYIAX to the Company, and upon the terms and subject to all of the conditions contained in the Exchange Agreement, the Company agreed to issue to NYIAX (i) 3,000,000 shares of common stock (such shares of common stock, the “Closing Shares”), and (ii) 2,000,000 shares of common stock (such shares of common stock, the “Additional Shares”), upon the terms and subject to the conditions set forth in the Exchange Agreement.

The Closing Shares will be issued in four equal quarterly tranches starting from the closing.

The Additional Shares will be issued only upon completion of a complete advertising cycle for a third party clientele, and upon the parties’ mutual written agreement that the Adio Platform (as defined in the Exchange Agreement) has been integrated into the NYIAX Platform (as defined in the Exchange Agreement) upon completion of the advertising cycle.

The Additional Shares will be issued within thirty ( 30 ) days from the completion of the integration.

Pursuant to the Exchange Agreement, as full consideration for the sale, assignment, transfer and delivery of the NYIAX Shares by NYIAX to the Company, the Company agreed to issue to NYIAX (i) 3,000,000 shares of common stock (such shares of common stock, the “NYIAX Closing Shares”), and (ii) 2,000,000 shares of common stock (such shares of common stock, the “NYIAX Additional Shares”), The NYIAX Closing Shares will be issued in four equal quarterly tranches starting from the closing.

The NYIAX Additional Shares will be issued only upon completion of a complete advertising cycle for a third party clientele, and upon the parties’ mutual written agreement that the Adio platform has been integrated into the NYIAX platform upon completion of the advertising cycle.

The NYIAX Additional Shares will be issued within thirty ( 30 ) days from the completion of the integration.

The Exchange Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including, without limitation, certain agreements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Commitments and Contingencies, continued

1 unchanged sentence

In connection with the Exchange, on March 16, 2025, the Company entered into a white label, co-marketing and intellectual property cross-license agreement (the “License Agreement”) with NYIAX, pursuant to which the Company received a non-exclusive license under certain of NYIAX’s jointly owned patent rights and know-how, and a non-exclusive license to white label NYIAX’s proprietary software-as-a-service advertising brokerage platform, all within the field of data, information and asset monetization and exchange.

In exchange, the Company granted to NYIAX a non-exclusive license under certain of the Company’s wholly owned patent rights, know-how and trademarks, including with respect to the Company’s Adio Platform (as defined in the License Agreement), in the field of advertising buying, selling and brokerage.

Pursuant to the License Agreement, as consideration for the services provided by NYIAX pursuant to the License Agreement and the rights to access and use the NYIAX Platform (as defined in the License Agreement) granted to the Company, and upon the terms and subject to all of the conditions contained in the License Agreement, the Company agreed to issue to NYIAX 2,530,000 shares (such shares, the “Consideration Shares”) of common stock.

In exchange, the Company granted to NYIAX a non-exclusive license under certain of the Company’s wholly owned patent rights, know-how and trademarks, including with respect to the Company’s Adio platform, in the field of advertising buying, selling and brokerage.

Pursuant to the License Agreement, as consideration for the services provided by NYIAX pursuant to the License Agreement and the rights to access and use the NYIAX platform granted to the Company, and upon the terms and subject to all of the conditions contained in the License Agreement, the Company agreed to issue to NYIAX 2,530,000 shares (such shares, the “NYIAX Consideration Shares”) of common stock.

Pursuant to the License Agreement, in consideration of the rights granted to NYIAX under the License Agreement, NYIAX agreed to pay to the Company a license fee in the form of a convertible promissory note in the aggregate amount $ 2,500,000 (the “NYIAX Convertible Note”).

3 unchanged sentences

The NYIAX Convertible Note will automatically convert at the earlier of (i) the Maturity Date, and (ii) the first underwritten public offering of NYIAX pursuant to an effective registration statement under the Securities Act, covering the offer and sale by NYIAX of its equity securities, as a result of or following which NYIAX shall be a reporting issuer under the Exchange Act, and NYIAX’s common stock is listed on the Trading Market (as defined in the NYIAX Convertible Note), at a conversion price of $ 2.00 per share.

The Company entered into an Extinguishment Agreement with NYIAX in September 2025 to convert the NYIAX Convertible Note to 1,250,000 shares of NYIAX in full repayment of the note.

The License Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including, without limitation, certain agreements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Commitments and Contingencies, continued

3 unchanged sentences

Concurrently, NYIAX agreed to enter into (i) a lock-up agreement in respect of the Additional Shares to be issued by the Company to NYIAX pursuant to the Exchange Agreement, pursuant to which the Additional Shares shall be subject to lock-up restrictions for two ( 2 ) years from the issuance (the “Additional Lock-Up Agreement”), (ii) a lock-up agreement in respect of the consideration shares (the “Consideration Shares”) to be issued by the Company to NYIAX pursuant to that certain White Label, Co-Marketing and Intellectual Property Cross-License Agreement, by and between the Company and NYIAX, dated as of March 16, 2025, pursuant to which the Consideration Shares shall be subject to lock-up restrictions for one ( 1 ) year from the issuance (the “Consideration Lock-Up Agreement”), and (iii) a lock-up agreement in respect of the Closing Shares to be issued by the Company to NYIAX pursuant to the Exchange Agreement, pursuant to which the Closing Shares shall be subject to lock-up restrictions for one ( 1 ) year from the issuance (the “Closing Lock-Up Agreement”, and together with the Datavault Lock-Up Agreement, the Additional Lock-Up Agreement, and the Consideration Lock-Up Agreement, the “Lock-Up Agreements”).

The Company recorded the first and second allotment of common stock of 750,000 shares for total of 1,500,000 shares as research and development expense of $ 1.1 million on the condensed consolidated statement of operations for the use of NYIAX IP as described above.

No revenue has been recorded under the agreements.

The Company accounted for the NYIAX transactions as a collaborative arrangement and allocated fair values of exchanged assets on their relative fair value.

The common stock consideration of aggregate of 7,530,000 shares, including the 2,000,000 contingently issuance shares which are considered probable to be issued, was measured at the closing date of April 9, 2025 for an aggregate fair value of $ 4.9 million and is recorded to additional paid-in capital on the condensed consolidated balance sheet.

The NYIAX common shares received in the aggregate of 2,150,000 were valued at $ 4.3 million and are recorded as an investment at fair value under the measurement alternative of ASC 321 at the close date fair value of $ 2 per share on the condensed consolidated balance sheet.

The fair value method was determined due to the Company not having significant influence over NYIAX.

IP licenses received from NYIAX represents the net amount of the shares exchanged and is expensed to research and development of $ 0.6 million on the condensed consolidated statement of operations.

The Company’s IP license granted to NYIAX represents functional intellectual property accounted for under ASC 606 with point-in-time revenue recognition.

Initial value allocated of $ 2.5 million is based on the fair value of the NYIAX Convertible Note.

However, as the collaborative arrangement includes consideration paid to the customer, NYIAX, for distinct goods and services for which the fair value was not reasonably estimable, the transaction price was reduced for any consideration paid in excess of goods or services with a readily determinable fair value, the NYIAX Investment.

Accordingly, the transaction price was reduced to zero as the excess fair value of the consideration paid to the customer was in excess of $ 2.5 million.

The contingently issuance shares are accounted for under ASC 718, Share-based payments as an equity-classified share-based payment to a customer.

Due to the probable achievement of the performance condition on the grant date, the shares are initially recorded at the grant date fair value of $ 1.3 million with no subsequent remeasurement.

IBM Purchase Commitment for Programs

On July 7, 2025, the Company entered into a purchase commitment for programs (the “IBM Purchase Commitment”) with International Business Machines Corporation (“IBM”), to purchase certain subscriptions from IBM program offerings (the “Programs”).

IBM agreed to license the Programs to the Company for two payments of $ 18.9 million on June 30, 2025 and $ 4.8 million on September 30, 2025, respectively (the “Program Payments”).

According to an Embedded Solution Agreement (the “Base Agreement”), of which the Purchase Commitment and the Cloud Services Agreement (as defined below) form a part, the Program Payments become due once an invoice is sent from IBM to the Company and are due within 30 days of receipt of the invoice.

On September 23, 2025, the Company entered into an amendment to the IBM Purchase Commitment (the “Amendment 1”) to amend the payment schedule to be as follows:

$ 2.5 million to be paid at the time of the agreement, $ 3.3 million on December 23, 2025 and eight payments of $ 2.2 million each quarter after that to end with the final payment on December 23, 2027.

The Company having paid $ 2.5 million on August 8, 2025, the total payments are $ 25.8 million.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Commitments and Contingencies, continued

Under the IBM Purchase Commitment, the Company must send a report to IBM every 90 days summarizing the use of each Program.

The Company may license the Programs to end-users, subject to certain limitations, restrictions, and requirements.

The Company must use its own intellectual property to add value to the Programs and describe this value to IBM as well as bundle it within the Programs when licensing to end-users.

The IBM Purchase Commitment includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including in the Base Agreement.

Payments under the IBM Purchase Commitment are capitalized to prepaid expenses and are amortized on a straight-line basis over the contractual term, which ends on June 29, 2028, with amortization recorded to research and development expense in the same manner as the related hosting fees.

As of September 30, 2025, the Company had approximately $ 23.3 million of remaining purchase commitments payable under the agreement.

Cloud Services Subscription Agreement

On July 7, 2025, the Company entered into a cloud services subscription agreement (the “Cloud Services Agreement”) with IBM, pursuant to which the Company has agreed to purchase certain subscriptions to IBM cloud services (the “Cloud Services”).

The Company has selected their Cloud Services, with the minimum value of the Cloud Services actually purchased within each annual period being (i) $ 105,564 in the first year, (ii) $ 2,111,850 in the second year, and (iii) $ 4,117,292.40 in the third year.

If the Cloud Services purchased in an annual period exceed the minimum, that surplus amount can be removed from the required minimum for the following year.

If the Cloud Services purchased in an annual period are below the minimum, the Company must place an order covering the additional amount within seven days of the end of the applicable annual period.

If the Company does not place that additional order, IBM may invoice the Company and require the Company to pay that additional amount to reach the minimum for the applicable annual period.

Pursuant to the Cloud Services Agreement, the Company must use its own intellectual property to add value to the Cloud Services for end-users of the Cloud Services.

The Cloud Services Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including in the Base Agreement.

The Company is recording the expense as subscription licenses expense in the research and development line item on the condensed consolidated statement of operations.

Related Parties

3 unchanged sentences

EOS Holdings received 3,999,911 shares of common stock of the Company at the close of the transaction.

As described in Note 5 Borrowings, the Company owes $ 8.3 million of principal balance under the DV Convertible Note to EOS Holdings as of June 30, 2025.

The Company has recorded $ 5,000 in interest income on the notes receivable for the six months ended June 30, 2025.

As described in Note 5 Borrowings, the Company owes $ 4.6 million of principal balance under the DV Convertible Note to EOS Holdings as of September 30, 2025.

In the third quarter of 2025, EOS Holdings exercised its conversion right under the DV Convertible Note, converting approximately $ 3.2 million of the principal balance into shares of the Company’s common stock.

The Company has recorded $ 5,000 in interest income on the notes receivable for the nine months ended September 30, 2025.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Related Parties, continued

In addition to the DV Convertible Note and the Data Vault Note Balance, on January 16, 2025, the Company entered into a Transition Services Agreement (“Transition Services Agreement”) to receive from EOS Holdings, employees to provide transition services in connection with the Acquired Assets for a period of up to three months.

For the three and six months ended June 30, 2025, the Company has paid $ 428,000 and $ 501,000 to EOS Holdings and has a balance due to EOS as of June 30, 2025 of $ 97,000 .

No fees were paid to EOS Holdings during the quarter ended June 30, 2025 in connection with the Transition Services Agreement.

For the three and nine months ended September 30, 2025, the Company has paid $ 160,000 and $ 661,000 to EOS Holdings and has a balance due to EOS as of September 30, 2025 of $ 160,000 .

No fees were paid to EOS Holdings during the quarter ended September 30, 2024 in connection with the Transition Services Agreement.

Helge Kristensen

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Kristensen serves as vice president of Hansong Technology, an original device manufacturer of audio products based in China, president of Platin Gate Aps, a company with focus on service-branding in lifestyle products as well as pro line products based in Denmark and co-founder and director of Inizio Capital, an investment company based in the Cayman Islands.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Related Parties, continued

For the three months ended June 30, 2025 and 2024, Hansong Technology purchased modules from the Company of approximately $ 26,000 and $ 10,000 , respectively, and made payments to the Company of approximately $ 0 and $ 0 , respectively.

At June 30, 2025 and 2024, Hansong Technology owed the Company approximately $ 61,000 and $ 39,000 , respectively.

For the three months ended June 30, 2025 and 2024, Hansong Technology sold speaker products to the Company of approximately $ 1,000 and $ 1,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 2,000 and $ 63,000 respectively.

At June 30, 2025 and 2024, the Company owed Hansong Technology approximately $ 42,000 and $ 163,000 , respectively.

For the six months ended June 30, 2025 and 2024, Hansong Technology purchased modules from the Company of approximately $ 37,000 and $ 35,000 , respectively, and made payments to the Company of approximately $ 0 and $ 0 , respectively.

For the six months ended June 30, 2025 and 2024, Hansong Technology sold speaker products to the Company of approximately $ 1,000 and $ 1,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 2,000 and $ 88,000 , respectively.

As of June 30, 2025 and December 31, 2024, Mr.

For the three months ended September 30, 2025 and 2024, Hansong Technology purchased modules from the Company of approximately $ 14,000 and $ 3,000 , respectively, and made payments to the Company of approximately $ 681,000 and $ 38,000 , respectively.

At September 30, 2025, there was a Hansong deposit liability of $ 605,000 .

See Note 1 for further details regarding contract liabilities.

At September 30, 2025 and 2024, Hansong Technology owed the Company approximately $ 0 and $ 4,000 , respectively.

For the three months ended September 30, 2025 and 2024, Hansong Technology sold speaker products to the Company of approximately $ 5,000 and $ 0 , respectively, and the Company made payments to Hansong Technology of approximately $ 48,000 and $ 96,000 respectively.

At September 30, 2025 and 2024, the Company owed Hansong Technology approximately $ 0 and $ 67,000 , respectively.

For the nine months ended September 30, 2025 and 2024, Hansong Technology purchased modules from the Company of approximately $ 51,000 and $ 38,000 , respectively, and made payments to the Company of approximately $ 681,000 and $ 38,000 , respectively.

For the nine months ended September 30, 2025 and 2024, Hansong Technology sold speaker products to the Company of approximately $ 6,000 and $ 1,000 , respectively, and the Company made payments to Hansong Technology of approximately $ 50,000 and $ 184,000 , respectively.

As of September 30, 2025 and December 31, 2024, Mr.

Kristensen owned less than 1.0 % of the outstanding shares of the Company’s common stock.

10 unchanged sentences

Our chief decision-maker, the Chief Executive Officer, evaluates our performance based on company-wide consolidated results.

We are evaluating the impact of the CSI acquisition on our segment determination and expect to conclude that analysis in the third quarter of 2025.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Nine Months Ended September 30, 2025 and 2024

Segment Information continued

The following table reflects results of operations of the Company’s reportable segment (in thousands):

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Cost of net revenue

5 unchanged sentences

Income tax expense

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Segment Information continued

Net revenue from customers is designated based on the geographic region to which the product is delivered.

Net revenue by geographic region for the three and six months ended June 30, 2025 and 2024 was as follows:

Net revenue by geographic region for the three and nine months ended September 30, 2025 and 2024 was as follows:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

Subsequent Events

On July 13, 2025, the Company entered into a Stock Purchase Agreement (the “API Purchase Agreement”) with API Media Innovations Inc., a New Jersey corporation (“API Media”), David Reese and Frank Tomaino (Mr.

Tomaino together with Mr.

Reese, the “Sellers” and each a “Seller”), pursuant to which the Company agreed to purchase from the Sellers all of the outstanding shares of common stock of API Media (the “API Shares”) for an aggregate purchase price of (i) an amount in cash equal to $ 6.0 million, (ii) 5,117,188 shares of common stock of the Company, and (iii) $ 2.0 million payable in the aggregate in the form of convertible promissory notes by the Company to the Sellers (the “API Notes”).

The API Notes shall be in a form agreed to among the Company and the Sellers and will payable in eight equal quarterly installments at the end of every three months following the closing of the purchase and sale of the API Shares (the “API Closing”), with the final payment due on the second anniversary of the API Closing.

The Company has agreed to pay interest at the rate of ten percent ( 10 %) per annum.

At any time and at the Sellers’ option, the unpaid balance of the API Notes shall be convertible to common stock, in increments of $ 250,000 , at a price of $ 1.14 per share.

Any unconverted balance of the API Notes shall be paid in cash on the second anniversary of the API Closing.

The API Purchase Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations.

If required by the applicable rules and regulations of the Nasdaq Capital Market, the Company will obtain a written consent of the Company’s stockholders to issue the shares of common stock to the Sellers and inform the stockholders of the Company of the receipt of the stockholder consent by preparing and filing with the U.S.

Securities and Exchange Commission an information statement with respect thereto;

provided, however, that in the event the Company is unable to obtain such prior written consent, then the Company shall organize a stockholders meeting and obtain such stockholders’ approval in a duly convened stockholders’ meeting.

The API Closing is conditioned on Mr.

Reese and Mr.

Tomaino entering into and delivering to the Company a consulting agreement, the form of which shall be mutually agreed upon.

Additionally, the API Closing is conditioned on the Company completing one or more financings totaling a minimum of $ 10.0 million in net proceeds.

Pursuant to the Purchase Agreement, the API Purchase Agreement can be terminated by mutual written consent of the parties, and also by either party, since the outside date, August 12, 2025 (the “Outside Date”) has passed, and the closing has not been consummated by the Outside Date.

Additionally the API Purchase Agreement can be terminated by either party if a final, non-appealable order, decree or ruling enjoining or otherwise prohibiting consummation of the purchase has been issued by any governmental authority or if the other party is in breach of the API Purchase Agreement which has not been cured within ten ( 10 ) days of written notice of such breach (provided that such terminating party has not committed a material breach which is the principal cause of the failure to close).

In the event that the API Purchase Agreement is terminated by the Company for a reason other than as permitted by the API Purchase Agreement, the Company shall pay to the Sellers an irrevocable and non-refundable breakup fee, in cash equal to $ 1.0 million, pursuant to the terms provided for in the API Purchase Agreement.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Subsequent Events, continued

July 2025 ATM Program, Equity Distribution Agreement and Waiver Agreements

On July 21, 2025, the Company entered into an equity distribution agreement (the “July 2025 EDA”) with Maxim Group LLC, as agent, pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $ 50,000,000 from time to time through Maxim Group LLC.

Any sales of shares of Common Stock pursuant to the July 2025 EDA will be made pursuant to a shelf registration statement (the “Registration Statement”) on Form S-3 (File No.

333-288538) (the “Registered Offering”), which was initially filed with the U.S.

Securities and Exchange Commission (the “SEC”) on July 7, 2025 and declared effective by the SEC on July 9, 2025, the prospectus contained therein and a prospectus supplemental relating to the Registered Offering dated July 22, 2025.

Maxim Group LLC may sell common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including, without limitation, sales made directly on The Nasdaq Capital Market or sales made into any other existing trading market for the Company’s common stock or to or through a market maker.

Subject to the terms and conditions of the July 2025 EDA, Maxim Group LLC will use its commercially reasonable efforts to sell the shares of the Company’s common stock from time to time, based upon its instructions (including any price, time or size limits or other parameters or conditions that we may impose).

The Company will pay to Maxim Group LLC a cash commission of up to 3.0 % of the gross proceeds from the sale of any shares of common stock by Maxim Group LLC under the July 2025 EDA.

The Company and Maxim Group LLC have also provided each other with customary indemnification rights.

The Company is not obligated to make any sales of common stock under the July 2025 EDA and no assurance can be given that it will sell any shares under the July 2025 EDA, or, if it does, as to the price or number of shares that it will sell, or the dates on which any such sales will take place.

The July 2025 EDA may be terminated by either party as set forth in the July 2025 EDA.

Also on July 21, 2025, the Company entered into an agreement (the “Waiver Agreement”) with the April 2025 Purchasers party to the April 2025 Purchase Agreement, pursuant to which the April 2025 Purchasers waived the provisions relating to variable rate transactions contained in Section 4.12(b) of the April 2025 Purchase Agreement for a period of 60 days and the provisions relating to participation rights contained in Section 4.19 of the April 2025 Purchase Agreement, and the Company agreed that until the earlier to occur of (a) the end of the 60 -day period beginning on the trading date after the date of the Waiver Agreement, and (b) when no Purchaser holds any of the Notes (as defined in the April 2025 Purchase Agreement), the Company will not sell shares of Common Stock pursuant to the July 2025 EDA (a)(i) on any trading day in an amount exceeding 10 % of the trading volume of the shares of Common Stock on such trading day during regular trading hours, or (ii) outside of regular trading hours, (b) at a per share price below $ 1.10 , or (c) in an aggregate amount exceeding $ 25,000,000 .

The Company also agreed to issue an aggregate of 5,000,000 shares of Common Stock to the April 2025 Purchasers on the date the Company receives stockholder approval for such issuance under applicable stock exchange rules.

July 2025 Subscription Agreement

On July 25, 2025, the Company entered into a subscription agreement (the “Subscription Agreement”) with a certain investor, pursuant to which the Company sold to the investor an aggregate of 284,091 unregistered shares of the Company’s common stock (the “Subscription Securities”) in a private placement, for an aggregate subscription amount of $ 250,000 .

The Subscription Securities are subject to certain transfer restrictions pursuant to the Subscription Agreement.

The Subscription Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Subsequent Events, continued

Web Access Intellectual Property Purchase Agreement

On July 30, 2025, pursuant to the certain Settlement Agreement and Release of All Claims dated as of July 30, 2025 (the “Settlement Agreement”), the Company” entered an intellectual property purchase agreement (the “Web Access IP Purchase Agreement”) with Web Access, LLC (“Web Access”), pursuant to which the Company agreed to purchase certain intellectual property and other related assets and liabilities from Web Access (the “Web Access IP Assets”).

The Company agreed to acquire the Web Access IP Assets in exchange for the issuance of 3,000,000 shares of common stock.

Web Access and an affiliate of Web Access will have certain registration rights for (i) the shares and (ii) an additional 300,000 shares of outstanding common stock pursuant to the Settlement Agreement, pursuant to that certain registration rights agreement with the Company and the holders of the registrable securities, dated as of July 30, 2025 (the “Registration Rights Agreement”).

The Company has acquired no rights in relation to any intellectual property related to Web Access’s “Weed Wagon” intellectual property.

Web Access has no further right to use of the Web Access IP Assets and shall not use any confusingly similar marks or domain names.

The Web Access IP Purchase Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including, without limitation, certain third-party agreements.

The Company’s CEO, Nathaniel Bradley, is a member and manager of Web Access.

Intellectual Property Sale and Assignment Agreement

On July 12, 2025, the Company entered into an intellectual property sale and assignment agreement (the “IP Sale and Assignment Agreement”) with Turner Global Media, LLC (“TGM”), pursuant to which the Company agreed to purchase, and TGM has agreed to sell and assign, certain intellectual property related to inaudible audio technology owned by TGM (the “TGM IP Assets”).

The Company agreed to acquire the TGM IP Assets from TGM in exchange for (i) the issuance to TGM of 2,500,000 shares of common stock as restricted stock, which are to be issued within 15 days of July 12, 2025 and (ii) a royalty (the “Royalty”) on the total revenue derived by the Company from (a) the sale, licensing, or commercialization of the TGM IP, and/or (b) the patented technology described in the eight patents listed in the IP Sale and Assignment Agreement (the “ADIO Patented Technology”), for the dissemination of audio signals, including inaudible frequencies, through any and all devices capable of producing sound, including but not limited to radios, televisions, streaming platforms, retail shelf talkers, venue sound systems, and wearable portable broadcast devices, before any deductions for taxes, discounts, or other expenses (“Gross Sales”).

The Royalty will be 15 % of Gross Sales.

The Royalty will be calculated and paid quarterly, within 30 days of the end of the relevant calendar quarter, beginning with the first full calendar quarter following July 12, 2025.

If the total Royalty paid to TGM reaches $ 15 million, the Royalty percentage drops from 15 % to 10 %.

Unless terminated earlier, the IP Sale and Assignment Agreement will expire upon the expiration of the patents included in the ADIO Patented Technology.

The IP Sale and Assignment Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Subsequent Events, continued

Purchase Commitment for Programs

On July 7, 2025, the Company entered into a purchase commitment for programs with an effective date of June 30, 2025 (the “Purchase Commitment”) with International Business Machines Corporation (“IBM”), pursuant to which the Company has agreed to purchase, and IBM has agreed to sell, certain subscriptions to IBM program offerings (the “Programs”).

Pursuant to the Purchase Commitment, IBM has agreed to license the Programs to the Company for two payments of $ 18.9 million on June 30, 2025 and $ 4.8 million on September 30, 2025, respectively (the “Program Payments”).

Under the Purchase Commitment, the Company must send a report to IBM every 90 days summarizing the use of each Program.

The Company may license the Programs to end-users, subject to certain limitations, restrictions, and requirements.

The Company must use its own intellectual property to add value to the Programs and describe this value to IBM as well as bundle it within the Programs when licensing to end-users.

The Purchase Commitment includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including in the Base Agreement.

Cloud Services Subscription Agreement

On July 7, 2025, the Company entered into a cloud services subscription agreement with an effective date of June 30, 2025 (the “Cloud Services Agreement”) with IBM, pursuant to which the Company has agreed to purchase, and IBM has agreed to sell, certain subscriptions to IBM cloud services (the “Cloud Services”).

If the Cloud Services purchased in an annual period exceed the minimum, that surplus amount can be removed from the required minimum for the following year.

If the Cloud Services purchased in an annual period are below the minimum, the Company must place an order covering the additional amount within seven days of the end of the applicable annual period.

If the Company does not place that additional order, IBM may invoice the Company and require the Company to pay that additional amount to reach the minimum for the applicable annual period.

Pursuant to the Cloud Services Agreement, the Company must use its own intellectual property to add value to the Cloud Services for end-users of the Cloud Services.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

Subsequent Events, continued

Securities Purchase Agreement

On August 4, 2025, the Company, entered into a Securities Purchase Agreement (the “August Purchase Agreement”) with certain institutional investors (the “August Purchasers”), pursuant to which the August Purchasers agreed to purchase from the Company in a registered direct offering, senior secured convertible notes having an aggregate principal amount of $ 6.7 million (the “August Initial Notes”) for an aggregate purchase price of $ 6.0 million and senior secured convertible notes having an aggregate principal amount of $ 6.7 million (the “August Additional Notes”, and together with the August Initial Notes, the “August Notes”) for an aggregate purchase price of $ 6.0 million upon satisfaction of certain closing conditions applicable to the August Initial Notes and August Additional Notes, respectively.

The closing of August Initial Notes (the “August Initial Closing”) will take place upon satisfaction of certain customary closing conditions set forth in the August Purchase Agreement and occurred on August 6, 2025.

The closing of the August Additional Notes (the “August Additional Closing,” and together with the August Initial Closing, the “August Closings”), subject to the satisfaction of certain additional closing conditions, will take place on or after the date that is 20 calendar days after the mailing by the Company of a definitive information statement on Schedule 14(c) with respect to the approval, by written consent of the Company’s stockholders, of the issuance of the shares of common stock of the Company issuable upon conversion of the August Notes and the issuance of the shares of common stock pursuant to the Exchange Agreement.

Obligations Under the Purchase Agreement

Pursuant to the August Purchase Agreement, the Company agreed, subject to certain exceptions, (i) not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of shares of common stock or securities convertible into shares of common stock until 45 days after the date of each August Closing, and (ii) not to issue certain securities if the issuance would constitute a variable rate transaction until no August Purchasers holds any August Notes.

Pursuant to the August Purchase Agreement, until the date that is 18 months after the date on which the August Notes are no longer outstanding, the August Purchasers have the right, but not the obligation, to participate in any issuance by the Company of any debt, preferred stock, shares of common stock or securities convertible into shares of common stock (a “Subsequent Financing”) up to a maximum of 65 % of such Subsequent Financing on the same terms, conditions and price provided to other investors in such Subsequent Financing.

The August Notes carry a 10 % original issue discount, and mature 18 months from the date of issuance.

No interest accrues during the term of the August Notes, unless an event of default occurs, in which case interest will accrue at a rate of 12 % per annum.

The obligations under the August Notes rank senior to all other existing indebtedness and equity of the Company.

The August Notes are convertible at any time beginning on the date of stockholder approval at the option of the holders into such number of shares of common stock at an initial conversion price equal to $ 1.00 per share (the “August Conversion Price”).

Alternatively, following the date of the stockholder approval, the August Notes are convertible at the holder’s election, at a price (the “August Alternate Conversion Price”) equal to the greater of (x) the Floor Price (as defined below) and (y) 80 % of the lowest volume weighted adjusted price of the shares of Common Stock (the “VWAP”) in the twenty (20) trading days prior to the applicable conversion date (“August Alternate Conversions”).

The conversion price of the August Notes is subject to a floor price of $ 0.1019 (the “August Floor Price”).

Bridge Financing

On October 10, 2025, the Company entered into a financing agreement for $ 1.4 million in proceeds net of fees of $ 60,000 .

The Company agreed to pay $ 87,000 weekly financing charges and the estimated term is 183 calendar days from the time of funding.

Q3 2025 Notes Conversion

On October 1, 2025, the Q3 2025 Notes were fully converted.

The Company issued 31,064,393 shares of common stock and the Q3 2025 Notes are no longer outstanding.

For further details on the Q3 2025 Notes, see Note 5 Borrowings.

Warrant Exchange

On October 2, 2025, the Company closed the Warrant Exchange Agreement entered into on August 4, 2025 entered into in connection with the Q3 2025 Notes to exchange 30,738,005 common stock warrants into shares of common stock.

The stock was issued on October 2, 2025 and the warrants are no longer outstanding.

For further details, see Note 5 Borrowings.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Subsequent Events (continued)

In the event the August Alternate Conversion Price would be lower than the August Floor Price, the Company is required to compensate the holders of the August Notes by paying the holders in cash an amount (the “August Alternate Conversion Floor Amount”) equal to the product obtained by multiplying (A) the VWAP on the day the holder delivers the applicable conversion notice and (B) the difference obtained by subtracting (I) the number of shares of common stock delivered (or to be delivered) to the holder on the applicable share delivery date with respect to such August Alternate Conversion from (II) the quotient obtained by dividing (x) the applicable conversion amount that the holder has elected to be the subject of the applicable August Alternate Conversion, by (y) the applicable August Alternate Conversion Price without being limited by the August Floor Price.

Under the August Notes, the Company is required to use up to 20 % of the proceeds from future financings to redeem the August Notes in an amount equal to the aggregate principal amount of the August Notes being redeemed from such proceeds multiplied by 105 %.

The August Notes contain 4.99 / 9.99 % beneficial ownership limitations and customary provisions regarding events of defaults and negative covenants.

Security Agreement and Guarantee

In connection with the registered direct offering (the “August Offering”), the Company agreed to forms of documents to be executed at or prior to the August Initial Closing, consisting of (i) a security agreement (the “August Security Agreement”), which will grant to the holders of the August Notes a security interest in all of the assets of the Company, and (ii) a subsidiary guarantee (the “Subsidiary Guarantee”), pursuant to which certain subsidiaries of the Company will guarantee the Company’s obligations under the Notes.

Exchange Agreements

Pursuant to the August Purchase Agreement, on August 4, 2025, the Company entered into exchange agreements (each, an “August Exchange Agreement”) with certain August Holders of the Company’s common stock purchase warrants.

Pursuant to the August Exchange Agreements, the August Holders agreed to exchange (a) their common stock purchase warrants (the “Original Warrants”) exercisable for an aggregate of approximately 31 million shares of common stock, for (b) the same number of shares (the “August Exchange Shares”) of common stock, subject to receipt of the stockholder approval.

The August Exchange Shares, once the stockholder approval is obtained, will be issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), contained in Section 3(a)(9) thereof.

October Purchase Agreement

On October 24, 2025, the Company entered into a securities purchase agreement (the “October Purchase Agreement”) with certain investors (“October Investor”, and collectively, the “October Investors”), pursuant to which the Company agreed to issue and sell to the October Investors, in a registered direct offering, (a) an aggregate of 1,470,588 shares (the “October Initial Shares”) of common stock of the Company at a price of $ 0.34 per share and (b) an aggregate of 4,255,319 shares (the “October Additional Shares”) of common stock at a price of $ 0.47 per share, for aggregate gross proceeds of approximately $ 2.5 million.

The closing with respect to the October Initial Shares took place on October 29, 2025.

The closing with respect to the October Additional Shares, subject to the satisfaction of certain additional closing conditions, is expected to take place on the business day immediately after the Company receives the approval of its stockholders with respect to an amendment to the Company’s certificate of incorporation to increase the number of shares of common stock authorized for issuance to an amount sufficient to satisfy the Company’s existing contractual obligations.

Acquisition of API Media

On October 28, 2025, the Company announced that it had entered into a definitive agreement to acquire API Media, a privately held technology provider headquartered in New Jersey (the “API Purchase Agreement”), for consideration of cash of $ 14.0 million.

API Media delivers audio-visual and IT services for large-scale sporting events and enterprise clients.

On October 28, 2025, the Company paid a deposit of $ 1.0 million to API.

Under the terms of the agreement, the Company will acquire 100 % of the equity interests of API Media in an all-cash transaction, which is expected to close in December 2025, subject to customary closing conditions and regulatory approvals.

The API Purchase Agreement can be terminated by mutual written consent of the parties, and also by either party after December 5, 2025 (the “Outside Date”), if the closing has not occurred by the Outside Date;

provided , however , that the right to terminate shall not be available to a party whose material breach of the API Purchase Agreement has been the principal cause of, or primarily resulted in, the failure of the closing to occur.

Following completion of the acquisition, the API Media brand will be retained, and the business will operate as part of the Company’s enterprise data-activation and monetization segment.

The Company expects to account for the transaction as a business combination in accordance with ASC 805, Business Combinations.

The Company is currently evaluating the preliminary purchase price allocation, including the fair values of the assets to be acquired, liabilities to be assumed, and any resulting goodwill or intangible assets.

Because the transaction had not closed as of September 30, 2025, no amounts related to this acquisition are included in the accompanying consolidated financial statements.

Letter of Intent to Acquire NYIAX Inc.

On October 13, 2025, the Company entered into a letter of intent (“LOI”) to acquire NYIAX Inc., a technology and services company with operations in the United States, Europe, and Dubai.

NYIAX operates a proprietary blockchain-enabled advertising and data-exchange platform jointly developed with Nasdaq and owns an associated portfolio of intellectual-property rights.

The proposed transaction is subject to the negotiation and execution of a definitive acquisition agreement, approval by the Company’s stockholders and Nasdaq, and other customary closing conditions.

If consummated, the transaction is expected to close in the first quarter of 2026.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 30, 2025 and 2024

For the Three and Nine Months Ended September 30, 2025 and 2024

Subsequent Events (continued)

Amendment of Prior Notes

At the August Initial Closing, the Company is expected to enter into agreements with the August Purchasers to amend those certain senior secured convertible notes issued on April 3, 2025 and May 21, 2025, the 2025 Notes between the Company and the August Purchasers in accordance with a certain Senior Secured Convertible Note Amendment (the “Note Amendment”).

Once the Note Amendment is entered into, the conversion price under an “Alternate Conversion will be revised from (a) the greater of (x) the floor price set forth in the 2025 Notes and (y) 90 % of the lowest VWAP in the ten (10) trading days prior to the applicable date for the Alternate Conversion to (b) the greater of (x) the floor price set forth in the 2025 Notes and (y) 80 % of the lowest VWAP in the twenty (20) trading days prior to the applicable date for the Alternate Conversion.

Placement Agency Agreement

In connection with the August Offering, on August 4, 2025, the Company entered into a placement agency agreement (the “Placement Agency Agreement”) with Maxim Group LLC (the “Placement Agent”), pursuant to which the Placement Agent agreed to act as placement agent on a “reasonable best efforts” basis in connection with the Offering.

Pursuant to the Placement Agency Agreement, the Company agreed to pay the Placement Agent an aggregate fee equal to 8.0% of the gross proceeds raised in the Offering and reimburse the Placement Agent an amount up to $ 15,000 for expenses in connection with the Offering.

The Company anticipates accounting for any completed transaction as a business combination under ASC 805, Business Combinations.

Because only a non-binding LOI had been executed as of September 30, 2025, no amounts related to this potential acquisition have been reflected in the accompanying consolidated financial statements.

Scilex Licensing Agreement

On November 3, 2025, the Company entered into a License Agreement (the “Scilex License Agreement”) with Scilex Holding Company (“Scilex”), to grant to Scilex a worldwide, exclusive, non-transferable license, with the right to sublicense, under the patents and know-how to research, develop, make, have made, use, sell, have sold, offer for sale, import, export, register, market, promote, advertise, commercialize and distribute the proprietary materials including a suite of patents related to the Company’s data platforms and any products created therefrom within the target market.

The target market is industries including biotechnology, biopharmaceutical, genetic, diagnostic, and data-related industries, and any markets relating to the generation, use, storage, analysis, tokenization, and exchange of DNA, genetic, diagnostic, and therapeutic data or materials.

The Scilex License Agreement expires upon the expiry of the patents underlying the proprietary materials, at which point the license shall become perpetual, irrevocable, non-exclusive and royalty-free.

The Scilex License Agreement is subject to earlier termination if, among other things:

(i) either party ceases to exist or becomes insolvent, (ii) either party commits a material breach of the Scilex License Agreement, (iii) Scilex fails to make any required payment to the Company that is not cured within 15 days, or (iv) Scilex does not achieve and maintain annual royalty payments to the Company of a minimum of $ 1.0 million after 24 months following the date of the Scilex License Agreement.

As consideration for the license, Scilex agreed to pay the Company (a) a non-refundable license fee of $ 10.0 million, payable in four equal installments of $ 2.5 million on or before the last day of each fiscal quarter, beginning on December 31, 2025, (b) subject to achievement of certain net sales for the licensed product up to an aggregate of $ 2,550.0 million, and (c) a five-percent ( 5 %) royalty on net sales of the product during the applicable royalty term under the Scilex License Agreement.

Dream Bowl Tokens

Subsequent to September 30, 2025, the Board of Directors approved the creation of the Dream Bowl 2026 Meme Coin digital tokens (“Dream Bowl Tokens”) and authorized the engagement of Teknos Associates to perform an independent valuation of the tokens.

The Board also declared a dividend of one Dream Bowl Token per share of Company Common Stock (including securities entitled to participate on an as-converted basis), payable to stockholders of record as of November 28, 2025, subject to certain conditions, including receipt of the valuation report and confirmation of adequate statutory surplus.

The dividend is expected to be paid within 60 days after the record date unless modified or revoked by the Board.

This subsequent event did not require adjustment to the Company’s September 30, 2025 consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements