Datavault AI Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Notice Regarding Forward Looking Statements This Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue,” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of Datavault AI Inc,’s (the “Company”, “our”, “us” or “we”) operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts. From time to time, forward-looking statements also are included in our other periodic reports on Form 10-K, 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, including risks related to market, economic and other conditions; the Company’s ability to continue as a going concern; the Company’s ability to manage costs and execute on its operational and budget plans; and, the Company’s ability to achieve its financial goals. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise. Overview Datavault AI is a pioneering technology licensing company that owns a portfolio of patented, secure platforms designed to redefine how data is managed, valued, and monetized in the modern era. Leveraging our proprietary HPC capabilities and advanced software, we aim to empower customers worldwide with revolutionary data solutions. At the heart of our offerings are our artificial intelligence (AI)-driven agents—branded as Data Vault®, DataValue®, DataScore®, and Data Vault Bank®. These tools harness generative AI to deliver enterprise-grade data management solutions tailored for the HPC landscape and the Web 3.0 paradigm. Our technology ensures data ownership immutability, experiential data observability, precise data asset valuation, and secure monetization—which we believe will unlock unprecedented opportunities for businesses in an increasingly data-driven world on which our executive leadership, with our engineering and software development teams, can capitalize. Datavault AI operates through two synergistic platforms (Data Science and Acoustic Science) to optimize our revenue generation. The operating results presented in our historical financial statements represent the audio business and may not be indicative of our results following the asset purchase from EOS Technology Holdings Inc. We expect to derive a higher portion of revenues from the assets purchased from EOS Technology Holdings Inc. as compared to the revenue generated by the legacy Company. We have incurred, and expect to continue to incur, increased salaries and benefits expense due to hiring the additional employees it will take to monetize the economic benefit of the assets purchased in the Data Vault transaction. Other corporate costs are expected to increase such as legal and research and development expenses due to increased patent activity as well as sales and marketing expenses. To date, our operations have been funded through sales of our common and preferred equity, proceeds from the exercise of warrants to purchase common stock, sale of debt instruments, and revenue from the sale of our products. Our condensed consolidated financial statements contemplate the continuation of our business as a going concern. However, we are subject to the risks and uncertainties associated with an emerging business, as noted above we have no established source of capital, and we have incurred recurring losses from operations since inception. 38 Table of Contents Comparison of the Three Months Ended March 31, 2025 and 2024 Revenue Revenue for the three months ended March 31, 2025 was $629,000 an increase of $374,000 or 147%, compared to the revenue for the three months ended March 31, 2024 of $255,000. The increase was a result of higher Consumer Audio Product sales and Component revenue which increased by $333,000 and $41,000, respectively compared to the three months ended March 31, 2024. Gross Deficit and Operating Expenses Gross Profit (Deficit) Gross profit for the three months ended March 31, 2025 was $69,000, an improvement of $152,000, compared to gross deficit of $83,000 for the three months ended March 31, 2024. The gross margin as a percent of sales was 11% for the three months ended March 31, 2025, compared to (33%) for the three months ended March 31, 2024. The improvement in gross deficit and gross margin as a percent of sales compared to the prior period is mainly attributable to the sale inventory with a lower cost basis. Research and Development Research and development expenses for the three months ended March 31, 2025 were $2,361,000, an increase of $646,000 compared to research and development expenses for the three months ended March 31, 2024 of $1,715,000. The increase in research and development expenses is primarily related to an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $356,000, legal expenses related to intellectual property of $104,000 and consultants expense of $25,000. Sales and Marketing Sales and marketing expenses for the three months ended March 31, 2025 were $1,495,000, an increase of $566,000, compared to the sales and marketing expenses for the three months ended March 31, 2024 of $929,000. The increase in sales and marketing expenses is primarily related to an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $178,000 and consulting expenses of $311,000. General and Administrative General and administrative expenses for the three months ended March 31, 2025 was $5,644,000, an increase of $4,213,000, compared to the general and administrative expenses for the three months ended March 31, 2024 of $1,431,000. The increase in general and administrative expenses is primarily related to increased amortization of intangibles of $2,309,000 for the assets acquired from EOS Holdings that closed on December 31, 2024, an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $533,000, increase in bonus of $90,000, increased investor relations expense of $669,000, increased consulting expense of $421,000, and increased legal fees of $211,000. Interest Expense, net Interest expense, net for the three months ended March 31, 2025 was $120,000, a decrease of $1,145,000, compared to the interest expense for the three months ended March 31, 2024 of $1,265,000. The decrease, was primarily due to the Company’s debt balance declining in the three months ended March 31, 2025. 39 Table of Contents Change in Fair Value of Warrant Liability Change in fair value of warrant liability for the three months ended March 31, 2025 was $17,000, compared to $8,129,000 for the three months ended March 31, 2024. The change in fair value of warrant liability for the three months ended March 31, 2025 was due to our minimal number of warrants classified as liabilities outstanding. The change in fair value of the warrant liability for the three months ended March 31, 2024 was due to the issuance of warrants in January 2024 associated with our short term note and the issuance of warrants in connection with our February Public Offering and March 2024 Offering, offset partially by the subsequent decrease in the price of our common stock price at March 31, 2024 compared to the price of our stock on the date of the warrant issuance as well as the decline in our stock price from December 31, 2023, related to existing warrant liabilities. Liquidity and Capital Resources Cash and cash equivalents as of March 31, 2025 was $171,000, compared to $3,330,000, as of December 31, 2024. We recorded net loss of $9,563,000 for the three months ended March 31, 2025 and used net cash in operating activities of $6,024,000. We incurred a net income of $2,707,000 for the three months ended March 31, 2024 and used net cash in operating activities of $3,540,000. The primary reasons for the increase in the use of net cash from operating activities during the three months ended March 31, 2025, was related to a net loss of $9,563,000 offset by the non-cash add back of depreciation and amortization of $2,321,000 in the three months ended March 31, 2025 compared to net income of $2,707,000 in the prior year offset by net non-cash add backs of $6,469,000. We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock and sale of debt instruments. In February 2025, we received aggregate gross proceeds of approximately $5.4 million in our registered direct offering. In January 2024, we received gross proceeds of $600,000 from the issuance of promissory notes and common stock purchase warrants to certain accredited investors. In February 2024, we received gross proceeds of approximately $10.0 million from the public offering of 1,025,600 units, with each unit consisting of one share of common stock (or pre-funded warrant in lieu thereof) and one warrant, each to purchase one (1) share of common stock. In March 2024 we received gross proceeds of approximately $2.3 million from the issuance of 417,833 shares of common stock, 93,342 pre-funded common stock warrants and the issuance of 511,175 warrants to purchase common stock. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. ​ Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item. ​ ​ 40 Table of Contents