What changed in this filing

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Item 1. Financial Statements

2025-08-19 compared with 2025-05-14 · 658 added, 280 removed, 666 unchanged (58% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

March 31, 2025

June 30, 2025

December 31, 2024

2 unchanged sentences

Accounts receivable

Unbilled accounts receivable

Prepaid expenses and other current assets

3 unchanged sentences

Deposit for business combination

Liabilities, Convertible Redeemable Preferred Stock and Stockholders’ Deficit

Liabilities, Convertible Redeemable Preferred Stock and Stockholders’ Equity

Current Liabilities:

1 unchanged sentence

Accrued liabilities

Convertible note payable, net, related party, current

Total current liabilities

Convertible note payable, net, related party

Convertible note payable, net, related party, net of current

2025 Convertible Notes

Convertible Notes to CSI shareholders

Warrant liabilities

4 unchanged sentences

375,000 shares authorized;

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

Stockholders’ Deficit:

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

Stockholders’ Equity:

Common stock, par value $ 0.0001 ;

300,000,000 shares authorized;

66,024,190 and 52,034,060 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively

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

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity / (deficit)

Total liabilities, convertible preferred stock and stockholders’ equity/(deficit)

Total stockholders’ equity

Total liabilities, 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 months ended March 31, 2025 and 2024

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

(in thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of revenue

7 unchanged sentences

Interest expense, net

Change in fair value of 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

Income (loss) before provision for income taxes

Loss before provision for income taxes

Provision for income taxes

Net income (loss)

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

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the three months ended March 31, 2025 and 2024

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

(in thousands, except share and per share data)

7 unchanged sentences

Issuance of common stock in connection with the February Offering

Issuance of common stock in connection with alternative cashless warrant exercise

Issuance of common stock in connection with warrant exercise

Conversion of liability warrants to equity warrants

Balance as of March 31, 2025

Stock-based compensation

Issuance of common stock in connection with warrant exercise

Issuance of common stock for conversions

Issuance of common stock with NYIAX transaction

Issuance of warrants with the 2025 Notes

Issuance of common stock for the acquisition of CSI

Equity issuance costs

Balance as of June 30, 2025

Convertible Preferred Stock

13 unchanged sentences

Balance as of March 31, 2024

Stock-based compensation

Issuance of common stock in connection with warrant exercise

Issuance of common stock and warrants, net of offering costs

Issuance of common stock to vendors

Restricted stock awards cancelled

Release of vested restricted common stock

Conversion of liability warrants to equity warrants

Balance as of June 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 three months ended March 31, 2025 and 2024

For the six months ended June 30, 2025 and 2024

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net loss to net cash used in operating activities:

2 unchanged sentences

Amortization of debt discounts

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

Change in fair value of warrant liability

1 unchanged sentence

Accounts receivable

Unbilled accounts receivable

Prepaid expenses and other current assets

4 unchanged sentences

Cash flows from investing activities:

Deposits for business combination

Issuance of note receivable

Purchases of property and equipment

Cash paid for acquisition of CSI, net

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of convertible notes, net of issuance costs

Proceeds from issuance of common stock, net of issuance costs

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 short-term loan, net of issuance costs

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

Proceeds from exercise of warrants

Repurchase of common stock warrants

Repurchase of Series B preferred stock and warrants

Repayment of convertible note principal and accrued interest

Repurchase of Series B preferred stock warrants

Repayment of short-term loan

Repurchase of common stock warrants

Repayment of convertible notes principal and accrued interest

Net cash provided by financing activities

2 unchanged sentences

Cash and cash equivalents as of end of period

Supplemental disclosure of cash flow information:

Cash paid for interest

Noncash Investing and Financing Activities:

Capitalized acquistion costs

Conversion of liability warrants to equity warrants

Issuance of warrant liability in connection with financing

1 unchanged sentence

Unpaid financings issuance costs

Unpaid deferred offering costs

Reclass liability warrant to equity

Cashless exercise of warrants

Issuance of common stock to vendors

warrant exercise in connection with loan settlement

Issuance of common stock in connection with Series B preferred stock

Capitalized acquisition costs

CSI Convertible Notes issued for CSI acquisition

Non cash common shares issued in CSI acquisition

Deposit paid in December 2024 used in CSI acquisition closing

Shares payable to NYIAX in share exchange agreement

Reclass liability warrant to equity

May 2025 10% note conversions

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 Months Ended March 31, 2025 and 2024

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

Business and Summary of Significant Accounting Policies

3 unchanged sentences

Datavault stands at the forefront of innovation, delivering cutting-edge Web 3.0 data management and high-performance computing (HPC) solutions to a global audience.

On May 20, 2025, the Company completed its previously announced asset purchase of technology assets, customer contracts, trademarks, and other intellectual property (collectively, the “CSI Acquired Assets”) from CompuSystems, Inc.

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.

Nasdaq Compliance

6 unchanged sentences

The Company’s securities may at that time be delisted from Nasdaq.

The monitoring period expired July 25, 2025 with no further action required by the Company.

First Bid Price Deficiency

On April 29, 2024, the Company received a letter from Nasdaq notifying the Company that it has regained compliance with the Minimum Bid Price Requirement pursuant to Listing Rule 5550 (a)(2), as required by the April 2024 Decision.

On April 29, 2024, the Company received a letter from Nasdaq notifying the Company that it has regained compliance with the Minimum Bid Price Requirement (defined below) pursuant to Listing Rule 5550 (a)(2), as required by the April 2024 Decision.

The Company will be subject to a mandatory panel monitor for a period of one year from the date of the letter pursuant to Nasdaq Listing Rule 5815(d)(4)(B).

1 unchanged sentence

Instead, the Staff will issue a delist determination letter and the Company will have an opportunity to request a new hearing with the initial Panel or a newly convened hearings panel if the initial Panel is unavailable.

The one-year monitoring period has concluded.

The one-year monitoring period has concluded with no further action required by the Company

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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

Business and Summary of Significant Accounting Policies, continued

Second Bid Price Deficiency

On May 6, 2025, the Company received a written notification (the “May 2025 Nasdaq Letter”) from the Staff that it was not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market, as set forth under the Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), because the closing bid price of the Company’s Common Stock was below $1.00 per share for the previous thirty (30) consecutive business days.

On May 6, 2025, the Company received a written notification (the “May 2025 Nasdaq Letter”) from the Staff that it was not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market, as set forth under the Nasdaq Listing Rule 5550(a)(2) Minimum Bid Price Requirement, because the closing bid price of the Company’s common stock was below $1.00 per share for the previous thirty (30) consecutive business days (the “Minimum Bid Price Requirement”).

The May 2025 Nasdaq Letter has no immediate effect on the listing of the common stock, which will continue to trade uninterrupted on the Nasdaq Capital Market under the ticker “DVLT.”

4 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.

Reverse Stock Splits

Reverse Stock Split

April 2024 Reverse Stock Split

3 unchanged sentences

The common stock began trading on a split-adjusted basis at the start of trading on April 15, 2024.

Unless otherwise indicated, the information presented in this Quarterly Report on Form 10-Q for the period ended March 31, 2025 (this “Report”) gives effect to the April 2024 Reverse Stock Split.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

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.

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

12 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 March 31, 2025 and December 31, 2024, there was no allowance for credit losses.

As of March 31, 2025, the Company had three customers accounting for 34 %, 33 % and 12 % of accounts receivable.

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

The Company had three customers accounting for 29 %, 25 % and 18 % of its net revenue for the three months ended March 31, 2025.

The Company had three customers accounting for 35 %, 29 % and 21 % of its net revenue for the three months ended March 31, 2024.

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.

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

5 unchanged sentences

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Accounts Receivable and Allowance for Credit Losses

2 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

Fair Value of Financial Instruments

1 unchanged sentence

The carrying value of the Company’s borrowings and capital lease liabilities approximates fair value based upon borrowing rates currently available to the Company for loans and capital leases with similar terms.

The Company’s Warrant liabilities and convertible note payable are the only financial instrument that is adjusted to fair value on a recurring basis.

The Company’s warrant liabilities and the convertible notes payable, net to a related party and the 2025 Convertible Notes (defined below) are the only financial instruments that are adjusted to fair value on a recurring basis.

Inventories, principally purchased components, are stated at the lower of cost or net realizable value.

6 unchanged sentences

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

As of March 31, 2025 and December 31, 2024, the Company had capitalized $ 117,000 and $ 0 , respectively, of deferred offering costs in prepaid expenses and other current assets on the condensed consolidated balance sheets.

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

Property and Equipment, Net

4 unchanged sentences

Maintenance and repairs are charged to operations as incurred.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

Business and Summary of Significant Accounting Policies, continued

Convertible Financial Instruments

4 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

Warrants for our common shares, convertible redeemable preferred shares, and derivative financial instruments are classified as equity if the contracts (1) require physical settlement or net-share settlement or (2) give the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement).

Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) that contain reset provisions that do not qualify for the scope exception are classified as equity or liabilities.

Contracts which (1) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company), (2) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement), or (3) contain reset provisions that do not qualify for the scope exception are classified as equity or liabilities.

The Company assesses classification of its warrants for shares of common stock and other derivatives at each reporting date to determine whether a change in classification between equity and liabilities is required.

4 unchanged sentences

Revenue Recognition

The Company historically generates revenue primarily from two product categories which include the sale of Consumer Audio Products as well as the sale of Components.

The Company historically generates revenue primarily from two product categories which are the sale of consumer audio products (“Consumer Audio Products”) as well as the sale of components (“Components”).

With the closing of the CSI acquisition, the Company also generates revenue from registration, data analytics, and lead management services for live events, such as trade shows and conferences, in both the corporate and government sectors (“Live Events”).

The Company applies the following five steps:

(1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

The Company considers customer purchase orders to be the contracts with a customer.

Revenues, net of expected discounts, are recognized when the performance obligations of the contract with the customer are satisfied and when control of the promised goods are transferred to the customer, typically when products, which have been determined to be the only distinct performance obligations, are shipped to the customer.

The Company considers customer purchase orders to be the contracts with a customer for Consumer Audio Products and Components.

The Company also enters into contracts with customers for providing Live Events with terms of three years.

The contract typically terminates after the close of the last event specified in the contract, unless both parties agree in writing to extend it.

There are no termination-for-convenience clauses in the CSI contract.

Contracts can only be terminated for breach or non-performance and in that circumstance, the Company must be compensated for all services up to the date of termination.

Therefore, a standard CSI contract is typically not shorter than its stated term.

Revenues on Consumer Audio Products and Components, net of expected discounts, are recognized when the performance obligations of the contract with the customer are satisfied and when control of the promised goods are transferred to the customer, typically when products, which have been determined to be the only distinct performance obligations, are shipped to the customer.

Expected costs of assurance warranties and claims are recognized as expense.

Revenues generated from Live Events contracts have a single performance obligation, event preparation and management.

A standard CSI contract contains fixed fees for services and pass through costs and other expenses that are variable depending on the number of supplies used or personnel costs incurred which are passed through to the client and are recognized on a gross basis in revenue as costs to fulfill the contract.

The contract also includes rebates payable to the client which the Company estimates as variable consideration using the most likely amount method at the outset of the contract.

The entire transaction price relates to the event preparation and management performance obligation.

The Company recognizes revenue as services are rendered using the input method.

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 Months Ended March 31, 2025 and 2024

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 us from a customer and deposited with the relevant government authority, are excluded from revenue.

Our revenue arrangements do not contain significant financing components.

Sales to certain distributors are made under arrangements which provide the distributors with price adjustments, price protection, stock rotation and other allowances under certain circumstances.

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.

The Company’s revenue arrangements do not contain significant financing components.

For Consumer Audio and Components, sales to certain distributors are made under arrangements which provide the distributors with price adjustments, price protection, stock rotation and other allowances under certain circumstances.

The Company does not provide its customers with a contractual right of return.

1 unchanged sentence

These returns, adjustments and other allowances are accounted for as variable consideration.

The Company estimates these amounts based on the expected amount to be provided to customers and reduce revenue recognized.

The Company believes that there will not be significant changes to our estimates of variable consideration.

If a customer pays consideration, or the Company has a right to an amount of consideration that is unconditional before the Company transfers 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 months ended March 31, 2025 and 2024, net revenue consisted of the following:

For the Three Months Ended March 31,

We estimate these amounts based on the expected amount to be provided to customers and reduce revenue recognized.

We believe that there will not be significant changes to our estimates of variable consideration.

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,

(in thousands)

1 unchanged sentence

Contract Balances

The Company receives payments from customers based on a billing schedule as established in our contracts to partially offset prepayments required by our vendors on long lead time materials.

The Company receives payments from customers based on a billing schedule as established in our contracts to partially offset prepayments required by our vendors on long lead time materials as well as for Live Events.

Amounts collected prior to the fulfillment of the performance obligation are considered contract liabilities and classified as customer advances within accrued liabilities on the consolidated balance sheets.

1 unchanged sentence

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

The Company has $ 83,000 and $ 109,000 of contract assets as of March 31, 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 March 31, 2025 in the next twelve months.

During the three months ended March 31, 2025, the Company recognized $ 49,000 of revenue that was included in the contract liabilities balance as of December 31, 2024.

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.

(in thousands)

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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

Business and Summary of Significant Accounting Policies, continued

16 unchanged sentences

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

Advertising costs for the three months ended March 31, 2025 and 2024 were approximately $ 146,000 and $ 147,000 , respectively.

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.

Comprehensive Loss

1 unchanged sentence

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

For the three months ended March 31, 2025 and 2024, the Company’s comprehensive loss is the same as its 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.

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 months ended March 31, 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 six months ended June 30, 2025 and 2024.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

For the Three and Six Months Ended June 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 three months ended March 31, 2025, warrants to purchase 15,204,647 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, 7,014,260 shares underlying restricted stock awards and 64,183 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 three months ended March 31, 2024, warrants to purchase 1,985,138 shares of common stock, 5,362 shares of restricted stock, 17 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 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.

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 March 31, 2025 and December 31, 2024.

The Company has recognized valuation allowances against its deferred tax assets as of June 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 March 31, 2025 and December 31, 2024, the Company recognized no interest and penalties.

As of June 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 Months Ended March 31, 2025 and 2024

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

Business and Summary of Significant Accounting Policies, continued

Recently Adopted Accounting Pronouncement

Recently Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2023-09 – Income Taxes (Topic 740):

2 unchanged sentences

The update is effective for public business entities for annual periods beginning after December 15, 2024, on a prospective basis but does not impact interim financial statements.

The Company has adopted standard as of March 31, 2025 and does not expect the adoption to have a material impact on its condensed consolidated financial statements.

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.

Recently Issued and Not Yet Adopted Accounting Pronouncements

16 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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 March 31, 2025, the Company had cash and cash equivalents of $ 0.2 million and reported net cash used in operations of $ 6.0 million during the three months ended March 31, 2025.

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.

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.

9 unchanged sentences

The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Asset Purchase

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

At the closing (the “CSI Closing”), pursuant to an asset purchase agreement, by and between the Company and CSI, dated as of December 19, 2024, as amended by that certain amendment to the asset purchase agreement, dated as of December 30, 2024, and as further amended by that certain second amendment to the asset purchase agreement, dated as of February 25, 2025, and as further amended by that certain third amendment to the asset purchase agreement, dated March 31, 2025, and as further amended by that certain fourth amendment to the asset purchase agreement, dated May 14, 2025 (the “CSI Asset Purchase Agreement”), the Company acquired the CSI Acquired Assets for an aggregate purchase consideration of $32.8 million consisting of (i) exclusivity fee of $ 1.0 million paid in the fourth fiscal quarter of 2024 (the “Exclusivity Fee”), (ii) amount in cash of $ 1.0 million paid to an escrow account in January 2025 (the “Escrow Amount”) (iii) an amount in cash equal to $ 5.0 million, (iv) 10,600,000 validly issued, fully paid and nonassessable shares of restricted common stock of the Company, (the “Closing Stock Consideration”), (v) $ 5.0 million payable in the form of the convertible note (the “Initial Convertible Note”) issued by the Company to CSI, (vi) $ 5.0 million payable in the form of the convertible note (the “First Convertible Note”) issued by the Company to CSI, (vii) $ 5.0 million payable in the form of convertible note (the “Second Convertible Note”, and together with the Initial Convertible Note and First Convertible Note, the “CSI Convertible Notes”) issued by the Company to CSI, (viii) $ 500,000 for the reimbursement of fees incurred by CSI due to the acquisition, and (ix) the assumption of certain transferred liabilities, as described in the CSI Asset Purchase Agreement.

Pursuant to the CSI Asset Purchase Agreement, in connection with the CSI Closing, the Company issued the CSI Convertible Notes in an aggregate principal amount of $ 15.0 million, each due on the second anniversary of the closing (the “Maturity Date”).

For additional information on the CSI Convertible Notes, refer to Note 5, Borrowings.

The acquisition was accounted for under ASC 805, Business Combinations and uses preliminary purchase price allocations, with adjustments permitted within the measurement period (not exceeding one year).

Adjustments beyond the measurement period are recorded in earnings.

A summary of the purchase consideration follows:

Closing Stock Consideration

Convertible Notes

Total purchase price consideration

Cash of $ 7.5 million includes initial cash paid of $ 1.0 million as Exclusivity Fee in December 2024, $ 1.0 million Break up Fee paid in January 2025, and cash paid at closing in May 2025 amounting to $ 5.5 million

The preliminary purchase price and purchase price allocation pending a final valuation of assets acquired and liabilities assumed follows:

Unbilled receivable

Intangible assets

Accrued expenses

Loan for purchase of equipment

Deferred revenue

Total purchase consideration

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

The acquired intangible assets values were estimated using the discounted cash flow method and estimated discount rate.

The useful lives are based on estimates of benefits derived from the future cash flows.

The acquired intangible assets, useful lives and a preliminary estimate of fair value at the acquisition date follows:

Useful Life (years)

Customer relationships

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.

EOS Asset Acquisition

On December 31, 2024, the Company completed its asset purchase of information technology assets, certain patents and trademarks (collectively, the “Acquired Assets”) from EOS Technology Holdings Inc.

(“EOS Holdings”).

At the closing (the “DV Closing”), pursuant to that asset purchase agreement, by and between the Company and EOS Holdings, dated as of September 4, 2024, and as amended on November 14, 2024, and as further amended from time to time (the “Asset Purchase Agreement”), the Company purchased the Acquired Assets for an aggregate purchase price of approximately $ 92,000,000 consisting of (i) $ 10,000,000 paid in the form of a promissory note issued by the Company to EOS Holdings (the “DV Convertible Note”), and (ii) 40,000,000 shares (the “Closing Stock Consideration”) of validly issued, fully paid and nonassessable shares of restricted common stock of the Company, with an aggregate fair value of approximately $ 82,000,000 based on the closing stock price of the Company on December 31, 2024.

At the closing (the “DV Closing”), pursuant to that asset purchase agreement, by and between the Company and EOS Holdings, dated as of September 4, 2024, and as amended on November 14, 2024, and as further amended from time to time (the “Asset Purchase Agreement”), the Company purchased the Acquired Assets for an aggregate purchase price of approximately $ 92.0 million consisting of (i) $ 10.0 million paid in the form of a promissory note issued by the Company to EOS Holdings (the “DV Convertible Note”), and (ii) 40,000,000 shares (the “DV Closing Stock Consideration”) of validly issued, fully paid and nonassessable shares of restricted common stock of the Company, with an aggregate fair value of approximately $ 82.0 million based on the closing stock price of the Company on December 31, 2024.

EOS Holdings is considered a related party as of the DV Closing.

See Note 11 Related Parties for further details.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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 March 31, 2025.

There is no change as of June 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 $ 92,000,000 plus capitalized fees of $ 575,000 were recorded to the intangible assets acquired of patents and trademarks for $ 2,384,000 and $ 90,191,000 , respectively, with useful weighted average remaining lives of ten years in each case .

For the three months ended March 31, 2025, the amortization expense related to intangible assets was approximately $ 2,309,000 .

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.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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

Balance Sheet Components

6 unchanged sentences

Machinery and equipment

Leasehold improvements

Furniture and fixtures

Accumulated depreciation and amortization

Property and equipment, net

Depreciation expense for the three months ended March 31, 2025 and 2024 was $12,000 and $ 20,000 , respectively.

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:

2025 remainder

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

Gross Carrying

Trade names and trademarks

Customer relationships

Internal use technology

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 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 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”).

19 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.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

Balance Sheet Components, continued

On December 23, 2024, the Company entered into a fourth Promissory Note and Security Agreement with the Borrower.

4 unchanged sentences

The above notes receivable are netted on the condensed consolidated balance sheet in “convertible note payable, net related party” as of March 31, 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 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.

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 balance as of March 31, 2025 is $ 299,000 .

At March 31, 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 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.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Balance Sheet Components, continued

Deposits for Business Combination

On December 19, 2024 the Company entered into an asset purchase agreement with CompuSystems Inc (“CSI”) as amended on December 30, 2024, February 25, 2025 and March 31, 2025 (the “CSI Purchase Agreement”) where the Company has agreed to purchase, assume and accept from CSI all of the rights, title and interests used in the acquired business, and products and services solely to the extent they utilize the transferred assets, including CSI’s customer contracts, trademarks and other intellectual property (the “CSI Acquisition”).

Pursuant to the CSI Purchase Agreement, the Company made an exclusivity deposit and a break-up fee deposit totaling $ 2,000,000 which is recorded on the condensed consolidated balance sheet in “deposit on business combination” as of March 31, 2025.

The acquisition has not closed as of March 31, 2025.

Accrued Liabilities

On December 19, 2024 the Company entered into an asset purchase agreement with CompuSystems Inc (“CSI”) as amended on December 30, 2024, February 25, 2025 and March 31, 2025 (the “CSI Purchase Agreement”) where the Company agreed to purchase, assume and accept from CSI all of the rights, title and interests used in the acquired business, and products and services solely to the extent they utilize the transferred assets, including CSI’s customer contracts, trademarks and other intellectual property (the “CSI Acquisition”).

Pursuant to the CSI Purchase Agreement, the Company made an exclusivity deposit and a break-up fee deposit totaling $ 2.0 million.

The acquisition was completed on May 20, 2025 and thus the acquisition deposits are recorded as part of purchase consideration in note 3.

Accrued liabilities (in thousands):

Accrued vacation

Accrued audit fees

Customer advance

Accrued compensation

Contract liabilities

Accrued lease liability, current portion

Accrued vacation

Accrued audit fees

Accrued payable to NYIAX

Accrued other

Total accrued liabilities

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

January 2024 Short-Term Loan Agreement

7 unchanged sentences

The 2024 Promissory Notes were settled via the payment of $ 667,000 in cash and a $ 333,000 offset to the amount due by one of the investors from the exercise of 9,322 Series B Preferred Stock purchase warrants.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 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 three months ended March 31, 2024.

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.

DV Convertible Note

6 unchanged sentences

The Note Balance on the maturity date will be automatically reduced by the amount of the DV Holdings Note Balance.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

Borrowings, continued

Pursuant to the DV Convertible Note, if, at any time while the DV Convertible Note is outstanding, the Company enters into any capital raising or financing transaction, including without limitation any issuance by the Company of shares of common stock or common stock equivalents (as defined in the DV Convertible Note) for cash consideration, indebtedness or a combination of units thereof (each, a “Subsequent Financing”), then the Company shall first pay to EOS Holdings at least 10 % of the gross proceeds of such Subsequent Financing to redeem all or a portion of the DV Convertible Note, plus accrued but unpaid interest, plus liquidated damages, if any, and any other amounts then owing to EOS Holdings.

If the aggregate gross proceeds of Subsequent Financings reach or exceed $ 50,000,000 , then the Company shall repay the DV Convertible Note in full, including accrued but unpaid interest, liquidated damages, if any, and any other amounts, then owing to EOS Holdings.

If the aggregate gross proceeds of Subsequent Financings reach or exceed $ 50.0 million, then the Company shall repay the DV Convertible Note in full, including accrued but unpaid interest, liquidated damages, if any, and any other amounts, then owing to EOS Holdings.

The DV Convertible Note includes customary event of default provisions.

1 unchanged sentence

Additionally, upon the occurrence of an event of default, interest shall accrue daily at the rate of ten percent ( 10 %) per annum on the aggregate outstanding principal balance and any other amounts then owing by Company to EOS Holdings.

The Company elected the fair value method for the DV Convertible Note outstanding of $ 10,000,000 as of December 31, 2024 due to the embedded derivatives identified within the agreement requiring recurring fair value measurements.

The carrying value of the DV Convertible Note is the same as the fair value as of March 31, 2025 due to the note’s issuance occurring on December 31, 2024 and no changes in the fair value have occurred as of the three months ended March 31, 2025.

The Company elected the fair value method for the DV Convertible Note outstanding of $ 10.0 million as of December 31, 2024 due to the embedded derivatives identified within the agreement requiring recurring fair value measurements.

The note is valued using level 3 inputs.

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) and the balance as of March 31, 2025 was $ 9,582,000 .

The DV Convertible Note is netted with the notes receivable from EOS Holdings in “convertible note payable, net, related party” on the condensed consolidated balance sheets as of March 31, 2025 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.

See Note 6, Fair Value Measurements for further information on inputs.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 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.

See Note 6 fair value measurements for further disclosures.

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

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”).

The warrants meet the equity classification guidance.

See note 7 for additional information.

The closing of the Additional Notes and Additional Warrants (the “Additional Closing,” and together with the initial closing, the “2025 Closings”) took place on May 20, 2025.

The Company received stockholders approval of the issuance of the shares of common stock issuable upon conversion of the 2025 Notes and exercise of the 2025 Warrants and a one-time reset, at the Company’s option, of the exercise price of outstanding common stock purchase warrants held by the April 2025 Purchasers that do not contain “alternative cashless exercise” features ( “Stockholder Approval”).

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.

2025 Convertible Notes

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

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

Alternatively, the Notes are convertible at a price (the “Alternate Conversion Price”) equal to the greater of (x) the Floor Price (as defined below) and (y) 90 % of the lowest volume weighted adjusted price of the shares of Common Stock (the “VWAP”) in the ten (10) trading days prior to the applicable conversion date (“Alternate Conversions”).

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.

Under the 2025 Notes, the Company is required to use up to 30 % of the proceeds from future financings to redeem the 2025 Notes in an amount equal to the aggregate principal amount of the 2025 Notes being redeemed from such proceeds multiplied by 105 %.

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

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

The fair value on issuance of the 2025 Notes was $ 23.2 million which exceeded the proceeds of $ 13.7 million by $ 9.5 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 $ 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.

Security Agreement and Guarantee

In connection with the initial closing on April 3, 2025, the Company entered into (i) a security agreement (the “Security Agreement”), which grants to the holders of the Notes a security interest in all of the assets of the Company, and (ii) a subsidiary guarantee (the “Subsidiary Guarantee”), pursuant to which all domestic subsidiaries of the Company have guaranteed the Company’s obligations under the Notes.

Placement Agency Agreement

As previously announced, in connection with the April 2025 Offerings, the Company entered into a placement agency agreement (the “April 2025 Placement Agency Agreement”) with Maxim Group LLC (the “Placement Agent”) on March 31, 2025, pursuant to which the Placement Agent agreed to act as placement agent on a “reasonable best efforts” basis in connection with the April 2025 Offerings.

Pursuant to the April 2025 Placement Agency Agreement and in connection with initial closing, the Company paid the Placement Agent an aggregate fee equal to 8.0 % of the gross proceeds raised at the initial closing and reimbursed the Placement Agent an amount up to $ 15,000 for expenses in connection with the Offerings.

In addition to similar rights previously granted to the Placement Agent, pursuant to the Placement Agency Agreement, the Company granted the Placement Agent a right of first refusal for a period of 30 days from August 22, 2025 to provide investment banking services to the Company on an exclusive basis, exercisable in the Placement Agent’s discretion.

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.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Borrowings, continued

CSI Convertible Notes

In connection with the CSI Asset Purchase Agreement, the Company issued the CSI Convertible Notes in an aggregate principal amount of $ 15.0 million, each due on the second anniversary of the closing (the “Maturity Date”).

The Company agreed to pay interest to CSI on the aggregate unconverted and then outstanding principal amount of the First Convertible Note and Second Convertible Note at the rate of five percent (5%) per annum, and on the aggregate unconverted and then outstanding principal amount of the Initial Convertible Note at the rate of ten percent (10%) per annum.

The Company agreed to pay interest accruing from the six-month anniversary of the closing on the First Convertible Note and from the nine-month anniversary of the closing on the Second Convertible Note on the unpaid balance of such principal amount no less frequently than quarterly per calendar quarter.

The payment of the accrued interest shall occur on the last business day of each calendar quarter.

If the Initial Convertible Note has not been satisfied in full within three (3) months after the Closing Date, then at CSI’s option, it shall be convertible to shares of common stock, in increments of $ 500,000 , at a price of $ 1.14 per share.

The Company shall also repay the principal amount and all accrued interest under the Initial Convertible Note in full, without a penalty, within three (3) business days after the Company raises an additional amount of capital totaling at least $ 15.0 million.

The First Convertible Note can be converted, partially or entirely, into shares of common stock, any time after the six-month anniversary of the closing until the First Convertible Note is fully paid off.

The Second Convertible Note can be converted, partially or entirely, into shares of common stock, any time after the nine-month anniversary of the closing until the Second Convertible Note is fully paid off.

The First Convertible Note and Second Convertible Note use a conversion price equaling to the average VWAP during the thirty (30) consecutive trading days ending on the trading day that is immediately prior to the conversion date subject to a floor price of $ 1.40 per share and ceiling price of $ 2.50 per share (the “Conversion Price”).

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

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

ASC 815 generally requires the analysis embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract.

None of the embedded terms required bifurcation and liability classification.

The CSI Convertible Notes were measured at fair value at issuance of aggregate of $ 9.7 million.

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.

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.

● 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.

These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

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

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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

Fair Value Measurements, continued

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

● 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.

These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

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:

(in thousands)

March 31, 2025

June 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

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

Years to maturity

Estimated future financing amount

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

Conversion price

Volatility (annual)

Risk-free rate

Dividend rate

Years to maturity

Estimated future financing amount

Discount rate

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

(in thousands)

3 unchanged sentences

Warrant liabilities

There were no transfers between Level 1, 2 or 3 during the three months ended March 31, 2025 or 2024.

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

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

Fair Value Measurements, continued

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 March 31, 2025 and 2024.

For March 31, 2025, the fair value of the common warrants was determined using the Black-Scholes Model based on the following key inputs and assumptions:

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:

common stock price of $ 0.67 ;

3 unchanged sentences

risk-free interest rate of 3.68 % and expected life of 2.4 to 2.59 years.

For the three month ended March 31,

For the six months ended June 30,

(in thousands)

5 unchanged sentences

The changes in fair value of the warrant liabilities are recorded in change in fair value of warrant liabilities in the condensed consolidated statements of operations.

DV Convertible Note

Convertible Notes

As described in Note 5, the Company elected the fair value option on the DV Convertible Note issued on December 31, 2024.

The fair value of the note was deemed to equal the principal plus accrued interest at March 31, 2025.

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

No gain or loss was recorded on the DV Convertible Note for the three month ended March 31, 2025.

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

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

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

For the six months ended June 30,

(in thousands)

Beginning balance

Change in fair value recorded in interest expense

Payment on DV note

Conversion of 10% notes

Ending balance

Convertible Redeemable Preferred Stock and Stockholders’ Equity

February 2024 Series B Preferred Stock and Series B Preferred Stock Warrants Repurchase

On February 13, 2024, the Company and its Series B Preferred Stock and Series B Preferred Stock Warrants holders entered into an arrangement where the Company agreed to repurchase 62,657 Series B Preferred Stock shares and 81,315 Series B Preferred Stock warrants for a total of $ 6,266,000 .

Unamortized discounts to the Series B Preferred Stock of $ 5,381,000 were immediately recorded as a deemed dividend as of repurchase date.

Unamortized discounts to the Series B Preferred Stock of $ 5.4 million were immediately recorded as a deemed dividend as of repurchase date.

The remaining fair value of the Series B Preferred Stock Warrant Liability of $ 824,000 was adjusted against additional paid-in-capital on repurchase date.

Other Deemed Dividends

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 $ 5,842,000 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 Months Ended March 31, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

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.

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

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Each February Pre-Funded Unit was issued at $ 9.735 per unit and included one pre-funded common stock warrant (the “February Pre-Funded Warrants”), exercisable for one share of common stock at an initial exercise price of $ 0.015 and one February Common Warrant.

The gross proceeds from the issuance of the February Units and the February Pre-Funded Units were $ 1,543,000 and $ 8,444,000 , respectively, for total aggregate proceeds of $ 9,987,000 before broker fees and related expenses of approximately $ 998,000 .

The gross proceeds from the issuance of the February Units and the February Pre-Funded Units were $ 1.5 million and $ 8.4 million, respectively, for total aggregate proceeds of $ 10.0 million before broker fees and related expenses of approximately $ 998,000 .

As a result of certain price protection clauses, the February Common Warrants did not meet the criteria for equity classification and thus are subject to liability treatment.

Accordingly, of the $ 9,987,000 gross proceeds from the February 2024 Public Offering, an amount of $ 6,308,000 , representing the fair value of the February Common Warrants as of the issuance date was allocated to the February Common Warrants liability, with the residual proceeds of $ 3,679,000 allocated to the common stock and February Pre-Funded Warrants, which met the criteria for equity classification.

Accordingly, of the $ 10 million gross proceeds from the February 2024 Public Offering, an amount of $ 6.3 million, representing the fair value of the February Common Warrants as of the issuance date was allocated to the February Common Warrants liability, with the residual proceeds of $ 3.7 million allocated to the common stock and February Pre-Funded Warrants, which met the criteria for equity classification.

Of the gross broker fees and related expenses of approximately $ 998,000 , the Company allocated $ 368,000 to the issued common stock and February Pre-Funded Warrants, which were recorded as a reduction of additional paid-in-capital.

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

On March 26, 2024, the Company entered into a Securities Purchase Agreement with certain purchasers where the Company issued 417,833 shares of common stock, 93,342 pre-funded common stock warrants (the “March Pre-Funded Warrants”) and common stock warrants (the “March Common Warrants”) to purchase up to 511,175 shares of common stock at an initial exercise price of $ 6.00 per share (known in aggregate as the “March 2024 Offering”).

Total proceeds per the Securities Purchase Agreement amounted to $ 2,299,000 before broker fees and other related expenses of approximately $ 388,000 .

Total proceeds per the Securities Purchase Agreement amounted to $ 2.3 million before broker fees and other related expenses of approximately $ 388,000 .

As a result of certain price protection clauses, the March Common Warrants did not meet the criteria for equity classification and thus are subject to liability treatment.

Accordingly, of the $ 2,299,000 gross proceeds from the March public offering, an amount of $ 1,227,000 , representing the fair value of the March Common Warrants as of the issuance date was allocated to the March Common Warrants liability, with the residual proceeds of $ 1,072,000 allocated to the common stock and March Pre-Funded Warrants, which met the criteria for equity classification.

Accordingly, of the $ 2.3 million gross proceeds from the March public offering, an amount of $ 1.2 million, representing the fair value of the March Common Warrants as of the issuance date was allocated to the March Common Warrants liability, with the residual proceeds of $ 1.1 million allocated to the common stock and March Pre-Funded Warrants, which met the criteria for equity classification.

Of the gross broker fees and related expenses of approximately $ 388,000 , the Company allocated $ 181,000 to the issued common stock and the March Pre-Funded Warrants, which were recorded as a reduction of additional paid-in-capital.

The remaining issuance cost of $ 207,000 was allocated to the March Common Warrants and was expensed on the date of issuance as such warrants were recorded at fair value.

April 2024 Issuances of Common Stock and Common Stock Warrants

On April 17, 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, 225,834 shares of common stock at $ 3.321 per share, and (ii) in a concurrent private placement, common stock purchase warrants exercisable for an aggregate of up to 225,834 shares of common stock, at an initial exercise price of $ 3.196 per share (the “Initial April 2024 Registered Direct Offering and Concurrent Private Placement”).

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 .

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”).

The Second 2024 Registered Direct Offering and Concurrent Private Placement closed on April 23, 2024 and the Company received gross proceeds of approximately $ 1.9 million before deducting placement agent fees and other offering expenses of approximately $ 268,000 .

On April 26, 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, 418,845 shares of common stock at $ 5.73 per share, and (ii) in a concurrent private placement, common stock purchase warrants exercisable for an aggregate of up to 418,845 shares of common stock, at an initial exercise price of $ 5.60 per share (the “Third April 2024 Registered Direct Offering and Concurrent Private Placement”).

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

On May 13, 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, 785,000 shares of common stock at $ 3.31 per share, and (ii) in a concurrent private placement, common stock purchase warrants exercisable for an aggregate of up to 785,000 shares of common stock, at an initial exercise price of $ 3.18 per share (the “Initial May 2024 Registered Direct Offering and Concurrent Private Placement”).

The Initial May 2024 Registered Direct Offering and Concurrent Private Placement closed on May 15, 2024 and the Company received gross proceeds of approximately $ 2.6 million before deducting placement agent fees and other offering expenses of approximately $ 314,000 .

On May 15, 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, 675,000 shares of common stock at $ 3.61 per share, and (ii) in a concurrent private placement, common stock purchase warrants exercisable for an aggregate of up to 675,000 shares of common stock, at an initial exercise price of $ 3.48 per share (the “Second May 2024 Registered Direct Offering and Concurrent Private Placement”).

The Second May 2024 Registered Direct Offering and Concurrent Private Placement closed on May 17, 2024 and the Company received gross proceeds of approximately $ 2.4 million before deducting placement agent fees and other offering expenses of approximately $ 290,000 .

For the three months ended June 30, 2024, the Company’s board of directors approved the issuance of a total of 136,203 shares of common stock to two vendors for investor relations services.

The fair value of such common shares was calculated to be $ 360,000 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 each agreement which ranged from 6 months to 12 months .

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

Warrants for Common Shares

A summary of the warrant activity and related information for the three months ended March 31, 2025 and 2024 is provided as follows.

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.

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.

5 unchanged sentences

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 Months Ended March 31, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

In connection with the 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.

12 unchanged sentences

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 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.

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 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.

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 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.

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 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.

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 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.

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.

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

February 2024 Warrants Black Scholes Value Payout

9 unchanged sentences

In the February 2025 Offering, the Company issued and sold to the February 2025 Investors in a registered direct offering, (a) an aggregate of 4,757,126 shares (the “February 2025 Shares”) of common stock of the Company, and (b) common stock purchase warrants (the “February 2025 Warrants”, and together with the Shares, the “February 2025 Securities”) exercisable for an aggregate of up to 4,757,126 shares of common stock, at an exercise price of $ 1.14 per share (the “February 2025 Warrant Shares”) at a combined offering price of $ 1.14 per share and accompanying February 2025 Warrant, for aggregate gross proceeds of approximately $ 5.4 million.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

The February 2025 Warrants are immediately exercisable upon issuance and will expire on the fifth anniversary of the issuance date of the February 2025 Warrants.

8 unchanged sentences

Pursuant to the February 2025 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 its shares of common stock or securities convertible into common stock until 30 days after the closing date of the February 2025 Offering, and (ii) not to issue certain securities if the issuance would constitute a variable rate transaction for a period of 4 months from the closing date of the February 2025 Offering, in each case unless the Company is required to complete a financing prior to the applicable date in order to satisfy Nasdaq’s continued listing requirements.

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

Placement Agency Agreement

3 unchanged sentences

The February 2025 Placement Agent Warrants will be exercisable 6 months after the commencement of sales in the February 2025 Offering and will expire on the five year anniversary of the initial exercise date.

During the three months ended March 31, 2025, two holders of warrants executed their right under the “alternative cashless exercise” provision to effect a cashless exercise of a total of 3,246,111 shares of common stock.

Warrants exercisable as of March 31, 2025 exclude warrants to purchase 1 shares of common stock issued to a marketing firm, which vest upon the achievement of certain milestones, warrants to purchase 2,513,703 shares of common stock issued to investors that participated in the December Inducement Agreement and warrants to purchase 607,689 shares of common stock issued to investors that participated in the September Inducement Agreement that requires shareholder approval prior to the warrants being exercisable, 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.

April 2025 Cashless Warrant Exercises

On April 1, 2025, 2,989,887 shares of common stock were issued pursuant to the cashless exercise terms of the warrants issued between April 2024 through September 2024.

April and May 2025 Warrants

In connection with the April 2025 Offerings, the Company issued 6,448,700 warrants to purchase common stock on April 3, 2025 and 12,897,401 warrants to purchase common stock on May 19, 2025.

The 2025 Warrants have an initial exercise price of $ 0.8615 per share.

The Initial Warrants are exercisable and expire five ( 5 ) years from the date of such effectiveness.

The Additional Warrants are exercisable immediately upon issuance and expire five ( 5 ) years from the date of issuance.

The exercise price of the 2025 Warrants is subject to (a) downward adjustment in the event the Company issues shares of common stock or common stock equivalents having an effective price lower than the then current exercise price of the 2025 Warrants, subject to certain exceptions and (b) standard, proportional adjustments in the event of certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate changes.

The Warrants contain 4.99 / 9.99 % beneficial ownership limitations.

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.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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

Convertible Redeemable Preferred Stock and Stockholders’ Equity, continued

Information regarding warrants for common stock outstanding and exercisable as of March 31, 2025 is as follows:

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

Weighted Average

1 unchanged sentence

Exercisable as of

March 31, 2025

$ 1.14 - $ 2.21

June 30, 2025

$ 0.86 - $ 2.21

18 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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

Stock-Based Compensation

8 unchanged sentences

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 March 31, 2025, up to 3,303,983 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 three months ended March 31, 2025 is presented below:

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:

Weighted-Average

1 unchanged sentence

Non-vested as of January 1, 2025

Non-vested as of March 31, 2025

A summary of activity related to restricted stock awards with performance-based vesting conditions for the three months ended March 31, 2025 is presented below:

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:

Weighted-Average

1 unchanged sentence

Non-vested as of January 1, 2025

Non-vested as of March 31, 2025

Non-vested as of June 30, 2025

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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

Stock-Based Compensation, continued

As of March 31, 2025, the unamortized compensation costs related to the unvested restricted stock awards with service based vesting conditions was approximately $ 5,609,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 2.8 years.

As of March 31, 2025, the unamortized compensation costs related to the unvested restricted stock awards with performance based vesting criteria was $ 1,930,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 1.7 years.

These performance awards vest upon the achievement of the Company’s aggregate revenue equaling or exceeding $ 40,000,000 over a 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 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.

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 months ended March 31, 2025, no shares of restricted stock units were released under the LTIP.

For the three months ended March 31, 2024, 20 shares of restricted stock issued under the LTIP, were released.

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 .

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 March 31, 2025, all compensation cost related to the September 2021 Inducement Grant was expensed.

As of March 31, 2025, 16 shares are unvested.

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.

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 March 31, 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, Chief Executive Officer, as an inducement grant (the “Bradley Inducement Grant”) pursuant to an inducement award agreement dated December 31, 2024.

As of June 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 March 31, 2025, the unamortized compensation cost related to the Bradley Inducement Grant was approximately $ 2,255,000 which is being amortized on a straight-line basis over a period of 2.25 years.

A summary of activity related to restricted stock units under the Company’s Technical Team Retention Plan of 2022 (the “2022 Plan”) for the three months ended March 31, 2025 is presented below:

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.

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.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 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:

Weighted-Average

1 unchanged sentence

Non-vested as of January 1, 2025

Non-vested as of March 31, 2025

As of March 31, 2025, the unamortized compensation cost related to the unvested restricted stock units was approximately $ 58,000 which is to be amortized on a straight-line basis over a weighted-average period of approximately 1.2 years.

For the three months ended March 31, 2025, no shares of restricted stock units were released under the 2022 Plan.

For the three months ended March 31, 2024, 3 shares of restricted stock units were released under the 2022 Plan.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

The Company recorded no provision for income taxes for the three months ended March 31, 2025 and 2024.

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.

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 March 31, 2025 and December 31, 2024, the Company retains a full valuation allowance on its deferred tax assets.

As of June 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 three months ended March 31, 2025 and 2024 was calculated on a jurisdiction basis.

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

Commitments and Contingencies

Operating Leases

The Company leases office space under a non-cancellable operating lease that expires in January 2024 and has an option to renew this lease, with renewal rates to be negotiated.

The Company leases office space under a non-cancellable operating lease that expired in January 2024 and had an option to renew this lease, with renewal rates to be negotiated.

Operating lease rentals are expensed on a straight-line basis over the life of the lease beginning on the date we take possession of the property.

2 unchanged sentences

The lease term is used to determine whether a lease is financing or operating and is used to calculate straight-line rent expense.

Additionally, the depreciable life of leasehold improvements is limited by the expected lease term.

Additionally, the depreciable leasehold improvements is limited by the expected lease term.

Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet;

we recognize lease expense for these leases on a straight-line basis over the lease term.

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

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 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):

Operating lease right-of-use assets

3 unchanged sentences

Operating lease liabilities, current, are included in accrued liabilities and Operating lease liabilities, non-current, are include in other liabilities on the condensed consolidated balance sheets.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

Commitments and Contingencies, continued

The components of lease costs were as follows (in thousands):

March 31, 2025

March 31, 2024

Three Months Ended

Six Months Ended

Operating lease cost

1 unchanged sentence

Total lease cost

As of March 31, 2025, the maturity of operating lease liabilities was as follows (in thousands):

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

Payments due in:

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Amounts representing interest

Present value of capital lease obligations

Present value of operating lease obligations

Lease Term and Discount Rate:

March 31, 2025

June 30, 2025

Weighted-average remaining lease term (in years)

1 unchanged sentence

The discount rate was calculated by using the Company’s estimated incremental borrowing rate.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Commitments and Contingencies, continued

Other Information:

1 unchanged sentence

Three Months Ended

March 31, 2025

Six Months Ended

June 30, 2025

Operating cash outflows from operating leases

6 unchanged sentences

The Company’s management does not believe that any such matters, individually or in the aggregate, will have a materially adverse effect on the Company’s condensed consolidated financial statements.

NYIAX Agreements

Exchange Agreement

On March 16, 2025, the Company entered into a share exchange agreement (the “Exchange Agreement”) with NYIAX, Inc., a Delaware corporation (“NYIAX”), pursuant to which NYIAX exchanged 900,000 shares (the “NYIAX Shares”) of NYIAX’s common stock, par value $ 0.0001 per share (the “NYIAX Common Stock”), for aggregate consideration of up to 5,000,000 shares of common stock (collectively, the “Exchange”).

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.

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.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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

Commitments and Contingencies, continued

Intellectual Property Cross-License Agreement

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.

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”).

The NYIAX Convertible Note is due on the first anniversary of the closing (the “Maturity Date”).

NYIAX agreed to pay interest to the Company on the aggregate unconverted and then outstanding principal amount of the NYIAX Convertible Note at the rate of four percent ( 4 %) per annum, accruing from the closing.

The NYIAX Convertible Note may be prepaid in full at NYIAX’s election.

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 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.

Software Development Agreement

In connection with the Exchange, on March 16, 2025, the Company entered into a software development agreement (the “Software Development Agreement”) with NYIAX, pursuant to which NYIAX has engaged the Company to develop certain software and provide certain additional professional services as the parties will agree under one or more statements of work.

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

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Commitments and Contingencies, continued

Lock-up Agreements

On April 9, 2025, the Company and NYIAX entered into the Lock-Up Agreements (defined below).

In connection with the Exchange Agreement, the Company agreed to enter into a lock-up agreement in respect of the NYIAX Shares, pursuant to which the NYIAX Shares shall be subject to lock-up restrictions for four ( 4 ) years from the issuance (the “Datavault Lock-Up Agreement).

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.

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 $ 9.7 million of principal balance under the DV Convertible Note to EOS Holdings, and EOS Holdings owes $ 299,000 in notes receivable to the Company, as of March 31, 2025.

The Company has recorded $ 5,000 in interest income on the notes receivable for the year ended March 31, 2025.

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.

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 period from January 16, 2025 through March 31, 2025, the Company has paid $ 428,000 to EOS Holdings.

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.

Helge Kristensen

1 unchanged sentence

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.

For the three months ended March 31, 2025 and 2024, Hansong Technology purchased modules from the Company of approximately $ 11,000 and $ 25,000 , respectively, and made no payments to the Company during those same periods.

At March 31, 2025 and 2024, Hansong Technology owed the Company approximately $ 35,000 and $ 29,000 , respectively.

For the three months ended March 31, 2025 and 2024, Hansong Technology sold no speaker products to the Company, and the Company made no payments to Hansong Technology for the three months ended March 31, 2025 and approximately $ 25,000 for the three months ended March 31, 2024.

At March 31, 2025 and 2024, the Company owed Hansong Technology approximately $ 43,000 and $ 225,000 , respectively.

As of March 31, 2025 and December 31, 2024, Mr.

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.

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.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

Segment Information continued

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.

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,

Cost of net revenue

5 unchanged sentences

Income tax expense

Net (loss) income

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 months ended March 31, 2025 and 2024 was as follows:

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

For the Three Months Ended

For the Six Months Ended

(in thousands)

1 unchanged sentence

Substantially all of our long-lived assets are located in the United States.

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 Months Ended March 31, 2025 and 2024

Subsequent Events

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 $ 5,555,555 (the “Initial Notes”) for an aggregate purchase price of $ 5,000,000 and senior secured convertible notes having an aggregate principal amount of $ 11,111,111 (the “Additional Notes”, and together with the Initial Notes, the (“2025 Notes”) for an aggregate purchase price of $ 10,000,000 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”).

The closing of the Additional Notes and Additional Warrants (the “Additional Closing,” and together with the initial closing, the “2025 Closings”) will take place on or after the date that is 20 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 issuable upon conversion of the 2025 Notes and exercise of the 2025 Warrants and a one-time reset, at the Company’s option, of the exercise price of outstanding common stock purchase warrants held by the April 2025 Purchasers that do not contain “alternative cashless exercise” features ( “Stockholder Approval”).

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

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

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

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 Months Ended March 31, 2025 and 2024

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

Subsequent Events, continued

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

The 2025 Warrants have an initial exercise price of $ 0.8615 per share.

The Initial Warrants will be exercisable upon effectiveness of Stockholder Approval and expire five (5) years from the date of such effectiveness.

The Additional Warrants will be issued in the Additional Closing, exercisable immediately upon issuance and expire five (5) years from the date of issuance.

The Warrants contain 4.99 / 9.99 % beneficial ownership limitations.

Security Agreement and Guarantee

Placement Agency Agreement

NYIAX Agreements

Exchange Agreement

The Exchange Agreement was not closed as of March 31, 2025.

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 Months Ended March 31, 2025 and 2024

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

Subsequent Events, continued

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

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

Intellectual Property Cross-License Agreement

The NYIAX Convertible Note is due on the first anniversary of the closing (the “Maturity Date”).

The NYIAX Convertible Note may be prepaid in full at NYIAX’s election.

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”).

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.

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”).

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.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2025 and 2024

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

Subsequent Events, continued

Software Development Agreement

Lock-up Agreements

On April 9, 2025, the Company and NYIAX entered into the Lock-Up Agreements (defined below).

Nasdaq Compliance

On May 6, 2025, the Company received the May 2025 Nasdaq Letter.

For discussion of the May 2025 Nasdaq Letter, please see Note 1 to Item 1 of this Report under the heading “Nasdaq Compliance”.

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”).

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 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.

DATAVAULT AI INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and Six Months Ended June 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.

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