Datavault AI Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Cautionary Notice Regarding Forward Looking Statements This Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,” “forecast,” “potential,” “continue,” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout this Report and include information concerning possible or assumed future results of Datavault AI Inc,’s (the “Company”, “our”, “us” or “we”) operations; business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any other statements that are not historical facts. From time to time, forward-looking statements also are included in our other periodic reports on Form 10-K, 10-Q and 8-K, in our press releases, in our presentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in any other reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, including risks related to market, economic and other conditions; the Company’s ability to continue as a going concern; the Company’s ability to manage costs and execute on its operational and budget plans; and, the Company’s ability to achieve its financial goals. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Report. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise. Overview Datavault AI Inc. (Nasdaq: DVLT) is an innovative technology licensing company revolutionizing data management, valuation, and monetization through its portfolio of patented, secure platforms. Our proprietary high-performance computing (“HPC”) infrastructure and advanced software empower global businesses with innovative, AI-driven solutions tailored for the Web 3.0 ecosystem. Central to our offerings are our flagship AI agents—Data Vault®, DataValue®, DataScore®, and Data Vault Bank®—which leverage generative AI to deliver enterprise-grade capabilities for data ownership immutability, real-time experiential observability, precise asset valuation, and secure monetization. Operating through two synergistic divisions—Data Science and Acoustic Science—we optimize revenue streams across industries such as sports, entertainment, biotech, fintech, and energy. With a seasoned executive leadership team and robust engineering expertise, Datavault AI is poised to capitalize on the growing demand for data-driven solutions, unlocking transformative opportunities in an increasingly digital world. Strategic Acquisition of CompuSystems, Inc. On May 20, 2025, we finalized the strategic acquisition of CompuSystems, Inc. (“CSI”) assets, a pivotal milestone in our growth strategy. This acquisition enhances our capabilities in event management and data monetization, particularly in the sports, entertainment, and venue markets, by integrating CSI’s historical, present, and future data with our patented Web 3.0 technologies, including Data Vault, Adio, and WiSA. To date, our operations have been funded through sales of our common and preferred equity, proceeds from the exercise of warrants to purchase common stock, sale of debt instruments, and revenue from the sale of our products. Our condensed consolidated financial statements contemplate the continuation of our business as a going concern. However, we are subject to the risks and uncertainties associated with an emerging business, as noted above we have no established source of capital, and we have incurred recurring losses from operations since inception. 51 Table of Contents Comparison of the Three and Six Months Ended June 30, 2025 and 2024 Revenue Revenue for the three months ended June 30, 2025 was $1.7 million, an increase of $1.4 million or 403% compared to the revenue for the three months ended June 30, 2024 of $0.3 million. The increase was a result of the acquisition of CSI. Revenue for the six months ended June 30, 2025 was $2.4 million, an increase of $1.8 million or 294% compared to the revenue for the six months ended June 30, 2024 of $0.6 million. The increase was a result of the acquisition of CSI. Gross Profit and Operating Expenses Gross Profit (Deficit) Gross profit for the three months ended June 30, 2025 was $35,000 compared to a gross profit of $11,000 for the three months ended June 30, 2024. The gross margin as a percent of sales was 2% for the three months ended June 30, 2025, compared to 3% for the three months ended June 30, 2024. Gross profit for the six months ended June 30, 2025 was 0.1 million compared to a gross deficit of ($72,000) for the six months ended June 30, 2024. Research and Development Research and development expenses for the three months ended June 30, 2025 were $4.2 million, an increase of $2.4 million, compared to the research and development expenses for the three months ended June 30, 2024 of $1.8 million. The increase in research and development expenses is primarily driven by the acquisition of NYIAX assets for $1.5 million in exchange for 1,500,000 shares of common stock and a payment of $450,000 to NYIAX, higher headcount resulting in increased salaries, wages, benefits, and stock-based compensation of $0.4 million, and legal expenses related to intellectual property of $0.3 million. Research and development expenses for the six months ended June 30, 2025 were $6.6 million, an increase of $3.1 million compared to the research and development expenses for the six months ended June 30, 2024 of $3.5 million. The increase in research and development expenses is primarily driven by the acquisition of NYIAX assets for $1.5 million in exchange for 1,500,000 shares of common stock and a payment to NYIAX of $450,000, higher headcount resulting in increased salaries, wages, benefits, and stock-based compensation of $0.8 million and facility expenses of $0.1 million, legal expenses related to intellectual property of $0.4 million and other research and development costs of $0.1 million. Sales and Marketing Sales and marketing expenses for the three months ended June 30, 2025 were $1.7 million, an increase of $0.9 million compared to the sales and marketing expenses for the three months ended June 30, 2024 of $0.9 million. The increase in sales and marketing expenses is primarily related to an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $0.6 million and consulting expenses of $0.2 million. Sales and marketing expenses for the six months ended June 30, 2025 were $3.2 million, an increase of $1.4 million compared to the sales and marketing expenses for the six months ended June 30, 2024 of $1.8 million. The increase in sales and marketing expenses is primarily related to an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $0.8 million, and increased consulting and investor relations expenses of $0.5 million and $45,000, respectively. General and Administrative General and administrative expenses for the three months ended June 30, 2025 were $6.5 million, an increase of $3.7 million compared to general and administrative expenses for the three months ended June 30, 2024 of $2.8 million. The increase in general and administrative expenses is primarily driven by higher amortization of intangibles assets of $2.3 million related to the Data Vault asset acquisition that closed on December 31, 2024, an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $1.2 million, increased consulting expense of $0.4 million, increased legal and accounting fees of $0.2 million and $0.2 million, respectively, offset partially by decreases in investor relations and shareholder expenses of $0.8 million and $82,000, respectively. 52 Table of Contents General and administrative expenses for the six months ended June 30, 2025 were $12.2 million, an increase of $8.0 million, compared to the general and administrative expenses for the three months ended June 30, 2024 of $4.2 million. The increase in general and administrative expenses is primarily driven by higher amortization of intangibles assets of $4.6 million related to the Data Vault asset acquisition that closed on December 31, 2024, an increase in headcount resulting in increased salaries and wages, benefits and stock-based compensation of $1.8 million, increased consulting expense of $0.8 million, increased legal and accounting fees of $0.4 million and $0.1 million, respectively, offset partially by decreases in investor relations and shareholder expenses of $0.1 million and $0.2 million, respectively. Interest expense, net for the three months ended June 30, 2025 was $17.2 million, an increase of $17.2 million compared to the interest expense for the three months ended June 30, 2024 of $4,000. Interest expense increased due to the issuance of the Additional Warrants with the 2025 Notes fair value at issuance of $16.7 million. Interest expense, net for the six months ended June 30, 2025 was $17.3 million, an increase of $16.1 million compared to the interest expense for the six months ended June 30, 2024 of $1.3 million. The increase in interest expense, net for the six months ended June 30, 2025, is due to the issuance of the Additional Warrants with the 2025 Notes fair value at issuance of $16.7 million. Change in fair value of convertible notes measured at fair value increased to $8.8 million for the three and six months ended June 30, 2025 compared to none for the three and six months ended June 30, 2024 due to the issuance of the 2025 Notes and recording the issuance fair value of $8.8 million, including $3.0 million of fees and original issue discount. Change in fair value of convertible note to related party measured at fair value increased to a gain of $1.4 million in the three and six months ended June 30, 2025 compared to none in the three and six months ended June 30, 2024 due to a decrease in the DV Note fair value of $1.4 million. Change in Fair Value of Warrant Liability Change in fair value of warrant liability for the three months ended June 30, 2025 was a gain of $2,000 compared to a loss of $37,255,000 for the three months ended June 30, 2024. The change in fair value of the warrant liability for the three months ended June 30, 2024 was due to the issuance of additional warrants to purchase 5,602,693 shares of common stock and the subsequent valuing of such warrants. The additional warrants were issued as a result of provision in certain of the warrant agreements that was triggered following the Company’s reverse stock split that occurred in April 2024. There was no such activity in the three months ended June 30, 2025. Change in fair value of warrant liability for the six months ended June 30, 2025 was a gain of $19,000 compared to a loss of $29,126,000 for the six months ended June 30, 2024. The change in fair value of the warrant liability for the six months ended June 30, 2024 was due to the issuance of additional warrants to purchase 5,602,693 shares of common stock and the subsequent valuing of such warrants. The additional warrants were issued as a result of provision in certain of the warrant agreements that was triggered following the Company’s reverse stock split that occurred in April 2024. There was no such activity in the six months ended June 30, 2025. Liquidity and Capital Resources Cash and cash equivalents as of June 30, 2025 were $0.7 million compared to $3.3 million, as of December 31, 2024. We recorded a net loss of $37.1 million and $46.7 million for the three and six months ended June 30, 2025 and used net cash in operating activities of $12.8 million for the six months ended June 30, 2025 vs $9.0 million for the six months ended June 30, 2024. Excluding non-cash adjustments, the primary reasons for the increase in the use of net cash from operating activities during the six months ended June 30, 2025, was related to an increase in the net loss. Cash provided by financing activities for the six months ended June 30, 2025 and 2024 totaled approximately $16.7 million and $14.9 million, respectively. 53 Table of Contents We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock and sale of debt instruments. In April 2025 and May 2025 we received $4.5 million and $9.2 million in proceeds from the issuance of the 2025 Notes. In February 2025, we received aggregate gross proceeds of approximately $5.4 million in our registered direct offering. In January 2024, we received gross proceeds of $600,000 from the issuance of promissory notes and common stock purchase warrants to certain accredited investors. In February 2024, we received gross proceeds of approximately $10.0 million from the public offering of 1,025,600 units, with each unit consisting of one share of common stock (or pre-funded warrant in lieu thereof) and one warrant, each to purchase one (1) share of common stock. In March 2024 we received gross proceeds of approximately $2.3 million from the issuance of 417,833 shares of common stock, 93,342 pre-funded common stock warrants and the issuance of 511,175 warrants to purchase common stock. We will need to raise additional proceeds via the issuance of equity securities and/or the sale of debt instruments in the remainder of 2025 and 2026 to fund operations. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. ​ Item 3. Quantitative and Qualitative Disclosures About Market Risk. As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item. ​