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Item 2. Management’s Discussion and Analysis

2026-08-19 compared with 2026-05-15 · 123 added, 42 removed, 44 unchanged (79% of the section changed)

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Datavault AI Inc.

(“Datavault,” the “Company,” “us,” “our,” or “we”) is a pioneering technology licensing company that owns a portfolio of patented, secure platforms designed to redefine how data is managed, valued, and monetized in the modern era.

Leveraging our proprietary high-performance computing capabilities and advanced software, our technology offerings are designed to ensure data ownership immutability, experiential data observability, precise data asset valuation, and secure monetization-which we believe will unlock significant opportunities for businesses in an increasingly data-driven world.

Datavault has two synergistic platforms-Data Sciences and Acoustic Sciences-that our executive leadership is focusing on as key drivers of future revenue growth.

Our Data Sciences division is focused on the delivery of cyber-secure, privacy protected data management and monetization technologies, the heart of which are our offerings of artificial intelligence-driven agents-branded as Data Vault®, DataValue®, DataScore®, and Data Vault Bank®.

We believe our Data Sciences division will redefine data management by providing a software as a service platform designed to enable organizations to acquire, value, refine, and monetize their data assets with unparalleled security and control.

Our Acoustic Sciences division is focused on technological innovations that have already produced advanced technologies in data-over-sound, low latency spatial audio and high-definition audio transmission, and our patented semiconductor and digital module technologies are currently

being deployed by several key customers, including Bang & Olufsen, Harmon Kardon, Klipsch and other leading electronics manufacturer.

Comparison of the Three Months Ended March 31, 2026 and March 31, 2025

Revenue for the three months ended March 31, 2026 was $3.4 million, an increase of $2.8 million or 443% compared to the revenue for the three months ended March 31, 2025 of $0.6 million.

The increase was a result of the acquisition of CSI.

(“Datavault,” the “Company,” “us,” “our,” or “we”) is an artificial intelligence platform ("AIP") company focused on transforming data and real-world assets into monetizable digital assets.

The Company is developing an integrated licensing and technology ecosystem that combines artificial intelligence, blockchain, data valuation, tokenization, cybersecurity, high-performance computing and exchange infrastructure to support the lifecycle of data and digital assets..

Part of the Datavault platform is an AI-driven inference layer that operates beneath the Company’s user-facing applications, exchanges and monetization technologies.

This inference layer is designed to analyze and contextualize data, identify relationships and patterns, generate insights, establish attributes and valuation signals, and support automated decision-making across the platform.

The Company’s proprietary technologies include AI-driven agents and patented technologies designed to enable data ownership, observability, valuation and monetization.

These technologies are intended to work together rather than operate as independent products, creating an integrated ecosystem through which enterprises, institutions and other asset owners can identify previously underutilized data, establish its value and ownership, protect it, create digital representations of the

underlying rights or assets, and access mechanisms for commercialization.

Datavault has two synergistic platforms-Data Sciences and Acoustic Sciences.

Our Data Sciences division is focused on the delivery of cyber-secure AIP, privacy-protected data management and monetization technologies, which include artificial intelligence-driven agents branded as Data Vault®, DataValue®, DataScore®, and Data Vault Bank®.

The Company’s cybersecurity capabilities are intended to provide security across this architecture, protecting data and digital assets as they move through the lifecycle from ingestion and inference through valuation, tokenization and exchange.

The Company’s exchange technologies are designed to provide the commercialization layer of the platform.

These technologies are intended to connect asset and data owners with markets through which digitally represented assets, rights and data may ultimately be transacted, licensed or otherwise monetized.

Datavault also operates an Acoustic Sciences platform that combines the Company’s patented audio and data-over-sound technologies with its events and experiential media business.

The Acoustic Sciences platform includes WiSA®, ADIO® and related technologies designed for wireless audio transmission, spatial and immersive audio experiences, data-over-sound applications and digital engagement.

The division also includes the Company’s live event capabilities, including CompuSystems, Inc.

(“CSI”), operating under the Event Citadel brand, and API Media Innovations Inc.

(“API Media”).

Event Citadel provides event registration, lead retrieval, data analytics and related services for trade shows, conferences and other live events, while API Media provides media infrastructure, on-site media capture, data collection and digital engagement services for sporting events, entertainment venues and other large-scale experiential activations.

The Company believes its events business provides both an established commercial revenue base and a real-world environment in which Datavault technologies can be deployed.

By integrating event registration, audience engagement, media infrastructure and experiential data with technologies such as ADIO®, the Company believes it can capture and authenticate interactions occurring at physical events and venues and connect those interactions to its broader Data Sciences platform.

This integration is designed to transform event-generated data into potentially monetizable digital assets while creating additional opportunities for audience engagement, credentialing, data analytics and tokenization.

Together, these capabilities form an integrated artificial intelligence platform designed to connect data, intelligence, value and markets.

The Company is building infrastructure intended to support the complete lifecycle of digital assets, with its AI inference layer providing the underlying intelligence that connects the Company’s data, valuation, security, tokenization and monetization technologies.

Comparison of the Three and Six Months Ended June 30, 2026 and June 30, 2025

Revenue for the three months ended June 30, 2026 was $6.7 million, an increase of $5.0 million or 287% compared to the revenue for the three months ended June 30, 2025 of $1.7 million.

The increase was primarily a result of the acquisition of CSI and API Media along with an increase in patent license revenue.

The CSI acquisition generated approximately $1.8 million in revenue and the API Media acquisition generated approximately $1.0 million in revenue for the three months ended June 30, 2026.

Revenue for the six months ended June 30, 2026 was $10.1 million, an increase of $7.7 million or 329% compared to the revenue for the six months ended June 30, 2025 of $2.4 million.

The increase was primarily a result of the acquisition of CSI and API Media along with an increase in patent license revenue.

The CSI acquisition generated approximately $4.1 million in revenue and the API Media acquisition generated approximately $1.2 million in revenue for the six months ended June 30, 2026.

Gross Profit and Operating Expenses

Gross profit for three months ended March 31, 2026 was $0.1 million compared to a gross profit of $0.1 million for the three months ended March 31, 2025.

The gross profit as a percent of sales was 3% for the three months ended March 31, 2026, compared to the gross profit of 11% for the three months ended March 31, 2025.

The decrease in gross profit is due to the inclusion of lower-margin revenue as a result of the acquisition of CSI.

Gross profit for three months ended June 30, 2026 was $2.9 million compared to a gross profit of $35,000 for the three months ended June 30, 2025.

The gross profit as a percent of sales was 43% for the three months ended June 30, 2026, compared to the gross profit of 2% for the three months ended June 30, 2025.

The increase in gross profit is due to the inclusion of higher-margin revenue as a result of the acquisition of API Media, an increase in higher margin audio product sales, and an increase in high-margin patent license sales.

Gross profit for the six months ended June 30, 2026 was $3.0 million compared to a gross profit of $0.1 million for the six months ended June 30, 2025.

The gross profit as a percent of sales was 30% for the six months ended June 30, 2026, compared to the gross profit of 4% for the six months ended June 30, 2025.

Research and Development

Research and development expenses for the three months ended March 31, 2026 were $5.7 million, an increase of $3.3 million, compared to the research and development expenses for the three months ended March 31, 2025 of $2.4 million.

Research and development expenses for the three months ended June 30, 2026 were $7.2 million, an increase of $3.0 million, compared to the research and development expenses for the three months ended June 30, 2025 of $4.2 million.

The increase in research and development expenses is primarily driven by IBM Watsonx AI and SanQtum AI subscription licenses of $3.1 million and higher legal expenses of $0.2 million.

Research and development expenses for the six months ended June 30, 2026 were $13.0 million, an increase of $6.4 million, compared to the research and development expenses for the six months ended June 30, 2025 of $6.6 million.

The increase in research and development expenses is primarily driven by IBM Watsonx AI and SanQtum AI subscription licenses of $6.2 million and higher legal expenses of $0.5 million.

Sales and Marketing

Sales and marketing expenses for the three months ended March 31, 2026 were $6.6 million, an increase of $5.1 million compared to the sales and marketing expenses for the three months ended March 31, 2025 of $1.5 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 $1.5 million, an increase in advertising and sponsorship projects of $2.8 million and consulting expenses of $0.4 million.

Sales and marketing expenses for the three months ended June 30, 2026 were $7.2 million, an increase of $5.5 million compared to the sales and marketing expenses for the three months ended June 30, 2025 of $1.7 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 $2.1 million, an increase in advertising and sponsorship projects of $2.4 million and legal and consulting expenses of $0.3 million.

Sales and marketing expenses for the six months ended June 30, 2026 were $13.8 million, an increase of $10.6 million compared to the sales and marketing expenses for the six months ended June 30, 2025 of $3.2 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 $3.6 million, an increase in advertising and sponsorship projects of $4.9 million and legal and consulting expenses of $0.8 million.

General and Administrative

General and administrative expenses for the three months ended March 31, 2026 were $18.7 million, an increase of $13.1 million compared to general and administrative expenses for the three months ended March 31, 2025 of $5.6 million.

General and administrative expenses for the three months ended June 30, 2026 were $14.9 million, an increase of $8.4 million compared to general and administrative expenses for the three months ended June 30, 2025 of $6.5 million.

The increase in general and administrative expenses is primarily driven by higher headcount, resulting in additional salaries, wages, commissions, benefits, and stock-based compensation of $3.3 million;

consulting and legal expenses of $1.6 million and $2.5 million respectively;

higher amortization of intangibles assets of $0.8 million related to the CSI acquisition closed on May 20, 2025, the IP acquisitions from Turner Global Media LLC and Web Access LLC closed in July 2025, the IP acquisition closed on January 04, 2026 and the API acquisition closed on January 22, 2026.

The increase also reflects higher acquisition-related expenses and investor relations costs of $0.6 million each.

legal and consulting expenses of $2.1 million;

higher amortization of intangibles assets of $0.7 million related to the CSI acquisition closed on May 20, 2025, the IP acquisitions from Turner Global Media LLC and Web Access LLC closed in July 2025, the IP acquisition closed on January 04, 2026 the API acquisition closed on January 22, 2026, and the Saleri acquisition closed in Q2 2026.

The increase also reflects higher acquisition-related expenses of $0.8 million and lease expense of $0.5 million.

General and administrative expenses for the six months ended June 30, 2026 were $33.6 million, an increase of $21.4 million compared to general and administrative expenses for the six months ended June 30, 2025 of $12.2 million.

legal and consulting expenses of $6.8 million;

higher amortization of intangibles assets of $1.5 million related to the CSI acquisition closed on May 20, 2025, the IP acquisitions from Turner Global Media LLC and Web Access LLC closed in July 2025, the IP acquisition closed on January 04, 2026 the API acquisition closed on January 22, 2026, and the Saleri acquisition closed in Q2 2026.

The increase also reflects higher acquisition-related expenses, investor relations costs, and lease expense of $1.5 million, $0.6 million and, $0.9 million, respectively.

Interest Expense, net

Interest expense, net for the three months ended March 31, 2026 was $1.1 million, an increase of $1.0 million compared to the interest income for the three months ended March 31, 2025 of $0.1 million.

Interest expense increased due to an increase in borrowings.

Interest expense, net for the three months ended June 30, 2026 was $1.0 million, a decrease of $16.2 million compared to the interest expense, net for the three months ended June 30, 2025 of $17.2 million.

Interest expense decreased due to an increase in short-term borrowings.

Interest expense, net for the six months ended June 30, 2026 was $2.1 million, a decrease of $15.2 million compared to the interest expense, net for the six months ended June 30, 2025 of $17.3 million.

Interest expense decreased due to an overall decrease in borrowings.

Debt Extinguishment

Debt extinguishment expense for the three months ended March 31, 2026 was $1.7 million, representing the difference between the settlement amount due and the carrying value of the First Convertible Note on the settlement date.

Debt extinguishment expense for the six months ended June 30, 2026 was $1.7 million, representing the difference between the settlement amount due and the carrying value of the First Convertible Note on the settlement date.

Crypto Assets

Loss on crypto assets was $8.1 million for the three months ended June 30, 2026, compared to no loss for the three months ended June 30, 2025.

For the six months ended June 30, 2026, loss on crypto assets was $25.1 million, compared to no loss for the six months ended June 30, 2025.

The losses during the 2026 periods were primarily attributable to decreases in the fair value of the Company’s crypto asset holdings resulting from fluctuations in market prices.

The Company did not hold crypto assets during the comparable 2025 periods.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability for the three months ended March 31, 2026 was zero compared to $17,000 of income for the three months ended March 31, 2025.

Impairment of investment in nonmarketable security

Impairment of investment in marketable security for the three months ended March 31, 2026 was $2.5 million compared to none for the three months ended March 31, 2025.

This impairment increase was primarily due to the decline in value of our investment in NYIAX.

Other Expense, net

Other expense, net for the three months ended March 31, 2026 was $16.8 million compared to $29,000 for the three months ended March 31, 2025.

This increase was primarily due to realized and unrealized gains and losses on crypto assets.

Change in fair value of warrant liability for the three months ended June 30, 2026 was $3.9 million compared to $2,000 of income for the three months ended June 30, 2025.

Change in fair value of warrant liability for the six months ended June 30, 2026 was $3.9 million compared to $19,000 of income for the six months ended June 30, 2025.

Impairment of Investments in Non-Marketable Securities

Impairment of investment in marketable security for the three months ended June 30, 2026 was $56.4 million compared to none for the three months ended June 30, 2025.

This impairment increase was primarily due to the decline in value of our investment in Vivasor, Inc.

Impairment of investment in marketable security for the six months ended June 30, 2026 was $58.9 million compared to none for the six months ended June 30, 2025.

This impairment increase was primarily due to the decline in value of our investment in Vivasor, Inc.

Other Income and Expense, net

Other income, net for the three months ended June 30, 2026 was $31,000 income compared to $3,000 expense for the three months ended June 30, 2025.

Other income, net for the six months ended June 30, 2026 was $186,000 income compared to $32,000 expense for the six months ended June 30, 2025.

Liquidity and Capital Resources

Cash and cash equivalents as of March 31, 2026 were $2.2 million compared to $2.0 million, as of December 31, 2025.

We recorded a net loss of $53.1 million for the three months ended March 31, 2026 and used net cash in operating activities of $8.7 million for the three months ended March 31, 2026 vs $6.0 million for the three months ended March 31, 2025.

Excluding non-cash adjustments, the primary reasons for the increase in the use of net cash from operating activities during the three months ended March 31, 2026, was related to an increase in the net loss.

Cash used in investing activities for the three months ended March 31, 2026 and 2025 totaled approximately $13.9 million and $1.1 million, respectively.

Cash and cash equivalents as of June 30, 2026 were $1.4 million compared to $2.0 million, as of December 31, 2025.

We recorded a net loss of $88.0 million and $141.2 million for the three and six months ended June 30, 2026, respectively and used net cash in operating activities of $80.0 million for the six months ended June 30, 2026 compared to $12.8 million for the six months ended June 30, 2025.

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, 2026, was related to an increase in the net loss.

Cash used in investing activities for the six months ended June 30, 2026 and June 30, 2025 totaled approximately $17.1 million and $6.6 million, respectively.

The increase was due to the acquisition of API on January 22, 2026.

Cash provided by financing activities for the three months ended March 31, 2026 and 2025 totaled approximately $22.8 million and $3.9 million, respectively.

The increase of $18.9 million of cash provided by financing activities is primarily attributable to an increase of $25.0 million provided by proceeds from equity offerings, offset by and increase of debt payments of $6.6 million.

We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock, sale of debt instruments and through the sale of Bitcoin.

As of May 15, 2026, we utilized our July ATM program to sell common stock for net proceeds of $32.4 million.

We raised net proceeds of $55.8 million on May 4, 2026 in a registered direct offering.

We will need to raise additional proceeds via the issuance of equity securities and/or the sale of debt instruments in the remainder of 2026 to fund operations.

In addition to raising proceeds from the issuance of equity securities/debt instruments, the Company has sufficient cash and cash equivalents, BTC, and other resources for the next 12 months.

Cash provided by financing activities for the six months ended June 30, 2026 and June 30, 2025 totaled approximately $96.5 million and $16.7 million, respectively.

The increase of $79.8 million of cash provided by financing activities is

primarily attributable to an increase of $32.4 million provided by proceeds from equity offerings at-the-market, and $55.7 million registered direct equity offering, offset by an increase of debt payments of $10.6 million.

In addition to our ongoing operating requirements, we have significant contractual and other commitments that may require substantial cash resources over the next twelve months.

These obligations include approximately $20.0 million of remaining transaction fee commitments related to the Helmex transaction, remaining purchase commitments under our agreements with IBM, potential earnout payments to EOS, and weekly payment obligations under our May 5, 2026 short-term loan.

In addition, in August 2026, we entered into a definitive agreement to acquire CyberCatch Holdings, Inc.

in an all-cash transaction.

Based on approximately 26.8 million CyberCatch common shares outstanding and consideration of $3.22 per share, approximately $86.2 million of cash consideration would be payable to holders of CyberCatch common shares, in addition to amounts that may be payable in respect of outstanding options and warrants, subject to the terms of the arrangement agreement.

The CyberCatch acquisition remains subject to shareholder, court, regulatory and other customary closing conditions.

We expect to fund our operating requirements and these commitments through existing cash and cash equivalents and other available resources, together with additional capital raised through equity and/or debt financings.

Our ability to satisfy these obligations and continue to fund operations will depend, in part, on our ability to obtain additional financing on acceptable terms.

We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock, the issuance of debt instruments, and the sale of Bitcoin.

As of August 15, 2026, we utilized our ATM offering to sell common stock for net proceeds of $32.4 million.

In addition, on May 5, 2026, we raised net proceeds of $55.8 million through a registered direct offering.

We intend to utilize our existing cash and cash equivalents, Bitcoin, and other available resources to fund our operations;

however, these resources are not expected to be sufficient to fund our operations and other cash requirements for the next 12 months.

Accordingly, we will need to raise additional capital through the issuance of equity securities and/or debt instruments to fund our operations and satisfy our anticipated cash requirements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

On July 17, 2026, we entered into a guarantee in connection with a bridge loan facility provided to NYIAX, Inc.

Under the guarantee, we may be required to satisfy NYIAX's obligations under the bridge loan facility in the event NYIAX fails to perform its repayment obligations, subject to a maximum guaranteed amount of approximately $0.8 million.

Accordingly, the guarantee represents a contingent obligation of the Company.

As of the date of this Quarterly Report, no amounts have been paid by the Company pursuant to the guarantee.

Other than the NYIAX guarantee described above, we do not have any material off-balance sheet arrangements.

Critical Accounting Estimates

The preparation of our unaudited condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures.

We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors that we believe to be reasonable under the circumstances.

Actual results may differ from these estimates.

We consider an accounting policy or estimate to be critical when it requires significant judgment or estimation and when changes in the underlying assumptions or estimates could have a material effect on our consolidated financial statements.

Business Combinations

We account for acquisitions that meet the definition of a business using the acquisition method of accounting.

The application of acquisition accounting requires significant judgment in determining the fair value of consideration transferred and the identifiable assets acquired and liabilities assumed.

The determination of fair value may involve the use of significant estimates and assumptions, including projected revenues and cash flows, expected growth rates, customer attrition rates, royalty rates, discount rates and the estimated useful lives of acquired intangible assets.

The excess of the purchase consideration over the fair value of identifiable net assets acquired is recorded as goodwill.

Changes in the assumptions and estimates used in determining the fair values of acquired assets and liabilities could materially affect the amounts recognized in connection with a business combination and subsequent periods.

Goodwill and Intangible Assets

Our intangible assets primarily consist of acquired technology, patents and patent rights, customer relationships, trademarks and other acquired intellectual property.

Intangible assets with finite useful lives are amortized over their estimated useful lives and are reviewed for impairment when events or changes in circumstances indicate that their carrying amounts may not be recoverable.

Determining the useful lives and recoverability of intangible assets requires management to make judgments regarding the expected period over which the assets will generate economic benefits and estimates of future cash flows attributable to those assets.

Goodwill is not amortized but is evaluated for impairment at least annually and whenever events or circumstances indicate that its carrying value may not be recoverable.

Our impairment assessments require management to make significant estimates and assumptions regarding future operating performance, revenue growth, cash flows, discount rates and other market and economic factors.

Changes in these assumptions or deterioration in expected operating results could result in the recognition of an impairment charge.

Revenue Recognition – Percentage of Completion

For certain arrangements for which revenue is recognized over time, we measure progress toward satisfaction of the performance obligation using an input method based on costs incurred relative to total estimated costs required to complete the performance obligation.

Revenue recognized under this method is dependent upon estimates of total expected contract costs and the extent of progress toward completion.

The estimation of total contract costs requires significant management judgment and is affected by a variety of factors, including the nature and complexity of the work to be performed, labor and other resource requirements, project timelines, changes in scope and other contractual or operational factors.

We review our estimates of contract performance and total expected costs on an ongoing basis and recognize changes in estimates in the period in which they become known.

Accordingly, revisions to estimated costs to complete or the estimated measure of progress could result in increases or decreases to revenue and earnings recognized in a particular period.

Quantitative and Qualitative Disclosures About Market Risk.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis