Heavy losses and going-concern warning at Interactive Strength (NASDAQ: TRNR)
Interactive Strength Inc., a connected fitness and acquisition platform, reports continuing heavy losses and liquidity pressure in its annual report for the year ended December 31, 2025. The company posted a net loss of $24.0 million and had an accumulated deficit of $227.5 million, with $19.9 million of operating loss and $10.4 million of cash used in operations.
Management acknowledges substantial doubt about the company’s ability to continue as a going concern, citing limited cash of approximately $4.4 million, dependence on new financing and about $18.0 million of debt outstanding, of which roughly $14.8 million matures within 12 months of the report date. Failure to refinance, raise capital, or restructure obligations could force drastic strategic alternatives.
During 2025–2026 the company advanced its acquisition strategy, including the July 2025 purchase of Wattbike and the March 2026 closing of the Ergatta merger, funded with up to $7.0 million in cash and up to $9.5 million in Series D preferred stock plus management incentives. It also executed multiple reverse stock splits, most recently a 1‑for‑10 split in February 2026, to maintain Nasdaq compliance, but warns of ongoing delisting risk if listing requirements are not met.
Positive
- None.
Negative
- Substantial going-concern doubt: Management discloses significant uncertainty about the company’s ability to continue operating, citing recurring losses, negative operating cash flow and a large accumulated deficit.
- Near-term debt and liquidity squeeze: Only about $4.4 million of unrestricted cash is available against roughly $18.0 million of total debt, with approximately $14.8 million maturing within 12 months of the report’s issuance date.
- Nasdaq listing risk: The company has repeatedly used reverse stock splits to maintain listing and warns that future noncompliance could lead to delisting, which would trigger default under senior secured convertible notes and further restrict access to capital.
Insights
Interactive Strength flags going-concern risk amid high losses and near-term debt maturities.
Interactive Strength combines fast growth-by-acquisition with a weak balance sheet. It recorded a $24.0 million net loss in 2025 and an accumulated deficit of $227.5 million, while using $10.4 million of operating cash. Management explicitly cites substantial doubt about continuing as a going concern.
The filing highlights only about $4.4 million of unrestricted cash against roughly $18.0 million of total debt, with about $14.8 million maturing within 12 months of the issuance date. Without fresh capital, refinancings, or equity-for-debt solutions, this maturity wall is a central risk. A Nasdaq delisting would also trigger default under senior secured convertible notes, tightening constraints further.
On the strategic side, the company is building a multi-brand fitness portfolio (FORME, CLMBR, Wattbike, Ergatta) and recovered $6.4 million from its Sportstech loan via settlement. These moves expand assets and recover capital but also add integration demands. Future filings covering debt amendments, capital raises, or post‑merger performance will be key to assessing whether the going‑concern risk eases.
Key Figures
Key Terms
going concern financial
reverse stock split financial
emerging growth company regulatory
Series D-1 Convertible Preferred Stock financial
registration rights agreement financial
General Data Protection Regulation regulatory
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on June 30, 2025, was $
The number of shares of Registrant’s Common Stock outstanding as of March 27, 2026 was
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission, or SEC, with respect to our 2026 Annual Meeting of Stockholders, which is expected to be filed no later than 120 days after the end of our last fiscal year ended December 31, 2025 are incorporated by reference in Part III of this Form 10-K.
Table of Contents
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PART I |
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Item 1. |
Overview |
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Item 1A. |
Risk Factors |
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Item 1B. |
Unresolved Staff Comments |
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Item 1C. |
Cybersecurity |
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Item 2. |
Properties |
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Item 3. |
Legal Proceedings |
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Item 4. |
Mine Safety Disclosures |
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PART II |
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
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Item 6. |
[Reserved] |
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Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
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Item 8. |
Financial Statements and Supplementary Data |
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Item 9. |
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
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Item 9A. |
Controls and Procedures |
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Other Information |
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Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
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PART III |
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Directors, Executive Officers and Corporate Governance |
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Executive Compensation |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
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Principal Accounting Fees and Services |
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PART IV |
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Exhibits, Financial Statement Schedules |
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Item 16. |
Form 10-K Summary |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K contains forward-looking statements that are subject to risks and uncertainties. All statements contained in this annual report on Form 10-K other than statements of historical fact, including statements regarding our future financial performance, our growth strategy, our objectives for future operations and industry trends, are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “can,” “may,” “intend,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” the negative of these terms, and other comparable terminology that convey uncertainty of future events or outcomes. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business and in the industry in which we operate. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance, or achievements expressed or implied by the forward-looking statements, including those factors discussed under “Risk Factors.” Forward-looking statements include, but are not limited to, statements regarding:
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We caution you that the foregoing list may not contain all of the forward-looking statements made in this annual report on Form 10-K. These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this annual report on Form 10-K.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and under similar headings in our most recent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward- looking events and circumstances discussed in this annual report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in our forward-looking statements.
You should refer to the “Risk Factors” section of this annual report on Form 10-K for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. We cannot assure you that the forward-looking statements in this annual report on Form 10-K will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
The forward-looking statements made in this annual report on Form 10-K and any annual report on Form 10-K relate only to events as of the date of hereof or thereof. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this annual report on Form 10-K to conform these statements to actual results or to changes in our expectations, except as required by law.
You should read this Annual Report on Form 10-K and the documents that we reference herein and have filed or incorporated by reference hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
We, and in certain cases through our subsidiaries, have obtained trademarks for Wattbike, CLMBR and FORME LIFE, which trademarks are our property. This 10-K also contains references to our trademarks and trademarks belonging to other entities, which trademarks remain the property of such other entities. Solely for convenience, trademarks and trade names referred to in this Annual Report on 10-K, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these
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trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply relationships with, or endorsement or sponsorship of us by, any other companies.
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SUMMARY RISK FACTORS
Before you invest in our common stock, you should carefully consider all of the information in this annual report on Form 10-K, including matters set forth under “Risk Factors.” These risks include, but are not limited to, the following:
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PART I
Item 1. Overview.
Our Purpose
We are an operationally-focused acquirer targeting businesses with strong underlying fundamentals within industries that benefit from long-term secular growth trends. We pursue asymmetric opportunities where assets are undervalued or where structural changes have created attractive entry points, allowing us to acquire high-quality businesses with stable demand drivers, strong market positioning, and differentiated product offerings. Our approach is to provide both long-term financial support and operational expertise to build value at the asset-level and generate attractive returns on invested capital. In addition, our public company structure provides differentiated access to capital markets and flexibility to structure transactions in ways that align purchase consideration to underlying value creation targets.
To date, we have invested in the fitness equipment sector leveraging hardware, software and content to deliver highly engaging and versatile workout experiences across both commercial and in-home markets. As of December 31, 2025, our portfolio consisted of three premium brands; Wattbike, CLMBR and FORME, each of which combines industry-leading engineering and design with world-class technology and fitness programming.
Our company has one reportable business segment, the development and sale of its connected fitness equipment and technology platform.
Who We Are
Interactive Strength Inc. ("we", "us" or the "Company") is a public company focused on accelerating growth through acquisitions and deploying capital into business sectors that are misunderstood or undervalued. We look for value creation opportunities via strategic repositioning, margin expansion, sales channel diversification, balance sheet optimization and portfolio enhancement. Assets in unique situations where complexity or volatility exist present an opportunity in which valuations can be well below intrinsic value.
At December 31, 2025, our portfolio consisted of three leading brands serving the commercial and at-home markets with specialty fitness equipment and virtual training, Wattbike, CLMBR and FORME:
The combination of technology with expert training leads to better outcomes for both consumers and trainers alike. Wattbike, FORME and CLMBR each offers unique fitness solutions for both the commercial and at-home markets.
WATTBIKE
Wattbike is recognized as an indispensable tool across nearly every corner of elite sport. Strength and conditioning coaches and performance staff have woven Wattbike into their daily programs because its metrics and reliability consistently meet the demands of professionals operating at the highest level. Professional teams that rely on Wattbike technology and data to enhance performance include:
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We believe that Wattbike's continued evolution and recent product launches position us to capture a significantly larger share of the global fitness market. Wattbike has built a comprehensive range of indoor performance bikes, and in recent years has expanded beyond elite training environments with new products developed to be used by anyone, anywhere. Whether in a professional strength and conditioning facility, boutique fitness studio, hotel fitness center or home gym, Wattbike delivers the same precision metrics and durability that made it a favorite at the highest levels of sport.
CLMBR
Through the CLMBR brand, we offer a vertical climbing machine that delivers a proven full-body cardio and strength workout, but with a design and content platform that makes the workout mass appealing and accessible to all fitness levels. A workout that has long been exclusive to celebrities and professional athletes with personal trainers can now be accessed by anyone. The patented open central design and content platform provides a vertical climbing experience that is unlike any other. CLMBR offers two display options: a 21” touch screen and a 10” touch screen – making it suitable for any commercial fitness application, both self-directed and instructor-directed environments, from large health clubs to boutique training studios. With its low impact and ergonomic movement, CLMBR is safe and accessible for most ages and levels of ability and can be found at gyms and fitness studios, hotels, physical therapy facilities and residential homes.
FORME
Through the FORME brand, we offer two connected hardware products, the FORME Studio (fitness mirror) and the FORME Studio Lift (fitness mirror and cable-based digital resistance). The FORME products are designed to provide a more integrated and immersive experience than similar products currently on the market. The FORME Studio features a 43-inch 4K ultra high definition (“UHD”) touchscreen display, which is among the largest and highest definition screens in the connected fitness equipment market, as well as two front-facing 12 megapixel (“MP”) wide angle cameras designed to facilitate seamless live interaction with a trainer. The FORME Studio Lift is an add-on to the FORME Studio and features two cable-based resistance arms that can provide up to 100 pounds of resistance per arm. Our products ship with a set of premium accessories that are included with purchase. We also offer add-on accessories, including our barre, a unique accessory that attaches to the FORME Studio or FORME Studio Lift and enables members to incorporate a wooden ballet barre into their barre routines. FORME is predominately focused on the B2B channel where its products serve customers in a variety of settings, including multifamily buildings, hotels, country clubs, universities and performance centers.
Recent Developments
Sportstech Settlement
On February 10, 2025, we, Sportstech Brands Holding GmBH ("Sportstech") and Mr. Ali Ahmad, the sole shareholder of Sportstech, entered into a Binding Transaction Agreement (the “Agreement”), pursuant to which we were to acquire Sportstech in a transaction (the “Transaction”) comprised of an initial investment and three optional investment tranches.
In anticipation of a Transaction closing during fiscal year 2025, we made a series of disbursements totaling $5.0 million under a term loan facility to Sportstech during the year ended December 31, 2025 to support its working capital needs and growth plans. The loan was secured by 100% of the equity interests in Sportstech and personally guaranteed by Mr. Ahmad, and was due to be paid back to us if the Transaction did not close by December 30, 2025. The Transaction did not close as the we and Sportstech were unable to come to terms on a final subscription and shareholders' agreement, and the loan was not paid back at the maturity date. The balance on the loan receivable from
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Sportstech as of December 31, 2025, including accrued interest and fees, was $6.6 million, which is recorded on our balance sheet as of December 31, 2025.
We pursued several legal options available to us in order to recover the loan receivable, including enforcement of the personal guarantee by Mr. Ahmad, and forcing a public auction of the equity interests in Sportstech in accordance with German law. On March 4, 2026, we and Sportstech settled the outstanding balance and we received $6.4 million in cash.
Acquisition
On February 18, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ergatta, Inc., a Delaware corporation ("Ergatta"), Ergatta Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Company ("Merger Sub"), and Tom Aulet, solely in his capacity as the securityholders’ representative (the “Securityholders’ Representative”), pursuant to which Merger Sub will merge with and into Ergatta (the “Merger”), with Ergatta surviving as a wholly owned subsidiary of the Company. At the effective time of the Merger, each issued and outstanding share of preferred stock of Ergatta (other than excluded and dissenting shares) will be cancelled and converted into the right to receive, subject to the terms of the Merger Agreement, (i) cash consideration of up to $7,000,000 paid to Ergatta's stockholders, consisting of: (a) $1,750,000 to be paid at the closing of the Merger (the “Closing”); (b) $1,750,000 in deferred cash evidenced by a senior secured promissory note to be delivered at the Closing and maturing on April 30, 2027; and (c) up to $3,500,000 to be payable on April 30, 2027, as provided by the calculations, formulas, and other procedures set forth in the Merger Agreement; and (ii) up to $9,500,000 worth of shares of Series D Preferred Stock (as defined below) to be issued to Ergatta's stockholders. Additionally, we will issue equity incentives to certain members of Ergatta's senior management, consisting of (i) up to $2,000,000 worth of shares of Series D-2 Preferred Stock (as defined below); and (ii) up to $1,000,000 worth of shares of Series D-3 Preferred Stock (as defined below). The Merger closed on March 11, 2026.
Upon closing, we filed a certificate of designation with the Secretary of State of the State of Delaware, creating three new series of preferred stock designated as (i) Series D-1 Convertible Preferred Stock, par value $0.0001 per share (“Series D-1 Preferred Stock”) and designating 4,750,000 shares thereof, (ii) Series D-2 Convertible Preferred Stock, par value $0.0001 per share (“Series D-2 Preferred Stock”) and designating 1,000,000 shares thereof, and (iii) Series D-3 Convertible Preferred Stock, par value $0.0001 per share (“Series D-3 Preferred Stock,” collectively with Series D-1 Preferred Stock and Series D-2 Preferred Stock, “Series D Preferred Stock”) and designating 500,000 shares thereof. Series D Preferred Stock shall have no voting rights, other than any vote required by law or the Company’s Certificate of Incorporation. Series D-1 Preferred Stock and Series D-2 Preferred Stock shall convert into shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”) on May 3, 2027. Series D-3 Preferred Stock shall convert to shares of Common Stock on May 1, 2028.
At the Closing, we entered into a registration rights agreement with the Securityholders' Representative, on behalf of the parties entitled to receive equity consideration under the Merger Agreement, pursuant to which we granted customary registration rights with respect to equity consideration issuable under the Merger Agreement.
Reverse Stock Split
On February 23, 2026, we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s common stock, $0.0001 par value per share (the "Common Stock"), at a rate of 1-for-10 (the “February 2026 Reverse Stock Split”), effective on February 24, 2026.
As a result of the February 2026 Reverse Stock Split, every ten pre-split shares of Common Stock were combined into one share of Common Stock, resulting in a reduction in the number of shares of the Company's outstanding Common Stock from 17,984,137 shares to 1,798,406 shares. Proportionate adjustments were made to the number of shares of Common Stock underlying our outstanding equity awards, and warrants, and the number of shares issuable under our equity incentive plans, convertible notes and other existing agreements, as well as their corresponding exercise or conversion price, as applicable. There was no change to the number of authorized shares or the par value per share of our Company's common stock. All share and per share information, including earnings per share, in this Form 10-K have been retroactively adjusted to reflect the February 2026, June 2025, November 2024 and June 2024 Reverse Stock Splits.
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Growth Strategies
Execute disciplined and accretive M&A strategy
We pursue attractive M&A opportunities in industries and sectors with favorable long-term fundamentals, where acquisitions can provide revenue diversification and financial and operational scale to the Company. Our team brings significant experience in M&A transactions across numerous sectors, and our ability to evaluate opportunities across a broad range of industries provides greater optionality and increases the probability of successful M&A execution and long-term value creation. We take a disciplined approach to M&A, focusing on managing downside risk while retaining significant upside and opportunistically utilize both equity and debt to fund acquisitions as well as further growth.
We acquired CLMBR in February 2024, Wattbike in July 2025 and Ergatta in March 2026. We expect that we will be able to acquire additional revenue-generating businesses that would generate higher earnings and cashflow through synergies with our existing business.
Expand into new geographies
We intend to expand the international reach of our existing assets by leveraging in-market relationships and sales infrastructure across the brands in our portfolio. For example, with Wattbike, based in the United Kingdom, we are currently evaluating potential expansion of those products into the US, where FORME, CLMBR and Ergatta have well-established routes to market in both the commercial and residential sectors, although we have not yet made any definitive plans regarding such expansion or the potential timing thereof. We plan to pursue disciplined international expansion by targeting countries with sound macroeconomic conditions, favorable growth trends and stable regulatory environments and, importantly, those where we have footholds and low-risk routes to market through our existing brand relationships and in-market presence.
Value Proposition
Publicly traded equity and Nasdaq-listed infrastructure
We are one of the few companies in our industry with a public currency, which we believe makes us an attractive acquiror. Being a publicly traded company gives us a competitive advantage in terms of flexibility and scope when structuring transactions for acquisitions or other strategic combinations. Our approach is to fund acquisitions with a significant portion of stock and utilize earn-outs to align and incentivize future performance. In addition, our public company listing on Nasdaq positions us well for potential strategic alternatives including business combinations.
Proven track record of company acquisitions
Since 2024, we have successfully acquired and integrated two companies that have been transformative to the Company, increasing our footprint and capabilities, and the integration of Ergatta is well underway. As a result, we have realized synergies in the form of both revenue and cost savings. We have also identified numerous targets within our M&A pipeline that could be attractive acquisition candidates in the future.
Strategic relationships
A key component of our strategy is to establish and expand strategic partnerships within both the fitness industry as well as other industries to help accelerate the expansion and growth of our business. To date, we focused on building strategic relationships in the fitness space, primarily through brand collaborations. One relationship that is of particular high value, is our distribution relationship with Woodway USA ("Woodway"). Woodway is currently the exclusive commercial distributor of CLMBR and also sells Wattbike and FORME products to their commercial partners around the world. We have also developed, and intend to continue to develop and expand, relationships with companies across other industries.
Intellectual Property
Our success depends in part upon our ability to obtain and maintain patent and other intellectual property protection with respect to our products and the technology we develop. We rely on a combination of patents, copyrights,
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trademarks, trade secrets, confidentiality procedures, and contractual commitments, to protect our intellectual property and proprietary know-how.
Patents
As of December 31, 2025, we owned (i) 50 issued patents and/or pending applications in the United States and (ii) 202 issued patents and 9 pending patent applications in foreign jurisdictions. The inventions covered by our patent and patent application portfolio primarily relate to various hardware and software inventions that may or may not be embodied in our current or future products. The issued United States patents are expected to expire between 2036 and 2040. We periodically review our development efforts to assess the existence and patentability of new intellectual property. We expect to continue to file patent applications in the United States and abroad covering technologies and products considered to be important to our business. We seek to protect proprietary technology related know-how that is not covered by our patent portfolio as trade secrets through contracts and policies to the extent that we believe it to be beneficial and cost-effective.
Trademarks
As of December 31, 2025, we owned (i) nine registered trademarks in the United States; (ii) five registered trademarks in various states; and (iii) 84 trademark grants of protection in foreign jurisdictions. We expect to continue to file trademark applications in the United States and abroad covering trademarks considered to be important to our business.
Trade Secrets and Other Intellectual Property
In addition to patent protection, we also rely on other proprietary rights and contractual obligations, including protection of trade secrets and other proprietary information that is not patentable or that we elect not to patent (for example, where we may not believe patent protection of a specific product or technology is critical to our business strategy at the time). We rely on contractual protections with our customers, suppliers, employees, consultants, and contractors, and we implement security measures designed to protect our intellectual property, including trade secrets. For example, all employees and consultants are generally required to execute confidentiality and invention assignment agreements in connection with their employment and consulting relationships with us, except with respect to content produced pursuant to specific strategic partnerships. However, we cannot guarantee that we have entered into such agreements with every such party, and we may not have adequate remedies in case of a breach of any such agreements.
Monitoring Unauthorized Use of Intellectual Property
Monitoring unauthorized use of our intellectual property is difficult and costly. Despite our efforts to protect our intellectual property, unauthorized parties may still copy, misappropriate, or otherwise obtain and use our software, technology, or other information that we regard as our proprietary intellectual property.
In the ordinary course of our business, we may become party to disputes involving intellectual property rights. Depending on the situation, we may defend our position, seek to negotiate a license or engage in other acceptable resolution that is appropriate to our business. See “Risk Factors – Risks Related to Our Intellectual Property.”
Competition
The fitness industry, including the smart home gym and connected fitness industry, is highly competitive. We face significant competition from multiple industries and exercise verticals, including at-home fitness equipment and content, fitness clubs, in-studio fitness classes, in-person personal training, and health and wellness apps. We expect the competition in our industry to intensify in the future as new and existing competitors introduce new or enhanced products and services that compete with ours.
Our competitors may develop, or have already developed, products, features, content, services, or technologies that are similar to ours or that achieve greater acceptance, may undertake more successful product development efforts, create more compelling employment opportunities, or marketing campaigns, or may adopt more aggressive pricing policies. Our competitors may also develop or acquire, or have already developed or acquired, intellectual property rights that significantly limit or prevent our ability to compete effectively. In addition, our competitors may have significantly greater resources than us, allowing them to identify and capitalize more efficiently upon opportunities in new markets and consumer preferences and trends, quickly transition and adapt their products and services, devote
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greater resources to marketing and advertising, or be better positioned to withstand substantial price competition. Current and potential competitors have established or may establish financial and strategic relationships between themselves or with our existing or potential customers, manufacturing partners, or other third parties. Any of the foregoing may enable our current and future competitors to better withstand adverse economic or market conditions.
We believe that we provide a compelling, cutting-edge and engaging service to our customers, which we believe provides us with a competitive advantage versus traditional fitness and wellness products and services, and future entrants. We believe we are competitive with other industry participants principally as a result of the following factors:
In addition, other competitive factors in our industry include:
We believe we compete favorably among competitors across all of these factors.
Human Capital Resources
General
As of December 31, 2025, we had 72 full-time employees, including 47 employees at our Wattbike subsidiary in the UK and 4 full-time equivalent employees located in Taiwan across manufacturing and supply chain functions. We consider relations with our employees to be good and have never experienced a work stoppage. None of our employees are either represented by a labor union or subject to a collective bargaining agreement. We also engage fitness instructors and fitness content production personnel on an independent contractor basis. Our utilization of independent contractors fluctuates significantly depending on several factors, including the growth of, and demand for new fitness content by, our member base.
Employee Relations
Our core philosophy is that our employees are our most important resource, dedicating their talents, time, and professional reputations to the Company. Our success has been built on attracting, motivating, and retaining a talented and driven workforce, particularly on our research and development teams, but also our senior management and
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support personnel. We have a diverse workforce that represents many cultures and we celebrate our diversity by fostering inclusion across our organization. Diversity is both a priority and strength of our company. Our employee base reflects diversity in backgrounds and experiences and each employee contributes different perspectives, ideas, strengths, and abilities to our business. Our training and development program focuses on a harassment-free workplace and diversity topics, as well as ethics and compliance. We consider our global employee relations to be good.
We offer competitive benefits tailored to local markets and laws and that are designed to support employee health, welfare and retirement; examples of such benefits include paid time off; remote working/work from home flexibility, 401(k), basic and voluntary life, disability and supplemental insurance; medical, dental and vision insurance; and flexible spending accounts.
Our compensation structure is intended to align incentives with the success of our company as a whole. This includes our executives, whose incentives are generally the same as the rest of our employees. We believe that this fosters harmony within the Company, as all teams are working together towards the same goals. For more details regarding our executive compensation, see “Item 11. Executive Compensation.”
We comply with applicable laws and regulations regarding workplace safety and are subject to audits by entities such as OSHA in the United States.
We rely on third parties to manufacture our products and require our suppliers to maintain a safe work environment.
Government Regulation
General
We are subject to many varying laws and regulations, including in the United States, the United Kingdom, and the European Union, including those related to privacy, data protection, content regulation, intellectual property, consumer protection, e-commerce, marketing, advertising, messaging, rights of publicity, health and safety, employment and labor, product liability, accessibility, competition, and taxation. These laws often require companies to implement specific information security controls to protect certain types of information, such as personal data, “special categories of personal data” or health data. These laws and regulations are constantly evolving and may be interpreted, applied, created, or amended in a manner that could harm our current or future business and operations. In addition, it is possible that certain governments may seek to block or limit our products and services or otherwise impose other restrictions that may affect the accessibility or usability of any or all of our products and services for an extended period of time or indefinitely. We have implemented compliance programs and processes, including with respect to export regulation, anti-bribery and anti-corruption, privacy, and cybersecurity. To date, our compliance with these regulations has not had a material impact on our results of operations.
Export Regulation and Anti-Corruption Compliance
Our business activities are also subject to various restrictions under U.S. export control and similar laws and regulations, as well as various economic and trade sanctions administered by the U.S. Treasury Department’s Office of Foreign Assets Control, which prohibit or restrict the provision of products and services to embargoed jurisdictions and sanctioned persons. Further, various countries regulate the import of certain technology and have enacted or could enact laws that could limit our ability to provide customers with our products in those countries.
We are also subject to various domestic and international anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the U.K. Bribery Act, as well as other similar anti-bribery and anti-kickback laws and regulations. These laws and regulations generally prohibit companies, their employees, and their intermediaries from directly or indirectly authorizing, offering, providing, and/or accepting improper payments or other benefits for improper purposes. Although we take precautions to prevent violations of these laws, our exposure for violating these laws increases as our international presence expands and as we increase sales and expand operations into new jurisdictions. New legislation or regulations, the application of laws from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the fitness industry generally could result in significant additional compliance costs and responsibilities for our business.
Privacy
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We are, and could become, subject to a variety of local, state, national and international laws, directives, and regulations that apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data in the different jurisdictions, and which sometimes conflict among the various jurisdictions and countries in which we operate. As we expand our business internationally, we expect to become subject to data privacy and security laws in additional jurisdictions. Data privacy laws and regulations, including, but not limited to, the California Privacy Rights Act ("CPRA") and the California Consumer Privacy Act ("CCPA"), as well as the General Data Protection Regulation ("GDPR") and its equivalent in the United Kingdom, pose increasingly complex compliance challenges, which may increase compliance costs. Any failure to comply with data privacy laws and regulations could result in significant penalties.
The CCPA requires, among other things, that covered companies provide disclosures to California consumers and affords such consumers with certain rights, including the ability to opt out of certain sales of their personal information. The CCPA prohibits discrimination against individuals who exercise their privacy rights and provides for civil penalties for violations, as well as a private right of action in certain circumstances. Additionally, the CPRA, which became effective in most material respects starting on January 1, 2023, further expands the CCPA with additional compliance requirements that may impact our business and establishes a regulatory agency dedicated to enforcing the CCPA and CPRA. In addition, we may be subject to other new data privacy laws, such as the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Connecticut Data Privacy Act and the Utah Consumer Privacy Act in the United States (all of which went into effect in 2023) as well as the European Union Regulation on Privacy and Electronic Communications (or ePrivacy Regulation). Further, in the United States, emerging state data privacy laws may encourage other states and the federal government to pass comparable legislation, introducing the possibility of greater penalties and more rigorous compliance requirements.
The GDPR regulates the collection, control, sharing, disclosure, use, and other processing of data that can directly or indirectly identify a living individual that is a resident of the European Union and imposes stringent data protection requirements with significant penalties and the risk of civil litigation, for noncompliance. Moreover, following the UK’s exit from the European Union, the GDPR was transposed into the UK GDPR. However, a risk of divergent parallel regimes (and related uncertainty) exist. We cannot predict how the GDPR, the UK GDPR, or other UK or international data protection laws or regulations may develop or impact our business if and when we become subject to such laws and regulations, nor can we predict the effects of divergent laws and related guidance.
We strive to comply with all applicable laws and regulations relating to privacy, data security, and data protection. However, governments are continuing to focus on privacy and data security, and it is possible that new privacy or data security laws will be passed, or existing laws will be amended in a way that is material to our business. Any significant change to applicable laws, regulations, or industry practices could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business. Any inability to adequately address data privacy or data protection, or other information security-related concerns, even if unfounded, or to successfully negotiate privacy, data protection or information security-related contractual terms with customers, or to comply with applicable laws, regulations and policies relating to privacy, data protection and information security, could result in additional cost and liability to us, harm our reputation and brand, and could negatively impact our business, financial condition, and results of operations.
Product Safety
We are or may become subject to a variety of laws and regulations in the United States and abroad regarding the safety of our products. These laws and regulations are continuously evolving and developing. In particular, fitness equipment sold for home use is regulated in the United States by the Consumer Product Safety Commission. Safety-related information that we learn about our products from any source may trigger federal reporting obligations that could lead to product safety investigations, corrective actions, enforcement actions, and civil or criminal penalties. To protect the health and safety of our users and mitigate these risks, we obtain relevant safety testing on our products and maintain all necessary product qualifications.
Cybersecurity
We are in the process of designing and implementing a security program consisting of policies, procedures, and technology intended to maintain the security and integrity of our information, systems and networks. Among other
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things, the program includes controls designed to limit access to systems, networks, and data, prevent unauthorized access or modification, and monitor for threats.
Environmental, Health, and Safety
We and our third-party manufacturers and suppliers are, and could become, subject to a wide range of international, federal, state, provincial, and local governmental regulations directed at preventing or mitigating environmental harm, as well as to the storage, discharge, handling, generation, disposal and labeling of toxic or other hazardous substances. Although we outsource our manufacturing, the manufacturing of our products by our third-party manufacturers and suppliers require the use of hazardous materials that similarly subject these third parties, and therefore our business, to such environmental laws and regulations. Our failure or the failure of these third parties to comply with these laws or regulations can result in regulatory, civil, or criminal penalties, fines, and legal liabilities, suspension of production, alteration of manufacturing processes, including for our products, reputational damage, and negative impact on our operations or sales of our products and services. Increased compliance costs by our third-party manufacturing partners may also result in increased costs to our business. Our business and operations are also subject to health and safety laws and regulations adopted by government agencies such as OSHA. Although we believe we are in material compliance with applicable law concerning matters relating to health, safety, and the environment, the risk of liability relating to these matters cannot be eliminated completely. To date, we have not incurred significant expenditures relating to environmental compliance nor have we experienced any material issues relating to employee health and safety.
See “Risk Factors – Risks Related to Privacy, Cybersecurity, and Infrastructure” and “Risks Related to Regulatory Matters – Our business is subject to a wide range of laws and regulations, many of which are evolving, and failure to comply with such laws and regulations could harm our business, financial condition, and results of operations” and “– We and our third-party manufacturers and suppliers are, or could become, subject to environmental, health, and safety laws, which could increase our costs, restrict our operations and require expenditures that could have a material adverse effect on our business, financial condition, and results of operations.”
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Item 1A. Risk Factors.
Investing in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed below under “Special Note Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth herein. We have also identified a number of these factors under the heading “Risk Factors” in our periodic reports we file with the SEC, including our quarterly reports on Form 10-Q for the quarters ended March 31, 2025, June 30, 2025, and September 30, 2025, and will do so in our future filings. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity, results of operations, and prospects. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this annual report on Form 10-K or any annual report on Form 10-K are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business. If any of the following risks or other risks not specified below materialize, our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our shares of common stock could decline.
Risks Related to Our Business and Industry
We have incurred operating and net losses in the past, expect to incur operating and net losses in the future, and may not achieve profitability, or, if we achieve profitability, be able to maintain it in the future.
We have incurred operating losses each year since our inception, including a net loss of $24.0 million for the year ended December 31, 2025, and expect to continue to incur net losses for the foreseeable future. We had an accumulated deficit of $227.5 million at December 31, 2025. We expect our operating expenses to increase in the future as we increase our sales and marketing efforts, continue to invest in technology and engineering, expand our operating and retail infrastructure, add training and fitness programs, classes, content, and software features to our streaming platform, expand into new geographies, and invest in new or complementary products, equipment, accessories, content, and services for our immersive, customizable, and digital fitness platform, which include the Wattbike, CLMBR, FORME Studio, FORME Studio Lift, accompanying accessories, and our coaching services which we collectively refer to as the “FORME platform.” Further, as a public company we have incurred, and will continue to incur, substantial additional legal, accounting, and other expenses that we did not incur as a private company. These efforts and additional expenses may be more costly than we expect, and we may not be able to increase our revenue to offset any increase in our expenses. If our revenue does not grow at a greater rate than our operating expenses, we will not be able to achieve or maintain profitability.
We have a limited operating history; and our past financial results may not be a reliable indicator of our ability to successfully establish our product and service offerings in the marketplace, or of our future performance, and our revenue growth rate is likely to slow as our business matures.
We commenced operations in May 2017, opened our first FORME-focused retail locations in late 2020, commenced delivery of our first FORME Studio in July 2021, commenced delivery our first FORME Studio Lift in August 2022, conducted our first live personal training session in July 2022, completed our acquisition of CLMBR's assets in February 2024 and completed the acquisition of Wattbike in July 2025. We have a limited history of generating revenue. As a result of our brief operating history, we have limited financial data that can be used to evaluate our current business, including our ability to successfully establish our product and service offerings in the marketplace. Furthermore, while our business has grown and much of that growth has occurred in recent periods, the smart home gym and connected fitness industry, including the market for connected fitness hardware, may not develop or continue to develop in a manner that we expect or that otherwise would be favorable to our business. As a result of our limited operating history and ongoing changes in our new and evolving industry, our historical revenue growth should not be considered indicative of our future performance, and estimates of future revenue growth are subject to many risks and uncertainties and our future revenue may differ materially from our projections. Our revenue growth, if any, may slow or our revenue may decline for a number of other reasons, including reduced demand for our products and services, the impacts to our business from inflation and rising interest rates, which in turn could, among other things, increase financing costs and thus reduce sales of our products, a decrease in the growth or reduction in size of our overall market, a reduction in discretionary spending by consumers, or if we cannot capitalize on growth opportunities. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by emerging companies in rapidly changing industries, including market acceptance of our products and services, attracting and retaining members, and increasing competition and expenses as we expand our business. We cannot be sure that we
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will be successful in addressing these and other challenges we may face in the future, and our business may be adversely affected if we do not manage these risks successfully. In addition, we may not achieve sufficient revenue to attain or maintain positive cash flows from operations or profitability in any given period, or at all.
Our business, financial condition, and results of operations are subject to risks associated with rising interest rates, which could negatively impact our customers’ ability to finance their purchases of our products or to make timely payments and our ability to obtain additional financing.
We face risks associated with rising interest rates, which could, among other things, negatively impact sales of, and demand for, our products, the ability of customers to make timely payments, and our ability to obtain debt financing on terms acceptable to us, if at all. Historically, a significant percentage of our members have financed their purchase of Wattbike equipment, and to a lesser extent our CLMBR and FORME Studio equipment, through third-party credit providers with whom we have existing relationships. If our third-party credit providers were to increase interest rates, it could negatively impact potential customers’ ability to finance purchases of our products, which in turn would negatively impact our revenue. In addition, general reductions in consumer lending and the availability of consumer credit as a result of higher interest rates could limit the number of customers with the financial means to purchase our products and could reduce demand for our products and services. Higher interest rates could also increase our costs or the monthly payments for our products financed through other sources of consumer financing, or negatively impact the ability of our customers to make timely payments for our products and services. Third-party financing providers may not continue to provide consumers with access to credit or may reduce available credit limits. Restrictions or reductions in the availability of consumer credit, the loss or deterioration of our relationships with our current financing partners or changes in the terms such entities may provide to our potential customers could have an adverse effect on our business, financial condition, and results of operations. In addition, we will need to raise additional financing to support our operations, which could include equity or debt financing, in the immediate and near term. Rising interest rates would negatively impact our ability to obtain such financing on commercially reasonable terms or at all. Further, to the extent we are required to obtain financing at higher borrowing costs to support our operations, we may be unable to offset such costs through price increases, other cost control measures, or other means. Any attempts to offset cost increases with price increases may result in reduced sales, increased customer dissatisfaction, or otherwise harm our reputation.
We have a limited operating history with which to evaluate and predict the profitability of our recurring revenue model and any new revenue models we may introduce in the future may be unsuccessful.
We began selling memberships to our VOD platform in 2021 with the delivery of our first FORME Studio, and launched our Live 1:1 personal training service in July 2022. In addition, we acquired CLMBR in February 2024 and acquired Wattbike in 2025. Accordingly, we have a limited operating history with which to evaluate our subscription model. For example, many of our members are on month-to-month membership terms and may cancel their memberships at any time. We have limited historical data with respect to rates of membership renewals, so we may be unable to accurately predict member renewal or retention rates. We measure our membership retention rate by the number of members as of the beginning of the month who have a paid membership with a successful credit card billing of at least three months. Additionally, prior renewal rates may not accurately predict future member renewal rates for a variety of reasons, such as members’ dissatisfaction with our offerings and the cost of our memberships, macroeconomic conditions, or new offering introductions by us or our competitors. If our members do not renew their memberships, our revenue may decline and our business will suffer.
In the future, we may offer new membership products, services, or pricing models, implement promotions, or replace or modify current membership pricing models, any of which could result in additional costs. For example, we recently launched our Custom Training service, which is currently charged as a monthly membership for $149/month. We cannot predict member reaction to, or the success of, any new or modified products, services, or pricing models, or whether the costs or logistics of implementing these changes, including any new or updated pricing models, will adversely impact our business. If the adoption of new revenue models adversely impacts our member relationships, then member growth, member engagement, and our business, financial condition, and results of operations could be harmed.
Our negative cash flows from operations, history of losses, and significant accumulated deficit raise substantial doubt about our ability to continue as a “going concern.”
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As an emerging growth company, the Company is subject to certain inherent risks and uncertainties associated with the development of an enterprise. In this regard, since the Company’s inception, substantially all of management’s efforts have been devoted towards the development of its brands and services, their penetration in the marketplace, and the development of a commercial organization, all at the expense of short-term profitability.
As of the date the accompanying financial statements were issued (the “issuance date”), management evaluated the following adverse conditions and events present at the Company in accordance with ASU 205-40:
These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
In the past, we have been unable to remain in compliance with certain qualifications required by the Nasdaq Capital Markets in order for the Company’s common stock to remain listed on the Nasdaq.
The requirements for remaining in compliance with Nasdaq listing requirements include a minimum stockholders’ equity balance of $2.5 million, a minimum of 500,000 publicly held shares, and a minimum trading price of $1.00 per share for a sustained period of time (collectively the “Rules”). On November 13, 2024, we received a notice from the Listing Qualifications staff of the Nasdaq (the “Staff”) notifying us that we did not comply with the minimum 500,000 publicly held shares requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(4) (“Rule 1”) but were
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granted a period of time to regain compliance. On December 23, 2024, we received a letter from the Staff confirming that the Company has demonstrated compliance with Rule 1. The letter also stated that we will be subject to a Mandatory Panel Monitor for a period of one year from the date of the letter in accordance with the requirements of Nasdaq Listing Rule 5815(d)(4)(B). If, within that one-year monitoring period, the Staff finds that the Company failed to remain in compliance with Rule 1, we will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency, the Staff will not be permitted to grant additional time for us to regain compliance with respect to that deficiency, and we will not be afforded an applicable cure or compliance period. Instead, the Staff will issue a Delist Determination Letter and we would have an opportunity to request a new hearing with the Panel. Although we will have the opportunity to present to the Panel, no assurance can be provided that the Staff will grant the Company a compliance plan and allow the Company’s securities to remain listed on the Nasdaq.
As of December 31, 2025 and through the date of this report, we were in compliance with the Rules. However, management can provide no assurance that the Company will be able to remain in compliance with the Rules and, if compliance is not maintained, that the Staff will not require our securities to be delisted from the Nasdaq. In order to remain in compliance with the minimum trading price requirement of $1.00 per share, we reverse splits of our common stock in June of 2024, November of 2024, June of 2025 and February of 2026. If a delisting occurs, it would be an event of default under our senior secured convertible notes, and we will be faced with a number of additional material adverse consequences, including limited availability of market quotations for our Common Stock; limited news and analyst coverage; decreased ability to obtain additional financing; limited liquidity for our stockholders due to thin trading; and a potential loss of confidence by investors, employees and other third parties who do business with us.
If we fail to compete successfully against existing and future competitors, we may fail to obtain a meaningful market share, which in turn would harm our business, financial condition, and results of operations.
We operate in a highly competitive market. We face significant competition from multiple industries and exercise verticals, including at-home fitness equipment and content, fitness clubs, in-studio fitness classes, in-person personal training, and health and wellness apps. In addition, we compete with other virtual or smart home gym providers such as Peloton Interactive, Inc., Echelon Fitness Multimedia LLC, and Tonal Systems, Inc., among others. We expect the competition in our market to intensify in the future as new and existing competitors introduce new or enhanced products and services that compete with ours.
Our competitors may develop, or have already developed, products, features, content, services, or technologies that are similar to ours or that achieve greater acceptance, may offer products at lower price points due to other revenue sources available within such competitors that are unavailable to us, may have better brand recognition, may undertake more successful product development efforts, create more compelling employment opportunities, or marketing campaigns, may be willing to offer products at price points with which we cannot compete, or may adopt more aggressive pricing policies. Our competitors may develop or acquire, or have already developed or acquired, intellectual property rights that significantly limit or prevent our ability to compete effectively. In addition, our competitors may have significantly greater resources than us, allowing them to identify and capitalize more efficiently upon opportunities in new markets and consumer preferences and trends, quickly transition and adapt their products and services, devote greater resources to marketing and advertising, or be better positioned to withstand substantial price competition. Current and future competitors have established or may establish financial and strategic relationships among themselves or with our existing or potential customers or other third parties in our industry, such as manufacturing and logistics providers. Additionally, any of the foregoing may enable our current and future competitors to better withstand adverse economic or market conditions, now or in the future, and significantly reduce their pricing so as to compete against us. If we are not able to compete effectively against our competitors, they may acquire and engage customers or generate revenue at the expense of our efforts, which could have an adverse effect on our business, financial condition, and results of operations.
Our business may be affected by seasonality.
Although we do not have sufficient history with our product sales to assess the potential impact of seasonality, we expect that our business may be influenced by seasonal trends consistent with traditional retail selling periods. Accordingly, fluctuations in revenue during months of high demand could have a disproportionate effect on our results of operations for the entire year. In addition, we may experience quarterly fluctuations caused by seasonality and other factors, and thus comparisons of our results of operations across different fiscal quarters may not be accurate indicators of our future performance. Annual or quarterly comparisons of our results of operations may not be useful and our
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results in any particular period will not necessarily be indicative of the results to be expected for any future period. Seasonality in our business can also be affected by introductions of new or enhanced products and services, including the costs associated with such introductions.
Our results of operations and other financial and non-financial business metrics may fluctuate from period to period due to a variety factors, many of which are beyond our control, and as a result, our results from any prior periods, or any historical trends reflected in such results, should not be viewed as indicative of our future financial or operating performance.
Our revenue and results of operations have fluctuated in the past and may fluctuate from period to period in the future due to a variety of factors, many of which are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factors described elsewhere in this annual report on Form 10-K:
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As a result of these and other factors, our results of operations and revenue may vary significantly from period to period. Accordingly, you should not rely on the results of any prior quarterly or annual periods, or any historical trends reflected in such results, as indications of our future revenue or operating performance.
We derive a significant portion of our revenue from sales of Wattbike products, and if sales of these products decline, it could materially and negatively affect our future revenue and results of operations.
Our Wattbike products are sold in highly competitive markets with limited barriers to entry. Introduction by competitors of comparable products at lower price points, a maturing product lifecycle, a decline in consumer spending, or other factors could result in a decline in our revenue derived from our Wattbike products, which could have a material adverse effect on our business, financial condition, and results of operations. Despite having been acquired on July 1, 2025, sales of our Wattbike products accounted for approximately 71% of revenue for the year ended December 31, 2025. As a result, any meaningful decline in sales of our Wattbike products, would materially and adversely affect our business, financial condition, and results of operations. Factors that could adversely affect Wattbike's business include, among others:
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As a result of Wattbike's revenue concentration, we are vulnerable to any factor that negatively affects Wattbike's business, and we may not be able to offset such an impact through performance of our CLMBR or FORME businesses. Any such development could have a material adverse effect on our business, financial condition, and results of operations.
Our membership revenue is largely dependent on our ability to maintain and grow the Wattbike, CLMBR and FORME subscriber bases.
Our membership revenue is dependent upon our ability to retain subscribers to our paid digital platforms at Wattbike, CLMBR and FORME Studio or FORME and to generate additional revenue from sales of new memberships and health coaching services, predominantly to new hardware customers. The majority of our memberships are on a month-to-month basis and members can cancel their membership at any time. As a result, our membership and health coaching revenue is largely dependent on our ability to sell our Wattbike, CLMBR and FORME Studio equipment and to engage and retain members with our digital experience and services on an ongoing basis thereafter. If we are unable to expand equipment sales across all of our product lines, engage new members or maintain and expand our member base, our business, financial condition, and results of operations may suffer.
Our results of operations could be adversely affected if we are unable to accurately forecast consumer demand for our products and services and adequately manage our inventory.
To ensure adequate inventory supply, we must forecast inventory needs and expenses and place orders sufficiently in advance with our suppliers and manufacturers, based on our estimates of future demand for particular products and services. Failure to accurately forecast our needs, and any concomitant failure to place sufficient orders, may result in manufacturing delays or increased costs. Our ability to accurately forecast demand could be affected by many factors, including changes in consumer demand for our products and services, changes in demand for the products and services of our competitors, unanticipated changes in general market conditions, and the weakening of economic conditions or consumer confidence in future economic conditions. This risk may be exacerbated by the fact that we may not carry a significant amount of inventory and may not be able to satisfy short-term demand increases. If we fail to accurately forecast consumer demand, we may experience excess inventory levels or a shortage of products available for sale.
Inventory levels in excess of consumer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margins to suffer and could impair the strength and premium nature of our brand. Further, lower than forecasted demand could also result in excess manufacturing capacity or reduced manufacturing efficiencies, which could result in lower margins. Conversely, if we underestimate consumer demand, our suppliers and manufacturers may not be able to deliver products to meet our requirements or we may be subject to higher costs in order to secure the necessary production capacity.
An inability to meet consumer demand and delays in the delivery of our products to our members could result in an increased rate of order cancellations, reputational harm and damaged member relationships and could have an adverse effect on our business, financial condition, and results of operations.
If we are unable to sustain competitive pricing levels for our connected fitness hardware products and memberships to the Ergatta, Wattbike, CLMBR and FORME platforms, our business could be adversely affected.
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We compete with products and services that are generally sold at lower prices. If we are unable to sustain competitive pricing levels for our connected hardware products and our membership and health coaching services, whether due to consumer sentiment and spending power, competitive pressure or otherwise, our financial results and cash flow could be significantly reduced. Further, our decisions around the development of new products and services are partly based on assumptions about pricing levels. If there is price compression in the market after these decisions are made, it could have a negative effect on our business. In addition, while we believe we offer high-quality, differentiated products and services, our pricing levels may be higher than those of our competitors. Our ability to maintain our pricing levels depends on several factors, including our brand recognition, product design and technology features and quality, innovative content, and public perception of our company. If we are unable to sustain our pricing levels due to these or other factors, our ability to attract new members and our business, financial condition, and results of operations could be harmed.
Changes in how we market our products and services could adversely affect our marketing expenses and membership levels.
We use a broad mix of marketing and other brand-building measures to attract members. We use online advertising, including through native advertising and social media influencers, as well as third-party social media platforms, as marketing tools. As online and social media platforms continue to rapidly evolve or grow more competitive, we must continue to maintain a presence on these platforms and establish a presence on new or emerging popular social media and advertising and marketing platforms. Moreover, as we expand and as competition for customers increases in the industry, we may experience increased marketing expenses. If we cannot cost-effectively use these marketing tools or if we fail to promote our products and services efficiently and effectively, our ability to acquire new members, maintain or increase membership levels and our financial condition may suffer. In addition, an increase in the use of online, social media, or any other marketing channels for product promotion and marketing may increase the burden on us to monitor compliance of such materials and increase the risk that such materials could contain problematic product or marketing claims, or otherwise violate applicable laws or regulations.
The market for our products and services is still in the early stages of growth and if the market does not continue to grow, grows more slowly than we expect, or fails to grow as large as we expect, or if our products and services do not gain market acceptance, our business, financial condition, and results of operations may be adversely affected.
The smart home gym and connected fitness market is relatively new, rapidly growing and largely unproven, and it is uncertain whether this market will achieve or sustain high levels of demand and achieve wide market acceptance. Our success depends substantially on the willingness of consumers to widely adopt our products and services. To be successful, we will have to make significant investments in the education of consumers about our products and services and provide quality products, content and member experiences that are superior to the products, content, and experiences provided by our competitors. Additionally, the fitness and wellness market is heavily saturated, and the demand for and market acceptance of new products and services in the market is uncertain. We cannot assure you that the connected fitness market will continue to develop, that the public’s interest in smart home gym and connected fitness will continue, or that our products and services will be widely adopted.
It is difficult to predict the future growth rates, if any, and size of the smart home gym and connected fitness market, and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. Any forecasts in this Annual Report on Form 10-K relating to the expected growth in the smart home gym and connected fitness market, including internally developed estimates, may prove to be inaccurate. Even if the market experiences the forecasted growth described in this Annual Report on Form 10-K, we may not grow our business at a similar rate, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this Annual Report on Form 10-K should not be taken as indicative of our future growth. If our market does not develop, develops more slowly than expected, or becomes saturated with competitors, or if our products and services do not achieve market acceptance, our business, financial condition, and results of operations could be adversely affected.
We may be unable to attract and retain members, which could have an adverse effect on our business and rate of growth.
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Our business and revenue growth is dependent on our ability to continuously attract and retain members, and we cannot be sure that we will be successful in these efforts, or that member retention levels will not materially decline. There are a number of factors that could lead to a decline in member levels or that could prevent us from increasing our member levels, including:
Additionally, further expansion into international markets such as Canada, the United Kingdom, and Europe will create new challenges in attracting and retaining members that we may not successfully address. As a result of these factors, we cannot be sure that our member levels will be adequate to maintain or permit the expansion of our operations. A decline in member levels could have an adverse effect on our business, financial condition, and results of operations.
If we are unable to attract or otherwise access health coaches and personal trainers, and fitness instructors to produce and provide fitness content and services on our platform, our business, financial condition, and results of operations could be harmed.
Our business depends in part on our ability to attract and access qualified trainers and fitness instructors to produce and provide fitness content and services on our platform. In addition, trainers and fitness instructors may become dissatisfied with our brand, products, services, programs, and/or benefits. If we are unable to access trainers and fitness instructors due to these or similar occurrences, or due to competition or other reasons, it would harm our ability to produce and provide fitness content on our platform, which in turn could materially and adversely affect our business, financial condition, and results of operations.
If we fail to cost-effectively attract, recruit, and retain qualified health coaches, personal trainers, and fitness instructors, our business would be materially and adversely affected.
Our business depends in part on our ability to cost-effectively access, attract, recruit, and retain qualified trainers and fitness instructors. Competition for qualified trainers and fitness instructors is intense and may increase due to various factors beyond our control. For example, the easing of COVID restrictions in the past years resulted in more people returning to traditional gyms and in-person fitness, resulting in increased demand for trainers and fitness instructors. As a result, we experienced increased competition for such personnel in the past year. Our competitors may attempt to compete for trainers and fitness instructors on the basis of providing a more compelling platform or more lucrative earning opportunities. In addition, we may experience complaints, negative publicity, strikes, or other work stoppages that could dissuade potential candidates from joining our company.
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In addition, most of the fitness instructors who are featured in our On-Demand content, as well as other content production providers with whom we work, are independent contractors and the classification of any of our independent contractors may be subject to challenge. Our use of independent contractors for content production activities fluctuates depending on production volume and schedule. Further, certain jurisdictions may adopt laws and regulations seeking to limit the scope of individuals who may be appropriately classified as independent contractors and instead seek to classify them as employees. If we are required to classify our independent contractors as employees, we would need to adapt our employment model accordingly. We may face specific risks relating to our ability to onboard fitness instructors as employees, our ability to partner with third-party organizations to source trainers and fitness instructors, and our ability to effectively utilize employee trainers and fitness instructors to meet customer demand.
Changes in certain laws and regulations, including immigration, labor and employment laws, occupational licensure regulations or background check requirements, may result in a change in the pool of qualified trainers and fitness instructors, which may result in increased competition for such personnel or higher costs of recruitment, operation and retention. Other factors outside of our control, may also reduce the number of trainers and fitness instructors on the CLMBR and FORME platform or impact our ability to onboard new trainers and fitness instructors. If we fail to attract qualified trainers and fitness instructors on favorable terms, or lose qualified trainers and fitness instructors to our competitors, we may not be able to meet customer demand or maintain competitive pricing for our personal training, health coaching, and fitness programs and classes, and our business, financial condition, and results of operations could be adversely affected.
If we fail to cost-effectively attract new members, or to increase utilization of the Ergatta, Wattbike, CLMBR and FORME platform from existing members, our business, financial condition, and results of operations could be harmed.
Our success depends in part on our ability to cost-effectively attract new members, retain existing members and increase membership rates across all of our platforms. Members have a wide variety of fitness options, including at-home fitness equipment and content, fitness clubs, in-studio fitness classes, in-person personal training, and health and wellness apps. To expand our member base, we must have the ability to appeal to individuals who have historically used other methods of personal fitness and training or who have not previously used personal fitness and training or regularly exercised. Our reputation, brands, and ability to build trust with existing and new members may be adversely affected by complaints and negative publicity about us, our offerings, our pricing and policies, trainers and fitness instructors on our platforms, or our competitors, even if factually incorrect or based on isolated incidents. Further, if existing and new members do not perceive the services provided by trainers and fitness instructors on the CLMBR and FORME platform to be helpful, effective, engaging, or affordable, or if we fail to offer compelling offerings, services, content, and features on our platforms, we may not be able to attract or retain members or to increase their utilization. If we fail to continue to grow our member base, retain existing members, or increase the overall utilization of our platforms by existing members, our business, financial condition, and results of operations could be adversely affected.
Changes to our pricing methodologies or business model could adversely affect our ability to attract or retain members as well as qualified trainers and fitness instructors.
Many factors, including operating costs, legal, and regulatory requirements or constraints and our current and future competitors’ pricing and marketing strategies, could significantly affect our pricing strategies. Certain of our competitors offer, or may in the future offer, lower-priced or a broader range of offerings. Similarly, certain competitors may use marketing strategies that enable them to attract or retain customers as well as qualified trainers and fitness instructors at a lower cost than us. We may reduce our membership and other pricing for members, increase the compensation we pay to trainers and fitness instructors, increase our marketing and other expenses, or otherwise modify our business model to attract and retain members, as well as qualified trainers and fitness instructors in response to competitive pressures. Furthermore, local regulations may affect our pricing in certain geographic locations, which could amplify these effects. For example, state and local laws and regulations may impose minimum earnings standards for trainers and fitness instructors, which in turn may cause us to revise our pricing methodology in certain markets. We have from time to time modified existing, or implemented new, pricing methodologies and strategies, which may not prove effective. Any of the foregoing actions may not ultimately be successful, and in turn could cause our business, financial condition, and operating results to suffer.
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If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative, and updated products and services in a timely manner or effectively manage the introduction of new or enhanced products and services, our business may be adversely affected.
Our success in maintaining and increasing our member base depends on our ability to identify and originate trends as well as to anticipate and react to changing consumer demands in a timely manner. Our products and services are subject to changing consumer preferences that cannot be predicted with certainty. If we are unable to introduce new or enhanced offerings in a timely manner, our competitors may introduce similar offerings faster than us, which could result in our new or enhanced offerings not being accepted by our members and negatively affect our rate of growth. Moreover, our new offerings may not receive consumer acceptance as preferences could shift rapidly to different types of fitness and wellness offerings or away from these types of offerings altogether, and our future success depends in part on our ability to anticipate and respond to these changes. Failure to anticipate and respond in a timely manner to changing consumer preferences could lead to, among other things, lower membership rates, lower sales, pricing pressure, lower gross margins, discounting of our existing CLMBR and FORME Studio equipment, and excess inventory levels. Even if we are successful in anticipating consumer preferences, our ability to adequately react to and address them will partially depend upon our continued ability to develop and introduce innovative, high-quality offerings. Development of new or enhanced products and services may require significant time and financial investment, which could result in increased costs and a reduction in our profit margins. For example, we have historically incurred higher levels of sales and marketing expenses accompanying each product and service introduction.
Moreover, we must successfully manage introductions of new or enhanced products and services, which could adversely impact the sales of our existing products and services. For instance, consumers may decide to purchase new or enhanced products and services instead of our existing products and services, which could lead to excess product inventory and discounting of our existing products and services.
Our success depends on our ability to develop and maintain the value and reputation of the Ergatta, Wattbike, CLMBR and FORME brands.
We believe that developing and maintaining our brand recognition and image is important to attracting and retaining members. Developing and maintaining our brand depends largely on the success of our marketing efforts, ability to provide consistent, high-quality products, services, features, content, and support to our members. We believe that the importance of our brand will increase as competition further intensifies and brand promotion activities may require substantial expenditures. Our brand could be harmed if we fail to achieve these objectives or if our public image were to be tarnished by negative publicity. Unfavorable publicity about us, including our products, services, technologies, customer service, content, personnel, and suppliers, or similar incidents involving our competitors in the smart home gym and smart home gym and connected fitness industry, could diminish confidence in, and the use of, our products and services. Such negative publicity also could have an adverse effect on the size, engagement and loyalty of our member base and result in decreased revenue, which could have an adverse effect on our business, financial condition, and results of operations.
We also sell Wattbike and CLMBR equipment and the FORME platform to commercial and wellness customers, which exposes us to additional business and financial risks. In addition, if we fail to successfully expand our commercial and corporate wellness business, it could negatively impact our ability to grow our business and gain market share.
We also sell Wattbike and CLMBR equipment and the FORME platform to commercial and wellness customers. For example, we are actively installing our products in hotels, resorts, and other commercial environments such as boutique hotels, luxury apartments, and private condominiums, as well businesses with which we establish corporate wellness partnerships for the benefit of their employees. For commercial customers, we typically sell our connected hardware products with a three-year content membership paid up front, plus we offer an extended warranty program. In addition, many of the risks associated with our individual members are often exacerbated or heightened in the commercial or corporate environment. For example, the equipment we install at these locations may be used more frequently and by a larger group of users, which may increase the rate of wear and tear or the risk of product malfunction or injury in connection with the use of our equipment. This in turn could expose us to liability claims, warranty expense, and damage to our brand and reputation, among other risks, any of which could harm our reputation,
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business, financial condition, and results of operations. If we fail to successfully expand our commercial and corporate wellness business, it could harm our ability to grow our business, gain market share, and expand our brand.
We have limited operating experience at our current scale of operations. If we are unable to manage our growth effectively, our brand, company culture, and financial performance may suffer.
We have expanded our operations rapidly and have limited operating experience at our current scale of operations. For example, we commenced commercial delivery of the FORME Studio in July 2021, launched our Live 1:1 personal training service in July 2022, delivered our FORME Studio Lift in August 2022, completed the acquisition of CLMBR's assets in February 2024 and completed the Wattbike acquisition in July 2025. As we continue our transition from initial product development to mass production and commercial shipment of our products, we have experienced, and may in the future experience, adjustments in our business operations and headcount. For example, as a result of completing development and commencing mass production of the FORME Studio Lift and in response to economic headwinds, we reduced the size of our engineering team in 2022 and expect to continue to reallocate our personnel resources to support our ongoing product development efforts while also increasing our focus on marketing and sales and building our brand. Our headcount reduction in July of 2022 comprised approximately 26% of our full-time employee base at the time of such reduction. We had a subsequent headcount reduction in December of 2022, comprising approximately 50% of our full-time employee base at the time of such reduction. We expect our headcount to fluctuate in the near term but to grow over the longer term as we continue to grow our business and expand our target markets. Further, we expect that our business and operations will become increasingly complex as we grow our business. To effectively manage and capitalize on our growth, we must continue to expand our sales and marketing, focus on innovative product and content development, and upgrade our management information systems and other processes. Our continued growth could strain our existing resources, and we could experience ongoing operating difficulties in managing our business, including difficulties in hiring, training, and managing a diffuse and growing employee base. Failure to scale and preserve our company culture with growth could harm our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives. Moreover, the vertically integrated nature of our business, where we design and develop our own CLMBR and FORME Studio equipment and accessories, and software, produce original fitness and wellness programming, recruit, train, and educate personal trainers, sell our products exclusively through our own sales teams and e-commerce site, and coordinate the delivery, installation, and service of our CLMBR and FORME Studio equipment with our third-party logistics providers, exposes us to risk and disruption at many points that are critical to successfully operating our business and may make it more difficult for us to scale our business. For example, we utilize both air and ocean shipment for our CLMBR and FORME Studio equipment and our limited history with commercial shipment of our products has in the past, and may in the future, result in delays in delivery and installation. If we do not adapt to meet these evolving challenges, or if our management team does not effectively scale with our growth, we may experience erosion to our brand, the quality of our products and services may suffer, and our company culture may be harmed.
Because we have a limited history operating our business at its current scale, it is difficult to evaluate our current business and future prospects, including our ability to plan for and model future growth. Our limited operating experience at this scale, combined with the rapidly evolving nature of the market in which we sell our products and services, substantial uncertainty concerning how these markets may develop, and other economic factors beyond our control, reduces our ability to accurately forecast quarterly or annual revenue. Failure to manage our future growth effectively could have an adverse effect on our business, financial condition, and results of operations.
If our marketing efforts are not effective, our ability to grow our business and maintain or expand our market share could suffer.
Maintaining and promoting awareness of the Ergatta, Wattbike, CLMBR and FORME platforms is important to our ability to retain existing customers and to attract new ones. To facilitate our future growth and profitability, we are investing in our advertising, promotion, public relations, and marketing programs. These brand promotion activities may not yield increased revenue and the efficacy of these activities will depend on a number of factors, including our ability to do the following:
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We may adjust or re-allocate our advertising spend across channels, product verticals, and geographic markets to optimize the effectiveness of these activities. We expect to increase advertising spend in future periods to continue driving our growth.
Implementing new marketing and advertising strategies also could increase the risk of devoting significant capital and other resources to endeavors that do not prove to be cost effective or provide a meaningful return on investment. We also may incur marketing and advertising expenses significantly in advance of recognizing revenue associated with such expenses and our marketing and advertising expenditures may not generate sufficient levels of brand awareness or result in increased revenue. Even if our marketing and advertising expenses result in increased sales, the increase might not offset our related expenditures. If we are unable to maintain our marketing and advertising channels on cost-effective terms or replace or supplement existing marketing and advertising channels with similarly or more effective channels, our marketing and advertising expenses could increase substantially and our brand, business, financial condition, and results of operations could suffer.
Our products and services may be affected from time to time by design and manufacturing or other defects that could adversely affect our business and result in harm to our reputation.
We offer complex hardware and software products and services that can be affected by design and manufacturing or other defects, errors, and bugs. Sophisticated operating system software and applications, such as those included in our products, often have issues that can unexpectedly interfere with the intended operation of hardware or software products. Defects may also exist in components or parts that we source from third parties. Any such defects could make our products and services unsafe, create a risk of environmental or property damage and personal injury, and subject us to the hazards and uncertainties of product liability claims, regulatory investigations, and related litigation. We have in the past and may in the future experience these defects and similar issues in our products. If any of our products have reliability, quality, or safety problems, we may not be able to successfully correct these problems in a timely manner or at all.
There can be no assurance that we will be able to detect and fix all issues and defects in the products, software, and services we offer. Failure to do so could result in widespread technical and performance issues affecting our products and services, damage our reputation, result in customer warranty or return claims, and deter customers from purchasing our products. In addition, these defects, errors, or bugs could interrupt or delay sales and revenue. If any defects or issues are not discovered until after we have commenced commercial production of a new product, we may incur significant additional development costs and product recall, repair or replacement costs. In addition, from time to time we may experience outages, service slowdowns, or errors that affect our fitness and wellness programming. As a result, our services may not perform as anticipated and may not meet customer expectations. Further, quality problems could adversely affect the experience for users of our products and services, and result in harm to our reputation, loss of competitive advantage, poor market acceptance, reduced demand for our products and services, delay in new product and service introductions, and lost revenue. Any of the foregoing could harm our ability to retain existing members and attract new customers, and could adversely affect our business, financial condition, and results of operations.
Service interruptions, outages, technical or performance issues, or similar events, including those related to, or caused by, defects or similar issues in our products and services, may result in claims against us and may cause us to incur significant additional expense to address these issues, and our liability insurance may not be adequate to cover any or all such costs.
Service interruptions, outages, technical and performance issues, or similar events affecting our products and services, including those related to, or caused by, defects or similar issues in our products and services, may result in claims against us by our members or others. For example, we have received claims in the past, including in the past year, and while such claims have not had a significant impact on our results of operations, we may be subject to future claims, which could have a material and adverse impact on our business, financial condition, and results of operations.
We maintain general liability insurance; however, design and manufacturing defects, and claims related thereto, may subject us to judgments or settlements that result in damages materially in excess of the limits of our insurance
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coverage. In addition, we may be exposed to recalls, product replacements or modifications, write-offs of inventory, property, plant and equipment, or intangible assets, and significant warranty and other expenses such as litigation costs and regulatory fines. If we cannot successfully defend any large claim, maintain our general liability insurance on acceptable terms, or maintain adequate coverage against potential claims, our financial results could be adversely impacted.
We may be subject to warranty claims that could result in significant direct or indirect costs, or we could experience greater returns than expected, either of which could have an adverse effect on our business, financial condition, and results of operations.
We generally provide a 12-month limited warranty on our CLMBR, FORME Studio and FORME Studio Lift. The occurrence of any defects or other warranty claims for which we have a legal obligation could make us liable for damages and warranty claims in excess of our current reserves, which could result in an adverse effect on our business prospects, liquidity, financial condition, and cash flows if warranty claims were to materially exceed anticipated levels. In addition, we could incur significant costs to correct any defects, warranty claims, or other problems, including costs related to product recalls. Any negative publicity related to the perceived quality and safety of our products could affect our brand image, decrease consumer and member confidence and demand, and adversely affect our business, financial condition, and results of operations. Moreover, certain other companies within our industry have in the past, and may in the future, received reports of injuries related to the use of their products and services and issued product recalls. Such activity by other companies within our industry, and the associated negative publicity, may be seen as characteristic of participants in our industry and may therefore harm the reputation of all participants in our industry, including us. Also, warranty claims may result in litigation, the occurrence of which could have an adverse effect on our business, financial condition, and results of operations.
In addition to warranties supplied by us, we also offer the option for members to purchase third-party extended warranty and services contracts and accidental protection coverage. Extended warranties are regulated in the United States on a state level and are treated differently by state. Outside the United States, regulations for extended warranties vary from country to country. In addition, changes in interpretation of the insurance regulations or other laws and regulations concerning warranties, whether limited, full, extended, or implied, on a federal, state, local, or international level may cause us to incur costs or have additional regulatory requirements to meet in the future. Our failure to comply with past, present, and future similar laws regarding warranties on our products, whether express or implied, could result in reduced sales of our products, reputational damage, litigation, penalties, and other sanctions, which could have an adverse effect on our business, financial condition, and results of operations.
The failure or inability of our contract manufacturers to comply with the specifications and requirements of our products could result in a product recall, which could adversely affect our reputation and subject us to significant liability should the use of any of our products cause or be claimed to cause physical harm.
All of our products are manufactured by independent third-party contract manufacturers. We do not have long-term contracts with our third-party contract manufacturers, and instead order from these manufacturers on a purchase order basis. Under certain circumstances, we may be required to, or may voluntarily, recall or withdraw products.
A widespread recall or withdrawal of any of our products may negatively and significantly impact our sales and profitability for a period of time and could result in significant losses depending on the costs of the recall, destruction of product inventory, reduction in product availability, and reaction of competitors and consumers. We may also be subject to claims or lawsuits, including class actions lawsuits (which could significantly increase any adverse settlements or rulings), resulting in liability for actual or claimed injuries or death. Any of these events could adversely affect our business, financial condition and results of operations. Even if a product liability claim or lawsuit is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused physical harm could adversely affect our reputation with existing and potential consumers and our corporate and brand image. Moreover, claims or liabilities of this sort might not be covered by insurance or by any rights of indemnity or contribution that we may have against others. A product liability judgment against us or a product recall could adversely affect our business, financial condition and results of operations.
If we fail to offer high-quality member support, our business and reputation will suffer.
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We currently work with third-party logistics providers to handle shipment and delivery of our connected fitness hardware products, including Wattbike, CLMBR, FORME Studio and FORME Studio Lift. Our third-party logistics providers also facilitate white-glove installation services of our products. Our in-house field operations team is responsible for training our third-party logistics providers on how to safely and correctly install our products, coordinating shipment and delivery matters, and communicating with our members throughout the entire pre-installation process. We do not have any minimum or long-term binding commitments with our third-party logistics providers and are generally billed upon shipment of the freight and believe alternative third-party logistics services would be available if needed. Our members also rely on our member support services to resolve any issues related to the use of our platforms. Providing a high-quality member experience is vital to our success in generating word-of-mouth referrals to drive sales and for retaining existing members. The importance of high-quality support will increase as we expand our business and introduce new products and services. If we do not help our members quickly resolve issues and provide effective ongoing support, our reputation may suffer and our ability to retain and attract members, or to sell additional products and services to existing members, could be harmed.
Our growth will depend in part on our ability to develop and expand our strategic and commercial relationships with companies across the fitness, wellness, hospitality, fashion, sports and design industries.
We have developed, and intend to continue to develop and expand, collaborations with companies across the fitness, wellness, hospitality, fashion, sports, and design industries. Our current and potential partners include international hotel chains, celebrity trainers, interior designers, celebrity stylists, and boutique fitness clubs. These strategic relationships tend to be focused on generating awareness of our brand by accessing audiences and followings and educating them regarding our products and services. If these arrangements do not continue to result in an increase in the number of customers and revenue, our business may be harmed.
The loss of a partnership could harm our results of operations, damage our reputation, increase pricing and promotional pressures from other partners and distribution channels, or increase our marketing costs. If we are not successful in maintaining existing and creating new relationships with any of these third parties, or if we encounter technological, content licensing, or other impediments to our development of these relationships, our ability to grow our business could be adversely impacted.
If we fail to obtain and retain high-profile strategic relationships, or if the reputation of any of these parties is impaired, our business may suffer.
A principal component of our marketing program and employee retention and recruitment has been to develop relationships with highly qualified and high-profile persons to help us extend the reach of our brand. Although we have relationships with well-known individuals in this manner, we may not be able to attract and build relationships with new persons in the future. In addition, if the actions of these parties were to damage their or our reputation, our relationships may be less attractive to our current or prospective customers. Any of these failures by us or these parties could materially and adversely affect our business, financial condition, and results of operations.
We face risks, such as unforeseen costs and potential liability in connection with content we acquire, produce, license and/or distribute through our service.
As a creator and distributor of fitness and wellness content, we face potential liability for negligence, copyright and trademark infringement, or other claims based on the nature and content of materials that we acquire, produce, license and/or distribute. We also may face potential liability for content used in promoting our service, including marketing materials. We are devoting more resources toward the development, production, marketing and distribution of our fitness and wellness content. We believe that original content can help differentiate our service from other offerings, enhance our brand and otherwise attract and retain members. To the extent our fitness and wellness content does not meet our expectations, in particular, in terms of costs, usage, and popularity, our business, including our brand and results of operations, may be adversely impacted. As we expand our fitness and wellness content, we continue to be responsible for production costs and other expenses. We also take on risks associated with production, such as completion and key talent risk with respect to our trainers and fitness instructors. We also contract with third parties related to the development, production, marketing and distribution of our fitness and wellness content. We may face potential liability or may suffer significant losses in connection with such arrangements, including, but not limited to, if such third parties violate applicable law, become insolvent or engage in fraudulent behavior. To the extent we license rights of our fitness and wellness content to third parties, we could become subject to product liability, intellectual
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property or other claims related to such merchandise. We may decide to remove content from our service, not to place licensed or produced content on our service, or discontinue or alter production of our original content if we believe such content might not be well received by our members, or could be damaging to our brand or business. To the extent we, in the future, do not accurately anticipate costs or mitigate risks, including for content that we produce but ultimately does not appear on or is removed from our service, or if we incur liability for content we acquire, produce, license and/or distribute, our business may suffer. Litigation to defend these claims could be costly and the expenses and damages arising from any liability or unforeseen production risks could harm our results of operations. We may not be indemnified against claims or costs of these types and we may not have insurance coverage for these types of claims.
Risks Related to Suppliers, Manufacturers, and Other Ecosystem Partners
We rely on a limited number of suppliers, manufacturers, and logistics partners for our CLMBR and FORME Studio equipment. A loss of any of these partners could negatively affect our business.
We rely on a limited number of suppliers to manufacture, transport, and install our Wattbike, CLMBR and FORME Studio equipment, which exposes us to supply chain and other risks. We have previously experienced, and may experience in the future, production, shipping, or logistical constraints that cause delays. Although we believe we have redundancy and alternatives for the manufacturers and suppliers for the key components of our products, our reliance on a limited number of manufacturers for the components and parts for our Wattbike, CLMBR and FORME Studio equipment and the geographic concentration among our suppliers increase our supply chain risk. In addition, we do not have long-term binding commitments with any of our manufacturers and suppliers and instead operate on a purchase order basis. Therefore, we have no guarantee that they will continue to manufacture or supply products or components for us on an ongoing basis. In the event of interruption from any of our manufacturers, we may not be able to replace or increase capacity from other sources or develop alternate or secondary sources without incurring material additional costs and substantial delays. Furthermore, our manufacturing partners’ primary facilities are located in Taiwan. Thus, our business could be adversely affected if one or more of our suppliers is impacted by a natural disaster or other interruption at a particular location.
Our suppliers and partners have no obligation to continue to accept purchase orders from us, and we may be unable to get them to accept additional orders or engage an alternate manufacturer on terms that are acceptable to us, which may undermine our ability to deliver our products to members in a timely manner. For example, it may take a significant amount of time to identify a manufacturer that has the capability and resources to build our CLMBR and FORME Studio equipment to our specifications in sufficient volume. Identifying suitable suppliers, manufacturers, and logistics partners is an extensive process that requires us to become satisfied with their quality control, technical capabilities, responsiveness and service, financial stability, regulatory compliance, and labor and other ethical practices. Accordingly, a loss of any of our significant suppliers, manufactures, or logistics partners could have an adverse effect on our business, financial condition, and results of operations.
We have limited control over our suppliers, manufacturers, and logistics partners, which may subject us to significant risks, including the potential inability to produce or obtain quality products and services on a timely basis or in sufficient quantity.
We have limited control over our suppliers, manufacturers, and logistics partners, which subjects us to risks, such as the following:
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In addition, we do not have long-term binding commitments with any manufacturers and suppliers and instead operate on a purchase order basis. We also rely on our logistics partners, including our warehouse and delivery partners, to complete a substantial percentage of our deliveries to members, with the rest of the deliveries handled by our own white-glove delivery and installation team. Our primary delivery and installation partner relies on a network of independent contractors to perform delivery and installation services for us in many markets. If any of these independent contractors, or the delivery and installation partner as a whole, do not perform their obligations or meet the expectations of us or our members, our reputation and business could suffer.
The occurrence of any of these risks, especially during periods of peak demand, could cause us to experience a significant disruption in our ability to produce and deliver our products to our members.
Increases in component and equipment costs, long lead times, supply shortages, and supply changes could disrupt our supply chain and negatively impact our business, financial condition, and results of operations.
Our ability to maintain and expand our business depends on our ability to obtain timely and adequate delivery of components and parts for our Wattbike, CLMBR and FORME Studio equipment. The majority of the components and parts that go into the manufacturing of this equipment are sourced from a limited number of third-party suppliers, and some of these components or parts are provided by a single supplier based in Taiwan. In addition, the global semiconductor supply shortage is having wide-ranging effects across multiple industries. We have experienced, and may continue to experience, direct and indirect adverse impacts on our business, including delays in securing certain components, including semiconductors, for our Wattbike, CLMBR and FORME Studio equipment. Our manufacturers generally purchase these components or parts on our behalf, subject to certain approved supplier lists, and we do not have long-term arrangements with most of our component or parts suppliers. We are therefore subject to the risk of shortages and long lead times in the supply of these components or parts and the risk that our suppliers discontinue or modify components or parts used in our Wattbike, CLMBR and FORME Studio equipment. In addition, the lead times associated with certain components or parts are lengthy and preclude rapid changes in design, quantities, and delivery schedules. We may in the future experience component shortages, and the predictability of the availability of these components or parts may be limited. In the event of a component shortage or supply interruption from suppliers of these components or parts, we may not be able to develop alternate sources in a timely manner. While we believe we can obtain alternative sources of supply on commercially reasonable terms if needed, developing alternate sources of supply for these components or parts may be time-consuming, difficult, and costly and there can be no assurance that we will be able to source these components or parts on terms that are acceptable to us, or at all, which may undermine our ability to fill our orders in a timely manner. Any interruption or delay in the supply of any of these components or
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parts, or the inability to obtain these components or parts from alternate sources at acceptable prices and within a reasonable amount of time, would harm our ability to meet our scheduled deliveries to our members.
Moreover, volatile global economic conditions may make it more likely that our suppliers may be unable to timely deliver supplies, or at all, and there is no guarantee that we will be able to timely locate alternative suppliers of comparable quality at an acceptable price. Several of the components or parts that go into the manufacturing of our Wattbike, CLMBR and FORME Studio equipment are sourced internationally, including from China, where the United States has imposed tariffs on specified products imported therefrom following the U.S. Trade Representative Section 301 Investigation. These tariffs have an impact on our component costs and have the potential to have an even greater impact depending on the outcome of the current trade negotiations, which have been protracted and recently resulted in increases in U.S. tariff rates on specified products from China. Increases in our component costs could have a material effect on our gross margins. The loss of a significant supplier, an increase in component costs, or delays or disruptions in the delivery of components or parts, could adversely impact our ability to generate future revenue and earnings and have an adverse effect on our business, financial condition, and results of operations.
Our ability to maintain a sufficient supply of components and raw materials for our products or to adequately control the costs thereof have been, and may be, negatively impacted by global supply chain constraints, which in turn may be impacted by geopolitical events or other factors beyond our control.
Our products incorporate various components and raw materials, such as semiconductors, and our ability to maintain a sufficient supply of such components has been, and may continue to be, impacted by global supply chain issues. Further, the availability of such components and raw materials at reasonable cost, which is essential to the successful production and sale of our products, is subject to factors beyond our control, such as geopolitical unrest, global health crises, and global economic conditions, among others. For example, Russia’s invasion of Ukraine has resulted in sanctions levied by the United States and other countries against Russia, higher energy prices, and higher prices for certain raw materials and goods and services, which in turn is contributing to higher inflation in the United States and globally, and has caused significant disruption to financial markets. While we do not currently believe our business has been significantly impacted by the Ukraine crisis to date, we could potentially be adversely impacted by any significant disruption to the global economy as a result of the ongoing crisis or any escalation thereof. For example, the conflict between Ukraine and Russia has adversely impacted, and could continue to exacerbate, global supply chain constraints and disrupt our operations or negatively impact the demand for our products and services. Any such disruption could result in an adverse impact to our financial results. Further, military, social, and political instability in a number of countries around the world, including continued hostilities and civil unrest in Ukraine and civil unrest in the Middle East, may have a negative effect on our business, financial condition, and operations as a result of any impact on our customers and manufacturing partners, the global supply chain, the volatility in the prices of components, the global economy, and the financial markets.
Further, as our products incorporate semiconductor components, our manufacturing processes are subject to risks and trends within the semiconductor industry generally, including wafer foundry manufacturing capacity, wafer prices and production yields, as well as timely delivery of semiconductors from foundries to our manufacturing partners and regulatory and geopolitical developments in various jurisdictions, including Russia, Ukraine, and Asia. If the cost of raw materials increases, or our manufacturing partners experience difficulties in obtaining sufficient components of sufficient quality for incorporation in our products, it could impact our ability to deliver products to our customers in a timely manner and adversely impact our business, financial condition, and results of operations, including our gross margins. For example, as Russia and Ukraine produce a significant portion of certain key raw materials used in semiconductor manufacturing such as neon and palladium, Russia’s invasion of Ukraine could exacerbate the ongoing semiconductor supply chain issues. Although we do not currently expect Russia’s invasion of Ukraine to materially impact us directly, we are unable at this time to predict the ultimate impact this conflict will have on our company, our supply chain, our customers, the global economy, or the financial markets. Further, future global pandemics similar to the COVID-19 pandemic may cause manufacturing and supply constraints that affect our products, and increased tensions between the United States and other countries, such as Russia or China, may negatively impact the supply of certain components incorporated in our products, which in turn could harm our business, financial condition, and results of operations.
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We depend on sole source and limited source suppliers for certain components and parts used in the manufacture of our products. If we are unable to source these components on a timely basis, we will not be able to deliver our products to our customers.
We depend on sole source and limited source suppliers for certain components and parts used in the manufacture of our products. Any of the sole source and limited source suppliers upon whom we rely could stop producing our components or parts, cease operations or be acquired by, or enter into exclusive arrangements with, our competitors. We generally do not have long-term supply agreements with our suppliers, and our purchase volumes are currently too low for us to be considered a priority customer by most of our suppliers. As a result, most of these suppliers could stop selling to us at commercially reasonable prices, or at all. Any such interruption or delay may force us to seek similar components or products from alternative sources, which may not be available. Switching suppliers may require that we redesign our products to accommodate new components or parts, which would be costly and time-consuming. Any interruption in the supply of sole source or limited source components for our products would adversely affect our ability to meet scheduled product deliveries to our customers, could result in lost revenue or higher expenses and would harm our business. Although we have not experienced any significant disruption as a result of our reliance on limited or sole source suppliers, we have a limited operating history and cannot assure you that we will not experience disruptions in our supply chain in the future as a result of such reliance or otherwise.
Our manufacturing partners and suppliers are located in Taiwan and China, which exposes us to various risks, including due to tensions between Taiwan and mainland China.
As the primary facilities of our manufacturing partners and the suppliers of certain components and parts used in the manufacture of our products are located in Taiwan and China, we face risks associated with geopolitical conditions, natural disasters, and other factors. For example, Taiwan is susceptible to regional natural disasters such as earthquakes, tsunamis, and typhoons, and has experienced an increasing frequency of extreme weather events, including heavier rains and atypical heat waves. In addition, we face risks associated to changes in governmental policies, taxation, inflation, or interest rates in Taiwan and by social instability and diplomatic and social developments in or affecting Taiwan which are outside of our control. For example, since 1949, Taiwan and the Chinese mainland have been separately governed. The government for the People’s Republic of China (the “PRC” which unless the context otherwise requires, refers to mainland China) claims that it is the only legitimate government in China and that Taiwan is part of China. Although significant economic and cultural relations have been established between Taiwan and mainland China in the past few years, relations between Taiwan and mainland China remain strained. For example, the PRC government has refused to renounce the use of military force to gain control over Taiwan and, in March 2005, passed an Anti-Secession Law that authorized non-peaceful means and other necessary measures should Taiwan move to gain independence from the PRC. The PRC government has indicated that it may use military force to gain control over Taiwan if Taiwan “declares independence.” Past developments in relations between Taiwan and mainland China have on occasion depressed the market prices of the securities of companies doing business in Taiwan. If political tensions between mainland China and Taiwan were to increase further, it could negatively impact our business, financial condition, and results of operations given our reliance on manufacturing partners and a sole source supplier in Taiwan. Given the current political and military situation in China and Taiwan, if the relationship between China and the United States worsens further, or if either China or the United States imposes significant new economic sanctions or restrictions on doing business, and we are restricted or precluded from continuing our manufacturing and supplier relationships with entities in Taiwan or the ability of such parties to maintain their relationships with us is disrupted, our costs could increase, and our ability to fulfill customer orders could be significantly harmed. Furthermore, relations between Taiwan and mainland China and other factors affecting military, political, or economic conditions in Taiwan could materially and adversely affect our business, financial condition, and results of operations, as well as the market price of the Common Stock. See “- We depend on sole source and limited source suppliers for certain components and parts used in the manufacture of our products. If we are unable to source these components on a timely basis, we will not be able to deliver our products to our customers.”
Our payments system depends on third-party providers and is subject to evolving laws and regulations.
Our members pay for our products and services, including their monthly membership fees, using a variety of different payment methods, including credit and debit cards, gift cards, and online wallets. We rely on internal systems as well as those of third parties to process payment. Acceptance and processing of these payment methods are subject to certain rules and regulations and require payment of interchange and other fees. To the extent there are disruptions in our payment processing systems, increases in payment processing fees, material changes in the payment ecosystem,
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such as large re-issuances of payment cards, delays in receiving payments from payment processors, or changes to rules or regulations concerning payment processing, our revenue, operating expenses and results of operation could be adversely impacted. We leverage our third-party payment processors to bill members on our behalf. If these third parties become unwilling or unable to continue processing payments on our behalf, we would have to find alternative methods of collecting payments, which could adversely impact member acquisition and retention. In addition, from time to time, we encounter fraudulent use of payment methods, which could impact our results of operation and if not adequately controlled and managed could create negative consumer perceptions of our services.
We have engaged third-party service providers to perform underlying card processing, currency exchange, identity verification, and fraud analysis services. If these service providers do not perform adequately or if they terminate their relationships with us or refuse to renew their agreements with us on commercially reasonable terms, we will need to find an alternate payment processor and may not be able to secure similar terms or replace such payment processors in an acceptable timeframe. Further, the software and services provided by our third-party payment processors may not meet our expectations, contain errors or vulnerabilities, be compromised, or experience outages. Any of these risks could cause us to lose our ability to accept online payments, or conduct other payment transactions, any of which could make our platform less convenient and attractive and harm our ability to attract and retain customers. In addition, our ability to accept orders could be negatively impacted and our business would be harmed. In addition, if these providers increase the fees they charge us, our operating expenses could increase.
The laws and regulations related to payments are complex and vary across different jurisdictions in the United States and globally. As a result, we are required to spend significant time and effort to comply with those laws and regulations. Any failure or claim of our failure to comply, or any failure by our third-party service providers to comply, could cost us substantial resources, could result in liabilities, or could force us to stop offering certain third-party payment services. As we expand the availability of new payment methods in the future, we may become subject to additional regulations and compliance requirements.
Further, through our agreement with our third-party credit card processor, we are subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard. We are also subject to rules governing electronic funds transfers. Any change in these rules and requirements could make it difficult or impossible for us to comply.
Any major disruption or failure of our information technology systems or websites, or our failure to successfully implement upgrades and new technologies effectively, could adversely affect our business and operations.
Certain of our information technology systems are designed and maintained by us and are critical for the efficient functioning of our business, including the manufacture and distribution of our Ergatta, Wattbike, CLMBR and FORME Studio equipment, online sales of our Ergatta, Wattbike, CLMBR and FORME Studio equipment, and the ability of our members to access content on our platforms. Our growth has, in certain instances, strained these systems. As we grow, we continue to implement modifications and upgrades to our systems, and these activities subject us to inherent costs and risks associated with replacing and upgrading these systems, including, but not limited to, impairment of our ability to fulfill customer orders and other disruptions in our business operations. Further, our system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. If we fail to successfully implement modifications and upgrades or expand the functionality of our information technology systems, we could experience increased costs associated with diminished productivity and operating inefficiencies related to the flow of goods through our supply chain.
In addition, any unexpected technological interruptions to our systems or websites would disrupt our operations, including our ability to timely deliver and track product orders, project inventory requirements, manage our supply chain, sell our Ergatta, Wattbike, CLMBR and FORME Studio equipment online, provide services to our members, and otherwise adequately serve our members.
A portion of our units were sold through our commercial website in 2025. The operation of our direct-to-consumer e-commerce business through our website depends on our ability to maintain the efficient and uninterrupted operation of online order-taking and fulfillment operations. Any system interruptions or delays could prevent potential customers from purchasing our Ergatta, Wattbike, CLMBR and FORME Studio equipment.
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Moreover, the ability of our members to access the content on our platform could be diminished by a number of factors, including members’ inability to access the internet, the failure of our network or software systems, security breaches, or variability in member traffic for our platform. Platform failures would be most impactful if they occurred during peak platform use periods, which generally occur before and after standard work hours. During these peak periods, there are a significant number of members concurrently accessing our platform and if we are unable to provide uninterrupted access, our members’ perception of our platform’s reliability may be damaged, our revenue could be reduced, our reputation could be harmed, and we may be required to issue credits or refunds, or risk losing members.
In the event we experience significant disruptions, we may be unable to repair our systems in an efficient and timely manner which could have a material adverse effect on our business, financial condition, and results of operations.
We rely heavily on third parties for most of our computing, storage, processing, and similar services. Any disruption of or interference with our use of these third-party services could have an adverse effect on our business, financial condition, and results of operations.
We have outsourced our cloud infrastructure to third-party providers, and we currently use these providers to host and stream our services and content. We are therefore vulnerable to service interruptions experienced by these providers and we expect to experience interruptions, delays, or outages in service availability in the future due to a variety of factors, including infrastructure changes, human, hardware or software errors, hosting disruptions, and capacity constraints. Outages and capacity constraints could arise from a number of causes such as technical failures, natural disasters, fraud, or security attacks. The level of service provided by these providers, or regular or prolonged interruptions in that service, could also affect the use of, and our members’ satisfaction with, our products and services and could harm our business and reputation. In addition, hosting costs will increase as membership engagement grows, which could harm our business if we are unable to grow our revenue faster than the cost of using these services or the services of similar providers.
Furthermore, our providers have broad discretion to change and interpret the terms of service and other policies with respect to us, and those actions may be unfavorable to our business operations. Our providers may also take actions beyond our control that could seriously harm our business, including discontinuing or limiting our access to one or more services, increasing pricing terms, terminating or seeking to terminate our contractual relationship altogether, or altering how we are able to process data in a way that is unfavorable or costly to us. Although we expect that we could obtain similar services from other third parties, if our arrangements with our current providers were terminated, we could experience interruptions on our platform and in our ability to make our content available to members, as well as delays and additional expenses in arranging for alternative cloud infrastructure services.
Any of these factors could further reduce our revenue, subject us to liability, and cause our members to decline to renew their memberships, any of which could have an adverse effect on our business, financial condition, and results of operations.
We face certain risks related to the interaction of our members, trainers, and fitness instructors.
The nature of our services is such that we cannot control all aspects of the interactions of our members, trainers, and fitness instructors. There is a possibility that one or more of our members, trainers, or fitness instructors could be subject to actual or perceived harm following interaction with another one of our members, trainers, or fitness instructors. For example, a verbal interaction between a member and a personal trainer may be perceived by one party as hostile, unwelcome, or causing emotional harm, unintentionally or otherwise. To the extent an unfortunate incident of this nature occurred, our reputation would be harmed and we could be exposed to liability, including through litigation. Litigation to defend these claims could be costly and the expenses and damages arising from any liability could harm our results of operations. We may not be indemnified against claims or costs of these types and we may not have insurance coverage for these types of claims.
If we experience any adverse change to, loss of, or claim that we do not hold necessary licenses to the music content included in our fitness content or otherwise accessible on our platform, it may have an adverse effect on our business, financial condition, and results of operations.
We include music in the fitness content, including our classes and on-demand and Live 1:1 personal training services, that we make available to our members. To secure the rights to use music in our content, we enter into license
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agreements with and pay royalties to rights holders such as record labels, music publishers, and performing rights organizations.
The process of obtaining licenses involves identifying and negotiating with many rights holders, some of whom are unknown or difficult to identify, and implicates a myriad of complex legal issues. Rights holders also may attempt to take advantage of their market power to seek burdensome financial terms from us. Our relationship with certain rights holders may deteriorate. Artists and/or artist groups may object and may exert public or private pressure on rights holders to discontinue or to modify license terms. Additionally, there is a risk that aspiring rights holders, their agents, or legislative or regulatory bodies will create or attempt to create new rights that could require us to enter into new license agreements with, and pay royalties to, newly defined groups of rights holders, some of which may be difficult or impossible to identify.
Although we expend significant resources in an attempt to comply with our music licenses and to avoid using music for which we do not have all applicable licenses, the fragmented nature of music rights and the lack of reliable data on copyright ownership, particularly with respect to musical compositions, make it nearly impossible to do so with 100% accuracy, so we cannot guarantee that we are not infringing or violating any third-party intellectual property rights, or that we will not do so in the future.
Comprehensive and accurate ownership information for the musical compositions embodied in sound recordings is sometimes unavailable. In some cases, we obtain ownership information directly from music publishers, and in other cases we rely on the assistance of third parties to determine ownership information. If the information provided to us or obtained by such third parties does not comprehensively or accurately identify the ownership of musical compositions, or if we (or our third-party vendor) are unable to determine which musical compositions correspond to specific sound recordings, it becomes difficult or impossible to identify the appropriate rights holders to whom to pay royalties. This may make it difficult to comply with the obligations of any agreements with those rights holders or to secure the appropriate licenses with all necessary parties.
These challenges, and others concerning the licensing of music on our platforms, may subject us to liability for copyright infringement, breach of contract, or other claims.
We are a party to many music license agreements that are complex and impose numerous obligations upon us that may make it difficult to operate our business, and a breach of such agreements could adversely affect our business, financial condition, and results of operations.
Our license agreements are complex and impose numerous obligations on us, including obligations to, among other things:
Certain of our license agreements also contain minimum guarantees or require that we make minimum guarantee or advance payments, which are not always tied to our number of members or stream counts for music used in our services. Accordingly, our ability to achieve and sustain profitability and operating leverage in part depends on our ability to increase our revenue through increased sales of memberships on terms that maintain an adequate gross margin. Our license agreements that contain minimum guarantees typically have terms of between one and three years, but our members may cancel their memberships at any time. We rely on estimates to forecast whether such minimum guarantees and advances against royalties could be recouped against our actual content costs incurred over the term
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of the license agreement. To the extent that our estimates underperform relative to our expectations, and our content costs do not exceed such minimum guarantees and advance payments, our margins may be adversely affected.
Some of our license agreements also include so-called “most-favored nations” provisions, which require that certain terms (including material financial terms) are no less favorable than those provided to any similarly situated licensor. If agreements are amended or new agreements are entered into on more favorable terms, these most-favored nations provisions could cause our payment or other obligations to escalate substantially. Additionally, some of our license agreements restrict our ability to undertake new business initiatives utilizing the licensed content (e.g., alternative distribution models), and without consent or negotiating additional licenses, our ability to undertake new business initiatives may be limited and our competitive position could be impacted.
The license agreements generally have a term of two years, with some arrangements including demonstration periods or pre-launch periods. The minimum guarantees or advances contained in the license agreements range from $20,000 to $150,000 and the royalty rates, after giving effect to “most-favored nations” provisions, are at the greater of 8.33% of gross service revenue or $3.25 per subscriber (or $6.50 per subscriber for an enterprise/commercial offering). In some arrangements, we may deduct a portion of payments (generally ranging from 2.5% to 25%) to performing rights organizations for performance rights.
If we breach any obligations in any of our license agreements, or if we use content in ways that are found to exceed the scope of such agreements, we could be subject to monetary penalties or claims of infringement, and our rights under such agreements could be terminated.
Our member engagement on mobile devices depends upon effective operation with mobile operating systems, networks, and standards that we do not control.
A significant and growing portion of our members access our platform through our Ergatta, Wattbike, CLMBR and FORME Studio apps and there is no guarantee that popular mobile devices will continue to support our Ergatta, Wattbike, CLMBR and FORME Studio apps or that mobile device users will use our CLMBR and FORME Studio apps rather than competing products. We are dependent on the interoperability of our Ergatta, Wattbike, CLMBR and FORME Studio apps with popular mobile operating systems that we do not control, such as Android and iOS devices. Additionally, in order to deliver high-quality mobile content, it is important that our digital offering is designed effectively and works well with a range of mobile technologies, systems, networks, and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks, or standards.
The smaller screen size and reduced functionality associated with some mobile devices may make accessing our Live 1:1 personal training service, and our On-Demand programs, classes, and content more difficult or less appealing to customers. If we are not able to deliver a rewarding experience on mobile devices, our business may suffer. Further, although we strive to provide engaging mobile experiences for members who visit our mobile website using a browser on their mobile device, we depend on members downloading our mobile apps to provide them with the optimal mobile experience. As new mobile devices and mobile platforms are released, we may encounter problems in developing or supporting apps for them. In addition, supporting new devices and mobile device operating systems may require substantial time and resources.
The success of our mobile apps could also be harmed by factors outside our control, such as:
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In the event that it is more difficult for our members to access and use our platform on their mobile devices or members find our mobile offerings do not effectively meet their needs, our competitors develop products and services that are perceived to operate more effectively on mobile devices, or if our members choose not to access or use our platform on their mobile devices or use mobile products that do not offer access to our platform, our member growth and member engagement could be adversely impacted.
We rely on third parties to drive traffic to our website, and these providers may change their algorithms or pricing in ways that could damage our business, operations, financial condition, and prospects.
We rely in part on digital advertising, including search engine marketing, to promote awareness of our brand and business and attract new members and increase engagement with existing members. In particular, we rely on search engines, such as Google, and the major mobile app stores as important marketing channels. Search engine companies change their search algorithms periodically, and our ranking in searches may be adversely impacted by those changes. Search engine companies or app stores may also determine that we are not in compliance with their guidelines and penalize us as a result. If search engines change their algorithms, terms of service, display, or the featuring of search results, determine we are out of compliance with their terms of service, or if competition increases for advertisements, we may be unable to cost-effectively add content and services to our website and apps. Our relationships with our marketing vendors are not long-term in nature and do not require any specific performance commitments. In addition, many of our online advertising vendors provide advertising services to other companies, including companies with whom we may compete. As competition for online advertising has increased, the cost for some of these services has also increased. Our digital advertising initiatives may become increasingly expensive and generating a return on those initiatives may be difficult. Even if we successfully increase revenue as a result of our paid digital advertising efforts, such increase may not offset the additional digital advertising expenses we incur.
Risks Related to Our Intellectual Property
We have in the past, and may in the future, face claims of intellectual property infringement, misappropriation or other violations, which could be time-consuming or costly to defend or settle, result in the loss of significant rights or harm our relationships with our members or reputation in the industry.
Our commercial success depends in part upon our ability, and the ability of our future collaborators, to develop, manufacture, market and sell our proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property of third parties. Companies in the fitness industry, including the smart home gym and connected fitness sector, may vigorously pursue, protect and enforce their intellectual property rights. Further, companies in the fitness industry are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. Our competitors, as well as a number of other entities and individuals, including so-called non-practicing entities, may own or claim to own intellectual property relating to our product offering. We may be unaware of the intellectual property rights that others may claim over some or all of our technologies. Because patent applications can take years to issue and are often afforded confidentiality for some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more aspects of our technology and there is also a risk that we could adopt a technology without knowledge of a pending patent application, which technology would infringe a third-party patent once that patent is issued. From time to time, third parties have in the past and may in the future assert against us and our members their patent and other intellectual property rights to technologies that are important to our business.
We have in the past, and may in the future, particularly as a public company with an increased profile and visibility, receive communications from others alleging our infringement, misappropriation or other violation of patents, trade secrets, or other intellectual property rights. In addition, in the event that we recruit employees from other technology companies, including certain potential competitors, and these employees are involved in the development of products that are similar to the products they assisted in developing for their former employers, we may become subject to claims that such employees have improperly used or disclosed trade secrets or other proprietary information. We may also in the future be subject to claims by our suppliers, employees, consultants, or contractors asserting an ownership right in our patents or patent applications, or other intellectual property as a result of the work they performed on our behalf.
Claims that our products or technologies infringe, misappropriate or otherwise violate third-party intellectual property rights, regardless of their merit or resolution, could be time-consuming or costly to defend or settle and could divert
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the efforts and attention of our management and technical personnel. Many potential litigants, including some of our competitors and patent holding companies, have the ability to dedicate substantial resources to enforcing their intellectual property rights. If such parties were to assert their intellectual property rights against us, even if we believe we would have defenses against any such assertion, there can be no assurance that any such defenses will be successful. For example, in a patent infringement claim against us, we may assert, as a defense, that we do not infringe the relevant patent claims, that the patent is invalid or both. The strength of our defenses will depend on the patents asserted, the interpretation of these patents, and our ability to invalidate the asserted patents. We may be unsuccessful in advancing non-infringement and/or invalidity arguments in our defense. In the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. Further, any litigation may also involve non-practicing entities or other adverse patent owners that have no relevant solution revenue, and therefore, our patent portfolio may provide little or no deterrence as we would not be able to assert our patents against such entities or other adverse patent owners. Infringement claims also could harm our relationships with our members and might deter future customers from doing business with us. We do not know whether we would prevail in these proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation. If any pending or future proceedings result in an adverse outcome, we could be required to:
Additionally, even if successful in such proceedings, our intellectual property rights in our products, services, content, or technologies may be invalidated or narrowed. Moreover, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of the Common Stock. Any of the foregoing results could have a material adverse effect on our business, financial condition, and results of operations.
In addition, certain contracts with our suppliers or customers may contain provisions whereby we indemnify, subject to certain limitations, the counterparty for damages suffered as a result of claims related to intellectual property infringement. Claims made under these provisions, even those without merit, could adversely affect our relationship with that third party as well as with new and existing customers, could be expensive to litigate and could result in significant payments. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations.
We use a significant amount of intellectual property in our business. Monitoring unauthorized use of our intellectual property can be difficult and costly and if we are unable to obtain, maintain, and protect our intellectual property, our business, financial condition, and results of operations could be adversely affected.
Our success depends in part upon our ability to obtain and maintain intellectual property rights with respect to our products and the technologies we develop. To accomplish this, we rely on a combination of intellectual property rights, including patents, copyrights, trade areas, domain name, and trademarks in the United States and in selected foreign countries where we believe filing for such protection is appropriate. We also rely on trade secret laws, as well as confidentiality and non-disclosure, licensing, and other contractual protections, to protect our intellectual property
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rights. Some of our products and technologies are not covered by any patent or patent application, as we do not believe patent protection of these products and technologies is critical to our business strategy at this time.
However, our efforts to protect our intellectual property rights may not be sufficient or effective, and any of our intellectual property rights may be challenged, which could result in them being narrowed in scope or declared invalid or unenforceable. There can be no assurance that our intellectual property rights will be sufficient to protect against others offering products, services, or technologies that are substantially similar to ours and that compete with our business. Certain unauthorized use of our intellectual property may go undetected, or we may face legal or practical barriers to enforcing our legal rights even where unauthorized use is detected.
Effective protection of patents, trademarks, such as our rights to use the “FORME Life” mark, and domain names is expensive and difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights. As we have grown, we have sought patent and trademark rights in a limited number of countries outside of the United States, a process that can be expensive and may not always be successful. For example, the U.S. Patent and Trademark Office and various foreign governmental patent agencies require compliance with a number of procedural requirements to complete the patent application process and to maintain issued patents, and noncompliance or non-payment could result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in a relevant jurisdiction. Further, intellectual property protection may not be available to us in every country in which our products and services are available. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against certain third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Further, the laws of some countries in which we operate or intend to operate do not protect proprietary rights and intellectual property to the same extent as the laws of the United States, and mechanisms for protection and enforcement of intellectual property rights in some foreign countries may be inadequate. To the extent we expand our international activities, our exposure to unauthorized copying and use of our products and technologies may increase. Further, competitors, foreign governments, foreign government-backed actors, criminals, or other third parties may gain unauthorized access to our proprietary information and technology. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our technology and intellectual property.
Patents and Other Registered Intellectual Property
Our patent and patent application portfolio primarily relates to various hardware and software inventions that may or may not be embodied in our current or future products. The United States patents in the portfolio and issued as of December 31, 2025 are expected to expire between 2036 and 2040, without taking potential patent term extensions or adjustments into account. We cannot assure you that any patents from any pending or future patent applications will be issued, and even if our pending patent applications are granted, the scope of the rights granted to us may not be meaningful, may not provide us with a commercial advantage and may be subject to reinterpretation after issuance. The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output in time to obtain patent protection. Failure to timely seek patent protection on products or technologies generally precludes us from seeking future patent protection on these products or technologies. Even if we do timely seek patent protection, the coverage claimed in a patent application can be significantly reduced before a patent is issued, and its scope can be reinterpreted after issuance.
We also rely on our trademarks to build name recognition and our brand in the markets in which we do business. Our registered or unregistered trademarks or trade names in the United States and in international jurisdictions may be challenged, infringed, circumvented, declared generic, lapsed, or determined to be infringing on or dilutive of other marks, and our current and future trademark applications may not be allowed or may subsequently be opposed. We may not be able to protect our rights in these trademarks and trade names, which we need in order to build name recognition with potential customers. At times, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. As a means to enforce our trademark rights and prevent infringement, we may be required to file trademark claims against third parties or initiate
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trademark opposition proceedings. This can be expensive and time-consuming, and we may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.
We cannot guarantee that:
In addition, our competitors or others may infringe on our trademarks or patents, independently develop similar offerings, duplicate our offerings, or design around our patents or other intellectual property rights. Further legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are constantly developing, uncertain, and may be applied or interpreted in ways that limit our ability to protect and enforce our rights. Effective intellectual property protection may be unavailable or more limited in foreign jurisdictions relative to those protections available in the United States. Further, intellectual property protection may not be applied for in one or more relevant jurisdictions. Even if foreign patents are granted, effective enforcement in foreign countries may not be available. The failure of our patents to adequately protect our technologies might make it easier for our competitors to offer similar products or technologies, and our business, financial condition, and results of operations could be adversely affected.
Trade Secrets and Other Unregistered Intellectual Property
In addition to patent protection, we also rely on other proprietary rights, including protection of trade secrets and other proprietary information that is not patentable or that we elect not to patent. We rely on contractual protections with our members, suppliers, employees, consultants, and contractors, and we implement security measures designed to protect our intellectual property, and proprietary technology. For example, all employees and consultants are generally required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require them to agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship. However, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technologies. Further, these agreements do not prevent our competitors or others from independently developing products or technologies that are substantially equivalent or superior to ours. The confidentiality agreements on which we rely to protect our intellectual property may be breached, may not be adequate to protect our confidential information, trade secrets, and proprietary technologies, and may not provide an adequate remedy in the event of unauthorized use or disclosure of our confidential information, trade secrets, or proprietary technologies.
Our trade secrets, know-how, and other proprietary information may be stolen, disclosed to our competitors, used in an unauthorized manner, or compromised through a direct intrusion by private parties or foreign actors, including
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those affiliated with or controlled by state actors, through cyber intrusions into our computer systems, physical theft through corporate espionage, or other means, or through more indirect routes, including by licensees that do not honor the terms of the license or other parties reverse engineering our products or technologies. Others may independently develop substantially equivalent products or technologies or otherwise gain access to our trade secrets. Unauthorized copying or other misappropriation of our trade secrets and other intellectual property could enable third parties to benefit from our technologies without paying us for doing so, which could harm our business. We cannot assure you that our contractual protections and security measures have not been or will not be breached or that we will have adequate remedies for any such breach. Accordingly, we cannot guarantee that we have secured, or will be able to secure, effective protections for all of our trade secrets or other proprietary information that we use or claim rights to. We rely in part on the laws of the United States and international laws to protect our intellectual property. Intellectual property such as trade secrets are difficult to protect, and some courts inside and outside of the United States are less willing or unwilling to protect intellectual property, including trade secrets.
Monitoring Unauthorized Use of Intellectual Property
Monitoring unauthorized use of our intellectual property is difficult and costly. Although we are not aware of any material misappropriation of our intellectual property to date, unauthorized use of our intellectual property may have occurred or may occur in the future. Although we have taken steps to minimize the risk of this occurring, any such failure to identify unauthorized use and otherwise adequately protect our intellectual property would adversely affect our business. When we become aware of companies infringing on our intellectual property rights, we seek to enforce our rights through appropriate actions. From time to time, we may need to commence litigation or other legal proceedings in order to:
Lawsuits or other proceedings that we initiate to protect or enforce our patents or other intellectual property rights could be expensive, time consuming, and unsuccessful. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their intellectual property or alleging that our intellectual property is invalid or unenforceable. Moreover, if we are required to commence litigation, whether as a plaintiff or defendant, we would also be forced to divert our attention and the efforts of our employees, which could, in turn, result in lower revenue and higher expenses. If we pursue litigation to assert our intellectual property rights, an adverse decision in any of these legal actions could limit our ability to assert our intellectual property rights, limit the value of our technologies or otherwise negatively impact our business, financial condition, and results of operations. Legal fees related to such litigation will increase our operating expenses and may reduce our net income.
Protection and pursuit of intellectual property rights and positions often results in protracted and expensive litigation for many companies. In the ordinary course of our business, we may become party to disputes involving intellectual property rights. We have in the past received, and we may in the future receive, communications alleging liability for damages or challenging the validity of our intellectual property or proprietary rights. We also have in the past, and may in the future receive claims of infringement or inquiries regarding possible infringement of the intellectual property rights of others, demands seeking royalty payments or other remedies, or cease and desist letters. Depending on the situation, we may defend our position, seek to negotiate a license, or engage in other acceptable resolution that is appropriate to our business.
If we encounter disputes or other issues related to the intellectual property we license from or develop with third parties, it could narrow or restrict our ability to use such intellectual property and adversely impact our ability to develop and market our current or new products and services.
Many of our products and services include intellectual property licensed from third parties, and we are party to a number of third-party intellectual property license agreements. Some of these license agreements require us to make one-time payments or ongoing royalty payments. We cannot guarantee that the technologies we license will not be licensed to our competitors or others in the fitness and wellness sector, including the smart home gym and connected
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fitness industry. As a result, we may not be able to prevent competitors from developing and commercializing competitive products in territories included in all of our licenses. In the future, we may need to obtain additional licenses, renew existing license agreements, or otherwise replace existing technologies. We are unable to predict whether these license agreements can be obtained or renewed or whether the technologies can be replaced on acceptable terms, or at all. In that event, we may be required to expend significant time and resources to redesign our technologies, products or the methods for manufacturing them or to develop or license replacement technologies, all of which may not be feasible on a technical or commercial basis. Any disputes with our licensing partners with respect to such agreements could narrow what we believe to be the scope of our rights to the relevant intellectual property, increase our obligations under such agreements, or restrict our ability to develop and market our current or new products and services. Any of these events could negatively impact our business, financial condition, and results of operations.
In addition, from time to time, we enter into agreements with select customers, such as our commercial customers, to customize and otherwise develop technologies and intellectual property, and we expect to enter into new, similar arrangements from time to time in the future. Some of these agreements contain terms that allocate ownership of, and rights to use and enforce, technologies and intellectual property rights. As a result of these agreements, we may be required to limit use of, refrain from using, or co-own certain of such related technologies and intellectual property rights in parts of our business. Determining inventorship and ownership of technologies and intellectual property rights resulting from development activities can be difficult and uncertain. Certain intellectual property rights to which we claim ownership are or may be subject to co-ownership disputes with certain inventors or third parties due to unexecuted assignment agreements. Disputes may arise with customers, vendors, and other third parties regarding ownership of and rights to use and enforce these technologies and intellectual property rights or regarding interpretation of our agreements with these third parties, and these disputes may result in claims against us or claims that intellectual property rights, which we believe we own, are not owned by us, are not enforceable, or are invalid. The cost and effort to resolve these types of disputes, or the loss of intellectual property rights if we lose these types of disputes, could harm our business, financial condition, and results of operations. Further, co-ownership of intellectual property rights may allow the other owners to freely use such intellectual property rights, or license or transfer such intellectual property rights to others including our competitors. Any of these could negatively impact our business, financial condition, and results of operations.
We may be involved in lawsuits to protect or enforce our patents or our other intellectual property rights, which could be expensive, time consuming and unsuccessful.
Competitors may infringe, misappropriate or otherwise violate our patents or our other intellectual property rights. To counter infringement, misappropriation, or other violations, we may be required to file legal claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not being issued. Litigation or other legal proceedings relating to intellectual property claims, with or without merit, are unpredictable and, even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our scientific and management personnel from their normal responsibilities. Any such litigation or proceedings also could substantially increase our operating losses and reduce the resources available for development activities or future sales, marketing, or distribution activities.
The initiation of a claim against a third party may also cause the third party to bring counter claims against us such as claims asserting that our patents are invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, non-enablement, or lack of statutory subject matter. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant material information from the United States Patent and Trademark Office, (the “USPTO”), or made a materially misleading statement, during prosecution. Third parties also may raise similar validity claims against our patents before the USPTO in post-grant proceedings such as ex parte reexaminations, inter partes review, or post-grant review, or oppositions or similar proceedings outside the United States, in parallel with litigation or even outside the context of litigation. The outcome following legal assertions of
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invalidity and unenforceability is unpredictable. We cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. For the patents and patent applications that we have licensed, we may have limited or no right to participate in the defense of any licensed patents against challenge by a third party. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of any future patent protection on our current or future proprietary technologies. Such a loss of patent protection could harm our business.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the price of the Common Stock. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors or other third parties may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Our use of third-party open source software may pose particular risks to our proprietary software, technologies, products, and services in a manner that could harm our business.
Certain of our software, as well as that of our vendors, may use or be derived from “open source” software that is generally made available to the public by its authors and/or other third parties. Some open software is made available under license terms that may impose certain obligations on us in the event we were to distribute derivative works of the open source software. These obligations may require us to make source code for the derivative works available to the public and/or license such derivative works under a particular type of license, rather than the forms of license we customarily use to protect our intellectual property. Additionally, some open source software licenses also require those who distribute or make available across a network software and services that include open source software which may include valuable proprietary code.
While we may take steps to monitor the use of all open source software in our products and technologies, and try to ensure that no open source software is used in such a way as to require us to disclose the source code to the related product or technology when we do not wish to do so, we have not conducted a complete open source license review and such use could inadvertently occur. Additionally, if a third-party software provider has incorporated certain types of open source software into software we license from such third party for our products and technologies, we could, under certain circumstances, be required to disclose the source code to our products and technologies. This could harm our intellectual property position and have a material adverse effect on our business, financial condition, and results of operations.
In addition, although some open source vendors provide warranty and support agreements, it is common for such software to be available “as-is” with no warranty, indemnity, or support.
Furthermore, there is an increasing number of open-source software license types, almost none of which have been tested in a court of law, resulting in a dearth of guidance regarding the proper legal interpretation of such licenses. Additionally, we could face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license, or cease offering the implicated products or services unless and until we can re-engineer them to avoid infringement. This re-engineering process could require us to expend significant additional research and development resources, and we cannot guarantee that we will be successful.
Additionally, the use of certain open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the functionality or origins of software. There is typically no support available for open source software, and we cannot ensure that the authors of such open source software will implement or push updates to address security risks or will not abandon further
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development and maintenance. Many of the risks associated with the use of open source software, such as the lack of warranties or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, negatively affect our business. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our platform. We cannot be sure that all open source software is identified, reviewed, or submitted for approval prior to use in our products and services. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have an adverse effect on our business, financial condition, and results of operations.
Risks Related to Privacy, Cybersecurity, and Infrastructure
We collect, store, process, and use personal information and other member data, which subjects us to legal obligations and laws and regulations related to security and privacy, and any actual or perceived failure to meet those obligations could harm our business.
In the ordinary course of our business, we may collect, process, transmit, disclose, store, and use a wide variety of data from current and prospective members, including personal information or personal data, such as home addresses and geolocation. Federal, state, and international laws and regulations governing privacy, data protection, and e-commerce transactions require us to safeguard our members’ personal information. Although we have established security procedures to protect member information, we may rely upon third-party service providers and technologies to operate critical business systems that process confidential and personal information in a variety of contexts, including, without limitation, third-party providers of cloud-based infrastructure, security technology, employee email, content delivery to members, and other functions. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. We may share or receive sensitive data with or from third parties. Further, advances in computer capabilities, new discoveries in the field of cryptography, inadequate facility security, or other developments may result in a compromise or breach of the technology we use to protect member data. Any compromise of our security, the security of our third-party service providers, or any other breach of our members’ privacy could harm our reputation or financial condition and, therefore, our business.
Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and continue to increase. These threats are becoming increasingly difficult to detect. These threats come from a variety of sources. In addition to traditional computer “hackers,” threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors now engage in attacks. We and the third parties upon which we rely may be subject to a variety of these evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
Any of the previously identified or similar threats could cause a security incident or other interruption. A security incident or other interruption could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to data. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our services. We may expend significant resources or modify our business activities in an effort to protect against security incidents.
Depending on the nature of the information compromised, in the event of a data breach or other unauthorized access to our member data, we may also have obligations to notify members, along with administrative bodies, about the incident. We may also need to provide some form of remedy, such as a membership to a credit monitoring service, for the individuals affected by the incident. A growing number of legislative and regulatory bodies have adopted consumer notification requirements in the event of unauthorized access to or acquisition of certain types of personal data. Such breach notification laws continue to evolve and may be inconsistent from one jurisdiction to another. Complying with these obligations could cause us to incur substantial costs and could increase negative publicity surrounding any incident that compromises member data.
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Furthermore, we may be required to disclose personal data pursuant to demands from individuals, privacy advocates, regulators, government agencies, and law enforcement agencies in various jurisdictions with conflicting privacy and security laws. This disclosure or refusal to disclose personal data may result in a breach of privacy and data protection policies, notices, laws, rules, court orders, and regulations and could result in proceedings or actions against us in the same or other jurisdictions, damage to our reputation and brand, and inability to provide our products and services to consumers in certain jurisdictions.
Finally, we are subject to laws and regulations that govern our collection, use, and transfer of member data. In some jurisdictions, we are subject to affirmative requirements to meet certain data privacy rights afforded to the residents of that jurisdiction (e.g., access rights, data portability rights, sales opt-out rights). These laws are numerous and complex and if we, or our third-party service provider, are accused of noncompliance, we could face penalties. Moreover, these laws and rules are changing and could therefore impose additional requirements with respect to the retention and security of member data, raise our internal compliance costs, limit our marketing activities, and/or otherwise adversely affect our business, financial condition, and results of operations.
Cybersecurity risks could adversely affect our business and disrupt our operations.
We face various cybersecurity threats, including threats to our information technology infrastructure, denial-of-service attacks, zero day attacks, phishing and spoofing attempts, fraudulent requests for money transfers, attempts to compromise proprietary information, and ransomware attacks. In addition, we face cybersecurity threats from entities that may seek to target us by exploiting our relationships with our members, vendors, subcontractors, employees, independent contractors, and other third parties with whom we do business. While the cyber threat landscape is ever-changing, the current risks may be heightened by ongoing tensions with various nation state threat actors.
Threats to our information technology assets, network, and data stored therein, are increasingly diverse and sophisticated. Despite our efforts and processes to prevent breaches, the commercial products we use, our servers, and other assets, along with those of our third party service providers, are vulnerable to cybersecurity threats, including zero day attacks, malware, phishing and spoofing exploits, denial-of-service attacks, compromise of physical assets, insider theft or misuse or mistake, and similar disruptions.
Despite our efforts to create security barriers to such threats, we may not be able to successfully guard against every threat or mitigate the resulting risks. A successful cyber-attack could lead to interruptions, delays, loss of critical data, unauthorized access to member data, and require large expenditures to investigate and remediate. This could, in turn, adversely affect consumer confidence, our business, our financial condition, and damage our reputation.
Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. Also, we cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.
A breach of our information technology systems or physical security systems, or any actual or perceived violation of privacy or data protection laws, could harm our reputation, business, financial condition, and results of operations.
We rely on our information technology systems to process, transmit, and store electronic information (including sensitive data such as confidential business information, financial information, and personally identifiable information relating to employees, members, and other business partners), and to manage or support a variety of critical business processes and activities, as well as physical security systems to protect our facilities and employees. We can provide no assurance that our current information technology or physical security systems, or those of the third parties upon which we rely, are fully protected.
Although we have not experienced any known cyber or physical security events which have materially impacted our business, financial condition, operations, liquidity, or reputation to date, it is possible that we (and/or our members, vendors, partners, or others) have faced a cyber or physical security compromise that is not (yet) known. Further, future threats could, among other consequences: cause harm to our business and our reputation; disrupt our operations;
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cost significant resources to address; expose us to potential liability, regulatory actions, and the loss of business; and impact our results of operations materially. Due to the evolving nature of these security threats, we cannot predict the potential impact of any future incident.
Applicable data privacy and security obligations may require us to notify relevant stakeholders of security incidents. Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences. These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms. Security incidents and attendant consequences may negatively impact our ability to grow and operate our business.
While we take measures to protect the security of, and prevent unauthorized access to, our systems, facilities, and personal and proprietary information, the security controls for our systems and facilities, as well as other security practices we follow, may not prevent unauthorized access or damage to our systems and facilities, or prevent the disablement or encryption of, use or misuse of, disclosure of, modification of, destruction of or loss of our data or the data of others (including personally identifiable information and proprietary information). Any actual or perceived security incident could harm our business and results of operations and could result in, among other things, unfavorable publicity, governmental inquiry, oversight, and sanction, difficulty in marketing our services, allegations by our members or partners that we have not performed our contractual obligations, litigation by affected parties including our members and possible financial obligations for damages related to the theft or misuse of such information or inventory, any of which could negatively impact our business, financial condition, and results of operations.
Data privacy and security are subject to frequently changing rules and regulations, and failure to comply with these rules and regulations could materially and adversely harm our reputation, business, financial condition, and results of operations.
We are, or could become, subject to a variety of local, state, national and international laws, directives, and regulations that apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data in the different jurisdictions, and which sometimes conflict among the various jurisdictions and countries in which we operate. If and as we expand our business internationally, we expect to become subject to data privacy and security laws in additional jurisdictions. Data privacy laws and regulations, including, but not limited to, the CCPA and the CPRA, as well as the European Union’s GDPR and its equivalent in the United Kingdom (to which we may become subject if we expand into those jurisdictions), pose increasingly complex compliance challenges, which may increase compliance costs. Any failure to comply with data privacy laws and regulations could result in significant penalties.
The CCPA requires, among other things, that covered companies provide disclosures to California consumers and affords such consumers with certain rights, including the ability to opt out of certain sales of their personal information. The CCPA prohibits discrimination against individuals who exercise their privacy rights and provides for civil penalties for violations, as well as a private right of action in certain circumstances. Additionally, the CPRA, which became effective in most material respects starting on January 1, 2023, further expands the CCPA with additional compliance requirements that may impact our business and establishes a regulatory agency dedicated to enforcing the CCPA and CPRA. Aspects of the interpretation and enforcement of the CCPA and CPRA remain uncertain and will impose additional compliance requirements that may impact our business. In addition, we may be subject to other new data privacy laws, such as the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Connecticut Data Privacy Act and the Utah Consumer Privacy Act in the United States (all of which went into effect in 2023) as well as the European Union Regulation on Privacy and Electronic Communications (or ePrivacy Regulation). Further, in the United States, emerging state data privacy laws may encourage other states and the federal government to pass comparable legislation, introducing the possibility of greater penalties and more rigorous compliance requirements.
The GDPR regulates the collection, control, sharing, disclosure, use, and other processing of data that can directly or indirectly identify a living individual that is a resident of the European Union and imposes stringent data protection requirements with significant penalties and the risk of civil litigation for noncompliance. Moreover, following the UK’s exit from the European Union, the GDPR was transposed into UK law (the “UK GDPR”). However, a risk of
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divergent parallel regimes (and related uncertainty) exist. We cannot predict how the GDPR, the UK GDPR, or other UK or international data protection laws or regulations may develop or impact our business if and when we become subject to such laws and regulations, nor can we predict the effects of divergent laws and related guidance.
Compliance with U.S. and international data protection laws and regulations could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business. Any inability to adequately address data privacy or data protection, or other information security-related concerns, even if unfounded, or to successfully negotiate privacy, data protection or information security-related contractual terms with members, or to comply with applicable laws, regulations and policies relating to privacy, data protection and information security, could result in additional cost and liability to us, harm our reputation and brand, and could negatively impact our business, financial condition, and results of operations.
Risks Related to Financial, Accounting, and Tax Matters
We may not be able to accurately predict our future capital needs, and we may not be able to obtain additional financing to fund our operations.
We will need to raise additional funds in the future, including in the short term and long term, to fund our operations and meet our obligations. Please refer to the “Liquidity and Capital Resources" section within the Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K and “ – Risks Related to Our Business and Industry – Our negative cash flows from operations, history of losses, and significant accumulated deficit raise substantial doubt about our ability to continue as a ‘going concern.’” Since our inception, we have funded our operations primarily with gross proceeds from sales of our redeemable convertible preferred stock, the issuance of common stock and the issuance of convertible notes, as well as from promissory notes. Certain of our outstanding convertible notes and promissory notes provide for a security interest on our assets. If we were to default on such notes or any other secured debt instrument and such default is not waived, any secured collateral would become subject to liens or risk of forfeiture. In addition, any required additional financing may not be available on terms acceptable to us, or at all. If we raise additional funds by issuing equity securities or convertible debt, investors may experience significant dilution of their ownership interest, and the newly issued securities may have rights senior to those of the holders of our Common Stock. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include security interests on our assets, negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to incur additional interest expense. If additional financing is not available when required or is not available on acceptable terms, we may have to scale back our operations, limit our production activities, or implement other cost reduction measures, including personnel costs.
We have identified material weaknesses in our internal control over financial reporting, and in the future, we may identify additional material weaknesses or fail to maintain an effective system of controls. If we do not remediate the material weaknesses in our internal control over financial reporting, or if we fail to establish and maintain effective internal control, we may not be able to accurately report our financial results or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in the market price of our Common Stock.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports in a timely manner. In preparing our financial statements as of and for the year ended December 31, 2025, management identified several material weaknesses in our internal control over financial reporting. The material weaknesses we identified related to (1) the lack of a sufficient number of trained professionals with the expertise to design, implement, and execute a formal risk assessment process and formal accounting policies, procedures, and controls over accounting and financial reporting to ensure the timely and accurate recording of financial transactions while maintaining a segregation of duties; (2) certain system limitations in our accounting software and the overall control environment and (3) the lack of a sufficient number of trained professionals with the appropriate U.S. GAAP technical expertise to identify, evaluate, and account for complex transactions and review valuation reports prepared by external specialists.
We are planning on implementing measures designed to improve our internal control over financial reporting to remediate these material weaknesses, including formalizing our processes and internal control documentation and strengthening supervisory reviews by our financial management; hiring additional qualified accounting and finance
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personnel and engaging financial consultants to enable the implementation of internal control over financial reporting and segregating duties amongst accounting and finance personnel.
While we are implementing these measures, we cannot assure you that these efforts will remediate our material weaknesses and significant deficiencies in a timely manner, or at all, or prevent restatements of our financial statements in the future. In particular, our material weakness related to our accounting software was not fully remediated as of December 31, 2025, as we expect to implement new software in 2026. If we are unable to successfully remediate our material weaknesses, or identify any future significant deficiencies or material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports, and the market price of our common stock may decline as a result.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. We expect to incur additional costs to remediate these material weaknesses and other control deficiencies, though there can be no assurance that our efforts will be successful or avoid potential future material weaknesses. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. If we are unable to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or if we identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting, and our stock price may decline as a result. We also could become subject to investigations by Nasdaq, the SEC, or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our products to new and existing customers.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the applicable listing standards of Nasdaq. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the applicable time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting.
In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems and controls to accommodate such changes. We have limited experience with implementing the systems and controls necessary to operate as a public company, as well as adopting changes in accounting principles or interpretations mandated by the relevant regulatory bodies. Additionally, if these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports, or the effectiveness of internal control over financial reporting. Moreover, our business may be
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harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise.
We currently have the following weaknesses as disclosed under Item 9A, “Controls and Procedures”:
Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations that we are currently required to include in our periodic reports filed with the SEC and, if applicable, annual independent registered public accounting firm attestation reports that may be required in the future regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our Common Stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.
We may need to incur significant expenditures to address the additional operational and control requirements of our growth, either of which could harm our business, financial condition, and results of operations.
To effectively manage our growth, we must continue to expand our operational, engineering and financial systems, procedures and controls, and to improve our accounting and other internal management systems. This may require substantial managerial and financial resources, and our efforts in this regard may not be successful. Our current systems, procedures, and controls may not be adequate to support our future operations. In addition, in connection with operating as a public company, we have incurred, and expect to continue to incur, additional significant legal, accounting, and other expenses that we did not incur as a private company. If our revenue does not increase to offset these increases in our expenses, we may not achieve or maintain profitability in future periods. Any failure to successfully implement systems enhancements and improvements will likely have a negative impact on our ability to manage our expected growth as well as our ability to ensure uninterrupted operation of key business systems and compliance with the rules and regulations applicable to public companies.
Our ability to use our net operating loss to offset future taxable income may be subject to certain limitations.
As of December 31, 2025, we had U.S. federal net operating loss carryforwards (“NOLs”) and state NOLs of approximately $160.7 million and $94.6 million, respectively, due to prior period losses which if not utilized will begin to expire for federal and state tax purposes beginning in 2037 and 2038, respectively. Realization of these NOLs depends on future income, and there is a risk that our existing NOLs could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our results of operations.
In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. Our initial public offering, as well as subsequent changes in our stock ownership, the causes of which may be outside of our control, could result in an additional ownership change under Section 382 of the Code. Our NOLs may also be impaired under state laws. In addition, under 2017 legislation commonly referred to as the Tax Cuts and Jobs Act, NOLs generated in taxable years beginning after December 31, 2017 may be utilized to offset no more than 80% of taxable income annually. This change may require us to pay federal income taxes in future years despite generating a cumulative loss for federal income tax purposes. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs, whether or not we attain profitability.
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Fluctuations in exchange rates between and among the currencies of the countries in which we do business could adversely affect our business, financial condition, and results of operations.
Our sales have been historically and primarily denominated in U.S. dollars. An increase in the value of the U.S. dollar relative to the currencies of the countries in which our members operate could impair the ability of our members to cost-effectively purchase or integrate our products into their product offerings, which may materially affect the demand for our products and cause these members to reduce their orders, which in turn would adversely affect our business, financial condition, and results of operations. If we increase operations in other currencies in the future, we may experience further foreign exchange gains or losses due to the volatility of other currencies compared to the U.S. dollar. Our results of operations are denominated in U.S. dollars, and the difference in exchange rates in one period compared to another may directly impact period-to-period comparisons of our results of operations. Furthermore, currency exchange rates have been especially volatile in the recent past, and these currency fluctuations may make it difficult for us to predict our results of operations.
We have not implemented any hedging strategies to mitigate risks related to the impact of fluctuations in currency exchange rates. Even if we were to implement hedging strategies, not every exposure can be hedged and, where hedges are put in place based on expected foreign exchange exposure, they are based on forecasts which may vary or which may later prove to have been inaccurate. Failure to hedge successfully or anticipate currency risks accurately could adversely affect our business, financial condition, and results of operations.
In preparing our consolidated financial statements, we make good faith estimates and judgments that may change or turn out to be erroneous, which could adversely affect our results of operations for the periods in which we revise our estimates or judgments.
In preparing our consolidated financial statements in conformity with GAAP, we must make estimates and judgments in applying our most critical accounting policies. Those estimates and judgments have a significant impact on the results we report in our consolidated financial statements. The most difficult estimates and subjective judgments that we make relate to fair value measurements, revenue recognition, inventories, internal use software, capitalized studio content, convertible notes, stock-based compensation, and income taxes. We base our estimates on historical experience, input from outside experts and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue, and expenses that are not readily apparent from other sources. We also have other key accounting policies that are not as subjective, and therefore, their application would not require us to make estimates or judgments that are as difficult, but which nevertheless could significantly affect our financial reporting. Actual results may differ materially from these estimates. If these estimates, judgments, or their related assumptions change, our results of operations for the periods in which we revise our estimates, judgments, or assumptions could be adversely and perhaps materially affected and may fall below the expectations of securities analysts and investors, resulting in a decline in the market price of the Common Stock.
Changes to financial accounting standards may affect our results of operations and could cause us to change our business practices.
We prepare our consolidated financial statements in accordance with GAAP. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, the SEC, and various bodies formed to interpret and create accounting rules and regulations. Changes in accounting rules can have a significant effect on our reported financial results and may affect our reporting of transactions completed before a change is announced. Changes to those rules or the questioning of current practices may adversely affect our financial results or the way we conduct our business. The issuance of new accounting standards or future interpretations of existing accounting standards, or resulting changes in our business practices or estimates, could result in future changes in our revenue recognition or other accounting policies that could have a material adverse effect on our business, financial condition, and results of operations.
We or our members may be subject to sales and other taxes, and taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, gross receipts, value added or similar taxes and may successfully impose additional obligations on us, and any such assessments or obligations could adversely affect our business, financial condition, and results of operations.
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The application of indirect taxes, such as sales and use tax, value-added tax, goods and services tax, business tax, and gross receipts tax, to businesses like ours and to our members is a complex and evolving issue. Many of the fundamental statutes and regulations that impose these taxes were established before the adoption and growth of the Internet and e-commerce. Significant judgment is required on an ongoing basis to evaluate applicable tax obligations and as a result amounts recorded are estimates and are subject to adjustments. In many cases, the ultimate tax determination is uncertain because it is not clear how new and existing statutes might apply to our business or to trainers and fitness instructors’ businesses generally. In addition, local governments are increasingly looking for ways to increase revenue, which has resulted in discussions about tax reform and other legislative action to increase tax revenue, including through indirect taxes.
We are subject to indirect taxes in the United States and various foreign jurisdictions, and we may face indirect tax audits in various U.S. and foreign jurisdictions. In certain jurisdictions, we collect and remit indirect taxes. However, tax authorities have raised and may continue to raise questions about or challenge or disagree with our calculation, reporting or collection of taxes and may require us to collect taxes in jurisdictions in which we do not currently do so or to remit additional taxes and interest, and could impose associated penalties and fees. A successful assertion by one or more tax authorities requiring us to collect taxes in jurisdictions in which we do not currently do so or to collect additional taxes in a jurisdiction in which we currently collect taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest, or could otherwise harm our business, financial condition, and results of operations. Although we have provided for potential payments of possible past tax liabilities in our financial statements, if these liabilities exceed such accruals, our financial condition could be harmed.
Additionally, one or more states, the federal government, other localities or other taxing jurisdictions may seek to impose additional reporting, record-keeping or indirect tax collection obligations on businesses like ours. For example, taxing authorities in the United States and other countries have identified e-commerce as a means to calculate, collect and remit indirect taxes for transactions taking place over the Internet, and are considering related legislation. After the U.S. Supreme Court decision in South Dakota v. Wayfair Inc., certain states have enacted laws that would require tax reporting, collection or tax remittance on items sold online. This new legislation could require us or trainers and fitness instructors to incur substantial costs in order to comply, including costs associated with tax calculation, collection, and remittance and audit requirements, which could make our offerings less attractive and could adversely affect our business, financial condition, and results of operations.
As a result of these and other factors, the ultimate amount of tax obligations owed may differ from the amounts recorded in our financial statements and any such difference may adversely impact our results of operations in future periods in which we change our estimates of our tax obligations or in which the ultimate tax outcome is determined.
Changes in our tax rates or exposure to additional tax liabilities or assessments could affect our profitability, and audits by tax authorities could result in additional tax payments.
We are affected by various taxes imposed in different jurisdictions, including direct and indirect taxes imposed on our global activities. Significant judgment is required in determining our provisions for taxes, and there are many transactions and calculations where the ultimate tax determination is uncertain. The amount of income tax we pay is subject to ongoing audits by tax authorities. If audits result in payments or assessments, our future results may include unfavorable adjustments to our tax liabilities, and we could be adversely affected. Any significant changes to the tax system in the jurisdictions where we operate could adversely affect our business, financial condition, and results of operations.
New or future changes to U.S. and non-U.S. tax laws could materially adversely affect us.
New or future changes in tax laws, regulations, and treaties, or the interpretation thereof, in addition to tax regulations adopted but not in effect, tax policy initiatives and reforms under consideration in the United States or in international jurisdictions, and other initiatives could have an adverse effect on the taxation of international businesses. Furthermore, countries where we are subject to taxes, including the United States, are independently evaluating their tax policy and we may see significant changes in legislation and regulations concerning taxation. Certain countries may enact tax legislation which could affect international businesses, and other countries have become more aggressive in their approach to audits and enforcement of their applicable tax laws. We are unable to predict what future tax changes may be proposed or enacted or the potential impact any such changes would have on our business, but any changes, to the extent they are brought into tax legislation, regulations, policies, or practices, could increase
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our effective tax rates in the United States, as well as in countries in the event we expand our international operations, and have an adverse effect on our overall tax effective rate, along with increasing the complexity, burden, and cost of tax compliance, all of which could impact our business, financial condition, and results of operations.
Tax regulatory authorities may disagree with our positions and conclusions regarding certain tax positions resulting in unanticipated costs or non-realization of expected benefits.
A tax authority may disagree with tax positions that we have taken. For example, a tax authority may take the position that material income tax liabilities, interest, and penalties are payable by us, in which case, we expect that we might contest such assessment. Contesting such an assessment may be lengthy and costly and if we were unsuccessful in disputing the assessment, the implications could be materially adverse to us and affect our anticipated effective tax rate or operating income, and we could be required to pay substantial penalties and interest where applicable.
Risks Related to Our International Operations
Our business, financial condition, and results of operations could be adversely affected by worldwide economic conditions, as well as political and economic conditions in the countries in which we conduct business.
Our business, financial condition, and results of operations are impacted by worldwide economic conditions. Uncertainty about current global economic conditions may cause businesses to postpone spending in response to tighter credit, unemployment or negative financial news. This in turn could have a material adverse effect on the demand for our products or the systems into which our products are incorporated. Multiple factors relating to our international operations and to particular countries in which we operate, or plan to operate, could negatively impact our business, financial condition, and results of operations. These factors include:
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These risks could harm our international operations, delay new product releases, increase our operating costs and hinder our ability to grow our operations and business and, consequently, our business, financial condition, and results of operations could suffer.
We have limited experience with international regulatory environments and market practices and may not be able to penetrate or successfully operate in the markets we choose to enter. In addition, we may incur significant expenses as a result of our international expansion, and we may not be successful. We may face limited brand recognition in certain parts of the world that could lead to non-acceptance or delayed acceptance of our products and services by consumers in new markets. We may also face challenges to acceptance of our fitness and wellness content in new markets. Our failure to successfully manage these risks could harm our international operations and have an adverse effect on our business, financial condition, and results of operations.
Expansion of our business internationally exposes us to numerous legal and regulatory requirements and failure to comply with such requirements, including unexpected changes to such requirements, could adversely affect our results of operations.
We intend to expand our business internationally and as a result, we will be increasingly subject to numerous, and sometimes conflicting, legal regimes of the United States and foreign national, state and provincial authorities on matters as diverse as anti-corruption, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, anti-competition, data security, privacy, labor relations, wages and severance, and health care requirements. For example, our operations in the United States are, and our operations outside of the United States may also be, subject to U.S. laws on these diverse matters. U.S. laws may be different in significant respects from the laws of jurisdictions where we seek to expand, such as Canada and the United Kingdom. We also may seek to expand operations in emerging market jurisdictions where legal systems are less developed or familiar to us. Our exposure for potential violations of international legal and regulatory requirements will increase to the extent we expand our international operations.
In addition, there can be no assurance that the laws or administrative practices relating to taxation (including the current position as to income and withholding taxes), foreign exchange, export controls or economic sanctions in the jurisdictions where we have operations will not change. Changes in tax laws in some jurisdictions may also have a
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retroactive effect and we may be found to have paid less tax than required in such regions. Compliance with diverse legal requirements is costly, time consuming, and requires significant resources. Violations of one or more of these regulations in the conduct of our business could result in significant fines, criminal sanctions against us or our officers, prohibitions on doing business, and damage to our reputation. Violations of these regulations in connection with the performance of our obligations to our members also could result in liability for significant monetary damages, fines or criminal prosecution, unfavorable publicity and other reputational damage, and allegations by our members that we have not performed our contractual obligations. Due to the varying degrees of development of the legal systems of the countries in which we operate, local laws might be insufficient to protect our rights. New legislation or regulation, the application of laws from jurisdictions whose laws do not currently apply to our business, or the application of existing laws and regulations to the fitness and wellness industry generally could result in significant additional compliance costs and responsibilities for our business.
Enhanced United States fiscal, tax and trade restrictions and executive and legislative actions could adversely affect our business, financial condition, and results of operations.
There is currently significant uncertainty about the future relationship between the United States and various other countries with respect to trade policies, treaties, tariffs and taxes. Recent U.S. administrations have implemented substantial changes to U.S. foreign trade policy with respect to China and other countries, including significant new and increased tariffs on goods imported into the United States. The current U.S. administration has announced increased tariffs and may put additional tariffs in place in the future. Our business may also be affected by tariffs set by countries into which we sell our products, whether as a response to U.S. foreign trade policy or otherwise. In addition, changes in international trade agreements, regulations, restrictions and tariffs, including new tariffs, may increase our operating costs, reduce our margins and make it more difficult for us to compete in the U.S. and overseas markets, and our business, financial condition and results of operations could be adversely impacted.
We may take actions to mitigate the impact of such tariffs, however, there is no assurance that all such efforts will be successful. The inability to mitigate the impact of the recently enacted tariffs would increase our costs, and our business, financial condition and results of operations could be adversely affected.
Tariffs and other trade restrictions may have an adverse impact on our business, operations and financial results.
We source materials from, and manufacture products in, foreign countries, including countries in Asia, and we also sell products in foreign countries. As a result, the price and availability of our products is susceptible to international trade risks and other international conditions. For example, any economic and political uncertainty caused by the tariffs imposed on goods from other countries by the current administration of the United States, and any corresponding tariffs or currency devaluations from other countries in response, may negatively impact demand and/or increase the cost for certain of our products. Furthermore, the imposition of additional tariffs, duties, border adjustment taxes or other trade restrictions by the United States could result in the adoption of additional or increased tariffs or other trade restrictions by other countries. Tariffs may in the future increase our cost of materials and may cause us to increase prices to our customers, which we believe may reduce demand for our products. Our price increases may not be sufficient to fully offset the impact of tariffs and may result in lowering our margin on products sold. In sum, if the United States increases or implements additional tariffs, or if additional tariffs or trade restrictions are implemented by other countries, the resulting trade barriers could have a significant adverse impact on our suppliers, our customers and on our business. The volatility and unpredictability of international trade policies and conditions add further complexity to our operations, making it challenging to forecast and plan effectively. We are not able to predict future trade policy of the United States or of any foreign countries in which we operate or purchase goods, or the terms of any trade agreements or their impact on our business. The adoption and expansion of trade restrictions and tariffs, quotas and embargoes, the occurrence or threat of a trade war or other governmental action related to tariffs or trade agreements or policies, has the potential to adversely impact demand for our products, our costs, our customers, our suppliers and the world and U.S. economies, which in turn could have a material adverse effect on our business, operating results and financial condition.
Our acquisition of Wattbike exposes us to distinct international trade and potential supply chain risks associated with its UK-based operations.
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Wattbike, which we acquired in July 2025 and which accounted for approximately 71% of our revenue for the year ended December 31, 2025, is headquartered in the United Kingdom. Therefore our business is subject to trade, regulatory, and currency risks that differ from those associated with our US-based operations.
In addition, changes in the trade relationship between the United States and the United Kingdom, including the potential imposition of US tariffs on UK-origin goods, could increase the cost of importing Wattbike products into the United States or reduce demand from US-based customers. Similarly, any retaliatory trade measures imposed by the UK or EU in response to US trade policy could affect our ability to sell products in those markets at competitive prices.
Wattbike's revenues and costs are primarily denominated in British pounds sterling. Fluctuations in the exchange rates between British pounds sterling and the US dollar can affect the reported value of Wattbike's revenues, expenses, and assets in our consolidated financial statements. We may not be able to fully hedge against these currency risks, and significant adverse currency movements could have a material impact on our results of operations and financial condition.
If any of these risks materialize, they could have a disproportionate effect on our overall business given Wattbike's current contribution to our revenue, and our business, financial condition, and results of operations could be materially adversely affected.
Wattbike's operations are based in the United Kingdom and expose us to distinct legal, regulatory, employment, and operational risks that materially differ from those of our U.S.-based businesses.
Wattbike operates primarily from its facility in the UK, and as of December 31, 2025, 47 of our 72 full-time employees were employed at our Wattbike subsidiary. Operating a business in the United Kingdom subjects us to a distinct regulatory and legal environment, including:
If we are unable to manage these UK-specific regulatory and operational requirements effectively, or if changes in applicable UK law or regulation increase our compliance burden, our business, financial condition, and results of operations could be adversely affected.
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Risks Related to Regulatory Matters
Our business is subject to a wide range of laws and regulations, many of which are evolving, and failure to comply with such laws and regulations could harm our business, financial condition, and results of operations.
We are subject to a wide variety of laws, regulations, and standards in the United States and other jurisdictions governing issues such as worker classification, labor and employment, anti-discrimination, automatically renewing subscription payments, gift cards, whistleblowing and worker confidentiality obligations, product liability, warranties, product defects, maintenance and repairs, personal injury, membership services, intellectual property, consumer protection, taxation, privacy, data security, competition, terms of service, mobile application accessibility, insurance, payment processing, environmental, health and safety, background checks, public health, anti-corruption, anti-bribery, import and export restrictions, trade and economic sanctions, foreign ownership and investment, foreign exchange controls, and delivery and installation of goods are often complex and subject to varying interpretations, in many cases due to their lack of specificity. As a result, their application in practice may change or develop over time through judicial decisions or as new guidance or interpretations are provided by regulatory and governing bodies, such as federal, state, and local administrative agencies.
Fitness equipment sold for home use, such as our CLMBR, FORME Studio and FORME Studio Lift products, is regulated in the United States by the Consumer Product Safety Commission (“CPSC”) under the Consumer Product Safety Act (“CPSA”). Safety-related information that we learn about our CLMBR, FORME Studio and FORME Studio Lift from any source-including, but not limited to, internal testing, third-party testing, our customer service channels, our social media accounts, customer reviews, investigative and news reports, and direct notices from the CPSC may trigger reporting obligations under the CPSA that could lead to product safety investigations, corrective actions including consumer-level recalls, enforcement actions, and civil or criminal penalties. The outcome of any such actions mandated by or entered into voluntarily with CPSC may have adverse business, financial, legal, reputational, and other consequences to our business.
The smart home gym and connected fitness industry and our business model are relatively nascent and rapidly evolving. New laws and regulations and changes to existing laws and regulations continue to be adopted, implemented and interpreted in response to our industry and related technologies. As we expand our business into new markets or introduce new offerings into existing markets, regulatory bodies or courts may claim that we or users on the CLMBR and FORME platforms are subject to additional requirements, or that we are prohibited from conducting our business in certain jurisdictions, or that users on the CLMBR and FORME platforms are prohibited from using the FORME platform, either generally or with respect to certain offerings.
Recent financial, political, and other events have increased the level of regulatory scrutiny on larger companies, technology companies in general and companies engaged in dealings with independent contractors. Regulatory bodies may enact new laws or promulgate new regulations that are adverse to our business, or, due to changes in our operations and structure or partner relationships as a result of changes in the market or otherwise, they may view matters or interpret laws and regulations differently than they have in the past or in a manner adverse to our business. See “- Challenges to independent contractor classification of certain personnel, including content production personnel, may have adverse business, financial, tax, legal, and other consequences to our business.” Such regulatory scrutiny or action may create different or conflicting obligations from one jurisdiction to another, and may have a negative outcome that could adversely affect our business, operations, financial condition, and results of operations. Additionally, we have invested and from time to time we will continue to invest resources in an attempt to influence or challenge legislation and other regulatory matters pertinent to our operations. These activities may not be successful, and any negative outcomes could adversely affect our business, operations, financial condition, and results of operations.
Challenges to independent contractor classification of certain personnel, including content production personnel, may have adverse business, financial, tax, legal, and other consequences to our business.
We may become subject to claims, lawsuits, arbitration proceedings, administrative actions, government investigations, and other legal and regulatory proceedings at the federal, state and municipal levels challenging the classification of our fitness instructors or other content production providers with whom we work as independent
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contractors. Our use of independent contractors for content production activities fluctuates depending on production volume and schedule. The tests governing whether an individual is an independent contractor or an employee vary by governing law and are typically highly fact sensitive. Laws and regulations that govern the status and misclassification of independent contractors are subject to changes and divergent interpretations by various authorities which can create uncertainty and unpredictability for us. For example, Assembly Bill 5 (as codified in part at Cal. Labor Code sec. 2750.3) codified and extended an employment classification test in Dynamex Operations West, Inc. v. Superior Court, which established a new standard for determining employee or independent contractor status. A determination that classifies our independent contractors as “employees,” could harm our business, financial condition, and results of operations, including as a result of:
In addition to the harms listed above, a determination in, or settlement of, any legal proceeding that classifies an independent contractor as an employee may require us to alter our existing business model or operations, which may increase our costs and may negatively impact our ability to add qualified fitness instructors and other content production personnel and grow our business. This in turn would likely have a material adverse effect on our business, financial condition, and results of operations and our ability to achieve or maintain profitability in the future.
We are subject to economic sanctions, export control, and similar laws. Non-compliance with such laws can subject us to criminal or civil liability and harm our business, financial condition, and results of operations.
The United States and various foreign governments have imposed controls, export license requirements, restrictions on the import or export of certain technologies, and economic sanctions measures administered by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) and other agencies. Our products are subject to U.S. export controls, which may require submission of a product classification request and submission of periodic reports. Compliance with applicable regulatory requirements regarding the export of our products and services may create delays in the introduction of our products and services in international markets, prevent our international members from accessing our products and services, and, in some cases, prevent the export of our products and services to some countries altogether. As a U.S. company, we are subject to U.S. sanctions restrictions in our U.S. and foreign activities.
Furthermore, U.S. export control laws and economic sanctions prohibit the provision of products and services to countries, governments, and persons targeted by U.S. sanctions. We are in the process of implementing policies and procedures to prevent transacting with or allowing our products to be provided to targets of U.S. sanctions, our products and services, including our firmware updates, could be inadvertently provided to those targets or to prohibited or blocked persons. Any such provision or prohibited transactions could have negative consequences for us, including government investigations, penalties, and reputational harm. Our failure to obtain required import or export approval for our products could harm our international and domestic sales and adversely affect our revenue. In addition, we could be subject to future enforcement action with respect to compliance with governmental export and import controls and economic sanctions laws that result in penalties, costs, and restrictions on export privileges that could have an adverse effect on our business, financial condition, and results of operations.
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In addition, various countries regulate the import and export of certain encryption and other technology, including import and export permitting and licensing requirements. While we do not currently incorporate any encryption technology in our products and services, if and when such laws become applicable to us it could limit our ability to distribute our products or could limit our users’ ability to access our products in those countries. Further, if changes in our products and services result in such laws becoming applicable to us (for example, if we were to incorporate encryption technology into our products and services), future changes in the export and import control regulations of the United States or other countries may prevent members from utilizing our products globally or, in some cases, prevent the export or import of our products to certain countries, governments, or persons altogether.
Any future change in export or import regulations, economic sanctions, or related legislation, or change in the countries, governments, persons, or technologies targeted by such regulations, could also result in decreased use of our products by, or in our decreased ability to export or sell products to, existing or potential users. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition, and results of operations. Additionally, supply chain and ethical sourcing rules in the United States, such as the Uyghur Forced Labor Prevention Act, and similar rules in other countries may impact outsourcing, manufacturing, sales, and ability to import or export our products and services.
We cannot predict whether any material suits, claims, or investigations relating to these laws may arise in the future. Regardless of the outcome of any future actions, claims, or investigations, we may incur substantial defense costs and such actions may cause a diversion of management time and attention. Also, it is possible that we may be required to pay substantial damages or settlement costs which could have a material adverse effect on our business, financial condition, and results of operations.
We could be adversely affected by violations of applicable anti-corruption laws or violations of our internal policies designed to ensure ethical business practices.
We are subject to the risk that we, our U.S. employees or our employees located in other jurisdictions or any third parties that we engage to do work on our behalf in foreign countries may take action determined to be in violation of anti-corruption laws in any jurisdiction in which we conduct business, including the FCPA and the U.K. Bribery Act, as well as other similar anti-bribery and anti-kickback laws and regulations. These laws prohibit companies and their employees and third-party intermediaries from corruptly promising, authorizing, offering, or providing, directly or indirectly, improper payments or anything of value to government officials, political parties, public international organizations, and private-sector recipients for the purpose of obtaining or retaining business, directing business to any person, or securing any improper advantage. In addition, U.S. public companies are required to maintain records that accurately and fairly represent their transactions and accounts and have an adequate system of internal accounting controls. In many foreign countries, including countries in which we may conduct business, it may be a local custom that businesses engage in practices that are prohibited by the FCPA or other applicable laws and regulations. We face significant risks if we or any of our directors, officers, employees, agents or other partners or representatives fail to comply with these laws.
We have begun to implement an anti-corruption compliance program, including policies and procedures designed to foster compliance with these laws. However, despite such precautions, our employees, contractors, agents, and companies to which we outsource certain of our business operations may take actions in violation of our policies or applicable law. Any such violation could have an adverse effect on our reputation, business, financial condition, results of operations, and prospects.
Any violation of the FCPA, other applicable anti-corruption laws, or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, substantial fines, sanctions, civil penalties, criminal penalties, and curtailment of operations in certain jurisdictions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, any of which could have a materially adverse effect on our reputation, business, financial condition, results of operations, and prospects. In addition, responding to any enforcement action may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.
Changes to U.S. or foreign trade policy, tariff, or similar regulations may have a material adverse effect on our business, financial condition, and results of operations.
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Changes in U.S. or foreign international, social, political, regulatory, and economic conditions or in laws and policies governing foreign trade, supply chain sourcing and transparency, manufacturing, development, and investment in the territories or countries where we currently sell our products or conduct our business have in the past and could in the future adversely affect our business. Although we do not currently expect Russia’s invasion of Ukraine or the related current or future export and other business sanctions on Russia and Belarus to materially impact us directly due to our limited sales to Russia, we are unable at this time to predict the ultimate impact this conflict will have on our company, the global economy or the stock markets.
Successive U.S. presidential administrations and Congress have instituted or proposed changes in trade policies that included the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., economic sanctions on individuals, corporations or countries, and other government regulations affecting trade between the U.S. and other countries where we conduct our business. Any new tariffs and other changes in U.S. trade policy could trigger retaliatory actions by affected countries, and certain foreign governments have instituted or are considering imposing trade sanctions on certain U.S. goods. U.S. presidential administrations and Congress also have focused on policy reforms that discouraged corporations from outsourcing manufacturing and production activities to foreign jurisdictions, including through tariffs or penalties on goods manufactured outside the United States, which have required us to change the way we conduct business. The current U.S. presidential administration has continued certain import tariffs and export restrictions against certain foreign manufacturers initiated by prior administrations.
Political changes and trends such as populism, protectionism, economic nationalism, and sentiment toward multinational companies and resulting changes to trade, tax or other laws and policies may be disruptive to our businesses. These changes in U.S. and foreign laws and policies have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry, and the global demand for our products, and as a result, could have a material adverse effect on our business, financial condition, and results of operations.
Changes in legislation in U.S. and foreign taxation of international business activities or the adoption of other tax reform policies, as well as the application of such laws, could adversely impact our financial position and results of operations.
Recent or future changes to U.S., U.K. and other tax laws could impact the tax treatment of our foreign earnings. We generally conduct our international operations through wholly owned subsidiaries, branches, or representative offices and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Further, we are in the process of implementing an international structure that aligns with our financial and operational objectives as evaluated based on our international markets, expansion plans, and operational needs for headcount and physical infrastructure outside the United States. The intercompany relationships between our legal entities are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. Although we believe we are compliant with applicable transfer pricing and other tax laws in the United States, the United Kingdom, and other relevant countries, due to changes in such laws and rules, we may have to modify our international structure in the future, which will incur costs, may increase our worldwide effective tax rate, and may adversely affect our financial position and results of operations. In addition, significant judgment is required in evaluating our tax positions and determining our provision for income taxes.
During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in foreign currency exchange rates, or by changes in the relevant tax, accounting, and other laws, regulations, principles, and interpretations. As we operate in numerous taxing jurisdictions, the application of tax laws can be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions. It is not uncommon for taxing authorities in different countries to have conflicting views with respect to, among other things, the manner in which the arm’s-length standard is applied for transfer pricing purposes, or with respect to the valuation of intellectual property.
If U.S., U.K., or other tax laws further change, if our current or future structures and arrangements are challenged by a taxing authority, or if we are unable to appropriately adapt the manner in which we operate our business, we may have to undertake further costly modifications to our international structure and our tax liabilities and results of operations may be adversely affected.
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We and our third-party manufacturers and suppliers are, or could become, subject to environmental, health, and safety laws, which could increase our costs, restrict our operations and require expenditures that could have a material adverse effect on our business, financial condition, and results of operations.
We and our third-party manufacturers and suppliers are, and could become, subject to a wide range of international, federal, state, provincial, and local governmental regulations directed at preventing or mitigating environmental harm, as well as to the storage, discharge, handling, generation, disposal and labeling of toxic or other hazardous substances. Although we outsource our manufacturing, the manufacturing of our products by our third-party manufacturers and suppliers require the use of hazardous materials that similarly subject these third parties, and therefore our business, to such environmental laws and regulations. Our failure or the failure of these third parties to comply with these laws or regulations can result in regulatory, civil, or criminal penalties, fines, and legal liabilities, suspension of production, alteration of manufacturing processes, including for our products, reputational damage, and negative impact on our operations or sales of our products and services. Failure to comply with environmental regulations could also subject us or our third-party manufacturing partners to property damage or personal injury claims. Compliance with current or future environmental laws and regulations could restrict our ability to expand our business or require us or our third-party manufacturing partners to incur other substantial expenses, which could harm our business. Increased compliance costs by our third-party manufacturing partners may also result in increased costs to our business. Our business and operations are also subject to health and safety laws and regulations adopted by government agencies such as the Occupational Safety and Health Administration (“OSHA”). Although we believe we are in material compliance with applicable law concerning matters relating to health, safety, and the environment, the risk of liability relating to these matters cannot be eliminated completely.
Risks Related to Being a Public Company
We have incurred increased costs and become subject to additional regulations and requirements as a result of being a public company, which could have a material adverse effect on our business, financial condition, and results of operations, and make it more difficult to run our business or divert management’s attention from our business.
As a public company, we are required to commit significant resources and management time and attention to the requirements of being a public company, which have caused us to incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting requirements. We also incur costs associated with the Sarbanes-Oxley Act and related rules implemented by the SEC and Nasdaq, and compliance with these requirements place significant demands on our legal, accounting and finance staff and on our accounting, financial and information systems. In addition, we might not be successful in implementing these requirements. The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees, or as our executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to the delisting of our Common Stock, fines, sanctions and other regulatory action and potentially civil litigation, any of which could have a material adverse effect on our business, financial condition, and results of operations.
We intend to hire additional accounting and finance personnel with system implementation experience and expertise regarding compliance with the Sarbanes-Oxley Act. We may be unable to locate and hire qualified professionals with requisite technical and public company experience when and as needed. In addition, new employees will require time and training to learn our business and operating processes and procedures. If we are unable to recruit and retain additional finance personnel or if our finance and accounting team is unable for any reason to respond adequately to the increased demands that will result from being a public company, the quality and timeliness of our financial reporting may suffer, which could result in the identification of additional material weaknesses in our internal control over financial reporting. Any consequences resulting from inaccuracies or delays in our reported financial statements could cause our stock price to decline and could harm our business, financial condition, and results of operations.
We are an emerging growth company and a smaller reporting company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies could make our Common Stock less attractive to investors.
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We are an “emerging growth company,” as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including:
We could be an emerging growth company through 2028. Our status as an emerging growth company will end as soon as any of the following takes place:
We currently intend to take advantage of the available exemptions described above.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this provision of the JOBS Act. As a result, we will not be subject to new or revised accounting standards at the same time as other public companies that are not emerging growth companies. Therefore, our consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates. In addition, for as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. Even if our management concludes that our internal controls over financial reporting are effective, however, our independent registered public accounting firm may still issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.
Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements including exemption from compliance with the auditor attestation requirements of Section 404 and reduced disclosure obligations regarding executive compensation in our annual report on Form 10-K and our periodic reports and proxy statements.
We cannot predict if investors will find our Common Stock less attractive if we choose to rely on any of the exemptions afforded emerging growth companies or smaller reporting companies. If some investors find our Common Stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our Common Stock and the market price of our Common Stock may be more volatile.
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny
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of securities analysts and investors. These new obligations and constituents require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition, and results of operations.
Risks Related to Our Common Stock
Sales of our currently issued and outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares and have a depressive effect on the price of the shares of our common stock.
A substantial minority of our outstanding shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act. In addition, we have issued notes that are convertible into shares of our common stock in connection with financing transactions and certain employment, director and consultant agreements, which shares of common stock, upon conversion, would also be considered “restricted securities.” As restricted securities, these shares may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Act and as required under applicable state securities laws. Rule 144 provides in essence that an Affiliate (as such term is defined in Rule 144(a)(1)) of an issuer who has held restricted securities for a period of at least six months may, under certain conditions, sell every three months, in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of common stock or the average weekly trading volume during the four calendar weeks prior to the sale. Rule 144 also permits, under certain circumstances, the sale of securities, without any limitation, by a person who is not an Affiliate of the company and who has satisfied a one-year holding period. The resale of significant amounts of our common stock under Rule 144 or under any other exemption from the registration requirements of the Securities Act, if available, or pursuant to subsequent registrations of our shares of common stock, could cause the market price of our shares of common stock to decline significantly.
An active trading market for the Common Stock may not develop or be sustained and stockholders may not be able to sell their shares at or above the price paid for such shares, or at all.
There was no public market for our Common Stock prior to our initial public offering. Although our Common Stock is currently listed on Nasdaq, an active market for our Common Stock may not develop or, if it does develop, it may not be sustainable or liquid enough for stockholders to sell their shares at or above the purchase price paid for such shares, or at all.
Our share price and trading volume have been, and are likely to continue to be, volatile and an active trading market for our Common Stock may not develop or be sustained and stockholders may not be able to sell their shares at or above the price paid for such shares, or at all.
Although our Common Stock is currently listed on Nasdaq, an active market in the Common Stock may not develop or, if it does develop, it may not be sustainable or liquid enough for stockholders to sell their shares at or above the purchase price paid for such shares, or at all. Our common stock is currently trading well below the initial public offering price per share.
The trading price and volume of our Common Stock has been, and will likely continue to be, volatile and has fluctuated, and will likely continue to fluctuate, significantly in response to numerous factors, many of which are beyond our control, including but not limited to:
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The stock markets in general have experienced extreme price and volume fluctuations. Stock prices of many companies, including companies in the fitness and wellness industry, have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, financial condition, and results of operations.
Moreover, because of these fluctuations, comparing our results of operations on a period-to-period basis may not be meaningful. You should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our net revenue or results of operations fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our Common Stock could decline substantially. Such a share price decline could occur even when we have met any previously publicly stated net revenue or earnings forecasts that we may provide.
Our focus on delivering a high-quality and engaging member experience may not maximize short-term financial results, which may yield results that conflict with the market’s expectations and could result in our stock price being negatively affected.
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We focus on driving long-term member engagement through innovation, frictionless, cost-effective and immersive programs, classes and content, technologically advanced and customizable connected fitness hardware products, and community support, which may not necessarily maximize short-term financial results. We may make business decisions that may reduce our short-term financial results if we believe that the decisions are consistent with our goals to improve the member experience, which we believe will improve our financial results over the long term. For example, our decision to use real, human trainers to deliver our coaching offering may increase operating expenses, but we believe these decisions will drive higher member satisfaction, retention, profit, and ultimately lifetime value. These decisions may not be consistent with the short-term expectations of our stockholders and may not produce the long-term benefits that we expect, in which case our membership growth and member engagement, business, financial condition, and results of operations could be harmed.
If our shares are delisted from Nasdaq and become subject to the penny stock rules, it would become more difficult to trade our shares.
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The price of our Common Stock has been volatile and has declined significantly since our initial public offering and has traded at prices as high as $34,000.00 per share to as low as $0.95 per share. If we do retain a listing on Nasdaq and if the price of our Common Stock is less than $5.00, the Common Stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for the Common Stock, and therefore stockholders may have difficulty selling their shares.
Substantial future sales of our Common Stock could cause the market price of the Common Stock to decline.
The market price of the Common Stock could decline as a result of the substantial sales of the Common Stock by the below selling stockholders.
During the year ended December 31, 2025, we issued 8,215 shares of Common Stock and in January and February of 2026 we issued 290,000 shares of Common Stock with an aggregate value of $3.2 million pursuant to an At The Market Offering Agreement with H.C. Wainwright & Co., LLC, dated as of May 17, 2024.
During the year ended December 31, 2025 we issued 234,407 shares of Common Stock in connection with the conversion of convertible notes and settlement of other debt and accounts payable. In January and February of 2026, we issued 1,436,900 shares of Common Stock in connection with the conversion of convertible notes and other indebtedness.
If securities analysts or industry analysts downgrade our Common Stock, publish negative research or reports, or fail to publish reports about our business, our ordinary share price and trading volume could decline.
The market price and trading market for the Common Stock will be influenced by the research and reports that industry or securities analysts publish about us, our business and our market. If one or more analysts adversely change their recommendation regarding our shares or change their recommendation about our competitors’ shares, our share price would likely decline. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets which in turn could cause our share price or trading volume to decline. In addition, if our results of operations fail to meet the expectations created by securities analysts’ reports, our share price could decline.
Our actual results of operations may not meet our guidance and investor expectations, which would likely cause our share price to decline.
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From time to time, we may release guidance in our earnings releases, earnings conference calls, or otherwise, regarding our future performance that represent our management’s estimates as of the date of release. If given, this guidance, which will include forward-looking statements, will be based on projections prepared by our management. Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control. The principal reason that we release such information is to provide a basis for our management to discuss our business outlook with analysts and investors. With or without our guidance, analysts and investors may publish expectations regarding our business, financial condition, and results of operations. We do not accept any responsibility for any projections or reports published by any such third parties. Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results. If our actual performance does not meet or exceed our guidance or investor expectations, the trading price of the Common Stock is likely to decline.
We do not expect to declare or pay any dividends on our Common Stock for the foreseeable future.
We do not intend to pay cash dividends on our Common Stock for the foreseeable future. Consequently, investors must rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking dividends should not purchase our Common Stock. Any future determination to pay dividends will be at the discretion of our board of directors and subject to, among other things, our compliance with applicable law, and depending on, among other things, our business prospects, financial condition, results of operations, cash requirements and availability, capital expenditure needs, the terms of any preference equity securities we may issue in the future, covenants in the agreements governing any current or future indebtedness, other contractual restrictions, industry trends, and any other factors or considerations our board of directors may regard as relevant.
Certain provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management, and limit the market price of the Common Stock.
Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and bylaws include provisions that:
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These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in a broad range of business combinations with any interested stockholder for a period of three years following the date on which such stockholder became an interested stockholder. See “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” Any delay or prevention of a change of control transaction or changes in our management could cause our stock price to decline or could prevent or deter a transaction that you might support.
Our amended and restated certificate of incorporation and amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and provides that federal district courts will be the sole and exclusive forum for Securities Act claims, which could limit our stockholders’ ability to obtain what they believe to be a favorable judicial forum for disputes with us or our directors, officers, or other employees.
Our amended and restated certificate of incorporation and our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware (or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware) shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws, or (d) any action asserting a claim against us governed by the internal affairs doctrine (collectively, the “Delaware Forum Provision”). Our amended and restated certificate of incorporation and our amended and restated bylaws further provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts are the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act (the “Federal Forum Provision”).
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As a result, the enforceability of this provision is uncertain, and a court may determine that such provision will not apply to suits brought to enforce any duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction. Further, compliance with the federal securities laws and the rules and regulations thereunder cannot be waived by investors in our Common Stock.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Accordingly, the Delaware Forum Provision does not designate the Court of Chancery as the exclusive forum for any derivative action arising under the Exchange Act, as there is exclusive federal jurisdiction in such instances.
Any person or entity purchasing or otherwise acquiring any interest in our capital stock shall be deemed to have notice of and consented to the Delaware Forum Provision and the Federal Forum Provision of our bylaws described above. These choice of forum provisions may impose additional litigation costs on stockholders in pursuing any such claims. Additionally, these choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, or other employees. Alternatively, if a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions
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or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, and results of operations and result in a diversion of the time and resources of our management and board of directors.
In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware and the federal district courts of the United States may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.
General Risk Factors
We face risks related to recession, inflation, weak growth, and other economic conditions.
Customer demand for our products may be impacted by weak economic conditions, inflation, weak growth, recession, equity market volatility, or other negative economic factors in the United States or other nations. For example, under these conditions, potential customers may delay or cancel purchases of our products. Further, in the event of a recession our manufacturing partners, suppliers, and other third-party partners, as well as our commercial and corporate wellness customers, may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or collect revenue or otherwise could harm our business, financial condition, and results of operations. Similarly, disruptions in financial and credit markets may impact our ability to manage normal commercial relationships with our customers, suppliers, and lenders and might cause us to not be able to access sources of liquidity, and our borrowing costs could increase. If general macroeconomic conditions deteriorate, our business, financial condition, and results of operations could be materially and adversely affected.
In addition, we are also subject to risk from inflation and increasing market prices of certain components, parts, supplies, and commodity raw materials, which are incorporated into our products or used by our suppliers to manufacture our products. These components, parts, supplies, and commodities may from time to time become restricted, or general market factors and conditions may affect pricing of such components, parts, supplies and commodities, such as inflation or supply chain constraints.
The ongoing inflationary pressures in the United States could increase our operating costs as well as our manufacturing and component costs, among others, which in turn could negatively affect our business, financial condition, and results of operations.
The United States has previously experienced high levels of inflation. If inflation rates begin to increase once again, it will likely affect our expenses, including, but not limited to, employee compensation expenses, increased manufacturing and supplier costs, and increasing market prices of certain components, parts, supplies, and commodity raw materials, which are incorporated into our products or used by our suppliers to manufacture our products. As a result of inflationary pressures, we have experienced general price increases in the cost of components and parts used in our products and in our manufacturing and logistical costs, which in turn has increased our overall operating costs. We have not taken any specific measures to mitigate inflationary pressures to date; however, we may in the future consider or implement such measures, including price increases for our products and services, changes to our pricing model, or reducing other operating and personnel costs. We cannot predict the impact of any actions we may take in response to such pressures on our business, financial condition, and results of operations. Any attempts to offset cost increases with price increases may result in reduced sales, increased customer dissatisfaction, or otherwise harm our reputation. Moreover, to the extent inflation results in rising interest rates, reduces discretionary spending, and has other adverse effects on the markets, it may adversely affect our business, financial condition and results of operations. Given our limited operating history, we cannot predict how ongoing recessionary or inflationary pressures may impact our business, financial condition, and results of operations in the future, including with respect to our manufacturing and logistics costs, our pricing models, and our customers’ ability to obtain financing for the purchase of our products. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs
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through price increases. Our inability or failure to do so could harm our business, financial condition, and operating results. See “- Risks Related to Suppliers, Manufacturers, and Other Ecosystem Partners - Our manufacturing partners and our sole supplier are located in Taiwan, which exposes us to various risks, including due to tensions between Taiwan and mainland China.”
An economic downturn or economic uncertainty may adversely affect consumer discretionary spending and demand for our products and services.
Our products and services may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions, including inflation, and other factors, such as consumer confidence in future economic conditions, fears of recession, the availability and cost of consumer credit, levels of unemployment, and tax rates. In recent years, the United States and other significant economic markets have experienced cyclical downturns and worldwide economic conditions remain uncertain. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to reductions and fluctuations. Due in part to our limited operating history, we cannot predict the extent to which we may be affected by recessionary conditions. Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products and services and consumer demand for our products and services may not grow as we expect. As we have a very limited history selling our connected fitness hardware products, we do not have sufficient basis with which to assess the impact of the current uncertain economic conditions on the sales of our products and services. However, we expect that ongoing economic uncertainty may result in reduced consumer demand for our connected fitness products and services in the future. Our sensitivity to economic cycles and any related fluctuation in consumer demand for our products and services could have an adverse effect on our business, financial condition, and results of operations.
Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations.
Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, could adversely affect our liquidity. The failure of financial institutions may increase the possibility of a sustained deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions. The distress or failure of one or more banks with which we have a commercial relationship could adversely affect, among other things, our ability to pursue key strategic initiatives, our ability to access funds, or our ability to borrow from financial institutions on favorable terms. In addition, our deposits will be at risk to the extent they exceed available FDIC insurance limits. If a bank with which we have a commercial relationship has failed or is otherwise distressed (including for example, as a result of large scale depositor withdrawals), or if market activity leads to threat of distress resulting in regulator control, the loss or restriction of access to our cash and liquidity resources could, among other things, adversely impact our ability to meet our operating expenses and financial obligations, or fulfill other obligations, and result in breaches of our contractual obligations or violations of federal or state wage and hour laws. Our ability to spread banking relationships among multiple institutions may be limited by practical considerations or our lender’s suitability requirements for deposit and custodial account institutions. Any of these effects could have a material adverse effect on our financial condition and results of operations.
Increasing scrutiny and evolving expectations from customers, partners, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us, expose us to new or additional risks, or harm our reputation.
Companies are facing increasing scrutiny from customers, partners, regulators, investors, and other stakeholders related to their environmental, social, and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds, and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions, and human rights.
For example, an increasing number of investors are also requiring companies to disclose corporate social and environmental policies, practices, and metrics. Legal and regulatory requirements, as well as investor expectations, on corporate social responsibility practices and disclosure, are subject to change, can be unpredictable, and may be difficult and expensive for us to comply with, given the complexity of our supply chain and our significant outsourced
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manufacturing. Increased ESG related compliance costs could result in increases to our overall operational costs. If we are unable to adapt to or comply, or are unable to cause our suppliers to comply, with such regulatory requirements, policies, or provisions or meet the expectations or standards of our customers, investors, and other stakeholders, a customer may stop purchasing products from us or an investor may sell their shares or take legal action against us, our reputation may suffer, and the price of the Common Stock may decline. Any of the foregoing could harm our reputation, revenue, business, financial condition, and results of operations.
Further, our current ESG disclosures, and any standards we may set for ourselves or a failure to meet these standards, may influence our reputation and the value of our brand. For example, we have elected to share publicly certain information about our ESG initiatives and information, and our commitment to the recruitment, engagement, and retention of a diverse workforce. Our business may face increased scrutiny related to these activities, including from the investment community, and our failure to achieve progress in these areas on a timely basis, or at all, could adversely affect our reputation, business, and financial performance.
Climate change may have an adverse impact on our business.
Risks related to rapid climate change may have an increasingly adverse impact on our business in the longer term. Any of our primary locations and the locations of our members and third-party partners, such as our manufacturing partners, may be vulnerable to the adverse effects of climate change. For example, our California locations have historically experienced, and are projected to continue to experience, climate-related events at an increasing frequency, including drought, water scarcity, heat waves, wildfires and resultant air quality impacts, and power shutoffs associated with wildfire prevention. In addition, some of our employees and our manufacturing partners are located in Taiwan, which is susceptible to regional natural disasters including, for example, earthquakes, tsunamis, and typhoons, and has experienced an increasing frequency of extreme weather events, including heavier rains and atypical heat waves. Changing market dynamics, global policy developments, and the increasing frequency and impact of extreme weather events on critical infrastructure in the U.S. and elsewhere have the potential to disrupt our business and the business of our members and third-party partners, and may cause us to experience higher attrition, losses and additional costs to maintain our operations. Further, the effects of climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on our members and third-party partners and impact the communities in which we operate. Overall, climate change, its effects, and the resulting, unknown impact could have a material adverse effect on our business, financial condition, and results of operations.
If we acquire businesses, enter into licensing arrangements, or make investments in other companies or technologies, it may disrupt our business, create integration issues, impair our results of operations, dilute our stockholders’ ownership, cause us to incur debt, divert management resources, or cause us to incur significant expense.
We may pursue in the future acquisitions of businesses and assets, as well as technology licensing arrangements, that we believe will complement our products or technologies. For example, in October 2023, we entered into the Asset Purchase Agreement with CLMBR and CLMBR1, LLC (the "Sellers") to purchase and acquire substantially all of the assets and assume certain liabilities of the Sellers, which was amended and restated on January 22, 2024 (see Note 24 to our consolidated financial statements included elsewhere in this annual report on Form 10-K). We also may pursue strategic alliances that leverage our core technologies and industry experience to expand our product offerings or distribution, or make investments in other companies. Any acquisition involves a number of risks, many of which could harm our business, or materially impact our stock price, including:
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Acquisitions also frequently result in the recording of goodwill and other intangible assets that are subject to potential impairments, which could harm our financial results. If we fail to properly evaluate acquisitions or investments, it may impair our ability to achieve the anticipated benefits of any such acquisitions or investments, and we may incur costs in excess of what we anticipate. The failure to successfully evaluate and execute acquisitions or investments or otherwise adequately address these risks could materially harm our business, financial condition, and results of operations.
To finance any acquisitions or investments, we may choose to issue equity or equity-linked securities as consideration, which could dilute the ownership of our stockholders, with such dilution being potentially material. If the price of our Common Stock is low or volatile, we may not be able to acquire other companies for equity or equity-linked consideration. In addition, newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operating flexibility, and would also require us to incur interest expense. Additional funds for acquisitions also may not be available on terms that are favorable to us, or at all.
We depend on our executive officers and other key employees, and the loss of one or more of these employees or an inability to attract or retain highly skilled employees could adversely affect our business.
Our success depends largely upon the continued services of our executive officers and other officers and key personnel, including Trent A. Ward, our co-founder and Chief Executive Officer, who are critical to the development of our business, future vision, and strategic direction. Mr. Ward is our principal executive officer and is expected to continue to hold for the foreseeable future, primary and ultimate responsibility, authority, and operational decision-making functions over the principal operations, business units, and functions of the Company, including all significant policymaking authority. As a result, the loss of Mr. Ward’s services for any reason would likely materially and adversely affect or business. We also heavily rely on the continued service and performance of our senior management team, which provides leadership, contributes to the core areas of our business and helps us to efficiently execute our
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business. We also are dependent on the continued service of our existing software engineers because of the complexity of our products and platform capabilities. If the senior management team, including any new hires that we make, fails to work together effectively and to execute our plans and strategies on a timely basis then our business and future growth prospects could be harmed. From time to time, there may be changes in our executive management team or other key personnel, which could disrupt our business. We do not have employment agreements with our executive officers or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time and with little or no notice. The loss of one or more of our executive officers or other key employees could have an adverse effect on our business, financial condition, and results of operations.
We have not entered into non-competition agreements with our executive officers and other key personnel during the course of their employment with us. As a result, such personnel are not contractually prohibited from working with or for our competitors after leaving our employment or from engaging in other business endeavors which are, may be perceived as, or may become, competitive to our business. The loss of the services of our executive officers and other officers and key personnel to our competitors may harm our reputation, brand, our competitive position, and our business. Furthermore, members of our management team or other personnel may engage in other business endeavors in addition to and outside of their employment with us. As a result, although members of our management team are full-time employees of ours and have been, and are expected to be, fully committed and focused on our business, they are not obligated to commit their time and attention exclusively to our business. Accordingly, their attention to our business may be diverted from time to time or they may encounter conflicts of interest in allocating their time and resources between us and other business endeavors in which they are engaged.
In addition, to execute our growth plan, we must attract and retain highly qualified personnel. Competition for these personnel in Southern California, where we produce much of our On-Demand content, and in other locations where we have a substantial presence, is intense, especially for qualified and highly skilled personnel, including senior management, engineers, producers, designers, product managers, logistics and supply chain personnel, retail managers, trainers, and fitness instructors. In addition, we have not historically conducted background checks on our employees or independent contractors. Although we conduct customary identity verification checks for employees and intend to implement additional background screening, and may conduct additional identify verification processes, for personnel generally as we deem necessary or appropriate, there can be no assurance that such processes will enable us to identify any potential risks or issues or otherwise be sufficient or accurate. The implementation of additional screening processes could make it more difficult for us to hire additional personnel. We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications. Many of the companies with which we compete for experienced personnel have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may adversely affect our ability to recruit and retain highly skilled employees. In addition, we may periodically change our equity compensation practices, which may include reducing the number of employees eligible for equity awards or reducing the size of equity awards granted per employee. If we are unable to attract, integrate, or retain the qualified and highly skilled personnel required to fulfill our current or future needs, our business, financial condition, results of operations, and future growth prospects could be adversely affected.
Our officers and directors may encounter conflicts of interest involving us and other entities with which they may be affiliated, including matters that involve corporate opportunities.
Many of our directors are, and any future directors may be, affiliated with other entities, including venture capital or private equity funds or businesses that may be complementary, competitive, or potentially competitive to our company. They may also in the future become affiliated with entities that are engaged in business or other activities similar to our business. Additionally, all of our officers and directors, in the course of their other business activities, may become aware of or involved in investments, business opportunities, or information which may be appropriate for presentation to us as well as to other entities to which they owe a fiduciary duty. As a result, directors and officers may encounter perceived or actual conflicts of interest involving us and other entities with which they are or become affiliated, including matters that involve corporate opportunities. For example, a portfolio company of a director-affiliated venture fund may become a competitor of ours or a potential strategic partner. In addition, in the event we
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consider potential acquisitions, it is possible an entity affiliated with one of our directors could be an acquisition target or a competitive acquiror. Further, to the extent we engage in transactions with any director-affiliated entity, it could create actual, or the perception of, additional conflicts of interest, including with respect to our ability to negotiate terms equivalent to those that could be obtained in an arms’-length negotiation with an unaffiliated third party. As a result of the foregoing, our directors and officers may have conflicts of interest in determining to which entity particular opportunities or information should be presented. If, as a result of such potential conflicts, we are deprived of investment, business, or information, the execution of our business plan and our ability to effectively compete may be adversely affected. Our directors are also not obligated to commit their time and attention exclusively to our business and accordingly, they may encounter conflicts of interest in allocating their time and resources between us and other entities with which they are affiliated.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce cash resources.
Our directors and executive officers may be subject to litigation for a variety of claims or disputes. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors, except liability for:
Such limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission. Our amended and restated bylaws provide that we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law and may indemnify our other employees and agents. Our amended and restated bylaws also provide that, on satisfaction of certain conditions, we will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee, or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. We have entered into, and intend to enter into, agreements to indemnify our directors and executive officers. With certain exceptions, these agreements provide for indemnification for related expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by any of these individuals in connection with any action, proceeding, or investigation. Such provisions in our amended and restated bylaws and our indemnification agreements may discourage stockholders from bringing a lawsuit against our directors and executive officers for breach of their fiduciary duties. Such provisions may also reduce the likelihood of derivative litigation against our directors and executive officers, even though an action, if successful, might benefit us and other stockholders. See “Management-Indemnification and Insurance.”
While we maintain directors’ and officers’ liability insurance, such insurance may not be adequate to cover all liabilities that we may incur, which may reduce our available funds to satisfy third-party claims and could harm our business, results of operations, and financial condition. Further, a stockholder’s investment may be harmed to the extent that we pay the costs of settlement and damage awards against our directors and executive officers as required by these indemnification provisions.
Litigation and other legal proceedings may adversely affect our business, financial condition, and results of operations.
From time to time we may become involved in legal proceedings, claims, government investigations, and other proceedings relating to patent and other intellectual property matters, product liability, labor and employment, competition or antitrust, commercial, tort or contract, privacy, consumer protection, tax, federal regulatory investigations, securities (including class action litigation), and other legal proceedings or investigations, which could have an adverse impact on our business, financial condition, and results of operations and divert the attention of our management from the operation of our business. Litigation is inherently unpredictable and can result in excessive or unanticipated verdicts and/or injunctive relief that affect how we operate our business. We could incur judgments or
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enter into settlements of claims for monetary damages or for agreements to change the way we operate our business, or both. There may be an increase in the scope of these matters or there may be additional lawsuits, claims, proceedings or investigations in the future, which could have a material adverse effect on our business, financial condition, and results of operations. Adverse publicity about regulatory or legal action against us could damage our reputation and brand image, undermine our members’ confidence and reduce long-term demand for our products, even if the regulatory or legal action is unfounded or not material to our operations.
Catastrophic events may disrupt our business.
We and our manufacturing partners have operations located in areas that are in active earthquake zones or are subject to wildfires, floods, hurricanes, and other natural disasters. For example, we engage in content production activities in Southern California and our manufacturing partners are located in Taiwan. In addition, man-made actions or other events, such as power outages, acts of war, terrorism, or other outbreak of hostilities, malicious computer viruses and pandemics or other widespread public health crises and disease outbreaks could cause disruptions in our business.
In the event of any such catastrophic event, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our product development, breaches of data security or loss of critical data, any of which could have an adverse effect on our business, financial condition, and results of operations. For example, a significant natural disaster, such as an earthquake, fire, or flood, could have an adverse effect on our business, financial condition, and results of operations, and our insurance coverage may be insufficient to compensate us for losses that may occur. Acts of terrorism, which may be targeted at metropolitan areas that have higher population density than rural areas, could also cause disruptions in our or our suppliers’ and manufacturers’ businesses or the economy as a whole. We may not have sufficient protection or recovery plans in some circumstances, such as natural disasters affecting locations that store significant inventory of our products, that house our servers, or from which we generate content. As we rely heavily on our computer and communications systems and the internet to conduct our business and provide high-quality customer service, these disruptions could negatively impact our ability to run our business and either directly or indirectly disrupt our suppliers’ and manufacturers’ businesses, which could have an adverse effect on our business, financial condition, and results of operations.
Regulations related to conflict minerals may cause us to incur additional expenses and could limit the supply and increase the costs of certain metals used in the manufacturing of our products.
We are subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which will require us to conduct due diligence on and disclose whether or not our products contain conflict minerals. The implementation of these requirements could adversely affect the sourcing, availability, and pricing of the materials used in the manufacture of components or parts used in our products. In addition, we will incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of minerals that may be used or necessary to the production of our products and, if applicable, potential changes to products, processes, or sources of supply as a consequence of such due diligence activities. It is also possible that we may face reputational harm if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to alter our products, processes, or sources of supply to avoid such materials.
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Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity
Risk Management and Strategy
The Company relies on information systems and the data stored on them to conduct its operations. Our cybersecurity risk management program is designed to allow us to identify, assess, and manage cybersecurity risks. Our Chief Technology Officer, with the support of our IT Manager, assesses and manages cybersecurity risk, including preventing, mitigating, detecting, and addressing cybersecurity incidents, if any. Our Chief Technology Officer has 30+ years of experience leading and managing consumer facing services at scale. He has a Bachelor of Science in Computer Science and has led and managed both engineering and Enterprise IT teams across large scale organizations focused on delivering secure and performant consumer products. Our Chief Technology Officer also works closely with other management positions to ensure that the Company understands its cybersecurity risk management responsibilities.
To operate our business, we utilize
Governance
The Company reports on its information security program to the Audit Committee of the Board of Directors (the “Audit Committee”).
We have
Item 2. Properties.
Our corporate headquarters is located in Austin, Texas, where we hold a lease that has a monthly fee of $99 and variable cost based on usage. This facility is primarily used for engineering, sales and marketing, and other general business purposes. We also have a small office in Taiwan that is primarily used for supply chain and manufacturing purposes. Wattbike leases approximately 9,556 square feet of office space in Nottingham, UK with annual rent of approximately $68,000. The lease term for our CLMBR studio in Denver, CO that was primarily used to facilitate live classes on a weekly basis expired in January 2026 and was not renewed.
We believe that our existing facilities are sufficient for our current needs. We may in the future add new facilities or expand our existing facilities as we continue to add employees and grow our business. We believe that new spaces will be available at reasonable terms in the future in order to meet our needs.
Item 3. Legal Proceedings.
The Company purchased substantially all of the assets of CLMBR, Inc. (“CLMBR, Inc.”) in February 2024. On March 7, 2024, a petition was filed by Tung Keng Enterprise Co., Ltd. d/b/a DK City Co., Ltd. (“DK City”) against CLMBR, Inc. and the Company in the United States District Court for the District of Colorado to enforce a monetary arbitration award of approximately $2.25 million against CLMBR, Inc. (the “Petition”). The Company was not involved in that
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prior arbitration, which involved alleged breaches of an equipment manufacturing agreement between CLMBR, Inc. and DK City and was resolved prior to the Company’s purchase of CLMBR, Inc. On June 25, 2024, CLMBR, Inc. and the Company collectively resolved the dispute via a Confidential Settlement Agreement and Mutual Release with DK City. Pursuant to that agreement, the Company was required to make certain payments to DK City, CLMBR, Inc. and the Company would be released from liability, and the Petition would be voluntarily dismissed without prejudice. The Company subsequently defaulted on this agreement due to not complying with the payment plan, and on September 22, 2025 a new petition was filed alleging breach of the negotiated settlement. The complaint seeks damages in the amount of $2.0 million, plus statutory interest and attorneys' fees. The Company has admitted liability, and the parties have requested a Magistrate Judge settlement conference. The plaintiff has filed a motion for summary judgment, but the parties are engaged in settlement discussions.
Total remaining payments as of December 31, 2025 of $2.1 million, including accrued interest, are reflected in Accrued Expenses and other current liabilities in the accompanying consolidated balance sheet.
On or about February 20, 2025, the Company was sued in the Superior Court of Massachusetts, Suffolk County, by one of its former financial services consultants (“the Plaintiff”), alleging a breach of an agreement between the parties for financial services Plaintiff allegedly provided to the Company. The dispute was fully and amicably resolved and on June 12, 2025, the parties filed a joint stipulation of dismissal with prejudice and settlement amount was $2.2 million. The current portion of the total remaining payments as of December 31, 2025 of $0.3 million is included in accrued expenses and other current liabilities and the non-current portion of $1.8 million is included in other long term liabilities in the condensed consolidated balance sheet.
From time to time, we may become involved in additional regulatory investigations or legal proceedings arising in the ordinary course of our business. With respect to the matters described above, and in particularly the DK City matter in which the Company has acknowledged a payment default, we cannot provide assurance as to the ultimate outcome. An adverse disposition of any pending matter could have a material adverse effect on our business, financial condition or results of operations because of defense and settlement costs, diversion of management resources, and other factors.
Item 4. Mine Safety Disclosures.
Not Applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock began trading on the Nasdaq Stock Market on April 28, 2023 under the symbol “TRNR.” Prior to that time, there was no established public trading market for our common shares.
Authorized Capital
As of December 31, 2025, the Company is authorized by its Certificate of Incorporation to issue an aggregate of 900,000,000 shares of Common Stock, and 200,000,000 shares of blank check preferred, of which 10,000,000 shares are designated as Series A Convertible Preferred Stock, 1,500,000 shares are designated as Series B Preferred Stock, 5,000,000 shares are designated as Series C Preferred Stock and 1,300,000 shares are designated as Series E Preferred Stock. As of December 31, 2025, 307,516 shares of Common Stock were issued and outstanding, 4,414,775 shares of Series A Convertible Preferred stock were issued and outstanding, 408,775 shares of Series B Preferred Stock were issued and outstanding, 1,534,921 shares of Series C Preferred Stock are issued and outstanding and 1,300,000 shares of Series E Preferred Stock are issued and outstanding.
Holders of Our Common Stock
As of December 31, 2025, there were approximately 20 registered holders of our common stock. This number does not include stockholders for whom shares are held in “nominee” or “street” name.
Dividend Policy
We have never declared or paid cash dividends on our common stock. We do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects, and other factors our board of directors may deem relevant. Series A Preferred Stock and Series C Preferred Stock, are entitled to dividends which would be accrued as set forth in the certificate of designations for Series A Preferred Stock and Series C Preferred Stock. Further, our current and any future debt facilities we may enter into may contain restrictions on our ability to pay dividends or make distributions, and any new credit facilities we may enter into may contain similar restrictions.
Recent Sales of Unregistered Securities
There were no sales of unregistered securities by the Company during the fiscal year ended December 31, 2025 that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K.
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and notes thereto for the years ended December 31, 2025 and 2024 included elsewhere in this annual report on Form 10-K. Historic results are not necessarily indicative of future results. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this annual report on Form 10-K, our actual results could differ materially from the results described in or implied by these forward-looking statements. You should carefully read the “Risk Factors” section to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section of this annual report on Form 10-K titled “Special Note Regarding Forward-Looking Statements.”
Overview
Interactive Strength Inc. is the parent company of three leading brands serving the commercial and at-home markets with specialty fitness equipment and virtual training; Wattbike, CLMBR and FORME. Wattbike, acquired in July of 2025, offers a range of high-performance indoor bikes that set the global standard in cycling. Known for unmatched accuracy, realistic ride feel, and advanced performance tracking, Wattbike is trusted by elite athletes, national teams, and fitness enthusiasts around the world. CLMBR offers a premium vertical climbing experience through its patented open-frame design and immersive touchscreen, delivering a high-intensity, low-impact workout that’s both efficient and effective. FORME delivers strength, mobility, and recovery training through immersive content, performance-grade hardware, and expert coaching. Its wall-mounted systems include the Studio, a smart fitness mirror for guided programming and live 1:1 personal training, and the Lift, which adds smart resistance cable training—ideal for high-performance environments and sport-specific development. The combination of technology with expert training leads to better outcomes for both consumers and trainers alike. Wattbike, CLMBR and FORME each offer unique fitness solutions for both the commercial and at-home markets.
Key milestones in our growth history include:
Our revenue is primarily generated from the sale of our connected fitness hardware products and associated recurring membership revenue.
During the years ended December 31, 2025 and 2024, we generated total revenue of $11.5 million and $5.4 million, respectively, and incurred net losses of $24.0 million and $34.9 million, respectively. As we generated recurring net losses and negative operating cash flow since inception, we have funded our operations primarily with gross proceeds from the issuance of convertible notes, the issuance of promissory notes to unrelated and related parties, and the issuance of common stock.
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Business Model and Growth Strategy
Acquire complementary businesses that generate attractive synergies
We acquired CLMBR, Inc. in February 2024 and Wattbike on July 1, 2025. In addition, on March 11, 2026, we completed the acquisition of Ergatta, a connected fitness company that is considered a pioneer in game-based connected fitness. We expect that we will be able to acquire additional revenue-generating businesses, which would generate higher earnings and cashflows through synergies with our existing business. Our team brings significant experience with M&A transactions and we are one of the few companies in our industry with publicly traded equity securities, which we believe makes us an attractive acquirer.
Leverage well established equipment distributors to scale in commercial channels
We have high value partnerships with numerous fitness equipment distributors around the world, including Woodway, to sell CLMBR, FORME and Wattbike products into a variety of commercial environments. These relationships allow us to leverage the sales knowledge, relationships and specialization of third parties to accelerate our sales initiatives. Importantly, this construct allows us to make the vast majority of our sales related expenses variable, as we typically pay commissions only when units are sold.
Expand into new geographies
We intend to expand the international reach of our existing brands by leveraging in-market relationships and sales infrastructure across the brands in our portfolio. For example, with Wattbike, which is based in the United Kingdom, we are currently evaluating potential expansion of that brand in the US, where FORME, CLMBR and Ergatta have well established routes to market in both commercial and residential markets, although we have not yet made any definitive plans regarding such expansion or the potential timing thereof. We plan to pursue disciplined international expansion by targeting countries with sound macroeconomic conditions, favorable growth trends and stable regulatory environments, and importantly, those where we have footholds and low risk routes to market through our existing brand relationships and in market presence.
Build out partnership ecosystem
We intend to continue to build our strategic partner ecosystem with a focus on relationships that enable us to extend our platform to new audiences. We are pursuing opportunities in a number of attractive verticals, including sports, physical therapy and rehabilitation, and telemedicine. We are continuously identifying and evaluating opportunities to apply our coaching know-how in new and innovative ways to expand our reach and impact.
Expand B2B Channel
We intend to expand our sales and marketing efforts into a variety of light commercial settings, including multifamily buildings, hotels, country clubs, universities and performance centers.
Factors Affecting Our Performance
Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following:
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We have experienced, and expect to continue to experience, some disruptions to parts of our supply chain, including procuring necessary components or parts in a timely fashion, with suppliers increasing lead times or placing products on allocation and raising prices. In addition, disruptions to commercial transportation infrastructure have increased delivery times for materials and components or parts for our fitness equipment, and has impacted, and could in the future impact, our ability to timely deliver our products to customers. While these supply chain disruptions have resulted in operational challenges, including extended customer order lead times and periodic product allocation, they have not had a material adverse effect on our revenue or liquidity or capital resources for the year ended December 31, 2025, and we have not implemented any significant mitigation efforts to date as a result. However, we cannot predict the impact to us of any future or prolonged supply chain disruptions or any mitigation efforts we may take going forward. For example, as a result of these supply chain disruptions, we may be required to increase customer order lead times and place some products on allocation. In addition, we may consider additional or alternative third-party manufacturing and logistics providers or suppliers. Such mitigation efforts may result in cost increases and any attempts to offset such increases with price increases may result in reduced sales, increased customer dissatisfaction, or otherwise harm our reputation. Further, if we were to elect to transition or add manufacturing or logistics providers or suppliers, it may result in temporary or additional delays in product delivery or risks related to consistent product quality or reliability. This in turn may limit our ability to fulfill customer orders and we may be unable to satisfy all of the demand for our products. We may in the future also purchase components further in advance, which in return can result in less capital being allocated to other activities such as marketing and other business needs. We cannot quantify the impact of such disruptions at this time or predict the impact of any mitigation efforts we may take in response to supply chain disruptions on our business, financial condition, and results of operations.
In addition, customer demand for our products may be impacted by weak economic conditions, inflation, weak growth, recession, equity market volatility, or other negative economic factors in the United States or other nations. The United States has recently experienced historically high levels of inflation. If the inflation rate continues to increase, it will likely affect our expenses, including, but not limited to, employee compensation expenses, increased manufacturing and supplier costs, and increasing market prices of certain components, parts, supplies, and commodity raw materials, which are incorporated into our products or used by our suppliers to manufacture our products. These components, parts, supplies, and commodities may from time to time become restricted, or general market factors and conditions may affect pricing of such components, parts, supplies and commodities, such as inflation or supply chain constraints. Given our limited operating history, we cannot predict how ongoing or increasing recessionary or inflationary pressures may impact our business, financial condition, and results of operations in the future.
RESULTS OF OPERATIONS
Critical Accounting Policies and Estimates
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates and assumptions, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions.
Some of the estimates and assumptions we have to make under U.S. GAAP require very difficult, subjective and/or complex judgments about matters that are inherently uncertain and, as a result, we have identified those as critical accounting estimates, which are considered critical to an understanding of our historical financial condition and results
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of operations and are reasonably likely to have a material impact on our future results of operations and financial condition. Critical accounting estimates include those used in estimating the fair value of our convertible notes, warrants issued in conjunction with the issuance of such convertible notes, assumptions used in determining the valuation allowance for our deferred tax assets and the impairment of goodwill and intangible assets and estimates and assumptions used in determining the fair value of consideration paid and liabilities assumed in business combinations. For a description of our significant accounting policies, see Note 2 to the Consolidated Financial Statements.
The critical accounting policies that reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements include those noted below.
Fair Value Measurements
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings when they occur. Our financial instruments that are carried at fair value in our consolidated financial statements consist of convertible notes, warrants and embedded derivative liabilities associated with the issuance of convertible notes and contingent consideration related to acquisition transactions. The fair value of these instruments that are measured at each accounting period are generally determined using Monte Carlo simulations or discounted cash flow analyses and are largely based on unobservable inputs to the valuation methodology (Level 3 inputs - see Note 13 to the Consolidated Financial Statements).
Goodwill and Intangible Assets
Our annual goodwill impairment assessment at December 31, 2025 was performed based on our determination that Wattbike, CLMBR and FORME comprise a single reporting unit based on the guidance provided in Accounting Standards Codification ("ASC") 350, and we performed a quantitative analysis using a combination of income and market approaches. Our reporting unit had fair values in excess of their carrying values, resulting in no impairment of goodwill.
We estimate the fair value of intangible assets acquired in business combinations based on an income approach. Where applicable, we utilize the relief-from-royalty method, which assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these types of assets. This approach is dependent on a number of factors, including estimates of future growth and trends, royalty rates for this category of intellectual property, discount rates and other variables. For the periods presented, we did not recognize any impairment of intangible assets.
Contingent Consideration
In accordance with ASC 805, Business Combinations, a liabilities for contingent consideration assumed in business acquisitions are recorded at fair value at the date of acquisition, with changes in the fair value recorded through earnings at each reporting period. We assess the fair value of this liability based on our estimate of the likelihood that sales projections will be achieved and that the contingent payment will be earned. For the years ended December 31, 2025 and 2024, we recorded gains on changes in fair value of contingent consideration of $0.2 million and $1.3 million, respectively.
Convertible Notes
As permitted under ASC Topic 825, Financial Instruments, we have elected the fair value option to account for some of our convertible notes that were issued in 2025 and 2024 (see Note 11 to the Consolidated Financial Statements). In accordance with ASC Topic 825, we record these convertible notes at fair value with changes in fair value recorded as a component of other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss. The convertible notes for which we elected the fair value option are valued using a discounted cash flow analysis or Monte Carlo Simulation model, and the assumptions used therein are discussed in Note 13 to the Consolidated Financial Statements. For the years ended December 31, 2025 and 2024, we recognized a gain (loss) on changes in fair value of convertible notes of $28.6 million and ($0.1 million), respectively.
84
Warrants and Derivative Liabilities
In connection with convertible notes that we issued in 2025 for which we did not elect the fair value option, we issued warrants to purchase our Common Stock which did not meet the requirements for equity classification, and are therefore classified as long-term liabilities in the accompanying consolidated balance sheets with changes in fair value recognized in earnings at each reporting period. We generally utilize a Black-Scholes option pricing model to determine the fair value of these liabilities, and for the years ended December 31, 2025 and 2024, we recognized gains on changes in fair value of warrants of $2.8 million and $9.3 million, respectively.
We also recognized derivative liabilities related to these convertible notes for the embedded conversion options contained in the notes, which are also measured at fair value with changes in fair value recorded in earnings in each reporting period. The fair value of these liabilities are generally determined using a Monte Carlo Simulation model, and the key inputs into the model are disclosed in Note 13 to the consolidated financial statements. For the years ended December 31, 2025 and 2024, we recognized a gain and loss on changes in fair value of derivatives of $0.5 million and $0.5 million, respectively.
Income Taxes
We maintain a full valuation allowance against all of our net deferred tax assets, and as a result we have historically not recorded an income tax benefit in the accompanying consolidated financial statements despite continued losses since inception. This valuation allowance reflects our assessment of whether it is more likely than not that we will generate sufficient taxable income in the future to be able to utilize our deferred tax assets. In determining whether a valuation allowance is warranted, we evaluate factors such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies. Evaluation of these factors requires our management to make certain estimates, assumptions and judgments. We consider all positive and negative evidence to estimate if sufficient future taxable income will be generated to realize our deferred tax assets, and we consider cumulative losses in recent years to be a significant type of negative evidence. As of December 31, 2025 and 2024, we determined that it is more-likely-than-not that our federal and state deferred tax assets will not be realized.
Recent Accounting Pronouncements
See Note 2, Summary of Significant Accounting Policies, of the notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the dates of the statement of financial position included in this annual report on Form 10-K.
Emerging Growth Company and Smaller Reporting Company Status
Under Section 107(b) of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, an “emerging growth company” can delay the adoption of new or revised accounting standards until such time as those standards would apply to private companies. We have elected this exemption to delay adopting new or revised accounting standards until such time as those standards apply to private companies. Where allowable, we have early adopted certain standards as described in Note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We will continue to remain an “emerging growth company” until the earliest of the following: (i) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (ii) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller
85
reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Components of Our Operating Results
Revenue
Connected Fitness Products
Connected Fitness Product revenue consists of sales of our connected fitness products and related accessories, delivery and installation services, and extended warranty agreements offered through a third-party. Fitness Product revenue is recognized at the time of delivery, except for extended warranty revenue which is recognized over the warranty period. For the third-party extended warranty service sold along with the connected fitness products, we do not obtain control of the warranty before transferring it to the customers. Therefore, we account for revenue related to the fees paid to the third-party extended warranty provider on a net basis, by recognizing only the net commission we retain. Connected fitness product revenue represented 90% and 74% of total revenue for the years ended December 31, 2025 and 2024, respectively.
Membership
Membership revenue consists of revenue generated from our monthly Connected Fitness membership. Membership revenue represented 6% and 15% of total revenue for the years ended December 31, 2025 and 2024, respectively.
Training
Training revenue consists of sales of our personal training services delivered through our connected fitness products, in-person classes and third-party mobile devices. Training revenue is recognized at the time of delivery. Training revenue represented 4% and 12% of total revenue for the years ended December 31, 2025 and 2024, respectively.
Cost of Revenue
Connected Fitness Product
Connected Fitness Product cost of revenue consists of Wattbike, CLMBR, Studio and Studio Lift and accessories product costs, including manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement costs, fulfillment costs, warehousing costs, and certain allocated costs related to management and facilities expenses associated with supply chain logistics.
Membership
Membership cost of revenue includes costs associated with personnel related expenses, filming and production costs, hosting fees, music royalties, amortization of capitalized content and amortization of capitalized software development costs.
Training
Training cost of revenue includes costs associated with personnel related expenses and rent expense.
Operating Expenses
Research and Development
Research and development expense primarily consists of personnel and facilities-related expenses, engineering costs, consulting and contractor expenses, tooling and prototype materials, and software platform expenses. We capitalize certain qualified costs incurred in connection with the development of internal-use software and software to be sold or marketed which may also cause research and development expenses to vary from period to period.
86
Sales and Marketing
Sales and marketing expense consists of performance marketing media spend, asset creation, other brand creative expenses, all showroom expenses and related lease payments and sales and marketing personnel-related expenses.
General and Administrative
General and administrative expenses include personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal, human resources, and IT functions. General and administrative expenses also include fees for professional services principally comprised of legal, audit, tax and accounting services, and insurance.
We expect to incur additional general and administrative expenses as a result of operating as an acquisition-focused public company, including expenses related to compliance and reporting obligations required of public companies, and increased costs for insurance, investor relations expenses, and professional services. As a result, we expect that our general and administrative expenses will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue, but we expect to leverage these expenses over time as we grow our revenue and member base.
Other (Expense) Income, Net
Other (expense) income, net consists of expenses associated with the issuance of convertible notes that were recognized at fair value, unrealized currency gains and losses, loss on exchange of warrants for equity, and fair value of issuance of Loss Restoration Agreement derivative.
Interest Expense
Interest expense consists of interest associated with our convertible notes and loans payable.
Interest Income
Interest income consists of interest associated with the loan receivable.
(Gain) loss upon extinguishment of debt and accounts payable
(Gain) loss on debt extinguishment and accounts payable is primarily the result of gains or losses incurred upon conversion of convertible notes and loans payable into equity, or an exchange of debt instruments.
Loss on issuance of warrants
Loss on issuance of warrants consists of fair value of issuance of warrants issued in connection with Registered Direct Offering and Best Efforts Offering.
Change in Fair Value of Convertible Notes
The change in fair value of convertible notes consists of the change in the fair value of the outstanding convertible notes since the previous reporting period.
Change in Fair Value of Earn Out
The change in fair value of earn out consists of the change in the fair value of outstanding contingent consideration liabilities since the previous reporting period.
Change in Fair Value of Derivatives
The change in fair value of derivatives consists of the change in the fair value of the outstanding derivatives since the previous reporting period.
87
Change in Fair Value of Warrants
The change in fair value of warrants consists of the change in the fair value of the outstanding warrants notes since the previous reporting period.
Change in Fair Value of Digital Assets
Change in fair value of digital assets consists of the subsequent remeasurement of our digital assets measured at fair value based on quoted prices on active exchanges (see Note 7 to the Consolidated Financial Statements).
Results of Operations
The following tables set forth our consolidated results of operations for the periods presented.
Results of Operations for the Years Ended December 31, 2025 and 2024
|
|
Year Ended December 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
||||
Revenue: |
|
(in thousands) |
|
|
(in thousands) |
|
|
|
|
|||||||
Fitness product revenue |
|
$ |
10,338 |
|
|
$ |
3,973 |
|
|
$ |
6,365 |
|
|
|
160 |
% |
Membership revenue |
|
|
731 |
|
|
|
783 |
|
|
|
(52 |
) |
|
|
(7 |
%) |
Training revenue |
|
|
461 |
|
|
|
624 |
|
|
|
(163 |
) |
|
|
(26 |
%) |
Total revenue |
|
|
11,530 |
|
|
|
5,380 |
|
|
|
6,150 |
|
|
|
114 |
% |
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of fitness product revenue (2) |
|
|
(7,898 |
) |
|
|
(3,798 |
) |
|
|
(4,100 |
) |
|
|
108 |
% |
Cost of membership (2) |
|
|
(1,517 |
) |
|
|
(3,318 |
) |
|
|
1,801 |
|
|
|
(54 |
%) |
Cost of training |
|
|
(1,202 |
) |
|
|
(1,042 |
) |
|
|
(160 |
) |
|
|
15 |
% |
Total cost of revenue |
|
|
(10,617 |
) |
|
|
(8,158 |
) |
|
|
(2,459 |
) |
|
|
30 |
% |
Gross profit (loss) |
|
|
913 |
|
|
|
(2,778 |
) |
|
|
3,691 |
|
|
|
(133 |
%) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development (1) |
|
|
2,918 |
|
|
|
6,988 |
|
|
|
(4,070 |
) |
|
|
(58 |
%) |
Sales and marketing (1) (2) |
|
|
2,268 |
|
|
|
1,080 |
|
|
|
1,188 |
|
|
|
110 |
% |
General and administrative (1) (2) |
|
|
15,585 |
|
|
|
18,339 |
|
|
|
(2,754 |
) |
|
|
(15 |
%) |
Total operating expenses |
|
|
20,771 |
|
|
|
26,407 |
|
|
|
(5,636 |
) |
|
|
(21 |
%) |
Loss from operations |
|
|
(19,858 |
) |
|
|
(29,185 |
) |
|
|
9,327 |
|
|
|
(32 |
%) |
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other expense, net: |
|
|
(1,004 |
) |
|
|
(956 |
) |
|
|
(48 |
) |
|
|
5 |
% |
Interest expense |
|
|
(11,781 |
) |
|
|
(7,727 |
) |
|
|
(4,054 |
) |
|
|
52 |
% |
Interest income |
|
|
1,552 |
|
|
|
— |
|
|
|
1,552 |
|
|
|
100 |
% |
Loss on issuance of warrants |
|
|
— |
|
|
|
(5,551 |
) |
|
|
5,551 |
|
|
|
(100 |
%) |
Gain (loss) upon extinguishment of debt and accounts payable |
|
|
2,702 |
|
|
|
(1,527 |
) |
|
|
4,229 |
|
|
|
(277 |
%) |
Change in fair value of convertible notes |
|
|
28,628 |
|
|
|
(128 |
) |
|
|
28,756 |
|
|
|
(22,466 |
%) |
Change in fair value of earn out |
|
|
241 |
|
|
|
1,300 |
|
|
|
(1,059 |
) |
|
|
(81 |
%) |
Change in fair value of derivatives |
|
|
482 |
|
|
|
(460 |
) |
|
|
942 |
|
|
|
(205 |
%) |
Change in fair value of digital assets |
|
|
(27,743 |
) |
|
|
— |
|
|
|
(27,743 |
) |
|
|
(100 |
%) |
Change in fair value of warrants |
|
|
2,813 |
|
|
|
9,300 |
|
|
|
(6,487 |
) |
|
|
(70 |
%) |
Total other income (expense), net |
|
|
(4,110 |
) |
|
|
(5,749 |
) |
|
|
1,639 |
|
|
|
(29 |
%) |
Loss before provision for income taxes |
|
|
(23,968 |
) |
|
|
(34,934 |
) |
|
|
10,966 |
|
|
|
(31 |
%) |
Income tax benefit (expense) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
- |
|
Net loss |
|
$ |
(23,968 |
) |
|
$ |
(34,934 |
) |
|
$ |
10,966 |
|
|
|
(31 |
%) |
88
|
|
|
Year Ended December 31, |
|
|
Change |
|
||||||||||
|
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
||||
|
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
Research and development |
|
|
$ |
894 |
|
|
$ |
3,805 |
|
|
$ |
(2,911 |
) |
|
|
(77 |
%) |
Sales and marketing |
|
|
|
— |
|
|
|
26 |
|
|
|
(26 |
) |
|
|
(100 |
%) |
General and administrative |
|
|
|
2,185 |
|
|
|
6,421 |
|
|
|
(4,236 |
) |
|
|
(66 |
%) |
Total stock-based compensation expense |
|
|
$ |
3,079 |
|
|
$ |
10,252 |
|
|
$ |
(7,173 |
) |
|
|
(70 |
%) |
For the years ended December 31, 2025 and 2024, $0.4 million and $0.6 million, respectively, of stock-based compensation was capitalized as internally developed software costs.
|
|
Year Ended December 31, |
|
|
Change |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
Cost of membership |
|
$ |
1,517 |
|
|
$ |
3,311 |
|
|
$ |
(1,794 |
) |
|
|
(54 |
%) |
Cost of fitness product revenue |
|
|
599 |
|
|
|
567 |
|
|
|
32 |
|
|
|
6 |
% |
General and administrative |
|
|
646 |
|
|
|
2,122 |
|
|
|
(1,476 |
) |
|
|
(70 |
%) |
Sales and marketing |
|
|
655 |
|
|
|
480 |
|
|
|
175 |
|
|
|
36 |
% |
Total depreciation and amortization expense |
|
$ |
3,417 |
|
|
$ |
6,480 |
|
|
$ |
(3,063 |
) |
|
|
(47 |
%) |
Revenue
|
|
Year Ended December 31, |
|
|
|
|
|
|
||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% Change |
|||
Revenue: |
|
(in thousands) |
|
|
|
|
|
|
||||||
Fitness product |
|
$ |
10,338 |
|
|
$ |
3,973 |
|
|
$ |
6,365 |
|
|
160% |
Membership |
|
|
731 |
|
|
|
783 |
|
|
|
(52 |
) |
|
(7%) |
Training |
|
|
461 |
|
|
|
624 |
|
|
|
(163 |
) |
|
(26%) |
Total revenue |
|
|
11,530 |
|
|
|
5,380 |
|
|
|
6,150 |
|
|
114% |
Percentage of revenue |
|
|
|
|
|
|
|
|
|
|
|
|||
Fitness product |
|
|
90 |
% |
|
|
74 |
% |
|
|
|
|
|
|
Membership |
|
|
6 |
% |
|
|
15 |
% |
|
|
|
|
|
|
Training |
|
|
4 |
% |
|
|
12 |
% |
|
|
|
|
|
|
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
Our consolidated revenue increased by $6.2 million, or 114%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was mainly due to the acquisition of Wattbike on July 1, 2025. Wattbike revenues from the acquisition date totaled $8.2 million, or 71% of our consolidated revenue for fiscal 2025.
Fitness product revenue increased by $6.4 million, or 160%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily attributable to the acquisition of Wattbike.
Membership revenue decreased by $0.1 million, or 7%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was primarily attributable to a focus on connected hardware product sales in the commercial channel where subscription attach rates tend to be lower. We expect significant increases in membership revenue in 2026 as a result of the Ergatta acquisition.
Training revenue decreased by $0.2 million, or 26%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was primarily attributable to declines training revenue associated with Forme Connected Fitness products.
89
Cost of Revenue and Gross Profit (Loss)
|
|
Year Ended December 31, |
|
|
|
|
|
|
||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% Change |
|||
Cost of Revenue: |
|
(in thousands) |
|
|
|
|
|
|
||||||
Fitness product |
|
$ |
7,898 |
|
|
$ |
3,798 |
|
|
$ |
4,100 |
|
|
108% |
Membership |
|
|
1,517 |
|
|
|
3,318 |
|
|
|
(1,801 |
) |
|
(54%) |
Training |
|
|
1,202 |
|
|
|
1,042 |
|
|
|
160 |
|
|
15% |
Total cost of revenue |
|
|
10,617 |
|
|
|
8,158 |
|
|
|
2,459 |
|
|
30% |
Gross Profit (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|||
Fitness product |
|
|
2,440 |
|
|
|
175 |
|
|
|
2,265 |
|
|
1294% |
Membership |
|
|
(786 |
) |
|
|
(2,535 |
) |
|
|
1,749 |
|
|
(69%) |
Training |
|
|
(741 |
) |
|
|
(418 |
) |
|
|
(323 |
) |
|
77% |
Total gross profit (loss) |
|
|
913 |
|
|
|
(2,778 |
) |
|
|
3,691 |
|
|
(133%) |
Gross Margin: |
|
|
|
|
|
|
|
|
|
|
|
|||
Fitness product |
|
|
24 |
% |
|
|
4 |
% |
|
|
|
|
|
|
Membership |
|
|
(108 |
%) |
|
|
(324 |
%) |
|
|
|
|
|
|
Training |
|
|
(161 |
%) |
|
|
(67 |
%) |
|
|
|
|
|
|
Total |
|
|
8 |
% |
|
|
(52 |
%) |
|
|
|
|
|
|
Fitness product cost of revenue for the year ended December 31, 2025 increased by $4.1 million, or 108%, compared to the year ended December 31, 2024. The increase is due to the acquisition of Wattbike.
Membership cost of revenue for the year ended December 31, 2025 decreased by $1.8 million, or 54%, compared to the year ended December 31, 2024. The decrease is primarily related to the reduction in amortization of content costs and capitalized software.
Training cost of revenue for the year ended December 31, 2025 increased by $0.2 million, or 15%, compared to the year ended December 31, 2024. The increase is primarily attributable to increased compensation expense for our trainers and higher rent expense.
For the year ended December 31, 2025, we had gross profit of $0.9 million, as compared to a gross loss of $2.8 million for the year ended December 31, 2024. The improvement is due to the acquisition of Wattbike, which accounted for 71% of our fiscal 2025 revenue despite having been acquired on July 1, 2025. We expect further improvements in gross profit and gross margin in 2026 with a full year of Wattbike operations and the Ergatta acquisition completed in early 2026, which we expect to be accretive to earnings.
Operating Expenses
|
|
Year Ended December 31, |
|
|
Change |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
|||
Operating Expenses: |
|
(in thousands) |
|
|
|
|
|
|
|
||||||
Research and development |
|
$ |
2,918 |
|
|
$ |
6,988 |
|
|
$ |
(4,070 |
) |
|
(58%) |
|
Sales and marketing |
|
|
2,268 |
|
|
|
1,080 |
|
|
|
1,188 |
|
|
110% |
|
General and administrative |
|
|
15,585 |
|
|
|
18,339 |
|
|
|
(2,754 |
) |
|
(15%) |
|
Total operating expenses |
|
$ |
20,771 |
|
|
$ |
26,407 |
|
|
$ |
(5,636 |
) |
|
(21%) |
|
Research and Development
Research and development expense which includes engineering expenses, decreased by $4.1 million, or 58%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The decrease was primarily due to decreases in stock-based compensation expense of $2.9 million, other personnel-related expenses of $1.1 million and a $0.2 million decrease in third-party engineering services, partially offset by Wattbike R&D expenses of $0.2 million.
Sales and Marketing
90
Sales and marketing expense increased by $1.2 million, or 110%, for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The increase is primarily due to sales and marketing expenses associated with Wattbike in the amount of $1.3 million, with no comparable amount in 2024, partially offset by a decrease in promotional expenses of $0.1 million.
General and Administrative
General and administrative expense decreased $2.8 million, or 15%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The decrease was due primarily to a decrease of $4.2 million in stock-based compensation expense and decreases in amortization expense of $1.5 million due to assets becoming fully depreciated, partially offset by expenses associated with Wattbike of approximately $2.2 million and increased transaction fees, largely due to the Wattbike acquisition, of $0.9 million.
Other (Expense) Income, net
|
|
Year Ended December 31, |
|
|
Change |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
|||
Other income (expense), net |
|
(in thousands) |
|
|
|
|
|
|
|
||||||
Other (expense) income, net: |
|
$ |
(1,004 |
) |
|
$ |
(956 |
) |
|
$ |
(48 |
) |
|
5% |
|
Interest expense |
|
|
(11,781 |
) |
|
|
(7,727 |
) |
|
|
(4,054 |
) |
|
52% |
|
Interest income |
|
|
1,552 |
|
|
|
— |
|
|
|
1,552 |
|
|
100% |
|
Loss on issuance of warrants |
|
|
— |
|
|
|
(5,551 |
) |
|
|
5,551 |
|
|
(100%) |
|
Gain (loss) upon extinguishment of debt and accounts payable |
|
|
2,702 |
|
|
|
(1,527 |
) |
|
|
4,229 |
|
|
(277%) |
|
Change in fair value of convertible notes |
|
|
28,628 |
|
|
|
(128 |
) |
|
|
28,756 |
|
|
(22466%) |
|
Change in fair value of earn out |
|
|
241 |
|
|
|
1,300 |
|
|
|
(1,059 |
) |
|
(81%) |
|
Change in fair value of derivatives |
|
|
482 |
|
|
|
(460 |
) |
|
|
942 |
|
|
(205%) |
|
Change in fair value of digital assets |
|
|
(27,743 |
) |
|
|
— |
|
|
|
(27,743 |
) |
|
100% |
|
Change in fair value of warrants |
|
|
2,813 |
|
|
|
9,300 |
|
|
|
(6,487 |
) |
|
(70%) |
|
Total other income (expense), net |
|
$ |
(4,110 |
) |
|
$ |
(5,749 |
) |
|
$ |
1,639 |
|
|
(29%) |
|
Other (Expense) Income, net
Other expense, net, for the year ended December 31, 2025 is mainly comprised of $0.9 million of issuance costs related to the June 2025 Convertible Exchangeable Notes, which were recorded at fair value (see Note 11 to the Consolidated financial statements). Other expense, net, for the year ended December 31, 2024 was primarily attributable to the loss on issuance of common stock to a lender in connection with entering the Equity Line of Credit Agreement of $0.4 million, loss on exchange of warrants issued for equity with the 2023 Convertible Note lender of $0.3 million and foreign currency exchange losses of $0.3 million.
Interest (Expense)
Interest expense increased by $4.1 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase in interest expense is mainly due to the overall increase in 2025, specifically the $14.2 million of Senior Secured Convertible Notes issued in 2025 (see Note 11 to the Consolidated Financial Statements), all of which were issued with a 10% original issue discount and carry a stated interest rate of 12%.
Interest Income
Interest income of $1.6 million for the year ended December 31, 2025, with no comparable amount for 2024, is attributable to the loan agreement entered into with Sportstech in January 2025 (see Note 25 to the Consolidated Financial Statements).
Loss on issuance of warrants
During the year ended December 31, 2024, we recorded a loss related to the fair value of warrants issued in connection with several equity offerings undertaken by the Company, with no comparable amount for the year ended December 31, 2025.
91
Gain (Loss) on extinguishment of debt and accounts payable
The gain on extinguishment of debt and accounts payable of $2.7 million for the year ended December 31, 2025 was primarily comprised of gains on the extinguishment of convertible notes and loans payable that were converted or exchanged for common stock in the amount of $5.6 million and a gain on the settlement of the Loss Restoration Agreement associated with a term loan of $0.2 million, largely offset buy the loss on extinguishment of debt associated with the June 2025 Convertible Exchangeable Notes of $3.2 million (see Note 11 to the Consolidated Financial Statements). Loss on extinguishment of debt and accounts payable for the year ended December 31, 2024 of $1.5 million was a result of the conversion of promissory notes and other debt issued in fiscal 2023 and 2024 into preferred stock.
Change in Fair Value of Convertible Notes
We recorded gains on the change in fair value of convertible notes for the year ended December 31, 2025 of $28.6 million due to the decrease in fair value of these notes, as compared to a loss of $0.1 million for the year ended December 31, 2024.
Change in the Fair Value of Earn out
During the year ended December 31, 2025, we recognized a change in the fair value of the contingent consideration liability related to the Wattbike acquisition in the amount of $0.2 million. During the year ended December 31, 2024, we recognized a change in the fair value of the contingent consideration liability related to the CLMBR acquisition in the amount of $1.3 million.
Change in Fair Value of Derivatives
The gain (loss) on the change in fair value of derivatives for the years ended December 31, 2025 and 2024 of $0.5 million and ($0.5) million, respectively, reflect the changes in fair value of our derivative instruments, which are primarily related to the embedded conversion option in certain notes issued in 2025 and 2024.
Change in Fair Value of Digital Assets
The loss on change in fair value of digital assets in the amount of $27.7 million consists of the subsequent remeasurement of the Company's digital assets acquired in June of 2025 measured at fair value based on quoted prices on active exchanges (see Note 7 to the Consolidated Financial Statements). These assets were liquidated in the fourth quarter of 2025 and we had no digital assets as of December 31, 2025.
Change in Fair Value of Warrants
The gain on change in fair value of warrants in the amount of $2.8 million and $9.3 million for the years ended December 31, 2025 and 2024, respectively, reflect changes in the value of warrants that do not qualify for equity treatment under U.S. GAAP that were granted in connection with the issuance of convertible notes in 2023, 2024 and 2025.
Liquidity and Capital Resources
At December 31, 2025, we had a working capital deficit of $16.6 million, mainly consisting of cash and cash equivalents of $0.5 million, accounts receivable of $2.6 million, inventory of $3.7 million, the Sportstech loan and interest receivable of $6.6 million and other current assets of $1.2 million, more than offset by accounts payable and accrued expenses of $13.8 million, the current portion of convertible notes and loans payable of $15.7 million and other current liabilities of $1.7 million. We have incurred an accumulated deficit of $227.5 million since inception, and we had negative cash flows from operations of $10.4 million and $14.8 million for the years ended December 31, 2025 and 2024, respectively. We have also reported operating losses of $19.9 million and $29.2 million for the years ended December 31, 2025 and 2024, respectively, and net losses of $24.0 million and $34.9 million for the years ended December 31, 2025 and 2024, respectively. We have funded our operations for the last few years through the sale of our debt and equity securities. Our material cash requirements are primarily comprised of:
92
As an emerging growth company, we are subject to certain inherent risks and uncertainties associated with the development of an enterprise. Since our inception, substantially all of management’s efforts have been devoted towards the development of its brands and services, their penetration in the marketplace, and the development of a commercial organization, all at the expense of short-term profitability.
In order to execute our growth strategy, we have been heavily dependent on financing from lenders and capital from private and public investors (collectively “outside capital”) since our inception and we expect to remain heavily dependent on outside capital for the foreseeable future until such time that our operations reach a scale of profitability that allows us to fund our obligations with cash inflows from operations. However, management can provide no assurance that we will ever be able to generate sufficient cash inflows to reduce or eliminate its reliance on outside capital.
Our available liquidity to fund our operations over the next twelve months beyond the issuance date was limited to approximately $4.4 million of cash and cash equivalents However, based on our anticipated liquidity needs, the foregoing available liquidity will not be sufficient to meet our obligations as they become due over the next year beyond the issuance date absent management’s ability to secure additional outside capital, which may not be available on commercially acceptable terms, or at all. The Securities Purchase Agreement that we entered into on January 28, 2025 with an accredited investor allows the investor to purchase up to $20.0 million of additional senior secured convertible notes from us, and we also have an At The Market Offering Agreement in place under which we may issue additional shares of Common Stock of approximately $6.0 million, however these do not represent firm commitments for additional capital. We currently have no firm commitments in place for securing additional outside capital.
Included in our anticipated liquidity needs is approximately $14.8 million of outstanding debt that is scheduled to mature over the next twelve months beyond the issuance date, and we do not have sufficient liquidity to repay such debt if a cash settlement is required. In the event we are unable to refinance our outstanding debt, settle some or all of the debt with shares of our common or preferred stock, secure additional outside capital, and/or secure amendments or waivers from its lenders to defer or modify the repayment terms, management will be required to seek other strategic alternatives to settle this indebtedness, which may include, among others, a significant curtailment of the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code. These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on the basis that we will continue to operate as a going concern, which contemplates that we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
Cash Flows
Comparison of the Years Ended December 31, 2025 and 2024
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Net cash used in operating activities |
|
$ |
(10,409 |
) |
|
$ |
(14,812 |
) |
Net cash used in investing activities |
|
|
(53,737 |
) |
|
|
(1,675 |
) |
Net cash provided by financing activities |
|
|
64,619 |
|
|
|
16,339 |
|
Effect of exchange rate on cash |
|
|
(99 |
) |
|
|
286 |
|
Net Change In Cash and Cash Equivalents and Restricted Cash |
|
$ |
374 |
|
|
$ |
138 |
|
93
Operating Activities
Net cash used in operating activities was $10.4 million and $14.8 million for the years ended December 31, 2025 and 2024, respectively. The decrease in 2025 is mainly due to more favorable changes in accounts receivable and inventory. The following table illustrates the components of cash used in operating activities:
|
|
Year Ended December 31, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Net loss |
|
$ |
(23,968 |
) |
|
$ |
(34,934 |
) |
Non-cash expenses, gains and losses (a) |
|
|
10,497 |
|
|
|
21,638 |
|
Changes in accounts receivable |
|
|
571 |
|
|
|
(2,049 |
) |
Changes in inventory |
|
|
1,803 |
|
|
|
1,575 |
|
Changes in accounts payable, accrued expenses and other current liabilities |
|
|
494 |
|
|
|
(762 |
) |
Other, net |
|
|
194 |
|
|
|
(280 |
) |
Total cash used in operations |
|
$ |
(10,409 |
) |
|
$ |
(14,812 |
) |
|
|
|
|
|
|
|
||
(a) - includes depreciation and amortization, stock-based compensation, non-cash interest expense and gains and losses on changes in fair value of the Company's financial instruments. |
|
|||||||
Investing Activities
Net cash used in investing activities of $53.7 million for the year ended December 31, 2025 was mainly comprised of the acquisition digital assets in the net amount of $47.3 million, the loan to Sportstech of $5.0 million, acquisition of software and content of $0.9 million and cash paid, net of cash acquired, for Wattbike of $0.5 million. Cash used in investing activities of $1.7 million for the year ended December 31, 2024 related to the acquisition of CLMBR, Inc. net of cash paid and cash acquired of $1.5 million and acquisition of software and content of $0.2 million.
Financing Activities
Net cash provided by financing activities was mainly comprised of proceeds from the issuance of convertible notes of $63.1 million, proceeds from other loans of $2.0 million and proceeds from the issuance of Common Stock from the At the Market Offering of $1.6 million, partially offset by the repayment of other loans in the amount of $2.0 million and cash settlement on a loss restoration agreement of $0.6 million. Net cash provided by financing activities of $16.3 million for the year ended December 31, 2024 was primarily from the issuance of convertible notes of $4.8 million, proceeds from loans and related party loans of $1.9 million, proceeds from issuance of common stock from equity line of credit $0.4 million, proceeds from common stock offering net of issuance and offering costs of $4.4 million, At the Market Offering proceeds of $8.4 million offset by the payment of loans and related party loans $3.3 million, payment of extension fee with convertible note holder $0.2 million and redemptions on convertible notes $0.2 million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Foreign Currency Risk
To date, most of our inventory purchases have been denominated in U.S. dollars. A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates. In addition, our suppliers incur many costs, including labor and supply costs, in other currencies. While we are not currently contractually obligated to pay increased costs due to changes in exchange rates, to the extent that exchange rates move unfavorably for our suppliers, they may seek to pass these additional costs on to us, which could have a material impact on our gross margins. Our operating results and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates. However, we believe that the exposure to foreign currency fluctuation from operating expenses is relatively small at this time as the
94
related costs do not constitute a significant portion of our total expenses. To date, we have not entered into derivatives or hedging transactions, as our exposure to foreign currency exchange rates has historically been partially hedged as our foreign currency denominated inflows have covered our foreign currency denominated expenses. However, we may enter into derivative or hedging transactions in the future if our exposure to foreign currency should become more significant.
Interest rate risk
Substantially all of our outstanding debt instruments have fixed interest rates. As a result, a hypothetical 100 basis point increase in interest rates would not result in a material impact on our cash flows, liquidity or results of operations for the years ended December 31, 2025 and 2024.
Inflation Risk
While inflation has contributed to increased manufacturing and supplier costs, higher component prices and elevated employee compensation expenses for the years ended December 31, 2025 and 2024, we do not believe that these inflationary pressures have had a material effect on our business, financial condition or results of operations. However, if our costs become subject to more significant or sustained inflationary pressures, we may not be able to fully offset such higher costs through price increases or other measures. Our inability or failure to do so could harm our business, financial condition, and operating results.
Item 8. Financial Statements and Supplementary Data.
The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those financial statements is found in Item 15 of Part IV of this Annual Report on Form 10-K.
95
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision, and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in connection with the period ending December 31, 2025. Based on that evaluation, management has concluded that as of the respective period, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below.
Notwithstanding the material weaknesses in our internal control over financial reporting, management has concluded that the audited consolidated financial statements included in this Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act for the Company. Management assessed the effectiveness of internal control over financial reporting as of the year ended December 31, 2025. In making this assessment, our management used the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2025, because of the material weaknesses described below.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm, as allowed by the SEC.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim consolidated financial statements would not be prevented or detected on a timely basis.
Management concluded that material weaknesses existed as of the year ended December 31, 2025. Specifically, management identified deficiencies in the principles associated with the control environment, risk assessment, control activities, information and communication and monitoring components of internal control, based on the criteria established by the COSO Framework, that constitute material weaknesses, either individually or in the aggregate.
96
These material weaknesses could result in a misstatement of the account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or timely detected.
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Remediation Plan and Status
We are committed to remediating the control deficiencies that constituted the above material weakness by implementing changes to our internal control over financial reporting. We are in the process of implementing measures designed to improve our internal control over financial reporting to remediate these material weaknesses, including formalizing our processes and internal control documentation and strengthening supervisory reviews by our financial management; hiring additional qualified accounting and finance personnel and engaging financial consultants to enable the implementation of internal control over financial reporting and segregating duties amongst accounting and finance personnel. In addition, we are planning on implementing an accounting software system with the design and
97
functionality to segregate incompatible accounting duties, which we currently expect will be implemented in our 2026 fiscal year.
While we are implementing these measures, we cannot assure you that these efforts will remediate our material weaknesses and significant deficiencies in a timely manner, or at all, or prevent restatements of our financial statements in the future. In particular, our material weakness related to our accounting software was not fully remediated for the fiscal year ended December 31, 2025 or the fiscal year ended December 31, 2024, as we expect to implement new software in 2026. If we are unable to successfully remediate our material weaknesses, or identify any future significant deficiencies or material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports, and the market price of our common stock may decline as a result.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the period ended December 31, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report of the Independent Registered Public Accounting Firm
This Annual Report on Form 10-K does not include an attestation report of our independent registered accounting firm regarding internal control over financial reporting. Our independent registered accounting firm will not be required to opine on the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer an “emerging growth company” as defined in the JOBS Act.
Item 9B. Other Information.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
98
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item 10 will be included under the captions “Executive Officers,” “Election of Directors” and “Delinquent Section 16(a) Reports” in our definitive proxy statement to be filed with the Securities and Exchange Commission, or SEC, with respect to our 2026 Annual Meeting of Stockholders, which is expected to be filed no later than 120 days after the end of our last fiscal year ended December 31, 2025 and is incorporated herein by reference.
Our board of directors adopted a code of ethics that applies to all of our employees, officers and directors, including our Chief Executive Officer and other executive and senior financial officers. The full text of our codes of business conduct and ethics is posted on the investor relations page of our website (www.interactivestrength.com). The inclusion of our website address in this annual report on Form 10-K is an inactive textual reference only. We intend to disclose future amendments to our codes of business conduct and ethics, or any waivers of such code, on our website or in public filings.
Insider Trading Policy
The Company has
Item 11. Executive Compensation.
The information required by this Item 11 will be included under the captions “Executive and Director Compensation” and “Compensation Committee Interlocks and Insider Participation” in our definitive proxy statement to be filed with the SEC with respect to our 2026 Annual Meeting of Stockholders and is, other than the information required by Item 402(v) of Regulation S-K, incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item 12 will be included under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans” in our definitive proxy statement to be filed with the SEC with respect to our 2026 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 will be included, as applicable, under the captions “Employment Agreements,” “Director Independence” and “Related Person Transactions” in our definitive proxy statement to be filed with the SEC with respect to our 2026 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services.
The information required by this Item 14 will be included under the captions “Audit Fees and Services” and “Pre-Approval Policies and Procedures” in our definitive proxy statement to be filed with the SEC with respect to our 2026 Annual Meeting of Stockholders and is incorporated herein by reference.
99
PART IV
Item 15. Exhibits, Financial Statement Schedules.
The following documents are filed as part of this Report:
(a) Financial Statements. The following documents are included on pages F2-F67 attached hereto and are filed as part of this Annual Report on Form 10-K:
Item 16. Form 10-K Summary
None.
Exhibit Index
Exhibit Number |
|
Description |
2.1† |
|
Agreement for the Sale and Purchase of the Entire Issued Share Capital and Loan Notes of Wattbike (Holdings) Limited, dated as of April 8, 2025, by and among Interactive Strength Inc., the Shareholders and the Loan Note Holders (incorporated by reference from Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed April 11, 2025). |
2.2† |
|
Agreement and Plan of Merger, by and among Interactive Strength Inc., Ergatta Acquisition Corp., Ergatta, Inc. and Tom Aulet, dated as of February 18, 2026 (incorporated by reference from Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed February 23, 2026). |
3.1 |
|
Amended and Restated Certificate of Incorporation of Interactive Strength Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed May 2, 2023). |
3.2 |
|
Amended and Restated Bylaws of Interactive Strength Inc. (incorporated by reference from Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed May 2, 2023). |
3.3 |
|
Certificate of Designation of Series A Preferred Stock (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed January 8, 2024). |
3.4 |
|
Certificate of Designation of Series B Convertible Preferred Stock (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed February 7, 2024). |
3.5 |
|
Certificate of Amendment to the Certificate of Incorporation of Interactive Strength Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed June 18, 2024). |
3.6 |
|
Certificate of Amendment to the Certificate of Designation of Series A Convertible Preferred Stock of Interactive Strength Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed July 2, 2024). |
3.7 |
|
Bylaws of Interactive Strength Inc. As Amended and Restated by the Board of Directors on July 3, 2024 (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed July 10, 2024). |
3.8 |
|
Certificate of Designation of Series C Convertible Preferred Stock of Interactive Strength Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed October 1, 2024). |
3.9 |
|
Certificate of Amendment to the Certificate of Incorporation of Interactive Strength Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed November 14, 2024). |
3.10 |
|
Certificate of Amendment to the Certificate of Designation of Series A Convertible Preferred Stock of Interactive Strength Inc. (incorporated by reference from Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed November 14, 2024). |
3.11 |
|
Certificate of Amendment to the Certificate of Designation of Series B Convertible Preferred Stock of Interactive Strength Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed December 13, 2024). |
3.12 |
|
Certificate of Amendment to the Certificate of Designation of Series C Convertible Preferred Stock of Interactive Strength Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed January 21, 2025). |
100
3.13 |
|
Certificate of Designation of Series LTI Convertible Preferred Stock of Interactive Strength Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed June 12, 2025). |
3.14 |
|
Certificate of Amendment to the Certificate of Incorporation of Interactive Strength Inc. (incorporated by reference from Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed July 2, 2025). |
3.15 |
|
Certificate of Designation of Series E Convertible Preferred Stock of Interactive Strength Inc. (incorporated herein by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on July 2, 2025). |
3.16 |
|
Certificate of Amendment to the Certificate of Incorporation of Interactive Strength Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February 25, 2026). |
3.17 |
|
Certificate of Designation of Preferences, Rights and Limitations of Series D1 Convertible Preferred Stock, Series D2 Convertible Preferred Stock and Series D3 Convertible Preferred Stock of Interactive Strength Inc. (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 11, 2026). |
4.1 |
|
Form of Specimen Common Stock Certificate (incorporated by reference from Exhibit 4.1 to the registrant’s Registration Statement on Form S-1 (File No. 333-269246), as declared effective by the SEC on April 27, 2023). |
4.2 |
|
Description of the Registrant’s Securities (incorporated by reference from Exhibit 4.10 to the registrant’s Annual Report on Form 10-K filed April 1, 2024). |
4.3 |
|
Form of Underwriter Warrant (incorporated by reference from Exhibit 4.3 to the registrant’s Registration Statement on Form S-1 (File No. 333-269246), as declared effective by the SEC on April 27, 2023). |
4.4 |
|
Form of Senior Secured Convertible Note (incorporated by reference from Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed February 3, 2025). |
4.5 |
|
Form of Common Warrant (incorporated by reference from Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed February 3, 2025). |
4.6 |
|
Form of Class A Incremental Note Purchase Warrant (incorporated by reference from Exhibit 4.3 to the registrant’s Current Report on Form 8-K filed February 3, 2025). |
4.7 |
|
Form of Class B Incremental Note Purchase Warrant (incorporated by reference from Exhibit 4.4 to the registrant’s Current Report on Form 8-K filed February 3, 2025). |
4.8 |
|
Form of Secured Convertible Note (incorporated by reference from Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed February 5, 2025). |
4.9 |
|
Form of Common Warrant (incorporated by reference from Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed March 7, 2025). |
4.10 |
|
Promissory Note (incorporated by reference from Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed March 7, 2025). |
4.11 |
|
Promissory Note (incorporated by reference from Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed May 2, 2025). |
4.12 |
|
Promissory Note, issued as of May 21, 2025 (incorporated by reference from Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed May 27, 2025). |
4.13 |
|
Warrant to Purchase Common Stock, issued May 21, 2025 (incorporated by reference from Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed May 27, 2025). |
4.14 |
|
Promissory Note, issued as of June 4, 2025 (incorporated by reference from Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed June 10, 2025). |
4.15 |
|
Form of Secured Convertible Exchangeable Note (incorporated by reference from Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed June 11, 2025). |
4.16 |
|
Form of Amended and Restated Senior Secured Convertible Note (incorporated by reference from Exhibit 4.1 to the registrant's Current Report on Form 8-K filed September 23, 2025). |
4.17 |
|
Amendment No. 1 to Senior Secured Convertible Note of Interactive Strength Inc., dated November 24, 2025 (incorporated by reference from Exhibit 4.1 to the registrant's Current Report on Form 8-K filed November 25, 2025). |
101
10.1# |
|
Form of Indemnification Agreement entered into with each of the Registrant’s officers and directors (incorporated by reference from Exhibit 10.1 to the registrant’s Registration Statement on Form S-1 (File No. 333-269246), as declared effective by the SEC on April 27, 2023). |
10.2# |
|
2020 Equity Incentive Plan and Forms of Stock Option Agreement, Notice of Exercise, and Stock Option Grant Notice thereunder (incorporated by reference from Exhibit 10.2 to the registrant’s Registration Statement on Form S-1 (File No. 333-269246), as declared effective by the SEC on April 27, 2023). |
10.3# |
|
2023 Stock Incentive Plan and Forms of Notice of Stock Option Grant, Stock Option Agreement, Notice of Restricted Stock Unit Award, Restricted Stock Unit Agreement, Notice of Restricted Stock Award, and Restricted Stock Agreement thereunder (incorporated by reference from Exhibit 10.3 to the registrant’s Registration Statement on Form S-1 (File No. 333-269246), as declared effective by the SEC on April 27, 2023). |
10.4# |
|
2023 Employee Stock Purchase Plan (incorporated by reference from Exhibit 10.4 to the registrant’s Registration Statement on Form S-1 (File No. 333-269246), as declared effective by the SEC on April 27, 2023). |
10.5# |
|
Executive Severance Plan (incorporated by reference from Exhibit 10.5 to the registrant’s Registration Statement on Form S-1 (File No. 333-269246), as declared effective by the SEC on April 27, 2023). |
10.6# |
|
Executive Annual Incentive Plan (incorporated by reference from Exhibit 10.6 to the registrant’s Registration Statement on Form S-1 (File No. 333-269246), as declared effective by the SEC on April 27, 2023). |
10.7# |
|
Non-Employee Director Compensation Policy (incorporated by reference from Exhibit 10.7 to the registrant’s Registration Statement on Form S-1 (File No. 333-269246), as declared effective by the SEC on April 27, 2023). |
10.8# |
|
Offer Letter from the registrant to Trent A. Ward, dated October 27, 2022 (incorporated by reference from Exhibit 10.8 to the registrant’s registration statement on Form S-1 (File No. 333-269246), as declared effective by the SEC on April 27, 2023). |
10.9† |
|
Note Purchase Agreement and Form of Note, dated June 6, 2023 by and among Interactive Strength Inc, THLWY LLC, a Wyoming limited liability company) and the additional lender parties listed therein (incorporated by reference from Exhibit 10.10 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on June 9, 2023). |
10.10† |
|
Form of Equity Line Purchase Agreement (incorporated by reference from Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed December 13, 2023). |
10.11 |
|
Form of Equity Line Registration Rights Agreement (incorporated by reference from Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed December 13, 2023). |
10.12 |
|
Amended and Restated Asset Purchase Agreement, dated January 22, 2024, by and among CLMBR, INC, CLMBR1, LLC and Interactive Strength Inc. (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed January 23, 2024). |
10.13 |
|
Note Purchase Agreement, dated February 1, 2024, by and among Interactive Strength Inc. and CLMBR Holdings LLC as Borrower and Treadway Holdings LLC as Purchaser (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed February 7, 2024). |
10.14 |
|
Securities Purchase Agreement, dated February 1, 2024, by and between Interactive Strength Inc. and Treadway Holdings LLC (incorporated by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed February 7, 2024). |
10.15 |
|
Credit Agreement, dated February 1, 2024, by and between Interactive Strength Inc. and Vertical Investors, LLC (incorporated by reference from Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed February 7, 2024). |
10.16† |
|
Exclusive Distribution Agreement, dated February 20, 2024, by and between Woodway USA, Inc. and Interactive Strength Inc. (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed February 26, 2024). |
10.17† |
|
Loan Modification Agreement, by and between Interactive Strength Inc. and Vertical Investors, LLC, dated April 24, 2024 (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed April 26, 2024). |
102
10.18 |
|
Loan Restoration Agreement, by and between Interactive Strength Inc. and Vertical Investors, LLC, dated April 24, 2024 (incorporated by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed April 26, 2024). |
10.19 |
|
Amendment to Loss Restoration Agreement, dated September 30, 2024, by and between Interactive Strength Inc. and Vertical Investors LLC (incorporated by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed October 4, 2024). |
10.20 |
|
Letter Agreement, dated January 14, 2025, by and among Interactive Strength Inc. and CLMBR Holdings LLC and Woodway USA, Inc. (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed January 21, 2025). |
10.21 |
|
Settlement Agreement, dated January 23, 2025, by and between Interactive Strength Inc. and Vertical Investors, LLC (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed January 29, 2025). |
10.22† |
|
Form of Securities Purchase Agreement (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed February 3, 2025). |
10.23 |
|
Form of Registration Rights Agreement (incorporated by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed February 3, 2025). |
10.24 |
|
Form of Guaranty (incorporated by reference from Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed February 3, 2025). |
10.25 |
|
Form of Security and Pledge Agreement (incorporated by reference from Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed February 3, 2025). |
10.26† |
|
Loan Agreement, by and between Sportstech Brands Holdings GmbH and Interactive Strength Inc., dated as of January 27, 2025 (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed February 4, 2025). |
10.27† |
|
Share Pledge Agreement, by and among Ali Ahmad, Sportstech Brands Holdings GmbH and Interactive Strength Inc., dated as of January 27, 2025 (incorporated by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed February 4, 2025). |
10.28 |
|
Exchange Agreement, by and between Interactive Strength Inc. and TR Opportunities II LLC, dated as of February 4, 2025 (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed February 5, 2025). |
10.29 |
|
Binding Transaction Agreement, by and between Interactive Strength Inc., Ali Ahmad and Sportstech Brands Holding GmbH, dated as of February 10, 2025 (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed February 14, 2025). |
10.30 |
|
Letter Agreement, dated March 3, 2025, by and among Interactive Strength Inc. and CLMBR Holdings LLC and Woodway USA, Inc. (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed March 3, 2025). |
10.31 |
|
Settlement Agreement, dated March 5, 2025, by and between Interactive Strength Inc. and Pillsbury Winthrop Shaw Pittman LLP (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed March 7, 2025). |
10.32 |
|
March 2025 Settlement Agreement, dated as of March 31, 2025, by and between Interactive Strength Inc. and Vertical Investors, LLC (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed April 4, 2025). |
10.33 |
|
Letter Agreement, dated April 18, 2025, by and among Interactive Strength Inc., CLMBR Holdings LLC, and TR Opportunities II LLC (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed April 18, 2025). |
10.34 |
|
Settlement Agreement, dated May 1, 2025, by and between Interactive Strength Inc. and Berenberg Capital Markets LLC (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed May 2, 2025). |
10.35 |
|
1st Amendment and Restatement Agreement, by and between Sportstech Brands Holding GmbH and Interactive Strength Inc., dated as of May 22, 2025 (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed May 29, 2025). |
10.36 |
|
Amended and Restated Loan Agreement, by and between Sportstech Brands Holding GmbH and Interactive Strength Inc., dated as of May 22, 2025 (incorporated by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed May 29, 2025). |
10.37 |
|
Securities Purchase Agreement, dated as of June 10, 2025, by and among Interactive Strength Inc., Interactive Strength Treasury LLC, and each of the investors listed on the Schedule of Buyers |
103
|
|
(incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed June 11, 2025). |
10.38 |
|
Form of Registration Rights Agreement (incorporated by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed June 11, 2025). |
10.39 |
|
Form of Master Netting Agreement (incorporated by reference from Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed June 11, 2025). |
10.40 |
|
Form of Security and Pledge Agreement (incorporated by reference from Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed June 11, 2025). |
10.41 |
|
Form of Backstop Agreement (incorporated by reference from Exhibit 10.5 to the registrant’s Current Report on Form 8-K filed June 11, 2025). |
10.42 |
|
Form of Inducement Letter (Incorporated by reference from Exhibit 10.1 to the registrant's Current Report on Form 8-K filed July 11, 2025). |
10.43 |
|
August 2025 Settlement Agreement, dated as of August 5, 2025 by and between Interactive Strength Inc. and Vertical Investors, LLC (incorporated by reference from Exhibit 10.1 to the registrant's Current Report on Form 8-K filed August 8, 2025). |
10.44 |
|
Exchange Agreement, dated as of August 8, 2025, by and between Interactive Strength Inc. and Vertical Investors, LLC (incorporated by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed August 8, 2025). |
10.45 |
|
Letter Agreement, dated August 8, 2025, by and among Interactive Strength Inc., CLMBR Holdings LLC, and TR Opportunities II LLC (incorporated by reference from Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed August 8, 2025). |
10.46 |
|
Global Note Amendment Agreement, dated as of September 18, 2025 (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed September 23, 2025). |
10.47 |
|
Offer of Employment, dated October 28, 2025, by and between Interactive Strength Inc. and Caleb Morgret (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed October 31, 2025). |
10.48 |
|
Final Netting Agreement, dated as of December 9, 2025, by and among Interactive Strength Inc., Interactive Strength Treasury, LLC, DWF Ventures Ltd. and FET US I LLC (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed December 12, 2025). |
10.49 |
|
Exchange Agreement, dated as of December 8, 2025, by and between Interactive Strength Inc. and Vertical Investors, LLC (incorporated by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed December 12, 2025). |
10.50 |
|
Exchange Agreement, dated as of December 29, 2025 (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed January 5, 2026). |
10.51 |
|
Settlement Agreement, dated as of December 31, 2025, by and between Interactive Strength Inc. and Vertical Investors, LLC (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed January 7, 2026). |
10.52 |
|
Exchange Agreement, dated as of December 31, 2025, by and between Interactive Strength Inc. and Vertical Investors, LLC (incorporated by reference from Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed January 7, 2026). |
10.53 |
|
Exchange Agreement, dated as of February 19, 2026, by and between Interactive Strength Inc. and Vertical Investors, LLC (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed February 25, 2026). |
10.54 |
|
Settlement Agreement, by and between Interactive Strength Inc. and Sportstech Brands Holding GmbH, dated as of February 27, 2026 (incorporated by reference from Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed March 5, 2026). |
14.1 |
|
Code of Ethics (incorporated by reference from Exhibit 14.1 to the registrant’s Annual Report on Form 10-K filed April 1, 2024). |
19.1 |
|
Interactive Strength Inc. Insider Trading Policy |
21.1* |
|
Subsidiaries of the Registrant |
23.1* |
|
Consent of Independent Registered Public Accounting Firm. |
104
31.1* |
|
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1* |
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2* |
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
97.1 |
|
Interactive Strength Inc. Clawback Policy (incorporated by reference from Exhibit 97.1 to the registrant’s Annual Report on Form 10-K filed April 1, 2024). |
101.INS* |
|
Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104* |
|
Cover page formatted as Inline XBRL and contained in Exhibit 101 |
|
|
|
* |
Filed herewith. |
# |
Indicates management contract or compensatory plan or arrangement. |
† |
The schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the SEC upon request. |
105
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
INTERACTIVE STRENGTH INC. |
|
|
Date: March 31, 2026 |
/s/ Trent A. Ward |
|
Trent A. Ward |
|
Chief Executive Officer |
|
(Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Trent A. Ward |
|
Chief Executive Officer and Chair |
|
March 31, 2026 |
Trent A. Ward |
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
/s/ Caleb Morgret |
|
Chief Financial Officer |
|
March 31, 2026 |
Caleb Morgret |
|
(Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Kirsten Bartok Touw |
|
Director |
|
March 31, 2026 |
Kirsten Bartok Touw |
|
|
|
|
|
|
|
|
|
/s/ Aaron N. D. Weaver |
|
Director |
|
March 31, 2026 |
Aaron N. D. Weaver |
|
|
|
|
|
|
|
|
|
/s/ Deepak M. Mulchandani |
|
Director |
|
March 31, 2026 |
Deepak M. Mulchandani |
|
|
|
|
|
|
|
|
|
/s/ David P. Leis |
|
Director |
|
March 31, 2026 |
David P. Leis |
|
|
|
|
106
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID |
F-2 |
Consolidated Balance Sheets as of December 31, 2025 and 2024 |
F-3 |
Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2025 and 2024 |
F-4 |
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years ended December 31, 2025 and 2024 |
F-5 |
Consolidated Statements of Cash Flows for the Years ended December 31, 2025 and 2024 |
F-7 |
Notes to Consolidated Financial Statements |
F-8 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Interactive Strength Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Interactive Strength Inc. and subsidiaries (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, stockholders’ (deficit) equity and convertible preferred stock, and cash flows, for each of the two years in the period ended December 31, 2025, and the related notes (collectively referred to as the "financial statements").
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses and incurred negative cash outflows from operations since inception, has an accumulated deficit and is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain its operations and does not have sufficient liquidity to repay certain outstanding loans and interest currently due, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
March 31, 2026
We have served as the Company's auditor since 2022.
F-2
INTERACTIVE STRENGTH INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, net |
|
|
|
|
|
|
||
Inventories, net |
|
|
|
|
|
|
||
Vendor deposits |
|
|
|
|
|
|
||
Loan receivable |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Right-of-use-assets |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Long-term inventories, net |
|
|
|
|
|
|
||
Vendor deposits long term |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and stockholders' equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued expenses and other current liabilities |
|
|
|
|
|
|
||
Operating lease liability, current portion |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Loan payable |
|
|
|
|
|
|
||
Income tax payable |
|
|
|
|
|
|
||
Derivatives |
|
|
|
|
|
|
||
Convertible notes payable |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Operating lease liability, net of current portion |
|
|
|
|
|
|
||
Other long term liabilities |
|
|
|
|
|
|
||
Warrant liabilities |
|
|
|
|
|
|
||
Loans payable non current |
|
|
|
|
|
|
||
Convertible notes payable non current |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
|
|
$ |
|
||
Commitments and contingencies (Note 15) |
|
|
|
|
|
|
||
Series E preferred stock, par value $ |
|
|
|
|
|
|
||
Stockholders' equity |
|
|
|
|
|
|
||
Series A preferred stock, par value $ |
|
|
|
|
|
|
||
Series B preferred stock, par value $ |
|
|
|
|
|
|
||
Series C preferred stock, par value $ |
|
|
|
|
|
|
||
Common stock, par value $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated other comprehensive income |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders' equity |
|
|
|
|
|
|
||
Total liabilities, preferred stock and stockholders' equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
INTERACTIVE STRENGTH INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share amounts)
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Revenue: |
|
|
|
|
|
|
||
Fitness product revenue |
|
$ |
|
|
$ |
|
||
Membership revenue |
|
|
|
|
|
|
||
Training revenue |
|
|
|
|
|
|
||
Total revenue |
|
|
|
|
|
|
||
Cost of revenue: |
|
|
|
|
|
|
||
Cost of fitness product revenue |
|
|
( |
) |
|
|
( |
) |
Cost of membership |
|
|
( |
) |
|
|
( |
) |
Cost of training |
|
|
( |
) |
|
|
( |
) |
Total cost of revenue |
|
|
( |
) |
|
|
( |
) |
Gross profit (loss) |
|
|
|
|
|
( |
) |
|
Operating expenses: |
|
|
|
|
|
|
||
Research and development |
|
|
|
|
|
|
||
Sales and marketing |
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
||
Total operating expenses |
|
|
|
|
|
|
||
Loss from operations |
|
|
( |
) |
|
|
( |
) |
Other income (expense), net: |
|
|
|
|
|
|
||
Other expense, net |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
( |
) |
|
|
( |
) |
Interest income |
|
|
|
|
|
|
||
Loss on issuance of warrants |
|
|
|
|
|
( |
) |
|
Gain (loss) upon extinguishment of debt and accounts payable |
|
|
|
|
|
( |
) |
|
Change in fair value of convertible notes |
|
|
|
|
|
( |
) |
|
Change in fair value of earnout |
|
|
|
|
|
|
||
Change in fair value of derivatives |
|
|
|
|
|
( |
) |
|
Change in fair value of digital assets |
|
|
( |
) |
|
|
|
|
Change in fair value of warrants |
|
|
|
|
|
|
||
Total other income (expense), net |
|
|
( |
) |
|
|
( |
) |
Loss before provision for income taxes |
|
|
( |
) |
|
|
( |
) |
Income tax expense |
|
|
|
|
|
|
||
Net loss attributable to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share - basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average common stock outstanding—basic and diluted |
|
|
|
|
|
|
||
|
|
|
Year Ended December 31, |
|
|||||
|
|
|
2025 |
|
|
2024 |
|
||
Net loss |
|
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive (loss) gain: |
|
|
|
|
|
|
|
||
Foreign currency translation (loss) gain |
|
|
|
( |
) |
|
|
|
|
Total comprehensive loss |
|
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
INTERACTIVE STRENGTH INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY AND CONVERTIBLE PREFERRED STOCK
(In thousands, except share amounts)
|
Convertible Preferred Stock Series E |
|
Convertible Preferred Stock Series A |
|
Convertible Preferred Stock Series B |
|
Convertible Preferred Stock Series C |
|
Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Income |
|
Accumulated Deficit |
|
Total Stockholders' (Deficit) Equity |
|
||||||||||||||||||||||||
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
|
|
|
|
|
|
|
|
||||||||||||||
Balances at December 31, 2023 |
|
— |
|
$ |
— |
|
|
— |
|
$ |
- |
|
|
— |
|
$ |
- |
|
|
— |
|
$ |
- |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
||||
Issuance of Series A Preferred stock upon conversion of debt |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Series B Preferred stock upon acquisition of CLMBR, Inc. |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Issuance of Common stock from upon acquisition of CLMBR, Inc. |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Issuance of Common stock upon waiver to enter into Note Agreement |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Issuance of Common stock upon issuance of convertible notes |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Issuance of Common stock from equity line of credit |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Issuance of Common stock upon conversion of convertible notes |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Registered direct offering, net of issuance costs of $ |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Issuance of Common stock from At the Market offering, net of offering costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of preferred shares upon conversion of warrants |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Common stock upon exercise of warrants |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Issuance of Common stock from Best Efforts Offering, net of offering costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Series A Preferred dividends declared and paid in kind |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
( |
) |
|
— |
|
||
Issuance of Series C Preferred stock upon conversion of Series A Preferred stock and conversion of debt |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
( |
) |
|
|
|||
Issuance of Common stock upon exercise of pre-funded warrants from Best Efforts Offering |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Issuance of Common stock upon extinguishment of debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Issuance of Common stock upon conversion of Series A Preferred stock |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 for 40 reverse stock split share round up |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1 for 100 reverse stock split share round up |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Issuance of Common stock upon exercise of stock options |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Foreign currency translation gain |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balances at December 31, 2024 |
|
— |
|
$ |
- |
|
|
|
$ |
|
|
|
$ |
- |
|
|
|
$ |
- |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
INTERACTIVE STRENGTH INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND CONVERTIBLE PREFERRED STOCK
(In thousands, except share amounts)
|
Convertible Preferred Stock Series E |
|
Convertible Preferred Stock Series A |
|
Convertible Preferred Stock Series B |
|
Convertible Preferred Stock Series C |
|
Common Stock |
|
Additional Paid-In Capital |
|
Accumulated Other Comprehensive Income |
|
Accumulated Deficit |
|
Total Stockholders' Equity |
|
||||||||||||||||||||||||
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
|
|
|
|
|
|
|
|
||||||||||||||
Balances at December 31, 2024 |
|
— |
|
$ |
- |
|
|
|
$ |
|
|
|
$ |
- |
|
|
|
$ |
- |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||||||||
Series A Preferred dividends declared and paid in kind |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
( |
) |
|
— |
|
||
Series C Preferred dividends declared and paid in kind |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
( |
) |
|
|
||||
Issuance of Common stock from At the Market offering |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Issuance of Common stock upon conversion of convertible notes |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Common stock upon conversion of preferred stock |
|
|
|
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
||||||
Issuance of Series C Preferred stock upon settlement of loss restoration agreement |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Gain on extinguishment of related party promissory notes |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Reverse stock split retirement of fractional shares |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Issuance of preferred stock series E upon acquisition of Wattbike |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
||
Issuance of Common stock upon exercise of warrants |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Issuance of Common stock upon settlement of debt and accounts payable |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
||||
Adjustments to par value of common stock for reverse stock splits |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
|
|
— |
|
|
— |
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Foreign currency translation gain |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balances at December 31, 2025 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
$ |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
INTERACTIVE STRENGTH INC.
CONSOLIDATED STATEMENT OF CASH FLOWS ((In thousands)
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
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Loss on extinguishment of FET Convertible note |
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Fair value of common stock issued with Best Efforts Offering |
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Change in fair value of warrants |
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Accounts receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Vendor deposits |
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Other assets |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Operating lease liabilities |
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Net cash used in operating activities |
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Cash Flows From Investing Activities: |
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Loan to Sportstech |
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Purchase of property and equipment |
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Acquisition of internal use software |
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Acquisition of digital assets |
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Acquisition of business, cash paid, net of cash acquired |
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Acquisition of software and content |
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Net cash used in investing activities |
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Cash Flows From Financing Activities: |
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Proceeds from issuance of related party loans |
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Payment on loss restoration agreement |
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Payments of related party loans |
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Proceeds from issuance of common stock and prefunded warrants upon offering, net of offering costs |
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Proceeds from issuance of common stock in registered direct offering, net of offering costs |
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Payments of offering costs |
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Redemption and payment on convertible notes |
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Proceeds from issuance of convertible notes, net of issuance costs |
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Proceeds from issuance of common stock from At the Market Offering, net of issuance costs |
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Payment of extension fee with convertible note holder |
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Payment of issuance costs |
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Proceeds from the issuance of common stock from equity line of credit |
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Net Change In Cash and Cash Equivalents and Restricted Cash |
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The accompanying notes are an integral part of these consolidated financial statements.
F-7
INTERACTIVE STRENGTH INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Description of Business and Basis of Presentation
Description and Organization
Interactive Strength Inc. (the "Company") is an acquisition-focused company seeking to accelerate growth via acquisitions and deploy capital into sectors that are considered undervalued due to temporary factors, operational or misunderstood industry trends. The Company's current portfolio consists of three leading brands serving the commercial and at-home markets with specialty fitness equipment and virtual training: CLMBR, FORME and Wattbike. CLMBR manufactures vertical climbing equipment and provides a unique digital and on-demand training platform. FORME is a hardware manufacturer and digital fitness service provider that combines award-winning smart gyms with live 1:1 personal training (from real humans) to deliver an immersive experience. Wattbike, acquired on July 1, 2025, has built a reputation as the training tool trusted by the world's top athletes, teams and military programs. The combination of technology with expert training leads to better outcomes for both consumers and trainers alike. CLMBR, FORME and Wattbike offer unique fitness solutions for both the commercial and at-home markets.
Reverse Stock Splits
On February 23, 2026, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s common stock, $
As a result of the February 2026 Reverse Stock Split, every ten pre-split shares of Common Stock were combined into one share of Common Stock, resulting in a reduction in the number of shares of the Company's outstanding Common Stock from
On June 26, 2025, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s Common Stock, at a rate of
The June 2025 Reverse Stock Split decreased the number of shares of Common Stock issued and outstanding from
The Common Stock began trading on a Reverse Stock Split-adjusted basis on The Nasdaq Capital Market on June 27, 2025.
On November 8, 2024, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s Common Stock at a rate of
The effect on shares from the November 2024 Reverse Stock Split on November 11, 2024 decreased the number of shares of Common Stock issued and outstanding from
F-8
Stock as a result of the November 2024 Reverse Stock Split, which affected all holders of Common Stock uniformly and did not affect any stockholder’s percentage ownership interest in the Company, except to the extent that the Reverse Stock Split resulted in an adjustment to a stockholder’s ownership of Common Stock due to the treatment of fractional shares. Therefore, voting rights and other rights and preferences of the holders of Common Stock were not affected by the November 2024 Reverse Stock Split (other than as a result of the treatment of fractional shares). Common stock issued pursuant to the November 2024 Reverse Stock Split remains fully paid and nonassessable, without any change in the par value per share.
On June 13, 2024, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s Common Stock at a rate of
The effect on shares from the June 2024 Reverse Stock Split on June 14, 2024 decreased the number of shares of Common Stock issued and outstanding from
All share and per share information, including earnings per share, in this Form 10-K have been retroactively adjusted to reflect the February 2026, June 2025, November 2024 and June 2024 Reverse Stock Splits and certain items in prior period financial statements have been revised to conform to the current presentation.
Acquisition of Wattbike Holdings Limited
On April 8, 2025, the Company entered into an Agreement for the Sale and Purchase of the Entire Issued Share Capital and Loan Notes of Wattbike (Holdings) Limited (“Wattbike”) (the “Purchase Agreement”) with the shareholders of Wattbike (the “Shareholders”) and holders of certain promissory notes (the “Notes") issued by Wattbike (the “Noteholders,” and together with the Shareholders, the “Sellers”) to acquire the entire issued share capital and Notes of Wattbike. On July 1, 2025, pursuant to the Purchase Agreement, the Company completed the acquisition for a total purchase price of approximately $
The Wattbike Acquisition was accounted for under the acquisition method of accounting under Accounting Standards Codification ("ASC") 805, Business Combinations. Assets acquired and liabilities assumed were recorded in the condensed consolidated balance sheet at their estimated fair values as of July 1, 2025, with the remaining unallocated purchase price recorded as goodwill (see Note 23).
Acquisition of CLMBR, Inc.
On October 6, 2023, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with CLMBR and CLMBR1, LLC (collectively, the “Sellers”) to purchase and acquire substantially all of the assets and assume certain liabilities of the Sellers. On January 22, 2024, the Company and the Sellers entered into an amended and restated Asset Purchase Agreement (the “Amended Agreement”). On February 2, 2024, pursuant to the Amended Agreement, the Company completed the acquisition for a total purchase price of approximately $
F-9
to the lender of the senior debt and the issuance of an $
The CLMBR Acquisition was accounted for under the acquisition method of accounting under ASC 805, Business Combinations. Assets acquired and liabilities assumed were recorded in the condensed consolidated balance sheet at their estimated fair values as of February 2, 2024, with the remaining unallocated purchase price recorded as goodwill (see Note 23).
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The consolidated financial statements include the accounts of Interactive Strength Inc. and its subsidiaries in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated.
Liquidity and Going Concern
In accordance with Accounting Standards Update ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), or ASU 205-40, management evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of the accompanying financial statements.
As an emerging growth company, the Company is subject to certain inherent risks and uncertainties associated with the development of an enterprise. In this regard, since the Company’s inception, substantially all of management’s efforts have been devoted towards the development of its brands and services, their penetration in the marketplace, and the development of a commercial organization, all at the expense of short-term profitability.
As of the date the accompanying consolidated financial statements were issued (the “issuance date”), management evaluated the following adverse conditions and events present at the Company in accordance with ASU 205-40:
F-10
These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
Note 2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. On an ongoing basis, the Company evaluates its estimates, including, among others, those related to the realizability of inventory, fair value measurements, useful lives of long lived assets, including property and equipment and finite lived intangible assets, product warranty, stock-based compensation expense, warrant liabilities, accrual of acquisition earn-outs, valuation of deferred taxes, valuation of derivatives, fair value of goodwill and other intangible assets, fair value of preferred stock in connection with acquisitions and debt extinguishments, and commitments and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable. Actual results may differ from these estimates.
Segment Information
Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company has one operating segment, the development and sale of its at-home fitness technology platform. The Company’s CODM is its chief executive officer, who manages the Company’s operations on a consolidated basis for the purpose of allocating resources. As the Company has one reportable segment, all required segment financial information is presented in the consolidated financial statements (See Note 3). The Company currently operates in the United States, the United Kingdom, and Taiwan. As of December 31, 2025 and December 31, 2024, substantially all of the Company's long-lived assets were held in the United States.
Cash
Cash consists of cash on deposit in banks.
Accounts Receivable
Accounts receivable represents the amounts that the Company has an unconditional right to receive, and is carried net of allowance for credit losses, in accordance with the Current Expected Credit Loss ("CECL") model under ASC 326. The Company estimates expected credit losses based on a combination of historical loss experience, customer creditworthiness, current economic conditions, and reasonable and supportable forward-looking information. The allowance for credit losses is updated at each reporting period to reflect changes in credit risk. The allowance for credit losses is recorded against accounts receivable balances, with a corresponding charge to expense in the consolidated statements of operations. Receivables are written off when management determines their collection is unlikely. The allowance is maintained at a level considered adequate to provide for potential credit losses based on management’s evaluation of the anticipated impact on the balance of current economic conditions, changes in character and size of
F-11
balance, past and expected future loss experience, reasonable and supportable forecasts and other pertinent factors. As of December 31, 2025 and 2024, the allowance for credit losses was $
Property and Equipment
Property and equipment purchased by the Company are stated at cost less accumulated depreciation. Major updates and improvements are capitalized, while charges for repairs and maintenance which do not improve or extend the lives of the respective asset are expensed as incurred. The Company capitalizes the cost of pre-production tooling which it owns under a supply arrangement. Pre-production tooling, including the related engineering costs, that the Company will not own or will not use in producing products under long-term supply arrangements, are expensed as incurred.
Depreciation and amortization is computed on a straight-line basis over the following estimated useful lives:
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Lesser of lease term or estimated useful life |
Inventories, net
Inventories, which are comprised of finished goods, are stated at the lower of cost or net realizable value. Cost is determined using first-in, first-out basis. Adjustments to reduce inventories to their estimated net realizable value are reflected in cost of revenues in the consolidated statement of operations. The Company assesses its allowance for inventory obsolescence by evaluating factors such as inventory levels, historical sales, and the remaining life of its products. Inventory losses are written-off against the allowance. Inventory not expected to be sold in the next twelve months is classified as long-term in the accompanying consolidated balance sheets.
Vendor Deposits
Vendor deposits represent prepayments made to the third-party manufacturers of the Company’s inventory. In general, the Company’s contract manufacturers require that the Company pay a portion of the costs for a manufacturing-related purchase order in advance, with the remaining cost being invoiced upon delivery of the products. Prior to receipt of the goods, any costs associated with the prepayments made by the Company are reflected as vendor deposits on the Company’s consolidated balance sheet. Vendor deposits where the Company will not receive goods within one year have been classified as long-term in the Company's consolidated balance sheet.
Capitalized Studio Content
Capitalized Studio content costs include certain expenditures to develop video and live content for the Company’s customers. The Company capitalizes production costs for recorded content in accordance with ASC 926-20, Entertainment-Films - Other Assets - Film Costs. The Company recognizes capitalized content, net of accumulated amortization, within other non-current assets in the consolidated balance sheets and recognizes the related amortization expense as a component of cost of membership revenue in the consolidated statements of operations and comprehensive loss. Costs which qualify for capitalization include production costs, development costs, direct costs, labor costs, and production overhead. Expenditures for capitalized content are included within investing activities in the consolidated statements of cash flows. Based on certain factors, including historical and estimated user viewing patterns, the Company amortizes individual titles within the Studio content library on a straight-line basis over a three-year useful life. The Company reviews factors impacting the amortization of the capitalized Studio content on an ongoing basis. Estimates related to these factors require considerable management judgment.
The Company considered certain factors in determining the useful life of the content, including expected periods over which the content will be made available through the platform and related viewership, the lack of “obsolescence” of such content over such period given the nature of its videos (i.e., exercise classes which are not significantly impacted by changes in markets or customer preferences, and/or for which the content is expected to significantly change or evolve over time), and the expected significant growth of its subscriber base which will contribute to substantial increases in viewership over time given the recent launch of its product and membership offerings. Based on these
F-12
factors, the Company has determined that a three-year (3-year) amortization period is reasonable for the content. The Company will continue to review factors impacting the amortization of the capitalized content on an ongoing basis.
The Company’s business model is membership-based as opposed to generating revenues at a specific title level. Therefore, all content assets are monetized as part of a single asset group. The content is assessed at the group level when an event or change in circumstances indicates a change in the expected usefulness of the content or that fair value may be less than unamortized cost. Unamortized costs are assessed for impairment regardless of whether the produced content is completed. To date, the Company has recognized one impairment with regards to the carrying value of its content portfolio. If circumstances in the future suggest that an impairment may exist, these aggregated content assets will be stated at the lower of unamortized cost or fair value. In addition, unamortized costs for assets that have been, or are expected to be, abandoned are written off. The unamortized cost of content is approximately $
Capitalized Software Costs
The Company capitalizes certain eligible software development costs incurred in connection with its internal use software in accordance with ASC 350-40, Internal-use Software and ASC 985, Software. These capitalized costs also relate to the Company’s Studio software that is accessed by its customers on a membership basis as well as certain costs associated with its information systems. Capitalized software costs are amortized over the estimated useful life of three years. Capitalization begins once the application development stage begins, management has authorized and committed to funding the project, it is probable the project will be completed, and the software will be used to perform the function intended. Internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. The Company expenses all costs incurred that relate to planning and post-implementation phases of development. Intangible assets are assessed for impairment when events or circumstances indicate the existence of a possible impairment, and
During the years ended December 31, 2025 and December 31, 2024, the Company capitalized $
During the years ended December 31, 2025 and December 31, 2024, the Company capitalized $
Amortization for capitalized software and internal-use software is computed on a straight-line basis over a three-year estimated useful life.
Goodwill
Goodwill consists of the excess of cost over the fair value of net assets acquired in business combinations. The Company follows the provisions of ASC Topic 350, “Intangibles —Goodwill and Other”, which requires an annual impairment test for goodwill. The Company may first choose to perform a qualitative evaluation of the likelihood of goodwill and intangible assets impairment. If the Company determines a quantitative evaluation is necessary, then it must perform a goodwill impairment test by comparing the fair value of the reporting unit to its carrying value. An impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.
Identifiable Intangible Assets
The Company follows the provisions of ASC Topic 350, “Intangibles - Goodwill and Other”, which establishes accounting standards for the impairment of long-lived assets such as intangible assets subject to amortization. The Company reviews long-lived assets to be held and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset group is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the asset group exceeds the fair value of the asset. The Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the asset. During the years ended December 31, 2025 and 2024, there was
F-13
The Company’s intangible assets subject to amortization consist of developed technology, customer related intangibles, trademark and tradenames, and content that are amortized on a straight-line basis over the estimated useful lives of the related intangible asset. The estimated useful lives of the respective intangible assets range from
The Company estimates the fair value of intangible assets based on an income approach using the relief-from-royalty method. This methodology assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these types of assets. This approach is dependent on a number of factors, including estimates of future growth and trends, royalty rates for this category of intellectual property, discount rates and other variables. The Company bases its fair value estimates on assumptions it believes to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. The Company recognizes an impairment loss when the estimated fair value of the intangible asset is less than the carrying value. For the periods presented, the Company did not recognize any impairment of intangible assets.
Business Combinations
The Company accounts for business combinations under the provisions of ASC 805, Business Combinations, which requires that the acquisition method of accounting be used for all business combinations. Assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values. ASC 805 also specifies criteria that intangible assets acquired in a business combination must be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date with changes in the fair value recorded through earnings.
Fair Value Measurements
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings when they occur. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurement or assumptions that market participants would use in pricing the assets or liabilities, such as inherent risk, transfer restrictions, and credit risk.
The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
The Company’s material financial instruments consist primarily of cash and cash equivalents, accounts payable, accrued expenses, bridge notes, convertible notes, contingent consideration, embedded derivatives and warrants. The carrying amounts of current financial instruments, which include cash, accounts receivable, accounts payable and accrued expenses, approximate their fair values due to the short-term nature of these instruments.
Impairment of Long-Lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by
F-14
a comparison of the carrying amount of an asset (or asset group) to the future undiscounted cash flows expected to be generated by the assets (or asset group). If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds their fair value. There was
Leases
The Company adopted the Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) (“ASU 2016-02” or “ASC 842”) as of January 1, 2022, using the modified retrospective method and utilized the effective date as its date of initial application, with prior periods presented in accordance with previous guidance under ASC 840, Leases. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and current and non-current lease liabilities, as applicable.
Convertible Notes
As permitted under ASC Topic 825, Financial Instruments, the Company has elected the fair value option to account for some of its convertible notes. In accordance with ASC Topic 825, the Company records these convertible notes at fair value with changes in fair value recorded as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss. As a result of applying the fair value option, direct costs and fees related to the convertible notes were expensed as incurred and were not deferred. In addition, the convertible notes meet other applicable criteria for electing fair value option under ASC Topic 825.
In connection with the Company’s issuance of the December 2023 Convertible Notes and some of the convertible notes issued during the year ended December 31, 2025, the Company bifurcated the embedded conversion option and recorded the embedded conversion option as a short-term derivative liability in the Company’s balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The convertible debt is carried at amortized cost. The derivative liability is remeasured at each reporting period with changes in fair value recorded in the consolidated statements of operations in other expense (income). See Note 11 for further details.
As permitted under ASC Topic 825, Financial Instruments, the Company has elected the fair value option to account for its February 2024 Convertible Notes upon amendment entered into in November 2024. In accordance with ASC Topic 825, the Company records these convertible notes at fair value with changes in fair value recorded as a component of other income (expense), net in the consolidated statement of operations and comprehensive loss.
Warrants
The Company accounts for common stock warrants as either equity-classified instruments or liability-classified instruments based on an assessment of the warrant terms. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all the requirements for equity classification under ASC 815, including whether the warrants are indexed to our Common Stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance, and, for liability-classified warrants, at each reporting period end date while the warrants are outstanding. The warrants are revalued on each subsequent balance sheet date until such instruments are exercised or expire, with any changes in the fair value between reporting periods recorded in the consolidated statements of operations and comprehensive loss.
Commitments and Contingencies
Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. If a loss is reasonably possible and the loss or range of loss can be reasonably estimated, the Company discloses the possible loss or states that such an estimate cannot be made.
F-15
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Refer to Note 4 for additional information.
Cost of Fitness Product Revenue
Cost of fitness product revenue relates to the Fitness Product costs, including manufacturing costs, duties and other applicable import costs, shipping and handling costs, packaging, warranty replacement costs, fulfillment costs, warehousing costs, and certain allocated costs related to management, facilities, and personnel-related expenses associated with supply chain logistics. Cost of fitness product revenue also contains valuation losses related to the Company’s inventory lower of cost or net realizable value reserve.
Cost of Membership
Membership cost of revenue includes costs associated with personnel-related expenses, filming and production costs, hosting fees, music royalties, and amortization of capitalized software development costs.
Cost of Training
Training cost of revenue includes costs associated with personnel-related expenses and rent expense.
Research and Development Costs
Research and development expenses consist primarily of personnel and facilities-related expenses, engineering costs, consulting and contractor expenses, tooling and prototype materials, software platform expenses and depreciation of property and equipment. Substantially all of the Company’s research and development expenses are related to developing new products and services and improving existing products and services. Research and development expenses are expensed as incurred.
Stock-Based Compensation
In December 2020, the Company's Board of Directors (the "Board") adopted the 2020 Equity Incentive Plan (“the 2020 Plan”) and in April 2023, Board adopted the 2023 Equity Incentive Plan (the “2023 Plan”). Stock-based awards are measured at the grant date based on the fair value of the award and are recognized as expense, net of actual forfeitures, on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The determination of the grant date fair value of stock awards issued is affected by a number of variables, including the fair value of the Company’s Common Stock, the expected Common Stock price volatility over the expected life of the awards, the expected term of the stock option, risk-free interest rates, and the expected dividend yield of the Company’s Common Stock. The Company derives its volatility from the average historical stock volatilities of several peer public companies over a period equivalent to the expected term of the awards. The Company estimates the expected term based on the simplified method for employee stock options considered to be “plain vanilla” options, as the Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate the expected term. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant. Expected dividend yield is
In June 2023, the Company granted options to non-employee directors, selected executives and other key employees where vesting is contingent on the Company's share price meeting certain targets. The fair value of each option granted was estimated on the date of grant using the Monte Carlo valuation model and assumes that share price targets are achieved. The awards are expensed on a straight-line basis over the requisite service period.
Stock-based compensation expense is classified in the accompanying consolidated statement of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
Foreign Currency Transactions
F-16
The functional currency for the Company’s wholly-owned foreign subsidiaries, Interactive Strength UK and Interactive Strength Taiwan, is the United States dollar. All foreign currency transaction gains and losses are recognized in the consolidated statements of operations and comprehensive loss through other income (expense).
Comprehensive Loss
Comprehensive loss includes net loss as well as other changes in stockholders’ deficit that result from transactions and economic events other than those with stockholders. For the years ended December 31, 2025 and 2024, comprehensive (loss) income included $
Loss Per Share
The Company computes loss per share using the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company’s redeemable convertible preferred stock and common stock issued upon early exercise of stock options are participating securities. The Company considers any shares issued upon early exercise of stock options, subject to repurchase, to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a cash dividend is declared on common stock. These participating securities do not contractually require the holders of such shares to participate in the Company’s losses. As such, net losses for the periods presented were not allocated to the Company’s participating securities.
Basic loss per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted earnings (loss) per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential shares of common stock outstanding during the period. Potential shares of common stock consist of incremental shares issuable upon the assumed exercise of stock options, conversion of convertible notes payable, exercise of warrants, employee stock purchase plan shares to be issued, and vesting of restricted stock awards.
Income Taxes
The Company utilizes the asset and liability method for computing its income tax provision. Deferred tax assets and liabilities reflect the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities as well as operating loss, capital loss, and tax credit carryforwards, using enacted tax rates. Management makes estimates, assumptions, and judgments to determine the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent the Company believes recovery is not likely, establishes a valuation allowance.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits, which to date have not been material, are recognized within income tax expense.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption. The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and has elected not to “opt out” of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that the Company either (i)
F-17
irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. As noted below, certain new or revised accounting standards were early adopted.
Accounting Pronouncements Recently Adopted
ASU 2016-13
On January 1, 2025, the Company adopted ASU 2016-13, “Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASC 326”). ASC 326 replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, as well as some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost are to be presented at the net amount expected to be collected by using an allowance for credit losses. Adoption of this update did not have a material impact on the Company's consolidated financial statements.
ASU 2023-07
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments in this ASU improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit and loss, and provide new segment disclosure requirements for entities with a single reportable segment, among other disclosure requirements. The Company adopted this standard on a retrospective basis for the 2024 annual period, and for interim periods beginning January 1, 2025. The impact is limited to financial statement disclosures. See Note 3 - Segment Reporting.
ASU 2020-04 and ASU 2022-06
In March 2020, the FASB issued ASU 2020-04, “Reference rate reform (Topic 848): Facilitation of the effects of reference rate reform on financial reporting.” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The amendments apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The amendments are elective and are effective upon issuance. In December 2022, the FASB issued ASU 2022-06, “Reference rate reform (Topic 848): Deferral of the sunset date of Topic 848” which defers the expiration date for Topic 848 from December 31, 2022 until December 31, 2024. The Company adopted this ASU effective January 1, 2025, which did not have a material impact on its consolidated financial statements.
ASU 2023-09
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU modifies income tax disclosures by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliations and (ii) the disclosure of income taxes paid disaggregated by jurisdiction, among other requirements. This ASU is effective for fiscal years beginning after December 31, 2024 and should be applied on a prospective basis, with the option to apply the standard retrospectively. The Company adopted this ASU effective January 1, 2025, which did not have a material impact on its consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
ASU 2024-03
In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". The amendments in ASU 2024-03 address investor requests for more detailed expense information and require additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently
F-18
evaluating this guidance to determine the impact it may have on its consolidated financial statements.
3. Segment Reporting
The Company is organized into
The following tables present revenue and significant segment expenses that are included within net loss:
|
|
Year Ended December 31, |
|
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
||
Total Revenues |
|
$ |
|
|
$ |
|
|
||
Less: |
|
|
|
|
|
|
|
||
Cost of fitness product revenue (excluding depreciation and amortization) |
|
|
|
|
|
|
|
||
Cost of membership (excluding depreciation and amortization) |
|
|
|
|
|
|
|
||
Cost of training |
|
|
|
|
|
|
|
||
Research and development (excluding stock based compensation) |
|
|
|
|
|
|
|
||
General and administrative (excluding stock based compensation, depreciation and amortization) |
|
|
|
|
|
|
|
||
Interest expense |
|
|
|
|
|
|
|
||
Interest income |
|
|
( |
) |
|
|
|
|
|
Change in fair value of earnout |
|
|
( |
) |
|
|
( |
) |
|
(Gain) loss upon extinguishment of debt and accounts payable |
|
|
( |
) |
|
|
|
|
|
Loss on issuance of warrants |
|
|
|
|
|
|
|
||
Change in fair value of convertible notes |
|
|
( |
) |
|
|
|
|
|
Change in fair value of derivatives |
|
|
( |
) |
|
|
|
|
|
Change in fair value of warrants |
|
|
( |
) |
|
|
( |
) |
|
Change in fair value of digital assets |
|
|
|
|
|
|
|
||
Depreciation and amortization expense |
|
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
|
||
Transaction related expenses (1) |
|
|
|
|
|
|
|
||
Vendor Settlements |
|
|
|
|
|
|
|
||
Other segment items (2) |
|
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
||
Reconciliation of net loss |
|
|
|
|
|
|
|
||
Adjustments and reconciling items |
|
|
|
|
|
|
|
||
Consolidated net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
(1)
(2)
The following tables present a summary of revenues by geographic area.
F-19
|
|
Year Ended December 31, 2025 |
|
|
|||||||||||||
(in thousands) |
|
CLMBR |
|
|
FORME |
|
|
WATTBIKE |
|
|
Total |
|
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fitness Product Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Membership Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Training Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fitness Product Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Membership Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fitness Product Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fitness Product Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
|
|
Year Ended December 31, 2024 |
|
|
|||||||||||||
(in thousands) |
|
CLMBR |
|
|
FORME |
|
|
WATTBIKE |
|
|
Total |
|
|
||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fitness Product Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Membership Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Training Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Europe |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fitness Product Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fitness Product Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Note 4. Revenue Recognition
The Company’s primary source of revenue is comprised of sales of its Connected Fitness Products and related accessories in Europe and the United States and, to a lesser extent, Membership revenue and sales of personal training services recorded within Training revenue.
The Company determines revenue recognition through the following steps:
F-20
Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company’s revenue is reported net of sales returns, discounts and incentives as a reduction of the transaction price.
The Company applies the practical expedient as per ASC 606-10-50-14 and does not disclose information related to remaining performance obligations due to their original expected terms being one year or less.
Connected Fitness Products
Connected Fitness Products include the Company’s portfolio of Connected Fitness Products and related accessories, delivery and installation services, and extended warranty agreements. The Company recognizes Connected Fitness Product revenue net of sales returns and discounts on the date the product has been delivered to the customer or at shipping point if the customer is responsible for shipping, except for extended warranty revenue which is recognized over the warranty period. The Company allows customers to return products within thirty days of purchase, as stated in its return policy.
Amounts paid for credit card processing fees for sales of Connected Fitness Products are included as a reduction to fitness product revenue in the Company’s consolidated statements of operations and comprehensive loss.
Membership
The Company’s memberships provide unlimited access to content in its library of on-demand fitness classes. The Company’s memberships are offered on a month-to-month basis. Amounts paid for membership fees are included within deferred revenue on the Company’s consolidated balance sheets and recognized ratably over the membership term. The Company records payment processing fees for its monthly membership charges within cost of membership in the Company’s consolidated statements of operations and comprehensive loss.
Training
The Company’s training services consist of personal training services delivered through its Connected Fitness Products, third-party mobile devices and in-studio classes. Training revenue is recognized at the time the services are delivered.
Standard Product Warranty
The Company offers a standard product warranty that its Connected Fitness Products and related accessories will operate under normal, non-commercial use for a period of one year which covers the touchscreen, frame and all incorporated elements, and related accessories from the date of original delivery. The Company has the obligation, at its option, to either repair or replace the defective product. At the time revenue is recognized, an estimate of future warranty costs are recorded as a component of cost of revenue. Factors that affect the warranty obligation include historical as well as current product failure rates, service delivery costs incurred in correcting product failures, and warranty policies and business practices.
The Company also offers the option for customers in some markets to purchase a third-party extended warranty and service contract that extends or enhances the technical support, parts, and labor coverage offered as part of the base warranty included with the Connected Fitness Product for an additional period of
For third-party extended warranty service sold along with the Company’s Connected Fitness Products, the Company does not obtain control of the warranty before transferring it to the customers. Therefore, the Company accounts for revenue related to the fees paid to the third-party extended warranty provider on a net basis, by recognizing only the net commission it retains. The Company considers multiple factors when determining whether it obtains control of third-party products including, but not limited to, evaluating whether it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product.
The Company sells connected fitness equipment and digital fitness services across Business to Business ("B2B") and Business to Customer ("B2C") channels in the United States, Europe and Asia.
The following table presents a summary of total revenues by product:
F-21
|
|
|
|
Year Ended December 31, |
|
|||||
|
|
|
|
2025 |
|
|
2024 |
|
||
|
|
|
|
(in thousands) |
|
|||||
CLMBR |
|
|
|
$ |
|
|
$ |
|
||
FORME |
|
|
|
|
|
|
|
|
||
WATTBIKE |
|
|
|
|
|
|
|
|
||
Total Fitness Product Revenue |
|
|
|
|
|
|
|
|
||
CLMBR |
|
|
|
|
|
|
|
|
||
FORME |
|
|
|
|
|
|
|
|
||
WATTBIKE |
|
|
|
|
|
|
|
|
||
Total Membership Revenue |
|
|
|
|
|
|
|
|
||
CLMBR |
|
|
|
|
|
|
|
|
||
FORME |
|
|
|
|
|
|
|
|
||
Total Training Revenue |
|
|
|
|
|
|
|
|
||
Total Revenue |
|
|
|
$ |
|
|
$ |
|
||
Note 5. Inventories, net
Inventories, net consisted of the following:
|
|
December 31, |
|
|
December 31, |
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Finished products |
|
$ |
|
|
$ |
|
||
Finished products - Long Term |
|
|
|
|
|
|
||
Raw materials - Long Term |
|
|
|
|
|
|
||
Total inventories, net |
|
$ |
|
|
$ |
|
||
Finished products - Long Term represents inventory not expected to be sold in the next twelve months. Raw materials - Long Term represents the components and parts currently being stored in our Taiwan facility that will be shipped to our manufacturing partners and will not be used within one year.
Note 6. Property and Equipment, net
Property and equipment, net consisted of the following:
|
|
December 31, |
|
|
December 31, |
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Pre-production tooling |
|
$ |
|
|
$ |
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Exercise equipment |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense amounted to $
Note 7. Goodwill, Intangible Assets, net and Digital Assets
Goodwill
Goodwill and intangible assets of $
F-22
Changes in goodwill for the years ended December 31, 2025 are as follows:
(in thousands) |
|
Goodwill |
|
|
Balance as of December 31, 2023 |
|
$ |
|
|
Goodwill acquired |
|
|
|
|
Purchase accounting adjustments to goodwill |
|
|
|
|
Balance as of December 31, 2024 |
|
|
|
|
Goodwill acquired |
|
|
|
|
Purchase accounting adjustments to goodwill |
|
|
|
|
Foreign currency translation adjustments |
|
|
|
|
Balance as of December 31, 2025 |
|
$ |
|
|
Intangible Assets, Net
Identifiable intangible assets, net consisted of the following:
|
|
As of December 31, |
|
|
As of December 31, |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||||||||||
(in thousands) |
|
Cost |
|
Accumulated Amortization |
Net Book Value |
|
|
Cost |
|
|
Accumulated Amortization |
|
|
Net Book Value |
|
|||||||||
Internal-use software |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Developed technology |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Customer related |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Trademark and trade name |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Total identifiable intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Amortization expense amounted to $
As of December 31, 2025, estimated annual amortization expense for each of the next five fiscal years is as follows:
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
Digital Assets
In June 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an entity affiliated with ATW Partners (“ATW”) and an entity affiliated with DWF Labs (“DWF”), pursuant to which the Company agreed to sell for $
In October 2025, due to a decrease in FET price, the collateral value was less than
F-23
and accrued interest of the June 2025 Convertible Exchangeable notes held by ATW as of September 30, 2025. An unsecured Remainder Note (as defined in the Master Netting Agreement) in the amount of $
In connection with the decrease in FET price, an event of default occurred under the June 2025 Convertible Exchangeable Notes held by DWF. On December 9, 2025, the Company entered into a Final Netting Agreement (the “Final Netting Agreement”) with DWF and the entity affiliated with FET (“FET Entity”), pursuant to which DWF accelerated its June 2025 Convertible Exchangeable Notes in the amount of $
Pursuant to the Final Netting Agreement, the Company caused the Custodian (as defined in the Master Netting Agreement) to deliver to DWF
The Company recognized changes in the fair value of its digital assets as gains and losses or losses in Change in fair value of digital assets on the Company's consolidated statement of operations during the period in which they occurred. As of December 31, 2025, the Company
(in thousands) |
|
Tether Units |
|
|
Tether Fair Value |
|
|
FET Units |
|
|
FET Fair Value |
|
|
Total Units |
|
|
Total Fair Value |
|
||||||
Digital assets at December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||||
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Tether used to purchase FET |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in fair value of digital assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Digital assets sold in satisfaction of June 2025 Convertible Exchangeable Notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Digital assets at December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||||
Note 8. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
|
|
December 31, |
|
|
December 31, |
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Security deposit |
|
|
|
|
|
|
||
Prepaid licenses |
|
|
|
|
|
|
||
Research and development tax credit |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
|
||
Insurance |
|
|
|
|
|
|
||
Other prepaid |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Note 9. Other Assets, net
Other assets, net consisted of the following:
|
|
As of December 31, |
|
|
As of December 31, |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||||||||||
(in thousands) |
|
Cost |
|
Accumulated Amortization |
Net Book Value |
|
|
Cost |
|
Accumulated Amortization |
Net Book Value |
|
||||||||||||
Capitalized content costs |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Capitalized software |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Total other assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
F-24
Amortization expense amounted to $
Note 10. Accrued Expenses and Other Current Liabilities
Accrued expenses consisted of the following:
|
|
December 31, |
|
|
December 31, |
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Accrued bonus |
|
$ |
|
|
$ |
|
||
Accrued payroll |
|
|
|
|
|
|
||
Accrued PTO |
|
|
|
|
|
|
||
Accrued legal settlements |
|
|
|
|
|
|
||
Accrued royalties |
|
|
|
|
|
|
||
Accrued professional fees |
|
|
|
|
|
|
||
Customer deposits |
|
|
|
|
|
|
||
Vendor settlements |
|
|
|
|
|
|
||
Loss restoration settlement |
|
|
|
|
|
|
||
Accrued VAT |
|
|
|
|
|
|
||
Other accrued expenses and current liabilities |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
Accrued legal settlement of $
Note 11. Debt
As of December 31, 2025 and 2024, debt consisted of the following:
|
|
December 31, |
|
|
December 31, |
|
||
Convertible Notes (in thousands) |
|
2025 |
|
|
2024 |
|
||
Senior secured convertible notes |
|
$ |
|
|
$ |
|
||
Discount on senior secured convertible notes |
|
|
( |
) |
|
|
|
|
June 2025 convertible preferred note |
|
|
|
|
|
|
||
Discount on June 2025 convertible preferred note |
|
|
( |
) |
|
|
|
|
Remainder notes |
|
|
|
|
|
|
||
Related party convertible notes |
|
|
|
|
|
|
||
Other convertible notes |
|
|
|
|
|
|
||
Total convertible notes payable |
|
|
|
|
|
|
||
Less: current portion |
|
|
( |
) |
|
|
( |
) |
Convertible notes payable - long-term |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Loans Payable (in thousands) |
|
|
|
|
|
|
||
Promissory notes - related parties |
|
|
|
|
|
|
||
Term loan, net of discount |
|
|
|
|
|
|
||
Working capital facility |
|
|
|
|
|
|
||
Principal stockholder promissory notes |
|
|
|
|
|
|
||
Other notes payable |
|
|
|
|
|
|
||
Discount on other notes payable |
|
|
( |
) |
|
|
|
|
Total loans payable |
|
|
|
|
|
|
||
Less: current portion |
|
|
( |
) |
|
|
( |
) |
Loans payable - long-term |
|
$ |
|
|
$ |
|
||
Senior Secured Convertible Notes
F-25
On January 28, 2025, the Company entered into a Securities Purchase Agreement (the "January 2025 SPA") with an accredited investor (the "Investor"). Pursuant to the January 2025 SPA, the Company sold and the Investor purchased, (a) a senior secured convertible note (the "January 2025 Convertible Note") in the amount of $
The January 2025 Convertible Note and the Class A Incremental Notes carry a
During the year ended December 31, 2025, the Company issued additional Class A Incremental Notes with substantially the same terms as the January 2025 Convertible Note as follows:
The conversion prices and exercise prices for the foregoing notes and warrants are subject to adjustments for stock dividends, stock splits and issuances of additional shares of Common Stock and, under certain circumstances, a floor price. Aggregate principal received for the January 2025 Convertible Note and Class A Incremental Notes (collectively, the "Senior Secured Convertible Notes") were allocated at issuance date to the issuance date fair value of the embedded derivatives and warrants issued in connection with the notes. The embedded derivatives, warrants and issuance costs were recorded as a direct reduction to the face value of the notes and are amortized over the life of
F-26
the notes as a component of interest expense.
In connection with the convertibility features contained in and warrants issued in connection with the issuance of the Senior Secured Notes, the Company recognized aggregate derivative and warrant liabilities in the amount of $
|
|
Year Ended December 31, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Contractual interest expense |
|
$ |
|
|
$ |
|
||
Amortization of debt discount and issuance costs |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
June 2025 Convertible Preferred Note
On June 4, 2025, the Company issued a convertible promissory note in the principal amount of $
The Company may prepay the outstanding principal balance of the June 2025 Convertible Preferred Note prior to the Maturity Date, provided that, if upon a prepayment in full prior to the Maturity Date, the aggregate amount of interest accrued on the June 2025 Convertible Preferred Note is less than $
Upon an Event of Default (as defined in the June 2025 Convertible Preferred Note), all outstanding principal and accrued but unpaid interest and expenses will become immediately due and payable.
The carrying value of the June 2025 Convertible Preferred Note as of December 31, 2025 was $
Remainder Notes
In June 2025, the Company entered into the Purchase Agreement with ATW Partners and DWF (see Note 7), whereby the Company issued June 2025 Convertible Exchangeable Notes in the aggregate principal amount of $
The June 2025 Convertible Exchangeable Notes were convertible (in whole or in part) at any time prior to the Maturity Date into the number of shares of Common Stock equal to (x) (i) the portion of the principal amount of the June 2025 Convertible Exchangeable Notes to be converted or redeemed, (ii) accrued and unpaid interest with respect to such principal amount of the June 2025 Convertible Exchangeable Notes, (iii) accrued and unpaid Late Charges with respect to such principal amount of the Convertible Exchangeable Note and interest, and (iv) any other unpaid amounts pursuant to the transaction documents divided by (y) a conversion price of $
As further described in Note 7, as a result of the decrease in FET, ATW and DWF sold the Company's FET and other collateral tokens provided to them under the terms of the Purchase Agreement, and the Company issued Remainder Notes to ATW and DWF in the principal amount of $
F-27
the Purchase Agreement and related netting agreements that were part of the Purchase Agreement, the sale of the FET and collateral tokens, along with the issuance of the Remainder Notes, fully satisfied the Company's obligations under the June 2025 Convertible Exchangeable Notes.
The Company had elected the fair value option for the June 2025 Convertible Exchangeable Notes under ASC 825, Financial Instruments, with changes in fair value recorded in earnings each reporting period to simplify the accounting. Accordingly, when the fair value option was applied, the Company did not separately evaluate the June 2025 Convertible Exchangeable Notes for the existence of embedded features that would require bifurcation as embedded derivatives under other accounting guidance. Debt issuance costs incurred in connection with June 2025 Convertible Exchangeable Notes of approximately $
The Remainder Notes issued to ATW and DWF have maturity dates of one year beyond their date of issuance and accrue interest at a rate of
Related Party Convertible Notes
On February 18, 2020, the Company entered into a $
Other Convertible Notes
On February 1, 2024, the Company entered into a Senior Secured Convertible Promissory Note (the "February 2024 Convertible Note") with Treadway Holdings LLC ("Treadway"), a lender, in the aggregate principal amount of $
The original maturity date of the February 2024 Convertible Note was
In November 2024, the Company and Treadway entered into an Amended and Restated Senior Secured Convertible Promissory Note (the “Amended and Restated Note”) that amended and restated the February 2024 Convertible Note in its entirety. The Amended and Restated Note has a principal amount of $
F-28
extinguishment. The Company elected the fair value option for the February 2024 Convertible Notes under ASC 825, Financial Instruments, with changes in fair value recorded in earnings each reporting period. The fair value of the February 2024 Convertible Notes and change to were determined using a discounted cash flow analysis at a discount rate of
Total payments for the year ended December 31, 2024 was $
On December 13, 2024, the Company and Treadway entered into a Letter Agreement (the “Letter Agreement”) that amends the Note Purchase Agreement. Pursuant to the Letter Agreement, Section 3.2(a) of the Note Purchase Agreement was amended to allow the Company to extend the maturity date of the Amended and Restated Note (the “Maturity Date”) upon written notice to Treadway and payment of the Extension Fee (as defined below) to extend the Maturity Date for an additional thirty-day period (each an “Extension”). The Company shall be entitled to up to three Extensions.
Pursuant to the Letter Agreement, each “Extension Fee” shall be an amount in cash, calculated as of the Maturity Date prior to giving effect to such Extension, equal to five percent (5%) of the sum of (A) the outstanding principal balance of the Amended and Restated Note plus (B) the principal amount of converted Amended and Restated Note for which Treadway is still holding the resulting conversion shares. For each Extension period, if the principal amount of the Amended and Restated Note converted by Treadway during such Extension period is less than the purchase price received by Treadway upon the sale of the resulting conversion shares (such difference, the “Conversion Profit”), then the Extension Fee for the following Extension shall be reduced by an amount equal to such Conversion Profit (but not less than zero).
In connection with the Letter Agreement, the Company exercised its option for the first Extension on December 13, 2024, and paid the applicable Extension Fee of $
On January 14, 2025, Treadway sold the Amended and Restated Note to Woodway USA, Inc. (the “Woodway”). Woodway was the guarantor of the Note Purchase Agreement and is currently the largest customer of the Company, pursuant to the Exclusive Distribution Agreement, by and between the Company and Woodway dated as of February 20, 2024. On March 3, 2025, Woodway sold the Amended and Restated Note to TR Opportunities II LLC (the “Current Holder”). The transfer of the Amended and Restated Note on January 14, 2025 and March 3, 2025 were both exchanges between creditors without any involvement of the Company, therefore on either exchange date there was no accounting impact to the Company.
On April 18, 2025, the Company and the Current Holder entered into a Letter Agreement to lower the conversion price to $
On September 26, 2025, the Company entered into an exchange agreement (the “Exchange Agreement”) with the Current Holder, pursuant to which the Current Holder and the Company exchanged the February 2024 Convertible Notes for a Class B Incremental Note in an aggregate principal amount of $
The September 2025 Exchange Note accrues interest at a rate of
The September 2025 Exchange Note is convertible (in whole or in part) at any time prior to the Maturity Date into the
F-29
number of shares of Common Stock equal to (x)
The September 2025 Exchange Note is also convertible (each, an “Alternate Conversion”) into shares of Common Stock at a conversion rate equal to the quotient of (x) the Conversion Amount, divided by (y) the Alternate Conversion Price (as defined below); provided, that if an event of default has occurred and is continuing, the September 2025 Exchange Note is convertible at a conversion rate equal to the quotient of (x)
For the year ended December 31, 2025, the Current Holder converted a total of $
The fair value of this note was $
Principal Stockholder Promissory Notes
Prior to December 31, 2023, the Company entered into promissory notes with a then-principal stockholder (the "former principal stockholder”) of the Company. See Note 22. Related Party Transactions.
Promissory Notes - Related Parties
On March 5, 2025, the Company entered into an agreement to settle outstanding liabilities with its former legal counsel by issuing to them an unsecured promissory note in the principal amount of $
On November 7, 2025, the Company's former legal counsel sold
During 2019, 2020, 2021, 2022, and 2023, the Company entered into certain promissory notes with other related parties, all of which were repaid or otherwise settled in full during year ended December 31, 2024 (see Note 22).
Term Loan
On February 1, 2024, the Company entered into a Credit Agreement (the "Term Loan") with Vertical Investors LLC, (the “Lender”) pursuant to which the Company agreed to borrow from the Lender a term loan in the aggregate principal amount of approximately $
F-30
On April 24, 2024, (the “Effective Date”) the Company entered into a Loan Modification Agreement (the “Modification Agreement”) with the Lender reducing the outstanding debt by $
Pursuant to the Modification Agreement, the Company agreed to make monthly payments of interest in the amount of $
On April 24, 2024, the Company entered into a Loan Restoration Agreement with the Lender (the “Restoration Agreement”). Pursuant to the Restoration Agreement, in the event the aggregate amount of funds received by the Lender (net of all commissions, transfer fees or other transaction fees of any kind and taxes paid or payable as a result thereof) arising out of the disposition of the Preferred Stock, shares of the Company’s Common Stock issuable upon conversion of the Preferred Stock, if converted by the Lender, or any other securities of the Company issued to the Lender as a result of its holding the Preferred Stock (the aggregate amount of funds, the “Net Trade Value”) received by the Lender on or before December 31, 2024 is less than $
The Restoration Agreement was accounted for a derivative in the Company’s consolidated balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The derivative liability or asset is remeasured at each reporting period using a Monte Carlo simulation with changes in fair value recorded in the consolidated statements of operations in change in fair value of derivatives (see Note 13).
On September 30, 2024, the Lender was issued
On September 30, 2024, the Company and the Lender entered into an amendment (the “Amendment”) to the previously disclosed Loss Restoration Agreement, dated as of April 24, 2024. The Amendment revised the definition of Preferred Stock to “
F-31
For the year ended December 31, 2024, the Company and Lender agreed to reduce the Loan Amount by $
On January 23, 2025, the Company and the Lender entered into a Settlement Agreement, pursuant to which the Company issued
On March 31, 2025, the Company and the Lender entered into a Settlement Agreement, pursuant to which the Company issued
On August 5, 2025, the Company and the Lender entered into a Settlement Agreement, pursuant to which the Company made a payment of $
On August 8, 2025, the Company and the Lender entered into an Exchange Agreement and agreed to reduce the Term Loan by $
On December of 2025, the Company and the Lender entered into two Exchange agreements, pursuant to which the Company issued an aggregate of
The carrying value of the Term Loan is as follows:
|
|
December 31, |
|
|
December 31, |
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Principal and interest |
|
$ |
|
|
$ |
|
||
Guarantee fees |
|
|
|
|
|
|
||
Unamortized debt discount |
|
|
|
|
|
( |
) |
|
Aggregate carrying value |
|
$ |
|
|
$ |
|
||
Interest expense recognized on the Term Loan is as follows:
|
|
Year Ended December 31, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Contractual interest expense |
|
$ |
|
|
$ |
|
||
Amortization of debt discount |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Working Capital Facility
In connection with the acquisition of Wattbike, the Company assumed the obligations under a working capital facility for a total of $
Other Notes Payable
As previously discussed, on November 7, 2025, Woodway purchased the New Woodway Note from the Company's former legal counsel in the principal amount of $
F-32
million of principal on this note for
On May 21, 2025, the Company issued an unsecured promissory note in the principal amount of $
On May 1, 2025, the Company entered into an agreement to settle outstanding liabilities with a third-party by issuing to the third-party an unsecured promissory note in the principal amount of $
In June 2023, the Company entered into a note purchase agreement (the "June 2023 Notes") pursuant to which the Company agreed to issue up to $
On November 10, 2023, the Company issued secured promissory notes (the "November 2023 Bridge Notes") in the aggregate principal amount of approximately $
The November 2023 Bridge Notes were amended in January 2024, and subsequently amended in February 2024, to include a conversion provision whereby at any time prior to maturity date the lender has the right to convert any outstanding and unpaid principal and accrued interest of the note into shares of the Company's Series A Preferred Stock at a conversion price of $
In April and May 2024, the Company issued senior secured convertible preferred notes (the "Q2 2024 Convertible Notes"), in the aggregate principal amount of approximately $
F-33
$
The change in the balance of other notes payable issued in 2023 and 2024 is as follows:
|
|
November 2023 |
|
|
June 2023 |
|
|
Q2 2024 |
|
|
|
|
||||
(in thousands) |
|
Bridge Notes |
|
|
Notes |
|
|
Convertible Notes |
|
|
Total |
|
||||
Carrying value at December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Issuance of promissory notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Change in estimated fair value of convertible notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Repayment of promissory notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Conversion to Series A Preferred Stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Carrying value at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
In August 2023, CLMBR, Inc. issued secured promissory notes in the aggregate principal amount and accrued interest of approximately $
In October 2023, CLMBR, Inc. issued secured promissory notes in the aggregate principal amount and accrued interest of approximately $
In November 2023, CLMBR, Inc. issued secured promissory notes in the aggregate principal amount and accrued interest of approximately $
The change in the balance of the promissory notes assumed in connection with the CLMBR Acquisition is as
F-34
follows:
|
|
August 2023 |
|
|
October 2023 |
|
|
November 2023 |
|
|
|
|
||||
(in thousands) |
|
Promissory Notes |
|
|
Promissory Notes |
|
|
Promissory Notes |
|
|
Total |
|
||||
Carrying value at December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Promissory notes assumed in connection with acquisition of CLMBR, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Repayment of promissory notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Conversion to Series A Preferred Stock |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Carrying value at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
On December 7, 2023, the Company issued a convertible note (the "December 2023 Note") to an accredited investor (the "Note Investor") with an aggregate principal amount of $
Scheduled maturities of the Company's outstanding debt as of December 31, 2025 is as follows:
Fiscal Years Ending December 31, |
|
|
|
|
||||
(in thousands) |
|
Convertible Notes |
|
|
Loans Payable |
|
||
2026 |
|
$ |
|
|
$ |
|
||
2027 |
|
|
|
|
|
|
||
2028 |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Note 12. Warrants
The following is a schedule of changes in stock purchase warrants issued and outstanding from December 31, 2024 to December 31, 2025;
|
|
Outstanding as of |
|
|
|
|
|
|
|
|
|
|
Outstanding as of |
|
||||||
|
December 31, 2024 |
Issued |
|
|
Exercised |
|
|
Canceled |
|
December 31, 2025 |
|
|||||||||
February 2024 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Woodway February 2024 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Registered Direct Placement Agent Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Registered Direct Offering Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Best Efforts Offering A-1 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Best Efforts Offering A-2 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Best Efforts Placement Agent Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
January 2025 Warrants |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Woodway May 2025 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Class A Incremental Notes Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Common Stock Purchase Warrants |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
The warrants are carried at fair value and classified as long-term liabilities within the Company's consolidated balance sheets as of December 31, 2025 and 2024. Changes in their fair value are recognized in earnings at each reporting
F-35
period. Warrant liabilities were $
January 2025 Warrants
In connection with the issuance of the January 2025 Convertible Note (see Note 7), the Company issued warrants to purchase
Woodway May 2025 Warrants
On May 21, 2025, the Company issued warrants to purchase
Class A Incremental Notes Warrants
During the year ended December 31, 2025, the Company issued an aggregate of
November 2023 Bridge Warrants
In connection with the November Bridge Notes discussed further in Note 11, the Company entered into a warrant agreement whereby the holders are eligible to receive warrants based on the occurrence of future events as defined in the agreement.
December 2023 Warrants
On December 7, 2023, the Company issued an aggregate
Pursuant to the warrant agreement entered into with an accredited investor in December 2023, the number of shares of common stock issuable under the warrants increased to
February 2024 Warrants
On February 1, 2024, the Company issued an aggregate
Woodway Warrants
F-36
On February 20, 2024, the Company issued
Registered Direct Placement Agent Warrants
On May 8, 2024, the Company entered into an engagement agreement with H.C. Wainwright & Co., LLC (the "Placement Agent"), pursuant to which the Placement Agent agreed to act as the exclusive placement agent in connection with the Registered Offering. The Company has agreed to issue the Placement Agent or its designees as compensation in connection with the Offering, warrants to purchase up to an aggregate of
Registered Direct Offering Warrants
Pursuant to the securities purchase agreement, in a concurrent private placement (together with the Registered Offering, the “Offering”), the Company has also agreed to issue to the Investors unregistered warrants to purchase up to an aggregate of
Best Efforts Offering Pre-Funded Warrants
On July 1, 2024, the Company issued pre-funded warrants to purchase up to an aggregate of
Best Efforts Offering A-1 and A-2 Warrants
On July 1, 2024, the Company issued Series A-1 warrants to purchase up to an aggregate of
Best Efforts Placement Agent Warrants
The Company entered into an engagement agreement with H.C. Wainwright & Co., LLC (the "Placement Agent"), pursuant to which the Placement Agent agreed to act as the exclusive placement agent in connection with the Best Efforts Offering. The Company has agreed to issue the Placement Agent or its designees as compensation in connection with the Offering, warrants to purchase up to an aggregate of
F-37
Note 13. Fair Value Measurements
The Company’s financial instruments consist of derivatives, convertible notes held at fair value and warrants.
|
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||
|
|
(in thousands) |
(in thousands) |
|
||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Derivatives |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Convertible Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
During the years ended December 31, 2025 and 2024, there were
.
The following summarizes the activity for the Company Level 3 assets and liabilities measured at fair value on a recurring basis for years ended December 31, 2025 and 2024.
Derivatives
(in thousands) |
|
Loss Restoration Derivative |
|
|
January 2025 Derivative |
|
|
Class A Incremental Notes Derivative |
|
|
Wattbike FX Contract Derivative |
|
|
Total Derivative Liabilities |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Fair value at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Issuance of derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Derivative settlement |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Change in estimated fair value of derivatives |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Acquisition |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fair value at December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
December 2023 |
|
|
Loss Restoration |
|
|
Total |
|
|||
(in thousands) |
|
Derivative |
|
|
Derivative |
|
|
Derivatives |
|
|||
Fair value at December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Issuance of derivatives |
|
|
|
|
|
|
|
|
|
|||
Derivative settlement |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Change in estimated fair value of derivatives |
|
|
( |
) |
|
|
|
|
|
|
||
Fair value at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The Company recorded the derivatives as a derivative asset or liability in the Company’s condensed consolidated balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. For the outstanding derivatives as of December 31, 2025 and December 31, 2024, the fair value of the derivatives were determined using a Monte Carlo simulation. The Monte Carlo Simulation valuation model incorporates assumptions as to stock price volatility, discount rate, dividend rate and risk-free interest rate.
The following table outlines the key inputs for the Monte Carlo Simulation models:
F-38
|
|
December 31, |
|
|
December 31, |
|
|
||
|
|
2025 |
|
|
2024 |
|
|
||
Weighted-average risk-free interest rate |
|
|
|
|
% |
|
|||
Weighted-average expected term (in years) |
|
|
|
|
|
|
|||
Weighted-average expected volatility |
|
|
% |
|
|
% |
|
||
Expected dividend yield |
|
|
% |
|
|
|
|||
Convertible Notes
September 2025 Exchange Note
The Company entered into convertible note arrangement in February 2024. The amendment to the Note represents the addition of a substantive conversion feature and as a result the Company recorded a loss on extinguishment upon issuance and the remaining unamortized discount was written off upon extinguishment. The Company elected the fair value option for the February 2024 Convertible Notes under ASC 825, Financial Instruments, with changes in fair value recorded in earnings each reporting period. The fair value of the February 2024 Convertible Notes were determined using a discounted cash flow analysis at a discount rate of
|
|
February 2024 |
|
|
(in thousands) |
|
Convertible Note |
|
|
Carrying amount at November 11, 2024 |
|
$ |
|
|
Loss on extinguishment of debt |
|
|
|
|
Cash paid for interest and principal |
|
|
( |
) |
Conversion to common stock |
|
|
( |
) |
Change in estimated fair value of convertible notes |
|
|
( |
) |
Fair value at December 31, 2024 |
|
|
|
|
Cash paid for interest |
|
|
( |
) |
Conversion to common stock |
|
|
( |
) |
Change in estimated fair value of convertible notes |
|
|
|
|
Fair value at December 31, 2025 |
|
$ |
|
|
January 2025 Exchange Notes
See Note 22, Related Party Transactions.
June 2025 Convertible Exchangeable Notes
The Company elected the fair value option for the June 2025 Convertible Exchangeable Notes. As further described in Note 7, these notes were retired in October and December of 2025. The fair value of the June 2025 Convertible Exchangeable Notes was determined at issuance based on net proceeds of $
F-39
|
|
June 2025 |
|
|
|
|
|
Convertible |
|
|
|
(in thousands) |
|
Exchangeable Notes |
|
|
|
Fair value at June 13, 2025 |
|
$ |
|
|
|
Change in estimated fair value of convertible notes |
|
|
( |
) |
|
Retirement of notes |
|
|
( |
) |
|
Fair value at December 31, 2025 |
|
$ |
|
|
|
Remainder Notes
The Company also elected the fair value option for the Remainder Notes issued upon the settlement of the June 2025 Convertible Exchangeable Notes (see Note 7). These notes were valued using a Monte Carlo Simulation model using a discount rate of
(in thousands) |
|
Remainder Notes |
|
|
Fair value at December 31, 2024 |
|
$ |
|
|
Fair value of Remainder Note issued 10/20/2025 |
|
|
|
|
Fair value of Remainder Note issued 12/9/2025 |
|
|
|
|
Change in estimated fair value of convertible notes |
|
|
( |
) |
Fair value at December 31, 2025 |
|
$ |
|
|
November 2023 Bridge Notes
On November 10, 2023, the Company issued the November Bridge Notes. The fair value of the bridge notes was determined using a discounted cash flow analysis at a discount rate of
The Company amended the Bridge notes into convertible notes in January 2024 and subsequently converted the notes into Preferred Stock Series A in February 2024 and March 2024. In February 2024 and March 2024, the Company recognized a loss equal to $
|
|
November 2023 |
|
|
(in thousands) |
|
Bridge Notes |
|
|
Fair value at December 31, 2023 |
|
$ |
|
|
Loss on extinguishment of debt |
|
|
|
|
Change in estimated fair value of convertible notes |
|
|
|
|
Conversion to Series A Preferred Stock |
|
|
( |
) |
Fair value at December 31, 2024 |
|
$ |
|
|
Accrued Earn Out
At December 31, 2025, the Company assessed the fair value of the contingent consideration recognized in the Wattbike acquisition (see Note 23) based on projected revenue and determined the likelihood of achieving the sales target that would generate the contingent payment was remote. As a result, the Company derecognized that liability at December 31, 2025 and recorded again on the change in fair value of $
As part of the Acquisition of CLMBR, Inc., the Sellers were entitled to receive a contingent payment in the form of shares of Common Stock (collectively, the “Earn-Out Shares”) calculated in the manner set forth in the Asset Purchase Agreement based on the 2024 Unit Sales (as defined in the Asset Purchase Agreement) and the volume-weighted average price (“VWAP”) for the Company’s common stock based on the
F-40
business-to-business channel, the Sellers would be entitled to an additional number of Earn-Out Shares calculated in the manner set forth in the Asset Purchase Agreement subject to total maximum number of
Warrants
The following table summarizes the activity for the Company Level 3 warrant liabilities measured at fair value on a recurring basis for the year ended December 31, 2025:
(in thousands) |
|
|
2024 Common Warrants (1) |
|
|
2025 Common Warrants (2) |
|
|
Total Warrants |
|
|
|||
Fair value at December 31, 2024 |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||
Issuance of warrants |
|
|
|
|
|
|
|
|
|
|
|
|||
Change in estimated fair value of warrants |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Fair value at December 31, 2025 |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||
(1) -
(2) -
The following table outlines the key inputs for the Black-Scholes option-pricing models:
|
|
December 31, |
|
|
December 31, |
|
|
||
|
|
2025 |
|
|
2024 |
|
|
||
Weighted-average risk-free interest rate |
|
|
|
|
|
||||
Weighted-average expected term (in years) |
|
|
|
|
|
||||
Weighted-average expected volatility |
|
|
% |
|
|
|
|||
Expected dividend yield |
|
|
% |
|
|
% |
|
||
The following table summarizes the activity for the Company Level 3 warrant liabilities measured at fair value on a recurring basis for the year ended December 31, 2024:
|
|
November 2023 |
|
|
December 2023 |
|
|
February 2024 |
|
|
Woodway |
|
|
Registered Direct |
|
|
Registered Direct Placement Agent |
|
|
Best Efforts Pre-Funded |
|
|
Best Efforts A-1 |
|
|
Best Efforts A-2 |
|
|
Best Efforts Placement Agent |
|
|
Total |
|
|
|||||||||||
(in thousands) |
|
Warrants |
|
|
Warrants |
|
|
Warrants |
|
|
Warrants |
|
|
Warrants |
|
|
Warrants |
|
|
Warrants |
|
|
Warrants |
|
|
Warrants |
|
|
Warrants |
|
|
Warrants |
|
|
|||||||||||
Fair value at December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||||
Issuance of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Change in estimated fair value of warrants |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Loss on cancelation of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Exercise of stock warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|||||||||
Conversion to Series A Preferred Stock |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|||||||||
Fair value at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||||
F-41
November 2023 Warrants
On November 10, 2023, the Company issued warrants to two accredited investors to purchase shares of Common Stock. The fair value of the warrants was determined using the Monte Carlo Simulation, given the variable number of shares issuable upon exercise of the warrant. For the outstanding warrants as of December 31, 2024 and December 31, 2023, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) and risk free rate.
|
|
December 31, |
|
|
|
|
|
2024 |
|
|
|
Weighted-average risk-free interest rate |
|
|
% |
|
|
Weighted-average expected term (in years) |
|
|
|
|
|
Weighted-average expected volatility |
|
|
% |
|
|
Expected dividend yield |
|
|
% |
|
|
December 2023 Warrants
On December 7, 2023, the Company issued warrants in connection with the issuance of the December 2023 Convertible Notes. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as of December 31, 2024 and December 31, 2023, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The warrants were no longer outstanding at December 31, 2024.
|
|
December 31, |
|
|
|
|
|
2024 |
|
|
|
Weighted-average risk-free interest rate |
|
|
% |
|
|
Weighted-average expected term (in years) |
|
|
— |
|
|
Weighted-average expected volatility |
|
|
% |
|
|
Expected dividend yield |
|
|
% |
|
|
Pursuant to the warrant agreement entered into with an accredited investor in December 2023, the warrant to purchase shares of common stock increased to
February 2024 Warrants
On February 1, 2024, the Company issued an aggregate
F-42
|
|
December 31, |
|
|
|
|
|
2024 |
|
|
|
Weighted-average risk-free interest rate |
|
|
% |
|
|
Weighted-average expected term (in years) |
|
|
|
|
|
Weighted-average expected volatility |
|
|
% |
|
|
Expected dividend yield |
|
|
% |
|
|
Woodway Warrants
On February 20, 2024, the Company issued warrants in connection with an Exclusive Distribution Agreement with WOODWAY USA, INC. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as December 31, 2024 and December 31, 2023, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate.
|
|
December 31, |
|
|
|
|
|
2024 |
|
|
|
Weighted-average risk-free interest rate |
|
|
% |
|
|
Weighted-average expected term (in years) |
|
|
|
|
|
Weighted-average expected volatility |
|
|
% |
|
|
Expected dividend yield |
|
|
% |
|
|
Registered Direct Placement Agent Warrants
On May 8, 2024, the Company issued warrants in connection with an agreement with the Placement Agent, pursuant to which the Placement Agent agreed to act as the exclusive placement agent in connection with the Registered Offering. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, and (3) dividend yield and (4) a risk free rate.
|
|
December 31, |
|
|
|
|
|
2024 |
|
|
|
Weighted-average risk-free interest rate |
|
|
% |
|
|
Weighted-average expected term (in years) |
|
|
|
|
|
Weighted-average expected volatility |
|
|
% |
|
|
Expected dividend yield |
|
|
% |
|
|
Registered Direct Offering Warrants
On May 20, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as December 31, 2024 and December 31, 2023, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. T
F-43
|
|
December 31, |
|
|
|
|
|
2024 |
|
|
|
Weighted-average risk-free interest rate |
|
|
% |
|
|
Weighted-average expected term (in years) |
|
|
|
|
|
Weighted-average expected volatility |
|
|
% |
|
|
Expected dividend yield |
|
|
% |
|
|
Best Efforts Offering Pre-Funded Warrants
On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as December 31, 2024 and December 31, 2023, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The warrants were exercised in full in July 2024.
Best Efforts A-1 Warrants
On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as December 31, 2024 and December 31, 2023, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate.
|
|
December 31, |
|
|
|
|
|
2024 |
|
|
|
Weighted-average risk-free interest rate |
|
|
% |
|
|
Weighted-average expected term (in years) |
|
|
|
|
|
Weighted-average expected volatility |
|
|
% |
|
|
Expected dividend yield |
|
|
% |
|
|
Best Efforts A-2 Warrants
On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as December 31, 2024 and December 31, 2023, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate.
|
|
December 31, |
|
|
|
|
|
2024 |
|
|
|
Weighted-average risk-free interest rate |
|
|
% |
|
|
Weighted-average expected term (in years) |
|
|
|
|
|
Weighted-average expected volatility |
|
|
% |
|
|
Expected dividend yield |
|
|
% |
|
|
Best Efforts Placement Agent Warrants
On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as December 31, 2024 and December 31, 2023, management
F-44
determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate.
|
|
December 31, |
|
|
|
|
|
2024 |
|
|
|
Weighted-average risk-free interest rate |
|
|
% |
|
|
Weighted-average expected term (in years) |
|
|
|
|
|
Weighted-average expected volatility |
|
|
% |
|
|
Expected dividend yield |
|
|
% |
|
|
Note 14. Leases
The Company adopted ASC 842 on January 1, 2022, using the effective date transition method, which requires a cumulative-effect adjustment to the opening balance of retained earnings on the effective date.
The Company has made certain assumptions and judgments when applying ASC 842 including the adoption of the package of practical expedients available for transition. The practical expedients allowed the Company to not reassess (i) whether expired or existing contracts contained leases, (ii) lease classification for expired or existing leases and (iii) previously capitalized initial direct costs. The Company also elected not to recognize right-of-use assets and lease liabilities for short-term leases (leases with a term of twelve months or less).
As of December 31, 2025 and 2024, the weighted average discount rate for operating leases was
The Company has entered into various short-term operating leases for office and warehouse space, with an initial term of twelve months or less. These short-term leases are not recorded on the Company’s consolidated balance sheets.
|
|
Year Ended December 31, |
|
|
|||||
|
|
2025 |
|
|
2024 |
|
|
||
|
|
(in thousands) |
|
|
|||||
Operating lease costs |
|
$ |
|
|
$ |
|
|
||
Variable lease costs |
|
|
|
|
|
|
|
||
Short-term lease costs |
|
|
|
|
|
|
|
||
Total lease costs |
|
|
|
|
|
|
|
||
Other information: |
|
|
|
|
|
|
|
||
Cash paid for amounts included in the measurement of operating lease liability |
|
$ |
|
|
$ |
|
|
||
Total right-of-use assets and operating lease liabilities of $
F-45
The following represents the Company’s minimum annual rental payments under operating leases for each of the next five years and thereafter:
Fiscal Year Ending December 31, |
|
Operating |
|
|
|
|
(in thousands) |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total future minimum lease payments |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Present value of operating lease liability |
|
$ |
|
|
|
|
|
|
|
Current portion of lease liability |
|
|
|
|
Non-current portion of lease liability |
|
|
|
|
Present value of operating lease liability |
|
$ |
|
|
Note 15. Commitments and Contingencies
Royalty Agreement
In 2017, the Company entered into a royalty agreement with Fuseproject and agreed to pay
Legal Proceedings
On March 7, 2024, a petition was filed by Tung Keng Enterprise Co., Ltd. d/b/a DK City Co., Ltd. (“DK City”) against CLMBR, Inc. and the Company in the United States District Court for the District of Colorado to enforce a monetary arbitration award of approximately $
Total remaining payments as of December 31, 2025 and 2024 of $
On or about February 20, 2025, the Company was sued in the Superior Court of Massachusetts, Suffolk County, by one of its former financial services consultants (“the Plaintiff”), alleging a breach of an agreement between the parties for financial services Plaintiff allegedly provided to the Company. The dispute was fully and amicably resolved and on June 12, 2025, the parties filed a joint stipulation of dismissal with prejudice and settlement amount was $
F-46
The Company is involved in legal proceedings in the normal course of business. The Company currently believes that any ultimate liability arising out of such proceedings will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
Note 16. Stockholders’ Equity
Common Stock
The Company’s authorized Common Stock consisted of
During the year ended December 31, 2025, the Company issued an aggregate of
During the year ended December 31, 2025, the Company issued an aggregate of
On October 10, 2025, the Company issued
In July 2025, the Company entered into an inducement offer letter agreement with the holder of the January 2025 Convertible Note to exercise their January 2025 Warrants for
In February 2025, the Company issued
On February 2, 2024, the Company issued
From January 2024 through June 2024, the Company issued
On February 1, 2024, the Company issued
On February 1, 2024, the Company issued
In January 2024 through May 2024, the Company issued
In May 2024, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering priced at-the-market under the rules of The Nasdaq Stock Market an aggregate of
In June 2024, the Company issued
In July 2024, the Company commenced a best efforts public offering of an aggregate of
F-47
In June 2024 through December 2024, the Company issued
From September 2024 through November 2024, the Company issued
From November 2024 through December 2024, the Company issued
Preferred Stock
In January 2024, the Board authorized the proposed issuance of shares of non-voting Series A and Series B convertible preferred stock. The Company's authorized preferred stock consists of
The Series A convertible preferred stock is subject to certain rights, preferences, privileges, and obligations, including voluntary and mandatory conversion provisions, as well as beneficial ownership restrictions and share issuance caps, as described below and as set forth in the Series A Certificate. The Series A convertible preferred stock can be issued at any time and any subsequent mandatory or voluntary conversion into common stock shall be at a conversion price at least equal to or above the closing price per share of the Common Stock as reported on Nasdaq on the last trading day immediately preceding the date that the Series A Certificate was approved by our board of directors, subject to customary adjustments for stock splits and combinations.
The Series A convertible preferred stock includes the following:
F-48
Pursuant to the Certificate of Designations of Series A Preferred Stock, on September 30, 2024, the Board declared a dividend on the shares of Series A Preferred Stock issued and outstanding as of the record date for such dividend, as a dividend in kind, in the form of
During the year ended December 31, 2025, the Board declared dividends on the Series A Preferred Stock as dividends in kind, and the Company issued a total of
There are no circumstances outside the Company's control other than final liquidation that would require the Company to settle the Series A Preferred Stock in cash, therefore the Series A Preferred Stock is classified as permanent equity on the Company's consolidated balance sheets as of December 31, 2025 and 2024.
The Series B convertible preferred stock includes the following:
During the year ended December 31, 2025,
The Company classifies Series B Preferred Stock in accordance with ASC 480, Distinguishing Liabilities from Equity, as there are conversion features that are subject to shareholder approval which is outside of the Company's control and therefore the securities should be classified outside of permanent stockholders’ equity (deficit). Upon receiving shareholder approval on May 31, 2024, the Company classified the Series B Preferred Stock as permanent equity as of December 31, 2025 and 2024.
The Series C convertible preferred stock includes the following:
F-49
During the year ended December 31, 2025, the Board declared dividends on the Series C Preferred Stock as dividends in kind, and the Company issued a total of
There are no circumstances outside the Company's control other than final liquidation that would require the Company to settle the Series C Preferred Stock in cash, therefore the Company classified the Series C Preferred Stock as permanent equity as of December 31, 2025 and 2024.
The Series E Preferred Stock includes the following:
All of the
Note 17. Equity-Based Compensation
On June 14, 2025, the Company issued a total of
F-50
and was initially included in Accrued expenses and other current liabilities, measured at the full redemption value, as there were conversion features that were subject to shareholder approval which is outside of the control of the Company. The Company recognized $
On December 31, 2025, the Board approved the cancellation and retirement of all of the shares of LTI Preferred Stock previously issued. In connection with the Board’s approval of the cancellation of the shares of LTI Preferred Stock, on December 31, 2025, each holder of LTI Preferred Stock entered into a letter agreement with the Company pursuant to which the holders of LTI Preferred Stock agreed to surrender all shares of LTI Preferred Stock held for cancellation, for no consideration.
Following the surrender of the shares pursuant to the letter agreements, the Company cancelled and rescinded the shares, and such shares were restored to the status of authorized but unissued shares of Series LTI Preferred Stock. As a result, the Company reversed all of the compensation expense previously recognized with respect to the LTI Preferred Stock, and there was
Stock Options - 2023 and 2020 Equity Incentive Plans
Presented below is a summary of the compensation cost recognized in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2025 and 2024:
|
|
|
Year Ended December 31, |
|
|||||
|
|
|
2025 |
|
|
2024 |
|
||
|
|
|
(in thousands) |
|
|||||
Research and development |
|
|
$ |
|
|
$ |
|
||
Sales and marketing |
|
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
|
$ |
|
|
$ |
|
||
For the years ended December 31, 2025 and 2024, $
During the years ended December 31, 2025 and 2024, the Company did
|
|
Number of options |
|
|
Weighted average exercise price |
|
|
Weighted average remaining contractual term (in years) |
|
|
Aggregate intrinsic value (in thousands) |
|
||||
Outstanding as of December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cancelled or forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding as of December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cancelled or forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outstanding as of December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options exercisable as of December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options unvested as of December 31, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The Company recognized stock-based compensation expense of $
F-51
unrecognized compensation expense of $
Note 18. Concentration of Credit Risk and Major Customers and Vendors
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company’s cash and cash equivalents are maintained with high-quality financial institutions, the compositions and maturities of which are regularly monitored by management.
For the years ended December 31, 2025 and 2024, Woodway, our exclusive distributor, represented
The Company had
Note 19. Benefit Plans
The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Matching contributions to the plan may be made at the discretion of the Company’s board of directors. During the years ended December 31, 2025 and 2024, the Company did
Note 20. Income Taxes
The components of loss before income taxes are as follows:
|
|
|
Year ended December 31, |
|
|||||
|
|
|
2025 |
|
|
2024 |
|
||
|
(in thousands) |
|
|||||||
United States |
|
|
$ |
( |
) |
|
$ |
( |
) |
Foreign |
|
|
|
( |
) |
|
|
( |
) |
Loss from operations before income taxes |
|
|
$ |
( |
) |
|
$ |
( |
) |
The components of income tax expense (benefit) are as follows:
|
|
|
Year ended December 31, |
|
|||||
|
|
|
2025 |
|
|
2024 |
|
||
|
(in thousands) |
|
|||||||
Current: |
|
|
|
|
|
|
|
||
Federal |
|
|
|
|
|
|
|
||
State |
|
|
|
|
|
|
|
||
Foreign |
|
|
|
|
|
|
|
||
Total current expense: |
|
|
|
|
|
|
|
||
Deferred expense : |
|
|
|
|
|
|
|
||
Federal |
|
|
|
|
|
|
|
||
State |
|
|
|
|
|
|
|
||
Foreign |
|
|
|
|
|
|
|
||
Total deferred expense: |
|
|
|
|
|
|
|
||
Total |
|
|
$ |
|
|
$ |
|
||
The following table is a reconciliation of the U.S. federal statutory rate to the Company’s effective rate for the years ended December 31, 2025 and 2024 in accordance with the guidance in ASU No. 2023-09:
F-52
|
|
|
Year ended December 31, |
|
|||||||||||
|
|
|
2025 |
|
|
2024 |
|
||||||||
|
(in thousands) |
|
|||||||||||||
Tax at Federal statutory rate |
|
|
$ |
( |
) |
|
% |
|
$ |
( |
) |
|
% |
||
Effect of: |
|
|
|
|
|
|
|
|
|
|
|
||||
Nondeductible expenses |
|
|
|
( |
) |
|
% |
|
|
|
|
- |
% |
||
Nontaxable changes in fair value of convertible notes |
|
|
|
( |
) |
|
% |
|
|
|
|
- |
% |
||
Research and development tax credits |
|
|
|
|
|
- |
% |
|
|
( |
) |
|
% |
||
State taxes, net of federal benefit |
|
|
|
|
|
- |
% |
|
|
( |
) |
|
% |
||
Foreign tax rate differential |
|
|
|
( |
) |
|
% |
|
|
( |
) |
|
% |
||
Return to provision adjustments |
|
|
|
( |
) |
|
% |
|
|
|
|
- |
% |
||
Change in valuation allowance |
|
|
|
|
|
- |
% |
|
|
|
|
- |
% |
||
Disqualified debt |
|
|
|
( |
) |
|
% |
|
|
( |
) |
|
% |
||
Stock based compensation |
|
|
|
|
|
- |
% |
|
|
|
|
- |
% |
||
Total |
|
|
$ |
|
|
- |
% |
|
$ |
|
|
- |
% |
||
The primary differences from the U.S. statutory rate and the Company’s effective tax rate for the year ended December 31, 2025 are due to the change in valuation allowance and State taxes, net of Federal benefit, partially offset by nontaxable changes in the fair value of convertible notes. The primary differences from the U.S. statutory rate and the Company’s effective tax rate for the year ended December 31, 2024 were are due to the change in valuation allowance, State taxes, net of Federal benefit and stock-based compensation including excess tax benefits.
On July 4, 2025, the One, Big, Beautiful Bill Acct (the "OBBA") was signed into law in the United States. The OBBA and relate notices include several significant provisions. The most significant impact is the reversal of capitalization of domestic research and development ("R&D") expenditures that was required under the Tax Cuts and Jobs Act that was enacted in 2017. For the year ended December 31, 2025, the Company was able to take a tax deduction for the unamortized balance of R&D costs and did
On August 16, 2022, the Inflation Reduction Act was signed into law in the United States. Among other provisions, the Inflation Reduction Act includes a
On March 11, 2021, the American Rescue Plan was enacted, which extends the period companies can claim an Employee Retention Credit, expands the IRC Section 162(m) limit on deductions for publicly traded companies, and repeals the election that allows U.S. affiliate groups to allocate interest expense on a worldwide basis, among other provisions. The Company reviewed the provisions of the law and determined it had no material impact for the year ended December 31, 2025.
On December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021. The act includes the Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the COVID-related Tax Relief Act of 2020, both of which extend many credits and other COVID-19 relief, among other extensions. The Company evaluated the provisions of the Consolidated Appropriations Act, including but not limited to the Employee Retention Credit extension, the extension for the IRC Section 45S credit for paid family and medical leave, and the provision allowing a full deduction for certain business meals, and determined that there was no material impact for the year ended December 31, 2025.
As of December 31, 2025 and December 31, 2024, the Company’s deferred tax assets were primarily comprised of U.S. federal, U.S. state and foreign net operating losses (“NOLs”). A valuation allowance was maintained and/or established on the Company’s gross deferred tax asset balances in substantially all jurisdictions as of December 31, 2025 and 2024. As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. The realization of deferred tax assets was based on the evaluation of current and estimated future profitability of the operations, reversal of deferred tax liabilities and the likelihood of utilizing tax credits and/or loss carryforwards. As of December 31, 2025 and 2024, the Company determined that it has not reached the more likely than not standard
F-53
wherein deferred taxes will be realized due to the recent history of losses and management’s expectation of continued tax losses.
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
. |
|
|
Year ended December 31, |
|
|||||
|
|
|
2025 |
|
|
2024 |
|
||
|
(in thousands) |
|
|||||||
Deferred tax assets: |
|
|
|
|
|
|
|
||
Net operating loss carryforwards - Federal |
|
|
$ |
|
|
$ |
|
||
Capitalized research and development |
|
|
|
|
|
|
|
||
Research and development tax credits |
|
|
|
|
|
|
|
||
Net operating loss carryforwards - State |
|
|
|
|
|
|
|
||
Net operating loss carryforwards - Foreign |
|
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
|
||
Change in fair market value of digital assets |
|
|
|
|
|
|
|
||
Non-operating financing items |
|
|
|
|
|
|
|
||
Fixed assets and intangibles |
|
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
|
||
Total deferred tax assets, gross: |
|
|
$ |
|
|
$ |
|
||
Valuation allowance |
|
|
|
( |
) |
|
|
( |
) |
Total deferred tax assets, net: |
|
|
$ |
|
|
$ |
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
|
||
Right of Use Asset |
|
|
|
( |
) |
|
|
( |
) |
Unrealized gain/loss and other |
|
|
|
( |
) |
|
|
( |
) |
Total deferred tax liabilities: |
|
|
$ |
( |
) |
|
$ |
( |
) |
Deferred tax assets, net: |
|
|
$ |
|
|
$ |
|
||
As of December 31, 2025 and 2024, the Company had federal NOLs of approximately $
As of December 31, 2025, the Company also had federal and state tax credits of $
As of December 31, 2025, the Company did
Section 382 of the Internal Revenue Code and similar provisions under state law limit the utilization of federal NOL carryforwards, state NOL carryforwards, and Research and Development (R&D) credits following certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%. Based on the Company’s analysis under Section 382, the Company believes that its federal NOL carryforwards, its state NOL carryforwards, and R&D credits are limited by Section 382 and similar provisions under state law as of December 31, 2025. The portion of federal NOL carryforwards, state NOL carryforwards, and R&D credits that were determined to be limited have been written off as of December 31, 2025. The remaining unused carryforwards and credits remain available for future periods. Due to the Company’s full valuation allowance, the write off of NOL carryforwards and R&D did not have any impact to the statements of operation and comprehensive loss.
The Company is subject to taxation in the United States, various state and local jurisdictions, as well as foreign jurisdictions where the Company conducts business. Accordingly, on a continuing basis, the Company cooperates with taxing authorities for the various jurisdictions in which it conducts business to comply with audits and inquiries
F-54
for tax periods that are open to examination. The tax years ended from December 31, 2023 and 2022 and later remain open to examination by tax authorities in the United States and United Kingdom, respectively.
Note 21. Loss Per Share
The computation of loss per share is as follows:
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
(in thousands, except share and per share amounts) |
|
|
|
|||||
Numerator: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss attributable to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
||
Weighted average common stock outstanding - |
|
|
|
|
|
|
||
Net loss per share attributable to common |
|
$ |
( |
) |
|
$ |
( |
) |
The following potentially dilutive shares were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Warrants to purchase common stock |
|
|
|
|
|
|
||
Series A Preferred Stock conversion to common stock |
|
|
|
|
|
|
||
Series B Preferred Stock conversion to common stock |
|
|
|
|
|
|
||
Series C Preferred Stock conversion to common stock |
|
|
|
|
|
|
||
Stock options to purchase common stock |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Note 22. Related Party Transactions
In the ordinary course of business, we may enter into transactions with directors, principal officers, their immediate families, and affiliated companies in which they are principal stockholders (commonly referred to as “related parties”).
Principal Stockholder Promissory Notes
During 2019, 2020, and 2021 the Company entered into the following promissory notes with a then-principal stockholder (the ”former principal stockholder”) of the Company:
F-55
As of December 31, 2024, all outstanding promissory notes with respect to the former principal stockholder are included within the loan payable on the consolidated balance sheet for a total of $
F-56
On January 29, 2025, the former principal stockholder assigned the outstanding notes as of December 31, 2024 to an accredited investor. On February 4, 2025, the Company and the accredited investor entered into an exchange agreement pursuant to which the Company issued (the “Exchange”) five new secured convertible promissory notes (the “January 2025 Exchange Notes”). At the time of the Exchange, (1) the Company has negative cash flows from operations, history of losses, and significant accumulated deficit that raise substantial doubt about our ability to continue as a going concern and (2) the accredited investor accepted an interest rate of
The January 2025 Exchange Notes were convertible (in whole or in part) at any time prior to the maturity date into the number of shares of Common Stock equal to (x) the sum of (A) the portion of the principal of the January 2025 Exchange Notes to be converted, redeemed or otherwise with respect to which this determination is being made, (B) accrued and unpaid interest with respect to the principal of the Exchange Note, (C) accrued and unpaid late charges with respect to the principal of the Exchange Note and interest, and (D) any other unpaid amounts pursuant to the Exchange Agreement, if any, divided by (y) a conversion price of $
|
|
January 2025 |
|
|
(in thousands) |
|
Exchange Notes |
|
|
Carrying amount at February 4, 2025 |
|
$ |
|
|
Conversion to common stock |
|
|
( |
) |
Gain on extinguishment of debt with related party |
|
|
( |
) |
Change in estimated fair value of convertible notes |
|
|
|
|
Fair value at December 31, 2025 |
|
$ |
|
|
Other Related Party Promissory Notes
See Note 7, for promissory notes issued to related parties during the year ended December 31, 2025.
During 2019, 2020, 2021, and 2022, the Company entered into the following promissory notes with other related parties:
F-57
Other Related Party Transactions
In 2017, the Company entered into a royalty agreement with Fuseproject and agreed to pay
As discussed further in Note 11, in November 2023, the Company issued secured promissory notes of approximately $
The Company assumed secured promissory notes in connection with the acquisition of CLMBR, Inc. of approximately $
In April and May 2024, the Company issued promissory notes of approximately $
In August 2024, the Company borrowed $
F-58
Note 23. Acquisitions
Wattbike Acquisition
On July 1, 2025, Company completed the Wattbike Acquisition (see Note 1) for a total purchase price of approximately $
Consideration |
|
(in thousands) |
|
|
Series E preferred stock issued |
|
$ |
|
|
Effective settlement of debt obligations |
|
|
|
|
Fair value of earn-out consideration |
|
|
|
|
Total |
|
$ |
|
|
The Wattbike Acquisition was a strategic acquisition intended to help accelerate the Company’s commercialization path and achieve immediate scale, resulting in a high growth, profitable platform that sells connected fitness equipment and digital fitness services across B2B and B2C channels.
The Wattbike Acquisition was accounted for as a purchase business combination in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed were recorded in the consolidated balance sheet at their estimated fair values as of July 1, 2025, with the remaining unallocated purchase price recorded as goodwill. Acquisition-related costs of $
During the year ended December 31, 2025, adjustments were made to the preliminary purchase price recorded at July 1, 2025, and are reflected as “Measurement Period Adjustments” in the table below. The U.S. GAAP purchase price was $
F-59
(in thousands) |
|
Preliminary Purchase Price Allocation as of July 1, 2025 (a) |
|
|
Measurement Period Adjustments (b) |
|
|
Purchase Price Allocation as of July 1, 2025 (as adjusted) |
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Cash |
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$ |
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$ |
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$ |
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|||
Accounts receivable, net of allowances |
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|
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Inventories, net |
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|||
Prepaid expenses |
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Other current assets |
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( |
) |
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||
Property and equipment, net |
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|||
Right-of-use-assets |
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Goodwill |
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|
|||
Intangible assets, net |
|
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|
|||
Total assets acquired |
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$ |
|
|
$ |
|
|
|
|
|||
Accounts payable |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other current liabilities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Derivative liability |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Operating lease liability, current portion |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Deferred revenue |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loan payable |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Operating lease liability, net of current portion |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net assets acquired |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
(a) As previously reported in the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2025.
(b) The measurement period adjustments were recorded in the fourth quarter of 2025 and are related to finalization of the valuation of the Series E Preferred Stock of $
The changes in Wattbike intangible assets from the date of acquisition to December 31, 2025 was as follows:
(in thousands) |
|
Wattbike |
|
|
Balance at December 31, 2024 |
|
$ |
|
|
Acquisitions and measurement period adjustments |
|
|
|
|
Amortization |
|
|
( |
) |
Translation adjustment |
|
|
( |
) |
Balance at December 31, 2025 |
|
$ |
|
|
The Company recorded a step-up in the fair value of inventory of approximately $
The identified intangible assets of $
F-60
annual amortization expense related to these intangible assets for each of the next five fiscal years is included in Note 7.
As part of the Wattbike Acquisition, the Sellers are entitled to receive a contingent payment in the form of shares of Common Stock subject to the satisfaction of applicable milestones as described below:
At December 31, 2025, the Company determined that the likelihood of Wattbike achieving the foregoing milestones was remote. As a result, the Company derecognized the aggregate accrued liability related to the contingent consideration and recorded a gain on the change in fair value of earnout in the accompanying consolidated statement of operations for the year ended December 31, 2025.
The following unaudited pro forma summary presents consolidated information of the Company, including Wattbike and CLMBR, as if the Wattbike Acquisition and the CLMBR Acquisition (discussed below) had occurred as of January 1, 2024, the earliest year presented herein:
|
|
Proforma |
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|||||
|
|
Years Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(in thousands) |
|
|||||
Revenue |
|
$ |
|
|
$ |
|
||
Operating Loss |
|
|
( |
) |
|
|
( |
) |
Net Loss |
|
|
( |
) |
|
|
( |
) |
Net loss per share – basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted average common stock outstanding – basic |
|
|
|
|
|
|
||
The unaudited pro forma consolidated results were prepared using the acquisition method of accounting and are based on the historical financial information of Wattbike, CLMBR and the Company. The unaudited pro forma consolidated results incorporate historical financial information for all significant acquisitions pursuant to SEC regulations since January 1, 2024. The historical financial information has been adjusted to give effect to pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had it completed these acquisitions on January 1, 2024.
CLMBR Acquisition
On October 6, 2023, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with CLMBR and CLMBR1, LLC (collectively, the “Sellers”) to purchase and acquire substantially all of the assets and assume certain liabilities of the Sellers. On January 22, 2024, the Company and the Sellers entered into an amended and restated Asset Purchase Agreement (the “Amended Agreement”). On February 2, 2024, pursuant to the Amended Agreement, the Company completed the acquisition for a total purchase price of approximately $
F-61
million cash payment to the lender of the senior debt and the issuance of an $
Consideration |
|
(in thousands) |
|
|
Cash Paid to Seller |
|
|
|
|
Common stock issued |
|
|
|
|
Series B preferred stock issued |
|
|
|
|
Payoff of Vertical debt (plus accrued interest) |
|
|
|
|
Retirement of Vertical Debt (including fees) |
|
|
|
|
Fair value of earn-out consideration |
|
|
|
|
Total |
|
|
|
|
The CLMBR acquisition was a strategic acquisition that helped accelerate the Company’s commercialization path and help achieve immediate scale, resulting in a high growth, profitable platform that sells connected fitness equipment and digital fitness services across B2B and B2C channels.
The CLMBR acquisition was accounted for as a purchase business combination in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed were recorded in the accompanying consolidated balance sheet at their estimated fair values as of February 2, 2024, with the remaining unallocated purchase price recorded as goodwill. Acquisition-related costs of $
During the year ended December 31, 2024, adjustments were made to the preliminary purchase price recorded at February 2, 2024, and are reflected as “Measurement Period Adjustments” in the table below. The U.S. GAAP purchase price was $
(in thousands) |
|
Preliminary Purchase Price Allocation as of February 2, 2024 (a) |
|
|
Measurement Period Adjustments (b) |
|
|
Purchase Price Allocation as of February 2, 2024 (a) (as adjusted) |
|
|||
Cash |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accounts receivable, net of allowances |
|
|
|
|
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( |
) |
|
|
|
||
Inventories, net |
|
|
|
|
|
|
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|
|||
Vendor deposits |
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|
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Prepaid expenses and other current assets |
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|
|
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|
|
|
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|
|||
Property and equipment, net |
|
|
|
|
|
|
|
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|
|||
Right-of-use-assets |
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|
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|
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|
|||
Other assets |
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|
|
|
|
|
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|
|||
Goodwill |
|
|
|
|
|
|
|
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|
|||
Intangible assets, net |
|
|
|
|
|
( |
) |
|
|
|
||
Total assets acquired |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Accounts payable |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Accrued expenses and other current liabilities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Operating lease liability, current portion |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Deferred revenue |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Loan payable |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Operating lease liability, net of current portion |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Net assets acquired |
|
$ |
|
|
$ |
|
|
$ |
|
|||
(a) As previously reported in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2024.
(b) The measurement period adjustments were recorded in the second, third and fourth quarter of 2024 and are related to finalization of valuation of intangible assets and other assets of $
F-62
value of Series B Preferred Stock issued and other immaterial adjustments of $
The Company recorded a step-up in the fair value of inventory of approximately $
The changes in intangible assets related to the CLMBR Acquisition for the years ended December 31, 2025 and 2024 was as follows:
(in thousands) |
|
CLMBR |
|
|
Balance at December 31, 2023 |
|
$ |
|
|
Acquisitions and measurement period adjustments |
|
|
|
|
Amortization |
|
|
( |
) |
Balance at December 31, 2024 |
|
|
|
|
Amortization |
|
|
( |
) |
Balance at December 31, 2025 |
|
$ |
|
|
The identified intangible assets of $
Compensation Arrangements
In connection with the acquisition CLMBR, Inc. the Company has agreed to pay additional consideration in future periods. Certain employees of CLMBR, Inc. will be paid a total of $
Accrued Earn Out
As part of the Acquisition of CLMBR, Inc., the Sellers shall be entitled to receive a contingent payment in the form of shares of Common Stock (collectively, the “Earn-Out Shares”) calculated in the manner set forth in the Asset Purchase Agreement based on the 2024 Unit Sales (as defined in the Asset Purchase Agreement) and the volume-weighted average price (“VWAP”) for the Company’s common stock based on the
24. Supplemental Disclosure of Cash Flow Information
F-63
Supplemental cash flow information for the years ended December 31, 2025 and 2024 is as follows:
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Supplemental Disclosure Of Cash Flow Information: |
|
|
|
|
|
|
||
Cash paid for Interest |
|
|
|
|
|
|
||
Non-Cash Investing and Financing Information: |
|
|
|
|
|
|
||
Property & equipment in accounts payable |
|
|
|
|
|
|
||
Inventories in accounts payable and accrued expenses |
|
|
|
|
|
|
||
Issuance of common stock and series B preferred stock for the acquisition of business |
|
|
|
|
|
|
||
Issuance and offering costs in accounts payable and accrued expenses |
|
|
|
|
|
|
||
Issuance of preferred stock through conversion of debt |
|
|
|
|
|
|
||
Conversion of convertible notes into common stock |
|
|
|
|
|
|
||
Gain on extinguishment of debt with related party |
|
|
|
|
|
|
||
Non-cash settlement of convertible notes through release of digital assets |
|
|
|
|
|
— |
|
|
Issuance of series E preferred stock for the acquisition of business |
|
|
|
|
|
|
||
Issuance of common stock upon conversion of convertible notes |
|
|
|
|
|
|
||
Issuance of Series C Preferred Stock upon settlement of loss restoration agreement |
|
|
|
|
|
|
||
Settlement of digital assets upon issuance of remainder notes |
|
|
|
|
|
|
||
Issuance of common stock upon exercise of common warrants |
|
|
|
|
|
|
||
Exercise and exchange of stock warrants |
|
|
|
|
|
|
||
Issuance of warrants with convertible notes |
|
|
|
|
|
|
||
Issuance of embedded derivatives with convertible notes |
|
|
|
|
|
|
||
Series A Dividends Paid in Kind |
|
|
|
|
|
|
||
Series C Dividends Paid in Kind |
|
|
|
|
|
|
||
Non cash settlement of debt and accounts payable |
|
|
|
|
|
|
||
Stock-based compensation capitalized in intangible asset and other assets |
|
|
|
|
|
|
||
Note 25. Subsequent Events
Sportstech Loan Receivable
On February 10, 2025, the Company, Sportstech Brands Holding GmBH ("Sportstech") and Mr. Ali Ahmad, the sole shareholder of Sportstech, entered into a Binding Transaction Agreement (the “Agreement”), pursuant to which the Company was to acquire Sportstech in a transaction (the “Transaction”) comprised of an initial investment and three optional investment tranches.
In anticipation of a Transaction closing during fiscal year 2025, the Company made a series of disbursements totaling $
The Company pursued several legal options available to it in order to recover the loan receivable, including enforcement of the personal guarantee by Mr. Ahmad, and forcing a public auction of the equity interests in Sportstech in accordance with German law. On March 4, 2026, the Company and Sportstech settled the outstanding balance and the Company received $
Conversion of Convertible Notes and Loans Payable
On February 27, 2026, Woodway exchanged $
F-64
On February 26, 2026, a related party noteholder of the Company exchanged $
Between February 17, 2026 and February 26, 2026 Vertical Investors, LLC exchanged $
In January of 2026, the Current Holder of the September 2025 Exchange Note converted $
In February of 2026, the holder of one of the Company's senior secured convertible notes converted an aggregate of $
Acquisition
On February 18, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Ergatta, Inc., a Delaware corporation ("Ergatta"), Ergatta Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Company ("Merger Sub"), and Tom Aulet, solely in his capacity as the securityholders’ representative (the “Securityholders’ Representative”), pursuant to which Merger Sub will merge with and into Ergatta (the “Merger”), with Ergatta surviving as a wholly owned subsidiary of the Company. At the effective time of the Merger, each issued and outstanding share of preferred stock of Ergatta (other than excluded and dissenting shares) will be cancelled and converted into the right to receive, subject to the terms of the Merger Agreement, (i) cash consideration of up to $
Upon closing, the Company filed a certificate of designation with the Secretary of State of the State of Delaware, creating three new series of preferred stock designated as (i) Series D-1 Convertible Preferred Stock, par value $
At the closing, the Company entered into a registration rights agreement with the Securityholders' Representative, on behalf of the parties entitled to receive equity consideration under the Merger Agreement, pursuant to which the Company granted customary registration rights with respect to equity consideration issuable under the Merger Agreement.
Issuance of Common Stock
In February 2026, the Company issued
Issuance of Additional Debt
During the three months ended March 31, 2026, the Company issued additional Class A Incremental Notes with substantially the same terms as the January 2025 Convertible Note (see Note 11) as follows:
F-65
F-66
FAQ
What were Interactive Strength (TRNR)’s 2025 losses and deficit?
Why does Interactive Strength (TRNR) note substantial going-concern doubt?
How much debt does Interactive Strength (TRNR) have and when is it due?
What major acquisitions has Interactive Strength (TRNR) completed recently?
What reverse stock split did Interactive Strength (TRNR) execute in 2026?
How many employees and brands does Interactive Strength (TRNR) have?
