[10-Q] Interactive Strength, Inc. Quarterly Earnings Report
Interactive Strength Inc. (TRNR) filed its Q3 2025 report. Revenue rose to $4.8 million from $2.0 million a year ago, producing a quarterly gross profit of $0.8 million versus a loss last year. The company reported a net loss of $5.2 million, improving from $7.1 million in Q3 2024.
The balance sheet expanded with total assets $85.4 million driven by digital assets $36.8 million, goodwill $15.1 million, and intangibles $8.1 million. Liabilities increased to $68.0 million, including convertible notes payable (non‑current) $32.36 million. Cash and cash equivalents were $0.8 million at quarter‑end.
Year‑to‑date operating cash outflow was $8.2 million, while financing cash inflow was $62.2 million, largely from $52.5 million of convertible notes and $7.9 million from incremental warrants/notes. The quarter reflected strategic moves: a 1‑for‑10 reverse split effective June 26, 2025; a binding agreement to acquire Sportstech via a staged equity structure; and the Wattbike acquisition with issuance of Series E preferred. Common shares outstanding were 2,079,510 as of September 30, 2025.
- None.
- None.
Insights
Revenue doubled and losses narrowed, but leverage rose.
TRNR posted stronger top line: total revenue of
Liquidity leaned on external funding. Financing inflows of
Strategic actions included the Wattbike acquisition (with Series E issuance) and a binding agreement to acquire Sportstech using staged equity tied to EBITDA formulas. Subsequent disclosures may detail closing milestones and any share issuance amounts tied to VWAP dates.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ________
Commission File Number:
(Exact name of registrant as specified in its charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 10, 2025, the registrant had
Unless otherwise indicated, all share numbers and per share totals have been adjusted to reflect the 1-for-40 reverse stock split that was effective on June 14, 2024, the 1-for-100 reverse stock split that was effective on November 11, 2024, and the 1-for-10 reverse stock split that was effective on June 26, 2025.
TABLE OF CONTENTS
Part I. Financial Information |
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Item 1 Financial Statements |
1 |
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Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations |
48 |
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Item 3 Quantitative and Qualitative Disclosures About Market Risk |
62 |
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Item 4 Controls and Procedures |
62 |
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Part II. Other Information |
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Item 1 Legal Proceedings |
65 |
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Item 1A Risk Factors |
65 |
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Item 5 Other Information |
67 |
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Item 6 Exhibits |
68 |
i
Item 1. Financial Statements
INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except share amounts)
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September 30, |
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December 31, |
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2025 |
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2024 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories, net |
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Derivatives |
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Vendor deposits |
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Loan receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use-assets |
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Intangible assets, net |
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Long-term inventories, net |
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Vendor deposits long term |
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Digital assets |
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Goodwill |
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Other assets |
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Total Assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liability, current portion |
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Deferred revenue |
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Loan payable |
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Income tax payable |
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Derivatives |
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Convertible note payable |
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Total current liabilities |
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Operating lease liability, net of current portion |
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Other long term liabilities |
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Warrant liabilities |
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Loan payable non current |
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Convertible note payable non current |
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Total liabilities |
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$ |
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$ |
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Commitments and contingencies (Note 15) |
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Series E preferred stock, par value $ |
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Stockholders' equity |
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Series A preferred stock, par value $ |
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Series B preferred stock, par value $ |
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Series C preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
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( |
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Total stockholders' equity |
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Total liabilities, preferred stock and stockholders' equity |
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$ |
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$ |
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1
INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(In thousands, except share and per share amounts)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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Revenue: |
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Fitness product revenue |
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$ |
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$ |
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$ |
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$ |
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Membership revenue |
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Training revenue |
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Total revenue |
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Cost of revenue: |
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Cost of fitness product revenue |
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( |
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( |
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( |
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( |
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Cost of membership |
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( |
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( |
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( |
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( |
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Cost of training |
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( |
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( |
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( |
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( |
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Total cost of revenue |
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( |
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( |
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( |
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Gross profit (loss) |
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( |
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( |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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Other income (expense), net: |
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Other income (expense), net |
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( |
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( |
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Interest expense |
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( |
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( |
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( |
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Interest income |
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Loss on issuance of warrants |
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( |
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Gain (loss) upon extinguishment of debt and accounts payable |
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Change in fair value of convertible notes |
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Change in fair value of earnout |
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Change in fair value of derivatives |
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Change in fair value of digital assets |
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Change in fair value of warrants |
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Total other income (expense), net |
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Loss before provision for income taxes |
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Income tax expense |
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Net loss attributable to common stockholders |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share - basic and diluted |
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$ |
( |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Weighted average common stock outstanding—basic and diluted |
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2025 |
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2024 |
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2025 |
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2024 |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Other comprehensive (loss) gain: |
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Foreign currency translation (loss) gain |
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( |
) |
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( |
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Total comprehensive loss |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
2
INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(unaudited)
(In thousands, except share amounts)
|
Convertible Preferred Stock Series B |
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Convertible Preferred Stock Series A |
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Convertible Preferred Stock Series B |
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Convertible Preferred Stock Series C |
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Common Stock |
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Subscription Receivable Preferred Stock Series A |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Accumulated Deficit |
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Total Stockholders' (Deficit) Equity |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Balances at December 31, 2023 |
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$ |
— |
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— |
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$ |
— |
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— |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
$ |
( |
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Issuance of preferred stock Series A upon conversion of debt |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Subscription receivable for issuance of Series A preferred stock |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
) |
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Issuance of preferred stock series B upon acquisition of CLMBR, Inc. |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock upon acquisition of CLMBR, Inc. |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Common stock upon waiver to enter into Note Agreement |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of shares upon issuance of convertible notes |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Common stock from equity line of credit |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Common stock upon conversion of convertible notes |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Issuance of Common stock upon exercise of stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Foreign currency translation gain (loss) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balances at March 31, 2024 |
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$ |
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$ |
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— |
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$ |
— |
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— |
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$ |
— |
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$ |
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$ |
( |
) |
$ |
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$ |
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$ |
( |
) |
$ |
( |
) |
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Issuance of preferred stock Series A upon conversion of debt |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Subscription receivable for issuance of Series A preferred stock |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Reclassification of series B preferred stock to permanent equity |
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( |
) |
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( |
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— |
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— |
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— |
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— |
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|
— |
|
|
|
|||
1 for 40 reverse stock split share round up |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Registered direct offering, net of issuance costs of $ |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Registered direct offering costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Issuance of Common stock from At the Market offering, net of issuance costs of $ |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
At the Market offering costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Issuance of Common stock from equity line of credit |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Common stock upon conversion of convertible notes |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of shares upon conversion of warrants |
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Common stock upon exercise of warrants |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Common stock upon exercise of stock options |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Foreign currency translation loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balances at June 30, 2024 |
|
— |
|
$ |
— |
|
|
|
$ |
|
|
|
$ |
— |
|
|
— |
|
$ |
— |
|
|
|
$ |
|
$ |
— |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
||||||||
Issuance of Common stock from Best Efforts Offering |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Best Efforts offering costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Series A Preferred dividends declared and paid in kind |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
( |
) |
|
— |
|
||
Issuance of preferred stock series C upon conversion of preferred series A and conversion of debt |
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Common stock from At the Market offering |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Common stock upon exercise of warrants |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Common stock upon extinguishment of debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Common stock upon exercise of stock options |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Foreign currency translation gain (loss) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balances at September 30, 2024 |
|
— |
|
$ |
— |
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
$ |
|
|
|
$ |
|
$ |
— |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
|||||||||
3
INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(unaudited)
(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 preferred stock series C upon settlement of loss restoration agreement |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Gain on extinguishment of related party promissory notes |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
||
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Foreign currency translation gain |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balances at March 31, 2025 |
|
— |
|
$ |
— |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||||||||||
Series A Preferred dividends declared and paid in kind |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
( |
) |
|
— |
|
||
Series C Preferred dividends declared and paid in kind |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
( |
) |
|
— |
|
||
Issuance of Common stock upon conversion of convertible notes |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of Common stock upon conversion of preferred stock |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Reverse stock split settlement of fractional shares |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Foreign currency translation gain |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balances at June 30, 2025 |
|
— |
|
$ |
— |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||||||||||
Issuance of Common stock upon conversion of convertible notes |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Reverse stock split retirement of fractional shares |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Issuance of preferred stock series C upon settlement of loss restoration agreement |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
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 |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Stock-based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Foreign currency translation gain |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||
Net loss |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balances at September 30, 2025 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
|||||||||||||
4
INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(In thousands)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash Flows From Operating Activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Foreign currency |
|
|
( |
) |
|
|
|
|
Depreciation |
|
|
|
|
|
|
||
Amortization |
|
|
|
|
|
|
||
Non-cash lease expense |
|
|
|
|
|
|
||
Inventory step up amortization |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Provision for bad debt |
|
|
|
|
|
|
||
Inventory write-off |
|
|
|
|
|
|
||
Loss on disposal of assets |
|
|
|
|
|
|
||
(Gain) loss on extinguishment of debt and accounts payable |
|
|
( |
) |
|
|
|
|
Fair value of common stock issued with Best Efforts Offering |
|
|
|
|
|
|
||
Loss on settlement of accounts payable |
|
|
|
|
|
|
||
Non-cash interest income |
|
|
( |
) |
|
|
|
|
Non-cash interest expense |
|
|
|
|
|
|
||
Amortization of debt discount |
|
|
|
|
|
|
||
Common stock issued to lender in connection with entering Equity Line of Credit Agreement |
|
|
|
|
|
|
||
Change in fair value of convertible notes |
|
|
( |
) |
|
|
|
|
Loss on issuance of warrants |
|
|
|
|
|
|
||
Change in fair value of digital assets |
|
|
|
|
|
|
||
Loss on exchange of warrants for equity |
|
|
|
|
|
|
||
Change in fair value of earnout |
|
|
|
|
|
( |
) |
|
Change in fair value of derivatives |
|
|
|
|
|
( |
) |
|
Change in fair value of warrants |
|
|
( |
) |
|
|
( |
) |
Changes in operating assets and liabilities |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
Vendor deposits |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
|
|
|
( |
) |
|
Accounts payable |
|
|
|
|
|
( |
) |
|
Accrued expenses and other current liabilities |
|
|
( |
) |
|
|
|
|
Deferred revenue |
|
|
|
|
|
( |
) |
|
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash Flows From Investing Activities: |
|
|
|
|
|
|
||
Loan to Sportstech |
|
|
( |
) |
|
|
|
|
Acquisition of internal use software |
|
|
( |
) |
|
|
|
|
Acquisition of digital assets |
|
|
( |
) |
|
|
|
|
Acquisition of business, cash paid, net of cash acquired |
|
|
( |
) |
|
|
( |
) |
Acquisition of software and content |
|
|
( |
) |
|
|
|
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash Flows From Financing Activities: |
|
|
|
|
|
|
||
Payments of loans |
|
|
( |
) |
|
|
( |
) |
Proceeds from loans |
|
|
|
|
|
|
||
Proceeds from issuance of related party loans |
|
|
|
|
|
|
||
Payment on loss restoration agreement |
|
|
( |
) |
|
|
|
|
Payments of related party loans |
|
|
|
|
|
( |
) |
|
Proceeds from issuance of common stock and prefunded warrants upon offering, net of offering costs |
|
|
|
|
|
|
||
Payments of offering costs |
|
|
( |
) |
|
|
( |
) |
Redemption and payment on convertible notes |
|
|
( |
) |
|
|
( |
) |
Proceeds from issuance of convertible notes, net of issuance costs |
|
|
|
|
|
|
||
Proceeds from issuance of common stock from At the Market Offering, net of issuance costs |
|
|
|
|
|
|
||
Proceeds from exercise of incremental warrants and issuance of convertible notes, net of issuance costs |
|
|
|
|
|
|
||
Interest paid on loans and convertible notes |
|
|
|
|
|
( |
) |
|
Proceeds from the exercise of warrants |
|
|
|
|
|
|
||
Proceeds from the issuance of common stock from equity line of credit |
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rate on cash |
|
|
|
|
|
( |
) |
|
Net Change In Cash and Cash Equivalents and Restricted Cash |
|
|
|
|
|
|
||
Cash and restricted cash at beginning of the period |
|
|
|
|
|
|
||
Cash and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
5
INTERACTIVE STRENGTH INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Basis of Presentation
Description and Organization
Interactive Strength Inc. (the "Company") has established a leading portfolio of premium fitness brands—Wattbike, CLMBR, and FORME—that combine advanced hardware, smart technology, and immersive content to deliver exceptional training experiences for both commercial and home use. ("Connected Fitness")
From elite performance to everyday wellness, the Company's ecosystem of performance-focused solutions delivers data-driven outcomes for athletes, fitness enthusiasts, and commercial operators.
Reverse Stock Split
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, $
The 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.
Binding LOI - Sportstech
On February 10, 2025, the Company, Sportstech and Mr. Ali Ahmad, the sole shareholder of Sportstech, entered into a Binding Transaction Agreement (the “Agreement”), pursuant to which the Company will acquire Sportstech in a transaction (the “Transaction”) comprised of an initial investment (the “Initial Investment”) and three optional investment tranches, which are callable, subject to performance metrics, by Mr. Ahmad or an entity connected to him.
Pursuant to the Agreement, in the Initial Investment, the Company will acquire an approximately
Optional Investment A (“Optional Investment A”) provides an option to call a capital increase of up to $
6
Optional Investment B (“Optional Investment B”) provides an option to call a capital increase of up to $
Optional Investment C (“Optional Investment C”) provides an option to call a capital increase of up to $
In addition, pursuant to the Agreement, Mr. Ahmad will join the Board of Directors of the Company (the "Board") upon closing of the Initial Investment.
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 (the “Transaction”). On July 1, 2025, pursuant to the Purchase Agreement, the Company completed the acquisition for a total purchase price of approximately $
The 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 July 1, 2025, with the remaining unallocated purchase price recorded as goodwill. See Note 23, which outlines the Company’s consideration transferred and the identifiable net assets acquired at their fair value as of July 1, 2025.
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 $
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, which outlines the Company’s consideration transferred and the identifiable net assets acquired at their fair value as of February 2, 2024.
Basis of Presentation and Consolidation
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The condensed 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.
In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, cash flows, and the changes in equity for the interim period.
7
Liquidity and Capital Resources
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 date the accompanying condensed consolidated financial statements were issued.
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 condensed 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:
8
As of September 30, 2025 and through the issuance date, the Company was in compliance with the Rules. However, management can provide no assurance that the Company will be able to remain in compliance with the Rules over the next twelve months beyond the issuance date and, if compliance is not maintained, that the Staff will not require the Company’s securities to be delisted from the Nasdaq. If a delisting occurs, the Company will be faced with a number of material adverse consequences, including limited availability of market quotations for its common stock; limited news and analyst coverage; decreased ability to obtain additional financing; limited liquidity for the Company’s stockholders due to thin trading; and a potential loss of confidence by investors, employees and other third parties who do business with the Company.
These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying condensed 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 condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
2. Summary of Significant Accounting Policies
Unaudited Interim Financial Information
The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. GAAP for interim financial reporting and as required by SEC Regulation S-X, Rule 10-01. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 31, 2025.
Use of Estimates
The preparation of the condensed 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 revenue related reserves, the realizability of inventory, fair value measurements, useful lives of long lived assets, including property and equipment and finite lived intangible assets, product warranties, stock-based compensation expense, warrant liabilities, accrual of acquisition earn-outs, legal accruals, valuation of
9
deferred taxes, valuation of derivatives, fair value of goodwill and other intangible assets, 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 condensed consolidated financial statements (See Note 3). The Company currently operates in the United States, the United Kingdom, and Taiwan. As of September 30, 2025 and December 31, 2024, substantially all of the Company's long-lived assets were held in the United States.
Significant Accounting Policies
During the three and nine months ended September 30, 2025, there were no significant changes to the Company’s significant accounting policies as described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2024, except as described below.
Loan Receivable
Loan receivable consists of a loan agreement entered into with Sportstech as a form of bridge financing until the acquisition is closed.
Digital Assets
As a result of the Company's investment in the utility tokens and key medium of exchange on the Fetch.ai network ("FET") as part of its treasury reserve diversification strategy, the Company recognized its investment in accordance with ASC 350-60 (as defined below). Under the guidance, digital assets and other crypto assets (“digital assets”) are accounted for as indefinite-lived intangible assets, and are initially measured at cost, and are adjusted to fair value at the end of each reporting period (see Note 7). The Company measures gains or losses on the disposition of digital assets in accordance with the first-in-first-out method of accounting. Additionally, changes in fair value are recorded in Change in fair value of digital assets in the Company's condensed consolidated statements of operations.
The Company expects to hold its digital assets as a long-term investment, and, therefore, they are classified as non-current assets as of September 30, 2025 on the condensed consolidated balance sheets.
Income Taxes
In July 2025, the One Big Beautiful Bill Act was signed into law. The legislation includes modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions including
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 condensed 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 has the option to adopt the new or revised standard at the time private companies adopt the new or revised standard and may do so until such time that the Company either (i)
10
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 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 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's adoption of this new standard effective as of January 1, 2025 did not have a material impact on its condensed 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 the 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 2023-08
In December 2023, the FASB issued ASU 2023-08, Accounting for and Disclosure of Crypto Assets, which is codified as ASC subtopic 350-60 ("ASC 350-60"). The new guidance is designed to streamline the accounting treatment of crypto assets. ASC 350-60 requires that an entity measure crypto assets at fair value with changes recognized in net income (loss) at each reporting period and present crypto assets separately from other intangible assets in the balance sheet and changes from the remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement. The guidance is effective for annual periods beginning after December 15, 2024 and interim periods within annual periods beginning after December 15, 2024. The Company adopted ASC 350-60 as of January 1, 2025 resulting in certain expanded disclosures about its digital assets. Refer to Note 7 for more information.
Accounting Pronouncements Not Yet Adopted
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. Early adoption is permitted. The Company adopted this guidance effective January 1, 2025, and will provide the required disclosures in the Company’s annual report on Form 10-K for the year ended December 31, 2025. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
ASU 2024-03
In November 2024, the FASB issued ASU 2024-03, as amended by ASU 2025-01, "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 evaluating this guidance to determine the impact it may have on its condensed consolidated financial statements.
11
ASU 2025-05
In July 2025, the FASB issued ASU 2025-05, “Financial Instruments – Credit Losses (Topic 326).” In developing forecasts as part of estimating expected credit losses, the ASU allows entities to elect a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. This ASU is effective for annual and interim periods beginning in 2026. Early adoption is permitted. The Company does not expect the new standard to have a material impact on its consolidated financial statements.
ASU 2025-06
In September 2025, the FASB issued ASU 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40).” The ASU updates the guidance on accounting for internal-use software costs by (i) removing all references to software development stages, and (ii) requiring that an entity capitalize software costs when both management has authorized and committed to funding the software project, and it is probable that the project will be completed and the software will be used to perform the function intended. This ASU is effective for annual and interim periods beginning in 2028. Early adoption is permitted. The Company is currently evaluating the impact of the new standard.
3. Segment Reporting
The Company is organized into
The following tables present revenue and significant segment expenses that are included within net loss:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
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 (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other segment items (3) |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reconciliation of net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjustments and reconciling items |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consolidated net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
(1)
12
(2)
(3)
4. Revenue Recognition
The Company’s primary source of revenue is substantially derived from the United States and Europe from sales of its Connected Fitness Products and related accessories and associated recurring Membership revenue, as well as from sales of personal training services recorded within Training revenue.
The Company determines revenue recognition through the following steps:
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. 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 payment processing fees for credit card sales for Connected Fitness Products are included as a reduction to fitness product revenue in the Company’s condensed 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 condensed 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 condensed consolidated statements of operations and comprehensive loss.
Training
The Company’s training services are personal training services delivered through the 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
13
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 if 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 geographic location:
|
|
Three Months Ended September 30, 2025 |
|
|
Nine Months Ended September 30, 2025 |
|
|
||||||||||||||||||||||||||
(in thousands) |
|
CLMBR |
|
|
FORME |
|
|
WATTBIKE |
|
|
Total |
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fitness Product Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||||
|
|
Three Months Ended September 30, 2024 |
|
|
Nine Months Ended September 30, 2024 |
|
|
||||||||||||||||||||||||||
(in thousands) |
|
CLMBR |
|
|
FORME |
|
|
WATTBIKE |
|
|
Total |
|
|
CLMBR |
|
|
FORME |
|
|
WATTBIKE |
|
|
Total |
|
|
||||||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
United States |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fitness Product Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||||
Membership Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Training Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Asia |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Fitness Product Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||||
5. Inventories, net
Inventories consist of the following:
|
|
September 30, |
|
|
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 the Company's Taiwan facility that will be shipped to the Company's manufacturing partners and will not be used within one year.
14
6. Property and Equipment, net
Property and equipment consisted of the following:
|
|
September 30, |
|
|
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 |
|
$ |
|
|
$ |
|
||
7. Goodwill, Intangible Assets, net and Digital Assets
Goodwill
Goodwill and intangible assets of $
Changes in goodwill for the nine months ended September 30, 2025 are as follows:
(in thousands) |
|
Goodwill |
|
|
Balance as of December 31, 2024 |
|
$ |
|
|
Goodwill acquired |
|
|
|
|
Balance as of September 30, 2025 |
|
$ |
|
|
Intangible Assets, Net
Identifiable intangible assets, net consist of the following:
|
|
As of September 30, |
|
|
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 September 30, 2025, estimated annual amortization expense for each of the next five fiscal years is as follows:
Fiscal Years Ending December 31, |
|
|||
(in thousands) |
|
|
|
|
2025 (remaining) |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
|
15
Digital Assets
In June 2025 the Company paid approximately $
(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 at September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||||
8. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
|
|
September 30, |
|
|
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 |
|
$ |
|
|
$ |
|
||
9. Other Assets, net
Other assets, net consisted of the following:
|
|
As of September 30, |
|
|
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 |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Amortization expense amounted to $
16
10. Accrued Expenses and Other Current Liabilities
Accrued expenses consisted of the following:
|
|
September 30, |
|
|
December 31, |
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Accrued bonus |
|
$ |
|
|
$ |
|
||
Accrued LTI |
|
|
|
|
|
|
||
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 $
Accrued LTI of $
17
11. Debt
Debt consisted of the following:
|
|
September 30, |
|
|
December 31, |
|
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
||
Principal stockholder promissory notes |
|
$ |
|
|
$ |
|
|
||
Promissory notes |
|
|
|
|
|
|
|
||
Term Loan |
|
|
|
|
|
|
|
||
Working capital facility |
|
|
|
|
|
|
|
||
Total loan payable |
|
$ |
|
|
$ |
|
|
||
Other related party convertible notes |
|
|
|
|
|
|
|
||
February 2024 convertible notes |
|
|
|
|
|
|
|
||
September 2025 convertible notes |
|
|
|
|
|
|
|
||
Total convertible note payable |
|
$ |
|
|
$ |
|
|
||
Total debt current |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
Promissory notes |
|
|
|
|
|
|
|
||
Total Loan Payable non current |
|
$ |
|
|
$ |
|
|
||
June 2025 convertible preferred notes |
|
|
|
|
|
|
|
||
June 2025 convertible exchangeable notes |
|
|
|
|
|
|
|
||
July 2025 convertible notes |
|
|
|
|
|
|
|
||
August 2025 convertible notes |
|
|
|
|
|
|
|
||
Total Convertible note payable non current |
|
$ |
|
|
$ |
|
|
||
Total debt |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
Principal Stockholder Promissory Notes
During 2019, 2020, and 2021, the Company entered into promissory notes with a then-principal stockholder (the "former principal stockholder”) of the Company. As the 2019, 2020 and 2021 notes were not paid upon maturity, these loans were in default and on August 4, 2023, the Company received a notice of default from the principal stockholder. The Company accrued for the default fee on the date of default and the additional default interest following that date (see Note 20 Related Party Transactions). On January 29, 2025, the Former Principal Stockholder assigned the Former Principal Stockholder Notes 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
Promissory Notes
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 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 $
On May 21, 2025, the Company issued an unsecured promissory note in the principal amount of $
18
Agreement, dated as of February 20, 2024. The promissory note carries an original issue discount of
The $
The carrying value of the promissory note is as follows:
|
|
September 30, |
|
|
December 31, |
|
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
||
Principal and interest |
|
$ |
|
|
$ |
|
|
||
Unamortized debt discount |
|
|
( |
) |
|
|
|
|
|
Aggregate carrying value |
|
$ |
|
|
$ |
|
|
||
Interest expense recognized on the promissory note is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
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 $
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 $
On April 24, 2024, (the “Effective Date”) the Company entered into 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 $
19
On April 24, 2024, the Company entered into a Loan Restoration Agreement with the Lender (the “Restoration Agreement”) which was amended on September 30, 2024. The Amendment revised the definition of Preferred Stock to “
As of September 30, 2024, the outstanding principal amount of the Loan was $
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 $
As of September 30, 2025, the Net Trade Value was $
The carrying value of the Term Loan is as follows:
|
|
September 30, |
|
|
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:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Contractual interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Amortization of debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
20
Convertible Notes
Other Related Party Convertible Notes
On February 18, 2020, the Company entered into a $
February 2024 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, 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 Holdings LLC 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 $
On December 13, 2024, the Company and Treadway Holdings LLC 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 Holdings LLC 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 Holdings LLC is still holding the resulting conversion shares. For each Extension period, if the principal amount of the Amended and Restated Note converted by Treadway Holdings LLC during such Extension period is less than the purchase price received by Treadway Holdings LLC 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 Holdings LLC sold the Amended and Restated Note to Woodway USA, Inc. (the “Purchaser”). The Purchaser was the guarantor of the Note Purchase Agreement and is currently the largest customer of the Company, pursuant to the previously disclosed Exclusive Distribution Agreement, by and between the Company and the Purchaser, dated as of February 20,
21
2024. On March 3, 2025, the Purchaser 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 August 8, 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 an Incremental Note in an aggregate principal amount of $
The September Exchange Note accrues interest at a rate of
The September Exchange Note is 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 September 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 Exchange Note is convertible at a conversion rate equal to the quotient of (x)
For the nine months ended September 30, 2025, the Current Holder converted a total of $
The fair value was $
January 2025 Exchange Notes
As previously disclosed, from 2019 to 2021, the Company entered into five promissory notes (collectively, the “Former Principal Stockholder Notes”) with a then-principal stockholder (the "Former Principal Stockholder”) of the Company.
On January 29, 2025, the Former Principal Stockholder assigned the Former Principal Stockholder Notes to an accredited investor that is managed by an ATW Partners related entity (the “Exchange Agreement Investor”). The Selling Stockholder is also managed by an ATW Partners related entity.
On February 4, 2025, the Company and the Exchange Agreement Investor entered into an Exchange Agreement (the “Exchange Agreement”), pursuant to which the Company and the Exchange Agreement Investor exchanged the Former Principal Stockholder Notes for five new secured promissory notes of the Company secured by the Company’s assets (the “January 2025 Exchange Notes”). Note 1 was exchanged for “Exchange Note 1”, Note 2 was exchanged for “Exchange Note 2”, Note 3 was exchanged for “Exchange Note 3”, Note 4 was exchanged for “Exchange Note 4”, and Note 5 was exchanged for “Exchange Note 5”. The January 2025 Exchange Notes were offered, sold, and issued by the Company to the Exchange Agreement Investor pursuant to the exemption provided in Section 3(a)(9) under the Securities Act.
22
The principal amounts of the January 2025 Exchange Notes are as follows: Exchange Note 1 principal amount: $
The January 2025 Exchange Notes accrue interest at a rate of
The January 2025 Exchange Notes are 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 $
The January 2025 Exchange Notes, in the aggregate principal amount of $
The Company has elected the fair value option to account for its January 2025 Exchange Notes upon issuance in February 2025.
The change in fair value of January 2025 Exchange Notes is as follows:
|
|
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 September 30, 2025 |
|
$ |
|
|
January 2025 Convertible Notes
On January 28, 2025, the Company sold a senior secured convertible note (the “January 2025 Convertible Notes”) in the aggregate principal amount of $
The January 2025 Convertible Notes is 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 January 2025 Convertible Notes sets forth certain standard events of default (each such event, an “Event of Default”), upon the occurrence of which the Company is required to deliver written notice to the Investor within one business day (an “Event of Default Notice”). At any time after the earlier of (a) the Investor’s receipt of an Event of Default Notice, and (b) the Investor becoming aware of an Event of Default, the Investor may require the Company to redeem all or any portion of the Note. Upon an Event of Default, the Note shall bear interest at a rate of the sum of (x) the applicable Interest Rate in effect for such determination and (y)
The $
23
The conversion price was amended upon entering into the June 2025 Convertible Exchangeable Notes on June 13, 2025 to $
For the nine months ended September 30, 2025, the Investor converted a total of $
Interest expense recognized on the January 2025 Convertible Notes is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
Contractual interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Amortization of debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
March 2025 Convertible Notes
On March 11, 2025, the Investor elected to exercise
The March 2025 Convertible Notes are 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 March 2025 Convertible Notes sets forth certain standard events of default (each such event, an “Event of Default”), upon the occurrence of which the Company is required to deliver written notice to the Investor within one business day (an “Event of Default Notice”). At any time after the earlier of (a) the Investor’s receipt of an Event of Default Notice, and (b) the Investor becoming aware of an Event of Default, the Investor may require the Company to redeem all or any portion of the Note. Upon an Event of Default, the Note shall bear interest at a rate of the sum of (x) the applicable Interest Rate in effect for such determination and (y)
The $
The conversion price was amended upon entering into the June 2025 Convertible Exchangeable Notes on June 13, 2025 to $
For the nine months ended September 30, 2025, the Investor converted a total of $
Interest expense recognized on the March 2025 Convertible Notes is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
Contractual interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Amortization of debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
24
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 September 30, 2025 was $
June 2025 Convertible Exchangeable Notes
On June 10, 2025, the Company entered into a securities purchase agreement (the "Purchase Agreement") to sell convertible exchangeable notes to ATW Partners and DWF Labs (together, the “Investors”). Pursuant to the Purchase Agreement, the Company will issue and the Investors will purchase senior secured convertible exchangeable notes in the amount of $
Pursuant to the Purchase Agreement, the Company will use
On June 13, 2025, the Company sold senior secured convertible notes (the “June 2025 Convertible Exchangeable Notes”) in the aggregate principal amount of $
The June 2025 Convertible Exchangeable Notes are 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 $
Starting on the six-month anniversary of the issuance of June 2025 Convertible Exchangeable Notes,
The June 2025 Convertible Exchangeable Notes set forth certain standard events of default (each such event, an “Event of Default”), upon the occurrence of which the Company is required to deliver written notice to the Investors within one business day (an “Event of Default Notice”). At any time after the earlier of (a) the Investors’ receipt of an Event of Default Notice, and (b) the Investors becoming aware of an Event of Default, the Investors may require the Company to satisfy the June 2025 Convertible Exchangeable Notes by (x) exchanging the outstanding principal of the June 2025 Convertible Exchangeable Notes for the FET held by the Company and / or (y) accelerating the Maturity Date.
The Company 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
25
features that would require bifurcation as embedded derivatives under other accounting guidance. All debt issuance costs incurred in connection with June 2025 Convertible Exchangeable Notes accounted for pursuant to the fair value option were expensed as incurred. The fair value of the June 2025 Convertible Exchangeable Notes and changes thereto were determined using a discounted cash flow analysis at a discount rate of
July 2025 Convertible Notes
On July 25, 2025, the Investor elected to exercise
The July 2025 Convertible Notes are 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 July 2025 Convertible Notes sets forth certain standard events of default (each such event, an “Event of Default”), upon the occurrence of which the Company is required to deliver written notice to the Investor within one business day (an “Event of Default Notice”). At any time after the earlier of (a) the Investor’s receipt of an Event of Default Notice, and (b) the Investor becoming aware of an Event of Default, the Investor may require the Company to redeem all or any portion of the Note. Upon an Event of Default, the Note shall bear interest at a rate of the sum of (x) the applicable Interest Rate in effect for such determination and (y)
The $
On September 18, 2025 the Company entered into the Global Note Amendment Agreement (the “Global Amendment”) to amend and restate the July 2025 Convertible Notes to include 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 July 2025 Convertible Notes are convertible at a conversion rate equal to the quotient of (x)
The carrying value of the July 2025 Convertible Notes is as follows:
|
|
September 30, |
|
|
December 31, |
|
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
||
Principal and interest |
|
$ |
|
|
$ |
|
|
||
Unamortized debt discount |
|
|
( |
) |
|
|
|
|
|
Unamortized issuance costs |
|
|
( |
) |
|
|
|
|
|
Aggregate carrying value |
|
$ |
|
|
$ |
|
|
||
26
Interest expense recognized on the July 2025 Convertible Notes is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
Contractual interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Amortization of debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
August 2025 Convertible Notes
On August 26, 2025, the Investor elected to exercise
The August 2025 Convertible Notes are 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 August 2025 Convertible Notes sets forth certain standard events of default (each such event, an “Event of Default”), upon the occurrence of which the Company is required to deliver written notice to the Investor within one business day (an “Event of Default Notice”). At any time after the earlier of (a) the Investor’s receipt of an Event of Default Notice, and (b) the Investor becoming aware of an Event of Default, the Investor may require the Company to redeem all or any portion of the Note. Upon an Event of Default, the Note shall bear interest at a rate of the sum of (x) the applicable Interest Rate in effect for such determination and (y)
The $
On September 18, 2025 the Company entered into the Global Note Amendment Agreement (the “Global Amendment”) to amend and restate the August 2025 Convertible Notes to include 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 August 2025 Convertible Notes are convertible at a conversion rate equal to the quotient of (x)
The carrying value of the August 2025 Convertible Notes is as follows:
|
|
September 30, |
|
|
December 31, |
|
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
||
Principal and interest |
|
$ |
|
|
$ |
|
|
||
Unamortized debt discount |
|
|
( |
) |
|
|
|
|
|
Unamortized issuance costs |
|
|
( |
) |
|
|
|
|
|
Aggregate carrying value |
|
$ |
|
|
$ |
|
|
||
27
Interest expense recognized on the August 2025 Convertible Notes is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
Contractual interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Amortization of debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
September 2025 Convertible Notes
On September 18, 2025, the Investor elected to exercise
The September 2025 Convertible Notes are 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 September 2025 Convertible Notes include 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 Convertible Notes are convertible at a conversion rate equal to the quotient of (x)
The September 2025 Convertible Notes sets forth certain standard events of default (each such event, an “Event of Default”), upon the occurrence of which the Company is required to deliver written notice to the Investor within one business day (an “Event of Default Notice”). At any time after the earlier of (a) the Investor’s receipt of an Event of Default Notice, and (b) the Investor becoming aware of an Event of Default, the Investor may require the Company to redeem all or any portion of the Note. Upon an Event of Default, the Note shall bear interest at a rate of the sum of (x) the applicable Interest Rate in effect for such determination and (y)
The $
The carrying value of the September 2025 Convertible Notes is as follows:
|
|
September 30, |
|
|
December 31, |
|
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
||
Principal and interest |
|
$ |
|
|
$ |
|
|
||
Unamortized debt discount |
|
|
( |
) |
|
|
|
|
|
Unamortized issuance costs |
|
|
( |
) |
|
|
|
|
|
Aggregate carrying value |
|
$ |
|
|
$ |
|
|
||
28
Interest expense recognized on the September 2025 Convertible Notes is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
Contractual interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Amortization of debt discount |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Scheduled maturities on the Company's outstanding indebtedness as of September 30, 2025 is as follows:
Fiscal Years Ending December 31, |
|
|||
(in thousands) |
|
|
|
|
2025 (remaining) |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Total |
|
$ |
|
|
12. Warrants
The following is a schedule of changes in warrants issued and outstanding from December 31, 2024 to September 30, 2025:
|
|
Outstanding as of |
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of |
|
|
|||||
|
|
December 31, 2024 |
|
|
Issued |
|
|
Exercised |
|
|
Canceled |
|
|
September 30, 2025 |
|
|
|||||
November 2023 Bridge Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
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 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
||||
January 2025 Class A Incremental Warrants |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
||||
January 2025 Class B Incremental Warrants |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
||||
March 2025 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Woodway May 2025 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
July 2025 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
August 2025 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
September 2025 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Warrants |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|||
The warrants are classified as other long-term liabilities within the condensed consolidated balance sheets and are carried at fair value, with changes in fair value recorded in earnings.
November 2023 Bridge Warrants
In connection with the November Bridge Notes issued in November 2023, 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.
February 2024 Warrants
On February 1, 2024, the Company issued an aggregate
29
Woodway February 2024 Warrants
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 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
January 2025 Warrants
On January 28, 2025, the Company issued warrants to purchase
January 2025 Class A Incremental Warrants
On January 28, 2025, the Company issued
30
January 2025 Class B Incremental Warrants
On January 28, 2025, the Company issued
March 2025 Warrants
On March 11, 2025, the Company issued warrants to purchase
Woodway May 2025 Warrants
On May 21, 2025, the Company issued warrants to purchase
July 2025 Warrants
On July 25, 2025, the Company issued warrants to purchase
August 2025 Warrants
On August 26, 2025, the Company issued warrants to purchase
September 2025 Warrants
On September 18, 2025, the Company issued warrants to purchase
13. Fair Value Measurements
The Company’s financial instruments consist of derivatives, convertible notes held at fair value, and warrants.
Assets and liabilities measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024 were as follows:
|
|
September 30, 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 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||
Derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Digital assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Derivatives |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||
Convertible Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||||
31
During the nine months ended September 30, 2025, there were
Digital assets
In June 2025, the Company invested in digital assets to diversify its treasury investment strategy. Under ASC 350-60, the Company’s digital assets are measured at fair value based on quoted prices on active exchanges, and are therefore categorized as Level 1 investments in the fair value hierarchy. The Company recognizes changes in the fair value of its digital assets as gains or losses in Change in fair value of digital assets on the Company's condensed consolidated statements of operations during the period in which they occur. For the three and nine months ended September 30, 2025, the Company recognized a $
The following summarizes the activity for the Company Level 3 assets and liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2025.
Derivatives
(in thousands) |
|
Loss Restoration Derivative |
|
|
January 2025 Derivative |
|
|
March 2025 Derivative |
|
|
July 2025 Derivative |
|
|
August 2025 Derivative |
|
|
September 2025 Derivative |
|
|
Wattbike FX Contract Derivative |
|
|
Total Derivative Liabilities |
|
|
Total Derivative Assets |
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Fair value at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||
Issuance of derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Derivative settlement |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|||||||
Change in estimated fair value of derivatives |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|||
Acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Fair value at September 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||||||
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 September 30, 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:
|
|
September 30, |
|
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
February 2024 Convertible Notes
The Company entered into a convertible note arrangement in February 2024. The amendment in November 2024 to the Note represented the addition of a substantive conversion feature and as a result was accounted for as a debt extinguishment. Subsequently, the remaining unamortized discount was written off. 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 was determined using a discounted cash flow analysis at a discount rate of
|
|
February 2024 |
|
|
|
(in thousands) |
|
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 September 30, 2025 |
|
$ |
|
|
|
32
January 2025 Exchange Notes
On February 4, 2025, the Company and the Exchange Agreement Investor entered into an Exchange Agreement (the “Exchange Agreement”), pursuant to which the Company and the Exchange Agreement Investor exchanged the Former Principal Stockholder Notes for five new secured promissory notes of the Company secured by the Company’s assets (the “January 2025 Exchange Notes”). The amendment to the Note represents the addition of a substantive conversion feature and as a result the Company recorded a gain on extinguishment included in condensed consolidated statement of stockholders' equity. The Company elected the fair value option for the January 2025 Exchange Notes under ASC 825, Financial Instruments, with changes in fair value recorded in earnings each reporting period. The fair value of the January 2025 Exchange Notes was determined using a discounted cash flow analysis at a discount rate 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 September 30, 2025 |
|
$ |
|
|
June 2025 Convertible Exchangeable Notes
The Company entered into senior secured convertible notes in June 2025. The Company 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. The fair value of the June 2025 Convertible Exchangeable Notes was determined using a discounted cash flow analysis at a discount rate of
|
|
June 2025 |
|
|
|
|
|
Convertible |
|
|
|
(in thousands) |
|
Exchangeable Notes |
|
|
|
Fair value at June 13, 2025 |
|
$ |
|
|
|
Change in estimated fair value of convertible notes |
|
|
( |
) |
|
Fair value at September 30, 2025 |
|
$ |
|
|
|
Warrants
(in thousands) |
|
2023 Common Warrants (1) |
|
|
2024 Common Warrants (2) |
|
|
2025 Common Warrants (3) |
|
|
2025 Incremental Warrants (4) |
|
|
Total Warrants |
|
|
|||||
Fair value at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||
Issuance of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Change in estimated fair value of warrants |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
||
Fair value at September 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|||||
(1)
(2)
(3)
(4)
For the outstanding warrants as September 30, 2025 and December 31, 2024, the Company 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.
33
The following table outlines the key inputs for the Black-Scholes option-pricing models:
|
|
September 30, |
|
|
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 outlines the key inputs for the Monte Carlo Simulation models:
|
|
September 30, |
|
|
December 31, |
|
|
||
|
|
2025 |
|
|
2024 |
|
|
||
Weighted-average risk-free interest rate |
|
|
|
|
% |
|
|||
Weighted-average expected term (in years) |
|
|
|
|
|
|
|||
Weighted-average expected volatility |
|
|
|
|
% |
|
|||
Expected dividend yield |
|
|
% |
|
|
% |
|
||
14. Leases
Lease Obligations
The Company has made certain assumptions and judgements 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 September 30, 2025, 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 condensed consolidated balance sheets.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
|
|
(in thousands) |
|
|
(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 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
The following represents the Company’s minimum annual rental payments under operating leases for each of the next five years and thereafter:
34
Fiscal Year Ending December 31, |
|
Operating |
|
|
|
|
(in thousands) |
|
|
2025 (remaining) |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total future minimum lease payments |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Present value of operating lease liability |
|
$ |
|
|
|
|
|
|
|
Less: current portion of lease liability |
|
|
|
|
Non-current portion of lease liability |
|
|
|
|
Present value of operating lease liability |
|
$ |
|
|
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 $
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 $
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.
16. Stockholders’ Equity (Deficit)
Common Stock
The Company’s authorized common stock consisted of
On February 2, 2024, the Company issued
35
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
In June 2024 through December 2024, the Company issued
The Reverse Stock Split on June 14, 2024 decreased the number of shares of Common Stock issued and outstanding but such reduction was subject to adjustment for the rounding up of fractional shares. On June 25, 2024 due to the rounding up of fractional shares, a total of
The Reverse Stock Split on November 11, 2024 decreased the number of shares of Common Stock issued and outstanding but such reduction was subject to adjustment for the rounding up of fractional shares. On November 21, 2024 due to the rounding up of fractional shares, a total of
From September 2024 through November 2024, the Company issued
From November 2024 through December 2024, the Company issued
In February 2025, the Company issued
From January 2025 through March 2025, the Company issued
From January 2025 through March 2025, the Company issued
From April 2025 through June 2025, the Company issued
From April 2025 through June 2025, the Company issued
In June 2025, no fractional shares were issued in connection with the
In July 2025,
36
In August 2025, the Company issued
From July 2025 to September 2025, the Company issued
In July 2025, the Company entered into an inducement offer letter agreement and agreed to exercise part of the January 2025 Warrants for
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:
On January 23, 2025 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
On April 17, 2025 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
On June 2, 2025 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
37
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 Company classified the Series A Preferred Stock as permanent equity as of September 30, 2025.
The Series B convertible preferred stock includes the following:
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 was outside of the control of the Company and therefore the securities should be classified outside of permanent stockholders’ deficit. Upon shareholder approval on May 31, 2024, the Company classified the Series B Preferred Stock as permanent equity.
The Series C convertible preferred stock includes the following:
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 September 30, 2025.
On January 23, 2025, the Board declared a dividend on the shares of Series C Preferred Stock issued and outstanding as of the record date for such dividend, as a dividend in kind, in the form of
On April 17, 2025, the Board declared a dividend on the shares of Series C Preferred Stock issued and outstanding as of the record date for such dividend, as a dividend in kind, in the form of
38
On June 2, 2025, the Board declared a dividend on the shares of Series C Preferred Stock issued and outstanding as of the record date for such dividend, as a dividend in kind, in the form of
The Series E Preferred Stock includes the following:
All of the
17. Equity-Based Compensation
2023 and 2020 Equity Incentive Plan
Presented below is a summary of the compensation cost recognized in the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2025 and 2024.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
For the three and nine months ended September 30, 2025 and 2024, $
During the nine months ended September 30, 2025, the Company did
The following summary sets forth the stock option activity under the 2023 and 2020 Plan:
39
|
|
Number of options |
|
|
Weighted average exercise price |
|
|
Weighted average remaining contractual term (in years) |
|
|
Aggregate intrinsic value (in thousands) |
|
||||
Outstanding as of December 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
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|
||||
Exercised |
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|
||||
Cancelled or forfeited |
|
|
( |
) |
|
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|
|
|
|
|
|
|
|||
Outstanding as of September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options exercisable as of September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options unvested as of September 30, 2025 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The aggregate intrinsic value of options outstanding, exercisable and unvested were calculated as the difference between the exercise price of the options and the estimated fair market value of the Company’s common stock, as of September 30, 2025.
For the three months ended September 30, 2025 and 2024, the Company recognized stock compensation expense of $
The Company recognized stock compensation expense of $
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 nine months ended September 30, 2025, Woodway our exclusive distributor represents
At September 30, 2025,
The Company had
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 Board. During the nine months ended September 30, 2025 and 2024, the Company did not make any contributions to the plan.
The Company contributes up to
40
20. Loss Per Share
The computation of loss per share is as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
(in thousands, except share and per share amounts) |
|
|
|
|||||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss attributable to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
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|
||||
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:
|
|
September 30, |
|
|
|||||
|
|
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 |
|
|
|
|
|
|
|
||
Series LTI Preferred Stock conversion to common stock |
|
|
|
|
|
|
|
||
Stock options to purchase common stock |
|
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
|
||
21. 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
On January 29, 2025, the Former Principal Stockholder assigned the Former Principal Stockholder Notes of $
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.
41
As of December 31, 2024, all outstanding promissory notes with respect to the former principal stockholder are included within the loan payable on the condensed consolidated balance sheet for a total of $
Loan payable included the following as of September 30, 2025 and December 31, 2024:
|
|
September 30, |
|
|
December 31, |
|
||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Principal stockholder promissory notes |
|
|
|
|
|
|
||
Total principal stockholder and related party promissory notes |
|
$ |
|
|
$ |
|
||
Other Related Party Transactions
In 2017, the Company entered into a royalty agreement with Fuseproject and agreed to pay
22. Supplemental Disclosure of Cash Flow Information
Supplemental cash flow information for the nine months ended September 30, 2025 and 2024 is as follows:
42
|
|
Nine Months Ended September 30, |
|
|||||
|
|
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 |
|
|
|
|
|
|
||
Issuance of series E preferred stock for the acquisition of business |
|
|
|
|
|
|
||
Issuance of common stock upon conversion of convertible notes and debt |
|
|
|
|
|
|
||
Issuance of Series C Preferred Stock upon settlement of loss restoration agreement |
|
|
|
|
|
|
||
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 accounts payable and debt |
|
|
|
|
|
|
||
Issuance of common stock in exchange for conversion of debt |
|
|
|
|
|
|
||
Stock-based compensation capitalized in intangible asset and other assets |
|
|
|
|
|
|
||
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 preexisting relationships |
|
|
|
|
Bridge financing |
|
|
|
|
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 condensed consolidated balance sheet at their estimated fair values as of July 1, 2025, with the remaining unallocated purchase price recorded as goodwill.
The purchase price allocation is preliminary and subject to change, including the valuation of intangible assets. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date.
43
Recognized amounts of identifiable assets acquired and liabilities assumed (in thousands) |
|
|
As of July 1, 2025 |
|
|
Cash |
|
|
$ |
|
|
Accounts receivable |
|
|
|
|
|
Inventories |
|
|
|
|
|
Prepaid expenses |
|
|
|
|
|
Other current assets |
|
|
|
|
|
Property and equipment, net |
|
|
|
|
|
Right-of-use-assets |
|
|
|
|
|
Intangible assets, net |
|
|
|
|
|
Accounts payable |
|
|
|
( |
) |
Accrued expenses and other current liabilities |
|
|
|
( |
) |
Derivative Liability |
|
|
|
( |
) |
Operating lease liability, current portion |
|
|
|
( |
) |
Deferred Liability |
|
|
|
( |
) |
Loan payable |
|
|
|
( |
) |
Operating lease liability, net of current portion |
|
|
|
( |
) |
Total identifiable net assets acquired |
|
|
|
|
|
Goodwill |
|
|
|
|
|
Total identifiable net assets acquired and goodwill |
|
|
$ |
|
|
The changes in intangible assets for the three months ended September 30, 2025 was as follows:
(in thousands) |
|
|
Wattbike |
|
|
Balance at December 31, 2024 |
|
|
$ |
|
|
Acquisitions and measurement period adjustments |
|
|
|
|
|
Amortization |
|
|
|
( |
) |
Translation adjustment |
|
|
|
( |
) |
Balance at September 30, 2025 |
|
|
$ |
|
|
The Company recorded a step-up in the fair value of inventory of approximately $
The identified intangible assets of $
Accrued Earn Out
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.
(i)
(ii) If the revenues of Wattbike for the period from October 1, 2026 to September 30, 2027 (“FY27”) (“FY27 Revenues”) exceed £
The following unaudited pro forma summary presents condensed consolidated information of the Company, including Wattbike as if the acquisition had occurred as of January 1, 2024, the earliest year presented herein:
44
|
|
Proforma |
|
|
Proforma |
|
|
||||||||||
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
|
||||
|
|
(in thousands) |
|
|
(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 for the three month and nine month periods were prepared using the acquisition method of accounting and are based on the historical financial information of Wattbike 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.
The following unaudited condensed consolidated results of operations for Wattbike included in the condensed consolidated statements of loss for the three and nine months ended September 30, 2025.
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||
|
|
|
|
|
|
|
|
|
||
|
|
|
|
2025 |
|
|
2025 |
|
||
Revenue |
|
|
|
$ |
|
|
$ |
|
||
Operating Loss |
|
|
|
|
( |
) |
|
|
( |
) |
Net Loss |
|
|
|
|
( |
) |
|
|
( |
) |
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 $
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 condensed consolidated balance sheet at their estimated fair values as of February 2, 2024, with the remaining unallocated purchase price recorded as goodwill.
45
(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 |
|
|
|
|
|
( |
) |
|
|
|
||
Inventories, net |
|
|
|
|
|
|
|
|
|
|||
Vendor deposits |
|
|
|
|
|
|
|
|
|
|||
Prepaid expenses and other current assets |
|
|
|
|
|
|
|
|
|
|||
Property and equipment, net |
|
|
|
|
|
|
|
|
|
|||
Right-of-use-assets |
|
|
|
|
|
|
|
|
|
|||
Other assets |
|
|
|
|
|
|
|
|
|
|||
Goodwill |
|
|
|
|
|
|
|
|
|
|||
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 adjustments to goodwill resulted from finalization of assets acquired and liabilities assumed as the Company obtained additional information during the measurement period. The purchase price allocation period closed as of December 31, 2024.
The Company recorded a step-up in the fair value of inventory of approximately $
The identified intangible assets 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
The following unaudited pro forma summary presents condensed consolidated information of the Company, including CLMBR as if the acquisition had occurred as of January 1, 2024, the earliest year presented herein:
46
|
|
Proforma |
|
|||||
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||
|
|
2024 |
|
|
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 for the three and nine months ended September 30, 2024 were prepared using the acquisition method of accounting and are based on the historical financial information of CLMBR, Inc. 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.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
||
|
|
2024 |
|
|
2024 |
|
|
||
Revenue |
|
$ |
|
|
$ |
|
|
||
Operating Loss |
|
|
|
|
|
( |
) |
|
|
Net Loss |
|
|
( |
) |
|
|
( |
) |
|
24. Subsequent Events
Class A Incremental Warrant Exercise
On October 3, 2025, the Investor elected to exercise Class A Incremental Warrants to purchase Class A Incremental Notes for an aggregate principal amount of $
Conversion of June 2025 FET Notes
In October 2025, due to a decrease in FET price, the collateral value was less than
Preferred Stock Dividends
Pursuant to the Certificate of Designations of Series C Preferred Stock, on October 6, 2025, the Board of Directors of the Company declared a dividend on the shares of Series C Preferred Stock issued and outstanding as of the record date for such dividend, as a dividend in kind, in the form of
Pursuant to the Certificate of Designations of Series A Preferred Stock, on October 6, 2025, the Board of Directors of the Company 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
The Company issued the Series A Preferred Stock and Series C Preferred Stock dividend shares on October 7, 2025.
47
Item 2. 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 unaudited condensed consolidated financial statements and the related notes and other financial information included in Part I, Item 1. of this Form 10-Q, and together with our audited consolidated financial statements, the related notes thereto and other information set forth in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 31, 2025 (the "2024 10-K"). Historic results are not necessarily indicative of future results.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” “trajectory” or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. Forward-looking statements include, but are not limited to, statements regarding:
48
These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause or contribute to a material difference include those discussed below and under Item 1A. Risk Factors, as well as the risks discussed in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). All forward-looking statements set forth in this Quarterly Report are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. Forward-looking statements set forth in this Quarterly Report speak only as of the date hereof, and we do not undertake any obligation to update forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events, except to the extent required by law. 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.
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: 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 is a UK-based indoor-performance bike business. 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.
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. As we launched our first connected fitness hardware product in July 2021, we began generating revenue from sales of our products starting in the second half of 2021.
During the three and nine months ended September 30, 2025 and 2024, we generated total revenue of $4.8 million and $2.0 million and $7.4 million and $3.0 million, respectively, and incurred net losses of $(5.2) million and $(7.1) million and $(14.0) million and $(29.2) 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 sales of our redeemable convertible preferred stock, the issuance of convertible notes, the issuance of promissory notes, and the issuance of common stock.
Business Model and Growth Strategy
Acquire complementary businesses that generate attractive synergies
We acquired CLMBR, Inc. in February 2024 and Wattbike (Holdings) Limited (“Wattbike”), a UK-based indoor-performance bike business, on July 1, 2025 and we believe that there are other compelling businesses to be acquired. We expect that we will be able to acquire revenue-generating businesses, which would generate higher earnings and cashflows through synergies with our existing
49
business. Our team has significant experience with M&A transactions and we are one of the few companies in our industry with a public currency, which we believe makes us an attractive acquirer.
Leverage well established equipment distributors to scale in commercial channels
We have high value partnerships with distributors, 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 product and service offerings. We are currently working with Sportstech Brands Holding GmbH, a direct-to-consumer fitness brand in Germany and across Europe, towards a possible acquisition or a partnership. We plan to continue to pursue disciplined international expansion by targeting countries with high fitness penetration and spend, as well as the presence of boutique fitness, and where we believe CLMBR, FORME and Wattbike’s value propositions will resonate.
Increase uptake of add-on services through compelling member experience
We intend to increase the uptake of our add-on memberships and services by providing compelling member experience focused on introducing our members to the variety of services available on our platform and specifically, the value-added benefits of our coaching and personal training offering. We believe our ability to provide service offerings at a number of price points will serve as a valuable lever for growth by increasing overall service revenues over time.
Reduce the cost of personal training and expand addressable market without sacrificing quality
We intend to continue to explore ways to leverage our products, technology, and proprietary trainer education platform to bring the cost of coaching down incrementally, while maintaining an unwavering focus on the quality of the coaching experience we deliver to our members. This strategy is key to our medium- to long-term objectives, as we believe we can expand the addressable market for coaching services by reducing the per session cost and increasing accessibility of expert coaching services through our hardware and mobile experiences.
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 corporate wellness
We intend to expand our recently launched corporate wellness initiative. Historically, corporate wellness programs were generally one-size-fits-all solutions for employees, such as corporate gyms. The rise of the hybrid workforce has made robust corporate wellness both an imperative and a challenge for many companies. We believe our comprehensive product portfolio makes us a better fit for modern corporate wellness programs than many existing alternatives. Our solution enables employers to provide all of their employees with a coaching platform regardless of whether they work from home, in the office, or both. Our multi-pronged service offering also provides a new level of customization that can be adapted to employees at virtually all levels of tenure.
Digital Asset Treasury Strategy
On June 10, 2025, the Company and the Treasury Subsidiary sold and, on June 13, 2025, the closing date, issued, for $50 million, the June 2025 Convertible Exchangeable Notes which are both (a) convertible into shares of Common Stock and (b) exchangeable into the utility tokens and key medium of exchange on the Fetch.ai network (“FET”). As of September 30, 2025, the Company had used approximately $47.3 million of the proceeds from the sale of the June 2025 Convertible Exchangeable Notes to purchase FET. In addition, each investor in the transaction has the right to require the Company and the Treasury Subsidiary to issue additional senior secured convertible exchangeable notes, up to an aggregate principal amount of an additional $444.4 million. Asset appreciation of the FET could be a future source of income to the Company.
50
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:
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 of our fitness equipment, and has impacted, and could in the future impact, our ability to timely deliver our products to customers. These supply chain disruptions have not materially affected our business outlook and goals or our operating results, including our revenues or liquidity or capital resources, and we have not implemented any 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.
51
Components of Our Operating Results
We generate revenue from sales of our connected fitness products, membership revenue, and personal training revenue. We identify our reportable segment based on the information used by management to monitor performance and make operating decisions. See Note 2 to our condensed consolidated financial statements included elsewhere in this report for additional information regarding our reportable segment.
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 95%, 88%, 80% and 64% of total revenue for the three and nine months ended September 30, 2025 and 2024, respectively.
Membership
Membership revenue consists of revenue generated from our monthly Connected Fitness membership. Membership revenue represented 3%, 7%, 11% and 20% of total revenue for the three and nine months ended September 30, 2025 and 2024, respectively.
Training
Training revenue consists of sales of our personal training services delivered through our connected fitness products and third-party mobile devices. Training revenue is recognized at the time of delivery. Training revenue represented 2%, 5%, 9% and 16% of total revenue for the three and nine months ended September 30, 2025 and 2024, respectively.
Cost of Revenue
Connected Fitness Products
Connected Fitness Product cost of revenue consists of CLMBR, Studio, Studio Lift, Wattbike 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, 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.
Sales and Marketing
Sales and marketing expense consists of performance marketing media spend, asset creation, and other brand creative expenses, all showroom expenses and related lease payments and sales and marketing personnel-related expenses.
52
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 a public company, including expenses related to compliance and reporting obligations 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 unrealized currency gains and losses, expenses related to equity line of credit commitment, 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 the related party loans, term loans, promissory notes and convertible notes.
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 was a result of conversion of promissory loans, convertible notes and senior secured debt into convertible notes.
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 issuance date and 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.
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 pursuant to ASC 350-60.
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.
Provision for Income Taxes
The provision for income taxes consists primarily of income taxes related to foreign and state jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred assets will not be utilized.
53
Results of Operations
The following tables set forth our condensed consolidated results of operations in dollars and as a percentage of total revenue for the periods presented. The period-to-period comparisons of our historical results are not necessarily indicative of the results that may be expected in the future.
|
|
Three Months Ended September 30, |
|
|
Change |
|
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
||||||||
Revenue: |
|
(in thousands) |
|
|
(in thousands) |
|
|
|
|
|
|
(in thousands) |
|
|
(in thousands) |
|
|
|
|
||||||||||||||
Fitness product revenue |
|
$ |
4,553 |
|
|
$ |
1,617 |
|
|
$ |
2,936 |
|
|
|
182 |
% |
|
|
$ |
6,541 |
|
|
$ |
1,927 |
|
|
$ |
4,614 |
|
|
|
239 |
% |
Membership revenue |
|
|
149 |
|
|
|
224 |
|
|
|
(75 |
) |
|
|
(33 |
%) |
|
|
|
489 |
|
|
|
586 |
|
|
|
(97 |
) |
|
|
(17 |
%) |
Training revenue |
|
|
113 |
|
|
|
173 |
|
|
|
(60 |
) |
|
|
(35 |
%) |
|
|
|
361 |
|
|
|
484 |
|
|
|
(123 |
) |
|
|
(25 |
%) |
Total revenue |
|
|
4,815 |
|
|
|
2,014 |
|
|
|
2,801 |
|
|
|
139 |
% |
|
|
|
7,391 |
|
|
|
2,997 |
|
|
|
4,394 |
|
|
|
147 |
% |
Cost of revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cost of fitness product revenue (2) |
|
|
(3,311 |
) |
|
|
(1,349 |
) |
|
|
(1,962 |
) |
|
|
145 |
% |
|
|
|
(4,925 |
) |
|
|
(2,075 |
) |
|
|
(2,850 |
) |
|
|
137 |
% |
Cost of membership (2) |
|
|
(360 |
) |
|
|
(768 |
) |
|
|
408 |
|
|
|
(53 |
%) |
|
|
|
(1,202 |
) |
|
|
(2,768 |
) |
|
|
1,566 |
|
|
|
(57 |
%) |
Cost of training |
|
|
(319 |
) |
|
|
(185 |
) |
|
|
(134 |
) |
|
|
72 |
% |
|
|
|
(935 |
) |
|
|
(522 |
) |
|
|
(413 |
) |
|
|
79 |
% |
Total cost of revenue |
|
|
(3,990 |
) |
|
|
(2,302 |
) |
|
|
(1,688 |
) |
|
|
73 |
% |
|
|
|
(7,062 |
) |
|
|
(5,365 |
) |
|
|
(1,697 |
) |
|
|
32 |
% |
Gross loss |
|
|
825 |
|
|
|
(288 |
) |
|
|
1,113 |
|
|
|
(386 |
%) |
|
|
|
329 |
|
|
|
(2,368 |
) |
|
|
2,697 |
|
|
|
(114 |
%) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Research and development (1) |
|
|
404 |
|
|
|
2,212 |
|
|
|
(1,808 |
) |
|
|
(82 |
%) |
|
|
|
2,453 |
|
|
|
6,708 |
|
|
|
(4,255 |
) |
|
|
(63 |
%) |
Sales and marketing (1) (2) |
|
|
460 |
|
|
|
194 |
|
|
|
266 |
|
|
|
137 |
% |
|
|
|
921 |
|
|
|
562 |
|
|
|
359 |
|
|
|
64 |
% |
General and administrative (1) (2) |
|
|
5,994 |
|
|
|
5,060 |
|
|
|
934 |
|
|
|
18 |
% |
|
|
|
15,120 |
|
|
|
15,438 |
|
|
|
(318 |
) |
|
|
(2 |
%) |
Total operating expenses |
|
|
6,858 |
|
|
|
7,466 |
|
|
|
(608 |
) |
|
|
(8 |
%) |
|
|
|
18,494 |
|
|
|
22,708 |
|
|
|
(4,214 |
) |
|
|
(19 |
%) |
Loss from operations |
|
|
(6,033 |
) |
|
|
(7,754 |
) |
|
|
1,721 |
|
|
|
(22 |
%) |
|
|
|
(18,165 |
) |
|
|
(25,076 |
) |
|
|
6,911 |
|
|
|
(28 |
%) |
Other income (expense), net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Other income (expense), net: |
|
|
(56 |
) |
|
|
256 |
|
|
|
(312 |
) |
|
|
(122 |
%) |
|
|
|
(1,094 |
) |
|
|
(506 |
) |
|
|
(588 |
) |
|
|
116 |
% |
Interest expense |
|
|
(4,017 |
) |
|
|
(1,831 |
) |
|
|
(2,186 |
) |
|
|
119 |
% |
|
|
|
(10,271 |
) |
|
|
(6,750 |
) |
|
|
(3,521 |
) |
|
|
52 |
% |
Interest income |
|
|
675 |
|
|
|
— |
|
|
|
675 |
|
|
|
100 |
% |
|
|
|
1,062 |
|
|
|
— |
|
|
|
1,062 |
|
|
|
100 |
% |
Loss on issuance of warrants |
|
|
— |
|
|
|
(4,780 |
) |
|
|
4,780 |
|
|
|
- |
|
|
|
|
— |
|
|
|
(5,551 |
) |
|
|
5,551 |
|
|
|
(100 |
%) |
Gain (loss) upon extinguishment of debt and accounts payable |
|
|
687 |
|
|
|
110 |
|
|
|
577 |
|
|
|
525 |
% |
|
|
|
5,146 |
|
|
|
(1,622 |
) |
|
|
6,768 |
|
|
|
(417 |
%) |
Change in fair value of convertible notes |
|
|
11,993 |
|
|
|
— |
|
|
|
11,993 |
|
|
|
100 |
% |
|
|
|
18,621 |
|
|
|
(316 |
) |
|
|
18,937 |
|
|
|
(5,993 |
%) |
Change in fair value of earn out |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
- |
|
|
|
|
— |
|
|
|
1,300 |
|
|
|
(1,300 |
) |
|
|
(100 |
%) |
Change in fair value of derivatives |
|
|
1,370 |
|
|
|
956 |
|
|
|
414 |
|
|
|
43 |
% |
|
|
|
(579 |
) |
|
|
201 |
|
|
|
(780 |
) |
|
|
(388 |
%) |
Change in fair value of digital assets |
|
|
(10,605 |
) |
|
|
— |
|
|
|
(10,605 |
) |
|
|
(100 |
%) |
|
|
|
(10,480 |
) |
|
|
— |
|
|
|
(10,480 |
) |
|
|
(100 |
%) |
Change in fair value of warrants |
|
|
755 |
|
|
|
5,902 |
|
|
|
(5,147 |
) |
|
|
(87 |
%) |
|
|
|
1,748 |
|
|
|
9,148 |
|
|
|
(7,400 |
) |
|
|
(81 |
%) |
Total other income (expense), net |
|
|
802 |
|
|
|
613 |
|
|
|
189 |
|
|
|
31 |
% |
|
|
|
4,153 |
|
|
|
(4,096 |
) |
|
|
8,249 |
|
|
|
(201 |
%) |
Loss before provision for income taxes |
|
|
(5,231 |
) |
|
|
(7,141 |
) |
|
|
1,910 |
|
|
|
(27 |
%) |
|
|
|
(14,012 |
) |
|
|
(29,172 |
) |
|
|
15,160 |
|
|
|
(52 |
%) |
Income tax benefit (expense) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
- |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
- |
|
Net loss |
|
$ |
(5,231 |
) |
|
$ |
(7,141 |
) |
|
$ |
1,910 |
|
|
|
(27 |
%) |
|
|
$ |
(14,012 |
) |
|
$ |
(29,172 |
) |
|
$ |
15,160 |
|
|
|
(52 |
%) |
|
|
Three Months Ended September 30, |
|
|
Change |
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
(in thousands) |
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||||||||||||
Research and development |
|
$ |
67 |
|
|
$ |
1,206 |
|
|
$ |
(1,139 |
) |
|
|
(94 |
%) |
|
$ |
1,139 |
|
|
$ |
3,527 |
|
|
$ |
(2,388 |
) |
|
|
(68 |
%) |
Sales and marketing |
|
|
— |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
(100 |
%) |
|
|
— |
|
|
|
(5 |
) |
|
|
5 |
|
|
|
(100 |
%) |
General and administrative |
|
|
334 |
|
|
|
1,949 |
|
|
|
(1,615 |
) |
|
|
(83 |
%) |
|
|
4,155 |
|
|
|
5,926 |
|
|
|
(1,771 |
) |
|
|
(30 |
%) |
Total stock-based compensation expense |
|
$ |
401 |
|
|
$ |
3,157 |
|
|
$ |
(2,756 |
) |
|
|
(87 |
%) |
|
$ |
5,294 |
|
|
$ |
9,448 |
|
|
$ |
(4,154 |
) |
|
|
(44 |
%) |
For the three and nine months ended September 30, 2025 and 2024, $0.1 million and $- million and $0.5 million and $0.2 million of stock-based compensation was capitalized as software costs, respectively.
|
|
Three Months Ended September 30, |
|
|
Change |
|
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
||||||||
|
|
(in thousands) |
|
|
(in thousands) |
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||||||||||||
Cost of membership |
|
$ |
360 |
|
|
$ |
769 |
|
|
$ |
(409 |
) |
|
|
(53 |
%) |
|
$ |
1,203 |
|
|
$ |
2,761 |
|
|
$ |
(1,558 |
) |
|
|
(56 |
%) |
Cost of fitness product revenue |
|
|
178 |
|
|
|
62 |
|
|
|
116 |
|
|
|
187 |
% |
|
|
473 |
|
|
|
164 |
|
|
|
309 |
|
|
|
188 |
% |
General and administrative |
|
|
78 |
|
|
|
422 |
|
|
|
(344 |
) |
|
|
(82 |
%) |
|
|
580 |
|
|
|
1,811 |
|
|
|
(1,231 |
) |
|
|
(68 |
%) |
Sales and marketing |
|
|
197 |
|
|
|
139 |
|
|
|
58 |
|
|
|
42 |
% |
|
|
459 |
|
|
|
370 |
|
|
|
89 |
|
|
|
24 |
% |
Total depreciation and amortization expense |
|
$ |
813 |
|
|
$ |
1,392 |
|
|
$ |
(579 |
) |
|
|
(42 |
%) |
|
$ |
2,715 |
|
|
$ |
5,106 |
|
|
$ |
(2,391 |
) |
|
|
(47 |
%) |
54
Comparison of the three and nine months ended September 30, 2025 and 2024
Revenue
|
|
Three Months Ended September 30, |
|
|
Change |
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% Change |
||||||
Revenue: |
|
(in thousands) |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
||||||||||||
Fitness product |
|
$ |
4,553 |
|
|
$ |
1,617 |
|
|
$ |
2,936 |
|
|
182% |
|
$ |
6,541 |
|
|
$ |
1,927 |
|
|
$ |
4,614 |
|
|
239% |
Membership |
|
|
149 |
|
|
|
224 |
|
|
|
(75 |
) |
|
(33%) |
|
|
489 |
|
|
|
586 |
|
|
|
(97 |
) |
|
(17%) |
Training |
|
|
113 |
|
|
|
173 |
|
|
|
(60 |
) |
|
(35%) |
|
|
361 |
|
|
|
484 |
|
|
|
(123 |
) |
|
(25%) |
Total revenue |
|
|
4,815 |
|
|
|
2,014 |
|
|
|
2,801 |
|
|
139% |
|
|
7,391 |
|
|
|
2,997 |
|
|
|
4,394 |
|
|
147% |
Percentage of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fitness product |
|
|
95 |
% |
|
|
80 |
% |
|
|
|
|
|
|
|
88 |
% |
|
|
64 |
% |
|
|
|
|
|
||
Membership |
|
|
3 |
% |
|
|
11 |
% |
|
|
|
|
|
|
|
7 |
% |
|
|
20 |
% |
|
|
|
|
|
||
Training |
|
|
2 |
% |
|
|
9 |
% |
|
|
|
|
|
|
|
5 |
% |
|
|
16 |
% |
|
|
|
|
|
||
Total |
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
||
Fitness product revenue increased by $2.9 million, or 182%, and $4.6 million, or 239%, for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively. The increase in Fitness Product revenue was mainly the result of the acquisition of Wattbike on July 1, 2025.
Membership revenue decreased $0.1 million, or 33%, and $0.1 million, or 17%, for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively. The decrease is a result of the acquisition of the CLMBR business and the evolution of the FORME business where the Company is now primarily selling to commercial customers ("B2B") through Woodway.
Training revenue decreased $0.06 million, or 35%, and $0.1 million, or 25%, for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively. The decrease was a result of a decrease in Live 1:1 training sessions.
Cost of Revenue and Gross Profit (Loss)
|
|
Three Months Ended September 30, |
|
|
Change |
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% Change |
||||||
Cost of Revenue: |
|
(in thousands) |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
||||||||||||
Fitness product |
|
$ |
3,311 |
|
|
$ |
1,349 |
|
|
$ |
1,962 |
|
|
145% |
|
$ |
4,925 |
|
|
$ |
2,075 |
|
|
$ |
2,850 |
|
|
137% |
Membership |
|
|
360 |
|
|
|
768 |
|
|
|
(408 |
) |
|
(53%) |
|
|
1,202 |
|
|
|
2,768 |
|
|
|
(1,566 |
) |
|
(57%) |
Training |
|
|
319 |
|
|
|
185 |
|
|
|
134 |
|
|
72% |
|
|
935 |
|
|
|
522 |
|
|
|
413 |
|
|
79% |
Total cost of revenue |
|
|
3,990 |
|
|
|
2,302 |
|
|
|
1,688 |
|
|
73% |
|
|
7,062 |
|
|
|
5,365 |
|
|
|
1,697 |
|
|
32% |
Gross Profit (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fitness product |
|
|
1,242 |
|
|
|
268 |
|
|
|
974 |
|
|
363% |
|
|
1,616 |
|
|
|
(148 |
) |
|
|
1,764 |
|
|
(1192%) |
Membership |
|
|
(211 |
) |
|
|
(544 |
) |
|
|
333 |
|
|
(61%) |
|
|
(713 |
) |
|
|
(2,182 |
) |
|
|
1,469 |
|
|
(67%) |
Training |
|
|
(206 |
) |
|
|
(12 |
) |
|
|
(194 |
) |
|
1617% |
|
|
(574 |
) |
|
|
(38 |
) |
|
|
(536 |
) |
|
1411% |
Total gross profit (loss) |
|
|
825 |
|
|
|
(288 |
) |
|
|
1,113 |
|
|
(386%) |
|
|
329 |
|
|
|
(2,368 |
) |
|
|
2,697 |
|
|
(114%) |
Gross Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fitness product |
|
|
27 |
% |
|
|
17 |
% |
|
|
|
|
|
|
|
25 |
% |
|
|
(8 |
%) |
|
|
|
|
|
||
Membership |
|
|
(142 |
%) |
|
|
(243 |
%) |
|
|
|
|
|
|
|
(146 |
%) |
|
|
(372 |
%) |
|
|
|
|
|
||
Training |
|
|
(182 |
%) |
|
|
(7 |
%) |
|
|
|
|
|
|
|
(159 |
%) |
|
|
(8 |
%) |
|
|
|
|
|
||
Total |
|
|
17 |
% |
|
|
(14 |
%) |
|
|
|
|
|
|
|
4 |
% |
|
|
(79 |
%) |
|
|
|
|
|
||
Fitness product cost of revenue increased by $2.0 million, or 145%, and $2.9 million, or 137%, for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively. The increase is mainly due cost of revenue associated with Wattbike, which was acquired on July 1, 2025.
Membership cost of revenue decreased by $0.4 million, or 53%, and $1.6 million, or 57% for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively. The decrease is primarily related to the decrease in software amortization expense.
Training cost of revenue increased $0.1 million, or 72%, and $0.4 million, or 79%, for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively. The increase is primarily attributable to the acquisition of CLMBR, Inc. with addition of in-training studio expenses including rent expense million
55
Our gross profit (loss) increased by $1.1 million or 386% and $2.7 million or 114% for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively, mainly due to the Wattbike acquisition.
Operating Expenses
|
|
Three Months Ended September 30, |
|
|
Change |
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
||||||
Operating Expenses: |
|
(in thousands) |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
||||||||||||
Research and development |
|
$ |
404 |
|
|
$ |
2,212 |
|
|
$ |
(1,808 |
) |
|
(82%) |
|
$ |
2,453 |
|
|
$ |
6,708 |
|
|
$ |
(4,255 |
) |
|
(63%) |
|
Sales and marketing |
|
|
460 |
|
|
|
194 |
|
|
|
266 |
|
|
137% |
|
|
921 |
|
|
|
562 |
|
|
|
359 |
|
|
64% |
|
General and administrative |
|
|
5,994 |
|
|
|
5,060 |
|
|
|
934 |
|
|
18% |
|
|
15,120 |
|
|
|
15,438 |
|
|
|
(318 |
) |
|
(2%) |
|
Total operating expenses |
|
|
6,858 |
|
|
|
7,466 |
|
|
$ |
(608 |
) |
|
(8%) |
|
$ |
18,494 |
|
|
$ |
22,708 |
|
|
$ |
(4,214 |
) |
|
(19%) |
|
Research and Development
Research and development expense decreased by $1.8 million, or 82%, and $4.3 million, or 63%, for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, respectively, primarily due to decreases in personnel-related costs of $0.2 million and $0.9 million, a decrease in stock-based compensation expense of $1.1 million and $2.4 million, and a decrease of $0.3 million and $0.9 million in software and subscriptions, respectively.
Sales and Marketing
Sales and marketing expense increased by approximately $0.3 million, or 137%, and $0.4 million, or 64%, for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, respectively, driven by increases in advertising expense $0.2 million and $0.2 million, respectively, and intangible amortization expense of $0.1 million and $0.1 million, respectively, both of which are attributable to the Wattbike acquisition.
General and Administrative
General and administrative expense increased by $0.9 million, or 18%, and decreased by $0.3 million, or 2%, for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, respectively. The increase in expense for the third quarter of 2025 was mainly due to $2.3 million of expenses attributable to Wattbike in 2025 with no comparable amount for 2024, and an increase in consulting and professional fees of $0.3 million, partially offset by a decrease in stock-based compensation expense of $1.6 million. General and administrative expense for the nine months ended September 30, 2025 reflect the Wattbike expenses of $2.3 million and a charge to settle a vendor liability of $0.4 million, neither of which were present in 2024, offset by decreases in depreciation and amortization expense of $1.3 million and stock-based compensation expense of $1.8 million.
Other Income (Expense), net
|
|
Three Months Ended September 30, |
|
|
Change |
|
Nine Months Ended September 30, |
|
|
Change |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
2025 |
|
|
2024 |
|
|
Amount |
|
|
% |
|
||||||
Other income (expense), net |
|
(in thousands) |
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
||||||||||||
Other (expense) income, net: |
|
$ |
(56 |
) |
|
$ |
256 |
|
|
$ |
(312 |
) |
|
(122%) |
|
$ |
(1,094 |
) |
|
$ |
(506 |
) |
|
$ |
(588 |
) |
|
116% |
|
Interest expense |
|
|
(4,017 |
) |
|
|
(1,831 |
) |
|
|
(2,186 |
) |
|
119% |
|
|
(10,271 |
) |
|
|
(6,750 |
) |
|
|
(3,521 |
) |
|
52% |
|
Interest income |
|
|
675 |
|
|
|
— |
|
|
|
675 |
|
|
100% |
|
|
1,062 |
|
|
|
— |
|
|
|
1,062 |
|
|
100% |
|
Loss on issuance of warrants |
|
|
— |
|
|
|
(4,780 |
) |
|
|
4,780 |
|
|
0% |
|
|
— |
|
|
|
(5,551 |
) |
|
|
5,551 |
|
|
(100%) |
|
Gain (loss) upon extinguishment of debt and accounts payable |
|
|
687 |
|
|
|
110 |
|
|
|
577 |
|
|
525% |
|
|
5,146 |
|
|
|
(1,622 |
) |
|
|
6,768 |
|
|
(417%) |
|
Change in fair value of convertible notes |
|
|
11,993 |
|
|
|
— |
|
|
|
11,993 |
|
|
100% |
|
|
18,621 |
|
|
|
(316 |
) |
|
|
18,937 |
|
|
(5993%) |
|
Change in fair value of earn out |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
n/a |
|
|
— |
|
|
|
1,300 |
|
|
|
(1,300 |
) |
|
(100%) |
|
Change in fair value of derivatives |
|
|
1,370 |
|
|
|
956 |
|
|
|
414 |
|
|
43% |
|
|
(579 |
) |
|
|
201 |
|
|
|
(780 |
) |
|
(388%) |
|
Change in fair value of digital assets |
|
|
(10,605 |
) |
|
|
— |
|
|
|
(10,605 |
) |
|
100% |
|
|
(10,480 |
) |
|
|
— |
|
|
|
(10,480 |
) |
|
100% |
|
Change in fair value of warrants |
|
|
755 |
|
|
|
5,902 |
|
|
|
(5,147 |
) |
|
(87%) |
|
|
1,748 |
|
|
|
9,148 |
|
|
|
(7,400 |
) |
|
(81%) |
|
Total other income (expense), net |
|
$ |
802 |
|
|
$ |
613 |
|
|
$ |
189 |
|
|
31% |
|
$ |
4,153 |
|
|
$ |
(4,096 |
) |
|
$ |
8,249 |
|
|
(201%) |
|
56
Other Income (Expense), net
Other income (expense), net consists of unrealized currency gains and losses and issuance costs related to the June 2025 Convertible Exchangeable Notes for the three and nine months ended September 30, 2025 and fair value of warrants issued in connection with Registered Direct Offering for the three and nine months ended September 30, 2024.
Interest Expense
Interest expense increased $2.2 million and $3.5 million for the three and nine months ended September 30, 2025 as compared to the three and nine months ended September 30, 2024, respectively. The increase in interest expense for the three months ended September 30, 2025 was mainly attributable to an increase of $3.0 million in interest and debt discount in connection with the January 2025, March 2025 and June 2025 convertible notes and $0.4 million of interest expense attributable to Wattbike, partially offset by a $1.3 decrease in interest from the February 2024 Treadway convertible note (see Note 11 to the condensed consolidated financial statements). The increase for the nine months ended September 30, 2025 was primarily attributable to an $8.1 million increase in interest and discount amortization related to the January 2025, March 2025 and June 2025 convertible notes and $0.4 million of interest expense attributable to Wattbike, partially offset by a decrease in interest expense from the February 2024 Treadway convertible note in the amount of $3.6 million and a $1.5 million decrease in interest on the December 2023 convertible note.
Interest Income
Interest income increased $0.7 million and $1.1 million for the three and nine months ended September 30, 2025 as compared to the three and nine months ended September 30, 2024, respectively, as a result of loan agreement entered into with Sportstech in January 2025.
Loss on issuance of warrants
During the three and nine months ended September 30, 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 three and nine months ended September 30, 2025.
Gain (loss) on extinguishment of debt and accounts payable
Gain (loss) on extinguishment of debt and accounts payable for the three and nine months ended September 30, 2025 was mainly the result of the conversion of convertible notes $0.7 million and $5.1 million, respectively. For the nine months ended September 30, 2024, we recorded a loss on the extinguishment of debt in the amount of $1.6 million, which was mainly due to the conversion of promissory notes issued in fiscal 2023 and 2024 into Series A Preferred Stock.
Change in Fair Value of Convertible Notes
We recorded gains on the change in fair value of convertible notes for the three and nine months ended September 30, 2025 of $12.0 million and $18.6 million due to the increase in fair value of these notes, with no comparable amount for the three and nine months ended September 30, 2024.
Change in Fair Value of Digital Assets
Change in fair value of digital assets 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 pursuant to ASC 350-60. For the three and nine months ended September 30, 2025, we recognized losses of $10.6 million and $10.5 million, respectively, related to the change in fair value.
Change in Fair Value of Derivatives
The gain on the change in fair value of derivatives for the three months ended September 30, 2025 and 2024 of $1.4 million and $1.0 million, respectively, reflect the decrease in the fair value of the Company's derivative instruments, which are primarily related to the issuance of convertible promissory notes and warrants, issued in connection with the issuance of debt. We recorded a loss of $0.6 million and a gain of $0.2 million for the nine months ended September 30, 2025 and 2024, respectively, due to the changes in fair value of these derivatives.
Change in Fair Value of Warrants
The gain on the change in fair value of warrants for the three months ended September 30, 2025 and 2024 was $0.8 million and $5.9 million, respectively. For the nine months ended September 30, 2025 and 2024 the gain was $1.7 million and $9.1 million, respectively.
57
Liquidity and Capital Resources
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 date the accompanying condensed consolidated financial statements were issued.
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 to making investments in research and development including the development of revenue generating products and services and the development of a commercial organization, all at the expense of short-term profitability.
As of the date the accompanying condensed 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:
58
These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying condensed 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 condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
Cash Flows
Comparison of the nine months ended September 30, 2025 and 2024
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Net cash used in operating activities |
|
$ |
(8,161 |
) |
|
$ |
(8,909 |
) |
Net cash used in investing activities |
|
|
(53,490 |
) |
|
|
(1,407 |
) |
Net cash provided by financing activities |
|
|
62,248 |
|
|
|
12,947 |
|
Effect of exchange rate on cash |
|
|
110 |
|
|
|
(362 |
) |
Net Change In Cash and Cash Equivalents and Restricted Cash |
|
$ |
707 |
|
|
$ |
2,269 |
|
Operating Activities
Net cash used in operating activities was $8.2 million and $8.9 million for the nine months ended September 30, 2025 and 2024, respectively, as the higher net loss, net of non-cash items, in 2025 was partially offset by a lower increase in accounts receivable. The following table represents the components of cash used in operating activities:
|
|
Nine Months Ended September 30, |
|
|||||
(in thousands) |
|
2025 |
|
|
2024 |
|
||
Net loss |
|
$ |
(14,012 |
) |
|
$ |
(29,172 |
) |
Non-cash expenses, gains and losses (a) |
|
|
3,742 |
|
|
|
20,073 |
|
Changes in accounts receivable |
|
|
(37 |
) |
|
|
(1,134 |
) |
Changes in inventory |
|
|
938 |
|
|
|
684 |
|
Changes in accounts payable, accrued expenses and other current liabilities |
|
|
1,430 |
|
|
|
859 |
|
Other, net |
|
|
(222 |
) |
|
|
(219 |
) |
Total cash used in operations |
|
$ |
(8,161 |
) |
|
$ |
(8,909 |
) |
|
|
|
|
|
|
|
||
(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. |
|
|||||||
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Investing Activities
Net cash used in investing activities of $53.5 million for the nine months ended September 30, 2025 was comprised of the acquisitions of digital assets of $47.3 million, software and content of $0.7 million, cash used for the acquisition of Wattbike of $0.4 million, and to the loan with Sportstech of $5.0 million.
Net cash used in investing activities of $1.4 million for the nine months ended September 30, 2024 related to the acquisition of CLMBR, Inc. net of cash acquired.
Financing Activities
Net cash provided by financing activities of $62.2 million for the nine months ended September 30, 2025 was primarily from proceeds from the issuance of convertible notes and exercise of incremental warrants of $60.2 million, net of issuance and offering costs, proceeds from issuance of promissory notes of $2.0 million, and At the Market Offering proceeds of $1.6 million.
Net cash provided by financing activities of $12.9 million for the nine months ended September 30, 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 offerings net of issuance and offering costs of $4.4 million and At the Market Offering proceeds of $4.0 million, partially offset by the payment of loans and related party loans and interest of $2.5 million.
Contractual Obligations and Other Commitments
Off-Balance Sheet Arrangements
In accordance with ASC 718, when a nonrecourse note is used to fund the exercise of a stock option, the stock option is not considered “exercised” for accounting purposes until the employee repays the loan. Prior to repayment of a nonrecourse loan, the outstanding shares received in exchange for the loan are excluded from the denominator of basic earnings per share. Additionally, the nonrecourse loan itself is not recorded on the Company’s condensed consolidated balance sheet since the arrangement is, in substance, a stock option.
In 2022, the sale of the shares of common stock to several employees was completed in the form of issuances of Secured Partial Recourse Promissory Notes (the “Note(s)”) by the respective employees to the Company.
The Notes were in the aggregate amount of $154,875 and 2 shares as of September 30, 2025 and December 31, 2024. The Notes are secured by a pledge of collateral, representing the shares of stock sold. Interest is charged at the mid-term Applicable Federal Rate as of the date of the Note and compounded annually. Per the terms of the Notes, 51% of the initial amounts of the outstanding principal balances plus any accrued and unpaid interest represent a full recourse note, and 49% of the initial amounts represent a nonrecourse note. The Company analyzed the terms of the Notes and concluded that the recourse portion of the notes are nonrecourse in nature as the Company does not have intention to seek repayment beyond the shares issued despite the recourse legal terms, and thus will be treated the same as the nonrecourse portion of the Notes. All Notes are outstanding as of September 30, 2025, and are not recorded on the condensed consolidated balance sheet.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the condensed consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders’ equity, revenue, expenses, and related disclosures. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions. The critical accounting policies that reflect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements include those noted below.
Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Form 10-K and in Note 2. to our consolidated financial statements included in our Form 10-K. As disclosed in Note 2 to our consolidated financial statements included in the 2024 Form 10-K, the preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. During the period covered by this Quarterly Report, there were no material changes to our critical accounting policies from those discussed in our Form 10-K other than those disclosed in Note 2. of this Quarterly Report.
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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 of our condensed financial statements included elsewhere in this report. As a result, our condensed 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 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.
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
Foreign Currency Risk
To date, all 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 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.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and operating results.
Tariff Risk
One of the Company's manufacturing partners used in the manufacture of our products is located in China and we face risks associated with geopolitical conditions including new tariffs on imports. To date, the tariffs have not had a material effect on our business, financial condition or results of operations. The tariffs could increase the cost to us of finished goods we import and we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and operating results.
Item 4. 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 September 30, 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 condensed consolidated financial statements included in this Form 10-Q 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 nine months ended September 30, 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 September 30, 2025, because of the material weaknesses described below.
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 nine months ended September 30, 2025. Specifically, management identified deficiencies in the principles associated with the control environment, risk assessment, control activities, information and
62
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.
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
63
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 functionality to segregate incompatible accounting duties, which we currently expect will be fully implemented in the first half of 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 nine months ended September 30, 2025 or the nine months ended September 30, 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 September 30, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Part II - Other Information
Item 1. Legal Proceedings.
For information regarding legal proceedings please refer to Note 15, Commitments and Contingencies, in Part I, Item 1, "Financial Statements" of this Quarterly Report on Form 10-Q. From time to time, we are involved in legal proceedings and subject to claims arising in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we believe that the resolution of current matters will not have a material adverse effect on our business, financial condition, or results of operations. Even if any particular litigation or claim is not resolved in a manner that is adverse to our interests, such litigation can have a negative impact on us because of defense and settlement costs, diversion of management resources from our business, and other factors.
Item 1A. Risk Factors.
Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in the 2024 10-K and in our other filings with the SEC, the occurrence of any one of which could have a material adverse effect on our actual results. Except as set forth below, there have been no material changes to the risk factors previously disclosed in the 2024 10-K. The Company is supplementing the risk factors previously disclosed in the 2024 10-K with the following risk factors.
Significant developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition can have an adverse effect on our business and financial statements.
Significant developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition, including laws and policies in areas such as trade, manufacturing, government purchasing, healthcare, intellectual property, regulatory enforcement and investment/development, can adversely affect our business and financial statements. The U.S. has announced and/or implemented significant new tariffs on imports from a wide range of countries, which has prompted retaliatory tariffs by a number of countries and a cycle of retaliatory tariffs by both the U.S. and other countries. In early April 2025, actions were taken by the U.S. and certain other countries to delay the effective date of certain of these tariffs, but as of the date of this report a number of new tariffs remain in effect, including significant tariffs between the U.S. and China. Collectively, these tariffs increase the cost to us of finished goods we import, which can increase the cost to our customers of certain of our finished goods, which can adversely impact demand for our products and our competitive positioning; could adversely impact the availability to us of certain products in certain countries and disrupt our supply chains, with related impacts to our operations; and could exacerbate inflation, diminish investment and result in broader negative impacts, economic instability and capital markets dislocation that may adversely impact demand for our products. In addition, whenever we are unable to fully recover higher costs, or whenever there is a time delay between the increase in costs and our ability to recover these costs, our margins and profitability can decline. The U.S. may implement additional tariffs and other measures, further retaliatory tariffs and other retaliatory actions may follow and the risks and adverse effects noted above may increase. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further discussion of the impact of these tariffs. The full impact of these tariffs and other actions on the Company and on our business partners remains highly uncertain and subject to rapid change.
All of the risks identified in this risk factor can adversely affect our business and financial statements.
Investing in and holding FET tokens involves significant risks, many of which are inherent to cryptocurrency and decentralized AI technologies.
Investing in and holding FET tokens involves significant risks, many of which are inherent to cryptocurrency and decentralized AI technologies, including the following:
Extreme Volatility and Price Fluctuations: The price of FET tokens is highly volatile and has experienced significant fluctuations in the past. This volatility is influenced by factors such as overall cryptocurrency market trends, regulatory developments, technological advancements within the AI and blockchain sectors, and specific developments within the Artificial Superintelligence Alliance ecosystem. There is no assurance that the value of FET tokens will increase, and their value could decline significantly or become worthless.
Regulatory Uncertainty: The regulatory landscape for cryptocurrencies and digital assets, including utility tokens like FET, is still evolving and varies significantly across jurisdictions. New regulations or governmental actions in the United States or other countries could adversely affect the legality, market price, or liquidity of FET tokens, potentially leading to a prohibition on their use or ownership.
Competition and Market Adoption: The decentralized AI and blockchain sectors are highly competitive. The success and value of FET tokens depend on the widespread adoption and utilization of the Fetch.ai platform and its AI agents. Competition from other projects or technologies could limit the growth and utility of the FET ecosystem.
65
Technology Risks and Security Vulnerabilities: The Fetch.ai platform relies on complex blockchain and AI technologies, which may contain undiscovered bugs, vulnerabilities, or errors. Exploits of such vulnerabilities could lead to loss of FET tokens, disruption of the network, or other adverse effects. The underlying smart contracts and blockchain infrastructure are also subject to security risks, including hacking, cyberattacks, and consensus attacks.
Limited Liquidity and Market Manipulation: While FET tokens are traded on various exchanges, there may be periods of limited liquidity, making it difficult to buy or sell large quantities without significantly impacting the price. Furthermore, the cryptocurrency market is susceptible to manipulation, including "pump and dump" schemes and other illicit activities, which could artificially inflate or deflate the price of FET tokens.
Dependence on Key Personnel and Community Support: The development and ongoing success of the Artificial Superintelligence Alliance ecosystem are heavily reliant on its core development team, community engagement, and strategic partnerships. The departure of key personnel or a decline in community support could negatively impact the project's progress and the value of FET tokens.
Loss of Private Keys and Custody Risks: The security of FET tokens depends on the owner's ability to securely manage their private keys. If private keys are lost, stolen, or compromised, the FET tokens associated with those keys may be irrevocably lost. Custody arrangements, while designed to be secure, are not without risk, and any failure in our custody provider's systems could result in a loss of our FET holdings.
Uncertainty of Future Development and Utility: While Fetch.ai has outlined various use cases for FET, the actualization and broad adoption of these functionalities are subject to numerous uncertainties, including technological hurdles, market acceptance, and the ability to attract developers and users to the ecosystem. If the envisioned utility does not materialize as expected, the value of FET tokens could suffer.
Our treasury strategy exposes us to various risks associated with the digital asset market.
Our treasury strategy exposes us to various risks associated with the digital asset market, including the following:
Digital Asset Market Risk: Our treasury strategy is highly exposed to the inherent volatility and speculative nature of the digital asset market. The value of FET tokens, and by extension, our treasury, can fluctuate wildly and rapidly due to various factors, including market sentiment, technological developments, regulatory changes, macroeconomic conditions, and unexpected events. We may incur significant losses if the market price of FET tokens declines, which could materially and adversely impact our financial condition and operating results.
Concentration Risk in FET: Our treasury strategy currently involves significant concentration in a single digital asset, FET. While we believe in the long-term potential of Fetch.ai, this concentration amplifies the impact of any adverse developments specific to the FET token or the Fetch.ai ecosystem. A decline in the perceived value, utility, or adoption of FET could have a disproportionately negative effect on our treasury.
Custody Risk: Although we utilize a reputable institutional custodian, BitGo, there is always a risk that our digital assets could be lost, stolen, or become inaccessible due to a security breach, operational failure, or other unforeseen events at the custodian. While insurance may provide some coverage, it may not cover all potential losses.
Regulatory Scrutiny and Future Restrictions: Governments and regulatory bodies worldwide are increasingly scrutinizing digital asset activities. Our treasury strategy could be adversely affected by new laws, regulations, or interpretations that restrict or prohibit the holding, trading, or use of digital assets, including FET. Such regulatory changes could render our holdings illiquid or subject to significant restrictions, potentially impairing our ability to realize value from our investment.
Accounting and Tax Complexity: The accounting treatment and tax implications of holding digital assets as treasury reserves are complex and subject to evolving guidance. Changes in accounting standards or tax laws could require us to revalue our digital asset holdings or incur significant tax liabilities, which could adversely affect our financial statements and profitability.
Reputational Risk: Negative public perception or unforeseen events related to the broader cryptocurrency industry or specific to Fetch.ai could damage our reputation and adversely affect our business and stock price.
Our issuance of convertible debt exposes us to various risks on dilution of our existing stockholders, downward pressure on stock price, impact on future financing and investor confidence.
Our issuance of convertible debt exposes us to various risks, including the following:
66
Dilution Risk to Existing Shareholders: Our issuance of convertible debt, which may be converted into shares of our common stock, poses a significant risk of dilution to our existing shareholders. Upon conversion, new shares will be issued, increasing the total number of outstanding shares and potentially decreasing the voting power of current shareholders. The extent of dilution will depend on the conversion price and the amount of debt converted.
Downward Pressure on Stock Price: The potential for future dilution from the conversion of debt can create downward pressure on our stock price. Investors may anticipate the increased supply of shares, leading to a negative impact on market valuation.
Impact on Future Financing: The existence of convertible debt on our balance sheet, and the potential for future dilution, may make it more difficult or expensive for us to raise additional capital through equity or debt offerings in the future. Potential investors may be wary of the existing conversion rights or the perceived debt burden.
Market Perception and Investor Confidence: The market's perception of our financial health and growth prospects can be influenced by our capital structure, including the amount and terms of our convertible debt. Negative perceptions could impact investor confidence and our stock valuation.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On August 5, 2025 we issued 195,732 shares of Series C Preferred Stock pursuant to a Loan Restoration Agreement.
From July 15, 2025 to September 18, 2025, we issued 592,049 shares of common stock in exchange for the reduction of a principal amount of notes by $3.2 million.
On August 22, 2025, we issued 18,450 shares of common stock in connection with the exercise of warrants.
The offers, sales and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act and Rule 506 promulgated under Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor or institutional accredited investor within the meaning of Rule 501(a) of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about the Registrant. No underwriter was involved in these transactions.
Item 5. Other Information
Our directors and officers (as defined in Rule 16a-1 under the Exchange Act) may from time to time enter into plans or other arrangements for the purchase or sale of our shares that are intended to satisfy the affirmative defense conditions of Rule 10b5–1(c) or may represent a non-Rule 10b5-1 trading arrangement under the Exchange Act. During the quarter ended September 30, 2025, no such plans or arrangements were
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Item 6. Exhibit
Exhibit No. |
|
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). |
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|
|
3.1 |
|
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). |
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|
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3.2 |
|
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). |
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4.1
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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 |
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|
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10.1 |
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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). |
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10.2 |
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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). |
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|
|
10.3
|
|
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). |
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|
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10.4
|
|
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 May August 8, 2025). |
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|
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10.5
|
|
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). |
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|
|
23.1
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|
Consent of UHY LLP, independent auditors of Wattbike (Holdings) Limited (incorporated by reference from Exhibit 23.1 to the registrant's Current Report on Form 8-K/A filed September 17, 2025). |
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|
|
99.1
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|
Pro Forma Financial Information Unaudited pro forma combined balance sheet as of June 30, 2025 and statements of operations for the six months ended June 30, 2025 Unaudited pro forma statements of operations for the year ended September 30, 2024 for Wattbike (Holdings) Limited and the year ended December 31, 2024 of Interactive Strength Inc. (incorporated by reference from Exhibit 99.1 to the registrant’s Current Report on Form 8-K/A filed September 17, 2025). |
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|
|
99.2
|
|
Financial Statements of Business Acquired (i) Report of Independent Auditor (ii) Consolidated balance sheets of Wattbike (Holdings) Limited and subsidiaries as of September 30, 2024 and 2023, the related consolidated statements of operations, stockholders' deficit, and cash flows for the years then ended (incorporated by reference from Exhibit 99.2 to the registrant’s Current Report on Form 8-K/A filed September 17, 2025). |
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|
|
99.3
|
|
Financial Statements of Business Acquired (i) Consolidated balance sheets of Wattbike (Holdings) Limited and subsidiaries as of June 30, 2025 (unaudited) and September 30, 2024, and the related (unaudited) consolidated statements of operations, changes in stockholders’ deficit and cash flows for the nine months ended June 30, 2025 (incorporated by reference from Exhibit 99.3 to the registrant’s Current Report on Form 8-K/A filed September 17, 2025). |
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|
31.1
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|
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. |
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|
|
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. |
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|
|
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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. |
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|
|
32.2* |
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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. |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents. |
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104 |
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Cover Page Formatted as Inline XBRL and Contained in Exhibit 101. |
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* In accordance with Item 601(b)(32)(ii) of Regulation S K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933 except to the extent that the registrant specifically incorporates it by reference.
+ 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 and/or exhibit will be furnished to the SEC upon request.
69
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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INTERACTIVE STRENGTH INC. |
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Date: November 14, 2025 |
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By: |
/s/ Trent A. Ward |
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Trent A. Ward |
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Chief Executive Officer |
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(Principal Executive Officer and Duly Authorized Officer) |
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Date: November 14, 2025 |
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By: |
/s/ Michael J. Madigan |
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Michael J. Madigan |
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Chief Financial Officer |
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(Principal Financial Officer and Principal Accounting Officer) |
70
FAQ
What was Interactive Strength (TRNR) Q3 2025 revenue?
Did TRNR achieve profitability in Q3 2025?
How much cash did TRNR have at quarter-end?
What financing did TRNR raise year-to-date?
What are TRNR’s key balance sheet items?
How many TRNR common shares were outstanding?
What corporate actions occurred in 2025?
