Empery Digital (EMPD) risk factors, FY2024 10-K

Risks Related to the Company’s Business, Operations, and Industry

1. 01To date we have funded operations through equity and debt offerings. As of December 31, 2024, we have an accumulated deficit of $166.3 million
2. 02While we believe these efforts have improved the internal control over financial reporting during 2024, they did not fully remediate the material weaknesses as we have not fully documented all of our policies or procedures and we have not performed any testing of our internal controls
3. 03Our transition to an outsourced manufacturing, design and development business model may not be successful, which could harm our ability to deliver products and recognize revenue
4. 04Our business success will depend in large part on our third party manufacturers’ ability to economically produce our vehicles at sufficient capacity to meet the demands of our customers
5. 05Our reliance on third parties reduces our control over the manufacturing, design and development processes, including reduced control over timing to release products, quality, product costs and product supply. We experienced delays in the design and development of previous vehicles we were seeking to develop
6. 06Our third party manufacturers may be unable to meet our growing sales and delivery plans, which could harm our business and prospects
7. 07Our third party manufacturers operate outside of the U.S., subjecting us to risks of international operations
8. 08Increases in costs, disruption of supply, or shortage of materials could harm our business
9. 09We have and could continue to experience delays and other complications in the design, manufacture, launch and production ramp of our vehicles and our future planned vehicles, which could harm our brand, business, prospects, financial condition and operating results
10. 10We are an early-stage company and we have delivered a limited number of vehicles to customers
11. 11The conflict with Russia and the Ukraine could have an impact on the availability of components used in the manufacturing of lithium ion batteries that we use to power our vehicles
12. 12We are currently taking orders for the Brat E-Bike, MN1s and HF1, and if these vehicles fail to perform as expected, our reputation could be harmed and our ability to develop, market and sell our vehicles could be harmed
13. 13We may not succeed in establishing, maintaining and strengthening our brand, which could materially and adversely affect customer acceptance of our products, which could in turn materially affect our business, results of operations or financial condition
14. 14An adverse determination in any significant product liability claim against us could materially adversely affect our business, results of operations or financial condition
15. 15Although Super Sonic has an incentive to refer customers to purchase units through us and Venom has incentives to place orders, there are no minimum order quantities in their agreements therefore we may not realize significant sales from these agreements
16. 16We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and could cause us to incur substantial costs
17. 17Increased tariffs or a global trade war could increase our costs and could further increase the cost of our products, which could adversely impact the competitiveness of our products and our financial results
18. 18As of March 25, 2025, we have 117 active powersports dealers, 8 golf cart dealers and 13 bicycle dealers to sell our vehicles and accessories. We have hired a new sales team in 2024 to continue to expand this network of dealers
19. 19Orders for vehicles are cancellable and there can be no assurance that all orders will result in revenue being recognized
20. 20The estimated fulfillment of all orders we have received assumes our third party manufacturers can successfully increase their production capacity in the future, of which there is no assurance. If we are unable to satisfy pending orders on a timely basis, customers may cancel their orders
21. 21We may be unable to improve our existing products and develop and market new products that respond to customer needs and preferences and achieve market acceptance
22. 22We have limited experience servicing our vehicles, we intend to primarily utilize third parties to service our vehicles, and if we are unable to address the service requirements of our customers, our business could be materially and adversely affected
23. 23Significant product repair and/or replacement due to product warranty claims or product recalls could have a material adverse impact on our business, results of operations or financial condition
24. 24Our success is dependent upon the success of the off-road vehicle industry and upon consumers’ willingness to adopt electric vehicles
25. 25Higher inflation and interest rates, volatile financial markets, unemployment and consumer confidence may cause consumers to defer or not purchase our products
26. 26We currently operate in an area of the vehicle sector that is not heavily regulated, and future changes in government oversight may subject us to increased regulations, which may increase our expenses
27. 27We could be negatively impacted by cybersecurity attacks and are subject to evolving privacy laws in the U.S. and other jurisdictions that could adversely impact our business and require that we incur substantial costs

Risks Related to our Common Stock

1. 28Your ownership may be diluted if additional capital stock is issued to raise capital, to finance our operations, to complete acquisitions or in connection with strategic transactions
2. 29If our stock price fluctuates, you could lose a significant part of your investment
3. 30We are party to certain agreements with a founder of the Company and certain executive officers that may create a conflict of interest for our board of directors in evaluating a potential change of control transaction
4. 31We do not intend to pay dividends in the foreseeable future
5. 32If securities or industry analysts do not publish research or reports about us, or if they adversely change their recommendations regarding our common stock, then our stock price and trading volume could decline
6. 33On July 17, 2024, we received a letter from the Nasdaq Office of General Counsel confirming the decision of the Panel that we had demonstrated compliance with the requirements for continued listing on The Nasdaq Capital Market, but that we will be subject to a Discretionary Panel Monitor for a period of one year
7. 34In an effort to regain compliance with Nasdaq listing rules, we completed reverse stock splits during 2024. We cannot predict whether we will need to complete an additional reverse stock split and the effect that such reverse stock split will have on the market price for shares of our common stock
8. 35As an “emerging growth company” under the Jumpstart Our Business Startups Act, or JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements
9. 36We intend to take advantage of all of these reduced reporting requirements and exemptions, other than the longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act