Interactive Strength, Inc.

Critical Accounting Policies and Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate these estimates and assumptions, including those described below. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions.

Some of the estimates and assumptions we have to make under U.S. GAAP require very difficult, subjective and/or complex judgments about matters that are inherently uncertain and, as a result, we have identified those as critical accounting estimates, which are considered critical to an understanding of our historical financial condition and results of operations and are reasonably likely to have a material impact on our future results of operations and financial condition. Critical accounting estimates include those used in estimating the fair value of our convertible notes, preferred stock recognized as liabilities, warrants issued in conjunction with the issuance of such convertible notes, assumptions used in determining the valuation allowance for our deferred tax assets and the impairment of goodwill and intangible assets and estimates and assumptions used in determining the fair value of consideration paid and liabilities assumed in business combinations. For a description of our significant accounting policies, see Note 2 to the Consolidated Financial Statements.

The critical accounting policies that reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements include those noted below.

Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent changes in fair value of these financial assets and liabilities are recognized in earnings when they occur. Our financial instruments that are carried at fair value in our consolidated financial statements consist of convertible notes, warrants and embedded derivative liabilities associated with the issuance of convertible notes, preferred stock accounted for as liabilities and contingent consideration related to acquisition transactions. The fair value of these instruments that are measured at each accounting period are generally determined using Monte Carlo simulations or discounted cash flow analyses and are largely based on unobservable inputs to the valuation methodology (Level 3 inputs - see Note 13 to the Consolidated Financial Statements).

Goodwill and Intangible Assets

Our annual goodwill impairment assessment at October 1, 2025 was performed based on our determination that Wattbike, CLMBR and FORME comprise a single reporting unit based on the guidance provided in Accounting Standards Codification ("ASC") 350, and we performed a quantitative analysis using a combination of income and market approaches. Our reporting unit had fair values in excess of their carrying values, resulting in no impairment of goodwill. We have also determined, with respect to future assessments of goodwill impairment, that Ergatta will also be included in a single reporting unit.

We estimate the fair value of intangible assets acquired in business combinations based on an income approach. Where applicable, we utilize the relief-from-royalty method, which assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to exploit the related benefits of these types of assets. This approach is dependent on a number of factors, including estimates of future growth and trends, royalty rates for this category of intellectual property, discount rates and other variables. For the periods presented, we did not recognize any impairment of intangible assets.

Contingent Consideration

In accordance with ASC 805, Business Combinations, liabilities for contingent consideration assumed in business acquisitions are recorded at fair value at the date of acquisition, with changes in the fair value recorded through earnings at each reporting period. We assess the fair value of this liability based on our estimate of the likelihood that sales projections or forecasted free cash flow, as defined, will be achieved and that the contingent payment will be earned. For the six months ended June 30, 2026 and 2025, we recorded losses on changes in fair value of contingent consideration of $0.5 million $0, respectively, and for the years ended December 31, 2025 and 2024, we recorded gains on changes in fair value of contingent consideration of $0.2 million and $1.3 million, respectively.

Convertible Notes

As permitted under ASC Topic 825, Financial Instruments, we have elected the fair value option to account for some of our convertible notes that were issued in 2025 and 2024 (see Note 11 to the Consolidated Financial Statements). In accordance with ASC Topic 825, we record these convertible notes at fair value with changes in fair value recorded as a component of other income (expense), net in the accompanying consolidated statements of operations and comprehensive loss. The convertible notes for which we elected the fair value option are valued using a discounted cash flow analysis or Monte Carlo Simulation model, and the assumptions used therein are discussed in Note 13 to the Consolidated Financial Statements. For the six months ended June 30, 2026 and 2025, we recorded a (loss) gain on the change in fair value of convertible notes of ($1.6) million and $6.6 million, respectively, and for the years ended December 31, 2025 and 2024, we recognized a gain (loss) on changes in fair value of convertible notes of $28.6 million and ($0.1 million), respectively.

Warrants and Derivative Liabilities

In connection with convertible notes that we issued in 2026 and 2025 for which we did not elect the fair value option, we issued warrants to purchase our Common Stock which did not meet the requirements for equity classification, and are therefore classified as long-term liabilities in the accompanying consolidated balance sheets with changes in fair value recognized in earnings at each reporting period. We generally utilize a Black-Scholes option pricing model to determine the fair value of these liabilities. For the six months ended June 30, 2026 and 2025 we recognized gains on changes in the fair values of warrants of $0.8 million and $1.0 million, respectively, and for the years ended December 31, 2025 and 2024, we recognized gains on changes in fair value of warrants of $2.8 million and $9.3 million, respectively.

We also recognized derivative liabilities related to these convertible notes for the embedded conversion options contained in the notes, which are also measured at fair value with changes in fair value recorded in earnings in each reporting period. The fair value of these liabilities are generally determined using a Monte Carlo Simulation model, and the key inputs into the model are disclosed in Note 13 to the consolidated financial statements. For the six months ended June 30, 2026 and 2025, we recognized a gain and loss on the changes in fair values of derivatives of $0.2 million and $1.9 million, respectively, and for the years ended December 31, 2025 and 2024, we recognized a gain and loss on changes in fair value of derivatives of $0.5 million and $0.5 million, respectively.

Income Taxes

We maintain a full valuation allowance against all of our net deferred tax assets, and as a result we have historically not recorded an income tax benefit in the accompanying consolidated financial statements despite continued losses since inception. This valuation allowance reflects our assessment of whether it is more likely than not that we will generate sufficient taxable income in the future to be able to utilize our deferred tax assets. In determining whether a valuation allowance is warranted, we evaluate factors such as prior earnings history, expected future earnings, carryback and carryforward periods and tax strategies. Evaluation of these factors requires our management to make certain estimates, assumptions and judgments. We consider all positive and negative evidence to estimate if sufficient future taxable income will be generated to realize our deferred tax assets, and we consider cumulative losses in recent years to be a significant type of negative evidence. As of June 30, 2026 and 2025, we determined that it is more-likely-than-not that our federal and state deferred tax assets will not be realized.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, of the notes to our consolidated financial statements included in the 2025 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the dates of the statement of financial position included in this quarterly report on Form 10-Q.

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. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We will continue to remain an “emerging growth company” until the earliest of the following: (i) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (ii) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We are also a “smaller reporting company,” meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Components of Our Operating Results

Revenue

Connected Fitness Products

Connected Fitness Product revenue consists of sales of our connected fitness products and related accessories, delivery and installation services, and extended warranty agreements offered through a third-party. Fitness Product revenue is recognized at the time of delivery, except for extended warranty revenue which is recognized over the warranty period. For the third-party extended warranty service sold along with the connected fitness products, we do not obtain control of the warranty before transferring it to the customers. Therefore, we account for revenue related to the fees paid to the third-party extended warranty provider on a net basis, by recognizing only the net commission we retain.

Membership revenue consists of revenue generated from our monthly Connected Fitness membership. With the recent acquisition of Ergatta, we expect our membership revenue to increase overall and as a percentage of total revenue during the remainder of 2026.

Training and Other Revenue

Training and other revenue consists of sales of our personal training services delivered through our connected fitness products and third-party mobile devices, and also includes license revenue generated by Ergatta. Training revenue is recognized at the time of delivery.

Cost of Revenue

Connected Fitness Product

Connected Fitness Product cost of revenue consists of Wattbike, Ergatta, CLMBR, Studio and Studio Lift and accessories product costs, including manufacturing costs, duties and other applicable importing costs, shipping and handling costs, packaging, warranty replacement costs, fulfillment costs, warehousing costs, and certain allocated costs related to management and facilities expenses associated with supply chain logistics.

Membership cost of revenue includes costs associated with personnel related expenses, filming and production costs, hosting fees, music royalties, amortization of capitalized content and amortization of capitalized software development costs.

Training and Other

Training and other revenue 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.

Sales and Marketing

Sales and marketing expense consists of performance marketing media spend, brand creative expenses, amortization of customer-related and trademark intangible assets, all showroom expenses and related lease payments and sales and marketing personnel-related expenses.

General and Administrative

General and administrative expenses include personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal, human resources, and IT functions. General and administrative expenses also include fees for professional services, principally comprised of legal, audit, tax and accounting services, insurance and depreciation of internal use software.

We expect to incur additional general and administrative expenses as a result of operating as an acquisition-focused public company, including expenses related to compliance and reporting obligations required of public companies, and increased costs for insurance, investor relations expenses, and professional services. As a result, we expect that our general and administrative expenses will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue, but we expect to leverage these expenses over time as we grow our revenue and member base.

Other (Expense) Income, Net

Other (expense) income, net mainly consists of expenses recognized in connection with settlement agreements with a certain lender, changes in fair value of preferred stock, foreign currency gains and losses and, in 2025, charges associated with the convertible notes that were recognized at fair value.

Interest Expense

Interest expense consists of interest associated with our convertible notes and loans payable.

Interest Income

Interest income in 2025 consists of interest associated with the loan receivable.

(Loss) gain upon extinguishment of debt

(Loss) gain on debt extinguishment is primarily the result of gains or losses incurred upon conversion of convertible notes and loans payable into equity, or an exchange of debt instruments.

Change in Fair Value of Convertible Notes

The change in fair value of convertible notes consists of the change in the fair value of the outstanding convertible notes since the previous reporting period.

Change in Fair Value of Earn Out

The change in fair value of earn out consists of the change in the fair value of outstanding contingent consideration liabilities since the previous reporting period.

Change in Fair Value of Derivatives

The change in fair value of derivatives consists of the change in the fair value of the outstanding derivatives since the previous reporting period.

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 since the previous reporting period.

Results of Operations for the Three and Six Months Ended June 30, 2026 and 2025

The following tables set forth our condensed consolidated results of operations for the three months ended June 30, 2026 and 2025, which we sometimes refer to as our second fiscal quarter, and for the six months ended June 30, 2026 and 2025. Due to the acquisitions of Wattbike and Ergatta during the past 12 months, our results of operations are not comparable year over year.

(1)

Includes stock-based compensation expense as follows:

For the three and six months ended June 30, 2025, $0.1 million and $0.5 million, respectively, of stock-based compensation was capitalized as software costs. No stock-based compensation was capitalized for the three and six months ended June 30, 2026.

(2)

Includes depreciation and amortization expense as follows:

Revenue

The following table shows the components of our consolidated revenue for the three and six months ended June 30, 2026 and 2025:

Fitness product revenue increased by $3.4 million to $4.4 million for the three months ended June 30, 2026, as compared to $0.9 million for the three months ended June 30, 2025. The increase was mainly the result of $3.7 million of revenues associated with Wattbike, which was acquired on July 1, 2025, and $0.6 million of revenues associated with Ergatta, acquired on March 11, 2026, partially offset by decreases in Forme and CLMBR revenue in 2026.

Fitness product revenue increased by $6.8 million to $8.8 million for the six months ended June 30, 2026, as compared to $2.0 million for the 6 months ended June 30, 2025. The increase was primarily due to revenues associated with Wattbike and Ergatta of $7.9 million and $0.7 million, respectively, in 2026, partially offset by decreases in Forme and CLMBR revenue.

Membership revenue was $2.1 million for the three months ended June 30, 2026, as compared to $0.2 million for the three months ended June 30, 2025, and $2.7 million for the six months ended June 30, 2026 as compared to $0.3 million for the six months ended June 30, 2025. Substantially all of our Membership revenue in 2026 is associated with Ergatta.

Training and other revenue was $0.2 million for the three months ended June 30, 2026 as compared to $0.1 million for the three months ended June 30, 2025, and $0.3 million for the six months ended June 30, 2026 as compared to $0.2 million for the six months ended June 30, 2025. The increase is mainly due to digital game content license revenue earned by Ergatta in 2026, partially offset by a decrease in Live 1:1 training sessions.

Cost of Revenue and Gross Margin

The following table shows the components of our cost of revenue and gross marginfor the three and six months ended June 30, 2026 and 2025:

Consolidated cost of revenue for the three months ended June 30, 2026 was $3.4 million, as compared to $1.4 million for the three months ended June 30, 2025. Consolidated cost of revenue for the six months ended June 30, 2026 was $7.0 million, as compared to $3.1 million for the six months ended June 30, 2025. The increases are mainly due to higher cost of fitness product revenue in 2026 resulting from the Wattbike acquisition on July 1, 2025.

For the second quarter of 2026, our gross profit improved to $3.2 million from a gross loss of $0.2 million for the second quarter of 2025, resulting in a gross margin of 48% in the second quarter of 2026 as compared to (16)% in the second quarter of 2025. The improvement isdue to the Wattbike and Ergatta acquisitions.

For the six months ended June 30, 2026, our gross profit improved to $4.8 million from a gross loss of $0.5 million for the six months ended June 30, 2025, resulting in a gross margin of 41% in the six months ended June 30, 2026 as compared to (19)% for the six months ended June 30, 2025. We expect further margin improvements in the second half of the year and beyond as we continue to realize synergies from the Wattbike and Ergatta acquisitions, as well as other potential acquisitions which we expect will be accretive to earnings. There can be no assurance, however, that we will achieve anticipated synergies or that future acquisitions will be consummated or accretive to earnings. See “Cautionary Statement Regarding Forward-Looking Statements” above and “Risk Factors” in Part II, Item 1A of this Quarterly Report for a discussion of risks that could cause actual results to differ materially from our expectations.

Operating Expenses

In the second quarter of 2025, we recognized a total of $2.4 million of compensation expense related to the full redemption value of Series LTI Preferred Stock that was issued to our executive officers and members of our Board of Directors on June 14, 2025. Approximately $2.1 million of this expense was recorded as general and administrative expense, and $0.3 million was recorded as research and development expense. The preferred stock was canceled and the corresponding liability was derecognized in the fourth quarter of 2025, however the issuance of the preferred stock resulted in significant operating expense for the three and six months ended June 30, 2025 with no comparable amount for the corresponding periods in fiscal 2026.

Research and Development

Research and development expense was $0.4 million for the second quarter of 2026, as compared to $0.8 million for the second quarter of 2025. The decrease is primarily due to reductions in stock-based compensation and other personnel-related costs of $0.5 million, partially offset by $0.1 million of research and development expenses at Wattbike and Ergatta not present in 2025.

For the six months ended June 30, 2026, research and development expense was $0.9 million, as compared to $2.1 million for the six months ended June 30, 2025. The decrease was due to lower stock-based compensation and other personnel-related costs of $1.3 million and lower engineering costs of $0.2 million, partially offset by $0.3 million of expenses associated with Wattbike and Ergatta not present in 2025.

Sales and Marketing

Sales and marketing expense was $2.2 million for the second quarter of 2026, as compared to $0.2 million for the second quarter of 2025. The increase was largely due to amortization expense for intangible assets acquired in the Ergatta and Wattbike transactions of $0.8 million and $0.2 million, respectively, as well as $1.0 million of other sales and marketing expenses associated with Wattbike and Ergatta, mainly for personnel, digital media and advertising expenses, not present in 2025.

Sales and marketing expense was $3.2 million for the six months ended June 30, 2026, as compared to $0.5 million for the six months ended June 30, 2025. The increase was largely due to amortization expense for intangible assets acquired in the Ergatta and Wattbike transactions of $0.9 million and $0.3 million, respectively, as well as approximately $1.6 million of other sales and marketing expenses associated with Wattbike and Ergatta, mainly for personnel, digital media and advertising expenses, not present in 2025.

General and Administrative

General and administrative expense was $4.0 million for the three months ended June 30, 2026 as compared to $4.6 million for the three months ended June 30, 2025, as the absence of $2.1 million of stock-based compensation expense associated with the LTI Preferred Stock in 2026 was largely offset by general and administrative expenses associated with Ergatta and Wattbike not present in 2025 of approximately $1.6 million, including $0.6 million of stock-based compensation expense related to equity grants issued in the Ergatta transaction.

General and administrative expense was $8.1 million for the six months ended June 30, 2026, as compared to $9.1 million for the six months ended June 30, 2025. The decrease reflects a $4.4 million total reduction in stock-based compensation in 2026 related to our legacy business, largely offset by general and administrative expenses associated with Ergatta and Wattbike of approximately $2.7 million (which includes $0.7 million of compensation expense related to the equity grants issued in the Ergatta transaction) and $0.6 million of increased acquisition transaction costs.

Other Income (Expense), net

Other Expense, net

Other expense, net for the three months ended June 30, 2026 of $1.5 million is mainly comprised of the change in fair value of convertible preferred stock of $1.1 million and expense recognized under a settlement agreement in the amount of $0.5 million. For the three months ended June 30, 2025, other expense of $0.9 million is mainly comprised of expense associated with the convertible notes issued in 2025 for which we elected the fair value option.

Other expense, net for the six months ended June 30, 2026 of $4.0 million consists of $2.6 million of expense recognized under settlement agreements, $1.1 million for the change in fair value of convertible preferred stock and a credit loss of $0.2 million recognized upon the settlement of the Sportstech loan receivable.

Interest Expense

Interest expense decreased by $3.0 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, and by $3.3 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The decreases are mainly attributable to a lower average debt balance for the first six months of 2026 as compared to 2025 and to the higher debt discount amortization on our convertible notes in 2025.

Interest Income

Interest income decreased by $0.2 million for the second quarter of 2026 as compared to the second quarter of 2025, and by $0.4 million for the six months ended June 30, 2026 as compared to the same period of a year ago due to the repayment of the loan receivable from Sportstech in early 2026.

(Loss) Gain on extinguishment of debt

The loss on extinguishment of debt for the three and six months ended June 30, 2026 of $0.6 million and $2.3 million, respectively, was mainly the result of the conversion of Class A Incremental Notes into equity (see Note 11 to the Consolidated Financial Statements), partially offset by gains on extinguishment of other indebtedness.

The gain on extinguishment of debt for the three and six months ended June 30, 2025 of $1.4 million and $4.5 million, respectively, was mainly the result of the conversion of notes formerly held by principal stockholders and certain other indebtedness into equity.

Change in Fair Value of Convertible Notes

We recorded losses on the change in fair value of convertible notes for the three and six months ended June 30, 2026 of $0.3 million and $1.6 million, respectively, and we recorded gains on the change in fair value of convertible notes for the three and six months ended June 30, 2025 of $7.2 million and $6.6 million, respectively. The gains for the three and six months ended June 30, 2025 are mainly due to the decrease in fair value of the convertible notes issued in connection with the Company's acquisition of digital assets in June of 2025 (see Note 11 to the Consolidated Financial Statements).

Change in Fair Value of Earnout

The loss on change in fair value of earnout of $0.5 million for the three and six months ended June 30, 2026 was the result of the increase in fair value of the contingent consideration related to the Ergatta acquisition.

Change in Fair Value of Derivatives

We recognized a gain on the change in fair value of derivatives for the three months and six months ended June 30, 2026 of $0.5 million and $0.2 million, respectively, as compared to a loss on the change in fair value of derivatives for the three and six months ended June 30, 2025 of $0.5 million and $1.9 million, respectively.

Change in Fair Value of Warrants

The gain on the change in fair value of warrants issued in conjunction with the issuance of convertible notes was $0.1 million and $0.5 million for the three months ended June 30, 2026 and 2025, respectively, and $0.8 million and $1.0 million for the six months ended June 30, 2026 and 2025, respectively.

Liquidity and Capital Resources

At June 30, 2026, we had a working capital deficit of $38.9 million, mainly consisting of cash and cash equivalents of $1.0 million, accounts receivable of $3.2 million, inventory of $4.7 million and vendor deposits and other current assets of $1.9 million, more than offset by accounts payable and accrued expenses of $13.1 million, convertible notes and loans payable of $21.4 million, mandatorily redeemable preferred stock of $9.5 million and other current liabilities of $5.1 million. We have incurred an accumulated deficit of $245.4 million since inception, and we had negative cash flows from operations of $5.6 million and $5.7 million for the six months ended June 30, 2026 and 2025, respectively, and $10.4 million and $14.8 million for the years ended December 31, 2025 and 2024, respectively. We also incurred operating losses of $7.4 million and $12.1 million for the six months ended June 30, 2026 and 2025, respectively, and $19.9 million and $29.2 million for the years ended December 31, 2025 and 2024, respectively. We have funded our operations for the last few years through the sale of our debt and equity securities. Our material cash requirements are primarily comprised of:

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Payments to vendors and professional service providers critical to our operations and our obligations as a public company

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Cash portions of the purchase price for strategic acquisitions

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Principal and interest payments on debt scheduled to mature over the next twelve months

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Obligations under legal settlements

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Salaries, wages and benefits to employees

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Sourcing, new product development and commercialization activities for our existing products

As an emerging growth company, we are subject to certain inherent risks and uncertainties associated with the development of an enterprise. Since our inception, substantially all of management’s efforts have been devoted towards the development of its brands and services, their penetration in the marketplace, and the development of a commercial organization, all at the expense of short-term profitability.

In order to execute our growth strategy, we have been heavily dependent on financing from lenders and capital from private and public investors (collectively “outside capital”) since our inception and we expect to remain heavily dependent on outside capital for the foreseeable future until such time that our operations reach a scale of profitability that allows us to fund our obligations with cash inflows from operations. However, management can provide no assurance that we will ever be able to generate sufficient cash inflows to reduce or eliminate our reliance on outside capital.

Our available liquidity to fund our operations over the next twelve months beyond the issuance date was limited to approximately $1.7 million of cash and cash equivalents However, based on our anticipated liquidity needs, the foregoing available liquidity will not be sufficient to meet our obligations as they become due over the next year beyond the issuance date absent management’s ability to secure additional outside capital, which may not be available on commercially acceptable terms, or at all. The Securities Purchase Agreement that we entered into on January 28, 2025 with an accredited investor allows the investor to purchase up to $16.0 million of additional senior secured convertible notes from us, and we also have an At The Market Offering Agreement in place under which we may issue additional shares of Common Stock of approximately $6.0 million, however these do not represent firm commitments for additional capital. We currently have no firm commitments in place for securing additional outside capital.

Included in our anticipated liquidity needs is approximately $23.1 million of outstanding debt that is scheduled to mature over the next twelve months beyond the issuance date, and we do not have sufficient liquidity to repay such debt if a cash settlement is required. In the event we are unable to refinance our outstanding debt, settle some or all of the debt with shares of our common or preferred stock, secure additional outside capital, and/or secure amendments or waivers from our lenders to defer or modify their repayment terms, management will be required to seek other strategic alternatives to settle this indebtedness, which may include, among others, a significant curtailment of the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code. These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on the basis that we will continue to operate as a going concern, which contemplates that we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Cash Flows

Comparison of the six months ended June 30, 2026 and 2025

Operating Activities

Net cash used in operating activities was $5.6 million for the six months ended June 30, 2026, essentially unchanged from the $5.7 million used in operations for the six months ended June 30, 2025. The following table represents the components of cash used in operating activities:

Investing Activities

Net cash provided by investing activities of $3.4 million for the six months ended June 30, 2026 was mainly comprised of the repayment of the Sportstech loan receivable in the amount of $6.4 million (see Note 2 to the Consolidated Financial Statements), partially offset by $1.7 million of cash paid in the Ergatta acquisition transaction, net of cash acquired, acquisition of software and content of $0.9 million and property and equipment purchases of $0.3 million. Net cash used in investing activities of $51.0 million for the six months ended June 30, 2025 were comprised of our acquisition of digital assets in June of 2025 in the amount of $45.0 million (see Note 7 to the Consolidated Financial Statements) the loan to Sportstech of $4.3 million and a loan to Wattbike prior to the closing of the acquisition in the amount of $1.2 million.

Financing Activities

Net cash provided by financing activities of $2.7 million for the six months ended June 30, 2026 was primarily from the issuance of convertible notes of $1.6 million and proceeds from the issuance of common stock from an At the Market Offering of $1.5 million, partially offset by the net payment of loans under a line of credit at Wattbike of $0.2 million and the repurchase of our common shares in the amount of $0.2 million.

Net cash provided by financing activities of $59.3 million for the six months ended June 30, 2025 was primarily from proceeds from the issuance of convertible notes and other notes payable in the amount of $56.1 million and $1.8 million, respectively, and At the Market Offering proceeds of $1.6 million.