Empery Digital Inc.

Current report

The data center projects underlying our existing investments, and any data center projects in which we may invest in the future, are subject to governmental permits, approvals and other regulatory requirements that we do not control.

Current report

Data center development and conversion projects typically require numerous permits, approvals and consents from state and local governmental authorities, public utility commissions and utilities, including zoning, land use, siting and building permits, environmental and air permits, and approvals relating to interconnection, power supply and on-site or behind-the-meter power generation. The process of obtaining these permits and approvals can be lengthy, costly and uncertain, and governmental authorities often have broad discretion in granting, conditioning or revoking them.

Current report

In addition, laws, regulations and policies applicable to data centers are evolving, and governmental authorities may adopt new requirements or interpret existing ones in a manner that restricts or increases the cost of developing or operating data centers. Any delay in, or failure to obtain or maintain, required permits and approvals or any adverse change in applicable laws or regulations could delay or prevent the closing of our existing or any future data center projects in which we may invest, any of which could result in the partial or total impairment of our investments and materially adversely affect our business, financial condition and results of operations.

Current report

We are subject to a court order that requires us to give advance notice to a stockholder before taking certain significant corporate actions, which may limit our ability to take those actions quickly.

Current report

On October 26, 2026, the Delaware Court of Chancery (the “Court”) entered an order in connection with the stockholder litigation brought by ATG Capital Opportunities Fund LP (“ATG”) challenging the re-election of Ian Read to our Board of Directors (the “Board”) at our 2026 annual meeting of stockholders. Under the order, we must give ATG at least five business days’ prior written notice before taking certain significant corporate actions. These actions include:

Current report

The order does not restrict us from meeting our existing funding obligations under the EMHU LLC Agreement. We must also notify ATG before any Board action for which Mr. Read’s attendance is needed to establish a quorum, or his vote is needed to approve the action.

Current report

These requirements will remain in effect while the related litigation is pending, unless the Court modifies or lifts them earlier. The Court has scheduled a hearing for January 2027. We cannot predict the outcome of the hearing, whether the Court will extend, expand or modify the order, or when the Read Litigation will be resolved.

Current report

The notice requirements could delay or impede our ability to take certain corporate actions. They could also limit our ability to pursue, negotiate or complete strategic transactions, financings, material investments or material contracts on favorable terms or on a timely basis. Counterparties may also be reluctant to transact with us while the order is in effect. In addition, ATG may challenge any action we notify it of, which could lead to further or prolonged disputes with ATG, more litigation costs, and diversion of management's attention. Separately, an adverse outcome in the underlying could affect the composition of the Board or the validity of actions it has taken. Any of these outcomes, alone or together, could harm our reputation and business and adversely affect our results of operations and financial condition.** **

Previous report

Our AI and data center infrastructure investments strategy may not perform as planned.

Previous report

We believe the potential for AI and data center infrastructure investments complements our current business model with potential for stable, long-term and high margin income. However, the success of this strategy may not develop as anticipated and may be affected by factors such as the reliability and timing of power supply, future demand for data center infrastructure, the ability of our partners to execute on proposed development plans, regulatory developments with respect to the development and operation of data centers and technological developments. A failure to successfully implement our AI and data center infrastructure investments strategy may adversely affect our business, prospects, or operations.

Previous report

Further, our business expansion into the AI and data center infrastructure industry may be capital intensive and is expected to shift the timing of cash inflows relative to capital outlays. Our AI and data center infrastructure investments require substantial up-front capital expenditures, which may temporarily reduce liquidity. This business expansion introduces uncertainties that could impact our liquidity and capital resources.

Previous report

Our capital allocation strategy, including decisions relating to our allocation of capital between our Bitcoin strategy, our e-bike and inventory financing business strategy, our data center infrastructure investments strategy and other initiatives may not be effective at enhancing stockholder value, or providing other benefits we expect.

Previous report

Our capital allocation decisions, including the amounts allocated to stock repurchases, Bitcoin holdings, e-bike and inventory financing and data center infrastructure investments, may not deliver the anticipated benefits to our shareholders and could adversely affect our business, financial condition, and results of operations. Decisions regarding the repurchases of our common stock, purchases and sales of Bitcoin, e-bike and inventory financing and data center infrastructure investments are based on numerous factors, including our financial performance, cash flow, amount of cash and short-term investment balances, capital requirements, market conditions, and the judgment of our management and Board of Directors. There can be no assurance that any such decisions will be effective in enhancing long-term shareholder value. If we do not properly allocate our capital, we may fail to produce optimal financial results and experience a reduction in stockholder value.

Previous report

Our expansion into data center and AI infrastructure investments may divert resources from our Bitcoin strategy and e-bike and inventory financing operations and introduce operational complexity.

Previous report

While we intend to continue our Bitcoin strategy and e-bike and inventory financing operations, the allocation of resources to support our data center development may reduce the capital, personnel and infrastructure available for these operations. In addition, expanding into AI and data center infrastructure investments may increase operational complexity and place additional demands on our management team, which could negatively affect our overall performance, strategic execution and profitability.

Previous report

Our data center infrastructure investments strategy depends upon the demand for data centers, which may not develop as anticipated.

Previous report

We have made a number of indirect investments in powered land properties intended to be converted or developed into data centers facilities and intend to evaluate additional data center infrastructure investment opportunities, including through our strategic partnership with Hunt Properties, due to the significant investment and demand for these facilities driven by the growth in artificial intelligence. The market for data centers, AI and high-performance computing is rapidly evolving and highly competitive and demand for the data center infrastructure assets into which we have or may in the future invest may not develop as anticipated.

Previous report

While we have targeted, and intend to continue to target, data center investments with the potential for long-term secured leases with creditworthy tenants, a reduction in the demand for data center assets, power or connectivity may have a material and adverse effect on our business and financial condition. General economic slowdowns, as well as adverse developments in the data center, internet, AI and data communications and broader technology industries, among other things, could lead to reduced demand for data center assets. In addition, changes in industry practice or in technology could reduce demand for the physical data center assets in which we have indirectly invested. Our data center investments may not achieve sufficient utilization rates or pricing to recover our investments. Technological developments, including more advanced or cost- or power-efficient alternatives, may reduce the competitiveness or useful life of the data center infrastructure in which we have indirectly invested. In addition, tenants or prospective tenants for the properties and facilities in which we, EMHU or CDP have invested, may choose to develop new data centers or expand their own existing data centers or consolidate into data centers in which we, EMHU or CDP do not have an interest.

Previous report

If any of these risks materialize, we may incur delays, cost overruns, reduced revenues, asset impairments, or losses. Any of these outcomes could materially adversely affect our business, financial condition, and results of operations.

Previous report

Our strategic data center investments are made via private companies, including EMHU and CDP, which are illiquid and subject to significant valuation uncertainty, and we may not realize a return on these investments.

Previous report

We have made, and expect to continue to make, strategic investments in private companies as part of our data center infrastructure investment strategy. For example, in June 2026, we made an initial capital contribution of $2.9 million for 25% of the common units of EMHU and committed to making a further capital contribution of $62.1 million upon the contemplated closing of a property acquisition. In addition, in July 2026 we purchased $20 million of CDP’s Series A-1 preferred stock, representing an approximately 8% ownership stake in CDP. These investments are in privately held companies whose securities are not traded on any public exchange and for which no established trading market exists. In addition, subject to certain limited exceptions, we must obtain the prior approval of TexStack, as managing member of EMHU, for any transfer of any of our equity interest in EMHU to third parties. As a result, these investments are inherently illiquid, and we may be unable to sell or otherwise dispose of these interests at favorable prices, or at all, if we require liquidity or wish to reallocate capital. Because these investments lack readily determinable fair values, the carrying values reflected on our balance sheet may not accurately represent the amounts that could be realized upon sale or liquidation. Adverse developments affecting such entities, including development delays, difficulties in securing long-term leases, declines in revenue, failure to achieve business and development milestones, competitive pressures, regulatory changes, or general economic conditions, could result in a partial or total impairment of our investment. Any such impairment would reduce the value of our balance sheet and could materially and adversely affect our financial condition and results of operations.

Previous report

Our investments in EMHU and CDP represent minority, non-controlling, equity interests, and we have only limited ability to exercise significant influence over the operating or financial policies of these entities. For example, through VEPS, we hold 25% of the common units of EMHU while TexStack serves as managing member holding the remaining 75% and broad discretionary authority, including over capital calls, distributions, and deemed liquidation events. For example, as managing member under the EMHU operating agreement, TexStack may make mandatory capital calls on a pro rata basis and the Company has agreed to irrevocably guarantee such additional capital contributions of VEPS, and distributions from EMHU may be made at the sole discretion of TexStack, as managing member, on a pro rata basis and subject to certain limitations and conditions. Further, subject to certain limited exceptions, we must obtain the prior approval of TexStack for any transfer of any of our equity interests in EMHU to third parties.

Previous report

As we continue to pursue our data center infrastructure strategy through EMHU and similar arrangements, we do not have the right to exercise sole decision-making authority over these investments, and TexStack’s or CDP’s interests may not always align with ours. For example, if TexStack fails to fund its share of required capital contributions, including in connection with the pending Property Acquisition, or if disputes arise between us and TexStack or Cardinal regarding the development or operation of the underlying data center infrastructure or the negotiation of a binding lease with a prospective tenant, we could be required to contribute unplanned capital, our interest could be diluted, or we could become involved in costly litigation or arbitration, any of which could adversely affect our business, financial condition, and results of operations.

Previous report

Consequently, we are in large part dependent on TexStack and the management teams and controlling stockholders of CDP, respectively, to make decisions that are in our interest as a minority investor in each of EMHU and CDP. These companies may take actions - including issuing additional equity that could dilute our ownership interest if we do not exercise participation rights or exercise consent rights available to us, entering into related-party transactions, making strategic decisions with which we disagree, or failing to pursue business opportunities - that could adversely affect the value of our investment. We also may have limited legal remedies in the event of disputes with majority holders or management of CDP. Any of the foregoing could materially and adversely affect the value of our strategic investments and our financial condition.

Previous report

The success of our AI and data center infrastructure investments depends, among other things, on the ability to negotiate and execute definitive long-term leases on commercially acceptable terms.

Previous report

The success of our investments in EMHU and CDP are materially dependent upon EMHU and CDP executing long-term definitive leases or their data center facilities with creditworthy hyperscaler or enterprise tenants on commercially acceptable terms. For example, we may not realize the anticipated benefits of our investment in CDP if CDP does not achieve tenant adoption at the pace required for its data center campus to be commercially viable. In July 2026, we invested $20.0 million in CDP’s Series A-1 Preferred Stock, representing an approximately 8% ownership interest in CDP, as part of a $70 million Series A financing by CDP to support its inaugural data center campus in West Texas. While CDP has entered into only a non-binding letter of intent for a 750 MW Phase I data center campus with a prospective tenant, there is no guarantee that CDP will enter into a definitive lease with this or any other tenant, or that any definitive lease, if executed, will be on the terms contemplated by the letter of intent. If CDP fails to achieve tenant adoption at the pace or on the terms necessary for the campus to be commercially viable, the value of our investment in CDP could be impaired, which could adversely affect our business, financial condition, and results of operations.

Previous report

Similarly, EMHU has entered into a definitive agreement to, subject to certain closing conditions, purchase 100% of the equity interests of the current holder of a fee simple title to a property in the Midwest that, upon closing, is intended to be converted into an AI data center, for an aggregate purchase price of approximately $230 million. Cardinal has executed a non-binding letter of intent which contemplates a triple net lease agreement between EMHU and the prospective tenant. However there is no guarantee that Cardinal or EMHU will be able to execute a definitive lease with this or any other tenant, or that any definitive lease, if executed, will be on the terms contemplated by the letter of intent. If EMHU is unable to negotiate and execute a long-term definitive lease on terms as favorable as those contemplated by the letter of intent, or at all, the Property Acquisition may not close or the value of our investment in EMHU could be impaired, which could adversely affect our business, financial condition, and results of operations.

Previous report

Our partners may experience delays or other impediments in the development of proposed data centers, which may impact the return on our investments.

Previous report

The development of new data centers and the retrofitting or expansion of existing facilities are highly complex, capital-intensive and multi-phase projects that typically involve extensive planning, engineering, permitting, procurement and construction processes. As a result, there could be significant delays between the time of our indirect investments in AI and data center infrastructure assets and the time by which such investments provide a return. Our investments in EMHU and CDP depend on the ability of Cardinal and CDP, respectively, to secure sufficient power and, directly or indirectly, and either deliver the property in condition for a data center to be built or complete construction of data center infrastructure suitable for artificial intelligence and high-performance computing tenants. We do not control Cardinal’s or CDP’s ability to secure sufficient power supply for these facilities, and difficulties in securing contracted energy or obtaining adequate power capacity could delay development, increase costs, or limit the ability of these facilities to attract or retain tenants, particularly as evolving technologies such as artificial intelligence increase power requirements. The Property Acquisition underlying our investment in EMHU also remains subject to completion of due diligence and other closing conditions, and any delay in satisfying, or failure to satisfy, these conditions could delay the development of AI and high-performance computing infrastructure on the property. Any such power constraints or construction and closing delays could impair the value of our investments in EMHU and CDP and adversely affect our business, financial condition, and results of operations.

Previous report

Risks Related to Our E-Bike and Inventory Financing Business Strategy

Previous report

We have a limited history of financing inventory purchases and parties to inventory financing agreements have defaulted and may in the future default on amounts owed to us which could materially adversely affect our business, results of operations or financial condition.

Previous report

We have a limited history of financing inventory purchases. On April 17, 2025, we entered into the Venom Supply Agreement to finance inventory purchases with Venom to finance Venom’s golf cart and accessory purchases from their international third-party supplier. The Venom Supply Agreement allowed Venom to purchase up to $2.0 million of golf carts with payment terms of earlier of 100 days from the date the golf carts leave the supplier’s facility or upon sale of the inventory by Venom and the Company would receive a 5% fee for the total cost of inventory ordered by Venom. Inventory purchased by Venom under the Venom Supply Agreement is collateral for the amount financed by the Company. The Venom Supply Agreement was amended on October 29, 2025 (“Amendment 1”) to increase the amount of inventory purchases by $700,000 with payment terms of the earlier of 60 days from when the inventory was received by Venom or upon sale of the inventory. Amendment 1 was completed to allow Venom to purchase MN1 Tradesman and MN1 Adventurers that the Company ordered but had not received from Super Sonic prior to the Venom APA being signed. The Venom Supply Agreement was further amended on November 17, 2025 to increase the amount of inventory purchases by $2.5 million.

Previous report

In July 2026, Venom informed the Company that it is unable to repay the amounts the Company has financed as of June 30, 2026, including any partial payments made for inventory not yet completed by the manufacturer. Although the Company has a security interest in the inventory and intends to exercise its rights to retain the inventory, the Company does not have a dealer network or access to Venom’s dealer network to sell the inventory immediately. The Company has reserved $2,026,087 for financing receivables owed by Venom and $96,450 for inventory deposits paid to the manufacturer for Venom inventory in the three and six months ended June 30, 2026. The Company may not be able to recover the amounts all or any of the amounts it has reserved, which could have a material adverse effect on our business, results of operations or financial condition.

Previous report

We are evaluating other opportunities to finance inventory purchases from other vendors, some of which may not be in an industry or for products which we have experience with, however such financing arrangements may not be available with favorable terms to us, or at all. Default by customers on inventory purchases financed by us, including Venom’s failure to repay amounts owed to us, could have a material adverse effect on our business, results of operations or financial condition.

Previous report

Anti-takeover provisions in our governing documents may discourage, delay or prevent a change of control of our company.

Previous report

Our certificate of incorporation and bylaws contain certain provisions that may discourage, delay or prevent a change in our management or change of control, including that they, collectively: authorize the issuance of “blank check” preferred stock that could be issued by our board of directors to thwart a takeover attempt; provide that, subject to the special rights of the holders of one or more series of preferred stock, special meetings of the stockholders may be called only by or at the direction of the Board of Directors, the Chairperson of the Board of Directors, the Chief Executive Officer or President, and shall not be called by any other person or persons. prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders; and establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders.

Previous report

These provisions in our certificate of incorporation and bylaws could prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Their impact that delays, deters, renders more difficult or prevents a change in our control in a takeover attempt may not be in the best interests of our stockholders. Even in the absence of a takeover attempt, the existence of these provisions could adversely affect the prevailing market price of our common stock if their impact is perceived by investors as detrimental. Also, they could make it more difficult for stockholders to replace or remove our management and thus facilitate management entrenchment.