Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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, 2025 filed with the SEC on March 31, 2026 (the "2025 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:

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 four leading brands serving the commercial and at-home markets with specialty fitness equipment and virtual training: Wattbike, Ergatta, CLMBR and FORME. Wattbike, acquired in July of 2025, offers a range of high-performance indoor bikes that set the global standard in cycling. Known for unmatched accuracy, realistic ride feel, and advanced performance tracking, Wattbike is trusted by elite athletes, national teams, and fitness enthusiasts around the world. Ergatta, acquired in March 2026, is a game-based connected fitness company. CLMBR offers a premium vertical climbing experience through its patented open-frame design and immersive touchscreen, delivering a high-intensity, low-impact workout that's both efficient and effective. FORME delivers strength, mobility, and recovery training through immersive content, performance-grade hardware, and expert coaching. Its wall-mounted systems include the Studio, a smart fitness mirror for guided programming and live 1:1 personal training, and the Lift, which adds smart resistance cable training-ideal for high-performance environments and sport-specific development. The combination of technology with expert training leads to better outcomes for both consumers and trainers alike. Wattbike, CLMBR and FORME each offer unique fitness solutions for both the commercial and at-home markets.

Key milestones in our growth history include:

Our revenue is primarily generated from the sale of our connected fitness hardware products and associated recurring membership revenue.

During the three months ended March 31, 2026 and 2025, we generated total revenue of $5.1 million and $1.4 million, respectively, and incurred net losses of $10.7 million and $6.6 million, respectively. As we generated recurring net losses and negative operating cash flow since inception, we have funded our operations primarily with gross proceeds from the issuance of convertible notes, the issuance of promissory notes to unrelated and related parties, and the issuance of common stock.

Business Model and Growth Strategy

Acquire complementary businesses that generate attractive synergies

We acquired CLMBR, Inc. in February 2024 and Wattbike on July 1, 2025. In addition, on March 11, 2026, we completed the acquisition of Ergatta, a connected fitness company that is considered a pioneer in game-based connected fitness. We expect that we will be able to acquire additional revenue-generating businesses, which would generate higher earnings and cashflows through synergies with our existing business. Our team brings significant experience with M&A transactions and we are one of the few companies in our industry with publicly traded equity securities, which we believe makes us an attractive acquirer.

Leverage well established equipment distributors to scale in commercial channels

We have high value partnerships with numerous fitness equipment distributors around the world, including Woodway, to sell CLMBR, FORME and Wattbike products into a variety of commercial environments. These relationships allow us to leverage the sales knowledge, relationships and specialization of third parties to accelerate our sales initiatives. Importantly, this construct allows us to make the vast majority of our sales related expenses variable, as we typically pay commissions only when units are sold.

Expand into new geographies

We intend to expand the international reach of our existing brands by leveraging in-market relationships and sales infrastructure across the brands in our portfolio. For example, with Wattbike, which is based in the United Kingdom, we are currently evaluating potential expansion of that brand in the US, where FORME, CLMBR and Ergatta have well established routes to market in both commercial and residential markets, although we have not yet made any definitive plans regarding such expansion or the potential timing thereof. We plan to pursue disciplined international expansion by targeting countries with sound macroeconomic conditions, favorable growth trends and stable regulatory environments, and importantly, those where we have footholds and low risk routes to market through our existing brand relationships and in market presence.

Build out partnership ecosystem

We intend to continue to build our strategic partner ecosystem with a focus on relationships that enable us to extend our platform to new audiences. We are pursuing opportunities in a number of attractive verticals, including sports, physical therapy and rehabilitation, and telemedicine. We are continuously identifying and evaluating opportunities to apply our coaching know-how in new and innovative ways to expand our reach and impact.

Expand B2B Channel

We intend to expand our sales and marketing efforts into a variety of light commercial settings, including multifamily buildings, hotels, country clubs, universities and performance centers.

Factors Affecting Our Performance

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following:

We have experienced, and expect to continue to experience, some disruptions to parts of our supply chain, including procuring necessary components or parts in a timely fashion, with suppliers increasing lead times or placing products on allocation and raising prices. In addition, disruptions to commercial transportation infrastructure have increased delivery times for materials and components or parts for our fitness equipment, and has impacted, and could in the future impact, our ability to timely deliver our products to customers. While these supply chain disruptions have resulted in operational challenges, including extended customer order lead times and periodic product allocation, they have not had a material adverse effect on our revenue or liquidity or capital resources for the three months ended March 31, 2026, and we have not implemented any significant mitigation efforts to date as a result. However, we cannot predict the impact to us of any future or prolonged supply chain disruptions or any mitigation efforts we may take going forward. For example, as a result of these supply chain disruptions, we may be required to increase customer order lead times and place some products on allocation. In addition, we may consider additional or alternative third-party manufacturing and logistics providers or suppliers. Such mitigation efforts may result in cost increases and any attempts to offset such increases with price increases may result in reduced sales, increased customer dissatisfaction, or otherwise harm our reputation. Further, if we were to elect to transition or add manufacturing or logistics providers or suppliers, it may result in temporary or additional delays in product delivery or risks related to consistent product quality or reliability. This in turn may limit our ability to fulfill customer orders and we may be unable to satisfy all of the demand for our products. We may in the future also purchase components further in advance, which in return can result in less capital being allocated to other activities such as marketing and other business needs. We cannot quantify the impact of such disruptions at this time or predict the impact of any mitigation efforts we may take in response to supply chain disruptions on our business, financial condition, and results of operations.

In addition, customer demand for our products may be impacted by weak economic conditions, inflation, weak growth, recession, equity market volatility, or other negative economic factors in the United States or other nations. The United States has recently experienced historically high levels of inflation. If the inflation rate continues to increase, it will likely affect our expenses, including, but not limited to, employee compensation expenses, increased manufacturing and supplier costs, and increasing market prices of certain components, parts, supplies, and commodity raw materials, which are incorporated into our products or used by our suppliers to manufacture our products. These components, parts, supplies, and commodities may from time to time become restricted, or general market factors and conditions may affect pricing of such components, parts, supplies and commodities, such as inflation or supply chain constraints. Given our limited operating history, we cannot predict how ongoing or increasing recessionary or inflationary pressures may impact our business, financial condition, and results of operations in the future.

RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

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

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

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

Fair Value Measurements

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

Goodwill and Intangible Assets

Our annual goodwill impairment assessment at 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 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 three months ended March 31, 2026 and 2025, we recorded losses on changes in fair value of contingent consideration of $26,000 and $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 three months ended March 31, 2026 and 2025, we recorded losses on the change in fair value of convertible notes of $1.4 million and $0.6 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 three months ended March 31, 2026 and 2025 we recognized gains on changes in the fair values of warrants of $0.7 million and $0.4 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 three months ended March 31, 2026 and 2025, we recognized a loss on the changes in

fair values of derivatives of $0.3 million and $1.5 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 March 31, 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. Where allowable, we have early adopted certain standards as described in Note 2 to our consolidated financial statements included in the 2025 10-K. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We will continue to remain an "emerging growth company" until the earliest of the following: (i) the last day of the fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (ii) the last day of the fiscal year in which our total annual gross revenue is equal to or more than $1.235 billion; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We are also a "smaller reporting company," meaning that the market value of our stock held by non-affiliates is less than $700.0 million and our annual revenue is less than $100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250.0 million or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700.0 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Components of Our Operating Results

Revenue

Connected Fitness Products

Connected Fitness Product revenue consists of sales of our connected fitness products and related accessories, delivery and installation services, and extended warranty agreements offered through a third-party. Fitness Product revenue is recognized at the time of delivery, except for extended warranty revenue which is recognized over the warranty period. For the third-party extended warranty service sold along with the connected fitness products, we do not obtain control of the warranty before transferring it to the customers. Therefore, we account for revenue related to the fees paid to the third-party extended warranty provider on a net basis, by recognizing only the net commission we retain. Connected fitness product revenue represented 87% and 77% of total revenue for the three months ended March 31, 2026 and 2025, respectively.

Membership

Membership revenue consists of revenue generated from our monthly Connected Fitness membership. Membership revenue represented 12% and 13% of total revenue for the three months ended March 31, 2026 and 2025, respectively. 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. Training and other revenue represented 2% and 10% of total revenue for the three months ended March 31, 2026 and 2025, respectively.

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

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. 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, 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 consists of expenses associated with the issuance of convertible notes that were recognized at fair value, unrealized currency gains and losses, and expense recognized in connection with a settlement agreement.

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 and accounts payable

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

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

The following tables set forth our consolidated results of operations for the periods presented.

Results of Operations for the Three Months Ended March 31, 2026 and 2025

The following tables set forth our condensed consolidated results of operations 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.

For the three months ended March 31, 2026 and 2025, $0 and $0.3 million, respectively, of stock-based compensation was capitalized as software costs.

Comparison of the three months ended March 31, 2026 and 2025

Revenue

Fitness product revenue increased by $3.4 million, or 324%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase in Fitness Product revenue was the result of $4.2 million of revenue associated with Wattbike, which was acquired on July 1, 2025, partially offset by a decrease in CLMBR revenue in 2026.

Membership revenue increased $0.4 million, or 244%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase is attributable to Ergatta, acquired on March 11, 2026.

Training and other revenue decreased by $47,000, or 36%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease was a result of a decrease in Live 1:1 training sessions.

Cost of Revenue and Gross Profit (Loss)

Fitness product cost of revenue increased by $2.1 million, or 232%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase is due to the cost of revenue associated with Wattbike, which was acquired on July 1, 2025.

Membership cost of revenue decreased by $58,000, or 14%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease is primarily related to the decrease in content amortization expense, partially offset by Ergatta membership cost of revenue not present in 2025.

Training and other cost of revenue decreased $0.2 million, or 61%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease is mainly due to the decline in Live 1:1 training sessions.

Our gross profit/loss improved from a loss of $0.3 million for the three months ended March 31, 2025 to gross profit of $1.6 million for the three months ended March 31, 2026. The improvement is mainly due to the Wattbike acquisition.

Operating Expenses

Research and Development

Research and development expense decreased by $0.8 million, or 66%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to decreases in stock-based compensation and other personnel-related costs of $0.6 million and $0.2 million, respectively.

Sales and Marketing

Sales and marketing expense increased by approximately $0.8 million, or 314%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, driven by increases in personnel-related expenses of $0.5 million and advertising expense $0.1 million, both of which are attributable to the Wattbike acquisition, and amortization of intangibles of $0.2 million associated with Ergatta.

General and Administrative

General and administrative expense decreased by $0.4 million, or 8%, for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The decrease was mainly due to decreases in stock-based compensation expense of $1.1 million and vendor settlements of $0.3 million, largely offset by Wattbike and Ergatta expenses of $0.8 million and $0.1 million, respectively, in 2026 with no comparable amount for 2025.

Other Income (Expense), net

Other Expense, net

Other expense, net for the three months ended March 31, 2026 is mainly comprised of expense recognized under a settlement agreement in the amount of $2.2 million and the credit loss of $0.2 million recognized upon the settlement of the Sportstech loan receivable. Other expense, net for the three months ended March 31, 2025 is mainly comprised of losses on the settlement of a Loss Restoration Agreement.

Interest Expense

Interest expense decreased by $0.2 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The decrease mainly attributable to the conversion of certain higher interest debt into equity, partially offset by an increase in amortization of debt discount.

Interest Income

Interest income decreased by $0.2 million for the three months ended March 31, 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 and accounts payable

The loss on extinguishment of debt and accounts payable for the three months ended March 31, 2026 was mainly the result of the conversion of Class A Incremental Notes into equity (see Note 11 to the Consolidated Financial Statements) resulting in a loss on extinguishment of $2.8 million, partially offset by gains on extinguishment of $1.1 million resulting from other indebtedness that was converted to equity. For the three months ended March 31, 2025, we recorded a gain on extinguishment of $3.0 million in connection with the conversion of debt to equity.

Change in Fair Value of Convertible Notes

We recorded losses on the change in fair value of convertible notes for the three months ended March 31, 2026 and 2025 of $1.4 million and $0.6 million due to the increase in fair value of these notes.

Change in Fair Value of Derivatives

The loss on the change in fair value of derivatives for the three months ended March 31, 2026 of $0.3 million reflects the increase in the fair value of the Company's derivative instruments, which are mainly the result of the issuance of convertible promissory notes. For the three months ended March 31, 2025, we recorded a loss of $1.5 million related to the increases in fair value of these instruments.

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 $0.7 million and $0.4 million, respectively.

Liquidity and Capital Resources

At March 31, 2026, we had a working capital deficit of $22.4 million, mainly consisting of cash and cash equivalents of $4.7 million, accounts receivable of $2.5 million, inventory of $4.5 million and vendor deposits and other current assets of $2.3 million, more than offset by accounts payable and accrued expenses of $14.5 million, the current portion of convertible notes and loans payable of $16.3 million and other current liabilities of $5.6 million. We have incurred an accumulated deficit of $238.3 million since inception, and we had negative cash flows from operations of $2.6 million and $3.5 million for the three months ended March 31, 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 $4.0 million and $6.3 million for the three months ended March 31, 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:

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 $1.3 million of cash and cash equivalents However, based on our anticipated liquidity needs, the foregoing available liquidity will not be sufficient to meet our obligations as they become due over the next year beyond the issuance date absent management's ability to secure additional outside capital, which may not be available on commercially acceptable terms, or at all. The Securities Purchase Agreement that we entered into on January 28, 2025 with an accredited investor allows the investor to purchase up to $20.0 million of additional senior secured convertible notes from us, and we also have an At The Market Offering Agreement in place under which we may issue

additional shares of Common Stock of approximately $6.0 million, however these do not represent firm commitments for additional capital. We currently have no firm commitments in place for securing additional outside capital.

Included in our anticipated liquidity needs is approximately $18.2 million of outstanding debt that is scheduled to mature over the next twelve months beyond the issuance date, and we do not have sufficient liquidity to repay such debt if a cash settlement is required. In the event we are unable to refinance our outstanding debt, settle some or all of the debt with shares of our common or preferred stock, secure additional outside capital, and/or secure amendments or waivers from its lenders to defer or modify 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 three months ended March 31, 2026 and 2025

Operating Activities

Net cash used in operating activities was $2.6 million and $3.5 million for the three months ended March 31, 2026 and 2025, respectively. The decrease was mainly due to favorable changes in accounts receivable and accounts payable and accrued expenses. The following table represents the components of cash used in operating activities:

Investing Activities

Net cash provided by investing activities of $4.2 million for the three months ended March 31, 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 and acquisition of software and content of $0.4 million. Net cash used in investing activities of $2.2 million for the three months ended March 31, 2025 were comprised of a loan to Sportstech of $2.0 million and acquisition of software and content of $0.2 million.

Financing Activities

Net cash provided by financing activities of $2.7 million for the three months ended March 31, 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 payment of loans under a line of credit at Wattbike of $0.3 million.

Net cash provided by financing activities of $7.8 million for the three months ended March 31, 2025 was primarily from proceeds from the issuance of convertible notes in the amount of $6.2 million and At the Market Offering proceeds of $1.6 million.