Empery Digital (EMPD) Risk Analysis

On May 13, 2025, the Company received a notice from Nasdaq that it was not in compliance with Nasdaq's Listing Rule 5550(a)(2), as the minimum bid price of its common stock had been below $1.00 per share for 30 consecutive business days. The Company submitted a hearing request to Nasdaq's Hearings Department for this matter, which stayed the suspension of the Company's common stock. The Company participated in a hearing with Nasdaq's Hearings Department on June 24, 2025. On July 17, 2025, Nasdaq informed the Company that it had regained compliance with the above listing rules and had to remain in compliance with the minimum bid price rule through November 10, 2025, which the Company did. In the event that the Company does not maintain compliance in the future our common stock could be delisted from Nasdaq and trading of our common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such an event, it could become more difficult to dispose of, or obtain accurate price quotations for, our common stock, and there would likely also be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline further. Also, it may be difficult for us to raise additional capital if we are not listed on a major exchange.

Our share price has historically been highly volatile and closed at $4.35 on March 25, 2026. The market price of our common stock is subject to wide fluctuations in response to, among other things, the risk factors described in this filing and other factors beyond our control, such as the market value of Bitcoin and fluctuations in the valuation of companies perceived by investors to be comparable to us. Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock. In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business.

If we need to raise additional funds to purchase digital assets, repay outstanding debt, finance our operations, to complete acquisitions or to develop strategic relationships by issuing equity or convertible debt securities, which would reduce the percentage ownership of our existing stockholders. Our board of directors has the authority, without action or vote of the stockholders, to issue all or any part of our authorized but unissued shares of common or preferred stock. Our certificate of incorporation authorizes us to issue up to 250,000,000 shares of common stock and 5,000,000 shares of preferred stock. Future issuances of common or preferred stock would reduce your influence over matters on which stockholders vote and would be dilutive to earnings per share. In addition, any newly issued preferred stock could have rights, preferences and privileges senior to those of the common stock. Those rights, preferences and privileges could include, among other things, the establishment of dividends that must be paid prior to declaring or paying dividends or other distributions to holders of our common stock or providing for preferential liquidation rights. These rights, preferences and privileges could negatively affect the rights of holders of our common stock, and the right to convert such preferred stock into shares of our common stock at a rate or price that would have a dilutive effect on the outstanding shares of our common stock.

We have been, and may in the future be, subject to informal private or public inquiries and formal proxy actions or proposals from stockholders or others that may not align with our business strategies or the interests of our other stockholders. Stockholder activism, which could take many forms or arise in a variety of situations, has been increasing in recent years. Volatility in the stock price of our common stock or the adoption and execution of our Bitcoin treasury strategy or other reasons may in the future cause us to become the target of stockholder activism. Responding to such actions can be costly and time-consuming, disrupt our business and operations, and divert the attention of our Board of Directors, management, and employees from the pursuit of our business strategies. We strive to maintain constructive, ongoing communications with all stockholders, and we welcome constructive input from all stockholders toward the shared goal of enhancing long-term stockholder value. Nonetheless, we may not be successful in engaging constructively with one or more stockholders, and any resulting activist campaign that contests, or seeks to change, our Board of Directors, management, strategic direction or business could have an adverse effect on us because (i) responding to proxy contests and other actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of management and our Board of Directors, (ii) perceived uncertainties as to our future direction caused by activist stockholders could result in the loss of potential business opportunities, make it more difficult to attract and retain qualified personnel and business partners, and affect our relationships with suppliers and other service providers, and (iii) if individuals are elected to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create additional value for our stockholders. Our stock price could also be subject to significant fluctuations or otherwise be adversely affected by the events, risks and uncertainties of any stockholder activism. In addition, we may be required to incur significant legal fees and other expenses related to any stockholder activism matters and our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any stockholder activism. As a result, the actions of stockholder activists could materially and adversely impact our business, operating results, and financial condition.

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. Additionally, in February 2026, we adopted a stockholder rights plan, pursuant to which we issued a dividend of one preferred share purchase right (a "Right") for each share of our common stock then outstanding. In the event of certain takeover events not authorized by our board of directors, the holders of Rights may purchase additional shares of common stock at a discount, diluting the ownership stake of any potential acquirer and making a takeover more expensive and difficult. These provisions in our certificate of incorporation and bylaws and the Rights 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 and the Rights 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.

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. 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.

As an "emerging growth company" under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. We are an emerging growth company until the earliest of: - the last day of the fiscal year during which we have total annual gross revenues of $1.235 billion or more;   - the last day of the fiscal year following the fifth anniversary of our initial public offering;   - the date on which we have, during the previous 3-year period, issued more than $1 billion in non-convertible debt; or   - the date on which we are deemed a "large accelerated issuer" as defined under the federal securities laws. For so long as we remain an emerging growth company, we will not be required to: - have an auditor report on our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;   - comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis);   - submit certain executive compensation matters to stockholders advisory votes pursuant to the "say on frequency" and "say on pay" provisions (requiring a non-binding stockholder vote to approve compensation of certain executive officers) and the "say on golden parachute" provisions (requiring a non-binding stockholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and   - include detailed compensation discussion and analysis in our filings under the Securities Exchange Act of 1934, as amended, and instead may provide a reduced level of disclosure concerning executive compensation. Additionally, for so long as we remain an emerging growth company, we: - may present only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A; and   - are eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards under §107 of the JOBS Act. For fiscal 2026, we will no longer qualify as an emerging growth company and will be required to comply with of all of these reporting requirements and lose the exemptions under §107 of the JOBS Act. Certain of these reduced reporting requirements and exemptions were already available to us due to the fact that we also qualify as a "smaller reporting company" under SEC rules. However, if we no longer qualify as a smaller reporting company, wee will be required to obtain an auditor attestation and report regarding management's assessment of internal control over financial reporting; provide a compensation discussion and analysis; provide a pay-for-performance graph or CEO pay ratio disclosure; and present three years of audited financial statements and related MD&A disclosure.