8-K: Empery Digital Divests Volcon Brand for 10% Venom EV Stake

Empery Digital Inc. has divested its Volcon power sports brand and related intellectual property to Venom EV, LLC in exchange for a 10% equity stake in Venom EV and strategic partnership rights.

Summary

• Empery Digital Inc. (the Company) entered into an Asset Purchase Agreement with Venom EV, LLC (Venom) on October 15, 2025.
• The Company transferred all right, title, and interests in certain intellectual property assets related to its power sports business (the Company IP) to Venom.
• The Company IP includes trademarks, patents, vehicle designs, manufacturing information, marketing assets, and sales assets for the Volcon brand, including social media accounts, but excludes the 'Brat' eBike.
• In exchange, Empery Digital will receive 10% of the shares of common stock of Venom on a fully diluted and non-dilutable basis, contingent upon Venom's conversion into a Delaware corporation.
• If Venom's conversion and share issuance do not occur within six months of the Purchase Agreement date, Empery Digital has the option to repurchase the Company IP for a nominal consideration of $100.
• Empery Digital retains the right to appoint one director to Venom's board of directors for a period of five years following the closing.
• Empery Digital will continue to finance Venom's inventory and will serve as the preferred provider for financing and logistics support services to Venom's customers for five years.
• Venom EV is required to obtain and maintain product liability insurance with coverage limits of not less than $5 million per occurrence and $5 million in the aggregate.
• Empery Digital will maintain product liability insurance for all Volcon vehicles sold prior to the agreement date (Volcon Grunt, Grunt EVO, Grunt Hunters Edition, Stag, MN1 Tradesman, MN1 Adventurer, and HF1 UTVs).

Sentiment

Score: 7

Explanation: The strategic divestiture allows Empery Digital to focus on its core blockchain and two-wheel EV business, potentially reducing risk and improving capital allocation. The 10% equity stake in Venom EV offers future upside, and the financing/logistics agreement provides ongoing revenue. However, the value of the Venom stake is currently unquantified, and the success of Venom's commercialization and Empery Digital's new focus areas remains to be seen.

Positives

• Empery Digital gains a 10% equity stake in Venom EV, LLC, providing potential upside from Venom's future growth in the power sports market.
• Reduced future product liability exposure for Empery Digital by transferring ownership of the four-wheel vehicle business.
• Strategic focus on the two-wheel business (Brat eBike) and expansion into European and Japanese markets, potentially streamlining operations.
• Opportunity to generate positive cash flow by expanding vehicle financing operations, leveraging the spread between the Company's cost of capital and interest income.
• Retains influence over Venom EV through the right to appoint one director to Venom's board for five years.
• Secured a preferred provider agreement for financing and logistics support to Venom's customers for five years, ensuring a continued revenue stream and strategic relationship.

Negatives

• Divestiture of the Volcon brand, which was a significant part of the Company's power sports business, may impact brand recognition and market presence.
• The 10% equity stake in Venom EV is contingent on Venom's conversion to a Delaware corporation, introducing a condition that must be met within six months.
• The current value of the 10% equity stake in Venom EV is not disclosed, making it difficult to assess the immediate financial benefit.
• Empery Digital will continue to finance Venom's inventory, which could tie up capital and expose the Company to credit risk.
• The option to repurchase the IP for a nominal $100 if the deal falls through suggests a low recovery value in that scenario.

Risks

• The highly volatile nature of the price of Bitcoin and other cryptocurrencies, which impacts Empery Digital's bitcoin treasury strategy.
• The Company's stock price may be highly correlated to the price of the digital assets that it holds.
• Increased competition in the industries in which the Company does and will operate.
• Significant legal, commercial, regulatory, and technical uncertainty regarding digital assets generally.
• Risks relating to the treatment of crypto assets for U.S. and foreign tax purposes.
• Uncertainty regarding Venom EV's ability to successfully commercialize the Volcon brand and generate returns for its shareholders.
• Failure of Venom EV to convert to a Delaware corporation and issue shares within six months, which would allow Empery Digital to repurchase the IP for nominal consideration, potentially disrupting the strategic shift.

Future Outlook

Empery Digital plans to concentrate on its two-wheel business, including launching new products in European markets and homologating the Brat eBike in Japan. The company also intends to expand its vehicle financing operations to generate positive cash flow by leveraging the spread between its cost of capital and interest income, with the ultimate goal of increasing bitcoin per share. Venom EV is positioned for faster commercialization under its new ownership.

Management Comments

• "Transferring the Volcon brand and related IP to Venom positions the platform for faster commercialization under an established owner." John Kim, Co-CEO of Empery Digital.
• "Empery Digital plans to expand its vehicle financing operations to generate positive cash flow by leveraging the spread between the Company’s cost of capital and interest income from vehicle financing."
• "These initiatives reflect Empery Digital’s continued commitment to disciplined capital deployment and operating efficiency with the goal of generating income to increase bitcoin per share."

Industry Context

This move reflects a strategic pivot for Empery Digital, divesting a capital-intensive power sports segment to focus on its two-wheel electric vehicle business and its core blockchain/digital asset management strategy. The expansion into vehicle financing aligns with a trend among automotive companies to capture additional revenue streams and support sales. The divestiture of the Volcon brand to a specialized entity like Venom EV could allow for more focused development and commercialization within the power sports EV market, which is experiencing growth but also intense competition.

Comparison to Industry Standards

• The divestiture of a non-core asset to focus on a primary business (two-wheel EVs and blockchain) is a common strategic move seen across various industries, aiming to improve operational efficiency and capital allocation.
• The retention of a 10% equity stake and a board seat in the divested entity is a standard practice in such carve-out transactions, allowing the seller to benefit from future growth while reducing direct operational burden.
• The preferred provider agreement for financing and logistics is a common strategy to maintain a revenue stream and strategic relationship post-divestiture.
• The product liability insurance requirements for Venom EV are standard for manufacturers in the power sports industry, reflecting the inherent risks.
• The 'true-up' mechanism for equity ownership is a sophisticated anti-dilution provision, often seen in venture capital or strategic investments to protect the investor's percentage stake.

Management Changes

Corporate Governance

Related Party Transactions

• Empery Digital Inc. will continue to finance Venom EV, LLC's inventory.
• Empery Digital Inc. will serve as the preferred provider for financing and logistics support services to Venom EV, LLC's customers for five years.

Stakeholder Impact

• Shareholders (Empery Digital): Potential for long-term value creation through a focused business strategy, reduced liability, and upside from the Venom EV equity stake. However, the immediate financial impact of the divestiture and the valuation of the Venom stake are uncertain.
• Employees (Empery Digital): Shift in focus to two-wheel EV business may lead to reallocation of resources or changes in roles related to the divested power sports segment.
• Customers (Volcon brand): The Volcon brand will now be under Venom EV, LLC, potentially leading to new product development and commercialization strategies. Empery Digital will continue to offer financing and logistics support.
• Management (Empery Digital): Strategic shift requires leadership to execute on the new focus areas (two-wheel EVs, financing, blockchain).
• Venom EV, LLC: Gains significant intellectual property and brand assets, along with financing support from Empery Digital, positioning it for growth in the power sports EV market.

Next Steps

• Venom EV, LLC to convert into a Delaware corporation.
• Venom EV, LLC to issue 10% of its common stock to Empery Digital Inc.
• Empery Digital Inc. to appoint one director to Venom EV's board.
• Empery Digital Inc. to continue financing Venom EV's inventory.
• Empery Digital Inc. to expand its two-wheel business, including new product launches in Europe and homologation of the Brat eBike in Japan.
• Empery Digital Inc. to expand vehicle financing operations.
• Venom EV, LLC to hire a Chief Financial Officer with public company experience within 12 months.
• James Haney or another approved officer to assume the position of Chief Executive Officer of Venom EV, LLC upon reorganization.

Key Dates

Recommendation

The filing details a significant strategic pivot for Empery Digital, divesting its Volcon power sports brand to focus on its two-wheel EV business and blockchain strategy. While the 10% equity stake in Venom EV offers potential upside and the reduction in product liability is positive, the immediate financial impact and the valuation of the Venom stake are not disclosed. The success of the new strategic focus areas (European/Japanese market expansion, vehicle financing) is yet to be proven. Given the strategic shift and the lack of immediate quantifiable financial performance metrics related to this transaction, a 'hold' recommendation is appropriate for a seasoned investor, awaiting further clarity on the execution of the new strategy and the performance of the Venom EV investment.

Keywords

Empery Digital, EMPD, Venom EV, Volcon, asset sale, intellectual property, power sports, eBike, Brat, equity stake, strategic partnership, vehicle financing, blockchain, Bitcoin, digital asset management, corporate governance, divestiture