Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of the historical results of operations and liquidity and capital resources of Angel Studios, Inc. (“Angel Studios,” “we,” “our,” “us,” or the “Company”). You should read the following discussion and analysis in conjunction with the accompanying condensed consolidated financial statements of the Company and the notes thereto, as well as with the Angel Legacy’s Annual Report on Form 10-K, including the audited consolidated financial statements and the related notes included therein.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements. The matters discussed in these forward-looking statements are subject to risk, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the federal securities laws that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements, including with respect to our recently announced Business Combination (as defined below). The forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, please refer to the “Risk Factors” section of this Quarterly Report on Form 10-Q and the registration statement on Form S-4 filed with the Securities and Exchange Commission (“SEC”) relating to our Business Combination. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a values based media distribution company that uses technology to empower a vibrant and growing community to replace the Hollywood gatekeeper system and champion stories that amplify light for mainstream audiences.
Our community, known as the Angel Guild, is at the heart of this mission.
1) The Angel Guild votes to select film and TV shows.
2) The Angel Guild rallies in theaters to support film releases.
3) The Angel Guild funds future films and TV shows with their membership.
As of September 30, 2025, through the Angel Guild, approximately 1.6 million paying members from more than 160 different countries help decide what film and TV projects we will market and distribute.
Pledge to Amplify Light
All Guild members make a written pledge stating: “When I vote, I pledge to help choose excellent entertainment that is true, honest, noble, just, authentic, lovely or admirable.”
Revenue
We primarily generate revenue from the following sources:
● Angel Guild revenue comes from monthly or annual membership fees. Currently there are three possible tiers for membership, Basic with Ads, Basic, and Premium. All memberships allow voting for every Angel Studios release, give early access for streaming,
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and help fund our original films, increasing new content releases. The Basic and Premium tiers have no ads during shows and the Premium tier includes two complimentary tickets to every Angel Studios theatrical release and a discount for all merchandise.
● Theatrical Distribution revenue comes from releasing our original films with our exhibitor partners. Every time a moviegoer purchases a ticket from the partner theaters, we receive a percentage of the box office revenue. For most international theaters, the percentage of box office revenue is first paid to a distributor who then pays us.
● Content Licensing revenue comes from licensing our films and TV shows to other distributors such as Amazon, Apple and Netflix. Our future plans include licensing the rights to our films and TV shows for other experiences such as derivative shows, video games, theme parks and Broadway-style plays.
● Other revenue is generated from sales of merchandise related to our films and series, as well as physical DVD sales. We also offer a direct online store for Angel Studios themed products and wholesale products to retail partners.
Founding
We were founded in 2013 by our Chief Executive Officer, Neal Harmon, along with his brothers Daniel, Jeffrey and Jordan, and their cousin, Benton Crane.
Bitcoin Treasury Strategy: Seeking to Empower the Angel Guild for Generations
As of September 30, 2025, we beneficially owned approximately 303.1 bitcoin. This equates to 1.7974 bitcoin per million shares of our Common Stock. We plan to hold bitcoin as a strategic treasury asset as an adjunct to our core film and TV distribution business. We do not have policies governing the amount of bitcoin we intend to hold now or in the future and the overall amount of bitcoin we intend to hold is uncertain. Additionally, we have not currently set any official policies governing how or when we will exchange cash for bitcoin, or sell bitcoin for cash, with the exception that bitcoin may be sold, if necessary, to meet the day-to-day financial obligations of the Company.
The continued implementation of our bitcoin treasury strategy aims to support its mission-driven approach of funding the world’s best filmmakers in producing stories that amplify light for generations to come. The overall strategy contemplates that we may (i) enter into capital raising transactions that are collateralized by its bitcoin holdings, (ii) consider pursuing strategies to create income streams or otherwise generate funds using its bitcoin holdings and (iii) periodically sell bitcoin for general corporate purposes, including to generate cash to meet its operating requirements.
Regulation A Offerings
In September 2024, we sold an aggregate of 3,538,661 shares of our Class A Common Stock, pursuant to an offering under Regulation A of the Securities Act of 1933, as amended (the “Securities Act”). The price of the Class A Common Stock was $5.66 per share, and the Regulation A Offering generated gross proceeds of approximately $20.0 million. We determined the Regulation A Price after considering several key factors at that time, including (i) the information set forth in the Angel Legacy offering statement on Form 1-A, originally filed with the SEC on June 20, 2024, as subsequently amended and filed with the SEC on each of August 9, 2024 and August 27, 2024, and as qualified by the SEC on August 29, 2024, (ii) our history and future growth expectations, as well as the history and future growth expectations of the industry in which we compete, (iii) our past and present financial performance, (iv) our prospects for future earnings and the present state of our business, (v) the general condition of the securities markets at the time of the Regulation A Offering, (vi) the recent market prices of, and demand for, publicly traded common stock of generally comparable companies and (vii) other relevant factors. Our Chief Executive Officer, Neal Harmon, purchased 42 shares of Class A Common Stock, our President, Jordan Harmon, purchased 3,536 shares of Class A Common Stock, our Chief Content Officer, Jeffrey Harmon purchased 42 shares of Class A Common Stock and one of our directors, Paul Ahlstrom, purchased 85 shares of Class A Common Stock, in each case as part of the Reg A Offering. We intend to use the proceeds from the Reg A Offering to manage our business and provide working capital for our operations. The proceeds may also be used to pay expenses relating to salaries and other compensation to our officers and employees.
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In September 2025, we sold an aggregate of 6,688,077 shares of our Class A Common Stock, pursuant to an offering under Regulation A. The price of the Class A Common Stock was $8.23 per share, and the Regulation A Offering generated gross proceeds of approximately $55.0 million. We determined the Regulation A Price after considering several key factors at that time, including (i) the information set forth in the Angel Legacy offering statement on Form 1-A, originally filed with the SEC on June 26, 2025, as subsequently amended and filed with the SEC on July 24, 2025, and as qualified by the SEC on August 6, 2025, (ii) our history and future growth expectations, as well as the history and future growth expectations of the industry in which we compete, (iii) our past and present financial performance, (iv) our prospects for future earnings and the present state of our business, (v) the general condition of the securities markets at the time of the Reg A Offering, (vi) the recent market prices of, and demand for, publicly traded common stock of generally comparable companies and (vii) other relevant factors. We intend to use the proceeds from the Reg A Offering to manage our business and provide working capital for our operations. The proceeds may also be used to pay expenses relating to salaries and other compensation to our officers and employees.
P&A Subsidiaries
Over the past year, we have formed several subsidiaries (each, a “P&A Subsidiary”) to exploit the commercial potential of specific films. Generally, a P&A Subsidiary enters into a distribution agreement with a filmmaker/production company to license the rights to market and distribute a film. The P&A Subsidiary then executes a services agreement with us to market the film’s theatrical release. The P&A Subsidiary also sublicenses the film to us for distribution via the Angel App and our website, as well as to other distribution networks. In exchange for our right to distribute the film, we retain a share of revenue generated by our distribution of the film to the Guild.
P&A Subsidiaries have dual class voting structures: preferred shares, which are offered to investors under Regulation A; and common shares, which we purchase at formation and which are the sole voting shares of a P&A Subsidiary. Typically, the preferred shares have a ‘Stated Value’ of 115-120% of the price at which the shares are sold. A P&A Subsidiary’s board of directors may, upon determining that the company has sufficient available funds, pay the Stated Value to preferred shareholders. Payments are made from receipts generated by the film’s theatrical release, after movie theaters have taken their negotiated share. If revenue generated from a film’s theatrical release is insufficient to pay the Stated Value, P&A Subsidiaries may pay the Stated Value from revenue generated by the film’s distribution, merchandizing sales, and other commercial exploitation. Upon full payment of the Stated Value, a P&A Subsidiary’s preferred shares are automatically redeemed, and we become the entity’s sole owner. After a P&A Subsidiary has redeemed its preferred shares, the subsidiary splits remaining revenue with the filmmaker according to the terms of the Distribution Agreement.
We are legally distinct from the P&A Subsidiaries, and investments in them are distinct from an investment in us. A P&A Subsidiary is formed solely to exploit the commercial potential of a single film, and proceeds generated from a subsidiary’s offering of preferred shares are used to market and distribute that one film. A P&A Subsidiary has no other business or assets other than its exploitation of the rights to the film. The subsidiary’s shareholders do not have any rights to our assets or securities if a film does not perform well financially.
Investors in our common stock are investing in us and our business, which is broader than the marketing of a single film. Investors in our Common Stock do not have any right to payment of any amounts from the receipts of a film’s theatrical release prior to dividend payments made to the shareholders of the P&A Subsidiaries.
P&A Subsidiaries are required to file current and periodic reports with the SEC pursuant to Rule 257(b) of Regulation A. Unlike us, P&A Subsidiaries do not have reporting obligations under Section 15 of the Exchange Act.
Off the Chain
On September 11, 2024, we and Off the Chain, LP (“Off the Chain”), a leading bitcoin asset management firm, entered into an agreement in principle for an investment by Off the Chain of approximately $10.0 million to help support our bitcoin treasury strategy. On September 30, 2024, we entered into a stock purchase agreement with Off the Chain, pursuant to which Off the Chain agreed to purchase an aggregate of 1,769,328 shares of Class A Common Stock, at a price of $5.66 per share, for an aggregate purchase price of $10.0 million, payable in bitcoin. The sale closed on October 10, 2024. We intend to use the proceeds from our sale of Class A Common Stock to Off the Chain to support our bitcoin treasury strategy.
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Recent Developments
The Merger
On September 10, 2025, the we consummated the previously announced Business Combination (as defined below) pursuant to that certain Agreement and Plan of Merger, dated as of September 11, 2024 (as amended, the “Merger Agreement”), by and among the Company, Sigma Merger Sub, Inc., a Delaware corporation and direct wholly owned subsidiary of the Company (“Merger Sub”), and Angel Studios Legacy, Inc. (f/k/a Angel Studios, Inc.), a Delaware corporation (“Angel Legacy”).
Pursuant to the terms of the Merger Agreement, a merger was effected in which Merger Sub merged with and into Angel Legacy, the separate corporate existence of Merger Sub ceased and Angel Legacy survived as the surviving company and direct wholly-owned subsidiary of the Company (the “Merger” and, collectively with the other transactions described in the Merger Agreement, the “Business Combination”). On the Closing Date (as defined in the Merger Agreement), and prior to the Effective Time (as defined in the Merger Agreement), the Company changed its name from “Southport Acquisition Corporation” to “Angel Studios, Inc.” Angel Legacy subsequently merged up and into Angel Studios, Inc., with Angel Studios, Inc. as the surviving entity.
Loan and Security Agreement with Warrant Offering
On September 8, 2025, we entered into a Loan and Security Agreement with certain lenders, which provides us with an up to $100.0 million term loan with a delayed draw feature, which is composed of four committed tranches: (i) the first tranche in an aggregate principal amount of $40.0 million, which was funded on the closing date; (ii) the second tranche in an aggregate principal amount equal to $20.0 million, which may be drawn on or prior to June 30, 2026; (iii) the third tranche in an aggregate principal amount equal to $20.0 million, which may be drawn by December 31, 2026 and (iv) the fourth tranche in an aggregate principal amount equal to $20.0 million, which may be drawn by June 30, 2027. The availability of each tranche will be subject to achievement by us of certain conditions, including, without limitation, achievement of a specified minimum annualized recurring revenue and receipt by us of a minimum of net cash proceeds from the sale or issuance of equity. Borrowings under the credit facility will be used to pay off certain of the Company’s existing indebtedness, as well as for general working capital purposes and business operations.
In connection with the credit facility, the Company issued each lender thereunder a warrant to purchase stock to purchase an aggregate amount of 1,462,682 shares of the Company’s Class A common stock with an exercise price per share of $7.29. The Warrants vest and become exercisable in proportion to and in conjunction with the advancement of each tranche under the Credit Facility. The warrants will expire on September 11, 2030.
Asset Purchase Agreement
The Company entered into a Term Sheet with 2521 that sets forth the principal terms and conditions governing the joint venture between the JV Partners, through Giant Slayer Media. The Term Sheet, pursuant to its terms, became binding on October 7, 2025, upon the execution of that certain Asset Purchase Agreement by and between Slingshot and Giant Slayer Media, also dated as of October 7, 2025.
Under the Term Sheet, and by means of the Asset Purchase Agreement, Giant Slayer Media will acquire substantially all of the assets of Slingshot related to the animated feature film, DAVID, the associated works and certain other ancillary rights and obligations.
In addition to the consummation of the transactions contemplated in the Term Sheet, the Asset Purchase Agreement also provided for, upon the closing of the transactions contemplated therein, the revocation by Slingshot of its deemed termination of the distribution agreement between us and Slingshot and the dismissal of the current lawsuit, brought by Slingshot against Angel Studios Licensing, LLC, our affiliate, pursuant to a Confidential Dismissal Agreement and Mutual Release (the “Dismissal Agreement”) effective as of October 7, 2025, by and between Angel Studios Licensing, LLC and Slingshot. The Dismissal Agreement resolved in full the action titled Slingshot USA, LLC v. Angel Studios Licensing, LLC, Case No. 250401064, in the Fourth Judicial District Court, Utah County, State of Utah (“Lawsuit”), and any and all claims arising from or relating to the parties’ prior content distribution agreements concerning DAVID and Young David. Slingshot dismissed the Lawsuit with prejudice on October 8, 2025.
Other
During the nine months ended September 30, 2025, we sold an aggregate of 9,071,042 shares of Class A Common Stock to various purchasers, generating gross proceeds of approximately $47.5 million. The issuances of the Class A Common Stock were made in reliance upon exemptions from registration provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.
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We intend to use the proceeds from the sales of Class A common stock to manage our business and provide working capital for our operations. The proceeds may also be used to pay expenses relating to salaries and other compensation to our officers and employees.
Financial Operations Overview
Revenues
Historically, we have primarily generated revenue from the Angel Guild, theatrical distribution, content licensing and other. See “Revenue” for more information.
Cost of Revenues
Cost of revenues represents the direct costs incurred by us in generating our revenue. These costs include expenses directly associated with the goods or services sold during the reporting period. Components of cost of revenues include licensing royalty expense, hosting, merchandise costs, credit card fees, freight and shipping costs and costs of services provided.
Operating Expenses
Selling and Marketing : Selling and marketing expenses include the promotion of the Angel Guild and increasing memberships, as well as current and future theatrical releases. As we continue to bring on additional content, drive Angel Guild memberships and promote future theatrical releases, this cost is expected to continue to rise.
Research and Development : Research and development expenses consist of the addition of personnel necessary to continue our focus on improving existing products, optimizing existing services and developing new technology to better meet the needs of our customers and partners.
General and Administrative : General and administrative expenses consist of the increased support staff necessary to manage the continued and expected growth of the business, including payroll and related expenses for executive, finance, content acquisition and administrative personnel, as well as recruiting, professional fees and other general corporate expenses.
Legal : Legal expenses include costs incurred in connection with legal proceedings, regulatory matters, compliance obligation, and corporate governance. Legal expenses may fluctuate based on the nature, timing, and complexity of matters encountered by us. While we strive to manage these costs effectively, they may have a material impact on our financial condition depending on the scope of ongoing or anticipated legal matters.
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Results of Operations
The following represents our performance highlights for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024:
For the three months ended September 30,
Change
2025
2024
2025 vs. 2024
Revenues
$
76,542,482
$
20,121,166
$
56,421,316
280
%
Cost of revenues
34,333,955
8,107,950
26,226,005
323
%
Selling and marketing
64,683,558
16,602,045
48,081,513
290
%
General and administrative
10,125,018
6,059,396
4,065,622
67
%
Research and development
4,215,813
3,168,016
1,047,797
33
%
Legal expense
1,275,008
1,328,090
(53,082)
(4)
%
Operating loss
(38,090,870)
(15,144,331)
(22,946,539)
152
%
Net gain on digital assets
2,071,977
862,479
1,209,498
140
%
Interest expense
(3,978,212)
(452,177)
(3,526,035)
780
%
Interest income
1,510,548
754,561
755,987
100
%
Impairment of investments
(125,000)
—
(125,000)
100
%
Loss before income tax benefit
(38,611,557)
(13,979,468)
(24,632,089)
176
%
Income tax benefit
—
(80,099)
80,099
(100)
%
Net loss
$
(38,611,557)
$
(13,899,369)
$
(24,712,188)
178
%
Revenues
The following represents our revenue by type for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024:
For the three months ended September 30,
Change
2025
2024
2025 vs. 2024
Angel Guild
$
59,225,827
$
9,028,572
$
50,197,255
556
%
Theatrical
5,455,476
4,939,612
515,864
10
%
Content licensing
9,013,353
1,947,539
7,065,814
363
%
Merchandise
2,325,526
2,232,592
92,934
4
%
Pay it Forward
156,654
378,628
(221,974)
(59)
%
Theatrical Pay it Forward
—
1,326,039
(1,326,039)
(100)
%
Other
365,646
268,184
97,462
36
%
Total Revenue
$
76,542,482
$
20,121,166
$
56,421,316
280
%
During the three months ended September 30, 2025, compared to the three months ended September 30, 2024, the increase in revenues was largely due to: 1) an increase in Angel Guild revenue by $50.2 million as a result of increased Angel Guild members from 0.3 million to 1.6 million from September 30, 2024 to September 30, 2025, and 2) content licensing revenue, which increased by $7.1 million as a result of larger licensing deals being entered into from our 2025 theatrical releases, compared to smaller deals as a result of smaller theatrical box office releases in 2024. This increase was offset by a decrease in Theatrical Pay it Forward revenue by $1.3 million, as theatrical Pay it Forward receipts were offset by the cost of purchasing and giving away free tickets and no revenue was recognized during the three months ended September 30, 2025.
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Cost of Revenues
The following represents our cost of revenues by type for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024:
For the three months ended September 30,
Change
2025
2024
2025 vs. 2024
Angel Guild
$
8,406,220
$
1,060,009
$
7,346,211
693
%
Theatrical
914,354
570,672
343,682
60
%
Royalties
19,051,179
2,012,241
17,038,938
847
%
Other
5,962,202
4,465,028
1,497,174
34
%
Total Cost of Revenues
$
34,333,955
$
8,107,950
$
26,226,005
323
%
During the three months ended September 30, 2025, cost of revenues was $34.3 million compared to $8.1 million in the same quarter in the prior year. The increase in Angel Guild cost of revenues by $7.3 million was a result of increased memberships and the transaction fees of $5.4 million related to that growth, as well as an increased number of free movie tickets for premium Angel Guild members for Angel theatrical releases of $1.6 million. The increase in royalties of $17.0 million was a result of higher royalties earned by filmmakers.
Selling and Marketing
The following represents our selling and marketing expenses by type for the three months ended September 30, 2025, as compared to the three months ended September 30, 2024:
For the three months ended September 30,
Change
2025
2024
2025 vs. 2024
Angel Guild
$
44,120,750
$
7,485,721
$
36,635,029
489
%
Theatrical
16,698,191
4,919,257
11,778,934
239
%
Other
3,864,617
4,197,067
(332,450)
(8)
%
Total Selling and Marketing
$
64,683,558
$
16,602,045
$
48,081,513
290
%
During the three months ended September 30, 2025, compared to the three months ended September 30, 2024, the increase in selling and marketing expenses was largely due to: 1) An increase in Angel Guild sales and marketing expenses of $36.6 million as a result of the promotion of the Angel Guild in an effort to increase memberships and 2) An increase in Theatrical sales and marketing expenses of $11.8 million as a result of two theatrical box office releases and related spend during the three months ended September 30, 2025. As we continue to bring on additional content, drive Angel Guild memberships and promote future theatrical releases, this cost is expected to fluctuate, but overall remain high and be a significant component of our operating expenses.
Other Operating Expenses
For the three months ended September 30, 2025, higher general and administrative costs of $4.1 million were primarily related to: 1) additional employee costs of $1.2 million during 2025 related to the support staff necessary to manage the continued and expected growth of the business, 2) additional option issuance costs of $1.6 million during 2025 due to an increase in options granted to employees and their related Black-Scholes value on the grant date and 3) additional 3 rd party accounting and auditing services of $0.9 million as a result of the costs incurred from the anticipated Merger with Merger Sub.
For the three months ended September 30, 2025, the increase in research and development costs of $1.0 million primarily related to additional employee costs during 2025 related to the support staff necessary to manage the continued and expected growth of the business.
Other Income and Expense
The increase of gain on digital assets of $1.2 million in 2025 is a result of measuring our digital assets at fair value at the end of each reporting period per Accounting Standards Update (“ASU”) No. 2023-08 and the value of bitcoin increasing during the three months ended September 30, 2025. During the three months ended September 30, 2024, we sold a portion of our digital assets and as such recognized a realized gain of $0.9 million.
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The increase in interest expense of $3.5 million is related to a higher dollar amount of P&A and other notes entered into and outstanding during the three months ended September 30, 2025, compared to the three months ended September 30, 2024, as can be seen on our condensed consolidated statements of cash flows.
The increase in interest income of $0.8 million is the result of higher cash balances during the three months ended September 30, 2025, compared to the three months ended September 30, 2024.
The following represents our performance highlights for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024:
For the nine months ended September 30,
Change
2025
2024
2025 vs. 2024
Revenues
$
211,624,538
$
65,485,798
$
146,138,740
223
%
Cost of revenues
81,100,542
31,339,159
49,761,383
159
%
Selling and marketing
176,719,216
54,893,723
121,825,493
222
%
General and administrative
27,330,996
15,972,632
11,358,364
71
%
Research and development
11,330,981
11,201,952
129,029
1
%
Legal expense
8,375,505
10,037,679
(1,662,174)
(17)
%
Operating loss
(93,232,702)
(57,959,347)
(35,273,355)
61
%
Net gain on digital assets
6,225,200
1,594,889
4,630,311
(550)
%
Interest expense
(8,285,269)
(1,969,247)
(6,316,022)
321
%
Interest income
4,043,439
2,581,062
1,462,377
57
%
Impairment of investments
(625,000)
—
(625,000)
100
%
Loss before income tax benefit
(91,874,332)
(55,752,643)
(36,121,689)
65
%
Income tax benefit
—
(4,483,167)
4,483,167
(100)
%
Net loss
$
(91,874,332)
$
(51,269,476)
$
(40,604,856)
79
%
Revenues
The following represents our revenue by type for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024:
For the nine months ended September 30,
Change
2025
2024
2025 vs. 2024
Angel Guild
$
140,726,967
$
21,267,884
$
119,459,083
562
%
Theatrical
45,763,314
17,816,535
27,946,779
157
%
Content licensing
18,175,430
12,916,008
5,259,422
41
%
Merchandise
4,396,200
5,939,426
(1,543,226)
(26)
%
Pay it Forward
914,746
5,166,860
(4,252,114)
(82)
%
Theatrical Pay it Forward
719,370
1,326,039
(606,669)
(46)
%
Other
928,511
1,053,046
(124,535)
(12)
%
Total Revenue
$
211,624,538
$
65,485,798
$
146,138,740
223
%
During the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, the increase in revenues was largely due to: 1) An increase in Angel Guild revenue by $119.5 million as a result of increased Angel Guild members from 0.3 million to 1.6 million paying Angel Guild members from September 30, 2024 to September 30, 2025, 2) An increase in Theatrical revenue by $27.9 million as a result of more theatrical box office releases in 2025, and 3) An increase in content licensing revenue of $5.3 million as a result of larger licensing deals being entered into from our 2025 theatrical releases, compared to smaller deals as a result of smaller theatrical box office releases in 2024. This increase was offset by a decrease in: 1) Merchandise revenue of $1.5 as a result of focusing less on Merchandise during 2025, and 2) Pay it Forward and Theatrical Pay it Forward revenue of $4.9 million, due to our focus transitioning away from Pay it Forward and focusing more on the Angel Guild.
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Cost of Revenues
The following represents our cost of revenues by type for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024:
For the nine months ended September 30,
Change
2025
2024
2025 vs. 2024
Angel Guild
$
24,456,919
$
2,648,424
$
21,808,495
823
%
Theatrical
4,205,600
1,961,323
2,244,277
114
%
Royalties
38,759,084
15,176,517
23,582,567
155
%
Other
13,678,939
11,552,895
2,126,044
18
%
Total Cost of Revenues
$
81,100,542
$
31,339,159
$
49,761,383
159
%
During the nine months ended September 30, 2025, cost of revenues was $81.1 million compared to $31.3 million for the nine months ended September 30, 2024. The increase in Angel Guild cost of revenues by $21.8 million was a result of increased memberships and the associated transaction fees of $13.1 million related to that growth, as well as an increased number of free movie tickets for premium Angel Guild members for Angel theatrical releases of $6.5 million. The increase in theatrical cost of revenues of $2.2 million was a result of six films being released during the nine months ended September 30, 2025 with only three films being released during the same period 2024. The increase in royalties of $23.6 million was a result of higher royalties earned by filmmakers.
Selling and Marketing
The following represents our selling and marketing expenses by type for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024:
For the nine months ended September 30,
Change
2025
2024
2025 vs. 2024
Angel Guild
$
108,836,272
$
14,967,609
$
93,868,663
627
%
Theatrical
56,283,846
29,925,585
26,358,261
88
%
Other
11,599,098
10,000,529
1,598,569
16
%
Total Selling and Marketing
$
176,719,216
$
54,893,723
$
121,825,493
222
%
During the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, the increase in selling and marketing expenses was largely due to: 1) an increase in Angel Guild sales and marketing expenses of $93.9 million as a result of the promotion of the Angel Guild in an effort to increase memberships and 2) an increase in theatrical sales and marketing expenses of $26.4 million as a result of six box theatrical box office releases in 2025 compared to only three during this same period in 2024. The main driver for the increase in other marketing was additional marketing staff needed to manage the continued and expected growth of the business. As we continue to bring on additional content, drive Angel Guild memberships and promote future theatrical releases, this cost is expected to fluctuate, but overall remain high and be a significant component of our operating expenses.
Other Operating Expenses
For the nine months ended September 30, 2025, higher general and administrative costs of $11.4 million were primarily related to: 1) additional employee costs of $2.4 million during 2025 related to the support staff necessary to manage the continued and expected growth of the business, 2) additional option issuance costs of $4.8 million during 2025 due to an increase in options granted to employees and their related Black-Scholes value on the grant date, 3) additional 3 rd party accounting and auditing services of $2.2 million as a result of the costs incurred from the Business Combination, and 4) additional foreign withholding tax of $0.7 million as a result of increase licensing deals in international territories.
For the nine months ended September 30, 2025, the decrease in legal expense of $1.7 million was largely a result of a decrease in legal costs associated with The Chosen, Inc. (f/k/a The Chosen, LLC) (“The Chosen”) arbitration and estimated liabilities as a result of the arbitration during 2024, which was offset by additional legal costs from the Business Combination. For more information, see “Part II—Other Information, Item 1. Legal Proceedings.”
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Other Income and Expense
The increase in the gain on digital assets of $4.6 million in 2025 is a result of measuring our digital assets at fair value at the end of each reporting period per Accounting Standards Update (“ASU”) No. 2023-08 and the value of bitcoin increasing during the nine months ended September 30, 2025. During the nine months ended September 30, 2024, we sold a portion of our digital assets and as such recognized a realized gain of $1.6 million.
The increase in interest expense of $6.3 million is related to a higher dollar amount of P&A and other notes entered into and outstanding during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, as can be seen on our condensed consolidated statements of cash flows.
The increase in interest income of $1.5 million is the result of higher cash balances during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.
Liquidity and Capital Resources
Operating and Capital Expenditure Requirements
As of
Change
September 30, 2025
December 31, 2024
2025 vs. 2024
Cash and cash equivalents
$
63,327,263
$
7,211,826
$
56,115,437
778
%
Accrued settlement costs
—
4,371,971
(4,371,971)
(100)
%
Loan guarantee payable
—
9,112,500
(9,112,500)
(100)
%
Notes payable
50,733,780
11,455,940
39,277,840
343
%
Cash and cash equivalents increased by $56.1 million in the nine months ended September 30, 2025, primarily due to cash used in operating activities of $58.7 million and cash used in investing activities of $15.6 million, offset by cash provided by financing activities of $130.4 million.
To date, we have funded a significant portion of our operations through private and public offerings of our common stock and raise of money through notes payable. As of September 30, 2025, we had cash on hand of approximately $63.3 million. Notes payable currently consists of 1) P&A notes in the amount of $9.5 million with amounts due based on timing of certain cash proceeds, but which amounts are expected to be paid within the next twelve months, 2) financing of a convertible note in the amount of $5.3, which will be come due, if not converted into equity beforehand, by May 1, 2027, and 3) a financing facility in the amount of $100.0 million, of which $40.0 million is currently drawn, with interest is payable monthly and principal installments starting in November 2027 and a final maturity of October 1, 2030. As we continue to grow, we expect to raise additional funds to cover any shortfall in operating needs. We project that our existing capital resources, including cash, accounts receivables, licensing receivables, recurring revenues from our membership base, and the ability to sell our digital assets if necessary, will be sufficient to meet our operating requirements for at least the next twelve months.
Evaluation of Going Concern
The condensed consolidated financial statements have been prepared assuming we will continue to operate as a going concern within one year from the date of issuance of these condensed consolidated financial statements. For the nine months ended September 30, 2025, we incurred a net loss of approximately $91.9 million and used cash in operating activities of approximately $58.7 million. We have an accumulated deficit of approximately $175.8 million as of September 30, 2025. A significant portion of the net loss for the period ended September 30, 2025 was due to the continued marketing expenses to increase Angel Guild memberships and support our theatrical releases. We anticipate that as we continue to grow the business, we will incur operating losses and use cash in operating activities during 2025 and into 2026.
We are working to increase revenues through the growth of Angel Guild memberships, our pipeline of theatrical releases through 2026 and additional streaming agreements. We finance marketing activities for theatrical releases through two primary methods: 1) Regulation A offerings that are tailored to raise money for the print and advertising costs (“P&A”) for specific theatrical releases and 2) P&A loan agreements with individual and institutional investors. During the nine months ended September 30, 2025, we raised $13.2 million from Regulation A offerings and received $32.0 million from P&A loans, both of which were used for P&A in various theatrical releases
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during the year. During the year ended 2024, we raised $0.0 million from Regulation A offerings and received $23.3 million from P&A loans. During the nine months ended September 30, 2025, we paid $36.5 million for the repayments of P&A loans, including interest and paid $15.8 million as a redemption of shares for Regulation A investors, from the proceeds collected from the theatrical releases and other revenues earned. During the year ended 2024, we paid $17.9 million for the repayments of P&A loans, including interest and paid $0.0 million as a redemption of shares for Regulation A investors, from the proceeds collected from the theatrical releases and other revenues earned.
Additionally, we have raised capital through the sale of our common stock, generating approximately $102.8 million of cash during the nine months ended September 30, 2025 and we have grown from 0.6 million Angel Guild members, as of December 31, 2024, to 1.6 million Angel Guild members, as of September 30, 2025, generating approximately $170.6 million in cash from Angel Guild paid memberships during the nine months ended September 30, 2025. Management believes it will be able to continue to fund operating capital shortfalls for the next year through the issuance of debt and our common stock. While there is no assurance of success, management remains committed to its plans to grow revenues and manage expenses. If these efforts are not successful, or if securing debt and selling our common stock on acceptable terms proves challenging, we can reduce our spend on marketing of the Angel Guild, which could materially affect our growth, our financial condition and/or our ability to continue as a going concern.
Discussion of Operating, Investing, Financing Cash Flows
Operating Activities. Cash flows used in operating activities for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, were as follows:
For the nine months ended September 30,
2025
2024
Net Change
Net cash and cash equivalents used in operating activities
$
(58,654,497)
$
(39,578,731)
$
(19,075,766)
Cash flows used in operating activities for the nine months ended September 30, 2025 was $58.7 million compared to cash flows used in operating activities of $39.6 million for the nine months ended September 30, 2024. The difference of $19.1 million is largely due to the increase in net loss for the period of $40.6 million, an increase in accounts receivable resulting in less proceeds received, a decrease in accounts payable and accrued liabilities resulting in greater distributions, partially offset by increases in deferred revenue and accrued licensing royalties.
Investing Activities. Cash flows provided by investing activities for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, were as follows:
For the nine months ended September 30,
2025
2024
Net Change
Purchases of property and equipment
$
(375,820)
$
(271,927)
$
(103,893)
Issuance of notes receivable
(986,387)
(1,455,279)
468,892
Collections of notes receivable
520,340
1,820,313
(1,299,973)
Purchase of digital assets
—
(48,515)
48,515
Sale of digital assets
99,118
2,182,381
(2,083,263)
Purchase of intangible assets
(3,006,012)
—
(3,006,012)
Purchase of content
(6,320,963)
(503,296)
(5,817,667)
Investments in affiliates
(5,511,002)
(1,033,516)
(4,477,486)
Net cash and cash equivalents provided by (used in) investing activities
$
(15,580,726)
$
690,161
$
(16,270,887)
Cash flows used in investing activities for the nine months ended September 30, 2025 was $15.6 million compared to cash flows provided by investing activities of $0.7 million for the nine months ended September 30, 2024. The increase of cash flows used was largely due to the increase of our purchase of content of $5.8 million, the purchase of prepaid content rights of $3.0 million, increased cash spend for investments in affiliates of $4.5 million, as well as a decrease in the sale of digital assets of $2.1 million. Both periods saw moderate activity in issuing and collecting repayments on notes receivable, with more collections during 2024 being the result of several of our filmmakers paying us back these notes receivables during this period (see “ Notes to the Condensed Consolidated Financial Statements—Notes Receivable ).
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Financing Activities. Cash flows provided by financing activities for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024, were as follows:
For the nine months ended September 30,
2025
2024
Net Change
Repayment of notes payable
$
(63,450,746)
$
(18,374,314)
$
(45,076,432)
Repayment of loan guarantee
(10,175,490)
—
(10,175,490)
Receipt of notes payable
106,166,018
17,043,019
89,122,999
Repayment of accrued settlement costs
(207,563)
(188,042)
(19,521)
Exercise of stock options
308,085
457,820
(149,735)
Issuance of common stock
102,787,036
26,901,019
75,886,017
Contribution of equity in noncontrolling interests
13,730,922
—
13,730,922
Redemption of equity in noncontrolling interests
(15,753,060)
—
(15,753,060)
Fees related to issuance of common stock and minority interest
(534,271)
(206,613)
(327,658)
Repurchase of common stock
(132,940)
(600,079)
467,139
Equity financing fees
(544,585)
—
(544,585)
Debt financing fees
(1,842,746)
—
(1,842,746)
Net cash and cash equivalents provided by financing activities
$
130,350,660
$
25,032,810
$
105,317,850
Cash flows provided by financing activities for the nine months ended September 30, 2025 were $130.4 million compared to cash flows provided by financing activities of $25.0 million for the nine months ended September 30, 2024. During the nine months ended September 30, 2025, we raised $55.0 million from a Regulation A offering, $47.5 million with issuance of our common stock, $13.7 million in equity from noncontrolling interests, and $106.2 million in notes payable. These were offset by the repayment of $36.5 million for P&A related notes, the repayment of $27.0 million of notes payable, a $15.8 million redemption paid for equity in noncontrolling interests and a $10.2 million payment related to a loan guarantee. During the nine months ended September 30, 2024, we received $17.0 million for P&A related notes, $26.9 million with the issuance of common stock, and repaid $18.6 million for P&A related notes.
Trends and Key Factors Affecting Our Performance
Angel Guild
We launched the Angel Guild in the second quarter of 2023. Since that time the Angel Guild grew to approximately 0.6 million Angel Guild members as of December 31, 2024, accounting for 32.5% of our total revenue in 2024. The Angel Guild grew to approximately 1.6 million Angel Guild members as of September 30, 2025, accounting for 66.5% of our total revenue in 2025. We attribute the Angel Guild growth to many factors including, but not limited to, new and exclusive content being added regularly to the Angel Guild, marketing optimization and upselling to the Angel App user base. For the nine months ended September 30, 2025, the trailing twelve months average revenue per member is $13.70 per month.
Angel Mobile and TV App Installs
We launched the Angel Mobile App in the fourth quarter of 2021 and the Angel TV App in the first quarter of 2022 (both, individually and collectively, an “Angel App”). Since that time, Angel App installs across all platforms grew to 59,877,979 installs as of December 31, 2024. As of September 30, 2025, the Angel app has a total of 100,245,157 installs. We attribute the Angel App growth to many factors including, but not limited to, new and exclusive content being added regularly to the Angel App and marketing optimization.
Critical Accounting Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reported periods. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and which require a company to make its most difficult and subjective judgments. Based on this definition, we have identified the critical accounting policies and judgments addressed below. Estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the
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basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Long-lived Assets
Intangible assets with finite lives and property, plant and equipment are amortized or depreciated over their estimated useful life on a straight-line basis. We monitor conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization or depreciation period. We test these assets for potential impairment whenever our management concludes events or changes in circumstances indicate that the carrying amount may not be recoverable. The original estimate of an asset’s useful life and the impact of an event or circumstance on either an asset’s useful life or carrying value involve significant judgment regarding estimates of the future cash flows associated with each asset.
Income Taxes
We account for income taxes under the liability method, whereby deferred tax asset or liability account balances are determined based on the difference between the financial statement and the tax bases of assets and liabilities using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets when we expect the amount of tax benefit to be realized is less than the carrying value of the deferred tax asset.
Accounting for income taxes involves uncertainty and judgment on how to interpret and apply tax laws and regulations within our annual tax filings. Such uncertainties from time to time may result in a tax position that may be challenged and overturned by a tax authority in the future which could result in additional tax liability, interest charges and possibly penalties.
Stock-Based Compensation
We account for stock-based compensation by measuring and recognizing as compensation expense the fair value of all share-based payment awards made to employees based on estimated grant date fair values. The determination of fair value involves a number of significant estimates. We use the Black-Scholes option pricing model or the Monte Carlo pricing model to estimate the value of employee stock options which require a number of assumptions to determine the model inputs. These include the expected volatility of our stock and employee exercise behavior, which are based on historical data as well as expectations of future developments over the term of the option. As stock-based compensation expense is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Management’s estimate of forfeitures is based on historical experience but actual forfeitures could differ materially as a result of voluntary employee actions and involuntary actions which would result in significant change in our stock-based compensation expense amounts in the future. The fair value of the Common Stock underlying the employee stock options is estimated using third party valuations, including market, income, and cost valuation approaches.
Other Estimates
See “Note 1” to the accompanying condensed consolidated financial statements included herein for further discussion.
Off-Balance Sheet Arrangements
As of September 30, 2025, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.