Trump Media & Technology Group Corp. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations References in this quarterly report on Form 10-Q (this “ Quarterly Report ”) to “TMTG,” “we,” “us” or the “Company” refer to Trump Media & Technology Group Corp. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. All amounts are in thousands, except per share data. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”) 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 including, without limitation, statements under “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. When used in this Quarterly Report, words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “aim,” “plan,” “may,” “will,” “continue,” “should,” “seek” and variations and similar words and expressions identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to management. 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. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 14, 2025 (the “Annual Report”), and other documents filed with the SEC, which describe additional factors that could adversely affect our business, financial condition, or results of operations. 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 ended March 31, 2025 with $758,981.6 of cash, cash equivalents, and short-term investments, as well as $9,803.5 of debt (excluding lease liabilities) arising from the transaction with WorldConnect Technologies, LLC (“WCT”). Truth Social TMTG started from scratch intending to open up the Internet and give the American people their voices back. At the time, with no accountability, unknown censors were squelching social media posts that contradicted the consensus of the corporate media—which, as always, was dutifully acting as a robotic mouthpiece for left-wing disinformation. This had already been going on, through shadow bans and other less overt forms of online policing, for some time. But Big Tech eventually lost all restraint, ruthlessly banning dissidents’ accounts for expressing any thought that fell within a rapidly expanding set of unauthorized and unutterable viewpoints. The victims, of course, included the then-sitting President of the United States, Donald Trump. 18 Table of Contents TMTG thus developed and launched the Truth Social platform, restoring free speech to millions of Americans who had been suffocated by Big Tech. Anchored by Donald Trump’s restored social media account, Truth Social was stood up as we’d envisioned it—a free-speech haven where everyone, regardless of their political viewpoint, could speak their mind without some faceless tech bureaucrat judging the acceptability of their speech. Truth Social was generally made available in the first quarter of 2022. TMTG prides itself on operating its platform, to the best of its ability, without relying on Big Tech companies. Partnering with mission-aligned technology firms, we fully launched Truth Social for iOS in April 2022. We debuted the Truth Social web application in May 2022, and the Truth Social Android App became available in the Samsung Galaxy and Google Play stores in October 2022. We introduced direct messaging to all versions of Truth Social in 2022, released a “Groups” feature for users in May 2023, and announced the general availability of Truth Social internationally in June 2023. In March 2025, TMTG announced updates and enhancements to the “Groups” feature. TMTG has also connected the Truth Social platform to its Truth+ streaming service, and added additional features including “for you” feed, a “discover” tab to find trending content, and a carousel to recommend other accounts. To foster a flourishing digital public forum, TMTG seeks to prevent illegal and other prohibited content from contaminating its platform. In accordance with Truth Social’s terms of service, illegal and prohibited content includes, but is not limited to a) sexual content or language; b) content that includes sexual activity, sexual intercourse or any type of sexual act; c) any content that portrays or suggest explicit sexual acts or sexually suggestive positions or poses; d) sexually suggestive (explicit or vague) statements, texts or phrases; or e) content in which sexual acts are requested or offered, including pornography, prostitution, sugar babies, sex trafficking or sexual fetishes. Using human moderators and an artificial intelligence vendor known as HIVE, Truth Social has developed what TMTG believes is a robust, fair, and viewpoint-neutral moderation system and that our moderation practices are consistent with, and indeed help facilitate, TMTG’s objective of maintaining “a public, real-time platform where any user can create content, follow other users, and engage in an open and honest global conversation without fear of being censored or cancelled due to their political viewpoints.” Truth+ Social media users were not the only casualties of the woke crackdown on free speech—dissident TV programming and news broadcasts were being suppressed by entertainment conglomerates and cable providers. Thus, after reopening the Internet to free speech, TMTG decided to create a TV streaming service to give Americans an alternative to woke Hollywood entertainment and biased news broadcasts, and to provide a safe home for content and newscasters that had been cancelled, were at risk of cancellation, or were being kept off the air for having the wrong perspectives. On April 16, 2024, TMTG announced that, after nine months of testing on its Web and iOS platforms, the Company had completed the research and development phase of a new live TV streaming platform and expects to begin scaling up its own content delivery network (“CDN”) branded as Truth+. We announced plans to roll out its streaming content in three phases: Phase 1: Introduce Truth Social’s CDN for streaming live TV to the Truth Social app for Android, iOS, and Web. On August 7, 2024, TMTG announced that TV streaming via Truth Social had become available via all three modalities. Phase 2: Release stand-alone Truth Social over-the-top streaming apps for phones, tablets, and other devices. As of October 21, 2024, TMTG had announced that Truth+ streaming had been released as a standalone product on Android, iOS, and Web. 19 Table of Contents Phase 3: Release Truth Social streaming apps for connected TVs. As of October 23, 2024, TMTG had announced that Truth+ streaming had been released on Apple TV, Android TV, and Amazon Fire TV. On March 19, 2025, TMTG announced the release of Truth+ streaming on Roku. On April 9, 2025, TMTG announced that the Truth+ mobile and streaming TV applications had been made available in Canada and Mexico, as well as the United States. Since the initial launch of Truth+, TMTG has steadily added both on-demand content and live 24-hour news streams. TMTG is actively assessing various means of monetizing the Truth+ platform, including through advertising and a subscription package with premium content. Truth.Fi Truth.Fi is TMTG’s newest brand, incorporating financial services and financial technology. By expanding into this realm, we aim to serve millions of investors in America and around the world who believe in the greatness of the American economy and want to invest in superior companies while avoiding the giant, woke investment funds and politically motivated debanking problems. On January 29, 2025, TMTG announced a financial technology strategy, including the investment of up to $250 million to be custodied by Charles Schwab. In addition to traditional investment vehicles, these funds may be allocated to customized separately managed accounts (“SMAs”); customized exchange-traded funds and/or exchange-traded products (collectively, “ETFs”); and Bitcoin and similar cryptocurrencies or crypto-related securities. On April 15, 2025, TMTG and its partners announced the launch of SMAs. On April 22, 2025, TMTG and its partners announced an agreement to launch a series of ETFs, which are expected to comprise digital assets as well as securities. Company Growth Strategy While continuing to develop, refine, and expand its existing products and services, TMTG is looking to further diversify into new sectors. A key part of its strategy is to form partnerships with great companies that align with TMTG’s mission, and to expand into new realms through mergers and acquisitions. We are strongly focusing on potential merger-and-acquisition opportunities with top-quality companies, and we hope to find “crown jewel” assets in the near future. TMTG envisions ultimately evolving into a larger holding company for numerous great products and services, compatible with America First principles, spanning multiple key sectors of the economy. Consolidated Results of Operations The following table sets forth our consolidated financial results for the periods presented and the dollar and percentage changes between those periods. The period-to-period comparison of financial results is not necessarily indicative of future results. (in thousands) For the three months March 31, 2025 For the three months March 31, 2024 Variance, $ Variance, % Revenue $ 821.2 $ 770.5 50.7 7 % Cost of revenue 336.7 93.4 243.3 260 % Research and development 12,564.9 33,158.6 (20,593.7 ) (62 %) Sales and marketing 497.4 1,070.4 (573.0 ) (54 %) General and administration 25,178.0 64,795.1 (39,617.1 ) (61 %) Depreciation and amortization 1,779.2 5.6 1,773.6 31,671 % ​ Total operating costs and expenses 40,356.2 99,123.1 (58,766.9 ) (59 %) Loss from operations (39,535.0 ) (98,352.6 ) 58,817.6 (60 %) Other income/(expense): Interest income 7,995.2 28.8 7,966.4 27,661 % Interest expense (186.8 ) (2,817.6 ) 2,630.8 (93 %) Change in fair value of derivative liabilities - (225,916.0 ) 225,916.0 (100 %) Loss on the extinguishment of debt - (542.3 ) 542.3 (100 %) Loss before income taxes (31,726.6 ) (327,599.7 ) 295,873.1 (90 %) 20 Table of Contents Revenues Revenues increased $50.7, or 7%, to $821.2 for the three months ended March 31, 2025 compared to revenue of $770.5 for the three months ended March 31, 2024. The increase was primarily attributable to an improvement in advertising economics between the relevant periods. Additionally, revenue has varied as we selectively test a nascent advertising initiative on our Truth Social platform. Cost of revenue Cost of revenue increased $243.3, or 260%, to $336.7 for the three months ended March 31, 2025 compared to $93.4 for the three months ended March 31, 2024. The increase was primarily due to content license and data center lease costs that support our burgeoning Truth+ platform. Research and development expense Research and development expense decreased $20,593.7, or 62%, to $12,564.9 for the three months ended March 31, 2025 compared to $33,158.6 for the three months ended March 31, 2024. The decrease was primarily driven by lower stock-based compensation expense of $7,561.0 in the first quarter of 2025 compared to $30,142.5 of stock-based compensation expense recorded in the first quarter of 2024. The 2024 charge related to the issuance of convertible notes to certain vendors engaged in the development of our live TV streaming platform, Truth+. The decrease in stock-based compensation expense was marginally offset by higher year-over-year consulting, software, and server costs related to the launch of Truth+. Sales and marketing expense Sales and marketing expense decreased $573.0, or 54%, to $497.4 for the three months ended March 31, 2025 compared to $1,070.4 for the three months ended March 31, 2024. The decrease was primarily driven by a $600.0 bonus paid to an entity owned by a former director of and consultant to Private TMTG during the first quarter of 2024. The decrease was marginally offset by an increase in the volume of marketing in the first quarter of 2025 compared to 2024. General and administration expense General and administration expense decreased $39,617.1, or 61%, to $25,178.0 for the three months ended March 31, 2025 compared to $64,795.1 for the three months ended March 31, 2024. The decrease was primarily due to lower stock-based compensation awards of $10,290.7 during the first quarter of 2025, compared to $59,975.5 of cash and stock-based compensation awards to employees and vendors in connection with the merger transaction recorded in the first quarter of 2024. These savings were partially offset by higher fees for legal and other professional services. 21 Table of Contents Depreciation and amortization Depreciation and amortization expense increased $1,773.6, or 31,671%, to $1,779.2 for the three months ended March 31, 2025 compared to $5.6 for the three months ended March 31, 2024. The increase in depreciation and amortization expense was due to the acquisition of software and hardware utilized to place our CDN into service as part of our launch of streaming video through Truth+. Interest income Interest income increased $7,966.4, or 27,661%, to $7,995.2 for the three months ended March 31, 2025 compared to $28.8 for the three months ended March 31, 2024. The increase was due to higher cash, cash equivalents, and short-term investment balances and interest earned for the full quarter in 2025 on cash holdings in a money market account and interest earned through repurchase agreements secured by U.S. treasury securities. Interest earned during the first quarter of 2024 only relates to the period from March 25, 2024 (the merger date) to quarter end as TMTG did not have investable cash prior to the merger date. Interest expense Interest expense decreased $2,630.8 or 93%, to $186.8 for the three months ended March 31, 2025 compared to $2,817.6 for the three months ended March 31, 2024. The decrease was primarily due to the conversion of Private TMTG Convertible Notes to common stock, thus no longer accruing or accreting interest as compared for the three months ended March 31, 2024. Interest expense for the three months ended March 31, 2025 is attributable to the accreted interest on the loan assumed as a result of the WCT acquisition. Change in the fair value of derivative liabilities The loss from the change in the fair value of the derivative liabilities of the Private TMTG Convertible Notes decreased $225,916.0, or 100%, to $0.0 for the three months ended March 31, 2025, compared to $225,916.0 for the three months ended March 31, 2024. All Private TMTG Convertible Notes were automatically converted into shares of our common stock immediately prior to Closing of the Merger, and pursuant to ASC 815, the derivative liabilities were revalued immediately prior to the conversion of the Private TMTG Convertible Notes on March 25, 2024, when our closing share price was $49.95 per share. The substantial increase in the value of our common stock when combined with the certainty of our execution of the Merger were primarily responsible for the increase in the change in fair value of the derivative liabilities. The increase in the fair value of the derivative liabilities was a non-cash expense and the issuance of Private TMTG common stock upon conversion of the Private TMTG Convertible Notes extinguished the derivative liabilities immediately prior to the Closing. Therefore, there was no derivative liability recorded as of March 31, 2025, and there will no longer be future earnings adjustments pertaining to the Private TMTG Convertible Notes derivative liabilities. Income Tax Expense TMTG did not record an income tax benefit for the three months ended March 31, 2025 and 2024 as no net credit was recognized due to the uncertainty of realizing future tax benefits emanating from the NOL carryforwards and other deferred tax assets. TMTG has established a full valuation allowance to offset its net deferred tax assets due to these uncertainties. Liquidity and Capital Resources Overview Historically, as a private company, we financed operations primarily through cash proceeds from the issuance of Private TMTG Convertible Notes. During 2024, our capitalization was significantly enhanced through receipt of proceeds from the Business Combination, the conversion of warrants, and the issuance of common stock described in detail in the section below titled, “Standby Equity Purchase Agreement.” As a result, we ended March 31, 2025 with $758,981.6 of cash, cash equivalents, and short-term investments and just $9,803.5 of debt (excluding lease liabilities). Cash and cash equivalents consist of interest-bearing deposits held at financial institutions. Cash deposits are held at major financial institutions and are subject to credit risk to the extent those balances exceed applicable Federal Deposit Insurance Corporation (FDIC) limitations. Short-term investments consist of repurchase agreements in which we loan our cash over 1 to 3 days to a seller in exchange for interest earned on debt securities collateralizing the loan. The seller retains a beneficial interest in the securities serving as collateral. 22 Table of Contents Our primary short-term requirements for liquidity and capital are to fund general working capital and to invest in our strategic growth initiatives. We currently seek to (1) grow our initial product, Truth Social; (2) increase additional product offerings and services, including through further development of our streaming technology platform, Truth+; and (3) pursue strategic acquisitions and/or partnerships. We intend to fund these activities through a combination of deploying cash on hand, generating advertising, subscription, and fee-based revenues, issuing equity, issuing debt, and/or selling stock pursuant to that certain Standby Equity Purchase Agreement dated July 3, 2024. We anticipate that the current cash and cash equivalents on hand will be sufficient to fund current operations for the at least the next 12 months; however, we cannot guarantee that we will not be required to obtain additional financing, or that additional financing, if needed, will be available on terms acceptable to us, or at all. In addition, although there are no other present binding understandings, commitments, or agreements with respect to any acquisition of other businesses, products, or technologies, we will, from time to time, evaluate acquisitions of other businesses, products, and technologies. If we are unable to raise additional equity or debt financing, as and when needed, we could be forced to forego such acquisitions or significantly curtail our operations. Standby Equity Purchase Agreement On July 3, 2024, we entered into the Standby Equity Purchase Agreement (the “SEPA”), pursuant to which we shall have the right, but not the obligation to sell up to $2,500,000.0 of our common stock, subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA. The per share subscription price is 97.25% of the Market Price during a one or three-day pricing period elected by us. The “Market Price” is defined in the SEPA as the lowest daily volume weighted average price (“VWAP”) during the one trading day, in the case of a one-day pricing period or of the three consecutive trading days, in the case of a three-day pricing period. There is no upper limit on the subscription price per share that could be paid for the shares. No shares of common stock were sold pursuant to the terms of the SEPA during the three months ended March 31, 2025. As of March 31, 2025, we have sold a cumulative total of 20,330,365 shares of our common stock for prices between $14.31 and $36.98 per share, pursuant to the terms of the SEPA. Proceeds of these equity sales under the terms of the SEPA were $449,874.6 (net of $513.5 of deferred offering costs). Cash Flows The following table shows our cash flows for the stated periods: (in thousands) For the three months ended March 31, 2025 For the three months ended March 31, 2024 Variance Net cash used in operating activities $ (9,737.8 ) $ (9,316.0 ) $ (421.8 ) Net cash used in investing activities (6,310.1 ) - (6,310.1 ) Net cash (used in)/provided by financing activities $ (8,060.8 ) $ 280,472.5 $ (288,533.3 ) Net Cash Used in Operating Activities Net cash used in operating activities for the three months ended March 31, 2025 was $9,737.8, $421.8 higher than $9,316.0 used in operating activities during the three months ended March 31, 2024. The modest increase in cash used in operating activities was primarily driven by higher fees for legal and other professional services, which were partially offset by higher interest income. 23 Table of Contents Net Cash Used in Investing Activities Net cash used in investing activities for the three months ended March 31, 2025 was $6,310.1 compared to $0.0 used in investing activities during the three months ended March 31, 2024. The increase was primarily due to $6,306.9 of cash outflows to short-term investments. Net Cash (Used in)/ Provided by Financing Activities Net cash used in financing activities for the three months ended March 31, 2025 was $8,060.8 compared to $280,472.5 provided by financing activities for the three months ended March 31, 2024. The cash used in the first quarter of 2025 of $8,060.8 mainly comprise the repurchase of common stock of $8,250.2, offset by $189.4 of net proceeds from the exercise of warrants. During the first quarter of 2024, the cash provided from financing activities comprised cash proceeds of $233,017.5 from the merger and $47,455.0 from the issuance of convertible notes. Off-Balance Sheet Arrangements There have been no material changes in our off-balance sheet arrangements as discussed in our Annual Report. Critical Accounting Policies and Significant Management Estimates We prepare our financial statements in accordance with GAAP. The preparation of financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, as well as the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management team. We refer to estimates, assumptions and judgments of this type as our critical accounting policies and estimates, which we discussed in our Annual Report. We review our critical accounting policies and estimates with the audit committee of our board of directors on an annual basis. There have been no material changes in our critical accounting policies from those disclosed in our Annual Report. Recent Accounting Pronouncements For information regarding recent accounting pronouncements, see Note 2 to our unaudited condensed consolidated financial statements.