What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2026-03-31 compared with 2025-03-28 · 366 added, 290 removed, 655 unchanged (50% of the section changed)

8 unchanged sentences

Consolidated Statements of Operations

Consolidated Statements of Changes in Stockholders’ (Deficit) Equity

Consolidated Statements of Changes in Stockholders’ Deficit

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Direct Digital Holdings, Inc.

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in stockholders’ (deficit) equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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Intangible assets, net 7,852 9,730

Deferred tax asset, net — 6,132

Operating lease right-of-use assets 702 832

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Accrued liabilities 2,164 1,257

Accrued liabilities - related party 3,663 —

Liability related to tax receivable agreement, current portion 41 41

Current maturities of long-term debt — 3,700

Current maturities of long-term debt - related party 12,003 —

Deferred revenues 513 507

Operating lease liabilities, current portion 221 188

Income taxes payable — 34

Total current liabilities 26,425 13,350

Long-term debt, net of current portion, deferred financing cost and debt discount 146 31,603

Liability related to tax receivable agreement, net of current portion — 5,201

Operating lease liabilities, net of current portion 608 783

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STOCKHOLDERS’ DEFICIT

Class A Common Stock, $ 0.001 par value per share, 160,000,000 shares authorized, 5,450,554 and 3,478,776 shares issued and outstanding, respectively

Class B Common Stock, $ 0.001 par value per share, 20,000,000 shares authorized, 10,868,000 shares issued and outstanding

Series A Convertible Preferred Stock, $ 0.001 par value per share, 10,000,000 shares authorized, 27,077 and 0 shares issued and outstanding, respectively

Class A Common Stock, $ 0.001 par value per share, 760,000,000 and 160,000,000 shares authorized, respectively, 1,324,307 and 99,100 shares issued and outstanding, respectively

Class B Common Stock, $ 0.001 par value per share, 20,000,000 shares authorized, 168,645 and 197,600 shares issued and outstanding

Additional paid-in capital 25,811 3,786

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General and administrative 10,662 14,222

Other expense — 8,830

Total operating expenses 25,174 30,624

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Other income 77 199

Revaluation of tax receivable agreement liability — 331

Loss on early termination of line of credit — ( 300 )

Expenses and commitment shares for Equity Reserve Facility ( 198 ) ( 532 )

Loss on settlement of accounts payable ( 267 ) —

Loss on debt extinguishment ( 3,769 ) —

Loss on Exit Fee ( 3,608 ) —

Derecognition of tax receivable agreement liability — 5,201

Commitment shares and expenses for Equity Reserve Facility ( 532 ) —

Interest expense ( 5,410 ) ( 4,378 )

Interest expense and amortization of deferred financing cost and debt discount (premium), net ( 5,203 ) ( 5,410 )

Total other expense, net ( 12,968 ) ( 542 )

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Weighted-average number of shares of common stock outstanding:

Basic 3,758 2,988

Diluted 308 68

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(in thousands except share data)

Common Stock Accumulated

Preferred Stock Common Stock Accumulated

Deficit Noncontrolling

Interest Stockholders’ (Deficit)

Class A Class B

Units Amount Units Amount APIC

Series A Convertible Class A Class B

Units Amount Units Amount Units Amount APIC

Balance, January 1, 2024 — $ — 63,250 $ — 197,600 $ — $ 3,081 $ ( 2,538 ) $ ( 5,962 ) $ ( 5,419 )

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Stock options exercised — — 228 — — — 92 — — 92

Conversion of Class B to Class A Common Stock 410,000 — ( 410,000 ) — 145 — ( 145 ) —

Acquisition and redemption of warrants, including expenses and related items — — — — ( 3,540 ) — — ( 3,540 )

Additional paid-in capital related to tax receivable agreement — — — — 250 — — 250

Distributions to holders of LLC Units — — — — — — ( 1,737 ) ( 1,737 )

Issuance of stock in lieu of cash bonus, net of tax withholdings — — 1,267 — — — 906 — — 906

Commitment shares issued in connection with the Equity Reserve Facility — — 1,141 — — — 150 — — 150

Issuance pursuant to the Equity Reserve Facility — — 28,727 — — — 3,008 — — 3,008

Net loss — — — — — — — ( 6,236 ) ( 13,671 ) ( 19,907 )

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Issuance related to vesting of restricted stock units, net of tax withholdings — — 4,282 — — — — — — —

Warrants exercised 39,101 — — — 215 — — 215

Stock options exercised 12,557 — — — 92 — — 92

Issuance of stock in lieu of cash bonus, net of tax withholdings 69,677 — — — 906 — — 906

Commitment shares issued in connection with the Equity Reserve Facility 62,762 — — — 150 — — 150

Issuance pursuant to the Equity Reserve Facility — — 433,806 — — — 7,316 — — 7,316

Exchange of Class B to Class A Common Stock — — 28,955 — ( 28,955 ) — ( 1,955 ) — 1,955 —

Issuance of Series A Convertible Preferred Shares 35,000 — — — — — 30,748 — — 30,748

Exchange of Series A Convertible Preferred Shares for Class A Common Stock ( 7,923 ) — 545,455 1 — — ( 1 ) — — —

Commitment shares issued in connection with the Equity Reserve Facility — — 1,817 — — — 10 — — 10

Settlement of accounts payable through issuance of common stock including commitment shares — — 210,892 — — — 941 — — 941

Preferred dividends accrued — — — — — — ( 55 ) — — ( 55 )

Net loss — — — — — — — ( 18,946 ) ( 8,777 ) ( 27,723 )

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For the Year Ended December 31,

Cash Flows (Used In) Provided By Operating Activities:

Cash Flows Used In Operating Activities:

Net loss $ ( 27,723 ) $ ( 19,907 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Amortization of deferred financing cost and debt discount 1,092 615

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of deferred financing cost and debt discount (premium), net 3,162 1,092

Amortization of intangible assets 1,879 1,954

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Derecognition of tax receivable agreement liability — ( 5,201 )

Revaluation of tax receivable agreement liability — ( 331 )

Loss on early termination of line of credit — 300

Loss on debt extinguishment 3,769 —

Loss on Exit Fee 3,608 —

Loss on settlement of accounts payable 267 —

Interest paid in kind 1,100 —

Commitment shares and expenses for Equity Reserve Facility — 532

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Operating lease liability ( 193 ) ( 127 )

Net cash (used in) provided by operating activities ( 8,648 ) 2,558

Net cash used in operating activities ( 8,907 ) ( 8,648 )

Cash Flows Used In Investing Activities:

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Net cash used in investing activities ( 87 ) ( 17 )

Cash Flows Provided by (Used In) Financing Activities:

Cash Flows Provided by Financing Activities:

Proceeds from note payable 3,804 4,000

Payments on term loan — ( 373 )

Proceeds from lines of credit 6,700 5,000

Payments on lines of credit ( 6,000 ) ( 2,000 )

Proceeds from line of credit — 6,700

Payments on line of credit ( 3,700 ) ( 6,000 )

Payment of expenses for Equity Reserve Facility ( 198 ) ( 382 )

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Proceeds from issuance of Class A Common Stock 8,688 1,646

Acquisition and redemption of warrants, including expenses — ( 3,540 )

Payments on financed insurance premiums ( 317 ) —

Payment of tax related to shares withheld upon vesting — ( 878 )

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Proceeds from warrants exercised — 215

Distributions to holders of LLC Units — ( 3,185 )

Net cash provided by (used in) financing activities 4,994 ( 1,311 )

Net (decrease) increase in cash and cash equivalents ( 3,671 ) 1,069

Net cash provided by financing activities 8,277 4,994

Net decrease in cash and cash equivalents ( 717 ) ( 3,671 )

Cash and cash equivalents, beginning of the period 1,445 5,116

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Non-cash Activities:

Common stock issued for subscription receivable $ 1,362 $ —

Conversion of term loan into preferred stock net of premium $ 30,748 $ —

Accrued term loan amendment closing fees $ — $ 3,000

Settlement of accounts payable through issuance of common stock $ 941 $ —

Financed insurance premiums $ 291 $ 129

Non-cash funding of debt issuance costs $ 63 $ —

Accrued dividends $ 55 $ —

Funding of interest reserve through debt $ — $ 2,000

Accrued term loan exit fee $ 3,000 $ —

Common stock issued for subscription receivable $ — $ 1,362

Issuance of stock in lieu of cash bonus, net of tax withholdings $ — $ 906

Financed insurance premiums $ 129 $ —

Outside basis difference in partnership $ — $ 1,536

Tax receivable agreement payable to Direct Digital Management, LLC $ — $ 1,286

Tax benefit on tax receivable agreement $ — $ 250

See accompanying notes to the consolidated financial statements.

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In February 2022, Direct Digital Holdings, Inc.

completed an initial public offering of its securities and, together with DDH LLC, effected a series of transactions (together, the “Organizational Transactions”) whereby Direct Digital Holdings, Inc.

became the sole managing member of DDH LLC, the holder of 100 % of the voting interests of DDH LLC and the holder of 19.7 % of the economic interests of DDH LLC, commonly referred to as an “Up-C” structure.

completed an initial public offering and certain organizational transactions which resulted in the Company's current Up-C structure.

(See Note 6 — Related Party Transactions).

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owns 100 % of the voting interest in DDH LLC and as of December 31, 2025 , it owns 88.7 % of the economic interest in DDH LLC.

See further discussion of the Up-C structure in Note 6 — Related Party Transactions of our consolidated financial statements.

DDH LLC was formed on June 21, 2018 and acquired by DDH on February 15, 2022 in connection with the Organizational Transactions.

DDH LLC was formed on June 21, 2018 and acquired by DDH on February 15, 2022 in connection with its organizational transactions.

DDH LLC’s wholly-owned subsidiaries are as follows:

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Huddled Masses, LLC Buy-side November 13, 2012 June 21, 2018

Our sell-side advertising business, operated through Colossus Media, provides advertisers of all sizes an advertising platform that automates the sale of ad inventory between advertisers and marketers.

Our platform is intended to help brands, media holding companies, independent agencies or emerging businesses reach audiences, curated creators and publishers find the right brands for their readers, as well as drive advertising yields across all channels:

Our sell-side advertising business, operated through Colossus Media, provides advertisers of all sizes a programmatic advertising platform that automates the sale of ad inventory between advertisers and marketers leveraging proprietary technology.

Our platform is intended to reach across a wide array of media partners to help brands, media holding companies, independent agencies or emerging businesses reach audiences, curated creators and publishers find the right brands for their readers, as well as drive advertising yields across all channels:

web, mobile, and connected TV ("CTV").

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In the digital advertising space, buyers, particularly small and mid-sized businesses, can potentially achieve significantly higher ROI on their advertising spend compared to traditional media advertising by leveraging data-driven over-the-top/connected TV (“OTT/CTV”), video and display, in-app, native including programmatic, search, social, influencer marketing and audio advertisements that are delivered both at scale and on a highly targeted basis.

Providing both the front-end, buy-side operations coupled with the Company’s proprietary sell-side operations is intended to enable the Company to curate the first through the last mile in the ad tech ecosystem execution process to drive higher results.

Providing both the front-end, buy-side advertising operations coupled with the Company’s proprietary sell-side operations is intended to enable the Company to curate the first through the last mile in the ad tech ecosystem execution process to drive higher results.

Note 2 — Basis of Presentation and Consolidation and Summary of Significant Accounting Policies

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Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards otherwise applicable to public companies until such time as those standards apply to private companies.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) it affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) it is no longer an emerging growth company or (ii) it affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.

As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

The adoption dates discussed below reflect this election.

Reverse Stock Split

On January 8, 2026, the Company filed a certificate of amendment to the amended and restated certificate of incorporation, as amended, with the Secretary of State of the State of Delaware, to effect a 55-to-1 reverse stock split of all classes of our issued and outstanding common stock, without any change to par value (the “Reverse Stock Split”).

The Reverse Stock Split became effective January 12, 2026.

No fractional shares were issued in connection with the reverse stock split as all fractional shares were rounded down to the next whole share, and a cash payment was made in lieu of such fractional shares.

The Reverse Stock Split was intended to bring the Company into compliance with Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule").

All share and per share amounts of our common stock listed in the consolidated financial statements and footnotes have been adjusted to give effect to the reverse stock split.

Revenue recognition

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sell-side advertising and buy-side advertising.

Thus, the Company disaggregates the revenue earned into these two segments.

For additional segment disclosures, refer to Note 7 — Segment Information of our consolidated financial statements.

For additional segment disclosures, refer to Note 7 — Segment Information.

The Company maintains agreements with its customers in the form of written service agreements, which set out the terms of the relationship, including payment terms (typically 30 to 90 days).

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In connection with the Company’s analysis of principal-versus-agent considerations, the Company has evaluated the specified goods or services and considered whether the Company controls the goods or services before they are provided to the customer, including the three indicators of control.

Based upon this analysis and the Company’s specific facts and circumstances, the Company concluded that it is a principal for the goods or services sold through both the Company’s sell-side advertising segment and buy-side advertising segment because the Company controls the specified good or service before it is transferred to the customer and the Company is the primary obligor in the agreement with customers.

On the sell-side advertising segment, the Company combines goods or services into a combined output that forms a single performance obligation to the end customer while on the buy-side advertising segment, the Company controls the specified goods or services before it is transferred to the end customer.

Additionally, the Company is the primary obligor in the agreement with customers in both the Company’s sell-side advertising segment and buy-side advertising segment.

Therefore, the Company reports revenue on a gross basis inclusive of all supplier costs and pays suppliers for the cost of digital media, advertising inventory, data and any add-on services or features.

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The Company generates revenue from the delivery of targeted digital media solutions, enabling advertisers to connect intelligently with their audiences across online display, video, social and mobile mediums using its proprietary programmatic SSP.

buyers and provides automated inventory management and monetization tools to publishers across various device types and digital ad formats.

The Company refers to its publishers, app developers, and channel partners collectively as its “publishers.” The Company’s platform allows the Company to sell, in real time, ad impressions from publishers to buyers and provides automated inventory management and monetization tools to publishers across various device types and digital ad formats.

The Company recognizes revenue at a point in time when an ad is delivered or displayed in response to a winning bid request from ad buyers.

Cash payments made to customers to support integration efforts and long-term contracts are recorded to prepaid expenses or other long-term assets (other assets) and amortized to revenue over the term of the contract.

The Company recorded these cash payments in prepaid expenses and other current assets for $ 0.3 million and $ 0 and in other long-term assets for $ 0.1 million and $ 0 as of December 31, 2025 and 2024, respectively.

During the years ended December 31, 2025 and 2024, other assets amortized were $ 0.1 million and $ 0 , respectively.

Buy-side advertising

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An “impression” is delivered when an advertisement appears on pages viewed by users.

The performance obligation is satisfied over time as the volume of impressions are delivered up to the contractual maximum.

The performance obligation, consisting of a series of distinct services, is satisfied over time as the volume of impressions are delivered up to the contractual maximum.

Many customers run several different campaigns throughout the year to capitalize on different seasons, special events and other happenings at their respective regions and localities.

The Company provides digital advertising and media buying capabilities with a focus on generating measurable digital and financial life for its customers.

Revenue arrangements are evidenced by a fully executed insertion order (“IO”) and/or a master service agreement (“MSA”) covering a combination of marketing tactics.

Generally, IOs specify the number and type of advertising impressions to be delivered over a specified time at an agreed upon price and performance objectives for an ad campaign.

Performance objectives are generally a measure of targeting, as defined by the parties in advance, such as number of ads displayed, consumer clicks on ads or consumer actions (which may include qualified leads, registrations, downloads, inquiries or purchases).

These payment models are commonly referred to as CPM (cost per impression), CPC (cost per click) and CPA (cost per action).

The majority of the Company’s contracts are flat-rate, fee-based contracts.

Revenue arrangements are evidenced by a fully executed insertion order (“IO”), a master service agreement (“MSA”) and/or a statement of work ("SOW") covering the scope of work to be accomplished and could be a combination of marketing execution tactics.

Generally, IOs specify the number and type of advertising metrics to be delivered over a specified time at an agreed upon price under payment models commonly referred to as CPM (cost per impression) or CPC (cost per click).

The majority of the Company’s contracts are flat-rate, fee-based contracts and may include provisions for management, agency or other professional fees.

Cash payments received prior to the Company’s delivery of its services are recorded to deferred revenue until the performance obligation is satisfied.

The Company recorded deferred revenue (contract liabilities) to account for billings in excess of revenue recognized, primarily related to contractual minimums billed in advance and customer prepayment, of $ 0.5 million and $ 0.5 million as of December 31, 2025 and 2024, respectively.

Revenue recognized during 2024 and 2023 from amounts included within the deferred revenue balances at the beginning of each respective period amounted to $ 0.4 million and $ 0.5 million, respectively.

Revenue recognized during 2025 and 2024 from amounts included within the deferred revenue balances at the beginning of each respective period amounted t o $ 0.5 million and $ 0.4 million , respectively.

Accounting Standards Codification (“ASC”) 606 provides various optional practical expedients.

The Company elected the use of the practical expedient relating to the disclosure of remaining performance obligations within a contract and will not disclose remaining performance obligations for contracts with an original expected duration of one year or less.

As of December 31, 2024 and 2023, goodwill was $ 6.5 million, which includes $ 2.4 million as a result of the acquisition of Huddled Masses and Colossus Media in 2018 and $ 4.1 million from the acquisition of Orange 142 in 2020.

Goodwill is attributable to entry into new markets not previously accessible and generation of future growth opportunities.

The Company expects to deduct goodwill for tax purposes in future years.

Goodwill is assessed for impairment at least annually (December 31) starting with a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying value.

As of December 31, 2025 and 2024, goodwill was $ 6.5 million, including amounts related to acquisitions in 2018 and in 2020.

The goodwill is deductible for tax purposes and is assessed for impairment at least annually (December 31) starting with a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit containing goodwill is less than its carrying value.

This qualitative assessment may include, but is not limited to, reviewing factors such as macroeconomic conditions, industry and market considerations, cost factors, entity-specific financial performance and other events, such as changes in our management, strategy and primary user base.

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Depending upon the results of the quantitative measurement, the recorded goodwill may be written down and an impairment expense is recorded in the consolidated statements of operations when the carrying amount of the reporting unit exceeds the fair value of the reporting unit.

Goodwill is reviewed annually and tested for impairment upon the occurrence of a triggering event.

The carrying value of the Company’s sell-side reporting unit was negative as of December 31, 2024, and therefore the Company performed a qualitative goodwill impairment assessment and determined it was more likely than not that the fair value of the sell-side reporting unit exceeded the carrying value.

The Company also performed a qualitative goodwill impairment assessment on the buy-side reporting unit.

The Company determined that there was no impairment of goodwill during the years ended December 31, 2024 and 2023.

Goodwill is tested annually for impairment or more frequently upon the occurrence of a triggering event.

The carrying value of the Company's

sell-side reporting unit was negative as of December 31, 2025.

Goodwill of $ 1.2 million as of December 31, 2025 is allocated to the sell-side reporting unit, which is included in the sell-side reportable segment.

The remaining goodwill of $ 5.3 million is allocated to our buy-side reporting unit.

There was no accumulated goodwill impairment as of December 31, 2025 and 2024.

Our reporting units align with our segments (see Note 7 — Segment Information).

Intangible assets, net

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Intangible assets are recorded at fair value at the time of their acquisition and are stated within the consolidated balance sheets net of accumulated amortization.

Intangible assets are amortized on a straight-line basis over their estimated useful lives and

recorded as amortization expense within general and administrative expenses in the consolidated statements of operations.

Intangible assets are amortized on a straight-line basis over their estimated useful lives and recorded as amortization expense within general and administrative expenses in the consolidated statements of operations.

The Company’s intangible assets are being amortized over their estimated useful lives, using the straight-line method with non-compete agreements over 5 years and other intangibles over 10 years.

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Contingently issued awards with a requisite service period that precedes the grant date are measured and recognized at the start of the requisite service period and remeasured each reporting period until the grant date.

The Company did not grant any stock options during the 2024 period.

The Company estimates the fair value of RSU’s based on the closing price of the Company’s common stock on the date of the grant.

The Company estimates the fair value of RSUs based on the closing price of the Company’s common stock on the date of the grant.

The Company estimates the fair value of stock options using the Black-Scholes valuation model.

Key input assumptions used to estimate the fair value of stock options include the fair value of the Company’s common stock, as well as assumptions regarding the expected common stock price volatility over the term of the stock options, the expected term of the stock options, risk-free interest rates and the expected dividend yield.

Given the Company’s short history as a public company, the expected volatility is determined based on the trading history of several unrelated public companies within the industry that the Company considers to be comparable and the expected term is determined based on a combination of the terms of stock options and peer data.

Key input assumptions used to estimate the fair value of stock options include the Company’s stock price, as well as assumptions regarding the expected common stock price volatility over the term of the stock options, the expected term of the stock options, risk-free interest rates and the expected dividend yield.

The risk-free interest rate is derived using the U.S.

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The Company considers an estimated forfeiture rate for stock options based on historical experience and the anticipated forfeiture rates during the future contract life.

The fair value of the Company’s stock options was estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average input assumptions used by the Company as follows:

Year Ended December 31,

Grant date fair value $ 53.90

Expected term 6.0

Expected term (in years) 10.0

Expected volatility 198 %

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The Company sponsors a safe harbor, defined contribution 401(k) and profit-sharing plan (the “Plan”) that allows eligible employees to contribute a percentage of their compensation.

The Company matches employee contributions up to a maximum of 100 % of the participant’s salary deferral, limited to 4 % of the employee’s salary.

The Company matches employee contributions up to a

maximum of 100 % of the participant’s salary deferral, limited to 4 % of the employee’s salary.

For the years ended December 31, 2025 and 2024, the Company’s matching contributions were $ 0.3 million and $ 0.2 million, respectively.

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The Company has an Employee Benefit Plan Trust (the “Trust”) to provide for the payment or reimbursement of all or a portion of covered medical, dental and prescription expenses for the employees of the Company.

The Trust is funded with contributions made by the Company and participating employees at amounts sufficient to keep the Trust on an actuarially

The Trust is funded with contributions made by the Company and participating employees at amounts sufficient to keep the Trust on an actuarially sound basis.

The self-funded plan has an integrated stop loss insurance policy for the funding of the Trust benefits in excess of the full funding requirements.

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The Company also has an incentive plan for executives and employees of the Company which provides for performance based awards payable in cash or stock-based compensation as determined by the Compensation Committee of the Company’s Board of Directors.

There was $ 0 and $ 2.4 million recognized during the years ended December 31, 2024 and 2023, respectively, for awards pursuant to this plan.

In February 2022, concurrent with the Organizational Transactions, the Company entered into a tax receivable agreement (“Tax Receivable Agreement” or “TRA”) with DDH LLC and Direct Digital Management, LLC (“DDM”).

There were no amounts recognized during the years ended December 31, 2025 and 2024, respectively, for awards pursuant to this plan.

In February 2022, concurrent with its organizational transactions, the Company entered into a tax receivable agreement (“Tax Receivable Agreement” or “TRA”) with DDH LLC and Direct Digital Management, LLC (“DDM”).

The TRA provides for certain income (loss) allocations between the Company and DDH LLC under the agreement.

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federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss under the LLC Agreement.

Pursuant to the Company’s election under Section 754 of the Internal Revenue Code (the “Code”), the Company expects to obtain an increase in its share of the tax basis in the net assets of DDH, LLC when LLC Units are redeemed or exchanged by the members of DDH, LLC.

The Company made an election under Section 754 of the Code for each taxable year in which a redemption or exchange of LLC interest occurred.

The Company made an election under Section 754 of the Code for each taxable year in which an exchange of LLC interest occurred.

During the year ended December 31, 2025, members of DDM exchanged 28,955 shares of Class B Common Stock into shares of Class A Common Stock.

No shares were exchanged or converted during the year ended December 31, 2024.

No shares were exchanged during the year ended December 31, 2024.

Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

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Accounts receivable balances are written off against the provision when the Company believes it is probable the receivable will not be recovered.

For the years ended December 31, 2024 and 2023, the Company's provision for credit losses net of recoveries, as reflected in the consolidated statements of cash flows was $ 0.6 million and $ 0.4 million, respectively.

For the years ended December 31, 2025 and 2024, the Company's provision for credit losses net of

recoveries, as reflected in the consolidated statements of cash flows was less than $ 0.1 million and $ 0.6 million, respectively.

The following table presents the changes in the provision for credit losses (in thousands):

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There is an inherent concentration of credit risk associated with accounts receivable arising from revenue from major customers on both the sell-side and buy-side of the business.

For the years ended December 31, 2024 and 2023, one sell-side customer represented 46 % and 73 % of revenues, respectively.

For the year ended December 31, 2025, two buy-side customers represented 27 % of revenues.

For the year ended December 31, 2024, one sell-side customer represented 46 % of revenues.

As of December 31, 2025, three buy-side customers accounted for 43 % of accounts receivable.

As of December 31, 2024, three customers (two buy-side and one sell-side) accounted for 34 % of accounts receivable.

As of December 31, 2023, one sell-side customer accounted for 83 % of accounts receivable.

As of December 31, 2024 one vendor accounted for 16 % of consolidated accounts payable.

As of December 31, 2023, three sellers of advertising inventory each accounted for at least 10%, and collectively accounted for 57 % of consolidated accounts payable.

As of December 31, 2025 and 2024 one vendor accounted for 21 % and 16 %, respectively, of consolidated accounts payable.

Accrued liabilities

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Accrued expenses 1,698 877

Accrued severance — 189

Accrued litigation settlement (1)

Accrued interest 5 50

Total accrued liabilities $ 2,164 $ 1,257

(1) In July 2022, the Company entered into a litigation settlement agreement with a vendor of Huddled Masses related to a delinquent balance from 2019 and agreed to pay a total of $ 0.5 million with monthly installment payments over 24 months beginning September 1, 2022.

Accrued liabilities - related party

The components of accrued liabilities - related party on the balance sheet as of December 31, 2025 and 2024 are as follows (in thousands):

Accrued dividend $ 55 $ —

Total accrued liabilities - related party $ 3,663 $ —

(1) See Note 9 — Commitments and Contingencies for further details.

Prepaid expenses and other current assets

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Stock subscription receivable (1)

Consideration paid to customers (2)

Other current assets

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The Company collected the receivable in January 2025.

(2) This line item consists of cash payments made to customers to support integration efforts and long-term contracts.

Segment information

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Our CODM does not evaluate operating segments using asset or liability information.

The Company operates two reportable segments:

Through December 31, 2025, the Company operated two reportable segments:

sell-side advertising, which includes the results of Colossus Media, and buy-side advertising, which includes the results of Orange 142 and Huddled Masses.

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All of the Company’s revenues are attributed to the United States.

As further described below in the Liquidity and Capital Resources – Going Concern section, the Company has experienced a series of unexpected setbacks in the past two years, particularly in the sell-side.

During 2025, the Company worked to reconstitute its prior business, target new customers and develop new products for the sell-side segment but was unable to achieve historical volumes.

Beginning in 2026, the Company has shifted its focus to driving intentional digital marketing spend with current and future customers historically classified by the Company as buy-side customers as well as new enterprise customers accessing the digital advertising market through its recently launched product – Ignition+.

In connection with this shift in focus, the Company is currently working on aggregating its operations.

Cost of revenues

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general and administrative expenses (including rent expense, professional fees, independent contractor costs, selling and marketing fees, administrative and operating system subscription costs, insurance, and amortization expense related to our intangible assets);

and other expense (including transactions that are unusual in nature or which are occurring infrequently).

See further discussion of Other Expenses within Operating Expenses for the year ended December 31, 2023 in Note 9 — Commitments and Contingencies.

and other expense.

Advertising costs

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Non-lease components are accounted for separately.

Deferred offering, financing, discount and issuance costs

Deferred offering, financing, discount, issuance costs and debt premium

The Company records certain legal, accounting and other third-party fees that are directly associated with a debt financing to deferred financing costs in the event that the Company completes the debt financing.

Costs associated with debt offerings are amortized to interest expense using the straight-line method, which approximates the effective interest method, over the life of the debt.

As of December 31, 2024 and 2023, $ 4.2 million and $ 1.7 million, respectively, of unamortized deferred financing costs are netted against debt in the consolidated balance sheets.

As of December 31, 2024 and 2023, $ 0.1 million and $ 0.2 million, respectively, of unamortized deferred financing costs are classified as prepaid expenses and other current assets in the consolidated balance sheets.

The Company records the differences between the face amount and the proceeds upon issuance of debt as a discount.

As of December 31, 2024 and 2023, $ 1.7 million and $ 0 , respectively, of unamortized debt discount related to the interest reserve added under the LS Amendment are netted against debt in the consolidated balance sheets.

Costs associated with debt financings are amortized to interest expense using the effective interest method over the life of the debt.

Unamortized deferred financing costs are netted against debt or classified as prepaid expenses and other current assets in the consolidated balance sheets.

Fees that are directly associated with an equity offering are recorded to additional paid-in capital in the event the Company completes an equity issuance.

The differences between the face amount and the proceeds upon issuance of debt are recorded as a discount or premium, including debt discount related to the interest reserve added under various amendments to the Company's credit facilities, and netted against debt in the consolidated balance sheets.

Upon a modification, the Company established new effective interest rates based on the carrying value of the modified debt.

Business combinations

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The Company bases its estimates on past experiences, market conditions, and other assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis.

The Company uses estimates to determine many reported amounts, including but not limited to gross vs net assessment in revenue recognition, recoverability of goodwill and long-lived assets, useful lives used in amortization of intangibles, income taxes and valuation allowances, stock-based compensation and fair values of assets and liabilities acquired in business combinations.

Fair value measurements

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Basic net loss per share excludes dilution and is determined by dividing net loss by the weighted average number of common shares outstanding including participating securities during the period.

Diluted net loss per share attributable to common stockholders reflects the potential dilution that could occur if securities and other contracts to issue common stock were exercised or converted into common stock including stock options, restricted stock units and warrants using the treasury stock method.

Adjustment to prior period consolidated financial statements

Subsequent to the issuance of the Company’s consolidated financial statements as of and for the year ended December 31, 2023, the Company determined that prepaid distributions of $ 1.7 million to holders of LLC Units were incorrectly classified as a related party receivable instead of noncontrolling interest on the consolidated balance sheet.

The Company determined that the 2023 consolidated financial statements were not materially misstated but has adjusted the 2023 consolidated financial statements to correct the immaterial error, resulting in a reversal of the prepaid distributions and a reduction in non-controlling interest.

In addition, in future filings, the Company will adjust the interim consolidated financial statements in the periods ending March 31, 2024, June 30, 2024 and September 30, 2024 to correct the immaterial error.

Diluted net income per share attributable to common stockholders reflects the potential dilution that could occur if securities and other contracts to issue common stock were exercised or converted into common stock including stock options, restricted stock units and warrants using the treasury stock method, and Series A Convertible Preferred Stock using the if-converted method.

Recent accounting pronouncements

Accounting pronouncements adopted

In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures.

The ASU requires that an entity disclose significant segment expenses impacting profit and loss that are regularly provided to the CODM.

The update is required to be applied retrospectively to prior periods presented, based on the significant segment expense categories identified and disclosed in the period of adoption.

The amendments in this ASU are required to be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

In August 2023, the FASB issued ASU 2023-05, Business Combinations - Joint Ventures Formations, which requires that joint ventures, upon formation, apply a new basis of accounting by initially measuring assets and liabilities at fair value.

The amendments in ASU 2023-05 are effective for joint ventures that are formed on or after January 1, 2025.

adoption is permitted.

The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

Accounting pronouncements not yet adopted

During the year ended December 31, 2025, the Company entered into a joint venture, but no material activity has occurred to date.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, a final standard on improvements to income tax disclosures.

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The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions and applies to all entities subject to income taxes.

The new standard is effective for emerging growth companies for annual periods beginning after December 15, 2025.

This accounting standard is effective in the first quarter of the Company's fiscal year ending December 31, 2026.

The Company is currently evaluating the impact of adoption on our financial disclosures.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements.

The new standard is effective for public entities for annual periods beginning after December 15, 2024, and early adoption is permitted.

The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

The Company adopted this standard effective January 1, 2025 using a retrospective approach.

Accounting pronouncements not yet adopted

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires a tabular disclosure of the amounts of specified natural expense categories included in each relevant expense caption.

Additionally, ASU 2024-03 requires the disclosure of the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.

The new standard is effective for annual reporting periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, on a prospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of adoption on the Company's consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses:

Measurement of Credit Losses for Accounts Receivable and Contract Assets, which simplifies the application of the current expected credit loss model for current accounts receivable and current contract assets under Accounting Standards Codification 606.

The new standard is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual reporting periods.

Early adoption is permitted.

The Company is currently evaluating the impact on the disclosures of the Company's consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting - Narrow Scope Improvements.

ASU 2025-11 improves the guidance in ASC 270, Interim Reporting, by improving the navigability of the required interim disclosures and clarifying when that guidance is applicable.

The guidance is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027.

Early adoption is permitted and the guidance may be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements.

The Company is currently evaluating the impact of adoption on the Company's consolidated financial statements.

Liquidity and capital resources

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Management’s assessment is based on the relevant conditions that are known or reasonably knowable as of the date these consolidated financial statements were issued or were available to be issued.

As discussed in Note 9 — Commitments and Contingencies , one of the Company’s sell-side customers paused its connection to the Company for a couple of weeks in May 2024, which reduced sell-side sales volumes.

As of the date of this report, sell-side volumes related to this customer have resumed but not yet at the levels experienced prior to the pause in May 2024 which has created significant disruption in the Company’s sell-side business.

The Company is actively working with its partners to achieve prior volume levels.

However, there can be no assurance that the Company will be able to achieve prior volume levels with its partners or on the timing of achieving such volume levels.

Additionally, the Company (1) incurred a net loss of $ 19.9 million in 2024 including the impact of the sell-side disruption described above and a decrease in customer spend on the buy-side, (2) reported an accumulated deficit of $ 8.8 million as of December 31, 2024, (3) reported cash and cash equivalents of $ 1.4 million as of December 31, 2024, (4) has borrowed $ 3.7 million as of December 31, 2024 and the date of this report, under the Credit Agreement which matures in July 2025, and (5) was notified by Nasdaq on October 18, 2024 that it was not in com pliance with Nasdaq's minimum stockholders' equity requirements.

As discussed in Note 9 — Commitments and Contingencies, the Company has experienced significant disruption in its sell-side business due to a series of unexpected setbacks in the past two years, particularly in the sell-side.

During 2025, the Company worked with its partners to achieve prior sell-side volume levels but was unable to achieve historical volumes.

Despite these challenges, the Company was able to reduce expenses, pay off the matured Credit Agreement with a term loan from Lafayette Square (see Note 3 — Long-Term Debt), convert existing debt of $ 35.0 million to Series A Convertible Preferred Stock and establish an Equity Reserve Facility raising additional equity of $ 10.3 million through December 31, 2025.

Additionally, the Company (1) incurred a net loss of $ 27.7 million for the year ended December 31, 2025 including the impact of the sell-side disruption described above, (2) reported an accumulated deficit of $ 27.7 million

as of December 31, 2025, (3) reported cash and cash equivalents of $ 0.7 million and a working capital deficit of $ 21.7 million as of December 31, 2025, (4) owes its lender $ 16.0 million (combination of principal, accrued fees, interest and the Exit Fee described in Note 3 — Long-Term Debt) as of December 31, 2025, under the 2021 Credit Facility (as defined below) which matures in December 2026 and (5) despite demonstrating compliance with the minimum stockholders' equity requirement for continued listing under Nasdaq Listing Rule 5550(b)(1) (the "Stockholders' Equity Rule") on November 7, 2025 and Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule") on February 12, 2026, remains subject to a discretionary Panel Monitor through November 7, 2026 for the Stockholders' Equity Rule and through February 12, 2027 for the Bid Price Rule.

The Company believes that it is not in compliance with the Stockholders' Equity Rule as of December 31, 2025.

These factors raise substantial doubt about the Company’s ability to continue as a going concern over the next twelve months.

The Company anticipates sources of liquidity to include cash on hand, cash flow from operations and cash generated from its sales under the Company's Equity Reserve Facility , and has taken several actions to address liquidity concerns.

These actions include (1) a plan to reduce expenses through a staff reduction, a pause on hiring and cost savings measures that was executed on July 1, 2024 with continuing cost savings impacts through December 31, 2024, (2) working with lenders to provide temporary various relief from debt covenants via amendments on October 15, 2024 and December 27, 2024 (see Note 3 — Long-Term Debt ) while rebuilding sell-side volumes, (3) putting in place a program to ra ise capital through an Equity Reserve Facility with stock sales continuing into 2025 (see Note 4 — Stockholders’ Deficit and Stock-Based Compensation ), and (4) a plan to achieve compliance with Nasdaq's minimum stockholders' equity requirements by raising additional funds in a registered or private offering .

The Company anticipates sources of liquidity to include cash on hand, cash flow from operations, cash generated from its sales under the Company's Equity Reserve Facility and cash generated from other potential sales of equity and/or debt securities and has taken several actions to address liquidity and performance concerns.

Such plans include (1) a shift in focus to driving intentional digital marketing spend with current and future customers historically classified by the Company as buy-side customers as well as new enterprise customers accessing the digital advertising market through its recently launched product – Ignition+ allowing for further growth and a return to profitability and (2) refinancing the 2021 Credit Facility by raising additional funds in a registered or private offering.

There can be no assurance that the Company’s actions will be successful or that additional financing will be available when needed or on acceptable terms.

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$ 10,285 $ 37,362

2021 Credit Facility - Accrued Fees 1,234 —

2021 Credit Facility - Accrued Interests 793 —

Credit Agreement — 3,700

Economic Injury Disaster Loan 149 150

Total long-term debt 41,212 31,744

Total debt 12,461 41,212

deferred financing cost (2)

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debt discount (3)

Total long-term debt, net of deferred financing cost and debt discount 35,303 30,056

( 249 ) ( 1,671 )

Total debt, net of deferred financing cost and debt discount 12,149 35,303

current portion (2)

( 12,003 ) ( 3,700 )

Total long-term debt, net of current portion, deferred financing cost and debt discount $ 146 $ 31,603

(1) As of December 31, 2024, amount includes an exit fee of $ 3.0 million, which is non-interest bearing and due at maturity or prepayment.

(2) As of December 31, 2024, amount includes $ 1.7 million for the interest reserve, pursuant to the LS Amendment, as defined below, net of amounts amortized for interest.

(1) As of December 31, 2025, amount includes $ 3.5 million amendment closing fees pursuant to the Ninth Amendment defined below, which is due at maturity or prepayment.

As of December 31, 2024, amount includes an exit fee of $ 3.0 million, which was converted into Series A Convertible Preferred Stock as part of the Ninth Amendment, as described below.

(2) The balances in 2025 are considered related party balances.

(3) The debt discount as of December 31, 2025 is composed of the difference between the fair value and the carrying value of the 2021 Credit Facility as of the Ninth Amendment date, as described below.

The components of interest expense and related fees for long-term debt is as follows (in thousands):

Interest expense – 2021 Credit Facility (1)

$ 3,436 $ 3,617

Interest expense – Credit Agreement 222 693

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Amortization of deferred financing cost and debt discount 2,104 1,092

Total interest expense and amortization of deferred financing cost and debt discount $ 5,410 $ 4,378

Amortization of debt premium ( 577 ) —

Total interest expense and amortization of deferred financing cost and debt discount (premium), net $ 5,203 $ 5,410

(1) For the year ended December 31, 2025, a portion of the interest expense related to the 2021 Credit Facility was applied against the interest reserve, as described below, and included in amortization of deferred financing cost and debt discount (premium), net in the consolidated statement of cash flows.

Lafayette Square

On December 3, 2021, the Company entered into the Term Loan and Security Agreement (the “2021 Credit Facility”) with Lafayette Square Loan Services, LLC (“Lafayette Square”) as administrative agent, and the various lenders thereto.

The term loan under the 2021 Credit Facility initially provided for a term loan in the principal amount of up to $ 32.0 million, consisting of a $ 22.0 million closing date term loan (the “Term Loan”) and an up to $ 10.0 million delayed draw

term loan (the “Delayed Draw Loan”).

The loans under the 2021 Credit Facility bear interest at the Term Secured Overnight Financing Rate (“SOFR”) with a credit spread of 0.15 % per annum for the interest periods of three months and providing for a credit spread adjustment of 0.10 %, 0.15 % or 0.25 % per annum for interest periods of one month, three months or six months, respectively.

The loans under the 2021 Credit Facility bear interest at SOFR plus the applicable credit spread adjustment plus the applicable margin minus any applicable impact discount.

Prior to entering into the Fifth Amendment as defined below, the applicable margin under the 2021 Credit Facility was based on the consolidated total net leverage ratio of the Company at a rate of 7.00 % per annum if the consolidated total net leverage ratio was less than or equal to 1.00 to 1.00 with gradual increases as the ratio increased up to 10.00 % per annum if the consolidated total net leverage ratio was greater than 3.50 to 1.00.

On December 3, 2021, the Company entered into the Term Loan and Security Agreement (as amended, unless the context indicates otherwise, the “2021 Credit Facility”) with Lafayette Square Loan Services, LLC (“Lafayette Square”) as administrative agent, and the various lenders thereto.

The loans under the 2021 Credit Facility are calculated using Term Secured Overnight Financing Rate (“Term SOFR”) with a credit spread adjustment of 0.10 % per annum for interest periods of one month and 0.15 % per annum for interest periods of three months.

The loans under the 2021 Credit Facility bear interest at Term SOFR plus the applicable margin minus any applicable impact discount.

The applicable margin under the 2021 Credit Facility is based on the consolidated total leverage ratio of the Company at a rate of 7.00 % per annum if the consolidated total leverage ratio is less than or equal to 1.00 to 1.00 with gradual increases as the ratio increases up to 10.00 % per annum if the consolidated total leverage ratio is greater than 3.50 to 1.00.

The maturity date of the 2021 Credit Facility is December 3, 2026.

On July 28, 2022, the Company entered into the Second Amendment and Joinder to Term Loan and Security Agreement and received proceeds of $ 4.3 million borrowed under the Delayed Draw Loan to pay the balance owed on the common unit redemption as well as costs associated with the transaction.

Subsequently, on October 3, 2023, the Company entered into the Fourth Amendment to the 2021 Credit Facility (the “Fourth Amendment”) and received proceeds of $ 3.6 million borrowed under the Delayed Draw Loan to make payments in connection with the consummation of the 2023 warrant tender offer and fees and expenses incurred as described in Note 4 — Stockholders’ Deficit and Stock-Based Compensation.

In connection with the Fourth Amendment, the Company agreed it would not be permitted to request any additional funds under the Delayed Draw Loan, and Lafayette Square would not be obligated to fund any such requests.

Quarterly installment payments on the Term Loan and the Delayed Draw Loan, due on the last day of each fiscal quarter, began March 31, 2022 with a final installment due December 3, 2026 for remaining balances outstanding under each loan.

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Each quarterly installment payment under the Delayed Draw Loan was 0.625 % of the amount of the Delayed Draw Loan through December 31, 2023, and each quarterly installment payment thereafter until maturity is 1.25 % of the amount of the Delayed Draw Loan.

Under the 2021 Credit Facility, dividends and distributions by DDH LLC to the Company and any shareholders of the Company are permitted so long as (i) no default or event of default is continuing or would occur after giving pro forma effect to such dividends and distributions under the 2021 Credit Facility, (ii) the Company, on a pro forma basis, maintains a consolidated senior net leverage ratio of not greater than 1.5 to 1.0, and (iii) the Company, on a pro forma basis, maintains liquidity of not less than $ 15.0 million.

The Company did not meet these conditions as of December 31, 2024 and therefore DDH LLC assets are considered restricted and no dividends or distributions to the Company and any shareholders is permitted while these conditions are not met.

The 2021 Credit Facility contains customary affi rmative and negative covenants.

Prior to entering into the Fifth Amendment, the Company was required to maintain varying threshold levels by quarter for net leverage ratio and fixed charge coverage ratio, as well as restrictions on the ability to incur indebtedness, create certain liens, make certain investments, make certain dividends and other types of distributions, and enter into or undertake certain mergers, consolidations, acquisitions and sales of certain assets and subsidiaries.

On October 15, 2024, with an effective date of June 30, 2024, the Company and Lafayette Square entered into the Fifth Amendment to the Term Loan and Security Agreement (the “Fifth Amendment”) which among other things, (1) deferred quarterly installment payments on the Term Loan and the Delayed Draw Loan for the periods from June 30, 2024 through December 31, 2025, (2) required that the Company pay a commitment fee of 50 basis points or an amount of $ 0.1 million to Lafayette Square, (3) allowed proceeds from future equity raises by the Company, if any, to cure potential financial covenant noncompliance, (4) provided for one-month and three-month interest periods, (5) replaced the calculation of the consolidated total net leverage ratio with a consolidated total leverage ratio for purposes of calculating the applicable margin and the financial covenant and (6) replaced the financial covenants under the 2021 Credit Facility (effective as of June 30, 2024) with varying threshold levels by quarter for minimum trailing twelve months EBITDA, minimum liquidity, maximum consolidated total leverage ratio and minimum fixed charge coverage ratio.

At times, amendments to the 2021 Credit Facility have modified this payment schedule.

The 2021 Credit Facility contains customary affirmative and negative covenants, including restrictions on the ability to incur indebtedness, create certain liens, make certain investments, make certain dividends and other types of distributions, and enter into or undertake certain mergers, consolidations, acquisitions and sales of certain assets and subsidiaries.

Current financial covenants as of and subsequent to December 31, 2025 include (1) a minimum unrestricted cash balance of $ 0.5 million, (2) minimum quarterly consolidated EBITDA of ($ 1.9 million) for the fiscal quarter ended March 31, 2026 and $ 0.5 million for each quarter thereafter, (3) minimum quarterly sell-side revenue of $ 2.5 million and $ 5.0 million for the fiscal quarters ended March 31, 2026 and thereafter, respectively, (4) maximum consolidated total leverage ratio of 3.50 to 1.00 for the quarter ended June 30, 2026 and 3.25 to 1.00 for each quarter thereafter and (5) minimum fixed charge coverage ratio of 1.25 to 1.00 for the quarter ended June 30, 2026 and 1.50 to 1.00 for each quarter thereafter.

The Company was in compliance with the financial covenants under the Credit Agreement, as amended, as of December 31, 2025.

Prior to entering into the Fifth Amendment as defined below, the Company entered into the second, third and fourth amendments to the 2021 Credit Facility.

On October 15, 2024, with an effective date of June 30, 2024, the Company and Lafayette Square entered into the Fifth Amendment (the “Fifth Amendment”) to the 2021 Credit Facility which among other things, (1) deferred quarterly installment payments on the Term Loan and the Delayed Draw Loan for the periods from June 30, 2024 through December 31, 2025, (2) required that the Company pay a commitment fee of 50 basis points or an amount of $ 0.1 million to Lafayette Square, (3) allowed proceeds from future equity raises by the Company, if any, to cure potential financial covenant noncompliance, (4) provided for one-month and three-month interest periods and (5) modified financial covenants.

The Fifth Amendment was accounted for as a modification.

In connection with the amendment, fees paid to Lafayette Square totaling $ 0.1 million were capitalized and are being amortized to interest expense using the straight-line method, which approximates the effective interest method, over the life of the debt.

On December 27, 2024, the Company and Lafayette Square entered into the Sixth Amendment and Waiver (the “LS Amendment”) to the 2021 Credit Facility.

Under the terms of the LS Amendment, among other changes, Lafayette Square extended a term loan equal to $ 6.0 million (the “Sixth Amendment Term Loan”).

Lafayette Square and the Company

agreed to use (1) $ 4.0 million out of the Sixth Amendment Term Loan to prepay the revolving credit notes under the Credit Agreement as described below, and (2) $ 2.0 million to fund an interest reserve under the 2021 Credit Facility.

The LS Amendment also (1) implemented a minimum unrestricted cash requirement of $ 750,000 at all times and removed the minimum consolidated EBITDA, (2) requires Lafayette Square’s prior written consent for certain permitted dividends, including dividends to the Company’s shareholders and (3) waived certain existing events of default related to minimum EBITDA covenants.

Additionally, the Company is required to provide to Lafayette Square a weekly cash flow forecast, prepared on a cumulative, weekly roll forward basis through a thirteen (13) week projection period.

Lastly, a $ 3.0 million exit fee, which was earned upon execution of the LS Amendment and is payable directly to Lafayette Square at maturity or prepayment, as defined, was added to the term loan balance.

The Company was in compliance with all the financial covenants under the 2021 Credit Facility, as amended, as of December 31, 2024.

The LS Amendment was accounted for as a modification.

In connection with the amendment, the $ 3.0 million exit fee was capitalized and is being amortized to interest expense using the straight-line method, which approximates the effective interest method, over the life of the debt, and fees paid to third parties totaling $ 0.1 million were expensed as incurred.

At the Company's option, the Company may at any time prepay the outstanding principal balance of the 2021 Credit Facility in whole or in part, without fee, penalty or premium other than the $ 3.0 million exit fee due at maturity or prepayment, as defined under the LS Amendment.

In connection with the Fifth

Amendment, fees paid to Lafayette Square totaling $ 0.1 million were capitalized and are being amortized to interest expense using the straight-line method, which approximates the effective interest method, over the life of the debt.

On December 27, 2024, the Company and Lafayette Square entered into the Sixth Amendment and Waiver (the “Sixth Amendment”) to the 2021 Credit Facility.

Under the terms of the Sixth Amendment, among other changes, Lafayette Square extended a term loan equal to $ 6.0 million (the “Sixth Amendment Term Loan”).

Lafayette Square and the Company agreed to use (1) $ 4.0 million out of the Sixth Amendment Term Loan to prepay the revolving credit notes under the Credit Agreement as defined below, and (2) $ 2.0 million to fund an interest reserve under the 2021 Credit Facility.

The Sixth Amendment also (1) modified financial covenants, (2) requires Lafayette Square’s prior written consent for certain permitted dividends, including dividends to the Company’s shareholders and (3) waived certain existing events of default related to minimum EBITDA covenants.

Lastly, a $ 3.0 million exit fee, which was fully earned upon execution of the Sixth Amendment and is payable directly to Lafayette Square at maturity or prepayment, was added to the term loan balance.

The Sixth Amendment was accounted for as a modification.

In connection with the Sixth Amendment, the $ 3.0 million exit fee was capitalized and amortized to interest expense using the straight-line method, which approximates the effective interest method, over the life of the debt, and fees paid to third parties totaling $ 0.1 million were expensed as incurred.

On August 8, 2025, the Company and Lafayette Square entered into the Seventh Amendment (the “Seventh Amendment”) which among other things, (1) provided for the conversion of $ 25.0 million of outstanding term loan obligations into newly issued shares of Series A Convertible Preferred Stock, (2) required the payment of a $ 1.0 million amendment closing fee and a $ 0.1 million amendment fee and (3) modified financial covenants.

The Seventh Amendment also established a $ 25.0 million exit fee due upon redemption in full of the newly issued preferred stock with reduction in the amount of the exit fee outstanding for any amounts redeemed or converted.

As Lafayette Square did not grant the Company a concession and the terms of the Seventh Amendment were not substantially different, the Seventh Amendment was accounted for prospectively as a modification and no gain or loss was recognized.

The shares of Series A Convertible Preferred Stock were recognized at fair value of $ 21.4 million upon issuance (see Note 4 — Stockholders’ Deficit and Stock-Based Compensation) and the Company established the new effective interest rates based on the carrying value of the modified debt.

The difference between the fair value of the shares of Series A Convertible Preferred Stock and the carrying value of the existing debt converted into Series A Convertible Preferred Stock is reflected as a debt premium.

On September 8, 2025, the Company and Lafayette Square entered into the Eighth Amendment (the “Eighth Amendment”) to the 2021 Credit Facility which among other things, Lafayette agreed to make a term loan in the principal amount equal to $ 3.8 million (the “Eighth Amendment Term Loan”) to repay in full the outstanding amounts owed under the Credit Agreement (as defined below).

The Eighth Amendment also provided for a $ 0.1 million interest reserve and a less than $ 0.1 million amendment fee.

The maturity date of the Eighth Amendment Term Loan was October 30, 2025 which was extended to October 30, 2026 on November 10, 2025 and later revised to September 30, 2026 pursuant to the Eleventh Amendment (as described below).

The Eighth Amendment was accounted for prospectively as a modification and no gain or loss was recognized.

The Company established the new effective interest rate based on the carrying value of the modified debt.

On October 14, 2025, the Company and Lafayette Square entered into the Ninth Amendment (the “Ninth Amendment”) to the 2021 Credit Facility which among other things, (1) provided for the conversion of $ 10.0 million of outstanding term loan obligations, including the $ 3.0 million exit fee established by the Sixth Amendment, into 10,000 newly issued shares of Series A Convertible Preferred Stock, (2) required the payment of a $ 3.5 million amendment closing fee at maturity, (3) modified financial covenants, (4) requires prepayments when the Company has an aggregate cash balances in excess of $ 2.5 million, (5) increases the Seventh Amendment exit fee from $ 25.0 million to $ 35.0 million and (6) waives any noncompliance with covenants as of September 30, 2025.

On October 28, 2025, the Company and Lafayette Square entered into the Tenth Amendment (the "Tenth Amendment") to the 2021 Credit Facility which among other things, allows the Company to request that Lafayette Square exchange and/or convert (each, an "Exchange"), in whole or in part, shares of Series A Convertible Preferred Stock into shares of Class A Common Stock;

provided, that Lafayette Square is permitted to decline any such request.

The Tenth Amendment provides that the ratio for each Exchange shall be, for each share of Series A Convertible Preferred Stock so exchanged, the quotient of (1) the Accumulated Conversion Value (as defined in the Certificate of Designation for the Series A Convertible Preferred Stock) attributable to such share of Series A Convertible Preferred Stock, divided by (2) the volume-weighted average price of the Class A Common Stock for the 20-trading day trailing period immediately preceding the delivery of the notice pursuant to the procedures set forth in the Tenth Amendment, rounded down to the nearest whole share.

The Company and Lafayette Square also agreed to modify the terms related to the Exit Fee such that the amount of the exit fee outstanding is also reduced for any proceeds received by Lafayette Square in connection with such exchanges pursuant to the Tenth Amendment.

Finally, the Tenth Amendment removes the requirement for the Company to make a prepayment of the loans under the 2021 Credit Facility with any proceeds received from the sale of Series A Convertible

Preferred Stock and provides for certain other technical amendments to the 2021 Credit Facility to permit the Exchange.

The Tenth Amendment also provided for a less than $ 0.1 million amendment fee.

As the Ninth Amendment and Tenth Amendment were executed shortly after one another, they were evaluated together for purposes of assessing the transactions under relevant guidance and accounted for as a debt extinguishment.

As a result, the Company recognized a $ 3.8 million loss on early debt extinguishment in the fourth quarter of fiscal 2025.

The Series A Convertible Preferred Stock issued in connection with the Ninth Amendment was recognized at its fair value of $ 9.7 million upon issuance (see Note 4 — Stockholders’ Deficit and Stock-Based Compensation), and the Company established the new effective interest rates for the new debt based on the fair value of the debt.

On January 27, 2026, the Company and Lafayette Square entered into the Eleventh Amendment (the “Eleventh Amendment”) to the 2021 Credit Facility which among other things, (1) modified financial covenants effective December 31, 2025, (2) required the payment of a $ 4.0 million amendment closing fee which allows Lafayette Square to recover the Exit Fee accrued by the Company in the quarter ended December 31, 2025 and (3) modified the principal payment schedule for the outstanding loans under the Term Loan Facility and clarified that the maturity date of the Eighth Amendment Term Loan is September 30, 2026.

At the Company's option, the Company may at any time prepay the outstanding principal balance of the 2021 Credit Facility in whole or in part, without fee, penalty or premium other than the $ 3.5 million amendment closing fee and the $ 4.0 million amendment closing fee due at maturity or prepayment, as defined under the Ninth Amendment and the Eleventh Amendment, respectively.

The obligations under the 2021 Credit Facility are secured by senior, first-priority liens on all or substantially all assets of the Company.

As of December 31, 2024, the Company owed a balance on the 2021 Credit Facility of $ 37.4 million.

Additional deferred financing costs of $ 3.3 million and less than $ 0.1 million were incurred during the year ended December 31, 2024 and 2023, respectively.

Unamortized deferred financing costs as of December 31, 2024 and 2023 were $ 4.2 million and $ 1.7 million, respectively.

Unamortized debt discount related to the interest reserve added under the LS Amendment as of December 31, 2024 and 2023 was $1.7 million and $0, respectively.

Accrued and unpaid interest was $ 0 as of December 31, 2024 and 2023.

As a result of entering into the Ninth and Tenth Amendments and the resulting debt extinguishment treatment, the Company recognized a $ 3.8 million loss on early debt extinguishment in the fourth quarter of fiscal 2025, primarily related to the write-off of $ 3.5 million of deferred financing costs and $ 3.0 million of debt premium, the expensing of $ 3.5 million of lender fees associated with the Ninth Amendment, partially offset by a $ 0.2 million gain on extinguishment representing the difference between the reacquisition price and the net carrying amount of the extinguished debt.

Accrued and unpaid interest was $ 0.8 million and $ 0 as of December 31, 2025 and 2024, respectively.

Accrued and unpaid fees were $ 1.2 million and $ 0 as of December 31, 2025 and 2024, respectively.

2023 Revolving Line of Credit - East West Bank

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The Credit Agreement provides for a revolving credit facility in the principal amount of up to $ 10.0 million, subject to a borrowing base determined based on eligible accounts, and an up to $ 5.0 million uncommitted incremental revolving facility.

Loans under the Credit Agreement mature on July 7, 2025 (the “Maturity Date”), unless the Credit Agreement is otherwise terminated pursuant to the terms of the Credit Agreement.

Borrowings under the Credit Agreement bear interest at a rate per annum equal to the one-month Term SOFR rate as determined by EWB on the first day of the applicable interest period, plus 0.10 %, plus 3.00 % per annum (the “Loan Rate”);

provided, that, in no event shall the Loan Rate be less than 0.50 % of the Loan Rate effective as of the date of the Credit Agreement nor more than the maximum rate of interest allowed under applicable law.

Upon an event of default under the Credit Agreement, the outstanding principal amounts of any advances will accrue interest at a rate per annum equal to the Loan Rate plus five percent ( 5 %), but in no event in excess of the maximum rate of interest allowed under applicable law.

At the Company’s option, the Company may at any time prepay the outstanding principal balance of the Credit Agreement in whole or in part, without fee, penalty or premium.

All accrued but unpaid interest on outstanding advances under the Credit Agreement are payable in monthly installments on the last day of each monthly interest period until the Maturity Date when the then-outstanding principal balance of the advances and all accrued but unpaid interest thereon becomes due and payable.

The obligations under the Credit Agreement are secured by all or substantially all of the borrowers’ assets.

Prior to entering into the Third Amendment as defined below, the Company was required to maintain compliance at all times with financial covenants with varying threshold levels by quarter for fixed charge coverage ratio, total funded debt-to-EBITDA ratio and a liquidity covenant.

Revolving Credit Availability was defined as an amount such that the ratio of the value of eligible accounts to the aggregate amount of all outstanding advances under the credit agreement at such time is not less than 2.0 to 1.0.

Additionally, the amounts outstanding under the Credit Agreement exceeded the Company’s borrowing base as of June 30, 2024 by $ 0.5 million which was addressed in the Third Amendment, requiring a $ 1.0 million principal payment on the outstanding loans under the Credit Agreement as of the date of the Third Amendment.

On October 15, 2024, with an effective date of June 30, 2024, the Company and EWB entered into the Third Amendment to the Credit Agreement (the “Third Amendment”) which, among other things, (1) provided that the Company make prepayments of the outstanding principal balance of the Credit Agreement of $ 1.0 million upon execution of the Third Amendment, $ 1.0 million on or before January 15, 2025 and $ 2.0 million on or before April 15, 2025, (2) required the Company to file a registration statement with the SEC to establish an equity line of credit offering on or before October

31, 2024 and to use commercially reasonable efforts to cause such registration statement to become effective, (3) required the net proceeds of a potential equity line of credit to be applied to the outstanding principal balance under the Credit Agreement in an amount that would cause the ratio of the value of eligible accounts to the aggregate amount of revolving credit advances to be not less than 1.00 to 1.00, (4) requires the consent of EWB prior to the ability of the Company to make certain restricted payments, including cash dividends, (5) requires the Company to make additional prepayments in the amount by which the outstanding loans under the Credit Agreement exceed the borrowing base between the calendar months ending November 30, 2024 and April 15, 2025, and (6) replaced the financial covenants under the Credit Agreement, effective as of June 30, 2024, with varying threshold levels by quarter for minimum trailing twelve months EBITDA, minimum liquid assets, maximum total funded debt to EBITDA leverage ratio, minimum fixed charge coverage ratio and revolving credit availability.

The Third Amendment was accounted for as a modification.

In connection with the amendment, fees paid to third parties totaling less than $ 0.1 million were expensed as incurred.

On December 27, 2024, the Company and EWB entered into the Waiver and Fourth Amendment (the “EWB Amendment”) to Credit Agreement.

Under the terms of the EWB Amendment, among other things, (1) the Company made prepayments on the revolving credit notes under the Credit Agreement equal to $ 5.0 million, consisting of (a) $ 4.0 million from the proceeds of the LS Amendment (as defined above) and (b) $ 1.0 million as the Company's out-of-pocket prepayment, (2) such prepayments were used to permanently reduce the commitment under the Credit Agreement to $ 5.0 million, (3) the financial covenants under the Credit Agreement were amended to implement a minimum unrestricted cash requirement of $ 750,000 at all times and to remove the minimum EBITDA covenant;

Loans under the Credit Agreement originally matured on July 7, 2025 (the “Maturity Date”), unless the Credit Agreement is otherwise terminated pursuant to the terms of the Credit Agreement which was extended per amendments to August 31, 2025.

Borrowings under the Credit Agreement bore interest at a rate per annum equal to the one-month Term SOFR rate, plus 0.10 %, plus 3.00 % per annum (the “Loan Rate”);

with a floor of 0.50 %.

On October 15, 2024, with an effective date of June 30, 2024, the Company and EWB entered into the Third Amendment to the Credit Agreement (the “Third EWB Amendment”) which, among other things, (1) provided that the Company make prepayments of the outstanding principal balance of the Credit Agreement of $ 1.0 million upon execution of the Third EWB Amendment, $ 1.0 million on or before January 15, 2025 and $ 2.0 million on or before April 15, 2025, (2) required the Company to file a registration statement with the SEC to establish an equity line of credit offering on or before October 31, 2024 and to use commercially reasonable efforts to cause such registration statement to become effective, (3) required the net proceeds of a potential equity line of credit to be applied to the outstanding principal balance under the Credit Agreement in an amount that would cause the ratio of the value of eligible accounts to the aggregate amount of revolving credit advances to be not less than 1.00 to 1.00, (4) required the consent of EWB prior to the ability of the Company to make certain restricted payments, including cash dividends, (5) required the Company to make additional prepayments in the amount by which the outstanding loans under the Credit Agreement exceed the borrowing base between the calendar months ending November 30, 2024 and April 15, 2025 in an amount of $ 1.0 million, and (6) replaced the financial covenants under the Credit Agreement, effective as of June 30, 2024, with varying threshold levels by quarter for minimum trailing twelve months EBITDA, minimum liquid assets, maximum total funded debt to EBITDA leverage ratio, minimum fixed charge coverage ratio and revolving credit availability.

The Third EWB Amendment was accounted for as

a modification.

In connection with the Third EWB Amendment, fees paid to third parties totaling less than $ 0.1 million were expensed as incurred.

On December 27, 2024, the Company and EWB entered into the Waiver and Fourth Amendment (the “Fourth EWB Amendment”) to Credit Agreement.

Under the terms of the Fourth EWB Amendment, among other things, (1) the Company made prepayments on the revolving credit notes under the Credit Agreement equal to $ 5.0 million, consisting of (a) $ 4.0 million from the proceeds of the Sixth Amendment Term Loan and (b) $ 1.0 million as the Company's out-of-pocket prepayment, (2) such prepayments were used to permanently reduce the commitment under the Credit Agreement to $ 5.0 million, (3) the financial covenants under the Credit Agreement were amended to implement a minimum unrestricted cash requirement of $ 0.8 million at all times and to remove the minimum EBITDA covenant;

and (4) EWB waived certain existing events of default related to the prior minimum EBITDA covenant.

Additionally, the Company is required to provide to EWB a weekly cash flow forecast, prepared on a cumulative, weekly roll forward basis through a thirteen (13) week projection period.

The Company was in compliance with all the financial covenants under the Credit Agreement, as amended, as of December 31, 2024.

The EWB Amendment was accounted for as a modification.

In connection with the amendment, fees paid to third parties totaling less than $ 0.1 million were expensed as incurred.

The Credit Agreement contains customary representations and warranties and includes affirmative and negative covenants applicable to the borrowers and their respective subsidiaries.

The affirmative covenants include, among others, covenants requiring the Company to maintain its legal existence and governmental compliance, deliver certain financial reports and maintain insurance coverage.

The negative covenants include, among others, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness and dividends and other distributions.

The Credit Agreement also includes customary events of default, including, among other things, non-payment defaults, covenant defaults, inaccuracy of representations and warranties, defaults under any of the loan documents, certain cross-defaults to other indebtedness, certain bankruptcy and insolvency events, invalidity of guarantees or grant of security interest, certain ERISA-related transactions and events, certain orders of forfeiture, change of control, certain undischarged attachments, sequestrations, or similar proceedings, and certain undischarged or non-stayed judgments, in certain cases subject to certain thresholds and grace periods.

The occurrence of an event of default could result in the acceleration of the obligations under the Credit Agreement of the Company or other borrowers.

During the year ended December 31, 2024, the Company incurred less than $ 0.1 million of deferred financing costs associated with the Credit Agreement.

As of December 31, 2024, there was $ 3.7 million outstanding under the Credit Agreement.

The collateral securing the obligations under the 2021 Credit Facility and the Credit Agreement is subject to intercreditor agreements between Lafayette Square and EWB.

Silicon Valley Bank (“SVB”) Financing

On January 9, 2023, the Company entered into a Loan and Security Agreement (the "SVB Loan Agreement"), by and among SVB, as lender, and DDH LLC, the Company, Huddled Masses, Colossus Media and Orange 142, as borrowers.

The SVB Loan Agreement provided for a revolving credit facility (the “SVB Revolving Credit Facility”) in the original principal amount of $ 5 million, subject to a borrowing base determined based on eligible accounts, and up to an additional $ 2.5 million incremental revolving facility subject to the lender’s consent, which would increase the aggregate principal amount of the Credit Facility to $ 7.5 million.

Loans under the SVB Revolving Credit Facility were to mature on September 30, 2024 unless the Credit Facility was otherwise terminated pursuant to the terms of the Loan Agreement.

On March 10, 2023, the California Department of Financial Protection and Innovation closed SVB and appointed the Federal Deposit Insurance Corporation as receiver.

As the Company had not yet drawn any amounts under the SVB Revolving Credit Facility, on March 13, 2023, the Company issued a notice of termination of the SVB Loan Agreement.

The termination of the SVB Revolving Credit Facility became effective April 20, 2023.

Prior to issuing the notice of termination, the Company received consent to terminate the SVB Revolving Credit Facility and a waiver of the terms relating to the SVB Revolving Credit Facility under its Term Loan and Security Agreement, dated as of December 3, 2021,

with Lafayette Square.

The Company did not hold material cash deposits or securities at Silicon Valley Bank and did not experience any adverse impact to its liquidity or to its business operations, financial condition or results of operations as a result of the SVB closure.

During the year ended December 31, 2023, the Company incurred $ 0.3 million of deferred financing costs.

After the Company issued the notice of termination, total deferred financing costs of $ 0.3 million were expensed to loss on early termination of line of credit during the year ended December 31, 2023.

The Fourth EWB Amendment was accounted for as a modification.

In connection with the Fourth EWB Amendment, fees paid to third parties totaling less than $ 0.1 million were expensed as incurred.

On July 17, 2025, the Company entered into the Fifth Amendment (the “Fifth EWB Amendment”) to the Credit Agreement, dated as of July 17, 2025 but effective as of July 7, 2025 which extended the maturity date of the Credit Agreement from July 7, 2025 to July 31, 2025.

In connection with the extension of the maturity date, the Company agreed to pay a $ 50,000 extension fee and agreed to pay additional interest on any loans at the existing loan rate plus 5 % per annum between July 7, 2025 and July 31, 2025.

On August 5, 2025, the Company entered into that certain Sixth Amendment (the “Sixth EWB Amendment”) to the Credit Agreement, dated as of August 5, 2025 but effective as of July 31, 2025 which extended the maturity date of the Credit Agreement from July 31, 2025 to August 31, 2025 (the "revised maturity date").

In connection with the extension of the maturity date, the Company agreed to make a principal payment in an amount equal to $ 0.2 million to reduce the outstanding loan balance by August 15, 2025.

On September 8, 2025, the Company used the proceeds of the Eighth Amendment (as defined above) to repay in full the outstanding loans, fees and other obligations of $ 3.6 million under the Credit Agreement and to terminate the Credit Agreement and release the liens in favor of EWB under the Credit Agreement.

The Company did not incur any termination penalties as a result of the repayment and termination of the Credit Agreement.

Small Business Administration Loans

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The loan is secured by substantially all assets of DDH LLC.

Accrued and unpaid interest expense as of December 31, 2024 and December 31, 2023 was less than $ 0.1 million and is included in accrued liabilities on the consolidated balance sheets.

As of December 31, 2025, future minimum payments related to long-term debt are as follows (in thousands):

2026 $ 12,315

Thereafter 132

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Less debt discount ( 249 )

Long-term debt, net of current portion, deferred financing cost and debt discount $ 31,603

Total long-term debt, including debt premium, net of current portion, deferred financing cost and debt discount $ 146

Note 4 — Stockholders’ Deficit and Stock-Based Compensation

Stockholders’ Equity – Initial Public Offering

Following the completion of the Organizational Transactions, DDH LLC’s limited liability company agreement was amended and restated to, among other things, appoint the Company as the sole managing member of DDH LLC and effectuate a recapitalization of all outstanding preferred units and common units into (i) economic nonvoting units of DDH LLC held by the Company and, through their indirect ownership of DDM, the Company’s Chairman and Chief Executive Officer and President, and (ii) noneconomic voting units of DDH LLC, 100 % of which are held by the Company.

In December 2023, DDM tendered 410,000 of its limited liability company units to the Company in exchange for newly issued shares of Class A Common Stock of the Company on a one -for-one basis.

Stockholders’ Equity

Following the completion of its organizational transactions, DDH LLC’s limited liability company agreement was amended and restated to, among other things, appoint the Company as the sole managing member of DDH LLC and effectuate a recapitalization of all outstanding preferred units and common units into (i) economic nonvoting units of DDH LLC held by the Company and, through their indirect ownership of DDM, the Company’s Chairman and Chief Executive Officer and President, and (ii) noneconomic voting units of DDH LLC, 100 % of which are held by the Company.

During the year ended December 31, 2025, DDM tendered 28,955 of its limited liability company units to the Company in exchange for newly issued shares of Class A Common Stock of the Company on a one -for-one basis.

In connection with these exchanges, an equivalent number of the holder’s shares of Class B Common Stock were cancelled.

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The Company is authorized to issue 760,000,000 shares of Class A Common Stock, par value $ 0.001 per share, 20,000,000 shares of Class B Common Stock, par value $ 0.001 per share, and 10,000,000 shares of preferred stock, par value $ 0.001 per share.

On February 15, 2022, the Company completed its initial public offering of 2,800,000 units (“Units”), each consisting of (i) one share of its Class A Common Stock and (ii) one warrant entitling the holder to purchase one share of its Class A

Common Stock at an exercise price of $ 5.50 per share.

The warrants became immediately exercisable upon issuance and were exercisable for a period of five years after the issuance date.

The shares of Class A Common Stock and warrants were immediately transferable separately upon issuance.

At December 31, 2024, none of these warrants were outstanding.

The underwriters in our initial public offering were granted a 45 -day option to purchase up to an additional 420,000 shares and/or warrants, or any combination thereof, to cover over-allotments, which they initially exercised, in part, electing to purchase warrants to purchase an additional 420,000 shares of Class A Common Stock.

As of December 31, 2024, none of these warrants were outstanding.

In connection with the Company’s initial public offering, the Company issued to the underwriters of the offering a unit purchase option to purchase (i) an additional 140,000 Units at a per Unit exercise price of $ 6.60 , which was equal to 120 % of the public offering price per Unit sold in the initial public offering, and (ii) warrants to purchase 21,000 shares of Class A Common Stock at a per warrant exercise price of $ 0.012 , which was equal to 120 % of the public offering price per warrant sold in the offering.

A group of underwriters exercised 70,000 Units and 10,500 warrants in November 2023.

At December 31, 2024, 70,000 Units and 10,500 warrants were outstanding.

The warrants had a fair value of $ 0 that was calculated using the Black-Scholes option-pricing model.

The number of authorized shares of Class A Common Stock increased from 160,000,000 to 760,000,000 pursuant to approval by the Company's stockholders on October 13, 2025 which became effective upon filing of a certificate of amendment to the Company’s Amended and Restated Certificate of Incorporation on November 5, 2025.

In connection with the Company's initial public offering of units (“Units”), each consisting of (i) one share (subject to adjustment for the Company’s 55-to-1 reverse stock split) of its Class A Common Stock and (ii) one warrant (subject to adjustment for the Company’s 55-to-1 reverse stock split) entitling the holder to purchase one share of its Class A Common Stock at an exercise price of $ 302.50 per share, the Company issued to the underwriters of the offering a unit purchase option to purchase (i) an additional 2,545 Units at a per Unit exercise price of $ 363.00 , which was equal to 120 % of the public offering price per Unit sold in the initial public offering, and (ii) underwriter warrants to purchase 381 shares of Class A Common Stock at a per warrant exercise price of $ 0.66 , which was equal to 120 % of the public offering price per warrant sold in the offering.

A group of underwriters exercised 1,272 Units and 190 underwriter warrants in November 2023.

At December 31, 2025, 1,272 Units and 190 underwriter warrants were outstanding while there were no public warrants outstanding as of December 31, 2025 and 2024.

The underwriter warrants had a fair value of $ 0 that was calculated using the Black-Scholes option-pricing model and were equity classified.

Variables used in the Black-Scholes option-pricing model include:

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Treasury bill rate, (2) expected life of 5 years, (3) expected volatility of approximately 66 % based on the trading history of similar companies, and (4) zero expected dividends.

On August 29, 2023, the Company filed a Tender Offer Statement on Schedule TO pursuant to which the Company offered to purchase all of its outstanding warrants for $ 1.20 per warrant in cash.

The Tender Offer expired at one minute after 11:59 PM, Eastern Time on September 28, 2023.

The Company accepted all validly tendered warrants for purchase and settlement on October 2, 2023.

As a result of the Tender Offer, a total of 2,213,652 warrants were tendered and not validly withdrawn prior to the expiration of the tender offer for a total purchase price of approximately $ 2.7 million.

On October 23, 2023, the Company distributed a notice of redemption to the registered holders of the remaining outstanding warrants announcing the redemption of those warrants for $ 0.35 per warrant.

The redemption closed on October 30, 2023, and all remaining 1,004,148 warrants were purchased for an aggregate price of approximately $ 0.4 million.

Equity Reserve Facility

On October 18, 2024, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with New Circle Principal Investments LLC, a Delaware limited liability company (“New Circle”), pursuant to which New Circle has committed to purchase, subject to certain limitations, up to $ 20 million (the “Total Commitment”) of the Company’s Class A Common Stock, par value $ 0.001 per share (the “Class A Common Stock”).

On October 18, 2024, the Company entered into a Share Purchase Agreement (as amended the “Purchase Agreement” and the facility as a whole, the "Equity Reserve Facility") with New Circle Principal Investments LLC, a Delaware limited

liability company (“New Circle”), and subsequently entered into an amendment with New Circle on October 24, 2025 (the “Amendment”) pursuant to which New Circle has committed to purchase, subject to certain limitations, up to $ 100 million (the “Total Commitment”) of the Company’s Class A Common Stock, par value $ 0.001 per share (the “Class A Common Stock”).

Under the applicable Nasdaq rules, the Company was not permitted to issue to New Circle under the Purchase Agreement more than 19.99 % of the shares of all classes of the Company’s common stock outstanding immediately prior to the execution of the Purchase Agreement (the “Exchange Cap”), unless (i) the Company obtained stockholder approval to issue shares of its Class A Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average purchase price per share paid by New Circle for all shares of the Company’s Class A Common Stock, if any, that the Company elected to sell to New Circle under the Purchase Agreement equaled or exceeded certain minimums permitted under the rules of the Nasdaq Stock Market.

The purchase price of the shares that may be sold to New Circle under the Purchase Agreement is based on an agreed upon fixed discount to the market price of our Class A Common Stock as computed under the Purchase Agreement.

On December 27, 2024, the Company’s stockholders approved the issuance and sale of up to 8.5 million shares above the Exchange Cap to New Circle under the Purchase Agreement.

On December 27, 2024, October 13, 2025 and December 30, 2025, the Company’s stockholders approved the issuance and sale of up to 154,545 , 909,090 and 1,818,181 shares, respectively, above the Exchange Cap to New Circle under the Purchase Agreement.

As consideration for New Circle’s irrevocable commitment to purchase shares of the Company’s Class A Common Stock upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, the Company paid New Circle structuring and legal fees of less than $ 0.1 million.

In addition, the Company issued 62,762 shares of the Company’s Class A Common Stock to New Circle.

In addition, the Company issued 1,141 shares of the Company’s Class A Common Stock to New Circle in October 2024, and an incremental 1,818 shares of the Company’s Class A Common Stock on October 24, 2025 in connection with the Amendment.

The Company sold 28,727 shares of the Company's Class A Common Stock for $ 3.0 million during the year ended December 31, 2024.

In 2025, through the date of this report, the Company sold an additional 1,389,351 shares of the Company's Class A Common Stock for $ 1.9 million.

The Purchase Agreement will automatically terminate on the earliest of (i) the 36-month anniversary of the of the Purchase Agreement, (ii) the date on which New Circle shall have made payment to the Company for Class A Common Stock equal to the Total Commitment or (iii) the date any statute, rule, regulation, executive order, decree, ruling or injunction that would prohibit any of the transactions contemplated by the Purchase Agreement goes into effect.

During the year ended December 31, 2025, the Company sold 433,806 shares of the Company's Class A Common Stock for $ 7.3 million.

During the year ended December 31, 2025, the Company incurred incremental issuance costs, which were expensed in the consolidated statements of operations, given the nature of the Equity Reserve Facility.

The Purchase Agreement will automatically terminate on the earliest of (i) the 36-month anniversary of the Purchase Agreement, (ii) the date on which New Circle shall have made payment to the Company for Class A Common Stock equal to the Total Commitment or (iii) the date any statute, rule, regulation, executive order, decree, ruling or injunction that would prohibit any of the transactions contemplated by the Purchase Agreement goes into effect.

The Company has the right to terminate the Purchase Agreement at any time, at no cost or penalty, upon five trading days’ prior written notice to New Circle so long as (a) there are no outstanding purchase notices under which our Class A Common Stock have yet to be issued and (b) the Company has paid all amounts owed to New Circle pursuant to the Purchase Agreement.

The Company and New Circle may also agree to terminate the Purchase Agreement by mutual written consent.

Series A Convertible Preferred Stock

Pursuant to the terms of the Seventh Amendment and pursuant to authority expressly vested in the Company’s board of directors as set forth in the Company’s Amended and Restated Certificate of Incorporation, on August 8, 2025, the Board authorized and the Company filed the Certificate of Designation of Series A Convertible Preferred Stock (the “Certificate of Designation’) with the Secretary of State of the State of Delaware, which established the Series A Convertible Preferred Stock in the amount of $ 25.0 million.

Pursuant to the terms of the Ninth Amendment, on October 15, 2025, the Company filed the Amended and Restated Certificate of Designation of Series A Convertible Preferred Stock (the “A&R Certificate of Designation”) with the Secretary of State of the State of Delaware, which amended and restated in its entirety the Certificate of Designation and established an additional $ 10.0 million of Series A Convertible Preferred Stock.

The A&R Certificate of Designation sets forth the rights, preferences, powers, restrictions and limitations of the Series A Convertible Preferred Stock.

Capitalized terms not otherwise defined in this item shall have the meanings given to such terms in the A&R Certificate of Designation.

The Series A Convertible Preferred Stock is not redeemable outside of the Company’s control and is therefore classified in permanent equity as of December 31, 2025.

The following is a summary of key terms of the Series A Convertible Preferred Stock, as amended by the A&R Certificate of Designation:

Designation and Amount.

The number of shares initially designated as Series A Convertible Preferred Stock was 25,000 .

Under the A&R Certificate of Designation, the number of shares designated as Series A Convertible Preferred Stock was increased by 10,000 to a total of 35,000 shares of Series A Convertible Preferred Stock.

The Series A Convertible Preferred Stock have a par value $ 0.001 per share and a stated value of $ 1,000 per share of Series A Convertible Preferred Stock (the “Conversion Value”), which shall be increased for any accrued and unpaid dividends.

The shares of Series A Convertible Preferred Stock carry a cumulative Dividend, compounded monthly, at a dividend rate of ten percent ( 10 %) per annum.

The Series A Convertible Preferred Stock will be senior to the Company’s Class A Common Stock, Class B Common Stock and all other series or classes of stock and equity securities of the Company that do not expressly rank senior to, or that are not pari passu with, the Series A Convertible Preferred Stock, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.

Voting Right and Protective Provisions.

Subject to certain limitations described in the A&R Certificate of Designation, the Series A Convertible Preferred Stock is voting stock with Holders entitled to vote together with the Common Stock on an as-if-converted-to-Common-Stock basis.

In addition, the A&R Certificate of Designation provides for certain protective provisions for Holders of Series A Convertible Preferred Stock, which apply at any time when at least 12,525 shares of Series A Convertible Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Convertible Preferred Stock) are outstanding.

At the option of the Holder thereof, each share of Series A Convertible Preferred Stock shall be convertible into the number of Conversion Shares equal to the Accumulated Conversion Value divided by $ 137.50 per share of Class A Common Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization), rounded down to the nearest whole share.

In the event of any Liquidation, the Holders of shares of Series A Convertible Preferred Stock then outstanding will be entitled to be paid out ahead of lower ranked securities and at an amount per share equal to three times ( 3.00 x) the Accumulated Conversion Value thereof with ratable distribution if assets are not sufficient to pay out at Accumulated Conversion Value.

During the year ended December 31, 2025, Lafayette Square exchanged 7,923 shares of Series A Convertible Preferred Stock for 545,455 shares of Class A Common Stock pursuant to the Tenth Amendment to the 2021 Credit Facility.

As of December 31, 2025, the amount of cumulative preferred dividends in arrears totaled $ 1.1 million representing $ 41.47 per preferred share of which $ 0.1 million was recorded as accrued liabilities in the consolidated balance sheet.

In October 2025, the terms of the initial issuance of $ 25.0 million Series A Convertible Preferred Stock were modified by the A&R Certificate of Designation, as described above, and the exchange mechanism between Lafayette Square and the Company was modified in the Ninth and Tenth Amendments.

The Company analyzed whether the change in terms constituted a modification or extinguishment, pursuant to the related authoritative guidance, and engaged an independent third-party valuation firm to assist with determining the fair value of the Series A Convertible Preferred Stock immediately before and after the change in terms.

Because the increase in fair value was substantive, the Company determined the change in terms resulted in extinguishment.

Accordingly, the Company recorded the resulting difference in fair value of approximately $ 3.3 million as a deemed dividend for the holders of Series A Convertible Preferred Stock.

Because the Company is in an accumulated deficit position, the deemed dividend was recorded to additional paid-in capital and increased the net loss allocated to Class A shareholders for the year ended December 31, 2025.

Continuation Capital Settlement Agreement

On November 20, 2025, the Company entered into a Settlement Agreement (the “Settlement Agreement”) with Continuation Capital, Inc.

(“Continuation Capital”), pursuant to which we agreed to issue up to 909,090 shares of Class A Common Stock (the “Exchange Shares”) in exchange for the release of certain claims held by Continuation Capital related to third party vendor payables separately assigned to Continuation Capital in the amount of $ 3 million.

The Exchange Shares will be sold to Continuation Capital at a price of 76 % of the lower of (a) the volume weighted average sale price of the Class A Common Stock on Nasdaq during the “Valuation Period,” which is the five day trading period, inclusive of the day of the share request under the Settlement Agreement, which will be extended as necessary to account for multiple tranches of issuances or (b) the average of the four lowest of the most recent five closing prices during the Valuation Period, as defined in the Settlement Agreement.

Additionally, as partial consideration for the entry into the Settlement Agreement, the Company paid Continuation Capital a settlement fee of 1,727 shares of Class A Common Stock.

The Settlement Agreement was approved on November 21, 2025 by a court following a hearing held on that same date, in which the court determined that Settlement Agreement is fair to Continuation Capital.

Accordingly, the issuance of securities under the Settlement Agreement will be exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 3(a)(10) thereunder.

From the date the Settlement Agreement was executed through December 31, 2025, $ 0.7 million has been paid to third party vendors and 209,162 shares have been issued pursuant to the program.

Subsequent to December 31, 2025 through the date of this report, $ 0.9 million has been paid to third party vendors and 608,164 shares have been issued pursuant to the program.

Noncontrolling Interest

Direct Digital Holdings, Inc.

is the sole managing member of DDH LLC, and consolidates the financial results of DDH LLC.

is the sole managing member of DDH LLC, and consolidates the financial results of DDH LLC but does not own all the economic interests in DDH LLC.

Therefore, Direct Digital Holdings, Inc.

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The Company’s board of directors reserved 63,636 shares of Class A Common Stock for issuance in equity awards under the 2022 Omnibus Plan.

On June 9, 2025 and December 30, 2025, the Company's stockholders approved amendments to the 2022 Omnibus Plan to increase the number of shares issuable by 72,727 shares and 163,636 shares, respectively.

Information on activity for both the stock options and RSUs is detailed below.

As of December 31, 2025, there were 254,309 shares available for grant under the 2022 Omnibus Plan.

During the years ended December 31, 2024 and 2023, the Company recognized $ 1.6 million and $ 2.1 million, respectively, of total stock-based compensation expense in the consolidated statement of operations in compensation, tax and benefits.

The 2023 stock-based compensation expense includes $ 1.4 million of bonus accrued for 2023 performance by certain Company executives which was paid out via a grant of Company stock in March 2024.

During the years ended December 31, 2025 and 2024, the Company recognized $ 1.5 million and $ 1.6 million, respectively, of total stock-based compensation expense in the consolidated statements of operations in compensation, taxes and benefits.

Stock Options

Options to purchase shares of common stock vest annually on the grant date anniversary over a period of three years and expire 10 years following the date of grant.

Options to purchase shares of common stock vest annually on the grant date anniversary over vesting periods of one to three years and expire 10 years following the date of grant.

The following table summarizes the stock option activity under the 2022 Omnibus Plan during the year ended December 31, 2025:

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Vested and exercisable at December 31, 2025 5,217 $ 126.05 6.65 $ —

The total fair value of options vested during the year was $ 0.2 million.

As of December 31, 2025, unrecognized stock-based compensation of $ 0.2 million was related to 11,080 of unvested stock options which will be recognized on a straight-line basis over a weighted-average vesting period of 0.67 years.

Restricted Stock Units

RSUs generally vest annually on the grant date anniversary over a period of three years .

RSUs generally vest annually on the grant date anniversary over vesting periods of one to three years .

A summary of RSU activity during the year ended December 31, 2025 and related information is as follows:

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The majority of vested RSUs were net share settled such that the Company withheld shares with a value equivalent to the employees’ obligation for the applicable income and other employment taxes.

The total shares withheld were 99,550 and were based on the value of the RSUs on their respective vesting dates as determined by the Company’s closing stock price.

The total shares withheld were 1,212 (including 451 sold as of December 31, 2025) and were based on the value of the RSUs on their respective vesting dates as determined by the Company’s closing stock price.

As of December 31, 2025, there was unrecognized stock-based compensation of $ 0.3 million related to unvested RSUs which will be recognized on a straight-line basis over a weighted average period of 0.55 years.

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Pursuant to the Company’s election under Section 754 of the Code in 2022, the Company expects to obtain an increase in its share of the tax basis in the net assets of DDH, LLC when LLC interests are redeemed or exchanged by the members of DDH, LLC.

In December 31, 2023, members of DDM exchanged 410,000 Class B shares into Class A shares.

The Company has recorded a liability related to the tax receivable agreement of $ 0 and $ 5.2 million as of December 31, 2024 and 2023, respectively.

The Company has recorded a deferred tax asset of $ 0 and $ 6.2 million as of December 31, 2024 and 2023, respectively.

The deferred tax asset is net of a valuation allowance of $ 7.7 million and $ 0.5 million as of December 31, 2024 and 2023, respectively.

Payments of $ 0 and less than $ 0.1 million were made during the years ended December 31, 2024 and 2023.

During the year ended December 31, 2025, members of DDM exchanged 28,955 Class B shares into Class A shares.

The Company has recorded a liability related to the tax receivable agreement of less than $ 0.1 million as of December 31, 2025 and 2024, respectively.

The Company has recorded a deferred tax asset of $ 0 as of December 31, 2025 and 2024 which is net of a valuation allowance of $ 13.4 million and $ 7.7 million as of December 31, 2025 and 2024, respectively.

No TRA payments were made during the years ended December 31, 2025 and 2024.

The payments under the TRA will not be conditional on holder of rights under the TRA having a continued ownership interest in either DDH LLC or the Company.

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The Company accounts for any amounts payable under the TRA in accordance with ASC Topic 450, Contingencies, and recognizes subsequent period changes to the measurement of the liability from the TRA in the statement of operations as a component of income before taxes.

For the year ended December 31, 2024, $ 5.2 million was recognized as income under other income (expense) due to the derecognition of the TRA liability, as a valuation allowance was recorded against the deferred taxes associated with the TRA.

For the years ended December 31, 2025 and 2024, $ 0 and $ 5.2 million were recorded as income in other income (expense), net of such change.

The term of the TRA commenced upon completion of the initial public offering and will continue until all tax benefits that are subject to the TRA have been utilized or expired, unless the Company exercises its right to terminate the TRA.

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the TRA would accelerate and the Company would be required to make an immediate payment equal to the present value of the anticipated future payments to be made by the Company under the TRA.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, a final standard on improvements to income tax disclosures.

The Company adopted this standard effective January 1, 2025 using a retrospective approach.

Through the Organizational Transactions completed in February 2022, the Company formed an Up-C structure which allows DDM to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership for U.S.

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Under the Up-C structure, the Company is subject to corporation income tax based on the ownership.

There was no exchange of shares of Class B Common Stock for shares of Class A Common Stock in the year ended December 31, 2024.

The components of income tax expense are as follows (in thousands):

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Federal $ — $ 5,192

State 940 363

Total deferred — 6,132

Total income tax expense $ — $ 6,132

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows (in thousands):

Year Ended December 31,

Federal income tax expense at statutory rate 21.0 % 21.0 %

State income tax expense — % 0.6 %

Partnership income not taxed ( 22.0 ) % ( 17.0 ) %

Amount Percent Amount Percent

Federal income tax benefit at statutory rate $ ( 5,822 ) 21.0 % $ ( 2,893 ) 21.0 %

State income tax (benefit) expense (1)

( 292 ) 1.0 % 986 ( 7.1 ) %

Partnership income not subject to tax 3,158 ( 11.4 ) % 3,031 ( 22.0 ) %

Valuation allowance 2,957 ( 10.6 ) % 6,168 ( 44.8 ) %

Deferred tax remeasurement — % ( 6.5 ) %

Derecognition of tax receivable agreement liability — — % ( 1,092 ) 7.9 %

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Effective income tax rate $ — — % $ 6,132 ( 44.5 ) %

(1) The states and local jurisdiction that contribute to the majority (greater than 50%) of the tax effect in this category include California, District of Columbia, Georgia, Tennessee and Texas.

Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting and the amounts used for tax purposes.

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The Company recorded a valuation allowance of $ 13.4 million against its deferred tax assets at December 31, 2025.

The valuation allowance increased by $ 7.2 million when compared to the valuation allowance $ 0.5 million recorded as of December 31, 2023.

The valuation allowance increased by $ 5.7 million when compared to the valuation allowance of $ 7.7 million recorded as of December 31, 2024.

Federal income taxes paid (net of refunds) were $ 0 and $ 0.1 million for the years ended December 31, 2025 and December 31, 2024, respectively.

State and local income taxes paid (net of refunds) were less than $ 0.1 million for the years ended December 31, 2025 and December 31, 2024.

Federal income taxes paid (net of refunds) were $ 0 and $ 0.1 million for the years ended December 31, 2025 and December 31, 2024, respectively.

State and local income taxes paid (net of refunds) were less than $ 0.1 million for the years ended December 31, 2025 and December 31, 2024.

Utilization of net operating loss and tax credit carryforwards may be subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended, in the event of a change in the Company’s ownership, as defined.

The annual limitation may result in the expiration of the net operating loss and tax credit before utilization.

Public ownership of the Company changed from 33 % to 89 % as of December 31, 2024 and 2025, respectively, which likely indicates a Section 382 ownership change.

The Company will monitor and perform a full 382/383 assessment to determine if a true ownership change occurred.

In the case of such a change, the net operating loss carryforwards and tax credit carryforwards may be subject to annual limitations before being applied to reduce future income tax liabilities.

The Company files income tax returns in the United States federal jurisdiction and various state jurisdictions.

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Accordingly, the Company has not recognized any penalty, interest or tax impact related to uncertain tax positions.

On July 4, 2025, new tax legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), was enacted effectively extending certain provisions of the 2017 Tax Cuts and Jobs Act, including adjusting a number of provisions that were subject to sunsets, phase-outs, or phase-ins.

While most of the changes made by OBBBA are effective in future tax years, some of its provisions are effective in the current tax year.

The Company determined that OBBBA had no material impact on its consolidated financial statements.

Note 6 — Related Party Transactions

Up-C Structure

In February 2022, the Company completed an initial public offering of its securities, and through the Organizational Transactions, formed an Up-C structure, which is often used by partnerships and limited liability companies and allows DDM, a Delaware limited liability company indirectly owned by Mark Walker (“Walker”) and Keith Smith (“Smith”), to retain its equity ownership in DDH LLC and to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity, for U.S.

In February 2022, the Company completed an initial public offering of its securities, and through its organizational transactions, formed an Up-C structure, which is often used by partnerships and limited liability companies and allows DDM, a Delaware limited liability company indirectly owned by Mark Walker (“Walker”) and Keith Smith (“Smith”), to retain its equity ownership in DDH LLC and to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity, for U.S.

federal income tax purposes.

DDM holds economic nonvoting LLC Units in DDH LLC and holds noneconomic voting equity interests in the form of the Class B Common Stock in Direct Digital Holdings (See Note 4 — Stockholders’ Deficit and Stock-Based Compensation).

One of the tax benefits to DDM associated with this structure is that future taxable income of DDH LLC that is allocated to DDM will be taxed on a pass-through basis and therefore will not be subject to corporate taxes at the entity level.

One of the tax

benefits to DDM associated with this structure is that future taxable income of DDH LLC that is allocated to DDM will be taxed on a pass-through basis and therefore will not be subject to corporate taxes at the entity level.

Additionally, DDM may, from time to time, redeem or exchange its LLC Units for shares of the Company’s Class A Common Stock on a one -for-one basis.

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Short term $ 41 $ 41

Long term — 5,201

Total liability related to tax receivable agreement $ 41 $ 41

Lafayette Square

As a result of the Seventh Amendment between the Company and Lafayette Square in which debt owed to Lafayette Square was converted to Series A Convertible Preferred Stock, Lafayette Square became a related party to the Company.

The consolidated financial statements have been updated to reflect the reclassification of the relevant term loans from short-term debt to related-party short-term debt, and corresponding reclassifications were also made to the current portion of long-term debt and accrued liabilities to reflect the related party relationship.

Note 7 — Segment Information

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Total revenues $ 34,694 $ 62,288

Operating loss by business segment reconciled to loss before income taxes is as follows (in thousands):

Income from reportable segment operations reconciled to loss before income taxes is as follows (in thousands):

Year Ended December 31,

Sell-side advertising (1)

$ ( 4,021 ) $ ( 579 )

Buy-side advertising (2)

Corporate office expenses ( 16,655 ) ( 14,851 )

Total operating loss ( 13,233 ) ( 2,185 )

Corporate other expense ( 542 ) ( 4,091 )

Income from reportable segment operations 933 3,422

Corporate office expense ( 28,656 ) ( 17,197 )

Loss before income taxes $ ( 27,723 ) $ ( 13,775 )

(1) For the year ended December 31, 2025, sell-side segment contained $ 0.1 million in depreciation and amortization of property, equipment and software, $ 0 in amortization of intangible assets and $ 0 in amortization of deferred financing cost and debt discount (premium), net.

For the year ended December 31, 2024, sell-side segment contained $ 0.2 million in depreciation and amortization of property, equipment and software, $ 0 in amortization of intangible assets and $ 0 in amortization of deferred financing cost and debt discount (premium), net.

(2) For the year ended December 31, 2025, buy-side segment contained less than $ 0.1 million in depreciation and amortization of property, equipment and software, $ 1.9 million in amortization of intangible assets and $ 0 in amortization

of deferred financing cost and debt discount (premium), net.

For the year ended December 31, 2024, buy-side segment contained less than $ 0.1 million in depreciation and amortization of property, equipment and software, $ 2.0 million in amortization of intangible assets and $ 0 in amortization of deferred financing cost and debt discount (premium), net.

Total assets by business segment are as follows (in thousands):

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Buy-side advertising 16,503 18,664

Assets from reportable segment operations 18,494 22,419

Corporate office 1,662 3,587

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Note 8 — Net Loss Per Share

The Company has two classes of common stock, Class A and Class B.

Shares of the Company’s Class B Common Stock do not share in the earnings or losses attributable to Direct Digital Holdings, Inc.

The Company has two classes of common stock, Class A and Class B, and one class of preferred stock, Series A Convertible Preferred Stock.

The holders of Series A Convertible Preferred Stock are contractually entitled to receive a cumulative dividend, whether or not declared.

In calculating the net loss attributable to Class A shareholders, the numerator for basic and diluted EPS is adjusted for the impact of the contractual amount of dividends payable to holders of Series A Convertible Preferred Stock.

Neither shares of the Company’s Class B Common Stock nor the Company's Class A Convertible Preferred Stock share in the earnings or losses attributable to Direct Digital Holdings, Inc.

and are therefore not participating securities.

The Company uses the two-class method to calculate basic and diluted earnings per share as a result of outstanding participating securities in the form of warrants.

The holders of warrants do not have a contractual obligation to share in the Company’s losses.

As such, losses are attributed entirely to common stockholders and for periods in which the Company has reported a net loss, diluted loss per common share is the same as basic loss per common share.

The following

table sets forth the computation of the Company’s basic and diluted net loss per share (in thousands, except per share amounts):

The following table sets forth the computation of the Company’s basic and diluted net loss per share (in thousands, except per share amounts):

Year Ended December 31,

Net loss attributable to Class A shareholders and participating securities ( 6,236 ) ( 2,194 )

net loss allocated to participating securities — —

Net loss attributable to Class A shareholders and Series A preferred stockholders $ ( 18,946 ) $ ( 6,236 )

Series A preferred stockholders cumulative and deemed dividends 4,411 —

Net loss allocated to Class A shareholders $ ( 23,357 ) $ ( 6,236 )

Weighted average common shares outstanding - basic 3,758 2,988

Class B Common Stock — —

Options to purchase common stock — —

Unvested restricted stock units — —

Weighted average common shares outstanding - diluted 3,758 2,988

Net loss per common share, basic $ ( 1.66 ) $ ( 0.73 )

Net loss per common share, diluted $ ( 1.66 ) $ ( 0.73 )

Weighted average common shares outstanding - basic and diluted 308 68

Net loss per common share, basic and diluted $ ( 75.79 ) $ ( 91.26 )

The following weighted-average outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been anti-dilutive (in thousands):

Year Ended December 31,

Series A convertible preferred stock 81 —

Class B Common Stock 188 198

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As of the date hereof, except as set forth below, we are not a party to any material legal or administrative proceedings nor are there any proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.

Litigation or

any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our management’s time and attention.

On May 10, 2024, the Company was the subject of a defamatory article / blog post.

In connection with this post, one of the Company’s sell-side customers paused its connection to the Company while the allegations were investigated.

This customer reconnected the Company on May 22, 2024 and sell-side volumes have resumed but not yet at the levels experienced prior to the pause in May 2024.

The Company is actively working with its partners to achieve prior volume levels.

In May 2024, the Company, as plaintiff, filed a lawsuit against the author of the defamato ry article.

On March 5, 2025, the United States District Court for the District of Maryland denied the defendant’s motion to dismiss in its entirety, and the Company will continue to vigorously pursue its claims and rights.

This customer reconnected the Company on May 22, 2024 and sell-side volumes have resumed but not yet at the levels experienced prior to the pause in May 2024 which has created a significant disruption in the Company's sell-side business.

During 2025, the Company worked with its partners to achieve prior sell-side volume levels but was unable to achieve historical volumes for the year.

In May 2024, the Company, as plaintiff, filed a lawsuit against the author of the defamatory article.

On March 5, 2025, the United States District Court for the District of Maryland denied the defendant’s motion to dismiss in its entirety.

On March 9, 2026, the Court granted the Company's motion to dismiss counterclaims but granted the defendant 21 days to amend their counterclaim.

The Company will continue to vigorously pursue its claims and rights and any defenses against counterclaims.

The Company cannot make any predictions about the final outcome of this litigation matter or the timing thereof.

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District Court for the Southern District of Texas, alleging violations of federal securities laws related to alleged false or misleading disclosures made by the Company in its public filings.

On July 9, 2024, another alleged stockholder filed a similar securities class action against the

Company, certain of our officers and directors, also in the Southern District of Texas.

On July 9, 2024, another alleged stockholder filed a similar securities class action against the Company, certain of our officers and directors, also in the Southern District of Texas.

The two actions have been consolidated.

Each of these complaints seeks unspecified damages, plus costs, fees, and attorneys’ fees.

On August 7, 2025, the district court granted the Company's motion to dismiss in full and with prejudice.

The lead plaintiff has since appealed that dismissal and has filed an opening brief which was due to the court on November 3, 2025.

The Company filed a response brief on January 2, 2026.

The lead plaintiff filed a reply brief on February 6, 2026.

The Company now awaits the Court's decision about whether to set the case for oral argument.

The Company cannot make any predictions about the final outcome of this matter or the timing thereof but believes that plaintiffs’ claims lack merit and intends to vigorously defend these lawsuits.

Other Expense (within Operating Expenses)

Typically, short payments received from our customers are charged back to our publishers, in accordance with our contracts with the publishers.

In January 2024, we received notice from one of our sell-side customers that it would be short paying the Company’s invoices.

The Company has requested, but has not yet received, an explanation from the customer for the short payment, and therefore the Company disputed it.

Because this information has not been received, the Company paid $ 8.8 million to a few publishers related to these charges.

As a result, for the year ended December 31, 2023, the Company has not recognized revenue related to the short payments and recognized $ 8.8 million in other expense related to the payments made to the publishers.

Although the Company is attempting to recover these amounts, recovery is neither estimable or probable and there can be no assurance that the Company will recover any amounts associated with this matter.

We do not expect these amounts to recur in any material fashion, although there is no assurance that customers will not take such action in the future.

Contingent Liability for Exit Fee

As further described in Note 3 — Long-Term Debt, the Seventh Amendment, Ninth Amendment and Tenth Amendment established an Exit Fee of up to $ 35.0 million due to Lafayette Square upon the redemption in full of the Series A Convertible Preferred Stock with reductions in the amount of the Exit Fee outstanding for any amounts of the Series A Convertible Preferred Stock redeemed, converted or exchanged.

Since it was established, the Exit Fee has been reduced by (1) $ 4.3 million for proceeds received by Lafayette upon exchanges pursuant to the Tenth Amendment during the quarter ended December 31, 2025 and (2) $ 3.6 million for the loss on Exit Fee recognized during the quarter ended December 31, 2025 for the difference between the face value of the Series A Convertible Preferred Stock exchanged and the proceeds received by Lafayette upon the exchange.

As of December 31, 2025, the maximum potential amount of the Exit Fee that could be payable is $ 27.1 million.

The timing and occurrence of a full redemption are uncertain and may be indefinite.

Accordingly, management has concluded that payment of the maximum potential amount of the Exit Fee as of December 31, 2025 is not probable as of the reporting date and that the ultimate amount of any such payment cannot be reasonably estimated.

As a result, no additional liability has been recorded in the accompanying consolidated financial statements.

The Company will reassess the likelihood and amount of any Exit Fee obligation in future periods as facts and circumstances change.

Continuation Capital Settlement Agreement

As described in Note 4 — Stockholders’ Deficit and Stock-Based Compensation, on November 20, 2025, the Company entered into the Settlement Agreement with Continuation Capital, pursuant to which we agreed to issue the Exchange Shares in exchange for the release of certain claims held by Continuation Capital related to third party vendor payables separately assigned by the Company to Continuation Capital in the amount of $ 3 million.

From the date the Settlement Agreement was executed through December 31, 2025, $ 0.7 million has been paid to third party vendors and 209,162 shares have been issued pursuant to the Settlement Agreement.

Subsequent to December 31, 2025 through the date

of this report, $ 0.9 million has been paid to third party vendors and 608,164 shares have been issued pursuant to the Settlement Agreement.

Operating Leases

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The future payments due under operating leases as of December 31, 2025 is as follows (in thousands):

Thereafter 29

Total undiscounted lease payments 955

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December 31, 2025

Thereafter 1,239

Total future amortization expense $ 7,852

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk