Direct Digital Holdings, Inc. 10-K

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk As a “smaller reporting company,” we are not required to provide the information required by this Item 7A. 58 Table of Contents ITEM 8. Consolidated Financial Statements and Supplementary Data DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm (PCAOB ID Number 243 ) 60 Consolidated Balance Sheets 61 Consolidated Statements of Operations 62 Consolidated Statements of Changes in Stockholders’ Deficit 63 Consolidated Statements of Cash Flows 64 Notes to the Consolidated Financial Statements 65 59 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Direct Digital Holdings, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Direct Digital Holdings, Inc. (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. Going Concern Uncertainty The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered significant disruption in its sell-side business and, among other things, has limited funds to meet certain upcoming obligations which, collectively, raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ BDO USA, P.C. We have served as the Company’s auditor since 2024. New York, New York March 31, 2026 60 Table of Contents DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share and par value amounts) December 31, 2025 2024 ASSETS CURRENT ASSETS Cash and cash equivalents $ 728 $ 1,445 Accounts receivable, net of provision for credit losses of $ 944 and $ 978 3,126 4,973 Prepaid expenses and other current assets 890 2,117 Total current assets 4,744 8,535 Property, equipment and software, net 166 341 Goodwill 6,520 6,520 Intangible assets, net 7,852 9,730 Operating lease right-of-use assets 702 832 Other long-term assets 172 48 Total assets $ 20,156 $ 26,006 LIABILITIES AND STOCKHOLDERS’ DEFICIT CURRENT LIABILITIES Accounts payable $ 7,820 $ 7,657 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 Total current liabilities 26,425 13,350 Long-term debt, net of current portion, deferred financing cost and debt discount 146 31,603 Operating lease liabilities, net of current portion 608 783 Total liabilities 27,179 45,736 COMMITMENTS AND CONTINGENCIES (Note 9) STOCKHOLDERS’ DEFICIT 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 1 — 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 Accumulated deficit ( 27,720 ) ( 8,774 ) Noncontrolling interest ( 5,115 ) ( 14,742 ) Total stockholders’ deficit ( 7,023 ) ( 19,730 ) Total liabilities and stockholders’ deficit $ 20,156 $ 26,006 See accompanying notes to the consolidated financial statements. 61 Table of Contents DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per-share data) For the Year Ended December 31, 2025 2024 Revenues Sell-side advertising $ 5,335 $ 35,660 Buy-side advertising 29,359 26,628 Total revenues 34,694 62,288 Cost of revenues Sell-side advertising 8,049 34,063 Buy-side advertising 16,226 10,834 Total cost of revenues 24,275 44,897 Gross profit 10,419 17,391 Operating expenses Compensation, taxes and benefits 14,512 16,402 General and administrative 10,662 14,222 Total operating expenses 25,174 30,624 Loss from operations ( 14,755 ) ( 13,233 ) Other income (expense) Other income 77 199 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 Interest expense and amortization of deferred financing cost and debt discount (premium), net ( 5,203 ) ( 5,410 ) Total other expense, net ( 12,968 ) ( 542 ) Loss before income taxes ( 27,723 ) ( 13,775 ) Income tax expense — 6,132 Net loss $ ( 27,723 ) $ ( 19,907 ) Net loss attributable to noncontrolling interest ( 8,777 ) ( 13,671 ) Net loss attributable to Direct Digital Holdings, Inc. $ ( 18,946 ) $ ( 6,236 ) Net loss per common share attributable to Direct Digital Holdings, Inc.: Basic $ ( 75.79 ) $ ( 91.26 ) Diluted $ ( 75.79 ) $ ( 91.26 ) Weighted-average number of shares of common stock outstanding: Basic 308 68 Diluted 308 68 See accompanying notes to the consolidated financial statements. 62 Table of Contents DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (in thousands except share data) Preferred Stock Common Stock Accumulated Deficit Noncontrolling Interest Stockholders’ (Deficit) 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 ) Stock-based compensation — — — — — — 1,552 — — 1,552 Issuance related to vesting of restricted stock units, net of tax withholdings — — 3,776 — — — ( 327 ) — — ( 327 ) Warrants exercised — — 711 — — — 215 — — 215 Stock options exercised — — 228 — — — 92 — — 92 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 ) Noncontrolling interest rebalancing — — — — — — ( 4,891 ) — 4,891 — Balance, December 31, 2024 — $ — 99,100 $ — 197,600 $ — $ 3,786 $ ( 8,774 ) $ ( 14,742 ) $ ( 19,730 ) Stock-based compensation — — — — — — 1,470 — — 1,470 Issuance related to vesting of restricted stock units, net of tax withholdings — — 4,282 — — — — — — — 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 ) Noncontrolling interest rebalancing — — — — — — ( 16,449 ) — 16,449 — Balance, December 31, 2025 27,077 $ — 1,324,307 $ 1 168,645 $ — $ 25,811 $ ( 27,720 ) $ ( 5,115 ) $ ( 7,023 ) See accompanying notes to the consolidated financial statements. 63 Table of Contents DIRECT DIGITAL HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Year Ended December 31, 2025 2024 Cash Flows Used In Operating Activities: Net loss $ ( 27,723 ) $ ( 19,907 ) 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 Reduction in carrying amount of right-of-use assets 182 156 Depreciation and amortization of property, equipment and software 262 275 Stock-based compensation 1,470 1,552 Deferred income taxes — 6,132 Derecognition of tax receivable agreement liability — ( 5,201 ) 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 Provision for credit losses/bad debt expense 6 619 Changes in operating assets and liabilities: Accounts receivable 1,841 31,615 Prepaid expenses and other assets ( 27 ) ( 60 ) Accounts payable 911 ( 26,269 ) Accrued liabilities and TRA payable 638 ( 1,103 ) Income taxes payable ( 65 ) ( 34 ) Deferred revenues 6 126 Operating lease liability ( 193 ) ( 127 ) Net cash used in operating activities ( 8,907 ) ( 8,648 ) Cash Flows Used In Investing Activities: Cash paid for capitalized software and property and equipment ( 87 ) ( 17 ) Net cash used in investing activities ( 87 ) ( 17 ) Cash Flows Provided by Financing Activities: Proceeds from note payable 3,804 4,000 Payments on term loan — ( 373 ) 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 ) Payment of deferred financing cost — ( 26 ) Proceeds from issuance of Class A Common Stock 8,688 1,646 Payments on financed insurance premiums ( 317 ) — Payment of tax related to shares withheld upon vesting — ( 878 ) Proceeds from options exercised — 92 Proceeds from warrants exercised — 215 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 Cash and cash equivalents, end of the period $ 728 $ 1,445 Supplemental Disclosure of Cash Flow Information: Cash paid for taxes $ 3 $ 388 Cash paid for interest $ 835 $ 4,300 Non-cash Activities: 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 Common stock issued for subscription receivable $ — $ 1,362 Issuance of stock in lieu of cash bonus, net of tax withholdings $ — $ 906 See accompanying notes to the consolidated financial statements. 64 Table of Contents Note 1 — Organization and Description of Business Direct Digital Holdings, Inc., incorporated as a Delaware corporation on August 23, 2021 and headquartered in Houston, Texas, together with its subsidiaries, is an end-to-end, full-service advertising and marketing platform primarily focused on providing advertising technology, data-driven campaign optimization and other solutions to help brands, agencies and middle market businesses deliver successful marketing results that drive return on investment ("ROI") across both the sell- and buy-side of the digital advertising ecosystem. Direct Digital Holdings, Inc. is the holding company for Direct Digital Holdings, LLC (“DDH LLC”), the business formed by the Company's founders in 2018 through acquisitions of Colossus Media, LLC (“Colossus Media”) and Huddled Masses, LLC (“Huddled Masses ® ” or “Huddled Masses”). Colossus Media operates the Company’s proprietary sell-side programmatic platform ("SSP") operating under the trademarked banner of Colossus SSP TM (“Colossus SSP”). In September 2020, DDH LLC acquired Orange142, LLC (“Orange 142”) to further bolster its overall programmatic buy-side advertising platform and to enhance its offerings across multiple industry verticals. In February 2022, Direct Digital Holdings, Inc. 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). In October 2024, the Company announced the unification of its buy-side businesses, Orange 142 and Huddled Masses. In these consolidated financial statements, the “Company,” “Direct Digital,” “Direct Digital Holdings,” “DDH,” “we,” “us” and “our” refer to Direct Digital Holdings, Inc., and, unless otherwise stated, all of its subsidiaries, including DDH LLC and, unless otherwise stated, its subsidiaries. All of the subsidiaries are incorporated in the state of Delaware, except for DDH LLC, which was formed under the laws of the State of Texas. Direct Digital Holdings, Inc. 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. 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: Subsidiary Business Segment Date of Formation Date of Acquisition Colossus Media, LLC Sell-side September 8, 2017 June 21, 2018 Orange142, LLC Buy-side March 6, 2013 September 30, 2020 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 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"). Our platform offers advertising inventory and creator content that is intended to align with brands, media holding companies and mid-market agencies focusing on key growth audiences. Our buy-side advertising business, now operating as Orange 142, provides technology-enabled advertising solutions and consulting services to clients through multiple demand side platforms (“DSPs”), across multiple industry verticals such as travel and tourism, higher education, energy, healthcare, financial services, consumer products and other sectors with particular emphasis on small and mid-sized businesses transitioning into digital with growing digital media budgets. 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 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 Basis of presentation and consolidation The Company’s consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the financial position, results of operations and cash flows for all periods presented. The consolidated financial statements include the accounts of Direct Digital Holdings, Inc. 65 Table of Contents and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). 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 (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 The Company recognizes revenue using the following five steps: 1) identification of a contract with a customer; 2) identification of the performance obligation(s) in the contract; 3) determination of the transaction price; 4) allocation of the transaction price to the performance obligation(s) in the contract; and 5) recognition of revenue when, or as, the performance obligation(s) are satisfied. The Company’s revenues are derived primarily from two sources: sell-side advertising and buy-side advertising. 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). For the sell-side advertising segment, the Company generates revenue by selling advertising inventory (digital ad units) that the Company purchases from publishers to advertisers through a process of monetizing ad impressions on the Company’s proprietary sell-side programmatic platform operating under the trademarked banner Colossus SSP. For the buy-side advertising segment, the Company generates revenue from customers that enter into agreements with the Company to provide managed advertising campaigns, which include digital marketing and media services to purchase digital advertising space, data and other add-on features. 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. 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. In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, in our sell-side advertising segment, many advertisers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing while, in our buy-side segment, the second and third quarters of the year reflect our highest levels of advertising activity and the first quarter reflects the lowest level of such activity. 66 Table of Contents Sell-side advertising The Company partners with publishers to sell advertising inventory to the Company’s Colossus Media-curated clients and the open markets (collectively referred to as “buyers”) seeking to access the general market as well as unique multi-cultural audiences. 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. 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 The Company purchases media based on the budget established by its customers with a focus on leveraging data services, customer branding, real-time market analysis and micro-location advertising. The Company offers its services on a fully managed basis, which is recognized over time using the output method when the performance obligation is fulfilled. An “impression” is delivered when an advertisement appears on pages viewed by users. 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”), 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 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. Goodwill 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. If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a quantitative goodwill impairment analysis is performed. 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 tested annually for impairment or more frequently upon the occurrence of a triggering event. The carrying value of the Company's 67 Table of Contents 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 Intangible assets consist of customer relationships, trademarks and non-compete agreements. 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. 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. Impairment of long-lived assets The Company evaluates the recoverability of long-lived assets, including property, equipment and software costs and intangible assets if facts or circumstances indicate that any of those assets might be impaired. ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows to determine if a write-down to fair value is necessary. No impairment loss was recognized during the years ended December 31, 2025 and 2024. Stock-based compensation Stock-based compensation cost for options and restricted stock units (“RSU”) awarded to employees and directors is measured at the grant date based on the calculated fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). 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 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 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. Treasury yield curve in effect at date of grant. Other assumptions are based on historical experience and activity. 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 (no stock options were granted during the year ended December 31, 2024): Year Ended December 31, 2025 Grant date fair value $ 53.90 Expected term (in years) 10.0 Expected volatility 198 % Risk-free interest rate 4.38 % Exercise price $ 54.52 Dividend yield — Employee benefit plans 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 68 Table of Contents 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. Although the Company may make a discretionary profit-sharing contribution to the Plan, during the years ended December 31, 2025 and 2024, no profit-sharing contributions were made. 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 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. As of December 31, 2025 and 2024, the Company recorded an estimated liability for incurred but not recognized claims in accrued liabilities in an amount which was less than $ 0.1 million. 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 were no amounts recognized during the years ended December 31, 2025 and 2024, respectively, for awards pursuant to this plan. Income taxes 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. DDH LLC is a limited liability company, is treated as a partnership for federal income tax purposes and generally is not subject to any entity-level U.S. federal income tax and certain state and local income taxes. Any taxable income or loss generated by the Company is allocated to holders of LLC units (“LLC Units”) in accordance with the Second Amended and Restated Limited Liability Company Agreement (“LLC Agreement”), and distributions to the owners of LLC Units in an amount sufficient to fund their tax obligations. The Company is subject to U.S. 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 exchanged by the members of DDH, LLC. 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 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. A valuation allowance is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The establishment of a valuation allowance requires significant judgment and is impacted by various estimates. Both positive and negative evidence, as well as the objectivity and verifiability of that evidence, is considered in determining the appropriateness of recording a valuation allowance on deferred tax assets. As of December 31, 2025 and 2024, the Company recorded a valuation allowance of $ 13.4 million and $ 7.7 million, respectively. Accounts receivable, net Accounts receivable primarily consists of billed amounts for products and services rendered to customers under normal trade terms. The Company performs credit evaluations of its customers’ financial condition and generally does not require collateral. Accounts receivable are stated at net realizable value. The Company insures a significant portion of its accounts receivable with unrelated third-party insurance companies in an effort to mitigate any future write-offs and establishes provision for credit losses as deemed necessary for accounts not covered by this insurance. Management periodically reviews outstanding accounts receivable for reasonableness. If warranted, the Company processes a claim with the third-party insurance company to recover uncollected balances, rather than writing the balances off to bad debt expense. The guaranteed recovery for the claim is approximately 90 % of the original balance, and if the full amount is collected by the insurance company, the remaining 10 % is remitted to the Company. If the insurance company is unable to collect the full amount, the Company records the remaining 10 % to bad debt expense. The Company’s provision for credit losses reflects the current expected credit loss inherent in the accounts receivable considering the Company’s aging analysis, historical collection experience, customer creditworthiness, current and future economic conditions and market conditions. 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, 2025 and 2024, the Company's provision for credit losses net of 69 Table of Contents 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): December 31, 2025 2024 Beginning balance $ 978 $ 344 Provision for credit losses 10 647 Write-offs, net of recoveries ( 44 ) ( 13 ) Ending balance $ 944 $ 978 Concentrations of customers and suppliers 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 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, 2025 and 2024 one vendor accounted for 21 % and 16 %, respectively, of consolidated accounts payable. Accrued liabilities The components of accrued liabilities on the balance sheet as of December 31, 2025 and 2024 are as follows (in thousands): December 31, 2025 2024 Accrued compensation and benefits $ 461 $ 330 Accrued expenses 1,698 877 Accrued interest 5 50 Total accrued liabilities $ 2,164 $ 1,257 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): December 31, 2025 2024 Accrued dividend $ 55 $ — Exit Fee (1) 3,608 — Total accrued liabilities - related party $ 3,663 $ — (1) See Note 9 — Commitments and Contingencies for further details. Prepaid expenses and other current assets The components of prepaid expenses and other current assets on the balance sheet as of December 31, 2025 and 2024 are as follows (in thousands): 70 Table of Contents December 31, 2025 2024 Prepaid expenses $ 541 $ 566 Stock subscription receivable (1) — 1,362 Consideration paid to customers (2) 250 — Other current assets 99 189 Total prepaid expenses and other current assets $ 890 $ 2,117 (1) The stock subscription receivable consists of amounts receivable for Class A Common Stock issued under the Equity Reserve Facility but not yet paid as of December 31, 2024. 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 Operating segments are components of an enterprise for which separate financial information is available and evaluated regularly by the Company’s chief operating decision maker (“CODM”) for purpose of assessing performance and allocating resources. The Company’s CODM is its Chairman and Chief Executive Officer. Revenue and operating income (loss) are used by our CODM to assess performance of our operating segments and allocate resources. Revenue is used by our CODM to identify underlying trends in the performance of our business and provide insights into customer demand. Operating income (loss) provides useful information regarding performance of each segment as it reflects profitability and performance of each segment on a consistent and comparable basis. The significant segment expenses reviewed by the CODM are consistent with the cost of revenues line item presented in the Company's consolidated statements of operations. Our CODM does not evaluate operating segments using asset or liability information. 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. In October 2024, the Company announced the unification of its buy-side businesses, Orange 142 and Huddled Masses. 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 Sell-side advertising The Company pays publishers a fee, which is typically a percentage of the value of the ad impressions monetized through the Company’s platform. Cost of revenues consists primarily of publisher media fees and data center co-location costs. Media fees include the publishing and real-time bidding costs to secure advertising space. Buy-side advertising Cost of revenues consists primarily of digital media fees, third-party platform access fees, and other third-party fees associated with providing services to the Company’s customers. Operating expenses Operating expenses consist of compensation expenses related to our executive, sales, finance and administrative personnel (including salaries, commissions, stock-based compensation, bonuses, benefits and taxes); 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. 71 Table of Contents Advertising costs The Company expenses advertising costs as incurred. Advertising expense incurred during the years ended December 31, 2025 and 2024 was $ 1.0 million and $ 1.6 million, respectively. These costs are included in general and administrative expenses in the consolidated statements of operations. Cash and cash equivalents Cash and cash equivalents consist of funds deposited with financial institutions and highly liquid instruments with original maturities of three months or less. Such deposits may, at times, exceed federally insured limits. The risk of loss attributable to any uninsured balances is mitigated by depositing funds only in high credit quality financial institutions. The Company has not experienced any losses in such amounts and believes it is not exposed to any significant credit risk to cash. Property, equipment and software, net Property and equipment are recognized in the consolidated balance sheets at cost less accumulated depreciation and amortization. The Company capitalizes purchases and depreciates its property and equipment using the straight-line method of depreciation over the estimated useful lives of the respective assets, generally ranging from three to five years . Leasehold improvements are amortized over the shorter of their useful lives or the remaining terms of the related leases. The Company capitalizes costs related to the development of internal-use software. Costs incurred during the application development phase are capitalized and amortized using the straight-line method over the estimated useful life, estimated at three years . The cost of repairs and maintenance are expensed as incurred. Major renewals or improvements that extend the useful lives of the assets are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation thereon are removed, and any resulting gain or loss is recognized in the consolidated statements of operations. Leases The Company has operating leases for real estate and determines if an arrangement is, or contains, a lease at inception. Operating leases are included in Operating Lease Right of Use ("ROU") Assets and Operating Lease Liabilities on the consolidated balance sheets. Operating lease asset and liability amounts are measured and recognized based on discounted future cash flow payment amounts the Company expects to make over the expected term of the underlying leases, including renewal periods the Company is reasonably certain to exercise. The lease liability for leases expected to be settled in twelve-months or less are classified as current liabilities. The general terms of the Company’s lease agreements require monthly payments. Because the Company does not generally have access to the rate implicit in its leases, the Company utilizes its incremental borrowing rate as the discount rate for measuring the lease liability. At commencement, the operating lease ROU asset and lease liability are the same, with adjustments to the ROU asset for lease incentives and initial direct costs incurred. The Company reviews all options to extend, terminate or purchase its ROU assets at the commencement of the lease and on an ongoing basis and accounts for these options when they are reasonably certain of being exercised. The Company evaluates lease modifications as they occur and records such as a separate lease or an adjustment to the existing ROU asset and lease liability as appropriate. Operating lease expense is recorded on a straight-line basis over the lease term with amortization of the ROU asset calculated as the difference between the straight-line operating lease expense and the implied interest expense on the lease liability. On the statement of cash flows, operating lease expense is included in operating cash flows. The Company’s operating leases may include both lease components (rent) and non-lease components (common area maintenance, utilities and other service charges). Non-lease components are accounted for separately. 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 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. 72 Table of Contents Upon a modification, the Company established new effective interest rates based on the carrying value of the modified debt. Business combinations The Company includes the results of operations of the businesses that are acquired as of the respective dates of acquisition. The Company allocates the fair value of the purchase price of acquisitions to the assets acquired and liabilities assumed based on their estimated fair values. The Company estimates and records the fair value of purchased intangible assets, which primarily consists of customer relationships, trademarks, and non-compete agreements. The excess of the fair value of the purchase price over the fair values of these identifiable assets, both tangible and intangible, and liabilities is recorded as goodwill. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. 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 as well as preferred stock issued and debt valued upon extinguishment. Fair value measurements The Company employs a hierarchy which prioritizes the inputs used to measure recurring fair value into three distinct categories based on the lowest level of input that is significant to the fair value measurement. The methodology for categorizing assets and liabilities that are measured at fair value pursuant to this hierarchy gives the highest priority to unadjusted quoted prices in active markets and the lowest levels to unobservable inputs, summarized as follows: • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities). • Level 3 – Significant unobservable inputs (including our own assumptions in determining fair value). We use the cost, income or market valuation approaches to estimate the fair value of our assets and liabilities when insufficient market-observable data is available to support our valuation assumptions. Fair value of financial instruments The Company considers the fair value of all financial instruments, including cash, accounts receivable and accounts payable to approximate their carrying values at year-end due to their short-term nature. The carrying value of the Company’s debt approximates fair value due to the market rates of interest. Net loss per share 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 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 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. Early 73 Table of Contents adoption is permitted. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements. 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. The standard requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid. 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 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. 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 or related disclosures. Liquidity and capital resources Going Concern The Company evaluated whether relevant conditions or events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern. Substantial doubt exists when conditions and events, considered in the aggregate, indicate it is probable that a company will not be able to meet its obligations as they become due within one year after the issuance date of its financial statements. 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, 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 74 Table of Contents 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, 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. The accompanying consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern. Note 3 — Long-Term Debt At December 31, 2025 and 2024, long-term debt consisted of the following (in thousands): December 31, 2025 2024 2021 Credit Facility (1) (2) $ 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 debt 12,461 41,212 Less: deferred financing cost (2) ( 63 ) ( 4,238 ) Less: debt discount (3) ( 249 ) ( 1,671 ) Total debt, net of deferred financing cost and debt discount 12,149 35,303 Less: 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, 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): 75 Table of Contents Year Ended December 31, 2025 2024 Interest expense – 2021 Credit Facility (1) $ 3,436 $ 3,617 Interest expense – Credit Agreement 222 693 Interest expense – other 18 8 Amortization of deferred financing cost and debt discount 2,104 1,092 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 (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 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 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. 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. Each quarterly installment payment under the closing date term loan was $ 0.1 million from January 1, 2022 through December 31, 2023, and each quarterly installment payment thereafter until maturity is $ 0.3 million. 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. 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 Fifth 76 Table of Contents 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 77 Table of Contents 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 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 On July 7, 2023, the Company entered into a Credit Agreement (as amended, the “Credit Agreement”) with East West Bank (“EWB”), as lender. 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 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 78 Table of Contents 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. 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. U.S. Small Business Administration Loans Economic Injury Disaster Loan In 2020, the Company applied and was approved for a loan pursuant to the Economic Injury Disaster Loan (“EIDL”), administered by the U.S. Small Business Administration (“SBA”). The Company received the loan proceeds of $ 0.2 million on June 15, 2020. The loan bears interest at a rate of 3.75 % and matures on June 15, 2050. Installment payments, including principal and interest, of less than $ 0.1 million began monthly on December 15, 2022. Each payment will first be applied to pay accrued interest, then the remaining balance will be used to reduce principal. The loan is secured by substantially all assets of DDH LLC. 79 Table of Contents Overall As of December 31, 2025, future minimum payments related to long-term debt are as follows (in thousands): 2026 $ 12,315 2027 3 2028 3 2029 4 2030 4 Thereafter 132 Total 12,461 Less current portion ( 12,003 ) Less deferred financing cost ( 63 ) Less debt discount ( 249 ) 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 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. As of December 31, 2025, DDM held 168,645 shares of Class B Common Stock. 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. 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: (1) discount rate of 1.94 % based on the applicable U.S. 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. Equity Reserve Facility 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 80 Table of Contents 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, 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 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. 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. 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. 81 Table of Contents Ranking. 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. Conversion. 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. Liquidation. 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. 82 Table of Contents Noncontrolling Interest Direct Digital Holdings, Inc. 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. reports a noncontrolling interest ("NCI") based on the common units of DDH LLC held by DDM. While Direct Digital Holdings, Inc. retains its controlling interest in DDH LLC, changes in its ownership interest in DDH LLC are accounted for as equity transactions. As such, future redemptions or direct exchanges of LLC Units by DDM will result in a change in ownership and reduce or increase the amount recorded as noncontrolling interest and increase or decrease additional paid-in capital when DDH LLC has positive or negative net assets, respectively. Stock-Based Compensation Plans In connection with the initial public offering, the Company adopted the 2022 Omnibus Incentive Plan (“2022 Omnibus Plan”) to facilitate the grant of equity awards to the Company’s employees, consultants and non-employee directors. 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, 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 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: Stock Options Shares Weighted Average Exercise Price Weighted Average Contractual Life (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2024 6,108 $ 136.95 7.78 $ — Granted 10,934 $ 54.52 — $ — Exercised — $ — — $ — Forfeited and expired ( 745 ) $ 69.53 — $ — Outstanding at December 31, 2025 16,297 $ 84.40 8.27 $ — 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. 83 Table of Contents Restricted Stock Units 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: Restricted Stock Units Number of Shares Weighted Average Grant Date Fair Value per Share Unvested - December 31, 2024 4,704 $ 154.00 Granted 18,661 $ 49.38 Vested ( 5,115 ) $ 97.31 Forfeited ( 1,045 ) $ 133.90 Unvested - December 31, 2025 17,205 $ 61.80 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 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. Note 5 — Tax Receivable Agreement and Income Taxes Tax Receivable Agreement The Company’s TRA with DDH LLC and DDM (together, the “TRA Holders”) provides for payment by the Company to the TRA Holders of 85 % of the net cash savings, if any, in U.S. federal, state and local income tax and franchise tax that the Company actually realizes or is deemed to realize in certain circumstances. The Company retains the benefit of the remaining 15 % of these net cash savings. The TRA liability is calculated by determining the tax basis subject to the TRA (“tax basis”) and applying a blended tax rate to the basis differences and calculating the resulting impact. The blended tax rate consists of the U.S. federal income tax rate and assumed combined state and local income tax rate driven by the apportionment factors applicable to each state. Any taxable income or loss generated by the Company will be allocated to TRA Holders in accordance with the LLC Agreement and the TRA, and distributions to the owners of LLC Units in an amount sufficient to fund their tax obligations will be made. 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. 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. The Company may elect to defer payments due under the TRA if the Company does not have available cash to satisfy its payment obligations under the TRA. Any such deferred payments under the TRA generally will accrue interest from the due date for such payment until the payment date. 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 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. If the Company elects to terminate the TRA early (or it is terminated early due to changes in control), the obligations under 84 Table of Contents 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. Income Taxes 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. federal income tax purposes. Under the Up-C structure, the Company is subject to corporation income tax based on the ownership. The components of income tax expense are as follows (in thousands): Year Ended December 31, 2025 2024 Current: Federal $ — $ — State — — Total current — — Deferred: Federal $ — $ 5,192 State — 940 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 (in thousands): Year Ended December 31, 2025 2024 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 ) % Derecognition of tax receivable agreement liability — — % ( 1,092 ) 7.9 % Other ( 1 ) — % ( 68 ) 0.5 % 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. 85 Table of Contents 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. The components of deferred tax assets are as follows (in thousands): December 31, 2025 2024 Deferred tax assets related to: Net operating loss carryforwards $ 3,407 $ 1,454 Partnership basis difference and other 9,957 6,255 Total deferred tax assets $ 13,364 $ 7,709 Valuation allowance ( 13,364 ) ( 7,709 ) Total deferred tax assets, net $ — $ — As of December 31, 2025, the Company had federal and state net operating loss carryforwards of $ 13.0 million and $ 6.0 million, respectively. Federal net operating loss carryforwards can be carried forward indefinitely and state net operating loss carryforwards are carried forward to each jurisdiction based on the varying state statutes. The Company recorded a valuation allowance of $ 13.4 million against its deferred tax assets at December 31, 2025. 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. In the normal course of business, the Company can be examined by various tax authorities, including the Internal Revenue Service in the United States. There are currently no federal or state audits in process. The Company analyzes its tax filing positions in all of the U.S. federal, state and local tax jurisdictions where it is required to file income tax returns, as well as for all open tax years in these jurisdictions. Federal and various states returns for the years ended December 2024, 2023 and 2022 remain open as of December 31, 2025. The Company evaluates tax positions taken or expected to be taken in the course of preparing an entity’s tax returns to determine whether it is “more-likely-than-not” that each tax position will be sustained by the applicable tax authority. As of December 31, 2025 and 2024, the Company had no uncertain tax positions. 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 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 86 Table of Contents 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. The Up-C structure also provides DDM with potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded. If the Company ever generates sufficient taxable income to utilize the tax benefits, DDH expects to benefit from the Up-C structure because, in general, the Company expects cash tax savings in amounts equal to 15 % of certain tax benefits arising from such redemptions or exchanges of DDM's LLC Units for Class A Common Stock or cash and certain other tax benefits covered by the TRA. As described in Note 5 — Tax Receivable Agreement and Income Taxes, for the year ended December 31, 2024, $ 5.2 million was recorded as income in other income (expense) for such change as the deferred taxes giving rise to the TRA have a valuation allowance recorded to offset the deferred tax assets. The aggregate balance of tax receivable liabilities as of December 31, 2025 and 2024, is as follows (in thousands): December 31, 2025 2024 Liability related to tax receivable agreement: Short term $ 41 $ 41 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 Revenue by business segment is as follows (in thousands): Year Ended December 31, 2025 2024 Sell-side advertising $ 5,335 $ 35,660 Buy-side advertising 29,359 26,628 Total revenues $ 34,694 $ 62,288 Income from reportable segment operations reconciled to loss before income taxes is as follows (in thousands): Year Ended December 31, 2025 2024 Sell-side advertising (1) $ ( 4,021 ) $ ( 579 ) Buy-side advertising (2) 4,954 4,001 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 87 Table of Contents 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): December 31, 2025 2024 Sell-side advertising $ 1,991 $ 3,755 Buy-side advertising 16,503 18,664 Assets from reportable segment operations 18,494 22,419 Corporate office 1,662 3,587 Total assets $ 20,156 $ 26,006 Note 8 — Net Loss Per Share 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 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, 2025 2024 Net loss attributable to Class A shareholders and Series A preferred stockholders $ ( 18,946 ) $ ( 6,236 ) Less: 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 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, 2025 2024 Series A convertible preferred stock 81 — Class B Common Stock 188 198 Options to purchase common stock 14 6 Restricted stock units 16 7 Total excludable from net loss per share attributable to common stockholders - diluted 299 211 Note 9 — Commitments and Contingencies Litigation We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. 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 88 Table of Contents 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 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. On May 23, 2024, an alleged stockholder, purportedly on behalf of the persons or entities who purchased or acquired publicly traded securities of the Company between April 2023 and March 2024, filed a putative class action against the Company, certain of our officers and directors, and other defendants in the U.S. 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. 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. 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 89 Table of Contents 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 During the years ended December 31, 2025 and 2024, the Company incurred fixed rent expense associated with operating leases for real estate of $ 0.3 million and $ 0.3 million, respectively. The Company did not have any finance leases, short-term leases nor variable leases over this time period. During the years ended December 31, 2025 and 2024, the Company had the following cash and non-cash activities associated with leases (in thousands): Year Ended December 31, Cash paid for amounts included in the measurement of lease liabilities: 2025 2024 Operating cash outflow for operating leases $ 268 $ 206 Non-cash changes to the operating lease ROU assets and operating lease liabilities: Additions and modifications to ROU asset obtained from new operating liabilities $ 52 $ 200 The weighted-average remaining lease term and discount rate for the Company’s operating leases is 3.66 years and 8.3 %, respectively, as of December 31, 2025. The weighted-average remaining lease term and discount rate for the Company’s operating leases is 4.6 years and 8.3 %, respectively, as of December 31, 2024. The future payments due under operating leases as of December 31, 2025 is as follows (in thousands): 2026 $ 278 2027 282 2028 180 2029 184 2030 31 Thereafter — Total undiscounted lease payments 955 Less effects of discounting ( 126 ) Less current lease liability ( 221 ) Total operating lease liability, net of current portion $ 608 Note 10 — Property, Equipment and Software, net Property, equipment and software, net consists of the following (in thousands): Useful Life (Years) December 31, 2025 2024 Furniture and fixtures 5 $ 153 $ 138 Computer equipment 3 20 20 Leasehold improvements 15 66 43 Capitalized software 3 751 702 Property, equipment and software, gross 990 903 Less: accumulated depreciation and amortization ( 824 ) ( 562 ) Total property, equipment and software, net $ 166 $ 341 90 Table of Contents The following table summarizes depreciation and amortization expense related to property, equipment and software by line item for the years ended December 31, 2025 and 2024 (in thousands): Year Ended December 31, 2025 2024 Cost of revenues $ 139 $ 167 General and administrative 123 108 Total depreciation and amortization $ 262 $ 275 Note 11 — Intangible Assets, net The Company records amortization expense on a straight-line basis over the life of the identifiable intangible assets related to an acquisition in September 2020. For the years ended December 31, 2025 and 2024, amortization expense of $ 1.9 million and $ 2.0 million, respectively, was recognized. As of December 31, 2025 and 2024, intangible assets net of accumulated amortization was $ 7.9 million and $ 9.7 million, respectively. As of December 31, 2025 and 2024, intangible assets and the related accumulated amortization, weighted-average remaining life and future amortization expense are as follows (in thousands): December 31, 2025 Weighted-Average Remaining Life (Years) Original Amount Accumulated Amortization Net Total Customer lists 4.8 $ 13,028 $ ( 6,839 ) $ 6,189 Trademarks and tradenames 4.8 3,501 ( 1,838 ) 1,663 Non-compete agreements 0.0 1,505 ( 1,505 ) — Total intangible assets, net $ 18,034 $ ( 10,182 ) $ 7,852 December 31, 2024 Weighted-Average Remaining Life (Years) Original Amount Accumulated Amortization Net Total Customer lists 5.8 $ 13,028 $ ( 5,537 ) $ 7,491 Trademarks and tradenames 5.8 3,501 ( 1,488 ) 2,013 Non-compete agreements 0.8 1,505 ( 1,279 ) 226 Total intangible assets, net $ 18,034 $ ( 8,304 ) $ 9,730 December 31, 2025 2026 $ 1,653 2027 1,653 2028 1,653 2029 1,653 2030 1,240 Thereafter — Total future amortization expense $ 7,852 ITEM 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure None. 91 Table of Contents