Direct Digital Holdings, Inc. 10-Q

ITEM 1A. Risk Factors As of the date of this Quarterly Report on Form 10-Q, other than the below, there have not been any material changes to the information related to the Item 1A. “Risk Factors” disclosure in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Our business involves significant risks. You should carefully consider the risks and uncertainties described in our Annual Report, together with all of the other information in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report. The risks and uncertainties described below and in our Annual Report are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. The realization of any of these risks and uncertainties could have a material adverse effect on our reputation, business, financial condition, results of operations, growth and future prospects as well as our ability to accomplish our strategic objectives. In that event, the market price of our common stock could decline and you could lose part or all of your investment. If we fail to satisfy applicable listing standards, including compliance with the rules requiring timely filing of our periodic reports with the SEC, our Class A Common Stock may be delisted from the Nasdaq Capital Market. On November 7, 2025, the Company received a Panel Decision regarding the Company’s continued listing on Nasdaq. The Panel Decision indicated that the Company had evidenced compliance with the Stockholders’ Equity Rule and, as such, that matter had been closed. However, the Panel Decision indicated that the Company would remain subject to a discretionary Panel Monitor with respect to the Stockholders’ Equity Rule for a period of one year from the date of the Panel Decision. The Panel Decision also indicated that the Panel had granted the Company an exception through January 30, 2026, to demonstrate compliance with the Bid Price Rule. On January 12, 2026, the Company effected a 55-to-1 reverse stock split of all classes of our common stock, including the Class A Common Stock listed on Nasdaq, which was intended to bring 43 Table of Contents the Company into compliance with the Bid Price Rule. On February 12, 2026, the Company received a Compliance Notice from Nasdaq, notifying the Company that it had evidenced compliance with the Bid Price Rule, due to the closing bid price for our Class A Common Stock having closed at or above $1.00 per share for over 20 consecutive business days. The Compliance Notice also indicated that the Company would remain subject to a Panel Monitor with respect to the Bid Price Rule for a period of one year from the date of the Compliance Notice. Under the terms of the Panel Monitor, if Nasdaq determines that the Company fails any listing standard during the one-year monitoring period, then, notwithstanding Rule 5810(c)(2), the Company will not be permitted to provide Nasdaq with a plan of compliance with respect to any deficiency that arises during the one-year monitoring period, and Nasdaq will not be permitted to grant additional time for us to regain compliance with respect to any deficiency, nor will we be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3). Rather, Nasdaq will promptly issue a Staff Delisting Determination Letter. On April 2, 2026, the Company received a Staff Delisting Determination Letter from Nasdaq, notifying the Company that it was once again not in compliance with the Stockholders’ Equity Rule, nor was it in compliance with either of the alternative listing standards, market value of listed securities of at least $35 million or net income of $500,000 from continuing operations in the most recently completed fiscal year, or in two of the three most recently completed fiscal years. The Company’s failure to comply with the Stockholders’ Equity Rule was based on the filing of its Annual Report on Form 10-K for the year ended December 31, 2025, reporting a stockholders’ deficit of ($7.0 million). The Company requested a hearing before the Panel, which was granted and was held on May 12, 2026. The hearing request automatically stayed any suspension or delisting action at least pending the hearing and the expiration of any additional extension period that may be granted by the Panel following the hearing. On May 21, 2026, the Company received a Compliance Notice from Nasdaq, notifying the Company that its request for additional time through August 14, 2026 to demonstrate compliance with the Stockholders’ Equity Rule was granted. The Company has provided an update to the Panel as to the Company’s progress toward demonstrating compliance with the Stockholders’ Equity Rule and requested additional time to demonstrate compliance past August 14, 2026. We are awaiting the Panel’s response to our request for an additional extension period to comply with the Stockholders’ Equity Rule. On April 23, 2026, the Company received an Additional Staff Delisting Determination Letter from Nasdaq, notifying the Company that it was not in compliance with the Bid Price Rule based on the Company’s closing bid price being lower than $1.00 per share for thirty (30) consecutive business days. As described below, the Company implemented a 4-to-1 reverse stock split effective April 27, 2026, in order to regain compliance with the Bid Price Rule. On May 21, 2026, the Company received a Compliance Notice from Nasdaq, notifying the Company that it had evidenced compliance with the Bid Price Rule, due to the closing bid price for our Class A Common Stock having closed at or above $1.00 per share for over 20 consecutive business days. On July 22, 2026, the SEC approved Nasdaq’s adoption of a new continued listing standard requiring companies listed on the Nasdaq Global Market and the Nasdaq Capital Market to maintain a minimum Market Value of Listed Securities (“MVLS”) of at least $5.0 million. Although the SEC subsequently stayed the implementation of the new MVLS requirement on July 29, 2026 pending a request for review of the SEC approval and there is no current timeline for the completion of the SEC’s review, it is possible that the new MVLS requirement may become effective in the near-term. The consequences of failing to comply with the new MVLS requirement differ materially from, and are more severe than, those applicable to either the Stockholders’ Equity Rule or the Bid Price Rule. If the new rule becomes effective, Nasdaq may issue a Staff Delisting Determination to any company with an MVLS that remains below $5.0 million for 30 consecutive business days informing the company that it is immediately subject to suspension and delisting without Nasdaq first providing any cure or compliance period. While a company may appeal such determination, the request for a hearing would not stay a suspension from trading on Nasdaq during the appeal process (though the company’s common stock could trade on the OTC Markets pending the decision of the hearing panel during that period). Based on the current market price of our Class A common stock as of the date of this Quarterly Report on Form 10-Q, our MVLS is below the $5.0 million threshold. Accordingly, there can be no assurance that the Company will satisfy the MVLS requirement within the applicable period prescribed by Nasdaq if the SEC’s approval of the requirement is upheld upon completion of their review. The Company is considering all available options to regain and maintain compliance with the Stockholders’ Equity Rule and the Bid Price Rule and to satisfy the new MVLS continued listing requirement in case such requirement becomes effective. There can be no assurances, however, that we will be successful in regaining compliance with or satisfying the continued listing requirements and maintaining the listing of our Class A Common Stock on the Nasdaq Capital Market. Delisting from the Nasdaq could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our Class A Common Stock. Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities. If our Class A Common Stock is delisted by the Nasdaq, the price of our Class A Common Stock may decline and our Class 44 Table of Contents A Common Stock may be eligible to trade on the OTC Markets or other over-the-counter quotation system, where an investor may find it more difficult to dispose of their Class A Common Stock or obtain accurate quotations as to the market value of our Class A Common Stock. Further, if we are delisted, we would incur additional costs under requirements of state “blue sky” laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our Class A Common Stock and the ability of our stockholders to sell our Class A Common Stock in the secondary market. ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds Unregistered Sales of Equity Securities None. Use of Proceeds None. Purchases of Equity Securities by the Issuer None. ITEM 3. Defaults Upon Senior Securities None. ITEM 4. Mine Safety Disclosures Not applicable.