Newsmax Inc. 10-Q

Item 1. Financial Statements NEWSMAX INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 126,718,693 $ 24,052,887 Investments 89,801,763 58,310,955 Accounts receivable, net 28,924,345 28,265,721 Inventories, net 1,883,028 1,792,697 Prepaid expenses and other current assets 4,790,037 5,868,534 Total current assets 252,117,866 118,290,794 Property and equipment, net 5,725,250 6,225,617 Right of use asset, operating lease 6,330,521 7,191,606 Other asset 13,489,980 13,755,420 Security deposits 543,699 609,426 Total assets $ 278,207,316 $ 146,072,863 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities Accounts payable $ 15,781,198 $ 14,670,846 Accrued expenses 13,191,197 9,882,720 Accrued payroll 2,889,593 2,220,872 Accrued distribution 1,097,223 1,068,366 Deferred revenue 13,376,709 13,652,699 Lease liability, operating lease 3,678,084 3,894,102 Lease liability, finance lease 194,831 199,237 Settlement liability 20,470,000 29,099,265 Warrant liability - 6,499,821 Derivative liability - 41,459,418 Total current liabilities 70,678,835 122,647,346 Long-term liabilities: Deferred revenue, net of current portion 2,992,697 2,835,218 Lease liability, operating lease, net of current portion 3,287,889 4,049,256 Lease liability finance lease, net of current portion 82,575 129,930 Settlement liability, net of current portion 23,784,963 25,477,941 Total liabilities 100,826,959 155,139,691 Commitments and contingencies (Note 11) Convertible and redeemable preferred stock, $ 0.001 par value; 11,034 shares authorized; and 0 and 5,575 shares issued and outstanding as of March 31, 2025 and December 31, 2024 - 128,576,901 Stockholders’ equity (deficit) Convertible and redeemable preferred stock, $ 0.001 par value; 60,000 shares authorized; and 0 and 45,014 shares issued and outstanding as of March 31, 2025 and December 31, 2024 - 86,742,045 Class A common stock, 0.001 par value; 50,000,000 shares authorized; 39,239,297 shares issued and outstanding; Class B common stock, 0.001 par value; 940,000,000 shares authorized 88,943,084 shares issued and outstanding at March 31, 2025. Class A common stock, 0.001 par value; 20,000 Class A shares authorized; 68,127,538 Class A shares issued and outstanding at December 31, 2024; 60,000 Class B shares authorized; 0 Class B shares issued and outstanding at December 31, 2024 (1) 128,182 10 Treasury stock, 0 and 27,061,584 shares at cost, respectively - ( 14,622,222 ) Additional paid-in capital 422,430,811 18,056,702 Accumulated other comprehensive income (loss) 429,542 ( 52,849 ) Accumulated deficit ( 245,608,178 ) ( 227,767,415 ) Total stockholders’ equity (deficit) 177,380,357 ( 137,643,729 ) Total liabilities, convertible and redeemable preferred stock and stockholders’ equity (deficit) $ 278,207,316 $ 146,072,863 (1) On March 28, 2025, the Company announced a 6,765.396 for 1 stock split, effective March 31, 2025. This stock split is reflected retroactively in all periods presented for the common shares issued and outstanding. See Note 1. Nature of Business. The accompanying notes are an integral part of these condensed consolidated financial statements. 2 NEWSMAX INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) For the three months ended March 31, 2025 2024 Revenues: Service revenue $ 43,735,340 $ 39,163,377 Product revenue 1,566,367 1,436,268 Total revenues 45,301,707 40,599,645 Cost of services 22,443,522 19,112,737 Cost of products sold 1,191,106 1,191,280 Gross profit 21,667,079 20,295,628 General and administrative expenses: Personnel costs 10,218,359 7,182,377 Advertising costs 4,418,454 4,492,600 Professional fees 2,624,464 1,338,750 Rent and utilities 1,449,791 1,497,064 Depreciation 736,875 805,049 Other corporate matters 9,667,603 53,236,120 Other 4,124,313 2,587,012 Total general and administrative expenses 33,239,859 71,138,972 Loss from operations ( 11,572,780 ) ( 50,843,344 ) Other (expense) income, net Interest and dividend income 1,054,286 27,293 Interest expense ( 6,055 ) ( 25,785 ) Unrealized gain on marketable securities 1,585,580 163,346 Other, net ( 8,288,556 ) ( 3,225 ) Total other (expense) income, net ( 5,654,745 ) 161,629 Net loss before income taxes ( 17,227,525 ) ( 50,681,715 ) Income tax expense 5,000 1,972 Net loss $ ( 17,232,525 ) $ ( 50,683,687 ) Other comprehensive income: Unrealized gain on available for sale debt investments, net of income tax 482,391 — Comprehensive loss $ ( 16,750,134 ) $ ( 50,683,687 ) Weighted average common stock outstanding, basic and diluted (1) 44,895,546 41,065,954 Net loss per share attributable to common stockholders, basic and diluted $ ( 0.49 ) $ ( 1.27 ) (1) On March 28, 2025, the Company announced a 6,765.396 for 1 stock split, effective March 31, 2025. This stock split is reflected retroactively in all periods presented for the common shares issued and outstanding. See Note 1. Nature of Business . The accompanying notes are an integral part of these condensed consolidated financial statements. 3 NEWSMAX INC. CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE AND REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (Unaudited) Convertible and Redeemable Series A Preferred Stock Class A and Class B Common Stock (1) Convertible and Redeemable Series B Preferred Stock Treasury Stock (1) Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Deficit Shares Amount Shares Amount Shares Amount Shares Amount Balance, December 31, 2023 5,575 $ 126,018,101 41,065,954 $ 10 - - 27,061,584 $ ( 14,622,222 ) $ 18,056,702 - $ ( 153,036,687 ) $ ( 149,602,197 ) Dividends accretion - 636,205 - - - - - - - - ( 636,205 ) ( 636,205 ) Net loss - - - - - - - - - - ( 50,683,687 ) ( 50,683,687 ) Balance, March 31, 2024 5,575 $ 126,654,306 41,065,954 $ 10 - $ - 27,061,584 $ ( 14,622,222 ) $ 18,056,702 $ - $ ( 204,356,579 ) $ ( 200,922,089 ) Balance, December 31, 2024 5,575 $ 128,576,901 41,065,954 $ 10 27,612 $ 86,742,045 27,061,584 $ ( 14,622,222 ) $ 18,056,702 $ ( 52,849 ) $ ( 227,767,415 ) $ ( 137,643,729 ) Dividends accretion - 608,238 - - - - - - - - ( 608,238 ) ( 608,238 ) Other comprehensive income - - - - - - - - - 482,391 - 482,391 Sale of preferred stock Series B - - - - 17,379 51,982,894 - - - - - 51,982,894 Issuance of equity-classified warrants - - - - - 1,144,976 - - - - - 1,144,976 Issuance of common stock, net of offering cost and expenses - - 7,500,000 7,500 - - - - 66,075,911 - - 66,083,411 Dividends — - - - — - - - ( 915,069 ) - - ( 915,069 ) 4 Recapitalization and conversion of preferred stock ( 5,575 ) ( 129,185,139 ) 79,623,230 120,672 ( 44,991 ) ( 139,869,915 ) ( 27,061,584 ) 14,622,222 329,312,157 - - 204,185,136 Stock-based compensation - - - - - - - - 1,577,109 - - 1,577,109 Warrant Liability conversion - - - - - - - - 8,324,000 - - 8,324,000 Net loss - - - - - - - - - - ( 17,232,525 ) ( 17,232,525 ) Balance, March 31, 2025 - $ - 128,189,184 $ 128,182 - $ - - $ - $ 422,430,811 $ 429,542 $ ( 245,608,178 ) $ 177,380,357 (1) On March 28, 2025, the Company announced a 6,765.396 for 1 stock split, effective March 31, 2025. This stock split is reflected retroactively in all periods presented for the common shares issued and outstanding. See Note 1. Nature of Business. The accompanying notes are an integral part of these condensed consolidated financial statements. 5 NEWSMAX INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024 (Unaudited) 2025 2024 Cash flows from operating activities: Net loss $ ( 17,232,525 ) $ ( 50,683,687 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,540,440 1,569,239 Stock-based compensation 1,577,109 - Change in fair value of warrant liability 1,824,179 - Change in fair value of derivative liability 6,104,230 - (Recovery of) provision for credit losses ( 118,266 ) ( 31,025 ) Unrealized gain on marketable securities ( 1,585,580 ) ( 163,346 ) Non-cash lease expense 889,411 848,007 Changes in operating assets and liabilities: (Increase) decrease in assets: Accounts receivable ( 540,358 ) ( 899,890 ) Inventory ( 90,331 ) 541,788 Prepaid expenses and other current assets ( 758,633 ) ( 704,998 ) Other asset ( 538,125 ) - Security deposits 65,727 ( 29,519 ) Increase (decrease) in liabilities: Accounts payable 577,173 ( 3,114,787 ) Accrued expenses 4,006,055 10,651,609 Lease liabilities ( 1,005,711 ) ( 820,112 ) Settlement liability ( 10,322,243 ) 40,000,000 Deferred revenue ( 118,511 ) ( 471,103 ) Net cash used in operating activities ( 15,725,959 ) ( 3,307,824 ) Cash flows from investing activities: Purchase of investments ( 36,672,837 ) - Proceeds from maturity of investments 7,250,000 - Sale of investments - 314,039 Purchase of property and equipment ( 73,077 ) ( 85,121 ) Net cash (used in) provided by investing activities ( 29,495,914 ) 228,919 Cash flows from financing activities: Proceeds from issuance of convertible preferred stock 87,073,000 - Payments of issuance costs on convertible preferred stock ( 6,330,778 ) - Proceeds from issuance of common stock IPO 74,250,000 - Payments of issuance costs on common stock IPO ( 6,780,143 ) - Payment of dividend ( 304,930 ) - Principal payment under finance lease obligation ( 19,470 ) ( 17,486 ) Net cash provided by (used in) financing activities 147,887,679 ( 17,486 ) Net change in cash 102,665,806 ( 3,096,391 ) Cash and cash equivalents – beginning 24,052,887 6,037,211 6 Cash and cash equivalents – ending $ 126,718,693 $ 2,940,820 Supplemental disclosures of cash flow information: Operating lease assets obtained in exchange for operating lease liabilities $ 28,391 $ - Interest paid $ 586 $ 9,795 Non-cash transactions: Property and equipment acquired through accounts payable: $ 195,722 $ 171,356 Non-cash financing activities: Common stock issuance costs reclassified from prepaid expenses $ ( 1,798,989 ) $ - Common stock issuance costs acquired through accounts payable $ ( 337,458 ) $ - Issuance of warrants in connection with the issuance of convertible stock $ 1,144,976 $ - Preferred stock cancellations to be refunded $ ( 115,000 ) $ - Accrued dividends payable $ 610,139 $ - IPO funds receivable in escrow $ 750,000 $ - The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Notes to Condensed Consolidated Financial Statements NOTE 1. NATURE OF BUSINESS Nature of Business Newsmax Inc. began as Newsmax Media, Inc., a Nevada corporation, which was incorporated on July 15, 1998, and registered on August 20, 1998, as a foreign corporation in the State of Florida. During 2014, Newsmax Media, Inc. changed its state of domicile from Nevada to Delaware. In connection with the change, the NMX Holdings, LLC entity was dissolved. On April 14, 2024, Newsmax Media, Inc. consummated a corporate reorganization. Newsmax Inc. (the "Company") was formed as a new holding company that owns all of the outstanding shares of the operating company, Newsmax Media, Inc. The stockholders of Newsmax Media, Inc. exchanged their shares of capital stock in Newsmax Media, Inc. for the same class and number of shares in Newsmax Inc. Subsequently, Newsmax Media, Inc. changed its state of domicile from Delaware to Florida. As a result of this reorganization, Newsmax Inc. became the direct holding company and the sole shareholder of Newsmax Media, Inc. Newsmax Media, Inc.’s ownership of its subsidiaries was not affected or changed as a result of this reorganization. The Company is a multi-platform media company that provides original news and lifestyle content using a mixed-revenue model that derives income from its linear cable television and over-the-top (“OTT”) news channels, websites, proprietary database, publishing products and e-commerce products. The Company uses original news and editorial content to draw large numbers of readers to its media outlets in order to sell advertising, print and online information products. The Company’s business operations are conducted through two operating segments, Broadcast and Digital. Private Placement In June 2024, the Company issued a Private Placement Memorandum ("PPM") to potential investors, aiming to raise capital through the sale of its Series B Preferred Stock in a Private Placement. The initial offering was for up to 30,000 shares of Series B Preferred Stock at $ 5,000 per share for a base offering amount of $ 150,000,000 , with the option to expand up to 45,000 shares of Series B Preferred Stock for an offering amount of $ 225,000,000 . The PPM was distributed to accredited investors as defined under Regulation D of the Securities Act of 1933. In connection with the PPM, the Company agreed to issue a three-year warrant to Digital Offering, LLC, as placement agent for the Private Placement, exercisable for 900 shares of Series B Preferred Stock with an exercise price per share of $ 5,000 upon the closing of the PPM. The offering was completed on February 27, 2025 and resulted in net proceeds of $ 206,660,285 . Public Offering and Listing On February 27, 2025, the Company completed the sale of the remaining Series B Preferred Stock from the PPM raising approximately $ 87,000,000 during the period January 1, 2025 through February 27, 2025. On March 24, 2025, a majority in interest of the shareholders of the Company approved by written consent (1) the amending and restating of the Company's articles of incorporation, the recapitalization of the Company's capital stock and the appointment of directors and (2) the Company's 2025 Omnibus Equity Incentive Plan. See Note 16. Equity-Based Compensation.. On March 28, 2025, the Company completed its initial public offering (the “IPO”). Concurrently with the closing of the IPO and in accordance with the terms of the applicable Certificates of Designation, all shares of the Company’s Series A-1 Preferred Stock, Series A-2 Preferred Stock, and Series A-3 Preferred Stock automatically converted into shares of the Company’s then-existing Class A Common Stock. At the Company’s election, all shares of the Company’s Series A Preferred Stock also converted into shares of the Company’s then-existing Class A Common Stock. All shares of Series B Preferred Stock automatically converted into shares of Class B Common Stock. On March 28, 2025 the Company also amended and restated its Articles of Incorporation (the "Amended and Restated Articles of Incorporation") to reclassify its authorized share capital to implement a dual class of securities. As a result, each share of the Company's then-existing Class A Common Stock that was issued and outstanding immediately prior to the effectiveness of the Amended and Restated Articles of Incorporation, and not held by the Company's CEO, was recapitalized, reclassified, and reconstituted into one fully paid and non-assessable share of Class B Common Stock of Newsmax Inc. Each share of the Company’s then-existing Class A Common Stock held by the Company's CEO immediately before the recapitalization, was recapitalized, reclassified, and reconstituted into one fully paid and non-assessable share of Class A Common Stock of 8 Newsmax Inc. Following the recapitalization, Class A Common Stock has ten votes per share and Class B Common Stock has one vote per share. Immediately following the recapitalization, the Company completed a 6,765.396 :1 forward stock split of its Series A and Series B Common Stock. 27,061,584 shares (post-split) of treasury stock were effectively retired and the embedded derivative liability associated with the Series B Preferred Stock was settled and reclassified to equity. Pursuant to the Amended and Restated Articles of Incorporation, the Company is authorized to issue 50,000,000 shares of Class A Common Stock; 940,000,000 shares of Class B Common Stock; and 10,000,000 shares of Preferred Stock. The par value of all shares is $ 0.001 . The IPO resulted in total net proceeds of $ 66,083,411 . On March 31, 2025, the Company listed on The New York Stock Exchange under the ticker symbol “NMAX”. Broadcast The broadcast segment of the Company’s business produces and licenses news, business news and lifestyle content for distribution primarily through multichannel video programming distributors (“MVPDs”) including cable television systems, direct broadcast satellite operators and telecommunication companies, primarily in the United States. The Company creates and broadcasts content and distributes such content using a hybrid distribution strategy of linear cable, free OTT channels and free ad-supported streaming television services (“FAST”) channels. The broadcast segment generates revenues from (1) linear TV channels, primarily through advertising sales, (2) OTT and FAST channels, primarily through revenue derived from third-party advertising in connection with services accessed through websites, apps and digital media players, (3) affiliate revenue earned through MDVPs broadcasting the Company’s content to their paid subscribers, and (4) subscription revenue earned via the Company’s new Newsmax+ subscription program which users can sign up to receive the Company’s content directly. Digital The digital segment generates revenues through (1) online advertising, including online display, email advertising, other online placements and print advertisements, (2) subscriptions, including our collection of specialized health and financial newsletters, Newsmax Magazine and four online membership programs, and (3) e-commerce, primarily through our subsidiaries that sell nutraceuticals and nonfiction books on political, financial and health-related topics. The Company also distributes content through its websites and social media accounts, apps, email and newsletters. The Company’s websites and apps provide live and/or on-demand streaming of network-related programming to allow video subscribers of the Company’s participating distribution partners to view Company content via the Internet. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The unaudited condensed consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been reflected in these unaudited condensed consolidated financial statements. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2025. The balance sheet at December 31, 2024 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S. GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read together with the annual audited consolidated financial statements and related notes for the fiscal year ended December 31, 2024. Principles of Consolidation The condensed consolidated financial statements include the accounts of Newsmax Inc. and its wholly owned subsidiaries Newsmax Media Inc, Medix Health, LLC (“Medix”), Crown Atlantic Insurance, LLC (“Crown”), Newsmax Broadcasting, LLC (“Broadcasting”), Humanix Publishing, LLC (“Humanix”), ROI Media Strategies (“ROI”) and Newsmax Radio LLC (“Radio”). All intercompany balances and transactions have been eliminated in consolidation. 9 Use of Estimates The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions made by management are used for, but not limited to, the allowance for credit losses, carrying value of other assets, and realizability of deferred income taxes. Investments Marketable Securities The Company accounts for its marketable securities in accordance with ASC Topic 321, Investments - Equity Securities. ASC Topic 321 requires companies to measure equity investments at fair value, with changes in fair value recognized in net income (loss). The Company’s investments in marketable securities consist of equity securities with readily determinable fair values. The cost of securities sold is based on the specific identification method, and interest and dividends on securities are included in non-operating income (expense). The fair market value of marketable equity securities is determined based on quoted market prices in active markets. See Note 3 - Fair Value Measurements, for additional information regarding the valuation of marketable equity securities. Available-for-Sale Debt Instruments The Company classifies investments in fixed income securities as available-for-sale debt investments. The Company’s available-for-sale debt investments primarily consist of certificates of deposits and treasury securities. These available-for-sale debt investments are held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of available-for-sale debt investments sold. These investments are recorded in the condensed consolidated balance sheets at fair value. Unrealized gains and losses on these investments are included within other comprehensive income (loss), net of tax. The Company classifies investments as current based on the nature of the investments and their availability for use in current operations. The Company regularly reviews investment securities for impairment. For debt securities, any impairment relating to credit losses is recorded through an allowance for credit losses. A change in the allowance for credit losses is recorded into earnings in the period of the change. Revenue Recognition In accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers,” the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled in exchange for those goods are services. The Company records taxes collected from customers and remitted to governmental authorities on a net basis. Service Revenue Service revenue is primarily derived from the Company’s original news and lifestyle content, using a mixed-revenue multi-platform model that derives income from digital, linear and OTT news channels, websites, proprietary database, publishing and video subscription services. The Company uses original news, syndicated services and editorial content to draw consumers to its media outlets in order to sell advertising, license fees and video, print and online information services. The Company earns revenue through contractual allocations of fees based on impressions received or subscriber counts. The Company’s service revenue is comprised of the following for the three months ended March 31, 2025 2024 Advertising revenue $ 28,887,194 $ 25,452,346 Subscription revenue 6,982,160 6,335,112 Affiliate fee revenue 7,428,423 6,600,636 10 Other 437,563 775,283 Total $ 43,735,340 $ 39,163,377 Advertising Revenue Advertising revenue is derived from the sale of advertising on the Company’s cable television, email database, in the Company’s magazine and related publications, or on the Company’s website. Revenue related to the sale of advertising in the broadcast segment is recognized at the time of broadcast. Revenue related to the Company's digital segment is recognized when display or other digital advertisements record impressions on the various digital media. Revenue related to the Company's magazine and related publications is recognized when the ad is displayed in the printed document. Each advertisement insertion order is determined to be a distinct performance obligation that is satisfied at the point in time when such advertisements are published/aired. The Company records revenue from contracts that are entered into between the Company and its customers, primarily advertising agencies and direct advertisers, at the amount charged for the services. Advertising contracts, which are generally short-term, are billed monthly for the services provided during the month, with payments due shortly thereafter. Cash payments received prior to services rendered result in deferred revenue, which is then recognized as revenue when the advertising time or space is actually provided. The Company enters into agreements with over-the-top distribution platforms to distribute the Company’s news channel. Pursuant to the Company’s distribution agreements, advertising revenues are earned based on an allocation of the fee determined by the number of impressions received. These contracts represent a single performance obligation recognized over time under the series guidance. Revenue is recognized upon delivery of the content over the course of an over-the-top distribution agreement term based on time elapsed, as this best depicts the simultaneous consumption and delivery of the services. The Company bills OTT customers monthly over the life of the contract. The Company has an unconditional right to receive payment of the amount billed generally within 30 to 90 days from the invoice date. The invoiced amount to be received is recorded in accounts receivable on the balance sheets. Subscription Revenue The Company sells magazines to consumers through subscriptions. Each subscription is determined to be a distinct performance obligation that is satisfied over the term of the subscription, normally one ( 1 ) to five ( 5 ) years. Subscriptions received in advance of the publication are recorded as deferred revenue and recognized as income on a straight line basis over the term, as this best represents the transfer of control of the services to the consumer. The Company also has Newsmax+ which is a subscription service that provides the Company’s content directly to consumers either on a monthly or annual basis. Monthly subscriptions are recognized as income in the month it was earned. Annual subscriptions are recorded as deferred revenue and recognized as income over the term of the contract each month. The Company’s deferred subscription revenue balances are shown below along with the corresponding revenue recognized from the prior period: March 31, 2025 December 31, 2024 Deferred subscription revenue, current portion $ 13,060,042 $ 13,356,032 Deferred subscription revenue, net of current portion 2,992,697 2,835,218 Total deferred subscription revenue $ 16,052,739 $ 16,191,250 Deferred subscription revenue recognized in revenue for the three months ended March 31, 2025 and 2024 was $ 3,622,705 and $ 4,811,383 , respectively. Affiliate Fee Revenue The Company generates affiliate fee revenue from agreements with MVPDs for cable networks. Affiliate fee revenue is recognized over time as we continuously make the programming available to the customer over the term of the agreement using the output method. For contracts with affiliate fees based on the number of the affiliate’s subscribers, revenues are recognized based on the contractual rate multiplied by the estimated number of subscribers each period. Consideration payable to a customer is treated as a cost of sale when distinct. If a distinct service is not received, such costs are recorded 11 as a reduction to revenues. Affiliate contracts are generally multi-year contracts billed monthly with payments due shortly thereafter. Other Other primarily includes revenue generated from the Company’s content licensing agreements. Revenue from content licensing agreements is recognized when the content is made available under the content licensing agreements. Deferred revenue related to licensing agreements amounts to $ 291,667 and $ 291,667 as of March 31, 2025 and December 31, 2024, respectively. Product Revenue Product sales are derived from the sales of books, audio and video, dietary supplements, and other items advertised on the Company’s website. Supplement, books, media and other product sales are recognized at the point in time control transfers to the customer, which is when the product is shipped. Allowances are considered for estimated returns and refunds at the point in time when revenue is recognized. As of March 31, 2025 and December 31, 2024, the refund liability was $ 462,417 and $ 424,278 , respectively and is classified as a reduction in accounts receivable. Product revenue is comprised of the following for the three months ended March 31: 2025 2024 Supplement sales $ 1,114,940 $ 1,287,350 Books, media and other product sales 658,723 251,515 Product returns and allowances ( 207,296 ) ( 102,596 ) Total $ 1,566,367 $ 1,436,268 Incremental Costs to Obtain a Contract The revenue standard requires capitalization of the incremental costs to obtain a contract, which the Company has identified as certain sales commissions. These costs are deferred and then amortized over the expected customer life. Amortization expense is included within sales and marketing on the accompanying condensed consolidated statements of operations. As of March 31, 2025, we have $ 498,750 of unamortized capitalized costs to obtain a contract, of which $ 498,750 is recorded within other current assets on our condensed consolidated statement of financial position. During the quarter ended March 31, 2025, we recorded approximately $ 39,375 of amortization of capitalized costs, which is recorded within professional fees on our condensed consolidated balance sheets. During the quarter ended March 31, 2024, we had no unamortized capitalized costs to obtain a contract and we recorded no amortization of capitalized costs. Practical Expedient As a practical expedient, the Company recognizes any incremental costs of obtaining contracts as expense when the amortization period is considered to be a year or less. As a practical expedient, the Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Shipping and Handling Costs Amounts billed to third-party customers for shipping and handling are included as a component of revenue. Shipping and handling costs incurred are included as a component of cost of products sold. Shipping and handling charges recorded as revenue amounted to $ 83,147 and $ 75,141 for the three months ended March 31, 2025 and 2024, respectively. Stock-Based Compensation Stock options granted to employees under the Company’s 2025 Omnibus Incentive Plan vest over 18 months based on continued service and are subject to forfeiture, repurchase, or clawback during this period. Although the awards allow for early exercise in 30-day increments starting after grant, the shares remain subject to repurchase and do not substantively vest until the end of the service period. Compensation expense is recognized using the straight-line method over the 18-month service period. 12 The fair value of stock options is determined on the grant date using the Black-Scholes option pricing model. The model incorporates assumptions including the $ 10 grant-date fair value of the underlying stock, the risk-free interest rate, and expected volatility based on a peer group. The Company applied the simplified method to estimate the expected term. Based on its review of contemporaneous public filings, the Company concluded that the awards were not “spring-loaded” under SEC Staff Accounting Bulletin No. 120. Stock-based compensation expense is included in cost of sales and selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss. The Company accounts for forfeitures as they occur. Accounts Receivable and Allowance for Credit Losses Accounts receivable is presented net of an allowance for credit losses of $ 2,186,481 and $ 2,308,612 at March 31, 2025 and December 31, 2024, respectively. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses and doubtful accounts. The Company’s allowance for credit losses is estimated based on historical loss rates, current conditions, reasonable economic forecasts that affect collectability, and known credit issues with specific customers. For the three month period ended March 31, 2025 and March 31, 2024, provisions (recoveries) for credit losses totaled approximately $( 118,266 ) and $( 187,066 ). Impairment of Long-Lived Assets The Company continually evaluates factors, events and circumstances that include, but are not limited to, historical and projected operating performance of the Company, specific industry trends and general economic conditions to assess whether the remaining estimated useful lives of long-lived assets may warrant revision or that the remaining balance of long-lived assets may not be recoverable. When such factors, events or circumstances indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of undiscounted cash flows over the remaining lives of the long-lived assets in measuring their recoverability. The Company measures asset impairment loss as the amount by which the carrying amount exceeds the fair market value of the asset. Other Assets During 2023, the Company capitalized a separate payment obligation of $ 41.3 million associated with a commercial counterparty to resolve various claims. The Company accounted for the payment as a reduction to the transaction price in accordance with the guidance in ASC 606-10-32-25 and 32-26 and is amortizing the asset as a contra-revenue item. In connection with the signing of this agreement, the Company identified indicators that the carrying value of these upfront costs were not fully recoverable based on estimated cash flows related to the customer relationship. As a result, the Company’s broadcast segment recognized impairment of the upfront cost during 2023 with no additional impairment recognized for the three months ended March 31, 2025 and 2024. Amortization of the capitalized costs of the asset is recorded on a straight-line basis over the life of the agreement which ends June 30, 2029 as contra revenue in the accompanying condensed consolidated statements of operations and comprehensive (loss) income. Amortization expense amounted to $ 764,190 and $ 764,190 during the three months ended March 31, 2025 and 2024, respectively. The Company evaluates these other assets for impairment each reporting period based upon its estimate of recoverability of the assets. Recoverability of the assets is based upon estimated cash flows including reductions for direct and allocable costs attributable to the underlying business arrangement. Fair Value Measurements The Company carries certain assets and/or liabilities at fair value in the condensed consolidated balance sheets. The Company applies accounting guidance that defines fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements under the accounting guidance are classified based on the following fair value hierarchy: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. We use inputs such as actual trade data, benchmark yields, and other similar data, which are obtained from quoted market 13 prices, independent pricing vendors, or other sources, to determine the ultimate fair value of assets or liabilities. Level 3: Unobservable inputs that are not corroborated by market data. The fair value of a financial instrument is the amount for which the instrument could be exchanged in a current transaction between willing parties. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, accrued payroll and accrued distribution approximate fair value due to their short-term nature and observable inputs. Net Loss Per Share Basic and diluted loss per share is computed as net loss available to common stockholders divided by the weighted average number of shares outstanding for the period. For the 3 months ended March 31, 2025 and 2024, all dilutive securities have been excluded as their inclusion would have had an antidilutive effect on loss per share. Potentially dilutive common shares include warrants, convertible preferred stock, and stock options. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require public entities to disclose significant segment expenses and other segment items and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The guidance is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in this ASU should be applied retrospectively to all periods presented. The adoption of this standard for interim periods beginning with the three months ended March 31, 2025 did not have a material impact on the Company's condensed consolidated financial results, but resulted in enhanced disclosures as included in Note 9. Segment Information. Recent Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) to enhance transparency and decision usefulness of income tax disclosures. ASU 2023-09 requires greater standardization and disaggregation of categories within an entity’s tax rate reconciliation disclosure, as well as disclosure of income taxes paid by jurisdiction, among other requirements. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 is effective on a prospective basis, with retrospective application permitted. The Company is currently evaluating the effects of this ASU on its income tax disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires additional disclosures of the nature of expenses included in the income statement. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027 on a prospective basis, with early adoption permitted. The Company is currently evaluating the provisions of the amendments and the impact on its disclosures. NOTE 3. FAIR VALUE MEASUREMENTS The Company accounts for its investments at fair value and classifies these assets within the fair value hierarchy (Level 1, Level 2, or Level 3). Assets and liabilities subject to fair value measurements are as follows: As of March 31, 2025 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents 14 U.S. Treasury securities $ — $ 19,868,400 $ - $ 19,868,400 Money market $ 30,275,441 $ - $ - $ 30,275,441 Certificates of deposit $ — $ 750,025 $ - $ 750,025 Total cash and cash equivalents $ 30,275,441 $ 20,618,425 $ — $ 50,893,866 Investments Equity securities $ 14,833,326 $ - $ - $ 14,833,326 U.S. Treasury securities $ — $ 71,467,608 $ - $ 71,467,608 Certificates of deposit $ — $ 3,500,830 $ - $ 3,500,830 Total investments $ 14,833,326 $ 74,968,438 $ — $ 89,801,763 Total assets $ 45,108,767 $ 95,586,863 $ — $ 140,695,629 As of December 31, 2024 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents U.S. Treasury securities $ — $ 4,959,350 $ - $ 4,959,350 Money market $ 12,615,549 $ 12,615,549 Certificates of deposit $ — $ 2,250,628 $ - $ 2,250,628 Total cash and cash equivalents $ 12,615,549 $ 7,209,978 $ — $ 19,825,527 Investments Equity securities $ 7,553,725 $ - $ - $ 7,553,725 U.S. Treasury securities $ 9,923,100 $ 36,580,580 $ - $ 46,503,680 Certificates of deposit $ — $ 4,253,550 $ - $ 4,253,550 Total investments $ 17,476,825 $ 40,834,130 $ — $ 58,310,955 Total assets $ 30,092,374 $ 48,044,108 $ — $ 78,136,482 Liabilities Warrant liability $ — $ - $ 6,499,821 $ 6,499,821 Derivative liability $ — $ - $ 41,459,418 $ 41,459,418 Total liabilities $ — $ — $ 47,959,239 $ 47,959,239 The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. During the quarter ended March 31, 2025, the transfers of assets between levels was a total of $ 9.9 million from Level 1 to Level 2 for U.S. treasury notes and bills that are considered Level 2 investments when they were issued before the most recent issue and were still outstanding at measurement day (off-the-run). There were no transfers in or out of Level 3 investments for the three months ended March 31, 2025. 15 The valuation methodologies and significant unobservable inputs for Level 3 investments were as follows: As of December 31, 2024 Fair Value Valuation Methodology Significant Unobservable Inputs Range Weighted Average Warrant liability $ 6,499,821 Modified Black Scholes Expected volatility 65 % 65 % Risk-free interest rate 4.17 % - 4.28 % 4.18 % Expected term 2.5 - 4.8 years 2.7 years Derivative liability $ 41,459,418 Scenario-based discounted cash flow Timing of conversion 0.18 - 4.42 years 0.70 years Discount rate 20 % 20 % Changes in Level 3 liabilities measured at fair value on a recurring basis for the three months ended March 31, 2025 were as follows: As of March 31, 2025 Warrant Liability Derivative Liability Opening Balance $ 6,499,821 $ 41,459,418 Total losses for the period Included in earnings (or changes in net assets) 1,824,179 6,104,230 Purchases, issues, sales, and settlements Issuances — 27,436,352 Settlement of derivative liability ( 75,000,000 ) Reclassification of warrant liability $ ( 8,324,000 ) Closing Balance $ — $ — Changes in Level 3 liabilities measured at fair value on a recurring basis for the year ended December 31, 2024 were as follows: As of December 31, 2024 Warrant Liability Derivative Liability Opening Balance $ — $ — Total losses for the period Included in earnings (or changes in net assets) 126,064 2,380,799 Purchases, issues, sales, and settlements Issuances 6,373,757 39,078,619 Closing Balance $ 6,499,821 $ 41,459,418 16 NOTE 4. PROPERTY AND EQUIPMENT Major classes of property and equipment are as follows: Estimated Useful Lives March 31, 2025 December 31, 2024 Furniture and fixtures 7 years $ 2,005,246 $ 2,022,586 Computer, office and production equipment 3 - 8 years 12,345,759 12,145,337 Leasehold improvements Lesser of Useful Life or Term of Lease 10,241,829 10,178,386 Fixed assets not yet placed in service N/A — — 24,592,834 24,346,310 Less: Accumulated depreciation ( 18,867,584 ) ( 18,120,692 ) $ 5,725,250 $ 6,225,617 Depreciation of property and equipment amounted to $ 736,875 and $ 805,049 for the three months ended March 31, 2025 and 2024, respectively. Included in property and equipment are finance lease assets of $ 397,051 and $ 525,379 as of March 31, 2025 and 2024, respectively. NOTE 5. INVESTMENTS Investments on the condensed consolidated balance sheets consisted of the following: March 31, 2025 December 31, 2024 Equity securities $ 14,833,326 $ 7,553,725 Available-for-sale securities $ 74,968,438 $ 50,757,230 Total investments $ 89,801,763 $ 58,310,955 Available-for-Sale Securities The major classes of the Company's available-for-sale investment securities and their respective fair values at March 31, 2025, were as follows: Amortized Cost Gross Unrealized gain Gross Unrealized Loss Fair Value Certificate of deposit $ 3,500,000 $ 830 $ — $ 3,500,830 U.S. Treasury securities $ 71,038,896 $ 428,712 $ 71,467,608 Total $ 74,538,896 $ 429,542 $ — $ 74,968,438 The maturity distribution based on the contractual terms of the Company's available-for-sale investment securities at March 31, 2025 was as follows: Amortized Cost Fair Value Due within 1 year $ 29,643,790 $ 29,831,550 Due after 1 year through 5 years $ 44,895,107 $ 45,136,888 Total $ 74,538,896 $ 74,968,438 The Company had 10 investments mature during the three months ended March 31, 2025. There were no material realized gains or losses from available for sale securities that were reclassified out of accumulated other comprehensive income for the three months ended March 31, 2025. 17 NOTE 6. LEASES The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are included in the Company’s condensed consolidated balance sheets within the right of use asset, net, and operating lease liability, current portion and net of current portion. Finance lease assets are included in Property and equipment, net and Finance lease liability, current portion and net of current portion. The Company generally uses the base, non-cancelable, lease term when determining the lease assets and liabilities. Below is a summary of the weighted-average discount rate and weighted-average remaining lease term for the Company’s leases: Other supplemental information: March 31, 2025 December 31, 2024 Operating leases: Weighted average of remaining lease term (in years) 2 2 Weighted average discount rate 4.35 % 4.35 % Finance leases: Weighted average of remaining lease term (in years) 1 2 Weighted average discount rate 10.83 % 10.96 % Operating lease expense is recognized on a straight-line basis over the lease term within operating expenses in the Company’s condensed consolidated statements of operations and comprehensive (loss) income. Finance lease expense is recognized over the lease term within interest expense and amortization in the Company’s condensed consolidated statements of operations and comprehensive (loss) income. The Company’s total operating and finance lease expense all relate to lease costs and amounted to $ 1,238,695 and $ 1,283,818 for the three months ended March 31, 2025 and 2024, respectively. Future minimum lease payments at March 31, 2025 were as follows: Operating Finance Total 2025 $ 3,055,315 $ 164,065 $ 3,219,380 2026 3,210,308 130,605 3,340,912 2027 614,950 4,999 619,949 2028 297,892 - 297,892 2029 72,447 - 72,447 Thereafter - - - Total lease payments $ 7,250,911 $ 299,669 $ 7,550,580 Less: imputed interest ( 284,938 ) ( 22,263 ) ( 307,202 ) Present value of lease liability $ 6,965,973 $ 277,406 $ 7,243,379 NOTE 7. LINE OF CREDIT The Company had a $ 9,000,000 bank line of credit with $ 500,000 outstanding during the first 10 months of 2024. The line bore interest at the greater of (i) one percent ( 1.000 %) or (ii) the Prime Rate minus seventy five hundredths percent (- 0.750 %). The line of credit expired in October 2024 and the Company did not renew. NOTE 8. INCOME TAXES Effective income tax rates for interim periods are based on the Company’s estimate of the applicable annual income tax rate. The Company’s effective income tax rate varies based upon the estimate of the Company’s annual taxable earnings and the allocation of those taxable earnings across the various states in which we operate. Changes in the annual allocation of the Company’s activity among these jurisdictions results in changes to the effective tax rate utilized to measure the Company’s income tax provision and deferred tax assets and liabilities. 18 The Company’s effective income tax rate for the three months ended March 31, 2025 and 2024 was approximately 0.03 % and 0.05 %, respectively. This was different than the expected federal income tax rate of 21% primarily due to the Company operating at a loss with a full valuation allowance. The Company had insignificant state income taxes for the three months ended March 31, 2025 and 2024 . NOTE 9. SEGMENT INFORMATION The Company has two operating segments: (1) Broadcasting and (2) Digital, which also qualify as reportable segments. In accordance with ASC 280, “Segment Reporting,” the operating segments reflect how the chief operating decision maker, which the Company defines as the chief executive officer, assesses the performance of each operating segment and determines the appropriate allocations of resources to each segment. We continually review our operating segment classifications to align with operational changes in our business and may make changes as necessary. The Company evaluates performance based upon several factors, of which the primary financial measure is Segment Adjusted EBITDA. Due to the integrated nature of these operating segments, estimates and judgements are made in allocating certain assets, revenues and expenses. Segment Adjusted EBITDA is defined as revenues less cost of revenues and general and administrative expenses and does not include depreciation, interest, net, asset impairment, unrealized gain (loss) on marketable securities, other corporate matters, other, net and income tax expense. Other corporate matters represent certain litigation expenses, and related fees, for specific proceedings that the Company has determined are infrequent and unusual in terms of their magnitude. Management believes that Segment Adjusted EBITDA is an appropriate measure for evaluating the operating performance of the Company’s business segments because it is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of and allocate resources to the Company’s business. We do not present asset information for our segments as this information is not used to allocate resources. 19 The following tables set forth the Company’s Revenues and Segment Adjusted EBITDA for the three months ended March 31, 2025 and 2024: For the three months ended March 31, 2025 2024 Revenues Broadcasting $ 36,187,178 $ 30,110,903 Digital 9,114,529 10,488,742 Total revenues $ 45,301,707 $ 40,599,645 Segment expenses and operating performance Broadcasting Cost of sales 18,643,765 15,340,809 Adjusted general and administrative expenses 15,392,171 10,996,759 Broadcasting adjusted EBITDA 2,151,242 3,773,335 Digital Cost of sales 4,990,863 4,963,208 Adjusted general and administrative expenses 7,443,210 6,101,044 Digital adjusted EBITDA ( 3,319,544 ) ( 575,510 ) Total reportable adjusted EBITDA ( 1,168,302 ) 3,197,825 Corporate and unallocated Depreciation ( 736,875 ) ( 805,049 ) Interest, net 1,048,231 1,508 Unrealized gain (loss) on marketable securities 1,585,580 163,346 Other corporate matters ( 9,667,603 ) ( 53,236,120 ) Other, net ( 8,288,556 ) ( 3,225 ) Loss before income tax expense ( 17,227,525 ) ( 50,681,715 ) Income tax expense 5,000 1,972 Net loss $ ( 17,232,525 ) $ ( 50,683,687 ) Revenues by Segment by Component For the three months ended March 31, 2025 2024 Broadcast Advertising $ 24,631,579 $ 20,303,395 Subscription 3,689,676 2,431,872 Affiliate fee 7,428,423 6,600,636 Other 437,500 775,000 Total Broadcast revenues 36,187,178 30,110,903 Digital Advertising $ 4,255,615 5,148,951 Subscription 3,292,484 3,903,240 Product sales 1,566,367 1,436,268 Other 63 283 Total Digital revenues 9,114,529 10,488,742 Total revenues $ 45,301,707 $ 40,599,645 20 NOTE 10. CONCENTRATIONS OF CREDIT RISKS Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, short-term investments available-for-sale and accounts receivable. Management believes the financial risks associated with these financial instruments are minimal. The Company places its cash, and its short-term investments with high credit quality financial institutions. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses due to this policy. The Company's short-term investments are generally deemed to be low risk; however, the longer the duration of a security, the more susceptible it is to changes in market interest rates and bond yields. As the balance of the Company's short-term investments has grown, the market risk related to those investments has grown as well. Concentrations of credit risk with respect to accounts receivable are limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading the trade credit risk. The Company controls credit risk through credit approvals, credit limits and monitoring procedures. The Company performs credit evaluations of its commercial customers but generally does not require collateral to support accounts receivable. No single customer accounted for over 10% of the Company’s condensed consolidated net revenues during either of the three months ended March 31, 2025 or 2024. No single customer accounted for over 10% of the Company’s condensed consolidated accounts receivable as of March 31, 2025 or December 31, 2024. NOTE 11. COMMITMENTS AND CONTINGENCIES The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. The following table summarizes the Company’s material firm commitments for contracts that run through 2027 as of March 31, 2025: Payments Due by Period Total 2025 2026 2027 Distribution agreements $ 8,277,525 $ 8,277,525 $ - $ - Other commitments 13,831,250 6,402,917 5,267,500 2,160,833 Total commitments and contractual obligations $ 22,108,775 $ 14,680,442 $ 5,267,500 $ 2,160,833 Distribution Agreements The Company has entered into several Affiliation/Distribution Agreements with the MVPDs. These agreements typically have a five-year term beginning as early as December 2014 and ending as late as December 2025. The Company is required to make payments under such agreements which have payment terms that are generally over a three -to- four-year period and as such will shift between accrued distribution fees or prepaid distribution fees. Other Commitments The Company has entered into several other contractual commitments over the next three years ending in December 2027 primarily related to talent costs and other service agreements. NOTE 12. LEGAL Legal Matters From time to time, the Company may be involved in various claims, lawsuits, and disputes with third parties, actions involving allegations of discrimination or breach of contract incidental to the ordinary operations of the business. In the opinion of management, the amount of ultimate liability with respect to these actions will not have a material adverse impact on the Company’s condensed consolidated financial position or results of condensed consolidated operations or condensed consolidated cash flows. The Company accrues for loss contingencies that are probable and reasonably estimable. The Company generally does not accrue for legal costs expected to be incurred with a loss contingency until those services are provided. 21 Defamation and Disparagement Claims From time to time, the Company is subject to lawsuits alleging defamation or disparagement. These include lawsuits filed by Smartmatic USA Corp. and certain of its affiliates (collectively, “Smartmatic”) and Dominion Voting Systems, Inc. and certain of its affiliates (collectively, “Dominion”) filed during 2023. The Smartmatic complaint sought an unspecified amount of damages while the Dominion complaint is seeking $ 1.6 billion in damages. On September 26, 2024, the Company entered into a settlement agreement with Smartmatic pursuant to which the parties agreed to resolve the lawsuits among them. The Company agreed to pay a settlement of approximately $ 40 million payable over time and granted a five year warrant to purchase 2,000 shares of Series B preferred stock at an exercise price of $ 5,000 per share. Refer to Note 15. Equity for details of the warrant. The settlement expense, inclusive of the warrant, is included in other corporate matters in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2024. The $ 40 million payable over time is recorded within settlement liability on the Condensed Consolidated Balance Sheet. As of March 31, 2025 the outstanding balance of the settlement is $ 10 million. The Company continues to believe the Dominion and other pending lawsuits are without merit and intends to defend against them vigorously. Discovery in the Dominion case, including depositions and expert discovery, remains ongoing, and summary judgement and other key motions will follow. At this time, a date for the trial in the Dominion lawsuit has not been established. The Company is unable to predict the final outcome of this matter and cannot reasonably estimate the amount of liability, if any. To date, the Company has not reserved any amounts for pending or future claims. There can be no assurance that the ultimate resolution of this pending matter will not have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. In 2023, the Company entered into a settlement agreement with a commercial counterparty for $ 41.3 million. As of March 31, 2025, and pursuant to the payment schedule associated with this settlement agreement, the Company has a total of approximately $ 34.0 million remaining to be paid over time. The fair value of the settlement agreement as of March 31, 2025 and 2024 was $ 27.5 million and $ 30.6 million, respectively, which assumes a discount rate of 9.75 % and making quarterly payments for 51 and 63 months, respectively. The fair value measurement is disclosed for information purposes and is not reflected in the carrying amount on the condensed consolidated balance sheet. The table below represents the estimated timing of payments over the term of the agreements. As of March 31, 2025 Payments Due by Period Total 2025 2026 2027 2028 2029 Settlement agreements $ 43,970,588 $ 18,492,647 $ 7,279,412 $ 7,279,412 $ 7,279,412 $ 3,639,706 NOTE 13. EMPLOYEE BENEFIT PLANS The Company maintains a 401(k) Salary Savings Plan (the “Plan”) covering those employees who meet eligibility requirements set forth in the Plan. The matching contribution is at the discretion of the Company’s Board of Directors. The Company’s policy is to match 100 % of the first 1 % of employee contributions and 50 % on the next 2 to 6 % of employee contributions. Total expense for the Plan for the three months ended March 31, 2025 and 2024 amounted to $ 382,362 and $ 892,005 , respectively. NOTE 14. CONVERTIBLE AND REDEEMABLE PREFERRED STOCK Convertible and Redeemable Preferred Stock Prior to the March 28, 2025 initial public offering, the Company held Convertible and Redeemable Preferred Stock, which converted in connection with the initial public offering. The conversion included accumulated dividends on the Redeemable Preferred Stock except for those shares held by two preferred stockholders who elected to receive their accumulated dividends in cash on the initial public offering date. As of March 31, 2025, the Company does not have Convertible and Redeemable Preferred Stock outstanding. Convertible and Redeemable Preferred Stock as of December 31, 2024 ( 71,034 total shares authorized and all classes are $ 0.001 par value per share) was as follows. The conversion prices and conversion ratios presented in this footnote have not been adjusted for the stock split disclosed in Note 1. Nature of Business: 22 Series Shares Authorized Shares Issued and Outstanding Per Unit Issue Price December 31, 2024 Conversion Price Liquidation Preference Carrying Amount Series A 3,965 611 $ 22,500 $ 22,500 $ 13,747,500 $ 14,726,570 Series A (with redemption rights) 35 35 $ 22,500 $ 22,500 787,500 1,296,850 Series A-1 2,445 1,222 $ 20,451 $ 20,451 25,000,000 32,147,260 Series A-2 3,176 2,647 $ 18,891 $ 18,891 50,000,000 50,000,000 Series A-3 1,413 1,060 $ 23,619 $ 23,619 25,036,140 30,406,221 Series B 60,000 27,612 $ 5,000 $ 50,741 138,060,000 86,742,045 71,034 33,187 $ 252,631,140 $ 215,318,946 Prior to the March 28, 2025 initial public offering, the Company’s Series A convertible preferred stock was classified as mezzanine equity and Series B convertible preferred stock was classified as permanent equity in our condensed consolidated financial statements. The following features were present in the preferred stock that was outstanding as of December 31, 2024. The Company measured the preferred stock where redemption was probable at its maximum redemption value plus dividends not declared or paid but which would be payable upon redemption. On December 31, 2024, the preferred stock was remeasured, resulting in a maximum redemption value of $ 128,576,901 and accretion of $ 12,814,190 , included in Accumulated Deficit on the condensed consolidated balance sheets as of December 31, 2024. The Series B preferred stock included certain redemption rights that were solely in the control of the Company, including redemption upon sale or liquidation of the Company, and an in-substance redemption feature associated with the conversion terms of the Series B preferred stock upon IPO. The stock was recorded in permanent equity on the condensed consolidated balance sheets as of December 31, 2024. The redemption features were bifurcated as an embedded derivative and were accounted for as a derivative liability on the condensed consolidated balance sheet. The fair value of the embedded derivative was estimated using a scenario-based discounted cash flow method. The valuation methodology included assumptions and judgments regarding discount rates and timing of conversion, which were primarily level 3 assumptions. The embedded derivative was measured at fair value on a recurring basis and any changes in fair value in a subsequent period were be recorded to other income (expense). For the three months ended March 31, 2025, the Company recognized a loss of $ 6.1 million in fair value adjustments in other, net on the condensed consolidated statements of operations and comprehensive (loss) income related to the change in net fair value between the beginning of the year and the conversion of the Series B preferred stock upon IPO. NOTE 15. EQUITY Common Stock A – As of March 31, 2025 and December 31, 2024, the Company was authorized to issue 50,000,000 shares of common stock, with a par value of $ 0.001 per share and 20,000 shares of common stock (pre-stock split), with a par value of $ 0.001 per share, respectively. Common Stock B - As of March 31, 2025 and December 31, 2024, the Company was authorized to issue 940,000,000 shares of common stock, with a par value of $ 0.001 per share and 60,000 shares of common stock (pre-stock split), with a par value of $ 0.001 per share, respectively. 23 Settlement Warrant - On September 26, 2024, the Company granted a five year warrant to purchase 2,000 shares of Series B preferred stock at an exercise price of $ 5,000 per share in connection with a settlement agreement with Smartmatic. Following the conversion of the underlying Series B preferred stock into Class B common stock in connection with the Company's March 28, 2025 initial public offering, Smartmatic has a five year warrant to purchase 1,333,333 shares of Class B common stock at an exercise price of $ 7.50 per share. Refer to Note 12. Legal for details of the settlement. The exercise price and the number of shares of the warrants are subject to adjustment for standard anti-dilution provisions. Exercise of the warrant would result in the Company recognizing a $ 10 million increase in gross proceeds. Prior to conversion of the underlying Series B preferred stock into Class B common stock, the settlement warrant did not meet the conditions to be classified in equity, and therefore the Company assessed and confirmed it met the definition of a liability under ASC 815 and ASC 480 and it was recognized on the balance sheet at fair value. Following the conversion of the underlying Series B preferred shares to Class B common shares as a result of the Company's March 28, 2025 offering, the warrant meets the conditions for equity classification. As a result, the warrant has been recorded in equity at its March 28, 2025 fair value of $ 8,324,000 with a final fair value adjustment loss of $ 1,824,179 recorded in other, net on the March 31, 2025 condensed consolidated statements of operations and comprehensive (loss) income. Agent Warrants - The Company agreed to issue a three-year warrant to the placement agent associated with the Private Placement of shares of the Company's Series B convertible preferred Stock. The number of shares under the warrant is equal to 2 % of the total shares raised under the private placement with an exercise price of $ 5,000 per share. Following the conversion of the underlying Series B preferred stock into Class B common stock in connection with the Company's March 28, 2025 initial public offering, the exercise price is $ 7.50 per share. The warrant holder has the option to elect net share settlement. The effective date of the warrant is the date of the final close of the private placement offering. The Company evaluated the warrant under ASC 718, Compensation - Stock Compensation and determined that the award was non-employee share-based compensation that does not meet the criteria for liability classification. As a result, the warrant was classified in equity in the Company's condensed consolidated balance sheets as of March 31, 2025. NOTE 16. EQUITY-BASED COMPENSATION On March 28, 2025, the Board adopted our 2025 Omnibus Equity Incentive Plan (the “2025 Plan”) and it was approved by our shareholders on March 24, 2025 (the “Effective Date”). Under the 2025 Plan, 6,500,000 shares of Class B Common Stock are initially available for grant. Our administrator may grant incentive stock options (“ISOs”), non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to participants to acquire shares of common stock under the 2025 Plan. The Plan was administered by the Board. On March 28, 2025, the Company granted stock options to employees and certain service providers to purchase an aggregate of 3,382,000 shares of common stock at an exercise price of $ 10.00 per share, which was the fair market value on the grant date. These options allow for early exercise after 90 days, vest over 1.5 years, and expire 10 years from the grant date. As of March 31, 2025, the Company’s total estimated compensation cost, not yet recognized, related to non-vested equity awards held by the Company’s employees under the 2025 Plan was approximately $ 20.5 million and is expected to be recognized over a weighted average period of 1.5 years. The Company’s equity-based awards are settled in Class B Common Stock. As of March 31, 2025, the Company had 4.1 million shares of Class B common stock reserved for future issuance as equity-based compensation. The following table summarizes the activities for our stock options for the three months ended March 31, 2025: Number of Shares Weighted-Average Grant Date Fair Value Per Share Outstanding at December 31, 2024 736,793 1.70 Granted 3,382,000 6.14 Exercised — — Forfeited — — Expired — — Outstanding at March 31, 2025 4,118,793 5.34 The Company granted 736,793 options under the previous equity incentive plan which were fully vested as of March 31, 2025. 24 The equity-based compensation expense was recorded in the Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2025 and 2024 as follows: Three Months Ended March 31, 2025 2024 Cost of services $ 652,151 $ — Personnel costs 924,958 — Total equity-based compensation expense $ 1,577,109 $ — NOTE 17. LOSS PER SHARE The holders of our Class A and Class B common stock have identical liquidation and dividend rights but different voting rights. Accordingly, we present the loss per share for Class A and Class B common stock together. Basic loss per share is computed by dividing net loss by the weighted-average number of shares of our Class A and Class B common stock outstanding. Loss per share for Class B common stock is not presented separately as under the two-class method Class A and Class B loss per share is not meaningfully different. The following table illustrates the reconciliation of the basic and diluted loss per share computations. Three Months Ended March 31, 2025 2024 Basic and diluted loss per share: Numerator: Net loss $ ( 17,232,525 ) ( 50,683,687 ) Cumulative dividends on preferred stock 4,667,803 1,443,735 Net loss attributable to common stockholders $ ( 21,900,328 ) $ ( 52,127,422 ) Denominator: Weighted average common stock outstanding, basic and diluted 1 44,895,546 41,065,954 Per share: Net loss per share attributable to common stockholders, basic and diluted $ ( 0.49 ) $ ( 1.27 ) 1 Includes 39.2 million and 41.1 million shares of Class A common stock and 88.9 million and 0 shares of Class B common stock, for the three months ended March 31, 2025 and 2024, respectively. The following outstanding potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stock for the periods presented because the impact of including them would have been anti-dilutive. Three Months Ended March 31, 2025 2024 Warrants 1,933,333 — Stock options 4,118,793 722,071 Preferred shares — 37,717,083 Total 6,052,127 38,439,153 NOTE 18. SUBSEQUENT EVENTS On April 15, 2025, a pretrial conference was held in the matter of Dominion vs. Newsmax. At the outset of the conference, the presiding judge informed the parties that he would shortly assume the role of President Judge of the Superior Court, a position that carries additional administrative responsibilities. 25 On April 16, 2025, the court issued an order adjourning the trial to a date to be determined. The court also ordered the parties to participate in mandatory mediation. The Company continues to believe it has meritorious defenses and intends to vigorously defend against the claims. The trial’s postponement does not impact the Company’s current assessment of the matter, and the Company does not expect this development to have a material effect on its condensed consolidated financial statements. 26