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Item 1A. Risk Factors

2026-08-14 compared with 2026-05-18 · 24 added, 26 removed, 246 unchanged (17% of the section changed)

31 unchanged sentences

Risks relating to dilution from our convertible preferred stock

Conversion of our outstanding Series B, Series C-1, Series C-2, Series D and Series J Convertible Preferred Stock could result in substantial dilution to our existing common stockholders.

The issuance and conversion of additional Series C-3 and Series C-4 Convertible Preferred Stock under our existing Securities Purchase Agreements could result in extraordinary additional dilution to our existing common stockholders.

The conversion price of each of our Series C-1, Series C-2, Series C-3, Series C-4 and Series D Convertible Preferred Stock is subject to a floor that we may waive in our sole discretion, and any such waiver would substantially increase the resulting dilution.

Conversion of our outstanding Series B, Series C-1, Series C-2, Series C-4, Series C-4, Series D and Series J Convertible Preferred Stock could result in substantial dilution to our existing common stockholders.

The issuance and conversion of additional Series C-4 Convertible Preferred Stock under our existing Securities Purchase Agreements could result in extraordinary additional dilution to our existing common stockholders.

The conversion price of each of our Series C-1, Series C-2, Series C-3, Series C-4 and Series D Convertible Preferred Stock was subject to a floor that we may waive in our sole discretion, which we elected to do on August 10, 2026, and reduced the conversion price of all outstanding shares of Series C-1, Series C-2, Series C-3, Series C-4 and Series D to $0.23 and such reduction will likely substantially increase the additional dilution to our existing common stockholders.

The existence of these contingent issuance and conversion rights may itself adversely affect the trading price of our common stock.

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As of the date of this Form 10-Q, we have outstanding the following series of our convertible preferred stock, each with a stated value of $1,000 per share, that are convertible into shares of our common stock:

1,632 shares of our Series B Convertible Preferred Stock (the "Series B Preferred"), originally issued on May 12, 2025 pursuant to the May 2025 PIPE Financing, the conversion price of which was reduced from $6.65 to $1.78 per share pursuant to a letter agreement dated February 6, 2026;

1,610.48 shares of our Series C-1 Convertible Preferred Stock (the “Series C-1 Preferred”), issued pursuant to the Securities Purchase Agreements that we entered into on February 6, 2026 and March 9, 2026 (the “Series C Purchase Agreements”);

2,031 shares of our Series C-2 Convertible Preferred Stock (the “Series C-2 Preferred”), issued on April 21, 2026 pursuant to the Series C Purchase Agreements;

2,740 shares of our Series C-3 Convertible Preferred Stock (the "Series C-3 Preferred"), issued on July 13, 2026 pursuant to the Series C Purchase Agreements;

6,821 shares of our Series C-4 Convertible Preferred Stock (the "Series C-4 Preferred"), issued on July 30, 2026 and August 14, 2026 pursuant to the Series C Purchase Agreement;

7,488 shares of our Series D Convertible Preferred Stock (the “Series D Preferred”), of which 5,250 shares were issued on April 20, 2026 to SEG Jets in partial consideration for our acquisition of an initial 19.98% interest in FLYTE and 5,778 shares were issued on April 20, 2026 to Creatd, Inc.

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Jenkins, in exchange for the termination of certain royalty rights.

The conversion price of each of the Series C-1 Preferred, Series C-2 Preferred and Series D Preferred is variable and is subject to downward adjustment based on the trading price of our common stock at specified dates following the effectiveness of the resale registration statement filed pursuant to the related registration rights agreements.

In each case, the conversion price is subject to a floor of $0.35 per share, which we may waive in our sole discretion.

The conversion price of the Series B Preferred is fixed at $1.78 per share, subject to customary anti-dilution adjustments.

The conversion price of each of the Series C-1 Preferred, Series C-2 Preferred, Series C-3 Preferred, Series C-4 Preferred and Series D Preferred is variable and is subject to downward adjustment based on the trading price of our common stock at specified dates following the effectiveness of the resale registration statement filed pursuant to the related registration rights agreements.

In each case, the conversion price is subject to a floor of $0.35 per share, which we may waive at our sole discretion and which we elected to waive on August 10, 2026, and reduced the conversion price of all outstanding shares of Series C-1, Series C-2, Series C-3, Series C-4 and Series D to $0.23.

The conversion price of the Series J Preferred is fixed at $1.56 per share, subject to customary anti-dilution adjustments.

Assuming conversion at the floor price (in the case of the Series C-1, Series C-2 and Series D Preferred) and at the applicable fixed conversion price (in the case of the Series B Preferred and the Series J Preferred), our issued and outstanding shares of convertible preferred stock would convert into an aggregate of approximately 58,337,003 shares of our common stock, consisting of:

approximately 916,854 shares issuable upon conversion of the Series B Preferred;

Assuming conversion at $0.23 (in the case of the Series C-1, Series C-2, Series C-3, Series C-4 and Series D Preferred) and at the applicable fixed conversion price (in the case of the Series J Preferred), our issued and outstanding shares of convertible preferred stock would convert into an aggregate of approximately 96,041,615 shares of our common stock, consisting of:

approximately 7,002,087 shares issuable upon conversion of the Series C-1 Preferred;

approximately 8,830,435 shares issuable upon conversion of the Series C-2 Preferred;

approximately 11,913,044 shares issuable upon conversion of the Series C-3 Preferred;

approximately 29,656,522 shares issuable upon conversion of the Series C-4 Preferred;

approximately 32,556,522 shares issuable upon conversion of the Series D Preferred;

approximately 6,083,005 shares issuable upon conversion of the Series J Preferred.

As of May 8, 2026, we had 2,692,473 shares of our common stock outstanding.

The aggregate number of shares of common stock issuable upon conversion of our issued and outstanding shares of convertible preferred stock as described above would represent approximately 2,167% of our common stock outstanding as of May 8, 2026, or, on a post-conversion basis, would result in the dilution of our existing common stockholders to less than approximately 4.4% of our post-conversion outstanding common stock.

If we were to waive the $0.35 floor with respect to any of the Series C-1 Preferred, the Series C-2 Preferred or the Series D Preferred, the number of shares of common stock issuable upon conversion of those securities could be substantially greater than the amounts above.

Conversion of the Series B Preferred, the Series C-1 Preferred, the Series C-2 Preferred, the Series D Preferred and the Series J Preferred is also subject to customary beneficial ownership limitations applicable to each holder, which limit individual holders' as-converted ownership to specified thresholds (typically 4.99% or 9.99%) but do not limit the aggregate amount of common stock that may be issued upon conversion to all holders.

As of August 10, 2026, we had 14,391,944 shares of our common stock outstanding.

The aggregate number of shares of common stock issuable upon conversion of our issued and outstanding shares of convertible preferred stock as described above would represent approximately 6,673% of our common stock outstanding as of August 10, 2026, or, on a post-conversion basis, would result in the dilution of our existing common stockholders to less than approximately 13.0% of our post-conversion outstanding common stock.

If we were to further lower the $0.23 conversion price with respect to any of the Series C-1 Preferred, the Series C-2 Preferred, the Series C-3 Preferred, the Series C-4 Preferred or the Series D Preferred, the number of shares of common stock issuable upon conversion of those securities could be substantially greater than the amounts above.

Conversion of the Series C-1 Preferred, the Series C-2 Preferred, the Series C-3 Preferred, the Series C-4 Preferred, the Series D Preferred and the Series J Preferred is also subject to customary beneficial ownership limitations applicable to each holder, which limit individual holders' as-converted ownership to specified thresholds (typically 4.99% or 9.99%) but do not limit the aggregate amount of common stock that may be issued upon conversion to all holders.

Therefore, the beneficial ownership limitations do not constrain the aggregate dilution described above.

The market price of our common stock has been, and may continue to be, volatile.

A sustained decline in our share price prior to the conversion of the Series C-1 Preferred, the Series C-2 Preferred or the Series D Preferred would significantly increase the number of shares issuable upon conversion of those securities, up to the limit imposed by the $0.35 floor (which we may waive in our sole discretion).

A sustained decline in our share price prior to the conversion of the Series C-1 Preferred, the Series C-2 Preferred, the Series C-3 Preferred, the Series C-4 Preferred or the Series D Preferred would significantly increase the number of shares issuable upon conversion of those securities, up to the limit imposed by the $0.35 floor, which we may waive in our sole discretion and which we elected to waive on August 10, 2026, and reduced the conversion price of all outstanding shares of Series C-1, Series C-2, Series C-3, Series C-4 and Series D to $0.23.

Any such conversion would dilute the voting power and economic interests of our existing common stockholders.

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Series C-4 Preferred Stock.

The investors in the Series C Purchase Agreements have agreed to purchase newly designated Series C-3 Convertible Preferred Stock (the “Series C-3 Preferred”), with a stated value of $1,000 per share, for an aggregate purchase price of $3,470,000, subject to the satisfaction of certain closing conditions, including effectiveness of the resale registration statement filed in connection with the Series C Purchase Agreements.

Series C-4 Preferred Stock.

The investors in the Series C Purchase Agreements may elect in their sole discretion to purchase up to an aggregate of $70,179,000.00 of newly designated Series C-4 Convertible Preferred Stock (the “Series C-4 Preferred”), with a stated value of $1,000 per share, in one or more closings.

The conversion price of each of the Series C-3 Preferred and the Series C-4 Preferred is subject to adjustment in a manner substantially similar to the Series C-1 Preferred and Series C-2 Preferred, including a $0.35 floor that we may waive in our sole discretion.

See Note 12 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information regarding the terms of the Series C-3 Preferred and Series C-4 Preferred.

Assuming all of the Series C-3 Preferred and the maximum amount of the Series C-4 Preferred are issued, and assuming conversion of each at the $0.35 floor price, the Series C-3 Preferred and the Series C-4 Preferred would convert into an aggregate of approximately 232,219,051 shares of our common stock (consisting of approximately 9,914,286 shares from the Series C-3 Preferred and approximately 222,304,765 shares from the Series C-4 Preferred).

Together with the shares of common stock that would be issued upon conversion of our currently outstanding Series C-1 Preferred, Series C-2 Preferred, Series D Preferred and Series J Preferred (as described in the preceding risk factor), the aggregate number of shares of common stock that could be issued upon conversion of all such securities at the relevant conversion prices would be approximately 289,639,200 shares.

As of May 8, 2026, we had 2,692,473 shares of common stock outstanding.

The aggregate number of shares of common stock issuable upon conversion of all of our existing and potential future shares of convertible preferred stock described above would represent approximately 10,758% of our common stock outstanding as of May 8, 2026, or, on a post-conversion basis, would result in the dilution of our existing common stockholders to less than approximately 0.9% of our post-conversion outstanding common stock.

There can be no assurance that we will not waive the floor.

Whether and when these contingent issuances and conversions occur will depend on, among other things, the investors' decisions to exercise their respective rights, the satisfaction of remaining closing conditions, our ability and willingness to waive the floor, and the trading price of our common stock.

The conversion price of each of the Series C-4 Preferred is subject to adjustment in a manner substantially similar to the Series C-1 Preferred, the Series C-2 Preferred and the Series C-3 Preferred including a $0.35 floor that we may waive in our sole discretion and which we elected to waive on August 10, 2026, and reduced the conversion price of all outstanding shares of Series C-1, Series C-2, Series C-3, Series C-4 and Series D to $0.23.

See Note 13 to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information regarding the terms of the Series C-4 Preferred.

Assuming all the maximum amount of the Series C-4 Preferred are issued, and assuming conversion of each at the $0.023 conversion price, the Series C-4 Preferred would convert into an aggregate of approximately 305,126,087 shares of our common stock.

Together with the shares of common stock that would be issued upon conversion of our currently outstanding Series C-1 Preferred, Series C-2 Preferred, Series C-3 Preferred, Series C-4 Preferred, Series D Preferred and Series J Preferred (as described in the preceding risk factor), the aggregate number of shares of common stock that could be issued upon conversion of all such securities at the relevant conversion prices would be approximately 401,167,702 shares.

As of August 10, 2026, we had 14,391,944 shares of common stock outstanding.

The aggregate number of shares of common stock issuable upon conversion of all of our existing and potential future shares of convertible preferred stock described above would represent approximately 27,874% of our common stock outstanding as of August 10, 2026, or, on a post-conversion basis, would result in the dilution of our existing common stockholders to less than approximately 3.6% of our post-conversion outstanding common stock.

The actual number of shares of common stock that may be issued under the Series C Purchase Agreements could be higher than the amounts set forth above if we waive the $0.35 floor in our sole discretion, which we may do at any time and which we elected to waive on August 10, 2026, and reduced the conversion price of all outstanding shares of Series C-1, Series C-2, Series C-3, Series C-4 and Series D to $0.23.

There can be no assurance that we will not further reduce the conversion price.

There can be no assurance that any of these events will occur or will not occur.

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As a result, we cannot rely on the Series C-4 right to fund our operations.

We may also be unable to satisfy the closing conditions to the Series C-3 issuance, in which case we will not receive the related proceeds.

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

What changed 10-Q

Item 1A. Risk Factors