Revenue Performance - Buy-side revenue increased 7% to $7.3 million in Q3 2025, compared to $6.8 million in Q3 2024, representing the majority of consolidated revenue[15] - Sell-side revenue decreased to $600,000 in Q3 2025 from $2.2 million in Q3 2024, primarily due to lower impression inventory[15] - The number of customers increased by 5%, but revenues declined by 70%, highlighting challenges in the sell-side[36] Financial Metrics - Gross margin for Q3 2025 was 28%, down from 39% in Q3 2024[16] - Operating expenses decreased by 25% to $6.1 million in Q3 2025, compared to $7.2 million in the same period last year[16] - Year-to-date operating expenses reduced by $5.4 million, approximately a 20% decrease compared to the first nine months of 2024[14] - Net loss improved to $5 million or $0.24 per share in Q3 2025, compared to a net loss of $6.4 million or $0.71 per share in Q3 2024[18] - Total cash plus accounts receivable as of September 30, 2025, was $4.5 million, down from $6.4 million at the end of 2024[18] Debt and Equity Management - Successfully converted $25 million of existing debt into Series A convertible preferred stock, enhancing financial flexibility[19] - Expanded equity line of credit facility to $100 million, raising $8.9 million since its inception in November 2024[20] - The company completed a $10 million conversion of debt to preferred equity, indicating a positive shareholder equity position post-quarter[39] Strategic Initiatives - New partnership with ReachTV aims to enhance data-driven marketing for travel and tourism, reaching over 50 million travelers per month[7] - The company expects 2026 to be a positive cash flow year, driven by optimization opportunities and a focus on the buy-side business[34] - The buy-side business remains profitable, while the sell-side is being streamlined to improve overall profitability[35] - AI initiatives are enabling growth on the sell-side without significantly increasing fixed costs[38]

Group 1: RLX Technology Inc - RLX Technology Inc reported quarterly earnings of 3 cents per share on sales of $158.600 million [1] - Shares of RLX Technology rose 6% to $2.47 in pre-market trading following the earnings report [1] Group 2: Other Stocks in Pre-Market Trading - Cidara Therapeutics, Inc. surged 92% to $203.50 after a Schedule 13D Amendment revealed beneficial ownership of 3.37 million shares [4] - Binah Capital Group, Inc. gained 52.2% to $2.17 after posting stronger-than-expected third-quarter results [4] - Expion360 Inc. rose 42.4% to $1.81 following its third-quarter results [4] - Aspire Biopharma Holdings, Inc. surged 31.2% to $0.1380 in pre-market trading [4] - Invivyd, Inc. gained 28.8% to $2.28 after reporting better-than-expected third-quarter financial results [4] - Milestone Scientific Inc. surged 26.3% to $0.4801 after reporting better-than-expected third-quarter sales [4] - Lazydays Holdings, Inc. gained 23.3% to $1.85 after a previous surge [4] - Omeros Corp gained 12.5% to $7.08 following a narrower-than-expected quarterly loss [4] - Nouveau Monde Graphite Inc rose 10% to $3.25 after a decline the previous day [4] Group 3: Declining Stocks in Pre-Market Trading - TSS Inc tumbled 40.2% to $9.10 after reporting a year-over-year decrease in third-quarter results [4] - enVVeno Medical Corp declined 35.8% to $0.42 after an unfavorable FDA appeal decision [4] - Nuvve Holding Corp fell 29.3% to $0.34 after announcing third-quarter results [4] - ESS Tech Inc shares dipped 24.2% to $3.22 after reporting weak quarterly sales [4] - Direct Digital Holdings Inc fell 18.8% to $0.23 after a significant gain the previous day [4] - StubHub Holdings Inc fell 18.8% to $15.28 after worse-than-expected third-quarter EPS results [4] - Mangoceuticals Inc dipped 17.7% to $0.98 after a decline the previous day [4] - Red Cat Holdings Inc dipped 15.1% to $6.57 after worse-than-expected financial results and a lowered FY25 sales guidance [4] - WhiteFiber Inc fell 13.4% to $17.21 after reporting worse-than-expected financial results [4] - Sobr Safe Inc fell 12.4% to $2.21 after a decline the previous day [4]

Financial Performance - Total revenues for the three months ended September 30, 2025, were $7,984,000, a decrease of 12% compared to $9,075,000 for the same period in 2024[10] - Gross profit for the nine months ended September 30, 2025, was $8,169,000, down from $14,444,000 in 2024, reflecting a decline of 43%[10] - The net loss attributable to Direct Digital Holdings, Inc. for the three months ended September 30, 2025, was $2,680,000, compared to a net loss of $2,690,000 in the same period of 2024[10] - For the nine months ended September 30, 2025, the net loss was $15.136 million, compared to a net loss of $13.338 million for the same period in 2024, representing an increase in loss of approximately 13.5%[19] - The company reported a total operating loss of $1.091 million for the three months ended September 30, 2025, compared to an operating income of $1.1 million for the same period in 2024[124] - The net loss attributable to Class A shareholders for the three months ended September 30, 2025, was $3.043 million, compared to a loss of $2.690 million in 2024, reflecting an increase in loss of approximately 13%[128] Assets and Liabilities - Total current assets decreased to $6,603,000 as of September 30, 2025, down from $8,535,000 at the end of 2024, representing a decline of 23%[8] - Total liabilities decreased to $29,230,000 as of September 30, 2025, compared to $45,736,000 at the end of 2024, a reduction of 36%[8] - The company reported cash and cash equivalents of $871,000 as of September 30, 2025, down from $1,445,000 at the end of 2024, a decrease of 40%[8] - The accumulated deficit increased to $16,058,000 as of September 30, 2025, from $8,774,000 as of December 31, 2024, indicating a worsening financial position[8] - Total long-term debt as of September 30, 2025, was $16.3 million, down from $41.2 million as of December 31, 2024[68] Operating Expenses - Operating expenses for the nine months ended September 30, 2025, were $18,429,000, a decrease of 20% compared to $22,973,000 in 2024[10] - Operating expenses for the three months ended September 30, 2025, were $6,125,000, down from $7,172,000 in the same period of 2024, indicating a decrease of approximately 15%[10] - The company incurred corporate office expenses of $4.961 million for the three months ended September 30, 2025, significantly higher than $0.247 million in the same period of 2024[125] Stock and Equity - The company issued 25,000 shares of Series A Convertible Preferred Stock, raising $21,220,000 net of issuance costs[12] - The company raised $6.708 million from the issuance of Class A Common Stock during the nine months ended September 30, 2025[19] - The Series A Convertible Preferred Stock was established with a total amount of $25.0 million, carrying a cumulative dividend rate of 10% per annum[101][103] - The balance of Class A Common Stock increased to 3,795,199 units as of September 30, 2024, from 3,478,776 units at the end of 2023, representing a growth of 9.1%[16] Revenue Recognition - Revenue from the sell-side advertising segment is generated through the sale of digital ad units, while the buy-side segment focuses on managed advertising campaigns[28] - The Company recognized revenue on a gross basis, inclusive of all supplier costs, for both sell-side and buy-side advertising segments[30] - The Company’s revenue recognition follows a five-step process, primarily derived from sell-side and buy-side advertising[27] - The Company generated revenue from both sell-side and buy-side advertising, with the latter focusing on managed advertising campaigns and data services[28] Cash Flow and Liquidity - The company utilized $7.036 million in operating activities for the nine months ended September 30, 2025, which is slightly lower than the $7.095 million used in the same period of 2024[19] - As of September 30, 2025, cash and cash equivalents were $0.9 million, raising substantial doubt about the company's ability to continue as a going concern[63] - The company anticipates liquidity sources from cash flow from operations and potential sales of equity or debt securities[65] Debt and Financing - The Company entered into a Term Loan and Security Agreement with a principal amount of up to $32.0 million, consisting of a $22.0 million closing date term loan and a $10.0 million delayed draw term loan[69] - The Company entered into a Credit Agreement with East West Bank for a revolving credit facility of up to $10.0 million, maturing on July 7, 2025[82] - The Company made prepayments totaling $1.0 million upon execution of the Third EWB Amendment, with additional prepayments of $1.0 million by January 15, 2025, and $2.0 million by April 15, 2025[86] Customer Concentration - Two customers accounted for 30% of revenues for the three months ended September 30, 2025, while one customer accounted for 12% of revenues for the same period in 2024[47] Strategic Initiatives - The company has a plan to reduce expenses through staff reductions and cost-saving measures, executed on July 1, 2024[65] - The company completed the unification of its buy-side businesses, Orange 142 and Huddled Masses, in October 2024, aiming to enhance its advertising solutions[21]

Core Insights - Direct Digital Holdings, Inc. reported a quarterly loss of $0.24 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.16, but an improvement from a loss of $0.71 per share a year ago [1] - The company posted revenues of $7.98 million for the quarter ended September 2025, missing the Zacks Consensus Estimate by 44.94% and down from $9.07 million year-over-year [2] - Direct Digital shares have declined approximately 79.5% year-to-date, contrasting with the S&P 500's gain of 15.6% [3] Financial Performance - The earnings surprise for the recent quarter was -50.00%, while the previous quarter saw a positive surprise of +76.04% with an actual loss of $0.23 against an expected loss of $0.96 [1][2] - Over the last four quarters, the company has only surpassed consensus EPS estimates once [2] Future Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.17 on revenues of $19 million, and for the current fiscal year, it is -$0.90 on revenues of $51.8 million [7] - The estimate revisions trend for Direct Digital was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Advertising and Marketing industry, to which Direct Digital belongs, is currently in the top 41% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8]

Financial Data and Key Metrics Changes - Consolidated revenue for Q3 2025 was $8 million, down from $9.1 million in Q3 2024, reflecting a decline in overall revenue [12] - Sell-side revenue decreased to $600,000 from $2.2 million in the same period last year, primarily due to lower impression inventory [12] - Buy-side revenue increased by approximately 7% to $7.3 million compared to $6.8 million in Q3 2024 [12] - Gross margin for Q3 2025 was 28%, down from 39% in Q3 2024 [12] - Operating expenses decreased by 25% to $6.1 million from $7.2 million in the prior year [13] - Total operating loss for Q3 was $3.9 million, slightly worse than the loss of $3.7 million in Q3 2024 [13] - Net loss improved to $5 million or $0.24 per share, compared to a net loss of $6.4 million or $0.71 per share in Q3 2024 [13] - Adjusted EBITDA for Q3 was a loss of $3 million, consistent with the loss of $2.9 million in the prior year [14] Business Line Data and Key Metrics Changes - The buy-side segment saw a revenue increase of 7% to $7.3 million, which constituted the majority of consolidated revenue [5] - The sell-side segment faced challenges with revenue significantly impacted by lower engagement levels and impression inventory [6] Market Data and Key Metrics Changes - The company is focusing on rebuilding publisher relationships and onboarding new customers in the sell-side segment [6] - The partnership with Reach TV aims to enhance inventory and data targeting for the buy-side business, reaching over 50 million travelers monthly [5] Company Strategy and Development Direction - The company is adopting a dual approach by leveraging its unique position in both buy-side and sell-side operations to create integrated solutions [6] - AI is being utilized to drive innovation and operational efficiencies, with a nearly 40% growth in feature sets due to new AI modules [9] - The company aims to minimize costs while driving growth, with a long-term goal of returning to strong year-over-year revenue growth [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in the sell-side business but remains committed to rebuilding and growing the business [11] - The company anticipates 2026 will be a positive cash flow year, driven by optimization opportunities and a focus on the profitable buy-side business [33] Other Important Information - The company successfully converted $25 million of existing debt into Series A convertible preferred stock, improving its equity position [14] - An additional $10 million debt-to-equity conversion was completed post-quarter-end, enhancing financial flexibility [15] - The equity line of credit facility was expanded to $100 million, providing additional financing capacity [16] Q&A Session Summary Question: Concerns about sell-side results and integration with DSPs - Management sees a combination of traditional business models and ecosystem platform play as viable paths for growth [20] Question: Impact of platform approach on buy-side outreach - Advertisers in alpha testing have responded favorably to the new platform approach, seeing benefits in performance and ROAS [23] Question: Details on the Orange 142 and Reach TV partnership - The partnership is viewed as strategic, complementing existing advertisers and enhancing the company's offerings in the travel sector [25] Question: Revenue from new verticals and customer attrition - The company is focusing on larger customers in new verticals to reduce churn and improve stability [29] Question: Inflection point towards positive cash flow - Management believes 2026 will be a positive cash flow year, with ongoing optimization efforts in the sell-side business [33] Question: Focus on buy-side versus sell-side - The sell-side is seen as important for overall profitability due to favorable operating leverage once past the break-even point [34] Question: Current status of shareholder equity - The company believes it is now positive in shareholder equity following recent debt conversions [38]

Core Insights - Direct Digital Holdings reported a 7% increase in buy-side revenue for Q3 2025 compared to Q3 2024, reaching $7.3 million, while consolidated revenue decreased by 12% to $8.0 million [1][12] - The company successfully reduced operating expenses by 15% in Q3 2025 and 20% for the first nine months of 2025 compared to the prior year [1][12] - The sell-side segment faced challenges with revenue dropping significantly due to lower impression inventory and engagement levels [3][12] Financial Performance - Buy-side advertising revenue increased by 7% from $6.9 million in Q3 2024 to $7.3 million in Q3 2025 [12] - Sell-side advertising revenue fell from $2.2 million in Q3 2024 to $0.6 million in Q3 2025, a decrease of 73% [12] - Gross profit for Q3 2025 was $2.2 million, representing 28% of revenue, down from 39% in Q3 2024 [12] - Operating loss for Q3 2025 was ($3.9 million), slightly worse than the ($3.7 million) loss in the prior year [12] Strategic Initiatives - The company is focusing on evolving into an AI-first organization, enhancing operational efficiency and developing new customer solutions [4][8] - Direct Digital Holdings is actively exploring strategic opportunities to support growth initiatives and enhance shareholder value [5][8] - The buy-side segment served approximately 220 customers in Q3 2025, with $2.1 million of revenue coming from new verticals [12] Capital Structure - The company issued $25 million of Series A Convertible Preferred Stock at a conversion price of $2.50 per share [6] - An additional $10 million of Series A Convertible Preferred Stock was issued on October 14, 2025 [7] - As of September 30, 2025, cash and cash equivalents were $0.9 million, down from $1.4 million at the end of 2024 [12]

Core Points - Direct Digital Holdings, Inc. has expanded its Equity Reserve Facility capacity from $20 million to $100 million, reflecting a strategic move to enhance liquidity and support business growth [1][2][3] - The proceeds from the sale of Class A Common Stock are intended for general corporate purposes, indicating a focus on operational flexibility and capital management [3][4] Group 1 - The amendment to the Share Repurchase Agreement with New Circle Capital allows for a total capacity of $100 million in gross proceeds [2] - CEO Mark Walker emphasized the importance of this expansion as a good capital management strategy to optimize access to capital and strengthen the balance sheet [3] - The company has filed a Form 8-K with the SEC for further details regarding the amendment [4] Group 2 - Direct Digital Holdings operates through its subsidiaries, Colossus Media, LLC and Orange 142, LLC, providing advertising and marketing technology solutions [1][10] - The company focuses on delivering data-driven digital media strategies for brands, agencies, and publishers, enhancing reach and performance across various platforms [10][11] - The company aims to humanize technology by providing dedicated support and tailored digital marketing solutions, generating billions of monthly impressions [11]

Core Viewpoint - Direct Digital Holdings, Inc. has successfully had a shareholder class action lawsuit dismissed by the U.S. District Court, which alleged false and misleading disclosures in the company's public filings [1][2]. Company Overview - Direct Digital Holdings operates as an advertising and marketing technology platform through its subsidiaries, Colossus Media, LLC and Orange 142, LLC [1][8]. - The company provides data-driven digital media strategies aimed at enhancing reach and performance for brands, agencies, and publishers [8][9]. - Colossus SSP serves as the sell-side platform, offering access to premium media properties, while Orange 142 focuses on customized digital marketing solutions for mid-market and enterprise companies [8]. Legal Developments - The court ruled that the statements made by the company did not constitute materially false statements or omissions that would mislead a rational investor [2]. - The dismissal of the lawsuit is subject to potential appeal, indicating that the legal matter may not be entirely resolved [1]. Market Position - Direct Digital Holdings emphasizes personal relationships and tailored digital marketing solutions, aiming to generate billions of monthly impressions across various media channels [9]. - The company has expertise in high-growth sectors such as Energy, Healthcare, Travel & Tourism, and Financial Services, which enhances its competitive positioning in the digital advertising industry [8].

Core Viewpoint - Direct Digital Holdings, Inc. has issued $25 million in Series A Convertible Preferred Stock to improve its financial position and reduce debt obligations [1][2][3] Financial Impact - The issuance of preferred stock increases stockholders' equity from a deficit of $24.6 million to approximately $0.4 million [2] - The company reduces ongoing debt service by over $3.5 million and mitigates maturing debt obligations due in December 2026 [2] Strategic Commentary - The CEO of Direct Digital Holdings emphasized that this investment strengthens the balance sheet and provides financial flexibility to support growth strategies while aiming to regain compliance with Nasdaq's minimum stockholders' equity requirement [3]

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) The unaudited condensed consolidated financial statements for the period ended June 30, 2025, show a significant decline in total assets and a worsening stockholders' deficit. The company reported a substantial decrease in revenue and an increased net loss compared to the prior year, primarily driven by a severe downturn in its sell-side advertising segment. Cash flow from operations remained negative, though improved from the prior year, with financing activities, particularly stock issuance, providing necessary liquidity. The notes highlight substantial doubt about the company's ability to continue as a going concern [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decline in total assets and an increase in liabilities, leading to a worsened stockholders' deficit Condensed Consolidated Balance Sheets | Balance Sheet Items (in thousands) | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $6,727 | $8,535 | | **Total Assets** | **$23,326** | **$26,006** | | **Total Current Liabilities** | $13,675 | $13,350 | | **Total Liabilities** | **$47,907** | **$45,736** | | **Total Stockholders' Deficit** | **($24,581)** | **($19,730)** | - The company's financial position weakened, with total assets decreasing by **10.3%** and total liabilities increasing by **4.7%** from December 31, 2024, to June 30, 2025. This resulted in a **24.6%** increase in the total stockholders' deficit[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations reveal a significant revenue decline and an increased net loss, primarily from sell-side advertising Condensed Consolidated Statements of Operations | Income Statement (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | **$10,144** | **$21,855** | **-53.6%** | | Sell-side advertising | $2,483 | $14,298 | -82.6% | | Buy-side advertising | $7,661 | $7,557 | +1.4% | | **Gross Profit** | **$3,561** | **$5,931** | **-40.0%** | | **Loss from Operations** | **($2,426)** | **($2,065)** | **+17.5%** | | **Net Loss** | **($4,196)** | **($3,141)** | **+33.6%** | | **Net Loss per Share (Basic)** | **($0.23)** | **($0.16)** | **+43.8%** | - For the six months ended June 30, 2025, total revenues plummeted by **58.5%** to **$18.3 million** from **$44.1 million** in the prior-year period. The net loss for the six-month period widened to **$10.1 million** from **$7.0 million**[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow from operations improved but remained negative, with financing activities providing necessary liquidity Condensed Consolidated Statements of Cash Flows | Cash Flows (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($5,398) | ($10,111) | | Net cash used in investing activities | ($38) | ($10) | | Net cash provided by financing activities | $5,584 | $6,074 | | **Net increase (decrease) in cash** | **$148** | **($4,047)** | - Cash used in operations for the first six months of 2025 improved to **-$5.4 million** from **-$10.1 million** in the prior year. Financing activities provided **$5.6 million** in cash, primarily from the issuance of **$5.9 million** in Class A Common Stock[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes highlight going concern doubts, customer concentration, ongoing litigation, and significant long-term debt - **Going Concern:** Management has identified conditions that raise substantial doubt about the Company's ability to continue as a going concern. These include a net loss of **$10.1 million** for the six months ended June 30, 2025, an accumulated deficit of **$13.4 million**, low cash reserves of **$1.6 million**, maturing debt, and non-compliance with Nasdaq's listing requirements[65](index=65&type=chunk)[66](index=66&type=chunk) - **Customer Concentration:** For the three months ended June 30, 2025, two customers accounted for **31%** of revenues. This is a significant reduction in concentration from the same period in 2024, where one sell-side customer accounted for **58%** of revenues[50](index=50&type=chunk) - **Litigation:** The company is involved in litigation, including a lawsuit it filed against the author of a defamatory article that caused a significant sell-side customer to temporarily pause its connection, disrupting business. The company is also defending against a putative class-action lawsuit alleging violations of federal securities laws[121](index=121&type=chunk)[122](index=122&type=chunk) - **Long-Term Debt:** As of June 30, 2025, total long-term debt was **$41.2 million**. The company has received multiple amendments to its credit facilities to provide temporary relief from debt covenants and extend maturity dates, indicating ongoing liquidity challenges[70](index=70&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the severe 54% year-over-year revenue decline in Q2 2025 to a significant disruption in its sell-side business, caused by a defamatory blog post in May 2024 that led a key customer to temporarily halt activity. While buy-side revenue saw marginal growth, the collapse in sell-side revenue led to a wider net loss. The company is facing substantial liquidity challenges, evidenced by a 'going concern' warning, non-compliance with Nasdaq listing rules, and reliance on an Equity Reserve Facility for funding. Management has implemented cost-saving measures, including staff reductions, to mitigate the financial impact [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Operational results show a sharp revenue drop due to sell-side disruption, despite cost-saving measures - The primary cause for the **83%** decrease in Q2 2025 sell-side advertising revenue was an unexpected business disruption from a defamatory blog post in May 2024, which caused partners and clients to pause activity. Sell-side volumes have not yet recovered to prior levels[173](index=173&type=chunk) Results of Operations | Revenue and Gross Profit (in thousands) | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | **$10,144** | **$21,855** | **(54%)** | | Sell-side advertising | $2,483 | $14,298 | (83%) | | Buy-side advertising | $7,661 | $7,557 | 1% | | **Gross Profit** | **$3,561** | **$5,931** | **(40%)** | - Operating expenses for Q2 2025 decreased by **25%** to **$6.0 million**, primarily due to lower compensation costs resulting from a staff reduction effective July 1, 2024, and reduced professional fees[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity remains a major concern, with substantial doubt about going concern and reliance on equity financing - The company's ability to continue as a going concern is in substantial doubt due to significant net losses, low cash balance (**$1.6 million**), maturing debt, and Nasdaq delisting risk[191](index=191&type=chunk) - To address liquidity concerns, the company is relying on cash from operations, its Equity Reserve Facility, and potential future financing. It has also implemented cost reductions and obtained temporary relief from debt covenants[192](index=192&type=chunk) - During the first six months of 2025, the company sold **6,059,351** shares of Class A Common Stock for **$4.6 million** under its Equity Reserve Facility to fund operations[143](index=143&type=chunk) Liquidity and Capital Resources | Key Liquidity Metrics (in thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,593 | $1,445 | | Working capital deficit | ($6,948) | ($4,815) | [Recent Developments](index=31&type=section&id=Recent%20Developments) Recent developments include Nasdaq non-compliance notices for equity and bid price, with an extension granted - On October 18, 2024, the company was notified by Nasdaq of non-compliance with the minimum stockholders' equity requirement. Subsequently, on May 12, 2025, it received another notice for failing to meet the **$1.00** minimum bid price requirement[140](index=140&type=chunk)[141](index=141&type=chunk) - The company has been granted an extension until October 14, 2025, by a Nasdaq Hearings Panel to regain compliance with the stockholders' equity rule, subject to meeting certain interim conditions[141](index=141&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company, as a "smaller reporting company," is not required to provide the information for this item - As a smaller reporting company, the registrant is exempt from providing quantitative and qualitative disclosures about market risk[210](index=210&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025. This is due to a previously identified material weakness related to the technical evaluation of accounting matters. While remediation efforts are underway, including hiring additional personnel and engaging consultants, they were not fully effective by the end of the period - The CEO and CFO concluded that the Company's Disclosure Controls were not effective as of June 30, 2025[211](index=211&type=chunk) - A material weakness in controls over the technical evaluation of accounting matters, previously identified as of December 31, 2023, and 2024, has not been fully remediated[212](index=212&type=chunk)[215](index=215&type=chunk) - Remediation steps include engaging consultants and hiring additional qualified accounting personnel, but these controls have not been in place long enough to demonstrate operating effectiveness[215](index=215&type=chunk) [Part II. Other Information](index=43&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is actively involved in two significant legal matters. It has filed a lawsuit against the author of a defamatory article from May 2024 that negatively impacted its business. Concurrently, it is defending against a consolidated putative class-action lawsuit filed by stockholders alleging violations of federal securities laws - The company filed a lawsuit against the author of a defamatory article published on May 10, 2024, which caused a major sell-side customer to temporarily pause its connection[219](index=219&type=chunk) - A putative class-action lawsuit was filed against the company and certain officers in May 2024, alleging violations of federal securities laws related to public disclosures. The company believes the claims lack merit and intends to defend itself vigorously[220](index=220&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) The primary risk highlighted is the potential delisting of the company's Class A Common Stock from the Nasdaq Capital Market. The company is non-compliant with both the minimum stockholders' equity and minimum bid price requirements. Failure to regain compliance within the granted extension period could severely impact the stock's liquidity, the company's ability to raise capital, and investor confidence - A significant risk is the potential delisting from the Nasdaq Capital Market due to non-compliance with the minimum stockholders' equity requirement and the minimum bid price rule[222](index=222&type=chunk)[223](index=223&type=chunk) - Delisting could adversely affect the ability to raise additional financing, negatively impact the value and liquidity of the stock, and result in a loss of institutional investor interest[223](index=223&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities in the reporting period[224](index=224&type=chunk) [Other Information](index=45&type=section&id=Item%205.%20Other%20Information) On August 5, 2025, the company entered into a Sixth Amendment to its Credit Agreement with East West Bank (EWB). This amendment extended the maturity date of the credit facility from July 31, 2025, to August 31, 2025, in exchange for a principal payment of $200,000 - The company amended its credit agreement with EWB on August 5, 2025, extending the maturity date to August 31, 2025[230](index=230&type=chunk) - In connection with the maturity extension, the company agreed to make a principal payment of **$200,000** by August 15, 2025[230](index=230&type=chunk)