Super League Enterprise(SLE) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the company Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements of Super League Enterprise, Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, stockholders' (deficit) equity, and cash flows. It also includes detailed notes on the company's business, significant accounting policies, intangible assets, acquisitions, debt, equity, commitments, and subsequent events Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :------------------ | | Cash and cash equivalents | $475 | $1,310 | | Accounts receivable, net | $2,337 | $3,766 | | Total current assets | $3,734 | $5,753 | | Total assets | $8,461 | $11,711 | | LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY (in thousands) | | | | Accounts payable and accrued expenses | $5,461 | $5,282 | | Contract liabilities | $1,036 | $50 | | Total current liabilities | $12,343 | $10,445 | | Total liabilities | $12,578 | $11,541 | | Total stockholders' (deficit) equity | $(4,117) | $170 | - Total assets decreased by approximately $3.25 million from December 31, 2024, to June 30, 2025, primarily driven by a decrease in cash and cash equivalents and accounts receivable[10] - Total stockholders' (deficit) equity shifted from a positive $170,000 at December 31, 2024, to a deficit of $(4,117,000) at June 30, 2025[10] Condensed Consolidated Statements of Operations This section details the company's financial performance, including revenue, cost of revenue, gross profit, operating expenses, and net loss over specific periods | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | REVENUE | $3,001 | $4,116 | $5,719 | $8,325 | | COST OF REVENUE | $1,692 | $2,470 | $3,214 | $4,947 | | GROSS PROFIT | $1,309 | $1,646 | $2,505 | $3,378 | | Total operating expense | $4,454 | $5,739 | $9,281 | $12,076 | | NET OPERATING LOSS | $(3,145) | $(4,093) | $(6,776) | $(8,698) | | NET LOSS | $(2,783) | $(2,455) | $(7,013) | $(7,715) | | Basic and diluted net loss per common share | $(4.52) | $(24.01) | $(13.40) | $(62.17) | - Revenue decreased by 27% for the three months ended June 30, 2025, and by 31% for the six months ended June 30, 2025, compared to the prior year periods[12] - Net loss per common share significantly improved from $(24.01) to $(4.52) for the three months ended June 30, 2025, and from $(62.17) to $(13.40) for the six months ended June 30, 2025, despite a higher net loss in absolute terms for the three-month period, largely due to changes in weighted-average shares outstanding[12] Condensed Consolidated Statements of Stockholders' (Deficit) Equity This section outlines changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit over time | (in thousands, except share data) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Common stock (Shares) - beginning of period | 405,610 | 119,353 | | Common stock (Shares) - end of period | 884,699 | 405,610 | | Additional paid-in capital - beginning of period | $270,111 | $258,923 | | Additional paid-in capital - end of period | $272,954 | $270,111 | | Accumulated Deficit - beginning of period | $(270,035) | $(249,014) | | Accumulated Deficit - end of period | $(277,149) | $(270,035) | | Total stockholders' (deficit) equity - end of period | $(4,117) | $170 | - The number of common shares outstanding significantly increased from 405,610 at December 31, 2024, to 884,699 at June 30, 2025, partly due to issuances of common stock and conversions of preferred stock[14] - Accumulated deficit increased from $(270,035,000) at December 31, 2024, to $(277,149,000) at June 30, 2025, primarily due to net losses and preferred stock dividends paid in common stock[15] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for the reported periods | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,995) | $(6,052) | | Net cash provided by (used in) investing activities | $796 | $(284) | | Net cash provided by financing activities | $2,364 | $412 | | NET DECREASE IN CASH | $(835) | $(5,924) | | Cash and Cash Equivalents – end of period | $475 | $1,685 | - Net cash used in operating activities decreased by $2.057 million, from $(6,052,000) in H1 2024 to $(3,995,000) in H1 2025[17] - Investing activities shifted from a net cash outflow of $(284,000) in H1 2024 to a net cash inflow of $796,000 in H1 2025, primarily due to proceeds from the sale of Mineville and Minehut assets[17] - Financing activities provided significantly more cash in H1 2025 ($2,364,000) compared to H1 2024 ($412,000), driven by proceeds from common stock and notes payable[17] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, assets, liabilities, and subsequent events 1. DESCRIPTION OF BUSINESS Super League Enterprise, Inc. is a company focused on connecting brands with consumers through playable media in mobile games and immersive gaming platforms. The company generates revenue from advertising, direct-to-consumer offers, and content/technology production. Key business updates include a 1-for-40 reverse stock split effective June 23, 2025, and the sale of its Mineville digital property in May 2025 for $350,000 cash, retaining ad sales and brand integration rights for two years. The company also regained compliance with Nasdaq's minimum bid price and annual meeting requirements but remains non-compliant with the stockholders' equity requirement - Super League Enterprise, Inc. redefines brand-consumer connection via playable media in mobile games and immersive platforms, offering ads, content, and experiences[19] - The company completed a 1-for-40 reverse stock split effective June 23, 2025, retroactively adjusting all share and per share data[22][23] - Sold its Mineville digital property (InPvP, LLC) for $350,000 cash in May 2025, while retaining exclusive ad sales and brand integration rights for the first year and non-exclusive for the second year on Purchaser's Microsoft servers[24][25] - Regained compliance with Nasdaq's minimum bid price ($1.00) and annual meeting requirements in July and June 2025, respectively, but remains non-compliant with the $2.5 million stockholders' equity requirement as of April 7, 2025[28][30][31] 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section outlines the significant accounting policies, including the basis of presentation, principles of consolidation, use of estimates, and the company's going concern assessment. It details revenue recognition for various streams (media and advertising, publishing and content studio, direct to consumer), accounting for intangible assets, goodwill, stock-based compensation, financing costs, and debt (including fair value option and modifications). The company operates in one reportable segment and highlights concentrations of credit risks and recent accounting pronouncements - The company's financial statements are prepared under U.S. GAAP for interim information, with certain annual disclosures omitted or condensed[32] - Management has identified substantial doubt about the company's ability to continue as a going concern due to accumulated deficits ($277.1 million as of June 30, 2025) and net cash used in operating activities ($4.0 million for H1 2025), and will seek additional capital through equity or debt financings[37][39][40] - Revenue is recognized when control of goods or services is transferred to customers, with significant judgment required for complex arrangements. Revenue streams include media and advertising, publishing and content studio, and direct to consumer[66][68][72] - The company accounts for certain promissory notes under the fair value option (FVO), remeasuring them at fair value each reporting period, with changes reflected in the condensed consolidated statements of operations[130][131] Revenue Breakdown by Category (in thousands) | Revenue Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Media and advertising | $1,476 | $1,734 | $2,748 | $3,099 | | Publishing and content studio | $1,391 | $2,204 | $2,658 | $4,742 | | Direct to consumer | $134 | $178 | $313 | $484 | | Total Revenue | $3,001 | $4,116 | $5,719 | $8,325 | Revenue Recognition Method | Method | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Single point in time | 42% | 46% | 41% | 39% | | Over time | 58% | 54% | 59% | 61% | 3. INTANGIBLE ASSETS Intangible assets, net, decreased from $4.07 million at December 31, 2024, to $2.85 million at June 30, 2025. The company recorded amortization expense of $1.081 million for the six months ended June 30, 2025. The decrease is partly due to the sale of Mineville assets for $350,000 in May 2025, which had a net carrying value of $350,000, resulting in no gain or loss. Additionally, the sale of Minehut assets in February 2024 generated $1.0 million in purchase consideration, with additional gains of $343,000 recognized in H1 2025 | Intangible Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Partner and customer relationships | $7,316 | $7,645 | | Capitalized software development costs | $4,974 | $4,774 | | Developed technology | $3,920 | $3,931 | | Total intangible assets | $20,291 | $20,431 | | Less: accumulated amortization | $(17,442) | $(16,361) | | Intangible assets, net | $2,849 | $4,070 | - Amortization expense for intangible assets totaled $1,081,000 for the six months ended June 30, 2025, a decrease from $1,286,000 in the prior year period[160] - The sale of Mineville assets in May 2025 for $350,000 cash resulted in no gain or loss, as the net carrying value matched the sale price[162][164] - Additional gains of $343,000 were recognized in H1 2025 from the sale of Minehut assets (February 2024), bringing total royalties collected from GamerSafer to $1,000,000[167] 4. ACQUISITIONS This section details the accounting for contingent consideration related to the Melon, Inc. acquisition (May 2023) and the Super Biz acquisition (October 2021). Melon contingent consideration is recorded as a fair value liability, with a change in fair value of $(14,000) for H1 2025. Super Biz contingent consideration, initially for post-combination services, was converted into an unsecured promissory note in August 2024, leading to a $336,000 extinguishment loss in FY2024. The Super Biz Note was amended in June 2025, extending maturity and increasing interest rates, with a change in fair value of the embedded derivative liability of $77,000 for H1 2025 Melon Acquisition Contingent Consideration (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Beginning balance | $138 | $538 | | Change in fair value | $(14) | $(80) | | Contingent consideration payments | $(8) | $(122) | | Accrued contingent consideration | $116 | $336 | - Contingent consideration for the Melon Acquisition is recorded as a fair value liability, with a $(14,000) change in fair value for the six months ended June 30, 2025[169][170] - The Super Biz Contingent Consideration was converted into an unsecured promissory note in August 2024, resulting in a $336,000 loss on extinguishment in FY2024[176][179] - The Super Biz Note was amended in June 2025, extending the maturity date to August 1, 2025, and increasing the interest rate to 20% from June 1, 2025. The change in fair value of the embedded derivative liability for the default interest provision was $77,000 for the six months ended June 30, 2025[181][182][183] 5. DEBT This section details various promissory notes and a terminated accounts receivable financing facility. Several promissory notes (Agile I & II, Diagonal I & II, Belleau, and a Related Party Note) are accounted for at fair value using Level 3 inputs. Agile I was repaid in February 2025 using proceeds from Agile II. The Belleau Note principal was reduced to $1.25 million in August 2025. The Related Party Note's maturity was extended to November 2026, with interest ceasing from November 2025 and monthly payments commencing. The SLR Accounts Receivable Financing Facility was terminated on June 10, 2025 Promissory Notes at Fair Value (in thousands) | Note Type | Gross Proceeds | Fair Value at Issuance | Fair Value June 30, 2025 | Interest Rate / Discount Rate | | :------------------ | :------------- | :--------------------- | :----------------------- | :---------------------------- | | Agile I Note | $1,850 | $2,132 | $0 | 42%/42% | | Agile II Note | $2,500 | $3,205 | $1,283 | 42%/42% | | Belleau Note | $1,100 | $894 | $888 | 20%/42% | | Diagonal I Note | $300 | $247 | $271 | 10%/42% | | Diagonal II Note | $145 | $123 | $115 | 10%/42% | | RP Note | $1,500 | $1,343 | $1,473 | 40%/42% | - The Agile I Note was fully repaid in February 2025 using $1.5 million from the Agile II Note proceeds[191][195] - The Belleau Note's aggregate principal amount was reduced to $1,250,000 in August 2025, with $1.1 million funded as of June 30, 2025[208][211] - The Related Party Promissory Note (RP Note) maturity was extended to November 19, 2026, with interest ceasing from November 19, 2025, and monthly payments of $175,000 commencing[214] - The Accounts Receivable Financing Facility (SLR Agreement) was terminated on June 10, 2025[219] 6. STOCKHOLDERS' (DEFICIT) EQUITY AND EQUITY-LINKED INSTRUMENTS This section details changes in stockholders' equity, including the authorization of Series AAAA Jr. Convertible Preferred Stock and a 1-for-40 reverse stock split of common stock effective June 23, 2025. It also covers various equity financings, such as May I, II, and III offerings, and the Hudson Equity Line of Credit (ELOC), which was terminated in May 2025. The company issued common stock dividends on preferred stock and modified Series AA Additional Investment Rights. Warrant liabilities, including September 2024 Series AAA Junior Investor Warrants and Placement Agent Warrants, are recorded at fair value due to cash settlement provisions or fundamental transaction triggers - The company authorized 3,775,047 shares of Series AAAA Jr. Convertible Preferred Stock in July 2025[224] - A 1-for-40 reverse stock split of common stock became effective on June 23, 2025, retroactively adjusting all share and per share data[226][228] Equity Financings - Common Stock Offerings (May 2025) | Offering Type | Shares Issued | Price Per Share | Gross Proceeds (approx.) | | :------------ | :------------ | :-------------- | :----------------------- | | May III | 79,750 | $4.80 | $670,000 | | May II | 104,167 | $4.80 | $500,000 (net $380,000) | | May I | 127,941 | $6.80 | $870,000 (net $700,400) | - The Hudson Equity Line of Credit (ELOC) was terminated effective May 8, 2025, having raised $231,000 from the sale of 17,925 common shares at an average price of $13.60 per share[265] Warrant Liability Fair Value (in thousands) | Warrant Type | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Series AAA Junior-3 and -4 Warrants | $20 | $348 | | Placement Agent Warrants | $54 | $587 | | Total fair value of warrant liability | $74 | $935 | - Warrant liabilities decreased from $935,000 at December 31, 2024, to $74,000 at June 30, 2025, with a gain on change in fair value of $861,000 for the six months ended June 30, 2025[12][251] 7. COMMITMENTS AND CONTINGENCIES This section outlines the company's commitments and contingencies, including settlements of legal claims. In May 2024, the company settled a dispute with Pioneer Capital Anstalt, resulting in a $213,000 noncash charge for modified additional investment rights and a $346,000 noncash charge for issuing 6,875 restricted common shares. Another settlement in March 2024 for a 2022 convertible note dispute led to a $164,000 noncash settlement expense in H1 2024 for issuing 12,500 common shares - Settled a dispute with Pioneer Capital Anstalt in May 2024, incurring a $213,000 noncash charge for modifying additional investment rights and a $346,000 noncash charge for issuing 6,875 restricted common shares[266][267] - Resolved a 2022 convertible note dispute in March 2024 by issuing 12,500 common shares, resulting in an additional noncash settlement expense of $164,000 in H1 2024[269] 8. SUBSEQUENT EVENTS Subsequent to June 30, 2025, the company regained Nasdaq compliance for its minimum bid price. It also designated Series AAAA Jr. Convertible Preferred Stock and entered into several exchange agreements to convert promissory notes into preferred or common stock and cash payments. New financing transactions include an Equity Line of Credit with Yield Point NY, LLC for up to $20 million and a Private Placement Offering of $4 million in 8% Senior Secured Convertible Notes and warrants. The Belleau Note principal was amended to $1.25 million - Regained compliance with Nasdaq Listing Rule 5550(a)(2) (minimum bid price) on July 8, 2025[271] - Designated 3,775,047 shares of Series AAAA Jr. Convertible Preferred Stock on July 11, 2025, with a stated value of $1.00 and an initial conversion price of Nasdaq Minimum Price + $0.01[272][273] - Entered into Preferred Stock Exchange Agreements in July 2025, converting approximately $3.29 million in promissory notes into Series AAAA Jr. Convertible Preferred Stock and cash payments[274][275] - Entered into an Equity Purchase Agreement on July 10, 2025, with Yield Point NY, LLC, providing the right to sell up to $20 million in common stock, and issued a pre-funded warrant for $600,000 shares of common stock as commitment[278][280][283] - Completed a Private Placement Offering on July 10, 2025, raising $4 million in gross proceeds from 8% Senior Secured Convertible Notes ($4,494,382 principal) and warrants to purchase 659,968 common shares[285] - The Belleau Note principal was reduced to $1,250,000 on August 11, 2025, via an Amended & Restated Unsecured Promissory Note[295] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition. It highlights a strategic focus on playable media, revenue diversification, and cost reduction initiatives, including a 35% workforce reduction in April 2025. The company experienced revenue declines in both the three and six months ended June 30, 2025, primarily due to macro headwinds and asset sales, but improved net loss per share. It also details recent acquisitions, expanded partnerships, and ongoing efforts to address Nasdaq listing compliance issues and secure additional financing - Super League is focused on transforming brand engagement through playable media, diversifying revenue, and significantly lowering operating costs[299][301] - A 35% workforce reduction and management compensation restructuring in April 2025 are expected to reduce fiscal year operating costs by approximately $2.7 million through December 31, 2025[301][314] - Acquired Supersocial in May 2025, an award-winning production studio, to expand partnerships and enhance 3D immersive experiences on platforms like Roblox[305] - Expanded partnership with AdArcade in May 2025 to offer Native Playables®, a patented mobile ad format, to consumer brands, broadening reach to 220 million monthly US gamers[308][309][310] Overview and Executive Summary This section provides a high-level overview of Super League Enterprise, Inc.'s business model, strategic initiatives, and recent corporate developments - Super League Enterprise, Inc. focuses on connecting brands with consumers through playable media in mobile games and immersive gaming platforms[299] - The company generates revenue from advertising, direct-to-consumer offers, and content/technology production, operating in one reportable segment[300] - Key strategic initiatives include revenue diversification, focusing on turnkey low-friction product solutions, and forging new partnerships[301] - A 1-for-40 reverse stock split was effective June 23, 2025, retroactively adjusting all share and per share data[302][303][304] - The sale of Mineville digital property in May 2025 for $350,000 cash included retaining ad sales and brand integration rights for two years[306][307] Results of Operations - Three Months Ended June 30, 2025 vs. 2024 This section analyzes the company's financial performance for the three months ended June 30, 2025, compared to the same period in 2024, highlighting revenue, expense, and net loss trends Three Months Ended June 30, 2025 vs. 2024 (in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------------- | :------ | :------ | :--------- | :--------- | | REVENUE | $3,001 | $4,116 | $(1,115) | (27)% | | COST OF REVENUE | $1,692 | $2,470 | $(778) | (31)% | | GROSS PROFIT | $1,309 | $1,646 | $(337) | (20)% | | Total operating expense | $4,454 | $5,739 | $(1,285) | (22)% | | NET LOSS | $(2,783)| $(2,455)| $328 | 13% | | Basic and diluted net loss per common share | $(4.52) | $(24.01)| $19.49 | (81)% | - Revenue decreased by 27% due to macro headwinds, tariff uncertainty, market education challenges for immersive platforms, and reduced direct-to-consumer revenue from the Mineville sale[312] - Gross profit margin improved to 44% in Q2 2025 from 40% in Q2 2024, despite lower revenue, due to a greater proportional decrease in cost of revenue[313] - Total operating expense decreased by 22%, driven by a 35% workforce reduction and management compensation restructuring, expected to save $2.7 million in fiscal year operating costs[314][315] Results of Operations - Six Months Ended June 30, 2025 vs. 2024 This section analyzes the company's financial performance for the six months ended June 30, 2025, compared to the same period in 2024, detailing revenue, expense, and net loss trends Six Months Ended June 30, 2025 vs. 2024 (in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------------- | :------ | :------ | :--------- | :--------- | | REVENUE | $5,719 | $8,325 | $(2,606) | (31)% | | COST OF REVENUE | $3,214 | $4,947 | $(1,733) | (35)% | | GROSS PROFIT | $2,505 | $3,378 | $(873) | (26)% | | Total operating expense | $9,281 | $12,076 | $(2,795) | (23)% | | NET LOSS | $(7,013)| $(7,715)| $(702) | (9)% | | Basic and diluted net loss per common share | $(13.40)| $(62.17)| $48.77 | (78)% | - Revenue decreased by 31% for the six months ended June 30, 2025, primarily due to industry softness in ad sales, macro environmental factors, and reduced direct-to-consumer revenues from the sales of Minehut and Mineville digital properties[317] - Gross profit margin improved to 44% in H1 2025 from 41% in H1 2024, driven by a greater proportional decrease in cost of revenue, particularly from a strategic 90% decrease in lower-margin influencer marketing revenues[318][333] - Net loss decreased by 9% to $7.0 million, and net loss per common share significantly improved to $(13.40) from $(62.17) in the comparable prior year period[319] Liquidity and Capital Resources The company's cash and cash equivalents decreased to $0.48 million at June 30, 2025, from $1.3 million at December 31, 2024. Management has identified substantial doubt about the company's ability to continue as a going concern due to net losses and accumulated deficit, necessitating additional capital. Recent equity financings in May 2025 raised approximately $1.75 million in gross proceeds. Debt financings include Agile I & II, Diagonal I & II, Belleau, and a Related Party Promissory Note, with various terms and repayment structures. The Accounts Receivable Financing Facility was terminated in June 2025 - Cash and cash equivalents decreased to $0.48 million at June 30, 2025, from $1.3 million at December 31, 2024[360] - Management has substantial doubt about the company's ability to continue as a going concern due to net losses and an accumulated deficit of $277.1 million, requiring additional equity or debt financing[361][362][363][364] Equity Financings - May 2025 Offerings (Gross Proceeds) | Offering Type | Gross Proceeds (approx.) | | :------------ | :----------------------- | | May III | $670,000 | | May II | $500,000 | | May I | $870,000 | | Total | $2,040,000 | - The Accounts Receivable Financing Facility (SLR Agreement) was terminated on June 10, 2025[429] Contractual Obligations and Off-Balance Sheet Commitments and Arrangements As of June 30, 2025, the company has no significant capital expenditure commitments, committed lines of credit, or long-term debt, and no guarantees. It leases approximately 200 square feet of office space at $3,000 per month. The company has not entered into any off-balance sheet financial guarantees, derivative contracts indexed to its shares, or variable interests in unconsolidated entities - As of June 30, 2025, the company has no significant commitments for capital expenditures, committed lines of credit, or long-term debt, and no guarantees[437] - The company leases approximately 200 square feet of office space at a rate of $3,000 per month on an annual basis[437] - No off-balance sheet financial guarantees, derivative contracts indexed to shares, or variable interests in unconsolidated entities have been entered into[438] Critical Accounting Estimates and Policies This section highlights critical accounting estimates, including revenue recognition, fair value option (FVO) election for promissory notes, and determination of fair value for warrants. Significant judgments are required in assessing collectability for revenue, determining appropriate discount rates for FVO debt, and estimating volatility, risk-free rates, and terms for Black-Scholes calculations for warrants. Variations in these estimates could materially impact financial results - Critical accounting estimates include revenue recognition, fair value option (FVO) election for promissory notes, and determination of fair value for warrants[442] - Significant judgments are required in assessing collectability for revenue, determining appropriate discount rates for FVO debt, and estimating Black-Scholes model inputs (volatility, risk-free rate, term) for warrants[445][449][450] - Variations in these judgments and estimates could have a material impact on the company's financial results[449][450] Relaxed Ongoing Reporting Requirements The company qualifies as a "smaller reporting company" and benefits from reduced disclosure obligations, including exemption from auditor attestation requirements of Section 404 of Sarbanes-Oxley and reduced executive compensation disclosures. It ceased being an "emerging growth company" as of December 31, 2024, but continues to leverage the smaller reporting company exemptions - The company qualifies as a "smaller reporting company" and benefits from reduced disclosure obligations[451] - Exemptions include not complying with auditor attestation requirements of Section 404 of Sarbanes-Oxley and reduced executive compensation disclosures[451] - The company ceased being an "emerging growth company" as of December 31, 2024, but continues to be a "smaller reporting company"[454] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is not currently exposed to significant market risks arising from changes in interest rates, foreign currency exchange rates, or derivative transactions in the ordinary course of its business - The company is not currently exposed to significant market risks from changes in interest rates, foreign currency exchange rates, or derivative transactions[456] Item 4. Controls and Procedures The CEO and CFO evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, concluding they are effective in providing reasonable assurance that required information is recorded, processed, summarized, and reported timely. No material changes in internal control over financial reporting were identified during the period - CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate financial reporting[457] - No material changes in internal control over financial reporting were identified during the period covered by the report[458] PART II. OTHER INFORMATION This section provides additional information not included in the financial statements, covering legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings The company has no legal proceedings to report for the period - No legal proceedings are reported for the period[460] Item 1A. Risk Factors The company faces risks related to potential delisting from Nasdaq due to non-compliance with listing requirements, specifically the stockholders' equity requirement. While compliance with the minimum bid price and annual meeting requirements has been regained, failure to meet the stockholders' equity threshold could lead to delisting, reduced liquidity, and hinder future financing. Additionally, the company faces litigation risk from preferred stockholders if consent for common stock issuances below conversion price floors or for incurring debt is not obtained - The company is at risk of delisting from Nasdaq due to non-compliance with the $2.5 million stockholders' equity requirement, despite regaining compliance with the minimum bid price and annual meeting rules[461][462][466] - Delisting could reduce common stock liquidity, market price, and ability to raise additional financing[467][473] - The company faces potential litigation from preferred stockholders if consent is not obtained for common stock issuances below conversion price floors or for incurring debt, as required by certain preferred stock certificates of designation[467][468] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered securities were issued during the three months ended June 30, 2025, that were not previously reported - No previously unreported unregistered securities were issued during the three months ended June 30, 2025[469] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report - No defaults upon senior securities were reported[470] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[471] Item 5. Other Information No other information is reported for this item - No other information is reported for this item[472] Item 6. Exhibits This section lists all exhibits filed with the 10-Q report, including underwriting agreements, placement agent agreements, purchase and sale agreements, certificates of amendment, promissory notes, employment agreement addendums, the 2025 Omnibus Equity Incentive Plan, and various certifications - Exhibits include various agreements such as underwriting, placement agent, and purchase/sale agreements[474] - Key financial and corporate documents like promissory notes, the 2025 Omnibus Equity Incentive Plan, and certifications from executive officers are also listed[474]