CAST 10-K & 10-Q changes, risk factors and insider trading

Summary of Risk Factors

Investing in our Class A common stock involves a high degree of risk. You should carefully consider all the information in this prospectus prior to investing in our Class A common stock. These risks are discussed more fully in the next section entitled “Risk Factors.” These risks and uncertainties include, but are not limited to, the following:

RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including the financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus before deciding whether to invest in shares of our Class A common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. If any of the following risks actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.

Risks Relating to Our Business

We may not be able to continue as a going concern without additional financing, and if such financing is not available to us or is not available to us on acceptable terms, we may be forced to cease operations.

We have a limited operating history and have incurred recurring losses from operations. As of December 31, 2025, we have an accumulated deficit of $200,881,532, and a stockholders’ deficit of $3,547,862. For the three months ended December 31, 2025, and 2024, we incurred a net loss of $2,783,982 and $3,929,518, respectively. For the six months ended December 31, 2025, and 2024, we incurred a net loss of $5,646,331 and $7,489,323, respectively. Our failure to generate sufficient revenues, effectively manage expenses or raise additional capital could adversely affect our ability to achieve our intended business objectives. These matters, among others, raise substantial doubt about our ability to continue as a going concern.

We funded our initial operations primarily through sales of Class A common stock to accredited investors, debt financing, and exchange of Class A common stock for services received by us. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our shareholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct business. If we are not able to raise additional capital when required or on acceptable terms, we may have to: (i) significantly delay, scale back or discontinue the development or commercialization of new products; (ii) seek collaborators for further development and commercialization of our products; or (iii) relinquish or otherwise dispose of some or all of our rights to technologies or the products that we would otherwise seek to develop or commercialize.

Our SmartGuide relies on a technology that we license from Nextelligence, Inc. and any interruption of our rights as a licensee could have a significant adverse impact on some major aspects of our business, such as product development, customer retention and sales.

Our SmartGuide has been built on technology developed by Nextelligence, Inc., or Nextelligence, and used by us pursuant to a Technology License and Development Agreement (as amended, the “Technology Agreement”). Nextelligence is principally owned and controlled by William A. Mobley, Jr., our founder, Chief Executive Officer and Chairman. The Technology Agreement provides that Nextelligence is obligated to provide all further development, improvement, modification, maintenance, management and enhancement services related to the technology. The Technology Agreement may be terminated if, among other things, we breach the Technology Agreement, if we become insolvent or subject to bankruptcy laws, or if there is a change of control (as defined in the Technology Agreement). If we were not able to use the technology for any reason, it could have a significant adverse impact on some major aspects of our business, such as product development, customer retention and sales.

If our efforts to attract and retain subscribers are not successful, our business will be adversely affected.

Our ability going forward to attract and retain subscribers will depend on our ability to consistently provide a robust, valuable and quality experience for selecting and viewing TV shows, movies and channels and access to online radio stations. Furthermore, the relative service levels, content offerings, pricing and related features of competitors to our service may adversely impact our ability to attract and retain subscribers. If consumers do not perceive our service offering to be of value, or if we introduce new or adjust existing services that are not favorably received by them, we may not be able to attract subscribers. In addition, many of our subscribers are re-joining our service or originate from word-of-mouth advertising from existing subscribers. Our attracting and retaining subscribers may depend on our ability to:

If our efforts to satisfy our existing subscribers are not successful, we may not be able to attract new subscribers, and as a result, our ability to maintain or grow our business will be adversely affected. Subscribers cancel their subscription to our service for many reasons, including a perception that they do not use the service sufficiently, the need to cut household expenses, availability of content is limited, competitive services provide a better value or experience, and customer service issues are not satisfactorily resolved. We must continually add new subscribers both to replace subscribers who cancel and to grow our business beyond our current subscriber base. If too many of our subscribers cancel our service, or if we are unable to attract new subscribers in numbers sufficient to grow our business, our operating results will be adversely affected. If we are unable to successfully compete with current and new competitors in both retaining our existing subscribers and attracting new subscribers, our business will be adversely affected. Further, if excessive numbers of subscribers cancel our service, we may be required to incur significantly higher marketing expenditures than we currently anticipate in order to replace these subscribers with new subscribers.

Our reported subscriber count includes inactive accounts and may not be indicative of current platform engagement or monetization potential.

We define a “subscriber” as any individual or entity that has registered for access to our platform, whether on a paid or free (ad-supported) tier basis. This metric represents cumulative account registrations since inception, and includes accounts that may be dormant, inactive or no longer engaged with the platform. We do not currently remove accounts from our subscriber count based on inactivity or lack of engagement, and we do not separately report the number of active users. As a result, our reported subscriber figures may significantly overstate the number of users who actively use the platform, generate advertising impressions, or contribute to revenue in any given period. Investors should not rely on our total subscriber count as a measure of current platform usage, engagement, or monetization capacity. If we were to adopt an active-user metric or reclassify inactive accounts, the resulting figures could be materially lower than the subscriber counts currently reported.

If we are not able to continue to innovate or if we fail to adapt to changes in our industry, our business, financial condition and results of operations would be materially and adversely affected.

The market for online video, radio and games is characterized by rapidly changing technology, evolving industry standards, new service and product introductions and changing customer demands. Although we have developed new products and services in order to meet customer demands, new technologies and evolving business models for delivery of entertainment video continue to develop at a fast pace and we may not be able to keep up with all of the changes. Consumers are afforded various means for consuming online video, radio and games. The various economic models underlying these differing means of entertainment video delivery include subscription, pay-per-view, ad-supported and piracy-based models. Several competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we do. New entrants may enter the market with unique service offerings or approaches to distributing online video, radio and games and other companies also may enter into business combinations or alliances that strengthen their competitive positions. The changes and developments taking place in our industry may also require us to re-evaluate our business model and adopt significant changes to our long-term strategies and business plan. If we are unable to successfully or profitably compete with current and new competitors, programs and technologies, our business will be adversely affected, and we may not be able to increase or maintain market share, revenues or profitability.

We may not be able to maintain or grow our revenue or our business.

Since the beginning of fiscal year 2019, we have been focused on investing in and developing new technologies, which we anticipate will drive future growth and give us a sustainable revenue stream. In addition, we have transitioned to a “multi license” model from a “single-license” model. We believe that with new technology, coupled with our new sales and marketing strategy focused on generating revenue through free registrations of FreeCast.com by partnering with retailers, manufacturers, operators and/or distributors of streaming devices, mobile phones, broadband carriers, broadcasters, property management, multi-dwelling developers, builders, and various mass consumer communities of streaming tv watchers in exchange for a negotiated revenue sharing percentage with each distributor on a case-by-case basis. However, there can be no assurance that we will be able to generate sufficient revenue from distributor fees or fees from premium content purchased by subscribers through our SmartGuide to fund our operations in the future. In addition, our growth may become stagnant for many other reasons, including decreasing consumer spending, increasing competition, slowing growth of the consumption of online video, radio and games, changes in government policies or general economic conditions.

If we are not able to manage our growth, our business could be adversely affected.

We are currently engaged in an effort to grow our service by promoting online access renewal, developing new products, expanding internationally and to residents of rural areas. As we undertake all these changes, if we are not able to manage the growing complexity of our business, including improving, refining or revising our systems and operational practices, our business may be adversely affected.

We are reliant on a limited number of customers, and the loss of one or more of these customers would adversely affect our business.

For the six months ended December 31, 2025, and 2024, more than 39% and 52%, respectively, of our total revenue was derived from two related party customers. The loss of either customer, or a substantial reduction in their business with us, would adversely affect our financial performance and our business. Our reliance on a small customer base limits our ability to mitigate downturns in specific customer relationships or industry segments. Strategic decisions made by these customers could adversely impact our operations, including pricing, service levels, and product development priorities. Financial instability or delayed payments from these customers could negatively affect our liquidity and working capital. We cannot be certain that we will retain these customers or replace the revenue if we lose them. Any disruption in our relationship with these two customers would likely have an adverse impact on our financial condition and business.

If our efforts to build strong brand identity and improve subscriber satisfaction and loyalty are not successful, we may not be able to attract or retain subscribers, and our operating results may be adversely affected.

We must continue to build and maintain strong brand identity for our products and services, which have expanded over time. We believe that strong brand identity will be important in attracting subscribers. If our efforts to promote and maintain our existing brands and brands we develop in the future are not successful, our operating results and our ability to attract subscribers may be adversely affected. From time to time, subscribers’ express dissatisfaction with our service, including, among other things, title availability, processing and service interruptions. To the extent dissatisfaction with our service is widespread or not adequately addressed, our brand may be adversely impacted and our ability to attract and retain subscribers may be adversely affected. With respect to our planned international expansion, we will also need to establish our brand and to the extent we are not successful, our business in new markets would be adversely impacted.

If we are unable to manage the mix of subscriber acquisition sources, our subscriber levels and marketing expenses may be adversely affected.

We utilize a broad mix of marketing programs to promote our service to potential new subscribers. We obtain new subscribers through our online marketing efforts, including paid search listings, banner ads, text links and permission-based e-mails. In addition, we have engaged in various offline marketing programs, including TV and radio advertising, direct mail and print campaigns, consumer package and mailing insertions. We maintain an active public relations program to increase awareness of our service and drive subscriber acquisition. We opportunistically adjust our mix of marketing programs to acquire new subscribers at a reasonable cost with the intention of achieving overall financial goals. If we are unable to maintain or replace our sources of subscribers with similarly effective sources, or if the cost of our existing sources increases, our subscriber levels and marketing expenses may be adversely affected.

If we are unable to continue using our current marketing channels, our ability to attract new subscribers may be adversely affected.

We may not be able to continue to support the marketing of our service by current means if such activities are no longer available to us, become cost prohibitive or are adverse to our business. If companies that currently promote our service decide that we are negatively impacting their business, that they want to compete more directly with our business or enter a similar business or decide to exclusively support our competitors, we may no longer be given access to such marketing through them. In addition, if advertising rates increase, we may curtail marketing efforts or otherwise experience an increase in our marketing costs. Laws and regulations impose restrictions on the use of certain channels, including commercial e-mail and direct mail. We may limit or discontinue use or support of e-mail and other activities if we become concerned that subscribers or potential subscribers deem such activities intrusive, which could affect our goodwill or brand. If the available marketing channels are curtailed, our ability to attract new subscribers may be adversely affected.

Although we do not distribute content through our service, if we are sued for content accessed through our service, our results of operations would be adversely affected.

Although we do not distribute content through our service, we face potential liability for negligence, copyright, patent or trademark infringement or other claims based on content accessed through our service. We also may face potential liability for content uploaded from our users in connection with our community-related content or reviews. If we become liable for such activities, then our business may suffer. Litigation to defend these claims could be costly and the expenses and damages arising from any liability could harm our results of operations. We cannot assure you that we are insured or indemnified to cover claims of these types or liability that may be imposed on us.

We rely upon a number of partners to offer our service.

We currently offer subscribers the ability to easily navigate available sources of online video, radio and games and consume such media through their computers and other Internet-connected devices. If we are not successful in maintaining existing and creating new relationships with content providers, or if we encounter technological, content licensing or other impediments to our ability to organize content, our ability to grow our business could be adversely impacted. Furthermore, mobile devices and TVs are manufactured and sold by entities other than FreeCast and while these entities should be responsible for the devices’ performance, the connection between these devices and FreeCast may nonetheless result in consumer dissatisfaction toward FreeCast and such dissatisfaction could result in claims against us or otherwise adversely impact our business.

Any significant disruption in our computer systems or those of third-party service providers that we rely on could adversely impact our business.

Subscribers and potential subscribers access our service through our website or their TVs, computers, game consoles, or streaming or mobile devices. Our reputation and ability to attract, retain and serve subscribers depend on the reliable performance of our computer systems and those of third-party service providers that we utilize in our operations. Interruptions in these systems, or with the Internet in general, including discriminatory network management practices, could make our service unavailable or degraded. Service interruptions, errors in our software or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our service to existing and potential subscribers.

Our servers and those of third-party service providers we use in our operations are vulnerable to computer viruses, physical or electronic break-ins, cyber-attacks and similar disruptions, which could lead to interruptions and delays in our service and operations, as well as loss, misuse or theft of data. Our website periodically experiences directed attacks intended to cause a disruption in service. Any successful attempt to disrupt our service or internal systems could harm our business, be expensive to remedy and damage our reputation. Our insurance does not cover expenses related to attacks on our website or internal systems, and efforts to prevent such attacks are costly and may limit the functionality of our services.

We rely on third-party service providers, including cloud computing and distributed infrastructure platforms, to support critical aspects of our operations, including data processing, storage and service delivery. Because we cannot easily switch our operations to alternative providers, any disruption of or interference with our use of these third-party services, whether due to technological, operational or business-related issues, could adversely impact our operations and the experience of our subscribers.

In addition, fires, floods, earthquakes, power losses, telecommunications failures and other catastrophic events could damage our systems or those of our third-party service providers or cause them to fail completely. As we do not maintain fully redundant systems, any such disruption could result in prolonged downtime, loss of subscribers and harm to our business and results of operations.

We rely heavily on our proprietary technology to locate and organize online video, radio and games and to manage other aspects of our operations, and the failure of this technology to operate effectively could adversely affect our business.

We continually enhance or modify the technology used for our operations. We cannot be sure that any enhancements or other modifications we make to our operations will achieve the intended results or otherwise be of value to our subscribers. Future enhancements and modifications to our technology could consume considerable resources. If we are unable to maintain and enhance our technology, our ability to retain existing subscribers and to add new subscribers may be impaired. In addition, if our technology or that of third-parties we utilize in our operations fails or otherwise operates improperly, our ability to retain existing subscribers and to add new subscribers may be impaired. Also, any harm to our subscribers’ personal computers or other devices caused by software used in our operations could have an adverse effect on our business, results of operations and financial condition.

Privacy concerns and restrictions on our ability to use subscriber data could adversely impact our business and reputation.

In the ordinary course of business and, in particular, in connection with merchandising our service to our subscribers, we collect and utilize data supplied by our subscribers. We currently face certain legal obligations regarding the manner in which we treat such information. Other businesses have been criticized by privacy groups and governmental bodies for attempts to link personal identities and other information to data collected on the Internet regarding users’ browsing and other habits. Increased regulation of data utilization practices, including self-regulation or findings under existing laws, which limit our ability to use collected data, could have an adverse effect on our business. In addition, if we were to disclose data about our subscribers in a manner that was objectionable to them, our business reputation could be adversely affected, and we could face potential legal claims that could impact our operating results.

Our reputation and relationships with subscribers would be harmed if our subscriber data, particularly billing data, were accessed by unauthorized people.

We maintain personal data regarding our subscribers, including names and, in many cases, mailing addresses. With respect to billing data, such as credit card numbers, we rely on licensed encryption and authentication technology to secure such information. We take measures to protect against unauthorized intrusion into our subscribers’ data. If, despite these measures, we, or our payment processing services, experience any unauthorized intrusion into our subscribers’ data, current and potential subscribers may become unwilling to provide the information to us necessary for them to become subscribers, we could face legal claims, and our business could be adversely affected. Similarly, if a well-publicized breach of the consumer data security of any other major consumer Web site were to occur, there could be a general public loss of confidence in the use of the Internet for commerce transactions which could adversely affect our business.

In addition, we do not obtain signatures from subscribers in connection with the use of credit cards by them. Under current credit card practices, to the extent we do not obtain cardholders’ signatures, we are liable for fraudulent credit card transactions, even when the associated financial institution approves payment of the orders. From time to time, fraudulent credit cards are used on our Web site to obtain service. Typically, these credit cards have not been registered as stolen and are therefore not rejected by our automatic authorization safeguards. While we do have a number of other safeguards in place, we nonetheless experience some loss from these fraudulent transactions. We do not currently carry insurance against the risk of fraudulent credit card transactions. A failure to adequately control fraudulent credit card transactions would harm our business and results of operations.

We may not be able to adequately protect our intellectual property rights.

We rely on a combination of trademark, copyright, trade secret and other intellectual property laws, as well as confidentiality procedures and contractual provisions, to protect our proprietary technology, business processes and other intellectual property. These measures may not be sufficient to prevent unauthorized use, disclosure or misappropriation of our intellectual property.

Confidentiality agreements with employees, contractors and other third parties may be breached, and we may not have adequate remedies for any such breach. In addition, policing unauthorized use of our intellectual property is difficult, time-consuming and costly, and we may be unable to detect or prevent such unauthorized use. Our trade secrets may be disclosed, become known to competitors or be independently developed by others. If we are unable to adequately protect our intellectual property rights, our competitive position could be adversely affected, and our business, financial condition and results of operations could be materially harmed.

Intellectual property claims against us could be costly and result in the loss of significant rights.

We may be subject to claims by third parties that we have infringed, misappropriated or otherwise violated their intellectual property rights. These claims may arise from our use of technology, content, business processes or other aspects of our operations. As the number of patents and other intellectual property rights in our industry increases, the risk of such claims may also increase.

Defending against intellectual property claims, regardless of their merit, can be costly, time-consuming and may divert the attention of management and technical personnel. If we are unable to successfully defend against such claims, we may be required to pay damages, enter into costly licensing agreements, modify or discontinue certain products or services, or develop alternative technologies, any of which could adversely affect our business.

In addition, we may be unable to obtain licenses to use intellectual property on commercially reasonable terms, or at all. Any such claims or limitations could materially and adversely affect our business, financial condition and results of operations.

If we are unable to protect our domain names, our reputation and brand could be adversely affected.

We currently hold various domain names relating to our brand, including freecast.com. Failure to protect our domain names could adversely affect our reputation and brand and make it more difficult for users to find our Web site and our service. The acquisition and maintenance of domain names generally are regulated by governmental agencies and their designees. The regulation of domain names in the U.S. may change in the near future. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain relevant domain names. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We may be unable, without significant cost or at all, to prevent third-parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights.

We depend on key management as well as experienced and capable personnel generally, and any failure to attract, motivate and retain our staff could severely hinder our ability to maintain and grow our business.

We rely on the continued service of our senior management, including our founder and Chief Executive Officer and Chairman of our board of directors, William A. Mobley, Jr., other members of our executive team and other key employees to develop our products, services and solutions. In our industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. As a result, our human resources organization focuses significant efforts on attracting and retaining individuals in key technology positions. If we lose the services of any member of management or key personnel and are unable to attract or locate suitable or qualified replacements, or otherwise hire talented personnel, we may incur additional expenses to recruit and train new staff, making it more difficult to meet our business objectives, which could severely disrupt our business and growth. In addition, our ability to execute our strategy depends in part on our ability to engage and retain qualified third-party contractors.

Our Chief Executive Officer and Chief Financial Officer also serve as executive officers of other companies and such other positions may create conflicts of interest for such officers in the future.

William A. Mobley, Jr., our Chief Executive Officer and Chairman, works full-time for us, devoting approximately 50 hours a week to our business. Mr. Mobley also works part-time for Nextelligence and serves as its Chief Executive Officer and Chairman of the board of directors. Mr. Mobley’s duties to Nextelligence may compete for his full attention to our business; accordingly, he may have conflicts of interest in allocating time between those separate business activities.

Jonathan Morris, our Chief Financial Officer, works full-time for us, devoting approximately 45 hours a week to our business. Mr. Morris also advises two special purpose acquisition companies (SPACs), ESH Acquisition Corp. and Twelve Seas Investment Co III, on a limited basis as a consultant and their Chief Financial Officer. Mr. Morris’ duties to these other businesses may compete for his full attention to our business; accordingly, he may have conflicts of interest in allocating time between those separate business activities.

In this Report, unless otherwise stated or the context otherwise requires, references to “FreeCast®,” “Company,” “we,” “us” and “our” or similar references mean FreeCast, Inc.

Operating expenses decreased by 30%, or $1,192,674 to $2,772,302 in the three months ended December 31, 2025, as compared to $3,964,976 for the three months ended December 31, 2024. The change in operating expenses is attributed to a $767,018 decrease in general and administrative expenses and a decrease in compensation and benefits expense of $413,934. The decrease in compensation and benefits was primarily the result of a decrease to executive compensation. The decrease in general and administrative expenses was primarily the result of decreased website development and professional fees. Operating expenses decreased by 24%, or $1,768,357 to $5,723,644 in the six months ended December 31, 2025, as compared to $7,492,001 for the six months ended December 31, 2024. The change in operating expenses is attributed to a $1,196,809 decrease in general and administrative expenses and a decrease in compensation and benefits expense of $530,283. The decrease in compensation and benefits was primarily the result of a decrease to executive compensation. The decrease in general and administrative expenses was primarily the result of decreased website development and professional fees.

On December 8, 2025, we entered into an Equity Purchase Agreement (EPA) with Amiens Technology Investments, LLC (the “Investor”), pursuant to which the Investor has committed to purchase shares of our Class A common stock. Upon the terms and subject to the satisfaction of the conditions set forth in the EPA, we have the right, but not the obligation, to sell to the Investor, and the Investor is obligated to purchase, up to $50 million (the “Commitment Amount”) in shares of our Class A common stock. Such sales of Class A common stock by us, if any, are subject to certain limitations set forth in the EPA, and may occur from time to time, at our sole discretion, over a period of up to 36 months, commencing on the trading day immediately following the date of the Direct Listing (such period, the “Commitment Period”). The EPA is not necessary to meet the Nasdaq initial listing standards, and our ability to complete the Direct Listing and qualify for initial listing on Nasdaq does not depend on the availability of funds under the EPA. However, completion of the Direct Listing is a condition to our ability to sell shares under the EPA.

We entered into the EPA to provide ourselves with a flexible source of potential liquidity following the commencement of public trading of our Class A common stock. The EPA is intended to provide flexibility to raise capital incrementally, if and when we determine it is appropriate to do so, based on market conditions, the trading price and liquidity of our Class A common stock, and our capital needs at the time. The EPA is not intended to serve as a committed financing for any specific purpose, and we have not made any determination to draw on the facility. We are not required to utilize the equity line facility, and the Investor does not have the right to require us to sell any shares under the EPA. We may elect not to draw on the EPA at all.

During the Commitment Period, we may from time to time, by written notice delivered by us to the Investor (each, an “Advance Notice”), direct the Investor to purchase a number of shares of our Class A common stock up to the Maximum Advance Amount (as defined in the EPA) as set forth in the Advance Notice, subject to limitations and adjustments as set forth in the EPA. The prices at which such shares will be sold will be based on the applicable Market Price (as defined in the EPA). Unless earlier terminated as provided under the EPA, the term of the facility provided under the EPA terminates automatically on the earliest of (1) the first day of the month following the 36-month anniversary of the trading day immediately following the date of the Direct Listing; (2) the date on which the Investor shall have made payment of Advances pursuant to EPA for Class A common stock equal to the Commitment Amount; (3) the date on which we announce or publicly disclose a material restatement of our financial statements for two (2) or more fiscal quarters; (4) the date a Variable Rate Transaction (as defined in the EPA) has occurred; and (5) the date we have failed to comply with the covenants and obligations contained in Section 6.21 of the EPA regarding the Investor’s right during the Commitment Period to participate in up to 30% of any subsequent capital raising transactions by us during the Commitment Period, on the same terms, conditions and price provided for in such financing.

Under the EPA, we will control the timing and amount of sales of our Class A common stock to the Investor, if any. The Investor has no right to require us to sell any shares of our Class A common stock to the Investor, but the Investor is obligated to make purchases as we direct, subject to certain conditions set forth in the EPA. Actual sales of shares of our Class A common stock to the Investor, if any, will depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading prices for the Class A common stock, and determinations by us as to the appropriate sources of funding for us and our operations.

As consideration for the Investor’s commitment to purchase shares of our Class A common stock in accordance with the EPA, we agreed to pay a commitment fee in an amount equal to $750,000, by the issuance to the Investor of a number of shares of Class A common stock (the “Commitment Shares”) as follows: (1) one-third of the Commitment Shares are to be issued to the Investor on the occurrence of the first closing under the EPA; (2) one-third of the Commitment Shares are to be issued to the Investor on the date the Investor has purchased an aggregate of $15.0 million of shares of our Class A common stock under the EPA; and (3) the remaining one-third of the Commitment Shares are to be issued to the Investor on the date the Investor has purchased an aggregate of $30.0 million of shares of our Class A common stock under the EPA. The number of Commitment Shares issued to the Investor on each required date will equal $250,000 divided by the lower of (i) $10.00; and (ii) the lowest daily VWAP (as defined in the EPA) of our Class A common stock during the five trading days immediately following the date we give the Investor notice of our intent to sell them Class A common stock under the EPA.

In accordance with the EPA, we are required to file a registration statement with respect to the resale of the shares of our Class A common stock issuable under the EPA, including the Commitment Shares. The EPA requires us to file a registration statement within 30 days following the trading day after the Direct Listing date, and to use commercially reasonable efforts to have such registration statement declared effective within 90 days following the trading day after the Direct Listing date. We are required to use commercially reasonable efforts to continuously maintain the effectiveness of the registration statement until all of the Commitment Shares and the shares of our Class A common stock to be issued from time to time under the EPA pursuant to an Advance Notice have been sold or may be sold without restriction pursuant to Rule 144. Such resale registration statement must be effective before we may begin giving Advance Notices.

Between July 2018 and April 2018, a related party, a company owned by William A. Mobley, Jr., Public Wire, loaned us $66,380, at an interest rate of 12% per annum. The notes representing the loan originally matured on dates ranging from April 1, 2019, to January 1, 2020. Effective June 30, 2021, we amended the original promissory note with Public Wire and combined principal and interest from the previous notes under one new loan. In addition, we extended the maturity date to June 30, 2024. On March 29, 2024, we entered into a Debt Conversion Agreement with Public Wire to convert the outstanding principal and interest of the note payable at a conversion price of $4.00 per share. The total outstanding principal of $89,289 and accrued interest of $29,425, total of $118,714, was converted into 29,679 shares of our Class B common stock. The Class B common stock was fair market valued at $8 per share and we recognized a debt extinguishment loss of $118,714.

Revolving Convertible Note Payable – Related Party

On July 1, 2018, we signed a revolving convertible note agreement with Nextelligence, which is a related party that is majority owned and controlled by William A. Mobley, Jr., which was amended and restated as of July 2, 2018, for an amount up to $1,000,000; with any borrowings on this loan being at our complete discretion. Outstanding principal accrued interest at 12% per annum and was due and payable on July 1, 2020. In lieu of repayment, at Nextelligence’s option, all or part of the outstanding principal and accrued interest was convertible into shares of our Class A common stock at a conversion price of $0.50 per share. The loan matured on July 1, 2020, was in default and remained as an on-demand liability of ours until June 30, 2021. On June 30, 2021, we entered into a new revolving convertible promissory note with Nextelligence for an amount up to $2,500,000; with any borrowings on this loan being at our complete discretion. Outstanding principal accrued interest at 12% per annum. The borrowing limit was increased to $6,000,000 pursuant to a first amendment to the note dated June 13, 2022. Pursuant to a second amendment to the note dated July 17, 2023, the borrowing limit was increased to $10,000,000 and the maturity date extended to June 30, 2025. In lieu of repayment, at Nextelligence’s option, all or part of the outstanding principal and accrued interest was convertible into shares of our Class A common stock at a conversion price of $0.50 per share.

On March 29, 2024, Nextelligence converted the principal of $13,139,473 and accrued interest of $1,607,952, a total of $14,747,425, into 29,494,851 shares of our Class A common stock.

The U.S. Premium Finance agreement dated September 15, 2016, was secured against all rights, title, and interest associated with the D&O and Workers Compensation policies. As part of the legal costs associated with obtaining premium financing, on September 19, 2016, we agreed to pay a loan origination fee in the amount of $98,250. The loan origination fee was recorded as a debt discount and amortized over the life on the policy, maturing September 2019.

On April 18, 2017, we entered into an additional agreement with U.S. Premium Finance. We received $568,935 in net proceeds from the premium financing agreement. The loan bears interest at a floating rate per annum equal to the greater of either (i) 4.99% or (ii) 4.99% plus the Wall Street Journal Prime Rate. During the year ended June 30, 2019, and 2018, the interest rate on the loan was 4.99%. We were required to pay monthly principal and interest of approximately $29,705, paid over 20 months, with the final payment on December 15, 2018.

The U.S. Premium Finance agreement dated April 18, 2017 was secured against all rights, title, and interest associated with the general liability insurance policy. As part of the legal costs associated with obtaining premium financing, on April 18, 2017, we incurred and capitalized a loan origination fee in the amount of $28,348. The loan origination fee was amortized over the life of the policy, maturing December 2018. As of June 30, 2022, and 2021, there were no prepaid loan origination fees as the amount was fully amortized.

On November 13, 2019, we settled the outstanding liability with U.S. Premium Finance, in which we agreed to pay $1,000,000 in various installments, with the last payment due on December 5, 2022. During the year ended June 30, 2020, in accordance with the agreement, we reduced the principal on the balance sheet and recognized a $774,009 gain on forgiveness of debt. In adherence to the conditions of the agreement, we paid $275,000 towards the outstanding balance of the loan as of June 30, 2020. In addition, as of November 13, 2019, we had accrued approximately $162,350 in interest, which was reduced to zero based on the settlement amount and we recognized as a gain on forgiveness of debt, of $162,350. As of June 30, 2023, the balance due was $650,000, all of which was current. In January 2024, we paid the entire principal balance and accrued interest to settle the outstanding liability.

On October 22, 2019, we entered into a promissory note with an unrelated third party for the amount of $250,000, at an interest at 6% per annum. Effective June 30, 2021, we combined all previous principal ($250,000) and interest ($25,356) related to this loan and extended the maturity date to June 30, 2024, as per the second amendment to the agreement. On March 29, 2024, we came to an agreement with the lender to convert all of the outstanding principal and interest on the note into shares of our Class A common stock at a conversion price of $4.00 per share. The total principal of $275,356 and accrued interest of $45,400, for a total of $320,076, was converted into 80,189 shares of our Class A common stock. The Class A common stock was fair market valued at $8 per share and we recognized a debt extinguishment loss of $320,076.

Between March 2022 and June 2022, an unrelated third party loaned us $200,000, at an interest rate of 6% per annum. In August 2022, the unrelated third party loaned us an additional $100,000. The notes matured on March 1, 2023, and were in default until a renewal and consolidating note was entered into as of August 1, 2023, in the principal amount of $320,384. The interest rate under the renewal note is 6% per annum, and it matures on July 31, 2024. On March 29, 2024, we came to an agreement with the lender to convert all of the outstanding principal and interest on the note into shares of our Class A common stock at a conversion price of $4.00 per share. The total principal of $320,384 and accrued interest of $12,692, for a total of $333,076, was converted into 83,269 shares of our Class A common stock. The Class A common stock was fair market valued at $8 per share and we recognized a debt extinguishment loss of $333,076.

On November 18, 2022, we entered into a loan agreement with two unrelated parties for the aggregate amount of $200,000, at an interest rate of 6% compounded annually. The loan matured on December 1, 2024. On March 29, 2024, we came to an agreement with the lenders to convert all of the outstanding principal and interest on the notes into shares of our Class A common stock at a conversion price of $4.00 per share. The total principal of $200,000 and accrued interest of $16,340, for a total of $216,340, was converted into 54,086 shares of our Class A common stock. The Class A common stock was fair market valued at $8 per share and we recognized a debt extinguishment loss of $216,340.

Warrant Modification

Effective as of June 15, 2023, we authorized and approved: (i) the reissuance of 38 expired warrants held by non-employees and 2 expired warrants held by an employee (“Expired Warrants”) to purchase an aggregate of 7,637,962 shares of our Class A common stock, at purchase prices from $0.50 to $8.00 per share, all of which had expired without being exercised; and (ii) the modification of 31 outstanding warrants held by non-employees and 1 warrant held by an employee (“Reissued Warrants”) to purchase an aggregate of 4,105,625 shares of our Class A common stock, at purchase prices from $3.50 to $6.00 per share, that by their terms will expire if not exercised on or prior to dates ranging from February 10, 2024, to September 30, 2025. We reissued the Expired Warrants and modified the Reissued Warrants (collectively “Warrant Modification”) by extending the expiration date to December 31, 2025, and maintaining all other terms in the original warrant agreements. All outstanding warrants expired unexercised at the end of the day on December 31, 2025.

The value of the Warrant Modification to purchase an aggregate of 23,487,174 shares was calculated using the Black-Scholes-Merton option pricing model. The incremental fair value attributable to the Expired Warrants and Reissued Warrants, which was measured at the amount equal to the incremental value reflecting in the change in fair value of the warrants before and after the Warrant Modification, was calculated at $9,848,947. The portion of the incremental fair value related to non-employee warrants that were initially issued as part of equity financings was $2,669,175 and was treated as a deemed dividend and is reflected as “Deemed dividend on warrant modification” in the accompanying statement of operations. The portion of the incremental fair value related to employee warrants that were initially issued as awards was $7,179,772 and was treated as stock-based compensation and is reflected in “Compensation and benefits” in the accompanying statement of operations. Accordingly, the Warrant Modification was recorded as an increase in additional paid in capital with a corresponding decrease to retained earnings.

We utilized an option pricing model to determine the fair value of our Class A common stock as of June 15, 2023. The significant inputs were as follows: volatility of 71.1%, term of 2 years and risk-free rate of 4.55%. The valuation determined the fair value of a share of our Class A common stock to be $1.8025 as of June 15, 2023.

The Black-Scholes-Merton option pricing model includes the following assumptions to determine the fair value attributable immediately before and after the warrant modification effective June 15, 2023:

For the six months ended December 31, 2025, cash used in operating activities decreased by $1,430,782 or 21.5% due primarily to our decrease in net loss of $1,842,992 and a net increase in working capital of $165,617. These were offset by a decrease in stock-based compensation of $561,872. The change in working capital was made up mainly of an increase in accounts receivable of $271,336, decrease in prepaid assets of $100,000, increase in deferred revenue of $84,979, and decrease in accounts payable and accrued expenses – related party of $141,828.