NOTE 17 — STOCKHOLDERS’ EQUITY

Preferred Stock

The Company’s Amended and Restated Articles of Incorporation authorize the issuance of 10,000,000 shares of preferred stock. The Company’s Board of Directors (the “Board”) has the power to designate the rights and preferences of the preferred stock and issue the preferred stock in one or more series.

Pursuant to the Second Amended and Restated Articles of Incorporation dated July 6, 2017, each share of Series C Preferred Stock (“Series C”) is convertible into one share of common stock, subject to adjustment for each issuance of common stock (but not upon issuance of common stock equivalents) that occurred, or occurs, from the date of issuance of the Series C (the “issue date”) until the fifth (5th) anniversary of the issue date (i) upon the conversion or exercise of any instrument issued on the issued date or thereafter issued (but not upon the conversion of the Series C), (ii) upon the exchange of debt for shares of common stock, or (iii) in a private placement, such that the total number of shares of common stock held by an “Eligible Class C Preferred Stock Holder” (based on the number of shares of common stock held as of the date of issuance) will be preserved at the same percentage of shares of common stock outstanding held by such Eligible Class C Preferred Stock Holder on such date. An Eligible Class C Preferred Stock Holder means any of (i) DE LLC for so long as Mr. O’Dowd continues to beneficially own at least 90% and serves on the board of directors or other governing entity, (ii) any other entity in which Mr. O’Dowd beneficially owns more than 90%, or a trust for the benefit of others, for which Mr. O’Dowd serves as trustee and (iii) Mr. O’Dowd individually. Series C will only be convertible by the Eligible Class C Preferred Stock Holder upon the Company satisfying one of the “optional conversion thresholds.” Specifically, a majority of the independent directors of the Board, in its sole discretion, must determine that the Company accomplished any of the following (i) EBITDA of more than $3.0 million in any calendar year, (ii) production of two feature films, (iii) production and distribution of at least three web series, (iv) theatrical distribution in the United States of one feature film, or (v) any combination thereof that is subsequently approved by a majority of the independent directors of the Board based on the strategic plan approved by the Board. At a meeting of the Board on November 12, 2020, a majority of the independent directors of the Board approved that the “optional conversion threshold” had been met.

At a meeting of the Board on November 12, 2020, the Board and Mr. O’Dowd agreed to restrict the conversion of the Series C until the Board approved its conversion. Therefore, on November 16, 2020, the Company and DE, LLC entered into a Stock Restriction Agreement pursuant to which the conversion of the Series C is prohibited until such time as a majority of the independent directors of the Board approves the removal of the prohibition. The Stock Restriction Agreement also prohibits the sale or other transfer of the Series C until such transfer is approved by a majority of the independent directors of the Board. The Stock Restriction Agreement shall terminate upon a Change of Control (as such term is defined in the Stock Restriction Agreement) of the Company.

On September 27, 2022, the Company’s shareholders approved an amendment to the terms of the Series C included in our Articles of Incorporation to increase the number of votes per share of common stock the Series C is convertible into from three votes per share to five votes per share. As a result, DE LLC, as the holder of the Series C was entitled to 11,847,350 votes, which was equal to approximately 57% of the voting securities of the Company as of December 31, 2023.

On September 24, 2024, the Company’s shareholders approved an amendment to the terms of the Series C included in our Articles of Incorporation to increase the number of votes per share of common stock the Series C is convertible into from five votes per share to ten votes per share. As a result, DE LLC, as the holder of the Series C was entitled to 23,694,700 votes, which was equal to approximately 68% of the voting securities of the Company as of that date.

On November 6, 2024, the Company received a letter (the “Letter”) from the Listing Qualifications staff (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that the Staff has determined that the Company violated Nasdaq’s voting rights rule set forth in Listing Rule 5640 (the “Voting Rights Rule”) due to the Company’s filing of shareholder-approved amendments to the Company’s articles of incorporation modifying the terms of the Company’s Series C to increase the number of votes per share of common stock the Series C is convertible into (i) from three votes per share to five votes per share, filed on September 29, 2022 (the “2022 Amendment”) and (ii) from five votes per share to ten votes per share, filed on September 25, 2024 (the “2024 Amendment” and, together with the 2022 Amendment, the “Amendments”).

As agreed with the Nasdaq, on January 21, 2025, the Company held a special shareholder meeting and the shareholders approved the adoption of the Articles of Amendment that would modify the terms of the Series C to decrease the number of votes per share of common stock the Series C is convertible into from ten votes per share to three votes per share. On January 24, 2025, the Company filed those Articles of Amendment to its Amended and Restated Articles of Incorporation with the Secretary of State of the State of Florida. As a result, DE LLC, as the holder of the Series C is entitled to 7,108,410 votes which was approximately 37% of the voting securities of the Company as of December 31, 2025.

The holder of Series C is entitled to vote together as a single class on all matters upon which common stockholders are entitled to vote.

The Certificate of Designation also provides for a liquidation value of $0.001 per share and dividend rights of the Series C on parity with the Company’s common stock.

Common Stock

The Company’s Amended and Restated Articles of Incorporation authorize the issuance of 200,000,000 shares of common stock.

Reverse Stock Split

Effective October 16, 2024, the Company amended its Amended and Restated Articles of Incorporation to effectuate a 1:2 reverse stock split.  All shares and per share amounts discussed in these consolidated financial statements have been retrospectively adjusted for the Reverse Stock Split.

2025 Lincoln Park Transaction

 On August 12, 2025, the Company entered into a purchase agreement (the “2025 LP Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park” or “Investor”), which provides that, upon the terms and subject to the conditions and limitations set forth therein, the Company may sell to Lincoln Park up to $15,000,000 of shares (the “Purchase Shares”) of its common stock, par value $0.015 per share, over the thirty-six (36) month term of the 2025 LP Purchase Agreement. Concurrently with entering into the 2025 LP Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park, pursuant to which it agreed to provide Lincoln Park with certain registration rights related to the shares issued under the 2025 LP Purchase Agreement (the “2025 LP Registration Rights Agreement”).

Beginning one business day following the Commencement Date (as defined below) and thereafter, the Company may direct Lincoln Park, on any business day selected by the Company (the “Purchase Date”) to purchase up to 20,000 shares of its common stock if the closing sale price is not below $0.10 (each, a “Regular Purchase”); provided that the share amount under a Regular Purchase may be increased to up to 25,000 shares, up to 50,000 shares, up to 75,000 or up to 100,000 shares if the closing sale price of its Common Stock is not below $1.50, $1.75, $2.00 or $2.50, respectively, on the business day on which we initiate the Regular Purchase. However, Lincoln Park’s maximum commitment in any single Regular Purchase may not exceed $500,000. Each Regular Purchase is subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the 2025 LP Purchase Agreement. The purchase price for Regular Purchases (the “Purchase Price”) shall be equal to 97% of the lesser of: (i) the lowest sale price of its common stock during the Purchase Date, or (ii) the average of the three (3) lowest closing sale prices of its common stock during the ten (10) business days prior to the Purchase Date. The Company shall have the right to submit a Regular Purchase notice to the Investor as often as every business day. A Regular Purchase notice is delivered to the Investor after the market has closed (i.e. after 4:00 P.M. Eastern Time) so that the Purchase Price is always fixed and known at the time the Company elects to sell shares to Lincoln Park.

In addition to Regular Purchases and provided that the Company has directed a Regular Purchase in full, the Company in its sole discretion may require Lincoln Park on each Purchase Date to purchase on the following business day (“Accelerated Purchase Date”) up to the lesser of (i) three (3) times the number of shares purchased pursuant to such Regular Purchase or (ii) 30% of the trading volume on the Accelerated Purchase Date (the “Accelerated Purchase”) at a purchase price equal to 97% of the lessor of: (i) the closing sale price on the Accelerated Purchase Date, or (ii) the Accelerated Purchase Date’s volume weighted average price (the “Accelerated Purchase Price”). The Company shall have the right in its sole discretion to set a minimum price threshold for each Accelerated Purchase in the notice provided with respect to such Accelerated Purchase and the Company may direct multiple Accelerated Purchases in a day provided that delivery of shares has been completed with respect to any prior Regular and Accelerated Purchases that Lincoln Park has purchased.

The Company may also direct Lincoln Park, on any business day on which an Accelerated Purchase has been completed and all of the shares to be purchased thereunder have been properly delivered to Lincoln Park in accordance with the 2025 LP Purchase Agreement, to make additional purchases upon the same terms as an Accelerated Purchase, (an “Additional Accelerated Purchase”). 

The purchase price of Regular Purchases, Accelerated Purchases and Additional Accelerated Purchases and the minimum closing sale price for a Regular Purchase will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during the business days used to compute the purchase price. The aggregate number of shares that the Company can sell to Lincoln Park under the 2025 LP Purchase Agreement may in no case exceed 2,346,371 shares (subject to adjustment as described above) of its common stock (which is equal to approximately 19.99% of the shares of the Common Stock outstanding immediately prior to the execution of the 2025 LP Purchase Agreement) (the “Exchange Cap”), unless (i) shareholder approval is obtained to issue shares above the Exchange Cap, in which the Exchange Cap will no longer apply, or (ii) the average price of all applicable sales of its common stock to Lincoln Park under the 2025 LP Purchase Agreement equals or exceeds $1.12 per share (subject to adjustment as described above) (which represents the lower of (A) the official closing price of its common stock on Nasdaq immediately preceding the signing of the 2025 LP Purchase Agreement and (B) the average official closing price of its common stock on Nasdaq for the five consecutive trading days ending on the trading day immediately preceding the date of the 2025 LP Purchase Agreement); provided that at no time may Lincoln Park (together with its affiliates) beneficially own more than 4.99% of the Company’s issued and outstanding common stock.

Under applicable rules of the NASDAQ Capital Market, the Company could not issue or sell more than 19.99% of the shares of its common stock outstanding immediately prior to the execution of the LP 2025 Purchase Agreement to Lincoln Park under the LP 2025 Purchase Agreement without shareholder approval. At a meeting held on November 10, 2025, the Company’s shareholders approved the issuance of up to $15 million of shares of the Company’s common stock pursuant to the LP 2025 Purchase Agreement.

On August 13, 2025, the Company issued 244,698 shares of its common stock to Lincoln Park as an initial fee for its commitment to Purchase Shares its common stock under the 2025 LP Purchase Agreement (the “Initial Commitment Shares”). The Company may issue up to 122,349 additional shares of its common stock pro-rata in connection with the sale of Purchase Shares (the “Additional Commitment Shares, and together with the Initial Commitment Shares, the “Commitment Shares”). In connection with the 2025 LP Purchase Agreement, the Company incurred and capitalized $281,403 of equity issuance costs recorded in other current assets on the Company’s consolidated balance sheet.

The 2025 LP Purchase Agreement contains customary representations, warranties, covenants, closing conditions, indemnification and termination provisions. Sales under the 2025 LP Purchase Agreement may commence only after certain conditions have been satisfied (the date on which all requisite conditions have been satisfied, the “Commencement Date”), which conditions include the filing of the Registration Statement (as defined below) covering the shares of common stock issued or sold by the Company to Lincoln Park under the 2025 LP Purchase Agreement.

 The 2025 LP Purchase Agreement may be terminated by the Company at any time after the Commencement Date, at its sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the 2025 LP Purchase Agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Common Stock. Although the Company has agreed to reimburse Lincoln Park for a limited portion of the fees it incurred in connection with the 2025 LP Purchase Agreement, the Company did not pay any additional amounts to reimburse or otherwise compensate Lincoln Park in connection with the transaction, other than the issuance of the Commitment Shares.

There are no limitations on the use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions on the Company’s ability to enter into a similar type of agreement involving a “variable rate transaction,” as such term is defined the 2025 LP Purchase Agreement, excluding an “at-the-market transaction,” through the 36-month anniversary of the date of the 2025 LP Purchase Agreement), rights of first refusal, participation rights, penalties or liquidated damages in the 2025 LP Purchase Agreement. The Company may deliver purchase notices under the 2025 LP Purchase Agreement, subject to market conditions, and in light of its capital needs, from time to time and under the limitations contained in the 2025 LP Purchase Agreement. Any proceeds that the Company receives under the 2025 LP Purchase Agreement are expected to be used for working capital and general corporate purposes.

On October 3, 2025, the Company filed a new Registration Statement on Form S-1 (the “Registration Statement” with the Securities Exchange Commission (the “SEC”) covering the resale of its common stock in accordance with the terms of the 2025 LP Registration Rights Agreement. The registration statement became effective on December 1, 2025.

For the year ended December 31, 2025, the Company did not sell any shares of common stock to Lincoln Park under the 2025 LP Purchase Agreement.

 2022 Lincoln Park Transaction

On August 10, 2022, the Company entered into a purchase agreement (the “LP 2022 Purchase Agreement”) and a registration rights agreement (the “LP 2022 Registration Rights Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company could sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to $25,000,000 in value of its shares of common stock from time to time over a 36-month period. Pursuant to the terms of the LP 2022 Registration Rights Agreement, the issuance of shares pursuant to the LP 2022 Purchase Agreement have been registered pursuant to our effective registration statement on Form S-1, and the related prospectus dated September 15, 2022.

During the year ended December 31, 2025, the Company did not sell shares of common stock under the LP 2022 Purchase Agreement. The LP 2022 Purchase Agreement expired in September 2025.

During the year ended December 31, 2024, the Company sold 475,000 shares of its common stock at prices ranging between $2.14 and $3.06 and received proceeds of $1,185,300.

 The Company evaluated the LP 2025 Purchase Agreement and the LP 2022 Purchase Agreement, considering the guidance in ASC 815-40, “Derivatives and Hedging — Contracts on an Entity’s Own Equity” (“ASC 815-40”), because each incudes the right to require Lincoln Park to purchase shares of common stock in the future (“put right”). We concluded that they are equity-linked contracts that do not qualify for equity classification, and therefore require fair value accounting. We analyzed the terms of the freestanding put right in both agreements and concluded that it has insignificant value at the inception of each agreement and as of December 31, 2025 and 2024.