Note 6 – Stockholders’ Equity (Deficit) and Mezzanine Equity

Preferred Stock

The Preferred Stock is divided into series, with the first series designated “Series A Preferred Stock” and consisting of 4,000,000 shares (the “Series A Shares”). Our board of directors may designate the remaining 1,000,000 authorized but unissued shares of Preferred Stock with such rights and privileges as the board of directors may determine without notice to our shareholders and without shareholder approval.

As of June 30, 2026, and 2025, there were 4,000,000 shares of Series A Preferred Stock issued and outstanding, respectively.

On May 16, 2024, in conjunction with the Reverse Split and Amendment, the Company’s largest shareholder Nextelligence, Inc., which is a related party and controller by the Company’s CEO, agreed to forfeit and cancel 20,000,000 shares of Class A common stock in exchange for the issuance of 4,000,000 shares of Series A preferred stock.

The Company determined the Series A Preferred Stock is classified as temporary mezzanine equity because the redemption rights are not solely within the Company’s control because the Company’s CEO, William Mobley is able to force the Company to redeem the shares for cash. Accordingly, the Company classifies the Series A Preferred Stock as mezzanine equity pursuant to ASC 480-10-S99. The Company accounted for the issuance of the Series A Preferred Stock at its fair value of $115,000,000. Subsequently, the Company has adjusted the carrying value of the Series A Preferred shares to its maximum redemption amount, which is $30 per share or $120,000,000 in the aggregate, given the instrument is currently redeemable.

The initial fair value of the Series A Preferred Stock was valued using a discounted cash flow and back solve method to determine $28.75 per share or $115,000,000 in the aggregate. The significant inputs were as follows: perpetual growth rate of 3%, market change factor of 5.8%, liquidity event of 1 year, volatility of 71.69% and risk-free rate of 5.13%. The accretion of $5,000,000 to redemption value was recorded as a deemed dividend and is disclosed on the statement of operations.

On September 26, 2024, the Company amended the Series A Preferred Stock to remove the redemption right by the Company pursuant to an amendment to the Company’s articles of incorporation filed with the Florida Secretary of State, and effective, on September 26, 2024.

On December 26, 2024, the Company amended the terms and conditions of the Series A Preferred Stock to replace the deemed liquidation triggered by a change in control with an ordinary liquidation. In conjunction with this amendment, the Company reclassified the Series A Preferred Stock from mezzanine equity to permanent equity because the features giving rise to mezzanine equity classification, the redemption right and the deemed liquidation, have been removed as part of the amendment.

A summary of the powers, preferences, rights, privileges, restrictions, and other matters relating to the Series A Shares are as follows:

Dividends. In any fiscal year Series A Shares are outstanding where the Company has revenue of more than $50,000,000, the holder of the Series A Shares (the “Series A Shareholder”) shall be entitled to receive an annual cash dividend equal to ten percent of any revenue above $50,000,000 (the “Annual Dividend Payment”). Subject to meeting the above criteria for such fiscal year, Annual Dividend Payments shall continue until such time as the aggregate amount of all Annual Dividend Payments is equal to the lesser of: (i) $160,000,000; or (ii) the product of the then number of outstanding shares of Series A Preferred Stock and $40 (as may be adjusted for any subdivisions or combinations) (the “Maximum Dividend Payment”). Notwithstanding the above, such dividends shall be payable only to the extent permitted by law out of assets legally available therefore. No dividends shall be paid on any Common Stock during any fiscal year of the Company until the Annual Dividend Payment on the Series A Shares shall have been paid or declared and set apart during that fiscal year.

Liquidation Preference. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the Series A Shareholder is entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of Common Stock, or other junior equity security by reason of their ownership thereof, an amount per Series A Share equal to $30 (as may be adjusted for any subdivisions or combinations) (the “Liquidation Amount”). If upon the occurrence of such event, the assets and funds to be distributed to the Series A Shareholder are insufficient to permit the payment to the Series A Holder of the full preferential Liquidation Amount, then the entire assets and funds of the Company legally available for distribution shall be distributed to the Series A Shareholder. After the distribution described above has been paid, the remaining assets of the Company available for distribution to shareholders shall be distributed among the holders of Common Stock pro rata based on the number of shares of Common Stock held by them. Any change in ownership or fundamental change shall be treated as a liquidation, dissolution or winding up of the Company, and shall entitle the Series A Shareholder and the holders of Common Stock to receive at the closing cash, securities or other property as specified above. Whenever the distribution provided for in this section shall be payable in securities or other property other than cash, the value of such distribution shall be the fair market value of such securities or other property as determined in good faith by the board of directors.

Redemption by the Company. The Company has the right at any time (the “Call Right”), but not the obligation, to cause the Series A Shareholder to sell some or all of the Series A Shares to the Company at the purchase price per share of $30 (as may be adjusted for any subdivisions or combinations) (the “Call Purchase Price”). If the Company desires to purchase the Series A Shares, the Company shall deliver to the Series A Shareholder a written notice (the “Call Exercise Notice”) exercising the Call Right. The closing of any sale of Series A Shares shall take place on a date (the “Call Right Closing Date”) no later than ten days following receipt by the Series A Shareholder of the Call Exercise Notice.

As mentioned above, the redemption feature was removed on September 26, 2024, as part of the amendment to the Company’s articles of incorporation.

Voting Rights. Except as otherwise required by law, the Series A Shares have no voting rights or powers on any matter presented to the shareholders of the Company for their action or consideration at any meeting of shareholders of the Company (or by written consent of shareholders in lieu of a meeting).

Conversion Rights. Except as otherwise required by law, the Series A Shares have no conversion rights or powers to convert into any other capital stock or security of the Company.

Transfers. Except as otherwise required by law, the Series A Shareholder has no rights or powers to enter into and/or consummate any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of one or more of the Series A Shares or any legal or beneficial interest in the Series A Shares, whether or not for value and whether voluntary or involuntary, without the prior written consent of the Company, in its sole discretion.

The Board of Directors may designate the authorized but unissued shares of the Preferred Stock with such rights and privileges as the board of directors may determine. As such, our board of directors may issue 5,000,000 preferred shares and designate the conversion, voting and other rights and preferences without notice to our shareholders and without shareholder approval.

Common Stock

As of June 30, 2026, the Company is authorized to issue 320,000,000 shares of Class A common stock and 30,000,000 shares of Class B common stock at a par value of $0.0001 per share.

As of June 30, 2026, and June 30, 2025, the Company had shares of Class A common stock outstanding of 28,988,755 and 25,947,813, respectively. As of June 30, 2026, and 2025, the Company had shares of Class B common stock outstanding of 13,925,640 and 13,937,640, respectively.

In general, except with regards to voting rights described below, shares of Class A Common Stock and Class B Common Stock have the same rights and privileges and rank equally, share ratably and are identical in all respects as to all matters. Without limiting the generality of the foregoing: (a) in the event of a merger, consolidation or other business combination requiring the approval of the holders of the Company’s capital stock entitled to vote thereon (whether or not the Company is the surviving entity), the holders of Class A Common Stock shall have the right to receive, or the right to elect to receive, the same form of consideration, if any, as the holders of Class B Common Stock and the holders of Class A Common Stock shall have the right to receive, or the right to elect to receive, at least the same amount of consideration, if any, on a per share basis as the holders of Class B Common Stock; and (b) in the event of (i) any tender or exchange offer to acquire any shares of Common Stock by any third party pursuant to an agreement to which the Company is a party or (ii) any tender or exchange offer by the Company to acquire any shares of Common Stock, pursuant to the terms of the applicable tender or exchange offer, the holders of Class A Common Stock shall have the right to receive, or the right to elect to receive, the same form of consideration as the holders of Class B Common Stock and the holders of Class A Common Stock shall have the right to receive, or the right to elect to receive, at least the same amount of consideration on a per share basis as the holders of Class B Common Stock.

With regards to voting rights, the holders of shares of Class A Common Stock and Class B Common Stock vote together as one class on all matters (including the election of directors) submitted to a vote or for the consent of the shareholders of the Company. However, each holder of shares of Class A Common Stock shall be entitled to one (1) vote for each share of Class A Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the shareholders of the Company, and the holder of shares of Class B Common Stock shall be entitled to fifteen (15) votes for each share of Class B Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the shareholders of the Company.

Shares of Class B common stock may only be issued to and held by William A. Mobley, Jr. personally or jointly with his spouse, and certain permitted entities owned or controlled by Mr. Mobley, or for which he has sole disposition and voting power over shares held by such entities, other than Nextelligence (each, a “Class B Holder”). Any issuance by us of Class B shares to anyone other than a Class B Holder is immediately null and void, and of no legal validity, force, or effect. Unless a Class B Holder requests to receive Class A shares, any issuance of common stock by us to a Class B Holder will be shares of Class B common stock. If a Class B Holder purchases or otherwise acquires or receives any shares of Class A common stock from a person or entity other than us, upon receipt thereof such shares of Class A common stock shall automatically be reclassified as and become an equal number of shares of Class B common stock. As of June 30, 2026, and 2025, William A Mobley, Jr. the Company CEO and Majority owner has 13,925,640 and 13,937,640 Class B shares outstanding, respectively, which is 100% of the Class B shares outstanding as of both reporting periods.

Class A Common Stock Subscriptions

During the year ended June 30, 2026, the Company received approximately $8.0 million in net proceeds from investors pursuant to securities purchase agreements involving pre-funded warrants. The transaction had not yet closed, and the related warrants had not been issued as of June 30, 2026. Accordingly, the proceeds were recorded as Common stock subscriptions within stockholders’ equity. The balance was adjusted for associated offering and financing costs related to the transaction and will be reclassified to additional paid in capital upon issuance of the underlying warrants. Any subsequent exercises will be accounted for on an individual basis for the number of underlying shares of common stock issued in exchange for the warrants. The deposits related to this transaction are associated with the future issuance of 2,776,600 pre-funded warrants.

In the year ended June 30, 2025, the Company received deposits in the amount of $1,500,000 for 187,500 Class A common shares to be issued pursuant to securities purchase agreements. These common shares were issued in January and February 2025.

During the year ended June 30, 2025, pursuant to the common stock subscription agreements, the Company issued 362,500 shares of Class A common stock at $8.00 per share for a total of $2,900,000.

During the year ended June 30, 2025, pursuant to the common stock subscription agreements, the Company issued 187,500 shares of Class A common stock at $8.00 per share for a total of $1,500,000 to related parties.

Class A common stock issuance

During the year ended June 30, 2026, the Company received deposits from three third party investors in the amount of $2,700,000 for 337,500 Class A common shares to be issued pursuant to the securities purchase agreement. These common shares were issued in July 2025.

Additionally, during the year ended June 30, 2026, the Company issued 1,806,935 shares to a related party in exchange for the conversion of a convertible related party note payable at various conversion prices between $1.55 and $4.00 per share. The principal of $3,764,052 was converted into 1,806,935 shares of Class A common stock (See Note 5).

On July 26, 2025, the Company approved the conversion of all outstanding principal and interest on a related party convertible note payable into common shares at a conversion price of $8 per share. The principal of $3,865,555 and accrued interest of $210,496, total of $4,076,051 was converted into 509,507 shares of Class A common stock (See Note 5).

On September 25, 2025, the Company issued 125,000 shares of its Class A common stock at $8 per share for a total value of $1,000,000 to Maxim Partners LLC (“Maxim”) in connection with its affiliate’s engagement as a financial advisor to assist with certain aspects of the Company’s direct listing process. The $1,000,000 issuance for services performed was deferred and resulted in a net effect of $0 on the Stockholder’s deficit as of December 31, 2025. Initially, the Company recorded an increase in common stock for the par value of the shares of $13 and reduced Additional Paid in Capital for the same amount. The advisory services contracted to be provided by Maxim’s affiliate include strategic guidance on listing objectives, structural planning, and investor communication strategy, with the penultimate service being the official direct listing. During the year ended June 30, 2026, the direct listing happened, which completed Maxim’s duties to perform contracted services. As a result, the Company recorded the $1,000,000 as stock-based compensation expense and an increase to Additional Paid in Capital for the same amount.  

Warrants

The Company from time-to-time issues warrants in conjunction with equity financing and to employees and non-employees for services.

During the year ended June 30, 2024, the Company issued warrants to purchase an aggregate of 100,000 shares of Class A common stock of the Company to the Company’s Chief Operating Officer for services in conjunction with his employment agreement. The warrants vest over a twelve-month term and have an exercise price of $2.00 per share. As a result, the Company recognized stock-based compensation of $144,262 for the years ended June 30, 2025. Under the Black-Scholes-Merton option pricing model the fair value of the warrants at time of issuance was approximately $572,343, the Company will amortize the fair value over 12 months as compensation and benefits expense in the accompanying statement of operations. The significant inputs were as follows: Class A common stock fair value of $7.32, volatility of 61.67%, term of 3 years and risk-free rate of 4.66%.

During the year ended June 30, 2025, the Company amended Mr. Savine’s employment agreement on November 15, 2024, to terminate the warrants in consideration for a cash bonus that is contingent upon a Liquidity Event as defined in Note 8. The termination of the warrants was treated as a cancellation and all previously unrecognized compensation cost of $352,814 was recognized on November 15, 2024, the date of cancellation.

On May 1, 2023, the Company issued warrants to Gary Engel, the Company’s Chief Marketing Officer, to purchase 12,500 shares of our Class A common stock, exercisable at $6.00 per share, issued in connection with entering into an employment agreement, effective May 1, 2023. The warrant vests ratably over 12 months and may be exercised in whole or in part at any time or from time to time from the vesting date up to and including May 1, 2026. Under the Black-Scholes-Merton option pricing model the fair value of the warrants at time of issuance was approximately $7,666. The Company will amortize the fair value over 12 months as compensation and benefits expense in the accompanying statement of operations. The significant inputs were as follows: Class A common stock fair value of $1.80, volatility of 92.1%, term of 3 years and risk-free rate of 3.85%.

On April 8, 2026, the Company issued warrants to purchase an aggregate of 6,743,587 shares of its Class A common stock at an exercise price of $4.25 per share, exercisable through May 15, 2026. On May 15, 2026, the Company amended the warrants to reduce the exercise price from $4.25 to $1.33 per share and extend the expiration date from May 15, 2026, to May 22, 2026. The amendment also permitted certain holders with aggregate exercise prices exceeding $200,000 to pay 25% of the exercise price upon exercise and the remaining 75% by June 19, 2026. During the extension period, holders exercised 250,000 warrants for aggregate cash proceeds of $332,500. The remaining warrants expired unexercised on May 22, 2026.

The value of the Warrants was calculated using the Black-Scholes-Merton option pricing model. The fair value of the Warrants as of April 8, 2026, was calculated at $9,550,942. The incremental fair value attributable to the Warrant Modification, which was measured at the amount equal to the change in fair value of the warrants immediately before and immediately after the Warrant Modification, was calculated at $1,860,556. The fair value of the warrants immediately before the Warrant Modification was determined to be $0 because the warrants were set to expire on the amendment day. Accordingly, the aggregate fair value attributable to the issuance and subsequent modification was $11,411,498.

The aggregate fair value attributable to the issuance and subsequent modification of the warrants, all of which were held by non-employees, was treated as a deemed dividend and is reflected as “Deemed dividend on warrant reissuance and modification” in the accompanying statement of operations. Accordingly, the issuance and subsequent modification were recorded as an increase in additional paid-in capital with a corresponding decrease to retained earnings.

The Company utilized the closing market price of our Class A common stock to determine its fair value as of the respective measurement dates. The fair value of a share of our Class A common stock was $4.08 as of April 8, 2026, and $1.44 as of May 15, 2026. The significant inputs used to value the Warrants as of April 8, 2026, included expected volatility of 292.90%, an expected term of approximately 0.10 years, a risk-free interest rate of 3.67% and an expected dividend yield of 0%. The significant inputs used to measure the incremental fair value attributable to the Warrant Modification as of May 15, 2026, included expected volatility of 284.21%, expected terms of approximately 0 years immediately before the modification and approximately 0.019 years immediately after the modification, a risk-free interest rate of 3.71% and an expected dividend yield of 0%.

On June 30, 2026, the Company received net deposits of $8,018,358 related to 2,776,600 pre-funded warrants that were issued as a part of the PIPE financing transaction that closed on July 2, 2026.

The following is a summary of outstanding stock warrants as of the years ended June 30, 2026, and 2025:

Stock Based Compensation - Stock Options

Effective June 25, 2021, the Board of Directors of FreeCast Inc. adopted the 2021 Equity Incentive Plan, (the “Incentive Plan”). The plan provides for both incentive stock options and non-qualified stock options to officers, directors, employees, and consultants of the Company. The plan authorized 3,000,000 awards to be granted under the Incentive Plan of which 2,150,552 remain available to be granted as of June 30, 2026. The Incentive Plan expires on June 25, 2031.

The Company recognizes stock-based compensation expense from stock-based payments using the grant date fair-value, including for stock options. The fair value of options awarded to employees is measured on the grant date using the Black-Scholes option-pricing model and is recognized as an expense over the requisite service period on a straight-line basis.

All stock options are exercisable into class A common stock except for the 125,004 options granted to the Company CEO, William Mobley, which are exercisable into class B common stock.

The following is a summary of outstanding stock options as of June 30, 2026, and 2025:

The following are the vesting terms associated with those shares:

The Black-Scholes option-pricing model includes the following weighted average assumptions to determine the grant share-based awards:

During the years ended June 30, 2026, and 2025, the Company recognized stock-based compensation from options of $259,354 and $484,947, respectively.

As of June 30, 2026, there was $28,761 in unrecognized stock-based compensation related to unvested stock options, net of estimated forfeitures.