Banzai (NASDAQ: BNZI) acquires ConnectAndSell assets using cash, stock, notes and earn-outs
Rhea-AI Filing Summary
Banzai International is acquiring substantially all assets of ConnectAndSell through an Asset Purchase Agreement, paying a mix of cash, stock, pre-funded warrants and notes with an initial Closing Consideration valued at $8.45M.
The structure includes $750,000 cash, $5.9M in Class A shares (with $1.34M of holdback stock), and an $1.8M employee indebtedness note at 8% interest, plus deferred payments of $1.5M and $3.25M and performance-based earn-outs tied to recurring revenue.
To help fund the deal, Banzai entered a subordinated secured loan for $2.1M in principal and received $2.0M of proceeds, repayable in 32 weekly installments with a 1.44x payment multiplier, secured on substantially all borrower assets and subordinated to existing senior debt. ConnectAndSell’s historical financials show recurring losses and a going-concern warning, highlighting integration and execution risks.
Positive
- None.
Negative
- None.
Insights
Banzai uses costly subordinated debt and structured equity to buy a distressed SaaS asset.
Banzai is purchasing ConnectAndSell’s sales-enablement SaaS business with layered consideration: upfront cash, stock, pre-funded warrants, an $1.8M seller note at 8%, two deferred cash installments totaling $4.75M, and revenue-based earn-outs. Part of the second deferred payment depends on completing a future private placement.
To support liquidity, Banzai added a subordinated secured promissory note with $2.1M principal, $2.0M net proceeds and a 1.44x repayment multiple over 32 weekly installments, all due by February 10, 2027. The debt is junior to existing lenders and secured by substantially all borrower assets, raising fixed obligations and collateral encumbrance.
ConnectAndSell’s audited statements show $14.7M revenue in 2025, positive operating income but a $3.1M net loss and an accumulated deficit of $57.6M, with auditors citing substantial doubt about its ability to continue as a going concern. Future filings may clarify how the acquired recurring revenue, earn-out triggers based on Year 1 MRR versus Closing MRR, and ownership limitations around 9.99% and 19.99% influence Banzai’s post‑deal financial profile.
8-K Event Classification
Key Figures
Key Terms
Subordinated Secured Promissory Note financial
Asset Purchase Agreement financial
Pre-Funded Warrants financial
Earn-Out Consideration financial
Beneficial Ownership Limitation financial
going concern financial
FAQ
What business is Banzai International (BNZI) acquiring from ConnectAndSell?
How much is Banzai International paying for the ConnectAndSell assets?
How is Banzai International financing the ConnectAndSell acquisition?
What earn-out structure applies to the ConnectAndSell transaction for BNZI?
What ownership limits apply to ConnectAndSell’s BNZI equity after closing?
What do ConnectAndSell’s financial statements reveal about its condition before acquisition?
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
On July 1, 2026 (the "Effective Date"), Banzai International, Inc. (the "Company") and its subsidiaries (together with the Company, the "Borrowers") entered into a Subordinated Business Loan and Security Agreement (the "Loan Agreement") with Agile Capital Funding, LLC, as collateral agent ("Collateral Agent"), and Agile Lending, LLC, as lead lender ("Lead Lender" and, together with any assignees party thereto, the "Lenders"). Pursuant to the Loan Agreement, the Borrowers issued a Subordinated Secured Promissory Note (the "Note"), dated July 1, 2026, in the aggregate principal amount of $2,100,000, and received $2,000,000 of proceeds, net of a $100,000 Administrative Agent Fee. The Note is repayable in 32 weekly installments of $94,500, representing a payment multiplier of 1.44x, and all amounts are due on February 10, 2027 (the "Maturity Date"). Borrowers may voluntarily prepay the Note in full, and if repaid within 30, 45, or 60 days after the Effective Date, the total loan payoff amount is reduced to $2,625,000, $2,730,000, or $2,835,000, respectively. Capitalized terms used but not defined in this Current Report on Form 8-K shall have the meanings set forth in the Loan Agreement and the Note, as applicable.
The Note is secured by a continuing security interest in substantially all assets of the Borrowers (the "Collateral"), and both the Collateral and the Borrowers' repayment obligations under the Note are subordinate to existing senior indebtedness, including indebtedness owed to CP BF Lending, LLC, 3i, LP, and Hudson Global Ventures, LLC.
The Loan Agreement contains customary covenants and events of default. Upon the occurrence of an Event of Default, the Lenders may, at their option, declare the entire unpaid principal balance of the Note, together with all accrued interest and other charges, immediately due and payable, and exercise any and all rights and remedies available under the Loan Agreement and applicable law, including repossession of the Collateral. In addition, interest on outstanding Obligations will accrue at the Default Rate, which is equal to the otherwise applicable interest rate plus five percentage points (5.00%).
The foregoing descriptions of the Loan Agreement and the Note are qualified in their entirety by reference to the full text of such documents, copies of which are attached hereto as Exhibits 10.5 and 10.6, respectively, and are incorporated herein by reference.
The information set forth in Item 2.01 of this Current Report on Form 8-K regarding the APA (as defined below) is incorporated herein by reference.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On July 2, 2026, the Company entered into an Asset Purchase Agreement (the "APA") with ConnectAndSell, Inc., a Delaware corporation ("ConnectAndSell"), and Banzai CS Acquisition, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("Acquisition Sub"), pursuant to which the Company agreed to purchase (and to direct the transfer of title to Acquisition Sub) substantially all of the assets of ConnectAndSell (the "Purchased Assets"), and Acquisition Sub agreed to assume certain specified liabilities of ConnectAndSell (the "Assumed Liabilities"), on the terms and subject to the conditions set forth in the APA (the "Transaction"), with the closing of the Transaction (the "Closing"). ConnectAndSell's business focuses on Software-as-a-Service and AI for sales enablement (the "Business"). A copy of the APA is filed as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The aggregate consideration for the Purchased Assets (the "Purchase Price") consists of (i) cash and shares of Class A Common Stock of the Company (the “Shares”) (or Pre-Funded Warrants in lieu of Shares) with an aggregate value of $8,450,000) (the "Closing Consideration"), payable at the Closing, comprised of (a) $750,000, payable in cash, (b) $5,900,000, payable in Shares (which will equal 9.99% of the number of shares of the Company's Class A Common Stock (the "Common Stock") outstanding immediately following such issuance), of which shares with an aggregate value of $1,340,000 (based on the Closing VWAP) (the "Holdback Shares") shall be withheld as security for ConnectAndSell's indemnification obligations under the APA, and/or Pre-Funded Warrants, and (c) a promissory note in the amount of $1,800,000 (the "Employee Indebtedness Note") bearing interest at a rate of 8% per annum, payable in equal quarterly installments in cash over the twelve (12)-month period following the Closing, provided that if the Company and ConnectAndSell mutually agree, any such quarterly payment may be made in freely trading shares of Common Stock and/or Pre-Funded Warrants, (ii) a first deferred cash payment in the amount of $1,500,000 (the "First Deferred Cash Payment"), payable within ten (10) days of the Closing, (iii) a second deferred cash payment in the amount of $3,250,000 (the "Second Deferred Cash Payment"), payable within three (3) Business Days following the earlier of (x) the date that the SEC declares effective the registration statement covering the securities issued in the Private Placement (as defined below) and (y) December 31, 2026, provided that if the Second Deferred Cash Payment becomes due and payable after September 30, 2026, the amount will be increased by simple interest at a rate of 8% per annum from September 30, 2026 until paid, (iv) earn-out payments contingent upon the achievement of certain revenue targets following the Closing (the "Earn-Out Consideration"), and (v) the assumption of the Assumed Liabilities. Pursuant to the APA, the Second Deferred Cash Payment shall be paid from the proceeds the Company receives from a future private placement offering of its equity and/or debt securities (the "Private Placement"), which proceeds shall be used for such purposes. A copy of the form of Pre-Funded Warrant is filed as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated herein by reference.
All shares of Common Stock issued pursuant to the APA, including any Earn-Out Consideration, will be valued based on the volume-weighted average price ("VWAP") of such shares over the five (5) trading days immediately preceding the applicable issuance date.
The VWAP of the shares of Common Stock over the five (5) trading days immediately preceding the Closing Date is referred to herein as the "Closing VWAP." In addition, if the VWAP of the shares of Common Stock over the five (5) trading days immediately preceding the earlier of (x) the 120th day following the Closing and (y) the effective date of the resale registration statement on Form S-3 is less than the Closing VWAP, the Company will issue to ConnectAndSell additional shares of Common Stock to compensate for such decrease with respect to the shares issued as closing consideration, provided that in no event shall the VWAP used for purposes of this adjustment be less than eighty-five percent (85%) of the Closing VWAP.
The Earn-Out Consideration is based upon targets occurring during the twelve (12)-month period following the Closing (the "Earn-Out Period") as follows: (i) $2,000,000 (the "Base Earn-Out Consideration"), payable in cash or, at the Company's option, in shares of Common Stock and/or Pre-Funded Warrants, if the average monthly recurring revenue of the Business for the twelve (12) calendar months following the Closing ("Year 1 MRR") is greater than or equal to ninety-five percent (95%) of the monthly recurring revenue of the Business as of the last day of the calendar month immediately preceding the Closing ("Closing MRR"); and (ii) additional performance earn-out consideration, payable in shares of Common Stock and/or Pre-Funded Warrants, equal to (A) three (3) times the amount by which Year 1 MRR exceeds Closing MRR, if such excess is less than or equal to $333,333, or (B) six (6) times such excess, if such excess is greater than $333,333.
Ownership Limitations and Pre-Funded Warrants
Under the APA, the Company may not issue shares of Common Stock to ConnectAndSell to the extent that, after giving effect to such issuance, ConnectAndSell, together with any affiliates thereof, would beneficially own in excess of 9.99% of the number of shares of Common Stock outstanding immediately following the Closing (the "Beneficial Ownership Limitation"). In addition, the Company may not issue shares of Common Stock to ConnectAndSell to the extent that the aggregate number of shares so issued would exceed 19.99% of the total number of shares of Common Stock and shares of Class B common stock outstanding immediately prior to the Closing (the "Nasdaq Ownership Limitation," together with the Beneficial Ownership Limitation, the “Ownership Limitations”). To the extent either Ownership Limitation prevents the Company from issuing consideration comprised exclusively of shares of Common Stock, the Company will instead issue (i) the maximum number of shares of Common Stock that may be issued without exceeding either Ownership Limitation, and (ii) Pre-Funded Warrants exercisable for the remaining shares of Common Stock. Each Pre-Funded Warrant is exercisable for one share of Common Stock at an exercise price of $0.0001 per share. Following the Closing, and until such time as the Stockholders’ Approval is obtained, ConnectAndSell, as a holder of shares of Common Stock, will not be entitled to vote on certain matters, including the approval of any amendment to the APA or the Pre-Funded Warrants to delete any ownership limitation or to approve matters that would result in ConnectAndSell's collective beneficial ownership exceeding 19.99% of the total number of shares of Common Stock and shares of Class B common stock outstanding immediately prior to the Closing.
Intellectual Property Licensing and Revenue Sharing
Pursuant to the APA, in the event that the Company or any of its affiliates enters into any agreement with a third party for the license or other commercialization of any intellectual property of the Business or related to the Purchased Assets (each, an "IP Agreement"), and such opportunity was identified, sourced or introduced by ConnectAndSell, the Company will pay to ConnectAndSell an amount equal to eighty percent (80%) of all net proceeds actually received by the Company or its affiliates pursuant to such IP Agreement. The Company has no obligation to enter into any IP Agreement and retains sole discretion with respect to the pursuit, negotiation, and execution of any such arrangements. In addition, subject to applicable customer agreements, privacy policies and applicable law, the Company has agreed to grant ConnectAndSell a limited, non-exclusive, non-transferable (except in connection with a sale of ConnectAndSell or the assets relating to its partnership with Sieve Technology AI, subject to certain conditions), perpetual, fully paid-up, royalty-free license to use certain intellectual property and customer data of the Business solely for purposes of ConnectAndSell's partnership with Sieve Technology AI (the "Sieve License Agreement").
Holdback and Indemnification
Shares of Common Stock with an aggregate value of $1,340,000 (based on the Closing VWAP) will be withheld by the Company at the Closing and retained for a period of twelve (12) months following the Closing as security for ConnectAndSell's indemnification obligations under the APA. The Holdback Shares will be valued at the Closing VWAP for purposes of any indemnification claims. The representations and warranties of the parties will survive for a period of twelve (12) months after the Closing. Subject to certain limited exceptions, ConnectAndSell's aggregate indemnification liability for breaches of representations and warranties is limited to the Holdback Shares, subject to a deductible equal to one percent (1.0%) of the Purchase Price. The Holdback Shares will be released to ConnectAndSell within five (5) business days after the expiration of the survival period, less any shares retained in satisfaction of or reserved for pending indemnification claims.
Registration Rights Agreement
At the Closing, the Company entered into a registration rights agreement (the "Registration Rights Agreement") with ConnectAndSell, pursuant to which the Company will agree to register for resale the shares of Common Stock and the Pre-Funded Warrants issued pursuant to the APA, and the shares of Common Stock issuable upon exercise of the Pre-Funded Warrants. The Company has agreed to
file a registration statement on Form S-3 (or such other form as the Company is then eligible) within thirty (30) days following the Closing and to use commercially reasonable efforts to cause such registration statement to be declared effective within ninety (90) days following the Closing (or one hundred twenty (120) days if the SEC reviews and has written comments to the registration statement), and to use commercially reasonable efforts to maintain the effectiveness of the registration statement, subject to liquidated damages if these obligations are not met. A copy of the form of Registration Rights Agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Voting and Support Agreement
On or prior to the date of the APA, Joseph P. Davy, the Company's Chief Executive Officer and chairman of the board of directors, executed and delivered a voting and support agreement (the "Voting and Support Agreement") pursuant to which Mr. Davy agreed to vote all shares of Common Stock and Class B common stock beneficially owned by him as of the date of the APA, together with any shares of the Company’s capital stock acquired thereafter, in favor of the issuance of shares of Common Stock underlying the Pre-Funded Warrants, as contemplated by the APA to meet any Nasdaq listing standards. As of July 1, 2026, Mr. Davy beneficially owns 1,557 shares of Class A Common Stock and 33,856 shares of Class B Common Stock, representing approximately 11.4% of the total voting power of the Company's outstanding voting securities. A copy of the form of Voting and Support Agreement is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by reference.
Reverse Services Agreement
At the Closing, the Company entered into a Reverse Services Agreement (the "Reverse Services Agreement") with ConnectAndSell to address customer contracts that cannot be assigned to the Company at Closing due to third-party consents that could not be obtained prior to Closing (the "CAS Unassigned Contracts"). During the period prior to the assignment or termination of each CAS Unassigned Contract (the "Transition Period"), the Company will provide all services necessary for ConnectAndSell to comply with its obligations under the CAS Unassigned Contracts, consistent with ConnectAndSell's historical practices. As consideration for such services, ConnectAndSell will pay the Company a monthly service fee equal to 100% of all fees received under the CAS Unassigned Contracts, which the Company may deduct from any Base Earn-Out Consideration otherwise payable to ConnectAndSell under the APA, with any shortfall payable in cash within 30 days following each calendar month. ConnectAndSell must also remit to the Company (i) 100% of all customer fees received under the CAS Unassigned Contracts within five (5) Business Days of receipt and (ii) 100% of any amounts received after Closing relating to assigned contracts or post-Closing billing ("Misdirected Payments") within two (2) Business Days of receipt, in each case without any offset or deduction. The Company has the right to set off any amounts owed by ConnectAndSell under the Reverse Services Agreement against Base Earn-Out Consideration or other amounts payable to ConnectAndSell under the APA. The Company grants ConnectAndSell a limited, worldwide, royalty-free, non-exclusive, non-transferable license to the acquired intellectual property solely to allow ConnectAndSell to remain in compliance with the CAS Unassigned Contracts, with sublicensing to existing customers permitted only at the Company's direction or with its prior written consent. A copy of the Reverse Services Agreement is filed as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated herein by reference.
Board Observation Rights
Pursuant to the APA, for the period commencing on the Closing and ending on the earlier of (i) the second (2nd) anniversary of the Closing and (ii) the date on which ConnectAndSell ceases to beneficially own at least 9.99% of the outstanding shares of Common Stock, upon notice to the Company, the Company shall invite a representative of ConnectAndSell to attend all meetings of the Company's board of directors in a nonvoting observer capacity and, in this respect, shall make available to such representative copies of all notices, minutes, consents, and other materials that it provides to the board of directors. Such representative shall agree to hold in confidence all information so provided, and the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting would be reasonably likely to adversely affect the attorney-client privilege between the Company and its counsel.
Series FE Preferred Stock Cancellation
In connection with the Transaction, the Company and FE IV OR Aggregator, LLC have agreed to cancel the single outstanding share of Series FE Preferred Stock, which FE IV OR Aggregator, LLC owns, and terminate all rights, preferences, privileges, or obligations associated therewith.
Stockholder Approval
Pursuant to the APA, within 120 days of Closing, the Company must obtain stockholder approval of the issuance of shares of Common Stock (including shares underlying the Pre-Funded Warrants) to the extent required to comply with Nasdaq Listing Rule 5635 (the "Stockholders' Approval"). The Company's board of directors has approved the APA and recommends that the Company's stockholders vote to approve the share issuance. If the Stockholders' Approval is not obtained within 120 days following the Closing (or such longer period as mutually agreed by the parties in writing), the Company will be required to pay ConnectAndSell in cash an amount equal to the Closing Non-Cash Consideration (as defined in the APA) within 30 days thereafter, upon which ConnectAndSell will surrender to
the Company for cancellation the Pre-Funded Warrants (or portions thereof) corresponding to such cash payment. ConnectAndSell shall retain all Shares issued at the Closing and all Pre-Funded Warrants exercisable for Shares that do not exceed the 19.99% threshold, and the foregoing payment obligation shall not affect any other rights of ConnectAndSell under the APA or the Registration Rights Agreement with respect to Shares and Pre-Funded Warrants retained by ConnectAndSell.
Closing Conditions
The Closing was subject to customary closing conditions, including, among others, (i) the accuracy of the representations and warranties of each party (subject to customary materiality qualifiers), (ii) the performance by each party of its covenants and obligations, (iii) the absence of any legal proceedings seeking to restrain or prohibit the Transaction, (iv) the execution and delivery of restrictive covenant agreements by certain key employees of ConnectAndSell, (v) the delivery of required financial statements by ConnectAndSell, (vi) the cancellation of the Series FE Preferred Stock, (vii) the approval for listing on Nasdaq of the shares of Common Stock issuable to ConnectAndSell pursuant to the APA, and (viii) the receipt of email confirmations from customers party to assigned contracts requiring consent to assignment, representing in the aggregate not less than 90% of the annualized recurring revenue attributable to all such contracts.
The foregoing descriptions of the APA and the ancillary agreements do not purport to be complete and are qualified in their entirety by the full text of the APA and the ancillary agreements, copies of which are filed as exhibits to this Current Report on Form 8-K and are incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 2.01 of this Current Report on Form 8-K regarding the Employee Indebtedness Note is incorporated herein by reference. In connection with the Transaction, at the Closing, the Company issued the Employee Indebtedness Note to ConnectAndSell in the principal amount of $1,800,000, bearing interest at a rate of 8% per annum. The Employee Indebtedness Note matures over the twelve (12)-month period following the Closing and is payable in equal quarterly installments in cash, provided that if the Company and ConnectAndSell mutually agree, any such quarterly payment may be made in shares of Common Stock and/or Pre-Funded Warrants. Upon the occurrence of an event of default, the outstanding principal and all other obligations under the Employee Indebtedness Note will bear interest at a rate of 10% per annum, compounded daily. In the event of a change of control of the Company prior to the maturity date, the entire outstanding principal amount, together with all accrued interest, will become immediately due and payable in cash. A copy of the form of Employee Indebtedness Note is filed as Exhibit 4.2 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth in Item 2.01 of this Current Report on Form 8-K regarding the issuance of shares of Common Stock and Pre-Funded Warrants to ConnectAndSell is incorporated herein by reference. The shares of Common Stock and Pre-Funded Warrants issued to ConnectAndSell pursuant to the APA were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"), based on representations made by ConnectAndSell in the APA, including that ConnectAndSell is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act and is acquiring the securities for investment purposes only and not with a view to distribution.
Item 7.01 Regulation FD Disclosure.
On July 6, 2026, the Company issued a press release announcing the entry into the APA. A copy of the press release is furnished as Exhibit 99.4 to this Current Report on Form 8-K and is incorporated herein by reference. The information furnished pursuant to this Item 7.01, including Exhibit 99.4, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Forward-Looking Statements
Certain statements contained in this filing may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the transactions contemplated by the APA. These forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions and include words such as “believes,” “plans,” “anticipates,” “projects,” “estimates,” “expects,” “intends,” “strategy,” “future,” “opportunity,” “may,” “will,” “should,” “could,” “potential,” or similar expressions. Statements that are not historical facts are forward-looking statements. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties. Forward-looking
statements speak only as of the date they are made, and Banzai undertakes no obligation to update any of them publicly in light of new information or future events. Actual results could differ materially from those contained in any forward-looking statement as a result of
various factors. Banzai and ConnectAndSell may be adversely affected by other economic, business, and/or competitive factors. Additional factors that may affect the future results of Banzai are set forth in its filings with the SEC, including Banzai’s most recently filed Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings with the SEC, which are available on the SEC’s website at www.sec.gov, specifically under the heading “Risk Factors.” The risks and uncertainties described above and in Banzai’s filings with the SEC are not exclusive. Readers are urged to consider these factors carefully in evaluating these forward-looking statements, and not to place undue reliance on any forward-looking statements.
This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy the securities discussed herein, nor shall there be any sale of such securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
The audited financial statements of ConnectAndSell, which comprise the balance sheets as of December 31, 2025 and 2024, the related statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes to the audited financial statements, are filed as Exhibit 99.1 hereto and incorporated by reference herein.
The unaudited condensed financial statements of ConnectAndSell, which comprise the balance sheet as of March 31, 2026, the related statements of operations, stockholders’ deficit, and cash flows for the three months ended March 31, 2026, and 2025, and the related notes to the unaudited condensed financial statements, are filed as Exhibit 99.2 hereto and incorporated by reference herein.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined (i) balance sheet as of March 31, 2026, (ii) statement of operations for the three months ended March 31, 2026, (iii) statement of operations for the year ended December 31, 2025, and (iv) the related notes thereto, required by Item 9.01(b) of Form 8-K are filed as Exhibit 99.3 hereto and incorporated by reference herein.
(d) Exhibits.
Exhibit No. |
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Description |
2.1 |
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Asset Purchase Agreement, dated as of July 2, 2026, by and between Banzai International, Inc. and ConnectAndSell, Inc. |
4.1 |
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Form of Pre-Funded Warrant |
4.2 |
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Form of Employee Indebtedness Note |
10.1 |
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Form of Registration Rights Agreement |
10.2 |
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Form of Assignment and Bill of Sale |
10.3 |
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Form of Voting and Support Agreement |
10.4 |
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Form of Reverse Services Agreement |
10.5 |
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Subordinated Business Loan and Security Agreement, dated July 1, 2026, by and among Agile Capital Funding, LLC, as Collateral Agent, Agile Lending, LLC, as Lead Lender, Banzai International, Inc., and the other Borrowers party thereto |
10.6 |
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Subordinated Secured Promissory Note, dated July 1, 2026, by Banzai International, Inc. and the other Borrowers in favor of Agile Lending, LLC |
23.1 |
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Consent of SingerLewak LLP |
99.1 |
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Audited financial statements of ConnectAndSell, Inc. as of December 31, 2025 and 2024 and for the years then ended |
99.2 |
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Unaudited condensed financial statements of ConnectAndSell, Inc. as of March 31, 2026 and for the three months ended March 31, 2026 and 2025 |
99.3 |
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Unaudited Pro Forma Condensed Combined Financial Statements |
99.4 |
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Press Release, dated July 7, 2026 (Furnished herewith) |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: July 7, 2026
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BANZAI INTERNATIONAL, INC. |
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By: |
/s/ Joseph Davy |
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Joseph Davy |
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Chief Executive Officer |
Exhibit 99.1
CONNECTANDSELL, INC.
FINANCIAL REPORT
DECEMBER 31, 2025
CONNECTANDSELL, INC.
CONTENTS
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INDEPENDENT AUDITOR'S REPORT |
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FINANCIAL STATEMENTS
Balance Sheets |
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Statements of Operations |
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Statements of Stockholders’ Deficit |
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Statements of Cash Flows |
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Notes to Financial Statements |
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INDEPENDENT AUDITOR’S REPORT
Board of Directors
ConnectAndSell, Inc.
Opinion
We have audited the financial statements of ConnectAndSell, Inc. (the “Company”), which comprise the balance sheets as of December 31, 2025 and 2024, the related statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Substantial Doubt About the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, has negative working capital and has stated that substantial doubt exists about the company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued.
1
Board of Directors
ConnectAndSell, Inc.
Independent Auditor’s Report
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
May 18, 2026
2
ASSETS
|
|
|
2025 |
|
|
|
2024 |
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,478,736 |
|
|
$ |
1,318,599 |
|
Accounts receivable, net allowance for credit losses of $34,040 and $271,546, respectively |
|
|
1,476,913 |
|
|
|
3,141,063 |
|
Other receivables |
|
|
40,702 |
|
|
|
925 |
|
Prepaid expenses and other current assets |
|
|
176,329 |
|
|
|
113,819 |
|
Right of use assets, current portion |
|
|
52,452 |
|
|
|
85,662 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
3,225,132 |
|
|
|
4,660,068 |
|
|
|
|
|
|
|
|
|
|
Right of use assets, noncurrent portion |
|
|
- |
|
|
|
52,452 |
|
Property and equipment, net |
|
|
14,311 |
|
|
|
21,349 |
|
Internally developed software, net |
|
|
969,183 |
|
|
|
1,282,055 |
|
Other assets |
|
|
42,937 |
|
|
|
54,779 |
|
|
|
|
|
|
|
|
|
|
Total assets |
|
S |
4,251,563 |
|
|
$ |
6,070,703 |
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities |
||||||||
Line of credit |
|
$ |
207,648 |
|
|
$ |
2,052,593 |
|
Current portion long-term debt, net of discount |
|
|
4,961,754 |
|
|
|
4,901,058 |
|
Related party notes payable and accrued interest |
|
|
4,057,046 |
|
|
|
3,013,730 |
|
Lease liability, current portion |
|
|
54,053 |
|
|
|
86,805 |
|
Accounts payable |
|
|
924,075 |
|
|
|
1,205,613 |
|
Accrued expenses and other current liabilities |
|
|
890,412 |
|
|
|
956,315 |
|
Deferred revenue |
|
|
7,785,463 |
|
|
|
7,444,552 |
|
Deferred stock liability |
|
|
1,334,193 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
20,214,644 |
|
|
|
19,660,666 |
|
|
|
|
|
|
|
|
|
|
Lease liability, noncurrent portion |
|
|
- |
|
|
|
54,053 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
20,214,644 |
|
|
|
19,714,719 |
|
Commitments and Contingencies (Note 11)
Stockholders' deficit |
|
|
|
|
|
|
|
|
Series A convertible preferred stock, $0.0001 par value; |
|
|
|
|
|
|
|
|
3,086,832 shares authorized; 2,753,489 shares issued and outstanding |
|
|
|
|
|
|
|
|
(aggregate liquidation preference of $812,279) |
|
|
751,930 |
|
|
|
751,930 |
|
|
|
|
|
|
|
|
|
|
Series B convertible preferred stock, $0.0001 par value; |
|
|
|
|
|
|
|
|
1,913,379 shares authorized; 943,813 shares issued and outstanding |
|
|
|
|
|
|
|
|
(aggregate liquidation preference of $595,121) |
|
|
536,426 |
|
|
|
536,426 |
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 140,000,000 shares authorized; |
|
|
|
|
|
|
|
|
29,653,140 shares issued and outstanding |
|
|
2,966 |
|
|
|
2,966 |
|
Additional paid-in capital |
|
|
40,328,485 |
|
|
|
39,536,082 |
|
Accumulated deficit |
|
|
(57,582,888) |
|
|
|
(54,471,420) |
|
|
|
|
|
|
|
|
|
|
Total stockholders' deficit |
|
|
(15,963,081) |
|
|
|
(13,644,016) |
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit |
|
$ |
4,251,563 |
|
|
$ |
6,070,703 |
|
See notes to financial statements
3
CONNECTANDSELL, INC.
STATEMENTS OF OPERATIONS
For the Years Ended Decmeber 31, 2025 and 2024
|
|
|
2025 |
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
14,715,954 |
|
|
|
$ |
16,209,629 |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
1,998,847 |
|
|
|
|
3,173,817 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
12,717,107 |
|
|
|
|
13,035,812 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
Engineering, research and development |
|
|
3,123,013 |
|
|
|
|
2,863,137 |
|
Sales and marketing |
|
|
6,339,507 |
|
|
|
|
7,175,172 |
|
General and administrative |
|
|
2,797,975 |
|
|
|
|
2,081,508 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
12,260,495 |
|
|
|
|
12,119,817 |
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
456,612 |
|
|
|
|
915,995 |
|
|
|
|
|
|
|
|
|
|
|
Other expense |
|
|
(4,641) |
|
|
|
|
(7,366) |
|
|
|
|
|
|
|
|
|
|
|
Loss on debt extinguishment |
|
|
(1,084,608) |
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(2,472,077) |
|
|
|
|
(1,024,332) |
|
|
|
|
|
|
|
|
|
|
|
Net loss before provision for taxes |
|
|
(3,104,714) |
|
|
|
|
(115,703) |
|
|
|
|
|
|
|
|
|
|
|
Income tax (provision) benefit |
|
|
(6,754) |
|
|
|
|
8,240 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,111,468) |
|
|
|
$ |
(107,463) |
|
See notes to financial statements
4
CONNECTANDSELL, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Years Ended Decmeber 31, 2025 and 2024
|
|
Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
Total |
|
||||||||||||
|
Series A |
|
Series B |
|
|
Common stock |
|
|
Paid-in |
|
|
|
Accumulated |
|
|
|
Stockholders |
|
|||||||||||||||
|
Shares |
|
|
|
Amount |
|
|
Shares |
|
|
|
Amount |
|
|
Shares |
|
|
|
Amount |
|
|
|
Capital |
|
|
|
Deficit |
|
|
|
Deficit |
|
|
Balance at December 31, 2023 |
|
2,753,489 |
|
|
$ |
751,930 |
|
|
943,813 |
|
|
$ |
536,426 |
|
|
29,653,140 |
|
|
$ |
2,966 |
|
|
$ |
38,803,926 |
|
|
$ |
(54,363,957 |
) |
|
$ |
(14,268,709 |
) |
Stock-based compensation |
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
729,656 |
|
|
|
- |
|
|
|
729,656 |
|
Exercise of stock options |
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
5,000 |
|
|
|
- |
|
|
|
2,500 |
|
|
|
- |
|
|
|
2,500 |
|
Net loss |
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(107,463 |
) |
|
|
(107,463 |
) |
Balance at December 31, 2024 |
|
2,753,489 |
|
|
$ |
751,930 |
|
|
943,813 |
|
|
$ |
536,426 |
|
|
29,658,140 |
|
|
$ |
2,966 |
|
|
$ |
39,536,082 |
|
|
$ |
(54,471,420 |
) |
|
$ |
(13,644,016 |
) |
Stock-based compensation |
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
792,403 |
|
|
|
- |
|
|
|
792,403 |
|
Net loss |
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,111,468 |
) |
|
|
(3,111,468 |
) |
Balance at December 31, 2025 |
|
2,753,489 |
|
|
$ |
751,930 |
|
|
943,813 |
|
|
$ |
536,426 |
|
|
29,658,140 |
|
|
$ |
2,966 |
|
|
$ |
40,328,485 |
|
|
$ |
(57,582,888 |
) |
|
$ |
(15,963,081 |
) |
See notes to financial statements
5
CONNECTANDSELL, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2025 and 2024
|
|
2025 |
|
2024 |
||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,111,468 |
) |
|
$ |
(107,463 |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Provision for bad debts |
|
|
34,040 |
|
|
|
271,546 |
|
Depreciation and amortization |
|
|
765,018 |
|
|
|
779,768 |
|
Amortization of debt discount and issuance costs |
|
|
60,696 |
|
|
|
66,946 |
|
Stock-based compensation |
|
|
792,403 |
|
|
|
729,656 |
|
Vesting of deferred stock |
|
|
1,334,193 |
|
|
|
- |
|
Noncash operating lease expense |
|
|
85,662 |
|
|
|
80,693 |
|
Loss on debt extinguishment |
|
|
1,084,608 |
|
|
|
- |
|
(Gain) loss on disposal or sale of equipment |
|
|
(143 |
) |
|
|
3,716 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
1,630,110 |
|
|
|
(1,292,588 |
) |
Other receivables |
|
|
(39,777 |
) |
|
|
1,000 |
|
Prepaid expenses and other current assets |
|
|
(62,510 |
) |
|
|
47,567 |
|
Other assets |
|
|
11,842 |
|
|
|
7,411 |
|
Accrued interest on related party notes payable |
|
|
258,708 |
|
|
|
392,412 |
|
Operating lease liability |
|
|
(86,805 |
) |
|
|
(79,092 |
) |
Accounts payable |
|
|
(281,538 |
) |
|
|
(188,423 |
) |
Accrued expenses and other current liabilities |
|
|
(65,903 |
) |
|
|
(3,335,693 |
) |
Deferred revenue |
|
|
340,911 |
|
|
|
676,393 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
2,750,047 |
|
|
|
(1,946,151 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Capitalized internal use software development costs |
|
|
(438,101 |
) |
|
|
(743,821 |
) |
Proceeds from sale of equipment |
|
|
300 |
|
|
|
750 |
|
Purchase of property and equipment |
|
|
(7,164 |
) |
|
|
(15,134 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(444,965 |
) |
|
|
(758,205 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
Advances from line of credit |
|
|
15,332,837 |
|
|
|
16,731,262 |
|
Repayments on line of credit |
|
|
(17,177,782 |
) |
|
|
(16,035,480 |
) |
Repayments on short-term debt |
|
|
- |
|
|
|
(2,500,000 |
) |
Proceeds from related party notes |
|
|
250,000 |
|
|
|
300,000 |
|
Repayments on related party notes |
|
|
(550,000 |
) |
|
|
- |
|
Proceeds from issuance of common stock |
|
|
- |
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(2,144,945 |
) |
|
|
(1,501,781 |
) |
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
160,137 |
|
|
|
(4,206,074 |
) |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash |
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
1,318,599 |
|
|
|
3,024,673 |
|
Restricted cash, beginning of period |
|
|
- |
|
|
|
2,500,000 |
|
Total, beginning of period |
|
$ |
1,318,599 |
|
|
$ |
5,524,673 |
|
Cash and cash equivalents, end of period |
|
|
1,478,736 |
|
|
|
1,318,599 |
|
Restricted cash, end of period |
|
|
- |
|
|
|
- |
|
Total, end of period |
|
$ |
1,478,736 |
|
|
$ |
1,318,599 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
954,447 |
|
|
$ |
522,753 |
|
Cash paid (received) for income taxes |
|
$ |
6,755 |
|
|
$ |
(8,240 |
) |
Noncash financing activities: |
|
|
|
|
|
|
|
|
Vesting of deferred stock and related liability |
|
$ |
1,334,193 |
|
|
$ |
- |
|
See notes to financial statements
6
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 1 – DESCRIPTION OF BUSINESS
Organization
Nomea, Inc. (the “Company”) was incorporated in Delaware on May 9, 2007 and amended its Articles of Incorporation on September 27, 2010 at which time the Company changed its name to ConnectAndSell, Inc. The Company is the first sales acceleration solution that improves the efficiency and effectiveness of critical business functions like outbound prospecting, qualifying marketing leads and channeling market development. The Company delivers conversations on demand, using a combination of proprietary switching technology and human intelligence which navigates voice mail, IVR phone menu trees and gatekeepers to allow customers to better focus and optimize their selling efforts. The Company’s product is sold as a “SAAS” (Software as a Service) product, principally to customers in North America.
Going Concern
As shown in the accompanying financial statements, the Company has negative working capital and has suffered recurring operating losses and, as of December 31, 2025, had an accumulated deficit of $57,582,888 and a line of credit that matures in December 2026. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the issuance date of these financial statements. Management’s plans in regard to this matter consist of taking steps to improve profitability and cash flows resulting from increased bookings, due to continuous efforts to increase new revenues and improve marketing strategies. Management also plans to continue to get an extension of the Company’s outstanding debt. Additionally, as discussed in Note 12, the Company is in process of negotiating a sale of the Company. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s most significant estimates relate to the valuation of its common stock, options, warrants, allowance for credit losses, deferred tax assets and the related valuation allowance, capitalization and amortization of software development costs and its going concern evaluation.
7
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. As of December 31, 2025 and 2024, cash and cash equivalents consist of cash deposited with banks. The recorded carrying amount of cash and cash equivalents approximates their fair value. The Company places its cash equivalents with high credit-quality financial institutions.
Accounts Receivable
The Company generally does not require collateral or other security in support of accounts receivable and does not charge interest on past due balances. To reduce credit risk, management performs ongoing credit evaluations of its customers’ financial condition, using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current credit risk rating, collection pattern of customers, as well as for changes in economic environmental conditions. The Company analyzes the need for reserves for potential credit losses and records allowances for credit losses when necessary. The Company writes off accounts against the allowance after all attempts at collection have been exhausted. Recoveries of accounts receivable previously written off are recorded when received. At December 31, 2025, 2024, the Company recorded an allowance for credit losses of $34,040 and $271,546, respectively.
The following table presents the activity in the allowance for credit losses for accounts receivable for the years ended December 31, 2025 and 2024:
Beginning balance as of January 1, 2024 |
$ |
265,100 |
Current-period provision for expected credit losses |
|
271,546 |
Write-offs charged against the allowance |
|
(265,100) |
Ending balance as of December 31, 2024 |
$ |
271,546 |
|
|
|
Beginning balance as of January 1, 2025 |
$ |
271,546 |
Current-period provision for expected credit losses |
|
34,040 |
Write-offs charged against the allowance |
|
(271,546) |
Ending balance as of December 31, 2025 |
$ |
34,040 |
8
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited with federally insured commercial banks in the United States. At times cash balances may exceed federal insurance limits. However, given the credit quality of these banks, the Company believes any credit risk to be low.
As of December 31, 2025, the Company had two customers who accounted for approximately 26% and 11% of total accounts receivable and there was one customer who accounted for approximately 18% of total revenues.
As of December 31, 2024, the Company had one customer who accounted for 34% of total accounts receivable and there were no customers who accounted for more than 10% of total revenues.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets, generally one to five years. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the lease term. Expenditures for repairs and maintenance are charged to expense as incurred. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in the statement of operations.
Long-lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No such impairments have been identified as of December 31, 2025 and 2024.
Revenue from Contracts with Customers
The Company recognizes revenue in accordance with ASC 606 (“ASC 606”), Revenue from Contracts with Customers, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized:
9
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from Contracts with Customers (Continued)
The Company offers its software under a cloud-based delivery model, where it provides access to its SAAS model where customers do not have the contractual right to take possession of the software. The Company sells “usage based” licenses, which is the usage of the product by the hour, by the connection or by the dial. Revenue on usage-based licenses is recognized in the period the usage has taken place. The Company also sells its services pursuant to license agreements, which includes named user licenses (“NULs”) which are single seat licenses with unlimited use, which range from two weeks to five years. Revenue on NULs is recognized ratably over the contract term.
All of the Company’s revenue and accounts receivable are generated from contracts with customers. Revenue is recognized when control of the promised services is transferred to the Company's customers at an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The majority of customer contracts have performance obligations that the Company satisfies over time and revenue is recognized by consistently applying a method of measuring progress toward satisfaction of that performance obligation.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under ASC 606. The transaction price is allocated to each distinct performance obligation and is recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the customer. The Company identifies and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations over the life of the contract.
The Company’s contracts typically contain a single performance obligation consisting of the SAAS in a multi-tenant environment where support and maintenance are included for customers. Contracts with multiple performance obligations may contain additional software products or professional services.
For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”) for any distinct good or service, the Company may be required to allocate the transaction price to each performance obligation using its best estimate for the SSP.
The Company’s SAAS contracts are recognized over time, generally using an output method for dials or connects expended to measure usage. For named user licenses and sessions with unlimited dials, revenues are recognized ratably over the term of the contracted period. Professional services are recognized over the service term using an output method or the right to invoice practical expedient, when applicable.
10
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from Contracts with Customers (Continued)
Customer payment terms vary by arrangement although payments are typically due within 15 - 45 days of invoicing. The timing between the satisfaction of the performance obligations and the payment is not significant and the Company currently does not have any significant financing components or significant extended payment terms.
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers by “Product Type” as it best describes the product offering as it flows through revenue. For all such revenue types, the revenue recognition is over time. The disaggregated revenue for the years ended December 31:
Product Type |
|
2025 |
|
2024 |
||||
Smart Dials |
|
$ |
458,492 |
|
|
$ |
1,940,884 |
|
NUL |
|
|
13,923,942 |
|
|
|
14,007,557 |
|
Connects |
|
|
119,209 |
|
|
|
171,207 |
|
Other |
|
|
214,311 |
|
|
|
89,981 |
|
Total Revenue |
|
$ |
14,715,954 |
|
|
$ |
16,209,629 |
|
Practical Expedients and Exemptions
There are several practical expedients and exemptions allowed under ASC 606 that impact timing of revenue recognition and the Company’s disclosures. Below is a list of practical expedients the Company applied in the adoption and application of ASC 606:
Application Practical Expedients
11
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from Contracts with Customers (Continued)
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in accounts receivable or contract liabilities (deferred revenue) in the Company’s consolidated balance sheets. The Company records deferred revenue when the Company has received or has the right to receive consideration, but has not yet transferred goods or services to the customer.
The Company generally invoices customers in advance of the service period. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue, or in revenue depending on whether the revenue recognition criteria has been met. Paid and unpaid invoice amounts for non-cancellable services occurring in future periods are included in deferred revenue.
Opening balances (January 1, 2024) of contract assets and liabilities were as follows:
Accounts receivable, net |
|
$ |
2,120,021 |
|
Deferred revenue |
|
$ |
6,768,159 |
|
Contract Costs
Costs to Obtain Contracts
The Company has determined that the only incremental costs incurred to obtain contracts with customers within the scope of Topic 606 are sales commissions paid to its employees. It is the Company’s policy to record sales commissions as an asset and amortize to expense ratably over the determined period of benefit. The balance was not significant to the Company’s financial statements and therefore not recorded in the Company’s balance sheet as of December 31, 2025 and 2024.
The Company applies the practical expedient in Topic 606 and expenses costs as incurred for sales commissions when the amortization period would have been one year or less.
Costs to Fulfill Contracts
The Company has concluded that the fulfillment costs associated with its contracts do not meet the capitalization criteria in Topic 340 and should not be capitalized and amortized.
Stock-based Compensation
GAAP establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. Under GAAP, share-based compensation cost is determined at the grant date using an option-pricing model. The value of the awards that is ultimately expected to vest is recognized as expense on a straight-line basis over the employee’s requisite service period. Options attributable to non-employees are amortized over the service period and the unvested portion of these options is re-measured at each vesting date.
12
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and Development
Research and development costs are charged to operations as incurred.
Internal-use Software
The Company develops internal-use software as required to support its operations. Costs incurred to develop internal-use software during the application development stage are capitalized and reported at cost, subject to an impairment test. Application development stage costs generally include costs associated with software configuration, coding, installation and testing. Costs of significant upgrades and enhancements that result in additional functionality are also capitalized whereas costs incurred for maintenance and minor upgrades and minor enhancements are expensed as incurred. Capitalized costs are amortized using the straight- line method over three years. The Company assesses the potential impairment of capitalized internal-use software whenever events or changes in circumstances indicate that the carrying value of the internal-use software may not be recoverable. No such impairments were identified during the years ended December 31, 2025 and 2024.
Advertising
The Company expenses the costs of advertising, including promotional expenses, as incurred. Advertising expense for the years ended December 31, 2025 and 2024 was $63,522 and
$91,193, respectively and included in sales and marketing expenses in the statement of operations.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of assets and liabilities. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating loss and tax credit carryovers. Deferred tax assets and liabilities are measured using the enacted tax rates applied to taxable income. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided against the Company’s deferred income tax assets when it is more likely than not that the asset will not be realized.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In the event that the Company changes its determination as to the amount of deferred tax assets that are more likely than not to be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
13
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
The Company follows authoritative guidance regarding uncertain tax positions. This guidance requires that realization of an uncertain income tax position must be more likely than not (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. The guidance further prescribes the benefit to be realized assumes a review by tax authorities having all relevant information and applying current conventions. The interpretation also clarifies the financial statement classification of tax-related penalties and interest and sets forth disclosures regarding unrecognized tax positions. The Company recognizes potential accrued interest and penalties related to unrecognized tax positions as income tax expense.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU became effective for the Company on January 1, 2025. The adoption of ASU 2023-09 did not have a material impact on the Company’s financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides (1) a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the assets and (2) entities other than public business entities with an accounting policy election to consider collection activity after the balance sheet date when estimating expected credit losses. This ASU is effective for the Company beginning on January 1, 2026. The Company is currently evaluating the impact of this new guidance on its financial statements.
In September 2025, the FASB issued ASU 2025‑06, Intangibles—Goodwill and Other—Internal‑Use Software (Subtopic 350-40), which updates guidance for capitalizing internal-use software costs. The new standard removes stage-based rules and requires capitalization only when management has authorized and funded the project and it is probable the software will be completed and used as intended. This ASU is effective for fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of this new guidance on its financial statements.
14
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 3 – FAIR VALUE MEASUREMENT
The Company measures and discloses fair value measurements as required by GAAP. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, GAAP uses a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The major categories of assets and liabilities measured at fair value at December 31, 2025 and 2024 are cash and cash equivalents, which are Level 1 and the deferred stock liability (see Note 6), which is Level 3.
NOTE 4 – SIGNIFICANT BALANCE SHEET COMPONENTS
Prepaid expenses and other current assets consisted of the following as of December 31:
|
|
2025 |
|
2024 |
||||
Software subscriptions |
|
$ |
35,956 |
|
|
$ |
40,221 |
|
Insurance |
|
|
20,646 |
|
|
|
27,706 |
|
Communications |
|
|
31,344 |
|
|
|
17,316 |
|
Data |
|
|
75,107 |
|
|
|
19,099 |
|
Other current assets |
|
|
13,276 |
|
|
|
9,477 |
|
Total Prepaid and other current assets |
|
$ |
176,329 |
|
|
$ |
113,819 |
|
15
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 4 – SIGNIFICANT BALANCE SHEET COMPONENTS (Continued)
Property and Equipment
Property and equipment consisted of the following as of December 31:
|
|
2025 |
|
2024 |
||||
Computers, equipment and |
|
$ |
111,506 |
|
|
$ |
105,755 |
|
leasehold improvements |
|
|
|
|
|
|
|
|
Less: accumulated depreciation and |
|
|
(97,195 |
) |
|
|
(84,406 |
) |
amortization |
|
|
|
|
|
|
|
|
Total Property and equipment, net |
|
$ |
14,311 |
|
|
$ |
21,349 |
|
Depreciation expense was $14,045 and $23,401 for the years ended December 31, 2025 and 2024, respectively.
Internally Developed Software
Internally developed software consisted of the following as of December 31:
|
|
2025 |
|
2024 |
||||
Capitalized internally developed software |
|
$ |
8,458,296 |
|
|
$ |
8,020,195 |
|
Less: accumulated depreciation and |
|
|
(7,489,113 |
) |
|
|
(6,738,140 |
) |
amortization |
|
|
|
|
|
|
|
|
Total Internally developed software, net |
|
$ |
969,183 |
|
|
$ |
1,282,055 |
|
Amortization expense was $750,973 and $756,367 for the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2025, future amortization expense is as follows:
Year Ending December 31, |
|
|
|
|
2026 |
|
$ |
581,829 |
|
2027 |
|
|
269,147 |
|
2028 |
|
|
91,207 |
|
Total amortization expense |
|
$ |
969,183 |
|
16
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 4 – SIGNIFICANT BALANCE SHEET COMPONENTS (Continued)
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following as of December 31:
|
|
2025 |
|
2024 |
||||
Employee-related liabilities |
|
$ |
422,498 |
|
|
$ |
491,884 |
|
Accrued cost of revenues |
|
|
84,123 |
|
|
|
119,680 |
|
Professional and other fees |
|
|
31,373 |
|
|
|
37,137 |
|
Other accrued liabilities |
|
|
352,418 |
|
|
|
307,614 |
|
Total accrued expenses |
|
$ |
890,412 |
|
|
$ |
956,315 |
|
NOTE 5 – DEBT
In June 2021, the Company entered into a loan and security agreement with a commercial bank. The loan is secured by all of the Company’s property. Under the agreement, the Company received an advance of $3 million under the term loan which bears interest at 2% above the Prime Rate, defined as the greater of 4% per annum or the variable rate of interest that appears in the Wall Street Journal. The maturity date of the term loan was June 28, 2024. Proceeds from the term loan were used to exercise a buyout option in a Royalty Purchase Agreement and repay the then outstanding term loan of $1.5 million. The agreement also provided access to a $3 million revolving line of credit which bears the same interest rate as the term loan and had a maturity date of June 28, 2023. In May 2023, the loan and security agreement was amended to extend the maturity date of the revolving line of credit to June 28, 2025 and to amend a certain financial covenant. In December 2023, the term loan was repaid as discussed below.
In October 2022, the loan agreement was amended to waive a default related to a certain financial covenant and will not continue to forbear on such covenant without the continuing security of a Third-Party Pledge Agreement. The Company entered into a Consideration and Repayment Agreement with one of the principals of the Company to provide additional cash security in the form of a pledged cash account at the bank. This principal entered into a Third-Party Pledge Agreement with the bank and deposited $2.3 million of personal funds, whereby the bank shall have first priority interest in the pledged account.
Under the Consideration and Repayment Agreement, the Company shall make three payments to this principal as follows: a) $50,000 in November 2022, b) $80,000 in December 2022, and
$100,000 in January 2023, which were recorded as interest expense. As the principal borrowed the funds used for the pledged account, the principal must make monthly interest payments to a brokerage firm on such borrowing, thus, the Company shall make such monthly interest payments for the principal. The Company recorded interest expense for these payments as incurred. During 2023, in connection with the amendment to the loan and security agreement discussed below, this agreement was terminated.
17
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 5 – DEBT (Continued)
The Company also granted the principal 2,500,000 deferred stock units. If any payments to the principal as discussed above are delayed, the Company shall grant an additional 350,000 deferred stock units. If the bank draws on the pledged account to cover any payment default by the Company under the loan agreement, the Company shall grant an additional 2,850,000 deferred stock units. The Company shall issue the shares of common stock underlying the outstanding deferred stock units granted in the settlement of such deferred stock units on or after the earlier of (i) the principal’s separation from service or (ii) a change in control; provided, however, that in event of a change of control, in lieu of issuing shares, the Company deliver the consideration that would have been payable in the change of control transaction had such shares been issued immediately prior to the consummation of the change in control. As these events are not currently considered probable of occurring, no expense for the deferred stock units has been recorded in these financial statements.
In December 2023, the loan and security agreement was amended as follows:
18
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 5 – DEBT (Continued)
In December 2023, the Company entered into a Guaranty Compensation Agreement with principals of the Company, providing a personal guarantee to the bank up to a maximum of $5 million. In the event of a Change of Control, the Company shall pay to the principals: a) $3 million if a Change of Control occurs within six months, b) $5 million if a change of control occurs more than six months but prior to 12 months, or c) $7.5 million if a Change of Control occurs more than 12 months. As a Change of Control is not currently considered probable of occurring, no liability has been recorded in these financial statements.
NOTE 6 – RELATED PARTY NOTES PAYABLE
The components of related party notes payable are:
|
|
2025 |
|
2024 |
||||
Interest-bearing notes payable on demand |
|
$ |
1,762,232 |
|
|
$ |
2,062,232 |
|
Accrued interest |
|
|
2,294,814 |
|
|
|
951,498 |
|
Total Related party notes payable |
|
$ |
4,057,046 |
|
|
$ |
3,013,730 |
|
In December 2016, $520,000 non-interest bearing unsecured promissory notes with officers of the Company, $105,000 of reimbursable legal fees and additional advances of $1,212,000 were converted into two junior demand unsecured promissory notes totaling $1,837,000, bearing interest at 20% per annum and payable on-demand. In conjunction with this agreement, the Company issued warrants for 13,709,612 shares of common stock to the junior demand promissory note holders with an exercise price of $0.52 and a term of 10 years. The allocated fair value of the warrants of $1,473,267 was recorded as interest expense (See Note 8 for further details).
In December 2017, additional advances of $385,000 were converted into a junior demand unsecured promissory note bearing interest at 20% per annum and payable on-demand.
19
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 6 – RELATED PARTY NOTES PAYABLE (Continued)
In September 2020, the Company entered into forbearance agreements with the related party lenders whereby the Company asked the lenders to forbear from exercising certain rights and remedies under the Demand Notes. The agreement effectively amended the original Demand Notes by allowing the Company to pay the lenders interest beginning January 10, 2021 through December 10, 2021. As consideration, the Company paid forbearance fees to the lenders in the form of 9,800,000 deferred common shares, which will be issued immediately prior to the occurrence of a liquidity event. A liquidity event is not currently considered probable of occurring, thus no expense for the deferred common shares has been recorded in these financial statements.
In June 2021, the Company granted 12,175,000 deferred stock units to the lenders for the subordination of the related party notes to the loan and security agreement with the commercial bank discussed in Note 5. The Company shall issue the shares of common stock underlying the outstanding deferred stock units granted in the settlement of such deferred stock units on or after the earlier of (i) the lender’s separation from service or (ii) a change in control; provided, however, that in event of a change of control, in lieu of issuing shares, the Company deliver the consideration that would have been payable in the change of control transaction had such shares been issued immediately prior to the consummation of the change in control. As these events were not currently considered probable of occurring, no expense for the deferred stock units was recorded in the financial statements as of December 31, 2024.
In March 2024, the forbearance agreements were amended to provide that the interest on the loans covered by such forbearance agreements shall be calculated on a compound basis for the date the loans were first made and interest began accruing. The deferred stock agreements were also amended to provide that: (i) in the event of a Change of Control in which the consideration payable in such change of control transaction is anything other than cash or cash equivalents, the grantees shall have the option of receiving the cash equivalent of the value of the deferred stock at such time in lieu of accepting the stock; and (ii) the time for issuance of the shares shall be the earlier of (x) the election by the grantees, which may be made no sooner than one year from the date of the amendment of the deferred stock agreements and no later than five years after the grantee’s separation from service, or (y) a change of control of the Company. In March 2025, which is one year from the amendment date, the grantees had the right to make the election for the issuance of the shares, as such the fair value of these shares were recorded as interest expense for $1,334,193. The fair value of the shares was estimated using the purchase price from the contemplated transaction in Note 12. As the grantees have the option of receiving cash, it has been classified as a liability under ASC 480, Distinguishing Liabilities from Equity.
20
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 6 – RELATED PARTY NOTES PAYABLE (Continued)
In September 2025, the forbearance agreements were amended to add that interest shall be compounded daily from the date the loans were first made and interest began accruing. In September 2025, the Company also approved payment of interest at 20% annually, compounded daily, on an interest balance owed from 2017 for the use of one of the same lender’s personal credit cards used to fund certain business expenses. In accordance with ASC 470‑50, Debt — Modifications and Extinguishments, the Company evaluated whether the amendment represented a substantial modification of the original debt. Based on this evaluation, the Company concluded that the amended terms resulted in a substantial change in the economic characteristics of the debt. As a result, the amendment was accounted for as a debt extinguishment. The extinguishment resulted in a loss of $1,084,608, which is included in other expense in the accompanying statement of operations for the year ended December 31, 2025.
During the years ended December 31, 2025 and 2024, the Company paid $219,922 and $0, of accrued interest on the demand promissory notes and interest-bearing notes, respectively. Interest expense on these notes was $1,563,238 and $392,412 for the years ended December 31, 2025 and 2024, respectively.
NOTE 7 – EQUITY
At December 31, 2025 and 2024, the authorized capital stock of the Company consisted of 145,000,211 shares of capital stock comprising 140,000,000 shares of common stock and 5,000,211 of convertible preferred stock. All classes of the Company’s stock have $0.0001 par value.
Stockholder Notes Receivable
In January 2015, the Company awarded three officers of the Company the right to each purchase 2,200,000 shares of Common stock, at a price of $0.45 per share under Restricted Stock Purchase Agreements. In consideration for such shares, the Company accepted nonrecourse promissory notes in the principal amount of $990,000 from each officer. The notes shall accrue interest at 1.75% per annum compounded annually. Principal plus accrued but unpaid interest shall become due and payable upon the earlier of (i) the date that is seven years following the date of the notes and (ii) each sale or other disposition by the note holders, other than a permitted transfer of any shares to a third party, until the balance of the notes has been paid in full. In July 2022, these notes were amended to extend the due date by one year. During 2022, One officer paid $15,000 in accrued interest to the Company. This payment was recognized as interest income in 2022. No payments were made in 2025 or 2024.
Under the agreements, the vesting schedule requires that ¼th of the shares purchased shall vest on the 12-month anniversary of the vesting start date and then 1/48th of the shares shall vest each anniversary thereafter. During the term of the agreement, the Company has the right to repurchase the unvested shares at $0.45 per share. Shares were fully vested in 2019.
21
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 7 – EQUITY (Continued)
Stockholder Notes Receivable (Continued)
In December 2017, a similar Restricted Stock Purchase Agreement was issued to an officer to purchase 5,431,731 shares of Common Stock at an exercise price of $0.52. The shares shall vest using the same schedule as the aforementioned 2015 awards. During the term of the agreement, the Company has the right to repurchase the unvested shares at $0.52 per share. A nonrecourse note for $2,824,500 was accepted from the officer for consideration of such shares. The notes shall accrue interest at 2.11% per annum compounded annually. Principal plus accrued but unpaid interest shall become due and payable upon the earlier of (i) the date that is seven years following the date of the notes and (ii) each sale or other disposition by the note holders, other than a permitted transfer of any shares to a third party, until the balance of the notes have been paid in full.
Upon any exercise by the Company of the Repurchase Option as defined in the Restricted Stock Purchase Agreement, the notes shall be deemed to have been repaid in an amount equal to the greater of (i) $0.0001 per share that is repurchased by the Company pursuant to the exercise of the Repurchase Right and (ii) that portion of the aggregate principal and accrued but unpaid interest of the notes as is equal to the portion that the shares being repurchased by the Company bears to the total number of shares originally purchased by the note holder pursuant to the Purchase Agreement.
Under the above Restricted Stock Agreements, total vested shares were 12,031,731 at December 31, 2025 and 2024. All shares were fully vested as of December 31, 2021. Because the notes are non-recourse, this transaction is treated as an issuance of a stock option for accounting purposes and neither the shares nor the non-recourse loans are shown as outstanding in the balance sheet.
During 2015 and 2016, an officer of the Company exercised fully vested options in exchange for two non-recourse loans:
For both notes, the unpaid principal amount and any accrued, but unpaid, interest is due upon the earlier of (1) 7 years from the date of the note or (2) the sale of the securities to a third party. For accounting purposes, this transaction was treated as an option modification (a modification of the term) resulting in a 1-time incremental stock compensation expense of $39,140 in 2016. Because the notes are non-recourse, this transaction is not treated as an option exercise for accounting purposes and neither the shares nor the non-recourse loans are shown as outstanding in the balance sheet. The May 8, 2015 promissory note was amended in 2022 to extend the due date by one year and to adjust the interest rate during that extended year to accrued at the rate of 1.74% per annum, and in 2023 to extend the due date by one additional year to March 15, 2024.
22
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 7 – EQUITY (Continued)
Stockholder Notes Receivable (Continued)
In 2021, an officer of the Company exercised fully vested options in exchange for a limited recourse promissory note for $42,560, dated July 8, 2021. Interest shall accrue at the rate of 1.74% per annum, compounded annually. The unpaid principal amount and any accrued, but unpaid, interest is due upon the earlier of (1) 7 years from the date of the note or (2) the sale of the securities to a third party. Because the notes are non-recourse, this transaction is not treated as an option exercise for accounting purposes and neither the shares nor the non-recourse loans are shown as outstanding in the balance sheet.
In August 2025, all of the stockholder notes were amended to extend the maturity date to May 31, 2026. After the original 7-year maturity date of the notes, interest shall accrue monthly at the applicable short-term federal rate. As of December 31, 2025 and 2024, the short-term federal rate was 3.60% and 4.21%, respectively.
Convertible Preferred Stock
The significant features of the Company’s convertible preferred stock are as follows:
Dividend provisions
The holders of Series A and Series B preferred stock are entitled to receive non-cumulative dividends, out of any assets legally available thereof, when and if declared by the Board of Directors, at a rate of $0.018 and $0.037 per share, respectively, per annum, adjustable for certain events, such as stock splits, stock dividends, combinations, subdivisions and recapitalizations and the like. There have been no declared dividends to date.
Liquidation preference
In the event of any liquidation, dissolution or winding up of the Company, the holders of Series A and Series B shall be entitled to be paid, out of the available funds and assets, and prior and in preference to any payment or distribution of any such funds on any shares of common stock, an amount equal to the sum of the applicable original issue price for such series of Preferred Stock, plus declared but unpaid dividends on such share. Original issue price shall mean $0.295 and $0.63055 for Series A and Series B, respectively, plus all declared but unpaid dividends. If assets are not sufficient to permit such payment, payment will be made ratably among the holders of the convertible preferred stock in proportion to the full amounts to which they would otherwise be entitled.
Following the payment of this liquidation amount, all of the remaining proceeds available for distribution to stockholders shall be distributed among the holders of preferred stock and common stock pro rata based on the number of shares of common stock held by each.
23
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 7 – EQUITY (Continued)
Convertible Preferred Stock (Continued)
Conversion rights
Each outstanding share of Series A and Series B is convertible, at the option of the holder, into fully paid and non-assessable shares of common stock as is determined by dividing the original issue price by the applicable original issue price for such series in effect on the date of conversion and shall be subject to adjustment in the event of the issuance of any additional stock without consideration or for a consideration per share less than the conversion price applicable to such series of preferred stock in effect immediately prior to the issuance of such additional stock, as well as stock splits, dividends and combinations.
The original issuance price and current conversion price for Series A and Series B is $0.295 and
$0.63055 per share.
Each share of preferred stock automatically converts into the number of shares of common stock into which such shares are convertible at the then-effective conversion price, upon the consent of the holders of more than 50% of the then-outstanding shares of preferred stock, or upon the closing of a public offering of common stock with gross proceeds of at least $20,000,000.
Voting rights
The holders of each share of preferred stock are entitled to the number of votes equal to the number of shares of common stock into which such share is convertible. The holders of common stock are entitled to one vote per share of common stock held by the stockholder.
Redemption rights
The preferred stock is not redeemable at the option of the holder.
The following are common shares reserved for future issuance as of December 31, 2025:
Outstanding stock options-2007 plan |
15,442,988 |
Outstanding stock options-2017 plan |
37,053,355 |
Options available for future issuance |
658,491 |
Outstanding warrants |
16,509,612 |
Series A Preferred Stock |
2,753,489 |
Series B Preferred Stock |
943,813 |
Restricted stock |
12,963,720 |
Deferred stock |
24,475,000 |
Total |
110,800,468 |
24
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 8 – WARRANTS
In 2016, the Company issued warrants to officers of the Company to purchase 2,000,000 shares of common stock, at a price of $0.52 per share and a term of 10 years, relating to an unconditional deficiency guaranty issued to the Lenders in conjunction with their 50/50 loan to the Company. The Company also issued warrants to purchase 13,709,612 shares of common stock in connection with the issuance of the junior demand promissory notes (see Note 6, Related Party Promissory Notes), at a price of $0.52 per share and a term of 10 years. These warrants were classified as equity instruments and were recorded at fair value at the date of issuance. The fair value of the warrants, determined using the Black-Scholes option-pricing model, was $2,557,645 at their issuance dates in 2016. These warrants expire December 2026.
In 2018, the Company issued warrants to a consultant to purchase 800,000 shares of common stock at a price of $0.52 per share and a term of 10 years. These warrants were classified as equity instruments and were recorded at fair value at the date of issuance. The fair value of the warrants, determined using the Black-Scholes option-pricing model, was $378,410 at their issuance date in 2018 and was recorded as stock compensation expense. These warrants expire in August 2028.
NOTE 9 – STOCK-BASED COMPENSATION
On December 22, 2017 the Company’s Board of Directors adopted and approved the 2017 Stock Option and Grant Plan (the “2017 Option Plan”). The 2017 Option Plan reserved 2,686,846 shares (rolled over from the Company’s 2007 Option Plan) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) for issuance in connection with the 2017 Option Plan and that such shares shall, when issued and paid for in accordance with the provisions of the 2017 Option Plan, constitute validly issued, fully paid and non-assessable shares of Common Stock. Under the 2007 Option Plan, 15,442,988 and 19,885,000 options were issued and remain outstanding as of December 31, 2025, 2024, respectively. No further shares are reserved for future issuance under the 2007 Plan.
In November 2019, the Board of Directors and stockholders approved an increase in the number of shares authorized for issuance in the 2017 Stock Option and Grant Plan to 37,716,846.
The 2017 Option Plan provides for the grant of incentive and non-statutory stock options to employees, outside directors and consultants of the Company. Only employees shall be eligible for the grant of incentive stock options. The term of each Stock Option shall be fixed by the Board of Directors, but no Stock Option shall be exercisable more than 10 years after the date the Stock Option is granted. If an employee is a Ten Percent Owner on the grant date of an Incentive Stock Option granted to such employee, the term of such Incentive Stock Option shall be no more than five years from the date of grant. At the discretion of the Company’s Board of Directors, certain options may be exercisable immediately at the date of grant. All other options are exercisable only to the extent vested.
25
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 9 – STOCK-BASED COMPENSATION (Continued)
The exercise price of both incentive and non-statutory stock options granted under the 2017 Option Plan must be at least equal to 100% of the fair value of the Company’s common stock at the date of grant, as determined by the Board of Directors. Incentive stock options granted to stockholders who own greater than 10% of the Company’s outstanding stock at the date of grant must be issued at no less than 110% of the estimated fair value of the common stock on the date of grant.
Summary
For the years ended, December 31, 2025 and 2024, the Company recorded stock-based compensation expense of $792,403 and $729,656, respectively.
Stock option activity for the years ended December 31, 2025 and 2024 is as follows:
|
|
Shares |
|
|
Weighted- |
|
Weighted- |
Outstanding at December 31, 2023 |
|
58,710,197 |
|
$ |
0.51 |
|
5.097 |
|
|
|
|
|
|
|
|
Options granted |
|
75,000 |
|
$ |
0.53 |
|
|
Options exercised |
|
(5,000) |
|
$ |
0.50 |
|
|
Options forfeited |
|
(185,214) |
|
$ |
0.50 |
|
|
Options expired |
|
(336,641) |
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2024 |
|
58,258,842 |
|
$ |
0.52 |
|
4.106 |
|
|
|
|
|
|
|
|
Options granted |
|
1,000,000 |
|
$ |
0.53 |
|
|
Options exercised |
|
- |
|
$ |
- |
|
|
Options forfeited |
|
(22,084) |
|
$ |
0.53 |
|
|
Options expired |
|
(6,740,415) |
|
$ |
0.47 |
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2025 |
|
52,496,343 |
|
$ |
0.52 |
|
3.556 |
|
|
|
|
|
|
|
|
Vested and expected to vest at |
|
51,347,641 |
|
$ |
0.52 |
|
3.547 |
|
|
|
|
|
|
|
|
Vested and exercisable at |
|
50,158,623 |
|
$ |
0.52 |
|
3.442 |
The weighted-average fair value of awards granted during the years ended December 31, 2025 and 2024 was $0.33 and $0.32, respectively. As of December 31, 2025 and 2024, there was $232,201 and $678,820, respectively, of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 2.18 and 1.10 years, respectively.
26
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 9 – STOCK-BASED COMPENSATION (Continued)
The fair value of options vested for the years ended December 31, 2025 and 2024 was $791,191 and $714,453, respectively. The intrinsic value of options exercised for the years ended December 31, 2025 and, 2024 was $0 and $150, respectively.
The fair value of employee and non-employee option grants issued in 2025 and 2024 was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions for the years ended December 31:
|
|
2025 |
|
2024 |
Expected dividend yield (1) |
|
0% |
|
0% |
Risk-free interest rate (2) |
|
3.84% |
|
4.22% |
Expected volatility (3) |
|
67.78% |
|
60.97% |
Expected life (in years) (4) |
|
5.69 |
|
6.08 |
NOTE 10 – INCOME TAXES
Income tax (expense) benefit consisted of the following for the years ended December 31:
|
|
2025 |
|
2024 |
||||
Current: |
|
|
|
|
|
|
|
|
United States |
|
$ |
- |
|
|
$ |
- |
|
State |
|
|
(6,754 |
) |
|
|
8,240 |
|
Total |
|
|
(6,754 |
) |
|
|
8,240 |
|
Deferred: |
|
|
|
|
|
|
|
|
United States |
|
|
- |
|
|
|
- |
|
State |
|
|
- |
|
|
|
- |
|
Total |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total income tax (expense) benefit |
|
$ |
(6,754 |
) |
|
$ |
8,240 |
|
27
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 10 – INCOME TAXES (Continued)
The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets (liabilities) are as follows for the years ended December 31:
|
|
2025 |
|
2024 |
||||
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operation loss carryforwards |
|
$ |
6,289,000 |
|
|
$ |
6,465,000 |
|
Stock based compensation |
|
|
4,058,000 |
|
|
|
4,006,000 |
|
Accruals and reserves |
|
|
858,000 |
|
|
|
500,000 |
|
Tax credits |
|
|
211,000 |
|
|
|
211,000 |
|
Other |
|
|
3,000 |
|
|
|
2,000 |
|
Total deferred tax assets |
|
|
11,419,000 |
|
|
|
11,184,000 |
|
|
|
|
|
|
|
|
|
|
Less: valuation allowance |
|
|
(11,179,000 |
) |
|
|
(10,843,000 |
) |
Net deferred tax assets |
|
|
240,000 |
|
|
|
341,000 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Fixed assets |
|
|
(2,000 |
) |
|
|
(3,000 |
) |
Intangibles (capitalized software) |
|
|
(238,000 |
) |
|
|
(338,000 |
) |
Total deferred tax liabilities |
|
|
240,000 |
|
|
|
(341,000 |
) |
|
|
|
|
|
|
|
|
|
Net deferred tax assets |
|
$ |
- |
|
|
$ |
- |
|
The reconciliation of the federal statutory tax rate to the effective rate of the Company’s provision for income taxes is as follows for the years ended December 31:
|
|
2025 |
|
2024 |
||||
Statutory federal income tax rate |
|
|
21 |
% |
|
|
21.00 |
% |
State income taxes net of federal tax benefits |
|
|
-8.33 |
% |
|
|
-581.62 |
% |
Stock compensation |
|
|
-0.44 |
% |
|
|
97.06 |
% |
Prior year - true-up |
|
|
0.03 |
% |
|
|
97.25 |
% |
Other |
|
|
-9.08 |
% |
|
|
14.27 |
% |
Valuation allowance |
|
|
-3.62 |
% |
|
|
378.40 |
% |
|
|
|
|
|
|
|
|
|
Effective rate |
|
|
-0.44 |
% |
|
|
26.36 |
% |
A number of the Company's tax returns remain subject to examination by taxing authorities. The Company’s tax years will remain open for examination by the federal and state authorities for three and four years, respectively, from the date of utilization of any net operating losses. These include U.S. federal returns for 2007 and later years and state tax returns for 2007 and later years. As of December 31, 2025, the Company has total recorded liabilities for uncertain tax positions totaling $79,000.
28
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 10 – INCOME TAXES (Continued)
Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The net valuation allowance increased by approximately $336,000 from 2024 to 2025 and by approximately $19,000 from 2023 to 2024.
As of December 31, 2025, the Company had net operating loss carryforwards for federal and state tax purposes of approximately $25,359,000 and $15,703,000, respectively. As of December 31, 2024, the Company had net operating loss carryforwards for federal and state tax purposes of approximately $26,223,000 and $16,301,000, respectively. The federal and state net operating loss carryforwards will expire at various dates beginning in 2027, unless previously utilized. Post-2018 federal NOLs can be carried forward indefinitely.
As of December 31, 2025, the Company had research credit carryforwards for federal and state tax purposes of approximately $101,000 and $111,000, respectively. The federal research credit carryforwards will expire beginning in 2033. The state research credits carryforward indefinitely.
Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code (the "Code"), as well as similar state provisions. In general, an "ownership change" as defined by the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a Company by certain stockholders or public groups. Since the Company's formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing stockholders' subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent disposition. The annual limitation may result in the expiration of net operating loss and tax credit carryforwards before utilization.
The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company's formation due to the complexity and cost associated with such a study, and the fact that there may be additional such ownership changes in the future. If the Company has experienced an ownership change at any time since its formation, utilization of the net operating loss or tax credit carryforwards to offset future taxable income and taxes, respectively, would be subject to an annual limitation under the Code, which is determined by first multiplying the value of the Company's stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required.
29
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 10 – INCOME TAXES (Continued)
Any limitation may result in expiration of all or a portion of the net operating loss or tax credit carryforwards before utilization. The Company maintains a full valuation allowance for deferred tax assets due to its historical losses and uncertainties surrounding its ability to generate future taxable income to realize these assets. Due to the existence of the valuation allowances, future changes in the Company's unrecognized tax benefits and recognizable deferred tax benefits under the completion of an ownership change analysis is not expected to impact its effective tax rate.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office facilities under a non-cancelable operating lease with an expiration date of July 2026. In March 2023, the Company entered into a Lease Extension Agreement for its office facility to extend the term for a period of three years commencing in August 2023 and terminating in July 2026, with monthly payments ranging from $7,380 to $7,838.
Rent expense related to the Company’s operating leases was $91,310 and $91,310 for the years ended December 31, 2025 and 2024, respectively. Cash paid for rent was $92,453 and
$89,709 for the years ended December 31, 2025 and 2024, respectively.
Future minimum payments under non-cancelable leases are as follows as of December 31, 2025:
For the Year Ending December 31, |
|
|
|
|
|
|
|
2026 |
|
$ |
54,865 |
Total |
|
|
54,865 |
Less imputed interest |
|
|
(812) |
Present value of lease liability |
|
$ |
54,053 |
Upon commencement of the Lease Extension Agreement in August 2023, the Company recorded a right-of-use asset and related lease liability of $251,070.
The Company’s lease contracts do not provide a readily determinable implicit rate. The Company used its estimated incremental borrowing rate of 6%, which was based on information available at the inception of the lease. The weighted average remaining term at December 31, 2025 was
0.58 years.
30
CONNECTANDSELL, INC.
NOTES TO FINANCIAL STATEMENTS
|
NOTE 11 – COMMITMENTS AND CONTINGENCIES (Continued)
Contingencies
In March 2026, the Company received a letter from an officer asserting that, pursuant to an employment agreement dated September 2021, the officer is entitled to a payment of at least
$2.0 million upon the closing of a contemplated asset purchase transaction (the “Contemplated Transaction”). The officer indicated that, absent written assurances of payment prior to closing, they intend to pursue legal remedies.
In April 2026, the Company received a letter from a financial advisor asserting that, under a letter agreement dated August 2023 (the “Letter Agreement”), approximately $2.0 million is payable upon closing of the Contemplated Transaction. The financial advisor further asserts that, because the Contemplated Transaction does not provide for assumption of the Company’s obligations under the Letter Agreement by the prospective acquirer, the Company must arrange alternative means of settlement acceptable to the advisor. The financial advisor has indicated it intends to pursue available legal or equitable remedies if the matter is not resolved.
The Company is currently evaluating these claims. At this time, the Company is unable to reasonably estimate the likelihood of loss or the amount or range of any potential loss, if any, related to these matters. Accordingly, no liability has been recorded in the accompanying financial statements as of December 31, 2025.
NOTE 12 – SUBSEQUENT EVENTS
In November 2025, the Company entered into a non-binding Letter of Intent (LOI) to be acquired. The LOI outlines preliminary terms and conditions for a potential acquisition; however, it is non-binding and subject to the negotiation and execution of definitive agreements, completion of due diligence, and customary closing conditions. There can be no assurance that the transaction will be completed on the terms contemplated or at all.
In April 2026, the Company entered into a Debt Assumption and Repayment Agreement with an officer of the Company. The officer assumed and paid off the loan balance and accrued interest totaling $4,970,489 in exchange for the Company’s agreement to pay the officer the full amount upon closing of the Contemplated Transaction.
Subsequent events have been evaluated through May 18, 2026, which is the date of the financial statements were issued or available to be issued. Other than events already disclosed in these financial statements, no material subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes.
31
Exhibit 99.2
CONNECTANDSELL, INC.
UNAUDITED CONDENSED FINANCIAL STATEMENTS
AS MARCH 31, 2026 AND FOR THE THREE MONTHS ENDED
MARCH 31, 2026 AND 2025
CONNECTANDSELL, INC.
CONTENTS
|
Page |
UNAUDITED CONDENSED FINANCIAL STATEMENTS
Unaudited Condensed Balance Sheets |
1 |
|
|
Unaudited Condensed Statements of Operations |
2 |
|
|
Unaudited Condensed Statements of Stockholders’ Deficit |
3 |
|
|
Unaudited Condensed Statements of Cash Flows |
4 |
|
|
Notes to Unaudited Condensed Financial Statements |
5 – 26 |
CONNECTANDSELL, INC.
UNAUDITED CONDENSED BALANCE SHEETS
As of March 31, 2026 and December 31, 2025
|
|
|
|
|
(Audited) |
ASSETS |
|
|
|
|
|
|
|
March 31, 2026 |
|
|
December 31, 2025 |
Current assets |
|
|
|
|
|
Cash and cash equivalents |
$ |
452,782 |
|
$ |
1,478,736 |
Accounts receivable, net allowance for doubtful accounts |
|
|
|
|
|
of $5,000 and $34,040, respectively |
|
1,143,176 |
|
|
1,476,913 |
Other receivables |
|
39,262 |
|
|
40,702 |
Prepaid expenses and other current assets |
|
173,339 |
|
|
176,329 |
Right of use assets, current portion |
|
30,204 |
|
|
52,452 |
|
|
|
|
|
|
Total current assets |
|
1,838,763 |
|
|
3,225,132 |
|
|
|
|
|
|
Property and equipment, net |
|
15,254 |
|
|
14,311 |
Internally developed software, net |
|
911,647 |
|
|
969,183 |
Other assets |
|
42,937 |
|
|
42,937 |
|
|
|
|
|
|
Total assets |
$ |
2,808,601 |
|
$ |
4,251,563 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
$ |
- |
|
$ |
207,648 |
Line of credit, net of discount |
|
4,961,754 |
|
|
4,961,754 |
Current portion long-term debt, net of discount |
|
4,139,298 |
|
|
4,057,046 |
Related party notes payable and accrued interest |
|
31,118 |
|
|
54,053 |
Lease liability, current portion |
|
952,921 |
|
|
924,075 |
Accounts payable |
|
990,670 |
|
|
890,412 |
Accrued expenses and other current liabilities |
|
6,843,043 |
|
|
7,785,463 |
Deferred revenue |
|
1,334,193 |
|
|
1,334,193 |
Deferred stock liability |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
19,252,997 |
|
|
20,214,644 |
|
|
|
|
|
|
Total liabilities |
|
19,252,997 |
|
|
20,214,644 |
|
|
|
|
|
|
Commitments and Contingencies (Note 10) |
|
|
|
|
|
|
|
|
|
|
|
Stockholders' deficit |
|
|
|
|
|
Series A convertible preferred stock, $0.0001 par value; |
|
|
|
|
|
3,086,832 shares authorized; 2,753,489 shares issued and outstanding |
|
|
|
|
|
(aggregate liquidation preference of $812,279) |
|
751,930 |
|
|
751,930 |
|
|
|
|
|
|
Series B convertible preferred stock, $0.0001 par value; |
|
|
|
|
|
1,913,379 shares authorized; 943,813 shares issued and outstanding |
|
|
|
|
|
(aggregate liquidation preference of $595,121) |
|
536,426 |
|
|
536,426 |
|
|
|
|
|
|
Common stock, $0.0001 par value; 140,000,000 shares authorized; |
|
|
|
|
|
29,653,140 shares issued and outstanding, respectively |
|
2,966 |
|
|
2,966 |
Additional paid-in capital |
|
40,365,502 |
|
|
40,328,485 |
Accumulated deficit |
|
(58,101,220) |
|
|
(57,582,888) |
|
|
|
|
|
|
Total stockholders' deficit |
|
(16,444,396) |
|
|
(15,963,081) |
|
|
|
|
|
|
Total liabilities and stockholders' deficit |
$ |
2,808,601 |
|
$ |
4,251,563 |
See notes to unaudited condensed financial statements.
1
CONNECTANDSELL, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2026 and 2025
|
|
|
2026 |
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
3,090,625 |
|
|
|
$ |
3,485,515 |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
376,206 |
|
|
|
|
567,220 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
2,714,419 |
|
|
|
|
2,918,295 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
Engineering, research and development |
|
|
803,991 |
|
|
|
|
701,977 |
|
Sales and marketing |
|
|
1,422,676 |
|
|
|
|
1,756,936 |
|
General and administrative |
|
|
700,836 |
|
|
|
|
741,306 |
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
2,927,503 |
|
|
|
|
3,200,219 |
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(213,084) |
|
|
|
|
(281,924) |
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
1,430 |
|
|
|
|
(1,022) |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(299,102) |
|
|
|
|
(1,607,126) |
|
|
|
|
|
|
|
|
|
|
|
Net loss before provision for taxes |
|
|
(510,756) |
|
|
|
|
(1,890,072) |
|
|
|
|
|
|
|
|
|
|
|
Income tax provision |
|
|
(7,576) |
|
|
|
|
(266) |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(518,332) |
|
|
|
$ |
(1,890,338) |
|
See notes to unaudited condensed financial statements.
2
CONNECTANDSELL, INC.
UNAUDITED CONDENSED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the three months ended March 31, 2026 and 2025
|
|
Convertible Preferred Stock |
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
Total |
|
||||||||||||
|
Series A |
|
|
Series B |
|
|
Common stock |
|
|
Paid-in |
|
|
|
Accumulated |
|
|
|
Stockholders |
|
||||||||||||||
|
Shares |
|
|
|
Amount |
|
|
Shares |
|
|
|
Amount |
|
|
Shares |
|
|
|
Amount |
|
|
|
Capital |
|
|
|
Deficit |
|
|
|
Deficit |
|
|
Balance at December 31, 2024 |
|
2,753,489 |
|
|
$ |
751,930 |
|
|
943,813 |
|
|
$ |
536,426 |
|
|
29,658,140 |
|
|
$ |
2,966 |
|
|
$ |
39,536,082 |
|
|
$ |
(54,471,420 |
) |
|
$ |
(13,644,016 |
) |
Stock-based compensation |
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
174,000 |
|
|
|
- |
|
|
|
174,000 |
|
Net loss |
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,890,338 |
) |
|
|
(1,890,338 |
) |
Balance at March 31, 2025 |
|
2,753,489 |
|
|
$ |
751,930 |
|
|
943,813 |
|
|
$ |
536,426 |
|
|
29,658,140 |
|
|
$ |
2,966 |
|
|
$ |
39,710,082 |
|
|
$ |
(56,361,758 |
) |
|
$ |
(15,360,354 |
) |
Balance at December 31, 2025 |
|
2,753,489 |
|
|
$ |
751,930 |
|
|
943,813 |
|
|
$ |
536,426 |
|
|
29,658,140 |
|
|
$ |
2,966 |
|
|
$ |
40,328,485 |
|
|
$ |
(57,582,888 |
) |
|
$ |
(15,963,081 |
) |
Stock-based compensation |
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
37,017 |
|
|
|
- |
|
|
|
37,017 |
|
Net loss |
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(518,332 |
) |
|
|
(518,332 |
) |
Balance at March 31, 2026 |
|
2,753,489 |
|
|
$ |
751,930 |
|
|
943,813 |
|
|
$ |
536,426 |
|
|
29,658,140 |
|
|
$ |
2,966 |
|
|
$ |
40,365,502 |
|
|
$ |
(58,101,220 |
) |
|
$ |
(16,444,396 |
) |
See notes to unaudited condensed financial statements.
3
CONNECTANDSELL, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2026 and 2025
|
|
2026 |
|
|
2025 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
(518,332 |
) |
|
$ |
(1,890,338 |
) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
175,263 |
|
|
|
202,422 |
|
Amortization of debt discount and issuance costs |
|
|
- |
|
|
|
15,174 |
|
Stock-based compensation |
|
|
37,017 |
|
|
|
174,000 |
|
Noncash operating lease expense |
|
|
22,248 |
|
|
|
20,933 |
|
Noncash interest expense |
|
|
- |
|
|
|
1,334,193 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
333,737 |
|
|
|
929,833 |
|
Other receivables |
|
|
1,440 |
|
|
|
- |
|
Prepaid expenses and other current assets |
|
|
2,990 |
|
|
|
(134,714 |
) |
Lease liability |
|
|
(22,935 |
) |
|
|
(20,933 |
) |
Accounts payable |
|
|
28,846 |
|
|
|
(172,546 |
) |
Accrued expenses and other current liabilities |
|
|
100,258 |
|
|
|
58,992 |
|
Accrued interest on related party notes payable |
|
|
207,252 |
|
|
|
47,905 |
|
Deferred revenue |
|
|
(942,420 |
) |
|
|
431,185 |
|
|
|
|
|
|
|
|
||
Net cash (used in) provided by operating activities |
|
|
(574,636 |
) |
|
|
996,106 |
|
|
|
|
|
|
|
|
||
Cash flows from investing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Capitalized internal use software development costs |
|
|
(115,193 |
) |
|
|
(153,864 |
) |
Purchase of property and equipment |
|
|
(3,477 |
) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(118,670 |
) |
|
|
(153,864 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
||
Advances from line of credit |
|
|
2,274,340 |
|
|
|
3,858,781 |
|
Repayments on line of credit |
|
|
(2,481,988 |
) |
|
|
(4,828,898 |
) |
Repayments on related party notes |
|
|
(125,000 |
) |
|
|
(300,000 |
) |
|
|
|
|
|
|
|
||
Net cash used in financing activities |
|
|
(332,648 |
) |
|
|
(1,270,117 |
) |
|
|
|
|
|
|
|
||
Net decrease in cash and cash equivalents |
|
|
(1,025,954 |
) |
|
|
(427,875 |
) |
|
|
|
|
|
|
|
||
Cash and cash equivalents, beginning of period |
|
$ |
1,478,736 |
|
|
$ |
1,318,599 |
|
|
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
452,782 |
|
|
$ |
890,724 |
|
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flows information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
120,525 |
|
|
$ |
198,272 |
|
Cash paid for income taxes |
|
$ |
7,576 |
|
|
$ |
266 |
|
|
|
|
|
|
|
|
||
Noncash financing activities: |
|
|
|
|
|
|
||
Vesting of deferred stock and related liability |
|
$ |
- |
|
|
$ |
1,334,193 |
|
See notes to unaudited condensed financial statements.
4
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 1 – DESCRIPTION OF BUSINESS
Organization
Nomea, Inc. (the “Company”) was incorporated in Delaware on May 9, 2007 and amended its Articles of Incorporation on September 27, 2010 at which time the Company changed its name to ConnectAndSell, Inc. The Company is the first sales acceleration solution that improves the efficiency and effectiveness of critical business functions like outbound prospecting, qualifying marketing leads and channeling market development. The Company delivers conversations on demand, using a combination of proprietary switching technology and human intelligence which navigates voice mail, IVR phone menu trees and gatekeepers to allow customers to better focus and optimize their selling efforts. The Company’s product is sold as a “SAAS” (Software as a Service) product, principally to customers in North America.
Going Concern
As shown in the accompanying financial statements, the Company has negative working capital and has suffered recurring operating losses and, as of March 31, 2026, had an accumulated deficit of $58,101,220, debt that matured in March 2026 and a line of credit that matures in December 2026. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the issuance date of these unaudited condensed financial statements. Management’s plans in regard to this matter consist of taking steps to improve profitability and cash flows resulting from increased bookings, due to continuous efforts to increase new revenues and improve marketing strategies. Management also plans to continue to get an extension of the Company’s outstanding debt. Additionally, as discussed in Note 10, the Company is in process of negotiating a sale of the Company. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s most significant estimates relate to the valuation of its common stock, options, warrants, allowance for credit losses, deferred tax assets and the related valuation allowance and capitalization and amortization of software development costs.
5
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. As of March 31, 2026 and December 31, 2025, cash and cash equivalents consist of cash deposited with banks. The recorded carrying amount of cash and cash equivalents approximates their fair value. The Company places its cash equivalents with high credit-quality financial institutions.
Accounts Receivable
The Company generally does not require collateral or other security in support of accounts receivable and does not charge interest on past due balances. To reduce credit risk, management performs ongoing credit evaluations of its customers’ financial condition, using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current credit risk rating, collection pattern of customers, as well as for changes in economic environmental conditions. The Company analyzes the need for reserves for potential credit losses and records allowances for credit losses when necessary. The Company writes off accounts against the allowance after all attempts at collection have been exhausted. Recoveries of accounts receivable previously written off are recorded when received. At March 31, 2026 and December 31, 2025, the Company recorded an allowance for credit losses of $5,000 and
$34,040, respectively.
The following table presents the activity in the allowance for credit losses for accounts receivable for the three months ended March 31, 2026 and 2025:
Beginning balance as of January 1, 2025 |
$ |
271,546 |
Current-period provision for expected credit losses |
|
- |
Write-offs charged against the allowance |
|
(60,900) |
Ending balance as of March 31, 2025 |
$ |
210,646 |
|
|
|
Beginning balance as of January 1, 2026 |
$ |
34,040 |
Current-period provision for expected credit losses |
|
- |
Write-offs charged against the allowance |
|
(29,040) |
Ending balance as of March 31, 2026 |
$ |
5,000 |
6
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited with federally insured commercial banks in the United States. At times cash balances may exceed federal insurance limits. However, given the credit quality of these banks, the Company believes any credit risk to be low.
As of and for the three months ended March 31, 2026, the Company had two customers who accounted for approximately 16% and 11% of total accounts receivable and there was one customer who accounted for approximately 19% of total revenues.
As of December 31, 2025, the Company had two customers who accounted for approximately 26% and 11% of total accounts receivable. and there was one customer who accounted for approximately 18% of total revenues. For the three months ended March 31, 2025, the Company had one customer who accounted for approximately 14% of total revenues.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets, generally one to five years. Leasehold improvements are amortized over the shorter of the estimated useful lives of the assets or the lease term. Expenditures for repairs and maintenance are charged to expense as incurred. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in the statement of operations.
Long-lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No such impairments have been identified as of December 31, 2025 or during the three months ended March 31, 2026.
Revenue from Contracts with Customers
The Company recognizes revenue in accordance with ASC 606 (“ASC 606”), Revenue from Contracts with Customers, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. To achieve this core principle, five basic criteria must be met before revenue can be recognized:
7
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from Contracts with Customers (Continued)
The Company offers its software under a cloud-based delivery model, where it provides access to its SAAS model where customers do not have the contractual right to take possession of the software. The Company sells “usage based” licenses, which is the usage of the product by the hour, by the connection or by the dial. Revenue on usage-based licenses is recognized in the period the usage has taken place. The Company also sells its services pursuant to license agreements, which includes named user licenses (“NULs”) which are single seat licenses with unlimited use, which range from two weeks to five years. Revenue on NULs is recognized ratably over the contract term.
All of the Company’s revenue and accounts receivable are generated from contracts with customers. Revenue is recognized when control of the promised services is transferred to the Company's customers at an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The majority of customer contracts have performance obligations that the Company satisfies over time and revenue is recognized by consistently applying a method of measuring progress toward satisfaction of that performance obligation.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under ASC 606. The transaction price is allocated to each distinct performance obligation recognized as revenue when, or as, the performance obligation is satisfied by transferring the promised good or service to the customer. The Company identifies and tracks the performance obligations at contract inception so that the Company can monitor and account for the performance obligations over the life of the contract.
The Company’s contracts typically contain a single performance obligation consisting of the SAAS in a multi-tenant environment where support and maintenance are included for customers. Contracts with multiple performance obligations may contain additional software products or professional services.
For contracts with multiple performance obligations where the contracted price differs from the standalone selling price (“SSP”) for any distinct good or service, the Company may be required to allocate the transaction price to each performance obligation using its best estimate for the SSP.
The Company’s SAAS contracts are recognized over time, generally using an output method for dials or connects expended to measure usage. For named user licenses and sessions with unlimited dials, revenues are recognized ratably over the term of the contracted period. Professional services are recognized over the service term using an output method or the right to invoice practical expedient, when applicable.
8
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from Contracts with Customers (Continued)
Customer payment terms vary by arrangement although payments are typically due within 15 - 45 days of invoicing. The timing between the satisfaction of the performance obligations and the payment is not significant and the Company currently does not have any significant financing components or significant extended payment terms.
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers by “Product Type” as it best describes the product offering as it flows through revenue. For all such revenue types, the revenue recognition is over time. The disaggregated revenue for the three months ended March 31 was as follows:
Product Type |
|
2026 |
|
2025 |
||||
Smart Dials |
|
$ |
34,427 |
|
|
$ |
94,856 |
|
NUL |
|
|
2,979,425 |
|
|
|
3,312,796 |
|
Connects |
|
|
4,385 |
|
|
|
40,950 |
|
Other |
|
|
72,388 |
|
|
|
36,913 |
|
Total Revenue |
|
$ |
3,090,625 |
|
|
$ |
3,485,515 |
|
Practical Expedients and Exemptions
There are several practical expedients and exemptions allowed under ASC 606 that impact timing of revenue recognition and the Company’s disclosures. Below is a list of practical expedients the Company applied in the adoption and application of ASC 606:
Application Practical Expedients
9
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue from Contracts with Customers (Continued)
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in accounts receivable or contract liabilities (deferred revenue) in the Company’s consolidated balance sheets. The Company records deferred revenue when the Company has received or has the right to receive consideration, but has not yet transferred goods or services to the customer.
The Company generally invoices customers in advance of the service period. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue, or in revenue depending on whether the revenue recognition criteria has been met. Paid and unpaid invoice amounts for non-cancellable services occurring in future periods are included in deferred revenue.
The opening balances (January 1, 2025) of contract assets and liabilities were as follows:
Accounts receivable, net |
|
$ |
3,141,063 |
|
Deferred revenue |
|
$ |
7,444,552 |
|
Contract Costs
Costs to Obtain Contracts
The Company has determined that the only incremental costs incurred to obtain contracts with customers within the scope of ASC 606 are sales commissions paid to its employees. It is the Company’s policy to record sales commissions as an asset and amortize to expense ratably over the determined period of benefit. The balance was not significant to the Company’s financial statements and therefore not recorded in the Company’s balance sheet as of March 31, 2026 and December 31, 2025.
The Company applies the practical expedient in ASC 606 and expenses costs as incurred for sales commissions when the amortization period would have been one year or less.
Costs to Fulfill Contracts
The Company has concluded that the fulfillment costs associated with its contracts do not meet the capitalization criteria in Topic 340 and should not be capitalized and amortized.
Stock-based Compensation
GAAP establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. Under GAAP, share-based compensation cost is determined at the grant date using an option-pricing model. The value of the awards that is ultimately expected to vest is recognized as expense on a straight-line basis over the employee’s requisite service period. Options attributable to non-employees are amortized over the service period and the unvested portion of these options is re-measured at each vesting date.
10
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and Development
Research and development costs are charged to operations as incurred.
Internal-use Software
The Company develops internal-use software as required to support its operations. Costs incurred to develop internal-use software during the application development stage are capitalized and reported at cost, subject to an impairment test. Application development stage costs generally include costs associated with software configuration, coding, installation and testing. Costs of significant upgrades and enhancements that result in additional functionality are also capitalized whereas costs incurred for maintenance and minor upgrades and minor enhancements are expensed as incurred. Capitalized costs are amortized using the straight- line method over three years. The Company assesses the potential impairment of capitalized internal-use software whenever events or changes in circumstances indicate that the carrying value of the internal-use software may not be recoverable. No such impairments were identified as of December 31, 2025 or during the three months ended March 31, 2026 and 2025.
Advertising
The Company expenses the costs of advertising, including promotional expenses, as incurred. Advertising expense for the three months ended March 31, 2026 and 2025 was $3,762 and
$43,135, respectively and included in sales and marketing expenses in the statement of operations.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of assets and liabilities. In addition, deferred tax assets are recorded for the future benefit of utilizing net operating loss and tax credit carryovers. Deferred tax assets and liabilities are measured using the enacted tax rates applied to taxable income. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided against the Company’s deferred income tax assets when it is more likely than not that the asset will not be realized.
Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, the Company considers all available evidence, including past operating results, estimates of future taxable income and the feasibility of tax planning strategies. In the event that the Company changes its determination as to the amount of deferred tax assets that are more likely than not to be realized, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made.
11
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
The Company follows authoritative guidance regarding uncertain tax positions. This guidance requires that realization of an uncertain income tax position must be more likely than not (i.e., greater than 50% likelihood of receiving a benefit) before it can be recognized in the financial statements. The guidance further prescribes the benefit to be realized assumes a review by tax authorities having all relevant information and applying current conventions. The interpretation also clarifies the financial statement classification of tax-related penalties and interest and sets forth disclosures regarding unrecognized tax positions. The Company recognizes potential accrued interest and penalties related to unrecognized tax positions as income tax expense.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This ASU became effective for the Company on January 1, 2025. The adoption of ASU 2023-09 did not have a material impact on the Company’s financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides (1) a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the assets and (2) entities other than public business entities with an accounting policy election to consider collection activity after the balance sheet date when estimating expected credit losses. This ASU is effective for the Company beginning on January 1, 2026. The adoption of ASU 2025-05 did not have a material impact on the Company’s financial statements.
In September 2025, the FASB issued ASU 2025‑06, Intangibles—Goodwill and Other—Internal‑Use Software (Subtopic 350-40), which updates guidance for capitalizing internal-use software costs. The new standard removes stage-based rules and requires capitalization only when management has authorized and funded the project and it is probable the software will be completed and used as intended. This ASU is effective for fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of this new guidance on its financial statements.
12
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 3 – FAIR VALUE MEASUREMENT
The Company measures and discloses fair value measurements as required by GAAP. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, GAAP uses a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The major categories of assets and liabilities measured at fair value at March 31, 2026 and December 31, 2025 are cash and cash equivalents, which are Level 1 and the deferred stock liability (see Note 6), which is Level 3.
NOTE 4 – SIGNIFICANT BALANCE SHEET COMPONENTS
Prepaid expenses and other current assets consisted of the following as of:
|
|
March 31, 2026 |
|
December 31, 2025 |
|
||
Software subscriptions |
|
$ |
75,516 |
|
$ |
35,956 |
|
Insurance |
|
|
11,420 |
|
|
20,646 |
|
Communications |
|
|
31,344 |
|
|
31,344 |
|
Data |
|
|
50,025 |
|
|
75,107 |
|
Other prepaid expenses |
|
|
4,034 |
|
|
13,276 |
|
Total Prepaid and other current assets |
|
$ |
173,339 |
|
$ |
176,329 |
|
13
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 4 – SIGNIFICANT BALANCE SHEET COMPONENTS (Continued)
Property and Equipment
Property and equipment consisted of the following as of:
|
|
March 31, 2026 |
|
December 31, 2025 |
|
||
Computers, equipment and leasehold improvements |
|
$ |
114,983 |
|
$ |
111,506 |
|
Less: accumulated depreciation and amortization |
|
|
(99,729) |
|
|
(97,195) |
|
Total Property and equipment, net |
|
$ |
15,254 |
|
$ |
14,311 |
|
Depreciation expense was $2,534 and $4,402 for the three months ended March 31, 2026 and 2025, respectively.
Internally Developed Software
Internally developed software consisted of the following:
|
|
March 31, 2026 |
|
December 31, 2025 |
|
||
Capitalized internally developed software |
|
$ |
8,573,489 |
|
$ |
8,458,296 |
|
Less: accumulated depreciation and amortization |
|
|
(7,661,842) |
|
|
(7,489,113) |
|
Total Internally developed software, net |
|
$ |
911,647 |
|
$ |
969,183 |
|
Amortization expense was $172,729 and $198,019 for the three months ended March 31, 2026 and 2025, respectively.
As of March 31, 2026, future amortization expense is as follows:
Year Ending December 31, |
|
|
|
|
2026 |
|
$ |
437,897 |
|
2027 |
|
|
334,544 |
|
2028 |
|
|
129,606 |
|
2029 and thereafter |
|
|
9,600 |
|
|
|
|
|
|
Total amortization expense |
|
$ |
911,647 |
|
14
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 4 – SIGNIFICANT BALANCE SHEET COMPONENTS (Continued)
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
|
|
March 31, 2026 |
|
December 31, 2025 |
|
||
Employee-related liabilities |
|
$ |
430,650 |
|
$ |
422,498 |
|
Accrued cost of revenues |
|
|
75,568 |
|
|
84,123 |
|
Professional and other fees |
|
|
143,529 |
|
|
31,373 |
|
Other accrued liabilities |
|
|
340,923 |
|
|
352,418 |
|
Total accrued expenses |
|
$ |
990,670 |
|
$ |
890,412 |
|
NOTE 5 – DEBT
In June 2021, the Company entered into a loan and security agreement with a commercial bank. The loan is secured by all of the Company’s property. Under the agreement, the Company received an advance of $3 million under the term loan which bears interest at 2% above the Prime Rate, defined as the greater of 4% per annum or the variable rate of interest that appears in the Wall Street Journal. The maturity date of the term loan is June 28, 2024. Proceeds from the term loan were used to exercise a buyout option in the Royalty Purchase Agreement and repay the then outstanding term loan of $1.5 million. The agreement also provided access to a $3 million revolving line of credit which bears the same interest rate as the term loan and a maturity date of June 28, 2023. In May 2023, the loan and security agreement was amended to extend the maturity date of the revolving line of credit to June 28, 2025 and to amend a certain financial covenant.
In October 2022, the loan agreement was amended to waive a default related to a certain financial covenant and will not continue to forbear on such covenant without the continuing security of a Third-Party Pledge Agreement. The Company entered into a Consideration and Repayment Agreement with one of the principals of the Company to provide additional cash security in the form of a pledged cash account at the bank. This principal entered into a Third-Party Pledge Agreement with the bank and deposited $2.3 million of personal funds, whereby the bank shall have first priority interest in the pledged account.
Under the Consideration and Repayment Agreement, the Company shall make three payments to this principal as follows: a) $50,000 in November 2022, b) $80,000 in December 2022, and $100,000 in January 2023, which were recorded as interest expense. As the principal borrowed the funds used for the pledged account, the principal must make monthly interest payments to a brokerage firm on such borrowing, thus, the Company shall make such monthly interest payments for the principal. The Company recorded interest expense for these payments as incurred. During 2023, in connection with the amendment to the loan and security agreement discussed below, this agreement was terminated.
15
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 5 – DEBT (Continued)
The Company also granted the principal 2,500,000 deferred stock units. If any payments to the principal as discussed above are delayed, the Company shall grant an additional 350,000 deferred stock units. If the bank draws on the pledged account to cover any payment default by the Company under the loan agreement, the Company shall grant an additional 2,850,000 deferred stock units. The Company shall issue the shares of common stock underlying the outstanding deferred stock units granted in the settlement of such deferred stock units on or after the earlier of (i) the principal’s separation from service or (ii) a change in control; provided, however, that in event of a change of control, in lieu of issuing shares, the Company deliver the consideration that would have been payable in the change of control transaction had such shares been issued immediately prior to the consummation of the change in control. As these events are not currently considered probable of occurring, no expense for the deferred stock units has been recorded in these financial statements.
In December 2023, the loan and security agreement was amended as follows:
16
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 5 – DEBT (Continued)
In December 2023, the Company entered into a Guaranty Compensation Agreement with principals of the Company, providing a personal guarantee to the bank up to a maximum of $5 million. In the event of a Change of Control, the Company shall pay to the principals: a) $3 million if a Change of Control occurs within six months, b) $5 million if a change of control occurs more than six months but prior to 12 months, or c) $7.5 million if a Change of Control occurs more than 12 months. As a Change of Control is not currently considered probable of occurring, no liability has been recorded in these financial statements.
NOTE 6 – RELATED PARTY NOTES PAYABLE
The components of related party notes payable are:
|
|
March 31, 2026 |
|
December 31, 2025 |
||||
Interest-bearing notes payable on demand |
|
$ |
1,762,232 |
|
|
$ |
1,762,232 |
|
Accrued interest |
|
|
2,377,066 |
|
|
|
2,294,814 |
|
Total Related party notes payable |
|
$ |
4,139,298 |
|
|
$ |
4,057,046 |
|
In December 2016, $520,000 non-interest bearing unsecured promissory notes with officers of the Company, $105,000 of reimbursable legal fees and additional advances of $1,212,000 were converted into two junior demand unsecured promissory notes totaling $1,837,000, bearing interest at 20% per annum and payable on-demand. In conjunction with this agreement, the Company issued warrants for 13,709,612 shares of common stock to the junior demand promissory note holders with an exercise price of $0.52 and a term of 10 years. The allocated fair value of the warrants of $1,473,267 was recorded as interest expense (See Note 8 for further details).
In December 2017, additional advances of $385,000 were converted into a junior demand unsecured promissory note bearing interest at 20% per annum and payable on-demand.
In September 2020, the Company entered into forbearance agreements with the related party lenders whereby the Company asked the lenders to forbear from exercising certain rights and remedies under the Demand Notes. The agreement effectively amended the original Demand Notes by allowing the Company to pay the lenders interest beginning January 10, 2021 through December 10, 2021. As consideration, the Company paid forbearance fees to the lenders in the form of 9,800,000 deferred common shares, which will be issued immediately prior to the occurrence of a liquidity event. A liquidity event is not currently considered probable of occurring, thus no expense for the deferred common shares has been recorded in these financial statements.
17
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 6 – RELATED PARTY NOTES PAYABLE (Continued)
In June 2021, the Company granted 12,175,000 deferred stock units to the lenders for the subordination of the related party notes to the loan and security agreement with the commercial bank discussed in Note 5. The Company shall issue the shares of common stock underlying the outstanding deferred stock units granted in the settlement of such deferred stock units on or after the earlier of (i) the lender’s separation from service or (ii) a change in control; provided, however, that in event of a change of control, in lieu of issuing shares, the Company deliver the consideration that would have been payable in the change of control transaction had such shares been issued immediately prior to the consummation of the change in control. As these events were not currently considered probable of occurring, no expense for the deferred stock units was recorded in the financial statements as of December 31, 2024.
In March 2024, the forbearance agreements were amended to provide that the interest on the loans covered by such forbearance agreements shall be calculated on a compound basis for the date the loans were first made and interest began accruing. The deferred stock agreements were also amended to provide that: (i) in the event of a Change of Control in which the consideration payable in such change of control transaction is anything other than cash or cash equivalents, the grantees shall have the option of receiving the cash equivalent of the value of the deferred stock at such time in lieu of accepting the stock; and (ii) the time for issuance of the shares shall be the earlier of (x) the election by the grantees, which may be made no sooner than one year from the date of the amendment of the deferred stock agreements and no later than five years after the grantee’s separation from service, or (y) a change of control of the Company. In March 2025, which is one year from the amendment date, the grantees had the right to make the election for the issuance of the shares, as such the fair value of these shares were recorded as interest expense for $1,334,193. The fair value of the shares was estimated using the purchase price from the contemplated transaction in Note 10. As the grantees have the option of receiving cash, it has been classified as a liability under ASC 480, Distinguishing Liabilities from Equity.
In September 2025, the forbearance agreements were amended to add that interest shall be compounded daily from the date the loans were first made and interest began accruing. In September 2025, the Company also approved payment of interest at 20% annually, compounded daily, on an interest balance owed from 2017 for the use of one of the same lender’s personal credit cards used to fund certain business expenses. In accordance with ASC 470‑50, Debt — Modifications and Extinguishments, the Company evaluated whether the amendment represented a substantial modification of the original debt. Based on this evaluation, the Company concluded that the amended terms resulted in a substantial change in the economic characteristics of the debt. As a result, the amendment was accounted for as a debt extinguishment. The extinguishment resulted in a loss of $1,084,608, which is included in other expense in the statement of operations for year ended December 31, 2025.
For the three months ended March 31, 2026 and 2025, the Company paid $0 of accrued interest on the demand promissory notes and interest-bearing notes. Interest expense on these notes was $207,252 and $86,905 for the three months ended March 31, 2026 and 2025, respectively.
18
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 7 – EQUITY
At March 31, 2026 and December 31, 2025, the authorized capital stock of the Company consisted of 145,000,211 shares of capital stock comprising 140,000,000 shares of common stock and 5,000,211 of convertible preferred stock. All classes of the Company’s stock have
$0.0001 par value.
Stockholder Notes Receivable
In January 2015, the Company awarded three officers of the Company the right to each purchase 2,200,000 shares of Common stock, par value of $0.001, at a price of $0.45 per share under Restricted Stock Purchase Agreements. In consideration for such shares, the Company accepted nonrecourse promissory notes in the principal amount of $990,000 from each officer. The notes shall accrue interest at 1.75% per annum compounded annually. Principal plus accrued but unpaid interest shall become due and payable upon the earlier of (i) the date that is seven years following the date of the notes and (ii) each sale or other disposition by the note holders, other than a permitted transfer of any shares to a third party, until the balance of the notes has been paid in full. In July 2022, these notes were amended to extend the due date by one year. During 2022, One officer paid $15,000 in accrued interest to the Company. This payment was recognized as interest income in 2022. No payments were made in 2026 or 2025.
Under the agreements, the vesting schedule requires that ¼th of the shares purchased shall vest on the 12-month anniversary of the vesting start date and then 1/48th of the shares shall vest each anniversary thereafter. During the term of the agreement, the Company has the right to repurchase the unvested shares at $0.45 per share. Shares were fully vested in 2019.
In December 2017, a similar Restricted Stock Purchase Agreement was issued to an officer to purchase 5,431,731 shares of Common Stock par value $.001, at an exercise price of $0.52. The shares shall vest using the same schedule as the aforementioned 2015 awards. During the term of the agreement, the Company has the right to repurchase the unvested shares at $0.52 per share. A nonrecourse note for $2,824,500 was accepted from the officer for consideration of such shares. The notes shall accrue interest at 2.11% per annum compounded annually. Principal plus accrued but unpaid interest shall become due and payable upon the earlier of (i) the date that is seven years following the date of the notes and (ii) each sale or other disposition by the note holders, other than a permitted transfer of any shares to a third party, until the balance of the notes have been paid in full.
Upon any exercise by the Company of the Repurchase Option as defined in the Restricted Stock Purchase Agreement, the notes shall be deemed to have been repaid in an amount equal to the greater of (i) $0.0001 per share that is repurchased by the Company pursuant to the exercise of the Repurchase Right and (ii) that portion of the aggregate principal and accrued but unpaid interest of the notes as is equal to the portion that the shares being repurchased by the Company bears to the total number of shares originally purchased by the note holder pursuant to the Purchase Agreement.
19
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 7 – EQUITY (Continued)
Stockholder Notes Receivable (Continued)
Under the above Restricted Stock Agreements, total vested shares were 12,031,731 at March 31, 2026 and December 31, 2025. All shares were fully vested as of December 31, 2021. Because the notes are non-recourse, this transaction is not treated as an option exercise for accounting purposes and neither the shares nor the non-recourse loans are shown as outstanding in the balance sheet.
During 2015 and 2016, an officer of the Company exercised fully vested options in exchange for two non-recourse loans:
For both notes, the unpaid principal amount and any accrued, but unpaid, interest is due upon the earlier of (1) 7 years from the date of the note or (2) the sale of the securities to a third party. For accounting purposes, this transaction was treated as an option modification (a modification of the term) resulting in a 1-time incremental stock compensation expense of $39,140 in 2016. Because the notes are non-recourse, this transaction is not treated as an option exercise for accounting purposes and neither the shares nor the non-recourse loans are shown as outstanding in the balance sheet. The May 8, 2015 promissory note was amended in 2022 to extend the due date by one year and to adjust the interest rate during that extended year to accrued at the rate of 1.74% per annum, and in 2023 to extend the due date by one additional year to March 15, 2024.
In 2021, an officer of the Company exercised fully vested options in exchange for a limited recourse promissory note for $42,560, dated July 8, 2021. Interest shall accrue at the rate of 1.74% per annum, compounded annually. The unpaid principal amount and any accrued, but unpaid, interest is due upon the earlier of (1) 7 years from the date of the note or (2) the sale of the securities to a third party. Because the notes are non-recourse, this transaction is not treated as an option exercise for accounting purposes and neither the shares nor the non-recourse loans are shown as outstanding in the balance sheet.
In August 2025, all of the stockholder notes were amended to extend the maturity date to May 31, 2026. After the original 7-year maturity date of the notes, interest shall accrue monthly at the applicable short-term federal rate. As of March 31, 2026 and December 31, 2025, the short-term federal rate was 3.53% and 3.60%, respectively.
20
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 7 – EQUITY (Continued)
Convertible Preferred Stock
The significant features of the Company’s convertible preferred stock are as follows:
Dividend provisions
The holders of Series A and Series B preferred stock are entitled to receive non-cumulative dividends, out of any assets legally available thereof, when and if declared by the Board of Directors, at a rate of $0.018 and $0.037 per share, respectively, per annum, adjustable for certain events, such as stock splits, stock dividends, combinations, subdivisions and recapitalizations and the like. There have been no declared dividends to date.
Liquidation preference
In the event of any liquidation, dissolution or winding up of the Company, the holders of Series A and Series B shall be entitled to be paid, out of the available funds and assets, and prior and in preference to any payment or distribution of any such funds on any shares of common stock, an amount equal to the sum of the applicable original issue price for such series of Preferred Stock, plus declared but unpaid dividends on such share. Original issue price shall mean $0.295 and $0.63055 for Series A and Series B, respectively, plus all declared but unpaid dividends. If assets are not sufficient to permit such payment, payment will be made ratably among the holders of the convertible preferred stock in proportion to the full amounts to which they would otherwise be entitled.
Following the payment of this liquidation amount, all of the remaining proceeds available for distribution to stockholders shall be distributed among the holders of preferred stock and common stock pro rata based on the number of shares of common stock held by each.
Conversion rights
Each outstanding share of Series A and Series B is convertible, at the option of the holder, into fully paid and non-assessable shares of common stock as is determined by dividing the original issue price by the applicable original issue price for such series in effect on the date of conversion and shall be subject to adjustment in the event of the issuance of any additional stock without consideration or for a consideration per share less than the conversion price applicable to such series of preferred stock in effect immediately prior to the issuance of such additional stock, as well as stock splits, dividends and combinations.
The original issuance price and current conversion price for Series A and Series B is $0.295 and
$0.63055 per share.
Each share of preferred stock automatically converts into the number of shares of common stock into which such shares are convertible at the then-effective conversion price, upon the consent of the holders of more than 50% of the then-outstanding shares of preferred stock, or upon the closing of a public offering of common stock with gross proceeds of at least $20,000,000.
21
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 7 – EQUITY (Continued)
Convertible Preferred Stock (Continued)
Voting rights
The holders of each share of preferred stock are entitled to the number of votes equal to the number of shares of common stock into which such share is convertible. The holders of common stock are entitled to one vote per share of common stock held by the stockholder.
Redemption rights
The preferred stock is not redeemable at the option of the holder.
The following are common shares reserved for future issuance as of March 31, 2026:
Outstanding stock options-2007 plan |
15,092,988 |
Outstanding stock options-2017 plan |
37,043,355 |
Options available for future issuance |
668,491 |
Outstanding warrants |
16,509,612 |
Series A Preferred Stock |
2,753,489 |
Series B Preferred Stock |
943,813 |
Restricted stock |
12,963,720 |
Deferred stock |
24,475,000 |
Total |
110,450,468 |
NOTE 8 – WARRANTS
In 2016, the Company issued warrants to officers of the Company to purchase 2,000,000 shares of common stock, at a price of $0.52 per share and a term of 10 years, relating to an unconditional deficiency guaranty issued to the Lenders in conjunction with their 50/50 loan to the Company. The Company also issued warrants to purchase 13,709,612 shares of common stock in connection with the issuance of the junior demand promissory notes (see Note 6, Related Party Promissory Notes), at a price of $0.52 per share and a term of 10 years. These warrants were classified as equity instruments and were recorded at fair value at the date of issuance. The fair value of the warrants, determined using the Black-Scholes option-pricing model, was $2,557,645 at their issuance dates in 2016. These warrants expire December 2026.
In 2018, the Company issued warrants to a consultant to purchase 800,000 shares of common stock at a price of $0.52 per share and a term of 10 years. These warrants were classified as equity instruments and were recorded at fair value at the date of issuance. The fair value of the warrants, determined using the Black-Scholes option-pricing model, was $378,410 at their issuance date in 2018 and was recorded as stock compensation expense. These warrants expire in August 2028.
22
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 9 – STOCK-BASED COMPENSATION
On December 22, 2017 the Company’s Board of Directors adopted and approved the 2017 Stock Option and Grant Plan (the “2017 Option Plan”). The 2017 Option Plan reserved 2,686,846 shares (rolled over from the Company’s 2007 Option Plan) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) for issuance in connection with the 2017 Option Plan and that such shares shall, when issued and paid for in accordance with the provisions of the 2017 Option Plan, constitute validly issued, fully paid and non-assessable shares of Common Stock. Under the 2007 Option Plan, 16,352,988 and 19,885,000 options were issued and remain outstanding as of March 31, 2026 and December 31, 2025, respectively. No further shares are reserved for future issuance under the 2007 Plan.
In November 2019, the Board of Directors and stockholders approved an increase in the number of shares authorized for issuance in the 2017 Stock Option and Grant Plan to 37,716,846.
The 2017 Option Plan provides for the grant of incentive and non-statutory stock options to employees, outside directors and consultants of the Company. Only employees shall be eligible for the grant of incentive stock options. The term of each Stock Option shall be fixed by the Board of Directors, but no Stock Option shall be exercisable more than 10 years after the date the Stock Option is granted. If an employee is a Ten Percent Owner on the grant date of an Incentive Stock Option granted to such employee, the term of such Incentive Stock Option shall be no more than five years from the date of grant. At the discretion of the Company’s Board of Directors, certain options may be exercisable immediately at the date of grant. All other options are exercisable only to the extent vested.
The exercise price of both incentive and non-statutory stock options granted under the 2017 Option Plan must be at least equal to 100% of the fair value of the Company’s common stock at the date of grant, as determined by the Board of Directors. Incentive stock options granted to stockholders who own greater than 10% of the Company’s outstanding stock at the date of grant must be issued at no less than 110% of the estimated fair value of the common stock on the date of grant.
Summary
For the three months ended, March 31, 2026 and 2025, the Company recorded stock-based compensation expense of $37,017 and $174,000, respectively.
23
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 9 – STOCK-BASED COMPENSATION (Continued)
Stock option activity for the three months ended March 31, 2026 and 2025 is as follows:
|
|
Shares |
|
Weighted |
|
Weighted |
|
Outstanding at December 31, 2024 |
|
58,258,842 |
|
$ |
0.52 |
|
4.106 |
|
|
|
|
|
|
|
|
Options forfeited |
|
(21,875) |
|
$ |
0.53 |
|
|
Options expired |
|
(3,492,997) |
|
$ |
0.45 |
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2025 |
|
54,743,970 |
|
$ |
0.52 |
|
3.964 |
|
|
|
|
|
|
|
|
Outstanding at December 31, 2025 |
|
52,496,343 |
|
$ |
0.52 |
|
3.556 |
|
|
|
|
|
|
|
|
Options expired |
|
(360,000) |
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2026 |
|
52,136,343 |
|
$ |
0.52 |
|
3.333 |
Vested and expected to vest at |
|
51,005,443 |
|
$ |
0.52 |
|
3.325 |
Vested and exercisable at |
|
50,337,270 |
|
$ |
0.52 |
|
3.253 |
As of March 31, 2026 and December 31, 2025, there was $196,018 and $232,201, respectively, of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 1.95 and 2.18 years, respectively.
The fair value of options vested for the three months ended March 31, 2026 and 2025 was $157,103 and $175,352, respectively.
24
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company leases office facilities under a non-cancelable operating lease with an expiration date of July 2026. In March 2023, the Company entered into a Lease Extension Agreement for its office facility to extend the term for a period of three years commencing in August 2023 and terminating in July 2026, with monthly payments ranging from $7,380 to $7,838.
Rent expense related to the Company’s operating leases was $22,827 and $22,827 for the three months ended March 31, 2026 and 2025, respectively. Cash paid for rent was $23,513 and $22,827 for the three months ended March 31, 2026 and 2025, respectively.
Future minimum payments under non-cancelable leases are as follows as of March 31, 2026:
For the Year Ending December 31, |
|
|
|
|
|
|
|
2026 |
|
$ |
31,251 |
Total |
|
|
31,351 |
Less imputed interest |
|
|
(233) |
Present value of lease liability |
|
$ |
31,118 |
Upon commencement of the Lease Extension Agreement in August 2023, the Company recorded a right-of-use asset and related lease liability of $251,070.
The Company’s lease contracts do not provide a readily determinable implicit rate. The Company used its estimated incremental borrowing rate of 6%, which was based on information available at the inception of the lease. The weighted average remaining term at March 31, 2026 was 0.33 years.
Contingencies
In March 2026, the Company received a letter from an officer asserting that, pursuant to an employment agreement dated September 2021, the officer is entitled to a payment of at least
$2.0 million upon the closing of a contemplated asset purchase transaction (the “Contemplated Transaction”). The officer indicated that, absent written assurances of payment prior to closing, they intend to pursue legal remedies.
In April 2026, the Company received a letter from a financial advisor asserting that, under a letter agreement dated August 2023 (the “Letter Agreement”), approximately $2.0 million is payable upon closing of the Contemplated Transaction. The financial advisor further asserts that, because the Contemplated Transaction does not provide for assumption of the Company’s obligations under the Letter Agreement by the prospective acquirer, the Company must arrange alternative means of settlement acceptable to the advisor. The financial advisor has indicated it intends to pursue available legal or equitable remedies if the matter is not resolved.
25
CONNECTANDSELL, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
NOTE 10 – COMMITMENTS AND CONTINGENCIES (Continued)
The Company is currently evaluating these claims. At this time, the Company is unable to reasonably estimate the likelihood of loss or the amount or range of any potential loss, if any, related to these matters. Accordingly, no liability has been recorded in the accompanying financial statements as of March 31, 2026 and December 31, 2025.
In November 2025, the Company entered into a non-binding Letter of Intent (LOI) to be acquired. The LOI outlines preliminary terms and conditions for a potential acquisition; however, it is non-binding and subject to the negotiation and execution of definitive agreements, completion of due diligence, and customary closing conditions. There can be no assurance that the transaction will be completed on the terms contemplated or at all.
NOTE 11 – SUBSEQUENT EVENTS
In April 2026, the Company entered into a Debt Assumption and Repayment Agreement with an officer of the Company. The officer assumed and paid off the loan balance and accrued interest totaling $4,970,489 in exchange for the Company’s agreement to pay the officer the full amount upon closing of the Contemplated Transaction.
In May 2026, the Company redeemed and canceled a total of 8,339,719 shares of common stock for a purchase price of $0.52 per share from two officers of the Company, in full satisfaction of amounts due under the nonrecourse promissory notes related to restricted stock purchase agreements and option exercises from 2015 and 2017 discussed in Note 7.
Subsequent events have been evaluated through June 5, 2026, which is the date of the financial statements were issued or available to be issued. Other than events already disclosed in these financial statements, no material subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes.
26
Exhibit 99.3
BANZAI INTERNATIONAL INC
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On July 2, 2026 (“Closing Date”), Banzai International, Inc. ("Banzai" or the "Company") and Banzai Acquisition Sub, Inc. ("Acquisition Sub"), a wholly-owned subsidiary of Banzai, entered into an Asset Purchase Agreement (the "APA") with ConnectAndSell, Inc. ("C&S"), pursuant to which Acquisition Sub agreed to acquire substantially all of the assets and assume certain specified liabilities of C&S (the "Acquisition").
The following unaudited pro forma condensed combined financial information presents the combination of the historical consolidated financial statements of Banzai and C&S and is intended to provide you with information about how the Acquisition might have affected Banzai’s historical financial statements.
The unaudited pro forma condensed combined balance sheet combines the historical balance sheets of Banzai and C&S as of March 31, 2026 on a pro forma basis as if the Acquisition had occurred as of that date. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2025, and the three months ended March 31, 2026, combines the historical statements of operations of Banzai and C&S for such periods on a pro forma basis as if the Acquisition and Transaction Financing (see Note B) had occurred on January 1, 2025, the beginning of the earliest period presented.
The unaudited pro forma condensed combined financial statements constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated.
The following unaudited pro forma condensed combined financial information gives effect to the following:
Accordingly, the actual adjustments may differ materially from those reflected in the unaudited pro forma condensed combined financial information and, upon completion of acquisition accounting, the purchase price will be finalized and the values assigned to assets and liabilities may change significantly from those reflected herein.
The pro forma financial information has been prepared by management in accordance with SEC Regulation S-X Article 11, Pro Forma Financial Information, as amended, and are not necessarily indicative of the financial position or results of operations that would have been realized if the aforementioned transactions had been completed on the dates indicated, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable.
The unaudited pro forma condensed combined financial information was derived from and should be read together with the accompanying notes to the unaudited pro forma condensed combined financial information, Banzai’s historical consolidated financial statements and accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in its annual report on Form 10-K for the fiscal year ended December 31, 2025, and its quarterly report on Form 10-Q for the three months ended March 31, 2026. The unaudited pro forma condensed combined financial information was also derived from and should be read together with C&S’s historical financial statements filed as an exhibit to this Current Report on Form 8-K.
Capitalized words not otherwise defined herein, shall have the meaning set forth in the APA.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of March 31, 2026
(in thousands)
|
|
Banzai |
|
|
ConnectAndSell |
|
|
Transaction Accounting Adjustments |
|
|
Notes |
|
Other Transaction Accounting Adjustments |
|
|
Notes |
|
Pro Forma Combined |
|
|||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash |
|
$ |
137 |
|
|
$ |
453 |
|
|
$ |
(1,203 |
) |
|
(A) (F) |
|
|
6,000 |
|
|
(B) |
|
$ |
5,387 |
|
Accounts receivable |
|
|
668 |
|
|
|
1,143 |
|
|
|
(1,143 |
) |
|
(F) |
|
|
|
|
|
|
|
668 |
|
|
Prepaid expenses and other current assets |
|
|
855 |
|
|
|
174 |
|
|
|
|
|
(F) |
|
|
|
|
|
|
|
1,029 |
|
||
Other receivables |
|
|
— |
|
|
|
39 |
|
|
|
(39 |
) |
|
(F) |
|
|
|
|
|
|
|
— |
|
|
Operating lease right-of-use assets, current |
|
|
— |
|
|
|
30 |
|
|
|
(30 |
) |
|
(F) |
|
|
|
|
|
|
|
— |
|
|
Total current assets |
|
|
1,660 |
|
|
|
1,839 |
|
|
|
(2,415 |
) |
|
|
|
|
6,000 |
|
|
|
|
|
7,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Property and equipment, net |
|
|
— |
|
|
|
15 |
|
|
|
|
|
(F) |
|
|
|
|
|
|
|
15 |
|
||
Intangible assets, net |
|
|
7,737 |
|
|
|
912 |
|
|
|
|
|
(F) |
|
|
|
|
|
|
|
8,649 |
|
||
Goodwill |
|
|
21,992 |
|
|
|
— |
|
|
|
18,978 |
|
|
(F) |
|
|
|
|
|
|
|
40,970 |
|
|
Operating lease right-of-use assets |
|
|
49 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
||
Bifurcated embedded derivative asset – related party |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||
Deferred offering costs |
|
|
32 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
32 |
|
||
Other assets |
|
|
4 |
|
|
|
43 |
|
|
|
(19 |
) |
|
(F) |
|
|
|
|
|
|
|
28 |
|
|
Total assets |
|
|
31,474 |
|
|
|
2,809 |
|
|
|
16,544 |
|
|
|
|
|
6,000 |
|
|
|
|
|
56,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accounts payable |
|
|
2,971 |
|
|
|
953 |
|
|
|
(953 |
) |
|
(F) |
|
|
|
|
|
|
|
2,971 |
|
|
Accrued expenses and other current liabilities |
|
|
4,068 |
|
|
|
991 |
|
|
|
(957 |
) |
|
(F) (H) |
|
|
|
|
|
|
|
4,102 |
|
|
Convertible notes – related party |
|
|
5,117 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,117 |
|
||
Convertible notes, carried at fair value |
|
|
1,890 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,890 |
|
||
Convertible notes (Yorkville) |
|
|
571 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
571 |
|
||
Convertible Note – Transaction Financing |
|
|
- |
|
|
|
— |
|
|
|
|
|
|
|
|
4,000 |
|
|
(B) |
|
|
4,000 |
|
|
Notes payable, carried at fair value |
|
|
2,258 |
|
|
|
— |
|
|
|
|
|
|
|
|
2,000 |
|
|
(B) |
|
|
4,258 |
|
|
Private placement warrant liability |
|
|
1,250 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250 |
|
||
Current portion of long-term debt |
|
|
— |
|
|
|
4,962 |
|
|
|
(3,162 |
) |
|
(A) (D) (F) |
|
|
|
|
|
|
|
1,800 |
|
|
Deferred Cash Payment liability |
|
|
— |
|
|
|
— |
|
|
|
4,750 |
|
|
(A) (B) |
|
|
|
|
|
|
|
4,750 |
|
|
Financial instruments – related party |
|
|
13 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
13 |
|
||
Earnout liability |
|
|
500 |
|
|
|
— |
|
|
|
60 |
|
|
(A) (C) |
|
|
|
|
|
|
|
560 |
|
|
Due to related party |
|
|
— |
|
|
|
4,139 |
|
|
|
(4,139 |
) |
|
(F) |
|
|
|
|
|
|
|
— |
|
|
Deferred revenue |
|
|
3,547 |
|
|
|
6,843 |
|
|
|
|
|
(F) (G) |
|
|
|
|
|
|
|
10,390 |
|
||
Deferred stock liability |
|
|
— |
|
|
|
1,334 |
|
|
|
(1,334 |
) |
|
(F) |
|
|
|
|
|
|
|
— |
|
|
Operating lease liabilities, current |
|
|
30 |
|
|
|
31 |
|
|
|
(31 |
) |
|
(F) |
|
|
|
|
|
|
|
30 |
|
|
Total current liabilities |
|
|
22,215 |
|
|
|
19,253 |
|
|
|
(5,766 |
) |
|
|
|
|
6,000 |
|
|
|
|
|
41,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Deferred revenue, non-current |
|
|
117 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
117 |
|
||
Deferred tax liability |
|
|
1,026 |
|
|
|
— |
|
|
|
|
|
(I) |
|
|
|
|
|
|
|
1,026 |
|
||
Holdback liability |
|
|
— |
|
|
|
— |
|
|
|
1,340 |
|
|
(E) |
|
|
|
|
|
|
|
1,340 |
|
|
Operating lease liabilities, non-current |
|
|
19 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
19 |
|
||
Total liabilities |
|
|
23,377 |
|
|
|
19,253 |
|
|
|
(4,426 |
) |
|
|
|
|
6,000 |
|
|
|
|
|
44,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common Stock |
|
|
— |
|
|
|
3 |
|
|
|
(3 |
) |
|
(F) |
|
|
|
|
|
|
|
— |
|
|
Preferred Stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
Series A and B convertible preferred stock |
|
|
— |
|
|
|
1,288 |
|
|
|
(1,288 |
) |
|
(F) |
|
|
|
|
|
|
|
— |
|
|
Additional paid-in capital |
|
|
117,346 |
|
|
|
40,366 |
|
|
|
(35,806 |
) |
|
(A) (F) |
|
|
|
|
|
|
|
121,906 |
|
|
Accumulated other comprehensive (loss) income |
|
|
(60 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
(60 |
) |
|
Accumulated deficit |
|
|
(109,189 |
) |
|
|
(58,101 |
) |
|
|
58,067 |
|
|
(F) (H) |
|
|
|
|
|
|
|
(109,223 |
) |
|
Stockholders' equity |
|
|
8,097 |
|
|
|
(16,444 |
) |
|
|
20,970 |
|
|
|
|
|
- |
|
|
|
|
|
12,623 |
|
Total liabilities and stockholders' equity |
|
$ |
31,474 |
|
|
$ |
2,809 |
|
|
$ |
16,544 |
|
|
|
|
$ |
6,000 |
|
|
|
|
$ |
56,827 |
|
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
Unaudited Pro Forma Condensed Combined Statement of Operations
Three Months Ended March 31, 2026
(in thousands, except per share data)
|
|
Banzai |
|
|
ConnectAndSell |
|
|
Transaction Accounting Adjustments |
|
|
Notes |
Other Transaction Accounting Adjustments |
|
|
Notes |
|
Reclassification Adjustments |
|
|
Notes |
|
Pro Forma Combined |
|
||||||
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue |
|
$ |
2,696 |
|
|
$ |
3,091 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,787 |
|
|||
Cost of revenue |
|
|
521 |
|
|
|
376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
897 |
|
|||
Gross profit |
|
|
2,175 |
|
|
|
2,715 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
4,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses |
|
|
7,650 |
|
|
|
701 |
|
|
|
|
|
|
|
|
|
|
|
|
2,052 |
|
|
(AA) (BB) |
|
|
10,403 |
|
||
Engineering, research and development |
|
|
— |
|
|
|
804 |
|
|
|
|
|
|
|
|
|
|
|
|
(804 |
) |
|
(AA) |
|
|
— |
|
||
Sales and marketing |
|
|
— |
|
|
|
1,423 |
|
|
|
|
|
|
|
|
|
|
|
|
(1,423 |
) |
|
(AA) |
|
|
— |
|
||
Depreciation and amortization expense |
|
|
305 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
175 |
|
|
(BB) |
|
|
480 |
|
||
Total operating expenses |
|
|
7,955 |
|
|
|
2,928 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
10,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating loss |
|
|
(5,780 |
) |
|
|
(213 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
(5,993 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest income |
|
|
(3 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|||
Interest expense |
|
|
9 |
|
|
|
299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
308 |
|
|||
Interest expense – related party |
|
|
194 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194 |
|
|||
Gain on extinguishment of liabilities |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Loss on debt issuance |
|
|
49 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49 |
|
|||
Loss on Private Placement Issuance |
|
|
1,598 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,598 |
|
|||
Loss on extinguishment of debt, net |
|
|
6 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|||
Change in fair value of financial instruments |
|
|
608 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
608 |
|
|||
Change in fair value of financial instruments – related party |
|
|
22 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22 |
|
|||
Change in fair value of convertible notes |
|
|
(372 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(372 |
) |
|||
Loss on Yorkville SEPA advances |
|
|
28 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28 |
|
|||
Other (income) expense, net |
|
|
550 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
549 |
|
|||
Total other expenses, net |
|
|
2,689 |
|
|
|
298 |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
2,987 |
|
Loss before income taxes |
|
|
(8,469 |
) |
|
|
(511 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
(8,980 |
) |
Income tax expense (benefit) |
|
|
(52 |
) |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45 |
) |
|||
Net loss |
|
$ |
(8,417 |
) |
|
$ |
(518 |
) |
|
$ |
— |
|
|
|
$ |
— |
|
|
|
|
$ |
— |
|
|
|
|
$ |
(8,935 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss attributable to common shareholders |
|
$ |
(8,417 |
) |
|
$ |
(518 |
) |
|
$ |
— |
|
|
|
$ |
— |
|
|
|
|
$ |
— |
|
|
|
|
$ |
(8,935 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss per share attributable to common shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic and diluted |
|
$ |
(11.69 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
|
|
$ |
— |
|
|
|
|
$ |
(3.31 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic and diluted |
|
|
720 |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
2,700 |
|
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
Unaudited Pro Forma Condensed Combined Statement of Operations
Year Ended December 31, 2025
(in thousands, except per share data)
|
|
Banzai |
|
|
ConnectAndSell |
|
|
Transaction Accounting Adjustments |
|
|
Notes |
|
Other Transaction Accounting Adjustments |
|
|
Notes |
|
Reclassification Adjustments |
|
|
Notes |
|
Pro Forma Combined |
|
||||||
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue |
|
$ |
12,161 |
|
|
$ |
14,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
26,877 |
|
|||
Cost of revenue |
|
|
2,189 |
|
|
|
1,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,188 |
|
|||
Gross profit |
|
|
9,972 |
|
|
|
12,717 |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
22,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative expenses |
|
|
27,287 |
|
|
|
2,798 |
|
|
|
34 |
|
|
(H) |
|
|
|
|
|
|
|
8,697 |
|
|
(AA) (BB) |
|
|
38,816 |
|
|
Engineering, research and development |
|
|
|
|
|
3,123 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,123 |
) |
|
(AA) |
|
|
— |
|
|||
Sales and marketing |
|
|
|
|
|
6,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,339 |
) |
|
(AA) |
|
|
— |
|
|||
Depreciation and amortization expense |
|
|
1,150 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
765 |
|
|
(BB) |
|
|
1,915 |
|
||
Total operating expenses |
|
|
28,437 |
|
|
|
12,260 |
|
|
|
34 |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
40,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Operating loss |
|
|
(18,465 |
) |
|
|
457 |
|
|
|
(34 |
) |
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
(18,042 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest income |
|
|
(3 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|||
Interest expense |
|
|
1,228 |
|
|
|
2,472 |
|
|
|
91 |
|
|
(D) |
|
|
1,504 |
|
|
(B) |
|
|
|
|
|
|
|
5,295 |
|
|
Interest expense – related party |
|
|
1,157 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,157 |
|
|||
Gain on extinguishment of liabilities |
|
|
(4,489 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,489 |
) |
|||
Gain on release of Vidello revenue holdback |
|
|
(973 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(973 |
) |
|||
Loss on debt issuance |
|
|
444 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
444 |
|
|||
Loss on Private Placement Issuance |
|
|
4,874 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,874 |
|
|||
Loss on issuance of term notes |
|
|
111 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111 |
|
|||
Loss on issuance of convertible bridge notes |
|
|
153 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153 |
|
|||
Loss on extinguishment of debt, net |
|
|
2,403 |
|
|
|
1,085 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,488 |
|
|||
Change in fair value of financial instruments |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Change in fair value of warrant liability |
|
|
(1,244 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,244 |
) |
|||
Change in fair value of warrant liability – related party |
|
|
(2 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|||
Change in fair value of bifurcated embedded derivative assets – related party |
|
|
54 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54 |
|
|||
Change in fair value of convertible notes |
|
|
(1,987 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,987 |
) |
|||
Change in fair value of term notes |
|
|
173 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173 |
|
|||
Change in fair value of convertible bridge notes |
|
|
(46 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46 |
) |
|||
Loss on Yorkville SEPA advances |
|
|
974 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
974 |
|
|||
Vidello earnout expense |
|
|
486 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
486 |
|
|||
Failed acquisition costs |
|
|
1,382 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,382 |
|
|||
Other (income) expense, net |
|
|
(727 |
) |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(722 |
) |
|||
Total other expenses, net |
|
|
3,968 |
|
|
|
3,562 |
|
|
|
91 |
|
|
|
|
|
1,504 |
|
|
|
|
|
— |
|
|
|
|
|
9,125 |
|
Loss before income taxes |
|
|
(22,433 |
) |
|
|
(3,105 |
) |
|
|
(125 |
) |
|
|
|
|
(1,504 |
) |
|
|
|
|
— |
|
|
|
|
|
(27,167 |
) |
Income tax expense (benefit) |
|
|
61 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67 |
|
|||
Net loss |
|
$ |
(22,494 |
) |
|
$ |
(3,111 |
) |
|
$ |
(125 |
) |
|
|
|
$ |
(1,504 |
) |
|
|
|
$ |
— |
|
|
|
|
$ |
(27,234 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss attributable to common shareholders |
|
$ |
(22,494 |
) |
|
$ |
(3,111 |
) |
|
$ |
(125 |
) |
|
|
|
$ |
(1,504 |
) |
|
|
|
$ |
— |
|
|
|
|
$ |
(27,234 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss per share attributable to common shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic and diluted |
|
$ |
(5.95 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
$ |
— |
|
|
|
|
$ |
— |
|
|
|
|
$ |
(4.73 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Weighted average common shares outstanding (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic and diluted |
|
|
3,783 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
5,763 |
|
See Notes to Unaudited Pro Forma Condensed Combined Financial Information
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
(dollar amounts in thousands, except per share data)
Note 1 — Basis of Presentation
The unaudited pro forma condensed combined financial information has been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Article 11 of Regulation S-X. The accompanying pro forma condensed combined financial information is based on the historical consolidated financial statements of Banzai and the historical financial statements of C&S after giving effect to the Acquisition as well as certain reclassifications (see Note 2).
The pro forma financial information was prepared using the acquisition method of accounting in accordance with ASC 805, with Banzai as the acquirer of C&S. Under the acquisition method of accounting, Banzai must record assets acquired and liabilities assumed from C&S at the Closing Date. Because the Closing Date occurred just prior to the filing of these pro forma financial statements, the allocation of the estimated purchase price to assets acquired and liabilities assumed is preliminary and based on the historical book values recorded on C&S’ balance sheet and information as of the date of this Current Report on Form 8-K. No fair value adjustments have been made to the acquired assets because the valuation of such assets and the purchase price allocation is pending completion. As such, other adjustments, including expense associated with the allocation of the purchase price to the acquired assets (i.e., amortization expense), have not been made.
The unaudited pro forma condensed combined balance sheet combines the historical balance sheets of Banzai and C&S as of March 31, 2026 on a pro forma basis as if the Acquisition had occurred as of that date. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2025, and the three months ended March 31, 2026 combines the historical statements of operations of Banzai and C&S for such periods on a pro forma basis as if the Acquisition and Transaction Financing (see Note B) had occurred on January 1, 2025, the beginning of the earliest period presented.
The unaudited pro forma condensed combined balance sheet as of March 31, 2026 has been prepared using, and should be read in conjunction with, the following:
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2025, and the three months ended March 31, 2026, has been prepared using, and should be read in conjunction with, the following:
The foregoing historical financial statements have been prepared in accordance with GAAP. The unaudited pro forma condensed combined financial information has been prepared based on the aforementioned historical financial statements and the assumptions and adjustments as described in the notes to the unaudited pro forma condensed combined financial information. Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The unaudited pro forma condensed combined financial information does not give effect to any synergies, operating efficiencies, tax savings or cost savings that may be associated with the Acquisition.
The pro forma adjustments reflecting the completion of the Acquisition are based on currently available information and assumptions and methodologies that management believes are reasonable under the circumstances. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the difference may be material.
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations would have been had the Acquisition taken place on the date indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company.
Note 2 — Accounting Policies and Reclassifications
As part of preparing the unaudited pro forma condensed combined financial information, Banzai conducted a review of the accounting policies and practices of C&S to determine if differences in accounting policies and practices require reclassification of results of operations to conform to Banzai’s accounting policies and practices.
The following reclassifications were made to C&S’s historical financial statements to conform to Banzai’s financial statement presentation:
Note AA — Engineering, research and development expense, and sales and marketing expense, previously presented by C&S as separate line items within operating expenses, have been reclassified to general and administrative expense, consistent with Banzai’s presentation.
Note BB — Depreciation and amortization expense has been reclassified as a separate line item within operating expenses, consistent with Banzai’s presentation.
These reclassifications have no effect on pro forma net loss or total pro forma stockholders’ equity (deficit).
Note 3 — Transaction Accounting Adjustments
The following describes each transaction accounting adjustment to the unaudited pro forma condensed combined balance sheet and statements of operations.
Note A — Purchase Consideration
The aggregate purchase consideration for the Acquisition is estimated at $13,260, comprised of the following:
Component |
|
Amount |
|
|
Cash consideration (see Note B) |
|
$ |
5,500 |
|
Shares of Banzai Class A Common Stock and/or Pre-Funded Warrants |
|
|
5,900 |
|
Of which: Holdback Shares withheld at Closing (see Note E) |
|
|
(1,340 |
) |
Employee Indebtedness Promissory Note (see Note D) |
|
|
1,800 |
|
Contingent consideration (earn-out) (see Note C) |
|
|
60 |
|
Total estimated consideration |
|
$ |
13,260 |
|
Pursuant to the APA, $5,500 of the aggregate consideration is payable in cash, consisting of: (i) $750 payable at Closing; (ii) $1,500 as the First Deferred Cash Payment; and (iii) $3,250 as the Second Deferred Cash Payment. The First Deferred Cash Payment is due and payable as soon as the Company has available cash and in any event within thirty (30) days of the Closing Date. The Second Deferred Cash Payment is due and payable within three (3) business days following the earlier of (i) the date the SEC declares effective the registration statement covering the securities issued in the Private Placement and (ii) December 31, 2026. If the Second Deferred Cash Payment becomes due and payable after September 30, 2026, the amount payable will be increased by simple interest at 8% per annum from September 30, 2026 until paid. No pro forma adjustment has been recorded for such contingent interest, as the obligation to pay interest would not arise until after the pro forma balance sheet date.
The total number of shares of Common Stock and Pre-Funded Warrants issued in connection with the Acquisition was 1,980,092, which was determined by dividing the $5,900 stock consideration by the Closing VWAP of $2.97966, defined in the APA as the 5-day volume-weighted average price of Banzai’s Class A Common Stock ending on the trading day immediately preceding the Agreement Date.
The 1,980,092 total shares and Pre-Funded Warrants was comprised of 294,917 shares of Common Stock and 1,685,175 Pre-Funded Warrants. The number of shares of Common Stock issued was determined to be the number of shares that would cause the holder to own not more than 9.99% of the shares of Banzai Common Stock outstanding immediately following Closing. Pre-Funded Warrants were issued in lieu of shares of Common Stock for the remainder of the $5,900 stock consideration (i.e., to the extent that issuance of shares would have caused the holder to exceed owning 9.99% of the shares of Banzai Common Stock outstanding immediately following Closing).
In addition, the APA provides that the aggregate number of shares issued to C&S may not exceed 19.99% of the total number of shares of Banzai Class A Common Stock and Class B Common Stock outstanding immediately prior to Closing (the "Nasdaq Issuance Cap"). Shares underlying Pre-Funded Warrants are exercisable upon stockholder approval of the issuance; such approval is required to be obtained within 120 days of Closing. If stockholder approval is not obtained within 120 days of closing, the Company is required, within 30 days thereafter, to pay in cash an amount equal to the Closing Non-Cash Consideration (i.e., the equity and warrant component of the Closing Consideration, excluding the Employee Indebtedness Note). Upon receipt of such cash payment, the Pre-Funded Warrants corresponding to the Shares for which such payment was made (being the warrants covering Shares that would have exceeded the Nasdaq Issuance Cap of 19.99%) shall be surrendered by Seller for cancellation. For the avoidance of doubt, Seller retains all Shares issued at closing and any Pre-Funded Warrants exercisable for Shares that do not exceed the 19.99% threshold.
The APA also provides that if the VWAP of the Shares over the five trading days immediately preceding the earlier of (i) the 120th day following the Closing Date and (ii) the Effective Date (i.e., the effective date of the Form S-3 registration statement covering the resale of shares issuable pursuant to the APA) (such earlier date, the “Measurement Date”) is less than the Closing VWAP, Banzai will issue to Seller an additional number of shares equal to the difference between (x) the number of Shares that would have been issued at closing using the Measurement Date VWAP and (y) the 1,980,092 Shares of Common Stock and Pre-Funded Warrants issued at closing subject to a floor of 85% of the Closing VWAP (i.e. $2.532711). If the Measurement Date VWAP equals the floor price, the maximum number of additional shares issuable under this provision would be approximately 349 thousand shares, representing approximately $1,041 of additional stock consideration at the Closing VWAP, illustrated as follows:
Sensitivity analysis for hypothetical additional shares issuable at the Measurement Date |
|
|||||||||||||||||||
Measurement Date VWAP |
|
|
% of Closing VWAP |
|
Total Shares at Measurement VWAP |
|
|
Less: Shares Issued at Closing |
|
|
Additional Shares |
|
|
Additional Value at Closing VWAP |
|
|||||
$ |
2.97966 |
|
|
100% |
|
|
1,980,092 |
|
|
|
(1,980,092 |
) |
|
|
— |
|
|
$ |
— |
|
$ |
2.83068 |
|
|
95% |
|
|
2,084,305 |
|
|
|
(1,980,092 |
) |
|
|
104,213 |
|
|
$ |
311 |
|
$ |
2.68170 |
|
|
90% |
|
|
2,200,099 |
|
|
|
(1,980,092 |
) |
|
|
220,007 |
|
|
$ |
656 |
|
$ |
2.53271 |
|
|
85% (floor) |
|
|
2,329,517 |
|
|
|
(1,980,092 |
) |
|
|
349,425 |
|
|
$ |
1,041 |
|
The Holdback Shares, representing $1,340 of the stock consideration, are withheld by Banzai for 12 months as security for indemnification obligations under the APA. The number of Holdback Shares is fixed at closing based on the Closing VWAP. The Holdback Shares are presented as a non-current liability of $1,340 on the unaudited pro forma condensed combined balance sheet; see Note E below.
Note B — Transaction Financing
On July 1, 2026, the Company entered into a subordinated business loan and security agreement with Agile Lending, LLC ("Agile") and Agile Capital Funding, LLC as the collateral agent ("Agile Funding") and issued a subordinated secured promissory note (the "Agile Note") for an aggregate principal amount of $2,100 and received net proceeds of $2,000, after administrative agent fees of $100 paid to Agile Funding, with a maturity date of February 4, 2027. The Agile Note bears interest at a rate of 44%. The Agile Note is classified as a current liability on the unaudited pro forma condensed combined balance sheet. Consistent with the Company's existing Agile Notes, the Agile Note is expected to be measured at fair value under the fair value option.
The proceeds of the Agile Note are being used to fund the $750 cash consideration payable at Closing, to provide post-Acquisition working capital, and potentially to partially fund the First and/or Second Deferred Cash Payments.
In order to provide additional financing in connection with the Acquisition (“Transaction Financing”), the Company is expected to issue a convertible promissory note (the “Financing Note”) with a principal amount of $4,000. The Financing Note had not yet closed as of the filing date of this unaudited pro forma condensed combined financial information included in this Current Report on Form 8-K. For purposes of the pro forma interest expense adjustment, the Company estimates the Financing Note to have a 1 year term and an interest rate of 12% per annum. The proceeds of the Private Placement are expected to be used to partially fund the First and/or Second Deferred Cash Payments.
The pro forma adjustments to the unaudited pro forma condensed combined balance sheet reflect:
The pro forma adjustments to the unaudited pro forma condensed combined statements of operations reflect, for the year ended December 31, 2025 only: (i) contractual financing charges of $924 and amortization of administrative agent fees of $100 related to the Agile Note, totaling $1,024; and (ii) interest expense of $480 related to the Financing Note, calculated at 12% per annum on the $4,000 principal for the one year term, for a combined pro forma adjustment of $1,504, as an estimation of the cost of the financing as if the Agile Note and the Financing Note had been outstanding from January 1, 2025, the beginning of the earliest period presented. No adjustment has been recorded for the three months ended March 31, 2026, since the full term of the Agile Note and the Financing Note would have elapsed prior to January 1, 2026 under this assumption.
Note C — Contingent Consideration (Earn-Out)
The APA provides for contingent earn-out payments (the “Earn-Out Consideration”) payable during the twelve-month period following the Closing Date (the “Earn-Out Period”), contingent upon C&S achieving specified monthly recurring revenue (“MRR”) targets. The Base Earn-Out of $2,000 is payable if Year 1 MRR is at least 95% of Closing MRR, and is payable in cash or, at the Company's option, in shares of Common Stock and/or Pre-Funded Warrants. An additional Performance Earn-Out is payable if Year 1 MRR exceeds Closing MRR, equal to (i) 3x the amount of such excess if the excess is $333,333 or less, or (ii) 6x the amount of such excess if the excess is greater than $333,333; the Performance Earn-Out Consideration is payable solely in shares of Common Stock and/or Pre-Funded Warrants.
Under ASC 805, contingent consideration is measured at fair value at the Closing Date and included in the total consideration transferred. Based on management’s probability assessment of the achievement of the MRR targets, the fair value of the Earn-Out Consideration has been estimated at $60. This estimate is subject to significant judgment and uncertainty; the actual fair value may differ materially. Changes in the fair value of the earn-out liability after the Closing Date will be recognized in earnings in subsequent periods and are not reflected in the unaudited pro forma condensed combined statement of operations.
Note D — Employee Indebtedness Note
Pursuant to the APA, the Company issued to C&S an Employee Indebtedness Note in the principal amount of $1,800, bearing interest at 8% per annum, payable in four equal quarterly installments. The Employee Indebtedness Note is classified as a current liability on the unaudited pro forma condensed combined balance sheet.
The pro forma adjustments reflect: (i) $1,800 as a new liability representing the Employee Indebtedness Note; and (ii) additional interest expense of $91 for the year ended December 31, 2025, calculated at 8% per annum as if the Employee Indebtedness Note had been outstanding from January 1, 2025, the beginning of the earliest period presented.
Note E — Holdback Shares
Pursuant to Section 3.4 of the APA, shares representing $1,340 of the $5,900 stock consideration (the “Holdback Shares”) are withheld by Banzai at the Closing for a period of twelve (12) months as security for C&S’s indemnification obligations under the APA. The Holdback Shares constitute the sole recourse for general indemnification claims under Section 9.2(a) of the APA (subject to a deductible equal to 1% of the Purchase Price and a per-item threshold of $35,000). At the end of the holdback period, unencumbered Holdback Shares are delivered to C&S. Holdback Shares applied to indemnification claims are valued at the greater of the Closing VWAP and the 5-day VWAP immediately preceding the date on which the applicable claim is finally resolved.
Because the Holdback Shares are not delivered to C&S at Closing, the Company has recognized the holdback obligation as a non-current liability of $1,340 on the unaudited pro forma condensed combined balance sheet, with the remaining $4,560 of stock consideration recorded as additional paid-in capital. The total consideration transferred is unchanged at $13,260. The Holdback Shares are treated as legally issued and outstanding for purposes of the pro forma loss per share calculation (Note I).
Note F — Preliminary Purchase Price Allocation
The Acquisition is expected to be accounted for as a business combination under ASC 805. The following table presents the preliminary allocation of the purchase price to the identifiable assets acquired and liabilities assumed:
Assets acquired |
|
|
|
|
Prepaid expenses and other current assets |
|
$ |
174 |
|
Property and equipment, net |
|
|
15 |
|
Intangible assets |
|
|
912 |
|
Other assets |
|
|
24 |
|
Total assets acquired |
|
|
1,125 |
|
Liabilities assumed: |
|
|
|
|
Deferred revenue |
|
|
(6,843 |
) |
Net assets (liabilities) acquired |
|
|
(5,718 |
) |
Total estimated consideration |
|
|
13,260 |
|
Goodwill |
|
$ |
18,978 |
|
The allocation of the estimated purchase price to assets acquired and liabilities assumed is preliminary and based on the historical book values recorded on C&S’ balance sheet and information as of the date of this Current Report on Form 8-K. No fair value adjustments have been made to the acquired assets because the valuation of such assets and the purchase price allocation is pending completion. As such, other adjustments, including expense associated with the allocation of the purchase price to the acquired assets (i.e., amortization expense), have not been made. The preliminary purchase price allocation is subject to change as additional information becomes available and as additional analyses are performed. The final purchase price allocation is expected to be completed no later than one year from the Closing Date and will be reflected in subsequent periodic reports filed with the SEC. The final purchase price allocation may differ materially from the amounts reflected herein.
The excess of total consideration over the net identifiable liabilities assumed has been allocated to goodwill. The goodwill is attributable to the assembled workforce, expected synergies, and the going-concern value of C&S’s business. All goodwill is expected to be deductible for income tax purposes over 15 years as an asset acquisition under Section 197 of the Internal Revenue Code.
Note G — Deferred Revenue
C&S’s deferred revenue as of the Closing Date ($6,843 in the aggregate) is recognized at its carrying value on the unaudited pro forma condensed combined balance sheet under ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to recognize and measure contract liabilities acquired in a business combination in accordance with ASC 606, rather than at fair value. Accordingly, no fair value adjustment to C&S’s deferred revenue has been reflected in this unaudited pro forma condensed combined financial information. No income statement adjustment is required for the periods presented, as the deferred revenue will be recognized as C&S performs its remaining obligations under the applicable customer contracts.
Note H — Transaction Costs
Transaction costs of $34 representing attorney's fees directly attributable to the Acquisition incurred after March 31, 2026 have been reflected as a pro forma adjustment, increasing general and administrative expense, with a corresponding decrease to retained earnings in the unaudited pro forma condensed combined balance sheet. Per Regulation S-X Article 11, nonrecurring transaction costs are included in the annual period unaudited pro forma condensed combined statement of operations for the year ended December 31, 2025 only and excluded from the interim period for the three months ended March 31, 2026. These costs are not expected to have a continuing impact on the combined company.
Transaction costs of approximately $1 and $10 were incurred by Banzai in the year ended December 31, 2025 and three months ended March 31, 2026, respectively, and approximately $84 and $151 was incurred by C&S in the year ended December 31, 2025 and three months ended March 31, 2026, respectively. These amounts are included in the respective historical financial statements and are not reflected as pro forma adjustments. Additional transaction costs of $356 were incurred by C&S after March 31, 2026, which are not reflected as pro forma adjustments.
Note I — Income Taxes
No income tax adjustment has been reflected in the unaudited pro forma condensed combined balance sheet or statement of
operations for any period presented. In an asset acquisition accounted for as a business combination under ASC 805, deferred tax liabilities may arise from the difference between the fair values of acquired assets and their respective tax bases. However, the deferred tax consequences of this Acquisition are not determinable pending completion of the preliminary purchase price allocation and the related fair value assessments. Additionally, the Company maintains a full valuation allowance against its net deferred tax assets, and any incremental deferred tax liability arising from this Acquisition is expected to be offset by a corresponding reduction in the valuation allowance with no net income tax effect. Accordingly, no income tax adjustment has been reflected in this unaudited pro forma condensed combined financial information.
Note J — Pro Forma Loss Per Share
The following table presents the computation of pro forma basic and diluted loss per share for each period presented:
|
|
Three months ended March 31, 2026 |
|
|
Year ended December 31, 2025 |
|
||
Numerator: |
|
|
|
|
|
|
||
Pro forma net loss |
|
$ |
(8,935 |
) |
|
$ |
(27,234 |
) |
|
|
|
|
|
|
|
||
Denominator: (in thousands) |
|
|
|
|
|
|
||
Historical weighted average shares outstanding - basic |
|
|
720 |
|
|
|
3,783 |
|
Pro forma shares issued in Acquisition (Note A) |
|
|
1,980 |
|
|
|
1,980 |
|
Pro forma weighted average shares outstanding - basic and diluted |
|
|
2,700 |
|
|
|
5,763 |
|
|
|
|
|
|
|
|
||
Pro forma basic and diluted loss per share |
|
$ |
(3.31 |
) |
|
$ |
(4.73 |
) |
Shares issued reflect an assumed Closing VWAP of $2.97966 per share ($5,900 ÷ $2.97966 = 1,980,092 shares).
Per Article 11 of Regulation S-X, shares issued in an acquisition are assumed to have been outstanding from January 1, 2025, the beginning of the earliest period presented. Accordingly, 1,980,092 pro forma shares are included in the weighted-average share count for both periods at full weight.
The Company is in a pro forma net loss position for all periods presented. Accordingly, all potentially dilutive securities (including warrants, options, convertible instruments, and unvested equity awards) are antidilutive and excluded from the diluted share count. Diluted loss per share equals basic loss per share for both periods.
EXHIBIT 99.4
Banzai Completes Acquisition of ConnectAndSell, Doubling Annual Revenue at 86% Gross Margin
Acquisition Adds Leading AI Sales Acceleration Platform Serving Approximately 250 B2B Organizations Across Financial Services, Healthcare, and Technology Industries
SEATTLE, WA – July 6, 2026 -- Banzai International, Inc. (Nasdaq: BNZI) (“Banzai” or the “Company”), a leading AI marketing technology company that provides essential marketing and sales solutions, today announced that it has completed its previously announced acquisition of substantially all assets of ConnectAndSell, Inc. (“ConnectAndSell”), an AI sales acceleration platform, effective July 2, 2026.
ConnectAndSell serves approximately 250 B2B organizations such as Intuit, RingCentral, Truckstop, and SAP across financial services, healthcare, technology, and other industries. ConnectAndSell’s FY 2025 revenue was $14.7 million, with a gross margin of 86%, and an average revenue per customer of approximately $59,000.
ConnectAndSell’s AI sales acceleration platform facilitates 4.8 million live customer conversations annually, improving seller productivity and allowing sales teams to spend more time in live conversations with qualified decision-makers. ConnectAndSell estimates customers leveraging their platform generate $17.8 billion in annual sales pipeline value. The acquisition brings a powerful sales acceleration platform into Banzai's portfolio, extending the Company's reach across more of the customer revenue journey.
Banzai believes the addition of ConnectAndSell strengthens its position as a provider of integrated marketing and sales technology solutions while creating meaningful cross-sell opportunities across the combined company’s customer base. The transaction also furthers Banzai’s strategy of building a powerful platform of revenue-generating software solutions.
The majority of ConnectAndSell’s thirty-eight team members will join Banzai as part of the transaction, bringing their substantial AI experience to Banzai. Banzai expects to recognize additional financial synergies through cost consolidation by the end of FY 2026.
"ConnectAndSell solves the hardest problem in B2B sales: getting decision-makers into live conversations,” said Joe Davy, Founder and CEO of Banzai. “It's a category-defining product with enterprise customers, exceptional margins, and a team that's been doing applied AI since before it was fashionable. The ConnectAndSell platform is a great example of beneficial AI making people more effective. We're thrilled to bring them into Banzai."
Financial and Strategic Benefits
Jonti McLaren, President of ConnectAndSell, added, "ConnectAndSell has built something truly differentiated, and Banzai is the right home to take it further. As part of Banzai's AI-powered product family, we can deliver even more value to the sales teams who rely on us every day to deliver millions of conversations and billions of dollars of sales pipeline for their businesses."
Transaction Details
Under the terms of the Asset Purchase Agreement, the total purchase consideration is $13.2 million, representing a purchase price of less than 1.0x ConnectAndSell's FY 2025 revenue. The purchase consideration is comprised of $5.5 million in cash, $1.8 million in a one-year seller’s note, and $5.9 million in Class A Common Stock and Pre-Funded Warrants priced at approximately $2.98 per share.
Additional details about the transaction will be included in a future Form 8-K to be filed with the Securities and Exchange Commission no later than July 9, 2026.
About ConnectAndSell, Inc.
ConnectAndSell is an AI sales acceleration platform that helps B2B sales teams reach targeted decision-makers and execute at scale by delivering millions of targeted sales conversations annually across enterprise and mid-market organizations. The platform combines patented technology with AI-driven conversation intelligence and sales coaching, analyzing every conversation to improve targeting, generate market insights, and enhance rep performance. By driving measurable pipeline growth while reducing the need for additional sales headcount, ConnectAndSell enables efficient, scalable go-to-market execution for B2B companies of all sizes. For more information, visit connectandsell.com.
About Banzai
Banzai is a marketing technology company that provides AI-enabled marketing and sales solutions for businesses of all sizes. On a mission to help their customers grow, Banzai enables companies of all sizes to target, engage, and measure both new and existing customers more effectively. Banzai has over 150,000 customers including Amazon, Dell, Salesforce, Aflac, Thermo Fisher Scientific, RBC Wealth Management, and Fitch Group. Learn more at www.banzai.io. For investors, please visit ir.banzai.io.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often use words such as "believe," "may," "will," "estimate," "target," "continue," "anticipate," "intend," "expect," "should," "would," "propose," "plan," "project," "forecast," "predict," "potential," "seek," "future," "outlook,"
and similar variations and expressions. Forward-looking statements are those that do not relate strictly to historical or current facts. Examples of forward-looking statements may include, among others, statements regarding Banzai International, Inc.'s (the "Company's"): future financial, business and operating performance and goals; annualized recurring revenue and customer retention; ongoing, future or ability to maintain or improve its financial position, cash flows, and liquidity and its expected financial needs; potential financing and ability to obtain financing; acquisition strategy and proposed acquisitions and, if completed, their potential success and financial contributions; strategy and strategic goals, including being able to capitalize on opportunities; expectations relating to the Company's industry, outlook and market trends; total addressable market and serviceable addressable market and related projections; plans, strategies and expectations for retaining existing or acquiring new customers, increasing revenue and executing growth initiatives; and product areas of focus and additional products that may be sold in the future. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Forward-looking statements are not guarantees of future performance, and our actual results of operations, financial condition and liquidity and development of the industry in which the Company operates may differ materially from those made in or suggested by the forward-looking statements. Therefore, investors should not rely on any of these forward-looking statements. Factors that may cause actual results to differ materially include changes in the markets in which the Company operates, customer demand, the financial markets, economic, business and regulatory and other factors, such as the Company's ability to execute on its strategy. More detailed information about risk factors can be found in the Company's Annual Report on Form 10-K and the Company's Quarterly Reports on Form 10-Q under the heading "Risk Factors," and in other reports filed by the Company, including reports on Form 8-K. The Company does not undertake any duty to update forward-looking statements after the date of this press release.
Investor Relations
Dean Ditto
Chief Financial Officer, Banzai
206 414-1777
ir.banzai.io
Media
Paul Witkowski
Senior Director Financial Reporting, Banzai
media@banzai.io