Newsmax Inc.

NOTE 1. NATURE OF BUSINESS

Nature of Business

Newsmax Inc. began as Newsmax Media, Inc., a Nevada Corporation, which was incorporated on July 15, 1998, and registered on August 20, 1998, as a foreign corporation in the State of Florida. During 2014, Newsmax Media, Inc. changed its state of domicile from Nevada to Delaware. In connection with the change, the NMX Holdings, LLC entity was dissolved.

On April 14, 2024, Newsmax Media, Inc. consummated a corporate reorganization. Newsmax Inc. (the "Company") was formed as a new holding company that owns all of the outstanding shares of the operating company, Newsmax Media, Inc. The stockholders of Newsmax Media, Inc. exchanged their shares of capital stock in Newsmax Media, Inc. for the same class and number of shares in Newsmax Inc. Subsequently, Newsmax Media, Inc. changed its state of domicile from Delaware to Florida. As a result of this reorganization, Newsmax Inc. became the direct holding company and the sole shareholder of Newsmax Media, Inc. Newsmax Media, Inc.’s ownership of its subsidiaries was not affected or changed as a result of this reorganization.

The Company is a multi-platform media company that provides original news and lifestyle content using a mixed-revenue model that derives income from its linear cable television and over-the-top (“OTT”) news channels, websites, proprietary database, publishing products and e-commerce products. The Company uses original news and editorial content to draw large numbers of readers to its media outlets in order to sell advertising, print and online information products. The Company’s business operations are conducted through two operating segments, Broadcast and Digital.

In June 2024, the Company issued a Private Placement Memorandum ("PPM") to potential investors, aiming to raise capital through the sale of its Series B Preferred Stock in a Private Placement. The initial offering was for up to 30,000 shares of Series B Preferred Stock at $5,000 per share for a base offering amount of $150,000,000, with the option to expand up to 45,000 shares of Series B Preferred Stock for an offering amount of $225,000,000. The PPM was distributed to accredited investors as defined under Regulation D of the Securities Act of 1933. In connection with the PPM, the Company agreed to issue a three-year warrant to Digital Offering, LLC, as placement agent for the Private Placement, exercisable for 900 shares of Series B Preferred Stock with an exercise price per share of $5,000 upon the closing of the PPM. As of December 31, 2024, the Company had raised approximately $138,000,000. The offering was closed on February 27, 2025 and raised a total of $225,000,000.

Stock Split

On March 28, 2025, a previously announced forward stock split of the Company's issued and outstanding shares of common stock at a ratio of 6,765.396-for-1 took effect. In accordance with ASC 260-10-55-12, the Company has adjusted the number of issued and outstanding common shares, par value, and the computations of basic and diluted earnings per share retroactively for all periods presented in the financial statements and related notes.

Broadcast

The broadcast segment of the Company’s business produces and licenses news, business news and lifestyle content for distribution primarily through multichannel video programming distributors (“MVPDs”) including cable television systems, direct broadcast satellite operators and telecommunication companies, primarily in the United States.

The Company creates and broadcasts content and distributes such content using a hybrid distribution strategy of linear cable, free OTT channels and free ad-supported streaming television services (“FAST”) channels. The broadcast segment generates revenues from (1) linear TV channels, primarily through advertising sales, (2) OTT and FAST channels, primarily through revenue derived from third-party advertising in connection with services accessed through websites, apps and digital media players, (3) affiliate revenue earned through MDVPs broadcasting the Company’s content to their paid subscribers, and (4) subscription revenue earned via the Company’s new Newsmax+ subscription program which users can sign up to receive the Company’s content directly.

Digital

The digital segment generates revenues through (1) online advertising, including online display, email advertising, other online placements and print advertisements, (2) subscriptions, including our collection of specialized health and financial newsletters, Newsmax Magazine and four online membership programs, and (3) e-commerce, primarily through our subsidiaries that sell nutraceuticals and nonfiction books on political, financial and health-related topics.

The Company also distributes content through its websites and social media accounts, apps, email and newsletters. The Company’s websites and apps provide live and/or on-demand streaming of network-related programming to allow video subscribers of the Company’s participating distribution partners to view Company content via the Internet.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Newsmax Inc. and its wholly owned subsidiaries Newsmax Media Inc, Medix Health, LLC (“Medix”), Crown Atlantic Insurance, LLC (“Crown”), Newsmax Broadcasting, LLC (“Broadcasting”), Humanix Publishing, LLC (“Humanix”), ROI Media Strategies (“ROI”) and Newsmax Radio LLC (“Radio”). All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions made by management are used for, but not limited to, the allowance for credit losses, carrying value of other assets, and realizability of deferred income taxes.

Reclassifications

Certain prior period comparative amounts have been reclassified to conform to the current period presentation. The Company reclassified certain litigation expenses, and related fees, for specific proceedings that the Company has determined are infrequent and unusual in terms of their magnitude, from Professional Fees to Other Corporate Matters within general and administrative expenses in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the year ended December 31, 2023, to conform to current year presentation. Such reclassifications did not affect total general and administrative expenses, loss from operations or net loss.

Cash and Cash Equivalents

The Company considers all investments, which includes money market funds, short-term treasuries and certificate of deposits, purchased with original maturities of three (3) months or less to be cash and cash equivalents. From time to time, the cash balance in the Company's bank accounts may exceed amounts covered by the insurance provided by the U.S. Federal Deposit Insurance Corporation ("FDIC"). The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents."

Investments

Marketable Securities

The Company accounts for its marketable securities in accordance with ASC Topic 321, Investments - Equity Securities. ASC Topic 321 requires companies to measure equity investments at fair value, with changes in fair value recognized in net income (loss). The Company’s investments in marketable securities consist of equity securities with readily determinable fair values. The cost of securities sold is based on the specific identification method, and interest and dividends on securities are included in non-operating income (expense).

The fair market value of marketable equity securities is determined based on quoted market prices in active markets. See Note 3 - Fair Value Measurements, for additional information regarding the valuation of marketable equity securities.

As of December 31, 2024 and 2023, zero and $313,285, respectively, of the Company’s marketable securities are held in a brokerage firm owned by a shareholder of the Company.

Available-for-Sale Debt Instruments

The Company classifies investments in fixed income securities as available-for-sale debt investments. The Company’s available-for-sale debt investments primarily consist of certificates of deposits and treasury securities. These available-for-sale debt investments are held in the custody of a major financial institution. A specific identification method is used to determine the cost basis of available-for-sale debt investments sold. These investments are recorded in the consolidated balance sheets at fair value. Unrealized gains and losses on these investments are included within other comprehensive income (loss), net of tax. The Company classifies investments as current based on the nature of the investments and their availability for use in current operations.

The Company regularly reviews investment securities for impairment. For debt securities, any impairment relating to credit losses is recorded through an allowance for credit losses. A change in the allowance for credit losses is recorded into earnings in the period of the change.

Revenue Recognition

In accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers,” the Company recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration the Company expects to be entitled in exchange for those goods are services. The Company records taxes collected from customers and remitted to governmental authorities on a net basis.

Service Revenue

Service revenue is primarily derived from the Company’s original news and lifestyle content, using a mixed-revenue multi-platform model that derives income from digital, linear and over-the-top (“OTT”) news channels, websites, proprietary database, publishing and video subscription services. The Company uses original news, syndicated services and editorial content to draw consumers to its media outlets in order to sell advertising, license fees and video, print and online information services. The Company earns revenue through contractual allocations of fees based on impressions received or subscriber counts.

The Company’s service revenue is comprised of the following for the years ended December 31,

Advertising Revenue

Advertising revenue is derived from the sale of advertising on the Company’s cable television, email database, in the Company’s magazine and related publications, or on the Company’s website. Revenue related to the sale of advertising in the broadcast segment is recognized at the time of broadcast. Revenue related to the Company's digital segment is recognized when display or other digital advertisements record impressions on the various digital media. Revenue related the Company's magazine and related publications is recognized when the ad is displayed in the printed document. Each advertisement insertion order is determined to be a distinct performance obligation that is satisfied at the point in time when such advertisements are published/aired. The Company records revenue from contracts that are entered into between the Company and its customers, primarily advertising agencies and direct advertisers, at the amount charged for the services. Advertising contracts, which are generally short-term, are billed monthly for the services provided during the month, with payments due shortly thereafter. Cash payments received prior to services rendered result in deferred revenue, which is then recognized as revenue when the advertising time or space is actually provided.

The Company enters into agreements with over-the-top distribution platforms to distribute the Company’s news channel. Pursuant to the Company’s distribution agreements, advertising revenues are earned based on an allocation of the fee determined by the number of impressions received. These contracts represent a single performance obligation recognized over time under the series guidance. Revenue is recognized upon delivery of the content over the course of an over-the-top distribution agreement term based on time elapsed, as this best depicts the simultaneous consumption and delivery of the services. The Company bills OTT customers monthly over the life of the contract. The Company has an unconditional right to receive payment of the amount billed generally within 30 days from the invoice date. The invoiced amount to be received is recorded in accounts receivable on the balance sheets.

Subscription Revenue

The Company sells magazines to consumers through subscriptions. Each subscription is determined to be a distinct performance obligation that is satisfied over the term of the subscription, normally one (1) to five (5) years. Subscriptions received in advance of the publication are recorded as deferred revenue and recognized as income on a straight line basis over the term, as this best represents the transfer of control of the services to the consumer.

During 2023, the Company launched Newsmax+ which is a subscription service that provides the Company’s content directly to consumers either on a monthly or annual basis. Monthly subscriptions are recognized as income in the month it was earned. Annual subscriptions are recorded as deferred revenue and recognized as income over the term of the contract each month.

The Company’s deferred subscription revenue balances are shown below along with the corresponding revenue recognized from the prior period:

Affiliate Fee Revenue

The Company generates affiliate fee revenue from agreements with MVPDs for cable networks. Affiliate fee revenue is recognized over time as we continuously make the programming available to the customer over the term of the agreement using the output method. For contracts with affiliate fees based on the number of the affiliate’s subscribers, revenues are recognized based on the contractual rate multiplied by the estimated number of subscribers each period. Consideration payable to a customer is treated as a cost of sale when distinct. If a distinct service is not received, such costs are recorded as a reduction to revenues. Affiliate contracts are generally multi-year contracts billed monthly with payments due shortly thereafter.

Other

Other primarily includes revenue generated from the Company’s content licensing agreements. Revenue from content licensing agreements is recognized when the content is made available under the content licensing agreements.

Deferred revenue related to licensing agreements amounts to $291,667 and $291,667 as of December 31, 2024 and 2023 respectively.

Product Revenue

Product sales are derived from the sales of books, audio and video, dietary supplements, and other items advertised on the Company’s website. Supplement, books, media and other product sales are recognized at the point in time control transfers to the customer, which is when the product is shipped. Allowances are considered for estimated returns and refunds at the point in time when revenue is recognized. As of December 31, 2024 and 2023, the refund liability was $424,278 and $701,025, respectively and is classified as a reduction in accounts receivable. Product revenue is comprised of the following for the years ended December 31:

Practical Expedient

As a practical expedient, the Company recognizes any incremental costs of obtaining contracts as expense when the amortization period is considered to be a year or less.

As a practical expedient, the Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products.

Shipping and Handling Costs

Amounts billed to third-party customers for shipping and handling are included as a component of revenue. Shipping and handling costs incurred are included as a component of cost of products sold. Shipping and handling charges recorded as revenue amounted to $327,085 and $360,084 for the years ended December 31, 2024 and 2023, respectively.

Cost of Services

Cost of services consists primarily of compensation-related expenses and costs incurred for the publishing of editorial, promotional, and news content across all platforms, as well as amounts due to third party websites and platforms to fulfil customers’ advertising campaigns. Web hosting and advertising serving platform costs are also included in cost of services.

Cost of Products Sold

Cost of product sold consists primarily of cost of inventory sold, fulfillment costs and compensation.

General and Administrative expenses

General and administrative expense consists of compensation-related expenses for corporate employees. Also, it consists of expense for advertising, facilities, professional services fees, insurance costs, and other general overhead costs.

Accounts Receivable and Allowance for Credit Losses

Accounts receivable is presented net of an allowance for credit losses of $2,308,612 and $3,607,933 at December 31, 2024 and 2023, respectively. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses and doubtful accounts. The Company’s allowance for credit losses is estimated based on historical loss rates, current conditions, reasonable economic forecasts that affect collectability, and known credit issues with specific customers.

Inventory

Inventory consists of promotional items, books and supplements and is stated at the lower of cost (first-in, first-out basis) or net realizable value. The Company also reduces the carrying value of inventories for items identified as excess, obsolete, or slow-moving based on customer demand and other economic factors.

Impairment of Long-Lived Assets

The Company continually evaluates factors, events and circumstances that include, but are not limited to, historical and projected operating performance of the Company, specific industry trends and general economic conditions to assess whether the remaining estimated useful lives of long-lived assets may warrant revision or that the remaining balance of long-lived assets may not be recoverable. When such factors, events or circumstances indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of undiscounted cash flows over the remaining lives of the long-lived assets in measuring their recoverability. The Company measures asset impairment loss as the amount by which the carrying amount exceeds the fair market value of the asset.

Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating lease liabilities are recorded based on the present value of lease payments over the expected lease term, discounted using the Company's incremental borrowing rate, and adjusted for lease incentives. The interest rate implicit in lease contracts is typically not readily determinable and the Company currently does not have any outstanding borrowings. As such, the Company estimates its incremental borrowing rate based on the rate it would incur to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Options to extend or terminate a lease are included in the calculation of the lease term to the extent that the option is reasonably certain of exercise.

The Company elected the package of practical expedients which permits the Company to not reassess under the new standard the prior conclusions about lease identification, lease classification, or initial direct costs The Company has made a policy election to exclude short-term leases, those with an original term of less than twelve months, from recognition and measurement under ASC 842. As such, the Company has not recognized an ROU asset or lease liability for these leases.

The Company’s operating lease portfolio primarily includes real estate and office equipment.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. The Company computes depreciation using the straight-line method over the estimated economic useful lives of the assets. Leasehold improvements are depreciated over the shorter of their estimated economic useful lives or the remaining term of the lease.

Other Assets

During 2023, the Company capitalized a separate payment obligation of $41.3 million associated with a commercial counterparty to resolve various claims. The Company accounted for the payment as a reduction to the transaction price in accordance with the guidance in ASC 606-10-32-25 and 32-26 and is amortizing the asset as a contra-revenue item. In connection with the signing of this agreement, the Company identified indicators that the carrying value of these upfront costs were not fully recoverable based on estimated cash flows related to the customer relationship. As a result, the Company’s broadcast segment recognized impairment of the upfront cost during 2024 and 2023 of zero and $23.9 million , respectably, in the accompanying consolidated statements of operations and comprehensive (loss) income.

Amortization of the capitalized costs of the asset is recorded on a straight-line basis over the life of the agreement which ends June 30, 2029 as contra revenue in the accompanying consolidated statements of operations and comprehensive (loss) income. Amortization expense amounted to $3,056,760 and $509,460 during the years ended December 31, 2024 and 2023, respectively.

The Company evaluates these other assets for impairment each reporting period based upon its estimate of recoverability of the assets. Recoverability of the assets is based upon estimated cash flows including reductions for direct and allocable costs attributable to the underlying business arrangement.

Fair Value Measurements

The Company carries certain assets and/or liabilities at fair value in the consolidated balance sheets. The Company applies accounting guidance that defines fair value as 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 at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. Fair value measurements under the accounting guidance are classified based on the following fair value hierarchy:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. We use inputs such as actual trade data, benchmark yields, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of assets or liabilities.

Level 3: Unobservable inputs that are not corroborated by market data.

The fair value of a financial instrument is the amount for which the instrument could be exchanged in a current transaction between willing parties. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, accrued payroll and accrued distribution approximate fair value due to their short-term nature and observable inputs.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred taxes related primarily to operating losses carried forward as well as differences between the financial reporting and tax reporting bases of assets and liabilities. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which also are recognized for operating losses that are available to offset future federal income taxes. The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. The recording of a deferred tax asset assumes the realization of such asset in the future. Otherwise, a valuation allowance is recorded to reduce the asset to its estimated net realizable value. If management determines that the Company may not be able to realize all or part of a deferred tax asset in the future, a valuation allowance for the deferred tax asset is charged to income tax expense in the period the determination is made. Management considers all positive and negative evidence including attribute carrybacks, reversing taxable temporary differences, future pretax income, and ongoing prudent and feasible tax planning strategies in assessing the estimated net realizable value of tax assets and the corresponding need for any related valuation allowances. ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. At December 31, 2024 and 2023, a full valuation allowance was required.

In accordance with the provisions of ASC 740, a two-step approach is utilized to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon the ultimate settlement. At December 31, 2024 and 2023, the Company has no liabilities for uncertain tax positions. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The open tax years subject to U.S. federal tax examinations with respect to the Company’s operations are 2019, 2021, 2022 and 2023.

Advertising Costs

Amounts incurred for advertising costs with third parties are expensed as incurred. Total advertising costs expensed for the years ended December 31, 2024 and 2023 were $16,872,315 and $16,981,894, respectively.

Mezzanine Equity

The Company has issued Series A convertible redeemable preferred stock instruments that the Company has determined are financial instruments with both equity and debt characteristics and are classified as mezzanine equity in the consolidated financial statements. The Company reassesses whether the instrument is currently redeemable or probable to become redeemable in the future as of each reporting date, in which, if the instrument meets either criteria, the Company will recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period.

To assess classification, the Company reviews all features of the instruments, including mandatory redemption features and conversion features that may be substantive. All financial instruments that are classified as mezzanine equity are evaluated for embedded derivative features by evaluating each feature against the nature of the host instrument (e.g., more equity-like or debt-like). The Company has evaluated the Series A convertible redeemable preferred stock and determined that its nature is that of an equity host and no embedded derivatives exist related to the Series A convertible redeemable preferred stock that would require bifurcation on our consolidated balance sheets.

Embedded Derivatives

Embedded derivatives that are required to be bifurcated from the underlying host instrument are accounted for and valued as a separate financial instrument. These embedded derivatives are bifurcated, accounted for at their estimated fair value, which is based on certain estimates and assumptions, and presented separately on the consolidated statements of financial position. Changes in fair value of the embedded derivatives related to the Series B convertible redeemable preferred stock are recognized as a non-cash component of other expense on our consolidated statements of operations and comprehensive (loss) income. The fair value for embedded derivatives are measured on a recurring basis using Level 3 inputs.

Warrants

The Company evaluates warrants under ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity. The Company assesses whether the warrant is a freestanding financial instruments and whether it meets the criteria to be classified in stockholders’ equity, or classified as a liability under ASC 480, Distinguishing Liabilities from Equity. Warrant liabilities are categorized within Level 3 of the fair value hierarchy and are remeasured at each financial reporting date with any changes in fair value being recognized as non-cash gains or losses in change in fair value of warrant liabilities in the consolidated statements of operations and comprehensive (loss) income.

Net Loss Per Share

Basic and diluted loss per share is computed as net loss available to common stockholders divided by the weighted average number of shares outstanding for the period. For the years ended December 31, 2024 and 2023, all dilutive securities have been excluded as their inclusion would have had an antidilutive effect on loss per share. Potentially dilutive common shares include warrants, convertible preferred stock, and stock options.

CARES Act

Under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) signed into law on March 27, 2020 and the subsequent extension of the CARES Act, businesses were eligible for various credits to provide financial relief such as the Employee Retention Credit (ERC), Economic Impact Payments (EIPs), Paid Sick and Family Leave Credits and Employment Tax Deferral credits. In 2023, the Company filed and collected $3,803,683 in tax credits under the CARES Act 2023 which is recorded within other, net on the consolidated statements of operations and comprehensive (loss) income.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU require public entities to disclose significant segment expenses and other segment items and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The guidance is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments in this ASU should be applied retrospectively to all periods presented. The adoption of this standard for the year ended December 31, 2024 did not have a material impact on the Company's consolidated financial results, but resulted in enhanced disclosures as included in Note 9. Segment Information.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) to enhance transparency and decision usefulness of income tax disclosures. ASU 2023-09 requires greater standardization and disaggregation of categories within an entity’s tax rate reconciliation disclosure, as well as disclosure of income taxes paid by jurisdiction, among other requirements. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. ASU 2023-09 is effective on a prospective basis, with retrospective application permitted. The Company is currently evaluating the effects of this ASU on its income tax disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires additional disclosures of the nature of expenses included in the income statement. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027 on a prospective basis, with early adoption permitted. The Company is currently evaluating the provisions of the amendments and the impact on its disclosures.

NOTE 3. FAIR VALUE MEASUREMENTS

The Company accounts for its investments at fair value and classifies these assets within the fair value hierarchy (Level 1, Level 2, or Level 3).

Assets and liabilities subject to fair value measurements are as follows:

The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. U.S. treasury notes and bills are considered Level 2 investments when they were issued before the most recent issue and were still outstanding at measurement day (off-the-run). There were no transfers in or out of Level 3 investments for the year ended December 31, 2024.

The valuation methodologies and significant unobservable inputs for Level 3 investments were as follows:

Changes in Level 3 liabilities measured at fair value on a recurring basis for the year ended December 31, 2024 were as follows (in thousands):

NOTE 4. PROPERTY AND EQUIPMENT

Major classes of property and equipment at December 31 are as follows:

Depreciation of property and equipment amounted to$3,115,635 and$3,164,254 for the years ended December 31, 2024 and 2023, respectively.

Included in property and equipment are finance lease assets of $429,133 and $391,524 as of December 31, 2024 and 2023, respectively.

NOTE 5. INVESTMENTS

Investments on the consolidated balance sheets consisted of the following at December 31:

Available-for-Sale Securities

The Company did not have available-for-sale securities at December 31, 2023. The major classes of the Company's available-for-sale investment securities and their respective fair values at December 31, 2024, were as follows:

The maturity distribution based on the contractual terms of the Company's available-for-sale investment securities at December 31, 2024 was as follows:

NOTE 6. LEASES

The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are included in the Company’s consolidated balance sheets within the right of use asset, net, and operating lease liability, current portion and net of current portion. Finance lease assets are included in Property and equipment, net and Finance lease liability, current portion and net of current portion. The Company generally uses the base, non-cancelable, lease term when determining the lease assets and liabilities.

Below is a summary of the weighted-average discount rate and weighted-average remaining lease term for the Company’s leases:

Operating lease expense is recognized on a straight-line basis over the lease term within operating expenses in the Company’s consolidated statements of operations and comprehensive (loss) income. Finance lease expense is recognized over the lease term within interest expense and amortization in the Company’s consolidated statements of operations and comprehensive (loss) income. The Company’s total operating and finance lease expense all relate to lease costs and amounted to $5,080,185 and $5,071,357 for the years ended December 31, 2024 and December 31, 2023, respectively.

Future minimum lease payments at December 31, 2024 were as follows:

NOTE 7. LINE OF CREDIT

The Company has a $9,000,000 bank line of credit. The line bears interest at the greater of (i) one percent (1.000%) or (ii) the Prime Rate minus seventy five hundredths percent (-0.750%). The line of credit expired in October 2024 which the Company did not renew as of December 31, 2024.

At December 31, 2023 the Company’s line of credit fair value approximates carrying value due to the variable market-based interest rate.

NOTE 8. INCOME TAXES

The components of income tax expense related to its operations are as follows at December 31:

The Company’s effective income tax rate differs from the statutory federal income tax rate of 21%, for the years ending December 31, as follows:

The components of deferred income tax assets and liabilities that have been presented in the Company’s consolidated financial statements are as follows at December 31:

At December 31, 2024 and 2023, the Company had $156,650,801 and $111,909,394 respectively, in federal net operating loss (“NOL”) carryforwards which $20,800,517 will expire from 2031 to 2037 and $135,850,284 will carry foward indefinitely and $156,078,701 and $103,707,626 respectively, in state net operating loss (“NOL”) carryforwards, which expire starting in the year 2031. In 2006, the Company had a more than 50% ownership change and, therefore, is subject to Internal Revenue Code (“IRC”) Section 382 NOL limitation. IRC Section 382 limits the Company’s utilization of its NOL to an annual amount after a more than 50% ownership change. The Company anticipates that all NOLs subject to the IRC Section 382 limitations will be available to be utilized in future years.

The valuation allowance increased by$19,542,294 for the year ended December 31, 2024. This change was primarily driven by increases in net operating loss carryovers, settlement liabilities, and other assets.

The valuation allowance increased by $11,136,567 for the year ended December 31, 2023. This change was primarily driven by increases in net operating loss carryovers, settlement liabilities, and other assets. ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. At December 31, 2024 and 2023, a full valuation allowance was required.

NOTE 9. SEGMENT INFORMATION

The Company has two operating segments: (1) Broadcasting and (2) Digital, which also qualify as reportable segments. In accordance with ASC 280, “Segment Reporting,” the operating segments reflect how the chief operating decision maker, which the Company defines as the chief executive officer, assesses the performance of each operating segment and determines the appropriate allocations of resources to each segment. We continually review our operating segment classifications to align with operational changes in our business and may make changes as necessary. The Company evaluates performance based upon several factors, of which the primary financial measure is Segment Adjusted EBITDA.

Due to the integrated nature of these operating segments, estimates and judgements are made in allocating certain assets, revenues and expenses.

Segment Adjusted EBITDA is defined as revenues less cost of revenues and general and administrative expenses and does not include depreciation, interest, net, asset impairment, unrealized gain (loss) on marketable securities, other corporate matters, other, net and income tax expense. Other corporate matters represent certain litigation expenses, and related fees, for specific proceedings that the Company has determined are infrequent and unusual in terms of their magnitude. Management believes that Segment Adjusted EBITDA is an appropriate measure for evaluating the operating performance of the Company’s business segments because it is the primary measure used by the Company’s chief operating decision maker to evaluate the performance of and allocate resources to the Company’s business. We do not present asset information for our segments as this information is not used to allocate resources.

The following tables set forth the Company’s Revenues and Segment Adjusted EBITDA for fiscal 2024 and 2023:

Revenues by Segment by Component

NOTE 10. CONCENTRATIONS OF CREDIT RISKS

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, short-term investments available-for-sale and accounts receivable. Management believes the financial risks associated with these financial instruments are minimal.

The Company places its cash, and its short-term investments with high credit quality financial institutions. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits. The Company has not experienced any losses due to this policy. The Company's short-term investments are generally deemed to be low risk; however, the longer the duration of a security, the more susceptible it is to changes in market interest rates and bond yields. As the balance of the Company's short-term investments has grown, the market risk related to those investments has grown as well.

Concentrations of credit risk with respect to accounts receivable are limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading the trade credit risk. The Company controls credit risk through credit approvals, credit limits and monitoring procedures. The Company performs credit evaluations of its commercial customers but generally does not require collateral to support accounts receivable.

No single customer accounted for over 10% of the Company’s consolidated net revenues during either of the years ended December 31, 2024 or 2023. No single customer accounted for over 10% of the Company’s consolidated accounts receivable as of December 31, 2024 or 2023.

NOTE 11. COMMITMENTS AND CONTINGENCIES

The Company has commitments under certain firm contractual arrangements (“firm commitments”) to make future payments. These firm commitments secure the future rights to various assets and services to be used in the normal course of operations. The following table summarizes the Company’s material firm commitments for contracts that run through 2027 as of December 31, 2024:

Distribution Agreements

The Company has entered into several Affiliation/Distribution Agreements with the MVPDs. These agreements typically have a five-year term beginning as early as December 2014 and ending as late as May 2025. The Company is required to make payments under such agreements which have payment terms that are generally over a three-to-four-year period and as such will shift between accrued distribution fees or prepaid distribution fees.

Other Commitments

The Company has entered into several other contractual commitments over the next three years ending in December 2027 primarily related to talent costs and other service agreements.

NOTE 12. LEGAL

Legal Matters

From time to time, the Company may be involved in various claims, lawsuits, and disputes with third parties, actions involving allegations of discrimination or breach of contract incidental to the ordinary operations of the business. In the opinion of management, the amount of ultimate liability with respect to these actions will not have a material adverse impact on the Company’s consolidated financial position or results of consolidated operations or consolidated cash flows. The Company accrues for loss contingencies that are probable and reasonably estimable. The Company generally does not accrue for legal costs expected to be incurred with a loss contingency until those services are provided.

Defamation and Disparagement Claims

From time to time, the Company is subject to lawsuits alleging defamation or disparagement. These include lawsuits filed by Smartmatic USA Corp. and certain of its affiliates (collectively, “Smartmatic”) and Dominion Voting Systems, Inc. and certain of its affiliates (collectively, “Dominion”) filed during 2021. The Smartmatic complaint sought an unspecified amount of damages while the Dominion complaint is seeking $1.6 billion in damages. On September 26, 2024, the Company entered into a settlement agreement with Smartmatic pursuant to which the parties agreed to resolve the lawsuits among them. The Company agreed to pay a settlement of approximately $40 million payable over time and granted a five year warrant to purchase 2,000 shares of Series B preferred stock at an exercise price of $5,000 per share. Refer to Note 15. Equity for details of the warrant. The settlement expense, inclusive of the warrant, is included in other corporate matters in the Consolidated Statements of Operations and Comprehensive (Loss) Income for the year ended December 31, 2024. The $40 million payable over time is recorded within settlement liability on the Consolidated Balance Sheet. As of December 31, 2024 the outstanding balance of the settlement is $20 million.

The Company continues to believe the Dominion and other pending lawsuits are without merit and intends to defend against them vigorously. Discovery in the Dominion case, including depositions and expert discovery, remains ongoing, and summary judgement and other key motions will follow. At this time, a trial in the Dominion lawsuit is not expected to commence until April 28, 2025. The Company is unable to predict the final outcome of this matter and cannot reasonably estimate the amount of liability, if any. To date, the Company has not reserved any amounts for pending or future claims. There can be no assurance that the ultimate resolution of this pending matter will not have a material adverse effect on the Company's business, financial condition, results of operations or cash flows.

In 2023, the Company entered into a settlement agreement with a commercial counterparty for $41.3 million. As of December 31, 2024, and pursuant to the payment schedule associated with this settlement agreement, the Company has a total of approximately $34.6 million remaining to be paid over time. The fair value of the settlement agreement as of December 31, 2024 and 2023 was $27.7 million and $30.2 million, respectively, which assumes a discount rate of 9.75% and making quarterly payments for 66 and 54 months, respectively. The fair value measurement is disclosed for information purposes and is not reflected in the carrying amount on the consolidated balance sheet.

The table below represents the estimated timing of payments over the term of the agreements.

NOTE 13. EMPLOYEE BENEFIT PLANS

The Company maintains a 401(k) Salary Savings Plan (the “Plan”) covering those employees who meet eligibility requirements set forth in the Plan. The matching contribution is at the discretion of the Company’s Board of Directors. The Company’s policy is to match 100% of the first 1% of employee contributions and 50% on the next 2 to 6% of employee contributions. Total expense for the Plan for the years ended December 31, 2024 and 2023 amounted to $1,240,644 and $892,005, respectively.

NOTE 14. CONVERTIBLE AND REDEEMABLE PREFERRED STOCK

Convertible and Redeemable Preferred Stock

Convertible and Redeemable Preferred Stock as of December 31, 2024 and 2023 (41,034 total shares authorized and all classes are $0.001 par value per share) is as follows. The conversion prices and conversion ratios presented in this footnote have not been adjusted for the stock split disclosed in Note 1. Nature of Business and Note 17. Subsequent Events:

The Company’s Series A convertible preferred stock is classified as mezzanine equity and Series B convertible preferred stock is classified as permanent equity in our consolidated financial statements.

Voting Rights

Each holder of Preferred A Shares has full voting rights and powers equal to the voting rights and powers of the holders of common stock on an as converted basis. The holders of Series A-1, A-2 and A-3 preferred stock also have the right to designate members to the Company’s board of directors, demand registration rights and limited approval rights. The holders of shares of Series B Preferred Stock do not have voting rights.

Dividends

The holders of the preferred stock are entitled to receive dividends at an annual dividend rate per share of 5% of the per-share-price. Dividends on Series A, A-1 and A-2 are payable only upon a liquidity event or if dividends are declared on common stock. Additionally, A-1 and A-2 are payable upon the conversion of Series A-1 or A-2 into common shares. Dividends on Series A-3 are only payable when and if declared on common stock, Series A-1 or Series A-2 preferred stock. The shares of Series B Preferred Stock accrue an annual dividend rate of 7% on the price per share. Series B dividends accrue daily and are payable when and if declared by the board of directors.

The Preferred A Shares have preference over dividends payable with respect to common stock. Series A-3 has a dividend preference over Series A-1 and Series A-2. Series B has a preference over Series A, Series A-1, Series A-2, and Series A-3

No cash or other dividend or distribution may be declared or paid on the common stock unless a dividend or other distribution is also declared and paid on the preferred stock.

As of December 31, 2024 and 2023, the Company has not recognized an accrual for unpaid dividends on preferred stock which amount to $33,729,540 and $25,723,781, respectively. Included in these amounts are dividends that have been accreted to the preferred stock being measured at its maximum redemption value which is explained below.

Liquidation Rights

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, each holder of preferred stock is entitled to receive, prior and in preference to any distributions to the common stockholders, an amount equal to the greater of (i) the liquidation preference price per share plus any accrued but unpaid dividends payable and (ii) the per share amount of all cash, securities, and other property to be distributed in respect of the Class A or Class B common stock such holder would have been entitled to received had it converted such preferred stock immediately prior to the date fixed for the liquidity event.

In the event of a sale of the Company, the holders of Series A-1, A-2, and A-3 preferred stock shall have the right to elect not to receive the cash payment and instead continue to hold the Series A-1, A-2, or A-3 preferred stock following the consummation of the sale of the company transaction.

In the event of a public sale of the Company, defined as any sale of capital stock to the public pursuant to an offering registered under the securities act of 1933, the holders of shares of preferred Series A-1, A-2, and A-3 stock shall be entitled, before any distribution or payment is made upon any Junior Stock, to be paid an amount equal to the greater of (i) the liquidation preference price per share plus any accrued but unpaid dividends payable and (ii) the per share amount of all cash, securities, and other property to be distributed in respect of the Class A or Class B common stock such holder would have been entitled to received had it converted such preferred stock immediately prior to the date fixed for the liquidity event. For the Series A preferred stock, the Company has the right to convert the preferred shares into shares of common A stock upon a liquidation event.

Upon a Liquidity Event, after the holders of the Series B Stock shall have been paid in full their full preferential amount to which they are entitled, the remaining assets of the Company legally available for distribution shall be distributed among the holders of the junior stock then outstanding, pursuant to the terms of the Certificate of Incorporation, the Series A Certificate of Designation, the Series A-1 Certificate of Designation and the Series A-2 Certificate of Designation. Pursuant to those agreements, after the holders of Series A, Series A-1 and Series A-2 have been paid in full their full preferential amount, the remaining assets of the Company shall be distributed ratably among the holders of the junior stock then outstanding.

“Junior stock” – shall mean the Common Stock and any other class or series of capital stock (including the Series A-1 Stock and the Series A-2 Stock) that ranks junior to the Series A-3 Stock (a) as to the payment of dividends, if any, or (b) as to the distribution of assets on any liquidation, dissolution or winding up of the Corporation, or both.

Conversion Rights

Preferred Series A, Series A-1, Series A-2, and Series A-3 shares have conversion rights to convert into common stock at a rate of one share of common stock for one share of convertible preferred stock. The conversion ratio is subject to customary anti-dilution protection and is unadjusted for the stock split referred to in Note 17. Subsequent Events for details around the stock split.

For the Series A preferred stock, the Company has the right to convert the preferred shares into shares of common A stock upon a liquidation event. For the Series A-1, A-2, and A-3 preferred stock, each share of preferred stock is automatically converted into common A stock at the earlier of an Initial Public Offering, a liquidation event, or the election by written consent of the holders of a majority of each respective series of shares.

Preferred Series B shares have conversion rights to convert into Class B common stock at a rate equal to the quotient of (i) the Liquidation Preference of such share of Series B Stock being converted plus any accrued but unpaid dividends, divided by (ii) the Conversion Price as of the time of the conversion. The Liquidation Preference shall initially mean $5,000 per share of Series B Preferred Stock. The Conversion Price shall mean $50,740.47 per share of Series B Preferred Stock; provided, that the Conversion Price for purposes of converting the Series B Stock upon (i) an IPO shall equal 75% of the price per share or deemed price per share sold to the public in such IPO or (ii) the consummation of a Qualified Financing shall be 75% of the price per share sold by the Company in such Qualified Financing

Redemption Rights

Certain holders of Series A preferred stock have certain redemption rights or put rights, including the right to require the Company to repurchase all or any portion of the preferred stock on any date commencing on and immediately following January 25, 2023, and upon certain change of control events at 100% of the liquidation preference thereof plus all accrued but unpaid dividends.

The holders of Series A-1 preferred stock have certain redemption rights or put rights, including the right to require the Company to repurchase all or any portion of the preferred stock on any date commencing on and immediately following April 16, 2026, and ending on April 16, 2028 at 100% of the liquidation preference thereof plus all accrued but unpaid dividends.

The holders of Series A-3 preferred stock have certain redemption rights or put rights, including the right to require the Company to repurchase all or any portion of the preferred stock on any date commencing on and immediately following July 16, 2027, and ending on July 16, 2029 at 100% of the liquidation preference thereof plus all accrued but unpaid dividends.

The Company measures the preferred stock where redemption is probable at its maximum redemption value plus dividends not currently declared or paid but which will be payable upon redemption. On December 31, 2024 the Company remeasured the preferred stock following the accretion method, which resulted in the preferred stock being measured at its maximum redemption value of $128,576,901 and accretion of $12,814,190, included in Accumulated Deficit on the consolidated balance sheets as of December 31, 2024. Similarly, on December 31, 2023, the preferred stock was remeasured, resulting in a maximum redemption value of $126,018,101 and accretion of $10,255,392, also included in Accumulated Deficit on the consolidated balance sheets as of December 31, 2023.

The Series B preferred stock includes certain redemption rights that are solely in the control of the Company, including redemption upon sale or liquidation of the Company, and an in-substance redemption feature associated with the conversion terms of the Series B preferred stock upon IPO. The stock is recorded in permanent equity on the consolidated balance sheets as of December 31, 2024. The redemption features are bifurcated as an embedded derivative and are accounted for as a derivative liability on the consolidated balance sheets. The fair value of the embedded derivative is estimated using ascenario-based discounted cash flow method. The valuation methodology includes assumptions and judgments regarding discount rates and timing of conversion, which are primarily level 3 assumptions. The embedded derivative is measured at fair value on a recurring basis and any changes in fair value in a subsequent period will be recorded to other income (expense). As of December 31, 2024, the embedded derivative had a net fair value of$41.5 million and the Company recognized a loss of $2.4 million in fair value adjustments in other, net on theconsolidated statements of operations and comprehensive (loss) income related to the change in net fair value.

Refer to Note 17. Subsequent Events for details on the subsequent conversion of all Series A Preferred Stock to Class A Common Stock and Series B Preferred Stock to Class B Common Stock

NOTE 15. EQUITY

Common Stock A – As of December 31, 2024 and 2023, the Company was authorized to issue 20,000 shares of common stock (pre-stock split), with a par value of $0.001 per share. See Note 17 Subsequent Events.

Common Stock B - As of December 31, 2024 and 2023, the Company was authorized to issue 60,000 shares of common stock (pre-stock split), with a par value of $0.001 per share. No shares have been issued as of December 31, 2024. See Note 17 Subsequent Events.

Settlement Warrant- On September 26, 2024, the Company granted a five year warrant to purchase 2,000 shares of Series B preferred stock at an exercise price of $5,000 per share in connection with a settlement agreement with Smartmatic. Refer to Note 12. Legal for details of the settlement. The exercise price and the number of shares of the warrants are subject to adjustment for standard anti-dilution provisions and for subsequent Series B preferred issuance at a price lower than the then exercise price of the warrants. Exercise of the warrant would result in the Company recognizing a $10 million increase in gross proceeds. The settlement warrant did not meet the conditions to be classified in equity, and therefore the Company assessed and confirmed it met the definition of a liability under ASC 815 and ASC 480 and is recognized on the balance sheet at fair value. The fair value of the warrant liability as of December 31, 2024 is $6,499,822 and the Company recognized a loss of$126,065 in fair value adjustments in other, net on theconsolidated statements of operations and comprehensive (loss) income.

Agent Warrant - The Company agreed to issue a three-year warrant to the placement agent associated with the Private Placement of shares of the Company's Series B convertible preferred Stock. The number of shares under the warrant is equal to 2% of the total shares raised under the private placement with an exercise price of $5,000 per share. The warrant holder has the option to elect net share settlement. The effective date of the warrant is the date of the final close of the private placement offering. The Company evaluated the warrant under ASC 718, Compensation - Stock Compensation and determined that the award was non-employee share-based compensation that does not meet the criteria for liability classification. As a result, the warrant was classified in equity in the Company's consolidated balance sheets.

NOTE 16. LOSS PER SHARE

The following table illustrates the reconciliation of the basic and diluted loss per share computations. The outstanding shares reflect the stock split described in Note 17. Subsequent Events:

The following outstanding potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stock for the periods presented because the impact of including them would have been anti-dilutive. The outstanding shares related to stock options reflect the stock split described in Note 17. Subsequent Events.

NOTE 17. SUBSEQUENT EVENTS

On February 27, 2025, the Company completed the sale of the remaining Series B Preferred Stock from the PPM raising approximately $87,000,000 during the period January 1, 2025 through February 27, 2025.

On March 24, 2025, a majority in interest of the shareholders of the Company approved by written consent (1) the amending and restating of the Company's articles of incorporation, the recapitalization of the Company's capital stock and the appointment of directors and (2) the Company's 2025 Omnibus Equity Incentive Plan. Copies of the written consents of the shareholders are filed as Exhibits 99.1 and 99.2, respectively, to this Annual Report on Form 10-K.

On March 28, 2025, the Company completed its initial public offering on the NYSE and is authorized to issue 50,000,000 shares of Class A Common Stock;940,000,000 shares of Class B Common Stock; and 10,000,000 shares of Preferred Stock. The par value of all shares is$0.001. The offering resulted in total proceeds of $75,000,000. In connection with the offering, Series A, A-1, A-2 and A-3 Preferred Stock were converted to Class A Common Stock at $10.00 per share and all of the Company's Series B Preferred Stock was converted to Class B Common Stock at $10.00 per share following the recapitalization discussed below.

Concurrently with the closing of the offering, the Company amended and restated its Articles of Incorporation (the "Amended and Restated Articles of Incorporation") to reclassify its authorized share capital to implement a dual class of securities. As a result, each share of the Company's existing Class A Common Stock of Newsmax Inc. that was issued and outstanding immediately prior to the effectiveness of the Amended and Restated Articles of Incorporation, and not held by the Company's CEO, was recapitalized, reclassified, and reconstituted into one fully paid and non-assessable share of Class B Common Stock of Newsmax Inc. Each share held by the Company's CEO immediately before the recapitalization, was recapitalized, reclassified, and reconstituted into one fully paid and non-assessable share of Class A Common Stock of Newsmax, Inc. Following the recapitalization, Class A Common Stock has ten votes per share and Class B Common Stock has one vote per share. Immediately following the recapitalization, the Company completed a 6,765.396:1 stock split of its Series A and Series B Common Stock.

On March 28, 2025, the Board adopted our 2025 Omnibus Equity Incentive Plan (the “2025 Plan”) and it was approved by our shareholders on March 24, 2025 (the “Effective Date”). Under the 2025 Plan, 6,500,000 shares of Class B Common Stock are initially available for grant. Our administrator may grant incentive stock options (“ISOs”), non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to participants to acquire shares of common stock under the 2025 Plan. It is anticipated that the Plan will be administered by the Board.On March 28, 2025, the Company granted stock options to employees and certain service providers to purchase an aggregate of 3,382,000 shares of common stock at an exercise price of $10.00 per share, which was the fair market value on the grant date. These options vest over 90 days and expire 9.5 years from the grant date.