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PREPAID MARKETING EXPENSES

12 Months Ended

Dec. 31, 2025

NOTE 5: PREPAID MARKETING EXPENSES

In 2025, the Company entered into multi-year marketing, licensing, sponsorship, and service agreements under which it provides equity instruments, pre-funded warrants, or cash as consideration. Amounts paid or the fair value of instruments issued in excess of amounts currently expensed are recorded as prepaid assets and amortized over the contractual service period on a straight-line basis.

University Marketing Agreements

AAA Tuscaloosa, LLC — University of Alabama

Effective July 16, 2025, the Company entered into a three-year Exclusive Private Label Manufacturing Agreement with AAA Tuscaloosa, LLC (“AAA”), pursuant to which the Company manufactures University of Alabama–branded apparel. AAA is responsible for marketing and selling the products through its website and campus bookstores and is considered the Company’s customer under ASC 606; revenue is recognized upon sale of products to end customers through AAA’s distribution channels.

As consideration, the Company agreed to issue common stock valued at $1,000,000 per year over the three-year term (total equity commitment of $3,000,000). On December 12, 2025, the Company issued 285,714 shares of common stock at a grant-date fair value of $7.92 per share (grant date: September 22, 2025; aggregate equity fair value: $2,262,855). The share-based consideration represents payment for distinct services, including licensing access, distribution, and marketing services, and is accounted for under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision at grant date, was $4,341,104. The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the year ended December 31, 2025, the Company recognized $666,032 of marketing expense, representing 168 days of amortization. As of December 31, 2025, the prepaid balance was $3,675,072, of which $1,357,173 is classified as current and $2,317,899 as non-current.

The agreement includes a 15-month make-whole provision (through March 12, 2027), under which the Company is required to issue additional shares or cash if the fair value of shares delivered falls below the $3,000,000 commitment; accordingly, the award is liability-classified under ASC 718. See Note 9 for the fair value detail and Monte Carlo assumptions.

Traffic Holdco, LLC — Collegiate NIL Program

Effective July 16, 2025, the Company entered into a three-year Exclusive Private Label Manufacturing Agreement with Traffic Holdco, LLC (“Traffic”), pursuant to which the Company obtained exclusive apparel manufacturing rights for collegiate Name, Image and Likeness (“NIL”) programs at a minimum of three universities. Traffic is responsible for licensing, marketing, and distribution through university channels and is considered the Company’s customer under ASC 606; revenue is recognized upon sale of products to end customers through Traffic’s distribution channels.

As consideration, the Company agreed to issue common stock valued at $1,000,000 per university per year over the three-year term (minimum total equity commitment of $9,000,000). On December 12, 2025, the Company issued 857,143 shares of common stock at a grant-date fair value of $7.92 per share (grant date: September 22, 2025; aggregate equity fair value: $6,788,573). The share-based consideration represents payment for distinct services, including licensing access, distribution, marketing, and compliance services, and is accounted for under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision, was $13,023,328. The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the year ended December 31, 2025, the Company recognized $1,998,100 of marketing expense, representing 168 days of amortization. As of December 31, 2025, the prepaid balance was $11,025,228, of which $4,341,109 is classified as current and $6,684,119 as non-current.

The agreement includes a 15-month make-whole provision (through March 12, 2027), under which the Company is required to issue additional shares or cash if the fair value of shares delivered falls below the guaranteed commitment; accordingly, the award is liability-classified under ASC 718. See Note 9 for the fair value detail and Monte Carlo assumptions.

The Grove Collective, LLC — University of Mississippi

Effective November 19, 2025, the Company entered into a three-year Exclusive Private Label Manufacturing Agreement with The Grove Collective, LLC (“Grove”), pursuant to which the Company will exclusively manufacture apparel products to be sold through Grove’s website and retail channels. The agreement supports marketing and brand development initiatives related to the University of Mississippi NIL program. Grove is considered the Company’s customer under ASC 606; revenue is recognized upon sale of products to end customers through Grove’s channels.

As consideration, the Company issued 385,107 shares of common stock at a grant-date fair value of $7.50 per share (aggregate equity fair value: $2,888,303), representing a total equity commitment of $3,000,000. The share-based consideration is accounted for as payment for distinct marketing, distribution, and related services under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision at grant date, was $4,970,835. The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the year ended December 31, 2025, the Company recognized $190,662 of marketing expense, representing 42 days of amortization. As of December 31, 2025, the prepaid balance was $4,780,173, of which $1,656,945 is classified as current and $3,123,228 as non-current.

The agreement includes a 15-month make-whole provision; accordingly, the award is liability-classified under ASC 718. See Note 9 for the fair value detail and Monte Carlo assumptions.

Buffalo Sports Properties / Learfield — University of Colorado

Effective December 3, 2025, the Company entered into a three-year Marketing and Sponsorship Agreement with Buffalo Sports Properties, LLC and Learfield (the “Provider”) for the University of Colorado athletic program. Under the agreement, the Company receives sponsorship, media, and NIL marketing benefits in exchange for a combination of cash and equity consideration. The Provider is considered the Company’s customer under ASC 606; revenue is recognized upon delivery of sponsorship and marketing benefits over the term.

As consideration, the Company agreed to pay $550,000 per year over the three-year term, consisting of $350,000 per year in common stock (total equity commitment: $1,050,000) and $200,000 per year in cash (total cash: $537,931). On December 12, 2025, the Company issued 193,036 shares of common stock at $6.68 per share (grant date: December 3, 2025; aggregate equity fair value: $1,289,480). The equity component is accounted for as payment for distinct sponsorship, media, and marketing services under ASC 718. The total consideration, including the equity component and the initial fair value of the make-whole provision, was $2,014,433. The Company recorded a prepaid asset equal to the fair value of consideration provided, amortized on a straight-line basis over the three-year term. For the year ended December 31, 2025, the Company recognized $51,881 of marketing expense, representing 29 days of amortization. As of December 31, 2025, the prepaid balance was $1,962,551, of which $671,478 is classified as current and $1,291,073 as non-current. The cash component is recognized as prepaid sponsorship expense and amortized as benefits are received; the first cash installment is due under the January 2026 billing schedule.

The agreement includes an 18-month make-whole provision (through June 12, 2027), under which the Company is required to issue additional shares or cash if the fair value of shares delivered falls below the guaranteed amount; accordingly, the award is liability-classified under ASC 718. See Note 9 for the fair value detail and Monte Carlo assumptions.

Other Marketing Agreements

MavDB Consulting LLC

In January 2025, the Company entered into a two-year marketing services agreement with MavDB Consulting LLC for content production, social media marketing, student athlete engagement, and event staffing. The consideration was satisfied through the issuance of 2,068,965 pre-funded warrants with an aggregate fair value of $2,689,656, accounted for as share-based consideration for marketing and advisory services. The warrants are equity-classified with no make-whole provision. The Company recognized $1,269,193 of marketing expense for the year ended December 31, 2025, representing 344 days of amortization over the two-year term. As of December 31, 2025, the prepaid balance was $1,420,463, of which $1,344,828 is classified as current and $75,635 as non-current.

In September 2025, the Company entered into a two-year cash-based marketing agreement with MavDB Consulting LLC for $1,240,000. The Company recognized $1,240,000 of marketing expense for the year ended December 31, 2025, representing the full contract value. No prepaid balance remains as of December 31, 2025.

In March 2025, Bailey entered into a five-year cash-based marketing services agreement with MavDB Consulting LLC for $2,500,000. The Company recognized $2,500,000 of marketing expense for the year ended December 31, 2025, representing the full contract value. No prepaid balance remains as of December 31, 2025.

MavDB is controlled by a shareholder who holds a significant amount of warrants and prefunded warrants. See Notes 10 and 11 for further detail on the equity transactions related to MavDB.

Other

In September 2025, the Company entered into a one-year agreement with Velora Marketing Services for $350,000 and a one-year agreement with i2i Marketing for $425,000. The Company recognized $350,000 and $425,000 of marketing expense, respectively, for the year ended December 31, 2025, representing the full contract value of each agreement. No prepaid balance remains as of December 31, 2025.

In September 2025, Bailey entered into a one-year marketing agreement with Candlelight Ventures for $350,000. The Company recognized $350,000 of marketing expense for the year ended December 31, 2025, representing the full contract value. No prepaid balance remains as of December 31, 2025.

Costs associated with all cash-based agreements are recognized as prepaid assets and expensed over the respective contractual service periods.

Summary of Consideration and Prepaid Balances

The following table summarizes the consideration provided under each agreement and the resulting prepaid marketing balances as of December 31, 2025:

	Consideration	Agreement		Term	2025		Prepaid Balance as of December 31, 2025
Agreement	Type	Amount		(Years)	Amortization		Current		Non-Current		Total
MavDB (Jan 2025)	PFW*	$	2,689,656	2	$	1,269,193	$	1,344,828	$	75,635	$	1,420,463
Traffic Holdco	Shares + MW**		13,023,328	3		1,998,100		4,341,109		6,684,119		11,025,228
AAA Tuscaloosa	Shares + MW		4,341,104	3		666,032		1,357,173		2,317,899		3,675,072
Grove	Shares + MW		4,970,835	3		190,662		1,656,945		3,123,228		4,780,173
Learfield	Shares + MW		2,014,433	3		51,882		671,478		1,291,073		1,962,551

		$	27,039,356		$	4,175,869	$	9,371,533	$	13,491,954	$	22,863,487

PFW = pre-funded warrants, equity-classified with no make-whole provision.

Shares + MW = common stock issued plus a make-whole provision guaranteeing the counterparty a minimum aggregate share value. The make-whole creates a liability-classified share-based award under ASC 718, measured at fair value via Monte Carlo simulation. See Note 9.

The following table disaggregates total consideration for the share-based agreements between the equity component (fair value of shares or warrants issued, recorded in equity) and the liability component (initial fair value of the make-whole provision, recorded as share-based payment liability on the consolidated balance sheet):

	Fair Value of Equity (Shares & PFW)		Share-Based Payment Liability		Total
Traffic Holdco	$	6,788,573	$	6,234,755	$	13,023,328
AAA Tuscaloosa		2,262,855		2,078,249		4,341,104
Grove		2,888,303		2,082,532		4,970,835
Learfield		1,289,480		724,953		2,014,433
	$	13,229,211	$	11,120,489	$	24,349,700

Total aggregate consideration for all share-based agreements was $24,349,700 at initial recognition, comprising $13,229,211 in equity fair value and $11,120,489 in share-based payment liability (make-whole provisions). At December 31, 2025, the total share-based payment liability was remeasured to $9,405,699, resulting in a recognized gain of $1,714,790.

Classification and Future Amortization

Prepaid marketing expenses are classified as current or non-current based on the portion of each agreement expected to be amortized within the next twelve months from the balance sheet date. Current prepaid balances represent the pro-rata share of total consideration allocable to services to be received in the twelve months ending December 31, 2026. Non-current prepaid balances represent the remaining unamortized consideration allocable to periods beyond December 31, 2026.

For agreements where amortization commenced during 2025, the current portion reflects the next twelve months of straight-line amortization based on the original contract term. For agreements entered into near year-end (primarily Learfield, commencing December 3, 2025), the current portion reflects the estimated twelve-month share based on the contractual service start date. Amortization begins on the service commencement date of each agreement.

Total prepaid marketing expenses recognized during the year ended December 31, 2025 was $3,978,943. Estimated future amortization of prepaid marketing expenses as of December 31, 2025 is as follows:

Year Ended December 31,	Amount
2026	$	9,371,533
2027		8,102,340
2028		5,389,614
Prepaid marketing expenses	$	22,863,487