Direct Digital Holdings Enters Material Agreement, Restates Financials

TL;DR

DDHI just signed a big deal but also has to fix old financials. Big cleanup happening.

AI Summary

Direct Digital Holdings, Inc. announced on October 14, 2024, that it is entering into a material definitive agreement. The company is also restating previously issued financial statements due to errors, indicating a need for correction in their past reporting. This filing also covers other events and includes financial statements and exhibits.

Why It Matters

The company is entering a significant new agreement while simultaneously correcting past financial reporting, which could impact investor confidence and future financial performance.

Risk Assessment

Risk Level: medium — Restating financial statements often indicates internal control weaknesses or accounting errors, which poses a risk to the company's financial integrity and investor trust.

Key Players & Entities

• Direct Digital Holdings, Inc. (company) — Registrant
• October 14, 2024 (date) — Date of earliest event reported

FAQ

Key Financial Figures

• $0.001 — tered Class A common stock, par value $0.001 per share DRCT The Nasdaq Stock Mar
• $32.0 million — m loan in the principal amount of up to $32.0 million and the existing $10.0 million delayed
• $10.0 million — of up to $32.0 million and the existing $10.0 million delayed draw term loan for the periods
• $0.1 m — fee of 50 basis points, or an amount of $0.1 million, to Lafayette Square, (3) allows
• $1.0 million — ipal balance of the Credit Agreement of $1.0 million upon execution of the Third Amendment,
• $2.0 million — llion on or before January 15, 2025 and $2.0 million on or before April 15, 2025, (2) requir
• $1.0 m — cted to decrease accrued liabilities by $1.0 million, decrease additional paid-in capi
• $5.6 m — decrease additional paid-in capital by $5.6 million, increase accumulated deficit by
• $4.4 million — illion, increase accumulated deficit by $4.4 million and increase noncontrolling interest by
• $2.2 million — and increase noncontrolling interest by $2.2 million. For the Non-Reliance Period ended June
• $4.2 million — illion, increase accumulated deficit by $4.2 million and increase noncontrolling interest by
• $2.4 million — and increase noncontrolling interest by $2.4 million. For the Non-Reliance Period ended Sept
• $3.5 m — million, increase warrant liability by $3.5 million, decrease additional paid-in capi
• $9.1 m — decrease additional paid-in capital by $9.1 million, increase retained earnings by $2
• $2.6 million — million, increase retained earnings by $2.6 million and increase noncontrolling interest by

Filing Documents

• tm2426201d1_8k.htm (8-K) — 46KB
• tm2426201d1_ex99-1.htm (EX-99.1) — 18KB
• tm2426201d1_ex99-1img001.jpg (GRAPHIC) — 22KB
• 0001104659-24-108648.txt ( ) — 280KB
• drct-20241014.xsd (EX-101.SCH) — 3KB
• drct-20241014_lab.xml (EX-101.LAB) — 33KB
• drct-20241014_pre.xml (EX-101.PRE) — 22KB
• tm2426201d1_8k_htm.xml (XML) — 4KB

01 Entry into a Material Definitive Agreement

Item 1.01 Entry into a Material Definitive Agreement. The "Company," "Direct Digital," "Direct Digital Holdings," "DDH," "we," "us" and "our" refer to Direct Digital Holdings, Inc., and, unless otherwise stated, all of its subsidiaries. On October 15, 2024, with an effective date of June 30, 2024, the Company and Lafayette Square Loan Services, LLC ("Lafayette Square"), as administrative agent, and the various lenders party thereto, entered into the Fifth Amendment (the " Fifth Amendment ") to the Term Loan and Security Agreement, dated December 3, 2021 (as amended, the " Lafayette Square Credit Facility "). The Fifth Amendment, among other things, (1) defers quarterly installment payments on the existing term loan in the principal amount of up to $32.0 million and the existing $10.0 million delayed draw term loan for the periods from June 30, 2024 through December 31, 2025, (2) requires that the Company pay a commitment fee of 50 basis points, or an amount of $0.1 million, to Lafayette Square, (3) allows proceeds from future equity raises by the Company, if any, to cure potential financial covenant noncompliance, (4) provides for one-month and three-month interest periods, (5) replaces the calculation of the consolidated total net leverage ratio with a consolidated total leverage ratio for purposes of calculating the applicable margin and the financial covenant and (6) replaces the financial covenants under the Lafayette Square Credit Facility (effective as of June 30, 2024). On October 15, 2024, with an effective date of June 30, 2024, the Company and East West Bank (" EWB ") entered into the Third Amendment (the "Third Amendment ") to the Credit Agreement, dated July 7, 2023 (as amended, the " East West Bank Credit Facility "), between EWB and the Company. The Third Amendment, among other things, (1) requires the Company to prepay the outstanding principal balance of the Credit Agreement of $1.0 million upon execution of the Third Amendment, $1.0 million on o

02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim

Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. On October 14, 2024, the Audit Committee of the Board of Directors (the " Audit Committee ") of the Company, in consultation with Company management, determined that the Company's interim financial statements (collectively, the " Prior Period Financial Statements ") as of the periods ended March 31, 2023, June 30, 2023, September 30, 2023, and for the three months ended March 31, 2023, the three and six months ended June 30, 2023 and the three and nine months ended September 30, 2023 (collectively, the " Non-Reliance Periods ") should no longer be relied upon. Management and the Audit Committee have determined that the errors described below in the unaudited interim consolidated financial statements for the Non-Reliance Periods noted above require a restatement of the Prior Period Financial Statements (the " Restatement "). Previously filed quarterly reports on Form 10-Q for the Prior Period Financial Statements have not been amended. Accordingly, investors should no longer rely upon the Company's previously released financial statements for these periods and any earnings releases or other communications relating to these periods. During the preparation of Company's consolidated financial statements as of and for the year ended December 31, 2023, the Company identified prior period accounting errors resulting from the incorrect (1) accounting for, and presentation of, noncontrolling interests (" NCI "), (2) recognition of an organizational transaction in connection with the Company's initial public offering, (3) presentation of earnings per share considering the effect of certain features of the Company's warrants and the impact of correcting the accounting for, and presentation of, NCI, and (4) timing of the recording of the 2023 redemption of warrants. The errors in the unaudited condensed consolidated financial statements for the Non-Reliance

01 Other Events

Item 8.01 Other Events As previously disclosed, the Company was notified by the Staff of the Listing Qualifications Department (the " Staff ") of The Nasdaq Stock Market LLC (" Nasdaq ") that the Company was not in compliance with Nasdaq Rule 5250(c)(1) (the "Rule"), which requires Nasdaq-listed companies to timely file all required periodic financial reports with the U.S. Securities and Exchange Commission (the " SEC "), due to the Company's failure to timely file with the SEC its Annual Report on Form 10-K for the year ended December 31, 2023, its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024, and its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 (together, the " Delayed Reports "). The Company previously submitted a plan to file the Delayed Reports with the SEC and thereby evidence compliance with the Rule, and Nasdaq subsequently granted the Company an exception through October 14, 2024, to do so. On October 15, 2024, the first business day following the exception date established by the Nasdaq, the Company filed the Delayed Reports with the SEC and believes it has evidenced compliance with the Rule; however, the Company is awaiting a formal compliance determination from the Staff. The Company will provide an update upon receipt of such determination. On October 15, 2024, the Company issued a press release regarding, among other things, the filing of the Delayed Reports. A copy of the press release is filed herewith as Exhibit 99.1 to this report and is incorporated herein by reference. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Current Report on Form 8-K may contain forward-looking As used below, "we," "us," and "our" refer to the Company. We use words such as "could," "would," "may," "might," "will," "expect," "likely," "believe," "continue," "anticipate," "estimate,"

Financial Statements and Exhibits

Financial Statements and Exhibits. (d) Exhibits EXHIBIT INDEX Exhibit No. Description 99.1 Press release, dated October 15, 2024. 104 Cover Page Interactive Data File, formatted in Inline Extensible Business Reporting Language (iXBRL). 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. October 15, 2024 (Date) Direct Digital Holdings, Inc. (Registrant) /s/ Diana P. Diaz Diana P. Diaz Chief Financial Officer

View Full Filing

View this 8-K filing on SEC EDGAR