OLD MARKET CAPITAL Corp: Form 10-Q for the period ended Jun 30, 2025

Forward- Looking Information

This Quarterly Report on Form 10-Q contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on management's current beliefs and assumptions, as well as information currently available to management. When used in this document, the words "anticipate", "estimate", "expect", "forecast", "will", "would", "may", "plan", "believe", "intend" and similar expressions are intended to identify forward-looking statements. Although Old Market Capital Corporation, including its subsidiaries (collectively, the "Company", "we", "us", or "our") believes that the expectations reflected or implied in such forward-looking statements are reasonable, it can give no assurance that such expectation will prove to be correct.

Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2025. Readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results or conditions, which may not occur as anticipated. Actual results or conditions could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein and in the Company’s other public filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended March 31, 2025, as well as other risks and uncertainties not now anticipated. The risks and uncertainties described herein and in the Company’s other public filings are not exclusive and further information concerning the Company and its businesses, including factors that potentially could materially affect the Company's financial results, may emerge from time to time. Except as required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

Any forward-looking statements made by us in this document speak only as of the date on which they are made. We are under no obligation, and expressly disclaim any obligation, to update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.

Overview

The Company was previously a specialized consumer finance company focused on subprime auto lending. The Company announced the restructuring of operations in November 2023 and now operates as a holding company which owns an indirect controlling interest in Amplex, a broadband company located in northwest Ohio. The Company, which is based in Omaha, Nebraska, continues to pursue additional controlling interests in other companies and sectors yet to be determined.

Change in Operating Strategy

On November 13, 2023, the Company entered into a Master Asset Purchase Agreement (the "Purchase Agreement") with Westlake Services, LLC dba Westlake Financial, a California limited liability company ("Westlake Financial"), pursuant to which the Company agreed to sell substantially all of the Company's finance receivables and all of its repossessed assets. On April 26, 2024, the transactions contemplated by the Purchase Agreement closed.

On June 15, 2024, the Company closed upon the acquisition of 51% of the issued and outstanding common shares of Amplex, which was placed into Amplex Holdings. Amplex is a provider of broadband internet, voice over internet protocol (VOIP), and video services within service areas located primarily in Northwest and North Central Ohio. As of June 30, 2025, Amplex had approximately 13,200 broadband customers (4,800 fiber subscribers) and over 13,000 fiber passings completed.

Concurrently, on June 15, 2024, the Company converted the outstanding principal and accrued interest of approximately $0.8 million under the Term Loan Advances into 421 shares of Amplex common stock at the Share Purchase Price of $1,792.55 and purchased 1,674 shares of Amplex common stock at the share purchase price of $1,792.55 each for an aggregate purchase price of $3.0 million. These transactions increased the Company's indirect ownership in Amplex to 56.5%. In December 2024, the Company entered into a Subscription Agreement whereby the Company invested an additional $4.5 million into Amplex Holdings, increasing the Company's ownership percentage to 60.9%.

How We Generate Revenues and Evaluate our Business

The Company generates revenues primarily through customer contracts and provides wireless internet services, fiber internet services, and other services including voice over telephone services. The Company fulfills obligations and recognizes revenue under a contract with a customer by transferring products and services in exchange for consideration from the customer. Payments received or consideration billed in advance are recorded as deferred revenue. Further, the Company records accounts receivable for services billed in advance.

Operating income (loss) is a key metric that we use to evaluate segment operating performance and to determine resource allocation between segments. We define operating income (loss) as revenues less operating expenses. Operating expenses include cost of wireless and fiber internet services, cost of other revenue, plant specific and nonspecific operations expenses, general and administrative expenses, and depreciation and amortization expenses.

Result of Operations

Three months ended June 30, 2025 compared to three months ended June 30, 2024

Revenues of Continuing Operations

For the three months ended June 30, 2025 and 2024, our revenues in dollars and as a percentage of total revenues were as follows:

(In thousands)

Revenue totaled $3.0 million for the three months ended June 30, 2025, compared to $0.5 million for the three months ended June 30, 2024. The increase in revenue for the three months ended June 30, 2025 is primarily due to the Company completing its acquisition of Amplex on June 15, 2024. As a result, revenue was received by the Company from additional services provided by Amplex for the entire quarter for the current period, whereas for the three months ended June 30, 2024, Amplex only provided 15 days’ worth of revenue. By acquiring a majority interest in Amplex Holdings, which holds 100% of Amplex, the Company now indirectly through Amplex provides wireless internet services, fiber internet services, and other services including VOIP telephone and video streaming. Further, as a result of changes in the Company's operations arising in connection with the transactions undertaken pursuant to the Purchase Agreement with Westlake Financial in April 2024 and the Amplex Acquisition in June 2024, the Company's revenue is not comparable on a year-over-year basis.

Expenses of Continuing Operations

For the three months ended June 30, 2025 and 2024, our expenses in dollars and as a percentage of total expenses were as follows:

(In thousands)

Cost of Wireless and Fiber Internet Services and Cost of Other Revenue of Continuing Operations

Cost of wireless and fiber internet services totaled $0.2 million for the three months ended June 30, 2025, compared to $0.1 for the three months ended June 30, 2024. In addition, cost of other revenue totaled $0.2 million for the three months ended June 30, 2025 compared to $0.1 million for the three months ended June 30, 2024. As discussed above, the Company now indirectly through Amplex provides wireless internet, fiber internet, and other services in conjunction with its acquisition of a majority interest in Amplex Holdings, which holds 100% of Amplex. Therefore, the cost of wireless and fiber internet services and cost of other revenue increased during the three months ended June 30, 2025 when compared to the prior period. As a result of the Purchase Agreement with Westlake Financial in April of 2024 and the Amplex Acquisition in June of 2024, the Company's cost of wireless and fiber internet services and cost of other revenue is not comparable on a year-over-year basis.

Plant Specific and Plant Nonspecific Operations of Continuing Operations

Plant specific and plant nonspecific operations expenses totaled $0.7 million for the three months ended June 30, 2025, compared to $0.1 million for the three months ended June 30, 2024. Due to the Company's acquisition of Amplex, the Company began providing additional services during the three months ended June 30, 2025 that were not provided in the prior period. Therefore, plant specific and nonspecific operations expenses increased for the three months ended June 30, 2025 when compared to the prior period. As a result of the Purchase Agreement with Westlake Financial in April of 2024 and the Amplex Acquisition in June of 2024, the Company's plant specific and nonspecific operations expenses are not comparable on a year-over-year basis.

General and Administrative Expenses of Continuing Operations

General and administrative expenses totaled $2.2 million for the three months ended June 30, 2025, compared to $3.8 million for the three months ended June 30, 2024. The decrease in general and administrative expenses for the three months ended June 30, 2025 is primarily due to additional professional fees and restructuring expenses incurred in the prior period in relation to the Amplex Acquisition, which was closed by the Company during the three months ended June 30, 2024. As a result of the Purchase Agreement with Westlake Financial in April of 2024 and the Amplex Acquisition in June of 2024, the Company's general and administrative expenses are not comparable on a year-over-year basis.

Depreciation and Amortization Expenses of Continuing Operations

Depreciation and amortization expense totaled $0.6 million for the three months ended June 30, 2025, compared to $0.1 million for the three months ended June 30, 2024. The increase in depreciation and amortization expense for the three months ended June 30, 2025 is primarily attributable to the consolidation of Amplex for the entire period of the three months ended June 30, 2025. As a result of the Purchase Agreement with Westlake Financial in April of 2024 and the Amplex Acquisition in June of 2024, the Company's depreciation and amortization expense is not comparable on a year-over-year basis.

Emigration Tax Expense of Continuing Operations

Emigration tax expense was $0 million for the three months ended June 30, 2025 compared to $1.7 million for the three months ended June 30, 2024. The decrease in emigration tax expense in the current period is due to the Company completing its continuation and domestication from a company incorporated under the laws of British Columbia to a corporation incorporated under the laws of the State of Delaware as of April 18, 2024.

Loss on Dissenting Shareholders' Liability of Continuing Operations

Loss on dissenting shareholders' liability was $0 million for the three months ended June 30, 2025 compared to $0.8 million for the three months ended June 30, 2024. The decrease in loss on dissenting shareholders' liability is a result of the change in fair value of the liability during the period that represents the amount owed to dissenting shareholders from the sale of assets to Westlake Financial. As of June 30, 2025, the Company settled the total amount owed to the dissenting shareholders.

Discontinued Operations

Income from discontinued operations was $38 thousand for the three months ended June 30, 2025 compared to income from discontinued operations of $542 thousand for the three months ended June 30, 2024. The decrease in income for the three months ended June 30, 2025 is primarily attributed to a decrease in general and administrative expenses and a decrease in credit losses due to the sale of the finance receivables and repossessed assets to Westlake Financial when compared to the three months ended June 30, 2024.

Liquidity and Capital Resources

The Company's cash flows are summarized as follows:

(In thousands)

Net cash provided by (used in) operating activities increased for the three months ended June 30, 2025 when compared to the three months ended June 30, 2024. The increase in cash provided by (used in) operating activities was primarily due to a decrease in net loss of $2.8 million, and net change in operating assets and liabilities of $0.4 million, partially offset by a decrease in cash provided by operating activities from discontinued operations of $1.1 million. Further, as a result of the Purchase Agreement with Westlake Financial in April of 2024 and the Amplex Acquisition in June of 2024, the Company's change in cash provided by operating activities is not comparable on a year-over-year basis.

Net cash (used in) provided by investing activities decreased for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The decrease in net cash (used in) provided by investing activities is primarily due to the purchase of property and equipment of $3.7 million for the three months ended June 30, 2025, as compared to the net $22 million proceeds received during the three months ended June 30, 2024 resulting from the $18.4 million of cash paid for the acquisition of Amplex in June 2024 offset by an increase in net cash provided by investing activities from discontinued operations of $40.8 million. As a result of the Purchase Agreement with Westlake Financial in April of

2024 and the Amplex Acquisition in June of 2024, the Company's change in cash provided by investing activities is not comparable on a year-over-year basis.

Net cash used in financing activities increased during the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase was primarily due to the proceeds of long-term debt of $0.9 million during the three months ended June 30, 2025.

We have no material commitments for capital expenditures as of June 30, 2025. Part of our growth strategy, however, is to acquire businesses. We would anticipate funding such activity through cash on hand, the issuance of debt, Common Stock, restricted stock units, and warrants for our Common Stock or a combination thereof.

Long-Term Borrowing Facilities

On September 23, 2024, Amplex entered into a Reconnect Program Loan and Security Agreement with the United States of America, acting through the Administrator of the Rural Utilities Service (“RUS”), for a secured loan of up to $21.3 million. The loan is intended to finance broadband infrastructure in rural areas where at least 50% of households lack sufficient access.

The loan bears interest at 2% per annum, with payments deferred for three years through October 31, 2027. After the deferral period, accrued interest will be capitalized, and monthly payments will amortize the balance through the loan’s maturity on October 31, 2046. Amplex may draw funds through October 31, 2029, and may prepay advances without penalty.

Loan proceeds are restricted and held in a pledged deposit account, classified under Prepaid expenses and other current assets. The loan is secured by all of Amplex’s assets and includes customary covenants and conditions, including maintaining positive cash flow by year five, compliance with buildout timelines, and restrictions on additional debt, asset transfers, and organizational changes without RUS consent.

Failure to meet these conditions or the occurrence of specified events of default could result in suspension of advances, acceleration of repayment obligations, or enforcement of collateral rights.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

Significant Developments

None.

Critical Accounting Policies and Estimates

A critical accounting estimate is an estimate that: (i) is made in accordance with generally accepted accounting principles, (ii) involved a significant level of estimation uncertainty and (iii) has had or is reasonably likely to have a material impact on the Company's financial condition or results of operations.

There have been changes in our critical accounting policies from those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2025 related to the Company’s acquisition of Amplex which closed June 15, 2024. We revised our critical policies relating to business combinations.

We account for our business combinations using the acquisition accounting method, which requires us to determine the fair value of identifiable assets acquired and liabilities assumed, including any contingent consideration, to properly allocate the purchase price to the individual assets acquired and liabilities assumed and record any residual purchase price as goodwill. We identify and attribute fair values and estimated lives to the intangible assets acquired and allocate the total cost of an acquisition to the underlying net assets based on their respective estimated fair values. If the initial accounting for the business combination has not been completed by the end of the reporting period in which the business combination occurs, provisional amounts are reported to present information about facts and circumstances that existed as of the acquisition date. Once the measurement period ends, which in no case extends beyond one year from the acquisition date, revisions to the accounting for the business combination are recorded in earnings. All acquisition-related costs, other than the costs to issue debt or equity securities, are accounted for as expenses in the period in which they are incurred.

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. A critical accounting estimate is an estimate that: (i) is made in accordance with GAAP, (ii) involved a significant level of estimation uncertainty and (iii) has had or is reasonably likely to have a material impact on the Company's financial condition or results of operations. The Company’s critical accounting estimates and assumptions affecting the financial statements relate to the fair value of assets acquired and liabilities assumed. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and involves the use of significant estimates, including projections of future cash inflows and outflows, discount rates and asset lives. We base our fair value estimates on assumptions we believe are reasonable but recognize that the assumptions are inherently uncertain.

The Company is required to test goodwill and indefinite lived intangible assets for impairment on an annual basis, or more often if indicators of potential impairment exist due to triggering events, by determining if the carrying value of the Company's goodwill exceeds the estimated fair value of said goodwill. Finite-lived intangible assets are amortized over their useful lives and tested for impairment when a triggering event occurs. Indicators that could trigger an interim impairment test include, but are not limited to, underperformance relative to projected future operating results, significant negative industry or economic trends, an adverse change in regulatory environment, or pending adverse litigation.

In evaluating goodwill and indefinite-lived intangible assets for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50%) that the fair value of the Company's goodwill is less than its carrying value as of the assessment date. If no events, facts, or circumstances are identified during the qualitative assessment, the Company does not need to perform a quantitative impairment assessment. If the Company concludes that it is more likely than not that the fair value of the goodwill is less than its carrying value, then the Company will perform a quantitative impairment test by comparing the fair value of the goodwill and indefinite-lived intangible assets with its carrying amount. If the carrying amount exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. During the periods presented, the Company did not have any impairment charges.

In evaluating finite-lived intangible assets for impairment, if impairment indicators (internal or external) suggest the asset’s carrying amount may not be recoverable, then the Company compares the asset’s carrying amount to the sum of its undiscounted future cash flows. If the carrying amount is less than the cash flows, no impairment is recognized. If the asset fails the recoverability test, the Company records impairment equal to the difference between the carrying amount and fair value

Evaluation of Disclosure Controls and Procedures

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s management evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).

Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures were not effective at a reasonable level of assurance as of June 30, 2025, due to the following material weaknesses: 1.) material weaknesses in our internal control over financial reporting relating to non-routine transactions which lead to the correction of errors with respect to the (a) application of complex technical accounting standards related to the presentation and measurement of certain equity and liability instruments from the re-domestication of the Company, (b) initial and subsequent measurement of redeemable noncontrolling interest, certain acquired assets and deferred tax liabilities assumed in the acquisition of a controlling interest in Amplex and the consolidation of smaller leasing entities for which a variable interest did not exist, and (c) post-business combination accounting for depreciation of assets recorded at fair value; 2.) a deficiency in internal control over financial reporting with respect to management’s review of earnings-per-share calculations; 3.) limited formal internal assessment documentation retained over the Company's evaluation of the financial reporting process; 4.) inadequate segregation of duties and lack of documented review of journal entries and monthly close process at the Amplex subsidiary; 5.) Amplex’s Chief Executive Officer having the ability to prepare and post journal entries without independent review or approval; and 6.) limited formally documented IT policies and procedures governing system access, change management, or data security for Amplex’s general ledger application. Additionally, there is no formal process for conducting periodic user access reviews at Amplex.

Remediation Plans for Material Weaknesses

During the first fiscal quarter of fiscal 2026, the Company began executing its remediation plan to address the material weaknesses identified above, which includes:

1. The implementation of new controls focused on financial reporting matters related to non-routine transactions. No such transactions occurred during the first quarter of fiscal 2026.

2. The implementation of control steps which would ensure accurate input information is used in the calculation of earnings-per-share, and that sufficient levels of review occur prior to finalizing calculations for earnings-per-share.

3. The implementation of new controls relating to the formal internal assessment and related documentation of the Company's evaluation of the financial reporting process.

4. The implementation of new controls relating to the review of journal entries occurring within the Amplex general ledger system, including review by corporate financial reporting personnel prior to approval.

5. The implementation of system configuration changes limiting the access of Amplex's Chief Executive Officer as it pertains to the ability to prepare and post journal entries.

6. Ensuring that Amplex's general ledger application and other relevant IT systems are included within the scope of our existing IT policies and procedures governing system access, change management, data security. and user access reviews.

Each weakness will not be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. The Company expects to complete the remediation of the above material weaknesses during fiscal 2026.

The Company's management, including our Chief Executive Officer and Chief Financial Officer, does not expect that the Company's disclosure controls and procedures or internal control over financial reporting will prevent all errors and all fraud due to inherent limitations of internal controls. Because of such limitations, there is a risk that material misstatements will not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

While the Company believes that its efforts for remediation, once implemented, will improve the effectiveness of its internal control over financial reporting, these remediation efforts have been ongoing and will require more time to operate for management to be able to conclude that the design is effective to remediate the material weaknesses identified. The Company may conclude that additional measures will be necessary to remediate the material weaknesses in its internal control over financial reporting, which may necessitate additional evaluation and implementation time.

Changes in Internal Control Over Financial Reporting

In connection with the weaknesses noted above management is in the process of establishing and is refining its internal procedures and controls to ensure the accounting around future complex transactions are thoroughly reviewed with external consultants specializing in the specific transactions identified.

Other than the remediation efforts for material weaknesses described above, during the most recent fiscal quarter, there has been no changes in the Company's internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

There have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussions of the Company’s risk factors under Part I, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2025.