What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 191 added, 170 removed, 590 unchanged (38% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2022

September 30, 2022

December 31, 2021

9 unchanged sentences

Other long-term assets

LIABILITIES AND STOCKHOLDER’ / MEMBERS' EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ / MEMBERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:

20 unchanged sentences

34,182 units issued and outstanding as of December 31, 2021

Class A common stock, $ 0.001 par value per share, 160,000,000 shares authorized, 3,163,214 shares issued and outstanding as of June 30, 2022

Class B common stock, $ 0.001 par value per share, 20,000,000 shares authorized, 11,378,000 shares issued and outstanding as of June 30, 2022

Class A common stock, $ 0.001 par value per share, 160,000,000 shares authorized, 3,260,364 shares issued and outstanding as of September 30, 2022

Class B common stock, $ 0.001 par value per share, 20,000,000 shares authorized, 11,278,000 shares issued and outstanding as of September 30, 2022

Additional paid-in capital

9 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Buy-side advertising

21 unchanged sentences

Income before taxes

Net income per common share / unit:

Net income (loss)

Net income (loss) per common share / unit:

Basic and Diluted

Weighted-average number of shares of common stock / units outstanding:

Basic and Diluted

See accompanying notes to the unaudited consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ / MEMBERS’ EQUITY (DEFICIT)

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Stockholders’

3 unchanged sentences

Conversion of member units to Class B shares

Conversion of Class B shares to Class A common stock

Redemption of common units

4 unchanged sentences

Issuance of restricted stock

Restricted stock forfeitures

Distributions to members

Additional paid-in capital related to tax receivable agreement

Balance, June 30, 2022

Balance, September 30, 2022

( 2,832,007 )

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Stockholders’

Balance, March 31, 2022

Balance, June 30, 2022

( 3,036,348 )

Transaction costs associated with IPO

Conversion of Class B shares to Class A common stock

Stock-based compensation

Issuance of restricted stock

Restricted stock forfeitures

Distributions to members

Additional paid-in capital related to tax receivable agreement

Balance, June 30, 2022

Balance, September 30, 2022

( 2,832,007 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ / MEMBERS’ EQUITY (DEFICIT)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Balance, December 31, 2020

1 unchanged sentence

Distributions to members

Balance, June 30, 2021

Balance, September 30, 2021

( 2,226,945 )

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Stockholders'

Balance, March 31, 2021

Balance, June 30, 2021

( 1,728,453 )

Distributions to members

Balance, June 30, 2021

Balance, September 30, 2021

( 2,226,945 )

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30,

Cash Flows (Used In) Provided By Operating Activities:

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

For the Nine Months Ended September 30,

Cash Flows Provided By Operating Activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Amortization of deferred financing costs

19 unchanged sentences

Net cash provided by operating activities

Cash Flows Provided By (Used In) Financing Activities:

Cash Flows Used In Financing Activities:

Proceeds from note payable

Payments on term loan

( 1,206,750 )

Payments on lines of credit

Payment of deferred financing costs

7 unchanged sentences

Distributions to members

Net cash provided by (used in) financing activities

Net cash used in financing activities

( 1,073,436 )

( 2,213,487 )

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of the period

Cash and cash equivalents, end of the year

Cash and cash equivalents, end of the period

Supplemental Disclosure of Cash Flow Information:

2 unchanged sentences

Non-cash Financing Activities:

Transaction costs related to issuances of Class A shares included in accounts payable and accrued liabilities

Common unit redemption balance included in accrued liabilities

Transaction costs related to issuances of Class A shares included in accrued liabilities

Outside basis difference in partnership

TRA payable to Direct Digital Management, LLC

Tax benefit on TRA

Tax receivable agreement payable to Direct Digital Management, LLC

Tax benefit on tax receivable agreement

See accompanying notes to the unaudited consolidated financial statements.

6 unchanged sentences

Direct Digital Holdings, Inc.

is the holding company for Direct Digital Holdings, LLC (“DDH LLC”), which is, in turn, the holding company for the business formed by DDH LLC’s founders in 2018 through the acquisition of Huddled Masses, LLC (“Huddled Masses”) and Colossus Media, LLC (“Colossus Media”).

Colossus Media operates our proprietary sell-side programmatic platform operating under the trademarked banner of Colossus SSP TM (“Colossus SSP”).

4 unchanged sentences

(See Note 7 – Related Party Transactions).

In these financial statements, the “Company,” “Direct Digital,” “Direct Digital Holdings,” “DDH,” “we,” “us” and “our” refer (i) following the completion of the Organizational Transactions, including the initial public offering, to Direct Digital Holdings, Inc., and, unless otherwise stated, all of its subsidiaries, including DDH LLC, and, unless otherwise stated, its subsidiaries, and (ii) on or prior to the completion of the Organizational Transactions, to DDH LLC.

All of the subsidiaries are incorporated in the state of Delaware, except for DDH LLC, which was formed under the laws of the State of Texas.

50 unchanged sentences

Such deposits may, at times, exceed federally insured limits.

As of June 30, 2022, $ 3,549,295 of the Company’s cash and cash equivalents exceeded the federally insured limits.

As of September 30, 2022, $ 5,487,110 of the Company’s cash and cash equivalents exceeded the federally insured limits.

The Company has not experienced any losses in such amounts and believes it is not exposed to any significant credit risk to cash.

4 unchanged sentences

The Company began insuring its accounts receivable with unrelated third-party insurance companies in an effort to mitigate any future write-offs and establishes an allowance for doubtful accounts as deemed necessary for accounts not covered by this insurance.

As of June 30, 2022 and December 31, 2021, the Company’s allowance for doubtful accounts

was $ 25,571 and $ 40,856 , respectively.

As of September 30, 2022 and December 31, 2021, the Company’s allowance for doubtful

accounts was $ 3,489 and $ 40,856 , respectively.

Management periodically reviews outstanding accounts receivable for reasonableness.

2 unchanged sentences

If the insurance company is unable to collect the full amount, the Company records the remaining 10 % to bad debt expense.

Bad debt expense was $ 27,224 and $ 31,815 for the three months ended June 30, 2022 and 2021, respectively, and $ 24,799 and $ 31,815 for the six months ended June 30, 2022 and 2021, respectively.

For the three months ended September 30, 2022, we recovered $ 22,082 on receivables previously written off.

Bad debt expense was $ 35,724 for the three months ended September 30, 2021.

Bad debt expense was $ 2,717 and $ 67,541 for the nine months ended September 30, 2022 and 2021, respectively.

Concentrations of credit risk

1 unchanged sentence

The following table sets forth our consolidated concentration of accounts receivable:

September 30,

Property and equipment, net

2 unchanged sentences

Leasehold improvements are amortized over the shorter of their useful lives or the remaining terms of the related leases.

As of June 30, 2022 and December 31, 2021, the Company has fully depreciated all property and equipment.

As of September 30, 2022 and December 31, 2021, the Company has fully depreciated all property and equipment.

The cost of repairs and maintenance are expensed as incurred.

5 unchanged sentences

If the Company determines that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a quantitative goodwill impairment analysis is performed, which is referred to as “Step 1”.

Depending upon the results of that measurement, the recorded goodwill may be written down, and impairment expense is recorded in the consolidated statements of operations when the carrying amount of the reporting unit exceeds the fair value of the reporting unit.

Depending upon the results of the Step 1 measurement, the recorded goodwill may be written down, and an impairment expense is recorded in the consolidated statements of operations when the carrying amount of the reporting unit exceeds the fair value of the reporting unit.

Goodwill is reviewed annually and tested for impairment upon the occurrence of a triggering event.

As of June 30, 2022, goodwill was $ 6,519,636 , which includes $ 2,423,936 as a result of the acquisition of Huddled Masses and Colossus Media in 2018 and $ 4,095,700 of goodwill recognized from the acquisition of Orange142 in September 2020.

As of September 30, 2022, goodwill was $ 6,519,636 , which includes $ 2,423,936 as a result of the acquisition of Huddled Masses and Colossus Media in 2018 and $ 4,095,700 of goodwill recognized from the acquisition of Orange142 in September 2020.

Intangible assets, net

7 unchanged sentences

Any impairment loss, if indicated, is measured as the amount by which the carrying amount of the asset exceeds its estimated fair value and is recognized as a reduction in the carrying amount of the asset.

As of June 30, 2022 and December 31, 2021, there were no events or changes in circumstances to indicate that the carrying amount of the assets may not be recoverable.

As of September 30, 2022 and December 31, 2021, there were no events or changes in circumstances to indicate that the carrying amount of the assets may not be recoverable.

Fair value measurements

12 unchanged sentences

These costs are deferred and amortized to interest expense using the straight-line method over the life of the debt.

In December 2021, the Company amended its line of credit with East West Bank (see Note 5 – Long-Term Debt) and incurred additional deferred financing costs of $ 4,613 during the six months ended June 30, 2022.

Unamortized deferred financing costs related to the line of credit was $ 33,434 and $ 96,152 as of June 30, 2022 and December 31, 2021, respectively, and due to the revolving nature of this debt, was classified as an asset on the consolidated balance sheets.

In December 2021, the Company entered into an agreement with Lafayette Square Loan Servicing, LLC (“Lafayette Square”) (see Note 5 – Long-Term Debt) and incurred additional deferred financing costs of $ 180,480 during the six months ended June 30, 2022.

Unamortized deferred financing costs was $ 2,038,438 and $ 2,091,732 as of June 30, 2022 and December 31, 2021, respectively, and netted against the outstanding debt on the consolidated balance sheets.

In December 2021, the Company amended its line of credit with East West Bank (see Note 5 – Long-Term Debt) and incurred additional deferred financing costs of $ 4,613 during the nine months ended September 30, 2022.

On July 26, 2022, the Company repaid the line of credit and terminated the Revolving Credit Facility as of such date and the remaining deferred financing costs of $ 33,434 were amortized to interest expense during the three months ended September 30, 2022.

Unamortized deferred financing costs related to the line of credit was $ 0 and $ 96,152 as of September 30, 2022 and December 31, 2021, respectively, and due to the revolving nature of this debt, was classified as an asset on the consolidated balance sheets.

Unamortized deferred financing costs was $ 2,250,171 and $ 2,091,732 as of September 30, 2022 and December 31, 2021, respectively, and netted against the outstanding debt on the consolidated balance sheets.

Right-of-use assets

2 unchanged sentences

Revenue recognition

The Company adopted FASB ASU 2014-09, Revenue from Contracts with Customers , (“Topic 606”), as of January 1, 2019, for all contracts not completed as of the date of adoption which had no impact on its financial position or results of operations using the modified retrospective method.

The Company adopted FASB ASU 2014-09, Revenue from Contracts with Customers , (“Topic 606”), as of January 1, 2019, for all contracts not completed as of the date of adoption and this has had no impact on the financial position or results of operations using the modified retrospective method.

The Company recognizes revenue using the following five steps:

21 unchanged sentences

Cash payments received prior to the Company’s delivery of its services are recorded to deferred revenue until the performance obligation is satisfied.

The Company recorded deferred revenue (contract liabilities) to account for billings in excess of revenue recognized, primarily related to contractual minimums billed in advance and customer prepayment, of $ 442,982 and $ 1,348,093 as of June 30, 2022 and December 31, 2021, respectively.

The Company recorded deferred revenue (contract liabilities) to account for billings in excess of revenue recognized, primarily related to contractual minimums billed in advance and customer prepayments, of $ 1,146,186 and $ 1,348,093 as of September 30, 2022 and December 31, 2021, respectively.

Sell-side advertising

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of revenues

7 unchanged sentences

The Company expenses advertising costs as incurred.

Advertising expense incurred during the three months ended June 30, 2022 and 2021 was $ 220,326 and $ 66,624 , respectively and $ 322,667 and $ 108,544 for the six months ended June 30, 2022 and 2021, respectively.

Advertising expense incurred during the three months ended September 30, 2022 and 2021 was $ 295,794 and $ 37,065 , respectively and $ 618,461 and $ 145,609 for the nine months ended September 30, 2022 and 2021, respectively.

These costs are included in general and administrative expenses in the consolidated statements of operations.

7 unchanged sentences

Basic income per share / unit is calculated by dividing net income available to common stockholders by the weighted average number of shares / units outstanding for the period.

Potentially dilutive securities include potential shares of common stock related to our stock options and restricted stock units.

Potentially dilutive securities include potential shares of common stock related to our stock options and RSUs.

Diluted earnings per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of potential shares of common stock would have an anti-dilutive effect.

1 unchanged sentence

Effective February 15, 2022, concurrent with the closing of the Company’s initial public offering, the Company entered into a tax receivable agreement (“Tax Receivable Agreement” or “TRA”) with DDH LLC and Direct Digital Management, LLC (“DDM” or the “Continuing LLC Owner”).

The Tax Receivable Agreement provides for certain income (loss) allocations between the Company and DDH LLC under the agreement.

The TRA provides for certain income (loss) allocations between the Company and DDH LLC under the agreement.

DDH LLC is a limited liability company and will continue to be treated as a partnership for federal income tax purposes and, as such, generally will not be subject to any entity-level U.S.

5 unchanged sentences

The Company plans to make an election under Section 754 of the Code for each taxable year in which a redemption or exchange of LLC interest occurs.

As of June 30, 2022, no redemptions or exchanges have been made by the members of DDH, LLC.

During the three months ended September 30, 2022, a member of DDM exchanged 100,000 Class B shares into Class A shares.

The Company applies ASC 740-10, Income Taxes (“ASC 740-10”), in establishing standards for accounting for uncertain tax positions.

2 unchanged sentences

First, the Company determines whether any amount may be recognized and then determines how much of a tax benefit or provision should be recognized.

As of June 30, 2022 and December 31, 2021, the Company had no uncertain tax positions.

As of September 30, 2022 and December 31, 2021, the Company had no uncertain tax positions.

Accordingly, the Company has not recognized any penalty, interest or tax impact related to uncertain tax positions.

7 unchanged sentences

Risks and uncertainties

Management is currently evaluating the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of these financial statements.

Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of these financial statements.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Liquidity and capital resources

As of June 30, 2022, the Company had cash and cash equivalents of $ 4,915,815 and availability under its Revolving Credit Facility (see Note 5 — Long-Term Debt) of $ 1,892,183 .

Based on projections of growth in revenue and operating results in the coming year, the available cash held by us and availability under our Revolving Credit Facility, the Company believes that it will have sufficient cash

resources to finance our operations and service any maturing debt obligations for at least the next twelve months following the issuance of these financial statements.

As of September 30, 2022, the Company had cash and cash equivalents of $ 7,010,796 .

Based on projections of growth in revenue and operating results in the coming year and the available cash held by us, the Company believes that it will have sufficient cash

resources to finance its operations and service any maturing debt obligations for at least the next twelve months following the issuance of these financial statements.

Note 3 — Intangible Assets

4 unchanged sentences

The Company records amortization expense on a straight-line basis over the life of the identifiable intangible assets.

For the three months ended June 31, 2022 and 2021, amortization expense of $ 488,455 and $ 488,455 , respectively, and for the six months ended June 30, 2022 and 2021, amortization expense of $ 976,909 and $ 976,909 , respectively, was recognized, and as of June 30, 2022 and December 31, 2021, intangible assets net of accumulated amortization was $ 14,614,669 and $ 15,591,578 , respectively.

As of June 30, 2022, intangible assets and the related accumulated amortization, weighted-average remaining life and future amortization expense are as follows:

For the three months ended September 30, 2022 and 2021, amortization expense of $ 488,455 and $ 488,455 , respectively, and for the nine months ended September 30, 2022 and 2021, amortization expense of $ 1,465,364 and $ 1,465,364 , respectively, was recognized, and as of September 30, 2022 and December 31, 2021, intangible assets net of accumulated amortization was $ 14,126,214 and $ 15,591,578 , respectively.

As of September 30, 2022, intangible assets and the related accumulated amortization, weighted-average remaining life and future amortization expense are as follows:

Trademarks and

4 unchanged sentences

( 3,907,636 )

Intangibles, net

Intangible assets, net

Estimated life (years)

4 unchanged sentences

Accrued liabilities consisted of the following:

September 30,

Accrued compensation and benefits

3 unchanged sentences

Total accrued liabilities

As of June 30, 2022, accrued expenses includes $ 3,962,162 related to the partial redemption of common units issued in connection with the acquisition of Orange142 (See Note 9 — Stockholders’ / Members’ Equity (Deficit) and Stock-Based Compensation Plans).

On July 28, 2022, the Company paid the $ 3,962,162 plus $ 36,473 of accrued interest in connection with the Second Amendment to the Redemption Agreement (the “Redemption Agreement Amendment”).

(See Note 14 – Subsequent Events).

On July 10, 2019, Huddled Masses was named as a defendant in a lawsuit related to a delinquent balance to a vendor.

On July 28, 2022, the Company entered into a settlement agreement with the vendor and agreed to pay a total of $ 515,096 with monthly installment payments of $ 21,500 over 24 months beginning September 1, 2022.

(See Note 14 – Subsequent Events) .

On July 28, 2022, the Company entered into a settlement agreement with the vendor and agreed to pay a total of $ 515,096 with monthly installment payments over 24 months beginning September 1, 2022.

Note 5 — Long-Term Debt

Revolving Line of Credit - East West Bank

On September 30, 2020, the Company entered into a credit agreement that provides for a revolving credit facility with East West Bank in the amount of $ 4,500,000 with an initial availability of $ 1,000,000 (the “Revolving Credit Facility”).

On September 30, 2020, the Company entered into a credit agreement that provided for a revolving credit facility with East West Bank in the amount of $ 4,500,000 with an initial availability of $ 1,000,000 (the “Revolving Credit Facility”).

On December 17, 2021, the Company amended the Revolving Credit Facility, which increased the amount of the revolving loan to $ 5,000,000 with an initial availability of $ 2,500,000 .

The loans under the Revolving Credit Facility bear interest at the LIBOR rate plus 3.5 % per annum, and at June 30, 2022 and December 31, 2021, the rate was 8.3 % and 7.0 %, respectively, with a 0.50 % unused line fee.

We expect that interest rates applicable to the Revolving Credit Facility will be modified upon the implementation of a LIBOR replacement rate that will apply to our current and future borrowings.

The maturity date of the Revolving Credit Facility is September 30, 2022.

All accrued but unpaid interest under the Revolving Credit Facility is payable in monthly installments on each interest payment date until the maturity date when the outstanding principal balance, together with all accrued but unpaid interest will be due.

In connection with the amendment, the Company incurred additional deferred financing fees of $ 4,613 during the six months ended June 30, 2022.

As of June 30, 2022 and December 31, 2021, the Company had outstanding borrowings under the Revolving Credit Facility of $ 400,000 and $ 400,000 , respectively, and deferred financing cost of $ 33,434 and $ 96,152 , respectively, which are classified as an asset on the consolidated balance sheets.

On July 26, 2022, the Company paid the outstanding balance of $ 400,000 plus accrued interest and terminated the Revolving Credit Facility.

(See Note 14 - Subsequent Events).

The Revolving Credit Facility is secured by the trade accounts receivable of DDH LLC and guaranteed by the Company.

The Revolving Credit Facility includes financial covenants, and as of June 30, 2022 and December 31, 2021, the Company was in compliance with all of its financial covenants.

The loans under the Revolving Credit Facility bore interest at the LIBOR rate plus 3.5 % per annum, and at December 31, 2021, the rate was 7.0 % with a 0.50 % unused line fee.

In connection with the amendment on December 17, 2021, the Company incurred additional deferred financing fees of $ 4,613 during the nine months ended September 30, 2022.

As of September 30, 2022 and December 31, 2021, the Company had outstanding borrowings under the Revolving Credit Facility of $ 0 and $ 400,000 , respectively.

On July 26, 2022, the Company repaid the outstanding balance of $ 400,000 plus accrued interest and terminated the Revolving Credit Facility as of such date.

During the three months ended September 30, 2022, the Company amortized the remaining deferred financing costs of $ 33,434 .

Deferred financing costs were $ 0 and $ 96,152 as of September 30, 2022 and December 31, 2021, respectively, which are classified as an asset on the consolidated balance sheets.

The components of interest expense and related fees for the lines of credit are as follows:

For the Three Months

For the Six Months

For the Nine Months

September 30,

Interest expense – East West Bank

1 unchanged sentence

Total interest expense and amortization of deferred financing costs

Accrued and unpaid interest as of June 30, 2022 and December 31, 2021 for the Revolving Credit Facility was $ 5,814 and $ 5,553 , respectively, related to the unused line fee.

Accrued and unpaid interest as of September 30, 2022 and December 31, 2021 for the Revolving Credit Facility was $ 0 and $ 5,553 , respectively, related to the unused line fee.

2020 Term Loan Facility and 2021 Credit Facility

7 unchanged sentences

indebtedness, liens, investments, acquisitions, dispositions, and restricted payments.

Each of Mark Walker

(“Walker”), Chairman of the Board and Chief Executive Officer, and Keith Smith (“Smith”), President, provided limited guarantees of the obligations under the 2020 Term Loan Facility.

Each of Mark Walker (“Walker”), Chairman of the Board and Chief Executive Officer, and Keith Smith (“Smith”), President, provided limited guarantees of the obligations under the 2020 Term Loan Facility.

The maturity date of the 2020 Term Loan Facility was September 15, 2023;

1 unchanged sentence

Lafayette Square

On December 3, 2021, DDH LLC entered into the 2021 Credit Facility with Lafayette Square as administrative agent, and the various lenders thereto.

On December 3, 2021, DDH LLC entered into the 2021 Credit Facility with Lafayette Square as administrative agent, and the various lenders party thereto.

The term loan under the 2021 Credit Facility provides for a term loan in the principal amount of up to $ 32,000,000 , consisting of a $ 22,000,000 closing date term loan and an up to $ 10,000,000 delayed draw term loan (“Delayed Draw Loan”).

5 unchanged sentences

On July 28, 2022, the Company entered into the Second Amendment and Joinder to Term Loan and Security Agreement (the “Term Loan Amendment”) and received proceeds of $ 4,260,000 borrowed under the Delayed Draw Loan to pay the balance owed on the common unit redemption (See Note 4 – Accrued Liabilities) as well as costs associated with the transaction.

The Company also amended certain covenants and quarterly payment requirements under the 2021 Credit Facility.

(See Note 14 - Subsequent Events).

Pursuant to the Term Loan Amendment, DDH LLC will indemnify the Company from and against any claims, losses, expenses and other liabilities incurred by the Company arising from the Company’s guarantor obligations under the 2021 Credit Facility and related term loan documents.

The Delayed Draw Loan is required to be repaid in quarterly installments payable on the last day of each fiscal quarter in an amount equal to (i) commencing with the fiscal quarter ending December 31, 2022 through and including the fiscal quarter ending December 31, 2023, $ 26,250 , and (ii) commencing March 31, 2024 and continuing on the last day of each fiscal quarter thereafter, $ 52,500 , with a final installment due December 3, 2026 in an amount equal to the remaining entire principal balance thereof.

After giving effect to the Delayed Draw Loan on the effective date of the Term Loan Amendment, no additional delayed draw loans will be available under the 2021 Credit Facility.

The obligations under the 2021 Credit Facility are secured by senior, first-priority liens on all or substantially all assets of DDH LLC and its subsidiaries and are guaranteed by the subsidiaries of DDH LLC and include a pledge and guarantee by the Company.

The 2021 Credit Facility is subject to an intercreditor agreement pursuant to which the lenders under the Revolving Credit Facility have a priority lien on the trade accounts receivable of DDH LLC and its subsidiaries that constitute eligible accounts under the Revolving Credit Facility and related proceeds, and the lenders under the 2021 Credit Facility have a priority lien on all other collateral.

In connection with the entry into the 2021 Credit Facility, we paid off in full and terminated the 2020 Term Loan Facility.

As of June 30, 2022, the Company owed a balance on the 2021 Credit Facility of $ 21,725,000 .

Financing costs incurred in the transaction were initially $ 2,127,185 in 2021 and additional fees of $ 180,480 were incurred for the six months ended June 30, 2022.

Unamortized deferred financing costs as of June 30, 2022 and December 31, 2021 were $ 2,038,438 and $ 2,091,732 , respectively.

Accrued and unpaid interest was $ 0 as of June 30, 2022 and December 31, 2021.

As of September 30, 2022, the Company owed a balance on the 2021 Credit Facility of $ 25,847,500 .

Financing costs incurred in the transaction were initially $ 2,127,185 in 2021 and additional fees of $ 520,682 were incurred during the nine months ended September 30, 2022.

Unamortized deferred financing costs as of September 30, 2022 and December 31, 2021 were $ 2,250,171 and $ 2,091,732 , respectively.

Accrued and unpaid interest was $ 0 as of September 30, 2022 and December 31, 2021.

The components of interest expense and related fees for the 2020 Term Loan Facility and 2021 Credit Facility are as follows:

For the Three Months

For the Six Months

For the Nine Months

September 30,

Interest expense – SilverPeak

Interest expense - Lafayette Square

Interest expense – Layfaette Square

Amortization of deferred financing costs – Silverpeak

6 unchanged sentences

The Company received the loan proceeds of $ 150,000 on June 15, 2020.

bears interest at a rate of 3.75 % and matures on June 15, 2050.

The loan bears interest at a rate of 3.75 % and matures on June 15, 2050.

Installment payments, including principal and interest, of $ 731 will be payable monthly beginning June 15, 2022.

1 unchanged sentence

The loan is secured by substantially all assets of DDH LLC.

Accrued and unpaid interest expense as of June 30, 2022 and December 31, 2021 was $ 11,428 and $ 8,647 , respectively, and is included in accrued expenses on the consolidated balance sheets.

Accrued and unpaid interest expense as of September 30, 2022 and December 31, 2021 was $ 12,842 and $ 8,647 , respectively, and is included in accrued expenses on the consolidated balance sheets.

Paycheck Protection Program

1 unchanged sentence

The PPP was authorized in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and was designed to provide a direct financial incentive for qualifying business to keep their workforce employees.

The SBA made PPP loans available to qualifying businesses in amounts up to 2.5 times their average monthly payroll expenses, and loans should be forgivable after a “covered period” (eight or twenty-four weeks) as long as the borrower maintains its payroll and utilities.

The SBA made PPP loans available to qualifying businesses in amounts up to 2.5 times their average monthly payroll expenses, and loans are forgivable after a “covered period” (eight or twenty-four weeks) as long as the borrower maintains its payroll and utilities.

The forgiveness amount will be reduced if the borrower terminates employees or reduces salaries and wages more than 25% during the covered period.

4 unchanged sentences

On April 11, 2022 , the balance on the PPP-2 Loan was forgiven.

As of June 30, 2022, future minimum payments related to long-term debt is as follows for the years ended December 31:

As of September 30, 2022, future minimum payments related to long-term debt are as follows for the years ended December 31:

Less current portion

10 unchanged sentences

In connection with the Orange142 acquisition, DDH LLC issued 3,500 non-voting Class A Preferred Units at a purchase price of $ 3,500,000 , and a fair value of $ 3,458,378 .

Class A Preferred Units were entitled to certain approval rights and were mandatorily

redeemable for $ 3,500,000 on September 30, 2022, with 10 % preferred annual returns paid on a quarterly basis.

Class A Preferred Units were entitled to certain approval rights and were mandatorily redeemable for $ 3,500,000 on September 30, 2022, with 10 % preferred annual returns paid on a quarterly basis.

Due to the mandatory redemption feature, ASC 480, requires that the Class A Preferred Units be classified as a liability rather than as a component of equity, with the preferred annual returns being accrued and recorded as interest expense.

In December 2021, DDH LLC redeemed the Class A Preferred Units and recognized a loss on the redemption of $ 41,622 in connection with the write-off of the fair value associated with the units.

For the six months ended June 30, 2021, the Company recorded interest expense relating to the Class A Preferred Units of $ 173,562 .

For the nine months ended September 30, 2021, the Company recorded interest expense relating to the Class A Preferred Units of $ 261,781 .

Class B Preferred Units

3 unchanged sentences

In February 2022, DDH LLC redeemed the Class B Preferred Units and recognized a loss on the redemption of $ 590,689 in connection with the write-off of the fair value associated with the units.

The Company recorded interest expense relating to the Class B Preferred Units of $ 0 and $ 122,972 , for the three months ended June 30, 2022 and 2021, respectively and $ 62,162 and $ 244,592 for the six months ended June 30, 2022 and 2021, respectively.

The Company recorded interest expense relating to the Class B Preferred Units of $ 0 and $ 124,323 , for the three months ended September 30, 2022 and 2021, respectively and $ 62,162 and $ 368,915 for the nine months ended September 30, 2022 and 2021, respectively.

Note 7 — Related Party Transactions

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As of December 31, 2021, the Company had a net payable to members that totaled $ 70,801 pertaining to loans made to the Company by its founding members Walker and Smith during the fiscal year ending December 31, 2020.

This remaining balance owed was paid to the members as of June 30, 2022.

This remaining balance owed was paid to the members as of September 30, 2022.

Up-C Structure

In February 2022, the Company completed an initial public offering of its securities, and through the Organizational Transaction, formed an Up-C structure, which is often used by partnership and limited liability companies and allows DDH, the Continuing LLC Owner, a Delaware limited liability company indirectly owned by Walker and Smith, to retain its equity ownership in DDH LLC and to continue to realize tax benefits associated with owning interests in an entity that treated as a partnership, or “passthrough” entity, for U.S.

In February 2022, the Company completed an initial public offering of its securities, and through the Organizational Transaction, formed an Up-C structure, which is often used by partnership and limited liability companies and allows DDH, the Continuing LLC Owner, a Delaware limited liability company indirectly owned by Walker and Smith, to retain its equity ownership in DDH LLC and to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “passthrough” entity, for U.S.

federal income tax purposes.

The Continuing LLC owner will hold economic nonvoting LLC Units in DDH LLC and will also hold noneconomic voting equity interests in the form of the Class B common stock in Direct Digital Holdings (See Note 9 – Stockholders’/Members’ Equity (Deficit and Stock-Based Compensation Plans).

The Continuing LLC owner will hold economic nonvoting LLC Units in DDH LLC and will also

hold noneconomic voting equity interests in the form of the Class B common stock in Direct Digital Holdings (See Note 9 – Stockholders’/Members’ Equity (Deficit) and Stock-Based Compensation Plans).

One of the tax benefits to the Continuing LLC Owner associated with this structure is that future taxable income of DDH LLC that is allocated to the Continuing LLC Owner will be taxed on a pass-through basis and therefore will not be subject to corporate taxes at the entity level.

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Prior to the Organizational Transactions, Smith served as a Manager on the Board of Managers of DDH LLC and now serves as a director on the Board of Directors and President of the Company.

Woolford previously served as a

Manager on the Board of Managers of DDH LLC and Senior Advisor of DDH LLC.

Woolford previously served as a Manager on the Board of Managers of DDH LLC and Senior Advisor of DDH LLC.

In exchange for these services, the Company paid Walker and Smith annual fees of $ 450,000 each and employee benefits for their direct families.

The Company paid Woolford $ 300 per hour for up to 50 hours per month and employee benefits for Woolford and her direct family.

In connection with the Organizational Transactions, the consulting agreements were canceled, and for the three months ended June 30, 2022 and 2021, total fees paid to Walker, Smith and Woolford were $ 0 , $ 0 and $ 0 , and $ 121,154 , $ 121,154 , and $ 45,000 , respectively.

For the six months ended June 30, 2022 and 2021, total fees paid to Walker, Smith and Woolford were $ 56,250 , $ 56,250 and $ 22,500 and $ 225,000 , $ 225,000 , and $ 90,000 , respectively.

In connection with the Organizational Transactions, the consulting agreements were canceled, and for the three months ended September 30, 2022 and 2021, total fees paid to Walker, Smith and Woolford were $ 0 , $ 0 and $ 0 , and $ 103,846 , $ 103,846 , and $ 45,000 , respectively.

For the nine months ended September 30, 2022 and 2021, total fees paid to Walker, Smith and Woolford were $ 56,250 , $ 56,250 and $ 22,500 and $ 328,846 , $ 328,846 , and $ 135,000 , respectively.

Note 8 — Commitments and Contingencies

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Huddled Masses was named as a defendant in a lawsuit on July 10, 2019 related to a delinquent balance to a vendor.

The matter is currently underway, and the Company has estimated a potential liability of approximately $ 501,078 .

Such liability has been recorded and included in accrued liabilities on the consolidated balance sheets as of June 30, 2022 and December 31, 2021 (See Note 4 – Accrued Liabilities).

On July 28, 2022, the Company entered into a settlement agreement with the vendor and agreed to pay a total of $ 515,096 with minimum monthly installment payments of $ 21,500 over the next 24 months (See Note 14 – Subsequent Events).

On July 28, 2022, the Company entered into a settlement agreement with the vendor and agreed to pay a total of $ 515,096 with monthly installment payments over 24 months beginning September 1, 2022.

The liability has been recorded and included in accrued liabilities on the consolidated balance sheets as of September 30, 2022 and December 31, 2021 (See Note 4 – Accrued Liabilities).

In June 2019, the Company entered into a sublease for its corporate office headquarters at 1233 West Loop South, Ste 1170 in Houston, TX.

The lease term expires July 1, 2022, and has a base monthly rent of approximately $ 3,600 per month.

The lease term expired July 1, 2022, and had a base monthly rent of approximately $ 3,600 per month.

In March 2022, the Company entered into a new lease to move its corporate headquarters to 1177 West Loop South, Ste 1310 in Houston, TX effective July 1, 2022, and paid a security deposit of approximately $ 29,000 .

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The base monthly rent varies annually over the term of the lease.

The Company also leases office furniture for its corporate headquarters under a lease agreement effective April 2019 and expiring July 2023.

The Company also leases office

furniture for its corporate headquarters under a lease agreement effective April 2019 and expiring July 2023.

The monthly rent expense is approximately $ 1,223 .

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The lease expires December 31, 2023 and has a base rent of approximately $ 6,700 per month.

For the three months ended June 30, 2022 and 2021, the Company incurred rent expense of $ 52,183 and $ 63,272 , respectively, for the combined leases.

For the six months ended June 30, 2022 and 2021, the Company incurred rent expense of $ 103,561 and $ 113,443 , respectively, for the combined leases.

Supplemental balance sheet information related to operating leases is included in the table below for the year ended June 30, 2022:

For the three months ended September 30, 2022 and 2021, the Company incurred rent expense of $ 89,452 and $ 52,288 , respectively, for the combined leases.

For the nine months ended September 30, 2022 and 2021, the Company incurred rent expense of $ 193,013 and $ 165,731 , respectively, for the combined leases.

Supplemental balance sheet information related to operating leases is included in the table below for the year ended September 30, 2022:

Operating lease - right-of-use asset

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Total lease liability

The weighted-average remaining lease term for the Company’s operating lease is seven years as of ended June 30, 2022, with a weighted-average discount rate of 8 %.

The weighted-average remaining lease term for the Company’s operating lease is seven years as of ended September 30, 2022, with a weighted-average discount rate of 8 %.

Lease liability with enforceable contract terms that have greater than one-year terms are as follows:

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In December 2021, DDH LLC redeemed all of the Class A Preferred Units.

As of December 31, 2021, the total outstanding common units of DDH LLC was 34,182 units.

As of December 31, 2021, the total number of outstanding common units of DDH LLC was 34,182 units.

The common units have voting rights, as well as certain redemption features at the option of the Company.

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Following the completion of the Organizational Transactions, DDH LLC’s limited liability company agreement was amended and restated to, among other things, appoint the Company as the sole managing member of DDH LLC and effectuate a recapitalization of all outstanding preferred units and common units into (i) economic nonvoting units of DDH LLC held by the Company and, through their indirect ownership of DDM, our Chairman and Chief Executive Officer and our President, and (ii) noneconomic voting units of DDH LLC, 100 % of which are held by the Company.

As of June 30, 2022, DDM held 11,378,000 shares of Class B common stock.

In August 2022, a Class B common stockholder tendered 100,000 of its limited

liability company units to the Company in exchange for newly issued shares of Class A common stock of the Company on a one-for-one basis.

In connection with this exchange, an equivalent number of the holder’s shares of Class B common stock were cancelled.

As of September 30, 2022, DDM held 11,278,000 shares of Class B common stock.

The Company is authorized to issue 160,000,000 shares of Class A common stock, par value $ 0.001 per share, 20,000,000 shares of Class B common stock, par value $ 0.001 per share, and 10,000,000 shares of preferred stock, par value $ 0.001 per share.

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The shares of Class A Common Stock and warrants may be transferred separately immediately upon issuance.

At June 30, 2022, 2,800,000 of these warrants are outstanding and the intrinsic value of these warrants is $ 0 .

At September 30, 2022, 2,800,000 of these warrants are outstanding and the intrinsic value of these warrants is $ 0 .

The underwriters in our initial public offering were granted a 45 -day option to purchase up to an additional 420,000 shares and/or warrants, or any combination thereof, to cover over-allotments, which they initially exercised, in part, electing to purchase warrants to purchase an additional 420,000 shares of Class A Common Stock.

As of June 30, 2022, 420,000 of these warrants are outstanding.

As of September 30, 2022, 420,000 of these warrants are outstanding.

In connection with our initial public offering, we issued to the underwriters of the offering a unit purchase option to purchase (i) an additional 140,000 Units at a per Unit exercise price of $ 6.60 , which was equal to 120 % of the public offering price per Unit sold in the initial public offering, and (ii) warrants to purchase 21,000 shares of Class A Common Stock at a per warrant exercise price of $ 0.012 , which was equal to 120 % of the public offering price per warrant sold in the offering.

The underwriters did not exercise this option.

The underwriters have not exercised this option as of September 30, 2022.

The Units were sold at a price of $ 5.50 per Unit, and the net proceeds from the offering were $ 10,167,043 , after deducting underwriting discounts and commissions and offering expenses payable by the Company.

The offering expenses recorded in accounts payable and accrued liabilities are approximately $ 1,045,000 as of June 30, 2022, and the Company intends to pay these amounts

throughout the remainder of 2022.

DDH LLC used the proceeds, together with pre-existing cash and cash equivalents, to purchase all of the remaining 5,637 common units and 7,046 Class B Preferred Units held indirectly by Woolford for an aggregate purchase price of approximately $ 14,246,251 , of which $ 10,284,089 was paid on the closing date of the initial public offering, and $ 3,962,162 was recorded in accrued liabilities in the consolidated balance sheets as of June 30, 2022 (See Note 4 – Accrued Liabilities).

On July 28, 2022, the Company paid the remainder of the purchase price.

(See Note 14 - Subsequent Events).

The offering expenses recorded in accrued liabilities are approximately $ 1,000,000 as of September 30, 2022, and the Company intends to pay these amounts throughout the remainder of 2022.

On July 28, 2022, DDH LLC entered into the Redemption Agreement Amendment with USDM Holdings, Inc.

that amends the previously disclosed Redemption Agreement by and between DDH LLC and USDM Holdings, Inc.

dated a of November 14, 2021 (the “Original Redemption Agreement”), as amended by the Amendment to Redemption Agreement dated as of February 15, 2022.

The Redemption Agreement Amendment, among other things, amended the remainder of the principal and interest for the Common Units Redemption Price to be $ 3,998,635 , which was paid in full on July 28, 2022.

The warrants had a fair value of $ 0 that was calculated using the Black-Scholes option -pricing model.

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Treasury bill rate, (2) expected life of 5 years, (3) expected volatility of approximately 66 % based on the trading history of similar companies, and (4) zero expected dividends.

The following table summarizes warrant activity as of June 30, 2022:

The following table summarizes warrant activity as of September 30, 2022:

Weighted Average

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Outstanding at January 1, 2022

Outstanding at June 30, 2022

Exercisable at June 30, 2022

Outstanding at September 30, 2022

Exercisable at September 30, 2022

Stock-Based Compensation Plans

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The 2022 Omnibus Plan reserved 1,500,000 shares of Class A common stock for issuance in equity awards.

On June 10, 2022, our board of directors granted 264,850 stock options and 363,614 RSUs to employees and non-employee directors.

The Company recognized $ 15,407 of stock-based compensation in the consolidated statement of operations related to the June 10, 2022 awards granted.

On June 10, 2022, our board of directors initially granted 264,850 stock options and 363,614 RSUs to employees and non-employee directors.

Information on activity for both the stock options and RSUs is detailed below.

As of September 30, 2022, the Company recognized $ 85,437 of stock-based compensation expense in the consolidated statement of operations.

Stock Options

Options to purchase shares of common stock vest annually on the grant date anniversary over a period of three years and expire 10 years following the date of grant.

The following table summarizes the stock option activity under the 2022 Omnibus Plan as of June 30, 2022:

The following table summarizes the stock option activity under the 2022 Omnibus Plan as of September 30, 2022:

Stock Options

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Intrinsic Value

Outstanding at January 1, 2022

Outstanding at June 30, 2022

Exercisable at June 30, 2022

As of June 30, 2022, all stock options remain unvested with related unamortized stock-based compensation expense totaling $ 252,938 and the weighted-average period over which such stock-based compensation expense will be recognized is 2.95 years.

Outstanding at December 31, 2021

Outstanding at September 30, 2022

Exercisable at September 30, 2022

As of September 30, 2022, all stock options remain unvested with related unamortized stock-based compensation expense totaling $ 238,527 and the weighted-average period over which such stock-based compensation expense will be recognized is 2.71 years.

Restricted Stock Units

Under the 2022 Omnibus Plan, the Company granted RSUs to all of its employees and non-employee directors.

The RSUs vest annually on the grant date anniversary over a period of three years .

RSUs vest annually on the grant date anniversary over a period of three years .

A summary of RSU activity and related information is as follows:

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Unvested- December 31, 2021

Unvested- June 30, 2022

As of June 30, 2022, unrecognized stock-based compensation of $ 577,124 related to unvested RSUs will be recognized on a straight- line basis over a period of 2.95 years.

Note 10 — Income Per Share / Unit

The computation of basic and diluted income per share/ unit is as follows.

The Company does not have any dilutive shares / units, and therefore the diluted weighted average number of shares / units outstanding are equal to the basic weighted average number of shares / units.

Unvested- September 30, 2022

As of September 30, 2022, unrecognized stock-based compensation of $ 539,812 related to unvested RSUs will be recognized on a straight- line basis over a period of 2.7 years.

Note 10 — Income (Loss) Per Share / Unit

The Company has two classes of common stock, Class A and Class B.

Basic and diluted earnings per share (“EPS”) attributable to common stockholders for Class A and Class B common stock were the same because they were entitled to the same liquidation and dividend rights.

The following table sets forth the computation of the Company’s basic and diluted income (loss) per share.

For the Three Months Ended

For the Six Months Ended

Net income per unit attributable to stockholders/members

Weighted average shares / units outstanding at the beginning of the period

Weighted average Class A and Class B shares issued during the period

Weighted average units redeemed during the period

Number of shares / units outstanding at the end of the period, basic and diluted

Net income per share / unit, basic and diluted

For the Nine Months Ended

September 30,

Net income (loss) per unit attributable to stockholders/members

Weighted average common shares outstanding - basic

Options to purchase common stock

Restricted stock

Weighted average common shares outstanding - diluted

Net income (loss) per share / unit, basic and diluted

Note 11 — Employee Benefit Plans

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The Company matches employee contributions up to a maximum of 100 % of the participant’s salary deferral, limited to 4 % of the employee’s salary.

For the three and six months ended June 31, 2022 and 2021, the Company matching contributions were $ 52,501 and $ 40,677 , respectively and $ 103,062 and $ 77,392 , respectively.

For the three and nine months ended September 30, 2022 and 2021, the Company matching contributions were $ 56,158 and $ 45,400 , respectively and $ 159,219 and $ 122,792 , respectively.

Additionally, the Company may make a discretionary profit- sharing contribution to the Plan.

During the three and six months ended June, 2022 and 2021, no profit-sharing contributions were made.

During the three and nine months ended September, 2022 and 2021, no profit-sharing contributions were made.

The Company has an Employee Benefit Plan Trust (the “Trust”) to provide for the payment or reimbursement of all or a portion of covered medical, dental and prescription expenses.

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The self-funded plan has an integrated stop loss insurance policy for the funding of the Trust benefits in excess of the full funding requirements.

As of June 30, 2022 and December 31, 2021, the Company analyzed the incurred but not reported claims and recorded an estimated liability, as required.

As of September 30, 2022 and December 31, 2021, the Company analyzed the incurred but not reported claims and recorded an estimated liability, as required.

Note 12 — Tax Receivable Agreement and Income Taxes

Tax Receivable Agreement

In connection with our initial public offering in February 2022, the Company entered into a TRA with DDH LLC and DDM (“TRA Holders”) which provides for payment by Direct Digital Holdings, Inc.

In connection with our initial public offering in February 2022, the Company entered into a tax receivable agreement (“TRA”) with DDH LLC and DDM (“TRA Holders”) which provides for payment by Direct Digital Holdings, Inc.

to the TRA Holders of 85 % of the net cash savings, if any, in U.S.

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The Company plans to make an election under Section 754 if the Code for each taxable year in which a redemption or exchange of LLC interest occurs.

As of June 30, 2022, no redemptions or exchanges have been made by the members of DDH, LLC.

As of June 30, 2022, Direct Digital Holdings, Inc.

recognized a deferred tax asset from the outside basis difference in the partnership interest of $ 3,234,000 , and reconized the total TRA liability of $ 2,748,900 , with $ 183,260 reflected in current liabilities based on the expected timing of our payments.

The payments under the TRA will not be conditional on holder of rights under the TRA having a continued ownership interest in either DDH LLC or Direct Digital Holdings, Inc.

During the three months ended September 30, 2022, a member of DDM exchanged 100,000 Class B shares into Class A shares.

As of September 30, 2022, Direct Digital Holdings, Inc.

recognized a deferred tax asset from the outside basis difference in the partnership interest of $ 3,234,000 , and recognized the total TRA liability of $ 2,748,900 , with $ 183,260 reflected in current liabilities based on the expected timing of our payments.

The payments under the TRA will not be conditional on holder of rights under the TRA

having a continued ownership interest in either DDH LLC or Direct Digital Holdings, Inc.

We may elect to defer payments due under the TRA if we do not have available cash to satisfy our payment obligations under the TRA.

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federal income tax purposes.

Under the TRA, the Company is subject to corporation income tax on 19.7 % of the taxable income, and as a result, recorded a provision for federal income tax of $ 86,676 for the three months ended June 30, 2022.

Under the TRA, the Company is subject to corporation income tax on 19.7 % of the taxable income, and as a result, recorded a provision for federal income tax of $ 81,710 and $ 168,386 for the three and nine months ended September 30, 2022, respectively.

In the fiscal year ending December 31, 2021, the Company was treated as a partnership, and therefore no income tax expense was recognized.

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For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Total provision for income taxes

The Company is also subject to Texas franchise taxes.

Including the franchise tax, total provision for income taxes for the three months ended September 30, 2022 and 2021 was $ 128,436 and $ 878 , respectively.

For the nine months ended September 30, 2022 and 2021, the total provision for income taxes including franchise tax was $ 215,112 and $ 54,878 , respectively.

The components of deferred tax assets are as follows:

September 30,

Outside basis difference in partnership interests in DDH, LLC

Total deferred income taxes

The effective tax rate for the three and six months ended June 30, 2022, was approximately 22%.

The effective tax rate for the three and nine months ended September 30, 2022, was approximately 22 % .

Under the Up-C ownership structure, the Company calculates taxable income as 19.7 % of consolidated net income, adjusted for temporary and permanent tax differences.

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For the Three Months

For the Six Months

For the Nine Months

September 30,

Buy-side advertising

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For the Three Months

For the Six Months

For the Nine Months

September 30,

Buy-side advertising

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Total assets by business segment are as follows:

September 30,

Buy-side advertising

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Note 14 — Subsequent Events

On July 26, 2022, the Company repaid the $ 400,000 that was outstanding pursuant to the Revolving Credit Facility and terminated the Revolving Credit Facility as of such date.

On July 28, 2022, the Company entered into the Term Loan Amendment with DDH LLC, Colossus Media, Huddled Masses, Orange142, Universal Standards for Digital Management, LLC (“USDM, LLC”), Lafayette Square, and the Lenders party thereto, pursuant to which the Company was joined as a guarantor of the obligations under the 2021 Credit Facility.

Additionally, under the Term Loan Amendment, DDH LLC borrowed $ 4,260,000 as the Delayed Draw Loan.

After giving effect to the Delayed Draw Loan on the effective date of the Term Loan Amendment, no additional delayed draw loans will be available under the 2021 Credit Facility.

On July 28, 2022, DDH LLC entered into the Redemption Agreement Amendment with USDM Holdings, Inc.

that amends the previously disclosed Redemption Agreement by and between DDH LLC and USDM Holdings, Inc., dated as of November 14, 2021 (the “Original Redemption Agreement”), as amended by the Amendment to Redemption Agreement dated as of February 15, 2022.

The Redemption Agreement Amendment, among other things, amends the remainder of the principal and interest for the Common Units Redemption Price (as defined in the Original Redemption Agreement) to be $ 3,998,635 .

Pursuant to the terms of the Redemption Agreement Amendment, proceeds of the Delayed Draw Loan were used to repay the outstanding balance and related expenses of the Original Redemption Agreement, as well as other transaction costs.

On July 28, 2022, the Company entered into a litigation settlement agreement with a vendor and agreed to pay a total of $ 515,096 with monthly installment payments of $ 21,500 over 24 months beginning September 1, 2022.

(See Note 4 – Accrued Liabilities and Note 8 – Commitments and Contingencies).

On November 9, 2022 the Company entered into a definitive agreement to acquire the software development rights to its proprietary supply-side platform supporting Colossus Media, LLC for a purchase price of $ 500,000 .

No other events occurred subsequent to the balance sheet date through the date of this report that would require recognition or disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements