What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-12 compared with 2025-08-06 · 129 added, 107 removed, 284 unchanged (45% of the section changed)

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• our ability to secure additional financing to meet our capital needs;

• ineligibility to file short-form registration statements on Form S-3, which may impair our ability to raise capital;

• our inability, due to the government shutdown or other factors, to have declared effective any registration statement for a public offering or a resale registration statement for a selling stockholder, which may impair our ability to raise capital;

• our failure to satisfy applicable listing standards of the Nasdaq Capital Market resulting in a potential delisting of our common stock;

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Direct Digital Holdings, Inc.

owns 100% of the voting interest in DDH LLC and as of June 30, 2025, DDH owns 53.6% of the economic interest in DDH LLC.

owns 100% of the voting interest in DDH LLC and as of September 30, 2025, DDH owns 63.5% of the economic interest in DDH LLC.

DDH LLC was formed on June 21, 2018 and acquired by the Company on

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Nasdaq Rule Noncompliance.

On October 18, 2024, we received a deficiency letter (the “Letter”) from the Listing Qualifications Department of Nasdaq (the "Staff") notifying the Company that it was not in compliance with the minimum stockholders’ equity requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5550(b)(1).

On October 18, 2024, we received a deficiency letter (the “Letter”) from the Listing Qualifications Department (the "Staff") of The Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that it was not in compliance with the minimum stockholders’ equity requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5550(b)(1).

This rule requires companies listed on the Nasdaq Capital Market to maintain stockholders’ equity of at least $2.5 million (the “Stockholders’ Equity Requirement”).

The Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2024 reported a stockholders’ deficit of $8.77 million.

The Letter further noted that as of the letter date, the Company did not have a market value of listed securities of $35.0 million, or net income from continued operations of $0.5 million in the most recently completed fiscal year or in two of the last three most recently completed fiscal years, which are the alternative quantitative standards to the Stockholders’ Equity Requirement for continued listing on Nasdaq Capital Market.

Subsequent to the end of an extension period granted by the Staff, the Company received a letter indicating that its common stock would be delisted.

The Company then requested a hearing before the Nasdaq Hearings Panel (the “Panel”).

The hearing was held on May 29, 2025 and, by decision dated June 9, 2025, the Panel accepted the Company’s proposed plan to regain compliance with the Stockholders’ Equity Requirement (the “Compliance Plan”), and granted the Company’s request for an extension through October 14, 2025, subject to the Company’s satisfaction of certain interim conditions.

If the Company is not able to evidence compliance with Nasdaq’s continued listing requirements within the time period permitted by Nasdaq, then the Company’s securities will be delisted from Nasdaq.

Separately, on May 12, 2025, the Company received notice from the Staff that the closing bid price of the Company’s Class A common stock was below $1.00 per share for the prior 30 consecutive business days, and therefore, the Company was not in compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule

The notice stated that the Company has 180 calendar days from the date of such notice, or until November 10, 2025, to regain compliance with the minimum bid price rule.

The Company intends to take all reasonable measures available to regain compliance and remain listed on Nasdaq.

The hearing was held on May 29, 2025 and, by decision dated June 9, 2025, the Panel accepted the Company’s proposed plan to regain compliance with the Stockholders’ Equity Requirement, and granted the Company’s request for an extension through October 14, 2025 to do so, subject to the Company’s satisfaction of certain interim conditions.

Since June 30, 2025, the Company completed the following transactions:

• Under the Purchase Agreement with New Circle, the Company sold 3.7 million shares of the Company's Class A Common Stock for $1.3 million during the quarter ended September 30, 2025.

• On August 8, 2025, the Company entered into the Seventh Amendment (the “Seventh Amendment”) to the Term Loan and Security Agreement dated December 3, 2021 (the “Term Loan Facility”) and Lafayette

Square Loan Servicing, LLC, as administrative agent, and the other lenders (collectively "Lafayette").

Under the terms of the Seventh Amendment, the parties agreed to convert and exchange term loans with an aggregate principal amount of $25.0 million for newly authorized shares of Series A Preferred Stock, par value $0.001, of the Company (the “Series A Preferred Stock”), with an aggregate face amount of $25.0 million issued to Lafayette.

• On October 14, 2025, the Company entered into the Ninth Amendment (the “Ninth Amendment”) to the Term Loan Facility with Lafayette.

Under the terms of the Ninth Amendment, the parties agreed to convert and exchange term loans with an aggregate principal amount of $10.0 million for newly authorized shares of Series A Preferred Stock, with an aggregate face amount of $10.0 million issued to Lafayette.

On November 7, 2025, the Panel notified the Company that the Staff has determined that the Company has evidenced compliance with the Stockholders’ Equity Requirement, but that the Panel has imposed a discretionary panel monitor for a period of one year.

Should the Company fail to maintain compliance with any continued listing requirement, the Staff will issue a delist determination letter and the Company may seek a new hearing with the Panel.

Also as previously disclosed, on May 12, 2025, the Company received a second notice (the “Second Notice”) from the Staff notifying the Company that because the closing bid price of the Company’s Class A common stock was below $1.00 per share for the prior 30 consecutive business days, the Company was not in compliance with the minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”).

The Second Notice states that the Company has 180 calendar days from the date of the Second Notice, or until November 10, 2025, to regain compliance with the Bid Price Rule.

As of November 10, 2025, the Company was not in compliance with the Bid Price Rule;

however, on November 7, 2025, the Panel granted the Company an exception until January 30, 2026, to demonstrate compliance with that rule.

If at any time before November 10, 2025, the bid price for the Company’s Class A Common Stock closes at or above $1.00 per share for a minimum of 10 consecutive business days (which number of days may be extended by Nasdaq), Nasdaq will provide written notification that the Company has achieved compliance with the Bid Price Rule, and the matter will be closed.

The Company is considering all available options to resolve the deficiency and regain compliance with the applicable Nasdaq Listing Rules within the timeframes required by Nasdaq.

However, there can be no assurance that the Company will be able to complete the steps outlined in the Compliance Plan or regain compliance with the minimum bid price rule.

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Equity Reserve Facility.

On October 18, 2024, the Company entered into a Share Purchase Agreement (the “Purchase Agreement" and the facility as a whole, the “Equity Reserve Facility”) with New Circle Principal Investments LLC, a Delaware limited liability company (“New Circle”), pursuant to which New Circle has committed to purchase, subject to certain limitations, up to $20 million (the “Total Commitment”) of the Company’s Class A Common Stock.

On October 18, 2024, the Company entered into a Share Purchase Agreement (as amended, the “Purchase Agreement" and together with the facility as a whole, the “Equity Reserve Facility”) with New Circle Principal Investments LLC, a Delaware limited liability company (“New Circle”), and subsequently entered into an amendment with New Circle on October 24, 2025 (the “Amendment”), pursuant to which New Circle has committed to purchase, subject to certain limitations, up to $100 million (the “Total Commitment”) of the Company’s Class A Common Stock.

The purchase price of the shares that may be sold to New Circle under the Purchase Agreement will be based on an agreed upon fixed discount to the market price of our Class A Common Stock as computed under the Purchase Agreement.

The Company sold 1,580,000 shares of the Company's Class A Common Stock for $3.0 million during the year ended December 31, 2024.

During the six months ended June 30, 2025, the Company sold 6,059,351 shares of the Company's Class A Common Stock for $4.6 million.

During the nine months ended September 30, 2025, the Company sold 9,759,351 shares of the Company's Class A Common Stock for $5.9 million.

The Purchase Agreement will automatically terminate on the earliest of (i) the 36-month anniversary of the Purchase Agreement, (ii) the date on which New Circle shall have made payment to the Company for Class A Common Stock equal to the Total Commitment or (iii) the date any statute, rule, regulation, executive order, decree, ruling or injunction that would prohibit any of the transactions contemplated by the Purchase Agreement goes into effect.

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Our customers (or buyers) include ad exchanges, DSPs, agencies and individual advertisers.

We have broad exposure to the ecosystem of buyers, reaching on average approximately 182,000 advertisers per month in the six months ended June 30, 2025, an increase of 33,000, or 22%, over the 149,000 advertisers per month in the six months ended June 30, 2024.

We have broad exposure to the ecosystem of buyers, reaching on average approximately 183,000 advertisers per month in the nine months ended September 30, 2025, an increase of 25,000, or 16%, over the 158,000 advertisers per month in the nine months ended September 30, 2024.

As spending on programmatic advertising increasingly becomes a larger share of the overall ad spend, advertisers and agencies are seeking greater control of their digital advertising supply chains.

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As a result of these direct relationships, our existing advertisers and agencies are incentivized to allocate an increasing percentage of their advertising budgets to our platform.

We also strive to retain existing publishers and add new publishers.

However, as discussed elsewhere in this Report and our public filings, including in Item 1A.

“Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, we continue to face challenges related to our return to historic levels of revenue and profitability.

We continue to strive to retain existing publishers and add new publishers.

Our proprietary Colossus SSP platform was custom developed with a view towards the specific challenges facing small and mid-sized publishers with the belief that smaller publishers often offer a more engaged, highly-valued, unique following but experience technological and budgetary constraints on the path to monetization.

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Each time the publisher’s web page loads, an ad request is sent to multiple ad exchanges and, in some cases, to the demand side platform directly from Colossus SSP.

In case of real-

time bidding (“RTB”) media buys, many DSPs would place bids to the impressions being offered by the publisher during the auction.

In case of real-time bidding (“RTB”) media buys, many DSPs would place bids to the impressions being offered by the publisher during the auction.

The advertiser that bids a higher amount compared to other advertisers will win the bid.

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The platform is comprised of publishers across multiple channels including OTT/CTV, display, native, in-app, online video (“OLV”), audio and digital out of home (“DOOH").

In the six months ended June 30, 2025, we processed approximately 202 billion average monthly impressions across many unique audiences including multicultural growth audiences at scale with 79 billion, or 39% , of those impressions from growing multicultural-focused audiences.

The Colossus SSP continues to expand its capabilities to give our content providers more avenues to distribute ad inventory such as OTT/CTV, digital audio, DOOH, etc.

In the nine months ended September 30, 2025, we processed approximately 199 billion average monthly impressions across many unique audiences including multicultural growth audiences at scale with 89 billion, or 45% , of those impressions from growing multicultural-focused audiences.

The Colossus SSP continues to expand its capabilities to give our content providers more

avenues to distribute ad inventory such as OTT/CTV, digital audio, DOOH, etc.

and inform our publishers to enhance their ad selling needs by distributing content in various forms to meet the rising demands of the ad buying community.

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In the advertising industry, companies commonly experience seasonal fluctuations in revenue.

For example, in our sell-side advertising segment, many advertisers allocate the largest portion of their budgets to the fourth quarter of the

calendar year in order to coincide with increased holiday purchasing.

For example, in our sell-side advertising segment, many advertisers allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing.

We expect our sell-side revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.

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On the buy-side of our business, our customers consist of purchasers of programmatic advertising inventory (ad space).

We serve the needs of over 220 small and mid-sized clients, consisting of advertising space buyers, including small and mid-sized companies, large advertising holding companies (which may manage several agencies), independent advertising agencies and mid-market advertising service organizations.

We serve the needs of about 220 small and mid-sized clients, consisting of advertising space buyers, including small and mid-sized companies, large advertising holding companies (which may manage several agencies), independent advertising agencies and mid-market advertising service organizations.

We serve a variety of customers across multiple industries including travel/tourism (including DMOs), education, energy, consumer packaged goods, healthcare, financial services and other industries.

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We are technology and media agnostic, and we believe our clients trust us to provide the best opportunity for success of their brands and businesses.

As a result, our clients have been loyal, with approximately 88% client retention amongst the clients that represent approximately 80% of our revenue during the six months ended June 30, 2025.

In addition, we cultivate client relationships through our pipeline of managed and moderate serve clients that conduct campaigns through our platform.

As a result, our clients have been loyal, with approximately 91% client retention amongst the clients that represent approximately 80% of our revenue during the nine months ended September 30, 2025.

In addition, we cultivate client relationships through our pipeline of managed and

moderate serve clients that conduct campaigns through our platform.

The managed services delivery model allows us to combine our technology with a highly personalized offering to strategically design and manage advertising campaigns.

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Results of Operations

Comparison of the Three and Six Months Ended June 30, 2025 and 2024

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

The following tables set forth our condensed consolidated results of operations for the periods presented (in thousands).

The period-to-period comparison of results is not necessarily indicative of results for future periods.

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2025 2024 Amount % 2025 2024 Amount %

Sell-side advertising $ 2,483 $ 14,298 $ (11,815) (83) % $ 4,511 j $ 30,799 j $ (26,288) (85) %

Buy-side advertising 7,661 7,557 104 1 % 13,790 j 13,331 j 459 3 %

Sell-side advertising $ 641 $ 2,202 $ (1,561) (71) % $ 5,153 $ 33,001 $ (27,848) (84) %

Buy-side advertising 7,343 6,873 470 7 % 21,133 20,204 929 5 %

Total revenues 7,984 9,075 (1,091) (12) % 26,286 53,205 (26,919) (51) %

Cost of revenues

Sell-side advertising 2,851 13,209 (10,358) (78) % 5,489 j 28,016 j (22,527) (80) %

Buy-side advertising 3,732 2,715 1,017 37 % 6,858 j 5,185 j 1,673 32 %

Sell-side advertising 1,457 2,654 (1,197) (45) % 6,946 30,670 (23,724) (77) %

Buy-side advertising 4,313 2,907 1,406 48 % 11,171 8,091 3,080 38 %

Total cost of revenues 5,770 5,561 209 4 % 18,117 38,761 (20,644) (53) %

Gross profit 2,214 3,514 (1,300) (37) % 8,169 14,444 (6,275) (43) %

Operating expenses 5,987 7,996 (2,009) (25) % 12,304 j 15,802 j (3,498) (22) %

Operating expenses 6,125 7,172 (1,047) (15) % 18,429 22,973 (4,544) (20) %

Loss from operations (3,911) (3,658) (253) 7 % (10,260) (8,529) (1,731) 20 %

Other expense, net (1,770) (1,350) (420) 31 % (3,786) j (2,563) j (1,223) 48 %

Loss before income taxes (4,196) (3,415) (781) 23 % (10,136) (7,436) (2,700) 36 %

Income tax benefit — (274) 274 (100) % — j (475) j 475 (100) %

Other expense, net (1,089) 3,887 (4,976) (128) % (4,876) 1,323 (6,199) (469) %

(Loss) income before income taxes (5,000) 229 (5,229) (2282) % (15,136) (7,206) (7,930) 110 %

Income tax expense — 6,606 (6,606) (100) % — 6,132 (6,132) (100) %

Net loss $ (5,000) $ (6,377) $ 1,377 (22) % $ (15,136) $ (13,338) $ (1,798) 13 %

Adjusted EBITDA (1)

$ (1,452) $ (1,343) $ (109) 8 % $ (4,476) k $ (3,005) k $ (1,471) 49 %

$ (2,963) $ (2,855) $ (108) 4 % $ (7,440) $ (5,858) $ (1,582) 27 %

_______________________________________________________

(1) For a definition of Adjusted EBITDA, an explanation of our management’s use of this measure, and a reconciliation of Adjusted EBITDA to net income see “ – Non-GAAP Financial Measures .”

Our revenues of $10.1 million for the three months ended June 30, 2025 decreased by $11.7 million, or 54%, from $21.9 million for the three months ended June 30, 2024.

Our revenues of $8.0 million for the three months ended September 30, 2025 decreased by $1.1 million, or 12%, from $9.1 million for the three months ended September 30, 2024.

Sell-side advertising revenue decreased $1.6 million, or 71% while buy-side revenue increased $0.5 million, or 7%, compared to the prior year period.

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Management attributes the cause of this decrease to unexpected business disruption amongst our partners, advertisers and clients caused by multiple short attacks and a market-discredited blog post against our supply-side platform, Colossus SSP, in mid May 2024.

Sell-side volumes have resumed but not yet at the levels experienced prior to the post in May 2024, which negatively affected revenue in the first half of 2025.

The Company sold approximately 182 million average monthly impressions in the second quarter of 2025, a decrease of 91% from the prior period.

Sell-side volumes have resumed but not yet at the levels experienced prior to the post in May 2024.

The Company continues efforts to reconstitute its prior business, target new customers and develop new products for the sell-side segment.

The Company sold approximately 154 million average monthly impressions in the third quarter of 2025, a decrease of 25% from the prior period.

The increase in buy-side revenue of $0.5 million was due to growth from new customers of $2.3 million, including $2.1 million from customers in new verticals, partially offset by a $1.8 million decrease in spending from existing customers, including a $0.7 million decrease from customers no longer actively purchasing from the Company.

Our revenues of $18.3 million for the six months ended June 30, 2025 decreased by $25.8 million, or 59%, from $44.1 million for the six months ended June 30, 2024.

Our revenues of $26.3 million for the nine months ended September 30, 2025 decreased by $26.9 million, or 51%, from $53.2 million for the nine months ended September 30, 2024.

Sell-side advertising revenue decreased $27.8 million, or 84%, while buy-side revenue increased $0.9 million, or 5%, compared to the prior year period.

The decrease in sell-side advertising revenue was primarily due to a decrease in impression inventory and the unexpected business disruption described above.

The Company sold approximately 185 million average monthly impressions in the first six months of 2025, a decrease of 91% from the prior period.

The increase in buy-side revenue of $0.5 million was due to growth from new customers of $3.8 million, including $2.2 million from customers in new verticals, partially offset by a $3.3 million decrease in spending

from existing customers, including a $2.9 million decrease from customers no longer actively purchasing from the Company.

The Company sold approximately 175 million average monthly impressions in the first nine months of 2025, a decrease of 87% from the prior period.

The increase in buy-side revenue of $0.9 million was due to growth from new customers of $5.0 million, including $4.3 million from customers in new verticals, partially offset by a $4.1 million decrease in spending from existing customers, including a $3.6 million decrease from customers no longer actively purchasing from the Company.

Cost of revenues

Cost of revenues of $6.6 million for the three months ended June 30, 2025 decreased by $9.3 million, or 59% from $15.9 million for the three months ended June 30, 2024.

Sell-side advertising cost of revenues decreased $10.4 million, to $2.9 million, or 115% of sell-side revenue, for the three months ended June 30, 2025, compared to $13.2 million, or 92% of sell-side revenue, for the same period in 2024.

Cost of revenues of $5.8 million for the three months ended September 30, 2025 increased by $0.2 million, or 4% from $5.6 million for the three months ended September 30, 2024.

Sell-side advertising cost of revenues decreased $1.2 million, to $1.5 million, or 227% of sell-side revenue, for the three months ended September 30, 2025, compared to $2.7 million, or 121% of sell-side revenue, for the same period in 2024.

The decrease in costs was primarily due to the related decrease in revenue, while the 106% increase as a percentage of revenue was due to fixed costs not decreasing at the same proportionate rate as the revenue decline.

Fixed cost of sell-side revenues for the three months ended June 30, 2025 of $0.9 million decreased by $0.5 million, or 40%, from fixed cost of sell-side revenues of $1.4 million for the same period in 2024.

Buy-side advertising cost of revenues increased $1.0 million to $3.7 million, or 49% of buy-side revenue, for the three months ended June 30, 2025, compared to $2.7 million, or 36% of buy-side revenue, for the same period in 2024.

Cost of revenues of $12.3 million for the six months ended June 30, 2025 decreased by $20.9 million, or 63% from $33.2 million for the six months ended June 30, 2024.

Sell-side advertising cost of revenues decreased $22.5 million to $5.5 million, or 122% of sell-side revenue, for the three months ended June 30, 2025, compared to $28.0 million, or 91% of sell-side revenue, for the same period in 2024.

Fixed cost of sell-side revenues for the three months ended September 30, 2025 of $0.8 million decreased by $0.1 million, or 4%, from fixed cost of sell-side revenues of $0.9 million for the same period in 2024.

Buy-side advertising cost of revenues increased $1.4 million to $4.3 million, or 59% of buy-side revenue, for the three months ended September 30, 2025, compared to $2.9 million, or 42% of buy-side revenue, for the same period in 2024.

See gross profit changes described in more detail below.

Cost of revenues of $18.1 million for the nine months ended September 30, 2025 decreased by $20.6 million, or 53% from $38.8 million for the nine months ended September 30, 2024.

Sell-side advertising cost of revenues decreased $23.7 million to $6.9 million, or 135% of sell-side revenue, for the nine months ended September 30, 2025, compared to $30.7 million, or 93% of sell-side revenue, for the same period in 2024.

The decrease in costs was primarily due to the related decrease in revenue, while the 42% increase as a percentage of revenue was due to fixed costs not decreasing at the same proportionate rate as the revenue decline.

Fixed cost of sell-side revenues for the six months ended June 30, 2025 of $1.8 million decreased by $0.9 million, or 33%, from fixed cost of sell-side revenues of $2.7 million for the same period in 2024.

Buy-side advertising cost of revenues increased $1.7 million, to $6.9 million, or 50% of buy-side revenue, for the six months ended June 30, 2025, compared to $5.2 million, or 39% of buy-side revenue, for the same period in 2024.

Gross profit was $3.6 million, or 35% of revenue, for the three months ended June 30, 2025, compared to $5.9 million, or 27% of revenue, for the same period in 2024, reflecting a decrease of $2.4 million, or 40%.

The change in gross profit margin percentage for the three months ended June 30, 2025 is attributable to the mix in revenue between our business segments as our sell-side segment has higher cost of revenues compared to our buy-side segment, as well as the lower sell-side fixed costs related to server capacity, analytic, development and technology-related costs.

Sell-side advertising gross profit decreased $1.5 million for the three months ended June 30, 2025 as compared to the same period in 2024, primarily due to the decrease in revenue partially offset by lower fixed costs.

Sell-side advertising gross margin percentage was (15)% and 8% for the three months ended June 30, 2025 and 2024, respectively.

Buy-side advertising gross profit decreased $0.9 million for the three months ended June 30, 2025, as compared to the same period in the prior year.

Buy-side advertising gross margin percentage was 51% and 64% for the three months ended June 30, 2025 and 2024, respectively, with the decrease in gross margin percentage due to higher cost to provide services to customers and the mix of services provided.

Gross profit was $6.0 million, or 33% of revenue, for the six months ended June 30, 2025, compared to $10.9 million, or 25% of revenue, for the same period in 2024, reflecting a decrease of $5.0 million, or 46%.

The change in gross profit margin percentage for the six months ended June 30, 2025 is attributable to the mix in revenue between our business segments as our sell-side segment has higher cost of revenues compared to our buy-side segment, as well as the lower sell-side fixed costs related to server capacity, analytic, development and technology-related costs.

Sell-side advertising gross profit decreased $3.8 million for the six months ended June 30, 2025 as compared to the same period in 2024, primarily due to the decrease in revenue partially offset by lower fixed costs.

Sell-side advertising gross margin percentage was (22)% and 9% for the six months ended June 30, 2025 and 2024, respectively.

Buy-side advertising gross profit decreased $1.2 million for the six months ended June 30, 2025, as compared to the same period in the prior year.

Buy-side advertising gross margin percentage was 50% and 61% for the six months ended June 30, 2025 and 2024, respectively, with the decrease in gross margin percentage due to higher cost to provide services to customers and the mix of services provided.

Fixed cost of sell-side revenues for the nine months ended September 30, 2025 of $2.6 million decreased by $0.9 million, or 26%, from fixed cost of sell-side revenues of $3.5 million for the same period in 2024.

Buy-side advertising cost of revenues increased $3.1 million, to $11.2 million, or 53% of buy-side revenue, for the nine months ended September 30, 2025, compared to $8.1 million, or 40% of buy-side revenue, for the same period in 2024.

See gross profit changes described in more detail below.

Gross profit was $2.2 million, or 28% of revenue, for the three months ended September 30, 2025, compared to $3.5 million, or 39% of revenue, for the same period in 2024, reflecting a decrease of $1.3 million, or 37%.

The change in gross profit margin percentage for the three months ended September 30, 2025 is attributable to lower gross profit margins for both the sell-side segment and the buy-side segment.

Sell-side advertising gross profit decreased $0.4 million for the three months ended September 30, 2025 as compared to the same period in 2024, primarily due to the decrease in revenue partially offset by lower fixed costs.

Sell-side advertising gross margin percentage was (127)% and (21)% for the three months ended September 30, 2025 and 2024, respectively.

Buy-side advertising gross profit decreased $0.9 million for the three months ended September 30, 2025, as compared to the same period in the prior year.

Buy-side advertising gross margin percentage was 41% and 58% for the

three months ended September 30, 2025 and 2024, respectively, with the decrease in gross margin percentage due to higher cost to provide services to customers and the mix of services provided.

Gross profit was $8.2 million, or 31% of revenue, for the nine months ended September 30, 2025, compared to $14.4 million, or 27% of revenue, for the same period in 2024, reflecting a decrease of $6.3 million, or 43%.

The change in gross profit margin percentage for the nine months ended September 30, 2025 is attributable to the mix in revenue between our business segments as our sell-side segment has higher cost of revenues compared to our buy-side segment, as well as the lower sell-side fixed costs related to server capacity, analytic, development and technology-related costs.

Sell-side advertising gross profit decreased $4.1 million for the nine months ended September 30, 2025 as compared to the same period in 2024, primarily due to the decrease in revenue partially offset by lower fixed costs.

Sell-side advertising gross margin percentage was (35)% and 7% for the nine months ended September 30, 2025 and 2024, respectively.

Buy-side advertising gross profit decreased $2.2 million for the nine months ended September 30, 2025, as compared to the same period in the prior year.

Buy-side advertising gross margin percentage was 47% and 60% for the nine months ended September 30, 2025 and 2024, respectively, with the decrease in gross margin percentage due to higher cost to provide services to customers and the mix of services provided.

Operating expenses

The following table sets forth the components of operating expenses for the periods presented (in thousands):

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2025 2024 Amount % 2025 2024 Amount %

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Compensation, taxes and benefits

Compensation, taxes and benefits of $3.6 million decreased by $0.5 million, or 13%, for the three months ended June 30, 2025 from $4.2 million for the same period in 2024.

Compensation, taxes and benefits of $7.3 million decreased by $1.4 million, or 16%, for the six months ended June 30, 2025 from $8.7 million for the same period in 2024.

The decrease is primarily due to lower payroll costs resulting from a staff reduction made effective July 1, 2024 when we began to execute an internal reorganization plan that included a staff reduction, a pause on hiring and cost savings measures, which has lowered certain ongoing expenses that positively affected the current period.

Compensation, taxes and benefits of $3.6 million increased by $0.1 million, or 3%, for the three months ended September 30, 2025 from $3.5 million for the same period in 2024.

Compensation, taxes and benefits of $10.9 million decreased by $1.3 million, or 11%, for the nine months ended September 30, 2025 from $12.2 million for the same period in 2024.

The decrease in the nine months ended September 30, 2025 compared to the prior year is primarily due to lower payroll costs resulting from a staff reduction made effective July 1, 2024 when we began to execute an internal reorganization plan that included a staff reduction, a pause on hiring and cost savings measures, which has lowered certain ongoing expenses that positively affected the current period.

General and administrative expense

General and administrative (“G&A”) expenses of $2.3 million for the three months ended June 30, 2025 decreased by $1.5 million from the same period in 2024.

G&A expenses as a percentage of revenue were 23% and 18% for the three months ended June 30, 2025 and 2024, respectively.

The decrease in G&A expenses was primarily due to lower professional fees and sales and marketing expenses.

G&A expenses of $5.0 million for the six months ended June 30, 2025 decreased by $2.1 million from the same period in 2024.

G&A expenses as a percentage of revenue were 27% and 16% for the six months ended June 30, 2025 and 2024, respectively.

The decrease in G&A expenses was primarily due to lower professional fees and sales and marketing expenses.

General and administrative (“G&A”) expenses of $2.5 million for the three months ended September 30, 2025 decreased by $1.1 million from the same period in 2024.

G&A expenses as a percentage of revenue were 31% and 40% for the three months ended September 30, 2025 and 2024, respectively.

The decrease in G&A expenses was primarily due to lower professional fees including $1.1 million in 2024 in costs to regain compliance with respect to delinquent SEC filings.

G&A expenses of $7.5 million for the nine months ended September 30, 2025 decreased by $3.3 million from the same period in 2024.

G&A expenses as a percentage of revenue were 29% and 20% for the nine months ended September 30, 2025 and 2024, respectively.

The decrease in G&A expenses was primarily due to lower professional fees including $1.3 million in 2024 in costs to regain compliance with respect to delinquent SEC filings, as well as lower sales and marketing expenses, consulting costs and travel expenses due to ongoing cost savings measures.

We expect to continue to invest in and incur additional expenses associated with our operation as a public company, including professional fees, inve stment in automation, and compliance costs associated with developing the requisite infrastructure required for internal controls.

However, on July 1, 2024, we executed an internal reorganization plan that included a staff reduction, a pause on hiring and cost savings measures, which have lowered certain ongoing expenses, especially as the Company ceased incurring additional one-time expenses to regain compliance with respect to delinquent SEC filings, which were filed in the fourth quarter of 2024.

Other expense, net

Other expense (income), net

The following table sets forth the components of other expense, net for the periods presented (in thousands):

Three Months Ended June 30, Change Six Months Ended June 30, Change

Three Months Ended September 30, Change Nine Months Ended September 30, Change

2025 2024 Amount % 2025 2024 Amount %

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Expenses for Equity Reserve Facility — — $ — nm (198) j — j $ (198) nm

Derecognition of tax receivable agreement liability — 5,201 $ (5,201) nm — 5,201 $ (5,201) nm

Other income 15 99 (84) (85) % 61 j 190 j (129) (68) %

Total other expense, net $ (1,770) $ (1,350) $ (420) 31 % $ (3,786) $ (2,563) $ (1,223) 48 %

Total other expense (income), net $ (1,089) $ 3,887 $ (4,976) (128) % $ (4,876) $ 1,323 $ (6,199) (469) %

nm – not meaningful

Total other expense, net for the three months ended June 30, 2025 and 2024 primarily consists of $1.8 million and $1.4 million, respectively, of interest expense.

Interest expense increased by $0.4 million compared to the prior period primarily due to the debt discount amortization partially offset by lower interest rates.

Total other expense, net for the six months ended June 30, 2025 and 2024 primarily consists of $3.6 million and $2.7 million, respectively, of interest expense.

Interest expense increased by $1.0 million compared to the prior period primarily due to the debt discount amortization partially offset by lower interest rates.

Total other expense (income), net for the three months ended September 30, 2025 and 2024 primarily consists of $1.1 million and $1.4 million, respectively, of interest expense.

Interest expense decreased by $0.3 million compared to the prior period primarily due to reduction of outstanding debt resulting from the conversion of debt to preferred stock.

Total other expense (income), net for the three months ended September 30, 2024 also includes $5.2 million relating to the derecognition of tax receivable agreement liability in connection with the full valuation allowance recorded on the Company's deferred tax assets during the three months ended September 30, 2024.

Total other expense (income), net for the nine months ended September 30, 2025 and 2024 primarily consists of $4.7 million and $4.1 million, respectively, of interest expense.

Interest expense increased by $0.7 million compared to the prior period primarily due to the debt discount amortization and higher cost on line of credit converted to long term debt partially offset by a decrease in interest expense from the reduction of outstanding debt resulting from the conversion of debt to preferred stock on August 8, 2025.

Total other expense (income), net for the nine months ended September 30, 2024 also includes $5.2 million relating to the derecognition of tax receivable agreement liability in connection with the full valuation allowance recorded on the Company's deferred tax assets.

Liquidity and Capital Resources

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However, there can be no assurance that the Company will be able to achieve prior volume levels with its partners or on the timing of achieving such volume levels.

Additionally, the Company (1) incurred a net loss of $10.1 million for the six months ended June 30, 2025 including the impact of the sell-side disruption described above, (2) reported an accumulated deficit of $13.4 million as of June 30, 2025, (3) reported cash and cash equivalents of $1.6 million as of June 30, 2025, (4) has borrowed $3.7 million as of June 30, 2025 and the date of this report, under the Credit Agreement (as amended, the “Credit Agreement”), dated July 7, 2023, with East West Bank (“EWB”), as lender, which matured in July 2025, (5) was notified by Nasdaq on October 18, 2024 that it was not in compliance with Nasdaq's minimum stockholders' equity requirement and is currently subject to a delisting letter and a hearings and appeal process.

Additionally, the Company (1) incurred a net loss of $15.1 million for the nine months ended September 30, 2025 including the impact of the sell-side disruption described above, (2) reported an accumulated deficit of $16.1 million as of September 30, 2025, (3) reported cash and cash equivalents of $0.9 million as of September 30, 2025, and (4) was notified by Nasdaq on October 18, 2024 that it was not in compliance with Nasdaq's minimum stockholders' equity requirements although it reported, on October 14, 2025, that it believes it has satisfied the stockholders' equity requirement and awaits a formal compliance determination from Nasdaq.

These factors raise substantial doubt about the Company’s ability to continue as a going concern over the next twelve months.

The Company anticipates sources of liquidity to include cash on hand, cash flow from operations, cash generated from its sales under the Company's Equity Reserve Facility and cash generated from other potential sales of equity and/or debt securities and has taken several actions to address liquidity concerns.

These actions include (1) a plan to reduce expenses through a staff reduction, a pause on hiring and cost savings measures that were executed on July 1, 2024 with continuing cost saving impacts through June 30, 2025, (2) working with lenders to provide temporary various relief from debt covenants via amendments on October 15, 2024, December 27, 2024, July 17, 2025 and August 5, 2025 (see Note 3 — Long-Term Debt to our condensed consolidated financial statements) while rebuilding sell-side volumes, (3) putting in place a program to raise capital through an Equity Reserve Facility with stock sales continuing into 2025 (see Note 4 — Stockholders’ Deficit and Stock-Based Compensation to our condensed consolidated financial statements ) , and (4) a plan to achieve compliance with Nasdaq's minimum stockholders' equity requirements by raising additional funds in a registered or private offering.

The Company anticipates sources of liquidity to include cash on hand, cash flow from operations, cash generated from its sales under the Company's Equity Reserve Facility (subject to the federal government resuming operations and the effectiveness of the Form S-1 resale registration statement to enable such sales) and cash generated from other potential sales of equity and/or debt securities and has taken several actions to address liquidity concerns.

These actions include (1) a plan to reduce expenses through a staff reduction, a pause on hiring and cost savings measures that were executed on July 1, 2024 with continuing cost saving impacts through September 30, 2025, (2) working with lenders to provide temporary various relief from debt covenants via amendments from October 2024 through October 2025 (see Note 3 — Long-Term Debt to our condensed consolidated financial statements) while rebuilding sell-side volumes, (3) putting in place a program to raise capital through an Equity Reserve Facility with stock sales continuing into 2025 (see Note 4 — Stockholders’ Deficit and Stock-Based Compensation), (4) converting $25.0 million and $10.0 million of debt with Lafayette Square to convertible preferred stock on August 8, 2025 and October 14, 2025, respectively, to achieve compliance with Nasdaq's

minimum stockholders' equity requirement (see Note 3 - Long-Term Debt), (5) paying off the matured Credit Agreement with a term loan from Lafayette Square (see Note 3 - Long-Term Debt) and (6) a plan to maintain compliance with Nasdaq's minimum stockholders' equity requirement by raising additional funds in a registered or private offering.

There can be no assurance that the Company’s actions will be successful or that additional financing will be available when needed or on acceptable terms.

Sources of Liquidity

The following table summarizes our cash and cash equivalents, and working capital deficit on June 30, 2025 and December 31, 2024 (in thousands):

June 30, 2025 December 31, 2024

The following table summarizes our cash and cash equivalents, and working capital deficit on September 30, 2025 and December 31, 2024 (in thousands):

September 30, 2025 December 31, 2024

Cash and cash equivalents $ 871 $ 1,445

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Historical Cash Flows:

The following table sets forth our cash flows for the six months ended June 30, 2025 and 2024 (in thousands):

Six Months Ended June 30,

The following table sets forth our cash flows for the nine months ended September 30, 2025 and 2024 (in thousands):

Nine Months Ended September 30,

Net cash used in operating activities $ (7,036) $ (7,095)

1 unchanged sentence

Net cash provided by financing activities 6,500 6,083

Net increase (decrease) in cash and cash equivalents $ 148 $ (4,047)

Our cash and cash equivalents at June 30, 2025 were held for working capital and general corporate purposes.

The increase in cash and cash equivalents compared with December 31, 2024, primarily resulted from $5.6 million in cash flows provided by financing activities partially offset by $5.4 million in cash flows used in operating activities.

Net decrease in cash and cash equivalents $ (574) $ (1,029)

Our cash and cash equivalents at September 30, 2025 were held for working capital and general corporate purposes.

The decrease in cash and cash equivalents compared with December 31, 2024, primarily resulted from $7.0 million in cash flows used in operating activities partially offset by $6.5 million in cash flows provided by financing activities.

Operating Activities

For the Six Months Ended June 30, 2025 and 2024

For the Nine Months Ended September 30, 2025 and 2024

Cash provided by operating activities has typically been generated from net income and by changes in our operating assets and liabilities, particularly in the areas of accounts receivable and accounts payable and accrued expenses, adjusted for certain non-cash and non-operating expense items such as depreciation, amortization, stock-based compensation and deferred income taxes.

For the six months ended June 30, 2025, net cash flows used in operating activities were $5.4 million and consisted of net loss of $10.1 million, offset by $5.0 million in adjustments for non-cash and non-operating items and $0.3 million of cash outflows from working capital.

Adjustments for non-cash and non-operating items mainly consisted of depreciation and amortization expense of $4.1 million, stock-based compensation expense of $0.7 million and expenses for the equity reserve facility of $0.2 million.

The $0.3 million decrease in cash resulting from changes in working capital primarily consisted of a $1.5 million decrease in accounts payable and a $0.8 million increase in prepaid expense partially offset by a $1.1 million decrease in accounts receivable and a $1.0 million increase in accrued expenses such as payroll and payroll related expenses.

The decrease in accounts payable and accounts receivable is mainly due to the continued impact from the May 2024 temporary disconnection by a significant customer as a result of the customer investigating a defamatory article / blog post against the Company.

For the six months ended June 30, 2024, net cash flows used in operating activities were $10.1 million and consisted of net loss of $7.0 million, offset by $1.7 million in adjustments for non-cash and non-operating items and $4.9 million of cash outflows from working capital.

Adjustments for non-cash and non-operating items mainly consisted of depreciation and amortization expense of $1.6 million and stock-based compensation expense of $0.7 million partially offset by a deferred tax benefit of $0.5 million.

The $4.9 million decrease in cash resulting from changes in working capital primarily consisted of a $21.6 million decrease in accounts payable and a $1.2 million decrease in accrued expenses partially offset by a $17.7 million decrease in accounts receivable.

The decrease in accounts payable and accounts receivable is mainly due to the typical seasonal decrease in revenue in the first half of the year compared to the fourth quarter.

For the nine months ended September 30, 2025, net cash flows used in operating activities were $7.0 million and consisted of net loss of $15.1 million, offset by $6.0 million in adjustments for non-cash and non-operating items and $2.1 million of cash inflows from working capital.

Adjustments for non-cash and non-operating items mainly consisted of

depreciation and amortization expense of $4.9 million and stock-based compensation expense of $1.1 million.

The $2.1 million increase in cash resulting from changes in working capital primarily consisted of a $1.4 million decrease in accounts receivable, a $1.0 million increase in accrued expenses such as payroll and debt restructuring expenses, and a $0.6 million increase in accounts payable, offset by a $0.9 million increase in prepaid expense.

The decrease in accounts receivable is mainly due to the continued impact from the May 2024 temporary disconnection by a significant customer as a result of the customer investigating a defamatory article / blog post against the Company.

For the nine months ended September 30, 2024, net cash flows used in operating activities were $7.1 million and consisted of net loss of $13.3 million, offset by $4.1 million in adjustments for non-cash and non-operating items and $2.1 million of cash inflows from working capital.

Adjustments for non-cash and non-operating items mainly consisted of depreciation and amortization expense of $2.3 million, stock-based compensation expense of $0.8 million and deferred tax expense of $6.1 million partially offset by $5.2 million of derecognition of tax receivable agreement liability in connection with the full valuation allowance recorded on the Company's deferred tax assets.

The $2.1 million increase in cash resulting from changes in working capital primarily consisted of a $30.9 million decrease in accounts receivable, partially offset by a $27.5 million decrease in accounts payable and a $1.5 million decrease in accrued expenses such as payroll and payroll related expenses.

The decrease in accounts payable and accounts receivable is mainly due to the May 2024 temporary disconnection by a significant customer as a result of a customer investigating a defamatory article / blog post against the Company, as well as a payment of $8.8 million to a few publishers associated with a charge recorded in 2023 related to a disputed short pay from as customer.

Investing Activities

For the Six Months Ended June 30, 2025 and 2024

For the Nine Months Ended September 30, 2025 and 2024

Our investing activities to date have consisted primarily of purchases of software, office furniture and leasehold improvements.

For the six months ended June 30, 2025 and 2024, net cash flows used in investing activities of less than $0.1 million were primarily related to office furniture and leasehold improvements.

For the nine months ended September 30, 2025 and 2024, net cash flows used in investing activities of less than $0.1 million were primarily related to office furniture and leasehold improvements.

Financing Activities

For the Six Months Ended June 30, 2025 and 2024

For the six months ended June 30, 2025, net cash provided by financing activities was $5.6 million mainly resulting from $5.9 million of proceeds from issuance of Class A Common Stock under the Equity Reserve Facility partially offset by $0.2 million for payments of expenses for the Equity Reserve Facility and deferred financing costs.

For the six months ended June 30, 2024, net cash provided by financing activities was $6.1 million mainly resulting from $6.7 million of proceeds from line of credit.

For the Nine Months Ended September 30, 2025 and 2024

For the nine months ended September 30, 2025, net cash provided by financing activities was $6.5 million mainly resulting from $6.7 million of proceeds from issuance of Class A Common Stock under the Equity Reserve Facility and $3.8 million of proceeds from term loan partially offset by $3.7 million for payments on the line of credit and $0.2 million for payments of expenses for the Equity Reserve Facility and deferred financing costs.

For the nine months ended September 30, 2024, net cash provided by financing activities was $6.1 million mainly resulting from $6.7 million of proceeds from line of credit and $0.2 million proceeds from warrants exercised partially offset by $0.6 million for payments on shares withheld for taxes and $0.4 million paid on the term loan.

Contractual Obligations and Future Cash Requirements

As of June 30, 2025, our principal contractual obligations expected to give rise to material cash requirements consist of the 2021 Credit Facility, the Credit Agreement and non-cancelable leases for our various facilities.

As of September 30, 2025, our principal contractual obligations expected to give rise to material cash requirements consist of the 2021 Credit Facility, the Credit Agreement and non-cancelable leases for our various facilities.

We anticipate that the future minimum payments related to our current indebtedness over the next five years will be $3.8 million in the remainder of 2025, $12.4 million in 2026, less than $0.1 million in each of 2027, 2028, and 2029, and $0.1 million thereafter, assuming we do not refinance our indebtedness or enter into a new credit facility.

The leases will require minimum payments of $0.1 million in 2025, $0.3 million in 2026, $0.3 million in 2027, $0.2 million in 2028, $0.2 million in 2029, and less than $0.1 million thereafter.

As of June 30, 2025, we had cash and cash equivalents of $1.6 million.

As of September 30, 2025, we had cash and cash equivalents of $0.9 million.

Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S.

generally accepted accounting principles (“GAAP”), including, in particular operating income, net cash provided by operating activities, and net income, we believe that earnings before interest, taxes, depreciation and amortization, as adjusted for expenses for the Equity Reserve Facility and stock-based compensation (“Adjusted EBITDA”), a non-GAAP measure, is useful in evaluating our operating performance.

generally accepted accounting principles (“GAAP”), including, in particular operating income, net cash provided by operating activities, and net income, we believe that earnings before interest, taxes, depreciation and amortization, as adjusted for stock-based compensation, expenses for the Equity Reserve Facility and derecognition of tax receivable agreement liability (“Adjusted EBITDA”), a non-GAAP measure, is useful in evaluating our operating performance.

The most directly comparable GAAP measure to Adjusted EBITDA is net income.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 2025 2024

6 unchanged sentences

Expenses for Equity Reserve Facility — — 198 —

Income tax benefit — (274) — (475)

Income tax expense — 6,606 — 6,132

Derecognition of tax receivable agreement liability — (5,201) — (5,201)

Adjusted EBITDA $ (2,963) $ (2,855) $ (7,440) $ (5,858)

10 unchanged sentences

The Company bases its estimates on past experiences, market conditions, and other assumptions that the Company believes are reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis.

The Company uses estimates to determine many reported amounts, including but not limited to gross vs net assessment in revenue recognition, recoverability of goodwill and long-lived assets, useful lives used in amortization of intangibles, income taxes and valuation allowances, stock-based compensation and fair values of assets and liabilities acquired in business combinations.

There have been no material changes to our critical accounting estimates and related policies as compared to the critical accounting estimates and related policies described in our "Management’s Discussion and Analysis of Financial Condition and Results of Operations" set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

4 unchanged sentences

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 2. Management’s Discussion and Analysis