What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-14 compared with 2026-05-15 · 94 added, 89 removed, 249 unchanged (42% of the section changed)

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Direct Digital Holdings, Inc.

owns 100% of the voting interest in DDH LLC and as of March 31, 2026, DDH owns 94.3% of the economic interest in DDH LLC.

owns 100% of the voting interest in DDH LLC and as of June 30, 2026, DDH owns 94.6% 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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Huddled Masses, LLC November 13, 2012 June 21, 2018

The Company provides technology-enabled advertising solutions and consulting services to clients either through multiple leading demand side platforms (“DSPs”) or through its own programming platform (Colossus SSP), across multiple industry verticals such as travel and tourism, higher education, energy, healthcare, financial services, consumer products and other sectors with particular emphasis on small and mid-sized businesses transitioning into digital with growing digital media budgets.

The Company provides technology-enabled advertising solutions and consulting services to clients either through multiple leading demand side platforms (“DSPs”) or through its own programmatic platform (Colossus SSP), across multiple industry verticals such as travel and tourism, higher education, energy, healthcare, financial services, consumer products and other sectors with particular emphasis on small and mid-sized businesses transitioning into digital with growing digital media budgets.

In the digital advertising space, buyers, particularly small and mid-sized businesses, can potentially achieve significantly higher ROI on their advertising spend compared to traditional media advertising by leveraging data-driven over-the-top/connected TV ("OTT/CTV"), video and display, in-app, native including programmatic, search, social, influencer marketing and audio advertisements that are delivered both at scale and on a highly targeted basis.

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Our CODM is our Chairman and Chief Executive Officer.

Revenues and operating income (loss) are used by our CODM to assess performance of our operating segments and allocate resources.

Revenues and operating income (loss) are used by our CODM to assess performance of our operating segment and allocate resources.

We operate in one reportable segment - digital advertising.

All our revenues are attributable to the United States.

All share and per share amounts of our common stock listed in this Quarterly Report on Form 10-Q have been adjusted to give effect to our 55-to-1 reverse stock split and 4-to-1 reverse stock split effective on January 12, 2026 and April 27, 2026, respectively.

Recent Developments

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Under the terms of the Panel Monitor, if Nasdaq determines that we fail any listing standard during the one-year monitoring period, then, notwithstanding Rule 5810(c)(2), we will not be permitted to provide Nasdaq with a plan of compliance with respect to any deficiency that arises during the one-year monitoring period.

In addition, Nasdaq will not be permitted to grant additional time for us to regain compliance with respect to any deficiency, nor will we be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3).

In addition, Nasdaq will not be permitted to grant additional time for us to regain compliance with respect to any defi ciency, nor will we be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3).

Rather, Nasdaq will promptly issue a Staff Delisting Determination Letter.

On April 2, 2026, we received a Staff Delisting Determination Letter from Nasdaq, notifying us that we were once again not in compliance with the Stockholders’ Equity Rule, nor are we in compliance with either of the alternative listing standards, market value of listed securities of at least $35 million or net income of $500,000 from continuing operations in the most recently completed fiscal year, in two of the three most recently completed fiscal years.

On April 2, 2026, we received a Staff Delisting Determination Letter from Nasdaq, notifying us that we were once again not in compliance with the Stockholders’ Equity Rule, nor were we in compliance with either of the alternative

listing standards, market value of listed securities of at least $35 million or net income of $500,000 from continuing operations in the most recently completed fiscal year, in two of the three most recently completed fiscal years.

Our failure to comply with the Stockholders’ Equity Rule was based on the filing of our Annual Report on Form 10-K for the year ended December 31, 2025, reporting a stockholders’ deficit of ($7.0 million).

We requested a hearing before the Panel, which was

granted and was held on May 12, 2026.

We requested a hearing before the Panel, which was granted and was held on May 12, 2026.

The hearing request automatically stayed any suspension or delisting action at least pending the hearing and the expiration of any additional extension period that may be granted by the Panel following the hearing.

On May 21, 2026, the Company received a Compliance Notice from Nasdaq, notifying the Company that its request for additional time through August 14, 2026 to demonstrate compliance with the Stockholders’ Equity Rule was granted.

The Company has provided an update to the Panel as to the Company’s progress toward demonstrating compliance with the Stockholders’ Equity Rule and requested additional time to demonstrate compliance past August 14, 2026.

We are awaiting the Panel’s response to our request for an additional extension period to comply with the Stockholders’ Equity Rule.

On April 23, 2026, we received an Additional Staff Delisting Determination Letter from Nasdaq, notifying us that we were not in compliance with the Bid Price Rule based on our closing bid price being lower than $1.00 per share for thirty (30) consecutive business days.

As described below, we implemented a 4-to-1 reverse stock split effective April 27, 2026, in order to regain compliance with the Bid Price Rule.

As of the date of this report, our closing bid price has exceeded $1.00 per share for more than ten (10) consecutive trading days, which we believe demonstrates compliance with the Bid Price Rule.

In order to evidence compliance with the Bid Price Rule, the Company must provide evidence of a closing bid price of at least $1.00 per share for a minimum of ten, but generally not more than twenty, consecutive trading days.

We are awaiting a formal determination from Nasdaq, which could take up to thirty days, that we have regained compliance with the Bid Price Rule as well as the Panel’s response to our request for an extension period to comply with the Stockholders’ Equity Rule.

There can be no assurance that the Panel will determine to continue the Company’s listing or that we will be able to evidence compliance with the applicable listing criteria within any extension period that may be granted by the Panel.

We implemented a 4-to-1 reverse stock split effective April 27, 2026, in order to regain compliance with the Bid Price Rule.

On May 21, 2026, the Company received a Compliance Notice from Nasdaq, notifying the Company that it had evidenced compliance with the Bid Price Rule, due to the closing bid price for our Class A Common Stock having closed at or above $1.00 per share for over 20 consecutive business days.

We intend to take all reasonable measures available to regain compliance with the Stockholders’ Equity Rule and remain listed on Nasdaq.

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On April 28, 2026, the Company entered into a Common Stock Purchase Agreement (the “Roth Purchase Agreement” and the facility as a whole, the "Committed Equity Facility") with Roth Principal Investments, LLC (“Roth”).

Pursuant to the Roth Purchase Agreement, and subject to the satisfaction of specified conditions, the Company has the right, but not the obligation, to sell to Roth up to an aggregate of $50.0 million of newly issued shares of the Company’s Class A common stock, par value $0.001 per share (“Class A Common Stock”), from time to time over a period of up to 36 months following commencement of the Roth Purchase Agreement.

The Company will have sole discretion over the timing and amount of any such sales and is under no obligation to sell any shares under the Roth Purchase Agreement.

The Company’s ability to sell shares under the Roth Purchase Agreement will commence upon satisfaction of customary conditions, after which, the Company may direct Roth to purchase shares through one or more market open, intraday, pre‑market, or post‑market purchases, subject to specified pricing thresholds and volume limitations.

There is no upper limit on the price per share that may be paid, and purchase prices are subject to customary equitable adjustments for stock splits, reverse stock splits, dividends or similar transactions.

Under the Nasdaq Stock Market rules, the Company may not issue more than 19.99% of its outstanding Class A Common Stock under the Roth Purchase Agreement unless stockholder approval is obtained or the average price paid for shares issued under the Roth Purchase Agreement equals or exceeds $2.45 (representing the lower of (a) the official closing price of our Class A Common Stock immediately preceding the execution of the Roth Purchase Agreement and (b) the average official closing price of our Class A Common Stock for the five consecutive trading days immediately preceding the execution of the Roth Purchase Agreement, as adjusted in accordance with applicable Nasdaq Stock Market rules).

In addition, Roth may not beneficially own more than 4.99% of the Company’s outstanding Class A Common Stock at any time.

The Roth Purchase Agreement also includes a prohibition, subject to limited exceptions, on the Company entering into certain variable rate or equity line financings during the term of the agreement, and includes customary restrictions on short selling or hedging transactions by Roth.

The net proceeds, if any, from sales of Class A Common Stock under the Roth Purchase Agreement will depend on market conditions and the Company’s election to sell shares from time to time.

The Company currently intends to use any net proceeds for general corporate purposes, which may include reducing outstanding indebtedness and funding working capital.

Pursuant to the Roth Purchase Agreement, the Company has the right, but not the obligation, to sell to Roth up to $50.0 million of the Company’s Class A common stock, par value $0.001 per share (“Class A Common Stock”).

The per‑share purchase price for shares sold under the Roth Purchase Agreement will be based on the volume‑weighted average trading price of the Class A Common Stock during the applicable valuation period, less a fixed discount at an effective rate of 7.4% (after giving effect to the reimbursement of our expenses in connection with each purchase pursuant to a letter agreement with Roth dated May 18, 2026).

The Company sold 38,288 shares of the Company's Class A Common Stock for $0.1 million during the six months ended June 30, 2026.

The Roth Purchase Agreement will terminate upon the earliest of the expiration of the 36‑month term, the sale of $50.0 million of shares under the agreement, certain events relating to delisting or bankruptcy, or termination by the Company upon prior written notice without penalty.

The Roth Purchase Agreement contains customary representations, warranties, indemnification provisions and conditions.

In connection with entering into the Roth Purchase Agreement, the Company paid Roth a structuring fee of $25,000, agreed to reimburse certain legal fees and ongoing due diligence expenses of $75,000, and paid $50,000 to Digital

Offering, LLC as a qualified independent underwriter for purposes of FINRA Rule 5121, with related fees subject to reimbursement up to specified amounts.

Reverse Stock Splits.

On January 8, 2026 and April 24, 2026, the Company filed certificates of amendment to the amended and restated certificate of incorporation, as amended, with the Secretary of State of the State of Delaware, to effect a 55-to-1 reverse stock split and a 4-to-1 reverse stock split, respectively, of all classes of our issued and outstanding common stock, without any change to par value.

The 55-to-1 reverse stock split (the "January Reverse Stock Split") became effective January 12, 2026 and the 4-to-1 reverse stock split (the "April Reverse Stock Split") became effective April 27, 2026.

Together, the January Reverse Stock Split and the April Reverse Stock Split are referred to as the Reverse Stock Splits.

No fractional shares were issued in connection with the Reverse Stock Splits as all fractional shares were rounded down to the next whole share, and a cash payment was made in lieu of such fractional shares.

The Reverse Stock Splits were intended to bring the Company into compliance with Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule").

All share and per share amounts of our common stock listed in the condensed consolidated financial statements and footnotes have been adjusted to give effect to the Reverse Stock Splits.

Key Factors Affecting Our Performance

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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 80% client retention amongst the clients that represent approximately 80% of our revenue during the three months ended March 31, 2026.

As a result, our clients have been loyal, with approximately 80% client retention amongst the clients that represent approximately 80% of our revenue during the six months ended June 30, 2026.

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

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Only recently have small and mid-sized businesses begun to leverage the power of digital media in meaningful ways, as emerging technologies have enabled advertising across multiple channels in a highly localized nature.

efficiencies yielding measurable results and higher advertising ROI, as well as the needs driven by global economic and supply chain challenges, have prompted these companies to begin utilizing digital advertising on an accelerated pace.

Campaign efficiencies yielding measurable results and higher advertising ROI, as well as the needs driven by global economic and supply chain challenges, have prompted these companies to begin utilizing digital advertising on an accelerated pace.

We believe this market is rapidly expanding, and that small-to-mid-sized advertisers will continue to increase their digital spend.

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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 three months ended March 31, 2026, 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 Company continues to expand its capabilities to give our content providers more avenues to distribute ad inventory such as OTT/CTV, digital audio, DOOH, etc.

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Other income includes income associated with recovery of receivables and other miscellaneous credit card rebates.

Loss on debt extinguishment .

On January 27, 2026, the Company and its lender executed an amendment to the debt agreement which was accounted for as a debt extinguishment, resulting in a loss from the write-off of unamortized deferred financing fees incurred through the date of the amendment as well as recognizing the remaining amendment closing fee of $0.4 million.

See Note 3 — Long-Term Debt to our condensed consolidated financial statements.

Loss on settlement of accounts payable.

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See further description in “ —Liquidity and Capital Resources .”

Interest expense and amortization of deferred financing cost and debt discount (premium), net.

Interest expense and amortization of deferred financing cost and debt discount (premium), net is mainly related to our debt as further described below in “ —Liquidity and Capital Resources.

Loss on debt extinguishment .

See Note 3 — Long-Term Debt to our condensed consolidated financial statements.

Derecognition of tax receivable agreement liability.

The Company derecognized its tax receivable agreement liability during the six months ended June 30, 2026.

Expenses for Equity Reserve Facility.

Expenses are mainly related to our Equity Reserve Facility as further described below in “ —Liquidity and Capital Resources.

Interest expense and amortization of deferred financing cost and debt discount (premium), net.

Interest expense and amortization of deferred financing cost and debt discount (premium), net is mainly related to our debt as further described below in “ —Liquidity and Capital Resources.

Results of Operations

Comparison of the Three Months Ended March 31, 2026 and 2025

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

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 March 31, Change

2026 2025 Amount %

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

2026 2025 Amount % 2026 2025 Amount %

Revenues $ 7,832 $ 10,144 $ (2,312) (23) % $ 14,512 $ 18,301 $ (3,789) (21) %

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(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 $6.7 million for the three months ended March 31, 2026 decreased by $1.5 million, or 18%, from $8.2 million for the three months ended March 31, 2025.

Our revenues of $7.8 million for the three months ended June 30, 2026 decreased by $2.3 million, or 23%, from $10.1 million for the three months ended June 30, 2025.

The decrease in revenue was due primarily to a $2.5 million decrease in spending from DSP customers and a $0.4 million decrease from customers no longer actively purchasing from the Company, partially offset by net growth from new and existing customers of $0.6 million primarily due to growth from customers in new verticals added in 2025.

Our revenues of $14.5 million for the six months ended June 30, 2026 decreased by $3.8 million, or 21%, from $18.3 million for the six months ended June 30, 2025.

The decrease in revenue was due primarily to a $4.5 million decrease in spending from DSP customers and a $0.8 million decrease from customers no longer actively purchasing from the

Company, partially offset by net growth from new and existing customers of $1.5 million primarily due to growth from customers in new verticals added in 2025.

Cost of revenues

Cost of revenues of $4.4 million (66% of revenue) for the three months ended March 31, 2026 decreased by $1.3 million, or 23% from $5.8 million (71% of revenue) for the three months ended March 31, 2025.

The decrease in costs was primarily due to the related decrease in revenue, while the 5% decrease as a percentage of revenue was due to reduction of fixed costs of revenue resulting from ongoing cost savings initiatives.

Fixed cost of revenues for the three months ended March 31, 2026 of $0.4 million decreased by $0.5 million, or 53%, from fixed cost of revenues of $0.9 million for the same period in 2025.

Gross profit was $2.3 million, or 34% of revenue, for the three months ended March 31, 2026, compared to $2.4 million, or 29% of revenue, for the same period in 2025, reflecting a decrease of $0.1 million, or 5%.

The change in gross profit margin percentage for the three months ended March 31, 2026 is attributable primarily to a reduction in fixed costs.

Cost of revenues of $5.2 million (66% of revenue) for the three months ended June 30, 2026 decreased by $1.4 million, or 21% from $6.6 million (65% of revenue) for the three months ended June 30, 2025.

The decrease in costs was primarily due to the related decrease in revenue, but was also impacted by a reduction of fixed costs of revenue resulting from ongoing cost savings initiatives.

Fixed cost of revenues for the three months ended June 30, 2026 of $0.3 million decreased by $0.6 million, or 69%, from fixed cost of revenues of $0.9 million for the same period in 2025.

Cost of revenues of $9.6 million (66% of revenue) for the six months ended June 30, 2026 decreased by $2.8 million, or 22% from $12.3 million (67% of revenue) for the six months ended June 30, 2025.

The decrease in costs was primarily due to the related decrease in revenue, but was also impacted by a reduction of fixed costs of revenue resulting from ongoing cost savings initiatives.

Fixed cost of revenues for the six months ended June 30, 2026 of $0.7 million decreased by $1.1 million, or 61%, from fixed cost of revenues of $1.8 million for the same period in 2025.

Gross profit was $2.7 million, or 34% of revenue, for the three months ended June 30, 2026, compared to $3.6 million, or 35% of revenue, for the same period in 2025, reflecting a decrease of $0.9 million, or 25%.

The change in gross profit margin percentage for the three months ended June 30, 2026 is attributable to changes in customer mix, including increased revenue from customers and service offerings with lower gross margin characteristics partially offset by a reduction in fixed costs.

While these relationships contributed to near-term margin compression, they supported the Company’s objectives of customer retention, revenue diversification and sustainable long-term growth.

Gross profit was $4.9 million, or 34% of revenue, for the six months ended June 30, 2026, compared to $6.0 million, or 33% of revenue, for the same period in 2025, reflecting a decrease of $1.0 million, or 17%.

The change in gross profit margin percentage for the six months ended June 30, 2026 is attributable to a reduction in fixed costs partially offset by the changes in customer mix that also impacted the three months ended June 30, 2026.

Operating expenses

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

Three Months Ended March 31, Change

2026 2025 Amount %

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

2026 2025 Amount % 2026 2025 Amount %

Compensation, taxes and benefits $ 3,215 $ 3,639 $ (424) (12) % $ 6,236 $ 7,303 $ (1,067) (15) %

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Compensation, taxes and benefits

Compensation, taxes and benefits of $3.0 million decreased by $0.6 million, or 18%, for the three months ended March 31, 2026 from $3.7 million for the same period in 2025.

The decrease in the three months ended March 31, 2026 compared to the prior year is primarily due to lower payroll costs due to continued cost management efforts, including workforce optimization and a pause on hiring, which have reduced recurring operating expenses in the current period.

Compensation, taxes and benefits of $3.2 million decreased by $0.4 million, or 12%, for the three months ended June 30, 2026 from $3.6 million for the same period in 2025.

The decrease in the three months ended June 30, 2026 compared to the prior year is primarily due to lower payroll costs due to continued cost management efforts, including workforce optimization and a pause on hiring, which have reduced recurring operating expenses in the current period.

Compensation, taxes and benefits of $6.2 million decreased by $1.1 million, or 15%, for the six months ended June 30, 2026 from $7.3 million for the same period in 2025.

The decrease in the six months ended June 30, 2026 compared to the prior year is primarily due to lower payroll costs due to continued cost management efforts, including workforce optimization and a pause on hiring, which have reduced recurring operating expenses in the current period.

General and administrative expense

General and administrative (“G&A”) expenses of $2.5 million for the three months ended March 31, 2026 decreased by $0.2 million from the same period in 2025.

G&A expenses as a percentage of revenue were 37% and 33% for the three months ended March 31, 2026 and 2025, respectively, primarily due to a decrease in revenues.

General and administrative (“G&A”) expenses of $2.4 million for the three months ended June 30, 2026 were consistent with the same period in 2025.

G&A expenses as a percentage of revenue were 30% and 23% for the three months ended June 30, 2026 and 2025, respectively, with the change in percentages primarily due to a decrease in revenues.

General and administrative expenses of $4.9 million for the six months ended June 30, 2026 decreased by $0.1 million from the same period in 2025.

G&A expenses as a percentage of revenue were 34% and 27% for the six months ended June 30, 2026 and 2025, respectively, with the change in percentages primarily due to a decrease in revenues.

The overall decrease in G&A expenses was primarily due to lower sales and marketing expenses and travel expenses due to ongoing cost savings measures.

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

Three Months Ended March 31, Change

2026 2025 Amount %

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

2026 2025 Amount % 2026 2025 Amount %

Interest expense and amortization of deferred financing cost and debt discount (premium), net $ (764) $ (1,789) $ 1,025 (57) % $ (1,327) $ (3,635) $ 2,308 (63) %

Loss on settlement of accounts payable (1,247) — (1,247) nm

Loss on debt extinguishment (517) — (517) nm

Expenses for Equity Reserve Facility — (198) 198 nm

Loss on settlement of accounts payable — — — nm (1,247) — (1,247) nm

Loss on debt extinguishment — — — nm (517) — (517) nm

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

Derecognition of tax receivable agreement liability 41 — 41 nm 41 — 41 nm

Other income 62 19 43 226 % 69 47 22 47 %

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nm – not meaningful

Total other expense, net for the three months ended March 31, 2026 and 2025 includes $0.6 million and $1.8 million, respectively, of interest expense.

Total other expense, net for the three months ended June 30, 2026 and 2025 includes $0.8 million and $1.8 million, respectively, of interest expense.

Interest expense decreased by $1.0 million compared to the prior period primarily due to the reduction of outstanding debt resulting from the conversion of debt to preferred stock in the second half of 2025.

Total other expense, net for the three months ended March 31, 2026 also includes $1.2 million for the loss on settlement of accounts payable associated with the issuance of common stock through the Continuation Capital program that the Company initiated in 2025 and $0.5 million for loss on debt extinguishment associated with the Eleventh Amendment to the Company's long term debt agreement.

Total other expense, net for the six months ended June 30, 2026 and 2025 includes $1.3 million and $3.6 million, respectively, of interest expense.

Interest expense decreased by $2.3 million compared to the prior period primarily due to the reduction of outstanding debt resulting from the conversion of debt to preferred stock in the second half of 2025.

Total other expense, net for the six months ended June 30, 2026 also includes $1.2 million for the loss on settlement of accounts payable associated with the issuance of common stock through the Continuation Capital program that the Company initiated in 2025 and $0.5 million for loss on debt extinguishment associated with the Eleventh Amendment to the Company's long term debt agreement.

Liquidity and Capital Resources

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During 2025, the Company worked with its partners to achieve prior volume levels of revenue but was unable to achieve historical volumes.

Despite these challenges, the Company was able to reduce expenses, pay off the matured Credit Agreement with a term loan from Lafayette Square (see Note 3 — Long-Term Debt), convert existing debt of $35.0 million to Series A Convertible Preferred Stock and establish an Equity Reserve Facility raising additional equity of $11.6 million through March 31, 2026.

Additionally, the Company (1) incurred a net loss of $5.6 million for the three months ended March 31, 2026 including the impact of the disruption described above, (2) reported an accumulated deficit of $33.0 million as of March 31, 2026, (3) reported cash and cash equivalents of $0.8 million and a working capital deficit of $23.9 million as of March 31, 2026, (4) owes its lender $17.4 million (combination of principal, accrued fees, interest and the preferred dividends) as of March 31, 2026, under the 2021 Credit Facility (as defined below) which matures in December 2026 and (5) despite demonstrating compliance with the minimum stockholders' equity requirement for continued listing under Nasdaq Listing Rule 5550(b)(1) (the "Stockholders' Equity Rule") on November 7, 2025 and Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule") on February 12, 2026, remains subject to a discretionary Panel Monitor through November 7, 2026 for the Stockholders' Equity Rule and through February 12, 2027 for the Bid Price Rule.

The Company was not in compliance with the Stockholders' Equity Rule as of March 31, 2026 or the Bid Price Rule as of April 23, 2026.

Despite these challenges, the Company was able to reduce expenses, pay off the matured Credit Agreement with a term loan from Lafayette Square (see Note 3 — Long-Term Debt), convert existing debt of $35.0 million to Series A Convertible Preferred Stock and raise additional equity through the Equity Reserve Facility and the Committed Equity Facility of $11.7 million through June 30, 2026.

Additionally, the Company (1) incurred a net loss of $9.2 million for the six months ended June 30, 2026 including the impact of the disruption described above, (2) reported an accumulated deficit of $36.4 million as of June 30, 2026, (3) reported cash and cash equivalents of $0.5 million and a working capital deficit of $27.5 million as of June 30, 2026, (4) owes its lender $18.8 million (combination of principal, accrued fees, interest and the preferred dividends) as of June 30, 2026, under the 2021 Credit Facility (as defined below) which matures in December 2026, (5) was notified by Nasdaq that it was not in compliance with the Stockholders' Equity Rule on April 2, 2026, and has until August 14, 2026 to demonstrate compliance with the Stockholders' Equity Rule (a request for extension

is currently under review by the Panel to extend this deadline), and (6) despite demonstrating compliance with the Bid Price Rule on February 12, 2026 and May 21, 2026, remains subject to a discretionary Panel Monitor through February 12, 2027 for the Bid Price Rule.

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 new Committed Equity Facility and cash generated from other potential sales of equity and/or debt securities and has taken several actions to address liquidity and performance concerns.

Such plans include (1) a shift in focus to driving intentional digital marketing spend with current and future customers as well as new enterprise customers accessing the digital advertising market through its recently launched product – Ignition+ allowing for further growth and a return to profitability and (2) refinancing the 2021 Credit Facility 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 Committed Equity Facility and cash generated from other potential sales of equity and/or debt securities and has taken several actions to address liquidity and performance concerns.

Such plans include (1) a shift in focus to driving intentional digital marketing spend with current and future customers as well as new enterprise customers accessing the digital advertising market through Ignition+, launched in March 2026 allowing for further growth and a return to profitability and (2) refinancing the 2021 Credit Facility 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 March 31, 2026 and December 31, 2025 (in thousands):

March 31, 2026 December 31, 2025

The following table summarizes our cash and cash equivalents, and working capital deficit on June 30, 2026 and December 31, 2025 (in thousands):

June 30, 2026 December 31, 2025

Cash and cash equivalents $ 520 $ 728

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Historical Cash Flows:

The following table sets forth our cash flows for the three months ended March 31, 2026 and 2025 (in thousands):

Three Months Ended March 31,

The following table sets forth our cash flows for the six months ended June 30, 2026 and 2025 (in thousands):

Six Months Ended June 30,

Net cash used in operating activities $ (1,934) $ (5,398)

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Net cash provided by financing activities 1,726 5,584

Net increase in cash and cash equivalents $ 68 $ 344

Our cash and cash equivalents at March 31, 2026 were held for working capital and general corporate purposes.

Cash and cash equivalents as of March 31, 2026 and December 31, 2025 were relatively unchanged with operating cash shortfalls offset by proceeds from issuance of shares under the Equity Reserve Facility.

Net (decrease) increase in cash and cash equivalents $ (208) $ 148

Our cash and cash equivalents at June 30, 2026 were held for working capital and general corporate purposes.

Cash and cash equivalents as of June 30, 2026 and December 31, 2025 were relatively unchanged with operating cash shortfalls offset by proceeds from issuance of shares under the Equity Reserve Facility and the Committed Equity Facility.

Operating Activities

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 three months ended March 31, 2026, net cash flows used in operating activities were $1.1 million and consisted of net loss of $5.6 million, offset by $3.0 million in adjustments for non-cash and non-operating items and $1.5 million of cash inflows from working capital.

Adjustments for non-cash and non-operating items mainly consisted of loss on settlement of accounts payable of $1.2 million, loss on debt extinguishment of $0.5 million, depreciation and amortization expense of $0.5 million and stock-based compensation expense of $0.2 million.

The $1.5 million increase in cash resulting from changes in working capital primarily consisted of a $1.1 million increase in accounts payable, a $0.3 million decrease in accounts receivable, partially offset by a $0.3 million increase in accrued liabilities and tax receivable agreement payable.

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, 2026, net cash flows used in operating activities were $1.9 million and consisted of net loss of $9.2 million, offset by $4.3 million in adjustments for non-cash and non-operating items and $2.9 million of cash inflows from working capital.

Adjustments for non-cash and non-operating items mainly consisted of loss on settlement of accounts payable of $1.2 million, depreciation and amortization expense of $1.2 million, interest paid in kind of $1.1 million, loss on debt extinguishment of $0.5 million, and stock-based compensation expense of $0.3 million.

The $2.9 million increase in cash resulting from changes in working capital primarily consisted of a $2.7 million increase in accounts payable and accrued liabilities.

The increase in accounts payable is mainly due to the timing of payments to vendors.

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

For the three months ended March 31, 2025, net cash flows used in operating activities were $2.7 million and consisted of net loss of $5.9 million, offset by $2.9 million in adjustments for non-cash and non-operating items and $0.3 million of cash inflows from working capital.

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 increase in cash resulting from changes in working capital primarily consisted of a $0.6 million decrease in accounts receivable and a $0.3 million increase in accrued expenses such as payroll and payroll related expenses, partially offset by a $0.6 million decrease in accounts payable.

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

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 expenses and other assets, 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 seasonal decrease in revenue in the first half of the year compared to the second half of the prior year.

Investing Activities

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

For the three months ended March 31, 2026, there were no investing activities.

For the three months ended March 31, 2025, net cash flows used in investing activities of less than $0.1 million were primarily related to office furniture and leasehold improvements.

For the six months ended June 30, 2026, there were no investing activities.

For the six months ended June 30, 2025, 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 three months ended March 31, 2026, net cash provided by financing activities was $1.1 million mainly resulting from $1.1 million of proceeds from issuance of Class A Common Stock under the Equity Reserve Facility.

For the three months ended March 31, 2025, net cash provided by financing activities was $3.1 million mainly resulting from $3.3 million of proceeds issuance of Class A Common Stock under the Equity Reserve Facility partially offset by $0.2 million for payment of expenses for the Equity Reserve Facility.

For the six months ended June 30, 2026, net cash provided by financing activities was $1.7 million mainly resulting from $1.2 million of proceeds from issuance of Class A Common Stock under the Equity Reserve Facility and the Committed Equity Facility as well as $0.5 million advances from related party.

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 issuance of Class A Common Stock under the Equity Reserve Facility partially offset by $0.2 million for payment of expenses for the Equity Reserve Facility.

Contractual Obligations and Future Cash Requirements

As of March 31, 2026, our principal contractual obligations expected to give rise to material cash requirements consist of the 2021 Credit Facility and non-cancelable leases for our various facilities.

As of June 30, 2026, our principal contractual obligations expected to give rise to material cash requirements consist of the 2021 Credit Facility 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 $17.5 million in the remainder of 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 the remainder of 2026, $0.3 million in 2027, $0.2 million in 2028, $0.2 million in 2029 and less than $0.1 million in 2030.

As of March 31, 2026, we had cash and cash equivalents of $0.8 million.

As of June 30, 2026, we had cash and cash equivalents of $0.5 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 stock-based compensation, expenses for the Equity Reserve Facility, loss on settlement of accounts payable and loss on debt extinguishment (“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, derecognition of tax receivable agreement liability, expenses for the Equity Reserve Facility, loss on settlement of accounts payable and loss on debt extinguishment (“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

2026 2025 2026 2025

Net loss $ (3,589) $ (4,196) $ (9,160) $ (10,136)

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Loss on debt extinguishment — — 517 —

Derecognition of tax receivable agreement liability (41) — (41) —

Amortization of intangible assets 413 489 827 977

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We believe that this non-GAAP financial measure is useful to investors for period-to-period comparisons of our business and in understanding and evaluating our operating results for the following reasons:

• Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as depreciation and amortization, interest expense, provision for income taxes, stock-based compensation, and certain one-time items such as acquisition transaction costs, losses from financing activities and costs for the Equity Reserve Facility that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired;

• Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items such as depreciation and amortization, interest expense, provision for income taxes, stock-based compensation, and certain one-time items such as acquisition transaction costs, derecognition of tax receivable agreement liability, losses from financing activities and costs for the Equity Reserve Facility that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired;

• Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, including the preparation of our annual operating budget, as a measure of operating performance and the effectiveness of our business strategies and in communications with our board of directors concerning our financial performance;

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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