What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-03-10 · 99 added, 130 removed, 72 unchanged (76% of the section changed)

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Company Overview

Inuvo is a technology company that develops and sells information technology solutions for marketing and advertising.

These solutions predictively identify and message online audiences for any product, service or brand across devices, formats, and channels including video, mobile, connected TV, linear TV, display, social, search and native.

These solutions allow Inuvo’s clients to engage with their audiences in a manner that drives responsiveness.

Inuvo facilitates the delivery of hundreds of millions of marketing messages to consumers every single month and counts among its clients numerous world-renowned names across industries.

The Inuvo solution incorporates a proprietary form of artificial intelligence, or AI, branded the IntentKey.

This patented machine learning technology uses interactions with Internet content as a source of information from which to predict consumer intent.

The AI can identify and advertise to the reasons why consumers are purchasing products and services not to who those consumers are.

In this regard, the technology is designed for a privacy conscious future and is focused on the components of the advertising value chain most responsible for return on advertising spend, the intelligence behind the advertising decision.

Inuvo technology can be consumed both as a managed service and SaaS.

For clients, Inuvo has also developed a collection of proprietary websites collectively branded as Bonfire Publishing where content is created specifically to attract qualified consumer traffic for clients through the publication of information across a wide range of topics including health, finance, travel, careers, auto, education and lifestyle.

These sites also provide the means to market test various Inuvo advertising

technologies.

Further, Inuvo also provides Search and Social advertising services through a proprietary set of technologies branded as CampSight.

There are many barriers to entry associated with the Inuvo business model, including a proficiency in large scale information processing, predictive software development, marketing data products, analytics, artificial intelligence, integration to the internet of things ("IOT"), and the relationships required to execute within the IOT.

Inuvo is an advertising technology and services business selling information technology solutions to brands, agencies and large consolidators of advertising demand (“Platforms”).

Inuvo’s revenue is derived from the placement of digital advertising throughout devices, websites, applications and browsers across social, search and programmatic advertising channels.

Inuvo facilitates, and gets paid, to deliver millions of advertising messages monthly and counts among its client's numerous world-renowned companies across industries.

Inuvo’s primary mission is to disrupt the advertising industry with its proprietary and patented generative large language artificial intelligence (AI), a technology capable of identifying and targeting audiences without using a consumer’s identity or data.

The AI was designed to replace the consumer data, analytics, segmentation and lookalike modeling technologies that have traditionally served the advertising industry as it transitions to a new paradigm where a consumer’s identity and data are no longer available for advertising decisions due to legislative and technological changes.

The advertising industry Inuvo serves is going through an unprecedented change the likes of which has never occurred with the potential to disrupt the over $600 billion dollars in annual worldwide digital media spend that supports the internet.

The cornerstone of the change revolves around the use of a consumer’s identity and data for ad-targeting.

While there are many ways to identify consumers, the principal method that has evolved within the browsers has been the cookie, which is the location within the browser where a consumer's identity gets stored.

When the cookie is no longer available, the means to lookup a consumer’s personal information in a database is no longer possible.

No Targeting.

Thirteen states have now signed consumer privacy legislation and another 17 have privacy bills in process.

Apple has already eliminated the use of cookies within its browser and Google began phasing them out in January of 2024.

Inuvo’s AI technology solves this challenge and can be consumed by clients both as a managed service and software-as-a-service.

For certain clients, Inuvo has also developed various proprietary technology and assets that include digital content, websites, automated campaigns, ad fraud detection, performance reporting and predictive media mix modeling.

There are many barriers to entry associated with the Inuvo business model, including a proficiency in large language model based artificial intelligence, large scale information processing, software development, consumer data products, analytics, IOT (internet of things) integration and the relationships required to execute within the IOT.

In 2023, Inuvo delivered roughly 11.27 billion ads.

Inuvo’s intellectual property is protected by 19 issued and eight pending patents.

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On March 12, 2020, we closed on the Loan and Security Agreement dated February 28, 2020 with Hitachi.

Under the terms of

the Loan and Security Agreement, Hitachi has provided us with a $5,000,000 line of credit commitment.

We are permitted to

borrow (i) 90% of the aggregate Eligible Accounts Receivable, plus (ii) the lesser of (A) 75% of the aggregate Unbilled

Accounts Receivable or (B) 50% of the amount available to borrow under (i), up to the maximum credit commitment.

interest rate under the Hitachi agreement is 2% in excess of the Wall Street Journal Prime Rate, with a minimum rate of 6.75%

per annum, on outstanding amounts.

Under the terms of the Loan and Security Agreement, Hitachi has provided us with a $5,000,000 line of credit commitment.

We are permitted to borrow (i) 90% of the aggregate Eligible Accounts Receivable, plus (ii) the lesser of (A) 75% of the aggregate Unbilled Accounts Receivable or (B) 50% of the amount available to borrow under (i), up to the maximum credit commitment.

The interest rate under the Hitachi agreement is 2% in excess of the Wall Street Journal Prime Rate, with a minimum rate of 6.75% per annum, on outstanding amounts.

The principal and all accrued but unpaid interest are due on demand.

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The Loan and Security Agreement contains certain affirmative and negative covenants to which we are also subject.

We agreed to pay Hitachi a commitment fee of $50,000, with one half due upon the execution of the agreement and the balance

due six months thereafter.

We agreed to pay Hitachi a commitment fee of $50,000, with one half due upon the execution of the agreement and the balance due six months thereafter.

We are obligated to pay Hitachi a commitment fee of $15,000 annually.

We are also obligated to

pay Hitachi a quarterly service fee of 0.30% on the monthly unused amount of the maximum credit line.

In addition to a $2,000

document fee we have paid to Hitachi, if we had exited our relationship with Hitachi before March 1, 2022, we were obligated to pay Hitachi an exit fee of $50,000.

On March 12, 2020, we drew $5,000,000 under this agreement, using $2,959,573 of these

proceeds to satisfy all of our obligations under a credit agreement with Western Alliance Bank.

We are also obligated to pay Hitachi a quarterly service fee of 0.30% on the monthly unused amount of the maximum credit line.

In addition to a $2,000 document fee we have paid to Hitachi, if we had exited our relationship with Hitachi before March 1, 2022, we were obligated to pay Hitachi an exit fee of $50,000.

On March 12, 2020, we drew $5,000,000 under this agreement, using $2,959,573 of these proceeds to satisfy all of our obligations under a credit agreement with Western Alliance Bank.

The balance was used for working capital and was repaid in 2020.

At December 31, 2022 and 2021, there were no outstanding balances due under the Loan and Security Agreement with Hitachi.

On March 1, 2023, we entered into Amendment No.

1 to Loan and Security Agreement and Collateral Documents (“Agreement”) with Mitsubishi HC Capital America, Inc., f/k/a/ Hitachi Capital America Corp.

Under the terms of the Agreement, MHCA has provided us with a $5,000,000 line of credit commitment.

We are permitted to borrow up to 80% of the aggregate Eligible Accounts Receivable (which may increase to 85% if certain conditions are met), up to the maximum credit commitment of $5,000,000.

We will pay MHCA monthly interest at the rate of 1.75% in excess of the Wall Street Journal Prime Rate.

The principal and all accrued but unpaid interest are due on demand.

In the event of a default under the terms of the Loan and Security Agreement, the interest rate increases to 6% greater than the interest rate in effect from time to time prior to a default.

The Agreement contains certain affirmative and negative covenants to which we are also subject.

We agreed to pay MHCA an amendment fee of $10,000 on issuance of the Agreement, and thereafter an annual commitment fee of $10,000.

We are also obligated to pay MHCA a quarterly service fee of 0.20% on the monthly unused amount of the maximum credit line.

If we terminate the Agreement (i) before February 28, 2024, we are obligated to pay MHCA an exit fee of $50,000, or (ii) after February 28, 2024 but before February 28, 2025, we are obligated to pay MHCA an exit fee of $25,000.

The Loan and Security Agreement continues for an indefinite term.

At December 31, 2023 and 2022, there were no outstanding balances due under the Loan and Security Agreement.

2023 Overview

We grew revenue, added new clients, and increased awareness in 2022.

Year-over-year (YOY) revenue was up 26%.

Our strategy of bringing together the capabilities of both platforms to serve joint clients was successfully implemented throughout the year.

Consequently, we were able to differentiate ourselves even further in the following ways:

• through the development of data warehousing and reporting that serves multi-channel clients;

• by conceiving, building and deploying AI based media-mix predictive technology;

• by extending the AI targeting technology to cable television;

• by incorporating AI based campaign decisions with CampSight;

• through the use of AI for content creation within Bonfire Publishing;

• through the development of a GUI that allows clients to visualize the AI targeting signals;

• by augmenting the AI brain with new concept understanding;

Gross margins declined in 2022 compared to 2021.

We reported gross margins of 60% in 2022 compared to 73.4% in 2021, primarily due to change in revenue mix.

The IntentKey and CampSight platforms provide a similar service to clients, where ultimately their purpose is the delivery of high converting consumers to maximize return on advertising spend.

The distinction between the platforms is mostly related to the channels each platform serves, programmatic for the IntentKey and social and search for CampSight.

As the number of joint clients grows, the need to distinguish between the platforms has diminished.

We reported net revenue of $73.9 million in 2023.

In 2023, we heavily invested in the go-to-market team and marketing programs to increase exposure for our solution.

2023 Highlights:

Gross margins increased to 85.8% in 2023 compared to 60.0% in 2022

Company reached a quarterly record revenue of $24.6 million in the third quarter

Company introduced several new 2024 revenue generating products

Company raised $4 million in May 2023 to fund working capital

Free-cash-flow was improved year-over-year by $3 million

Marketing and brand awareness was raised with over 35 media mentions

23 new Agencies/Brands were signed up

Agency insider, Barry Lowenthal, joined the executive team as President

Company now has as clients a top three Auto, Retail, and Technology company

The Company's solutions are designed to deliver high converting audiences that maximize the return on advertising spend for clients.

Company revenue is derived directly from the placement of advertising.

Revenue and margin is therefore most impacted by either a change in the number of advertisements placed and/or the price paid for each advertisement placed.

Results of Operations

For the Years Ended December 31,

2022 2021 Change % Change

Net Revenue $ 75,603,745 $ 59,830,688 $ 15,773,057 26.4 %

$ (1,692,217 )

Cost of Revenue

Gross Profit $ 45,359,358 $ 43,904,851 $ 1,454,507 3.3 %

We experienced 26% higher YOY revenue for the year ended December 31, 2022 as compared to the same period in 2021.

The amount of business served exceeded the prior year across both platforms.

Both platforms benefited from the acquisition of new customers, in part as a result of the 2021 agreement with a business development partner discussed in Note 9 to our Consolidated Financial Statements.

During 2022, three material clients accounted for 29.1%, 24.1% and 12.9% of our revenue, respectively.

In 2021, three separate material clients accounted for 14.3%, 15.6% and 33.0% of our revenue, respectively.

In 2021 and throughout 2022 we onboarded several Direct clients that contributed to revenue growth.

We have experienced churn in our Direct client base where some Direct clients that were material to 2021 were not served or only partially served in 2022 and some Direct clients that were material to 2022 are no longer being served.

Historically, we have been able to replace lost clients with new clients or by expanding our relationship with existing clients, however, we would likely experience a significant decline in revenue and our business operations could be significantly harmed if we are unable to replace lost clients.

(19,767,115 )

We reported $73.9 million in net revenue for the year ended December 31, 2023, a slight decrease as compared to $75.6 million during the same period in 2022.

During 2023, we had lower year-over-year revenue in the early quarters but gained significant momentum during the second half of the year.

Revenue for the quarter ended December 31, 2023 was $20.8 million, 21% higher than the same period in 2022.

During 2023 our three largest customers accounted for 60.4%, 12.8%, and 5.7% of our revenues, respectively.

In 2022, two of the same customers and another customer accounted for 29.1%, 24.1% and 12.9% of our revenues, respectively.

Unlike 2022, the revenue mix in 2023 showed increases from Platform clients.

In 2022 we had some material Agency and Brand clients that were not served in 2023 which contributed to the slight decline in annual revenue.

Historically, we have been able to replace lost clients with new clients or by expanding our relationship with existing clients.

We would likely experience a significant decline in revenue and our business could be harmed if we are unable to replace lost clients.

Cost of Revenue

Cost of revenue is primarily composed of payments to advertising exchanges that provide access to digital inventory where we serve advertisements using information predicted by the IntentKey platform.

To a lesser extent, cost of revenue includes payments to website publishers and app developers that host advertisements we serve through CampSight.

CampSight cost of revenue is relatively small and therefore generates a higher gross margin.

In recent quarters, the components of the cost of revenue have shifted, as the IntentKey platform revenue becomes a greater percentage of Net Revenue.

As CampSight revenue declines as a percent of total Net Revenue, one should expect total gross margin to decrease.

Cost of revenue increased 90% in 2022 compared to the prior year due to this shift in revenue and to the acquisition of new customers as mentioned in the Net Revenue section above.

Cost of revenue is primarily composed of payments to advertising exchanges that provide access to digital inventory where we serve advertisements.

To a lesser extent, cost of revenue includes payments to website publishers and app developers that host advertisements.

The decline in cost of revenue for the year ended December 31, 2023, compared to the same time period in 2022 was due to the change in revenue mix as discussed in the Net Revenue section above.

The higher gross margin in the current year, 85.8% compared to 60.0% in the prior year, was due to the change in revenue mix.

Operating Expenses

For the Year Ended December 31,

2022 2021 Change % Change

Marketing costs

Compensation 12,463,095 11,381,279 1,081,816 9.5 %

General and administrative

Operating expenses

Marketing costs consist mostly of traffic acquisition costs and include those expenses required to attract an audience to owned

and operated web properties.

Marketing costs year ended December 31, 2022 compared to the same period in 2021 increased as the result of higher revenue.

In June 2022, we identified some of the advertising we purchased from a prominent advertising network during the quarter ended June 30, 2022 appeared, according to our technology and assessment, to be comprised of invalid advertising clicks.

As a result, we refunded $1.5 million to our clients that were impacted by the invalid clicks and reversed any revenue that would have been recognized during the quarter ended June 30, 2022 related to this invalid traffic.

In addition, we provided evidence to the network from which we bought the media and demanded a refund of the spend.

The network in question immediately launched an internal investigation.

We have held back approximately $1.4 million in net payments due until such time as a satisfactory resolution is determined and have not reflected any offsetting adjustment to the related marketing expense and payables.

As a result, we have entered into a mediation process with the advertising network.

For the time being, the amount held back is recorded as a marketing expense and an accounts payable.

The fraud that was discovered was atypical, sophisticated and not common within the network in question.

As of December 31, 2022, no invalid traffic associated from the fraud was detected and the recompense from the advertising network is still pending.

Compensation expense was higher for the year ended December 31, 2022 compared to the same time period in 2021 due primarily to higher salaries and benefits.

Marketing costs consist mostly of traffic acquisition (i.e., media) costs and include those expenses required to attract audiences to various web properties.

Marketing costs year ended December 31, 2023 compared to the same period in 2022 increased due to a higher number of campaigns.

As we reported in our Form 10-Q filing for the quarterly period June 30, 2022, we identified certain advertising transactions with a prominent advertising network that, during the quarter ended June 30, 2022, appeared, according to our technology and assessment, to be comprised of invalid advertising clicks.

As a result, in that quarter, we refunded $1.5 million to our clients that were impacted and reversed any revenue that would have been recognized related to this invalid traffic.

In addition, in June 2022, we held back approximately $1.4 million in net payments due to the advertising network.

On September 21, 2023 we reached an agreement with the advertising network resulting in extinguishing of all related liabilities and a reversal of Marketing costs.

Compensation expense was higher for the year ended December 31, 2023 compared to the same time period in 2022 due primarily to higher salary and incentive expense.

Our total employment, both full and part-time, was 93 at December 31, 2023 compared to 86 at December 31, 2022.

General and administrative costs were higher for the year ended December 31, 2022 compared to the same time period in 2021 primarily due to higher reserve for doubtful accounts, professional fees, travel and entertainment expense, IT costs and insurance expense.

General and administrative costs were lower for the year ended December 31, 2023 compared to the same time period in 2022 primarily due to a decrease in the reserve for doubtful accounts and professional fees.

Financing (expense), net

Finance (expense), net of interest income, for the year ended December 31, 2023 was approximately $30 thousand expense and was primarily due to financing expenses of approximately $77 thousand and commitment fee expense of approximately $18 thousand offset by interest income of approximately $63 thousand.

Finance expense, net, for the year ended December 31, 2022 was approximately $21 thousand and was primarily due to financing expenses of approximately $59 thousand offset by interest income, net of fees, on marketable securities of approximately $38 thousand.

Finance expense, net, was approximately $87 thousand for the year ended December 31, 2021 and was primarily composed of financing expense on finance lease obligations, the Hitachi Loan and Security Agreement and our marketable securities.

Other (expense) income, net

Other income (expense), net, for the year ended December 31, 2022 was an expense of approximately $436

thousand from net realized and unrealized gains and losses discussed in Note 3 to our Consolidated Financial Statements.

Other income, net, was approximately $257 thousand for the year ended December 31, 2021 and included the reversal of deferred revenue from the contract cancellation of approximately $415 thousand and reversal of an accrued sales reserve of $50 thousand, partially offset by the unrealized losses on trading securities discussed in Note 3 to our Consolidated Financial Statements.

Other income (expense), net, for the year ended December 31, 2023 was income of approximately $15 thousand from net realized and unrealized gains and losses discussed in Note 3 to our Consolidated Financial Statements.

Other income (expense), net, for the year ended December 31, 2022 was an expense of approximately $436 thousand from net realized and unrealized gains and losses discussed in Note 3 to our Consolidated Financial Statements.

Liquidity and Capital Resources

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At December 31, 2022, our funds with the investment management company were approximately $2 million and were invested in cash equivalent accounts and marketable debt and equity securities.

A detail of the activity is described in Note 3 to our Consolidated Financial Statements.

Details of the activity is described in Note 3 to our Consolidated Financial Statements.

On May 28, 2021, we entered into a Sales Agreement (the "Sales Agreement") with A.G.P./Alliance Global Partners, as sales agent (the "Sales Agent"), pursuant to which we may offer and sell through or to the Sales Agent shares of our common stock (the "ATM Program") up to an aggregate amount of gross proceeds of $35,000,000.

During the year ended December 31, 2022, we did not issue any shares of common stock or receive any aggregate proceeds from the ATM Program, and we did not pay any commissions to the Sales Agent.

During the year ended December 31, 2023, we sold 173,558 shares of common stock for gross proceeds totaling $63,136 under the ATM Program and paid the Sales Agent a commission of $1,902, all of which occurred during the second quarter of 2023.

Any shares of common stock offered and sold in the ATM Program will be issued pursuant to our universal shelf registration statement on Form S-3 (the “Shelf Registration Statement”).

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Under the terms of the Sales Agreement, the Sales Agent is entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of shares under the Sales Agreement.

We have focused our resources behind a plan to grow our AI technology, the IntentKey, where we have a technological advantage and higher margins.

On May 30, 2023, we raised $4.0 million in gross proceeds in a registered direct offering, before expenses, through the sale of an aggregate of 16,000,000 shares of our common stock.

The shares were offered pursuant to an effective shelf registration statement on Form S-3 (the “Shelf Registration Statement”) and a prospectus supplement relating to the offering was filed with the SEC on May 26, 2023.

We have focused our resources behind a plan to market our collective multi-channel advertising capabilities differentiated by our AI technology, the IntentKey, where we have a technological advantage and higher margins.

If we are successful in implementing our plan, we expect to return to a positive cash flow from operations.

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As of December 31, 2023, we have approximately $4.4 million in cash, cash equivalents and short-term marketable securities.

Our net working capital was $2.8 million.

Our net working capital was $211.1 thousand.

We have encountered recurring losses and cash outflows from operations, which historically we have funded through equity offerings and debt facilities.

For the year ended December 31, 2023 we had a net loss of $10.3 million and net cash outflows from operations of $2.6 million.

In addition, our investment in internally developed

software consists primarily of labor costs which are of a fixed nature and amounted to approximately $1.7 million for the year ended December 31, 2022.

In addition, our investment in internally developed software consists primarily of labor costs which are of a fixed nature and amounted to approximately $1.7 million for the year ended December 31, 2023.

Through December 31, 2023, our accumulated deficit was $167.4 million.

Management plans to support the Company’s future operations and capital expenditures primarily through borrowings from the Hitachi credit facility, until reaching profitability.

The credit facility is due upon demand and therefore there can be no assurances that sufficient borrowings will be available to support future operations until profitability is reached.We believe our current cash position and credit facility will be sufficient to sustain operations for at least the next twelve months from the date of this filing.

Management plans to support the Company’s future operations and capital expenditures primarily through cash raised through the sale of stock in May 2023, cash generated from future operations and borrowings from the credit facility until reaching profitability.

The credit facility is due upon demand and therefore there can be no assurances that sufficient borrowings will be available to support future operations until profitability is reached.

Our collection period is less than 30 days and can also be used to meet accrued obligations.

We believe our current cash position and credit facility will be sufficient to sustain operations for at least the next twelve months from the date of this filing.

If our plan to grow the IntentKey product is unsuccessful, we may need to fund operations through private or public sales of securities, debt financings or partnering/licensing transactions over the long term.

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$ (2,554,075 )

Net cash used in investing activities

$ (5,573,991 )

Net cash (used in)/provided by financing activities

Net cash provided by/(used in) investing activities

$ (1,666,125 )

Net cash provided by/(used in) financing activities

Cash Flows - Operating

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We reported a net loss of $10,389,653, which included non-cash expenses:

depreciation and amortization of $2,598,957, amortization of right of use assets $103,926 and stock-based compensation of $2,350,314;

change in operating assets and liabilities was a net use of cash of $753,111 primarily due to an increase in the accounts receivable balance by $3,119,222, partially offset by an increase in the accounts payable balance of $3,200,086.

depreciation and amortization of $2,655,368, amortization of right of use assets of $96,190 and stock-based compensation of $1,986,296;

and change in operating assets and liabilities was a net provision of cash of $2,325,415 primarily due to a decrease in the accounts receivable balance by $1,106,387, offset by a decrease in the accounts payable balance of $1,612,682 and an increase in accrued expenses and other liabilities of $2,813,043.

Our terms are such that we generally collect receivables prior to paying trade payables.

However, our Media sales arrangements typically have slower payment terms than the terms of related payables.

In recent quarters, we expanded our Direct customer business in part by acquiring new customers (see Note 2).

These customers typically require longer credit terms than traditional cents per click ("CPC") based customer, in some cases to 120 days and beyond.

During 2022, cash used in operating activities was $5,573,991.

We reported a net loss of $13,106,539 which included the non-cash expenses of depreciation and amortization of $2,598,957, amortization of right of use assets $103,926 and stock-based compensation expenses of $2,350,314.

The change in operating assets and liabilities was a net use of cash of $3,077,525.

The change in operating assets and liabilities was a net provision of cash of $753,111.

Cash Flows - Investing

Net cash used in investing activities was $1,666,125 and $4,597,885 for 2022 and 2021, respectively.

Cash used in investing activities in 2022 and 2021 consisted of capitalized internal development costs and purchase of marketable securities.

Net cash provided by investing activities was $606,190 for 2023.

Net cash used in investing activities was $1,666,125 in 2022.

Cash used in investing activities in 2023 and 2022 consisted of capitalized internal development costs and cash provided in 2023 and 2022 consisted of proceeds from the sale of marketable securities.

Cash Flows - Financing

Net cash provided by financing activities was $3,456,924 during 2023, primarily from the proceeds from the capital raise (see Note 1).

Net cash used in financing was $304,433 during 2022.

Net cash provided by financing activities was $12,459,441 in 2021, primarily from proceeds from the sale of common stock.

Critical Accounting Policies and Estimates

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GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods.

The following disclosure supplements the descriptions of our accounting policies, which are described in Note 2 to our Consolidated Financial Statements regarding significant areas of judgement.

The estimates and assumptions that management makes affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities.

The estimates and assumptions used are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements.

Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial

statements, and such differences could be material.

A discussion of some of our more significant accounting policies and estimates follows.

Revenue recognition - Both of our platforms generate revenue from ad placements and clicks on advertisements on websites, some of which we own.

We recognize revenue from ad placements and clicks in the period in which they occur.

We also recognize revenue from serving impressions when we complete all or a part of an order from an advertiser.

The revenue is recognized in the period that the impression is served.

Revenues are recognized net of adjustments based on the traffic generated and is billed monthly.

We subsequently settle these transactions with our business partners at which time adjustments for invalid traffic may impact the amount collected.

Payments to publishers who display advertisements on our behalf and payments to ad exchanges are recognized as cost of revenue.

There have been no material changes to our estimates of revenue for the periods presented within this Annual Report on Form 10-K.

Accounts receivable - Accounts receivable consists of trade receivables from customers.

We record accounts receivable at its net realizable value, recognizing an allowance for doubtful accounts based on our best estimate of probable credit losses on our existing accounts receivable.

Balances are written off against the allowance after all means of collection have been exhausted and the possibility of recovery is considered remote.

Goodwill - Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the net tangible and intangible assets acquired.

We perform an impairment test annually as of December 31, 2022.

As a result, we perform our annual goodwill impairment test by comparing the fair value of our reporting unit with its carrying amount.

We generally determine the fair value of our reporting unit using the income approach methodology of valuation that includes the undiscounted cash flow method as well as other generally accepted valuation methodologies.

If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the amount it exceeds fair value is equivalent to the amount of impairment loss.

Intangible Assets - We allocate a portion of the purchase price of acquisitions to identifiable intangible assets and we amortize definite-lived assets over their estimated useful lives.

We consider our indefinite-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Trade names are not amortized as they are believed to have an indefinite life.

Trade names are reviewed annually for impairment under ASC 350.

We also acquire intangible assets outside of acquisitions and record them at their fair value and amortize them over their estimated useful lives.

We recorded no impairment of intangible assets during 2022 or 2021.

Capitalized Software Costs - We capitalize certain costs related to internally developed software and amortize these costs using the straight-line method over the estimated useful life of the software, generally two years.

We do not sell internally developed software.

Certain development costs not meeting the criteria for capitalization, in accordance with ASC 350-40 Internal-Use Software, are expensed as incurred.

Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material.

Our significant accounting policies related to Revenue Recognition, Equity-Based Compensation, Capitalized Software costs, Goodwill, Long-lived Assets and others are described in Note 2 — Summary of Significant Accounting Policies, of the Consolidated Financial Statements included elsewhere in this Report.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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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-K

Item 7. Management’s Discussion and Analysis