What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-05 compared with 2025-02-27 · 80 added, 74 removed, 120 unchanged (56% of the section changed)

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Company Overview

Inuvo is a leading advertising technology and services business that has successfully developed and commercialized large language generative artificial intelligence that can discover and target digital audiences instantly without having to track consumers around the internet.

Inuvo’s innovative technology positions it as a leader within the advertising industry, offering a valuable solution to marketers seeking to navigate the evolving landscape of consumer privacy.

Rather than targeting people, the artificial intelligence (AI) targets the reasons behind why people are interested in products, services and brands.

Inuvo sells its information technology solutions to agencies and brands (collectively, “Agencies & Brands”) along with large consolidators of advertising demand (“Platforms”).

Inuvo’s revenue is derived from the placement of digital advertising across devices, websites, applications and browsers within 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 artificial intelligence, a technology capable of identifying and targeting audiences without using a consumer’s identity or data.

The AI, marketed as IntentKey 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 targeting based on a consumer’s identity and data are no longer possible due to the legislative and technological changes occurring.

Inuvo’s AI technology solves the identity challenge by leveraging artificial intelligence, data analytics, and automation that can optimize the purchase and placement of advertising in real time without consumer data.

The technology can be consumed by clients as a managed service or self-service (SaaS).

Additionally, Inuvo has developed proprietary technology and assets tailored to certain clients 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.

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

Inuvo is a market leader in generative artificial intelligence for modeling media audiences.

As a leading provider of AI-driven data and advertising technology solutions, we have successfully commercialized a proprietary, patented large language model (“LLM”) that identifies and actions the reasons why consumers are interested in products, services, or brands - rather than who they are - offering a high-performance, privacy-by-design solution for the modern advertising landscape.

Intelligence for the Agentic Era.

As the industry moves toward “agentic” systems - where autonomous AI agents increasingly handle the planning and execution of media tasks - Inuvo is uniquely positioned as a critical intelligence layer.

Unlike legacy systems that rely on static historical data or consumer IDs (cookies), Inuvo’s technology provides the real-time, intent-based reasoning required for autonomous media planning and activation.

By serving as the neural network for these adaptive systems, Inuvo enables brands to move from traditional audience targeting to dynamic model planning.

Inuvo’s core competitive advantage lies in Intent Discovery.

While the programmatic industry has traditionally relied on reaching known users based on past behavior, Inuvo’s AI discovers new, high-value audiences as their motivations form.

This intelligence is delivered through a suite of advanced visualization and compliance tools:

The Company’s flagship proprietary AI, IntentKey®, analyzes live content consumption across the open web, mapping human motivation to a concept graph of over 25 million ideas.

This allows Inuvo to predict purchase intent with precision, often identifying emerging audience shifts 24 hours before they become competitive in the open market.

This, in turn, delivers targeting leverage that translates to superior supply/demand yields within bid streams.

A first-of-its-kind visualization that allows marketers to see “intent-in-motion,” mapping the real-time journey from initial discovery to final purchasing decision.

An AI-powered quality assurance feature within our Campsight system that ensures ad creatives remain consistent, accurate and compliant across digital networks.

Inuvo delivers these capabilities through two primary business channels:

Agencies & Brands:

Managed and self-service offerings that utilize Inuvo’s intelligence layer for precision audience discovery and brand-safe activation across CTV, Video, Audio, Native, and Display channels.

Inuvo provides strategic integrations for large consolidators of advertising demand.

This business is optimized to prioritize advertising quality, scalability, and compliance, leveraging AI to align merchant messaging with online content in a durable, defensible manner.

Inuvo’s competitive moat and intellectual property are protected by 18 issued and three pending patents issued by the United States Patent and Trademark Office.

Our IP portfolio includes patents, trade secrets and trademarks.

We actively seek to protect our IP rights and to deter unauthorized use of our IP and other assets.

While our IP rights are important to our success, our business is not significantly dependent on any single patent, trademark, or other IP right.

Credit Agreement

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 were 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 was 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 were 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 Loan and Security Agreement contained certain affirmative and negative covenants to which we were also subject.

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 provided us with a $5,000,000 line of credit commitment.

We were permitted to borrow up to 85% of the aggregate Eligible Accounts Receivable, up to the maximum credit commitment of $5,000,000.

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

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

We also paid MHCA a quarterly service fee of 0.20% on the monthly unused amount of the maximum credit line.

All obligations to MHCA have been satisfied and the Agreement was terminated on July 31, 2024.

At December 31, 2024 and 2023, there were no outstanding balances due under the Agreement.

On July 30, 2024, we entered into a Financing and Security Agreement and Collateral Documents (“Financing Agreement”) with SLR Digital Finance LLC (“SLR”).

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Repayment of the Financing Agreement will be made through collections from eligible accounts receivable.

At December 31, 2024 there were no outstanding balances due under the Financing Agreement.

At December 31, 2025 the outstanding balance under the Financing Agreement at that date was $3,288,100.

2025 Overview

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The highlights of 2025, include:

13.4% increase in net revenue to $83.8 million

13% increase in gross profit to $71.8 million

45% reduction in the net loss

6X improvement in the adjusted EBITDA loss for 2024

Net cash provided by operating activities of $230,000 in 2024

All time company quarterly record of $26.2 million of net revenue in Q4 2024

Net Income of $141,000 in Q4 2024

Inuvo introduced IntentPath for next-level audience visualization capability that predicts how audiences move from awareness to engagement to conversion.

The Company launched Ranger, an advanced quality assurance and compliance capability within its Campsight system, designed to strengthen responsible monetization and improve creative verification and message consistency.

The Company appointed Rob Buchner as Chief Operating Officer in a newly created role to support operational scale and accelerate go-to-market execution for IntentKey, and he was subsequently appointed Chairman and Chief Executive Officer in January 2026.

15 new Agencies/Brands were signed up.

Secured a $10.0 million credit line in July

Completed a Master Services Agreement with one of the largest retailers in the world, and

Launched the IntentKey Platform, an advanced AI agent specifically designed for audience modeling.

Results of Operations

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Cost of Revenue

$ (7,545,930 )

We reported $86.2 million in net revenue for the year ended December 31, 2025, a 2.9% increase compared to $83.8 million during the same period in 2024.

During 2024, the higher revenue was primarily driven by Platform customers where we launched new product enhancements tailored to their needs.

Net revenue for the quarter ended December 31, 2024 was $26.2 million, representing the highest quarterly revenue in the Company's history and a 25% increase compared to the same period in 2023.

The higher revenue was due to increasing demand within both Platforms and Agencies & Brands.

Our largest Platform partner, which introduced a new product in 2023, continued to generate strong performance throughout 2024.

During 2024 our largest customer accounted for 75% of our revenues.

In 2023, the same customer accounted for 60.4% of our revenues.

Platform clients represented 83.8% of the overall revenue for the year ended December 31, 2025 compared to 82.8% in the same period of 2024.

For the year ended December 31, 2025, our two largest clients, both Platform clients, accounted for 64.2% and 19.3% of our overall revenue, respectively.

During 2024 our largest client, also a Platform client, accounted for 75.0% of our revenues.

Revenue from one of our largest Platform clients increased significantly in 2025 compared to the prior year due to the introduction of a new product in the fourth quarter of 2024.

However, this increase was offset by a decline in revenue from our largest Platform client, as advertising activity was reduced during the second half of 2025 to comply with our client's new requirements.

Cost of Revenue

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 increase in cost of revenue for the year ended December 31, 2024, compared to the same time period in 2023 was related to higher revenue within a Platform client this year.

Gross margin of 85.6% for the year ended December 31, 2024 was nearly level as compared to 85.8% in the prior year period.

Cost of revenue is primarily composed of payments to website publishers and app developers that host advertisements.

To a lesser extent, cost of revenue includes payments to advertising exchanges that provide access to digital inventory where we serve advertisements.

The increase in cost of revenue for the year ended December 31, 2025, compared to the same time period in 2024 was primarily related to the change in mix within Platform revenue.

As mentioned above, revenue from a new product introduced in the fourth quarter of 2024 accounted for the increase in cost of revenue.

The change in gross margin in the current year ended December 31, 2025, 74.5% compared to 85.6% in the same period of 2024 was primarily due to a change in the revenue mix.

Operating Expenses

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Marketing costs

$ (7,772,899 )

General and administrative

Operating expenses

Marketing costs consist mostly of media costs incurred on behalf of clients.

Marketing costs for the year ended December 31, 2024 compared to the same period in 2023 was 14.8% higher due primarily to higher revenue from Platform advertisers in the comparable periods.

Marketing costs in 2024 include the fully amortized remaining balance of $500,000 of the referral and support services asset (see Note 8 – Commitments to our Consolidated Financial Statements).

Compensation expense was lower for the year ended December 31, 2024 compared to the same time period in 2023 due primarily to lower incentive, commission, and stock-based compensation expense.

$ (6,363,697 )

Marketing costs consist primarily of traffic acquisition, or media, costs and include expenses incurred to attract and direct audience traffic to various web properties.

Marketing costs for the year ended December 31, 2025 compared to the same period in 2024 was 13.0% lower due primarily to lower revenue in 2025 from the Platform client mentioned in Net Revenue section above and to fully amortizing the remaining balance of $600,000 of the referral and support services asset in the third quarter of 2024 (see Note 8 – Business Development Agreement to our Consolidated Financial Statements).

Compensation expense was flat for the year ended December 31, 2025, compared to the same time period in 2024.

Our total employment, both full and part-time, was 79 at December 31, 2025 compared to 81 at December 31, 2024.

General and administrative costs were lower for the year ended December 31, 2024 compared to the same time period in 2023 due primarily to an adjustment in the reserve for expected credit losses.

During 2024, we made an adjustment to the allowance for expected credit losses for a balance due from a former client in 2022.

The client has since paid off their full outstanding balance and no longer has any obligation to us as of December 31, 2024.

General and administrative expenses increased for the year ended December 31, 2025 compared to the same period in 2024 primarily due to a $1.4 million reduction in the allowance for expected credit losses recorded in 2024 related to a balance due from a former client.

That client subsequently paid its outstanding balance in full and had no remaining obligations to the Company as of December 31, 2025.

Financing expense, net

Finance expense, net of interest income, for the year ended December 31, 2024 was approximately $266,000 expense and was primarily due to interest expense of approximately $221,000 and commitment fee expense of approximately $66,000 offset by interest income of approximately $71,000.

Finance expense, net of interest income, for the year ended December 31, 2025 was approximately $259,000 expense and was primarily due to interest and financing expenses of approximately $400,000 and commitment fee expense of approximately $80,000 offset by interest income of approximately $218,000.

During 2025, the Company received a delayed refund from the Internal Revenue Service (IRS) of which $158,000 was recorded as interest income.

Other income, net

Other income, net, for the year ended December 31, 2025 was income of approximately $1.9 million.

During the year ended December 31, 2025, the Company received a payment from the IRS totaling $610,352 in connection with an amended form filed in May 2023 for the Employee Retention Credit (ERC) related to the first quarter of 2021.

Of this amount, $533,093 was recognized in Other Income, and $77,259 of interest was recorded in Financing expense, net.

The Company received an additional ERC payment from the IRS related to the second quarter of 2021, totaling $606,156.

Of this amount, $525,085 was recognized in Other Income, and $81,071 of interest was recorded in Financing expense, net.

During the year ended December 31, 2025, the Company received a refund of approximately $700,000 from a partner related to amounts previously paid in 2022.

The refund was recognized in other income during 2025 and represents a non-recurring item.

Other income, net, for the year ended December 31, 2024 was income of approximately $26,000 for setup charges to new Platform partners.

Other income, net, for the year ended December 31, 2023 was income of approximately $15,000 from net realized and unrealized gains and losses.

Liquidity and Capital Resources

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The sales of the Shares made under the ATM Agreement will be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended.

The Company will pay Wainwright a commission rate of up to 3.0% of the aggregate gross proceeds from each sale of Shares.

For the year ended December 31, 2024, the Company has not sold any shares of common stock under the ATM Agreement.

We will pay Wainwright a commission rate of up to 3.0% of the aggregate gross proceeds from each sale of Shares.

For the year ended December 31, 2024, we did not sell any shares of common stock under the ATM Agreement.

During the year ended December 31, 2025, we utilized the ATM Agreement and sold 165,641 shares of common stock for gross proceeds of $1,184,740, before deducting commissions and other offering-related costs.

On July 31, 2024, we entered into a Financing and Security Agreement (the “Financing Agreement”) with SLR Digital Finance LLC (“SLR”), effective July 30, 2024.

Pursuant to the terms of the Financing Agreement, SLR will finance up to $10 million dependent upon eligible receivables.

Availability as of December 31, 2024 equaled the maximum credit commitment of $10,000,000.

Pursuant to the terms of the Financing Agreement, SLR will finance up to $10 million subject to availability based on the amount of eligible accounts receivable.

Eligibility is determined by criteria such as geographic location of the customer and aging of receivables.

As of December 31, 2025, our accounts receivable, net of allowance for credit losses, were $5,887,884, of which a substantial portion qualified as eligible under the Financing Agreement.

At December 31, 2025, the outstanding balance due under the Financing Agreement was $3,288,100.

See Note 6 – Bank Debt to our Consolidated Financial Statements.

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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, 2024 we had a net loss of $5.8 million and net cash flow from operations of $0.2 million.

For the year ended December 31, 2025 we had a net loss of $5.1 million and the net cash used in operations was $1.8 million.

Additionally, our investment in investing activities totaled approximately $1.6 million for the year ended December 31, 2025.

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Through December 31, 2025, our accumulated deficit was $178.3 million.

Subsequent to December 31, 2025, on January 14, 2026, the Company entered into a securities purchase agreement with a certain investor pursuant to which the Company authorized the issuance of subordinated convertible notes in the aggregate principal amount of approximately $3.33 million, subject to a 10% original issue discount.

The subordinated convertible note is convertible into shares of the Company’s common stock at a conversion price of $3.10 per share, subject to applicable NYSE American ownership limits and certain registration rights obligations.

In connection with the convertible note financing, the Company also entered into a debt subordination agreement with its senior lender and a registration rights agreement with the investor.

This financing provided incremental liquidity subsequent to year-end and is included as a subsequent event.

Management expects the additional capital to enhance the Company’s liquidity position and support operations and strategic initiatives in 2026.

Subsequent to December 31, 2025, the Company received approximately $6.2 million in connection with a previously disclosed class action settlement.

The settlement proceeds represent a one-time, non-recurring cash inflow and enhanced the Company’s liquidity position after year-end.

Management considered the receipt of these proceeds, along with subsequent financing activity, in its assessment of the Company’s liquidity and capital resources.

Management plans to support the Company’s future operations and capital expenditures primarily through cash generated from its credit facility until such time as we reach 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.

We believe our current cash position, together with availability under our credit facility and proceeds received subsequent to December 31, 2025 from the $6.2 million class action settlement and the subordinated convertible note issued in January 2026, 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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$ (1,601,903 )

$ (1,857,375 )

Net cash provided by/(used in) financing activities

Cash Flows - Operating

Net cash provided by operating activities was $229,554 during 2024.

Net cash used in operating activities was $1,786,301 during 2025.

We reported a net loss of $5,095,518, which included non-cash expenses:

depreciation and amortization of $2,515,177, stock-based compensation of $1,501,444, $800,000 for the impairment and amortization of a referral and support services agreement, and amortization of right of use assets of $54,356;

partially offset by an adjustment to expect losses on accounts receivable of $1,442,533.

The change in operating assets and liabilities was a net provision of cash of $2,342,255 primarily due to increases in accrued expenses and other liabilities of $2,329,295 and accounts payable balance of $1,990,231 partially offset by an increase in the accounts receivable balance by $1,876,282.

depreciation and amortization of $2,234,749 and stock-based compensation of $1,144,773.

The change in operating assets and liabilities was a net use of cash of $303,348 primarily due to a decrease in the accounts receivable balance of $6,703,509, offset by decreases in accrued expenses and other liabilities of $5,565,487 and accounts payable of $1,331,567.

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.

During 2023, cash used in operating activities was $2,554,075.

We reported a net loss of $10,389,653 which included the non-cash expenses of depreciation and amortization of $2,655,368, amortization of right of use assets $96,190 and stock-based compensation expenses of $1,986,296.

During 2024, cash provided by operating activities was $229,554.

We reported a net loss of $5,761,801 which included the non-cash expenses of depreciation and amortization of $2,515,177, stock-based compensation expenses of $1,501,444, $800,000 for the impairment and amortization of a referral and support services agreement, and amortization of right of use assets of $54,356.

The change in operating assets and liabilities was a net provision of cash of $2,342,255.

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Net cash used in investing activities was $1,601,903 for 2025 and consisted primarily of capitalized internal development costs.

Net cash provided by investing activities in 2023 was $606,190 and consisted primarily of proceeds from the sale of marketable securities partially offset by capitalized internal development costs.

Net cash used in investing activities in 2024 was $1,857,375 and consisted primarily of capitalized internal development costs.

Cash Flows - Financing

Net cash used in financing activities was $353,388 during 2024, primarily due to the election of certain participants to have the Company withhold the issuance of shares pursuant to vesting restricted stock units in consideration of the Company’s payment of taxes on behalf of such participants.

Net cash provided by financing was $3,456,924 during 2023, primarily from the proceeds from the capital raise (see Note 1 – Organization and Business to our Consolidated Financial Statements).

Net cash provided by financing activities was $3,768,880 during 2025, primarily due to the utilization of our Financing Agreement as discussed in Note 6 - Bank Debt to our Consolidated Financial Statements and sales of common stock through the ATM as discussed in Note 11 – Stockholders’ Equity to our Consolidated Financial Statements.

Net cash used in financing was $353,388 during 2024, primarily due to the election of certain participants to have the Company withhold the issuance of shares pursuant to vesting restricted stock units in consideration of the Company’s payment of taxes on behalf of such participants.

Critical Accounting Policies and Estimates

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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