Inuvo, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS INUVO, INC. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2026 (Unaudited) and December 31, 2025 March 31, 2026 December 31, 2025 Assets Current assets Cash and cash equivalents $ 2,887,144 $ 2,839,921 Accounts receivable, net of allowance for credit losses of $ 35,191 and $ 98,954 , respectively 4,326,204 5,887,884 Prepaid expenses and other current assets 630,994 489,790 Total current assets 7,844,342 9,217,595 Property and equipment, net 1,567,094 1,629,561 Other assets Goodwill 9,853,342 9,853,342 Intangible assets, net of accumulated amortization 3,308,000 3,425,375 Right of use assets - operating lease 597,093 663,635 Other assets 68,342 78,342 Total other assets 13,826,777 14,020,694 Total assets $ 23,238,213 $ 24,867,850 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 4,101,976 $ 7,090,784 Accrued expenses and other current liabilities 4,051,565 3,619,974 Lease liability - operating lease 279,900 294,093 Outstanding borrowings under Financing Agreement — 3,288,100 Convertible notes, at fair value 2,148,018 — Total current liabilities 10,581,459 14,292,951 Long-term liabilities Deferred tax liability 110,646 107,971 Lease liability - operating lease 387,049 443,912 Total long-term liabilities 497,695 551,883 Stockholders’ equity Preferred stock, $ 0.001 par value: Authorized shares 500,000 , none issued and outstanding — — Common stock, $ 0.001 par value: Authorized shares 200,000,000 ; issued and outstanding shares 14,785,003 and 14,701,949 , respectively. 14,786 14,703 Additional paid-in capital 188,553,148 188,312,843 Accumulated deficit ( 176,408,875 ) ( 178,304,530 ) Total stockholders’ equity 12,159,059 10,023,016 Total liabilities and stockholders’ equity $ 23,238,213 $ 24,867,850 See accompanying notes to the condensed consolidated financial statements. 4 Table of Contents INUVO, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months Ended March 31, 2026 2025 Net revenue $ 7,927,553 $ 26,708,032 Cost of revenue 4,263,665 5,620,941 Gross profit 3,663,888 21,087,091 Operating expenses Marketing costs 2,092,812 17,512,994 Compensation 3,690,203 3,599,321 General and administrative 1,761,827 1,744,563 Total operating expenses 7,544,842 22,856,878 Operating loss ( 3,880,954 ) ( 1,769,787 ) Financing expense, net ( 398,439 ) ( 27,929 ) Other income 6,177,724 540,571 Income before provision for income taxes 1,898,331 ( 1,257,145 ) Provision for income taxes ( 2,676 ) ( 2,676 ) Net income (loss) 1,895,655 ( 1,259,821 ) Per common share data Basic $ 0.13 $ ( 0.09 ) Diluted $ 0.13 $ ( 0.09 ) Weighted average shares Basic 14,736,821 14,271,927 Diluted 14,900,134 14,271,927 See accompanying notes to the condensed consolidated financial statements. 5 Table of Contents INUVO, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) For the Three Months Ended March 31, 2026 Common Stock Additional Paid in Shares Stock Capital Accumulated Deficit Total Balance as of December 31, 2025 14,701,949 $ 14,703 $ 188,312,843 $ ( 178,304,530 ) $ 10,023,016 Net income 1,895,655 1,895,655 Stock-based compensation 302,719 302,719 Stock issued for vested restricted stock units net of shares withheld for taxes 83,054 83 ( 62,414 ) ( 62,331 ) Balance as of March 31, 2026 14,785,003 $ 14,786 $ 188,553,148 $ ( 176,408,875 ) $ 12,159,059 2025 Common Stock Additional Paid in Shares Stock Capital Accumulated Deficit Total Balance as of December 31, 2024 14,050,483 $ 14,051 $ 186,669,733 $ ( 173,209,012 ) $ 13,474,772 Net loss ( 1,259,821 ) ( 1,259,821 ) Stock-based compensation 304,284 304,284 Stock issued for vested restricted stock units net of shares withheld for taxes 151,892 152 ( 201,511 ) ( 201,359 ) At-the-market sale of common stock net of issuance costs 159,431 159 1,128,679 1,128,838 Balance as of March 31, 2025 14,361,806 $ 14,362 $ 187,901,185 $ ( 174,468,833 ) $ 13,446,714 See accompanying notes to the condensed consolidated financial statements. 6 Table of Contents INUVO, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, 2026 2025 Operating activities: Net income (loss) $ 1,895,655 $ ( 1,259,821 ) Adjustments to reconcile net income (loss) to net cash provided by/(used in) operating activities: Depreciation and amortization 538,786 568,042 Change in right of use assets - financing — 6,090 Change in right of use assets - operating lease 66,541 59,945 Stock based compensation 302,719 304,284 Adjustment to expected losses on accounts receivable ( 63,763 ) 31,624 Deferred income tax expense 2,676 2,676 Change in fair value of convertible notes ( 18,649 ) — Change in operating assets and liabilities: Accounts receivable 1,625,443 491,707 Prepaid expenses, other current assets and other assets ( 131,204 ) ( 99,191 ) Accrued expenses and other liabilities 431,591 754,973 Accounts payable ( 2,988,808 ) ( 1,165,346 ) Lease liability - operating lease ( 71,056 ) ( 61,895 ) Net cash provided by/(used in) operating activities 1,589,931 ( 366,912 ) Investing activities: Purchases of equipment and capitalized development costs ( 358,944 ) ( 451,729 ) Net cash used in investing activities ( 358,944 ) ( 451,729 ) Financing activities: Proceeds from at-the-market sales — 1,128,838 Payments net of proceeds on Financing Agreement ( 3,288,100 ) — Proceeds from issuance of convertible note 3,000,000 — Principal payments of convertible note ( 833,333 ) — Principal payments on finance lease obligations — ( 6,090 ) Net taxes paid on restricted stock unit grants exercised ( 62,331 ) ( 201,359 ) Net cash provided by/(used in) financing activities ( 1,183,764 ) 921,389 Effect of exchange rate changes — — Net change – cash 47,223 102,748 Cash and cash equivalent, beginning of year 2,839,921 2,459,245 Cash and cash equivalent, end of period $ 2,887,144 $ 2,561,993 Supplemental information: Interest paid $ 422,467 $ 125,726 See accompanying notes to the condensed consolidated financial statements. 7 Table of Contents Inuvo, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1 – Organization and Business Company Overview Inuvo, Inc. (the "Company") operates in the generative artificial intelligence market for modeling media audiences. We provide AI-driven data and advertising technology solutions and 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 positioned as a critical, media audience decisioning 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 and activation. 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. Speed of insight-to-execution is our competitive advantage. IntentKey delivers value from intent signals in-the-moment and unlocks superior ROAS (return on ad spend) by matching high yield ad inventories in the bid stream before competitors have even identified consumer intent. · IntentPath: 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. · Ranger: 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: · Audience Modeling (formerly Agencies and 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. · Legacy Search (formerly Platforms): 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 15 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. Liquidity Our principal sources of liquidity are the sale of our common stock and our Financing and Security Agreement with SLR Digital Finance LLC (“SLR”), effective as of July 30, 2024 (the “Financing Agreement”) discussed in Note 5 – Debt. On January 29, 2026, we received gross proceeds of approximately $ 6.2 million in connection with a class action settlement. These proceeds represent a one-time, non-recurring source of liquidity and are not expected to recur in future periods. 8 Table of Contents On January 14, 2026, we entered into a securities purchase agreement with a certain investor pursuant to which we issued a subordinated convertible note with an aggregate principal amount of approximately $ 3.3 million, subject to a 10 % original issue discount, resulting in gross proceeds of approximately $ 3.0 million, prior to the deduction of transaction related expenses. 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, we also entered into a debt subordination agreement with our senior lender and a registration rights agreement with the investor. This financing supplemented the Company’s available liquidity during the period. See Note 5 – Debt to our Condensed Consolidated Financial Statements. On July 31, 2024, we entered into the Financing Agreement with SLR, effective July 30, 2024. 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 March 31, 2026, our accounts receivable, net of allowance for credit losses, were $ 4.3 million, of which a substantial portion qualified as eligible under the Financing Agreement. As of March 31, 2026, the outstanding balance due under the Financing Agreement was $ 0 . See Note 5 – Debt to our Condensed Consolidated Financial Statements. On May 7, 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co. LLC (“Wainwright”), to sell shares of our common stock, par value $ 0.001 per share, (the “Shares”), having an aggregate sales price of up to $ 15 million, from time to time, through an “at the market offering” program under which Wainwright will act as sales agent. 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. We will pay Wainwright a commission rate of up to 3.0 % of the aggregate gross proceeds from each sale of Shares. For the three-month period ended March 31, 2026, the Company has not sold any additional shares of common stock under the ATM Agreement. During the three-month period ended March 31, 2025, we utilized the ATM Agreement and sold 159,431 shares of common stock for gross proceeds of $ 1.2 million. As of March 31, 2026, approximately $ 13.8 million remained available for issuance under the ATM Agreement, based on cumulative gross sales of shares under the program to date. 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 and maintain positive cash flows from operations. However, there is no assurance that we will be able to achieve this objective. As of March 31, 2026, we have approximately $ 2.9 million in cash and cash equivalents. Our net working capital deficit was approximately $ 2.7 million. Our investing activities totaled $ 358,944 for the three-month period ended March 31, 2026. This amount primarily consists of internally developed software costs, which are largely comprised of fixed labor costs, along with other capitalized expenditures. We have encountered recurring losses and cash outflows from operations, which historically we have funded through equity offerings and debt facilities. Through March 31, 2026, our accumulated deficit was $ 176.4 million. Management plans to support the Company’s future operations and capital expenditures primarily through cash generated from operations and availability under the Financing Agreement and other available financing sources until such time as we reach profitability. The Financing Agreement 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 the Financing Agreement, together with expected cash flows from operations, 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. 9 Table of Contents Note 2 – Summary of Significant Accounting Policies Basis of presentation The condensed consolidated financial statements presented are for Inuvo and its subsidiaries. The accompanying unaudited condensed consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying condensed consolidated balance sheet as of December 31, 2025, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (GAAP). In our opinion, these condensed consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 5, 2026. Use of estimates The preparation of financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying condensed consolidated financial statements are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the condensed consolidated financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying condensed consolidated financial statements, and such differences could be material. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (the exit price ) in an orderly transaction between market participants at the measurement date. The fair value standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. The Company uses the hierarchy prescribed in the accounting guidance for fair value measurements, based upon the available inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows: • Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date; • Level 2 – Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and • Level 3 – Unobservable inputs reflecting the Company's own assumptions about the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. The carrying amounts of certain financial assets and liabilities, including cash and cash equivalents, accounts receivable, prepaid and other current assets, accounts payable, and accrued liabilities, approximate fair value because of the short maturity and liquidity of those instruments. The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety. See Note 5 for fair value disclosures related to the Company's convertible note. Convertible Note – Fair Value Option The Company evaluated its convertible note and determined that it includes embedded features that would otherwise require potential bifurcation. Neither the note nor any embedded features were required to be classified as equity. Therefore, the Company elected the fair value option ("FVO") under ASC 825, Financial Instruments, for the convertible note at its date of issuance. Under the FVO, the convertible note is recorded at fair value upon initial recognition and is subsequently remeasured at fair value at each reporting date. Changes in fair value, excluding changes attributable to instrument-specific credit risk, are recognized in other income (expense) within the condensed consolidated statements of operations. The portion of the total change in fair value resulting from changes in instrument-specific credit risk is recognized separately in other comprehensive income (loss). Upon derecognition of the convertible note, any cumulative gain or loss previously recognized in other comprehensive income as a result of changes in instrument specific credit risk will be reclassified to net income. The Company determined that the change in fair value of its FVO liabilities attributable to instrument-specific credit risk was not significant. Accordingly, net income or loss equals comprehensive income or loss for all periods presented. Interest expense on the convertible note is included in financing expense within the condensed consolidated statements of operations. The election of the FVO is irrevocable and is applied on an instrument-by-instrument basis. As a result of the FVO election, the embedded conversion feature is not required to be separately accounted for. Debt issuance costs incurred in connection with the convertible note measured at fair value under the FVO are expensed as incurred. Revenue Recognition We generate revenue by identifying audiences and presenting advertisements on behalf of our customers. We provide our products, technologies and services to agencies and brands (collectively, “Audience Modeling”) along with large consolidators of advertising demand (“Legacy Search”). Currently, revenue from Audience Modeling is primarily through our IntentKey products and services and revenue from Legacy Search is primarily through our Bonfire products and services. Our revenue is derived from the placements of advertisements across advertising channels, browsers, applications and devices. Pricing for those advertisement placements is typically either on a cost per thousand impressions or cost-per-click basis. Our revenue is a function of the number of advertisements placed combined with the price we obtain (using our technologies) for the placements made on behalf of our clients. We assume the risk associated of finding placements at a cost below that for which it had been sold. We recognize revenue when control of the contracted services or product is transferred to our customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those services or products. We determine revenue recognition through (i) identification of a contract with a customer, (ii) identification of the performance obligations in the contract, (iii) determination of the transaction price, (iv) allocation of the transaction price to the performance obligations in the contract, and (v) recognition of revenue when or as the performance obligations are satisfied. For Audience Modeling, the terms of an agreement are captured in an Insertion Order (“IO”) where revenue is recognized upon delivery of services during the period covered by the IO. For Legacy Search, terms are generally captured in multi-year master service agreements and revenue is recognized based on the number of advertisements placed or clicked on in the period they occur. We settle advertisement placement prices with our customers net of any adjustments for quality. For the three-month period ended March 31, 2026, we generated $ 7,927,553 in revenue of which 57.1 % was from Legacy Search and 42.9 % from Audience Modeling. For the three-month period ended March 31, 2025, we generated $ 26,708,032 in revenue of which 88.7 % was from Legacy Search and 11.3 % from Audience Modeling. Customer concentration For the three-month period ended March 31, 2026, four customers accounted for 32.1 %, 23.2 %, 13.7 %, and 13.2 % of our overall revenue, respectively. Those same customers accounted for 37.1 %, 14.1 %, 15.6 %, and 12.5 % of our gross accounts receivable balance as of March 31, 2026. For the three-month period ended March 31, 2025, two customers accounted for 70.8 % and 17.4 %, of our overall revenue, respectively. Those same customers accounted for 51.9 % and 27.5 % of our gross accounts receivable balance as of March 31, 2025. 10 Table of Contents Recently Issued Accounting Pronouncements In September 2025, the Financial Accounting Standards Board (FASB) issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes guidance for internal-use software costs and relocates the website development-costs guidance (previously in Subtopic 350-50) into Subtopic 350-40. The amendments require enhanced disclosures for capitalized software costs under ASC 350-40 and ASC 360-10, effective for annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements. In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contract with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-based Noncash Consideration from a Customer in a Revenue Contract which refines the scope of derivative accounting and clarifies the interaction between derivative accounting and revenue recognition guidance. The amendments are effective for fiscal years beginning after December 15, 2026. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements. In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires public companies to disclose additional information about certain expense categories within the income statement in the notes to the financial statements. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statement disclosures. In May 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the accounting for the settlement of convertible debt instruments with an induced conversion feature. The amendments are effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted. The Company adopted this guidance during the quarter ended March 31, 2026. The adoption of ASU 2024-04 did not have a material impact on the Company's condensed consolidated financial statements. 11 Table of Contents Note 3 – Property and Equipment The net carrying value of property and equipment was as follows as of: March 31, 2026 December 31, 2025 Furniture and fixtures $ 269,123 $ 269,123 Equipment 1,069,956 1,062,765 Capitalized software development costs 19,763,354 19,411,743 Leasehold improvements 467,243 467,243 Subtotal 21,569,676 21,210,874 Less: accumulated depreciation and amortization ( 20,002,582 ) ( 19,581,313 ) Total $ 1,567,094 $ 1,629,561 During the three months ended March 31, 2026 and March 31, 2025, depreciation and amortization expense was $ 421,411 and $ 450,666 , respectively. Note 4 – Other Intangible Assets and Goodwill The following is a schedule of intangible assets and goodwill as of March 31, 2026: Term Carrying Value Accumulated Amortization and Impairment Net Carrying Value Year-to-date Amortization Customer list, Google 20 years $ 8,820,000 $ ( 6,210,750 ) $ 2,609,250 $ 110,250 Customer relationships 20 years 570,000 ( 261,250 ) 308,750 7,125 Trade names, web properties (1) - 390,000 — 390,000 — Intangible assets classified as long-term $ 9,780,000 $ ( 6,472,000 ) $ 3,308,000 $ 117,375 Goodwill, total - $ 9,853,342 $ — $ 9,853,342 $ — (1) The trade names related to our web properties have an indefinite life, and as such are not amortized. Amortization expense over the next five years and thereafter is as follows: 2026 (remainder of year) $ 352,125 2027 469,500 2028 469,500 2029 469,500 2030 469,500 Thereafter 687,875 Total $ 2,918,000 12 Table of Contents The following is a schedule of intangible assets and goodwill as of December 31, 2025 and amortization expense for the three months ended March 31, 2025: Term Carrying Value Accumulated Amortization and Impairment Net Carrying Value Year-to-date Amortization Customer list, Google 20 years $ 8,820,000 $ ( 6,100,500 ) $ 2,719,500 $ 110,251 Customer relationships 20 years 570,000 ( 254,125 ) 315,875 7,125 Trade names, web properties - 390,000 — 390,000 — Intangible assets classified as long-term $ 9,780,000 $ ( 6,354,625 ) $ 3,425,375 $ 117,376 Goodwill, total $ 9,853,342 $ — $ 9,853,342 $ — Note 5 – Debt Credit Facility On July 30, 2024, we entered into the Financing Agreement with SLR. Under the terms of the Financing Agreement, SLR has provided us with a $ 10 million line of credit commitment. We are permitted to borrow up to 90 % of eligible accounts receivable as defined in the Financing Agreement, up to the maximum credit commitment of $ 10 million. As of March 31, 2026, our accounts receivable, net of allowance for credit losses, totaled $ 4.3 million of which a substantial portion qualified as eligible under the agreement. As of December 31, 2025, our accounts receivable, net of allowance for credit losses, $ 5.9 million of which a substantial portion qualified as eligible under the agreement. The outstanding balance under the Financing Agreement at that date was $ 3.3 million. During the three months ended March 31, 2026, we made payments of $ 3.3 million towards the Financing Agreement, resulting in an outstanding balance of $ 0 as of March 31, 2026. We will pay SLR monthly interest at the rate of 1.0% in excess of the Prime Rate but not less than 7% . The Prime Rate was 6.75 % as of March 31, 2026 and as of December 31, 2025 . The Financing Agreement has a three-year term. The Financing Agreement contains certain affirmative and negative covenants to which we are also subject to. We agreed to pay SLR an annual facility fee of 0.80 % of the maximum credit commitment. We also agreed to pay a minimum utilization amount of the interest rate multiplied by difference between $ 0.5 million and the average daily outstanding loan during a month. We are obligated to pay SLR a monthly service fee of 0.15 % of the average net amount of outstanding loans during each month. If we terminate the Financing Agreement prior to the second anniversary of the effective date, an amount equal to 1.0% of the maximum credit commitment will be due as an early termination payment and if we terminate after the second anniversary of the effective date but prior to the end of the term, an amount equal to 0.25% of the maximum credit commitment will be due. Repayment of the financing agreement will be made through collections from eligible accounts receivable. Convertible Note On January 14, 2026, we entered into a securities purchase agreement with a certain investor pursuant to which we issued a subordinated convertible note with an aggregate principal amount of approximately $ 3.3 million, subject to a 10 % original issue discount, resulting in gross proceeds of approximately $ 3.0 million. The note bears interest at a rate of 8 % per annum and mature 12 months from the issuance date. The note is repayable in four equal quarterly installments of approximately $ 833,333 in principal and $ 66,667 in interest, commencing March 31, 2026. The note is convertible into shares of our common stock at a conversion price of $ 3.10 per share, subject to applicable ownership limitations. In connection with the financing, we entered into a subordination agreement with our senior lender and a registration rights agreement with the investor. Debt issuance costs of $ 267,500 incurred in connection with the convertible note were expensed as incurred. Refer to Note 2 for additional information regarding the Company's accounting policy for the convertible note under the fair value option. 13 Table of Contents The following table summarizes the change in convertible note fair value for the three months ended March 31, 2026 (in dollars): March 31, 2026 Balance at January 1, 2026 $ — Issuance of convertible note at fair value $ 3,000,000 Principal repayment ( 833,333 ) Change in fair value of convertible note ( 18,649 ) Balance at March 31, 2026 $ 2,148,018 The following table presents information about the Company's liabilities measured at fair value on a recurring basis as of March 31, 2026: March 31, 2026 Level Level 2 Level 3 Total Fair Value Liabilities: Convertible note, at fair value $ — $ — $ 2,148,018 $ 2,148,018 Total Liabilities $ — $ — $ 2,148,018 $ 2,148,018 There were no transfers between Levels 1, 2, or 3 of the fair value hierarchy during the three months ended March 31, 2026. The fair value of the convertible note is classified within Level 3 of the fair value hierarchy, as the measurement incorporates significant unobservable inputs. The fair value was determined using a Monte Carlo simulation model incorporating a probability-weighted scenario analysis. Cash settlement amounts, including principal, accrued interest, and make-whole amounts, were discounted using a credit-adjusted yield reflective of the Company's credit profile and market conditions as of the measurement date. The conversion feature was valued based on the lower of the contractual conversion price of $3.10 per share and 93% of the lowest daily volume-weighted average price during the five trading days preceding the conversion date. The significant unobservable inputs used in the Level 3 fair value measurement of the convertible note are as follows: Significant Unobservable Input March 31, 2026 Volatility 72.7 % Credit-adjusted yield 35.0 % Calibration discount 20.0 % Probability of capital raise 70.0 % Note 6 – Accrued Expenses and Other Current Liabilities The accrued expenses and other current liabilities consist of the following as of: March 31, 2026 December 31, 2025 Accrued marketing costs $ 2,384,960 $ 2,612,968 Accrued compensation 1,433,191 792,723 Accrued professional fees and other 223,441 202,057 Accrued taxes, current portion 9,973 12,226 Total $ 4,051,565 $ 3,619,974 Note 7 – Stock-Based Compensation We maintain a stock-based compensation program intended to attract, retain and provide incentives for talented employees and directors and align stockholder and employee interests. During the 2026 and 2025 periods, we granted restricted stock units (“RSUs”) from the 2017 Equity Compensation Plan, as amended (“2017 ECP”) and the 2025 Omnibus Incentive Compensation Plan (“2025 Plan”). RSU vesting periods are generally up to three years and/or achieving certain financial targets. On March 21, 2025, the Board of Directors adopted the 2025 Plan, approved by stockholders at the annual meeting held on May 22, 2025. The 2025 Plan replaced the 2017 ECP for purposes of new awards. All awards granted under the 2017 ECP prior to approval of the 2025 Plan remain outstanding and continue in full force and effect under the terms of the 2017 ECP; however, no new awards may be granted under the 2017 ECP following the effective date of the 2025 Plan. As of March 31, 2026, shares subject to outstanding awards under the 2017 ECP and 2025 Plan were 515,147 and 238,000 shares, respectively. Shares available for future grant under the 2025 Plan at March 31, 2026, were 881,885 . As of March 31, 2026, the total share reserve authorized under the 2025 Plan was 1,119,885 . Compensation Expense For the three months ended March 31, 2026 and March 31, 2025, we recorded stock-based compensation expense for all equity incentive plans of $ 302,719 and $ 304,284 , respectively. Total compensation cost not yet recognized at March 31, 2026 was $ 1,416,123 , which will be recognized over a weighted-average recognition period of approximately 1.2 years. The following table summarizes the stock grants outstanding under 2017 ECP and 2025 Plan as of March 31, 2026: Options Outstanding RSUs Outstanding Options and RSUs Exercised/Vested Available Shares Total Awards (Outstanding + Available) Total — 753,147 — 881,885 1,635,032 The fair value of restricted stock units is determined using market value of the common stock on the date of the grant. The fair value of stock options is determined using the Black-Scholes-Merton valuation model. The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense and include the expected life of the option, stock price volatility, risk-free interest rate, dividend yield, and exercise price. The company accounts for forfeitures as they occur. 14 Table of Contents There were no options granted in the period ended March 31, 2026. The following table summarizes our restricted stock unit activity for the three months ended March 31, 2026: RSUs Number of Shares Weighted Average Grant Date Fair Value Outstanding, beginning of period 779,979 $ 3.32 Granted 84,000 $ 2.14 Vested ( 110,832 ) $ 4.20 Outstanding, end of period 753,147 $ 3.06 Note 8 – Stockholders’ Equity Sales of Common Stock Under At-the-Market Offering On May 7, 2024, we entered into an At-the-Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, pursuant to which we may offer and sell shares of its common stock, par value $ 0.001 per share, having an aggregate offering price of up to $ 15.0 million. During the three-month period ended March 31, 2025, we utilized the ATM Agreement and sold 159,431 shares of common stock for gross proceeds of $ 1.2 million. As of March 31, 2026, approximately $ 13.8 million remained available for issuance under the ATM Agreement, based on cumulative gross sales of shares under the program to date. Warrants On September17, 2021, we signed an agreement with a marketing platform and consulting company to provide referral and support services to us for a period of five years . As part of that agreement, we granted a seven year warrant exercisable into 30,000 shares of our common stock, at $ 7.20 per share, which vests in two tranches when certain performance metrics are achieved. The warrant was valued using the Black Scholes option pricing model at a total of $ 149,551 based on a seven-year term, an implied volatility of 100 %, a risk-free equivalent yield of 1.17 %, and a stock price of $ 7.10 . The warrant is classified as equity and will be expensed over the vesting period of each tranche if the performance criteria are achieved. At the period ended March 31, 2026, approximately 19,300 shares have been forfeited and approximately 10,700 shares underlying the warrant have vested. Earnings per Share The following table sets forth the computation of basic and diluted earnings (loss) per share (in dollars, except share data): For the Three Months Ended March 31, 2026 2025 Net income (loss) $ 1,895,655 $ ( 1,259,821 ) Weighted average shares, basic 14,736,821 14,271,927 Dilutive effect of restricted stock units 163,313 — Weighted average shares, diluted 14,900,134 14,271,927 Basic earnings (loss) per share $ 0.13 $ ( 0.09 ) Diluted earnings (loss) per share $ 0.13 $ ( 0.09 ) For the three-month period ended March 31, 2026, we reported net income and accordingly evaluated potentially dilutive securities. Restricted stock units representing 163,313 weighted average shares, using the treasury stock method, were included in the calculation of diluted earnings per share as their effect was dilutive. Convertible notes issued in January 2026 were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive as the conversion price exceeded the average market price of the Company’s common stock during the period. As of March 31, 2026, the convertible note was potentially convertible into a maximum of approximately 806,000 shares of common stock based on the contractual conversion price of $ 3.10 per share applied to the outstanding principal balance of $ 2.5 million, using the as if converted method. Additionally, warrants to purchase approximately 10,700 shares of common stock were excluded from the calculation of diluted earnings per share because their effect would have been anti-dilutive. For the three-month periods ended March 31, 2025, reported a net loss and, as a result, all potentially dilutive securities were anti-dilutive. 15 Table of Contents Note 9 – Segment Reporting The Company operates as a single reportable segment that places digital advertising throughout devices, websites, applications and browsers across social, search and programmatic advertising channels, facilitating the delivery of millions of advertising messages monthly. The Chief Operating Decision Maker ("CODM"), identified as the Chief Executive Officer, evaluates the Company's financial performance and makes resource allocation decisions based on consolidated financial information. Measure of Segment Profit or Loss The CODM evaluates performance and allocates resources based on contribution margin, which is calculated as revenue after deducting marketing expenses, exchange fees, and publisher payments. Exchange fees and publisher payments are classified as cost of revenue. The resulting contribution margin covers the Company’s fixed costs and profit. Significant Segment Expenses The Company reports total revenue and significant expenses provided to the CODM, which include cost of revenue, marketing, and compensation expenses. These expenses are regularly reviewed to assess operating performance. The following table presents these expenses: For the Three Months Ended March 31, 2026 2025 Revenue $ 7,927,553 $ 26,708,032 Cost of Revenue 4,263,665 5,620,941 Marketing 2,092,812 17,512,994 Professional Fees 723,103 476,303 IT Costs 328,844 324,018 Provision/(reversal of provision) for bad debts ( 63,763 ) 31,624 Depreciation and Amortization 538,786 568,042 Other 234,857 344,576 Compensation 3,690,203 3,599,321 Segment Operating Loss $ ( 3,880,954 ) $ ( 1,769,787 ) Other segment expenses include facilities costs, travel and entertainment expenses and various other corporate expenses. Geographic Information The Company’s operations are based in the United States, and substantially all revenue is derived from U.S. clients. 16 Table of Contents Note 10 – Leases As of March 31, 2026 and December 31, 2025, total operating and financed right-of-use assets were $ 597,093 and $ 0 , and $ 663,635 and $ 0 , respectively. As of March 31, 2026 and 2025, we recorded $ 83,461 and $ 83,459 , respectively, in rent expense related to operating leases. Information related to our operating lease liabilities are as follows: For the Three Months Ended March 31, 2026 Cash paid for operating lease liabilities $ 78,284 Weighted-average remaining lease term 2.2 years Weighted-average discount rate 10.5 % Minimum future lease payments ended March 31, 2026 2026 (remainder of year) 265,530 2027 237,867 2028 233,727 2029 19,525 756,649 Less imputed interest ( 89,700 ) Total lease liabilities $ 666,949 Current portion $ 279,900 Long-term portion $ 387,049 Note 11 – Allowance for Credit Losses The activity in the allowance for credit losses was as follows during the three-month period ended March 31, 2026 and year ended December 31, 2025: 2026 2025 Balance at the beginning of the year $ 98,954 $ 144,625 Provision/(reversal of provision) for bad debts ( 63,763 ) ( 55,668 ) Charge-offs — 9,997 Balance at the end of the year $ 35,191 $ 98,954 The allowance for credit losses at March 31, 2026 was $ 35,191 , a decrease of $ 63,763 from December 31, 2025, primarily driven by improved collections experience and a reduction in aged receivables during the period. Note 12 – Commitments and Contingencies The Company is from time to time subject to legal proceedings and claims that arise in the ordinary course of business. On January 29, 2026, Carambolico LTD commenced a lawsuit, captioned Carambolico LTD v. Alot, Inc., No. 04CV-26-458 (Ark. Cir. filed Jan. 29, 2026), in the Circuit Court of Benton County, Arkansas, naming Alot, Inc., a wholly owned subsidiary of the Company, as defendant. The complaint asserts breach of contract and related claims under a services agreement and seeks $ 1.5 million in damages. The Company believes the claims are without merit and intends to vigorously defend the matter. In April 2026, AEM Days Ltd. commenced a lawsuit, captioned AEM Days Ltd. v. Alot, Inc., No. 60CV-26-3363 (Ark. Cir. filed Apr. 2026), in the Circuit Court of Pulaski County, Arkansas, naming Alot, Inc., a wholly owned subsidiary of the Company, as defendant. The complaint asserts claims related to a services agreement and seeks approximately $ 766,000 in unpaid invoices. The Company believes the claims are without merit and intends to vigorously defend the matter. In each of the above matters, the Company is currently unable to predict the outcome or estimate a range of reasonably possible loss, if any. No liability has been accrued as of March 31, 2026. Note 13 – Related Party Transactions During the three-month period ended March 31, 2025, the Company engaged in a transaction with Gabriel Court Consortium, LLC, a company in which one of our directors holds a significant interest. The transaction involved consulting services amounting to approximately $ 12,500 . These transactions were conducted in the ordinary course of business. During the three-month period ended March 31, 2025, the Company engaged in a transaction with First Orion Corp., a company in which one of our former directors holds a significant interest. The transaction involved the sale of services amounting to approximately $ 78,000 . These transactions were conducted in the ordinary course of business. During the three-month period ended March 31, 2025, the Company engaged in a transaction with James & James, a company in which one of our former directors holds a significant interest. The transaction involved the sale of services amounting to approximately $ 154,000 . These transactions were conducted in the ordinary course of business. Note 14 – Subsequent Event The Company has evaluated subsequent events through the date these financial statements were issued and has identified the event included in Note 12 – Commitments and Contingencies above. 17 Table of Contents