MARCHEX INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO FINANCIAL STATEMENTS Page Marchex, Inc. Report of Independent Registered Public Accounting Firm , RSM US LLP (PCAOB ID: 49 ) 33 Consolidated Balance Sheets as of December 31, 2025 and 2024 35 Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 36 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2025 and 2024 37 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 38 Notes to the Consolidated Financial Statements 39 32 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders' and the Board of Directors of Marchex, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Marchex, Inc. and its subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024 , and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of management. Our responsibility is to express an opinion on the financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of internal controls over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Occurrence and Completeness of Revenue As described in Note 1 of the consolidated financial statements, the Company generates revenue from the Company’s conversational analytics technology platform when customers pay the Company a fee for call, text, phone number or other communication related data element tracking, based on a pre-negotiated rate. Revenue is recognized over time as the service is performed, which is generally measured by the delivery of the related data element per the terms of the customer contract. We identified the occurrence and completeness of revenue as a critical audit matter as the process to record revenue which is billed in arrears creates complexity in auditing the timing of revenue recognition. Revenue is driven by data derived from an internally developed system, which requires an increased audit effort to assess the reliability of data. 33 Table of Contents Our audit procedures related to the occurrence and completeness of revenue included performing the following audit procedures, among others: • We obtained an understanding of the relevant controls related to the occurrence and completeness of data elements and tested the relevant controls for design and operating effectiveness. • In order to assess the accuracy of data elements generated from the internally developed information system we reconciled the total data element information to the third-party vendor bills. • On a sample basis, we agreed the minutes from the data element information to the vendor bill. • On a sample basis, we listened to calls to determine the data element occurred. • On a sample basis, we tested the timing of revenue recognized by selecting samples of transactions occurring around both quarter-end and year-end. • We tested the accuracy of management's quarterly revenue close adjustment schedule to underlying supporting customer contracts, data elements information and to the adjustment made to the general ledger. • We tested the reasonableness of changes in revenue by performing trend analysis which compared quarter-over quarter revenues. /s/ RSM US LLP We have served as the Company's auditor since 2022. Los Angeles, California March 25, 2026 34 Table of Contents MARCHEX, INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands) December 31, 2025 2024 Assets Current assets: Cash and cash equivalents $ 9,942 $ 12,767 Accounts receivable, net 6,670 7,072 Prepaid expenses 1,005 695 Other current assets 1,420 1,744 Total current assets 19,037 22,278 Property and equipment, net 1,854 1,811 Other assets, net 563 397 Right-of-use lease assets 668 1,156 Goodwill 17,558 17,558 Total assets $ 39,680 $ 43,200 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 3,198 $ 1,349 Accrued benefits and payroll 1,175 2,133 Other accrued expenses and current liabilities 2,739 4,197 Deferred revenue and deposits 598 1,093 Operating lease liability, current 355 495 Total current liabilities 8,065 9,267 Deferred tax liabilities 664 579 Operating lease liability, non-current 366 721 Other non-current 500 — Total liabilities $ 9,595 $ 10,567 Commitments and contingencies - See Note 10 Stockholders’ equity: Common stock, $ 0.01 par value; Authorized 137,500 shares Class A: 12,500 shares authorized; 4,661 shares issued and outstanding at December 31, 2025 and December 31, 2024 $ 49 $ 49 Class B: 125,000 shares authorized; 39,248 shares issued and outstanding at December 31, 2025, including 113 shares of restricted stock; and 39,025 shares issued and outstanding at December 31, 2024, including 365 shares of restricted stock 392 390 Additional paid-in capital 361,057 358,372 Accumulated deficit ( 331,413 ) ( 326,178 ) Total stockholders’ equity 30,085 32,633 Total liabilities and stockholders’ equity $ 39,680 $ 43,200 See accompanying Notes to the Consolidated Financial Statements. 35 Table of Contents MARCHEX, INC. AND SUBSIDIARIES Consolidated Statements of Operations (in thousands, except per share amounts) Year Ended December 31, 2025 2024 Revenue $ 45,420 $ 48,122 Expenses: Cost of revenue (1) 16,626 17,172 Amortization of capitalized software development costs (1) 89 — Total cost of revenue (1) 16,715 17,172 Sales and marketing (1) 12,528 12,136 Product development 9,747 12,414 General and administrative 10,804 10,245 Acquisition settlement 1,350 — Amortization of intangible assets from acquisitions — 602 Total operating expenses $ 51,144 $ 52,569 Loss from operations ( 5,724 ) ( 4,447 ) Interest income (expense) and other, net 568 ( 120 ) Loss before income tax expense ( 5,156 ) ( 4,567 ) Income tax expense 79 380 Net loss applicable to common stockholders $ ( 5,235 ) $ ( 4,947 ) Basic and diluted net loss per Class A and B share applicable to common stockholders $ ( 0.12 ) $ ( 0.11 ) Shares used to calculate basic net loss per share applicable to common stockholders: Class A 4,661 4,661 Class B 39,199 38,498 Shares used to calculate diluted net loss per share applicable to common stockholders: Class A 4,661 4,661 Class B 43,860 43,159 (1) Excludes amortization of intangible assets from acquisitions See accompanying Notes to the Consolidated Financial Statements. 36 Table of Contents MARCHEX, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity (in thousands) Class A Class B Additional Total common stock common stock paid-in Accumulated stockholders ’ Shares Amount Shares Amount capital deficit equity Balance at December 31, 2023 4,661 $ 49 38,661 $ 386 $ 356,666 $ ( 321,231 ) $ 35,870 Issuance of common stock upon exercise of options, issuance and vesting of restricted stock and under employee stock purchase plan, net — — 8 — 3 — 3 Stock-based compensation from options and restricted stock, net of forfeitures — — — — 1,707 — 1,707 Issuance of Class B common stock in connection with prior deferred issuance from acquisition — — 356 4 ( 4 ) — — Net loss — — — — — ( 4,947 ) ( 4,947 ) Balance at December 31, 2024 4,661 $ 49 39,025 $ 390 $ 358,372 $ ( 326,178 ) $ 32,633 Issuance of common stock upon exercise of options, issuance and vesting of restricted stock and under employee stock purchase plan, net — — 223 2 298 — 300 Stock-based compensation from options and restricted stock, net of forfeitures — — — — 2,387 — 2,387 Net loss — — — — — ( 5,235 ) ( 5,235 ) Balance at December 31, 2025 4,661 $ 49 39,248 $ 392 $ 361,057 $ ( 331,413 ) $ 30,085 See accompanying Notes to the Consolidated Financial Statements. 37 Table of Contents MARCHEX, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2025 2024 Cash flows from operating activities: Net loss applicable to common stockholders $ ( 5,235 ) $ ( 4,947 ) Adjustments to reconcile net loss to net cash from operating activities: Amortization, depreciation, and loss on disposals 2,674 2,646 Gain on domain asset sale ( 632 ) — Provision for doubtful accounts 93 ( 147 ) Deferred income taxes 86 330 Stock-based compensation 2,387 1,707 Acquisition settlement 1,350 — Change in certain assets and liabilities: Accounts receivable, net 309 469 Prepaid expenses, other current assets, and other assets ( 427 ) 280 Accounts payable 1,849 ( 566 ) Accrued compensation, other accrued, and other liabilities ( 3,367 ) ( 755 ) Deferred revenue and deposits ( 495 ) ( 121 ) Net cash from (used in) operating activities $ ( 1,408 ) $ ( 1,104 ) Cash flows from investing activities: Capitalized software development costs ( 1,443 ) ( 47 ) Purchases of property and equipment ( 36 ) ( 382 ) Proceeds from domain asset sale 159 — Net cash from (used in) investing activities $ ( 1,320 ) $ ( 429 ) Cash flows from financing activities: Proceeds from exercises of stock options, and issuance and vesting of restricted stock 300 3 Repayments under finance lease liabilities and related obligations ( 397 ) ( 310 ) Net cash from (used in) financing activities $ ( 97 ) $ ( 307 ) Net increase (decrease) in cash and cash equivalents ( 2,825 ) ( 1,840 ) Cash and cash equivalents at beginning of period 12,767 14,607 Cash and cash equivalents at end of period $ 9,942 $ 12,767 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 46 $ 63 Cash paid for interest $ 82 $ 124 Non-cash purchases of property and equipment $ — $ 383 See accompanying Notes to the Consolidated Financial Statements. 38 Table of Contents MARCHEX, INC. AND SUBSIDIARIES Notes to the Consolidated Financial Statements No te 1: Description of Business and Summary of Significant Accounting Policies (a) Description of Business and Basis of Presentation Marchex, Inc. was incorporated in the state of Delaware on January 17, 2003. Marchex is a conversation intelligence company that harnesses the power of AI and conversation intelligence to provide actionable insights derived from prescriptive vertical market data analytics. Marchex enables organizations across business functions to optimize customer acquisitions and experiences, transforming conversations into meaningful business outcomes. Marchex provides AI-powered conversation intelligence solutions for market-leading companies in leading B2B2C vertical markets, including many of the world’s most innovative and successful brands. The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. The preparation of our Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company has used estimates related to several financial statement amounts, including revenues, the fair value of stock options awards, and the impairment of goodwill. Actual results could differ from those estimates.Certain prior‑period cash flow amounts have been reclassified to conform to the current‑period presentation. These reclassifications had no impact on net cash provided by (used in) operating, investing, or financing activities. (b) Going Concern Based on our operating plans we believe that our resources will be sufficient to fund our operations, including any investments in strategic initiatives, for at least twelve months from March 26, 2026 , the date of financial statement issuance. The Company considers any substantial doubt raised from recent net losses from operations to be alleviated by management's future operating plans, which consist of strategies for product innovation, increased sales, and cost cutting and efficiency efforts. When evaluating the Company's ability to continue as a going concern, management analyzed our working capital and cash position, positive momentum from year over year operating performance, and absence of any internal or external matters outstanding that would cause operating plans to be significantly revised. (c) Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist primarily of money market funds. The Company maintains cash balances with large financial institutions in excess of federally insured limits. (d) Fair Value of Financial Instruments The carrying value of financial instruments approximates their fair value based on the liquidity of these financial instruments and their short-term nature. Further, these financial instruments are considered at Level 1 fair value with observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Assets, liabilities, and operations of foreign subsidiaries are recorded based on the functional currency of the entity. For a majority of our foreign operations, the functional currency is the U.S. dollar. Assets and liabilities denominated in a currency other than the functional currency are remeasured each month with the remeasurement gain or loss recorded in Interest income (expense) and other, net in the Consolidated Statements of Operations. (e) Accounts Receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable balances are presented net of allowance for credit losses. 39 Table of Contents Allowance for Credit Losses The allowance for credit losses is the Company’s best estimate of the amount of expected credit losses in existing accounts receivable. The Company determines the allowance based on analysis of historical bad debts, customer concentrations, customer creditworthiness and current economic trends. Past due balances over 90 days and specific other balances are reviewed individually for collectability. The Company reviews accounts for collectability and the allowance for adequacy quarterly. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Allowance for Customer Credits The allowance for customer credits is the Company’s best estimate of the amount of expected future reductions in customers’ payment obligations related to delivered services. The Company determines the allowance for customer credits based on analysis of historical credits and expected revenue adjustments. (f) Property and Equipment Property and equipment are stated at cost. Depreciation on computers and other related equipment, purchased and internally developed software, and furniture and fixtures are calculated on the straight-line method over the estimated useful lives of the assets, generally averaging three years . Leasehold improvements are amortized straight-line over the shorter of the lease term or estimated useful lives of the assets generally ranging from five to eight years . In accordance with ASC 350-40, Internal-Use Software , the Company capitalizes eligible software development costs into Property and equipment, net on the Consolidated Balance Sheets. The Company notes that our external-use projects fall under ASC 350-40 guidance, as opposed to ASC 985-20, Costs of Software to be Sold, Leased, or Marketed , because as a substantive plan to market the software externally to be sold exists, our customers access the software through cloud hosting arrangements and the customers don't have the right to take possession of the software at any time during the hosting period. Under ASC 350-40, development costs for applicable projects will begin capitalization once the preliminary project stage is completed, management has committed to fully funding the computer software project, and it is probable that the project will be seen to completion and the software will be used to perform the function intended. Eligible costs for the development of software as a service ("SaaS") products for customer-use are capitalized to the extent they are recoverable by the anticipated net realizable value of the product until it is available to customers. Capitalized software costs are amortized on a straight-line basis when placed into service over the estimated useful life of the software, which is generally three years . We capitalized $ 1.4 million and $ 47.2 thousand in software development costs for the years ended December 31, 2025 and 2024 , respectively. (g) Leases The Company determines whether an arrangement is a lease or contains a lease at inception of the arrangement. For arrangements considered leases, the Company assesses the lease for finance or operating classification and records a right-of-use asset and lease liability as of the commencement date. Finance leases are recorded on the Company's Consolidated Balance Sheets and interest is recognized and presented separately in Interest income (expense) and other on the Company's Consolidated Statements of Operations. Operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Right-of-use assets which represent the Company’s right to use the underlying asset for the lease term are amortized over the shorter of the useful life of the asset and the lease term. Operating leases with an initial term of 12 months or less are not recorded on the Company's Consolidated Balance Sheets. (h) Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed in business combinations accounted for under the purchase method, net of recognized impairment. Goodwill acquired in a purchase business combination is not amortized, but instead tested for impairment at least annually on November 30, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. No impairment was recognized for the years ended December 31, 2025 and 2024 . 40 Table of Contents (i) Impairment or Disposal of Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the primary asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds fair value. Assets to be disposed of would be separately presented on the Company's Consolidated Balance Sheets and reported at the lower of their carrying amount or fair value less costs to sell, and are no longer depreciated. No impairment was recognized for the years ended December 31, 2025 and 2024 . (j) Revenue Recognition We generate the majority of our revenues from conversational intelligence product offerings. Customers typically receive the benefit of the Company’s services as they are performed and substantially all the Company’s revenue is recognized over time as the services are performed. Revenue is recognized when a customer obtains control of services in an amount that reflects the consideration the Company expects to receive in exchange for those services. The Company measures revenue based on the consideration specified in the customer arrangement, and revenue is recognized when the performance obligations in the customer arrangement are satisfied. A performance obligation is a promise in a contract to transfer a distinct service or product to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. The Company’s AI-powered conversational analytics technology platform provides data and insights into the conversations our clients are having with their customers across phone, text and other communication channels. Our tools enable brands to personalize customer interactions in order to accelerate sales and capture more opportunities to grow their business. The Company generates revenue from the Company’s conversational analytics technology platform when customers pay the Company a fee for call, text, or other communication related data element they receive from calls or texts or for each phone number tracked based on a pre-negotiated rate. Revenue is recognized as services are provided over time, which is generally measured by the delivery of each call/text or call/text related data element or each phone number tracked. The majority of the Company’s customers are invoiced on a monthly basis following the month of the delivery of services and are required to make payments under standard credit terms. The Company establishes an allowance for customer credits, which is included in Accounts receivable, net in the Company's Consolidated Balance Sheets, using its best estimate of the amount of expected future reductions in customers’ payment obligations related to delivered services based on analysis of historical credits and expected revenue adjustments. The majority of the Company’s total revenue is derived from contracts that include consideration that is variable in nature. The variable elements of these contracts primarily include the number of transactions (for example, the number of qualified phone calls). For contracts with an effective term greater than one year, the Company applies the standard’s practical expedient that permits the exclusion of disclosure of the value of unsatisfied performance obligations for these contracts as the Company’s right to consideration corresponds directly to the value provided to the customer for services completed to date and all future variable consideration is allocated to wholly unsatisfied performance obligations. A term for purposes of these contracts has been estimated at 24 months. In addition, the Company applies the standard’s optional exemption to disclose information about performance obligations for contracts that have original expected terms of one year or less. For arrangements that include multiple performance obligations, the transaction price from the arrangement is allocated to each respective performance obligation based on its relative standalone selling price and recognized when revenue recognition criteria for each performance obligation are met. The standalone selling price for each performance obligation is established based on the sales price at which the Company would sell a promised good or service separately to a customer or the estimated standalone selling price. 41 Table of Contents The Company’s incremental direct costs of obtaining a contract, which consist primarily of sales commissions, are generally deferred and amortized to sales and marketing expense over the estimated life of the relevant customer relationship of approximately 24 months and are subject to being monitored every period to reflect any significant change in assumptions. In addition, the deferred contract cost asset is assessed for impairment on a periodic basis. The Company’s contract acquisition costs are included in O ther assets, net in the Company's Consolidated Balance Sheets. The Company is applying the standard’s practical expedient permitting expensing of costs to obtain a contract when the expected amortization period is one year or less, which typically results in expensing commissions paid to acquire certain contracts. (k) Cost of Revenue Our cost of revenue represents the cost of providing our services to our customers. These costs primarily consist of cloud computing and hosting costs, telecommunication costs, including the use of phone numbers relating to our services; bandwidth and software license fees; network operations; and payroll and related expenses of personnel, including stock based compensation. (l) Advertising Expenses Advertising costs are expensed as incurred and include mobile and online advertising and related outside marketing activities, including sponsorships and trade shows. Such costs are included in sales and marketing. Advertising costs were approximately $ 0.4 million and $ 0.4 million for the years ended December 31, 2025 and 2024 , respectively. (m) Product Development Product development costs consist primarily of expenses incurred by the Company in the R&D, creation, and enhancement of the Company’s products and services. R&D costs are expensed as incurred and include compensation and related expenses, costs of computer hardware and software, and costs incurred in developing features and functionality of the services. For the periods presented, substantially all of the product development expenses are related to R&D. Product development costs are expensed as incurred or capitalized into property and equipment in accordance with FASB ASC 350. ASC 350 requires that cost incurred in the preliminary project and post-implementation stages of an internal use software project be expensed as incurred and that certain costs incurred in the application development stage of a project be capitalized. (n) Income Taxes The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax law is recognized in results of operations in the period that includes the enactment date. The Company adopted ASU 2023-09, Improvements to Income Tax Disclosures , on January 1, 2025 using the prospective transition method. The Notes to the Consolidated Financial Statements have been prepared accordingly to reflect the application of ASU 2023-09 guidance for the year ended December 31, 2025, through the additional income tax disclosures, particularly regarding the effective tax reconciliation and income taxes paid. See Note 11: Taxes for additional information. (o) Defined Contribution 401(k) Plan The Company maintains voluntary defined contribution plans, which are qualified, covering employees that meet eligibility requirements. Eligible employees may elect to defer and contribute a portion of their eligible compensation to the plans, not to exceed the dollar amounts set by applicable laws. Cash contributions by the Company were approximately $ 0.2 million for both the years ended December 31, 2025 and 2024 . 42 Table of Contents (p) Stock-Based Compensation The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognizes it as expense, over the vesting or service period, as applicable, of the stock award using the straight-line method. The Company accounts for forfeitures as they occur. (q) Net Loss Per Share The Company computes net loss per share of Class A and Class B common stock using the two class method. Under the provisions of the two class method, basic net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the year. Diluted net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common and dilutive common equivalent shares outstanding during the period. The computation of the diluted net loss per share of Class B common stock assumes the conversion of Class A to Class B common stock, while the diluted net loss per share of Class A common stock does not assume the conversion of those shares. In accordance with the two class method, the undistributed losses for each year are allocated based on the contractual participation rights of the Class A and Class B common shares and the restricted shares as if the losses for the year had been distributed. Considering the terms of the Company’s charter which provides that, if and when dividends are declared on its common stock in accordance with DGCL, equivalent dividends shall be paid with respect to the shares of Class A and Class B common stock and that both classes of common stock have identical dividend rights and would share equally in the Company’s net assets in the event of liquidation, the Company has allocated undistributed losses on a proportionate basis. Instruments granted in unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities prior to vesting. As such, the Company’s RSAs are considered participating securities for purposes of calculating loss per share. Under the two class method, dividends paid on unvested restricted stock are allocated to these participating securities and therefore impact the calculation of amounts allocated to common stock. (r) Guarantees FASB ASC 460, Guarantees, provides accounting guidance surrounding liability recognition and disclosure requirements related to guarantees. In the ordinary course of business, the Company is not subject to potential obligations under guarantees that fall within the scope of ASC 460 except for standard indemnification provisions that are contained within many of the Company’s agreements, and give rise only to the disclosure requirements prescribed by ASC 460. In certain agreements, the Company has agreed to indemnification provisions of varying scope and terms with customers, vendors and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of agreements or representations and warranties made by the Company, services to be provided by the Company and intellectual property infringement claims made by third parties. As a result of these provisions, the Company may from time to time provide certain levels of financial support to contract parties to seek to minimize the impact of any associated litigation in which they may be involved. To date, there have been no known events or circumstances that have resulted in any material costs related to these indemnification provisions and no liabilities therefore have been recorded in the accompanying Consolidated Financial Statements. However, the maximum potential amount of the future payments the Company could be required to make under these indemnification provisions could be material. (s) Recent Accounting Pronouncement Not Yet Effective In January 2025, the FASB issued Accounting Standards Update ("ASU") 2025-01, which updates the effective date of the November 2024 issued ASU 2024-03, Disaggregation of Income Statement Expenses, that requires public entities to improve disclosures about their expenses and provide more detailed information about the types of expenses in commonly presented expense captions. ASU 2024-03 is now effective for annual periods beginning after December 15, 2026 and interim periods within annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing the impact of this ASU on its Consolidated Financial Statement disclosures. 43 Table of Contents In September 2025, the FASB issued ASU 2025-06, Accounting for Internal-Use Software, which makes improvements to internal-use software accounting guidance to better align with contemporary software development practices, rather than traditional, stage-based models. Under the revised guidance, a Company may begin capitalizing internal-use software costs only when management has authorized and committed to funding the project and it's probable that the project will be completed and used for its intended function. ASU 2025-06 is effective for annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing the impact of this ASU on its Consolidated Financial Statements and related disclosures. Note 2: Revenue Recognition The majority of the Compan y’s customers are invoiced on a monthly basis following the month of the delivery of services and are required to make payments under standard credit terms. Net a ccounts receivable was $ 7.4 million, including unbilled accounts receivable of $ 1.5 million, at January 1, 2024. Net accounts receivable, including unbilled accounts receivable, consists of the following as of the periods below: December 31, (In Thousands) 2025 2024 Accounts receivable: Billed $ 5,330 $ 5,420 Unbilled 1,395 1,736 Allowance for expected credit losses ( 55 ) ( 84 ) Accounts receivable, net $ 6,670 $ 7,072 Customer payments received in advance of revenue recognition or the Company's unconditional right to invoice are considered contract liabilities and are recorded as deferred revenue. The beginning and ending deferred revenue balances and activity during the period consists of the following: (In Thousands) Balance at December 31, 2024 $ 1,093 Current year deferral of revenue 685 Revenue earned from beginning deferred revenue ( 1,180 ) Balance at December 31, 2025 $ 598 The Company’s incremental direct costs of obtaining a contract, which consist primarily of sales incentive compensation including commissions, are generally deferred and amortized to sales and marketing expense over the estimated life of the relevant customer relationship. The Company’s net contract acquisition costs shown below consist of $ 1.0 million and $ 0.8 million in Prepaid expenses and other current assets on the December 31, 2025 and December 31, 2024 Consolidated Balance Sheets, respectively, and $ 0.2 million and $ 0.4 million in Other assets, net on the December 31, 2025 and December 31, 2024 Consolidated Balance Sheets, respectively. The gross and net amounts consist of the following: December 31, (In Thousands) 2025 2024 Contract assets: Gross balance $ 4,698 $ 3,407 Accumulated amortization ( 3,482 ) ( 2,247 ) Contract assets, net $ 1,216 $ 1,160 Note 3: Segment Reporting and Geographic Information Operating segments are revenue-producing components of the enterprise for which separate financial information is produced internally for the Company’s management. For the years ended December 31, 2025 and 2024 , the Company operated in a single segment comprised of its conversational analytics and related solutions. In accordance with ASC 280, Segment Reporting , this single segment presentation is the basis upon which the Company's chief operating decision maker relies for performance evaluation and benchmarking. 44 Table of Contents Long-lived assets by geographical region are based on the location of the legal entity that owns the assets. As of December 31, 2025 and 2024, no significant long-lived assets were held by entities outside of the U.S. Revenues from customers by geographical areas are tracked on the basis of the location of the customer. The majority of the Company’s revenue and accounts receivable are derived from sales to domestic customers. Revenues by geographic region are as follows: Year Ended December 31, (In Percentages) 2025 2024 United States 98 % 99 % Canada and other countries 2 % 1 % Total 100 % 100 % Note 4: Concentrations The Company maintains substantially all of its cash and cash equivalents with two financial institutions. The Company has one customer that generally represents more than 10% of consolidated revenue. The table below sets forth the percentage of the Company's consolidated revenue that was attributed to this customer for the periods presented below: Year Ended December 31, (In Percentages) 2025 2024 Customer A 11 % 10 % The Company has one customer that represents more than 10% of consolidated accounts receivable. The Company also has a significant concentration of credit risk arising from receivables due from a network of independent dealers that is above the 10 % threshold. These dealers, while independently operated, sell the same brands and collectively represent a substantial portion of the Company's receivables. The table below sets forth the percentage of the Company's outstanding receivable balance that was attributed to this customer, and attributed to the aggregated balance due from the independent dealer network, as of the periods presented below: December 31, (In Percentages) 2025 2024 Concentration type: Customer A 24 % 23 % Independent dealer network A 17 % 15 % Note 5: Fair Value of Financial Instruments The Company had the following financial instruments as of December 31, 2025 and 2024 : cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities. The carrying value of these financial instruments approximates their fair value based on the liquidity of these financial instruments and their short-term nature. Further, these financial instruments are considered at Level 1 fair value with observable inputs that reflect quoted prices for identical assets or liabilities in active markets. The following table provides information about the fair value of our cash and cash equivalents balance: December 31, (In Thousands) 2025 2024 Level 1 assets: Cash $ 4,669 $ 7,615 Money market funds 5,273 5,152 Total cash and cash equivalents $ 9,942 $ 12,767 45 Table of Contents No te 6: Stockholders' Equity (a) Common Stock and Authorized Capital The total number of shares of all classes of capital stock which the Company has authority to issue is 138,500,000 shares, consisting of (i) 137,500,000 shares of common stock, par value $ 0.01 per share, of which 12,500,000 shares are designated Class A common stock and 125,000,000 shares are designated Class B common stock, and (ii) 1,000,000 shares of preferred stock, par value $ 0.01 per share. The Company’s board of directors has the authority to designate rights, privileges and restrictions of each such series, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series. The Company has two classes of authorized common stock: Class A and Class B common stock. Except with respect to voting rights, the Class A and Class B shares have identical rights. Each share of Class A common stock is entitled to twenty-five votes per share, and each share of Class B common stock is entitled to one vote per share. Each share of Class A common stock is convertible at the holder’s option into one share of Class B common stock. In accordance with the stockholders’ agreement signed by the founding Class A common stockholders, the following provisions survived the Company’s initial public offering: Class A stockholders other than Russell Horowitz may only sell, assign or transfer their Class A stock to existing Class A stockholders or to the Company and in the event of transfers of Class A stock not expressly permitted by the stockholders’ agreement, such shares of Class A stock shall be converted into shares of Class B common stock. I n May 2025, the Company’s board of directors authorized a new share repurchase program, which supersedes and replaces all prior repurchase programs. Under the 2025 Repurchase Program, the Company is authorized to repurchase up to 3,000,000 shares of the Company’s Class B common stock in the aggregate through open market and privately negotiated transactions, at such times and in such amounts as the Company deems appropriate. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability, and other market conditions. The 2025 Repurchase Program does not have an expiration date and may be expanded, limited, or terminated at any time without prior notice. The Company has made no repurchases under the 2025 Repurchase Program and additionally no repurchases were made under the superseded 2014 Repurchase Program for the years ended December 31, 2025 and 2024. Shares repurchased but not yet retired by the Company will be classified as treasury stock on the Consolidated Balance Sheets before retirement. Retirement of treasury stock results in reductions to common stock and additional paid-in capital. (b) Stock Option Plan The Company’s active stock incentive plan, which was established in 2021, allows for grants of stock options, RSAs, and RSUs to eligible participants and such options may be designated as incentive or non-qualified stock options at the discretion of the 2021 Plan’s Administrative Committee. Prior to the 2021 Plan, the Company granted stock-based awards under its 2012 Stock Incentive Plan. No further awards were made under the 2012 Plan after December 31, 2021. The 2021 Plan authorizes up to 3,500,000 shares of Class B common stock that may be issued with respect to awards granted under the 2021 Plan, and provides that the total number of shares of Class B common stock for which options designated as incentive stock options may be granted shall not exceed 3,500,000 shares. Annual increases to each of these share limits are to be added on the first day of each fiscal year beginning on January 1, 2022 equal to 3 % of the outstanding common stock (including for this purpose any shares of common stock issuable upon conversion of any outstanding capital stock of the Company) or in the case of incentive stock options, the lesser of (i) 2,000,000 shares of Class B common stock, or (ii) 3 % of the outstanding common stock (including for this purpose any shares of common stock issuable upon conversion of any outstanding capital stock of the Company), or (iii) such number as determined by the Company’s board of directors. As a result of this provision, the authorized number of shares available under the 2021 Plan was increased by 1,310,575 and 1,299,680 on January 1, 2025 and 2024, respectively, bringing the aggregate authorized number of shares available under the 2021 Plan to 8,666,546 and 7,355,971 on January 1, 2025 and 2024 , respectively. The Company may issue new shares or reissue treasury shares for stock option exercises and restricted stock grants. Generally, stock options have 10 -year terms and vest 25 % each year either annually or quarterly, over a 4 -year period and RSAs and RSUs vest 25 % each year annually over a 4 -year period. 46 Table of Contents The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognizes it as expense over the vesting or service period, as applicable, of the stock-based award using the straight-line method. The Company accounts for forfeitures as they occur. Stock-based compensation expense has been included in the same lines as compensation paid to the same employees in the Consolidated Statements of Operations. The Company did no t grant any options with exercise prices less than the then current market value during 2025 or 2024. Stock-based compensation expense was included in the following operating expense categories: Year Ended December 31, (In Thousands) 2025 2024 Cost of revenue $ 12 $ 24 Sales and marketing 433 308 Product development 259 54 General and administrative 1,683 1,321 Total stock-based compensation $ 2,387 $ 1,707 The Company uses the Black-Scholes option pricing model to estimate the per share fair value of stock option grants with time-based vesting. The Black-Scholes model relies on a number of key assumptions to calculate estimated fair values. For the years ended December 31, 2025 and 2024 , the expected life of each award granted was determined based on historical experience with similar awards, giving consideration to contractual terms, anticipated exercise patterns, and vesting schedules. Expected volatility is based on historical volatility levels of the Company’s Class B common stock. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury issues with terms approximately equal to the expected life of the option. The Company uses an expected annual dividend yield in consideration of the Company’s common stock dividend payments, which we consider to be zero . The following assumptions were used in determining the fair value of time-vested stock option grants for the periods indicated: Year Ended December 31, 2025 2024 Expected life (in years) 4.00 - 6.25 4.00 - 6.25 Risk-free interest rate 3.54 % - 4.32 % 3.93 % - 4.43 % Expected volatility 57 % - 61 % 57 % - 64 % As of December 31, 2025, there were $ 2.2 million of unrecognized compensation costs related to stock options. These costs are expected to be recognized over the weighted average period of 2.29 years. Stock option activity during the period was as follows: Options (in thousands) Weighted average exercise price of options Weighted average remaining contractual term (in years) Balance at December 31, 2024 7,039 $ 1.91 7.57 Options granted 1,307 1.82 Options forfeited ( 321 ) 1.55 Options expired ( 176 ) 3.75 Options exercised ( 216 ) 1.39 Balance at December 31, 2025 7,633 $ 1.89 7.50 47 Table of Contents RSAs and RSUs are generally measured at fair value on the date of grant based on the number of awards granted and the quoted price of the Company’s common stock. RSAs and RSUs are expensed on a straight-line basis over the vesting or service period, as applicable, and forfeitures are recognized as they occur. RSUs entitle the holder to receive one share of the Company’s Class B common stock upon satisfaction of certain service conditions. As of December 31, 2025, there were $ 0.9 million of unrecognized compensation costs related to restricted stock. These costs are expected to be recognized over the weighted average period of 1.88 years. RSA and RSU activity during the period was as follows: Shares/ Units (In Thousands) Weighted Average Grant Date Fair Value Unvested at December 31, 2024 406 $ 2.04 Granted 872 1.77 Vested ( 273 ) 1.90 Forfeited ( 22 ) 2.85 Unvested at December 31, 2025 983 $ 1.84 Note 7: Net Loss Per Share The Company computes net loss per share of Class A and Class B common stock using the two class method. Under the provisions of the two class method, basic net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the year. Diluted net loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common and dilutive common equivalent shares outstanding during the period. The computation of the diluted net loss per share of Class B common stock assumes the conversion of Class A to Class B common stock, while the diluted net loss per share of Class A common stock does not assume the conversion of those shares. The following table presents the computation of basic net loss per share applicable to common stockholders for the periods ended: Year Ended December 31, 2025 2024 (In Thousands, Except Per Share Amounts) Class A Class B Class A Class B Basic net loss per share: Numerator: Net loss applicable to common stockholders $ ( 556 ) $ ( 4,679 ) $ ( 534 ) $ ( 4,413 ) Denominator: Weighted average number of shares outstanding - basic 4,661 39,199 4,661 38,498 Basic net loss per share applicable to common stockholders $ ( 0.12 ) $ ( 0.12 ) $ ( 0.11 ) $ ( 0.11 ) 48 Table of Contents The following table presents the computation of diluted net loss per share for the periods ended: Year Ended December 31, 2025 2024 (In Thousands, Except Per Share Amounts) Class A Class B Class A Class B Diluted net loss per share: Numerator: Net loss applicable to common stockholders $ ( 556 ) $ ( 4,679 ) $ ( 534 ) $ ( 4,413 ) Reallocation of net loss for Class A to Class B shares — ( 556 ) — ( 534 ) Diluted net loss applicable to common stockholders: $ ( 556 ) $ ( 5,235 ) $ ( 534 ) $ ( 4,947 ) Denominator: Weighted average number of shares outstanding - basic 4,661 39,199 4,661 38,498 Conversion of Class A to B common shares outstanding — 4,661 — 4,661 Weighted average number of shares outstanding - diluted 4,661 43,860 4,661 43,159 Diluted net loss per share applicable to common stockholders $ ( 0.12 ) $ ( 0.12 ) $ ( 0.11 ) $ ( 0.11 ) Anti-dilutive securities — 5,835 — 5,951 Note 8: Property and Equipment Property and equipment consisted of the following: December 31, (In Thousands) 2025 2024 Computer and other related equipment $ 1,129 $ 1,198 Purchased software 3,240 3,276 Furniture and fixtures 13 262 Software development costs 742 — Software development costs - in progress 748 72 $ 5,872 $ 4,808 Less: accumulated depreciation and amortization ( 4,018 ) ( 2,997 ) Property and equipment, net $ 1,854 $ 1,811 During the year ended December 31, 2025 , the Company recorded a loss on disposal of $ 25.0 thousand that is included within Product development on the Consolidated Statement of Operations. During the year ended December 31, 2025, the Company also recorded a loss on disposal of $ 84.6 thousand, for assets that were located at the Wichita, KS office space associated with the operating lease termination described in Note 9: Leases below, that is included within Interest income (expense) and other, net on the Consolidated Statement of Operations. Depreciation and amortization expense related to property and equipment was as follows: Year Ended December 31, (In Thousands) 2025 2024 Depreciation and amortization expense $ 1,350 $ 1,399 49 Table of Contents No te 9: Leases The Company has an operating lease for its corporate office headquarters in Seattle, WA. The Company had an operating lease for office space in Wichita, KS, which was terminated during the second quarter of 2025. The Company recognizes its operating lease agreements in accordance with ASC 842, Leases , and recognizes rent expense on a straight-line basis over the lease term with any lease incentives amortized as a reduction of rent expense over the lease term. Assets under operating leases are included in Right-of-use lease assets, and the related liabilities are included in Operating lease liability, current and Operating lease liability, non-current on the Consolidated Balance Sheets. Assets that were under finance leases, which primarily represented computer equipment, were subject to a rental agreement for a third-party's utilization of this equipment; however, we retained our primary obligation under the original financing terms. Therefore, the Company did not have a right-of-use asset, but did carry the lease liability related to this financed equipment, on the Consolidated Balance Sheets. During the fourth quarter of 2025, the Company made its final payment under the finance leases and therefore does not carry any liabilities related to these previous obligations as of December 31, 2025. Lease cost recognized in the Consolidated Statements of Operations and other lease information is summarized as follows: Year Ended December 31, (In Thousands, Except Lease Terms and Percentages) 2025 2024 Operating lease cost $ 460 $ 575 Finance lease cost: Interest on lease liabilities 24 72 Variable and short-term lease cost 21 23 Total lease cost $ 505 $ 670 Other information: Weighted-average remaining lease term - operating leases 1.9 2.6 Weighted-average remaining lease term - finance leases — 0.9 Weighted-average discount rate - operating leases 7.5 % 7.0 % Weighted-average discount rate - finance leases 14.1 % 14.1 % Cash paid for operating leases $ 462 $ 562 Cash paid for finance leases $ 421 $ 459 As of December 31, 2025, the Company’s future payments under operating lease liabilities were as follows: (In Thousands) 2026 $ 397 2027 380 Gross future lease payments $ 777 Less: imputed interest ( 56 ) Present value of total lease liabilities $ 721 Less: current portion of lease liabilities ( 355 ) Total long-term lease liabilities $ 366 No te 10: Commitments and Contingencies Commitments The Company has commitments for future payments related to its office facility, as well as other contractual obligations primarily related to minimum payments due to outside service providers. For information regarding the Company's lease commitments, see Note 9: Leases above. 50 Table of Contents Future minimum payments on the Company's other contractual obligations are approximately as follows: (In Thousands) 2026 $ 4,793 2027 1,696 2028 and thereafter 13 Total minimum payments $ 6,502 Contingencies The Company from time to time is a party to disputes and legal and administrative proceedings arising from the ordinary course of business. We could become in the future subject to legal proceedings, governmental investigations, and claims in the ordinary course of business, including employment claims, contract-related claims, and claims of alleged infringement of third-party patents, trademarks, and other intellectual property rights. Such claims, even if not meritorious, could force us to expend significant financial and managerial resources and could be material. See (p) Guarantees section of Note 1: Description of Business and Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for additional information. In certain agreements, the Company has agreed to indemnification provisions of varying scope and terms with customers, vendors and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of agreements or representations and warranties made by the Company, services to be provided by the Company and intellectual property infringement claims made by third parties. As a result of these provisions, the Company may from time to time provide certain levels of financial support to contract parties to seek to minimize the impact of any associated litigation in which they may be involved. To date, there have been no known events or circumstances that have resulted in any material costs related to these indemnification provisions and no liabilities therefore have been recorded in the accompanying Consolidated Financial Statements. However, the maximum potential amount of the future payments the Company could be required to make under these indemnification provisions could be material. On October 21, 2022, the Shareholder Representatives for the former shareholders of Telmetrics, Inc. (an entity acquired by the Company in 2018) filed litigation against the Company in the U.S. District Court for the District of Delaware. The plaintiffs are asserting claims under a share purchase agreement and escrow agreement regarding entitlement to an earnout of up to $ 3.0 million and $ 1.0 million that was placed in escrow to secure indemnification obligations. On March 22, 2023, the plaintiffs filed an amended complaint also seeking substantial punitive damages, followed by a second amended complaint on May 9, 2023. On February 2, 2024, the Magistrate Judge issued a report and recommendation advising the U.S. District Court Judge to dismiss certain claims from the second amended complaint and to allow other claims to proceed to discovery. On July 17, 2024, the U.S. District Court Judge adopted portions of the Magistrate Judge's recommendation, and the parties subsequently commenced discovery. During the period, the Company and the plaintiffs made significant progress in negotiating a settlement. Based on the current status of those discussions and an evaluation of the relevant facts and circumstances, the Company has determined that a loss is probable and reasonably estimable and, accordingly, recorded an additional $ 1.4 million as Acquisition expense in the Consolidated Statement of Operations and has recorded an accrual of $ 2.1 million, the expected settlement amount, related to this matter, of which $ 1.6 million is recorded in other accrued expenses and current liabilities and $ 0.5 million in other non-current within liabilities at December 31, 2025 on the Consolidated Balance Sheet. The accrual reflects management’s current estimate of the probable loss associated with the litigation; however, the ultimate resolution of this matter may differ from the amount accrued. While any litigation contains an element of uncertainty, the Company is not aware of any other legal proceedings or claims which are pending that the Company believes, based on current knowledge, will have, individually or taken together, a material adverse effect on the Company’s financial condition, results of operations or liquidity. 51 Table of Contents Note 11: Taxes The components of the Company's loss before income tax expense consisted of the following: Year Ended December 31, (In Thousands) 2025 2024 United States $ ( 5,156 ) $ ( 4,565 ) Foreign — ( 2 ) Loss before income tax expense $ ( 5,156 ) $ ( 4,567 ) The Company's income tax expense consisted of the following components: Year Ended December 31, (In Thousands) 2025 2024 Current provision State $ 36 $ 49 Deferred provision (benefit) Federal 58 160 State ( 15 ) 171 Total income tax expense $ 79 $ 380 As noted in Note 1: Description of Business and Summary of Significant Accounting Policies , the Company adopted ASU 2023-09 on a prospective-basis for the year ended December 31, 2025. The Company's income tax expense differed from the amounts computed by applying the U.S. federal statutory rate to the loss before the provision for income taxes in accordance with ASU 2023-09 for the following items: (In Thousands, Except Percentages) Year Ended December 31, 2025 % of Loss Before Income Tax Income tax benefit at U.S. statutory rate $ ( 1,083 ) 21.0 % State taxes, net of valuation allowance (1) ( 89 ) 1.7 % Foreign tax effects: Statutory rate differences 116 - 2.2 % Provincial Tax (Ontario) ( 222 ) 4.3 % Canadian credits ( 413 ) 8.0 % Permanent differences 14 - 0.3 % Deferred adjustments 88 - 1.7 % Canadian valuation allowance 822 - 15.9 % Tax law changes ( 466 ) 9.0 % Valuation allowance 773 - 15.0 % Nondeductible items 155 - 3.0 % Deferred adjustments 373 - 7.2 % Other items ( 99 ) 1.9 % Stock based compensation 110 - 2.1 % Total income tax expense $ 79 - 1.5 % (1) Michigan state taxes made up the majority (greater than 50%) of this item (2) Includes non-deductible stock-based compensation and excess tax benefits and shortfalls from stock-based compensation 52 Table of Contents Prior to the adoption of ASU 2023-09, for the year ended December 31, 2024, the Company's income tax expense differed from the amounts computed by applying the U.S. federal statutory rate to the loss before the provision for income taxes for the following items: Year Ended December 31, (In Thousands) 2024 Income tax benefit at U.S. statutory rate $ ( 959 ) State taxes, net of valuation allowance ( 129 ) Foreign taxes 92 Non-deductible items 13 Stock-based compensation (1) 145 Valuation allowance 491 Tax credits ( 474 ) Goodwill tax basis difference 1,201 Total income tax expense $ 380 (1) Includes non-deductible stock-based compensation and excess tax benefits and shortfalls from stock-based compensation In accordance with the adoption of ASU 2023-09 on a prospective-basis for the year ended December 31, 2025, the following table summarizes activity related to cash payments for income taxes (net of refunds): (In Thousands) Year Ended December 31, 2025 State California $ 19 Texas 21 All other states 6 Income tax paid, net of refunds $ 46 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below and reflect the 21 % U.S. federal statutory rate as of December 31, 2025 and 2024: As of December 31, 2025 (In Thousands) 2025 2024 Deferred tax assets: Accrued liabilities not currently deductible $ 521 $ 357 Intangible assets-excess of financial statement over tax amortization 2,793 3,276 Stock-based compensation 1,269 941 Federal net operating and capital losses 43,886 42,283 Research & experimental tax and other credit carryforwards 7,629 6,198 Lease liability 179 307 Capitalized R&D 1,181 2,170 Other 148 274 Gross deferred tax assets $ 57,606 $ 55,806 Valuation allowance ( 56,192 ) ( 54,597 ) Net deferred tax assets $ 1,414 $ 1,209 Deferred tax liabilities: Fixed assets $ ( 248 ) $ ( 295 ) Intangible assets-excess of tax over financial statement amortization ( 1,610 ) ( 1,433 ) Right-of-use lease asset ( 166 ) — Other ( 54 ) ( 60 ) Net deferred tax liabilities $ ( 664 ) $ ( 579 ) 53 Table of Contents As of December 31, 2025, the Company’s federal and state net operating loss ("NOL") carryforwards were approximately $ 190.6 million and $ 67.6 million , respectively. Of the total federal NOL carryforwards reported, the Company has accumulated $ 67.5 million with an indefinite life as of December 31, 2025. The remaining federal and state NOL carryforwards will begin to expire in 2027 and 2029 , respectively, for income tax purposes. As of December 31, 2025, the Company’s federal R&D credit carryforwards were $ 6.2 million , which will begin to expire in 2029 . The Tax Reform Act of 1986 limits the use of NOL and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. The Company is not aware that any such change has occurred related to these specific tax attributes, or that the utilization of the carryforwards is limited such that these NOL or tax credit carryforwards will likely never be utilized. Accordingly, the Company has included these federal NOL and tax credit carryforwards in its deferred tax assets (subject to valuation allowance). The Company has recorded a deferred tax asset for stock-based compensation recorded on unexercised non-qualified stock options and certain restricted shares and restricted share units. The ultimate realization of this asset is dependent upon the fair value of the Company’s stock when the options are exercised and when restricted shares vest, and generation of sufficient taxable income to realize the benefit of the related tax deduction. The Tax Cuts and Jobs Act contained a provision which requires the capitalization of Section 174 costs incurred in years beginning on or after January 1, 2022. Section 174 costs are expenditures which represent R&D costs that are incident to the development or improvement of a product, process, formula, invention, computer software, or technique. This provision changes the treatment of Section 174 costs such that the expenditures are no longer allowed as an immediate deduction but rather must be capitalized and amortized. The Company regularly reviews deferred tax assets to assess whether it is more likely than not that its deferred tax assets will be realized and, if necessary, establishes a valuation allowance for portions of such assets to reduce the carrying value. In assessing whether it is more likely than not that the Company’s deferred tax assets will be realized, factors considered included: historical taxable income, historical trends related to customer usage rates, projected revenues and expenses, macroeconomic conditions, issues facing the industry, existing contracts, the Company’s ability to project future results and any appreciation of its other assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company considered the future reversal of deferred tax liabilities, carryback potential, projected taxable income, and tax planning strategies as well as its history of taxable income or losses in the relevant jurisdictions in making this assessment. Based on the level of historical taxable losses and the uncertainty of projections for future taxable income over the periods for which the deferred tax assets are deductible, with the exception of certain insignificant foreign deferred tax assets, the Company concluded that it is not more likely than not that the gross deferred tax assets will be realized and, accordingly, recorded 100 % valuation allowance against these deferred tax assets as of both December 31, 2025 and 2024. From time to time, various state, federal and other jurisdictional tax authorities undertake audits of the Company and its filings. In evaluating the exposure associated with various tax filing positions, the Company on occasion accrues charges for uncertain positions. Resolution of uncertain tax positions will impact the Company’s effective tax rate when settled. The Company does not have any significant accruals for uncertain tax positions including interest or penalties. The provision for income taxes includes the impact of contingency provisions and changes to contingencies that are considered appropriate. The Company files U.S. federal, certain U.S. state, and certain foreign tax returns. The Company's federal and state returns for all years will remain open to examination by federal and state tax authorities for three and four years, respectively, from the date of utilization of any net operating loss carryforwards. On July 4, 2025, President Trump signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes were not material to the income tax provision for the year ended December 31, 2025. 54 Table of Contents The following table summarizes activity related to tax contingencies, which are recorded as an offset to deferred tax assets: (In Thousands) Gross tax contingencies—December 31, 2024 $ 1,469 Gross decrease to current period tax positions ( 59 ) Gross tax contingencies—December 31, 2025 $ 1,410 Note 12: Domain Asset Sale In April 2025, the Company sold one of its domain assets to a third-party buyer for a total sales price of $ 0.8 million, with payments to be made over a four-year period. Each payment that the Company receives from the buyer will be reduced by a 15 % commission fee, resulting in total net cash proceeds of approximately $ 0.7 million. Approximately $ 0.6 million was recognized as a gain within Interest income (expense) and other, net on the Consolidated Statement of Operations for the year ended December 31, 2025. The remaining amount of approximately $ 48.2 thousand will be recognized as interest income over the four-year payment period due to the financing component of the agreement. At December 31, 2025, there was approximately $ 0.2 million of the receivable recorded within Other current assets and $ 0.3 million within Other assets, net on the Consolidated Balance Sheet. Note 13: Acquisition Agreement in Principle ("AIP") Marchex entered into an AIP on November 13, 2025 to acquire 100 % of the stock of Archenia, Inc. from its stockholders (the “Sellers”) for consideration consisting of a $ 10.0 million convertible promissory note, with interest at 6 %, payable in three equal tranches on the 12, 18 and 24 monthly anniversaries of the closing date of the transaction. Principal and interest under the note would be convertible in whole or in part into shares of Marchex’s Class B common stock at $ 1.80 per share (the 30-day average closing price through November 11, 2025). A special committee of Marchex’s Board of Directors consisting solely of independent directors (the “Special Committee”) has approved Marchex entering into the AIP because certain of the Sellers are related parties. The parties have agreed to promptly commence to negotiate a definitive purchase agreement relating to the transaction. Conditions to entering into the definitive agreement include receipt of audited financial statements of Archenia for such periods as required by SEC rules, and receipt of a customary fairness opinion by a financial advisor selected by the Special Committee. Conditions to closing the transaction shall include approval of the transaction by a majority of Marchex’s disinterested stockholders. The closing date, in the event a definitive agreement is entered into and the transaction is approved by disinterested stockholders, is anticipated to occur in June 2026. 55 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.