Inuvo, Inc.

Previous wording

Bonfire platform reset. In response to more stringent compliance requirements, including changes in the Google ecosystem which have suppressed revenue per click (RPC), and as a result of the detection of lower quality traffic on our systems, we developed and deployed an AI compliance system (“Ranger”) to not only enforce our partners’ stricter standards, but to reveal quality differences that had previously been difficult to detect at scale. While this allowed us to take action against bad actors, it also necessitated that we intentionally constrain Bonfire-related revenue in order to have clearer visibility and insight into traffic quality (“Bonfire Reset”). As a result, revenue from our Legacy Search business was lower year-over-year beginning in late fourth quarter 2025 and continued to be lower year-over-year in the first quarter of 2026. As our Legacy Search business generates a higher gross margin and lower operating margin compared to the Audience Modeling business, lower revenue from Legacy Search has also constrained our consolidated gross margins. We have taken, and continue to take, steps to lower costs in our Legacy Search business, including reducing headcount. We currently expect this business to recover gradually as the year progresses, but there can be no guarantees that it will fully recover.

Current wording

Bonfire platform reset. In response to more stringent compliance requirements, including changes in the Google ecosystem which have suppressed revenue per click (RPC), and as a result of the detection of lower quality traffic on our systems, we developed and deployed an AI compliance system (“Ranger”) to not only enforce our partners’ stricter standards, but to reveal quality differences that had previously been difficult to detect at scale. While this allowed us to take action against bad actors, it also necessitated that we intentionally constrain Bonfire-related revenue in order to have clearer visibility and insight into traffic quality (“Bonfire Reset”). As a result, revenue from our Legacy Search business was lower year-over-year beginning in late fourth quarter 2025 and continues to be lower year-over-year for six-month period ended June 30, 2026. As our Legacy Search business generates a higher gross margin and lower operating margin compared to the Audience Modeling business, lower revenue from Legacy Search has also constrained our consolidated gross margins. We have taken, and continue to take, steps to lower costs in our Legacy Search business, including reducing headcount. We currently expect this business to improve gradually as the year progresses, but there can be no guarantees that it will fully recover. Consistent with these actions, our total employment, both full- and part-time, declined from 82 at June 30, 2025 to 51 at June 30, 2026, a 38% reduction, reflecting our continued discipline in aligning our cost structure with lower levels of revenue generation.

Previous wording

*Investment focus on IntentKey.*We believe IntentKey is positioned to benefit from the aforementioned industry shifts because it is designed to operate as a privacy-safe decisioning layer that does not rely on cookies or persistent identifiers. We further believe that the adoption of autonomous and AI-enabled workflows may increase demand for algorithmic software, like IntentKey, that can translate intent signals into real-time activation across programmatic environments. As a result, we are focused on growing and enhancing the IntentKey AI product. To the extent we are successful in accelerating IntentKey revenue and that IntentKey becomes a larger portion of our overall revenue mix, we expect that direct operating margins will also increase, as Audience Modeling has historically yielded higher direct operating margins than our Legacy Search business.

Current wording

Investment focus on IntentKey.We believe IntentKey is positioned to benefit from the aforementioned industry shifts because it is designed to operate as a privacy-safe decisioning layer that does not rely on cookies or persistent identifiers. We further believe that the adoption of autonomous and AI-enabled workflows may increase demand for algorithmic software, like IntentKey, that can translate intent signals into real-time activation across programmatic environments. As a result, we are focused on growing and enhancing the IntentKey AI product. To the extent we are successful in accelerating IntentKey revenue and that IntentKey becomes a larger portion of our overall revenue mix, we expect that direct operating margins will also increase, as Audience Modeling has historically yielded higher direct operating margins than our Legacy Search business. Reflecting this strategic focus, Audience Modeling revenue grew 16% for the six months ended June 30, 2026, compared to the same period in 2025, resulting from the Bonfire Reset andForces Impacting the Industry described above.

Previous wording

Revenue for the three-month period ended March 31, 2026, decreased by 70.3% as compared to the same time period in 2025. This decrease was driven by 81% decline in revenue from Legacy Search resulting from the Bonfire Reset described inSignificant Business Trendsabove. This decrease was partially offset by a 13% increase in revenue from Audience Modeling as we continue to grow our IntentKey platform.

Current wording

Revenue for the three-month period ended June 30, 2026, decreased 66.8% and revenue for the six-month period ended June 30, 2026, decreased 68.7% as compared to the same periods in 2025, respectively. The decrease for the three-month and six-month periods ended June 30, 2026 was driven by 80% decline in revenue from Legacy Search resulting from the Bonfire Reset and Forces Impacting the Industry described inSignificant Business Trends above. The decrease was partially offset by a 19% and 16% increase in revenue from Audience Modeling in each period, respectively as we continue to grow our IntentKey platform.

Previous wording

Cost of revenue is composed of payments to website publishers and app developers that host advertisement as well as payments to advertising exchanges that provide access to digital inventory where we serve advertisements. The decrease in cost of revenue for the period ended March 31, 2026, compared to the same time period in 2025 was driven by a decrease in revenue from our Legacy Search clients. The resulting change in revenue mix drove gross margin lower to 46.2% compared to 79.0% in the same quarter last year. Our Legacy Search business historically carries higher gross margins as a lower proportion of its costs are recorded in cost of revenue, with a greater portion reflected in marketing and other operating expenses.

Current wording

Cost of revenue is composed of payments to website publishers and app developers that host advertisement as well as payments to advertising exchanges that provide access to digital inventory where we serve advertisements. The decrease in cost of revenue for the six-month period ended June 30, 2026, compared to the same time period in 2025 was driven by a decrease in revenue from our Legacy Search clients. The resulting change in revenue mix drove gross margin lower to 45.2% compared to 77.3% in the same period last year. Our Legacy Search business historically carries higher gross margins as a lower proportion of its costs are recorded in cost of revenue, with a greater portion reflected in marketing and other operating expenses.

Previous wording

to various web properties. Marketing costs for the three-month period ended March 31, 2026 decreased compared to the same period in 2025 due to the decline in revenue from Legacy Search discussed above inSignificant Business Trends.

Current wording

Marketing costs consist mostly of traffic acquisition (i.e., media) costs and include those expenses required to attract audiences to various web properties. Marketing costs for the three and six months period ended June 30, 2026 decreased compared to the same periods in 2025 due to the decline in revenue from Legacy Search discussed above inSignificant Business Trends.

Previous wording

General and administrative costs for the three months ended March 31, 2026, increased 1% compared to the same period in 2025.

Current wording

General and administrative costs for the three and six months ended June 30, 2026 increased $314 thousand compared to the same period in 2025 and increased $331 thousand compared to the same period in 2025, respectively primarily due to higher professional fees.

Previous wording

Other income was approximately $6.2 million and $540,571 for the three months ended March 31, 2026 and 2025, respectively. In January 2026, we received gross proceeds of approximately $6.2 million in connection with a class action settlement. The settlement proceeds represent a one-time, non-recurring cash inflow. During March 2025, we received a payment from the Internal Revenue Service totaling $610,352 in connection with an amended form filed in May 2023 for the Employee Retention Credit related to the first quarter of 2021. Of the total payment, $533,093 was recognized in Other income, while $77,259 of interest was recorded in Financing expense, net.

Current wording

Other income was $559,991 and $1,100,562 for the three and six months ended June 30, 2025. In March 2025, the Company received a payment from the Internal Revenue Service ("IRS") totaling $610,352 in connection with an amended form filed in May 2023 for the Employee Retention Credit ("ERC") related to the first quarter of 2021. Of this amount, $533,093 was recognized in Other Income, and $77,259 of interest was recorded in Financing expense, net. In June 2025, the Company received an additional ERC payment from the IRS related to the second quarter of 2021, totaling $606,156. Of this amount, $525,085 was recognized in Other Income, and $81,071 of interest was recorded in Financing expense, net.

Previous wording

Our principal sources of liquidity are the sale of our common stock and our Financing Agreement with SLR (the “Financing Agreement”), which is discussed in Note 5 – Debt.

Current wording

Our principal sources of liquidity are the sale of our common stock and our Note Purchase Agreement with Streeterville, pursuant to which we issued the A-1 Note and the B Note, each discussed in Note 6 – Debt.

Previous wording

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.

Current wording

On January 29, 2026, we received gross proceeds of approximately $6.2 million in connection with a class action settlement. These proceeds represented a one-time, non-recurring source of liquidity and are not expected to recur in future periods. On May 7, 2024, we entered into the ATM Agreement with Wainwright to sell shares of our common stock, par value $0.001 per share, having an aggregate sales price of up to $15 million, from time to time, through an "at the market offering" program under which Wainwright acts as sales agent. We will pay Wainwright a commission rate of up to 3.0% of the aggregate gross proceeds from each sale. For the six-month period ended June 30, 2026, we have not sold any shares of common stock under the ATM Agreement. As of June 30, 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 suspended the ATM Agreement and terminated the continuous offering by us under the associated prospectus supplement. We will not make any sales of Common Shares pursuant to the ATM Agreement, unless and until a new prospectus is filed and the expiration of a 180-day lockup period following completion of the Offerings.

Previous wording

During the fourth quarter of 2025, we deliberately slowed growth in our Legacy Search business in order to better align with more rigorous compliance standards required by our partners. As a result, since that time, revenue has been constrained in our Legacy Search business and this, in turn, has negatively impacted our margins, net income, and cash generation. In response, we have taken steps to contain costs until the Legacy Search business returns to profitability. In addition, 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.

Current wording

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.

Previous wording

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.

Current wording

As of June 30, 2026, we have over $0.9 million in unrestricted cash and cash equivalents and $6.2 million in restricted cash held pursuant to the DACA described above, for total cash, cash equivalents, and restricted cash of approximately $7.1 million. Our net working capital deficit was approximately $4.8 million. Our investing activities totaled $0.6 million for the six-month period ended June 30, 2026, primarily consisting of internally developed software costs, 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 June 30, 2026, our accumulated deficit was $180.4 million.

Previous wording

Management plans to support the Company’s future operations and capital expenditures through cash generated from operations and availability under its Financing Agreement and other available financing sources until such time as we reach profitability. The credit facility is due upon demand and therefore there can be no assurances that sufficient borrowings will be available to support future operations until profitability is reached. We believe our current cash position and credit facility, 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.

Current wording

Management plans to support the Company's future operations and capital expenditures primarily through cash flows from operations, availability under the Note Purchase Agreement, proceeds from the Securities Purchase Agreement that closed on July 1, 2026 and other available financing sources until such time as we generate sufficient positive cash flow from operations to support our ongoing liquidity needs. The A-1 Note and the B Note are subject to redemption rights in favor of Streeterville as described in Note 6 – Debt, and therefore there can be no assurance that sufficient funds will remain available to support future operations until profitability is reached. We believe our current cash position and the Note Purchase Agreement, together with proceeds from the Securities Purchase Agreement and 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.

Previous wording

The table below sets forth a summary of our cash flows for the three months ended March 31, 2026 and 2025:

Current wording

The table below sets forth a summary of our cash flows for the six months ended June 30, 2026 and 2025:

Previous wording

Net cash provided by operating activities was $1,589,931 during the three months ended March 31, 2026. We reported net income of $1,895,655, which included the receipt of approximately $6.2 million in non-recurring settlement proceeds during the current period, non-cash expenses of depreciation and amortization expense of $538,786 and stock-based compensation expense of $302,719. The change in operating assets and liabilities during the three months ended March 31, 2026 was a net use of cash of $1,134,034 primarily due to a decrease in the accounts payable balance of $2,988,808, partially offset by the decrease in accounts receivable balance of $1,625,443 and an increase in accrued expenses and other current liabilities of $431,591. Our terms are such that we generally collect receivables prior to paying trade payables; however, our Media sales arrangements typically have slower payment terms than the terms of related payables.

Current wording

Net cash used in operating activities was $717,262 during the six months ended June 30, 2026. We reported a net loss of $2,144,259, which included the receipt of approximately $6.2 million in non-recurring settlement proceeds during the period, non-cash expenses of depreciation and amortization expense of $1,057,370 and stock-based compensation expense of $543,147. The change in operating assets and liabilities during the six months ended June 30, 2026 was a net use of cash of $1,119,704 primarily due to a decrease in accounts payable of $2,904,122 offset by a decrease in accounts receivable of $1,433,270 and an increase of accrued liabilities and other liabilities of $707,822. Our Legacy Search terms are such that we generally collect receivables prior to paying trade payables. However, our Media sales arrangements typically have slower payment terms than the terms of related payables.

Previous wording

During the comparable three-month period in 2025, cash used in operating activities was $366,912 from a net loss of $1,259,821 that included several non-cash expenses of depreciation and amortization expense of $568,042 depreciation of right of use assets of $6,090, and stock-based compensation expense of $304,284. The change in operating assets and liabilities during the three months ended March 31, 2025, was a net use of cash of $79,752.

Current wording

During the comparable six-month period in 2025, cash used in operating activities was $223,257 from a net loss of $2,761,084 and included non-cash expenses of depreciation and amortization expense of $1,130,600 and stock-based compensation expense of $596,073. The change in operating assets and liabilities during the six months ended June 30, 2025 was a net provision of cash of $692,028 primarily due to a decrease in accounts receivable of $2,825,264 and an increase in accounts payable of $382,182, offset by a decrease of accrued liabilities and other liabilities of $2,358,189 .

Previous wording

Net cash used in investing activities was $451,729 for the three months ended March 31, 2025, and consisted primarily of capitalized internal development costs.

Current wording

Net cash used in investing activities was $598,197 for the six months ended June 30, 2026, and consisted primarily of capitalized internal development costs.

Previous wording

Net cash used by investing activities was $358,944 for the three months ended March 31, 2026, and consisted primarily of capitalized internal development costs.

Current wording

Net cash used in investing activities was $858,441 for the six months ended June 30, 2025, and consisted primarily of capitalized internal development costs.

Previous wording

Net cash provided by financing activities was $921,389 during the three months ended March 31, 2025, and was primarily from the proceeds from the ATM Agreement as discussed in Note 1 – Organization and Business.

Current wording

Net cash provided by financing activities during the six months ended June 30, 2025 was $757,641, and was primarily from the proceeds from the ATM Agreement as discussed in Note 1 – Organization and Business.