Inuvo, Inc.

Inuvo, Inc.

Notes to Condensed Consolidated Financial Statements

Note 1 – Organization and Business

Company Overview

Inuvo, Inc. (the "Company") operates in the generative artificial intelligence market for modeling media audiences. We provide AI-driven data and advertising technology solutions and have successfully commercialized a proprietary, patented large language model ("LLM”) that identifies and actions the reasons why consumers are interested in products, services, or brands - rather than who they are - offering a high-performance, privacy-by-design solution for the modern advertising landscape.

Intelligence for the Agentic Era. As the industry moves toward "agentic” systems - where autonomous AI agents increasingly handle the planning and execution of media tasks - Inuvo is positioned as a critical, media audience decisioning layer. Unlike legacy systems that rely on static historical data or consumer IDs (cookies), Inuvo’s technology provides the real-time, intent-based reasoning required for autonomous media planning and activation. By serving as the neural network for these adaptive systems, Inuvo enables brands to move from traditional audience targeting to dynamic model planning and activation.

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

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

Inuvo delivers these capabilities through two primary business channels:

Inuvo’s competitive moat and intellectual property are protected by 15 issued and three pending patents issued by the United States Patent and Trademark Office. Our IP portfolio includes patents, trade secrets and trademarks. We actively seek to protect our IP rights and to deter unauthorized use of our IP and other assets. While our IP rights are important to our success, our business is not significantly dependent on any single patent, trademark, or other IP right.

Liquidity

Our principal sources of liquidity are the sale of our common stock and our Note Purchase Agreement with Streeterville Capital, LLC ("Streeterville"), dated June 29, 2026 (the "Note Purchase Agreement"), pursuant to which we issued a Secured Promissory Note A-1 in the original principal amount of $4.1 million (the "A-1 Note") and a Secured Promissory Note B in the original principal amount of $6.2 million (the "B Note"), each discussed in Note 6 – Debt.

In connection with entering into the Note Purchase Agreement, we used approximately $3.8 million of the A-1 Note proceeds to retire our outstanding convertible promissory note, including accrued interest, and we terminated our Financing and Security Agreement with SLR Digital Finance LLC ("SLR"), (the "Financing Agreement"). As of June 30, 2026, we had no outstanding convertible debt and no amounts outstanding under our prior receivables-based credit facility. See Note 6 – Debt.

Of the $6.2 million in gross proceeds from the B Note, funds were deposited into a deposit account at Lakeside Bank held by our newly formed wholly-owned subsidiary, INUV Holdings, LLC, pursuant to a Deposit Account Control Agreement (the "DACA") among INUV Holdings, LLC, Streeterville, and Lakeside Bank. Amounts held in the DACA are not available for our general working capital or corporate purposes and will be released to us only in connection with a permitted Note Exchange, as further discussed in Note 6 – Debt. As of June 30, 2026, $6.2 million remained subject to the DACA and was classified as restricted cash on our condensed consolidated balance sheet.

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 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, 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.

On June 30, 2026, we entered into a Securities Purchase Agreement with an accredited investor providing for the issuance, in a registered direct offering, of 1,631,121 shares of common stock and pre-funded warrants exercisable for up to 1,337,693 shares of common stock. In a concurrent private placement, we also agreed to issue Class A and Class B common stock purchase warrants exercisable for an aggregate of up to 5,937,628 shares of common stock. The Class A and Class B warrants have an exercise price of $1.28 per share, become exercisable six months after issuance, and expire five years and one year after issuance, respectively. We also issued placement agent warrants to purchase 148,441 shares of common stock at an exercise price of $1.25 per share. The placement agent warrants become exercisable six months after issuance and expire three years from the commencement of sales pursuant to the offerings. The offerings (the “Offerings”) closed on July 1, 2026, subsequent to quarter end, generating gross proceeds of approximately $3.0 million, before deducting placement agent fees and offering expenses of $0.6 million. See Note 15 – Subsequent Events. In connection with the Offerings, 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.

We have focused our resources behind a plan to market our collective multi-channel advertising capabilities differentiated by our AI technology, the IntentKey, where we have a technological advantage and higher margins. If we are successful in implementing our plan, we expect to return to and maintain positive cash flows from operations. However, there is no assurance that we will be able to achieve this objective.

As of June 30, 2026,we had approximately $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. Cash of $1.2 million that was held pursuant to the DACA was released from restrictions on July 1, 2026. 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.

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 exclusive of $5 M in long-term restricted cash, 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.

Note 2 – Summary of Significant Accounting Policies

Basis of presentation

The condensed consolidated financial statements presented are for Inuvo and its subsidiaries. The accompanying unaudited condensed consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying condensed consolidated balance sheet as of December 31, 2025, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). In our opinion, these condensed consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 5, 2026.

Use of estimates

The preparation of financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying condensed consolidated financial statements are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the condensed consolidated financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying condensed consolidated financial statements, and such differences could be material.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (theexit price) in an orderly transaction between market participants at the measurement date. The fair value standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. The Company uses the hierarchy prescribed in the accounting guidance for fair value measurements, based upon the available inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows:

The carrying amounts of certain financial assets and liabilities, including cash and cash equivalents, accounts receivable, prepaid and other current assets, accounts payable, and accrued liabilities, approximate fair value because of the short maturity and liquidity of those instruments. The carrying value of the Company's Streeterville Notes (see Note 6 - Debt) approximate fair value as of June 30, 2026. The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety. The Company elected the fair value option for its 3i, LP convertible note, which was measured on a recurring basis using significant unobservable inputs (Level 3) until it was repaid in full on June 29, 2026. As a result, the Company had no assets or liabilities measured at fair value on a recurring basis as of June 30, 2026 or December 31, 2025. See Note 6 – Debt.

Convertible Note – Fair Value Option

The Company evaluated its convertible note and determined that it included embedded features that would otherwise require potential bifurcation. Neither the note nor any embedded features were required to be classified as equity. Therefore, the Company elected the fair value option ("FVO") under ASC 825, Financial Instruments, for the convertible note at its date of issuance. Under the FVO, the convertible note was recorded at fair value upon initial recognition and subsequently remeasured at fair value until it was repaid in full on June 29, 2026. Changes in fair value, excluding changes attributable to instrument-specific credit risk, were recognized in other income (expense) within the condensed consolidated statements of operations. The Company determined that changes in fair value attributable to instrument-specific credit risk were not significant. Accordingly, net income equaled comprehensive income for all periods presented. Interest expense on the convertible note was included in financing expense within the condensed consolidated statements of operations. The election of the FVO is irrevocable and is applied on an instrument-by-instrument basis. As a result of the FVO election, the embedded conversion feature was not required to be separately accounted for. Debt issuance costs incurred in connection with the convertible note measured at fair value under the FVO were expensed as incurred.

Revenue Recognition

We generate revenue by identifying audiences and presenting advertisements on behalf of our customers. We provide our products, technologies and services to agencies and brands (collectively, “Audience Modeling”) along with large consolidators of advertising demand (“Legacy Search”). Currently, revenue from Audience Modeling is primarily through our IntentKey products and services and revenue from Legacy Search is primarily through our Bonfire products and services. Our revenue is derived from the placements of advertisements across advertising channels, browsers, applications and devices. Pricing for those advertisement placements is typically either on a cost per thousand impressions or cost-per-click basis.

Our revenue is a function of the number of advertisements placed combined with the price we obtain (using our technologies) for the placements made on behalf of our clients. We assume the risk associated of finding placements at a cost below that for which it had been sold.

We recognize revenue when control of the contracted services or product is transferred to our customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those services or products. We determine revenue recognition through (i) identification of a contract with a customer, (ii) identification of the performance obligations in the contract, (iii) determination of the transaction price, (iv) allocation of the transaction price to the performance obligations in the contract, and (v) recognition of revenue when or as the performance obligations are satisfied.

For Audience Modeling, the terms of an agreement are captured in an Insertion Order ("IO") where revenue is recognized upon delivery of services during the period covered by the IO. For Legacy Search, terms are generally captured in multi-year master service agreements and revenue is recognized based on the number of advertisements placed or clicked on in the period they occur. We settle advertisement placement prices with our customers net of any adjustments for quality.

For the three-month period ended June 30, 2026, we generated $7,535,055 in revenue of which 52.4% was from Legacy Search and 47.6% from Audience Modeling. For the three-month period ended June 30, 2025, we generated $22,671,333 in revenue of which 86.7% was from Legacy Search and 13.3% from Audience Modeling. For the six-month period ended June 30, 2026, we generated $15,462,609 in revenue of which 54.8% was from Legacy Search and 45.2% from Audience Modeling. For the six-month period ended June 30, 2025, we generated $49,379,365 in revenue of which 87.8% was from Legacy Search and 12.2% from Audience Modeling.

Accounts receivable, net of allowance for credit losses, was $12,545,771 as of January 1, 2025, representing the opening balance for the comparative 2025 period.

Customer concentration

For the three- and six-month periods ended June 30, 2026, revenue and gross accounts receivable concentration by customer were as follows:

For the three- and six-month periods ended June 30, 2025, revenue and gross accounts receivable concentration by customer were as follows:

Recently Issued Accounting Standards

In September 2025, the Financial Accounting Standards Board (FASB) issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes guidance for internal-use software costs and relocates the website development-costs guidance (previously in Subtopic 350-50) into Subtopic 350-40. The amendments require enhanced disclosures for capitalized software costs under ASC 350-40 and ASC 360-10, effective for annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statements.

In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contract with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-based Noncash Consideration from a Customer in a Revenue Contract which refines the scope of derivative accounting and clarifies the interaction between derivative accounting and revenue recognition guidance. The amendments are effective for fiscal years beginning after December 15, 2026. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial

statements.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires public companies to disclose additional information about certain expense categories within the income statement in the notes to the financial statements. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this guidance on its condensed consolidated financial statement disclosures.

In May 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the accounting for the settlement of convertible debt instruments with an induced conversion feature. The amendments are effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted. The Company adopted this guidance during the quarter ended March 31, 2026. The adoption of ASU 2024-04 did not have a material impact on the Company's condensed consolidated financial statements.

Note 3 – Property and Equipment

The net carrying value of property and equipment was as follows as of:

During the three months ended June 30, 2026 and June 30, 2025, depreciation and amortization expense was $401,209 and $445,183, respectively. During the six months ended June 30, 2026 and June 30, 2025, depreciation and amortization expense was $822,620 and $895,849, respectively. During the three and six months ended June 30, 2026, we disposed of equipment and software approximately $296,000 and $340,800 respectively, that was no longer in use. The Company recognized a loss on disposal of approximately $14,300 and $15,600 during the three- and six-month periods ended June 30, 2026, respectively.

** Note 4 – Other Intangible Assets and Goodwill**

The following is a schedule of intangible assets and goodwill as of June 30, 2026:

Amortization expense over the next five years and thereafter is as follows:

Note 5 – Restricted Cash

In connection with the Note Purchase Agreement, the $6.2 million proceeds from the B Note were deposited into a Lakeside Bank account owned by the Company's wholly-owned subsidiary, INUV Holdings, LLC, under the DACA. Streeterville holds a first-position security interest in and control over the account, and funds are unavailable for general corporate purposes except as released via a Note Exchange.

The Company is entitled to the release of $1.2 million of restricted cash held pursuant to the DACA upon the completion of a Qualified Equity Offering on or before July 31, 2026. On July 1, 2026, the Company completed a registered direct offering generating gross proceeds of approximately $3.0 million, which satisfied the requirements for the release of the $1.2 million. Accordingly, $1.2 million of restricted cash has been classified as current as of June 30, 2026.

The remaining $5.0 million of restricted cash has been classified as non-current because its release is contingent upon future note exchanges under the Note Purchase Agreement, which are triggered by a $2.0 million reduction of the A-1 Note or any additional A Notes issued upon exchange from the B Note (the A-1 Note and any additional A Notes that are issued upon exchange from the B Note, collectively, the “A Notes”) through either Streeterville's monthly redemption right or a Company-elected prepayment. As of June 30, 2026, substantially all of the Company's restricted cash was held by the Company's wholly-owned subsidiary, INUV Holdings, LLC, and was restricted from being distributed, loaned, or advanced to the Company pursuant to the DACA.

The following table provides a reconciliation of cash and cash equivalents and restricted cash:

Note 6 – Debt

Credit Facility

We maintained a Financing and Security Agreement with SLR Digital Finance LLC ("SLR"), effective July 30, 2024, providing for borrowings of up to 90% of eligible accounts receivable, up to a $10 million maximum commitment. The outstanding balance was $3,288,101 as of December 31, 2025. On June 29, 2026, in connection with entering into the Note Purchase Agreement described below, we repaid any then-outstanding balance and terminated the Financing Agreement. In connection with this termination, during the three and six months ended June 30, 2026, we recognized a loss on extinguishment of $250,386 in other expense. As of June 30, 2026, we have no obligations and no further borrowing availability under this facility.

Convertible Note

On January 14, 2026, we issued a subordinated convertible note with an aggregate principal amount of approximately $3.3 million (10% original issue discount, $3.0 million gross proceeds), accounted for under the fair value option (ASC 825-10). The note called for four equal quarterly principal installments of $833,333, plus accrued interest, the first of which was paid on March 31, 2026. On June 29, 2026, in connection with entering into the Note Purchase Agreement described below, we repaid the note in full for total cash consideration of $2,835,000, consisting of $2,500,000 of remaining principal, $66,667 of accrued interest, and $268,333, representing a make-whole payment and an early termination fee. Changes in fair value of $620,315 and $601,666 for the three and six months ended June 30, 2026, respectively, are included in other income (expense) within the condensed consolidated statements of operation. As of June 30, 2026, the note is no longer outstanding.

Streeterville Notes

On June 29, 2026, we entered into a Note Purchase Agreement with Streeterville, pursuant to which we issued the A-1 Note and the B Note (the B Note, together with the A-1 Note and any additional A Notes, the "Notes"), for aggregate gross proceeds of $10 million. The A-1 Note bears interest at 9% per annum and carries a $342,000 original issue discount; the B Note bears interest at 5% per annum and carries no original issue discount. Both Notes mature 24 months from issuance.

We used a portion of the A-1 Note proceeds to repay and terminate the Financing Agreement and to repay and extinguish the convertible note, each as described above. The $6.2 million of B Note proceeds were deposited into a deposit account held by our wholly-owned subsidiary, INUV Holdings, LLC, subject to a DACA in favor of Streeterville; see Note 5 – Restricted Cash.

The Notes are secured by substantially all of our assets, including our intellectual property, and are guaranteed by our subsidiaries. Streeterville has the right, beginning nine months after issuance, to redeem up to $750,000 per month under the A-1 Note at its sole discretion (the "Monthly Redemption" right); the B Note carries no Monthly Redemption right. Beginning six months after issuance, Streeterville may redeem amounts under either Note if our common stock trades at a specified premium to a defined minimum price (the "Limited Redemption" right). We have the right to exchange up to $1,000,000 of the B Note into an A Note for every $2,000,000 reduction in the A Notes balance, and a separate right to exchange $1,200,000 of the B Note upon completion of a qualifying equity offering by July 31, 2026, in each case with a corresponding release of funds from the deposit account described above.

Because Streeterville's Monthly Redemption right becomes exercisable within twelve months of the balance sheet date, we have classified $3,337,000 of the A-1 Note as a current liability, with the remaining $6,405,000 of Notes payable, net, classified as non-current.

Maximum potential redemptions under the Notes over the next several years, assuming Streeterville exercises the Monthly Redemption right at its full permitted pace, are as follows:

The table above reflects the maximum amount Streeterville could elect to redeem under the Monthly Redemption right if exercised at the full permitted pace each month; actual redemptions are at Streeterville's sole discretion and may be less than the maximum, or accelerated further through the Limited Redemption right described above, which is contingent on our common stock trading at a specified premium and is not readily estimable. The Notes require no other scheduled principal payments prior to the contractual maturity date in June 2028.

Discount Allocation

The unamortized original issue discount related to the A-1 Note ($342,000 face) has been allocated between current and non-current Notes payable, consistent with the current/non-current classification of the underlying principal and will be amortized to interest expense over the term of the debt.

Note 7 – Accrued Expenses and Other Current Liabilities

The accrued expenses and other current liabilities consist of the following as of:

Note 8 – Stock-Based Compensation

We maintain a stock-based compensation program intended to attract, retain and provide incentives for talented employees and directors and align stockholder and employee interests. On March 21, 2025, the Board of Directors adopted the 2025 Omnibus Equity Compensation Plan (the "2025 Plan"), which was approved by stockholders at the annual meeting held on May 22, 2025. The 2025 Plan replaced the 2017 Equity Compensation Plan ("2017 ECP") for new awards. Outstanding awards granted under the 2017 ECP remain subject to their original terms. During the six months ended June 30, 2026 we granted restricted stock units ("RSUs") under the 2025 Plan. During the six months ended June 30, 2025, we granted RSUs under the 2017 ECP. RSU vesting periods are generally up to three years and/or based upon achieving certain financial targets.

At June 30, 2026, shares subject to outstanding awards under the 2017 ECP and 2025 Plan were 426,970 and 236,500 shares, respectively. Shares available for future grant under the 2025 Plan at June 30, 2026, were 861,820.

As of June 30, 2026, the total share reserve authorized under the 2025 Plan was 1,098,320.

Compensation Expense

For the three months ended June 30, 2026 and June 30, 2025, we recorded stock-based compensation expense for all equity incentive plans of $240,428 and $291,789 respectively. For the six months ended June 30, 2026 and June 30, 2025, we recorded stock-based compensation expense for all equity incentive plans of $543,147 and $596,073, respectively. Total compensation cost not yet recognized at June 30, 2026 was $1,132,678, which will be recognized over a weighted-average recognition period of approximately 1.2 years. There were no stock options granted during the three and six months ended June 30, 2026.

The following table summarizes outstanding stock-based awards as of six months ended June 30, 2026:

The fair value of restricted stock units is determined using market value of the common stock on the date of the grant.

The following table summarizes the stock grants outstanding under 2017 ECP and 2025 Plan as of June 30, 2026:

Note 9 – Stockholders' Equity

Sales of Common Stock Under At-the-Market Offering

On May 7, 2024, we entered into an At-the-Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, pursuant to which we may offer and sell shares of our common stock, par value $0.001 per share, having an aggregate offering price of up to $15.0 million. We did not sell any shares under the ATM Agreement during the six months ended June 30, 2026. During the six months ended June 30, 2025, we utilized the ATM Agreement and sold 159,431 shares of common stock for gross proceeds of $1.2 million. 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 have 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 an 180-day lockup period following completion of the Offerings.

Warrants

On September17, 2021, we signed an agreement with a marketing platform and consulting company to provide referral and support services to us for a period offive years. As part of that agreement, we granted aseven year warrant exercisable into 30,000 shares of our common stock, at $7.20 per share, which vests in two tranches when certain performance metrics are achieved. The warrant was valued using the Black Scholes option pricing model at a total of $149,551 based on aseven-year term, an implied volatility of 100%, a risk-free equivalent yield of 1.17%, and a stock price of $7.10. The warrant is classified as equity and will be expensed over the vesting period of each tranche if the performance criteria are achieved. At the period ended June 30, 2026, approximately 19,300 shares have been forfeited and approximately 10,700 shares underlying the warrant have vested.

Subsequent to quarter end, on July 1, 2026, the Company issued pre-funded warrants and common stock purchase warrants exercisable for an aggregate of up to 7,423,762 additional shares of common stock in connection with the registered direct offering and concurrent private placement described in Note 15 – Subsequent Events.

Earnings per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share (in dollars, except share data):

For the three and six months ended June 30, 2026 and 2025, we generated a net loss and as a result, any potential common shares are anti-dilutive.

As of June 30, 2026,663,470 restricted stock units and 10,700 vested warrants, for a total of 674,170 potentially dilutive shares, were excluded from the computation of diluted net loss per share because their effect would have been antidilutive due to the net losses in the period.

Note 10 – Segment Reporting

The Company operates as a single reportable segment that places digital advertising throughout devices, websites, applications and browsers across social, search and programmatic advertising channels, facilitating the delivery of millions of advertising messages monthly. The Chief Operating Decision Maker ("CODM"), identified as the Chief Executive Officer, evaluates the Company's financial performance and makes resource allocation decisions based on consolidated financial information.

Measure of Segment Profit or Loss

The CODM evaluates performance and allocates resources based on contribution margin, which is calculated as revenue after deducting marketing expenses, exchange fees, and publisher payments. Exchange fees and publisher payments are classified as cost of revenue. The resulting contribution margin covers the Company's fixed costs and profit.

Significant Segment Expenses

The Company reports total revenue and significant expenses provided to the CODM, which include cost of revenue, marketing, and compensation expenses. These expenses are regularly reviewed to assess operating performance. The following table presents these expenses:

Other segment expenses include facilities costs, travel and entertainment expenses and various other corporate expenses.

Geographic Information

The Company's operations are based in the United States, and substantially all revenue is derived from U.S. clients.

Note 11 – Leases

As of June 30, 2026 and December 31, 2025, operating lease right-of-use assets were $529,194 and $663,635, respectively, and financed lease right-of-use assets were $0 as of both dates.

For the six months ended June 30, 2026 and 2025, we recorded $0 and $12,237, respectively, in amortization expense related to finance leases.

Rent expense related to operating leases was $83,461 and $83,456 for the three months ended June 30, 2026 and 2025, respectively, and $166,922 and $166,915 for the six months ended June 30, 2026 and 2025, respectively.

Cash paid for operating leases presented below includes payments for operating lease obligations as well as certain other lease-related charges, including common area maintenance charges, that are not included in rent expense.

Information related to our operating leases for the periods ended 2026 are as follows:

Note 12 – Allowance for Credit Losses

The activity in the allowance for credit losses was as follows during the six-month period ended June 30, 2026 and the year ended December 31, 2025:

The allowance for credit losses at June 30, 2026 was $37,735, a decrease of $61,219 from December 31, 2025, primarily driven by improved collections experience and a reduction in aged receivables during the period.

Note 13 – Commitments and Contingencies

The Company is from time to time subject to legal proceedings and claims that arise in the ordinary course of business.

On January 29, 2026, Carambolico LTD commenced a lawsuit, captioned Carambolico LTD v. Alot, Inc., No. 04CV-26-458 (Ark. Cir. filed Jan. 29, 2026), in the Circuit Court of Benton County, Arkansas, naming Alot, Inc., a wholly owned subsidiary of the Company, as defendant. The complaint asserts breach of contract and related claims under a services agreement and seeks $1.5 million in damages. The Company believes the claims are without merit and intends to vigorously defend the matter.

In April 2026, AEM Days Ltd. commenced a lawsuit, captioned AEM Days Ltd. v. Alot, Inc., No. 60CV-26-3363 (Ark. Cir. filed Apr. 2026), in the Circuit Court of Pulaski County, Arkansas, naming Alot, Inc., a wholly owned subsidiary of the Company, as defendant. The complaint asserts claims related to a services agreement and seeks approximately $766,000 in unpaid invoices. The Company believes the claims are without merit and intends to vigorously defend the matter.

In each of the above matters, the Company is currently unable to predict the outcome or estimate a range of reasonably possible loss, if any. No liability has been accrued as of June 30, 2026.

As previously disclosed, on January 29, 2026, the Company received approximately $6.2 million in proceeds pursuant to a class action settlement in which the Company was a claimant. The proceeds were recognized as a gain within Other income, net in the accompanying condensed consolidated statements of operations during the six months ended June 30, 2026.

Note 14 – Related Party Transactions

There was no related party activity for the three and six months ended June 30, 2026.

During the three and six months ended June 30, 2025, we provided services to Gabriel Court Consortium, LLC, a company in which one of the Company's directors held a significant interest. Revenue from these services was approximately $12,500 and $25,000 for the three and six months ended June 30, 2025, respectively.

During the three and six months ended June 30, 2025, we provided services to First Orion Corp., a company in which one of the Company's former directors held a significant interest. Revenue from these services was approximately $48,000 and $126,000 for the three and six months ended June 30, 2025, respectively.

During the three and six months ended June 30, 2025, we provided services to James & James, a company in which one of the Company's former directors held a significant interest. Revenue from these services was approximately $235,000 and $389,000 for the three and six months ended June 30, 2025, respectively.

Note 15 – Subsequent Events

Registered Direct Offering and Concurrent Private Placement

The Company entered into a Securities Purchase Agreement with an accredited investor for a registered direct offering of 1,631,121 shares of common stock and pre-funded warrants to purchase up to 1,337,693 shares, together with a concurrent private placement of Class A and Class B common stock purchase warrants to purchase up to an aggregate of 5,937,628 common shares. The Class A and Class B warrants have an exercise price of $1.28 per share, become exercisable six months after issuance, and expire five years andone year after issuance, respectively. We also issued placement agent warrants to purchase 148,441 shares of common stock at an exercise price of $1.25 per share. The Offerings closed on July 1, 2026, for aggregate gross proceeds of approximately $3.0 million, before deducting placement agent fees and offering expenses of $0.6 million.

Completion of this offering satisfied the "Qualified Equity Offering" condition under the Company's Note Purchase Agreement with Streeterville Capital, LLC dated June 29, 2026 (see Note 6 – Debt). As a result, the Company has the right to a $1,200,000 Note Exchange, releasing that amount from the restricted deposit account described in Note 5 – Restricted Cash to the Company's operating account.

Asset Purchase Agreement

On July 24, 2026, we entered into an Asset Purchase Agreement to sell certain proprietary software and a related advertising account to an unaffiliated third party for $450,000, subject to closing conditions not yet satisfied as of the date of this filing.