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Summary of Business and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2024

The accompanying unaudited condensed consolidated financial statements and condensed footnotes have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments, consisting of only normal recurring items, considered necessary for fair statement have been included. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024, or for other interim periods or future years.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated balance sheet as of December 31, 2023 is derived from audited financial statements as of that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission ("SEC") on February 23, 2024.

Reverse Stock Split and Reduction in Authorized Shares

On April 12, 2024, the Company effected a reverse stock split of its outstanding common stock and a reduction in the Company's authorized shares of common stock. As a result of the reverse stock split, each six outstanding shares of the Company’s common stock were combined into one outstanding share of common stock, without any change in par value. The common stock began trading on the Nasdaq Capital Market on a split-adjusted basis on April 15, 2024. No fractional shares were issued in connection with the reverse stock split and the Company will pay the fair value of such fractional shares in cash. As a result of the reduction in the Company's authorized shares of common stock, the Company's authorized shares went from 142,857 shares to 47,619 shares.

All share and per share amounts of the Company’s common stock, as well as stock options and restricted stock units (“RSUs”), included in the accompanying condensed consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented, unless indicated otherwise. In addition, as a result of the reverse stock split, the Company reclassified an amount equal to the reduction in the par value of common stock to additional paid-in capital on its condensed consolidated balance sheets.

Liquidity and Going Concern

The Company has incurred significant losses in each fiscal year since its incorporation in 2006. The Company incurred a net loss of $2,411 for the three months ended March 31, 2024 and a net loss of $21,917 for the year ended December 31, 2023. As of March 31, 2024, the Company had cash and cash equivalents of $9,563 and an accumulated deficit of $346,662. Historically, the Company has relied primarily on the sale of its capital stock to fund operating activities. Management expects to incur additional losses and experience negative operating cash flows into the foreseeable future.

In July 2023, the Company commenced a restructuring plan that included a global reduction-in-force and other cost saving actions to reduce its expenses (the "2023 Restructuring Plan"). The 2023 Restructuring Plan resulted in the reduction of the Company's global employees by 64 full-time employees during the second half of 2023, reducing its total headcount by approximately 37%. The 2023 Restructuring Plan was substantially complete in 2023.

The Company’s ability to achieve its business objectives, and to continue to meet its obligations, is dependent upon maintaining a certain level of liquidity, which is impacted by several factors, such as its ability to manage its cash flows, including the effectiveness of the 2023 Restructuring Plan, its ability to maintain its strategic partnerships, its ability to increase new bookings, the extent of customer acceptance, retention and use of its MarinOne platform, and general macroeconomic conditions such as inflation or the extent and duration of any recession. Although the Company has pursued, and may continue to pursue, additional sources of liquidity, including additional equity and debt financing, there is no assurance that any additional financing will be available on acceptable terms, or at all. Failure to manage its cash flows, improve customer retention rates, or raise additional capital would have a material adverse effect on the Company’s ability to achieve its intended business objectives.

Based on the funds the Company has available as of the date of the filing of this Quarterly Report on Form 10-Q and its history of recurring losses and negative operating cash flows, there is substantial doubt raised about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is substantially dependent upon its ability to achieve its intended business objectives. If the Company is unable to achieve its intended business objectives, it is probable that the Company may be required to initiate further cost savings activities, extend payment terms with suppliers, liquidate assets where possible, or wind-up operations. These actions could materially impact the Company’s business, results of operations and future prospects. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern for one year after the filing date of the accompanying condensed consolidated financial statements.

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the Company’s uncertainty related to its ability to continue as a going concern. These adjustments could materially impact the Company’s accompanying condensed consolidated financial statements.

The Company is not aware of any specific event or circumstance that would require it to update its estimates, judgments or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to the Company’s financial statements.

Fair Value of Financial Instruments

The Company’s financial instruments, including accounts receivable, accounts payable and accrued expenses are carried at cost, which approximates fair value because of the short-term nature of those instruments. Cash equivalents are comprised of money market funds recorded at fair value and are classified as Level 1 within the fair value hierarchy.

Allowances for Credit Losses and Revenue Credits

The Company performs a regular review of its customers’ payment histories and associated credit risks and it generally does not require collateral from its customers. Certain contracts with advertising agencies contain sequential liability provisions, whereby the agency does not have an obligation to pay the Company until payment is received from the agency’s customers. In these circumstances, the Company evaluates the credit worthiness of the agency’s customers, in addition to the agency itself. The Company maintains an allowance for credit losses which reflects its best estimate of potentially uncollectible trade receivables and is based on both specific and general reserves. General reserves are maintained on a collective basis by considering factors such as historical experience, the age of the receivable balances, current economic conditions and a reasonable and supportable forecast of future economic conditions.

The activity in the Company’s allowance for credit losses for the three months ended March 31, 2024 is summarized as follows (in thousands):


	Total
Balance at December 31, 2023	$	501
Current period provision for expected losses		(10	)
Write-offs charged against allowance		(70	)
Balance at March 31, 2024	$	421

From time to time, the Company provides credits to customers that typically relate to customer disputes or billing adjustments and are recorded as a reduction of revenue. Reserves for these revenue credits are accounted for as variable consideration under authoritative revenue recognition guidance (see Note 2) and are estimated based on historical credit activity. As of March 31, 2024, and December 31, 2023, the Company recorded an allowance for potential customer credits in the amount of $13 and $12, respectively.

Revenue Recognition

The Company generates revenues principally from subscriptions either directly with advertisers or with advertising agencies to its platform for the management of search, social and eCommerce. The Company also generates revenues from strategic agreements with certain leading publishers. Under the subscription agreements, the Company receives consideration based on the advertising spend that customers manage on its platform. Revenues are recognized when control of these services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. See Note 2 for further discussion of the Company’s revenues.

Internally Developed Software

Costs incurred in the development phase are capitalized and amortized over the product’s estimated useful life, when the development costs are considered recoverable. The Company expenses all costs incurred that relate to planning and post implementation phases of development. Development phase costs generally include salaries and personnel costs and third-party contractor expenses associated with software development, configuration and coding. Capitalized costs related to internally developed software under development are treated as construction in progress until the program, feature or functionality is ready for its intended use, at which time amortization commences.

During the three months ended March 31, 2024, the Company analyzed whether its internally developed software still met the definition of an asset. As of March 31, 2024, the Company concluded that due to the fact the internally developed software does not have a future economic benefit to the Company based on its negative cash flows, it no longer meets the definition of an asset. Additionally, as the internally developed software no longer meets the definition of an asset, the development costs related to internally developed software will no longer be capitalized as these development costs are considered to be unrecoverable. Instead, all development costs related to the internally developed software will be expensed as incurred.

As of March 31, 2024 and December 31, 2023, there was no unamortized internally developed software costs, including construction in progress. During the three months ended March 31, 2024, no amounts were capitalized relating to internally developed software as the development costs in the period related to internally developed software were considered unrecoverable. During the three months ended March 31, 2023, the Company capitalized $579 of development costs related to internally developed software. During the three months ended March 31, 2024, the Company had no amortization of capitalized costs related to internally developed software, while during the three months ended March, 31, 2023 the Company amortized $419. Amortization of internally developed software is reflected in cost of revenues. Costs associated with minor enhancements and maintenance are expensed as incurred.

Research and Development

Research and development costs are expensed as incurred, except for certain internal software development costs, which may be capitalized when recoverable, as noted above. Research and development costs consist of personnel costs, including salaries, stock-based compensation expense, benefits and bonuses, as well as non-personnel costs such as professional fees payable to third-party development resources, amortization of intangible assets and allocated overhead costs

Recent Accounting Pronouncement Not Yet Effective

Recent Accounting Pronouncements Not Yet Effective

In November 2023, the Financial Standards Accounting Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting – Improvements to Reportable Segment Disclosures (Topic 280) ("ASU 2023-07"). ASU 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes – Improvements to Income Tax Disclosures (Topic 740) ("ASU 2023-09"). ASU 2023-09 requires enhanced annual disclosures regarding the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and may be adopted on a prospective or retrospective basis. Early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.