Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview

Inuvo provides artificial intelligence-driven solutions for modeling media audiences. As a provider of AI-driven data and advertising technology solutions, we have successfully commercialized a proprietary AI model, built on our issued patents, 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 - we believe Inuvo is positioned to serve as a media audience decisioning layer. Unlike legacy systems that rely on static historical data or consumer IDs (cookies), Inuvo's technology provides real-time, intent-based reasoning designed to support autonomous media planning and activation. Inuvo's technology is intended to enable brands to move from traditional audience targeting to dynamic model planning & activation.

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

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

	·	The Company's flagship proprietary AI, IntentKey®, analyzes live content consumption across the open web, mapping human motivation to a concept graph of over 25 million ideas. This allows Inuvo to predict purchase intent, often identifying emerging audience shifts up to 24 hours before they become competitive in the open market. We believe this delivers targeting leverage that translates to improved supply/demand yields within bid streams. Speed of insight-to-execution is our competitive advantage. IntentKey delivers value from intent signals in-the-moment and is designed to improve ROAS (return on ad spend) by matching high yield ad inventories in the bid stream as consumer intent forms.
	·	IntentPath: A visualization that allows marketers to see "intent-in-motion," mapping the real-time journey from initial discovery to final purchasing decision.
	·	Ranger: An AI-powered quality assurance feature within our Campsight system that ensures ad creatives remain consistent, accurate and compliant across digital networks. In October 2026, we sold certain proprietary software, including Ranger, and retained a perpetual license to use it (see Note 15 - Subsequent Events).

Inuvo delivers these capabilities through two primary business channels:

	·	Audience Modeling (formerly Agencies and Brands): Managed and self-service offerings that utilize Inuvo's intelligence layer for precision audience discovery and brand-safe activation across CTV, Video, Audio, Native, and Display channels.
	·	Legacy Search (formerly Platforms): Inuvo provides strategic integrations for large consolidators of advertising demand. This business is optimized to prioritize advertising quality, scalability, and compliance, leveraging AI to align merchant messaging with online content.

Inuvo's competitive moat and intellectual property are protected by 15 issued and three pending patent applications with 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.

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Significant Business Trends

Our business results have been, or are expected to be, impacted by several trends and strategic activities, which are described below. We expect that the trends described below may continue to impact our results of operations, cash flows, and financial position.

Forces Impacting the Industry

The digital advertising industry in which we operate is experiencing structural change driven by privacy-related regulation, browser and platform policy changes, and changing consumer and advertiser behaviors, particularly as it relates to consumer use of artificial intelligence in information-gathering. These factors have, among other things, led to a wider distribution of consumer intent signals across media platforms and has reduced availability and utility of third-party cookies and other persistent identifiers that are used by legacy advertising technology platforms to ensure advertising alignment and yield a return on investment for advertisers. As a result, there has been an adverse impact on the entire search ecosystem.

Likewise, as consumers, publishers, and media platforms demand greater privacy regulation, some media platforms have moved to block or otherwise restrain advertising technologies that do not comply with internal privacy rules. Still others have sought to leverage their own proprietary data to create their own advertising ecosystems, which is further fragmenting advertising inventory and the digital advertising industry generally. These developments, and others like them, indicate that the technological infrastructure previously used by the adtech industry is rapidly becoming obsolete, and other technologies will be needed for advertisers to achieve their goals.

In addition, the industry has experienced an increase in sophisticated technologies, often nefarious, that have allowed lower quality traffic to masquerade as legitimate, high-intent consumer demand. This has further driven technology companies that control search engines, browsers, and other technologies, to strengthen compliance requirements for their digital advertising partners to improve the integrity of online traffic.

Inuvo Response

In response to the systemic industry changes above, Inuvo has taken the following actions:

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 has been lower year over year since late in the fourth quarter of 2025. It declined further in the third quarter of 2026, to approximately $3.9 million from approximately $18.7 million in the third quarter of 2025. In August 2026, a component of Legacy Search revenue ceased. We do not expect Legacy Search revenue to return to historical levels, and it may decline further.

Because Legacy Search generates a higher gross margin and lower operating margin than Audience Modeling, lower Legacy Search revenue has also reduced our consolidated gross margin. In response to these declines, we reduced costs, including headcount, and Legacy Search revenue now approximately covers its direct operating costs. Our total full- and part-time employment declined 41%, from 80 at September 30, 2025 to 47 at September 30, 2026. In the third quarter of 2026, we also recorded impairment charges of $2.4 million on long-lived and intangible assets, principally those supporting the Legacy Search business. See Note 4 - Other Intangible Assets and Goodwill.

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Investment focus on IntentKey. We believe IntentKey is positioned to benefit from the aforementioned industry shifts for several reasons. First, because it is designed to operate as a privacy-safe decisioning layer that does not rely on cookies or persistent identifiers, it is not subject to the same rules and regulations that have penalized other legacy technologies that rely on identity-based advertising. Likewise, because IntentKey operates outside of the identity-based advertising platforms, including those platforms, such as walled gardens, that rely on captive, limited audiences, it has the ability to capture net-new customers more efficiently and overcome other inherent limitations presented by industry fragmentation. 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 development, marketing, sales, and other efforts aimed at driving growth of the IntentKey product. As part of these efforts, we replaced most of our IntentKey sales team to support our new go-to-market strategy. The majority of these new sales representatives were hired in early summer 2026. Because of these changes and the length of time it takes to move a sale from prospect to revenue, new revenue generation was temporarily lower in the third quarter and is expected to remain low until the first part of 2027, when the summer new hires have completed a full sales cycle. 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.

Results of Operations

		For the Three Months Ended September 30,																For the Nine Months Ended September 30,
		2026				2025				Change				% Change				2026				2025				Change				% Change
Net Revenue		$	6,802,036			$	22,570,572			$	(15,768,536	)			(69.9	)%		$	22,264,645			$	71,949,937			$	(49,685,292	)			(69.1	)%
Cost of Revenue			3,812,452				6,002,423				(2,189,971	)			(36.5	)%			12,283,084				17,199,909				(4,916,825	)			(28.6	)%
Gross Profit		$	2,989,584			$	16,568,149			$	(13,578,565	)			(82.0	)%		$	9,981,561			$	54,750,028			$	(44,768,467	)			(81.8	)%

Net Revenue

Revenue for the three-month period ended September 30, 2026, decreased 69.9% and revenue for the nine-month period ended September 30, 2026, decreased 69.1% as compared to the same periods in 2025. The decreases were driven by declines of approximately 80% in Legacy Search revenue in both periods, resulting from the Bonfire Reset and the Forces Impacting the Industry described in Significant Business Trends above. Audience Modeling revenue was essentially flat for the nine months, at approximately $9.9 million in each period, but declined in the third quarter of 2026 compared with the third quarter of 2025. The decline was due to a temporary reduction in a key client's campaign budget and lower new revenue as our new sales team works through the sales cycle, as discussed in Investment Focus on IntentKey in Significant Business Trends above. The client has since increased its budget, but not yet to the level before the reduction, and there can be no assurance that it will return to that level.

Cost of Revenue

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 nine-month period ended September 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 44.8% compared to 76.1% 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.

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Operating Expenses

		For the Three Months Ended September 30,																For the Nine Months Ended September 30,
		2026				2025				Change				% Change				2026				2025				Change				% Change
Marketing costs		$	1,410,615			$	13,375,136			$	(11,964,521	)		(89.5		%)		$	4,896,380			$	45,026,458			$	(40,130,078	)		(89.1		%)
Compensation			2,049,736				3,145,125				(1,095,389	)		(34.8		%)			8,604,340				9,945,452				(1,341,112	)		(13.5		%)
General and administrative			1,885,285				1,717,591				167,694				9.8	%			5,760,073				5,261,165				498,908				9.5	%
Impairment of intangible and long-lived assets			2,448,750			$	-				2,448,750			NM					2,448,750			$	-				2,448,750			NM
Operating expenses		$	7,794,386			$	18,237,852			$	(10,443,466	)		(57.3		%)		$	21,709,543			$	60,233,075			$	(38,523,532	)		(64.0		%)

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 nine months periods ended September 30, 2026, decreased compared to the same periods in 2025 due to the decline in revenue from Legacy Search.

Compensation expense decreased approximately $1.1 million and $1.3 million for the three and nine months periods ended September 30, 2026, compared to the same time periods in 2025. The decreases were primarily due to lower payroll from the cost-saving measures described in Significant Business Trends and lower incentive and commission accruals. They were partially offset by lower capitalized labor. Compensation expense included severance of $54 thousand and $1.4 million for the three and nine month periods ended September 30, 2026, respectively. Our total employment, both full- and part-time, was 47 at September 30, 2026, compared to 80 at September 30, 2025.

General and administrative costs for the three and nine months ended September 30, 2026 increased $0.2 million and $0.5 million, respectively, compared to the same period in 2025, primarily due to higher professional fees associated with our 2026 financing transactions.

In the third quarter of 2026, we recorded impairment charges of $2.4 million, consisting of $2,388,750 on the customer list, which has no remaining carrying value, and $60,000 on capitalized internal-use software. The charges resulted from the cessation in August 2026 of revenue from the customer relationship underlying the customer list. No goodwill impairment was recognized. See Note 4.

Financing expense, net

Financing expense, net, for the three and nine months ended September 30, 2026, was approximately $426 thousand and $931 thousand, respectively. The expense, net for the three months ended September 30, 2026 consisted of $178 thousand of contractual interest on the Streeterville Notes and $300 thousand of debt issuance costs related to the Notes, which were expensed under the fair value option, partially offset by $52 thousand of interest income. For the nine months ended September 30, 2026, financing expense, net included approximately $426 thousand of expenses related to the convertible note, which was repaid in June 2026. See Note 6 - Debt.

Finance expense, net, for the three and nine months ended September 30, 2025, was approximately $113,633 and $159,259, respectively.

Other income (loss), net

Other income (loss) was $279,700 and $5,569,472 for the three and nine months ended September 30, 2026, respectively.

Other income (loss) for the three months ended September 30, 2026, consisted primarily of a $278 thousand gain from the change in fair value of the Streeterville Notes. See Note 6 - Debt. The gain reflects a decrease in the estimated fair value of the Notes, driven primarily by the decline in our stock price. Other income (loss) for the nine months ended September 30, 2026 was due primarily to a $6.2 million class action settlement received in January 2026, representing a one-time, non-recurring cash inflow, partially offset by a combined $852 thousand charge related to the retirement of prior debts, as mentioned above.

Other income was $48,124 and $1,148,686 for the three and nine months ended September 30, 2025. During the nine months ended September 30, 2025, the Company received payments totaling $1,216,508 from the Internal Revenue Service ("IRS") in connection with amended filings submitted in May 2023 for Employee Retention Credits ("ERC") related to the first and second quarters of 2021. In March 2025, the Company received $610,352, of which $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 $606,156, of which $525,085 was recognized in Other income and $81,071 of interest was recorded in Financing expense, net. In total, the Company recognized $1,058,178 in Other income and $158,330 in interest income related to the ERC payments during the nine months ended September 30, 2025.

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Liquidity and Capital Resources

Our principal sources of liquidity are cash on hand, the release of restricted cash under our Note Purchase Agreement with Streeterville, and sales of our common stock.

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 Agreement with SLR.

The $6.2 million of B Note proceeds were deposited into an account at Lakeside Bank held by our wholly owned subsidiary, INUV Holdings, LLC, under a Deposit Account Control Agreement (the "DACA") with Streeterville and Lakeside Bank. Funds held under the DACA are not available for general corporate purposes and are released only in connection with a permitted Note Exchange. The July 1, 2026 Offering satisfied the Qualified Equity Offering condition and entitled us to a $1.2 million Note Exchange and a corresponding release from the DACA. We completed this Note Exchange on October 27, 2026, and $1.2 million was released to our operating account the subsequent day. As of September 30, 2026, $6.2 million remained subject to the DACA. Of that, $1.2 million is classified as current restricted cash and $5.0 million as non-current restricted cash.

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 nine-month period ended September 30, 2026, we have not sold any shares of common stock under the ATM Agreement. As of September 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.

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 closed on July 1, 2026, for aggregate gross proceeds of approximately $3.0 million, before deducting placement agent fees and offering expenses of $0.3 million. 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 September 30, 2026, we have over $1.0 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 $7.3 million. Our net working capital deficit was approximately $4.4 million. Our investing activities totaled $0.8 million for the nine-month period ended September 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 September 30, 2026, our accumulated deficit was $185.4 million.

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Our recurring operating losses, our working capital deficit of approximately $4.4 million as of September 30, 2026, decline in Legacy Search revenue, and contractual debt obligations, including Streeterville's right to redeem up to $750,000 per month under the A Notes beginning March 29, 2027, have resulted in substantial doubt about our ability to continue as a going concern for one year after the date these condensed consolidated financial statements are issued.

Management has implemented several measures to improve liquidity, reduce operating costs, and support the Company's long-term financial position. These measures include reducing headcount from 80 employees as of September 30, 2025, to 47 employees as of September 30, 2026, completing the sale of certain proprietary software and a related advertising account for $450,000 in October 2026, and completing a $1.2 million Note Exchange that resulted in the release of previously restricted cash for general corporate purposes.

In addition, management continues to evaluate opportunities to raise additional capital through equity or debt financing arrangements, implement further cost reductions, and expand revenue within its Audience Modeling business. While these initiatives are intended to strengthen the Company's liquidity position and support its ongoing operations, there can be no assurance that additional financing will be available on acceptable terms, that planned operating improvements will be achieved, or that these measures will generate sufficient liquidity to meet the Company's obligations as they become due.

Accordingly, management has concluded that substantial doubt about the Company's ability to continue as a going concern has not been alleviated. The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Cash Flows

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

		For the Nine Months Ended September 30,
		2026				2025
Net cash used in operating activities		$	(2,943,115	)		$	(1,807,308	)
Net cash used in investing activities		$	(818,840	)		$	(1,240,992	)
Net cash provided by financing activities		$	8,179,738			$	3,968,636

Cash Flows - Operating

Net cash used in operating activities was $2,943,115 during the nine months ended September 30, 2026. We reported a net loss of $7,100,695, which included the receipt of approximately $6.2 million in non-recurring settlement proceeds during the period, non-cash charges for impairment of $2,448,750, depreciation and amortization expense of $1,544,889 and stock-based compensation expense of $800,878. The change in operating assets and liabilities during the nine months ended September 30, 2026 was a net use of cash of $1,862,016 primarily due to a decrease in accounts payable of $3,014,815 and a decrease of accrued liabilities and other liabilities of $412,300, partially offset by a decrease in accounts receivable of $1,781,261. 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.

During the comparable nine-month period in 2025, cash used in operating activities was $1,807,308 from a net loss of $4,501,648 and included non-cash expenses of depreciation and amortization expense of $1,685,756 and stock-based compensation expense of $842,887. The change in operating assets and liabilities during the nine months ended September 30, 2025 was a net use of cash of $48,874 primarily due to a decrease in accounts receivable of $2,611,148 offset by a decrease in accounts payable of $765,360, and a decrease of accrued liabilities and other liabilities of $1,636,113 .

Cash Flows - Investing

Net cash used in investing activities was $818,840 for the nine months ended September 30, 2026, and consisted primarily of capitalized internal development costs.

Net cash used in investing activities was $1,240,992 for the nine months ended September 30, 2025, and consisted primarily of capitalized internal development costs.

Cash Flows - Financing

Net cash provided by financing activities was $8,179,738 during the nine months ended September 30, 2026, and was primarily from the proceeds from the Note Purchase Agreement as discussed in Note 6 - Debt.

Net cash provided by financing activities during the nine months ended September 30, 2025 was $3,968,636, and was primarily due to the utilization of our Financing Agreement as discussed in Note 6 - Debt.

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Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The estimates and assumptions that management makes affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used 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. Our significant accounting policies related to Revenue Recognition, Equity-Based Compensation, Capitalized Software Costs, Goodwill, Long-lived Assets and others are described in Note 2 - of this report and in our Annual Report on Form 10-K for the year ended December 31, 2025.

Impairment of goodwill and long-lived assets. We test goodwill for impairment annually as of December 31, and between annual tests when events indicate that the fair value of our single reporting unit may be below its carrying amount. We test long-lived assets when events indicate their carrying amounts may not be recoverable. Because of the decline in Legacy Search revenue, including the cessation in August 2026 of revenue from the customer relationship underlying the customer list, we performed interim tests as of September 30, 2026. We recorded $2.4 million of impairment charges on long-lived and intangible assets and no goodwill impairment. We estimated the reporting unit's fair value using the guideline public company method of the market approach and a 20% control premium. Fair value exceeded the $16.2 million carrying amount by approximately 26%. A decline in our share price to approximately $0.34, about 39% below the September 30, 2026 price of $0.56, would eliminate this excess.

Fair value of notes payable. We elected the fair value option for the Streeterville Notes and estimate their fair value using a Monte Carlo simulation model that incorporates significant unobservable inputs, including discount rates, probability of default, recovery rates, stock price volatility, and the expected timing of redemptions. Changes in these assumptions may materially affect the estimated fair value of the Notes. Changes in fair value are recognized in other income (expense), net, except for changes attributable to instrument-specific credit risk, which are recognized in other comprehensive income.

Off Balance Sheet Arrangements

As of September 30, 2026, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.