424B3

 

 

 

 

 

 

 

 

PROSPECTUS SUPPLEMENT NO. 2

(to prospectus dated April 20, 2022)

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-262201

 

https://cdn.kscope.io/b2e6ee4493a50112aeb31ea86440d146-img96198083_0.jpg 

AdTheorent Holding Company, Inc.

 

Up to 76,713,193 Shares of Common Stock

Up to 15,973,904 Shares of Common Stock Issuable Upon the Exercise of Warrants

Up to 5,432,237 Warrants

 

 

This prospectus supplement is being filed to update and supplement the information contained in the prospectus dated April 20, 2022 (the “Prospectus”), related to which consists of (i) up to 10,541,667 shares of Common Stock issuable upon the exercise of 10,541,667 warrants (the “Public Warrants”) originally issued in the initial public offering of MCAP Acquisition Corporation, a Delaware corporation (“MCAP”), by the holders thereof, and (ii) up to 5,432,237 shares of Common Stock issuable upon the exercise of 5,432,237 warrants (the “Private Warrants” and, together with the Public Warrants, the “Warrants”) originally issued in a private placement in connection with the initial public offering of MCAP with the information contained in our Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (“SEC”) on August 9, 2022 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.

 

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

 

AdTheorent Holding Company, Inc.’s Common Stock is quoted on The Nasdaq Capital Market LLC (“Nasdaq”) under the symbol, “ADTH”. On August 8, 2022, the closing price of our Common Stock was $3.14.

 

See the section entitled “Risk Factors” beginning on page 7 of the Prospectus to read about factors you should consider before buying our securities.

 

Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under the Prospectus or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus supplement is August 9, 2022

 

 


 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-40116

AdTheorent Holding Company, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

85-3978415

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

330 Hudson Street, 13th Floor

New York, New York

10013

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (800) 804-1359

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.0001 per share

 

ADTH

 

The Nasdaq Stock Market

Warrants to purchase common stock

 

ADTHW

 

The Nasdaq Stock Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated filer

 

 

Accelerated filer

 

Non-Accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 4, 2022, the registrant had 86,476,989 shares of common stock outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

4

 

 

 

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

4

 

Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2022 and 2021

5

 

Condensed Consolidated Statements of Equity for the three and six month periods ended June 30, 2022 and 2021

6

 

Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2022 and 2021

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

 

 

 

PART II.

OTHER INFORMATION

36

 

 

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

37

Item 4.

Mine Safety Disclosures

37

Item 5.

Other Information

37

Item 6.

Exhibits

37

SIGNATURES

 

 

3


 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements (Unaudited).

 

ADTHEORENT HOLDING COMPANY, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)

 

 

 

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

63,628

 

 

$

100,093

 

Accounts receivable, net

 

 

44,089

 

 

 

55,936

 

Income tax recoverable

 

 

99

 

 

 

95

 

Prepaid expenses

 

 

7,901

 

 

 

3,801

 

Total current assets

 

 

115,717

 

 

 

159,925

 

Property and equipment, net

 

 

571

 

 

 

409

 

Operating lease right-of-use assets

 

 

6,249

 

 

 

 

Investment in SymetryML Holdings

 

 

851

 

 

 

 

Customer relationships, net

 

 

6,712

 

 

 

8,986

 

Other intangible assets, net

 

 

6,830

 

 

 

7,608

 

Goodwill

 

 

34,842

 

 

 

35,778

 

Deferred income taxes, net

 

 

3,670

 

 

 

434

 

Other assets

 

 

368

 

 

 

402

 

Total assets

 

$

175,810

 

 

$

213,542

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

9,989

 

 

$

12,382

 

Accrued compensation

 

 

3,985

 

 

 

10,530

 

Accrued expenses

 

 

2,422

 

 

 

4,664

 

Operating lease liabilities, current

 

 

1,276

 

 

 

 

Total current liabilities

 

 

17,672

 

 

 

27,576

 

Revolver borrowings

 

 

 

 

 

39,017

 

SAFE Notes

 

 

 

 

 

2,950

 

Warrants

 

 

9,579

 

 

 

12,166

 

Seller's Earn-Out

 

 

5,318

 

 

 

18,081

 

Operating lease liabilities, non-current

 

 

6,832

 

 

 

 

Deferred rent

 

 

 

 

 

1,869

 

Total liabilities

 

 

39,401

 

 

 

101,659

 

Stockholders’ equity

 

 

 

 

 

 

Preferred Stock, $0.0001 per share, 20,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common Stock, $0.0001 par value, 350,000,000 shares authorized; 86,099,633 and 85,743,994 shares issued and outstanding as of June 30, 2022 and December 31, 2021

 

 

9

 

 

 

9

 

Additional paid-in capital

 

 

77,851

 

 

 

70,778

 

Retained earnings

 

 

58,549

 

 

 

42,512

 

Total stockholders’ equity attributable to AdTheorent Holding Company, Inc.

 

 

136,409

 

 

 

113,299

 

Noncontrolling interests in consolidated subsidiaries

 

 

 

 

 

(1,416

)

Total stockholders' equity

 

 

136,409

 

 

 

111,883

 

Total liabilities and stockholders’ equity

 

$

175,810

 

 

$

213,542

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

4


 

ADTHEORENT HOLDING COMPANY, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue

 

$

42,476

 

 

$

39,867

 

 

$

76,717

 

 

$

70,834

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Platform operations

 

 

20,854

 

 

 

18,263

 

 

 

38,626

 

 

 

33,151

 

Sales and marketing

 

 

11,083

 

 

 

8,422

 

 

 

21,413

 

 

 

16,480

 

Technology and development

 

 

4,153

 

 

 

2,670

 

 

 

8,438

 

 

 

5,133

 

General and administrative

 

 

5,103

 

 

 

7,977

 

 

 

10,704

 

 

 

10,114

 

Total operating expenses

 

 

41,193

 

 

 

37,332

 

 

 

79,181

 

 

 

64,878

 

Income (loss) from operations

 

 

1,283

 

 

 

2,535

 

 

 

(2,464

)

 

 

5,956

 

Interest expense, net

 

 

(47

)

 

 

(610

)

 

 

(156

)

 

 

(1,210

)

Gain on change in fair value of Seller's Earn-Out

 

 

37,419

 

 

 

 

 

 

12,763

 

 

 

 

Gain on change in fair value of warrants

 

 

18,523

 

 

 

 

 

 

2,587

 

 

 

 

Gain on deconsolidation of SymetryML

 

 

 

 

 

 

 

 

1,939

 

 

 

 

Loss on change in fair value of SAFE Notes

 

 

 

 

 

 

 

 

(788

)

 

 

 

Loss on fair value of investment in SymetryML Holdings

 

 

(10

)

 

 

 

 

 

(10

)

 

 

 

Other (expense) income, net

 

 

(1

)

 

 

20

 

 

 

(19

)

 

 

20

 

Total other income (expense), net

 

 

55,884

 

 

 

(590

)

 

 

16,316

 

 

 

(1,190

)

Net income before benefit (provision) for income taxes

 

 

57,167

 

 

 

1,945

 

 

 

13,852

 

 

 

4,766

 

Benefit (provision) for income taxes

 

 

610

 

 

 

(584

)

 

 

1,635

 

 

 

(1,572

)

Net income

 

$

57,777

 

 

$

1,361

 

 

$

15,487

 

 

$

3,194

 

Less: Net loss attributable to noncontrolling interest

 

 

 

 

 

171

 

 

 

550

 

 

 

341

 

Net income attributable to AdTheorent Holding Company, Inc.

 

$

57,777

 

 

$

1,532

 

 

$

16,037

 

 

$

3,535

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

$

0.67

 

 

$

0.03

 

 

$

0.19

 

 

$

0.06

 

     Diluted

 

$

0.62

 

 

$

0.02

 

 

$

0.17

 

 

$

0.06

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

     Basic

 

 

85,766,302

 

 

 

59,873,921

 

 

 

85,755,210

 

 

 

59,863,656

 

     Diluted

 

 

93,402,650

 

 

 

67,078,778

 

 

 

93,263,518

 

 

 

63,688,104

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

5


 

ADTHEORENT HOLDING COMPANY, LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except for number of shares)

(unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings

 

 

Noncontrolling
Interests

 

 

Total
Stockholders'
Equity

 

December 31, 2021

 

 

85,743,994

 

 

$

9

 

 

$

70,778

 

 

$

42,512

 

 

$

(1,416

)

 

 

111,883

 

Equity-based compensation

 

 

 

 

 

 

 

 

1,988

 

 

 

 

 

 

 

 

 

1,988

 

Seller's Earn-Out equity-based compensation

 

 

 

 

 

 

 

 

492

 

 

 

 

 

 

 

 

 

492

 

Conversion of SAFE Notes into SymetryML preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,938

 

 

 

3,938

 

SymetryML preferred stock issuance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

400

 

 

 

400

 

Deconsolidation of SymetryML Holdings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,372

)

 

 

(2,372

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(41,740

)

 

 

(550

)

 

 

(42,290

)

March 31, 2022

 

 

85,743,994

 

 

$

9

 

 

$

73,258

 

 

$

772

 

 

$

 

 

$

74,039

 

Equity-based compensation

 

 

 

 

 

 

 

 

3,856

 

 

 

 

 

 

 

 

 

3,856

 

Seller's Earn-Out equity-based compensation

 

 

 

 

 

 

 

 

499

 

 

 

 

 

 

 

 

 

499

 

Exercises of options

 

 

355,639

 

 

 

 

 

 

183

 

 

 

 

 

 

 

 

 

183

 

Transaction cost adjustment

 

 

 

 

 

 

 

 

55

 

 

 

 

 

 

 

 

 

55

 

Net income

 

 

 

 

 

 

 

 

 

 

 

57,777

 

 

 

 

 

 

57,777

 

June 30, 2022

 

 

86,099,633

 

 

$

9

 

 

$

77,851

 

 

$

58,549

 

 

$

 

 

$

136,409

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings

 

 

Noncontrolling
Interests

 

 

Total
Stockholders'
Equity

 

December 31, 2020

 

 

59,853,276

 

 

$

6

 

 

$

45,584

 

 

$

16,309

 

 

$

(632

)

 

 

61,267

 

Equity-based compensation

 

 

 

 

 

 

 

 

164

 

 

 

 

 

 

 

 

 

164

 

Exercises of options

 

 

20,645

 

 

 

 

 

 

10

 

 

 

 

 

 

 

 

 

10

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

2,003

 

 

 

(170

)

 

 

1,833

 

March 31, 2021

 

 

59,873,921

 

 

$

6

 

 

$

45,758

 

 

$

18,312

 

 

$

(802

)

 

$

63,274

 

Equity-based compensation

 

 

 

 

 

 

 

 

108

 

 

 

 

 

 

 

 

 

108

 

Exercises of options

 

 

8,602

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

1,532

 

 

 

(171

)

 

 

1,361

 

June 30, 2021

 

 

59,882,523

 

 

$

6

 

 

$

45,874

 

 

$

19,844

 

 

$

(973

)

 

$

64,751

 

See accompanying notes to condensed consolidated financial statements.

6


 

ADTHEORENT HOLDING COMPANY, INC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$

15,487

 

 

$

3,194

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Provision for bad debt

 

 

172

 

 

 

1

 

Amortization expense

 

 

3,950

 

 

 

4,154

 

Depreciation expense

 

 

92

 

 

 

70

 

Amortization of debt issuance costs

 

 

28

 

 

 

80

 

Gain on change in fair value of Seller's Earn-Out

 

 

(12,763

)

 

 

 

Gain on change in fair value of warrants

 

 

(2,587

)

 

 

 

Gain on deconsolidation of SymetryML

 

 

(1,939

)

 

 

 

Loss on change in fair value of SAFE Notes

 

 

788

 

 

 

 

Loss on fair value of investment in SymetryML Holdings

 

 

10

 

 

 

 

Deferred tax benefit

 

 

(3,236

)

 

 

(1,072

)

Equity-based compensation

 

 

5,844

 

 

 

272

 

Seller's Earn-Out equity-based compensation

 

 

991

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

11,675

 

 

 

6,819

 

Income taxes recoverable

 

 

(4

)

 

 

86

 

Prepaid expenses and other assets

 

 

(3,626

)

 

 

(1,204

)

Accounts payable

 

 

(2,440

)

 

 

(2,114

)

Accrued expenses and other liabilities

 

 

(9,153

)

 

 

(6,067

)

Net cash provided by operating activities

 

 

3,289

 

 

 

4,219

 

Cash flows from investing activities

 

 

 

 

 

 

Capitalized software development costs

 

 

(1,240

)

 

 

(1,119

)

Purchase of property and equipment

 

 

(211

)

 

 

(91

)

Decrease in cash from deconsolidation of SymetryML

 

 

(69

)

 

 

 

Net cash used in investing activities

 

 

(1,520

)

 

 

(1,210

)

Cash flows from financing activities

 

 

 

 

 

 

Cash received for exercised options

 

 

183

 

 

 

18

 

Payment of revolver borrowings

 

 

(39,017

)

 

 

 

Proceeds from SAFE Notes

 

 

200

 

 

 

700

 

Proceeds from SymetryML preferred stock issuance

 

 

400

 

 

 

 

Payment of term loan

 

 

 

 

 

(1,213

)

Net cash used in financing activities

 

 

(38,234

)

 

 

(495

)

Net (decrease) increase in cash and cash equivalents

 

 

(36,465

)

 

 

2,514

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

100,093

 

 

 

16,767

 

Cash, cash equivalents and restricted cash at end of period

 

$

63,628

 

 

$

19,281

 

Cash and cash equivalents

 

 

63,628

 

 

 

19,281

 

Restricted cash

 

 

 

 

 

 

Cash, cash equivalents and restricted cash at end of period

 

$

63,628

 

 

$

19,281

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Increase in lease liabilities from obtaining right-of-use assets - ASC 842 adoption

 

$

8,376

 

 

 

 

Increase in lease liabilities from obtaining right-of-use assets

 

$

214

 

 

 

 

Non-cash investing and financial activities

 

 

 

 

 

 

Capitalized software and property and equipment, net included in accounts payable

 

$

95

 

 

$

11

 

See accompanying notes to condensed consolidated financial statements.

7


 

ADTHEORENT HOLDING COMPANY, INC AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except shares/units and per share/unit data)

(unaudited)

1.
DESCRIPTION OF BUSINESS

AdTheorent Holding Company Inc. and its subsidiaries (the “Company”, “AdTheorent”), is a digital media platform which focuses on performance-first, privacy-forward methods to execute programmatic digital advertising campaigns, serving both advertising agency and brand customers. The Company uses machine learning and advanced data science to organize, analyze and operationalize non-sensitive data to deliver real-world value for customers. Central to its ad-targeting and campaign optimization methods, the Company builds custom machine learning models for each campaign using historic and real-time data to predict future consumer conversion actions for every digital ad impression. The Company’s machine learning models are customized for every campaign and the platform “learns” over the course of each campaign as it processes more data related to post media view conversion experience. AdTheorent is a Delaware corporation headquartered in New York, New York.

 

2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the operations of the Company. All intercompany transactions have been eliminated in consolidation.

 

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021. The Condensed Consolidated Balance Sheet as of December 31, 2021, has been derived from the Company's audited consolidated financial statements as of that date. The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, which include a complete set of footnote disclosures, including the Company's significant accounting policies. The results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period.

Retroactive Application of Recapitalization

As discussed in Note 3 – Business Combination included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, the business combination that occurred on December 22, 2021 (“Business Combination”) was accounted for as a reverse recapitalization ("Reverse Recapitalization") of equity structure, whereby at the closing of the Business Combination, the outstanding Class A, B and C units of AdTheorent Holding Company, LLC, a Delaware limited liability company (“Legacy AdTheorent”) and the outstanding stock options and Restricted Interest Units of Legacy AdTheorent were exchanged for the Company’s Common Stock and equity awards using a ratio (“Exchange Ratio”) of 1.376 and 1.563, respectively. Accordingly, pursuit to GAAP, the Condensed Consolidated Financial Statements and the related notes have been recast and are presented on an if-converted basis using the respective Exchange Ratio. In addition, the Exchange Ratio is utilized for calculating earnings per share in all prior periods presented.

Summary of Significant Accounting Policies

There have been no material changes in the Company's significant accounting policies during the six months ended June 30, 2022, as compared to the significant accounting policies described in Note 2 to the Consolidated Financial Statements for the year ended December 31, 2021, except as detailed below.

Leases

The Company adopted Accounting Standards Codification ("ASC") Topic 842, Leases (“ASC 842”) on January 1, 2022 using the cumulative effect transition method for leases in existence as of the date of adoption. The reported results for 2022 reflect the application of ASC 842 guidance while the reported results for 2021 were prepared under the previous guidance of

8


 

ASC 840, Leases (“ASC 840”). The adoption of ASC 842 represents a change in accounting principle that recognizes right-of-use (“ROU”) assets and lease liabilities arising from all leases based on the present value of future minimum lease payments over the lease term. Consistent with ASC 840, lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company’s adoption of ASC 842 had no impact on the Condensed Consolidated Statements of Operations or the Condensed Consolidated Statement of Cash Flows.

The Company elected the package of practical expedients permitted under the transition guidance within ASC 842, which allows for the following: (i) to carry forward the historical lease classification, (ii) not to reassess whether any existing contract contains a lease and (iii) not to reassess initial direct costs for existing leases.

The Company categorizes leases at their inception as either operating or finance leases. Operating leases are classified as non-current operating lease right-of-use assets and current and non-current operating lease liabilities on the Condensed Consolidated Balance Sheet. The Company did not have any finance leases upon adoption on January 1, 2022 or as of June 30, 2022.

Adoption of ASC 842 resulted in the recognition of operating right-of-use assets of $6,507, along with associated operating lease liabilities of $8,376 as of January 1, 2022. The difference between the operating lease ROU assets and total operating lease liabilities is the reclassification of previously recognized deferred rent liabilities against operating lease ROU assets. The adoption of ASC 842 did not result in an adjustment to retained earnings and it did not impact the Company's deferred tax assets or liabilities.

The Company’s operating leases are primarily for real property in support of its business operations. Although the Company's leases may contain renewal options, the Company is generally not reasonably certain to exercise these options at the commencement date. Accordingly, renewal options are generally not included in the lease term for determining the ROU asset and lease liability at commencement.

The Company has elected to account for lease components and non-lease components as a single lease component. Payments to lessors for reimbursement of real estate taxes, common area maintenance costs or insurance as applicable are generally variable in nature and are also expensed as incurred as variable lease costs and not included in the right-of-use assets or lease liabilities.

Variable lease payment amounts that cannot be determined at lease commencement such as increases in lease payments based on changes in index rates or usage, are not included in the right-of-use assets or liabilities. Such variable payments are expensed as incurred.

Discount rates are determined based on the Company’s incremental borrowing rate as the Company’s leases generally do not provide an implicit rate.

See Note 19 – Leases for further details.

Fair Value Option Investments

The fair value option provides an option to elect fair value as an alternative measurement for selected financial instruments. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument-by-instrument basis and must be applied to an entire instrument and is irrevocable once elected. The Company has investments in the common stock of SymetryML Holdings, LLC (“SymetryML Holdings”) for which it has the ability to exercise significant influence. The Company has made an irrevocable election to account for those investments at fair value. Estimating the fair values of these investments requires significant judgment regarding of the assumptions that market participants would use in pricing those assets.

See Note 18 – SymetryML and SymetryML Holdings for further details.

Liquidity

As of June 30, 2022, the Company had cash of $63,628 and working capital, consisting of current assets, less current liabilities, of $98,045. The Company believes its existing cash and cash flow from operations will be sufficient to meet the Company’s working capital requirements for at least the next 12 months.

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Emerging Growth Company

From time to time, new accounting pronouncements, or Accounting Standard Updates (“ASU”) are issued by the Financial Accounting Standards Board ("FASB"), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.

The Company is an emerging growth company (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. This means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company has the option to adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and can do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. The Company has elected to use the extended transition period for complying with new or revised accounting standards unless the Company otherwise early adopts select standards.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

ASU No. 2016-02, Leases (Topic 842)

In February 2016, the FASB issued ASC 842, which sets out the principles for the recognition, measurement, and presentation of all leases on the balance sheet as well as provides for additional lease disclosure requirements. The Company adopted ASC 842 on January 1, 2022 using the cumulative effect transition method for leases in existence as of the date of adoption. See above for the Company's accounting policy for leases under ASC 842 and the impact from adoption.

ASU No. 2020-04, Reference Rate Reform (Topic 848)

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), subsequently clarified in January 2021 by ASU No. 2021-01, Reference Rate Reform (Topic 848) (“ASU 2021-01”). The main provisions of this update provide optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The guidance in ASU 2020-04 and ASU 2021-01 was effective upon issuance and, once adopted, may be applied prospectively to contract modifications and hedging relationships through December 31, 2022. The Company adopted ASU 2020-04 on January 1, 2022. The adoption did not have a material effect on the Company's Condensed Consolidated Financial Statements.

Accounting Pronouncements Issued Not Yet Adopted

ASU No. 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes (Topic 740)

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) (“ASU 2019-12”), which is part of the FASB’s overall simplification initiative to reduce the costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. ASU 2019-12 simplifies accounting guidance for intra-period allocations, deferred tax liabilities, year-to-date losses in interim periods, franchise taxes, step-up in tax basis of goodwill, separate entity financial statements, and interim recognition of tax laws or rate changes. ASU 2019-12 is effective for emerging growth companies following private company adoption dates in fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the new guidance to determine the impact it will have on the Condensed Consolidated Financial Statements.

ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The updated guidance also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected

10


 

credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument. ASU 2016-13, as subsequently amended for various technical issues, is effective for emerging growth companies following private company adoption dates for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the new guidance to determine the impact it will have on the Condensed Consolidated Financial Statements.

 

3.
REVENUE RECOGNITION

ASC 606, Revenue from Contracts with Customers

Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company measures revenue based on the consideration specified in the customer arrangement, and revenue is recognized when the performance obligations in the customer arrangement are satisfied. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation.

The Company’s revenue streams include Managed Programmatic revenue and Direct Access revenue. Direct Access revenue is new to the market and not yet material to the Company from a financial reporting perspective.

The Company has elected to expense the costs to obtain or fulfill a contract as incurred because the amortization period of the asset that the Company otherwise would have recognized is one year or less. Therefore, there were no contract cost assets recognized as of June 30, 2022 or December 31, 2021.

The Company has elected not to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period for performance obligations with a remaining performance obligation that is part of a contract that has an original expected duration of one year or less.

Contract assets and contract liabilities related to the Company’s revenue streams were not significant to these Condensed Consolidated Financial Statements.

Receivables related to revenue from contracts with customers are described in Note 4— Accounts Receivable, Net.

4.
ACCOUNTS RECEIVABLE, Net

Accounts receivable, net consisted of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Accounts receivables

 

 

44,231

 

 

 

56,180

 

Other receivables

 

 

395

 

 

 

121

 

 

 

 

44,626

 

 

 

56,301

 

Less: allowance for doubtful accounts

 

 

(537

)

 

 

(365

)

Accounts receivable, net

 

 

44,089

 

 

 

55,936

 

 

The provision for bad debt expense (benefit) on accounts receivable was $78 and ($1) for the three months ended June 30, 2022 and 2021, respectively and $172 and $1 for the six months ended June 30, 2022 and 2021, respectively.

 

The following table presents changes in the allowance for doubtful accounts:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Beginning balance

 

$

459

 

 

$

448

 

 

$

365

 

 

$

457

 

Reserve for doubtful accounts

 

 

78

 

 

 

 

 

 

178

 

 

 

89

 

Write-offs, net of recoveries

 

 

 

 

 

 

 

 

(6

)

 

 

(98

)

Ending balance

 

$

537

 

 

$

448

 

 

$

537

 

 

$

448

 

 

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5.
PREPAID EXPENSES

Prepaid expenses consisted of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Income taxes

 

$

4,841

 

 

$

2,683

 

Insurance

 

 

1,604