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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ☒ No ☐

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

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 ☒

~~Indicate the number of shares outstanding of each~~Securities registered pursuant to Section 12(b) of the ~~issuer’s classes of common stock as of the latest practicable date~~.Act:

As of May 10, 2021, the registrant had 4,660,927 shares of Class A common stock, $.01 par value per share, and 36,719,471 shares of Class B common stock, $.01 par value per share, outstanding, respectively.

	December 31,			September 30,			December 31,			March 31,
	2016			2017			2020			2021
Assets
Current assets:
Cash and cash equivalents	$	103,950		$	104,377		$	33,851		$	28,169
Accounts receivable, net		18,922			14,893			6,331			6,869
Prepaid expenses and other current assets		1,531			1,905			2,160			2,514
Refundable taxes		98			86
Total current assets		124,501			121,261			42,342			37,552
Property and equipment, net		3,557			2,538			2,747			2,477
Right-of-use lease asset								3,744			3,358
Other assets, net		214			328			1,345			1,318
Goodwill								17,558			17,558
Intangible assets from acquisitions, net								9,196			8,015
Total assets	$	128,272		$	124,127		$	76,932		$	70,278
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	6,811		$	5,265		$	2,424		$	1,737
Accrued expenses and other current liabilities		7,707			6,345
Deferred revenue		349			335
Accrued benefits and payroll								5,975			5,139
Other accrued expenses and current liabilities								4,210			4,054
Deferred revenue and deposits								1,393			1,309
Lease liability current								1,827			1,807
Loan obligations, current								5,123			5,135
Total current liabilities		14,867			11,945			20,952			19,181
Other non-current liabilities		134			988
Deferred tax liabilities								156			223
Lease liability non-current								3,136			2,742
Total liabilities		15,001			12,933			24,244			22,146
Commitments and contingencies - See Note 10
Stockholders’ equity:
Class A common stock		53			53
Class B common stock		380			386
Common stock, $0.01 par value, Authorized 137,500 shares
Class A: 12,500 shares authorized; 4,661 shares issued and outstanding at December 31, 2020 and March 31, 2021								49			49
Class B: 125,000 shares authorized; 36,462 shares issued and outstanding at December 31, 2020, including 1,007 shares of restricted stock; and 36,685 shares issued and outstanding at March 31, 2021, including 1,148 shares of restricted stock								365			367
Additional paid-in capital		360,422			363,977			350,960			351,734
Accumulated deficit		(247,584	)		(253,222	)		(298,686	)		(304,018	)
Total stockholders’ equity		113,271			111,194			52,688			48,132
Total liabilities and stockholders’ equity	$	128,272		$	124,127		$	76,932		$	70,278

	Nine Months Ended September 30,						Three Months Ended September 30,						Three Months Ended March 31,
	2016			2017			2016			2017			2020			2021
Revenue	$	101,146		$	68,444		$	30,749		$	22,053		$	12,008		$	12,980
Expenses:
Service costs(3)		60,964			37,690			18,505			11,917			4,828			5,422
Sales and marketing(1)		16,733			12,075			5,562			3,612			4,170			3,637
Product development(3)		21,859			13,809			6,832			4,256			5,358			5,322
General and administrative(3)		15,815			10,568			5,320			3,144			3,453			2,620
Acquisition and disposition related costs		662			—			354			—
Amortization of intangible assets from acquisitions⁽²⁾⁽³⁾														1,763			1,181
Acquisition and disposition-related costs (benefit)														(635	)		45
Total operating expenses		116,033			74,142			36,573			22,929			18,937			18,227
Impairment of goodwill		(63,305	)		—			—			—			(14,688	)		—
Impairment of intangible assets from acquisitions														(4,959	)		—
Loss from operations		(78,192	)		(5,698	)		(5,824	)		(876	)		(26,576	)		(5,247	)
Other income (expense), net		(90	)		134			(15	)		77
Interest income (expense) and other, net														110			(12	)
Loss before provision for income taxes		(78,282	)		(5,564	)		(5,839	)		(799	)		(26,466	)		(5,259	)
Income tax expense		40			37			15			12
Income tax expense (benefit)														(943	)		73
Loss from continuing operations														(25,523	)		(5,332	)
Income from discontinued operations, net of tax														648			—
Net loss applicable to common stockholders	$	(78,322	)	$	(5,601	)	$	(5,854	)	$	(811	)	$	(24,875	)	$	(5,332	)
Basic and diluted net loss per Class A and Class B share applicable to common stockholders:
Continuing operations													$	(0.54	)	$	(0.12	)
Discontinued operations, net of tax														0.01			—
Basic and diluted net loss per Class A and Class B share applicable to common stockholders	$	(1.88	)	$	(0.13	)	$	(0.14	)	$	(0.02	)	$	(0.53	)	$	(0.12	)
Shares used to calculate basic net loss per share applicable to common stockholders:
Class A		5,233			5,056			5,233			5,056			4,661			4,661
Class B		36,372			37,565			36,639			37,820			42,179			39,087
Shares used to calculate diluted net loss per share applicable to common stockholders:
Class A		5,233			5,056			5,233			5,056			4,661			4,661
Class B		41,605			42,621			41,872			42,876			46,840			43,748
(1) Excludes amortization of intangibles from acquisitions
(2) Components of amortization of intangibles from acquisitions
Service costs													$	756		$	623
Sales and marketing														742			530
General and administrative														265			28
Total													$	1,763		$	1,181
(3) Components of related party support services fee recovery
Service costs																$	763
Sales and marketing																	60
Product development																	275
General and administrative																	133
Total																$	1,231


	Class A				Class B								Additional					Total
	common stock				common stock				Treasury stock				paid-in		Accumulated			stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		capital		deficit			equity
Balances at December 31, 2019		4,661	$	49		39,610	$	396		—	$	—	$	359,633	$	(260,240	)		99,838
Issuance of common stock upon exercise of options, issuance and vesting of restricted stock and under employee stock purchase plan, net		—		—		158		2		—		—		6		—			8
Stock compensation from options and restricted stock, net of forfeitures		—		—		—		—		—		—		1,057		—			1,057
Net loss		—		—		—		—		—		—		—		(24,875	)		(24,875	)
Balances at March 31, 2020		4,661	$	49		39,768	$	398		—	$	—	$	360,696	$	(285,115	)	$	76,028

	Class A				Class B								Additional					Total
	common stock				common stock				Treasury stock				paid-in		Accumulated			stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		capital		deficit			equity
Balances at December 31, 2020	$	4,661	$	49	$	36,462	$	365	$	—	$	—	$	350,960	$	(298,686	)	$	52,688
Issuance of common stock upon exercise of options, issuance and vesting of restricted stock and under employee stock purchase plan, net		—		—		223		2		—		—		30		—			32
Stock compensation from options and restricted stock, net of forfeitures		—		—		—		—		—		—		744		—			744
Net loss		—		—		—		—		—		—		—		(5,332	)		(5,332	)
Balances at March 31, 2021		4,661	$	49		36,685	$	367		—	$	—	$	351,734	$	(304,018	)	$	48,132

For the Nine Months Ended September 30,

2016

2017

Operating Activities:

Net loss

$
(78,322
)

$
(5,601
)
Adjustments to reconcile net loss to net cash used in operating activities:

Amortization and depreciation

2,457

2,266

Impairment of goodwill

63,305

—

Allowance for doubtful accounts and advertiser credits

1,429

673

Loss on disposal of fixed assets

3

—

Stock-based compensation

7,246

3,500

Change in certain assets and liabilities:

Accounts receivable, net

1,612

3,356

Refundable taxes

10

12

Prepaid expenses, other current assets and other assets

(223
)

51

Accounts payable

(1,477
)

(1,525
)
Accrued expenses and other current liabilities

1,812

(1,003
)
Deferred revenue

(329
)

(14
)
Other non-current liabilities

(396
)

(23
)
Net cash provided by (used in) operating activities

(2,873
)

1,692

Investing Activities:

Cash paid for sale of Archeo assets

(224
)

—

Purchases of property and equipment

(594
)

(1,274
)
Purchases of intangible assets

(11
)

(15
)
Net cash used in investing activities

(829
)

(1,289
)
Financing Activities:

Tax withholding related to restricted stock awards

(154
)

—

Repurchase of Class B common stock

(365
)

—

Proceeds from exercises of stock options, issuance and vesting of restricted
stock and employee stock purchase plan, net

341

24

Net cash provided by (used in) financing activities

(178
)

24

Net increase (decrease) in cash and cash equivalents

(3,880
)

427

Cash and cash equivalents at beginning of period

109,155

103,950

Cash and cash equivalents at end of period

$
105,275

$
104,377

	For the three months ended March 31,
	2020			2021
Cash flows from operating activities:
Net loss applicable to common shareholders	$	(24,875	)	$	(5,332	)
Less:
Net income from discontinued operations, net of tax	$	648		$	-
Loss from continuing operations	$	(25,523	)	$	(5,332	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization and depreciation		2,269			1,608
Impairment of goodwill		14,688			—
Impairment of intangible assets from acquisitions		4,959			—
Allowance for doubtful accounts and advertiser credits		1,162			27
Acquisition-related benefit		(728	)		—
Stock-based compensation		1,056			744
Deferred income taxes		(800	)		63
Change in certain assets and liabilities:
Accounts receivable, net		(263	)		(564	)
Prepaid expenses, other current assets and other assets		(863	)		(394	)
Accounts payable		793			(675	)
Accrued expenses and other current liabilities		521			(1,007	)
Deferred revenue and deposits		285			(85	)
Net cash (used in) continuing operating activities		(2,444	)		(5,615	)
Net cash provided by discontinued operating activities		730			—
Net cash (used in) operating activities		(1,714	)		(5,615	)
Investing Activities:
Cash paid for acquisitions		88			—
Purchases of property and equipment		(589	)		(100	)
Purchases of intangible assets and other assets		(4	)		—
Net cash used in continuing investing activities		(505	)		(100	)
Net cash used in discontinued investing activities		(4	)		—
Net cash used in investing activities		(509	)		(100	)
Financing Activities:
Proceeds from exercises of stock options, issuance and vesting of restricted stock and employee stock purchase plan, net		8			33
Net cash provided by continuing financing activities		8			33
Net decrease in cash and cash equivalents		(2,215	)		(5,682	)
Cash and cash equivalents at beginning of period		41,731			33,851
Less: Cash and cash equivalents of discontinued operations at the end of period		(79	)		—
Cash and cash equivalents of continuing operations at end of period	$	39,437		$	28,169
Supplemental disclosure of cash flow information:
Cash paid for operating leases	$	301		$	471

Marchex, Inc. (the “Company”) was incorporated in the state of Delaware on January 17, 2003. The Company is a ~~call~~conversational analytics and solutions company that helps businesses connect, drive, measure, and convert callers into ~~customers.~~customers, and connects the voice of the customer to their business. We deliver data insights and incorporate artificial intelligence (AI)-powered functionality that drives insights and solutions to help companies find, engage and support their customers across voice and text-based communication channels.

In October 2020, the Company sold its interests in certain assets related to its Local Leads Platform, Call Marketplace and other assets not related to core conversational analytics and sales engagement solutions. The purchaser is a related party controlled by a shareholder and officers of the Company. The assets met the definition of a business and represented a discontinued operation since the disposal enabled the Company to focus more wholly on its core conversational analytics and sales engagement solution activities, and it had a significant effect on the Company’s operations and financial results. The Company ~~provides products~~will have no further involvement in the key strategic decision making or operations of the business. As a result, the operating results related to these assets are shown as discontinued operations, net of tax, in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2020. See Note 14. Discontinued Operations and ~~services~~Related Party Investment of the Notes to the Condensed Consolidated Financial Statements for ~~businesses~~further discussion. Unless otherwise indicated, information presented in the Notes to the Financial Statements relates only to the Company’s continuing operations.

In late 2019, an outbreak of COVID-19 emerged and by March 2020, was declared a global pandemic by the World Health Organization. Across the United States and the world, governments and municipalities instituted measures in an effort to ~~drive sales. The~~control the spread of COVID-19, including quarantines, shelter-in-place orders, school closings, travel restrictions and the closure of non-essential businesses. By the end of March, the macroeconomic impacts became significant, exhibited by, among other things, a rise in unemployment and market volatility.

For most of the quarter ended March 31, 2020, the Company’s ~~analytics technology can facilitate call quality, analyze calls~~results reflect historical trends and ~~measure~~seasonality. However, beginning in March 2020, the ~~outcomes~~Company experienced a decline in revenues due to the impact of ~~calls. The~~COVID-19 and the related reductions in global economic activity and reduced spending by its customers in response to the macroeconomic impact. During the quarter ended March 31, 2020, the Company also ~~delivers performance-based, pay-for-call advertising across numerous mobile~~assessed the realized and ~~online publishers~~potential credit deterioration of its customers due to ~~connect consumers with businesses over~~changes in the ~~phone.~~macroeconomic environment, which has been reflected in an increase in its allowance for credit losses for accounts receivable as of March 31, 2020 and December 31, 2020. Additionally, the Company determined that indicators of impairment had occurred during the first quarter of 2020, which resulted in the Company performing an interim impairment analysis during the first quarter of 2020. As a result of this interim impairment test, the Company recognized an impairment of its intangible long-lived assets and goodwill during the first quarter of 2020. See the Note 11. Identifiable Intangible Assets from Acquisitions and Note 12. Goodwill in these Notes to the Condensed Consolidated Financial Statements for additional information.

For additional information for the effects of the COVID-19 pandemic and resulting global disruptions on the Company’s business and operations, refer to Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 1.A of Part II, “Risk Factors”.

The accompanying unaudited ~~condensed consolidated financial statements of Marchex, Inc. and its wholly-owned subsidiaries~~Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States ~~of America for interim financial information~~("U.S. GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). ~~Accordingly, they do~~Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not ~~include all~~misleading.

The preparation of our unaudited Condensed Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the ~~information~~financial statements and ~~notes required by generally accepted~~the reported amounts of revenue and expenses during the reporting period. The Company has used estimates

related to several financial statement amounts, including revenues, allowance for doubtful accounts, allowance for advertiser credits, useful lives for property and equipment and intangible assets, valuation of intangible assets, valuation of contingent consideration transferred as a result of business combinations, the fair value of the Company’s common stock and stock option awards, the impairment of goodwill and the valuation allowance for deferred tax assets. The inputs into our judgments and estimates consider the economic implications of COVID-19 on our critical and significant accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. estimates. Actual results could differ from those estimates.

Operating results for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017,~~2021, or for any other period. The interim financial information is unaudited, and reflects all normal adjustments that are, in our opinion, necessary to provide a fair statement of results for the interim periods presented. The balance sheet at December 31, ~~2016~~2020 has been derived from the audited ~~consolidated financial statements~~Consolidated Financial Statements at that date, but does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. These condensed consolidated financial statements and notesdate. This report should be read in conjunction with the ~~Company’s audited consolidated financial statements and accompanying notes included~~Consolidated Financial Statements in ~~the Annual Report on~~our 2020 Form 10-K ~~for~~where we include additional information about our policies and the ~~year ended December 31, 2016, as amended,~~methods and ~~filed with the SEC.~~assumptions used in our estimates.

Our Company consolidates all entities that we control by ownership of ~~the Company and its wholly-owned subsidiaries.~~a majority voting interest. All inter-company transactions and balances have been eliminated in consolidation.

~~The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”)~~ Certain reclassifications have been made to the Condensed Consolidated Financial Statements in the ~~United States requires management~~prior periods to ~~make estimates~~conform to the current period presentation.

Assets, liabilities and ~~assumptions that affect~~operations of foreign subsidiaries are recorded based on the ~~reported amounts~~functional currency of ~~assets~~the entity. For a majority of our foreign operations, the functional currency is the U.S. dollar. Assets and liabilities denominated in other than the functional currency are remeasured each month with the remeasurement gain or loss recorded in other income and ~~disclosure~~expense in the Condensed Consolidated Statements of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These judgments are difficult as matters that are inherently uncertain directly impact their valuation and accounting. Actual results may vary from management’s estimates and assumptions.Operations.

~~In May 2014, the FASB issued Accounting Standards Update No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606) (ASU 2014-09)~~, which amends the existing accounting standards for revenue recognition. ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled when products or services are transferred to customers. In July 2015, the FASB voted to approve a one-year delay of the effective date. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within those annual periods. In 2016, the FASB issued additional guidance to clarify the implementation guidance including ASU No. 2016-08, ~~Revenue from Contracts with Customers - Principal versus Agent Considerations~~. This ASU clarifies the implementation guidance for principal versus agent considerations in ASU 2014-09 and provides indicators that assist in the assessment of control. ASU 2014-09 allows adoption using either (i) a full retrospective approach for all periods presented in the period of adoption, or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of adoption and providing certain additional disclosures. The Company will adopt the new standard on January 1, 2018 using the modified retrospective approach. The Company’s evaluation of the impact of the new standard is ongoing and while it has not yet completed its assessment of the effect that ASU 2014-09 and related standards will have on its consolidated financial statements and related disclosures, the Company will be required to include additional disclosures in the notes to its consolidated financial statements.

~~In February 2016, the FASB issued Accounting Standards Update No. 2016-02~~ ~~Leases (Topic 842) (ASU 2016-02)~~, an ASU requiring the recognition of lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company currently plans to adopt the new standard on January 1, 2019. The ASU must be adopted using a modified retrospective approach. The Company anticipates that adoption will affect its statement of financial position and will require changes to some of its processes. Most significant to the Company, the new guidance requires lessees to recognize operating building leases with a term of more than 12 months as lease assets and lease liabilities. The Company is currently in the process of evaluating the impact of adoption of ASU 2016-02 will have on its consolidated financial statements.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (ASU 2016-13), an ASU amending the impairment model for most financial assets and certain other instruments. Early adoption is permitted after December 15, 2018. The ASU must be adopted using a modified-retrospective approach. In November 2018, the FASB issued Accounting Standards Update No. 2018-19, Codification Improvements (Topic 326), Financial Instruments - Credit Losses (ASU 2018-19), an ASU intended to improve the Codification or correct its unintended application. The ASU is effective ~~for reporting periods beginning after December 15, 2019,~~upon the adoption of the amendments in Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, with early adoption permitted after December 15, 2018. The Company does not expect adoption of ASU 2018-19 and ASU 2016-13 to have a material impact on its Condensed Consolidated Financial Statements. In addition, in May 2019, the FASB issued Accounting Standards Update No. 2019-05, Financial Instruments — Credit Losses (Topic 326), Targeted Transition Relief, (ASU 2019-05)), an ASU which provides ASU 2016-13 transition relief by providing entities with an alternative to irrevocably elect the fair value option for eligible financial assets measured at amortized cost upon adoption of the credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard and eligible for the applying the fair value option in ASC 825-10. The election must be applied on an instrument-by-instrument basis and is not available for either available-for-sale or held-to-maturity debt securities. The ASU is effective upon the adoption of the amendments in ASU 2016-13. In addition, in November 2019, the FASB issued Accounting Standards Update No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) - Effective Dates (ASU-2019-10), an ASU modifying the effective dates of various previous pronouncements. As the Company qualifies as a Smaller Reporting Company with the SEC, this ASU revised the effective date of ASU 2016-13 and ASU 2017-04 to fiscal years beginning after December 15, 2022. The Company does not expect adoption of ASU 2019-10 to have a material impact on our Consolidated Financial Statements. The Company does not expect adoption of ASU 2019-10, ASU 2019-05, ASU 2018-19 and ASU 2016-13 to have a material impact on its Consolidated Financial Statements.

In February 2020, the FASB issued Accounting Standards Update No. 2020-02, Financial Instruments — Credit Losses (Topic 326) and Leases (Topic 842). This ASU adds an SEC paragraph pursuant to the issuance of SEC Staff Accounting Bulletin No. 119, which adds Topic 6M on Accounting for Loan Losses by Registrants Engaged in Lending Activities Subject to FASB ASC Topic 326. It also adds a note in paragraph 842-10-S65-1 regarding the updated effective date for Leases pursuant to the issuance of ASU 2019-10. Additionally, in March 2020 Accounting Standards Update No. 2020-03, Codification Improvements to Financial Instruments (ASU 2020-03), an ASU which represent changes to clarify or improve the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. The amendments and are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The Company does not expect adoption of ASU 2020-02 and of ASU 2020-03 to have a material impact on our Consolidated Financial Statements.

In November 2019, the FASB issued Accounting Standards Update No. 2019-11, Codification Improvement to Topic 326, Financial Instruments — Credit Losses, an ASU which makes several amendments to the new credit losses standard, including an

amendment requiring entities to include certain expected recoveries of the amortized cost basis previously written off, or expected to be written off, in the allowance for credit losses for purchased credit deteriorated assets. The amendments also provide transition relief related to troubled debt restructurings, allow entities to exclude accrued interest amounts from certain required disclosures and clarify the requirements for applying the collateral maintenance practical expedient. For entities that have not yet adopted the new credit losses standard, the effective dates and transition requirements are the same as those in ASU 2016-13. For entities that have adopted the new credit losses standard, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim period, as long as the entity has adopted the new credit losses standard. The ASU must be adopted using a modified-retrospective approach. The Company does not expect adoption of ASU ~~2016-13~~2019-11 to have a material impact on its ~~consolidated financial statements.~~Consolidated Financial Statements.

In ~~August 2016,~~December 2019, the FASB issued Accounting Standards Update No. ~~2016-15,~~ ~~Statement of Cash Flows~~2019-12, Income Taxes (Topic ~~230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15)~~,740) – Simplifying the Accounting for Income Taxes, an ASU which ~~addresses eight specific cash flow issues with~~eliminates certain exceptions to the ~~objective~~guidance in Accounting Standards Codification (ASC or Codification) 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of ~~reducing~~deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the ~~existing diversity~~accounting for franchise taxes and enacted changes in ~~practice~~tax laws or rates and clarifies the accounting for transactions that result in ~~how certain cash receipts and cash payments are presented and classified~~a step-up in the ~~statement~~tax basis of ~~cash flows.~~goodwill. The guidance also clarifies that single-member limited liability companies and similar disregarded entities that are not subject to income tax are not required to recognize an allocation of consolidated income tax expense in their separate financial statements, but they could elect to do so. The ASU is effective for reporting periods beginning after December 15, ~~2017,~~2020, with early adoption permitted. The transition method related to the ASU ~~must be adopted using retrospective approach.~~amendments depend upon the nature of the guidance and vary depending upon the specific amendment being implemented. The Company does not expect adoption of ASU ~~2016-15~~2019-12 to have a material impact on its ~~consolidated~~Consolidated Financial Statements.

We generate the majority of our revenues from core analytics and solutions services. Customers typically receive the benefit of the Company’s services as they are performed and substantially all the Company’s revenue is recognized over time as the services are performed.

Revenue is recognized when a customer obtains control of services in an amount that reflects the consideration the Company expects to receive in exchange for those 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. A performance obligation is a promise in a contract to transfer a distinct service or product to the customer. 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 call analytics technology platform provides data and insights that can measure the performance of mobile, online and offline advertising for customers and small business resellers. The Company generates revenue from the Company’s call analytics technology platform when advertisers pay the Company a fee for each call/text or call/text related data element they receive from calls or texts or for each phone number tracked based on a pre-negotiated rate. Revenue is recognized as services are provided over time, which is generally measured by the delivery of each call/text or call/text related data element or each phone number tracked.

The majority of the Company’s customers are invoiced on a monthly basis following the month of the delivery of services and are required to make payments under standard credit terms. Collection on the related receivables may vary from reported information based upon third-party refinement of the estimated and reported amounts owed that occurs subsequent to period ends. The Company establishes an allowance for advertiser credits, which is included in Other accrued expenses and current liabilities in the balance sheet, using its best estimate of the amount of expected future reductions in advertisers’ payment obligations related to delivered services based on analysis of historical credits. The balance associated with the allowance for advertiser credits in the Company’s Condensed Consolidated Balance Sheet was $206,000 and $216,000 as of December 31, 2020 and March 31, 2021, respectively. Customer payments received in advance of revenue recognition are also contract liabilities and are recorded as deferred revenue. The deferred revenue balance in the Company’s Condensed Consolidated Balance Sheet as of December 31, 2020 and March 31, 2021 was $1.4 million and $1.3 million, respectively. During the three months ended March 31, 2020 and 2021, revenue recognized that was included in the contract liabilities balances at the beginning of the period was $503,000 and $749,000, respectively.

The majority of the Company’s total revenue is derived from contracts that include consideration that is variable in nature. The variable elements of these contracts primarily include the number of transactions (for example, the number qualified phone calls). For contracts with an effective term greater than one year, the Company applies the standard’s practical expedient that permits the exclusion of disclosure of the value of unsatisfied performance obligations for these contracts as the Company’s right to consideration corresponds directly to the value provided to the customer for services completed to date and all future variable consideration is allocated to wholly unsatisfied performance obligations. A term for purposes of these contracts has been estimated at 24 months. In addition, the Company applies the standard’s optional exemption to disclose information about performance obligations for contracts that have original expected terms of one year or less.

For arrangements that include multiple performance obligations, the transaction price from the arrangement is allocated to each respective performance obligation based on its relative standalone selling price and recognized when revenue recognition criteria for each performance obligation are met. The standalone selling price for each performance obligation is established based on the sales price at which the Company would sell a promised good or service separately to a customer or the estimated standalone selling price.

The Company’s incremental direct costs of obtaining a contract, which consist primarily of sales commissions, are generally deferred and amortized to sales and marketing expense over the estimated life of the relevant customer relationship of approximately 24 months and are subject to being monitored every period to reflect any significant change in assumptions. In addition, the deferred contract cost asset is assessed for impairment on a periodic basis. The Company’s contract acquisition costs are included in other assets, net in the balance sheet. The Company is applying the standard’s practical expedient permitting expensing of costs to obtain a contract when the expected amortization period is one year or less, which typically results in expensing commissions paid to acquire certain contracts. As of December 31, 2020 and March 31, 2021, the Company had $167,000 and $140,000 of net deferred contract costs, respectively, and the accumulated amortization associated with these costs was $989,000 and $1.1 million for the periods ended December 31, 2020 and March 31, 2021, respectively.

Operating segments are revenue-producing components of the enterprise for which separate financial ~~statements.~~

information is produced internally for the Company’s management. For the three months ended March 31, 2020 and 2021, the Company operated in a single segment comprised of its core analytics and solutions services. In October ~~2016,~~2020, the ~~FASB issued Accounting Standards Update No. 2016-16,~~ ~~Income Taxes (Topic 740), Intra-Entity Transfers of Assets~~Company sold certain assets related to its Local Leads Platform, Call Marketplace and other ~~than Inventory (ASU 2016-16), an ASU requiring the recognition of income tax effects of intercompany sales and transfers of~~ assets other than inventory in the period in which the transfer occurs. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The ASU must be adopted using a modified retrospective approach. The Company does not ~~expect adoption of ASU 2016-16~~related to ~~have a material impact on its consolidated financial statements.~~

~~In November 2016, the FASB issued Accounting Standards Update No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash (a Consensus of the FASB Emerging Issues Task Force) (ASU 2016-18), an ASU requiring entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows.~~core conversational analytics. As a result, the operating results related to these assets are shown as discontinued operations in the Condensed Consolidated Statements of Operations for all periods presented. See Note 14. Discontinued Operations and Related Party Investment for further discussion.

Long-lived assets by geographical region are based on the location of the legal entity that owns the assets. As of December 31, 2020 and March 31, 2021, no significant long-lived assets were held by entities ~~will no longer present transfers between~~outside of the United States.

Revenues from customers by geographical areas are tracked on the basis of the location of the customer. The majority of the Company’s revenue and accounts receivable are derived from domestic sales to customers.

The Company maintains substantially all of its cash and cash equivalents with 2 financial institutions and ~~restricted cash~~are all considered at Level 1 fair value with observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

There were no customers that represented more than 10% of consolidated revenue for the three months ended March 31, 2020 and restricted cash equivalents in the statement of cash flows. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The ASU must be adopted using retrospective approach. 2021.

The Company ~~does not expect adoption~~has one customer that represents more than 10% of ~~ASU 2016-18 to have a material impact on its~~ consolidated ~~financial statements.~~accounts receivable. The outstanding receivable balance for this customer is as follows (in percentages):

~~In January 2017, the FASB issued Accounting Standards Update No. 2017-01,~~ ~~Business Combinations (Topic 805), Clarifying the Definition of a Business (ASU 2017-01),~~ an ASU changing the definition of a business to assist with evaluating whether a set of transferred assets and activities is a business. The ASU is effective for reporting periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The ASU must be adopted using a prospective approach on or after the effective date. The Company does not expect adoption of ASU 2017-01 to have a material impact on its consolidated financial statements.

~~In May 2017, the FASB issued Accounting Standards Update No. 2017-09,~~ ~~Compensation - Stock Compensation (Topic 718)~~, Scope of Modification Accounting, an ASU clarifying when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The ASU should be adopted using a prospective approach on or after the adoption date. The Company does not expect adoption of ASU 2017-09 to have a material impact on its consolidated financial statements.

The Company had the following financial instruments as of December 31, 2020 and March 31, 2021: cash and cash equivalents, accounts receivable, and accounts payable and accrued liabilities. The carrying value of these financial instruments approximates their fair value based on the liquidity of these financial instruments and their short-term nature. Further, these financial instruments are considered at Level 1 fair value with observable inputs that reflect quoted prices for identical assets or liabilities in active markets.

The following table provides information about the fair value of our cash and cash equivalents balance as of December 31, 2020 and March 31, 2021 (in thousands):

In November 2014, the Company’s board of directors authorized a share repurchase program (the “2014 Repurchase Program”), which supersedes and replaces any prior repurchase programs. Under the 2014 Repurchase Program, the Company is authorized to repurchase up to 3 million shares of the Company’s Class B common stock in the aggregate through open market and privately negotiated transactions, at such times and in such amounts as the Company deems appropriate. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability, and other market conditions. The 2014 Repurchase Program does not have an expiration date and may be expanded, limited or terminated at any time without prior notice. During the three months ended March 31, 2020 and 2021, the Company did not repurchase any Class B common stock.

The Company grants stock-based awards, including stock options, restricted stock awards, and restricted stock units. The Company measures stock-based compensation cost at the grant date based on the fair value of the award and recognizes it as expense over the vesting or service period, as applicable, of the stock-based award using the straight-line method.

~~On January 1, 2017, the~~ The Company ~~adopted Accounting Standards Update No. 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09)~~. This ASU impacts several aspects of accounting for share-based payment transactions, including certain income tax consequences, forfeitures, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Upon adoption, the Company elected to accountaccounts for forfeitures as they occur and no longer uses an estimated forfeiture rate in the calculation of stock-based compensation expense. The net cumulative effect of this election was recognized as a $37,000 increase to accumulated deficit on January 1, 2017. Also under ASU 2016-09, excess tax benefits generated when stock-based awards vest or are settled are no longer recognized in equity but are instead recognized as a reduction to the provision for income taxes. On January 1, 2017, the Company recorded unrecognized excess tax benefits of $3.7 million to accumulated deficit, with a corresponding increase to the valuation allowance on deferred tax assets. This resulted in no net impact to equity due to the Company’s full valuation allowance.occur.

Stock-based compensation expense was included in the following operating expense categories as follows (in thousands):

The Company uses the Black-Scholes option pricing model to estimate the per share fair value of stock option grants with time-based vesting. The Black-Scholes model relies on a number of key assumptions to calculate estimated fair values. For the ~~quarters~~three months ended ~~September 30, 2016~~March 31, 2020 and ~~2017,~~2021 the expected life of each award granted was determined based on historical experience with similar awards, giving consideration to contractual terms, anticipated exercise patterns, vesting schedules and expirations. Expected volatility is based on historical volatility levels of the Company’s Class B common stock and the expected volatility of companies in similar industries that have similar vesting and contractual terms. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury issues with terms approximately equal to the expected life of the option.

The following weighted average assumptions were used in determining the fair value of time-vested stock option grants for the periods presented:

Stock option activity during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 is summarized as follows:

Restricted stock awards and restricted stock units are generally measured at fair value on the date of grant based on the number of awards granted and the quoted price of the Company’s common stock. Restricted stock units entitle the holder to receive one share of the Company’s Class B common stock upon satisfaction of certain service conditions.

Restricted stock awards and restricted stock unit activity during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2021 is summarized as follows:

In the nine months ended September 30, 2016, the Company repurchased approximately 45,000 shares from certain executives for minimum withholding taxes on approximately 146,000 restricted stock award vests. The number of shares repurchased was based on the value on the vesting date of the restricted stock awards equivalent to the value of the executive’s minimum withholding taxes of $154,000, which was remitted in cash to the appropriate taxing authorities. The payments are reflected as a financing activity within the consolidated statement of cash flows when paid. The payments had the effect of share repurchases by the Company as they reduced the number of shares that would have otherwise been issued on the vesting date and were recorded as a reduction of additional paid-in capital.

The Company computes net income (loss) per share of Class A and Class B common stock using the ~~two class~~two-class method. Under the provisions of the ~~two class~~two-class method, basic net income (loss) per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the year. Diluted net income (loss) per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common and dilutive common equivalent shares outstanding during the period. The computation of the diluted net income (loss) per share of Class B common stock assumes the conversion of Class A common stock to Class B common stock, while the diluted net income (loss) per share of Class A common stock does not assume the conversion of those shares.

In accordance with the ~~two class~~two-class method, the undistributed earnings (losses) for each year are allocated based on the contractual participation rights of the Class A and Class B common shares and the restricted shares as if the earnings for the year had been distributed. Considering the terms of the Company’s charter which provides that, if and when dividends are declared on ~~our~~the Company’s common stock in accordance with Delaware General Corporation Law, equivalent dividends shall be paid with respect to the shares of Class A common stock and Class B common stock and that both classes of common stock have identical dividend rights and would share equally in the Company’s net assets in the event of liquidation, the Company has allocated undistributed earnings (losses) on a proportionate basis.

Instruments granted in unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities prior to vesting. As such, the Company’s restricted stock awards are considered participating securities for purposes of calculating earnings per share.

The following tables present the computation of basic net loss per share applicable to common stockholders for the periods ended (in thousands, except per share amounts):

	Nine months ended September 30,												Three months ended March 31,
	2016						2017						2020						2021
	Class A			Class B			Class A			Class B			Class A			Class B			Class A			Class B
Basic net loss per share:
Numerator:
Net loss from continuing operations, net of tax													$	(2,539	)	$	(22,984	)	$	(568	)	$	(4,764	)
Discontinued operations, net of tax														64			584			—			—
Net loss applicable to common stockholders	$	(9,850	)	$	(68,472	)	$	(665	)	$	(4,936	)	$	(2,475	)	$	(22,400	)	$	(568	)	$	(4,764	)
Denominator:
Weighted average number of shares outstanding used to calculate basic net loss per share		5,233			36,372			5,056			37,565			4,661			42,179			4,661			39,087
Basic net loss per share:
Continuing operations, net of tax													$	(0.54	)	$	(0.54	)	$	(0.12	)	$	(0.12	)
Discontinued operations, net of tax														0.01			0.01			—			—
Basic net loss per share applicable to common stockholders	$	(1.88	)	$	(1.88	)	$	(0.13	)	$	(0.13	)	$	(0.53	)	$	(0.53	)	$	(0.12	)	$	(0.12	)

The following tables present the computation of diluted net loss per share applicable to common stockholders for the periods ended (in thousands, except per share amounts):

Nine months ended September 30,

2016

2017

Class A

Class B

Class A

Class B

Diluted net loss per share

Numerator:

Net loss applicable to common stockholders

$
(9,850
)

$
(68,472
)

$
(665
)

$
(4,936
)

Reallocation of net loss for Class A shares as a result of conversion
   of Class A to Class B shares

—

(9,850
)

—

(665
)

Diluted net loss applicable to common stockholders

$
(9,850
)

$
(78,322
)

$
(665
)

$
(5,601
)

Denominator:

Weighted average number of shares outstanding used to calculate
   basic net loss per share

5,233

36,372

5,056

37,565

Conversion of Class A to Class B common shares outstanding

—

5,233

—

5,056

Weighted average number of shares outstanding used to calculate
   diluted net loss per share

5,233

41,605

5,056

42,621

Diluted net loss per share applicable to common stockholders

$
(1.88
)

$
(1.88
)

$
(0.13
)

$
(0.13
)

	Three months ended September 30,												Three months ended March 31,
	2016						2017						2020						2021
	Class A			Class B			Class A			Class B			Class A			Class B			Class A			Class B
Diluted net loss per share
Numerator:
Net loss from continuing operations, net of tax													$	(2,539	)	$	(22,984	)	$	(568	)	$	(4,764	)
Reallocation of net loss for Class A shares as a result of conversion of Class A to Class B shares														—			(2,539	)		—			(568	)
Diluted net loss from continuing operations, net of tax													$	(2,539	)	$	(25,523	)	$	(568	)	$	(5,332	)
Net income from discontinued operations, net of tax													$	64		$	584		$	-		$	-
Reallocation of discontinued operations for Class A shares as a result of conversion of Class A to Class B shares														—			64			—			—
Diluted net income from discontinued operations, net of tax													$	64		$	648		$	-		$	-
Net loss applicable to common stockholders	$	(732	)	$	(5,122	)	$	(96	)	$	(715	)	$	(2,475	)	$	(24,875	)	$	(568	)	$	(5,332	)
Reallocation of net loss for Class A shares as a result of conversion of Class A to Class B shares		—			(732	)		—			(96	)
Diluted net loss applicable to common stockholders	$	(732	)	$	(5,854	)	$	(96	)	$	(811	)
Denominator:
Weighted average number of shares outstanding used to calculate basic net loss per share		5,233			36,639			5,056			37,820			4,661			42,179			4,661			39,087
Conversion of Class A to Class B common shares outstanding		—			5,233			—			5,056			—			4,661			—			4,661
Weighted average number of shares outstanding used to calculate diluted net loss per share		5,233			41,872			5,056			42,876			4,661			46,840			4,661			43,748
Diluted loss per share:
Continuing operations, net of tax													$	(0.54	)	$	(0.54	)	$	(0.12	)	$	(0.12	)
Discontinued operations, net of tax														0.01			0.01			—			—
Diluted net loss per share applicable to common stockholders	$	(0.14	)	$	(0.14	)	$	(0.02	)	$	(0.02	)	$	(0.53	)	$	(0.53	)	$	(0.12	)	$	(0.12	)

The computation of diluted net loss per share excludes the following because their effect would be anti-dilutive (in thousands):

The Company maintains substantially all of its cash and cash equivalents with two financial institutions and are all considered at Level 1 fair value with observable inputs that reflect quoted prices for identical assets or liabilities in active markets. At various points during the nine months ended September 30, 2016 and 2017, the Company held cash equivalents in deposit sweep and money market accounts with these same financial institutions. These Level 2 assets were fully liquidated prior to September 30, 2016 and 2017.

A significant amount of the Company’s revenue earned from advertisers is generated through arrangements with distribution partners. The Company may not be successful in renewing any of these agreements, or, if they are renewed, they may not be on terms as favorable as current arrangements. The Company may not be successful in entering into agreements with new distribution partners or advertisers on commercially acceptable terms. In addition, several of these distribution partners or advertisers may be considered potential competitors. There were no distribution partners paid more than 10% of revenue for the three and nine months ended September 30, 2016 and 2017.

~~The advertisers representing more than 10% of revenue are as follows (in percentages):~~

~~The outstanding receivable balance for each advertiser representing more than 10% of accounts receivable is as follows (in percentages):~~

In certain cases, the Company may engage directly with one or more advertising agencies who act on an advertiser’s behalf. In addition, an advertising agency may represent more than one advertiser that utilizes the Company’s products and services. One advertising agency represented 19% and 21% of revenue for the three and nine months ended September 30, 2016, respectively, and less than 10% of revenue for the three and nine months ended September 30, 2017, respectively. This same advertising agency represented 26% and 11% of accounts receivable as of December 31, 2016 and September 30, 2017, respectively. One other advertising agency represented less than 10% of accounts receivable as of December 31, 2016, and 11% of accounts receivable as of September 30, 2017.

Operating segments are revenue-producing components of the enterprise for which separate financial information is produced internally for the Company’s management. For the periods presented, we primarily operated as a single segment. In 2016, we had other operating activities related to the transition activities of the Archeo operations which were not significant.

Revenues from advertisers by geographical areas are tracked on the basis of the location of the advertiser. The vast majority of the Company’s revenue and accounts receivable are derived from domestic sales to advertisers engaged in various mobile, online and other activities.

Depreciation and amortization expense related to property and equipment was approximately ~~$762,000~~$427,000 and ~~$786,000~~$359,000 for the three months ended March 31, 2020 and 2021, respectively.

The Company has an operating lease for office space for its corporate headquarters in Seattle, Washington. It also has operating leases for office space in Mississauga, Canada and Wichita, Kansas. The Company leases its office facilities under operating lease agreements in accordance with ASC 842 and recognizes rent expense on a straight-line basis over the lease term with any lease incentives amortized as a reduction of rent expense over the lease term.

The Company’s lease agreement with respect to office space in Seattle, Washington, as amended, expires on March 31, 2025. The Company has the option to terminate the lease in March 2023, subject to satisfaction of certain conditions, including a payment of a termination fee of approximately $671,000. In addition, as part of the agreement, the lessor paid towards the cost of certain leasehold improvements (“landlord contribution”) of which the Company could use approximately $180,000 of unused landlord contribution as a credit against any payment obligation under the lease. In the second quarter of 2019, the Company requested the $180,000 landlord contribution from the lessor as a reimbursement towards certain leasehold improvements and received those funds in the third quarter of 2019. In the first quarter of 2018, the lessor paid $373,000 towards certain leasehold improvements which the Company accounted for as a lease incentive and is amortizing as a reduction of rent expense over the lease term. Additionally, in April 2018, the lessor refunded the previously provided security deposit and the Company provided a letter of credit to the lessor in the amount of $575,000, which will be reduced by $100,000 annually starting in April 2019. Additionally, in the third quarter of 2020, the Company concluded that exercising its option to terminate this office lease in March 2023 had met the reasonably certain threshold and as such, the Company remeasured its ROU asset and liability associated with this lease as of September 30, 2020 based on the expected termination fee payment of approximately $671,000 and a lease termination date of March 2023.

The Company’s lease agreement with respect to office space in Mississauga, Canada commenced in November 2016, ~~and 2017, respectively, and was approximately $2.4 million and $2.3 million~~with a lease term of 60 months, expiring on November 30, 2021. The Company has the option to terminate the lease upon nine months’ notice without any termination fees if such notice is provided.

The Company commenced a new lease for an office space in Wichita, Kansas in June 2020 which continues for a period of 66 months with an option to extend the term for two additional periods of three years each. The Company has the ~~nine months ended September 30, 2016 and 2017, respectively.~~option to terminate the lease pursuant to certain terms as specified in the lease without any termination fees if notice is provided.

Lease cost recognized in the Company’s Condensed Consolidated Statements of Operations and other information is summarized as follows (in thousands):

As of March 31, 2021, the Company’s operating lease liabilities were as follows (in thousands):

The Company has commitments for future payments primarily related to office facilities leases and other contractual obligations. The Company leases its office facilities under operating lease agreements in accordance with ASC 842 and recognizes rent expense on a straight-line basis over the lease term with any lease incentive amortized as a reduction of rent expense over the lease term. Other contractual obligations primarily relate to minimum contractual payments due to ~~distribution partners and other~~ outside service providers. Future minimum payments are approximately as follows (in thousands):

Facilities
operating
leases

Other
contractual
obligations

Total

2017

$
288

$
1,052

$
1,340

2018

1,370

2,433

3,803

2019

1,476

809

2,285

2020

1,520

1

1,521

2021 and after

7,414

—

7,414

Total minimum payments

$
12,068

$
4,295

$
16,363

	Facilities and other operating leases (1)		Other contractual obligations		Total
2021		1,441		819		2,260
2022		1,871		272		2,143
2023		1,161		30		1,191
2024		209		0		209
2025 and after		174		0		174
Total minimum payments	$	4,856	$	1,121	$	5,977
(1) For additional information regarding the Company's operating leases, see Note 9, Leases of the Notes to the Condensed Financial Statements.

In June 2017, the Company entered into an amendment to the lease agreement originally dated in June 2009 and as amended to date, with respect to office space in Seattle, Washington. The amendment extends the lease term for a period of 84 months expiring on March 31, 2025 and reduces the leased office space starting on September 1, 2017. The Company has the option to terminate the lease in March 2023, subject to satisfaction of certain conditions, including a payment of a termination fee of approximately $671,000. In addition, the lessor will pay towards the cost of certain leasehold improvements (“landlord contribution”) of which the Company may use up to approximately $180,000 of any unused landlord contribution as a credit against any payment obligation under the lease. In March 2018, the lessor will refund the previously provided security deposit and the Company will provide a letter of credit to the lessor in the amount of $575,000, which will be reduced by $100,000 each March starting in 2019.

Rent expense incurred by the Company was approximately $559,000 and $651,000 for the three months ended September 30, 2016 and 2017, respectively, and was approximately $1.5 million and $1.6 for the nine months ended September 30, 2016 and 2017, respectively.

The Company from time to time is a party to disputes and legal and administrative proceedings arising from the ordinary course of business. In some agreements to which the Company is a party, the Company has agreed to indemnification provisions of varying scope and terms with advertisers, vendors and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of agreements or representations and warranties made by the Company, services to be provided by the Company and intellectual property infringement claims made by third parties. As a result of these provisions, the Company may from

time to time provide certain levels of financial support to ~~our~~its contract parties to seek to minimize the impact of any associated litigation in which they may be involved. The Company has also entered into purchase arrangements that included earnout arrangements based on targeted financial goals that are subject to review and escrow provisions wherein a portion of consideration was placed into escrow in order to secure indemnification obligations. The escrow amounts are included as part of the purchase price consideration and if there is any excess escrow amount above identified indemnification obligations, the excess may be released. In the event any indemnification obligations are identified, the economic consideration may be reduced accordingly.

To date, there have been no known events or circumstances that have resulted in any material costs related to these indemnification provisions, additional earnout consideration, and no liabilities therefore have been recorded in the accompanying ~~consolidated financial statements.~~Condensed Consolidated Financial Statements. However, the maximum potential amount of the future payments we could be required to make under these ~~indemnification~~ provisions could be material.

While any litigation contains an element of uncertainty, the Company is not aware of any legal proceedings or claims which are pending that the Company believes, based on current knowledge, will have, individually or taken together, a material adverse effect on the Company’s financial condition, results of operations or liquidity.

The Company determined that it is not more likely than not that its deferred tax assets will be realized and accordingly recorded 100% valuation allowance against these deferred tax assets as of December 31, ~~2016~~2020 (excluding certain insignificant Canadian deferred tax assets) and ~~September 30, 2017.~~March 31, 2021. In assessing whether it is more likely than not that the Company’s deferred tax assets will be realized, factors considered included: historical taxable income, historical trends related to advertiser usage rates, projected revenues and expenses, macroeconomic conditions, issues facing the industry, existing contracts, the Company’s ability to project future results and any appreciation of its other assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company considered the future reversal of deferred tax liabilities, carryback potential, projected taxable income, and tax planning strategies as well as its history of taxable income or losses in the relevant jurisdictions in making this assessment. Based on the level of historical taxable losses and the uncertainty of projections for future taxable income over the periods for which the deferred tax assets are deductible, the Company concluded that it is not more likely than not that the gross deferred tax assets will be realized.

The Company adopted ASU 2015-17 on January 1, 2017, which requires all deferred tax assets and liabilities, and any related valuation allowance, to be classified as non-current on the balance sheet. The adoption of this standard did not have any impact on the Company’s financial statements due to the full valuation allowance recorded on our deferred taxes.

From time to time, various state, federal and other jurisdictional tax authorities undertake audits of the Company and its filings. In evaluating the exposure associated with various tax filing positions, the Company on occasion accrues charges for uncertain positions. Resolution of uncertain tax positions will impact ~~our~~the Company’s effective tax rate when settled. The Company does not have any significant interest or penalty accruals. The provision for income taxes includes the impact of contingency provisions and changes to contingencies that are considered appropriate. The Company files U.S. federal, certain U.S. states, and certain foreign tax returns. Generally, U.S. federal, U.S. state, and foreign tax returns filed for years after 2012 are within the statute of limitations and are under examination or may be subject to examination.

In the third quarter of 2016, the Company incurred approximately $1.6 million in employee separation and facility termination related costs. At December 31, 2016, $354,000 was accrued, of which substantially all was paid in the first half of 2017.

In the first quarter of 2017, the Company incurred approximately $700,000 of employee separation related costs as part of savings measures implemented in 2017, all of which were paid in the first half of 2017.(11) Identifiable Intangible Assets from Acquisitions

In November 2014, the Company’s board of directors authorized a share repurchase program (the “2014 Repurchase Program”), which supersedes and replaces any prior repurchase programs. Under the 2014 Repurchase Program, the Company is authorized to repurchase up to 3 million shares of the Company’s Class B common stock in the aggregate through open market and privately negotiated transactions, at such times and in such amounts as the Company deems appropriate. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability, and other market conditions. The 2014 Repurchase Program does not have an expiration date and may be expanded, limited or terminated at any time without prior notice. During the nine months ended September 30, 2016, the Company repurchased 89,000 shares of Class B common stock for $365,000. The Company did not repurchase any Class B common stock for the nine months ended September 30, 2017.

During the nine months ended September 30, 2016, and 2017, the Company’s board of directors approved and the Company retired approximately 250,000 and 239,000 shares of treasury stock, respectively.

For the three months ended ~~June~~March 31, 2020, our stock price was impacted by volatility in the U.S. financial markets as a result of the rapid spread of the coronavirus globally which has resulted in increased travel restrictions and disruption and shutdown of businesses, and traded below the then book value for an extended period of time. As a result, the Company performed an interim impairment test of our long-lived intangible assets using an undiscounted cash flow analysis pursuant to ASC 360, Property, Plant, and Equipment to determine if the cash flows expected to be generated by the asset groups over the estimated remaining useful life of the primary assets were sufficient to recover the carrying value of the asset groups, which were determined to be at the acquisition level. Based on this analysis, which included evaluating various cash flow scenarios, the undiscounted cash flows were not sufficient to recover the carrying value of the groups. As a result, the Company was required to determine the fair value of each asset group. To estimate the fair value, the Company utilized both the cost recovery and income approach, which is based on a discounted cash flow (DCF) analysis and calculates the fair value by estimating the after-tax cash flows attributable to the asset group and then discounting the after-tax cash flows to present value using a risk-adjusted discount rate. Assumptions used in the DCF require significant judgment, including judgment about appropriate discount rates and terminal values, growth rates, and the amount and timing of expected future cash flows. The forecasted cash flows are based on the Company's most recent strategic plan and for periods beyond the strategic plan and the Company's estimates were based on assumed growth rates expected as of the measurement date. The Company believes its assumptions were consistent with the plans and estimates that a market participant would use to manage the business.

Based on the results of this testing, the Company recorded pre-tax non-cash impairment totaling $5.0 million in the first quarter of 2020 relating to customer relationships, technologies, non-compete agreements and tradenames. These charges are reflected in the Company’s Condensed Consolidated Statement of Operations for the three-month period ended March 31, 2020.

Identifiable intangible assets from acquisitions consisted of the following (in thousands):

Amortizable intangible assets are amortized on a straight-line basis over their useful lives. Customer relationships, acquired technologies, tradenames, and non-compete agreements have a weighted average useful life from date of purchase of 5 years, 3 years, 2 years, 1-2 years, respectively. Aggregate amortization expense incurred by the Company for the three months ended March 31, 2020 and 2021 was approximately $1.8 million and $1.2 million, respectively. Based upon the current amount of acquired identifiable intangible assets subject to amortization, the estimated amortization expense for the next five years is as follows: $3.3 million in 2021, $2.1 million in 2022, $2.0 million in 2023, and $602,000 in 2024.

The balance of goodwill as of December 31, 2020 and March 31, 2021 is $17.6 million. There were 0 changes in the carrying amount of goodwill for the three months ended March 31, 2021.

The Company performs its annual impairment testing on November 30 ~~2016,~~and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. When evaluating goodwill for impairment, the Company may first perform a qualitative assessment and determine if the fair value of the reporting unit is more likely than not greater than its carrying amount. For the three months ended March 31, 2020, the Company’s stock price was impacted by volatility ~~among other factors,~~ in the U.S. financial markets as a result of the rapid spread of the coronavirus globally which has resulted in increased travel restrictions and disruption and shutdown of businesses, and traded below the then book value for an extended period of time. Accordingly, the Company tested its goodwill for impairment and concluded that the carrying value exceeded the estimated fair value of the Company’s single reporting unit and recognized an impairment loss during the ~~second~~first quarter of ~~2016~~2020 of ~~$63.3 million which reduced~~$14.7 million. The Company tested its goodwill for impairment again upon the Divestiture and at November 30, 2020. No additional impairment loss was determined to ~~$0 on~~have occurred. The impairment charges from the first quarter of 2020 are reflected in the Company’s ~~balance sheet.~~Condensed Consolidated Statement of Operations for the three months ended March 31, 2020 within Impairment of goodwill. The estimated fair value of the Company’s single reporting unit was based on estimates of future operating results, discounted cash flows and other market-based factors, including the Company’s stock price. The goodwill impairment loss resulted primarily from a sustained decline in the Company’s common stock share price and market capitalization as well as lower projected revenue growth rates and profitability levels compared to historical results. The lower projected operating results ~~reflected~~reflect changes in assumptions related to organic revenue growth rates, market trends, business mix, cost structure, and other expectations about the anticipated short-term and long-term operating results.

The testing of goodwill for impairment requires the Company to make significant estimates about its future performance and cash flows, as well as other assumptions. Events and circumstances considered in determining whether the carrying value of goodwill may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant changes in competition and market dynamics; significant and sustained declines in the Company’s stock price and market capitalization; a significant decline in its expected future cash flows or a significant adverse change in the Company’s business climate. These estimates and circumstances are inherently uncertain and can be affected by

numerous factors, including changes in economic, industry or market conditions, changes in business operations, a loss of a significant customer, changes in competition, volatility in financial markets, or changes in the share price of the Company’s Class B common stock and market capitalization. The Company will continue to monitor its financial performance, stock price and other factors in order to determine if there are any indicators of impairment prior to its annual impairment evaluation in November 2021.

During the second quarter of 2020, the Company secured $5.3 million in promissory notes to bank lenders pursuant to government loan programs (collectively, the “Loans”). At December 31, 2020 and March 31, 2021, the remaining balance was $5.1 million. The difference relates to the business operations divested in October 2020. The Loans were made under, and are subject to the terms and conditions of, the CARES Act and are administered by the U.S. Small Business Administration (“SBA”). The current terms of the Loans are two years with maturity dates in the second quarter of 2022 and they contain a fixed annual interest rate of 1%. Payments of principal and interest on the Loans will be deferred for a period in excess of six months. We expect this repayment commencement period to be in the middle part to latter half of 2021. Principal and interest are payable monthly commencing one month after the payment deferral period and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. There are scenarios where, under the terms of the CARES Act, recipients can apply for and receive forgiveness for all, or a portion of the Loans issued. Such forgiveness will be determined, subject to limitations and conditions, based on the use of Loan proceeds for certain permissible purposes as set forth in the CARES Act, including, but not limited to, payroll, mortgage and rent costs. Due to the uncertainties concerning the anticipated timing of repayment that are not within our control as well as the evolving parameters and interpretations of requirements, these loans are presented as a current liability on our Condensed Consolidated Balance Sheets.

In addition, under foreign wage and rent subsidy programs in response to the COVID-19 pandemic, a subsidiary received approximately $151,000 in funding during the three months ended March 31, 2021 that were treated as reductions of payroll and related expenses.

In October 2020, the Company sold certain assets related to its Local Leads Platform, Call Marketplace and other assets not related to core conversational analytics. The purchaser is a related party controlled by a shareholder and officers of the Company. This divestiture represented a discontinued operation since the disposal enables the Company to focus more wholly on its core conversational analytics and sales engagement solution activities, and it will have a significant effect on the Company’s operations and financial results. The Company has no further involvement in the key strategic decision making or operations of the divested assets. Accordingly, we have presented the results of operations of these assets in the Condensed Consolidated Financial Statements as discontinued operations, net of tax, for historical periods.

The Company received cash consideration at closing of approximately $2.3 million. No gain or loss on the sale of discontinued operations was recognized in the Condensed Consolidated Statement of Operations as it was sold to a related party. The net consideration received from the sale is recognized in the Company’s Consolidated Statements of Stockholder’s Equity. The sale also includes (i) contingent consideration based on the achievement of certain revenue and thresholds from the Call Marketplace, Local Leads Platform and the purchaser’s total business; (ii) certain contingent sale transaction consideration; (iii) shares of Class B common stock in the purchaser equal to the issuance of a 10% equity interest; and (iv) the cancellation of Company stock options for 1.5 million shares currently held by two officers of the Company who are involved in the transaction.

In connection with the closing, the Company also entered into an administrative support services agreement with the related party purchaser pursuant to which the Company will provide services to the related party purchaser for a support services fee, with certain guaranteed payments to the Company in the first year and conditionally in the second year following closing. Support services fees related to this arrangement totaled $1.2 million for the three months ended March 31, 2021 and are included in the Company’s Condensed Consolidated Statements of Operations, net of the related expenses, within Service costs, Sales and marketing, Product development, and General and administrative.

As of March 31, 2021, the net amount of $242,000 is due from the purchaser and is included in the Company’s Condensed Consolidated Balance Sheet within Prepaid and other current assets as of March 31, 2021. The net amount due to the purchaser of $1.1 million is included in the Company’s Condensed Consolidated Balance Sheet within Accounts payable as of December 31, 2020.

The Company has determined that although we hold variable interests in the related party purchaser, we are not the primary beneficiary and are not required to consolidate the entity. We considered whether we have the ability to exercise significant influence over the operating and financial policies of the purchaser and do not believe these criteria were met. As a result, the Company has elected to measure the investment at cost because the equity securities do not have a readily determinable fair value. The investment

balance of $341,000 is included in Other assets, net on the Company’s Condensed Consolidated Balance Sheet as of December 31, 2020 and March 31, 2021.

The Condensed Consolidated Financial Statements for the three months ended March 31, 2020 reflect the operations of the divested assets as a discontinued operation. Discontinued operations include the following:

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believes,” “intends,” “expects,” “anticipates,” “plans,” “may,” “will” and similar expressions to identify forward-looking statements. All forward-looking statements, including, but not limited to, statements regarding our future operating results, financial position, prospects, acquisitions, dispositions, and business strategy, expectations regarding our growth and the growth of the industry in which we operate, and plans and objectives of management for future operations, are inherently uncertain as they are based on our expectations and assumptions concerning future events. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements we make. There are a number of important factors that could cause the actual results of Marchex to differ materially from those indicated by such forward-looking statements. Any or all of our forward-looking statements in this report may turn out to be inaccurate. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. They may be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including but not limited to the risks, uncertainties and assumptions described in this report, in Part II, Item 1A. under the caption “Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020, as amended, and those described from time to time in our future reports filed with the SEC. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur as contemplated and actual results could differ materially from those anticipated or implied by the forward-looking statements. In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic may amplify many of these risks. All forward-looking statements in this report are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operation and financial condition. You should read this analysis in conjunction with the attached condensed consolidated financial statements and related notes thereto, and with our audited consolidated financial statements and the notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020, as amended.

References herein to “we,” “us” or “our” refer to Marchex, Inc. and its wholly-owned subsidiaries unless the context specifically states or implies otherwise.

Marchex is a ~~call~~conversational analytics and solutions company that helps businesses connect, drive, measure, ~~and~~ convert callers into ~~customers.~~customers, and connects the voice of the customer to their business. We deliver data insights and incorporate artificial intelligence (AI)-powered functionality that drives insights and solutions to help companies find, engage and support their customers across voice and text-based communication channels.

We ~~provide products and services~~believe that we have a set of tools for ~~businesses of all sizes~~enterprises that depend on phone calls, texts and other communication channels to ~~drive sales.~~help convert prospects into customers, to deliver compelling customer experiences during the sales process and maximize returns. Our ~~analytics products can provide actionable intelligence on~~mission is to help our customers grow by giving them real-time insights into the ~~major media channels advertisers use~~conversations they are having with their customers across phone, text and other communication channels. Marchex leverages proprietary data and conversational insights to ~~acquire customers over the phone.~~deliver real-time AI-powered functionality that drives solutions that help enable brands to personalize customer interactions in order to accelerate sales and grow their business.

Leveraging the call analytics platform, Marchex Omnichannel Analytics Cloud provides a single source to marketers to see which media channels are driving phone calls across Search, Display and Video, and Social Media. Our Omnichannel Analytics Cloud products include:

~~Marchex Search Analytics~~. Marchex Search Analytics is a product for search marketers that drive phone calls from search campaigns. Marchex Search Analytics attributes inbound phone calls made directly from paid search ads and landing pages to a keyword. The platform can deliver this data as well as data about call outcomes directly into search management platforms like DoubleClick Search and Kenshoo.

~~Marchex Social Analytics~~. Launched in February 2017, Marchex Social Analytics is a product for marketers that buy social media advertising. Marchex Social Analytics can measure the influence that social advertising from select sources like Facebook or Instagram has on inbound phone calls so that marketers can better attribute their return on advertising spend for inbound phone calls and delivers this data to marketers in a reporting dashboard.

~~Marchex Speech Analytics.~~ Launched in April 2017, Marchex Speech Analytics is a product that helps enable actionable insights for enterprise and mid-sized companies, helping them understand what is happening on inbound calls from consumers. Leveraging Marchex’s proprietary Call DNA® technology to aggregate and analyze call data, Marchex Speech Analytics includes dashboards and visual analytics to make it easier for marketers and call center teams to discern actionable insights.

~~Marchex Audience Targeting~~. Launched in July 2017, Marchex Audience Targeting leverages call data to automatically build audience segments for display and social media platforms. Marchex Audience Targeting helps marketers target high intent audiences with their display campaigns and fine-tune campaigns to specific audience segments that are most likely to convert to customers, or find new segments and opportunities that have not been targeted before.

Innovating on ~~Our Mobile Performance Advertising.~~Conversational Analytics Technology and Solutions. We plan to continue to expand and invest in our speech analytics technology and expand our AI, data science, and machine learning capabilities. We also plan to continue to expand our range of ~~call-based advertising~~call, text, and other communication channels analytics and engagement product capabilities ~~and channel specific solutions~~ by growing our ~~call~~conversation analytics and solutions offerings, including ~~number provisioning,~~AI-driven speech technology solutions, call tracking, call ~~mining,~~monitoring, text communications, keyword-level tracking, display ad impression measurement and other products as part of our owned, end-to-end, ~~call-based~~call and text-based advertising solutions. ~~To date in 2017, we launched several~~Our expanding capabilities are enabling us to develop new ~~products. These new products include: (1)~~ ~~Display~~solutions, like sales acceleration and ~~Video Analytics~~ ~~for general availability, which measures the impact~~personalization solutions that enable us to take advantage of ~~display and video advertising campaigns on inbound phone calls to call centers and stores; (2)~~ ~~Marchex Omnichannel Analytics Cloud,~~ ~~which can connect call~~our growing conversational data ~~to media channels, including search, display and video, social and sites, to phone calls made to a business; (3)~~ ~~Marchex Social Analytics,~~ which can measure the influence that social advertising from select sources like Facebook or Instagram has on inbound phone calls so that marketers can better attribute their return on advertising spend for inbound phone calls and delivers this data to marketers in a reporting dashboard; (4) ~~Marchex Speech Analytics,~~ ~~which helps companies understand what is happening on inbound calls from consumers; and (5)~~ ~~Marchex Audience Targeting,~~ ~~which leverages call data to automatically~~

build audience segments for display and social media platforms. Additional information regarding our new product offerings in 2017 is included in the Overview section on page 15. We are also focused on growing our base of call distribution by bringing in new sources of the rapidly growing mobile advertising market as well as other online and offline sources of distribution.assets.

Supporting and Growing the Number of ~~Advertisers~~Customers Using Our Products and Services. We plan to continue to provide a consistently high level of service and support to our ~~advertisers~~conversational analytics and solutions customers and we will continue to help them achieve their return on investment goals. We are focused on ~~continuing to grow~~increasing our ~~advertiser~~customer base through our direct sales and marketing efforts, including strategic sales, inside sales, and additional partnerships with ~~large local advertiser~~ resellers.

Pursuing Selective Acquisition Opportunities. We intend to pursue select acquisition opportunities and will apply evaluation criteria to any acquisitions we may pursue in order to enhance our strategic position, strengthen our financial profile, augment our points of defensibility and increase shareholder value. We will focus on acquisition opportunities that represent one or more of the following characteristics:

Evolving Our Business Strategy.Our industry is undergoing significant change and our business strategy is continuing to evolve to meet these changes. In order to profitably grow our business, we may need to expand into new lines of business beyond our current focus of providing mobile advertising analytics products and services, which may involve pursuing strategic transactions, including potential acquisitions of, or investments in, related or unrelated businesses. In addition, we may seek divestitures of existing businesses or assets.

~~Pursuing Selective Acquisition Opportunities.~~ ~~We intend~~ For example, in October 2020, we sold certain assets related to ~~pursue select acquisition opportunities~~our Call Marketplace, Local Leads Platform and ~~will apply rigorous evaluation criteria~~other assets not related to any acquisitions we may pursue in order to enhance our strategic position, strengthen our financial profile, augment our points of defensibility and increase shareholder value. We will focus on acquisition opportunities that represent one or more of the following characteristics:core conversational analytics.

Developing New Markets. We intend to analyze opportunities and may seek to expand our technology-based products into new business areas where our services can be replicated on a cost-effective basis, or where the creation or development of a product or service may be appropriate. We have technology integration partnerships and referral agreements with Adobe, ~~DoubleClick,~~Google Search, and Salesforce, Facebook, and other third-party ~~marketers; and in 2017, we signed an integration agreement with Facebook.~~marketers. We anticipate utilizing various strategies to enter new markets, ~~including:~~including developing strategic relationships; innovating with existing proprietary technologies; acquiring products that address a new category or opportunity; and creating joint venture relationships.

~~Building and Expanding Relationships with Advertising Agencies.~~ Advertising agencies are influential in determining how large national advertisers allocate their advertising budgets. We believe building deep relationships with leading global advertising agencies and creating awareness within these agencies about the benefits of our offerings is an important step in attracting new large advertising customers. We plan to continue building strong relationships with advertising agencies.

We were incorporated in Delaware on January 17, 2003. ~~Acquisition initiatives have played an important part in our corporate history to date.~~

We have offices in Seattle, ~~Washington~~Washington; Wichita, Kansas; and Mississauga, Canada.

In November 2020, we launched Marchex Marketing Edge, a new solution that enables brand marketers and agencies to tie revenue-generating conversations back to the specific marketing campaigns that generated them. This new product captures

conversational data across multiple communication channels, including calls, text, and chat - as well as web form completions - and uses AI-powered conversation intelligence to identify and classify the conversations that can drive sales. It helps enable businesses to complete and enrich the picture of ~~Operations~~their digital marketing performance and power automated actions by flowing conversational data into a growing list of third party Martech, Adtech, CRM and chat systems, and makes it simpler to create custom integrations.

In October 2020, we sold certain assets related to the Local Leads Platform, Call Marketplace and ~~balances within Marchex have~~other assets not related to core conversational analytics (the “Divestiture”). The purchaser is a related party controlled by a shareholder and officers of the Company. At closing, we received cash consideration of approximately $2.3 million. The sale also includes (i) contingent consideration based on the achievement of certain revenue and thresholds from the Call Marketplace, Local Leads Platform and the purchaser’s total business; (ii) certain contingent sale transaction consideration; (iii) shares of Class B common stock in the purchaser equal to the issuance of a 10% equity interest; and (iv) the cancellation of Company stock options for 1.5 million shares held by two executive officers of our Company who were involved in the transaction.

In connection with the closing, we also entered into an administrative support services agreement with the purchaser pursuant to which we will provide administrative services to the purchaser for a support services fee, with certain guaranteed payments to us in the first year and contingently in the second year following closing.

~~The comparative periods presented are~~classified as discontinued operations for the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2020. See Note 14. Discontinued Operations and ~~2017.~~

~~Revenue~~Related Party Investment of the Notes to Condensed Consolidated Financial Statements for further discussion.

In October 2020, we completed a joint and equal tender offer with Edenbrook Capital, LLC for the purchase of 10 million shares of Class B common stock at $2.15 per share, of which our share of the repurchase totaled approximately $10.8 million for 5 million shares.

In late 2019, an outbreak of COVID-19 emerged and by early March 2020 was declared a global pandemic by the World Health Organization. Across the United States and the world, governments and municipalities instituted measures in an effort to control the spread of COVID-19, including quarantines, shelter-in-place orders, school closings, travel restrictions and the closure of non-essential businesses. By the end of March 2020, the macroeconomic impacts became significant, exhibited by, among other things, a rise in unemployment and market volatility.

The rapid spread of COVID-19 globally has resulted in increased travel restrictions and disruption and shutdown of businesses. We ~~primarily generate~~have experienced adverse impacts from quarantines, market downturns and changes in customer behavior related to pandemic fears and impacts on our ~~revenues from advertisers for use~~workforce due to COVID-19. In addition, many of our ~~call analytics technology and pay-for-call advertising products and services. Our revenue also consists of payments from our~~customers, reseller partners ~~for use of our local leads platform~~ and ~~marketing services, which they offer to their small business customers, as well as payments from advertisers for cost-per-action services.~~

We recognize revenue upon the completion of our performance obligation, provided that: (1) evidence of an arrangement exists; (2) the arrangement fee is fixed or determinable; and (3) collection is reasonably assured.

In certain cases, we record revenue based on available and reported preliminary information from third parties. Collection on the related receivables may vary from reported information based upon third-party refinement of the estimated and reported amounts owed that occurs subsequent to period ends.

Our performance-based advertising services, which includes our call analytics technology and call marketplace services, amounted to greater than 80% of revenues in all periods presented. In addition, we generate revenue through our local leads platform, which enables partner resellers to sell call advertising and/or search marketing products, and campaign management services. These secondary sources accounted for less than 20% of our revenues in all periods presented. We have no barter transactions.

Our call analytics technology platform provides data and insights that can measure the performance of mobile, online and offline advertising for advertisers and small business resellers. We generate revenue from our call analytics technology platform when advertisers pay us a fee for each call or call related data element they receive from calls including call-based ads we distribute through our sources of call distribution or for each phone number tracked based on a pre-negotiated rate.

~~Our call marketplace offers advertisers and adverting service providers’ ad placements across our distribution network. Advertisers or advertising~~agencies, service providers ~~are charged on a pay-per-call~~and suppliers have experienced financial distress, and may file for bankruptcy protection, go out of business, or cost-per-action basis. We generate revenue upon delivery of qualified and reported phone calls to advertisers or advertising service providers’ listings. These advertisers and advertising service providers pay us a designated transaction fee for each qualified phone call, which occurs when a user makes a phone call, clicks, or completes a specified action on any ofsuffer further disruptions in their advertisement listings after it has been placed by us or by our distribution partners. Each qualified phone call or specified action on an advertisement listing represents a completed transaction. We also generate revenue from cost-per-action, which occurs when a user makes a phone call from our advertiser’s listing or is redirected from one of our web sites or a third-party web site in our distribution network to an advertiser web site and completes the specified action.

~~Our local leads platform allows reseller partners to sell call advertising, search marketing, and other lead generation products through their existing sales channels to small~~ business advertisers. We generate revenue from reseller partners utilizing our local leads platform and are paid account fees and/or agency fees for our products in the form of a percentage of the cost of every call or click delivered to advertisers. The reseller partners engage the advertisers and are the primary obligor, and we, in certain instances, are only financially liabledue to the ~~publishers~~coronavirus outbreak. The extent to which the coronavirus impacts our continuing results will depend on future developments, which are highly uncertain, but has resulted in a material adverse impact on our capacity as a collection agency for the amount collected from the advertisers. We recognize revenue for these fees under the net revenue recognition method. In limited arrangements resellers pay us a fee for fulfilling an advertiser’s campaign in our distribution network and we act as the primary obligor. We recognize revenue for these fees under the gross revenue recognition method.

We enter into agreements with various mobile, online and offline distribution partners to provide distribution for pay-for- call advertisement listings which contain call tracking numbers and/or URL strings of our advertisers. We generally pay distribution partners based on a percentage of revenue or a fixed amount for each phone call on these listings. The level of phone calls contributed by our distribution partners has varied, and we expect it will continue to vary, from quarter to quarter and year to year, sometimes significantly. If we do not add new distribution partners or renew our existing distribution partner agreements and on terms as favorable as current arrangements, replace traffic lost from terminated distribution agreements with other sources, or if our distribution partners’ businesses do not grow or are adversely affected, our revenue andbusiness, results of operations ~~may be materially~~ and ~~adversely affected. Our ability~~financial condition at least for the near term.

For most of the quarter ended March 31, 2020, our results reflect historical trends and seasonality. However, beginning in March 2020, we experienced a decline in revenues due to ~~grow will be impacted~~the impact of COVID-19 and the related reductions in global economic activity and reduced spending by our ~~ability~~customers in response to ~~increase~~the macroeconomic impact. We also assessed the realized and potential credit deterioration of our ~~distribution,~~customers due to changes in the macroeconomic environment, which ~~impacts~~was reflected in our allowance for credit losses for accounts receivable as of March 31, 2020 and December 31, 2020. Additionally, we determined that indicators of impairment had occurred during the ~~number~~first quarter of ~~mobile~~2020, which resulted in us performing an interim impairment analysis during the first quarter of 2020. As a result of this interim impairment test, we recognized an impairment of our intangible long-lived assets and ~~Internet users who have access~~goodwill during the first quarter of 2020. See the Notes to ~~our advertisers’ listings~~Condensed Consolidated Financial Statements for additional information. For additional information for the effects of the COVID-19 pandemic and ~~the rate at which our advertisers are able to convert calls from these mobile and Internet users into completed transactions, such as a purchase or sign up. Our ability to grow also depends~~resulting global disruptions on our ~~ability~~business and operations, refer to ~~continue to increase the number~~“Results of ~~advertisers who use our products~~Operations” within this discussion and ~~services, the amount these advertisers spend on our products~~analysis and ~~services, advertiser adoption~~Item 1.A of ~~new products and services and the amount these advertisers are willing to pay for these new products and services.~~Part II, “Risk Factors”.

We utilize phone numbers as part of a number of analytics services to our customers such as our call and text analytics and ~~pay-for-call services to advertisers, which enables advertisers and other users of our services to help measure the effectiveness of mobile, online, and offline advertising campaigns.~~communications. If we are not able to secure or retain sufficient phone numbers needed for our services or we are limited in the number of available telecommunication carriers or vendors to provide such phone numbers to us in the event of any industry consolidation or if telecommunication carriers or vendors were to experience system disruptions, our revenue and results of operations may be materially and adversely affected.

We have revenue concentrations with certain large customers including reseller partners and advertising agencies. Many of these customers are not subject to long term contracts with us or have contracts with near term expiration dates, and are able to reduce or cease advertising spend at any time and for any reason. Reseller partners purchase various advertising and marketing services from us, as well as provide us with a large number of advertisers. A loss of certain reseller partners or a decrease in revenue from these resellers could adversely affect our business. In some cases, we engage with advertisers through advertising agencies, who act on behalf of the advertisers. Advertising agencies may place insertion orders with us for particular advertising campaigns for a set period of time and are not obligated to commit beyond the campaign governed by a particular insertion order and may also cancel the campaign prior to completion. Advertising agencies also have relationships with many different providers, each of whom may be running portions of the advertising campaign. We have call advertising arrangements with certain large customers, which provide flexibility around financial commitments, termination rights, indemnification, and security obligations. Our large customers may vary spend levels and there can be no assurances that our large customers will continue to spend at levels similar to prior quarters. If any of our largest customers are acquired, such acquisition may impact its advertising spending or budget with us, including due to rebranding, change in advertising agency, or change in media tactics. A significant reduction in advertising spending or budgets by our largest customers, or the loss of one or more of these customers, if not replaced by new customers or an increase in business from existing customers, would have a material adverse effect on our future operating results.

We anticipate that these variables will fluctuate in the future, affecting our ability to grow and our financial results. In particular, it is difficult to project ~~phone~~ call and text usage, the number of ~~phone~~ calls or texts or other actions performed by users of our ~~products and services, which will be delivered to our advertisers, and how much advertisers will spend with us and the amount they are willing to pay for our products and~~ services. It is even more difficult to anticipate the average revenue per phone call or other performance-based actions. It is also difficult to anticipate the impact of worldwide and domestic economic conditions on advertising budgets.

~~In addition, we believe we will experience seasonality.~~ Our quarterly results have fluctuated in the past and may fluctuate in the future due to ~~seasonal fluctuations in levels of mobile and internet usage and seasonal purchasing cycles of many advertisers.~~seasonality. Our experience has shown that during the spring and summer months, ~~mobile and Internet usage is lower~~call volumes in certain verticals such as home services are generally higher than during other times of the year and during the latter part of the fourth quarter of the calendar year we generally experience lower call ~~volume and reduced demand for calls from our call advertising customers.~~volumes. The extent to which ~~usage and~~ call ~~volume~~volumes may decrease during these off-peak periods is difficult to predict. Prolonged or severe decreases in ~~usage and~~ call ~~volume~~volumes during these periods may adversely affect our growth rate and results and in turn the market price of our securities. However, there can be no assurances such seasonal trends will consistently repeat each year. Historically, we have seen this trend generally reversing in the first quarter of the calendar year with increased ~~mobile and internet usage~~call volumes and often new budgets at the beginning of the year for many of our customers with fiscal years ending December 31. However, there can be no assurances such seasonal trends will consistently repeat each year. ~~The current business environment~~

In addition, as discussed elsewhere in this report, we have and ~~our industry has generally both resulted in, and we~~ may continue to ~~see, many advertisers~~experience impacts from quarantines, market downturns and reseller partners reducing advertising and marketing services budgets or adjusting such budgets throughout the year, changing marketing strategies or agency affiliations, or advertisers being acquired by parent companies with alternative media initiatives, which we expect will impact our quarterly results of operationschanges in ~~addition~~customer behavior related to the ~~typical seasonality seen in our industry.~~

pandemic. We believe that our future revenue growth will depend on, among other factors, our ability to attract new ~~advertisers,~~customers, compete effectively, maximize our sales efforts, ~~demonstrate a positive return on investment for advertisers,~~ successfully improve existing analytics products and ~~services,~~sales engagement solutions, and develop successful new products and ~~services.~~solutions. If we are unable to generate adequate revenue growth and to manage our expenses, we may continue to incur significant losses in the future and may not be able to achieve or maintain profitability.

We generate the majority of our revenues from core analytics and solutions services. Our call analytics technology platform provides data and insights that can measure the performance of calls and texts for our customers. We generate revenue from our call analytics technology platform when customers pay us a fee for each call/text or call/text related data element they receive from calls or texts including call-based ads we distribute through our sources of call distribution or for each phone number tracked based on a pre-negotiated rate. Customers typically receive the benefit of our services as they are performed and substantially all of our revenue is recognized over time as services are performed.

In certain cases, we record revenue based on available and reported preliminary information from third parties. Collection on the related receivables may vary from reported information based upon third party refinement of the estimated and reported amounts owed that occurs subsequent to period ends.

Our service costs represent the cost of providing our ~~performance-based advertising~~ services ~~and~~to our ~~search marketing services. The service~~customers. These costs ~~that we have incurred in the periods presented~~ primarily ~~include:~~

For the periods presented the largest component of our service costs consists of user acquisition costs that relate primarily to payments made to distribution partners for access to their mobile, online, offline, or other user traffic. We enter into agreements of varying durations with distribution partners that integrate our services into their web sites, indexes or other sources of user traffic. The primary economic structure of the distribution partner agreements is a variable payment based on a specified percentage of revenue.

~~These variable payments are often subject to minimum payment amounts per phone call or other action. Other payment structures that to a lesser degree exist include:~~

We expense user acquisition costs based on whether the agreement provides for variable or fixed payments. Agreements with variable payments based on a percentage of revenue, number of paid phone calls, or other metrics are expensed as incurred based on the volume of the underlying activity or revenue multiplied by the agreed-upon price or rate. Agreements with fixed payments with minimum guaranteed amounts of usage are expensed at the greater of the pro-rata amount over the term of arrangement or the actual usage delivered to date based on the contractual revenue share.compensation.

Product development costs consist primarily of expenses incurred in the research and development, creation and enhancement of our products and services.

For the periods presented, substantially all of our product development expenses are research and development. Product development costs are expensed as incurred or capitalized into property and equipment in accordance ~~with FASB ASC 350,~~ ~~Intangibles – Goodwill and Other~~. This statement requires that costs incurred in the preliminary project and post-implementation stages of an internal use software project be expensed as incurred and that certain costs incurred in the application development stage of a project be capitalized.U.S. GAAP.

We measure stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense over the vesting or service period, as applicable, of the stock-based award using the straight-line method. ~~Beginning in the first quarter of 2017, we~~We account for forfeitures as they ~~occur, rather than estimate expected forfeitures.~~occur. Stock-based compensation expense is included in the same lines as compensation paid to the same employees in the ~~consolidated statements~~Condensed Consolidated Statements of ~~operations.~~Operations.

Amortization of intangible assets excluding goodwill relates to intangible assets identified in connection with our acquisitions. The intangible assets have been identified as customer relationships; acquired technology; non-competition agreements; tradenames. These assets are amortized over useful lives ranging from 12 to 60 months.

We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax law is recognized in results of operations in the period that includes the enactment date. On January 1, 2017, previously unrecognized excess tax benefits of $3.7 million were recorded to accumulated deficit and an increase to our deferred tax assets with a corresponding change to the valuation allowance as a result of the adoption of ASU 2016-09. We also adopted ASU 2015-17 on January 1, 2017, which requires all deferred tax assets and liabilities, and any related valuation allowance, to be classified as non-current on the balance sheet. The adoption of this standard did not have any impact on the company’s financial statements due to the full valuation allowance recorded on our deferred taxes. Uncertain tax positions as of September 30, 2017 amounted to $1.1 million.

At September 30, 2017, based upon both positive and negative evidence available, we determined that it is not more likely than not that our deferred tax assets of $47.5 million will be realized and accordingly, we have recorded a 100% valuation allowance of $47.5 million against these deferred tax assets. This compares to a valuation allowance of $44.5 million at December 31, 2016. Based on the level of historical taxable losses and the uncertainty of projections for future taxable income over the periods for which the deferred tax assets are deductible, we concluded that it is not more likely than not that the gross deferred tax assets will be realized. In assessing the realizability of deferred tax assets, we considered whether it is more likely than not that some or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. We also considered the future reversal of deferred tax liabilities, carryback potential, projected taxable income, and tax planning strategies as well as its history of taxable income or losses in the relevant jurisdictions in making this assessment. We incurred taxable losses in 2014, 2015, and 2016. As of September 30, 2017, our federal NOL carryforwards were approximately $73.7 million for income tax purposes, which will begin to expire in 2026. As of September 30, 2017, our state, city, and other foreign jurisdiction NOL carryforwards were approximately $5.4 million, which begin to expire in 2025.

From time to time, various state, federal, and other jurisdictional tax authorities undertake reviews of us and our filings. We believe any adjustments that may ultimately be required as a result of any of these reviews will not be material to the financial statements.

The following table presents ~~certain of our operating~~revenue and results from continuing operations and as a percentage of revenue ~~for the periods indicated:~~

Nine Months Ended
September 30,

Three Months Ended
September 30,

2016

2017

2016

2017

Revenue

100
%

100
%

100
%

100
%
Expenses:

Service costs

60
%

55
%

60
%

54
%
Sales and marketing

16
%

18
%

18
%

17
%
Product development

22
%

20
%

22
%

19
%
General and administrative

16
%

15
%

18
%

14
%
Acquisition and disposition related costs

1
%

0
%

1
%

0
%
Total operating expenses

115
%

108
%

119
%

104
%
Impairment of goodwill

(63
%)

(—
%)

(—
%)

(—
%)
Loss from operations

(78
%)

(8
%)

(19
%)

(4
%)
Other expense

0
%

0
%

0
%

0
%
Loss before provision for income taxes

(77
%)

(8
%)

(19
%)

(4
%)
Income tax expense

0
%

0
%

0
%

0
%
Net loss applicable to common stockholders

(77
%)

(8
%)

(19
%)

(4
%)

~~Comparison of the three months ended September 30, 2016 to the three months ended September 30, 2017 and the nine months ended September 30, 2016 to the nine months ended September 30, 2017.~~

Revenue decreased 28% from $30.7 million for the three months ended September 30, 2016 to $22.1 million in the same period in 2017. Revenue decreased 32% from $101.1 million for the for the nine months ended September 30, 2016 to $68.4 million in the same period in 2017. These decreases were due primarily to larger advertiser budget reductions for our pay-for-call services, and fewer accounts and related performance-based advertising and platform revenues from reseller partners like YP.

We expect our revenues to be lower in the near term compared to the most recent quarters with fewer small business accounts on our local leads platform and reduced demand for calls from our call advertising customers.

Under our primary contract with YP, we generate revenues from our local leads platform to sell call advertising and/or search marketing packages through their existing sales channels, which are then fulfilled by us across our distribution network. We are paid account fees and agency fees for our products in the form of a percentage of the cost of every call or click delivered to their advertisers. We also have a separate pay-for-call relationship with YP. We charge an agreed-upon price for qualified calls or leads from our network. In 2016, we extended these agreements through December 31, 2018. The primary local leads platform arrangement provides YP flexibility to migrate active accounts to itself or a third-party provider prior to the end of an advertiser contract and provides YP with certain termination rights beginning January 1, 2018 upon four-months prior notice. We expect YP may decrease the number of new advertiser accounts with us and may elect to migrate certain active accounts to itself or a third-party provider which would result in fewer small business accounts and related revenues, as well as reduced contribution and profitability. YP’s small business account base utilizing our platform has declined, and to the extent declines occur in their business, their small business accounts may spend fewer dollars on our pay-for-call services. We expect YP and local leads platform advertisers in future periods will comprise lower total revenues compared to previous periods and YP as a percentage of our total revenue may also comprise a smaller percentage of our total revenue with any revenue increase. We also have a separate distribution partner agreement with YP. Dex recently acquired YP Holdings, which is the parent company of YP. We have a separate partner reseller arrangement with Dex for call advertising services. It is possible that this acquisition may result in changes to our relationship and arrangements with YP and/or Dex, including changes that may result in a significant reduction in the paid account fees and agency fees that we receive from YP. There can be no assurance that our business with YP and/or Dex in the future will continue at or near current revenue and contribution levels, that we will be able to renew and extend the contracts, and if renewed, the contracts may be on less favorable terms to us, any of which could have a material adverse effect on our future operating results. YP was responsible for 22% and 23% of our total revenues the three and nine months ended September 30, 2016, respectively, and YP including Dex was 21% and 22% for the three and nine months ended September 30, 2017, respectively.

We also have arrangements with advertising agencies, such as Resolution Media and OMD Digital, who act on an advertiser’s behalf and may represent more than one advertiser that utilizes our products and services. Our primary arrangement with Resolution Media is for pay-for-call services whereby we charge an agreed-upon price for qualified calls or leads from our network and call analytic services. Resolution Media accounted for 19% of total revenues and less than 10% of total revenues for the three months ended September 30, 2016 and 2017, respectively, and 21% and less than 10% of total revenues for the nine months ended September 30, 2016 and 2017, respectively, of which the majority of the revenues related to a single advertiser, State Farm. State Farm, who utilizes our services through Resolution Media and OMD Digital, accounted for 22% and 15% of total revenues for the three months ended September 30, 2016 and 2017, respectively, and 24% and 16% for the nine months ended September 30, 2016 and 2017, respectively. Resolution Media and OMD Digital place insertion orders for our services on behalf of State Farm for campaigns which are for a set period of time and/or budget level. We expect in the near to intermediate term campaign spend levels related to State Farm to be lower compared to previous quarters, which will result in lower total revenues and contribution.

We have revenue concentrations with certain large customers including reseller partners and advertising agencies. Many of these customers are not subject to long term contracts with us or may have contracts with near term expiration dates such as Yellow Pages Ltd (“YPG”), and are able to reduce or cease advertising spend at any time and for any reason. Reseller partners purchase various advertising and marketing services from us, as well as provide us with a large number of advertisers. We expect YPG local leads platform revenues to be lower prospectively compared to previous periods and to cease under the contractual arrangement by the end of 2017. A loss of certain reseller partners or a decrease in revenue from these resellers could adversely affect our business. In some cases, we engage with advertisers through advertising agencies, who act on behalf of the advertisers. Advertising agencies, such as Resolution Media and OMD Digital, may place insertion orders with us on behalf of advertisers (including State Farm) for particular advertising campaigns for a set period of time and are not obligated to commit beyond the campaign governed by a particular insertion order and may also cancel the campaign prior to completion. Advertising agencies also have relationships with many different providers, each of whom may be running portions of the advertising campaign. We have call advertising arrangements with certain large customers, such as T-Mobile, which provide flexibility around financial commitments, termination rights, indemnification, and security obligations. Our large customers may vary spend levels and there can be no assurances that our large customers including T-Mobile will continue to spend at levels similar to prior quarters. If any of our largest customers are acquired, such acquisition may impact its advertising spending or budget with us, including due to rebranding, change in advertising agency, or change in media tactics. A significant reduction in advertising spending or budgets by our largest customers, or the loss of one or more of these customers, if not replaced by new customers or an increase in business from existing customers, would have a material adverse effect on our future operating results.

Our ability to maintain and grow our revenues will depend in part on maintaining and increasing the number and volume of transactions with advertisers and advertising services providers and maintaining and increasing the number of phone calls and the other actions performed by users of our services through our distribution partners. We believe this is dependent in part on delivering quality traffic that ultimately results in purchases or conversions as well as providing through our call analytics platform quality data and insights that can measure the performance of advertising spend for our advertisers and advertising service providers. Our revenues are primarily generated using third-party distribution networks to deliver the pay-for-call advertisers’ listings. The distribution network includes mobile and online search engine applications, directories, destination sites, shopping engines, third-party Internet domains or web sites, other targeted Web-based content and offline sources. We generate revenue upon delivery of qualified and reported phone calls to our advertisers or to advertising services providers’ listings. We pay a revenue share to the distribution partners to access their mobile, online, offline or other user traffic. We also generate revenue from cost-per-action services, which occurs when a user makes a phone call from our advertiser’s listing or is redirected from one of our web sites or a third-party web site in our distribution network to an advertiser web site and completes the specified action. Other revenues include our call provisioning and call tracking services, local leads platform for resellers, and campaign management services. Companies distributing advertising through mobile and internet based sources have experienced, and are likely to continue to experience consolidation. If we do not add new distribution partners or renew our existing distribution partner agreements and on terms as favorable as current arrangements, replace traffic lost from terminated distribution agreements with other sources, or if our distribution partners’ businesses do not grow or are adversely affected, our revenue and results of operations may be materially and adversely affected. We utilize phone numbers as part of our call analytics and pay-for-call services to advertisers, which enables advertisers and other users of our services to help measure the effectiveness of mobile, online, and offline advertising campaigns. If we are not able to secure or retain sufficient phone numbers needed for our services or we are limited in the number of available telecommunication carriers or vendors to provide such phone numbers to us in the event of any industry consolidation or if telecommunication carriers or vendors were to experience system disruptions, our revenue and results of operations may be materially and adversely affected. In addition, if revenue grows and the volume of transactions and traffic increases, we will need to expand our network infrastructure. Inefficiencies in our network infrastructure to scale and adapt to higher call volumes could materially and adversely affect our revenue and results of operations.

We anticipate that these variables will fluctuate in the future, affecting our ability to grow and our financial results. In particular, it is difficult to project phone call usage, the number of phone calls or other actions performed by users of our products and services, which will be delivered to our advertisers, and how much advertisers will spend with us and the amount they are willing to pay for our products and services. It is even more difficult to anticipate the average revenue per phone call or other performance-based actions. It is also difficult to anticipate the impact of worldwide and domestic economic conditions on advertising budgets.

In addition, we believe we will experience seasonality. Our quarterly results have fluctuated in the past and may fluctuate in the future due to seasonal fluctuations in levels of mobile and internet usage and seasonal purchasing cycles of many advertisers. Our experience has shown that during the spring and summer months, mobile and Internet usage is lower than during other times of the year and during the latter part of the fourth quarter of the calendar year we generally experience lower call volume and reduced demand for calls from our call advertising customers. The extent to which usage and call volume may decrease during these off-peak periods is difficult to predict. Prolonged or severe decreases in usage and call volume during these periods may adversely affect our growth rate and results and in turn the market price of our securities. Historically, we have seen this trend generally reversing in the first quarter of the calendar year with increased mobile and internet usage and often new budgets at the beginning of the year for many of our customers with fiscal years ending December 31. However, there can be no assurances such seasonal trends will consistently repeat each year. The current business environment and our industry has generally both resulted in, and we may continue to see, many advertisers and reseller partners reducing advertising and marketing services budgets or adjusting such budgets throughout the year, changing marketing strategies or agency affiliations, or advertisers being acquired by parent companies with alternative media initiatives, which we expect will impact our quarterly results of operations in addition to the typical seasonality seen in our industry.

We believe that our future revenue growth will depend on, among other factors, our ability to attract new advertisers, compete effectively, maximize our sales efforts, demonstrate a positive return on investment for advertisers, successfully improve existing products and services, and develop successful new products and services. If we are unable to generate adequate revenue growth and to manage our expenses, we may continue to incur significant losses in the future and may not be able to achieve or maintain profitability.

	Nine months ended September 30,										Three months ended September 30,										Three months ended March 31, 2020			% of revenue			Three months ended March 31, 2021			% of revenue
	2016		% of revenue			2017		% of revenue			2016		% of revenue			2017		% of revenue
Revenue																					$	12,008			100	%	$	12,980			100	%
Expenses:
Service costs	$	60,964		60	%	$	37,690		55	%	$	18,505		60	%	$	11,917		54	%		4,828			40	%		5,422			42	%
Sales and marketing		16,733		16	%		12,075		18	%		5,562		18	%		3,612		17	%		4,170			35	%		3,637			28	%
Product development		21,859		22	%		13,809		20	%		6,832		22	%		4,256		19	%		5,358			45	%		5,322			41	%
General and administrative		15,815		16	%		10,568		15	%		5,320		18	%		3,144		14	%		3,453			29	%		2,620			20	%
Acquisition and disposition related costs		662		1	%	—			—	%		354		1	%	—			—	%
	$	116,033		115	%	$	74,142		108	%	$	36,573		119	%	$	22,929		104	%
Amortization of intangible assets from acquisitions																						1,763			15	%		1,181			9	%
Acquisition and disposition-related costs (benefit)																						(635	)		-5	%		45			0	%
Total operating expenses																						18,937			158	%		18,227			140	%
Impairment of goodwill																						(14,688	)		-122	%		-			0	%
Impairment of intangible assets from acquisitions																						(4,959	)		-41	%		-			0	%
Loss from operations																						(26,576	)		-221	%		(5,247	)		-40	%
Interest income (expense) and other, net																						110			1	%		(12	)		0	%
Loss before provision for income taxes																						(26,466	)		-220	%		(5,259	)		-41	%
Income tax expense (benefit)																						(943	)		-8	%		73			1	%
Net loss applicable to continuing operations																					$	(25,523	)		-213	%	$	(5,332	)		-41	%

Stock-based compensation expense was included in the following operating expense categories as follows (in thousands):

See Note ~~3. Stock-based Compensation Plans~~6. Stockholder’s Equity of the Notes to Condensed Consolidated Financial Statements as well as our Critical Accounting Policies for additional information about stock-based compensation.

Revenue increased 8% from ~~$18.5~~$12.0 million for the three months ended ~~September 30, 2016~~March 31, 2020 to ~~$11.9~~$13.0 million for the three months ended March 31, 2021. The three months ended March 31, 2020 was affected by the impact of the coronavirus pandemic on customer usage, rate discounts and credits provided as a result of customer distress. These same impacts did not recur to the same extent during the three months ended March 31, 2021 and are the primary reason for the increase in revenue.

In the immediate near term, we expect our revenues to be similar to modestly higher than levels of our most recent quarter as a result of potential volume increases as the business disruption caused by the continuing coronavirus pandemic unwinds and as we gain traction with new customers. While we saw some recovery in the ~~same period~~first part of 2021, we expect potential near term revenue increases would be potentially greater, if not for the pandemic disruption to our customers and our prospective customers that will continue to cause further delays in ~~2017.~~the sales process, delays in signing new customers, and a decrease in business and rates from existing customers. We expect this would result in further delay in launching pilots and tests and new customer programs that were previously planned, resulting in possible lower near term revenues from our customers as well as lower than anticipated future new revenues from our prospective customers. We also expect that financial difficulties and business interruptions caused by the coronavirus impact has and will continue to result in some cases in payment delays, and an impairment of our customers’ ability to make payments, which we expect will further reduce our revenues from recent quarterly results.

In the longer term, we believe that our new product releases and growth initiatives may enable the Company to have an opportunity for potential revenue growth. A preliminary indicator of this potential growth is that several customers and prospective customers have indicated that they plan to initiate trials and are considering the adoption of new products, which would result in new revenue opportunities.

For additional discussion of trends and other factors in our business, refer to Industry and Market Factors in Item 2 of this Quarterly Report on Form 10-Q.

Service Costs. Service costs increased 12% from $4.8 million for the three months ended March 31, 2020 to $5.4 million for the three months ended March 31, 2021. As a percentage of revenues, service costs were ~~60%~~40% and ~~54%~~42% for the three months ended ~~September 30, 2016~~March 31, 2020 and ~~2017,~~2021, respectively. The ~~decrease~~increase in dollars was primarily due to ~~a decrease~~an increase in ~~distribution partner payments, personnel costs, and~~ communication and network costs totaling ~~$6.5 million. The decrease as a percentage of revenue was primarily a result of lower distribution partner payments~~$657,000 resulting from our infrastructure initiatives, which include cloud migration initiatives, certain platform integrations and ~~decreases in overall operating costs.~~other initiatives.

Service costs decreased 38% from $61.0 million for the nine months ended September 30, 2016 to $37.7 million in the same period in 2017. As a percentage of revenues, service costs were 60% and 55% for the nine months ended September 30, 2016 and 2017, respectively. The decrease in dollars was primarily due to a decrease in distribution partner payments, personnel and outside service provider costs, stock-based compensation, and communication and network costs totaling $23.0 million. The decrease as a percentage of revenue was primarily a result of lower distribution partner payments and decreases in overall operating costs.

We expect that user acquisition costs and revenue shares to distribution partners are likely to increase prospectively given the competitive landscape for distribution partners. To the extent that payments to pay-for-call, or cost-per-action distribution partners make up a larger percentage of future operations, or the addition or renewal of existing distribution partner agreements are on terms less favorable to us, we expect that service costs will increase as a percentage of revenue. To the extent of revenue declines in these areas, we expect revenue shares to distribution partners to decrease in absolute dollars. Our other sources of revenues, such as our local leads platform have no corresponding distribution partner payments and accordingly have a lower service cost as a percentage of revenue relative to our overall service cost percentage. In addition, advertisers from whom we generate a portion of our call advertising revenues through our local leads platform generally have lower service costs as a percentage of revenue relative to our overall service cost percentage. To the extent our local leads platform makes up a smaller percentage of our future operations, we expect that service costs will increase as a percentage of revenue. We expect in the near and intermediate term ~~for~~that service costs in absolute dollars will be similar in relation to the most recent periods. Upon completion of various infrastructure efficiency initiatives, there may also be a positive impact on service costs as a percentage of revenue and further benefit in ~~absolute dollars to be relatively stable relative to~~ the ~~most recent quarterly periods. We also expect service costs in absolute dollars to increase over the longer term in connection with any revenue increase~~event we generate contribution from new launches of analytics products and ~~expansion in our communication and network infrastructure.~~sales engagement solutions.

Sales and ~~Marketing~~.Marketing. Sales and marketing expenses decreased ~~35%~~13% from ~~$5.6~~$4.2 million for the three months ended ~~September 30, 2016~~March 31, 2020 to $3.6 million infor the ~~same period in 2017. The decrease was primarily due to a decrease in personnel costs and travel costs totaling $1.9 million.~~three months ended March 31, 2021. As a percentage of revenue, sales and marketing expenses were ~~relatively flat at 18%~~35% and ~~17%~~28% for the three months ended ~~September 30, 2016~~March 31, 2020 and ~~2017.~~

~~Sales and marketing expenses decreased 28% from $16.7 million for the nine months ended September 30, 2016 to $12.1 million in the same period in 2017.~~2021, respectively. The net decrease in dollars ~~was primarily attributable to a decrease in personnel costs which included $307,000 of employee separation related costs in the 2017 period, stock-based compensation,~~ and ~~travel costs totaling $4.3 million. As a percentage of revenue, sales and marketing expenses were 16% and 18% for the nine months ended September 30, 2016 and 2017, respectively. The increase~~ as a percentage of revenue was primarily attributable to ~~lower~~an aggregate net decrease in personnel and outside service provider costs and stock-based compensation costs totaling $445,000 and a decrease in travel related costs largely due to pandemic influenced restrictions totaling $195,000, offset by an increase in marketing costs of $125,000. The decrease in personnel costs was primarily the result of less incentive compensation in part stemming from pandemic influences on new business initiatives. The percentage of revenue decrease

was partially attributable to the benefit obtained from a portion of the sales and marketing expenses being fixed in nature and the percentage benefiting as a result of higher revenues in ~~2017.~~2021.

We expect some volatility in sales and marketing expenses based on the timing of marketing initiatives but expect sales and marketing expenses in the near ~~and intermediate~~ term to ~~be relatively stable to modestly lower in absolute dollars relative to the most recent quarterly periods. We expect that sales and marketing expenses will~~ increase in connection with any revenue ~~increase~~increase. We also expect, to the extent that we ~~also~~ increase our marketing activities, ~~and~~this could correspondingly ~~could~~also cause an increase as a percentage of revenue. We also believe that if pandemic related restrictions ease, travel related costs will increase as compared to the year ended December 31, 2020.

Product ~~Development~~.Development. Product development expenses decreased ~~38%~~slightly from ~~$6.8~~$5.4 million for the three months ended ~~September 30, 2016~~March 31, 2020 to ~~$4.3~~$5.3 million infor the ~~same period in 2017.~~three months ended March 31, 2021. As a percentage of revenue, product development expenses were ~~22%~~45% and ~~19%~~41% for the three months ended ~~September 30, 2016~~March 31, 2020 and ~~2017,~~2021, respectively. The ~~net decrease in dollars and percentage was primarily due to a decrease in personnel and outside service provider costs and travel costs of $2.6 million.~~

~~Product development expenses decreased 37% from $21.9 million for the nine months ended September 30, 2016 to $13.8 million in the same period in 2017. As a~~ percentage of revenue ~~product development expenses were 22% and 20% for the nine months ended September 30, 2016 and 2017, respectively. The net~~ decrease was attributable to higher revenues in dollars and percentage was primarily due to a decrease in personnel costs, which included $358,000 of employee separation related costs in the 2017 period, stock-based compensation, and travel costs totaling $8.2 million.2021.

~~We expect product development expenditures to be stable to modestly lower in the near and intermediate term in absolute dollars relative to our most recent quarterly periods.~~ In the immediate and longer term, to the extent our revenues increase, we expect that product development expenses will increase in absolute dollars as we increase the number of personnel and consultants to enhance our service ~~offerings and as a result of additional stock-based compensation expense.~~offerings.

General and ~~Administrative~~. Administrative. General and administrative expenses decreased ~~41%~~24% from ~~$5.3~~$3.5 million for the three months ended ~~September 30, 2016~~March 31, 2020 to ~~$3.1~~$2.6 million infor the ~~same period in 2017.~~three months ended March 31, 2021. As a percentage of revenue, general and administrative expenses were ~~18%~~29% and ~~14%~~20% for the three months ended ~~September 30, 2016~~March 31, 2020 and ~~2017,~~2021, respectively. The ~~net~~ decrease in dollars ~~and percentage~~ was primarily ~~due to~~comprised of a decrease in personnel and outside service provider costs and stock-based compensation ~~and professional fees~~costs totaling ~~$2.2 million.~~

General and administrative expenses decreased 33% from $15.8 million for the nine months ended September 30, 2016 to $10.6 million in the same period in 2017. The net decrease in dollars was primarily due to$275,000, a decrease in ~~personnel~~travel related costs of $209,000, and ~~outside service provider costs, stock-based compensation, and professional fees totaling $5.3 million. As~~ a ~~percentage~~decrease in bad debt expenses of ~~revenue, general and administrative expenses~~$178,000 that were ~~relatively flat at 16% and 15% for~~largely a result of pandemic influences on customers in the ~~nine~~three months ended ~~September 30, 2016 and 2017, respectively.~~March 31, 2020.

We also expect our general and administrative expenses to ~~be stable in the near term relative to our most recent quarterly periods. We expect that our general and administrative expenses will~~ increase ~~in the longer term~~ to the extent that we expand our operations and incur additional costs in connection with being a public company, including expenses related to professional fees and insurance, and as a result of stock-based compensation expense. We also expect fluctuations in our general and administrative expenses to the extent the recognition timing of stock compensation is impacted by market conditions relating to our stock ~~price~~price. In addition, we anticipate that our general and ~~forfeitures.~~administrative expenses will be adversely impacted by the continuing COVID-19 pandemic at least for the near term.

Amortization of Intangible Assets from Acquisitions. Intangible amortization expense was $1.8 million and $1.2 million for the three months ended March 31, 2020 and 2021, respectively. The amortization of intangibles related to service costs, sales and marketing and general and administrative expenses. During the three months ended March 31, 2020, we recorded an impairment charge totaling $5.0 million relating to our intangible assets from acquisitions, resulting in a decrease in amortization for the three months ended March 31, 2021 as compared to the same period in 2020. For additional information, see the discussion in “Impairment of Goodwill and Impairment of Intangible Assets from Acquisitions” below.

Acquisition and Disposition-related Costs (Benefits). The change in the acquisition and disposition-related benefits from $635,000 for the three months ended March 31, 2020 to a cost of $45,000 for the three months ended March 31, 2021 was primarily due to an adjustment in 2020 to the estimated fair value of our contingent consideration liabilities related to our acquisition of Telmetrics in November 2018 and our acquisition of Sonar in December 2019, offset by accretion of interest expense and professional and related fees primarily associated with acquisition and disposition related matters during the three months ended March 31, 2020.

Impairment of ~~goodwill~~Goodwill and Impairment of Intangible Assets from Acquisitions. For the three months ended ~~June 30, 2016,~~March 31, 2020, our stock price was impacted by volatility in the U.S. financial markets as a result of the rapid spread of the coronavirus globally which has resulted in increased travel restrictions and disruption and shutdown of businesses, and traded below the then book value for an extended period of time. Accordingly, we tested our goodwill for impairment and concluded that the carrying value exceeded the estimated fair value of our single reporting unit and recognized an estimated impairment loss during the ~~second~~first quarter of ~~2016~~2020 of ~~$63.3 million reducing our goodwill to $0 on our balance sheet.~~$14.7 million. The estimated fair value of our single reporting unit was based on estimates of future operating results, discounted cash flows and other market-based factors, including our stock price. The goodwill impairment loss resulted primarily from a sustained decline in our common stock share price and market capitalization as well as lower projected revenue growth rates and profitability levels compared to historical results. The lower projected operating results ~~reflected~~reflect changes in assumptions related to organic revenue growth rates, market trends, business mix, cost structure, and other expectations about the anticipated short-term and long-term operating results. As of March 31, 2021, we have $17.6 million of goodwill remaining on our balance sheet.

In addition, we performed an interim impairment test of our long-lived intangible assets using an undiscounted cash flow analysis to determine if the cash flows expected to be generated by the asset groups over the estimated remaining useful life of the primary assets were sufficient to recover the carrying value of the asset groups, which were determined to be at the acquisition level (Telmetrics, Callcap and Sonar). Based on this analysis, which included evaluating various cash flow scenarios, the undiscounted cash flows were not sufficient to recover the carrying value of the groups. As a result, we were required to determine the fair value of each asset group. To estimate the fair value, we utilized both the cost recovery and income approach, which is based on a discounted cash flow (DCF) analysis and calculates the fair value by estimating the after-tax cash flows attributable to the asset group and then discounting the after-tax cash flows to present value using a risk-adjusted discount rate. Assumptions used in the DCF require significant judgment, including judgment about appropriate discount rates and terminal values, growth rates, and the amount and

timing of expected future cash flows. The forecasted cash flows are based on our most recent strategic plan and for periods beyond the strategic plan, our estimates were based on assumed growth rates expected as of the measurement date. We believe our assumptions were consistent with the plans and estimates that a market participant would use to manage the business. Based on the results of this testing, we recorded a pretax non-cash impairment totaling $5.0 million in the first quarter of 2020 relating to customer relationships, technologies, non-compete agreements and tradenames. This charge is reflected in our Condensed Consolidated Statements of Operations for the three months ended March 31, 2020. The identified intangible assets acquired in the Telmetrics, Callcap and Sonar acquisitions, after this charge, are $8.0 million in aggregate as of March 31, 2021 and are being amortized on a straight-line basis over a range of useful lives of 12 to 60 months.

The current business environment is subject to evolving market conditions and requires significant management judgment to interpret the potential impact to our assumptions. To the extent that changes in the current business environment impact our ability to achieve levels of forecasted operating results and cash flows, or should other events occur indicating the remaining carrying value of our assets might be impaired, we would test our goodwill and intangible assets for impairment and may recognize an additional impairment loss to the extent that the carrying amount exceeds such assets’ fair values. No additional impairment of our intangible assets has been discovered since the first quarter of 2020. We will continue to monitor our financial performance, stock price and other factors in order to determine if there are any additional indicators of impairment. As a result, we may record an additional impairment loss in the near or intermediate term, which could have an adverse effect on our financial condition and results of operations.

Income ~~Taxes~~Tax (Benefit). ~~Income~~ The income tax expense (benefit) from continuing operations for the three months ended March 31, 2020 and 2021 was ($943,000) and $73,000, respectively. The income tax benefit for the three months ended March 31, 2020 consisted primarily of deferred tax benefits related to one of our foreign jurisdictions, tax benefits from the release of a portion of our valuation allowance resulting from the acquisition of Sonar, and an allocation of profits to discontinued operations. The income tax expense for the three months ended ~~September 30, 2016 and 2017 was $15,000 and $12,000, respectively, and for the nine months ended September 30, 2016 and 2017 was $40,000 and $37,000, respectively. Income~~March 31, 2021 consisted primarily of deferred tax ~~expense consisted~~benefits related to one of our foreign jurisdictions offset by U.S. state income ~~taxes for all periods.~~tax expense. The effective tax rate differed from the expected tax rate of ~~34%~~21% due to a full valuation allowance and to a lesser extent due to state income taxes, non-deductible stock-based compensation related to incentive stock options recorded under the fair-value method, federal research and development credits, and other non-deductible amounts.

At March 31, 2021, based on all the available evidence, both positive and negative, we determined that it is not more likely than not that our deferred tax assets (excluding certain insignificant Canadian deferred tax assets) will be realized and accordingly, we have recorded a 100% valuation allowance of $47.4 million against our net deferred tax assets ($48.6 million of deferred tax assets that are partially offset by $1.2 million in reversing deferred tax liabilities). This compares to a 100% valuation allowance of $43.3 million at December 31, 2020 ($44.6 million of deferred tax assets that are partially offset by $1.3 million in reversing deferred tax liabilities). In assessing the realizability of deferred tax assets, based on all the available evidence, both positive and negative, we considered whether it is more likely than not that some or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. We considered the future reversal of deferred tax liabilities, carryback potential, projected taxable income, and tax planning strategies as well as the Company’s history of taxable income or losses in the relevant jurisdictions in making this assessment. We have incurred federal taxable losses in 2020 and 2021.

Discontinued Operations, net of tax. In October 2020, we sold certain assets related to the Local Leads Platform, Call Marketplace and other assets not related to core conversational analytics to a related party controlled by a shareholder and officers of the Company. The operating results related to these dispositions are shown as discontinued operations, net of tax. Income from discontinued operations, net of tax, was $648,000 for the three months ended March 31, 2020. See Note 14.Discontinued Operations and Related Party Investment of the Notes to Condensed Consolidated Financial Statements for further discussion.

Net Loss.Net loss from continuing operations was ~~($5.9)~~$25.5 million ~~and ($78.3) million in~~for the three ~~and nine~~ months ended ~~September 30, 2016, respectively, and was ($811,000) and ($5.6)~~March 31, 2020 compared to net loss of $5.3 million infor the ~~same periods in 2017, respectively.~~three months ended March 31, 2021. The ~~reduction~~decrease in loss for the three months ended March 31, 2021 was primarily attributable to a long-lived intangible assets and an estimated goodwill impairment charge in the ~~second quarter of 2016~~three months ended March 31, 2020 with no corresponding amounts in for the amount of $63.3 million. The reduction in loss to a lesser extent was due to the effect of fewer personnel, lower distribution partner payments and lower overall operating costs in 2017, which were partially offset by lower revenues and $700,000 of employee related separation costs.three months ended March 31, 2021.

As of ~~September 30, 2017,~~December 31, 2020 and March 31, 2021, we had cash and cash equivalents of ~~$104.4~~$33.9 million and $28.2 million, respectively. As of March 31, 2020, we had current debt of $5.1 million and ~~long term~~current and long-term contractual obligations of ~~$16.4~~$6.0 million, of which ~~$12.1~~$4.9 million is for rent under our facility operating leases.

Cash ~~provided by~~used in operating activities was $5.6 million for the ~~nine~~three months ended ~~September 30, 2017 of approximately $1.7 million consisted~~March 31, 2021. The cash used in operating activities was primarily a result of a net loss of ~~$5.6~~$5.3 million, adjusted for non-cash items of ~~$6.4~~$2.5 million, which primarily ~~includes~~included depreciation and amortization ~~allowance for doubtful accounts and advertiser credits,~~ and stock-based compensation, and ~~approximately $854,000 provided by~~changes in working capital of $2.8 million, which primarily

included increases in accounts receivable and other ~~activities.~~current asset balances and decreases in accounts payable and accrued payroll account balances.

Cash used in operating activities ~~for~~was $1.7 million during the ~~for the nine~~three months ended ~~September 30, 2016~~March 31, 2020, of which approximately ~~$2.9~~$2.4 million ~~consisted~~was used by continuing operations and $730,000 was provided by discontinued operations. The cash used in continuing operating activities was primarily a result of a net loss of ~~$78.3~~$25.5 million adjusted for non-cash items of ~~$74.4~~$22.6 million, ~~including~~which primarily included the aggregate estimated impairment of goodwill and intangible assets from acquisitions of ~~$63.3~~$19.6 million, in addition to depreciation and amortization, stock based compensation, the allowance for doubtful accounts and ~~advertiser credits, stock-based compensation, and approximately $1.0 million provided by~~other changes in working ~~capital and other activities.~~capital.

With respect to a majority of our call-based advertising services, the amount payable to our distribution partners will be calculated at the end of a calendar month, with a payment period following the delivery of the phone calls or other actions. These services constituted a significant portion of revenues for the three and nine months ended September 30, 2016 and 2017. We generally receive payment from advertisers in close proximity to the timing of the corresponding payments to the distribution partners who provide calls, other delivery actions, or placement for the listings. In certain cases, payments to distribution partners are paid in advance or are fixed in advance based on a guaranteed minimum amount of usage delivered. We have no corresponding payments to distribution partners related to our local leads platform.

Nearly all of our reseller partner arrangements are billed on a monthly basis following the month of our phone call or other action delivery. This payment structure results in our advancement of monies to the distribution partners who have provided the corresponding calls, other delivery actions, or placements of the listings. For these services, reseller partner payments are generally received two to four weeks following payment to the distribution partners. We also have payment arrangements with advertising agencies whereby we receive payment after the agency’s advertiser pays the agency, which is generally between 60 and 120 days or longer, following the delivery of services. We expect that, at least for the near term, our revenues will be impacted as a result of business disruption to our customers and prospects caused by the continuing pandemic. We do believe the disruption will impact our business in the ~~future periods, if the amounts from our reseller partner~~intermediate and ~~agency arrangements account for a greater percentage of our operating activity, working capital requirements will increase~~long term as ~~a result.~~

Wewell in part because several customers have ~~payment arrangements with reseller partners, such as YP and/~~had their operations permanently impacted or ~~Dex, CDK Global, hibu Inc., and Web.com whereby~~shut down. Further, we receive payment generally between 30 and 60 days following the delivery of services. We also have payment arrangements with Resolution Media and OMD Digital, advertising agencies related to our call advertising services, whereby we receive payment when the agency’s advertiser pays the agency, which is generally between 60 and 90 days following the delivery of services andexpect in 2021, that in some ~~instances may take longer. For~~cases financial difficulties and business interruptions caused by the ~~nine months ended~~COVID-19 outbreak have and as of September 30, 2017, amounts from these partners and agencies totaled 46% of total revenue and $7.3 million in net accounts receivable. Based on the timing of payments, we generally have this level of amounts in outstanding accounts receivable at any given time from these partners and advertising agencies. A single advertiser, State Farm, who represented the majority of the revenue and accounts receivable generated by Resolution Media and OMD Digital, accounted for 16% of total revenues and 22% of accounts receivable for the nine months ended and as of September 30, 2017, respectively. We expect campaign spend levels related to State Farm to be lower compared to previous periods, which will result in ~~lower total revenues~~further payment delays and ~~contributions. For the nine months ended and as~~an impairment of ~~September 30, 2017, amounts from these resellers and agencies along with T-Mobile accounted for 56% of total revenue and $9.7 million in net accounts receivable.~~

our customers to make payments. In ~~2016, we extended~~turn, this will also cause our local leads platform and pay-for-call services agreements with YP through December 31, 2018. The primary local leads platform arrangement provides YP flexibility to migrate active accounts to itself or a third-party provider prior to the end of an advertiser contract and provides YP with certain termination rights beginning January 1, 2018 upon four-months prior notice. We also have a separate distribution partner agreement with YP. We expect YP and local leads platform advertisers in future periods will comprise lower total revenues compared to previous periods. Dex recently acquired YP Holdings, which is the parent company of YP. We have a separate partner reseller arrangement with Dex for call advertising services. It is possible that this acquisition may result in changes to our relationship and arrangements with YP and/or Dex, including changes that may result in a significant reduction in the paid account fees and agency fees that we receive from YP. There can be no assurance that our business with YP and/or Dex in the future will continue at or near current revenue and contribution levels, that we will be able to renew and extend the contracts, and if renewed, the contracts may be on less favorable terms to us, any of which could have a material adverse effect on our future operating results. Net accounts receivable balances outstanding as of September 30, 2017 from YP including Dex totaled $3.0 million.

We have revenue concentrations with certain large advertisers including reseller partners and advertising agencies. Many of these customers are not subject to long term contracts with us or have contracts with near term expiration dates such as YPG, and are generally able to reduce or cease advertising spending at any time and for any reason. Reseller partners purchase various advertising and marketing services, as well as provide us with a large number of advertisers. We expect YPG local leads platform revenues to be lower ~~prospectively compared~~than current levels if customers are unable to ~~previous periods and to cease under~~procure our services at the ~~contractual arrangement by~~same volumes as previously, which we expect will be the end of 2017. A loss of certain reseller partners or a decrease in revenue from these resellers could adversely affect our business. In some cases, we engage with advertisers through advertising agencies, who act on behalf of the advertisers. Advertising agencies, such as Resolution Media and OMD Digital, may place insertion orders with us on behalf of advertisers (including State Farm)case for particular advertising campaigns for a set period of time and are not obligated to commit beyond the campaign governed by a particular insertion order and may also cancel the campaign prior to completion. Advertising agencies also have relationships with many different providers, each of whom may be running portions of the advertising campaign. We have call advertising arrangements with certain large customers, such as T-Mobile, which provide flexibility around financial commitments, termination rights, indemnification, and security obligations. Our large customers may vary spend levels and there can be no assurances that our large customers including T-Mobile will continue to spend at levels similar to prior quarters. If anyseveral of our ~~largest customers are acquired, such acquisition may~~customers. It will also adversely impact ~~its advertising spending or budget~~our collectability associated with ~~us, including due~~our accounts receivable balances and result in higher bad debt expenses. In addition, we expect it will reduce our cash flows from the levels we have experienced in recent periods. This expected adverse impact on our operating cash flows will correspondingly reduce our liquidity

Additionally, the Seattle, WA City Council recently implemented a new employee payroll tax which imposed a quarterly tax on businesses with rates ranging from 0.7% to ~~rebranding, change~~2.4% on certain employee and independent contractor earnings and was effective January 1, 2021. This new employee payroll tax expense will result in advertising agency, or change in media tactics. A significant reduction in advertising spending or budgets by our largest customers, or the loss of one or more of these customers, if not replaced by new customers or an increase in ~~business~~our operating expenses since a number of our employees are based in Seattle. In addition, we expect it will reduce our cash flows to some extent from ~~existing customers, would adversely affect revenues and profitability.~~the levels we have experienced in recent periods. This ~~could have a material adverse effect~~expected impact on our ~~results of operations and financial condition. There can be no assurances that these partners or other advertisers~~operating cash flows will ~~not experience financial difficulty, curtail operations,~~correspondingly reduce ~~or eliminate spend budgets, change marketing strategies or agency affiliations, be acquired by parent companies with alternative media tactics, delay payments or otherwise forfeit balances owed.~~our liquidity.

Cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2017 of approximately $1.3 million~~March 31, 2021 was $100,000 and was primarily attributable to cash paid for purchases ~~for~~of property and equipment.

Cash used in investing activities ~~for~~was $509,000 during the ~~nine~~three months ended ~~September 30, 2016 of approximately $829,000~~March 31, 2020, which was almost entirely attributable to amounts used by continuing operations and primarily attributable to purchases ~~for~~of property and ~~equipment of approximately $594,000 and cash paid for costs incurred as a result of the sale of the remaining Archeo assets of $224,000.~~equipment.

We expect property and equipment purchases in the near and intermediate term to be ~~stable to relatively~~modestly higher compared to our most recent periods. We expect any increase to our operations to have a corresponding increase in expenditures for our systems and personnel. We plan to continue a strategic expense investment in 2021 to address various infrastructure initiatives, including consolidating infrastructure and data centers. In consideration of the strategic expense initiative, we expect our expenditures for product development initiatives ~~and internally developed software~~ will be relatively stable to modestly higher in the near and intermediate term and increase in the longer term in absolute dollars with any acceleration in development activities and as we increase the number of personnel and consultants to enhance our service offerings. In the intermediate to long term, we also expect to increase the number of personnel supporting our sales, marketing and related growth initiatives.

Cash provided by financing activities ~~for~~was $33,000 during the ~~nine~~three months ended ~~September 30, 2017 of approximately $24,000~~March 31, 2021. The cash used was primarily attributable to proceeds from the employee stock purchase ~~plan.~~ program.

Cash ~~used in~~provided by continuing financing activities for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2020 of approximately ~~$178,000~~$8,000 was primarily attributable to repurchases of 89,000 shares of Class B common stock for treasury and minimum tax withholding payments related to certain executive restricted stock award vests totaling $519,000, which was partially offset by proceeds ~~primarily~~ from ~~employee stock option exercises and~~ the employee stock purchase ~~plan of $341,000.~~

The following table summarizes our contractual obligations as of September 30, 2017, and the effect these obligations are expected to have on our liquidity and cash flows in future periods (in thousands).

We anticipate that we will need to invest working capital towards the development of our overall operations and to fund any losses from operations, and we expect that capital expenditures may increase in future periods, particularly with any increase in our operating activities. We may also pursue a significant number of acquisitions. As a result, we could experience a reduction of our cash balances or the incurrence of debt.

In November 2014, our board of directors authorized a new share repurchase program (the “2014 Repurchase Program”) which supersedes and replaces any prior repurchase programs. Under the 2014 Repurchase Program, we are authorized to repurchase up to 3 million shares of our Class B common stock in the aggregate through open market and privately negotiated transactions, at such times and in such amounts as we deem appropriate. Repurchases may also be made under a Rule 10b5-1 plan, which would permit shares to be repurchased when we might otherwise be precluded from doing so under insider trading laws. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability, and other market conditions. The 2014 Repurchase Program does not have an expiration date and may be expanded, limited or terminated at any time without prior notice. We have made no repurchases under the 2014 Repurchase Program for the for the nine months ended September 30, 2016 and 2017.program.

Based on our operating plans we believe that our resources will be sufficient to fund our operations, including any investments in strategic initiatives, for at least twelve months, ~~as well as potential strategic initiatives which~~however the length and severity of the pandemic could ~~include acquisitions and/or a partial return of capital to~~influence our ~~stockholders.~~operating plans and resources significantly. Additional equity and debt financing may be needed to support our acquisition strategy, our long-term obligations and our company’s needs. There can be no assurance that, if we needed additional funds, financing arrangements would be available in amounts or on terms acceptable to us, if at all. Failure to generate sufficient revenue or raise additional capital could have a material adverse effect on our ability to continue as a going concern and to achieve our intended business objectives.

Our Condensed Consolidated Financial Statements have been prepared using accounting principles generally accepted in the United States (U.S. GAAP). Our critical accounting policies are those that we believe have the most significant impact to reported amounts of assets, liabilities, revenue and expenses and the related disclosures of contingent assets and liabilities and that require the most difficult, subjective, or complex judgements.

The policies below are critical to our business operations and the understanding of our results of operations. In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of our results.

Our condensed consolidated financial statements have been prepared using accounting principles generally accepted in the United States for interim financial information. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the related disclosures of contingent assets and liabilities. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

~~Our~~We believe the following topics reflect our critical accounting policies and our more significant judgement and estimates used in the preparation of our financial statements.

Our Company consolidates all entities that we control by ownership of a majority voting interest. Additionally, there are situations in which U.S. GAAP requires consolidation even though the usual condition of consolidation (ownership of a majority voting interest) does not apply. Generally, this occurs when an entity holds an interest in another business enterprise that was achieved through arrangements that do not involve voting interests, which results in a disproportionate relationship between such entity's voting interests in, and its exposure to the economic risks and potential rewards of, the other business enterprise. This disproportionate relationship results in what is known as a variable interest, and the entity in which we have the variable interest is referred to as a "VIE." An enterprise must consolidate a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both (1) the power to direct the activities of the VIE that most significantly impact the entity's economic performance and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

Our Company holds a remaining interest in the related party purchaser of our divested operations, for which we determined we were not the primary beneficiary. Our variable interests in this VIE primarily relate to the ~~following matters~~issuance of a 10% equity interest in the related party purchaser; contingent consideration related to the transaction; and ~~are described below:~~

All inter-company transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to the Condensed Consolidated Financial Statements in the prior periods to conform to the current period presentation.

We ~~currently~~generate the majority of our revenues from core analytics and solutions services. Our call analytics technology platform provides data and insights that can measure the performance of calls and texts for our customers. We generate revenue by delivering call advertising services that enable advertisers of all sizes to reach consumers across online, mobile and offline sources. Our primary source of revenue is performance-based advertising, which includes pay-for-call advertising and cost-per-action services. For pay-for-call advertising, revenue is recognized upon delivery of qualified and reported phone calls or other action to our advertisers or advertising service providers’ listing which occurs when a mobile, online or

offline user makes a phone call or clicks on any of their advertisements after it has been placed by us or by our distribution partners. Each phone call or other action on an advertisement listing represents a completed transaction. For cost-per-action services, revenue is recognized when a user makes a phone call from our ~~advertiser’s listing or is redirected from one of our websites or a third-party website in our distribution network to an advertiser website and completes the specified action.~~

We have entered into agreements with various distribution partners in order to expand our distribution network, which includes search engines, directories, product shopping engines, third-party vertical and branded websites, and mobile and offline sources. We generally pay distribution partners based on a specified percentage of revenue or a fixed amount per phone call or other action on these listings. We act as the primary obligor in these transactions, and we are responsible for providing customer and administrative services to the advertiser. In accordance with FASB ASC 605, ~~Revenue Recognition~~ the revenue derived from advertisers who receive paid introductions through us as supplied by distribution partners is reported gross based upon the amounts received from the advertiser. We also recognize revenue for certain agency contracts with advertisers under the net revenue recognition method. Under these specific agreements, we purchase listings on behalf of advertisers from search engines and directories. We are paid account fees and also agency fees based on the total amount of the purchase made on behalf of these advertisers. Under these agreements, our advertisers are primarily responsible for choosing the publisher and determining pricing, and we, in certain instances, are only financially liable to the publisher for the amount collected from our advertisers. This creates a sequential liability for media purchases made on behalf of advertisers. In certain instances, the web publishers engage the advertisers directly and we are paid an agency fee based on the total amount of the purchase made by the advertiser. In limited arrangements, resellersanalytics technology platform when customers pay us a fee for ~~fulfilling an advertiser’s campaign~~each call/text or call/text related data element they receive from calls or texts including call-based ads we distribute through our sources of call distribution or for each phone number tracked based on a pre-negotiated rate. As such, the majority of total revenue is derived from contracts that include consideration that is variable in nature. The variable elements of these contracts primarily include the number of transactions (for example, the number qualified phone calls).

Customers typically receive the benefit of our ~~distribution network~~services as they are performed and ~~we act~~substantially all of our revenue is recognized over time as services are performed. The majority of the ~~primary obligor. We recognize revenue for these fees~~Company’s customers are invoiced on a monthly basis following the month of the delivery of services and are required to make payments under standard credit terms.

For arrangements that include multiple performance obligations, the ~~gross revenue recognition method.~~

~~When an arrangement involves multiple deliverables, the entire fee~~transaction price from the arrangement is allocated to each respective ~~deliverable~~performance obligation based on its relative standalone selling price and recognized when revenue recognition criteria for each ~~deliverable~~performance obligation are met. The standalone selling price for each ~~deliverable~~performance obligation is established based on the sales price ~~charged when the same deliverable is sold separately, the price~~ at which we would sell a ~~third-party sells the same~~promised good or ~~similar and largely interchangeable deliverable on~~service separately to a ~~standalone basis~~customer or the estimated standalone selling ~~price if the deliverable were to be sold separately.~~price.

FASB ASC Topic 718, Compensation – Stock Compensation (ASC 718) requires the measurement and recognition of compensation for all stock-based awards made to employees, non-employees and directors including stock options, restricted stock issuances, and restricted stock units be based on estimated fair values. ~~Beginning January 1, 2017, we~~We account for forfeitures as they ~~occur, rather than estimating expected forfeitures.~~occur. We measure ~~stock-based~~stock-

based compensation cost at the grant date based on the fair value of the award and recognize it as expense over the vesting or service period, as applicable, of the stock-based award using the straight-line method.

We generally use the Black-Scholes option pricing model as our method of valuation for stock-based awards with ~~time- based~~time-based vesting. Our determination of the fair value of stock-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected life of the award, our expected stock price, volatility over the term of the award and actual and projected exercise behaviors.

Although the fair value of stock-based awards is determined in accordance with ~~FASB~~ ASC 718, Compensation – Stock Compensation, the assumptions used in calculating fair value of stock-based awards and the use of the Black-Scholes option pricing model is highly subjective, and other reasonable assumptions could provide differing results. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. See Note ~~3 Stock-based Compensation Plans~~6. Stockholder’s Equity in the ~~Condensed~~ Notes to Condensed Consolidated Financial Statements for additional information.

Accounts receivable balances are presented net of allowance for doubtful accounts and advertiser credits. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our accounts receivable. We determine our allowance based on analysis of historical bad debts, advertiser concentrations, advertiser creditworthiness and current economic trends. We review the allowance for collectability on a quarterly basis. Account balances are written off against the allowance after all reasonable means of collection have been exhausted and the potential recovery is considered remote. If the financial condition of our advertisers were to deteriorate, resulting in an impairment of their ability to make payments, or if we underestimated the allowances required,

additional allowances may be required which would result in increased general and administrative expenses in the period such determination was made.

We determine our allowance for advertiser credits and adjustments based upon our analysis of historical credits. Material differences may result in the amount and timing of our revenue for any period if our management made different judgments and estimates.

Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed in business combinations accounted for under the purchase method. Intangible assets from acquisitions represent customer relationships, technologies, non-compete agreements, and tradenames related to previous acquisitions. These assets are determined to have definite lives and are amortized on a straight-line basis over the estimated period over which we expect to realize economic value related to the intangible asset. The amortization periods range from one year to 5 years.

We apply the provisions of the FASB ASC Topic 350, “Intangibles - Goodwill and Other” (ASC 350) whereby assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead test for impairment at least annually. ASC 350 also requires that intangible assets with definite useful lives be amortized over the respective estimated lives to their estimated residual values and reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment” (ASC 360). Intangible assets are "grouped" and evaluated for impairment at the lowest level of identifiable cash flows.

Goodwill is tested annually on November 30 for impairment. Goodwill and intangible assets are also tested more frequently if events and circumstances indicate that the assets might be impaired. The provisions of the accounting standard for goodwill and other intangible assets allow us to first assess qualitative factors to determine whether it is necessary to perform a quantitative impairment test. Events and circumstances considered in determining whether the carrying value of goodwill and intangible assets may not be recoverable include but are not limited to significant changes in performance relative to expected operating results; significant changes in the use of the assets; and significant changes in competition and market dynamics. These estimates are inherently uncertain and can be affected by numerous factors, including changes in economic, industry or market conditions, changes in business operations, a loss of a significant customer, changes in competition or changes in the share price of common stock and market capitalization. If our stock price were to trade below book value per share for an extended period of time and/or we experience adverse effects of a continued downward trend in the overall economic environment, changes in the business itself, including changes in projected earnings and cash flows, we may have to recognize an impairment of all or some portion of our goodwill and intangible assets. An impairment loss is recognized to the extent that the carrying amount exceeds the asset or asset group’s fair value. If the fair value is lower than the carrying value, a material impairment charge may be reported in our financial results. We exercise judgment in the assessment of the related useful lives of intangible assets, the fair values, and the recoverability. In certain instances, the fair value is determined in part based on cash flow forecasts and discount rate estimates. We cannot accurately predict the amount and timing of any impairment of goodwill or intangible assets. Should the value of goodwill or intangible assets become impaired, we would record the appropriate charge, which could have an adverse effect on our financial condition and results of operations.

Any future impairment charges could have a material adverse effect on our financial results.

We are subject to income taxes in the U.S. and certain international jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax law is recognized in results of operations in the period that includes the enactment date. On January 1, 2017, previously unrecognized excess tax benefits of $3.7 million were recorded to accumulated deficit and an increase to our deferred tax assets with a corresponding change to the valuation allowance as a result of the adoption of ASU 2016-09. We also adopted ASU 2015-17, on January 1, 2017, which requires all deferred tax assets and liabilities, and any related valuation allowance, to be classified as non-current on the balance sheet. The adoption of this standard did not have any impact on the company’s financial statements due to the full valuation allowance recorded on our deferred taxes. Uncertain tax positions as of September 30, 2017 amounted to $1.1 million.

We determined that it is not more likely than not that ~~its~~our deferred tax assets (excluding certain insignificant Canadian deferred tax assets) will be realized and accordingly recorded 100% valuation allowance against these deferred tax assets as of December 31, ~~2016~~2020 and ~~September 30, 2017.~~March 31, 2021. In assessing whether it is more likely than not that our deferred tax assets will be realized, factors considered included: historical taxable income, historical trends related to advertiser usage rates, projected revenues and expenses, macroeconomic conditions, issues facing the industry, existing contracts, our ability to project future results and any appreciation of its other assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. We considered the future reversal of deferred tax liabilities, carryback potential, projected taxable income, and tax planning strategies as well as its history of taxable income or losses in the relevant jurisdictions in making this assessment. Based on the level of historical taxable losses and the uncertainty of projections for future taxable income over the periods for which the deferred tax assets are deductible, we concluded that it is not more likely than not that the gross deferred tax assets will be realized.

We determine if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to us the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to us if we obtain the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. We have lease agreements which include lease components. We do not have lease agreements which include non-lease components or variable lease components.

Operating leases are included in right of use assets (“ROU”) and lease liabilities on our Condensed Consolidated Balance Sheets. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. We primarily leases office facilities which are classified as operating leases. We do not have finance leases. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in our leases, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The lease term for all of our leases includes the non-cancellable period of the lease. Options for lease renewals have been excluded from the lease term (and lease liability) for our leases as the reasonably certain threshold is not met. Lease payments included in the measurement of the lease liability are comprised of fixed payments.

The new standard also provides practical expedients for an entity’s ongoing accounting. We elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we did not recognize ROU assets or lease liabilities, and this included not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. We also elected the practical expedient to not separate lease and non-lease components for all of its leases.

~~In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which amends the existing~~For discussion regarding recent accounting ~~standards for revenue recognition. ASU 2014-09 requires an entity to recognize the amount~~pronouncements not yet effective, see Note 1. Description of ~~revenue to which it expects to be entitled when products or services are transferred to customers. In July 2015, the FASB voted to approve a one-year delay~~ Business and Basis of Presentation of the effective date. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within those annual periods. ASU 2014-09 may be applied using either (i) a full retrospective approach for all periods presented in the period of adoption, or (ii) a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of adoption and providing certain additional disclosures. In 2016, the FASB issued additional guidance to clarify the implementation guidance including ASU No. 2016-08, ~~Revenue from Contracts with Customers - Principal versus Agent Considerations~~. This ASU clarifies the implementation guidance for principal versus agent considerations in ASU No. 2014-09 and provides indicators that assist in the assessment of control. We will adopt the new standard on January 1, 2018 using the modified retrospective approach. Our evaluation of the impact of the new standard is ongoing and while we have not yet completed our assessment of the effect that ASU No. 2014-09 and related standards will have on our consolidated financial statements and related disclosures, we will be required to include additional disclosures in the notesNotes to our ~~consolidated financial statements.~~

~~In February 2016, the FASB issued Accounting Standards Update No. 2016-02~~ ~~Leases (Topic 842) (ASU 2016-02)~~, an ASU requiring the recognition of lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We currently plan to adopt the new standard on January 1, 2019. The ASU must be adopted using a modified retrospective approach. We anticipate that adoption will affect our statement of financial position and will require changes to some of our processes. Most significant to us, the new guidance requires lessees to recognize operating building leases with a

term of more than 12 months as lease assets and lease liabilities. We are currently in the process of evaluating the impact of adoption of ASU 2016-02 will have on our consolidated financial statements.

~~In June 2016, the FASB issued Accounting Standards Update No. 2016-13~~,Condensed Consolidated Financial ~~Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (ASU 2016-13)~~, an ASU amending the impairment model for most financial assets and certain other instruments. The ASU is effective for reporting periods beginning after December 15, 2019, with early adoption permitted after December 15, 2018. The ASU must be adopted using a modified-retrospective approach. We do not expect adoption of ASU 2016-13 to have a material impact on our consolidated financial statements.

~~In August 2016, the FASB issued Accounting Standards Update No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15)~~, an ASU which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The ASU must be adopted using retrospective approach. We do not expect adoption of ASU 2016-15 to have a material impact on its consolidated financial statements.

~~In October 2016, the FASB issued Accounting Standards Update No. 2016-16,~~ ~~Income Taxes (Topic 740), Intra-Entity Transfers of Assets other than Inventory (ASU 2016-16)~~, an ASU requiring the recognition of income tax effects of intercompany sales and transfers of assets other than inventory in the period in which the transfer occurs. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The ASU must be adopted using a modified retrospective approach. We do not expect adoption of ASU 2016-16 to have a material impact on its consolidated financial statements.

~~In November 2016, the FASB issued Accounting Standards Update No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash (a Consensus of the FASB Emerging Issues Task Force) (ASU 2016-18)~~, an ASU requiring entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. As a result, entities will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents in the statement of cash flows. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The ASU must be adopted using retrospective approach. We do not expect adoption of ASU 2016-18 to have a material impact on its consolidated financial statements.

~~In January 2017, the FASB issued Accounting Standards Update No. 2017-01,~~ ~~Business Combinations (Topic 805), Clarifying the Definition of a Business (ASU 2017-01)~~, an ASU changing the definition of a business to assist with evaluating whether a set of transferred assets and activities is a business. The ASU is effective for reporting periods beginning after December 15, 2017, and interim periods within those years, with early adoption permitted. The ASU must be adopted using a prospective approach on or after the effective date. We do not expect adoption of ASU 2017-01 to have a material impact on our consolidated financial statements.

In May 2017, the FASB issued Accounting Standards Update No. 2017-09, Compensation - Stock Compensation (Topic 718), Scope of Modification Accounting, an ASU clarifying when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. The ASU is effective for reporting periods beginning after December 15, 2017, with early adoption permitted. The ASU should be adopted using a prospective approach on or after the adoption date. We do not expect adoption of ASU 2017-09 to have a material impact on our consolidated financial statements.Statements.

Our web site, www.marchex.com, provides access, without charge, to our annual report on Form 10-K, ~~as amended,~~ quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such materials are electronically filed with the Securities and Exchange Commission. To view these filings, please go to our web site and click on “Investor Relations” and then click on “SEC Filings.” Investors and others should note that we announce material financial

information to our investors using our investor relations website, press releases, SEC filings, and public conference calls and webcasts. We also use the following social media channels as a means of disclosing information about us, our services, and other matters, and for complying with our disclosure obligations under Regulation FD:

The information we post through these social media channels may be deemed material. Accordingly, investors should monitor the above account and the blog, in addition to following our investor relations website, press releases, SEC filings, and public conference calls and webcasts. This list may be updated from time to time. The information we post through these channels is not a part of this Quarterly Report on Form 10-Q.

Our exposure to market risk is limited to foreign currency and interest income sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because the majority of our investments are in short-term, money market funds. We place our investments with high-quality financial institutions. Due to the nature of our short-term investments, we believe thatAs a smaller reporting company under SEC Regulations, we are not ~~subject~~required to any material market risk exposure. We do not have any material foreign currency or other derivative financial instruments. The effect of changes in foreign currency exchange rates on our operating results was not material.provide this information.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive ~~officer and~~ officer/our principal financial officer, of the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based on this evaluation, our principal executive officer ~~and~~/ our principal financial officer ~~have~~has concluded that, as of the date of the evaluation, our disclosure controls and procedures were effective.

During the three months ended ~~September 30, 2017,~~March 31, 2021, no change was made to our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 outbreak. We are continually monitoring and assessing the COVID-19 situation and our internal controls to minimize any impact on their design and operating effectiveness.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance of achieving the desired control objectives.

In addition, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We are not a party to any material legal proceedings. From time to time, however, we may be subject to legal proceedings and claims in the ordinary course of business, including claims of alleged infringement of intellectual property rights, and a variety of claims arising in connection with our products and services.

Set forth below and elsewhere in this report and in other documents we file with the SEC are risks and uncertainties that could cause our actual results to materially differ from the results contemplated by the forward-looking statements contained in this report and in other documents we file with the SEC. Some of the risk factors were previously disclosed in our December 31, 2016 Annual Report on Form 10-K as amended. They have been updated to include information as of November 6, 2017.RISK FACTORS

An investment in our Class B common stock involves various risks, including those mentioned below and those that are discussed from time to time in our other periodic filings with the SEC. Investors should carefully consider these risks, along with the other information contained in this report, before making an investment decision regarding our stock. There may be additional risks of which we are currently unaware, or which we currently consider immaterial. All of these risks could have a material adverse effect on our business, financial condition, results of operations, and the value of our stock.

The continuing impacts of COVID-19 are highly unpredictable and could be significant, and may have an adverse effect on our business, operations and our future financial performance.

In late 2019, COVID-19 emerged and by early March 2020 was declared a global pandemic by the World Health Organization. Governments and municipalities around the world instituted measures in an effort to ~~Our Company~~control the spread of COVID-19, including quarantines, shelter-in-place orders, school closings, travel restrictions, and closure of non-essential businesses. By the end of March 2020, the macroeconomic impacts became significant, exhibited by, among other things, a rise in unemployment and market volatility.

The global health and economic implications of this pandemic has had and is expected to continue to have significant impacts on our business, operations and future financial performance at least for the near term. As a result of the scale of the continuing COVID-19 pandemic and the speed at which the global community has been impacted, our quarterly and annual revenue trends or growth rates and expenses as a percentage of our revenues may differ significantly from our historical trends and rates, and our future operating results may fall below expectations.

The impact of the continuing COVID-19 pandemic on our business, operations and future financial performance could include, but are not limited to: significant decline in revenues due to customers adversely impacted by the COVID-19 pandemic, including many of our larger customers (such as automotive manufacturing, automotive services, dental and health provider networks, home services, real estate, small business resellers, agencies and hospitality companies, which have seen their operations largely limited or shut-down); significant decline in revenues as customer spending slows due to an economic downturn; significant decrease in our operating cash flows as a result of decreased customer spending and deterioration in the credit quality of our customers, which could adversely affect our accounts receivables; sales prospects delaying decision making and reducing propensity to purchase; extensive recent burn rate and anticipated continued significant burn rate; challenges in servicing customers and extending and entering into new agreements; anticipated reduction in customer budgets and slower sales cycles; customer requests for price concessions and extended payment terms; customer cancellations and inability to pay; customer reconsideration and delay in launching previously slated test programs with us; our working capital needs and declining cash position; recent and potentially future losses and asset impairments; suspension of hiring initiatives; absence of debt or equity financing alternatives; and the rapid and broad-based shift to a remote working environment creates inherent productivity, connectivity, and oversight challenges. In addition, the changed environment under which we are operating could have an impact on our internal controls over financial reporting as well as our ability to meet a number of our compliance requirements in a timely or quality manner.

We have largely incurred net losses since our inception, and we may incur net losses in the foreseeable future.

We had an accumulated deficit of ~~$253.2~~$304.0 million as of ~~September 30, 2017.~~March 31, 2021. Our net expenses may increase based on the initiatives we undertake which for instance, may include increasing our sales and marketing activities, hiring additional personnel, incurring additional costs as a result of being a public company, acquiring additional businesses and making additional equity grants to our employees. This may result in the reduction of our cash balances or the incurrence of debt.

We have in the past and may in the future find it advisable to take measures to streamline operations and reduce expenses, including, without limitation, reducing our workforce or discontinuing certain products or businesses. Such measures may place significant strains on our management and employees, and could impair our development, marketing, sales, and customer support efforts. We may also incur liabilities from these measures. Such effects from streamlining could have a negative impact on our business and financial results.

We believe that our future revenue growth will depend on, among other factors, our ability to attract new ~~advertisers,~~customers, compete effectively, maximize our sales efforts, demonstrate a positive return on investment, ~~for advertisers,~~ successfully improve existing products and services, and develop successful new products and services. If we are unable to generate adequate revenue growth and to manage our expenses, we may continue to incur significant losses in the future and may not be able to achieve or maintain profitability.

We are dependent on certain distribution partners, for distribution of our services, and we derive a significant amount of our total revenue through these distribution partners. A loss of distribution partners or a decrease in revenue from certain distribution partners could adversely affect our business.

A relatively small number of distribution partners currently deliver a significant percentage of calls and traffic to our advertisers. There was no distribution partner paid more than 10% of total revenues for the for the nine months ended September 30, 2017. Our existing agreements with many of our larger distribution partners permit either company to terminate without penalty on short notice and are primarily structured on a variable-payment basis, under which we make payments based on a specified percentage of revenue or based on the number of paid phone calls or click-throughs. We intend to continue devoting resources in support of our larger distribution partners, but there are no guarantees that these relationships will remain in place over the short-or long-term. In addition, we cannot be assured that any of these distribution partners will continue to generate current levels of revenue for us or that we will be able to maintain the applicable variable payment terms at their current levels. A loss of any of these distribution partners or a decrease in revenue or contribution due to lower calls and traffic or less favorable variable payment terms from any one of these distribution relationships could have a material adverse effect on our business, financial condition and results of operations. Companies distributing advertising through mobile or online Internet have experienced, and will likely continue to experience, consolidation. This consolidation has reduced the number of partners that control the mobile and online advertising outlets with the most user calls and traffic. According to the comScore qSearch analysis of the U.S. desktop search marketplace for June 2017, Yahoo! and Microsoft accounted for 11.8% and 23.0%, respectively, of the core search market in the United States and Google accounted for 63.1%. As a result, the larger distribution partners have greater control over determining the market terms of distribution, including placement of call and click-based advertisements and cost of placement. In addition, many participants in the performance-based advertising and search marketing industries control significant portions of mobile and online traffic that they deliver to advertisers. We do not believe, for example, that Google, Microsoft, and Yahoo! are as reliant as we are on a third-party distribution network to deliver their services. This gives these companies a significant advantage over us in delivering their services, and with a lesser degree of risk.

We rely on certain advertiser reseller partners and agencies, including YP and/or Dex, Resolution Media, OMD Digital, CDK Global, hibu Inc., and Web.com for the purchase of various advertising and marketing services, as well as to provide us with a large number of advertisers. A loss of certain advertiser reseller partners and agencies or a decrease in revenue from these reseller partners and agencies could adversely affect our business. Such advertisers are subject to varying terms and conditions, which may result in claims or credit risks to us.

We benefit from the established relationships and national sales teams that certain of our reseller partners, who are leading reseller partners of advertisers and advertising agencies, have in place throughout the U.S. and international markets. These advertiser reseller partners and agencies refer or bring advertisers to us for the purchase of various advertising products and services. We derive a sizeable portion of our total revenue through these advertiser reseller partners and agencies. Additionally, these advertiser reseller partners and agencies may decide to operate the advertising services we perform internally with their own teams and technology. A loss of certain advertiser reseller partners and agencies or a decrease in revenue from these clients could adversely affect our business.

Through our primary contract with YP, we generate revenues from our local leads platform. We also have a separate pay-for-call services arrangement with YP. In 2016, we extended these agreements through December 31, 2018. The primary local leads platform arrangement provides YP flexibility to migrate active accounts to itself or a third-party provider prior to the end of an advertiser contract and provides YP with certain termination rights beginning January 1, 2018 upon four-months prior notice. We also have a separate distribution partner agreement with YP. We expect YP may decrease the number of new advertiser accounts with us and may elect to migrate certain active accounts to itself or a third-party provider which would result in fewer small business accounts and related revenues, as well as reduced contribution and profitability. YP’s small business account base utilizing our platform has declined, and to the extent declines occur in their business, their small business accounts may spend fewer dollars on our pay-for-call services. We expect YP and local leads platform advertisers in future periods will comprise lower total revenues compared to previous periods and YP as a percentage of our total revenue may also comprise a smaller percentage of our total revenue with any revenue increase. Dex recently acquired YP Holdings, which is the parent company of YP. We have a separate reseller partner arrangement with Dex for call advertising services. YP is our largest reseller partner and including Dex was responsible for 22% of our total revenues for the nine months ended September 30, 2017. It is possible that this acquisition may result in changes to our relationship and arrangements with YP and/or Dex, including changes that may result in a significant reduction in the paid account fees and agency fees that we receive from YP. There can be no assurance that our business with YP and/or Dex in the future will continue at or near current revenue and contribution levels, that we will be able to renew and extend the contracts, and if renewed, the contracts may be on less favorable terms to us, any of which could have a material adverse effect on our future operating results.

These reseller partners and agencies may in certain cases be subject to negotiated terms and conditions separate from those applied to advertising clients. In some cases, the applicable contract terms may be the result of legacy or industry association documentation or simply customized advertising solutions for large reseller partners and agencies. In any case, as a consequence of such varying terms and conditions, we may be subject to claims or credit risks that we may otherwise mitigate more efficiently across our automated advertiser management platform.

These claims and risks may vary depending on the nature of the aggregated client base. Among other claims, we may be subject to disputes based on third-party tracking information or analysis. We may also be subject to differing credit profiles and risks based on the agency relationship associated with these advertisers. For such advertisers, payment may be made on an invoice basis, unlike our retail platform, which in many instances is paid in advance of the service. In some limited circumstances, we may also have accepted individual advertiser payment liability in place of liability of the advertising agency or media advisor.

We received approximately ~~60% and 53%~~30% of our revenue from our five largest customers for the ~~year ended December 31, 2016 and the nine~~three months ended ~~September 30, 2017, respectively,~~March 31, 2021, and the loss of one or more of these customers could adversely impact our results of operations and financial condition.

Our five largest customers accounted for approximately ~~60% and 53%~~30% of our total revenues for the ~~year ended December 31, 2016 and the nine~~three months ended ~~September 30, 2017, respectively. YP was~~March 31, 2021. In particular, our ~~largest customer~~customers in the automotive and ~~was responsible~~related services sectors account for ~~22%~~a significant portion of our ~~total revenues for the nine months ended September 30, 2017.~~revenue.

Through our primary contract with YP, we generate revenues from our local leads platform. We also have a separate pay-for-call services arrangement with YP. In 2016, we extended these agreements through December 31, 2018. The primary local leads platform arrangement provides YP flexibility to migrate active accounts to itself or a third-party provider prior to the end of an advertiser contract and provides YP with certain termination rights beginning January 1, 2018 upon four-months prior notice. We also have a separate distribution partner agreement with YP. We expect YP may decrease the number of new advertiser accounts with us and may elect to migrate certain active accounts to itself or a third-party provider which would result in fewer small business accounts and related revenues, as well as reduced contribution and profitability. YP’s small business account base utilizing our platform has declined, and to the extent declines occur in their business, their small business accounts may spend fewer dollars on our pay-for-call services. We expect YP and local leads platform advertisers in future periods will comprise lower total revenues compared to previous periods and YP as a percentage of our total revenue may also comprise a smaller percentage of our total revenue with any revenue increase. Dex recently acquired YP Holdings, which is the parent company of YP. We have a separate reseller partner arrangement with Dex for call advertising services. It is possible that this acquisition may result in changes to our relationship and arrangements with YP and/or Dex, including changes that may result in a significant reduction in the paid account fees and agency fees that we receive from YP. There can be no assurance that our business with YP and/or Dex in the future will continue at or near current revenue and contribution levels, that we will be able to renew and extend the contracts, and if renewed, the contracts may be on less favorable terms to us, any of which could have a material adverse effect on our future operating results.

We have arrangements with Resolution Media and OMD Digital, who act as agents on advertisers’ behalf, for pay-for-call services whereby we charge an agreed upon price for qualified calls or leads from our network and call analytic services. A single advertiser, State Farm who utilizes our services primarily through Resolution Media and OMD Digital, accounted for 16% of total revenues for the nine months ended September 30, 2017. We expect campaign spend levels related to State Farm to be lower compared to previous periods, which will result in lower total revenues and contributions.

Many of our ~~other large~~ customers ~~including reseller partners, and advertising agencies~~ are not subject to long term contracts with us or have contracts with near term expiration dates ~~such as YPG,~~ and are able to reduce or in some cases cease ~~advertising spend~~spending at any time and for any reason. Reseller partners purchase various advertising and marketing services from us, as well as provide us with a large number of advertisers. We expect YPG local leads platform revenues to be lower prospectively compared to previous periods and to cease under the contractual arrangement by the end of 2017. A loss of certain reseller partners or a decrease in revenue from these resellers could adversely affect our business. In some cases, we engage with advertisers through advertising agencies, who act on behalf of the advertisers. Advertising agencies, such as Resolution Media and OMD Digital, may place insertion orders with us on behalf of advertisers (including State Farm) for particular advertising campaigns for a set period of time and are not obligated to commit beyond the campaign governed by a particular insertion order and may also cancel the campaign prior to completion. Advertising agencies also have relationships with many different providers, each of whom may be running portions of the advertising campaign. We have ~~call advertising arrangements~~agreements with certain large customers ~~such as T-Mobile,~~ which provide flexibility around financial commitments, termination rights, indemnification, and security obligations. Our large customers may vary spend levels and there can be no assurances that our large customers ~~including T-Mobile~~ will continue to spend at levels similar to prior quarters. If any of our largest customers are acquired, such acquisition may impact its ~~advertising~~ spending with us. Furthermore, our large customers from time to time may impose financial condition, data security and privacy or ~~budget with us, including due~~insurance requirements that we may not be able to ~~rebranding, change in advertising agency, or change in media tactics.~~satisfy. A significant reduction in ~~advertising~~ spending ~~or budgets~~ by our largest customers, or the loss of one or more of these customers, if not replaced by new customers or an increase in business from existing customers, would have a material adverse effect on our ~~future operatingresults.~~business, financial condition and results of operations.

Our large customers have substantial negotiating leverage, which may require that we agree to terms and conditions that may have an adverse effect on our business.

Our large customers have substantial purchasing power and leverage in negotiating contractual arrangements with us. These customers may seek for us to develop additional features, may require penalties for failure to deliver such features, may seek discounted product or service pricing, and may seek more favorable contractual terms. As we sell more products and services to this class of customer, we may be required to agree to such terms and conditions. Such large customers also have substantial leverage in negotiating resolution of any disagreements or disputes that may arise. Any of the foregoing factors could result in a material adverse effect on our business, financial condition and results of operations.

If some of our customers experience financial distress or suffer disruptions in their business, their weakened financial position could negatively affect our own financial position and results.

We have a diverse customer base, and, at any given time, one or more customers may experience financial distress, file for bankruptcy protection, go out of business, or suffer disruptions in their business. We believe this risk is magnified at least for the near term by the disruption caused by the recent coronavirus outbreak. In addition, this disruption has disproportionately impacted certain business sectors, including sectors where we have significant customers such as automotive, financial services, home services and travel and hospitality. If a customer with whom we do a substantial amount of business experiences financial difficulty or suffers disruptions in their business, it could delay or jeopardize the collection of accounts receivable, result in significant reductions in services provided by us and may have a material adverse effect on our results of operations and liquidity.

~~We may incur liabilities for the activities of our advertisers, reseller partners, distribution partners and other users of our services, which could adversely affect our business.~~

Many of our advertisement distribution processes are automated. In some cases, advertisers or reseller partners use our online tools and account management systems to create and submit advertiser listings, and in other cases, we create and submit advertising listings on behalf of our advertisers or reseller partners using the distribution partners’ user interface. Although we monitor our distribution partners on an ongoing basis primarily for traffic quality, these partners control the distribution of the advertiser listings provided in the user interface submissions.

We have a large number of distribution partners who display our advertiser listings on their networks. Our advertiser listings are delivered to our distribution partners in an automated fashion through the distribution partners’ user interface. Our distribution partners are contractually required to use the listings created by our advertiser customers in accordance with applicable laws and regulations and in conformity with the publication restrictions in our agreements, which are intended to promote the quality and validity of the traffic provided to our advertisers. Nonetheless, we do not operationally control or manage these distribution partners or third parties they may contract with and any breach of these agreements on the part of any distribution partner or its affiliates could result in liability for our business. These agreements include indemnification obligations on the part of our distribution partners, but there is no guarantee that we would be able to collect against offending distribution partners or their affiliates in the event of a claim under these indemnification provisions. Alternatively, we may incur substantial costs as part of our indemnification obligations to distribution partners for liability they may incur as a result of displaying content we have provided them. Any costs incurred as a result

~~of activities of our distribution partners and their third-party partners could have a material adverse effect on our business, operating results and financial condition.~~

We do not conduct a manual editorial review of a substantial number of the advertiser listings directly submitted by advertisers or reseller partners online, nor do we manually review the display of the vast majority of the advertiser listings by our distribution partners submitted to us by the distribution partners’ user interface. Likewise, in cases where we provide editorial or value-added services for our large reseller partners or agencies, such as ad creation and optimization for local advertisers or landing pages and micro-sites for pay-for-call customers, we rely on the content and information provided to us by these agents on behalf of their individual advertisers. We do not investigate the individual business activities of these advertisers other than the information provided to us or in some cases review of advertiser websites. We may not successfully avoid liability for unlawful activities carried out by our advertisers or reseller partners and other users of our services or unpermitted uses of our advertiser listings by distribution partners and their affiliates.

Our potential liability for unlawful activities of our advertisers and other users of our services or unpermitted uses of our advertiser listings and advertising services and platform by distribution partners and reseller partners and agencies could require us to implement measures to reduce our exposure to such liability, which may require us, among other things, to spend substantial resources, to discontinue certain service offerings or to terminate certain distribution partner relationships. For example, as a result of the actions of advertisers in our network, we may be subject to private or governmental actions relating to a wide variety of issues, such as privacy, gambling, promotions, and intellectual property ownership and infringement. Under agreements with certain of our larger distribution partners, we may be required to indemnify these distribution partners against liabilities or losses resulting from the content of our advertiser listings, or resulting from third-party intellectual property infringement claims. Although our advertisers agree to indemnify us with respect to claims arising from these listings, we may not be able to recover all or any of the liabilities or losses incurred by us as a result of the activities of our advertisers.

Our insurance policies may not provide coverage for liability arising out of activities of users of our services. In addition, our reliance on some content and information provided to us by our large advertiser reseller partners and agencies may expose us to liability not covered by our insurance policies. Furthermore, we may not be able to obtain or maintain adequate insurance coverage to reduce or limit the liabilities associated with our businesses. Any costs incurred as a result of such liability or asserted liability could have a material adverse effect on our business, operating results and financial condition. Our insurance policies may not provide coverage for liability arising out of activities of users of our services. In addition, our reliance on some content and information provided to us by our large advertiser reseller partners and agencies may expose us to liability not covered by our insurance policies. Furthermore, we may not be able to obtain or maintain adequate insurance coverage to reduce or limit the liabilities associated with our businesses. Any costs incurred as a result of such liability or asserted liability could have a material adverse effect on our business, operating results and financial condition.

~~If we do not maintain and grow a critical mass of advertisers and distribution partners, the value of our services could be adversely affected.~~

Our success depends, in large part, on the maintenance and growth of a critical mass of advertisers and distribution partners and a continued interest in our call analytics, pay-for-call, performance-based advertising, and search marketing services. Advertisers will generally seek the most competitive return on investment from advertising and marketing services. Distribution partners will also seek the most favorable payment terms available in the market. Advertisers and distribution partners may change providers or the volume of business with a provider, unless the product and terms are competitive. In this environment, we must compete to acquire and maintain our network of advertisers and distribution partners. If our business is unable to maintain and grow our base of advertisers, our current distribution partners may be discouraged from continuing to work with us, and this may create obstacles for us to enter into agreements with new distribution partners. Our business also depends in part on certain of our large reseller partners and agencies to grow their base of advertisers as these advertisers become increasingly important to our business and our ability to attract additional distribution partners and opportunities. Similarly, if our distribution network does not grow and does not continue to improve over time, current and prospective advertisers and reseller partners and agencies may reduce or terminate this portion of their business with us. Any decline in the number of advertisers and distribution partners could adversely affect the value of our services.

~~The mobile advertising market may develop more slowly than expected, which could harm our business.~~

If the market for mobile marketing and advertising develops more slowly than we expect, our business could suffer. Our future success is highly dependent on the commitment of advertisers and marketers to mobile communications as an advertising and marketing medium, the willingness of our potential advertisers to outsource their mobile advertising and marketing needs, and our ability to sell our mobile advertising services to reseller partners and agencies. The mobile advertising and marketing market is rapidly evolving. Businesses, including current and potential advertisers, may find mobile advertising or marketing to be less effective than traditional advertising media or marketing methods or other technologies for promoting their products and services. As a result, the future demand and market acceptance for mobile marketing and advertising is uncertain. Many of our current or potential advertisers may have little or no experience using mobile communications for advertising or marketing purposes and have allocated only a limited portion of their advertising or marketing budgets to mobile communications advertising or marketing, and there is no certainty that they will allocate more funds in the future, if any. Funds to these types of campaigns may fluctuate greatly as different agencies and advertisers test and refine their overall marketing strategies to include mobile advertising and analytics tools. The adoption rate and budget commitments may vary from period to period as agencies and advertisers determine the appropriate mix of media and lead sources in short term and longer term campaigns.

We are dependent upon the quality of mobile, online, offline and other traffic sources in our network to provide value to our advertisers and the advertisers of our reseller partners and agencies, and any failure in our quality control could have a material adverse effect on the value of our services to our advertisers and adversely affect our revenues.

We utilize certain monitoring processes with respect to the quality of the mobile, online, offline and other traffic sources that we deliver to our advertisers. Among the factors we seek to monitor are sources and causes of low quality phone calls such as unwanted telemarketer calls or other actions such as non-human processes, including robots or robocallers, spiders or other software, the mechanical automation of calling, and other types of invalid calls, call fraud, or call spam, the purpose of which is something other than to view the underlying content. Additionally, we also seek to identify other indicators which may suggest that a user may not be targeted by or desirable to our advertisers. Even with such monitoring in place, there is a risk that a certain amount of low quality mobile, online, offline and other traffic or traffic that is deemed to be less valuable by our advertisers will be delivered to such advertisers, which may be detrimental to those relationships. We have regularly refunded fees that our advertisers had paid to us which were attributed to low quality mobile, online, offline and other traffic. If we are unable to stop or reduce low quality phone calls and Internet traffic, these refunds may increase. Low quality mobile, online, offline and other traffic may further prevent us from growing our base of advertisers and cause us to lose relationships with existing advertisers, or become the target of litigation, both of which would adversely affect our revenues.

We depend on being able to secure enough phone numbers to support our advertisers and other users of our services and any obstacles that we face which prevent us from meeting this demand could adversely affect our business.

We utilize phone numbers as part of a number of information and analytic services to advertisers, such as our call analytics, call tracking, and pay-for-call services. Our services that utilize phone numbers are designed to enable advertisers and other users of our services to utilize mobile, online and offline advertising and to help measure the effectiveness of mobile, online and offline advertising campaigns. We secure a majority of our phone numbers through telecommunication carriers that we have contracted with and a smaller number through the 800 Service Management System, and such telecommunication carriers provide the underlying telephone service. Our telecommunications carriers and telephone number acquisition process are subject to the rules and guidelines established by the Federal Communications Commission. Furthermore, to the extent we offer call recording and pay-for-call services, we may be directly subject to certain telecommunications-related regulations. The Federal Communications Commission and our telecommunication carriers may change the rules and guidelines for securing phone numbers or change the requirements for retaining the phone numbers we have already secured. As a result, we may not be able to secure or retain sufficient phone numbers needed for our services. We may also be limited in the number of available telecommunications carriers or vendors to provide such phone numbers to us in the event of any industry consolidations.

~~Our automated voice and mobile advertising-based technologies are heavily reliant on vendors.~~

Certain voice and mobile advertising-based products are heavily reliant on vendors. The free directory product that we provide relies on technology provided by third-party vendors that include voice recognition software and business, government and residence data listings. We cannot guarantee that the technology, data and services provided by our third-party vendors will be of sufficient quality to meet the demands of our customers and partners. Further, we cannot guarantee that the technologies, data and services will be available to us in the future on acceptable terms, if at all. Any perception by our customers or partners that our voice and mobile advertising-based products are incomplete or not of sufficient quality could lead to a loss in confidence by our customers or partners, which in turn could lead to a decline in revenues. If we are unable to continue maintaining, advancing and improving our voice and mobile advertising-based products, our operating results may be adversely affected.

~~Our business strategy is evolving and may involve pursuing new lines of business or strategic transactions and investments, some of which may not be successful.~~

Our industry is undergoing significant change and our business strategy is continuing to evolve to meet these changes. In order to profitably grow our business, we may need to expand into new lines of business beyond our current focus of providing mobile advertising analytics products and services, which may involve pursuing strategic transactions, including potential acquisitions of, or investments in, related or unrelated businesses. In addition, we may seek divestitures of existing businesses or assets. There can be no assurance that we will be successful with our efforts to evolve our business strategy and we could suffer significant losses as a result, which could have a material adverse effect on our business, financial condition and results of operations.

~~Our acquisitions could divert management’s attention, cause ownership dilution to our stockholders, cause our earnings to decrease and be difficult to integrate.~~

Our business strategy includes identifying, structuring, completing and integrating acquisitions. Acquisitions involve a high degree of risk. We may also be unable to find a sufficient number of attractive opportunities to meet our objectives which include revenue growth, profitability and competitive market share. Our acquired companies may have histories of net losses and may expect net losses for the foreseeable future. Acquisitions are accompanied by a number of risks that could harm our business, operating results and financial condition:

~~Consequently, we might not be successful in integrating any acquired businesses, products or technologies, and might not achieve anticipated revenue and cost benefits.~~

~~We may decide to dispose of assets or business that may no longer help us meet our objectives.~~

If we decide to sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the achievement of our strategic objectives. We may also dispose of a business at a price or on terms that are less desirable than we had anticipated. In addition, we may experience greater dis- synergies than expected, and the impact of the divestiture on our revenue may be larger than projected.

~~Our international operations and any expansion subjects us to additional risks and uncertainties and we may not be successful with our strategy to expand such operations.~~

We have limited operations, through our international subsidiaries, in other countries. We have international subsidiaries in Australia, Canada, Ireland, and the United Kingdom. Any international expansion presents unique challenges and risks. Compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions and could interfere with our ability to offer our products and services to one or more countries or expose us or our employees to fines and penalties. We may also have to offer our products and services in a modified format which may not be as compelling to certain customers, and we are subject to increased foreign currency exchange rate risks and our international operations and any expansion will require additional management attention and resources. We cannot assure you that we will be successful in any international expansion. There are risks inherent in conducting business in international markets, including:

~~Our failure to address these risks adequately could materially and adversely affect our business, revenue, results of operations and financial condition.~~

We may be subject to intellectual property claims, which could adversely affect our financial condition and ability to use certain critical technologies, divert our resources and management attention from our business operations and create uncertainty about ownership of technology essential to our business.

Our success depends, in part, on our ability to operate without infringing on the intellectual property rights of others. There can be no guarantee that any of our intellectual property will not be challenged by third parties. We may be subject to patent infringement claims or other intellectual property infringement claims, and claims of copyright infringement with respect to certain of our websites that would be costly to defend and could limit our ability to use certain critical technologies. The expansion of our call advertising business increases the potential intellectual property infringement claims we may be subject to, particularly in light of the large number of patents which have been issued (or are pending) in the telecommunications field over the last several decades, both in the U.S. and internationally. Jingle, which we acquired in 2011, was subject to patent infringement claims, which were unsuccessful at trial. We resolved this matter and obtained a license to the patents at issue.

We believe that a consolidation of patent portfolios by major technology companies and independent asset holding companies will increase the chances of aggressive assertions of patent and other intellectual property claims. Within the technology telecommunications and online sectors, among other related sectors, we have witnessed various claim holders and alleged rights holders pursue business strategies devoted to extracting settlements or license fees for a wide range of basic and commonly accepted methods and practices. We may be subject to those intellectual property claims in the ordinary course of our business. Also, our partners and customers may also find that they are subject to similar claims, in which case we may be included in any related process or dispute settlement. Any patent or other intellectual property litigation could negatively impact our business by diverting resources and management attention from other aspects of the business and adding uncertainty as to the ownership of technology, services and property that we view as proprietary and essential to our business. In addition, a successful claim of patent infringement against us and our failure or inability to license the infringed or similar technology on reasonable terms, or at all, could prevent us from using critical technologies which could have a material adverse effect on our business.

We may need additional funding to meet our obligations and to pursue our business strategy. Additional funding may not be available to us and our financial condition could therefore be adversely affected.

We may require additional funding to meet our ongoing obligations and to pursue our business strategy, which may include the selective acquisition of businesses and technologies. In addition, we have incurred, and we may incur certain obligations in the future. There can be no assurance that, if we were to need additional funds to meet these obligations, additional financing arrangements would be available in amounts or on terms acceptable to us, if at all. Furthermore, if adequate additional funds are not available, we will be required to delay, reduce the scope of, or eliminate material parts of the implementation of our business strategy, including potential additional acquisitions or internally-developed businesses.

During the second quarter of 2020, we secured $5.3 million in promissory notes to bank lenders pursuant to government loan programs (collectively, the “Loans”). At March 31, 2021, the remaining balance was $5.1 million. The difference relates to the October 2020 sale of Call Marketplace, Local Leads, and other operations not core to the analytics business.

The Loans were made under, and are subject to the terms and conditions of, the CARES Act and are administered by the U.S. Small Business Administration (“SBA”). The Loans bear an interest rate of 1% per annum, have a two-year maturity, and allow for early repayment and a deferment period until a final forgiveness decision is made between lenders and the SBA. Amounts under the Loans will be repayable to the lenders in monthly installments following the deferment period. The Loans or portions thereof may be eligible for forgiveness if certain requirements of the government program are met. Should we be audited or reviewed by the U.S. Department of the Treasury as a result of filing an application for forgiveness or otherwise, such audit or review could result in the diversion of management’s time and attention and legal and reputational costs. If we were to be audited and receive an adverse finding in such audit, we could be required to return the full amount of the Loans, which could reduce our liquidity, and potentially subject us to fines and penalties.

Our quarterly results of operations might fluctuate due to seasonality, which could adversely affect our growth rate and in turn the market price of our securities.

Our quarterly results have fluctuated in the past and may fluctuate in the future due to seasonality. Our experience has shown that during the spring and summer months, call volumes in certain verticals such as home services are generally higher than during other times of the year and during the latter part of the fourth quarter of the calendar year we generally experience lower call volumes. The extent to which call volumes may decrease during these off-peak periods is difficult to predict. Prolonged or severe decreases in call volumes during these periods may adversely affect our growth rate and results, and in turn, the market price of our securities. Historically, we have seen this trend generally reversing in the first quarter of the calendar year with increased call volumes and often new budgets at the beginning of the year for many of our customers with fiscal years ending December 31. However, there can be no assurances such seasonal trends will consistently repeat each year.

We are exposed to risks associated with credit card fraud and credit payment, and we may continue to suffer losses as a result of fraudulent data or payment failure by customers.

We have suffered losses and may continue to suffer losses as a result of payments made with fraudulent credit card data. Our failure to control fraudulent credit card transactions could reduce our net revenue and gross margin and negatively impact our standing with applicable credit card authorization agencies. In addition, under limited circumstances, we extend credit to customers who may default on their accounts payable to us or fraudulently “charge-back” amounts on their credit cards for services that have already been delivered by us.

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud, which could harm our brand and operating results.

Effective internal controls are necessary for us to provide reliable and accurate financial reports and effectively prevent fraud. We have devoted significant resources and time to comply with the internal control over financial reporting requirements of the Sarbanes-Oxley Act of 2002. In addition, Section 404 under the Sarbanes-Oxley Act of 2002 requires that we assess and in certain instances for our auditors to attest to the effectiveness of our controls over financial reporting. Our current and future compliance with the annual internal control report requirement will depend on the effectiveness of our financial reporting and data systems and controls across our operating subsidiaries. We expect these systems and controls to become increasingly complex to the extent that we integrate acquisitions and our business grows. To effectively manage this growth, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. We cannot be certain that these measures will ensure that we design, implement and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation or operation, could harm our operating results or cause us to fail to meet our financial reporting obligations. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock and our access to capital.

The Tax Cuts and Jobs Act of 2017 could adversely affect our business and financial condition.

On December 22, 2017, the U.S. government enacted comprehensive Federal tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act makes a U.S. federal net operating loss generally less valuable as an asset and changes use limitations. Net operating losses arising in taxable years beginning after December 31, 2017 are limited in use to offset eighty percent of taxable income, without the ability to carryback such net operating losses, but with an indefinite carryforward of such losses (instead of the former 2-year carryback and 20-year carryforward for net operating losses arising in taxable years beginning before December 31, 2017). Our ability to utilize our net operating losses is conditioned upon our achieving profitability in the future and generating U.S. federal taxable income and our operating loss carryforwards generated prior to December 31, 2017 could expire unused.

Tax authorities at the international, federal, state and local levels are continually reviewing the appropriate treatment of companies engaged in e-commerce and digital information services. Furthermore, from time to time, various state, federal and other jurisdictional tax authorities undertake reviews of us and our filings. In evaluating the exposure associated with various tax filing positions, we may on occasion accrue charges for probable exposures. We cannot predict the outcome of any of these reviews nor whether any will have a material adverse impact on our business. In addition, the Seattle, WA City Council has implemented a new employee payroll expense tax which increases our tax expense since a number of our employees are based in Seattle.

Our operations are less diversified, and we have reduced sources of revenue following the divestiture transaction, which may negatively impact the value and liquidity of our Class B common stock.

We consummated the divestiture of our media assets in October 2020, in part to focus on the conversational analytics and sales engagement solutions opportunity. Following the divestiture, the scope of our operations has been reduced in that our sources of revenue are limited to our call analytics business, through which we provide various analytics solutions and products, but without our former call marketplace product, local leads product or other related assets and operations. We may not be able to secure additional sources of revenue or to grow our remaining call analytics business, which could negatively impact the value and liquidity of our Class B common stock.

We have discretion in the use of the proceeds from the divestiture transaction and may not use them effectively.

Upon the consummation of the divestiture transaction, we received cash proceeds. We plan to use the proceeds for working capital and other general corporate purposes in connection with our call analytics business. Our management has broad discretion in the application of the proceeds from the divestiture transaction and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our Class B common stock. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our Class B common stock to decline. Pending their use, we may invest the proceeds in a manner that does not produce income or that loses value.

The markets in which we operate are highly competitive and rapidly changing and we may be unable to compete successfully.

There are a number of companies that develop or may develop products that compete in our targeted markets. We compete with call analytics technology providers such as Twilio, Invoca, DialogTech, and Convirza. As we continue to advance our data analytics technologies, we anticipate facing increased competition from companies providing broader products and solutions, such as companies like Oracle and Google (which offers Google Ads call tracking). The markets for our products and services are characterized by intense competition, evolving industry and regulatory standards, emerging business and distribution models, disruptive software and hardware technology developments, short product and service life cycles, price sensitivity on the part of customers, and frequent new product introductions. Current and potential competitors have established, or may establish, cooperative relationships among themselves or with third parties to increase the ability of their technologies to address the needs of our prospective customers. Furthermore, there has been a trend toward industry consolidation in our markets for several years. We expect this trend to continue as companies attempt to strengthen or hold their market positions.

The competition in our targeted markets could adversely affect our operating results by reducing the volume of the products and services we license or sell or the prices we can charge. Some of our current or potential competitors have significantly greater financial, technical and marketing resources than we do. These competitors may be able to respond more rapidly than we can to new or emerging technologies or changes in customer requirements. They may also devote greater resources to the development, promotion and sale of their products than we do. To the extent they do so, market acceptance and penetration of our products and services, and therefore our revenues, may be adversely affected. Our success depends substantially upon our ability to enhance our products and services and to develop and introduce, on a timely and cost-effective basis, new products and services that meet changing customer requirements and incorporate technological enhancements. If we are unable to develop or acquire new products, services, functionalities or technologies to adapt to these changes our business will suffer.

The conversational analytics and solutions market may develop more slowly than expected, which could harm our business.

If the market for conversational analytics solutions develops more slowly than we expect, our business could suffer. Our future success is highly dependent on the commitment of advertisers and marketers to mobile communications as an advertising and marketing medium, the increased adoption by businesses of conversational analytics and solutions, and our ability to sell our conversational analytics and solutions services to large to small customers in different verticals as well as to reseller partners and agencies. The mobile advertising and marketing market is rapidly evolving, and most businesses have historically not utilized nor allocated a portion of their marketing and/or sales budgets to conversational analytics and solutions. As a result, the future demand and market acceptance for conversational analytics and related services is uncertain.

We depend on the growth of mobile technologies, call technologies, the Internet and the Internet infrastructure for our future growth and any decrease in growth or anticipated growth in mobile, telecommunications, and Internet usage could adversely affect our business prospects.

Our future revenue and profits, if any, depend upon the continued widespread use of mobile technologies and the Internet as an effective commercial and business medium. Factors which could reduce the widespread use of mobile technologies (including mobile devices, in particular) and the Internet include possible disruptions or other damage to the mobile, Internet or telecommunications infrastructure and networks; failure of the individual networking infrastructures of our customers or cloud-based providers alleviate potential overloading and delayed response times; increased governmental regulation and taxation; and actual or perceived lack of data security or privacy protection.

In particular, concerns over the security of online transactions and the privacy of users, including the risk of identity theft, may inhibit the growth of Internet and mobile usage, including commercial transactions. In order for the mobile and online commerce market to develop successfully, we and other market participants must be able to transmit confidential information, including credit card information, securely over public networks. Any decrease in anticipated mobile and Internet growth and usage could have a material adverse effect on our business prospects.

Our business strategy is evolving and may involve pursuing new lines of business or strategic transactions and investments, some of which may not be successful.

Our industry is undergoing significant change and our business strategy is continuing to evolve to meet these changes. In order to profitably grow our business, we may need to expand into new lines of business beyond our current focus of providing call and text analytics and communications services, which may involve pursuing strategic transactions, including potential acquisitions of, or investments in, related or unrelated businesses. In addition, we may seek divestitures of existing businesses or assets and may pursue other strategic alternatives and opportunities. There can be no assurance that we will be successful with our efforts to evolve our business strategy and we could suffer significant losses as a result, which could have a material adverse effect on our business, financial condition and results of operations.

Our acquisitions could divert management’s attention, cause ownership dilution to our stockholders, cause our earnings to decrease and be difficult to integrate.

Acquisitions are accompanied by a number of risks that could harm our business, operating results and financial condition: we could experience a substantial strain on our resources, including time and money, and we may not be successful; our management’s attention could be diverted from our ongoing business concerns; we may seek to enter new markets where we have no or limited experience or where competitors may have stronger market positions; integrating new companies, including Telmetrics, Callcap and Sonar, may take longer than expected; while integrating new companies, we may lose key executives or other employees of these companies; we may issue shares of our Class B common stock as consideration for acquisitions which may result in ownership dilution to our stockholders; acquisitions of certain companies may result in us pursuing a diversified operating or holding company structure to allow us to focus on running diverse businesses independently, but in such event we may not realize the anticipated strategic benefits; we could fail to successfully integrate our financial and management controls, technology, reporting systems and procedures, or adequately expand, train and manage our workforce; we could experience customer dissatisfaction or performance problems with an acquired company or technology; we could become subject to unknown or underestimated liabilities of an acquired entity or incur unexpected expenses or losses from such acquisitions, including litigation; we could incur possible impairment charges related to goodwill or other intangible assets resulting from acquisitions or other unanticipated events or circumstances, any of which could harm our business; and we may be exposed to investigations and/or audits by federal, state or other taxing authorities.

Consequently, we might not be successful in integrating any acquired businesses, products or technologies, and might not achieve anticipated revenue and cost benefits.

We may decide to dispose of assets or a business that may no longer help us meet our objectives.

If we decide to sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the achievement of our strategic objectives. We may also dispose of a business at a price or on terms that are less desirable than we had anticipated. In addition, we may experience greater disruption to our remaining business than expected, and the impact of the divestiture on our revenue may be larger than projected, including with respect to our recent divestiture of our media assets to focus on the conversational analytics and sales engagement solutions opportunity.

We depend on being able to secure enough phone numbers to support our customers and other users of our services and any obstacles that we face which prevent us from meeting this demand could adversely affect our business.

We utilize phone numbers as part of a number of information and analytic services to our customers, such as our call and text analytics and communications. We secure a majority of our phone numbers through telecommunication carriers that we have contracted with and a smaller number through the 800 Service Management System, and such telecommunication carriers provide the underlying telephone service. Our telecommunications carriers and telephone number acquisition process are subject to the rules and guidelines established by the Federal Communications Commission. Furthermore, we may be directly subject to certain telecommunications-related regulations. The Federal Communications Commission and our telecommunication carriers may change the rules and guidelines for securing phone numbers or change the requirements for retaining the phone numbers we have already secured. As a result, we may not be able to secure or retain sufficient phone numbers needed for our services. We may also be limited in the number of available telecommunications carriers or vendors to provide such phone numbers to us in the event of any industry consolidations. In addition, mobile carriers are, or are currently contemplating, modifying messaging volume caps, adding significant one-time and recurring registration requirements for each phone number, and imposing significant additional fees. Any of the foregoing factors could result in a material adverse effect on our business, financial condition and results of operations.

Our international operations and any expansion subjects us to additional risks and uncertainties and we may not be successful with our international operations.

We have operations in Canada and through our other international subsidiaries, in other countries. We have international subsidiaries in Canada, Ireland, and the United Kingdom. Any international expansion presents unique challenges and risks. Compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business in international jurisdictions and could interfere with our ability to offer our products and services to one or more countries or expose us or our employees to fines and penalties. We may also have to offer our products and services in a modified format which may not be as compelling to certain customers, and we are subject to increased foreign currency exchange rate risks and our international operations and any expansion will require additional management attention and resources. We cannot assure you that we will be successful in our international operations.

There are risks inherent in conducting business in international markets, including: the need to localize our products and services to foreign customers’ preferences and customs, including the possibility of storing data locally if customers require; difficulties in managing operations due to language barriers, distance, staffing and cultural differences; application of foreign laws and regulations to us, in particular data and privacy regulations in Europe and other international jurisdictions, including the EU General Data Protection Regulation; compliance with anti-bribery laws, such as the Foreign Corrupt Practices Act and the UK Anti-Bribery Act; tariffs and other trade barriers; fluctuations in currency exchange rates; establishing local offices, sales channels, management systems and infrastructures; reduced protection for intellectual property rights in some countries; changes in foreign political and economic conditions; compliance with the laws of numerous taxing jurisdictions, both foreign and domestic; foreign exchange controls that might prevent us from repatriating cash earned outside the United States; the complexity and potentially adverse tax consequences of U.S. tax laws as they relate to our international operations; increased costs to establish and maintain effective controls at foreign locations; and overall higher costs of doing business internationally.

Our technical systems are vulnerable to interruption and damage that may be costly and time-consuming to resolve and may harm our business and reputation.

A disaster could interrupt our services for an indeterminate length of time and severely damage our business, prospects, financial condition and results of operations. Our systems and operations are vulnerable to damage or interruption from: fire; floods; network failure; hardware failure; software failure; power loss; telecommunications failures; break-ins; terrorism, war or sabotage; computer viruses; denial of service attacks; penetration of our network by unauthorized computer users and “hackers” and other similar events; natural disasters, including, but not limited to, hurricanes, tornadoes, and earthquakes; and other unanticipated problems.

We may not have developed or implemented adequate protections or safeguards to overcome any of these events. We also may not have anticipated or addressed many of the potential events that could threaten or undermine our technology network. Any of these occurrences could cause material interruptions or delays in our business, result in the loss of data or render us unable to provide services to our customers. In addition, if a person is able to circumvent our security measures, he or she could destroy or misappropriate valuable information, including sensitive customer information, or disrupt our operations. We have deployed firewall hardware intended to thwart hacker attacks. Although we maintain property insurance and business interruption insurance, our insurance may not be adequate to compensate us for all losses that may occur as a result of a catastrophic system failure or other loss, and our insurers may not be able or may decline to do so for a variety of reasons. If we fail to address these issues in a timely manner, we may lose the confidence of our customers and reseller partners, our revenue may decline, and our business could suffer. In addition, as we expand our service offerings and enter into new business areas, we may be required to significantly modify and expand our software and technology platform. If we fail to accomplish these tasks in a timely manner, our business and reputation will likely suffer. Furthermore, some of these events could disrupt the economy and/or our customers’ business activities and in turn materially affect our operating results.

Cybersecurity risks could adversely affect our business and disrupt our operations.

The threats to network and data security are increasingly diverse and sophisticated. Despite our efforts and processes to prevent breaches, our devices, as well as our servers, computer systems, and those of third parties that we use in our operations are vulnerable to cybersecurity risks, including cyber-attacks such as viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft or misuse, and similar disruptions from unauthorized tampering with our servers and computer systems or those of third parties that we use in our operations, which could lead to interruptions, delays, loss of critical data, unauthorized access to user data, and loss of customer confidence. In addition, we may be the target of email scams that attempt to acquire personal information or Company assets. Despite our efforts to create security barriers to such threats, we may not be able to entirely mitigate these risks. Any cyber-attack that attempts to obtain our or our users’ data and assets, disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could adversely affect our business, operating results, and financial condition, be expensive to remedy, and damage our reputation. In addition, any such breaches may result in negative publicity, adversely affect our brand, decrease demand for our products and services, and adversely affect our operating results and financial condition.

We rely on third-party technology, platforms, carriers, communications providers, and server and hardware providers, and a failure of service by these providers could adversely affect our business and reputation.

We rely upon third-party colocation providers to host our main servers. If these providers are unable to handle current or higher volumes of use, experience any interruption in operations or cease operations for any reason or if we are unable to agree on satisfactory terms for continued hosting relationships, we would be forced to enter into a relationship with other service providers or assume hosting responsibilities ourselves. If we are forced to switch hosting facilities, we may not be successful in finding an alternative service provider on acceptable terms or in hosting the computer servers ourselves. We may also be limited in our remedies against these providers in the event of a failure of service. In the past, we have experienced short-term outages in the service maintained by one of our colocation providers.

We rely upon third-party cloud providers to host certain of our products and services and this reliance is anticipated to increase over time. We may experience interruptions, delays and outages in service and availability from time to time as a result of problems with our third‑party cloud providers’ infrastructure. Lack of availability of this infrastructure could be due to a number of potential causes including technical failures, natural disasters, fraud or security attacks that we cannot predict or prevent. In addition, if our security, or that of any of these third‑party cloud providers, is compromised, or our products and services are unavailable to our customers within a reasonable amount of time or at all, then our business, results of operations and financial condition could be adversely affected.

We also rely on a select group of third-party providers for components of our technology platform and support for our services, such as hardware and software providers, telecommunications carriers and Voice over Internet Protocol (VoIP) providers, and credit card processors. As a result, key operational resources of our business are concentrated with a limited number of third-party providers. A failure or limitation of service or available capacity by any of these third-party providers could adversely affect our business and

reputation. Furthermore, if any of these providers are unable to provide the levels of service and dedicated resources over time that we required in our business, we may not be able to replace certain of these providers in a manner that is efficient, cost-effective or satisfactory to our customers, and as a result our business could be materially and adversely affected. Short term or repeat problems with any of these service providers could provide an interruption of service or service quality impairment to significant customers, which could also impact materially our revenue in any period due to credits or potential loss of significant customers.

If our security measures, including those of our vendors or partners, are breached or are perceived as not being secure, we may lose customers and incur significant legal and financial exposure and suffer an adverse effect on our business.

We store and transmit data and information about our customers and their respective users. We also work with vendors and partners who may come into contact with certain data, such as carriers, colocation and data storage facilities. We deploy security measures to protect this data and information, as do third parties we utilize to assist in data and information storage. Our security measures and those of the third parties we partner with to assist in data and information storage, as well as to assist in the delivery of services to our customers, may suffer breaches. Security breaches of our data storage systems or our third-party colocation and technology providers we utilize to store data and information relating to our customers and their respective users could expose us to significant potential liability. Similarly, security breaches of our vendors and partners, or ineffective data security by our vendors or partners, may result in similar significant liability. In addition, security breaches, actual or perceived, could result in legal liability, government fines, and the loss of customers that could potentially have an adverse effect on our business.

We may not be able to protect our intellectual property rights, which could adversely affect our competitive position.

We rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology. We also rely on a number of registered and unregistered trademarks to protect our brand.

As of December 31, 2020, in the United States, we have been issued 26 patents, which are estimated to expire between 2027 and 2038, and have 7 patent applications pending for examination. As of such date, in Canada we also have 1 issued patent which expires in 2026 and 1 patent application pending for examination. In addition, as of December 31, 2020, we have 11 trademarks registered in the United States, 4 trademarks pending registration in the United States, and 32 trademarks registered in foreign jurisdictions.

The status of any patent involves complex legal and factual questions. The scope of allowable claims is often uncertain. As a result, we cannot be sure that: (1) any patent application filed by us will result in a patent being issued; (2) that any patents issued in the future will afford adequate protection against competitors with similar technology; and (3) that the patents issued to us, if any, will not be infringed upon or designed around by others.

We further seek to protect our intellectual property rights by implementing a policy that requires our employees and independent contractors involved in development of intellectual property on our behalf to enter into agreements acknowledging that all works or other intellectual property generated or conceived by them on our behalf are our property, and assigning to us any rights, including intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.

Despite our efforts to protect our technology and proprietary rights through intellectual property rights, licenses and other contractual protections, unauthorized parties may still copy or otherwise obtain and use our software and other technology.

In addition, we may in the future expand our international operations, and effective intellectual property, copyright, trademark and trade secret protection may not be available or may be limited in foreign countries. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Further, companies in the internet, communications and technology industries may own large numbers of patents, copyrights and trademarks and may frequently threaten litigation, or file suit against us based on allegations of infringement or other violations of intellectual property rights, which may adversely affect our business or financial prospects.

We may be involved in lawsuits to protect or enforce our patents, which could be expensive and time consuming.

We may initiate patent litigation against third parties to protect or enforce our patent rights, and we may be sued by others seeking to invalidate our patents or prevent the issuance of future patents. We may also become subject to interference proceedings conducted in the patent and trademark offices of various countries to determine the priority of inventions. The defense and prosecution, if necessary, of intellectual property suits, interference proceedings and related legal and administrative proceedings is costly and may divert our technical and management personnel from their normal responsibilities. We may not prevail in any of these suits. An adverse determination of any litigation or defense proceedings could put our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not being issued. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments in the litigation. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the trading price of our Class B common stock.

We may incur liabilities for the activities of our customers and other users of our services, which could adversely affect our business.

The actual or perceived improper sending of text messages or voice calls may subject us to potential risks, including liabilities or claims relating to consumer protection laws and regulatory enforcement, including fines. For example, the Telephone Consumer Protection Act of 1991 restricts telemarketing and the sending of automatic SMS text messages without explicit customer consent. The scope and interpretation of the laws that are or may be applicable to the delivery of text messages or voice calls are continuously evolving and developing. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper consent, we could face direct liability. We rely on contractual representations made to us by our customers that they will comply with our acceptable use restrictions and applicable law in using our services. We cannot predict whether our role in facilitating our customers’ or other users’ activities would expose us to liability under applicable law.

Even if claims asserted against us do not result in liability, we may incur substantial costs in investigating and defending such claims. If we are found liable for our customers’ or other users’ activities, we could be required to pay fines or penalties, redesign business methods or otherwise expend resources to remedy any damages caused by such actions and to avoid future liability, which could have a material adverse effect on our business, financial condition and results of operations.

Our insurance policies may not provide coverage for liability arising out of activities of our customers or other users of our services. In addition, we may not be able to obtain or maintain adequate insurance coverage to reduce or limit the liabilities associated with our businesses. Any costs incurred as a result of such liability or asserted liability could have a material adverse effect on our business, operating results and financial condition.

We may be subject to those intellectual property claims in the ordinary course of our business. Also, our partners and customers may also find that they are subject to similar claims, in which case we may be included in any related process or dispute settlement. Any patent or other intellectual property litigation could negatively impact our business by diverting resources and management attention from other aspects of the business and adding uncertainty as to the ownership of technology, services and property that we view as proprietary and essential to our business. In addition, a successful claim of patent infringement against us and our failure or inability to license the infringed or similar technology on reasonable terms, or at all, could prevent us from using critical technologies which could have a material adverse effect on our business.

Federal, state, and foreign regulation of telecommunications and data privacy may adversely affect our business and operating results.

We provide information and analytics services to our customers and reseller partners. In connection therewith, we obtain certain telecommunications products and services from carriers in order to deliver these packages of information and analytic services.

Telecommunications laws and regulations (and interpretations thereof) are evolving in response to rapid changes in the telecommunications industry. If our carrier providers were to be subject to any changes in applicable law or regulation (or interpretations thereof), or additional taxes or surcharges, then we in turn may be subject to increased costs for their products and services or receive products and services that may be of less value to our customers, which in turn could adversely affect our business and operating results. Furthermore, our call recording and/or monitoring services may directly subject us to certain telecommunications-related regulations. Finally, in the event that any federal or state regulators were to expand the scope of applicable laws and regulations or their application to include certain end users and information service providers, then our business and operating results could also be adversely affected. The following existing and possible future federal and state laws could impact the growth and profitability of our business:

We may also be subject to costs and liabilities with respect to privacy issues. Several companies have incurred penalties for failing to abide by the representations made in their public-facing privacy policies. In addition, several states have passed laws that require businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event of a security breach. For example, California enacted the California Consumer Privacy Act (“CCPA”), which took effect on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. Further, it is anticipated that additional federal and state privacy-related legislation may be enacted. Such legislation could negatively affect our business.

Foreign countries may enact laws that could negatively impact our business and/or may prosecute us for violating existing laws. Such laws might include EU member country conforming legislation under applicable EU Privacy, eCommerce, Data Protection Directives (and similar legislation in other countries where we may have operations), and the EU General Data Protection Regulation, which is directly applicable to all member states and which has substantial compliance obligations and significant potential administrative fines for non-compliance. Any costs incurred in addressing foreign laws could negatively affect the viability of our business. Our exposure to this risk will increase to the extent we expand our operations internationally.

In addition, the potential regulation of new and emerging technologies, such as artificial intelligence (“AI”) which we are increasingly building into many of our new offerings, may result in increased compliance costs and risks. Any additional costs and penalties associated with increased compliance and risk reduction could make certain offerings less profitable or increase the difficulty of bringing certain offerings to market.

We may face risks related to litigation that could result in significant legal expenses and settlement or damage awards.

From time to time, we are subject to claims and litigation, which could seriously harm our business and require us to incur significant costs.

We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in these types of lawsuits. Defending against litigation may require significant attention and resources of management. Regardless of the outcome, such litigation could result in significant legal expenses.

If we are a party to material litigation and if the defenses we claim are ultimately unsuccessful, or if we are unable to achieve a favorable settlement, we could be liable for large damage awards that could have a material adverse effect on our business and Consolidated Financial Statements.

We may be subject to securities litigation in connection with the divestiture transaction, which is expensive and could divert our attention.

We may be subject to securities litigation in connection with the divestiture transaction, including possible regulatory action or class action lawsuits. Litigation is frequently initiated in connection with merger and acquisition transactions, particularly those involving insiders. Regulatory inquiries and litigation are complex and could result in substantial costs, divert our management's attention and resources, and harm our business, financial condition and results of operations.

We are susceptible to general economic conditions, natural catastrophic events and public health crises, and a downturn in spending by customers could adversely affect our operating results.

Our operating results will be subject to fluctuations based on general economic conditions. Deterioration in economic conditions could cause decreases in or delays in customer spending and reduce and/or negatively impact our short-term ability to grow our

revenues. Further, any decreased collectability of accounts receivable or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.

Furthermore, our business is subject to the impact of natural catastrophic events such as earthquakes, floods or power outages, political crises such as terrorism or war, and public health crises, such as disease outbreaks, epidemics, or pandemics (including COVID-19) on the U.S. and global economies, our markets and business locations.

The loss of our senior management, including other key personnel, could harm our current and future operations and prospects.

We are heavily dependent upon the continued services of members of our senior management team and other key personnel. Each member of our senior management team and other key personnel are at-will employees and may voluntarily terminate his or her employment with us at any time with minimal notice. Following any termination of employment, each of these ~~employees~~members would only be subject to a twelve-month non-competition and non-solicitation obligation with respect to our customers and employees under our standard confidentiality agreement. The loss of the services of any member of our senior management, including other key personnel, for any reason, or any conflict among our senior management or other key personnel, could harm our current and future operations and prospects.

We have experienced turnover in certain senior executives and the duties and responsibilities of the chief executive officer are performed by the office of the CEO consisting of Michael Arends, Ethan Caldwell and Russell Horowitz and subject to oversight by our Chairman, Anne Devereux-Mills. We are assessing our current and future senior leadership needs, although we may not be successful in ~~finding or hiring suitable additional senior leadership.~~

recent years. Additional turnover at the senior management level may create instability within the Company and our employees may decide to terminate their employment, which could further impede the maintenance of our day to day operations. Such instability could impede our ability to implement fully our business plan and growth strategy, which would harm our business and prospects.

We may have difficulty retaining current personnel as well as attracting and retaining additional qualified, experienced, highly skilled personnel, which could adversely affect the implementation of our business plan.

Our performance is largely dependent upon the talents and efforts of highly skilled individuals. In order to fully implement our business plan, we will need to retain our current qualified personnel, as well as attract and retain additional qualified personnel. Thus, our success will, in significant part, depend upon our retention of current personnel as well as the efforts of personnel not yet identified and upon our ability to attract and retain highly skilled managerial, engineering, sales and marketing personnel. We are also dependent on managerial and technical personnel to the extent they may have knowledge or information about our businesses and technical systems that may not be known by our other personnel. There can be no assurance that we will be able to attract and retain necessary personnel. The failure to hire and retain such personnel could adversely affect the implementation of our business plan.

If we are unable to obtain and maintain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors may also be adversely affected if we experience difficulty in maintaining adequate directors’ and officers’ liability insurance.

We may not be able to obtain and maintain insurance policies on terms affordable to us that would adequately insure our business and property against damage, loss or claims by third parties. To the extent our business, property or ~~property suffers~~systems suffer any damages, losses or claims by third parties that are not covered or adequately covered by insurance, our financial condition may be materially adversely affected. We currently have directors’ and officers’ liability insurance. If we are unable to maintain sufficient insurance as a public company to cover liability claims made against our officers and directors, we may not be able to retain or recruit qualified officers and directors to manage our company, which could have a material adverse effect on our operations.

It may be difficult for us to retain or attract qualified officers and directors, which could adversely affect our business and our ability to maintain the listing of our Class B common stock on the NASDAQ Global Select Market.

We may be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of changes in the rules and regulations which govern publicly-held companies, including, but not limited to, certifications from executive officers and requirements for financial experts on boards of directors. The perceived increased personal risk associated with these changes may deter qualified individuals from accepting these roles. Further, applicable rules and regulations of the Securities and Exchange Commission and the NASDAQ Stock Market heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, our business and our ability to maintain the listing of our shares of Class B common stock on the NASDAQ Global Select Market could be adversely affected.

~~If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud, which could harm our brand and operating results.~~

Effective internal controls are necessary for us to provide reliable and accurate financial reports and effectively prevent fraud. We have devoted significant resources and time to comply with the internal control over financial reporting requirements of the Sarbanes-Oxley Act of 2002. In addition, Section 404 under the Sarbanes-Oxley Act of 2002 requires that we assess and our auditors attest to the effectiveness of our controls over financial reporting. Our current and future compliance with the annual internal control report requirement will depend on the effectiveness of our financial reporting and data systems and controls across our operating subsidiaries. We expect these systems and controls to become increasingly complex to the extent that we integrate acquisitions and our business grows. To effectively manage this growth, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. We cannot be certain that these measures will ensure that we design, implement and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation or operation, could harm our operating results or cause us to fail to meet our financial reporting obligations. Inadequate internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock and our access to capital.

~~We may be required to increase or decrease the valuation allowance against our deferred tax assets.~~

Factors in our ability to realize a tax benefit from our deferred tax assets include tax attributes and operating results of acquired businesses, the nature, extent and periods that temporary differences are expected to reverse and our expectations about future operating results. We regularly review our deferred tax assets to assess whether or not it is more likely than not that the deferred tax assets will be realized, and if necessary, increase or decrease the valuation allowance for portions of such assets to reduce the carrying value. At the end of the fourth quarter of 2012, we recognized a partial valuation allowance of $16.4 million on our federal deferred tax assets which reduced our net deferred assets to $28.5 million. At the end of the second quarter of 2013, our gross deferred tax assets increased by approximately $651,000 due primarily to the 2012 and 2013 research and development credit which was reinstated as part the 2012 American Taxpayer Relief Act signed into law in January 2013. This increase was offset by a corresponding increase in our valuation allowance. We increased the valuation allowance by $22.3 million to record a full valuation allowance against our deferred tax assets as of September 30, 2014 resulting in a corresponding income tax expense of $22.3 million for the third quarter of 2014. As of September 30, 2017, our deferred tax assets were $47.5 million and we have provided a full valuation allowance of $47.5 million as we believe it is not more likely than not that these assets will be realized.

~~We may experience unforeseen liabilities arising out of third-party domain names included in our distribution network, which could negatively impact our financial results.~~

We display pay-for-call listings on third-party domain names and third-party websites that are part of our distribution network, which could subject us to a wide variety of civil claims including intellectual property ownership and infringement. The potential violation of third-party intellectual property rights and potential causes of action under consumer protection laws may subject us to unforeseen liabilities including injunctions and judgments for money damages.

~~We may face risks related to litigation that could result in significant legal expenses and settlement or damage awards.~~

~~From time to time, we are subject to claims and litigation, which could seriously harm our business and require us to incur significant costs.~~

~~If we are unable to compete in the highly competitive performance-based advertising and search marketing industries, we may experience reduced demand for our products and services.~~

~~We operate in a highly competitive and changing environment. We principally compete with other companies which offer services in the following areas:~~

Although we currently pursue a strategy that allows us to potentially partner with all relevant companies in the industry, there are certain companies in the industry that may not wish to partner with us. Despite the fact that we currently work with several of our potential competitors, there are no guarantees that these companies will continue to work with us in the future.

We currently or potentially compete with leading search engines and digital advertising networks such as Google, Microsoft, and Yahoo!. We also compete with call analytics technology providers such as Twilio, Telemetrics, Invoca, DialogTech and Convirza. As we continue to advance our data analytics technologies, we anticipate facing increased competition from companies providing more broad advertising solutions, such as data management companies like Datalogix. We also face competition on the call supply side, where competing mobile ad companies like xAd look to outbid, partner with or otherwise secure sources of call supply we utilize. Many of these actual or perceived competitors also currently or may in the future have business relationships with us, particularly in distribution. However, such companies may terminate their relationships with us. Furthermore, our competitors may be able to secure agreements with us on more favorable terms, which could reduce the usage of our services, increase the amount payable to our distribution partners, reduce total revenue and thereby have a material adverse effect on our business, operating results and financial condition. We expect competition to intensify in the future because current and new competitors can enter our market with little difficulty. The barriers to entering our market are relatively low. Further, if the consolidation trend continues among the larger media and search engine companies with greater brand recognition, the share of the market remaining for smaller search marketing services providers could decrease, even though the number of smaller providers could continue to increase. These factors could adversely affect our competitive position. Some of our competitors, as well as potential entrants into our market, may be better positioned to succeed in this market. They may have:

Currently, and in the future, as the use of the Internet and other mobile and online services increases, there will likely be larger, more well-established and well-financed entities that acquire companies and/or invest in or form joint ventures in categories or countries of interest to us, all of which could adversely impact our business. Any of these trends could increase competition and reduce the demand for any of our services.

~~We face competition from traditional media companies, and we may not be included in the advertising budgets of large advertisers, which could harm our operating results.~~

In addition to digital/online companies, we face competition from companies that offer traditional media advertising opportunities. Most large advertisers have set advertising budgets, a very small portion of which is allocated to mobile or Internet advertising. We expect that large advertisers will continue to focus most of their advertising efforts on traditional media. If we fail to convince these companies to spend a portion of their advertising budgets with us, or if our existing advertisers reduce the amount they spend on our programs, our operating results would be harmed.

~~If we are not able to respond to the rapid technological change characteristic of our industry, our products and services may cease to be competitive.~~

The market for our products and services is characterized by rapid change in business models and technological infrastructure, and we will need to constantly adapt to changing markets and technologies to provide new and competitive products and services. If we are unable to ensure that our users, advertisers, reseller partners, and distribution partners have a high-quality experience with our products and services, then they may become dissatisfied and move to competitors’ products and services. Accordingly, our future success will depend, in part, upon our ability to develop and offer competitive products and services for both our target market and for applications in new markets. We may not, however, be able to successfully do so, and our competitors may develop innovations that render our products and services obsolete or uncompetitive.

~~Our technical systems are vulnerable to interruption and damage that may be costly and time-consuming to resolve and may harm our business and reputation.~~

We may not have developed or implemented adequate protections or safeguards to overcome any of these events. We also may not have anticipated or addressed many of the potential events that could threaten or undermine our technology network. Any of these occurrences could cause material interruptions or delays in our business, result in the loss of data or render us unable to provide services to our customers. In addition, if a person is able to circumvent our security measures, he or she could destroy or misappropriate valuable information, including sensitive customer information, or disrupt our operations. We have deployed firewall hardware intended to thwart hacker attacks. Although we maintain property insurance and business interruption insurance, our insurance may not be adequate to compensate us for all losses that may occur as a result of a catastrophic system failure or other loss, and our insurers may not be able or may decline to do so for a variety of reasons. If we fail to address these issues in a timely manner, we may lose the confidence of our advertisers, reseller partners, and distribution partners, our revenue may decline and our business could suffer. In addition, as we expand our service offerings and enter into new business areas, we may be required to significantly modify and expand our software and technology platform. If we fail to accomplish these tasks in a timely manner, our business and reputation will likely suffer. Furthermore, some of these events could disrupt the economy and/or our customers’ business activities and in turn materially affect our operating results.

We also rely on a select group of third-party providers for components of our technology platform and support for our call-based and advertising services, such as hardware and software providers, telecommunications carriers and Voice over Internet Protocol (VoIP) providers, credit card processors and domain name registrars. As a result, key operational resources of our business are concentrated with a limited number of third-party providers. A failure or limitation of service or available capacity by any of these third-party providers could adversely affect our business and reputation. Furthermore, if any of these significant providers are unable to provide the levels of service and dedicated resources over time that we required in our business, we may not be able to replace certain of these providers in a manner that is efficient, cost-effective or satisfactory to our customers, and as a result our business could be materially and adversely affected. Short term or repeat problems with any of these service providers could provide an interruption of service or service quality impairment to significant customers, which could also impact materially our revenue in any period due to credits or potential loss of significant~~customers.~~

If our security measures, including those of our vendors or partners, are breached or are perceived as not being secure, we may lose advertisers, reseller partners and distribution partners and as a result we may incur significant legal and financial exposure and suffer an adverse effect on our business.

We store and transmit data and information about our advertisers, reseller partners, distribution partners and their respective users. We also work with vendors and partners who may come into contact with certain data, such as carriers, colocation and data storage facilities and distribution partners referring callers. We deploy security measures to protect this data and information, as do third parties we utilize to assist in data and information storage. Our security measures and those of the third parties we partner with to assist in data and information storage, as well as to assist in the delivery of services to our advertisers, may suffer breaches. Security breaches of our data storage systems or our third-party colocation and technology providers we utilize to store data and information relating to our advertisers, reseller partners, distribution partners and their respective users could expose us to significant potential liability. Similarly, security breaches of our vendors and partners, or ineffective data security by our vendors or partners, may result in similar significant liability. In addition, security breaches, actual or perceived, could result in legal liability, government fines, and the loss of advertisers, reseller partners and distribution partners that could potentially have an adverse effect on our business.

We may not be able to protect our intellectual property rights, which could result in our competitors marketing competing products and services utilizing our intellectual property and could adversely affect our competitive position.

Our success and ability to compete effectively are substantially dependent upon our internally developed and acquired technology and data resources, which we protect through a combination of copyright, trade secret, and patent and trademark law. To date, we have had issued or have applications pending for the following patents:

In the future, additional patent applications may be filed with respect to internally developed or acquired technologies. Our industry is highly competitive and many individuals and companies have sought to patent processes in the industry. We may decide not to protect certain intellectual properties or business methods which may later turn out to be significant to us. In addition, the patent process takes several years and involves considerable expense. Further, patent applications and patent positions in our industry are highly uncertain and involve complex legal and factual questions due in part to the number of competing technologies. As a result, we may not be able to successfully prosecute these patent applications, in whole or in part, or any additional patent filings that we may make in the future. We also depend on our trademarks, trade names and domain names. We may not be able to adequately protect our technology and data resources. In addition, intellectual property laws vary from country to country, and it may be more difficult to protect our intellectual property in some foreign jurisdictions in which we may plan to enter. If we fail to obtain and maintain patent or other intellectual property protection for our technology, our competitors could market competing products and services utilizing our~~technology.~~

Despite our efforts to protect our proprietary rights, unauthorized parties domestically and internationally may attempt to copy or otherwise obtain and use our services, technology and other intellectual property. We cannot be certain that the steps we have taken will prevent any misappropriation or confusion among consumers and advertisers. If we are unable to protect our intellectual property rights from unauthorized use, our competitive position could be adversely affected.

~~We may be involved in lawsuits to protect or enforce our patents, which could be expensive and time consuming.~~

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments in the litigation. If securities analysts or investors perceive these results to be negative, it could have an adverse effect on the trading price of our Class B common stock.

~~Our quarterly results of operations might fluctuate due to seasonality, which could adversely affect our growth rate and in turn the market price of our securities.~~

Our quarterly results have fluctuated in the past and may fluctuate in the future due to seasonal fluctuations in the level of mobile and Internet usage and seasonal purchasing cycles of many advertisers. Our experience has shown that during the spring and summer months, mobile and Internet usage is generally lower than during other times of the year and during the latter part of the fourth quarter of the calendar year we generally experience lower call volume and reduced demand for calls from our call advertising customers. The extent to which usage and call volume may decrease during these off-peak periods is difficult to predict. Prolonged or severe decreases in usage and call volume during these periods may adversely affect our growth rate and results, and in turn, the market price of our securities. Historically, we have seen this trend generally reversing in the first quarter of the calendar year with increased mobile and internet usage and often new budgets at the beginning of the year for many of our customers with fiscal years ending December 31. However, there can be no assurances such seasonal trends will consistently repeat each year. The current business environment and our industry has generally both resulted in, and we may continue to see, many advertisers and reseller partners reducing advertising and marketing services budgets or adjusting such budgets throughout the year, changing marketing strategies or agency affiliations, or advertisers being acquired by parent companies with alternative media initiatives, which we expect will impact our quarterly results of operations in addition to the typical seasonality seen in our industry.

~~We are susceptible to general economic conditions, and a downturn in advertising and marketing spending by advertisers could adversely affect our operating results.~~

Our operating results will be subject to fluctuations based on general economic conditions, in particular those conditions that impact advertiser-consumer transactions. Deterioration in economic conditions could cause decreases in or delays in advertising spending and reduce and/or negatively impact our short-term ability to grow our revenues. Further, any decreased collectability of accounts receivable or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.

We depend on the growth of mobile technologies, the Internet and the Internet infrastructure for our future growth and any decrease in growth or anticipated growth in mobile and Internet usage could adversely affect our business prospects.

In particular, concerns over the security of online transactions and the privacy of users, including the risk of identity theft, may inhibit the growth of Internet usage, including commercial transactions. In order for the mobile and online commerce market to develop successfully, we and other market participants must be able to transmit confidential information, including credit card information, securely over public networks. Any decrease in anticipated mobile and Internet growth and usage could have a material adverse effect on our business prospects.

~~We are exposed to risks associated with credit card fraud and credit payment, and we may continue to suffer losses as a result of fraudulent data or payment failure by advertisers.~~

We have suffered losses and may continue to suffer losses as a result of payments made with fraudulent credit card data. Our failure to control fraudulent credit card transactions could reduce our net revenue and gross margin and negatively impact our standing with applicable credit card authorization agencies. In addition, under limited circumstances, we extend credit to advertisers who may default on their accounts payable to us or fraudulently “charge-back” amounts on their credit cards for services that have already been delivered by us.

~~Regulation of E-Commerce, Online Tracking, Online Data Collection, and Use of the Internet may adversely affect our business and operating results.~~

Mobile and online search, e-commerce and related businesses face uncertainty related to new or future government regulation at the federal, state, and international levels regarding e-commerce, online tracking, online data collection, and use of the Internet. Due to the rapid growth and widespread use of the Internet, state and federal legislatures (both domestically and abroad) have enacted and may continue to enact various laws and regulations relating to the Internet. Individual states may also enact consumer protection laws that are more restrictive than the ones that already exist.

Furthermore, the application of existing laws and regulations to companies that engage in e-commerce, or otherwise interact with the Internet remains somewhat unclear. For example, as a result of the actions of advertisers in our network, we may be subject to existing laws and regulations relating to a wide variety of issues such as consumer privacy, gambling, sweepstakes, advertising, promotions, defamation, pricing, taxation, financial market regulation, quality of products and services, computer trespass, spyware, adware, child protection and intellectual property ownership and infringement. In addition, it is not clear whether existing laws that require licenses or permits for certain of our advertisers’ lines of business apply to us, including those related to insurance and securities brokerage, law offices and pharmacies. Existing federal, state, and foreign laws that may affect the growth and profitability of our business include, among others:

Many Internet services are automated, and companies such as ours may be unknowing conduits for illegal or prohibited materials. It is possible that some courts may impose a strict liability standard or require such companies to monitor their customers’ conduct. Although we would not be responsible or involved in any way in such illegal conduct, it is possible that we would somehow be held responsible for the actions of our advertisers or distribution partners.

We may also be subject to costs and liabilities with respect to privacy issues. Several companies have incurred penalties for failing to abide by the representations made in their public-facing privacy policies. In addition, several states have passed laws that require businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event of a security breach. Further, it is anticipated that additional federal and state privacy-related legislation will be enacted. Such legislation could negatively affect our business. In addition, foreign countries may enact laws that could negatively impact our business and/or may prosecute us for violating existing laws. Such laws might include EU member country conforming legislation under applicable EU Privacy, eCommerce, Data Protection Directives (and similar legislation in other countries where we may have operations), and the recently enacted EU General Data Protection Regulation, which is directly applicable to all member states. Any costs incurred in addressing foreign laws could negatively affect the viability of our business. Our exposure to this risk will increase to the extent we expand our operations internationally.

~~Federal, state, and foreign regulation of telecommunications may adversely affect our business and operating results.~~

We provide information and analytics services to certain advertisers and reseller partners that may include information services. In connection therewith, we obtain certain telecommunications products and services from carriers in order to deliver these packages of information and analytic services.

Telecommunications laws and regulations (and interpretations thereof) are evolving in response to rapid changes in the telecommunications industry. If our carrier partners were to be subject to any changes in applicable law or regulation (or interpretations thereof), or additional taxes or surcharges, then we in turn may be subject to increased costs for their products and services or receive products and services that may be of less value to our customers, which in turn could adversely affect our business and operating results. Furthermore, our call recording and pay-for-call services may directly subject us to certain telecommunications-related regulations. Finally, in the event that any federal or state regulators were to expand the scope of applicable laws and regulations or their application to include certain end users and information service providers, then our business and operating results could also be adversely affected. The following existing and possible future federal and state laws could impact the growth and profitability of our business:

State and local governments may in the future be permitted to levy additional taxes on Internet access and electronic commerce transactions, which could result in a decrease in the level of usage of our services. In addition, we may be required to pay additional income, sales, or other taxes.

The federal government has placed a ban for now on state and local governments’ imposition of new taxes on Internet access or electronic commerce transactions through the Internet Tax Freedom Act. The proposed Marketplace Fairness Act, if enacted into law, would allow states to require online and other out of state merchants to collect and remit sales and use tax on products and services that they may sell. An increase in taxes may make electronic commerce transactions less attractive for advertisers and businesses, which could result in a decrease in the level of usage of our services. Additionally, from time to time, various state, federal and other jurisdictional tax authorities undertake reviews of us and our filings. In evaluating the exposure associated with various tax filing positions, we may on occasion accrue charges for probable exposures. We cannot predict the outcome of any of these reviews.

Our Class B common stock prices have been and are likely to continue to be highly volatile.

The trading prices of our Class B common stock have been and are likely to continue to be highly volatile and subject to wide fluctuations and has ~~more recently~~at times declined significantly.

Our stock prices may fluctuate in response to a number of events and factors, which may be the result of our business strategy or events beyond our control, including:

In addition, the stock market in general, and the NASDAQ Global Select Market and the market for mobile and online commerce companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the listed companies. These broad market and industry factors may seriously harm the market price of our Class B common stock, regardless of our operating performance. In the past, following periods of volatility in the market, securities class action litigation has often been instituted against these companies.

Litigation against us, whether or not judgment is entered against us, could result in substantial costs and potentially economic loss, and a diversion of our management’s attention and resources, any of which could seriously harm our financial condition. Additionally, there can be no assurance that an active trading market of our Class B common stock will be sustained.

If securities analysts do not continue to publish research or publish negative research about our business, our stock price and trading volume could decline.

The trading market for our Class B common stock depends in part on the research and reports that securities analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes negative research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, we could lose visibility in the market for our stock and demand for our stock could decrease, which could cause our stock price or trading volume to decline.

Our ~~founders control~~founder controls the outcome of stockholder voting, and there may be an adverse effect on the price of our Class B common stock due to the disparate voting rights of our Class A common stock and our Class B common stock.

As of ~~September 30, 2017,~~March 31, 2021, Russell C. Horowitz, ~~and Ethan A. Caldwell, two of~~ our ~~founders,~~founder, beneficially owned 100% of the outstanding shares of our Class A common stock, which shares represented ~~77%~~75% of the ~~combined~~ voting power of all outstanding shares of our capital stock. ~~These founders together controlled 77% of the combined voting power of all outstanding shares of our capital stock as of September 30, 2017.~~ The holders of our Class A common stock and Class B common stock have identical rights except that the holders of our Class B common stock are entitled to one vote per share, while holders of our Class A common stock are entitled to twenty-five votes per share on all matters to be voted on by stockholders. This concentration of control could be disadvantageous to our other stockholders with interests different from those of ~~these founders.~~our founder. This difference in the voting rights of our Class A common stock and Class B common stock could adversely affect the price of our Class B common stock to the extent that investors or any potential future purchaser of our shares of Class B common stock give greater value to the superior voting rights of our Class A common stock.

Further, as long as ~~these founders have~~our founder has a controlling interest, ~~they~~he will continue to be able to elect all or a majority of our board of directors and generally be able to determine the outcome of all corporate actions requiring stockholder approval. As a result, ~~these founders~~our founder will be in a position to continue to control all fundamental matters affecting our company, including any merger involving, sale of substantially all of the assets of, or change in control of, our company. The ability of ~~these founders~~our founder to control our company may result in our Class B common stock trading at a price lower than the price at which such stock would trade if ~~these founders~~our founder did not have a controlling interest in us. This control may deter or prevent a third-party from acquiring us which could adversely affect the market price of our Class B commonstock.

Anti-takeover provisions may limit the ability of another party to acquire us, which could cause our stock price to decline.

Our certificate of incorporation, as amended, our by-laws, as amended, and Delaware law contain provisions that could discourage, delay or prevent a ~~third-party~~third party from acquiring us, even if doing so may be beneficial to our stockholders. In addition, these provisions could limit the price investors would be willing to pay in the future for shares of our Class B common stock. The following are examples of such provisions in our certificate of incorporation, as amended, or our ~~by-laws:~~

We are also subject to Section 203 of the Delaware General Corporation Law, which provides, subject to enumerated exceptions, that if a person acquires 15% or more of our voting stock, the person is an “interested stockholder” and may not engage in “business combinations” with us for a period of three years from the time the person acquired 15% or more of our voting stock. The application of Section 203 of the Delaware General Corporation Law could have the effect of delaying or preventing a change of control of our company.

We may not pay dividends on our Class B common stock in the ~~future which could impair the value of such stock.~~future.

Under Delaware law, dividends to stockholders may be made only from the surplus of a company, or, in certain situations, from the net profits for the current or prior fiscal ~~year or~~year. We declared and paid a special dividend in the ~~fiscal year before which~~last quarter of 2017 and the first quarter of 2018, respectively. Special dividends generally result in a reduction in stock price with the dividend ~~is declared.~~distributed. In addition, we paid a quarterly dividend on our Class B common stock from November 2006 through May 2015. Our ability to pay dividends ~~in the future will depend on~~is dependent upon a variety of factors, including our financial results, liquidity and financial ~~condition.~~condition and capital requirements. There is no assurance that we will pay dividends in the future.

In November 2014, we established a 2014 share repurchase program (the “2014 Repurchase Program”), which supersedes and replaces any prior repurchase programs, and authorized the Company to repurchase up to 3 million shares in the aggregate of the Company’s Class B common stock. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability, and other market conditions. During the three months ended ~~September 30, 2017,~~March 31, 2021, we did not have any share repurchases and 1,319,128 of Class B common shares may yet be purchased under the ~~plan.~~2014 Share Repurchase Program.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Large accelerated filer	☐	Accelerated filer	☒☐

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~☒	Smaller reporting company	☐☒

Emerging growth company	☐


~~Class~~Title of each class	~~Outstanding at November 3, 2017~~Trading
~~Class A common stock, par value $.01 per share~~Symbol(s)	~~5,056,136~~Name of each exchange on which registered
Class B ~~common stock, par value $.01 per share~~Common Stock	~~38,613,134~~MCHX	The Nasdaq Global Select Market

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Condensed Consolidated Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	45
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1418
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3231
Item 4.	Controls and Procedures	3231

PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	3332
Item 1A.	Risk Factors	3332
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5446
Item 4.	Mine Safety Disclosures	5446
Item 6.	Exhibits	5547
Signature		5648

	Nine months ended September 30,		Three months ended September 30,		Three months ended March 31,
	2016	2017	2016	2017	2020	2021
Expected life (in years)	4.0-6.25	4.0-6.25	4.0	4.0-6.25	4.0 - 6.25	4.0 - 6.25
Risk-free interest rate	0.86%-1.15%	1.68%-1.96%	1.01%	1.71%-1.96%	1.13%-1.22%	0.64%-1.16%
Expected volatility	57%-58%	55%-56%	57%	55%	46%-52%	50%-56%
Expected dividend yield	0%	0%	0%	0%

	Shares (in thousands)			Weighted average exercise price		Weighted average remaining contractual term (in years)		Shares (in thousands)			Weighted average exercise price		Weighted average remaining contractual term (in years)
Balance at December 31, 2016		7,678		$	5.97		5.07
Balance at December 31, 2020									3,460		$	3.82		6.50
Options granted		1,226			2.73				288			2.11
Options forfeited		(794	)		4.17				(36	)		3.28
Options expired		(1,833	)		6.00				(76	)		6.41
Balance at September 30, 2017		6,277		$	5.55		5.98
Options exercised									(2	)		2.66
Balance at March 31, 2021									3,634		$	3.64		6.58

	For the Nine Months Ended September 30,
	2016			2017
Operating Activities:
Net loss	$	(78,322	)	$	(5,601	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization and depreciation		2,457			2,266
Impairment of goodwill		63,305			—
Allowance for doubtful accounts and advertiser credits		1,429			673
Loss on disposal of fixed assets		3			—
Stock-based compensation		7,246			3,500
Change in certain assets and liabilities:
Accounts receivable, net		1,612			3,356
Refundable taxes		10			12
Prepaid expenses, other current assets and other assets		(223	)		51
Accounts payable		(1,477	)		(1,525	)
Accrued expenses and other current liabilities		1,812			(1,003	)
Deferred revenue		(329	)		(14	)
Other non-current liabilities		(396	)		(23	)
Net cash provided by (used in) operating activities		(2,873	)		1,692
Investing Activities:
Cash paid for sale of Archeo assets		(224	)		—
Purchases of property and equipment		(594	)		(1,274	)
Purchases of intangible assets		(11	)		(15	)
Net cash used in investing activities		(829	)		(1,289	)
Financing Activities:
Tax withholding related to restricted stock awards		(154	)		—
Repurchase of Class B common stock		(365	)		—
Proceeds from exercises of stock options, issuance and vesting of restricted stock and employee stock purchase plan, net		341			24
Net cash provided by (used in) financing activities		(178	)		24
Net increase (decrease) in cash and cash equivalents		(3,880	)		427
Cash and cash equivalents at beginning of period		109,155			103,950
Cash and cash equivalents at end of period	$	105,275		$	104,377

	At December 31,		At March 31,
	2020		2021
Level 1 Assets:
Cash	$	13,492	$	7,810
Money market funds		20,359		20,359
Total cash and cash equivalents	$	33,851	$	28,169

	Shares/ Units (in thousands)			Weighted average grant date fair value		Shares/ Units (in thousands)			Weighted average grant date fair value
Unvested balance at December 31, 2016		2,757		$	3.90
Unvested balance at December 31, 2020							1,632		$	3.18
Granted		622			2.82		172			2.01
Vested		(687	)		4.60		(71	)		3.25
Forfeited		(563	)		4.16		(186	)		2.78
Unvested balance at September 30, 2017		2,129		$	3.29
Unvested balance at March 31, 2021							1,547		$	3.09

	At December 31, 2016			At September 30, 2017
Advertiser A		11	%		20	%
Advertiser B		30	%		22	%
Advertiser C		15	%		16	%

	At December 31, 2016			At September 30, 2017			At December 31, 2020			At March 31, 2021
Computer and other related equipment	$	18,467		$	18,930		$	13,278		$	13,319
Purchased and internally developed software		6,811			6,687			2,058			2,106
Furniture and fixtures		1,493			1,071			1,271			1,271
Leasehold improvements		2,371			1,133			1,737			1,737
	$	29,142		$	27,821		$	18,344		$	18,433
Less: Accumulated depreciation and amortization		(25,585	)		(25,283	)		(15,597	)		(15,956	)
Property and equipment, net	$	3,557		$	2,538		$	2,747		$	2,477

	Total
Gross future operating lease payments	$	4,856
Less: imputed interest		(307	)
Present value of total operating lease liabilities		4,549
Less: current portion of operating lease liabilities		(1,807	)
Total long-term operating lease liabilities	$	2,742

	Facilities operating leases		Other contractual obligations		Total
2017	$	288	$	1,052	$	1,340
2018		1,370		2,433		3,803
2019		1,476		809		2,285
2020		1,520		1		1,521
2021 and after		7,414		—		7,414
Total minimum payments	$	12,068	$	4,295	$	16,363

	As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount
Customer relationships	$	13,018	$	(4,693	)	$	(3,430	)	$	4,895
Technologies		9,369		(4,731	)		(1,062	)		3,576
Non-compete agreements		3,409		(2,413	)		(346	)		650
Tradenames		734		(538	)		(121	)		75
Total identifiable intangible assets from acquisitions	$	26,530	$	(12,375	)	$	(4,959	)	$	9,196

	As of March 31, 2021
	Gross Carrying Amount		Accumulated Amortization			Impairment			Net Carrying Amount
Customer relationships	$	13,018	$	(5,189	)	$	(3,430	)	$	4,399
Technologies		9,369		(5,336	)		(1,062	)		2,971
Non-compete agreements		3,409		(2,474	)		(346	)	$	589
Tradenames		734		(557	)		(121	)		56
Total identifiable intangible assets from acquisitions	$	26,530	$	(13,556	)	$	(4,959	)	$	8,015

	Three months ended March 31, 2020
Revenue	$	12,778
Expenses:
Service costs		9,670
Sales and marketing		821
Product development		686
General and administrative		284
Total operating expenses		11,461
Impairment of goodwill		(469	)
Income from discontinued operations before provision for income taxes		848
Income tax expense		200
Total income from discontinued operations	$	648

	Total		Less than 1 year		1-3 years		4-5 years
Contractual Obligations:
Operating leases	$	12,068	$	1,297	$	2,974	$	7,797
Other contractual obligations		4,295		3,124		1,171		—
Total contractual obligations (1)	$	16,363	$	4,421	$	4,145	$	7,797


Exhibit Number		Description
†~~3.3~~31.1(i)		~~Second Amended and Restated By-Laws of the Registrant.~~
~~†31.1~~		Certification of Principal Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†~~31.2~~31.1(ii)		Certification of Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
††32		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†101.INS		Inline XBRL Instance ~~Document.~~Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
†101.SCH		Inline XBRL Taxonomy Extension Schema Document.
†101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
†101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
†101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document.
†101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
†104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

	MARCHEX, INC.

Date: ~~November 6, 2017~~May 13, 2021	By:	/s/ MICHAEL A. ARENDS
	Name:	Michael A. Arends
	Title:	~~Chief Financial~~Co-CEO (Principal Executive Officer and member of the office of CEO (Principal Financial and Accounting Officer)for SEC reporting purposes)