DRCT

MKT CAP —P/E —DIV YIELD —FCF YIELD —REV TTM $30.9M −15.2%NET INCOME −$23MNET CASH $376K52W 0.25 – 83.82SEC XBRL · TTM TO Invalid Date

How DRCT rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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You should read this summary together with the more detailed description of each risk factor below.
Some of these material risks include: • Our credit facilities subject us to operating restrictions and financial covenants that impose risk of default and may restrict our business and financing activities. • The substantial doubt raised about our ability to continue as a going concern, which may hinder our ability to obtain future financing. • We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs, which may in turn impair our growth. • If we fail to satisfy applicable listing standards, our Class A Common Stock may be delisted from the Nasdaq Capital Market. • Our strategic shift to focusing on driving digital marketing spend among buy-side and new enterprise customers may not achieve the benefits anticipated by management. • High customer concentration exposes us to various risks faced by our major customers and may subject us to significant fluctuations or declines in revenues. • We are subject to payment-related risks and, if our clients do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected. • If we fail to detect advertising fraud, we could harm our reputation and hurt our ability to execute our business plan. • Operational and performance issues with our platform, whether real or perceived, including a failure to respond to technological changes or to upgrade our technology systems, may adversely affect our business, operating results and financial condition. • If the use of third-party “cookies,” mobile device IDs or other tracking technologies is restricted without similar or better alternatives, our platform’s effectiveness could be diminished and our business, results of operations, and financial condition could be adversely affected. • Unfavorable publicity and negative public perception about our industry, particularly concerns regarding data privacy and security relating to our industry’s technology and practices, and perceived failure to comply with laws and industry self-regulation, could adversely affect our business and operating results. • Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our business, operating results and financial condition. • Future acquisitions or strategic investments could be difficult to identify and integrate, divert the attention of management, and could disrupt our business, dilute stockholder value and adversely affect our business, results of operations and financial condition. • Changes in legislative, judicial, regulatory or cultural environments relating to information collection, use and processing may limit our ability to collect, use and process data.
Such developments could cause revenue to decline, increase the cost of data, reduce the availability of data and adversely affect the demand for our products and services. • Our buy-side clients include DMOs, which often operate as public/private partnerships involving a national, provincial, state and local governmental entity. • The requirements of being a public company may strain our resources and divert our management’s attention. • The digital advertising industry is intensely competitive, and if we do not effectively compete against current and future competitors, our business, results of operations, and financial condition could be harmed. • A significant inadvertent disclosure or breach of confidential and/or personal information we hold, or of the security of our or our customers’, suppliers’ or other partners’ computer systems, could be detrimental to our business, reputation and results of operations. • We are a holding company and our principal asset is our equity interest in DDH LLC, and, accordingly, we depend on distributions from DDH LLC to pay our taxes, expenses and dividends. • If we fail to maintain or implement effective internal controls, we may not be able to report financial results accurately or on a timely basis, or to detect fraud, which could have a material adverse effect on our business and the per share price of our Class A Common Stock.
Our credit facilities, as defined in Note 3 — Long-Term Debt to our consolidated financial statements, contain affirmative and negative covenants including a minimum unrestricted cash requirement of $450,000 at all times.
Upon an event of default, unless waived, the lender could elect to terminate commitments, cease making further loans, cause its loan to become due and payable in full and force us into bankruptcy or liquidation.
Our ability to (1) renew our existing term credit facility, which matures on December 3, 2026, or (2) enter into any new credit facility may be limited due to various factors, including the status of our business, global credit market conditions and perceptions of our business or industry by sources of financing.
Our audited consolidated financial statements as of December 31, 2025 have been prepared under the assumption that we will continue as a going concern for the next twelve months.
As of December 31, 2025, we had cash and cash equivalents of $0.7 million and an accumulated deficit of $27.7 million.
Our strategic shift to focusing on driving digital marketing spend among buy-side and new enterprise customers may not achieve the benefits anticipated by management, which could cause a material adverse effect on our business and prospects.
During 2025, the Company worked to reconstitute its prior business, target new customers and develop new products for the sell-side segment but was unable to achieve historical volumes.
Beginning in 2026, the Company has shifted its focus to driving intentional digital marketing spend with current and future customers historically classified by the Company as buy-side customers as well as new enterprise customers accessing the digital advertising market through its recently launched product – Ignition+.
If we are unable to realize the benefits of this strategic shift, or the change in strategy results in unexpected costs or delays, our business and prospects could be materially adversely affected.
For the year ended December 31, 2025, two buy-side customers represented 27% of revenues.
For the year ended December 31, 2024, one sell-side customer represented 46% of revenues.
As of December 31, 2025, three buy-side customers accounted for 43% of accounts receivable.
We may be subject to fraudulent or malicious activities undertaken by persons seeking to use our sell-side platform for improper purposes, which could materially affect us.
The requirements of being a public company may strain our resources, divert our management’s attention.
Economic downturns or unstable market conditions, such as those potentially created by high price inflation, increasing interest rates, health pandemics or geopolitical instability may cause advertisers to decrease their advertising budgets, which could reduce spend though our platform and adversely affect our business, results of operations, and financial condition.
A portion of our revenue has been derived from customers that programmatically purchase or sell advertising inventory through our platform.
We expect that spending on programmatic ad buying and selling will continue to be a source of revenue for the foreseeable future, and that the velocity of our revenue growth will depend on increasing spend through our platform.
Our sell-side sales cycle often has a duration of six-to-twelve months, while our buy-side business sales cycle often has a duration of three-to-nine months.
In particular, uncertainty regarding the impacts of inflation, increasing interest rates and the war in Ukraine on the economy in the United States may cause general business conditions in the United States and elsewhere to deteriorate or become volatile, which could cause advertisers to delay, decrease or cancel purchases of our solution, and expose us to increased credit risk on advertiser orders.
On August 7, 2025, the district court granted the Company's motion to dismiss in full and with prejudice.
The lead plaintiff has since appealed that dismissal and has filed an opening brief on November 3, 2025.
The Company filed a response brief on January 2, 2026.
The lead plaintiff filed a reply brief on February 6, 2026.
The Company now awaits the Court's decision about whether to set the case for oral argument.
The Company cannot make any predictions about the final outcome of this matter or the timing thereof but believes that plaintiffs’ claims lack merit and intends to vigorously defend these lawsuits.
Risks Related to our Offering with New Circle and Owning our Securities The sale or issuance of our Class A Common Stock to New Circle may cause dilution and the sale of the shares of Class A Common Stock acquired by New Circle, or the perception that such sales may occur, could cause the price of our Class A Common Stock to decrease.
On October 18, 2024, we entered into the Purchase Agreement with New Circle, which was subsequently amended, pursuant to which (i) we issued 1,141 shares of Class A Common Stock having an aggregate value of $150,000 to New Circle as the Commitment Shares, as partial consideration for New Circle’s commitment to purchase shares of Class A Common Stock under the Purchase Agreement in lieu of a cash payment, and (ii) New Circle has committed to purchase up to $100 million of our Class A Common Stock.
In addition, we issued 1,818 shares of Class A Common Stock to New Circle in October 2025 as partial consideration for the amendment that increased the commitment size from $20 million to $100 million.
The shares of our Class A Common Stock that may be issued under the Purchase Agreement may be sold by us to New Circle at our discretion from time to time over the 36-month period following the Commencement (such date on which all of such conditions are satisfied, the “Commencement Date”).
The purchase price for the shares that we may sell to New Circle under the Purchase Agreement will fluctuate based on the price of our Class A Common Stock.
Depending on market liquidity at the time, sales of such shares may cause the trading price of our Class A Common Stock to decrease.
Additional sales of our Class A Common Stock, if any, to New Circle will depend upon market conditions and other factors to be determined by us.
We may ultimately decide to sell to New Circle all, some or none of the additional shares of our Class A Common Stock that may be available for us to sell pursuant to the Purchase Agreement.
If and when we do sell additional shares to New Circle, after New Circle has acquired the shares, New Circle may resell all, some or none of those shares at any time or from time to time in its discretion.
To the extent that we raise additional funds through the sale of equity or convertible debt securities, the issuance of such securities will result in dilution to our stockholders.
We may direct New Circle to purchase up to $100 million worth of shares of our Class A Common Stock under our agreement over a 36-month period pursuant to purchase notices that we deliver to New Circle under the Purchase Agreement.
Unless otherwise waived by New Circle, the maximum number of shares that may be purchased pursuant to each purchase notice is equal to a number of shares up to the lesser of (i) the number of shares equal to 100% of the average daily trading volume of our Common Stock during the five trading days immediately preceding the date of our purchase notice or (ii) 100,000 shares, provided that New Circle may agree, in its sole discretion to waive such provision and purchase shares in excess of such amounts in connection with one or more particular purchase notices.

and 26 more.

Gone since FY2024

You should read this summary together with the more detailed description of each risk factor contained below.
Some of these material risks include: • Our credit facilities subject us to operating restrictions and financial covenants that impose risk of default and may restrict our business and financing activities. • The substantial doubt raised about our ability to continue as a going concern, which may hinder our ability to obtain future financing; • We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs, which may in turn impair our growth. • We are currently ineligible to file new short-form registration statements on Form S-3 or use our existing registration statement on Form S-3, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all. • If we fail to satisfy applicable listing standards, including compliance with the rules requiring timely filing of our periodic reports with the SEC, our Class A Common Stock may be delisted from the Nasdaq Capital Market; • The restatement of our consolidated financial statements for the quarterly periods in the year ended December 31, 2023 has subjected us to a number of additional costs, risks and uncertainties; • High customer concentration exposes us to various risks faced by our major customers and may subject us to significant fluctuations or declines in revenues. • We are subject to payment-related risks and, if our clients do not pay or dispute their invoices, our business, financial condition and operating results may be adversely affected. • If we fail to detect advertising fraud, we could harm our reputation and hurt our ability to execute our business plan. • Operational and performance issues with our platform, whether real or perceived, including a failure to respond to technological changes or to upgrade our technology systems, may adversely affect our business, operating results and financial condition. • If the use of third-party “cookies,” mobile device IDs or other tracking technologies is restricted without similar or better alternatives, our platform’s effectiveness could be diminished and our business, results of operations, and financial condition could be adversely affected. • Unfavorable publicity and negative public perception about our industry, particularly concerns regarding data privacy and security relating to our industry’s technology and practices, and perceived failure to comply with laws and industry self-regulation, could adversely affect our business and operating results. • Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our business, operating results and financial condition. • Future acquisitions or strategic investments could be difficult to identify and integrate, divert the attention of management, and could disrupt our business, dilute stockholder value and adversely affect our business, results of operations and financial condition. • Changes in legislative, judicial, regulatory or cultural environments relating to information collection, use and processing may limit our ability to collect, use and process data.
Such developments could cause revenue to decline, increase the cost of data, reduce the availability of data and adversely affect the demand for our products and services. • Our buy-side clients include DMOs, which often operate as public/private partnerships involving a national, provincial, state and local governmental entity. • The requirements of being a public company may strain our resources and divert our management’s attention. • The digital advertising industry is intensely competitive, and if we do not effectively compete against current and future competitors, our business, results of operations, and financial condition could be harmed. • A significant inadvertent disclosure or breach of confidential and/or personal information we hold, or of the security of our or our customers’, suppliers’ or other partners’ computer systems, could be detrimental to our business, reputation and results of operations. • We are a holding company and our principal asset is our equity interest in DDH LLC, and, accordingly, we depend on distributions from DDH LLC to pay our taxes, expenses and dividends. • DDH is controlled by DDM, whose interests may differ from those of our public stockholders. • The sale or issuance of our Class A Common Stock to New Circle pursuant to the Purchase Agreement may cause dilution and the sale of the shares of Class A Common Stock acquired by New Circle, or the perception that such sales may occur, could cause the price of our Class A Common Stock to be volatile. • If we fail to maintain or implement effective internal controls, we may not be able to report financial results accurately or on a timely basis, or to detect fraud, which could have a material adverse effect on our business and the per share price of our Class A Common Stock.
Our credit facilities, as defined in Note 3 — Long-Term Debt in the Notes to Consolidated Financial Statements for the fiscal years ended December 31, 2024 and 2023, contain affirmative and negative covenants.
On December 27, 2024, the financial covenants in our credit facilities were modified to add a minimum unrestricted cash requirement of $750,000 at all times and remove the minimum consolidated EBITDA requirement.
Upon an event of default, unless waived, the lenders could elect to terminate commitments, cease making further loans, cause their loans to become due and payable in full and force us into bankruptcy or liquidation.
Our ability to (1) renew our existing term credit facility, which matures on December 3, 2026, (2) renew our existing revolving credit facility, which matures on July 7, 2025 or (3) enter into any new credit facility may be limited due to various factors, including the status of our business, global credit market conditions and perceptions of our business or industry by sources of financing.
Our audited consolidated financial statements as of December 31, 2024 have been prepared under the assumption that we will continue as a going concern for the next twelve months.
As of December 31, 2024, we had cash and cash equivalents of $1.4 million and an accumulated deficit of $8.8 million.
As a result of our failure to timely file our Annual Report on Form 10-K for year ended December 31, 2023, and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024 and June 30, 2024, we are currently ineligible to file new short-form registration statements on Form S-3 or use our existing registration statement on Form S-3, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all.
Form S-3 permits eligible issuers to conduct registered offerings using a short-form registration statement that allows the issuer to incorporate by reference its past and future filings and reports made under the Exchange Act.
In addition, Form S-3 enables eligible issuers to conduct primary offerings “off the shelf” under Rule 415 of the Securities Act.
The shelf registration process, combined with the ability to forward incorporate information, allows issuers to avoid delays and interruptions in the offering process and to access the capital markets in a more expeditious and efficient manner than raising capital in a standard registered offering pursuant to a Registration Statement on Form S-1.
As a result of the delayed filing of several of our periodic reports with the SEC during 2024, we will not be eligible to register the offer and sale of our securities using a registration statement on Form S-3 until one year from the date we regained and maintain status as a current filer.
Should we wish to register the offer and sale of our securities to the public prior to the time we are eligible to use Form S-3, both our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and potentially harming our business and financial condition.
The restatement of our consolidated financial statements for the quarterly periods in the year ended December 31, 2023 has subjected us to a number of additional costs, risks and uncertainties.
As previously reported, our management determined that our consolidated financial statements for the quarterly periods in the years ended December 31, 2023 should be restated due to accounting errors resulting from the incorrect (1) accounting for, and presentation of, noncontrolling interests (“NCI”), (2) recognition of an organizational transaction in connection with the Company’s initial public offering, (3) presentation of earnings per share considering the effect of certain features of the Company’s warrants and the impact of correcting the accounting for, and presentation of NCI, and (4) timing of the recording of the 2023 redemption of warrants.
The restatement of our consolidated financial statements and the process of remediating the material weaknesses caused us to incur substantial expenses for legal, accounting, and other professional services and diverted our management’s attention from our business.
Continued remediation efforts could continue to cause us to incur increased expenses in these areas.
As a result of the restatement and the change in our registered public accounting firm, we were delayed in filing our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly Reports on Form 10-Q for each of the quarterly periods ended March 31, 2024 and June 30, 2024, and there can be no assurance that we will be able to timely file our required reports for future periods.
In addition, as a result of the restatement and associated non-reliance on previously issued quarterly financial statements, investors may lose confidence in our financial reporting and the price of our Class A Common Stock could decline.
We could also be subject to regulatory, stockholder or other actions in connection with the restatement and/or the associated material weaknesses, which would, regardless of the outcome, consume management’s time and attention and may result in additional legal, accounting and other costs.
If such proceedings arise and we do not prevail in such proceedings, we could be required to pay damages or settlement costs.
The restatement and related matters could impair our reputation or could cause our stockholders or other counterparties to lose confidence in us.
Any of these occurrences could adversely affect our business, financial condition and results of operations.
For the years ended December 31, 2024 and 2023, one sell-side customer represented 46% and 73% of revenues, respectively.
As of December 31, 2023, one sell-side customer accounted for 83% of accounts receivable.
In 2024, we experienced a short-pay notice from the concentrated sell-side customer resulting in reduction of our 2023 revenue to the reported amount of $157.1 million.
The Company was not provided information as to the reason for the short pay and disputed it.
In conjunction with the short pay, the Company recorded a charge of $8.8 million during the year ended December 31, 2023 for payments made in early 2024 to a few publishers, primarily because of the Company’s inability to charge back the publishers for the short pay given the lack of information and related documentation supporting such transaction.
We do not expect these amounts to recur in any material fashion, although there is no assurance that this or other customers will not take such action in the future.
We may be subject to fraudulent or malicious activities undertaken by persons seeking to use our sell-side or buy-side platform for improper purposes, which could materially affect us.
The requirements of being a public company have increased our operating expenses and may divert our management’s attention.
Economic downturns or unstable market conditions, such as those potentially created by high price inflation, increasing interest rates, the imposition by the U.S.
Government of tariffs and other trade barriers, as well as any retaliation by trade partners, health pandemics or geopolitical instability may cause advertisers to decrease their advertising budgets, which could reduce spend though our platform and adversely affect our business, results of operations, and financial condition.
The substantial majority of our revenue has been derived from customers that programmatically purchase or sell advertising inventory through our platform.
We expect that spending on programmatic ad buying and selling will continue to be our primary source of revenue for the foreseeable future, and that our revenue growth will largely depend on increasing spend through our platform.
Our sell-side sales cycle often has a duration of six-to-12 months, while our buy-side business sales cycle often has a duration of three-to-nine months.
In particular, uncertainty regarding the impacts of inflation, increasing interest rates, the imposition by the U.S.
Government of tariffs and other trade barriers, as well as any retaliation by trade partners, and military conflicts in Ukraine and the Middle East may cause general business conditions in the United States and elsewhere to deteriorate or become volatile, which could cause advertisers to delay, decrease or cancel purchases of our solution, and expose us to increased credit risk on advertiser orders.

and 60 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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