Overview

AiAdvertising’s primary focus is to disrupt the digital advertising world by offering a solution that harnesses the power of artificial intelligence (AI) to enable marketers to increase productivity, efficiency, and performance.

Critical Accounting Policies

The company’s discussion and analysis of its financial condition and results of operations are based on its financial statements, which are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities. The company’s critical accounting policies include:

Revenue Recognition:

• The company adopted ASC 606 in 2018, which requires recognizing revenue when control of promised goods or services is transferred to customers.
• Reimbursable costs from clients are recorded as gross revenue due to the company’s control over inputs and discretion in pricing and supplier selection.

Accounts Receivable:

• The company extends credit to customers and reviews accounts regularly to determine collectability, maintaining an allowance for doubtful accounts.

Impairment of Long-Lived Assets:

• The company reviews long-lived assets for impairment when events or changes indicate the carrying amount may not be recoverable, writing them down to fair value if impaired.

Indefinite-Lived Intangibles and Goodwill:

• The company tests these assets for impairment annually and when events indicate a potential impairment, using a two-step approach to determine fair value.

Business Combinations:

• The company allocates the fair value of purchase consideration to acquired assets and liabilities, with any excess recorded as goodwill.

Fair Value of Financial Instruments:

• The company’s financial instruments are carried at cost, which approximates fair value due to their short-term nature.

Recent Developments

The company filed a Certificate of Amendment to increase the authorized shares of its Series I Preferred Stock from 3,000,000 to 3,400,000.

Results of Operations

Revenue for Q1 2024 decreased 7.1% to $2,019,323 compared to Q1 2023, due to declines in Digital Marketing and Web Development, partially offset by increases in Creative Services and Platform revenue.

Cost of revenue increased 8.4% to $1,795,273, primarily due to higher purchased media costs in digital marketing.

Selling, general and administrative expenses increased 47.2% to $2,064,657, driven by higher advertising, promotion, research and development, and cloud-based tool costs.

The company recorded a $20,202 impairment of intangible assets related to a domain name it decided not to renew.

Net loss for Q1 2024 was $1,860,809, up from $883,288 in Q1 2023, due to the increases in cost of revenue and SG&A expenses.

Liquidity and Capital Resources

As of March 31, 2024, the company had a working capital deficit of $50,160, compared to a deficit of $1,493,314 at the end of 2023.

Cash used in operating activities was $1,423,004 in Q1 2024, up from $611,081 in Q1 2023, primarily due to the increased net loss, faster payment of vendor invoices, and reduced customer deposits.

Financing activities provided $2,500,000 in Q1 2024, up from $556,006 in Q1 2023, mainly from the $2,500,000 received for the Series I preferred stock issuance.

The company has negative monthly cash flows of around $200,000 and its current cash is not sufficient to sustain operations for 12 months without additional borrowing or stock sales. The company plans to raise more capital from existing and new investors, as well as generate future revenue, to fund its operations and development.