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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2013

OR

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

For the transition period from              to            

Commission File Number 001-375796

TREMOR VIDEO, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (646) 723-5300

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

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes o    No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes o    No x

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 x    No o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $321.0 million as of the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing sale price on The New York Stock Exchange reported for such date.*

As of March 21, 2014, there were 50,341,663 shares of the registrant’s common stock $0.0001 par value per share outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the information called for by Part III of this Annual Report on Form 10-K, to the extent not set forth herein, are incorporated herein by reference from the definitive proxy statement relating to our 2014 annual meeting of stockholders.  The proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2013.

*Registrant’s initial public offering closed on July 2, 2014.  Calculated based on shares outstanding as of July 2, 2014 and initial public offering price of $10.00 per share.

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Tremor Video, Inc.

Form 10-K

For the Fiscal Year Ended December 31, 2013

The Tremor Video logo and names Tremor Video, Tremor Video Network, VideoHub, eQ score+ and other trademarks or service marks of Tremor Video, Inc. appearing in this report are the property of Tremor Video, Inc. and its consolidated subsidiaries. This report contains additional trade names, trademarks and service marks of others, which are the property of their respective owners.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties.  In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” and or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking statements include statements about:

·                  the expansion of the online video advertising market;

·                  the adoption of brand-centric metrics, advanced ad formats and performance-based pricing models;

·                  our ability to increase revenue from new and existing advertisers with respect to the Tremor Video Network and our licensed VideoHub analytics solution;

·                  our ability to ensure a high level of brand safety for our clients;

·                  our ability to acquire an adequate supply of premium video advertising inventory from publishers on terms that are favorable to us;

·                  the effects of increased competition as well as innovations by new and existing competitors in our market;

·                  our ability to effectively innovate and scale our technology and to continue to address the rapidly evolving requirements of advertisers in the online video market;

·                  our ability to effectively manage our growth;

·                  the increase in broadband speed, sales of internet-connected devices and time spent viewing online videos;

·                  our ability to successfully expand our reach beyond current core verticals and manage our international expansion;

·                  our ability to protect viewers’ information and adequately address privacy concerns;

·                  the effect of regulatory developments and industry standards regarding internet privacy and other matters;

·                  our ability to maintain, protect and enhance our intellectual property;

·                  the development or adoption of our programmatic buying solution;

·                  our ability to effectively deliver video ad campaigns with a guaranteed demographic reach;

·                  costs associated with defending intellectual property infringement, securities and other claims;

·                  potential acquisition and integration of complementary business and technologies;

·                  our expected use of proceeds from our initial public offering;

·                  statements regarding future revenue or the sources of such revenue, gross margins, net income, hiring plans, expenses, capital expenditures, capital requirements and stock performance;

·                  our ability to detect “bot” traffic and other fraudulent or malicious activity; and

·                  our ability to attract and retain qualified employees and key personnel.

You should refer to “Part I. Item 1A. Risk Factors” of this Annual Report on Form 10-K for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this report and the documents that we reference in this report and have filed or incorporated by reference as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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PART I

ITEM 1.                                  BUSINESS

Overview

Tremor Video, Inc., or Tremor, we or us, is a leading provider of technology-driven video advertising solutions enabling brand advertisers to engage consumers across multiple internet-connected devices including computers, smartphones, tablets and connected TVs. Our clients include some of the largest brand advertisers in the world including all of the top 10 automakers and 9 of the top 10 consumer packaged goods companies. Our relationships with leading brand advertisers and their agencies have helped us create a robust online video ecosystem that includes more than 500 premium websites and mobile applications, over 200 of which partner with us on an exclusive basis. Our proprietary technology, VideoHub, analyzes in-stream video content, detects viewer and system attributes, and leverages our large repository of stored data to optimize video ad campaigns for brand-centric metrics. VideoHub also provides advertisers and agencies with advanced analytics and measurement tools enabling them to understand why, when and where viewers engage with their video ads.

Our VideoHub technology is the backbone of the Tremor Video Network through which we offer advertisers access to engaged consumers at scale in brand safe environments across multiple devices. We specialize in delivering in-stream video advertisements, which are served to viewers immediately prior to or during the publisher’s content when viewers are most engaged. This is in contrast to traditional in-banner video advertising, which is served on the periphery of publisher content where viewers may not be directing their attention. We further enhance advertisers’ campaigns with innovative ad formats specifically developed to harness the creative aspects of online video, which often result in consumers choosing to extend their interaction with a brand’s message significantly past the original ad experience. To align our solutions with the goals of brand advertisers, we offer a number of brand performance-based pricing models for in-stream video advertising such as cost per engagement, or CPE, pricing, where we are compensated only when viewers actively engage with advertisers’ campaigns and cost per completed and viewable video, or CPV&C, where we are only compensated when a video ad is both completed and viewable by the viewer for the duration of the ad. As a result, we enable our clients to effectively purchase measurable brand results rather than just impressions or clicks.  In addition to our performance-based pricing models, we also offer advertisers the ability to purchase campaigns on a CPM-basis with a guaranteed demographic reach, or demo guarantees, where an advertiser pays based on the number of impressions that are delivered to a target demographic.

Driven by client demand, in 2012 we began licensing VideoHub analytics to advertisers and their agencies through an intuitive and customizable console. Our VideoHub analytics suite helps advertisers and their agencies manage online video brand marketing efforts by providing advanced analytic and measurement tools. By licensing VideoHub analytics, advertisers and their agencies are able to gain transparency into the performance of ad campaigns across the entirety of their video ad buys, including on publisher sites that are not part of the Tremor Video Network.  In addition, we recently began licensing this solution to publishers who can use the platform’s advanced analytics and measurement tools to gain insights into what is driving the performance of ad campaigns running on their sites and the relative value of their inventory.

To complement our current offerings, we are continuing to develop and invest in a programmatic buying solution for brand advertisers.  In the second half of 2013, we introduced a demand side platform, or DSP, for brand performance, which we are currently testing with select partners.   Through our DSP, advertisers and agencies can leverage VideoHub technology to programmatically bid on and buy video ad inventory for brand-centric metrics both on the Tremor Video Network and through third party supply sources.  In addition, we are continuing to integrate our technology with third party exchanges and DSPs, giving them and their advertiser and agency clients the ability to programmatically bid on and buy video ad inventory on the Tremor Video Network.  These programmatic capabilities, combined with the managed campaign solutions that we currently offer through our direct sales force, enable brand advertisers to achieve their brand performance goals regardless of their preferred buying method.

Industry Background

Advertisers often view the advertising market as a funnel that maps a potential consumer’s purchase decision process from the moment he or she is introduced to a brand to the point of purchase. At the top of the marketing funnel, advertisers are focused on building brand awareness amongst the largest possible number of potential consumers and use reach as the primary metric to measure success. Traditionally, advertisers have preferred national television and outdoor media, such as a Super Bowl commercial or Times Square billboard, to achieve brand awareness. At the bottom of the marketing funnel, advertisers are focused on generating specific actions by a consumer in a short period of time. At this stage of the funnel, advertisers have generally relied on direct response marketing, such as newspaper inserts and coupons, as well as online search and display advertising, where conversions are used to measure campaign success.

In the middle of the marketing funnel, advertisers seek to engage consumers and educate them about their brand in order to differentiate themselves from competitors and drive consumer preferences toward a particular branded product to influence future

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purchase decisions, which we refer to as brand lift. Historically, advertisers have sought to achieve middle of the funnel objectives through print, which can tell a deeper story about a product and its benefits, and allows the reader to linger as long as he or she likes, and to a lesser extent through local and cable television, which offers a more targeted audience for a product’s message than national television. Traditional solutions for middle of the funnel marketing have significant limitations because they lack interactivity, the ability to measure and analyze the results of brand-centric ad campaigns in real-time and the ability to adjust campaigns in real-time to optimize for desired performance.

We believe in-stream video is a highly effective channel for brand advertisers to meet their middle of the funnel objectives by combining the rich “sight, sound and motion” of television, the opt-in engagement of print and the real-time measurement and optimization capabilities of online.

Several factors, including the availability of high-speed broadband and mobile network infrastructure, growth of internet-connected devices capable of video consumption, an increase in online video content and a behavioral shift towards online video viewing, are driving robust growth in online video consumption and creating a significant opportunity for in-stream video advertising. As a result, online video advertising is amongst the fastest growing advertising formats in the United States.  Despite this tremendous growth opportunity, brand advertisers face several challenges to the adoption of online video advertising that require sophisticated technology to solve: audience and device fragmentation, the complexity of analyzing video and optimizing campaigns, the absence of performance transparency, premium inventory and brand safety challenges, lack of placement transparency, and the lack of consistent and standard measurements.

Tremor Video Technology and Solutions

VideoHub

VideoHub powers our video advertising solutions to effectively address the challenges faced by advertisers to achieve their brand performance objectives.

Through VideoHub we deliver:

·                  Brand-centric key performance indicators.  We have developed a suite of brand-centric key performance indicators, or KPIs, such as engagement (i.e., the interaction of a viewer with a video ad) and brand lift (i.e., a positive shift in preference towards a brand or branded product driven by exposure to a video ad and brand education), which are tailored to the needs of brand advertisers. Before the launch of a video advertising campaign, a brand advertiser selects the KPI against which it wants to optimize the performance of its campaign. Throughout a campaign, VideoHub analyzes and stores data for all KPIs in our suite, not only the KPI selected by the advertiser for optimization. As a result, an advertiser can understand what signals enhance a specific performance objective even if it has not chosen to optimize a campaign against that KPI.

·                  Distinct signals to drive optimization.  By analyzing the results of over 20 billion in-stream video ads served through the Tremor Video Network, we have identified a proprietary suite of distinct signals, which may vary by device type, that we believe correlate most strongly to campaign performance. We are continually refining our suite of signals as we amass additional data and gain further insights into what drives a successful video ad campaign.

·                  Brand-centric optimization.  Using a proprietary algorithm, VideoHub builds a decision tree that predicts performance of the video ad campaign for the chosen KPI based on its analysis of a series of signals. VideoHub optimizes the campaign for the selected KPI by analyzing the signals of each ad request, such as video player size, geography, publisher, content category, length of video, browser type and viewer data, and prioritizing the delivery of ads that are more likely to perform. For instance, if a client chooses to optimize a video ad campaign for engagement, VideoHub will continuously track and analyze the signals described above to determine which signals are most correlated with achieving a high engagement rate and deliver ad campaigns in response to ad requests that meet these criteria.

·      In-stream video analysis and categorization.  VideoHub performs an analysis on every video stream and categorizes it among one of approximately 72 video content categories enabling us to further optimize a video ad campaign. We also have the ability to scan and categorize content by analyzing the audio track and certain visual elements. This functionality enables us to optimize video ad campaigns and also helps us to identify various categories of inappropriate content in order to prevent video ads from being shown within video streams in these categories.

·                  Ad performance transparency.  VideoHub offers advertisers transparency into the workings of its decision tree so that they can understand what signals are driving the performance of their video ad campaigns. These insights into campaign performance can not only inform future online advertising decisions but also influence offline advertising decisions.

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·                  Ad placement transparency.  VideoHub tracks the number of impressions served to a specific publisher site and whether a video ad placement is fully, partially, or not visible to a viewer, which we refer to as viewability. With this functionality, advertisers know where an ad campaign is running and can validate that their video ads are viewable.

·                  Cross site and channel measurement.  Our proprietary metric, eQ score+, allows advertisers to compare video inventory quality across different publisher sites by measuring attributes such as viewability, the size of the video player and ad completion rate. When coupled with pricing information, these insights help advertisers compare the relative value of video inventory across publishers. In addition, VideoHub provides advertisers and agencies access to metrics that measure audience reach and frequency of viewing by a particular audience, similar to what is used in the television industry, enabling them to compare the brand performance of their online and offline video ad campaigns.

·                  Programmatic buying for brand performance.  Our recently introduced DSP, which we are currently testing with select partners, enables advertisers and agencies to programmatically buy video ad inventory for brand-centric metrics. Using VideoHub technology, our DSP is able to optimize programmatic video buys across a broad spectrum of brand marketing goals — from the most basic, such as audience reach, to more sophisticated KPIs such as engagement and brand lift.  Through our DSP, advertisers and agencies will be able to access video ad inventory on the Tremor Video Network as well as certain third-party networks and exchanges that are integrated with our technology.

·                  Licensed VideoHub analytics.   We license VideoHub analytics to advertisers, agencies and publishers through an intuitive and customizable console.  Advertisers and agencies utilizing this solution can access analytics across the entirety of their video ad buys, including on publisher sites that are not part of the Tremor Video Network. In order to analyze video ad campaigns running outside the Tremor Video Network, VideoHub generates a tracking code which is associated with a given video ad unit. When the video ad is served by a publisher the tracking code communicates data regarding the video ad to VideoHub. Our clients can then access VideoHub’s advanced analysis of this data in order to gain valuable insights into campaign performance.  We believe that the breadth of this solution enables agencies to achieve greater operational efficiency, as it relieves them from the need to integrate and support multiple, disparate technologies, and provides publishers with a powerful monetization tool by providing insights into the value and performance of their inventory.

·                  Advanced ad formats.  Our proprietary ad formats give brand advertisers the ability to create a more engaging experience across multiple internet-connected devices, allowing viewers to interact with an add and explore additional content within the ad itself, driving increased awareness and time spend with an ad.

Tremor Video Network

The Tremor Video Network offers advertisers access to premium video inventory at scale across multiple internet-connected devices in brand safe environments.

Through the Tremor Video Network we deliver:

·                  Scale and reach across multiple devices.  The Tremor Video Network delivers scale and reach across multiple internet-connected devices, including computers, smartphones, tablets and connected TVs, enabling our clients to use our solutions to address their online video advertising needs across these devices. Through VideoHub, we are able to optimize ad campaigns for each type of device. We have partnered with more than 500 premium websites and mobile applications, over 200 of which partner with us on an exclusive basis. These relationships enable publishers to more effectively monetize their video content. We have served over 20 billion in-stream video ads, and in 2013 alone, we delivered on average over 700 million in-stream video ad impressions per month.

·                  Premium video content.  We continuously evaluate and refine our publisher network to ensure that our advertisers have access to high performing content in a brand safe environment. We consider a premium publisher to be a publisher that has professionally produced content, offers a quality video viewing experience, including size and placement of the video player, and delivers strong brand-centric performance results to brand advertisers.

·                  Brand safety.  Our technology scans and categorizes every video within the Tremor Video Network and prevents video ads from being served within content that is identified as objectionable for the brand advertiser, including content that contains accidents, distasteful or obscene language, substance abuse, violence, gambling, sex or crime. We believe that the combination of our video scanning technology, selective manual content reviews and publisher inventory selection practices ensures a high level of brand safety for our clients.

·                  In-stream video focus.  We specialize in delivering in-stream video advertisements, which can be served to viewers immediately prior to or during the publisher’s content when they are most engaged. We believe in-stream video is better

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aligned with brand advertisers’ middle of the funnel objectives than either display or video in-banner advertising, both of which are served on the periphery of publisher content where viewers may not direct their attention. Moreover, we believe that in-stream video advertising solves many of the challenges of mobile advertising that are created by screen size limitations since the publisher content within which the video ad is served will generally occupy the entire mobile screen. Our technology is able to adjust video ads for varying screen sizes.  Despite our focus on in-stream advertising, to meet specific objectives of our advertiser and agency clients we may deliver in-banner advertisements with respect to certain campaigns running on the Tremor Video Network.

·                  Innovative pricing models.  We offer innovative brand performance-based pricing for in-stream video advertising, such as:

·                  CPE pricing, where we are compensated only when viewers actively engage with advertisers’ campaigns, such as by interacting with the elements of the video ad through clicks or screen touches or by rolling over certain elements of the video ad for at least three seconds;

·                  Cost per video completion, or CPVC, pricing, where we are compensated only when viewers complete the video ad;

·                  Cost per brand-shift, or CPS, pricing, where we are compensated only when a campaign results in a positive shift in the consumer’s favorability or intent towards a brand

·                  Cost per conquest, or CPQ, pricing, where we are compensated only when a consumer’s intent is shifted away from a competing brand;

·                  CPV&C pricing, where we are only compensated when a video ad is both completed and viewable by the viewer for the duration of the ad.

We believe that advertisers are attracted to our performance-based pricing models because these models more closely tie advertising spend to actual campaign performance. Our performance based pricing models are also generally available on tablets and smartphones.

·                  Programmatic capabilities.  We are continuing to integrate our technology with third party exchanges and DSPs, giving them and their advertiser and agency clients the ability to programmatically bid on and buy video ad inventory on the Tremor Video Network.  These programmatic capabilities complement the managed campaign solutions that we currently offer through our direct sales force, enabling brand advertisers to achieve their brand performance goals regardless of their preferred buying method.

Clients

Advertisers and Agencies

We have built relationships with advertisers and agencies of all sizes. As of December 31, 2013, we had 356 advertiser clients, including all of the top 10 automaker advertisers and 9 of the top 10 CPG advertisers.

Revenue contribution from individual brand advertisers varies from period to period.  We do not believe our business is substantially dependent upon any individual advertiser as no individual advertiser represented more than 10% of our revenue in 2013, 2012 or 2011.  We maintain close relationships directly with brand advertisers and we consider them to be our clients, as the video ad campaigns we run are those of the advertiser and we work closely with them to execute their video ad campaigns. However, we primarily market and sell our solutions to advertising agencies on behalf of their advertiser clients.

Traditionally, advertising agencies have purchased media on the Tremor Video Network through campaigns that are sold and managed by our direct sales force, which we refer to as managed campaigns.  In 2013, these managed campaigns accounted for substantially all of our in-stream video advertising revenue.  More recently, as the online video advertising market has evolved, agencies have executed campaigns through intermediaries such as DSPs that often use real time bidding to purchase video inventory on an automated or programmatic basis, which we refer to as programmatic campaigns.

For managed campaigns, we do not directly contract with brand advertisers; rather, we contract through insertion orders directly with the advertising agencies or agency holding companies representing these advertisers.  However, brand advertisers are ultimately responsible to us for all contractual payment obligations.  Insertion orders set forth campaign parameters such as size and duration of the campaign, type of video ad format, devices on which the campaign will run, the KPI for which to optimize performance and the desired pricing model. Prior to running the campaign, the advertiser and its agency often work with our creative team to provide the

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creative direction of the campaign and design and build an advanced ad unit. The completed video ad is then uploaded to our ad server by our operations personnel. Once uploaded, the video ad is available to be served to the publisher ad inventory available on our Tremor Video Network. When a publisher makes an ad request, VideoHub analyzes the signals associated with that ad request and prioritizes the delivery of video ad campaigns that are more likely to perform, utilizing our optimization technology and taking into consideration the applicable campaign parameters. During a campaign flight, a client may access analytics about the performance of its video ad campaign and validate the placement of its video ads and number of impressions delivered.

Programmatic campaigns running on the Tremor Video Network are generally purchased through DSPs that act as a representative for advertisers and advertising agencies.  These DSPs are either integrated directly with our technology or transact through an integrated exchange that acts as an intermediary.  Prior to integrating our technology with a given DSP, we will generally enter into a master services agreement with the DSP that governs the purchasing of inventory on the Tremor Video Network.  Unlike managed campaigns, programmatic campaigns running through third party DSPs do not utilize VideoHub technology for optimizing campaign delivery; rather, the DSP will bid on Tremor Video Network inventory using its own decision engine.  If the bid price exceeds the floor price and all other bids for the inventory, the transaction may be executed and the ad will be served on the Tremor Video Network.  While the DSP is responsible for bidding decisions, the overall direction of the advertising spend, including the campaign parameters and eligible inventory sources, is typically determined by the advertiser or advertising agency.  We generally bill DSPs directly for any video inventory that they purchase on behalf of advertisers and agencies on the Tremor Video Network.

In the second half of 2013, we introduced our DSP for brand performance, which we are currently testing with select partners.   Through our DSP, advertisers and agencies can leverage VideoHub technology to programmatically bid on and buy video ad inventory for brand-centric metrics both on the Tremor Video Network and through third party supply sources.

We provide basic access to our VideoHub analytics suite to advertisers with respect to their video ad campaigns running through the Tremor Video Network and charge a license fee for advanced analytics. We also license analytics to advertisers and agencies to track the performance of their video advertising campaigns across their ad buys. The license fee varies depending upon the level of access to our video advertising analytics and the volume of impressions actually analyzed by VideoHub during the term of the license.

Publisher Partners

Publishers provide us with the video content within which we deliver video advertising campaigns on the Tremor Video Network on behalf of our advertiser clients. We have partnered with more than 500 premium websites and mobile applications, over 200 of which partner with us on an exclusive basis. We consider a premium publisher to be a publisher that has professionally produced content, offers a quality viewing experience, which includes size and placement of the video player, and delivers brand metric performance results to brand advertisers.

We enter into agreements with our exclusive publisher partners that typically have a one year term and provide for a minimum fill rate, or a percentage of video ad inventory made available by the publisher to the Tremor Video Network that we must utilize in a given month, at a fixed cost per thousand impressions, or CPM. The scope of these exclusive relationships varies, with some publishers imposing geographical, device or inventory type limitations. For example, under an exclusive relationship, we may be a publisher’s exclusive partner only for in-stream video in the United States. A publisher’s direct sales force may continue to sell their video ad inventory to advertisers or agencies directly. With respect to our non-exclusive publishers, we purchase video ad inventory on an as needed basis at a fixed CPM.

In addition to our direct relationships with premium publishers, we have also partnered with third party video advertising networks and exchanges that are integrated with our technology.  Through our DSP, advertisers and agencies are able to leverage VideoHub technology to programmatically bid on and buy video inventory on these third party networks and exchanges using brand-centric metrics.

We recently began licensing VideoHub analytics to publishers, who can use the platform’s advanced analytics and measurement tools to gain insights into what is driving the performance of ad campaigns running on their sites.  This provides a publisher’s direct sales force with a powerful tool to understand the value of their inventory. The license fee we charge publishers varies depending upon the level of access to our video advertising analytics and the volume of impressions actually analyzed by VideoHub during the term of the license.

Sales

As of December 31, 2013, we had total sales and marketing staff of 168, with 152 based in the United States, and 16 based internationally. For 2013, 2012 and 2011, our total sales and marketing expenses were $38.5 million, $35.0 million, and $28.8 million, respectively.

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Tremor Video Network Sales

Our sales strategy is focused on targeting the most “video ready” brand advertisers, including those advertisers that are large television advertising spenders and have internet display and search budgets. Our advertiser sales force is structured around the verticals that are most ready to spend on online video. Our core verticals include automotive, CPG and entertainment. In addition, we have increasingly focused on the technology and telecommunications, retail and financial services verticals as potential areas for expansion.  Our sales force is responsible for client acquisition for both managed and programmatic campaigns running on the Tremor Video Network.

We also have developed and will continue to develop preferred relationships with key agency holding companies that position us to benefit from increased online video spending by their constituent agencies. Brand advertisers’ purchasing decisions typically are made and coordinated by their advertising agencies and require input from multiple constituencies and the sales process therefore can be time-consuming. We have invested significant resources in establishing relationships with our brand advertisers, agencies and agency holding companies.

Our sales executives and account managers are assigned to specific advertisers to oversee relationships.  For managed campaigns, our sales executive and account managers provide guidance throughout the campaign process from launch to post campaign review, and our creative team will often work with advertisers to create innovative ad campaigns that are specifically suited for in-stream video viewing and optimizing viewer engagement. We generally locate sales and marketing personnel across the United States to align with the geographies of our advertisers and agencies.

Enterprise Sales

Our enterprise sales organization is responsible for client acquisition, account management and overall market awareness of our licensed VideoHub analytics solution, as well as our recently introduced DSP. We expect to continue to grow our enterprise sales and account management headcount in all of our principal markets.

Publisher Development

Our publisher initiatives utilize a full-service development and support strategy. Our team of publisher development professionals is responsible for ensuring that we are meeting the ongoing needs of our publishers throughout the duration of the relationship, and is supported by engineers with deep technical expertise. We invest significant time in cultivating relationships with our publishers to ensure they understand the potential benefits of monetizing their inventory with us rather than with third-party media networks and exchanges. This relationship building process can be time consuming and we have invested significant resources in establishing relationships with our publisher partners.

Technology and Development

Our technology and development efforts are focused on significant investments in VideoHub, which powers all of our solutions.  As of December 31, 2013, we had a total of 90 employees engaged in technology and development functions. For 2013, 2012 and 2011, our total technology and development expenses were $11.6 million, $8.1 million and $5.9 million, respectively.

Competition

We operate in a dynamic and competitive market, influenced by trends in both the overall advertising market as well as the online video advertising industry. The competitive dynamics of our market are unpredictable because our market is in an early stage of development, rapidly evolving, fragmented and subject to potential disruption by new technological innovations. We compete with large online video publishers such as Hulu, LLC and YouTube, LLC, which is owned by Google Inc., as well as advertising technology companies, advertising networks, DSPs, supply side platforms and exchanges, some of which transact programmatically. We also compete for advertiser spending with publishers, such as CBS, CNN and ESPN, who rely on their own sales organizations to attract brand advertisers across their properties.

In the traditional media space, our primary competitors for middle of the funnel advertising spend are mainly cable TV broadcasters, radio broadcasters and print media publishers. Across the digital media landscape, we compete for advertising spend with large entities such as Google Inc., Facebook, Inc., Microsoft Corporation, AOL Inc. and Yahoo! Inc. that offer video advertising services as part of a larger solution for digital media buying. Many of these competitors have significant client relationships, much larger financial resources and longer operating histories than we have.

We believe the principal competitive factors in our industry include the following:

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·                  proven technology and optimization capabilities;

·                  pricing;

·                  quality and scale of online video inventory;

·                  depth and breadth of relationships with brand advertisers and premium publishers;

·                  multi-channel capabilities;

·                  brand-centric measurement;

·                  ability to ensure brand safety; and

·                  transparency into ad performance and placement.

We believe that we compete favorably with respect to all of these factors and that we are well positioned as a leading provider of technology-driven video advertising solutions to brand advertisers.

Intellectual Property

Our ability to protect our intellectual property and our technology will be an important factor in the success and continued growth of our business. We rely on a combination of trade secrets, copyrights, patents and trademarks, as well as contractual protections, to establish and protect our intellectual property and protect our proprietary technology.  We currently own two issued U.S. patents that expire in 2028 and 2031, respectively, and one granted European patent, which we registered in France, Germany and Great Britain, that expires in 2029. Additionally, we currently own seven pending U.S. patent applications that we are currently prosecuting with the U.S. Patent and Trademark Office, although there can be no assurance that any of these patent applications will ultimately be issued a patent.  We register certain domain names, trademarks and service marks in the United States and in certain locations outside the United States. We also rely upon common law protection for certain marks, such as “Tremor Video.” We generally enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with parties, with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. We also use measures designed to control access to our technology and proprietary information. We view our trade secrets and know-how as a significant component of our intellectual property assets, which we believe differentiate us from our competitors.

Despite our efforts to preserve and protect our intellectual property, our efforts may not prevent the misappropriation of our intellectual property or technology, or deter independent development of similar intellectual property or technology by others. Policing unauthorized use of our technology and intellectual property is difficult. Third parties may attempt to copy, reverse engineer or otherwise obtain our proprietary technology, or otherwise violate our intellectual property rights. Unauthorized disclosure by our employees, contractors or other third parties could also occur. Effective intellectual property protection may not be available in the United States or other jurisdictions in which we operate and the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any impairment or loss of our intellectual property, or any inability to enforce our intellectual property rights effectively, could harm our business or our ability to compete. Also, protecting our technology and intellectual property is costly and time-consuming. Any unauthorized disclosure or use of our intellectual property or technology could make it more expensive for us to do business and could harm our operating results.

Additionally, we expect that products in our industry may be subject to third-party infringement lawsuits as the number of competitors grows and the functionality of products in different industry segments overlaps. We currently face, and expect to face in the future claims by third parties that we infringe upon or misappropriate their intellectual property rights, and we may be found to be infringing upon or to have misappropriated such rights. We cannot assure you that we are not infringing or violating any third-party intellectual property rights. Such claims may be made by competitors or other entities. In the future, we, or our clients, may be the subject of legal proceedings alleging that our solutions or underlying technology infringe or violate the intellectual property rights of others.

Governmental Regulation; Industry Alliances

We are subject to numerous U.S. and foreign laws and regulations that are applicable to companies engaged in the online video advertising business, including video advertising on mobile devices. In addition, many areas of law that apply to our business are still

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evolving, and could potentially affect our business to the extent they restrict our business practices or impose a greater risk of liability. We are aware of several ongoing lawsuits filed against companies in our industry alleging various violations of privacy or data security related laws.

Privacy

Privacy and data protection laws and regulations play a significant role in our business. In the United States, at both the state and federal level, there are laws that govern activities such as the collection, use and disclosure of data by companies like us. Online advertising activities in the United States have primarily been subject to regulation by the Federal Trade Commission, or the FTC, which has regularly relied upon Section 5 of the Federal Trade Commission Act, or Section 5, to enforce against unfair and deceptive trade practices. Section 5 has been the primary regulatory tool used to enforce against alleged violations of consumer privacy interests. In addition, our solutions reach devices and users throughout the world, including in Australia, North America, South America, Europe and Asia. As a result, some of our activities may also be subject to the laws of foreign jurisdictions. In particular, European data protection laws can be more restrictive regarding the collection, use, and disclosure of data than those in the United States. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business.

Additionally, U.S. and foreign governments have enacted, considered or are considering legislation or regulations that could significantly restrict industry participants’ ability to collect, augment, analyze, use and share anonymous data, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tools to track people online. The European Union, or EU, and some EU member states have already implemented legislation and regulations requiring advertisers to obtain specific types of notice and consent from individuals before using cookies or other technologies to track individuals and their online behavior and deliver targeted advertisements. It remains a possibility that additional legislation and regulations may be passed or otherwise issued in the future. We also participate in industry self-regulatory programs under which, in addition to other compliance obligations, we provide consumers with notice about our use of cookies and our collection and use of data in connection with the delivery of targeted advertising and allow them to opt-out from the use of data we collect for the delivery of targeted advertising. The rules and policies of the self-regulatory programs that we participate in are updated from time to time and may impose additional restrictions upon us in the future.

Any failure, or perceived failure, by us to comply with U.S. federal, state, or international laws or regulations pertaining to privacy or data protection, or other policies, self-regulatory requirements or legal obligations could result in proceedings or actions against us by governmental entities or others.

In December 2011, the FTC issued an order in connection with the resolution of allegations that from April 2007 until September 2009, before we acquired ScanScout, Inc., or ScanScout, ScanScout’s privacy policy was deceptive with respect to cookies and consumers’ ability to opt-out from data collection. The order requires that we do not misrepresent the extent to which data from or about a particular user or the user’s online activities is collected, used, disclosed, or shared, or the extent to which users may exercise control over the collection, use, disclosure, or sharing of data collected from or about them, their computers or devices, or their online activities. It also requires that we: (1) notify users that our websites collect information for the purpose of sending targeted advertisements, along with a hyperlink to an opt-out mechanism, (2) include a hyperlink to such opt-out mechanism within or immediately adjacent to display advertisements; (3) undertake reasonable efforts to develop and implement a hyperlink to such opt out mechanism within or immediately adjacent to video advertisements; and (4) engage in recordkeeping and reporting obligations. The obligations under the order remain in effect until the latter of December 14, 2031, or the date 20 years after the date, if any, on which the U.S. government or the FTC files a complaint in federal court alleging any violation of the order. A violation of the order could lead to an FTC action for civil penalties. In addition, ScanScout was subject to a putative class action legal proceeding regarding its use of “Flash” cookies, which was settled in March 2012 and dismissed with prejudice.

Advertising

Even though we generally receive certain contractual protections from our advertisers with respect to their video ads, we may nevertheless be subject to regulations concerning the content of ads. Federal and state laws governing intellectual property or other third-party rights could apply to the content of ads we place. Laws and regulations regarding unfair and deceptive advertising, sweepstakes, advertising to children, and other consumer protection regulations, may also apply to the ads we place on behalf of clients.

Industry Alliances

Given the developmental stage of video advertising, industry practices are rapidly evolving. We are participating members of the Digital Advertising Alliance, or DAA, including the DAA Principles and Communications Advisory Committee, which oversees the DAA and its working groups. We also participate in a wide range of IAB committees, councils and working groups, such as the

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IAB Public Policy Council, the Networks and Exchanges Committee and the Digital Video Committee, as well as other industry groups that are focused on establishing best practices for the online video advertising industry. Our Chief Revenue Officer, Randy Kilgore, currently serves on the board of directors of the Interactive Advertising Bureau.

Employees

As of December 31, 2013, we had 291 employees, of which 90 were primarily engaged in technology and development, 168 were engaged in sales and marketing, and 33 were engaged in general and administrative. Substantially all of these employees are located in the United States. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.

Information about Segment and Geographic Revenue

Information about segment and geographic revenue is set forth in “Note 18 — Segment and Geographic Information” in the notes to the consolidated financial statements included in Part IV, Item 15 of this Form 10-K, which are presented beginning on page F-1.

Corporate Information

Tremor Video, Inc. was originally organized as Tremor Media, LLC in November 2005 and converted into a corporation named “Tremor Media, Inc.” under the laws of the State of Delaware in September 2006. We changed our name to Tremor Video, Inc. in June 2011.

Available Information

Our website is located at www.tremorvideo.com, and our investor relations website is located at http://investor.tremorvideo.com. The contents of our website are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the US Securities and Exchange Commission, or SEC, and any references to our websites are intended to be inactive textual references only. The following filings are available for download free of charge through our investor relations website as soon as reasonably practicable after we file them with the SEC: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, as well as any amendments to such reports and all other filings pursuant to Section 13(a) or 15(d) of the Securities Act. Additionally, copies of materials filed by us with the SEC may be accessed at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or at www.sec.gov. For information about the SEC’s Public Reference Room, contact 1-800-SEC-0330.

ITEM 1A.                         RISK FACTORS

The following is a summary description of some of the material risks and uncertainties that may affect our business, including our future financial and operational results.  In addition to the other information in this Annual Report on Form 10-K, the following statements should be carefully considered in evaluating us.

Risks Relating to Our Business and Industry

Because our business model is continuing to develop, our past operating results may not be indicative of future performance, and our future operating results may fluctuate materially and may increase your investment risk.

We were formed in November 2005 and have a limited operating history.  In 2011, we made the strategic decision to focus our media business on in-stream video advertising and to move away from in-banner video advertising.  This strategy may not prove to be a successful.  As a result of our focus on delivering in-stream video advertising, we have experienced a significant reduction in our in-banner revenue.  Substantially all of our revenue in 2013 and 2012 was generated by the sale of in-stream video ads through the Tremor Video Network.  Additionally, in 2012, we began licensing VideoHub analytics to brand advertisers and their agencies and, more recently, to publishers.  Although we have experienced significant growth in revenue generation in recent periods, our relatively short operating history and developing business model make it difficult to assess our future prospects.  The success of our business faces a number of challenges, including:

·                  continuing to innovate and improve the technologies that enable us to provide our solutions;

·                  maintaining and expanding our existing relationships, and developing new relationships with, brand advertisers and premium publishers;

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·                  increasing the level of spending by our brand advertisers;

·                  the growth, evolution and rate of adoption of industry standards;

·                  offering competitive pricing to brand advertisers;

·                  offering competitive rates to premium publishers;

·                  delivering online video advertising campaign performance results that are superior to those that brand advertisers receive through the use of competing providers or technologies;

·                  competing effectively against traditional and online media companies to increase our share of brand advertising spend;

·                  ensuring that our clients’ video ads are shown in brand-safe environments;

·                  maintaining and increasing the value of our brand and goodwill with brand advertisers and premium publishers;

·                  effectively controlling our costs as we grow our business;

·                  responding to evolving government regulations relating to the internet, telecommunications, privacy, marketing and advertising aspects of our business;

·                  developing market acceptance for our licensed VideoHub analytics solution and programmatic buying solutions; and

·                  identifying, attracting, retaining and motivating qualified personnel.

Our ability to meet these challenges will help determine whether we can successfully leverage our business model to achieve profitability and growth in the future.  We cannot assure our ability to achieve this goal, to generate consistent and improving operating results, or even to maintain the same level of success that we have had to date.  If we fail to meet these challenges, our operating results may fluctuate materially and may increase your investment risk.

We have incurred significant net losses since inception, and we expect our operating expenses to increase significantly in the foreseeable future.  Accordingly, we may never achieve or sustain profitability.

We have incurred operating losses since we were formed and expect to incur operating losses in the future.  We incurred net losses of $13.5 million, $16.6 million and $21.0 million in fiscal 2013, fiscal 2012 and fiscal 2011, respectively, and we had an accumulated deficit of $110.9 million as of December 31, 2013 (which includes a $15.8 million deemed dividend related to the conversion of our Series F preferred stock on July 2, 2013).  We do not know if we will be able to achieve profitability or maintain profitability on a continued basis.  Although our revenue has increased substantially in recent periods, we may not be able to maintain this rate of revenue growth.  We anticipate that our operating expenses will continue to increase as we scale our business and expand our operations.  In particular, we plan to continue to invest in our technology and development efforts and sales and marketing efforts and further increase the number of our programmatic and enterprise focused sales and marketing professionals.  We also expect our general and administrative expenses to increase in absolute dollars as a result of operating as a public company.  Our ability to achieve or sustain profitability is based on numerous factors, many of which are beyond our control.  We may never be able to generate sufficient revenue to achieve or sustain profitability.

Unfavorable conditions in the global economy or the vertical markets we serve could limit our ability to grow our business and negatively affect our operating results.

General worldwide economic conditions have experienced significant instability in recent years.  These conditions make it extremely difficult for brand advertisers and us to accurately forecast and plan future business activities, and could cause our brand advertisers to reduce or delay their advertising spending.  Historically, economic downturns have resulted in overall reductions in advertising spending.  For example, our operating results for the second and third quarters of 2011 were adversely affected by a reduction in video advertising spending because of uncertainty and volatility caused by the U.S. budget and European financial crises.  Additionally, our operating results for the first quarter of 2012 were adversely affected by the challenging global economic outlook.  If macroeconomic conditions deteriorate, advertisers may curtail or freeze spending on advertising in general and for solutions such as ours specifically.  Furthermore, we generally sell through insertion orders with ad agencies.  These insertion orders generally do not include long-term obligations and are cancelable upon short notice and without penalty in accordance with standard terms and

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conditions for the purchase of internet advertising published by the Interactive Advertising Bureau.  Any reduction in advertising spending could limit our ability to grow our business and negatively affect our operating results.

In addition, our business may be materially and adversely affected by weak economic conditions in the specific vertical markets that we serve.  In 2013, we derived the majority of our revenue from advertisers in the consumer packaged goods, entertainment and automotive industries.

We cannot predict the timing, strength or duration of any economic slowdown or recovery.  In addition, even if the overall economy improves, we cannot assure you that the market for online video advertising solutions will experience growth or that we will experience growth.

If we fail to adapt and respond effectively to rapidly changing technology and client needs, our solutions may become less competitive or obsolete.

Our future success will depend on our ability to adapt and innovate.  To attract new brand advertisers and increase spend by existing brand advertisers, we will need to expand and enhance our solutions to meet client needs, add functionality and address technological advancements.  If we fail to develop new solutions that address brand advertiser needs, or enhance and improve our solutions in a timely manner or conform to industry standards, we may not be able to achieve or maintain adequate market acceptance of our solutions, and our solutions may become less competitive or obsolete.

Our ability to grow is also subject to the risk of future disruptive technologies.  If new technologies emerge that are able to deliver video advertising solutions at lower prices or more efficiently or effectively than our solutions, such technologies could adversely impact our ability to compete.  For example, if we fail to achieve success with our programmatic media buying solution or if our mobile solution is not considered effective, our business and growth prospects could be harmed.

The market in which we participate is intensely competitive and fragmented, and we may not be able to compete successfully with our current or future competitors.

The online video advertising market is highly competitive.  We compete with large online video publishers such as Hulu, LLC and YouTube, LLC, which is owned by Google Inc., as well as advertising technology companies, advertising networks, DSPs, supply side platforms and exchanges, some of which transact programmatically.  They, or other companies that offer competing advertising solutions, may establish or strengthen cooperative relationships with brand advertisers, ad agencies, agency holding companies or publishers, thereby limiting our ability to promote our solutions and generate revenue.  Competitive pressures could require us to reduce the prices we charge advertisers or increase the prices we pay to publishers.  For example, the online video advertising industry has recently experienced and may continue to experience price erosion due to the influx of online video ad inventory as well as the automation of ad buying.

In the traditional media space, our primary competitors for middle of the funnel advertising spend are mainly cable TV broadcasters, radio broadcasters and print media publishers, some of which also have a digital presence.  Across the digital media landscape, we compete for advertising spend with large entities such as Google, Inc., Facebook, Inc., Microsoft Corporation, AOL Inc. and Yahoo! Inc. that offer video advertising services as part of a larger solution for digital media buying.  Many of these competitors and potential competitors have significant client relationships, much larger financial resources and longer operating histories than we have and may be less severely affected by changes in consumer preferences, regulations or other developments that may impact the online video advertising industry as a whole.

Our business may suffer to the extent that our advertisers and publishers purchase and sell online video advertising directly from each other or through other companies that are able to become intermediaries between advertisers and publishers.  New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants offer multiple new products and services such as analytics, programmatic media buying and exchanges, and bundled offline and online video advertising, aimed at capturing advertising spend.  If the market shifts towards such new technologies and we are unable to either provide such solutions in a compelling manner or otherwise compete with such shift in ad spending, we may incur increased pricing pressure, reduced profit margins, increased sales and marketing expenses or the loss of market share.  For example, we believe that our revenue in the second half of 2013 was negatively impacted by an increase in the prevalence of programmatic video ad buying compared to campaigns purchased on a managed basis.  If there is a delay in, or failure to adopt, our programmatic buying solutions our business and growth prospects could be harmed.

We believe we compete for brand advertiser spend primarily on the basis of proven technology and optimization capabilities, pricing, quality and scale of online video inventory, depth and breadth of relationships with brand advertisers and premium publishers, multi-channel capabilities, brand-centric measurement, ability to ensure brand safety and transparency into ad performance and placement.  Our competitors or potential competitors may adopt certain aspects of our business model, which could reduce our ability

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to differentiate our solutions.  As market dynamics change, or new campaign purchasing patterns arise, or as new and existing competitors introduce more competitive pricing or new or disruptive technologies, we may be unable to maintain our brand advertisers’ existing spend with us, renew our agreements with existing exclusive premium publishers, or attract new advertisers or publishers at the same price or based on the same pricing model as previously used.  As a result, we may be required to change our pricing models, introduce new pricing models and incur additional expenses in response to competitive pressures, which could harm our revenue, profitability and operating results.  For all of these reasons, we may not be able to compete successfully against our current and future competitors.

We operate in a new and rapidly evolving industry.  If the online video advertising industry does not develop or develops more slowly than we expect, our operating results and growth prospects could be harmed.

Online video advertising is an emerging industry, and future demand and market acceptance for online video advertising is uncertain.  Many brand advertisers have limited experience with online brand advertising, generally, and online video advertising specifically, and may continue to devote more significant portions of their advertising budgets to traditional, offline-based advertising, such as television and print, and may not devote significant portions of their advertising budgets to online video advertising.  Additionally, we compete for online advertising spend with other products and technologies such as search, display and in-banner video as well as advertising networks and exchanges.

We believe that the continued growth and acceptance of online video ad spending by brand advertisers generally will depend on the perceived effectiveness and the acceptance of our solutions, which are still emerging and evolving, and the continued growth in commercial use of online media, as well as other factors.  Additionally, brand advertisers may find online video advertising to be less effective than traditional offline channels, such as television, newspapers, radio and billboards, or other online methods for promoting their products and services, and they may reduce their spending on online video advertising from current levels as a result.  Accordingly, if the market for online video advertising deteriorates, or develops more slowly than we expect, our operating results and growth prospects could be harmed.

We generate substantially all of our revenue from the Tremor Video Network.

We generate substantially all of our revenue from the Tremor Video Network.  Due to the concentration in our revenue, we are potentially subject to greater risks than more diversified companies.  While we began licensing VideoHub analytics in 2012, there can be no assurance that a market will develop for this solution or that licensing revenue will increase.  Additionally, we may develop other solutions from time to time, such as our recently introduced programmatic buying solution, but there can be no assurance that we will successfully develop these solutions or that a market will develop for them.  As a result, we expect to be substantially dependent upon revenue generated from the Tremor Video Network for the foreseeable future.  Due to our limited historical experience, we may not be able to accurately predict future usage trends.

We may be unable to retain key advertisers, attract new advertisers or replace departing advertisers with advertisers that can provide comparable revenue to us.

Our success requires us to maintain and expand our relationships with our existing brand advertisers, including the ad agencies that represent them, and to develop new relationships with other brand advertisers and ad agencies.  Generally, we sell through insertion orders with ad agencies.  These insertion orders generally do not include long-term obligations requiring them to purchase from us and are cancelable upon short notice and without penalty in accordance with standard terms and conditions for the purchase of internet advertising published by the Interactive Advertising Bureau.  As a result, we have limited visibility as to our future advertising revenue streams from our advertisers.

Our advertisers’ usage may decline or fluctuate as a result of a number of factors, including, but not limited to:

·                  the performance of their video ad campaigns and their perception of the efficacy and efficiency of their advertising spend through the Tremor Video Network;

·                  changes in the economic prospects of advertisers or the economy generally, which could alter current or prospective advertisers’ spending priorities;

·                  our access to premium inventory;

·                  our ability to deliver video ad campaigns in full, i.e., our ability to serve each requested impression;

·                  their satisfaction with our solutions and our client support;

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·                  the ability of our optimization algorithms underlying our solutions to deliver better rates of return on video ad spend dollars than competing solutions;

·                  seasonal patterns in advertisers’ spending, which tend to be discretionary;

·                  the pricing of our or competing solutions; and

·                  reductions in spending levels or changes in brand advertisers’ strategies regarding video advertising spending.

If a major advertiser decides to materially reduce its advertising spend through the Tremor Video Network, it could do so on short or no notice, which could impair our operating results.  We cannot assure that our advertisers will continue to use the Tremor Video Network or that we will be able to replace in a timely or effective manner departing advertisers with new advertisers from whom we generate comparable revenue.

If an advertiser fails to pay for ad requests that we have fulfilled, we would still be required to pay the publisher for its ad inventory.

We purchase video ad inventory from our publishers to connect our advertiser clients with engaged audiences through the Tremor Video Network.  If advertisers fail to pay for ad requests we have filled, we would still be required to pay the publisher for its ad inventory.  Any significant failure by advertisers to pay us could adversely affect our operating results.

We are highly dependent on advertising agencies and their holding companies as intermediaries, and this may adversely affect our ability to attract and retain business.

Our business focuses on brand advertisers that rely upon advertising agencies in planning and purchasing advertising.  Although we maintain relationships with the owners of brands, we do not contract with them directly.  Instead, we sell to advertising agencies that utilize our solutions on behalf of their clients.  Each advertising agency allocates advertising spend from brand advertisers across numerous channels.  We do not have exclusive relationships with advertising agencies and we depend on agencies to work with us as they embark on marketing campaigns for brands.

If we fail to maintain satisfactory relationships with an advertising agency, we risk losing business from the brand advertisers represented by that agency.  If the advertising agency is owned by a holding company, this risk is magnified because we also risk losing business from the other agencies owned by such holding company and the brand advertisers those agencies represent.  Consolidation among agency holding companies could increase this risk.  Because advertising agencies act as intermediaries for multiple brand advertisers, our client base is more concentrated than might be reflected by the number of brand advertisers that run campaigns through the Tremor Video Network.

Further, our revenue could be adversely impacted by industry changes relating to the use of advertising agencies.  For example, if brand advertisers seek to bring their marketing campaigns in-house rather than using an advertising agency, we would need to enter agreements with the brand advertisers directly, which we might not be able to do and which could increase our sales and marketing expense.  Moreover, as a result of dealing primarily with advertising agencies, advertisers may attribute the value we provide to the advertising agency rather than to us, further limiting our ability to develop long term relationships directly with brand advertisers.  Brand advertisers may move from one advertising agency to another, and, accordingly, even if we have a positive relationship with an advertising agency, we may lose the underlying business when an advertiser switches to a new agency.  The presence of advertising agencies as intermediaries between us and the advertisers thus creates a challenge to building our own brand awareness and affinity with the advertisers that are the ultimate source of our revenue.

In addition, advertising agencies that are our clients also offer or may offer some of the components of our solutions, including selling ad inventory through their own trading desks.  As such, these advertising agencies are, or may become, our competitors.  If they further develop their capabilities, they may be more likely to offer their own solutions to advertisers, and our ability to compete effectively could be compromised.

If brand advertisers do not perceive meaningful benefits from performance-based advertising solutions, then our revenue and gross margins may be adversely affected.

The Tremor Video Network enables brand advertisers to only pay for advertising that “performed”.  Our performance-based pricing models include cost per engagement, or CPE, pricing where we are compensated only when viewers actively engage with advertisers’ campaigns, such as by interacting with the elements of the video ad through clicks or screen touches or by rolling over certain elements of the video ad for at least three seconds, and cost per video completion, or CPVC, pricing where we are

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compensated only when a viewer completes the video ad.  In October 2013, we introduced additional performance-based pricing models where we are compensated only when a campaign results in a positive shift in the consumer’s favorability or intent towards a brand (which we refer to as cost per brand-shift, or CPS) or when a consumer’s intent is shifted away from a competing brand (which we refer to as cost per conquest, or CPQ).  Building on our CPVC offering, we also announced a new pricing model where we are only compensated when a video ad is both completed and viewable by the viewer for the duration of the ad (which we refer to as CPV&C). We will continue to offer our CPE-priced and CPVC-priced offerings in addition to these newly announced performance-based pricing models.

The market for performance-based advertising solutions is evolving and has not yet been widely adopted by brand advertisers.  A significant portion of our revenue is generated from ad campaigns that are priced on a performance basis.  Under performance-based pricing models, advertisers only pay us if the applicable performance metrics are satisfied.  We believe performance-based pricing generally provides greater margins than CPM priced campaigns, because we are often able to serve our advertisers’ performance goals with a lower number of purchased impressions.  Historically, a larger portion of brand advertisers’ online advertising budgets have been based on the number of impressions served, such as cost per thousand impressions, or CPM, without regard to performance, and such advertisers may be reluctant or slow to adopt performance-based pricing solutions, including the new suite of performance-based pricing models that we introduced in October 2013.  Additionally, during the last half of 2013, an increased number of campaigns were run on the Tremor Video Network on a CPM-basis with demo guarantees compared to prior periods.  For this period, these campaigns had lower gross margins than our CPE- and CPVC-priced campaigns as well as CPM-priced campaigns without demo guarantees.  Campaigns priced on a performance-basis or a CPM-basis with demo guarantees are subject to the risk that we may purchase ad inventory that we are unable to monetize if the purchased inventory does not perform for our advertisers.  If brand advertisers do not perceive meaningful benefits from our performance-based advertising solutions, our revenue and gross margins may be adversely affected.

If we fail to maintain or increase our access to premium advertising inventory, our operating results may be harmed.

Our success requires us to maintain and expand our access to premium video advertising inventory.  We do not own or control the video ad inventory upon which our business depends.  We purchase this ad inventory from our publishers generally either in exclusive one year agreements or by spot purchases.  These publishers are generally not required to provide us with a specified level of inventory, and we cannot assure you that our exclusive publishers will renew their agreements with us or continue to make their ad inventory available to us.  In addition, we review our publishers and have removed, and may in the future remove, publishers from our network based on the quality of the inventory, the demographic reach of the inventory, viewer experience and our confidence in the integrity of their ad requests.  As a result, we may have limited visibility as to our future access to inventory from publishers.  If a publisher decides not to make video ad inventory available to us or if we decide to remove a publisher from our network, we may not be able to replace this ad inventory with comparable ad inventory quickly enough to fulfill our brand advertisers’ requests.  Additionally, with respect to CPM-priced campaigns sold with demo guarantees, if we are unable to access inventory targeted to the selected demographic on a cost-effective basis our margins could be adversely affected.

Publishers have a variety of channels in which to sell their video ad inventory, including direct sales forces and supply side platforms.  Under our exclusive arrangements, a publisher’s direct sales force may sell their own video ad inventory, and many of our exclusive publishers maintain significant direct sales forces.  Furthermore, the scope of exclusivity with respect to the third party monetization of video ad inventory varies with publishers, with some publishers imposing geographical, device, or inventory type limitations.  Any increase in a publisher’s direct sales efforts may negatively impact our access to that publisher’s inventory.  Additionally, if publishers sell their non-exclusive inventory through supply side platforms, or if our competitors offer higher prices for their ad inventory, our ability to obtain ad inventory on a cost-effective basis may be affected.

If we are unable to maintain or increase our access to premium video ad inventory, our operating results may be harmed.

We may not be able to adequately satisfy the supply from our exclusive publishers with demand from our advertisers.

Substantially all of our exclusive publisher agreements obligate us to fill a specified percentage of the video ad inventory that they make available to us, which we refer to as an ad request.  In some cases, there is no cap on our fill obligation.  If we are unable to deliver ad campaigns to this inventory, we will bear the loss on those unfilled ad requests.  This risk can be magnified during certain times of the year when we see increased ad requests from our exclusive publishers coupled with reduced purchase demand from our advertisers.

Additionally, in order to satisfy our required fill obligations, we may have to serve less optimized inventory to our advertisers.  This may negatively impact the performance of an ad campaign, which could particularly impact us with respect to our campaigns that are priced on a performance basis.  As a result, our margins may be negatively impacted even if we are able to fully satisfy the fill obligation.

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Any significant failure to adequately match demand from our advertisers with supply from our publishers would harm our operating results.

If we fail to detect fraud or other actions that impact video ad campaign performance, we could lose the confidence of advertisers or agencies, which would cause our business to suffer.

Our business relies on effectively and efficiently delivering video ad campaigns for brand advertisers.  We have in the past, and may in the future, be subject to fraudulent and malicious activities.  An example of such activities would be the use of bots, non-human traffic delivered by machines that are designed to simulate human users and artificially inflate user traffic on websites.  These activities could overstate the performance of any given video ad campaign and could harm our reputation.  It may be difficult to detect fraudulent or malicious activity because we do not own content and rely in part on our publisher partners for controls with respect to such activity.  While we assess the campaign performance on our publishers’ websites, such assessments may not detect or prevent fraudulent or malicious activity.  Further, we may need to improve over time our processes for assessing the quality of publisher ad requests.  If fraudulent or other malicious activity is perpetrated by others, and we fail to detect or prevent it, the affected advertisers may experience or perceive a reduced return on their investment and our reputation may be harmed.  High levels of fraudulent or malicious activity could lead to dissatisfaction with our solutions, refusals to pay, refund demands or withdrawal of future business.  If we fail to detect fraud or other actions that impact the performance of our video ad campaigns, we could lose the confidence of our advertisers or agencies, which could cause our business to suffer.

We only recently began licensing VideoHub analytics and if a market for this solution fails to develop, our growth prospects could be adversely affected.

We only recently began licensing VideoHub analytics, and demand for this solution by advertisers, agencies or publishers may not develop or may develop more slowly than we expect.  Third parties from which we license certain data utilized by these solutions may terminate such licenses or be unwilling to renew such licenses on terms that are satisfactory to us.  Additionally, our ability to measure campaigns running through publishers that do not provide inventory to the Tremor Video Network depends on such publishers accepting our tags on their sites.  If a publisher does not accept our tags, VideoHub will not be able to track video ad campaign performance across these sites.  This inability could potentially diminish the value of our licensing solution to our advertiser and agency clients for non-Tremor Video Network video ad campaigns.  Additionally, our competitors may develop competitive solutions that gain greater market acceptance than our licensed solutions.  If the market for these solutions fails to develop, our growth prospects could be adversely affected.

Our sales efforts with advertisers, agencies and publishers require significant time and expense.

Attracting new brand advertisers, ad agencies and premium publishers requires significant time and expense, and we may not be successful in establishing new relationships or in maintaining or advancing our current relationships.  For example, certain brand advertisers may have no or limited experience with online video advertising or may be unfamiliar with our solutions.  In addition, brand advertisers’ purchasing decisions typically are made and coordinated by their advertising agencies and require input from multiple constituencies.  The process of selling our solutions to brand advertisers and ad agencies can therefore be time-consuming.  With respect to our publishers, we often seek to establish exclusive long-term relationships to ensure access to premium content for our brand advertisers.  As a result, we invest significant time in cultivating relationships with our publishers to ensure they understand the potential benefits of monetization of their inventory with us rather than with third-party media networks and exchanges.  The relationship building process can take many months and may not result in us winning an opportunity with any given advertiser, agency or publisher.

Our technology and online video brand advertising are relatively new and often require us to spend substantial time and effort educating potential advertisers and publishers about our solutions, including providing demonstrations and comparisons against other available services.  This process can be costly and time-consuming.  If we are not successful in streamlining our sales processes with advertisers and publishers, our ability to grow our business may be adversely affected.

We experience fluctuations in our operating results due to a number of factors which make our future results difficult to predict and could cause our operating results to fall below expectations.

Our operating results have historically fluctuated and our future operating results may vary significantly from quarter to quarter due to a variety of factors, many of which are beyond our control.  Period-to-period comparisons of our operating results should not be relied upon as an indication of our future performance.  Given our relatively short operating history and the rapidly evolving online video advertising industry, our historical operating results may not be useful in predicting our future operating results.

Factors that may affect our operating results include the following:

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·                  changes in the economic prospects of advertisers, the industries we primarily serve, or the economy generally, which could alter current or prospective advertisers’ spending priorities, or could increase the time it takes us to close sales with advertisers;

·                  the addition of new advertisers or the loss of existing advertisers;

·                  changes in demand for our solutions;

·                  changes in the amount, price and quality of available video advertising inventory from publishers;

·                  the timing and amount of sales and marketing expenses incurred to attract new advertisers and publishers;

·                  the cancellation or delay of campaigns by brand advertisers;

·                  changes in our pricing policies, the pricing policies of our competitors or the pricing of online video advertising generally, including the relative mix of performance-priced campaigns, CPM-priced campaigns with demo guarantees, and CPM-priced campaigns without demo guarantees;

·                  timing differences at the end of each period between our payments to publishers for advertising inventory and our collection of advertising revenue related to that inventory; and

·                  costs related to acquisitions of other businesses.

Our operating results may fall below the expectations of market analysts and investors in some future periods.  If this happens, even just temporarily, the market price of our common stock may fall.

Our revenue tends to be seasonal in nature.

Our revenue tends to be seasonal in nature, with the third and fourth quarters of each calendar year historically representing the largest percentage of our total revenue for the year and the first quarter of each calendar year historically representing the lowest percentage of our total revenue for the year.  Many of the brand advertisers in the verticals we serve spend significant portions of their advertising budgets during the third quarter, in connection with summer, back to school and entertainment events, and in the fourth quarter, in connection with the holiday season.  During the first quarter, brand advertisers generally devote less of their budgets to ad spending, and as a result, our exclusive publishers generally make a larger proportion of their ad inventory available to us.  This combination generally results in lower revenue and gross margins for us during the first quarter of each calendar year.  Our operating cash flows could also fluctuate materially from period to period as a result of these seasonal fluctuations.

We have made and may make additional acquisitions that could entail significant execution, integration and operational risks.

As part of our business strategy, we have in the past acquired, and may in the future acquire, companies, technologies and solutions that we believe complement our business.  Acquisitions involve numerous risks, any of which could harm our business, including:

·                  difficulties in integrating the technologies, solutions, operations, existing contracts and personnel of a target company;

·                  difficulties in supporting and transitioning clients, if any, of a target company;

·                  diversion of financial and management resources from existing operations or alternative acquisition opportunities;

·                  failure to realize the anticipated benefits or synergies of a transaction;

·                  failure to identify all of the problems, liabilities or other shortcomings or challenges of an acquired company, technology, or solution, including issues related to intellectual property, solution quality or architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or client issues;

·                  risks of entering new markets in which we have limited or no experience;

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·                  potential loss of key employees, brand advertisers and publishers from either our current business or a target company’s business;

·                  inability to generate sufficient revenue to offset acquisition costs; and

·                  possible write-offs or impairment charges relating to acquired businesses.

In addition, we may incur indebtedness to complete an acquisition, which may impose operational limitations, or issue equity securities, which would dilute our stockholders’ ownership.  We may also unknowingly inherit liabilities from acquired businesses or assets that arise after the acquisition and are not adequately covered by indemnities.  Additionally, acquisitions also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial results.

Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic political and regulatory risks associated with specific countries.  The failure to successfully evaluate and execute acquisitions or investments or otherwise adequately address the risks described above could materially harm our business and financial results.

We have limited international operations and any future international expansion may expose us to several risks, such as difficulty adapting our solutions for international markets.

We have limited experience in marketing, selling and supporting our solutions abroad.  During fiscal 2013, fiscal 2012 and fiscal 2011, more than 95% of our revenue was generated in the United States.  While we have offices outside of North America in Singapore and the United Kingdom, substantially all of our operations are located in the United States.

Any future international expansion of our business will involve a variety of risks, including:

·                  localization of our solutions, including translation into foreign languages and adaptation for local practices;

·                  unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;

·                  differing labor regulations where labor laws may be more advantageous to employees as compared to the United States;

·                  more stringent regulations relating to data security and the unauthorized use of, or access to, commercial and personal information, particularly in the European Union;

·                  reluctance to allow personally identifiable data related to non-U.S. citizens to be stored in databases within the United States, due to concerns over the U.S. government’s right to access information in these databases or other concerns;

·                  changes in a specific country’s or region’s political or economic conditions;

·                  challenges inherent in efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs;

·                  risks resulting from changes in currency exchange rates;

·                  limitations on our ability to reinvest earnings from operations in one country to fund the capital needs of our operations in other countries;

·                  different or lesser intellectual property protection; and

·                  exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S. Foreign Corrupt Practices Act and similar laws and regulations in other jurisdictions.

Operating internationally requires significant management attention and financial resources.  We cannot be certain that the investment and additional resources required in establishing and expanding our international operations will produce desired levels of

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revenue or profitability.  If we invest substantial time and resources to establish and expand our international operations and are unable to do so successfully and in a timely manner, our business and operating results will suffer.

We have not engaged in currency hedging activities to limit risk of exchange rate fluctuations.  Changes in exchange rates affect our costs and earnings, and may also affect the book value of our assets located outside the United States and the amount of our stockholders’ equity.

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.

Our business and operations may consume resources faster than we anticipate.  In the future, we may need to raise additional funds to expand our marketing and sales and technology development efforts or to make acquisitions.  Additional financing may not be available on favorable terms, if at all.  Our credit facility matures in December 2014, and we may be unable to renew the credit facility on terms that are acceptable to us.  If adequate funds are not available on acceptable terms, we may be unable to fund the expansion of our marketing and sales and technology development efforts or take advantage of acquisition or other opportunities, which could harm our business and results of operations.  Furthermore, if we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock.  Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.  As a result, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.

Provisions of our debt instruments may restrict our ability to pursue our business strategies.

Our credit facility requires us, and any debt instruments we may enter into in the future may require us, to comply with various covenants that limit our ability to, among other things:

·                  dispose of assets;

·                  complete mergers or acquisitions;

·                  incur indebtedness;

·                  encumber assets;

·                  pay dividends or make other distributions to holders of our capital stock;

·                  make specified investments;

·                  change certain key management personnel; and

·                  engage in transactions with our affiliates.

These restrictions could inhibit our ability to pursue our business strategies.  We are also subject to a financial covenant with respect to minimum monthly working capital levels.  If we default under our credit facility, and such event of default is not cured or waived, the lender could terminate commitments to lend and cause all amounts outstanding with respect to the debt to be due and payable immediately, which in turn could result in cross defaults under other debt instruments.

Our assets and cash flow may not be sufficient to fully repay borrowings under all of our outstanding debt instruments if some or all of these instruments are accelerated upon a default.  We may incur additional indebtedness in the future.  The debt instruments governing such indebtedness could contain provisions that are as, or more, restrictive than our existing debt instruments.  If we are unable to repay, refinance or restructure our indebtedness when payment is due, the lenders could proceed against the collateral granted to them to secure such indebtedness or force us into bankruptcy or liquidation.

We have experienced rapid growth in recent periods.  If we fail to manage our growth effectively, our financial performance may suffer.

We have expanded our revenue, solutions, scale, employee headcount and overall business operations in recent periods.  Our expansion has placed, and our expected future growth will continue to place, a significant strain on our managerial, operational, product development, sales and marketing, administrative, financial and other resources.  For instance, we expect to be substantially

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dependent on our direct sales force to obtain new clients, and we plan to continue to expand our direct sales force both domestically and internationally.  Newly hired sales personnel may not become productive as quickly as we would like, or at all, thus representing increased operating costs and lost opportunities which in turn would adversely affect our business, financial condition and operating results.

If we do not manage our growth effectively, successfully forecast demand for our solutions or manage our expected expenses accordingly, our operating results will be harmed.  If we fail to manage our growth effectively, our financial performance may suffer.

We depend on key personnel to operate our business, and if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed.

In addition to the continued services of William Day, our President and Chief Executive Officer, and Steven Lee, a Senior Vice President and our Chief Technology Officer, we believe that our future success is highly dependent on the contributions of our senior management, as well as our ability to attract and retain highly skilled and experienced technical and other personnel in the United States and abroad.  We do not have key person insurance on any of our executives.  All of our employees, including our senior management, are free to terminate their employment relationship with us at any time, and their knowledge of our business, technology and industry may be difficult to replace.  In addition, we believe that our senior management has developed highly successful and effective working relationships.  If one or more of these individuals leave, we may not be able to fully integrate new executives or replicate the current dynamic and working relationships that have developed among our executive officers and other key personnel, and our operations could suffer.  Qualified technical personnel are in high demand, particularly in the digital media industry, and we may incur significant costs to attract them.  Many of the companies with which we compete for experienced personnel also have greater resources than us.  Additionally, volatility or lack of performance in our stock price may also affect our ability to attract employees and retain our key employees.  If we are unable to attract and retain our senior management and key employees, our ability to develop and successfully grow our business could be harmed.

Defects or errors in our solutions could harm our reputation, result in significant costs to us, impair our advertisers’ ability to deliver effective advertising campaigns and impair our ability to meet or fulfill obligations with publishers.

The technology underlying our solutions, including our proprietary technology and technology provided by third-parties, may contain material defects or errors that can adversely affect our ability to operate our business and cause significant harm to our reputation.  This risk is compounded by the complexity of the technology underlying our solutions and the large amounts of data we utilize.  Errors, defects, disruptions in service or other performance problems in our solutions could result in the incomplete or inaccurate delivery of an ad campaign, including serving an ad campaign in an incomplete or inaccurate manner, in an incorrect geographical location or in an environment that is detrimental to the advertiser’s brand health.  Any such failure, malfunction, or disruption in service could result in damage to our reputation, our advertising clients withholding payment to us, advertisers or publishers making claims or initiating litigation against us, and our giving credits to our advertiser clients toward future advertising spend.  In addition, the terms of our exclusive publisher agreements generally require us to pay for a percentage of the ad requests delivered by such publishers, even if we are unable to deliver our solutions due to disruptions in our technology.  As a result, defects or errors in our solutions could harm our reputation, result in significant costs to us, impair our advertisers’ ability to deliver effective advertising campaigns and impair our ability to meet our fill obligations with publishers.

System failures could significantly disrupt our operations and cause us to lose advertisers or publishers.

Our success depends on the continuing and uninterrupted performance of our solutions, which we utilize to place video ads, monitor the performance of advertising campaigns, manage our advertising inventory and respond to publisher ad calls.  Our revenue depends on our ability to categorize video content and deliver ads as well as measure campaigns on a real-time basis.  Sustained or repeated system failures that interrupt our ability to deliver ads through the Tremor Video Network and provide access to our licensed solutions, including technological failures affecting our ability to deliver video ads quickly and accurately and to process viewers’ responses to ads or fill publisher ad requests, could significantly reduce the attractiveness of our solutions and reduce our revenue.  Our systems are vulnerable to damage from a variety of sources, including telecommunications failures, power outages, malicious human acts and natural disasters.  In addition, any steps we take to increase the reliability and redundancy of our systems may be expensive and may not be successful in preventing system failures.  Any such system failures could significantly disrupt our operations and cause us to lose advertisers or publishers.

Security breaches, computer viruses and computer hacking attacks could harm our business and results of operations.

We collect, store and transmit information of, or on behalf of, our advertisers and publishers.  We take steps to protect the security, integrity and confidentiality of the information we collect, store or transmit, but there is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts.  Security breaches, computer malware and computer hacking attacks have become more prevalent in our industry and may

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occur on our systems or those of our information technology vendors in the future.  Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, or the inadvertent transmission of computer viruses or other harmful software code could result in the unauthorized disclosure, misuse, or loss of information, legal claims and litigation, indemnity obligations, regulatory fines and penalties, contractual obligations and liabilities, and other liabilities.  In addition, if our security measures or those of our vendors are breached or unauthorized access to consumer data otherwise occurs our solutions may be perceived as not being secure, and advertisers or publishers may reduce the use of or stop using our solutions.

While we and our publishers have security measures in place, these systems and networks are subject to ongoing threats and, therefore, these security measures may be breached as a result of employee error, failure to implement appropriate processes and procedures, malfeasance, third-party action, including cyber-attacks or other international misconduct by computer hackers or otherwise.  This could result in one or more third parties obtaining unauthorized access to our publishers’ or advertisers’ data or our data, including personally identifiable information or other viewer data, intellectual property and other confidential business information.  Third parties may also attempt to fraudulently induce employees into disclosing sensitive information such as user names, passwords or other information in order to gain access to our advertisers’ data or our data, including intellectual property and other confidential business information.

Because techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative or mitigation measures.  Though it is difficult to determine what harm may directly result from any specific interruption or breach, any failure to maintain performance, reliability, security and availability of our network infrastructure or otherwise to maintain the confidentiality, security, and integrity of data that we store or otherwise maintain on behalf of third parties may harm our reputation and our relationships with advertisers, agencies or publishers or harm our ability to retain existing clients and attract new clients.  Any of these could harm our business, financial condition and results of operations.

If such unauthorized disclosure or access does occur, we may be required to notify our advertisers, agencies or publishers or those persons whose information was improperly used, disclosed or accessed.  We may also be subject to claims of breach of contract for such use or disclosure, investigation and penalties by regulatory authorities and potential claims by persons whose information was improperly used or disclosed.  The unauthorized use or disclosure of information may result in the termination of one or more of our commercial relationships or a reduction in advertiser, agency or publisher confidence and usage of our solutions.  We may also be subject to litigation and regulatory action alleging the improper use, transmission or storage of confidential information, which could damage our reputation among our current and potential clients, require significant expenditures of capital and other resources and cause us to lose business and revenue.

Interruptions or delays in service from our third-party data center hosting facilities and other third parties could impair the delivery of our solutions and harm our business.

We currently utilize a single third-party data center hosting facility located in Boston, Massachusetts to deliver our solutions.  All of our data storage and analytics are conducted on, and the video ad campaigns we deliver are processed through, servers in this facility. We also rely on bandwidth providers, internet service providers and mobile networks to deliver video ads.  In addition, we utilize a third party data center hosting facility located in New York, New York for corporate information technology use.  Any damage to, or failure of, the systems of our third-party data centers or our other third-party providers could result in interruptions to the availability or functionality of our service.  If for any reason our arrangements with our data centers or third-party providers are terminated, we could experience additional expense in arranging for new facilities, technology services and support.  In addition, the failure of our data centers or any other third-party providers to meet our capacity requirements could result in interruptions in the availability or functionality of our solutions or impede our ability to scale our operations.

The occurrence of a natural disaster, an act of terrorism, vandalism or sabotage, a decision to close our third-party data centers or the facilities of any third-party provider without adequate notice, or other unanticipated problems at these facilities could result in lengthy interruptions in the availability of our solutions.  While we have disaster recovery arrangements in place, they have not been tested under actual disasters or similar events and may not effectively permit us to continue to provide our solutions in the event of any problems with respect to our data centers or any other third-party facilities.  To date, we have not experienced these types of events, but we cannot provide any assurances that they will not occur in the future.  If any such event were to occur to our business, the delivery of our solutions could be impaired and our business harmed.

Our net operating loss carryforwards may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.

We may be limited in the portion of net operating loss carryforwards that we can use in the future to offset taxable income for U.S. federal income tax purposes.  At December 31, 2013, we had approximately $84.7 million of U.S. federal and state net operating

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loss carryforwards, or NOLs, which expire in various years beginning in 2026.  A lack of future taxable income would adversely affect our ability to utilize these NOLs.  In addition, under Section 382 of the Internal Revenue Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income.  We believe that we experienced an ownership change under Section 382 of the Internal Revenue Code in prior years that may limit our ability to utilize a portion of the NOLs in the future.  In addition, future changes in our stock ownership, including future offerings, as well as other changes that may be outside of our control, could result in additional ownership changes under Section 382 of the Internal Revenue Code.  Our NOLs may also be impaired under similar provisions of state law.  We have recorded a full valuation allowance related to our NOLs and other net deferred tax assets due to the uncertainty of the ultimate realization of the future benefits of those assets.  Our NOLs may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.

Risks Relating to Our Data Collection and Intellectual Property

Our ability to generate revenue depends on our ability to collect and use significant amounts of data to deliver video ads, and any limitations on the collection and use of this data could significantly diminish the value of our solutions.

Our ability to optimize the placement and scheduling of video advertisements for our advertisers and to grow our revenue depends on our ability to successfully leverage data that we collect from our advertisers, publishers, and third parties such as data providers.  Our ability to successfully leverage such data, in turn, depends on our ability to collect and obtain rights to utilize such data.

When we deliver a video ad, we are often able to collect anonymous information about the placement of the video ad and the interaction of the user with the video ad.  We currently employ cookies to conduct online video ad campaigns.  Cookies are small files of non-personalized information placed on an internet consumer’s computer.  The cookies are used to collect information related to the consumer, such as demographic information and history of the consumer’s interactions with our advertisers’ and our publishers’ websites, and any video ads we deliver.  We also employ cookies and mobile tracking technology to deliver reporting on ads on web publishers’ sites and in mobile applications.  We may also be able to collect information about the user’s location.  As we collect and aggregate this data provided by billions of video ad impressions, we analyze it in order to optimize the placement and delivery of video ads across the advertising inventory provided to us by publishers.  For example, we may use the collected information to limit the number of times a specific video ad is presented to the user, to provide a video ad to only certain types of users, or to provide a report to an advertiser or publisher regarding the performance of an advertising campaign or inventory, respectively.

Risks Related to Data Collected from Consumers

We participate in industry self-regulatory programs under which, in addition to other compliance obligations, we provide consumers with notice about our use of cookies and our collection and use of data in connection with the delivery of targeted advertising.  In addition, consumers can currently opt out of the placement or use of our cookies for online targeted advertising purposes by either deleting or disabling cookies on their browsers, visiting websites that allow consumers to place an opt-out cookie on their browsers, which instructs advertisers and their service providers not to use certain data about the consumer’s online activity for the delivery of targeted advertising, or by downloading browser plug-ins and other tools that can be set to: (1) identify cookies and other tracking technologies used on websites; (2) prevent websites from placing third-party cookies and other tracking technologies on the consumer’s browser; or (3) block the delivery of online advertisements on websites and applications.

If consumer sentiment regarding privacy issues or the development and deployment of new browser solutions or other mechanisms that limit the use of cookies or other tracking technologies or data collected through use of such technologies results in a material increase in the number of consumers who choose to opt out or are otherwise using browsers where they need to, and fail to, configure the browser to accept cookies, our ability to collect valuable and actionable data would be impaired.  Consumers may become increasingly resistant to the collection, use, and sharing of information used to deliver targeted advertising and may take steps to prevent such collection and use of information.  Consumers may elect not to allow data collection, use, or sharing for targeted advertising for a number of reasons, such as privacy concerns or pricing mechanisms that may charge the user based upon the amount or types of data consumed on the device.  Consumers may also elect to opt out of receiving targeted advertising specifically from our solutions.

Risks Related to Data Collected from Publishers and Advertisers

In order to effectively operate our video advertising campaigns, we collect data from advertisers, publishers, and other third parties.  If we are not able to obtain sufficient rights to data from these third parties, we may not be able to utilize data in our solutions.  Although our arrangements with advertisers and publishers generally permit us to collect non-personally identifiable and aggregate data from advertising campaigns, some of our advertisers and publishers do not allow us to collect some or all of this data or limit our use of this data, and future advertisers and publishers may do so in the future.  For example, publishers may not agree to permit us to place our data collection tags on their sites or agree to provide us with the data generated by interactions with the content

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on their sites.  It would be difficult to comply with these requests, and to do so would cause us to spend significant amounts of resources.  It could also make it difficult for us to deliver effective advertising campaigns that meet the demands of our advertisers.

We and many of our advertisers and publishers voluntarily participate in several trade associations and industry self-regulatory groups that promulgate best practice guidelines or codes of conduct addressing the delivery of promotional content to users, and tracking of users or devices for the purpose of delivering targeted advertising.  We could be adversely affected by changes to these guidelines and codes in ways that are inconsistent with our practices or in conflict with the laws and regulations of U.S. or international regulatory authorities.  If we are perceived as not operating in accordance with industry best practices or any such guidelines or codes with regard to privacy, our reputation may suffer, we could lose relationships with advertisers or publishers, and we could be subject to proceedings or actions against us by governmental entities or others as described below.  Any limitation on our ability to collect data about user behavior and interaction with content could make it more difficult for us to deliver effective video advertising campaigns that meet the demands of our advertisers.

Risks Related to Data Collection Technology

Changes in device and software features and new technologies could make it easier for internet consumers to prevent the placement of cookies.  In particular, the default settings of consumer devices and software may be set to prevent the placement of cookies unless the consumer actively elects to allow them.  For example, Apple Inc.’s Safari browser currently does not accept third-party cookies as a default, and consumers must activate a browser setting to enable cookies to be set.  Mozilla Corporation and Microsoft Inc. also have announced plans to adopt similar defaults in future versions of their respective Firefox and Internet Explorer browsers.  On February 22, 2012, the Digital Advertising Alliance announced that its members will work to add browser-based header signals to the set of tools by which consumers can express their preferences not to be tracked online.  On March 26, 2012, the U.S. Federal Trade Commission, or the FTC, issued a report on consumer privacy, which calls for the development and implementation of a persistent Do Not Track mechanism to enable consumers to choose whether to allow the tracking of their online search and browsing activities.  Various industry participants have worked to develop and finalize standards relating to a Do Not Track mechanism, and such standards may be implemented and adopted by industry participants at any time.

Network carriers, providers of mobile device operating systems, and device manufacturers may also impact our ability to collect data on internet-connected devices.  These carriers, operating system providers, and device manufacturers are increasingly promoting features that allow device users to disable some of the functionality of the device or its operating system, which may impair or disable the collection of data on their devices.

Any interruptions, failures, or defects in our data collection, mining, analysis, and storage systems could limit our ability to aggregate and analyze user data from our clients’ advertising campaigns.  If that happens, we may not be able to optimize the placement of advertising for the benefit of our advertisers, which could make our solutions less valuable, and, as a result, we may lose clients and our revenue may decline.

If web, smartphones, tablet and connected TV devices, their operating systems or content distribution channels, including those controlled by our competitors, develop in ways that prevent our advertising from being delivered to their users, our ability to grow our business could be impaired.

Our business model depends upon the continued compatibility of our solutions with most internet-connected devices across online, mobile, tablet and connected TV distribution channels, as well as the major operating systems that run on them.  The design of these devices and operating systems are controlled by third parties with whom we do not have any formal relationships.  These parties frequently introduce new devices, and from time to time they may introduce new operating systems or modify existing ones.  In some cases, the parties that control the development of internet-connected devices and operating systems include companies that we regard as our competitors, including some of our most significant competitors.  For example, Google Inc. controls the Android operating system and also controls a significant number of mobile devices.  If our solutions were unable to work on these devices or operating systems, either because of technological constraints or because a maker of these devices or developer of these operating systems wished to impair our ability to provide video ads on them, our ability to grow our business could be impaired.

Our business practices with respect to data could give rise to liabilities or reputational harm as a result of governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.

U.S. and foreign governments have enacted, considered, or are considering legislation or regulations that could significantly restrict our ability to collect, augment, analyze, use, and share anonymous data, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tools to track people online.  Federal, state, and international laws and regulations govern the collection, use, retention, sharing, and security of data that we collect across our solutions.  We strive to comply with all applicable laws, regulations, self-regulatory requirements, policies, and legal obligations relating to privacy and data protection.  However, it is possible that these requirements may be interpreted and applied in a manner

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that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices.  As we expand our operations globally, compliance with regulations that differ from country to country may also impose substantial compliance burdens on our business.  In particular, the European Union has traditionally taken a broader view as to what is considered personal information and has imposed greater obligations under data privacy laws and regulations.  In addition, individual EU member countries have had discretion with respect to their interpretation and implementation of the regulations, which has resulted in variation of privacy standards from country to country.  We may be subject to foreign laws regulating online and mobile advertising even in jurisdictions where we do not have any physical presence to the extent a digital media content provider has advertising inventory that we manage or to the extent that we collect and use data from consumers in those jurisdictions.  Any failure, or perceived failure, by us to comply with U.S. federal, state, or international laws, including laws and regulations regulating privacy, data security, or consumer protection, or other policies, self-regulatory requirements or legal obligations could result in proceedings or actions against us by governmental entities or others.  We are aware of several ongoing lawsuits filed against companies in our industry alleging various violations of privacy- or data security-related laws.

Our subsidiary ScanScout was in the past subject to an FTC inquiry regarding its use of “Flash” cookies.  As a result of our acquisition of ScanScout in December 2010, we are now subject to an FTC order regarding certain notice, disclosure and choice obligations regarding the use of cookies and our collection and use of data in connection with the delivery of targeted advertising.  See “Item 1 — Business — Government Regulation; Industry Alliances” for a more complete description of this order.  In addition, ScanScout was subject to a putative class action legal proceeding regarding its use of “Flash” cookies, which was settled in March 2012 and dismissed with prejudice.

The regulatory framework for privacy issues worldwide is evolving, and various government and consumer agencies and public advocacy groups have called for new regulation and changes in industry practices, including some directed at the advertising industry in particular.  It is possible that new laws and regulations will be adopted in the United States and internationally, or existing laws and regulations may be interpreted in new ways that would affect our business particularly with regard to collection or use of data to target ads to consumers.

A number of U.S. state and federal bills have been proposed and are under consideration that contain provisions that would regulate how companies, such as ours, can use cookies and other tracking technologies to collect and use information about individuals and their online behaviors.  At least one such bill presently has been proposed in the U.S. Congress.  The U.S. government, including the FTC and the Department of Commerce, has announced that it is reviewing the need for greater regulation of the collection of consumer information, including regulation aimed at restricting some targeted advertising practices.  The FTC has also adopted revisions to its rules implementing the Children’s Online Privacy Protection Act, or COPPA Rules, that became effective July 1, 2013, that broaden the applicability of the COPPA Rules, including the types of information that would be subject to these regulations, and could effectively limit the information that we or our advertisers collect and use through certain online publishers and the content of video ads our advertisers may display.

Many European Union member states are in the process of or have already enacted legislation to implement the European Union ePrivacy Directive (Directive 2009/136/EC amending Directive 2009/136/CE) requiring advertisers to obtain specific types of notice and consent from individuals before using cookies or other technologies to track individuals and their online behavior and deliver targeted advertisements.  In particular, to comply with certain of these requirements, the use of cookies or other similar technologies may require the user’s affirmative, opt-in consent.  Further, the European Commission has proposed a General Data Protection Regulation that may strengthen EU laws regarding notice and consent for tracking technology.  The EU proposals, if implemented, may result in a greater compliance burden with respect to collecting information about persons in Europe.  Complying with any new regulatory requirements could force us to incur substantial costs or require us to change our business practices in a manner that could compromise our ability to effectively pursue our growth strategy.

Any proceeding or action brought against us by a governmental entity or others relating to noncompliance with U.S federal, state, or international laws, self-regulatory requirements, policies, or other legal obligations relating to privacy or data protection could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, adversely affect the demand for our solutions, and ultimately result in the imposition of monetary liability.  We may also be contractually liable to indemnify and hold harmless our advertisers and publishers from the costs or consequences of noncompliance with privacy-related laws, regulations, self-regulatory requirements or other legal obligations, or inadvertent or unauthorized use or disclosure of data that we store or handle as part of providing our solutions.

Changes in global privacy-related laws and regulations and self-regulatory regimes may also impact our advertisers and publishers and adversely affect the demand for our solutions or otherwise harm our business, results of operations, and financial condition.  For instance, privacy laws or regulations could require digital media content providers to take additional measures to facilitate consumer privacy preferences, in which case we will be reliant upon them to do so.  In addition, digital media content providers could become subject to regulatory restrictions that would require them to limit or cease altogether the collection and/or use of data by third parties such as ourselves.  For example, one potential form of restriction on the use of cookies would allow the website

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that the consumer has elected to visit, a first-party website, to continue to place cookies on the user’s browser or device without explicit consent, but would require the user’s explicit consent for a third party to place its cookies on the user’s browser or device.  Additionally, the March 2012 FTC staff report recommends that websites offer consumers a choice about whether the owner of the website can use third parties like us to track the activity for marketing purposes (e.g., delivery of targeted advertising).  We are a third party in this context, and therefore currently depend on the ability to place our cookies on browsers and devices of users that visit the websites of our digital media content providers and to track devices for the purpose of ad delivery reporting on mobile devices, and if we were restricted from doing so because of compliance with laws or regulatory and industry best practices or recommendations by digital media content providers, our ability to gather the data on which we rely would be impaired.  Further, we could be placed at a competitive disadvantage to large competitors such as Google, Facebook, Microsoft, AOL, and Yahoo! who have heavily trafficked, first-party properties that would continue to have greater ability to collect visitor data and use such data for marketing purposes.

Any failure to protect our intellectual property rights could negatively impact our business.

We regard the protection of our intellectual property, which includes trade secrets, copyrights, trademarks, domain names, one patent and several patent applications, as critical to our success.  We strive to protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions.  We generally enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with parties, with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information.  However, we may not be successful in executing these agreements with every party who has access to our confidential information or contributes to the development of our intellectual property.  Those agreements that we do execute may be breached, and we may not have adequate remedies for any such breach.  These contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our intellectual property, or deter independent development of similar intellectual property by others.  Breaches of the security of our solutions, databases or other resources could expose us to a risk of loss or unauthorized disclosure of information collected, stored, or transmitted for or on behalf of advertisers or publishers, or of cookies, data stored in cookies, other user information, or other proprietary or confidential information.

We currently own two issued U.S. patents and one granted European patent, which we registered in France, Germany and Great Britain.  Additionally, we currently own seven pending U.S. patent applications that we are currently prosecuting with the U.S. Patent and Trademark Office, although there can be no assurance that any of these patent applications will ultimately be issued a patent.  We also register certain domain names, trademarks and service marks in the United States and in certain locations outside the United States.  We also rely upon common law protection for certain marks, such as “Tremor Video.” Any of our patents, trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation.  While we have a patent and certain patent applications pending, we may be unable to obtain patent protection for the technology covered in our patent applications.  In addition, our existing patents and any patents that may be issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties.  Our competitors and others could attempt to capitalize on our brand recognition by using domain names or business names similar to ours.  Domain names similar to ours have been registered in the United States and elsewhere.  We may be unable to prevent third parties from acquiring or using domain names and other trademarks that infringe on, are similar to, or otherwise decrease the value of our brands, trademarks or service marks.  Effective trade secret, copyright, trademark, domain name and patent protection are expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights.  We may be required to protect our intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful or which we may not pursue in every location.  We may, over time, increase our investment in protecting our intellectual property through additional patent filings that could be expensive and time-consuming.

Additionally, in the United States, the central provisions of the Leahy-Smith America Invents Act, or AIA, became effective recently.  Among other things, this law switched U.S. patent rights from the former “first-to-invent” system to a “first inventor-to-file” system.  This may result in inventors and companies having to file patent applications more frequently to preserve rights in their inventions.  This may favor larger competitors that have the resources to file more patent applications.

Monitoring unauthorized use of our intellectual property is difficult and costly.  Our efforts to protect our proprietary rights and intellectual property may not be adequate to prevent their misappropriation or misuse.  Further, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights.  Our competitors may also independently develop similar technology.  The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate.  Effective patent, trademark, copyright and trade secret protection may not be available to us in every country in which our solutions or technology are hosted or available.  Further, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain.  The laws in the United States and elsewhere change rapidly, and any future changes could adversely affect us and our intellectual property.  Our failure to meaningfully protect our intellectual property could result in competitors offering solutions that incorporate our most technologically advanced features, which could seriously reduce demand for our solutions.  In addition, we may in the future find it necessary or appropriate to initiate infringement claims or litigation, whether to protect our intellectual property or

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to determine the enforceability, scope and validity of the intellectual property rights of others.  Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination that is unfavorable to us.  In addition, litigation is inherently uncertain.  Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property.

Our business may suffer if it is alleged or determined that our solutions or another aspect of our business infringes the intellectual property rights of others.

The online advertising industry is characterized by the existence of large numbers of patents, copyrights, trademarks, trade secrets and other intellectual property and proprietary rights.  Companies in this industry are often required to defend against litigation claims that are based on allegations of infringement or other violations of intellectual property rights.  Our technologies may not be able to withstand any third-party claims or rights against their use.

Our success depends, in part, upon non-infringement of intellectual property rights owned by others and being able to resolve claims of intellectual property infringement or misappropriation without major financial expenditures or adverse consequences.  We currently face, and expect to face in the future, claims by third parties that we infringe upon or misappropriate their intellectual property rights, and we may be found to be infringing upon or to have misappropriated such rights.  Such claims may be made by competitors or other parties.  We cannot assure you that we are not infringing or violating any third-party intellectual property rights.  From time to time, we or our clients may be subject to legal proceedings relating to our solutions or underlying technology and the intellectual property rights of others, particularly as we expand the complexity and scope of our business.  As a result of disclosure of information in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties.

Regardless of whether claims that we are infringing patents or infringing or misappropriating other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend, and can impose a significant burden on management and employees.  The outcome of any litigation is inherently uncertain, and we may receive unfavorable interim or preliminary rulings in the course of litigation.  There can be no assurances that favorable final outcomes will be obtained in all cases.  We may decide to settle lawsuits and disputes on terms that are unfavorable to us.  Some of our competitors have substantially greater resources than we do and are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could.  Claims that we are infringing patents or other intellectual property rights could:

·                  subject us to significant liabilities for monetary damages, which may be tripled in certain instances, and the attorney’s fees of others;

·                  prohibit us from developing, commercializing or continuing to provide some or all of our solutions unless we obtain licenses from, and pay royalties to, the holders of the patents or other intellectual property rights, which may not be available on commercially favorable terms, or at all;

·                  subject us to indemnification obligations or obligations to refund fees to, and adversely affect our relationships with, our current or future advertisers, agencies, and publishers;

·                  result in injunctive relief against us, or otherwise result in delays or stoppages in providing all or certain aspects of our solutions;

·                  cause advertisers, agencies, or publishers to avoid working with us;

·                  divert the attention and resources of management and technical personnel; and

·                  require technology or branding changes to our solutions that would cause us to incur substantial cost and that we may be unable to execute effectively or at all.

In addition, we may be exposed to claims that the content contained in ad campaigns violates the intellectual property or other rights of third parties.  Such claims could be made directly against us or against the publishers from whom we purchase ad inventory.  Generally, under our agreements with publishers, we are required to indemnify the publisher against any such claim with respect to an ad we served.  We attempt to mitigate this exposure by generally requiring our advertisers and/or ad agencies to indemnify us for any damages from any such claims.  There can be no assurance, however, that our advertisers will have the ability to satisfy their indemnification obligations to us, and pursuing any claims for indemnification may be costly or unsuccessful.  As a result, we may be

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required to satisfy our indemnification obligations to our publishers or claims against us with our assets.  This result could harm our reputation, business, financial condition and results of operations.

We use open source software in our solutions that may subject our technology to general release or require us to re-engineer our solutions, which may cause harm to our business.

Our technology incorporates or is distributed with software or data licensed from third parties, including some software distributed under so-called “open source” licenses, which we use without charge.  Some of these licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software, and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use.  By the terms of certain open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available under open source licenses, if we combine our proprietary software with open source software in certain manners.  Although we monitor our use of open source software, we cannot be sure that all open source software is reviewed prior to use in our proprietary software, that our programmers have not incorporated open source software into our proprietary software, or that they will not do so in the future.  Additionally, the terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts.  There is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide our solutions to our clients.  In addition, the terms of open source software licenses may require us to provide software that we develop, using such open source software, to others on unfavorable license terms.  As a result of our current or future use of open source software, we may face claims or litigation, be required to release our proprietary source code, pay damages for breach of contract, re-engineer our technology, discontinue sales in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business, financial condition or operating results.

We rely on data, other technology, and intellectual property licensed from other parties, the failure or loss of which could increase our costs and delay or prevent the delivery of our solutions.

We utilize various types of data, other technology, and intellectual property licensed from unaffiliated third parties in order to provide certain elements of our solutions.  Any errors or defects in any third-party data or other technology could result in errors in our solutions that could harm our business.  In addition, licensed technology, data, and intellectual property may not continue to be available on commercially reasonable terms, or at all.  Any loss of the right to use any of these on commercially reasonable terms, or at all, could result in delays in producing or delivering our solutions until equivalent data, other technology, or intellectual property is identified and integrated, which delays could harm our business.  In this situation we would be required to either redesign our solutions to function with technology, data or intellectual property available from other parties or to develop these components ourselves, which would result in increased costs.  Furthermore, we might be forced to limit the features available in our current or future solutions.  If we fail to maintain or renegotiate any of these technology or intellectual property licenses, we could face significant delays and diversion of resources in attempting to develop similar or replacement technology, or to license and integrate a functional equivalent of the technology or intellectual property.  The occurrence of any of these events may have an adverse effect on our business, financial condition and operating results.

Risks Related to Being a Public Company

If we fail to maintain proper and effective internal and disclosure controls, our ability to produce accurate financial statements and other disclosures on a timely basis could be impaired.

The Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.  Commencing as of the fiscal year beginning January 1, 2014, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal controls over financial reporting as required by Section 404 of the Sarbanes-Oxley Act.  As an “emerging growth company” under the Jumpstart Our Business Startups, or JOBS Act, we have availed ourselves in this annual report, and we expect to avail ourselves in future filings, of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting; however, we may no longer avail ourselves of this exemption when we cease to be an “emerging growth company.” This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions and that we expend significant management efforts.  Prior to becoming a public company, we were never required to test our internal controls within a specified period, and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner.  Moreover, if we or our independent registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

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We may in the future discover areas of our internal controls over financial reporting that need improvement.  Our internal controls over financial reporting will not prevent or detect all error and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective disclosure controls and procedures or proper and effective internal controls over our financial reporting, we may not be able to produce timely and accurate financial statements and other disclosures, and we may conclude that our internal controls over financial reporting are not effective.  If that were to happen, the market price of our stock could decline and we could be subject to sanctions or investigations by the New York Stock Exchange, or NYSE, the SEC or other regulatory authorities.

Risks associated with being a public company.

As a public company, and particularly after we cease to be an “emerging growth company,” we will incur significant legal, accounting and other expenses that we did not incur as a private company.  In addition, the Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the SEC and NYSE impose numerous requirements on public companies, including requiring changes in corporate governance practices.  Also, the Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results.  Our management and other personnel will need to devote a substantial amount of time to compliance with these laws and regulations.  These requirements have increased and will continue to increase our legal, accounting, and financial compliance costs and have made and will continue to make some activities more time consuming and costly.  For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or to incur substantial costs to maintain the same or similar coverage.  These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers.

As an “emerging growth company” under the JOBS Act we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.

We are an “emerging growth company” and, for as long as we continue to be an “emerging growth company,” we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and not being required to hold a nonbinding advisory vote on executive compensation or obtain stockholder approval of “golden parachute” payments.  We could be an “emerging growth company” for up to five years, although, if we have more than $1.0 billion in annual revenue, if the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of any year, or we issue more than $1.0 billion of non-convertible debt over a three year period before the end of that five-year period, we would cease to be an “emerging growth company” as of December 31st following such occurrence.  Investors may find our common stock less attractive if we choose to rely on these exemptions, in which case the price of our common stock may suffer or there may be a less active trading market for our common stock and our stock price may be more volatile.

Risks Related to Ownership of Our Common Stock

The market price of our common stock may be volatile, which could result in substantial losses for investors.

The trading price of our common stock has been, and is likely to continue to be, volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.  Since shares of our common stock were sold in our IPO in June 2013 at a price of $10.00 per share, our stock price has ranged from an intraday low of $3.59 to an intraday high of $11.09 through March 21, 2014.  In addition, the trading prices of the securities of technology companies in general have been highly volatile, and the volatility in market price and trading volume of securities is often unrelated or disproportionate to the financial performance of the companies issuing the securities.  In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, factors affecting the market price of our common stock include:

·             price and volume fluctuations in the overall stock market, or in the market for the stock of comparable companies, from time to time;

·             adverse changes in the regulatory environment;

·             actual or anticipated changes in our earnings or fluctuations in our operating results or the results of our competitors;

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·             changes in the market perception of online video advertising platforms generally or in the effectiveness of our solutions in particular;

·             announcements of technological innovations, new solutions, acquisitions, strategic alliances or significant agreements by us or by our competitors;

·             issuance of new or changed securities analysts’ reports or recommendations for our or our competitors’ stock;

·             litigation involving us;

·             changes in general economic, industry and market conditions and trends;

·             recruitment or departure of key personnel; and

·             the other factors described in this section of the report titled “Risk Factors.”

In the past, following periods of volatility in the market price of a company’s securities, securities class action or derivative litigation has often been brought against that company and its officers and directors.  We are currently subject to a putative class action lawsuit filed in the United States District Court for the Southern District of New York, which alleges certain misrepresentations by us in connection with our initial public offering concerning our business and prospects.  Because of the potential volatility of our stock price, we may become the target of additional securities litigation in the future.  Securities litigation could result in substantial costs and divert management’s attention and resources from our business.

The pending class action litigation could cause us to incur substantial costs and divert our management’s attention and resources.

In November 2013, a putative class action lawsuit was filed in the United States District Court for the Southern District of New York against us, our directors, and certain of our executive officers. The lawsuit alleges certain misrepresentations by us in connection with our initial public offering concerning our business and prospects.  The lawsuit seeks unspecified damages.  On February 7, 2014, the Court entered an order appointing lead plaintiff and lead counsel.  On March 3, 2014, the Court entered an order requiring that lead plaintiff file an amended complaint on or before April 1, 2014.  We intend to vigorously defend against these claims and to seek dismissal of the amended complaint.  Due to the early stage of these proceedings, we cannot predict the likely outcome of the lawsuit, and an adverse result could have a material effect on our financial statements. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Sales of substantial amounts of our common stock in the public markets, or the perception that they might occur, could reduce the price that our common stock might otherwise attain and may dilute your voting power and your ownership interest in us.

Sales of a substantial number of shares of our common stock, or the perception that a substantial number of shares could be sold, could reduce the market price of our common stock.  As of March 21, 2014, we had 50,341,663 shares of common stock outstanding.   In addition, the shares subject to outstanding options and warrants, for which 4,507,658 shares and 39,824 shares, respectively, were exercisable as of December 31, 2013 will become available for sale immediately upon the exercise of such options or warrants.

Moreover, as of December 24, 2013, the date of the expiration of our IPO lockup, holders of an aggregate of approximately 34,276,207 shares of our common stock, or 68.7%, of our common stock have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.  We have also registered for offer and sale all shares of common stock that we may issue under our stock-based compensation plans.  These shares can be freely sold in the public market upon issuance. Sales of common stock by existing stockholders in the public market, the availability of these shares for sale, our issuance of securities or the perception that any of these events might occur could materially and adversely affect the market price of our common stock.  In addition, the sale of these securities could impair our ability to raise capital through the sale of additional stock.

In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, and employee arrangements or otherwise.  Any such issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.

Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

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Our executive officers, directors and principal stockholders and their respective affiliates beneficially owned, in the aggregate, a significant percentage of our outstanding common stock as of December 31, 2013.  These persons, acting together, are able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions.  The interests of this group of stockholders may not coincide with our interests or the interests of other stockholders.

If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish negative evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors.  If no or few analysts commence coverage of us, the trading price of our stock would likely decrease.  Even if we do obtain analyst coverage, if one or more of the analysts covering our business issues an adverse opinion of our company because we fail to meet their expectations or otherwise, the price of our stock could decline.  If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.

Anti-takeover provisions in our certificate of incorporation and bylaws as well as provisions of Delaware law might discourage, delay or prevent a change in control of our company or changes in our board of directors or management and, therefore, depress the price of our common stock.

Our certificate of incorporation and bylaws and Delaware law contain provisions that may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock or transactions that our stockholders might otherwise deem to be in their best interests.  These provisions may also prevent or frustrate attempts by our stockholders to replace or remove members of our board of directors or our management.  Therefore, these provisions could adversely affect the price of our stock.  Our corporate governance documents include provisions:

·                  establishing a classified board of directors with staggered three-year terms so that not all members of our board of directors are elected at one time;

·                  providing that directors may be removed by stockholders only for cause;

·                  preventing the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

·                  requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;

·                  permitting the board of directors to issue up to 10,000,000 shares of preferred stock with any rights, preferences and privileges as they may designate;

·                  limiting the liability of, and providing indemnification to, our directors and officers;

·                  providing that vacancies may be filled by remaining directors;

·                  preventing cumulative voting; and

·                  providing for a supermajority requirement to amend our bylaws.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the General Corporation Law of the State of Delaware, which prohibits a Delaware corporation from engaging in a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.  Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

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ITEM 1B.                         UNRESOLVED STAFF COMMENTS

None.

ITEM 2.                                  PROPERTIES

Our principal offices occupy approximately 22,000 square feet of leased office space in New York, New York pursuant to a lease agreement that expires in 2021. We also lease offices in Mountain View, California; San Francisco, California; Santa Monica, California; Chicago, Illinois; Boston, Massachusetts; Southfield, Michigan; Irving, Texas; London, England; and Singapore. We also utilize a third-party data center hosting facilities located in Boston, Massachusetts and New York, New York. We believe our facilities are adequate for our current and near-term needs.

ITEM 3.                                  LEGAL PROCEEDINGS

In November 2013, a putative class action lawsuit was filed in the United States District Court for the Southern District of New York against us, our directors, and certain of our executive officers. The lawsuit alleges certain misrepresentations by us in connection with our initial public offering concerning our business and prospects.  The lawsuit seeks unspecified damages.  On February 7, 2014, the Court entered an order appointing lead plaintiff and lead counsel.  On March 3, 2014, the Court entered an order requiring that the lead plaintiff file an amended complaint on or before April 1, 2014.  We intend to vigorously defend against these claims and to seek dismissal of the amended complaint.  Due to the early stage of these proceedings, we cannot predict the likely outcome of the lawsuit, and an adverse result could have a material effect on our financial statements.

In addition, from time to time we are involved in legal proceedings or subject to claims arising in the ordinary course of our business, including, but not limited to, certain pending patent and privacy litigation matters.  Although the results of litigation and claims cannot be predicted with certainty, except as noted above we do not believe we are a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

ITEM 4.                                  MINE SAFETY DISCLOSURES

Not applicable.

Part II

ITEM 5.                                  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has been listed on the New York Stock Exchange under the symbol “TRMR” since June 27, 2013. Prior to that time, there was no public market for our stock.

Holders of Record

As of December 31, 2013 there were approximately 198 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Price Range of Our Common Stock

The following table sets forth for the indicated periods the intraday high and low sales prices per share for our common stock on the New York Stock Exchange.

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Stock Price Performance Graph

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or incorporated by reference into any filing of Tremor Video, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

This following graph compares, for the year ended December 31, 2013, the cumulative total return on our common stock, the NYSE Composite Index and the Powershares S&P SmallCap Information Technology Portfolio Index.  The graph assumes $100 was invested on June 26, 2013, in the common stock of Tremor Video, Inc, the NYSE Composite Index and the Powershares S&P SmallCap Information Technology Portfolio Index, and assumes the reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.

The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.

Dividend Policy

We have never declared or paid any dividends on our common stock or any other securities. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Additionally, our ability to pay dividends on our common stock is limited by restrictions under the terms of the agreements governing our credit facility. Payment of future cash dividends, if any, will be at the discretion of the board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of current or then-existing debt instruments and other factors the board of directors deems relevant.

Use of Proceeds

On July 2, 2013, we closed our IPO, in which we issued and sold 7,500,000 shares of common stock at a public offering price of $10.00 per share, for aggregate gross proceeds to us of $75 million.  All of the shares issued and sold in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-188813), which was declared effective by the SEC on June 26, 2013.  Credit Suisse Securities (USA) LLC, Jefferies LLC, Canaccord Genuity Inc. and Oppenheimer & Co. Inc. acted as the underwriters.  The offering commenced on June 14, 2013 and did not terminate before all of the securities registered in the registration statement were sold.

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The net offering proceeds to us, after deducting underwriting discounts and commissions totaling approximately $5.3 million and offering expenses totaling approximately $3.1 million, were approximately $66.6 million.  No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates.  Subsequent to July 2, 2013, we invested a portion of the net offering proceeds into money market securities.  There has been no material change in the planned use of proceeds from our IPO as described in our prospectus dated June 26, 2013 filed with the SEC on June 27, 2013 pursuant to Rule 424(b) of the Securities Act.

Purchases of Equity Securities by the Issuer

None.

Recent Sales of Unregistered Securities

From January 1, 2013 through July 2, 2013, the closing of our initial public offering, we granted options under our 2008 Equity Incentive Plan to purchase an aggregate of 566,305 shares of our common stock to employees, consultants and directors, having a weighted average exercise price of $7.09 per share. Of these, options to purchase an aggregate of 25,331 shares have been cancelled without being exercised. During the period from January 1, 2013 through July 2, 2013, an aggregate of 68,791 shares were issued upon the exercise of stock options, at exercise prices between $0.63 and $5.01 per share, for aggregate proceeds of approximately $0.1 million. The offers, sales and issuances of the securities described in this paragraph were exempt from registration under Rule 701 promulgated under the Securities Act in that the transactions were under compensatory benefit plans as provided under Rule 701. Appropriate legends were affixed to the securities issued in these transactions.

On July 2, 2013, upon the closing of our IPO, all of our then-outstanding preferred stock was automatically converted into 34,172,316 shares of our common stock and all of our then-outstanding warrants to purchase preferred stock were automatically converted into warrants to purchase 142,534 shares of our common stock.  Additionally, upon the closing of our IPO, all of our then-outstanding Series II common stock was automatically converted into 1,052,464 shares of our common stock. The offers, sales and issuances of such securities were deemed to be exempt from registration under the Securities Act in reliance on Section 3(a)(9) of the Securities Act.

On July 25, 2013, Silicon Valley Bank (“SVB”) exercised, in full, the following warrants to acquire common stock pursuant to a cashless net exercise:  (i) warrants to acquire 17,607 shares of common stock, net of 14,052 shares of common stock tendered to us, at an exercise price of $3.79 per share, with an expiration date of February 8, 2020, (ii)  warrants to acquire 16,210 shares of common stock, net of 19,321 shares of common stock tendered to us, at an exercise price of $4.64 per share, with an expiration date of December 7, 2018 and (iii) warrants to acquire 30,250 shares of common stock, net of 5,270 shares of common stock tendered to us, at an exercise price of $1.27 per share, with an expiration date of June 7, 2017  (refer to note 11 of the notes to consolidated financial statements included in Part IV, Item 15 of this Form 10-K, which are presented beginning on page F-1).  The number of shares tendered to us to satisfy the exercise price for the warrants was based on the closing price of our common stock on July 24, 2013.  In the aggregate, we issued 64,067 shares to SVB in connection with these exercises.  The offers, sales and issuances of such securities were deemed to be exempt from registration under the Securities Act in reliance on Regulation D promulgated thereunder.

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ITEM 6.                                  SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth our selected consolidated financial data. The following selected consolidated financial data for the years ended December 31, 2013, 2012 and 2011 and the selected consolidated balance sheet data as of December 31, 2013 and 2012 are derived from our audited consolidated financial statements that are included in this Annual Report on Form 10-K, which have been audited by Ernst & Young LLP, our independent registered public accounting firm. The consolidated balance sheet data as of December 31, 2011 is derived from audited consolidated financial statements that are not included in this Annual Report on Form 10-K. Our historical results are not necessarily indicative of the results to be expected in the future.

The following data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in conjunction with the consolidated financial statements, related notes, and other financial information included elsewhere in this Annual Report on Form 10-K.

Consolidated Statements of Operations Data:

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Consolidated Balance Sheets Data:

(1)         Includes stock-based compensation expense as follows:

(2)         Includes stock-based long-term incentive compensation expense of $1.6 million for the year ended December 31, 2013.

(3)         For the year ended December 31, 2013, basic and diluted net loss per share attributable to common stockholders includes $15.8 million deemed dividend from the conversion of our Series F preferred stock on July 2, 2013.  Refer to “Note 2 — Summary of Significant Accounting Policies” and “Note 13 — Preferred Stock, Common Stock and Stockholders’ Equity (Deficit)” in the notes to the consolidated financial statements included in Part IV, Item 15 of this Form 10-K, which are presented beginning on page F-1.

(4)         As a result of our operating losses incurred for the years ended December 31, 2013, 2012 and 2011, all potentially dilutive securities are anti-dilutive and, accordingly, basic and diluted weighted average number of shares of common stock outstanding is equal for the periods presented.

(5)         For the year ended December 31, 2013, our basic and diluted weighted average number of shares of common stock outstanding increased by approximately 21.0 million shares as a result of our IPO on July 2, 2013.

(6)         In-stream advertising revenue is the revenue we generate solely from the sale of in-stream video ads.

(7)         We define Adjusted EBITDA as net loss before interest expense, net and other (income) expense, net, income tax expense, depreciation and amortization expense, and adjusted to eliminate the impact of stock-based compensation expense, stock-based long-term incentive compensation expense, both of which are non-cash items, and litigation costs associated with pending class action securities litigation. We have included Adjusted EBITDA in this Annual Report on Form 10-K because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short- and long-term operational plans. In particular, we believe that the exclusion of the expenses eliminated in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core business. Accordingly, we believe that Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Adjusted EBITDA is a non-GAAP financial measure. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash and capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; (e) Adjusted EBITDA does not reflect litigation costs associated with pending class action securities litigation; and (f) other companies, including companies in our industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces its usefulness as a comparative measure.

Because of these and other limitations, you should consider Adjusted EBITDA alongside our other GAAP-based financial performance measures, net loss and our other GAAP financial results. The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP measure, for each of the periods indicated:

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(a) Refer to footnote (2) above and footnote (10) below for a further description of our stock-based long-term incentive compensation expense.

(8)         At December 31, 2013, cash and cash equivalents includes $66.6 million in proceeds from the common stock issuance as a result of our IPO on July 2, 2013.

(9)         At December 31, 2011, included with cash and cash equivalents are $8.7 million of short-term investments.

(10)  At December 31, 2013, total liabilities include $1.6 million of stock-based long-term incentive compensation expense related to our long-term sales incentive compensation plan.  Payments earned under the plan for the 2013 plan year will be made in stock-based awards to participants that remain employed with us through June 30, 2014.  If any participant in our long-term sales incentive compensation plan is not employed on June 30, 2014, such participant will forfeit any rights to receive payment under the plan.

ITEM 7.                                  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Form 10-K, particularly in “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

Overview

We are a leading provider of technology-driven video advertising solutions enabling brand advertisers to engage consumers across multiple internet-connected devices including computers, smartphones, tablets and connected TVs.  Our clients include some of the largest brand advertisers in the world including all of the top 10 automakers and 9 of the top 10 consumer packaged goods companies.  Our relationships with leading brand advertisers and their agencies have helped us create a robust online video ecosystem that includes more than 500 premium websites and mobile applications, over 200 of which partner with us on an exclusive basis.  Our proprietary technology, VideoHub, analyzes in-stream video content, detects viewer and system attributes, and leverages our large repository of stored data to optimize video ad campaigns for brand-centric metrics.  VideoHub also provides advertisers and agencies with advanced analytics and measurement tools enabling them to understand why, when and where viewers engage with their video ads.

Our VideoHub technology is the backbone of the Tremor Video Network through which we offer advertisers access to engaged consumers at scale in brand safe environments across multiple devices.  In 2013, we derived substantially all of our revenue by delivering in-stream video advertising on behalf of a diversified base of brand advertisers in the United States through the Tremor Video Network.  Our in-stream video advertising revenue grew from $75.5 million in 2011 to $99.7 million in 2012 and to $128.3 million in 2013, or 32.1% and 28.7% from 2011 to 2012 and from 2012 to 2013, respectively.  Consistent with our strategy to focus on in-stream video advertising, our revenue from in-banner advertising revenue declined from $14.8 million in 2011 to $3.8 million in 2012 and $0.3 million in 2013. Despite this focus, in order to meet specific objectives of our advertiser and agency clients we may deliver in-banner advertisement with respect to certain campaigns running on the Tremor Video Network.  Accordingly, revenue from in-banner advertising may increase in future periods.

To further align the Tremor Video Network with the needs of brand advertisers, we offer a number of performance-based pricing models for in-stream video advertisements.  These models include cost per engagement, or CPE, pricing where we are compensated only when viewers actively engage with advertisers’ campaigns, such as by interacting with the elements of the video ad through clicks or screen touches or by rolling over certain elements of the video ad for at least three seconds, and cost per video completion, or CPVC, pricing where we are compensated only when a viewer completes the video ad.  In October 2013, we introduced additional performance-based pricing models where we are compensated only when a campaign results in a positive shift in the consumer’s favorability or intent towards a brand (which we refer to as cost per brand-shift, or CPS) or when a consumer’s intent is shifted away from a competing brand (which we refer to as cost per conquest, or CPQ).  Building on our CPVC offering, we also announced a new pricing model where we are only compensated when a video ad is both completed and viewable by the viewer for the duration of the ad (which we refer to as CPV&C).  We believe our performance-based pricing models have higher gross margins than traditional CPM pricing models, which are based solely on the number of ad impressions delivered, because we are often able to serve our advertisers’ performance goals with a lower number of purchased impressions.  As viewers increase time spent viewing video on smartphones and tablets, we expect brand advertisers to devote increasing amounts of advertising spend to these channels.  Smartphones and tablets are inherently interactive and we believe that our in-stream advertising capabilities and higher

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margin CPE pricing model is well suited to address the growing market for mobile video ads.  As a percentage of total revenue, revenue attributable to performance-based pricing for 2013, 2012 and 2011 was 29.8%, 22.7% and 7.9%, respectively. We are focused on increasing the sales of video ad campaigns with performance-based pricing to drive revenue growth and increased margins.

In addition to our performance-based pricing models, we also offer advertisers the ability to purchase campaigns on a CPM-basis with a guaranteed demographic reach, or demo guarantees, where an advertiser pays based on the number of impressions that are delivered to a target demographic.  In 2013, campaigns sold with demo guarantees had lower gross margins than CPM-priced campaigns that were sold without demo guarantees.

In 2012, we also began licensing VideoHub analytics to advertisers and agencies through an intuitive, customizable user interface.  This license solution affords advertisers transparency and analytical tools to measure the effectiveness of video ad campaigns across all of their video ad buys, whether or not those campaigns are run through the Tremor Video Network.  Recently, we also began to license VideoHub analytics to publishers who can use the platform to gain insights into what is driving the performance of ad campaigns running on their sites.  In 2013 and 2012, we generated $3.2 million and $1.7 million, respectively, of revenue from licensed analytics-solutions.  Our gross margin on this licensing revenue is generally higher than that for the Tremor Video Network.

To complement our current offerings, we are continuing to develop and invest in a programmatic buying solution for brand advertisers.  In the second half of 2013, we introduced a demand side platform, or DSP, for brand performance, which we are currently testing with select partners.  Through our DSP, advertisers and agencies can leverage VideoHub technology to programmatically bid on and buy video ad inventory for brand-centric metrics both on the Tremor Video Network and through third party supply sources.  In addition, we are continuing to integrate our technology with third party exchanges and DSPs, enabling them and their advertiser and agency clients to programmatically bid on and buy video ad inventory on the Tremor Video Network.

We have increased our revenue from $90.3 million in 2011 to $105.2 million in 2012 and $131.8 million in 2013. Over the same period, our gross margin varied from 35.2% in 2011 to 41.7% in 2012 and 40.9% in 2013 due in part to variations of the percentage of revenue derived from our performance based pricing models and, more recently, revenue derived from CPM-priced campaigns sold with demo guarantees. Our net loss decreased from $21.0 million in 2011 to $16.6 million in 2012 and $13.5 million in 2013. Our Adjusted EBITDA (refer to “Key Metrics-Adjusted EBITDA”) improved from a loss of $10.9 million in 2011 to a loss of $7.2 million in 2012 and a loss of $2.1 million in 2013.

On July 2, 2013, we issued and sold 7,500,000 shares of common stock in our initial public offering, or IPO.  The net offering proceeds to us, after deducting underwriting discounts and commissions totaling approximately $5.3 million and offering expenses totaling approximately $3.1 million, were approximately $66.6 million.

Key Metrics

We monitor the key metrics set forth in the table below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess our operational efficiencies.

(1)         In-stream advertising revenue is the revenue we generate solely from the sale of in-stream video ads.

Revenue and Gross Margin

In the past, we generated a significant portion of revenue from the delivery of video display and banner ads, or in-banner video ads.  Beginning in 2011, we decided to focus our business on in-stream video advertising and to move away from in-banner video advertising.  We believe in-stream video ads are better suited for brand advertisers because they can be served to viewers immediately prior to or during the publisher’s content commanding attention when viewers are most engaged as opposed to in-banner video ads, which are served on the periphery of publisher content where viewers may not direct their attention.  As a result, revenue from the

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delivery of in-stream video ads has increased year over year as a percentage of our total revenue, and revenue from the delivery of in-banner video ads has decreased.  In 2013, 2012 and 2011, our in-banner video advertising revenue was $0.3 million, $3.8 million and $14.8 million, respectively.  Despite our focus on in-stream advertising, in order to meet specific objectives of our advertiser and agency clients, we may deliver in-banner advertisement with respect to certain campaigns running on the Tremor Video Network.  As a result, revenue from in-banner advertising may increase in future periods.

Historically, gross margin has been positively affected by campaigns priced on a performance basis.  As a percentage of total revenue, revenue attributable to performance-based pricing for 2013, 2012 and 2011 was 29.8%, 22.7% and 7.9%, respectively.  For 2013, CPM-priced campaigns sold with demo guarantees had lower gross margins than CPM-priced campaigns that were sold without demo guarantees.  In the second half of 2013, our gross margin was negatively affected by an increase in the relative mix of CPM-priced campaigns sold with demo guarantees and a decrease in the relative mix of campaigns priced on a performance basis. If the relative mix of CPM-priced campaigns sold with demo guarantees increases, or the relative mix of campaigns priced on a performance basis decreases in future periods, our gross margin may be negatively affected.

In 2012, we began to license VideoHub analytics to advertisers and agencies through an intuitive and customizable console.  We also recently expanded this offering to publishers.  In the near-term, we are investing in the further development of our programmatic buying solution, the enhancement of our licensed solutions, and the expansion of our sales and support for these solutions.  Over time we expect the licensing portion of our business to become a more significant contributor to our operating results, which we believe would have a positive impact on our gross margin.

Adjusted EBITDA

Adjusted EBITDA represents our net loss before interest expense, net and other (income) expense, net, income tax expense, depreciation and amortization expense, and adjusted to eliminate the impact of stock-based compensation expense, stock-based long-term incentive compensation expense, both of which are non-cash items, and litigation costs associated with pending class action securities litigation.  Adjusted EBITDA is a key measure used by management to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.  In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis and, in the case of the exclusion of the impact of non-cash stock-based compensation expense, stock-based long-term incentive compensation expense and litigation costs associated with pending class action securities litigation, excludes items that we do not consider to be indicative of our core operating performance.

Adjusted EBITDA is not a measure calculated in accordance with GAAP. Please see footnote (7) to the table in “Item 6 —Selected Consolidated Financial Data” in this Annual Report on Form 10-K for a discussion of the limitations of Adjusted EBITDA and a reconciliation of adjusted EBITDA to net loss, the most comparable GAAP measurement, for the years ended December 31, 2013, 2012  and 2011.

Components of Operating Results

We operate in one segment, online video advertising services.  The key elements of our operating results include:

Revenue

We generate revenue primarily by delivering in-stream video advertisements for brand advertisers and agencies through the Tremor Video Network.  We also began licensing VideoHub analytics to advertisers and agencies in 2012 and, more recently, to publishers.

We generally price delivery of our video ads on a CPM, CPE, CPVC, CPQ or CPV&C basis.  We recognize revenue for video ad delivery through the Tremor Video Network upon: (i) delivery of impressions served for CPM-priced ad campaigns without demo guarantees; (ii) delivery of each impression served to a target demographic for CPM-priced ad campaigns with demo guarantees; (iii) engagement by the consumer with a video ad for CPE-priced ad campaigns; (iv) completion of a video ad by the consumer for CPVC-priced ad campaigns; (v) positive shift in a consumer’s favorability towards a brand for CPS-priced ad campaigns; (vi) shift of a consumer’s intent away from a competing brand for CPQ-priced ad campaigns; and (vii) completion of a video ad by a consumer, which video ad is viewable for its duration, for CPV&C-priced ad campaigns.  The prices we charge our clients also vary depending upon the ad format chosen and the device type through which the campaign runs, but are generally consistent across computers, smartphones and tablets.  For managed campaigns, we offer our Tremor Video Network solution to advertisers by entering into insertion orders with ad agencies on behalf of advertisers.  These insertion orders are generally cancellable upon short notice and without penalty consistent with standard terms and conditions for the purchase of internet advertising for media buys one year or less published by the Interactive Advertising Bureau.  For programmatic campaigns purchased on the Tremor Video Network by advertisers and agencies through third party DSPs or exchanges, we enter into agreements with such DSPs or exchanges.

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In 2012, we began generating revenue from licensing VideoHub analytics.  We provide basic access to VideoHub analytics to advertisers and agencies with respect to their video ad campaigns running through the Tremor Video Network and charge a license fee for advanced analytics.  We also license VideoHub analytics for a fee to advertisers and agencies for video advertising campaigns running outside the Tremor Video Network and to publishers who use our solution to gain insights into the performance of their video inventory.  The license fee varies depending upon the level of access to our video advertising analytics and the volume of impressions being analyzed by VideoHub.  We recognize revenue with respect to this solution on a CPM basis based upon the number of impressions being analyzed in a given month. In limited cases, we may charge a minimum monthly fee.  Typically, our license terms are for one year periods.

Our revenue recognition policies are discussed in more detail in the section below titled “—Critical Accounting Policies and Estimates.”

Cost of Revenue

Our cost of revenue primarily represents the video advertising inventory costs under our publisher contracts, research costs, third party hosting fees, and third party serving fees incurred to deliver the video ads run through the Tremor Video Network.  Cost of revenue also includes costs from our licenses from third party data providers utilized in our licensed analytics.  Substantially all of our cost of revenue is attributable to video advertising inventory costs under our publisher contracts.  We recognize cost of revenue on a publisher-by-publisher basis at the same time as we recognize the associated advertising revenue.  Substantially all of our exclusive publisher contracts contain minimum percentage fill rates on qualified video ad requests, which effectively means that we must purchase this inventory from our exclusive publishers even if we lack a video advertising campaign to deliver.  We recognize the difference between our contractually required fill rate and the number of video ads actually delivered by us on the publisher’s website, if any, as a cost of revenue as of the end of each applicable monthly period.  Historically, the impact of the difference between the contractually required fill rate and the number of ads delivered has not been material.  Costs owed to publishers but not yet paid are recorded in our consolidated balance sheets as accounts payable and accrued expenses.

Operating Expenses

Operating expenses consist of technology and development, sales and marketing, general and administrative and depreciation and amortization expenses.  Salaries, incentive compensation, stock-based compensation and other personnel-related costs are the most significant components of each of these expense categories other than depreciation and amortization expenses.  We grew to 291 employees at December 31, 2013 from 252 employees at December 31, 2012, and we expect to continue to hire new employees in order to support our anticipated revenue growth.  We include stock-based compensation expense in connection with the grant of stock options or restricted stock unit awards in the applicable operating expense category based on the respective equity award recipient’s function.

Technology and Development Expense. Technology and development expense primarily consists of salaries, incentive compensation, stock-based compensation and other personnel-related costs for development, network operations and engineering personnel.  Additional expenses in this category include costs related to the development, quality assurance and testing of new technology and maintenance and enhancement of existing technology and infrastructure as well as consulting, travel and other related overhead.  We engage third-party consulting firms for various technology and development efforts, such as documentation, quality assurance and support.  Due to the rapid development and changes in our business, we have expensed technology and development expenses in the same year that the costs are incurred.  The number of employees in technology and development functions grew to 90 employees at December 31, 2013 from 68 employees at December 31, 2012.  We intend to continue to invest in our technology and development efforts, in particular as it relates to our programmatic buying solution, by hiring additional personnel and by using outside consulting firms for various initiatives.  We believe continuing to invest in technology and development efforts is essential to maintaining our competitive position.

Sales and Marketing Expense.  Sales and marketing expense primarily consists of salaries, incentive compensation, stock-based compensation and other personnel-related costs for our marketing and creative employees and our advertiser focused, publisher focused and enterprise focused sales and sales support employees.  Additional expenses in this category include marketing programs, consulting, travel and other related overhead.  The number of employees in sales and marketing functions grew to 168 employees at December 31, 2013 from 156 employees at December 31, 2012.  We expect our sales and marketing expense to increase in the foreseeable future as we continue to grow the Tremor Video Network, further increase the number of our enterprise solution focused sales and marketing professionals and expand our marketing activities.

General and Administrative Expense. General and administrative expense primarily consists of salaries, incentive compensation, stock-based compensation and other personnel-related costs for business operations, administration, finance and accounting, legal, information systems and human resources employees.  Included in general and administrative expenses are consulting and professional fees, including legal, accounting and investor relations fees, insurance, costs associated with compliance

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with the Sarbanes-Oxley Act and other public company corporate expenses, travel and other related overhead.  The number of employees in general and administrative functions grew to 33 employees at December 31, 2013 from 28 employees at December 31, 2012.  We expect our general and administrative expenses to increase in absolute dollars as a result of operating as a public company and the continuing growth of our business.

Depreciation and Amortization Expense. Depreciation and amortization expense primarily consists of our depreciation expense related to investments in property, equipment and software as well as the amortization of intangible assets originating from our acquisitions of ScanScout, Inc., or ScanScout, in December 2010 and Transpera, Inc. in February 2011 and certain intangible assets from TubeMogul in January 2012.  These acquired intangible assets include technology, customer relationships, trademarks and trade names and non-competition agreements.

Interest and Other Income (Expense), Net

Interest and other income (expense), net consist primarily of interest income, interest expense, foreign exchange transaction gains and losses, and mark-to-market income (expense).  Interest income is derived from interest received on our cash and cash equivalents.  Interest expense consists primarily of the interest incurred on outstanding borrowings under our credit facility.  As of December 31, 2013, we did not have any outstanding borrowings under our credit facility.  Mark-to-market income (expense) consists primarily of income (expense) related to our preferred stock warrant liability.  As of December 31, 2013, we no longer have any preferred stock warrant liability outstanding.

Results of Operations

The following table is a summary of our consolidated statement of operations data for each of the periods indicated. The period-to-period comparisons of the results are not necessarily indicative of our results for future periods.

Comparison of Years Ended December 31, 2013 and 2012

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Revenue.   The increase in revenue in 2013 compared to 2012 was primarily attributable to a $28.6 million increase in our in-stream video advertising revenue, representing 28.7% growth year-over-year, and a $1.5 million increase in revenue from licensing solutions. The increase in revenue was partially offset by a $3.5 million reduction to $0.3 million in in-banner video advertising revenue due to our decision at the beginning of 2011 to increase our focus on the sale of in-stream video advertising and de-emphasize in-banner advertising.

Cost of Revenue, Gross Profit and Gross Margin.   The increase in cost of revenue in 2013 compared to 2012 was driven primarily by $15.4 million of increased video advertising inventory costs, resulting from our revenue increase, and a $1.2 million increase in data, ad serving, hosting and research costs. The increase in our gross profit in 2013 compared to 2012 was driven by a 25.3% increase in revenue year-over-year partially offset by a 27.1% increase in our cost of revenue year-over-year.

The 0.8 percentage point decline in our gross margin during 2013 compared to 2012 was primarily attributable to a decrease in the second half of 2013 in the relative mix of our performance-priced ad campaigns and an increase in the relative mix of CPM-priced ad campaigns sold with demo guarantees.  Historically, our performance-priced ad campaigns have had higher gross margins than our traditional CPM priced campaigns.  For 2013, CPM-priced campaigns sold with demo guarantees had lower gross margins than CPM-priced campaigns that were sold without demo guarantees.

Technology and Development.   The increase in technology and development expense in 2013 compared to 2012 was primarily attributable to a $2.6 million increase in salaries, incentive compensation, stock-based compensation costs and other personnel-related costs associated with the increase in headcount, as we continue to invest in technology and development efforts, in particular with respect to our programmatic buying solution, and a $0.9 million increase in recruiting fees, professional development, technology maintenance and overhead costs.

Sales and Marketing.   The increase in sales and marketing expense in 2013 compared to 2012 was primarily attributable to a $2.4 million increase in salaries, incentive compensation, stock-based compensation and other personnel-related costs, as we increased the number of sales and marketing personnel to support our expanding advertiser base and our licensing and programmatic buying initiatives, a $1.4 million increase in professional fees and overhead costs, and a $1.1 million increase in travel and entertainment expenses. These increases were partially offset by a $1.4 million decrease in marketing costs.

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General and Administrative.   The increase in general and administrative expense in 2013 compared to 2012 was primarily attributable to a $ 1.3 million increase in salaries, incentive compensation, stock-based compensation costs and other personnel-related costs and an increase of $1.4 million in public company and professional development expenses, and other taxes and fees.  These increases were partially offset by a $2.6 million decrease in legal, consulting, professional and recruiting fees and overhead costs.