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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, 2015

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 001-35982

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 ¨  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 ¨  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 ¨

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 ¨

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  ¨    No   x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $124.7 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 8, 2016, there were 52,563,181 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 2016 annual meeting of stockholders.  The proxy statement will be filed with the U.S. Securities and Exchange Commission not later than 120 days after December 31, 2015.

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Tremor Video, Inc.

Form 10-K

For the Fiscal Year Ended December 31, 2015

The Tremor Video logo, name 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 outcome-based pricing models;

·    our ability to increase revenue from new and existing buyers;

·    the adoption of our programmatic solutions for buyers and sellers;

·    the adoption of our all-screen optimization solution for in-stream video advertising;

·    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 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 our clients;

·    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;

·    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;

·    expected investments or expenditures;

·             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., we or us, provides software for video advertising effectiveness.  Our buyer and seller platforms enable seamless transactions in a premium video marketplace by offering control and transparency to our clients.  Our technology optimizes performance of video ad campaigns across all screens, including computers, smartphones, tablets and connected TVs, to make advertising more relevant for consumers and deliver maximum results for buyers and sellers of video advertising.

Our buyer platform enables advertisers, agencies and other buyers of advertising, which we collectively refer to as buyers, to discover, buy, optimize and measure the effectiveness of their video ad campaigns.  Our proprietary technology analyzes video content, detects viewer and system attributes, and leverages our large repository of stored and integrated third-party data to optimize and target the delivery of ad campaigns to achieve a broad spectrum of marketing goals — from audience reach to more sophisticated goals such as engagement, brand lift and viewability.  Through our All-Screen optimization solution, buyers are able to choose a single campaign goal and our technology will optimize delivery of  the campaign across a broad inventory pool to find the right viewer wherever they may be watching video, eliminating the need to allocate campaign budgets to a specific screen or device.  Our advanced analytics suite enables buyers to gain a deep understanding of the drivers of campaign performance and obtain reporting on key brand performance metrics such as viewability, as well as TV-like metrics that measure reach and frequency of viewing by a particular audience.

We empower video ad buying however a buyer wants to transact through.  Buyers can purchase advertising on our buyer platform on a guaranteed and fully managed basis through the use of insertion orders. For these campaigns, our team of specialists manages the delivery of the campaign according to an agreed set of objectives at a pre-negotiated fixed price and we are required to secure all inventory to fulfill the campaign.   In addition, buyers can transact directly on our buyer platform through the Tremor Video DSP, an intuitive and customizable user interface that allows them to actively manage the execution of their campaigns on a programmatic basis.   Campaigns run through the Tremor Video DSP are typically non-guaranteed and utilize our real-time bidding and optimization technology to maximize a buyer’s campaign spend for delivery against a given campaign objective.  The Tremor Video DSP is directly integrated with a number of video inventory sources, enabling buyers to dynamically purchase ad impressions through a robust auction environment as well as through private marketplaces that connect buyers directly to selected sellers.  The Tremor Video DSP can be accessed on a self-service basis or at varying levels of managed service, depending on the preferences of the buyer.

To better align our solutions with the specific needs of buyers on a given campaign, we offer a number of different pricing models through our buyer platform, including proprietary outcome-based pricing models such as cost per-engagement, or CPE, pricing where we are compensated only when viewers actively engage with buyers’ campaigns, or 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.  Our outcome-based pricing models typically generate higher gross margins than other campaigns running through our buyer platform that are based on more traditional CPM (cost per thousand impressions) pricing models because we are often able to serve our clients’ outcome-based goals with a lower number of purchased impressions.

We also offer a seller platform, the Tremor Video SSP, which helps suppliers of video advertising inventory, or sellers, improve yield and maximize the value of their inventory by enabling their programmatic sales efforts.  Sellers on the Tremor Video SSP can make inventory available to buyers through an open exchange, where buyers bid on inventory in a robust auction environment, or through private marketplaces so that only selected buyers have the opportunity to purchase video ad inventory.  Through the Tremor Video SSP, we provide sellers with tools to manage their supply hierarchies and demand tiers, and offer real-time reporting that allows sellers to effectively monitor bidding activity on their inventory.   Buyers connect to sellers on the Tremor Video SSP through third-party demand side platforms, or third party DSPs, that are integrated directly with our seller platform.  In addition, the Tremor Video SSP is one of many inventory sources that is connected to the Tremor Video DSP; accordingly, buyers on the Tremor Video DSP are able to dynamically purchase advertising inventory on the Tremor Video SSP.

Industry Background

Online video advertising is among the fastest growing advertising formats worldwide.  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 across screens.  We believe this growth will continue to accelerate as traditional television content migrates online.

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Online video advertising offers brand advertisers a number of advantages over more traditional advertising solutions, such as the ability to measure and analyze large repositories of data in real-time and optimize the delivery of an ad campaign for a specific campaign objective or target audience.  Online video provides buyers with unprecedented control over the direction and targeting of their ad campaigns and offers transparency into what is driving performance, giving marketers the ability to effectively measure the return on their brand advertising dollars.  We believe that online video is a highly effective channel for brand advertisers to meet their advertising 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.

As online video advertising continues to scale and evolve, the need for software solutions that automate the process for planning, buying and measuring video advertising across screens has become more pronounced.  Recently, an increasing amount of online video  advertising is being transacted programmatically.  Programmatic buying refers to the automated purchase of digital advertising through technology, including the use of real-time bidding technology that allows for the dynamic purchase and sale of advertising inventory on an impression-by-impression basis.  This technology enables buyers and sellers to efficiently transact in an open auction environment or through private marketplaces that seamlessly connect buyers and sellers of video advertising.

Despite the tremendous growth opportunity for the online video advertising market, there are a number of 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 across multiple screens; ensuring that video ads are viewable to viewers; the absence of performance transparency; scarcity of premium inventory; reliance on multiple technology providers and intermediaries; challenges combatting fraudulent activities and brand safety issues; and the lack of consistent and standard measurements.

Tremor Video Technology and Solutions

We provide software for video advertising effectiveness. Our buyer and seller platforms enable seamless transactions between buyers and sellers of advertising in a premium video marketplace.

Buyer Platform

Our buyer platform enables buyers to efficiently discover buy, optimize and measure the effectiveness of their video ad campaigns. Through our buyer platform we deliver:

·                  Advanced optimization for brand performance.  We have developed a suite of brand-centric key performance indicators, or KPIs, such as engagement, viewability and brand preference (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 and designed specifically for video. Before the launch of a video advertising campaign, a buyer selects the KPI against which it wants to optimize the performance of its campaign.  Using a proprietary algorithm, our technology 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, such as video player size, geography, content category, length of video and viewer data, including demographic information and viewing history.  Our technology performs an analysis on every video stream, including the ability to scan and categorize content by analyzing the audio track and certain visual elements, and optimizes delivery of the campaign for the selected KPI by directing advertising spend towards video ad inventory that is more likely to perform.  For instance, if a client chooses to optimize a video ad campaign for engagement, our technology will continuously track and analyze the signals described above to determine which are most correlated with achieving a high engagement rate and direct campaign spend towards video ad inventory that meet these criteria.

·                  All-screen optimization.  Our all-screen optimization solution for in-stream video advertising enables buyers to select a single KPI and our technology will optimize delivery of the campaign across screens to find the right viewer wherever they may be watching video, whether on computers, tablets, smartphones or connected TVs, thus eliminating the need to allocate campaign budgets to a specific device.

·                  Precision targeting.  In addition to offering optimization against a suite of brand-centric KPIs, our technology enables precise targeting across specific signals such as demographics, geography and player-size.  We also enable buyers to target consumers using first-party data or data from integrated third party data management platforms.

·                  Scale and reach.  Our buyer platform delivers scale and reach across multiple internet-connected devices, including computers, smartphones, tablets, and connected TVs, enabling buyers to use our solutions to address their online video advertising needs across screens. We continuously evaluate and refine our network of sellers to ensure that

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buyers have access to high performing content in a brand safe environment. We often partner with sellers on an exclusive basis, meaning that only we and the sellers’ direct sales force are able to sell their video ad inventory.

·                  Tremor Video DSP.  Buyers are able to directly access our buyer platform through the Tremor Video DSP user interface, which allows them to actively manage the execution of their campaigns.  Buyers are able to manage settings from account level, advertiser level, campaign level or placement level to create workflow efficiency.  The Tremor Video DSP utilizes our proprietary real-time bidding and optimization technology to maximize a buyer’s campaign spend for delivery against a given campaign objective. The Tremor Video DSP is a fully automated solution that can be accessed on a self-service basis, or at varying levels of managed service depending on the buyer’s preference.

The Tremor Video DSP is directly integrated with the largest video supply side platforms, enabling the dynamic purchase of individual ad impressions utilizing real-time bidding technology in an open exchange as well as through private marketplaces that connect buyers directly to selected sellers of video advertising inventory.  Our Deal Manager solution allows buyers on the Tremor Video DSP to discover, activate and analyze all of their private market place deals through one central console.  Buyers can explore and purchase pre-approved packages of inventory that have been curated for performance against a given metric or seamlessly execute direct buys with specific sellers, while monitoring performance in real time.

·                  Advanced Analytics.  We provide buyers with advanced analytics and measurement tools so that they can understand the true performance of their ad campaigns, relieving them from the need to integrate and support multiple, disparate technologies, including:

·                        Ad performance transparency.  We provide buyers with transparency into the workings of our decision engine 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.

·                        Viewability.  Our technology analyzes whether a video ad placement is fully, partially, or not visible to a viewer.  Our platform is also integrated with third party technology providers that provide independent metrics for measuring and validating viewability. Buyers are able to optimize delivery of their video campaigns to maximize viewability and we offer pricing models where a buyer only pays for viewable impressions.

·                        Cross-site measurement.  Our proprietary measurement tools enable buyers to compare video inventory quality across sellers by measuring attributes such as viewability, the size of the video player and ad completion rate. When coupled with pricing information, these insights help buyers compare the relative value of video inventory across sellers.

·                        TV-like buying and measurement.   Our buyer platform enables advertisers to buy and measure video advertising in a manner consistent with the television industry, using metrics such as gross rating points, or GRPs, which are a measure of reach and frequency among a target audience, and verify the audience they reach using Nielsen reporting.  These functions help buyers unify the planning and measurement of TV and online video advertising campaigns.

·                  Brand safety.  Our buyer platform offers advanced solutions for combating fraudulent or objectionable ad placements.  Through server-to-server integrations with third party technology providers, our platform preemptively and in real-time prevents the placement of advertising to inventory that is identified as being potentially fraudulent.  We also offer solutions that block placements of advertising to brand conflicting properties or page content that is identified as being inappropriate or unsafe for the brand.

·                  Advanced ad formats.  Our proprietary ad formats give buyers the ability to create a more engaging experience across multiple internet-connected devices, allowing viewers to interact with an ad and explore additional content within the ad itself, driving increased awareness and time spent with an ad.  Our creative team often works with buyers to create custom ad units prior to the launch of an advertising campaign.

·                  Integrated data and technology partners.  In addition to our proprietary technology, our buyer platform is integrated with a suite of third-party technologies, including data management platforms to enhance audience targeting.  For instance, our ProximityPlus targeting solution, which uses third party geo-behavioral data from smartphones to create advanced audience segments around consumer intent and behavior, and our SocialAffinity targeting solution, which relies on a panel of third party social data to target consumers who have a higher propensity to like a brand

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based on their affinities.  We are also integrated with a number of third-party technologies that offer placement verification and reporting services.  By offering access to these integrated technologies through a single platform, we reduce complexities faced by buyers utilizing multiple technology providers.

·                  Full spectrum buying options.  Our buyer platform empowers video ad buying however a buyer wants to transact. We offer varying levels of client service, from fully managed to self-service, based on the individual preference of a buyer.  Buyers can purchase advertising through guaranteed pricing models as well as non-guaranteed pricing, and can transact through open auction or private marketplaces with specific sellers.  Our deal-manager allows buyers to actively track all of their campaigns from one central platform console.

·                  Proprietary pricing models.  We offer innovative brand outcome-based pricing for in-stream video advertising that allow buyers to purchase measurable brand results, such as:

·                  CPE pricing, where we are compensated only when viewers actively engage with buyers’ 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;

·                  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;

·                  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; and

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

We believe that buyers are attracted to our outcome-based pricing models because these models more closely tie advertising spend to actual campaign performance.

Seller Platform

Our seller platform, the Tremor Video SSP helps sellers improve yield and maximize the value of their video inventory by enabling their programmatic sales efforts.

·                  Robust auction environment.  The Tremor Video SSP is directly integrated with the leading video demand side platforms, including the Tremor Video DSP, creating a robust marketplace through which sellers are able to efficiently monetize their advertising inventory in an open auction real-time bidding environment.  Server-to-server integrations with third party DSPs are multi-faceted and often require several months of testing and technical trouble-shooting to ensure that the third party DSP is able to access the full functionality of our platform.  These server-to-server integrations significantly reduce latency and response time.

·                  Private marketplaces.  The Tremor Video SSP enables sellers to establish private marketplaces with buyers.  Private marketplaces can be transacted through invite only auctions, where select buyers are given the opportunity to bid on a curated set of publisher inventory at a pre-negotiated price on a non-guaranteed basis.  For instance, a buyer can access a private marketplace on the Tremor Video SSP that consists of sellers that have been specifically selected because they are likely to have a high number of viewable impressions.  In addition, private marketplaces can directly connect a given buyer to a seller on our Tremor Video SSP, allowing them to efficiently transact on a guaranteed or non-guaranteed basis without the need for manual insertion orders.

·                  Inventory management tools.  We provide sellers with the tools and controls to manage their inventory across multiple devices and platforms.  These tools enable sellers to establish supply hierarchies and demand tiers, set minimum price floors, and define advertiser and category level black and white lists to manage potential sales channel conflicts.

·                  Advanced real-time reporting.  Real-time reporting provides up-to-the-second data, allowing sellers to effectively monitor buyers’ buying patterns and make instant changes to take advantage of market dynamics and maximize their yield.

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Clients

Buyers

We maintain close relationships directly with brand advertisers and we consider them to be our clients, as the video ad campaigns we run are ultimately those of the advertiser and we work closely with them to execute their campaigns. However, we primarily market and sell our buyer platform to advertising agencies, including agency trading desks, which often plan and execute programmatic transactions on behalf of an agency.

Buyers are able to access our buyer platform as a managed service, with our team of specialists managing the execution of an advertising campaign, from advising on pre-flight planning through post-campaign reporting and analysis. In addition, buyers can transact directly on our buyer platform through the Tremor Video DSP.   The Tremor Video DSP can be accessed on a self-service basis or at varying levels of managed service, depending on the preferences of the buyer. Typically, the Tremor Video DSP is utilized by agency trading desks on behalf of brand advertisers.

Buyers are also able to connect to inventory on the Tremor Video SSP through third party DSPs.  Third party DSPs purchase advertising inventory on the Tremor Video SSP through server-to-server integrations, in an open auction environment or through private marketplaces. Campaigns running through third-party DSPs do not utilize our technology for optimizing campaign delivery or making bidding decisions; rather, the DSP will bid on inventory using its own decision engine.  While the third-party DSP is responsible for bidding decisions, the overall direction of the advertising spend is typically determined by the advertiser or advertising agency.

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 2015, 2014 or 2013.

Sellers

Sellers own or operate websites and applications through which video advertisements can be delivered to consumers as they navigate across screens, including computers, smartphones, tablets and connected TVs.  Sellers provide us with the content, or video advertising inventory, within which video advertising campaigns are delivered on our buyer platform.  Sellers also utilize the Tremor Video SSP as a yield-optimization and supply management tool to improve their selling efforts.

One of the primary factors on which buyers judge our buyer platform offering is the ability to provide access to premium and unique advertising inventory at scale.  We judge the quality of advertising inventory based on a number of factors, including whether content has been professionally produced, the quality of the video viewing experience, including size and placement of the video player, and its performance results against key brand performance objectives. In order to secure premium video inventory, we sometimes partner with sellers on an exclusive basis.  These arrangements typically have a one year term and provide for a minimum fill rate, or a percentage of video ad inventory made available by the seller, that we must purchase in a given month.

The Tremor Video SSP helps sellers improve their yield and maximize the value of their video inventory by enabling their programmatic sales efforts.  Sellers can sell their video inventory through an open exchange, where demand sources bid on inventory in a robust auction environment, or through private marketplaces so that only a selected buyer or buyers have the opportunity to purchase video ad inventory.  We provide sellers with the tools and controls to manage their inventory across multiple devices and platforms.  These tools enable sellers to establish supply hierarchies and demand tiers, set minimum price floors, and define advertiser and category level black and white lists to manage potential sales channel conflicts.  Real-time reporting provides up-to-the-second data, allowing sellers to effectively monitor buyers’ buying patterns and make instant changes to take advantage of market dynamics and maximize their yield.

In addition to our direct relationships with sellers of premium video inventory, we have also partnered with third-party video supply side platforms, networks and exchanges that represent video inventory from multiple sellers in order to provide our buyer clients with access to a broad and diverse inventory pool.  Our buyer platform is directly integrated with the largest third-party supply side platforms enabling buyers to purchase video inventory through a robust auction environment as well as through private marketplaces.

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Technology and Development

We have incurred substantial technology and development expenses developing, maintaining and improving the technology that underlies our buyer and seller platforms.  We believe that technology innovation is key to our success and we intend to continue to invest in the development of new feature sets and functionalities as well as enhancements to our existing product suite.  As of December 31, 2015, we had a total of 102 employees engaged in technology and development functions. For 2015, 2014, and 2013, our total technology and development expenses were $20.2 million, $17.0 million, and $11.6 million, respectively, reflecting our continued investments in technology and the launch of new products and offerings.

Sales

As of December 31, 2015, we had total sales and marketing staff of 195 employees.  For 2015, 2014, and 2013, our total sales and marketing expenses were $48.9 million, $42.6 million, and $38.5 million, respectively.

Buyer Platform Sales

Our sales strategy is focused on targeting the most “video ready” brand advertisers, including those advertisers that are large traditional television advertising spenders.  We have developed and will continue to develop preferred relationships with key agency holding companies, advertising agencies and agency trading desks that position us to benefit from increased online video spending. 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 brand advertisers, advertising agencies and agency trading desks.

Our buyer focused sales force is generally structured around core vertical markets, including automotive, CPG, entertainment, technology and telecommunications, retail and financial services.  In addition, certain members of our sales team are focused on establishing relationships with key decision makers within the largest advertising agencies and agency trading desks, in particular as relates to the Tremor Video DSP offering.  Our sales team is supported by engineers with deep technical expertise.

Sales executives and account managers are assigned to specific advertisers to oversee relationships.  For managed service campaigns, our team of specialists provides 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 buyers and the vertical markets that we serve.

Seller Platform Sales

Our seller initiatives utilize a full-service development and support strategy. Our seller focused sales team is responsible for ensuring that we are meeting the ongoing needs of our sellers throughout the duration of the relationship, and is supported by engineers with deep technical expertise. We invest significant time in identifying and cultivating relationships with sellers to ensure they understand the potential benefits of monetizing their inventory with us, and in order to secure access to premium advertising inventory for buyers.

Our seller team is focused on fostering adoption and overall market awareness of the Tremor Video SSP solution.   We also maintain a sales team that is focused on identifying and increasing spend from third-party DSPs that transact on the Tremor Video SSP.  Our team of technical account managers monitors third-party DSP bidding activities and provides recommendations that inform their trading practices, including insights around bidding behaviors and forecasting tools that assist in media planning.  Our sales team also collaborates with DSPs to create private marketplaces with select sellers on the Tremor Video SSP through custom deal configurations.

The relationship building process can be time consuming and we have invested significant resources in establishing relationships with our seller partners.

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

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development, rapidly evolving, fragmented and subject to potential disruption by new technological innovations. We compete with large online video publishers such as Google, Inc., Facebook, Inc., AOL Inc. and Yahoo! Inc. that offer video advertising services as part of a larger solution for digital media buying, as well as advertising technology companies, advertising networks, demand side platforms, supply side platforms and exchanges. We also compete for advertiser spending with large sellers who rely on their own sales organizations to attract buyers across their properties. In the traditional media space, our primary competitors for advertising spend are mainly TV broadcasters, radio broadcasters and print media publishers. Many of these competitors have significant client relationships, much larger financial resources and longer operating histories than we have.

With respect to our buyer platform, we believe that we compete for advertising 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 buyers and sellers, all-screen capabilities, brand-centric measurement, and ability to ensure brand safety and transparency into ad performance and placement.   With respect to our seller platform, we believe that we compete primarily on the basis of the speed and ease of use of our platform, the quality of tools that we provide to sellers to control their inventory and maximize yield, our ability to provide demand to sellers at scale, and our ability to provide real-time reporting and analytics.

We believe that we compete favorably with respect to all of these factors and that we are well positioned as a leading provider of software solutions for video advertising effectiveness.

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 five 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 have faced, 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 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.

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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 and relevant self-regulatory bodies 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 or by redefining the types of information that constitute personal information and non- personal information.  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.  We sometimes use precise location information for the purpose of better targeting online or mobile advertisements.  The use of precise location information is of significant interest to regulators and legislators and new regulations or legislation may impose additional restrictions and/or costs upon us in the future.  It remains a possibility that additional legislation and regulations may be passed or otherwise issued other than in relation to precise location information 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 buyers 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

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DAA and its working groups. We also participate in a wide range of Interactive Advertising Bureau (“IAB”) committees, councils and working groups, as well as other industry groups that are focused on establishing best practices for the online video advertising industry.

Employees

As of December 31, 2015, we had 335 employees, of which 102 were primarily engaged in technology and development functions, 195 were engaged in sales and marketing functions, and 38 were engaged in general and administrative functions. 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 II, Item 8 of this Form 10-K.

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 U.S. 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.  For fiscal years 2015, 2014 and 2013, our total revenue was $173.8 million, $159.5 million and $131.8 million, respectively.  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 buyers and sellers;

·        increasing the level of spending through our buyer and seller platforms;

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·        developing market acceptance for our programmatic solutions, including the Tremor Video DSP and the Tremor Video SSP;

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

·        offering competitive pricing to buyers;

·        offering competitive rates to sellers;

·        delivering online video advertising campaign performance results that are superior to 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 buyers and sellers;

·        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; 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 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 $43.2 million, $23.5 million, and $13.5 million in fiscal years 2015, 2014, and 2013, respectively, and we had an accumulated deficit of $177.7 million and $134.4 million as of December 31, 2015 and 2014, respectively, which included a $20.9 million goodwill impairment charge in fiscal 2015 and a $15.8 million deemed dividend related to the conversion of our Series F preferred stock in fiscal 2013 in connection with the closing of our initial public offering, or IPO.  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.  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 advertisers and us to accurately forecast and plan future business activities, and could cause buyers to reduce or delay their advertising spending.  Historically, economic downturns have resulted in overall reductions in advertising spending.  If macroeconomic conditions deteriorate, buyers may curtail or freeze spending on advertising in general and for solutions such as ours specifically, which would impact the amount of spend transacted through both our buyer and seller platforms.  Furthermore, our contracts and relationships with advertising agencies on behalf of advertisers generally do not include long-term obligations requiring them to purchase our solutions and are cancelable upon short or no notice and without penalty.  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.

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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 buyers, sellers and increase spend transacted through our platforms, 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 the client’s 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, the online video advertising industry is shifting, in part, towards programmatic buying solutions.  Programmatic buying is the automated purchase of digital advertising inventory through technology, including real time bidding technology, which allows for the dynamic purchase and sale of advertising inventory on an impression-by-impression basis.  If our programmatic solutions are not considered effective, or if there is a delay or failure of the market to adopt our solutions, our business and growth prospects could be harmed as buyers may increasingly rely on programmatic channels to transact online video advertising spend. Moreover, even if our programmatic solutions experience significant adoption, such adoption may occur at the expense of our traditional non-programmatic managed service model.

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 Google Inc., Facebook, Inc., AOL Inc. and Yahoo! Inc. that offer video advertising services as part of a larger solution for digital media buying, as well as advertising technology companies, advertising networks, demand side platforms, supply side platforms and exchanges.  In the traditional media space, our primary competitors are mainly TV networks, radio broadcasters and print media publishers, many of which also have a digital presence.

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.  They, or other companies that offer competing advertising solutions, may establish or strengthen cooperative relationships with buyers or sellers, thereby limiting our ability to promote our solutions and generate revenue.  Competitive pressures could require us to reduce the prices we charge buyers or increase the prices we pay to sellers.  For example, the online video advertising industry may experience price erosion due to increased adoption of automated ad buying.

Our business may suffer to the extent that buyers and sellers purchase and sell online video advertising directly from each other or through other companies that are able to become intermediaries between buyers and sellers.  New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants offer multiple new products and services aimed at capturing advertising spend such as analytics, programmatic buying and bundled offline and online video advertising.  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.  If there is a failure to adopt our programmatic solutions our business and growth prospects could be harmed.

For our buyer platform, we believe that we compete for advertising 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 buyers and sellers, all-screen capabilities, brand-centric measurement, ability to ensure brand safety and transparency into ad performance and placement.  For our seller platform, we believe that we compete primarily on the basis of the speed and ease of use of our platform, the quality of tools that we provide to sellers to control their inventory and maximize yield, our ability to provide demand to sellers at scale and our ability to provide real-time reporting and analytics.

Our competitors or potential competitors may adopt certain aspects of our business model, which could reduce our ability to differentiate our solutions.  As market dynamics change, or as new and existing competitors introduce more competitive pricing or

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new or disruptive technologies, we may be unable to maintain or attract new buyers or sellers or increase spend transacted through our platforms.  As a result, we may be required to change our business model 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 buyers 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 shift or 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 buyers 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, buyers 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.

If the market for our programmatic solutions develops more slowly than we expect then our operating results and growth prospects may be adversely affected.

In 2014, we introduced to market the Tremor Video DSP, a programmatic solution, which enables advertisers to transact directly on our platform through an intuitive and customizable user interface.   Campaigns on the Tremor Video DSP are purchased using real-time bidding technology to dynamically purchase individual ad impressions on a real-time basis through integrated inventory pools in an open exchange as well as through private marketplaces that connect buyers directly to selected sellers.  The Tremor Video DSP can be accessed on a self-service basis or at varying levels of managed service, depending on the preferences of the buyer.

In 2015, we introduced to market a seller platform, the Tremor Video SSP, which helps sellers maximize the value of their video inventory by enabling their programmatic sales efforts and automating workflow.  Sellers on the Tremor Video SSP can make inventory available to buyers that are integrated with our technology through a robust auction environment or through private marketplaces so that only selected buyers have the opportunity to purchase video ad inventory.

These solutions are still developing, and the future demand and acceptance for these solutions is uncertain and will likely depend on their perceived effectiveness by buyers and sellers.  If the market for our programmatic solutions develops more slowly than we expect, or fails to develop, our operating results and growth prospects could be harmed.

Our business depends in part on the success of our strategic relationships with third parties.

Our business depends in part on our ability to continue to successfully manage and enter into successful strategic relationships with third parties. We currently have and are seeking to establish new relationships with third parties to develop integrations with complementary technologies and data vendors.   Our ability to target, verify and measure campaigns is in part dependent on the data that we receive through third party integrations.

In addition, the success of our programmatic solutions is dependent, in part, on our ability to integrate our technology with third-party programmatic sources of inventory and demand.  The Tremor Video DSP is directly integrated with the largest third party video SSPs, enabling the dynamic purchase ad impressions in an open exchange as well as through private marketplaces.  If we fail to maintain existing integrations or attract new supply partners, it could negatively impact the effectiveness of and market for our Tremor Video DSP.  We do not have exclusive relationships with these third party SSPs and they are generally under no obligation to provide inventory to the Tremor Video DSP.

Buyers connect to the Tremor Video SSP through third party DSPs that are directly integrated with our platform.  We are reliant on these third party DSPs to increase the amount of spend that is transacted through our seller platform.  We do not have exclusive relationships with these third party DSPs and they are generally free to stop transacting on the Tremor Video SSP with little or no notice.

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In some instances, the third party DSPs that transact on the Tremor Video SSP are also our competitors.  As a result, they may be more likely to decrease or eliminate their spending on our platform.  Some third party DSPs control significant amounts of advertising spend across a broad spectrum of buyers; therefore, any determination by a third party DSP to materially decrease their spending on our platform could impair our operating results. If we experience connectivity or other technical problems with our integrations with third party DSPs they may be unable to transact on our platform, and any such technical difficulties could lead to a negative perception of our product that could impact future spend decisions.

Integrations with third parties are often costly and time consuming, and can present technological challenges.  If we experience any delays in our integration efforts or are unable to attract new strategic third parties with whom to integrate our technology, it could impact the efficacy of our solutions and hurt our ability to compete in the marketplace.

We may be unable to retain key buyers, attract new buyers or replace departing buyers with buyers 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.  Our contracts and relationships with advertising agencies on behalf of advertisers generally do not include long-term obligations requiring them to purchase our solutions and are cancelable upon short or no notice and without penalty.  As a result, we have limited visibility as to our future advertising revenue streams from our buyers.

Our buyers’ 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 our solutions;

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

·                  our access to premium inventory;

·                  our access to multiple channels and screens;

·                  our ability to serve video ad campaigns in brand safe environments;

·                  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;

·                  our ability to offer a complete programmatic solution for buying advertising;

·                  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 buyers’ spending, which tend to be discretionary;

·                  the pricing of our or competing solutions; and

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

If a major buyer decides to materially reduce its advertising spend with us it could do so on short or no notice, which could impair our operating results.  We cannot assure that our buyers will continue to use our platforms or that we will be able to replace in a timely or effective manner departing buyers with new buyers from whom we generate comparable revenue.  Any non-renewal, cancellation or deferral of large advertising contracts, or a number of contracts that in the aggregate account for a significant amount of revenue, could cause an immediate and significant decline in our revenue and harm our business.

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We may be unable to deliver advertising in a brand safe environment, which could harm our reputation and cause our business to suffer.

It is important to buyers that advertisements not be placed in or near content that is unlawful or would be deemed offensive or inappropriate by their customers. Unlike advertising on other mediums, online content can be more unpredictable, and we cannot guarantee that advertisements will appear in a brand safe environment. If we are not successful in delivering ads in a brand safe environment, our reputation could suffer and our ability to attract potential buyers and retain and expand business with existing buyers could be harmed, or our customers may seek to avoid payment or demand refunds, any of which could harm our business and operating results.

Activities of our advertising clients with which we do business could damage our reputation or give rise to legal claims against us.

Failure of our advertising clients to comply with federal, state, local or foreign laws or our policies could damage our reputation and expose us to liability under these laws. We may also be liable to third-parties for content in the ads we deliver if the content violates intellectual property rights of third-parties or if the content is in violation of applicable laws. A third-party or regulatory authority may file a claim against us even if our advertising client has represented that its ads are lawful and that they have the right to use any intellectual property included in an ad. Any of these claims could be costly and time-consuming to defend and could also hurt our reputation. Further, if we are exposed to legal liability, we could be required to pay substantial fines or penalties, redesign our business methods, discontinue some of our solutions or otherwise expend significant resources.

If a buyer fails to pay for ad requests that we have fulfilled, we would still be required to pay the seller for its ad inventory.

Sellers provide the video ad inventory on which we run advertising campaigns for buyers through our buyer platform.  If a buyer fails to pay for ad requests we have filled, we would generally still be required to pay the seller for its ad inventory.  Any significant failure by buyers to pay us could adversely affect our operating results.

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

We are highly dependent on brand advertisers that rely upon advertising agencies, including agency trading desks, 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 our solutions.

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.

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We must provide value to both buyers and sellers of video advertising without being perceived as favoring one over the other or being perceived as competing with them through offerings.

Buyers and sellers have different interests, with each trying to maximize its value in their transactions. We are interposed between buyers and sellers, and to be successful, we must continue to find ways of providing value to both without being perceived as favoring one at the expense of the other. Because new business models continue to emerge, we must constantly adapt our relationship with buyers and sellers and how we market ourselves to each. If we fail to balance our clients’ interests appropriately, our ability to provide a full suite of services and our growth prospects may be compromised.

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

Our outcome-based pricing models enable buyers to only pay for advertising that “performed”.  Under outcome-based pricing models, buyers only pay us if the applicable performance metrics are satisfied. For example, with our cost per engagement, or CPE, pricing model we are compensated only when viewers actively engage with buyers’ 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.

The market for outcome-based video advertising solutions is evolving and has not yet been widely adopted by buyers.  A significant portion of our revenue is generated from ad campaigns that are priced on an outcome basis.  We believe outcome-based pricing generally provides greater margins than CPM priced campaigns, because we are often able to serve our buyers’ performance goals with a lower number of purchased impressions.  Historically, a larger portion of buyers’ 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 buyers may be reluctant or slow to adopt outcome-based pricing solutions.  Additionally, we offer buyers the ability to purchase campaigns on a CPM-basis with a guaranteed demographic reach, or demo guarantees.  These campaigns have generally had lower gross margins than our outcome-based pricing models 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 buyers.  If buyers do not perceive meaningful benefits from our outcome-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.  Sellers are generally not required to provide us with a specified level of inventory, and we cannot be assured that our exclusive sellers will renew their agreements with us or continue to make their ad inventory available to us.  Sellers may seek to change the terms on which they offer inventory to us, including seeking an increase in the price we pay for inventory, or may elect to make advertising inventory available to our competitors who offer more favorable economic terms.  Furthermore, sellers may enter into exclusive relationships with our competitors, which preclude us from accessing their inventory.  In addition, we review our sellers on an on-going basis and have ceased, and may in the future cease, doing business with sellers based on the quality of their inventory, the demographic reach of their inventory, viewer experience and our confidence in the integrity of their ad requests.  Further, we may need to improve over time our processes for assessing the quality of seller ad requests.  As a result of these factors, we may have limited visibility as to our future access to inventory from sellers or the terms on which such inventory will be made available.  If a seller decides not to make video ad inventory available to us on acceptable terms, or if we decide to cease doing business with a seller, we may not be able to replace this ad inventory with comparable ad inventory quickly enough to fulfill our buyers’ requests.  If sellers seek an increase in the price we pay for video ad inventory, it could negatively impact our gross margin.  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.

Sellers have a variety of channels in which to sell their video ad inventory, including direct sales forces and third party supply side platforms.  Under our exclusive arrangements, a seller’s direct sales force may sell their own video ad inventory, and many of our exclusive sellers maintain significant direct sales forces.  Furthermore, the scope of exclusivity with respect to the third-party monetization of video ad inventory varies with sellers, with some sellers imposing geographical, device, or inventory type limitations.  Any increase in a seller’s direct sales efforts may negatively impact our access to that inventory.

If we are unable to maintain or increase our access to premium video ad inventory or if sellers seek to change the terms on which they offer us such inventory, our operating results may be harmed.

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

In certain instances, we enter into exclusive relationships with sellers.  Substantially all of our exclusive seller 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

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unfilled ad requests.  This risk can be magnified during certain times of the year when we see increased ad requests from our exclusive sellers coupled with reduced purchase demand from our buyers.

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

Any significant failure to adequately match demand from our buyers with supply from our sellers 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 buyers, which would cause our business to suffer.

Our business relies on effectively and efficiently delivering video ad campaigns for buyers.  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 seller partners for controls with respect to such activity.  These risks become more pronounced when programmatic buying is in place.  While we assess the campaign performance on our sellers’ websites and have engaged third-parties to combat fraudulent and malicious activities, such assessments may not detect or prevent fraudulent or malicious activity.  In addition, buyers increasingly rely on third party vendors to measure campaigns and detect fraud.  If we are unable to successfully integrate our technology with such vendors, or our measurement and fraud detection differs from their findings, buyers could lose confidence in our solutions and our revenues could decrease.  If fraudulent or other malicious activity is perpetrated by others, and we fail to detect or prevent it, the affected buyers may experience or perceive a reduced return on their investment and our reputation may be harmed.  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 buyers, which could cause our business to suffer.

Our sales efforts with buyers and sellers require significant time and expense.

Attracting new buyers and sellers requires significant time and expense, and we may not be successful in establishing new relationships or in maintaining or advancing our current relationships.  Our technology and online video brand advertising are relatively new and often require us to spend substantial time and effort educating potential buyers and sellers about our solutions, including providing demonstrations and comparisons against other available services.

The sales cycle for newer solutions, such as the Tremor Video DSP, can be particularly long and unpredictable and requires considerable time and effort.  Sales efforts involve educating buyers about the use, technical capabilities and benefits of our platform, as many buyers have limited or no experience with programmatic buying. Some buyers undertake a significant evaluation process that frequently involves not only our platform but also the offerings of our competitors. This process can be costly and time-consuming. As a result, it is difficult to predict when we will obtain new customers and begin generating revenue from these new customers. As part of our sales cycle, we may incur significant expenses. We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue.

With respect to our sellers, we often seek to establish exclusive long-term relationships to ensure access to premium content for buyers.  In addition, we are focused on increasing adoption by sellers of the Tremor Video SSP.  As a result, we invest significant time in cultivating relationships with our sellers to ensure they understand the potential benefits of our platform and monetization of their inventory with us rather than with third-party media networks, exchanges and supply side platforms.  The relationship building process can take many months and may not result in us winning an opportunity with any given buyer or seller.

Because of competitive market conditions and the negotiating leverage enjoyed by large advertises, agencies and publishers, we are sometimes forced to choose between losing the opportunity or contracting on terms that allocate more risk to us than or are otherwise less favorable than we prefer to accept.

If we are not successful in streamlining our sales processes with buyers and sellers, our ability to grow our business may be adversely affected.

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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:

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

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

·                  changes in demand for our solutions, including the Tremor Video DSP and Tremor Video SSP;

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

·                  the timing and amount of sales and marketing expenses incurred to attract new buyers and sellers;

·                  the cancellation or delay of campaigns by buyers;

·                  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 sellers 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 and varies from quarter to quarter.  During the first quarter, buyers generally devote less of their budgets to ad spending and our exclusive sellers generally make a larger proportion of their ad inventory available to us.  Under the terms of our contracts with exclusive sellers we are typically required to pay for a percentage of the ad requests delivered by such sellers, even if we are unable to deliver an ad to that inventory.  As a result, this combination may result 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;

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

·                  potential loss of key employees, customers or suppliers 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 each of fiscal years 2015, 2014 and 2013, substantially all of our revenue was generated in the United States.  While we have offices outside of North America in Australia, Brazil, 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.

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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 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 2016, 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.

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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 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, 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 clients’ ability to deliver effective advertising campaigns and impair our ability to meet or fulfill obligations with sellers.

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 buyer’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, buyers or sellers making claims or initiating litigation against us, and our giving credits to our buyer clients toward future advertising spend.  In addition, the terms of our exclusive seller agreements generally require us to pay for a percentage of the ad requests delivered by such sellers, 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 buyers’ ability to deliver effective advertising campaigns and impair our ability to meet our fill obligations with sellers.

System failures could significantly disrupt our operations and cause us to lose buyers or sellers.

Our success depends on the continuing and uninterrupted performance of our solutions.  Sustained or repeated system failures that interrupt our ability to provide our solutions, including technological failures affecting our ability to deliver video ads quickly and accurately and to process seller 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 buyers or sellers.

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 buyers and sellers.  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

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breaches, computer malware and computer hacking attacks have become more prevalent in our industry and may 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 buyers or sellers may reduce the use of or stop using our solutions.

While we 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 sellers’ or buyers’ 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 buyers’ 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 buyers or sellers 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 buyers or sellers 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 buyer or seller 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.

Even if we do not suffer a data security breach, the increase in the number and the scope of data security incidents has increased regulatory and industry focus on security requirements and heightened data security industry practices.  New regulation, evolving industry standards, and the interpretation of both, may cause us to incur additional expense in complying with any new data security requirements.  Further, any actual or perceived threats to the security of computers and computer networks, especially mobile devices and mobile networks, could lead existing and potential users to refrain from responding to services from our advertising clients.

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 two third-party data center hosting facilities, located in Boston, Massachusetts and Santa Clara, California, and Amazon Web Services to deliver our solutions.  All of our data storage and analytics are conducted on, and the video ad campaigns that are transacted through our buyer and seller platforms are processed through, servers in these facilities. We also rely on multiple bandwidth providers, multiple internet service providers, as well as content delivery network, or CDN providers, and domain name systems, or DNS providers, and mobile networks to deliver video ads.  In addition, we utilize two third-party data center hosting facilities located in Santa Clara, California and New York, New York for corporate information technology communications, data storage, data processing and office automation.  Any damage to, or failure of, these systems within our third-party data hosting facilities 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 center hosting facilities 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 center hosting facilities 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 center hosting facilities 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

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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 center hosting facilities 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.

We relocated our headquarters and sublet our former headquarters. If our subtenant is unable to meet its obligations under the sublease we may be responsible which could impact our financial performance.

In June 2015, we relocated our headquarters; however the lease for our former headquarters does not expire until 2021.  In connection with our relocation, we sublet our former headquarters.  If the subtenant is unable to meet its obligations under the sublease, we may remain responsible for the obligations under the lease or incur expenses as a result of their breach.  Any such unanticipated expenses may impact our financial performance.

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 carry-forwards, or NOLs, that we can use in the future to offset taxable income for U.S. federal income tax purposes.  At December 31, 2015, we had U.S. federal and state NOLs of $110.0 million and $108.7 million, respectively, and foreign NOLs of $6.8 million and $6.3 million related to our international subsidiaries in Germany and United Kingdom, respectively.  The U.S. federal NOLs will expire in various years beginning in 2026 through 2035.  Our foreign NOLs can be carried forward without limitation in each respective country.  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 substantially all of our NOLs and other 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 buyers and to grow our revenue depends on our ability to successfully leverage data that we collect from our buyers, sellers, 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 and other tracking technologies to conduct online video ad campaigns.  These tracking technologies 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 sellers’ websites, and any video ads we deliver.  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 sellers.  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 a buyer or seller 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 other tracking technologies and our collection and use of data in connection with the delivery of targeted advertising.  In addition, consumers can, as of March 15, 2016, 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 buyers 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

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other tracking technologies on the consumer’s browser; or (3) block the delivery of online advertisements on websites and applications.

Cookies may easily be deleted or blocked by Internet users. All of the most commonly used Internet browsers (Chrome, Firefox, Internet Explorer, and Safari) allow Internet users to modify their browser settings to prevent first party or third-party cookies from being accepted by their browsers. Most browsers also now support temporary privacy modes that allow the user to suspend, with a single click, the placement of new cookies or reading or updates of existing cookies. Internet users can also delete cookies from their computers at any time. Some Internet users also download free or paid “ad blocking” software that prevents third-party cookies from being stored on a user’s computer or mobile device. In addition, the Safari browser blocks third-party cookies by default. Many applications and other devices allow users to avoid receiving advertisements by paying for subscriptions or other downloads. The browser developer Mozilla, which publishes Firefox, has previously announced an intention to block third-party cookies by default in a future iteration of the Firefox browser, and other browsers may do the same. Mobile devices based upon the Android operating system use cookies only in their web browser applications, so that cookies do not track Android users while they are using other applications on the device.

Ad-blocking technologies have emerged that have the effect of blocking the display of an advertisement. Estimates of the use of ad-blocking technologies vary by user population, type of media content, geography, and other factors, and the ultimate prevalence and effect of ad-blocking technologies is not certain, but it could have an adverse effect on our business if it reduces the volume or effectiveness (and therefore value) of advertising. In addition, some ad-blocking technologies block only ads that are targeted through use of third-party data, while allowing ads based on first-party data (i.e. data owned by the provider of the website or application being viewed). These ad-blockers could place us at a disadvantage because we rely on third-party data, while large competitors have troves of first-party data they use to direct advertising. Other technologies allow ads that are deemed “acceptable,” which could be defined in ways that place us or our clients at a disadvantage, particularly if such technologies are controlled or influenced by our competitors. Even if ad-blockers do not ultimately have a material impact on our business, investor concerns about ad blockers could cause our stock price to decline.

Increased prevalence of ad-blocking has prompted examination of the effect of digital advertising industry practices upon the quality of user experiences, and changes in industry practices may emerge as a result. Such changes could reduce the viability of our existing business model, place us at a competitive disadvantage, or require us to invest significantly in developing new technologies and business practices.

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 Sellers and Buyers

In order to effectively operate our video advertising campaigns, we collect data from buyers, sellers, 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 buyers and sellers generally permit us to collect non-personally identifiable and aggregate data from advertising campaigns, some of our buyers and sellers do not allow us to collect some or all of this data or limit our use of this data, and future buyers and sellers may do so in the future.  For example, sellers 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 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 buyers.

We and many of our buyers and sellers 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 buyers or sellers, 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

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behavior and interaction with content could make it more difficult for us to deliver effective video advertising campaigns that meet the demands of our buyers.

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 and other tracking technologies.   Current versions of the most widely used web browsers, such as Chrome, Firefox, Internet Explorer and Safari, allow users to send “Do Not Track” signals, to indicate that they do not wish to have their web usage tracked. However, there is currently no definition of “tracking” and no standards regarding how to respond to a “Do Not Track” preference that are accepted or standardized in the industry. The World Wide Web Consortium, or W3C, chartered a “Tracking Protection Working Group” in 2011 to convene a multi-stakeholder group of academics, thought leaders, companies, industry groups and consumer advocacy organizations to create a voluntary “Do Not Track” standard for the web. The W3C is continuing to work on a policy specification that will provide guidance as to how websites and buyers should respond to a “Do Not Track” signal, but it is unclear exactly what that specification will advise, and to what extent that specification will be accepted by legislators and regulators worldwide.

Even absent an industry standard, various government authorities have indicated an intent to implement some type of “Do Not Track” standard. For example, the Federal Trade Commission, or FTC, has previously stated that it will pursue a legislative solution if the industry does not agree to a standard. Similarly, the European Commission, which proposes legislation to the European Parliament, has suggested that it intends to consider “Do Not Track” legislation in the absence of an industry standard. Some proposed “Do Not Track” standards, including the current draft specifications being considered by the W3C, impose limits or requirements that apply to data gathering and use by third parties like us, but that may not apply to first parties. Laws or regulations could take a similar approach. Any such standard, law, or regulation could place us at a competitive disadvantage to first-party data owners such as large website operators, many of whom own or are developing or acquiring capabilities that compete with our solutions.

Effective January 1, 2014, amendments to the California Online Privacy Protection Act of 2003, California Business and Professional Code § 22575 et seq., require operators of websites or online services to disclose how the operator responds to “Do Not Track” signals regarding the collection of personally identifiable information about an individual consumer’s online activities over time and across third-party Web sites or online services, as well as to disclose whether third parties may collect personally identifiable information about an individual consumer’s online activities over time and across different Web sites or online services. It is possible that other states could adopt legislation similar to California’s. The Do-Not-Track Online Act of 2013 was introduced in the United States Senate in February 2013, and it is possible that the federal government may adopt Do Not Track legislation. We may be subject to disclosure requirements such as California’s, and while we do not collect data that is traditionally considered personally identifiable information in the United States without user consent, we may nonetheless elect to respond by adopting a policy to discontinue profiling or web tracking in response to “Do Not Track” requests, and it is possible that we could in the future be prohibited from using non-personal consumer data by industry standards or state or federal legislation, which may diminish our ability to optimize and target advertisements, and the value of our services.

In addition to “Do Not Track” options, certain mobile devices allow users to “Limit Ad Tracking” on their device. Like “Do Not Track,” “Limit Ad Tracking” is a signal that is sent by particular mobile devices, when a user chooses to send such a signal. While there is no clear guidance on how third parties must respond upon receiving such a signal, it is possible that sellers, regulators, or future legislation may dictate a response that would limit our access to data, and consequently negatively impact the effectiveness of our solution and the value of our services.

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 buyers, 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

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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 and relevant self-regulatory bodies 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.  Such legislation or regulation could affect the costs of doing business online and may adversely affect the demand for or effectiveness and value of our solution.

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 new laws and regulations will be adopted in the United States and internationally, or existing laws and regulations may be interpreted and applied in new ways or in a manner 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, or regulations, 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.  Some of our competitors may have more access to lobbyists or governmental officials and may use such access to effect statutory or regulatory changes in a manner that commercially harms us while favoring their solutions.

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 buyers collect and use through certain sellers and the content of video ads our buyers may display.

In 2009, the European Union ePrivacy Directive was amended (Directive 2009/136/EC amending Directive 2002/58/EC) requiring buyers to obtain specific types of notice and consent from individuals before using cookies or other technologies to track individuals

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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 buyers and sellers 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 buyers and sellers 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 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 and other tracking technologies 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, 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.

The Court of Justice of the European Union recently issued an opinion finding that the EU-U.S. Safe Harbor Framework, under which personal data of EU residents may be transferred to the United States, is invalid and can no longer support data transfers to the United States, which could subject us to increased regulatory scrutiny and might hamper our plans to expand our business in Europe.

The use and transfer of personal data in EU member states is currently governed under Directive 95/46/EC (which is commonly referred to as the Data Protection Directive) as well as legislation adopted in the member states to implement the Data Protection Directive. The transfer of what is deemed to be personal data of EU subjects to countries (like the United States) that are determined to have inadequate privacy protections for such data currently was previously permitted under, among other methods, a process agreed to by the EU and the United States known as the EU-U.S. Safe Harbor Framework, pursuant to which U.S. businesses committed to treat the personal data of EU residents in accordance with privacy principles promulgated by the Data Protection Directive, and could self-certify their compliance with the Safe Harbor Framework.

We are a Safe Harbor participant, and previously relied upon the Safe Harbor Framework to allow us to conduct certain transfers of personal data of EU Subjects, including both data about our employees and consumer data that is collected and processed through our technology. Recent developments, however, no longer allow us to rely exclusively on the Safe Harbor Framework to support our data transfers. In particular, the Court of Justice of the European Union (“CJEU”) recently issued an opinion concluding that the Safe Harbor Framework is not sufficient to allow transfers of personal data of EU subjects to the United States.

Given the CJEU’s opinion, we can no longer rely on the Safe Harbor Framework to justify the transfer of personal data of EU subjects to the United States. Instead, we must rely on alternative compliance measures. Being forced to rely on alternative compliance measures could also affect the market for our technology, as EU customers may choose to do business with EU-based companies or other competitors that do not need to transfer personal data to the United States in order to avoid the above-identified risks and legal issues.

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In February 2016, it was announced that the United States and the EU have agreed to replace the Safe Harbor Framework with a new agreement known as the EU-U.S. Privacy Shield. At this time, however, it is not clear that the Privacy Shield will be embraced by EU privacy regulators or that the Privacy Shield will be an appropriate means for us to transfer personal data from the EU to the U.S.

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, two U.S. patents 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 buyers or sellers, 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 five 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 adequately protect our intellectual property or 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, which avoids infringing on our intellectual property rights.  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 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.

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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 have faced, 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 buyers and sellers;

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

·                  cause buyers or sellers 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 sellers from whom we purchase ad inventory.  Generally, under our agreements with sellers, we are required to indemnify the seller against any such claim with respect to an ad we served.  We attempt to mitigate this exposure by generally requiring buyers to indemnify us for any damages from any such claims.  There can be no assurance, however, that our buyers 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 required to satisfy our indemnification obligations to our sellers or claims against us with our assets.  This result could harm our reputation, business, financial condition and results of operations.

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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 and/or distribute 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, including our competitors, 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 and damage our reputation and losses in revenue, and we could be required to spend significant amounts of additional research and development resources to fix any problems.  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 and Public Company Financial Reporting

We have restated our prior consolidated financial statements, which may lead to additional risks and costs.

As discussed in Note 19 to our consolidated financial statements included in Part II - Item 8 of this report, we have restated our consolidated financial statements as of and for each of the first three quarters of 2015 following a change in accounting treatment to reflect the revenue attributable to the Tremor Video SSP net of inventory costs rather than on a gross basis. As a result of the restatement, we are subject to additional risks and may incur unanticipated costs for accounting and legal fees.

We have identified a material weakness in our internal control over financial reporting which could, if not remediated, result in additional material misstatements in our financial statements.  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 control over financial reporting, that meet the applicable standards.  We may err in the design or operation of our controls.  In addition, 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.  We are, commencing as of the fiscal year 2014, required to 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 disclosed in Item 9A, management identified a material weakness in our internal control over financial reporting related to principal-agent considerations around revenue recognition. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a

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timely basis. As a result of the material weakness, our management concluded that our internal control over financial reporting was not effective. We are actively engaged in implementing a remediation plan designed to address the material weakness. If our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results.  In addition, 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 and could lead to substantial additional costs for accounting and legal fees.

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.

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 identify new or additional material weaknesses in our internal controls, or 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.

Our accounting is becoming more complex, and relies upon estimates or judgments relating to our critical accounting policies. If our accounting is erroneous or based on assumptions that change or prove to be incorrect, our operating results could fall below the expectations of securities analysts and investors, resulting in a decline in our stock price.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States, or U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes, and also to comply with many complex requirements and standards. We devote substantial resources to compliance with accounting requirements and we base our estimates on our best judgment, historical experience, information derived from third parties, and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. However, various factors are causing our accounting to become complex. As a result of the introduction of our Tremor Video SSP, we use both gross and net revenue reporting, as opposed to our historical use only of gross reporting. Ongoing evolution of our business, and any future acquisitions, will compound these complexities. Our operating results may be adversely affected if we make accounting errors or our judgments prove to be wrong, assumptions change or actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors or guidance we may have provided, resulting in a decline in our stock price and potential legal claims. Significant judgments, assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, stock-based compensation, business combinations, and income taxes.

We have begun reporting a portion of our revenue on a net basis. The combination of gross and net revenue reporting may make our financial reporting more complex and difficult to understand.

The recognition of our revenue is governed by certain criteria that must be met and that determine whether we report revenue either on a gross basis, where third party inventory costs are reflected in cost of revenue, or on a net basis, where third party inventory costs reduce revenue.  Before we introduced the Tremor Video SSP, we reported all of our revenue on a gross basis, but we have determined that we are required to report revenue from the Tremor Video SSP on a net basis.

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The combination of net and gross revenue reporting may make our financial reporting more complex and difficult for investors to understand, and may make comparison of our results of operations to prior periods or other companies more difficult. We may experience significant fluctuations in revenue in future periods depending upon, in part, the nature of our sales and our reporting of such revenue. The need to consider the use of net reporting more broadly for different kinds of transactions as our business evolves would require application of judgment and could increase the potential for reporting errors.

In order to provide guidance or make other projections regarding our expectations of U.S. GAAP revenue for future periods, we must make estimates and assumptions about the mix of gross and net-reported transactions based upon the volumes and characteristics of the transactions we think will make up the total mix of revenue in the period covered by the projection. Those estimates and assumptions may be inaccurate when made, or may be rendered inaccurate by circumstances occurring after the guidance is given, such as changing the characteristics of our offerings or particular transactions in response to client demands, market developments, regulatory pressures, acquisitions, and other factors, In addition, the rules governing revenue recognition in our business are complex, and the rules or their interpretation may evolve. As a result, it is possible that our projections of U.S. GAAP revenue guidance may vary from actual results, or comparisons of our projections from period to period may be difficult.

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.  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, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance compared to when we were a private company.  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 from the date of our initial public offering in June 2013, 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.  Between January 1, 2015 and March 8, 2016, our stock price has ranged from $1.65 per share to $3.22 per share.  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;

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

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

·                  a lack of trading volume in our common stock;

·                  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.  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 executive officers, alleging certain misrepresentations by us in connection with our initial public offering concerning our business and prospects.  On March 5, 2015, the district court granted our motion to dismiss the lawsuit and entered judgment in our favor and on February 8, 2016, the United States Court of Appeals for the Second Circuit confirmed the judgment of the district court.  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.

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 8, 2016, we had 52,563,181 shares of common stock outstanding.  In addition, the shares subject to outstanding warrants to purchase common stock and stock option awards for which 39,824 shares and 7,045,044 shares, respectively, were exercisable as of December 31, 2015 will become available for sale immediately upon the exercise of such warrants to purchase common stock or stock option awards.

We have also registered for offer and sale all shares of common stock that we may issue under our stock-based compensation plans, including our employee stock purchase plan.  These shares can be freely sold in the public market upon issuance. Sales of common stock by existing stockholders in the public market, whether as part of an underwritten public offering or pursuant to exemptions from registration, 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.

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, 2015.  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.

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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.  We do not have any control over these analysts, and their reports or analyst consensus may not reflect our guidance, plans or expectations.  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.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

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ITEM 2.  PROPERTIES

In 2014, we entered into a lease for our new headquarters at 1501 Broadway, New York, New York, for approximately 51,000 square feet of office space.  The initial ten-year term of the lease commenced on January 7, 2015, and we relocated to this new office space in June 2015.

We also lease offices in Mountain View, California; San Francisco, California; Santa Monica, California; Atlanta, Georgia; Chicago, Illinois; Boston, Massachusetts; Southfield, Michigan; Irving, Texas; Melbourne and Sydney, Australia, London, England; and Singapore. We utilize third-party data center hosting facilities located in Santa Clara, California, 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 alleging certain misrepresentations by us in connection with our IPO concerning our business and prospects.  On March 5, 2015, the District Court granted our motion to dismiss and entered judgment in our favor and, on February 8, 2016, the United States Court of Appeals for the Second Circuit confirmed the judgment of the District Court.

In addition, from time to time we are involved in legal proceedings or subject to claims arising in the ordinary course of our business.  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.

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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, 2015, there were approximately 83 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.

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.

The following graph compares, for the period from June 26, 2013 through December 31, 2015, 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.

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Relative Price Performance

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.  Subsequent to July 2, 2013, we invested a portion of the net offering proceeds into money market securities.  In 2015, we used $1.7 million of the net offering proceeds to acquire a business in Australia.  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

On September 8, 2015, we granted John Rego, our newly appointed Chief Financial Officer, options to purchase 570,000 shares of our common stock at an exercise price of $1.94 per share, the closing price of our common stock on the date of grant.  On October 20, 2015, we granted John Walsh, our newly appointed Chief Technology Officer, options to purchase 350,000 shares of our common

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stock at an exercise price of $1.90 per share, the closing price of our common stock on the date of grant.  These option grants were made outside of our stockholder approved equity compensation plans.  The options are generally subject to the same terms and conditions as options granted under our 2013 Equity Incentive Plan, or 2013 Plan.  A description of our 2103 Plan is set forth in “Note 14 - Stock-Based Compensation Expense — Stock Based Incentive Plans”  in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.  The offers, sales and issuances of the securities described in this paragraph were exempt from registration under Regulation D promulgated under the Securities Act.

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, 2015, 2014, and 2013 and the selected consolidated balance sheet data as of December 31, 2015 and 2014 are derived from our audited consolidated financial statements that are included in Part II, Item 8 of this Annual Report on Form 10-K, which have been audited by Ernst & Young LLP, our independent registered public accounting firm. The selected consolidated financial data for the years ended December 31, 2012 and 2011 and the selected consolidated balance sheet data as of December 31, 2013, 2012 and 2011 are 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.

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

(2)         Includes stock-based long-term incentive compensation expense of $0.4 million, $0.7 million and $1.6 million for the years ended December 31, 2015, 2014 and 2013, respectively.

(3)         Reflects impairment charges incurred during the year ended December 31, 2015 of (a) $20.9 million related to goodwill, (b) $1.2 million related to certain intangible assets, and (c) $0.6 million related to certain property and equipment.  Refer to “Note 7 — Goodwill and Intangible Assets, Net in the notes to the consolidated financial statement included in Part II, Item 8 of this Form 10-K.

(4)         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 12 — Stockholders’ Equity” in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

(5)         As a result of our operating losses incurred for the years ended December 31, 2015, 2014, 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 years presented.

(6)         For the year ended December 31, 2013, our basic and diluted weighted-average number of shares of common stock outstanding increased as a result of our IPO on July 2, 2013.  Refer to “Note 12 — Stockholders’ Equity” in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.

(7)         We define total spend as the aggregate gross spend transacted through our platforms.  Total spend does not represent revenue earned by us and is a non-GAAP financial measure.  Total spend is a key measure used by management to assess our market share and scale, and is used to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.  We believe total spend is a meaningful measurement of our operating performance because our ability to generate increases in total spend is strongly correlated to our ability to generate increases in revenue.  However, use of total spend 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 U.S. GAAP. One of the limitations of total spend is that other companies, including companies in our industry, may calculate total spend or similarly titled measures differently, which reduces its usefulness as a measure of comparison to other companies in our industry.

The following table presents a reconciliation of total spend to revenue, the most directly comparable U.S. GAAP measure, for each of the periods indicated:

(a)         We record revenue from our buyer platform on a gross basis, including costs of inventory.  Accordingly, for revenue generated from our buyer platform, total spend is equivalent to revenue.  We record revenue from the Tremor Video SSP net of inventory costs. Total spend through the Tremor Video SSP is equal to the revenue generated from the Tremor Video SSP plus associated costs of inventory.  See “Note 2 — Summary of Significant Accounting Policies” in the notes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K.  The Tremor Video SSP was introduced in 2015.  Therefore, for periods prior to 2015, total spend is equivalent to our U.S. GAAP revenue.

(8)         Adjusted EBITDA represents our net loss before interest and other (income) expense, net, provision for income taxes, depreciation and amortization expense, and adjusted to eliminate the impact of non-cash stock-based compensation expense, non-cash stock-based long-term incentive compensation expense, non-cash impairment charges, executive severance costs, acquisition-related costs, and litigation costs associated with 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, non-cash stock-based long-term incentive compensation, non-cash impairment charges, executive severance costs, acquisition-related costs, and litigation costs associated with class action securities litigation, excludes items that we do not consider to be indicative of our core operating performance.

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 U.S. GAAP. Some of these limitations are: (a) although depreciation and amortization expense 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 class action securities litigation; (f) Adjusted EBITDA does not reflect non-cash impairment charges associated with changes in the estimated fair value of our net assets compared to their carrying values; (g) Adjusted EBITDA does not reflect executive severance costs; (h) Adjusted EBITDA does not reflect acquisition-related costs; and (i) 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

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

(a)         Refer to footnote (3) above for a further description of our impairment charges incurred during the year ended December 31, 2015.

(b)         Reflects severance costs incurred related to the termination of certain executives.

(c)          Reflects acquisition-related costs incurred in connection with our acquisition of TVN.  Includes $493 in compensation-related expenses related to contingent consideration payable to certain TVN sellers that are subject to continued employment.  Refer to “Note 6 — Acquisition in the notes to the consolidated financial statement included in Part II, Item 8 of this Form 10-K.

(d)         Refer to footnote (2) above and footnote (11) below for a further description of our stock-based long-term incentive compensation expense.

(9)         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.

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

(11)  At December 31, 2015 and 2014, accrued compensation, benefits and payroll taxes includes $0.5 million and $0.8 million of stock-based long-term incentive compensation expense, respectively, related to our long-term sales incentive compensation plan.  Payments earned under the long-term sales incentive compensation plan for the 2014 and 2013 plan years were paid in stock-based awards in August 2015 and 2014, respectively.  Payments earned under the plan for the 2015 plan year will be made in stock-based awards to participants that remain employed with us through June 30, 2016, which will be paid in August 2016.  If any participant in our long-term sales incentive compensation plan is not employed on June 30, 2016, such participant will forfeit any rights to receive payment under the plan for the 2015 plan year.

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

Tremor Video, Inc., we or us, provides software for video advertising effectiveness.  Our buyer and seller platforms enable seamless transactions in a premium video marketplace by offering control and transparency to our clients.  Our technology optimizes performance of video ad campaigns across all screens, including computers, smartphones, tablets and connected TVs, to make advertising more relevant for consumers and deliver maximum results for buyers and sellers of video advertising.

Our buyer platform enables advertisers, agencies and other buyers of advertising, which we collectively refer to as buyers, to discover, buy, optimize and measure the effectiveness of their video ad campaigns.  Our proprietary technology analyzes video content, detects viewer and system attributes, and leverages our large repository of stored and integrated third-party data to optimize the delivery of ad campaigns to achieve a broad spectrum of marketing goals — from audience reach to more sophisticated goals such as engagement, brand lift and viewability.  Through our All-Screen optimization solution, buyers are able to choose a single campaign goal and our technology will optimize delivery of  the campaign across a broad inventory pool to find the right viewer wherever they may be watching video, eliminating the need to allocate campaign budgets to a specific screen or device.  Our advanced analytics suite enables buyers to gain a deep understanding of the drivers of campaign performance and obtain reporting on key brand performance metrics such as viewability, as well as TV-like metrics that measure reach and frequency of viewing by a particular audience.

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We empower video ad buying however a buyer wants to transact. Buyers can purchase advertising on our buyer platform on a guaranteed and fully managed basis through the use of insertion orders. For these campaigns, our team of specialists manages the delivery of the campaign according to an agreed set of objectives at a pre-negotiated fixed price, and we are required to secure all inventory to fulfill the campaign.  In addition, buyers can transact directly on our buyer platform through the Tremor Video DSP, an intuitive and customizable user interface that allows them to actively manage the execution of their campaigns on a programmatic basis.  Campaigns run through the Tremor Video DSP are typically non-guaranteed and utilize our real-time bidding and optimization technology to maximize a buyer’s campaign spend for delivery against a given campaign objective..  The Tremor Video DSP is directly integrated with a number of video inventory sources, enabling buyers to dynamically purchase ad impressions through a robust auction environment as well as through private marketplaces that connect buyers directly to selected sellers.  The Tremor Video DSP can be accessed on a self-service basis or at varying levels of managed service, depending on the preferences of the buyer.

To better align our solutions with the specific needs of buyers on a given campaign, we offer a number of different pricing models through our buyer platform, including proprietary outcome-based pricing models such as cost per-engagement, or CPE, pricing where we are compensated only when viewers actively engage with buyers’ campaigns, or 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.  Our outcome-based pricing models typically generate higher gross margins than other campaigns running through our buyer platform that are based on more traditional CPM (cost per thousand impressions) pricing models because we are often able to serve our clients’ outcome-based goals with a lower number of purchased impressions.

We also offer a seller platform, the Tremor Video SSP, which helps suppliers of video advertising inventory, or sellers, improve yield and maximize the value of their video inventory by enabling their programmatic sales efforts.  Sellers on the Tremor Video SSP can make inventory available to buyers through an open exchange, where buyers bid on inventory in a robust auction environment, or through private marketplaces so that only selected buyers have the opportunity to purchase video ad inventory.  Through the Tremor Video SSP, we provide sellers with tools to manage their supply hierarchies and demand tiers, and offer real-time reporting that allows sellers to effectively monitor bidding activity on their inventory.  Buyers connect to sellers on the Tremor Video SSP through third-party demand side platforms, or third party DSPs, that are integrated directly with our seller platform.  In addition, the Tremor Video SSP is one of many inventory sources that is connected to the Tremor Video DSP; accordingly, buyers on the Tremor Video DSP are able to dynamically purchase advertising inventory on the Tremor Video SSP.

In the first quarter of 2016, we determined, based on our review of relevant accounting guidance, that revenue attributable to the Tremor Video SSP should be reported net of costs of inventory rather than on a gross basis as had previously been reported.  As a result, we concluded that our previously issued quarterly financial statements for the quarterly periods ending March 31, June 30, and September 30, 2015, should not be relied upon and should be restated to reflect the reporting of revenue attributable to the Tremor Video SSP on a net instead of a gross basis.  This correction had the effect of decreasing both revenue and cost of revenue in the same amount in our quarterly financial statements for each such period.  The restatement had no impact on our reported gross profit, net loss or Adjusted EBITDA for any period.  Revenue generated from our buyer platform will continue to be reported on a gross basis, based primarily on our determination that we act as the primary obligor in the delivery of advertising campaigns for buyers through our buyer platform.  See “Note 2 — Summary of Significant Accounting Policies” and “Note 19 — Quarterly Results of Operations (Unaudited)” in notes to consolidated financial statements.

Advertising spend transacted on our platforms has grown significantly.  Total spend (refer to “Key Metrics-Total Spend”) has increased from $131.8 million in 2013 to $159.5 million in 2014 and $203.9 million in 2015.  We have increased our revenue from $131.8 million in 2013 to $159.5 million in 2014 and $173.8 million in 2015.  Over the same period, our gross margin varied from 40.9% in 2013 to 36.2% in 2014 and 42.9% in 2015.  Our net loss increased from $13.5 million in 2013 to $23.5 million in 2014 and to $43.2 million in 2015. The increase in our net loss during 2015 includes $22.7 million of non-cash impairment charges to goodwill, certain intangible assets and property and equipment maintained at our former headquarters (refer to note 5 in notes to Consolidated Financial Statements).  Our adjusted EBITDA (refer to “Key Metrics-Adjusted EBITDA”) was a $2.1 million loss in 2013, a $10.9 million loss in 2014, and a $4.6 million loss in 2015.

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.  Total spend and Adjusted EBITDA are discussed immediately following the table below. Revenue, gross margin and net loss are discussed under the headings “Components of our Results of Operations.”

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Total spend

We define total spend as the aggregate gross spend transacted through our platforms.  We record revenue from our buyer platform on a gross basis, including inventory costs.  Accordingly, for our buyer platform total spend is equivalent to revenue.  We record revenue from the Tremor Video SSP net of inventory costs.  Total spend generated through the Tremor Video SSP is equal to the revenue generated from the Tremor Video SSP plus associated inventory costs.  See Note 2 — Summary of Significant Accounting Policies” in notes to consolidated financial statements.  The Tremor Video SSP was introduced in 2015.  Therefore, for periods prior to 2015, total spend is equivalent to our reported revenue.

Total spend does not represent revenue earned by us and is a non-GAAP financial measure.  We believe total spend is a meaningful measurement of our operating performance because our ability to generate increases in total spend is strongly correlated to our ability to generate increases in revenue.  Total spend is a key measure used by management to assess our market share and scale, and is used to evaluate operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.  However, use of total spend 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 U.S. GAAP. One of the limitations of total spend is that other companies, including companies in our industry, may calculate total spend or similarly titled measures differently, which reduces its usefulness as a measure of comparison to other companies in our industry.  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 total spend and a reconciliation of total spend to revenue, the most comparable U.S. GAAP measurement, for the years ended December 31, 2015, 2014 and 2013.

Within total spend, we closely monitor the percentage contributions among the following operational metrics: programmatic; non-programmatic higher function; and non-programmatic media.  Programmatic includes all spend attributable to the Tremor Video SSP, Tremor Video DSP, and agency trading desks.  We define non-programmatic higher-function as non-programmatic spend running through our buyer platform that utilizes our all-screen optimization solution or is purchased using our proprietary outcome-based pricing models.  We define non-programmatic media as non-programmatic spend running through our buyer platform that is purchased without any of our higher-function products.  We track these operational metrics in order to better understand how our clients are transacting on our platforms, which informs decisions as to the allocation of resources and capital.  The table below shows the dollar and percentage contribution to total spend from each of programmatic, non-programmatic higher-function; and non-programmatic media.  We believe that total spend from programmatic and non-programmatic higher function will continue to increase in future periods, while total spend from non-programmatic media will continue to decrease.

Adjusted EBITDA

Adjusted EBITDA represents our net loss before interest and other (income) expense, net, provision for income taxes, depreciation and amortization expense, and adjusted to eliminate the impact of non-cash stock-based compensation expense, non-cash stock-based long-term incentive compensation expense, non-cash impairment charges, executive severance costs, acquisition-related costs, and litigation costs associated with class action securities litigation.  Adjusted EBITDA is a key measure used by management to evaluate

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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, non-cash stock-based long-term incentive compensation expense, non-cash impairment charges, executive severance costs, acquisition-related costs, and litigation costs associated with 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 U.S. GAAP. See footnote 8 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 U.S. GAAP measurement, for the years ended December 31, 2015, 2014 and 2013.

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 from buyers and sellers who use our platforms for the purchase and sale of video advertising inventory.

Through our buyer platform, we generate revenue by delivering video advertising campaigns for buyers.  On our buyer platform we offer a number of different pricing models, including outcome-based pricing models where we are compensated only when viewers take certain actions or when certain campaign results are achieved, CPM-based pricing models where an advertiser pays based on the total number of ad impressions delivered and campaigns priced with a guaranteed demographic reach, or demo guarantees, where an advertiser pays based on the number of ad impressions delivered to a specific demographic.  For campaigns sold on a CPM-basis, we recognize revenue upon delivery of impressions, or delivery of impressions to a specific target demographic for CPM-priced ad campaigns with demo guarantees.  With respect to our outcome-based pricing models, we recognize revenue only when the specified action is taken or campaign result is achieved.  Revenue generated from our buyer platform is reported on a gross basis, based primarily on our determination that we act as the primary obligor in the delivery of advertising campaigns for buyers through our buyer platform.

Through our seller platform, which was launched in 2015, we generate revenue by providing sellers with tools to programmatically manage and monetize their inventory. For transactions executed through our seller platform,  we act as the agent on behalf of the seller that is making its inventory available to buyers.  Revenue is recognized when the buyer purchases video advertising inventory from the seller on our seller platform.  Revenue generated from the Tremor Video SSP is reported net of inventory costs that we remit to sellers.

The license fees for our licensed analytics solutions are based on the number of impressions being analyzed through these solutions.  We recognize revenue with respect to these solutions on a cost per impression basis based on the number of impressions being analyzed in a given month.  Typically, our license terms are for one year periods.  In limited cases, we charge a minimum monthly fee. We have discontinued selling our licensed analytics solutions as of December 31, 2015.

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

Cost of Revenue, Gross Profit and Gross Margin

Our cost of revenue primarily represents video advertising inventory costs, research costs, third-party hosting fees, and third-party serving fees incurred to deliver video ads. Cost of revenue also includes costs from our licenses from third-party data providers utilized in our platforms.  Substantially all of our cost of revenue for our buyer platform is attributable to video advertising inventory costs under seller contracts.  Cost of revenue for our seller platform primarily consists of third-party hosting fees. We recognize cost of revenue on a seller-by-seller basis upon delivery of an ad impression .

Certain of our contracts with sellers contain minimum percentage fill rates on qualified video ad requests, which effectively means that we must purchase this inventory from our exclusive sellers 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 seller’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

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contractually required fill rate and the number of ads delivered has not been material.  Costs owed to sellers but not yet paid are recorded in our consolidated balance sheets as accounts payable and accrued expenses.

Gross margin is our gross profit expressed as a percentage of our total revenue.  For our buyer platform, our gross margin is primarily impacted by video advertising inventory costs associated with delivering our advertisers campaigns relative to the revenue we generate from delivering such campaigns.  Historically, our gross margin on our buyer platform has been positively affected by the relative contribution to our revenue from non-programmatic higher-function campaigns (i.e., campaigns purchased using our all-screen optimization solution or our proprietary outcome-based pricing models) compared to non-programmatic media campaigns, which are purchased on a CPM or demo-guarantee basis.  Because we book campaigns from our Tremor Video SSP net of inventory costs, campaigns running through our seller platform generate substantially higher margins than campaigns running through our buyer platform, which is reported on a gross basis.  As a result, in the future our gross margin will be impacted by the relative mix of revenue from our seller platform and our buyer platform.

Operating Expenses

Operating expenses consist of technology and development, sales and marketing, general and administrative depreciation and amortization expenses, and impairment charges.  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 and impairment charges.  Our employee head count remained relatively stable with 335 employees at December 31, 2015 down slightly from 339 employees at December 31, 2014. We include stock-based compensation expense in connection with the grant of stock option awards 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 remained relatively stable with 102 employees at December 31, 2015 down slightly from 105 employees at December 31, 2014.  We intend to continue to invest in our technology and development efforts, in particular as it relates to our programmatic solutions, by strategically 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, creative and 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 195 employees at December 31, 2015 from 192 employees at December 31, 2014.  We expect our sales and marketing expense to increase in the foreseeable future to support our continued revenue growth.

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 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 declined to 38 employees at December 31, 2015 from 42 employees at December 31, 2014.  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 certain intangible assets.

Impairment Charges.  Impairment charges consist of write downs to goodwill and intangible assets related to historical acquisitions, as well as charges recorded in connection with the impairment of certain property and equipment located at our former headquarters that we vacated (refer to note 5 and 7 in notes to consolidated financial statements).

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Interest and Other Income, Net

Interest and other income, net consist primarily of interest income, interest expense, foreign exchange transaction gains and losses, and mark-to-market expense.  Interest income is derived from interest received on our cash and cash equivalents.  Interest expense consists primarily of the interest incurred on our then-outstanding borrowings under our credit facility.  As of December 31, 2015, we did not have any outstanding borrowings under our credit facility.  Mark-to-market expense consist primarily of expense related to contingent consideration incurred in connection with our acquisition of The Video Network Pty Ltd (refer to notes 3 and 6 in notes to consolidated financial statements).

Provision for Income Taxes

Provision for income taxes consists of minimum U.S. state and local taxes, income taxes in foreign jurisdictions in which we conduct business and deferred income taxes.

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.