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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Inuvo Inc | AMEX:INUV | AMEX | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.0211 | 6.06% | 0.3694 | 0.3699 | 0.3301 | 0.35 | 515,495 | 00:49:20 |
þ
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
INUVO, INC.
|
(Exact name of registrant as specified in its charter)
|
Nevada
|
|
87-0450450
|
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
500 President Clinton Ave., Suite 300, Little Rock, AR
|
|
72201
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Title of each class
|
|
Name of each exchange on which registered
|
Common Stock
|
|
NYSE MKT
|
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
þ
|
|
|
Emerging growth company
|
o
|
|
|
Page No.
|
Part I
|
||
|
||
Item 1.
|
Business.
|
|
Item 1A.
|
Risk Factors.
|
|
Item 1B.
|
Unresolved Staff Comments.
|
|
Item 2.
|
Properties.
|
|
Item 3.
|
Legal Proceedings.
|
|
Item 4.
|
Mine Safety Disclosures.
|
|
|
||
Part II
|
||
|
||
Item 5.
|
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|
|
Item 6.
|
Selected Financial Data.
|
|
Item 7.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations.
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
|
Item 8.
|
Financial Statements and Supplementary Data.
|
|
Item 9.
|
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
|
|
Item 9A.
|
Controls and Procedures.
|
|
Item 9B.
|
Other Information.
|
|
|
||
Part III
|
||
|
||
Item 10.
|
Directors, Executive Officers and Corporate Governance.
|
|
Item 11.
|
Executive Compensation.
|
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence.
|
|
Item 14.
|
Principal Accounting Fees and Services.
|
|
|
||
Part IV
|
||
|
||
Item 15.
|
Exhibits, Financial Statement Schedules.
|
•
|
material dependence on our relationships with Yahoo!, OpenX, Google and other demand partners;
|
•
|
dependence on relationships with supply partners and the introduction of new products and services, which require significant investment;
|
•
|
dependence on our ability to effectively market and attract traffic to our sites;
|
•
|
dependence on our financing arrangements with Western Alliance Bank, which is collateralized by our assets;
|
•
|
need to keep pace with technology changes;
|
•
|
fluctuations of quarterly financial results and the trading price of our common stock;
|
•
|
vulnerability to interruptions of services;
|
•
|
dependence on key personnel;
|
•
|
vulnerability to regulatory and legal uncertainties and our ability to comply with applicable laws and regulations;
|
•
|
need to protect our intellectual property;
|
•
|
the seasonality of our business;
|
•
|
vulnerability to publishers who could fabricate clicks;
|
•
|
vulnerability to a downturn and to uncertainty in global economic conditions;
|
•
|
requirement to adhere to the covenants and restrictions in our grant agreement with the state of Arkansas; and
|
•
|
the dilutive impact to our stockholders from outstanding restricted stock grants and options.
|
•
|
ValidClick: A software as a service and delivery platform for publishers that offers a pay-per-click solution where advertisements are targeted to consumers based on content and behaviors.
|
•
|
Digital Publishing: Branded web properties like ALOT.com, earnspendlive.com, search4answers.com and many more with content developed, edited and published by Inuvo in categories like health, finance, travel, entertainment, careers, education, lifestyle and automotive.
|
•
|
Visual Monetization Platform ("VMP"): A Supply Side Platform ("SSP") that offers publishers numerous forms of monetization both visually (images and video) and within or surrounding content.
|
•
|
IntentKey: A consumer intent recognition system designed to reach highly targeted mobile and desktop In-Market audiences with precision.
|
•
|
Audience Delivery Solutions: Inuvo’s audience delivery solution is a campaign management and optimization service for advertisers that uses the IntentKey and our proprietary Demand Side Platform (“DSP”).
|
•
|
MYAP: A proprietary online affiliate management solution that provides advertisers with the ability to sign up, manage and track the activities of publishers through a privately-branded platform with full data transparency. Typically, each MYAP customer is supported by a customized software implementation.
|
•
|
pay fees to the lender associated with the credit facility;
|
•
|
meet prescribed financial covenants;
|
•
|
maintain our corporate existence in good standing;
|
•
|
grant the lender a security interest in our assets;
|
•
|
provide financial information to the lender; and
|
•
|
refrain from any transfer of any of our business or property, subject to customary exceptions.
|
•
|
our ability to attract new distribution partners, including the length of our sales cycles, or to sell increased usage of our service to existing distribution partners;
|
•
|
technical difficulties or interruptions in our services;
|
•
|
changes in privacy protection and other governmental regulations applicable to our industry;
|
•
|
changes in our pricing policies or the pricing policies of our competitors;
|
•
|
the financial condition and business success of our distribution partners;
|
•
|
purchasing and budgeting cycles of our distribution partners;
|
•
|
acquisitions of businesses and products by us or our competitors;
|
•
|
competition, including entry into the market by new competitors or new offerings by existing competitors;
|
•
|
discounts offered to advertisers by upstream advertising networks;
|
•
|
our history of litigation;
|
•
|
our ability to hire, train and retain sufficient sales, client management and other personnel;
|
•
|
timing of development, introduction and market acceptance of new services or service enhancements by us or our competitors;
|
•
|
concentration of marketing expenses for activities such as trade shows and advertising campaigns;
|
•
|
expenses related to any new or expanded data centers; and
|
•
|
general economic and financial market conditions.
|
•
|
unexpected increases in usage of our services;
|
•
|
computer viruses and other security issues;
|
•
|
interruption or other loss of connectivity provided by third-party internet service providers;
|
•
|
natural disasters or other catastrophic events; and
|
•
|
server failures or other hardware problems.
|
|
High
|
|
Low
|
||||
Year Ended December 31, 2017:
|
|
|
|
|
|
||
First Quarter
|
$
|
1.74
|
|
|
$
|
1.21
|
|
Second Quarter
|
$
|
1.39
|
|
|
$
|
0.96
|
|
Third Quarter
|
$
|
1.24
|
|
|
$
|
0.88
|
|
Fourth Quarter
|
$
|
1.12
|
|
|
$
|
0.70
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
||
First Quarter
|
$
|
2.77
|
|
|
$
|
1.67
|
|
Second Quarter
|
$
|
2.13
|
|
|
$
|
1.33
|
|
Third Quarter
|
$
|
1.78
|
|
|
$
|
1.05
|
|
Fourth Quarter
|
$
|
2.31
|
|
|
$
|
1.00
|
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||||
January 1 - December 31
|
|
45,900
|
|
|
$
|
0.98
|
|
|
45,900
|
|
|
$
|
—
|
|
Total
|
|
45,900
|
|
|
|
|
45,900
|
|
|
—
|
|
•
|
Grew revenue by 11% and gross profits, net of traffic acquisition costs ("TAC"), by 30%.
|
•
|
Acquired the assets of NetSeer Inc. growing revenue in that business from $0.8 million in the month of February 2017 to $1.9 million in December 2017.
|
•
|
Opened a new development and support office in San Jose, CA.
|
•
|
Entered partnerships with Microsoft Bing and OpenX.
|
•
|
Hired a Chief Revenue Officer who built a Media and Publisher Sales and Account Management organization.
|
•
|
Began developing relationships in China that could result in media spend in the USA.
|
•
|
Continued the migration to mobile, going from 52.4% mobile in 2016 to 62.1% in 2017.
|
|
For the Years Ended December 31,
|
|||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
% Change
|
|||||||
Net Revenue
|
$
|
79,554,493
|
|
|
$
|
71,530,102
|
|
|
$
|
8,024,391
|
|
|
11.2
|
%
|
Cost of Revenue
|
36,669,543
|
|
|
21,364,795
|
|
|
15,304,748
|
|
|
71.6
|
%
|
|||
Gross Profit
|
$
|
42,884,950
|
|
|
$
|
50,165,307
|
|
|
(7,280,357
|
)
|
|
(14.5
|
%)
|
|
Marketing Cost (TAC)
|
$
|
28,578,401
|
|
|
$
|
39,195,653
|
|
|
(10,617,252
|
)
|
|
(27.1
|
%)
|
|
Gross Profit adjusted for Marketing Cost (TAC)
|
$
|
14,306,549
|
|
|
$
|
10,969,654
|
|
|
3,336,895
|
|
|
30.4
|
%
|
|
For the Year Ended December 31,
|
|||||||||||||
|
2017
|
|
2016
|
|
Change
|
|
% Change
|
|||||||
Marketing costs (TAC)
|
$
|
28,578,401
|
|
|
$
|
39,195,653
|
|
|
$
|
(10,617,252
|
)
|
|
(27.1
|
%)
|
Compensation
|
10,200,117
|
|
|
6,830,338
|
|
|
3,369,779
|
|
|
49.3
|
%
|
|||
Selling, general and administrative
|
8,342,906
|
|
|
4,996,482
|
|
|
3,346,424
|
|
|
67.0
|
%
|
|||
Operating expenses
|
$
|
47,121,424
|
|
|
$
|
51,022,473
|
|
|
$
|
(3,901,049
|
)
|
|
(7.6
|
%)
|
•
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
Exhibit No.
|
|
Description of Exhibit
|
2.1
|
|
|
2.2
|
|
|
3(i).1
|
|
|
3(i).2
|
|
|
3(i).3
|
|
|
3(i).4
|
|
|
3(i).5
|
|
|
3(i).6
|
|
|
3(ii).1
|
|
|
3(ii).2
|
|
|
4.1
|
|
|
4.2
|
|
|
4.3
|
|
|
4.4
|
|
|
10.1
|
|
|
10.2
|
|
10.3
|
|
|
10.4
|
|
|
10.5
|
|
|
10.6
|
|
|
10.7
|
|
|
10.8
|
|
|
10.9
|
|
|
10.10
|
|
|
10.11
|
|
|
10.12
|
|
|
10.13
|
|
|
10.14
|
|
|
10.15
|
|
|
10.16
|
|
|
10.17
|
|
|
10.18
|
|
|
10.19
|
|
|
10.20
|
|
|
10.21
|
|
|
10.22
|
|
|
10.23
|
|
|
10.24
|
|
10.25
|
|
|
10.26
|
|
|
10.27
|
|
|
10.28
|
|
|
10.29
|
|
|
10.30
|
|
|
10.31
|
|
|
10.32
|
|
|
10.33
|
|
|
10.34
|
|
|
10.35
|
|
|
10.36
|
|
|
10.37
|
|
|
10.38
|
|
|
10.39
|
|
|
21.1
|
|
|
23.1
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
32.2
|
|
|
101.INS
|
|
XBRL Instance Document *
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document*
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document*
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document*
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document*
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document*
|
|
Inuvo, Inc.
|
|
|
|
|
|
|
February 8, 2018
|
By:
|
/s/ Wallace D. Ruiz
|
|
|
|
Chief Financial Officer
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Richard K. Howe
|
|
Chairman of the Board of Directors, Chief Executive Officer, and principal executive officer
|
|
February 8, 2018
|
Richard K. Howe
|
|
|
|
|
|
|
|
|
|
/s/ Wallace D. Ruiz
|
|
Chief Financial Officer, principal financial and accounting officer
|
|
February 8, 2018
|
Wallace D. Ruiz
|
|
|
|
|
|
|
|
|
|
/s/ G. Kent Burnett
|
|
Director
|
|
February 8, 2018
|
G. Kent Burnett
|
|
|
|
|
|
|
|
|
|
/s/ Gordon J. Cameron
|
|
Director
|
|
February 8, 2018
|
Gordon J. Cameron
|
|
|
|
|
|
|
|
|
|
/s/ Charles D. Morgan
|
|
Director
|
|
February 8, 2018
|
Charles D. Morgan
|
|
|
|
|
|
|
|
|
|
/s/ Charles L. Pope
|
|
Director
|
|
February 8, 2018
|
Charles L. Pope
|
|
|
|
|
|
|
|
|
|
/s/ Patrick Terrell
|
|
Director
|
|
February 8, 2018
|
Patrick Terrell
|
|
|
|
|
|
CONTENTS
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
Consolidated Financial Statements:
|
|
|
Consolidated Balance Sheets
|
|
|
Consolidated Statements of Operations
|
|
|
Consolidated Statements of Stockholders’ Equity
|
|
|
Consolidated Statements of Cash Flows
|
|
|
Notes to Consolidated Financial Statements
|
|
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash
|
$
|
4,084,686
|
|
|
$
|
3,946,804
|
|
Accounts receivable, net of allowance for doubtful accounts of $83,789 and $23,000, respectively
|
10,759,250
|
|
|
7,586,129
|
|
||
Unbilled revenue
|
4,330
|
|
|
8,644
|
|
||
Prepaid expenses and other current assets
|
395,861
|
|
|
284,469
|
|
||
Total current assets
|
15,244,127
|
|
|
11,826,046
|
|
||
Property and equipment, net
|
2,306,279
|
|
|
1,615,223
|
|
||
Other assets
|
|
|
|
||||
Goodwill
|
9,853,342
|
|
|
5,760,808
|
|
||
Intangible assets, net of accumulated amortization
|
10,808,018
|
|
|
8,343,876
|
|
||
Other assets
|
36,070
|
|
|
15,186
|
|
||
Total other assets
|
20,697,430
|
|
|
14,119,870
|
|
||
Total assets
|
$
|
38,247,836
|
|
|
$
|
27,561,139
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
13,614,053
|
|
|
$
|
9,280,779
|
|
Revolving credit line
|
4,900,000
|
|
|
—
|
|
||
Accrued expenses and other current liabilities
|
2,887,816
|
|
|
2,689,640
|
|
||
Total current liabilities
|
21,401,869
|
|
|
11,970,419
|
|
||
|
|
|
|
||||
Long-term liabilities
|
|
|
|
||||
Deferred tax liability
|
2,331,900
|
|
|
3,738,500
|
|
||
Other long-term liabilities
|
426,725
|
|
|
326,428
|
|
||
Total long-term liabilities
|
2,758,625
|
|
|
4,064,928
|
|
||
|
|
|
|
||||
Stockholders’ equity
|
|
|
|
||||
Preferred stock, $.001 par value:
|
|
|
|
||||
Authorized shares 500,000, none issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, $.001 par value:
|
|
|
|
|
|
||
Authorized shares 40,000,000; issued shares 28,994,981 and 25,300,189 respectively; outstanding shares 28,618,454 and 24,923,662, respectively
|
28,996
|
|
|
25,300
|
|
||
Additional paid-in capital
|
136,033,967
|
|
|
130,418,413
|
|
||
Accumulated deficit
|
(120,579,062
|
)
|
|
(117,521,362
|
)
|
||
Treasury stock, at cost - 376,527 shares
|
(1,396,559
|
)
|
|
(1,396,559
|
)
|
||
Total stockholders' equity
|
14,087,342
|
|
|
11,525,792
|
|
||
Total liabilities and stockholders' equity
|
$
|
38,247,836
|
|
|
$
|
27,561,139
|
|
|
2017
|
|
2016
|
||||
Net revenue
|
$
|
79,554,493
|
|
|
$
|
71,530,102
|
|
Cost of revenue
|
36,669,543
|
|
|
21,364,795
|
|
||
Gross profit
|
42,884,950
|
|
|
50,165,307
|
|
||
Operating expenses
|
|
|
|
||||
Marketing costs (TAC)
|
28,578,401
|
|
|
39,195,653
|
|
||
Compensation
|
10,200,117
|
|
|
6,830,338
|
|
||
Selling, general and administrative
|
8,342,906
|
|
|
4,996,482
|
|
||
Total operating expenses
|
47,121,424
|
|
|
51,022,473
|
|
||
Operating loss
|
(4,236,474
|
)
|
|
(857,166
|
)
|
||
Interest expense, net
|
(318,193
|
)
|
|
(99,965
|
)
|
||
Loss from continuing operations before taxes
|
(4,554,667
|
)
|
|
(957,131
|
)
|
||
Income tax benefit
|
1,498,076
|
|
|
29,260
|
|
||
Loss from continuing operations
|
(3,056,591
|
)
|
|
(927,871
|
)
|
||
Net (loss) income from discontinued operations
|
(1,109
|
)
|
|
155,287
|
|
||
Net loss
|
$
|
(3,057,700
|
)
|
|
$
|
(772,584
|
)
|
|
|
|
|
||||
Per common share data
|
|
|
|
||||
Basic and diluted
|
|
|
|
||||
Net loss from continuing operations
|
$
|
(0.11
|
)
|
|
$
|
(0.04
|
)
|
Net income from discontinued operations
|
—
|
|
|
0.01
|
|
||
Net loss
|
$
|
(0.11
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
||||
Weighted average shares
|
|
|
|
||||
Basic
|
28,155,320
|
|
|
24,660,995
|
|
||
Diluted
|
28,155,320
|
|
|
24,660,995
|
|
|
Common Stock
|
|
Additional Paid in Capital
|
|
Accumulated Deficit
|
|
Treasury Stock
|
|
Total
|
|||||||||||||
|
Shares
|
|
Stock
|
|
|
|
|
|||||||||||||||
Balances as of December 31, 2015
|
24,375,881
|
|
|
$
|
24,752
|
|
|
$
|
129,081,029
|
|
|
$
|
(116,748,778
|
)
|
|
$
|
(1,396,559
|
)
|
|
$
|
10,960,444
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(772,584
|
)
|
|
—
|
|
|
(772,584
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
1,264,266
|
|
|
—
|
|
|
—
|
|
|
1,264,266
|
|
|||||
Treasury Stock Repurchase
|
(15,883
|
)
|
|
(16
|
)
|
|
(22,483
|
)
|
|
—
|
|
|
—
|
|
|
(22,499
|
)
|
|||||
Stock issued for vested restricted stock awards
|
396,997
|
|
|
397
|
|
|
(397
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Contingent stock issuance
|
166,667
|
|
|
167
|
|
|
299,834
|
|
|
—
|
|
|
—
|
|
|
300,001
|
|
|||||
Taxes withheld on vested restricted stock
|
—
|
|
|
—
|
|
|
(203,836
|
)
|
|
—
|
|
|
—
|
|
|
(203,836
|
)
|
|||||
Balances as of December 31, 2016
|
24,923,662
|
|
|
$
|
25,300
|
|
|
$
|
130,418,413
|
|
|
$
|
(117,521,362
|
)
|
|
$
|
(1,396,559
|
)
|
|
$
|
11,525,792
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,057,700
|
)
|
|
—
|
|
|
(3,057,700
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
1,279,807
|
|
|
—
|
|
|
—
|
|
|
1,279,807
|
|
|||||
Stock issued for vested restricted stock awards
|
309,057
|
|
|
309
|
|
|
22,200
|
|
|
—
|
|
|
—
|
|
|
22,509
|
|
|||||
NetSeer acquisition
|
3,529,000
|
|
|
3,529
|
|
|
4,455,715
|
|
|
—
|
|
|
—
|
|
|
4,459,244
|
|
|||||
Shares withheld for taxes on vested restricted stock
|
|
|
|
|
|
|
(97,539
|
)
|
|
—
|
|
|
—
|
|
|
(97,539
|
)
|
|||||
Treasury Stock Retirement
|
(143,265
|
)
|
|
(142
|
)
|
|
(44,629
|
)
|
|
—
|
|
|
|
|
|
(44,771
|
)
|
|||||
Balances as of December 31, 2017
|
28,618,454
|
|
|
$
|
28,996
|
|
|
$
|
136,033,967
|
|
|
$
|
(120,579,062
|
)
|
|
$
|
(1,396,559
|
)
|
|
$
|
14,087,342
|
|
|
2017
|
|
2016
|
||||
Operating activities:
|
|
|
|
||||
Net loss
|
$
|
(3,057,700
|
)
|
|
$
|
(772,584
|
)
|
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
3,029,801
|
|
|
2,209,738
|
|
||
Stock based compensation
|
1,279,807
|
|
|
1,264,266
|
|
||
Write-off of publisher payable
|
315,137
|
|
|
—
|
|
||
Provision for doubtful accounts
|
60,789
|
|
|
5,800
|
|
||
Amortization of financing fees
|
25,600
|
|
|
25,600
|
|
||
Adjustment of European liabilities related to discontinued operations
|
1,109
|
|
|
(176,988
|
)
|
||
Deferred income taxes
|
(1,406,600
|
)
|
|
(61,100
|
)
|
||
Change in operating assets and liabilities:
|
|
|
|
||||
Accounts payable
|
437,241
|
|
|
(622,548
|
)
|
||
Prepaid expenses and other assets
|
52,687
|
|
|
219,656
|
|
||
Accounts receivable and unbilled revenue
|
(1,216,611
|
)
|
|
(583,082
|
)
|
||
Accrued expenses and other liabilities
|
(669,541
|
)
|
|
(420,875
|
)
|
||
Other
|
—
|
|
|
(34,864
|
)
|
||
Net cash (used in) provided by operating activities
|
(1,148,281
|
)
|
|
1,053,019
|
|
||
|
|
|
|
||||
Investing activities:
|
|
|
|
||||
Net cash received from NetSeer asset acquisition
|
235,763
|
|
|
—
|
|
||
Purchases of equipment and capitalized development costs
|
(1,558,693
|
)
|
|
(1,116,371
|
)
|
||
Net cash used in investing activities
|
(1,322,930
|
)
|
|
(1,116,371
|
)
|
||
|
|
|
|
||||
Financing activities:
|
|
|
|
||||
Net proceeds on revolving line of credit
|
4,900,000
|
|
|
—
|
|
||
Prepaid financing fees
|
25,600
|
|
|
25,600
|
|
||
Payoff of NetSeer debt acquired
|
(2,015,577
|
)
|
|
—
|
|
||
Payments on capital leases
|
(158,782
|
)
|
|
(46,313
|
)
|
||
Net taxes paid on RSU grants exercised
|
(97,376
|
)
|
|
(203,836
|
)
|
||
Treasury Stock Repurchase
|
(44,772
|
)
|
|
(22,499
|
)
|
||
Net cash provided by (used in) financing activities
|
2,609,093
|
|
|
(247,048
|
)
|
||
|
|
|
|
||||
Net change – cash
|
137,882
|
|
|
(310,400
|
)
|
||
Cash, beginning of year
|
3,946,804
|
|
|
4,257,204
|
|
||
Cash, end of year
|
$
|
4,084,686
|
|
|
$
|
3,946,804
|
|
|
|
|
|
||||
Supplemental information:
|
|
|
|
||||
Interest paid
|
$
|
268,960
|
|
|
$
|
72,751
|
|
Income taxes paid, net of refund
|
$
|
—
|
|
|
$
|
26,000
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
NetSeer asset acquisition (See Note 15)
|
$
|
4,459,244
|
|
|
$
|
—
|
|
Purchase of property and equipment under capital lease
|
$
|
530,407
|
|
|
|
||
Write-down of domain names due to settlement of contingent liability
|
$
|
369,506
|
|
|
$
|
43,367
|
|
Stock issuance for partial settlement of contingent liability
|
$
|
—
|
|
|
$
|
300,001
|
|
|
2017
|
|
2016
|
||||
Balance at the beginning of the year
|
$
|
23,000
|
|
|
$
|
17,200
|
|
Provision for bad debts
|
63,000
|
|
|
6,557
|
|
||
Charge-offs
|
(2,211
|
)
|
|
(874
|
)
|
||
Recoveries
|
—
|
|
|
117
|
|
||
Balance at the end of the year
|
$
|
83,789
|
|
|
$
|
23,000
|
|
|
2017
|
|
2016
|
||||
Furniture and fixtures
|
$
|
288,536
|
|
|
$
|
241,876
|
|
Equipment
|
1,509,464
|
|
|
811,948
|
|
||
Software
|
7,582,181
|
|
|
6,132,626
|
|
||
Leasehold improvements
|
455,850
|
|
|
441,382
|
|
||
Subtotal
|
$
|
9,836,031
|
|
|
$
|
7,627,832
|
|
Less: accumulated depreciation and amortization
|
(7,529,752
|
)
|
|
(6,012,609
|
)
|
||
Total
|
$
|
2,306,279
|
|
|
$
|
1,615,223
|
|
|
Term
|
|
Carrying
Value
|
|
Accumulated Amortization and Impairment
|
|
Net Carrying Value
|
|
2017
Amortization
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
Customer list, Google
|
20 years
|
|
$
|
8,820,000
|
|
|
$
|
(2,572,500
|
)
|
|
$
|
6,247,500
|
|
|
$
|
441,000
|
|
Technology, NetSeer
|
5 years
|
|
3,600,000
|
|
|
(660,000
|
)
|
|
2,940,000
|
|
|
660,000
|
|
||||
Customer list, all other
|
10 years
|
|
1,610,000
|
|
|
(939,190
|
)
|
|
670,810
|
|
|
161,004
|
|
||||
Trade names, ALOT
|
5 years
|
|
960,000
|
|
|
(960,000
|
)
|
|
—
|
|
|
32,000
|
|
||||
Customer relationships, NetSeer
|
20 years
|
|
570,000
|
|
|
(26,125
|
)
|
|
543,875
|
|
|
26,125
|
|
||||
Domain websites (2)
|
5 years
|
|
300,001
|
|
|
(300,001
|
)
|
|
—
|
|
|
32,056
|
|
||||
Trade names, web properties (1)
|
-
|
|
390,000
|
|
|
—
|
|
|
390,000
|
|
|
—
|
|
||||
Brand, NetSeer
|
1 year
|
|
121,000
|
|
|
(110,917
|
)
|
|
10,083
|
|
|
110,917
|
|
||||
Non-competition agreements, NetSeer
|
1 year
|
|
69,000
|
|
|
(63,250
|
)
|
|
5,750
|
|
|
63,250
|
|
||||
Intangible assets classified as long-term
|
|
|
$
|
16,440,001
|
|
|
$
|
(5,631,983
|
)
|
|
$
|
10,808,018
|
|
|
$
|
1,526,352
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Goodwill, total
|
|
|
$
|
9,853,342
|
|
|
$
|
—
|
|
|
$
|
9,853,342
|
|
|
$
|
—
|
|
|
Term
|
|
Carrying
Value
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
|
2016
Amortization
|
||||||||
Customer list, Google
|
20 years
|
|
$
|
8,820,000
|
|
|
$
|
(2,131,500
|
)
|
|
$
|
6,688,500
|
|
|
$
|
441,000
|
|
Customer list, all other
|
10 years
|
|
1,610,000
|
|
|
(778,186
|
)
|
|
831,814
|
|
|
161,004
|
|
||||
Exclusivity agreement
|
1 year
|
|
120,000
|
|
|
(120,000
|
)
|
|
—
|
|
|
—
|
|
||||
Trade names, ALOT
|
5 years
|
|
960,000
|
|
|
(928,000
|
)
|
|
32,000
|
|
|
192,000
|
|
||||
Domain websites (2)
|
5 years
|
|
669,507
|
|
|
(267,945
|
)
|
|
401,562
|
|
|
136,704
|
|
||||
Tradenames, web properties (1)
|
-
|
|
390,000
|
|
|
—
|
|
|
390,000
|
|
|
—
|
|
||||
Intangible assets classified as long-term
|
|
|
$
|
12,569,507
|
|
|
$
|
(4,225,631
|
)
|
|
$
|
8,343,876
|
|
|
$
|
930,708
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Goodwill, total
|
|
|
$
|
5,760,808
|
|
|
$
|
—
|
|
|
$
|
5,760,808
|
|
|
$
|
—
|
|
(1)
|
The trade names related to our web properties have an indefinite life, and as such are not amortized.
|
(2)
|
In May 2015, we purchased
two
domain websites with a fair value of
$715,874
. We determined they should be amortized over
5
years (see Note 8). In May 2016, the carrying value was adjusted by approximately
$46,000
to reflect the lower price paid as compared to the contingent liability recorded as a result of the change in the price of Inuvo stock from the date of acquisition to the first contingent release of shares. In 2017, we determined that the seller would not meet the specific performance target for the second and third years and therefore, we adjusted the carrying value of the intangible asset and associated contingent liability by
$369,506
.
|
2018
|
$
|
1,366,337
|
|
2019
|
1,350,504
|
|
|
2020
|
1,350,504
|
|
|
2021
|
1,350,504
|
|
|
2022
|
496,294
|
|
|
Thereafter
|
4,503,875
|
|
|
Total
|
$
|
10,418,018
|
|
|
|
December 31, 2017
|
|
December 31, 2016
|
||||
Revolving credit line - 5.25 percent at December 31, 2017 (prime plus 0.75 percent), due September 29, 2018 - current portion
|
|
$
|
4,900,000
|
|
|
$
|
—
|
|
Total
|
|
$
|
4,900,000
|
|
|
$
|
—
|
|
|
2017
|
|
2016
|
||||
Accrued marketing costs (TAC)
|
$
|
1,107,404
|
|
|
$
|
1,622,737
|
|
Accrued payroll and commission liabilities
|
867,634
|
|
|
250,000
|
|
||
Accrued expenses and other
|
624,688
|
|
|
289,435
|
|
||
Capital leases, current portion
|
209,940
|
|
|
31,210
|
|
||
Accrued sales allowance
|
50,000
|
|
|
250,000
|
|
||
Accrued taxes
|
25,905
|
|
|
10,313
|
|
||
Deferred Arkansas grant, current portion and accrued reserve
|
2,245
|
|
|
13,468
|
|
||
Contingent stock due for acquired domains, current portion
|
—
|
|
|
222,477
|
|
||
Total
|
$
|
2,887,816
|
|
|
$
|
2,689,640
|
|
|
2017
|
|
2016
|
||||
Capital leases, less current portion
|
$
|
281,470
|
|
|
$
|
—
|
|
Deferred rent
|
131,493
|
|
|
163,165
|
|
||
Accrued taxes, less current portion
|
13,762
|
|
|
13,763
|
|
||
Contingent stock due for acquired domains, less current portion
|
—
|
|
|
147,029
|
|
||
Deferred Arkansas grant, less current portion
|
—
|
|
|
2,471
|
|
||
Total
|
$
|
426,725
|
|
|
$
|
326,428
|
|
|
2017
|
|
2016
|
||||
Current tax provision
|
$
|
(91,477
|
)
|
|
$
|
5,180
|
|
Deferred tax benefit
|
(1,406,599
|
)
|
|
(34,440
|
)
|
||
Total tax benefit
|
$
|
(1,498,076
|
)
|
|
$
|
(29,260
|
)
|
|
2017
|
|
2016
|
||
Federal statutory rate
|
34
|
%
|
|
34
|
%
|
State income tax rate, net of federal benefit
|
4
|
%
|
|
(1
|
%)
|
Permanent differences
|
(2
|
%)
|
|
(2
|
%)
|
Temporary differences
|
—
|
%
|
|
(5
|
%)
|
Impact in changes in tax law
|
22
|
%
|
|
—
|
%
|
Change in valuation allowance
|
(25
|
%)
|
|
(22
|
%)
|
|
33
|
%
|
|
4
|
%
|
|
2017
|
|
2016
|
||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss carry forward
|
$
|
29,622,135
|
|
|
$
|
27,202,348
|
|
Intangible assets
|
1,278,900
|
|
|
2,239,700
|
|
||
Stock based expenses
|
1,176,900
|
|
|
1,484,900
|
|
||
Accrued expense
|
362,000
|
|
|
311,000
|
|
||
Deferred rent
|
33,400
|
|
|
69,300
|
|
||
Allowance for doubtful accounts
|
23,200
|
|
|
9,800
|
|
||
Other
|
7,200
|
|
|
14,200
|
|
||
Subtotal
|
32,503,735
|
|
|
31,331,248
|
|
||
Less valuation allowance
|
(32,503,735
|
)
|
|
(31,331,248
|
)
|
||
Total
|
—
|
|
|
—
|
|
||
Deferred tax liabilities:
|
|
|
|
|
|
||
Intangible assets and property and equipment
|
2,307,600
|
|
|
3,702,300
|
|
||
Other
|
24,300
|
|
|
26,200
|
|
||
Total
|
2,331,900
|
|
|
3,728,500
|
|
||
Total deferred tax liabilities
|
$
|
(2,331,900
|
)
|
|
$
|
(3,728,500
|
)
|
|
Options Outstanding
|
|
RSUs Outstanding
|
|
Options and RSUs Exercised
|
|
Available Shares
|
|
Total
|
|||||
2017 ECP
|
—
|
|
|
125,000
|
|
|
—
|
|
|
1,875,000
|
|
|
2,000,000
|
|
2010 ECP
|
250,498
|
|
|
946,538
|
|
|
2,780,740
|
|
|
604,242
|
|
|
4,582,018
|
|
2005 LTIP (*)
|
13,748
|
|
|
—
|
|
|
950,085
|
|
|
—
|
|
|
963,833
|
|
Total
|
264,246
|
|
|
1,071,538
|
|
|
3,730,825
|
|
|
2,479,242
|
|
|
7,545,851
|
|
|
Options
|
|
Weighted Average Exercise Price
|
|||
Outstanding, beginning of year
|
264,246
|
|
|
$
|
2.84
|
|
Granted
|
—
|
|
|
$
|
—
|
|
Forfeited, expired or cancelled
|
—
|
|
|
$
|
—
|
|
Exercised
|
—
|
|
|
$
|
—
|
|
Outstanding, end of year
|
264,246
|
|
|
$
|
2.84
|
|
Exercisable, end of year
|
264,246
|
|
|
$
|
2.84
|
|
|
Restricted Stock
|
|
Weighted Average Fair Value
|
|||
Outstanding, beginning of year
|
755,507
|
|
|
$
|
2.84
|
|
Granted
|
868,628
|
|
|
$
|
1.22
|
|
Exercised
|
(406,156
|
)
|
|
$
|
2.61
|
|
Forfeited
|
(146,441
|
)
|
|
$
|
1.15
|
|
Outstanding, end of year
|
1,071,538
|
|
|
$
|
1.84
|
|
|
Lease Payments
|
||
2018
|
$
|
466,329
|
|
2019
|
473,851
|
|
|
2020
|
402,138
|
|
|
2021
|
239,090
|
|
|
2022
|
$
|
162,706
|
|
Total
|
$
|
1,744,114
|
|
|
Lease Payments
|
||
2018
|
$
|
243,725
|
|
2019
|
$
|
214,738
|
|
2020
|
$
|
82,405
|
|
Total payments under capital lease obligations
|
$
|
540,868
|
|
Less amount representing interest
|
(49,458
|
)
|
|
Present value of capital lease obligations
|
491,410
|
|
|
Current portion of capital lease obligations
|
(209,940
|
)
|
|
Capital lease obligations, net of current portion
|
$
|
281,470
|
|
|
2017
|
2016
|
||||
Equipment
|
$
|
707,264
|
|
$
|
103,609
|
|
Less accumulated depreciation
|
(242,169
|
)
|
(69,072
|
)
|
||
Equipment, net
|
$
|
465,095
|
|
$
|
34,537
|
|
|
|
||
Total consideration paid in common stock (with marketability discount applied)
|
$
|
4,459,244
|
|
Fair value of assets acquired:
|
|
||
Accounts receivable, net
|
(2,292,485
|
)
|
|
Prepaid expenses and other current assets
|
(236,163
|
)
|
|
Property and equipment, net
|
(119,101
|
)
|
|
Goodwill
|
(4,013,034
|
)
|
|
Intangible assets
|
(4,360,000
|
)
|
|
Fair value of liabilities assumed:
|
|
||
Accounts payable
|
$
|
3,579,787
|
|
Accrued expenses and other current liabilities
|
1,152,789
|
|
|
Other long-term liabilities
|
49,149
|
|
|
Debt
|
2,015,577
|
|
|
Cash received in acquisition
|
$
|
235,763
|
|
|
|
1 Year Inuvo Chart |
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