Notes to Consolidated Financial Statements
Note 1 – Organization and Business
Company Overview
Inuvo, Inc. and subsidiaries ("we", "us" or "our") is an internet advertising technology and digital publishing company.
We develop technology to deliver content and targeted advertisements over the internet. We generate revenue when an end user clicks on the advertisements we delivered. We manage our business as
two
segments, the Partner Network and the Owned and Operated Network.
The Partner Network delivers advertisements to our partners' owned or managed websites and applications on desktop, tablet and mobile devices. We generate revenue in this segment when an advertisement we serve is clicked. At that time, we share a portion of the revenue we collect from the advertiser with the publishing partner where the click originated. Our proprietary technology platform allows for targeted distribution of advertisements at a scale that measures in the hundreds of millions of advertisements delivered monthly.
The Owned and Operated Network designs, builds and markets consumer websites and applications. This segment consists of our mobile-ready ALOT websites and acquired web properties. The focus is on providing engaging content to our users. The majority of revenue generated by this segment is derived from clicks on advertisements delivered through web searches and advertisements displayed on the websites.
We have taken several significant steps to position our business for long-term success including investments in ad serving technology, the development of adaptive, native advertising technology, the creation of proprietary content, the expansion of publishers within the Partner Network, the continued expansion of direct relationships with advertisers, and the optimization of overhead and operational costs all of which we expect will improve revenue and profitability. Our ALOT-branded websites and applications have a broad appeal focusing on popular topics such as health, local search, finance, careers, travel, living and education. These sites are content rich, searchable, mobile-ready web properties. We plan to continue the expansion of our website and mobile application business by expanding the ALOT brand and acquiring websites. Recently, we launched the ALOT Auto site that focuses on popular automotive topics. In 2015, we launched our proprietary native advertising solution for web publishers and application developers, "SearchLinks"
®
. This is our entry product in the fast growing native advertising marketplace where ad copy seamlessly integrates with the content of the host website or application. SearchLinks was made available to the marketplace in the third quarter of 2015 and is included in the Partner Network. We expect it to be a contributor for the remainder of 2016 and 2017.
Liquidity
On September 27, 2016, we renewed our Business Financing Agreement with Western Alliance Bank ("Western Alliance Bank"), the parent company of Bridge Bank, N.A., our original lender (see Note 5, "Notes Payable"). The renewal provided continued access to the revolving line of credit up to
$10 million
through September 2018. As of
September 30, 2016
, the balance of the revolving line of credit was
zero
and had approximately
$5.7 million
of available credit. During the first quarter of 2014, we filed an S-3 registration statement with the Securities and Exchange Commission ("SEC") to replace the existing, expiring S-3 “shelf” registration statement. Though the revolving line of credit and cash generated by operations is expected to provide sufficient cash for operations over the next
twelve
months, we may still elect to sell stock to the public or to selected investors, or borrow under the current or any replacement line of credit or other debt instruments in order to fund the development of our technologies, make acquisitions, pursue new business opportunities or grow existing businesses.
Customer concentration
We generate the majority of our revenue from
two
customers, Yahoo! and Google. At
September 30, 2016
and
December 31, 2015
, these two customers combined accounted for
98.5%
and
98.6%
, respectively, of our gross accounts receivable balance. For the three and
nine
months ended
September 30, 2016
, these two customers combined accounted for
98.6%
and
98.2%
of net revenue, respectively. For the
three and nine
months ended
September 30, 2015
, these two customers combined accounted for
97.8%
and
98.1%
of net revenue, respectively.
We leverage the vast, direct relationships Yahoo! and Google have with advertisers as an alternative to going directly to advertisers ourselves. While this strategy creates a concentration risk, it also provides upside opportunities not the least of which include; access to hundreds of thousands of advertisers across geographies; the ability to scale our business across verticals; an avoidance of the sales costs associated with a direct to advertisers sales force; access to innovation; and macro level market insight.
Note 2 – Summary of Significant Accounting Policies
Basis of presentation
The consolidated financial statements presented are for Inuvo, Inc. and its consolidated subsidiaries. The accompanying unaudited consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet as of
December 31, 2015
, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). In our opinion, these consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended
December 31, 2015
, which was filed with the SEC on February 12, 2016.
Use of estimates
The preparation of financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. We regularly evaluate estimates and assumptions related to allowances for doubtful accounts, accrued sales reserve, goodwill and purchased intangible asset valuations, lives of intangible assets, deferred income tax asset valuation allowances, contingent liabilities, including the Arkansas grant contingency, and stock compensation. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 605-10 Revenue Recognition. We recognize revenue when the following criteria have been met: persuasive evidence of an arrangement exists, the fees are fixed and determinable, no significant obligations remain and collection of the related receivable is reasonably assured.
Most of our revenue is generated through clicks on advertisements presented on our properties or those of our partners. We recognize revenue from clicks in the period in which the click occurs. Payments to partners who display advertisements we serve are recognized as cost of revenue. Revenue from data sales and commissions is recognized in the period in which the transaction occurs and the other revenue recognition criteria are met.
Recent accounting pronouncements
I
n May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in Topic 605, “
Revenue Recognition
” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which defers by one year the effective date of ASU 2014-09. Accordingly, this guidance is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted for interim and annual periods beginning after December 15, 2016. The Company plans to adopt this guidance on January 1, 2018. The Company is currently evaluating the effects, if any, that the adoption of this guidance will have on the Company’s financial position, results of operations and cash flows.
In November 2015, FASB issued ASU No. 2015-17,
Balance Sheet Classification of Deferred Taxes,
to simplify the presentation of deferred income taxes. The amendments in this Update require that deferred tax liabilities and assets be
classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. The amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The adoption of ASU 2015-17 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842).
This standard will require all leases with durations greater than twelve months to be recognized on the balance sheet and is effective for interim and annual reporting periods beginning after December 15, 2018, although early adoption is permitted. We believe adoption of this standard will have an impact on our Consolidated Balance Sheets. Although we have not completed our assessment, we do not expect the adoption to change the recognition, measurement or presentation of lease expenses within the consolidated financial position or results of operations.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation—Stock Compensation (Topic 718)
. This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The adoption of ASU 2016-09 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.
In August 2016, the FASB issued ASU No. 2016-15,
Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments.
This Update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The adoption of ASU 2016-15 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.
Note 3– Property and Equipment
The net carrying value of property and equipment was as follows as of:
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
Furniture and fixtures
|
$
|
240,577
|
|
|
$
|
230,637
|
|
Equipment
|
809,089
|
|
|
2,815,748
|
|
Software
|
5,949,792
|
|
|
9,856,947
|
|
Leasehold improvements
|
441,381
|
|
|
436,311
|
|
Subtotal
|
7,440,839
|
|
|
13,339,643
|
|
Less: accumulated depreciation and amortization
|
(5,688,915
|
)
|
|
(11,534,082
|
)
|
Total
|
$
|
1,751,924
|
|
|
$
|
1,805,561
|
|
During the
three and nine
months ended
September 30, 2016
, depreciation expense was
$325,236
and
$958,704
, respectively. During the
three and nine
months ended
September 30, 2015
, depreciation expense was
$229,350
and
$615,778
, respectively.
Note 4 – Other Intangible Assets and Goodwill
The following is a schedule of intangible assets as of
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term
|
|
Carrying
Value
|
|
Accumulated Amortization and Impairment
|
|
Net Carrying Value
|
|
Year-to-date Amortization
|
|
|
|
|
|
|
|
|
|
|
Customer list, Google
|
20 years
|
|
$
|
8,820,000
|
|
|
$
|
(2,021,250
|
)
|
|
$
|
6,798,750
|
|
|
$
|
330,750
|
|
Customer list, all other
|
10 years
|
|
1,610,000
|
|
|
(737,935
|
)
|
|
872,065
|
|
|
120,753
|
|
Trade names, ALOT (1)
|
5 years
|
|
960,000
|
|
|
(880,000
|
)
|
|
80,000
|
|
|
144,000
|
|
Domain websites (2)
|
5 years
|
|
669,507
|
|
|
(235,386
|
)
|
|
434,121
|
|
|
104,145
|
|
Trade names, web properties (1)
|
-
|
|
390,000
|
|
|
—
|
|
|
390,000
|
|
|
—
|
|
Intangible assets classified as long-term
|
|
|
$
|
12,449,507
|
|
|
$
|
(3,874,571
|
)
|
|
$
|
8,574,936
|
|
|
$
|
699,648
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill, Partner Network
|
|
|
$
|
1,776,544
|
|
|
$
|
—
|
|
|
$
|
1,776,544
|
|
|
$
|
—
|
|
Goodwill, Owned and Operated Network
|
|
|
3,984,264
|
|
|
—
|
|
|
3,984,264
|
|
|
—
|
|
Goodwill, total
|
|
|
$
|
5,760,808
|
|
|
$
|
—
|
|
|
$
|
5,760,808
|
|
|
$
|
—
|
|
|
|
(1)
|
We have determined the ALOT trade names should be amortized over
five
years and the trade names related to our web properties have an indefinite life, and as such are not amortized.
|
|
|
(2)
|
On May 8, 2015, we purchased
two
domain websites with a fair value of
$715,874
. We determined they should be amortized over
five
years (see Note 7). The carrying value was adjusted by approximately
$46 thousand
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.
|
Amortization expense over the next five years and thereafter is as follows:
|
|
|
|
|
2016
|
$
|
231,060
|
|
2017
|
764,240
|
|
2018
|
732,240
|
|
2019
|
732,240
|
|
2020
|
612,858
|
|
Thereafter
|
5,112,298
|
|
Total
|
$
|
8,184,936
|
|
Note 5 - Notes Payable
On March 1, 2012 we entered into a Business Financing Agreement with Bridge Bank, which is now owned by Western Alliance Bank. The agreement provided us with a
$5 million
term loan and access to a revolving credit line of up to
$10 million
which we use to help satisfy our working capital needs. We have provided Western Alliance Bank with a first priority perfected security interest in all of our accounts and personal property as collateral for the credit facility. Available funds under the revolving credit line are
80%
of eligible accounts receivable balances plus
$1 million
, up to a limit of
$10 million
. Eligible accounts receivable is generally defined as those from United States based customers that are not more than
90
days from the date of invoice. We had approximately
$5.7 million
available under the revolving credit line as of
September 30, 2016
.
On September 27, 2016, the Company entered into the Sixth Business Financing Modification Agreement with Western Alliance Bank, the parent company of Bridge Bank, our original lender, that renewed the existing Agreement and modified some terms. The modified terms require a monthly quick ratio of not less than
.75
to 1.00; quarterly consolidated revenue shall not negatively deviate more than
20%
from projections; and quarterly consolidated Adjusted EBITDA shall not negatively deviate more than
$500,000
from projections. The renewed agreement extended the revolving line of credit to September 2018. While we periodically utilize our line of credit for operating needs, as of
September 30, 2016
, the balance of the revolving line of credit was
zero
. We were in compliance with all bank covenants as of
September 30, 2016
.
Note 6 – Accrued Expenses and Other Current Liabilities
The accrued expenses and other current liabilities consist of the following as of:
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
Accrued marketing costs
|
$
|
2,060,206
|
|
|
$
|
1,404,488
|
|
Accrued sales allowance
|
250,000
|
|
|
500,000
|
|
Contingent stock due for acquired domains, current portion
|
222,477
|
|
|
238,625
|
|
Accrued expenses and other
|
209,522
|
|
|
294,629
|
|
Capital leases, current portion
|
35,434
|
|
|
46,313
|
|
Deferred Arkansas grant, current portion
|
13,468
|
|
|
27,679
|
|
Accrued taxes
|
7,949
|
|
|
13,803
|
|
Accrued payroll and commission liabilities
|
5,000
|
|
|
643,908
|
|
Total
|
$
|
2,804,056
|
|
|
$
|
3,169,445
|
|
Note 7 – Other Long-Term Liabilities
Other long-term liabilities consist of the following as of:
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
Deferred rent
|
$
|
172,604
|
|
|
$
|
198,323
|
|
Contingent stock due for acquired domains, less current portion
|
147,029
|
|
|
477,249
|
|
Deferred Arkansas grant, less current portion
|
5,839
|
|
|
15,940
|
|
Capital leases, less current portion
|
4,536
|
|
|
31,210
|
|
Total
|
$
|
330,008
|
|
|
$
|
722,722
|
|
On May 8, 2015, we purchased
two
domain websites with a fair value of
$715,874
(see Note 4). The purchase consideration was our common stock and is contingent upon the seller attaining specific performance targets over
three
years. On May 8, 2016, the seller achieved the specific performance target for the first year and as a result, we issued
166,667
shares of common stock. The accrued contingent liability and the related intangible asset, domain websites, were adjusted by approximately
$46 thousand
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.
Note 8 – Income Taxes
We have a deferred tax liability of
$3,799,600
as of
September 30, 2016
, related to our intangible assets.
We also have a net deferred tax asset of approximately
$39,852,000
. We believe it is more likely than not that essentially none of our deferred tax assets will be realized, and we have recorded a valuation allowance for the net deferred tax assets that may not be realized as of
September 30, 2016
.
Note 9 - Stock-Based Compensation
We maintain a stock-based compensation program intended to attract, retain and provide incentives for talented employees and directors and align stockholder and employee interests. Currently, we grant options and restricted stock units ("RSUs") from the 2010 Equity Compensation Plan (“2010 ECP”). Option and RSUs vesting periods are generally up to
three
years.
Compensation Expense
For the three and
nine
months ended
September 30, 2016
, we recorded stock-based compensation expense for all equity incentive plans of
$315,596
and
$1,002,044
, respectively. For the
three and nine
months ended
September 30, 2015
, we recorded stock-based compensation expense for all equity incentive plans of
$251,144
and
$385,818
. Total compensation cost
not yet recognized at
September 30, 2016
was
$1,902,574
to be recognized over a weighted-average recognition period of
1.3
years.
Significant Grants and Cancellations
On July 27, 2015 and August 4, 2015, we granted certain employees service and performance RSUs totaling
965,500
shares with a weighted average fair value of
$3.03
per share. The service RSUs vest annually over a
three
year period, commencing in July 2016, at the rate of
25%
of the grant in year one and year two and the remaining
50%
of the grant vesting on the third anniversary of the grant date. The awarding of the performance RSUs is contingent upon achieving certain revenue and profit targets and vest annually, one-third upon each anniversary of the grant date. On July 27, 2016, August 4, 2016, and August 5, 2016, the first measurement period targets were achieved and the number of shares issued totaled
297,690
with a weighted average fair value of
$1.32
.
On April 1, 2016, we granted members of our board of directors a total of
63,160
RSUs with a weighted average fair value of
$1.90
a share which fully vest on March 31, 2017.
The following table summarizes the stock grants outstanding under our 2005 Long-Term Incentive Plan ("2005 LTIP") and 2010 ECP plans as of
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
RSUs Outstanding
|
|
Options and RSUs Exercised
|
|
Available Shares
|
|
Total
|
2010 ECP
|
250,498
|
|
|
790,985
|
|
|
2,337,705
|
|
|
606,757
|
|
|
3,985,945
|
|
2005 LTIP (*)
|
13,748
|
|
|
114,972
|
|
|
835,113
|
|
|
—
|
|
|
963,833
|
|
Total
|
264,246
|
|
|
905,957
|
|
|
3,172,818
|
|
|
606,757
|
|
|
4,949,778
|
|
(*) Expired June 2015
Note 10 – Discontinued Operations
Certain of our subsidiaries previously operated in the European Union ("EU"). Though our operations ceased in 2009, statutory requirements required a continued presence in the EU for varying terms until November 2015. Profits and losses generated from the remaining assets and liabilities are accounted for as discontinued operations.
In the third quarter of 2016, our petition with the UK (United Kingdom) Companies House to strike off and dissolve the remaining subsidiary in the EU was approved. As a result, for the
three and nine
months ended
September 30, 2016
, we recorded net income of
$171,844
and
$172,197
, respectively. The net income came primarily from the writing off of certain accrued liabilities originating in 2009 and earlier. For the
three and nine
months ended
September 30, 2015
, we recorded net income of
$32,065
and
$37,632
largely due to adjustment of certain liabilities originating in 2009 and earlier and translation adjustments.
Note 11 - Earnings per Share
During the
three and nine
month periods ended
September 30, 2016
, we generated a net loss from continuing operations and as a result, all of our shares are anti-dilutive. During the
three and nine
month periods ended
September 30, 2015
, we generated net income from continuing operations. Accordingly, some of our outstanding stock options, warrants and restricted stock awards have a dilutive impact for the 2015 periods, illustrated in the following table. We generated basic and diluted earnings per share from net income of
$0.03
for the
three
month period ending
September 30, 2015
and
$0.07
for the
nine
month period ending
September 30, 2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
|
September 30, 2016
|
|
September 30, 2015
|
|
September 30, 2016
|
|
September 30, 2015
|
Weighted average shares outstanding for basic EPS
|
|
24,694,566
|
|
|
24,271,895
|
|
|
24,571,271
|
|
|
24,209,667
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
Options
|
|
—
|
|
|
13,971
|
|
|
—
|
|
|
9,353
|
|
RSUs
|
|
—
|
|
|
296,831
|
|
|
—
|
|
|
251,428
|
|
Warrants
|
|
—
|
|
|
205,772
|
|
|
—
|
|
|
78,624
|
|
Weighted average shares outstanding for diluted EPS
|
|
24,694,566
|
|
|
24,788,469
|
|
|
24,571,271
|
|
|
24,549,072
|
|
In 2015, we had potentially dilutive options and restricted stock units. We had
308,925
outstanding stock options with a weighted average exercise price of
$4.56
for the three months ended
September 30, 2015
and
313,543
outstanding stock options with a weighted average price of
$4.50
for the nine months ended
September 30, 2015
. For the three months ended
September 30, 2015
, we had
806,363
outstanding restricted stock units with a weighted average price of
$3.82
. For the nine months ended
September 30, 2015
, we had
1,097,442
restrictive stock units outstanding with a weighted average exercise price of
$3.20
. All warrants were dilutive for the three and nine months ended September 30, 2015.
Note 12 - Leases
We lease certain office space and equipment. As leases expire, it can be expected that they will be renewed or replaced in the normal course of business. Rent expense from continuing operations was
$42,248
and
$135,635
for the
three
and
nine
months ended
September 30, 2016
, respectively and
$21,997
and
$34,897
for the three and
nine
months ended
September 30, 2015
.
Minimum future lease payments under non-cancelable operating leases as of
September 30, 2016
are:
|
|
|
|
|
|
|
2016
|
$
|
45,393
|
|
2017
|
182,456
|
|
2018
|
183,858
|
|
2019
|
184,852
|
|
2020
|
140,749
|
|
Total
|
$
|
737,308
|
|
In April 2015, we entered into a
five
year agreement to lease office space in Little Rock, Arkansas commencing October 1, 2015, to serve as our headquarters. The new lease is for
12,245
square feet and will cost approximately
$171,000
during its first year. Thereafter, the lease payment will increase by
2%
.
Note 13 - Litigation and Settlements
From time to time we may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. In addition, we are currently involved in the following litigation which is not incidental to its business:
Oltean, et al. v. Think Partnership, Inc.; Edmonton, Alberta CA.
On March 6, 2008, Kelly Oltean, Mike Baldock and Terry Schultz, former employees, filed a breach of employment claim against Inuvo in The Court of Queen's Bench of Alberta, Judicial District of Edmonton, Canada, claiming damages for wrongful dismissal in the amount of
$200,000
for each of Kelly Oltean and Terry Schultz and
$187,500
for Mike Baldock. On March 6, 2008, the same
three
plaintiffs filed a similar statement of claim against Vintacom Acquisition Company, ULC, a subsidiary of Inuvo, again for wrongful dismissal and claiming the same damages. In October 2009, the
two
actions were consolidated. On August 18, 2016, the case was dismissed by a Consent Order whereby the case was dismissed without costs to the Company.
Note 14 - Segments
We operate our business as
two
segments, Partner Network and Owned and Operated Network which are described in Note 1.
Listed below is a presentation of net revenue and gross profit for all reportable segments for the three and
nine
months ended
September 30, 2016
and
2015
. We currently only track certain assets at the segment level and therefore assets by segment are not presented below.
Revenue by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
September 30, 2016
|
|
September 30, 2015
|
|
September 30, 2016
|
|
September 30, 2015
|
|
$
|
|
% of Revenue
|
|
$
|
|
% of Revenue
|
|
$
|
|
% of Revenue
|
|
$
|
|
% of Revenue
|
Partner Network
|
6,165,769
|
|
|
35.3
|
%
|
|
7,241,441
|
|
|
37.6
|
%
|
|
16,187,174
|
|
|
31.2
|
%
|
|
24,098,859
|
|
|
48.8
|
%
|
Owned and Operated Network
|
11,319,318
|
|
|
64.7
|
%
|
|
12,012,611
|
|
|
62.4
|
%
|
|
35,677,274
|
|
|
68.8
|
%
|
|
25,303,950
|
|
|
51.2
|
%
|
Total net revenue
|
17,485,087
|
|
|
100.0
|
%
|
|
19,254,052
|
|
|
100.0
|
%
|
|
51,864,448
|
|
|
100.0
|
%
|
|
49,402,809
|
|
|
100.0
|
%
|
Gross Profit by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
For the Nine Months Ended
|
|
September 30, 2016
|
|
September 30, 2015
|
|
September 30, 2016
|
|
September 30, 2015
|
|
$
|
|
Gross Profit %
|
|
$
|
|
Gross Profit %
|
|
$
|
|
Gross Profit %
|
|
$
|
|
Gross Profit %
|
Partner Network
|
1,050,256
|
|
|
17.0
|
%
|
|
1,381,134
|
|
|
19.1
|
%
|
|
2,870,589
|
|
|
17.7
|
%
|
|
5,111,050
|
|
|
21.2
|
%
|
Owned and Operated Network
|
11,298,589
|
|
|
99.8
|
%
|
|
11,996,489
|
|
|
99.9
|
%
|
|
35,601,261
|
|
|
99.8
|
%
|
|
25,253,367
|
|
|
99.8
|
%
|
Total gross profit
|
12,348,845
|
|
|
70.6
|
%
|
|
13,377,623
|
|
|
69.5
|
%
|
|
38,471,850
|
|
|
74.2
|
%
|
|
30,364,417
|
|
|
61.5
|
%
|