Notes to Consolidated Financial Statements
(Unaudited)
Note 1 – Organization and Business
Company Overview
Inuvo is a technology company that develops and sells information technology solutions for marketing and advertising. These solutions predictively identify and message online audiences for any product or service across devices, channels and formats, including video, mobile, connected TV, display, social and native. These solutions allow Inuvo’s clients to engage with their customers and prospects in a manner that drives responsiveness. Inuvo facilitates the delivery of hundreds of millions of marketing messages to consumers every single month and counts among its clients numerous world- renowned names in industries that have included retail, automotive, insurance, health care, technology, telecommunications and finance.
The Inuvo solution incorporates a proprietary form of artificial intelligence, or AI, branded the IntentKey. This patented machine learning technology uses interactions with Internet content as a source of information from which to predict consumer intent. The AI can identify and advertise to the reasons why consumers are purchasing products and services not who those consumers are. In this regard, the technology is designed for a privacy conscious future and focused on the components of the advertising value chain most responsible for return on advertising spend, the intelligence behind the advertising decision.
Inuvo technology can be consumed both as a managed service and software-as-a-service. For clients, Inuvo has also developed a collection of websites including alot.com and earnspendlive.com, where Inuvo creates content in health, finance, travel, careers, auto, education and living categories. These sites provide the means to test various Inuvo technologies, while also delivering high quality consumers to these services clients through consumer interaction with the proprietary content within these sites.
There are many barriers to entry associated with the Inuvo business model, including a proficiency in large scale information processing, predictive software development, marketing data products, analytics, artificial intelligence, integration to the internet of things ("IOT"), and the relationships required to execute within the IOT. Inuvo’s intellectual property is protected by 18 issued and seven pending patents.
Liquidity
Throughout 2020 and the first quarter of 2021, we raised capital, reversing a historical net working capital deficit. Our principal sources of liquidity come as a result of the sale of common stock and use of a credit facility through Hitachi Capital America Corp. ("Hitachi") described in Note 6.
On March 20, 2020, we sold an aggregate of 3,931,428 shares of our common stock to the five members of our Board of Directors in a private placement exempt from registration under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act of 1933, as amended. We received proceeds of $688,000 in this offering. On March 27, 2020, we closed on the first tranche of a registered direct offering in which we sold 3,115,001 shares of our common stock for gross proceeds of $545,125. On April 2, 2020, we closed on a second tranche of the registered direct offering in which we sold 1,400,285 shares of our common stock for gross proceeds of $245,050.
On April 10, 2020, we obtained an unsecured $1.1 million loan under the Paycheck Protection Program (the "PPP Loan") pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and which is administered by the United States Small Business Administration ("SBA"). In accordance with the requirements of the CARES Act, proceeds from the PPP Loan were used for payroll costs. The PPP Loan was fully forgiven on November 2, 2020. On May 15, 2020, we received a COVID-19 Economic Injury Disaster Loan ("EIDL") from the SBA for $149,900. We repaid the EIDL in full on January 28, 2021.
On June 8, 2020, we closed an additional registered direct offering of an aggregate of 12,222,222 shares of our common stock for gross proceeds of $5.5 million. On July 27, 2020, we closed a firm commitment underwritten follow-on public offering of an aggregate of 21,500,000 shares of our common stock for gross proceeds of $10.75 million. On January 19, 2021, we raised $8.0 million in gross proceeds in a registered direct offering, before expenses, through the sale of an aggregate of 13,333,334 shares of our common stock, and on January 22, 2021, we raised an additional $6.25 million in gross proceeds in a registered direct offering, before expenses, through the sale of an aggregate of 5,681,817 shares of our common stock.
On January 7, 2021, we filed the Articles of Amendment to our Articles of Incorporation in the state of Nevada increasing the number of authorized shares of our common stock from 100,000,000 to 150,000,000.
In March 2021, we contracted with an investment management company to manage our cash in excess of current operating needs. We placed $2 million in a money market fund and $10 million in an interest-bearing account. At September 30, 2021, our net deposits with the investment management company were $9 million and were invested in money market funds and marketable debt and equity securities. A detail of the activity is described in Note 3 to our Consolidated Financial Statements.
On May 28, 2021, we entered into a Sales Agreement (the "Sales Agreement") with A.G.P./Alliance Global Partners, as sales agent (the "Sales Agent"), pursuant to which we may offer and sell through or to the Sales Agent shares of our common stock (the "ATM Program") up to an aggregate amount of gross proceeds of $35,000,000. During the three months ended September 30, 2021, we did not issue any shares of common stock, we did not receive any aggregate proceeds, and we did not pay any commissions to the Sales Agent. Any shares of common stock offered and sold in the ATM Program will be issued pursuant to our universal shelf registration statement on Form S-3 (the "Shelf Registration Statement"). The ATM Program will terminate upon (a) the election of the Agent upon the occurrence of certain adverse events, (b) 10 days’ advance notice from one party to the other, or (c) the sale of the balance available under our Shelf Registration Statement. Under the terms of the Sales Agreement, the Sales Agent is entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of shares under the Sales Agreement.
On August 11, 2021, our shareholders approved a proposal to amend our articles of incorporation to increase the number of authorized shares of our common stock from 150,000,000 to 200,000,000, and on August 19, 2021, we filed Articles of Amendment to our Articles of Incorporation in the state of Nevada increasing the number of authorized shares of our common stock from 150,000,000 to 200,000,000.
Though we believe our current cash position and credit facility will be sufficient to sustain operations for the next twelve
months, if our plan to grow the IntentKey product is unsuccessful, we may need to fund operations through private or public
sales of securities, debt financings or partnering/licensing transactions.
Customer concentration
Our three largest customers are Google, Yahoo! and Proper Media and all are clients of the ValidClick platform. The percentages of overall Inuvo revenue associated with these clients is noted below:
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For the Three Months Ended September 30,
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For the Nine Months Ended September 30,
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2021
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2020
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2021
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2020
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Google
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36.4%
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29.1
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%
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|
38.3
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%
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23.1
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%
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Yahoo!
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14.3%
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22.2
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%
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16.7
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%
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39.4
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%
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Proper Media
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13.6%
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—
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%
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15.5
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%
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—
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%
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Total
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64.3%
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51.3
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%
|
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70.5
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%
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62.5
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%
|
As of September 30, 2021, Google, Yahoo! and Proper Media accounted for 44.0% of our gross accounts receivable balance. As of December 31, 2020, the same three customers accounted for 38.4% of our gross accounts receivable balance.
We still source the majority of our ValidClick revenue through these services relationships where we have access to advertiser media spend indirectly. While this strategy creates a concentration risk, we believe that it also provides upside opportunities including; 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 large direct to advertisers’ sales force; access to innovation; overall media budget market insights; attractive payment terms; and low risk on receivables.
Impact of COVID-19 Pandemic
First identified in late 2019 and known now as COVID-19, the outbreak has impacted millions of individuals and businesses worldwide. In response, many countries have implemented measures to combat the outbreak which has had an unprecedented economic consequence. We did not experience an impact from COVID-19 through the end of fiscal year 2019 and had only minor impact from COVID-19 in the first quarter of 2020. Because we operate in the digital advertising industry, unlike a brick and mortar-based company, predicting the impact of the coronavirus pandemic on our company is difficult. Beginning in late April 2020, we experienced a significant reduction in marketing budgets and a decrease in monetization rates which impacted
ValidClick more severely than IntentKey. This resulted in a significant reduction in our overall revenue run rates during 2020 with the low point occurring during May 2020.
In response to COVID-19, we curtailed expenses, including compensation and travel throughout 2020, in addition to other actions. Additionally, in April 2020, we obtained an unsecured PPP Loan under the CARES Act of $1.1 million which we used primarily for payroll costs. The loan was fully forgiven by the SBA on November 2, 2020.
Beginning mid-June 2020, we began to experience an improvement in overall daily revenue. Due to the unprecedented sustainability of COVID-19 on our business, we were unable to predict with any certainty how our clients would adapt their business strategies within the context of COVID-19 and therefore how our revenue run rate would change as a result. We, therefore, were focusing our resources on areas we believe could have more immediate revenue potential, attempting to reduce expenses and raising additional capital so as to mitigate operating disruptions while the impact of COVID-19 abates. Since the start of the year with the roll out of vaccinations, we have seen an increase in our client’s willingness to spend on advertising and thereby an improvement in our revenue run rates.
Our net working capital was a positive $13.1 million as of September 30, 2021. During January 2021, we raised approximately $14.3 million, before expenses, through the sale of our securities in two offerings. During the second and third quarters of 2020, we raised approximately $16.5 million, before expenses, through the sale of our securities and in April 2020, we obtained a $1.1 million PPP Loan. There is no assurance that we will be successful in obtaining additional funding to grow operations, but believe we have sufficient capital to operate during the next twelve months.
Note 2 – Summary of Significant Accounting Policies
Basis of presentation
The consolidated financial statements presented are for Inuvo 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, 2020, 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, 2020, which was filed with the SEC on February 11, 2021, as amended on Form 10-K/A as filed with the SEC on March 10, 2021.
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 goodwill and purchased intangible asset valuations and income tax valuation allowance. 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
Both of our platforms generate revenue from ad placements and clicks on advertisements on websites, some of which we own. We recognize revenue from ad placements and clicks in the period in which they occur. We also recognize revenue from serving impressions when we complete all or a part of an order from an advertiser. The revenue is recognized in the period that the impression is served. Payments to publishers who display advertisements on our behalf and payments to ad exchanges are recognized as cost of revenue.
The below table is the proportion of revenue that is generated through advertisements on our ValidClick and IntentKey platforms:
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For the Three Months Ended September 30,
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For the nine Months Ended September 30,
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2021
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2020
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2021
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2020
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ValidClick Platform
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$
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11,742,855
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69.7
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%
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$
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6,239,406
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|
67.7
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%
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|
$
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29,955,169
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74.7
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%
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$
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24,966,122
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78.7
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%
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IntentKey Platform
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5,098,180
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30.3
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%
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2,974,944
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32.3
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%
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10,139,258
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25.3
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%
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6,771,398
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21.3
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%
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Total
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$
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16,841,035
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100.0
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%
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|
$
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9,214,350
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|
100.0
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%
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$
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40,094,427
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|
100.0
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%
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$
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31,737,520
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|
|
100.0
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%
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Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. On November 15, 2019, the FASB delayed the effective date for certain small public companies and other private companies. As amended, the effective date of ASC Topic 326 was delayed until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities.
Note 3 - Fair Value Measurements
The following table summarizes our cash equivalents and marketable securities measured at fair value. Certain marketable securities consist of investments in debt and equity securities. Debt securities are classified as trading securities. We classify our cash equivalents and marketable securities within Level 1 because we use quoted market prices models utilizing market observable inputs to determine their fair value.
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September 30, 2021
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Cash and cash equivalents:
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Cash
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$
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5,682,780
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Money Market Funds
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6,019,684
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Total cash and cash equivalents
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11,702,464
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Marketable securities
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Debt securities
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2,020,563
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Equity securities
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905,222
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Total marketable securities
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2,925,785
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Total cash and cash equivalents and marketable securities
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$
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14,628,249
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The gross unrealized losses on our marketable securities was approximately $79 thousand and $54 thousand for the three and nine months ended September 30, 2021, respectively.
Note 4 – Property and Equipment
The net carrying value of property and equipment was as follows as of:
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September 30, 2021
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December 31, 2020
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Furniture and fixtures
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$
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293,152
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$
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293,152
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Equipment
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1,129,835
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1,052,199
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Capitalized internal use and purchased software
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12,532,394
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11,475,683
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Leasehold improvements
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458,885
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421,016
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Subtotal
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14,414,266
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13,242,050
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Less: accumulated depreciation and amortization
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(12,991,844)
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(12,054,989)
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Total
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$
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1,422,422
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$
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1,187,061
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During the three and nine months ended September 30, 2021, depreciation expense was $325,112 and $944,746, respectively. During the three and nine months ended September 30, 2020, depreciation expense was $335,769 and $1,053,802, respectively.
Note 5 – Other Intangible Assets and Goodwill
The following is a schedule of intangible assets and goodwill as of September 30, 2021:
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Term
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Carrying
Value
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Accumulated Amortization and Impairment
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Net Carrying Value
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Year-to-date Amortization
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Customer list, Google
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20 years
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$
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8,820,000
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|
$
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(4,226,250)
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|
$
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4,593,750
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$
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330,750
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Technology
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5 years
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3,600,000
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(3,360,000)
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$
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240,000
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540,000
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Customer list, ReTargeter
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5 years
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1,931,250
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(836,875)
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$
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1,094,375
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289,688
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Customer list, all other
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10 years
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1,610,000
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(1,542,956)
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$
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67,044
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|
120,753
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Brand name, ReTargeter
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5 years
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643,750
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(278,958)
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|
$
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364,792
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|
|
96,563
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Customer relationships
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20 years
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570,000
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|
(133,000)
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|
$
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437,000
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|
21,374
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|
Trade names, web properties (1)
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—
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390,000
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|
—
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$
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390,000
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|
|
—
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|
Intangible assets classified as long-term
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$
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17,565,000
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$
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(10,378,039)
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$
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7,186,961
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$
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1,399,128
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Goodwill, total
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—
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$
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9,853,342
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|
$
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—
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|
$
|
9,853,342
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|
|
$
|
—
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|
(1) The trade names related to our web properties have an indefinite life, and as such are not amortized.
Amortization expense over the next five years and thereafter is as follows:
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Remaining 2021
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$
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466,376
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2022
|
1,071,294
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2023
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984,500
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2024
|
769,917
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2025
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469,500
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Thereafter
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3,035,374
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Total
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$
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6,796,961
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Note 6 – Bank Debt
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 revolving credit line of up to $10 million which we used to help satisfy our working capital needs. On October 11, 2018, we entered into the Amended and Restated Financing Agreement with Western Alliance Bank which superseded the Business Financing Agreement, as amended. All obligations under the Amended and Restated Financing Agreement, as amended, with Western Alliance Bank have been met and all agreements with Western Alliance Bank have been terminated.
On March 12, 2020, we closed on the Loan and Security Agreement dated February 28, 2020 with Hitachi. Under the terms of the Loan and Security Agreement, Hitachi has provided us with a $5,000,000 line of credit commitment. We are permitted to borrow (i) 90% of the aggregate Eligible Accounts Receivable, plus (ii) the lesser of (A) 75% of the aggregate Unbilled Accounts Receivable or (B) 50% of the amount available to borrow under (i), up to the maximum credit commitment. The interest rate under the Hitachi agreement is 2% in excess of the Wall Street Journal Prime Rate, with a minimum rate of 6.75% per annum, on outstanding amounts. The principal and all accrued but unpaid interest are due on demand.
We agreed to pay Hitachi a commitment fee of $50,000, with one half due upon the execution of the agreement and the balance due six months thereafter. We are obligated to pay Hitachi a commitment fee of $15,000 annually. We are also obligated to pay Hitachi a quarterly service fee of 0.30% on the monthly unused amount of the maximum credit line. In addition to a $2,000 document fee we have paid to Hitachi, if we exit our relationship with Hitachi before March 1, 2022, we are obligated to pay Hitachi an exit fee of $50,000. On March 12, 2020, we drew $5,000,000 under this agreement, using $2,959,573 of these proceeds to satisfy all of our obligations under the Western Alliance Bank credit agreement and the balance was used for working capital. At December 31, 2020 and September 30, 2021, there were no outstanding balances due under the Loan and Security Agreement with Hitachi.
Note 7 – Accrued Expenses and Other Current Liabilities
The accrued expenses and other current liabilities consist of the following as of:
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|
|
September 30, 2021
|
|
December 31, 2020
|
Accrued marketing costs
|
$
|
4,794,137
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|
|
$
|
3,234,192
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|
Accrued payroll and commission liabilities
|
593,419
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|
|
423,373
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|
Accrued expenses and other
|
450,633
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|
|
440,578
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|
Accrued taxes
|
13,696
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|
|
8,305
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|
Arkansas grant contingency
|
10,000
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|
|
60,000
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|
Accrued sales allowance
|
—
|
|
|
50,000
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|
|
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|
Total
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$
|
5,861,885
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|
|
$
|
4,216,448
|
|
Note 8 – Convertible Promissory Notes
On March 1, 2019, Inuvo entered into a Securities Purchase Agreement with three accredited investors for the purchase and sale of an aggregate of $1,440,000 of principal of Original Issue Discount Unsecured Subordinated Convertible Notes due September 1, 2020 (the "Calvary Notes") to fund working capital and additional expenses resulting from the delay in closing of certain planned, and since terminated, mergers with ConversionPoint Technologies Inc. and ConversionPoint Holdings Inc. The initial conversion price of the Calvary Notes was $1.08 per share which would have made the Calvary Notes then convertible into 1,333,333 unregistered shares of Inuvo’s common stock upon conversion. The Calvary Notes were issued in a private placement and the shares of common stock issuable upon conversion are restricted, subject to resale under Rule 144. The proceeds to Inuvo from the offering were $1,200,000. Inuvo did not pay any commissions or finders fees in connection with the sale of the Calvary Notes and Inuvo utilized the proceeds for working capital.
On November 11, 2019, we entered into Note Modification and Release Agreements with the holders of $1,080,000 principal amount of the Calvary Notes. Under the terms of the Note Modification and Release Agreement, the parties agreed that in consideration of such noteholder’s agreement to convert a minimum of 50% of the outstanding amount of the note (the "First Conversion Amount") that the conversion price for the First Conversion Amount would be $0.265 per share and that the conversion price for any remaining amount due under the note would be $0.30 per share, subject to future adjustments under the terms of the note including dilutive issuances at a price below $0.30 per share, subject to a floor of $0.23 per share. The agreement contains mutual general releases. These holders converted an aggregate of $765,000 due under the Calvary Notes into 2,886,792 shares of our common stock.
In January 2020, a noteholder of a $360,000 principal amount Calvary note converted the note into 1,200,000 shares of our common stock. On April 21, 2020, a noteholder converted $200,000 principal amount due under the Calvary Notes into 1,142,857 shares of our common stock. On May 5, 2020, a noteholder converted the final $115,000 principal amount due under the Calvary Notes into 657,143 shares of our common stock, thereby satisfying the Calvary Notes in full and completing the extinguishment of the Calvary Notes.
Note 9 – Other Long-Term Liabilities
The lease liabilities and other long-term liabilities consist of the following as of:
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|
|
September 30, 2021
|
|
December 31, 2020
|
Deferred rent
|
11,945
|
|
|
4,057
|
|
Deferred revenue
|
—
|
|
|
420,000
|
|
SBA loan
|
—
|
|
|
149,900
|
|
Total
|
$
|
11,945
|
|
|
$
|
573,957
|
|
Note 10 – Commitments
On September 17, 2021, we signed an agreement with a business development partner to provide referral and support services to us for periods ranging from two to five years. The agreement required an advance fee of $1.5 million and was recorded as a long-term asset. As part of the agreement, we granted a warrant exercisable into 300,000 shares of our common stock, which vest over two years upon achieving certain performance metrics (see Note 13 - Stockholder's Equity). Additionally, we agreed to pay quarterly support fees upon reaching certain levels of operational activity.
In March 2020, we entered into an agreement to allow a third party to license and use ValidClick technology. The agreement required a nonrefundable fee of $500,000 in March with subsequent fees as earned in later quarters. The $500,000 fee was recorded as deferred revenue in March 2020. Effective March 1, 2021, the agreement was canceled and the remaining deferred revenue balance of $420,000 was recognized as other income.
Note 11 – Income Taxes
We have a deferred tax assets of $37,693,100. 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 of $35,848,400 for the deferred tax assets that may not be realized as of September 30, 2021 and December 31, 2020. We also have deferred tax liabilities totaling $1,951,700 as of September 30, 2021, related to intangible assets acquired in March 2012. These balances are presented as a net deferred tax liability of $107,000 composed of indefinite lived intangible assets.
Note 12 – 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. During the 2021 and 2020 periods, we granted restricted stock units ("RSUs") from the 2017 Equity Compensation Plan, as amended (“2017 ECP”). RSU vesting periods are generally up to three years and/or achieving certain financial targets.
On January 1, 2021, in accordance with the plan provisions, the number of shares available for issuance under the 2017 ECP plan was increased by 150,000 shares.
Compensation Expense
During the three and nine months ended September 30, 2021, stock-based compensation expense was $613,544 and $1,566,016, respectively. During the three and nine months ended September 30, 2020, stock-based compensation expense was $258,430 and $660,615, respectively. Total compensation cost not yet recognized at September 30, 2021 was $4,208,496 to be recognized over a weighted-average recognition period of approximately two years.
The following table summarizes the stock grants outstanding under the 2017 ECP and the 2010 Equity Compensation Plan ("2010 ECP"), which expired on its terms in April 2020, for the nine months ended September 30, 2021:
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|
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|
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|
|
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Options Outstanding
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RSUs Outstanding
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Options and RSUs Exercised
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Available Shares
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|
Total
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2017 ECP
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—
|
|
|
3,960,001
|
|
|
2,734,138
|
|
|
2,705,861
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|
|
9,400,000
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|
2010 ECP (*)
|
1,500
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|
|
—
|
|
|
5,011,511
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|
|
—
|
|
|
5,013,011
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Total
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1,500
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|
|
3,960,001
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|
|
7,745,649
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|
|
2,705,861
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|
|
14,413,011
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(*) Expired April 2020
The following table summarizes the activity of stock option awards under the 2010 ECP for the nine months ended September 30, 2021:
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Shares Subject to Options Outstanding
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|
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Number of Shares
|
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Weighted Average Exercise Price
|
|
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Balance as of December 31, 2020
|
9,500
|
|
|
$
|
0.56
|
|
|
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Stock options exercised
|
4,750
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|
|
$
|
0.56
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|
|
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Stock options canceled
|
3,250
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|
|
$
|
0.56
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|
|
|
Balance as of September 30, 2021
|
1,500
|
|
|
0.56
|
|
|
|
Stock options exercisable as of September 30, 2021
|
1,500
|
|
|
0.56
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|
|
|
The following table summarizes the activities for our unvested RSUs for the nine months ended September 30, 2021:
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Unvested RSUs
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Number of Shares
|
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Weighted Average Grant Date Fair Value
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Unvested as of December 31, 2020
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1,930,526
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|
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$
|
0.28
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Granted
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4,610,000
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|
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$
|
1.36
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Vested
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2,171,331
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$
|
0.47
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Forfeited
|
409,194
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$
|
1.23
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Unvested as of September 30, 2021
|
3,960,001
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|
|
$
|
1.33
|
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Note 13 – Stockholders Equity
Warrants
On September 17, 2021, we signed an agreement with a marketing platform and consultancy company to provide referral and support services to us for a period of five years (see Note 10 - Commitments). As part of that agreement, we granted a warrant exercisable into 300,000 shares of our common stock, which vests in two tranches when certain performance metrics are achieved. The warrant was valued using the Black Scholes option pricing model at a total of $149,551 based on a seven-year term, an implied volatility of 100%, a risk-free equivalent yield of 1.17%, and a stock price of $0.71. The warrant is classified as equity and will be expensed on a ratable basis over the measurement period of each tranche. For the three months ended September 30, 2021, we recognized approximately $6 thousand in expense and $143 thousand is unrealized.
Earnings per Share
For the three and nine months ended September 30, 2021 and 2020, we generated a net loss from continuing operations and as a result, all of our shares are anti-dilutive.
Note 14 – Leases
We have entered into operating and finance leases primarily for real estate and equipment rental. These leases have terms which range from two years to four years, and often include one or more options to renew or in the case of equipment rental, to purchase the equipment. These operating and finance leases are listed as separate line items on our consolidated balance sheets and represent our right to use the underlying asset for the lease term. Our obligations to make lease payments are also listed as separate line items on our consolidated balance sheets. As of September 30, 2021 and December 31, 2020, total operating and financed right-of-use assets were $723,069 and $287,225, and $606,573 and $395,910, respectively.
As of September 30, 2021 and 2020, we recorded $237,423 and $291,100, respectively, in amortization expense related to finance leases.
Because the rate implicit in each lease is not readily determinable, we use the incremental borrowing rate to determine the present value of the lease payments.
Information related to our operating lease liabilities are as follows:
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For the Nine Months Ended September 30,
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Cash paid for operating lease liabilities
|
$
|
433,569
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Weighted-average remaining lease term
|
3.38
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Weighted-average discount rate
|
6.25
|
%
|
|
|
|
|
|
|
|
Minimum future lease payments ended September 30, 2021
|
|
|
2021
|
95,843
|
|
|
2022
|
380,482
|
|
|
2023
|
297,921
|
|
|
2024
|
13,128
|
|
|
2025
|
2,143
|
|
|
2026
|
1,071
|
|
|
|
790,588
|
|
|
Less imputed interest
|
(67,520)
|
|
|
Total lease liabilities
|
$
|
723,068
|
|
|
Information related to our financed lease liabilities are as follows:
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|
|
|
|
|
|
For the Nine Months Ended September 30,
|
Cash paid for finance lease liabilities
|
$
|
172,459
|
|
Weighted-average remaining lease term
|
2.45
|
Weighted-average discount rate
|
6.25
|
%
|
|
|
|
|
|
|
Minimum future lease payments ended September 30, 2021
|
|
2021
|
$
|
106,224
|
|
2022
|
119,452
|
|
2023
|
84,127
|
|
2024
|
3,856
|
|
|
313,659
|
|
Less imputed interest
|
(29,613)
|
|
Total lease liabilities
|
$
|
284,046
|
|
Note 15 – Related Party Transactions
On March 20, 2020, we sold an aggregate of 3,931,428 shares of our common stock at a purchase price of $0.175 per share to the five members of our Board of Directors in a private placement exempt from registration under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act of 1933, as amended. We received proceeds of $688,000 in this offering. The purchase price of the shares of our common stock sold in the offering exceeded the closing market price of our common stock on March 19, 2020, the trading day immediately preceding the day the binding Insider Subscription Agreements were executed by the purchasers. The purchasers were all accredited investors. We did not pay any commissions or finder’s fees, and we used the proceeds for general working capital.