UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2023

OR

 

     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________________ to ______________________

 

Commission file number: 001-32442

inuvo_10qimg1.jpg

 

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)

 

(501) 205-8508 

Registrant's telephone number, including area code

 

not applicable 

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock

INUV

NYSE American

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒     No ☐

 

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act:  ☐

 

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

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

Title of Class

 

August 4, 2023

Common Stock

 

137,948,345

 

 

 

 

TABLE OF CONTENTS

 

 

 

Page No.

Part I

 

Item 1.

Financial Statements.

 

4

 

Consolidated Balance Sheets

 

4

 

Consolidated Statements of Operations and Comprehensive Loss

 

5

 

Consolidated Statements of Cash Flows

 

6

 

Consolidated Statements of Stockholders' Equity

 

7

 

Notes to Consolidated Financial Statements

 

9

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

23

Item 4.

Controls and Procedures.

 

23

 

Part II

 

Item 1.

Legal Proceedings.

 

25

Item 1A.

Risk Factors.

 

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

25

Item 3.

Defaults upon Senior Securities.

 

25

Item 4.

Mine Safety and Disclosures.

 

25

Item 5.

Other Information.

 

25

Item 6.

Exhibits.

 

26

Signatures

 

27

 

 
2

Table of Contents

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “will,” “should,” “intend,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of such terms or other comparable terminology. This report includes, among others, statements regarding our risks associated with:

 

·

a decline in general economic conditions;

·

decreased market demand for our products and services;

·

customer revenue concentration;

·

risks associated with customer collections;

·

seasonality impacts on financial results and cash availability;

·

dependence on advertising suppliers;

·

the ability to acquire traffic in a profitable manner;

·

failure to keep pace with technological changes;

·

interruptions within our information technology infrastructure;

·

dependence on key personnel;

·

regulatory and legal uncertainties;

·

failure to comply with privacy and data security laws and regulations;

·

third party infringement claims;

·

publishers who could fabricate fraudulent clicks;

·

the ability to continue to meet the NYSE American listing standards;

·

the impact of quarterly results on our common stock price;

·

dilution to our stockholders upon the exercise of outstanding restricted stock unit grants and warrants;

·

the on-going impact of the COVID-19 pandemic on our Company; and

·

our ability to identify, finance, complete and successfully integrate future acquisitions.

 

These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, including the risks described in Part II, Item 1A. Risk Factors appearing in this report, together with those appearing in Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission ("SEC") on March 9, 2023 and our subsequent filings with the SEC.

 

Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

 

OTHER PERTINENT INFORMATION

 

Unless specifically set forth to the contrary, when used in this report the terms “Inuvo,” the “Company,” “we,” “us,” “our” and similar terms refer to Inuvo, Inc., a Nevada corporation, and its subsidiaries. When used in this report, “second quarter 2023” means for the three months ended June 30, 2023, “second quarter 2022” means for the three months ended June 30, 2022,  “2022” means the fiscal year ended December 31, 2022 and “2023” means the fiscal year ending December 31, 2023. The information which appears on our corporate web site at www.inuvo.com and our various social media platforms are not part of this report.

 

 
3

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

INUVO, INC.

CONSOLIDATED BALANCE SHEETS

June 30, 2023 (Unaudited) and December 31, 2022

 

 

June 30,

2023

 

 

December 31,

2022

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$5,045,112

 

 

$2,931,415

 

Marketable securities - short term

 

 

 

 

 

1,529,464

 

Accounts receivable, net of allowance for doubtful accounts of $1,762,998 and $1,440,678, respectively.

 

 

10,795,658

 

 

 

11,119,892

 

Prepaid expenses and other current assets

 

 

828,601

 

 

 

798,977

 

Total current assets

 

 

16,669,371

 

 

 

16,379,748

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,680,448

 

 

 

1,668,972

 

Other assets

 

 

 

 

 

 

 

 

Goodwill

 

 

9,853,342

 

 

 

9,853,342

 

Intangible assets, net of accumulated amortization

 

 

5,157,041

 

 

 

5,649,291

 

Referral and support services agreement advance

 

 

650,000

 

 

 

800,000

 

Marketable securities - long term

 

 

 

 

 

660,126

 

Right of use assets - operating lease

 

 

128,689

 

 

 

310,162

 

Right of use assets - finance lease

 

 

110,738

 

 

 

168,750

 

Other assets

 

 

35,170

 

 

 

66,919

 

Total other assets

 

 

15,934,980

 

 

 

17,508,590

 

 

 

 

 

 

 

 

 

 

Total assets

 

$34,284,799

 

 

$35,557,310

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$6,192,824

 

 

$8,044,802

 

Accrued expenses and other current liabilities

 

 

8,241,372

 

 

 

5,162,458

 

Lease liability - operating lease

 

 

119,624

 

 

 

287,523

 

Lease liability - finance lease

 

 

74,097

 

 

 

101,003

 

Total current liabilities

 

 

14,627,917

 

 

 

13,595,786

 

 

 

 

 

 

 

 

 

 

Long-term liabilities

 

 

 

 

 

 

 

 

Deferred tax liability

 

 

107,000

 

 

 

107,000

 

Lease liability - operating lease

 

 

10,331

 

 

 

23,878

 

Lease liability - finance lease

 

 

33,344

 

 

 

70,597

 

Other long-term liabilities

 

 

3,555

 

 

 

10,733

 

Total long-term liabilities

 

 

154,230

 

 

 

212,208

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value:

 

 

 

 

 

 

 

 

Authorized shares 500,000, none issued and outstanding

 

 

 

 

 

 

Common stock, $0.001 par value:

 

 

 

 

 

 

 

 

Authorized shares 200,000,000; issued and outstanding shares 137,817,253 and 120,137,124, respectively.

 

 

137,818

 

 

 

120,138

 

Additional paid-in capital

 

 

183,239,735

 

 

 

178,771,604

 

Accumulated other comprehensive loss

 

 

 

 

 

 

(84,868)

Accumulated deficit

 

 

(163,874,901)

 

 

(157,057,558)

Total stockholders' equity

 

 

19,502,652

 

 

 

21,749,316

 

Total liabilities and stockholders' equity

 

$34,284,799

 

 

$35,557,310

 

 

See accompanying notes to the consolidated financial statements.

 

 
4

Table of Contents

 

INUVO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

 

For the Three Months

Ended June 30,

 

 

For the Six Months

Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net revenue

 

$16,651,405

 

 

$22,651,305

 

 

$28,498,845

 

 

$41,260,672

 

Cost of revenue

 

 

2,368,540

 

 

 

9,273,589

 

 

 

5,559,103

 

 

 

17,935,095

 

Gross profit

 

 

14,282,865

 

 

 

13,377,716

 

 

 

22,939,742

 

 

 

23,325,577

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing costs

 

 

12,056,616

 

 

 

10,988,409

 

 

 

19,144,166

 

 

 

18,157,858

 

Compensation

 

 

3,253,416

 

 

 

3,215,890

 

 

 

6,676,257

 

 

 

6,373,596

 

General and administrative

 

 

2,311,885

 

 

 

2,011,237

 

 

 

3,893,774

 

 

 

3,737,909

 

Total operating expenses

 

 

17,621,917

 

 

 

16,215,536

 

 

 

29,714,197

 

 

 

28,269,363

 

Operating loss

 

 

(3,339,052)

 

 

(2,837,820)

 

 

(6,774,455)

 

 

(4,943,786)

Financing expense, net

 

 

(38,186)

 

 

3,070

 

 

 

(57,306)

 

 

2,071

 

Other income (expense), net

 

 

 

 

 

(395,177)

 

 

14,418

 

 

 

(377,475)

Net loss

 

 

(3,377,238 )

 

 

(3,229,927)

 

 

(6,817,343)

 

 

(5,319,190)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities

 

 

 

 

 

(124,253)

 

 

84,868

 

 

 

(222,409)

Comprehensive loss

 

$(3,377,238)

 

$(3,354,180)

 

$(6,732,475)

 

$(5,541,599)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per common share data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(0.03)

 

$(0.03)

 

$(0.05)

 

$(0.04)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

127,249,916

 

 

 

119,827,944

 

 

 

124,115,098

 

 

 

118,788,819

 

Diluted

 

 

127,249,916

 

 

 

119,827,944

 

 

 

124,115,098

 

 

 

118,788,819

 

 

See accompanying notes to the consolidated financial statements.

 

 
5

Table of Contents

 

INUVO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

For the Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Operating activities:

 

 

 

 

Net loss

 

($6,817,343)

 

 

($5,319,190)

 

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

1,317,203

 

 

$1,308,776

 

Depreciation-Right of Use Assets - Financing

 

 

58,013

 

 

 

48,697

 

Stock based compensation

 

 

935,145

 

 

 

1,355,534

 

 

 

 

 

 

 

 

 

 

Amortization of financing fees

 

 

2,084

 

 

 

2,500

 

Provision (recovery) of doubtful accounts

 

 

322,320

 

 

 

20,086

 

Loss (gain) on marketable securities

 

 

(14,418)

 

 

377,475

 

Stock warrant expense

 

 

(8,598)

 

 

12,945

 

Derecognition of contingency and grant

 

 

 

 

 

(10,000)

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,913

 

 

 

(3,849,084)

Referral and support services agreement advance

 

 

150,000

 

 

 

150,000

 

Prepaid expenses, unbilled revenue and other assets

 

 

2,126

 

 

 

333,820

 

Accrued expenses and other liabilities

 

 

3,069,680

 

 

 

1,597,637

 

Accounts payable

 

 

(1,851,978 )

 

 

1,401,820

 

Net cash used in operating activities

 

 

(2,833,853)

 

 

(2,568,984)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of equipment and capitalized development costs

 

 

(836,428)

 

 

(911,443)

Purchase of marketable securities

 

 

 

 

 

 

(1,600,121)

Proceeds from the sale of marketable securities

 

 

2,288,873

 

 

 

1,155,912

 

Net cash provided by (used in) investing activities

 

 

1,452,445

 

 

 

(1,355,652)

Financing activities:

 

 

 

 

 

 

 

 

Gross proceeds from line of credit

 

 

592,868

 

 

 

 

Repayments on line of credit

 

 

(592,868)

 

 

 

Payments on finance lease obligations

 

 

(64,159)

 

 

(49,737)

Proceeds from at-the-market sales

 

 

61,136

 

 

 

 

Capital raise, net of issuance costs

 

 

3,665,000

 

 

 

 

Net taxes paid on restricted stock unit grants exercised

 

 

(166,872)

 

 

(128,521)

Net cash provided by/(used in) financing activities

 

 

3,495,105

 

 

 

(178,258)

Net change – cash

 

 

2,113,697

 

 

 

(4,102,894)

Cash and cash equivalent, beginning of year

 

$2,931,415

 

 

 

10,475,964

 

Cash and cash equivalent, end of period

 

$5,045,112

 

 

$6,373,070

 

Supplemental information:

 

 

 

 

 

 

 

 

Interest paid

 

$67,532

 

 

$12,625

 

 

See accompanying notes to the consolidated financial statements.

 

 
6

Table of Contents

 

INUVO, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

For the Six Months Ended June 30,

 

2023

 

 

Common Stock

 

 

 Additional

Paid in

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

 

 

 

 

Shares

 

 

Stock

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Total

 

Balance as of December 31, 2022

 

 

120,137,124

 

 

$120,138

 

 

$178,771,604

 

 

$(157,057,558)

 

$(84,868)

 

$21,749,316

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,440,105)

 

 

 

 

 

 

(3,440,105)

Unrealized gain on debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

84,868

 

 

 

84,868

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

432,084

 

 

 

 

 

 

 

 

 

 

 

432,084

 

Stock issued for vested restricted stock awards

 

 

1,503,238

 

 

 

1,503

 

 

 

(1,503)

 

 

 

 

 

 

 

 

 

 

 

Shares withheld for taxes on vested restricted stock

 

 

 

 

 

 

 

 

 

 

(166,872)

 

 

 

 

 

 

 

 

 

 

(166,872)

Reversal of expense related to a change in warrant vesting

 

 

 

 

 

 

 

 

 

 

(9,874)

 

 

 

 

 

 

 

 

 

 

(9,874)

Balance as of March 31, 2023

 

 

121,640,362

 

 

$121,641

 

 

$179,025,439

 

 

$(160,497,663)

 

$

 

 

$18,649,417

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,377,238)

 

 

 

 

 

 

(3,377,238)

Unrealized loss on debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

503,061

 

 

 

 

 

 

 

 

 

 

 

503,061

 

Stock issued for vested restricted stock awards

 

 

3,333

 

 

 

3

 

 

 

(3)

 

 

 

 

 

 

 

 

 

 

 

Stock warrants issued for referral agreement

 

 

 

 

 

 

 

 

 

 

1,276

 

 

 

 

 

 

 

 

 

 

 

1,276

 

Capital raise, net of issuance costs

 

 

16,000,000

 

 

 

16,000

 

 

 

3,649,000

 

 

 

 

 

 

 

 

 

 

 

3,665,000

 

AGP Closing at-the-market sale

 

 

 173,558

 

 

 

 174

 

 

 

60,962

 

 

 

 

 

 

 

 

 

 

 

61,136

 

Balance as of June 30, 2023

 

 

137,817,253

 

 

$137,818

 

 

$183,239,735

 

 

$(163,874,901)

 

$

 

 

$19,502,652

 

 

 
7

Table of Contents

 

2022

 

 

Common Stock

 

 

 Additional

Paid in

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

 

 

 

Shares

 

 

Stock

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Total

 

Balance as of December 31, 2021

 

 

118,747,447

 

 

$118,748

 

 

$176,586,529

 

 

$(143,951,019)

 

$53,737

 

 

$32,807,995

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,089,263)

 

 

 

 

 

 

(2,089,263)

Unrealized loss on debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(98,156)

 

 

(98,156)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

671,158

 

 

 

 

 

 

 

 

 

 

 

671,158

 

Stock issued for vested restricted stock awards

 

 

1,059,755

 

 

 

1,060

 

 

 

(1,060)

 

 

 

 

 

 

 

 

 

 

 

Shares withheld for taxes on vested restricted stock

 

 

 

 

 

 

 

 

 

 

(128,520)

 

 

 

 

 

 

 

 

 

 

(128,520)

Stock warrants issued for referral agreement

 

 

 

 

 

 

 

 

 

 

12,483

 

 

 

 

 

 

 

 

 

 

 

12,483

 

Balance as of March 31, 2022

 

 

119,807,202

 

 

 

119,808

 

 

 

177,140,590

 

 

 

(146,040,282)

 

 

(44,419)

 

$31,175,697

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,229,927)

 

 

 

 

 

 

(3,229,927)

Unrealized loss on debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(124,253)

 

 

(124,253)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

684,376

 

 

 

 

 

 

 

 

 

 

 

684,376

 

Stock issued for vested restricted  stock awards

 

 

66,666

 

 

 

66

 

 

 

(66)

 

 

 

 

 

 

 

 

 

 

 

Stock warrants issued for referral agreement

 

 

 

 

 

 

 

 

 

 

462

 

 

 

 

 

 

 

 

 

 

 

462

 

Balance as of June 30, 2022

 

 

119,873,868

 

 

$119,874

 

 

$177,825,362

 

 

$(149,270,209)

 

$(168,672)

 

$28,506,355

 

 

 
8

Table of Contents

 

Inuvo, Inc.

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, service or brand across devices, formats, and channels including video, mobile, connected TV, linear TV, display, social, search and native. These solutions allow Inuvo’s clients to engage with their audiences 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 client’s numerous world-renowned brands across industries.

 

The Inuvo solution incorporates a proprietary form of artificial intelligence, or AI, branded the IntentKey. This patented technology is a model of the human language built from crawling public content on billions of webpages. The AI uses this model of the language to predict and action audiences based on the reasons why consumers are interested, not who the people are within those audiences. In this regard, the technology is designed for a consumer privacy conscious future while addressing 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 certain clients, Inuvo has also developed website services that have included proprietary digital properties collectively branded as Bonfire Publishing where content is created specifically to align with the audiences our clients are targeting. These publications provide information across a wide range of topics including health, finance, travel, careers, auto, education and lifestyle. These websites also provide the means to market test various Inuvo advertising technologies. Further, Inuvo provides campaign delivery services across all advertising platforms and channels.

 

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 19 issued and eight pending patents.

 

Liquidity

 

As of June 30, 2023, we had approximately $5 million in cash and cash equivalents and our net working capital was approximately $2 million. We have encountered recurring losses and cash outflows from operations, which historically we have funded through equity offerings and debt facilities. In addition, our investment in internally developed software consists primarily of labor costs which are of a fixed nature. Through June 30, 2023, our accumulated deficit was $163.9 million.

 

Our principal sources of liquidity are the sale of our common stock and our credit facility discussed in Note 6 - Bank Debt. On May 30, 2023, we raised $4.0 million in gross proceeds in a registered direct offering, before expenses, through the sale of an aggregate of 16,000,000 shares of our common stock The shares were offered pursuant to an effective shelf registration statement on Form S-3 (the “Shelf Registration Statement”) and a prospectus supplement relating to the offering was filed with the SEC on May 26, 2023.

 

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 cash equivalent accounts and $10 million in an interest-bearing account. At June 30, 2023, our funds with the investment management company were approximately $467 thousand and were invested in cash and cash equivalent accounts. A detail of the activity is described in Note 3 to our Consolidated Financial Statements.

 

 
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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 $14,611,900. During the year ended December 31, 2021 and through March 31, 2023, we did not issue any shares of common stock or receive any aggregate proceeds under the ATM Program, and we did not pay any commissions to the Sales Agent. During the quarter ended June 30, 2023, we sold 173,558 shares for gross proceeds totaling $63,136 under the ATM Program and paid the Sales Agent a commission of $1,902.  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 ATM Program will terminate upon (a) the election of the Sales 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.

 

We have focused our resources behind a plan to market our collective multi-channel advertising capabilities differentiated by our AI technology, the IntentKey, where we have a technology advantage and higher margins. If we are successful in implementing our plan, we expect to return to a positive cash flow from operations. However, there is no assurance that we will be able to achieve this objective.

 

Management plans to support the Company’s future operations and capital expenditures primarily through cash raised from the sale of stock in May 2023, cash generated from future operations and borrowings from the credit facility until reaching profitability. The credit facility is due upon demand and therefore there can be no assurances that sufficient borrowings will be available to support future operations until profitability is reached. We believe our current cash position and credit facility will be sufficient to sustain operations for at least the next twelve months from the date of this filing. 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 over the long term.

  

Customer concentration

 

For the three-month period ending June 30, 2023, three customers accounted for 78.6% of our overall revenue at 54.0%, 16.9% and 7.7% and for the six-month period ending June 30, 2023, 73.5% of our overall revenue at 42.5%, 20.4% and 10.6%, respectively. Those same three customers accounted for 47.3% of our gross accounts receivable balance as of June 30, 2023. As of December 31, 2022, the same customers accounted for 23.9% of our gross accounts receivable balance.

 

 
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Note 2 – Summary of Significant Accounting Policies

 

Basis of presentation

 

The consolidated financial statements presented are for Inuvo and its 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, 2022, 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, 2022, which was filed with the SEC on March 9, 2023.

 

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 allowance for doubtful accounts, capitalized labor, 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

 

Revenue recognition - We generate revenue by identifying audiences and presenting advertisements on behalf of our customers. Ultimately, our customers are brands and merchants. We may contract directly with a brand or merchant, a Direct Customer or we may serve the ultimate customer through a contract with an agent, an Indirect Customer. Revenue is recognized when the contracted services are provided to a customer in an amount that reflects the consideration the Company expects to receive in exchange for those services. We charge our customers on a cents per thousand (CPM) basis, cost per click ("CPC") basis, or as a specific dollar charge. Revenue billed as CPM is generally programmatic digital advertising and is performed under a contract known as an Insertion Order (“IO”). Programmatic digital advertising revenue is recognized in part or fully in the period the IO is partially or fully executed. Revenue earned from placing an ad or an impression on websites, some of which we own, may be on a CPM or CPC basis. We recognize revenue from ad placement and serving impressions in the period in which they occur. The Company settles ad placement and CPC transactions with its customers net of any adjustments for poor traffic quality. Payments to advertising exchanges that provide access to digital inventory and to a lesser extent, payments to website publishers and app developers that host advertisements we serve are recognized as cost of revenue.

 

 
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Table of Contents

 

The following table provides revenues for Direct Customers, Indirect Customers, and Consulting during the periods presented.

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Direct Customers

 

$3,306,788

 

 

 

19.8%

 

$11,560,450

 

 

 

51.0%

 

$7,226,562

 

 

 

25.4%

 

22,286,019

 

 

 

54.0%

Indirect Customers

 

 

13,317,899

 

 

 

80.0%

 

 

11,046,215

 

 

 

48.8%

 

 

21,231,089

 

 

 

74.5%

 

18,885,325

 

 

 

45.8%

Consulting

 

26,718

 

 

 

0.2%

 

44,640

 

 

 

0.2%

 

41,194

 

 

 

0.1%

 

89,328

 

 

 

0.2%

Total

 

$16,651,405

 

 

 

100.0%

 

$22,651,305

 

 

 

100.0%

 

$28,498,845

 

 

 

100.0%

 

$41,260,672

 

 

 

100.0%

 

Recently Adopted Accounting Pronouncements

 

On January 1, 2023, we adopted Accounting Standards Code (ASC) No. 326, Financial Instruments-Credit Losses. ASC 326 requires a financial asset (loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables, and any other financials assets not excluded from scope) measured at amortized cost basis to be presented at the net amount expected to be collected. The adoption of this new standard did not have a material impact on our consolidated financial statements.

 

 
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Table of Contents

 

Note 3 – Fair Value Measurements

 

The carrying amounts reported in the balance sheet for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term nature of these items.

 

In accordance with accounting principles generally accepted in the United States, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy prioritizes the inputs used to measure fair value as follows:

 

Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

 

Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

 

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. We classify our cash equivalents and marketable securities within Level 1 because we use observable inputs that reflect quoted market prices for identical assets in active markets to determine their fair value. We have classified debt securities as available for sale securities with unrealized gains and losses recorded as other comprehensive income. We have classified equity securities as trading and are marked to market with changes recorded as other income on the income statement. Any interest income or dividends are recorded within financing expense, net on the income statement.

 

 

 

Investment Assets

at Fair Value

 

 

Investment Assets

at Fair Value

 

 

 

As of June 30, 2023

 

 

As of December 31, 2022

 

 

 

Level 1

 

 

Total

 

 

Level 1

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities

 

 

 

 

 

 

 

$936,563

 

 

$936,563

 

Equity securities

 

 

 

 

 

 

 

$1,253,027

 

 

$1,253,027

 

Cash equivalents

 

$467,384

 

 

$467,384

 

 

$801

 

 

$801

 

Total Investments at Fair Value

 

$467,384

 

 

$467,384

 

 

$2,190,391

 

 

$2,190,391

 

 

 
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Table of Contents

 

The cost, gross unrealized gains (losses) and fair value of marketable securities by major security type were as follows:

 

 

 

As of December 31

 

 

 

2022

 

 

 

Cost

 

 

Unrealized

Gain (Loss)

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

 

 

 

 

 

 

 

 

Debt securities

 

$1,021,431

 

 

$(84,868)

 

$936,563

 

Equity securities

 

 

1,776,773

 

 

 

(523,746)

 

 

1,253,027

 

Total marketable securities

 

 

 

 

 

 

 

 

 

$2,189,590

 

 

Note 4 – Property and Equipment

 

The net carrying value of property and equipment was as follows as of:

 

 

 

June 30,

2023

 

 

December 31,

2022

 

Furniture and fixtures

 

$293,152

 

 

$293,152

 

Equipment

 

 

1,274,851

 

 

 

1,265,752

 

Capitalized internal use and purchased software

 

 

15,330,939

 

 

 

14,503,608

 

Leasehold improvements

 

 

458,885

 

 

 

458,885

 

Subtotal

 

 

17,357,827

 

 

 

16,521,397

 

Less: accumulated depreciation and amortization

 

 

(15,677,379)

 

 

(14,852,425)

Total

 

$1,680,448

 

 

$1,668,972

 

 

During the six months ended June 30, 2023 and June 30, 2022, depreciation expense was $824,954 and $729,732, respectively.

 

 Note 5 – Other Intangible Assets and Goodwill

 

The following is a schedule of intangible assets and goodwill as of June 30, 2023:

 

 

 

Term

 

 

Carrying

Value

 

 

Accumulated Amortization and Impairment

 

 

Net Carrying

Value

 

 

Year-to-date Amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer list, Google

 

20 years

 

 

$8,820,000

 

 

$(4,998,000)

 

$3,822,000

 

 

$220,500

 

Technology

 

5 years

 

 

 

3,600,000

 

 

 

(3,600,000)

 

 

0

 

 

 

0

 

Customer list, ReTargeter

 

5 years

 

 

 

1,931,250

 

 

 

(1,512,813)

 

 

418,437

 

 

 

193,125

 

Customer list, all other

 

10 years

 

 

 

1,610,000

 

 

 

(1,610,000)

 

 

0

 

 

 

0

 

Brand name, ReTargeter

 

5 years

 

 

 

643,750

 

 

 

(504,271)

 

 

139,479

 

 

 

64,375

 

Customer relationships

 

20 years

 

 

 

570,000

 

 

 

(182,875)

 

 

387,125

 

 

 

14,250

 

Trade names, web properties (1)

 

 

-

 

 

 

390,000

 

 

 

 

 

 

 

390,000

 

 

 

0

 

Intangible assets classified as long-term

 

 

 

 

 

$17,565,000

 

 

$(12,407,959)

 

$5,157,041

 

 

$492,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill, total

 

 

-

 

 

$9,853,342

 

 

$

 

 

$9,853,342

 

 

$

 

 

 

(1)

The trade names related to our web properties have an indefinite life, and as such are not amortized.

 

 
14

Table of Contents

 

Amortization expense over the next five years and thereafter is as follows:

 

2023 (remainder of year)

 

$492,250

 

2024

 

 

769,917

 

2025

 

 

469,500

 

2026

 

 

469,500

 

2027

 

 

469,500

 

Thereafter

 

 

2,096,374

 

Total

 

$4,767,041

 

 

Note 6 – Bank Debt

 

On March 1, 2023, we entered into Amendment No. 1 to Loan and Security Agreement and Collateral Documents (“Agreement”) with Mitsubishi HC Capital America, Inc., f/k/a/ Hitachi Capital America Corp. (“MHCA”). Under the terms of the Agreement, MHCA has provided us with a $5,000,000 line of credit commitment. We are permitted to borrow up to 80% of the aggregate Eligible Accounts Receivable (which may increase to 85% if certain conditions are met), up to the maximum credit commitment of $5,000,000. We will pay MHCA monthly interest at the rate of 1.75% in excess of the Wall Street Journal Prime Rate. The principal and all accrued but unpaid interest are due on demand. In the event of a default under the terms of the Loan and Security Agreement, the interest rate increases to 6% greater than the interest rate in effect from time to time prior to a default. The Agreement contains certain affirmative and negative covenants to which we are also subject. We agreed to pay MHCA an amendment fee of $10,000 on issuance of the Agreement, and thereafter an annual commitment fee of $10,000. We are also obligated to pay MHCA a quarterly service fee of 0.20% on the monthly unused amount of the maximum credit line. If we terminate the Agreement (i) before February 28, 2024, we are obligated to pay MHCA an exit fee of $50,000, or (ii) after February 28, 2024 but before February 28, 2025, we are obligated to pay MHCA an exit fee of $25,000. The Loan and Security Agreement continues for an indefinite term. At June 30, 2023, there were no outstanding balances due under the Loan and Security Agreement.

 

Note 7 – Accrued Expenses and Other Current Liabilities

 

The accrued expenses and other current liabilities consist of the following as of:

 

 

 

June 30,

2023

 

 

December 31,

2022

 

Accrued marketing costs

 

$6,226,698

 

 

$3,321,598

 

Accrued payroll and commission liabilities

 

 

1,012,366

 

 

 

782,441

 

Accrued expenses and other

 

 

997,537

 

 

 

1,044,664

 

Arkansas grant contingency

 

 

_

 

 

 

10,000

 

Accrued taxes, current portion

 

 

4,771

 

 

 

3,755

 

 

 

 

 

 

 

 

 

 

Total

 

$

8,241,372

 

 

$5,162,458

 

 

 
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Table of Contents

 

Note 8 – Commitments    

 

On September 17, 2021, we signed a multi-year agreement with a business development partner to provide referral and support services to us. The agreement required an advance fee of $1.5 million with $300,000 recorded in other current assets. The advance is being amortized as marketing expenses over five years. As of June 30, 2023, $550,000 has been amortized and the balance is $650,000.  As part of the agreement, we granted a warrant exercisable into 300,000 shares of our common stock, which vests over two years upon achieving certain performance metrics (see Note 11 - Stockholders' Equity).  Additionally, we agreed to pay quarterly support fees upon reaching certain levels of operational activity. In April 2022, we agreed to

Amendment No. 2 ("amendment") to the agreement. The amendment replaced the quarterly support fees with a commission on quarterly cumulative programmatic revenue. The amendment also revised the cumulative target media spend and the associated commission. The total amount of commission recognized for the six months ended June 30, 2023 and 2022 was approximately $40,000 and $394,000, respectively.

 

Note 9 – Income Taxes

 

We have no current income tax expense and incur only the minimum state taxes which are included in operating expenses. We have deferred tax assets of $41,453,068. 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 $40,042,968 for the deferred tax assets that may not be realized as of June 30, 2023 and December 31, 2022. We also have deferred tax liabilities totaling $1,517,100 as of June 30, 2023, related to intangible assets acquired in March 2012 and February 2017. These balances are presented as a net deferred tax liability of $107,000 composed of indefinite lived intangible assets.

 

Note 10 – 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 2023 and 2022 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 based upon achieving certain financial targets.

 

On January 1, 2022, in accordance with the plan provisions, the number of shares available for issuance under the 2017 ECP was increased by 150,000 shares. On June 16, 2022, our stockholders approved an amendment to the 2017 ECP increasing the number of shares of our common stock reserved for issuance by 15,000,000 shares. As of June 30, 2023, the total number of authorized shares of our common stock under the 2017 ECP was 24,550,000.

 

Compensation Expense

 

For the six months ended June 30, 2023 and June 30, 2022, we recorded stock-based compensation expense for all equity incentive plans of $935,145 and $1,355,534 respectively. Total compensation cost not yet recognized at June 30, 2023 was $2,588,400, which will be recognized over a weighted-average recognition period of approximately three years.

 

The following table summarizes the stock grants outstanding under 2017 ECP for the three months ended June 30, 2023:

 

 

 

Options

Outstanding

 

 

RSUs

Outstanding

 

 

Options and

RSUs Exercised

 

 

Available

Shares

 

 

Total Awards Authorized

 

Total

 

 

 

 

 

6,893,349

 

 

 

6,600,788

 

 

 

11,055,863

 

 

 

24,550,000

 

 

 
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Table of Contents

 

The fair value of restricted stock units is determined using market value of the common stock on the date of the grant. The fair value of stock options is determined using the Black-Scholes-Merton valuation model. The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense and include the expected life of the option, stock price volatility, risk-free interest rate, dividend yield, exercise price, and forfeiture rate.

Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. The forfeiture rate, which is estimated at a weighted average of 0% of unvested options outstanding, is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

 

The following table summarizes the activity of stock option awards for the six months ended June 30, 2023:

 

 

 

Shares Subject to Options Outstanding

 

 

 

Number of

Shares

 

 

Weighted

Average

Exercise Price

 

Outstanding, beginning of period

 

 

100,000

 

 

$0.52

 

Stock options canceled

 

 

(100,000)

 

$0.52

 

Outstanding, end of period

 

 

 

 

 

 

 

The following table summarizes the activities for our RSUs for the six months ended June 30, 2023:

 

 

 

RSUs

 

 

 

Number of

Shares

 

 

Weighted

Average Grant

Date Fair

Value

 

Outstanding, beginning of period

 

 

4,913,339

 

 

$0.79

 

Granted

 

 

4,070,000

 

 

$0.31

 

Vested

 

 

(2,039,989)

 

$0.86

 

Cancelled

 

 

(50,001)

 

$0.54

 

Outstanding, end of period

 

 

6,893,349

 

 

$0.49

 

 

Note 11 – Stockholders' Equity

 

Warrants

 

On September 17, 2021, we signed an agreement with a marketing platform and consulting company to provide referral and support services to us for a period of five years (see Note 8 - Commitments).  As part of that agreement, we granted a warrant exercisable into 300,000 shares of our common stock, at $0.72 per share, 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 over the vesting period of each tranche if the performance criteria are achieved. On August 31, 2022, 85,862 shares vested in accordance with the contracted performance criteria. For the second tranche, we recognized a credit of approximately $2,000 for the six-month period ended June 30, 2023 relating to a change in the probability of performance criteria being achieved.

 

Earnings per Share

 

For the three-month period ended June 30, 2023 and 2022, we generated a net loss from continuing operations and as a result, any potential common shares are anti-dilutive.

 

 
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Note 12 – Leases

 

We have entered into operating and finance leases primarily for real estate and equipment rental. These leases have terms which range from three years to five 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 obligation to make lease payments is also listed as separate line items on our consolidated balance sheets.  As of June 30, 2023 and December 31, 2022, total operating and financed right-of-use assets were $128,689 and $110,738, and $310,162 and $168,750, respectively.

 

For the six months ended June 30, 2023 and 2022, we recorded $58,013 and $48,697, respectively, in amortization expense related to finance leases. 

 

Because the rate implicit in each lease is not readily determinable, we use our incremental borrowing rate to determine the present value of the lease payments.

 

Information related to our operating lease liabilities are as follows:

 

 

 

For the Six

Months Ended

June 30,

 

Cash paid for operating lease liabilities

 

$104,276

 

Weighted-average remaining lease term

 

2.57 years

 

Weighted-average discount rate

 

 

6.25%

 

Minimum future lease payments ended June 30, 2023

 

 

 

2023 (remainder of year)

 

$110,260

 

2024

 

 

16,638

 

2025

 

 

5,653

 

2026

 

 

1,993

 

 

 

 

134,544

 

Less imputed interest

 

 

(4,589)

Total lease liabilities

 

$129,955

 

 

Information related to our financed lease liabilities are as follows:

 

 

 

For the Six

Months Ended

June 30,

 

Cash paid for finance lease liabilities

 

$36,103

 

Weighted-average remaining lease term

 

1.63 years

 

Weighted-average discount rate

 

 

6.25%

 

Minimum future lease payments ended June 30, 2023

 

 

 

2023 (remainder of the year)

 

$36,957

 

2024

 

 

56,180

 

2025

 

 

18,490

 

 

 

 

111,627

 

Less imputed interest

 

 

(4,186)

Total lease liabilities

 

$107,441

 

 

 
18

Table of Contents

 

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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, service or brand across devices, formats, and channels including video, mobile, connected TV, linear TV, display, social, search and native. These solutions allow Inuvo’s clients to engage with their audiences 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 client’s numerous world-renowned brands across industries.

 

The Inuvo solution incorporates a proprietary form of artificial intelligence, or AI, branded the IntentKey. This patented technology is a model of the human language built from crawling public content on billions of webpages. The AI uses this model of the language to predict and action audiences based on the reasons why consumers are interested, not who the people are within those audiences. In this regard, the technology is designed for a consumer privacy conscious future while addressing 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 certain clients, Inuvo has also developed website services that have included proprietary digital properties collectively branded as Bonfire Publishing where content is created specifically to align with the audiences our clients are targeting. These publications provide information across a wide range of topics including health, finance, travel, careers, auto, education and lifestyle. These websites also provide the means to market test various Inuvo advertising technologies. Further, Inuvo provides campaign delivery services across all advertising platforms and channels.

 

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 19 issued and eight pending patents.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, accounts receivable allowances, capitalized software costs, goodwill and stock-based compensation.  We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our audited consolidated financial statements for 2022 appearing in our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on March 9, 2023.  The estimates and assumptions that management makes affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used 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 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.

 

 
19

Table of Contents

 

Results of Operations

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

Change

 

 

% Change

 

 

2023

 

 

2022

 

 

Change

 

 

% Change

 

Net Revenue

 

$16,651,405

 

 

$22,651,305

 

 

(5,999,900)

 

 

(26.5)%

 

$28,498,845

 

 

$41,260,672

 

 

(12,761,827)

 

 

(30.9)%

Cost of Revenue

 

 

2,368,540

 

 

 

9,273,589

 

 

 

(6,905,049)

 

 

(74.5)%

 

 

5,559,103

 

 

 

17,935,095

 

 

 

(12,375,992)

 

 

(69.0)%

Gross Profit

 

$14,282,865

 

 

$13,377,716

 

 

$905,149

 

 

 

6.8%

 

$22,939,742

 

 

$23,325,577

 

 

$(385,835)

 

 

(1.7)%

 

Net Revenue

 

Revenue for the three-month period ended June 30, 2023, declined 26.5% and revenue for the six-month period ended June 30, 2023, declined 30.9% as compared to the same periods in 2022, respectively. The lower revenue this year compared to last year was primarily attributable to the loss of a Direct Customer in the fourth quarter of last year. The increase in our Indirect Customer base was due to increased advertising from an existing customer. Historically, we have been able to replace lost clients with new clients or by expanding our relationship with existing clients, however, we would likely experience a significant decline in revenue and our business operations could be significantly harmed if we are unable to replace lost clients.

  

Cost of Revenue

 

Cost of revenue is primarily composed of payments to advertising exchanges that provide access to digital inventory where we serve advertisements. To a lesser extent, cost of revenue includes payments to website publishers and app developers that host advertisements. The decline in cost of revenue for the three and six months period ended June 30, 2023, compared to the same time period in 2022 was related to the decline in Direct Customers as discussed in the Net Revenue section above.  The higher gross margin in the current year quarter, 85.8% compared to 59.1% in the same quarter last year was due to changes in revenue mix, where a greater percent of the revenue this year was from Indirect Customers which typically have higher gross margins.

 

 
20

Table of Contents

 

Operating Expenses  

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

Change

 

 

% Change

 

 

2023

 

 

2022

 

 

Change

 

 

% Change

 

Marketing costs

 

$12,056,616

 

 

$10,988,409

 

 

$1,068,207

 

 

 

9.7%

 

$19,144,166

 

 

$18,157,858

 

 

$986,308

 

 

 

5.4%

Compensation

 

 

3,253,416

 

 

 

3,215,890

 

 

 

37,526

 

 

 

1.2%

 

 

6,676,257

 

 

 

6,373,596

 

 

 

302,661

 

 

 

4.7%

General and administrative

 

 

2,311,885

 

 

 

2,011,237

 

 

 

300,648

 

 

 

14.9%

 

 

3,893,774

 

 

 

3,737,909

 

 

 

155,865

 

 

 

4.2%

Operating expenses

 

$17,621,917

 

 

 

16,215,536

 

 

$1,406,381

 

 

 

8.7%

 

$29,714,197

 

 

$28,269,363

 

 

$1,444,834

 

 

 

5.1%

 

Marketing costs consist mostly of traffic acquisition (i.e., Campaigns) costs and include those expenses required to attract an audience to various web properties, both owned and unowned. Marketing costs was 9.7% higher for the three months ended and 5.4% higher for the six months ended June 30, 2023, compared to the same period in 2022 due to higher revenue from Indirect Customers.

 

Compensation expense was $38 thousand higher for the three months ended and $303 thousand higher for the six months ended June 30, 2023, compared to the same time period in 2022 primarily due to higher salary expense. Our total employment, both full- and part-time, was 84 at June 30, 2023 compared to 83 at June 30, 2022.

 

General and administrative costs for the three and six months ended June 30, 2022 increased 14.9% and 4.2%, respectively, compared to the same periods in 2022 due primarily to an increase in the reserve for doubtful accounts and higher depreciation expense. 

 

Financing expense, net

 

Finance expense, net, for the three and six months ended June 30, 2023, was approximately $38 thousand and $57 thousand, respectively. The main factor behind this year's quarter expense was the utilization of our line of credit amounting to approximately $46 thousand (See Note 6), which was partially offset by interest income, net of fees, totaling around $14.7 thousand.

 

Other income, net

 

There was no net other income (expense) in the three-month period ending on June 30, 2023. For the six-month period, net other income was $14 thousand from the unrealized gains, as detailed in Note 3 of our Consolidated Financial Statements.

 

Other income (expense), net, for the three and six months ended June 30, 2022 was an expense of approximately $395 thousand and approximately $377 thousand respectively, from realized and unrealized gain and losses discussed in Note 3 to our Consolidated Financial Statements.

 

Liquidity and Capital Resources

 

As of June 30, 2023, we have approximately $5 million in cash and cash equivalents and our net working capital was approximately $2 million.  We have encountered recurring losses and cash outflows from operations, which historically we have funded through equity offerings and debt facilities.  In addition, our investment in internally developed software consists primarily of labor costs which are of a fixed nature.  Through June 30, 2023, our accumulated deficit was $163.9 million.

 

 
21

Table of Contents

 

Our principal sources of liquidity are the sale of our common stock and our credit facility discussed in Note 6 - Bank Debt. On May 30, 2023, we raised $4.0 million in gross proceeds in a registered direct offering, before expenses, through the sale of an aggregate of 16,000,000 shares of our common stock The shares were offered pursuant to an effective shelf registration statement on Form S-3 (the “Shelf Registration Statement”) and a prospectus supplement relating to the offering was filed with the SEC on May 26, 2023.

 

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 cash equivalent accounts and $10 million in an interest-bearing account. At June 30, 2023,

our funds with the investment management company were approximately $467 thousand and were invested in cash and cash equivalent accounts. 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 $14,611,900. During the year ended December 31, 2021 and through June 30, 2023, we did not issue any shares of common stock or receive any aggregate proceeds under the ATM Program, 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 ATM Program will terminate upon (a) the election of the Sales 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.

 

We have focused our resources behind a plan to market our collective multi-channel advertising capabilities differentiated by  our AI technology, the IntentKey, where we have a technology advantage and higher margins. If we are successful in implementing our plan, we expect to return to a positive cash flow from operations. However, there is no assurance that we will be able to achieve this objective.

 

Management plans to support the Company’s future operations and capital expenditures primarily through cash raised through the sale of stock in May 2023, cash generated from future operations and borrowings from the credit facility until reaching profitability. The credit facility is due upon demand and therefore there can be no assurances that sufficient borrowings will be available to support future operations until profitability is reached. We believe our current cash position and credit facility will be sufficient to sustain operations for at least the next twelve months from the date of this filing. 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 over the long term.

 

Cash Flows

 

The table below sets forth a summary of our cash flows for the six months ended June 30, 2023 and 2022:

 

 

 

For the Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Net cash used in operating activities

 

$(2,833,853)

 

$(2,568,984)

Net cash provided by/(used in) investing activities

 

$1,452,445

 

 

$(1,355,652)

Net cash provided by/(used in) financing activities

 

$3,495,105

 

 

$(178,258)

 

 
22

Table of Contents

 

Cash Flows - Operating

 

Net cash used in operating activities was $2,833,853 during the six months ended June 30, 2023. We reported a net loss of $6,817,343 which included non-cash expenses of depreciation and amortization expense of $1,317,203, depreciation of right of use assets of $58,013 and stock-based compensation expense of $935,145. The change in operating assets and liabilities during the six months ended June 30, 2023 was a net provision of cash of $1,371,741 primarily due to an increase of accrued liabilities and other liabilities of $3,069,680 partially offset by a lower accounts payable balance. Our terms are such that we generally collect receivables prior to paying trade payables. However, our Media sales arrangements typically have slower payment terms than the terms of related payables.

 

During the comparable six-month period in 2022, cash used in operating activities was $2,568,984 from a net loss of $5,319,190 and included several non-cash expenses of depreciation and amortization expense of $1,308,776 and stock-based compensation expense of $1,355,534. The change in operating assets and liabilities during the six months ended June 30, 2022, was a net use of cash of $365,807.

 

Cash Flows - Investing

 

Net cash provided by investing activities was $1,452,445 for the six months ended June 30, 2023, and consisted primarily of the sale of marketable securities, partially offset by capitalized internal development costs.  

 

Net cash used in investing activities was $1,355,652 for the six months ended June 30, 2022, and consisted primarily of the purchase of marketable securities and capitalized internal development costs. 

 

Cash Flows - Financing

 

Net cash provided by financing activities was $3,495,105 and during the six months ended June 30, 2023, and was primarily from proceeds from the capital raise (see Note 1).  

 

Net cash used in financing activities during the six months ended June 30, 2022 was $178,258.

 

Off Balance Sheet Arrangements

 

As of June 30, 2023, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable to a smaller reporting company.

 

ITEM 4.  CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this report, is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and to reasonably assure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

 
23

Table of Contents

 

Our management does not expect that our disclosure controls will prevent all errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of June 30, 2023, the end of the period covered by this report, our management concluded their evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. As of the evaluation date, our Chief Executive Officer and Chief Financial Officer concluded that we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
24

Table of Contents

 

PART II

 

Item 1 - LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS-UPDATE

 

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Accordingly, we incorporate by reference the risk factors disclosed in Part I, Item 1A of our Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 9, 2023 and our subsequent filings with the SEC, subject to the new or modified risk factors appearing below that should be read in conjunction with the risk factors disclosed in such Form 10-K and our subsequent filings.

 

We rely on three customers for a significant portion of our revenues. We are reliant upon three customers for most of our revenue. During the second quarter of 2023, they accounted for 54.0%, 16.9% and 7.7% of our revenues, respectively.  During the same period in 2022, three different customers accounted for our largest revenue sources at 27.4%, 27.2% and 13.6%, respectively. The amount of revenue we receive from these customers is dependent on a number of factors outside of our control, including changes in the respective customers advertising budget, both in terms of allocated dollars and media mix, financial resources of the customers, as well as general economic conditions.  We would likely experience a significant decline in revenue and our business operations could be significantly harmed if these customers do not continue to utilize our services. Additionally, our business operations and financial condition could be significantly harmed if these customers do not pay for our services on a timely basis. The loss of any of these customers or a material change in the revenue or gross profit they generate or their failure to timely pay us for our services would have a material adverse impact on our business, results of operations and financial condition in future periods.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4.  MINE SAFETY AND DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

 
25

Table of Contents

 

ITEM 6. EXHIBITS

 

No.

 

Exhibit Description

 

Form

 

Date Filed

Number

Filed or Furnished Herewith

3(i).1

 

Articles of Incorporation, as amended

 

10-KSB

 

3/1/04

4

 

3(i).2

 

Amended to Articles of Incorporation filed March 14, 2005

 

10-KSB

 

3/31/06

3.2

 

3(i).3

 

Articles of Merger between Inuvo, Inc. and Kowabunga! Inc.

 

8-K

 

7/24/09

3.4

 

3(i).4

 

Certificate of Change Filed Pursuant to NRS 78.209

 

8-K

 

12/10/10

3(i).4

 

3(i).5

 

Certificate of Merger as filed with the Secretary of State of Nevada on February 29, 2012

 

10-K

 

3/29/12

3(i).5

 

3(i).6

 

Articles of Amendment to Amended Articles of Incorporation as filed on February 29, 2012

 

10-K

 

3/29/12

3(i).6

 

3(i).7

 

Articles of Amendment to Amended Articles of Incorporation as filed on October 31, 2019

 

10-Q

 

5/15/20

3(i).7

 

3(i).8

 

Certificate of Validation of Amendment to Amended Articles of Incorporation as filed October 16, 2020.

 

10-Q

 

11/9/20

3(i).8

 

3(i).9

 

Articles of Amendment to Articles of Incorporation as filed January 7, 2021

 

10-K

 

2/11/21

3(i).9

 

3(i).10

 

Articles of Amendment to Articles of Incorporation as filed on August 19, 2021

 

10-Q

 

11/12/21

3(i).10

 

3(ii).1

 

Amended and Restated By-Laws

 

10-K

 

3/31/10

3(ii).4

 

3(ii).2

 

Bylaw amendment adopted February 29, 2012

 

8-K

 

3/6/12

3(ii).1

 

10.1

 

Extension Amendment to Google Services Agreement by and between Vertro, Inc. and Google LLC, dated as of April 24, 2023, and effective as of May 1, 2023

 

8-K

 

4/27/23

10.1

 

10.2

 

Amendment #32 to the Yahoo Publisher Network Contract #1-19868214, dated as of May 10, 2023

 

8-K

 

5/16/23

10.1

 

10.3

 

Extension Amendment to Google Services Agreement by and between Vertro, Inc. and Google LLC, dated as of May 24, 2023, and effective as of June 1, 2023

 

8-K

 

5/24/23

10.1

 

10.4

 

Form of Securities Purchase Agreement dated May 25, 2023 by and between Inuvo and the purchasers listed therein

 

8-K

 

5/25/23

10.1

 

10.5

 

Extension Amendment to Google Services Agreement by and between Vertro, Inc. and Google LLC, dated as of June 23, 2023, and effective as of July 1, 2023

 

8-K

 

6/27/23

10.1

 

10.6

 

Extension Amendment to Google Services Agreement by and between Vertro, Inc. and Google LLC, dated as of July 24, 2023, and effective as of August 1, 2023

 

8-K

 

7/25/2023

10.1

 

31.1

 

Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer

 

 

 

 

 

Filed

31.2

 

Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer

 

 

 

 

 

Filed

32.1

 

Section 1350 certification of Chief Executive Officer

 

 

 

 

 

Furnished

32.2

 

Section 1350 certification of Chief Financial Officer

 

 

 

 

 

Furnished

101.INS

 

Inline XBRL Instance Document

 

 

 

 

 

Filed

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

 

 

Filed

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

 

 

Filed

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

 

 

Filed

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

 

 

Filed

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

Filed

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

Filed

104

 

The cover page for Inuvo, Inc.’s quarterly report on Form 10-Q for the period ended June 30, 2023, formatted in Inline XBRL (included with Exhibit 101 attachments).

 

 

 

 

 

Furnished

 

 
26

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Inuvo, Inc.

 

 

 

 

 

August 10, 2023

By:

/s/ Richard K. Howe

 

 

 

Richard K. Howe,

 

 

 

Chief Executive Officer, principal executive officer

 

 

 

 

 

August 10, 2023

By:

/s/ Wallace D. Ruiz

 

 

 

Wallace D. Ruiz,

 

 

 

Chief Financial Officer, principal financial and accounting officer

 

 

 
27

 

nullnullnullnullv3.23.2
Cover - shares
6 Months Ended
Jun. 30, 2023
Aug. 04, 2023
Cover [Abstract]    
Entity Registrant Name Inuvo, Inc.  
Entity Central Index Key 0000829323  
Document Type 10-Q  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Small Business true  
Entity Shell Company false  
Entity Emerging Growth Company false  
Entity Current Reporting Status Yes  
Document Period End Date Jun. 30, 2023  
Entity Filer Category Non-accelerated Filer  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2023  
Entity Common Stock Shares Outstanding   0
Document Quarterly Report true  
Document Transition Report false  
Entity File Number 001-32442  
Entity Incorporation State Country Code NV  
Entity Tax Identification Number 87-0450450  
Entity Address Address Line 1 500 President Clinton Ave.  
Entity Address Address Line 2 Suite 300  
Entity Address City Or Town Little Rock  
Entity Address State Or Province AR  
Entity Address Postal Zip Code 72201  
City Area Code 501  
Local Phone Number 205-8508  
Security 12b Title Common stock  
Trading Symbol INUV  
Security Exchange Name NYSEAMER  
Entity Interactive Data Current Yes  
v3.23.2
CONSOLIDATED BALANCE SHEETS - USD ($)
Jun. 30, 2023
Dec. 31, 2022
Current assets    
Cash and cash equivalents $ 5,045,112 $ 2,931,415
Marketable securities - short term 0 1,529,464
Accounts receivable, net of allowance for doubtful accounts of $1,762,998 and $1,440,678, respectively. 10,795,658 11,119,892
Prepaid expenses and other current assets 828,601 798,977
Total current assets 16,669,371 16,379,748
Property and equipment, net 1,680,448 1,668,972
Other assets    
Goodwill 9,853,342 9,853,342
Intangible assets, net of accumulated amortization 5,157,041 5,649,291
Referral and support services agreement advance 650,000 800,000
Marketable securities - long term 0 660,126
Right of use assets - operating lease 128,689 310,162
Right of use assets - finance lease 110,738 168,750
Other assets 35,170 66,919
Total other assets 15,934,980 17,508,590
Total assets 34,284,799 35,557,310
Current liabilities    
Accounts payable 6,192,824 8,044,802
Accrued expenses and other current liabilities 8,241,372 5,162,458
Lease liability - operating lease 119,624 287,523
Lease liability - finance lease 74,097 101,003
Total current liabilities 14,627,917 13,595,786
Long-term liabilities    
Deferred tax liability 107,000 107,000
Lease liability - operating lease 10,331 23,878
Lease liability - finance lease 33,344 70,597
Other long-term liabilities 3,555 10,733
Total long-term liabilities 154,230 212,208
Preferred stock, $0.001 par value:    
Authorized shares 500,000, none issued and outstanding 0 0
Common stock, $0.001 par value:    
Authorized shares 200,000,000; issued and outstanding shares 137,817,253 and 120,137,124, respectively. 137,818 120,138
Additional paid-in capital 183,239,735 178,771,604
Accumulated other comprehensive loss 0 (84,868)
Accumulated deficit (163,874,901) (157,057,558)
Total stockholders' equity 19,502,652 21,749,316
Total liabilities and stockholders' equity $ 34,284,799 $ 35,557,310
v3.23.2
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)
Jun. 30, 2023
Dec. 31, 2022
CONSOLIDATED BALANCE SHEETS    
Allowance for doubtful accounts $ 1,762,998 $ 1,440,678
Preferred stock, par or stated value per share (in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized (in shares) 500,000 500,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, par or stated value per share (in dollars per share) $ 0.001 $ 0.001
Common stock shares authorized (in shares) 200,000,000 200,000,000
Common stock shares issued (in shares) 137,817,253 120,137,124
Common stock shares outstanding (in shares) 137,817,253 120,137,124
v3.23.2
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)        
Net revenue $ 16,651,405 $ 22,651,305 $ 28,498,845 $ 41,260,672
Cost of revenue 2,368,540 9,273,589 5,559,103 17,935,095
Gross profit 14,282,865 13,377,716 22,939,742 23,325,577
Operating expenses        
Marketing costs 12,056,616 10,988,409 19,144,166 18,157,858
Compensation 3,253,416 3,215,890 6,676,257 6,373,596
General and administrative 2,311,885 2,011,237 3,893,774 3,737,909
Total operating expenses 17,621,917 16,215,536 29,714,197 28,269,363
Operating loss (3,339,052) (2,837,820) (6,774,455) (4,943,786)
Financing expense, net (38,186) 3,070 (57,306) 2,071
Other income (expense), net 0 (395,177) 14,418 (377,475)
Net loss (3,377,238) (3,229,927) (6,817,343) (5,319,190)
Other comprehensive income        
Unrealized gain (loss) on marketable securities 0 (124,253) 84,868 (222,409)
Comprehensive loss $ (3,377,238) $ (3,354,180) $ (6,732,475) $ (5,541,599)
Per common share data Basic and diluted:        
Net loss per share (basic and diluted) $ (0.03) $ (0.03) $ (0.05) $ (0.04)
Weighted average shares        
Basic 127,249,916 119,827,944 124,115,098 118,788,819
Diluted 127,249,916 119,827,944 124,115,098 118,788,819