Inuvo, Inc 10-K for FY2019

Inuvo, Inc. (INUV)

10-K 2020-05-12 For: 2019-12-31

Added on April 12, 2026

About this 10-K

Inuvo, Inc filed this 10-K on May 12, 2020, covering the fiscal year ended December 31, 2019 (FY2019).

Headline figures

Fiscal year ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $61.53M; down 16.1% from $73.33M a year earlier
Net loss: $4.49M; compared with a net loss of $5.89M a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


Nevada						87-0450450
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


500 President Clinton Ave., Suite 300, Little Rock, AR						72201
(Address of principal executive offices)						(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	INUV	NYSE American


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☑
		Emerging growth company	☐


	For the Years Ended December 31,
	2019		2018		Change		% Change
Net Revenue	$	61,525,214	$	73,330,642	$	(11,805,428)	(16.1)	%
Cost of Revenue	22,700,873		29,921,482		(7,220,609)		(24.1)	%
Gross Profit	$	38,824,341	$	43,409,160	(4,584,819)		(10.6)	%


☑			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


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


INUVO, INC.
(Exact name of registrant as specified in its charter)


	For the Year Ended December 31,
	2019		2018		Change		% Change
Marketing costs (TAC)	$	30,135,991	$	31,852,190	$	(1,716,199)	(5.4	%)
Compensation	7,753,528		8,524,476		(770,948)		(9.0	%)
Selling, general and administrative	8,673,015		8,502,874		170,141		2.0	%
Operating expenses	$	46,562,534	$	48,879,540	$	(2,317,006)	(4.7	%)


Director	Audit Committee Member	Nominating, Corporate Governance and Compensation Committee Member
Charles D. Morgan		✓
Patrick Terrell	✓
Gordon J. Cameron	✓(1)	✓
G. Kent Burnett	✓	✓ (1)


Name	Fees earned or paid in cash ($)	Stock awards ($)	Option awards ($)	Non-equity incentive plan compensation ($)	Nonqualified deferred compensation earnings ($)	All other compensation ($)	Total ($)
Charles D. Morgan	7,500	9,800	—	—	—	—	17,300
Patrick Terrell	7,500	9,800	—	—	—	—	17,300
Gordon J. Cameron	7,500	9,800	—	—	—	—	17,300
G. Kent Burnett	7,500	9,800	—	—	—	—	17,300


Name and principal position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Nonequity incentive plan compen-sation ($)	Non-qualified deferred compen-sation earnings ($)	All other compen-sation ($)	Total ($)

Richard K. Howe,	2019	379,073	—	102,460	—	—	—	4,280	485,813
Chairman and Chief Executive Officer	2018	425,000	—	272,897	—	—	—	11,000	708,897

Wallace D. Ruiz,	2019	262,625	—	36,490	—	—	—	7,200	306,315
Chief Financial Officer	2018	275,000	—	97,463	—	—	—	11,000	383,463

Don (Trey) Barrett III	2019	240,625	—	49,372	—	—	—	2,619	292,616
Chief Operating Officer	2018	250,000	—	129,951	—	—	—	6,220	386,171


OPTION AWARDS										STOCK AWARDS
Name	Number of securities under-lying un-exercised options (#) exercisable	Number of securities under-lying un-exercised options (#) un-exercisable	Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)	Option exercise price ($)	Option expiration date	Number of shares or units of stock that have not vested (#)	Market value of shares or units of stock that have not vested ($)	Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)	Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested (#)
Richard K. Howe	-	-	-	-	-	627,000	188,000	-	-

Wallace D. Ruiz	-	-	-	-	-	219,167	65,750	-	-

Don (Trey) Barrett III	-	-	-	-	-	325,556	97,667	-	-


Name of Beneficial Owner	No. of Shares Beneficially Owned	% of Class

Charles Morgan ⁽¹⁾	5,139,771	8.2	%
Richard K. Howe ⁽¹⁾	1,808,032	2.9	%
Patrick Terrell ⁽²⁾	1,665,980	2.6	%
Wallace D. Ruiz	398,033	*
John B. Pisaris	361,053	*
Don Walker “Trey” Barrett III	423,345	*
G. Kent Burnett ⁽¹⁾	1,442,256	2.3	%
Gordon J. Cameron ⁽³⁾	406,529	*
All named executive officers, directors and director nominees as a group (eight persons) ^(1)(2)(3)	11,644,999	18.5	%
Ingalls & Snyder, LLC ⁽⁴⁾	5,362,886	8.5	%
Herald Investment Management Limited ⁽⁵⁾	6,142,857	9.8	%


Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights(a) ⁽¹⁾	Weighted average exercise price of outstanding options, warrants and rights (a)($) ⁽²⁾	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)

Plans approved by our stockholders:
2005 Long-Term Incentive Plan*	3,750	3.7	—
2010 Equity Compensation Plan	1,201,168	-	25,759
2017 Equity Compensation Plan	1,382,281	-	7,206,175
Plans not approved by stockholders	-	-	-


			CONTENTS
Report of Independent Registered Public Accounting Firm			2
Consolidated Financial Statements:
Consolidated Balance Sheets			3
Consolidated Statements of Operations			5
Consolidated Statements of Stockholders’ Equity			6
Consolidated Statements of Cash Flows			7
Notes to Consolidated Financial Statements			8


	2019		2018
Assets
Current assets
Cash	$	372,989	$	228,956

Accounts receivable, net of allowance for doubtful accounts of $225,000 and $63,727, respectively	7,529,785		6,711,595
Unbilled revenue	5,813		11,754

Prepaid expenses and other current assets	238,075		259,712
Total current assets	$	8,146,662	$	7,212,017
Property and equipment, net	1,374,152		2,123,672
Other assets
Goodwill	9,853,342		9,853,342
Intangible assets, net of accumulated amortization	10,451,593		9,441,681
Other assets	865,179		35,170
Total other assets	$	21,170,114	$	19,330,193
Total assets	$	30,690,928	$	28,665,882

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	7,520,567	$	9,499,541
Accrued expenses and other current liabilities	$	4,057,340	$	2,489,834
Notes payable	—		250,000
Derivative liability	$	182,250	—
Convertible promissory notes, current portion (net)	$	536,806	$	—
Financed receivables	$	3,381,364	$	1,859,853
Total current liabilities	$	15,678,327	$	14,099,228

Long-term liabilities
Deferred tax liability	2,019,200		2,339,832
Convertible promissory notes, net of current portion (net)	$	—	1,000,000
Other long-term liabilities	452,051		193,007
Total long-term liabilities	$	2,471,251	$	3,532,839

Stockholders’ equity
Preferred stock, $0.001 par value:
Authorized shares - 500,000 - none issued and outstanding	—		—
Common stock, $0.001 par value:
Authorized shares 100,000,000; issued shares 52,222,538 and 32,757,817 respectively; Authorized shares 40,000,000; issued and outstanding shares 51,846,011 and 32,381,290, respectively	52,223		32,759


	2019		2018
Net revenue	$	61,525,214	$	73,330,642
Cost of revenue	22,700,873		29,921,482
Gross profit	38,824,341		43,409,160
Operating expenses
Marketing costs (Traffic Acquisition Costs-TAC)	30,135,991		31,852,190
Compensation	7,753,528		8,524,476
Selling, general and administrative	8,673,015		8,502,874
Total operating expenses	46,562,534		48,879,540
Operating loss	(7,738,193)		(5,470,380)



Interest expense, net	(482,210)		(420,452)
Other income, net	3,397,902		—
Loss from continuing operations before taxes	(4,822,501)		(5,890,832)
Income tax benefit	334,394		—


Net loss	$	(4,488,107)	$	(5,890,832)

Per common share data
Basic and diluted


Net loss	$	(0.11)	$	(0.19)

Weighted average shares
Basic	40,454,779		31,019,623
Diluted	40,454,779		31,019,623


	Common Stock					Additional Paid in Capital		Accumulated Deficit			Treasury Stock		Total
	Shares	Stock
Balances as of December 31, 2017	28,618,454	$	28,996	$	136,033,967	$	(120,579,062)		$	(1,396,559)	$	14,087,342
Net loss	—	—		—		(5,890,832)			—		(5,890,832)
Stock-based compensation	—	—		915,469		—			—		915,469
Stock issued for vested restricted stock awards	527,866	528		(528)		—			—		—
Sale of common stock	3,289,000	3,289		1,997,294		—			—		2,000,583
Shares withheld for taxes on vested restricted stock				(78,747)							(78,747)
Cancellation of common stock	(54,030)	(54)		54		—			—		—


Balances as of December 31, 2018	32,381,290	$	32,759	$	138,867,509	$	(126,469,894)		$	(1,396,559)	$	11,033,815
Net loss	—	—		—		(4,488,107)			—		(4,488,107)
Stock-based compensation	—	—		789,914		—			—		789,914


Stock issued for vested restricted stock awards	765,429	765		(765)		—			—		—
Shares withheld for taxes on vested restricted stock				(45,565)		—			—		(45,565)
Convertible Note Conversion	2,886,792	2,887		834,283		—					837,170
Sale of common stock	15,812,500	$	15,812	$	4,398,311	$	—		$	—	4,414,123
Balances as of December 31, 2019	51,846,011	$	52,223	$	144,843,687	$	(130,958,001)		$	(1,396,559)	$	12,541,350


	2019		2018
Audit Fees	$	235,000	$	262,000
Audit-Related Fees	21,360		32,000
Tax Fees	—		—
All Other Fees	—		—
Total	$	256,360	$	294,000


	2019		2018
Operating activities:
Net loss	$	(4,488,107)	$	(5,890,832)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on merger termination	(3,766,667)		—
Loss on extinguishment of convertible debt	193,179		—
Deferred income taxes	(334,394)		—
Depreciation and amortization	3,245,192		3,181,619
Amortization of Right of Use Assets	177,193		—
Mark to market fair value of derivative	(78,913)		—
Stock based compensation	789,914		915,469
Amortization of financing fees	59,245		40,382
Deferred income taxes	—		7,931
(Recovery)/Provision for doubtful accounts	161,273		(20,062)
Amortization of OID interest expense	119,167		—

Amortization of debt discount	168,105		—




Change in operating assets and liabilities:

Accounts receivable and unbilled revenue	(973,522)		4,058,591
Prepaid expenses and other assets	20,893		139,031
Accounts payable	(1,978,974)		(4,114,512)
Accrued expenses and other liabilities	1,348,033		(417,784)

Net cash used in operating activities	(5,338,383)		(2,100,167)
Investing activities:
Purchases of equipment and capitalized development costs	(1,194,164)		(1,634,919)

Net cash used in investing activities	(1,194,164)		(1,634,919)
Financing activities:
Proceeds from sale of common stock, net of expenses	4,414,123		2,000,583
Proceeds from financed receivables	1,521,511		1,859,853
Proceeds from convertible promissory note	1,200,000		1,000,000
(Payments)/Proceeds on note payable	(250,000)		250,000
Net proceeds on revolving line of credit	—		(4,900,000)
Payments on finance/capital leases	(198,960)		(211,671)
Net taxes paid on RSU grants exercised	(45,565)		(77,044)
Prepaid financing fees	(24,529)		(42,365)
Shareholder settlement	125,000		—
Debt issuance cost	(65,000)		—
Net cash provided by (used in) financing activities	6,676,580		(120,644)


Net change – cash	144,033		(3,855,730)
Cash, beginning of year	228,956		4,084,686
Cash, end of year	$	372,989	$	228,956

Supplemental information:
Interest paid	$	421,860	$	388,757
Non-cash investing and financing activities:
Debt conversion and related activities	$	837,170	$	—
Adoption of ASC 842-old capital leases	$	263,580	$	—
Adoption of ASC 842	$	1,173,946	$	—
ReTargeter assets	$	2,575,000	$	—
Conversion of debt to common stock	$	765,000	$	—
Derecognition of derivative in exchange for common stock	$	72,170	$	—


	2019		2018
Balance at the beginning of the year	$	63,727	$	83,789
Provision/(recoveries) for bad debts	189,441		(14,000)
Charge-offs	(28,168)		(6,062)


Balance at the end of the year	$	225,000	$	63,727


	2019		2018
Furniture and fixtures	$	293,152	$	293,152
Equipment	1,025,357		1,527,054
Software	10,309,298		9,142,075
Leasehold improvements	421,016		421,016
Subtotal	$	12,048,823	$	11,383,297
Less: accumulated depreciation and amortization	(10,674,671)		(9,259,625)
Total	$	1,374,152	$	2,123,672


	Term	Carrying Value		Accumulated Amortization and Impairment		Net Carrying Value		2019 Amortization

Customer list, Google	20 years	$	8,820,000	$	(3,454,500)	$	5,365,500	$	441,000
Technology	5 years	3,600,000		(2,100,000)		1,500,000		720,000
Customer list, ReTargeter (2)	5 years	1,931,250		(160,938)		1,770,312		160,938
Customer list, all other	10 years	1,610,000		(1,261,198)		348,802		161,004
Brand name, ReTargeter (2)	5 years	643,750		(53,646)		590,104		53,646
Customer relationships	20 years	570,000		(83,125)		486,875		28,500
Trade names, web properties (1)	-	390,000		—		390,000		—
Intangible assets classified as long-term		$	17,565,000	$	(7,113,407)	$	10,451,593	$	1,565,088

Goodwill, total		$	9,853,342	$	—	$	9,853,342	$	—


	Term	Carrying Value		Accumulated Amortization		Net Carrying Value		2018 Amortization
Customer list, Google	20 years	$	8,820,000	$	(3,013,500)	$	5,806,500	$	441,000
Technology	5 years	3,600,000		(1,380,000)		2,220,000		720,000
Customer list, all other	10 years	1,610,000		(1,100,194)		509,806		161,004
Customer relationships	20 years	570,000		(54,625)		515,375		28,500
Tradenames, web properties (1)	-	390,000		—		390,000		—
Brand	1 year	121,000		(121,000)		—		10,083
Non-competition agreements	1 year	69,000		(69,000)		—		5,750
Intangible assets classified as long-term		$	15,180,000	$	(5,738,319)	$	9,441,681	$	1,366,337



Goodwill, total		$	9,853,342	$	—	$	9,853,342	$	—


2020	$	1,865,504
2021	1,865,504
2022	1,071,294
2023	984,500
2024	769,917
Thereafter	3,504,874
Total	$	10,061,593


	December 31, 2019		December 31, 2018
Financed receivables - 5.75 percent at December 31, 2019 (prime plus 1 percent) on invoice receivables; 6.75 percent at December 31, 2019 (prime plus 2 percent) on uninvoiced receivables	3,381,364		1,859,853
Total	$	3,381,364	$	1,859,853


	2019		2018
Accrued marketing costs (TAC)	$	2,200,014	$	1,509,843
Accrued expenses and other	1,152,267		461,823
Operating lease liability	362,130		—
Finance lease liability	80,777		—
Capital leases, current portion	—		198,769
Accrued commissions	115,707		200,290
Arkansas grant contingency	85,000		55,000
Accrued sales allowance	50,000		50,000
Accrued taxes, current portion	11,445		14,109
Total	$	4,057,340	$	2,489,834


	2019		2018
Capital leases, less current portion	—		80,969
Operating lease liability	394,889		—
Deferred rent	57,162		98,276
Accrued taxes, less current portion	—		13,762
Total	$	452,051	$	193,007


	2019		2018
Current tax provision	$	—	$	—
Deferred tax benefit	(334,394)		—
Total tax benefit	$	(334,394)	$	—


	2019		2018
Federal statutory rate	21	%	21	%
State income tax rate, net of federal benefit	1	%	(1	%)
Permanent differences	(3	%)	(2	%)
Change in valuation allowance	(12	%)	(18	%)
	7	%	—	%


	2019		2018
Deferred tax assets:
Net operating loss carry forward	$	32,742,350	$	31,473,506
Intangible assets	686,400		863,400
Accrued expense	223,100		142,000
Deferred rent	15,700		27,000
Allowance for doubtful accounts	61,700		17,500
Other	258,600		140,300
Subtotal	33,987,850		32,663,706
Less valuation allowance	(33,987,850)		(32,663,706)
Total	—		—
Deferred tax liabilities:
Intangible assets and property and equipment	1,989,800		2,162,500
Other	29,400		177,332
Total	2,019,200		2,339,832
Total deferred tax liabilities	$	(2,019,200)	$	(2,339,832)


	Options Outstanding	RSUs Outstanding	Options and RSUs Exercised	Available Shares	Total
2017 ECP	—	1,382,281	511,544	7,206,175	9,100,000
2010 ECP	14,498	1,186,670	3,855,091	25,759	5,082,018
2005 LTIP (*)	3,750	—	950,085	—	953,835
Total	18,248	2,568,951	5,316,720	7,231,934	15,135,853


	Options	Weighted Average Exercise Price
Outstanding, beginning of year	264,246	$	2.84
Granted	—	$	—
Forfeited, expired or cancelled	245,998	$	2.92
Exercised	—	$	—
Outstanding, end of year	18,248	$	1.74
Exercisable, end of year	18,248	$	1.74


	Restricted Stock	Weighted Average Fair Value
Outstanding, beginning of year	1,571,864	$	0.79
Granted	3,061,429	$	0.30
Exercised	944,052	$	0.58
Forfeited	1,120,290	$	0.83
Outstanding, end of year	2,568,951	$	0.79


	December 31, 2019
Cash paid for operating lease liabilities	$	451,107
Weighted-average remaining lease term	2.0 years
Weighted-average discount rate	6.25		%


Minimum future lease payments ended December 31, 2019
2020	408,263
2021	242,558
2022	163,284
	814,105
Less imputed interest	(57,084)
Total lease liabilities	$	757,021


	December 31, 2019
Cash paid for finance lease liabilities	$	270,312
Weighted-average remaining lease term	Less than one year
Weighted-average discount rate	6.25		%


Minimum future lease payments ended December 31, 2019
2020	82,405
	82,405
Less imputed interest	(1,628)
Total lease liabilities	$	80,777