8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)     July 29, 2015

INUVO, INC.

(Exact name of registrant as specified in its charter)

Nevada	001-32442	87-0450450
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1111 Main St., Suite 201, Conway AR	72032
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code 855-440-8484

 not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02.           RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On July 29, 2015, Inuvo, Inc. issued an earnings release regarding financial performance for Q2 2015 and held a management conference call to discuss these results and the outlook of the Company. Copies of the earnings release and the script of the Company’s management for the conference call is being furnished herewith as Exhibits 99.1 and 99.2 respectively.

The information in this Current Report on Form8-K under this caption and accompanying exhibits are being furnished under Item 2.02 and shall not be deemed to be “filed” for the purposes of Section18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

The Company made reference to non-GAAP financial information in the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the press release announcing Q2 financial results.

ITEM 7.01           REGULATION FD DISCLOSURE.

On July 29, 2015, the Company held a management conference call to discuss the Company's financial results for Q2 2015, the outlook of the Company and certain other matters.

A copy of the script for the conference call is attached as Exhibit 99.2 and is incorporated by reference into this Current Report on Form8-K.

The information in this Current Report on Form 8-K and accompanying exhibit is being furnished and shall not be deemed to be “filed” for the purposes of Section18 of the Exchange Act, or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d)           Exhibits.

Exhibit No.    Description

99.1        Earnings Release for Q2 2015.

99.2        Conference Call Script.

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 hereunto duly authorized.

	INUVO, INC.
Date: July 29, 2015	By:	/s/ John B. Pisaris
	John B. Pisaris, General Counsel

EXHIBIT INDEX

99.1        Earnings Release for Q2 2015.

99.2        Conference Call Script.

EX-99.1

Inuvo Reports 53% Increase in Revenues for 2015 Second Quarter

Net Income of $0.02 per Diluted Share

CONWAY, AR--(Marketwired - Jul 29, 2015) - Inuvo, Inc. (NYSE MKT: INUV), an advertising technology and digital publishing company, today announced revenues of $16.7 million in the second quarter of 2015 compared to $10.9 million in the same quarter last year, a 53% increase. Net income in the second quarter of 2015 was $445,000 or $0.02 per diluted share compared to $382,000 or $0.02 per diluted share in the same quarter of 2014. For the first half of 2015, revenue was $30.1 million, a 43% increase over the first half of last year. Net income for the first half of 2015 was $1,071,000 or $0.04 per diluted share compared to $1,057,000 or $0.04 per diluted share in the same period last year. 

"We are pleased to report a third consecutive quarter of strong year-over-year growth and a seventh consecutive quarter of profitability," stated Rich Howe, Chairman and CEO of Inuvo. "We are making and will continue to make the necessary investments to capture market share in support of growth. While both segments experienced strong growth in the quarter, the Partner Network benefited from an uncharacteristically strong spring, the result of strong advertiser demand in Automotive that is likely to normalize in the second half of the year. We remain poised to deliver on the potential of the SearchLinks Native Advertising solution and committed to increasing user engagement within the ALOT sites."

Second Quarter 2015 Highlights

• Revenue was $16.7 million, 53% ahead of the second quarter 2014 revenue of $10.9 million.

◦ Partner revenue was $9.3 million, 67% ahead of the second quarter 2014 Partner revenue of $5.6 million.

◦ Owned & Operated revenue was $7.4 million, 39% ahead of the second quarter 2014 Owned & Operated revenue of $5.4 million.

• Net income was $445,000 or $0.02 per diluted share, 16% ahead of the second quarter of 2014.

• Adjusted EBITDA, a non-GAAP measure, was $1.1 million.

First Half 2015 Highlights

• Revenue was $30.1 million, 43% ahead of the first half 2014 revenue of $21.1 million.

◦ Partner revenue was $16.9 million, 53% ahead of the first half 2014 Partner revenue of $11.0 million.

◦ Owned & Operated revenue was $13.3 million, 32% ahead of the first half 2014 Owned & Operated revenue of $10.0 million.

• Net income was $1,071,000 or $0.04 per diluted share, largely unchanged from the first half of 2014.

• Adjusted EBITDA, a non-GAAP measure, was $1.8 million.

• Debt decreased to $1.5 million at June 30, 2015 compared to $3.6 million at December 31, 2014.

The Inuvo business is managed along two segments, the Partner Network and the Owned and Operated Network. The Partner Network facilitates transactions between advertisers and our partners' websites and applications. The Owned and Operated Network designs, builds and markets mobile-ready consumer websites and applications mainly under the ALOT brand. The segments share the utilization of the company's core ad delivery software as a service (SaaS) technologies. 

Three-month financial results for the period ended June 30, 2015Net revenues for the three months ended June 30, 2015, were $16.7 million as compared to $10.9 million for the three months ended June 30, 2014. Revenue in our Partner Network was $9.3 million in the second quarter of 2015 compared to $5.6 million in the same quarter last year and is reflective of the growth in this segment. Revenue in our Owned and Operated Network was $7.4 million in the second quarter of 2015 compared to $5.4 million in the same quarter last year and is the result of expansion across the sites both existing and new. Operating expenses increased from $5.8 million in the second quarter of 2014 to $9.1 million in the same quarter this year, comprised notably of increased marketing and compensation expenses.

For the quarter ended June 30, 2015, Net Income was $445,000 or $0.02 per diluted share compared to $382,000, or $0.02 per diluted share, for the three months ended June 30, 2014.

For the quarter ended June 30, 2015, Adjusted EBITDA, a non-GAAP measure, was $1.1 million compared to $1.2 million in the second quarter of 2014.

Balance Sheet as of June 30, 2015
Cash and cash equivalents totaled $3.8 million at June 30, 2015. Current assets and total assets were $10.4 million and $27.4 million, respectively, and current liabilities and total liabilities were $13.2 million and $18.2 million, respectively, as of June 30, 2015. Bank debt was reduced to $1.5 million from $3.6 million at December 31, 2014. Stockholders' equity was approximately $9.2 million at June 30, 2015.

Conference Call Information
Date: Wednesday, July 29, 2015
Time: 4:15 p.m. EDT
Domestic Dial-in number: 1-888-503-8175
International Dial-in number: 1-719-325-2463
Live webcast: http://public.viavid.com/index.php?id=115448

In addition, the call will be webcast on the Investor Relations section of the Company's website at http://investor.inuvo.com/events_and_presentations where it will also be archived for 45 days. A telephone replay will be available through Saturday, September 12, 2015. To access the replay, please dial 1-877-870-5176 (domestic) or 1-858-384-5517 (international). At the system prompt, enter the code 1503372 followed by the # sign. You will then be prompted for your name, company and phone number. Playback will then automatically begin.

About Inuvo, Inc.
Inuvo®, Inc. (NYSE MKT: INUV) is an advertising technology and digital publishing business that serves billions of income generating ads monthly across a network of websites and apps serving desktop, tablet and mobile devices. To learn more about Inuvo, please visit www.inuvo.com or download our app at http://apple.co/1glLIGD for Apple iPhone or http://bit.ly/1G5f3K4 for Android.

Forward-looking Statements This press release contains certain forward-looking statements that are based upon current expectations and involve certain risks and uncertainties within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words or expressions such as "anticipate," "plan," "will," "intend," "believe" or "expect'" or variations of such words and similar expressions are intended to identify such forward-looking statements.

These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including, without limitation, statements made with respect to expectations with respect to our lack of profitable operating history, changes in our business, potential need for additional capital, fluctuations in demand; changes to economic growth in the U.S. economy; and government policies and regulations, including, but not limited to those affecting the Internet, all as set forth in our Annual Report on Form 10-K for the year ended December 31, 2014. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of Inuvo and are difficult to predict. Inuvo undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

INUVO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
									(Unaudited)
									June 30,					December 31,
									2015					2014
Assets
Current assets
		Cash							$	3,779,339				$	3,714,525
		Accounts receivable, net								6,348,993					5,106,300
		Unbilled revenue								29,038					23,541
		Prepaid expenses and other current assets								286,577					299,873
Total current assets										10,443,947					9,144,239
Property and equipment, net										1,201,858					959,475
Goodwill										5,760,808					5,760,808
Intangible assets, net										9,789,539					9,530,322
Other assets										210,050					211,833
Total assets									$	27,406,202				$	25,606,677
Liabilities and Stockholders' Equity
Current liabilities
		Accounts payable							$	8,368,632				$	5,714,158
		Accrued expenses and other current liabilities								4,175,373					3,704,464
		Term and credit notes payable, current portion								666,667					959,942
Total current liabilities										13,210,672					10,378,564
Deferred tax liability										3,552,500					3,552,500
Term and credit notes payable, long term										833,334					2,666,667
Other long-term liabilities										581,052					735,211
Total liabilities										18,177,558					17,332,942
Total stockholders' equity										9,228,644					8,273,735
Total liabilities and stockholders' equity									$	27,406,202				$	25,606,677
INUVO, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
				(Unaudited)
				Three Months Ended							Six Months Ended
				June 30,			June 30,				June 30,					June 30,
				2015			2014				2015					2014
Net revenue				$	16,727,810		$	10,942,033			$	30,148,757				$	21,063,750
Cost of revenue					7,092,744			4,666,175				13,161,963					8,342,930
Gross profit					9,635,066			6,275,858				16,986,794					12,720,820
Operating expenses
	Marketing costs				6,583,262			3,614,598				11,505,408					7,278,285
	Compensation				1,341,453			1,139,095				2,532,510					2,239,010
	Selling, general and administrative				1,178,539			1,054,355				2,166,305					2,064,964
Total operating expenses					9,103,254			5,808,048				16,204,223					11,582,259
Operating income					531,812			467,810				782,571					1,138,561
Interest expense, net					(37,412	)		(103,301		)		(88,573	)				(201,103	)
Net income from continuing operations before taxes					494,400			364,509				693,998					937,458
Income tax (expense) benefit					(34,700	)		-				371,753					75,698
Net income from continuing operations					459,700			364,509				1,065,751					1,013,156
Net income (loss) from discontinued operations					(14,692	)		17,782				5,567					43,894
Net income					445,008			382,291				1,071,318					1,057,050
Total comprehensive income				$	445,008		$	382,291			$	1,071,318				$	1,057,050
Earnings per share, basic and diluted
	From continuing operations			$	0.02		$	0.02			$	0.04				$	0.04
	From discontinued operations				.-			.-				-					-
Net income				$	0.02		$	0.02			$	0.04				$	0.04
Weighted average shares outstanding
	Basic				24,268,364			23,445,771				24,178,037					23,480,956
	Diluted				24,689,110			24,050,239				24,432,837					23,936,241
By Segment (Unaudited):
Net revenue
	Partner Network			$	9,284,038		$	5,569,504			$	16,857,418				$	11,021,121
	Owned and Operated Network				7,443,772			5,372,529				13,291,339					10,042,629
			Total	$	16,727,810		$	10,942,033			$	30,148,757				$	21,063,750
Gross profit
	Partner Network			$	2,209,021		$	959,197			$	3,729,916				$	2,817,601
	Owned and Operated Network				7,426,045			5,316,661				13,256,878					9,903,219
			Total	$	9,635,066		$	6,275,858			$	16,986,794				$	12,720,820

Reconciliation of Net Loss from Continuing Operations before Taxes to Adjusted EBITDA

INUVO, INC.
RECONCILIATION OF NET INCOME FROM CONTINUING OPERATIONS BEFORE TAXES TO ADJUSTED EBITDA
(Unaudited)
	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2015		2014		2015		2014
Net income from continuing operations before taxes	$	494,400	$	364,509	$	693,998		937,458
Interest expense, net		37,412		103,301		88,573		201,103
Depreciation		214,046		243,335		386,428		499,307
Amortization		258,156		198,501		456,657		397,002
Stock-based compensation		82,750		248,382		134,674		378,830
Severances and other non-recurring, non-cash items		--		36,145		--		117,943
Adjusted EBITDA	$	1,086,764	$	1,194,173	$	1,760,330	$	2,531,643

In addition to disclosing financial results in accordance with United States generally accepted accounting principles ("GAAP"), our earnings release contains the non-GAAP financial measure "Adjusted EBITDA."

Adjusted EBITDA is not a measure of performance defined in accordance with GAAP. However, management believes that Adjusted EBITDA is useful to investors in evaluating the Company's performance because Adjusted EBITDA is a commonly used financial analysis tool for measuring and comparing companies in the Company's industry in areas of operating performance.

Management believes that the disclosure of Adjusted EBITDA offers an additional view of the Company's operations that, when coupled with the GAAP results and the reconciliation to GAAP net loss, provides a more complete understanding of the Company's results of operations and the factors and trends affecting the Company's business.

We present Adjusted EBITDA as a supplemental measure of our performance. We defined Adjusted EBITDA as net income (loss) from continuing operations before taxes plus (i) interest expense, net, (ii) depreciation, (iii) amortization, (iv) stock-based compensation, and (v) accrued severance and other non-recurring, noncash expense. These further adjustments are itemized above. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same or similar to some of the adjustments in the presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

CONTACT INFORMATION

Inuvo, Inc.
Wally Ruiz
Chief Financial Officer
501-205-8397wallace.ruiz@inuvo.com
or
Investor Relations
Capital Markets Group
Alan Sheinwald
914-669-0222alan@CapMarketsGroup.com

EX-99.2

Inuvo, Inc.

Second Quarter 2015 Conference Call

July 29, 2015

Operator:

Good day and welcome to the Inuvo, Inc. 2015 Second Quarter Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Alan Sheinwald of Capital Markets Group, LLC. Please go ahead, sir.

Alan Sheinwald:

Thank you, Operator and good afternoon. I’d like to thank everyone for joining us today for the Inuvo second quarter 2015 shareholder’s update conference call. Today, Mr. Richard Howe, Chief Executive Officer, and Mr. Wally Ruiz, Chief Financial Officer, of Inuvo will be your presenters on the call.

Before we begin, I’m going to review the Company’s Safe Harbor statement. The statements in this conference call that are not descriptions of historical facts are forward-looking statements relating to future events and, as such, all forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially.When used in this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to Inuvo, Inc., are, as such, a forward-looking statement. Investors are cautioned that all forward-looking statements involve risks and uncertainties which may cause actual results to differ from those anticipated by Inuvo at this time. In addition, other risks are more fully described in Inuvo's public filings with the US Securities and Exchange Commission, which can be reviewed at www.sec.gov.

With that out of the way, now I’d like to congratulate Management on outstanding growth in the second quarter, and turn the call over to Mr. Richard Howe, CEO of Inuvo. Rich, the floor is yours.

Richard Howe Comments:

Thank you Alan, and thanks everyone for joining us today.

We are pleased to be announcing our third consecutive quarter of strong growth, year-over-year. Revenue in the 2nd Quarter was $16.7 million, up 53% from $10.9 million in Q2 last year and up 25% sequentially.

Net Income was also strong at $445,000 dollars or $0.02 per diluted share, up 16% over last year. This marks the 6^th straight quarter of positive Net Income on a GAAP basis and the 14^th straight quarter of positive Net Income when adjusted for non-cash items.

Gross margin in the 2nd Quarter was a solid 58% and Gross Profit was up 54% year-over-year. Both segments of the business were up in Q2 with the Partner Segment Revenue up 67% and the Owned & Operated up 39% year-over-year.

Wally Ruiz, our CFO, will be sharing additional details about our financials shortly, but the bottom line is we’ve had a great first half of 2015.

Let me share with you what we’ve been up to within each segment of the business starting first with the Owned and Operated segment.

We experienced improvement within the O/O segment throughout the quarter. The result of a continued focus on additional site features designed to improve engagement with our audience.

These feature enhancements began in the early part of the year and have started to translate into an increase in the number of pages the average user engages with, on the alot branded publications, along with an increase in the total time spent on alot. Collectively, these two measures are what we mean when we refer to engagement.

In this regard, in the quarter, the average page views per user on the Health site was up 50%, the Living site was up 100%, and the Travel site had an outstanding improvement of 200% sequentially.

Increasing the engagement with our sites will be an ongoing focus for this year as it provides additional opportunities to put our advertisers’ messages in front of an involved, in-market, information seeking group of consumers. In turn this improved user engagement allows us to command a premium from advertisers for ad placements on our sites.

During Q2 we also completed the final transition of legacy alot properties, moving them to the new alot page template. The highest level domain, alot.com, has now joined the family and completes this Brand overhaul. You can now go to alot.com as a launching point for all of the websites and you will note that we now provide a consistent user experience for all visitors, including the legacy consumers who still use the alot toolbar.

Our work with the Careers site over the last year led to the development and launch of an Education site, which we announced in the quarter. This vertical has a highly engaged audience searching for information that can help them further their own or their children’s educational aspirations. While the site has only been live a relatively short time, we are seeing promising results for page views and visits.

The number and technological sophistication of marketing initiatives we deploy in an effort to attract an audience to our sites continued to grow in Q2. We have broadened the number of channels we use to market through and have seen some encouraging results.

Pinterest, Facebook, Instagram and a number of the content recommendation technology providers are among the marketing channels we expect to grow throughout the second half of the year.

In addition to building more engagement features and increasing our social presence, we are also excited about expanding the use of our in-house photographic and video production capabilities.

During Q2 we began creating our first in-house and proprietary photo shoots, which we deployed in test to measure whether these more highly targeted photos would translate into engagement with consumers through image galleries deployed on the sites.

Early results suggest they did and because of that we have plans to scale this effort throughout Q3 and Q4, using both in-house staff and freelance photographers who will work side by side with our design, editorial and advertising teams. In addition, we will also be deploying our first in-house produced videos in Q3.

Our Partner segment had a very successful second quarter. With that said, we can on occasion within this segment experience an acceleration of growth when partners benefit from a demand from advertisers that exceeds the supply of leads in that market. A number of our partners had this occur in Q2 and as a result we expect them to normalize within the second half of the year.

Internally, and as a result of the SearchLinks launch, we have also organized within the Partner Segment around two product offerings which we will refer to going forward as PartnerAds and SearchLinks.

The PartnerAds business has performed well for us over the last 2-years. Within PartnerAds, our focus will be to continue to sign up new customers while directing some resources towards selling, delivering and supporting SearchLinks. Our PartnerAds business has and continues to successfully serve ads into thousands of websites daily.

In last few quarters we have been messaging the upcoming launch of SearchLinks, reinforcing the strategic advantage of our Digital Publishing business as a catalyst for the design and optimization of the product line.

The opportunity size, the quality of publishing partners and the more comprehensive nature of the SearchLinks solution points to an opportunity to capitalize on the growing market for Native Advertising. The PartnerAds business has also been an asset in this launch, having supplied the beta clients for the first quarters in-market tests.

The SearchLinks launch, which we announced officially on Tuesday has actually been ongoing for about a month. The early feedback, the quality of publishing partners, the signups and the pipeline are all progressing nicely. In this short time, we have signed up about 40 new publishing partners for SearchLinks, about half of which are now live.

We designed SearchLinks to address some very real issues facing publishers who are currently using competing products. Among those issues were poor ad-targeting, poor ad-content, poor ad-quality and insufficient ad-coverage per page topic.

We wanted to design a product that didn’t bait consumers into a click. Rather, we have designed an ad-product that is so aligned with the content that it also aligns with the interests of consumers.

Q2 was a very busy quarter for SearchLinks – scaling a solution like this requires a coordination among development, delivery, account management and sales teams and in many of those functions, it has also meant hiring and training new people.

We expect to continue to hire in support of this product for the foreseeable future and as we onboard more publishers we will continue to optimize, through technology enhancements, the delivery and support of those clients in an effort to become more efficient.

An example of this is self-service. For now, we have chosen to work closely with publishers to ensure as much as possible that these new clients experience early success with our product. Soon however, we expect to be in a position where we feel comfortable allowing clients to go through the qualification, signup, implementation and payment processes in an automated fashion.

SearchLinks is by far the most technically sophisticated product line we have ever built and we wouldn’t have directed our resources towards this solution if we didn’t believe the opportunity warranted it.

SearchLinks is currently delivering about $10,000 dollars per day in Revenue. The product line is currently comprised of three different ad-unit types. We expect the suite of ad-units to expand over time.

We are excited about this launch and we plan to push hard through the second half to sign up and successfully implement as many new clients as practical. Like any new product launch, we expect as we scale that we will encounter various challenges but with that said, we feel good about our ability to deliver on the promise of the solution, both for ourselves and our partners.

I’d now like to turn the call over to Wally.

Wally Ruiz Comments:

Thank you Rich and good afternoon everyone.  Today we reported another consecutive quarter of strong revenue growth and profitability.

Inuvo reported revenue of $16.7 million in the second quarter of 2015 compared to $10.9 million in the same quarter of last year, a 53% increase; $9.3 million came from the Partner Network and $7.4 million from the Owned and Operated Network.

The Partner Network which delivers advertisements to our partner’s websites and applications, reported $9.3 million in the second quarter of this year compared to $5.6 million in the same quarter last year, a 67% increase.

Higher revenue in the Partner Network this year compared to the same quarter last year is due largely to the expansion of market share within the existing publisher base, and a focus on marketing campaigns in verticals that returned better than average ROIs in the quarter.

Though we are pleased with the high growth rate in the Partner segment, we believe these verticals will settle back to normal growth levels as competitors begin to exploit them.

The Owned & Operated Network, which is made up of a collection of websites and apps we own and where income is derived from advertisements, represented 45% of the company’s total revenue in the current year quarter.

The Owned & Operated Network reported $7.4 million of revenue in the second quarter of 2015, a 39% increase over the same quarter last year. The growth in this business segment is largely due to the investment made in proprietary content and effective marketing campaigns resulting in more revenue.

In the second quarter of this year we announced and launched a new website, education.alot.com which contributed to revenue growth in the quarter. Further, we acquired two websites that in their first full quarter, were also important contributors to the quarter’s revenue.

During the second quarter, we increased our sales allowance by approximately $326 thousand to a balance at June 30th of $866 thousand. The allowance is used to address advertiser adjustments that occur from time to time. Adjustments the company has incurred in 2015 have not been material.

Gross profit in the second quarter of 2015 was $9.6 million compared to $6.3 million last year, a 54% improvement. Gross profit as a percent of revenue or gross margin was 58% in the second quarter of 2015 compared to 57% in the same quarter last year.

Partner Network gross profit in the second quarter of 2015 was approximately $2.2 million compared to $1 million last year. The improved gross profit in this year’s quarter was primarily due to higher revenue associated with 45% more clicks on ads than during the same quarter last year and due to higher average RPCs (revenue per click) this year compared to the same period last year.

Gross Profit in the Owned & Operated segment in the second quarter of 2015 was $7.4 million compared to $5.3 million last year. The higher gross profit in this year’s quarter compared to last year is primarily due to higher revenue.

Operating expense, which is comprised of Marketing costs, Compensation expense and Selling, general & administration expense was $9.1 million in the second quarter of 2015 compared to $5.8 million in the same quarter last year.

Marketing costs are the primary costs associated with the Owned & Operated Network where dollars are spent to build an audience for the various sites and apps we own. Marketing costs were $6.6 million in the second quarter of 2015, a $3 million increase from the same quarter in the prior year.

Compensation expense increased by $200 thousand to $1.3 million in the second quarter of 2015 compared to the same quarter in the prior year. The higher expense in the current quarter is primarily due to higher payroll associated with additional hiring and to higher company incentive plan expense. At June 30, 2015, we had 56 full- and part-time employees; a year earlier we had 40 full- and part-time employees. S, G & A or Selling, general & administration expense was $1.2 million in the second quarter of 2015 compared to $1.1 million in the same quarter in the prior year. The increase in the current quarter S, G & A expense is due primarily to higher professional fees and facilities costs.

For the remainder of the year, we intend to maintain our focus on accelerating growth; with investments designed to continue the expansion of our web properties and support costs associated with the expansion of our Native Advertising product, SearchLinks. We therefore expect marketing costs to increase in coming quarters commensurate with a growing revenue in the Owned & Operated Network. We expect compensation expense to increase as we step up hiring, particularly to support the roll out of SearchLinks. We expect S, G & A expense to remain relatively flat.

Net interest expense was $37 thousand in the second quarter of 2015, $66,000 less than last year’s second quarter expense. This year’s lower expense is due to lower loan balances and the renegotiation of our line of credit and term debt last year.

We have accrued a tax expense of $36,000 in the second quarter of this year for state income tax we believe will be due.

The net loss from discontinued operations was $15 thousand in the second quarter of 2015 compared to an $18 thousand net income in the same quarter last year. The loss was due to a foreign exchange translation adjustment and an audit fee expense.

The Company reported a net income in the second quarter of 2015 of $445 thousand, or $0.02 per diluted share, compared to $382 thousand, or $0.02 per diluted share in the prior year quarter.

EBITDA, adjusted for stock based compensation expense was approximately $1.1 million in the quarter that ended June 30, 2015; compared to an adjusted EBITDA of $1.2 million in the same quarter of the prior year.

Turning to the Balance Sheet as of June 30, 2015, cash and cash equivalents totaled $3.8 million at the end of June, about $64 thousand higher than the cash balance at December 31^st. Bank debt was $1.5 million in June compared to $3.6 million at December 31^st 2014.

Now, I’d like to turn the call back to Rich for closing remarks.

Richard Howe Comments:

Thanks Wally.

In summary, we’ve had an exceptional first half of 2015 and we have exciting plans in place for both segments of the business in the second half. Producing our own video and image libraries is an exciting next step in our evolution as a digital publisher and SearchLinks opens Inuvo up to a market for advertising technology that we have never before had the opportunity to fulfill.

While we haven’t provided guidance, we have suggested in the past that we felt, based on the performance of the business over the last 18 months that Inuvo could be a $100-million-dollar annual revenue run rate company, organically, by the end of 2017. While aggressive, we still think this is an achievable longer term goal for our company even though our quarterly performance may continue to fluctuate as we execute our growth programs.

With that, I’d like to now turn the call over to the operator for questions.

Richard Howe Closing Comments:

I would like to thank everyone who joined us on today’s call. We appreciate your continued interest in Inuvo and look forward to reporting progress over the coming quarters.