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) |
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o | Smaller reporting company x |
Title of Class | April 22, 2016 | |
Common Stock | 24,469,604 |
Page No. | |||
Part I | |||
Item 1. | Financial Statements. | ||
Consolidated Balance Sheets | |||
Consolidated Statements of Income | |||
Consolidated Statements of Cash Flows | |||
Notes to Consolidated Financial Statements | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations. | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | ||
Item 4. | Controls and Procedures. | ||
Part II | |||
Item 1. | Legal Proceedings. | ||
Item 1A. | Risk Factors. | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | ||
Item 3. | Defaults upon Senior Securities. | ||
Item 4. | Mine Safety and Disclosures. | ||
Item 5. | Other Information. | ||
Item 6. | Exhibits. | ||
Signatures |
• | material dependence on our relationships with Yahoo! and Google; |
• | dependence of our Partner Network segment on relationships with distribution partners, and on the introduction of new products and services, which require significant investment; |
• | dependence of our Owned and Operated Network segment on our ability to effectively market and attract traffic; |
• | ability to acquire traffic through other search engines; |
• | dependence on our financing arrangements with Bridge Bank, N.A. which is collateralized by our assets; |
• | covenants and restrictions in our grant agreement with the state of Arkansas; |
• | lack of control over content and functionality of advertisements we display from third-party networks; |
• | need to keep pace with technology changes; |
• | fluctuations of quarterly earnings and the trading price of our common stock; |
• | vulnerability to interruptions of services; |
• | dependence on key personnel; |
• | vulnerability to regulatory and legal uncertainties and our ability to comply with applicable laws and regulations; |
• | need to protect our intellectual property; |
• | vulnerability to publishers who could fabricate clicks; |
• | dilutive impact to our stockholders from outstanding restricted stock grants, warrants and options; |
• | seasonality of our business; and |
• | downturn or uncertainty in global economic conditions. |
2016 | 2015 | ||||||
Assets | |||||||
Current assets | |||||||
Cash | $ | 4,433,537 | $ | 4,257,204 | |||
Accounts receivable, net of allowance for doubtful accounts of $16,736 and $17,200, respectively | 5,065,091 | 7,001,337 | |||||
Unbilled revenue | 8,727 | 16,154 | |||||
Prepaid expenses and other current assets | 280,619 | 345,752 | |||||
Total current assets | 9,787,974 | 11,620,447 | |||||
Property and equipment, net | 1,854,313 | 1,805,561 | |||||
Other assets | |||||||
Goodwill | 5,760,808 | 5,760,808 | |||||
Intangible assets, net of accumulated amortization | 9,086,657 | 9,320,951 | |||||
Other assets | 218,745 | 224,759 | |||||
Total other assets | 15,066,210 | 15,306,518 | |||||
Total assets | $ | 26,708,497 | $ | 28,732,526 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 7,664,096 | $ | 10,080,315 | |||
Accrued expenses and other current liabilities | 2,860,740 | 3,169,445 | |||||
Total current liabilities | 10,524,836 | 13,249,760 | |||||
Long-term liabilities | |||||||
Deferred tax liability | 3,799,600 | 3,799,600 | |||||
Other long-term liabilities | 701,957 | 722,722 | |||||
Total long-term liabilities | 4,501,557 | 4,522,322 | |||||
Stockholders’ equity | |||||||
Preferred stock, $.001 par value: | |||||||
Authorized shares 500,000, none issued and outstanding | — | — | |||||
Common stock, $.001 par value: | |||||||
Authorized shares 40,000,000; issued shares 24,823,798 and 24,752,408, respectively; outstanding shares 24,447,271 and 24,375,881, respectively | 24,823 | 24,752 | |||||
Additional paid-in capital | 129,428,346 | 129,081,029 | |||||
Accumulated deficit | (116,374,506 | ) | (116,748,778 | ) | |||
Treasury stock, at cost - 376,527 shares | (1,396,559 | ) | (1,396,559 | ) | |||
Total stockholders' equity | 11,682,104 | 10,960,444 | |||||
Total liabilities and stockholders' equity | $ | 26,708,497 | $ | 28,732,526 |
For the Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Net revenue | $ | 18,730,449 | $ | 13,420,947 | |||
Cost of revenue | 4,285,270 | 6,069,219 | |||||
Gross profit | 14,445,179 | 7,351,728 | |||||
Operating expenses | |||||||
Marketing costs | 11,065,666 | 4,922,146 | |||||
Compensation | 1,716,880 | 1,191,057 | |||||
Selling, general and administrative | 1,259,626 | 987,766 | |||||
Total operating expenses | 14,042,172 | 7,100,969 | |||||
Operating income | 403,007 | 250,759 | |||||
Interest expense, net | (23,608 | ) | (51,161 | ) | |||
Income from continuing operations before taxes | 379,399 | 199,598 | |||||
Income tax (expense) benefit | (7,235 | ) | 406,453 | ||||
Net income from continuing operations | 372,164 | 606,051 | |||||
Net income from discontinued operations | 2,110 | 20,259 | |||||
Net income | 374,274 | 626,310 | |||||
Per common share data | |||||||
Basic and diluted: | |||||||
Net income from continuing operations | $ | 0.02 | $ | 0.03 | |||
Net income from discontinued operations | — | — | |||||
Net income | $ | 0.02 | $ | 0.03 | |||
Weighted average shares | |||||||
Basic | 24,381,497 | 24,086,705 | |||||
Diluted | 24,566,288 | 24,240,258 |
For the Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Operating activities: | |||||||
Net income | $ | 374,274 | $ | 626,310 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Settlement of tax liability | — | (406,453 | ) | ||||
Depreciation and amortization | 540,562 | 370,883 | |||||
Stock based compensation | 359,338 | 51,924 | |||||
Amortization of financing fees | 6,400 | 9,533 | |||||
Adjustment of European liabilities related to discontinued operations | (5,144 | ) | (20,461 | ) | |||
Recovery of doubtful accounts | (464 | ) | (80 | ) | |||
Change in operating assets and liabilities: | |||||||
Accounts receivable and unbilled revenue | 1,944,137 | (2,287,739 | ) | ||||
Prepaid expenses and other assets | 64,747 | 57,613 | |||||
Accounts payable | (2,411,075 | ) | 1,307,931 | ||||
Accrued expenses and other liabilities | (299,033 | ) | (837,934 | ) | |||
Other, net | — | 11,801 | |||||
Net cash provided by (used in) operating activities | 573,742 | (1,116,672 | ) | ||||
Investing activities: | |||||||
Purchases of equipment and capitalized development costs | (372,598 | ) | (239,427 | ) | |||
Net cash used in investing activities | (372,598 | ) | (239,427 | ) | |||
Financing activities: | |||||||
Payments on term note payable and capital leases | (12,859 | ) | (183,725 | ) | |||
Net taxes paid on RSU grants exercised | (11,952 | ) | (251,084 | ) | |||
Net cash used in financing activities | (24,811 | ) | (434,809 | ) | |||
Net change – cash | 176,333 | (1,790,908 | ) | ||||
Cash, beginning of year | 4,257,204 | 3,714,525 | |||||
Cash, end of period | $ | 4,433,537 | $ | 1,923,617 | |||
Supplemental information: | |||||||
Interest paid | $ | 18,063 | $ | 37,075 | |||
Income taxes paid | $ | — | $ | 97,483 | |||
March 31, 2016 | December 31, 2015 | ||||||
Furniture and fixtures | $ | 231,463 | $ | 230,637 | |||
Equipment | 775,713 | 2,815,748 | |||||
Software | 9,978,535 | 9,856,947 | |||||
Leasehold improvements | 440,900 | 436,311 | |||||
Subtotal | 11,426,611 | 13,339,643 | |||||
Less: accumulated depreciation and amortization | (9,572,298 | ) | (11,534,082 | ) | |||
Total | $ | 1,854,313 | $ | 1,805,561 |
Term | Carrying Value | Accumulated Amortization and Impairment | Net Carrying Value | Year-to-date Amortization | |||||||||||||
Customer list, Google | 20 years | $ | 8,820,000 | $ | (1,800,750 | ) | $ | 7,019,250 | $ | 110,250 | |||||||
Customer list, all other | 10 years | 1,610,000 | (657,433 | ) | 952,567 | 40,251 | |||||||||||
Trade names, ALOT (1) | 5 years | 960,000 | (784,000 | ) | 176,000 | 48,000 | |||||||||||
Domain websites (2) | 5 years | 715,874 | (167,034 | ) | 548,840 | 35,793 | |||||||||||
Trade names, web properties (1) | - | 390,000 | — | 390,000 | — | ||||||||||||
Intangible assets classified as long-term | $ | 12,495,874 | $ | (3,409,217 | ) | $ | 9,086,657 | $ | 234,294 | ||||||||
Goodwill, Partner Network | $ | 1,776,544 | $ | — | $ | 1,776,544 | $ | — | |||||||||
Goodwill, Owned and Operated Network | 3,984,264 | — | 3,984,264 | — | |||||||||||||
Goodwill, total | $ | 5,760,808 | $ | — | $ | 5,760,808 | $ | — |
(1) | We have determined the ALOT trade names should be amortized over five years and the trade names related to our web properties have an indefinite life, and as such are not amortized. |
(2) | On May 8, 2015, we purchased two domain websites with a fair value of $715,874. We determined they should be amortized over five years (see Note 7). |
2016 | $ | 702,882 | |
2017 | 777,176 | ||
2018 | 745,176 | ||
2019 | 745,176 | ||
2020 | 613,949 | ||
Thereafter | 5,112,298 | ||
Total | $ | 8,696,657 |
March 31, 2016 | December 31, 2015 | ||||||
Accrued marketing costs | $ | 2,068,677 | $ | 1,404,488 | |||
Accrued sales allowance | 250,000 | 500,000 | |||||
Contingent stock due for acquired domains, current portion | 238,625 | 238,625 | |||||
Accrued expenses and other | 185,692 | 294,629 | |||||
Accrued payroll and commission liabilities | 47,045 | 643,908 | |||||
Capital leases, current portion | 42,279 | 46,313 | |||||
Accrued taxes | 14,954 | 13,803 | |||||
Deferred Arkansas grant, current portion | 13,468 | 27,679 | |||||
Total | $ | 2,860,740 | $ | 3,169,445 |
March 31, 2016 | December 31, 2015 | ||||||
Contingent stock due for acquired domains, less current portion | $ | 477,249 | $ | 477,249 | |||
Deferred rent | 189,750 | 198,323 | |||||
Capital leases, less current portion | 22,385 | 31,210 | |||||
Deferred Arkansas grant, less current portion | 12,573 | 15,940 | |||||
Total | $ | 701,957 | $ | 722,722 |
Options Outstanding | RSUs Outstanding | Options and RSUs Exercised | Available Shares | Total | ||||||||||
2010 ECP | 250,498 | 1,047,848 | 2,017,682 | 669,917 | 3,985,945 | |||||||||
2005 LTIP (*) | 33,748 | 114,972 | 835,113 | — | 983,833 | |||||||||
Total | 284,246 | 1,162,820 | 2,852,795 | 669,917 | 4,969,778 |
For the Three Months Ended | ||||||
March 31, 2016 | March 31, 2015 | |||||
Weighted average shares outstanding for basic EPS | 24,381,497 | 24,086,705 | ||||
Effect of dilutive securities | ||||||
Options | 7,926 | 5,770 | ||||
Restricted stock units | 131,032 | 127,607 | ||||
Warrants | 45,833 | 20,176 | ||||
Weighted average shares outstanding for diluted EPS | 24,566,288 | 24,240,258 |
Lease Payments | |||
2016 | $ | 141,071 | |
2017 | 182,456 | ||
2018 | 183,858 | ||
2019 | 184,852 | ||
2020 | 140,749 | ||
Total | $ | 832,986 |
For the Three Months Ended | ||||||||||||
March 31, 2016 | March 31, 2015 | |||||||||||
$ | % of Revenue | $ | % of Revenue | |||||||||
Partner Network | 5,275,257 | 28.2 | % | 7,573,380 | 56.4 | % | ||||||
Owned and Operated Network | 13,455,192 | 71.8 | % | 5,847,567 | 43.6 | % | ||||||
Total net revenue | 18,730,449 | 100.0 | % | 13,420,947 | 100.0 | % |
For the Three Months Ended | ||||||||||||
March 31, 2016 | March 31, 2015 | |||||||||||
$ | Gross Profit % | $ | Gross Profit % | |||||||||
Partner Network | 1,023,365 | 19.4 | % | 1,520,895 | 20.1 | % | ||||||
Owned and Operated Network | 13,421,814 | 99.8 | % | 5,830,833 | 99.7 | % | ||||||
Total gross profit | 14,445,179 | 77.1 | % | 7,351,728 | 54.8 | % |
For the Three Months Ended March 31, | |||||||||||||||
2016 | 2015 | Change | % Change | ||||||||||||
Partner Network | $ | 5,275,257 | $ | 7,573,380 | $ | (2,298,123 | ) | (30.3 | )% | ||||||
Owned and Operated Network | 13,455,192 | 5,847,567 | 7,607,625 | 130.1 | % | ||||||||||
Net Revenue | $ | 18,730,449 | $ | 13,420,947 | $ | 5,309,502 | 39.6 | % |
For the Three Months Ended March 31, | |||||||||||||||
2016 | 2015 | Change | % Change | ||||||||||||
Partner Network | $ | 4,251,892 | $ | 6,052,485 | $ | (1,800,593 | ) | (29.7 | )% | ||||||
Owned and Operated Network | 33,378 | 16,734 | 16,644 | 99.5 | % | ||||||||||
Cost of revenue | $ | 4,285,270 | $ | 6,069,219 | $ | (1,783,949 | ) | (29.4 | )% |
For the Three Months Ended March 31, | |||||||||||||||
2016 | 2015 | Change | % Change | ||||||||||||
Marketing costs | $ | 11,065,666 | $ | 4,922,146 | $ | 6,143,520 | 124.8 | % | |||||||
Compensation | 1,716,880 | 1,191,057 | $ | 525,823 | 44.1 | % | |||||||||
Selling, general and administrative | 1,259,626 | 987,766 | $ | 271,860 | 27.5 | % | |||||||||
Operating expenses | $ | 14,042,172 | $ | 7,100,969 | $ | 6,941,203 | 97.8 | % |
Exhibit No. | Description of Exhibit | |
10.25 | Amendment #12 dated March 31, 2016 to Yahoo! Publisher Network Contract #1-19868214 with Yahoo! Inc., Yahoo! Singapore Digital Marketing Pte. Ltd., and Yahoo! EMEA Limited * | |
31.1 | Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer * | |
31.2 | Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer * | |
32.1 | Section 1350 certification of Chief Executive Officer * | |
32.2 | Section 1350 certification of Chief Financial Officer * | |
101.INS | XBRL Instance Document * | |
101.SCH | XBRL Taxonomy Extension Schema Document * | |
1010.CAL | XBRL Taxonomy Extension Calculation Linkbase Document * | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document * | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document * | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document * |
Inuvo, Inc. | |||
April 27, 2016 | By: | /s/ Richard K. Howe | |
Richard K. Howe, | |||
Chief Executive Officer, principal executive officer | |||
April 27, 2016 | By: | /s/ Wallace D. Ruiz | |
Wallace D. Ruiz, | |||
Chief Financial Officer, principal financial and accounting officer |
• | As shown in Attachment A and as described in this Cover Page and Attachments |
• | Minimum Above the Fold: For desktop and tablet, Paid Search Results – ***. |
• | For clarity, any launch of the Links and Results set forth in implementation #6 above will be subject to Yahoo’s prior approval (email acceptable). |
• | Additional terms for adult Paid Results are set forth in Section D of Attachment A. |
• | Additional terms for D2S are set forth in Section G of Attachment A |
• | Terms and Conditions are set forth in Attachment B. |
• | Additional terms for syndication are set forth in Attachment C. |
• | Additional terms for *** are set forth in Section 4 of Amendment #1 to the Original Agreement and in Attachment D. |
• | Branding: Publisher will display the Marks as shown in the mockups attached hereto (or as approved in writing by Yahoo) on Publisher’s Offerings and in connection with the offer of the Applications and Syndicated Applications and the implementations associated therewith. Publisher will abide by the terms in Attachment E and any other guidelines that may be provided by Yahoo from time to time. |
• | Additional terms for Applications and Bundled Applications are set forth in Attachment F. |
• | Additional terms for error implementations (implementation #5 under Implementations on Publisher’s Offerings) are set forth in Attachment G. |
• | Additional terms for domain match implementations (implementation #4 under Implementations on Publisher’s Offerings) are set forth in Attachment H. |
• | Additional terms for email implementations (implementation #7 under Implementations on Publisher’s Offerings) are set forth in Attachment I. |
• | Notwithstanding anything to the contrary contained in this Agreement, all Paid Results distributed in connection with any and all *** hereunder may only appear on web sites owned and operated by Publisher. |
Total monthly Gross Revenue | Percentage of total monthly Gross Revenue* |
*** | ***% |
*** | ***% |
*** | ***% |
Total monthly Gross Revenue | Percentage of total monthly Gross Revenue* |
*** | ***% |
*** | ***% |
*** | ***% |
Total monthly Gross Revenue | Percentage of total monthly Gross Revenue* |
*** | ***% |
*** | ***% |
*** | ***% |
12. | Section B.4 of Attachment A of the Original Agreement is amended and restated to read as follows: |
(a) | Immediately suspend Publisher’s distribution of Links and/or Results in any specific Email implementation or in Email generally; |
(b) | Terminate this Email Attachment for any or no reason in Yahoo’s sole discretion, on 24 hours’ notice to Publisher. Within 24 hours of receiving such notice, Publisher and its vendors will stop including Links and/or Results in any Email. Yahoo’s sole obligation to Publisher with regard to this Email Attachment is for undisputed payments. In addition, Yahoo will have no obligations to nor any liability in connection with any of Publisher’s vendors under this Email Attachment. |
INUVO, INC. | YAHOO! INC. |
By: /s/ Don W. Barrett, III | By: /s/ Ian Weingarten |
Name: Don W. Barrett, III | Name: Ian Weingarten |
Title: COO | Title: SVP, Corporate Development & Partnerships |
Date: 3/11/16 | Date: March 30th, 2016 |
YAHOO! EMEA LIMITED | |
By: /s/ Ronnie Cobane | |
Name: William R. Cobane | |
Title: Director | |
Date: 18 April 2016 | |
By: /s/ Margaret Chang | |
Name: Margaret Chang | |
Title: Senior Director | |
Date: 13 Apr 2016 |
1. | I have reviewed this annual report on Form 10-K of Inuvo, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | I have reviewed this annual report on Form 10-K of Inuvo, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and |
2. | The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company. |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and |
2. | The information contained in the Report fairly presents, in all material respects, the financial conditions and results of operations of the Company. |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Apr. 22, 2016 |
|
Document And Entity Information | ||
Entity Registrant Name | Inuvo, Inc. | |
Entity Central Index Key | 0000829323 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 24,469,604 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Assets | ||
Allowance for Doubtful accounts | $ 16,736 | $ 17,200 |
Stockholders Equity | ||
Preferred stock par value (usd 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 value (usd per share) | $ 0.001 | $ 0.001 |
Common stock shares authorized (in shares) | 40,000,000 | 40,000,000 |
Common stock shares issued (in shares) | 24,823,798 | 24,752,408 |
Common stock shares outstanding (in shares) | 24,447,271 | 24,375,881 |
Treasury stock (in shares) | 376,527 | 376,527 |
Organization and Business |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business | Organization and Business Company Overview Inuvo, Inc. and subsidiaries ("we", "us" or "our") is an internet advertising technology and digital publishing company. We develop technology to deliver content and targeted advertisements over the internet. We generate revenue when an end user clicks on the advertisements we delivered. We manage our business as two segments, the Partner Network and the Owned and Operated Network. The Partner Network delivers advertisements to our partners' owned or managed websites and applications on desktop, tablet and mobile devices. We generate revenue in this segment when an advertisement we serve is clicked. At that time, we share a portion of the revenue we collect from the advertiser with the publishing partner where the click originated. Our proprietary technology platform allows for targeted distribution of advertisements at a scale that measures in the hundreds of millions of advertisements delivered monthly. The Owned and Operated Network designs, builds and markets consumer websites and applications. This segment consists of our mobile-ready ALOT websites and acquired web properties. The focus is on providing engaging content to our users. The majority of revenue generated by this segment is derived from clicks on advertisements delivered through web searches and advertisements displayed on the websites. We have taken several significant steps to position our business for long-term success including investments in ad serving technology, the development of adaptive, native advertising technology, the creation of proprietary content, the expansion of publishers within the Partner Network, the continued expansion of direct relationships with advertisers, and the optimization of overhead and operational costs all of which we expect will improve revenue and profitability. Our ALOT-branded websites and applications have a broad appeal focusing on popular topics such as health, local search, finance, careers, travel, living and education. These sites are content rich, searchable, mobile-ready web properties. We plan to continue the expansion of our website and mobile application business by expanding the ALOT brand and acquiring websites. In 2015, we launched our proprietary native advertising solution for web publishers and application developers, "SearchLinks"®. This is our entry product in the fast growing native advertising marketplace where ad copy seamlessly integrates with the content of the host website or application. SearchLinks was made available to the marketplace in the third quarter of 2015. We expect it to be a contributor to growth in 2016. Liquidity On September 29, 2014, we renewed our Business Financing Agreement with Bridge Bank, N.A. ("Bridge Bank") (see Note 5, "Notes Payable"). The renewal provided continued access to the revolving line of credit up to $10 million through September 2016 and a new term loan of $2 million through September 2017. As of March 31, 2016, the balance of both the term loan and the revolving line of credit was zero and the revolving line of credit had approximately $4.9 million of available credit. During the first quarter of 2014 we filed an S-3 registration statement with the Securities and Exchange Commission ("SEC") to replace the existing, expiring S-3 “shelf” registration statement. Though we believe the revolving line of credit and cash generated by operations will provide sufficient cash for operations over the next twelve months, we may still elect to sell stock to the public or to selected investors, or borrow under the current or any replacement line of credit or other debt instruments in order to fund the development of our technologies, make acquisitions, pursue new business opportunities or grow existing businesses. Customer concentration We generate the majority of our revenue from two customers, Yahoo! and Google. At March 31, 2016 and December 31, 2015, these two customers combined accounted for 98.6% of our gross accounts receivable balance. For the three months ended March 31, 2016 and March 31, 2015, these two customers combined accounted for 97.4% and 98.3% of net revenue, respectively. We leverage the advertiser relationships Yahoo! and Google have developed as an alternative to going direct to advertisers. While this strategy creates a concentration risk, it also provides upside opportunities not the least of which include; access to hundreds of thousands of advertisers across geographies; the ability to scale our business across verticals; a reduction in sales costs associated with direct sales to advertisers; access to innovation; macro level market insight. |
Summary of Significant Accounting Policies |
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Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of presentation The consolidated financial statements presented are for Inuvo, Inc. and its consolidated subsidiaries. The accompanying unaudited consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet as of December 31, 2015, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. In our opinion, these consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC on February 12, 2016. Use of estimates The preparation of financial statements, in accordance with accounting principles generally accepted in the United States ("GAAP"), requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. We regularly evaluate estimates and assumptions related to allowances for returns and redemptions, allowances for doubtful accounts, goodwill and purchased intangible asset valuations, lives of intangible assets, deferred income tax asset valuation allowances, contingent liabilities, including the Arkansas grant contingency, and stock compensation. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material. Revenue Recognition We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 605-10 Revenue Recognition. We recognize revenue when the following criteria have been met: persuasive evidence of an arrangement exists, the fees are fixed and determinable, no significant obligations remain and collection of the related receivable is reasonably assured. Most of our revenue is generated through clicks on advertisements presented on our properties or those of our partners. We recognize revenue from clicks in the period in which the click occurs. Payments to partners who display advertisements we serve are recognized as cost of revenue. Revenue from data sales and commissions is recognized in the period in which the transaction occurs and the other revenue recognition criteria are met. Recent accounting pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which defers by one year the effective date of ASU 2014-09. Accordingly, this guidance is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted for interim and annual periods beginning after December 15, 2016. The Company plans to adopt this guidance on January 1, 2018. The Company is currently evaluating the effects, if any, that the adoption of this guidance will have on the Company’s financial position, results of operations and cash flows. In November 2015, FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, to simplify the presentation of deferred income taxes. The amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. The amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The adoption of ASU 2015-17 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard will require all leases with durations greater than twelve months to be recognized on the balance sheet and is effective for interim and annual reporting periods beginning after December 15, 2018, although early adoption is permitted. We believe adoption of this standard will have an impact on our Consolidated Balance Sheets. Although we have not completed our assessment, we do not expect the adoption to change the recognition, measurement or presentation of lease expenses within the Consolidated Statements of Income and Cash Flows. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The adoption of ASU 2015-17 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations. |
Property and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Property and Equipment The net carrying value of property and equipment was as follows as of:
During the three months ended March 31, 2016 and March 31, 2015 depreciation expense was $306,268 and $172,382, respectively. |
Other Intangible Assets and Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Intangible Assets and Goodwill | Other Intangible Assets and Goodwill The following is a schedule of intangible assets from continuing operations as of March 31, 2016:
Our amortization expense over the next five years and thereafter is as follows:
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Notes Payable |
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Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | Notes Payable On March 1, 2012 we entered into a Business Financing Agreement with Bridge Bank. The agreement provided us with a $5 million term loan and access to a revolving credit line of up to $10 million which we use to help satisfy our working capital needs. We have provided Bridge Bank with a first priority perfected security interest in all of our accounts and personal property as collateral for the credit facility. Available funds under the revolving credit line are 80% of eligible accounts receivable balances plus $1 million, up to a limit of $10 million. Eligible accounts receivable is generally defined as those from United States based customers that are not more than 90 days from the date of invoice. We had approximately $4.9 million available under the revolving credit line as of March 31, 2016. In September 2014, the Company entered into the Fifth Business Financing Modification Agreement with Bridge Bank that renewed the existing Agreement and modified some terms. The renewed agreement extended the revolving line of credit to September 2016 and provided for a new term loan of $2 million through September 2017. As of March 31, 2016, the balance of the term loan and the revolving line of credit were zero. On October 9, 2014, the Agreement was amended to clarify the definition of the financial covenants. The financial covenants are Debt Service Coverage Ratio, measured monthly on a trailing three months basis, of not less than 1.75 to 1.0 for the August 2014 measuring period, and each month measuring period thereafter and an Asset Coverage Ratio, measured monthly, of not less than 1.25 to 1.0 for the months ended August 2014 and September 30, 2014; 1.15 to 1.0 for the months ended October 31, 2014, November 30, 2014 and December 31, 2014, and 1.25 to 1.0 for the month ending January 31, 2015 and each month thereafter. We were in compliance with all bank covenants as of March 31, 2016. |
Accrued Expenses and Other Current Liabilities |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities The accrued expenses and other current liabilities consist of the following as of:
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Other Long-Term Liabilities |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Long-Term Liabilities | Other Long-Term Liabilities Other long-term liabilities consist of the following as of:
On May 8, 2015, we purchased two domain websites with a fair value of $715,874 (see Note 4). The purchase consideration is our common stock and is contingent upon the seller attaining specific performance targets over three years. |
Income Taxes |
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Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We have a deferred tax liability of $3,799,600 as of March 31, 2016, related to our intangible assets. We also have a net deferred tax asset of approximately $39,852,000. We believe it is more likely than not that essentially none of our deferred tax assets will be realized, and we have recorded a valuation allowance for the net deferred tax assets that may not be realized as of March 31, 2016. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation We maintain a stock-based compensation program intended to attract, retain and provide incentives for talented employees and directors and align stockholder and employee interests. Currently, we grant options and restricted stock units ("RSUs") from the 2010 Equity Compensation Plan (“2010 ECP”). Option and restricted stock unit vesting periods are generally up to three years. Compensation Expense For the three months ended March 31, 2016 and March 31, 2015, we recorded stock-based compensation expense for all equity incentive plans of $359,338 and $51,924, respectively. Total compensation cost not yet recognized at March 31, 2016 was $2,425,276 to be recognized over a weighted-average recognition period of 1.5 years. Significant Grants and Cancellations On April 20, 2015, we granted members of our board of directors a total of 51,948 RSUs with a weighted average fair value of $2.31 a share which fully vested on March 31, 2016. On July 27, 2015 and August 4, 2015, we granted certain employees service and performance RSUs totaling 965,500 shares with a weighted average fair value of $3.03 per share. The service RSUs vest annually over a three year period, commencing in July 2016, at the rate of 25% of the grant in year one and year two and the remaining 50% of the grant vesting on the third anniversary of the grant date. The awarding of the performance RSUs is contingent upon achieving certain revenue and profit targets and vest annually, one-third upon each anniversary of the grant date. The following table summarizes the stock grants outstanding under our 2005 Long-Term Incentive Plan ("2005 LTIP") and 2010 ECP plans as of March 31, 2016:
(*) Expired June 2015 |
Discontinued Operations |
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Mar. 31, 2016 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | Discontinued Operations Certain of our subsidiaries previously operated in the European Union ("EU"). Though operations ceased in 2009, statutory requirements required a continued presence in the EU for varying terms until November 2015. Profits and losses generated from the remaining assets and liabilities are accounted for as discontinued operations. For the three months ended March 31, 2016 and March 31, 2015, we recorded net income of $2,110 and $20,259, respectively, which came primarily from an adjustment of certain accrued liabilities originating in 2009 and earlier. |
Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share During the three months ended March 31, 2016 and 2015, we generated net income from continuing operations. Accordingly, some of our outstanding stock options, warrants and restricted stock awards have a dilutive impact, illustrated in the following table. We generated basic and diluted earnings per share from net income of $0.02 for the three month period ending March 31, 2016 and $0.03 for the three month period ending March 31, 2015.
In addition, the weighted average number of securities that were anti-dilutive for the three months ended March 31, 2016, but which could potentially dilute EPS in the future were 276,320 outstanding stock options with a weighted average exercise price of $2.86; 997,806 outstanding restricted stock units with a weighted average price of $3.20; and 675,000 outstanding warrants with a weighted average exercise price of $2.20. For the three months ended March 31, 2015, we had potentially dilutive options and warrants. We had 359,641 outstanding stock options with a weighted average exercise price of $5.93 and 725,000 outstanding warrants with a weighted average exercise price of $2.15. |
Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Leases | Leases We lease certain office space and equipment. As leases expire, it can be expected that they will be renewed or replaced in the normal course of business. Rent expense from continuing operations was $49,030 for three months ended March 31, 2016 and a credit of $1,966 for the three months ended March 31, 2015. The credit is primarily due to subleasing the company's former New York City office at a higher rate than its lease cost. Minimum future lease payments under non-cancelable operating leases as of March 31, 2016 are:
In April 2015, we entered into a five year agreement to lease office space in Little Rock, Arkansas commencing October 1, 2015, to serve as our headquarters. The new lease is for 12,245 square feet and will cost approximately $171,000 during its first year. Thereafter, the lease payment will increase by 2%. |
Litigation and Settlements |
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Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Litigation and Settlements | Litigation and Settlements From time to time we may become subject to legal proceedings, claims and litigation arising in the ordinary course of business. In addition, we are currently involved in the following litigation which is not incidental to its business: Oltean, et al. v. Think Partnership, Inc.; Edmonton, Alberta CA. On March 6, 2008, Kelly Oltean, Mike Baldock and Terry Schultz, former employees, filed a breach of employment claim against Inuvo in The Court of Queen's Bench of Alberta, Judicial District of Edmonton, Canada, claiming damages for wrongful dismissal in the amount of $200,000 for each of Kelly Oltean and Terry Schultz and $187,500 for Mike Baldock. On March 6, 2008, the same three plaintiffs filed a similar statement of claim against Vintacom Acquisition Company, ULC, a subsidiary of Inuvo, again for wrongful dismissal and claiming the same damages. In October 2009, the two actions were consolidated. The case is in the discovery stage and there has not been any progress in the litigation since April 2013 and Inuvo has been holding this matter in abeyance pending the Plaintiffs taking the next step in the litigation process. |
Segments |
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Segments | Segments We operate our business as two segments, Partner Network and Owned and Operated Network which are described in Note 1. Listed below is a presentation of net revenue and gross profit for all reportable segments for the three months ended March 31, 2016 and 2015. We currently only track certain assets at the segment level and therefore assets by segment are not presented below. Revenue by Segment
Gross Profit by Segment
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Subsequent Events |
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Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On March 31, 2016, the Company entered into Amendment #12 to Yahoo! Publisher Network Contract #1-19868214 (the “Amendment”) with Yahoo! Inc., Yahoo! Singapore Digital Marketing Pte. Ltd., and Yahoo! EMEA Limited (together, “Yahoo”). The Amendment modifies the terms of the Yahoo! Publisher Network Contract #1-19868214, as amended, between the Company and Yahoo! (the "Contract"). The Contract had an end date of July 24, 2016 and, among other things, the amendment extends the term of the Contract until May 31, 2018. |
Summary of Significant Accounting Policies (Policies) |
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Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The consolidated financial statements presented are for Inuvo, Inc. and its consolidated subsidiaries. The accompanying unaudited consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet as of December 31, 2015, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. In our opinion, these consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC on February 12, 2016. |
Use of estimates | Use of estimates The preparation of financial statements, in accordance with accounting principles generally accepted in the United States ("GAAP"), requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. We regularly evaluate estimates and assumptions related to allowances for returns and redemptions, allowances for doubtful accounts, goodwill and purchased intangible asset valuations, lives of intangible assets, deferred income tax asset valuation allowances, contingent liabilities, including the Arkansas grant contingency, and stock compensation. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material. |
Revenue Recognition | Revenue Recognition We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 605-10 Revenue Recognition. We recognize revenue when the following criteria have been met: persuasive evidence of an arrangement exists, the fees are fixed and determinable, no significant obligations remain and collection of the related receivable is reasonably assured. Most of our revenue is generated through clicks on advertisements presented on our properties or those of our partners. We recognize revenue from clicks in the period in which the click occurs. Payments to partners who display advertisements we serve are recognized as cost of revenue. Revenue from data sales and commissions is recognized in the period in which the transaction occurs and the other revenue recognition criteria are met. |
Recent accounting pronouncements | Recent accounting pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, which defers by one year the effective date of ASU 2014-09. Accordingly, this guidance is effective for interim and annual periods beginning after December 15, 2017 with early adoption permitted for interim and annual periods beginning after December 15, 2016. The Company plans to adopt this guidance on January 1, 2018. The Company is currently evaluating the effects, if any, that the adoption of this guidance will have on the Company’s financial position, results of operations and cash flows. In November 2015, FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, to simplify the presentation of deferred income taxes. The amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. The amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The adoption of ASU 2015-17 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This standard will require all leases with durations greater than twelve months to be recognized on the balance sheet and is effective for interim and annual reporting periods beginning after December 15, 2018, although early adoption is permitted. We believe adoption of this standard will have an impact on our Consolidated Balance Sheets. Although we have not completed our assessment, we do not expect the adoption to change the recognition, measurement or presentation of lease expenses within the Consolidated Statements of Income and Cash Flows. In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718). This standard makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The adoption of ASU 2015-17 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations. |
Property and Equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Carrying Value of Property and Equipment | The net carrying value of property and equipment was as follows as of:
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Other Intangible Assets and Goodwill (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets from Continuing Operations | The following is a schedule of intangible assets from continuing operations as of March 31, 2016:
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Schedule of Amortization Expense | Our amortization expense over the next five years and thereafter is as follows:
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Accrued Expenses and Other Current Liabilities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Expenses and other Current Liabilities | The accrued expenses and other current liabilities consist of the following as of:
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Other Long-Term Liabilities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Long-Term Liabilities | Other long-term liabilities consist of the following as of:
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Stock-Based Compensation (Tables) |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Based Compensation Grants | The following table summarizes the stock grants outstanding under our 2005 Long-Term Incentive Plan ("2005 LTIP") and 2010 ECP plans as of March 31, 2016:
(*) Expired June 2015 |
Earnings per Share (Tables) |
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Number of Shares |
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Leases (Tables) |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | Minimum future lease payments under non-cancelable operating leases as of March 31, 2016 are:
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Segments (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of all reportable segments | Listed below is a presentation of net revenue and gross profit for all reportable segments for the three months ended March 31, 2016 and 2015. We currently only track certain assets at the segment level and therefore assets by segment are not presented below. Revenue by Segment
Gross Profit by Segment
|
Property and Equipment (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
|
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | $ 11,426,611 | $ 13,339,643 | |
Less: accumulated depreciation and amortization | (9,572,298) | (11,534,082) | |
Total | 1,854,313 | 1,805,561 | |
Depreciation expense | 306,268 | $ 172,382 | |
Furniture and fixtures | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 231,463 | 230,637 | |
Equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 775,713 | 2,815,748 | |
Software | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 9,978,535 | 9,856,947 | |
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | $ 440,900 | $ 436,311 |
Other Intangible Assets and Goodwill - Amortization Expense (Details) |
Mar. 31, 2016
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2016 | $ 702,882 |
2017 | 777,176 |
2018 | 745,176 |
2019 | 745,176 |
2020 | 613,949 |
Thereafter | 5,112,298 |
Net Carrying Value | $ 8,696,657 |
Notes Payable (Details) |
Mar. 01, 2012
USD ($)
|
Mar. 31, 2016
USD ($)
|
Oct. 09, 2014 |
Sep. 30, 2014
USD ($)
|
Sep. 29, 2014
USD ($)
|
---|---|---|---|---|---|
Bridge Bank – Term Note Payable - March 1, 2012 | Bridge Bank, N.A. | Term Note Payable | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, face amount | $ 5,000,000 | ||||
Bridge Bank – Revolving Credit Line - March 1, 2012 | Bridge Bank, N.A. | Line of Credit | Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Line of credit facility, maximum borrowing capacity | $ 10,000,000 | $ 10,000,000 | |||
Debt instrument, allowable borrowings, percentage of eligible accounts receivable | 80.00% | ||||
Debt instrument, additional borrowing maximum, over eligible accounts receivable limit | $ 1,000,000 | ||||
Period for eligible accounts receivable | 90 days | ||||
Remaining borrowing capacity | $ 4,900,000 | ||||
Term loan | 0 | ||||
Bridge Bank – Term Note Payable - September 10, 2017 | Term Note Payable | |||||
Debt Instrument [Line Items] | |||||
Term loan | $ 0 | $ 2,000,000 | |||
Fifth Business Financing Modification Agreement with Bridge Bank | Bridge Bank, N.A. | Proceeding three month period beginning August 2014 | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, minimum debt service coverage ratio | 1.75 | ||||
Fifth Business Financing Modification Agreement with Bridge Bank | Bridge Bank, N.A. | August 2014 through September 2014 period | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, minimum asset coverage ratio | 1.25 | ||||
Fifth Business Financing Modification Agreement with Bridge Bank | Bridge Bank, N.A. | October 2014 through December 2014 period | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, minimum asset coverage ratio | 1.15 | ||||
Fifth Business Financing Modification Agreement with Bridge Bank | Bridge Bank, N.A. | January 2015 and period thereafter | |||||
Debt Instrument [Line Items] | |||||
Debt instrument, minimum asset coverage ratio | 1.25 |
Accrued Expenses and Other Current Liabilities (Details) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued marketing costs | $ 2,068,677 | $ 1,404,488 |
Accrued sales allowance | 250,000 | 500,000 |
Contingent stock due for acquired domains, current portion | 238,625 | 238,625 |
Accrued expenses and other | 185,692 | 294,629 |
Accrued payroll and commission liabilities | 47,045 | 643,908 |
Capital leases, current portion | 42,279 | 46,313 |
Accrued taxes | 14,954 | 13,803 |
Deferred Arkansas grant, current portion | 13,468 | 27,679 |
Total | $ 2,860,740 | $ 3,169,445 |
Other Long-Term Liabilities - Componenets of Other Long-Term Liabilities(Details) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Contingent stock due for acquired domains, less current portion | $ 477,249 | $ 477,249 |
Deferred rent | 189,750 | 198,323 |
Capital leases, less current portion | 22,385 | 31,210 |
Deferred Arkansas grant, less current portion | 12,573 | 15,940 |
Total | $ 701,957 | $ 722,722 |
Other Long-Term Liabilities - Narrative (Details) - Domain websites |
May. 08, 2015
USD ($)
website
|
Mar. 31, 2016
USD ($)
|
||
---|---|---|---|---|
Finite-Lived Intangible Assets [Line Items] | ||||
Number of finite-lived intangible assets purchased | website | 2 | |||
Carrying Value | $ | [1] | $ 715,874 | $ 715,874 | |
Contingency accrual, payment period | 3 years | |||
|
Income Taxes (Details) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Deferred tax liability | $ 3,799,600 | $ 3,799,600 |
Deferred tax asset | $ 39,852,000 |
Stock-Based Compensation - Narrative (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Aug. 04, 2015 |
Apr. 20, 2015 |
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock based compensation | $ 359,338 | $ 51,924 | ||
Compensation cost related to non vested awards not yet recognized | $ 2,425,276 | |||
Average remaining expense recognition period | 1 year 6 months | |||
Restricted stock units | Board of Directors | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity instruments other than options, grants in period (in shares) | 51,948 | |||
Grants in period, weighted average grant date fair value (in dollars per share) | $ 2.31 | |||
Restricted Stock Units (RSUs) and Performance Restricted Stock Units (RSUs) | Employee | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity instruments other than options, grants in period (in shares) | 965,500 | |||
Grants in period, weighted average grant date fair value (in dollars per share) | $ 3.03 | |||
Restricted Stock Units- Service Based | Employee | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Option and restricted stock unit vesting period | 3 years | |||
Restricted Stock Units- Service Based | Employee | Share-based Compensation Award, Tranche One | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Award vesting rights, percentage | 25.00% | |||
Restricted Stock Units- Service Based | Employee | Share-based Compensation Award, Tranche Two | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Award vesting rights, percentage | 25.00% | |||
Restricted Stock Units- Service Based | Employee | Share-based Compensation Award, Tranche Three | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Award vesting rights, percentage | 50.00% | |||
Restricted Stock Units- Performance Based | Employee | Share-based Compensation Award, Tranche One | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Award vesting rights, percentage | 33.33% | |||
Restricted Stock Units- Performance Based | Employee | Share-based Compensation Award, Tranche Two | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Award vesting rights, percentage | 33.33% | |||
Restricted Stock Units- Performance Based | Employee | Share-based Compensation Award, Tranche Three | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Award vesting rights, percentage | 33.33% | |||
Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Option and restricted stock unit vesting period | 3 years |
Stock-Based Compensation - Schedule of Grants (Details) |
Mar. 31, 2016
shares
|
---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options Outstanding (in shares) | 284,246 |
RSUs Outstanding (in shares) | 1,162,820 |
Options and RSUs Exercised (in shares) | 2,852,795 |
Available Shares (in shares) | 669,917 |
Total (in shares) | 4,969,778 |
2010 ECP | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options Outstanding (in shares) | 250,498 |
RSUs Outstanding (in shares) | 1,047,848 |
Options and RSUs Exercised (in shares) | 2,017,682 |
Available Shares (in shares) | 669,917 |
Total (in shares) | 3,985,945 |
2005 LTIP | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Options Outstanding (in shares) | 33,748 |
RSUs Outstanding (in shares) | 114,972 |
Options and RSUs Exercised (in shares) | 835,113 |
Available Shares (in shares) | 0 |
Total (in shares) | 983,833 |
Discontinued Operations (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Discontinued Operations and Disposal Groups [Abstract] | ||
Net income from discontinued operations | $ 2,110 | $ 20,259 |
Earnings per Share (Details) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Net income (loss) per share (in usd per share) | $ 0.02 | $ 0.03 |
Weighted average shares outstanding | ||
Weighted average shares outstanding for basic EPS (in shares) | 24,381,497 | 24,086,705 |
Effect of dilutive securities | ||
Warrants (in shares) | 45,833 | 20,176 |
Weighted average shares outstanding for diluted EPS (in shares) | 24,566,288 | 24,240,258 |
Employee stock option | ||
Effect of dilutive securities | ||
Share-based payment arrangements (in shares) | 7,926 | 5,770 |
Options outstanding (shares) | 276,320 | 359,641 |
Options, outstanding, weighted average exercise price during period (in USD per share) | $ 2.86 | $ 5.93 |
Restricted stock units | ||
Effect of dilutive securities | ||
Share-based payment arrangements (in shares) | 131,032 | 127,607 |
Options outstanding (shares) | 997,806 | |
Equity instruments other than options, outstanding, weighted average exercise price during period (in USD per share) | $ 3.20 | |
Warrant | ||
Effect of dilutive securities | ||
Options outstanding (shares) | 675,000 | 725,000 |
Equity instruments other than options, outstanding, weighted average exercise price during period (in USD per share) | $ 2.20 | $ 2.15 |
Leases (Details) |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Apr. 30, 2015
USD ($)
ft²
|
Mar. 31, 2016
USD ($)
|
Mar. 31, 2015
USD ($)
|
|
Related Party Transaction [Line Items] | |||
Rent expense, operating leases (credits) | $ 49,030 | $ (1,966) | |
Lease Payments | |||
2016 | 141,071 | ||
2017 | 182,456 | ||
2018 | 183,858 | ||
2019 | 184,852 | ||
2020 | 140,749 | ||
Total | $ 832,986 | ||
Arkansas Democrat-Gazette, Inc. | |||
Lease Payments | |||
Lessee leasing arrangements, term of contract | 5 years | ||
Number of square feet | ft² | 12,245 | ||
Operating leases, future minimum payments due, next twelve months | $ 171,000 | ||
Annual lease payment increase, percentage | 2.00% |
Litigation and Settlements (Details) - Pending Litigation |
1 Months Ended | |
---|---|---|
Mar. 06, 2008
USD ($)
plaintiff
|
Oct. 31, 2009
legal_action
|
|
Loss Contingencies [Line Items] | ||
Number of plaintiffs | plaintiff | 3 | |
Number of actions consolidated | legal_action | 2 | |
Oltean, et al. (Kelly Oltean) v. Think Partnership, Inc. | ||
Loss Contingencies [Line Items] | ||
Damages sought | $ 200,000 | |
Oltean, et al. (Terry Schultz) v. Think Partnership, Inc. | ||
Loss Contingencies [Line Items] | ||
Damages sought | 200,000 | |
Oltean, et al. (Mike Baldock) v. Think Partnership, Inc. | ||
Loss Contingencies [Line Items] | ||
Damages sought | $ 187,500 |
Segments - Schedule of Net Revenue (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2016
USD ($)
segment
|
Mar. 31, 2015
USD ($)
|
|
Segment Reporting [Abstract] | ||
Number of reportable segments | segment | 2 | |
Segment Reporting Information [Line Items] | ||
Net revenue | $ 18,730,449 | $ 13,420,947 |
Percent of revenue | 100.00% | 100.00% |
Operating Segments | Partner Network | ||
Segment Reporting Information [Line Items] | ||
Net revenue | $ 5,275,257 | $ 7,573,380 |
Percent of revenue | 28.20% | 56.40% |
Operating Segments | Owned and Operated Network | ||
Segment Reporting Information [Line Items] | ||
Net revenue | $ 13,455,192 | $ 5,847,567 |
Percent of revenue | 71.80% | 43.60% |
Segments - Schedule of Gross Profit (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Segment Reporting Information [Line Items] | ||
Gross Profit | $ 14,445,179 | $ 7,351,728 |
Percent of Gross Profit | 77.10% | 54.80% |
Operating Segments | Partner Network | ||
Segment Reporting Information [Line Items] | ||
Gross Profit | $ 1,023,365 | $ 1,520,895 |
Percent of Gross Profit | 19.40% | 20.10% |
Operating Segments | Owned and Operated Network | ||
Segment Reporting Information [Line Items] | ||
Gross Profit | $ 13,421,814 | $ 5,830,833 |
Percent of Gross Profit | 99.80% | 99.70% |
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