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 |
Emerging growth company | o |
Title of Class | October 27, 2017 | |
Common Stock | 28,480,659 |
Page No. | |||
Part I | |||
Item 1. | Financial Statements. | ||
Consolidated Balance Sheets | |||
Consolidated Statements of Operations | |||
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!, Google and OpenX; |
• | dependence on relationships with distribution partners, and on the introduction of new products and services, which require significant investment; |
• | dependence on our financing arrangements with Western Alliance Bank, which is collateralized by our assets; |
• | dependence on our ability to effectively market and attract traffic; |
• | need to keep pace with technology changes; |
• | fluctuations of quarterly financial results 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; |
• | vulnerability to a downturn and to uncertainty in global economic conditions; |
• | integration of our recent NetSeer asset acquisition; |
• | requirement to adhere to the covenants and restrictions in our grant agreement with the state of Arkansas; |
• | the dilutive impact to our stockholders from outstanding restricted stock grants, warrants and options; and |
• | the seasonality of our business. |
2017 | 2016 | ||||||
Assets | |||||||
Current assets | |||||||
Cash | $ | 2,901,965 | $ | 3,946,804 | |||
Accounts receivable, net of allowance for doubtful accounts of $161,789 and $23,000, respectively. | 9,976,903 | 7,586,129 | |||||
Prepaid expenses and other current assets | 347,707 | 293,113 | |||||
Total current assets | 13,226,575 | 11,826,046 | |||||
Property and equipment, net | 2,233,183 | 1,615,223 | |||||
Other assets | |||||||
Goodwill | 9,773,842 | 5,760,808 | |||||
Intangible assets, net of accumulated amortization | 11,319,044 | 8,343,876 | |||||
Other assets | 96,070 | 15,186 | |||||
Total other assets | 21,188,956 | 14,119,870 | |||||
Total assets | $ | 36,648,714 | $ | 27,561,139 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 11,761,983 | $ | 9,280,779 | |||
Accrued expenses and other current liabilities | 2,936,116 | 2,689,640 | |||||
Revolving credit line - current portion | 5,000,000 | — | |||||
Total current liabilities | 19,698,099 | 11,970,419 | |||||
Long-term liabilities | |||||||
Deferred tax liability | 3,738,500 | 3,738,500 | |||||
Other long-term liabilities | 485,405 | 326,428 | |||||
Total long-term liabilities | 4,223,905 | 4,064,928 | |||||
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 28,989,416 and 25,300,189, respectively; outstanding shares 28,664,354 and 24,923,662, respectively | 29,042 | 25,300 | |||||
Additional paid-in capital | 135,596,357 | 130,418,413 | |||||
Accumulated deficit | (121,582,959 | ) | (117,521,362 | ) | |||
Treasury stock, at cost - 325,062 and 376,527 shares, respectively | (1,315,730 | ) | (1,396,559 | ) | |||
Total stockholders' equity | 12,726,710 | 11,525,792 | |||||
Total liabilities and stockholders' equity | $ | 36,648,714 | $ | 27,561,139 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net revenue | $ | 20,311,502 | $ | 17,485,087 | $ | 55,798,545 | $ | 51,864,448 | |||||||
Cost of revenue | 9,649,295 | 5,136,242 | 25,161,761 | 13,392,598 | |||||||||||
Gross profit | 10,662,207 | 12,348,845 | 30,636,784 | 38,471,850 | |||||||||||
Operating expenses | |||||||||||||||
Marketing costs | 7,161,905 | 9,921,395 | 21,122,489 | 30,395,472 | |||||||||||
Compensation | 2,363,901 | 1,650,474 | 7,053,308 | 4,973,192 | |||||||||||
Selling, general and administrative | 2,025,254 | 1,229,177 | 6,308,552 | 3,759,225 | |||||||||||
Total operating expenses | 11,551,060 | 12,801,046 | 34,484,349 | 39,127,889 | |||||||||||
Operating loss | (888,853 | ) | (452,201 | ) | (3,847,565 | ) | (656,039 | ) | |||||||
Interest expense, net | (97,318 | ) | (25,729 | ) | (212,922 | ) | (71,784 | ) | |||||||
Loss from continuing operations before taxes | (986,171 | ) | (477,930 | ) | (4,060,487 | ) | (727,823 | ) | |||||||
Income tax expense | — | 43,013 | — | 91,999 | |||||||||||
Net loss from continuing operations | (986,171 | ) | (434,917 | ) | (4,060,487 | ) | (635,824 | ) | |||||||
Net income (loss) from discontinued operations | — | 171,844 | (1,109 | ) | 172,197 | ||||||||||
Net loss | (986,171 | ) | (263,073 | ) | (4,061,596 | ) | (463,627 | ) | |||||||
Per common share data | |||||||||||||||
Basic and diluted: | |||||||||||||||
Net loss from continuing operations | $ | (0.03 | ) | $ | (0.02 | ) | $ | (0.14 | ) | $ | (0.03 | ) | |||
Net income from discontinued operations | — | 0.01 | — | 0.01 | |||||||||||
Net loss | $ | (0.03 | ) | $ | (0.01 | ) | $ | (0.14 | ) | $ | (0.02 | ) | |||
Weighted average shares | |||||||||||||||
Basic | 28,553,055 | 24,694,566 | 28,030,902 | 24,571,271 | |||||||||||
Diluted | 28,553,055 | 24,694,566 | 28,030,902 | 24,571,271 |
For the Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Operating activities: | |||||||
Net loss | $ | (4,061,596 | ) | $ | (463,627 | ) | |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||
Depreciation and amortization | 2,239,498 | 1,658,352 | |||||
Stock based compensation | 923,072 | 1,002,044 | |||||
Provision of doubtful accounts | 138,789 | 5,800 | |||||
Amortization of financing fees | 19,200 | 19,200 | |||||
Adjustment of European liabilities related to discontinued operations | 1,109 | (176,988 | ) | ||||
Change in operating assets and liabilities: | |||||||
Prepaid expenses and other assets | 81,485 | 143,485 | |||||
Accounts payable | (1,099,692 | ) | (2,030,096 | ) | |||
Accrued expenses and other liabilities | (967,553 | ) | (349,869 | ) | |||
Accounts receivable | (237,078 | ) | 680,281 | ||||
Net cash (used in) provided by operating activities | (2,962,766 | ) | 488,582 | ||||
Investing activities: | |||||||
Net cash received from NetSeer asset acquisition | 235,763 | — | |||||
Purchases of equipment and capitalized development costs | (1,062,811 | ) | (929,380 | ) | |||
Net cash used in investing activities | (827,048 | ) | (929,380 | ) | |||
Financing activities: | |||||||
Net proceeds on revolving credit line | 5,000,000 | — | |||||
Payoff of NetSeer debt acquired | (2,015,577 | ) | — | ||||
Net taxes paid on RSU grants exercised | (97,376 | ) | (140,742 | ) | |||
Payments on capital leases | (97,300 | ) | (37,553 | ) | |||
Treasury stock repurchase | (44,772 | ) | — | ||||
Net cash provided by (used in) financing activities | 2,744,975 | (178,295 | ) | ||||
Net change – cash | (1,044,839 | ) | (619,093 | ) | |||
Cash, beginning of year | 3,946,804 | 4,257,204 | |||||
Cash, end of period | $ | 2,901,965 | $ | 3,638,111 | |||
Supplemental information: | |||||||
Interest paid | $ | 180,796 | $ | 55,085 | |||
Income taxes paid | $ | — | $ | 26,000 | |||
Non cash investing and financing activities: | |||||||
NetSeer stock issuance (See Note 13) | $ | 4,459,244 | $ | — | |||
Purchase of property and equipment under capital lease | $ | 523,518 | $ | — | |||
Stock issuance for partial settlement of contingent liability | $ | — | $ | 300,001 | |||
Write-down of domain names and corresponding contingent liability | $ | 222,477 | $ | 46,367 |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||
2017 | 2016 | 2017 | 2016 | ||||||
Yahoo! | 62.1 | % | 67.3 | % | 68.5 | % | 64.0 | % | |
OpenX | 12.9 | % | — | % | 7.4 | % | — | % | |
Google | 8.9 | % | 31.3 | % | 10.8 | % | 34.2 | % | |
Total | 83.9 | % | 98.6 | % | 86.7 | % | 98.2 | % |
September 30, 2017 | December 31, 2016 | ||||||
Furniture and fixtures | $ | 288,536 | $ | 241,876 | |||
Equipment | 1,468,776 | 811,948 | |||||
Capitalized internal use and purchased software | 7,131,442 | 6,132,626 | |||||
Leasehold improvements | 444,507 | 441,382 | |||||
Subtotal | 9,333,261 | 7,627,832 | |||||
Less: accumulated depreciation and amortization | (7,100,078 | ) | (6,012,609 | ) | |||
Total | $ | 2,233,183 | $ | 1,615,223 |
Term | Carrying Value | Accumulated Amortization and Impairment | Net Carrying Value | Year-to-date Amortization | |||||||||||||
Customer list, Google | 20 years | $ | 8,820,000 | $ | (2,462,250 | ) | $ | 6,357,750 | $ | 330,750 | |||||||
Technology, NetSeer | 5 years | 3,600,000 | (480,000 | ) | 3,120,000 | 480,000 | |||||||||||
Customer list, all other | 10 years | 1,610,000 | (898,939 | ) | 711,061 | 120,753 | |||||||||||
Trade names, ALOT | 5 years | 960,000 | (960,000 | ) | — | 32,000 | |||||||||||
Customer relationships, NetSeer | 20 years | 570,000 | (19,000 | ) | 551,000 | 19,000 | |||||||||||
Domain websites (2) | 5 years | 447,030 | (321,130 | ) | 125,900 | 53,185 | |||||||||||
Trade names, web properties (1) | - | 390,000 | — | 390,000 | — | ||||||||||||
Brand, NetSeer | 1 year | 121,000 | (80,667 | ) | 40,333 | 80,667 | |||||||||||
Non-competition agreements, NetSeer | 1 year | 69,000 | (46,000 | ) | 23,000 | 46,000 | |||||||||||
Intangible assets classified as long-term | $ | 16,587,030 | $ | (5,267,986 | ) | $ | 11,319,044 | $ | 1,162,355 | ||||||||
Goodwill, total | - | $ | 9,773,842 | $ | — | $ | 9,773,842 | $ | — |
(1) | 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. In May 2016, the carrying value was adjusted by approximately $46 thousand to reflect the lower price paid as compared to the contingent liability recorded as a result of the change in the price of Inuvo stock from the date of acquisition to the first contingent release of shares. In March 2017, we determined that the seller would not meet the specific performance target for the second year and therefore, we adjusted the carrying value of the intangible asset by $222,477. |
2017 | $ | 398,617 | |
2018 | 1,420,301 | ||
2019 | 1,404,468 | ||
2020 | 1,354,985 | ||
2021 | 1,350,504 | ||
Thereafter | 5,000,169 | ||
Total | $ | 10,929,044 |
September 30, 2017 | December 31, 2016 | |||||||
Revolving credit line - 5.0 percent at September 30, 2017 (prime plus 0.75 percent), due September 29, 2018 - current portion | $ | 5,000,000 | $ | — | ||||
Total | $ | 5,000,000 | $ | — |
September 30, 2017 | December 31, 2016 | ||||||
Accrued marketing costs | $ | 1,518,998 | $ | 1,622,737 | |||
Accrued expenses and other | 575,544 | 289,435 | |||||
Accrued sales allowance | 250,000 | 250,000 | |||||
Accrued payroll and commission liabilities | 217,598 | 250,000 | |||||
Capital leases, current portion | 212,692 | 31,210 | |||||
Contingent stock due for acquired domains, current portion (see Note 7) | 147,029 | 222,477 | |||||
Accrued taxes | 8,643 | 10,313 | |||||
Deferred Arkansas grant, current portion | 5,612 | 13,468 | |||||
Total | $ | 2,936,116 | $ | 2,689,640 |
September 30, 2017 | December 31, 2016 | ||||||
Capital leases, less current portion | $ | 333,311 | $ | — | |||
Deferred rent | 138,331 | 163,165 | |||||
Accrued taxes, less current portion | 13,763 | 13,763 | |||||
Contingent stock due for acquired domains, less current portion | — | 147,029 | |||||
Deferred Arkansas grant, less current portion | — | 2,471 | |||||
Total | $ | 485,405 | $ | 326,428 |
Options Outstanding | RSUs Outstanding | Options and RSUs Exercised | Available Shares | Total | ||||||||||
2017 ECP | — | 125,000 | — | 1,875,000 | 2,000,000 | |||||||||
2010 ECP | 250,498 | 1,046,761 | 2,780,740 | 504,019 | 4,582,018 | |||||||||
2005 LTIP (*) | 13,748 | — | 950,085 | — | 963,833 | |||||||||
Total | 264,246 | 1,171,761 | 3,730,825 | 2,379,019 | 7,545,851 |
2017 | $ | 116,235 | |
2018 | 466,329 | ||
2019 | 473,851 | ||
2020 | 402,138 | ||
2021 | 239,090 | ||
2022 | 162,706 | ||
Total | $ | 1,860,349 |
Total consideration paid in common stock (with marketability discount applied) | $ | 4,459,244 | |
Fair value of assets acquired: | |||
Accounts receivable, net | (2,292,485 | ) | |
Prepaid expenses and other current assets | (236,163 | ) | |
Property and equipment, net | (119,101 | ) | |
Goodwill | (4,013,034 | ) | |
Intangible assets | (4,360,000 | ) | |
Fair value of liabilities assumed: | |||
Accounts payable | $ | 3,579,787 | |
Accrued expenses and other current liabilities | 1,152,789 | ||
Other long-term liabilities | 49,149 | ||
Debt | 2,015,577 | ||
Cash received in acquisition | $ | 235,763 | |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2017 | 2016 | Change | % Change | 2017 | 2016 | Change | % Change | ||||||||||||||||||||||
Net Revenue | $ | 20,311,502 | $ | 17,485,087 | $ | 2,826,415 | 16.2 | % | $ | 55,798,545 | $ | 51,864,448 | $ | 3,934,097 | 7.6 | % | |||||||||||||
Cost of Revenue | 9,649,295 | 5,136,242 | 4,513,053 | 87.9 | % | 25,161,761 | 13,392,598 | 11,769,163 | 87.9 | % | |||||||||||||||||||
Gross Profit | $ | 10,662,207 | $ | 12,348,845 | (1,686,638 | ) | (13.7 | %) | $ | 30,636,784 | $ | 38,471,850 | $ | (7,835,066 | ) | (20.4 | )% |
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2017 | 2016 | Change | % Change | 2017 | 2016 | Change | % Change | ||||||||||||||||||||||
Marketing costs | $ | 7,161,905 | $ | 9,921,395 | $ | (2,759,490 | ) | (27.8 | %) | $ | 21,122,489 | $ | 30,395,472 | $ | (9,272,983 | ) | (30.5 | )% | |||||||||||
Compensation | 2,363,901 | 1,650,474 | 713,427 | 43.2 | % | 7,053,308 | 4,973,192 | $ | 2,080,116 | 41.8 | % | ||||||||||||||||||
Selling, general and administrative | 2,025,254 | 1,229,177 | 796,077 | 64.8 | % | 6,308,552 | 3,759,225 | $ | 2,549,327 | 67.8 | % | ||||||||||||||||||
Operating expenses | $ | 11,551,060 | $ | 12,801,046 | $ | (1,249,986 | ) | (9.8 | %) | $ | 34,484,349 | $ | 39,127,889 | $ | (4,643,540 | ) | (11.9 | )% |
• | pay fees to the lender associated with the credit facility; |
• | meet prescribed financial covenants; |
• | maintain our corporate existence in good standing; |
• | grant the lender a security interest in our assets; |
• | provide financial information to the lender; and |
• | refrain from any transfer of any of our business or property, subject to customary exceptions. |
• | using the combined company’s cash and other assets efficiently to develop the business of the combined company; |
• | appropriately managing the liabilities of the combined company; |
• | potential unknown or currently unquantifiable liabilities associated with the merger and the operations of the combined company; and |
• | performance shortfalls at one or both of the companies as a result of the diversion of management’s attention caused by completing the acquisition and integrating the companies’ operations. |
Exhibit No. | Description of Exhibit | |
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance Document * | |
101.SCH | XBRL Taxonomy Extension Schema Document * | |
101.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. | |||
November 1, 2017 | By: | /s/ Richard K. Howe | |
Richard K. Howe, | |||
Chief Executive Officer, principal executive officer | |||
November 1, 2017 | By: | /s/ Wallace D. Ruiz | |
Wallace D. Ruiz, | |||
Chief Financial Officer, principal financial and accounting officer |
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 |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Oct. 27, 2017 |
|
Document And Entity Information | ||
Entity Registrant Name | Inuvo, Inc. | |
Entity Central Index Key | 0000829323 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2017 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 28,480,659 |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Assets | ||
Allowance for Doubtful accounts | $ 161,789 | $ 23,000 |
Stockholders Equity | ||
Preferred stock par value (in 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 (in 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) | 28,989,416 | 25,300,189 |
Common stock shares outstanding (in shares) | 28,664,354 | 24,923,662 |
Treasury stock (in shares) | 325,062 | 376,527 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Income Statement [Abstract] | ||||
Net revenue | $ 20,311,502 | $ 17,485,087 | $ 55,798,545 | $ 51,864,448 |
Cost of revenue | 9,649,295 | 5,136,242 | 25,161,761 | 13,392,598 |
Gross profit | 10,662,207 | 12,348,845 | 30,636,784 | 38,471,850 |
Operating expenses | ||||
Marketing costs | 7,161,905 | 9,921,395 | 21,122,489 | 30,395,472 |
Compensation | 2,363,901 | 1,650,474 | 7,053,308 | 4,973,192 |
Selling, general and administrative | 2,025,254 | 1,229,177 | 6,308,552 | 3,759,225 |
Total operating expenses | 11,551,060 | 12,801,046 | 34,484,349 | 39,127,889 |
Operating loss | (888,853) | (452,201) | (3,847,565) | (656,039) |
Interest expense, net | (97,318) | (25,729) | (212,922) | (71,784) |
Loss from continuing operations before taxes | (986,171) | (477,930) | (4,060,487) | (727,823) |
Income tax expense | 0 | 43,013 | 0 | 91,999 |
Net loss from continuing operations | (986,171) | (434,917) | (4,060,487) | (635,824) |
Net income (loss) from discontinued operations | 0 | 171,844 | (1,109) | 172,197 |
Net loss | $ (986,171) | $ (263,073) | $ (4,061,596) | $ (463,627) |
Per common share data: Basic and diluted | ||||
Net loss from continuing operations (in usd per share) | $ (0.03) | $ (0.02) | $ (0.14) | $ (0.03) |
Net income from discontinued operations (in usd per share) | 0.00 | 0.01 | 0.00 | 0.01 |
Net loss (in usd per share) | $ (0.03) | $ (0.01) | $ (0.14) | $ (0.02) |
Weighted average shares | ||||
Basic (in shares) | 28,553,055 | 24,694,566 | 28,030,902 | 24,571,271 |
Diluted (in shares) | 28,553,055 | 24,694,566 | 28,030,902 | 24,571,271 |
Organization and Business |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Business | Organization and Business Company Overview We develop technology that connects advertisers with consumers through interactions with Inuvo ad-units on websites and apps across devices. The Inuvo MarketPlace provides the means to interact with tens of thousands of advertisers (Demand) and tens of thousands of online publishers (Supply). We interact with Demand/Supply constituents directly and indirectly. We serve ads within content, video and slideshows. We target ads to consumers using our proprietary IntentKey machine learning technology that includes a database of 580 million machine profiles, of which 180 million are updated each week. We earn revenue when consumers view and click on our ads. We touch 80% of all US households weekly. Our business scales as we add Demand and Supply relationships with many barriers to entry including the ability to process hundreds of thousands of transactions per second. Our intellectual property is protected by eleven issued and eight pending patents. We count among our many contractual relationships, three clients who collectively manage over 50% of all US digital advertising budgets. Included within our Supply portfolio is a collection of owned websites such as alot.com and earnspendlive.com, where we create content in health, finance, travel, careers, auto, education and living categories. These sites provide the means to test ad-tech, while also delivering high quality consumers to advertisers through interaction with proprietary content in the form of images, videos, slideshows and the written word. In February 2017, we entered into an Asset Purchase Agreement with NetSeer, Inc. ("NetSeer") which allowed us to advance our technology strategy while increasing both the number of advertisers and publishers within the Inuvo MarketPlace. We exchanged 3,529,000 shares of Inuvo common stock and assumed approximately $6.8 million of specified liabilities in this business combination (See Note 13). We are focused on growth and expect to generate a positive cash flow in the long term. We expect to continue to make strategic investments principally in these areas: marketing technology that helps drive traffic to our owned websites; ad-units that perform better for publishers; demand technology that optimizes advertiser choices; supply technology that optimizes publisher yield; and audience targeting technology that improves the alignment of advertising with consumer and yield. Liquidity On March 27, 2017, we amended our Business Financing Agreement with Western Alliance Bank ("Western Alliance Bank"), the parent company of Bridge Bank, N.A., our original lender (see Note 5). The amendment, while providing continued access to the revolving line of credit up to $10 million through September 2018, included the collateral acquired in the NetSeer asset acquisition and modified certain financial covenants. On July 31, 2017, we entered into the Ninth Business Financing Modification Agreement with Western Alliance Bank. The amendment changed certain financial ratios, definitions, the advance rate, the finance charge and the non-formula availability. As of September 30, 2017, the balance of the revolving line of credit was $5.0 million and had approximately $3.6 million of available credit. Though the revolving line of credit and cash generated by operations is expected to 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. During the third quarter of 2017, we filed an S-3 registration statement with the Securities and Exchange Commission ("SEC") to replace the existing, expiring S-3 "shelf" registration statement, which permits us to offer and sell up to $15 million of our securities from time to time in one or more offerings. To date, we have not taken down any sales from this 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 securities 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. During September 2017, 45,900 shares of our common stock were repurchased in the open market at an average price of $.97 per shares under the Company’s current share repurchase program, which was announced on December 9, 2016 and authorizes the repurchase of the Company’s common stock totaling $500,000. Under the authorization, the Company may purchase shares from time to time in the open market or in privately negotiated transactions in compliance with the applicable rules and regulations of the SEC. Customer concentration In 2017, we generated the majority of our revenue from three Demand side customers, Yahoo!, Google, and OpenX as noted below:
At September 30, 2017, these three customers accounted for 77.1% of our gross accounts receivable balance. As of December 31, 2016, Yahoo! and Google accounted for 98.6% of our gross accounts receive balance. The reduction in the Yahoo! and Google concentration is the result of additional sources of Demand, primarily due to the asset acquisition in February 2017. Though the Yahoo! and Google concentration is declining as a percentage of overall revenue, we still source the majority of our Demand through these relationships where we have access to advertiser budgets indirectly. While this strategy creates a concentration risk, we believe that it also provides upside opportunities including; access to hundreds of thousands of advertisers across geographies; the ability to scale our business across verticals; an avoidance of the sales costs associated with a large direct to advertisers’ sales force; access to innovation; overall media budget market insights; attractive payment terms; and low risk on receivables. |
Summary of Significant Accounting Policies |
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Sep. 30, 2017 | |
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, 2016, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). In our opinion, these consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 16, 2017. Use of estimates The preparation of financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. We regularly evaluate estimates and assumptions related to allowances for doubtful accounts, accrued sales reserve, 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. We also generate a portion of our revenue from advertisers and exchanges on a CPM (cost per thousand impressions) basis. Using the Inuvo technology to reach targeted audiences, we serve ads to publisher inventory that is available from our proprietary network, owned websites and lastly, through exchanges. Publishers use our technology to monetize their inventory. We generally recognize CPM revenue upon fulfilling all or part of our contractual obligations, subject to satisfying all other revenue recognition criteria, including (i) persuasive evidence of an existing arrangement, (ii) delivery having occurred or services having been rendered, (iii) the fees being fixed or determinable, and (iv) collectability being reasonably assured. We generally bill and collect the full purchase price of impressions from advertisers. 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. The Company plans to adopt this guidance on January 1, 2018. The Company has identified its population of contracts and has begun its assessment of performance obligations and calculation of transaction price for each contract. The Company is in the process of evaluating the quantitative and qualitative impact the adoption will have on its accounting policies and related disclosures. 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. 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 balance sheets, consolidated financial position or results of operations. In January 2017, ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment was issued by the FASB. The new guidance simplifies the accounting for goodwill impairments by eliminating Step 2 from the goodwill impairment test. The guidance requires, among other things, recognition of an impairment loss when the carrying value of a reporting unit exceeds its fair value. The loss recognized is limited to the total amount of goodwill allocated to that reporting unit. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material effect on its financial statements. |
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 and nine months ended September 30, 2017 depreciation expense was $406,014 and $1,077,143, respectively. During the three and nine months ended September 30, 2016, depreciation expense was $325,236 and $958,704, 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 as of September 30, 2017:
Amortization expense over the next five years and thereafter is as follows:
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Revolving credit line |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Revolving credit line | Revolving credit line The following table summarizes our revolving credit line balances as of:
On March 1, 2012, we entered into a Business Financing Agreement with Bridge Bank, which is now owned by Western Alliance Bank. The agreement provided us with a revolving credit line of up to $10 million which we use to help satisfy our working capital needs. We have provided Western Alliance 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 85% of eligible accounts receivable balances plus $500,000, 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 $3.6 million available under the revolving credit line as of September 30, 2017. On March 27, 2017, the Company entered into the Eighth Business Financing Modification Agreement with Western Alliance Bank, the parent company of Bridge Bank, our original lender, that modified the existing Agreement. The modified terms require a monthly quick ratio of not less than .65 to 1.00 from February 1, 2017 through December 31, 2017; and a monthly quick ratio of not less than .75 to 1.00 on and after January 1, 2018; and quarterly consolidated Adjusted EBITDA shall not negatively deviate more than $300,000 from projections for the quarter ending March 31, 2017, by more than $400,000 for the quarters ending June 30, 2017, September 30, 2017, and December 31, 2017, or with respect to any quarter in 2018 and beyond, by more than 25% from projections. On July 31, 2017, the Company entered into the Ninth Business Financing Modification Agreement with Western Alliance Bank. The modified terms require a monthly quick ratio of not less than .60 to 1.00 from June 1, 2017 through December 31, 2017; and a monthly quick ratio of not less than.70 to 1.00 on and after January 1, 2018; and quarterly consolidated Adjusted EBITDA of not less than 25% of the projections provided to the bank for the quarter ending June 30, 2017 and each quarter thereafter; the advance rate increases to 85%; and the non-formula availability decreases to $500,000 immediately, to $250,000 after October 15, 2017 and to zero at December 31, 2017. In addition, the finance charge for outstanding advances increases by 25 basis points and by 75 basis points for outstanding advances on the non-formula availability until the Company reports two consecutive months of positive Adjusted EBITDA. The revolving line of credit is effective to September 2018. While we periodically utilize our line of credit for operating needs, as of September 30, 2017, the balance of the revolving line of credit was $5.0 million. We were in compliance with all bank covenants as of September 30, 2017. |
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 was our common stock and is contingent upon the seller attaining specific performance targets over three years. On May 8, 2016, the seller achieved the specific performance target for the first year and as a result, we issued 166,667 shares of common stock. The accrued contingent liability and the related intangible asset, domain websites, were adjusted by approximately $46 thousand to reflect the lower price paid as compared to the contingent liability recorded as a result of the change in the price of Inuvo stock from the date of acquisition to the first contingent release of shares. In March 2017, we determined that the seller would not meet the specific performance target for the second year and therefore, we adjusted the carrying value of the related intangible asset and contingent liability by $222,477. |
Income Taxes |
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Sep. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We have a deferred tax liability of $3,738,500 as of September 30, 2017, related to intangible assets acquired in March 2012. We also have a net deferred tax asset of approximately $31,331,248. 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 September 30, 2017. |
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”) and 2017 Equity Compensation Plan ("2017 ECP"). Option and RSUs vesting periods are generally up to three years. Compensation Expense For the three and nine months ended September 30, 2017, we recorded stock-based compensation expense for all equity incentive plans of $336,913 and $923,072, respectively. For the three and nine months ended September 30, 2016, we recorded stock-based compensation expense for all equity incentive plans of $315,596 and $1,002,044. Total compensation cost not yet recognized at September 30, 2017 was $1,580,437 to be recognized over a weighted-average recognition period of 1.0 years. Significant Grants and Cancellations 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. On July 27, 2017, August 4, 2017, and August 11, 2017, the second measurement period targets were achieved and the number of shares issued totaled 294,152 with a weighted average fair value of $1.00. On February 7, 2017, we granted former NetSeer employees service RSUs totaling 186,828 shares with a weighted average fair value of $1.65 per share which vest annually over a three year period. On February 15, 2017, we granted a former NetSeer employee 20,520 RSUs with a weighted average fair value of $1.62 which fully vested on August 7, 2017. On April 1, 2017, we granted members of our board of directors a total of 116,280 RSUs with a weighted average fair value of $1.29 a share which fully vest on March 31, 2018. On June 19, 2017, we granted an employee service and performance RSUs totaling 125,000 RSUs with a weighted average fair value of $1.04 per share. The service RSUs vest annually over a three year period. The awarding of the performance RSUs is contingent upon achieving certain revenue and profit targets and vest annually over a three year period. On June 19, 2017, we granted certain former NetSeer employees service and performance RSUs totaling 400,000 shares with a weighted average fair value of $1.04 per share. The service RSUs vest annually over a three year period. 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. On July 7, 2017, we granted an employee 20,000 RSUs with a weighted average fair value of $1.02 which vest annually over a three year period. The following table summarizes the stock grants outstanding under our 2005 Long-Term Incentive Plan ("2005 LTIP"), the 2010 ECP and the 2017 ECP as of September 30, 2017:
(*) Expired June 2015 |
Discontinued Operations |
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Sep. 30, 2017 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | Discontinued Operations Certain of our subsidiaries previously operated in the European Union ("EU"). Though our 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. In the third quarter of 2016, our petition with the UK (United Kingdom) Companies House to strike off and dissolve our remaining subsidiary in the EU was approved. As a result, for the nine months ended September 30, 2017, we recorded a net loss of $1,109 due to a charge from a service provider. For the three and nine months end September 30, 2016, we recorded a net income of $171,844 and $172,197, respectively, which were due to adjustments of certain accrued liabilities. |
Earnings per Share |
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Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Earnings per Share During the three and nine month periods ended September 30, 2017 and September 30, 2016, we generated a net loss from continuing operations and as a result, all of our shares are anti-dilutive. |
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 $109,701 and $346,717 for the three and nine months ended September 30, 2017 and $42,248 and $135,635 for the three and nine months ended September 30, 2016, respectively. Minimum future lease payments under non-cancelable operating leases as of September 30, 2017 are:
In June 2017, we entered into an agreement with Dell Financial Services to lease computer equipment for our data centers. The lease has a term of three years and will cost approximately $173,000 over the life of the lease. As part of the NetSeer asset acquisition, Inuvo assumed the office space lease that served as NetSeer's headquarters in Sunnyvale, CA. The lease was for 15,717 square feet and cost approximately $95,000 for the remaining term of the lease which expired in July 2017. In June 2017, we entered into an agreement to lease 4,801 square feet of office space in San Jose, CA commencing on July 17, 2017. The lease has a term of five years and will cost approximately $216,000 during its first year. After the first year, the lease payment will increase by 3% per annum. |
NetSeer Acquisition |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
NetSeer Acquisition | NetSeer Acquisition On February 6, 2017, we entered into an Asset Purchase Agreement to acquire the assets of NetSeer, Inc. Under the terms of the agreement, we acquired substantially all of the assets of NetSeer, and assumed certain liabilities and personnel obligations, in exchange for 3,529,000 shares of our common stock. Of this amount, 529,350 shares were deposited into escrow with our counsel under the terms of an escrow agreement pending possible post-closing adjustments in the purchase price related to working capital and audited financial statement adjustments, as well as in connection with possible indemnification claims post-closing. The operating results of this acquisition have been included in the consolidated statements of operations since the acquisition date. As a result of the business acquisition, the Company recognized goodwill in the amount of $4,013,034. The factors contributing to the recognition of the amount of goodwill are based on strategic benefits that are expected to be realized from acquiring NetSeer's assembled workforce in addition to other synergies gained from integrating NetSeer's operations into the Company’s consolidated structure. The Company incurred approximately $350,000 in acquisition related costs, which are recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations.
In accordance with ASC guidance related to business combinations, net consideration was first allocated to the fair value of assets acquired, including specifically identifiable intangible assets and liabilities assumed, with the excess being recorded as goodwill. Goodwill related to this acquisition is not deductible for tax purposes and is not amortized, but instead is subject to periodic impairment tests. The purchase includes the assumption of gross customer accounts receivable totaling $2,292,485. The Company estimates that most of these receivables will be collected. Therefore, the receivables are recorded at the estimated fair value, which equals the gross contractual amount. Specifically identifiable intangible assets consist of $4,360,000 and are amortized on a straight-line basis over the estimated useful life. Additionally, NetSeer revenue totaling approximately $10.0 million since the acquisition date is included in the consolidated statements of operations. |
Segments |
9 Months Ended |
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Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Segments | Segments In accordance with ASC 280 - Segment reporting, segment information reported is built on the basis of internal management data used for performance analysis of businesses and for the allocation of resources. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker, its chief executive officer, reviews financial information presented on a consolidated basis and no expense or operating income is evaluated at a segment level. Given the consolidated level of review by the Company’s chief executive officer, the Company operates as one reportable segment. Most net revenue is earned in the United States and all long-lived assets are located in the United States. Through December 31, 2016, we reported our business as two segments. Both business segments recognize revenue identically. Virtually all the revenue generated within digital publishing comes from our advertising technology. Operationally, these websites are no different from any other website we serve ads to and in this regard, have always been managed internally as an additional source of supply for our ad serving technology. As a result, starting in the first quarter of 2017, we began reporting as a single segment. We believe this will bring more clarity to shareholders. |
Related Party Transactions |
9 Months Ended |
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Sep. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions For the three and nine months ended September 30, 2017, the Company received a total of $27,576 and $91,718, respectively, and for the three and nine months ended September 30, 2016, $27,141 and $77,453, respectively, from First Orion Corp., which is partially owned by two directors and shareholders of Inuvo, for providing IT services. |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
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, 2016, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). In our opinion, these consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. |
Use of estimates | The preparation of financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. We regularly evaluate estimates and assumptions related to allowances for doubtful accounts, accrued sales reserve, 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. The Company plans to adopt this guidance on January 1, 2018. The Company has identified its population of contracts and has begun its assessment of performance obligations and calculation of transaction price for each contract. The Company is in the process of evaluating the quantitative and qualitative impact the adoption will have on its accounting policies and related disclosures. 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. 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 balance sheets, consolidated financial position or results of operations. In January 2017, ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment was issued by the FASB. The new guidance simplifies the accounting for goodwill impairments by eliminating Step 2 from the goodwill impairment test. The guidance requires, among other things, recognition of an impairment loss when the carrying value of a reporting unit exceeds its fair value. The loss recognized is limited to the total amount of goodwill allocated to that reporting unit. The guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect the adoption of this guidance to have a material effect on its financial statements. |
Organization and Business (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Customer Concentration | In 2017, we generated the majority of our revenue from three Demand side customers, Yahoo!, Google, and OpenX as noted below:
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Property and Equipment (Tables) |
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets from Continuing Operations | The following is a schedule of intangible assets as of September 30, 2017:
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Schedule of Amortization Expense | Amortization expense over the next five years and thereafter is as follows:
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Revolving credit line (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Notes Payable | The following table summarizes our revolving credit line balances as of:
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Accrued Expenses and Other Current Liabilities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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"), the 2010 ECP and the 2017 ECP as of September 30, 2017:
(*) Expired June 2015 |
Leases (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | Minimum future lease payments under non-cancelable operating leases as of September 30, 2017 are:
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NetSeer Acquisition (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions | On February 6, 2017, we entered into an Asset Purchase Agreement to acquire the assets of NetSeer, Inc. Under the terms of the agreement, we acquired substantially all of the assets of NetSeer, and assumed certain liabilities and personnel obligations, in exchange for 3,529,000 shares of our common stock. Of this amount, 529,350 shares were deposited into escrow with our counsel under the terms of an escrow agreement pending possible post-closing adjustments in the purchase price related to working capital and audited financial statement adjustments, as well as in connection with possible indemnification claims post-closing. The operating results of this acquisition have been included in the consolidated statements of operations since the acquisition date. As a result of the business acquisition, the Company recognized goodwill in the amount of $4,013,034. The factors contributing to the recognition of the amount of goodwill are based on strategic benefits that are expected to be realized from acquiring NetSeer's assembled workforce in addition to other synergies gained from integrating NetSeer's operations into the Company’s consolidated structure. The Company incurred approximately $350,000 in acquisition related costs, which are recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations.
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Organization and Business - Customer Concentration (Details) - Net Revenue |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Yahoo!, OpenX and Google | ||||
Concentration Risk [Line Items] | ||||
Percentage of concentration risk (as percent) | 83.90% | 98.60% | 86.70% | 98.20% |
Customer Concentration Risk | Yahoo! | ||||
Concentration Risk [Line Items] | ||||
Percentage of concentration risk (as percent) | 62.10% | 67.30% | 68.50% | 64.00% |
Customer Concentration Risk | OpenX | ||||
Concentration Risk [Line Items] | ||||
Percentage of concentration risk (as percent) | 12.90% | 0.00% | 7.40% | 0.00% |
Customer Concentration Risk | Google | ||||
Concentration Risk [Line Items] | ||||
Percentage of concentration risk (as percent) | 8.90% | 31.30% | 10.80% | 34.20% |
Property and Equipment (Details) - USD ($) |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, gross | $ 9,333,261 | $ 9,333,261 | $ 7,627,832 | ||
Less: accumulated depreciation and amortization | (7,100,078) | (7,100,078) | (6,012,609) | ||
Total | 2,233,183 | 2,233,183 | 1,615,223 | ||
Depreciation expense | 406,014 | $ 325,236 | 1,077,143 | $ 958,704 | |
Furniture and fixtures | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, gross | 288,536 | 288,536 | 241,876 | ||
Equipment | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, gross | 1,468,776 | 1,468,776 | 811,948 | ||
Capitalized internal use and purchased software | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, gross | 7,131,442 | 7,131,442 | 6,132,626 | ||
Leasehold improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Property, plant and equipment, gross | $ 444,507 | $ 444,507 | $ 441,382 |
Other Intangible Assets and Goodwill - Amortization Expense (Details) |
Sep. 30, 2017
USD ($)
|
---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | |
2017 | $ 398,617 |
2018 | 1,420,301 |
2019 | 1,404,468 |
2020 | 1,354,985 |
2021 | 1,350,504 |
Thereafter | 5,000,169 |
Net Carrying Value | $ 10,929,044 |
Revolving credit line - Schedule of Notes Payable (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Debt Instrument [Line Items] | ||
Total | $ 5,000,000 | $ 0 |
Line of Credit | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Revolving credit line - 5.0 percent at September 30, 2017 (prime plus 0.75 percent), due September 29, 2018 - current portion | 5,000,000 | $ 0 |
Total | $ 5,000,000 | |
Stated interest rate (as percent) | 5.00% | |
Line of Credit | Revolving Credit Facility | Prime Rate | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 0.75% |
Revolving credit line - Narrative (Details) - USD ($) |
Jul. 31, 2017 |
Mar. 27, 2017 |
Mar. 01, 2012 |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|---|
Debt Instrument [Line Items] | |||||
Debt balance | $ 5,000,000 | $ 0 | |||
Line of Credit | Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Debt balance | 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 (as percent) | 85.00% | ||||
Debt instrument, additional borrowing maximum, over eligible accounts receivable limit | $ 500,000 | ||||
Period for eligible accounts receivable | 90 days | ||||
Remaining borrowing capacity | 3,600,000 | ||||
Debt balance | $ 5,000,000 | ||||
Eighth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Period from February 1, 2017 through December 31, 2017 | |||||
Debt Instrument [Line Items] | |||||
Quick ratio (not less than) | 0.65 | ||||
Eighth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Period from January 1, 2018 and after | |||||
Debt Instrument [Line Items] | |||||
Quick ratio (not less than) | 0.75 | ||||
Eighth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Quarter ending March 31, 2017 | |||||
Debt Instrument [Line Items] | |||||
Maximum decline in Adjusted EBITDA from projected amount | $ 300,000 | ||||
Maximum percentage of decline in revenue from projected amount (as percent) | 25.00% | ||||
Eighth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Quarter ending June 30, 2017 | |||||
Debt Instrument [Line Items] | |||||
Maximum decline in Adjusted EBITDA from projected amount | $ 400,000 | ||||
Eighth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Quarter ending September 30, 2017 | |||||
Debt Instrument [Line Items] | |||||
Maximum decline in Adjusted EBITDA from projected amount | $ 400,000 | ||||
Maximum percentage of decline in revenue from projected amount (as percent) | 25.00% | ||||
Eighth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Quarter ending December 31, 2017 | |||||
Debt Instrument [Line Items] | |||||
Maximum decline in Adjusted EBITDA from projected amount | $ 400,000 | ||||
Maximum percentage of decline in revenue from projected amount (as percent) | 25.00% | ||||
Ninth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | |||||
Debt Instrument [Line Items] | |||||
Percentage change in finance charge for outstanding advances (as percent) | 0.25% | ||||
Percentage change in finance charge for outstanding advances on the non-formula availability (as percent) | 0.75% | ||||
Ninth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Period from January 1, 2018 and after | |||||
Debt Instrument [Line Items] | |||||
Quick ratio (not less than) | 0.70 | ||||
Ninth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Quarter ending June 30, 2017 | |||||
Debt Instrument [Line Items] | |||||
Maximum percentage of decline in revenue from projected amount (as percent) | 25.00% | ||||
Ninth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Period from June 1, 2017 to December 31, 2017 | |||||
Debt Instrument [Line Items] | |||||
Quick ratio (not less than) | 0.60 | ||||
Ninth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Period After June 30, 2017 | |||||
Debt Instrument [Line Items] | |||||
Advance rate (as percent) | 85.00% | ||||
Ninth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Period after July 31, 2017 | |||||
Debt Instrument [Line Items] | |||||
Non-formula availability | $ 500,000 | ||||
Ninth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Period after October 15, 2017 | |||||
Debt Instrument [Line Items] | |||||
Non-formula availability | 250,000 | ||||
Ninth Business Financing Modification Agreement with Western Alliance Bank | Line of Credit | Revolving Credit Facility | Period at December 31, 2017 | |||||
Debt Instrument [Line Items] | |||||
Non-formula availability | $ 0 |
Accrued Expenses and Other Current Liabilities (Details) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Payables and Accruals [Abstract] | ||
Accrued marketing costs | $ 1,518,998 | $ 1,622,737 |
Accrued expenses and other | 575,544 | 289,435 |
Accrued sales allowance | 250,000 | 250,000 |
Accrued payroll and commission liabilities | 217,598 | 250,000 |
Capital leases, current portion | 212,692 | 31,210 |
Contingent stock due for acquired domains, current portion (see Note 7) | 147,029 | 222,477 |
Accrued taxes | 8,643 | 10,313 |
Deferred Arkansas grant, current portion | 5,612 | 13,468 |
Total | $ 2,936,116 | $ 2,689,640 |
Other Long-Term Liabilities - Components of Other Long-Term Liabilities(Details) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Other Liabilities Disclosure [Abstract] | ||
Capital leases, less current portion | $ 333,311 | $ 0 |
Deferred rent | 138,331 | 163,165 |
Accrued taxes, less current portion | 13,763 | 13,763 |
Contingent stock due for acquired domains, less current portion | 0 | 147,029 |
Deferred Arkansas grant, less current portion | 0 | 2,471 |
Total | $ 485,405 | $ 326,428 |
Other Long-Term Liabilities - Narrative (Details) |
1 Months Ended | |||||||
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May 08, 2016
shares
|
May 08, 2015
USD ($)
website
|
Mar. 31, 2017
USD ($)
|
May 31, 2016
USD ($)
|
Sep. 30, 2017
USD ($)
|
[1] | |||
Performance shares | Common stock | ||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||
Number of shares issued for performance target achievement | shares | 166,667 | |||||||
Domain websites | ||||||||
Finite-Lived Intangible Assets [Line Items] | ||||||||
Number of finite-lived intangible assets purchased | website | 2 | |||||||
Carrying value | $ 715,874 | $ 447,030 | ||||||
Contingency accrual, payment period | 3 years | |||||||
Impairment of finite-lived intangible assets | $ 222,477 | $ 46,000 | ||||||
|
Income Taxes (Details) - USD ($) |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Income Tax Disclosure [Abstract] | ||
Deferred tax liability | $ 3,738,500 | $ 3,738,500 |
Deferred tax asset | $ 31,331,248 |
Stock-Based Compensation - Narrative (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 07, 2017 |
Jun. 19, 2017 |
Apr. 01, 2017 |
Feb. 15, 2017 |
Feb. 07, 2017 |
Aug. 04, 2015 |
Aug. 11, 2017 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Option and restricted stock unit vesting period (up to) | 3 years | ||||||||||
Stock based compensation | $ 336,913 | $ 315,596 | $ 923,072 | $ 1,002,044 | |||||||
Compensation cost related to non vested awards not yet recognized | $ 1,580,437 | $ 1,580,437 | |||||||||
Average remaining expense recognition period | 1 year | ||||||||||
Restricted Stock Units (RSUs) and Performance Restricted Stock Units (RSUs) | Employees | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Option and restricted stock unit vesting period (up to) | 3 years | 3 years | |||||||||
Equity instruments other than options, grants in period (in shares) | 125,000 | 965,500 | |||||||||
Grants in period, weighted average grant date fair value (in usd per share) | $ 1.04 | $ 3.03 | |||||||||
Award vesting rights (as percent) | 33.33% | 33.33% | |||||||||
Issued in period (in shares) | 294,152 | ||||||||||
Issued in period, weighted average grant date fair value (in usd per share) | $ 1.00 | ||||||||||
Restricted Stock Units (RSUs) and Performance Restricted Stock Units (RSUs) | Former NetSeer Employees | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Option and restricted stock unit vesting period (up to) | 3 years | ||||||||||
Equity instruments other than options, grants in period (in shares) | 400,000 | ||||||||||
Grants in period, weighted average grant date fair value (in usd per share) | $ 1.04 | ||||||||||
Award vesting rights (as percent) | 33.33% | ||||||||||
Restricted Stock Units- Service Based | Employees | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Option and restricted stock unit vesting period (up to) | 3 years | ||||||||||
Restricted Stock Units- Service Based | Employees | Vesting percentage, Year 1 | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Award vesting rights (as percent) | 25.00% | ||||||||||
Restricted Stock Units- Service Based | Employees | Vesting percentage, Year 2 | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Award vesting rights (as percent) | 25.00% | ||||||||||
Restricted Stock Units- Service Based | Employees | Vesting percentage, Year 3 | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Award vesting rights (as percent) | 50.00% | ||||||||||
Restricted Stock Units- Performance Based | Employees | Vesting percentage, Year 1 | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Award vesting rights (as percent) | 33.33% | ||||||||||
Restricted Stock Units- Performance Based | Employees | Vesting percentage, Year 2 | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Award vesting rights (as percent) | 33.33% | ||||||||||
Restricted Stock Units- Performance Based | Employees | Vesting percentage, Year 3 | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Award vesting rights (as percent) | 33.33% | ||||||||||
Restricted Stock Units | Employees | |||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||
Option and restricted stock unit vesting period (up to) | 3 years | ||||||||||
Equity instruments other than options, grants in period (in shares) | 20,000 | 20,520 | 186,828 | ||||||||
Grants in period, weighted average grant date fair value (in usd per share) | $ 1.02 | $ 1.62 | $ 1.65 | ||||||||
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) | 116,280 | ||||||||||
Grants in period, weighted average grant date fair value (in usd per share) | $ 1.29 |
Stock-Based Compensation - Schedule of Grants (Details) |
Sep. 30, 2017
shares
|
|||
---|---|---|---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options Outstanding (in shares) | 264,246 | |||
RSUs Outstanding (in shares) | 1,171,761 | |||
Options and RSUs Exercised (in shares) | 3,730,825 | |||
Available Shares (in shares) | 2,379,019 | |||
Total (in shares) | 7,545,851 | |||
2017 ECP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options Outstanding (in shares) | 0 | |||
RSUs Outstanding (in shares) | 125,000 | |||
Options and RSUs Exercised (in shares) | 0 | |||
Available Shares (in shares) | 1,875,000 | |||
Total (in shares) | 2,000,000 | |||
2010 ECP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options Outstanding (in shares) | 250,498 | |||
RSUs Outstanding (in shares) | 1,046,761 | |||
Options and RSUs Exercised (in shares) | 2,780,740 | |||
Available Shares (in shares) | 504,019 | |||
Total (in shares) | 4,582,018 | |||
2005 LTIP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options Outstanding (in shares) | 13,748 | [1] | ||
RSUs Outstanding (in shares) | 0 | [1] | ||
Options and RSUs Exercised (in shares) | 950,085 | [1] | ||
Available Shares (in shares) | 0 | [1] | ||
Total (in shares) | 963,833 | [1] | ||
|
Discontinued Operations (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Discontinued Operations and Disposal Groups [Abstract] | ||||
Net income (loss) from discontinued operations | $ 0 | $ 171,844 | $ (1,109) | $ 172,197 |
Leases (Details) |
1 Months Ended | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
---|---|---|---|---|---|---|
Jun. 30, 2017
USD ($)
ft²
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
Jul. 31, 2017
USD ($)
ft²
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
|
Leases [Abstract] | ||||||
Rent expense, operating leases (credits) | $ 109,701 | $ 42,248 | $ 346,717 | $ 135,635 | ||
Lease Payments | ||||||
2017 | 116,235 | 116,235 | ||||
2018 | 466,329 | 466,329 | ||||
2019 | 473,851 | 473,851 | ||||
2020 | 402,138 | 402,138 | ||||
2021 | 239,090 | 239,090 | ||||
2022 | 162,706 | 162,706 | ||||
Total | $ 1,860,349 | $ 1,860,349 | ||||
NetSeer | ||||||
Operating Leased Assets [Line Items] | ||||||
Operating lease, payments | $ 95,000 | |||||
Number of square feet | ft² | 15,717 | |||||
Computer equipment | ||||||
Operating Leased Assets [Line Items] | ||||||
Lease term | 3 years | |||||
Operating leases, future minimum payments due, next twelve months | $ 173,000 | |||||
Office Space | ||||||
Operating Leased Assets [Line Items] | ||||||
Lease term | 5 years | |||||
Number of square feet | ft² | 4,801 | |||||
Operating leases, future minimum payments due, next twelve months | $ 216,000 | |||||
Annual lease payment increase, percentage | 3.00% |
NetSeer Acquisition - Narrative (Details) - USD ($) |
1 Months Ended | 8 Months Ended | ||
---|---|---|---|---|
Feb. 06, 2017 |
Feb. 28, 2017 |
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Business Acquisition [Line Items] | ||||
Goodwill | $ 9,773,842 | $ 5,760,808 | ||
NetSeer | ||||
Business Acquisition [Line Items] | ||||
Shares issued in asset purchase agreement (in shares) | 3,529,000 | 3,529,000 | ||
Shares deposited into escrow (in shares) | 529,350 | |||
Goodwill | $ 4,013,034 | |||
Accounts receivable | 2,292,485 | |||
Intangible assets | 4,360,000 | |||
Revenue of acquired entity since acquisition date | $ 10,000,000 | |||
NetSeer | Selling, General and Administrative Expenses | ||||
Business Acquisition [Line Items] | ||||
Acquisition related costs | $ 350,000 |
NetSeer Acquisition - Schedule of Assets and Liabilities Acquired (Details) - USD ($) |
Feb. 06, 2017 |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|---|
Fair value of assets acquired: | |||
Goodwill | $ (9,773,842) | $ (5,760,808) | |
NetSeer Asset Acquisition | |||
Business Acquisition [Line Items] | |||
Total consideration paid in common stock (with marketability discount applied) | $ 4,459,244 | ||
Fair value of assets acquired: | |||
Accounts receivable, net | (2,292,485) | ||
Prepaid expenses and other current assets | (236,163) | ||
Property and equipment, net | (119,101) | ||
Goodwill | (4,013,034) | ||
Intangible assets | (4,360,000) | ||
Fair value of liabilities assumed: | |||
Accounts payable | 3,579,787 | ||
Accrued expenses and other current liabilities | 1,152,789 | ||
Other long-term liabilities | 49,149 | ||
Debt | 2,015,577 | ||
Cash received in acquisition | $ 235,763 |
Segments (Details) - segment |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2017 |
Dec. 31, 2016 |
|
Segment Reporting [Abstract] | ||
Number of reportable segments | 1 | 2 |
Related Party Transactions (Details) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
Sep. 30, 2017
USD ($)
director
|
Sep. 30, 2016
USD ($)
|
|
Related Party Transactions [Abstract] | ||||
Revenue from related party | $ | $ 27,576 | $ 27,141 | $ 91,718 | $ 77,453 |
Number of directors partially owning First Orion Corp. | director | 2 |
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