Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2023

Summary of Significant Accounting Policies

Basis of presentation

The consolidated financial statements presented are for Inuvo and its subsidiaries. The accompanying unaudited consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet as of December 31, 2022, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). In our opinion, these consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 9, 2023.

Use of estimates

The preparation of financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. We regularly evaluate estimates and assumptions related to allowance for doubtful accounts, capitalized labor, goodwill and purchased intangible asset valuations and income tax valuation allowance. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material.

Revenue Recognition

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

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

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2023				2022				2023				2022
Direct Customers	$	3,306,788	19.8	%	$	11,560,450	51.0	%	$	7,226,562	25.4	%	$	22,286,019	54.0	%
Indirect Customers		13,317,899	80.0	%		11,046,215	48.8	%		21,231,089	74.5	%		18,885,325	45.8	%
Consulting		26,718	0.2	%		44,640	0.2	%		41,194	0.1	%		89,328	0.2	%
Total	$	16,651,405	100.0	%	$	22,651,305	100.0	%	$	28,498,845	100.0	%	$	41,260,672	100.0	%

Recently Adopted Accounting Pronouncements

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