inuv-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

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

For the transition period from ______________________ to ______________________

Commission file number: 001-32442


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)

(501) 205-8508

Registrant's telephone number, including area code

not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act: ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


Title of Class						November 5th
Common Stock						118,747,447

TABLE OF CONTENTS


		Page No.
Part I

Item 1.	Financial Statements.	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Operations	6
	Consolidated Statements of Cash Flows	7
	Consolidated Statements of Stockholders' Equity	8
	Notes to Consolidated Financial Statements	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	24
Item 4.	Controls and Procedures.	24

Part II

Item 1.	Legal Proceedings.	25
Item 1A.	Risk Factors.	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	26
Item 3.	Defaults upon Senior Securities.	26
Item 4.	Mine Safety and Disclosures.	26
Item 5.	Other Information.	26
Item 6.	Exhibits.	27
Signatures		28

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "will," "should," "intend," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," or "continue," or the negative of such terms or other comparable terminology. This report includes, among others, statements regarding our risks associated with:

•our history of losses and declining revenues;

•our reliance on revenues from a limited number of customers;

•seasonality of our business which impacts our financial results and cash availability;

•dependence on our advertising suppliers;

•our ability to acquire traffic in a profitable manner;

•failure to keep pace with technology changes;

•impact of possible interruption in our network infrastructure;

•dependence on our key personnel;

•regulatory and legal uncertainties;

•failure to comply with privacy and data security laws and regulations;

•third party infringement claims;

•publishers who could fabricate fraudulent clicks;

•our ability to continue to meet the NYSE American listing standards;

•the impact of quarterly results on our common stock price;

•dilution to our stockholders upon the exercise of outstanding restricted stock unit grants and warrants;

•the on-going impact of the COVID-19 pandemic on our Company; and

•our ability to identify, finance, complete and successfully integrate future acquisitions.

These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, including the risks described in Part II, Item 1A. Risk Factors appearing in this report, together with those appearing in Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission ("SEC") on February 11, 2021, as amended on Form 10-K/A as filed with the SEC on March 10, 2021 and our subsequent filings with the SEC.

Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

OTHER PERTINENT INFORMATION

Unless specifically set forth to the contrary, when used in this report the terms "Inuvo," the "Company," "we," "us," "our" and similar terms refer to Inuvo, Inc., a Nevada corporation, and its subsidiaries. When used in this report, "third quarter 2021" means for the three months ended September 30, 2021, "third quarter 2020" means for the three months ended September 30, 2020, "2020" means the fiscal year ended December 31, 2020 and "2021" means the fiscal year ending December 31, 2021. The information which appears on our corporate web site at www.inuvo.com and our various social media platforms are not part of this report.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INUVO, INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2021 (Unaudited) and December 31, 2020


	September 30, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalent	$	11,702,464	$	7,890,665
Marketable securities	2,925,785		—
Accounts receivable, net of allowance for doubtful accounts of $161,904 and $209,667, respectively	8,920,881		6,227,610
Prepaid expenses and other current assets	496,250		413,435
Total current assets	24,045,380		14,531,710

Property and equipment, net	1,422,422		1,187,061
Other assets
Right of use assets - operating lease	723,069		606,573
Right of use assets - finance lease	287,225		395,910
Referral and support services agreement advance	1,475,000		—
Intangible assets, net of accumulated amortization	7,186,961		8,586,089
Goodwill	9,853,342		9,853,342
Other assets	44,236		20,886
Total other assets	19,569,833		19,462,800

Total assets	$	45,037,635	$	35,181,571

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	4,680,629	$	4,048,260
Accrued expenses and other current liabilities	5,861,885		4,216,448
Lease liability - operating lease	334,758		217,671
Lease liability - finance lease	147,661		246,793





Total current liabilities	11,024,933		8,729,172

Long-term liabilities
Deferred tax liability	107,000		107,000

Lease liability - operating lease	388,310		388,902
Lease liability - finance lease	136,385		93,426
Other long-term liabilities	11,945		573,957
Total long-term liabilities	643,640		1,163,285

Stockholders’ equity
Preferred stock, $0.001 par value:
Authorized shares 500,000, none issued and outstanding	—		—
Common stock, $0.001 par value:
Authorized shares 200,000,000 and 100,000,000, respectively; issued and outstanding shares 118,747,447 and 98,035,829, respectively.	118,748		98,036
Additional paid-in capital	175,960,347		161,541,448
Accumulated deficit	(142,710,033)		(136,350,370)

Total stockholders' equity	33,369,062		25,289,114
Total liabilities and stockholders' equity	$	45,037,635	$	35,181,571

See accompanying notes to the consolidated financial statements.

INUVO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Net revenue	$	16,841,035	$	9,214,350	$	40,094,427	$	31,737,520
Cost of revenue	3,757,938		1,645,392		7,466,017		6,154,921
Gross profit	13,083,097		7,568,958		32,628,410		25,582,599
Operating expenses
Marketing costs	10,163,006		5,668,707		25,681,930		19,148,925
Compensation	2,840,149		2,462,693		8,458,233		6,925,239
Selling, general and administrative	1,824,869		1,870,258		5,226,737		5,710,221
Total operating expenses	14,828,024		10,001,658		39,366,900		31,784,385
Operating loss	(1,744,927)		(2,432,700)		(6,738,490)		(6,201,786)


Interest expense, net	(6,261)		(26,143)		(36,641)		(251,335)
Other income (expense), net	(79,080)		53,763		415,468		(136,483)



Net loss	$	(1,830,268)	$	(2,405,080)	$	(6,359,663)	$	(6,589,604)

Per common share data
Basic and diluted:


Net loss	$	(0.02)	$	(0.03)	$	(0.05)	$	(0.09)

Weighted average shares
Basic	116,645,509		92,110,881		117,230,419		70,652,630
Diluted	116,645,509		92,110,881		117,230,419		70,652,630

See accompanying notes to the consolidated financial statements.

INUVO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Nine Months Ended September 30,
	2021		2020
Operating activities:
Net loss	$	(6,359,663)	$	(6,589,604)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,343,874		2,452,930
Depreciation-Right of Use Assets	237,423		291,100
Stock based compensation	1,566,016		660,615
Unrealized loss on purchase of marketable securities	(54,532)		—
Amortization of financing fees	8,750		11,092
Provision for doubtful accounts	(47,763)		(73,333)
Third party rights agreement termination	(420,000)		—
Derecognition of contingencies	(110,000)		—
Contract Cancellation	—		(1,260,978)
Amortization of debt discount	—		18,286
Amortization of OID interest expense	—		13,167
Mark to market fair value of derivative	—		102,664
Loss on extinguishment of convertible debt	—		65,700
Change in operating assets and liabilities:
Marketable securities	(2,871,253)		—
Accounts receivable	(2,645,508)		3,564,381
Referral and support services agreement advance	(1,500,000)		—
Prepaid expenses, unbilled revenue and other current assets	(77,503)		(225,771)
Accounts payable	632,369		(3,031,304)
Accrued expenses and other liabilities	1,754,574		(334,576)

Net cash used in operating activities	(7,543,216)		(4,335,631)
Investing activities:
Purchases of equipment and capitalized development costs	(1,180,107)		(852,423)
Net cash used in investing activities	(1,180,107)		(852,423)
Financing activities:
Proceeds from sale of common stock, net	13,137,500		16,432,190

Proceeds from ValidClick licensing agreement	—		500,000
Proceeds from PPP and SBA loans	—		1,258,900
Net payments on line of credit	—		(3,381,364)

Payments on finance lease obligations	(181,998)		(412,382)

Proceeds from exercise of options	1,569		—
SBA loan repayment	(149,900)		—
Net taxes paid on restricted stock unit grants exercised	(272,049)		(54,065)
Net cash provided by financing activities	12,535,122		14,343,279

Net change – cash	3,811,799		9,155,225
Cash and cash equivalent, beginning of year	7,890,665		372,989
Cash and cash equivalent, end of period	$	11,702,464	$	9,528,214
Supplemental information:
Interest paid	$	42,474	$	200,904

Non cash investing and financing activities:
Assets purchased under finance lease	$	125,825	$	524,368
Assets purchased under operating lease	$	344,311	$	249,595
Conversion of Debt and derecognition of derivative and discounts to common stock	$	—	$	923,810

See accompanying notes to the consolidated financial statements.

INUVO, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

For the Nine Months Ended September 30,


2021
	Common Stock			Additional Paid in Capital		Accumulated Deficit			Total
	Shares	Stock
Balance as of December 31, 2020	98,035,829	$98,036		$	161,541,448	$	(136,350,370)		$	25,289,114
Net loss						(2,147,268)			(2,147,268)
Stock-based compensation				394,870					394,870
Stock issued for vested restricted stock awards	1,467,465	1,467		(1,467)					—
Shares withheld for taxes on vested restricted stock				(161,244)					(161,244)
Proceeds from exercise of options				1,569					1,569
Sale of common stock, net	19,015,151	19,016		13,118,484					13,137,500
Balance as of March 31, 2021	118,518,445	$118,519		$	174,893,660	$	(138,497,638)		$	36,514,541
Net loss						(2,382,127)			(2,382,127)
Stock-based compensation				557,602					557,602





Balance as of June 30, 2021	118,518,445	$	118,519	$	175,451,262	$	(140,879,765)		$	34,690,016
Net loss						(1,830,268)		—	(1,830,268)
Stock-based compensation				613,544					613,544
Shares withheld for taxes on vest restricted stock				(110,805)					(110,805)
Stock issued for vested restricted stock awards	229,002	229		(229)					—
Stock warrants issued for referral agreement				6,575					6,575
Balance as of September 30, 2021	118,747,447	$	118,748	$	175,960,347	$	(142,710,033)		$	33,369,062


2020
	Common Stock		Additional Paid in Capital		Accumulated Deficit		Treasury Stock		Total
	Shares	Stock
Balance as of December 31, 2019	51,846,011	$52,223	$	144,843,687	$	(129,045,801)	$	(1,396,559)	$	14,453,550
Net loss					(2,825,236)				(2,825,236)
Stock-based compensation			208,897						208,897
Stock issued for vested restricted stock awards	260,719	261

SEC Form 10-Q filed by Inuvo, Inc