Inuvo Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
INUV$0.41-0.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0001654954-24-005713
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001654954-24-010179
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 42 previous paragraphs and 44 current paragraphs.
20 unchanged; 17 reworded; 7 added; 4 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 3 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
The Inuvo products and services use analytics, data and artificial intelligence in a manner that optimizes the purchase and placement of advertising in real time. These capabilities are typically sold with services both individually and in combination with each other based on client needs. These products and services include:
Current report
Revenue for the three-month period ended June 30, 2024, increased 9.4% and revenue for the six-month period ended June 30, 2024, increased 23.6% as compared to the same periods in 2023, respectively. The higher revenue for the three-and-six-month period ended June 30, 2024 compared to the prior year periods was attributable to increasing demand within Platforms. Within Agencies & Brands, a new client which started in 2024 and has begun scaling.
Current report
Finance expense, net, for the three and six months ended June 30, 2023, was approximately $38 thousand and $57 thousand, respectively.
Current report
There was no net other income (expense) in the three-month and six- month period ended June 30, 2024 and the three-month period ended June 30, 2023. For the six-month period ended 2023, net other income was $14 thousand from the unrealized gains, as detailed in Note 3 - Property and Equipment of our Consolidated Financial Statements.
Current report
On May 7, 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co. LLC (“Wainwright”), to sell shares of our common stock, par value $0.001 per share, (the “Shares”), having an aggregate sales price of up to $15,000,000, from time to time, through an “at the market offering” program under which Wainwright will act as sales agent. The sales, if any, of the Shares made under the ATM Agreement will be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company will pay Wainwright a commission rate of up to 3.0% of the aggregate gross proceeds from each sale of Shares. For the six-month period ended June 30, 2024, the Company has not sold any shares of common stock under the ATM Agreement.
Current report
On July 31, 2024, we entered into a Financing and Security Agreement (the "Financing Agreement”) with SLR Digital Finance LLC ("SLR”), dated July 30, 2024. Pursuant to the terms of the Financing Agreement, SLR will finance up to $10 million dependent upon eligible receivables. See Note 13 - Subsequent Events of our Consolidated Financial Statements.
Current report
Net cash provided by financing activities during the six months ended June 30, 2023 was $3,495,105, and was primarily from proceeds from the capital raise (see Note 1 - Organization and Business of our Consolidated Financial Statements).
Removed paragraphs (4)
Previous report
The advertising industry Inuvo serves is going through an unprecedented change the likes of which has never occurred with the potential to disrupt the over $600 billion dollars in annual worldwide digital media spend that supports the internet. The cornerstone of the change revolves around the use of a consumer’s identity and data for ad-targeting. While there are many ways to identify consumers, the principal method that has evolved within the browsers has been the cookie, which is the location within the browser where a consumer's identity gets stored. When the cookie is no longer available, the means to lookup a consumer’s personal information in a database is no longer possible. No Cookie. No Data. No Targeting. Thirteen states have now signed consumer privacy legislation and another 17 have privacy bills in process. Apple has already eliminated the use of cookies within its browser and Google began phasing them out in January of 2024.
Previous report
Revenue for the three-month period ended March 31, 2024, increased 43.7% as compared to the same time period in 2023. The higher revenue this quarter compared to the prior year period was attributable to accelerating demand within Platforms since the third quarter of last year.
Previous report
Other income was approximately $0 and $14 thousand for the three months ended March 31, 2024 and 2023, respectively.
Previous report
On May 28, 2021, we entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners, as sales agent (the “Sales Agent”), pursuant to which we may offer and sell through or to the Sales Agent shares of our common stock (the “ATM Program”) up to an aggregate amount of gross proceeds of $35,000,000. During the year ended December 31, 2023, we sold 173,558 shares of common stock for gross proceeds totaling $63,136 under the ATM Program and paid the Sales Agent a commission of $1,902, all of which occurred during the second quarter of 2023. For the three-month period ended March 31, 2024, we did not issue any shares of common stock or receive any aggregate proceeds under the ATM Program, and we did not pay any commissions to the Sales Agent. Any shares of common stock offered and sold in the ATM Program were issued pursuant to our universal shelf registration statement on Form S-3 (the “Shelf Registration Statement”). The ATM Program terminated on March 15, 2024, the third (3rd) anniversary of the initial effective date of the Shelf Registration Statement. Under the terms of the Sales Agreement, the Sales Agent was entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of shares under the Sales Agreement.
Reworded paragraphs (17)
Previous wording
Inuvo’s primary mission is to disrupt the advertising industry with its proprietary and patented generative large language artificial intelligence (AI), a technology capable of identifying and targeting audiences without using a consumer’s identity or data. The AI was designed to replace the consumer data, analytics, segmentation and lookalike modeling technologies that have traditionally served the advertising industry as it transitions to a new paradigm where a consumer’s identity and data are no longer available for advertising decisions due to legislative and technological changes.
Current wording
Inuvo’s primary mission is to disrupt the advertising industry with its proprietary and patented generative large language artificial intelligence (AI), a technology capable of identifying and targeting audiences without using a consumer’s identity or data. The AI was designed to replace the consumer data, analytics, segmentation and lookalike modeling technologies that have traditionally served the advertising industry as it transitions to a new paradigm where a consumer’s identity and data are no longer available for advertising decisions due to legislative and technological changes. Rather than targeting people, the AI targets the reasons behind why people are interested in products, services and brands.
Previous wording
There are many barriers to entry associated with the Inuvo business model, including a proficiency in large language model based artificial intelligence, large scale information processing, software development, consumer data products, analytics, IOT (internet of things) integration and the relationships required to execute within the IOT. In 2023, Inuvo delivered roughly 11.27 billion ads. Inuvo’s intellectual property is protected by 19 issued and eight pending patents.
Current wording
There are many barriers to entry associated with the Inuvo business model, including a proficiency in large language model based artificial intelligence, large scale information processing, software development, consumer data products, analytics, IOT (internet of things) integration and the relationships required to execute within the IOT. Inuvo’s intellectual property is protected by 19 issued and eight pending patents.
Previous wording
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The estimates and assumptions that management makes affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material. Our significant accounting policies related to Revenue Recognition, Equity-Based Compensation, Capitalized Software Costs, Goodwill, Long-lived Assets and others are described in Note 2 — Summary of Significant Accounting Policies, of the Consolidated Financial Statements included elsewhere in this Report.
Current wording
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The estimates and assumptions that management makes affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material. Our significant accounting policies related to Revenue Recognition, Equity-Based Compensation, Capitalized Software Costs, Goodwill, Long-lived Assets and others are described in Note 2 - Summary of Significant Accounting Policies of our Consolidated Financial Statements included elsewhere in this Report.
Previous wording
Cost of revenue is primarily composed of payments to advertising exchanges that provide access to digital inventory where we serve advertisements. To a lesser extent, cost of revenue includes payments to website publishers and app developers that host advertisements. The decline in cost of revenue for the period ended March 31, 2024, compared to the same time period in 2023 was related to the change in revenue mix due to increasing demand and consequently revenue from Platform clients. The higher gross margin in the current year quarter, 87.7% compared to 73.1% in the same quarter last year was primarily due to a change in the revenue mix, where Platform clients typically have higher gross margins.
Current wording
Cost of revenue is primarily composed of payments to advertising exchanges that provide access to digital inventory where we serve advertisements. To a lesser extent, cost of revenue includes payments to website publishers and app developers that host advertisements. The decline in cost of revenue for the three-and-six-month period ended June 30, 2024, compared to the same time periods in 2023 was related to the change in revenue mix due to higher revenue from Platform clients.
Previous wording
Marketing costs consist mostly of traffic acquisition (i.e., media) costs and include those expenses required to attract audiences to various web properties. Marketing costs for the three-month period ended March 31, 2024 compared to the same period in 2023 increased due to a higher costs associated with higher revenue with Platforms.
Current wording
Marketing costs consist mostly of traffic acquisition (i.e., media) costs and include those expenses required to attract audiences to various web properties. Marketing costs for the three-and-six-month period ended June 30, 2024 compared to the same period in 2023 increased due to higher media costs required to serve Platform advertisers.
Previous wording
Compensation expense was lower for the three-month period ended March 31, 2024, compared to the same time period in 2023 due primarily to lower commission expense and a decrease in our incentive accrual, partially offset by higher payroll expense. Our total employment, both full- and part-time, was 93 at March 31, 2024 compared to 85 at March 31, 2023.
Current wording
Compensation expense was approximately $222 thousand lower for the three months ended and approximately $420 thousand lower for the six months ended June 30, 2024, compared to the same time periods in 2023 primarily due to lower incentive expense, stock-based compensation, and commission expense. Our total employment, both full- and part-time, was 83 at June 30, 2024 compared to 84 at June 30, 2023.
Previous wording
General and administrative costs for the three months ended March 31, 2024, decreased 56% compared to the same period in 2023 due primarily to a $1.1 million dollar adjustment to the expected losses for accounts receivable for a balance due from a former client in 2022 that now pays consistently, has significantly reduced its outstanding amount owed and is expected to pay the remaining amount due.
Current wording
General and administrative costs for the three and six months ended June 30, 2024 decreased $772 thousand and $1.7 million, respectively, compared to the same periods in 2023 due primarily to a decrease in the expense for doubtful accounts related to a former client in 2022 that now pays consistently, has significantly reduced its outstanding amount owed and is expected to pay the remaining amount due.
Previous wording
Finance expense, net, for the three months ended March 31, 2024, was approximately $20 thousand compared to $19 thousand in the same quarter last year.
Current wording
Finance expense, net, for the three and six months ended June 30, 2024, was approximately $42 thousand and $63 thousand, respectively.
Previous wording
Our principal sources of liquidity are the sale of our common stock and our credit facility discussed in Note 5 - Bank Debt.
Current wording
Our principal sources of liquidity are the sale of our common stock and our credit facility discussed in Note 5 - Bank Debt of our Consolidated Financial Statements.
Previous wording
As of March 31, 2024, we have over $2 million in cash and cash equivalents. Our net working capital deficit was approximately $1.5 million. We have encountered recurring losses and cash outflows from operations, which historically we have funded through equity offerings and debt facilities. In addition, our investment in internally developed software consists primarily of labor costs which are of a fixed nature. Through March 31, 2024, our accumulated deficit was $169.6 million.
Current wording
As of June 30, 2024, we have over $2 million in cash and cash equivalents. Our net working capital deficit was approximately $2.8 million. We have encountered recurring losses and cash outflows from operations, which historically we have funded through equity offerings and debt facilities. In addition, our investment in internally developed software consists primarily of labor costs which are of a fixed nature. Through June 30, 2024, our accumulated deficit was $171.3 million.
Previous wording
Management plans to support the Company’s future operations and capital expenditures primarily through cash raised through the sale of stock in May 2023, cash generated from future operations and borrowings from the credit facility until reaching profitability. The credit facility is due upon demand and therefore there can be no assurances that sufficient borrowings will be available to support future operations until profitability is reached. Our collection period is less than 30 days and can also be used to meet accrued obligations. We believe our current cash position and credit facility will be sufficient to sustain operations for at least the next twelve months from the date of this filing. If our plan to grow the IntentKey product is unsuccessful, we may need to fund operations through private or public sales of securities, debt financings or partnering/licensing transactions over the long term.
Current wording
Management plans to support the Company’s future operations and capital expenditures primarily through cash raised from the sale of stock in May 2023 and cash generated from its credit facility until such time as we reach profitability. The credit facility is due upon demand and therefore there can be no assurances that sufficient borrowings will be available to support future operations until profitability is reached. Our collection period is less than 30 days and can also be used to meet accrued obligations. We believe our current cash position and credit facility will be sufficient to sustain operations for at least the next twelve months from the date of this filing. If our plan to grow the IntentKey product is unsuccessful, we may need to fund operations through private or public sales of securities, debt financings or partnering/licensing transactions over the long term.
Previous wording
The table below sets forth a summary of our cash flows for the three months ended March 31, 2024 and 2023:
Current wording
The table below sets forth a summary of our cash flows for the six months ended June 30, 2024 and 2023:
Previous wording
Net cash used in operating activities was $1,355,592 during the three months ended March 31, 2024. We reported a net loss of $2,111,658, which included non-cash expenses of depreciation and amortization expense of $673,203, depreciation of right of use assets of $18,649 and stock-based compensation expense of $396,312. The change in operating assets and liabilities during the three months ended March 31, 2024 was a net provision of cash of $772,069 primarily due to a decrease in the accounts payable balance of $1,101,313, partially offset by the decrease in accounts receivable balance of $1,616,597. Our terms are such that we generally collect receivables prior to paying trade payables. However, our Media sales arrangements typically have slower payment terms than the terms of related payables.
Current wording
Net cash used in operating activities was $1,160,170 during the six months ended June 30, 2024. We reported a net loss of $3,858,849, which included non-cash expenses of depreciation and amortization expense of $1,350,004, depreciation of right of use assets of $36,115 and stock-based compensation expense of $714,993. The change in operating assets and liabilities during the six months ended June 30, 2024 was a net provision of cash of $2,177,150 primarily due to a decrease in accounts receivable of $2,500,163 partially offset by a decrease of accrued liabilities and other liabilities of $324,358 and a decrease in accounts payable of $356,230. Our terms are such that we generally collect receivables prior to paying trade payables. However, our Media sales arrangements typically have slower payment terms than the terms of related payables.
Previous wording
During the comparable three-month period in 2023, cash used in operating activities was $3,230,999 from a net loss of $3,440,105 and included several non-cash expenses of depreciation and amortization expense of $639,026 and stock-based compensation expense of $432,084. The change in operating assets and liabilities during the three months ended March 31, 2023, was a net use of cash of $836,562.
Current wording
During the comparable six-month period in 2023, cash used in operating activities was $2,833,853 from a net loss of $6,817,343 and included several non-cash expenses of depreciation and amortization expense of $1,317,203 and stock-based compensation expense of $935,145. The change in operating assets and liabilities during the six months ended June 30, 2023 was a net provision of cash of $1,371,741 primarily due to an increase of accrued liabilities and other liabilities of $3,069,680 partially offset by a lower accounts payable balance.
Previous wording
Net cash used by investing activities was $472,228 for the three months ended March 31, 2024, and consisted primarily of capitalized internal development costs.
Current wording
Net cash used in investing activities was $933,955 for the six months ended June 30, 2024, and consisted primarily of capitalized internal development costs.
Previous wording
Net cash used in investing activities was $1,877,638 for the three months ended March 31, 2023, and consisted primarily of the purchase of marketable securities and to a lesser extent, capitalized internal development costs.
Current wording
Net cash provided by investing activities was $1,452,445 for the six months ended June 30, 2023, and consisted primarily of the sale of marketable securities, partially offset by capitalized internal development costs.
Previous wording
Net cash used financing activities was $180,677 and during the three months ended March 31, 2024, and was primarily from net taxes paid on restricted stock unit grants exercised.
Current wording
Net cash used in financing activities was $334,425 during the six months ended June 30, 2024, and was primarily due to net taxes paid on restricted stock unit grants exercised.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Net cash used in financing activities was $391,529 during the three months ended March 31, 2023.