Inuvo, Inc.

Previous wording

Inuvo’s AI technology solves this challenge and can be consumed by clients both as a managed service and software-as-a-service. For certain clients, Inuvo has also developed various proprietary technology and assets that include digital content, websites, automated campaigns, ad fraud detection, performance reporting and predictive media mix modeling.

Current wording

Inuvo’s AI technology solves this challenge and can be consumed by Agency & Brands clients both as a managed service and software-as-a-service. For certain clients, Inuvo has also developed various proprietary technology and assets that include digital content, websites, automated campaigns, ad fraud detection, performance reporting and predictive media mix modeling.

Previous wording

There are many barriers to entry associated with the Inuvo business model, including a proficiency in large language model

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 20 issued and four pending patents.

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. For the three-month period ended September 30, 2024, the increase in cost of revenue compared to the same period in 2023 was related to the higher revenue within Agencies & Brands in this year's quarter. For the nine-month period ended September 30, 2024, the decrease in cost of revenue compared to the same period in 2023 was attributed to lower revenue within Agencies & Brands during the comparable period.

Current wording

Cost of revenue is primarily composed of payments to website publishers and app developers that host advertisements. To a lesser extent, cost of revenue includes payments to advertising exchanges that provide access to digital inventory where we serve advertisements. The increase in cost of revenue for the period ended March 31, 2025, compared to the same time period in 2024 was related to the change in revenue mix due to increasing demand from Platform clients. The change in gross margin in the current year quarter, 79.0% compared to 87.7% in the same quarter last year was primarily due to a change in the revenue mix.

Previous wording

Marketing costs consist mostly of traffic acquisition (i.e., media) costs and include those expenses required to attract an audience to various web properties. Marketing costs for the three months ended September 30, 2024 were 3.5% lower than the same quarter last year primarily due to lower revenue derived from Platform advertisers. Marketing costs for the nine months ended September 30, 2024 were 15.7% higher compared to the same period in 2023 due primarily to higher revenue from Platform advertisers in the comparable periods. In the third quarter of 2024 we fully amortized the remaining balance of the referral and support services asset (see Note 7 - Commitments of our Consolidated Financial Statements) increasing the Marketing costs in both the three and nine months ended September 30, 2024 .

Current wording

Marketing costs consist mostly of traffic acquisition (i.e., media) costs and include those expenses required to attract audiences

Previous wording

Compensation expense was $420,000 lower for the three months ended September 30, 2024 and $840,000 lower for the nine months ended September 30, 2024, compared to the same time periods in 2023 primarily due to lower stock-based compensation and accrued incentive expense. Our total employment, both full- and part-time, was 82 at September 30, 2024 compared to 86 at September 30, 2023.

Current wording

Compensation expense was higher for the three-month period ended March 31, 2025, compared to the same time period in 2024 due primarily to a one-time accrual of an employee benefit of $335,000 and a higher incentive accrual. Our total employment, both full- and part-time, was 81 at March 31, 2025 compared to 93 at March 31, 2024.

Previous wording

General and administrative costs for the three and nine months ended September 30, 2024 decreased 31.2% and 38.4%, respectively, compared to the same periods in 2023 due primarily to an adjustment in the reserve for expected credit losses. During 2024, we made an adjustment to the allowance for expected credit losses for a balance due from a former client in 2022. The client has since paid off their full outstanding balance and no longer has any obligation to us as of September 30, 2024.

Current wording

General and administrative costs for the three months ended March 31, 2025, increased 153% compared to the same period in 2024. During 2024, we made a $1.1 million adjustment reducing the allowance for expected credit losses for a balance due from a former client in 2022. The client has since paid off their full outstanding balance and no longer has any obligation to us as of December 31, 2024.

Previous 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.

Current wording

Our principal sources of liquidity are the sale of our common stock and our credit facility discussed in Note 5 - Bank Debt.

Previous wording

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 nine-month period ended September 30, 2024, the Company has not sold any shares of common stock under the ATM Agreement.

Current wording

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 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. We will pay Wainwright a commission rate of up to 3.0% of the aggregate gross proceeds from each sale of Shares. For the year ended December 31, 2024, we have not sold any shares of common stock under the ATM Agreement. For the three-month period ended March 31, 2025, we utilized the ATM Agreement and sold 1,594,313 shares of common stock for gross proceeds of $1,163,491.

Previous wording

On July 31, 2024, we entered into a Financing and Security Agreement (the "Financing Agreement”) with SLR Digital Finance LLC ("SLR”), effective July 30, 2024. Pursuant to the terms of the Financing Agreement, SLR will finance up to $10 million dependent upon eligible receivables. See Note 5 – Bank Debt of our Consolidated Financial Statements.

Current wording

On July 31, 2024, we entered into a Financing and Security Agreement (the "Financing Agreement”) with SLR Digital Finance LLC ("SLR”), effective July 30, 2024. Pursuant to the terms of the Financing Agreement, SLR will finance up to $10 million dependent upon eligible receivables. Availability as of December 31, 2024 equaled the maximum credit commitment of $10,000,000. See Note 5 – Bank Debt to our Consolidated Financial Statements.

Previous wording

We have focused our resources behind a plan to market our collective multi-channel advertising capabilities differentiated by our AI technology, the IntentKey, where we have a technological advantage and higher margins. If we are successful in implementing our plan, we expect to return to positive cash flows from operations. However, there is no assurance that we will be able to achieve this objective.

Current wording

We have focused our resources behind a plan to market our collective multi-channel advertising capabilities differentiated by our AI technology, the IntentKey, where we have a technological advantage and higher margins. If we are successful in implementing our plan, we expect to return to and maintain positive cash flows from operations. However, there is no assurance that we will be able to achieve this objective.

Previous wording

As of September 30, 2024, we have approximately $2.6 million in cash and cash equivalents. Our net working capital deficit was $3.4 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 September 30, 2024, our accumulated deficit was $173.4 million.

Current wording

As of March 31, 2025, we have approximately $2.6 million in cash and cash equivalents. Our net working capital deficit was approximately $2.2 million. In March 2025, we received a payment from the Internal Revenue Service totaling $610,352, which was recorded as other income and interest income, in connection with an amended form filed in May 2023 for the Employee Retention Credit related to the first quarter of 2021. Additionally, our investing activities totaled $451,729 for the three-month period ended March 31, 2025. This amount primarily consists of internally developed software costs, which are largely comprised of fixed labor costs, along with other capitalized expenditures. We have encountered recurring losses and cash outflows from operations, which historically we have funded through equity offerings and debt facilities. Through March 31, 2025, our accumulated deficit was $174.5 million.

Previous wording

Management plans to support the Company’s future operations and capital expenditures primarily through 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.

Current wording

Management plans to support the Company’s future operations and capital expenditures primarily through 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. 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 nine months ended September 30, 2024 and 2023:

Current wording

The table below sets forth a summary of our cash flows for the three months ended March 31, 2025 and 2024:

Previous wording

Net cash used in operating activities was $100,345 during the nine months ended September 30, 2024. We reported a net loss of $5,903,142, which included non-cash expenses of depreciation and amortization expense of $1,951,196, depreciation of right of use assets of $48,317, stock-based compensation expense of $1,087,533, and $800,000 for the impairment and amortization of a referral and support services agreement. The change in operating assets and liabilities during the nine months ended September 30, 2024 was a net provision of cash of $4,185,284 primarily due to a decrease of $1,899,029 in accounts receivable and an increase of accrued and other liabilities of $940,076. 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 $366,912 during the three months ended March 31, 2025. We reported a net loss of $1,259,821, which included non-cash expenses of depreciation and amortization expense of $568,042, depreciation of right of use assets of $6,090 and stock-based compensation expense of $304,284. The change in operating assets and liabilities during the three months ended March 31, 2025 was a net use of cash of $79,752 primarily due to a decrease in the accounts payable balance of $1,165,346, offset by the decrease in accounts receivable balance of $491,707 and an increase in accrued expenses and other current liabilities of $754,973. 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 nine-month period in 2023, cash used in operating activities was $457,716 from a net loss of $7,988,323 and included several non-cash expenses of depreciation and amortization expense of $1,984,139 and stock-based compensation expense of $1,471,683. The change in operating assets and liabilities during the nine months ended September 30, 2023, was a net provision of cash of $3,265,938.

Current wording

During the comparable three-month period in 2024, cash used in operating activities was $1,355,592 from a net loss of $2,111,658 that included several non-cash expenses of depreciation and amortization expense of $673,203 and stock-based compensation expense of $396,312, offset by a reduction to the allowance for expected credit losses of $1.1 million. The change in operating assets and liabilities during the three months ended March 31, 2024, was a net provision of cash of $640,110.

Previous wording

Net cash provided by investing activities was $1,029,656 for the nine months ended September 30, 2023, and consisted primarily of the sale of marketable securities, partially offset by capitalized internal development costs.

Current wording

Net cash used by investing activities was $451,729 for the three months ended March 31, 2025, and consisted primarily of capitalized internal development costs.

Previous wording

Net cash used in investing activities was $1,409,762 for the nine months ended September 30, 2024, and consisted primarily of capitalized internal development costs.

Current wording

Net cash used in investing activities was $472,228 for the three months ended March 31, 2024, and consisted primarily of capitalized internal development costs.

Previous wording

Net cash provided by financing activities during the nine months ended September 30, 2023 was $3,475,126 and was primarily from proceeds from the capital raise (see Note 1 - Organization and Business of our Consolidated Financial Statements).

Current wording

Net cash provided by financing activities was $921,389 and during the three months ended March 31, 2025, and was primarily from the proceeds from the ATM Agreement as discussed in Note 1 – Organization and Business.

Previous wording

Net cash used in financing activities was $343,526 during the nine months ended September 30, 2024, and was primarily due to taxes paid on restricted stock unit grants exercised.

Current wording

Net cash used in financing activities was $180,677 during the three months ended March 31, 2024, and was primarily from net taxes paid on restricted stock unit grants exercised.