þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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INUVO, INC.
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(Exact name of registrant as specified in its charter)
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Nevada
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87-0450450
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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500 President Clinton Ave., Suite 300, Little Rock, AR
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72201
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common Stock
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NYSE American
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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þ
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Smaller reporting company
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þ
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Emerging growth company
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o
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Page No.
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Part I
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Item 1.
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Business.
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Item 1A.
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Risk Factors.
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Item 1B.
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Unresolved Staff Comments.
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Item 2.
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Properties.
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Item 3.
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Legal Proceedings.
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Item 4.
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Mine Safety Disclosures.
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Part II
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Item 5.
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Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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Item 6.
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Selected Financial Data.
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Item 7.
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Management's Discussion and Analysis of Financial Condition and Results of Operations.
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk.
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Item 8.
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Financial Statements and Supplementary Data.
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Item 9.
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Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
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Item 9A.
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Controls and Procedures.
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Item 9B.
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Other Information.
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Part III
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Item 10.
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Directors, Executive Officers and Corporate Governance.
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Item 11.
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Executive Compensation.
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence.
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Item 14.
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Principal Accounting Fees and Services.
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Part IV
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Item 15.
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Exhibits, Financial Statement Schedules.
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Item 16.
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Form 10-K Summary
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•
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risks associated with our pending Merger;
|
•
|
material dependence on our relationships with Yahoo!, Google, Microsoft Online and other demand partners and risks associated with declining revenue from Yahoo!;
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•
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dependence on our financing arrangements with Western Alliance Bank, which is collateralized by our assets;
|
•
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dependence on relationships with supply partners and the introduction of new products and services, which require significant investment;
|
•
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the seasonality of our business and restricted cash flow during seasonal low periods;
|
•
|
dependence on our ability to effectively market and attract traffic to our sites;
|
•
|
risks associated with our failure to adhere to the covenants and restrictions in our grant agreement with the state of Arkansas;
|
•
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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;
|
•
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need to protect our intellectual property;
|
•
|
vulnerability to publishers who could fabricate clicks;
|
•
|
vulnerability to a downturn and to uncertainty in global economic conditions; and
|
•
|
the dilutive impact to our stockholders from outstanding restricted stock grants, options and convertible securities.
|
•
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ValidClick: A software as a service and delivery platform for publishers that offers a pay-per-click solution where advertisements are targeted to consumers based on content and behaviors.
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•
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IntentKey: A consumer intent recognition system designed to reach highly targeted mobile and desktop In-Market audiences with precision.
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•
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Digital Publishing: Branded web properties like alot.com, earnspendlive.com, search4answers.com and many more with content developed, edited and published by Inuvo in categories like health, finance, travel, entertainment, careers, education, lifestyle and automotive.
|
•
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pay fees to the lender associated with the credit facility;
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•
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maintain our corporate existence in good standing;
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•
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grant the lender a security interest in our assets;
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•
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provide financial information to the lender; and
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•
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refrain from any transfer of any of our business or property, subject to customary exceptions.
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•
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our ability to attract new distribution partners, including the length of our sales cycles, or to sell increased usage of our service to existing distribution partners;
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•
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technical difficulties or interruptions in our services;
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•
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changes in privacy protection and other governmental regulations applicable to our industry;
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•
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changes in our pricing policies or the pricing policies of our competitors;
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•
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the financial condition and business success of our distribution partners;
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•
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purchasing and budgeting cycles of our distribution partners;
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•
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acquisitions of businesses and products by us or our competitors;
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•
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competition, including entry into the market by new competitors or new offerings by existing competitors;
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•
|
discounts offered to advertisers by upstream advertising networks;
|
•
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our history of litigation;
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•
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our ability to hire, train and retain sufficient sales, client management and other personnel;
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•
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timing of development, introduction and market acceptance of new services or service enhancements by us or our competitors;
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•
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concentration of marketing expenses for activities such as trade shows and advertising campaigns;
|
•
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expenses related to any new or expanded data centers; and
|
•
|
general economic and financial market conditions.
|
•
|
unexpected increases in usage of our services;
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•
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computer viruses and other security issues;
|
•
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interruption or other loss of connectivity provided by third-party internet service providers;
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•
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natural disasters or other catastrophic events; and
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•
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server failures or other hardware problems.
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For the Years Ended December 31,
|
|||||||||||||
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2018
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|
2017
|
|
Change
|
|
% Change
|
|||||||
Net Revenue
|
$
|
73,330,642
|
|
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$
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79,554,493
|
|
|
$
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(6,223,851
|
)
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(7.8
|
%)
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Cost of Revenue
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29,921,482
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|
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36,669,543
|
|
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(6,748,061
|
)
|
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(18.4
|
%)
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|||
Gross Profit
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$
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43,409,160
|
|
|
$
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42,884,950
|
|
|
524,210
|
|
|
1.2
|
%
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|
Marketing Cost (TAC)
|
$
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31,852,190
|
|
|
$
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28,578,401
|
|
|
3,273,789
|
|
|
11.5
|
%
|
|
Gross Profit adjusted for Marketing Cost (TAC)
|
$
|
11,556,970
|
|
|
$
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14,306,549
|
|
|
(2,749,579
|
)
|
|
(19.2
|
%)
|
|
For the Year Ended December 31,
|
|||||||||||||
|
2018
|
|
2017
|
|
Change
|
|
% Change
|
|||||||
Marketing costs (TAC)
|
$
|
31,852,190
|
|
|
$
|
28,578,401
|
|
|
$
|
3,273,789
|
|
|
11.5
|
%
|
Compensation
|
8,524,476
|
|
|
10,200,117
|
|
|
(1,675,641
|
)
|
|
(16.4
|
%)
|
|||
Selling, general and administrative
|
8,502,874
|
|
|
8,342,906
|
|
|
159,968
|
|
|
1.9
|
%
|
|||
Operating expenses
|
$
|
48,879,540
|
|
|
$
|
47,121,424
|
|
|
$
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1,758,116
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|
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3.7
|
%
|
•
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
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•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
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Name
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Age
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|
Positions
|
|
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Richard K. Howe
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56
|
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Executive Chairman of the Board and Chief Executive Officer; Class I Director
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Wallace D. Ruiz
|
|
67
|
|
Chief Financial Officer, Secretary
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John B. Pisaris, Esq.
|
|
53
|
|
General Counsel
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Don Walker “Trey” Barrett III
|
|
54
|
|
Chief Operating Officer
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Charles D. Morgan
|
|
76
|
|
Class III director
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Gordon J. Cameron
|
|
54
|
|
Class I director
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G. Kent Burnett
|
|
74
|
|
Class II director
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Patrick Terrell
|
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64
|
|
Class III director
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Director
|
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Audit Committee Member
|
|
Nominating, Corporate Governance and Compensation Committee Member
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Charles D. Morgan
|
|
|
|
a
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Patrick Terrell
|
|
a
|
|
a
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Gordon J. Cameron
|
|
a
;
(1)
|
|
|
G. Kent Burnett
|
|
|
|
a
;
(1)
|
•
|
the integrity of our financial statements;
|
•
|
our compliance with legal and regulatory requirements; and
|
•
|
the qualifications and independence of our independent registered public accountants.
|
•
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overseeing our compensation programs and practices, including our executive compensation plans and incentive compensation plans;
|
•
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recommending the slate of director nominees for election to our board of directors;
|
•
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identifying and recommending candidates to fill vacancies occurring between annual stockholder meetings;
|
•
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reviewing the composition of board committees; and
|
•
|
monitoring compliance with, reviews, and recommends changes to our various corporate governance policies and guidelines.
|
•
|
the name and address of the person recommended as a director candidate;
|
•
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all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended;
|
•
|
the written consent of the person being recommended as a director candidate to be named in the proxy statement as a nominee and to serve as a director if elected;
|
•
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as to the person making the recommendation, the name and address, as they appear on our books, of such person, and number of shares of our common stock owned by such person;
provided, however
, that if the person is not a registered holder of our common stock, the person should submit his or her name and address along with a current written statement from the record holder of the shares that reflects the recommending person’s beneficial ownership of our common stock; and
|
•
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a statement disclosing whether the person making the recommendation is acting with or on behalf of any other person and, if applicable, the identity of such person.
|
•
|
$30,000 annual retainer payable quarterly; and
|
•
|
$30,000 of restricted stock units, calculated at fair market value on the date of grant, vesting March 31.
|
Director Compensation
|
|||||||||||||||||||||
Name
|
|
Fees earned or paid in cash ($)
|
|
Stock
awards
($)
|
|
Option
awards
($)
|
|
Non-equity
incentive plan
compensation
($)
|
|
Nonqualified
deferred
compensation
earnings
($)
|
|
All other
compensation
($)
|
|
Total
($)
|
|||||||
Charles D. Morgan
|
|
30,000
|
|
|
27,060
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,060
|
|
Charles L. Pope
(1)
|
|
22,500
|
|
|
8,557
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31,057
|
|
Patrick Terrell
|
|
30,000
|
|
|
27,060
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,060
|
|
Gordon J. Cameron
|
|
30,000
|
|
|
27,060
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,060
|
|
G. Kent Burnett
|
|
30,000
|
|
|
27,060
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,060
|
|
•
|
reviewed and discussed with management and Mayer Hoffman McCann P.C., our independent registered public accounting firm, our audited consolidated financial statements as of December 31, 2018 and the year then ended;
|
•
|
discussed with Mayer Hoffman McCann P.C. the matters required to be discussed by Statement on Auditing Standards No. 61, “
Communication with Audit Committees
,” as amended, with respect to its review of the findings of the independent registered public accounting firm during its examination of our consolidated financial statements; and
|
•
|
received from Mayer Hoffman McCann P.C. written affirmation of its independence as required by the Independence Standards Board Standard No. 1, “
Independence Discussions with Audit Committees
.” In addition, the Audit Committee discussed with Mayer Hoffman McCann P.C., its independence and determined that the provision of non-audit services was compatible with maintaining auditor independence.
|
Dated March 6, 2019
|
|
Audit Committee of the Board of Directors of Inuvo, Inc.
|
|
|
|
|
|
/s/ Gordon J. Cameron, Chairman
|
|
|
/s/Patrick Terrell
|
•
|
Alignment with stockholder interests:
Compensation should be tied, in part, to our stock performance through the granting of equity awards to align the interests of executive officers with those of our stockholders;
|
•
|
Recognition for business performance:
Compensation should correlate in large part with our overall financial performance;
|
•
|
Accountability for individual performance:
Compensation should partially depend on the individual executive’s performance, in order to motivate and acknowledge the key contributors to our success; and
|
•
|
Competition:
Compensation should generally reflect the competitive marketplace and be consistent with that of other well-managed companies in our peer group. In implementing this compensation philosophy, the Nominating, Corporate Governance and Compensation Committee takes into account the compensation amounts from the previous years for each of the named executive officers, and internal compensation equity between the named executive officers and other employees.
|
•
|
base salary;
|
•
|
cash bonus plan;
|
•
|
2010 Plan awards;
|
•
|
2017 Plan awards; and
|
•
|
other fringe benefits and perquisites.
|
•
|
all individuals serving as our principal executive officer or acting in a similar capacity during the year ended December 31, 2018;
|
•
|
our two most highly compensated named executive officers at December 31, 2018 whose annual compensation exceeded $100,000; and
|
•
|
up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as a named executive officer of our company at December 31, 2018.
|
Name and principal position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Nonequity incentive plan compen-sation ($)
|
Non-qualified deferred compen-sation earnings ($)
|
All
other compen-sation
($)
|
Total
($)
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
Richard K. Howe,
|
2018
|
425,000
|
|
—
|
|
272,897
|
|
—
|
|
—
|
|
—
|
|
11,000
|
|
708,897
|
|
Chairman and Chief Executive Officer
|
2017
|
420,000
|
|
245,000
|
|
442,175
|
|
—
|
|
—
|
|
—
|
|
10,800
|
|
1,117,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wallace D. Ruiz,
|
2018
|
275,000
|
|
—
|
|
97,463
|
|
—
|
|
—
|
|
—
|
|
11,000
|
|
383,463
|
|
Chief Financial Officer
|
2017
|
275,000
|
|
105,000
|
|
157,919
|
|
—
|
|
—
|
|
—
|
|
10,800
|
|
548,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Don (Trey) Barrett III
|
2018
|
250,000
|
|
—
|
|
129,951
|
|
—
|
|
—
|
|
—
|
|
6,220
|
|
386,171
|
|
Chief Operating Officer
|
2017
|
250,000
|
|
140,000
|
|
210,560
|
|
—
|
|
—
|
|
—
|
|
3,000
|
|
603,560
|
|
•
|
by us for cause (as defined in the employment agreements);
|
•
|
by us without cause, or by the executive for good reason (as defined in the employment agreements);
|
•
|
due to death or disability; or
|
•
|
by the executive without good reason.
|
•
|
his earned but unpaid basic salary through the termination date, plus a portion of the executive’s bonus based upon the bonus he would have earned in the year in which his employment was terminated, pro-rated for the amount of time employed by us during such year and paid on the original date such bonus would have been payable;
|
•
|
an amount payable over the 12-month period following termination equal to one times the sum of his basic salary at the time of termination, plus a termination bonus equal to the bonus paid to the executive during the four fiscal quarters prior to the date of termination (except that if a target bonus has been established for Mr. Howe, each such person’s termination bonus is equal to his target bonus for the fiscal year in which the termination occurs, increased or decreased pursuant to actual performance versus targeted performance in the then current plan measured as of the end of the calendar month preceding the termination date), or in the event of a change of control (as defined below), the greater of the relevant calculation above or the bonus paid to the executive during the four fiscal quarters prior to the change of control;
|
•
|
any other amounts or benefits owing to the executive under our then-applicable employee benefit, long-term incentive, or equity plans and programs, within the terms of such plans, payable over the 12-month period following termination; and
|
•
|
benefits (including health, life, and disability) as if the executive was still an employee during the 12-month period following termination.
|
OPTION AWARDS
|
STOCK AWARDS
|
|||||||||||||||||
Name
|
Number of securities underlying unexercised options
(#) exercisable
|
Number of securities underlying unexercised options
(#) unexercisable
|
Equity incentive plan awards: Number of securities underlying unexercised unearned options
(#)
|
Option exercise price
($)
|
Option expiration date
|
Number of shares or units of stock that have not vested (#)
|
Market value of shares or units of stock that have not vested ($)
|
Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)
|
Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested (#)
|
|||||||||
Richard K. Howe
|
120,000
|
|
—
|
|
—
|
|
$
|
2.93
|
|
3/14/2021
|
126,000
|
|
134,820
|
|
294,000
|
|
314,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wallace D. Ruiz
|
43,000
|
|
—
|
|
—
|
|
$
|
2.93
|
|
3/14/2021
|
45,000
|
|
48,150
|
|
105,000
|
|
112,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Don (Trey) Barrett III
|
40,000
|
|
—
|
|
—
|
|
$
|
2.93
|
|
3/14/2021
|
60,000
|
|
64,200
|
|
140,000
|
|
149,800
|
|
•
|
each person who is known by us to be the beneficial owner of more than 5% of our outstanding common stock;
|
•
|
each director and nominee;
|
•
|
each named executive officer; and
|
•
|
all named executive officers and directors as a group.
|
Name of Beneficial Owner
|
|
No. of Shares Beneficially Owned
|
|
% of Class
|
||
|
|
|
|
|
||
Charles Morgan
(1)
|
|
2,061,200
|
|
|
6.4
|
%
|
Richard K. Howe
(2)
|
|
1,094,808
|
|
|
3.4
|
%
|
Patrick Terrell
(3)
|
|
684,694
|
|
|
2.1
|
%
|
Wallace D. Ruiz
(4)
|
|
373,483
|
|
|
1.2
|
%
|
John B. Pisaris
|
|
320,855
|
|
|
1
|
%
|
Don Walker “Trey” Barrett III
(5)
|
|
359,290
|
|
|
1.1
|
%
|
G. Kent Burnett
(6)
|
|
173,685
|
|
|
0.5
|
%
|
Gordon J. Cameron
(7)
|
|
120,815
|
|
|
0.4
|
%
|
All named executive officers, directors and director nominees as a group (eight persons)
(1)(2)(3)(4)(5)(6)(7)
|
|
5,188,800
|
|
|
15.9
|
%
|
Onset V L.P.
(8)
|
|
2,559,691
|
|
|
7.9
|
%
|
Ingalls & Snyder, LLC
(9)
|
|
2,349,471
|
|
|
7.9
|
%
|
Renaissance Technologies LLC
(10)
|
|
1,633,390
|
|
|
5
|
%
|
(1)
|
Includes 38,961 shares of common stock issuable pursuant to the exercise restricted stock grants and shares of common stock held by Ingalls & Snyder, LLC on his behalf. See footnote 9.
|
(6)
|
Includes 38,961 shares issuable pursuant to the exercise of restricted stock grants.
|
(7)
|
Includes 6,630 shies held by Mrs. Cameron and 38,961 shares pursuant to the exercise of restricted stock grants.
|
(8)
|
Onset V L.P.’s address is 2400 Sand Hill Road, Suite 150, Menlo Park CA 94025.
|
(9)
|
Pursuant to the Schedule 13D filed with the SEC on June 26, 2018, Ingalls & Snyder, LLC has dispositive power over shares held by Mr. Charles D. Morgan and Mr. G. Kent Burnett who serve as members of Inuvo's board of directors and Mr. Richard K. Howe who serves as Inuvo's Chairman and CEO. The principal business address of Ingalls & Snyder, LLC is 1325 Avenue of the Americas, 18th Floor, New York, NY 10019-6066. See footnote 1.
|
(10)
|
Renaissance Technologies LLC’s address is 800 Third Avenue, New York NY 10022.
|
Plan category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights(a) (1)
|
|
Weighted average exercise price of outstanding options, warrants and rights (a) (2)
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
|
||||
|
|
|
|
|
|
|
||||
Plans approved by our stockholders:
|
|
|
|
|
|
|
||||
2005 Long-Term Incentive Plan
|
|
13,748
|
|
|
$
|
2.97
|
|
|
—
|
|
2010 Equity Compensation Plan
|
|
1,088,862
|
|
|
$
|
2.83
|
|
|
612,237
|
|
2017 Equity Compensation Plan
|
|
733,500
|
|
|
$
|
—
|
|
|
1,524,836
|
|
Plans not approved by stockholders
|
|
—
|
|
|
—
|
|
|
—
|
|
(1)
|
The numbers in this column (a) reflect shares of common stock to be issued upon exercise of outstanding stock options and the vesting of outstanding RSUs.
|
(2)
|
The weighted-average exercise prices in this column are based on outstanding options and do not take into account unvested awards of RSUs as these awards do not have an exercise price.
|
|
|
2018
|
|
2017
|
||||
Audit Fees
|
|
$
|
262,000
|
|
|
$
|
331,711
|
|
Audit-Related Fees
|
|
32,000
|
|
|
—
|
|
||
Tax Fees
|
|
—
|
|
|
—
|
|
||
All Other Fees
|
|
—
|
|
|
—
|
|
||
Total
|
|
$
|
294,000
|
|
|
$
|
331,711
|
|
No.
|
|
Exhibit Description
|
|
Form
|
|
Date Filed
|
Number
|
Filed or Furnished Herewith
|
1.1
|
|
|
8-K
|
|
5/11/18
|
1.1
|
|
|
2.1
|
|
|
8-K
|
|
7/24/09
|
2.4
|
|
|
2.2
|
|
|
8-K
|
|
10/17/11
|
2.5
|
|
|
2.3
|
|
|
8-K
|
|
11/5/18
|
2.1
|
|
|
2.4
|
|
|
8-K
|
|
11/5/18
|
2.2
|
|
|
2.5
|
|
|
8-K
|
|
11/5/18
|
2.3
|
|
|
2.6
|
|
|
8-K
|
|
11/5/18
|
2.4
|
|
|
2.7
|
|
|
8-K
|
|
11/5/18
|
2.5
|
|
|
2.8
|
|
|
8-K/A
|
|
3/5/19
|
2.1
|
|
|
3(i).1
|
|
|
10-KSB
|
|
3/1/04
|
4
|
|
|
3(i).2
|
|
|
10-KSB
|
|
3/31/06
|
3.2
|
|
|
3(i).3
|
|
|
8-K
|
|
7/24/09
|
3.4
|
|
|
3(i).4
|
|
|
8-K
|
|
12/10/10
|
3(i).4
|
|
|
3(i).5
|
|
|
10-K
|
|
3/29/12
|
3(i).5
|
|
|
3(i).6
|
|
|
10-K
|
|
3/29/12
|
3(i).6
|
|
|
3(ii).1
|
|
|
10-K
|
|
3/31/10
|
3(ii).4
|
|
|
3(ii).2
|
|
|
8-K
|
|
3/6/12
|
3(ii).1
|
|
|
4.1
|
|
|
8-K
|
|
2/19/08
|
4.1
|
|
|
4.2
|
|
|
8-K
|
|
10/17/11
|
10.23
|
|
|
4.3
|
|
|
8-K
|
|
3/6/18
|
4.1
|
|
|
10.1
|
|
|
8-K
|
|
3/6/12
|
10.1
|
|
|
10.2
|
|
|
8-K
|
|
3/6/12
|
10.6
|
|
10.3
|
|
|
8-K
|
|
3/6/12
|
10.7
|
|
|
10.4
|
|
|
10-Q
|
|
8/9/12
|
10.1
|
|
|
10.5
|
|
|
10-Q
|
|
11/8/12
|
10.1
|
|
|
10.6
|
|
|
10-Q
|
|
5/9/13
|
10.8
|
|
|
10.7
|
|
|
10-K
|
|
3/10/14
|
10.27
|
|
|
10.8
|
|
|
10-Q
|
|
10/30/14
|
10.1
|
|
|
10.9
|
|
|
10-Q
|
|
10/30/14
|
10.2
|
|
|
10.10
|
|
|
10-Q
|
|
10/26/16
|
10.26
|
|
|
10.11
|
|
|
10-K
|
|
2/16/17
|
10.31
|
|
|
10.12
|
|
|
10-Q
|
|
5/5/17
|
10.26
|
|
|
10.13
|
|
|
10-Q
|
|
8/8/17
|
10.29
|
|
|
10.14
|
|
|
10-Q
|
|
11/7/18
|
10.4
|
|
|
10.15
|
|
|
|
|
|
|
Filed
|
|
10.16
|
|
|
10-K
|
|
3/13/13
|
10.25
|
|
|
10.17
|
|
|
10-Q
|
|
4/29/15
|
10.31
|
|
|
10.18
|
|
|
10-K
|
|
2/16/17
|
10.32
|
|
|
10.19
|
|
|
|
|
|
|
Filed ***
|
|
10.20
|
|
|
10-Q
|
|
5/15/12
|
10.1
|
|
|
10.21
|
|
|
10-Q/A
|
|
12/28/12
|
10.1
|
|
|
10.22
|
|
|
10-Q/A
|
|
1/6/14
|
10.28
|
|
|
10.23
|
|
|
10-K
|
|
2/12/16
|
10.24
|
|
|
10.24
|
|
|
10-Q
|
|
4/27/16
|
10.25
|
|
|
10.25
|
|
|
8-K
|
|
3/6/18
|
10.1
|
|
|
10.26
|
|
|
8-K
|
|
5/15/18
|
10.1
|
|
|
10.27
|
|
|
10-Q
|
|
11/7/18
|
10.1
|
|
|
10.28
|
|
|
|
|
|
|
Filed ***
|
|
10.29
|
|
|
10-Q
|
|
11/7/18
|
10.5
|
|
|
10.30
|
|
|
8-K
|
|
3/05/19
|
10.1
|
|
|
10.31
|
|
|
8-K
|
|
3/05/19
|
10.2
|
|
|
10.32
|
|
|
DEF14A
|
|
4/30/2010
|
A
|
|
|
10.33
|
|
|
S-8
|
|
2/29/2012
|
99.2
|
|
|
10.34
|
|
|
DEF14A
|
|
4/28/2017
|
A
|
|
|
10.35
|
|
|
10-K
|
|
3/13/2013
|
10.23
|
|
|
10.36
|
|
|
10-K
|
|
3/13/2013
|
10.24
|
|
|
10.37
|
|
|
10-Q
|
|
4/29/2015
|
10.30
|
|
|
10.38
|
|
|
10-Q
|
|
8/8/2017
|
10.28
|
|
|
10.39
|
|
|
8-K
|
|
3/6/2012
|
10.2
|
|
|
10.4
|
|
|
8-K
|
|
3/6/2012
|
10.4
|
|
|
10.41
|
|
|
8-K
|
|
3/6/2012
|
10.5
|
|
|
10.42
|
|
|
8-K
|
|
2/7/2017
|
10.1
|
|
|
Inuvo, Inc.
|
|
|
|
|
|
|
March 15, 2019
|
By:
|
/s/ Wallace D. Ruiz
|
|
|
|
Chief Financial Officer
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Richard K. Howe
|
|
Chairman of the Board of Directors, Chief Executive Officer, and principal executive officer
|
|
March 15, 2019
|
Richard K. Howe
|
|
|
|
|
|
|
|
|
|
/s/ Wallace D. Ruiz
|
|
Chief Financial Officer, principal financial and accounting officer
|
|
March 15, 2019
|
Wallace D. Ruiz
|
|
|
|
|
|
|
|
|
|
/s/ G. Kent Burnett
|
|
Director
|
|
March 15, 2019
|
G. Kent Burnett
|
|
|
|
|
|
|
|
|
|
/s/ Gordon J. Cameron
|
|
Director
|
|
March 15, 2019
|
Gordon J. Cameron
|
|
|
|
|
|
|
|
|
|
/s/ Charles D. Morgan
|
|
Director
|
|
March 15, 2019
|
Charles D. Morgan
|
|
|
|
|
|
|
|
|
|
/s/ Patrick Terrell
|
|
Director
|
|
March 15, 2019
|
Patrick Terrell
|
|
|
|
|
|
CONTENTS
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
Consolidated Financial Statements:
|
|
|
Consolidated Balance Sheets
|
|
|
Consolidated Statements of Operations
|
|
|
Consolidated Statements of Stockholders’ Equity
|
|
|
Consolidated Statements of Cash Flows
|
|
|
Notes to Consolidated Financial Statements
|
|
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
||||
Current assets
|
|
|
|
||||
Cash
|
$
|
228,956
|
|
|
$
|
4,084,686
|
|
Accounts receivable, net of allowance for doubtful accounts of $63,727 and $83,789, respectively
|
6,711,595
|
|
|
10,759,250
|
|
||
Unbilled revenue
|
11,754
|
|
|
4,330
|
|
||
Prepaid expenses and other current assets
|
259,712
|
|
|
395,861
|
|
||
Total current assets
|
7,212,017
|
|
|
15,244,127
|
|
||
Property and equipment, net
|
2,123,672
|
|
|
2,306,279
|
|
||
Other assets
|
|
|
|
||||
Goodwill
|
9,853,342
|
|
|
9,853,342
|
|
||
Intangible assets, net of accumulated amortization
|
9,441,681
|
|
|
10,808,018
|
|
||
Other assets
|
35,170
|
|
|
36,070
|
|
||
Total other assets
|
19,330,193
|
|
|
20,697,430
|
|
||
Total assets
|
$
|
28,665,882
|
|
|
$
|
38,247,836
|
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Accounts payable
|
$
|
9,499,541
|
|
|
$
|
13,614,053
|
|
Accrued expenses and other current liabilities
|
2,489,834
|
|
|
2,887,816
|
|
||
Financed receivables
|
1,859,853
|
|
|
—
|
|
||
Notes payable
|
250,000
|
|
|
—
|
|
||
Revolving line of credit
|
—
|
|
|
4,900,000
|
|
||
Total current liabilities
|
14,099,228
|
|
|
21,401,869
|
|
||
|
|
|
|
||||
Long-term liabilities
|
|
|
|
||||
Deferred tax liability
|
2,339,832
|
|
|
2,331,900
|
|
||
Convertible promissory note
|
1,000,000
|
|
|
—
|
|
||
Other long-term liabilities
|
193,007
|
|
|
426,725
|
|
||
Total long-term liabilities
|
3,532,839
|
|
|
2,758,625
|
|
||
|
|
|
|
||||
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 32,757,817 and 28,994,981 respectively; outstanding shares 32,381,290 and 28,618,454, respectively
|
32,759
|
|
|
28,996
|
|
||
Additional paid-in capital
|
138,867,509
|
|
|
136,033,967
|
|
||
Accumulated deficit
|
(126,469,894
|
)
|
|
(120,579,062
|
)
|
||
Treasury stock, at cost - 376,527 shares
|
(1,396,559
|
)
|
|
(1,396,559
|
)
|
||
Total stockholders' equity
|
11,033,815
|
|
|
14,087,342
|
|
||
Total liabilities and stockholders' equity
|
$
|
28,665,882
|
|
|
$
|
38,247,836
|
|
|
2018
|
|
2017
|
||||
Net revenue
|
$
|
73,330,642
|
|
|
$
|
79,554,493
|
|
Cost of revenue
|
29,921,482
|
|
|
36,669,543
|
|
||
Gross profit
|
43,409,160
|
|
|
42,884,950
|
|
||
Operating expenses
|
|
|
|
||||
Marketing costs (TAC)
|
31,852,190
|
|
|
28,578,401
|
|
||
Compensation
|
8,524,476
|
|
|
10,200,117
|
|
||
Selling, general and administrative
|
8,502,874
|
|
|
8,342,906
|
|
||
Total operating expenses
|
48,879,540
|
|
|
47,121,424
|
|
||
Operating loss
|
(5,470,380
|
)
|
|
(4,236,474
|
)
|
||
Interest expense, net
|
(420,452
|
)
|
|
(318,193
|
)
|
||
Loss from continuing operations before taxes
|
(5,890,832
|
)
|
|
(4,554,667
|
)
|
||
Income tax benefit
|
—
|
|
|
1,498,076
|
|
||
Loss from continuing operations
|
(5,890,832
|
)
|
|
(3,056,591
|
)
|
||
Loss from discontinued operations
|
—
|
|
|
(1,109
|
)
|
||
Net loss
|
$
|
(5,890,832
|
)
|
|
$
|
(3,057,700
|
)
|
|
|
|
|
||||
Per common share data
|
|
|
|
||||
Basic and diluted
|
|
|
|
||||
Net loss from continuing operations
|
$
|
(0.19
|
)
|
|
$
|
(0.11
|
)
|
Net income from discontinued operations
|
—
|
|
|
—
|
|
||
Net loss
|
$
|
(0.19
|
)
|
|
$
|
(0.11
|
)
|
|
|
|
|
||||
Weighted average shares
|
|
|
|
||||
Basic
|
31,019,623
|
|
|
28,155,320
|
|
||
Diluted
|
31,019,623
|
|
|
28,155,320
|
|
|
Common Stock
|
|
Additional Paid in Capital
|
|
Accumulated Deficit
|
|
Treasury Stock
|
|
Total
|
|||||||||||||
|
Shares
|
|
Stock
|
|
|
|
|
|||||||||||||||
Balances as of December 31, 2016
|
24,923,662
|
|
|
$
|
25,300
|
|
|
$
|
130,418,413
|
|
|
$
|
(117,521,362
|
)
|
|
$
|
(1,396,559
|
)
|
|
$
|
11,525,792
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,057,700
|
)
|
|
—
|
|
|
(3,057,700
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
1,279,807
|
|
|
—
|
|
|
—
|
|
|
1,279,807
|
|
|||||
Stock issued for vested restricted stock awards
|
309,057
|
|
|
309
|
|
|
22,200
|
|
|
—
|
|
|
—
|
|
|
22,509
|
|
|||||
2017 asset acquisition
|
3,529,000
|
|
|
3,529
|
|
|
4,455,715
|
|
|
—
|
|
|
—
|
|
|
4,459,244
|
|
|||||
Taxes withheld on vested restricted stock
|
|
|
|
|
(97,539
|
)
|
|
|
|
|
|
(97,539
|
)
|
|||||||||
Treasury Stock Retirement
|
(143,265
|
)
|
|
(142
|
)
|
|
(44,629
|
)
|
|
—
|
|
|
—
|
|
|
(44,771
|
)
|
|||||
Balances as of December 31, 2017
|
28,618,454
|
|
|
$
|
28,996
|
|
|
$
|
136,033,967
|
|
|
$
|
(120,579,062
|
)
|
|
$
|
(1,396,559
|
)
|
|
$
|
14,087,342
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,890,832
|
)
|
|
—
|
|
|
(5,890,832
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
915,469
|
|
|
—
|
|
|
—
|
|
|
915,469
|
|
|||||
Stock issued for vested restricted stock awards
|
527,866
|
|
|
528
|
|
|
(528
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Shares withheld for taxes on vested restricted stock
|
|
|
|
|
|
|
(78,747
|
)
|
|
—
|
|
|
—
|
|
|
(78,747
|
)
|
|||||
Sale of common stock
|
3,289,000
|
|
|
3,289
|
|
|
1,997,294
|
|
|
—
|
|
|
|
|
|
2,000,583
|
|
|||||
Cancellation of common stock
|
(54,030
|
)
|
|
(54
|
)
|
|
54
|
|
|
—
|
|
|
|
|
|
—
|
|
|||||
Balances as of December 31, 2018
|
32,381,290
|
|
|
$
|
32,759
|
|
|
$
|
138,867,509
|
|
|
$
|
(126,469,894
|
)
|
|
$
|
(1,396,559
|
)
|
|
$
|
11,033,815
|
|
|
2018
|
|
2017
|
||||
Operating activities:
|
|
|
|
||||
Net loss
|
$
|
(5,890,832
|
)
|
|
$
|
(3,057,700
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
3,181,619
|
|
|
3,029,801
|
|
||
Stock based compensation
|
915,469
|
|
|
1,279,807
|
|
||
Amortization of financing fees
|
40,382
|
|
|
25,600
|
|
||
Deferred income taxes
|
7,931
|
|
|
(1,406,600
|
)
|
||
(Recovery)/Provision for doubtful accounts
|
(20,062
|
)
|
|
60,789
|
|
||
Write-off of publisher payable
|
—
|
|
|
315,137
|
|
||
Adjustment of European liabilities related to discontinued operations
|
—
|
|
|
1,109
|
|
||
Change in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable and unbilled revenue
|
4,058,591
|
|
|
(1,216,611
|
)
|
||
Prepaid expenses and other assets
|
139,031
|
|
|
52,687
|
|
||
Accounts payable
|
(4,114,512
|
)
|
|
437,241
|
|
||
Accrued expenses and other liabilities
|
(417,784
|
)
|
|
(669,541
|
)
|
||
Net cash used in operating activities
|
(2,100,167
|
)
|
|
(1,148,281
|
)
|
||
Investing activities:
|
|
|
|
||||
Purchases of equipment and capitalized development costs
|
(1,634,919
|
)
|
|
(1,558,693
|
)
|
||
Net cash received from NetSeer asset acquisition
|
—
|
|
|
235,763
|
|
||
Net cash used in investing activities
|
(1,634,919
|
)
|
|
(1,322,930
|
)
|
||
Financing activities:
|
|
|
|
||||
Net proceeds from sale of common stock
|
2,000,583
|
|
|
—
|
|
||
Proceeds from financed receivables
|
1,859,853
|
|
|
—
|
|
||
Proceeds from convertible promissory note
|
1,000,000
|
|
|
—
|
|
||
Proceeds from note payable
|
250,000
|
|
|
—
|
|
||
Net proceeds on revolving line of credit
|
(4,900,000
|
)
|
|
4,900,000
|
|
||
Payments on capital leases
|
(211,671
|
)
|
|
(158,782
|
)
|
||
Net taxes paid on RSU grants exercised
|
(77,044
|
)
|
|
(97,376
|
)
|
||
Prepaid financing fees
|
(42,365
|
)
|
|
25,600
|
|
||
Payoff of NetSeer debt acquired
|
—
|
|
|
(2,015,577
|
)
|
||
Treasury Stock Repurchase
|
—
|
|
|
(44,772
|
)
|
||
Net cash (used in) provided by financing activities
|
(120,644
|
)
|
|
2,609,093
|
|
||
|
|
|
|
||||
Net change – cash
|
(3,855,730
|
)
|
|
137,882
|
|
||
Cash, beginning of year
|
4,084,686
|
|
|
3,946,804
|
|
||
Cash, end of year
|
$
|
228,956
|
|
|
$
|
4,084,686
|
|
|
|
|
|
||||
Supplemental information:
|
|
|
|
||||
Interest paid
|
$
|
388,757
|
|
|
$
|
268,960
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
NetSeer asset acquisition (See Note 17)
|
$
|
—
|
|
|
$
|
4,459,244
|
|
Purchase of property and equipment under capital lease
|
$
|
—
|
|
|
$
|
530,407
|
|
Write-down of domain names due to settlement of contingent liability
|
$
|
—
|
|
|
$
|
369,506
|
|
|
2018
|
|
2017
|
||||
Balance at the beginning of the year
|
$
|
83,789
|
|
|
$
|
23,000
|
|
(Recoveries)/provision for bad debts
|
(14,000
|
)
|
|
63,000
|
|
||
Charge-offs
|
(6,062
|
)
|
|
(2,211
|
)
|
||
Balance at the end of the year
|
$
|
63,727
|
|
|
$
|
83,789
|
|
|
2018
|
|
2017
|
||||
Furniture and fixtures
|
$
|
293,152
|
|
|
$
|
288,536
|
|
Equipment
|
1,527,054
|
|
|
1,509,464
|
|
||
Software
|
9,142,075
|
|
|
7,582,181
|
|
||
Leasehold improvements
|
421,016
|
|
|
455,850
|
|
||
Subtotal
|
$
|
11,383,297
|
|
|
$
|
9,836,031
|
|
Less: accumulated depreciation and amortization
|
(9,259,625
|
)
|
|
(7,529,752
|
)
|
||
Total
|
$
|
2,123,672
|
|
|
$
|
2,306,279
|
|
|
Term
|
|
Carrying
Value
|
|
Accumulated Amortization and Impairment
|
|
Net Carrying Value
|
|
2018
Amortization
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
Customer list, Google
|
20 years
|
|
$
|
8,820,000
|
|
|
$
|
(3,013,500
|
)
|
|
$
|
5,806,500
|
|
|
$
|
441,000
|
|
Technology, NetSeer
|
5 years
|
|
3,600,000
|
|
|
(1,380,000
|
)
|
|
2,220,000
|
|
|
720,000
|
|
||||
Customer list, all other
|
10 years
|
|
1,610,000
|
|
|
(1,100,194
|
)
|
|
509,806
|
|
|
161,004
|
|
||||
Customer relationships, NetSeer
|
20 years
|
|
570,000
|
|
|
(54,625
|
)
|
|
515,375
|
|
|
28,500
|
|
||||
Trade names, web properties (1)
|
-
|
|
390,000
|
|
|
—
|
|
|
390,000
|
|
|
—
|
|
||||
Brand, NetSeer
|
1 year
|
|
121,000
|
|
|
(121,000
|
)
|
|
—
|
|
|
10,083
|
|
||||
Non-competition agreements, NetSeer
|
1 year
|
|
69,000
|
|
|
(69,000
|
)
|
|
—
|
|
|
5,750
|
|
||||
Intangible assets classified as long-term
|
|
|
$
|
15,180,000
|
|
|
$
|
(5,738,319
|
)
|
|
$
|
9,441,681
|
|
|
$
|
1,366,337
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Goodwill, total
|
|
|
$
|
9,853,342
|
|
|
$
|
—
|
|
|
$
|
9,853,342
|
|
|
$
|
—
|
|
|
Term
|
|
Carrying
Value
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
|
2017
Amortization
|
||||||||
Customer list, Google
|
20 years
|
|
$
|
8,820,000
|
|
|
$
|
(2,572,500
|
)
|
|
$
|
6,247,500
|
|
|
$
|
441,000
|
|
Technology, NetSeer
|
5 years
|
|
3,600,000
|
|
|
(660,000
|
)
|
|
2,940,000
|
|
|
660,000
|
|
||||
Customer list, all other
|
10 years
|
|
1,610,000
|
|
|
(939,190
|
)
|
|
670,810
|
|
|
161,004
|
|
||||
Trade names, ALOT
|
5 years
|
|
960,000
|
|
|
(960,000
|
)
|
|
—
|
|
|
32,000
|
|
||||
Customer relationships, NetSeer
|
20 years
|
|
570,000
|
|
|
(26,125
|
)
|
|
543,875
|
|
|
26,125
|
|
||||
Domain websites (2)
|
5 years
|
|
300,001
|
|
|
(300,001
|
)
|
|
—
|
|
|
32,056
|
|
||||
Tradenames, web properties (1)
|
-
|
|
390,000
|
|
|
—
|
|
|
390,000
|
|
|
—
|
|
||||
Brand, NetSeer
|
1 year
|
|
121,000
|
|
|
(110,917
|
)
|
|
10,083
|
|
|
110,917
|
|
||||
Non-competition agreements, NetSeer
|
1 year
|
|
69,000
|
|
|
(63,250
|
)
|
|
5,750
|
|
|
63,250
|
|
||||
Intangible assets classified as long-term
|
|
|
$
|
16,440,001
|
|
|
$
|
(5,631,983
|
)
|
|
$
|
10,808,018
|
|
|
$
|
1,526,352
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Goodwill, total
|
|
|
$
|
9,853,342
|
|
|
$
|
—
|
|
|
$
|
9,853,342
|
|
|
$
|
—
|
|
(1)
|
The trade names related to our web properties have an indefinite life, and as such are not amortized.
|
(2)
|
In May 2015, we purchased
two
domain websites with a fair value of
$715,874
. We determined they should be amortized over
5
years. In May 2016, the carrying value was adjusted by approximately
$46,000
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 2017, we determined that the seller would not meet the specific performance target for the second and third years and therefore, we adjusted the carrying value of the intangible asset and associated contingent liability by
$369,506
.
|
2019
|
$
|
1,350,504
|
|
2020
|
1,350,504
|
|
|
2021
|
1,350,504
|
|
|
2022
|
556,294
|
|
|
2023
|
469,500
|
|
|
Thereafter
|
3,974,375
|
|
|
Total
|
$
|
9,051,681
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
||||
Revolving credit line - 5.25 percent at December 31, 2017 (prime plus 0.75 percent), due September 29, 2018 - current portion
|
|
$
|
—
|
|
|
$
|
4,900,000
|
|
Financed receivables - 6.5 percent at December 31, 2018 (prime plus 1 percent) on invoice receivables; 7.5 percent at December 31, 2018 (prime plus 2 percent) on uninvoiced receivables
|
|
1,859,853
|
|
|
—
|
|
||
Total
|
|
$
|
1,859,853
|
|
|
$
|
4,900,000
|
|
|
2018
|
|
2017
|
||||
Accrued marketing costs (TAC)
|
$
|
1,509,843
|
|
|
$
|
1,107,404
|
|
Accrued expenses and other
|
461,823
|
|
|
624,688
|
|
||
Accrued payroll and commission liabilities
|
200,290
|
|
|
867,634
|
|
||
Capital leases, current portion
|
198,769
|
|
|
209,940
|
|
||
Arkansas grant contingency
|
55,000
|
|
|
2,245
|
|
||
Accrued sales allowance
|
50,000
|
|
|
50,000
|
|
||
Accrued taxes, current portion
|
14,109
|
|
|
25,905
|
|
||
Total
|
$
|
2,489,834
|
|
|
$
|
2,887,816
|
|
|
2018
|
|
2017
|
||||
Deferred rent
|
$
|
98,276
|
|
|
$
|
131,493
|
|
Capital leases, less current portion
|
80,969
|
|
|
281,470
|
|
||
Accrued taxes, less current portion
|
13,762
|
|
|
13,762
|
|
||
Total
|
$
|
193,007
|
|
|
$
|
426,725
|
|
|
2018
|
|
2017
|
||||
Current tax provision
|
$
|
—
|
|
|
$
|
(91,477
|
)
|
Deferred tax benefit
|
—
|
|
|
(1,406,599
|
)
|
||
Total tax benefit
|
$
|
—
|
|
|
$
|
(1,498,076
|
)
|
|
2018
|
|
2017
|
||
Federal statutory rate
|
21
|
%
|
|
34
|
%
|
State income tax rate, net of federal benefit
|
(1
|
%)
|
|
4
|
%
|
Permanent differences
|
(2
|
%)
|
|
(2
|
%)
|
Impact in changes in tax law
|
—
|
%
|
|
22
|
%
|
Change in valuation allowance
|
(18
|
%)
|
|
(25
|
%)
|
|
—
|
%
|
|
33
|
%
|
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
||||
Net operating loss carry forward
|
$
|
31,473,506
|
|
|
$
|
29,622,135
|
|
Intangible assets
|
863,400
|
|
|
1,278,900
|
|
||
Stock based expenses
|
—
|
|
|
1,176,900
|
|
||
Accrued expense
|
142,000
|
|
|
362,000
|
|
||
Deferred rent
|
27,000
|
|
|
33,400
|
|
||
Allowance for doubtful accounts
|
17,500
|
|
|
23,200
|
|
||
Other
|
140,300
|
|
|
7,200
|
|
||
Subtotal
|
32,663,706
|
|
|
32,503,735
|
|
||
Less valuation allowance
|
(32,663,706
|
)
|
|
(32,503,735
|
)
|
||
Total
|
—
|
|
|
—
|
|
||
Deferred tax liabilities:
|
|
|
|
|
|
||
Intangible assets and property and equipment
|
2,162,500
|
|
|
2,307,600
|
|
||
Other
|
177,332
|
|
|
24,300
|
|
||
Total
|
2,339,832
|
|
|
2,331,900
|
|
||
Total deferred tax liabilities
|
$
|
(2,339,832
|
)
|
|
$
|
(2,331,900
|
)
|
|
Options Outstanding
|
|
RSUs Outstanding
|
|
Options and RSUs Exercised
|
|
Available Shares
|
|
Total
|
|||||
2017 ECP
|
—
|
|
|
733,500
|
|
|
41,664
|
|
|
1,524,836
|
|
|
2,300,000
|
|
2010 ECP
|
250,498
|
|
|
838,364
|
|
|
3,380,919
|
|
|
612,237
|
|
|
5,082,018
|
|
2005 LTIP (*)
|
13,748
|
|
|
—
|
|
|
950,085
|
|
|
—
|
|
|
963,833
|
|
Total
|
264,246
|
|
|
1,571,864
|
|
|
4,372,668
|
|
|
2,137,073
|
|
|
8,345,851
|
|
|
Options
|
|
Weighted Average Exercise Price
|
|||
Outstanding, beginning of year
|
264,246
|
|
|
$
|
2.84
|
|
Granted
|
—
|
|
|
$
|
—
|
|
Forfeited, expired or cancelled
|
—
|
|
|
$
|
—
|
|
Exercised
|
—
|
|
|
$
|
—
|
|
Outstanding, end of year
|
264,246
|
|
|
$
|
2.84
|
|
Exercisable, end of year
|
264,246
|
|
|
$
|
2.84
|
|
|
Restricted Stock
|
|
Weighted Average Fair Value
|
|||
Outstanding, beginning of year
|
1,071,538
|
|
|
$
|
1.84
|
|
Granted
|
1,664,266
|
|
|
$
|
0.76
|
|
Exercised
|
641,843
|
|
|
$
|
2.26
|
|
Forfeited
|
522,097
|
|
|
$
|
1.04
|
|
Outstanding, end of year
|
1,571,864
|
|
|
$
|
0.79
|
|
|
Lease Payments
|
||
2019
|
$
|
477,319
|
|
2020
|
405,606
|
|
|
2021
|
242,558
|
|
|
2022
|
$
|
163,284
|
|
Total
|
$
|
1,288,767
|
|
|
Lease Payments
|
||
2019
|
$
|
213,879
|
|
2020
|
82,405
|
|
|
Total payments under capital lease obligations
|
296,284
|
|
|
Less amount representing interest
|
(16,546
|
)
|
|
Present value of capital lease obligations
|
279,738
|
|
|
Current portion of capital lease obligations
|
(198,769
|
)
|
|
Capital lease obligations, net of current portion
|
$
|
80,969
|
|
|
2018
|
2017
|
||||
Equipment
|
$
|
707,264
|
|
$
|
707,264
|
|
Less accumulated depreciation
|
(441,084
|
)
|
(242,169
|
)
|
||
Equipment, net
|
$
|
266,180
|
|
$
|
465,095
|
|
|
|
||
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
|
|
|
|
WEBSEARCH SERVICE (“WS”)
|
Search Fees
|
Sites approved for WS: See
Exhibit B
Approved Client Applications for WS:
Alot Extension
|
$***
|
ADVERTISING SERVICES
|
ADSENSE FOR SEARCH (“AFS”)
|
AFS Revenue Share Percentage
|
AFS Deduction Percentage
|
Sites approved for AFS: See
Exhibit B
Approved Client Applications for AFS:
Alot Extension
|
See
Exhibit A
|
***
|
GOOGLE
|
COMPANY
|
|
|
By: /s/ Philipp Schindler
|
By: /s/ Don W. Barrett III
|
Name: Philipp Schindler
|
Name: Don W. Barrett III
|
Title: Authorized Signatory
|
Title: COO
|
Date: 2019.01.22
|
Date: 1/22/19
|
16:50:55 – 08’00’
|
|
1.
|
Compensation Section on the Cover Page
.
|
2.
|
Section 1 of Amendment #16
. The last sentence of Section 1 of Amendment #16 is hereby deleted. The deleted sentence is stated below for ease of reference:
|
3.
|
Miscellaneous
. Except as expressly set forth herein, the Agreement will remain in full force and effect in accordance with its terms. The Agreement is amended to provide that references in the Agreement to “this Agreement” or “the Agreement” (including indirect references such as ‘hereunder,” “hereby,” “herein,” and “hereof”) shall be deemed references to the Agreement as amended hereby. In the event of a conflict between any of the terms and conditions of the Agreement and the terms and conditions of this Amendment #18, the terms and conditions of this Amendment #18 shall govern. This Amendment #18 may be executed in one or more counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same instrument. An electronically transmitted signature via pdf or facsimile shall be deemed the equivalent to an original ink signature.
|
INUVO, INC.
|
OATH HOLDINGS INC
.
|
|
|
By: /s/ Richard K. Howe
|
By: /s/ Rohit Chandra
|
|
|
Name: Richard K. Howe
|
Name: Rohit Chandra
|
|
|
Title: CEO
|
Title: OVP Search and Ad Platforms
|
|
|
Date: January 17, 2019
|
Date: 1/21/2019
|
|
|
|
OATH (EMEA) LIMITED
|
|
|
|
By: /s/ Ronnie Cobane
|
|
|
|
Name: William R. Cobane
|
|
|
|
Title: Director
|
|
|
|
Date: 24 January 2019
|
|
YAHOO! SINGAPORE DIGITAL MARKETING PTE. LTD.
|
|
|
|
By: /s/ Chia Fanci Rud
|
|
|
|
Name: Chia Fanci Rud
|
|
|
|
Title: Director
|
|
|
|
Date: 23 Jan 2019
|
|
|
EXHIBIT 21.1-SUBSIDIARIES OF THE REGISTRANT
|
|
Inuvo, Inc.
|
Nevada Corporation
|
|
|
ValidClick
|
Missouri Corporation
|
|
|
Vintacom Florida, Inc.
|
Florida Corporation
|
|
|
iLead Media, LLC
|
Delaware Limited Liability Company
|
|
|
Kowabunga Marketing, Inc.
|
Michigan Corporation
|
|
|
Vertro, Inc.
|
Delaware Corporation
|
|
|
ALOT, Inc.
|
Delaware Corporation
|
|
|
Varick & Spring I, Inc.
|
Delaware Corporation
|
|
|
Who Midco Corporation
|
Delaware Corporation
|
|
|
Varick and Spring II, Inc.
|
Delaware Corporation
|
|
|
Think Relevant Media, LLC.
|
Arkansas Corporation
|
|
|
Bonfire Publishing Group, LLC.
|
Florida Corporation
|
|
|
NetSeer Acquisition, Inc.
|
Nevada Corporation
|
|
|
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.
|