Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2020 | May 08, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-32442 | |
Entity Registrant Name | Inuvo, Inc. | |
Entity Central Index Key | 0000829323 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Incorporation, State or Country Code | NV | |
Entity Tax Identification Number | 87-0450450 | |
Entity Address, Address Line One | 500 President Clinton Ave., | |
Entity Address, Address Line Two | Suite 300 | |
Entity Address, City or Town | Little Rock | |
Entity Address, State or Province | AR | |
Entity Address, Postal Zip Code | 72201 | |
City Area Code | 501 | |
Local Phone Number | 205-8508 | |
Title of 12(b) Security | Common stock | |
Trading Symbol | INUV | |
Security Exchange Name | NYSEAMER | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding (in shares) | 63,607,474 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash | $ 470,807 | $ 372,989 |
Accounts receivable, net of allowance for doubtful accounts of $225,000. | 5,796,515 | 7,529,785 |
Prepaid expenses and other current assets | 353,795 | 243,888 |
Total current assets | 6,621,117 | 8,146,662 |
Property and equipment, net | 1,315,633 | 1,374,152 |
Other assets | ||
Intangible assets, net of accumulated amortization | 9,985,217 | 10,451,593 |
Goodwill | 9,853,342 | 9,853,342 |
Right of use assets - operating lease | 646,727 | 756,115 |
Right of use assets - finance lease | 476,209 | 88,178 |
Other assets | 20,886 | 20,886 |
Total other assets | 20,982,381 | 21,170,114 |
Total assets | 28,919,131 | 30,690,928 |
Current liabilities | ||
Accounts payable | 8,115,326 | 7,520,567 |
Accrued expenses and other current liabilities | 3,759,314 | 3,614,433 |
Lease liability - operating lease | 301,641 | 362,130 |
Lease liability - finance lease | 211,285 | 80,777 |
Line of credit | 1,503,147 | 0 |
Financed receivables | 0 | 3,381,364 |
Convertible promissory note | 271,108 | 536,806 |
Derivative liability | 149,400 | 182,250 |
Total current liabilities | 14,311,221 | 15,678,327 |
Long-term liabilities | ||
Deferred tax liability | 2,019,200 | 2,019,200 |
Lease liability - operating lease | 345,596 | 394,889 |
Lease liability - finance lease | 142,986 | 0 |
Other long-term liabilities | 520,846 | 57,162 |
Total long-term liabilities | 3,028,628 | 2,471,251 |
Preferred stock: | ||
Preferred stock, $.001 par value | 0 | 0 |
Common stock: | ||
Common stock, $.001 par value | 60,730 | 52,223 |
Additional paid-in capital | 146,698,348 | 144,843,687 |
Accumulated deficit | (133,783,237) | (130,958,001) |
Treasury stock, at cost - 376,527 shares | (1,396,559) | (1,396,559) |
Total stockholders' equity | 11,579,282 | 12,541,350 |
Total liabilities and stockholders' equity | 28,919,131 | 30,690,928 |
Allowance for doubtful accounts | $ 225,000 | $ 225,000 |
Common stock shares authorized | 100,000,000 | 100,000,000 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Assets | ||
Allowance for doubtful accounts | $ 225,000 | $ 225,000 |
Stockholders Equity | ||
Preferred stock par value (in usd per share) | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 500,000 | 500,000 |
Preferred stock shares issued | 0 | 0 |
Preferred stock shares outstanding | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
Common stock shares authorized | 100,000,000 | 100,000,000 |
Common stock shares issued | 60,729,560 | 52,222,538 |
Common stock shares outstanding | 60,353,033 | 51,846,011 |
Treasury stock (in shares) | 376,527 | 376,527 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Net revenue | $ 14,932,983 | $ 15,464,569 |
Cost of revenue | 3,439,501 | 6,680,628 |
Gross profit | 11,493,482 | 8,783,941 |
Operating expenses | ||
Marketing costs (traffic acquisition costs or TAC) | 9,622,823 | 6,544,009 |
Compensation | 2,344,235 | 1,808,556 |
Selling, general and administrative | 2,058,842 | 2,377,061 |
Total operating expenses | 14,025,900 | 10,729,626 |
Operating loss | (2,532,418) | (1,945,685) |
Other expense, net | (140,307) | 0 |
Interest expense, net | (152,511) | (516,708) |
Net Income (Loss) Attributable to Parent, Total | $ (2,825,236) | $ (2,462,393) |
Per common share data: Basic and diluted | ||
Net loss (in usd per share) | $ (0.05) | $ (0.08) |
Weighted average shares | ||
Basic (in shares) | 53,642,787 | 32,396,998 |
Diluted (in shares) | 53,642,787 | 32,396,998 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Operating activities: | ||
Net loss | $ (2,825,236) | $ (2,462,393) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Loss on extinguishment of convertible debt | 68,757 | 0 |
Depreciation and amortization | 835,748 | 823,765 |
Depreciation-Right of Use Assets | 105,678 | 0 |
Stock based compensation | 208,897 | 96,871 |
Mark to market fair value of derivative | 71,550 | 333,333 |
Amortization of financing fees | 10,198 | 21,182 |
Amortization of debt discount | 14,982 | 0 |
Amortization of OID interest expense | 10,787 | 0 |
Change in operating assets and liabilities: | ||
Accounts receivable | 1,737,568 | 557,332 |
Prepaid expenses, unbilled revenue and other current assets | (120,360) | (19,454) |
Accrued expenses and other liabilities | 108,172 | 592,293 |
Accounts payable | 594,759 | (990,764) |
Net cash provided by/(used in) operating activities | 821,500 | (1,047,835) |
Investing activities: | ||
Purchases of equipment and capitalized development costs | (310,853) | (310,221) |
Net cash used in investing activities | (310,853) | (310,221) |
Financing activities: | ||
Proceeds from sale of common stock, net | 1,206,788 | 0 |
Proceeds from ValidClick licensing agreement | 500,000 | 0 |
Proceeds from convertible promissory notes | 0 | 1,200,000 |
Net proceeds from line of credit | (1,878,217) | 0 |
Net proceeds from financed receivables | 0 | 231,512 |
Payments on finance lease obligations | (220,216) | (54,015) |
Net taxes paid on RSU grants exercised | (21,184) | 0 |
Net cash (used in)/provided by financing activities | (412,829) | 1,377,497 |
Net change – cash | 97,818 | 19,441 |
Cash, beginning of year | 228,956 | |
Cash, end of period | 470,807 | 248,397 |
Supplemental information: | ||
Interest paid | 126,236 | 117,609 |
Non cash investing and financing activities: | ||
Adoption of ASC 842 | 0 | 1,437,526 |
Conversion of Debt and derecognition of derivative and discounts to common stock | 468,667 | 0 |
Assets purchased under finance lease obligations | $ 364,545 | $ 0 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) | Total | Common Stock | Additional Paid in Capital | Accumulated Deficit | Treasury Stock |
Beginning balance (in shares) at Dec. 31, 2018 | 32,381,290 | ||||
Beginning balance at Dec. 31, 2018 | $ 11,033,815 | $ 32,759 | $ 138,867,509 | $ (126,469,894) | $ (1,396,559) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (2,462,393) | (2,462,393) | |||
Stock-based compensation | 96,871 | 96,871 | |||
Stock issued for vested restricted stock awards (in shares) | 186,031 | ||||
Stock issued for vested restricted stock awards | 0 | $ 186 | (186) | ||
Ending balance (in shares) at Mar. 31, 2019 | 32,567,321 | ||||
Ending balance at Mar. 31, 2019 | 8,668,293 | $ 32,945 | 138,964,194 | (128,932,287) | (1,396,559) |
Beginning balance (in shares) at Dec. 31, 2019 | 51,846,011 | ||||
Beginning balance at Dec. 31, 2019 | 12,541,350 | $ 52,223 | 144,843,687 | (130,958,001) | (1,396,559) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net loss | (2,825,236) | ||||
Stock-based compensation | 208,897 | 208,897 | |||
Stock issued for vested restricted stock awards (in shares) | 260,593 | ||||
Stock issued for vested restricted stock awards | 0 | $ 261 | (261) | ||
Shares withheld for taxes on vest restricted stock | (21,184) | (21,184) | |||
Convertible Note Conversion (in shares) | 1,200,000 | ||||
Convertible Note Conversion | 468,667 | $ 1,200 | 467,467 | ||
Sale of Common Stock (in shares) | 7,046,429 | ||||
Sale of common stock, net | 1,206,788 | $ 7,046 | 1,199,742 | ||
Ending balance (in shares) at Mar. 31, 2020 | 60,353,033 | ||||
Ending balance at Mar. 31, 2020 | $ 11,579,282 | $ 60,730 | $ 146,698,348 | $ (133,783,237) | $ (1,396,559) |
Organization and Business
Organization and Business | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business | Organization and Business Company Overview Inuvo is a technology company that develops and sells information technology solutions for marketing. These platforms predictively identify and message online audiences for any product or service across devices, channels and formats, including video, mobile, connected TV, display, social and native. These capabilities allow Inuvo’s clients to engage with their customers and prospects in a manner that drives engagement from the first contact with the consumer. Inuvo facilitates the delivery of hundreds of millions of marketing messages to consumers every single month and counts among its clients numerous world-renowned names in industries that have included retail, automotive, insurance, health care, technology, telecommunications and finance. Inuvo has contractual relationships with three clients who collectively manage over 50% of all U.S. digital media budgets. Inuvo’s solution incorporates a proprietary form of artificial intelligence, or AI, branded the IntentKey. This sophisticated machine learning technology uses interactions with Internet content as a source of information from which to predict consumer intent. The AI includes a continually updated database of over 500 million machine profiles which Inuvo utilizes to deliver highly aligned online audiences to its clients. Inuvo earns revenue when consumers view or click on its client’s messages. Inuvo’s business scales through account management activity with existing clients and by adding new clients through sales activity. As part of Inuvo’s technology strategy, it owns a collection of websites including alot.com and earnspendlive.com, where Inuvo creates content in health, finance, travel, careers, auto, education and living categories. These sites provide the means to test Inuvo’s technologies, while also delivering high quality consumers to clients through the interaction with proprietary content in the form of images, videos, slideshows and articles. There are many barriers to entry associated with Inuvo’s business model, including a proficiency in large scale information processing, predictive software development, marketing data products, analytics, artificial intelligence, integration to the internet of things (IOT), and the relationships required to execute within the IOT. Inuvo’s intellectual property is protected by 17 issued and eight pending patents. Mergers Termination On June 20, 2019, Inuvo entered into an Agreement and Plan of Merger Termination Agreement (the “Merger Termination Agreement”) with ConversionPoint Technologies Inc., a Delaware corporation (“CPT”), ConversionPoint Holdings, Inc., a Delaware corporation (“Parent”), CPT Merger Sub, Inc., a Delaware corporation, (“CPT Merger Sub”), and CPT Cigar Merger Sub, Inc., a Nevada corporation (“Inuvo Merger Sub”), which, among other things, (1) terminated the Agreement and Plan of Merger, dated November 2, 2018, by and among Inuvo, CPT, Parent, CPT Merger Sub, and Inuvo Merger Sub, as amended (the “Merger Agreement”), pursuant to which Inuvo would have merged with and into Inuvo Merger Sub and become a wholly-owned subsidiary of Parent, and CPT would have merged with and into CPT Merger Sub and become a wholly-owned subsidiary of Parent (the “Mergers”), and (2) terminated each of the Support Agreements that were entered into by certain officers and directors of Inuvo and the parties to the Merger Agreement. The Merger Agreement was terminated as a result of Parent’s inability to fulfill the closing condition of the Mergers that Parent raise $36,000,000 in gross proceeds from an equity, debt, or equity-linked offering of its securities which no longer obligated Inuvo to consummate the Mergers contemplated by the Merger Agreement. Concurrently with the execution of the Merger Termination Agreement, CPT Investments, LLC, a California limited liability company and an affiliate of CPT (“CPT Investments”), and Inuvo entered into a certain Inuvo Note Termination Agreement (the “Note Termination Agreement”) and agreed to (1) terminate and cancel the 10% Senior Unsecured Subordinated Convertible Promissory Note, dated November 1, 2018, executed by Inuvo in favor of CPT Investments (the “CPTI Note”), which as of June 20, 2019, had $1,063,288 in accrued principal and interest outstanding (the “Outstanding Indebtedness”) by July 20, 2019, (2) effective immediately, terminate all conversion rights under the CPTI Note to convert amounts outstanding into shares of Inuvo’s common stock, (3) terminate the Securities Purchase Agreement, dated November 1, 2018, by and between Inuvo and CPTI (the “Securities Purchase Agreement”), and (4) terminate the Registration Rights Agreement, dated November 1, 2018, by and between Inuvo and CPTI. The Merger Termination Agreement provided that the termination fee of $2,800,000 to be paid to Inuvo (the “Termination Fee”) for failure to fulfill the Financing Condition would be satisfied as follows: (1) $1,063,288 of the Termination Fee (the “Indebtedness Satisfaction Amount”) was satisfied in consideration of the termination and cancellation of the Outstanding Indebtedness pursuant to the CPTI Note Termination Agreement that was approved by CPT’s senior lenders Montage Capital II, L.P. and Partners for Growth IV, L.P. (the “Senior Lenders”) of CPT’s issuance of a replacement note to CPT Investments that was entered into in July 2019; (2) $1,611,712 of the Termination Fee (the “ReTargeter Satisfaction Amount”) was satisfied by CPT transferring all of the assets related to CPT’s programmatic and RTB advertising solutions business conducted through managed services and a proprietary SaaS solution (the “ReTargeter Business”), free and clear of all liabilities, encumbrances, or liens, to Inuvo (the “ReTargeter Asset Transfer”). The enterprise valuation of the ReTargeter Business was determined to be $2.57 million; and (3) CPT paid $125,000 to Inuvo on September 15, 2019 to be contributed to the settlement of ongoing litigation with respect to the Mergers (the “Litigation Fee”). On September 30, 2019, Inuvo paid its obligation of $250,000 under a confidential settlement agreement that it entered into on June 20, 2019 resolving certain outstanding litigation related to the Mergers. Under the Merger Termination Agreement, CPT and Inuvo agreed to mutually release all claims that each party had against the other, as well as certain affiliated entities of each. Inuvo, however, will be able to pursue any claims against CPT and its affiliates for breaches of the Merger Termination Agreement. Liquidity For the three months ended March 31, 2020, our revenues declined 3.4% from the same period in the prior year. The lower revenue and higher operating costs in the three-month period of 2020 is principally responsible for our $2.8 million net loss. Of the loss, approximately $1.1 million were the non-cash expenses of depreciation, amortization and stock-based compensation. Since our credit facility is dependent upon receivables, and we do not know when, if ever, that our revenues will return to historic levels or if we will be able to replace those lost revenues with revenues from other sources, the combination of lower credit availability and negative cash flows generated from operating activities introduces potential risk to operation without interruption. Our principal sources of liquidity are our borrowings under our credit facility which is described in Note 5, the sale of our common stock and borrowings from non-bank financial institutions. On March 20, 2020, we closed a Loan and Security Agreement (the “Loan and Security Agreement”) dated February 28, 2020 by and between our company and our subsidiaries and Hitachi Capital America Corp. (“Hitachi”) replacing the previous credit facility with Western Alliance Bank. Under the terms of the Loan and Security Agreement Hitachi has provided us with a $5,000,000 line of credit commitment. We are permitted to borrow (i) 90% of the aggregate Eligible Accounts Receivable, plus (i) the lesser of 75% of the aggregate Unbilled Accounts Receivable (as those terms are defined in the Loan and Security Agreement) or 50% of the amount available to borrow under (i), up to the maximum credit commitment. On March 12, 2020 we drew $5,000,000 under this agreement, using $2,959,573 of these proceeds to satisfy our obligations to Western Alliance Bank under our credit agreement with it and the balance is being used for working capital. Following the satisfaction of our obligations to Western Alliance Bank, all agreements with that entity have been terminated. On March 20, 2020, we sold an aggregate of 3,931,428 shares of our common stock at a purchase price of $0.175 per share to the five members of our Board of Directors in a private placement exempt from registration under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act of 1933, as amended. We received proceeds of $688,000 in this offering. On March 27, 2020, we closed on the first tranche of a registered direct offering (the "Registered Direct Offering") in which we sold 3,115,001 shares of our common stock at a price of $0.175 per share for gross proceeds of $545,125. On April 2, 2020, we closed on a second tranch of the Registered Direct Offering in which we sold 1,400,285 shares of our common stock at a price of $0.175 per share for gross proceeds of $245,050. On April 10, 2020, we obtained an unsecured $1.1 million loan through Relyance Bank N.A. under the Paycheck Protection Program (the “PPP Loan”) pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the United States Small Business Administration. In accordance with the requirements of the CARES Act, the we will use proceeds from the PPP Loan primarily for payroll costs. We have pooled our resources behind a plan to grow our AI technology, the IntentKey, where we have a technology advantage and higher margins. If we are successful in implementing our plan, we expect to return to a positive cash flow from operations by the second half of 2020. However, there is no assurance that we will be able to achieve this objective. Though we believe current operating cash flows and the credit facility will be sufficient to sustain operations into the third quarter of 2020, if our plan to grow the IntentKey business is unsuccessful, we may need to fund operations through private or public sales of securities, debt financings or partnering/licensing transactions. There is no assurance that we will be successful in obtaining funding to continue operations in which case we would need to find additional sources of credit and make substantial reductions to operating expense. A substantial reduction of operating expense may cause disruption to the business and the generation of future revenue. Given the above conditions, there is substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared with the realization of assets and the satisfaction of liabilities in the normal course of business. Customer concentration We generated the majority of our revenue from two customers, Yahoo! and Google as noted below: For the Three Months Ended March 31, 2020 2019 Yahoo! 51.4% 73.6 % Google 18.4% 11.7 % Total 69.8% 85.3 % As of March 31, 2020, Yahoo! and Google accounted for 55.0% of our gross accounts receivable balance. As of December 31, 2019, the same two customers accounted for 60.2% of our gross accounts receivable balance. We still source the majority of our revenue through these relationships where we have access to advertiser budgets indirectly. While this strategy creates a concentration risk, we believe that it also provides upside opportunities including; access to hundreds of thousands of advertisers across geographies; the ability to scale our business across verticals; an avoidance of the sales costs associated with a large direct to advertisers’ sales force; access to innovation; overall media budget market insights; attractive payment terms; and low risk on receivables. As our IntentKey business continues to grow and become a larger proportion of our overall revenue, the percentage of Yahoo! and Google revenue to the total revenue is expected to decrease. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of presentation The consolidated financial statements presented are for Inuvo and its consolidated subsidiaries. The accompanying unaudited consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet as of December 31, 2019, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). In our opinion, these consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on May 12, 2020. Use of estimates The preparation of financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. We regularly evaluate estimates and assumptions related to allowances for doubtful accounts, goodwill and purchased intangible asset valuations, valuation of long-lived assets and derivative liability. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material. Revenue Recognition Most of our revenue is generated through clicks on advertisements presented on our properties or those of our partners. We recognize revenue from clicks in the period in which the click occurs. Payments to partners who display advertisements on our behalf are recognized as cost of revenue. Revenue from data sales and commissions is recognized in the period in which the transaction occurs and the other revenue recognition criteria are met. Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. We also recognize revenue from serving impressions when we complete all or a part of an order from an advertiser. The revenue is recognized in the period that the impression is served. The below table is the proportion of revenue that is generated through advertisements on our ValidClick and IntentKey platforms: For the Three Months Ended March 31, 2020 2019 ValidClick Platform $ 13,076,990 87.6 % $ 14,188,025 91.7 % IntentKey Platform 1,855,993 12.4 % 1,276,544 8.3 % Total $ 14,932,983 100.0 % $ 15,464,569 100.0 % The following table presents our revenue disaggregated by channel: For the Three Months Ended March 31, 2020 2019 Mobile $ 7,674,981 $ 10,546,622 Desktop 6,887,241 4,594,622 Other 370,761 323,325 Total $ 14,932,983 $ 15,464,569 Leases In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) (ASU 2016-02), as amended, which generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. We adopted the new standard effective January 1, 2019 on a modified retrospective basis and did not restate comparative periods. We elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. We also elected to combine lease and non-lease components and to keep leases with an initial term of 12 months or less off the balance sheet and recognize the associated lease payments in the consolidated statements of income on a straight-line basis over the lease term. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized right-of-use assets and lease liabilities for operating leases of approximately $1.2 million and finance leases of approximately $265,000, respectively, on January 1, 2019. Recent Accounting Pronouncements Not Yet Adopted |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment The net carrying value of property and equipment was as follows as of: March 31, 2020 December 31, 2019 Furniture and fixtures $ 293,152 $ 293,152 Equipment 1,043,521 1,025,357 Capitalized internal use and purchased software 10,601,987 10,309,298 Leasehold improvements 421,016 421,016 Subtotal 12,359,676 12,048,823 Less: accumulated depreciation and amortization (11,044,043) (10,674,671) Total $ 1,315,633 $ 1,374,152 |
Other Intangible Assets and Goo
Other Intangible Assets and Goodwill | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Other Intangible Assets and Goodwill | Other Intangible Assets and Goodwill The following is a schedule of intangible assets as of March 31, 2020: Term Carrying Accumulated Amortization and Impairment Net Carrying Value Year-to-date Amortization Customer list, Google 20 years $ 8,820,000 $ (3,564,750) $ 5,255,250 $ 110,250 Technology 5 years 3,600,000 (2,280,000) 1,320,000 180,000 Customer list, ReTargeter (2) 5 years 1,931,250 (257,500) 1,673,750 96,563 Customer list, all other 10 years 1,610,000 (1,301,450) 308,550 40,250 Brand name, ReTargeter (2) 5 years 643,750 (85,833) 557,917 32,188 Customer relationships 20 years 570,000 (90,250) 479,750 7,125 Trade names, web properties (1) - 390,000 — 390,000 — Intangible assets classified as long-term $ 17,565,000 $ (7,579,783) $ 9,985,217 $ 466,376 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. We recorded $2.57 million in intangible assets from the CPT Merger Termination Agreement. An independent valuation of the assets was performed to determine the carrying value of the assets listed above. See Note 1 - Organization and Business. Amortization expense over the next five years and thereafter is as follows: 2020 $ 1,399,128 2021 1,865,504 2022 1,071,294 2023 984,500 2023 769,917 Thereafter 3,504,874 Total $ 9,595,217 |
Bank Debt
Bank Debt | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Bank Debt | Bank Debt The following table summarizes our bank debt as of: March 31, 2020 December 31, 2019 Line of credit - 6.75 percent at March 31, 2020 (prime plus 2 percent) $ 1,503,147 $ — Financed receivables - 5.75 percent at December 31, 2019 (prime plus 1 percent) on invoiced receivables; 6.75 percent December 31, 2019 (prime plus 2 percent) on uninvoiced receivables $ — $ 3,381,364 Total $ 1,503,147 $ 3,381,364 On March 1, 2012 we entered into a Business Financing Agreement with Bridge Bank, which is now owned by Western Alliance Bank. The agreement provided us with a revolving credit line of up to $10 million which we used to help satisfy our working capital needs. On October 11, 2018, we entered into the Amended and Restated Financing Agreement with Western Alliance Bank which superseded the Business Financing Agreement, as amended. The material terms of the Amended and Restated Financing Agreement included financing eligible invoiced receivables at an advance rate of 85% and an interest rate of prime plus 1% and a sub-limit of up to $2.5 million of uninvoiced eligible receivables at an advance rate of 75% and an interest rate of prime plus 2%. The sub-limit provision expired at the end of April 2019. The Amended and Restated Financing Agreement included certain fees; a facility fee of $11,765 due at closing; an annual facility fee of 0.25% of the account balance due beginning on April 20, 2019; a monthly maintenance fee of 0.125% of the ending daily account balance; a $30,000 fee in lieu of a warrant; and $80,000 due upon termination of the agreement or repayment of our obligations under the agreement. The Amended and Restated Financing Agreement was secured by all of our assets. On April 30, 2019, under the terms of the Second Amendment, Western Alliance Bank agreed to extend the $2.5 million sub-limit provision of uninvoiced eligible receivables until the earlier of May 31, 2019 or three days after the closing of the Mergers, among other terms. On June 6, 2019, we entered into the Third Amendment to the Amended and Restated Financing. The Third Amendment provided that with respect to the eligible unbilled receivable sublimit of $2,500,000, which expired May 31, 2019 under the Amended and Restated Financing Agreement, that: (i) lender had no obligation to finance unbilled receivables but may do so in its discretion; and (ii) lender may terminate financing of unbilled receivables upon written notice. The Third Amendment also imposed an amendment fee of $2,000. On March 12, 2020, we closed on the Loan and Security Agreement dated February 28, 2020 with Hitachi. Under the terms of the Loan and Security Agreement, Hitachi has provided us with a $5,000,000 line of credit commitment. We are permitted to borrow (i) 90% of the aggregate Eligible Accounts Receivable, plus (i) the lesser of 75% of the aggregate Unbilled Accounts Receivable or 50% of the amount available to borrow under (i), up to the maximum credit commitment. On March 12, 2020 we drew $5,000,000 under this agreement, using $2,959,573 of these proceeds to satisfy our obligations to Western Alliance Bank under our credit agreement with it and the balance is being used for working capital. Following the satisfaction of our obligations to Western Alliance Bank, all agreements with that entity have been terminated. We pay Hitachi a monthly interest at the rate of 2% in excess of the Wall Street Journal Prime Rate, with a minimum rate of 6.75% per annum, on outstanding amounts. The principal and all accrued but unpaid interest are due on demand. |
Accrued Expenses, Other Current
Accrued Expenses, Other Current Liabilities and Lease Liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Payables and Accruals [Abstract] | |
Accrued Expenses, Other Current Liabilities and Lease Liabilities | Accrued Expenses, Other Current Liabilities and Lease LiabilitiesThe accrued expenses, other current liabilities and lease liabilities consist of the following as of: March 31, 2020 December 31, 2019 Accrued marketing costs (TAC) $ 2,389,201 $ 2,200,014 Accrued expenses and other 1,011,802 1,152,267 Accrued payroll and commission liabilities 226,901 115,707 Arkansas grant contingency 75,000 85,000 Accrued sales allowance 50,000 50,000 Accrued taxes 6,410 11,445 Operating lease liability 301,641 362,130 Financing lease liability 211,285 80,777 Total $ 4,272,240 $ 4,057,340 |
Convertible Promissory Notes
Convertible Promissory Notes | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Convertible Promissory Notes | Convertible Promissory Notes On March 1, 2019, Inuvo entered into a Securities Purchase Agreement with three accredited investors (the “Purchasers”) for the purchase and sale of an aggregate of $1,440,000 of principal of Original Issue Discount Unsecured Subordinated Convertible Notes due September 1, 2020 (the “Calvary Notes”) to fund working capital and additional expenses resulting from the delay in closing of the Mergers associated with the government shut down. The initial conversion price of the Calvary Notes was $1.08 per share which would make them convertible into 1,333,333 unregistered shares of Inuvo’s common stock upon conversion. The Calvary Notes were issued in a private placement and the shares of common stock issuable upon conversion are restricted, subject to resale under Rule 144. The proceeds to Inuvo from the offering were $1,200,000. Inuvo did not pay any commissions or finders fees in connection with the sale of the Calvary Notes and Inuvo utilized the proceeds for working capital. The Calvary Notes are reported net of unamortized original issue discounts and initial value attributed to the bifurcated embedded conversion feature. At March 31, 2020, the remaining principal amount outstanding is $315,000, with a carrying amount net of discounts of $271,108. Consideration of Down Round price adjustment The Notes contain certain triggers that create adjustments to the conversion ratio, which provide down round protection to the holders. Because the conversion feature has been bifurcated as an embedded derivative and is marked to fair value at each reporting period, the actual occurrence of a trigger and the resulting adjustment to the conversion rate does not require any additional accounting treatment at the time of the price adjustment. Rather, the next fair value computation reflects the new terms of the conversion feature. On July 15, 2019, we closed on an underwritten public offering of 13,750,000 shares at an offering price of $0.30 per share. As a result, this triggered a corresponding adjustment to the conversion ratio in the Notes to $0.30. The fair value of the embedded derivative at September 30, 2019, reflected these new terms. Modifications/Extinguishment On November 11, 2019 we entered into Note Modification and Release Agreements with the holders of $1,080,000 principal amount of the Calvary Notes. Under the terms of the Note Modification and Release Agreement, the parties agreed that in consideration of such noteholder’s agreement to convert a minimum of 50% of the outstanding amount of the note (the “First Conversion Amount”) that the conversion price for the First Conversion Amount would be $0.265 per share and that the conversion price for any remaining amount due under the note would be $0.30 per share, subject to future adjustments under the terms of the note including dilutive issuances at a price below $0.30 per share, subject to a floor of $0.23 per share. The agreement contains mutual general releases. These holders converted an aggregate of $765,000 due under the Calvary Notes into 2,886,792 shares of our common stock. Immediately prior to the conversion, the carrying value of the derivative was marked-to-market. Upon converting, the issued shares were recorded at their fair value of $0.29 per share. This resulted in a loss on extinguishment. Both the loss due to the marking to market and the loss on extinguishment totaling approximately $193,000 were recorded to other income, net. In January 2020, a noteholder of the Original Issue Discount Unsecured Subordinated Convertible Notes due September 1, 2020 converted $360,000 principal amount due under the Note into 1,200,000 shares of our common stock. The carrying value of the bifurcated derivative was marked-to-market immediately prior to the conversion. Upon conversion, the issued shares were recorded at their fair value. Both the loss due to the marked-to-market and loss on extinguishment of approximately $69,000 were recorded to other income, net. See Note 8 for discussion. |
Derivative Liability
Derivative Liability | 3 Months Ended |
Mar. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Liability | Derivative Liability The derivative liability reported in the financial statements represents the embedded conversion feature in the convertible promissory notes described in Note 7, which has been bifurcated for accounting purposes. The derivative is marked-to-market each reporting period at fair value under ASC 820 using significant observable and unobservable inputs, with changes in fair value recorded in the statement of operations. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below: Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3—Inputs that are both significant to the fair value measurement and unobservable. At March 31, 2020, we recorded a derivative liability of $149,400 related to the bifurcated embedded conversion feature of the Calvary Notes discussed in Note 7 - Convertible Promissory Note. In accordance with the guidance above, the fair value of the derivative liability is considered "Level 3." |
Lease Liabilities and Other Lon
Lease Liabilities and Other Long-Term Liabilities | 3 Months Ended |
Mar. 31, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Lease Liabilities and Other Long-Term Liabilities | Lease Liabilities and Other Long-Term Liabilities The lease liabilities and other long-term liabilities consist of the following as of: March 31, 2020 December 31, 2019 Deferred revenue $ 500,000 $ — Operating lease liability 345,596 394,889 Financing lease liability 142,986 — Deferred rent 20,846 57,162 Total $ 1,009,428 $ 452,051 |
Commitments
Commitments | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments | Commitments In March 2020, we entered into an agreement to allow a third party to license and use ValidClick technology. The agreement required a nonrefundable, fully earned fee of $500,000 in March with subsequent fees as earned in later quarters. The $500,000 fee was recognized as deferred revenue in March 2020. We are committed to paying a monthly development royalty and marketing services fee when certain adjusted gross profit targets are achieved. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income TaxesWe have a deferred tax liability of $2,019,200 as of March 31, 2020 and December 31, 2019, related to intangible assets acquired in March 2012, February 2017 and June 2019. We also have a net deferred tax asset $33,987,850. We believe it is more likely than not that essentially none of our deferred tax assets will be realized, and we have recorded a valuation allowance for the net deferred tax assets that may not be realized as of March 31, 2020 and December 31, 2019. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation We maintain a stock-based compensation program intended to attract, retain and provide incentives for talented employees and directors and align stockholder and employee interests. Currently, we grant options and restricted stock units ("RSUs") from the 2010 Equity Compensation Plan (“2010 ECP”) and the 2017 ECP. Option and RSUs vesting periods are generally up to three years and/or achieving certain financial targets. On August 14, 2019, the Inuvo Nominating, Corporate Governance and Compensation Committee approved modifications to the outstanding RSU grants under the 2010 and 2017 ECP plans. The modifications include deeming the performance criteria for the performance based RSU grants with a measurement period based on June 30, 2019 as met and vested. In addition, any remaining RSU grants outstanding were modified to vest in three equal parts on August 19, 2019, January 1, 2020 and July 1, 2020 as long as the grantee is employed by Inuvo on the vesting date. On August 21, 2019 our board of directors adopted, subject to stockholder approval, an amendment to our 2017 ECP to increase in the number of shares reserved for issuance upon grants made under the plan by an additional 6,800,000 shares of our common stock. The stockholders approved the amendment to our 2017 ECP at the annual stockholders meeting on October 4, 2019. On January 1, 2020, in accordance with the plan provisions, the number of shares available for issuance under the 2017 and 2010 ECP plans were increased by 150,000 and 250,000 shares, respectively. Compensation Expense For the three months ended March 31, 2020 and March 31, 2019, we recorded stock-based compensation expense for all equity incentive plans of $208,897 and $96,871, respectively. Total compensation cost not yet recognized at March 31, 2020 was $424,464 to be recognized over a weighted-average recognition period of 1.0 year. The following table summarizes the stock grants outstanding under our 2005 Long-Term Incentive Plan ("2005 LTIP"), the 2010 ECP and the 2017 ECP for the three months ended March 31, 2020: Options Outstanding RSUs Outstanding Options and RSUs Exercised Available Shares Total 2017 ECP — 1,165,479 728,346 7,356,175 9,250,000 2010 ECP (**) 14,498 1,072,171 3,969,590 275,759 5,332,018 2005 LTIP (*) — — 953,835 — 953,835 Total 14,498 2,237,650 5,651,771 7,631,934 15,535,853 (*) Expired June 2015 (**) Expires April 2020 The following table summarizes the activities of stock option awards under the 2005 LTIP and the 2010 ECP as of March 31, 2020: Shares Subject to Options Outstanding Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Balance as of December 31, 2019 18,248 $ 1.74 1.8 $ 2,019 Stock options canceled 3,750 $ 3.7 — — Balance as of March 31, 2020 14,498 $ 1.23 1.64 $ 2,019 Stock options exercisable as of March 31, 2020 14,498 $ 1.23 1.64 $ 2,019 The following table summarizes the activities for our unvested RSUs for the three months ended March 31, 2020: Unvested RSUs Number of Shares Weighted Average Grant Date Fair Value Unvested as of December 31, 2019 2,568,951 $ 0.79 Granted — $ — Vested 331,301 $ 0.21 Forfeited — $ — Unvested as of March 31, 2020 2,237,650 $ 0.27 |
Earnings per Share
Earnings per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings per Share | Earnings per ShareDuring the three month period ended March 31, 2020 and March 31, 2019, we generated a net loss from continuing operations and as a result, all of our shares are anti-dilutive. |
Leases
Leases | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Leases | Leases The Company has entered into operating and finance leases primarily for real estate and equipment rental. These leases have terms which range from two As of March 31, 2020, the Company recorded $105,678 in amortization expense related to finance leases. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Information related to the Company's operating lease liabilities are as follows: For the Three Months Ended March 31, Cash paid for operating lease liabilities $ 115,751 Weighted-average remaining lease term 1.9 years Weighted-average discount rate 6.25 % Minimum future lease payments ended March 31, 2020 2020 287,220 2021 242,558 2022 163,284 693,062 Less imputed interest (45,825) Total lease liabilities $ 647,237 Information related to the Company's financed lease liabilities are as follows: For the Three Months Ended March 31, Cash paid for finance lease liabilities 220,216 Weighted-average remaining lease term 1.0 year Weighted-average discount rate 6.25 % Minimum future lease payments ended March 31, 2020 2020 $ 178,957 2021 194,376 373,333 Less imputed interest (19,062) Total lease liabilities $ 354,271 |
Leases | Leases The Company has entered into operating and finance leases primarily for real estate and equipment rental. These leases have terms which range from two As of March 31, 2020, the Company recorded $105,678 in amortization expense related to finance leases. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Information related to the Company's operating lease liabilities are as follows: For the Three Months Ended March 31, Cash paid for operating lease liabilities $ 115,751 Weighted-average remaining lease term 1.9 years Weighted-average discount rate 6.25 % Minimum future lease payments ended March 31, 2020 2020 287,220 2021 242,558 2022 163,284 693,062 Less imputed interest (45,825) Total lease liabilities $ 647,237 Information related to the Company's financed lease liabilities are as follows: For the Three Months Ended March 31, Cash paid for finance lease liabilities 220,216 Weighted-average remaining lease term 1.0 year Weighted-average discount rate 6.25 % Minimum future lease payments ended March 31, 2020 2020 $ 178,957 2021 194,376 373,333 Less imputed interest (19,062) Total lease liabilities $ 354,271 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party TransactionsOn March 20, 2020, we sold an aggregate of 3,931,428 shares of our common stock at a purchase price of $0.175 per share to the five members of our Board of Directors in a private placement exempt from registration under Section 4(a)(2) and Rule 506(b) of Regulation D under the Securities Act of 1933, as amended. We received proceeds of $688,000 in this offering. The purchase price of the shares of our common stock sold in the offering exceeded the closing market price of our common stock on March 19, 2020, the trading day immediately preceding the day the binding Insider Subscription Agreements were executed by the purchasers. The purchasers were all accredited investors. We did not pay any commissions or finder’s fees, and we are using the proceeds for general working capital.In June 2019, the Company entered into a agreement with First Orion Corp., which is partially owned by two directors and shareholders of Inuvo, to provide office space. The lease is for eight |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events First identified in late 2019 and known now as Covid-19, the outbreak has impacted millions of individuals and businesses worldwide. In response, many countries have implemented measures to combat the outbreak which has had an unprecedented economic consequence. The Company had not experienced an impact from Covid-19 through the end of fiscal year 2019 and had only minor impact from Covid-19 in the first quarter of 2020. In April of 2020, the Company experienced a significant reduction in advertiser marketing budgets across both the ValidClick and IntentKey platforms as a direct consequence of Covid-19. The Company is unable at this time to predict with any certainty how the second quarter will materialize and as a result is taking a just-in-time approach to business operations, focusing resources on areas with immediate revenue potential and reducing expenses where necessary. On April 2, 2020, the Company closed on a second tranche of the Registered Direct Offering in which we sold 1,400,285 shares of our common stock at a price of $0.175 per share for aggregate gross proceeds of $245,050. On April 10, 2020, the Company obtained an unsecured $1.1 million loan through Relyance Bank N.A. under the Paycheck Protection Program (the “PPP Loan”) pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and is administered by the United States Small Business Administration. In accordance with the requirements of the CARES Act, the Company will use proceeds from the PPP Loan primarily for payroll costs. Effective April 20, 2020, the Company and the holder of the remaining Calvary Notes due September 1, 2020 in the principal amount of $315,000 (the “Promissory Note”) as modified under that certain Note Modification and Release Agreement effective November 11, 2019 (the “Modification”) (the Promissory Note and Modification collectively referred to herein as, the “Note”), agreed to amend the Note to extend the maturity date to December 31, 2020 and reduce the conversion price to $0.175 per share. On April 21,2020, the Noteholder converted $200,000 principal amount due under the Note into 1,142,857 shares of our common stock. On May 5, 2020, the Noteholder converted the final $115,000 principal amount due under the Note into 657,143 shares of our common stock, thereby satisfying the Note in full. On April 29, 2020, our Board of Directors implemented a temporary compensation change for senior officers and employees. Effective May 1, 2020, certain employees with salaries in excess of $100,000 per year will be required, on a temporary basis, to forego a specified percentage of their salary ranging from 50% to 7% (the “Reduction Percentage”). To incentivize these employees, each will be granted restricted stock unit awards (each, an “Award”) pursuant to the Company’s 2017 ECP. Management anticipates that these actions will reduce on-going expenses and assist the Company in achieving its short-term goals. The participants include the Company’s Chairman and CEO, Richard Howe, Chief Financial Officer, Wallace Ruiz, and Chief Operating Officer, Trey Barrett (collectively the “Named Executive Officers”). The temporary salaries for the Named Executive Officers are as follows: Name and Principal Position Temporary Salary Richard K. Howe, Chairman and Chief Executive Officer $212,500 Wallace Ruiz, Chief Financial Officer $200,750 Don (Trey) Barrett III $200,000 The Awards to be issued to the effected employees will be issued at the end of each semi-monthly pay period commencing May 15, 2020. The number of shares of common stock to be issued pursuant to each Award shall be computed as follows: applicable Reduction Percentage of one one-twenty-fourth (1/24) of the employee’s annual salary prior to the reduction divided by the per share closing price of the Company’s common stock on the NYSE American on the trading day prior to the end of each semi-monthly pay period. The Awards will vest six months after issuance at which time the shares will be issued. Except as otherwise provided in the Plan or any applicable employment agreement, the employee must remain in the employ of the Company during the vesting period and the Awards are not transferable prior to vesting. These actions will remain in effect until June 30, 2020. The Board may modify, terminate or extend the program at its discretion. Additionally, the Board modified the independent director compensation program, which previously provided for a $30,000 annual cash retainer paid quarterly and annual restricted stock unit grants equivalent to $30,000 of worth of stock, eliminating the cash retainer and replacing it with quarterly restricted stock unit grants equivalent to $7,500 worth of stock vesting six months after date of issuance. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation The consolidated financial statements presented are for Inuvo and its consolidated subsidiaries. The accompanying unaudited consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet as of December 31, 2019, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States ("GAAP"). In our opinion, these consolidated financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on May 12, 2020. |
Use of estimates | Use of estimates The preparation of financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. We regularly evaluate estimates and assumptions related to allowances for doubtful accounts, goodwill and purchased intangible asset valuations, valuation of long-lived assets and derivative liability. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material. |
Revenue Recognition | Revenue Recognition Most of our revenue is generated through clicks on advertisements presented on our properties or those of our partners. We recognize revenue from clicks in the period in which the click occurs. Payments to partners who display advertisements on our behalf are recognized as cost of revenue. Revenue from data sales and commissions is recognized in the period in which the |
Leases | Leases |
Recent Accounting Pronouncements Not Yet Adopted | Recent Accounting Pronouncements Not Yet AdoptedIn June 2016, (FASB) issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. On November 15, 2019, the FASB delayed the effective date certain small public companies and other private companies. As amended, the effective date of ASC Topic 326 was delayed until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities. |
Organization and Business (Tabl
Organization and Business (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Customer Concentration | We generated the majority of our revenue from two customers, Yahoo! and Google as noted below: For the Three Months Ended March 31, 2020 2019 Yahoo! 51.4% 73.6 % Google 18.4% 11.7 % Total 69.8% 85.3 % |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Revenue from Products and Services | The below table is the proportion of revenue that is generated through advertisements on our ValidClick and IntentKey platforms: For the Three Months Ended March 31, 2020 2019 ValidClick Platform $ 13,076,990 87.6 % $ 14,188,025 91.7 % IntentKey Platform 1,855,993 12.4 % 1,276,544 8.3 % Total $ 14,932,983 100.0 % $ 15,464,569 100.0 % The following table presents our revenue disaggregated by channel: For the Three Months Ended March 31, 2020 2019 Mobile $ 7,674,981 $ 10,546,622 Desktop 6,887,241 4,594,622 Other 370,761 323,325 Total $ 14,932,983 $ 15,464,569 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Net Carrying Value of Property and Equipment | The net carrying value of property and equipment was as follows as of: March 31, 2020 December 31, 2019 Furniture and fixtures $ 293,152 $ 293,152 Equipment 1,043,521 1,025,357 Capitalized internal use and purchased software 10,601,987 10,309,298 Leasehold improvements 421,016 421,016 Subtotal 12,359,676 12,048,823 Less: accumulated depreciation and amortization (11,044,043) (10,674,671) Total $ 1,315,633 $ 1,374,152 |
Other Intangible Assets and G_2
Other Intangible Assets and Goodwill (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets from Continuing Operations | The following is a schedule of intangible assets as of March 31, 2020: Term Carrying Accumulated Amortization and Impairment Net Carrying Value Year-to-date Amortization Customer list, Google 20 years $ 8,820,000 $ (3,564,750) $ 5,255,250 $ 110,250 Technology 5 years 3,600,000 (2,280,000) 1,320,000 180,000 Customer list, ReTargeter (2) 5 years 1,931,250 (257,500) 1,673,750 96,563 Customer list, all other 10 years 1,610,000 (1,301,450) 308,550 40,250 Brand name, ReTargeter (2) 5 years 643,750 (85,833) 557,917 32,188 Customer relationships 20 years 570,000 (90,250) 479,750 7,125 Trade names, web properties (1) - 390,000 — 390,000 — Intangible assets classified as long-term $ 17,565,000 $ (7,579,783) $ 9,985,217 $ 466,376 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. |
Schedule of Amortization Expense | Amortization expense over the next five years and thereafter is as follows: 2020 $ 1,399,128 2021 1,865,504 2022 1,071,294 2023 984,500 2023 769,917 Thereafter 3,504,874 Total $ 9,595,217 |
Bank Debt (Tables)
Bank Debt (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Summary of revolving credit line | The following table summarizes our bank debt as of: March 31, 2020 December 31, 2019 Line of credit - 6.75 percent at March 31, 2020 (prime plus 2 percent) $ 1,503,147 $ — Financed receivables - 5.75 percent at December 31, 2019 (prime plus 1 percent) on invoiced receivables; 6.75 percent December 31, 2019 (prime plus 2 percent) on uninvoiced receivables $ — $ 3,381,364 Total $ 1,503,147 $ 3,381,364 |
Accrued Expenses, Other Curre_2
Accrued Expenses, Other Current Liabilities and Lease Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses, Other Current Liabilities and Lease Liabilities | The accrued expenses, other current liabilities and lease liabilities consist of the following as of: March 31, 2020 December 31, 2019 Accrued marketing costs (TAC) $ 2,389,201 $ 2,200,014 Accrued expenses and other 1,011,802 1,152,267 Accrued payroll and commission liabilities 226,901 115,707 Arkansas grant contingency 75,000 85,000 Accrued sales allowance 50,000 50,000 Accrued taxes 6,410 11,445 Operating lease liability 301,641 362,130 Financing lease liability 211,285 80,777 Total $ 4,272,240 $ 4,057,340 |
Lease Liabilities and Other L_2
Lease Liabilities and Other Long-Term Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Other Liabilities Disclosure [Abstract] | |
Schedule of Lease Liabilities and Other Long-Term Liabilities | The lease liabilities and other long-term liabilities consist of the following as of: March 31, 2020 December 31, 2019 Deferred revenue $ 500,000 $ — Operating lease liability 345,596 394,889 Financing lease liability 142,986 — Deferred rent 20,846 57,162 Total $ 1,009,428 $ 452,051 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Stock Grants Outstanding | The following table summarizes the stock grants outstanding under our 2005 Long-Term Incentive Plan ("2005 LTIP"), the 2010 ECP and the 2017 ECP for the three months ended March 31, 2020: Options Outstanding RSUs Outstanding Options and RSUs Exercised Available Shares Total 2017 ECP — 1,165,479 728,346 7,356,175 9,250,000 2010 ECP (**) 14,498 1,072,171 3,969,590 275,759 5,332,018 2005 LTIP (*) — — 953,835 — 953,835 Total 14,498 2,237,650 5,651,771 7,631,934 15,535,853 (*) Expired June 2015 (**) Expires April 2020 |
Schedule of Stock Option Award Activity | The following table summarizes the activities of stock option awards under the 2005 LTIP and the 2010 ECP as of March 31, 2020: Shares Subject to Options Outstanding Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Balance as of December 31, 2019 18,248 $ 1.74 1.8 $ 2,019 Stock options canceled 3,750 $ 3.7 — — Balance as of March 31, 2020 14,498 $ 1.23 1.64 $ 2,019 Stock options exercisable as of March 31, 2020 14,498 $ 1.23 1.64 $ 2,019 |
Schedule of Nonvested Restricted Stock Units Activity | The following table summarizes the activities for our unvested RSUs for the three months ended March 31, 2020: Unvested RSUs Number of Shares Weighted Average Grant Date Fair Value Unvested as of December 31, 2019 2,568,951 $ 0.79 Granted — $ — Vested 331,301 $ 0.21 Forfeited — $ — Unvested as of March 31, 2020 2,237,650 $ 0.27 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Schedule of information relating to leases | Information related to the Company's operating lease liabilities are as follows: For the Three Months Ended March 31, Cash paid for operating lease liabilities $ 115,751 Weighted-average remaining lease term 1.9 years Weighted-average discount rate 6.25 % Information related to the Company's financed lease liabilities are as follows: For the Three Months Ended March 31, Cash paid for finance lease liabilities 220,216 Weighted-average remaining lease term 1.0 year Weighted-average discount rate 6.25 % |
Schedule of operating lease maturity | Minimum future lease payments ended March 31, 2020 2020 287,220 2021 242,558 2022 163,284 693,062 Less imputed interest (45,825) Total lease liabilities $ 647,237 |
Schedule of finance lease liability | Minimum future lease payments ended March 31, 2020 2020 $ 178,957 2021 194,376 373,333 Less imputed interest (19,062) Total lease liabilities $ 354,271 |
Subsequent Event (Tables)
Subsequent Event (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Summary of Temporary Salaries | The temporary salaries for the Named Executive Officers are as follows: Name and Principal Position Temporary Salary Richard K. Howe, Chairman and Chief Executive Officer $212,500 Wallace Ruiz, Chief Financial Officer $200,750 Don (Trey) Barrett III $200,000 |
Organization and Business - Nar
Organization and Business - Narrative (Details) $ / shares in Units, machine_profile in Millions | Apr. 02, 2020USD ($)$ / sharesshares | Mar. 27, 2020USD ($)$ / sharesshares | Mar. 20, 2020USD ($)$ / sharesshares | Mar. 12, 2020USD ($) | Feb. 28, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 15, 2019USD ($) | Jun. 20, 2019USD ($) | Mar. 31, 2020USD ($)clientpatentmachine_profile | Dec. 31, 2019 | Apr. 10, 2020USD ($) | Nov. 01, 2018 |
Debt Instrument [Line Items] | ||||||||||||
Number of clients who collectively manage US digital advertising budgets | client | 3 | |||||||||||
Percentage of all US digital advertising budgets managed by group of clients (more than) | 50.00% | |||||||||||
Number of machine profiles in database (more than) | machine_profile | 500 | |||||||||||
Number of issued patents | patent | 17 | |||||||||||
Number of pending patents | patent | 8 | |||||||||||
Intangible assets acquired | $ 2,570,000 | |||||||||||
Change in revenues from prior period | 3.40% | |||||||||||
Net loss | $ 2,800,000 | |||||||||||
Depreciation, amortization, and stock-based compensation | $ 1,100,000 | |||||||||||
Shares authorized amount (in shares) | shares | 3,115,001 | 3,931,428 | ||||||||||
Sale of stock, price per share (in usd per share) | $ / shares | $ 0.175 | $ 0.175 | ||||||||||
Sale of stock, consideration received on transaction | $ 545,125 | $ 688,000 | ||||||||||
Subsequent Event | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Shares authorized amount (in shares) | shares | 1,400,285 | |||||||||||
Sale of stock, price per share (in usd per share) | $ / shares | $ 0.175 | |||||||||||
Sale of stock, consideration received on transaction | $ 245,050 | |||||||||||
Accounts Receivable | Customer Concentration Risk | Yahoo! and Google | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Percentage of concentration risk (as percent) | 55.00% | 60.20% | ||||||||||
Line of Credit | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Stated interest rate | 6.75% | |||||||||||
Line of Credit | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Stated interest rate | 10.00% | |||||||||||
Terminated Merger With Conversion Point Technologies | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Business acquisition, termination fee paid | $ 2,800,000 | |||||||||||
Terminated Merger With Conversion Point Technologies | Conversion Point Holdings Inc | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Face amount | 36,000,000 | |||||||||||
Indebtedness Satisfaction Amount | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Line of credit facility, fair value of amount outstanding | 1,063,288 | |||||||||||
Business acquisition, termination fee paid | 1,063,288 | |||||||||||
ReTargeter Satisfaction Amount | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Business acquisition, termination fee paid | 1,611,712 | |||||||||||
Intangible assets acquired | $ 2,570,000 | |||||||||||
Litigation Fee | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Business acquisition, termination fee paid | $ 250,000 | $ 125,000 | ||||||||||
Loan And Security Agreement | Hitachi Capital America Corp. | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Stated interest rate | 6.75% | |||||||||||
Line of credit facility, maximum borrowing capacity | $ 5,000,000 | $ 5,000,000 | ||||||||||
Percentage of aggregate Eligible Accounts Receivable | 90.00% | |||||||||||
Percentage of aggregate Unbilled Accounts Receivable | 75.00% | |||||||||||
Percentage of amount available to borrow under maximum credit commitment | 50.00% | |||||||||||
Credit Agreement | Western Alliance Bank | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Extinguishment of debt | $ 2,959,573 | $ 2,959,573 | ||||||||||
PPP Loan | Unsecured Debt | Subsequent Event | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Face amount | $ 1,100,000 |
Organization and Business - Cus
Organization and Business - Customer Concentration (Details) - Customer Concentration Risk - Net Revenue | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Yahoo! and Google | ||
Concentration Risk [Line Items] | ||
Percentage of concentration risk (as percent) | 69.80% | 85.30% |
Yahoo! | ||
Concentration Risk [Line Items] | ||
Percentage of concentration risk (as percent) | 51.40% | 73.60% |
Concentration Risk [Line Items] | ||
Percentage of concentration risk (as percent) | 18.40% | 11.70% |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Summary of Revenue from Products and Services (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Disaggregation of Revenue [Line Items] | ||
Net revenue | $ 14,932,983 | $ 15,464,569 |
Percentage of total revenue | 100.00% | 100.00% |
Mobile | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | $ 7,674,981 | $ 10,546,622 |
Desktop | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | 6,887,241 | 4,594,622 |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | 370,761 | 323,325 |
ValidClick Platform | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | $ 13,076,990 | $ 14,188,025 |
Percentage of total revenue | 87.60% | 91.70% |
IntentKey Platform | ||
Disaggregation of Revenue [Line Items] | ||
Net revenue | $ 1,855,993 | $ 1,276,544 |
Percentage of total revenue | 12.40% | 8.30% |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Narrative (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 | Jan. 01, 2019 |
Disaggregation of Revenue [Line Items] | |||
Right of use assets - operating lease | $ 646,727 | $ 756,115 | |
Total lease liabilities | 647,237 | ||
Right of use assets - finance lease | 476,209 | $ 88,178 | |
Total lease liabilities | $ 354,271 | ||
Accounting Standards Update 2016-02 | |||
Disaggregation of Revenue [Line Items] | |||
Right of use assets - operating lease | $ 1,200,000 | ||
Total lease liabilities | 1,200,000 | ||
Right of use assets - finance lease | 265,000 | ||
Total lease liabilities | $ 265,000 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | $ 12,359,676 | $ 12,048,823 | |
Less: accumulated depreciation and amortization | (11,044,043) | (10,674,671) | |
Total | 1,315,633 | 1,374,152 | |
Depreciation expense | 369,372 | $ 441,841 | |
Furniture and fixtures | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 293,152 | 293,152 | |
Equipment | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 1,043,521 | 1,025,357 | |
Capitalized internal use and purchased software | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | 10,601,987 | 10,309,298 | |
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Property, plant and equipment, gross | $ 421,016 | $ 421,016 |
Other Intangible Assets and G_3
Other Intangible Assets and Goodwill - Schedule of Goodwill and Intangible Assets (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Schedule of Finite-Lived Intangible Assets and Goodwill [Line Items] | ||
Net Carrying Value | $ 9,595,217 | |
Year-to-date Amortization | 466,376 | |
Intangible assets classified as long-term | ||
Carrying Value | 17,565,000 | |
Accumulated Amortization and Impairment | (7,579,783) | |
Net Carrying Value | 9,985,217 | $ 10,451,593 |
Goodwill, Impaired, Accumulated Impairment Loss | ||
Carrying Value | 9,853,342 | |
Net Carrying Value | 9,853,342 | $ 9,853,342 |
Intangible assets acquired | 2,570,000 | |
Trade names, web properties | ||
Schedule of Finite-Lived Intangible Assets and Goodwill [Line Items] | ||
Indefinite-lived Intangible Assets (Excluding Goodwill) | $ 390,000 | |
Customer list, Google | ||
Schedule of Finite-Lived Intangible Assets and Goodwill [Line Items] | ||
Term | 20 years | |
Carrying Value | $ 8,820,000 | |
Accumulated Amortization and Impairment | (3,564,750) | |
Net Carrying Value | 5,255,250 | |
Year-to-date Amortization | $ 110,250 | |
Technology | ||
Schedule of Finite-Lived Intangible Assets and Goodwill [Line Items] | ||
Term | 5 years | |
Carrying Value | $ 3,600,000 | |
Accumulated Amortization and Impairment | (2,280,000) | |
Net Carrying Value | 1,320,000 | |
Year-to-date Amortization | $ 180,000 | |
Customer list, Retargeter | ||
Schedule of Finite-Lived Intangible Assets and Goodwill [Line Items] | ||
Term | 5 years | |
Carrying Value | $ 1,931,250 | |
Accumulated Amortization and Impairment | (257,500) | |
Net Carrying Value | 1,673,750 | |
Year-to-date Amortization | $ 96,563 | |
Customer list, all other | ||
Schedule of Finite-Lived Intangible Assets and Goodwill [Line Items] | ||
Term | 10 years | |
Carrying Value | $ 1,610,000 | |
Accumulated Amortization and Impairment | (1,301,450) | |
Net Carrying Value | 308,550 | |
Year-to-date Amortization | $ 40,250 | |
Brand name, Retargeter | ||
Schedule of Finite-Lived Intangible Assets and Goodwill [Line Items] | ||
Term | 5 years | |
Carrying Value | $ 643,750 | |
Accumulated Amortization and Impairment | (85,833) | |
Net Carrying Value | 557,917 | |
Year-to-date Amortization | $ 32,188 | |
Customer relationships | ||
Schedule of Finite-Lived Intangible Assets and Goodwill [Line Items] | ||
Term | 20 years | |
Carrying Value | $ 570,000 | |
Accumulated Amortization and Impairment | (90,250) | |
Net Carrying Value | 479,750 | |
Year-to-date Amortization | $ 7,125 |
Other Intangible Assets and G_4
Other Intangible Assets and Goodwill - Amortization Expense (Details) | Mar. 31, 2020USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2020 | $ 1,399,128 |
2021 | 1,865,504 |
2022 | 1,071,294 |
2023 | 984,500 |
2023 | 769,917 |
Thereafter | 3,504,874 |
Net Carrying Value | $ 9,595,217 |
Bank Debt - Schedule of Notes P
Bank Debt - Schedule of Notes Payable (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Debt Instrument [Line Items] | ||
Line of credit - 6.75 percent at March 31, 2020 (prime plus 2 percent) | $ 1,503,147 | $ 0 |
Financed receivables - 5.75 percent at December 31, 2019 (prime plus 1 percent) on invoiced receivables; 6.75 percent December 31, 2019 (prime plus 2 percent) on uninvoiced receivables | 0 | 3,381,364 |
Total | $ 1,503,147 | $ 3,381,364 |
Line of Credit | ||
Debt Instrument [Line Items] | ||
Stated interest rate | 6.75% | |
Line of Credit | Prime Rate | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 2.00% | |
Line of Credit | Revolving Credit Facility | Uninvoiced Receivables | ||
Debt Instrument [Line Items] | ||
Stated interest rate | 6.75% | |
Line of Credit | Revolving Credit Facility | Uninvoiced Receivables | Prime Rate | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 2.00% | |
Line of Credit | Revolving Credit Facility | Invoiced Receivables | ||
Debt Instrument [Line Items] | ||
Stated interest rate | 5.75% | |
Line of Credit | Revolving Credit Facility | Invoiced Receivables | Prime Rate | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 1.00% |
Bank Debt - Narrative (Details)
Bank Debt - Narrative (Details) - USD ($) | Mar. 12, 2020 | Feb. 28, 2020 | Apr. 30, 2019 | Oct. 11, 2018 | Mar. 31, 2020 | Jun. 06, 2019 | Mar. 01, 2012 |
Hitachi Capital America Corp. | |||||||
Debt Instrument [Line Items] | |||||||
Commitment fee | $ 50,000 | ||||||
Amendment fee | $ 2,000 | ||||||
Percentage due upon execution of agreement | 50.00% | ||||||
Balance due, term | 6 months | ||||||
Annual commitment fee amount | $ 15,000 | ||||||
Quarterly service fee | 0.30% | ||||||
Exit fee | $ 50,000 | ||||||
Third Amendment to the Amended and Restated Financing Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Amendment fee | $ 2,000 | ||||||
Loan And Security Agreement | Hitachi Capital America Corp. | |||||||
Debt Instrument [Line Items] | |||||||
Line of credit facility, maximum borrowing capacity | $ 5,000,000 | $ 5,000,000 | |||||
Percentage of aggregate Eligible Accounts Receivable | 90.00% | ||||||
Percentage of aggregate Unbilled Accounts Receivable | 75.00% | ||||||
Percentage of amount available to borrow under maximum credit commitment | 50.00% | ||||||
Stated interest rate | 6.75% | ||||||
Credit Agreement | Western Alliance Bank | |||||||
Debt Instrument [Line Items] | |||||||
Extinguishment of debt | $ 2,959,573 | $ 2,959,573 | |||||
Line of Credit | |||||||
Debt Instrument [Line Items] | |||||||
Stated interest rate | 6.75% | ||||||
Line of Credit | Prime Rate | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate | 2.00% | ||||||
Monthly Interest | Loan And Security Agreement | Hitachi Capital America Corp. | |||||||
Debt Instrument [Line Items] | |||||||
Stated interest rate | 2.00% | ||||||
Revolving Credit Facility | Line of Credit | Amended And Restated Financing Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Eligible invoiced receivables advance rate | 85.00% | ||||||
Eligible uninvoiced receivables sub limit | $ 2,500,000 | $ 2,500,000 | |||||
Eligible uninvoiced receivables advance rate | 75.00% | ||||||
Commitment fee | $ 11,765 | ||||||
Commitment fee percentage | 0.25% | ||||||
Monthly maintenance fee | 0.125% | ||||||
Fee in lieu of warrant | $ 30,000 | ||||||
Fee due upon termination | $ 80,000 | ||||||
Revolving Credit Facility | Line of Credit | Amended And Restated Financing Agreement | Prime Rate | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate | 1.00% | ||||||
Revolving Credit Facility | Line of Credit | Amended And Restated Financing Agreement Uninvoiced Eligible Invoices | Prime Rate | |||||||
Debt Instrument [Line Items] | |||||||
Basis spread on variable rate | 2.00% | ||||||
Revolving Credit Facility | Line of Credit | Second Amendment | |||||||
Debt Instrument [Line Items] | |||||||
Days after merger | 3 days | ||||||
Revolving Credit Facility | Line of Credit | Third Amendment to the Amended and Restated Financing Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Eligible uninvoiced receivables sub limit | $ 2,500,000 | ||||||
Revolving Credit Facility | Line of Credit | Bridge Bank, N.A. | Bridge Bank – Revolving Credit Line - March 1, 2012 | |||||||
Debt Instrument [Line Items] | |||||||
Line of credit facility, maximum borrowing capacity | $ 10,000,000 |
Accrued Expenses, Other Curre_3
Accrued Expenses, Other Current Liabilities and Lease Liabilities (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Payables and Accruals [Abstract] | ||
Accrued marketing costs (TAC) | $ 2,389,201 | $ 2,200,014 |
Accrued expenses and other | 1,011,802 | 1,152,267 |
Accrued payroll and commission liabilities | 226,901 | 115,707 |
Arkansas grant contingency | 75,000 | 85,000 |
Accrued sales allowance | 50,000 | 50,000 |
Accrued taxes | 6,410 | 11,445 |
Operating lease liability | 301,641 | 362,130 |
Financing lease liability | 211,285 | 80,777 |
Total | $ 4,272,240 | $ 4,057,340 |
Convertible Promissory Notes (D
Convertible Promissory Notes (Details) | Nov. 11, 2019USD ($)$ / sharesshares | Jul. 15, 2019$ / sharesshares | Mar. 01, 2019USD ($)sharesaccredited_investor$ / shares | Jan. 31, 2020USD ($)shares | Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2019$ / shares |
Debt Instrument [Line Items] | |||||||
Proceeds from convertible promissory notes | $ 1,200,000 | $ 0 | $ 1,200,000 | ||||
Conversion of Debt and derecognition of derivative and discounts to common stock | 468,667 | 0 | |||||
Loss on extinguishment of convertible debt | 68,757 | $ 0 | |||||
Convertible Debt | |||||||
Debt Instrument [Line Items] | |||||||
Face amount | $ 1,440,000 | ||||||
Debt instrument, principal amount due | 315,000 | ||||||
Discounts | $ 271,108 | ||||||
Convertible Debt | Original Issue Discount Unsecured Subordinated Convertible Notes | |||||||
Debt Instrument [Line Items] | |||||||
Number of accredited investors | accredited_investor | 3 | ||||||
Number of shares convertible (in shares) | shares | 1,333,333 | ||||||
Minimum conversion | 50.00% | ||||||
Conversion of Debt and derecognition of derivative and discounts to common stock | $ 765,000 | $ 360,000 | |||||
Conversion of stock, common stock issued (in shares) | shares | 2,886,792 | 1,200,000 | |||||
Loss on extinguishment of convertible debt | $ 193,000 | $ 69,000 | |||||
Convertible Debt | Original Issue Discount Unsecured Subordinated Convertible Notes | Initial Conversion | |||||||
Debt Instrument [Line Items] | |||||||
Conversion price (in usd per share) | $ / shares | $ 0.30 | $ 0.30 | $ 1.08 | $ 0.29 | |||
Number of shares issued (in shares) | shares | 13,750,000 | ||||||
Convertible Debt | Original Issue Discount Unsecured Subordinated Convertible Notes | Initial Conversion | Maximum | |||||||
Debt Instrument [Line Items] | |||||||
Conversion price (in usd per share) | $ / shares | 0.30 | ||||||
Convertible Debt | Original Issue Discount Unsecured Subordinated Convertible Notes | Initial Conversion | Minimum | |||||||
Debt Instrument [Line Items] | |||||||
Conversion price (in usd per share) | $ / shares | 0.23 | ||||||
Convertible Debt | Original Issue Discount Unsecured Subordinated Convertible Notes | Note Modification and Release Agreement, First Conversion Amount | |||||||
Debt Instrument [Line Items] | |||||||
Conversion price (in usd per share) | $ / shares | $ 0.265 | ||||||
Convertible Debt | Note Modification and Release Agreement | |||||||
Debt Instrument [Line Items] | |||||||
Face amount | $ 1,080,000 |
Derivative Liability (Details)
Derivative Liability (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Derivative [Line Items] | ||
Derivative liability | $ 149,400 | $ 182,250 |
Convertible Debt | Original Issue Discount Unsecured Subordinated Convertible Notes | ||
Derivative [Line Items] | ||
Derivative liability | $ 149,400 |
Lease Liabilities and Other L_3
Lease Liabilities and Other Long-Term Liabilities (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Other Liabilities Disclosure [Abstract] | ||
Deferred revenue | $ 500,000 | $ 0 |
Operating lease liability | 345,596 | 394,889 |
Financing lease liability | 142,986 | 0 |
Deferred rent | 20,846 | 57,162 |
Total | $ 1,009,428 | $ 452,051 |
Commitments (Details)
Commitments (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Licensing of ValidClick Technology | |
Other Commitments [Line Items] | |
Other income | $ 500 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Income Tax Disclosure [Abstract] | ||
Deferred tax liability | $ 2,019,200 | $ 2,019,200 |
Deferred tax asset | $ 33,987,850 | $ 33,987,850 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) - USD ($) | Jan. 01, 2020 | Aug. 21, 2019 | Mar. 31, 2020 | Mar. 31, 2019 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Option and restricted stock unit vesting period (up to) | 3 years | |||
Stock based compensation | $ 208,897 | $ 96,871 | ||
Compensation cost related to non vested awards not yet recognized | $ 424,464 | |||
Average remaining expense recognition period | 1 year | |||
2017 ECP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Increase in shares of common stock reserved for grants | 150,000 | 6,800,000 | ||
2010 ECP | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Increase in shares of common stock reserved for grants | 250,000 |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Grants (Details) - shares | Mar. 31, 2020 | Dec. 31, 2019 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options Outstanding (in shares) | 14,498 | 18,248 |
RSUs Outstanding (in shares) | 2,237,650 | |
Options and RSUs Exercised (in shares) | 5,651,771 | |
Available Shares (in shares) | 7,631,934 | |
Total (in shares) | 15,535,853 | |
2017 ECP | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options Outstanding (in shares) | 0 | |
RSUs Outstanding (in shares) | 1,165,479 | |
Options and RSUs Exercised (in shares) | 728,346 | |
Available Shares (in shares) | 7,356,175 | |
Total (in shares) | 9,250,000 | |
2010 ECP | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options Outstanding (in shares) | 14,498 | |
RSUs Outstanding (in shares) | 1,072,171 | |
Options and RSUs Exercised (in shares) | 3,969,590 | |
Available Shares (in shares) | 275,759 | |
Total (in shares) | 5,332,018 | |
2005 LTIP | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Options Outstanding (in shares) | 0 | |
RSUs Outstanding (in shares) | 0 | |
Options and RSUs Exercised (in shares) | 953,835 | |
Available Shares (in shares) | 0 | |
Total (in shares) | 953,835 |
Stock-Based Compensation - Sc_2
Stock-Based Compensation - Schedule of Outstanding Options (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Number of Shares | ||
Beginning balance (in shares) | 18,248 | |
Stock options canceled (in shares) | 3,750 | |
Ending balance (in shares) | 14,498 | 18,248 |
Stock options exercisable (in shares) | 14,498 | |
Weighted Average Exercise Price | ||
Beginning balance (in usd per share) | $ 1.74 | |
Stock options canceled (in usd per share) | 3.7 | |
Ending balance (in usd per share) | 1.23 | $ 1.74 |
Stock options exercisable (in usd per share) | $ 1.23 | |
Stock options outstanding, weighted average remaining contractual term | 1 year 7 months 20 days | 1 year 9 months 18 days |
Stock options exercisable, weighted average remaining contractual term | 1 year 7 months 20 days | |
Stock options outstanding, aggregate intrinsic value | $ 2,019 | $ 2,019 |
Stock options exercisable, aggregate intrinsic value | $ 2,019 |
Stock-Based Compensation - Sc_3
Stock-Based Compensation - Schedule of Unvested RSU (Details) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Number of Shares | |
Unvested as of end of period (in shares) | 2,237,650 |
Restricted Stock Units | |
Number of Shares | |
Unvested as of beginning of period (in shares) | 2,568,951 |
Granted (in shares) | 0 |
Vested (in shares) | 331,301 |
Forfeited (in shares) | 0 |
Unvested as of end of period (in shares) | 2,237,650 |
Weighted Average Grant Date Fair Value | |
Unvested as of beginning of period (in usd per share) | $ / shares | $ 0.79 |
Grants (in usd per share) | $ / shares | 0 |
Vested (in usd per share) | $ / shares | 0.21 |
Forfeited (in usd per share) | $ / shares | 0 |
Unvested as of end of period (in usd per share) | $ / shares | $ 0.27 |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Dec. 31, 2019 | Jan. 01, 2019 | |
Lessee, Lease, Description [Line Items] | |||
Right of use assets - operating lease | $ 646,727 | $ 756,115 | |
Operating lease liability | 647,237 | ||
Right of use assets - finance lease | 476,209 | $ 88,178 | |
Finance lease liability | 354,271 | ||
Finance lease amortization expense | $ 105,678 | ||
Accounting Standards Update 2016-02 | |||
Lessee, Lease, Description [Line Items] | |||
Right of use assets - operating lease | $ 1,200,000 | ||
Operating lease liability | 1,200,000 | ||
Right of use assets - finance lease | 265,000 | ||
Finance lease liability | $ 265,000 | ||
Minimum | |||
Lessee, Lease, Description [Line Items] | |||
Term of contract | 2 years | ||
Maximum | |||
Lessee, Lease, Description [Line Items] | |||
Term of contract | 4 years |
Leases - Operating Leases (Deta
Leases - Operating Leases (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Leases [Abstract] | |
Cash paid for operating lease liabilities | $ 115,751 |
Weighted-average remaining lease term | 1 year 10 months 24 days |
Weighted-average discount rate | 6.25% |
Minimum future lease payments ended March 31, 2020 | |
2020 | $ 287,220 |
2021 | 242,558 |
2022 | 163,284 |
Payments due | 693,062 |
Less imputed interest | (45,825) |
Total lease liabilities | $ 647,237 |
Leases - Finance Leases (Detail
Leases - Finance Leases (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Leases [Abstract] | |
Cash paid for finance lease liabilities | $ 220,216 |
Weighted-average remaining lease term | 1 year |
Weighted-average discount rate | 6.25% |
Minimum future lease payments ended March 31, 2020 | |
2020 | $ 178,957 |
2021 | 194,376 |
Payments due | 373,333 |
Less imputed interest | (19,062) |
Total lease liabilities | $ 354,271 |
Related Party Transactions (Det
Related Party Transactions (Details) | Mar. 27, 2020USD ($)$ / sharesshares | Mar. 20, 2020USD ($)$ / sharesshares | Jun. 30, 2019USD ($)director |
Related Party Transaction [Line Items] | |||
Shares authorized amount (in shares) | shares | 3,115,001 | 3,931,428 | |
Sale of stock, price per share (in usd per share) | $ / shares | $ 0.175 | $ 0.175 | |
Sale of stock, consideration received on transaction | $ 545,125 | $ 688,000 | |
Number of directors partially owning First Orion Corp. | director | 2 | ||
Director | Prepaid Office Lease | |||
Related Party Transaction [Line Items] | |||
Lease term | 8 months | ||
Related party transaction, amount of transaction | $ 80,000 |
Subsequent Event - Narrative (D
Subsequent Event - Narrative (Details) - USD ($) | May 05, 2020 | May 01, 2020 | Apr. 21, 2020 | Apr. 02, 2020 | Mar. 27, 2020 | Mar. 20, 2020 | Mar. 31, 2020 | Mar. 31, 2019 | Apr. 20, 2020 | Apr. 10, 2020 | Mar. 01, 2019 |
Subsequent Event [Line Items] | |||||||||||
Shares authorized amount (in shares) | 3,115,001 | 3,931,428 | |||||||||
Sale of stock, price per share (in usd per share) | $ 0.175 | $ 0.175 | |||||||||
Sale of stock, consideration received on transaction | $ 545,125 | $ 688,000 | |||||||||
Conversion of Debt and derecognition of derivative and discounts to common stock | $ 468,667 | $ 0 | |||||||||
Option and restricted stock unit vesting period (up to) | 3 years | ||||||||||
Restricted Stock Units | Independent Director | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Annual director compensation | $ 30,000 | ||||||||||
Annual restricted stock unit grants | 30,000 | ||||||||||
Convertible Debt | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Face amount | $ 1,440,000 | ||||||||||
Debt instrument, principal amount due | $ 315,000 | ||||||||||
Subsequent Event | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Shares authorized amount (in shares) | 1,400,285 | ||||||||||
Sale of stock, price per share (in usd per share) | $ 0.175 | ||||||||||
Sale of stock, consideration received on transaction | $ 245,050 | ||||||||||
Subsequent Event | Senior Officers and Employees | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Threshold for temporary salary reduction | $ 100,000 | ||||||||||
Subsequent Event | Restricted Stock Units | Senior Officers and Employees | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Reduction percentage | 4.17% | ||||||||||
Option and restricted stock unit vesting period (up to) | 6 months | ||||||||||
Subsequent Event | Restricted Stock Units | Independent Director | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Option and restricted stock unit vesting period (up to) | 6 months | ||||||||||
Quarterly restricted stock unit grants | $ 7,500 | ||||||||||
Subsequent Event | Unsecured Debt | PPP Loan | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Face amount | $ 1,100,000 | ||||||||||
Subsequent Event | Convertible Debt | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Debt instrument, principal amount due | $ 315,000 | ||||||||||
Conversion price (in usd per share) | $ 0.175 | ||||||||||
Conversion of Debt and derecognition of derivative and discounts to common stock | $ 115,000 | $ 200,000 | |||||||||
Conversion of stock, common stock issued (in shares) | 657,143 | 1,142,857 | |||||||||
Subsequent Event | Minimum | Senior Officers and Employees | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Percentage of salary to forego | 50.00% | ||||||||||
Subsequent Event | Maximum | Senior Officers and Employees | |||||||||||
Subsequent Event [Line Items] | |||||||||||
Percentage of salary to forego | 7.00% |
Subsequent Events - Summary of
Subsequent Events - Summary of Temporary Salaries (Details) - Subsequent Event - Senior Officers and Employees | May 01, 2020USD ($) |
Richard K. Howe, Chairman and Chief Executive Officer | |
Subsequent Event [Line Items] | |
Temporary Salary | $ 212,500 |
Wallace Ruiz, Chief Financial Officer | |
Subsequent Event [Line Items] | |
Temporary Salary | 200,750 |
Don (Trey) Barrett III | |
Subsequent Event [Line Items] | |
Temporary Salary | $ 200,000 |