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Discontinued Operations
 12 Months Ended
Dec. 31, 2011
Notes to Financial Statements  
Note 12 - Discontinued Operations

During the second quarter of 2008, we made a decision to divest our MSA operations and ceased operations of our Web Diversity subsidiary. On March 1, 2010, we, as a result of market and strategic reasons, accelerated our decision to exit the negative-option marketing programs which was part of our web properties Segment with the acquisition of iLead in 2006. As a result in this change to the iLead business, we deemed all remaining intangible assets associated with this business as of December 31, 2009 to be impaired. On June 3, 2010, we entered into an Asset Purchase Agreement (the “Agreement”) with Omega Direct Marketing, LLC (“Omega”) to sell all of the gross assets of our Exact Supplements, LLC. Business (“Exact”). The purchase price is 50% of all monthly revenues for the immediate 12 months after the date of the Agreement, less specific costs as defined in the Agreement for revenue from the sold customer base. We shall recognize gains from the sale of Exact only upon receipt of monies per the Agreement. During the year ended December 31, 2011 and 2010, we did not recognize any gain or loss from this sale. Additionally, as all assets of Exact were written off as of December 31, 2009 and, therefore, no gain or loss was recognized on the sale of Exact.

 

On September 24, 2010, we sold the assets of MSA and our related companies Rightstuff, Inc. and Checkup Marketing, Inc., all North Carolina corporations which are wholly-owned subsidiaries of Inuvo, Inc. The purchase price of the assets was $766,636, of which $247,147 was paid at closing and the balance was paid in three equal installments of $173,163 each during the 90 days following the closing. Under the terms of the agreement, the purchaser also assumed certain liabilities related to the purchased assets. To ensure orderly transition of the business, we agreed to provide the purchaser with hosting services at no cost for 90 days following the closing. The agreement contains customary indemnification, non-disclosure and non-solicitation provisions. All the proceeds received from the sale of MSA were used to reduce the term note with Wachovia. Additionally, we reported a non-cash charge in discontinued operations of approximately $1.5 million for the loss on the sale for the year ended December 31, 2010.

 

In July 2010, the Board of Directors approved the plan to sell our RESO business unit. On December 10, 2010, we closed the sale of the assets of RESO. The purchase price of the assets was $750,000, of which all was paid at closing less $31,716 working capital adjustment and $50,000 held in escrow for a period of one year that was paid in December 2011.  Earlier in 2010, we announced our intention to sell the business and we accounted for the subsidiary as a discontinued operation since that time. To ensure an orderly transition of the business, we agreed to provide transitional services until April 15, 2011 and received a fee of $107,204 paid in five equal monthly installments. The Asset Purchase Agreement contains customary indemnification, non-disclosure and non-solicitation provisions. All the proceeds from the sale were used to reduce the term note with Wachovia. In addition, we reported a gain on the sale of RESO in discontinued operations of approximately $500,000.

 

The table below summarizes unaudited financial results for the assets classified as held for sale which is comprised primarily of our MSA, iLead and RESO business units for the years ended December 31, :

 

    Years Ended  
    2011     2010  
Revenue   $ -     $ 7,805,231  
Income from discontinued operations before  loss on sale     257,136       621,140  
Loss on sale of discontinued operations     -       (989,364 )
Income (loss) from discontinued operations   $ 257,136     $ (368,224 )