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Organization and Business Overview
 3 Months Ended
Mar. 31, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business Overview
Organization and Business Overview
 
Business Overview
 
Inuvo®, Inc. and subsidiaries ("we", "us" or "our") is an Internet marketing and technology company that develops consumer applications and delivers targeted advertisements onto websites reaching desktop and mobile.

At its core, our business is built on the delivery of Internet advertisements to consumers. Most of our revenue is generated when a consumer clicks on an advertisement we have delivered, although we also generate revenue through sales commissions and sponsored advertisements. We manage our business as two segments, Network and Applications.

The Network segment facilitates transactions between advertisers and website publishers, including both third party websites and our owned and operated websites. In this segment, we design, build, implement, manage and sell technology platforms and services. The majority of revenue generated by this segment is derived from clicks on advertisements, but we also generate revenue through sales commissions. Our technology and services offer transparency and alignment between advertisers and publishers through a sophisticated technology to target offers and predict fraud effectively, which we believe is a point of differentiation among service providers in our marketplace.

The Applications segment designs, builds and markets consumer applications, including our ALOT product portfolio and BargainMatch CashBack application. The majority of revenue generated by this segment is derived from clicks on advertisements and sponsored advertisements within applications.

Relocation of corporate headquarters

After completing the merger with Vertro, Inc. ("Vertro"), our leadership team began to explore opportunities for consolidation of our offices in New York City and Clearwater, FL. In the fourth quarter of 2012, the state of Arkansas offered us a grant to relocate our offices and operations to their state.

On January 25, 2013, we reached an agreement with the state of Arkansas and received a grant of up to $1.75 million for costs related to the relocation and the purchase of equipment necessary to begin operations in Arkansas. The grant is contingent upon us having at least fifty full-time equivalent permanent positions within four years, maintaining at least fifty full-time equivalent permanent positions for the following six years and paying those positions an average total compensation of $90,000 per year. If we fail to meet the requirements of the grant after the initial four year period, we may be required to repay a portion of the grant, up to but not to exceed the full amount of the grant. Based on our hiring and financial forecasts, we believe the probability of being required to repay the grant is remote.

During the first quarter of 2013, we terminated our Clearwater, FL lease. In addition, on April 12, 2013, we entered into an agreement to sublease our New York, NY office. These activities will significantly reduce future cash outlays for rent. See Note 11 - Leases for further discussion.

Liquidity
 
During 2012, our liquidity was unfavorably affected by significant investments in search costs to increase downloads of our ALOT product. We are taking steps to reduce operating costs. Cost synergies from the merger with Vertro on March 1, 2012 are currently yielding approximately $2 million in annual cost savings. We project the move to Arkansas will save us approximately $2.5 million in annual rent, payroll and other operating costs. To conserve cash, we may from time to time delay payments to our website publishers and other vendors, which may affect their decisions to do business with us.

We also have access to a revolving line of credit with Bridge Bank, N.A. ("Bridge Bank"), which allows for up to $10 million in borrowings and had approximately $0.5 million in availability as of May 3, 2013.

We believe that the revolving line of credit and operating cost savings from the merger with Vertro and relocation to Arkansas will provide us with sufficient cash for operations over the next 12 months.
Customer concentration

We generate the majority of our revenue from two customers, Yahoo! and Google. At March 31, 2013 and 2012 these two customers accounted for 82.2 percent and 82.7 percent of our gross accounts receivable balance, respectively. For the three months ended March 31, 2013 and 2012 they accounted for 91.3 percent and 88.4 percent of net revenue, respectively.

On February 1, 2013 we agreed to a new two year services agreement with Google. Our current contract with Yahoo! extends through April 2014.
 
Merger with Vertro

On March 1, 2012 we merged with Vertro, an Internet company that owns and operates the ALOT product portfolio, comprised of both browser-based consumer applications and websites. Among other things, the merger with Vertro:

•
enhanced our ability to attract advertisers, publishers and consumers;
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diversified our revenue streams, mitigating our dependence on a single customer;
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allowed us to leverage existing ALOT install and distribution capability, providing a vehicle for our consumer facing innovations like BargainMatch;
•
provided a greater footprint to access the debt and capital markets;
•
combined the experience of two digital marketing teams, broadening our capabilities and reducing time to market; and
•
eliminated overlapping operating and public company expenses, reducing combined costs by over $2 million per year.

NYSE MKT

Our common stock is listed on the NYSE MKT, LLC (the "Exchange"). In November 2012, we were notified by the Exchange that we were not in compliance with certain aspects of their listing requirements; specifically, due to losses from continuing operations and/or net losses in our five most recent fiscal years, the Exchange's minimum requirement for continued listing is stockholders' equity of not less than $6,000,000. We were afforded the opportunity to submit a plan of compliance to the Exchange by December 31, 2012 to demonstrate our ability to regain compliance with their listing standards. We submitted our plan and were notified on February 15, 2013 that it was accepted. We are able to continue our listing during the plan period, which ends December 2, 2013, though subject to periodic review to determine whether it is making progress consistent with the plan. As of March 31, 2013 our stockholders' equity was $4,088,853.