Quarterly report pursuant to Section 13 or 15(d)

Organization and Business

v3.8.0.1
Organization and Business
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business
Organization and Business
 
Company Overview
 
We develop technology that connects advertisers with consumers through interactions with content across devices. Inuvo provides the means to interact with tens of thousands of advertisers (Demand) and tens of thousands of online publishers (Supply). We interact with Demand/Supply constituents directly and indirectly. We serve ads within content, video and slideshows. We target ads to consumers using our proprietary IntentKey, a form of artificial intelligence ("AI") that uses the Internet content as a source of information from which the machine learns Intent. The result of the AI includes a database of over 500 million machine profiles, of which 100 million are updated each week. We use this AI as the means to develop and deliver highly targeted online audiences to our advertisers. We earn revenue when consumers view and/or click on our ads. Our business scales as we add Demand and Supply relationships with many barriers to entry including the ability to process hundreds of thousands of transactions per second. Collectively, our technology platforms facilitate the buying and selling of media in a manner that positions Inuvo as an advertising exchange.

Our intellectual property is protected by 18 issued and eight pending patents. We count among our many contractual relationships, three clients who collectively manage over 50% of all US digital advertising budgets. Included within our Supply portfolio is a collection of owned websites such as alot.com and earnspendlive.com, where we create content in health, finance, travel, careers, auto, education and living categories. These sites provide the means to test advertising technologies, while also delivering high quality consumers to advertisers through interaction with proprietary content in the form of images, videos, slideshows and the written word.
 
Liquidity

On April 18, 2018, we entered into the Tenth Business Financing Modification Agreement with Western Alliance Bank ("Western Alliance Bank"), the parent company of Bridge Bank, N.A., our original lender (see Note 15). The agreement provides continued access to the revolving line of credit up to $10 million through September 2018. As of March 31, 2018, the balance of the revolving line of credit was $4.9 million and had approximately $1.2 million of available credit. During the third quarter of 2017, we filed an S-3 registration statement with the Securities and Exchange Commission ("SEC") to replace the existing, expiring S-3 "shelf" registration statement, which permits us to offer and sell up to $15 million of our securities from time to time in one or more offerings. To date, we have not taken down any sales from this shelf registration statement. The revolving line of credit and cash generated by operations may not provide sufficient cash for operations over the next twelve months. We may elect to sell stock to the public or to selected investors, or borrow under the current or any replacement line of credit or other debt instruments in order to fund the development of our technologies, make acquisitions, pursue new business opportunities or grow existing businesses.

Customer concentration

We generated the majority of our revenue from three Demand side customers, Yahoo!, Google, and OpenX as noted below:

 
For the Three Months Ended
March 31,
 
 
2018
2017
 
Yahoo!
70.5
%
75.4
%
 
Google
9.5
%
12.9
%
 
OpenX
6.7
%
2.6
%
 
Total
86.7
%
90.9
%
 


As of March 31, 2018 and December 31, 2017, these three customers accounted for 76.0% and 79.9%, respectively, of our gross accounts receivable balance.

Though the Yahoo! and Google concentration is declining as a percentage of overall revenue, we still source the majority of our
Demand 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.