Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

inuvo_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________________ to ______________________
Commission file number: 001-32442

Inuvo, Inc.

(Exact name of registrant as specified in its charter)

Nevada		87-0450450
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
500 President Clinton Ave., Suite 300 Little Rock, AR		72201
(Address of principal executive offices)		(Zip Code)

(501) 205-8508

Registrant's telephone number, including area code

not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	INUV	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act: ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Title of Class		November 1, 2024
Common Stock		140,499,799

TABLE OF CONTENTS

			Page No.
Part I
Item 1.	Financial Statements.		4
	Consolidated Balance Sheets		4
	Consolidated Statements of Operations and Comprehensive Loss		5
	Consolidated Statements of Cash Flows		6
	Consolidated Statements of Stockholders' Equity		7
	Notes to Consolidated Financial Statements		8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.		18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.		22
Item 4.	Controls and Procedures.		22
Part II
Item 1.	Legal Proceedings.		23
Item 1A.	Risk Factors.		23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		23
Item 3.	Defaults upon Senior Securities.		23
Item 4.	Mine Safety and Disclosures.		23
Item 5.	Other Information.		23
Item 6.	Exhibits.		24
Signatures		25

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "will," "should," "intend," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," or "continue," or the negative of such terms or other comparable terminology. This report includes, among others, statements regarding our risks associated with:

·	a decline in general economic conditions;
·	decreased market demand for our products and services;
·	customer revenue concentration;
·	risks associated with customer collections;
·	seasonality impacts on financial results and cash availability;
·	dependence on advertising suppliers;
·	the ability to acquire traffic in a profitable manner;
·	failure to keep pace with technological changes;
·	interruptions within our information technology infrastructure;
·	dependence on key personnel;
·	regulatory and legal uncertainties;
·	failure to comply with privacy and data security laws and regulations;
·	third party infringement claims;
·	publishers who could fabricate fraudulent clicks;
·	the ability to continue to meet the NYSE American listing standards;
·	the impact of quarterly results on our common stock price;
·	dilution to our stockholders upon the exercise of outstanding restricted stock unit grants and warrants; and
·	our ability to identify, finance, complete and successfully integrate future acquisitions.

These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, including the risks described in Part II, Item 1A. Risk Factors appearing in this report, together with those appearing in Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the Securities and Exchange Commission ("SEC") on February 29, 2024 and our subsequent filings with the SEC.

Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

OTHER PERTINENT INFORMATION

Unless specifically set forth to the contrary, when used in this report the terms "Inuvo," the "Company," "we," "us," "our" and similar terms refer to Inuvo, Inc., a Nevada corporation, and its subsidiaries. When used in this report, "third quarter 2024" means for the three months ended September 30, 2024, "third quarter 2023" means for the three months ended September 30, 2023, "2023" means the fiscal year ended December 31, 2023 and "2024" means the fiscal year ending December 31, 2024. The information which appears on our corporate web site at www.inuvo.com and our various social media platforms are not part of this report.

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INUVO, INC.

CONSOLIDATED BALANCE SHEETS

September 30, 2024 (Unaudited) and December 31, 2023

		September 30, 2024			December 31, 2023
Assets
Current assets
Cash and cash equivalents		$	2,586,821			$	4,440,454
Accounts receivable, net of allowance for credit losses of $132,625 and $1,645,045, respectively			8,782,460				9,226,956
Prepaid expenses and other current assets			882,550				1,076,121
Total current assets			12,251,831				14,743,531
Property and equipment, net			1,791,896				1,680,788
Other assets
Goodwill			9,853,342				9,853,342
Intangible assets, net of accumulated amortization			4,012,249				4,664,791
Referral and support services agreement advance			-				500,000
Right of use assets - operating lease			971,819				805,786
Right of use assets - finance lease			24,243				72,560
Other assets			78,345				53,346
Total other assets			14,939,998				15,949,825
Total assets		$	28,983,725			$	32,374,144
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable		$	7,088,597			$	6,432,120
Accrued expenses and other current liabilities			8,316,652				7,926,479
Lease liability - operating lease			250,975				123,074
Lease liability - finance lease			23,321				50,801
Total current liabilities			15,679,545				14,532,474
Long-term liabilities
Deferred tax liability			94,590				89,238
Lease liability - operating lease			805,731				751,821
Lease liability - finance lease			923				18,209
Other long-term liabilities			-				216
Total long-term liabilities			901,244				859,484
Stockholders' equity
Preferred stock, $0.001 par value:
Authorized shares 500,000, none issued and outstanding			-				-
Common stock, $0.001 par value:
Authorized shares 200,000,000; issued and outstanding shares 140,467,661 and 137,983,918, respectively.			140,467				137,983
Additional paid-in capital			185,612,822				184,291,414
Accumulated deficit			(173,350,353	)			(167,447,211	)
Total stockholders' equity			12,402,936				16,982,186
Total liabilities and stockholders' equity		$	28,983,725			$	32,374,144

See accompanying notes to the consolidated financial statements.

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INUVO, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

		For the Three Months Ended September 30,			For the Nine Months Ended September 30,
		2024			2023			2024			2023
Net revenue		$	22,371,153			$	24,570,588			$	57,603,935			$	53,069,433
Cost of revenue			2,594,642				2,274,626				7,599,872				7,833,729
Gross profit			19,776,511				22,295,962				50,004,063				45,235,704
Operating expenses
Marketing costs			17,006,131				17,625,806				42,540,355				36,769,972
Compensation			3,106,384				3,525,943				9,362,474				10,202,200
General and administrative			1,607,258				2,335,295				3,835,162				6,229,069
Total operating expenses			21,719,773				23,487,044				55,737,991				53,201,241
Operating loss			(1,943,262	)			(1,191,082	)			(5,733,928	)			(7,965,537	)
Financing (expense), net of interest income			(101,031	)			19,852				(163,862	)			(37,454	)
Other income			-				250				-				14,668
Income tax expense			-				-				(5,352	)			-
Net loss			(2,044,293	)			(1,170,980	)			(5,903,142	)			(7,988,323	)
Other comprehensive income
Unrealized loss on marketable securities			-				-				-				84,868
Comprehensive loss		$	(2,044,293	)		$	(1,170,980	)		$	(5,903,142	)		$	(7,903,455	)
Per common share data
Basic and diluted:
Net loss		$	(0.01	)		$	(0.01	)		$	(0.04	)		$	(0.06	)
Weighted average shares
Basic			140,454,840				127,381,051				139,791,180				128,793,522
Diluted			140,454,840				127,381,051				139,791,180				128,793,522

See accompanying notes to the consolidated financial statements.

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INUVO, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		For the Nine Months Ended September 30,
		2024			2023
Operating activities:
Net loss		$	(5,903,142	)		$	(7,988,323	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			1,951,196				1,984,139
Depreciation-Right of Use Assets - Financing			48,317				77,790
Stock based compensation			1,087,533				1,471,683
Derecognition of contingency and grant			(35,000	)			-
Amortization of financing fees			20,000				5,833
Impairment and amortization of referral and support services agreement advance			800,000				225,000
Adjustment to expected losses on accounts receivable			(1,454,533	)			747,772
Deferred income tax expense			5,352				-
Loss (gain) on marketable securities			-				(14,418	)
Stock warrant expense			-				(8,130	)
Change in operating assets and liabilities:
Accounts receivable			1,899,029				212,393
Right of use assets - operating lease			169,253				-
Prepaid expenses and other current assets, and other assets			(131,428	)			(172,679	)
Accrued expenses and other liabilities			940,076				3,279,560
Accounts payable			656,477				(278,336	)
Lease liability - operating lease			(153,475	)			-
Net cash used in operating activities			(100,345	)			(457,716	)
Investing activities:
Purchases of equipment and capitalized development costs			(1,409,762	)			(1,259,217	)
Proceeds from the sale of marketable securities			-				2,288,873
Net cash provided by (used in) investing activities			(1,409,762	)			1,029,656
Financing activities:
Gross proceeds from line of credit			-				592,868
Repayments on line of credit			-				(592,868	)
Principal payments on finance lease obligations			(44,766	)			(84,138	)
Proceeds from at-the-market sales			-				61,136
Capital raise, net of issuance costs			-				3,665,000
Net taxes paid on restricted stock unit grants exercised			(298,760	)			(166,872	)
Net cash provided by/(used in) financing activities			(343,526	)			3,475,126
Net change - cash			(1,853,633	)			4,047,066
Cash and cash equivalent, beginning of year			4,440,454				2,931,415
Cash and cash equivalent, end of period		$	2,586,821			$	6,978,481
Supplemental information:
Interest paid		$	221,534			$	85,488
Acquisition of right of use asset for operating lease liability		$	335,286			$	1,105,148
Issuance of restricted stock units for accrued incentive liability		$	535,119			$	-

See accompanying notes to the consolidated financial statements.

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INUVO, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

For the Nine Months Ended September 30,

2024
		Common Stock			Additional			Accumulated
		Shares			Stock			Paid in Capital			Deficit			Total
Balance as of December 31, 2023			137,983,918			$	137,983			$	184,291,414			$	(167,447,211	)		$	16,982,186
Net loss															(2,111,658	)			(2,111,658	)
Stock-based compensation											396,312								396,312
Stock issued for vested restricted stock units			1,444,866				1,445				(1,445	)							-
Shares withheld for taxes on vested restricted stock											(161,973	)							(161,973	)
Balance as of March 31, 2024			139,428,784			$	139,428			$	184,524,308			$	(169,558,869	)		$	15,104,867
Net loss															(1,747,191	)			(1,747,191	)
Stock-based compensation											318,681								318,681
Stock issued for vested restricted stock units			1,005,543				1,006				(1,006	)							-
Shares withheld for taxes on vested restricted stock											(136,787	)							(136,787	)
Balance as of June 30, 2024			140,434,327			$	140,434			$	184,705,196			$	(171,306,060	)		$	13,539,570
Net loss															(2,044,293	)			(2,044,293	)
Stock-based compensation											372,540								372,540
Issuance of restricted stock units											535,119								535,119
Stock issued for vested restricted stock units			33,334			$	33				(33	)							-
Balance as of September 30, 2024			140,467,661			$	140,467			$	185,612,822			$	(173,350,353	)		$	12,402,936

2023
											Accumulated
					Additional						Other
		Common Stock			Paid in			Accumulated			Comprehensive
		Shares			Stock			Capital			Deficit			Income (Loss)			Total
Balance as of December 31, 2022			120,137,124			$	120,138			$	178,771,604			$	(157,057,558	)		$	(84,868	)		$	21,749,316
Net loss															(3,440,105	)							(3,440,105	)
Unrealized gain on debt securities																			84,868				84,868
Stock-based compensation											432,084												432,084
Stock issued for vested restricted stock units			1,503,238				1,503				(1,503	)											-
Shares withheld for taxes on vested restricted stock											(166,872	)											(166,872	)
Reversal of expense related to a change in warrant vesting											(9,874	)											(9,874	)
Balance as of March 31, 2023			121,640,362			$	121,641			$	179,025,439			$	(160,497,663	)		$	-			$	18,649,417
Net loss															(3,377,238	)							(3,377,238	)
Unrealized loss on debt securities																							-
Stock-based compensation											503,061												503,061
Stock issued for vested restricted stock units			3,333				3				(3	)											-
Stock warrants issued for referral agreement											1,276												1,276
Capital raise, net of issuance costs			16,000,000				16,000				3,649,000												3,665,000
AGP Closing at-the-market sale			173,558				1174				60,962												61,136
Balance as of June 30, 2023			137,817,253			$	137,818			$	183,239,735			$	(163,874,901	)		$	-			$	19,502,652
Net loss															(1,170,980	)							(1,170,980	)
Stock-based compensation											536,538												536,538
Stock issued for vested restricted stock units			166,665				165				(165	)											-
Stock warrants issued for referral agreement											468												468
Balance as of September 30, 2023			137,983,918			$	137,983			$	183,776,576			$	(165,045,881	)		$	-			$	18,868,678

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Inuvo, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 - Organization and Business

Company Overview

Inuvo is an advertising technology and services business selling information technology solutions to brands, agencies (collectively, "Agencies & Brands") and large consolidators of advertising demand ("Platforms"). Inuvo's revenue is derived from the placement of digital advertising throughout devices, websites, applications and browsers across social, search and programmatic advertising channels. Inuvo facilitates, and gets paid, to deliver millions of advertising messages monthly and counts among its client's numerous world-renowned companies across industries.

Inuvo's primary mission is to disrupt the advertising industry with its proprietary and patented generative large language artificial intelligence (AI), a technology capable of identifying and targeting audiences without using a consumer's identity or data. The AI was designed to replace the consumer data, analytics, segmentation and lookalike modeling technologies that have traditionally served the advertising industry as it transitions to a new paradigm where a consumer's identity and data are no longer available for advertising decisions due to legislative and technological changes. Rather than targeting people, the AI targets the reasons behind why people are interested in products, services and brands.

Inuvo's AI technology solves this challenge and can be consumed by clients both as a managed service and software-as-a-service. For certain clients, Inuvo has also developed various proprietary technology and assets that include digital content, websites, automated campaigns, ad fraud detection, performance reporting and predictive media mix modeling.

The Inuvo products and services use analytics, data and artificial intelligence in a manner that optimizes the purchase and

placement of advertising in real time. These capabilities are typically sold with services both individually and in combination

with each other based on client needs. These products and services include:

	·	IntentKey: An artificial intelligence-based consumer intent recognition system designed to reach highly targeted mobile and desktop In-Market audiences with precision; and
	·	Bonfire: A marketing and advertising solution where a collection of data, analytics, software and publishing is used to align advertising messages with consumers across websites online.

There are many barriers to entry associated with the Inuvo business model, including a proficiency in large language model

based artificial intelligence, large scale information processing, software development, consumer data products, analytics, IOT

(internet of things) integration and the relationships required to execute within the IOT. Inuvo's intellectual property is protected by 19 issued and six pending patents.

Liquidity

Our principal sources of liquidity are the sale of our common stock and our credit facility discussed in Note 5 - Bank Debt of our Consolidated Financial Statements.

On May 30, 2023, we raised $4.0 million in gross proceeds in a registered direct offering, before expenses, through the sale of an aggregate of 16,000,000 shares of our common stock. The shares were offered pursuant to an effective shelf registration statement on Form S-3 (the "Shelf Registration Statement") and a prospectus supplement relating to the offering was filed with the SEC on May 26, 2023.

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On May 7, 2024, we entered into an At The Market Offering Agreement (the "ATM Agreement") with H.C. Wainwright & Co. LLC ("Wainwright"), to sell shares of our common stock, par value $0.001 per share, (the "Shares"), having an aggregate sales price of up to $15,000,000, from time to time, through an "at the market offering" program under which Wainwright will act as sales agent. The sales, if any, of the Shares made under the ATM Agreement will be made by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company will pay Wainwright a commission rate of up to 3.0% of the aggregate gross proceeds from each sale of Shares. For the nine-month period ended September 30, 2024, the Company has not sold any shares of common stock under the ATM Agreement.

On July 31, 2024, we entered into a Financing and Security Agreement (the "Financing Agreement") with SLR Digital Finance LLC ("SLR"), effective July 30, 2024. Pursuant to the terms of the Financing Agreement, SLR will finance up to $10 million dependent upon eligible receivables. See Note 5 - Bank Debt of our Consolidated Financial Statements.

We have focused our resources behind a plan to market our collective multi-channel advertising capabilities differentiated by our AI technology, the IntentKey, where we have a technological advantage and higher margins. If we are successful in implementing our plan, we expect to return to positive cash flows from operations. However, there is no assurance that we will be able to achieve this objective.

As of September 30, 2024, we have approximately $2.6 million in cash and cash equivalents. Our net working capital deficit was $3.4 million. We have encountered recurring losses and cash outflows from operations, which historically we have funded through equity offerings and debt facilities. In addition, our investment in internally developed software, which was $1,347,550 for the nine months ended September 30, 2024, consists primarily of labor costs which are of a fixed nature. Through September 30, 2024, our accumulated deficit was $173.4 million.

Management plans to support the Company's future operations and capital expenditures primarily through cash generated from its credit facility until such time as we reach profitability. The credit facility is due upon demand and therefore there can be no assurances that sufficient borrowings will be available to support future operations until profitability is reached. Our collection period is less than 30 days and can also be used to meet accrued obligations. We believe our current cash position and credit facility will be sufficient to sustain operations for at least the next twelve months from the date of this filing. If our plan to grow the IntentKey product is unsuccessful, we may need to fund operations through private or public sales of securities, debt financings or partnering/licensing transactions over the long term.

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Note 2 - Summary of Significant Accounting Policies

Basis of presentation

The consolidated financial statements presented are for Inuvo and its 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, 2023, 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, 2023, which was filed with the SEC on February 29, 2024.

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 capitalized labor, goodwill and purchased intangible asset valuations and income tax valuation allowance. 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

We generate revenue by identifying audiences and presenting advertisements on behalf of our customers. We provide our products, technologies and services to Agencies & Brands and Platforms (large consolidators of advertising demand). Currently, revenue from our IntentKey products and services are primarily from Agencies & Brands, and revenue from our Bonfire products and services are primarily from Platforms. Our revenue is derived from the placements of advertisements across advertising channels, browsers, applications and devices. Pricing for those advertisement placements is typically either on a cost-per-click or cost per thousand impressions basis.

Our revenue is a function of the number of advertisements placed combined with the price we obtain (using our technologies) for the placements made on behalf of our clients. We assume the risk associated of finding placements at a cost below that for which it had been sold.

We recognize revenue when control of the contracted services or product is transferred to our customer, in an amount that reflects the consideration we expect to be entitled to in exchange for those services or products. We determine revenue recognition through (i) identification of a contract with a customer, (ii) identification of the performance obligations in the contract, (iii) determination of the transaction price, (iv) allocation of the transaction price to the performance obligations in the contract, and (v) recognition of revenue when or as the performance obligations are satisfied.

For Agencies & Brands, the terms of an agreement are captured in an Insertion Order ("IO") where revenue is recognized upon delivery of services during the period covered by the IO. For Platforms, terms are generally captured in multi-year master service agreements and revenue is recognized based on the number of advertisements placed or clicked on in the period they occur. We settle advertisement placement prices with our customers net of any adjustments for quality.

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For the three-month period ended September 30, 2024, we generated $22,371,153 in revenue of which 82.8% was from Platforms and 17.2% from Agencies & Brands. For the three-month period ended September 30, 2023, we generated $24,570,588 in revenue of which 87.2% was from Platforms and 12.8% from Agencies & Brands. For the nine-month period ended September 30, 2024, we generated $57,603,935 in revenue of which 83.6% was from Platforms and 16.4% from Agencies & Brands. For the nine-month period ended September 30, 2023, we generated $53,069,433 in revenue of which 79.8% was from Platforms and 20.2% from Agencies & Brands.

Customer concentration

For the three-month period ending September 30, 2024, one customer accounted for 79.9% of our overall revenue, and for the nine-month period ended September 30, 2024, 76.5% of our overall revenue. That same customer accounted for 59.6% of our gross accounts receivable balance as of September 30, 2024. As of December 31, 2023, the same customer accounted for 50.5% of our gross accounts receivable balance.

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires retrospective disclosure of significant segment expenses and other segment items on an annual and interim basis. Additionally, it requires disclosure of the title and position of the Chief Operating Decision Maker ("CODM"). This ASU is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The adoption is not expected to have a material impact on the Company's consolidated results of operations, cash flows, or financial position but will have an impact on disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires an annual tabular effective tax rate reconciliation disclosure including information for specified categories and jurisdiction levels, as well as, disclosure of income taxes paid, net of refunds received, disaggregated by federal, state/local, and significant foreign jurisdiction. This ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The adoption will have an impact on disclosures and not impact the Company's consolidated results of operations, cash flows, nor financial position.

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Note 3 - Property and Equipment

The net carrying value of property and equipment was as follows as of:

		September 30, 2024			December 31, 2023
Furniture and fixtures		$	293,152			$	293,152
Equipment			1,178,367				1,292,528
Capitalized internal use and purchased software			17,507,067				16,159,517
Leasehold improvements			465,885				458,885
Subtotal			19,444,471				18,204,082
Less: accumulated depreciation and amortization			(17,652,575	)			(16,523,294	)
Total		$	1,791,896			$	1,680,788

During the three months ended September 30, 2024 and September 30, 2023, depreciation expense was $440,899 and $420,808, respectively. During the nine months ended September 30, 2024 and September 30, 2023, depreciation expense was $1,298,653 and $1,245,762, respectively. During the nine months ended September 30, 2024, we disposed of approximately $169,000 of fully depreciated equipment that was no longer in use. There was no cash inflow or outflow associated with this transaction, and no gain or loss was recorded.

Note 4 - Intangible Assets and Goodwill

The following is a schedule of intangible assets and goodwill as of September 30, 2024:

		Term			Carrying Value			Accumulated Amortization and Impairment			Net Carrying Value			Year-to-date Amortization
Customer list, Google		20 years			$	8,820,000			$	(5,549,250	)		$	3,270,750			$	330,750
Customer list, ReTargeter		5 years				1,931,250				(1,931,250	)			-				225,313
Brand name, ReTargeter		5 years				643,750				(643,750	)			-				75,104
Customer relationships		20 years				570,000				(218,501	)			351,499				21,376
Trade names, web properties (1)			-				390,000				-				390,000				-
Intangible assets classified as long-term						$	12,355,000			$	(8,342,751	)		$	4,012,249			$	652,543
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.

Amortization expense over the next five years and thereafter is as follows:

2024 (remainder of year)		$	117,375
2025			469,500
2026			469,500
2027			469,500
2028			469,500
Thereafter			1,626,875
Total		$	3,622,250

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The following is a schedule of intangible assets and goodwill as of December 31, 2023:

		Term			Carrying Value			Accumulated Amortization and Impairment			Net Carrying Value			2023 Amortization
Customer list, Google		20 years			$	8,820,000			$	(5,218,500	)		$	3,601,500			$	441,000
Technology		5 years				3,600,000				(3,600,000	)			-				-
Customer list, ReTargeter		5 years				1,931,250				(1,705,938	)			225,312				386,250
Customer list, all other		10 years				1,610,000				(1,610,000	)			-				-
Brand name, ReTargeter		5 years				643,750				(568,646	)			75,104				128,750
Customer relationships		20 years				570,000				(197,125	)			372,875				28,500
Trade names, web properties			-				390,000				-				390,000				-
Intangible assets classified as long-term						$	17,565,000			$	(12,900,209	)		$	4,664,791			$	984,500
Goodwill, total						$	9,853,342			$	-			$	9,853,342			$	-

Note 5 - Bank Debt

On March 1, 2023, we entered into Amendment No. 1 to Loan and Security Agreement and Collateral Documents ("Agreement") with Mitsubishi HC Capital America, Inc., f/k/a/ Hitachi Capital America Corp. ("MHCA"). Under the terms of the Agreement, MHCA provided us with a $5,000,000 line of credit commitment. We were permitted to borrow up to 85% of the aggregate Eligible Accounts Receivable, up to the maximum credit commitment of $5,000,000. We paid MHCA monthly interest at the rate of 1.75% in excess of the Wall Street Journal Prime Rate. We paid MHCA an amendment fee of $10,000 on issuance of the Agreement, and thereafter an annual commitment fee of $10,000. We also paid MHCA a quarterly service fee of 0.20% on the monthly unused amount of the maximum credit line. All obligations to MHCA have been satisfied and the Agreement was terminated on July 31, 2024.

On July 30, 2024, we entered into a Financing and Security Agreement and Collateral Documents ("Financing Agreement") with SLR Digital Finance LLC ("SLR"). Under the terms of the Financing Agreement, SLR has provided us with a $10,000,000 line of credit commitment. We are permitted to borrow up to 90% of eligible accounts receivable under the Financing Agreement, up to the maximum credit commitment of $10,000,000. We will pay SLR monthly interest at the rate of 1.0% in excess of the Prime Rate but not less than 7%. The Financing Agreement has a three year term. The Financing Agreement contains certain affirmative and negative covenants to which we are also subject. We agreed to pay SLR an annual facility fee of 0.80% of the maximum credit commitment. We also agreed to pay a minimum utilization amount of the interest rate multiplied by difference between $500,000 and the average daily outstanding loan during a month. We are obligated to pay SLR a monthly service fee of 0.15% on of the average net amount of outstanding loans during each month. If we terminate the Financing Agreement prior to the second anniversary of the Effective Date, an amount equal to 1.0% of the maximum credit commitment will be due as an early termination payment and if we terminate after the second anniversary of the Effective Date but prior to the end of the term, an amount equal to 0.25% of the maximum credit commitment will be due. Repayment of the financing agreement will be made through collections from eligible accounts receivable.

At September 30, 2024, the outstanding balances due under the Financing Agreement was $0.

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Note 6 - Accrued Expenses and Other Current Liabilities

The accrued expenses and other current liabilities consist of the following as of:

		September 30, 2024			December 31, 2023
Accrued marketing costs		$	6,227,976			$	5,717,983
Accrued payroll and commission liabilities			990,751				1,544,460
Accrued expenses and other			1,085,684				622,960
Arkansas grant contingency			-				35,000
Accrued taxes, current portion			12,241				6,076
Total		$	8,316,652			$	7,926,479

Note 7 - Commitments

On September 17, 2021, we signed a multi-year agreement with a business development partner to provide referral and support services to us. The agreement required an advance fee of $1.5 million. The advance was being amortized as marketing expenses over five years. As of September 30, 2024, we recorded an impairment to the asset bringing the balance to $0, as no significant revenue has been realized within 2024 and therefore management determined future revenue under this arrangement is uncertain. As of December 31, 2023, $700,000 had been amortized and the balance was $800,000.

As part of the agreement, we granted a warrant exercisable into 300,000 shares of our common stock, which vested over two years upon achieving certain performance metrics (see Note 10 - Stockholders' Equity).

Note 8 - Income Taxes

As of September 30, 2024, we have $5,352 deferred income tax expense and incur only the minimum state taxes which are included in operating expenses. We have deferred tax assets of $42,619,514. 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 of $41,543,303 for the deferred tax assets that may not be realized as of September 30, 2024. We also have deferred tax liabilities totaling $1,170,800 as of September 30, 2024, related to intangible assets acquired in March 2012 and February 2017. These balances are presented as a net deferred tax liability of $94,589 composed of indefinite lived intangible assets. As of December 31, 2023, the Company has a net deferred tax liability of $89,238. The net deferred tax liability is due to goodwill and trade name that are amortized for tax purposes both of which are not being amortized for book purposes.

Note 9 - 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. During the 2024 and 2023 periods, we granted restricted stock units ("RSUs") from the 2017 Equity Compensation Plan, as amended ("2017 ECP"). RSU vesting periods are generally up to three years and/or based upon achieving certain financial targets.

As of September 30, 2024, the total number of authorized shares of our common stock under the 2017 ECP was 24,550,000.

Compensation Expense

For the three and nine months ended September 30, 2024, we recorded stock-based compensation expense for all equity incentive plans of $463,189 and $1,178,182, respectively. For the three and nine months ended September 30, 2023, we recorded stock-based compensation expense for all equity incentive plans of $536,538 and $1,471,683, respectively. Total compensation cost not yet recognized at September 30, 2024 was $3,015,515 which will be recognized over the next three years.

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The following table summarizes the stock grants outstanding under 2017 ECP as of September 30, 2024:

		Options Outstanding			RSUs Outstanding			Options and RSUs Exercised			Available Shares			Total Awards Authorized
Total			-				11,684,052				9,964,117				2,901,831				24,550,000

The fair value of RSUs is determined using market value of the common stock on the date of the grant. The fair value of stock options is determined using the Black-Scholes-Merton valuation model. The use of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense and include the expected life of the option, stock price volatility, risk-free interest rate, dividend yield, exercise price, and forfeiture rate. Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. The forfeiture rate, which is estimated at a weighted average of 0% of unvested options outstanding, is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

The following table summarizes the activities for our RSUs for the nine months ended September 30, 2024:

		RSUs
		Number of Shares			Weighted Average Grant Date Fair Value
Outstanding, beginning of period			7,010,016			$	0.48
Granted			8,087,366			$	0.33
Vested			(3,329,996	)		$	0.64
Cancelled			(83,334	)		$	0.52
Outstanding, end of period			11,684,052			$	0.33

During the nine months ended September 30, 2024, the Company awarded RSUs to employees to settle accrued compensation obligations as of December 31, 2023. The RSUs have a one-year vesting period, and there was no incremental expense associated with the award. $535,119 was reclassified from accrued liabilities to additional paid in capital.

Note 10 - Stockholders' Equity

Warrants

On September 17, 2021, we signed an agreement with a marketing platform and consulting company to provide referral and support services to us for a period of five years (see Note 7 - Commitments). As part of that agreement, we granted a seven year warrant exercisable into 300,000 shares of our common stock, at $0.72 per share, which vests in two tranches when certain performance metrics are achieved. The warrant was valued using the Black Scholes option pricing model at a total of $149,551 based on a seven-year term, an implied volatility of 100%, a risk-free equivalent yield of 1.17%, and a stock price of $0.71. The warrant is classified as equity and will be expensed over the vesting period of each tranche if the performance criteria are achieved. On August 31, 2022, 85,862 shares vested in accordance with the contracted performance criteria. On August 31, 2023, 21,136 shares vested. For the second tranche, we reversed approximately $7,900 for the year ended December 31, 2023 due to a change in the probability of performance criteria being achieved. In accordance with our agreement, after the second anniversary of the original issue date of the warrants, any interests in warrant shares that have not vested pursuant to the terms and conditions of the agreement were deemed forfeited and shall never become exercisable. At the period ended September 30, 2024, approximately 193,000 shares underlying the warrant have been forfeited. As of the period ended September 30, 2024, there are 107,000 vested shares underlying the warrant.

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Earnings per share

For the three-month and nine-month period ended September 30, 2024 and 2023, we generated a net loss from continuing operations and as a result, any potential common shares issuance would be anti-dilutive.

Note 11 - Leases

We have entered into operating and finance leases primarily for real estate and equipment rental. These leases have terms which range from three years to five years, and often include one or more options to renew or in the case of equipment rental, to purchase the equipment. These operating and finance leases are listed as separate line items on our consolidated balance sheets and represent our right to use the underlying asset for the lease term. Our obligation to make lease payments is also listed as separate line items on our consolidated balance sheets. As of September 30, 2024 and December 31, 2023, total operating and financed right-of-use assets were $971,819 and $24,243, and $805,786 and $72,560, respectively.

For the nine months ended September 30, 2024 and 2023, we recorded $48,317 and $77,790, respectively, in amortization expense related to finance leases. For the nine months ended September 30, 2024 and 2023, we recorded $250,541 and $274,707, respectively, in rent expense related to operating leases.

In May 2023, we entered into an agreement to lease 4,128 square feet of office space in San Jose, CA commencing on September 1, 2023. The lease has a term of sixty-five months with an abatement period of five months and cost approximately $208,000 during its first year. Thereafter, the lease payments increase by 3%.

In January 2024, we amended and renewed our lease at our corporate headquarters in Little Rock, Arkansas. The lease was extended for thirty-six months commencing on February 1, 2024 and expiring on January 31, 2027 and will cost approximately $127,000 during its first year. Thereafter, the lease payments increase by 2% annually.

Whenever the rate implicit in each lease is not readily determinable, we use our incremental borrowing rate to determine the present value of the lease payments.

Information related to our operating lease liabilities for the period ended September 30, 2024 are as follows:

		For the Three Months Ended September 30, 2024			For the Nine Months Ended September 30, 2024
Cash paid for operating lease liabilities		$	91,727			$	239,999

Minimum future lease payments ended September 30, 2024
2024 (remainder of year)			85,240
2025			349,194
2026			354,565
2027			237,867
2028			233,727
Thereafter			19,525
			1,280,118
Less imputed interest			(223,412	)
Total lease liabilities		$	1,056,706

Weighted-average remaining lease term		2.98 years
Weighted-average discount rate			10.5	%

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Information related to our financed lease liabilities for the period ended September 30, 2024 are as follows:

		For the Three Months Ended September 30, 2024			For the Nine Months Ended September 30, 2024
Cash paid for finance lease liabilities		$	13,102			$	44,766

Minimum future lease payments ended September 30, 2024
2024 (remainder of the year)			6,240
2025			18,491
			24,731
Less imputed interest			(487	)
Total lease liabilities		$	24,244

Weighted-average remaining lease term		1 year
Weighted-average discount rate			6.25	%

Note 12 - Allowance for Credit Losses

The activity in the allowance for doubtful accounts was as follows during the nine-month period ended September 30, 2024 and the year ended December 31, 2023:

		2024			2023
Balance at the beginning of the year		$	1,645,045			$	1,440,678
Adjustment to expected losses on accounts receivable			(1,454,533	)			786,549
Charge-offs			(62,587	)			(582,189	)
Recoveries			4,700				7
Ending Balance		$	132,625			$	1,645,045

The allowance for doubtful accounts at September 30, 2024 was $132,625, a decrease of $1,512,420, from December 31, 2023. During 2024, we made an adjustment to the allowance for expected credit losses for a balance due from a former client in 2022. The client has since paid off their full outstanding balance and no longer has any obligation to us as of September 30, 2024.

Note 13 - Related Party Transactions

During the nine-month period ended September 30, 2024, the Company engaged in a transaction with First Orion Corp., a company in which one of our directors holds a significant interest. The transaction involved the sale of services amounting to approximately $35,000. These transactions were conducted in the ordinary course of business.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview

Inuvo is an advertising technology and services business selling information technology solutions to brands, agencies and large consolidators of advertising demand ("Platforms"). Inuvo's revenue is derived from the placement of digital advertising throughout devices, websites, applications and browsers across social, search and programmatic advertising channels. Inuvo facilitates, and gets paid, to deliver millions of advertising messages monthly and counts among its client's numerous world-renowned companies across industries.

Inuvo's primary mission is to disrupt the advertising industry with its proprietary and patented generative large language artificial intelligence (AI), a technology capable of identifying and targeting audiences without using a consumer's identity or data. The AI was designed to replace the consumer data, analytics, segmentation and lookalike modeling technologies that have traditionally served the advertising industry as it transitions to a new paradigm where a consumer's identity and data are no longer available for advertising decisions due to legislative and technological changes. Rather than targeting people, the AI targets the reasons behind why people are interested in products, services and brands.

Inuvo's AI technology solves this challenge and can be consumed by clients both as a managed service and software-as-a-service. For certain clients, Inuvo has also developed various proprietary technology and assets that include digital content, websites, automated campaigns, ad fraud detection, performance reporting and predictive media mix modeling.

The Inuvo products and services use analytics, data and artificial intelligence in a manner that optimizes the purchase and

placement of advertising in real time. These capabilities are typically sold with services both individually and in combination

with each other based on client needs. These products and services include:

	·	IntentKey: An artificial intelligence-based consumer intent recognition system designed to reach highly targeted mobile and desktop In-Market audiences with precision; and
	·	Bonfire: A marketing and advertising solution where a collection of data, analytics, software and publishing is used to align advertising messages with consumers across websites online.

There are many barriers to entry associated with the Inuvo business model, including a proficiency in large language model

based artificial intelligence, large scale information processing, software development, consumer data products, analytics, IOT

(internet of things) integration and the relationships required to execute within the IOT. Inuvo's intellectual property is protected by 19 issued and six pending patents.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The estimates and assumptions that management makes affect the reported amounts of assets, liabilities, net revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used are based upon management's regular evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material. Our significant accounting policies related to Revenue Recognition, Equity-Based Compensation, Capitalized Software Costs, Goodwill, Long-lived Assets and others are described in Note 2 - Summary of Significant Accounting Policies of our Consolidated Financial Statements included elsewhere in this Report.

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Results of Operations

		For the Three Months Ended September 30,			For the Nine Months Ended September 30,
		2024			2023			Change			% Change			2024			2023			Change			% Change
Net Revenue		$	22,371,153			$	24,570,588			$	(2,199,435	)			(9.0	)%		$	57,603,935			$	53,069,433			$	4,534,502				8.5	%
Cost of Revenue			2,594,642				2,274,626				320,016				14.1	%			7,599,872				7,833,729				(233,857	)			(3.0	)%
Gross Profit		$	19,776,511			$	22,295,962			$	(2,519,451	)			(11.3	)%		$	50,004,063			$	45,235,704			$	4,768,359				10.5	%

Net Revenue

Revenue for the three-month period ended September 30, 2024, decreased 9.0% and revenue for the nine-month period ended September 30, 2024, increased 8.5% as compared to the same periods in 2023, respectively. The higher revenue for the three-month period ended September 30, 2023 was mainly driven by an increased focus on and the launch of new product enhancements for Platform customers. The revenue for the three-month period ended September 30, 2023 was extraordinarily high, the highest quarterly revenue realized in the Company's history. The higher revenue for the nine-month period ended September 30, 2024 compared to comparable prior year period was primarily attributable to increasing demand within Platforms. Revenues related to Agencies & Brands increased by 15% for the three-month period ended September 30, 2024, compared to the same period in the prior year.

Cost of Revenue

Cost of revenue is primarily composed of payments to advertising exchanges that provide access to digital inventory where we serve advertisements. To a lesser extent, cost of revenue includes payments to website publishers and app developers that host advertisements. For the three-month period ended September 30, 2024, the increase in cost of revenue compared to the same period in 2023 was related to the higher revenue within Agencies & Brands in this year's quarter. For the nine-month period ended September 30, 2024, the decrease in cost of revenue compared to the same period in 2023 was attributed to lower revenue within Agencies & Brands during the comparable period.

Operating Expenses

		For the Three Months Ended September 30,		For the Nine Months Ended September 30,
		2024			2023			Change			% Change		2024			2023			Change			% Change
Marketing costs		$	17,006,131			$	17,625,806			$	(619,675	)		(3.5%)		$	42,540,355			$	36,769,972			$	5,770,383				15.7	%
Compensation			3,106,384				3,525,943				(419,559	)		(11.9%)			9,362,474				10,202,200				(839,726	)			(8.2	)%
General and administrative			1,607,258				2,335,295				(728,037	)		(31.2%)			3,835,162				6,229,069				(2,393,907	)			(38.4	)%
Operating expenses		$	21,719,773			$	23,487,044			$	(1,767,271	)		(7.5%)		$	55,737,991			$	53,201,241			$	2,536,750				4.8	%

Marketing costs consist mostly of traffic acquisition (i.e., media) costs and include those expenses required to attract an audience to various web properties. Marketing costs for the three months ended September 30, 2024 were 3.5% lower than the same quarter last year primarily due to lower revenue derived from Platform advertisers. Marketing costs for the nine months ended September 30, 2024 were 15.7% higher compared to the same period in 2023 due primarily to higher revenue from Platform advertisers in the comparable periods. In the third quarter of 2024 we fully amortized the remaining balance of the referral and support services asset (see Note 7 - Commitments of our Consolidated Financial Statements) increasing the Marketing costs in both the three and nine months ended September 30, 2024 .

Compensation expense was $420,000 lower for the three months ended September 30, 2024 and $840,000 lower for the nine months ended September 30, 2024, compared to the same time periods in 2023 primarily due to lower stock-based compensation and accrued incentive expense. Our total employment, both full- and part-time, was 82 at September 30, 2024 compared to 86 at September 30, 2023.

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General and administrative costs for the three and nine months ended September 30, 2024 decreased 31.2% and 38.4%, respectively, compared to the same periods in 2023 due primarily to an adjustment in the reserve for expected credit losses. During 2024, we made an adjustment to the allowance for expected credit losses for a balance due from a former client in 2022. The client has since paid off their full outstanding balance and no longer has any obligation to us as of September 30, 2024.

Financing expense, net

Financing expense, net of interest income, for the three and nine months ended September 30, 2024, was approximately $101,000 and $163,000, respectively.

Financing (expense), net of interest income, for the three and nine months ended September 30, 2023, was approximately $20,000 income and $37,000 expense, respectively.

The higher expenses in this year's periods compared to last year was due to the amortization of the closing costs of the new credit agreement (see Note 5 - Bank Debt of our Consolidated Financial Statements) and to higher overall borrowing balances.

Liquidity and Capital Resources

Our principal sources of liquidity are the sale of our common stock and our credit facility discussed in Note 5 - Bank Debt of our Consolidated Financial Statements.

On May 7, 2024, we entered into an At The Market Offering Agreement (the "ATM Agreement") with H.C. Wainwright & Co. LLC ("Wainwright"), to sell shares of our common stock, par value $0.001 per share, (the "Shares"), having an aggregate sales price of up to $15,000,000, from time to time, through an "at the market offering" program under which Wainwright will act as sales agent. The sales, if any, of the Shares made under the ATM Agreement will be made by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company will pay Wainwright a commission rate of up to 3.0% of the aggregate gross proceeds from each sale of Shares. For the nine-month period ended September 30, 2024, the Company has not sold any shares of common stock under the ATM Agreement.

On July 31, 2024, we entered into a Financing and Security Agreement (the "Financing Agreement") with SLR Digital Finance LLC ("SLR"), effective July 30, 2024. Pursuant to the terms of the Financing Agreement, SLR will finance up to $10 million dependent upon eligible receivables. See Note 5 - Bank Debt of our Consolidated Financial Statements.

We have focused our resources behind a plan to market our collective multi-channel advertising capabilities differentiated by our AI technology, the IntentKey, where we have a technological advantage and higher margins. If we are successful in implementing our plan, we expect to return to positive cash flows from operations. However, there is no assurance that we will be able to achieve this objective.

As of September 30, 2024, we have approximately $2.6 million in cash and cash equivalents. Our net working capital deficit was $3.4 million. We have encountered recurring losses and cash outflows from operations, which historically we have funded through equity offerings and debt facilities. In addition, our investment in internally developed software consists primarily of labor costs which are of a fixed nature. Through September 30, 2024, our accumulated deficit was $173.4 million.

Management plans to support the Company's future operations and capital expenditures primarily through cash generated from its credit facility until such time as we reach profitability. The credit facility is due upon demand and therefore there can be no assurances that sufficient borrowings will be available to support future operations until profitability is reached. Our collection period is less than 30 days and can also be used to meet accrued obligations. We believe our current cash position and credit facility will be sufficient to sustain operations for at least the next twelve months from the date of this filing. If our plan to grow the IntentKey product is unsuccessful, we may need to fund operations through private or public sales of securities, debt financings or partnering/licensing transactions over the long term.

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Cash Flows

The table below sets forth a summary of our cash flows for the nine months ended September 30, 2024 and 2023:

		For the Nine Months Ended September 30,
		2024			2023
Net cash used in operating activities		$	(100,345	)		$	(457,716	)
Net cash provided by/(used in) investing activities		$	(1,409,762	)		$	1,029,656
Net cash provided by/(used in) financing activities		$	(343,526	)		$	3,475,126

Cash Flows - Operating

Net cash used in operating activities was $100,345 during the nine months ended September 30, 2024. We reported a net loss of $5,903,142, which included non-cash expenses of depreciation and amortization expense of $1,951,196, depreciation of right of use assets of $48,317, stock-based compensation expense of $1,087,533, and $800,000 for the impairment and amortization of a referral and support services agreement. The change in operating assets and liabilities during the nine months ended September 30, 2024 was a net provision of cash of $4,185,284 primarily due to a decrease of $1,899,029 in accounts receivable and an increase of accrued and other liabilities of $940,076. Our terms are such that we generally collect receivables prior to paying trade payables. However, our Media sales arrangements typically have slower payment terms than the terms of related payables.

During the comparable nine-month period in 2023, cash used in operating activities was $457,716 from a net loss of $7,988,323 and included several non-cash expenses of depreciation and amortization expense of $1,984,139 and stock-based compensation expense of $1,471,683. The change in operating assets and liabilities during the nine months ended September 30, 2023, was a net provision of cash of $3,265,938.

Cash Flows - Investing

Net cash used in investing activities was $1,409,762 for the nine months ended September 30, 2024, and consisted primarily of capitalized internal development costs.

Net cash provided by investing activities was $1,029,656 for the nine months ended September 30, 2023, and consisted primarily of the sale of marketable securities, partially offset by capitalized internal development costs.

Cash Flows - Financing

Net cash used in financing activities was $343,526 during the nine months ended September 30, 2024, and was primarily due to taxes paid on restricted stock unit grants exercised.

Net cash provided by financing activities during the nine months ended September 30, 2023 was $3,475,126 and was primarily from proceeds from the capital raise (see Note 1 - Organization and Business of our Consolidated Financial Statements).

Off Balance Sheet Arrangements

As of September 30, 2024, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to a smaller reporting company.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain "disclosure controls and procedures" as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this report, is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and to reasonably assure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our management does not expect that our disclosure controls will prevent all errors and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any systems of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of September 30, 2024, the end of the period covered by this report, our management concluded their evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. As of the evaluation date, our Chief Executive Officer and Chief Financial Officer concluded that we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1 - LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS-UPDATE

We desire to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Accordingly, we incorporate by reference the risk factors disclosed in Part I, Item 1A of our Form 10-K for the year ended December 31, 2023, as filed with the SEC on February 29, 2024 and our subsequent filings with the SEC, subject to the new or modified risk factors appearing below that should be read in conjunction with the risk factors disclosed in such Form 10-K and our subsequent filings.

We rely on one customer for a significant portion of our revenues. We are reliant upon one customer for most of our revenue. For the three-month period ending September 30, 2024, one Platform customer accounted for 79.9% of our overall revenue, and for the nine-month period ended September 30, 2024, 76.5% of our overall revenue. The amount of revenue we receive from this customer is dependent on a number of factors outside of our control, including changes in the respective customers advertising budget, both in terms of allocated dollars and media mix, financial resources of the customers, as well as general economic conditions. We would likely experience a significant decline in revenue and our business operations could be significantly harmed if these customers do not continue to utilize our services. Additionally, our business operations and financial condition could be significantly harmed if these customers do not pay for our services on a timely basis. The loss of any of these customers or a material change in the revenue or gross profit they generate or their failure to timely pay us for our services would have a material adverse impact on our business, results of operations and financial condition in future periods.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY AND DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

Trading Plans

During the three months ended September 30, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6. EXHIBITS

No.		Exhibit Description		Form		Date Filed		Number		Filed or Furnished Herewith
3(i).1		Articles of Incorporation, as amended		10-KSB		3/1/04		4
3(i).2		Amended to Articles of Incorporation filed March 14, 2005		10-KSB		3/31/06		3.2
3(i).3		Articles of Merger between Inuvo, Inc. and Kowabunga! Inc.		8-K		7/24/09		3.4
3(i).4		Certificate of Change Filed Pursuant to NRS 78.209		8-K		12/10/10		3(i).4
3(i).5		Certificate of Merger as filed with the Secretary of State of Nevada on February 29, 2012		10-K		3/29/12		3(i).5
3(i).6		Articles of Amendment to Amended Articles of Incorporation as filed on February 29, 2012		10-K		3/29/12		3(i).6
3(i).7		Articles of Amendment to Amended Articles of Incorporation as filed on October 31, 2019		10-Q		5/15/20		3(i).7
3(i).8		Certificate of Validation of Amendment to Amended Articles of Incorporation as filed October 16, 2020.		10-Q		11/9/20		3(i).8
3(i).9		Articles of Amendment to Articles of Incorporation as filed January 7, 2021		10-K		2/11/21		3(i).9
3(i).10		Articles of Amendment to Articles of Incorporation as filed on August 19, 2021		10-Q		11/12/21		3(i).10
3(ii).1		Amended and Restated By-Laws		10-K		3/31/10		3(ii).4
3(ii).2		Bylaw amendment adopted February 29, 2012		8-K		3/6/12		3(ii).1
10.1		Financing and Security Agreement by by and among Inuvo, Inc., Vertro, Inc., ValidClick, Inc., Think Relevant Media, LLC, Kowabugna Marketing, Inc., Bonfire Publishing Group, LLC, Southern Muse Media, LLC, Netseer, Inc., Emerald Brands, LLC, Alot, Inc. and Daily Reads, LLC, and SLR Digital Finance LLC		8-K		8/1/24		10.1
31.1		Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer								Filed
31.2		Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer								Filed
32.1		Section 1350 certification of Chief Executive Officer								Furnished
32.2		Section 1350 certification of Chief Financial Officer								Furnished
101.INS		Inline XBRL Instance Document								Filed
101.SCH		Inline XBRL Taxonomy Extension Schema Document								Filed
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document								Filed
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document								Filed
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document								Filed
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document								Filed
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document								Filed
104		The cover page for Inuvo, Inc.'s quarterly report on Form 10-Q for the period ended September 30, 2024, formatted in Inline XBRL (included with Exhibit 101 attachments).								Filed

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Inuvo, Inc.
November 8, 2024	By:	/s/ Richard K. Howe
		Richard K. Howe,
		Chief Executive Officer, principal executive officer
November 8, 2024	By:	/s/ Wallace D. Ruiz
		Wallace D. Ruiz,
		Chief Financial Officer, principal financial and accounting officer

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