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Inuvo, Inc. (NYSEMKT:INUV)

Q1 2014 Earnings Conference Call

April 24, 2014 16:30 ET

Executives

Alan Sheinwald - Alliance Advisors

Richard Howe - Chief Executive Officer

Wally Ruiz - Chief Financial Officer

Analysts

Howard Halpern - Taglich Brothers

Operator

Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the Inuvo Inc. 2014 First Quarter Conference Call. During today’s presentation all participants will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator Instructions)

At this time, I would like to turn the conference over to Alan Sheinwald of Alliance Advisors. Please go ahead sir.

Alan Sheinwald - Alliance Advisors

Thank you, operator and good afternoon. I’d like to thank everyone for joining us today for the Inuvo First Quarter 2014 Shareholder Update Conference Call. Mr. Richard Howe, Chief Executive Officer and Mr. Wally Ruiz, Chief Financial Officer of Inuvo will be the presenters on the call today.

Before we begin, I’m going to review the company’s Safe Harbor statement. The statements in this conference call that are not descriptions of historical facts are forward-looking statements relating to future events and as such all forward-looking statements are made pursuant to the Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially.

When used in this call the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to Inuvo, Inc., are as such, a forward-looking statement. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which may cause actual results to differ from those anticipated by Inuvo at this time. In addition, other risks are more fully described in Inuvo’s public filings with the U.S. Securities and Exchange Commission, which can be reviewed at www.sec.gov.

Well with that out of the way now I’d like to congratulate management on a strong first quarter and introduce Mr. Richard Howe, CEO of Inuvo. Rich, the floor is yours.

Richard Howe - Chief Executive Officer

Thank you, Alan, and thanks, everyone, for joining us today. I am very pleased to report that the first quarter of 2014 was the most profitable quarter in recent memory. We’ve worked very hard to meet our strategic objective to build a scalable business model that will deliver both growth through the right mix of products and profit. In the first quarter we delivered $10.1 million in revenue and $675,000 or $0.03 per share in profit.

These first quarter results and the second quarter’s upward revenue trajectory give us confidence that we now have a scalable model that meets both our long-term growth and profit objectives, in addition to building value per shareholders through proprietary technology and content which I’ll describe in more detail a little later. On our year end call in March we shared the company’s two primary strategic goals for 2014. These were to accelerate our expansion into mobile and to grow the ALOT branded network of content rich and mobile-enabled websites and applications.

At that time we also provided additional information about our plans to accelerate the transition from toolbar, a strategy we first introduced on our first quarter 2013 conference call. It maybe important to note that the toolbar’s current run rate represents less than 6% of overall revenue. I’d like to now share some additional details about each of these goals within the context of our segment.

We’re getting first with the Partner Network. Partner Network margins were strong in the first quarter and while revenue was lower than in the previous quarter, we currently see an upward revenue trajectory within this segment. Revenue and margin impact in the quarter was due in part to the introduction, a technological and network systems innovation that were deployed in late 2013 that allowed for more advanced monitoring and better enforcement of network contract and policy.

One of these innovations now adopted and implemented by roughly three quarters of our publishers is a service that allows partners to more easily consume and optimize our ad inventory. While at the same time providing Inuvo with deeper insights into where and how various partners utilize that ad inventory. These new technologies can be deployed by our publishing partners in a fraction of the time of our previous solution, which in turn expands our universe of potential partners.

Additionally we’re now also actively distributing display-based advertising product to publishers and mobile application developers. These innovations and our focus on publishing partners who themselves have concentration in mobile has allowed us to make significant progress towards our overall mobile goal as a company. In March of the first quarter roughly 25% of this segment’s revenue was directly related to mobile web and mobile application sources. Overall in the quarter roughly 19% of this segment’s revenue was from mobile traffic.

In addition to these publisher product innovations, we also began to enhance the platform that supports our Partner business through improved set of tools and reports designed to provide these partners with more and better information upon which to improve the performance of their implementation. We will continue to add feature enhancements here as our suite of publisher and application partner product expand.

Now let’s talk about the Owned and Operated segments. Within this segment we continue to see great momentum and positive growth signals coming from the sites and mobile applications business. Before I talk more about that I’d like to bring you speed and the progress we’ve made related to our toolbar transition. Revenue in the quarter from the toolbar was roughly $1 million down from $4.8 million in the first quarter of 2013.

While this difference in large part reflects the year-over-year revenue decline in the quarter, it also masks the accelerated growth rate occurring within the ALOT website and mobile applications business which I’ll talk about it in a second. We expect the toolbar business to be fully transitioned by year end and remain certain that this was an important and (enhanced) by correct decision for Inuvo given the climate surrounding the use and distribution of toolbar applications online.

Looking forward we expect to see positive quarter-over-quarter growth within this segment which indicates that the underlying growth rate in the sites business is now overcoming the decline in the toolbar business. In the first quarter we continued our aggressive expansion of content development within existing and new vertical. Some of the most valuable companies in our space have built both technology and content assets and should be evident from our disclosures over the last 12 months that we’re pursuing a similar path.

We’ve built a truly scalable machine here not just for the deployment of content online across devices but also for content creation. We’ve now created and deployed thousands of individual content pieces that complement the more than 14 million merchant record that power the local.alot.com website. Including our ALOT homepage we now have a significant database of specialized content covering topics that includes finance, health, careers, travel, local interest, legal and very soon we’ll be launching another new site at living.alot.com and our continuing efforts to broaden our content. In this case, the consumer interest categories that include entertainment, gardening and fashion.

We had almost 9 million unique visitors to the ALOT sites in the first quarter. We also mentioned on our March call that we would be developing and distributing mobile application as a complement to and as an additional distribution mechanism for this now considerable database of content. These mobile applications will be an extension to our sites providing our users with utilities and information specific to their individual needs. Much of our activity today here has been to test in market various mobile application monetization technique.

Expect to hear more about the launch of these applications over the coming months. Further and starting in the second quarter we’re also introducing site design features that highlight social sharing of content, the integration of video, and the promotion of our own mobile application. All of these enhancements are aimed at increasing user engagement, driving more organic traffic to the site and ultimately increasing overall revenue. Collectively all of these efforts are yielding a significant return within this ALOT sites and mobile applications business which has grown 162% when compared to the first quarter of 2013 and 44% between Q4, 2013 and Q1, 2014.

To put this in perspective the business delivered roughly $1.5 million in profitable revenue in March alone, exceeding our internal plans and strategic goals. Not only is this business growing but it is also meeting our strategic objectives to expand into mobile. Almost 25% of all the revenue generated from this business in the first quarter was a result of consumer engagement through mobile devices. I’d like to also add that in addition to the various product sites and applications we’re deploying, we’re also greatly enhancing the information we collect within our network and the utilization of that information either through better campaign on the marketing side and/or improved ad targeting on the user experience side. We believe these efforts will be rewarded through improved margins in the future.

With that I’d like to now turn the call over to Wally for a more detailed accounting of our year end results. Wally?

Wally Ruiz - Chief Financial Officer

Thank you, Rich. Good afternoon everyone. Thank you for joining us today to discuss the company’s financial results for the first quarter of 2014. Our 10-Q as of March 31 will be filed with the SEC and be available this afternoon. Inuvo reported net revenue of $10.1 million in the first quarter of 2014 compared to $15.9 million in the first quarter of last year, $5.4 million came from the Partner segment and $4.7 million from the Owned and Operated segment. The Partner segment which delivers advertisements to our Partner’s websites and applications represents 54% of the company’s total revenue in the current year quarter. The $5.4 million reported in the first quarter of this year was a 39% decrease from the same quarter last year.

The revenue decrease in the Partner segment in the first quarter of this year compared to last year is due in large part to a program we initiated in the fourth quarter of 2013 that was designed to improve overall traffic quality by enforcing publisher contract and the expansion of network operating policies that included the validation of traffic sources, technological detection of (spurious) traffic, publisher auditing and the modification of publisher payment terms.

The result of these changes was lower revenue in this segment in the fourth quarter of last year and into the first quarter of this year. But of a higher quality which is expected to translate into higher revenue per click. The Owned and Operated segment delivers advertisements through websites and applications that Inuvo designs, builds, and markets under the ALOT brand. The Owned and Operated segment reported $4.7 million of revenue in the first quarter of 2014, a 33% decrease from the same quarter last year. As mentioned the lower revenue in this segment is due to our decision to transition away from the toolbar products.

The toolbar revenue in the first quarter of this year was $981,000 down from $4.8 million in the same quarter last year, partially offset by revenue from the ALOT sites and applications which was $3.7 million up 162% from the first quarter of last year and 44% - up 44% from the immediate prior quarter. Gross profit in the first quarter of 2014 was $6.4 million compared to $8.4 million last year. Partner segment gross profit was $1.9 million compared to $1.8 million last year. The changes implemented in the fourth quarter of last year to improve traffic quality though causing lower revenue improved margins in this segment in the first quarter of 2014.

As we complete the implementation of our technology and policy we expect in subsequent quarters revenue to grow and margins to settle to a level lower than the first quarter. Gross profit in the Owned and Operated segment was $4.6 million compared to $6.6 million last year. The lower gross profit is due to lower revenue this year compared to last year. As a percent of revenue the Owned and Operated segment gross profit was 98% in the first quarter of this year compared to 95% for the same quarter last year due to transitioning away from the toolbar through the Owned and Operated websites and applications.

Operating expense was $5.8 million in the first quarter this year. This is a $3.1 million decrease from the same quarter last year. All three categories of operating expense, marketing cost, optimization and selling and general administration expense improved in the first quarter this year compared to the same quarter last year. Marketing costs are primarily cost associated with the Owned and Operated segment where we spend money to drive traffic to our landing pages where successful result is when a customer clicks on an advertisement. Marketing cost decreased $1 million in the first quarter of 2014 from the same quarter last year. The lower marketing cost is due to the transitioning away from the toolbar products where we no longer spend to attract users. This was partially offset by higher spending for the ALOT sites and applications.

Compensation expense decreased by $893,000 in the first quarter of 2014 from the same quarter and the prior year. The lower expense in the current quarter is primarily due to lower number of employees this year over last year. There were 32 full-time permanent employees at Inuvo at the end of March 2014 compared to 48 employees at the same time last year. In addition in the first quarter of last year we incurred a severance charge of $316,000 associated with the relocation to Arkansas.

Selling, general and administration expense decreased $1.1 million in the first quarter of 2014 compared to the same quarter and the prior year. The decrease in the current quarter SG&A expense is due primarily to lower depreciation and amortization expense associated with the closing last year of offices and data centers in New York and Florida. Lower facilities expense due to the move in Arkansas lowered professional fees and T&E expense as well as an adjustment to payable for over approval in prior years.

Going forward on a quarterly basis we expect marketing cost to increase as we roll out new Owned and Operated websites and applications. Compensation expense increased as we step up hiring to measure it with our growth and SG&A expense to remain relatively flat. Other net expenses primarily interest and that was $98,000 in the first quarter of 2014, last year’s net interest or net expense was $107,000, this year’s lower expense of Q2 lower average loan balance. The company reported a $76,000 income tax benefit in the first quarter of 2014 due to amortizing its deferred tax liability generated from intangible assets acquired in the March 2012 acquisition of Vertro.

Net income from discontinued operations was $26,000 in the first quarter of 2014 and was composed of a reversal of liabilities to web publishers and vendors from 2009 and earlier. This compares to a loss of $125,000 in the same quarter last year. The company reported a net income in the first quarter of this year a $675,000 or $0.03 per share compared to a net loss last year of $291,000 or $0.01 per share loss. EBITDA adjusted for stock compensation expense and approved severances was approximately $1.3 million in the quarter that ended March 31, 2014 and that compares to an adjusted EBITDA of $1.4 million in the same quarter last year.

Turning to the balance sheet, cash and cash equivalents was $2.7 million at March 31 of this year compared to $3.1 million at the end of last year. Bank debt was approximately $5.5 million at the end of March compared to $6.1 million at the end of December 2013. Stockholders’ equity was $6.1 million at March 31, 2014. On April 16 we received word from the New York Stock Exchange that they would spend to the end of May the time that Inuvo had to regain compliance with their continued listing standards. We believe as of March 31 we meet the exchanges standards having a net income from continuing operations of $649,000 and a stockholders’ equity in excess of $6 million.

With that I’d like to turn the call back to Rich.

Richard Howe - Chief Executive Officer

Thanks, Wally. We had a very profitable first quarter and on a cumulative basis the last six quarters combined have been profitable and cash flow positive. We’re excited about our prospects for the reminding year. Let me now summarize what is that said today. The Partner segment is growing again. The site and mobile app business grew 44% quarter-over-quarter and a 162% year-over-year delivering $1.5 million in revenue in March. The Toolbar represents less than 6% of current revenues at this point.

The company expects to have another profitable year in 2014. In March roughly 30% of overall revenue in the company came from mobile. The changes we’ve made are actually opening up new opportunities for us with our major partners at Google and Yahoo. And finally we believe we now have a scalable content creation and multi device delivery platform. Now in addition to our operating goal and now that we do have a scalable model we also feel the time is right to invest in the business. With our debt down to roughly $5.5 million we believe the better use of capital would be to drive growth as opposed to continuing to pay down debt.

To that end we’re currently reviewing term sheets with a goal to expand our capital availability of between $1 million and $2 million through debt financing that we believe can immediately be used to drive growth. There are of course no assurances that we’d be successful and the efforts to secured financing on terms and conditions acceptable to the company. In our business today we have more control, less risk, and greater ability to scale than we have ever in the past. Even without additional financing we expect to remain profitable throughout 2014 with revenue expanding from the first quarter.

I would like to now turn the call back over to the operator for questions and answers.

Question-and-Answer Session

Operator

Thank you, sir. Ladies and gentlemen we will now begin the question-and-answer session. (Operator Instructions) Our first question is from the line of Howard Halpern, Taglich Brothers. Please go ahead.

Howard Halpern - Taglich Brothers

Congratulations. Great quarter, you guys delivered. It’s being fairly due to the story. Could you just describe what your overall strategic plan is and how I guess content really plays a role in your growth plans?

Richard Howe

You bet. So we said a number of times that this year we have two primary objectives strategically to expand in mobile and to growth Owned and Operated business which is directly related to the question you just asked about content. So the reason why we’ve been focused on the Owned and Operated segment of the business is because through building that business we’re massing quite a large database of proprietary content that can be repurposed and extended and maybe more importantly it would be delivered across multiple devices, building mobile applications and websites, mobile web. Those are our long list of places where that content can be used and then reused. And for those of us who have built big data businesses in the past the key to strong margins in our business like that is the reuse of that business. Once you create at one time you can you can reuse it as many times as you can find application for it. So that’s kind of been the goal.

Howard Halpern - Taglich Brothers

Okay. In terms of you talking about investing to grow the business, what would you use the proceeds for just strategic opportunities that you see or is there a specific thing that you actually see out there that could drive revenues quickly?

Richard Howe

You bet. Thank you for asking that question. We’ve figured somebody would. So here is the really the good news. The additional capital that we might be able to bring into the business does not need to be (our find) towards building anything. Right now we have everything we need. So we would directly apply additional capital today in one or both of the following ways. We have a number of partners on the business – the partner side of the business that we could do more business with. And sometimes we can encourage them to do more business with by having improved payment terms with them. So we might allocate capital towards that activity, that’s one.

The second area is the Owned and Operated business. So again another reason why we’ve entered this business was because we had so much more control over our density in that part of the business. We market in that business. We’re now building marketing campaigns, launching them and running them profitably which means that if we have more money we can do more of it. And since it is profitable we know we can spend $1 and get $1 plus return out of it.

Howard Halpern - Taglich Brothers

Okay, okay and well keep up the good work. I’ll jump back in the queue. Let’s someone else ask the question.

Richard Howe

Thank you.

Operator

Thank you. Our next question comes from the line of Matt Paul with Sidoti & Company. Please go ahead.

Unidentified Analyst

Hey guys this is Mike, I am actually filling in for Matt. Just a couple of questions, I wonder if you have any metric in which you can maybe track the web traffic on the two most recent (bondage) and maybe throw some color on how that compares to the core group portfolio?

Richard Howe

Could you be a little bit more specifics on the two most recent launches, what do you mean by that?

Unidentified Analyst

I have the questions from Matt, he is traveling, so he wants to know more about the metrics used to track web traffic?

Richard Howe

Well so he is probably referring to the sites.

Unidentified Analyst

Yes.

Richard Howe

So we launched a number of sites right now. What I can say on a revenue basis without quantifying the exact amount of money we make a new site because we don’t disclose that. But despite our tracking on a per site revenue very closely to what our original business plan had anticipated for them, that’s good. As it relates to the amount of traffic that we’ve generated from the sites I said in my call notes that in the first quarter of this year we saw 9 million unique visitors to the collective group of those sites. We don’t split that out either Mike. So but I will – I can add this I mean the two most traffic sites in the portfolio right now are not surprisingly the first two we launched right and that is the health site and the local site.

Unidentified Analyst

Sure, okay, great. And just talk about maybe the pace on the Owned and Operated. Is that – is this no more a one website per quarter or are we right in taking on that front?

Richard Howe

I think it’s been more than that actually because I think we launched more than one site in perhaps the prior quarters. We’ll probably launch a site in fact we’ll launch a site in the second quarter. When we launch more than one site a quarter maybe is the answer and while that sounds like I am not really answering the question. One of the things we’re of course realizing now that we’re in this business in a big way is that there are so many ways to expand the existing verticals we have.

So health for an example is a category that we could broaden quite extensively and so since we’re having success in that particular vertical we have a tendency at this point to say we did better off sending our time broadening our content repository in that vertical as opposed to launching another three or four sites. That’s particularly true on the margin side because what happens when we launch a new site is we often start off in a neutral position from a profitability perspective where on an existing site like at health or a local or some of the bigger ones we’re already profitable. I hope that helps.

Unidentified Analyst

Sure, yes. And I think I don’t know if I heard it correct. But you guys expect revenue to increase going forward but for margins to decrease from the current period. Is that right?

Wally Ruiz

Yes. You’ve heard it correctly, Mike, yes.

Unidentified Analyst

Okay. So can you throw some color line, is that mostly due to what increased marketing cost or I mean how should we think of that going forward?

Wally Ruiz

Yes. What we’re talking about is that we made a lot of changes in the fourth quarter and among them we have is auditing a publisher as we put in some validation procedures and processes. But in the end the net of the dollars that we made a bunch of changes in the Partner segment in the fourth quarter of last year and some of those changes involved contract changes and some of those contract changes ended up favorable to Inuvo, right. As this implementation – as we complete this implementation into Q1 the first quarter that, that would be a fact and our margins will be diminishing. So I would not expect the same margins that we had in the first quarter to see that in the second quarter.

Unidentified Analyst

I mean so going forward do you guys expect maybe any one-time item impacting you guys negatively or?

Wally Ruiz

No, not negatively. I think that you see margins return to normal.

Richard Howe

And as I said in my conference call mostly we’re going to start making additional investments in marketing activity to drive top-line at this point, that could have some impact on margins as well.

Unidentified Analyst

Okay, great. That’s all I have. Thanks guys.

Operator

Thank you. Our next question is from the line of Mike (Satter), Private Investor. Please go ahead.

Unidentified Analyst

Hey Wally and Rich, how are you doing today?

Wally Ruiz

Hi Mike.

Richard Home

We’re good.

Unidentified Analyst

Good. Rich, I don’t know if you remember me from a call a long time ago. We had joked about the website and you definitely have lived up to your promise through making the websites more esthetically sleek, you look great.

Richard Howe

Thank you.

Unidentified Analyst

Quick question. I want to go back to something we’ve talked about on that call as well. I’m wondering if you could give any more updates, I know I’m probably one of the investors that keeps hammering away at this. But how we’re doing on BabytoBee.com? I notice that there have been some changes on the website and I slowly see some different content specifically focusing on the possibility at offering some support forms. And I can’t tell if that’s new per se or it’s full compound that existed previously. Do you have any comments on that?

Richard Howe

Sure, I do, Mike. So let me explain exactly what we did with baby.com. So the site that you’re referring to at BabytoBee.com, look at that domain as being orphaned. It’s there and we own domain or content on it, but it is not generating any revenue for us and we’re not spending anytime on it.

Unidentified Analyst

Right.

Richard Howe

Now that being said when we launched our health vertical we repurposed all of the content that we had for BabytoBee under our health vertical. So if you go to the health site you’ll see.

Unidentified Analyst

Yes, I see a lot of a overlap between the Oracles and yes – there, I see, you kind of migrated a lot of the stuff pin to it, I do see that, yes.

Richard Howe

That’s exactly what we did and that’s the way you should look at it. We really – the ALOT sites is where we’re spending our time, our activity, our money any of these old sites that we have while they’re still available and they’re in some cases that BabytoBee they might generate I don’t know 100 bucks a day or something, we don’t spend anytime on it.

Unidentified Analyst

Well that wouldn’t make sense as to why that’s not listed on your website because I’m guessing on your actually - your company website.

Richard Howe

Okay.

Unidentified Analyst

So this is going to fall under the ALOT brands and eventually that site will just kind of drop off and so on?

Richard Howe

Yes, there is no (indiscernible), you can turn it off, so we just leave it.

Unidentified Analyst

Right. My other question is how is BargainMatch going, is that – are you going to invest anymore in that or is that again going to somehow migrate to be integrated into ALOT.com?

Richard Howe

So we – BargainMatch is another area that we stopped focusing attention on. And that was more just as a result of seeing success with the O&O strategy that we have. So what happens when you start latching on to a business model that’s working for you, you tend to take all of the resources that you have elsewhere on activities that aren’t generating as faster growth or as margin and move them over and that’s what we did. So put it this way BargainMatch stuff put on the Back Burner. Now that being said we may at some point in the future incorporate a shopping experience within the overall suite of ALOT site, but for now I’d say it’s on the backburner.

Unidentified Analyst

Okay. Do you guys have any plans I think this was some (indiscernible) I had given previously. One of the things I know is its ALOT looks great but there is – it’s very, it’s difficult when you’re exploring content, when you’re balancing from health, finance career it’s hard to get back to the homepage like ALOT.com. So I’m wondering if you would – you guys would consider putting just a very and actually you have that. When you do a search there, there is a nice little icon that pops up and so it brings you back to like a homepage. Do you know what I mean so as you navigate and once you go on to health it’s difficult to get back to the original webpage itself so without having to kind of type it in again there was no way to redirect like when we’re playing on our computers we have the home button whatever that set to whatever browser you could just click it and it brings you back to whatever. So what I am saying is that would be a – I think that yes.

Richard Howe

Yes we’re making ALOT, we continue to make budget changes to this site might based on user feedback from people like yourself and users on the site. So I would suggest what – give me a call after this call or more sometime and we can give you more specifics on that, but we’re always trying to improve that experience of course.

Unidentified Analyst

Okay. And then it looks like you guys had given some nice downloads on Google Play, you released a recent one, having to (Do-IT NEWS).

Richard Howe

Yes.

Unidentified Analyst

So all that added. So it looks like you are getting and also some of the weather stuff and the – you have some apps on that you deal with picture editing. It looks like you’re getting a lot of sizable downloads at the mobile apps. Can you give anymore kind of a guidance in that area. Do you – I guess what I’m saying is can we foresee one day those apps – when you click on apps on ALOT.com, could it be possible someday that those actually be those apps right there and they’re going right suite ALOT.com where you see the desktop apps, do you understand what I mean?

Richard Howe

Well we’re going to try and make it easy for people to consumer our apps no matter where they land I mean Google, the Google Play app store or the Apple app store are the places where so many people go. So there always – we’re always going to deploy them there because that’s what the consumers go. But the answer is yes I mean we’ve said a part of our strategy is to build and deploy and make available to our users mobile applications that are aligned with each of the verticals that we’re in and we’re starting to do that as you’d cite and you’ll see us do more of it.

Unidentified Analyst

Okay. Last question it’s kind of the elephant in the room shelf registration. You talked about rising some capital and I know of it there was – you guys have had a shelf registration in the past and you didn’t really use that much of it. Can you provide any idea I mean I know it’s always there in terms of if they went into effect I saw the filing, the SEC filing. So you have set aside is it 15 million shares to be accurate for the shelf registration, is that correct?

Wally Ruiz

Yes, Mike it’s actually $15 million and.

Unidentified Analyst

Dollars I’m sorry, okay.

Wally Ruiz

Yes. And just as you pointed out that the shelf registration that we had was expiring this month in April. And all we did was keep it a line, that’s it.

Unidentified Analyst

Okay. So it was wrongful to make an assumption that, that shelf registration was somehow indicative of the expansion that was – you know what I mean the expansion quite a listing requirement, you could see how the investments you make – so that’s not connected in anyway.

Wally Ruiz

Yes.

Richard Howe

No, so let me answer this. So I guess some people would make that expansion but that’s not the case. The shelf was expiring, we want to keep the shelf active, it’s a prudent thing to do, so we basically just did what everybody does.

Unidentified Analyst

Right.

Richard Howe

We just got it active. I think to the point of the stock exchange listing Wally said in his notes that our shareholder equity is above the level that the New York Stock Exchange site is being required to maintain listing standard. So we believe we’re in compliance.

Unidentified Analyst

Okay, okay. And I said the last question – this is the very last within opportunity. Do you have any intentions of partnering maybe you can name any specific company, but do you have any future plans or anything that we can expect in the next years that you may actually have some announcements of partnering in the varying companies that may fill in some of those marketing gaps and fill in some other areas to help drive traffic?

Richard Howe

No.

Unidentified Analyst

Not necessarily you’re making any investments but just partnering?

Richard Howe

I don’t – if you’re speaking specifically to marketing I would have to say it’s unlikely. It’s not.

Unidentified Analyst

Okay.

Richard Howe

It’s not improbable but it’s unlikely. And let me just explain why, because this is an important reason why. We believe that the machine that we’ve built on the O&O side include – which includes the marketing machine we have is an asset, a technological asset, a very statistical basis, a technological asset and we want.

Unidentified Analyst

Richard.

Richard Howe

To own and control that. So.

Unidentified Analyst

Are you speaking about (indiscernible).

Richard Howe

No, I’m just talking about the marketing activity that we do today to try to encourage consumers to visit our – anyone of our sites or our mobile applications is a machine that we’ve built in this technology.

Unidentified Analyst

So maybe more a broader question. Is there potential in the next year that there maybe some partnerships independent of whatever that reason might be?

Richard Howe

Well there is always a chance we might do partnerships that help us supercharge the business. There is none that I’m looking at in the foreseeable future.

Unidentified Analyst

Okay, great. Thank you as always for taking the time. I really appreciate it.

Richard Howe

You bet, Mike.

Unidentified Analyst

Bye-bye.

Operator

Thank you. (Operator Instructions) Gentlemen, I’m showing no further questions at this time. Please continue with any closing remarks.

Richard Howe - Chief Executive Officer

Alright, thank you, officer. I’d like to thank everyone who joined us on today’s call. We appreciate your continued interest in Inuvo and we look forward to reporting progress over the coming quarters.

Operator

Thank you, sir. Ladies and gentlemen, that does conclude our conference for today. Thank you very much for your participation. You may now disconnect.

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