As filed with the Securities and Exchange Commission on April 15, 2019.

Registration Number 333-______

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

ConversionPoint Holdings, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

7372

82-2687415

(State or other jurisdiction of
incorporation or

organization)

(Primary Standard Industrial
Classification Code

Number)

(I.R.S. Employer Identification
Number)

840 Newport Center Drive, Suite 450

Newport Beach, CA 92660

(888) 706-6764

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Robert Tallack

President and Chief Executive Officer

Raghunath Kilambi

Chief Financial Officer

ConversionPoint Holdings, Inc.

840 Newport Center Drive, Suite 450

Newport Beach, CA 92660 (888) 706-6764

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Larry A. Cerutti, Esq.	Stuart Bressman, Esq.
Bardia Moayedi, Esq. Troutman Sanders LLP 5 Park Plaza, Suite 1400	Jessica Y. Chen, Esq White & Case LLP 1221 Avenue of the Americas
Irvine, California 92614	New York, New York 10020
(949) 622-2700/(949) 622-2739 (fax)	(212) 819-9200/(212) 354-8113(fax)

Approximate date of commencement of proposed sale to public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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,” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Larger accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
		Emerging growth company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered		Proposed Maximum Aggregate Offering Price(1)(2)				Amount of Registration Fee
Common Stock, par value $0.0001		$	40,000,000			$	4,848.00

(1)

Estimate solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Includes the aggregate offering price of shares that the underwriters have the option to purchase.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED APRIL 15, 2019

PROSPECTUS

Shares

Common Stock

This is the initial public offering of shares of common stock of ConversionPoint Holdings, Inc. We are offering shares of our common stock to be sold in this offering.

We expect the initial public offering price will be between $ and $ per share. Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on The NASDAQ Capital Market under the symbol “CPTI.” The listing of our common stock on The NASDAQ Capital Market will be subject to us fulfilling all listing requirements of The NASDAQ Capital Market.

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and we have elected to adopt certain reduced public company reporting requirements.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 14 of this prospectus.

	Per Share	Total
Public offering price	$	$
Underwriting discounts and commissions (1)	$	$
Proceeds, before expenses, to us	$	$

(1)

See “Underwriting” beginning on page 134 for additional information regarding total underwriting compensation.

We have granted the underwriters an option, exercisable one or more times in whole or in part, to purchase up to additional shares of common stock from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus. If the underwriters exercise the option in full, the total underwriting discounts and commissions payable will be $ , and the total proceeds to us, before expenses, will be $ .

Neither the Securities and Exchange Commission, or SEC, nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of common stock against payment on or about , 2019.

Oppenheimer & Co.

GMP Securities

, 2019.

TABLE OF CONTENTS

	Page
Prospectus Summary	1
Risk Factors	14
Cautionary Note Regarding Forward-Looking Statements	44
Use of Proceeds	45
Dividend Policy	46
Capitalization	46
Dilution	47
Unaudited Pro Forma Combined Condensed Consolidated Financial Statements	48
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations	56
Business	74
Management	93
Executive and Director Compensation	99
Certain Relationships and Related Party Transactions	118
Security Ownership of Certain Beneficial Owners and Management	124
Description of Capital Stock	126
Shares Eligible for Future Sale	130
Underwriting	132
Legal Matters	138
Experts	138
Where You Can Find More Information	138
Index To Financial Statements	F-1

You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the SEC. Neither we nor the underwriters have authorized anyone to provide you with different information, and we take no responsibility for any other information others may give you. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell, or soliciting an offer to buy, these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock. Our business, financial condition, results of operations and prospects may have changed since such date.

Unless otherwise indicated, all references in this prospectus to “ConversionPoint Holdings” or “we,” “our,” “us” or similar terms refer to ConversionPoint Holdings, Inc. and its consolidated subsidiaries.

For investors outside the United States neither we nor any of the underwriters have taken any action to permit a public offering of the shares of our common stock or the possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus outside the United States.

This prospectus includes industry and market data that we obtained from our own internal estimates, industry publications and research, surveys and studies conducted by third parties. Industry publications and third party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third party research, surveys and studies are reliable, we have not independently verified such data. Accordingly, you are cautioned not to give undue weight to such information.

Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

EXPLANATORY NOTE

The completion of this offering is contingent upon the closings of the mergers described in this prospectus and the closings of the mergers are contingent upon the completion of this offering.

Prior to the purchase and sale of any shares of common stock subject to this offering, ConversionPoint Holdings, Inc., the registrant whose name appears on the cover page of this prospectus and the registration statement of which this prospectus forms a part, will change its name to ConversionPoint Technologies, Inc. and ConversionPoint Holdings, Inc.’s current wholly-owned subsidiary, ConversionPoint Technologies Inc., a Delaware corporation, will change its name to CPT, Inc.

PROSPECTUS SUMMARY

This summary highlights selected information included elsewhere in this prospectus and does not contain all of the information you should consider before buying shares of our common stock. You should read the entire prospectus carefully, especially the “Risk Factors” section and financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in shares of our common stock. Some of the statements in this prospectus constitute forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.” Unless the context requires otherwise, references in this prospectus to “our company,” “ConversionPoint Holdings,” “we,” “us” and “our” refer to ConversionPoint Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries.

Our Company

Our Business

Upon completion of this offering and the mergers described below, we expect our business will be comprised of the collective businesses of ConversionPoint Technologies Inc., a Delaware corporation, or ConversionPoint, and Inuvo, Inc., a Nevada corporation, or Inuvo. We will be a newly-combined technology company with a mission to provide a first-party data driven, end-to-end, artificial intelligence (AI)-powered e-commerce platform not previously available to small and mid-size businesses, or SMBs. We expect that this collective business will consist, in part, of ConversionPoint’s enterprise grade e-commerce technology, which currently is used to support over 100 premium online retailers and which harnesses first-party data from over a billion shoppers per month and billions of consumer interactions across over 860 brands to create optimized product experiences, and Inuvo’s market leading AI-powered advertising platform and first party data engine currently used to create the industry’s most accurate, real-time view of highly specific and custom audiences. We believe that the combination of ConversionPoint’s and Inuvo’s technologies will allow us, utilizing our combined expertise in real-time first-party data, AI and customer acquisition and engagement technology, to deliver an end-to-end, managed services and SaaS platform to SMBs that will empower them to succeed in a fragmented marketplace by creating a “modern front office” through the unification of real-time data, precision audiences and engaging page experiences resulting in increased conversions that drive billions of dollars of revenue.

Our combined businesses currently generate revenue from the following three business models: e-commerce, managed services, and SaaS. Today, e-commerce sales generate 18%, managed services generates 79% and SaaS generates 3% of our revenues on a combined basis. Upon merging, we expect to utilize one integrated, AI-powered, end-to-end platform to drive our revenue. We expect that our managed services will generate 40% and SaaS will generate 60% of our revenue.

As a combined company, we expect to integrate IntentKey, which is Inuvo’s AI-powered targeting platform, into our unified data platform. IntentKey enables campaigns to reach audiences that would typically be missed. The following are some key facts and statistics regarding IntentKey:

Over 10 years and millions of dollars have been invested in IntentKey

	o	IntentKey’s prospecting engine understands consumer online behavior to uncover consumer intent
	o	The developers of IntentKey were pioneers in the field of AI, which has been refined and optimized over the past 10 years

IntentKey learns consumer browsing intent

	o	IntentKey’s AI crawls millions of web sites daily to learn the intentions of web pages
	o	20 million new URLs are added daily to keep up with new trends

IntentKey creates precise customer profiles

	o	IntentKey’s system stores over 500 million anonymous consumer profiles
	o	IntentKey has 24 million targetable concepts allowing us to target hard to find in-market shoppers

IntentKey provides real time data updates

	o	500 million anonymous consumer records are updated continuously to predict consumer purchases
	o	IntentKey’s AI can detect in-market shopper activity within minutes

IntentKey’s AI by the numbers

	o	Over 500 million consumer profiles are updated daily
	o	AI processes 20 billion ad calls every day to update the profiles in real time
	o	3.5 billion URLs in IntentKey’s portfolio with 20 million added daily
	o	AI is managed in two co-located data centers to handle volume
	o	24 million important concepts identified (objects, ideas, emotions, place, etc.)

ConversionPoint, through its wholly-owned subsidiaries, helps e-commerce companies and brands target, convert, manage and re-engage their customers using sophisticated online tracking and data analytics. ConversionPoint’s suite of technologies manages and optimizes multiple aspects of e-commerce including: rich media content creation, product information management and syndication, audience targeting, conversion optimization, remarketing, logistics and customer management. ConversionPoint both delivers its technologies to its customers through software-as-a-service, or SaaS, and uses its technologies to provide managed digital marketing and e-commerce technology services to brands and advertisers, which we refer to as managed services. ConversionPoint also uses its own technologies to sell various products directly to consumers, which we refer to as e-commerce product sales. ConversionPoint’s vision is to simplify the entire e-commerce experience by integrating its technologies and offering a broad range of e-commerce solutions on a single, easy-to-use platform.

Inuvo develops data, analytics and artificial intelligence technology that empowers its clients to execute their business-to-business and business-to-consumer strategies. These capabilities allow Inuvo’s clients to engage with customers and prospects in a manner that drives closer collaboration through knowledge. These unique and patented technologies have been used to serve numerous world-renowned customers in industries that have included retail, automotive, insurance, health care, technology, telecommunications and finance.

The Mergers

We have entered into an agreement and plan of merger (as may be amended from time to time), which we refer to as the merger agreement, with ConversionPoint and Inuvo, providing for the combination of the companies under our company, which is a newly formed holding company. Under the merger agreement, a copy of which has been submitted to the SEC and is an exhibit to the registration statement of which this prospectus forms a part, our wholly-owned subsidiary, CPT Merger Sub, Inc., or ConversionPoint Merger Sub, will be merged with and into ConversionPoint with ConversionPoint as the surviving company, and our wholly-owned subsidiary, CPT Cigar Merger Sub, Inc., or Inuvo Merger Sub, will be merged with and into Inuvo with Inuvo as the surviving company. As a result, ConversionPoint and Inuvo will each become our wholly-owned subsidiaries. We refer to these mergers as the ConversionPoint merger and the Inuvo merger, respectively, and together as the mergers.

We have filed with the SEC a registration statement on Form S-4 in connection with the issuance of shares of our common stock in connection with the mergers and in connection with the solicitation of proxies from the stockholders of ConversionPoint and Inuvo to vote at special meetings of the stockholders of ConversionPoint and Inuvo that are being held on May 8, 2019 for the purpose of approving the merger agreement.

This offering is conditioned upon the stockholders of each of ConversionPoint and Inuvo approving the mergers and the successful closing of the mergers immediately prior to, or contemporaneously with, the completion of this offering, and the completion of the mergers is conditioned upon, among other things, us receiving at least $36.0 million in gross proceeds from this offering, which we refer to as the financing condition.

At or about the completion of the mergers and this offering, we expect to change our name to ConversionPoint Technologies, Inc. and change the name of ConversionPoint to CPT, Inc.

Industry Background

The e-commerce market is growing. According to a forecast published by e-Marketer.com in December 2018, worldwide e-commerce sales approximated $2.9 trillion during 2018. The U.S. e-commerce market is evolving and continues to be a high growth market as retailers and brands increase their online sales. According to forecast published by e-Marketer.com in February 2019, in the U.S. alone, over $523 billion in e-commerce product sales were consummated in 2018 and e-commerce sales are expected to grow between $70-$80 billion annually between 2017 and 2020. We believe this creates an increasingly large market opportunity for data driven e-commerce solutions to assist brands and retailers.

The e-commerce market is also increasingly complex. We believe that several significant trends have contributed to an increasing complexity and fragmentation of digital marketing and sales, including:

Multiple digital marketing channels. There are numerous digital marketing channels available, but these channels are fragmented and often lack integration.

Third party marketplaces. Third party marketplaces aggregate multiple sellers of similar products, thus creating control over marketplaces for themselves while offering little technical differentiation for consumer acquisition between sellers.

Increased use of mobile devices for e-commerce. The rapid adoption of mobile internet-enabled devices is transforming the way consumers shop and make purchase decisions.

Growth of additional online consumer touch points. Search engines, social networks, content rich advertorials and brand websites, have emerged as key influencers and important points of product research for consumers making purchase decisions

Consolidation of customer relationship management and marketing / advertising. A convergence of business-to-business and business-to-consumer customer data is a necessary requirement to delivering on the promise of consumer engagement.

Our Competitive Strengths

Our competitive strengths are comprised of the following elements:

Full suite of solutions. We provide a full suite of solutions to create and publish product experiences, target, convert and re-engage consumers, and manage payments and logistics, which have been designed to enable our customers to easily integrate with their business information systems. Our interactive content builder, content syndication and digital media optimization platforms are currently available as SaaS solutions and through managed services. Our retargeting and customer relationship management platforms are currently offered through managed services, however, both are actively being developed into SaaS solutions. We expect to combine all of our current technology solutions into an integrated platform to provide manufacturer brands a fully integrated self-serve SaaS offering.

Unified content creation and product management. ConversionPoint’s content builder and syndication technology provides customers with one interface to create interactive rich media product experiences, and publish such rich media content across ConversionPoint’s network of over 100 online retailers, which drives brands to use ConversionPoint’s technology.

Highly relevant and targeted ads. Through algorithmic audience segmentation technology, we deliver targeted ads to high value audiences at opportune times. These audiences can be segmented across a broad spectrum of behavioral and demographic attributes.

Experienced management team. We have a management team with deep operational experience in technology, software development, e-commerce, digital marketing, media buying and customer conversion.

	·	*Cutting edge engineering.* ConversionPoint engineering leverages modern technologies to solve complex problems using its proprietary development framework, including its full stack, continuous development ecosystem that enables it to accelerate new application and iterative development. ConversionPoint’s platform has been designed to enable its customers to easily integrate ConversionPoint’s technology with their business information systems.

	·	*Deep data analytics*. We gather vast amounts of data related to consumer online behavior and curate such data into customizable reports and dashboards that provide valuable and actionable insights. These reports improve visibility into a seamless and connected consumer purchase journey, enabling brands and advertisers to measure and optimize their digital marketing spend while increasing their customer life time value.

Strong intellectual property portfolio. We have 15 issued patents, 8 pending patents and four provisional patents.

Long-standing partnership and customer relationships. We have long-standing relationships with some of the largest and most well-established e-commerce retailers in the U.S. including Walmart, Lowe’s, Costco and Office Depot and we have long-standing customer relationships with brand customers including Dell, Intel, Activision, Sony, Garmin, Roku, Yahoo!, Google and Bing.

Sophisticated machine learning technology. Our sophisticated machine learning technology anonymously predicts and updates the interests of consumers on sites where we place advertising. We use our database of over 500 million machine profiles to develop audiences for our clients that are look- alike matches for actual purchasers of our clients’ products.

Our Growth Strategy

The primary elements of our growth strategy include:

Development of end-to-end unified SaaS offering. We expect to unify all of our technology platforms into one framework to provide a streamlined user experience for customers to leverage all of our applications through a SaaS model.

Expand salesforce to acquire new customers and online advertisers. We intend to increase our salesforce to expand our existing partnerships with leading online retailers and brands and to aggressively activate new online retail partnerships and new brand advertiser relationships.

Focus on SMBs. We believe that there is a significant opportunity for an end-to-end e-commerce technology solution for SMBs seeking to grow their online sales without dealing with the many challenges of integrating multiple point solutions. We intend to heavily market our platforms to SMBs.

Maintain innovation. We continue to develop and introduce new features and improved functionality to our platforms. Key initiatives include development of easy to use self-serve platforms for SMBs, and continued development of AI-enhanced marketing technologies, including, but not limited to, technology for syndicating customized rich media content and product page layouts based on consumer profiles and behavior.

Expand the number of online retailers supported by our content syndication platform. Our network already includes a multitude of online retailers such as Walmart, Lowe’s, Costco and Office Depot. We intend to expand our network of online retailers, which we believe will result in meaningful growth of both our brand customer base and the sales they process through our technology platforms.

Risks Associated with Our Business

Our business is subject to numerous risks, including risks associated with the businesses of ConversionPoint and Inuvo. These risks are more fully described in the section entitled “Risk Factors” beginning on page 14 of this prospectus. You should read these risks before you invest in our common stock. We may be unable, for many reasons, including those that are beyond our control, to implement our business strategy. In particular, risks associated with our business after the closings of the mergers include the following:

We do not have a history as a combined company. Failure to successfully combine the businesses of ConversionPoint and Inuvo, or to achieve integration in the expected time frame, may adversely affect our future results.

We face intense competition, and we may not be able to compete effectively, which could reduce demand for our products and adversely affect our business, growth, revenues and market share.

Because of ConversionPoint’s decision to shift its focus from e-commerce product sales to growing its managed services and SaaS businesses during 2018, ConversionPoint experienced a significant loss in 2018 as compared to 2017, a decline in revenues in 2018 from 2017 and may not achieve or sustain profitability in the future.

We may not be able to successfully develop our end-to-end SaaS offering.

The success of our company will depend on relationships with third parties and pre-existing customers of ConversionPoint and Inuvo, which relationships may be affected by customer preferences or public attitudes about the merger. Any adverse changes in these relationships could adversely affect our business, financial condition or results of operations.

Because the strategic relationships with ConversionPoint’s cutomers are based on individual purchase orders that can be terminated at any time, ConversionPoint’s results of operations can vary significantly from quarter to quarter.

Without obtaining adequate capital funding or improving ConversionPoint’s financial performance, ConversionPoint may not be able to continue as a going concern.

Our future results will suffer if we do not effectively manage our expanded operations following the mergers.

The loss of key personnel could have a material adverse effect on our business, financial condition or results of operations.

The price of shares of our common stock is likely to be volatile, and you could lose all or part of your investment.

As a result of these risks and other risks described under “Risk Factors,” there is no guarantee that we will experience growth or profitability in the future.

Implications of Being an Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of common stock that are held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We refer to the Jumpstart Our Business Startups Act of 2012 in this prospectus as the “JOBS Act,” and references in this prospectus to “emerging growth company” shall have the meaning associated with it in the JOBS Act.

As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

reduced disclosure about our executive compensation arrangements;

no requirement that we hold non-binding advisory votes on executive compensation or golden parachute arrangements; and

exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We have elected to adopt certain reduced disclosure requirements for purposes of the registration statement of which this prospectus is a part. In addition, for so long as we qualify as an emerging growth company, we expect to take advantage of certain of the reduced reporting and other requirements of the JOBS Act with respect to the periodic reports we will file with the SEC and proxy statements that we use to solicit proxies from our stockholders. As a result, the information contained in this prospectus and in our periodic reports and proxy statements may be different than the information provided by other public companies.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates for new or revised accounting standards.

For certain risks related to our status as an emerging growth company, see the section titled “Risk Factors — Risks Related to Our Common Stock and this Offering — We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our shares of common stock less attractive to investors.”

Corporate Information

We were incorporated in the State of Delaware on November 1, 2018. Upon completion of this offering, we will change our name to ConversionPoint Technologies, Inc. Our principal executive offices are located at 840 Newport Center Drive, Suite 450, Newport Beach, CA 92660. Our telephone number is (888) 706-6764. Our Internet website address is www.conversionpoint.com. ConversionPoint’s principal executive offices are located at 840 Newport Center Drive, Suite 450, Newport Beach, California 92660. ConversionPoint’s phone number is (888) 706-6764 and its website is www.conversionpoint.com. Inuvo’s principal executive offices are located at 500 President Clinton Avenue, Suite 300, Little Rock, Arkansas 72201. Inuvo’s phone number is (501) 205-8508 and its website is www.inuvo.com. The information contained on, or that can be accessed through, our website or the websites of ConversionPoint and Inuvo is not a part of this prospectus. We have included our, ConversionPoint’s and Inuvo’s website addresses in this prospectus solely as inactive textual references.

The Offering

Common stock offered by us:		shares ( shares if the underwriters exercise their option to purchase additional shares in full)

Assumed initial public offering price:		$ (the midpoint of the range set forth on the cover page of this prospectus) per share of common stock.


Common stock to be outstanding after the offering:		shares ( shares if the underwriters exercise their option to purchase additional shares in full)

Underwriters’ Option to Purchase Additional Shares		We have granted the underwriters an option, exercisable one or more times in whole or in part, to purchase up to additional shares of common stock from us at the public offering price less the underwriting discount within days from the date of this prospectus.

Use of proceeds:		We estimate that the net proceeds from the sale of shares of our common stock that we are selling in this offering will be approximately $ million (or approximately $ million if the underwriters’ option to purchase additional shares of common stock in this offering is exercised in full), based upon an assumed initial public offering price of $ per share, which is the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We currently intend to use approximately $15.9 million of the net proceeds from this offering to satisfy the cash portion of the merger consideration payable to Inuvo stockholders; approximately $8.9 million for the reduction of ConversionPoint and Inuvo indebtedness; and approximately $ million for general corporate purposes. See “Use of Proceeds” on page 45.

Lock-up:		Prior to the completion of this offering, we and each of our officers and directors, and 5% stockholders will agree, subject to certain exceptions, not to sell, offer, agree to sell, contract to sell, hypothecate, pledge, grant any option to purchase, make any short sale of, or otherwise dispose of or hedge, directly or indirectly, any units, shares of common stock, or any securities convertible into or exercisable or exchangeable for shares of common stock, for a period of 180 days after the closing of this offering. See “Underwriting” for additional information.

Risk Factors:		Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 14 and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

Mergers:		The completion of this offering is contingent upon the closings of the mergers described in this prospectus and the closings of the mergers are contingent upon the completion of this offering.
Proposed NASDAQ Capital Market Symbol:		We have applied to list our common stock on The NASDAQ Capital Market under the symbol “CPTI.”

Transfer Agent and Registrar:		Colonial Stock Transfer Co. Inc. is our transfer agent.

The number of shares of our common stock to be outstanding after this offering is based on:

approximately shares of our common stock outstanding upon completion of the mergers; and

shares of common stock to be issued and sold by us in this offering.

The number of shares of our common stock to be outstanding after this offering excludes as of , 2019:

an aggregate of shares of common stock underlying options granted by ConversionPoint and Inuvo that will be converted to options to purchase shares of our common stock in connection with the mergers, which options will be granted under our 2018 Omnibus Incentive Plan, or 2018 Plan;

shares of common stock reserved for future issuance under our 2018 Plan (which amount includes an aggregate of 1,300,000 shares of our common stock underlying options we expect to grant at the closing the mergers); and

an aggregate of shares of common stock issuable upon exercise of outstanding warrants with an average exercise price per share of $ .

Except as otherwise indicated herein, all information in this prospectus:

assumes the closing of the mergers; and

assumes no exercise of the underwriters’ option to purchase up to an additional shares of common stock.

Selected Historical Consolidated Financial Data of ConversionPoint

The selected historical consolidated financial data of ConversionPoint for the years ended December 31, 2018 and 2017 have been derived from ConversionPoint’s audited consolidated financial statements and related notes, included herein beginning at page F-3. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of ConversionPoint or us, and you should read the following information together with ConversionPoint’s audited consolidated financial statements, the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — ConversionPoint” beginning on page 56.

	As of and for the Years Ended December 31, 2018 and 2017
	2018			2017
Consolidated Statements of Operations Data:
Net revenues	$	39,780,941		$	49,920,621
Cost of revenues		29,898,887			37,776,678
Gross profit		9,882,054			12,143,943
Operating expenses		36,124,174			11,353,088
Interest expense, net		7,306,092			829,169
Income tax expense (benefit)		(308,719	)		(434,974	)
Net (loss) income available to common stock holders	$	(33,239,493	)	$	396,660
Net (loss) income per share Basic and Diluted	$	(2.43	)	$	0.04
Shares used in per share calculation		–			–
Basic and Diluted		13,676,220			9,670,302

Consolidated Balance Sheet Data:
Cash and cash equivalents	$	2,282,526		$	4,695,803
Total assets	$	48,961,064		$	55,435,947
Long-term debt (current and non-current)	$	5,767,996		$	11,221,123
Total liabilities	$	12,951,634		$	17,577,717
Total stockholders’ equity	$	36,009,430		$	37,858,230

Selected Historical Consolidated Financial Data of Inuvo

The selected historical consolidated financial data of Inuvo for each of the years ended December 31, 2018, 2017 and 2016, and as of December 31, 2018, 2017 and 2016 have been derived from Inuvo’s audited consolidated financial statements and related notes included herein beginning on page F-123. The selected historical consolidated financial data for the years ended December 31, 2015, and 2014 and as of December 31, 2015 and 2014 have been derived from Inuvo’s audited consolidated financial statements and related notes, which have not been incorporated by reference in this prospectus. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Inuvo or us, and you should read the following information together with Inuvo’s audited consolidated financial statements, the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Inuvo” beginning on page 56.

	As of and for the Years Ended December 31,
	2018			2017			2016			2015		2014
Consolidated Statements of Operations Data:
Net revenues	$	73,330,642		$	79,554,493		$	71,530,102		$	70,438,116	$	49,599,486
Cost of revenues.		29,921,482			36,669,543			21,364,795			23,721,996		20,424,561
Gross profit		43,409,160			42,884,950			50,165,307			46,716,120		29,174,925
Operating expenses		48,879,540			47,121,424			51,022,473			44,569,147		26,677,916
Interest expense, net		420,452			318,193			99,965			141,311		351,225
Net (loss) income from discontinued operations	$	–		$	(1,109	)	$	155,287		$	33,969	$	(40,670	)
Income (loss) available to common stock holders	$	(5,890,832	)	$	(3,057,700	)	$	(772,584	)	$	2,339,774	$	2,105,114
Net income (loss) from continuing operations per share Basic	$	(0.19	)	$	(0.11	)	$	(0.04	)	$	0.10	$	0.09
Net income (loss) from discontinued operations per share Basic	$	–		$	–		$	0.01		$	–	$	–
Net income (loss) per share Basic	$	(0.19	)	$	(0.11	)	$	(0.03	)	$	0.10	$	0.09
Shares used in per share calculation		–			–			–			–		–
Basic		31,019,623			28,155,320			24,660,995			24,249,852		23,527,872
Diluted		31,019,623			28,155,320			24,660,995			24,539,555		24,145.823

Consolidated Balance Sheet Data:
Cash and cash equivalents	$	228,956		$	4,084,686		$	3,946,804		$	4,257,204	$	3,714.525
Total assets	$	28,665,882		$	38,247,836		$	27,561,139		$	28,732,526	$	25,606,677
Long term debt (current and noncurrent)	$	3,109,853		$	4,900,000		$	–		$	–	$	3,626,609
Total liabilities	$	17,632,067		$	24,160,494		$	16,035.347		$	17,772,082	$	17,332,942
Total stockholders’ equity	$	11,033,815		$	14,087,342		$	11,525,792		$	10,960,444	$	8,273,735

Summary Selected Unaudited Pro Forma Combined Condensed Consolidated Financial Information

The following selected unaudited pro forma combined condensed consolidated financial information has been prepared to illustrate the effect of the mergers. The unaudited pro forma combined condensed consolidated balance sheet information gives effect to the mergers as if the mergers had occurred on December 31, 2018. The unaudited pro forma combined condensed consolidated statements of operations information for the year ended December 31, 2018 gives effect to the mergers as if the mergers had occurred on January 1, 2018.

This unaudited pro forma combined condensed consolidated financial information is for informational purposes only. We have based the pro forma adjustments upon available information and certain assumptions that we believe are reasonable under the circumstances. We describe in greater detail the assumptions underlying the pro forma adjustments in the accompanying notes, which you should read in conjunction with these unaudited pro forma combined condensed consolidated financial statements. In many cases, we based these assumptions on preliminary information and estimates. The actual adjustments to our audited combined financial statements will depend upon a number of factors and additional information that will be available on or after the closing date of this offering. A final determination of the fair value of Inuvo’s assets and liabilities will be based on the actual net tangible and intangible assets and liabilities that exist as of the date of closing of the mergers and, therefore, cannot be made prior to that date. Additionally, the value of the portion of the merger consideration to be paid in shares of our common stock will be determined based on the trading price of our common stock at the time of the closing of the mergers. Accordingly, the actual adjustments that will appear in our financial statements will differ from these pro forma adjustments, and those differences may be material.

The unaudited pro forma combined condensed consolidated financial statements do not purport to represent what our results of operations or financial condition would have been had the mergers actually occurred on the assumed dates, nor do they purport to project our results of operations or financial condition for any future period or future date. You should read the unaudited pro forma combined condensed consolidated financial statements in conjunction with “Use of Proceeds,” “Capitalization,” “Selected Historical Consolidated Financial Data of ConversionPoint,” “Selected Historical Consolidated Financial Data of Inuvo,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the historical financial statements, including the related notes thereto, appearing elsewhere in this offering memorandum.

The unaudited pro forma combined condensed consolidated financial information should not be considered predictive of results that may be realized in the future.

	Year Ended December 31, 2018 (unaudited)

Net revenues	$	113,111,583
Cost of revenues		59,820,369
Gross profit		53,291,214
Operating expenses		–
Sales and marketing		37,790,663
General and administrative		40,196,731
Amortization of intangibles assets		13,683,121
Total operating expenses		91,670,515

Operating income (loss)		(38,379,301	)
Interest expense, net		6,107,813
Loss from continuing operations before taxes		(44,487,114	)
Income tax expense (benefit)		(308,719	)
Net income (loss) from continuing operations		(44,178,395	)
Net income (loss)	$	(44,178,395	)
Net loss per share, basic and diluted	$	(1.71	)
Weighted-average shares outstanding, basic and diluted		25,805,497

The following summary balance sheet data as of December 31, 2018 is presented:

on a pro forma basis after giving effect to the completion of the mergers that are expected to occur prior to, or contemporaneously with, the completion of this offering; and

on a pro forma as adjusted basis after giving effect to the sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

	As of December 31, 2018 (unaudited)
	Pro Forma			Pro Forma as Adjusted⁽¹⁾

Cash and cash equivalents	$	13,686,217		$
Other current assets		12,548,142
Other long-term assets		125,986,297
Total assets		152,220,656
Accounts payable, accrued expenses and other current liabilities		22,197,511
Other long-term liabilities		193,007
Total liabilities		22,390,518
Common stock		25,805
Additional paid-in capital		173,672,294
Accumulated deficit		(43,867,961	)
Total stockholders’ equity		129,830,138
Total liabilities and stockholders’ equity		152,220,656

(1)

Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) each of pro forma as adjusted cash and cash equivalents, total assets and total stockholders’ equity (deficit) by approximately $ million, $ million and $ million, respectively, assuming that the number of shares we are offering, as set forth on the cover page of this prospectus, remains the same and the underwriters do not exercise their option to purchase additional shares. Depending on market conditions and other considerations at the time we price this offering, we may sell a greater or lesser number of shares than the number set forth on the cover page of this prospectus. An increase (decrease) of 1.0 million shares in the number of shares we are offering would increase (decrease) each of pro forma as adjusted cash and cash equivalents, total assets and total stockholders’ equity (deficit) by approximately $ million, $ million and $ million, respectively, assuming an initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions payable by us. An increase of 1.0 million shares in the number of shares we are offering, together with a $1.00 increase in the public offering price per share, would increase each of pro forma as adjusted cash and cash equivalents, total assets and total stockholders’ equity (deficit) by approximately $ million, $ million and $ million, respectively. A decrease of 1.0 million shares in the number of shares we are offering, together with a $1.00 decrease in the public offering price per share, would decrease each of pro forma as adjusted cash and cash equivalents, total assets and total stockholders’ equity (deficit) by approximately $ million, $ million and $ million, respectively.

RISK FACTORS

Investing in shares of our common stock involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this prospectus, including our, ConversionPoint’s and Inuvo’s financial statements and the related notes appearing at the end of this prospectus, before making your decision to invest in shares of our common stock. We cannot assure you that any of the events discussed in the risk factors below will not occur. These risks could have a material and adverse impact on our business, results of operations, financial condition or prospects. If that were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.

This prospectus also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks faced by us described below and elsewhere in this prospectus. See “Cautionary Note Regarding Forward-Looking Statements” for information relating to these forward-looking statements.

Risks Relating to ConversionPoint’s Business

Because of ConversionPoint’s decision to shift its focus from e-commerce product sales to growing its managed services and SaaS businesses during 2018, ConversionPoint reported a net loss of approximately $33.2 million in 2018 as compared to net income of approximately $400,000 in 2017 and its net revenues in 2018 declined approximately $10.2 million from approximately $50.0 million in 2017 to approximately $39.8 million in 2018. As of December 31, 2018, ConversionPoint had an accumulated deficit of approximately $34.4 million. ConversionPoint expects net losses to decrease during 2019, as it focuses on growing its higher margin managed services and SaaS revenues. These efforts may prove more expensive than ConversionPoint currently anticipates, and it may not succeed in increasing its revenue sufficiently, or at all, to achieve and sustain profitability. Growth of ConversionPoint’s revenue may slow or revenue may decline for a number of possible reasons, including a decrease in its ability to attract and retain customers, increasing competition, decreasing growth of its overall market, and an inability to timely and cost-effectively introduce new products and services that are favorably received by customers. If ConversionPoint is unable to meet these risks and challenges as it encounters them, its business and operating results may be adversely affected, and even if it were able to achieve profitability, ConversionPoint may not be able to sustain or increase such profitability.

ConversionPoint’s growth depends in part on the success of its strategic relationships with third parties.

ConversionPoint anticipates that it will continue to depend on its relationships with various third parties, including online retailers, ad networks, affiliate marketing companies, fulfillment companies, credit card processors, and technology and content providers, in order to grow its business. Identifying, negotiating and documenting relationships with these third parties may require significant time and resources as does integrating their content and technology with ConversionPoint’s solutions. If the third party content or technology integrated with ConversionPoint’s solutions is not well received by its customers, ConversionPoint’s brand and reputation could be negatively affected. ConversionPoint’s agreements with third party business partners such as retailers like Walmart, Lowe’s, Costco and Office Depot, are typically non-exclusive and do not prohibit them from working with ConversionPoint’s competitors or from offering competing services. If and to the extent that any of these third parties compete with ConversionPoint or cease to do business with ConversionPoint, it could hurt ConversionPoint’s growth prospects.

The strategic relationships with ConversionPoint’s cutomers are based on individual purchase orders that can be terminated at any time. While ConversionPoint does not depend on any single customer for a significant portion of its revenues, there is a risk that existing customers will terminate their relationships with ConversionPoint. There is also a risk that ConversionPoint’s customers will attempt to impose new or additional requirements on ConversionPoint that reduce the profitability of those customers. If ConversionPoint does not develop relationships with new customers, it may not be able to increase, or even maintain, its revenues, and its financial condition, results of operations, business and/or prospects may be materially adversely affected.

ConversionPoint operates in a rapidly developing and changing industry, which makes it difficult to evaluate its current business and future prospects.

ConversionPoint has encountered and will continue to encounter risks and difficulties frequently experienced by companies in rapidly developing and changing industries, including challenges in hiring and retaining qualified employees, determining appropriate investments of its limited resources, market acceptance of its existing and future solutions, effectively integrating acquired software platforms, competition from established companies with greater financial and technical resources, acquiring and retaining customers, making improvements to its existing solutions and developing new solutions. ConversionPoint’s current operations infrastructure may require changes for ConversionPoint to achieve profitability and scale its operations efficiently. If ConversionPoint fails to implement these changes in a timely manner or is unable to implement them due to factors beyond its control, its business may suffer, its revenue may decline, and it may not be able to achieve further growth or profitability. It cannot be assured that ConversionPoint will be successful in addressing these and other challenges it may face in the future.

If the market for ConversionPoint’s solutions slows or declines, its business, growth prospects, and financial condition would be adversely affected.

The future growth of digital marketing and e-commerce could be constrained by the level of acceptance and expansion of digital marketing and e-commerce SaaS solutions and managed services. Even if these services become widely adopted, brands, product companies, advertisers and agencies may not make significant investments in such solutions. It is difficult to predict customer adoption rates, customer demand for ConversionPoint’s technologies, the future growth rate and size of the digital marketing solutions or the entry of competitive solutions. The continued expansion of the market for digital marketing solutions depends on a number of factors, including the continued growth of e-commerce, the online advertising market, and social and mobile advertising, and the cost, performance and perceived value associated with online marketing solutions, as well as ConversionPoint’s ability to address security and privacy concerns and comply with applicable legal requirements which are continually evolving.

ConversionPoint expects to derive, in the future, a substantial portion of its revenue from the sale of its solutions delivered under a SaaS model. As a result, widespread use and acceptance of this business model is critical to its future growth and success. Under the more traditional license model for software procurement, users of software typically run the applications in-house on their own hardware. Because many companies are generally predisposed to maintaining control of their information technology systems and infrastructure, there may be resistance to the concept of accessing software functionality as a service provided by a third party. In addition, the market for SaaS solutions is still evolving, and existing and new market participants may introduce new types of solutions and different approaches to enable organizations to address their needs. If the market for SaaS solutions fails to grow or grows slower than ConversionPoint currently anticipates, demand for its solutions and its revenue, gross margin and other operating results would be negatively impacted.

Without obtaining adequate capital funding or improving ConversionPoint’s financial performance, ConversionPoint may not be able to continue as a going concern.

The report of ConversionPoint’s independent registered public accounting firm for the year ended December 31, 2018 contains an explanatory paragraph indicating that there is substantial doubt as to ConversionPoint’s ability to continue as a going concern as a result of the significant loss from operations in 2018, negative operating cash flows and a significant accumulated deficit. This report is dated March 15, 2019 and does not take into account any proceeds from this offering. ConversionPoint’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which contemplate that ConversionPoint will continue to operate as a going concern. ConversionPoint’s financial statements do not contain any adjustments that might result if it were unable to continue as a going concern. ConversionPoint’s ability to continue as a going concern will be determined by its and ConversionPoint Holdings’ ability to complete this offering. If ConversionPoint is unable to obtain adequate funding from this offering or in the future, or if ConversionPoint is unable to grow its revenue to achieve and sustain profitability, ConversionPoint may not be able to continue as a going concern.

If ConversionPoint does not retain its senior management team and key employees, or if it fails to attract and retain additional highly skilled sales talent, ConversionPoint may not be able to sustain its growth or achieve its business objectives.

ConversionPoint’s future success is substantially dependent on the continued service of its senior management team including, among others, Robert Tallack, President and Chief Executive Officer and Raghu Kilambi, Vice Chair and Chief Financial Officer. ConversionPoint’s future success also depends on its ability to continue to attract, retain, integrate and motivate highly skilled technical, sales and administrative employees. Competition for these employees in ConversionPoint’s industry is intense. As a result, ConversionPoint may be unable to attract or retain management executives and other key personnel that are critical to ConversionPoint’s success, resulting in harm to ConversionPoint’s key client relationships, loss of key information, expertise or know-how and unanticipated recruitment and training costs. The loss of the services of ConversionPoint’s senior management or other key employees could make it more difficult to successfully operate ConversionPoint’s business and pursue its business goals.

ConversionPoint stores personally identifiable information of its customers and consumers which is subject to strict privacy and data protection regulation, which can change in the future.

ConversionPoint stores personally identifiable information, such as credit card information, of its customers and consumers who purchase products and services from it to enable payment for such products and services and for shipping such products. ConversionPoint also captures and stores information from consumers and customers such as IP addresses, online behavioral information and geographic information through ConversionPoint’s web analytics tracking solutions, that enable ConversionPoint to display digital advertisements to targeted population segments, as well as collect, manage and store data regarding the measurement and valuation of their digital advertising and marketing campaigns. As such, ConversionPoint is subject to federal, state, provincial and foreign laws regarding privacy and protection of data. Some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data and ConversionPoint’s agreements with certain merchants require ConversionPoint to notify them in the event of a security incident. Evolving regulations regarding personal data and personal information, in the European Union and elsewhere, including, but not limited to, the General Data Protection Regulation, which we refer to as GDPR, and the California Consumer Privacy Act of 2018, especially relating to classification of IP addresses, machine identification, location data and other information, may limit or inhibit ConversionPoint’s ability to operate or expand its business. Such laws and regulations require or may require ConversionPoint or its customers to implement privacy and security policies, permit consumers to access, correct or delete personal information stored or maintained by ConversionPoint or its customers, inform individuals of security incidents that affect their personal information, and, in some cases, obtain consent to use personal information for specified purposes. Other proposed legislation could, if enacted, impose additional requirements and prohibit the use of specific technologies, such as those that track individuals’ activities on web pages or record when individuals click on a link contained in an email message. Such laws and regulations could restrict ConversionPoint’s ability and its customers’ ability to collect and use web browsing data and personal information, which may reduce ConversionPoint’s customers’ demand for its solutions.

Changing industry standards and industry self-regulation regarding the collection, use and disclosure of data may have similar effects. Existing and future privacy and data protection laws and increasing sensitivity of consumers to unauthorized disclosures and use of personal information may also negatively affect the public’s perception of ConversionPoint’s sales and marketing practices. If ConversionPoint’s solutions are perceived to cause, or are otherwise unfavorably associated with, invasions of privacy, whether or not illegal, ConversionPoint or its customers may be subject to public criticism.

Any failure on ConversionPoint’s part to comply with applicable privacy and data protection laws, regulations, policies and standards or any inability to adequately address privacy concerns associated with ConversionPoint’s solutions, even if unfounded, could subject ConversionPoint to liability, damage ConversionPoint’s reputation, impair its sales and harm its business. Furthermore, the costs of compliance with, and other burdens imposed by, such laws, regulations, policies and standards may result in a decrease in ConversionPoint’s profitability and/or limit adoption of and demand for its solutions.

Domestic and foreign government regulation and enforcement of data tracking technologies is expansive, not clearly defined and rapidly evolving. Such regulation could directly restrict portions of ConversionPoint’s business or indirectly affect its business by constraining its customers’ use of ConversionPoint’s platform.

ConversionPoint’s services, through the use of cookies and tracking pixel technologies, enable ConversionPoint and its customers to track consumer online behavior and display digital advertisements to targeted population segments at opportune times. Federal, state, municipal and/or foreign governments and agencies have adopted and could in the future adopt, modify, apply or enforce laws, policies, and regulations covering technologies such as cookies and tracking pixels, that are used to collect, store and/or process data. The uncertainty and inconsistency among these laws, coupled with a lack of guidance as to how these laws will be applied to current and emerging Internet and mobile technologies, creates a risk that regulators, lawmakers or other third parties may assert claims, pursue investigations or audits, or engage in civil or criminal enforcement. These actions could limit the market for ConversionPoint’s services or impose burdensome requirements on its services and/or customers’ use of its services, thereby rendering ConversionPoint’s business unprofitable.

This area of the law is currently under intense government scrutiny and many governments, including the U.S. government, are considering a variety of proposed regulations that would restrict or impact the conditions under which data obtained from or through the activities of visitors could be collected, processed or stored. ConversionPoint may have to develop alternative systems to collect, store and manage user data if users block cookies, tracking pixels or regulations introduce barriers to collecting cookie data or using tracking pixels. In addition, third parties may develop technology or policies to track consumer online behavior, including through next-generation web browsers or other means, which could subsequently prevent ConversionPoint from directly importing data to ConversionPoint’s systems. ConversionPoint may not be able to develop adequate alternatives to cookie data and pixel data collection, which could negatively impact ConversionPoint’s revenue and operating results.

If the use of “cookie” tracking technologies is restricted, regulated or otherwise blocked, or if changes in our industry cause cookies to become less reliable or acceptable as a means of tracking consumer behavior, ConversionPoint’s business and financial results could be negatively impacted.

Cookies are small data files that are sent by websites and stored locally on an internet user’s computer or mobile device. ConversionPoint uses cookies to track consumer online behavior and display digital advertisements to targeted population segments at opportune times. However, internet users can easily disable, delete and block cookies directly through browser settings or through other software, browser extensions or hardware platforms that physically block cookies from being created and stored.

There have been efforts within ConversionPoint’s industry to replace cookies with alternative tracking technologies. To the extent these efforts are successful, ConversionPoint may have difficulty adapting to those new tracking technologies and may become dependent on third parties for access to tracking data.

ConversionPoint may have to develop alternative systems to collect user data if users block cookies or regulations introduce barriers to collecting cookie data. In addition, third parties may develop technology or policies to harvest user data including through next-generation web browsers or other means, which could subsequently prevent ConversionPoint from directly importing data to its systems. ConversionPoint may not be able to develop adequate alternatives to cookie data collection, which could negatively impact ConversionPoint’s business and financial results.

Cybersecurity incidents could harm ConversionPoint’s business and negatively impact its financial results.

ConversionPoint stores personally identifiable information, credit card information and other confidential information of its customers and consumers. ConversionPoint may experience successful attempts by third parties to obtain unauthorized access to such personally identifiable information. This information could also be otherwise exposed through human error or malfeasance. The unauthorized access or compromise of this personally identifiable information could have an adverse effect on ConversionPoint’s business, financial condition and results of operations.

Cybersecurity incidents could endanger the confidentiality, integrity and availability of ConversionPoint’s information resources and the information it collects, uses, stores and discloses. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to ConversionPoint’s information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. ConversionPoint believes that it takes reasonable steps to protect the security, integrity and confidentiality of the information ConversionPoint collects, uses, stores, and discloses, and it takes steps to strengthen its security protocols and infrastructure, but there is no guarantee that inadvertent or unauthorized data access will not occur despite its efforts. For example, ConversionPoint could be negatively impacted by software bugs or other technical malfunctions, as well as employee error or malfeasance. Any unauthorized access or use of information, virus or similar breach or disruption to ConversionPoint’s, its customers’, or its partners’ systems could result in disrupted operations, loss of information, damage to ConversionPoint’s reputation and customer relationships, early termination of ConversionPoint’s contracts and other business losses, indemnification of its customers, liability for stolen assets or information, increased cybersecurity protection and insurance costs, financial penalties, litigation, regulatory investigations and other significant liabilities, any of which could materially harm ConversionPoint’s business.

If ConversionPoint fails to maintain a consistently high level of customer service, its brand, business and financial results may be harmed.

ConversionPoint believes its focus on customer service and support is critical to onboarding new customers, retaining existing customers and growing ConversionPoint’s business. If ConversionPoint is unable to maintain a consistently high level of customer service and technical support, ConversionPoint may lose existing customers. In addition, ConversionPoint’s ability to attract new customers is highly dependent on ConversionPoint’s reputation and on positive recommendations from its existing customers. Any failure to maintain a consistently high level of customer service, or a market perception that ConversionPoint does not maintain high-quality customer service, could adversely affect its reputation and the number of positive customer referrals that ConversionPoint receives.

If ConversionPoint cannot efficiently implement its solutions for customers, ConversionPoint may lose customers.

ConversionPoint’s customers have a variety of different data formats, enterprise applications and infrastructure and ConversionPoint’s platform must support its customers’ data formats and integrate with complex enterprise applications and infrastructures. If ConversionPoint’s platform does not support a customer’s required data format or appropriately integrate with a customer’s applications and infrastructure, then ConversionPoint may choose to configure its platform to do so, which would increase ConversionPoint’s expenses. Additionally, ConversionPoint does not control its customers’ implementation schedules. As a result, as ConversionPoint has experienced in the past, if ConversionPoint’s customers do not allocate internal resources necessary to meet their implementation responsibilities or if ConversionPoint faces unanticipated implementation difficulties, the implementation may be delayed. If the customer implementation process is not executed successfully or if execution is delayed, ConversionPoint could incur significant costs, customers could become dissatisfied and decide not to increase usage of ConversionPoint’s platform, not to use ConversionPoint’s platform beyond an initial period prior to their term commitment and revenue recognition could be delayed. In addition, competitors with more efficient operating models that have lower implementation costs, could penetrate ConversionPoint’s customer relationships.

Additionally, large customers may request or require specific features or functions unique to their particular business processes, which increase ConversionPoint’s upfront investment in sales and deployment efforts and the revenues resulting from the customers under ConversionPoint’s typical contract term may not cover ConversionPoint’s upfront investments. If prospective large customers require specific features or functions that ConversionPoint does not offer, then the market for ConversionPoint’s solutions will be more limited and ConversionPoint’s business could suffer. If ConversionPoint is unable to address the needs of these customers in a timely fashion or further develop and enhance ConversionPoint’s solutions, these customers may not renew their subscriptions, seek to terminate their relationship with ConversionPoint, renew on less favorable terms, or reduce their marketing spend on ConversionPoint’s platform. If any of these were to occur, ConversionPoint’s revenues may decline and its operating results could be adversely affected.

If ConversionPoint fails to manage and increase the capacity of its hosted infrastructure, ConversionPoint’s customers may be unable to use ConversionPoint’s platform, which could harm ConversionPoint’s reputation and demand for its solutions.

ConversionPoint has experienced significant growth in the number of users, transactions and data that ConversionPoint’s hosting infrastructure supports. ConversionPoint seeks to maintain sufficient excess capacity in its third party hosted infrastructure to be sufficiently flexible and scalable to meet the needs of all of its customers. However, the provision of new hosting infrastructure requires significant lead time. If ConversionPoint does not accurately predict its infrastructure capacity requirements, its customers could experience service outages that may subject ConversionPoint to financial penalties or other liabilities, result in customer losses, harm ConversionPoint’s reputation and adversely affect its ability to grow its revenue.

Mobile and other devices are increasingly being used to conduct e-commerce, and if ConversionPoint’s solutions do not operate as effectively, when accessed through these devices, or in different formats and resolutions, ConversionPoint’s customers may not be satisfied with ConversionPoint’s services, which could harm ConversionPoint’s business.

Effective functionality on mobile and other devices, and across multiple platforms and using different resolutions, is integral to ConversionPoint’s long-term development and growth strategy. In the event that ConversionPoint’s customers have difficulty accessing and using ConversionPoint’s platform on mobile and other devices, ConversionPoint’s business and operating results could be adversely affected. In addition, ConversionPoint is taking steps to comply with the Twenty-First Century Communications and Video Accessibility Act and similar accessibilities laws that require making the internet fully accessible to people with disabilities. There can be no assurance we can do so at a reasonable cost or at all.

ConversionPoint must develop and introduce enhancements and new features that achieve market acceptance or that keep pace with technological developments to remain competitive in the evolving online marketing industry.

ConversionPoint operates in a dynamic market characterized by rapidly changing technologies and industry and legal standards. The introduction of new digital marketing solutions by ConversionPoint’s competitors, the market acceptance of solutions based on new or alternative technologies, or the emergence of new industry standards could render ConversionPoint’s platforms obsolete. ConversionPoint’s ability to compete successfully, attract new customers and increase revenues from existing customers depends in large part on its ability to enhance and improve its existing digital marketing solutions and to continually introduce or acquire new features that are in demand by the markets ConversionPoint serves. ConversionPoint is in the process of a significant upgrade to its software platform infrastructure, and the success of this project or any other enhancement or new solution depends on several factors, including, timely completion, adequate quality testing, and appropriate introduction and market acceptance. Any new platform or feature that ConversionPoint develops or acquires may not be introduced in a timely manner, may contain defects, may be costlier to complete than ConversionPoint anticipates or may not achieve the broad market acceptance necessary to generate significant revenues. If ConversionPoint is unable to complete the upgrade to its software platform infrastructure and integrate its various service offerings effectively or in a timely manner, or to anticipate or timely and successfully develop or acquire new offerings, including its end-to-end SaaS offering, or features or enhance ConversionPoint’s existing platform to meet customer requirements, ConversionPoint’s business and operating results will be adversely affected.

ConversionPoint’s business and prospects would be harmed if changes to technologies used in its platform or new versions or upgrades of operating systems and internet browsers adversely impact the process by which merchants, brands and consumers interface with ConversionPoint’s platform.

In the future, providers of internet browsers could introduce new features that would make it difficult for ConversionPoint to provide certain of its services such as retargeter, or for ConversionPoint’s customers to use ConversionPoint’s platform. In addition, internet browsers for desktop or mobile devices could introduce new features, change existing browser specifications such that they would be incompatible with ConversionPoint’s platform, or prevent customers from accessing ConversionPoint’s platform. In addition, the growing use of ad blockers in internet browsers could impact ConversionPoint’s ability to serve ads. Any changes to technologies used in ConversionPoint’s platform, to existing features that ConversionPoint relies on, or to operating systems or internet browsers that make it difficult for customers to access or use ConversionPoint’s platform, may make it more difficult for ConversionPoint to maintain or increase its revenues and could adversely impact its business and prospects.

ConversionPoint’s business is exposed to a multitude of risks based on its acceptance of credit cards and reliance on third party credit card processors.

ConversionPoint’s customers typically pay for their orders with debit cards or credit cards, and ConversionPoint depends on third party credit card processing in connection with online product sales. There are many risks related to ConversionPoint’s acceptance of credit cards, the collection and storage of credit card data, and ConversionPoint’s dependence on third party credit card processors to process payments.

ConversionPoint’s failure to limit fraudulent transactions conducted on its websites or through its platform, such as through use of stolen credit card numbers, could subject ConversionPoint to liability and adversely impact its reputation. Under credit card association rules, penalties may be imposed at the discretion of the association for inadequate fraud protection. Any such potential penalties would be imposed on ConversionPoint’s credit card processor by the association. Under ConversionPoint’s contracts with ConversionPoint’s payment processors, ConversionPoint is required to reimburse them for such penalties. ConversionPoint faces the risk that it may fail to maintain an adequate level of fraud protection and that one or more credit card associations or other processors may, at any time, assess penalties against ConversionPoint or terminate ConversionPoint’s ability to accept credit card payments or other form of online payments from customers, which would have a material adverse effect on ConversionPoint’s business, financial condition and operating results. Although ConversionPoint does not believe there has been a compromise of customer information, it is possible that either ConversionPoint or its subsidiaries may not be in full compliance with these standards. Accordingly, ConversionPoint could be fined, which could impact its financial condition, or certain of ConversionPoint’s products could be suspended, which would cause ConversionPoint to be unable to process payments using credit cards. If ConversionPoint is unable to accept credit card payments, ConversionPoint’s business, financial condition and operating results may be adversely affected.

In addition, most of ConversionPoint’s e-commerce product sale transactions are deemed high risk, and there often exists a shortage of merchant processors able or willing to process such online transactions. Relevant factors typically used in determining whether a credit card transaction is high risk, include, the nature of the industry (health and wellness products are considered high risk), high monthly sales volumes or individual transactions, the acceptance of recurring payments, the sale of subscription-based products and card not present (CNP) transactions (i.e., transactions made where the cardholder does not physically present the credit card for a merchant’s visual examination, which is the case in all online credit card transactions). Almost all of ConversionPoint’s product sales, which constituted 83.4% and 51.0% of ConversionPoint’s net revenues in 2017 and 2018, respectively, are deemed “high” risk because they either involve health and wellness products, a high number of individual monthly transactions, recurring payments and/or CNP transactions.

In the past, ConversionPoint has had to decrease the volume of sales as a result of the shortage of available merchant processing. The future shortage of merchant processing available to process payments for ConversionPoint’s e-commerce product sales and the sales of ConversionPoint’s customers’ products, could result in a decrease in the volume of products ConversionPoint or its managed service customers are able to sell and could have a material adverse effect on ConversionPoint’s revenue. Further, such credit card processors require ConversionPoint to maintain significant reserves (often up to 10% of the sale) to cover refunds, chargebacks and fraud, which results in delays of up to 6 months in receiving such revenue. If ConversionPoint’s refunds or chargebacks increase, ConversionPoint’s processors could require ConversionPoint to increase such reserves, increase fees or terminate their contracts with ConversionPoint, which would have an adverse effect on ConversionPoint’s financial condition.

In addition, ConversionPoint could be liable if there is a breach of security with respect to the payment information it stores. Online commerce and communications depend on the secure transmission of confidential information over public networks. ConversionPoint relies on encryption and authentication technology to authenticate and secure the transmission of confidential information, including customer credit card numbers. However, ConversionPoint cannot ensure this technology will prevent breaches of the systems it uses to protect customer payment data.

In the future, ConversionPoint may explore accepting various forms of payment that may have higher fees and costs than ConversionPoint’s current payment methods. If ConversionPoint’s customers utilize alternative payment methods, ConversionPoint’s payment costs could increase and ConversionPoint’s operating results could be adversely impacted.

ConversionPoint derives a portion of its revenue from monthly subscription agreements, and intends to increase the proportion of its revenue which is generated through monthly subscription agreements.

ConversionPoint derives a portion of its revenue from subscription agreements and intends to increase the portion of its revenue which is generated through subscription agreements. Subscription agreements are typically month-to-month or one year in length, and often terminable on 30 days’ notice. As a result, a portion of the revenue ConversionPoint reports in each quarter is generated from customer agreements entered into during previous periods. Consequently, a decline in new or renewed subscriptions in any one quarter may not be reflected in ConversionPoint’s financial performance in that quarter but might negatively affect ConversionPoint’s revenue in future quarters. Accordingly, the effect of significant declines in sales and market acceptance of ConversionPoint’s solutions may not be reflected in ConversionPoint’s short-term results of operations.

ConversionPoint derives some of its revenue from usage-based pricing models, which makes it difficult to forecast revenues from its current customers and future prospects.

Some of ConversionPoint’s services are offered on a usage-based pricing model in which ConversionPoint’s fees are calculated based on the customer’s use of aspects of ConversionPoint’s services. This pricing model makes it difficult to accurately forecast revenues, because ConversionPoint’s customers’ activities on ConversionPoint’s platform may vary from month to month based on the variety of industries in which ConversionPoint’s advertisers operate, the seasonality of those industries and fluctuations in ConversionPoint’s customers’ marketing budgets and other factors. If ConversionPoint incorrectly forecasts revenues for these customers and the amount of revenue is less than projections ConversionPoint provides to investors, the price of ConversionPoint’s common stock could decline substantially. Additionally, if ConversionPoint overestimates usage, ConversionPoint may incur additional expenses in adding infrastructure, without a commensurate increase in revenues, which would harm ConversionPoint’s gross margins and other operating results.

ConversionPoint obtains certain products it sells from third parties.

ConversionPoint derives a portion of its revenue from direct online product sales, and sources certain products it sells from third-parties and relies on them to meet its sales needs. ConversionPoint plans to continue to rely upon such third parties to supply products it sells. If these suppliers fail to maintain high manufacturing standards and processes, it could harm ConversionPoint’s business. In the event of a natural disaster or business failure, including due to bankruptcy of a supplier, ConversionPoint may not be able to secure replacement products on a timely or cost-effective basis, which could result in delays, additional costs and reduced revenues. In addition, price increases from a supplier would directly affect ConversionPoint’s profitability if it is not able to pass price increases on to customers.

As a direct-to-consumer marketer, ConversionPoint is subject to extensive regulation. If ConversionPoint is required to pay damages or expenses in connection with legal claims, ConversionPoint’s business, financial condition and results of operations may be harmed.

Historically, a substantial portion of ConversionPoint’s revenue has been derived from negative option marketing, in which consumers sign up to receive a free trial product and to be billed monthly for continued delivery of such product until such consumer affirmatively cancels his or her subscription. Such products typically include monthly subscriptions for health and wellness e-books, and health and beauty products such as facial creams and nutritional supplements. During 2017 and 2018, ConversionPoint generated net revenues of $35,912,210, and $12,266,634, respectively, through such trial offer sales, which represented, 71.9% and 30.8%, respectively, of ConversionPoint’s net revenues. Although ConversionPoint continues, and contemplates continuing, to engage in e-commerce product sales through negative option marketing, since the second quarter of 2018, ConversionPoint has shifted its focus from e-commerce product sales to growing its managed services and SaaS businesses. As a direct-to-consumer marketer, ConversionPoint is subject to various federal, state and foreign laws and regulations such as the Restore Online Shoppers Confidence Act, which we refer to as ROSCA, and the Dot Com Disclosure Guidance published by the United States Federal Trade Commission (“FTC”), which requires certain disclosures to prevent unfair, deceptive or misleading online advertisements. ConversionPoint’s failure to comply with these regulations could, among other things, result in consumer lawsuits, federal investigations, or State Attorney General actions or inquiries. Such claims or inquiries, regardless of their merit, could divert management time and attention away from ConversionPoint’s business, result in significant costs to investigate and defend, harm ConversionPoint’s reputation and result in the cessation of certain portions of ConversionPoint’s business. If ConversionPoint or its subsidiaries become subject to these or similar types of claims or investigations, and are not successful in their defense, ConversionPoint or its subsidiaries may be forced to pay damages, some of which may be substantial, or to cease parts of their business.

ConversionPoint could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs its clients would have to pay for its offering and adversely affect its operating results.

In general, in connection with e-commerce product sales, ConversionPoint has not historically collected state or local sales, use or other similar taxes in any jurisdictions in which ConversionPoint does not have a tax nexus, in reliance on court decisions or applicable exemptions that restrict or preclude the imposition of obligations to collect such taxes with respect to online sales of products. In addition, ConversionPoint has not historically collected state or local sales, use or other similar taxes in certain jurisdictions in which ConversionPoint does have a physical presence, in reliance on applicable exemptions. On June 21, 2018, the U.S. Supreme Court decided, in South Dakota v. Wayfair, Inc., that state and local jurisdictions may, at least in certain circumstances, enforce a sales and use tax collection obligation on remote vendors that have no physical presence in such jurisdiction. A number of states have already begun, or have positioned themselves to begin, requiring sales and use tax collection by remote vendors and/or by online marketplaces. The details and effective dates of these collection requirements vary from state to state. It is possible that one or more jurisdictions may assert that ConversionPoint has liability for periods for which ConversionPoint has not collected sales, use or other similar taxes, and if such an assertion or assertions were successful it could result in substantial tax liabilities, including for past sales taxes and penalties and interest, which could materially adversely affect ConversionPoint’s business, financial condition and operating results.

ConversionPoint or its subsidiaries may be exposed to material product liability claims, which could increase their costs and adversely affect ConversionPoint’s reputation and business.

As a marketer and distributor of products designed for human consumption or use, ConversionPoint or its subsidiaries could be subject to product liability claims if the use of products they market or distribute, is alleged to have resulted in injury or undesired results. Products marketed include vitamins that are classified as dietary supplements and skin care products, and in most cases are not subject to pre-market regulatory approval in the United States. Previously unknown adverse reactions resulting from human consumption of these ingredients could occur.

ConversionPoint has not had any product liability claims filed against it or its subsidiaries, but in the future ConversionPoint or its subsidiaries may be subject to various product liability claims, including, due to product tampering by unauthorized third parties, product contamination, and claims that products had inadequate instructions for use, or inadequate warnings concerning possible side effects and interactions with other substances. The cost of defense can be substantially higher than the cost of settlement even when claims are without merit. The high cost to defend or settle product liability claims could have a material adverse effect on ConversionPoint’s business and operating results and ConversionPoint’s insurance, if any, may not be adequate.

ConversionPoint operates in an industry with extensive intellectual property litigation. Claims of infringement against ConversionPoint may harm ConversionPoint’s business.

ConversionPoint’s success depends, in part, upon its non-infringement of intellectual property rights owned by others and being able to resolve claims of intellectual property infringement without major financial expenditures or adverse consequences. The internet-related software field generally is characterized by extensive intellectual property litigation. Although ConversionPoint’s industry is rapidly evolving, many companies that own, or claim to own, intellectual property have aggressively asserted their rights. From time to time, ConversionPoint may be subject to legal proceedings and claims relating to the intellectual property rights of others, including, but not limited to, patents and trademarks, and ConversionPoint expects that third parties will assert intellectual property claims against ConversionPoint, particularly as ConversionPoint expands the complexity and scope of its business. In addition, many of ConversionPoint’s subscription agreements require ConversionPoint to indemnify its customers against claims that its solutions infringe the intellectual property rights of third parties.

Future litigation may be necessary to defend ConversionPoint or its customers by determining the scope, enforceability and validity of third party proprietary rights or to establish ConversionPoint’s proprietary rights. Some of ConversionPoint’s competitors have substantially greater resources than ConversionPoint does and are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than ConversionPoint could. In addition, patent holding companies that focus solely on extracting royalties and settlements by enforcing patent rights may target ConversionPoint. Regardless of whether claims that ConversionPoint is infringing patents or other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend and could, harm ConversionPoint’s reputation, adversely affect its relationship with customers and partners, cause delays or stoppages in its services, divert management’s attention and resources, require changes to its software that would cause it to incur substantial costs and/or subject it to significant liability.

In addition to liability for monetary damages against ConversionPoint, which may be tripled and may include attorneys’ fees, or, in some circumstances, damages against ConversionPoint’s customers, ConversionPoint may be prohibited from developing, commercializing or continuing to provide some or all of ConversionPoint’s software solutions unless ConversionPoint obtains licenses from, and pay royalties to, the holders of the patents or other intellectual property rights, which may not be available on commercially favorable terms, or at all.

Activities of ConversionPoint’s customers and affiliates or the content of their marketing messages, could damage ConversionPoint’s brand, subject it to liability and harm its business and financial results.

ConversionPoint’s terms of service prohibit ConversionPoint’s customers and affiliates from using ConversionPoint’s platform to engage in illegal activities, including, fraudulent marketing activities, and its employment and marketing policies prohibit its employees from engaging in fraudulent marketing activities. Customers, affiliate marketers or employees may nonetheless engage in prohibited or illegal activities in violation of applicable laws, which could subject ConversionPoint to liability. For example, from time to time, certain of ConversionPoint’s affiliate marketing companies use content that infringes on the rights of others, including, but not limited to, unauthorized celebrity endorsements, that have resulted in the receipt of cease and desist letters and claims for damages. In addition, there have been limited instances in which ConversionPoint’s employees have used infringing content in certain marketing materials, that have resulted in the receipt of cease and desist letters and claims for damages. ConversionPoint’s brand may be negatively impacted by the actions of customers, affiliates or employees, that are deemed to be hostile, offensive, inappropriate or illegal. Although ConversionPoint attempts to monitor the appropriateness of the content of its customers, affiliates and employees, ConversionPoint does not have control over their activities. The safeguards ConversionPoint has in place may not be sufficient for ConversionPoint to avoid liability or avoid harm to ConversionPoint’s brand, especially if such hostile, offensive, inappropriate or illegal use is high profile, which could adversely affect its business and financial results.

ConversionPoint’s failure to protect its intellectual property rights could diminish the value of its services, weaken its competitive position and reduce its revenue.

ConversionPoint regards the protection of its intellectual property, which includes trade secrets, copyrights, trademarks and domain names, as critical to ConversionPoint’s success. ConversionPoint strives to protect its intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. ConversionPoint enters into confidentiality and invention assignment agreements with its employees and contractors, and confidentiality agreements with parties with whom it conducts business in order to limit access to, and disclosure and use of, its proprietary information. However, these contractual arrangements and the other steps ConversionPoint has taken to protect ConversionPoint’s intellectual property may not prevent the misappropriation of ConversionPoint’s proprietary information or deter independent development of similar technologies by others.

ConversionPoint has four provisional patent applications and is investigating seeking patent protection for other aspects of ConversionPoint’s technologies, but there can be no assurance that ConversionPoint will file for any additional patent protection, or any patents will ultimately be issued, or that, if issued, they will not be challenged. ConversionPoint has registered domain names, trademarks and service marks in the United States and may also pursue additional registrations both in and outside the United States. Effective trade secret, copyright, trademark, domain name and patent protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending ConversionPoint’s rights. ConversionPoint may be required to protect its intellectual property in an increasing number of jurisdictions, a process that is expensive and may not be successful or which ConversionPoint may not pursue in every location.

Monitoring unauthorized use of ConversionPoint’s intellectual property is difficult and costly. ConversionPoint’s efforts to protect its proprietary rights may not be adequate to prevent misappropriation of its intellectual property. Further, ConversionPoint may not be able to detect unauthorized use of, or take appropriate steps to enforce, its intellectual property rights. In addition, ConversionPoint’s competitors may independently develop similar technology. The laws in the United States and elsewhere change rapidly, and any future changes could adversely affect ConversionPoint and its intellectual property. ConversionPoint’s failure to meaningfully protect its intellectual property could result in competitors offering services that incorporate ConversionPoint’s most technologically advanced features, which could seriously reduce demand for ConversionPoint’s software solutions. In addition, ConversionPoint may in the future need to initiate infringement claims or litigation. Litigation, whether ConversionPoint is a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of ConversionPoint’s technical staff and managerial personnel, which could harm ConversionPoint’s business, whether or not such litigation results in a determination that is unfavorable to ConversionPoint. In addition, litigation is inherently uncertain, and thus ConversionPoint may not be able to stop its competitors from infringing upon ConversionPoint’s intellectual property rights.

ConversionPoint’s use of “open source” software could negatively affect its ability to sell its solutions and could subject ConversionPoint to litigation.

A portion of ConversionPoint’s technology platform and solutions incorporate so-called “open source” software, and ConversionPoint may incorporate additional open source software in the future. Open source software is generally licensed by its authors or other third parties under open source licenses. If ConversionPoint fails to comply with these licenses, it may be subject to specified conditions, including requirements that ConversionPoint offer its solutions that incorporate the open source software for no cost, that ConversionPoint make available source code for modifications or derivative works it creates based upon, incorporating or using the open source software and that ConversionPoint license such modifications or derivative works under the terms of the particular open source license. If an author or other third party that distributes open source software that ConversionPoint uses were to allege that ConversionPoint has not complied with the conditions of one or more of these licenses, ConversionPoint could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, including being enjoined from the sale of ConversionPoint’s solutions that contain the open source software. ConversionPoint could be subject to suits by parties claiming ownership of what ConversionPoint believes to be open source software. Litigation could be costly for ConversionPoint to defend, have a negative effect on ConversionPoint’s operating results and financial condition and require ConversionPoint to devote additional research and development resources to change ConversionPoint’s solutions.

Risks Related to Inuvo’s Business

Inuvo has a history of losses, and its revenues declined in 2018 from 2017 and Inuvo cannot anticipate with any degree of certainty what its revenues will be in future periods. Inuvo’s working capital deficit has increased substantially at December 31, 2018 as compared to December 31, 2017.

Inuvo reported a net loss of approximately $5.9 million in 2018 as compared to a net loss of approximately $3.1 million in 2017. At December 31, 2018, Inuvo had a cash balance of approximately $229,000 and a working capital deficit of approximately $6.9 million as compared to a cash balance of approximately $4.1 million and a working capital deficit of approximately $6.2 million at December 31, 2017. As described elsewhere in this prospectus, Inuvo’s industry is currently in a consolidation phase and Inuvo’s strategic decisions to discontinue certain non-strategic technologies in response to Inuvo’s changing industry involved the short-term loss of revenue and margin in anticipation of future growth and margins starting in 2019. Inuvo estimates that the revenue loss associated with this decision was $7.2 million in 2018. In addition, Inuvo is incurring certain additional costs associated with the mergers which also adversely impacts Inuvo’s working capital. Since Inuvo’s credit facility is dependent upon receivables, and Inuvo does not know when, if ever, that Inuvo’s revenues will return to historic levels or if Inuvo will be able to replace those lost revenues with revenues from other sources, the combination of lower credit availability and recent negative cash flows generated from operating activities introduces potential risk of operation without interruption.

Inuvo relies on three customers for a significant portion of its revenues.

Inuvo is reliant upon Yahoo!, Google and Microsoft Online for most of its revenue. During 2018, they accounted for 71.3%, 10.1% and 5.5% of its revenues, respectively. In 2017, Yahoo!, Google and OpenX accounted for 66.7%, 10.4% and 9.4% of Inuvo’s revenues. The amount of revenue Inuvo receives from these customers is dependent on a number of factors outside of Inuvo’s control, including the amount they charge for advertisements, the depth of advertisements available from them, and their ability to display relevant ads in response to end-user queries. Inuvo’s revenue in the third quarter 2018 was 17.3% lower than the same quarter of 2017 due to demand and pricing changes by Inuvo’s largest customer, Yahoo!. The result was approximately a 40% decrease in RPCs. Inuvo has not seen an appreciable change in remote procedure calls, or RPCs, and Inuvo does not know whether RPCs will return to their former levels.

Inuvo would likely experience a significant decline in revenue and Inuvo’s business operations could be significantly harmed if (i) these customers do not approve Inuvo’s new websites, publishers and / or applications, (ii) if Inuvo or its publishers violate their guidelines or they change their guidelines, or (iii) if Inuvo’s contracts with these customers are terminated or expire without being renewed. In addition, if any of these preceding circumstances were to occur, Inuvo may not be able to find a suitable alternate paid search results provider or otherwise replace the lost revenues. Inuvo’s contracts with each of these customers contain broad termination provisions and Inuvo’s Yahoo! contract expires in November 2020, Inuvo’s Google contract expires in February 2021 and Inuvo’s Microsoft Online contract expires in February 2020. The loss of any of these customers or a material change in the revenue or gross profit they generate would have a material adverse impact on Inuvo’s business, results of operations and financial condition in future periods.

Failure to comply with the covenants and restrictions in Inuvo’s credit facility could impact Inuvo’s ability to access capital as needed.

Inuvo has a credit facility with Western Alliance Bank. The facility expired in September 2018 and was extended to October 2018. Inuvo signed a new facility agreement with Western Alliance Bank on October 11, 2018. The new agreement may be terminated by either party at any time and has a sub-limit provision that expires on April 30, 2019. While Inuvo believes it will be able to renew with substantially similar terms and conditions, there are no assurances that Inuvo will be able to renew. In that event, Inuvo’s liquidity in future periods would be materially adversely impacted. The credit facility contains a number of requirements, among other things:

payment of fees to the lender associated with the credit facility;

maintenance of Inuvo’s corporate existence in good standing;

granting the lender a security interest in Inuvo’s assets;

providing financial information to the lender; and

refrain from any transfer of any of Inuvo’s business or property, subject to customary exceptions.

A breach in Inuvo’s covenants could result in a default under the credit facility, and in such event Western Alliance Bank could elect to declare all borrowings outstanding, if any, to be due and payable. If this occurs and Inuvo has outstanding obligations and is not able to repay, Western Alliance Bank could require Inuvo to apply all of its available cash to repay the debt amounts and could then proceed against the underlying collateral. Should this occur, Inuvo cannot assure you that its assets would be sufficient to repay its debt in full, Inuvo would be able to borrow sufficient funds to refinance the debt, or that Inuvo would be able to obtain a waiver to cure any such default. In such an event, Inuvo’s ability to conduct its business as it is currently conducted would be in jeopardy.

Failure to comply with the covenants and restrictions in Inuvo’s grant agreement with the State of Arkansas could result in the repayment of a portion of the grant, which Inuvo may not be able to repay or finance on favorable terms.

In January 2013, Inuvo entered into an agreement with the State of Arkansas whereby Inuvo was granted $1,750,000 for the relocation of Inuvo to Arkansas and for the purchase of equipment. The grant was contingent upon Inuvo having at least 50 full-time equivalent permanent positions within four years, maintaining at least 50 full-time equivalent permanent positions for the following six years and paying those positions an average total compensation of $90,000 per year.

If Inuvo fails to meet the requirements of the grant after the initial four-year period, it may be required to repay a portion of the grant, up to but not to exceed the full amount of the grant. As of February 28, 2019, Inuvo had 37 full-time employees located in Arkansas. Failure to meet the requirements of the grant after the initial four-year period, may require Inuvo to repay a portion of the grant, up to but not to exceed the full amount of the grant. At December 31, 2018, Inuvo accrued a contingent liability of $55,000 for the lower than required employment. Should the lower than required employment continue, Inuvo cannot assure you that its assets would be sufficient to repay its grant in full, Inuvo would be able to borrow sufficient funds to refinance the grant, or that Inuvo would be able to obtain a waiver to cure any such default. In such an event, Inuvo’s ability to conduct its business as it is currently conducted would be in jeopardy.

Inuvo’s business is seasonal and its financial results and cash availability may vary significantly from period to period.

Historically, the last half of the year has stronger demand and therefore greater revenue than the first half of the year. Inuvo experiences lower RPCs due to a decline in demand for inventory on website and app space and the recalibrating of advertiser’s marketing budgets after the holiday selling season. If Inuvo is not able to appropriately adjust to seasonal or other factors, it could have a material adverse effect on its financial results. A material percentage of Inuvo’s operating expense is fixed and does not vary significantly with revenue. When revenue is seasonally lower cash availability is constrained. The bank credit facility and cash generated by operations may be insufficient to continue normal operations. Inuvo may elect to sell securities to the public or to selected investors, or borrow under the current or any replacement line of credit or other debt instruments which may cause dilution.

Inuvo depends on relationships with and the success of its supply partners.

Inuvo’s supply partners are very important to its success. Inuvo must recruit and maintain partners who are able to drive traffic successfully to their websites and mobile applications, resulting in clicks on advertisements Inuvo has delivered. These partners may experience difficulty in attracting and maintaining users for a number of reasons, including competition, rapidly changing markets and technology, industry consolidation and changing consumer preferences. Further, Inuvo may not be able to further develop and maintain relationships with distribution partners. They may be able to make their own deals directly with advertisers, may view Inuvo as a competitor or may find Inuvo’s competitors’ offerings more desirable. Any of these potential events could have a material adverse effect on Inuvo’s business, financial position and results of operations.

The success of Inuvo’s owned sites depend on Inuvo’s ability to acquire traffic in a profitable manner.

Inuvo’s ALOT-branded websites depend on Inuvo’s ability to attract traffic in a profitable manner. Inuvo uses a predictive model to calculate the rate of return for marketing campaigns, which includes estimates and assumptions. If these estimates and assumptions are not accurate, Inuvo may not be able to effectively manage its marketing decisions and could acquire traffic in an unprofitable manner. In addition, Inuvo may not be able to maintain and grow its traffic for a number of reasons, including, but not limited to, acceptance of its websites by consumers, the availability of advertising to promote its websites, competition and sufficiency of capital to purchase advertising. Inuvo advertises on search engine websites to drive traffic to its owned and operated websites. Inuvo’s keyword advertising is done primarily with Google and Facebook, but also with Yahoo! and Bing. If Inuvo is unable to maintain and grow traffic to its sites in a profitable manner, it could have a material adverse effect on Inuvo’s business, financial condition and results of operations.

Inuvo’s business must keep pace with rapid technological change to remain competitive.

Inuvo’s business operates in a market characterized by rapidly changing technology, evolving industry standards, frequent new product and service announcements, enhancements and changing customer demands. Inuvo must adapt to rapidly changing technologies and industry standards and continually improve the speed, performance, features, ease of use and reliability of Inuvo’s services. This includes making Inuvo’s products and services compatible and maintaining compatibility with multiple operating systems, desktop and mobile devices and evolving network infrastructure. If Inuvo fails to do this, its results of operations and financial position could be adversely affected.

Inuvo’s services may be interrupted if Inuvo experiences problems with its network infrastructure.

The performance of Inuvo’s network infrastructure is critical to its business and reputation. Because Inuvo’s services are delivered solely through the internet, Inuvo’s network infrastructure could be disrupted by a number of factors, including, but not limited to:

unexpected increases in usage of Inuvo’s services;

computer viruses and other security issues;

interruption or other loss of connectivity provided by third party internet service providers;

natural disasters or other catastrophic events; and

server failures or other hardware problems.

While Inuvo has data centers in multiple, geographically dispersed locations and active back-up and disaster recovery plans, Inuvo cannot assure you that serious interruptions will not occur in the future. If Inuvo’s services were to be interrupted, it could cause loss of users, customers and business partners, which could have a material adverse effect on Inuvo’s results of operations and financial position.

Inuvo depends on key personnel, the loss of whom could harm Inuvo’s business.

Inuvo’s success depends in part on the retention of personnel critical to its business operations. Loss of key personnel may result in disruption of operations, loss of key business relationships or expertise, additional recruiting and training costs and diminished anticipated benefits of acquisitions. Inuvo’s future success is substantially dependent on the continued service of its key senior management. Inuvo has experienced difficulty from time to time in attracting or retaining the personnel necessary to support the growth of its business, and Inuvo may experience similar difficulties in the future.

Regulatory and legal uncertainties could harm Inuvo’s business.

There is increasing awareness of internet-based commerce or commercial search activity and interest from state and federal lawmakers in regulating these services. New regulation of activities in which Inuvo is involved or the extension of existing laws and regulations to internet-based services could have a material adverse effect on Inuvo’s business, results of operations and financial position.

Failure to comply with federal, state and international privacy and data security laws and regulations, or the expansion of current or the enactment of new privacy and data security laws or regulations, could adversely affect Inuvo’s business.

A variety of federal, state and international laws and regulations govern the collection, use, retention, sharing and security of consumer data. In addition, various federal, state and foreign legislative and regulatory bodies may expand current or enact new laws regarding privacy matters. For example, recently there have been Congressional hearings and increased attention to the capture and use of location-based information relating to users of smartphones and other mobile devices, and internationally the European Union’s new GDPR went into effect in May 2018. Inuvo has posted privacy policies and practices concerning the collection, use and disclosure of subscriber data on Inuvo’s websites and applications. The existing and soon to be enacted privacy and data security related laws and regulations are evolving and subject to potentially differing interpretations. Several internet companies have incurred penalties for failing to abide by the representations made in their privacy policies and practices. In addition, several states have adopted legislation that requires businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event of a security breach. Any failure, or perceived failure, by Inuvo to comply with its posted privacy policies or with any data-related consent orders, FTC requirements or orders or other federal, state or international privacy or consumer protection-related laws, including the GDPR, regulations or industry self-regulatory principles could result in claims, proceedings or actions against Inuvo by governmental entities or others or other liabilities, which could adversely affect Inuvo’s business.

Inuvo may face third party intellectual property infringement claims that could be costly to defend and result in the loss of significant rights.

From time to time third parties have asserted infringement claims against Inuvo, including copyright, trademark and patent infringement, among other things. While Inuvo believes that it has defenses to these types of claims under appropriate trademark laws, Inuvo may not prevail in its defenses to any intellectual property infringement claims. In addition, Inuvo may not be adequately insured for any judgments awarded in connection with any litigation. Any such claims and resulting litigation could subject Inuvo to significant liability for damages or result in the invalidation of Inuvo’s proprietary rights, which would have a material adverse effect on its business, financial condition and results of operations. Even if Inuvo were to prevail, these claims could be time-consuming, expensive to defend and could result in the diversion of management’s time and attention.

Inuvo is subject to risks from publishers who could fabricate clicks either manually or technologically.

Inuvo’s business involves the establishment of relationships with website owners and publishers. In exchange for their consumer traffic, Inuvo provides an advertising placement service and shares a portion of the revenue it collects with that website publisher. Although Inuvo has click fraud detection software in place, Inuvo cannot guarantee that it will identify all fraudulent clicks or be able to recover funds distributed for fabricated clicks. This risk could materially impact Inuvo’s ability to borrow, its cash flow and the stability of its business.

A downturn or uncertainty in global economic conditions may have a significant negative effect on Inuvo’s access to credit and its ability to raise capital and may impact its business, operating results or financial condition.

A future downturn or uncertainty in global economic conditions, may result in significant reductions in, and heightened credit quality standards for, available capital and liquidity from banks and other providers of credit and substantial reductions and/or fluctuations in equity and currency values worldwide, which may make it difficult for Inuvo to raise additional capital or obtain additional credit, when needed, on acceptable terms or at all. Moreover, deteriorated economic conditions, or the threat of a prolonged recessionary period, may cause disruptions and volatility in global financial markets, increased rates of default and bankruptcy and have a negative impact on the levels of consumer spending. These macroeconomic developments could negatively affect Inuvo’s business, operating results or financial condition in a number of ways. For example, current or potential customers, such as advertisers, may delay or decrease spending with Inuvo or may not pay Inuvo or may delay paying Inuvo for previously performed services. In addition, if consumer spending decreases, this may result in fewer clicks on Inuvo’s advertisers’ ads displayed on Inuvo’s or its partner websites.

Inuvo’s quarterly operating results can be difficult to predict and can fluctuate substantially, which could result in volatility in the price of its common stock.

Inuvo’s quarterly revenues and other operating results have varied in the past and are likely to continue to vary significantly from quarter to quarter. Inuvo’s agreements with distribution partners and key customers do not require minimum levels of usage or payments, and its revenues therefore fluctuate based on the actual usage of its service each quarter by existing and new distribution partners. Quarterly fluctuations in Inuvo’s operating results also might be due to numerous other factors, including:

	·	its ability to attract new distribution partners, including the length of its sales cycles, or to sell increased usage of its service to existing distribution partners;

	·	technical difficulties or interruptions in its services;

	·	changes in privacy protection and other governmental regulations applicable to its industry;

	·	changes in its pricing policies or the pricing policies of its competitors;

	·	the financial condition and business success of its distribution partners;

	·	purchasing and budgeting cycles of its distribution partners;

	·	acquisitions of businesses and products by Inuvo or its competitors;

	·	competition, including entry into the market by new competitors or new offerings by existing competitors;

	·	discounts offered to advertisers by upstream advertising networks;

	·	its history of litigation;

	·	its ability to hire, train and retain sufficient sales, client management and other personnel;

	·	timing of development, introduction and market acceptance of new services or service enhancements by Inuvo or its competitors;

	·	concentration of marketing expenses for activities such as trade shows and advertising campaigns;

	·	expenses related to any new or expanded data centers; and

	·	general economic and financial market conditions.

Inuvo has historically had difficulties meeting the financial covenants set forth in its credit agreement.

During the third quarter of 2018, Inuvo failed to comply with the minimum revenue and adjusted EBITDA requirement. Inuvo’s lender has given it waivers in the past, including in connection with its failure to meet the covenants during the third quarter of 2018, and reset Inuvo’s financial covenants several times. A breach in its covenants could result in a default under the credit facility, and in such event Western Alliance Bank could elect to declare all borrowings outstanding, if any, to be due and payable. If this occurs and Inuvo has outstanding obligations and are not able to repay, Western Alliance Bank could require Inuvo to apply all of its available cash to repay the debt amounts and could then proceed against the underlying collateral. Should this occur, Inuvo cannot assure you that its assets would be sufficient to repay its debt in full, Inuvo would be able to borrow sufficient funds to refinance the debt, or that Inuvo would be able to obtain a waiver to cure any such default. In such an event, Inuvo’s ability to conduct its business as it is currently conducted would be in jeopardy.

Significant dilution will occur if outstanding convertible securities options are exercised or restricted stock unit grants vest.

As of December 31, 2018, Inuvo had stock options outstanding to purchase a total of 264,246 shares with exercise prices ranging from $0.56 to $3.70 per share, with a weighted average exercise price of $2.84. Inuvo also had 1,571,864 restricted stock units outstanding. If outstanding stock options are exercised or restricted stock units vest, dilution will occur to Inuvo’s stockholders, which may be significant. In addition, in relation to the CPT bridge note, under certain circumstances, CPT Investments, LLC has the right to convert its debt to Inuvo stock.

Risks Related to Our Business and Industry

The merger of ConversionPoint and Inuvo will be completed concurrently with the closing of this offering, so we do not have a history as a combined company. Failure to successfully combine the businesses of ConversionPoint and Inuvo, or to achieve integration in the expected time frame, may adversely affect our future results.

The merger of ConversionPoint and Inuvo will be completed concurrently with the closing of this offering, so we do not have a history as a combined company. The success of the mergers will depend, in part, on our ability to realize the anticipated benefits from combining the businesses of ConversionPoint and Inuvo. To realize these anticipated benefits, including the cost synergies being forecast, the businesses of ConversionPoint and Inuvo must be successfully integrated. Historically, ConversionPoint and Inuvo have been independent companies, and they will continue to be operated as such until the completion of the mergers. Our management may face significant challenges in consolidating the functions of Inuvo and ConversionPoint, integrating the technologies, organizations, procedures, policies and operations, as well as addressing the different business cultures of the two companies, and retaining key personnel. If ConversionPoint and Inuvo are not successfully integrated or such integration is delayed, the anticipated benefits of the mergers may not be realized fully or at all, or may take longer to realize than expected. The integration may also be complex and time consuming, and require substantial funds and resources and effort. The integration process and other disruptions resulting from the mergers may also disrupt each company’s ongoing businesses and/or adversely affect their relationships with employees, customers, regulators and others with whom they have business or other dealings.

ConversionPoint and Inuvo will incur significant transaction and merger-related costs in connection with the mergers.

ConversionPoint and Inuvo expect to incur significant costs associated with completing the mergers and combining the operations of the two companies. Although the exact amount of these costs is not yet known, ConversionPoint and Inuvo estimate that these costs will be significant. In addition, there may be unanticipated costs associated with the integration. Although ConversionPoint and Inuvo expect that the elimination of duplicative costs and other efficiencies may offset incremental transaction and merger-related costs over time, these benefits may not be achieved in the near term or at all.

Our success will be dependent on the ability to maintain and renew business relationships, including relationships with pre-existing customers and partners of both ConversionPoint and Inuvo, and to establish new business relationships. There can be no assurance that we will be able to maintain pre-existing customer contracts, partnership relationships and other business relationships, or enter into or maintain new customer contracts and other partnership and business relationships, on acceptable terms, if at all. Relationships with third parties can be terminated at any time. The failure to maintain important business relationships could have a material adverse effect on our business, financial condition or results of operations.

We face intense competition, and we may not be able to compete effectively, which could reduce demand for our products and adversely affect our business, growth, revenues and market share.

The overall market for e-commerce solutions is rapidly evolving, highly competitive, complex, fragmented with numerous single point solutions, and is subject to changing technology and shifting consumer needs. In addition, many companies in our target markets are offering, or may soon offer, products and services that may compete with our products and services. ConversionPoint currently competes with established companies, such as Optimizely and Voluum in the digital media optimization space, WebCollage in the rich content creation and product information syndication space, Limelight and Click Funnels in the sales conversion space, AdRoll and Criteo in the remarketing space, and Narvar and ShipStation in the shipping and logistics space. Inuvo currently competes with Media.net and other smaller players within the search advertising space, and IBM Watson Media, Oracle / GrapeShot, Quantcast, TheTradeDesk and others for data driven online audience identification and execution.

Many of our competitors, have longer operating histories, significantly greater financial, technical, marketing, distribution, professional services or other resources and greater name recognition than we, ConverisionPoint and Inuvo do. In addition, many of our competitors have strong relationships with current and potential customers and extensive knowledge of the e-commerce industry. As a result, they may be able to respond more quickly to new or emerging technologies and changes in customer requirements, for example by offering a SaaS based product that competes with our products or devoting greater resources to the development, promotion and sale of their products than we do. Increased competition may lead to price cuts, alternative pricing structures, fewer customer orders, reduced gross margins, longer sales cycles and loss of market share. We may not be able to compete successfully against current and future competitors, and our business, results of operations and financial condition will be harmed if we fail to meet these competitive pressures.

Our future results will suffer if we do not effectively manage our expanded operations following the mergers.

Following the mergers, the size of our business will be significantly larger than the current businesses of either Inuvo or ConversionPoint. Our future success depends, in part, upon our ability to manage this expanded business, which will pose substantial challenges for our management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. We cannot assure you that we will be successful or that we will realize the expected operating efficiencies, annual net operating synergies, revenue enhancements and other benefits currently anticipated to result from the merger.

Failure to adequately manage our growth could impair our ability to deliver high-quality solutions to our customers, hurt our reputation and compromise our ability to become profitable.

We expect to experience significant growth in our business. If we do not effectively manage our growth, the quality of service of our solutions may suffer, which could negatively affect our reputation, demand for our solutions or compromise our ability to become profitable. Our growth is expected to place a significant strain on our managerial, operational and financial resources and our infrastructure. Our future success will depend, in part, upon the ability of our senior management to manage growth effectively. This will require us to, among other things, hire additional personnel, implement additional management information systems and maintain close coordination among our engineering, operations, legal, finance, sales and marketing and client service and support organizations.

The loss of key personnel could have a material adverse effect on our business, financial condition or results of operations.

The success of the mergers will depend in part on our ability to retain key employees who continue employment with us after the merger is completed. In addition, certain key executives of Inuvo, including Richard Howe, its CEO, intend to cease an operational role with us within six months following the consummation of the merger. It is possible that other key employees might decide not to remain with us after the merger is completed. The loss of the day-to-day involvement of these executives could have a material adverse effect on us, and if other key employees terminate their employment, our business activities might be adversely affected, management’s attention might be diverted from integrating ConversionPoint’s and Inuvo’s operations to recruiting suitable replacements and our business, financial condition or results of operations could be adversely affected. In addition, we might not be able to locate suitable replacements for any such key employees who leave us or offer employment to potential replacements on reasonable terms.

Most of our senior management team will have limited experience managing a publicly traded company, and regulatory compliance may divert their attention from the day-to-day management of our business.

Most of the individuals who will constitute our senior management team have limited experience managing a publicly-traded company and limited experience complying with the increasingly complex laws pertaining to public companies. The senior management team may not successfully or efficiently manage the transition to a public company that is subject to significant regulatory oversight and reporting obligations under United States securities laws. In particular, these new obligations will require substantial attention from the management and could divert their attention away from the day-to-day management of our business.

Our reported financial results may be adversely affected by changes in U.S. GAAP.

U.S. GAAP is subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change.

In particular, in May 2014, the FASB issued ASC 606, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. As an “emerging growth company,” we are allowed under the JOBS Act to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We have elected to take advantage of this extended transition period under the JOBS Act with respect to ASC 606, which resulted in ASC 606 becoming effective for us on January 1, 2019. Any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.

We are evaluating ASC 606 and have not determined the impact it may have on our financial reporting. If, for example, we were required to recognize revenue differently with respect to our managed services and SaaS businesses, the differential revenue recognition may cause variability in our reported operating results due to a dealy in our ability to report revenues under ASC 606.

We will record goodwill that could become impaired and adversely affect our operating results.

The mergers will be accounted for as an acquisition of Inuvo by ConversionPoint, in accordance with accounting principles generally accepted in the United States. Under the acquisition method of accounting, the assets and liabilities of ConversionPoint and Inuvo will be recorded, as of completion, at their respective fair values and added to those of ConversionPoint and Inuvo, respectively. The reported financial condition and results of operations of our company issued after completion of the mergers will reflect ConversionPoint and Inuvo balances and results after completion of the mergers, but will not be restated retroactively to reflect the historical financial position or results of operations of ConversionPoint and Inuvo for periods prior to the mergers. Following completion of the mergers, our earnings will reflect acquisition accounting adjustments. See “Unaudited Pro Forma Combined Condensed Consolidated Financial Statements” beginning on page 48.

Under the acquisition method of accounting, the total purchase price will be allocated to the tangible assets and liabilities and identifiable intangible assets acquired in the mergers based on their fair values as of the date of completion of the mergers. The excess of the purchase price over those fair values will be recorded as goodwill. Inuvo and ConversionPoint expect that the mergers will result in the creation of goodwill based upon the application of the acquisition method of accounting. To the extent the value of goodwill or intangibles becomes impaired, we may be required to incur material charges relating to such impairment. Such a potential impairment charge could have a material impact on our operating results.

The ability of ConversionPoint and Inuvo to utilize net operating loss carryforwards and certain other tax attributes may be limited.

Federal and state income tax laws impose restrictions on the utilization of net operating losses, which we refer to as NOL, and tax credit carryforwards in the event that an “ownership change” occurs for tax purposes, as defined by Section 382 of the Internal Revenue Code. In general, an ownership change occurs when stockholders owning 5% or more of a “loss corporation” (a corporation entitled to use NOL or other loss carryovers) have increased their ownership of stock in such corporation by more than 50 percentage points during any three-year period. The annual base limitation under Section 382 of the Internal Revenue Code is calculated by multiplying the loss corporation’s value at the time of the ownership change by the greater of the long-term tax-exempt rate determined by the IRS in the month of the ownership change or the two preceding months.

As of December 31, 2018, ConversionPoint and Inuvo had $25 million and $89 million, respectively, of federal NOLs that are currently limited in their annual use. As a result of the mergers, it is possible that either or both ConversionPoint and Inuvo will be deemed to have undergone an “ownership change” for purposes of Section 382 of the Internal Revenue Code. Accordingly, our ability to utilize ConversionPoint’s and/or Inuvo’s NOL carryforwards may be substantially limited. These limitations could in turn result in increased future tax payments for us, which could have a material adverse effect on our business, financial condition or results of operations.

The mergers may not be accretive, and may be dilutive, to ConversionPoint’s and Inuvo’s earnings per share, which may negatively affect the market price of our common stock.

Although the mergers are expected to be accretive to earnings per share, the mergers may not be accretive, and may be dilutive, to ConversionPoint’s and Inuvo’s earnings per share. The expectation that the mergers will be accretive is based on preliminary estimates that may materially change. In addition, future events and conditions could decrease or delay any accretion, result in dilution or cause greater dilution than may be expected, including:

adverse changes in market conditions;

the market for e-commerce marketing solutions;

operating results;

competitive conditions;

laws and regulations affecting e-commerce and online marketing

inability to effectively integrate ConversionPoint’s and Inuvo’s operations and technology solutions;

capital expenditure obligations; and

general economic conditions.

Any dilution of, or decrease or delay of any accretion to, ConversionPoint’s or Inuvo’s earnings per share could cause the price of our common stock to decline.

Business issues currently faced by one company may be imputed to the operations of the other company or us.

To the extent that either ConversionPoint or Inuvo currently has or is perceived by customers to have operational challenges, those challenges may raise concerns by existing customers of the other company following the merger which may limit or impede our future ability to maintain relationships with those customers.

The unaudited pro forma combined condensed consolidated financial information included in this prospectus may not be indicative of what our actual financial position or results of operations would have been had the mergers been completed on the dates indicated.

The unaudited pro forma combined condensed consolidated financial information in this prospectus is presented for illustrative purposes only and is not necessarily indicative of what our actual financial position or results of operations would have been had the mergers been completed on the dates indicated. The unaudited pro forma combined condensed consolidated financial information reflects adjustments, which are based upon preliminary estimates, to allocate the purchase price to the assets acquired and liabilities assumed of Inuvo based on their fair value. The purchase price allocation reflected in this prospectus is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets acquired and liabilities assumed of Inuvo as of the date of the completion of the mergers. In addition, subsequent to the closing date of the mergers, there may be refinements to the purchase price allocation as additional information becomes available. Accordingly, the final purchase price allocation may differ materially from the pro forma adjustments reflected in this prospectus. See “Unaudited Pro Forma Combined Condensed Consolidated Financial Statements,” beginning on page 48, for more information.

Risks Related to Our Common Stock and This Offering

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock calculated on a pro-forma basis after taking into account the closings of the mergers. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our net tangible book value per share after this offering. Based on the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $ per share, representing the difference between our pro forma net tangible book value per share after giving effect to this offering and the assumed initial public offering price. Purchasers of common stock in this offering will have contributed approximately percent of the aggregate price paid by all purchasers of our stock but will own only approximately percent of our common stock outstanding after this offering, excluding any shares of our common stock that they may have acquired prior to this offering. Furthermore, if the underwriters exercise their option to purchase additional shares, you will experience further dilution. For a further description of the dilution that you will experience immediately after this offering, see “Dilution.”

No public market for our common stock currently exists and an active trading market may not develop or be sustained following this offering.

Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. Although we have applied to list our common stock on The NASDAQ Capital Market an active trading market for our shares may never develop on either market or, if developed, be maintained following this offering. If an active market for our common stock does not develop or is not maintained, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for the shares or at all. An inactive trading market also may impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration. The lack of an active market also may reduce the fair market value of your shares.

We have broad discretion in the use of net proceeds from this offering and may not use them effectively.

Although we currently intend to use the net proceeds from this offering in the manner described in “Use of Proceeds” elsewhere in this prospectus, we will have broad discretion in the application of the net proceeds and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. Our failure to apply these net proceeds effectively could result in financial losses that could have a material adverse effect on our business, cause the price of our common stock to decline and delay the expansion of our business. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

As a result of becoming a public company, we will be obligated to develop and maintain effective internal control over financial reporting. ConversionPoint’s independent registered public accounting firm has identified a material weakness in ConverisonPoint’s internal control over financial reporting and if our remediation of this material weaknesses is not effective, or if we fail to develop and maintain an effective system of disclosure controls/procedures and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

As a public company, we will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K. Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting, as well as a statement that our independent registered public accounting firm has issued an opinion on the effectiveness of our internal control over financial reporting, provided that our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required to be filed with the SEC following the later of the date we are deemed to be an “accelerated filer” or a “large accelerated filer,” each as defined in the Exchange Act, or the date we are no longer an emerging growth company, as defined in the JOBS Act. We could be an emerging growth company for up to five years. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation. We will be required to disclose changes made in our internal control and procedures on a quarterly basis. To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff.

In connection with the audit of ConversionPoint’s consolidated financial statements, ConversionPoint’s independent registered public accounting firm identified a material weakness in ConversionPoint’s internal control over financial reporting. ConversionPoint’s independent registered public accounting firm has not audited or expressed an opinion on the effectiveness of ConversionPoint’s internal control over financial reporting. However, they identified a material weakness related to the accounting for complex accounting matters such as revenue recognition related to contracts that contain multiple deliverables, complex financing transactions, and stock-based compensation. ConversionPoint did not have sufficient controls in place to identify, analyze and apply GAAP as it relates to these complex areas such that there was a reasonable possibility that a material misstatement would not be prevented or detected on a timely basis. This deficiency could result in additional misstatements to ConversionPoint’s and our consolidated financial statements that could be material and may not be prevented or detected on a timely basis.

After the completion of the mergers, we intend to continue to evaluate whether we need to hire additional finance and accounting personnel as we continue to build our financial reporting infrastructure and further develop and document our accounting policies and financial reporting procedures. In addition, ConversionPoint has implemented management review controls designed to identify errors or fraud in the financial statements and identify all period-end adjusting entries. Finally, we intend to restructure our accounting department following the completion of the mergers, including adopting certain control processes currently existing at Inuvo. We cannot assure you that the remediation measures that ConversionPoint has initially implemented and the further measures that we intend to implement after the completion of the mergers will be sufficient to remediate ConversionPoint’s existing material weakness or to identify or prevent additional material weaknesses in the future. We also cannot assure you that ConversionPoint and/or it’s independent registered public accounting firm has identified all of ConversionPoint’s existing material weaknesses in its interval control over financial reporting or that we will not in the future have additional material weaknesses. If the remediation of above material weakness is not effective, or if we experience additional material weaknesses or otherwise fail to maintain an effective system of internal controls over financial reporting in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, cause a decline in the market price of our common stock.

We are in the early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to complete our assessment, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.

If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal control over financial reporting, including as a result of the material weakness described above, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, and we may be subject to investigation and/or sanctions by the SEC. In addition, if we are unable to meet these requirements, we may not be able to remain listed on The NASDAQ Capital Market.

The price of our shares of common stock is likely to be volatile, and you could lose all or part of your investment.

The trading price of our shares of common stock is likely to be volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in the “Risk Factors” section and elsewhere in this prospectus, these factors include, without limitation:

competition from existing technologies and products or new technologies and products that may emerge;

the completion of this offering is contingent upon the closings of the mergers described in this prospectus and the closings of the mergers are contingent upon the completion of this offering;

the loss of significant customers;

actual or anticipated variations in our quarterly operating results;

failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;

our cash position;

announcement or expectation of additional financing efforts;

issuances of debt or equity securities;

our inability to successfully enter new markets or develop additional products;

actual or anticipated fluctuations in our competitors’ operating results or changes in their respective growth rates;

sales of our shares of common stock by us, or our stockholders in the future;

trading volume of our shares of common stock on The NASDAQ Capital Market;

market conditions in our industry;

overall performance of the equity markets and general political and economic conditions;

introduction of new products or services by us or our competitors;

additions or departures of key management, scientific or other personnel;

publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities or industry analysts;

changes in the market valuation of similar companies;

disputes or other developments related to intellectual property and other proprietary rights;

changes in accounting practices;

significant lawsuits, including stockholder litigation; and

other events or factors, many of which are beyond our control.

Furthermore, the public equity markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our shares of common stock. If the market price of our shares of common stock after this offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.

We do not anticipate paying cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment.

We have never declared or paid cash dividends on our capital stock. We intend to retain a significant portion of our future earnings, if any, to finance the operations, development and growth of our business. Any future determination to declare dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant. As a result, only appreciation of the price of our common stock, which may never occur, will provide a return to stockholders.

If securities or industry analysts do not publish research or reports, or publish inaccurate or unfavorable research or reports about our business, our share price and trading volume could decline.

The trading market for our shares of common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If no securities or industry analysts commence coverage of our company, the trading price for our shares of common stock may be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our shares of common stock, changes their opinion of our shares or publishes inaccurate or unfavorable research about our business, our share price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares of common stock could decrease and we could lose visibility in the financial markets, which could cause our share price and trading volume to decline.

We are not subject to the provisions of Section 203 of the Delaware General Corporation Law, which could negatively affect your investment.

We elected in our certificate of incorporation to be effective upon the completion of this offering to not be subject to the provisions of Section 203 of the Delaware General Corporation Law, or Section 203. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns (or, in certain cases, within three years prior, did own) 15% or more of the corporation’s voting stock. This may make us more vulnerable to takeovers that are completed without the approval of our board of directors and/or without giving us the ability to prohibit or delay such takeovers as effectively.

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders. These provisions include:

a requirement that special meetings of stockholders be called only by the board of directors, the president or the chief executive officer;

advance notice requirements for stockholder proposals and nominations for election to our board of directors; and

the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.

These anti-takeover provisions and other provisions in our certificate of incorporation and bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving our Company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.

Our certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our certificate of incorporation or our bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the provisions of certificate of incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find these provisions of our certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our shares of common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in this prospectus, our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our shares of common stock held by non-affiliates exceeds $700 million as of any June 30 before that time or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31, or if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, in which case we would no longer be an emerging growth company immediately. We cannot predict if investors will find our shares of common stock less attractive because we may rely on these exemptions. If some investors find our shares of common stock less attractive as a result, there may be a less active trading market for our shares of common stock and our share price may be more volatile.

Under the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates for new or revised accounting standards.

We may have difficulty operating as a publicly traded company.

As a publicly traded company, we believe that our business will benefit from, among other things, providing direct access to equity capital and a tailored capital structure, allowing us to better focus our financial and operational resources on our specific business, allowing our management to design and implement corporate strategies and policies that are based primarily on the business characteristics and strategic decisions of our business, allowing us to more effectively respond to industry dynamics and allowing the creation of effective incentives for our management and employees that are more closely tied to our business performance. However, we may not be able to achieve some or all of the benefits that we believe we can achieve as an independent company in the time we currently expect, if at all. Additionally, new appointees to our board of directors will have limited familiarity with our offerings, business and strategy, and it may take time for such appointees to become conversant in our business. Implementing these changes may take longer than we expect, result in the incurrence of additional costs or divert management’s attention, which could adversely affect our business.

We will incur significant costs as a result of operating as a public company and our management expects to devote substantial time to public company compliance programs.

As a public company, we will incur significant legal, accounting and other expenses due to our compliance with regulations and disclosure obligations applicable to us, including compliance with the Sarbanes-Oxley Act as well as rules implemented by the SEC and NASDAQ. The SEC and other regulators have continued to adopt new rules and regulations and make additional changes to existing regulations that require our compliance. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that have required the SEC to adopt additional rules and regulations in these areas. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact, in ways we cannot currently anticipate, the manner in which we operate our business. Our management and other personnel will devote a substantial amount of time to these compliance programs and monitoring of public company reporting obligations and, as a result of the new corporate governance and executive compensation related rules, regulations and guidelines prompted by the Dodd-Frank Act and further regulations and disclosure obligations expected in the future, we will likely need to devote additional time and costs to comply with such compliance programs and rules. These rules and regulations will cause us to incur significant legal and financial compliance costs and will make some activities more time-consuming and costly.

To comply with the requirements of being a public company, we may need to undertake various activities, including implementing new internal controls and procedures and hiring new accounting or internal audit staff. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Securities Exchange Act of 1934, or the Exchange Act, is accumulated and communicated to our principal executive and financial officers. Our current controls and any new controls that we develop may become inadequate and weaknesses in our internal control over financial reporting may be discovered in the future.

Any failure to develop or maintain effective controls could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting which we may be required to include in our periodic reports we will file with the SEC under Section 404 of the Sarbanes-Oxley Act, harm our operating results, cause us to fail to meet our reporting obligations, or result in a restatement of our prior period financial statements. In the event that we are not able to demonstrate compliance with the Sarbanes-Oxley Act, that our internal control over financial reporting is perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and the price of our common stock could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on The NASDAQ Capital Market.

We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act, and are therefore not yet required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with certain of these rules, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report. This assessment will need to include the disclosure of any material weaknesses in our internal control over financial reporting identified by our management or our independent registered public accounting firm. We are just beginning the costly and challenging process of compiling the system and processing documentation needed to comply with such requirements. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective.

Raising additional capital, including through future sales and issuances of our common stock, or warrants or the exercise of rights to purchase common stock pursuant to our equity incentive plan could result in additional dilution of the percentage ownership of our stockholders, could cause our share price to fall and could restrict our operations.

We expect that significant additional capital will be needed in the future to continue our planned operations, including any potential acquisitions, hiring new personnel and continuing activities as an operating public company. To the extent we seek additional capital through a combination of public and private equity offerings and debt financings, our stockholders may experience substantial dilution. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders may be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt and receivables financings may be coupled with an equity component, such as warrants to purchase shares of our common stock, which could also result in dilution of our existing stockholders’ ownership. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt and other operating restrictions that could adversely impact our ability to conduct our business. A failure to obtain adequate funds may cause us to curtail certain operational activities, including sales and marketing, in order to reduce costs and sustain the business, and would have a material adverse effect on our business and financial condition.

Under our 2018 Plan, we may grant equity awards covering up to 4,500,000 shares of our common stock. As of the date of this offering, we have not granted any options to purchase shares of common stock under the 2018 Plan. Immediately after the completion of this offering we plan to issue options to purchase approximately shares of our common stock comprised of (i) options to purchase an aggregate of shares of common stock underlying options granted by ConversionPoint and Inuvo that will be converted to options to purchase shares of our common stock in connection with the mergers, and (ii) options to purchase an aggregate of 1,300,000 shares of our common stock that we expect to grant at the closing of the mergers. We plan to register the number of shares available for issuance under our 2018 Plan. Sales of shares issued upon exercise of options or granted under our 2018 Plan may result in material dilution to our existing stockholders, which could cause our share price to fall.

Our issuance of shares of preferred stock could adversely affect the market value of our common stock, dilute the voting power of common stockholders and delay or prevent a change of control.

Upon the completion of this offering, our board of directors will have the authority to cause us to issue, without any further vote or action by the stockholders, up to 10,000,000 shares of preferred stock in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series.

The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive. For example, investors in the common stock may not wish to purchase common stock at a price above the conversion price of a series of convertible preferred stock because the holders of the preferred stock would effectively be entitled to purchase common stock at the lower conversion price causing economic dilution to the holders of common stock.

Further, the issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of our other classes of voting stock either by diluting the voting power of our other classes of voting stock if they vote together as a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote even if the action were approved by the holders of our other classes of voting stock. The issuance of shares of preferred stock may also have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares.

Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third party claims against us and may reduce the amount of money available to us.

Our certificate of incorporation and bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the Delaware General Corporation Law, our bylaws and our indemnification agreements that we plan to enter into with our directors and officers provide that:

We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.

We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

We will not be obligated pursuant to our bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification.

The rights conferred in our bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.

We may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.

In addition, under the merger agreement, we have agreed, following the effective times of the mergers, to indemnify and exculpate (and advance expenses to), each present and former director and officer of ConversionPoint and its subsidiaries and Inuvo and its subsidiaries, together with their respective executors, heirs and administrators, against all losses, claims, damages, expenses (including reasonable attorneys’ fees and including any attorneys’ fees or other fees incurred to enforce our indemnification obligation), or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the effective times of the mergers. We have also agreed to continue all rights to exculpation or indemnification provided for in the organizational documents of ConversionPoint and Inuvo in favor of the current or former directors or officers of ConversionPoint and Inuvo, as applicable. Further, we have agreed, subject to certain limitations, to cause the surviving corporations in the ConversionPoint merger and Inuvo merger to maintain, for six years after the effective times of the mergers, directors’ and officers’ liability insurance in an amount and scope reasonably acceptable to ConversionPoint and Inuvo, as applicable.

To the extent that a claim for indemnification is brought by any of our directors or officers, it would reduce the amount of funds available for use in our business.

We have applied for listing of our common stock on The NASDAQ Capital Market. There is no guarantee that our common stock will be listed on The NASDAQ Capital Market.

We have applied for listing of our common stock on The NASDAQ Capital Market. On the date of this prospectus, we believe that we will satisfy the listing requirements of, and expect that our common stock we plan to issue in this offering will be listed, on The NASDAQ Capital Market. This listing, however, is not guaranteed. Therefore, it may be difficult to sell any shares of common stock you purchase in this offering if you desire or need to sell them. Our lead underwriter, Oppenheimer & Co. Inc., is not obligated to make a market in our common stock, and even after making a market, can discontinue market making at any time without notice. Neither we nor the underwriters can provide any assurance that an active and liquid trading market in our common stock will develop or, if developed, that the market will continue.

Cautionary Note Regarding Forward-Looking Statements

This prospectus contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding our strategy, future events, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, among others, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “would,” “will,” “should,” “could,” “objective,” “target,” “ongoing,” “contemplate,” “potential” or “continue” or the negative of these terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, without limitation, statements about:

the completion of the mergers, which is conditioned upon the completion of this offering in order to satisfy the financing condition;

our ability to generate or secure sufficient funding to support our growth strategy;

future sales of our common stock that could depress the trading price of our common stock on The NASDAQ Capital Market, lower our value and make it more difficult for us to raise capital;

our ability to convert to a SaaS model;

our ability to compete effectively;

our future financial performance, including our expectations regarding our revenue, cost of revenue, operating expenses, and our ability to achieve and maintain future profitability;

our expectations regarding outstanding litigation, including with respect to the mergers;

our expectations and management of future growth;

our ability to maintain, protect and enhance our intellectual property;

the increased expenses associated with being a public company;

our anticipated uses of net proceeds from this offering;

our expectations regarding the effects of existing and developing laws and regulations, including with respect to privacy and data protection;

our beliefs regarding our liquidity and sufficiency of cash to fund our operations; and

the other matters described in “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.”

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in our forward-looking statements. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section beginning on page 14, which could cause actual results or events to differ materially from such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Use of proceeds

We estimate that the net proceeds from our issuance and sale of shares of our common stock in this offering will be approximately $ million, assuming an initial public offering price of $ per share of common stock, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares in full, we estimate that the net proceeds from this offering will be approximately $ million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase or decrease in the assumed initial public offering price of $ per share of common stock would increase or decrease the net proceeds from this offering by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions. Similarly, each increase or decrease of $1.0 million in the amount of securities offered by us would increase or decrease the net proceeds that we receive from this offering by approximately $ million, assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions.

We currently intend to use approximately $15.9 million of the net proceeds from this offering to satisfy the cash portion of the merger consideration payable to Inuvo stockholders. We also currently intend to use approximately $8.9 million for the reduction of indebtedness we incurred for working capital purposes under (i) the loan agreement with Western Alliance Bank (approximately $1.9 million), which does not have a maturity date and bears interest at a rate per annum equal to the prime rate plus 1%, (ii) the SellPoints unsecured subordinated promissory notes (approximately $3.1 million), which mature on May 31, 2019, and bear interest at the rate of 10% per annum, (iii) the Loan and Security Agreement with Montage Capital II, L.P and Partners for Growth IV, L.P. (approximately, $2.4 million), which matures upon the earlier of the closing of this offering and May 31, 2020, and bears interest at the rate of 12.25% per annum, (iv) notes payable to related parties of ConversionPoint (approximately $0.3 million), which accrue interest at a rate of 8% per annum and are due within 30 days after the date on which all amounts are repaid to Montage and Partners for Growth under the Loan and Security Agreement described above, (v) notes payable to related parties of Inuvo (approximately $0.3 million), which accrue interest at a rate of 10% per annum and mature on the earlier to occur of a change in control of Inuvo or November 2, 2019, and (f) the promissory note issued to CPT Investments, LLC (approximately $1.0 million), which accrues interest at a rate of 10% per annum and is due and payable on June 30, 2019. We also intend to use approximately $ million for general corporate purposes. The principal reasons for this offering are to increase our capitalization and financial flexibility, increase our visibility in the marketplace and create a public market for our shares of common stock.

This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including, among other things, the cash generated by our operations and the rate of growth, if any, of our business. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering for other purposes, and we will have broad discretion in the application of net proceeds.

Although it is difficult to predict future liquidity requirements, we believe that the net proceeds from this offering and our existing cash flow from operations will be sufficient to fund our operations for the next twelve months.

Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments, certificates of deposit and direct or guaranteed obligations of the U.S. government.

ConversionPoint had negative operating cash flow for the year ended December 31, 2018. In the future, additional financing may be required to support our expected investments in our combined business. To the extent we, as a combined company, have negative cash flow in future periods, we may use a portion of our general working capital (including the proceeds of this offering) to fund such negative cash flow.

Dividend Policy

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and future earnings, if any, to fund the development and growth of our business and to repay indebtedness. Therefore, we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors, and will depend upon our results of operations, financial condition, capital requirements and other factors including contractual obligations that our board of directors deems relevant and any limits in the payment of dividends that may be imposed upon us under any credit facility or other agreement we may have with a third party that restricts out ability to pay dividends.

Capitalization

The following table sets forth our cash and our capitalization as of December 31, 2018:

on a pro forma basis after giving effect to the completion of the mergers that will occur prior to, or contemporaneously with, the completion of this offering; and

on a pro forma as adjusted basis, after giving effect to the sale of shares of common stock in this offering at the assumed initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table assumes no exercise of the underwriters’ option to purchase up to an additional shares of common stock. The pro forma information below is only for illustrative purposes and our capitalization following the completion of this offering will be adjusted based on the actual offering price and other terms of this offering determined at pricing. You should read this table in conjunction with “Use of Proceeds” set forth above, “Unaudited Pro Forma Combined Condensed Consolidated Financial Statements” set forth below, as well as our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and financial statements and the related notes appearing elsewhere in this prospectus.

	Pro Forma After the Mergers	Pro Forma As Adjusted

Cash and cash equivalents	$	$
Notes payable
Stockholders’ equity
Preferred stock, $0.0001 par value: 10,000,000 authorized, no shares issued and outstanding on September 30, 2018
Common stock, $0.0001 par value: 90,000,000 shares authorized, shares issued and outstanding, pro forma after the mergers and shares issued and outstanding, pro forma as adjusted
Retained earnings (accumulated deficit)
Total stockholders’ equity
Total capitalization	$	$

The table above excludes the following as of December 31, 2018:

an aggregate of shares of common stock issuable under outstanding options granted under, or subject to, the 2018 Plan, with an average exercise price per share of $ ;

shares of common stock reserved for future issuance under the 2018 Plan; and

an aggregate of shares of common stock issuable upon exercise of outstanding warrants with an average exercise price per share of $ .

Dilution

If you purchase shares of common stock in this offering, your interest will be diluted immediately to the extent that the initial public offering price per share of our common stock exceeds the as adjusted net tangible book value per share of our common stock immediately following the completion of this offering.

Our pro forma net tangible book value as of December 31, 2018 was approximately $ million, or $ per share. Pro forma net tangible book value per share represents our total stockholders’ equity divided by the number of shares of common stock outstanding after giving effect to completion of the mergers.

Dilution in pro forma net tangible book value per share of common stock to new investors represents the difference between the amount per share paid by purchasers in this offering and the pro forma as adjusted net tangible book value per share of common stock immediately after completion of this offering. After giving effect to our sale of shares of common stock in this offering at the assumed initial public offering price of $ per share, which is the midpoint of the range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value as of December 31, 2018 would have been $ million, or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors purchasing shares of our common stock in this offering, as illustrated in the following table:

Assumed initial public offering price per share		$
Pro forma net tangible book value per share as of December 31, 2018	$
Increase in pro forma net tangible book value per share attributable to new investors	$
Adjusted pro forma net tangible book value per share as of December 31, 2018, after giving effect to the offering		$
Dilution per share to new investors in the offering		$

If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value per share after giving effect to the offering would be $ per share. This represents an increase in pro forma as adjusted net tangible book value of $ per share to existing stockholders and dilution in pro forma as adjusted net tangible book value of $ per share to investors purchasing shares in this offering.

A $1.00 increase or decrease in the assumed initial public offering price of $ , the mid-point of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma as adjusted net tangible book value after this offering by $ million and the pro forma as adjusted net tangible book value per share after this offering by $ per share and would increase (decrease) the dilution per share to investors purchasing shares in this offering by $ per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. The information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of the offering determined at pricing.

UNAUDITED PRO FORMA
COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma combined condensed consolidated balance sheet as of December 31, 2018 is presented as if the proposed mergers had occurred as of December 31, 2018. The unaudited pro forma combined condensed consolidated statement of operations for the year ended December 31, 2018 is presented as if the mergers had occurred on January 1, 2018. The unaudited pro forma consolidated financial statements of ConversionPoint and Inuvo have been adjusted to reflect certain reclassifications in order to conform Inuvo’s historical financial statement presentation to ConversionPoint’s financial statement presentation for the combined company.

The unaudited pro forma combined condensed consolidated financial statements give effect to the mergers under the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations, which we refer to as ASC 805, with ConversionPoint treated as the acquirer. As of the date of this prospectus, ConversionPoint has not completed the detailed valuation work necessary to arrive at the required estimates of the fair value of the Inuvo assets to be acquired and the liabilities to be assumed and the related allocation of purchase price, nor has it identified all adjustments necessary to conform Inuvo’s accounting policies to ConversionPoint’s accounting policies. A final determination of the estimated fair value of Inuvo’s assets and liabilities, including intangible assets with both indefinite or finite lives, will be based on the actual net tangible and intangible assets and liabilities of Inuvo that exist as of the closing date of the mergers and, therefore, cannot be made prior to the completion of the mergers. In addition, the value of the consideration to be paid by ConversionPoint Holdings upon the consummation of the mergers will be determined based on the closing price per share of Inuvo and ConversionPoint Holdings common stock on the closing date of the mergers. As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analyses are performed. The preliminary pro forma adjustments have been made solely for the purpose of presenting the unaudited pro forma combined condensed consolidated financial statements.

ConversionPoint’s estimated fair value of Inuvo’s assets and liabilities as of December 31, 2018 is based on preliminary valuation studies and due diligence. Until the mergers are completed, both companies are limited in their ability to share certain information. Therefore, information necessary for the complete valuation is not currently available and, accordingly, management of ConversionPoint has used its best estimates based upon information currently available. Upon completion of the mergers, final valuations will be performed based on the actual net tangible and intangible assets of Inuvo that will exist on the date of the mergers. The final purchase price allocation may be different than that reflected in the pro forma purchase price allocation presented herein, and this difference may be material.

Assumptions and estimates underlying the unaudited adjustments to the pro forma combined condensed consolidated financial statements are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma combined condensed consolidated financial statements. The historical consolidated financial statements have been adjusted in the unaudited pro forma combined condensed consolidated financial statements to give effect to pro forma events that are: (1) directly attributable to the mergers; (2) factually supportable; and (3) with respect to the unaudited pro forma combined condensed consolidated statements of operations, expected to have a continuing impact on the combined results of ConversionPoint and Inuvo following the mergers.

In connection with the plan to integrate the operations of ConversionPoint and Inuvo, ConversionPoint anticipates that non-recurring charges, such as costs associated with systems implementation, relocation expenses, severance and other costs related to closing the transaction, will be incurred. ConversionPoint is not able to determine the timing, nature and amount of these charges as of the date of this prospectus. However, these charges could affect the combined results of operations of ConversionPoint and Inuvo, as well as those of the combined company following the mergers, in the period in which they are recorded. The unaudited pro forma combined condensed consolidated financial statements do not include the effects of the costs associated with any restructuring or integration activities resulting from the transaction, as they are non-recurring in nature and not factually supportable at the time that the unaudited pro forma combined condensed consolidated financial statements were prepared. Additionally, these adjustments do not give effect to any synergies that may be realized as a result of the mergers, nor do they give effect to any nonrecurring or unusual restructuring charges that may be incurred as a result of the integration of the two companies.

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEETS

OF CONVERSIONPOINT AND INUVO

As of December 31, 2018

Historical

ConversionPoint
Technologies, Inc.

Historical
Inuvo, Inc.

Pro Forma
Adjustments (a)

Pro Forma
Adjustments (b)

Pro Forma
Adjustments (c)

Pro Forma
Adjustments (d)

Pro Forma
Adjustments (e)

Pro Forma
Adjustments (f)

Pro Forma
Adjustments (g)

Pro Forma
Amounts

Cash and cash equivalents

2,282,526

228,956

36,000,000

(3,060,500

)

(5,853,351

)

(15,911,414

)

–

13,686,217

Accounts receivable, net

4,904,667

6,723,349

–

11,628,016

Inventories

129,853

–

129,853

Prepaid expenses and other current assets

530,561

259,712

–

790,273

Total current assets

7,847,607

7,212,017

36,000,000

(3,060,500

)

(5,853,351

)

(15,911,414

)

–

26,234,359

Property and equipment, net

602,270

2,123,672

–

2,725,942

Other assets

159,812

35,170

–

194,982

Intangible assets, net

16,428,127

9,441,681

–

42,658,319

–

68,528,127

Goodwill

23,923,248

9,853,342

–

20,760,656

–

54,537,246

Total Assets

48,961,064

28,665,882

36,000,000

(3,060,500

)

(5,853,351

)

(15,911,414

)

63,418,975

–

152,220,656

Accounts payable

2,834,098

9,499,541

–

12,333,639

Accrued expenses and other current liabilities

3,151,216

2,489,834

–

5,641,050

Deferred revenue

1,198,324

–

1,198,324

Financed receivables

–

1,859,853

–

(1,859,853

)

–

Notes payable - related party

425,000

–

425,000

Notes payable

1,829,004

1,250,000

–

(3,079,004

)

–

Convertible notes payable

125,000

–

125,000

Bridge notes payable

2,395,000

–

2,395,000

Loan payable

79,498

–

79,498

Total current liabilities

12,037,140

15,099,228

–

(4,938,857

)

–

22,197,511

Deferred Tax Liability

–

2,339,832

–

(2,339,832

)

–

Notes payable

914,494

–

(914,494

)

–

Other long-term liabilities

–

193,007

–

193,007

Total Liabilities

12,951,634

17,632,067

–

(5,853,351

)

–

(2,339,832

)

–

22,390,518

Treasury stock

–

(1,396,559

)

–

1,396,559

–

Common stock

1,500

32,813

–

(32,813

)

–

24,305

25,805

Additional paid-in capital

70,376,360

138,867,455

36,000,000

(3,060,500

)

–

(15,911,414

)

(62,074,833

)

9,499,531

(24,305

)

173,672,294

Accumulated deficit

(34,368,430

)

(126,469,894

)

–

126,469,894

(9,499,531

)

–

(43,867,961

)

Total Stockholders’ Equity

36,009,430

11,033,815

36,000,000

(3,060,500

)

–

(15,911,414

)

65,758,807

–

129,830,138

Total Liabilities and Stockholders’ Equity

48,961,064

28,665,882

36,000,000

(3,060,500

)

(5,853,351

)

(15,911,414

)

63,418,975

–

152,220,656

The accompanying notes are an integral part of these unaudited pro forma combined condensed consolidated financial statements

UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS OF CONVERSIONPOINT TECHNOLOGIES INC. AND INUVO, INC.
For the year ended December 31, 2018

	Historical ConversionPoint Technologies, Inc.			Historical Inuvo, Inc.			Pro Forma Adjustments (i)			Pro Forma Adjustments (j)			Pro Forma Adjustments (k)			Pro Forma Adjustments (l)			Pro Forma Adjustments (m)			Notes	Pro Forma Amounts
Net revenues	$	39,780,941		$	73,330,642		$	–		$	–		$	–		$	–		$	–			$	113,111,583
Cost of revenues		29,898,887			29,921,482			–			–			–			–			–				59,820,369
Gross profit		9,882,054			43,409,160			–			–			–			–			–				53,291,214
Operating expenses		–			–			–			–			–			–			–				–
Sales & marketing expenses		2,920,030			34,870,633			–			–			–			–			–		(h)		37,790,883
General and administrative expenses		28,721,023			12,642,570			–			–			–			–			(1,166,862	)	(h)		40,196,731
Amortization of intangibles assets		4,483,121			1,366,337			–			–			–			7,833,663			–		(h)		13,683,121
Total operating expenses		36,124,174			48,879,540			–			–			–			7,833,663			(1,166,862	)			91,670,515

Operating income (loss)		(26,242,120	)		(5,470,380	)		–			–			–			(7,833,663	)		1,166,862				(38,379,301	)

Interest expense, net		7,306,092			420,452			(12,500	)		(1,267,231	)		(339,000	)		–			–				6,107,813
Loss from continuing operations before taxes		(33,548,212	)		(5,890,832	)		12,500			1,267,231			339,000			(7,833,663	)		1,166,862				(44,487,114	)
Income tax expense (benefit)		(308,719	)		–			–			–			–			–			–		(n)		(308,719	)
Net income (loss) from continuing operations		(33,239,493	)		(5,890,832	)		12,500			1,267,231			339,000			(7,833,663	)		1,166,862				(44,178,395	)
Net income (loss) from discontinued operations		–			–			–			–			–			–			–				–
Net income (loss)	$	(33,239,493	)	$	(5,890,832	)	$	12,500		$	1,267,231		$	339,000		$	(7,833,663	)	$	1,166,862			$	(44,178,395	)
Net income per share, basic and diluted	$	(2.43	)	$	(0.19	)																	$	(1.71	)
Weighted-average shares outstanding, basic and diluted		13,676,220			31,019,623																			25,805,497

The accompanying notes are an integral part of these unaudited pro forma combined condensed consolidated financial statements

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The unaudited pro forma combined condensed consolidated financial statements are prepared under the acquisition accounting method in accordance with ASC 805, with ConversionPoint treated as the acquirer. Under the acquisition accounting method, the total estimated purchase price allocation is calculated as described in Note 4. In accordance with ASC 805, the assets acquired and the liabilities assumed have been measured at fair value based on various preliminary estimates, and these estimates are subject to change pending further review of the fair value of assets acquired and liabilities assumed. The final amounts recorded for the mergers may differ materially from the information presented herein.

The unaudited pro forma combined condensed consolidated financial statements were prepared in accordance with GAAP and pursuant to SEC Regulation S-X Article 11, and present the pro forma financial position and results of operations of the combined companies based upon the historical information after giving effect to the mergers and adjustments described in these Notes to the unaudited pro forma combined condensed consolidated financial statements. The unaudited pro forma combined condensed consolidated balance sheet is presented as if the mergers had occurred on December 31, 2018; and the unaudited pro forma combined condensed consolidated statement of operations for the year ended December 31, 2018 are presented as if the mergers had occurred on January 1, 2018.

Certain reclassifications have been made relative to Inuvo’s historical financial statements to conform to the financial statement presentation of ConversionPoint. Such reclassifications are described in further detail in Note 5 to the unaudited pro forma combined condensed consolidated financial statements.

Accounting Policies

As a result of the continuing review of Inuvo’s accounting policies, ConversionPoint may identify differences between the accounting policies of the two businesses that, when conformed, could have a material impact on the combined financial statements. The unaudited pro forma combined condensed consolidated financial statements do not assume any differences in accounting policies other than the reclassification of certain Inuvo’s operating expenses to conform with ConversionPoint operating expenses (see Note 5).

Preliminary Estimated Purchase Price Consideration

Subject to the terms and conditions of the merger agreement, each outstanding share of Inuvo common stock will be exchanged for 0.18877 of a share of ConversionPoint Holdings common stock.

The merger agreement provides that stock options and warrants of ConversionPoint and Inuvo will be converted to options of ConversionPoint Holdings based on the exchange ratio. The estimated value of the stock options converted based on closing price is not considered material.

The requirement to determine the final purchase price using the number of Inuvo shares outstanding at the closing date and the closing price of ConversionPoint’s common stock as of the closing date could result in a total purchase price different from the price assumed in these unaudited pro forma combined condensed consolidated financial statements, and that difference may be material. Therefore, the estimated consideration expected to be transferred reflected in these unaudited pro forma combined condensed consolidated financial statements does not purport to represent what the actual consideration transferred will be when the mergers are completed.

As a condition to the closing of the merger agreement, ConversionPoint and/or ConversionPoint Holdings must raise a minimum of $36,000,000 of equity and/or debt (ConversionPoint and/or ConversionPoint Holdings is not currently pursuing a debt financing). With the proceeds, ConversionPoint Holdings will pay Inuvo stockholders $0.45 per Inuvo share in cash or an estimated total of $15,911,414. Additionally, Inuvo is required to pay back its financed receivables and certain notes payable, which as of December 31, 2018, totaled $1,859,853 and $1,250,000 respectively and ConversionPoint is required to pay its notes payable, which as of December 31, 2018 totaled $2,743,498. Solely for the purposes of the pro forma combined condensed consolidated financial statements, ConversionPoint Holdings assumes that it will pay $15,911,414 and $5,853,351 in cash to former Inuvo stockholders and to lenders, respectively, and $4,861,000 in total fees to close the mergers as described in Note 5.

For purposes of these unaudited pro forma combined condensed consolidated financial statements, the estimated purchase price has been allocated among Inuvo’s tangible and intangible assets and liabilities based on their estimated fair value as of December 31, 2018. The final determination of the allocation of the purchase price will be based on the estimated fair value of such assets and liabilities as of the date of closing of the mergers. Such final determination of the purchase price allocation may be significantly different from the preliminary estimates used in these unaudited pro forma combined condensed consolidated financial statements.

Preliminary Estimated Purchase Price Allocation

The following allocation of the preliminary estimated purchase price assumes, with the exception of goodwill and other identifiable intangible assets, carrying values approximate estimated fair value. Fair value of goodwill is based on a preliminary estimated purchase price of $76,792,622. The calculation of the purchase price consideration to acquire Inuvo is as follows:

Cash consideration per share	$	0.45
Inuvo’s effective common shares outstanding		35,358,698

Cash consideration (cash consideration per share times Inuvo’s effective common shares outstanding)	$	15,911,414

ConversionPoint’s stock price per share	$	9.21
ConversionPoint’s basic exchange ratio		0.97314

ConversionPoint Holdings’ stock price per share – based on ConversionPoint’s stock price	$	9.46
Inuvo’s basic exchange ratio		0.18193

Stock consideration per share (ConversionPoint Holdings’ stock price times Inuvo’s basic exchange ratio)	$	1.72

Stock consideration (ConversionPoint Holdings’ stock price per share times Inuvo’s basic exchange ratio)	$	60,881,208

Total consideration per share (cash per share plus stock per share consideration)	$	2.17

Total purchase price consideration (cash plus stock consideration)	$	76,792,622

Based upon these assumptions, the total purchase price consideration was allocated to Inuvo’s assets and liabilities, as of December 31, 2018, as follows:

	Estimated Fair Value

Cash and cash equivalents	$	228,956
Accounts receivable, net		6,723,349
Prepaid expenses and other current assets		259,712
Total current assets		7,212,017

Property and equipment, net		2,123,672
Other assets		35,170
Identifiable intangible assets, net		52,100,000
Goodwill		30,613,998
Total Assets Acquired		92,084,857


Accounts payable	$	9,499,541
Accrued expenses and other current liabilities		2,489,834
Financed receivables		1,859,853
Notes payable		1,250,000
Total current liabilities		15,099,228

Other long-term liabilities		193,007

Total Liabilities Assumed		15,292,235

Net Assets Acquired		76,792,622

Total Estimated Purchase Price	$	76,792,622

The preliminary amounts assigned to identifiable intangible assets and estimated weighted average useful lives are as follows:

	Range of Useful Life (in years)		Estimated Fair Value as of December 31, 2018
Customer Relationships		5	$	34,200,000
Technology		5		11,800,000
Websites		Indefinite		6,100,000
Identifiable intangible assets, net			$	52,100,000

For each identified intangible asset, the valuation firm used a separate measure. Inuvo’s technology was valued by way of the relief-from-royalty method (“RRM”). The RRM is based on the assumption that, in lieu of ownership of the technology, the company would be willing to pay a royalty in order to enjoy the benefits of the asset. Under this method, value is estimated by discounting the hypothetical royalty payments to their present value equivalent over the economic life of the asset. Inuvo’s websites were valued by way of the with-and-without method (“WWOM”). The WWOM estimated the value of the websites by quantifying the loss of economic profits under a hypothetical condition where only the subject intangible asset does not exist and needs to be re-created. The projected cash flows are calculated in each “with” and “without” scenario, and the difference in the annual cash flows (i.e., the lost profit) is then discounted to the present to derive an indication of value for the asset. Finally, Inuvo’s customer relationships were valued by way of the multi-period exceed earnings method (“MPEEM”). The MPEEM estimates the value of the customer relationships calculating the amount of residual (or excess) cash flows generated by the asset and discounting those cash flows to the present value equivalent. The method involves starting with the financial projections of the business and then estimating the cash flows attributable to the subject intangible assets after subtracting “charges” for use of other tangible and intangible assets that contribute to the overall cash flows of the business. These charges represent the return on and of all contributory assets, and are applied in order to estimate the “excess” earnings generated by the subject intangible asset. Based on the merger, Inuvo stockholders will exchange their shares into an aggregate of 6,432,800 shares on a proportional basis.

Goodwill is calculated as the difference between the preliminary fair value of the consideration and the preliminary fair values of the assets acquired and liabilities assumed. Goodwill is not amortized. The factors contributing to the recognition of the amount of goodwill are based on strategic benefits that are expected to be realized from the merger. ConversionPoint and Inuvo identified significant cross-selling opportunities to their respective customers and combined annual cost savings synergies. Additionally, the combined companies are expected to result in a more robust e-commerce technology solution to better serve its customers. Finally, ConversionPoint is also acquiring Inuvo’s workforce with a unique skill set in the e-commerce and digital marketing industry.

The identifiable intangible assets are amortized using a straight-line method.

The final determination of the purchase price allocation will be based on the actual net tangible and intangible assets of Inuvo that will exist on the date of the mergers and completion of the valuation of the fair value of such net assets. ConversionPoint anticipates that the ultimate purchase price allocation of balance sheet accounts such as current assets and liabilities, property and equipment, intangible assets and long-term assets and liabilities will differ from the preliminary assessment outlined above. Any changes to the initial estimates of the fair value of the acquired assets and assumed liabilities will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill.

Preliminary Pro Forma Financial Statement Adjustments

Adjustments included in the column under the heading “Pro Forma Adjustments” represent the following:

Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet

To record the minimum capital raise of $36,000,000, which is a requirement to close the mergers.

To record the costs related to the acquisition. ConversionPoint estimated the costs to raise capital and identified the following expenses:

i.	Financing fee (7% of capital raise):	$	2,520,000
ii.	Professional and transaction fees:	$	540,500
		$	3,060,000

Estimated transaction fees totaling $1,800,500, which are expected to be deducted from the proceeds of the capital raise, but relate to cost of the merger with Inuvo, and therefore, will be accounted for as general and administrative cost in the period incurred, have been excluded from the pro forma adjustments as they are not expected to have a continuing impact on the combined results of ConversionPoint and Inuvo. The $1,800,500 is comprised of Inuvo’s M&A advising fee of $1,260,000 and professional and transaction fees of $540,500.

To record the payment of debt, which is due at the time of the IPO:

i.	Financed receivables:	$	1,859,853
ii.	Notes payable from Inuvo:	$	1,250,000
iii.	Notes payable from ConversionPoint	$	2,743,498
		$	5,853,351

To record the cash to close the deal, which is $0.45 per share with 35,358,698 outstanding shares or $15,911,414.

To record the preliminary purchase price allocation.

To record the accelerated vesting of ConversionPoint and Inuvo RSUs upon the IPO. ConversionPoint has 928,893 RSUs at $9.21 a share for a total of compensation expense of $8,555,105 and Inuvo has compensation costs note yet recognized of $944,426. The total additional compensation expense for both entities is $9,499,531. Additionally, the Company excluded the compensation expense related to the restricted stock units from the adjustment to the Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations of ConversionPoint Technologies Inc. and Inuvo, Inc as they are nonrecurring expenses and do not have a continuing impact on the business.

To record the stockholders’ equity balances at the time the mergers take place.

Unaudited Pro Forma Combined Condensed Consolidated Statement of Operations

Conforming Reclassifications Between ConversionPoint and Inuvo:

The following reclassifications have been made to the presentation of Inuvo’s historical consolidated financial statements to conform to ConversionPoint’s presentation:

A portion of the compensation and selling, general and administrative operating expenses of Inuvo’s books was reclassified to sales, marketing, general and administrative, and amortization of intangibles assets to conform to ConversionPoint operating expenses presentation.

Pro Forma Adjustments

Reflects pro forma adjustment to interest expense for the ConversionPoint convertible note, which was assumed to be converted on January 1, 2018, and therefore, the interest expense related to the convertible note payable was reduced.

Reflects pro forma adjustment to interest expense for the ConversionPoint note payable, which was assumed to be paid off on January 1, 2018, and therefore, the interest expense related to the note payable was reduced.

Reflects the pro forma adjustments to interest expense for the Inuvo financed receivables and notes payable, which are required to be paid with a change in control assumed to be effective January 1, 2018, and therefore, the interest expense related to the financed receivables and notes payable needs to be reduced.

Represents estimated increase in amortization of intangible assets of $7,833,663 related to the fair value adjustment of intangible assets acquired.

To remove the acquisition costs for both ConversionPoint and Inuvo related to the mergers, which were previously recorded in the statement of operations.

No net income tax benefit because of the full valuation allowance.

Pro Forma Combined Net Income (Loss) per Share

The pro forma basic and diluted net income (loss) per share presented in the unaudited pro forma combined condensed consolidated statements of operations is computed based on the weighted-average number of shares outstanding:

	Year Ended December 31, 2018

Pro Forma net loss available to common stockholders, as combined	$	(44,178,395	)
ConversionPoint Technologies shares converted to ConversionPoint Holdings shares		15,567,200
Inuvo shares converted to ConversionPoint Holdings shares		6,432,800
Shares expected to be issued upon IPO		3,805,497
Pro Forma weighted-average shares, Basic and Diluted		25,805,497
Pro Forma net loss per share, Basic and Diluted	$	(1.71	)

Management’s Discussion and Analysis of Financial Condition and
Results of Operations

You should read the following discussion and analysis of the financial condition and results of operations of ConversionPoint and Inuvo together with ConversionPoint’s and Inuvo’s financial statements and the related notes and other financial information included elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results after consummation of the mergers may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” beginning on page 14. The historical results of ConversionPoint and Inuvo are not necessarily indicative of the results to be expected for any future period.

Overview

Upon completion of this offering and the mergers described below, we expect our business will be comprised of the collective businesses of ConversionPoint Technologies Inc., a Delaware corporation, or ConversionPoint, and Inuvo, Inc., a Nevada corporation, or Inuvo. We will be a newly-combined technology company with a mission to provide a first-party data driven, end-to-end, AI-powered e-commerce platform not previously available to SMBs. We expect that this collective business will consist, in part, of ConversionPoint’s enterprise grade e-commerce technology, which currently is used to support over 100 premium online retailers and which harnesses first-party data from from over a billion shoppers per month and billions of consumer interactions across over 860 brands to create optimized product experiences, and Inuvo’s market leading AI-powered advertising platform and first party data engine currently used to create the industry’s most accurate, real-time view of highly specific and custom audiences. We believe that the combination of ConversionPoint’s and Inuvo’s technologies will allow us, utilizing our combined expertise in real-time first-party data, AI and customer acquisition and engagement technology, to deliver an end-to-end, managed services and SaaS platform to SMBs that will empower them to succeed in a fragmented marketplace by creating a “modern front office” through the unification of real-time data, precision audiences and engaging page experiences resulting in increased conversions that drive billions of dollars of revenue.

Set forth below is a discussion and analysis of the financial condition and results of operations of ConversionPoint for the years ended December 31, 2018 and 2017 and Inuvo for the years ended December 31, 2018 and 2017.

ConversionPoint

Company Overview

ConversionPoint, through its wholly-owned subsidiaries, helps e-commerce companies and brands target, convert, manage and re-engage their customers using sophisticated online tracking and data analytics. ConversionPoint’s suite of technologies manages and optimizes multiple aspects of e-commerce including: rich media content creation and syndication, audience targeting, conversion optimization, remarketing, logistics and customer management. ConversionPoint both delivers its technologies to its customers through SaaS and uses its technologies to provide managed digital marketing and e-commerce technology services to brands and advertisers, which we refer to as managed services. ConversionPoint also uses its own technologies to sell various products directly to consumers, which we refer to as e-commerce product sales. ConversionPoint’s vision is to simplify the entire e-commerce experience by integrating its technologies and offering a broad range of e-commerce solutions on a single, easy-to-use platform.

ConversionPoint was formed as a Delaware corporation on November 2, 2016. In April 2017, ConversionPoint acquired Branded Response, Inc. and Push Holdings, LLC, both of which are engaged in the business of e-commerce product sales, with the vision of using Push’s existing technology platform as the foundation to develop both organically and through strategic acquisition, a unified e-commerce solution to (a) more efficiently manage ConversionPoint’s own internal e-commerce product campaigns, (b) manage campaigns for third parties, on a managed services basis, and (c) develop and license their technology to third parties on a self-serve SaaS subscription basis. In 2017, ConversionPoint began generating managed service revenues.

In December 2017, ConversionPoint acquired SellPoints, Inc., a venture-backed Delaware corporation, which had developed a suite of software solutions enabling brands to create and syndicate interactive rich media content experiences to a network of online retailers, track online consumer behavior, retarget consumers based on their online behavior, and deliver robust data analytics and reporting. ConversionPoint believed that SellPoints’ technologies, coupled with its large brand customers and partners, would add significant capabilities to the end-to-end e-commerce platform ConversionPoint was creating.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with 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. ConversionPoint evaluates these estimates and assumptions on an ongoing basis and bases its estimates on historical experience, current conditions and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. ConversionPoint’s actual results may materially differ from these estimates.

The more critical accounting estimates include estimates related to revenue recognition, accounts receivable, business combinations, goodwill and intangible assets, software development costs, stock-based compensation and income taxes, have the greatest potential impact on our consolidated financial statements. Therefore, ConversionPoint considers these to be our critical accounting policies and estimates.

Revenue Recognition

ConversionPoint generates revenue from three primary revenue types: e-commerce product sales, managed services and SaaS.

ConversionPoint recognizes revenue in accordance with ASC 605, Revenue Recognition and related authoritative guidance. Under ASC 605, revenue is recognized when the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) fees are fixed or determinable; (iii) the collection of the fees is reasonably assured; and (iv) services have been rendered.

ConversionPoint recognizes revenue in accordance with ASC 605-2, Multiple Deliverables. The determination of whether the arrangement contains multiple elements is determined based on whether the product or service has a stand-alone value. ConversionPoint evaluates each arrangement and was determined that SaaS offerings are recorded as a single unit of accounting for the purposes of allocation of the arrangement consideration and revenue recognition. For arrangements that include a combination of both managed services and SaaS, ConversionPoint has determined that standalone value exists since both products are sold separately. In these cases, ConversionPoint allocates the arrangement consideration to the managed services and SaaS elements based on the relative stand-alone selling prices.

Accounts Receivable

Accounts receivable consists primarily of in-transit credit card settlements from customer sales processed through merchant accounts and revenue earned from customers based on contractual agreements. Merchant accounts frequently require a portion of settlements to be held back for potential future chargebacks and refunds. Holdbacks generally amount to 10% of total settlements and are generally released within six months or when the risk of chargebacks is remote. ConversionPoint estimates the impact of future chargebacks and sales returns based on historical experience and provides an allowance against accounts receivable. Additionally, ConversionPoint performs ongoing evaluations of its customers’ financial condition. ConversionPoint provides credit to some of its customers in the normal course of business and maintains allowances for potential credit losses.

Business Combinations

ConversionPoint allocates the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions with respect to intangible assets and liability obligations. Although ConversionPoint believes the assumptions and estimates ConversionPoint has made are reasonable, they are based in part on historical experience, market conditions and information obtained from management of the acquired companies and are inherently uncertain. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:

	·	future expected cash flows from software technologies;

	·	historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;

	·	the acquired company’s trade name and trademarks as well as assumptions about the period of time the acquired trade name and trademarks will continue to be used in the combined company’s product portfolio;

	·	the expected use of the acquired assets; and

	·	discount rates.

Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

Goodwill and Intangible Assets

Goodwill is recorded as the difference between the aggregate consideration paid for the acquisitions of Push and SellPoints in 2017 and the fair value of the acquired net tangible and intangible assets acquired. ConversionPoint evaluates goodwill for impairment on an annual basis in the fourth quarter or more frequently if indicators of impairment exist that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

For 2018, ConversionPoint conducted the goodwill impairment testing by assessing qualitative factors to determine whether it was more likely than not that the fair value of our reporting unit was less than its carrying amount. As part of this assessment, ConversionPoint considered factors, including but not limited to, the overall macroeconomic environment, specific industry and market conditions, cost factors, our overall financial performance against expectations and changes in strategy or the manner in which it uses its assets. While ConversionPoint had operating losses in 2018, ConversionPoint increased its revenues in managed services and SaaS, which are the key segments. No other indicators of impairment were identified during ConversionPoint assessment. Accordingly, ConversionPoint concluded there was no impairment to goodwill at the impairment testing date.

ConversionPoint’s intangible assets consist of software technology, customer lists and brand names which are amortized using the straight-line method over five years. These intangible assets resulted from the acquisitions of Push and SellPoints in 2017.

Software Development Costs

Capitalization of software development costs begins during the application development stage. Costs incurred in the application development phase, including upgrades and enhancements, if it is probable that such expenditures will result in additional functionality, are capitalized and will be amortized over their estimated useful life. Software development costs incurred subsequent to the establishment of technological feasibility are capitalized on the accompanying balance sheets on a periodic basis, usually quarterly. Software development costs are amortized using the straight-line method over five years.

Software development activities generally consist of three stages: (i) the planning stage; (ii) the application and infrastructure development stage; and (iii) the post-implementation stage. Costs incurred in the planning and post-implementation stages of software development, including costs associated with the post configuration training and repairs and maintenance of the developed technologies, are expensed as incurred. ConversionPoint capitalizes costs associated with software developed when both the preliminary project stage is completed and management has authorized further funding for the completion of the project. Costs incurred in the application and infrastructure development stages, including significant enhancements and upgrades, are capitalized. Capitalization ends once a project is substantially complete and the software and technologies are ready for their intended purpose. Software development costs are amortized using a straight-line method over the estimated useful life of five years, commencing when the software is ready for its intended use.

Stock-Based Compensation

ConversionPoint values stock compensation based on the fair value recognition provisions of ASC 718, Compensation – Stock Compensation, which establishes accounting for stock-based awards exchanged for employee services and requires companies to expense the estimated grant date fair value of stock awards over the requisite employee service period.

The fair value of restricted stock awards is based on the market price of ConversionPoint’s common stock on the date of the grant. To value stock option awards, ConversionPoint uses the Black-Scholes-Merton option pricing model. This model involves assumptions including the stock price, expected life of the option, stock price volatility, risk-free interest rate, dividend yield and exercise price. ConversionPoint recognizes compensation expense in earnings over the requisite service period, while forfeitures of awards are recognized as they occur.

ConversionPoint also grants stock-based awards to non-employees. ConversionPoint believes that for stock options issued to non-employees, the fair value of the stock option is more reliably measurable than the fair value of the services rendered. Therefore, ConversionPoint estimates the fair value of non-employee stock options using a Black-Scholes-Merton valuation model with appropriate assumptions. The estimated fair value of non-employee stock options is re-measured over the vesting period, and the expense is recognized on a straight-line basis over the period during which the award vests.

Income Taxes

ConversionPoint uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax laws is recognized in the consolidated statement of operations in the period that includes the enactment date.

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are more likely than not expected to be realized based on the weighting of positive and negative evidence. Future realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character (for example, ordinary income or capital gain) within the carryback or carryforward periods available under the applicable tax law. ConversionPoint regularly reviews the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. ConversionPoint’s judgments regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute its business plans and/or tax planning strategies. Should there be a change in the ability to recover deferred tax assets, the tax provision would increase or decrease in the period in which the assessment is changed.

JOBS Act

Under the JOBS Act, emerging growth companies also can delay adopting new or revised accounting standards until such time as those standards apply to private companies. ConversionPoint Holdings has elected to avail itself of this exemption from new or revised accounting standards. As a result of this election, ConversionPoint Holdings’ financial statements may not be comparable to companies that comply with public company effective dates for new or revised accounting standards.

Overview of 2018

In the second quarter of 2018, ConversionPoint shifted its focus away from e-commerce product sales towards its long-term growth strategy of further developing its managed services and SaaS offerings for brands and advertisers. ConversionPoint began devoting resources to integrating its various technology solutions into an end-to-end e-commerce platform and increasing managed services and SaaS revenues. While ConversionPoint continued, and plans to continue, e-commerce product sales, the shift in internal resources away from e-commerce product sales resulted in a decrease in overall revenues in 2018, as compared to 2017, although managed services and SaaS revenues increased during 2018.

As part of its strategy of focusing on developing its managed services and SaaS businesses and continuing to develop and enhance its end-to-end e-commerce solutions, in November 2018, ConversionPoint entered into the merger agreement to acquire Inuvo. Inuvo owns IntentKey, a first party consumer data platform with strong intellectual property that allows brands to better target potential customers online. ConversionPoint views Inuvo and its first party data platform as a key part of the development of its end-to-end e-commerce technology platform and the growth of its managed services and SaaS revenues.

ConversionPoint believes it is providing enterprise grade e-commerce technologies available to SMBs, which primarily currently use multiple technology point solutions to operate their e-commerce businesses.

Results of Operations for the Years ended December 31, 2018 and 2017

	For the Years Ended December 31,
	2018			2017			Change			% Change
Net Revenues	$	39,780,941		$	49,920,921		$	(10,139,680	)		(20.3	)%
Cost of Revenues		29,898,887			37,776,678			(7,877,791	)		(20.9	)%
Gross Profit		9,882,054			12,143,943			(2,261,889	)		(18.6	)%
Gross Profit Percentage		24.8	%		24.3	%
Operating Expenses:
Sales and marketing		2,920,030			4,298,412			(1,378,382	)		(32.1	)%
General and administrative		28,721,023			5,776,332			22,944,691			397.2	%
Amortization of intangibles assets		4,483,121			1,278,344			3,204,777			250.7	%
Total operating expenses		36,124,174			11,353,088			24,771,086			218.2	%
(Loss) Income from Operations		(26,242,120	)		790,855			(27,032,975	)		(3,418.2	)%
Interest Expense:
Debt conversion to equity discount		4,360,929			–			4,360,929			N/A
Warrants issued to debt holders		1,494,308			–			1,494,308			N/A
Interest expense – stated rate		1,450,855			829,169			621,686			75.0	%
Total interest expense, net		7,306,092			829,169			6,476,923			781.1	%
Loss Before Income Tax Benefit		(33,548,212	)		(38,314	)		(33,509,898	)		87,461.2	%
Income Tax Benefit		(308,719	)		(434,974	)		126,255			(29.0	)%
Net (Loss) Income	$	(33,239,493	)	$	396,660		$	(33,636,153	)		(8,479.8	)%

Segment Reporting

ConversionPoint and its subsidiaries operate in the following three business segments: e-commerce product sales, managed services and SaaS. The following financial information presents ConversionPoint’s consolidated statements of income (loss) and certain operating data for each of the periods indicated. The results of operations by segment are also discussed as part of a discussion of the consolidated overview.

e-commerce product sales reportable segment: ConversionPoint sells various products primarily in the health, wellness and beauty industries directly to consumers online. ConversionPoint sells these products primarily through trial offers and a monthly subscription model. ConversionPoint uses its expertise and its internally developed technologies to maximize the lifetime value of customers.

Managed services reportable segment: consists mainly of the management of digital advertising campaigns and retargeting technologies for brands and advertisers.

SaaS reportable segment: consists of rich media content creation and product information management and syndication, which increase the return on investment for brands and advertisers selling on various online retail channels through higher online check out rates for the brands and advertisers using the technology.

Operating Data for the Year ended December 31, 2018 and 2017

	For the Years Ended December 31,
	2018			2017			Change			% Change
e-commerce Product
Revenue	$	20,287,005		$	41,651,146		$	(21,364,141	)		(51.3	)%
Cost of revenues		16,511,602			32,952,100			(16,446,498	)		(49.9	)%
Segment gross profit		3,775,403			8,693,046			(4,917,643	)		(56.6	)%
Gross profit percentage		18.6	%		20.9	%		23.0	%		(2.3	)%

Managed Services
Revenue	$	15,951,669		$	7,950,890		$	8,000,779			100.6	%
Cost of revenues		12,785,624			4,766,526			8,019,098			168.2	%
Segment gross profit		3,166,045			3,184,364			(18,319	)		(0.6	)%
Gross profit percentage		19.8	%		40.1	%		(0.2	)%		(20.3	)%

SaaS
Revenue	$	3,542,267		$	318,585		$	3,223,682			1,011.9	%
Cost of revenues		601,661			52,052			549,609			1,055.9	%
Segment gross profit		2,940,606			266,533			2,674,073			1,003.3	%
Gross profit percentage		83.0	%		83.7	%		83.0	%		(0.7	)%

Net Revenues

Revenues were $39.8 million for the year ended December 31, 2018, compared to $49.9 million for the same period in 2017, a decrease of $10.1 million, or 20.3%. The decline in revenues was primarily driven by a strategic effort by ConversionPoint to shift its prior focus on e-commerce product revenues, to growing managed services and SaaS revenues, which generally have higher gross margins.

Revenues in the e-commerce product sales segment decreased from $41.7 million for the year ended December 31, 2017, to $20.3 million for the same period in 2018. The $21.4 million decrease is due to ConversionPoint’s increased focus growing its SaaS and managed services businesses, which it began in the second quarter of 2018, together with a more competitive online payment processing environment. At the beginning of 2018, ConversionPoint was selling nine different products online, however, in the second half of the year, ConversionPoint decided to keep only the highest selling product offerings. As a result, ConversionPoint was selling four products at the end of the year. Additionally, ConversionPoint reallocated employees from e-commerce product sales to managed services to focus on assisting customers sell their own products online.

Revenues from managed services increased from $8.0 million for the period ended December 31, 2017, to $16.0 million for the same period in 2018. The $8.0 million increase is primarily a result of increasing focus on expanding ConversionPoint’s managed services business commencing in the second quarter of 2018 by allocating more headcount to assist customers sell their own products online, and the acquisition of SellPoints in December 2017, which contributed an additional $3.3 million of managed services revenue during the year ended December 31, 2018. In 2018, ConversionPoint launched various managed services’ campaigns, which increased from three in mid-2018 to eight at the end of 2018.

Revenues from SaaS increased from $0.3 for the period ended December 31, 2017, to $3.5 million for the same period in 2018. The $3.2 million increase is primarily as a result of ConversionPoint’s acquisition of SellPoints in December 2017, and revenues derived during 2018, from its cloud-based technology platforms.

Cost of Revenues and Gross Profit

Consolidated cost of revenues was $29.9 million for the year ended December 31, 2018, compared to $37.8 million for the year ended December 31, 2017, a decrease of $10.1 million, or 20.3%. The decrease is primarily due to the decrease in e-commerce product revenues which had a corresponding decrease in customer acquisition costs that are lower in ConversionPoint’s other business segments.

Cost of revenues for the e-commerce product segment was $16.5 million for the year ended December 31, 2018, compared to $33.0 million for the same period in 2017, a decrease of $16.4 million, or 49.9%. Cost of revenues for the e-commerce product segment as a percentage of overall e-commerce product revenues for the years ended December 30, 2018 and 2017 was relatively consistent at 81.4% and 79.1%, respectively.

Cost of revenues for the managed services segment was $12.8 million and $4.8 million for the years ended December 31, 2018 and 2017, respectively, an increase of $8.0 million. Cost of revenues for the managed services segment as a percentage of overall managed services revenues was 80.2% and 59.9% for the years ended December 31, 2018 and 2017, respectively. The increase in managed services costs of revenues is due, primarily, to higher than expected customer delivery costs, including digital marketing costs incurred on behalf of customers.

Cost of revenues for the SaaS segment increased from $0.1 million to $0.6 million for the years ended December 31, 2018 and 2017, respectively, an increase of $0.5 million. The $0.5 million increase is due to the SellPoints acquisition in December 2017 and the costs of revenues resulting from its technology platforms. Cost of revenues for the SaaS segment as a percentage of overall SaaS revenues was relatively consistent at 17.0% and 16.3% for the years ended December 31, 2018 and 2017, respectively.

Consolidated gross profit was $9.9 million for the year ended December 31, 2018 compared to $12.1 million for the same period in 2017, a decrease of $2.2 million or 18.6%. The decrease in gross profit is due to shifts in ConversionPoint’s strategic focus to managed services and SaaS, which resulted in lower total revenue in 2018. Gross profit as a percentage of net sales increased slightly to 24.8% from 24.3% for the years ended December 31, 2018 and 2017, respectively.

Gross profit in the e-commerce product segment was $3.8 million for the year ended December 31, 2018, compared to $8.7 million for the same period in 2017, a decrease of $4.9 million. The decrease is primarily the result of ConversionPoint’s strategic shift from e-commerce product sales towards managed services and SaaS. Costs of revenue related to e-commerce product are variable and as a result, as a percentage of net sales, gross profit was relatively constant at 18.6% and 20.9% for the years ended December 31, 2018 and 2017, respectively.

Gross profit in the managed services segment was flat at $3.2 million for both years ended December 31, 2018 and 2017. The managed services segment gross profit as a percentage of net sales was 19.8% and 40.1% for the years ended December 31, 2018 and 2017, respectively. The lower gross profit percentage from managed services is due to higher than expected customer delivery costs. ConversionPoint expects managed services gross margins to increase in 2019.

Gross profit in the SaaS segment was $2.9 million for the year ended December 31, 2018, compared to $0.3 million for the same period in 2017, an increase of $2.6 million. This segment of revenue was new in 2018, as a result of the acquisition of SellPoints. The SaaS segment gross profit as a percentage of net sales was relatively constant at 83.0% and 83.7% for the years ended December 31, 2018 and 2017, respectively.

Operating Expenses

Sales and marketing - Sales and marketing expenses include those expenses required to support the e-commerce product segment, including, customer acquisition costs. Sales and marketing expenses for the years ended December 31, 2018 and 2017 were $2.9 million and $4.3 million, respectively. The decrease in sales and marketing costs of $1.4 million for the year ended December 31, 2018, compared to the same period in the prior year, is primarily due to a decrease in e-commerce product revenues and the related decrease in sales and marketing expenses. The variable third party sales and marketing costs include, among others, call center expenses, chargeback management and other software and web hosting related costs.

General and administrative - General and administrative expenses were $28.7 million for the year ended December 31, 2018, compared to $5.8 million for the same period in 2017, an increase of $22.9 million. The increase is primarily due to the inclusion of a full year of operating expenses in 2018, for Push and SellPoints, which were acquired in April 2017 and December 2017, respectively. In addition, $9.7 million of additional general and administrative expenses in 2018, resulted from stock-based compensation plans established in 2018, and $2.1 million resulted from an increased headcount and additional compensation costs.

General and administrative expenses for Push, which ConversionPoint acquired in April of 2017, for the years ended December 31, 2018 and 2017, were $6.2 million and $1.7 million, respectively. The $4.5 million increase is primarily a result of the general and administrative expenses for Push for all of 2018, compared to 8 months for the prior year, the hiring of additional employees to scale up the business, and the cancellation of 500,000 warrants issued in 2017 to acquire the full rights to the intellectual property of push, which were cancelled in connection with the Merger and had a fair value of $1.5 million.

General and administrative expenses for SellPoints, which ConversionPoint acquired in December 2017, for the years ended December 31, 2018 and 2017, were $6.6 million and $0.4 million, respectively. The $6.2 million increase is primarily a result of the general and administrative expenses for SellPoints for all of 2018, compared to one month for the prior year, and the hiring of additional employees to scale up the business.

Amortization of intangible assets - Amortization of intangible assets was $4.5 million for the year ended December 31, 2018 compared to $1.3 million for 2017. The increase resulted from the intangible assets acquired as part of the acquisitions of Push and SellPoints. ConversionPoint is amortizing the intangible assets acquired over a five-year period.

Interest expense, net - Interest expense, net, which represents interest expense on the outstanding notes payable, increased from $0.8 million during the year ended December 31, 2017, to $7.3 million, for the year ended December 31, 2018. The increase primarily resulted from the conversion of notes to equity at a 50% discount to the conversion price provided in the notes. ConversionPoint recognized approximately $4.4 million in debt conversion discounts for the year ended December 31, 2018, which are non-recurring. Additionally, ConversionPoint issued warrants to lenders having a fair market value of $1.5 million for the year ended December 31, 2018. Finally, interest expense increased by $0.6 million due to the notes acquired as part of the SellPoints’ acquisition.

Income tax benefit - Income tax benefit is primarily driven by the change in the valuation allowance resulting from the changes in the Tax Cuts and Jobs Act which included a rate reduction which took effect on January 1, 2018.

Liquidity and Capital Resources

During the year ended December 31, 2018, ConversionPoint funded its operations primarily from cash on hand, cash generated by operations and private placements of equity securities. As of December 31, 2018, ConversionPoint had cash and cash equivalents of $2,282,526, as compared to $4,695,803 at December 31, 2017.

ConversionPoint and all of its subsidiaries are parties to a Loan and Security Agreement with Montage Capital II, L.P. and Partners for Capital Growth IV, L.P. As of March 1, 2019, $2,438,664, in principal and interest was outstanding under the loan. As of March 15, 2019, ConversionPoint was in default under the loan agreement, which default, the lenders have agreed to forebear until May 31, 2019 as described below. On November 2, 2018, ConversionPoint and its subsidiaries had certain technical defaults and an anticipated financial covenant default under the Loan and Security Agreement, and entered into an amendment to the Loan and Security Agreement, pursuant to which the lenders agreed to forbear from exercising remedies arising out of the existing defaults and the anticipated default until the earlier to occur of (i) their timely compliance with certain non-financial covenants under the Loan and Security Agreement as amended, upon which time the existing defaults and anticipated default shall automatically be waived, (ii) the occurrence of another event of default, or (iii) February 15, 2019. Pursuant to such amendment, the lenders also agreed to decrease ConversionPoint’s minimum cash covenant from $5,000,000 to $3,500,000 measured as of the last day of each month, and to eliminate the minimum EBITDA covenant included in the loan agreement, until February 15, 2019. As of February 15, 2019, ConversionPoint remained in default under the financial covenants under the loan agreement.

As of December 31, 2018, the financial covenants were as follows: (1) minimum cash covenant of $3,500,000 or (2) maximum adjusted quarterly EBITDA and minimum adjusted quarterly revenue for the three-month period ending on December 31, 2018 of $1,750,000 and $18,000,000, respectively. As of December 31, 2018, ConversionPoint was not in compliance with either financial covenant. As of December 31, 2018, ConversionPoint had a cash balance of $2,282,526 and the maximum adjusted quarterly EBITDA and minimum adjusted quarterly revenue for the three-month period ending on December 31, 2018 was $(9,057,622) and $11,171,501, respectively. Subsequently, on March 13, 2019, the lenders agreed to a further forbearance from exercising remedies arising from such defaults until May 31, 2019, and that such forbearance would be converted into a waiver of such defaults if ConversionPoint raises a minimum of $5,000,000 on or before May 31, 2019 through ConversionPoint Holdings’ initial public offering or otherwise. ConversionPoint is obligated to repay all amounts due and owing upon ConversionPoint Holdings’ initial public offering. The lenders also agreed to decrease ConversionPoint’s minimum cash covenant from $3,500,000 to $2,500,000 effective May 31, 2019, or reinstate a minimum EBITDA of at least $1.00.

In connection with the Loan and Security Agreement, ConversionPoint has entered into deposit control agreements with all of its banking institutions in favor of the lenders pursuant to which the lenders can assume control of ConversionPoint’s bank accounts in the event ConversionPoint defaults under the Loan and Security Agreement.

For the year ended December 31, 2018, ConversionPoint’s revenues declined 20.3% from the same period in the prior year. The lower revenue, combined with increased operating expenses, is principally responsible for ConversionPoint’s $25.4 million net operating loss during the year ended December 31, 2018. ConversionPoint incurred operating losses, has a working capital deficit and generated negative cash flows from operating activities during the year ended December 31, 2018 which raises substantial doubt about its ability to continue as a going concern.

ConversionPoint expects to use a significant amount of cash over the next twelve-month period for operating activities in order to carry out its strategic objectives. ConversionPoint’s management is therefore seeking additional sources of financing, including an initial public offering. Furthermore, ConversionPoint’s management is focused on increasing revenues and improving profit margins through the integration of its technology platform and expansion of managed services and SaaS products, which the ConversionPoint expects will reduce the levels of cash required for its operating activities.

ConversionPoint considers historical operating results, capital resources and financial position, in combination with current projections and estimates, as part of its plan to fund operations over a reasonable period of time. While management believes it will have access to other financing sources and that based on current projections, ConversionPoint will be able to maintain current operations and meet its obligations, there can be no assurance that additional sources of financing will be available on acceptable terms or that ConversionPoint will successfully execute its operating plans.

ConversionPoint’s consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

Cash Flows

The table below sets forth a summary of ConversionPoint’s cash flows for the years ended December 31, 2018 and 2017:

	For the Years Ended December 31,
	2018			2017
Net cash provided by (used in)
Operating activities	$	(10,371,061	)	$	(1,405,236	)
Investing Activities		(2,624,959	)		455,224
Financing Activities		10,582,743			5,000,885

Cash Flows - Operating

Net cash used in operating activities was $10.4 million during the year ended December 31, 2018. During that period, ConversionPoint reported a net loss of $33.2 million, which included the following non-cash expenses: depreciation and amortization expense of $4.6 million, stock-based compensation expense of $9.7 million, discount on conversion of debt of $4.4 million, cancellation of warrants of $1.5 million, and warrants issued to lenders of $1.3 million. The change in operating assets and liabilities during the year ended December 31, 2018, was primarily due to an increase in other accrued liabilities and deferred revenue.

During the comparable period in 2017, cash used in operating activities was $1.4 million from a net income of $0.3 million, which included the following non-cash expense: depreciation and amortization of $1.3 million and $0.5 million deferred tax benefit. The cash provided was decreased by a $2.2 million increase in accounts receivable and $0.3 million in other assets as the business was ramping up in 2017.

Cash Flows - Investing

Net cash used in investing activities was $2.6 million during 2018, which primarily consisted of capitalized internal software development costs and purchases of property and equipment.

Net cash provided by investing activities was $0.5 million during 2017, which primarily consisted of cash acquired in business acquisitions, offset by capitalized internal software development costs and purchases of property and equipment.

Cash Flows - Financing

Net cash provided by financing activities was $10.6 million during 2018, which primarily resulted from net proceeds of $12.1 million resulting from the sale of common stock, offset by repayments of ConversionPoint’s notes payable of $1.8 million.

In 2017, net cash provided by financing activities was $5.0 million which largely consisted of net proceeds of $2.6 million from the issuance of convertible promissory notes, net proceeds of $1.8 million from the sale of common stock, and net proceeds of $0.6 million from issuance of bridge notes.

For information concerning ConversionPoint’s term and convertible notes payable, see Note 8 to ConversionPoint’s Consolidated Financial Statements for the years ended December 31, 2018 and 2017 included elsewhere in this prospectus.

Off Balance Sheet Arrangements

As of December 31, 2018, ConversionPoint did not have any off-balance sheet arrangements that had or were reasonably likely to have a current or future effect on ConversionPoint’s 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 ConversionPoint is a party, under which ConversionPoint has 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.

Dividends on ConversionPoint Common Stock

ConversionPoint has never declared or paid cash dividends on its capital stock. ConversionPoint currently intends to retain all available funds and future earnings, if any, to fund the development and growth of its business and to repay indebtedness. Therefore, ConversionPoint does not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of its board of directors, and will depend upon its results of operations, financial condition, capital requirements and other factors including contractual obligations that its board of directors deems relevant.

Inuvo

Company Overview

Inuvo is a technology company that provides data-driven platforms that can automatically identify and message online audiences for any product or service across devices, channels and formats, including video, mobile, connected TV, display, social and native. These capabilities allow Inuvo’s clients to engage with their customers and prospects in a manner that we believe drives engagement from the first contact with the consumer. Inuvo facilitates over a billion marketing messages to consumers every single month and counts among its clients numerous world-renowned names in industries that have included retail, automotive, insurance, health care, technology, telecommunications and finance. Inuvo counts among its many contractual relationships, three clients who collectively manage over 50% of all U.S. digital media budgets.

Inuvo’s solution incorporates a proprietary form of artificial intelligence (AI) branded the IntentKey. This sophisticated machine learning technology uses interactions with Internet content as a source of information from which to predict consumer intent. The AI includes a continually updated database of over 500 million machine profiles which Inuvo utilizes to deliver highly aligned online audiences to its clients. Inuvo earns revenue when consumers view or click on its client’s messages. Inuvo’s business scales through account management activity with existing clients and adding new clients with sales activity.

Inuvo counts among its many contractual relationships, three clients who collectively manage over 50% of all U.S. digital media budgets. As part of Inuvo’s technology strategy, it also owns a collection of websites such as alot.com and earnspendlive.com, where it creates content in health, finance, travel, careers, auto, education and living categories. These sites provide the means to test Inuvo’s technologies, while also delivering high quality consumers to clients through the interaction with proprietary content in the form of images, videos, slideshows and articles.

There are many barriers to entry to Inuvo’s business that would require proficiency in large scale data center management, software development, data products, analytics, artificial intelligence, integration to the internet of things (IOT), the relationships required to execute within the IOT and the ability to process tens of billions of transactions daily. Inuvo’s intellectual property is protected by 15 issued and 8 pending patents.

2018 Overview

In 2018, Inuvo executed on the three goals management had set for the company when management made the decision to purchase NetSeer in the prior year: 1) to bring AI to digital marketing; 2) to re-imagine how consumer information is collected and used for marketing purposes; and 3) to expand Inuvo’s marketing technology footprint beyond search advertising. As is the case with most acquisitions, there were components of the NetSeer business that were aligned with these strategies and some that were not.

Inuvo had gained sufficient experience with the NetSeer assets to begin re-engineering the business so as to align with these strategic goals. Inuvo’s first decision was to focus all of its attention on the most differentiated component of the asset, which was the artificial intelligence technology being used to manufacture this rich source of consumer prospecting information, which we sometimes refer to as the data in this section. This decision had implications that included: a) discontinuing certain non-strategic technologies including a proprietary marketing platform; b) finding a suitable substitute marketing platform for the execution of the data; and c) raising capital to fund the strategy and working capital needs throughout the re-engineering period which Inuvo estimated would take the entire fiscal 2018 year.

There was a trade-off associated with the decision to discontinue the non-strategic technologies which involved the short-term loss of revenue and margin in anticipation of future growth and margins starting in 2019. Inuvo estimated that the revenue loss associated with this decision was $7.2 million in 2018. The attrition of revenue occurred faster than Inuvo had expected, and as a result, Inuvo accelerated the elimination of expenses and resources associated with the discontinued technologies including the elimination of approximately 20 full time employees. Inuvo raised approximately $2.1 million (net) in May of 2018 to ensure continuity of the strategy.

In January of 2019, Inuvo completed the re-engineering with the announcement of the integration of the IntentKey into the world’s largest independent marketplace for digital advertising, AppNexus which was the solution to the problem identified in b) above. This means the data is now executable on what we believe is one of the world’s best advertising platforms used by thousands of potential Inuvo clients. Early results from new and existing clients suggest both better results and a materially improved competitive positioning as evidenced by a strong pipeline of requests for proposals, or "RFPs". Inuvo believes that the technology it has developed and the integration it has engineered with the IntentKey data platform is a fast, cost-effective solution for an industry burdened by complicate technology.

Heading into 2019, Inuvo is effectively a business with two data management platforms, the IntentKey and ValidClick. In both cases, Inuvo leverages these platforms to consummate a transaction between consumer and advertiser. This means Inuvo now can serve clients across numerous marketing channels with enviable enabling relationships like AppNexus, Google, Yahoo! and Microsoft Online. While the ValidClick business was effectively flat year-over-year, this was more the consequence of limited resources to pursue monetization opportunities as opposed to lack of opportunity. Now that Inuvo is past the investment stage with the IntentKey, Inuvo expects the ValidClick business to continue to grow in what remains the largest single marketing spend category.

The foundation, which was laid in 2018, was the catalyst for the announcement of the execution of the merger agreement with ConversionPoint in November of 2018. The combination of Inuvo’s front-end marketing technologies with ConversionPoint’s back-end e-commerce engagement technologies represent what we believe is the next wave of digital technology consolidation and we believe Inuvo will be among the first to execute on this opportunity. This new positioning within e-commerce technology combined with a stronger product value proposition and more capital with greater operating scale forms the foundation of Inuvo’s excitement for the consummation of the mergers.

Comparison of the Year Ended December 31, 2018 and 2017

	For the Years Ended December 31,
	2018		2017		Change			% Change
Net Revenue	$	73,330,642	$	79,554,493	$	(6,223,851	)		(7.8	)%
Cost of Revenue		29,921,482		36,669,543		(6,748,061	)		(18.4	)%
Gross Profit	$	43,409,160	$	42,884,950		524,210			1.2	%
Marketing Cost (TAC)	$	31,852,190	$	28,578,401		3,273,789			11.5	%
Gross Profit adjusted for Marketing Cost (TAC)	$	11,556,970	$	14,306,549		(2,749,579	)		(19.2	)%

Net Revenue

Net revenue for the year ended December 31, 2018 was $73.3 million compared to $79.6 million for the year ended December 31, 2017. The decline in net revenue was primarily due to the strategic decision to discontinue non-strategic technologies including a proprietary marketing platform. Inuvo estimates that the revenue loss associated with this decision was approximately $7.2 million in 2018. In addition, Inuvo experienced lower monetization for its inventory from its largest demand partner. Inuvo has not seen an appreciable change in monetization for its inventory and Inuvo does not know whether monetization will return to former levels.

Cost of Revenue

Cost of revenue is primarily generated by payments to website publishers and app developers that host advertisements Inuvo serves and payments to ad exchanges that provide access to supply inventory where Inuvo serves advertisements. The decrease in the cost of revenue in 2018 compared to 2017 is due primarily to lower revenue and to the loss of revenue associated with the discontinuation of non-strategic revenue including a proprietary marketing platform discussed in the Net Revenue section.

Operating Expenses

	For the Year Ended December 31,
	2018		2017		Change			% Change
Marketing costs (TAC)	$	31,852,190	$	28,578,401	$	3,273,789			11.5	%
Compensation		8,524,476		10,200,117		(1,675,641	)		(16.4	)%
Selling, general and administrative		8,502,874		8,342,906		159,968			1.9	%
Operating expenses	$	48,879,540	$	47,121,424	$	1,758,116			3.7	%

Operating expenses increased by $1.8 million or 3.7% in the twelve months ended December 31, 2018 as compared to the same period ended December 31, 2017.

Marketing costs include those expenses required to attract an audience to Inuvo-owned web properties. Marketing costs increased by 11.5% in the twelve month period ended December 31, 2018 as compared to the same period ended December 31, 2017. The increase in marketing costs was partially due to adjusting traffic acquisition campaigns as a result of lower monetization experienced in the second half of the year.

Compensation expense decreased 16.4% in the twelve months ended December 31, 2018 due primarily to lower headcount. Inuvo’s total employment, both full-time and part-time, was 66 at December 31, 2018 compared to 89 at the same time last year.

Selling, general and administrative costs were $8.5 million, an increase of 1.9% over 2017. Among the higher 2018 expenses compared to 2017 were professional fees, IT costs and depreciation and amortization expense, offset by lower corporate expenses, travel and entertainment expenses and facility and marketing expenses.

Interest Expense, net

Interest expense, net, which represents interest expense on the bank credit facility, capital lease obligations and notes payable, was higher in 2018 compared to the same period in 2017 primarily due to higher interest rates on the credit line this year compared to last year.

Income tax benefit

In 2017, Inuvo recognized an income tax benefit of $1,498,076. due to the passing of the Tax Cuts and Jobs Act in December 2017. The new law reduced corporate income tax rates from 35% to 21%. As a result, the deferred tax assets and liabilities recorded in the consolidated balance sheet were revalued at the new tax rates. Both the deferred tax assets and the deferred tax liabilities were reduced. The decrease in the deferred tax liability resulted in the one-time tax benefit.

Income (loss) from Discontinued Operations

Certain of Inuvo’s subsidiaries previously operated in the European Union (“EU”). Though operations ceased in 2009, statutory requirements made it necessary to have a continued presence in the EU for varying terms until November 2015. Profits and losses generated from the remaining assets and liabilities are accounted for as discontinued operations.

In the third quarter of 2016, Inuvo’s petition with the UK (United Kingdom) Companies House to strike off and dissolve the remaining subsidiary in the EU was approved. As of December 31, 2017, Inuvo recorded a net income of $1,109 due primarily to the adjustment of certain accrued liabilities. No further charges or adjustments are expected.

Comparison of the Year Ended December 31, 2017 and 2016

Results of Operations

	For the Years Ended December 31,
	2017		2016		Change			% Change
Net Revenue	$	79,554,493	$	71,530,102	$	8,024,391			11.2	%
Cost of Revenue		36,669,543		21,364,795		15,304,748			71.6	%
Gross Profit	$	42,884,950	$	50,165,307	$	(7,280,357	)		(14.5	)%
Marketing Cost (TAC)	$	28,578,401	$	39,195,653	$	(10,617,252	)		(27.1	)%
Gross Profit adjusted for Marketing Cost (TAC)	$	14,306,549	$	10,969,654	$	3,336,895			30.4	%

Net Revenue

Net revenue for the year ended December 31, 2017 was $79.6 million compared to $71.5 million for the year ended December 31, 2016. The increase was primarily due to growth in the business acquired in February 2017. Revenue from the acquired business line grew from $0.8 million in its first month of operations, February 2017 to $1.9 million in December 2017. Inuvo expects the new business line to continue to fuel its growth into the future. Revenue from Inuvo’s ValidClick business, serving advertisements to publisher partners, increased 25% in 2017 compared to 2016. Revenue from Inuvo’s Digital Publishing business declined as Inuvo redirected resources and investment to the acquired business which has higher gross margins. The fourth quarter is traditionally the highest revenue quarter of the year. In 2017, the fourth quarter revenue was $23.8 million, 21% greater than the same quarter in 2016. The higher revenue in the fourth quarter of 2017 was attributable primarily to the new business line.

Cost of Revenue

Cost of revenue is primarily generated by payments to website and application publishers who host Inuvo’s advertisements. The increase in cost of revenue in 2017 compared to 2016 was due to with the higher revenue from the acquired business and ValidClick.

Operating Expenses

	For the Year Ended December 31,
	2017		2016		Change			% Change
Marketing costs (TAC)	$	28,578,401	$	39,195,653	$	(10,617,252	)		(27.1	)%
Compensation		10,200,117		6,830,338		3,369,779			49.3	%
Selling, general and administrative		8,342,906		4,996,482		3,346,424			67.0	%
Operating expenses	$	47,121,424	$	51,022,473	$	(3,901,049	)		(7.6	)%

Operating expenses decreased in the twelve months ended December 31, 2017 as compared to the same period of the prior year.

Marketing costs or TAC include those expenses required to attract traffic to Inuvo’s owned web properties. The decrease in marketing costs in the twelve months ended December 31, 2017 was a strategy initiated at the beginning of 2017 in anticipation of the acquisition in February 2017. This strategy was designed to focus resources and investment towards a higher growth and gross margin (after TAC) business at the expense of growth in another business line at lower gross margin.

Compensation expense increased 49.3% in the twelve months ended December 31, 2017 primarily due to an increase in the number of employees. The higher headcount was primarily due to the additional employees from the February 2017 acquisition. Inuvo’s total employment, both full-time and part-time, was 89 at December 31, 2017 compared to 72 at December 31, 2016. Inuvo expects compensation expense to increase, though moderately, in the coming quarters as Inuvo hires additional developers and sales personnel to support the anticipated growth.

Selling, general and administrative costs in 2017 were $8.3 million, an increase of 67.0% over 2016. The primary reasons for the higher cost in the twelve months ended December 31, 2017 compared to the same period last year was due to the acquisition in February 2017. Among the higher 2017 expenses compared to 2016 were IT costs approximately $1.3 million higher; amortization and depreciation expense approximately $852,000 higher; facilities cost approximately $290,000 higher and travel and entertainment costs approximately $255,000 higher. Inuvo expects selling, general and administrative costs to decrease in 2018.

Interest Expense, net

Interest expense, net, which represents interest expense on the bank credit facility, was higher in 2017 compared to the same periods in 2016 because of a higher average outstanding revolving credit line balance and higher interest rates in 2017 compared to 2016.

Income Tax Benefit

In 2017, Inuvo recognized an income tax benefit of $1,498,076 due to the passing of the Tax Cuts and Jobs Act in December 2017. The new law reduced corporate income tax rates from 35% to 21%. As a result, the deferred tax assets and liabilities recorded in the consolidated balance sheet were reevaluated at the new tax rates. Both the deferred tax assets and the deferred tax liabilities were reduced. The decrease in the deferred tax liability resulted in the one-time tax benefit.

In 2016, Inuvo recognized an income tax benefit of $29,260.

Income (loss) from Discontinued Operations

Certain of Inuvo’s subsidiaries previously operated in the European Union (EU). Though operations ceased in 2009, statutory requirements made it necessary to have a continued presence in the EU for varying terms until November 2015. Profits and losses generated from the remaining assets and liabilities are accounted for as discontinued operations.

In the third quarter of 2016, Inuvo’s petition with the UK (United Kingdom) Companies House to strike off and dissolve the remaining subsidiary in the EU was approved. As a result, for the twelve months ended December 31, 2017, Inuvo recognized a net loss from discontinued operations of $1,109 due to a charge from a service provider. As of December 31, 2016, Inuvo recorded a net income of $155,287 due primarily to the adjustment of certain accrued liabilities. No further charges or adjustments are expected.

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 more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. Inuvo also has other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding Inuvo’s results, which are described in Note 2 to Inuvo’s audited consolidated financial statements for 2018 and 2017 appearing elsewhere in this prospectus. 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. Inuvo regularly evaluates estimates and assumptions related to allowances for sale chargebacks, allowances for doubtful accounts, goodwill and purchased intangible asset valuations, lives of intangible assets, deferred income tax asset valuation allowances, contingent liabilities, including the Arkansas grant contingency, and stock compensation. Though actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, in the past such differences have been immaterial. Because Inuvo’s procedures require review of estimates and assumptions throughout the fiscal year, and differences between the estimates and assumptions and the actual results have been minor and immaterial, Inuvo has no reason not to believe the accuracy of its estimates and assumptions will continue into future quarters.

Liquidity and Capital Resources

On October 11, 2018, Inuvo entered into the Amended and Restated Business Financing Agreement with Western Alliance Bank. The Amended and Restated Financing Agreement, which is secured by all of Inuvo’s assets, amended and superseded in its entirety the Business Financing Agreement, as amended, that Inuvo entered into on March 1, 2012 with Bridge Bank, N.A. which is now owned by Western Alliance Bank. The Amended and Restated Financing Agreement does not have a term and either party may terminate upon notice to the other party. As a result of the amended terms of Inuvo’s lending relationship with Western Alliance Bank, Inuvo has additional access to credit.

During the third quarter of 2017, Inuvo filed an S-3 registration statement with the SEC to replace an existing, expiring S-3 “shelf” registration statement, which permits Inuvo to offer and sell up to $15 million of its securities from time to time in one or more offerings. In May 2018, Inuvo took down from this shelf registration statement approximately $2.3 million in an underwritten public offering. The underwritten public offering was 2,860,000 shares of Inuvo common stock at a public offering price of $0.70 per share and an additional 429,000 shares to cover over-allotments in connection with the offering. The net proceeds after deducting the underwriting discounts and commissions and estimated offering expenses payable was approximately $2.0 million.

For the year ended December 31, 2018, Inuvo’s revenues declined 7.8% from the prior year. The lower revenue in 2018 is principally responsible for Inuvo’s $5.9 million net loss in 2018. Of the $5.9 million loss, approximately $4.1 million was depreciation, amortization and stock-based compensation expense. Further, Inuvo had roughly $500,000 of merger-related costs and an additional $175,000 in other non-cash accruals. Since Inuvo’s credit facility is dependent upon receivables, and Inuvo does not know when, if ever, that its revenues will return to historic levels or if Inuvo will be able to replace those lost revenues with revenues from other sources, the combination of lower credit availability and recent negative cash flows generated from operating activities introduces potential risk of losing operations without interruption. As described earlier in this prospectus, on November 2, 2018, Inuvo entered into the merger agreement. At the closing of the mergers, which is subject to a number of conditions precedent, Inuvo will become a wholly-owned subsidiary of ConversionPoint. In addition, on November 1, 2018, Inuvo borrowed $1 million from an affiliate of ConversionPoint, CPT Investments, LLC, which Inuvo is using for working capital, and on November 2, 2018, four directors of Inuvo lent Inuvo $62,500 each, for an aggregate of $250,000, to cover certain costs associated with the pending mergers. In March 2019, Inuvo sold an aggregate of $1,440,000 Original Issue Discount Unsecured Subordinated Convertible Notes due September 1, 2020 in a private placement and received $1,200,000 in proceeds which Inuvo is using for working capital. Subject to the terms of the merger agreement and the credit facility with the additional borrowing, together with this additional capital raise, Inuvo believes that it will have sufficient cash and credit to operate until the mergers close. There are no assurances Inuvo will be successful in its efforts to generate revenues, report profitable operations or close the mergers in which case, Inuvo would need to find additional sources of credit and make substantial reductions to operating expense.

Cash Flows - Operating

Net cash used in operating activities was $2,100,167 during 2018. Inuvo reported a net loss of $5,890,832, which included non-cash expenses; depreciation and amortization of $3,181,619 and stock-based compensation of $915,469. The change in operating assets and liabilities was a net use of cash of $334,674 primarily due to a decrease in the accounts payable balance by $4,114,512, partially offset by a decrease in the accounts receivable balance by $4,058,591. Inuvo’s terms are such that Inuvo generally collects receivables prior to paying trade payables. Media sales, which are part of the NetSeer business acquired in 2017, typically have slower payment terms than the terms of related payables.

During 2017, cash used in operating activities was $1,148,281. Inuvo reported a net loss of $3,057,700, which included a deferred income tax benefit of $1,406,600 due to the change in tax legislation. Additional non-cash expenses included the non-cash expenses of depreciation and amortization of $3,029,801 and stock-based compensation expenses of $1,279,807. The change in operating assets and liabilities was a net use of cash of $1,396,224.

Cash Flows - Investing

Net cash used in investing activities was $1,634,919 and $1,322,930 for 2018 and 2017, respectively. Cash used in investing activities in both years has primarily consisted of capitalized internal development costs.

Cash Flows - Financing

Net cash used in financing activities was $120,644 during 2018 net of repayments on Inuvo’s revolving line of credit and capital leases. In addition, in May 2018, Inuvo sold approximately $2.3 million of common shares in the underwritten public offering. The net proceeds after deducting the underwriting discounts and commissions and estimated offering expenses payable was approximately $2.0 million. On November 1, 2018, Inuvo borrowed $1 million from an affiliate of ConversionPoint, CPT Investments, LLC, which Inuvo is using for working capital, and on November 2, 2018, four directors of Inuvo lent Inuvo $62,500 each, for an aggregate of $250,000, to cover certain costs associated with the pending mergers.

During 2017, net cash used in financing activities was $2,609,093 which largely consisted of proceeds from the revolving credit facility used to pay off the debt acquired in the NetSeer asset acquisition.

Off Balance Sheet Arrangements

As of December 31, 2018, Inuvo does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on Inuvo’s 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 Inuvo is a party, under which Inuvo has 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.

Business

Overview

Upon completion of this offering and the mergers described below, we expect our business will be comprised of the collective businesses of ConversionPoint and Inuvo. We will be a newly-combined technology company with a mission to provide a first-party data driven, end-to-end, AI-powered e-commerce platform not previously available to SMBs. We expect that this collective business will consist, in part, of ConversionPoint’s enterprise grade e-commerce technology, which currently is used to support over 100 premium online retailers and which harnesses first-party data from from over a billion shoppers per month and billions of consumer interactions across over 860 brands to create optimized product experiences, and Inuvo’s market leading AI-powered advertising platform and first party data engine currently used to create the industry’s most accurate, real-time view of highly specific and custom audiences. We believe that the combination of ConversionPoint’s and Inuvo’s technologies will allow us, utilizing our combined expertise in real-time first-party data, AI and customer acquisition and engagement technology, to deliver an end-to-end, managed services and SaaS platform to SMBs that will empower them to succeed in a fragmented marketplace by creating a “modern front office” through the unification of real-time data, precision audiences and engaging page experiences resulting in increased conversions that drive billions of dollars of revenue.

Our combined businesses currently generate revenue from the following three business models: e-commerce, managed services, and SaaS. Today, e-commerce sales generate 18%; managed services generates 79% and SaaS generates 3% of our revenues on a combined basis. Upon merging, we expect to utilize one integrated, AI-powered, end-to-end platform to drive our revenue. We expect that our managed services will generate 40% and SaaS will generate 60% of our revenue.

Over 10 years and millions of dollars have been invested in IntentKey

IntentKey’s prospecting engine understands consumer online behavior to uncover consumer intent

The developers of IntentKey were pioneers in the field of AI, which has been refined and optimized over the past 10 years

IntentKey learns consumer browsing intent

IntentKey’s AI crawls millions of web sites daily to learn the intentions of web pages

20 million new URLs are added daily to keep up with new trends

IntentKey creates precise customer profiles

IntentKey’s system stores over 500 million anonymous consumer profiles

IntentKey has 24 million targetable concepts allowing us to target hard to find in-market shoppers

IntentKey provides real time data updates

500 million anonymous consumer records are updated continuously to predict consumer purchases

IntentKey’s AI can detect in-market shopper activity within minutes

IntentKey’s AI by the numbers

Over 500 million consumer profiles are updated daily

AI processes 20 billion ad calls every day to update the profiles in real time

3.5 billion URLs in IntentKey’s portfolio with 20 million added daily

AI is managed in two co-located data centers to handle volume

24 million important concepts identified (objects, ideas, emotions, place, etc.)

Background of the Mergers

We have entered into a merger agreement with ConversionPoint and Inuvo providing for the combination of ConversionPoint and Inuvo under our company, which is a new holding company. Pursuant to the merger agreement, a copy of which has been filed with the SEC as an exhibit to the registration statement of which this prospectus forms a part, our wholly-owned subsidiary, CPT Merger Sub, Inc., or ConversionPoint Merger Sub, a Delaware corporation, will be merged with and into ConversionPoint with ConversionPoint as the surviving company, and our wholly-owned subsidiary, CPT Cigar Merger Sub, Inc., or Inuvo Merger Sub, a Nevada corporation, will be merged with and into Inuvo with Inuvo as the surviving company. As a result, ConversionPoint and Inuvo will each become our wholly-owned subsidiaries. We refer to these mergers as the ConversionPoint merger and the Inuvo merger, respectively, and together as the mergers.

We have filed with the SEC a registration statement on Form S-4 in connection with the issuance of shares of our common stock in connection with the mergers and in connection with the solicitation of proxies from the stockholders of ConversionPoint and Inuvo to vote at special meetings of the stockholders of ConversionPoint and Inuvo that will be held on May 8, 2019 for the purpose of approving the merger agreement. The registration statement was declared effective by the SEC on April 9, 2019.

Upon completion of the mergers, our business will be comprised of the businesses of ConversionPoint and Inuvo which are described below.

Business of ConversionPoint

Company Overview

ConversionPoint, through its wholly-owned subsidiaries, helps e-commerce companies and brands target, convert, manage and re-engage their customers using sophisticated online tracking and data analytics. ConversionPoint’s suite of technologies manages and optimizes multiple aspects of e-commerce including: rich media content creation and syndication, audience targeting, conversion optimization, remarketing, logistics and customer management. ConversionPoint both delivers its technologies to its customers through software-as-a-service, which we refer to as SaaS, and uses its technologies to provide managed digital marketing and e-commerce technology services to brands and advertisers, which we refer to as managed services. ConversionPoint also uses its own technologies to sell various products directly to consumers, which we refer to as e-commerce product sales. ConversionPoint’s vision is to simplify the entire e-commerce experience by integrating its technologies and offering a broad range of e-commerce solutions on a single, easy-to-use platform.

ConversionPoint was formed as a Delaware corporation in November , 2016, by the founders of Branded Response Inc., a California corporation, which was formed in May 2016. Branded Response began as an e-commerce seller of health, wellness and beauty products. Branded Response’s management team had significant prior successes in creating direct-to-consumer e-commerce product campaigns. As Branded Response’s sales began to grow, its management began evaluating e-commerce technologies to become more efficient and cost effective at acquiring customers and maximizing customer lifetime value with respect to the sale of its own products. Branded Response began collaborating with Push Interactive, LLC, a direct-to-consumer marketing company based in Minneapolis, Minnesota, formed in May 2010, which had developed a suite of online marketing technologies to increase the efficiency of their own product sales. Push and Branded Response realized that the e-commerce market lacked an end-to-end solution to manage the entire e-commerce marketing, sales, customer service and logistics process. In April 2017, ConversionPoint acquired both Push and Branded Response, Conversion Point’s vision was to use Push’s technology platform as the foundation to develop both organically and through strategic acquisition, a unified e-commerce solution to (a) more efficiently manage the companies’ own internal e-commerce product campaigns, (b) manage campaigns for third parties, on a managed services basis and (c) license to third parties on a self-serve SaaS subscription basis. In 2017, ConversionPoint began generating managed services revenues.

In December 2017, ConversionPoint acquired SellPoints, Inc., a venture-backed Delaware corporation, formed in May 2000, which had developed a suite of software solutions enabling brands to create and syndicate rich media content to a network of online retailers, track online consumer behavior, retarget consumers based on their online behavior, and deliver robust data analytics and reporting. ConversionPoint believed that SellPoints’ technologies and large brand customers and partners would add significant capabilities to the end-to-end e-commerce platform ConversionPoint was creating.

The following reflects our organizational structure. All of our subsidiaries are wholly-owned.

Industry Background

Growing e-commerce market

According to a forecast published by e-Marketer.com in December 2018, worldwide e-commerce sales approximated $2.9 trillion during 2018. The U.S. e-commerce market is evolving and continues to be a high growth market, as retailers and brands increase their online sales. According to a forecast published by e-Marketer.com in February 2019, in the U.S. alone, over $523 billion in e-commerce product sales were consummated in 2018 and e-commerce sales are expected to grow between $70-$80 billion annually between 2017 and 2020. Amazon.com controls approximately 50% of the U.S. market according to an article published by e-Marketer.com in July 2018 entiteld “Amazon Now Has Nearly 50% of the U.S. Ecommerce Market.”

ConversionPoint believes that Amazon.com has developed its leading market position in part due to its technology foundation across the entire consumer online retail lifecycle which enables Amazon to leverage customer shopping data as predictors of future purchase behavior. While Amazon.com dominates the online retail market in the U.S. and has positioned itself as strategically aligned with small and medium sized retailers, ConversionPoint believes Amazon.com’s dominance is making it increasingly difficult for non-Amazon online sellers to access shoppers. ConversionPoint believes this leaves retailers in a difficult situation with Amazon.com because of the large fees and minimal access to customer data.

ConversionPoint believes this creates an increasingly large market opportunity for data driven e-commerce solutions to assist brands and retailers when not selling through Amazon.com channels. E-commerce platforms such as Shopify and Big Commerce, as well as leading retailers, continue to drive innovation through disparate technologies to lower customer acquisition costs while increasing the yield on e-commerce media spend.

Increasing complexity of e-commerce

ConversionPoint believes that several significant trends have contributed to an increasing complexity and fragmentation of digital marketing and sales, including:

Multiple digital marketing channels. There are numerous digital marketing channels including, among others, search, display, video, native, email, text and social advertising which are available to retailers, advertisers and brands as a conduit to the consumers who purchase their products. These channels are fragmented, each with their own platforms that often lack of integration which limits their ability to holistically serve consumers.

Third party marketplaces. Third party marketplaces, such as Amazon.com, Etsy.com and eBay, aggregate multiple sellers of similar products, thus creating control over marketplaces for themselves while offering little technical differentiation for consumer acquisition between sellers.

Increased use of mobile devices for e-commerce. The rapid adoption of mobile internet-enabled devices, such as smartphones and tablets, has resulted in an increase in mobile commerce, which is transforming the way consumers shop and make purchase decisions.

Growth of additional online consumer touch points. As consumers have moved more of their shopping online, search engines, social networks, content rich advertorials brand websites, have emerged as key influencers and important points of product research for consumers making purchase decisions.

Consolidation of customer relationship management and marketing/advertising. A convergence of business-to-business and business-to-consumer customer data, actionable on a single platform, is a necessary requirement to delivering on the promise of consumer engagement. The implication of this belief inevitably leads to a consolidation of technologies from first contact through fulfillment with the consumer.

Key Challenges Facing Retailers and Brands Selling Online

As online shopping increases, ConversionPoint believes it is becoming critical for brands, advertisers and retailers to leverage data and technology for reach, efficiency and return on e-commerce investment. According to AdMaster’s 2018 Digital Marketing Trends report, advertisers and brands are allocating larger portions of their advertising budgets to digital marketing and are seeking a more efficient and measurable way to reach their target audience. ConversionPoint believes its solutions address the challenges the e-commerce industry faces today, which include:

	·	*In-house solutions are costly and slow to innovate.* Retailers and brands that rely on in-house capabilities may have to invest in and maintain significant technological infrastructure, human resources and industry relationships, which requires significant capital and long periods of time to set up. This presents a challenge for many SMBs.

	·	*Fragmented solutions.* ConversionPoint’s competitors offer a single-point solution, rather than a suite of e-commerce technologies for content creation, content management, customer acquisition, customer relationship management, data analytics, fulfillment, delivery and remarketing. Single-point solutions do not address the needs of retailers and brands seeking an integrated solution to manage multiple aspects of online marketing. Furthermore, ConversionPoint believes retailers or brands stitching multiple single-point solutions together generally results in technology and data integrity challenges.

	·	*Broad and stale data*. According to “The New State of Audience Data: Accuracy Matters” report published by Lotame in July 2018, marketers are most concerned with the quality and accuracy of data. According to an article published by e-Marketer.com in March 2018 entitled “Marketers Waste About One-Fourth of Their Budgets,” it takes several days on average, for advertisers to receive third party data, and the targeting is too broad, resulting in brands and advertisers wasting an average of 26% of their marketing budgets on ineffective channels and strategies.
	·	*Lack of visibility*. To measure success and maximize return on investment, advertisers need to access, correlate and analyze large amounts of data across multiple technology platforms in real-time. The lack of access to, and integration of customer data between, multiple technology platforms makes it difficult for brands and retailers to gain accurate insights into consumer behavior necessary to adapt their e-commerce strategies to improve return on e-commerce investment.

	·	*Inefficient content management*. Without a rich media content syndication platform integrated with major retailers, brands selling products through multiple online retailers must upload and update rich media product content on multiple online retailer websites, which is inefficient and may require significant human capital.

ConversionPoint’s Solutions

ConversionPoint’s technologies optimize many aspects of the e-commerce ecosystem.

Ultimately, through its SaaS and managed service offerings, ConversionPoint’s technology platforms allow brands to generate and manage online sales on a more cost-effective basis. For example, ConversionPoint provides manufacturer brands with tools to create and syndicate rich media product content across ConversionPoint’s network of online retailers. Additionally, manufacturer brands, leveraging ConversionPoint’s technologies, can retarget shoppers, launch customer relationship management acquisition programs, optimize acquisition media spend, improve add-to-cart rates and manage shipping logistics and fulfillment. ConversionPoint’s technology is embedded on over 100 premium retail websites, and is used by over 860 brands. During the 11-month period ended March 31, 2019, ConversionPoint’s technology was involved with over $6.6 billion in online transactions and created over $1.3 billion in incremental sales, resulting in a 25% increase in revenue (from $5.3 billion) and a 15% increase in add-to-cart rates. ConversionPoint’s unique page experiences alone drive an average 15% increase in add-to-cart rates. Currently, ConversionPoint processes consumer shopping data from over 1 billion consumers each month.

ConversionPoint is in the process of unifying its current technology solutions into an integrated platform to provide manufacturer brands and retailers with an end-to-end SaaS offering.

ConversionPoint believes its solutions offer the following benefits:

	·	*End-to-end technology solution*. ConversionPoint provides technology solutions for managing most aspects of the e-commerce process, including, digital ad buying with real-time optimization, online retailer marketing, customer relationship management, remarketing and logistics.

	·	*Reduced integration costs, time to market and dependence on in-house resources*. Customers can more efficiently market their products through existing and new online channels without the costs related to installing and maintaining their own hardware and software infrastructure, while minimizing in-house head count. ConversionPoint manages or hosts its solutions on behalf of its customers, thereby reducing the customer’s cost and dependency on dedicated IT staff, offsite hosting and on-premises systems.

	·	*Unified content creation and product information management*. ConversionPoint’s multi-channel rich media content creation and syndication platform provides customers with one interface to create, deliver and manage interactive content experiences across ConversionPoint’s network of over 100 online retailers, and based on each retailer’s website design requirements.

	·	*Highly relevant, targeted ads.* Through ConversionPoint’s sophisticated consumer online behavioral tracking technology, ConversionPoint delivers highly relevant and targeted digital ads at opportune times.

	·	*Media optimization.* ConversionPoint’s real-time multivariate testing technology optimizes to the highest converting advertising yield to maximize return on investment for manufacturer brands.

	·	*Extension of lifetime customer value*. Brands can use ConversionPoint’s technology to control and optimize the offering of additional items for purchase upon checkout and offer customized membership programs, both of which can increase the lifetime value of customers.

	·	*Robust data and analytics reporting*. ConversionPoint captures meaningful, real-time consumer behavioral data from over one billion online shoppers each month, which it uses to inform its system and continually optimize the performance of its solutions. The scale and breadth of this data is continually growing as more interactive content experiences are published and consumers interact with these experiences. Through ConversionPoint’s robust data and analytics reporting, ConversionPoint provides brands and advertisers with valuable insights into the performance of digital marketing campaigns, including campaign delivery data (such as impressions, views and clicks), performance data (such as cost-per-click, earnings per-click, conversion rates and cost per acquisition) and anonymous buyer data (such as geography, device type and referral source). These reports provide ConversionPoint brands and advertisers with actionable insights that allow them to evaluate and improve the efficiency of their e-commerce campaigns.

ConversionPoint’s Technology Products

ConversionPoint offers a suite of solutions applicable to the pre-sale, sale and post-sale moments of the online shopper journey.

Pre-Sale: ConversionPoint’s suite of media buying and online sales and marketing management tools allow ConversionPoint and its advertisers and brands to target consumers based on their online behavior, and engage in and optimize media buying and campaign management in real time. ConversionPoint’s multi-variate testing technology helps manufacturer brands increase the yield of their digital marketing spend.

ConversionPoint’s pre-sale products include:

	·	Digital media optimization: ConversionPoint’s digital media optimization platform creates customized landing pages and engages in real-time testing to determine the highest converting ads and landing pages, together with the best multi-variate online placement to maximize return on investment.

	·	Retargeting: ConversionPoint’s retargeting platform uses algorithmic audience segmentation and aggregates anonymous consumer data related to the timing and nature of their interaction with product content to construct high-value audience segments for display advertising campaigns. The technology associates these segments with relevant ad units, enabling the delivery of impactful ads to consumers at the most opportune times.

Sale: ConversionPoint’s online sales solutions enable manufacturer brands to create and syndicate rich media content to ConversionPoint’s network of online retailers and improve the buying experience across online retailers. ConversionPoint’s data analytics and reporting capabilities provide engagement insights that can be used to optimize marketing efforts.

	·	Interactive content builder: ConversionPoint’s interactive content building platform is a programmatic, user-friendly platform that enables brands to construct highly engaging product experiences, including videos, images, 360 degree animated views, documents and comparison charts. Content can be custom designed to appear native to the target website and delivered inline, overlaid on top of existing elements, or as a call to action or button.

	·	Content syndicator: ConversionPoint’s content syndication platform allows brands to organize and publish the rich media experiences, constructed using the interactive content builder, to retailer websites within ConversionPoint’s retailer network.

	·	Reporting dashboard: Anonymous data collected from consumer interactions with brand content is curated into a suite of customizable reports and dashboards providing brands and advertisers with valuable marketing and data analytics, enabling them to leverage engagement insights to optimize their digital marketing efforts.

	·	Retargeting: ConversionPoint’s retargeting technology tracks various shopping behaviors, builds audience segments according to those behaviors and delivers more effective advertising at opportune times.

	·	Secure payments processing platform: By integrating with major payment gateways, ConversionPoint’s technologies provide high level data security, fraud protection and dispute resolution.

Post-Sale: ConversionPoint’s post-sale solutions manage shipping and fulfillment, customer communications, upsells and remarketing. ConversionPoint’s post-sale solutions include:

	·	Shipping management platform: ConversionPoint’s shipping and logistics solutions manage, among other things, product shipments and can deliver shipping notifications to consumers, on brand.

	·	Customer communications: ConversionPoint’s platform provides brands and advertisers with multiple post-sale customer touchpoints, including, on brand order confirmations and reorder reminder triggers. ConversionPoint’s platform also includes email and SMS capabilities that allows brands to communicate with consumers following a sale.

	·	Remarketing: ConversionPoint’s retargeting technology tracks consumer post-sale behavior and can re-engage prior customers with relevant offers.

	·	Recurring membership programs: Through ConversionPoint’s platforms, brands can create customized membership programs to keep consumers engaged and increase lifetime customer value.

	·	Dashboard and reporting: ConversionPoint unifies sales data from various e-commerce storefronts, providing a dashboard of marketing expenses and sales, for profit and loss performance reporting.

ConversionPoint’s E-Commerce Product Sales

Through ConversionPoint’s subsidiaries, Branded Response and Push, ConversionPoint sells a multitude of products directly to consumers, including health and wellness products (e.g., facial creams, nutritional supplements and anti-snoring devices), eBooks and various other consumer products. During 2017 and 2018, ConversionPoint generated $41,651,146 and $20,287,005, respectively, in e-commerce product net revenues, which constituted, 83.4% and 51.0%, respectively, of ConversionPoint’s net revenues during those periods.

E-commerce product are sold through trial offers, in which consumers sign up to receive a free trial product and to be billed monthly for continued delivery of these products until the consumer affirmatively cancels his or her subscription, and non-trial offers, in which consumers make one-time purchases of products. In 2017 and 2018, trial offer sales constituted 86.2% and 60.5%, respectively, of ConversionPoint’s e-commerce product net revenues and non-trial sales constituted the balance.

Sales and Marketing

Push and Branded Response market products directly to consumers online and through various online third party marketing companies, that send traffic to landing pages for the products on a cost-per-acquisition, or CPA, basis where the marketing company is paid a flat fee for each product sold, or on a cost-per-click, or CPC, basis where ConversionPoint pays a set fee each time a consumer clicks on an advertisement, regardless of whether the consumer purchases a product. CPA and CPC rates generally depend upon the price at which the product is sold and are negotiated separately with each marketing company.

Products are marketed online, primarily through email marketing, native advertising (material in an online publication which resembles the publication’s editorial content but is paid for by an advertiser and intended to promote the advertiser’s product), and display advertisements (such as online banner ads). Customers pay for products online using credit cards.

Suppliers, Shipping and Fulfillment

Branded Response purchases finished products it sells from various U.S.-based third party fulfillment houses that store and ship the products to customers. Push purchases finished products it sells from various manufacturers, and stores and ships products from its facility in Minneapolis, Minnesota.

Although Branded Response and Push generally have good relationships with the third party fulfillment houses and manufacturers with which they work, they believe they could replace any of their current fulfillment houses or manufacturers without great difficulty or a significant increase to their cost of goods sold.

Customers

ConversionPoint serves customers across a wide range of industries and geographies. ConversionPoint’s technology product customers include both traditional and online retailers, and small and large brands, such as Intel and Nikon. ConversionPoint’s e-commerce product sales are made primarily to individuals located in the United States.

Key Relationships

ConversionPoint has long-standing relationships with Walmart, Lowe’s, Costco and Office Depot and other major online retailers, which integrate ConversionPoint’s JavaScript tags on their online retail store web pages, allowing ConversionPoint’s brand customers to directly publish interactive experiences and product information to such retail websites. The strategic relationships with ConversionPoint’s cutomers are based on individual purchase orders rather than long-term contracts.

ConversionPoint’s Competitive Strengths

ConversionPoint believes it has the following competitive strengths:

Full suite of solutions. ConversionPoint provides a full suite of solutions to create and publish product experiences, target, convert and re-engage consumers, and manage payments and logistics. ConversionPoint’s interactive content builder, content syndication, and digital media optimization platforms are currently available as SaaS solutions and through managed services. ConversionPoint’s retargeting and customer relationship management platforms are currently offered through managed services, however, both are actively being developed into SaaS solutions. ConversionPoint is unifying all of its current technology solutions into an integrated platform to provide brands a fully integrated self-serve SaaS offering.

Highly relevant and targeted ads. Through algorithmic audience segmentation technology, ConversionPoint delivers targeted ads to high value audiences at opportune times. These audiences can be segmented across a broad spectrum of behavioral and demographic attributes.

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Experienced management team. ConversionPoint has a management team with deep operational experience in technology, software development, e-commerce, digital marketing, media buying, customer conversion and retail strategy.

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Cutting edge engineering. ConversionPoint engineering leverages modern technologies to solve complex problems using its proprietary development framework, including its full stack, continuous development ecosystem that enables it to accelerate new application and iterative development.

	·	*Deep data analytics*. ConversionPoint gathers vast amounts of data related to consumer online behavior and curates such data into customizable reports and dashboards that provide valuable and actionable insights. These reports improve visibility into a seamless and connected consumer purchase journey, enabling brands and advertisers to measure and optimize their digital marketing spend while increasing their customer lifetime value.

	·	*Long-standing partnership and customer relationships*. We have long-standing relationships with some of the largest and well established e-commerce retailers in the U.S. including Walmart, Lowe’s, Costco and Office Depot and we have long-standing customer relationships with brand customers including Dell, Intel, Activision, Sony, Garmin, Roku, Yahoo!, Google and Bing.

ConversionPoint’s Growth Strategy

In the second quarter of 2018, ConversionPoint began shifting its focus away from e-commerce product sales, towards its long term growth strategy of further developing and expanding its managed services and SaaS businesses. The following are key elements of ConversionPoint’s growth strategy:

Expand salesforce to acquire new customers and online advertisers. ConversionPoint intends to increase its salesforce to expand its existing partnerships with leading online retailers and brands and to aggressively activate new online retail partnerships and new brand advertiser relationships.

Development of end-to-end unified SaaS offering. ConversionPoint is actively unifying all of its technology platforms into one framework to provide a streamlined user experience for customers to leverage all of ConversionPoint’s applications through a SaaS model.

Focus on SMBs. ConversionPoint believes that there is a significant opportunity for an end-to-end e-commerce technology solution for SMBs seeking to grow their online sales without dealing with the many challenges of integrating multiple point solutions. ConversionPoint intends to heavily market its platforms to SMBs.

Maintain innovation. ConversionPoint continues to develop and introduce new features and improved functionality to its platforms. Key initiatives include development of easy to use self-serve platforms for SMBs, and continued development of AI-enhanced marketing technologies, including, but not limited to, technology for syndicating customized rich media content and product page layouts based on consumer profiles and behavior.

Expand the number of retailers supported by ConversionPoint’s content syndication platform. ConversionPoint’s network already includes a multitude of online retailers such as Walmart, Lowe’s, Costco and Office Depot. ConversionPoint intends to expand its network of online retailers, which ConversionPoint believes will result in meaningful growth of both its manufacturer brand customer base and the sales they can process through ConversionPoint’s technology platforms.

ConversionPoint’s Technology Platform

ConversionPoint has developed its proprietary technology platform with a focus on delivering industry-leading breadth, scalability, reliability and flexibility. A portion of ConversionPoint’s platform is cloud-based and SaaS, with a single code base and multi-tenant software architecture. Because of this architecture, there is no need for customers to download, install or upgrade software.

ConversionPoint’s software has been developed using agile software development methodologies, which allow ConversionPoint to rapidly iterate by developing small, incremental changes that are continuously integrated into its code base.

ConversionPoint hosts its platform on secure third party hosting platforms, using servers, networking systems and storage systems it leases from its hosting providers. ConversionPoint employs system security, including firewalls, load balancers, threat protection layers, encryption technology and antivirus software and conducts regular system tests and vulnerability and intrusion assessments. In the event of failure, ConversionPoint has engineered its systems with backup and recovery capabilities designed to provide for business continuity.

Competition

The overall market for e-commerce solutions is rapidly evolving, highly competitive, complex, fragmented with numerous single point solutions, and is subject to changing technology and shifting customer needs. ConversionPoint faces significant competition. To maintain and improve ConversionPoint’s competitive position, ConversionPoint must keep pace with the evolving needs of its customers and continue to develop and introduce new modules, features and services in a timely and efficient manner, and complete the development of its unified end-to-end e-commerce SaaS platform.

ConversionPoint currently competes with established companies, such as Optimizely and Voluum in the digital media optimization space, WebCollage in the rich content creation and product information syndication space, Limelight and Click Funnels in the sales conversion space, AdRoll and Criteo in the remarketing space, and Narvar and ShipStation in the shipping and logistics space.

ConversionPoint believes the principal competitive factors in its market include the following:

	·	solution quality, breadth, flexibility and functionality;

	·	level of customer satisfaction and the ability to respond to customer needs rapidly;

	·	ability to innovate and develop new or improved products and modules; and

	·	brand awareness and reputation.

ConversionPoint believes that it competes favorably with respect to the factors described above, however, competitors continue to increase their suite of offerings across e-commerce channels to better compete. A number of competitors have greater name recognition and are better capitalized than ConversionPoint. ConversionPoint’s ability to remain competitive in its market segment depends upon its ability to innovate and to efficiently provide unique solutions to its demand and supply customers.

Research and Development

ConversionPoint’s research and development efforts are focused on the following:

	·	integrating and enhancing the architecture of its various technology platforms;

	·	creating additional functionality for its customers, including developing AI-enhanced marketing technologies;

	·	maintaining and extending its integration with the online channels it supports; and

	·	developing an integrated self-serve SaaS platform for SMBs.

Intellectual Property

ConversionPoint’s ability to protect its intellectual property, including its technology, will be an important factor in the success and continued growth of its business. ConversionPoint protects its intellectual property through trade secrets law, copyrights, trademarks and contracts. ConversionPoint has filed four provisional U.S. patent applications related to its content creation, syndication and online tracking technologies. Some of ConversionPoint’s technologies rely on third party licensed intellectual property. ConversionPoint also protects details about its processes, products and strategies as trade secrets, keeping confidential the information that it believes provides it with a competitive advantage.

In addition, ConversionPoint has established business procedures designed to maintain the confidentiality of its proprietary information, including the use of confidentiality agreements and assignment-of-inventions agreements with employees, independent contractors, consultants and companies with which ConversionPoint conducts business.

Government Regulation

The legal environment of the Internet is evolving rapidly in the United States and elsewhere. The manner in which existing laws and regulations will be applied to the internet in general, and how they will relate to ConversionPoint’s business in particular, both in the United States and internationally, are often unclear. For example, ConversionPoint often cannot be certain how existing laws will apply in the e-commerce and online context, including with respect to such topics as privacy, pricing, credit card fraud, advertising, taxation, content regulation, quality of products and services and intellectual property ownership and infringement. Furthermore, it is not clear how existing laws governing issues such as sales and other taxes and personal privacy will apply to the internet, as many of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or e-commerce. It is also unclear how the laws that do reference the internet will be interpreted by courts, which may impact their applicability and scope. Compliance may be costly and may require ConversionPoint to modify its business practices and product offerings. In addition, it is possible that governments of one or more countries may seek to censor content available on ConversionPoint’s or its customers’ websites or may even attempt to completely block access to those websites. Noncompliance or perceived noncompliance could also subject ConversionPoint to significant penalties and negative publicity. Accordingly, adverse legal or regulatory developments could substantially harm ConversionPoint’s business.

Customers load product information and other content onto ConversionPoint’s platform, generally without any control or oversight by ConversionPoint, at which point ConversionPoint may legally be considered to be the distributor of that content. This presents legal challenges to ConversionPoint’s business and operations, such as rights of privacy or intellectual property rights related to the content loaded onto ConversionPoint’s platform. Both in the United States and internationally, ConversionPoint must monitor and comply with a host of legal concerns regarding the content loaded onto its platform. The scope of ConversionPoint’s liability for third party content loaded onto its platform for delivery to various online e-commerce channels may vary from jurisdiction to jurisdiction and may vary depending on the type of claim, such as privacy, infringement or defamation claims. ConversionPoint’s ability to employ processes to quickly remove infringing or offending content from its platform, for example, is an important tool in protecting ConversionPoint from exposure for the potentially infringing activities of its customers. ConversionPoint also incorporates protections in customer contracts that allows ConversionPoint to take steps, if needed, to limit its risk regarding much of the content loaded onto, and collected by, ConversionPoint’s platform and solutions.

Numerous laws and regulatory schemes have been adopted at the national and state level in the United States and internationally that have a direct impact on ConversionPoint’s business and operations. These laws include, but are not limited to, the following:

Copyright and trademark. The Copyright Act of 1976 and the statutes and regulations associated with copyrights and trademarks and enforced by the United States Patent and Trademark Office are intended to protect the rights of third parties from infringement. Using certain of ConversionPoint’s services, customers can upload any content they desire for use with ConversionPoint’s solutions. ConversionPoint maintains an active copyright and trademark infringement policy and responds to take-down requests by third party intellectual property right owners that might result from content posted by ConversionPoint’s customers using ConversionPoint’s solutions. As ConversionPoint’s business expands to other countries, ConversionPoint must also respond to regional and country-specific intellectual property considerations, including take-down and cease and desist notices in foreign languages, and ConversionPoint must build infrastructure to support these processes. The Digital Millennium Copyright Act also applies to ConversionPoint’s business. This statute provides relief for claims of circumvention of copyright-protected technologies but includes a safe harbor that is intended to reduce the liability of online service providers for listing or linking to third party websites that include materials that infringe copyrights or other rights of others.

Data privacy and security. ConversionPoint receives, processes, stores, uses and shares data, some of which contains personal information. ConversionPoint is therefore subject to U.S. federal, state, local and foreign laws and regulations regarding data privacy and the collection, storage, sharing, use, processing, disclosure and protection of personal information and other data from users, employees or business partners, including GDPR. The scope of such laws and regulations is regularly changing, the laws and regulations are subject to different and new interpretations, and the requirements and their enforcement may be inconsistent among countries or in conflict with other rules. Foreign data protection and privacy laws, for example, are often more restrictive than those in the United States. GDPR expands the rights of individuals to control how their personal data is processed, includes restrictions on the use of personal data of children, creates new regulatory and operational requirements for processing personal data and providing data breach notification, increases requirements for security and confidentiality and provides for significant penalties for non-compliance. There are also a number of legislative proposals recently enacted or pending before the U.S. Congress, various state legislative bodies and foreign governments concerning content regulation and data protection that could affect ConversionPoint. For example, in June 2018, the State of California enacted the California Consumer Privacy Act of 2018, which will come into effect on January 1, 2020 and would require companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices, would allow consumers to opt out of certain data sharing with third parties and would provide a new cause of action for data breaches. The burdens imposed by these and other laws and regulations that may be enacted, or new interpretation of existing laws and regulations, may require ConversionPoint to modify its data processing practices and policies and to incur substantial costs in order to comply.

In addition, it is not possible to predict whether or when additional legislation or regulations may be adopted, and certain proposals, if adopted, could harm ConversionPoint’s business through a decrease in customers and revenue. These decreases could be caused by, among other possible provisions, the required use of disclaimers or other requirements before prospective buyers can interact with ConversionPoint’s customers. ConversionPoint uses tracking technology to track purchases and consumer online behavior to enable ConversionPoint to serve relevant ads to consumers based on their online behavior. Laws prohibiting or inhibiting such tracking could make it difficult to effectively provide certain of ConversionPoint’s services. The interpretation and implementation of processes to comply with cookie laws, for example, continues to evolve, and ConversionPoint cannot predict how any new laws or regulations will apply to ConversionPoint or its business. Any failure by ConversionPoint to comply with privacy-related laws and regulations could result in proceedings by governmental or regulatory bodies or civil litigants that could potentially harm its business, results of operations and financial condition.

Credit card protections. ConversionPoint collects credit card data in processing the fees paid to ConversionPoint by its customers, as well as consumer credit card information when ConversionPoint’s customers use some of its solutions. Several major credit card companies have formed the Payment Card Industry Council, or PCI Council, in order to establish and implement security standards for companies that transmit, store or process credit card data. The PCI Council has created the Payment Card Industry Data Security Standard, or PCI DSS. Although the PCI DSS is not law, merchants using PCI Council members to process transactions are required to comply with the PCI DSS, with associated fines and penalties for non-compliance. Elements of the PCI DSS have begun to emerge as law in some states, however, and ConversionPoint expects the trend to continue as to further laws and restrictions in collecting and using credit card information.

Employees

As of March 1, 2019, ConversionPoint had 85 full-time employees, none of whom were covered by a collective bargaining agreement.

Facilities

ConversionPoint’s corporate headquarters are located in Newport Beach, California, where it leases 9,209 square feet of office space. The lease has a term of five years, and expires in July 2023. It also conducts operations from 26,558 square feet of office and warehouse space in Minneapolis, Minnesota, which consists of three interconnected buildings, pursuant to a lease that has a term of 60 months and expires in December 2021. It also operates from 15,096 square feet of office space in Emeryville, California pursuant to a lease that expires in May 2021.

Legal Proceedings

From time to time, ConversionPoint is subject to legal proceedings, claims and litigation arising in the ordinary course of business. ConversionPoint is currently involved in two litigation matters related to the mergers, D’Arcy v. Inuvo, Inc. et al, and Franchi v. Inuvo, Inc. et al.

On December 19, 2018, Peter D’Arcy, who claims to be a stockholder of Inuvo, filed a putative class action lawsuit, captioned D’Arcy v. Inuvo, Inc. et al., No. 1:18-cv-02023-UNA, in the United States District Court for the District of Delaware. The lawsuit names ConversionPoint and various entities created to effect the merger as defendants. The D’Arcy action also names Inuvo and the members of Inuvo’s board of directors as defendants. The complaint filed in the lawsuit asserts claims under Section 14(a) and Section 20(a) of the Exchange Act challenging the adequacy of the disclosures relating to the merger transactions made in a joint consent solicitation statement/prospectus.

The foregoing lawsuit seeks, among other relief, an injunction preventing the parties from consummating the merger transactions, damages in the event the merger transactions are consummated and an award of attorneys’ fees. Inuvo and ConversionPoint believe the claims asserted in the lawsuit is without merit. We believe the allegations in the lawsuit have been mooted by the filing of our amended S-4 Registration Statement on March 15, 2019. Inuvo intends to vigorously contest any continued litigation, and any fee petitions brought by Plaintiff’s counsel.

On January 4, 2019, another purported stockholder of Inuvo, Adam Franchi, commenced a substantially similar putative class action lawsuit, captioned Franchi v. Inuvo, Inc. et al., No. A-19-787021-C, in the District Court of the State of Nevada in the County of Clark. This complaint also names ConversionPoint and various entities created to effect the merger as defendants. The Franchi action also names Inuvo and the members of Inuvo’s board of directors as defendants. The complaint asserts breach of fiduciary duties claims arising from the adequacy of the disclosures relating to the merger transactions made in a joint consent solicitation statement/prospectus, and seeks an injunction preventing the parties from consummating the merger transactions, damages in the event the merger transactions are consummated and an award of attorneys’ fees.

Inuvo and ConversionPoint believe the claims asserted in the Franchi lawsuit are similarly without merit. We believe the allegations in the lawsuit have been mooted by the filing of our amended S-4 Registration Statement on March 15, 2019. ConversionPoint and Inuvo intend to vigorously contest any continued litigation, and any fee petitions brought by Plaintiff’s counsel. The Franchi complaint seeks, among other relief, an injunction preventing the parties from consummating the merger transactions, damages in the event the merger transactions are consummated and an award of attorneys’ fees. Inuvo and ConversionPoint believe the claims asserted in the lawsuits are without merit. On February 5 and 14, 2019, Inuvo filed motions to dismiss, or in the alternative to stay, the Franchi action, pending the resolution of the first-filed D’Arcy action. A hearing on the Franchi motion is yet to be scheduled. On April 11, 2019, Plaintiff Franchi filed a notice of voluntary dismissal.

Business of Inuvo

Company Overview

Inuvo provides data-driven platforms that can automatically identify and message online audiences for any product or service across devices, channels and formats, including video, mobile, connected TV, display, social and native. These capabilities allow Inuvo’s clients to engage with their customers and prospects in a manner that we believe drives engagement from the first contact with the consumer. Inuvo facilitates over one billion marketing messages to consumers every single month and counts among its clients numerous world-renowned names in industries that have included retail, automotive, insurance, health care, technology, telecommunications and finance. Inuvo counts among its many contractual relationships three clients who collectively manage over 50% of all U.S. digital media budgets.

Inuvo’s solution incorporates a proprietary form of artificial intelligence, or AI, branded the IntentKey. This sophisticated machine learning technology uses interactions with Internet content as a source of information from which to predict consumer intent. The AI includes a continually updated database of over 500 million machine profiles which Inuvo utilizes to deliver highly aligned online audiences to its clients. Inuvo earns revenue when consumers view or click on its clients’ messages. Inuvo’s business scales through account management activity with existing clients and by adding new clients through sales activity.

As part of Inuvo’s technology strategy, it owns a collection of websites such as alot.com and earnspendlive.com, where Inuvo creates content in health, finance, travel, careers, auto, education and living categories. These sites provide the means to test Inuvo’s technologies, while also delivering high quality consumers to clients through the interaction with proprietary content in the form of images, videos, slideshows and articles.

There are many barriers to entry to Inuvo’s business that would require proficiency in large scale data center management, software development, data products, analytics, artificial intelligence, integration to the internet of things, or IOT, the relationships required to execute within the IOT and the ability to process tens of billions of transactions daily. Inuvo’s intellectual property is protected by 15 issued and 8 pending patents.

Products and Services

The Inuvo Exchange is a digital marketplace that allows advertisers and publishers the opportunity to buy and sell advertising space in real time. The Exchange includes the following products and services:

ValidClick: SaaS and delivery platform for publishers that offers a pay-per-click solution where advertisements are targeted to consumers based on content and behaviors.

IntentKey: A consumer intent recognition system designed to reach highly targeted mobile and desktop In-Market audiences with precision.

Digital Publishing: Branded web properties such as alot.com, earnspendlive.com, search4answers.com and many more with content developed, edited and published by Inuvo in categories like health, finance, travel, entertainment, careers, education, lifestyle and automotive.

Key Relationships

Inuvo maintains long-standing relationships with Yahoo!, Google and Microsoft Online that provide access to hundreds of thousands of advertisers from which most of its ValidClick and Digital Publishing revenue originates. When an advertisement is clicked, Inuvo effectively sells that click to these partners who then sell it to the advertisers. Inuvo maintains multi-year service contracts with these companies. Inuvo also has contracts with OpenX and AppNexus that provide access to advertisers and publishers for the IntentKey. In 2018, these customers accounted for 92.9% of Inuvo’s total revenue as compared to 92.6% in 2017.

In addition to its key customer relationships, Inuvo maintains important distribution relationships with owners and publishers of websites and mobile applications. Through its relationship with Yahoo!, Inuvo provides these partners with advertisements through which they monetize their websites and mobile applications. Inuvo continuously monitors its partners’ traffic with a variety of proprietary and patent-protected software tools that can determine the quality of the traffic that is viewing and clicking on served advertisements.

Strategy

Inuvo’s business strategy has been to develop technologies that displace intermediaries while cultivating relationships that provide access to media spend and media inventory. In this regard, Inuvo has proprietary demand and supply side technologies, consumer targeting technologies, on-page or in-app ad-unit technologies, proprietary data and data management technologies and advertising fraud detection technologies. Inuvo has both direct and indirect relationships at some of the largest media buyers and/or consolidators in the industry. For Inuvo’s core business, the immediate strategy is to complement Inuvo’s indirect channels with more direct advertiser and publisher relationships as a way to reduce concentration risk and improve margins.

Inuvo’s competitive position requires a strategy that allows Inuvo to provide the absolute best solutions to publishers for monetization of their content. To accelerate the time to market for technology that accomplishes this goal and to gain competitive reconnaissance, Inuvo has developed a set of owned and operated digital properties. These websites provide the means to test advertising technology in a controlled environment, which reduces the time to market for the introduction of those technologies. The strategy has the added benefit of providing a high-quality directly controlled source of advertising inventory which can be adapted to meet demand and supply changes in near real time.

Inuvo’s industry is currently in a consolidation phase. Inuvo’s business strategy aligns with this trend as it is by design an end-to-end complete approach to the value chain. Inuvo evaluates acquisition candidates as opportunities arise that have either advertisers or advertising relationships Inuvo does not possess or publishers or publishing partners with whom Inuvo does not currently have a relationship.

Inuvo’s device strategy is to become screen agnostic allowing its technologies to work across various hardware or software options. Inuvo will continue to develop technologies that allow it to distribute ads across any medium.

Sales and Marketing

Inuvo drives general awareness of its brands through various marketing channels including its websites, social media, blogs, public relations, trade shows, conferences and similar means. Sales and marketing for its products differs based on whether they are demand or supply facing.

The demand side of Inuvo’s business includes sales executives who create demand from agencies, trading desks and brands directly. Leveraging Inuvo’s IntentKey technology to highlight its differentiation, Inuvo’s sales executives explain how Inuvo identifies the most relevant content and audiences, allowing Inuvo to target these consumers when they are most prone to engage, respond, subscribe, tune-in and watch. Inuvo’s product organization fulfills the business development initiatives that cement profitable relationships with programmatic demand partners, who are incorporated into Inuvo’s stack to drive monetization for its publishing partners.

The supply side of Inuvo’s business includes sales executives who sell to publishers directly. Creating differentiation, they explain Inuvo’s unique ability to create incremental revenue streams for publishers through Inuvo’s custom placements and unique approach to maximizing yield while preserving user experience.

Both demand and supply relationships require account management/campaign management, plus operations teams, who ensure that publisher implementations are successful, advertising campaigns deliver anticipated results and clients’ expectations are exceeded.

Competition

Inuvo faces significant competition in its industry. Competitors continue to increase their suite of offerings across marketing channels to better compete for total advertising dollars.

A significant number of competitors have greater name recognition and are better capitalized than Inuvo. Inuvo’s ability to remain competitive in its market segment depends upon Inuvo’s ability to be innovative and to efficiently provide unique solutions to its demand and supply customers. There are no assurances Inuvo will be able to remain competitive in its markets in the future.

Technology Platforms

Inuvo’s proprietary applications are constructed from established, readily available technologies. Some of the basic elements on which Inuvo’s products are built are components from leading software and hardware providers such as Oracle, Microsoft, Sun, Dell, EMC and Cisco, while some components are constructed from leading open source software projects such as Apache Web Server, MySQL, Java, Perl, Java and Linux. By seeking to strike the proper balance between using commercially available software and open source software, Inuvo’s technology expenditures are directed toward maintaining its technology platforms while minimizing third party technology supplier costs.

Inuvo strives to build high-performance, availability and reliability into its product offerings. Inuvo safeguards against the potential for service interruptions at its third party technology vendors by engineering controls into its critical components. Inuvo delivers its hosted solutions from facilities, geographically disbursed throughout the United States and maintains ready, on-demand services through third party cloud providers Microsoft Azure and Amazon Web Services to enhance Inuvo’s business continuity. Inuvo’s applications are monitored 24 hours a day, 365 days a year by specialized monitoring systems that aggregate alarms to a human-staffed network operations center. If a problem occurs, appropriate engineers are notified, and corrective action is taken.

Intellectual Property Rights

Inuvo owns intellectual property, or IP, and related IP rights that relate to its products, services and assets. Inuvo’s IP portfolio includes patents, trade secrets and trademarks. Inuvo actively seeks to protect its IP rights and to deter unauthorized use of its IP and other assets. While Inuvo’s IP rights are important to its success, its business as a whole is not significantly dependent on any single patent, trademark, or other IP right.

Inuvo’s trademarks include the U.S. Federal Registration for its consumer facing brand ALOT^® in the United States. Inuvo’s patents include 15 patents issued by the United States Patent and Trademark Office and eight pending patent applications.

To distinguish Inuvo’s products and services from its competitors’ products, Inuvo has obtained trademarks and trade names for its products. Inuvo also protects details about its processes, products, and strategies as trade secrets, keeping confidential the information that Inuvo believes provides it with a competitive advantage.

Employees

As of February 28, 2019, Inuvo had 60 full-time and part-time employees, none of whom were covered by a collective bargaining agreement.

Seasonality

Inuvo’s future results of operations may be subject to fluctuation because of seasonality. Historically, in the later part of the fourth quarter and the earlier part of the first quarter Inuvo experiences lower revenue due to a decline in demand for inventory on websites and apps and the recalibrating of advertiser’s marketing budgets after the holiday selling season. If Inuvo is not able to appropriately adjust to seasonal or other factors, it could have a material adverse effect on Inuvo’s financial results.

History

Inuvo was incorporated under the laws of the state of Nevada in October 1987 and operated within the oil and gas industry. This endeavor was not profitable, and from 1993 to 1997 Inuvo had essentially no operations. In 1997, Inuvo reorganized and through 2006 Inuvo acquired a number of companies involved in advertising and internet marketing. In 2009, following the weakness in the economy, a new team was called in to assess the array of businesses that had been acquired in the preceding years and as a result between 2009 and 2011, Inuvo sold or retired eleven businesses.

In March 2012, as part of a long-term strategy, Inuvo acquired Vertro, Inc. (“Vertro”), which owns and operates the ALOT product portfolio. This acquisition included the ALOT brand, as well as a long-standing relationship with Google. In 2013, with a grant funded by the State of Arkansas, Inuvo moved the headquarters to Arkansas, where it has remained.

In February 2017, Inuvo entered into an Asset Purchase Agreement with NetSeer, Inc. (“NetSeer”) which allowed Inuvo to advance its technology strategy while increasing both the number of advertisers and publishers within the Inuvo Exchange. Inuvo exchanged 3,529,000 shares of Inuvo common stock and assumed approximately $6.8 million of specified liabilities in this business combination.

Legal Proceedings

On December 19, 2018 and December 20, 2018, respectively, Peter D’Arcy and Morris Akerman, both of whom claim to be stockholders of Inuvo, filed separate putative class action lawsuits, captioned D’Arcy v. Inuvo, Inc. et al., No. 1:18-cv-02023-UNA, in the United States District Court for the District of Delaware; and Akerman v. Inuvo, Inc. et al., No. 2:18-cv-02407, in the United States District Court for the District of Nevada. The two lawsuits each named Inuvo and the members of Inuvo’s board of directors as defendants. The D’Arcy action also names ConversionPoint and various entities created to effect the merger as defendants. The complaints filed in the lawsuits assert claims under Section 14(a) and Section 20(a) of the Exchange Act challenging the adequacy of the disclosures relating to the merger transactions made in a joint consent solicitation statement/prospectus.

On December 21, 2018, Domenic Spagnolo, another purported stockholder of Inuvo, filed a substantially similar lawsuit, captioned Spagnolo v. Inuvo, Inc. et al., No. 1:18-cv-12099, in the United States District Court for the Southern District of New York. This lawsuit also challenges the adequacy of disclosure under the same sections of the Exchange Act against Inuvo and its directors.

Each of the foregoing lawsuits seeks, among other relief, an injunction preventing the parties from consummating the merger transactions, damages in the event the merger transactions are consummated, and an award of attorneys’ fees. Inuvo and ConversionPoint believe the claims asserted in the lawsuits are without merit. We believe the allegations in the lawsuits have been mooted by the filing of our amended S-4 Registration Statement on March 15, 2019. Inuvo intends to vigorously contest any continued litigation, and any fee petitions brought by Plaintiffs’ counsels. On February 4, 2019, Inuvo filed a motion to dismiss, or in the alternative stay, the Akerman and Spagnolo actions pending the resolution of the first-filed D’Arcy case. Then, on March 4, 2019, Inuvo filed a second motion to dismiss the Spagnolo action based on a failure to state a claim under the law. In the Spagnolo action, the court issued an order giving Plaintiff Spagnolo an opportunity to amend his complaint in response to the second motion to dismiss, or alternatively, serve his opposition to the motion to dismiss by March 25, 2019. Additionally, Plaintiff Spagnolo filed for a preliminary injunction, seeking to enjoin a shareholder vote on the merger. Per court order, Inuvo responded to the preliminary injunction on March 1, 2019. Plaintiff Spagnolo replied on March 8, 2019. Following the filing of our amended S-4 Registration Statement on March 15, 2019, Plaintiff Spagnolo withdrew his motion for preliminary injunction. The next day, the court dismissed the Spagnolo action as moot and set a deadline of April 11, 2019 for Plaintiff Spagnolo to make an application for attorney’s fees and expenses. On March 25, 2019, Plaintiff Spagnolo filed a motion for an award of attorney’s fees and expenses. Inuvo’s opposition is due April 25, 2019. Plaintiff Spagnolo’s reply is due May 9, 2019.

In the Akerman action, following the filing of our amended S-4 Registration Statement on March 15, 2019, Plaintiff Akerman filed a stipulation of dismissal, dismissing the entire action, except with respect to a fee and expense request. No deadline has been set for Plaintiff Akerman to file a fee and expense request.

On January 4, 2019 and January 8, 2019, respectively, two more purported stockholders of Inuvo, Adam Franchi and Les Thomas, commenced substantially similar putative class action lawsuits, captioned Franchi v. Inuvo, Inc. et al., No. A-19-787021-C and Thomas v. Inuvo, Inc. et al., No. T19-57, in the District Court of the State of Nevada in the County of Clark. These complaints also name Inuvo and the members of Inuvo’s board of directors as defendants. The Franchi action also names ConversionPoint and various entities created to effect the merger as defendants. Both complaints assert breach of fiduciary duties claims arising from the adequacy of the disclosures relating to the merger transactions made in a joint consent solicitation statement/prospectus, and both complaints seek an injunction preventing the parties from consummating the merger transactions, damages in the event the merger transactions are consummated and an award of attorneys’ fees.

Inuvo and ConversionPoint believe the claims asserted in the Franchi and Thomas lawsuits are similarly without merit. We believe the allegations in the lawsuits have been mooted by the filing of our amended S-4 Registration Statement on March 15, 2019. ConversionPoint and Inuvo intend to vigorously contest any continued litigation, and any fee petitions brought by Plaintiffs’ counsel. On January 25, 2018, the Thomas plaintiff filed a preliminary injunction seeking to enjoin the merger. A hearing on the preliminary injunction was held on March 18, 2019. The Franchi and Thomas complaints seek, among other relief, an injunction preventing the parties from consummating the merger transactions, damages in the event the merger transactions are consummated and an award of attorneys’ fees. Inuvo and ConversionPoint believe the claims asserted in the lawsuits are without merit. On February 5 and 14, 2019, Inuvo filed motions to dismiss, or in the alternative to stay, the Franchi and Thomas actions, respectively, pending the resolution of the first-filed D’Arcy action. A hearing on the Franchi motion is yet to be scheduled. Following the filing of our amended S-4 Registration Statement on March 15, 2019, Plaintiff Thomas filed a stipulation of dismissal, dismissing the action, but requesting the court maintain jurisdiction to determine Plaintiff’s mootness fee claim. On April 12, 2019, counsel for Plaintiff Thomas filed a motion for attorney’s fees and expenses. Inuvo must respond by May 3, 2019. Plaintiff Thomas’s reply is due no later than May 17, 2019. The Thomas court has scheduled a hearing on the motion for that same day, May 17, 2019. On April 11, 2019, Plaintiff Franchi filed a notice of voluntary dismissal.

More Information

Inuvo’s web site address is www.inuvo.com. Inuvo files with, or furnishes to, the Securities and Exchange Commission (the “SEC”) annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports, as well as various other information. This information can be found on the SEC website at www.sec.gov. In addition, Inuvo makes available free of charge through the Investor Relations page of its web site, its annual reports, quarterly reports and current reports, and all amendments to any of those reports, as soon as reasonably practicable after providing such reports to the SEC. The information contained in, or that can be accessed through, our website is not a part of this prospectus.

Management

Executive Officers and Directors

The following table sets forth the names, state of residence, ages and positions of (i) our current executive officers and directors, (ii) the indiviuals who will also become executive officers upon completion of this offering and (iii) our director nominees who will also become directors upon the effectiveness of this offering.

Name	Age	Positions Held

Current Executive Officers
Robert Tallack	40	President, Chief Executive Officer and Director

Raghu Kilambi	53	Chief Financial Officer and Director

Expected Executive Officers
Don Walker “Trey” Barrett, III	54	Chief Operating Officer

Tom Furakawa	47	Chief Technology Officer

Jonathan Gregg	45	President of CPT Enterprise

Non-Employee Director Nominees
Richard K. Howe	56	Director Nominee

Gordon J. Cameron	54	Director Nominee

Executive Officers

Robert Tallack, has served as our President, Chief Executive Officer and director since our inception in December 2018 and has served as ConversionPoint’s Chief Executive Officer and as a director since its inception in April 2017, where he completed two major acquisitions of two technology companies, Push Holdings, Inc., and SellPoints Inc. Between May 2016 and the present date, Mr. Tallack has served as Chief Executive Officer, Treasurer and as a director of Branded Response, Inc. Since January 2009, Mr. Tallack has served as Chairman of Karate Kids Canada, where he has driven the mission of this organization, to provide free fitness programs to disadvantaged youth in Canada. Between January 2011 and December 2015, Mr. Tallack served as Chief Executive Officer of Revive Bioscience, Inc., where he successfully secured a global license with a leading sports brand and developed products which were distributed across North America. Mr. Tallack is a former three-time world martial arts champion, nine-time Canadian national martial arts champion, a former Professional Mixed Martial Arts fighter and holds a board breaking world record. Mr. Tallack attended Queens University between September 2001 and June 2004, where he received a bachelor’s degree in health science, with a minor in commerce.

Raghunath “Raghu” Kilambi, has served as our Chief Financial Officer and director since our inception in December 2018 and has served as ConversionPoint’s Chief Financial Officer since December 2017, and as Vice Chair and a director since January 2018. Mr. Kilambi has also been the principal of Kirarv Capital, a technology investment firm, since June 2009. Mr. Kilambi has raised over $1 billion of equity and debt capital for growth private and public companies in his career and has also been a senior officer and director of companies that were awarded Barron’s ASAP Magazine Top Ramp Champ awards and Profit Magazine’s Top 3 Growth Company awards. Previously, from 1998 to 2001 Raghu was the Co-Founder, CFO and Chief Strategy Officer of FutureLink Corp., a leading first-generation VC-backed cloud computing technology company that grew from startup to over $100 million in annualized revenues and a peak NASDAQ valuation of over $2 billion. Raghu has also been an investor in companies that were subsequently acquired by companies including Yahoo! (1998), eBay (2005) and CGI Group (2006). Raghu graduated with Great Distinction with a Bachelor of Commerce (University Scholar) and a Graduate Diploma in Public Accounting from McGill University and qualified as a Canadian Chartered Accountant in 1989.

Expected Executive Officers

Don Walker “Trey” Barrett, III. Mr. Barrett, joined Inuvo in February 2010 as Senior Vice President of Corporate Strategy and Business Development, and was promoted to Chief Operating Officer in February 2013. Prior to joining Inuvo, Mr. Barnett served as Acxiom Corporation’s Director of Interactive Media Products overseeing the innovation and development of the Relevance-X product line. With over 25 years of data-driven direct marketing experience, he has been involved in several successful business start-ups in the direct and interactive marketing industries. Mr. Barnett earned a bachelor’s degrees in Marketing and Economics from the University of Arkansas at Fayetteville. Mr. Barrett is expected to become our Chief Operating Officer upon the effectiveness of this offering.

Tom Furakawa, has served as ConversionPoint’s Chief Technolgy Officer since July 2018. Previously, between March 2017 and July 2018, Mr. Furukawa served as Chief Product Officer for Ad Exchange Group, where he was responsible for the design and development of Ad Exchange Group’s performance marketing technology platform. From August 2015 to March 2017, he served as Head of Product for ZEFR Inc., where he developed and deployed ZEFR’s social video marketing and digital rights management platform. Between January 2014 and August 2015, Mr. Furakawa was the CEO and co-founder of Enstigo Inc., a do-it-yourself, video advertising creation, measurement, and collaboration platform for digital agencies. Mr. Furukawa received a B.S. in Information and Computer Science from the University of California Irvine. Mr. Furakawa is expected to become our Chief Technology Officer upon the effectiveness of this offering.

Jonathan Gregg, has served as President of Sellpoints since March 2018 and served as its Chief Revenue Officer between August 2017and March 2018. Between October 2015 and May 2017, Mr. Gregg served as Chief Revenue Officer for Sqor, Inc., where he was responsible for revenue strategy and partnerships. Between October 2013 and August 2015, he served as Chief Revenue Officer for Share This, Inc., where he was responsible for revenue strategy, operations and partnerships. Between August 2012 and October 2013, he served as Vice President of Sales at inPowered, where he was responsible for sales strategy and operations. Previously, Mr. Gregg served as a Vice President of Business Development at Blinkx, and a Manager of Global Alliances at Yahoo!, where he set in motion major alliances aligned with corporate initiatives. Prior thereto, he was a leading contributor for Yahoo!’s Media Sales team in both New York City, New York and Sunnyvale, California. Mr. Gregg started his career in New York City in media planning for Ogilvy & Mather and in account services for Wunderman, Cato Johnson, and has a degree in English from LeMoyne College in Syracuse, New York. Mr. Gregg is expected to become the Preisdent of CPT Enterprises upon the effectiveness of this offering.

Non-Employee Director Nominees

Richard K. Howe, has been a member of Inuvo’s board of directors since November 2008, and has served as Executive Chairman of the board since March 2012 and as Inuvo’s Chief Executive Officer since December 2012. Previously, he served as Inuvo’s President and Chief Executive Officer from November 2008 until March 2012. Prior to joining Inuvo, Mr. Howe served as Chief Marketing, Strategy and M&A Officer at the billion-dollar multi-channel marketing services leader Acxiom Corporation (NasdaqGS: ACXM) where, since 2004, he led the company’s transition to online marketing services, the expansion into China and the development of the big data consulting services group. From 2001 to 2004, he served as general manager of Global Marketing Services (GMS) at Fair Isaac & Company (NYSE: FICO), a leading provider of analytics products and services where he drove the company’s online initiatives. Between 1999 and 2001, Mr. Howe started, grew and sold private Internet search innovator, ieWild. Mr. Howe has over his career led the acquisition, merger or divestiture of a dozen companies on three continents worth many hundreds of millions of dollars to shareholders. Mr. Howe earned a bachelor’s degree with distinction in engineering from Concordia University, Canada, and he earned his master’s degree in engineering from McGill University, Canada.

Gordon J. Cameron, has been a member of Inuvo’s board of directors since November 2016. He is a business transformation executive with three decades of success in growing businesses while managing risk. Mr. Cameron is currently an Executive Vice President in Retail Lending at PNC Financial Services, one of the largest diversified financial services institutions in the United States, where he serves as a credit risk executive, a position he has held since 2008. Prior to PNC Financial Services, Mr. Cameron was the Chief Credit Officer, Retail and Small Business Lending, at Canadian Imperial Bank of Commerce from 2005 to 2008. Mr. Cameron was the Chief Scientist Transaction Analytics, Global Account Management Solutions at Fair Isaac Corporation FICO from 2001 to 2005. Prior to his tenure with Fair Isaac Corporation, Mr. Cameron held executive positions at IeWild Inc., HNC Software Inc., Advanta National Bank/Fleet, The Campbell Group LTD and Fidelity Bank N.A. Mr. Cameron received a MBA from Widener University School of Management and a B.S. in Finance from Pennsylvania State University.

Appointment of Officers; Family Relationships

Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships among any of our directors or executive officers.

Board Composition

Our board of directors currently consists of two members, Robert Tallack and Raghu Kilambi. Upon the appointment of Messrs. Howe and Cameron at the completion of this offering, our board will consist of four members with three vacancies. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal.

Our certificate of incorporation and bylaws provide that the authorized number of directors may be changed only by resolution of the board of directors. Our certificate of incorporation and bylaws also provide that any vacancy on our board of directors, including a vacancy resulting from an expansion of our board of directors, may be filled only by vote of a majority of our directors then in office, although less than a quorum or by a sole remaining director.

We have no formal policy regarding board diversity. Our priority in selection of board members is identification of members who will further the interests of our stockholders through his or her established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge of our business and understanding of the competitive landscape.

Independence of our Board of Directors and Board Committees

Rule 5605 of the NASDAQ Listing Rules requires a majority of a listed company’s board of directors to be comprised of “independent directors,” as defined in such rule, subject to specified exceptions. In addition, the NASDAQ Listing Rules require that, subject to specified exceptions: each member of a listed company’s audit, compensation and nominating committees be independent as defined under the NASDAQ Listing Rules; audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act; and compensation committee members also satisfy an additional independence test for compensation committee members under the NASDAQ Listing Rules.

Our board of directors has evaluated the independence of its members and director nominees based upon the rules of the NASDAQ Stock Market and the SEC. Applying these standards, our board of directors has determined that except for Mr. Cameron, all of the directors who will serve immediately following the completion of this offering have a relationship with our company that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Thus, upon the completion of this offering only Mr. Cameron will be “independent” as that term is defined under Rule 5605(a)(2) of the NASDAQ Listing Rules. Messrs. Tallack and Kilambi are not considered independent because each is an officer of ConversionPoint Holdings and has been an officer and director of ConversionPoint. Mr. Howe is not considered independent because he has been the Chief Executive Officer and a director of Inuvo.

Board Committees

Our board of directors expects to establish standing committees in connection with the discharge of its responsibilities. Upon the commencement of the trading of our common stock on The NASDAQ Capital Market, these committees will include an audit committee, a compensation committee and a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Members will serve on committees until their resignation or until otherwise determined by our board of directors. Each of these committees will adopt a written charter that satisfies the applicable standards of the SEC and the NASDAQ Listing Rules, which we will post on the investor relations section of our website upon the completion of this offering.

Audit Committee

Effective at the time of this offering, the sole member of our audit committee will be Mr. Cameron, who will be the chair of the audit committee. Mr. Cameron satisfies the heightened audit committee independence requirements under the NASDAQ Listing Rules and Rule 10A-3 of the Exchange Act. As a company listing on The NASDAQ Capital Market in connection with our initial public offering, we are permitted to phase-in our compliance with the independent audit committee member requirements set forth in the NASDAQ Listing Rules and relevant SEC rules as follows: (i) one independent member at the time of listing; (ii) a majority of independent members within 90 days of listing; and (iii) all independent members within one year of listing. We intend to add one independent director elected to our board of directors to our audit committee as soon as possible but in no event later than 90 days after our initial listing on The NASDAQ Capital Market and one other independent director elected to our board of directors to our audit committee no later than one year after our initial listing on The NASDAQ Capital Market. Accordingly, we expect that the audit committee will, subject to the phase-in provisions, comply with the applicable audit committee composition and independence requirements. We have determined that the fact that our audit committee will not be made of three independent directors upon our initial listing on The NASDAQ Capital Market does not materially adversely affect the ability of the audit committee to act independently and to satisfy the other requirements of the SEC and The NASDAQ Capital Market.

In addition, our board of directors has determined that Mr. Cameron qualifies as an audit committee financial expert, as that term is defined under SEC rules, and possesses the requisite financial sophistication, as defined under the NASDAQ Listing Rules. Our audit committee will assist our board of directors in its oversight of our accounting and financial reporting process and the audits of our financial statements. Under its charter, our audit committee will be responsible for, among other things:

overseeing accounting and financial reporting process;

selecting, retaining and replacing independent auditors and evaluating their qualifications, independence and performance;

reviewing and approving scope of the annual audit and audit fees;

discussing with management and independent auditors the results of annual audit and review of quarterly financial statements;

reviewing adequacy and effectiveness of internal control policies and procedures;

approving retention of independent auditors to perform any proposed permissible non-audit services;

overseeing internal audit functions and annually reviewing audit committee charter and committee performance;

preparing the audit committee report that the SEC requires in our annual proxy statement; and

reviewing and evaluating the performance of the Audit Committee, including compliance with its charter.

Compensation Committee

Effective at the time of this offering, the sole member of our compensation committee will be Mr. Cameron who will be the chair of the compensation committee. Mr. Cameron will be independent as defined under the NASDAQ Listing Rules and he satisfies NASDAQ’s additional independence standards for compensation committee members. As a company listing on The NASDAQ Capital Market in connection with our initial public offering, we are permitted to phase-in our compliance with the independent compensation committee member requirements set forth in the NASDAQ Listing Rules and relevant SEC rules as follows: (i) one independent member at the time of listing; (ii) a majority of independent members within 90 days of listing; and (iii) all independent members within one year of listing. We intend to add one independent director elected to our board of directors to our compensation committee as soon as possible but in no event later than 90 days after our initial listing on The NASDAQ Capital Market and one other independent director elected to our board of directors to our compensation committee no later than one year after our initial listing on The NASDAQ Capital Market. Accordingly, we expect that the compensation committee will, subject to the phase-in provisions, comply with the applicable compensation committee composition and independence requirements. We have determined that the fact that our compensation committee will not be made of three independent directors upon our initial listing on The NASDAQ Capital Market does not materially adversely affect the ability of the audit committee to act independently and to satisfy the other requirements of the SEC and The NASDAQ Capital Market Mr. Cameron is a non-employee directors within the meaning of Rule 16b-3 under the Exchange Act and outside directors as defined by Section 162(m) of the Internal Revenue Code. Our compensation committee assists our board of directors in the discharge of its responsibilities relating to the compensation of our executive officers. Under its charter, our compensation committee will be responsible for, among other things:

developing and maintaining an executive compensation policy and monitor the results of that policy;

recommending to our board of directors for approval compensation and benefit plans;

reviewing and approving annually corporate and personal goals and objectives to serve as the basis for the CEO’s compensation, evaluating the CEO’s performance in light of those goals and objectives and determining the CEO’s compensation based on that evaluation;

determining and approving the annual compensation for other executive officers;

retaining or obtaining the advice of a compensation consultant, outside legal counsel or other advisor;

approving any grants of stock options, restricted stock, performance shares, stock appreciation rights, and other equity-based incentives to the extent provided under our equity compensation plans;

reviewing and making recommendations to our board of directors regarding the compensation of non-employee directors; and

reviewing and evaluating the performance of the compensation committee, including compliance with its charter.

Nominating and Corporate Governance Committee

Effective at the time of this offering, the sole member of our nominating and corporate governance committee will be Mr. Cameron who will be the chair of the nominating and corporate governance committee. Mr. Cameron will be independent as defined under the NASDAQ Listing Rules. As a company listing on The NASDAQ Capital Market in connection with our initial public offering, we are permitted to phase-in our compliance with the independent nominating and corporate governance committee member requirements set forth in the NASDAQ Listing Rules and relevant SEC rules as follows: (i) one independent member at the time of listing; (ii) a majority of independent members within 90 days of listing; and (iii) all independent members within one year of listing. We intend to add one independent director elected to our board of directors to our nominating and corporate governance committee as soon as possible but in no event later than 90 days after our initial listing on The NASDAQ Capital Market and one other independent director elected to our board of directors to our nominating and corporate governance committee no later than one year after our initial listing on The NASDAQ Capital Market. Accordingly, we expect that the nominating and corporate governance committee will, subject to the phase-in provisions, comply with the applicable nominating and corporate governance committee composition and independence requirements. We have determined that the fact that our nominating and corporate governance committee will not be made of three independent directors upon our initial listing on The NASDAQ Capital Market does not materially adversely affect the ability of the audit committee to act independently and to satisfy the other requirements of the SEC and The NASDAQ Capital Market under its charter, our nominating and corporate governance committee will be responsible for, among other things:

considering and reviewing periodically the desired composition of our board of directors;

establishing any qualifications and standards for individual directors;

identifying, evaluating and nominating candidates for election to our board of directors;

ensuring that the members of our board of directors satisfy SEC and NASDAQ independence and other requirements relating to membership on our board of directors and committees;

making recommendations to our board of directors regarding the size of the board of directors, the tenure and classifications of directors, and the composition of the committees of the board of directors; and

considering other corporate governance and related matters as requested by our board of directors.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves, or in the past has served, as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any entity that has one or more executive officers serving as members of our board of directors or our compensation committee. None of the members of our compensation committee is or has been an officer or employee of ConversionPoint Holdings.

Code of Business Conduct and Ethics

Effective as the time of this offering, we have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Following this offering, a copy of the code will be made available on the investor relations section of our website, which is located at www.conversionpoint.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.

Executive and Director Compensation

Background

As of date of this prospectus, none of our executive officers, directors or director nominees has received any compensation from ConversionPoint Holdings.

This executive and director compensation section sets forth certain information regarding total compensation earned by ConversionPoint’s and Inuvo’s named executive officers and directors for the years set forth below, as well as equity awards held by ConversionPoint’s and Inuvo’s named executive officers on December 31, 2018.

ConversionPoint

Compensation Philosophy

The fundamental objectives of ConversionPoint’s executive compensation program is to attract and retain highly qualified executive officers, motivate these executive officers to materially contribute to ConversionPoint’s long-term business success, and align the interests of ConversionPoint’s executive officers and stockholders.

2018 Compensation Determination Process

In 2018, the compensation program for ConversionPoint’s executive officers consisted of the following components:

	·	base salary; and

	·	cash bonuses.

ConversionPoint believes that its executive compensation package consists of elements of compensation that are typically used to incentivize and reward executive management at other private companies of ConversionPoint’s size, in its geographic area or in ConversionPoint’s industry.

Base Salary

Base salary is an important component of executive compensation because it provides executives with an assured-level of income, assists ConversionPoint in attracting executives and recognizes different levels of responsibility and authority among executives. The determination of base salaries is based upon the executive’s qualifications and experience, scope of responsibility and potential to achieve the goals and objectives established for the executive. Additionally, contractual provisions in executive employment agreements, past performance, internal pay equity and comparison to competitive salary practices are also considered.

Plan Awards

The objective of ConversionPoint’s long-term incentive program is to provide a long-term retention incentive for the named executive officers and others and to align their interests directly with those of ConversionPoint’s stockholders by way of stock ownership. Under ConversionPoint’s 2018 Omnibus Incentive Plan, which we refer to as the ConversionPoint 2018 Plan, the ConversionPoint board has the discretion to determine whether equity awards will be granted to named executive officers and if so, the number of shares subject to each award. To date, the named executive officers have been granted restricted stock units as a reward for prior performance, which vest upon termination without “Cause,” a change of control or a public company event, and have been awarded restricted stock units.

The ConversionPoint board determines the recipients of long-term incentive awards based upon such factors as performance, the length of continuous employment, managerial level, any prior awards and recruiting and retention demands, expectations and needs. All of ConversionPoint’s employees are eligible for awards. The ConversionPoint board grants such awards by formal action, which awards are not final until a stock option agreement or restricted stock unit agreement is delivered by ConversionPoint and executed by both the company and the employee. There is no set schedule for the ConversionPoint board to consider and grant awards. The ConversionPoint board has the discretion to make grants whenever it deems it appropriate in ConversionPoint’s best interests.

ConversionPoint does not have any program, plan or practice in place to time option or other award grants with the release of material, non-public information and does not release such information for the purpose of affecting the value of executive compensation. The exercise price of stock subject to options awarded under the ConversionPoint 2018 Plan is the fair market value of the stock on the date the grant is approved by the ConversionPoint board. Under the terms of each plan, the fair market value of the stock is determined by the ConversionPoint board.

Cash Bonus Plan

To date, there is no formal cash bonus plan for named executive officers. Rather, ConversionPoint has granted named executives cash bonuses based on overall company performance.

Retirement and Other Post-Termination Benefits

Other than 401(k) plans established by SellPoint and Push described below, employment agreements with ConversionPoint’s executive officers and certain other employment agreements which provide for severance for termination without cause or by the executive for good reason, ConversionPoint has not entered into any employment agreements that provide for a continuation of post-employment benefits. ConversionPoint’s benefits plans are generally the same for all employees, and so as of the date hereof, the ConversionPoint board does not believe that any such plans in their present forms would continue post-employment, except as required by law (including with respect to COBRA), in connection with separation agreements entered into with certain terminated employees, or otherwise set forth herein. ConversionPoint does not currently maintain any other retirement or post-termination benefits plans.

Change in Control Severance Policy

ConversionPoint does not currently maintain any change in control severance plans or severance policies. Therefore, none of ConversionPoint’s named executive officers will receive any cash severance payments in the event ConversionPoint undergoes a change in control, unless their employment agreement otherwise provides.

Insurance

All full-time employees of Branded Response, including the named executive officers who are employees of Branded Response, which include Messrs. Tallack and Kilambi, are eligible to participate in standard medical, dental and vision insurance plans. Branded Response pays 50% of health insurance premiums, and 75% of dental and vision insurance premiums, with employees paying the balance through payroll deductions. All full-time employees of SellPoints are eligible to participate in standard medical, dental, vision and long-term and short-term disability insurance plans, with their dependents being covered by the medical and dental insurance plans. SellPoints pays 90% of the employees’, and 40% of their dependents’, annual health, dental and vision insurance premiums, and 100% of the employees’ disability insurance premiums, with employees paying the balance through payroll deductions. All full-time employees of Push, including the named executive officers who are employees of Push, which include Messrs. Newton and Jahnke, are eligible to participate in standard medical, dental and long-term and short-term disability insurance plans, with their dependents being covered by the medical and dental plans. Push pays 100% of the annual insurance premiums for employees and their dependents.

401(k) Plans

Employees of Push and SellPoints can participate in 401(k) plans established by each of Push and SellPoints, which are qualified defined contribution retirement plans, sponsored by Principal Financial and ADP Retirement Services, respectively. Participants are provided the opportunity to make salary reduction contributions to the plan on a pre-tax basis. SellPoints and Push have the ability to make discretionary matching contributions and discretionary profit sharing contributions to such plans, however, currently do not make any matching contributions.

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Other Benefits

ConversionPoint seeks to maintain an open and inclusive culture in its facilities and operations among executives and other company employees. Thus, ConversionPoint does not provide executives with separate dining or other facilities, nor does ConversionPoint have programs for providing personal-benefit perquisites to executives, such as defraying the cost of personal entertainment or family travel.

Summary Compensation Table

The tables and discussion below present compensation information for ConversionPoint’s chief executive officer, chief financial officer and its two other most highly compensated executive officers for the years ended December 31, 2018 and 2017, whom ConversionPoint refers to as its named executive officers. Amounts set forth below reflect compensation received by the named executive officer while such named executive officer was employed by ConversionPoint or its subsidiaries.

Name and Function	Year		Salary ($)			Bonus ($)			Restricted Stock Unit Awards ($)			Total ($)
Robert Tallack		2018	$	425,558	(1)	$	83,333	(2)	$	723,003	(3)	$	1,231,894
Chief Executive Officer		2017	$	306,500	(4)	$	0			–		$	306,500

Raghu Kilambi		2018	$	291,667	(5)	$	100,000	(6)	$	483,000	(3)	$	874,667
Chief Financial Officer		2017	$	35,000		$	50,000	(7)		–		$	85,000

Christopher Jahnke		2018	$	274,314	(8)	$	81,666		$	1,212,404	(3)	$	1,568,474
Chief Marketing Officer		2017	$	135,000		$	182,727			–		$	317,727

Haig Newton		2018	$	274,314	(8)	$	81,666		$	1,212,404	(3)	$	1,568,474
Chief Technology Officer		2017	$	135,000		$	182,727			–		$	317,727

	(1)	Includes $337,000 in consulting fees paid to MJB Fitness, Inc., an entity in which Mr. Tallack has an economic interest, and $88,558 in deferred compensation which has not yet been paid.
	(2)	Bonus accrued in 2018, which has not yet been paid.
	(3)	Restricted stock units in the amounts of 78,502, 52,443, 131,640 and 131,640 were granted respectively to Messrs. Tallack, Kilambi, Jahnke and Newton, and all vest at the effective time of the mergers the completion of the ConversionPoint merger. The value of the restricted stock units are based on the valuation of shares of common stock sold by ConversionPoint in recent securities offerings. 43,000 of the restricted stock units granted to each of Messrs. Newton and Jahnke replaced 43,000 shares of common stock issued to each of them in 2018, which were cancelled upon the issuance of the restricted stock units.
	(4)	Includes $108,000 paid as consulting fees to Shogun Health, Inc., an entity controlled by Mr. Tallack, and $158,500 paid as consulting fees to MJB Fitness, Inc., an entity in which Mr. Tallack has an economic interest $40,000, of which was paid in 2018.
	(5)	Includes $7,705 in deferred compensation which has not yet been paid.
	(6)	Includes $8,333 in bonuses which have been accrued and not yet paid.
	(7)	Bonus amount was accrued in 2017 and paid in 2018.
	(8)	Includes $41,875 in deferred compensation which has not yet been paid.

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Executive Employment Agreements

On November 1, 2018, ConversionPoint entered into employment agreements with each of Messrs. Tallack, Kilambi, Jahnke and Newton.

The employment agreements entered with Messrs. Tallack, Kilambi, Newton and Jahnke, have an initial term of three years, after which each executive’s employment agreement automatically renews for additional one-year periods on the same terms and conditions, unless either party to the agreement exercises their respective termination rights available to such party in the agreement. The employment agreements currently provide for a minimum annual base salary of $350,000 for Mr. Tallack, $300,000 for Mr. Kilambi, and $335,000 for each of Messrs. Newton and Jahnke. The employment agreements provide for target bonuses of $200,000 for each executive. The employment agreements require ConversionPoint to compensate the executives and provide them with certain benefits if their employment is terminated. The compensation and benefits the executives are entitled to receive upon termination of employment vary depending on whether their employment is terminated:

by ConversionPoint for cause (as defined in the employment agreements);

by ConversionPoint without cause, or by the executive for good reason (as defined in the employment agreements);

due to death or disability; or

by the executive without good reason.

In the event of a termination by ConversionPoint without cause or a termination by the executive for good reason, the executive would be entitled to receive the following:

his earned but unpaid base salary and all bonuses earned for services provided through the termination date;

an amount payable on the effective termination date equal to, in the case of Mr. Tallack and Mr. Kilambi, 18 months of base salary, and in the case of Messrs. Newton and Jahnke, 12 months of base salary;

an amount payable on the effective termination date equal to, in the case of Mr. Tallack and Mr. Kilambi, the greater of 150% of the cash bonus paid to him during the prior 18 months, and 150% of the target cash bonus set forth in his employment agreement, and in the case of Messrs. Newton and Jahnke, the greater of 100% of the cash bonus paid to them during the prior 18 months, and 100% of the target cash bonus set forth in their employment agreement;

benefits (including health and disability) as if the executive was still an employee during the 18-month period following termination for Mr. Tallack and Mr. Kilambi, and during the 12-month period following termination for Messrs. Newton and Jahnke; and

any equity awards held by the executive will immediately and fully vest and become exercisable throughout the full term of such award as if the executive were still employed by ConversionPoint.

In the event of a termination by ConversionPoint of Messrs. Tallack, Kilambi, Newton or Jahnke upon their death or permanent disability, they would be entitled to receive the earned but unpaid portion of their base salary through the date of termination, and any equity award held by them will immediately and fully vest and become exercisable throughout the full term of such award as if they were still employed by ConversionPoint.

Messrs. Tallack, Kilambi, Newton or Jahnke may terminate their employment for any reason (other than good reason) upon giving 10 days’ advance written notice to ConversionPoint, in which case ConversionPoint will pay the executive the earned but unpaid portion of their base salary through the termination date.

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Outstanding Equity Awards at Fiscal Year End

The following table provides information concerning unexercised warrants, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of December 31, 2018.

Restricted Stock Unit Awards (1)

	Number of units of stock that have not vested (#)		Market value of units of stock that have not vested ($)		Number of units of stock that have vested (#)		Market value of units of stock that have vested ($)		Expiration Date

Robert Tallack		78,502	$	723,003		0	$	–	October 30, 2028
Raghunath Kilambi		52,443	$	483,000		0	$	–	October 30, 2028
Christopher Jahnke		43,000	$	396,030		0	$	–	August 29, 2028
		88,640	$	816,374		0	$	–	October 30, 2028
Haig Newton		43,000	$	396,030		0	$	–	August 29, 2028
		88,640	$	816,374		0	$	–	October 30, 2028

(1)

Provided that the recipient of a restricted stock unit continues to be employed by ConversionPoint at the effective time of the ConversionPoint merger, the ConversionPoint board intends to accelerate the vesting of the restricted stock unit at such time.

Securities Authorized for Issuance under Equity Compensation Plans

On February 21, 2018, ConversionPoint adopted the ConversionPoint Technologies Inc. 2018 Omnibus Incentive Plan, as later amended on February 21, 2018 by the Amended and Restated ConversionPoint Technologies Inc. 2018 Omnibus Incentive Plan, which we collectively refer to as the ConversionPoint Plan. The ConversionPoint Plan is intended to permit the grant of stock options (both incentive stock options, or ISOs and non-qualified stock options, or NQSOs or, collectively, Options), stock appreciation rights, or SARs, restricted stock awards, or Restricted Stock Awards, restricted stock units, or RSUs, incentive awards, or Incentive Awards, other stock-based awards, or Stock-Based Awards, dividend equivalents, or Dividend Equivalents, and cash awards, or Cash Awards.

The ConversionPoint Plan is administered by ConversionPoint Board. Any of ConversionPoint’s employees or service providers, employees or service providers of its Affiliates (as defined in the ConversionPoint Plan) and nonemployee members of its board or of any board of directors of its Affiliates is eligible to receive an award under the ConversionPoint Plan.

Under the ConversionPoint Plan, ConversionPoint may issue a maximum aggregate of 4,500,000 shares of ConversionPoint common stock, all of which may be issued pursuant to Options, SARs, Restricted Stock Awards, RSUs, Incentive Awards, Stock-Based Awards or Dividend Equivalents.

Compensation of Directors

The directors do not receive any compensation for service as directors.

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Inuvo

Compensation Philosophy

The fundamental objectives of Inuvo’s executive compensation program are to attract and retain highly qualified executive officers, motivate these executive officers to materially contribute to Inuvo’s long-term business success and align the interests of Inuvo’s executive officers and stockholders by rewarding Inuvo’s executives for individual and corporate performance based on targets established by the Nominating, Corporate Governance and Compensation Committee.

Inuvo believes that achievement of these compensation program objectives enhances long-term stockholder value. When designing compensation packages to reflect these objectives, the Nominating, Corporate Governance and Compensation Committee has adopted the following four principles as a guide:

Alignment with stockholder interests: Compensation should be tied, in part, to Inuvo’s stock performance through the granting of equity awards to align the interests of executive officers with those of Inuvo’s stockholders;

Recognition for business performance: Compensation should correlate in large part with Inuvo’s overall financial performance;

Accountability for individual performance: Compensation should partially depend on the individual executive’s performance, in order to motivate and acknowledge the key contributors to Inuvo’s success; and

Competition: Compensation should generally reflect the competitive marketplace and be consistent with that of other well-managed companies in Inuvo’s peer group. In implementing this compensation philosophy, the Nominating, Corporate Governance and Compensation Committee takes into account the compensation amounts from the previous years for each of the named executive officers, and internal compensation equity between the named executive officers and other employees.

2018 Compensation Determination Process

In 2018, the compensation program for Inuvo’s executive officers consisted of the following components:

base salary;

cash bonus plan;

2010 Plan awards;

2017 Plan awards; and

other fringe benefits and perquisites.

The Nominating, Corporate Governance and Compensation Committee believes that Inuvo’s executive compensation package consists of elements of compensation that are typically used to incentivize and reward executive management at other companies of Inuvo’s size, in Inuvo’s geographic area or in Inuvo’s industry. Each of these components is designed to meet the program’s objectives of providing a combination of fixed and variable, performance-based compensation linked to individual and corporate performance. In the course of setting the initial compensation level for new hires or adjusting the compensation of existing employees, the Nominating, Corporate Governance and Compensation Committee considered the advice and input of Inuvo’s management. Inuvo’s Chief Executive Officer typically makes recommendations to the Nominating, Corporate Governance and Compensation Committee for any proposed changes in salary, as well as performance-based awards and stock option grants, for the other named executive officers. The Nominating, Corporate Governance and Compensation Committee decides any salary change, as well as performance-based awards and stock option grants, for the Chief Executive Officer.

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Base Salary

Base salary is an important component of executive compensation because it provides executives with an assured-level of income, assists Inuvo in attracting executives and recognizes different levels of responsibility and authority among executives. The determination of base salaries is based upon the executive’s qualifications and experience, scope of responsibility and potential to achieve the goals and objectives established for the executive. Additionally, contractual provisions in executive employment agreements, past performance, internal pay equity and comparison to competitive salary practices are also considered.

In general, the Nominating, Corporate Governance and Compensation Committee considers two types of potential base salary increases including “merit increases” based upon the executives’ individual performance and/or “market adjustments” based upon the peer group salary range for similar executives.

Plan Awards

The objective of Inuvo’s long-term incentive program is to provide a long-term retention incentive for the named executive officers and others and to align their interests directly with those of Inuvo’s stockholders by way of stock ownership. Under Inuvo’s 2010 Equity Compensation Plan (the “2010 Plan”), and Inuvo’s 2017 Equity Compensation Plan (the “2017 Plan”), the board of directors or the Nominating, Corporate Governance and Compensation Committee has the discretion to determine whether equity awards will be granted to named executive officers and if so, the number of shares subject to each award. Both plans allow the board or the Nominating, Corporate Governance and Compensation Committee to grant options and restricted stock and other stock-based awards with respect to up to shares of Inuvo’s common stock, valued in whole or in part by reference to the fair market value of the stock. In most instances, these long-term grants vest over a multi-year basis.

The Inuvo board or the Nominating, Corporate Governance and Compensation Committee determines the recipients of long-term incentive awards based upon such factors as performance, the length of continuous employment, managerial level, any prior awards and recruiting and retention demands, expectations and needs. All Inuvo’s employees are eligible for awards. The Inuvo board or the Nominating, Corporate Governance and Compensation Committee grants such awards by formal action, which awards are not final until a stock option agreement is delivered by Inuvo and executed by both Inuvo and the employee. There is no set schedule for the board or the Nominating, Corporate Governance and Compensation Committee to consider and grant awards. The Inuvo board and the Nominating, Corporate Governance and Compensation Committee have the discretion to make grants whenever it deems it appropriate in Inuvo’s best interests. The Nominating, Corporate Governance and Compensation Committee has discretion to grant equity awards at any time.

Inuvo does not have any program, plan or practice in place to time option or other award grants with the release of material, non-public information and does not release such information for the purpose of affecting the value of executive compensation. The exercise price of stock subject to options awarded under the plans is the fair market value of the stock on the date the grant is approved by the board or the Nominating, Corporate Governance and Compensation Committee. Under the terms of each plan, the fair market value of the stock is the closing sales price of the stock on the date the grant is approved by the board or the Nominating, Corporate Governance and Compensation Committee as reported by the NYSE American.

Cash Bonus Plan

For 2018 Inuvo approved a 2018 Management Incentive Program. The program established a variable cash incentive pool which may be awarded to executive officers and Inuvo’s employees, including Inuvo’s Chief Executive Officer, based on achieving certain revenue and net income levels as determined by Inuvo’s 2018 financial results or at the discretion of the Committee. The program provided that the total incentive pool which was available for distribution would be divided between Inuvo’s executive officers (75% in the aggregate) and other employees (25% in the aggregate), subject to their continued employment with Inuvo. The percentage of pool participation by each of Inuvo’s individual executive officers was fixed by the program and the amount of individual awards to Inuvo’s employees, other than its executive officers, was determined by Inuvo’s Chief Executive Officer. No cash bonuses were paid to Inuvo’s executive officers for 2018 because the targets under the 2018 Management Incentive Program were not met.

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Other Compensation and Benefits

Inuvo has historically provided perquisites and other types of non-cash benefits on a very limited basis in an effort to avoid an entitlement mentality, reinforce a pay-for-performance orientation and minimize expense. Such benefits, when provided, can include additional health care benefits and additional life insurance.

Retirement and Other Post-Termination Benefits

Other than Inuvo’s 401(k) plan, employment agreements with Inuvo’s named executive officers and certain other employment agreements which provide for severance for termination without cause, Inuvo has not entered into any employment agreements that provide for a continuation of post-employment benefits. Inuvo’s benefits plans are generally the same for all employees, and so as of the date of this Prospectus, the Nominating, Corporate Governance and Compensation Committee does not believe that any such plans in their present forms would continue post-employment, except as required by law (including with respect to COBRA), or otherwise set forth in this Prospectus. Inuvo does not currently maintain any other retirement or post-termination benefits plans.

Change in Control Severance Policy

Inuvo does not currently maintain any change in control severance plans or severance policies, except as provided in the executive employment agreements and the 2010 Plan and 2017 Plan, both of which are discussed in this section. Therefore, none of Inuvo’s named executive officers will receive any cash severance payments in the event Inuvo undergoes a change in control, unless their employment agreement otherwise provides.

Insurance

All full-time employees, including the named executive officers, are eligible to participate in Inuvo’s standard medical, dental, long-term and short-term disability and life insurance plans. The terms of such benefits for the named executive officers are generally the same as those for all other company employees, with the exception of the level of life insurance coverage. Inuvo pays approximately 95% of the annual health insurance premium with employees paying the balance through payroll deductions. Inuvo pays for up to $1,000,000 of basic life insurance and AD&D insurance for Inuvo’s CEO, CFO, COO and General Counsel. All other full-time employees can elect basic life insurance and AD&D insurance coverage equal to their annual salary, up to $150,000, paid by Inuvo.

401(k)

Inuvo’s employees can participate in a 401(k) plan, which is a qualified defined contribution retirement plan, sponsored by Insperity, professional employer organization that provides services to Inuvo. Participants are provided the opportunity to make salary reduction contributions to the plan on a pre-tax basis. Inuvo has the ability to make discretionary matching contributions and discretionary profit sharing contributions to such plan. Inuvo’s current practice is to match participant’s contributions up to the first four percent of their annual earnings. The company match is fully vested when made. Inuvo suspended its match in November 2018.

Other Benefits

Inuvo seeks to maintain an open and inclusive culture in Inuvo’s facilities and operations among executives and other company employees. Thus, Inuvo does not provide executives with separate dining or other facilities, nor does it have programs for providing personal-benefit perquisites to executives, such as defraying the cost of personal entertainment or family travel. Inuvo’s basic health care and other insurance programs are generally the same for all eligible employees, including the named executive officers.

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Summary Compensation Table

The following table summarizes all compensation recorded by Inuvo in each of the last two completed fiscal years for:

all individuals serving as Inuvo’s principal executive officer or acting in a similar capacity during the year ended December 31, 2018;

Inuvo’s two most highly compensated named executive officers at December 31, 2018 whose annual compensation exceeded $100,000; and

up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as a named executive officer of Inuvo’s company at December 31, 2018.

The value attributable to any option awards is computed in accordance with FASB ASC Topic 718. The assumptions made in the valuations of the option awards are included in Note 12 of the notes to Inuvo’s consolidated financial statements for the year ended December 31, 2018 appearing in Inuvo’s 2018 Form10-K.

Name and principal position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Nonequity incentive plan compensation ($)		Non-qualified deferred compensation earnings ($)		All other compensation ($)		Total ($)

Richard K. Howe,	2018		425,000		0		272,897		0		0		0		11,000		708,897
Chairman and Chief Executive Officer	2017		420,000		245,000		442,175		0		0		0		10,800		1,117,975

Wallace D. Ruiz,	2018		275,000		0		97,463		0		0		0		11,000		383,463
Chief Financial Officer	2017		275,000		105,000		157,919		0		0		0		10,800		548,719

Don (Trey) Barrett III	2018		250,000		0		129,951		0		0		0		6,220		386,171
Chief Operating Officer	2017		250,000		140,000		210,560		0		0		0		3,000		603,560

Executive Employment Agreements

On March 1, 2012, Inuvo entered into employment agreements with each of Messrs. Howe and Ruiz. Mr. Barrett does not have an employment agreement and his compensation is set by the Nominating, Corporate Governance and Compensation Committee.

The employment agreements entered into by Messrs. Howe and Ruiz, each referred to as an executive, have an initial term of one year, after which each executive’s employment agreement automatically renews for additional one-year periods on the same terms and conditions, unless either party to the agreement exercises the respective termination rights available to such party in the agreement. The employment agreements currently provide for a minimum annual base salary of $425,000 for Mr. Howe and $275,000 for Mr. Ruiz. The employment agreements require Inuvo to compensate the executives and provide them with certain benefits if their employment is terminated. The compensation and benefits the executives are entitled to receive upon termination of employment vary depending on whether their employment is terminated:

by Inuvo for cause (as defined in the employment agreements);

by Inuvo without cause, or by the executive for good reason (as defined in the employment agreements);

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due to death or disability; or

by the executive without good reason.

In the event of a termination by Inuvo, without cause, or a termination by the executive for good reason, the executive would be entitled to receive the following:

his earned but unpaid basic salary through the termination date, plus a portion of the executive’s bonus based upon the bonus he would have earned in the year in which his employment was terminated, pro-rated for the amount of time employed by Inuvo during such year and paid on the original date such bonus would have been payable;

an amount payable over the 12-month period following termination equal to one times the sum of his basic salary at the time of termination, plus a termination bonus equal to the bonus paid to the executive during the four fiscal quarters prior to the date of termination (except that if a target bonus has been established for Mr. Howe, each such person’s termination bonus is equal to his target bonus for the fiscal year in which the termination occurs, increased or decreased pursuant to actual performance versus targeted performance in the then current plan measured as of the end of the calendar month preceding the termination date), or in the event of a change of control (as defined below), the greater of the relevant calculation above or the bonus paid to the executive during the four fiscal quarters prior to the change of control;

any other amounts or benefits owing to the executive under Inuvo’s then-applicable employee benefit, long-term incentive, or equity plans and programs, within the terms of such plans, payable over the 12-month period following termination; and

benefits (including health, life and disability) as if the executive was still an employee during the 12-month period following termination.

Finally, in the event of a termination without cause by Inuvo, with good reason by the executive, or following a change of control (as defined in the employment agreements), any equity award held by the executive will immediately and fully vest and become exercisable throughout the full term of such award as if the executive were still employed by Inuvo. In the event of a termination by Inuvo with cause, Messrs. Ruiz and Howe would be entitled to receive the earned but unpaid portion of such executive’s base salary through the date of termination.

In the event of a termination by Inuvo of Mr. Ruiz upon the death or permanent disability of such executive, the executive would be entitled to receive the earned but unpaid portion of such executive’s base salary through the date of termination, the earned but unpaid portion of any vested incentive compensation under and consistent with plans adopted by Inuvo prior to the date of termination, and over the 12 months following the date of termination an amount equal to 20% base salary at the time of termination for each year of employment with Inuvo, capped at 100% of the base salary.

In the event of a termination by Inuvo of Mr. Howe upon the death or permanent disability of such executive, the executive would be entitled to receive the earned but unpaid portion of such executive’s base salary through the date of termination, any other amounts or benefits owing to the executive under any of Inuvo’s then-applicable employee benefit, long-term incentive or equity plans and programs, and over the 12 months following the date of termination an amount equal to 20% base salary at the time of termination for each year of employment with Inuvo, capped at 100% of the base salary.

The executive may terminate employment for any reason (other than good reason) upon giving 30 days’ advance written notice to Inuvo. In the event of a termination by Mr. Ruiz without good reason, such executive is entitled to receive the earned but unpaid portion of such executive’s base salary through the date of termination, and the earned but unpaid portion of any vested incentive compensation under and consistent with Inuvo’s plans adopted by Inuvo prior to the date of termination. In the event of a termination by Mr. Howe without good reason, such executive is entitled to receive the earned but unpaid portion of his base salary through the termination date and any other amounts and benefits owing to the executive under Inuvo’s then applicable employee benefit, long term incentive or equity plans and programs.

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Outstanding Equity Awards at Year End

The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of December 31, 2018.

	OPTION AWARDS													STOCK AWARDS
Name	Number of securities underlying unexercised options (#) exercisable		Number of securities underlying unexercised options (#) unexercisable		Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)		Option exercise price ($)		Option expiration date	Number of shares or units of stock that have not vested (#)		Market value of shares or units of stock that have not vested ($)		Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)		Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested (#)
Richard K. Howe		120,000		0		0		2.93	3/14/2021		126,000		134,820		294,000		314,850
Wallace D. Ruiz		43,000		0		0		2.93	3/14/2021		45,000		48,150		105,000		112,350
Don (Trey) Barrett III		40,000		0		0		2.93	3/14/2021		60,000		64,200		140,000		149,800

Inuvo Equity Compensation Plans

Inuvo maintains a stock-based compensation program intended to attract, retain and provide incentives for talented employees and directors and align stockholder and employee interests. Currently, Inuvo grants options and restricted stock units (RSUs) from the 2010 Equity Compensation Plan (2010 ECP) and the 2017 Equity Compensation Plan (2017 ECP). Option and restricted stock unit vesting periods are generally up to three years. The 2005 Plan expired in June 2015.

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Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth securities authorized for issuance under any equity compensation plans approved by Inuvo’s stockholders as well as any equity compensation plans not approved by Inuvo’s stockholders as of December 31, 2018.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) (1)		Weighted average exercise price of outstanding options, warrants and rights (b) (2)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)

Plans approved by Inuvo’s stockholders:
2005 Long-Term Incentive Plan		13,748		2.97		0
2010 Equity Compensation Plan		1,088,862		2.83		612,237
2017 Equity Compensation Plan		733,500		–		1,524,836
Plans not approved by stockholders		0		–		0

(1) The numbers in this column (a) reflect shares of common stock to be issued upon exercise of outstanding stock options and the vesting of outstanding awards of RSUs.

(2) The weighted-average exercise prices in this column are based on outstanding options and do not take into account unvested awards of RSUs as these awards do not have an exercise price.

Compensation of Directors

Each independent member of Inuvo’s board of directors receives the following fees:

$30,000 annual retainer payable quarterly; and

$30,000 of restricted stock units, calculated at fair market value on the date of grant, vesting March 31.

The following table provides information concerning the compensation paid to Inuvo’s independent directors for their services as members of Inuvo’s board of directors for 2017. The information in the following table excludes any reimbursement of out-of-pocket travel and lodging expenses which Inuvo may have paid.

Name	Fees earned or paid in cash ($)		Stock awards ($)		Option awards ($)		Director Compensation Non-equity incentive plan compensation ($)		Nonqualified deferred compensation earnings ($)		All other compensation ($)		Total ($)
Charles D. Morgan		30,000		27,060		0		0		0		0		57,060
Charles L. Pope(1)		22,500		8,557		0		0		0		0		31,057
Patrick Terrell		30,000		27,060		0		0		0		0		57,060
Gordon J. Cameron		30,000		27,060		0		0		0		0		57,060
G. Kent Burnett		30,000		27,060		0		0		0		0		57,060

(1)

Mr. Pope served as a member of Inuvo’s board of directors from September 2008 until July 2018

Director Independence

Each of Messrs. Morgan, Terrell, Cameron and Burnett are independent directors as defined by the NYSE American Company Guide.

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ConversionPoint Holdings 2018 Omnibus Incentive Plan

On December 13, 2018, our board and sole stockholder adopted the 2018 Plan. The material terms of the 2018 Plan are summarized below.

Summary of the Material Terms of the 2018 Plan

Purpose. We established the 2018 Plan to attract, retain and motivate our employees, officers and directors, to promote the success of our business by linking the personal interests of our employees, officers, consultants, advisors and directors to those of our stockholders and to encourage stock ownership on the part of management. The 2018 Plan is intended to permit the grant of stock options (both incentive stock options, or ISOs and non-qualified stock options, or NQSOs or, collectively, Options), stock appreciation rights, or SARs, restricted stock awards, or Restricted Stock Awards, restricted stock units, or RSUs, incentive awards, or Incentive Awards, other Stock-Based awards, or Stock Based Awards, dividend equivalents, or Dividend Equivalents, and cash awards, or Cash Awards.

Administration. The 2018 Plan will be administered by the Compensation Committee. The Compensation Committee may act through subcommittees or, with respect to awards granted to individuals who are not subject to the reporting and other provisions of Section 16 of the Exchange Act, and who are not members of our board or the board of directors of our Affiliates (as defined by the 2018 Plan), delegate to one or more officers all or part of its duties with respect to such awards. The Compensation Committee may, at its discretion, accelerate the time at which any award may be exercised, become transferable or nonforfeitable or become earned and settled including without limitation (i) in the event of the participant’s death, disability, retirement or involuntary termination of employment or service (including a voluntary termination of employment or service for good reason) or (ii) in connection with a Change in Control (as defined in the 2018 Plan).

Eligibility. Any of our employees or service providers, employees or service providers of our Affiliates (as defined in the 2018 Plan), and nonemployee members of our board or of any board of directors of our Affiliates is eligible to receive an award under the 2018 Plan.

Authorized Shares. Under the 2018 Plan, we may issue a maximum aggregate of 4,500,000 shares of our common stock, all of which may be issued pursuant to Options, SARs, Restricted Stock Awards, RSUs, Incentive Awards, Stock-Based Awards or Dividend Equivalents. Each share issued in connection with an award will reduce the number of shares available under the 2018 Plan by one, and each share covered under a SAR will reduce the number of shares available under the 2018 Plan by one, even though the share is not actually issued upon settlement of the SAR. Shares relating to awards that are terminated by expiration, forfeiture, cancellation or otherwise without issuance of shares of our common stock, settled in cash in lieu of shares, or exchanged prior to the issuance of shares for awards not involving shares, will again be available for issuance under the 2018 Plan. Shares not issued as a result of net settlement of an award, tendered or withheld to pay the exercise price, purchase price or withholding taxes of an award or shares purchased on the open market with the proceeds of the exercise price of an award will not again be available for issuance under the 2018 Plan.

Award Limits. In any calendar year, no participant may be granted awards that relate to more than 1,000,000 shares of our common stock. For these purposes, an Option and its corresponding SAR will be counted as a single award. For any Cash Awards that are intended to constitute annual incentive awards, the maximum amount payable to any one participant with respect to any 12-month period is $5,000,000. Award limits that are expressed as a number of shares are subject to the adjustment provisions of the 2018 Plan as described below.

A non-employee director may not be granted awards during any single calendar year that, taken together with any cash fees paid to such non-employee director during such calendar year in respect of the non-employee director’s service as a member of the board during such year, exceeds $750,000 in total value (calculating the value of any such awards based on the grant date fair value of such awards for financial accounting purposes). Notwithstanding the foregoing, the board may make exceptions to the foregoing limit (up to twice such limit) for a non-executive chair of the board or, in extraordinary circumstances, for other individual non-employee directors, as the board may determine, provided that the non-employee director, receiving such awards may not participate in the decision to make such awards.

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Written Agreements. All awards granted under the 2018 Plan will be governed by separate written agreements between the participants and us. The written agreements will specify the terms of the particular awards.

Transferability. Generally, an award is non-transferable except by will or the laws of descent and distribution, and during the lifetime of the participant to whom the award is granted, the award may only be exercised by, or payable to, the participant. However, the Compensation Committee may provide that awards, other than ISOs or a Corresponding SAR (as defined below) that is related to an ISO, may be transferred by a participant to immediate family members or trust or other entities on behalf of the Participant and/or family members for charitable donations. Any such transfer will be permitted only if (i) the participant does not receive any consideration for the transfer and (ii) the Compensation Committee expressly approves the transfer. The holder of the transferred award will be bound by the same terms and conditions that governed the award during the period that it was held by the participant, except that such transferee may only transfer the award by will or the laws of descent and distribution.

Maximum Award Period. No award shall be exercisable or become vested or payable more than ten years after the date of grant.

Compliance with Applicable Law. No award shall be exercisable, vested or payable except in compliance with all applicable federal and state laws and regulations (including, without limitation, tax and securities laws), any listing agreement with any stock exchange to which we are a party, and the rules of all domestic stock exchanges on which our shares may be listed.

Payment. The exercise or purchase price of an award, and any taxes required to be withheld with respect to an award, may be paid in cash or, if the written agreement so provides, the Compensation Committee may allow a participant to pay all or part of the exercise or purchase price, and any required withholding taxes, by tendering shares of common stock, through a broker-assisted cashless exercise, by means of “net exercise” procedure, or any other specified medium of payment.

Stockholder Rights. No participant shall have any rights as our stockholder as a result of issuance of an award until the award is settled by the issuance of common stock (other than a Restricted Stock Award or RSUs for which certain stockholder rights may be granted).

Forfeiture Provisions. Awards do not confer upon any individual any right to continue in our employ or service or in the employ or service of our Affiliates. All rights to any award that a participant has will be immediately forfeited if the participant is discharged from employment or service for “Cause” (as defined in the 2018 Plan).

Types of awards

Options. Both ISOs and NQSOs may be granted under the 2018 Plan. Our Compensation Committee will determine the eligible individuals to whom grants of Options will be made, the number of shares subject to each option, the exercise price per share, the time or times at which the option may be exercised, whether any performance or other conditions must be satisfied before a participant may exercise an option, the method of payment by the participant, the method of delivery of shares to a participant, whether the Option is an ISO or a NQSO, and all other terms and conditions of the award. However, the exercise price of an Option may not be less than the fair market value of a share of common stock on the date the Option is granted. No participant may be granted ISOs that are first exercisable in any calendar year for shares of common stock having an aggregate fair value (determined on the date of grant) that exceeds $100,000. With respect to an ISO granted to a participant who is a Ten Percent Shareholder (as defined in the 2018 Plan), the exercise price per share may not be less than 110% of the fair market value of the common stock on the date the Option is granted. At the Compensation Committee’s discretion, an Option may be granted with or without a Corresponding SAR (as defined below).

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SARs. A SAR entitles the participant to receive, upon exercise, the excess of the fair market value on that date of each share of common stock subject to the exercised portion of the SAR over the fair market value of each such share on the date of the grant of the SAR. A SAR can be granted alone or in tandem with an Option. A SAR granted in tandem with an Option is called a Corresponding SAR and entitles the participant to exercise the Option or the SAR, at which time the other tandem award expires with respect to the number of shares being exercised. The Compensation Committee is authorized to determine the eligible individuals to whom grants of SARs will be made, the number of shares of common stock covered by the grant, the time or times at which a SAR may be exercised and all other terms and conditions of the SAR. However, no participant may be granted Corresponding SARs that are related to ISOs which are first exercisable in any calendar year for shares of common stock having an aggregate fair market value (determined on the date of grant) that exceeds $100,000.

Restricted Stock Awards and RSUs. A Restricted Stock Award is the grant or sale of shares of common stock, which may be subject to forfeiture for a period of time or subject to certain conditions. A RSU entitles the participant to receive, upon vesting, shares of our common stock. We will deliver to the participant one share of common stock for each RSU that becomes earned and payable. With regard to Restricted Stock Awards, the Compensation Committee is authorized to determine the eligible individuals to whom grants will be made, the number of shares subject to such grants, the purchase price, if any, to be paid for each share subject to the award of restricted stock, the time or times at which the restrictions will terminate, and all other terms and conditions of the restricted stock. With regard to RSUs, the Compensation Committee is authorized to determine the eligible individuals to whom grants will be made, the number of shares subject to such grants and the vesting conditions entitling a participant to settlement of the RSUs.

Incentive Awards. An Incentive Award entitles the participant to receive cash or common stock when certain conditions are met. The Compensation Committee has the authority to determine the eligible individuals to whom grants will be made and all other terms and conditions of the Incentive Award.

Stock-Based Awards. Stock-Based Awards may be denominated or payable in, valued by reference to or otherwise based on shares of common stock, including awards convertible or exchangeable into shares of common stock (or the cash value thereof) and common stock purchase rights and awards valued by reference to the fair market value of the common stock. The Compensation Committee has the authority to determine the eligible individuals to whom grants will be made and all other terms and conditions of Stock-Based Awards. However, the purchase price for the common stock under any Stock-Based Award in the nature of a purchase right may not be less than the fair market value of a share of common stock as of the date the award is granted.

Our Compensation Committee is authorized under the 2018 Plan to grant shares of common stock as a bonus, or to grant shares of common stock or other awards in lieu of any of our obligations or of our affiliates to pay cash or to deliver other property under the 2018 Plan or under any other of our plans or compensatory arrangements or any of our affiliates.

Dividend Equivalents. Our Compensation Committee may also grant Dividend Equivalents under the 2018 Plan. A Dividend Equivalent is an award that entitles the participant to receive cash, shares of common stock, other awards or other property equal in value to all or a specified portion of dividends paid with respect to shares of our common stock. The Compensation Committee is authorized to determine the eligible individuals to whom grants will be made and all other terms and conditions of the Dividend Equivalents. However, no Dividend Equivalents may be awarded with an Option, SAR or Stock-Based Award in the nature of purchase rights.

Cash Awards. Cash Awards will also be authorized under the 2018 Plan. Cash Awards may be granted as an element of or a supplement to any other award under the 2018 Plan or as a stand-alone Cash Award. The Compensation Committee is authorized to determine the eligible individuals to whom grants will be made and all other terms and conditions of any such Cash Awards.

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Performance Criteria. Our Compensation Committee has the discretion to establish objectively determinable performance conditions for when awards will become vested, exercisable and payable. These performance conditions may be based on one or any combination of metrics related to our financial, market or business performance. The form of the performance conditions also may be measured on a company, affiliate, division, business unit or geographic basis, individually, alternatively or in any combination, subset or component thereof. Performance goals may reflect absolute entity performance or a relative comparison of entity performance to the performance of a peer group of entities or other external measure of the selected performance conditions. Profits, earnings and revenues used for any performance condition measurement may exclude any extraordinary or nonrecurring items. The performance conditions may, but need not, be based upon an increase or positive result under the aforementioned business criteria and could include, for example and not by way of limitation, maintaining the status quo or limiting the economic losses (measured, in each case, by reference to the specific business criteria). An award that is intended to become exercisable, vested or payable on the achievement of performance conditions means that the award will not become exercisable, vested or payable solely on mere continued employment or service. However, such an award, in addition to performance conditions, may be subject to continued employment or service by the participant. The performance conditions may include any or any combination of the following: (a) revenue, (b) earnings before interest, taxes, depreciation and amortization, or EBITDA, (c) cash earnings (earnings before amortization of intangibles), (d) operating income, (e) pre-or after-tax income, (f) earnings per share, (g) net cash flow, (h) net cash flow per share, (i) net earnings, (j) return on equity, (k) return on total capital, (l) return on sales, (m) return on net assets employed, (n) return on assets or net assets, (o) share price performance, (p) total stockholder return, (q) improvement in or attainment of expense levels, (r) improvement in or attainment of working capital levels, (s) net sales, (t) revenue growth or product revenue growth, (u) operating income (before or after taxes), (v) pre-or after-tax income (before or after allocation of corporate overhead and bonus), (w) earnings per share; (x) return on equity, (y) appreciation in and/or maintenance of the price of the shares of common stock, (z) market share, (aa) gross profits, (bb) comparisons with various stock market indices; (cc) reductions in cost, (dd) cash flow or cash flow per share (before or after dividends), (ee) return on capital (including return on total capital or return on invested capital), (ff) cash flow return on investments; (gg) improvement in or attainment of expense levels or working capital levels, (hh) stockholder equity and/or (ii) other criteria selected by the Compensation Committee.

Our Compensation Committee has the discretion to select one or more periods of time over which the attainment of one or more of the foregoing performance conditions will be measured for the purpose of determining when an award will become vested, exercisable or payable. The Compensation Committee has the authority to adjust goals and awards in the manner set forth in the 2018 Plan.

Change in Control. In the event of a “Change in Control” (as defined in the 2018 Plan) and, with respect to awards that are subject to Section 409A of the Internal Revenue Code, and such awards, 409A Awards, only to the extent permitted by Section 409A of the Internal Revenue Code, our Compensation Committee in its discretion may, on a participant-by-participant basis (a) accelerate the vesting of all unvested and unexercised Options, SARs or Stock-Based Awards in the nature of purchase rights and/or terminate such awards, without any payment therefore, immediately prior to the date of any such transaction after giving the participant at least seven days written notice of such actions; (b) fully vest and/or accelerate settlement of any awards; (c) terminate any outstanding Options, SARs or Stock-Based Awards in the nature of purchase rights after giving the participant notice and a chance to exercise such awards (to the extent then exercisable or exercisable upon the change in control); (d) cancel any portion of an outstanding award that remains unexercised or is subject to restriction or forfeiture in exchange for a cash payment to the participant of the value of the award; or (e) require that the award be assumed by the successor corporation or replaced with interests of an equal value in the successor corporation.

Amendment and Termination. The 2018 Plan will expire 10 years after its effective date, unless terminated earlier by our board of directors. Any award that is outstanding as of the date the 2018 Plan expires will continue in force according to the terms set out in the award agreement. Our board of directors may terminate, amend or modify the 2018 Plan at any time. However, stockholder approval may be required for certain types of amendments under applicable law or regulatory authority. Except as may be provided in an award agreement or the 2018 Plan, no amendment to the 2018 Plan may adversely affect the terms and conditions of any existing award in any material way without the participant’s consent.

An amendment will be contingent on approval of our stockholders, to the extent required by law, by the rules of any stock exchange on which our securities are then traded or if the amendment would (i) increase the benefits accruing to participants under the 2018 Plan, including without limitation, any amendment to the 2018 Plan or any agreement to permit a re-pricing or decrease in the exercise price of any outstanding awards, (ii) increase the aggregate number of shares of common stock that may be issued under the 2018 Plan, or (iii) modify the requirements as to eligibility for participation in the 2018 Plan.

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Material U.S. federal income tax consequences of awards under the 2018 Plan

The following discussion summarizes the principal federal income tax consequences associated with awards under the 2018 Plan. The discussion is based on laws, regulations, rulings and court decisions currently in effect, all of which are subject to change.

ISOs. A participant will not recognize taxable income on the grant or exercise of an ISO (although the excess of the fair market value of the common stock over the exercise price will be included for alternative minimum tax purposes). A participant will recognize taxable income when he or she disposes of the shares of common stock acquired under the ISO. If the disposition occurs more than two years after the grant of the ISO and more than one year after its exercise, the participant will recognize long-term capital gain (or loss) to the extent the amount realized from the disposition exceeds (or is less than) the participant’s tax basis in the shares of common stock. A participant’s tax basis in the common stock generally will be the amount the participant paid for the stock. If common stock acquired under an ISO is disposed of before the expiration of the ISO holding period described above, the participant will recognize as ordinary income in the year of the disposition the excess of the fair market value of the common stock on the date of exercise of the ISO over the exercise price. Special rules apply if a participant pays the exercise price by delivery of common stock. We will not be entitled to a federal income tax deduction with respect to the grant or exercise of an ISO. However, in the event a participant disposes of common stock acquired under an ISO before the expiration of the ISO holding period described above, we generally will be entitled to a federal income tax deduction equal to the amount of ordinary income the participant recognizes.

NQSOs. A participant will not recognize any taxable income on the grant of a NQSO. On the exercise of a NQSO, the participant will recognize as ordinary income the excess of the fair market value of the common stock acquired over the exercise price. A participant’s tax basis in the common stock is the amount paid plus any amounts included in income on exercise. Special rules apply if a participant pays the exercise price by delivery of common stock. The exercise of a NQSO generally will entitle us to claim a federal income tax deduction equal to the amount of ordinary income the participant recognizes.

SARs. A participant will not recognize any taxable income at the time SARs are granted. The participant at the time of exercise will recognize as ordinary income the amount of cash and the fair market value of the common stock that he or she receives. We generally will be entitled to a federal income tax deduction equal to the amount of ordinary income the participant recognizes.

Restricted Stock Awards and RSUs. With regard to Restricted Stock Awards, a participant will recognize ordinary income on account of a Restricted Stock Award on the first day that the shares are either transferable or not subject to a substantial risk of forfeiture. The ordinary income recognized will equal the excess of the fair market value of the common stock on such date over the price, if any, paid for the stock. However, even if the shares under a Restricted Stock Award are both nontransferable and subject to a substantial risk of forfeiture, the participant may make a special “83(b) election” to recognize income, and have his or her tax consequences determined, as of the date the Restricted Stock Award is made. The participant’s tax basis in the shares received will equal the income recognized plus the price, if any, paid for the Restricted Stock Award. We generally will be entitled to a federal income tax deduction equal to the ordinary income the participant recognizes. With regard to RSUs, the participant will not recognize any taxable income at the time RSUs are granted. When the terms and conditions to which the RSUs are subject have been satisfied and the RSUs are paid, the participant will recognize as ordinary income the fair market value of the common stock he or she receives. We generally will be entitled to a federal income tax deduction equal to the ordinary income the participant recognizes.

Incentive Awards. A participant will not recognize any taxable income at the time an Incentive Award is granted. When the terms and conditions to which an Incentive Award is subject have been satisfied and the award is paid, the participant will recognize as ordinary income the amount of cash and the fair market value of the common stock he or she receives. We generally will be entitled to a federal income tax deduction equal to the amount of ordinary income the participant recognizes.

Stock-Based Awards. A participant will recognize ordinary income on receipt of cash or shares of common stock paid with respect to a Stock-Based Award. We generally will be entitled to a federal tax deduction equal to the amount of ordinary income the participant recognizes.

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Dividend Equivalents. A participant will recognize as ordinary income the amount of cash and the fair market value of any common stock he or she receives on payment of the Dividend Equivalents. To the extent the Dividend Equivalents are paid in the form of other awards, the participant will recognize income as otherwise described herein.

Cash Awards. With regard to Cash Awards, a participant will recognize ordinary income on account of a Cash Award on the first day that the award is not subject to a substantial risk of forfeiture. We generally will be entitled to a federal income tax deduction equal to the ordinary income the participant recognizes.

Limitation on Deductions. The deduction for a publicly-held corporation for otherwise deductible compensation to a “covered employee” generally is limited to $1,000,000 per year. An individual is a covered employee if he or she is the chief executive officer, chief financial officer or one of the three highest compensated officers for the year (other than the chief executive officer or chief financial officer) or was a covered employee for any preceding year beginning after December 31, 2016.

Other Tax Rules. The 2018 Plan is designed to enable our Compensation Committee to structure awards that will not be subject to Section 409A of the Internal Revenue Code, which imposes certain restrictions and requirements on deferred compensation. However, our Compensation Committee may grant awards that are subject to Section 409A of the Internal Revenue Code. In that case, the terms of such 409A Award will be (a) subject to the deferral election requirements of Section 409A of the Internal Revenue Code; and (b) may only be paid upon a separation from service, a set time, death, disability, a change in control or an unforeseeable emergency, each within the meanings of Section 409A of the Internal Revenue Code. Our Compensation Committee shall not have the authority to accelerate or defer a 409A Award other than as permitted by Section 409A of the Internal Revenue Code. Moreover, any payment on a separation from service of a “Specified Employee” (as defined in the 2018 Plan) under a 409A award will not be made until six months following the participant’s separation from service (or upon the participant’s death, if earlier) as required by Section 409A of the Internal Revenue Code.

Non-Employee Director Compensation

Upon completion of this offering, our non-employee directors will receive a quarterly cash retainer of $ . In addition, we will reimburse all of our directors for travel and other necessary business expenses incurred in the performance of director services and extend coverage to them under our directors’ and officers’ indemnity insurance policies.

Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law, or the DGCL, provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with any threatened, pending or completed actions, suits or proceedings in which such person is made a party by reason of such person being or having been a director, officer, employee or agent to the corporation. The DGCL provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Sections 8.1 and 8.2 of Article VIII of our bylaws provide for indemnification by us of our directors, officers, employees and agents to the fullest extent permitted by the DGCL.

Article X of our certificate of incorporation eliminates the liability of a director or stockholder for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under Delaware law. Under Section 102(b)(7) of the DGCL, a director shall not be exempt from liability for monetary damages for any liabilities arising (i) from any breach of the director’s duty of loyalty to the corporation or its stockholders, (ii) from acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.

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Prior to the completion of this offering, we will enter into agreements to indemnify our directors and officers as determined by our board of directors. These agreements will provide for indemnification of related expenses including attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.

The limitation of liability and indemnification provisions in our certificate of incorporation and our bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons under the foregoing provisions of our certificate of incorporation or our bylaws, or otherwise, we have been informed that in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

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Certain Relationships and Related Party Transactions

Set forth below are summaries of related person transactions for ConversionPoint Holdings, ConversionPoint and Inuvo covering the periods indicated. It is our intention to ensure that all future transactions, if any, between us and related persons are approved by our audit committee or a majority of the independent and disinterested members of our board of directors (except for compensation arrangements, which are approved by our compensation committee), and are on terms no less favorable to us than those that we could obtain from unaffiliated third parties. See “Policies and Procedures for Related Person Transactions” below.

ConversionPoint

The following is a summary of transactions since May 20, 2016 (the date of inception) to which ConversionPoint has been a participant, in which:

	·	the amount involved exceeded or will exceed $120,000; and

	·	any of ConversionPoint’s directors, executive officers, or holders of more than 5% of its voting securities, or immediate family member or affiliate of such persons, had or will have a direct or indirect material interest, other than compensation and other arrangements that are described under “Executive Director Compensation—ConversionPoint—Executive Employment Agreements” beginning on page 101.

All of the related party transactions described below have been approved by a majority of the disinterested members of the ConversionPoint board. ConversionPoint believes that each of the transactions described below were on terms no less favorable to ConversionPoint than terms ConversionPoint would have obtained from unaffiliated third parties.

Agreements with Branded Response and Push Holdings

On May 19, 2016 Branded Response issued Shock Media Group, Inc., a company controlled by Peter Nguyen, a significant stockholder and former director of ConversionPoint, a non-interest bearing Promissory Note in the principal amount of $100,000, which note was repaid on July 5, 2018.

On June 22, 2016, Branded Response entered into a Bill of Sale and Assignment and Assumption Agreement with FigJam Media, Inc., a Florida corporation, pursuant to which Branded Response purchased various beauty product inventory and domain names in exchange for a $540,000 Promissory Note issued to Spoya Pty Ltd., and an agreement to pay a royalty to FigJam equal to 5% of the net sales generated by the assets purchased. At the time of the transaction, Stephen Blazick, who was a director, officer and shareholder of Branded Response, owned 33% of FigJam Media, Inc. On August 7, 2017, Branded Response transferred the assets of FigJam to an equity holder in FigJam Media, Inc., in exchange for a mutual release of claims.

On July 18, 2016, Branded Response issued Shock Media Group, Inc., a non-interest bearing Promissory Note in the amount of $225,000, which was due and payable on July 13, 2018. On May 1, 2017, Branded Response and Shock Media Group, Inc., amended the note to extend the maturity date to April 30, 2019. As of October 31, 2018, $225,000 was outstanding under the note.

Pursuant to a CFO Consulting Agreement dated October 1, 2016, between Branded Response and Thomsen & Associates Consulting Corporation, which is wholly-owned by Jack Thomsen, the Chief Financial Officer of Branded Responses, Inc., and ConversionPoint’s current Treasurer, Branded Response paid Thomsen & Associates $27,000 during 2016 and $98,000 during 2017, for CFO consulting services provided to Branded Response and ConversionPoint.

On January 11, 2017, in exchange for a loan in the amount of $100,000, Branded Response issued a non-interest-bearing $100,000 Promissory Note to Shogun Health Inc., a company controlled by Robert Tallack, which note was repaid in May 2018.

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On April 25, 2017, in connection with ConversionPoint’s acquisition of Push Holdings, ConversionPoint assumed a Lease Agreement dated June 1, 2017, between Tamble, Inc., as tenant, and Glenwood, LLC, as landlord, for the premises located at 225 Thomas Avenue North, Minneapolis, Minnesota, at which Push and its subsidiaries conduct their operations. The original rent was $14,000 per month and the lease expired on June 30, 2019. On June 1, 2018, in connection with the further build out of the premises for use by ConversionPoint, the lease was amended to increase the rent to $27,000 per month and extend the term of the lease to December 31, 2021. On September 15, 2018, in connection with the assumption of space vacated by a prior tenant, ConversionPoint amended the lease to increase the rent to $30,600 per month. Messrs. Newton and Jahnke, are officers and directors, and each hold over 5% of ConversionPoint’s voting securities and are members and managers of Glenwood, LLC.

On April 25, 2017, pursuant to an Exchange Agreement, ConversionPoint acquired of all of the outstanding shares of common stock of Branded Response Inc., from Peter Nguyen, Stephen Blazick and Robert Tallack in exchange for an aggregate of 6,824,500 shares of ConversionPoint’s common stock. At the time of the acquisition, Messrs. Nguyen, Blazick and Tallack were ConversionPoint’s sole officers, directors and stockholders, and each held over 5% of ConversionPoint’s voting securities.

Pursuant to a Services Agreement entered into in or about June 2016, between Branded Response and Push Innovation Live LLC, a California limited liability company which is controlled by Peter Nguyen, ConversionPoint’s former chairman and the holder of over 5% of ConversionPoint’s voting securities, between July 2016 and March 2017, and between June 4, 2017 and August 25, 2018, Push Innovations Live provided Branded Response with call center services. Pursuant to the agreement, for the fiscal years ended December 31, 2016, December 31, 2017 and December 31, 2018, Branded Response paid $411,282, $880,483, and $93,513, respectively, to Push Innovations Live LLC. On August 25, 2018, ConversionPoint terminated its agreement with Push Innovations Live LLC.

Pursuant to a Services Agreement dated in or about June 2016, between Branded Response and Chargeback 360, LLC, a California limited liability company, which is controlled by Mr. Nguyen, Chargeback 360, LLC, provided certain chargeback services to Branded Response. Pursuant to the agreement, for the fiscal years ended December 31, 2016, December 31, 2017, and December 31, 2018, Branded Response paid $398,053, $1,607,107 and $109,371, respectively, to Chargeback 360, LLC. On September 30, 2018, ConversionPoint terminated its agreement with Chargeback 360, LLC.

Pursuant to a Master Services Agreement dated June 2, 2016, between Branded Response and Ad Exchange Group, LLC, a California limited liability company, which is controlled by Mr. Nguyen, Ad Exchange Group, LLC provides Branded Response with certain order fulfillment services. Under the agreement, for the fiscal years ended December 31, 2016, December 31, 2017 and December 31, 2018, Branded Response paid $1,184,873, $2,534,250 and $853,271, respectively, to Push Innovations, LLC, which is wholly-owned by Ad Exchange Group, LLC.

Between May 2016 and July 2018, Branded Response and ConversionPoint shared office space, equipment, furniture and fixtures with Shock Media Group, Inc., which is controlled by Mr. Nguyen, and between May 2016 and April 2017, Branded Response’s employees were on Shock Media Group, Inc.’s payroll. For the fiscal years ended December 31, 2016, and December 31, 2017, ConversionPoint paid $401,094 and $604,200, respectively, to Shock Media Group, Inc., for rent and reimbursement of expenses, including, but not limited to payroll and related expenses, and for the nine months ended September 30, 2018, ConversionPoint paid $115,477 to Shock Media Group, Inc., for rent and expense reimbursements.

During 2016 and 2017, Branded Response purchased $43,461, and $72,844, respectively, in web traffic from Ad Exchange Group, LLC. During 2017, Branded Response sold $53,514 in web traffic to Ad Exchange Group, LLC. Mr. Nguyen owns and controls Ad Exchange Group, LLC.

On September 1, 2017, Branded Response entered into an Intellectual Property License Agreement with MJB Fitness Inc., an entity in which Mr. Tallack holds an economic interest, pursuant to which MJB Fitness licensed the right to Branded Response to sell certain ebooks developed and owned by MJB Fitness, Inc., in exchange for a royalty equal to 5% of Branded Response’s gross sales of such ebooks.

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For the fiscal year ended December 31, 2016, Branded Response paid $142,032 to Shogun Health, Inc., a Canadian corporation, which is wholly-owned by Robert Tallack, of which $101,000 constituted compensation for consulting services provided to Branded Response, in lieu of salary, and $41,032 constituted royalties for sales of eBooks created and owned by Shogun Health, Inc. For fiscal year ended December 31, 2017, Branded Response paid $152,316 to Shogun Health, Inc., of which $108,000 constituted compensation for consulting services provided to Branded Response, in lieu of salary, and $44,316 constituted royalties for sales of eBooks created and owned by Shogun Health, Inc.

For the fiscal year ended December 31, 2017, Branded Response paid MJB Fitness, Inc., $277,331, of which $158,500 constituted compensation for consulting services provided to Branded Response, in lieu of salary, $82,195 constituted reimbursement for expenses incurred in connection with such consulting services, and $36,636, constituted royalties for sales of eBooks pursuant to the Intellectual Property License Agreement with MJB Fitness, Inc., described above. For the fiscal year ended December 31, 2018, Branded Response paid MJB Fitness, Inc., $840,471, of which $337,000 constituted compensation for consulting services provided to Branded Response, in lieu of salary, $71,863 constituted reimbursement of expenses incurred in connection with such consulting services, and $431,609, constituted royalties for sales of eBooks earned pursuant to the Intellectual Property License Agreement described above.

CPT Investments, LLC

On October 31, 2018, ConversionPoint loaned $25,000 to CPT Investments, LLC, a California limited liability company, owned by Bridgewater Capital Corporation, Mr. Marks and Mr. Kilambi. Bridgewater Capital is controlled by Messrs. Peschong and Thomsen and CPT Investments, LLC, is managed by Mr. Kilambi. In exchange for the loan, CPT Investments, LLC issued ConversionPoint a Promissory Note that accrues interest at a rate of 10% per annum and is due and payable on or before June 30, 2019.

On November 1, 2018, CPT Investments, LLC, agreed to loan up to $2,000,000 to Inuvo and in connection with the same, CPT Investments, LLC loaned $1,000,000 to Inuvo, in exchange for a Convertible Promissory Note in the principal amount of $1,000,000 which accrues interest at a rate of 10% per annum and is due and payable on or before the earlier of November 1, 2021 and the closing of the mergers.

On March 1, 2019, CPT Investment, LLC, agreed to waive certain of its rights under the CPT bridge note and permitted Inuvo to issue the Inuvo convertible notes.

Acquisitions

On April 24, 2017, pursuant to an Exchange Agreement, ConversionPoint acquired of all of the outstanding shares of common stock of Branded Response Inc., a California corporation, from Peter Nguyen, Stephen Blazick and Robert Tallack in exchange for an aggregate of 6,824,500 shares of ConversionPoint’s common stock.

On April 24, 2017, pursuant to an Exchange Agreement, ConversionPoint acquired all of the outstanding shares of common stock of Push Holdings, Inc., a Delaware corporation, from Christopher Jahnke and Haig Newton, in exchange for an aggregate of 3,157,500 shares of ConversionPoint’s common stock. Push Holdings wholly owns Push Interactive, LLC, a Delaware limited liability company, Comiseo LLC, a Minnesota limited liability company, and Tamble Inc., a Delaware corporation. Push Interactive, LLC, wholly owns Push Properties, LLC, a Minnesota limited liability company and Tremeta LLC, a Minnesota limited liability company. In connection with the Share Exchange Agreement, Branded Response and Push Holdings entered into a two-year Source Code License Agreement with Haig Newton and Christopher Jahnke pursuant to which Messrs. Newton and Jahnke granted ConversionPoint a worldwide, exclusive, fully-paid royalty free license for the source code developed by the subsidiaries of Push Holdings, Inc., which underlies certain of ConversionPoint’s software solutions.

On December 1, 2017, ConversionPoint acquired SellPoints, a Delaware corporation, through a reverse triangular merger, pursuant to which SellPoints became ConversionPoint’s wholly-owned subsidiary, and the stockholders of SellPoints became stockholders of ConversionPoint. The purchase price was $17,291,818, calculated based on the fair value of the ConversionPoint common stock delivered in connection with the purchase. As a result of the closing of the merger, ConversionPoint issued (1) 1,302,230 shares of common stock to the former stockholders of SellPoints, (2) 260,051 shares of common stock to certain bridge note holders of SellPoints, (3) 19,111 shares of common stock to the secured lenders of SellPoints, and (4) 296,133 shares of common stock was placed in escrow to satisfy certain indemnification claims and other obligations under the merger agreement, of which 162,071 remains in escrow.

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Warrant Cancellations

On October 31, 2018, ConversionPoint entered into agreements with each of Messrs. Newton, Jahnke, Peschong, Thomsen, Marks and Kilambi and with Hybrid Theory Capital, Ltd., a company controlled by Mr. Tallack, whereby warrants to purchase an aggregate of 2,900,000 shares of ConversionPoint common stock held by such warrant holders were voluntarily cancelled in order to obtain an acceptable capitalization of ConversionPoint in connection with the mergers.

RSU Grants

On August 30, 2018, ConversionPoint issued restricted stock units covering an aggregate of 234,000 shares of ConversionPoint common stock to certain executive officers. On October 31, 2018, ConversionPoint issued an aggregate of 694,893 RSUs to certain executive officers and employees.

Employment Agreements

ConversionPoint has entered into an employment agreement with each of Messrs. Tallack, Janke, Kilambi, Marks, Peschong and Newton, providing for, without limitation, certain payments upon termination. See “Executive Director Compensation—ConversionPoint—Executive Employment Agreements” in this prospectus for a further discussion of these agreements.

Loans to ConversionPoint

On January 1, 2019, in exchange for a $100,000 loan made by each of Christopher Jahnke, a director and Chief Marketing Officer of ConversionPoint, and Robert Tallack, a director and Chief Executive Officer of ConversionPoint, ConversionPoint issued a $100,000 Subordinated Unsecured Promissory Note to each of Messrs. Jahnke and Tallack. On January 8, 2019, in exchange for a $50,000 loan received from Haig Newton, a director and Chief Technology Officer of ConversionPoint, ConversionPoint issued a $50,000 Subordinated Unsecured Promissory Note to Mr. Newton. Each of the notes accrue interest at a rate of 8% per annum, are subordinated to amounts due to Montage Capital II, L.P. and Partners for Growth IV, L.P under the Loan and Security Agreement between ConversionPoint, its subsidiaries and such lenders and is due and payable in full within 30 days after the date on which all amounts are repaid under such Loan and Security Agreement.

Inuvo

The following is a summary of transactions since January 1, 2017 to which Inuvo has been a participant, in which:

	·	the amount involved exceeded or will exceed $120,000; and

	·	any of Inuvo’s directors, executive officers, or holders of more than 5% of its voting securities, or immediate family member or affiliate of such persons, had or will have a direct or indirect material interest, other than compensation and other arrangements that are described under “Executive Director Compensation—Inuvo—Executive Employment Agreements” beginning on page 101.

In April 2013, Inuvo entered into a Services Agreement with First Orion Corp. whereby Inuvo and First Orion Corp., provided each other with office and technical support services on a cost plus 30% basis. The fees under the Services Agreement fluctuated depending on usage and in 2018 and 2017, Inuvo received a total of $31,500 and $117,385, respectively from First Orion Corp. for providing services.

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On November 2, 2018, Inuvo entered into certain 10% Promissory Notes with members of the Inuvo board, wherein Messrs. Howe, Morgan, Burnett and Cameron each lent Inuvo $62,500 for an aggregate of $250,000. Inuvo used the proceeds from the notes to cover a portion of the costs associated with the mergers. The notes are unsecured, bear interest at 10% per annum, and the principal and accrued interest is due on November 1, 2019, subject to acceleration upon an “Event of Default” or “Change of Control” (as those terms are defined in the notes). Inuvo’s obligations under the notes are subordinate to Inuvo’s obligations to Western Alliance Bank, a secured lender of Inuvo, and to holders of Inuvo’s subordinated promissory notes issued to CPT Investments, LLC.

Indemnification of Officers and Directors

Our certificate of incorporation and our bylaws provide that we will indemnify our directors and officers with respect to certain liabilities, expenses and other accounts imposed upon them because of having been a director or officer, except in the case of willful misconduct or a knowing violation of criminal law. See “Description of Capital Stock–Limitation on Liability and Indemnification of Directors and Officers” on page 128 of this prospectus.

Policies and Procedures for Related Person Transactions

Our board of directors will adopt a written policy with respect to related person transactions, which will become effective at the time of this offering. This policy will govern the review, approval or ratification of covered related person transactions. The audit committee of our board of directors will manage this policy.

For purposes of the policy, a “related person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we were, are or will be a participant, and the amount involved exceeds the applicable dollar threshold set forth under Item 404 of Regulation S-K and in which any related person had, has or will have a direct or indirect material interest. As defined in Item 404 of Regulation S-K, “related person” generally includes our directors (and director nominees), executive officers, holders of more than 5% of our voting securities, and immediate family members or affiliates of such persons.

The policy will generally provide that we may enter into a related person transaction only if:

the audit committee pre-approves such transaction in accordance with the guidelines set forth in the policy,

the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party and the audit committee (or the chairperson of the audit committee) approves or ratifies such transaction in accordance with the guidelines set forth in the policy,

the transaction is approved by the disinterested members of the board of directors, or

the transaction involves compensation approved by the compensation committee of the board of directors.

In the event a related person transaction is not pre-approved by the audit committee and our management determines to recommend such related person transaction to the audit committee, such transaction must be reviewed by the audit committee. After review, the audit committee will approve or disapprove such transaction. If our Chief Executive Officer, in consultation with our audit committee, determines that it is not practicable or desirable for us to wait until the next audit committee meeting, the chairperson of the audit committee will possess delegated authority to act on behalf of the audit committee. The audit committee (or the chairperson of the audit committee) may approve only those related person transactions that are in, or not inconsistent with, our best interests and the best interests of our stockholders, as the audit committee (or the chairperson of the audit committee) determines in good faith. All approvals made by chairperson of the audit committee will be ratified by the full audit committee at the next regularly scheduled meeting or within 120 days from approval by chairperson.

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We expect that our audit committee will determine that that the following transactions, even if the amount exceeds the applicable dollar threshold set forth under Item 404 of Regulation S-K in the aggregate, will be deemed to be pre-approved by the audit committee:

any employment of certain named executive officers that would be publicly disclosed;

director compensation that would be publicly disclosed;

transactions with other companies where the related person’s only relationship is as a director or owner of less than ten percent of such company (other than a general partnership), if the aggregate amount involved does not exceed the greater of $200,000 or five percent of that company’s consolidated gross revenues;

transactions where all stockholders receive proportional benefits;

transactions involving competitive bids;

transactions with a related person involving the rendering of services at rates or charges fixed in conformity with law or governmental authority; and

transactions with a related person involving services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture or similar services.

In addition, the audit committee will review the policy at least annually and recommend amendments to the policy to the board of directors from time to time.

The policy will provide that all related person transactions will be disclosed to the audit committee, and all material related person transactions will be disclosed to the board of directors. Additionally, all related person transactions requiring public disclosure will be properly disclosed, as applicable, on our various public filings.

The audit committee will review all relevant information available to it about the related person transaction. The policy will provide that the audit committee may approve or ratify the related person transaction only if the audit committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our best interests and the best interests of our stockholders. The policy will also provide that the audit committee may, in its sole discretion, impose such conditions as it deems appropriate on us or the related person in connection with approval of the related person transaction.

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Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information on a pro forma basis after taking into account the closing of the mergers regarding beneficial ownership of our common stock as of , 2019 by:

each person, or group of affiliated persons, known by us who will beneficially own more than 5% of our shares of common stock;

each of our directors and director nominees;

each of our named executive officers; and

all of our directors, director nominees and executive officers as a group.

The table is based on information provided to us by our directors, director nominees, executive officers and principal stockholders and our expectations as to ownership of our common stock by the holders of common stock of ConversionPoint and Inuvo at the closing of the mergers. Beneficial ownership is determined in accordance with the rules of the SEC, and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, including stock options and warrants that are exercisable within 60 days of , 2019. To our knowledge, except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Shares of common stock underlying derivative securities, if any, that are currently exercisable or exercisable within 60 days after , 2019 are deemed to be outstanding in calculating the percentage ownership of the applicable person or group, but are not deemed to be outstanding as to any other person or group.

For purposes of computing percentage ownership after our initial public offering, we have assumed that shares of our common stock will be issued by us in our initial public offering. The table below assumes that the initial public offering price for shares of our common stock to be sold in this offering is $ per share, which is the midpoint of the range on the front cover of this prospectus. The precise holdings of shares of our common stock by particular existing owners after the offering would differ from that presented in the table below if the actual initial public offering price per share differs from the assumed price.

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o ConversionPoint Holdings, Inc., 840 Newport Center Drive, Suite 450, Newport Beach, California 92660.

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Shares of Common Stock
Beneficially Owned Prior
to the Offering

Shares of Common
Stock Beneficially
Owned After the
Offering

Name and Address of Beneficial Owner

Number

Percentage (1)

Number (2)

Percentage (3)

Directors, Director Nominees and Named Executive Officers

Robert Tallack (4)

Raghu Kilambi (4)

Don Walker “Trey” Barrett, III (4)

Tom Furakawa (4)

Jonathan Gregg (4)

Richard Howe (4)

Gordon Cameron (4)

Greater than 5% stockholders

All directors and executive officers as a group (7 persons)

Less than 1%.

(1)

Percentage of beneficial ownership prior to the offering is based on shares of common stock to be outstanding as of the closings of the mergers.

(2)

Assumes no purchase of shares of common stock in this offering by our directors, executive officers and greater than 5% stockholders.

(3)

Percentage of beneficial ownership after the offering is based on shares of common stock, consisting of shares of common stock outstanding as of the closings of the mergers and an assumed shares of our common stock that will be issued by us in this offering. The percentage of shares beneficially owned after the offering assumes no exercise of the underwriters’ option to purchase additional shares of our common stock.

(4)

Messrs. Tallack and Kilambi are directors of ConversionPoint Holdings. Messrs. Howe and Cameron are director nominees of ConversionPoint Holdings and are expected to become directors upon the effectiveness of this offering. Messrs. Barrett, Furakawa and Gregg are expected to become executive officers of ConversionPoint Holdings upon the effectiveness of this offering.

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Description of Capital Stock

The following description summarizes the most important terms of our capital stock, as they are expected to be in effect upon the consummation of this offering. We are incorporated in the State of Delaware. This summary does not purport to be complete and is qualified in its entirety by the provisions of our certificate of incorporation and bylaws, copies of which have been filed with the SEC as exhibits to the registration statement of which this prospectus is a part, and to the applicable provisions of Delaware law.

Authorized Capital Stock

We are authorized to issue up to 90,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred stock, $0.0001 par value per share. As of the date of this prospectus, we have 1,000 shares of common stock issued and outstanding to our current parent, ConversionPoint. These shares will be canceled upon consummation of the mergers.

Common Stock

The following summarizes the rights of holders of our common stock:

each holder of common stock is entitled to one vote per share on all matters to be voted upon generally by the stockholders;

subject to preferences that may apply to shares of preferred stock that may be issued and outstanding, the holders of common stock are entitled to receive lawful dividends as may be declared by our board of directors;

upon our liquidation, dissolution or winding up, the holders of our shares of common stock and non-voting common stock are entitled to receive a pro rata portion of all of our assets remaining for distribution after satisfaction of all its liabilities and the payment of any liquidation preference of any then outstanding preferred stock;

there are no redemption or sinking fund provisions applicable to our common stock; and

there are no preemptive or conversion rights applicable to our common stock.

As of the closings of the mergers, there is expected to be shares of common stock issued and outstanding and there is expected to be holders of record of our common stock.

Preferred Stock

Our board of directors is authorized to issue from time to time, in one or more designated series, any or all of our authorized but unissued shares of preferred stock with dividend, redemption, conversion, exchange, voting and other provisions as may be provided in that particular series. The issuance need not be approved by our common stockholders.

The rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. Issuance of a new series of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of entrenching our board of directors and making it more difficult for a third party to acquire, or discourage a third party from acquiring, a majority of our outstanding voting stock.

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Anti-Takeover Effects of Delaware Law and our Certificate of Incorporation and Bylaws

A number of provisions of Delaware law, our certificate of incorporation and our bylaws contain provisions that could have the effect of delaying, deferring and discouraging another party from acquiring control of us. These provisions, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of ConversionPoint Holdings to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire ConversionPoint Holdings because negotiation of these proposals could result in an improvement of their terms.

Undesignated Preferred Stock

The ability to authorize undesignated preferred stock will make it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of ConversionPoint Holdings.

Delaware Anti-Takeover Statute

We are subject to the provisions of Section 203 of the DGCL, which we refer to as Section 203, regulating corporate takeovers. In general, Section 203 prohibits a publicly-held Delaware corporation from engaging, under specified circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:

prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares of voting stock outstanding (but not the outstanding voting stock owned by the stockholder) (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66-2/3% of the outstanding voting stock that is not owned by the interested stockholder.

Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting securities. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

The provisions of Delaware law, our certificate of incorporation and our bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

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Board Vacancies; Removal

Our bylaws provide that any vacancy occurring on our board of directors may be filled by a majority of directors then in office, even if less than a quorum. Our certificate of incorporation provides that directors may be removed only for cause by affirmative vote of the holders of a majority of the voting power of the outstanding shares of common stock entitled to vote. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of board, may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum. In addition, the number of directors constituting our board of directors will be permitted to be set only by a resolution adopted by our board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This makes it more difficult to change the composition of our board of directors but promotes continuity of management.

Special Meetings of Stockholders

Our bylaws provide that only our board of directors may call a special meeting, and that stockholders may only conduct business at special meetings of stockholders that was specified in the notice of the meeting. This provision will limit the ability of a stockholder to call a special meeting of the stockholders.

Exclusive Forum

Limitation on Liability and Indemnification of Directors and Officers

Our certificate of incorporation contains provisions that eliminate, to the maximum extent permitted by the General Corporation Law of the State of Delaware, or the DGCL, the personal liability of our directors and executive officers for monetary damages for breach of their fiduciary duties as directors or officers. Our certificate of incorporation and bylaws provide that we must indemnify our directors and executive officers and may indemnify our employees and other agents to the fullest extent permitted by the DGCL.

Sections 145(a) and 102(b)(7) of the DGCL empowers a corporation to indemnify any director, officer, employee or agent, or former director, officer, employee or agent, who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of such person’s service as a director, officer, employee or agent of the corporation, or such person’s service, at the corporation’s request, as a director, officer, employee or agent of another corporation or enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding; provided that such director, officer employee or agent acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation; and, with respect to any criminal action or proceeding, provided that such director, officer employee or agent had no reasonable cause to believe his conduct was unlawful.

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Section 145(b) of the DGCL empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit; provided that such director, officer, employee or agent acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such director, officer, employee or agent shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such director, officer, employee or agent is fairly and reasonably entitled to indemnity for such expenses that the court shall deem proper.

Prior to the completion of this offering, we will enter into indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our certificate of incorporation and bylaws, and we intend to enter into indemnification agreements with any new directors and executive officers in the future.

Prior to the completion of this offering, we will purchase and we currently intend to maintain directors’ and officers’ liability insurance.

Qualification and Election of Directors

Our bylaws provide that to be eligible to be a nominee for election to our board of directors, a person must submit a written questionnaire regarding his or her background and qualifications and must agree to other representations as set forth in our bylaws. In addition, we have adopted a director resignation policy. The director resignation policy is incorporated into our bylaws and will be incorporated in our Corporate Governance Guidelines and provides that any nominee for director in an uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” his or her election must tender his or her resignation to the board of directors for consideration in accordance with the procedures set forth in our Corporate Governance Guidelines. The Nominating and Corporate Governance Committee will then evaluate the best interests of our company and our stockholders and will recommend to the board of directors the action to be taken with respect to the tendered resignation. Following the board of directors’ determination, we will promptly publicly disclose the board of directors’ decision of whether or not to accept the resignation and an explanation of how the decision was reached, including, if applicable, the reasons for rejecting the resignation.

Listing

There is currently no established public trading market for our common stock, and a liquid public trading market for our common stock may not develop or be sustained after this offering. We have applied to have our shares of common stock listed for trading on The NASDAQ Capital Market under the symbol “CPTI.” No assurance can be given that such listing will be approved.

Transfer Agent

Colonial Stock Transfer Co., Inc. will serve as transfer agent and registrar for our common stock.

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Shares Eligible for Future Sale

Immediately prior to this offering, there has been no established public trading market for our common stock, and a liquid public trading market for our common stock may not develop or be sustained after this offering. Future sales of significant amounts of our common stock, including shares issued under our 2018 Plan, in the public market after this offering, or the anticipation of those sales, could adversely affect the public market prices prevailing from time to time and could impair our ability to raise capital through sales of our equity securities. We have applied to have our shares of common stock listed for trading on The NASDAQ Capital Market under the symbol “CPTI.” No assurance can be given that such listing will be approved.

Based on shares of common stock outstanding as of the completion of the mergers, after giving effect to the issuance of the shares of our common stock offered in this offering, we will have outstanding an aggregate of shares of common stock (or shares of common stock if the underwriters exercise in full their option to purchase additional shares of our common stock). Also, upon completion of this offering, shares of our common stock will be issuable upon the exercise of outstanding options and warrants.

The shares of common stock sold by us in this offering (or shares if the underwriters exercise in full their option to purchase additional shares of our common stock) will be freely tradable without further restriction or registration under the Securities Act, except that any shares purchased by our “affiliates,” as defined in Rule 144 under the Securities Act, or Rule 144, may generally only be sold in compliance with Rule 144, which is described below.

Of the remaining shares of common stock, shares will not be “restricted securities,” and shares will be deemed “restricted securities,” as defined in Rule 144. Restricted securities may be sold in the public market only if they qualify for an exemption from registration under Rule 144 or any other applicable exemption.

Rule 144

All shares of our common stock held by our “affiliates,” as that term is defined in Rule 144, generally may be sold in the public market only in compliance with Rule 144. Rule 144 defines an affiliate as any person who directly or indirectly controls, or is controlled by, or is under common control with, the issuer, which generally includes our directors, executive officers, 10% stockholders and certain other related persons.

Under Rule 144, a person (or persons whose shares are aggregated) who is deemed to be an “affiliate” of ours would be entitled to sell within any three-month period a number of shares of our common stock that does not exceed the greater of (i) 1% of the then outstanding shares of our capital stock, or (ii) an amount equal to the average weekly trading volume of our common stock on The NASDAQ Capital Market during the four calendar weeks preceding such sale. Sales under Rule 144 are also subject to a six-month holding period and requirements relating to manner of sale, notice and the availability of current public information about us.

Rule 144 also provides that a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has for at least six months beneficially owned shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock without regard to the limitations described above, subject to our compliance with Exchange Act reporting obligations for at least 90 days prior to the sale, and provided that such sales comply with the current public information requirements of Rule 144. A person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned for at least one year shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock under Rule 144 without regard to the current public information requirements of Rule 144, subject to our compliance with Exchange Act reporting obligations for at least 90 days prior to the sale.

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Rule 701

In general, under Rule 701 under the Securities Act, any of an issuer’s employees, directors, officers, consultants or advisors who purchases shares from the issuer in connection with a compensatory stock or option plan or other written agreement before the effective date of a registration statement under the Securities Act is entitled to sell such shares 90 days after the effective date of the registration statement in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period restriction, contained in Rule 144.

Lock-up Agreements

We, all of our directors and officers have agreed not to sell or otherwise transfer or dispose of any common stock for a period of days from the date of this prospectus. See “Underwriting” for a description of these lock-up provisions.

Registration Statement on Form S-8

We intend to file with the SEC a registration statement on Form S-8 covering the shares of common stock reserved for issuance under the 2018 Plan. That registration statement is expected to be filed and become effective as soon as practicable after the closing of this offering. Upon effectiveness, the shares of common stock covered by that registration statement will be eligible for sale in the public market, subject to the lock-up agreements and Rule 144 restrictions described above.

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Underwriting

Pursuant to an underwriting agreement we entered into with the underwriters named below, Oppenheimer & Co. Inc. is acting as the representative of the underwriters.

The underwriting agreement provides for the purchase of a specific number of common stock by each of the underwriters. The underwriters’ obligations are several, which means that each underwriter is required to purchase a specified number of common stock, but is not responsible for the commitment of any other underwriter to purchase common stock. Subject to the terms and conditions of the underwriting agreement, each underwriter has severally agreed to purchase the number of common stock set forth opposite its name below:

Underwriter		Number of Common Stock
Oppenheimer & Co. Inc.
GMP Securities L.P.
Total

Our common stock will be offered in the United States through those underwriters who are registered to offer the common stock for sale in the United States which, in the case of GMP Securities L.P., will be through its affiliate, Griffiths McBurney Corp., a U.S.-registered broker-dealer.

The underwriters have agreed to purchase all of the common stock offered by this prospectus (other than those covered by the option to purchase additional shares described below), if any are purchased. The common stock offered hereby are expected to be ready for delivery on or about , 2019 against payment in immediately available funds.

The underwriters are offering the common stock subject to various conditions and may reject all or part of any order. The representative of the underwriters has advised us that the underwriters propose initially to offer the common stock to the public at the public offering price set forth on the cover page of this prospectus and to dealers at a price less a concession not in excess of $ per share of common stock to brokers and dealers. After the common stock are released for sale to the public, the representative may change the offering price, the concession, and other selling terms at various times.

Prior to this offering, there has not been a public market for our common stock. Consequently, the initial public offering price for our common stock will be determined by negotiations between us and the representative. Among the factors to be considered in these negotiations will be prevailing market conditions, our financial information, market valuations of other companies that we and the international underwriters believe to be comparable to us, estimates of our business potential, the present state of our development and other factors deemed relevant. There can be no assurance that the initial public offering price of the common stock will correspond to the price at which the common stock will trade in the public market subsequent to the offering or that an active public market for the common stock will develop and continue after the offering.

We have applied to list our common stock on the NASDAQ Capital Market under the symbol “CPTI.”

We have granted the underwriters an option to purchase additional shares of common stock. This option, which is exercisable for up to 30 days after the date of this prospectus, permits the underwriters to purchase a maximum of additional shares of common stock from us. If the underwriters exercise all or part of this option, they will purchase common stock covered by the option at the public offering price that appears on the cover page of this prospectus, less the underwriting discounts and commissions. If this option is exercised in full, the total price to public will be $ , and the total proceeds to us, before expenses, will be $ million.

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The following table provides information regarding the amount of the discounts and commissions to be paid to the underwriters by us, before expenses:

Per
Share of
Common Stock

Total Without
Exercise of
Option to
Purchase
Additional
Shares

Total With Full
Exercise of
Option to
Purchase
Additional
Shares

Public offering price

Underwriting discounts and commissions

Proceeds, before expenses, to us

We estimate that our total expenses of the offering, excluding the estimated underwriting discounts and commissions, will be approximately $ . We have agreed to reimburse the underwriters for expenses related to this offering, including the underwriters’ reasonable out-of-pocket costs and expenses incident to the performance of its obligations under the underwriting agreement (including, without limitation, the reasonable fees and expenses of the underwriters’ outside counsel).

We have also agreed pursuant to an engagement letter between us and Oppenheimer & Co. Inc., to provide Oppenheimer & Co. Inc. a right of first refusal during the term of the engagement letter and for a period of 12 months following the termination of the engagement letter, to be retained by us, subject to certain limitations, to provide services with respect to certain of our future acquisitions, corporate transactions and offerings and financings.

Further, subject to certain conditions and exceptions, we have agreed pursuant to an engagement letter between us and GMP Securities L.P., to provide GMP Securities L.P. with a right of first offer to, until 12 months after the date of closing of this offering, (i) act as lead agent or underwriter for any Canadian (or any Canadian component of an equity offering conducted primarily outside of Canada) equity offering by us, or (ii) review any offer from a third party proposing to serve as financial advisor, lead manager or placement agent in connection with a company financing and to accept such engagement.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933.

We and the holders of substantially all of our common stock outstanding on the date of this prospectus, including each of our executive officers and directors, have agreed to a 180-day “lock-up” with respect to our common stock and other of our securities that they beneficially own, including securities that are convertible into common stock and securities that are exchangeable or exercisable for common stock. This means that, subject to certain exceptions, for a period of 180 days following the date of this prospectus, we and such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written consent of Oppenheimer & Co. Inc.

Rules of the Securities and Exchange Commission may limit the ability of the underwriters to bid for or purchase our common stock before the distribution is completed. However, the underwriters may engage in the following activities in accordance with the rules:

Stabilizing transactions — The representative may make bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, so long as stabilizing bids do not exceed a specified maximum.

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Over-allotments and syndicate covering transactions — The underwriters may sell more common stock in connection with this offering than the number of shares of common stock that they have committed to purchase. This over-allotment creates a short position for the underwriters. This short sales position may involve either “covered” short sales or “naked” short sales. Covered short sales are short sales made in an amount not greater than the underwriters’ over-allotment option to purchase additional common stock in this offering described above. The underwriters may close out any covered short position either by exercising its over-allotment option or by purchasing common stock in the open market. To determine how they will close the covered short position, the underwriters will consider, among other things, the price per share of common stock available for purchase in the open market, as compared to the price at which they may purchase common stock through the over-allotment option. Naked short sales are short sales in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing common stock in the open market. A naked short position is more likely to be created if the underwriters are concerned that, in the open market after pricing, there may be downward pressure on the price per share of common stock that could adversely affect investors who purchase common stock in this offering.

Penalty bids — If the representative purchases common stock in the open market in a stabilizing transaction or syndicate covering transaction, it may reclaim a selling concession from the underwriters and selling group members who sold those common stock as part of this offering.

Passive market making — Market makers in the common stock who are underwriters or prospective underwriters may make bids for or purchases of common stock, subject to limitations, until the time, if ever, at which a stabilizing bid is made.

Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales or to stabilize the market price of our common stock may have the effect of raising or maintaining the market price of our common stock or preventing or mitigating a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. The imposition of a penalty bid might also have an effect on the price of the common stock if it discourages resales of our common stock.

Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions may occur on Nasdaq or otherwise. If such transactions are commenced, they may be discontinued without notice at any time.

Electronic Delivery of Preliminary Prospectus

A prospectus in electronic format may be delivered to potential investors by one or more of the underwriters participating in this offering. The prospectus in electronic format will be identical to the paper version of such prospectus. Other than the prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part.

Other Activities and Relationships

The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for us and our affiliates, for which they received or will receive customary fees and expenses. In the ordinary course of their various business activities, the underwriters and certain of their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments issued by us and our affiliates. The underwriters and certain of their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

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Selling Restrictions

European Economic Area

In relation to each member state of the European Economic Area, no offer of shares which are the subject of the offering has been, or will be made to the public in that Member State, other than under the following exemptions under the Prospectus Directive:

(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(b) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the representatives for any such offer; or

provided that no such offer of shares referred to in (a) to (c) above shall result in a requirement for the Company or any representative to publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

Each person located in a Member State to whom any offer of shares is made or who receives any communication in respect of an offer of shares, or who initially acquires any shares will be deemed to have represented, warranted, acknowledged and agreed to and with each representative and the Company that (1) it is a “qualified investor” within the meaning of the law in that Member State implementing Article 2(1)(e) of the Prospectus Directive; and (2) in the case of any shares acquired by it as a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, the shares acquired by it in the offer have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Member State other than qualified investors, as that term is defined in the Prospectus Directive, or in circumstances in which the prior consent of the representative has been given to the offer or resale; or where shares have been acquired by it on behalf of persons in any Member State other than qualified investors, the offer of those shares to it is not treated under the Prospectus Directive as having been made to such persons.

We, the representative and their respective affiliates will rely upon the truth and accuracy of the foregoing representations, acknowledgments and agreements.

This prospectus has been prepared on the basis that any offer of shares in any Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending to make an offer in that Member State of shares which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for us or the representative to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither we nor the representative have authorized, nor do they authorize, the making of any offer of shares in circumstances in which an obligation arises for us or the representative to publish a prospectus for such offer.

For the purposes of this provision, the expression an “offer of shares to the public” in relation to any ordinary shares in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the ordinary shares to be offered so as to enable an investor to decide to purchase or subscribe the ordinary shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (as amended) and includes any relevant implementing measure in each Member State.

The above selling restriction is in addition to any other selling restrictions set out below.

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Notice to Prospective Investors in Canada

This document constitutes an “exempt offering document” as defined in and for the purposes of applicable Canadian securities laws. No prospectus has been filed with any securities commission or similar regulatory authority in Canada in connection with the offer and sale of the securities described herein, or the Securities. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this document or on the merits of the Securities and any representation to the contrary is an offence.

Canadian investors are advised that this document has been prepared in reliance on section 3A.3 of National Instrument 33-105 Underwriting Conflicts, or NI 33-105. Pursuant to section 3A.3 of NI 33-105, this document is exempt from the requirement to provide investors with certain conflicts of interest disclosure pertaining to “connected issuer” and/or “related issuer” relationships as would otherwise be required pursuant to subsection 2.1(1) of NI 33-105.

Resale Restrictions

The offer and sale of the securities in Canada is being made on a private placement basis only and is exempt from the requirement to prepare and file a prospectus under applicable Canadian securities laws. Any resale of Securities acquired by a Canadian investor in this offering must be made in accordance with applicable Canadian securities laws, which may vary depending on the relevant jurisdiction, and which may require resales to be made in accordance with Canadian prospectus requirements, a statutory exemption from the prospectus requirements, in a transaction exempt from the prospectus requirements or otherwise under a discretionary exemption from the prospectus requirements granted by the applicable local Canadian securities regulatory authority. These resale restrictions may under certain circumstances apply to resales of the securities outside of Canada.

Representations of Purchasers

Each Canadian investor who purchases the securities will be deemed to have represented to the issuer and to each dealer from whom a purchase confirmation is received, as applicable, that the investor (i) is purchasing as principal, or is deemed to be purchasing as principal in accordance with applicable Canadian securities laws, for investment only and not with a view to resale or redistribution; (ii) is an “accredited investor” as such term is defined in section 1.1 of National Instrument 45-106 Prospectus Exemptions, or NI 45-106, or, in Ontario, as such term is defined in section 73.3(1) of the Securities Act (Ontario); and (iii) is a “permitted client” as such term is defined in section 1.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.

Taxation and Eligibility for Investment

Any discussion of taxation and related matters contained in this document does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a Canadian investor when deciding to purchase the securities and, in particular, does not address any Canadian tax considerations. No representation or warranty is hereby made as to the tax consequences to a resident, or deemed resident, of Canada of an investment in the securities or with respect to the eligibility of the securities for investment by such investor under relevant Canadian federal and provincial legislation and regulations.

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Rights of Action for Damages or Rescission

Securities legislation in certain of the Canadian jurisdictions provides certain purchasers of securities pursuant to an offering memorandum, including where the distribution involves an “eligible foreign security” as such term is defined in Ontario Securities Commission Rule 45-501 Ontario Prospectus and Registration Exemptions and in Multilateral Instrument 45-107 Listing Representation and Statutory Rights of Action Disclosure Exemptions, as applicable, with a remedy for damages or rescission, or both, in addition to any other rights they may have at law, where the offering memorandum, or other offering document that constitutes an offering memorandum, and any amendment thereto, contains a “misrepresentation” as defined under applicable Canadian securities laws. These remedies, or notice with respect to these remedies, must be exercised or delivered, as the case may be, by the purchaser within the time limits prescribed under, and are subject to limitations and defences under, applicable Canadian securities legislation. In addition, these remedies are in addition to and without derogation from any other right or remedy available at law to the investor. Canadian investors should refer to the applicable provisions of the securities legislation of such investors’ province or territory for particulars of these rights or consult a legal advisor.

Language of Documents

Upon receipt of this document, each Canadian investor hereby confirms that it has expressly requested that all documents evidencing or relating in any way to the sale of the securities described herein (including for greater certainty any purchase confirmation or any notice) be drawn up in the English language only. Par la réception de ce document, chaque investisseur canadien confirme par les présentes qu’il a expressément exigé que tous les documents faisant foi ou se rapportant de quelque manière que ce soit à la vente des valeurs mobilières décrites aux présentes (incluant, pour plus de certitude, toute confirmation d’achat ou tout avis) soient rédigés en anglais seulement.

Notice to Investors in Israel

This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel Securities Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the shares is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals,” each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors will be required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.

Notice to Prospective Investors in Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, ConversionPoint Holdings, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

Notice to Prospective Investors in the United Kingdom

In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order, and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.

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Legal Matters

The validity of the shares of common stock offered by this prospectus will be passed upon for us by Troutman Sanders LLP, Irvine, California. Certain legal matters in connection with this offering will be passed upon for the underwriters by White & Case LLP, New York, New York.

Experts

The consolidated financial statements of ConversionPoint Technologies, Inc. as of December 31, 2018, 2017 and 2016, for the years ended December 31, 2018 and 2017 and for the period from May 20, 2016 through December 31, 2016 appearing in this registration statement have been audited by Squar Milner LLP, as stated in their report appearing elsewhere in the registration statement (which report expresses an unqualified opinion on the financial statements and an explanatory paragraph relating to the Company’s ability to continue as a going concern as described in Note 2 to the 2018 consolidated financial statements), and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

The consolidated financial statements of Inuvo as of December 31, 2018, 2017 and 2016 appearing in this registration statement have been audited by Mayer Hoffman McCann P.C., as stated in their report appearing elsewhere in the registration statement (which report expresses an unqualified opinion on the financial statements), and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

The finalized statements of SellPoints, Inc. as of November 30, 2017 and December 31, 2016, and the related statements of operations, stockholders’ deficit and cash flows for the period from January 1, 2017 through November 30, 2017, and for the year ended December 31, 2016 have been so included in reliance upon the reports of Frank Rimerman & Co., LLP, as stated in their report offering election in the registration statement (which report expresses an unqualified opinion on the financial statements), and are included in reliance upon such report and upon the authority of such firm as experts in accounting and auditing.

Where You Can Find More Information

This prospectus, which constitutes a part of the registration statement on Form S-1 filed with the SEC, does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. Accordingly, we refer you to the registration statement, including the exhibits and schedules thereto, for further information about us and the shares of common stock to be sold in this offering. Statements or summaries in this prospectus as to the contents of any contract or other document referred to in this prospectus are not necessarily complete and, where that contract or document is filed as an exhibit to the Registration Statement, each statement or summary is qualified in all respects by reference to the exhibit to which the reference relates. Our filings with the SEC, including the registration statement, are also available to you for free on the SEC’s internet website at www.sec.gov.

Upon completion of this offering, we will become subject to the informational and reporting requirements of the Exchange Act and, in accordance with those requirements, will file periodic reports, proxy and information statements and other information with the SEC. You will be able to inspect and copy these periodic reports, proxy and information statements and other information at the addresses set forth above. In addition, you will be able to request a copy of any of our periodic reports filed with the SEC at no cost, by writing or telephoning us at the following address:

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Investor Relations

ConversionPoint Holdings, Inc.

840 Newport Coast Drive, Suite 450

Newport Beach, California 92660

(888) 706-6764

We also currently intend to maintain an internet website at www.conversionpoint.com following the completion of this offering. Information contained on or accessible through our website is not part of this prospectus.

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INDEX TO FINANCIAL STATEMENTS

ConversionPoint Holdings, Inc.

Report of Independent Registered Public Accounting Firm		F-3

Consolidated Balance Sheet		F-5

Notes to Consolidated Balance Sheet		F-6

ConversionPoint Technologies Inc.

Report of Independent Registered Public Accounting Firm		F-8

Consolidated Balance Sheets as of December 31, 2018 and 2017		F-9

Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017		F-10

Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2018 and 2017		F-11

Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017		F-12

Notes to Consolidated Financial Statements, December 31, 2018 and 2017		F-14

SellPoints, Inc.

Independent Auditor’s Report		F-41

Balance Sheets, November 30, 2017 and December 31, 2016		F-43

Statements of Operations for the Year Ended December 31, 2016 and for the Period from January 1, 2017 through November 30, 2017		F-44

Statements of Stockholders’ Deficit, Period from January 1, 2017 through November 30, 2017 and Year Ended December 31, 2016		F-45

Statements of Cash Flows		F-46

Notes to Financial Statements for the Year Ended December 31, 2016 and for the Period from January 1, 2017 through November 30, 2017		F-48

Push Holdings, Inc.

Independent Auditor’s Report		F-76

Consolidated Balance Sheets as of April 28, 2017 and December 31, 2016		F-78

Consolidated Statements of Operations for the Period from January 1, 2017 through April 28, 2017 and the Year Ended December 31, 2016		F-79

Consolidated Statements of Stockholders’ Equity (Deficit) for the Period from January 1, 2017 through April 28, 2017 and the Year Ended December 31, 2016		F-80

Consolidated Statements of Cash Flows for the Period from January 1, 2017 through April 28, 2017 and the Year Ended December 31, 2016		F-81

Notes to Consolidated Financial Statements for the Period from January 1, 2017 through April 28, 2017 and the Year Ended December 31, 2016		F-82

Inuvo, Inc.

Report of Independent Registered Public Accounting Firm		F-92

F-1

Consolidated Balance Sheets for the Years Ended December 31, 2018 and 2017		F-93

Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017		F-94

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018 and 2017		F-95

Consolidated Statements of Cash Flows for the Years Ended December 31, 2018 and 2017		F-96

Notes to Consolidated Financial Statements for the Years Ended December 31, 2018 and 2017		F-97

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder

ConversionPoint Holdings, Inc.

Opinion on the Financial Statement

We have audited the accompanying consolidated balance sheet of ConversionPoint Holdings, Inc. (the “Company”) as of December 31, 2018 and the related notes to the financial statement (collectively, the financial statement). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Other Matter

The accompanying financial statement has been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statement, the Company does not have any sources of cash and does not have any operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters, which include raising additional capital through an initial public offering, among other plans, are also described in Note 2. The financial statement does not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

Basis for Opinion

The financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

F-3

Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.

SQUAR MILNER LLP

/s/ Squar Milner LLP

We have served as the Company’s auditor since its creation in 2018, in addition we have served as ConversionPoint Technologies, Inc.’s auditor since 2017.

Irvine, California

April 12, 2019

F-4

CONVERSIONPOINT HOLDINGS, INC.

CONSOLIDATED BALANCE SHEET

December 31, 2018

ASSETS
Due from related party	$	0.10
Total assets	$	0.10
STOCKHOLDER’S EQUITY
Stockholder’s Equity
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued or outstanding	$	–
Common stock, $0.0001 par value; 90,000,000 shares authorized; 1,000 shares issued and outstanding		0.10
Total stockholder’s equity	$	0.10

The accompanying notes are an integral part of this consolidated financial statement.

F-5

CONVERSIONPOINT HOLDINGS, INC.

NOTES TO CONSOLIDATED BALANCE SHEET

December 31, 2018

ORGANIZATION AND NATURE OF THE BUSINESS

ConversionPoint Holdings Inc., (the “Company”) a Delaware corporation, was incorporated on November 2, 2018 (“Inception”). At inception, the Company issued 1000 shares of its common stock to the sole stockholder, ConversionPoint Technologies Inc. (“ConversionPoint”) thereby becoming a wholly owned subsidiary of ConversionPoint. The Company was incorporated to facilitate the merger agreement (the “Merger”) between ConversionPoint and Inuvo, Inc., a public company in the United States (“Inuvo”). The Company has filed registration statements on Form S-1 and Form S-4 with the SEC in the United States. The Form S-4, which includes a preliminary joint proxy statement/prospectus with Inuvo, was declared effective by the SEC on April 9, 2019. The Form S-1 had not become effective as of April 12, 2019. As of December 31, 2018 and for the period from Inception through December 31, 2018, the Company did not have any operations.

The Merger provides, by its terms and subject to the conditions thereof, for two separate mergers involving ConversionPoint and Inuvo, respectively. First, CPT Merger Sub, Inc. (“CPT Merger Sub”), a wholly owned subsidiary of the Company, will merge with and into ConversionPoint, with ConversionPoint surviving the merger as a wholly owned subsidiary of the Company. Second, simultaneously with the consummation of the ConversionPoint merger, the Merger provides for the merger of CPT Cigar Merger Sub, Inc. (“Inuvo Merger Sub”), another wholly owned subsidiary of the Company, with and into Inuvo, with Inuvo surviving the merger as a wholly owned subsidiary of the Company. As a result of such mergers, both of the surviving entities, ConversionPoint and Inuvo, will become wholly owned subsidiaries of the Company. It is a condition to the mergers, among other conditions as specified in the merger agreement, that the Company’s common stock be approved for listing on (i) The NASDAQ Capital Market, subject to notice of issuance, and (ii) on the Toronto Stock Exchange (TSX), subject to standard listing conditions of the TSX. The Merger was unanimously approved by the Board of Directors of the Company, ConversionPoint, Inuvo, CPT Merger Sub, and Inuvo Merger Sub.

The Company’s activities to date have focused primarily on completing the merger between ConversionPoint and Inuvo and raising equity capital through an Initial Public Offering (“IPO”). The Company is required to raise a minimum of $36,000,000 in order to close the Merger. If the aforementioned Form S-1 does not go effective, the affirmative vote of the required percentage of stockholders of both entities approving the mergers is not received, or if the Company does not raise a minimum of $36,000,000, the Company may be dissolved or liquidated.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statement has been prepared on an accrual basis of accounting in accordance with United States Generally Accepted Accounting Principles (“GAAP”), as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”).

F-6

CONVERSIONPOINT HOLDINGS, INC.

NOTES TO CONSOLIDATED BALANCE SHEET

December 31, 2018

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Principles of Consolidation

The consolidated balance sheet includes the accounts of ConversionPoint Holdings, Inc. and its wholly owned subsidiaries, CPT Merger Sub and Inuvo Merger Sub. Material intercompany balances and transactions have been eliminated in consolidation.

Going Concern and Management’s Plans

The Company does not have any sources of cash, does not have any operations and was incorporated exclusively to facilitate the Merger, which raises substantial doubt about its ability to continue as a going concern.

The Company’s management is primarily focused on completing the Merger and raising the minimum capital required to complete the Merger through an IPO. While management believes it will complete the Merger and raise the minimum capital required to complete the Merger though an IPO, there can be no assurance that the Merger will be completed.

The financial statement does not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates under different assumptions or circumstances.

RELATED PARTY TRANSACTIONS

ConversionPoint has incurred legal and other costs/expenses relating to the Merger, the IPO and the aforementioned SEC filings on the Company’s behalf. As of December 31, 2018, such costs and expenses approximated $748,000. Because other entities are responsible for such expenses and costs unless and until the Company’s Form S-1 registration statement becomes effective, the minimum offering amount is raised, and the other conditions set forth in the Merger agreement (as described in the aforementioned S-4 filing) are satisfied, these transactions have not been reflected in the accompanying balance sheet.

Additionally, the Company issued common stock to ConversionPoint for a nominal amount, which has not been paid and as such, has been presented as “Due from related party” in the accompanying consolidated balance sheet.

SUBSEQUENT EVENTS

The Company evaluated events subsequent to December 31, 2018 for their potential impact on the financial statement and disclosures through the date these financial statements were available to be issued.

Subsequent to December 31, 2018, costs related to the Merger and IPO (See Note 3) totaling approximately $262,000 were incurred by ConversionPoint on behalf of the Company.

F-7

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

ConversionPoint Technologies Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of ConversionPoint Technologies Inc. (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Other Matter

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company incurred a significant loss from operations in 2018, has negative operating cash flows, and has a significant accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters, which include raising additional capital through an initial public offering, among other plans, are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Squar Milner LLP

We have served as the Company’s auditor since 2017.

Irvine, California

March 15, 2019

F-8

CONVERSIONPOINT TECHNOLOGIES INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2018 and 2017

	2018			2017
ASSETS
Current Assets
Cash and cash equivalents	$	2,282,526		$	4,695,803
Accounts receivable, net		4,904,667			4,737,663
Inventory		129,853			251,435
Prepaid expenses and other current assets		530,561			369,044
Total current assets		7,847,607			10,053,945
Property and Equipment, net (Note 4)		602,270			84,863
Other assets (Note 5)		159,812			391,653
Due from related party		–			80,763
Intangible Assets, net (Note 6)		16,428,127			20,476,475
Goodwill (Note 3)		23,923,248			24,348,248

Total assets	$	48,961,064		$	55,435,947

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities
Accounts payable	$	2,834,098		$	2,651,796
Accrued expenses and other current liabilities (Note 7)		3,151,216			2,991,916
Deferred revenue		1,198,324			435,502
Notes payable, current portion (Note 8)		1,829,004			3,883,000
Bridge notes payable (Note 8)		2,395,000			2,902,060
Convertible notes payable (Note 9)		125,000			–
Notes payable – related party (Note 15)		425,000			–
Loan payable (Note 8)		79,498			144,213
Total current liabilities		12,037,140			13,008,487
Deferred tax liability		–			277,380
Notes payable (Note 8)		914,494			–
Convertible notes payable (Note 9)		–			3,816,850
Notes payable – related party (Note 15)		–			425,000
Convertible notes payable – related party (Note 9)		–			50,000
Total liabilities		12,951,634			17,577,717
Commitments and contingencies (Note 13)
Stockholders’ Equity
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued or outstanding		–			–
Common stock, $0.0001 par value; 100,000,000 shares authorized; 14,993,995 and 12,619,472 issued and outstanding as of December 31, 2018 and 2017, respectively		1,500			1,263
Additional-paid-in-capital		70,376,360			38,985,904	)
Accumulated deficit		(34,368,430	)		(1,128,937	)
Total stockholders’ equity		36,009,430			37,858,230	)

Total liabilities and stockholders’ equity (deficit)	$	48,961,064		$	55,435,947

The accompanying notes are an integral part of these consolidated financial statements.

F-9

CONVERSIONPOINT TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2018 and 2017

	2018			2017

NET REVENUES	$	39,780,941		$	49,920,621

COST OF REVENUES		29,898,887			37,776,678

GROSS PROFIT		9,882,054			12,143,943

OPERATING EXPENSES:
Sales and marketing		2,920,030			4,298,412
General and administrative		28,721.023			5,776,332
Amortization of intangibles		4,483,121			1,278,344
Total operating expenses		36,124,174			11,353,088

(LOSS) INCOME FROM OPERATIONS		(26,242,120	)		790,855

INTEREST EXPENSE:
Debt conversion to equity discount		4,360,929			–
Warrants issued to debt holders		1,494,308			–
Interest expense – stated rate		1,450,855			829,169
Total interest expense, net		7,306,092			829,169

ConversionPoint Holdings, Inc. S-1