Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Vertro, Inc. (1094808) 10-Q published on Nov 09, 2011 at 4:05 pm
Reporting Period: Sep 29, 2011
On October 27, 2011, a complaint was filed in the Supreme Court of the State of New York, County of New York against us, our directors, Inuvo, Inc. and Anhinga Merger Subsidiary, Inc. on behalf of a putative class of similarly situated investors. A second complaint, also purportedly brought on behalf of a class of investors, was filed on November 3, 2011, against these same defendants in the Court of Chancery for the State of Delaware. The plaintiffs in both suits allege that our Board of Directors breached their fiduciary duties regarding the contemplated transaction with Inuvo (the “Merger”) and that Vertro, Inuvo, and Anhinga Merger Subsidiary aided and abetted the alleged breach of fiduciary duties. The plaintiffs ask that the Merger be enjoined and seek other unspecified monetary relief.
While total revenue declined during the three month and nine month periods due to factors affecting the user base of ALOT products in aggregate, we experienced improvement in per-user attrition and revenue performance for new distribution during the quarter. These improvements related to the release of a new version of the ALOT Homepage product that produced faster response times for users globally, and we believe positively impact the expected Lifetime Value of users acquired in the quarter.
Variances for the three months and nine months ended September 30, 2011 and 2010, respectively, were primarily due to challenges we experienced in achieving cost effective distribution of our ALOT products as we were unable to acquire our targeted number of users at our desired prices. However, during the three months ended September 30, 2011, the roll out of our new Homepage product began to show significant increases in expected lifetime values per user over recent trends. Based on these expected lifetime values, we continued to spend throughout the whole quarter under the assumption that most of the benefits of this spend would be received over the lifetime values of the users in subsequent quarters. Customer acquisition costs are recognized in the period in which they are spent, but the users monetize over a lifetime longer than the current period.
The merger will not be completed unless all of the conditions to the merger have been satisfied or, if permissible, waived. We cannot predict what the effect on the market price of our shares of common stock would be if the merger is not completed, but depending on market conditions at the time, it could result in a decline in market price. A substantial delay in completing the merger due to litigation that has been instituted regarding the merger or the need to satisfy the conditions to closing the merger, or the imposition of any unfavorable terms, conditions, or restrictions in obtaining a waiver to such conditions or otherwise, could have a material adverse effect on the anticipated benefits of, or increase the costs associated with or delay the cost savings anticipated from, the merger, thereby impacting the business, financial condition, or results of operations of the combined company after the merger. In addition, we are subject to restrictions on the operation of our business while the merger is pending, which could impair our ability to operate our businesses and prevent us from pursuing attractive business opportunities that may arise prior to the completion of the merger. Any of these situations could also result in a decline in the market price of our common stock. Also, the uncertainty regarding whether the merger will be completed (including uncertainty regarding whether the conditions to closing will be met) could impact our relationships with our employees, suppliers and partners. These restrictions and uncertainties could have an adverse impact on our business, financial condition, or results of operations and could result in a decline in the market price of our common stock or an increase in the volatility of these market prices.
The success of the merger will depend, in large part, on the ability of the combined company following the completion of the merger to realize the anticipated benefits from combining the businesses of Inuvo and Vertro. The failure to integrate successfully and to manage successfully the challenges presented by the integration process may result in the combined company's failure to achieve some or all of the anticipated benefits of the merger. Potential difficulties that may be encountered in the integration process include the following: