What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-04 · 221 added, 258 removed, 519 unchanged (48% of the section changed)

2 unchanged sentences

(Amounts in thousands, except share and per share data)

September 30, 2021

March 31, 2022

December 31, 2021

9 unchanged sentences

107,200  

Restricted cash

Property and equipment, net

29 unchanged sentences

104,772  

Contingencies (see Note 10)

Contingencies (Note 10)

Shareholders' equity:

8 unchanged sentences

and Shares outstanding —

78,928,638 and 76,349,274 , respectively

79,683,435 and 78,965,260 , respectively (Note 7)

Treasury stock, at cost —

4,089,780 and 3,945,867 Shares, respectively

4,300,152 and 4,091,823 Shares, respectively (Note 7)

( 11,171 )  

13 unchanged sentences

(Amounts in thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Costs and expenses:

4 unchanged sentences

Depreciation and amortization

Goodwill impairment and write-off of intangible assets

Write-off of intangible assets

Total costs and expenses

(Loss) income from operations

Loss from operations

Interest expense, net

Loss on early extinguishment of debt

(Loss) income before income taxes

Income tax benefit (expense)

Net (loss) income

Basic and diluted (loss) income per share:

Loss before income taxes

Income tax benefit

Basic and diluted loss per share:

Weighted average number of shares outstanding:

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Amounts in thousands, except share data)

(Amounts in thousands, except share and per share data)

Treasury stock

1 unchanged sentence

Total shareholders'

Balance at June 30, 2021

Vesting of restricted stock units and issuance of stock under incentive plans

Increase in treasury stock resulting from shares withheld to cover statutory taxes

Exercise of stock options

Share-based compensation

Balance at September 30, 2021

Balance at December 31, 2021

1 unchanged sentence

Increase in treasury stock resulting from shares withheld to cover statutory taxes

Exercise of stock options

Share-based compensation

Balance at September 30, 2021

Balance at March 31, 2022

Treasury stock

1 unchanged sentence

Total shareholders'

Balance at June 30, 2020

Vesting of restricted stock units and issuance of restricted stock

Increase in treasury stock resulting from shares withheld to cover statutory taxes

Exercise of warrants by certain warrant holders (see Note 7)

Share-based compensation

Balance at September 30, 2020

Balance at December 31, 2020

Vesting of restricted stock units and issuance of restricted stock

Vesting of restricted stock units and issuance of stock under incentive plans

Increase in treasury stock resulting from shares withheld to cover statutory taxes

Repurchase of shares into treasury stock

Exercise of warrants by certain warrant holders (see Note 7)

Exercise of stock options

Share-based compensation

Balance at September 30, 2020

Balance at March 31, 2021

See notes to consolidated financial statements

1 unchanged sentence

(Amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

$ ( 2,013 )  

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

3 unchanged sentences

Non-cash accrued compensation expense for Put/Call Consideration

Non-cash termination of Put/Call Consideration

Goodwill impairment

Write-off of intangible assets

Provision for bad debt

Provision for income taxes

Changes in assets and liabilities, net of business acquisition:

2 unchanged sentences

Other non-current assets

( 13 )  

Operating lease assets and liabilities, net

( 42 )  

Accounts payable

( 3,348 )  

Accrued expenses and other current liabilities

( 6,251 )  

Deferred revenue

( 174 )  

( 85 )  

Net cash (used in) provided by operating activities

( 1,776 )  

CASH FLOWS FROM INVESTING ACTIVITIES:

Capitalized costs included in intangible assets

( 1,071 )  

Business acquisition, net of cash acquired

( 971 )  

Acquisition of property and equipment

Net cash used in investing activities

( 2,049 )  

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of long-term debt, net of debt financing costs

49,624  

Repayments of long-term debt

( 1,250 )  

Exercise of stock options

1 unchanged sentence

Taxes paid related to net share settlement of vesting of restricted stock units

Proceeds from the issuance of stock

Repurchase of treasury stock

Net cash provided by (used in) financing activities

Net decrease in cash, cash equivalents and restricted cash

( 448 )  

Net cash (used in) provided by financing activities

( 1,698 )  

Net (decrease) increase in cash, cash equivalents and restricted cash

( 5,523 )  

11,573  

Cash, cash equivalents and restricted cash at beginning of period

34,467  

22,567  

Cash, cash equivalents and restricted cash at end of period

$ 28,944  

$ 34,140  

SUPPLEMENTAL DISCLOSURE INFORMATION

2 unchanged sentences

Share-based compensation capitalized in intangible assets

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Liability incurred for deferred payment in connection with True North acquisition

Contingent consideration in connection with True North acquisition

Equity issued in connection with True North acquisition

See notes to consolidated financial statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share data)

(Amounts in thousands, except share and per share data)

Summary of significant accounting policies

2 unchanged sentences

Certain information and note disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to those rules and regulations.

The accompanying unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for any future interim periods or for the full year ending December 31, 2021 .

and 2021, but are not necessarily indicative of the results of operations to be anticipated for any future interim periods or for the full year ending December 31, 2022 .

From time to time, the Company may enter into relationships or investments with other entities, and, in certain instances, the entity in which the Company has a relationship or investment may qualify as a variable interest entity (“VIE”).

13 unchanged sentences

(b) Recently issued and adopted accounting standards

In January 2016, FASB issued ASU No.

2016 - 13, Financial Instruments—Credit Losses, and additional changes, modifications, clarifications or interpretations thereafter, which require a reporting entity to estimate credit losses on certain types of financial instruments, and present assets held at amortized cost and available-for-sale debt securities at the amounts expected to be collected.

In January 2016, Financial Accounting Standards Board ("FASB") issued Accounting Standards Updates ("ASU") No.

2016 - 13, Financial Instruments—Credit Losses ("Topic 326" ) , and additional changes, modifications, clarifications or interpretations thereafter, which require a reporting entity to estimate credit losses on certain types of financial instruments, and present assets held at amortized cost and available-for-sale debt securities at the amounts expected to be collected.

The new guidance is effective for annual and interim periods beginning after December 15, 2022 , and early adoption is permitted.

The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020 - 04, Reference Rate Reform (Topic 848 ):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides optional guidance to ease the potential burden in accounting for the discontinuation of a reference rate such as LIBOR, formerly known as the London Interbank Offered Rate, because of reference rate reform.

The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020 - 04, Reference Rate Reform :

Facilitation of the Effects of Reference Rate Reform on Financial Reporting 

("Topic 848" ), which provides optional guidance to ease the potential burden in accounting for the discontinuation of a reference rate such as LIBOR, formerly known as the London Interbank Offered Rate, because of reference rate reform.

The ASU is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.

On January 1, 2021, FASB issued ASU 2019 - 12, Simplifying  

Accounting  

Income  

Taxes , which simplifies the accounting for income taxes by removing certain exceptions and improving the application of existing guidance.

The new guidance is effective for annual and interim periods beginning  after December 15, 2020.The adoption of ASU 2019 - 12  on January 1, 2021 did not have a material effect on our consolidated financial statements.

The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and does not anticipate having material impact.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share and per share data)

Revenue is recognized when control of goods or services is transferred to customers, in amounts that reflect the consideration the Company expects to be entitled to in exchange for those goods or services.

The Company's performance obligation is typically to (a) deliver data records, based on predefined qualifying characteristics specified by the customer, (b) generate conversions, based on predefined user actions (for example, a click, a registration or the installation of an app) and subject to certain qualifying characteristics specified by the customer, (c) verify user interest or transfer calls to advertiser clients as a part of the contact center operation, or (d) deliver media spend as a part of the AdParlor business.

On January 1, 2018, we adopted and started applying the practical expedient offered under FASB Accounting Standards Codification ("ASC"), Revenue from Contracts with Customers, 

("Topic 606" ),  

which permits, under ASC 606 - 10 - 55 - 18 revenue to be recognized when control of goods or services is transferred to customers, in amounts that reflect the consideration the Company expects to be entitled to in exchange for those goods or services.

If a customer pays consideration before the Company's performance obligations are satisfied, such amounts are classified as deferred revenue on the consolidated balance sheets.

September 30, 2021 and December 31, 2020 , the balance of deferred revenue was $ 722 and $ 1,373 , respectively.

March 31, 2022 and

December 31, 2021 , the balance of deferred revenue was 

$ 651 , respectively.

The majority of the deferred revenue balance as of 

December 31, 2020 was recognized into revenue during the first quarter of 2021 .

December 31, 2021 was recognized into revenue during the

first quarter of

When there is a delay between the period in which revenue is recognized and when a customer invoice is issued, revenue is recognized, and the related amounts are recorded as unbilled revenue within accounts receivable on the consolidated balance sheets.

September 30, 2021 and December 31, 2020 , unbilled revenue included in accounts receivable was $ 27,692 and $ 28,337 , respectively.

March 31, 2022 and December 31, 2021 , unbilled revenue included in accounts receivable was $ 29,958 and $ 31,842 , respectively.

In line with industry practice, the unbilled revenue balance is recorded based on the Company's internally tracked conversions, net of estimated variances between this amount and the amount tracked and subsequently confirmed by customers.

1 unchanged sentence

Historical estimates related to unbilled revenue have not been materially different from actual revenue billed.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share data)

(d) Use of estimates

3 unchanged sentences

Actual results could differ from these estimates.

(Loss) income per share

Basic (loss) income per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period, in addition to restricted stock units ("RSUs") and restricted common stock that are vested but not delivered.

Diluted (loss) income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock are exercised or converted into common stock and is calculated using the treasury stock method for stock options, restricted stock units, restricted stock, warrants and deferred common stock.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share and per share data)

Loss per share

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, in addition to restricted stock units ("RSUs") and restricted common stock that are vested but not delivered.

Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock are exercised or converted into common stock and is calculated using the treasury stock method for stock options, restricted stock units, restricted stock, warrants and deferred common stock.

Common equivalent shares are excluded from the calculation in loss periods, as their effects would be anti-dilutive.

For the 

nine months ended September 30, 2021 and 2020 , basic and diluted (loss) income per share was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Net (loss) income

$ ( 2,452 )  

$ 1,169  

$ ( 13,889 )  

three months ended March 31, 2022 and 2021 , basic and diluted loss per share was as follows:

Three Months Ended March 31,

$ ( 2,013 )  

2 unchanged sentences

79,608,513  

77,866,621  

76,111,405  

Weighted average restricted shares vested not delivered

1 unchanged sentence

2,284,080  

1,887,041  

2,452,857  

Total basic weighted average shares outstanding

1 unchanged sentence

81,892,593  

79,753,662  

78,564,262  

Dilutive effect of assumed conversion of restricted stock units

594,604  

650,357  

Total diluted weighted average shares outstanding

1 unchanged sentence

81,892,593  

79,753,662  

79,214,619  

Basic and diluted (loss) income per share:

$ ( 0.03 )  

$ 0.01  

$ ( 0.17 )  

$ 0.03  

$ ( 0.03 )  

$ 0.01  

Basic and diluted loss per share:

$ ( 0.02 )  

The following potentially dilutive securities were excluded from the calculation of diluted (loss) income per share, as their effects would have been anti-dilutive for the periods presented:

Three Months Ended September 30,

Nine Months Ended September 30,

Based upon exercise prices to the average stock prices for the three months ended March 31, 2022 and 2021, certain stock equivalents, including stock options and warrants, have been excluded from diluted weighted average share calculations due to their anti-dilutive nature.

Three Months Ended March 31,

Restricted stock units

1 unchanged sentence

3,042,873  

2,814,788  

1,639,561  

Stock options

3 unchanged sentences

833,333  

Total anti-dilutive securities

1 unchanged sentence

6,080,206  

5,852,121  

4,981,894  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share data)

(Amounts in thousands, except share and per share data)

Intangible assets, net

1 unchanged sentence

Amortization period (in years)

September 30, 2021

March 31, 2022

December 31, 2021

2 unchanged sentences

$ 10,603  

$ 7,376  

Acquired proprietary technology

36 unchanged sentences

10,433  

11,095  

13,501  

Total intangible assets, net

1 unchanged sentence

$ 35,747  

The gross amounts associated with software developed for internal use primarily represent capitalized costs of internally developed software.

The amounts relating to acquired proprietary technology, customer relationships, trade names, domain names, databases and non-competition agreements primarily represent the fair values of intangible assets acquired as a result of the acquisition of Fluent, LLC, effective December 8, 2015 ( the "Fluent LLC Acquisition"), the acquisition of Q Interactive, LLC, effective June 8, 2016 ( the "Q Interactive Acquisition"), the acquisition of substantially all the assets of AdParlor, 

Holdings, Inc.

and certain of its affiliates , effective July 1, 2019 ( the "AdParlor Acquisition"), and the acquisition of a 50 % interest in Winopoly (the "Initial Winopoly Acquisition"), effective April 1, 2020 ( see Note  

and certain of its affiliates , effective July 1, 2019 ( the "AdParlor Acquisition"), the acquisition of a 50 % interest in Winopoly (the "Initial Winopoly Acquisition"), effective April 1, 2020 ( see Note  

Business acquisition ), and the acquisition of 100 % interest in True North Loyalty, LLC.

(the "True North Acquisition"), effective January 1, 2022 ( see Note 11 , Business acquisition). 

In connection with the Initial Winopoly Acquisition, the Company recorded 100 % equity ownership for GAAP purposes due to Winopoly's status as a VIE for which the Company is a primary beneficiary, so no further intangible assets were acquired in connection with the Full Winopoly Acquisition described in Note 11,  

Business acquisition.

In connection with the Initial Winopoly Acquisition, the Company recorded 100 % equity ownership for GAAP purposes, and 

no further intangible assets were acquired in connection with the Full Winopoly Acquisition described in Note  

Business acquisition . 

During the three months ended 

March 31, 2021, the Company determined that the reduction in operating results of the Fluent reporting unit, along with a decline in the market value of its publicly-traded stock, collectively constituted a triggering event. As such, the Company conducted an interim test of the recoverability of its long-lived assets. Based on the results of this recoverability test, which measured the Company's projected undiscounted cash flows as compared to the carrying value of the asset group, the Company determined that, as of 

March 31, 2021, its long-lived assets were not impaired.

Management believes that the assumptions utilized in this interim impairment testing, including the estimation of future cash flows, were reasonable. The Company completed its quarterly triggering event assessments for the three months ended June 30, 2021 and September 30, 2021 and has determined that no triggering event had occurred requiring further impairment assessments for its long lived assets.

The Company completed its quarterly triggering event assessments for the three months ended March 31, 2022 

and has determined that no triggering event had occurred requiring impairment assessments for its long-lived assets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share data)

Amortization expense of $ 3,006 and $ 3,711 for the three months ended September 30, 2021 and 2020 , respectively, and $ 9,352 and $ 10,917 , for the nine months ended 

September 30, 2021 and 2020 , respectively, is included in depreciation and amortization expenses in the consolidated statements of operations.

As of September 30, 2021 , intangible assets with a carrying amount of $ 592 , included in the gross amount of software developed for internal use, have not commenced amortization, as they are not ready for their intended use.

As of September 30, 2021 , estimated amortization expense related to the Company's intangible assets for the remainder of 2021  and through 2026 and thereafter are as follows:

September 30, 2021

(Amounts in thousands, except share and per share data)

Amortization expense of $ 3,141 and $ 3,177 for the three months ended March 31, 2022 and 2021 , respectively, is included in depreciation and amortization expenses in the consolidated statements of operations.

As of March 31, 2022 , intangible assets with a carrying amount of $ 968 , included in the gross amount of software developed for internal use, have not commenced amortization, as they are not ready for their intended use.

As of March 31, 2022 , estimated amortization expense related to the Company's intangible assets for the remainder of 2022  and through 2027  and thereafter are as follows:

March 31, 2022

Remainder of 2022

$ 7,828  

11,843  

2027 and thereafter

$ 34,938  

Goodwill represents the cost in excess of fair value of net assets acquired in a business combination.

As of September 30, 2021 , the total balance of goodwill was $ 165,088 , and relates to the acquisition of Interactive Data, LLC, the Fluent LLC Acquisition, the Q Interactive Acquisition, the AdParlor Acquisition, and the Initial Winopoly Acquisition 

Goodwill represents consideration in excess of fair value of net assets acquired in a business combination.

As of March 31, 2022 , the total balance of goodw ill was $ 166,180 , an increase of $ 1,092 from December 31, 2021, as a result of the True North Acquisition (see Note  

Business acquisition). 

The balance also r elates to the acquisition of Interactive Data, LLC, the Fluent LLC Acquisition, the Q Interactive Acquisition, the AdParlor Acquisition, and the Initial Winopoly Acquisition 

(see Note 

Business acquisition ).

In connection with the Initial Winopoly Acquisition, the Company recorded 100 % equity ownership for GAAP purposes, and 

no further goodwill was acquired in connection with the Full Winopoly Acquisition as described in Note  

Business acquisition .

In connection with the Initial Winopoly Acquisition, the Company recorded 100 % equity ownership for GAAP purposes due to Winopoly's status as aVIE for which the Company is a primary beneficiary, so no further goodwill was acquired in connection with the Full Winopoly Acquisition described in Note 11,  

Business acquisition 

In accordance with ASC 350, Intangibles - Goodwill and Other, goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value.

The measurement date of the Company's annual goodwill impairment test is October 1.

During the three months ended 

March 31, 2021, the Company determined that the reduction in operating results of the Fluent reporting unit, along with a decline in the market value of its publicly-traded stock, collectively constituted a triggering event. As such, the Company conducted an interim test of the fair value of its goodwill for potential impairment. Based on the results as of March 31, 2021, which used a combination of the income and market approaches to determine the fair value of the Fluent reporting unit, the Company concluded its goodwill of $ 160,922 was not impaired since the results of the interim test indicated that the estimated fair value exceeded its carrying value by approximately 17 %.

The Company believes that the assumptions utilized in its interim impairment testing, including the determination of an appropriate discount rate of 14.5 %, long-term profitability growth projections, and estimated future cash flows, are reasonable. The risk of future impairment of goodwill exists if actual results, such as lower than expected revenue, profitability, cash flows, market multiples, discount rates and control premiums, differ from the assumptions used in the Company's interim impairment test.

The Company completed its quarterly triggering event assessments for the three months ended June 30, 2021 and September 30, 2021 and determined no triggering event had occurred that would require further interim impairment assessments for its remaining goodwill.

However, if additional reduction in operating results or a decline in the market value of its publicly-traded stock occurs, this could result in future impairment charges.

The Company completed its quarterly triggering event assessments for the three months ended March 31, 2022 and determined no triggering event had occurred that would require interim impairment assessments for its remaining goodwill.

However, if there is a reduction in operating results or a decline in the market value of its publicly-traded stock, this could result in future impairment charges.

Long-term debt, net

Long-term debt, net, related to the Refinanced Term Loan, the New Credit Facility Term Loan, and Note Payable (each as defined below) consisted of the following:

September 30, 2021

March 31, 2022

December 31, 2021

Refinanced Term Loan due 2023 (less unamortized discount and financing costs of $0 and $2,386 , respectively)

$ 39,350  

New Credit Facility Term Loan due 2026 (less unamortized discount and financing costs of $ 853 and $ 921 , respectively)

$ 44,147  

Note Payable due 2021 (less unamortized discount of $0 and $24 , respectively)

Long-term debt, net

$ 45,329  

40,576  

Current portion of long-term debt

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share data)

(Amounts in thousands, except share and per share data)

Refinanced Term Loan

On March 31, 2021, Fluent, LLC redeemed in full $ 38,318  aggregate principal amount of its prior term loan entered into on December 8, 2015 and due March 26, 2023 ( the "Refinanced Term Loan"), prior to maturity, resulting in a loss of $ 2,964  as a cost of early extinguishment of debt.

New Credit Facility

1 unchanged sentence

and Silicon Valley Bank.

The Credit Agreement provides for a term loan in the aggregate principal amount of $ 50.0 million funded on the closing date (the “Term Loan”), along with an undrawn revolving credit facility of up to $ 15.0 million (the "Revolving Loans," and together with the Term Loan, the "New Credit Facility").

The Credit Agreement provides for a term loan in the aggregate principal amount of $ 50,000 funded on the closing date (the “Term Loan”), along with an undrawn revolving credit facility of up to $ 15,000  (the "Revolving Loans," and together with the Term Loan, the "New Credit Facility").

The proceeds of the Term Loan were used to repay all outstanding amounts under the Refinanced Term Loan, including transaction fees and expenses, and for working capital and other general corporate purposes.

1 unchanged sentence

The applicable margin is between 0.75 % and 

1.75 % for base rate borrowings and 1.75 % and 2.75 % for LIBOR rate borrowings, depending upon the Company's consolidated leverage ratio. The opening interest rate of the New Credit Facility is 2.50 % (LIBOR + 2.25 %). 

1.75 % for base rate borrowings and 1.75 % and 2.75 % for LIBOR rate borrowings, depending upon the Company's consolidated leverage ratio. The opening interest rate of the New Credit Facility was 

2.50 % (LIBOR + 2.25 %) and as of March 2022, the interest rate increased to 2.75 % (LIBOR + 2.50 %)

Borrowings under the Credit Agreement are secured by substantially all of the assets of Fluent, LLC and, subject to certain exclusions, each of its existing and future U.S.

15 unchanged sentences

Scheduled principal amortization of the Term Loan is $ 1,250  per quarter, which commenced with the fiscal quarter ended June 30, 2021. 

At September 30, 2021 , the Company was in compliance with all of the financial and other covenants under the Credit Agreement.

On July 1, 2019, in connection with the AdParlor Acquisition , the Company issued a promissory note (the "Note Payable") in the principal amount of $ 2,350 , net of discount of $ 150 from imputing interest on the non-interest-bearing note using a 4.28 % rate. The promissory note was guaranteed by the Company's subsidiary, Fluent, LLC, did not accrue interest except in the case of default, was payable in two equal installments on the first and second anniversaries of the date of closing of the acquisition and was subject to setoff in respect of certain indemnity and other matters.

 The first installment payment of $ 1,250 was made on July 1, 2020, and the second installment payment of $ 1,250 was made on July 1, 2021, in each case using cash on hand.

As of September 30, 2021 , scheduled future maturities of the Credit Agreement and Note Payable are as follows:

September 30, 2021  

At March 31, 2022 , the Company was in compliance with all of the financial and other covenants under the Credit Agreement.

Effective September 1, 2021, the Credit Agreement was amended to add Winopoly as a party to that agreement following the consummation of the Full Winopoly Acquisition which transaction is more fully described in Note 11 of this Form 

As of March 31, 2022 , scheduled future maturities of the Credit Agreement and Note Payable are as follows:

March 31, 2022  

Remainder of 2022

3 unchanged sentences

$ 45,000  

As of September 30, 2021 , the fair value of long-term debt is considered to approximate its carrying value.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share and per share data)

As of March 31, 2022 , the fair value of long-term debt is considered to approximate its carrying value.

The fair value assessment represents a Level 2 measurement.

2 unchanged sentences

The Company updates its estimated annual effective tax rate on a quarterly basis and, if the estimate changes, makes a cumulative adjustment. 

September 30, 2021 and December 31, 2020 , the Company has recorded a full valuation allowance against net deferred tax assets, and intends to continue maintaining a full valuation allowance on these net deferred tax assets until there is sufficient evidence to support the release of all or a portion of these allowances.

March 31, 2022 and December 31, 2021 , the Company has recorded a full valuation allowance against net deferred tax assets and intends to continue maintaining a full valuation allowance on these net deferred tax assets until there is sufficient evidence to support the release of all or a portion of these allowances.

Release of some or all of the valuation allowance would result in the recognition of certain deferred tax assets and an increase in deferred tax benefit for any period in which such a release may be recorded, however, the exact timing and amount of any valuation allowance release are subject to change, depending upon the level of profitability the Company is able to achieve and the net deferred tax assets available.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share data)

For the nine months ended September 30, 2021 and 2020 , the Company's effective income tax benefit rate of 0 % differed from the statutory federal income tax rate of 21 %, with such differences resulting primarily from the application of the full valuation allowance against the Company's deferred tax assets.

For the three months ended March 31, 2022 and 2021 , the Company's effective income tax benefit rate of 0 % differed from the statutory federal income tax rate of 21 %, with such differences resulting primarily from the application of the full valuation allowance against the Company's deferred tax assets.

The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances, and information available as of the reporting dates.

1 unchanged sentence

For those income tax positions where it is not more-likely-than- not that a tax benefit will be sustained, no tax benefit has been recognized in the Company's financial statements.

September 30, 2021 and December 31, 2020 , the balance of unrecognized tax benefits was $ 1,480 .

March 31, 2022 and December 31, 2021 , the balance of unrecognized tax benefits was $ 1,480 .

The unrecognized tax benefits, if recognized, would result in an increase to net operating losses that would be subject to a valuation allowance and, accordingly, result in no impact to the Company’s annual effective tax rate.

As of September 30, 2021 , the Company has not accrued any interest or penalties with respect to its uncertain tax positions.

As of March 31, 2022 , the Company has not accrued any interest or penalties with respect to its uncertain tax positions.

The Company does not anticipate a significant increase or reduction in unrecognized tax benefits within the next twelve months.

Common stock, treasury stock and warrants

September 30, 2021 and December 31, 2020 , the number of issued shares of common stock was 

March 31, 2022 and December 31, 2021 , the number of issued shares of common stock was 

83,983,587 and 83,057,083 , respectively, which included shares of treasury stock of 

4,300,152 and 4,091,823 , respectively.

For the nine months ended September 30, 2021 , the change in the number of issued shares of common stock was the result of an aggregate 

For the three months ended March 31, 2022 , the change in the number of issued shares of common stock was the result of an aggregate 

926,504 shares of common stock issued upon vesting of RSUs, including 

208,329 shares of common stock withheld to cover statutory taxes upon such vesting, which are reflected in treasury stock, as discussed below.

The change also included the exercise of 198,000 stock options by a former key executive. 

Treasury stock

September 30, 2021 and December 31, 2020 , the Company held shares of treasury stock of 4,089,780  and 3,945,867 , with a cost of $ 10,718 and $ 9,999 , respectively.

March 31, 2022 and December 31, 2021 , the Company held shares of treasury stock of 4,300,152  and 4,091,823 , with a cost of $ 11,171 and $ 10,723 , respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share and per share data)

The Company's share-based incentive plans allow employees the option to either make cash payment or forfeit shares of common stock upon vesting to satisfy federal and state statutory tax withholding obligations associated with equity awards.

The forfeited shares of common stock may be taken into treasury stock by the Company or sold on the open market.

For the nine months ended September 30, 2021 , 143,913  shares of common stock were withheld to cover statutory taxes owed by certain employees for this purpose, all of which were taken into treasury stock. See Note 8 , Share-based compensation. 

September 30, 2021 and December 31, 2020 , warrants to purchase an aggregate of 

For the three months ended March 31, 2022 , 208,329  shares of common stock were withheld to cover statutory taxes owed by certain employees for this purpose, all of which were taken into treasury stock. See Note 8 , Share-based compensation. 

March 31, 2022 and December 31, 2021 , warrants to purchase an aggregate of 

833,333 of common stock were outstanding with exercise prices ranging from $ 3.75 to $ 6.00 per share.

On July 9, 2018 the Company entered into First Amendments (the "First Amendments") to the Amendments to Warrants and Agreements to Exercise ("Amended Whitehorse Warrants") with (i) H.I.G. Whitehorse SMA ABF, L.P.

On July 9, 2018 the Company entered into the First Amendments (the "First Amendments") to the Amendments to Warrants and Agreements to Exercise ("Amended Whitehorse Warrants") with (i) H.I.G. Whitehorse SMA ABF, L.P.

regarding 

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The Company funded such purchase with cash on hand.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share data)

Share-based compensation

As of September 30, 2021 , the Company maintains two share-based incentive plans:

the Cogint, Inc.

2015 Stock Incentive Plan and the Fluent, Inc.

2018  Stock Incentive Plan (the "2018  Plan") which, combined, authorize the issuance of 

As of March 31, 2022 , the Company maintains two share-based incentive plans:

the Cogint, Inc. 

2015 Stock Incentive Plan and the Fluent, Inc.

2018  Stock Incentive Plan (the "2018 Plan") which, combined, authorize the issuance of 

21,468,344 shares of common stock.

As of September 30, 2021 , there were 

1,015,494 shares of common stock reserved for issuance under the 2018  Plan.

The primary purpose of the plans is to attract, retain, reward and motivate certain individuals by providing them with opportunities to acquire or increase their ownership interests in the Company.

As of March 31, 2022 , there were 

909,251 shares of common stock available for additional grants pursuant to the Company's equity plans.

The primary purpose of the plans is to attract, retain, reward, and motivate certain individuals by providing them with opportunities to acquire or increase their ownership interests in the Company.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share and per share data)

Stock options

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provided, that no shares will vest prior to the first anniversary of the grant date.

As of September 30, 2021 , the first condition for the stock options issued on February 1, 2019, December 20, 2019 and March 1, 2020 had been met and the second condition for the stock options issued on December 20, 2019 and March 1, 2020 had been met.

As of March 31, 2022 , the first condition for the stock options issued on February 1, 2019, December 20, 2019 and March 1, 2020 had been met and the second condition for the stock options issued on December 20, 2019 and March 1, 2020 had been met.

Any shares that remain unvested as of the fifth anniversary of the grant date will vest in full on such date.

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1.05 %  

For the nine months ended September 30, 2021 , details of stock option activity were as follows:

For the three months ended March 31, 2022 , details of stock option activity were as follows:

Number of options

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Outstanding as of December 31, 2021

2,294,000  

$ 4.34  

$ 2,256  

108,000  

$ 6.33  

( 198,000 )  

Outstanding as of September 30, 2021

2,204,000  

$ 4.41  

Options exercisable as of September 30, 2021

1,307,000  

$ 4.06  

Outstanding as of March 31, 2022

Options exercisable as of March 31, 2022

The aggregate intrinsic value amounts in the table above represent the difference between the closing price of the Company's common stock at the end of the reporting period and the corresponding exercise prices, multiplied by the number of in-the-money stock options as of the same date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share and per share data)

For the 

nine months ended September 30, 2021 , the unvested balance of options was as follows:

three months ended March 31, 2022 , the unvested balance of options was as follows:

Number of options

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$ 4.91  

108,000  

$ 6.33  

( 436,000 )  

Unvested as of September 30, 2021

Unvested as of March 31, 2022

897,000  

$ 4.91  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share data)

Compensation expense recognized for stock options of $ 105 and $ 167  for the 

three months ended September 30, 2021 and 2020 , respectively, and $ 395 and $ 1,424 for the nine months ended September 30, 2021 and 2020 , respectively, was recorded in sales and marketing, product development and general and administrative expenses in the consolidated statements of operations. As of September 30, 2021 , there was $ 230 of unrecognized share-based compensation with respect to outstanding stock options.

three months ended March 31, 2022 and 2021 , respectively, was recorded in sales and marketing, product development and general and administrative expenses in the consolidated statements of operations. As of March 31, 2022 , there was $ 20 of unrecognized share-based compensation with respect to outstanding stock options.

Restricted stock units and restricted stock

For the nine months ended September 30, 2021 , details of unvested RSU and restricted stock activity were as follows:

For the three months ended March 31, 2022 , details of unvested RSU and restricted stock activity were as follows:

Number of units

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$ 3.75  

Unvested as of September 30, 2021

Unvested as of March 31, 2022

1,985,611  

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the increase in treasury stock was due to shares withheld to cover statutory withholding taxes upon the delivery of shares following vesting of RSUs.

As of September 30, 2021 , there were 

As of March 31, 2022 , there were 

4,300,152  outstanding shares of treasury stock.

Vested not delivered represents vested RSUs with delivery deferred to a future time.

For the nine months ended September 30, 2021 , there was a net decrease of 

570,335 shares included in the vested not delivered balance as a result of the delivery of 

650,333 shares, partially offset by the vesting of 79,998 shares with deferred delivery election.

As of September 30, 2021 , 

For the three months ended March 31, 2022 , there was a net increase of 

45,731  shares included in the vested not delivered balance as a result of the timing of delivery of certain shares.

As of March 31, 2022 , 

1,737,397 outstanding RSUs were vested not delivered.

Compensation expense recognized for RSUs and restricted stock of $ 1,063  and $ 1,131  for the three months ended September 30, 2021 and 2020 , respectively, and $ 3,276  and $ 3,544 for the nine months ended September 30, 2021 and 2020 , respectively, was recorded in sales and marketing, product development and general and administrative in the consolidated statements of operations, and intangible assets in the consolidated balance sheets.

Compensation expense recognized for RSUs and restricted stock of $ 910  and $ 1,105  for the three months ended March 31, 2022 and 2021 , respectively, was recorded in sales and marketing, product development and general and administrative in the consolidated statements of operations, and intangible assets in the consolidated balance sheets.

The fair value of the RSUs and restricted stock was estimated using the closing prices of the Company's common stock on the dates of grant.

As of September 30, 2021 , unrecognized share-based compensation expense associated with the granted RSUs and stock options amounted to $ 8,716 , which is expected to be recognized over a weighted average period of 

For the three and 

nine months ended September 30, 2021 and 2020 , share-based compensation for the Company's stock option, RSU, common stock and restricted stock awards were allocated to the following accounts in the consolidated financial statements:

Three Months Ended September 30,

Nine Months Ended September 30,

As of March 31, 2022 , unrecognized share-based compensation expense associated with the granted RSUs and stock options amounted to $ 6,089 , which is expected to be recognized over a weighted average period of 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share and per share data)

For the 

three months ended March 31, 2022 and 2021 , share-based compensation for the Company's stock options, RSU's, common stock and restricted stock awards were allocated to the following accounts in the consolidated financial statements:

Three Months Ended March 31,

Sales and marketing

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$ 1,272  

$ 3,671  

$ 4,968  

On May 13, 2021, the Company's then-CEO and then-President purchased a total of 50,000 shares from the Company for cash under the 2018 Stock Incentive Plan.

The per share purchase price for each transaction was the closing price reported on Nasdaq on the date of purchase.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share data)

Segment information

The Company identifies operating segments as components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and performance assessment.

The profitability measure employed by CODM is EBITDA.

As of September 30, 2021 , the Company has two operating segments and two corresponding reporting units, “Fluent”

The profitability measure employed by CODM is earnings before interest, taxes, depreciation and amortization ("EBITDA").

As of March 31, 2022 , the Company has two operating segments and two corresponding reporting units, “Fluent”

and “All Other,”

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Summarized financial information concerning the Company's segments is shown in the following tables below:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Fluent segment revenue:

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$ 58,252  

$ 180,091  

$ 189,507  

International

25,375  

12,832  

40,041  

35,178  

Fluent segment revenue

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$ 67,542  

$ 220,132  

$ 224,685  

All Other segment revenue:

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$ 2,597  

$ 9,194  

$ 3,745  

International

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$ 2,628  

$ 9,274  

$ 4,038  

Segment EBITDA

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( 243 )  

17,768  

Depreciation and amortization

11,492  

Total (loss) income from operations

$ ( 2,047 )  

$ 2,551  

$ ( 9,086 )  

Total loss from operations

$ ( 1,629 )  

September 30,

Total assets:

6 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share data)

(Amounts in thousands, except share and per share data)

As of March 31, 2022, long-lived assets are all located in the United States.

For the three months ended 

March 31, 2022, the Company identified an international customer within the Fluent segment with revenue in the amount of $ 13,077  which represents 14.7 % of consolidated revenue.

Contingencies

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WC Docket 

 On May 6, 2021, the Company and the NY AG executed an Assurance of Discontinuance (the “AOD”) to resolve this matter. The AOD imposed injunctive provisions on the Company’s practices with regard to political advocacy campaigns, most of which the Company had already implemented, and imposed a $ 3.7 million penalty, which was in line with the Company's accrual in the prior quarter and paid in full as of June 30, 2021.

 On May 6, 2021, the Company and the NY AG executed an Assurance of Discontinuance (the “AOD”) to resolve this matter. The AOD imposed injunctive provisions on the Company’s practices with regard to political advocacy campaigns, most of which the Company had already implemented, and imposed a $ 3,700  penalty, which was in line with the Company's accrual as of March 31, 2021 

and paid in full as of June 30, 2021.

On December 13, 2018, the Company received a subpoena from the United States Department of Justice (“DOJ”) regarding the same issue. On March 12, 2020, the Company received a subpoena from the Office of the Attorney General of the District of Columbia ("DC AG") regarding the same issue.

The Company was responsive and fully cooperated with each of the DOJ and the DC AG.

The Company was responsive and fully cooperated with each of the DOJ and the DC AG. At this time, it is not possible to predict the ultimate outcome of this matter or the significance, if any, to our business, results of operations or financial position.

On June 27, 2019, as a part of two  sales and use tax audits covering the period from December 1, 2010 to November 30, 2019, the New York State Department of Taxation and Finance (the “Tax Department”) issued a letter stating its position that revenue derived from certain of the Company’s customer acquisition and list management services are subject to sales tax, as a result of being deemed information services.

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During that meeting, the Company informed the Tax Department that a majority of the Proposed Audit Adjustments was attributable to revenue derived from transfers which were either excluded resales or sourced outside of New York and renewed its challenge as to the taxability of its customer acquisition revenue.

On July 22 and 31, 2020, the Company received Notices of Determination from the Tax Department totaling $ 3.0  million, including $ 0.7 million of interest.

On October 16, 2020, the Company filed challenges to the Notices of Determination. Since June 21, 2021, the Company and the Tax Department have been participating in a conciliation conference, but the audits have not yet been resolved.

Based on the foregoing, the Company believes it is probable that a sales tax liability may result from this matter and has estimated the range of any such liability to be between $ 0.8  million and $ 3.0 million.

The Company has accrued a liability associated with these sales and use tax audits at the low end of this range.

On July 22 

and 31,  

2020, the Company received notices of determination from the Tax Department totaling $ 3.0  million, including $ 0.7 million of interest.

On October 16, 2020, the Company filed challenges to the notices of determination. On March 31, 2022, after a Conciliation Conference, the Company reached a settlement with the Tax Department for $ 1.7  million.

which was paid on April 1, 2022.

On January 28, 2020, the Company received a Civil Investigative Demand from the Federal Trade Commission (“FTC”) regarding compliance with the Federal Trade Commission Act, 15 U.S.C.

1 unchanged sentence

Part 310, as they relate to the advertising, marketing, promotion, offering for sale, or sale of rewards and other products, the transmission of commercial text messages, and/or consumer privacy or data security. The Company has been responsive and is fully cooperating with the FTC. At this time, it is not possible to predict the ultimate outcome of this matter or the significance, if any, to the Company’s business, results of operations or financial position.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share and per share data)

On October 6, 2020, the Company received notice from the Pennsylvania Office of the Attorney General (“PA OAG”) that it was reviewing the Company’s business practices for compliance under the Unfair Trade Practices and Consumer Protection Law, 73 P.S.

1 unchanged sentence

the Telemarketer Registration Act, 73 P.S.

, and the Telemarketing Sales Rule, 16 C.F.R.

 The Company has been responsive and is fully cooperating with the PA OAG.

("PA TSR"), and the Telemarketing Sales Rule, 16 C.F.R.

310 et seq ("TSR"). The Company has been responsive and is fully cooperating with the PA OAG.

On February 14, 2022, the PA OAG sent a letter in which it asserted that the Company's lead generation practices violate the PA TSR, the PA UTP and the TSR.

The Company disputes the PA OAG's assertions and believes its lead generation practices are compliant. 

At this time, it is not possible to predict the ultimate outcome of this matter or the significance, if any, to the Company’s business, results of operations or financial position

Business acquisition

True North acquisition

January 1, 2022 ,  the Company acquired a 

100 % membership interest in True North Loyalty, LLC (the "True North Acquisition") for a deemed purchase price of $ 2,321 , which consisted of $ 1,000  of cash at closing, $ 860 of deferred payments due at both the first and second anniversary of the closing adjusted for net-working capital, and contingent consideration with a fair value at the closing of $ 250 , payable in common stock based upon the achievement of specified revenue targets over the 

five -year period following the completion of the acquisition.

The Company also issued 

100,000  shares of fully vested stock under the Fluent, Inc. 

2018  Stock Incentive Plan to the sellers valued at $ 211 .

Certain seller parties entered into employment and non-competition agreements with Company in connection with the True North Acquisition.

True North Loyalty, LLC is a subscription-based business that utilizes call center operations and other media channels to market recurring revenue services to consumers.

In accordance with ASC 

805,  the Company determined that the True North Acquisition constituted the purchase of a business. For the three months ended March 31, 2022 ,  the Company incurred transaction-related expenses of  

$ 20 and $ 125 of compensation expense related to non-compete agreements in connection with the acquisition, which are recorded as part of general and administrative expenses in the consolidated statements of operations. Assets and revenues of True North Loyalty, LLC totaled 

0.7 % and 

1.5 % , respectively, of the Company's consolidated financial statements at and for the three months ended 

March 31, 2022 

and are included in the Fluent operating segment.

January 1, 2022, it was determined to use the excess earnings method, a variation of the income approach, to amortize:

(i) the fair value of the acquired customer relationships related to subscribers of $ 170 over a period of 

one  year and (ii) the fair value of the acquired customer relationships related to call centers of $ 1,180 , over a period of 

five  years. The amount of the purchase price in excess of the fair value of the net assets acquired was recorded as goodwill in the amount of $ 1,092  and primarily relates to intangible assets that do 

not  qualify for separate recognition, including assembled workforce and synergies.

For tax purposes, the goodwill is not deductible.

Below is a summary of the purchase price allocation of the True North acquisition:

Accounts receivable, net  

Prepaid expenses and other current assets  

Intangible assets:

Customer list  

Developed technology  

Goodwill  

Other non-current assets  

Liabilities assumed  

Consideration transferred $ 2,321

Certain fair values may be estimated at the acquisition date pending confirmation or completion of the valuation process.

Where provisional values are used in accounting for a business combination, they may be adjusted retrospectively in subsequent periods, not to exceed one year from the acquisition date.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share and per share data)

Winopoly acquisition

6 unchanged sentences

The amount of the purchase price in excess of the fair value of the net assets acquired was recorded as goodwill in the amount of $ 1,131 and primarily relates to intangible assets that do not qualify for separate recognition, including assembled workforce and synergies.

In connection with the Initial Winopoly Acquisition, the Company had recorded 100 % equity ownership for GAAP purposes. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share data)

In connection with the Initial Winopoly Acquisition, the Company had recorded 100 % equity ownership for GAAP purposes due to Winopoly's status as VIE for which the Company is a primary beneficiary.

In connection with the Initial Winopoly Acquisition, at any time between the fourth and sixth anniversary of the Initial Winopoly Acquisition, the sellers had the ability to exercise a put option to require the Company to acquire the remaining 50 % membership interests in Winopoly.

7 unchanged sentences

2018 Stock Incentive Plan to certain Winopoly personnel valued at $ 1,360 .

Certain seller parties entered into employment and non-competition agreements with Company in connection with the Full Winopoly Acquisition.

As a result, the Put/Call Consideration was terminated, partially offsetting the consideration paid in the Full Winopoly Acquisition, resulting in a net expense of $ 2,796 on the date of the Full Winopoly Acquisition which was recorded as general and administrative and product development expenses.

For the nine months ended September 30, 2021, the Company incurred transaction related costs of $ 28 in connection with the Full Winopoly Acquisition which are also recorded as general and administrative expenses.

Certain seller parties entered into employment and non-competition agreements with the Company in connection with the Full Winopoly Acquisition.

As a result, the Put/Call Consideration was terminated, partially offsetting the consideration paid in the Full Winopoly Acquisition, resulting in a net expense of $ 3,201  on the date of the Full Winopoly Acquisition which was recorded as general and administrative and product development expenses.

For the year ended December 31, 2021, the Company incurred transaction-related costs of $ 28 in connection with the Full Winopoly Acquisition which are also recorded as general and administrative expenses.

Although the sellers maintained an equity interest in Winopoly through August 31, 2021, the Company had deemed this equity interest to be non-substantive in nature, as the sellers would primarily benefit from the Initial Winopoly Acquisition based on periodic distributions of the earnings of Winopoly and the Put/Call Consideration, both of which were dependent on the sellers' continued service.

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In addition, the Company had estimated the amount of the Put/Call Consideration, which was accreted over the six -year estimated service period, consisted of the estimated four years until the put/call could be exercised and the additional two -year service requirement.

For the three and 

nine months ended September 30, 2021 , compensation expense of $ 586  and $ 3,213 , respectively, and for the three and 

nine months ended September 30, 2020  compensation expense of $ 654 and $ 1,184 , respectively, related to the Put/Call Consideration were recorded in general and administrative on the consolidated statement of operations, which had a corresponding liability in other non-current liabilities on the consolidated balance sheet.

For the 

three months ended March 31, 2021, compensation expense of $ 1,746  related to the Put/Call Consideration were recorded in general and administrative on the consolidated statement of operations, which had a corresponding liability in other non-current liabilities on the consolidated balance sheet.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands, except share and per share data)

Variable Interest Entity

The Company determined that, following the Initial Winopoly Acquisition, Winopoly qualified as a VIE for which the Company was a primary beneficiary (as discussed in Note 11 , Business acquisition ).

The Company determined that, following the Initial Winopoly Acquisition, Winopoly qualified as a VIE for which the Company was a primary beneficiary (see Note 11 , Business acquisition ).

A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest. The primary beneficiary is the party that has the power to direct activities that most significantly impact the operations of the VIE and has the obligation to absorb losses or the right to benefits from the VIE that could potentially be significant to the VIE.

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On September 1, 2021, the Company completed the Full Winopoly Acquisition and Winopoly's status as a VIE terminated (see Note 3 , Intangible assets, net , Note 4 , Goodwill and Note 11 , Business acquisition).

 Related party transactions

During the three and 

nine months ended September 30, 2021 , the Company recognized revenue from a client in which the then-CEO holds a significant ownership interest.

Accounts receivable for this client were $ 0 and $ 137 as of September 

30, 2021 and December 31, 2020, respectively. For the three and 

nine months ended September 30, 2021 , the Company recognized revenue from this client of $ 0 and $ 33 , respectively, and for the three and nine months ended September 

30, 2020, the Company recognized revenue from this client of $ 69 and $ 214 , respectively. In accordance with the Company's policies and procedures for determining allowances for doubtful accounts and write-offs, the Company wrote-off the outstanding accounts receivable from this client as of June 30, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements