What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-10 · 345 added, 155 removed, 585 unchanged (46% of the section changed)

2 unchanged sentences

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

March 31, 2022

June 30, 2022

December 31, 2021

69 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

$ 98,361  

$ 73,378  

$ 187,424  

$ 143,548  

Costs and expenses:

Cost of revenue (exclusive of depreciation and amortization)

70,026  

56,605  

137,589  

107,595  

Sales and marketing

1 unchanged sentence

General and administrative

11,688  

11,527  

22,975  

23,226  

Depreciation and amortization

Write-off of intangible assets

Goodwill impairment and write-off of intangible assets  

55,400  

55,528  

Loss on disposal of property and equipment

Total costs and expenses

149,753  

78,130  

240,445  

150,587  

Loss from operations

( 51,392 )  

( 4,752 )  

( 53,021 )  

Interest expense, net

( 430 )  

( 427 )  

( 814 )  

Loss on early extinguishment of debt

Loss before income taxes

Income tax benefit

( 51,822 )  

( 5,179 )  

( 53,835 )  

Income tax (expense) benefit

( 5,122 )  

$ ( 56,944 )  

$ ( 5,179 )  

$ ( 58,957 )  

Basic and diluted loss per share:

$ ( 0.70 )  

$ ( 0.06 )  

$ ( 0.73 )  

$ ( 0.70 )  

$ ( 0.06 )  

$ ( 0.73 )  

Weighted average number of shares outstanding:

81,493,821  

79,962,275  

81,193,107  

79,560,643  

81,493,821  

79,962,275  

81,193,107  

79,560,643  

See notes to consolidated financial statements

4 unchanged sentences

Total shareholders'

Balance at March 31, 2022

83,983,587  

4,300,152  

$ ( 11,171 )  

$ 420,285  

$ ( 196,981 )  

$ 212,175  

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

162,495  

Share-based compensation

( 56,944 )  

Balance at June 30, 2022

84,146,082  

4,300,152  

$ ( 11,171 )  

$ 421,172  

$ ( 253,925 )  

$ 156,118  

Balance at December 31, 2021

83,057,083  

4,091,823  

$ ( 10,723 )  

$ 419,059  

$ ( 194,968 )  

$ 213,410  

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

1,088,999  

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

208,329  

( 448 )  

Share-based compensation

Balance at March 31, 2022

( 58,957 )  

Balance at June 30, 2022

84,146,082  

4,300,152  

$ ( 11,171 )  

$ 421,172  

$ ( 253,925 )  

$ 156,118  

Treasury stock

1 unchanged sentence

Total shareholders'

Balance at December 31, 2020

Balance at March 31, 2021

82,228,823  

4,055,011  

$ ( 10,623 )  

$ 413,958  

$ ( 191,167 )  

$ 212,209  

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

211,436  

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

Exercise of stock options

13,821  

( 43 )  

Share-based compensation

Balance at March 31, 2021

( 5,179 )  

Balance at June 30, 2021

82,440,259  

4,068,832  

$ ( 10,666 )  

$ 415,325  

$ ( 196,346 )  

$ 208,354  

Balance at December 31, 2020

80,295,141  

3,945,867  

$ ( 9,999 )  

$ 411,753  

$ ( 184,909 )  

$ 216,885  

Vesting of restricted stock units and issuance of restricted stock

1,947,118  

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

122,965  

( 667 )  

Exercise of warrants by certain warrant holders (Note 7)

198,000  

Share-based compensation

( 11,437 )  

Balance at June 30, 2021

82,440,259  

4,068,832  

$ ( 10,666 )  

$ 415,325  

$ ( 196,346 )  

$ 208,354  

See notes to consolidated financial statements

1 unchanged sentence

(Amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

$ ( 58,957 )  

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

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

Depreciation and amortization

3 unchanged sentences

Non-cash accrued compensation expense for Put/Call Consideration

Goodwill impairment

55,400  

Write-off of intangible assets

Loss on disposal of property and equipment

Provision for bad debt

Changes in assets and liabilities, net of business acquisition:

Provision for income taxes

Changes in assets and liabilities, net of business acquisitions:

Accounts receivable

( 7,913 )  

Prepaid expenses and other current assets

4 unchanged sentences

Accounts payable

( 3,348 )  

Accrued expenses and other current liabilities

3 unchanged sentences

( 72 )  

Net cash (used in) provided by operating activities

Net cash used in operating activities

( 1,947 )  

2 unchanged sentences

( 2,199 )  

Business acquisition, net of cash acquired

Business acquisitions, net of cash acquired

( 971 )  

11 unchanged sentences

( 448 )  

Proceeds from the issuance of stock

Net cash (used in) provided by financing activities

2 unchanged sentences

( 8,071 )  

11,573  

Cash, cash equivalents and restricted cash at beginning of period

6 unchanged sentences

Cash paid for interest

$ 1,097  

Cash paid for income taxes

9 unchanged sentences

(a) Basis of preparation 

The accompanying unaudited consolidated financial statements have been prepared by Fluent, Inc., a Delaware corporation (the "Company" or "Fluent"), in accordance with accounting principles generally accepted in the United States ("US GAAP") and applicable rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting.

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.

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 .

The accompanying unaudited consolidated financial statements have been prepared by Fluent, Inc., a Delaware corporation (the "Company" or "Fluent"), in accordance with accounting principles generally accepted in the United States ("GAAP") and applicable rules and regulations of the Securities and Exchange Commission (the "SEC") regarding interim financial reporting.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with 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 ended June 30, 2022  and 2021 , respectively, 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”).

3 unchanged sentences

Business acquisition 

and Note 12 , Variable Interest Entity ).

Beginning September 1, 2021, Winopoly is a wholly-owned subsidiary of the Company.

and Note 12 , Variable Interest Entity ). Winopoly has been a wholly-owned subsidiary of the Company since September 1, 2021.

The information included in this Quarterly Report on Form 10 -Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10 -K for the year ended 

6 unchanged sentences

(b) Recently issued and adopted accounting standards

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

In January 2016, the 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.

5 unchanged sentences

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 and does not anticipate having material impact.

The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements, and it does not anticipate that such adoption will have a material impact on its consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4 unchanged sentences

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.

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, LLC, business.

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.

March 31, 2022 and

June 30, 2022 and

December 31, 2021 , the balance of deferred revenue was 

2 unchanged sentences

December 31, 2021 was recognized into revenue during the

first quarter of

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.

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

June 30, 2022 and December 31, 2021 , unbilled revenue included in accounts receivable was $ 31,804 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.

2 unchanged sentences

(d) Use of estimates

The preparation of consolidated financial statements in accordance with US GAAP requires the Company’s management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods.

Significant items subject to such estimates and assumptions include the allowance for doubtful accounts, useful lives of intangible assets, recoverability of the carrying amounts of goodwill and intangible assets, the portion of revenue subject to estimates for variances between internally-tracked conversions and those confirmed by the customer, purchase accounting, put/call consideration, consolidation of variable interest entity, accruals for contingencies and allowance for deferred tax assets.

The preparation of consolidated financial statements in accordance with GAAP requires the Company’s management to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods.

Significant items subject to such estimates and assumptions include the allowance for doubtful accounts, useful lives of intangible assets, recoverability of the carrying amounts of goodwill and intangible assets, the portion of revenue subject to estimates for variances between internally-tracked conversions and those confirmed by the customer, purchase accounting, the put/call consideration, consolidation of variable interest entity, accruals for contingencies and allowance for deferred tax assets.

These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable.

Actual results could differ from these estimates.

(e) Fair value

The fair value of the Company’s cash, cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying values because of the short-term nature of these instruments.

As of June 30, 2022 , the fair value of long-term debt is considered to approximate its carrying value.

The fair value assessment represents a Level 2 measurement.

The fair value of certain long-lived non-financial assets and liabilities may be required to be measured on a nonrecurring basis in certain circumstances, including when there is evidence of impairment.

As of June 30, 2022, 

certain non-financial assets have been measured at fair value subsequent to their initial recognition. The Company determined the estimated fair value to be Level 3, as certain inputs used to determine fair value are unobservable, see Note 4, Goodwill , for further discussion of the impairment charge.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1 unchanged sentence

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.

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 

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

Three Months Ended March 31,

For the three and 

six months ended June 30, 2022 and 2021 , basic and diluted loss per share was as follows:

Three Months Ended June 30,

Six Months Ended June 30,

$ ( 56,944 )  

$ ( 5,179 )  

$ ( 58,957 )  

Weighted average shares outstanding

1 unchanged sentence

78,270,386  

79,479,049  

77,574,295  

Weighted average restricted shares vested not delivered

1 unchanged sentence

1,691,889  

1,714,058  

1,986,348  

Total basic weighted average shares outstanding

1 unchanged sentence

79,962,275  

81,193,107  

79,560,643  

Dilutive effect of assumed conversion of restricted stock units

2 unchanged sentences

79,962,275  

81,193,107  

79,560,643  

Basic and diluted loss per share:

1 unchanged sentence

$ ( 0.06 )  

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,

$ ( 0.73 )  

$ ( 0.70 )  

$ ( 0.06 )  

$ ( 0.73 )  

Based upon the exercise price and the average stock price for the three and six months ended June 30, 2022 and 2021 , respectively, 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 June 30,

Six Months Ended June 30,

Restricted stock units

1 unchanged sentence

2,843,570  

1,875,000  

2,843,570  

Stock options

3 unchanged sentences

2,204,000  

833,333  

Total anti-dilutive securities

1 unchanged sentence

5,880,903  

4,014,000  

5,880,903  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3 unchanged sentences

Amortization period (in years)

March 31, 2022

June 30, 2022

December 31, 2021

43 unchanged sentences

$ 35,747  

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

The gross amounts associated with software developed for internal use primarily represents the 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, 

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). 

(the "True North Acquisition"), effective January 1, 2022 ( 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.

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.

During the second quarter of 2022, the Company determined that the decline in its publicly traded stock price which resulted in a corresponding decline in its market capitalization 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 June 30, 2022, its long-lived assets were not impaired.

The Company believes that the assumptions utilized in this interim impairment testing, including the estimation of future cash flows, were reasonable. Future tests may indicate impairment if actual future cash flows or other factors differ from the assumptions used in the Company's interim impairment test at June 30, 2022. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(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

Amortization expense of $ 3,218  

and $ 3,169  for the three months ended June 30, 2022 and 2021 , respectively, and $ 6,359  

and $ 6,346 , for the six  months ended June 30, 2022 and 2021 , respectively, is included in depreciation and amortization expenses in the consolidated statements of operations.

As of June 30, 2022 , intangible assets with a carrying amount of $ 1,116 , 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 June 30, 2022 , estimated amortization expense related to the Company's intangible assets for the remainder of 2022  and through 2027  and thereafter are as follows:

June 30, 2022

Remainder of 2022

2 unchanged sentences

$ 32,872  

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 

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

As of June 30, 2022, the total balance of goodwill was $ 110,780 , a decrease of $ 54,308  from December 31, 2021, as a result of a non-cash impairment charge of $ 55,400 partially offset by $ 1,092 attributable to the True North Acquisition (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 balance also includes goodwill from the acquisition of Interactive Data, LLC, the Fluent LLC Acquisition, the Q Interactive Acquisition, the AdParlor Acquisition, and the Initial Winopoly Acquisition (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 a VIE 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 assessed 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.

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:

March 31, 2022

During the second quarter of 2022, the Company determined that the decline in the market value of its publicly-traded stock, which resulted in a corresponding decline in its market capitalization, constituted a triggering event.

The Company conducted an interim test of the fair value of the Fluent reporting unit's goodwill for potential impairment as of June 30, 2022.

The Company considered a combination of income and market approaches to determine the fair value of the Fluent reporting unit. The Company determined that a market-based approach, which considered the Company’s implied market multiple applied to management’s forecast and further adjusted for a control premium, provided the best indication of fair value of the Fluent reporting unit. The results of this market-based approach indicated that its carrying value exceeded its fair value by 27 %.

The Company therefore concluded that the Fluent reporting unit’s goodwill of $162.0 million was impaired and recorded a non-cash impairment charge of $ 55.4 million.

The Company believes that the assumptions utilized in its interim impairment testing, including forecasted cash flows, market multiples and control premiums, are reasonable.

Balance as of December 31, 2021

$ 160,922  

$ 4,166  

$ 165,088  

True North Acquisition 

Fluent goodwill impairment

( 55,400 )  

Balance as of June 30, 2022

$ 106,614  

$ 4,166  

$ 110,780  

Long-term debt, net of unamortized discount and financing costs, related to the Refinanced Term Loan and the New Credit Facility Term Loan consisted of the following:

June 30, 2022

December 31, 2021

10 unchanged sentences

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, $ 766 of which was a cash payment.

On March 31, 2021, Fluent, LLC, a wholly-owned subsidiary of the Company redeemed in full $ 38,318 in the aggregate principal amount of a 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 the cost of early extinguishment of the debt, $ 766 of which was a cash payment.

New Credit Facility

On March 31, 2021, Fluent, LLC entered into a credit agreement (the “Credit Agreement”) by and among, Fluent, LLC, certain subsidiaries of Fluent, LLC as guarantors, Citizens Bank, N.A. as administrative agent, lead arranger and bookrunner, BankUnited, N.A.

and Silicon Valley Bank.

On March 31, 2021, Fluent, LLC entered into a credit agreement (the “Credit Agreement”) with certain subsidiaries of Fluent, LLC as guarantors, and Citizens Bank, N.A. as administrative agent, lead arranger and bookrunner.

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.

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

Borrowings under the Credit Agreement bear interest at a rate per annum equal to an applicable margin, plus, at the Company's option, either a base rate or a LIBOR rate (subject to a floor of 0.25 %).

1 unchanged sentence

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 %)

2.50 % (LIBOR + 2.25 %), which increased to 3.92 % (LIBOR + 2.25 %) as of June 30, 2022.

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 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  

At June 30, 2022 , the Company was in compliance with all of the financial and other covenants under the Credit Agreement.

Effective April 

29, 2022, the Credit Agreement was amended to add certain additional subsidiaries of Fluent, LLC as parties. 

As of June 30, 2022 , scheduled future maturities of the Credit Agreement are as follows:

June 30, 2022  

Remainder of 2022

5 unchanged sentences

(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.

The Company is subject to federal and state income taxes in the United States.

The tax provision for interim periods is determined using an estimate of the Company's annual effective tax rate.

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

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.

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

June 30, 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 that the Company is able to achieve and the net deferred tax assets available.

For the six months ended June 30, 2022, the Company's effective income tax expense rate of 9.5 % primarily represents the projected federal and state cash tax expense expected to result in taxable income for full-year 2022 after consideration of the impact of a non-deductible goodwill impairment against pre-tax year-to-date losses. For the six months ended June 30, 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.

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

June 30, 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 March 31, 2022 , the Company has not accrued any interest or penalties with respect to its uncertain tax positions.

As of June 30, 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

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

June 30, 2022 and December 31, 2021 , the number of issued shares of common stock was 

84,146,082 and 83,057,083 , respectively, which included shares of treasury stock of 

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

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 

For the six months ended June 30, 2022 , the change in the number of issued shares of common stock was the result of an aggregate 

1,088,999 shares of common stock issued upon vesting of RSUs, including 

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Treasury stock

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.

June 30, 2022 and December 31, 2021 , the Company held shares of treasury stock of 4,300,152  and 4,091,823 , respectively with a cost of $ 11,171 and $ 10,723 , respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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 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 

46,667  warrants to purchase common stock of the Company, par value $ 0.0005  per share, at an exercise price of $ 3.00  per share;

Whitehorse SMA Holdings I, LLC regarding 

66,666  warrants to purchase common stock of the Company at an exercise price of $ 3.00  per share;

and (iii) Whitehorse Finance, Inc.

regarding 

186,667  warrants to purchase common stock of the Company at an exercise price of $ 3.00 per share.

In November 2017, the Amended Whitehorse Warrants were exercised, and the Company issued an aggregate of 300,000 shares of common stock of the Company (the "Warrant Shares") to the warrant holders.

Pursuant to the First Amendments, the warrant holders had the right, but not the obligation, to require the Company to purchase from these warrant holders the 300,000 Warrant Shares at $ 3.8334 per share (the "Put Right"), which could be exercised during the period commencing January 1, 2019 and ending December 15, 2019. 

On December 6, 2019, the Company entered into the Second Amendments to the Amended Whitehorse Warrants, pursuant to which the expiration of the Put Right was extended from December 15, 2019 to January 31, 2020.

On January 31, 2020, the holders of the Amended Whitehorse Warrants exercised the Put Right, requiring the Company to purchase from the warrant holders the 300,000 Warrant Shares for an aggregate of $ 1,150 .

The Company funded such purchase with cash on hand.

For the six months ended June 30, 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. 

As of March 31, 2022, there were outstanding warrants to purchase an aggregate of 833,333  shares of common stock at prices ranging from $ 3.75 to $ 6.00 per share.

On May 22, 2022, the warrants expired, unexercised. 

Share-based compensation

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

As of June 30, 2022 , the Company maintained 

two share-based incentive plans:

the Cogint, Inc. 

2015 Stock Incentive Plan and the Fluent, Inc.

2015 Stock Incentive Plan (the "2015 Plan") and the Fluent, Inc.

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

21,484,593 shares of common stock.

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.

On June 8, 2022 ( the "Effective Date"), the stockholders of the Company approved the Fluent, Inc.

2022 Omnibus Equity Incentive Plan (the "2022 Plan").

The 2022 Plan has 10,909,251 shares of common stock reserved for issuance including 909,251 shares of common stock that were carried over from the 2018 Plan.

No  further awards may be issued under the 2015 Plan or the 2018 Plan (together, the "Prior Plans").

All awards under the Prior Plans that were outstanding as of the Effective Date will continue to be governed by the terms, conditions and procedures set forth in the Prior Plans and any applicable award agreement. 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)

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The Compensation Committee of the Company's Board of Directors approved the grant of stock options to certain Company executives, which were issued on February 1, 2019, December 20, 2019, 

March 1, 2020, and March 1, 2021 respectively, under the 2018 Plan.

March 1, 2020, and March 1, 2021, under the 2018 Plan.

Subject to continuing service, 50 % of the shares subject to these stock options will vest if the Company's stock price remains above 125.00 %, 133.33 %, 133.33 % and 133.33 %, respectively, of the exercise price for twenty consecutive trading days, and the remaining 50 % of the shares subject to these stock options will vest if the Company's stock price remains above 156.25 %, 177.78 %, 

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

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.

As of June 30, 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 three months ended March 31, 2022 , details of stock option activity were as follows:

For the six months ended June 30, 2022 , details of stock option activity were as follows:

Number of options

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Outstanding as of December 31, 2021

Outstanding as of March 31, 2022

Options exercisable as of March 31, 2022

2,204,000  

$ 4.41  

(65,000 )  

Outstanding as of June 30, 2022

2,139,000  

$ 4.37  

Options exercisable as of June 30, 2022

1,242,000  

$ 3.98  

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.

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For the 

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

six months ended June 30, 2022 , the unvested balance of options was as follows:

Number of options

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$ 4.91  

Unvested as of March 31, 2022

Unvested as of June 30, 2022

897,000  

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Compensation expense recognized for stock options of $ 20 and $ 123  for the 

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.

three months ended June 30, 2022 and 2021 , respectively, and $ 125  

$ 290  for the six months ended 

June 30, 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 June 30, 2022 , there was $ 20 of unrecognized share-based compensation with respect to outstanding stock options.

Restricted stock units and restricted stock

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

For the six months ended June 30, 2022 , details of unvested RSU and restricted stock activity were as follows:

Number of units

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$ 3.72  

Unvested as of March 31, 2022

Unvested as of June 30, 2022

1,875,000  

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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 March 31, 2022 , there were 

4,300,152  outstanding shares of treasury stock.

As of June 30, 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 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 , 

For the six months ended June 30, 2022 , there was a net increase of 

17,206  

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

As of June 30, 2022 , 

1,708,872 outstanding RSUs were vested not delivered.

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.

Compensation expense recognized for RSUs and restricted stock of $ 867  and $ 1,108  for the three months ended June 30, 2022 and 2021 , respectively, and $ 1,777  

$ 2,213  

for the six months ended 

June 30, 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, net 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 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 

As of June 30, 2022 , unrecognized share-based compensation expense associated with the granted RSUs and stock options amounted to $ 5,109 , 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,

For the three and 

six months ended June 30, 2022 and 2021 , share-based compensation for the Company's stock options, RSUs, common stock and restricted stock awards were allocated to the following accounts in the consolidated financial statements:

Three Months Ended June 30,

Six Months Ended June 30,

Sales and marketing

6 unchanged sentences

$ 1,902  

$ 2,503  

Segment information

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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”

As of June 30, 2022 , the Company has two operating segments and two corresponding reporting units, “Fluent”

and “All Other,”

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for the purposes of segment reporting, represents the consolidated operating results of the Company excluding “All Other.”

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

Three Months Ended March 31,

Summarized financial information concerning the Company's segments for the three and six  months ended June 30, 2022 and 2021  are shown in the following tables below:

Three Months Ended June 30,

Six Months Ended June 30,

Fluent segment revenue:

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$ 59,306  

$ 115,343  

$ 117,558  

International

41,258  

$ 10,693  

66,633  

19,983  

Fluent segment revenue

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$ 69,999  

$ 181,976  

$ 137,541  

All Other segment revenue:

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$ 3,338  

$ 5,376  

$ 5,935  

International

2 unchanged sentences

$ 3,379  

$ 5,448  

$ 6,007  

Segment EBITDA

2 unchanged sentences

$ ( 1,582 )  

$ ( 46,247 )  

All Other segment EBITDA

( 135 )  

( 48,060 )  

( 1,386 )  

( 46,382 )  

Depreciation and amortization

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$ ( 51,392 )  

$ ( 4,752 )  

$ ( 53,021 )  

Total assets:

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(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.

As of June 30, 2022 , long-lived assets are all located in the United States.

For the 

six months ended 

June 30, 2022 , the Company identified an international customer within the Fluent segment with revenue in the amount of $ 40,635  

which represents 22 % of consolidated revenue.

Contingencies

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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. 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.

The Company has not received any communications from either the DOJ or the DC AG since the second quarter of 2020.

 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.

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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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.

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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

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.

While, the Company continues to believe that its lead generation practices are compliant with applicable laws, the Company and the PA OAG are negotiating the terms of an Assurance of Voluntary Compliance ("AVC") to resolve the matter.

It is uncertain whether a mutually acceptable AVC can be reached and the terms thereof.

Consequently, 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

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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 

100 % membership interest in True North Loyalty, LLC for a deemed purchase price of $ 2,321 , which consisted of $ 1,000 in cash at closing, $ 860 of deferred payments due at both the first and second anniversary of the closing date adjusted for net-working capital, and contingent consideration with a fair value at the closing date 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 .

100,000  shares of fully vested stock under the 2018  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.

1 unchanged sentence

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.

805,  the Company determined that the True North Acquisition constituted the purchase of a business. For the three and six  months ended June 30, 2022 ,  the Company incurred transaction-related expenses of $ 39  and $ 59 , respectively, and compensation expense related to non-compete agreements in connection with the acquisition of $ 125 and $ 250 , respectively, 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 1 % and 2 %, respectively, of the Company's consolidated assets and revenues as of and for the 

six  months ended 

June 30, 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:

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Liabilities assumed  

Consideration transferred $ 2,321

Consideration transferred  

$ 2,321  

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

3 unchanged sentences

Winopoly acquisition

On April 1, 2020, the Company acquired, through a wholly-owned subsidiary, a 50 % membership interest in Winopoly (the "Initial Winopoly Acquisition") for a deemed purchase price of $ 2,553 , which consisted of $ 1,553 in cash and contingent consideration with a fair value of $ 1,000 payable based upon the achievement of specified revenue targets over the eighteen -month period following the completion of the acquisition.

As of the first quarter of 2021, the initial contingent consideration of $ 1,000 had been paid based on specific revenue targets having been met.

On April 1, 2020, the Company acquired, through a wholly-owned subsidiary, a 50 % membership interest in Winopoly for a deemed purchase price of $ 2,553 , which consisted of $ 1,553 in cash and contingent consideration with a fair value of $ 1,000 payable based upon the achievement of specified revenue targets over the eighteen -month period following the completion of the acquisition.

The initial contingent consideration of $1,000 had been paid based on specific revenue targets having been met in the first quarter of 2021.

On May 17, 2021, additional contingent consideration that was not previously deemed to be probable of payment in the amount of $ 500 was paid based on a specific revenue target having been met.

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In connection with the exercise of the put/call option, certain of the seller parties would have been required to enter into employment agreements with the Company in order to receive their respective shares of the Put/Call Consideration.

On September 1, 2021, 

the Company acquired the remaining 50 % membership interest in Winopoly (the “Full Winopoly Acquisition”) in a negotiated transaction.

The consideration was $ 7,785 , which consisted of $ 3,425 of cash at closing, $ 2,000 of cash due on January 31, 2022, and $ 500 of deferred payments due at both the first and second anniversary of the closing.

The Company also issued 500,000 shares of fully-vested stock under the Fluent, Inc.

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

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.

4 unchanged sentences

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.

On September 1, 2021, 

the Company acquired the remaining 50 % membership interest in Winopoly (the “Full Winopoly Acquisition”) in a negotiated transaction.

The Company also issued 500,000 shares of fully-vested stock under the 2018 Plan to certain Winopoly personnel valued at $ 1,360 .

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

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.

three and 

six months ended June 30, 2021, compensation expense of $ 881 and $ 2,627  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.

There was no corresponding charge for the three and six months ended June 30, 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1 unchanged sentence

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 (see Note 11 , Business acquisition ).

The Company determined that, following the Initial Winopoly Acquisition, Winopoly qualified as a VIE for which the Company was the primary beneficiary (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.

1 unchanged sentence

The Company's conclusion that Winopoly was a VIE, and the Company was its primary beneficiary, derived from contractual arrangements that provided the Company with control over certain activities that most significantly impacted its economic performance.

These significant activities included the compliance practices of Winopoly and the Company's provisions of leads that Winopoly used to generate its revenue, which ultimately gave the Company its controlling interest.

These significant activities include the compliance practices of Winopoly and the Company's provisions of leads that Winopoly used to generate its revenue, which ultimately gave the Company its controlling interest.

The Company therefore consolidated Winopoly in its consolidated financial statements from the inception of the Initial Winopoly Acquisition, inclusive of deemed compensation expense to the sellers for services rendered.

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).

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

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