What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-07 compared with 2022-08-09 · 148 added, 160 removed, 770 unchanged (29% of the section changed)

2 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

15 unchanged sentences

165,088  

Other non-current assets

51 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

$ 89,046  

9 unchanged sentences

Sales and marketing

12,590  

Product development

13,979  

11,331  

General and administrative

4 unchanged sentences

Depreciation and amortization

Goodwill impairment and write-off of intangible assets  

10,037  

Goodwill impairment and write-off of intangible assets

55,528  

Loss on disposal of property and equipment

Loss (gain) on disposal of property and equipment

Total costs and expenses

3 unchanged sentences

238,492  

Loss from operations

( 51,392 )  

Income (loss) from operations

( 2,047 )  

5 unchanged sentences

Loss on early extinguishment of debt

Loss before income taxes

( 51,822 )  

Income (loss) before income taxes

( 2,452 )  

2 unchanged sentences

( 2,119 )  

$ ( 56,944 )  

Net income (loss)

( 2,452 )  

( 55,844 )  

Basic and diluted loss per share:

Basic and diluted income (loss) per share:

$ 0.04  

19 unchanged sentences

Total shareholders'

Balance at March 31, 2022

Balance at June 30, 2022

84,146,082  

7 unchanged sentences

Share-based compensation

( 56,944 )  

Balance at June 30, 2022

Balance at September 30, 2022

84,242,962  

18 unchanged sentences

( 55,844 )  

Balance at June 30, 2022

Balance at September 30, 2022

84,242,962  

7 unchanged sentences

Total shareholders'

Balance at March 31, 2021

Balance at June 30, 2021

82,440,259  

11 unchanged sentences

( 2,452 )  

Balance at June 30, 2021

Balance at September 30, 2021

83,018,418  

16 unchanged sentences

( 719 )  

Exercise of warrants by certain warrant holders (Note 7)

Exercise of stock options

198,000  

1 unchanged sentence

( 13,889 )  

Balance at June 30, 2021

Balance at September 30, 2021

83,018,418  

7 unchanged sentences

(Amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation and amortization

10,037  

Non-cash loan amortization expense

2 unchanged sentences

Non-cash accrued compensation expense for Put/Call Consideration

Non-cash termination of Put/Call Consideration

Goodwill impairment

6 unchanged sentences

Accounts receivable

( 7,913 )  

Prepaid expenses and other current assets

Other non-current assets

( 25 )  

Operating lease assets and liabilities, net

1 unchanged sentence

Accounts payable

( 1,212 )  

Accrued expenses and other current liabilities

2 unchanged sentences

( 89 )  

( 72 )  

Net cash used in operating activities

( 1,947 )  

Net cash provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

18 unchanged sentences

( 4,198 )  

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

Net decrease in cash, cash equivalents and restricted cash

( 1,361 )  

8 unchanged sentences

$ 1,162  

$ 1,413  

Cash paid for income taxes

11 unchanged sentences

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 .

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 September 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”).

20 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 it does not anticipate that such adoption will have a material impact on its consolidated financial statements.

The Company has completed its assessment and concluded this update has no  material impact on its consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6 unchanged sentences

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.

June 30, 2022 and

September 30, 2022 and

December 31, 2021 , the balance of deferred revenue was 

4 unchanged sentences

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.

June 30, 2022 and December 31, 2021 , unbilled revenue included in accounts receivable was $ 31,804 and $ 31,842 , respectively.

September 30, 2022 and December 31, 2021 , unbilled revenue included in accounts receivable was $ 28,384 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.

3 unchanged sentences

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.

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 considerations, 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.

2 unchanged sentences

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.

As of September 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.

As of September 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)

(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.

Income (loss) per share

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

Diluted income (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.

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

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,

nine months ended September 30, 2022 and 2021 , basic and diluted income (loss) per share was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Net income (loss)

$ 3,113  

17 unchanged sentences

Dilutive effect of assumed conversion of restricted stock units

107,650  

Total diluted weighted average shares outstanding

3 unchanged sentences

79,753,662  

Basic and diluted loss per share:

Basic and diluted income (loss) per share:

$ 0.04  

4 unchanged sentences

$ ( 0.69 )  

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,

Based upon the exercise price and the average stock price for the three and nine months ended September 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 September 30,

Nine Months Ended September 30,

Restricted stock units

20 unchanged sentences

Amortization period (in years)

June 30, 2022

September 30, 2022

December 31, 2021

45 unchanged sentences

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 ( Note  

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

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

LLC, 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 ( Note  

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

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. 

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. The Company continued to see a decline in its market capitalization for the third quarter of 2022 and conducted another recoverability test of its long-lived assets.

Based on the results of the recoverability tests, which measured the Company's projected undiscounted cash flows as compared to the carrying value of the asset group, the Company determined that its long-lived assets were not impaired as of June 30, 2022 or September 30, 2022.

The Company believes that the assumptions utilized in the impairment tests, including the estimation of future cash flows, were reasonable. Future tests may indicate impairment if actual future cash flows or other factors considered differ from the assumptions used in the prior interim impairment tests. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1 unchanged sentence

Amortization expense of $ 3,292  

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

and $ 3,006  for the three months ended September 30, 2022 and 2021 , respectively, and $ 9,651  

and $ 9,352 , for the nine  months ended September 30, 2022 and 2021 , respectively, is included in depreciation and amortization expenses in the consolidated statements of operations.

As of September 30, 2022 , intangible assets with a carrying amount of $ 1,034 , 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, 2022 , estimated amortization expense related to the Company's intangible assets for the remainder of 2022  and through 2027  and thereafter are as follows:

September 30, 2022

Remainder of 2022

3 unchanged sentences

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 

As of September 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).

 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 

 The balance also includes goodwill from the acquisition of the Fluent LLC Acquisition, the Q Interactive Acquisition, the AdParlor Acquisition, and the Initial Winopoly Acquisition (Note 

Business acquisition ).

2 unchanged sentences

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.

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

During the second quarter of 2022, the Company determined that the decline in the market value of its publicly-traded stock price, 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 therefore concluded that the Fluent reporting unit’s goodwill of $ 162,000 was impaired and recorded a non-cash impairment charge of $ 55,400 in the second quarter of 2022.

During the third quarter of 2022,  the Company assessed the impact of the continued decline in the market value of its publicly-traded stock price and concluded that the continued decline constituted a triggering event.

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

The Company applied a combination of income and market approaches to determine the fair value of the Fluent reporting unit and concluded its goodwill of $ 106,600 was not impaired since the results of the test indicated that the estimated fair value exceeded its carrying value by approximately 4 %.

If there is a reduction in operating results or a further decline in the market value of the Company's publicly-traded stock, this could result in future impairment charges, which could affect the financial results.

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 

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

Balance as of September 30, 2022

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

September 30, 2022

December 31, 2021

New Credit Facility Term Loan due 2026 (less unamortized discount and financing costs of $ 786 and $ 921 , respectively)

New Credit Facility due 2026 (less unamortized discount and financing costs of $ 720 and $ 921 , respectively)

$ 41,780  

5 unchanged sentences

$ 40,329  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

Refinanced Term Loan

7 unchanged sentences

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

2.50 % (LIBOR + 2.25 %), which increased to 4.87 % (LIBOR + 1.75 %) as of September 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 June 30, 2022 , the Company was in compliance with all of the financial and other covenants under the Credit Agreement.

At September 30, 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, Business acquisition , of this Quarterly Report on Form 

1 unchanged sentence

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  

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

September 30, 2022  

Remainder of 2022

8 unchanged sentences

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.

September 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.

For the nine months ended September 30, 2022, the Company's effective income tax expense rate of 4.0 % primarily represents the projected federal and state cash tax expense expected to result in taxable income for full-year 2022 after the impact of a non-deductible goodwill impairment against pre-tax year-to-date losses, offset by the benefit of federal research and development credits on expected federal cash tax expense. For the nine months ended September 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.

June 30, 2022 and December 31, 2021 , the balance of unrecognized tax benefits was $ 1,480 .

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

As of September 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

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

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

84,242,962 and 83,057,083 , respectively, which included shares of treasury stock of 

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

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 

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

1,185,879 shares of common stock issued upon vesting of RSUs, including 

1 unchanged sentence

Treasury stock

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.

September 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)

2 unchanged sentences

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

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.

For the nine months ended September 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. 

On May 22, 2022, the warrants to purchase an aggregate of 833,333  shares of common stock at prices ranging from $ 3.75 to $ 6.00 per share expired, unexercised.

Share-based compensation

As of June 30, 2022 , the Company maintained 

two share-based incentive plans:

the Cogint, 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.

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. 

On June 8, 2022, the stockholders of the Company approved the Fluent, Inc.

2022 Omnibus Equity Incentive Plan (the "2022 Plan") that authorized for issuance 

15,422,523 shares of the Company's common stock.

As of September 30, 2022 , the Company had 

10,901,195 shares of common stock available for grants pursuant to the 2022 Plan, which includes 

901,195  shares of common stock previously available for issuance under the Fluent, Inc.

2018 Stock Incentive Plan (the "Prior 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. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2 unchanged sentences

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, under the 2018 Plan.

March 1, 2020, and March 1, 2021, under the Prior 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 %, 

2 unchanged sentences

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

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.

As of September 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.

32 unchanged sentences

1.05 %  

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

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

Number of options

6 unchanged sentences

( 65,000 )  

Outstanding as of June 30, 2022

Outstanding as of September 30, 2022

2,139,000  

$ 4.37  

Options exercisable as of June 30, 2022

Options exercisable as of September 30, 2022

1,242,000  

4 unchanged sentences

For the 

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

Number of options

nine months ended September 30, 2022 , the unvested balance of stock options was as follows:

Number of stock options

Weighted average exercise price per share

3 unchanged sentences

$ 4.91  

Unvested as of June 30, 2022

Unvested as of September 30, 2022

897,000  

1 unchanged sentence

Compensation expense recognized for stock options of $ 0 and $ 105  for the 

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.

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

$ 395  for the nine months ended 

September 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 September 30, 2022 , there was $ 0 of unrecognized share-based compensation with respect to outstanding stock options.

Restricted stock units and restricted stock

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

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

Number of units

15 unchanged sentences

$ 3.80  

$ 3.72  

Unvested as of June 30, 2022

Unvested as of September 30, 2022

1,780,023  

2 unchanged sentences

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 June 30, 2022 , there were 

As of September 30, 2022 , there were 

4,300,152  

1 unchanged sentence

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

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 , 

For the nine months ended September 30, 2022 , there was no net change in the vested not delivered balance as a result of the timing of delivery of certain shares.

As of September 30, 2022 , 

1,691,666 outstanding RSUs were vested not delivered.

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  

Compensation expense recognized for RSUs and restricted stock of $ 818  and $ 1,063  for the three months ended September 30, 2022 and 2021 , respectively, and $ 2,595  

$ 3,276  

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.

for the nine months ended 

September 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 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 

As of September 30, 2022 , unrecognized share-based compensation expense associated with the granted RSUs and stock options amounted to $ 4,190 , which is expected to be recognized over a weighted average period of 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1 unchanged sentence

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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Sales and marketing

10 unchanged sentences

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

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

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

and “All Other,”

4 unchanged sentences

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 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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Fluent segment revenue:

30 unchanged sentences

$ ( 42,055 )  

$ ( 46,247 )  

All Other segment EBITDA

2 unchanged sentences

( 42,357 )  

( 46,382 )  

Depreciation and amortization

Total loss from operations

10,037  

Total income (loss) from operations

$ ( 2,047 )  

$ ( 52,394 )  

September 30,

Total assets:

7 unchanged sentences

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

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

As of September 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  

nine months ended 

September 30, 2022 , the Company identified an international customer within the Fluent segment with revenue in the amount of $ 59,175  

which represents 21 % of consolidated revenue.

17 unchanged sentences

2020, the Tax Department issued Statements of Proposed Audit Adjustment totaling $ 8.2 million, including $ 2.0 million of interest.

The Company formally disagreed with the amount of the Proposed Audit Adjustments and met with the Tax Department on March 4, 2020. 

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. 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.

The Company formally disagreed with the amount of the Proposed Audit Adjustments and  notices of determination subsequently issued by the Tax Department totaling $ 3.0  million, including $ 0.7 million of interest.

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 (“CID”) from the Federal Trade Commission (“FTC”) regarding compliance with the Federal Trade Commission Act, 15 U.S.C.

§45 or the Telemarketing Sales Rule, 16 C.F.R.

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.

Since receipt of the CID, the Company has provided information and documentation and fully cooperated with the FTC. 

On October 18, 2022, the FTC sent the Company a draft complaint and proposed consent order seeking injunctive relief and a civil monetary penalty. 

A substantial majority of the injunctive provisions contained in the consent order are consistent with the Company’s current business practices.

The FTC and the Company have commenced settlement negotiations.

The Company believes that a loss from these matters is probable but it is not yet possible to reasonably estimate the magnitude of such loss. 

An unfavorable outcome of this matter could have a material adverse effect on the Company’s business, results of operations and/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.

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

201 - 1 et seq.

the Telemarketer Registration Act, 73 P.S.

("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.

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.

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

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

On July 27, 2022, the PA AG sent the Company a draft Assurance of Voluntary Compliance (“AVC”). The Company responded with a revised AVC but the PA AG indicated an unwillingness to negotiate the terms of the AVC, and on November 2, 2022, the Commonwealth of Pennsylvania filed a complaint for permanent injunction, civil penalties in the amount of $ 1,000 for each violation of the PA Consumer Protection Law and disgorgement of profits plus other monetary relief, and other equitable relief against Fluent, LLC and four of its subsidiaries in the United States District Court for the Western District of Pennsylvania. 

The Company believes its current practices are in compliance with the PA Consumer Protection Law and is currently evaluating this complaint. 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

4 unchanged sentences

The Company also issued 

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.

100,000  shares of fully vested stock under the Prior Plan to the sellers valued at $ 211 .

Certain seller parties entered into employment and non-competition agreements with the 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 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.

805,  the Company determined that the True North Acquisition constituted the purchase of a business. For the three and nine  months ended September 30, 2022 ,  the Company incurred transaction-related expenses of $ 0  and $ 59 , respectively, and compensation expense related to non-compete agreements in connection with the acquisition of $ 125 and $ 375 , 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 2 % and 2 %, respectively, of the Company's consolidated assets and revenues as of and for the 

nine  months ended 

September 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:

41 unchanged sentences

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

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

3 unchanged sentences

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.

nine months ended September 30, 2021, compensation expense of $ 586 and $ 3,213  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 nine months ended September 30, 2022.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9 unchanged sentences

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