flnt20220331

flnt20220331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-37893

FLUENT, INC.

(Exact name of registrant as specified in its charter)

Delaware

77-0688094

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

300 Vesey Street, 9th Floor

New York, New York

10282

(Address of principal executive offices)

(Zip Code)

(646) 669-7272

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0005 par value per share

FLNT

The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of May 2, 2022, the registrant had 79,798,165 shares of common stock outstanding.

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FLUENT, INC.

TABLE OF CONTENTS FOR FORM 10-Q

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	2
	Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021	3
	Consolidated Statements of Changes in Shareholders' Equity for the three months ended March 31, 2022 and 2021	4
	Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		33

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PART I - FINANCIAL INFORMATION

Unless otherwise indicated or required by the context, all references in this Quarterly Report on Form 10-Q to "we," "us," "our," "Fluent," or the "Company," refer to Fluent, Inc. and its consolidated subsidiaries.

ITEM 1. FINANCIAL STATEMENTS.

FLUENT, INC.

CONSOLIDATED BALANCE SHEETS

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

(unaudited)

	*March 31, 2022*			*December 31, 2021*
ASSETS:
Cash and cash equivalents	$	28,944		$	34,467
Accounts receivable, net of allowance for doubtful accounts of $368 and $313, respectively		65,023			70,228
Prepaid expenses and other current assets		2,138			2,505
Total current assets		96,105			107,200
Property and equipment, net		1,298			1,457
Operating lease right-of-use assets		6,369			6,805
Intangible assets, net		34,938			35,747
Goodwill		166,180			165,088
Other non-current assets		1,905			1,885
Total assets	$	306,795		$	318,182
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable	$	12,782		$	16,130
Accrued expenses and other current liabilities		28,823			33,932
Deferred revenue		701			651
Current portion of long-term debt		5,000			5,000
Current portion of operating lease liability		2,228			2,227
Total current liabilities		49,534			57,940
Long-term debt, net		39,147			40,329
Operating lease liability		5,213			5,692
Other non-current liabilities		726			811
Total liabilities		94,620			104,772
Contingencies (Note 10)
Shareholders' equity:
Preferred stock — $0.0001 par value, 10,000,000 Shares authorized; Shares outstanding — 0 shares for both periods		—			—
Common stock — $0.0005 par value, 200,000,000 Shares authorized; Shares issued — 83,983,587 and 83,057,083, respectively; and Shares outstanding — 79,683,435 and 78,965,260, respectively (Note 7)		42			42
Treasury stock, at cost — 4,300,152 and 4,091,823 Shares, respectively (Note 7)		(11,171	)		(10,723	)
Additional paid-in capital		420,285			419,059
Accumulated deficit		(196,981	)		(194,968	)
Total shareholders' equity		212,175			213,410
Total liabilities and shareholders' equity	$	306,795		$	318,182

See notes to consolidated financial statements

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FLUENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)

	*Three Months Ended March 31,*
	*2022*			*2021*
Revenue	$	89,063		$	70,170
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization)		67,562			50,990
Sales and marketing		3,852			2,961
Product development		4,556			3,434
General and administrative		11,287			11,699
Depreciation and amortization		3,307			3,373
Write-off of intangible assets		128			—
Total costs and expenses		90,692			72,457
Loss from operations		(1,629	)		(2,287	)
Interest expense, net		(384	)		(1,008	)
Loss on early extinguishment of debt		—			(2,964	)
Loss before income taxes		(2,013	)		(6,259	)
Income tax benefit		—			1
Net loss	$	(2,013	)	$	(6,258	)

Basic and diluted loss per share:
Basic	$	(0.02	)	$	(0.08	)
Diluted	$	(0.02	)	$	(0.08	)

Weighted average number of shares outstanding:
Basic		80,889,052			81,892,593
Diluted		80,889,052			81,892,593

See notes to consolidated financial statements

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FLUENT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

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

(unaudited)

	*Common stock*				*Treasury stock*					*Additional paid-in*		*Accumulated*			*Total shareholders'*
	*Shares*		*Amount*		*Shares*		*Amount*			*capital*		*deficit*			*equity*
Balance at December 31, 2021		83,057,083	$	42		4,091,823	$	(10,723	)	$	419,059	$	(194,968	)	$	213,410
Vesting of restricted stock units and issuance of stock under incentive plans		926,504		—		—		—			211		—			211
Increase in treasury stock resulting from shares withheld to cover statutory taxes		—		—		208,329		(448	)		—		—			(448	)
Share-based compensation		—		—		—		—			1,015		—			1,015
Net loss		—		—		—		—			—		(2,013	)		(2,013	)
Balance at March 31, 2022		83,983,587	$	42		4,300,152	$	(11,171	)	$	420,285	$	(196,981	)	$	212,175

	*Common stock*				*Treasury stock*					*Additional paid-in*			*Accumulated*			*Total shareholders'*
	*Shares*		*Amount*		*Shares*		*Amount*			*capital*			*deficit*			*equity*
Balance at December 31, 2020		80,295,141	$	40		3,945,867	$	(9,999	)	$	411,753		$	(184,909	)	$	216,885
Vesting of restricted stock units and issuance of stock under incentive plans		1,735,682		1		—		—			(1	)		—			—
Increase in treasury stock resulting from shares withheld to cover statutory taxes		—		—		109,144		(624	)		—			—			(624	)
Exercise of stock options		198,000		—		—		—			934			—			934
Share-based compensation		—		—		—		—			1,272			—			1,272
Net loss		—		—		—		—			—			(6,258	)		(6,258	)
Balance at March 31, 2021		82,228,823	$	41		4,055,011	$	(10,623	)	$	413,958		$	(191,167	)	$	212,209

See notes to consolidated financial statements

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FLUENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(unaudited)

	*Three Months Ended March 31,*
	*2022*			*2021*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,013	)	$	(6,258	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		3,307			3,373
Non-cash loan amortization expense		68			202
Share-based compensation expense		988			1,231
Non-cash loss on early extinguishment of debt		—			2,198
Non-cash accrued compensation expense for Put/Call Consideration		—			1,746
Write-off of intangible assets		128			—
Provision for bad debt		81			(99	)
Changes in assets and liabilities, net of business acquisition:
Accounts receivable		5,127			4,764
Prepaid expenses and other current assets		451			(868	)
Other non-current assets		(13	)		(196	)
Operating lease assets and liabilities, net		(42	)		(45	)
Accounts payable		(3,348	)		5,792
Accrued expenses and other current liabilities		(6,251	)		(7,393	)
Deferred revenue		(174	)		562
Other		(85	)		(32	)
Net cash (used in) provided by operating activities		(1,776	)		4,977
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized costs included in intangible assets		(1,071	)		(816	)
Business acquisition, net of cash acquired		(971	)		—
Acquisition of property and equipment		(7	)		(20	)
Net cash used in investing activities		(2,049	)		(836	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net of debt financing costs		—			49,624
Repayments of long-term debt		(1,250	)		(41,736	)
Exercise of stock options		—			934
Prepayment penalty on debt extinguishment		—			(766	)
Taxes paid related to net share settlement of vesting of restricted stock units		(448	)		(624	)
Net cash (used in) provided by financing activities		(1,698	)		7,432
Net (decrease) increase in cash, cash equivalents and restricted cash		(5,523	)		11,573
Cash, cash equivalents and restricted cash at beginning of period		34,467			22,567
Cash, cash equivalents and restricted cash at end of period	$	28,944		$	34,140
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest	$	301		$	772
Cash paid for income taxes	$	34		$	15
Share-based compensation capitalized in intangible assets	$	27		$	41
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Liability incurred for deferred payment in connection with True North acquisition	$	860		$	—
Contingent consideration in connection with True North acquisition	$	250		$	—
Equity issued in connection with True North acquisition	$	211		$	—

See notes to consolidated financial statements

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FLUENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

(unaudited)

1. Summary of significant accounting policies

(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.

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

From time to time, the Company may enter into relationships or investments with other entities, and, in certain instances, the entity in which the Company has a relationship or investment may qualify as a variable interest entity (“VIE”). The Company consolidates a VIE in its financial statements if the Company is deemed to be the primary beneficiary of the VIE. 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. From April 1, 2020 through August 31, 2021, the Company had included Winopoly, LLC ("Winopoly") in its consolidated financial statements as a VIE (as further discussed in Note 11, Business acquisition and Note 12, Variable Interest Entity). Beginning September 1, 2021, Winopoly is a wholly-owned subsidiary of the Company.

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 December 31, 2021 ("2021 Form 10-K") filed with the SEC on March 9, 2021. The consolidated balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date included in the 2021 Form 10-K.

Principles of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant transactions among the Company and its subsidiaries have been eliminated upon consolidation.

(b) Recently issued and adopted accounting standards

In January 2016, Financial Accounting Standards Board ("FASB") issued Accounting Standards Updates ("ASU") No. 2016-13, Financial Instruments—Credit Losses ("Topic 326"), and additional changes, modifications, clarifications or interpretations thereafter, which require a reporting entity to estimate credit losses on certain types of financial instruments, and present assets held at amortized cost and available-for-sale debt securities at the amounts expected to be collected. The new guidance is effective for annual and interim periods beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform : Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("Topic 848"), which provides optional guidance to ease the potential burden in accounting for the discontinuation of a reference rate such as LIBOR, formerly known as the London Interbank Offered Rate, because of reference rate reform. The ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements and does not anticipate having material impact.

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FLUENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(unaudited)

(c) Revenue recognition

On January 1, 2018, we adopted and started applying the practical expedient offered under FASB Accounting Standards Codification ("ASC"), Revenue from Contracts with Customers, ("Topic 606"), which permits, under ASC 606-10-55-18 revenue to be recognized when control of goods or services is transferred to customers, in amounts that reflect the consideration the Company expects to be entitled to in exchange for those goods or services. 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. As of March 31, 2022 and December 31, 2021, the balance of deferred revenue was $701 and $651, respectively. The majority of the deferred revenue balance as of December 31, 2021 was recognized into revenue during the first quarter of 2022.

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. As of March 31, 2022 and December 31, 2021, unbilled revenue included in accounts receivable was $29,958 and $31,842, respectively. In line with industry practice, the unbilled revenue balance is recorded based on the Company's internally tracked conversions, net of estimated variances between this amount and the amount tracked and subsequently confirmed by customers. Substantially all amounts included within the unbilled revenue balance are invoiced to customers within the month directly following the period of service. Historical estimates related to unbilled revenue have not been materially different from actual revenue billed.

(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. 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.

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FLUENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(unaudited)

2. Loss per share

Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period, in addition to restricted stock units ("RSUs") and restricted common stock that are vested but not delivered. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock are exercised or converted into common stock and is calculated using the treasury stock method for stock options, restricted stock units, restricted stock, warrants and deferred common stock. Common equivalent shares are excluded from the calculation in loss periods, as their effects would be anti-dilutive.

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

	*Three Months Ended March 31,*
	*2022*			*2021*
Numerator:
Net loss	$	(2,013	)	$	(6,258	)
Denominator:
Weighted average shares outstanding		79,161,367			79,608,513
Weighted average restricted shares vested not delivered		1,727,684			2,284,080
Total basic weighted average shares outstanding		80,889,052			81,892,593
Dilutive effect of assumed conversion of restricted stock units		—			—
Total diluted weighted average shares outstanding		80,889,052			81,892,593
Basic and diluted loss per share:
Basic	$	(0.02	)	$	(0.08	)
Diluted	$	(0.02	)	$	(0.08	)

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,*
	*2022*		*2021*
Restricted stock units		1,985,611		3,042,873
Stock options		2,139,000		2,204,000
Warrants		833,333		833,333
Total anti-dilutive securities		4,957,944		6,080,206

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FLUENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(unaudited)

3. Intangible assets, net

Intangible assets, net, other than goodwill, consist of the following:

	*Amortization period (in years)*		*March 31, 2022*			*December 31, 2021*
Gross amount:
Software developed for internal use		3	$	10,603			9,552
Acquired proprietary technology		3-5		15,824			14,844
Customer relationships		5-10		38,068			37,886
Trade names		4-20		16,657			16,657
Domain names		20		195			191
Databases		5-10		31,292			31,292
Non-competition agreements		2-5		1,768			1,768
Total gross amount				114,407			112,190
Accumulated amortization:
Software developed for internal use				(5,864	)		(5,263	)
Acquired proprietary technology				(13,571	)		(13,402	)
Customer relationships				(31,317	)		(29,948	)
Trade names				(5,368	)		(5,145	)
Domain names				(60	)		(58	)
Databases				(21,521	)		(20,859	)
Non-competition agreements				(1,768	)		(1,768	)
Total accumulated amortization				(79,469	)		(76,443	)
Net intangible assets:
Software developed for internal use				4,739			4,289
Acquired proprietary technology				2,253			1,442
Customer relationships				6,751			7,938
Trade names				11,289			11,512
Domain names				135			133
Databases				9,771			10,433
Total intangible assets, net			$	34,938		$	35,747

The gross amounts associated with software developed for internal use primarily represent capitalized costs of internally developed software. The amounts relating to acquired proprietary technology, customer relationships, trade names, domain names, databases and non-competition agreements primarily represent the fair values of intangible assets acquired as a result of the acquisition of Fluent, LLC, effective December 8, 2015 (the "Fluent LLC Acquisition"), the acquisition of Q Interactive, LLC, effective June 8, 2016 (the "Q Interactive Acquisition"), the acquisition of substantially all the assets of AdParlor, 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 (see Note 11, Business acquisition), and the acquisition of 100% interest in True North Loyalty, LLC. (the "True North Acquisition"), effective January 1, 2022 (see Note 11, Business acquisition). In connection with the Initial Winopoly Acquisition, the Company recorded 100% equity ownership for GAAP purposes due to Winopoly's status as a VIE for which the Company is a primary beneficiary, so no further intangible assets were acquired in connection with the Full Winopoly Acquisition described in Note 11, Business acquisition.

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.

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FLUENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(unaudited)

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:

Year	*March 31, 2022*
Remainder of 2022	$	7,828
2023		6,608
2024		6,459
2025		5,033
2026		1,450
2027 and thereafter		7,560
Total	$	34,938

4. Goodwill

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 goodwill was $166,180, an increase of $1,092 from December 31, 2021, as a result of the True North Acquisition (see Note 11, Business acquisition). The balance also relates 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 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 aVIE for which the Company is a primary beneficiary, so no further goodwill was acquired in connection with the Full Winopoly Acquisition described in Note 11, Business acquisition

In accordance with ASC 350, Intangibles - Goodwill and Other, goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value. The measurement date of the Company's annual goodwill impairment test is October 1.

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.

5. 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*			*December 31, 2021*
New Credit Facility Term Loan due 2026 (less unamortized discount and financing costs of $853 and $921, respectively)	$	44,147		$	45,329
Less: Current portion of long-term debt		(5,000	)		(5,000	)
Long-term debt, net (non-current)	$	39,147		$	40,329

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FLUENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(unaudited)

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.

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. 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.

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%). The applicable margin is between 0.75% and 1.75% for base rate borrowings and 1.75% and 2.75% for LIBOR rate borrowings, depending upon the Company's consolidated leverage ratio. The opening interest rate of the New Credit Facility was 2.50% (LIBOR + 2.25%) and as of March 2022, the interest rate increased to 2.75% (LIBOR + 2.50%)

Borrowings under the Credit Agreement are secured by substantially all of the assets of Fluent, LLC and, subject to certain exclusions, each of its existing and future U.S. subsidiaries. Such assets include, subject to certain limitations, the equity interests of each of the existing and future direct and indirect U.S. subsidiaries of Fluent, LLC.

The Credit Agreement contains negative covenants that, among other things, limit Fluent, LLC's ability to: incur indebtedness; grant liens on its assets; enter into certain investments; consummate fundamental change transactions; engage in mergers or acquisitions or dispose of assets; enter into certain transactions with affiliates; make changes to its fiscal year; enter into certain restrictive agreements; and make certain restricted payments (including for dividends and stock repurchases, which are generally prohibited except in a few circumstances and/or up to specified amounts). Each of these limitations are subject to various conditions.

The Credit Agreement matures on March 31, 2026 and interest is payable monthly. 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 10-Q.

Maturities

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

Year		*March 31, 2022*
Remainder of 2022	$	3,750
2023		5,000
2024		5,000
2025		5,000
2026		26,250
Total maturities	$	45,000

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FLUENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(unaudited)

Fair value

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.

6. Income taxes

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.

As of 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 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. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. 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.

As of March 31, 2022 and December 31, 2021, the balance of unrecognized tax benefits was $1,480. The unrecognized tax benefits, if recognized, would result in an increase to net operating losses that would be subject to a valuation allowance and, accordingly, result in no impact to the Company’s annual effective tax rate. As of March 31, 2022, the Company has not accrued any interest or penalties with respect to its uncertain tax positions.

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

7. Common stock, treasury stock and warrants

Common stock

As of March 31, 2022 and December 31, 2021, the number of issued shares of common stock was 83,983,587 and 83,057,083, respectively, which included shares of treasury stock of 4,300,152 and 4,091,823, respectively.

For the three months ended March 31, 2022, the change in the number of issued shares of common stock was the result of an aggregate 926,504 shares of common stock issued upon vesting of RSUs, including 208,329 shares of common stock withheld to cover statutory taxes upon such vesting, which are reflected in treasury stock, as discussed below.

Treasury stock

As of 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.

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FLUENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

(unaudited)

The Company's share-based incentive plans allow employees the option to either make cash payment or forfeit shares of common stock upon vesting to satisfy federal and state statutory tax withholding obligations associated with equity awards. The forfeited shares of common stock may be taken into treasury stock by the Company or sold on the open market. For the 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.

Warrants

As of 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 $

SEC Form 10-Q filed by Fluent Inc.