PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business.) Fluent, Inc. specializes in performance-based digital marketing, leveraging proprietary data and media properties for customer acquisition - Fluent is a digital marketing services leader, focusing on performance-based customer acquisition for **over 500 brands** across diverse industries[83](index=83&type=chunk) - The company operates owned digital media properties and syndicated marketplaces to connect advertisers with consumers[83](index=83&type=chunk)[84](index=84&type=chunk)[119](index=119&type=chunk) - A key asset is a large, proprietary database of first-party, self-declared user information, used for targeted advertising and lead generation[85](index=85&type=chunk)[125](index=125&type=chunk) - Growth strategies include increasing traffic monetization, enhancing product offerings, expanding syndicated marketplaces, and developing an influencer marketing platform[99](index=99&type=chunk)[100](index=100&type=chunk)[149](index=149&type=chunk) - A single long-standing advertiser client accounted for **18.1% of consolidated revenue** in 2023, down from 22.1% in 2022[153](index=153&type=chunk) - The company is subject to numerous laws and regulations regarding digital advertising, telemarketing, and data privacy, having recently settled investigations with the FTC and PAAG[132](index=132&type=chunk)[133](index=133&type=chunk)[156](index=156&type=chunk) - As of December 31, 2023, the company had **277 employees** and operates under a hybrid work model[158](index=158&type=chunk) [Item 1A. Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors.) The company faces risks from intense competition, revenue concentration, evolving regulations, financial covenants, and stock volatility - The company operates in an intensely competitive digital marketing industry characterized by rapid technological change and evolving standards[142](index=142&type=chunk)[191](index=191&type=chunk) Revenue Concentration Risk (2023) | Source | Percentage of Revenue | | :--- | :--- | | Gaming Advertisers | 38% | | Single Largest Gaming Client | 18.1% | - The business is subject to numerous and evolving laws and regulations, including TCPA, CAN-SPAM, GDPR, and CCPA, increasing compliance and operational risks[27](index=27&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) - The company's Credit Agreement contains restrictive covenants that may limit operational and financial flexibility, including incurring additional debt or paying dividends[12](index=12&type=chunk)[15](index=15&type=chunk) - The company faces risks related to its common stock, including non-compliance with Nasdaq's minimum bid price, stock price volatility, and ownership concentration[4](index=4&type=chunk)[221](index=221&type=chunk)[223](index=223&type=chunk) - There is a risk of impairment for the company's goodwill and intangible assets, with substantially all goodwill from prior acquisitions impaired as of December 31, 2023[1](index=1&type=chunk)[25](index=25&type=chunk) - Limitations on the ability to collect and use user data, such as deprecation of third-party cookies and ad tracking restrictions, could diminish the value of the company's services[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) [Item 1B. Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) The company reports that there are no unresolved staff comments - Not applicable; the company has no unresolved staff comments[229](index=229&type=chunk)[278](index=278&type=chunk) [Item 1C. Cybersecurity](index=35&type=section&id=Item%201C.%20Cybersecurity.) The company's cybersecurity program, based on NIST, is overseen by IT and Legal, with no material incidents in 2023 - The company's cybersecurity program is based on the **NIST framework** and is reviewed annually[279](index=279&type=chunk) - Governance is managed by the IT and Legal teams, with the CTO and General Counsels reporting to the CEO and providing quarterly updates to the Audit Committee[231](index=231&type=chunk)[250](index=250&type=chunk) - The company did not experience a **material cybersecurity incident** during the year ended December 31, 2023[251](index=251&type=chunk) [Item 2. Properties](index=35&type=section&id=Item%202.%20Properties.) The company's headquarters are in New York, NY, with AdParlor operating from a co-working space in Toronto, Canada - The company's headquarters are located at **300 Vesey Street, 9th Floor, New York, NY**, under a lease for **42,685 square feet**[281](index=281&type=chunk) - The AdParlor business operates from a co-working space in **Toronto, Ontario, Canada**[281](index=281&type=chunk) [Item 3. Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings.) The company recently settled significant legal matters, including FTC, PAAG, and TCPA class action lawsuits, with millions in penalties - On May 26, 2023, Fluent settled with the FTC, including a **$2.5 million civil penalty** and required business practice changes[285](index=285&type=chunk) - The company settled a telemarketing investigation with the PAAG for **$0.25 million**[258](index=258&type=chunk) - The company contributed **$3.1 million** to a **$9.75 million** settlement for the TCPA class action lawsuit, *Daniel Berman v. Freedom Financial Network*[286](index=286&type=chunk) - A sales and use tax audit with the New York State Department of Taxation and Finance was settled for **$1.7 million** in March 2022[257](index=257&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company - Not applicable[259](index=259&type=chunk)[287](index=287&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=38&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) The company's common stock is listed on Nasdaq under "FLNT", with no dividends paid or planned, and no Q4 2023 share repurchases - The company's common stock is listed on The Nasdaq Capital Market under the symbol **"FLNT"**[262](index=262&type=chunk) - The company has not paid dividends and does not intend to in the foreseeable future, partly due to Credit Agreement restrictions[289](index=289&type=chunk) - No shares of the company's common stock were purchased by or on behalf of the company during the **fourth quarter of 2023**[263](index=263&type=chunk)[290](index=290&type=chunk) [Item 6. [Reserved]](index=38&type=section&id=Item%206.%20%5BReserved%5D.) This item is reserved [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) In 2023, Fluent's revenue decreased **17% to $298.4 million**, with a net loss of **$63.2 million**, impacted by macroeconomic headwinds and FTC settlement Key Financial Performance (2023 vs. 2022) | Metric (in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | $298.4 | $361.1 | | Net Loss | ($63.2) | ($123.3) | | Adjusted EBITDA | $6.8 | $22.7 | - The **17% revenue decrease** in 2023 was driven by a challenging macroeconomic environment, reduced client spending, and FTC Consent Order changes[272](index=272&type=chunk)[347](index=347&type=chunk) - The company implemented a Traffic Quality Initiative and is expanding into new syndicated performance marketplaces to source higher quality media traffic and improve customer acquisition[269](index=269&type=chunk)[270](index=270&type=chunk) - On April 2, 2024, the company entered into a new SLR Credit Agreement, providing a **$20.0 million term loan** and a **$30.0 million revolving credit facility**[396](index=396&type=chunk)[460](index=460&type=chunk) - The company recorded a goodwill impairment charge of **$55.4 million** in 2023, a significant reduction from the **$111.1 million** impairment in 2022[440](index=440&type=chunk) - As of December 31, 2023, cash and cash equivalents were **$15.8 million**, a decrease of **$9.7 million** from the prior year-end[454](index=454&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This information is not required as the company is a "smaller reporting company" - The Company is not required to provide this information as it qualifies as a "smaller reporting company"[480](index=480&type=chunk)[621](index=621&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=56&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data.) This section presents the company's audited consolidated financial statements for 2023 and 2022, including the independent auditor's report and notes - This item includes the Consolidated Financial Statements and Notes, along with the report of the independent registered public accounting firm[481](index=481&type=chunk) - The independent auditor, Grant Thornton LLP, issued an opinion that the financial statements present fairly the financial position and results of operations in conformity with U.S. GAAP[529](index=529&type=chunk) [Notes to Consolidated Financial Statements](index=72&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, a **$55.4 million** goodwill impairment, TAPP consolidation, debt refinancing, legal settlements, and deferred tax assets - The company recognized a goodwill impairment charge of **$55.4 million** in 2023, reducing goodwill to **$1.3 million**, following a **$111.1 million** impairment in 2022[402](index=402&type=chunk)[427](index=427&type=chunk) - On April 2, 2024, the company entered into a new credit agreement for a **$20 million term loan** and a **$30 million revolving facility**, replacing its previous facility[396](index=396&type=chunk) - The company settled legal matters with the FTC for **$2.5 million**, the PAAG for **$0.25 million**, and contributed **$3.1 million** to a TCPA class action settlement during 2023[393](index=393&type=chunk)[394](index=394&type=chunk)[395](index=395&type=chunk) - The company determined that TAPP, an influencer-based business, qualified as a **Variable Interest Entity (VIE)** and consolidated its operations starting January 9, 2023[386](index=386&type=chunk)[387](index=387&type=chunk) - As of December 31, 2023, the company maintained a full valuation allowance of **$14.6 million** against its net deferred tax assets due to uncertainty about their realization[433](index=433&type=chunk)[434](index=434&type=chunk) Segment Revenue (in thousands) | Segment | 2023 Revenue (in thousands) | 2022 Revenue (in thousands) | | :--- | :--- | :--- | | Fluent | $289,083 | $350,789 | | All Other | $9,316 | $10,345 | [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=57&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure.) This item is not applicable to the company - Not applicable[483](index=483&type=chunk)[484](index=484&type=chunk) [Item 9A. Controls and Procedures](index=57&type=section&id=Item%209A.%20Controls%20and%20Procedures.) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2023[486](index=486&type=chunk) - Management's assessment, based on the **COSO framework**, concluded that internal control over financial reporting was **effective** as of December 31, 2023[487](index=487&type=chunk) - A previously disclosed **material weakness** in internal control regarding non-routine transactions was **remediated** during the fourth quarter of 2023[489](index=489&type=chunk)[496](index=496&type=chunk) [Item 9B. Other Information](index=58&type=section&id=Item%209B.%20Other%20Information.) This item is not applicable to the company - Not applicable[492](index=492&type=chunk)[499](index=499&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=58&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections.) This item is not applicable to the company - Not applicable[493](index=493&type=chunk)[500](index=500&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=59&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance.) Information for this item will be incorporated by reference from the company's 2024 Annual Meeting of Stockholders proxy statement - Information for this item is incorporated by reference from the definitive proxy statement for the **2024 Annual Meeting of Stockholders**[502](index=502&type=chunk) [Item 11. Executive Compensation](index=59&type=section&id=Item%2011.%20Executive%20Compensation.) Information for this item will be incorporated by reference from the company's 2024 Annual Meeting of Stockholders proxy statement - Information for this item is incorporated by reference from the definitive proxy statement for the **2024 Annual Meeting of Stockholders**[503](index=503&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=59&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters.) Information for this item will be incorporated by reference from the company's 2024 Annual Meeting of Stockholders proxy statement - Information for this item is incorporated by reference from the definitive proxy statement for the **2024 Annual Meeting of Stockholders**[504](index=504&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=59&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence.) Information for this item will be incorporated by reference from the company's 2024 Annual Meeting of Stockholders proxy statement - Information for this item is incorporated by reference from the definitive proxy statement for the **2024 Annual Meeting of Stockholders**[505](index=505&type=chunk) [Item 14. Principal Accounting Fees and Services](index=59&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services.) Information for this item will be incorporated by reference from the company's 2024 Annual Meeting of Stockholders proxy statement - Information for this item is incorporated by reference from the definitive proxy statement for the **2024 Annual Meeting of Stockholders**[506](index=506&type=chunk) PART IV [Item 15. Exhibits, Financial Statement Schedules](index=60&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules.) This section lists all documents filed as part of the Form 10-K, including financial statements, schedules, and various exhibits - This item contains a list of all financial statements, schedules, and exhibits filed as part of the Form 10-K[511](index=511&type=chunk)[512](index=512&type=chunk) [Item 16. Form 10-K Summary](index=62&type=section&id=Item%2016.%20Form%2010-K%20Summary.) This item is not applicable to the company - Not applicable[516](index=516&type=chunk)[517](index=517&type=chunk)

NEW YORK, April 01, 2024 (GLOBE NEWSWIRE) -- Fluent, Inc. (NASDAQ:FLNT) announced today that it will report its financial results for the fourth quarter and fiscal year ended December 31, 2023, after the close of the U.S. financial markets on April 2, 2024. Fluent will host a conference call at 4:30 pm ET on the same day to discuss the results. The conference call can be accessed by phone after registering online at Fluent Conference Call or via audio at Audio Registration. The call will also be webcast sim ...

NEW YORK, April 01, 2024 (GLOBE NEWSWIRE) -- Fluent, Inc. (NASDAQ: FLNT) announced today that it will report its financial results for the fourth quarter and fiscal year ended December 31, 2023, after the close of the U.S. financial markets on April 2, 2024. Fluent will host a conference call at 4:30 pm ET on the same day to discuss the results. The conference call can be accessed by phone after registering online at Fluent Conference Call or via audio at Audio Registration. The call will also be webcast si ...

NEW YORK, March 21, 2024 (GLOBE NEWSWIRE) -- Fluent Inc., a leader in performance marketing, has selected Fyllo | Semasio, the leading provider of next-gen contextual targeting solutions powered by advanced semantic technology, to launch a contextual advertising solution with Semasio's technology built to ensure consumer privacy. The partnership couples Fluent's first-party survey data sourced exclusively from its owned and operated sites with Semasio's advanced semantic targeting. The combination results i ...

Fluent (FLNT) reported break-even quarterly earnings per share versus the Zacks Consensus Estimate of a loss of $0.03. This compares to loss of $0.01 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 100%. A quarter ago, it was expected that this data and analytics company would post earnings of $0.01 per share when it actually produced a loss of $0.05, delivering a surprise of -600%.Over the last four quarters, the company has ...

Revenue of $72.8 million for Q4 2023 and $298.4 million for FY 2023Net loss of $1.9 million for Q4 2023 and $63.2 million for FY 2023Gross profit (exclusive of depreciation and amortization) of $20.8 million for Q4 2023 and $78.5 million for FY 2023Media margin of $24.1 million for Q4 2023 and $91.3 million for FY 2023Adjusted EBITDA of $2.5 million for Q4 2023 and $6.8 million for FY 2023Adjusted net loss of $0.4 million for Q4 2023 and $7.2 million for FY 2023 NEW YORK, Feb. 29, 2024 (GLOBE NEWSWIRE) -- F ...

Revenue and Profit Performance - Q4 2023 revenue was $72.8 million, a decrease of 14.1% compared to $84.7 million in Q4 2022[2] - Full-year 2023 revenue was $298.4 million, a decrease of 17.4% compared to $361.1 million in 2022[9] - Q4 2023 gross profit (exclusive of depreciation and amortization) was $20.8 million, an increase of 4.0% over Q4 2022 and representing 29% of revenue[9] - Full-year 2023 gross profit (exclusive of depreciation and amortization) was $78.5 million, a decrease of 16.2% over 2022 and representing 26% of revenue[2] - Q4 2023 media margin was $24.1 million, an increase of 1.7% over Q4 2022 and representing 33.1% of revenue[9] - Full-year 2023 media margin was $91.3 million, a decrease of 17.0% over prior year and representing 30.6% of revenue[2] EBITDA and Net Loss - Q4 2023 adjusted EBITDA was $2.5 million, a decrease of $0.2 million over Q4 2022 and representing 3.4% of revenue[9] - Full-year 2023 adjusted EBITDA was $6.8 million, a decrease of $15.9 million over prior year and representing 2.3% of revenue[2] - Q4 2023 net loss was $1.9 million, or $0.02 per share, compared to net loss of $67.5 million, or $0.83 per share, for Q4 2022[9] - Full-year 2023 net loss was $63.2 million, or $0.77 per share, compared to net loss of $123.3 million, or $1.51 per share, for the prior year[2] - Net loss for the year ended December 31, 2023, was $63.2 million, compared to $123.3 million in 2022, showing a significant improvement[18] - Adjusted EBITDA for the year ended December 31, 2023, was $6.8 million, compared to $22.7 million in 2022[19] - Adjusted net loss for the year ended December 31, 2023, was $7.2 million, compared to an adjusted net income of $5.8 million in 2022[32] Goodwill and Impairment - Goodwill impairment for the year ended December 31, 2023, was $55.4 million, compared to $111.1 million in 2022[18] - Goodwill significantly decreased from $55.111 million in 2022 to $1.261 million in 2023, a decline of 97.7%[36] Cash Flow and Financial Position - Net cash provided by operating activities for the year ended December 31, 2023, was $8.1 million, compared to $2.0 million in 2022[18] - Cash and cash equivalents decreased from $25.547 million in 2022 to $15.804 million in 2023, a decline of 38.1%[36] - Accounts receivable decreased from $63.164 million in 2022 to $56.531 million in 2023, a decline of 10.5%[36] - Total current assets decreased from $92.217 million in 2022 to $78.406 million in 2023, a decline of 15.0%[36] - Current portion of long-term debt increased from $5.000 million in 2022 to $30.488 million in 2023, a rise of 509.8%[36] - Total liabilities decreased from $90.014 million in 2022 to $77.463 million in 2023, a decline of 13.9%[36] Strategic Initiatives and Growth Plans - The company plans to expand its media footprint through influencer and syndicated performance marketplaces[22] - The company will focus on sourcing customer traffic that meets internal quality mandates and leveraging its platform to drive consumer insights[22] - The company will continue to invest in growth initiatives with long-term potential and competitive advantage while expanding margins over time[22] - The company is managing growth through international expansion and integration of acquired business units[35] Credit Agreement and Financial Risks - On January 26, 2024, the company entered into a Third Temporary Waiver and Amendment to Credit Agreement, waiving certain covenant breaches until April 30, 2024[23] - The company faces substantial doubt about its ability to continue as a going concern due to potential non-compliance with credit agreement covenants[35] - The company is dependent on third-party publishers, internet search providers, and social media platforms for a significant portion of website traffic[35] - The company is exposed to credit risk from certain clients and pricing pressure, which may impact revenue allocation[35] Non-GAAP Financial Measures - Media margin is defined as a non-GAAP financial measure reflecting variable costs paid for media and related expenses, excluding non-media cost of revenue[28]

NEW YORK, Feb. 27, 2024 (GLOBE NEWSWIRE) -- Fluent, Inc. (NASDAQ:FLNT), a leader in performance marketing, recently surveyed the AdExchanger audience of marketing professionals to reveal valuable insights about how top brands, agencies, media companies, and retailers are strategizing around commerce media growth in 2024. "Our goal with this survey is to empower industry stakeholders with actionable insights to make informed decisions and drive success in their respective commerce media initiatives," says Ma ...

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS.](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20September%2030%2C%202023%20and%20December%2031%2C%202022) Total assets and shareholders' equity significantly decreased from December 2022 to September 2023, driven by goodwill impairment and net loss Consolidated Balance Sheets (in thousands) | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :----- | :-------------------------------- | :------------------------------- | | Total Assets | $112,090 | $183,969 | | Total Liabilities | $76,600 | $90,014 | | Total Shareholders' Equity | $35,490 | $93,955 | - **Current portion of long-term debt** **increased significantly** from **$5,000 thousand** to **$31,799 thousand**, indicating a **reclassification** due to **covenant non-compliance** and **potential acceleration**[98](index=98&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20three%20and%20nine%20months%20ended%20September%2030%2C%202023%20and%202022) Revenue declined and **net loss** increased for both Q3 and 9M 2023, primarily due to **goodwill impairment** Three Months Ended September 30 (in thousands) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :----- | :------------------ | :------------------ | :--------- | | Revenue | $66,239 | $89,046 | -26% | | Total Costs and Expenses | $100,173 | $88,419 | +13% | | Income (loss) from operations | $(33,934) | $627 | NM | | Net income (loss) | $(33,627) | $3,113 | NM | | Basic EPS | $(0.41) | $0.04 | NM | | Diluted EPS | $(0.41) | $0.04 | NM | Nine Months Ended September 30 (in thousands) | Metric | 2023 (in thousands) | 2022 (in thousands) | Change (%) | | :----- | :------------------ | :------------------ | :--------- | | Revenue | $225,638 | $276,470 | -18% | | Total Costs and Expenses | $283,986 | $328,864 | -14% | | Income (loss) from operations | $(58,348) | $(52,394) | +11% | | Net income (loss) | $(61,319) | $(55,844) | +10% | | Basic EPS | $(0.74) | $(0.69) | +7% | | Diluted EPS | $(0.74) | $(0.69) | +7% | - **Goodwill impairment** and **write-off of intangible assets significantly impacted** the three-month period, with a **charge** of **$29,705 thousand** in 2023 compared to none in 2022[73](index=73&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20for%20the%20three%20and%20nine%20months%20ended%20September%2030%2C%202023%20and%202022) Shareholders' equity significantly decreased from December 2022 to September 2023, primarily due to a substantial **net loss** Consolidated Statements of Changes in Shareholders' Equity (in thousands) | Metric | December 31, 2022 (in thousands) | September 30, 2023 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Total Shareholders' Equity | $93,955 | $35,490 | | Accumulated Deficit | $(318,300) | $(379,619) | | Common Stock Issued | 84,385,458 shares | 85,803,727 shares | | Treasury Stock | 4,300,152 shares ($11,171) | 4,611,569 shares ($11,407) | - The **net loss** of **$61,319 thousand** for the nine months ended September 30, 2023, was the **primary driver** of the **decrease** in **total shareholders' equity**[76](index=76&type=chunk) - **Share-based compensation** contributed **$3,090 thousand** to additional paid-in capital for the nine months ended September 30, 2023[76](index=76&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20nine%20months%20ended%20September%2030%2C%202023%20and%202022) **Net cash** from operations **increased** for 9M 2023 despite higher **net loss**, driven by working capital changes; **cash used in investing and financing** also **increased** Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :----------------- | :--- | :--- | | Net cash provided by operating activities | $9,695 | $7,134 | | Net cash used in investing activities | $(5,368) | $(4,297) | | Net cash used in financing activities | $(9,361) | $(4,198) | | Net decrease in cash and cash equivalents | $(5,034) | $(1,361) | | Cash and cash equivalents at end of period | $20,513 | $33,106 | - The **increase** in **cash used in investing activities** was mainly due to **increased** investment in capitalized software and the TAPP consolidation[305](index=305&type=chunk) - The **increase** in **cash used in financing activities** was primarily due to a **$5.0 million** **debt prepayment** and fees related to **debt modification**[325](index=325&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Summary of significant accounting policies](index=8&type=section&id=1.%20Summary%20of%20significant%20accounting%20policies) Accounting policies and estimates are detailed, highlighting **substantial doubt** about the company's **going concern** ability due to **debt** and **covenant issues** - Management concluded there is **substantial doubt** about the Company's ability to continue as a **going concern** through the one-year period after the issuance date, contingent on a **new Credit Agreement amendment**, **cost reductions**, and **growth opportunities**[22](index=22&type=chunk)[85](index=85&type=chunk) - **Revenue** is recognized when control of goods or services is transferred, typically based on delivering data records, generating conversions, verifying user interest, or delivering media spend[117](index=117&type=chunk) - The company uses a fair value hierarchy (Level 1, 2, 3) for assets and liabilities, with certain non-financial assets measured at Level 3 due to unobservable inputs[93](index=93&type=chunk)[143](index=143&type=chunk) [2. Income (loss) per share](index=11&type=section&id=2.%20Income%20(loss)%20per%20share) **Basic** and **diluted income (loss) per share** calculations are presented, with certain stock equivalents excluded from **diluted EPS** due to their anti-dilutive nature in **loss periods** Income (Loss) Per Share (Three Months Ended September 30) | Metric | 2023 | 2022 | | :----- | :--- | :--- | | Basic EPS | $(0.41) | $0.04 | | Diluted EPS | $(0.41) | $0.04 | Income (Loss) Per Share (Nine Months Ended September 30) | Metric | 2023 | 2022 | | :----- | :--- | :--- | | Basic EPS | $(0.74) | $(0.69) | | Diluted EPS | $(0.74) | $(0.69) | - Anti-dilutive securities, including **7,330,375 restricted stock units** and **stock options** for the nine months ended September 30, 2023, were excluded from **diluted EPS** calculations due to **loss periods**[95](index=95&type=chunk)[123](index=123&type=chunk) [3. Intangible assets, net](index=12&type=section&id=3.%20Intangible%20assets%2C%20net) **Net intangible assets decreased** to **$27,710 thousand** as of September 30, 2023, from **$28,745 thousand** at December 31, 2022, with amortization expenses recognized and impairment assessed Net Intangible Assets (in thousands) | Asset Type | September 30, 2023 | December 31, 2

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) The company's financial statements reflect decreased total assets due to a significant goodwill impairment, with positive Q2 net income and operating cash flow Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | **Total Current Assets** | $89,044 | $92,217 | ($3,173) | | **Goodwill** | $30,966 | $55,111 | ($24,145) | | **Total Assets** | $155,082 | $183,969 | ($28,887) | | **Total Current Liabilities** | $53,976 | $50,219 | $3,757 | | **Total Liabilities** | $86,947 | $90,014 | ($3,067) | | **Total Shareholders' Equity** | $68,135 | $93,955 | ($25,820) | Consolidated Statements of Operations Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | **Revenue** | $82,145 | $98,361 | $159,399 | $187,424 | | **Income (Loss) from Operations** | $6,739 | ($51,392) | ($24,414) | ($53,021) | | **Goodwill Impairment** | $0 | $55,400 | $25,700 | $55,400 | | **Net Income (Loss)** | $4,251 | ($56,944) | ($27,692) | ($58,957) | | **Diluted EPS** | $0.05 | ($0.70) | ($0.34) | ($0.73) | Consolidated Statements of Cash Flows Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $2,051 | ($1,947) | | **Net cash used in investing activities** | ($3,642) | ($3,176) | | **Net cash used in financing activities** | ($2,973) | ($2,948) | | **Net decrease in cash and cash equivalents** | ($4,564) | ($8,071) | - In Q1 2023, the company recorded a non-cash goodwill impairment charge of **$25.7 million**, with the fair value exceeding carrying value by only **5%** as of June 30, 2023, suggesting future risk[59](index=59&type=chunk)[60](index=60&type=chunk) - The company settled with the FTC for a **$2.5 million** civil penalty, with the PAAG for **$0.25 million**, and contributed **$3.1 million** to the Berman class action settlement[96](index=96&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - Subsequent to the quarter end, the company amended its Credit Agreement to avoid a projected covenant violation, requiring a **$5 million prepayment** of its term loan[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management discusses a 15% revenue decline due to market challenges, a reduced net loss from lower expenses, and a material weakness in internal controls Financial Summary Comparison (in millions) | Metric | Six Months 2023 | Six Months 2022 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $159.4 | $187.4 | -15% | | **Media Margin** | $47.9 | $58.3 | -18% | | **Adjusted EBITDA** | $6.0 | $14.2 | -58% | | **Net Loss** | ($27.7) | ($59.0) | +53% | - Revenue for the first six months of 2023 **decreased by $28.0 million (15%)** to $159.4 million, primarily due to declines in the US Rewards and employment opportunities businesses[150](index=150&type=chunk) - General and administrative expenses for Q2 2023 **decreased by 66%** to $3.9 million, mainly due to lower litigation-related costs and an insurance reimbursement[162](index=162&type=chunk) - The company recorded a **$25.7 million goodwill impairment** in H1 2023, with the reporting unit's fair value exceeding its carrying value by only **5%**, indicating continued risk[167](index=167&type=chunk)[201](index=201&type=chunk) - The company was not in compliance with a condition to draw on its Revolving Loans and amended its Credit Agreement to avoid a projected covenant violation[194](index=194&type=chunk)[197](index=197&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) As a smaller reporting company, Fluent, Inc. is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide the information required by this Item[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management identified a material weakness in internal controls over financial reporting, rendering disclosure controls ineffective as of June 30, 2023 - A **material weakness** in internal control over financial reporting was identified, relating to the company's ability to timely account for non-routine or complex financial transactions[206](index=206&type=chunk) - Due to the material weakness, the CEO and Interim CFO concluded that the company's disclosure controls and procedures were **not effective** as of June 30, 2023[206](index=206&type=chunk) - A remediation plan is being developed with Audit Committee oversight to enhance processes for identifying and accounting for such complex transactions[207](index=207&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings.) The company resolved significant legal matters through settlements with the FTC, the PAAG, and in a class action lawsuit - On May 26, 2023, Fluent agreed to a settlement with the FTC, which included a **$2.5 million civil penalty** and required changes to its business practices[217](index=217&type=chunk) - The company settled with the Pennsylvania Office of the Attorney General (PAAG) on May 19, 2023, agreeing to pay **$0.25 million** for investigatory costs[218](index=218&type=chunk) - In the 'Daniel Berman v. Freedom Financial Network' class action, the company agreed to contribute **$3.1 million** to a settlement fund[219](index=219&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors.) The company faces material risks from recent legal settlements, potential Nasdaq delisting, restrictive debt covenants, and a material weakness in internal controls - The FTC Consent Order and PAAG settlement will have a **negative short-term impact** on revenues and media margin[223](index=223&type=chunk) - The company faces a potential **delisting risk** from Nasdaq for failing to meet the minimum $1.00 bid price requirement, with a compliance deadline of October 30, 2023[228](index=228&type=chunk) - Covenants in the Credit Agreement impose significant operational restrictions, and a breach could lead to **debt acceleration**[231](index=231&type=chunk)[234](index=234&type=chunk) - Management has identified a **material weakness** in internal controls, which could adversely affect financial reporting and investor confidence[235](index=235&type=chunk)[237](index=237&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[241](index=241&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) There were no defaults upon senior securities to report for the period - None[243](index=243&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company - Not Applicable[245](index=245&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information.) The company amended its Credit Agreement, adjusting financial covenants, requiring a $5 million loan prepayment, and reducing its revolving loan facility - On August 21, 2023, Fluent, LLC entered into a fourth amendment to its Credit Agreement to adjust financial covenants, modify interest rates, and require a **$5 million prepayment** on its Term Loan[247](index=247&type=chunk) - The amendment also **reduced the Revolving Loans facility by $5 million** to a new total of $10 million[247](index=247&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits.) This section lists exhibits filed with the report, including credit agreement amendments, equity award forms, and officer certifications [Signatures](index=43&type=section&id=Signatures) The report was duly signed on August 21, 2023, by the Interim Chief Financial Officer