Fluent(FLNT) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Q2 2025 financials show significant net loss, deteriorating financial position, and management's substantial doubt about going concern Consolidated Balance Sheets As of June 30, 2025, the balance sheet shows declining total assets, liabilities, and shareholders' equity Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $4,929 | $9,439 | | Total current assets | $46,948 | $65,955 | | Total assets | $74,471 | $93,617 | | Total current liabilities | $49,651 | $64,682 | | Total liabilities | $55,348 | $68,662 | | Total shareholders' equity | $19,123 | $24,955 | Consolidated Statements of Operations Q2 2025 saw significant revenue declines and continued net losses, though the net loss improved year-over-year Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $44,706 | $58,717 | $99,916 | $124,700 | | Loss from operations | $(7,106) | $(10,378) | $(14,182) | $(14,331) | | Net loss | $(7,223) | $(11,627) | $(15,492) | $(17,903) | | Basic and Diluted EPS | $(0.30) | $(0.75) | $(0.68) | $(1.11) | Consolidated Statements of Cash Flows Operating cash flow turned positive in H1 2025, while investing and financing activities continued to use cash Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $3,047 | $(13,199) | | Net cash used in investing activities | $(3,231) | $(3,542) | | Net cash (used in) provided by financing activities | $(3,198) | $7,374 | | Net decrease in cash, cash equivalents, and restricted cash | $(3,382) | $(9,367) | Notes to Consolidated Financial Statements Notes reveal a 'Going Concern' warning, debt covenant non-compliance, and ongoing capital raises to maintain liquidity - Management has concluded there is substantial doubt about the Company's ability to continue as a going concern for one year, citing declining revenue, profitability challenges, and potential insufficiency of borrowing capacity[25][28] - As of June 30, 2025, the Company was not in compliance with its financial covenants under the SLR Credit Agreement, which would have resulted in an event of default. A subsequent amendment on August 15, 2025, waived this non-compliance contingent on raising at least $8.5 million in additional capital[27][76][77] - The company has engaged in multiple private placements and warrant issuances throughout late 2024 and the first half of 2025 to raise capital, primarily from related parties including officers, directors, and the largest stockholder[111][115][117] - Subsequent to the quarter end, on August 19, 2025, the company entered into agreements for a private placement to raise approximately $10.3 million in gross proceeds to satisfy the conditions of its latest debt amendment[152][153] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes revenue decline to media supply issues and divestitures, while reiterating going concern doubt due to covenant non-compliance Second Quarter Financial Summary Q2 2025 saw a 24% revenue decrease, but net loss and Adjusted EBITDA improved compared to Q2 2024 Q2 2025 vs Q2 2024 Financial Highlights | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenue | $44.7 million | $58.7 million | | Net Loss | $7.2 million | $11.6 million | | Net Loss per Share | $0.30 | $0.75 | | Adjusted EBITDA | ($2.8 million) | ($4.5 million) | Results of Operations Q2 2025 revenue declined due to O&O media supply issues, partially offset by Commerce Media Solutions growth and workforce reductions - Revenue from owned and operated marketplaces fell to $21.4 million in Q2 2025 from $42.0 million in Q2 2024, primarily due to decreased media supply following the FTC Consent Order[196] - Commerce Media Solutions revenue grew significantly to $16.1 million in Q2 2025 from $7.3 million in Q2 2024, partially offsetting the decline in the core business[196] - The company executed workforce reductions in Q1 2025 and throughout 2024, leading to lower salary and benefit expenses across Sales & Marketing, Product Development, and General & Administrative departments[215] Liquidity and Capital Resources Liquidity remains under pressure with debt covenant non-compliance, requiring a capital raise despite ongoing going concern doubts - As of June 30, 2025, the company was not in compliance with financial covenants under its SLR Credit Agreement, triggering a potential event of default[254][264] - A Fifth Amendment to the credit agreement, dated August 15, 2025, waived the non-compliance contingent on the company raising at least $8.5 million in capital by August 19, 2025[254][265] - To meet the financing condition, the company entered into agreements on August 19, 2025, for a private placement to raise gross proceeds of approximately $10.3 million[241] - Management has concluded that there is substantial doubt about the Company's ability to continue as a going concern for one year after the issuance date of the 10-Q[255] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is exempt from market risk disclosures - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[272] Controls and Procedures Management concluded disclosure controls were effective with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[274] - No material changes were made to the internal control over financial reporting during the quarter ended June 30, 2025[275] PART II - OTHER INFORMATION Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently party to any material legal proceedings[277] Risk Factors Substantial doubt about going concern persists due to declining revenue, losses, and debt covenant non-compliance, with potential margin compression from new business investments - A primary risk factor is the substantial doubt about the company's ability to continue as a going concern, stemming from declining revenue, profitability issues, and debt covenant breaches[280][283] - As of June 30, 2025, the company was not in compliance with its financial covenants, which could have resulted in an event of default and debt acceleration. A subsequent amendment provided a waiver contingent on an additional capital raise[282] - The company's investment in its growing Commerce Media Solutions business may lead to continued margin compression, and its ability to improve profitability is uncertain[287] Unregistered Sales of Equity Securities and Use of Proceeds Certain stockholders and officers exercised pre-funded warrants, leading to the issuance of over 3.1 million common shares - In Q2 2025, a total of 3,159,527 shares of common stock were issued upon the exercise of pre-funded warrants by a principal stockholder and certain officers/directors[290]