UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON, DC~~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

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

For the quarterly period ended September 30, ~~2017~~2022

☐

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

~~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~~ File Number 001-37893

~~COGINT,~~

FLUENT, INC.

(Exact ~~Name~~name of ~~Registrant~~registrant as ~~Specified~~specified in ~~Its Charter)~~its charter)

Delaware

77-0688094

(State or ~~Other Jurisdiction~~other jurisdiction of

~~Incorporation~~incorporation or ~~Organization)~~organization)

(I.R.S. Employer

Identification No.)

300 Vesey Street, 9th Floor

New York, New York

~~(I.R.S. Employer~~

~~Identification No.)~~

10282

(Address of principal executive offices)

(Zip Code)

~~2650 North Military Trail, Suite 300,~~

~~Boca Raton, Florida 33431~~(646) 669-7272

(~~Address of Principal Executive Offices) (Zip Code)~~Registrant's telephone number, including area code)

~~(561) 757-4000~~

~~(Registrant’s Telephone Number, Including Area Code)~~Not Applicable

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

Table of Contents

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~~ Yes ☐ NO No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). ☒ ~~YES~~ Yes ☐ NO 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~~"large accelerated filer,~~” “accelerated~~" "accelerated filer,~~” “smaller~~" "smaller reporting company,”" and ~~“emerging~~"emerging growth ~~company”~~company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐☒
~~Emerging growth 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~~ Yes ☐ NO No ☒

As of November 3, ~~2017,~~2022, the registrant had ~~59,677,382~~79,951,143 shares of common stock, $0.0005 par value per share outstanding.

Table of Contents

~~COGINT,~~

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

	(unaudited)
	September 30, 2017			December 31, 2016			*September 30, 2022*			*December 31, 2021*
ASSETS:
Current assets:
Cash and cash equivalents	$	10,323		$	10,089		$	33,106		$	34,467
Accounts receivable, net of allowance for doubtful accounts of $2,401 and $790 at September 30, 2017 and December 31, 2016, respectively		37,148			30,958
Accounts receivable, net of allowance for doubtful accounts of $491 and $313, respectively								67,550			70,228
Prepaid expenses and other current assets		2,315			2,053			2,312			2,505
Total current assets		49,786			43,100			102,968			107,200
Property and equipment, net		1,899			1,350			1,063			1,457
Operating lease right-of-use assets								5,653			6,805
Intangible assets, net		91,554			98,531			30,714			35,747
Goodwill		166,256			166,256			110,780			165,088
Other non-current assets		2,425			2,674			1,840			1,885
Total assets	$	311,920		$	311,911		$	253,018		$	318,182
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Trade accounts payable	$	12,400		$	14,725
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable							$	14,918		$	16,130
Accrued expenses and other current liabilities		15,622			6,981			27,577			33,932
Deferred revenue		444			318			1,331			651
Current portion of long-term debt		2,750			4,135			5,000			5,000
Current portion of operating lease liability								2,402			2,227
Total current liabilities		31,216			26,159			51,228			57,940
Promissory notes payable to certain shareholders, net		10,543			10,748
Long-term debt, net		49,555			35,130			36,780			40,329
Acquisition consideration payable in stock		10,225			10,225
Operating lease liability								4,238			5,692
Other non-current liabilities								723			811
Total liabilities		101,539			82,262			92,969			104,772
Contingencies (Note 10)
Shareholders' equity:
Series A preferred stock—$0.0001 par value, 10,000,000 shares authorized; 0 share issued and outstanding at September 30, 2017 and December 31, 2016		-			-
Series B preferred stock—$0.0001 par value, 10,000,000 shares authorized; 0 share issued and outstanding at September 30, 2017 and December 31, 2016		-			-
Common stock—$0.0005 par value, 200,000,000 shares authorized; 56,418,136 and 53,717,996 shares issued at September 30, 2017 and December 31, 2016, respectively; and 56,065,613 and 53,557,761 shares outstanding at September 30, 2017 and December 31, 2016, respectively		28			27
Treasury stock, at cost, 352,523 and 160,235 shares at September 30, 2017 and December 31, 2016, respectively		(1,274	)		(531	)
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 — 84,242,962 and 83,057,083, respectively; and Shares outstanding — 79,942,810 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		373,087			344,384			421,990			419,059
Accumulated deficit		(161,460	)		(114,231	)		(250,812	)		(194,968	)
Total shareholders’ equity		210,381			229,649
Total liabilities and shareholders’ equity	$	311,920		$	311,911
Total shareholders' equity								160,049			213,410
Total liabilities and shareholders' equity							$	253,018		$	318,182

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenue

$
57,248

$
52,176

$
161,038

$
132,643

Cost of revenues (exclusive of depreciation and
amortization)

37,687

39,658

109,509

97,709

Gross profit

19,561

12,518

51,529

34,934

Operating expenses:

Sales and marketing expenses

6,280

3,699

16,636

10,004

General and administrative expenses

21,365

13,614

60,938

40,148

Depreciation and amortization

3,585

3,507

10,460

9,112

Write-off of long-lived assets

-

4,055

3,626

4,055

Total operating expenses

31,230

24,875

91,660

63,319

Loss from operations

(11,669
)

(12,357
)

(40,131
)

(28,385
)
Other income (expense):

Interest expense, net

(2,426
)

(1,880
)

(7,098
)

(5,561
)
Other expenses, net

-

-

-

(1,273
)
Total other expense

(2,426
)

(1,880
)

(7,098
)

(6,834
)
Loss before income taxes

(14,095
)

(14,237
)

(47,229
)

(35,219
)
Income taxes

-

(4,493
)

-

(11,519
)
Net loss

$
(14,095
)

$
(9,744
)

$
(47,229
)

$
(23,700
)
Loss per share:

Basic and diluted

$
(0.25
)

$
(0.19
)

$
(0.86
)

$
(0.56
)
Weighted average number of shares outstanding:

Basic and diluted

55,390,247

50,654,690

54,665,776

42,100,504

Comprehensive loss:

Net comprehensive loss

$
(14,095
)

$
(9,744
)

$
(47,229
)

$
(23,700
)

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2022*			*2021*			*2022*			*2021*
Revenue	$	89,046		$	85,858		$	276,470		$	229,406
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization)		65,270			63,784			202,859			171,379
Sales and marketing		4,254			3,034			12,590			8,995
Product development		4,622			4,464			13,979			11,331
General and administrative		10,877			13,279			33,852			36,505
Depreciation and amortization		3,398			3,200			10,037			9,939
Goodwill impairment and write-off of intangible assets		—			144			55,528			343
Loss (gain) on disposal of property and equipment		(2	)		—			19			—
Total costs and expenses		88,419			87,905			328,864			238,492
Income (loss) from operations		627			(2,047	)		(52,394	)		(9,086	)
Interest expense, net		(517	)		(405	)		(1,331	)		(1,840	)
Loss on early extinguishment of debt		—			—			—			(2,964	)
Income (loss) before income taxes		110			(2,452	)		(53,725	)		(13,890	)
Income tax (expense) benefit		3,003			—			(2,119	)		1
Net income (loss)		3,113			(2,452	)		(55,844	)		(13,889	)

Basic and diluted income (loss) per share:
Basic	$	0.04		$	(0.03	)	$	(0.69	)	$	(0.17	)
Diluted	$	0.04		$	(0.03	)	$	(0.69	)	$	(0.17	)

Weighted average number of shares outstanding:
Basic		81,592,316			80,133,406			81,327,639			79,753,662
Diluted		81,699,966			80,133,406			81,327,639			79,753,662

~~CONDENSED~~ CONSOLIDATED ~~STATEMENT~~STATEMENTS OF CHANGES IN ~~SHAREHOLDERS’~~SHAREHOLDERS' EQUITY

Common stock

Treasury stock

Additional paid-in

Accumulated

Total
Shareholders'

Shares

Amount

Shares

Amount

capital

deficit

equity

Balance as at December 31, 2016

53,717,996

$
27

160,235

$
(531
)

$
344,384

$
(114,231
)

$
229,649

Vesting of restricted stock units and
   issuance of restricted stock

2,700,140

1

-

-

(1
)

-

-

Increase in treasury stock resulting
   from shares withheld to pay
   statutory taxes in connection with
   the vesting of restricted stock units

-

-

192,288

(743
)

-

-

(743
)
Share-based compensation

-

-

-

-

28,704

-

28,704

Net loss

-

-

-

-

-

(47,229
)

(47,229
)
Balance as at September 30, 2017

56,418,136

$
28

352,523

$
(1,274
)

$
373,087

$
(161,460
)

$
210,381

	*Common stock*				*Treasury stock*					*Additional paid-in*		*Accumulated*			*Total shareholders'*
	*Shares*		*Amount*		*Shares*		*Amount*			*capital*		*deficit*			*equity*
Balance at June 30, 2022		84,146,082	$	42		4,300,152	$	(11,171	)	$	421,172	$	(253,925	)	$	156,118
Vesting of restricted stock units and issuance of stock under incentive plans		96,880		—		—		—			—		—			—
Share-based compensation		—		—		—		—			818		—			818
Net income		—		—		—		—			—		3,113			3,113
Balance at September 30, 2022		84,242,962	$	42		4,300,152	$	(11,171	)	$	421,990	$	(250,812	)	$	160,049

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		1,185,879		—		—		—			211		—			211
Increase in treasury stock resulting from shares withheld to cover statutory taxes		—		—		208,329		(448	)		—		—			(448	)
Share-based compensation		—		—		—		—			2,720		—			2,720
Net loss		—		—		—		—			—		(55,844	)		(55,844	)
Balance at September 30, 2022		84,242,962	$	42		4,300,152	$	(11,171	)	$	421,990	$	(250,812	)	$	160,049

Nine Months Ended September 30,

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$
(47,229
)

$
(23,700
)
Adjustments to reconcile net loss to net cash (used in) provided by operating
activities:

Depreciation and amortization

10,460

9,112

Non-cash interest expenses and related amortization

2,268

1,839

Share-based compensation expense

27,702

21,941

Non-cash loss on exchange of warrants

-

1,273

Write-off of long-lived assets

3,626

4,055

Provision for bad debts

2,352

666

Deferred income tax benefit

-

(11,561
)
Changes in assets and liabilities:

Accounts receivable

(8,542
)

(3,301
)
Prepaid expenses and other current assets

(262
)

545

Other non-current assets

249

(549
)
Trade accounts payable

(2,325
)

5,027

Accrued expenses and other current liabilities

8,641

(533
)
Deferred revenue

126

(428
)
Net cash (used in) provided by operating activities

(2,934
)

4,386

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

(1,144
)

(722
)
Capitalized costs included in intangible assets

(5,512
)

(7,980
)
Acquisition, net of cash acquired

-

(50
)
Deposits as collateral

-

(750
)
Net cash used in investing activities

(6,656
)

(9,502
)
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of shares, net of issuance costs

-

4,724

Proceeds for debt obligations, net of debt costs

14,039

(682
)
Repayments of long-term debt

(3,472
)

(1,688
)
Taxes paid related to net share settlement of vesting of restricted stock units

(743
)

(305
)
Net cash provided by financing activities

9,824

2,049

Net increase (decrease) in cash and cash equivalents

$
234

$
(3,067
)
Cash and cash equivalents at beginning of period

10,089

13,462

Cash and cash equivalents at end of period

$
10,323

$
10,395

SUPPLEMENTAL DISCLOSURE INFORMATION

Cash paid for interest

$
4,940

$
3,795

Cash paid for income taxes

$
-

$
-

Share-based compensation expense capitalized in intangible assets

$
1,002

$
868

Issuance of common stock to a vendor for services rendered

$
-

$
146

Fair value of acquisition consideration

$
-

$
21,206

Warrants issued in relation to the term loan

$
-

$
492

	*Nine Months Ended September 30,*
	*2022*			*2021*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(55,844	)	$	(13,889	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		10,037			9,939
Non-cash loan amortization expense		201			361
Share-based compensation expense		2,652			3,577
Non-cash loss on early extinguishment of debt		—			2,198
Non-cash accrued compensation expense for Put/Call Consideration		—			3,213
Non-cash termination of Put/Call Consideration		—			(629	)
Goodwill impairment		55,400			—
Write-off of intangible assets		128			343
Loss on disposal of property and equipment		19			—
Provision for bad debt		275			113
Provision for income taxes		2,119			—
Changes in assets and liabilities, net of business acquisitions:
Accounts receivable		2,406			(14,012	)
Prepaid expenses and other current assets		277			227
Other non-current assets		52			(298	)
Operating lease assets and liabilities, net		(127	)		(136	)
Accounts payable		(1,212	)		8,493
Accrued expenses and other current liabilities		(9,616	)		(5,685	)
Deferred revenue		456			(651	)
Other		(89	)		(96	)
Net cash provided by (used in) operating activities		7,134			(6,932	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalized costs included in intangible assets		(3,316	)		(2,237	)
Business acquisitions, net of cash acquired		(971	)		—
Acquisition of property and equipment		(10	)		(26	)
Net cash used in investing activities		(4,297	)		(2,263	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt, net of debt financing costs		—			49,624
Repayments of long-term debt		(3,750	)		(45,486	)
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	)		(719	)
Proceeds from the issuance of stock		—			136
Net cash (used in) provided by financing activities		(4,198	)		3,723
Net decrease in cash, cash equivalents and restricted cash		(1,361	)		(5,472	)
Cash, cash equivalents and restricted cash at beginning of period		34,467			22,567
Cash, cash equivalents and restricted cash at end of period	$	33,106		$	17,095
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest	$	1,162		$	1,413
Cash paid for income taxes	$	603		$	356
Share-based compensation capitalized in intangible assets	$	68		$	94
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		$	—

The accompanying unaudited ~~condensed~~ consolidated financial statements have been prepared ~~for Cogint,~~by Fluent, Inc., a Delaware corporation (the "Company" or "Fluent"), in accordance with accounting principles generally accepted in the United States ~~(“US GAAP”~~("GAAP") and applicable rules and regulations of the Securities and Exchange Commission (the ~~“SEC”~~"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 ~~condensed~~ 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, ~~2017.~~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). Winopoly has been a wholly-owned subsidiary of the Company since September 1, 2021.

The information included in this ~~quarterly report~~Quarterly Report on Form ~~10-Q~~10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in ~~our~~the Company's Annual Report on Form ~~10-K~~10-K for the year ended December 31, ~~2016 (“2016~~2021 ("2021 Form ~~10-K”~~10-K") filed with the SEC on March 9, 2022.

The ~~condensed~~ consolidated balance sheet as of December 31, ~~2016~~2021 included herein was derived from the audited financial statements as of that date included in the ~~2016~~2021 Form ~~10-K, but does not include all disclosures including notes required by US GAAP.~~10-K.

~~Certain prior period items, including write-off of long-lived assets, have been reclassified to conform to the current period presentation.~~

The ~~condensed~~ 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.

In ~~May 2014,~~January 2016, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards ~~Update (“ASU”~~Updates ("ASU") No. ~~2014-09 (“~~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 ~~2014-09”~~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 has completed its assessment and concluded this update has no material impact on its consolidated financial statements.

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)~~~~.” The standard’s core principle is that a company will recognize~~("Topic 606"),which permits, under ASC 606-10-55-18, revenue to be recognized when ~~it transfers promised~~control of goods or services is transferred to customers, in ~~an amount~~amounts that ~~reflects~~reflect the consideration ~~to which~~ the ~~company~~Company expects to be entitled to in exchange for those goods or services. ~~In August 2015, FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral~~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 ~~Effective Date,” which delays~~contact center operation, or (d) deliver media spend as a part of the ~~effective date~~business of ~~ASU 2014-09 by one year. FASB also agreed to allow entities to choose to adopt~~AdParlor, LLC, a wholly-owned subsidiary of the ~~standard~~Company.

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 September 30, 2022 and December 31, 2021, unbilled revenue included in accounts receivable was $28,384 and $31,842, respectively. In ~~March 2016, FASB issued ASU No. 2016-08, “Revenue~~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 ~~Contracts~~actual revenue billed.

The preparation of consolidated financial statements in accordance with ~~Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)” (“ASU 2016-08”), which clarifies~~GAAP requires the ~~implementation guidance on principal versus agent considerations. The guidance includes indicators~~Company’s management to ~~assist an entity in evaluating whether it controls the good or the service before it is transferred~~make estimates and assumptions relating to the ~~customer. The new revenue recognition standard will be effective for public entities for annual reporting periods beginning after December 15, 2017,~~reported amounts of assets and ~~interim periods therein, that is,~~liabilities, the ~~first quarter~~disclosure of 2018. The new standard also permits two methods of adoption: retrospectively to each prior reporting period presented (full retrospective method), or retrospectively with the cumulative effect of initially applying the guidance recognizedcontingent assets and liabilities at the date of ~~initial application (the modified retrospective method). We currently do not plan to early adopt ASU 2014-09, and we anticipate adopting~~ the ~~standard using the modified retrospective method. We plan to have our preliminary assessment on the impact this guidance will have on our condensed~~ consolidated financial statements, and ~~related disclosures in~~ the ~~fourth quarter~~reported amounts of ~~2017.~~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 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. Actual results could differ from these estimates.

~~In February 2016, FASB issued ASU No. 2016-02 (“ASU 2016-02”), “Leases (Topic 842),”~~ which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet. This guidance will be effective in the first quarter of 2019 on a modified retrospective basis and early adoption is permitted. We are still evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.

~~In March 2016, FASB issued ASU No. 2016-09 (“ASU 2016-09”), “Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting,”~~ which simplifies the accounting for share-based payment transactions, including the income tax consequences, an option to recognize gross share-based compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. We adopted ASU 2016-09 in the first quarter of 2017 on a retrospective basis. As a result

The fair value of the adoption, the Company recorded an increase to the deferred tax asset balance and an increase to the corresponding valuation allowance of $301 related to the cumulative-effect adjustment as of January 1, 2017. For the three and nine months ended September 30, 2017, the Company recorded tax expense of $482 and $2,451, respectively, which was offset by a corresponding reduction in the valuation allowance.

~~In August 2016,~~ ~~FASB issued ASU No. 2016-15 (“ASU 2016-15”), “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,”~~ which provides guidance for certain cash flow issues, including contingent consideration payments made after a business combination and debt prepayment or debt extinguishment costs, etc. The guidance will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, and early adoption is permitted. We are still evaluating the impact of ASU 2016-15 on our condensed consolidated financial statements.

~~In November 2016, the FASB issued ASU 2016-18 (“ASU 2016-18”), “Restricted Cash,” which requires entities to show the changes in the total of~~Company’s cash, cash equivalents, ~~restricted cash~~accounts receivable, accounts payable and ~~restricted cash equivalents~~accrued liabilities approximate their carrying values because of the short-term nature of these instruments.

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 ~~the statement~~certain circumstances, including when there is evidence of ~~cash flows. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted.~~impairment. As of September 30, 2022, certain non-financial assets have been measured at fair value subsequent to their initial recognition. The Company ~~plans to adopt this standard on January 1, 2018, and~~determined the standard will result in changes to its consolidated statements of cash flows such that restricted cash amounts will be included in the beginning-of-period and end-of-period cash and cash equivalents totals.

~~In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (“ASU 2017-04”), “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,”~~ which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds itsestimated fair value up to be Level 3, as certain inputs used to determine fair value are unobservable, see Note 4,Goodwill, for further discussion of the ~~amount~~impairment charge.

(Amounts in ~~the first quarter of 2020 on a prospective basis,~~thousands, except share and ~~early adoption is permitted. We do not expect the standard to have a material impact on our condensed consolidated financial statements.~~

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

For the three and nine months ended September 30, 2022 and 2021, basic and diluted ~~loss~~income (loss) per share ~~for the three and nine months ended September 30, 2017 and 2016 is~~was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except share data)

2017

2016

2017

2016

Numerator:

Net loss

$
(14,095
)

$
(9,744
)

$
(47,229
)

$
(23,700
)
Denominator:

Weighted average shares outstanding - Basic and diluted

55,390,247

50,654,690

54,665,776

42,100,504

Loss per share:

Basic and diluted:

$
(0.25
)

$
(0.19
)

$
(0.86
)

$
(0.56
)

7Based 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.

(In thousands)	Amortization period	September 30, 2017			December 31, 2016
								*Amortization period (in years)*		*September 30, 2022*			*December 31, 2021*
Gross amount:
Software developed for internal use	3-10 years		17,945			11,438			3	$	12,842			9,552
Acquired proprietary technology	5 years		11,381			13,532			3-5		15,871			14,844
Customer relationships	7-10 years		34,986			34,986			5-10		38,068			37,886
Trade names	20 years		16,357			18,057			4-20		16,657			16,657
Domain names	20 years		199			191			20		195			191
Databases	5-10 years		31,292			31,292			5-10		31,292			31,292
Non-competition agreements	2-5 years		1,768			1,768			2-5		1,768			1,768
			113,928			111,264
Total gross amount											116,693			112,190
Accumulated amortization:
Software developed for internal use			(1,312	)		(505	)				(7,301	)		(5,263	)
Acquired proprietary technology			(4,124	)		(2,660	)				(14,131	)		(13,402	)
Customer relationships			(8,431	)		(4,840	)				(34,053	)		(29,948	)
Trade names			(1,482	)		(916	)				(5,815	)		(5,145	)
Domain names			(17	)		(10	)				(65	)		(58	)
Databases			(6,061	)		(3,354	)				(22,846	)		(20,859	)
Non-competition agreements			(947	)		(448	)				(1,768	)		(1,768	)
			(22,374	)		(12,733	)
Total accumulated amortization											(85,979	)		(76,443	)
Net intangible assets:
Software developed for internal use			16,633			10,933					5,541			4,289
Acquired proprietary technology			7,257			10,872					1,740			1,442
Customer relationships			26,555			30,146					4,015			7,938
Trade names			14,875			17,141					10,842			11,512
Domain names			182			181					130			133
Databases			25,231			27,938					8,446			10,433
Non-competition agreements			821			1,320
		$	91,554		$	98,531
Total intangible assets, net										$	30,714		$	35,747

The gross ~~amount~~amounts associated with software developed for internal use ~~mainly~~primarily represents the capitalized costs of internally developed software. The amounts relating to acquired proprietary technology, customer relationships, trade names, domain names, databases and non-competition agreements ~~mainly~~primarily represent the fair values of intangible assets acquired as a result of the acquisition of Fluent, LLC, ~~(“Fluent”)~~ effective on December 8, 2015 ~~(the “Fluent Acquisition”~~(the "Fluent LLC Acquisition") ~~and~~ , the acquisition of Q Interactive, LLC, ~~(“Q Interactive”)~~ effective on 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 ~~“Q Interactive Acquisition”~~"Initial Winopoly Acquisition"), effective April 1, 2020 (Note11, 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.

~~On January 18, 2017,~~During the ~~Company’s management~~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 ~~Board~~conducted another recoverability test of ~~Directors approved a plan~~its long-lived assets. Based on the results of the recoverability tests, which measured the Company's projected undiscounted cash flows as compared to ~~merge and fully integrate Q Interactive’s business into Fluent (the “Q Interactive Integration”).~~ ~~As a result,~~ the ~~remaining balance~~carrying value of the asset group, the Company determined that its long-lived assets were not impaired as of ~~$3,626, relating primarily to~~June 30, 2022 or September 30, 2022. The Company believes that the ~~acquired proprietary technology and trade names acquired~~assumptions utilized in the ~~Q Interactive Acquisition, was written off to operating expenses as a write-off~~impairment tests, including the estimation of ~~long-lived assets.~~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.

Amortization ~~expenses~~expense of ~~$3,362~~ $3,292and ~~$3,333~~$3,006 for the three months ended September 30, ~~2017~~ 2022 and ~~2016,~~2021, respectively, and ~~$9,931~~ $9,651and ~~$8,726~~$9,352, for the nine months ended September 30, ~~2017~~ 2022 and ~~2016,~~2021, respectively, ~~were~~is included in depreciation and amortization ~~expenses.~~expenses in the consolidated statements of operations. As of September 30, ~~2017,~~2022, intangible assets with a carrying amount of ~~$3,444,~~$1,034, included in the gross ~~amounts~~amount of software developed for internal use, have not ~~been amortized. These intangible assets will start to amortize when~~ commenced amortization, as they are ~~put into~~not ready for their intended use.

As of September 30, ~~2017,~~2022, estimated amortization ~~expenses~~expense related to the ~~Company’s~~Company's intangible assets for the remainder of ~~2017~~2022 and through ~~2022~~2027 and thereafter are as follows:

Goodwill represents the ~~cost~~consideration paid in excess of the fair value of ~~the~~ net assets acquired in a business combination. As of September 30, ~~2017 and December 31, 2016,~~2022, the total balance of goodwill ~~includes $5,227~~ 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 11,Business acquisition). The balance also includes goodwill from the acquisition of ~~Interactive Data, LLC (“Interactive Data”) effective on October 2, 2014, $155,645 as a result of~~ the Fluent LLC Acquisition, ~~effective on December 8, 2015, and $5,384 as a result of~~ the Q Interactive Acquisition, ~~effective on June 8, 2016.~~the AdParlor Acquisition, and the Initial Winopoly Acquisition (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 goodwill was acquired in connection with the Full Winopoly Acquisition described in Note 11,Business acquisition.

In accordance with ASC ~~Topic~~ 350,“Intangibles - Goodwill and Other,” goodwill is ~~tested~~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 ~~our~~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 $162,000 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, ~~2017,~~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 ~~no events or changes~~reasonable.

(Amounts in ~~circumstances to indicate that goodwill is impaired.~~thousands, except share and per share data)

Long-term debt, net ~~including promissory notes payable~~of unamortized discount and financing costs, related to ~~certain shareholders, net, as of September 30, 2017, consist~~the Refinanced Term Loan and the New Credit Facility consisted of the following:

12% term loan,

12% incremental term loan,

10% promissory notes,

(In thousands)

due 2020

due 2020

due 2021

Total

Principal amount

$
41,203

$
14,485

$
10,000

$
65,688

Less: unamortized debt issuance costs

3,156

783

330

4,269

Add: PIK interest accrued to the principal balance

546

10

873

1,429

Long-term debt, net

38,593

13,712

10,543

62,848

Less: Current portion of long-term debt

2,062

688

-

2,750

Long-term debt, net (non-current)

$
36,531

$
13,024

$
10,543

$
60,098

~~Long-term debt, net, including promissory notes payable to certain shareholders, net, as of December~~

On March 31, ~~2016, consist~~2021, Fluent, LLC, a wholly-owned subsidiary of the ~~following:~~

12% term loan,

10% promissory notes,

(In thousands)

due 2020

due 2021

Total

Principal amount

$
42,750

10,000

$
52,750

Less: unamortized debt issuance costs

3,964

384

4,348

Add: PIK interest accrued to the principal balance

479

1,132

1,611

Long-term debt, net

39,265

10,748

50,013

Less: Current portion of long-term debt

4,135

-

4,135

Long-term debt, net (non-current)

$
35,130

$
10,748

$
45,878

On Company redeemed in full $38,318 in the aggregate principal amount of a term loan entered into on December 8, 2015 and due March 26, 2023 (the "Refinanced Term Loan"), prior to maturity, resulting in a loss of $2,964 as the cost of early extinguishment of the debt, $766 of which was a cash payment.

On March 31, 2021, Fluent, LLC entered into ana credit agreement ~~(“Credit~~(the “Credit Agreement”) with certain ~~financial institutions,~~subsidiaries of Fluent, LLC as guarantors, and Citizens Bank, N.A. as administrative agent, lead arranger and bookrunner. The Credit Agreement provides for a term loan in the aggregate principal amount of ~~$45,000 (“Term~~$50,000 funded on the closing date (the “Term Loan”), along with ~~Whitehorse Finance, Inc. acting as~~an undrawn revolving credit facility of up to $15,000 (the "Revolving Loans," and together with the ~~agent (the “Term~~Term Loan, ~~Agent”~~the "New Credit Facility"). ~~Fluent’s obligations in respect~~

The proceeds of the Term Loan ~~are guaranteed by~~were used to repay all outstanding amounts due under the ~~Company and substantially all of the other direct and indirect subsidiaries of the Company and secured by substantially all of such entities’ assets. The Credit Agreement has a five year term.~~

~~Prior to the Amendment No. 3 to Credit Agreement entered into on January 19, 2017 (the “Amendment No. 3”),~~ payments of principal in the amount of $563 each were due on the last day of each quarter, commencing March 31, 2016. Additionally, 50% of excess cash flow of Fluent and its subsidiaries for the immediately preceding fiscal year is required, in theRefinanced Term Loan, ~~Agent’s sole discretion, to be paid towards the Term Loan obligations, commencing with the fiscal year ending December 31, 2016. As a result of the excess cash flow~~including transaction fees and expenses, and for the year ended December 31, 2016, we reclassified a total amount of $1,885 into current portion of long-term debt in the condensed consolidated balance sheet as of December 31, 2016. Because the Term Loan Agent refused the prepayment, we reclassified the $1,885 back to non-current portion of long-term debt in the first quarter of 2017. The Credit Agreement provides for certain other customary mandatory prepayments upon certain events, and also provides for certain prepayment premiums during the first four years of the Term Loan, provided that the prepayment premiums are not applicable to scheduled payments of principal, the required excess cash flow payments and certain other required prepayments.

Debt issuance costs, including the fair value of warrants issued to the Term Loan Agent and its affiliates in prior periods (“Whitehorse Warrants”), are amortized into interest expense over the term of the Term Loan using the interest method. The Whitehorse Warrants include warrants to purchase, in aggregate, 300,000 shares of common stock, ~~with an exercise price of $5.08 per share.~~ ~~We estimate the fair value of such warrants on the date of grant using a Black-Scholes pricing model and recognized them as debt issuance costs and additional paid-in capital.~~

The Credit Agreement, as amended, contains customary representations and warranties, covenants (including certain financial covenants), and events of default, upon the occurrence of which the Term Loan Agent may accelerate the obligations under the Credit Agreement. Certain restrictive covenants impose limitations on the way we conduct our business, including limitations on the amount of additional debt we can incur and restricts our ability to make certain investmentsworking capital and other ~~restricted payments, including certain intercompany payments of cash and other property.~~ The financial covenants include the requirement that the Company and its subsidiaries attain, on a quarterly basis, certain minimum EBITDA thresholds for the immediately preceding twelve-month period, Fluent and its subsidiaries attain, on a quarterly basis, certain minimum EBITDA thresholds for the immediately preceding twelve-month period, Fluent and its subsidiaries meet certain leverage ratios on a quarterly basis, Fluent and its subsidiaries meet certain fixed charge coverage ratios on a quarterly basis, and Fluent and its subsidiaries maintain at all times cash and cash equivalent balances of at least $2.0 million (or such lesser amount agreed to by the Term Loan Agent), in the aggregate. On August 7, 2017, the Company and its subsidiaries entered into Amendment No. 4 to the Credit Agreement (“Amendment No. 4”). Amendment No. 4 provides that there shall be no requirement that the Company and its subsidiaries meet any minimum EBITDA threshold for the twelve-month period ended June 30, 2017. The requirement that Fluent and its subsidiaries meet the required minimum EBITDA threshold for the twelve-month period ended June 30, 2017 was not impacted by Amendment No. 4. As of June 30, 2017, the Company was in compliance with the covenantsgeneral corporate purposes.

Borrowings under the Credit Agreement ~~after giving effect~~bear interest at a rate per annum equal to ~~Amendment No. 4. On November 3, 2017,~~an applicable margin, plus, at the ~~Company~~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 ~~its subsidiaries entered into Amendment No. 5~~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 ~~the Credit Agreement (“Amendment No. 5”~~4.87% (LIBOR + 1.75%)~~. Amendment No. 5 provides for certain amendments to the definition~~ as of EBITDA by adding back acquisition and restructuring costs resulting from the Business Combination Transaction (as defined below), and non-recurring costs relating to litigation with TRADS that we settled on July 22, 2017. Amendment No. 5 also amends the minimum EBITDA threshold for the Company and its subsidiaries beginning with the quarter ended September 30, 2017. In addition, Amendment No. 5 allows for additional transfer of cash from Fluent to the Company, provided that Fluent maintains a minimum cash balance. As of September 30, 2017, the Company was in compliance with the covenants2022.

Borrowings under the Credit Agreement ~~after giving effect to Amendment No. 5.~~

On January 19, 2017, Fluent entered into Amendment No. 3, amending Fluent's Term Loan facility dated December 8, 2015. The Amendment No. 3, among other things, provides for a new term loan in the principal amount of $15,000 ("Incremental Term Loan"), subject to the terms and conditions of the Amendment No. 3, and modifies certain other Credit Agreement provisions, including certain financial covenants and related definitions. The entire Incremental Term Loan of $14,039, net of debt issuance costs of $961, was received on February 1, 2017.

~~The Incremental Term Loan and Fluent's existing Term Loan (collectively, the "Term Loans") are guaranteed by the Company and the other direct and indirect subsidiaries of the Company, and~~ 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 ~~Company~~equity interests of each of the existing and ~~its~~future direct and indirect U.S. subsidiaries ~~including~~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 ~~each case,~~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 ~~an equal~~March 31,2026 and ~~ratable basis. The Term Loans accrue~~ interest ~~at the rate of: (a) either, at Fluent's option, LIBOR (subject to a floor of 0.50%) plus 10.5% per annum, or base rate plus 9.5% per annum,~~is payable ~~in cash, plus (b) 1% per annum, payable, at Fluent's option, in either cash or in-kind. Payments of~~monthly. Scheduled principal amortization of the Term ~~Loans are $688~~Loan is $1,250 per quarter, ~~replacing~~which commenced with the ~~original $563 for the Term Loan, payable at the end of each calendar~~fiscal quarter ~~commencing on March 31, 2017. The Term Loans mature on December 8, 2020.~~

~~On December 8, 2015,~~ended June 30, 2021. At September 30, 2022, the Company ~~entered into and consummated the promissory notes financing (the “Promissory Notes”)~~was in compliance with ~~each of Frost Gamma Investment Trust (“Frost Gamma”),~~ ~~an affiliate of Phillip Frost, M.D., the Vice Chairman~~all of the ~~Company’s Board of Directors,~~ ~~Michael Brauser, Chairman of the Board of Directors,~~financial and another investor (collectively, the “Promissory Note Investors”), pursuant to which the Company issued Promissory Notes of $5.0 million to Frost Gamma, $4.0 million to Michael Brauser, and $1.0 million to another investor, for an aggregate financing in the amount of $10.0 million. The Promissory Note Investors received (i) a promissory note in the principal amount equal to the amount of their respective promissory notes, with a rate of interest of 10% per annum, which interest shall be capitalized monthly by adding to the outstanding principal amount of such Promissory Notes, and (ii) a grant of 100 shares of convertible Series B preferred stock (“Series B Preferred”) for each $1.0 million increment of their respective Promissory Notes, with a total of 1,000 shares of Series B Preferred granted (“Promissory Note Shares”), pursuant to fee letter agreements. Each share of Series B Preferred automatically converted into 50 shares of common stock in February 2016.

Under the terms of the Promissory Notes, the Company is required to repay the principal and all accrued interest six months after the repayment of all amounts due under the Credit Agreement, except that the Company may repay the Promissory Notes earlier from the proceeds of a round of public equity financing. During the nine months ended September 30, 2017, the Company repaid accrued paid-in-kind (“PIK”) interest of $533, $426, and $107 to Frost Gamma, Michael Brauser and another investor, respectively.

The fair value of Promissory Note Shares of $413 was calculated by multiplying the closing common stock market price of the Company on December 8, 2015 of $8.45, with the total shares granted, as converted, which was recognized as debt issuance costs.

In connection with the Promissory Notes, on December 8, 2015, the Company, each lender under the Promissory Notes, and the Term Loan Agent, etc. entered into a Subordination Agreement (the “Subordination Agreement”), pursuant to which the debt under the Promissory Notes was made expressly subordinate to the debtother covenants under the Credit Agreement. ~~In addition,~~ Effective September 1, 2021, the ~~Subordination~~Credit Agreement ~~restricts~~was amended to add Winopoly as a party to that agreement following the ~~terms~~consummation of the ~~Promissory Notes. The terms~~Full Winopoly Acquisition which transaction is more fully described in Note 11,Business acquisition, of this Quarterly Report on Form 10-Q. Effective April 29,2022,the ~~Subordination~~Credit Agreement ~~shall remain in effect until such time that all obligations under~~was amended to add certain additional subsidiaries of Fluent, LLC as parties.

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

~~The net balance of Promissory Notes is presented as promissory notes payable to certain shareholders, net, in the condensed consolidated balance sheet.~~(unaudited)

As mentioned above, the Company’s long-term debt outstanding as of September 30, 2017 represented 1) the Term Loans with interest at LIBOR (with a floor of 0.5%) plus 10.5% per annum and 2) the Promissory Notes pursuant to the agreements effective December 8, 2015, with a rate of interest of 10% per annum. Considering the Term Loans have a variable interest rate, and interest rates have been relatively stable, we regard the fair values of the long-term debt to approximate their carrying amount as of September 30, 2017. This fair value assessment represents Level 2 measurements.

The Company is subject to federal and state income taxes in the United States. ~~Our~~The tax provision for interim periods is determined using an estimate of ~~our~~the Company's annual effective tax rate. The Company updates its estimated annual effective tax rate ~~adjusted for discrete items arising in that quarter. In each quarter, we update our estimate of the annual effective tax rate,~~on a quarterly basis and, if ~~our estimated annual tax rate~~the estimate changes, ~~we make~~ a cumulative adjustment is made.

As of 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 ~~quarter.~~ the Company is able to achieve and the net deferred tax assets available.

For thenine 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 ~~34%~~ ~~for~~21%, with such differences resulting primarily from the ~~three and nine months ended September 30, 2017 and 2016.~~ ~~For the three and nine months ended September 30, 2017, the effective income tax rate was 0%, and the difference is mainly the result~~application of the full valuation allowance ~~applied~~ against the ~~Company’s~~Company's deferred tax assets and state income taxes. For the three and nine months ended September 30, 2016, the effective income tax rate was 32% and 33%, respectively, and this difference is primarily due to state income taxes and nondeductible expenses.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 atas of the reporting ~~date.~~dates. For those tax positions where it is ~~more-likely-than-not~~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~~ more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the ~~Company’s~~Company's financial statements.

As of September 30, 2022 and December 31, 2021, the balance of unrecognized tax benefits ~~as of September 30, 2017 and December 31, 2016~~ was $1,668. In the Company’s tax return filed for the year ended December 31, 2015, a loss of $4,375, resulting from the disposal of all assets and liabilities related to the Company’s Chinese and British Virgin Islands based subsidiaries (collectively, the “Advertising Business”) in 2015, was included. This uncertain tax position of $1,668 is reflected as a reduction in deferred tax assets. Based on management’s assessment, no tax benefit has been recognized for the loss mentioned above. This$1,480. The unrecognized tax ~~benefit,~~benefits, if recognized, would ~~favorably affect~~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 before application~~rate. As of ~~any valuation allowance. The~~September 30, 2022, the Company has not accrued any interest or penalties ~~as of September 30, 2017~~ 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.

As of September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, the number of issued shares of common stock was ~~56,418,136~~84,242,962 and ~~53,717,996,~~83,057,083, respectively, which included shares of treasury stock of ~~352,523~~4,300,152 and ~~160,235,~~4,091,823, respectively.

For the nine months ended September 30, 2022, the change in the number of issued shares of common stock ~~during~~was the ~~nine months ended September 30, 2017 was due to the issuance~~result of an aggregate ~~of 2,700,140~~1,185,879 shares of common stock ~~from the~~issued upon vesting of ~~restricted stock units (“RSUs”) and the issuance of restricted stock,~~RSUs, including ~~192,288~~208,329 shares of common stock withheld to ~~pay withholding~~cover statutory taxes upon such vesting, which are reflected in treasury ~~stock.~~stock, as discussed below.

As of September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, the Company held shares of treasury stock of ~~352,523~~4,300,152 and ~~160,235,~~4,091,823, respectively with a cost of ~~$1,274~~$11,171 and ~~$531,~~$10,723, respectively. ~~This increase~~

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 ~~during~~by the Company or sold on the open market. For the nine months ended September 30, ~~2017 was due to~~2022, 208,329 shares of common stock were withheld to ~~pay withholding~~cover statutory taxes ~~upon the vesting~~owed by certain employees for this purpose, all of ~~RSUs.~~which were taken into treasury stock. See Note 8, Share-based compensation.

On May 22, 2022, the warrants to purchase an aggregate of ~~2,220,102~~833,333 shares of common stock ~~were outstanding, with exercise~~at prices ranging from $3.75 to ~~$10.00~~$6.00 per ~~share.~~share expired, unexercised.

On June 8, 2022, the stockholders of ~~September 30, 2017,~~ the Company ~~maintains two share-based incentive plans:~~approved the ~~2008 Share~~Fluent, Inc. 2022 Omnibus Equity Incentive Plan (the ~~“2008 Plan”~~"2022 Plan")~~, which was carried forward as a result~~ that authorized for issuance 15,422,523 shares of the ~~reverse acquisition between~~Company's common stock. As of September 30, 2022, the Company ~~and The Best One,~~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. ~~(“TBO”) consummated on March 21, 2015, whereby TBO became a wholly-owned subsidiary of the Company (the “TBO Merger”), and the Cogint, Inc. 2015~~2018 Stock Incentive Plan (the ~~“2015 Plan”~~"Prior Plan"), approved during the annual meeting of stockholders on June 2, 2015, which authorized the issuance of 2,500,000 shares of common stock. The total shares of common stock authorized for issuance under the 2015 Plan was increased on June 3, 2016 to 12,500,000 shares, and subsequently increased on September 6, 2017 to 13,500,000 shares, which subsequent increase becomes effective 20 days after the mailing of the stockholder notice on Schedule 14C.. The primary purpose of the ~~2015 Plan~~plans is to attract, retain, reward, and motivate certain individuals by providing them with ~~an opportunity~~opportunities to acquire or increase ~~a proprietary interest~~their ownership interests in the ~~Company~~Company.

(Amounts in thousands, except share and ~~to incentivize them to expend maximum effort for the growth and success~~per share data)

The Compensation Committee of the ~~Company, so as to strengthen the mutuality of the interests between such individuals and the stockholders of the Company.~~

As of September 30, 2017, there were 180,568 and 3,838,658 shares (inclusive of the increase of 1,000,000 shares to the 2015 Plan approved on September 6, 2017) of common stock reserved for issuance under the 2008 Plan and the 2015 Plan, respectively.

Marlin Capital Investments, LLC (“Marlin Capital”), a company which our Chairman Michael Brauser owns 50% and is one of two managers, holds RSUs representing the right to receive 2,000,000 shares of the Company’s common stock, which RSUs are outside of the 2008 Plan and 2015 Plan. These RSUs vest annually beginning from October 13, 2015 only if certain performance goals of the Company are met. The shares underlying such RSUs will not be delivered until October 13, 2018, unless there is a change of control of the Company. Share-based compensation expenses of $315 and $315 for the three months ended September 30, 2017 and 2016, respectively, and $937 and $937 for the nine months ended September 30, 2017 and 2016, respectively, associated with shares under the Marlin Capital agreement, were recognized.

Effective November 16, 2015, the Company entered into an employment agreement with Michael Brauser (the “Michael Brauser Employment Agreement”) relating to his service as Executive Chairman of theCompany's Board of Directors ~~pursuant~~approved the grant of stock options to certain Company executives, which ~~Michael Brauser will receive an annual base salary of $25 payable in accordance with~~were issued on February 1, 2019, December 20, 2019, March 1, 2020, and March 1, 2021, under the ~~Company’s general payroll practices and RSUs outside~~Prior Plan. Subject to continuing service, 50% of the ~~2008 Plan~~shares subject to these stock options will vest if the Company's stock price remains above 125.00%, 133.33%, 133.33% and 2015 Plan representing the right to receive 5,000,000 shares of common stock. The issuance of shares of common stock underlying the RSUs was approved by the stockholders at the annual meeting in 2016. These RSUs vest ratably over a four-year period; provided, however, that no portion133.33%, respectively, of the ~~RSUs shall~~exercise price for twenty consecutive trading days, and the remaining 50% of the shares subject to these stock options will vest ~~unless~~if the Company's stock price remains above 156.25%, 177.78%, 177.78% and ~~until~~177.78%, respectively, of the ~~Company has gross revenue in excess~~exercise price for twenty consecutive trading days; provided, that no shares will vest prior to the first anniversary of ~~$100.0 million~~ the grant date. As of September 30, 2022, the first condition for the stock options issued on February 1, 2019, December 20, 2019 and ~~positive EBITDA in any one fiscal year during~~March 1, 2020 had been met and the ~~vesting period (the “Vesting Conditions”). In addition, such RSUs~~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 ~~upon a Company change in control, termination of Michael Brauser without cause, termination by Michael Brauser for good reason, or Michael Brauser’s death or disability.~~on such date. The Company determined that the Vesting Conditions were met, effective March 14, 2017, and as a result, 1,250,000 shares were vested, but Michael Brauser has elected to defer delivery of any vested RSUs until his separation from service from the Company or death or disability. ~~Effective on June 23, 2017, the Michael Brauser Employment Agreement was terminated. Mr. Brauser continues to serve as Chairman~~fair value of the ~~Board of Directors of~~stock options granted was estimated at the ~~Company.~~ On September 6, 2017, the Company entered into a consulting services agreement with Mr. Brauser, effective on June 23, 2017, for a term of four years (the “Consulting Agreement”), under which Mr. Brauser will serve as a strategic advisor to cogint but will receive no salary for such services. In consideration for Mr. Brauser’s services, the Consulting Agreement provides for continued vesting on all outstanding RSUs granted to Mr. Brausertrading day before the ~~effective~~ date of grant using a Monte Carlo simulation model. The key assumptions utilized to calculate the ~~Consulting Agreement.~~grant-date fair values for these awards are summarized below:

For the time Dr. Phillip Frost joined the Board of Directors of the Company as Vice Chairman, Frost Gamma was granted 3,000,000 RSUs, outside of the 2008 Plan and 2015 Plan. The issuance of shares of common stock underlying such RSUs was approved by the stockholders at the annual meeting in 2016. These grants were fully vested on December 8, 2015, but Frost Gamma has elected to defer delivery of any vested RSUs until Dr. Phillip Frost’s separation from service from the Company or death or disability.

~~Details of share options activity during the~~ nine months ended September 30, ~~2017~~2022, details of stock option activity were as follows:

The aggregate intrinsic value amounts in the table above represent the difference between the closing price of the ~~Company’s~~Company's common stock ~~on September 30, 2017~~at the end of ~~$4.90~~the reporting period and the corresponding exercise ~~price,~~prices, multiplied by the number of in-the-money stock options as of the same date.

For the nine months ended September 30, 2022, the unvested balance of stock options ~~is shown below~~was as follows:

Compensation expense recognized for stock options of $0 and $105 for the ~~nine~~three months ended September 30, ~~2017:~~

~~Compensation expenses recognized from employee stock options~~2022 and 2021, respectively, and $125and$395 for the ~~three~~nine months ended September 30, ~~2017~~ 2022 and ~~2016 of $31~~2021, respectively, was recorded in sales and ~~$35, respectively,~~marketing, product development and ~~$91 and $82 for the nine months ended September 30, 2017 and 2016, respectively, were recognized in~~ general and administrative expenses in the ~~condensed~~ consolidated statements of operations. As of September 30, ~~2017,~~2022, there was $0 of unrecognized share-based compensation ~~cost relating~~with respect to ~~granted share options amounted to $274, which are expected to be recognized over a weighted average period of 2.2 years.~~outstanding stock options.

For the nine months ended September 30, 2022, details of unvested ~~RSUs~~RSU and restricted stock activity ~~during the nine months ended September 30, 2017~~ were as follows:

Compensation expense recognized ~~share-based compensation (included~~for RSUs and restricted stock of $818 and $1,063 for the three months ended September 30, 2022 and 2021, respectively, and $2,595and$3,276for the nine months ended September 30, 2022 and 2021, respectively, was recorded in sales and marketing, ~~expenses,~~product development and general and administrative ~~expenses~~ in the ~~condensed~~ consolidated statements of operations, and intangible assets, net in the ~~condensed~~ consolidated balance sheets) for these RSUs and restricted stock of $11,461 and $7,615 for the three months ended September 30, 2017 and 2016, respectively, and $28,613 and $22,561 for the nine months ended September 30, 2017 and 2016, respectively.sheets. The fair value of the RSUs and restricted stock was estimated using the ~~market value~~closing prices of the ~~Company’s~~Company's common stock on the ~~date~~dates of ~~grant, which was equivalent to the closing price of the common stock on the grant date.~~grant.

As of September 30, ~~2017,~~2022, unrecognized share-based compensation ~~expenses~~expense associated with the granted RSUs and ~~restricted~~ stock options amounted to ~~$59,625,~~$4,190, which ~~are~~is expected to be recognized over a weighted average period of ~~1.9~~1.4 years.

~~The Company issues shares to certain third-party vendors from time to time~~FLUENT, INC.

(Amounts in ~~lieu of cash for services rendered. Stock~~thousands, except share and per share data)

For the three and nine months ended September 30, 2022 and 2021, share-based compensation ~~expenses for shares issued to third-party vendors of $0 and $37~~ for the three months ended September 30, 2017 and 2016, respectively, and $0 and $166 for the nine months ended September 30, 2017 and 2016, respectively, were recognized in general and administrative expenses.

~~The share-based compensation expenses for the Company’s share~~Company's stock options, RSUs, and common stock awards were allocated to the following accounts in the ~~condensed~~consolidated financial statements:

The Company identifies operating segments as components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and performance assessment. The profitability measure employed by CODM is earnings before interest, taxes, depreciation and amortization ("EBITDA"). As of September 30, 2022, the Company has two operating segments and two corresponding reporting units, “Fluent” and “All Other,” and one reportable segment. “All Other” represents the operating results of AdParlor, LLC, and is included for purposes of reconciliation of the respective balances below to the consolidated financial statements. “Fluent,” 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 nine months ended September 30, 2022 and 2021 are shown in the following tables below:

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

For the nine months ended September 30, 2022, the Company identified an international customer within the Fluent segment with revenue in the amount of $59,175which represents 21% of consolidated revenue.

In the ordinary course of business, the Company is subject to loss contingencies that cover a range of matters. An estimated loss from a loss contingency, such as a legal proceeding or claim, is accrued if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued, the Company evaluates, among other factors, the degree of probability and the ability to reasonably estimate the amount of any such loss.

On October 26, 2018, the Company received a subpoena from the New York Attorney General’s Office (“NY AG”) regarding compliance with New York Executive Law § 63(12) and New York General Business Law § 349, as they relate to the collection, use, or disclosure of information from or about consumers or individuals, as such information was submitted to the Federal Communication Commission (“FCC”) in connection with the FCC’s rulemaking proceeding captioned “Restoring Internet Freedom,” WC Docket No.17-108. On May 6, 2021, the Company and the NY AG executed an Assurance of Discontinuance (the “AOD”) to resolve this matter. The AOD imposed injunctive provisions on the Company’s practices with regard to political advocacy campaigns, most of which the Company had already implemented, and imposed a $3,700 penalty, which was in line with the Company's accrual as of March 31, 2021 and paid in full as of June 30, 2021.

On December 13, 2018, the Company received a subpoena from the United States Department of Justice (“DOJ”) regarding the same issue. On March 12, 2020, the Company received a subpoena from the Office of the Attorney General of the District of Columbia ("DC AG") regarding the same issue. The Company has not received any communications from either the DOJ or the DC AG since the second quarter of 2020. At this time, it is not possible to predict the ultimate outcome of this matter or the significance, if any, to the Company's business, results of operations or financial position.

On June 27, 2019, as a part of two sales and use tax audits covering the period from December 1, 2010 to November 30, 2019, the New York State Department of Taxation and Finance (the “Tax Department”) issued a letter stating its position that revenue derived from certain of the Company’s customer acquisition and list management services are subject to sales tax, as a result of being deemed information services. The Company disputed the Tax Department's position on several grounds, but on January 14 and 15,2020, 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 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. 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.

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. § 201-1et seq.; the Telemarketer Registration Act, 73 P.S. § 2241et. seq., and the Telemarketing Sales Rule, 16 C.F.R. 310 et seq. 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.

On January 1, 2022, the Company acquired a 100% membership interest in True North Loyalty, LLC for a deemed purchase price of $2,321, which consisted of $1,000 in cash at closing, $860 of deferred payments due at both the first and second anniversary of the closing date adjusted for net-working capital, and contingent consideration with a fair value at the closing date of $250, payable in common stock based upon the achievement of specified revenue targets over the five-year period following the completion of the acquisition. The Company also issued 100,000 shares of fully vested stock under the 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 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.

On January 1, 2022, it was determined to use the excess earnings method, a variation of the income approach, to amortize: (i) the fair value of the acquired customer relationships related to subscribers of $170 over a period of one year, and (ii) the fair value of the acquired customer relationships related to call centers of $1,180, over a period of five years. The amount of the purchase price in excess of the fair value of the net assets acquired was recorded as goodwill in the amount of $1,092 and primarily relates to intangible assets that do not qualify for separate recognition, including assembled workforce and synergies. For tax purposes, the goodwill is not deductible.

Certain fair values may be estimated at the acquisition date pending confirmation or completion of the valuation process. Where provisional values are used in accounting for a business combination, they may be adjusted retrospectively in subsequent periods, not to exceed one year from the acquisition date.

On April 1, 2020, the Company acquired, through a wholly-owned subsidiary, a 50% membership interest in Winopoly for a deemed purchase price of $2,553, which consisted of $1,553 in cash and contingent consideration with a fair value of $1,000 payable based upon the achievement of specified revenue targets over the eighteen-month period following the completion of the acquisition. The initial contingent consideration of $1,000 had been paid based on specific revenue targets having been met in the first quarter of 2021. On May 17, 2021, additional contingent consideration that was not previously deemed to be probable of payment in the amount of $500 was paid based on a specific revenue target having been met. Winopoly is a contact center operation, which serves as a marketplace that matches consumers sourced by Fluent and other third parties with advertiser clients. In accordance with ASC 805, the Company determined that the Initial Winopoly Acquisition constituted the purchase of a business.

On April 1, 2020, the fair value of the acquired customer relationships of $600, to be amortized over a period of five years, was determined using the excess earnings method, a variation of the income approach, while the fair value of the acquired developed technology of $800, to be amortized over a period of three years, was determined using the cost approach. The amount of the purchase price in excess of the fair value of the net assets acquired was recorded as goodwill in the amount of $1,131 and primarily relates to intangible assets that do not qualify for separate recognition, including assembled workforce and synergies. In connection with the Initial Winopoly Acquisition, the Company had recorded 100% equity ownership for GAAP purposes due to Winopoly's status as VIE for which the Company is a primary beneficiary.

In connection with the Initial Winopoly Acquisition, at any time between the fourth and sixth anniversary of the Initial Winopoly Acquisition, the sellers had the ability to exercise a put option to require the Company to acquire the remaining 50% membership interests in Winopoly. During this period, the Company also had the ability to exercise a call option to require the sellers to sell the remaining 50% membership interests in Winopoly to the Company. The purchase price to be paid upon exercise of the put or call option for the remaining 50% membership interests was calculated based on a multiple of 4.0x EBITDA (as such term is defined in the agreement between the parties), applied to a twelve-month period spanning the five months prior to the month of the put/call closing extending through six months following the month of the put/call closing (the "Put/Call Consideration"). In connection with the exercise of the put/call option, certain of the seller parties would have been required to enter into employment agreements with the Company in order to receive their respective shares of the Put/Call Consideration.

Although the sellers maintained an equity interest in Winopoly through August 31, 2021, the Company had deemed this equity interest to be non-substantive in nature, as the sellers would primarily benefit from the Initial Winopoly Acquisition based on periodic distributions of the earnings of Winopoly and the Put/Call Consideration, both of which were dependent on the sellers' continued service. Without providing service, the sellers could benefit from their pro-rata share of the proceeds upon a third-party sale or liquidation of Winopoly; however, such a liquidity event was considered unlikely. Therefore, no non-controlling interest had been previously recognized. Periodic distributions for services rendered were recorded as compensation expense. In addition, the Company had estimated the amount of the Put/Call Consideration, which was accreted over the six-year estimated service period, consisted of the estimated four years until the put/call could be exercised and the additional two-year service requirement.

On September 1, 2021, the Company acquired the remaining 50% membership interest in Winopoly (the “Full Winopoly Acquisition”) in a negotiated transaction. The 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 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. As a result, the Put/Call Consideration was terminated, partially offsetting the consideration paid in the Full Winopoly Acquisition, resulting in a net expense of $3,201 on the date of the Full Winopoly Acquisition which was recorded as general and administrative and product development expenses.

For the year ended December 31, 2021, the Company incurred transaction-related costs of $28 in connection with the Full Winopoly Acquisition which are also recorded as general and administrative expenses. For the three and 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.

The Company determined that, following the Initial Winopoly Acquisition, Winopoly qualified as a VIE for which the Company was the primary beneficiary (Note 11, Business acquisition). A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest. The primary beneficiary is the party that has the power to direct activities that most significantly impact the operations of the VIE and has the obligation to absorb losses or the right to benefits from the VIE that could potentially be significant to the VIE. We assess whether we are the primary beneficiary of a VIE at the inception of the arrangement and at each reporting date.

The Company's conclusion that Winopoly was a VIE, and the Company was its primary beneficiary, derived from contractual arrangements that provided the Company with control over certain activities that most significantly impacted its economic performance. These significant activities include the compliance practices of Winopoly and the Company's provisions of leads that Winopoly used to generate its revenue, which ultimately gave the Company its controlling interest. The Company therefore consolidated Winopoly in its consolidated financial statements from the inception of the Initial Winopoly Acquisition, inclusive of deemed compensation expense to the sellers for services rendered. On September 1, 2021, the Company completed the Full Winopoly Acquisition and Winopoly's status as a VIE terminated (Note 3, Intangible assets, net, Note 4, Goodwill and Note 11, Business acquisition).

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company"), is an industry leader in data-driven digital marketing services. We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumers they are seeking to reach. We deliver performance-based marketing executions and lead generation data records to our clients, which includes over 500 consumer brands, direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Wellness, Retail & Consumer, and Staffing & Recruitment.

We attract consumers at scale to our owned digital media properties primarily through promotional offerings and employment opportunities. To register on our sites, consumers provide their names, contact information and opt-in permission to present them with offers on behalf of our clients. Approximately 90% of these users engage with our media on their mobile devices or tablets. Our always-on, real-time capabilities enable users to access our media whenever and wherever they choose.

Once users have registered with our sites, we apply our proprietary direct marketing technologies to engage them with surveys and other experiences, through which we gather information about their lifestyles, preferences, purchasing histories and other matters. Based on our proprietary analytics applied to this information, we serve targeted, relevant offers to them on behalf of our clients. As new users register and engage on our sites and existing registrants re-engage, we believe the enrichment of our database through the new registrations or re-engagements expands our addressable client base and improves the effectiveness of our performance-based campaigns.

Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences. We have permission to contact the majority of users in our database through multiple channels, such as email, direct mail, telephone, push notifications or SMS text messaging. We leverage this data in our performance offerings primarily to serve advertisements that we believe will be relevant to our registered users based on the information they provide, and in our lead generation offerings to provide our clients with users' contact information so that our clients may communicate with the users directly. We continue to leverage our existing database into new revenue streams, including utilization-based models, such as programmatic advertising.

Three months ended September 30, 2022, compared to three months ended September 30, 2021:

Nine months ended September 30, 2022, compared to nine months ended September 30, 2021:

Media margin, adjusted EBITDA and adjusted net income (loss) are non-GAAP financial measures. See "Definitions, Reconciliations and Uses of Non-GAAP Financial Measures" below.

Development, Acquisition and Retention of High-Quality Targeted Media Traffic

Our business depends on identifying and accessing media sources that are of high quality and on our ability to attract targeted users to our media properties. As our business has grown, we have attracted larger and more sophisticated clients to our platform. Our traffic quality initiative (the "Traffic Quality Initiative"), which commenced in 2020, curtailed the volume of lower quality affiliate traffic that we source as we took a strategic course to focus on building high quality traffic to increase our value proposition to clients and to fortify our leadership positions in the industry in relation to the evolving regulatory landscape. Our strategy of focusing on high quality targeted media traffic continues.

We believe that significant value can be created by improving the quality of traffic sourced to our media properties, through increased user participation rates on our sites, leading to higher conversion rates, resulting in increased monetization, and increasing revenue and media margin. Media margin, a non-GAAP measure, is the portion of gross profit (exclusive of depreciation and amortization) reflecting variable costs paid for media and related expenses and excluding non-media cost of revenue. We have also been pursuing strategic initiatives that enable us to grow revenue with existing user traffic volume, while attracting new users to our media properties. During the third quarter of 2022, we continued to focus on improved monetization of consumer traffic through improved customer relationship management, new streams of traffic and internal capabilities that allow us to re-engage consumers who have registered on our owned media properties. Through these initiatives, our business has become less dependent on traditional, low-quality sources of traffic volume to generate revenue growth.

During 2022, we have increased our spend with major digital media platforms and revised our bidding strategies for affiliate traffic. While these strategies yielded lower margins initially and below our historical levels achieved through affiliate marketing, we have optimized our spend for improved profitability and intend to continue to do so in future periods. The mix and profitability of our media channels, strategies and partners is likely to continue to be dynamic and reflect evolving market dynamics as well as the impact of our Traffic Quality Initiative. Volatility of affiliate supply sources, consolidation of media sources, changes in search engine algorithms, email and text message blocking algorithms, and increased competition for available media made the process of growing our traffic under our evolving quality standards challenging during 2021. As we evaluate and scale new media channels, strategies, and partners, we may determine that certain sources initially able to provide us profitable quality traffic may not be able to maintain our quality standards over time, and we may need to discontinue, or direct a modification of the practices of, such sources, which could reduce profitability.

Our results are subject to fluctuations as a result of seasonality and cyclicality in our and our clients’ businesses. Other factors affecting our business may include macroeconomic conditions that impact the digital advertising industry, the various client verticals we serve, and general market conditions.

We are subject to risks and uncertainties caused by events with significant macroeconomic impacts, including but not limited to, the COVID-19 pandemic. Inflation, rising interest rates and reduced consumer confidence may cause our customers and/or clients to be cautious in their spending. The full impact of these macroeconomic events and the extent to which these macro factors may impact our business, financial condition, and results of operations in the future remains uncertain.

On March 13, 2020, in response to the COVID-19 pandemic, we implemented a company-wide work-from-home policy. Beginning in September 2022, we modified the policy to now require minimum in office attendance for employees. While we believe we have adapted well to a work-from-home environment, COVID-19 increases the likelihood of certain risks of disruption to our business, such as the incapacity of certain employees or system interruptions, which could lead to diminishment of our regular business operations, technological capacity and cybersecurity capabilities, as well as operational inefficiencies and reputational harm.

Please see Item 1A. Risk Factors in the 2021 Form 10-K, for more information or further discussion of the possible impact of unfavorable conditions and COVID-19 pandemic on our business.

Media margin is defined as that portion of gross profit (exclusive of depreciation and amortization) reflecting the variable costs paid for media and related expenses and excluding non-media cost of revenue. Gross profit (exclusive of depreciation and amortization) represents revenue minus cost of revenue (exclusive of depreciation and amortization). Media margin is also presented as percentage of revenue.

Adjusted EBITDA is defined as net income (loss) excluding (1) income taxes, (2) interest expense, net, (3) depreciation and amortization, (4) share-based compensation expense, (5) loss on early extinguishment of debt, (6) accrued compensation expense for the Put/Call Consideration, (7) goodwill impairment, (8) write-off of intangible assets, (9) acquisition-related costs, (10) restructuring and other severance costs, and (11) certain litigation and other related costs.

Adjusted net income (loss) is defined as net income (loss) excluding (1) share-based compensation expense, (2) loss on early extinguishment of debt, (3) accrued compensation expense for the Put/Call Consideration, (4) goodwill impairment, (5) write-off of intangible assets, (6) acquisition-related costs, (7) restructuring and other severance costs, and (8) certain litigation and other related costs. Adjusted net income (loss) is also presented on a per share (basic and diluted) basis.

Below is a reconciliation of media margin from gross profit (exclusive of depreciation and amortization) for the three and nine months ended September 30, ~~2017~~2022 and ~~2016:~~2021, respectively, which we believe is the most directly comparable GAAP measure:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2017

2016

2017

2016

Sales and marketing expenses

$
862

$
657

$
2,428

$
1,778

General and administrative expenses

10,209

6,661

25,274

20,163

11,071

7,318

27,702

21,941

Capitalized in intangible assets

421

369

1,002

868

Total

$
11,492

$
7,687

$
28,704

$
22,809

Table of Contents

~~The Company currently manages its operations in two reportable segments, Information Services~~Below is a reconciliation of adjusted EBITDA from net loss for the three and ~~Performance Marketing. The segments reflect~~nine months ended September 30, 2022 and 2021, respectively, which we believe is the ~~way the Company evaluates its business performance and manages its operations.~~

~~Information regarding our Information Services and Performance Marketing segments is as follows:~~most directly comparable GAAP measure:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2017

2016

2017

2016

Revenue:

Information Services

$
22,808

$
14,803

$
57,863

$
39,254

Performance Marketing

34,440

37,373

103,175

93,389

$
57,248

$
52,176

$
161,038

$
132,643

Loss (income) from operations:

Information Services

$
(7,227
)

$
(10,000
)

$
(20,780
)

$
(19,963
)
Performance Marketing

1,120

1,819

49

6,065

(6,107
)

(8,181
)

(20,731
)

(13,898
)
Corporate⁽¹⁾

(5,562
)

(4,176
)

(19,400
)

(14,487
)

$
(11,669
)

$
(12,357
)

$
(40,131
)

$
(28,385
)
Depreciation and amortization:

Information Services

$
1,818

$
1,665

$
4,802

$
4,221

Performance Marketing

1,767

1,842

5,658

4,891

$
3,585

$
3,507

$
10,460

$
9,112

Write-off of long-lived assets

Information Services

$
-

$
4,055

$
1,189

$
4,055

Performance Marketing

-

-

2,437

-

$
-

$
4,055

$
3,626

$
4,055

Share-based compensation expense:

Information Services

$
4,786

$
2,923

$
11,481

$
8,884

Performance Marketing

1,190

858

3,454

2,345

5,976

3,781

14,935

11,229

Corporate⁽¹⁾

5,095

3,537

12,767

10,712

$
11,071

$
7,318

$
27,702

$
21,941

Capital expenditure:

Information Services

$
1,972

$
1,892

$
5,759

$
7,826

Performance Marketing

416

331

897

876

$
2,388

$
2,223

$
6,656

$
8,702

(In thousands)

September 30, 2017

December 31, 2016

Assets:

Information Services

$
90,419

$
91,405

Performance Marketing

201,017

197,937

291,436

289,342

Corporate⁽²⁾

20,484

22,569

$
311,920

$
311,911

Intangible assets, net:

Information Services

$
52,706

$
52,424

Performance Marketing

38,848

46,107

$
91,554

$
98,531

Goodwill:

Information Services

$
44,178

$
44,178

Performance Marketing

122,078

122,078

$
166,256

$
166,256

Below is a reconciliation of adjusted net income (loss) and adjusted net income (loss) per share from net loss ~~from operations from segments to loss before income taxes~~ for ~~the periods presented is as follows:~~

~~Revenue by geography is based on the location of the customers. The following table sets forth revenue by geographic areas:~~

~~For~~ the three and nine months ended September 30, ~~2017~~2022 and ~~2016, material~~2021, respectively, which we believe is the most directly comparable GAAP measure.

We present media margin, as a percentage of revenue, adjusted EBITDA, adjusted net income (loss) and adjusted net income (loss) per share as supplemental measures of our financial and operating performance because we believe they provide useful information to investors. More specifically:

Media margin, as defined above, is a measure of the efficiency of the Company’s operating model. We use media margin and the related ~~party transactions~~measure of media margin as a percentage of revenue as primary metrics to measure the financial return on our media and related costs, specifically to measure the degree by which the revenue generated from our digital marketing services exceeds the cost to attract the consumers to whom offers are made through our services. We use media margin extensively to manage our operating performance, including evaluating operational performance against budgeted media margin and understanding the efficiency of our media and related expenditures. We also use media margin for performance evaluations and compensation decisions regarding certain personnel.

Adjusted EBITDA, as defined above, is another primary metric by which we evaluate the operating performance of our business, on which certain operating expenditures and internal budgets are based and by which, in addition to media margin and other factors, our senior management is compensated. The first three adjustments represent the conventional definition of EBITDA, and the remaining adjustments are items recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. These adjustments include certain litigation and other related costs associated with legal matters outside the ordinary course of business, including costs and accruals related to matters as described below (See Part II, Item 1 — Legal Proceedings). We consider items one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules. There were no adjustments for one-time items in the periods presented by this Quarterly Report on Form 10-Q.

Adjusted net income (loss), as ~~follows:~~defined above, and the related measure of adjusted net income (loss) per share exclude certain items that are recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. We believe adjusted net income (loss) affords investors a different view of the overall financial performance as compared to adjusted EBITDA and the GAAP measure of net income (loss).

~~On December 8, 2015,~~Media margin, adjusted EBITDA, adjusted net income (loss) and adjusted net income (loss) per share are non-GAAP financial measures with certain limitations regarding their usefulness. They do not reflect our financial results in accordance with GAAP, as they do not include the impact of certain expenses that are reflected in our consolidated statements of operations. Accordingly, these metrics are not indicative of our overall results or indicators of past or future financial performance. Further, they are not financial measures of profitability and are neither intended to be used as a proxy for the profitability of our business nor to imply profitability. The way we measure media margin, adjusted EBITDA and adjusted net income (loss) may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in our various agreements.

Three months ended September 30, 2022 compared to three months ended September 30, 2021

Revenue. Revenueincreased $3.2 million, or 4%, to $89.0 million for the three months ended September 30, 2022, compared to $85.9 million for the three months ended September 30, 2021. The increase was largely attributable to growth in the Rewards business, driven by expanding media footprint in the U.S, investment in organically building our social media strategy and footprint, and expanded customer relationship management ("CRM") capabilities which have enabled us to re-engage with users who have already registered on our owned media properties. Rewards revenue growth was partially offset by our employment opportunities marketplace, due to challenges we faced with our technology platform migration, coupled with difficult year-over-year industry comps.

Each of the foregoing factors has served to increase monetization of consumer traffic, which has partially offset reductions in traffic volume year-over-year, stemming from our Traffic Quality Initiative. Through these initiatives, our business has become less dependent on traffic volume to generate revenue growth. During the third quarter of 2022, we continued with the major digital media platform customer acquisition growth initiatives that were accelerated to the second quarter of 2022 and deployed further strategic initiatives using our customer relationship management capabilities. Moving forward, we will continue to assess the strategic relevancy of various initiatives and make adjustments as necessary.

Cost of revenue (exclusive of depreciation and amortization). Cost of revenue increased $1.5 million, or 2%, to $65.3 million for the three months ended September 30, 2022, compared to $63.8 million for the three months ended September 30, 2021. Our cost of revenue primarily consists of media and related costs associated with acquiring traffic from third-party publishers and digital media platforms for our owned and operated websites, which historically were on behalf of third-party advertisers, as well as the costs of fulfilling rewards earned by consumers who complete the requisite number of advertisers' offers.

The total cost of revenue as a percentage of revenue decreased to 73% for the three months ended September 30, 2022 compared to 74% for the three months ended September 30, 2021. In the normal course of executing paid media campaigns to source consumer traffic, we regularly evaluate new channels, strategies and partners, in an effort to identify actionable opportunities which can then be optimized over time. Traffic acquisition costs incurred with the major digital media platforms from which we sourced increased traffic volumes have historically been higher than affiliate traffic sources. We have continued to increase our spend and improve profitability with our major digital media platforms compared to the same period last year, driven by strategic and test and learn initiatives that began in the second quarter of 2022 and continued through the current quarter. The mix and profitability of our media channels, strategies and partners is likely to be dynamic and reflect evolving market dynamics and the impact of our Traffic Quality Initiative. As we evaluate and scale new media channels, strategies and partners, we may determine that certain sources initially able to provide us profitable quality traffic may not be able to maintain our quality standards over time, and we may need to discontinue, or direct a modification of the practices of, such sources, which could reduce profitability. We believe our Traffic Quality Initiative will benefit the Company ~~entered into~~over time, providing the ~~Promissory~~foundation to support sustainable long-term growth and positioning us as an industry leader. Past levels of cost of revenue (exclusive of depreciation and amortization) may therefore not be indicative of future costs, which may increase or decrease as these uncertainties in our business play out.

Sales and marketing. Sales and marketing expenses increased $1.2 million, or 40%, to $4.3 million for the three months ended September 30, 2022, compared to $3.0 million for the three months ended September 30, 2021, due to increase in business travel and events, along with increased headcount to support the growing business.For the three months ended September 30, 2022 and 2021, the amounts consisted mainly of employee salaries and benefits of $3.6 million and $2.7 million, advertising costs of $0.3 and $0.1 million, and non-cash share-based compensation expenses of $0.1 and $0.2 million respectively. As business travel and in-person meetings and events have resumed, we anticipate that our sales and marketing expenditures may increase in future periods. As a result, past levels of sales and marketing expenditures may not be indicative of future expenditures, which may increase or decrease as these uncertainties in our business play out.

Product development.Product development expense increased $0.2 million, or 4%, to $4.6 million for the three months ended September 30, 2022, compared to $4.5 million for the three months ended September 30, 2021. For the three months ended September 30, 2022 and 2021, the amounts consisted mainly of salaries and benefits of $3.3 million and $2.8 million, professional fees of $0.6 million and $0.5 million, software license and maintenance costs of $0.4 million and $0.2 million, and non-cash share-based compensation expense of $0.1 million and $0.2 million, respectively.The increase in product development expenses reflect investments in our technology and analytics platform, as well as the development of new app-based media properties, expanding beyond our traditional focus on web-based media properties.

General and administrative.General and administrative expenses decreased by $2.4 million, or 18%, to $10.9 million for the three months ended September 30, 2022, compared to $13.3 million for the three months ended September 30, 2021. For the three months ended September 30, 2022 and 2021, the amounts consisted mainly of employee salaries and benefits of $5.1 million and $5.1 million, professional fees of $1.6 million and $1.4 million, office overhead of $1.1 million and $1.1 million, non-cash share-based compensation expense of $0.6 million and $0.8 million, software license and maintenance costs of $0.6 million and $1.2 million, acquisition-related costs of $0.5 million and $2.3 million, certain litigation and related costs of $0.5 million and $0.3 million, and had $0.6 million of accrued compensation expense for the Put/Call Consideration from the Initial Winopoly Acquisition described below under the heading "Liquidity and Capital Resources" (Note 11, Business acquisition, in the Notes to Consolidated Financial Statements), for the three months ended September 30, 2021. The decline was mainly the result of costs incurred related to the Full Winopoly acquisition during the quarter ended September 30, 2021, along with ~~certain investors,~~the termination of the Put/Call Consideration.

Depreciation and amortization.Depreciation and amortization expenses increased $0.2 million, or 6%, to $3.4 million for the three months ended September 30, 2022, compared to $3.2 million for the three months ended September 30, 2021.

Write-off of intangible assets. For the three months ended September 30, 2021, we recognized $0.1 million for the write off of intangible assets related to software developed for internal use, with no corresponding charge in the current period.

Interest expense, net. Interest expense, net, increased $0.1 million for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, which increase was driven by an ~~aggregate financing~~increase in interest rates.

Net income (loss) before income taxes.For the three months ended September 30, 2022, net income before income taxes was $0.1 million, ~~pursuant~~compared to ~~which~~net loss before income taxes of $2.5 million for the three months ended September 30, 2021. The increase in net income before income taxes of $2.6 million was primarily due to an increase in revenue of $3.2 million and a decrease in general and administrative expenses of $2.4 million, partially offset by an increase in cost of revenue of $1.5 million, an increase in sales and marketing of $1.2 million, and an increase in product development of $0.2 million, as discussed above.

Income tax benefit. For the three months ended September 30, 2022, the Company ~~received $5.0~~had income tax benefit of $3.0 million, ~~from Frost Gamma, $4.0 million from Michael Brauser, and $1.0 million from another investor.~~ with no corresponding impact for the three months ended September 30, 2021.

As of September 30, ~~2017,~~2022 and 2021, we recorded a full valuation allowance against our net deferred tax assets. We intend to maintain a full valuation allowance against the ~~principal, plus~~net deferred tax assets until there is sufficient evidence to support the release of all or some portion of this allowance. Based on various factors, including our history of losses, current loss, estimated future taxable loss, exclusive of reversing temporary differences and carryforwards, future reversals of existing taxable temporary differences and consideration of available tax planning strategies, we believe it is unlikely that within the next twelve months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance may be released. 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 on the profitability that we are able to achieve and the net deferred tax assets available.

Net income (loss). Net income of $3.1 million and net loss of $2.5 million were recognized for the three months ended September 30, 2022 and 2021, respectively, as a result of the foregoing.

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021

Revenue. Revenue increased $47.1 million, or 21%, to $276.5 million for the nine months ended September 30, 2022, compared to $229.4 million for the nine months ended September 30, 2021. The increase was largely attributable to growth in the Rewards business, driven by our expanding media footprint in both the U.S and international markets, increased client demand in the Fluent Sales Solution business unit, and expanded CRM capabilities which have enabled us to re-engage with users who have already registered on our owned media properties. Rewards revenue growth was partially offset by our employment opportunities marketplace, due to challenges we faced with our technology platform migration, coupled with difficult year-over-year industry comps.

Each of the foregoing factors has contributed to the increase monetization of consumer traffic, which has partially offset reductions in traffic volume year-over-year, stemming from our Traffic Quality Initiative. Through these initiatives, our business has become less dependent on traffic volume to generate revenue growth. We also sourced higher volumes of traffic from major digital media platforms in the first nine months of 2022 compared to the first nine months of 2021, with year-over-year reductions in lower-quality affiliate traffic.These trends are anticipated to continue in the near future as we evaluate and scale media channels, strategies and partnerships.

Cost of revenue (exclusive of depreciation and amortization). Cost of revenue increased $31.5 million, or 18%, to $202.9 million for the nine months ended September 30, 2022, compared to $171.4 million for the nine months ended September 30, 2021.

The total cost of revenue as a percentage of revenue decreased to 73% for the nine months ended September 30, 2022, compared to 75% for the nine months ended September 30, 2021.

Sales and marketing. Sales and marketing expenses increased $3.6 million, or 40%, to $12.6 million for the nine months ended September 30, 2022, compared to $9.0 million for the nine months ended September 30, 2021, due to increase in business travel, events and in-person meetings. For the nine months ended September 30, 2022 and 2021, the amounts consisted mainly of employee salaries and benefits of $10.7 million and $7.8 million, advertising costs of $0.8 and $0.4 million, non-cash share-based compensation expense of $0.4 and $0.6 million, and meals and entertainment of $0.3 million and $0.0 million, respectively.

Product development.Product development expense increased $2.6 million, or 23%, to $14.0 million for the nine months ended September 30, 2022, compared to $11.3 million for the nine months ended September 30, 2021. For the nine months ended September 30, 2022 and 2021, the amounts consisted mainly of salaries and benefits of $10.1 million and $7.8 million, professional fees of $2.0 million and $1.0 million, software license and maintenance costs of $1.2 million and $0.9 million, non-cash share-based compensation expense of $0.4 million and $0.7 million, and acquisition related costs of $0.0 million and $0.6 million, respectively. The increase in product development expenses reflect investments in our technology and analytics platform, as well as the development of new app-based media properties, expanding beyond our traditional focus on web-based media properties.

General and administrative.General and administrative expenses decreased by $2.7 million, or 7%, to $33.9 million for the nine months ended September 30, 2022, compared to $36.5 million for the nine months ended September 30, 2021. For the nine months ended September 30, 2022 and 2021, the amounts consisted mainly of employee salaries and benefits of $16.0 million and $15.0 million, professional fees of $4.3 million and $4.1 million, office overhead of $3.4 million and $3.3 million, certain litigation and related costs of $2.5 million and $1.3 million, non-cash share-based compensation expense of $1.8 million and $2.3 million, software license and maintenance costs of $1.8 million and $2.7 million, acquisition-related costs of $1.7 million and $2.8 million, and accrued ~~PIK interest,~~compensation expense for the Put/Call Consideration from the Initial Winopoly Acquisition described below under the heading "Liquidity and Capital Resources" of ~~such Promissory~~$0.0 million and $3.2 million (Note 11, Business acquisition, in the Notes ~~owing~~ to ~~Frost Gamma, Michael Brauser~~Consolidated Financial Statements), respectively. The decrease was mainly the result of the termination of the Put/Call Consideration related to the Initial Winopoly Acquisition (as defined below) in the prior year, overall lower acquisition related costs in connection with the True North Acquisition and ~~such other investor, were $5,437, $4,349,~~the Full Winopoly Acquisition (as defined below) and ~~$1,087, respectively.~~software license fees, offset by increased employee salaries and benefits and litigation and related costs due to the New York State Tax Department settlement.

Depreciation and amortization.Depreciation and amortization expenses increased $0.1 million, or 1%, to $10.0 million for the nine months ended September 30, 2022, compared to $9.9 million for the nine months ended September 30, 2021.

Goodwill impairment. During the nine months ended September 30, ~~2017,~~ 2022, we recognized a $55.4 million goodwill impairment related to the Fluent reporting unit, with no corresponding impairment charge in the prior period.

Write-off of intangible assets. During the nine months ended September 30, 2022, we recognized a $0.1 million write-off on intangible assets, compared to $0.3 million write-off of intangible assets for the nine months ended September 30, 2021 related to software developed for internal use.

Interest expense, net. Interest expense, net, decreased $0.5 million, or 28%, to $1.3 million for the nine months ended September 30, 2022, from $1.8 million for the nine months ended September 30, 2021. The decrease was attributable to a lower interest rate on the New Credit Facility, described below under "Liquidity and Capital Resources," compared to the prior loan in place during the first quarter of 2021.

Loss on early extinguishment of debt. During the nine months ended September 30, 2021, we recognized $3.0 million of loss due to the early extinguishment of debt, described below under "Liquidity and Capital Resources," with no corresponding charge in the nine months ended September 30, 2022.

Net loss before income taxes.For the nine months ended September 30, 2022, net loss before income taxes was $53.7 million, compared to net loss before income taxes of $13.9 million for the nine months ended September 30, 2021. The change in net loss of $39.8 million was primarily due to the non-cash goodwill impairment charge of $55.4 million,an increase in the cost of revenue of $31.5 million, an increase in sales and marketing of $3.6 million, and an increase in product development of $2.6 million, partially offset by an increase in revenue of $47.1 million, as discussed above.

Income tax (expense) benefit. For the nine months ended September 30, 2022, the Company ~~repaid $533, $426,~~had income tax expense of $2.1 million, compared to$0.0 million income tax benefit for the nine months ended September 30, 2021.

Net loss. Net loss of $55.8 million and ~~$107~~net loss of $13.9 million were recognized for the nine months ended September 30, 2022 and 2021, respectively, as a result of the foregoing.

Cash provided by (used in) operating activities. For the nine months ended September 30, 2022, net cash provided by operating activities was $7.1 million, compared to ~~Frost Gamma, Michael Brauser~~net cash used by operating activities of $6.9 million for the nine months ended September 30, 2021. Net loss in the current period of $55.8 million represents an increase of $42.0 million, as compared with net loss of $13.9 million in the prior period. Adjustments to reconcile netloss to net cash provided by operating activities of$70.8 million in the current periodincreased by $51.7 million, as compared with $19.1 million in the prior period, primarily due to a non-cash impairment loss related to goodwill of $55.4 million in the current period. Changes in assets and ~~another investor,~~liabilities consumed cash of $7.9 million in the current period, as compared with $12.2 million in the prior period, primarily due to ordinary-course changes in working capital, largely involving the timing of receipt of amounts owing from clients and disbursements of amounts payable to vendors.

Cash used in investing activities. For the nine months ended September 30, 2022 and 2021, net cash used in investing activities was $4.3 million and $2.3 million, respectively. ~~See Note 5, “Long-term~~The increase was mainly due to the True North Acquisition that occurred in the current year along with continued investment in internally developed software.

Cash (used in) provided by financing activities.Net cash used in financing activities for the nine months ended September 30, 2022 was $4.2 million and net cash provided by financing activities was $3.7 million for the nine months ended September 30, 2021. The change of $7.9 million in cash used by financing activities in the current period was mainly due to the decrease in the repayment of long term debt of $41.7 million in the current year, along with net” proceeds from issuance of long-term debt, net of financing costs, of $49.6 million, the exercise of stock options by a former key executive of $0.9 million, and the prepayment penalty on early debt extinguishment of $0.8 million that occurred solely during the nine months ended September 30, 2021.

As of September 30, 2022, we had noncancelable operating lease commitments of $7.2 million and long-termdebt with a $42.5 million principal balance. For the nine months ended September 30, 2022, we funded our operations using available cash.

As of September 30, 2022, we had cash and cash equivalents of approximately $33.1 million, a decrease of $1.4 million from $34.5 million as of December 31, 2021. We believe that we will have sufficient cash resources to finance our operations and expected capital expenditures for ~~details.~~the next twelve months and beyond.

We may explore the possible acquisition of businesses, products and/or technologies that are complementary to our existing business. We continue to identify and prioritize additional technologies, which we may wish to develop internally or through licensing or acquisition from third parties. While we may engage from time to time in discussions with respect to potential acquisitions, there can be no assurance that any such acquisitions will be made or that we will be able to successfully integrate any acquired business with our then current business or realize anticipated cost synergies. In order to finance such acquisitions and working capital, it may be necessary for us to raise additional funds through public or private financings. Any equity or debt financings, if available at all, may be on terms which are not favorable to us and, in the case of equity financings, may result in dilution to shareholders.

On ~~February 22, 2016,~~April 1, 2020, we acquired a 50% membership interest in Winopoly, LLC (the "Initial Winopoly Acquisition"), for a deemed purchase price of $2.6 million, comprised of $1.6 million in upfront cash paid to the ~~Company’s Series B Preferred, 450,962~~seller parties and contingent consideration with a fair value of $1.0 million, payable based upon the achievement of specified revenue targets over the eighteen-month period following the completion of the acquisition. (Note 11, Business acquisition, in the Notes to Consolidated Financial Statements.) On September 1, 2021, we acquired the remaining 50% membership interest in Winopoly, LLC ("the Full Winopoly Acquisition") in a negotiated transaction. The consideration was $7.8 million, which consisted of $3.4 million of cash at closing, $2.0 million of cash due on January 31, 2022, and $0.5 million of deferred payments due at each of the first and second anniversaries of the closing. We also issued 500,000 shares ~~in total, including 141,430 shares previously issued to Frost Gamma in relation~~of fully-vested stock under the Fluent, Inc. 2018 Stock Incentive Plan (the "Prior Plan") to certain ~~financial arrangements,~~Winopoly personnel valued at $1.4 million. On January 1, 2022, we acquired a 100% membership interest in True North Loyalty, LLC. (“True North Acquisition”) for a deemed purchase price of $2.3 million, which consisted of $1.0 million of cash at closing, $0.5 million of deferred payments due at both the first and ~~156,544~~second anniversary of the closing and ~~105,704~~contingent consideration with a fair value of $0.3 million, payable based upon the achievement of specified revenue targets over the five-year period following the completion of the acquisition. We also issued 100,000 shares ~~previously issued~~of fully vested stock under the Prior Plan to ~~Ryan Schulke, Chief Executive Officer of Fluent, and Matthew Conlin, President of Fluent, respectively,~~the sellers valued at $0.2 million. (Note 11 Business acquisition, in ~~connection with~~ the ~~Fluent Acquisition, automatically converted into the Company’s common stock, by multiplying each such share of Series B Preferred by 50.~~Notes to Consolidated Financial Statements.)

On March ~~11, 2016,~~ 31, 2021, Fluent, LLC, our wholly-owned subsidiary, entered into a credit agreement (the “Credit Agreement”) with certain subsidiaries of Fluent, LLC as guarantors and Citizens Bank, N.A., as administrative agent, lead arranger and bookrunner. The Credit Agreement provides for a term loan in the aggregate principal amount of $50.0 million funded on the closing date (the “Term Loan”), along with an undrawn revolving credit facility of up to $15.0 million (the "Revolving Loans," and together with the Term Loan, the "New Credit Facility"). As of September 30, 2022, the Credit Agreement has an outstanding principal balance of $42.5 million and matures on March 31, 2026. Principal amortization of the Credit Agreement is $1.3 million per quarter, which commenced with the fiscal quarter ended June 30, 2021.

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%), which increased to 4.87% (LIBOR + 1.75%) as of September 30, 2022.

The Credit Agreement contains restrictive covenants which impose limitations on the way we conduct our business, including limitations on the amount of additional debt we are able to incur and our ability to make certain investments and other restricted payments. The restrictive covenants may limit our strategic and financing options and our ability to return capital to our stockholders through dividends or stock buybacks. Furthermore, we may need to incur additional debt to meet future financing needs. The Credit Agreement is guaranteed by us and our direct and indirect subsidiaries and is secured by substantially all of our assets and those of our direct and indirect subsidiaries, including Fluent, LLC, in each case, on an equal and ratable basis.

The Credit Agreement requires us to maintain and comply with certain financial and other covenants. While we were in compliance with the financial and other covenants as of September 30, 2022, we cannot guarantee that we will be able to maintain compliance with such financial or other covenants in future periods. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness, which would materially adversely affect our financial condition if we are unable to access sufficient funds to repay all the outstanding amounts. Moreover, if we are unable to meet our debt obligations as they come due, we could be forced to restructure or refinance such obligations, seek additional equity financing or sell assets, which we may not be able to do on satisfactory terms, or at all.

Management's discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We periodically evaluate our estimates, including those related to revenue recognition, allowance for doubtful accounts, useful lives of intangible assets, recoverability of the carrying amounts of goodwill and intangible assets, share-based compensation and income taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

As disclosed in Note 4, Goodwill, the Company ~~issued 900,108 common earn-out shares~~engaged a third party to ~~Frost Gamma, and 1,800,220 Series A earn-out shares to certain investors (which were converted to 1,800,220 shares of common stock~~assist in ~~March 2016), including 567,069 shares to Grander Holdings, Inc. 401K,~~conducting an ~~entity owned by Michael Brauser, upon a Board of Directors determination that certain financial targets had been achieved as set forth in the merger agreement~~interim test of the ~~TBO Merger effective on March 21, 2015.~~

~~Marlin Capital holds RSUs representing~~fair value of its goodwill for potential impairment for the ~~right~~three months ended June 30, 2022. The Company considered a combination of income and market approaches to ~~receive 2,000,000 shares~~determine the fair value of the Fluent reporting unit. The Company determined that a market-based approach, which considered the Company’s ~~common stock. These RSUs vest annually beginning from October 13, 2015 only if certain performance goals~~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. Based on the results of this market-based approach as of June 30, 2022, the Company ~~are met. The shares underlying~~concluded that its carrying value exceeded its estimated fair value by 27%. As such ~~RSUs will not be delivered until October 13, 2018, unless there is~~the Company concluded that its goodwill of $162,000 for the Fluent reporting unit was impaired and recorded a ~~change~~non-cash impairment charge of ~~control~~$55,400 for the second quarter of 2022.

Additionally, the Company engaged a third party to assist in conducting a test of the ~~Company. Share-based compensation expenses~~fair value of ~~$315 and $315~~its goodwill for potential impairment for the three months ended September 30, ~~2017~~2022. The Company considered a combination of income and ~~2016, respectively,~~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 $937 and $937 for the nine months ended September 30, 2017 and 2016, respectively, associated with shares under the Marlin Capital agreement, were recognized, respectively. See Note 8, “Share-based payments,” for details.

Effective on August 1, 2015, the Company entered into a consulting agreement with DAB Management Group Inc. (“DAB”) for DAB to provide consulting services related to business development, future acquisitions and strategic transactionsfurther adjusted for a ~~term~~control premium, and income approach together provided the best indication of six months, and shall automatically renew for additional six-month periods, unless either party provides written notice to the other of its intent not to renew not fewer than 30 days prior to the expirationfair value of the ~~then current term (the “DAB Agreement”). DAB is owned by Daniel Brauser, a director~~Fluent reporting unit. Based on the results of the Company at the time the DAB Agreement was entered into and the son of Michael Brauser, our Chairman. Under the DAB Agreement, the consulting service fee is $20 per month. The Company recognized consulting service fee of $60 each for the three months ended September 30, 2017 and 2016, and $180 each for the nine months ended September 30, 2017 and 2016.

In October 2015, the Company entered into a Non-Exclusive Aircraft Dry Lease Agreement with Brauser Aviation, LLC, an affiliated entity of our Chairman, to pay a set hourly rate for Company-related usage of the aircraft. The Company recognized aircraft lease fee of $0 and $58 for the three months ended September 30, 2017 and 2016, respectively, and $27 and $168 for the nine months ended September 30, 2017 and 2016, respectively.

~~On September 6, 2017, the Company entered into the Consulting Agreement with Mike Brauser, effective on June 23, 2017, for a term of four years, under which, Mr. Brauser will serve~~this approach as a strategic advisor to cogint but will receive no salary for such services. In consideration for Mr. Brauser’s services, the Consulting Agreement provides for continued vesting on all outstanding RSUs granted to Mr. Brauser before the effective date of the Consulting Agreement. See Note 8, “Share-based payments,” for details.

The Company incurred data costs of $1,179 and $874 for the three months ended September 30, 2017 and 2016, respectively, and $3,400 and $2,757 for the nine months ended September 30, 2017 and 2016, respectively, under certain non-cancellable data licensing agreements. As of September 30, ~~2017, material capital commitments under non-cancellable data licensing agreements were $24,321, shown as follows:~~2022, the Company concluded that its fair value exceeded it carrying value by 4%. As such the Company concluded that its goodwill of $106,600 for the Fluent reporting unit was not impaired.

These impairment tests involve the use of accounting estimates and assumptions, changes in which could materially impact our financial condition or operating performance if actual results differ from such estimates or assumptions. The critical assumptions used in determining the fair value of the reporting unit are forecasted cash flows, market multiples, and control premiums. Management exercises judgment in developing these assumptions. Certain of these assumptions are based on facts specific to the reporting unit, market participant assumptions and management’s projected cash flows. If actual cash flows were to decline from forecast, or market factors such as valuation multiples or interest rates were to trend in an unfavorable direction, there would be an increased risk of goodwill impairment for the Fluent reporting unit.

~~(b) Contingency~~For additional information, please refer to our 2021 Form 10-K. Except as set forth herein, there have been no additional material changes to Critical Accounting Policies and Estimates disclosed in the 2021 Form 10-K.

See Note 1(b), "Recently issued and adopted accounting standards," in the ~~Company entered~~Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

As a ~~settlement agreement~~smaller reporting company, we are not required to provide the information required by this Item.

Our management, with ~~TransUnion~~the participation of our principal executive officer and ~~TransUnion Risk~~principal financial officer, evaluated the effectiveness of our disclosure controls and ~~Alternative Data Solutions, Inc. (“TRADS”), settling all litigation with TransUnion~~procedures (as such term is defined in Rules 13a-15(e) and ~~TRADS. Company subsidiary, IDI Holdings, LLC (“IDI Holdings”), will pay $7,000 to TRADS over~~15d-15(e) under the course of one year to settle all matters (the “TRADS Litigation Settlement”). The terms of the settlement agreement are confidential. The Company recorded the expense of $7,000 in general and administrative expenses during the three months ended June 30, 2017. AsExchange Act) as of September 30, ~~2017,~~2022. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the ~~remaining unpaid balance of $5,000 was reflected in accrued expenses~~Exchange Act is recorded, processed, summarized and ~~other current liabilities~~reported within the time periods specified in the ~~condensed~~SEC's rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2022. Management believes the consolidated ~~balance sheet. For a description of the legal proceedings settled~~financial statements included in ~~the TRADS Litigation Settlement, see Part I, Item 3 of the Company’s 2016 Form 10-K and Part II, Item 1 of the Company’s~~this Quarterly Report on Form 10-Q fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with GAAP.

There were no changes to our internal control over financial reporting during this quarterended ~~March 31, 2017.~~September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other than as disclosed below under "Certain Legal Matters," the Company is not currently ~~a party to~~aware of any legal proceeding, investigation or claim which, in the opinion of the Company's management, is likely to have a material adverse effect on the business, financial condition, results of operations or cash ~~flows.~~flows of the Company. Legal fees associated with ~~such~~ legal proceedings are expensed as incurred. We review legal proceedings and claims on an ongoing basis and follow appropriate accounting guidance, including ASC 450, when making accrual and disclosure decisions. We establish accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, we evaluate, among other factors, the ~~degree of~~ probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. We do not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated.

In addition, we may be involved in litigation from time to time in the ordinary course of business. We do not believe that the ultimate resolution of any such matters will have a material adverse effect on our business, financial condition, results of operations or cash flows. However, the results of such matters cannot be predicted with certainty and we cannot assure you that the ultimate resolution of any legal or administrative proceeding or dispute will not have a material adverse effect on our business, financial condition, results of operations and cash flows.

On September 6, 2017, the Company entered into a Business Combination Agreement (the “Business Combination Agreement”) with BlueFocus International Limited (“BlueFocus”), a private company limited by shares registered in Hong Kong. Under the terms of the Business Combination Agreement, the Company will issue to BlueFocus shares of the Company’s common stock, representing 63% of the Company’s common stock on a fully diluted, post-transaction basis (the “Purchased Shares”). In consideration of the Purchased Shares, BlueFocus will contribute to the Company (i) all of the issued and outstanding membership interests, shares of capital stock, and/or other equity interests of certain entities (the “Contributed Entities”), (ii) $100.0 million in cash (the “Cash Consideration”) and if applicable, certain net working capital adjustments, and (iii) repay, assume, or refinance indebtedness for borrowed money of the Company as of the Closing (as defined below). We refer to the issuance of the Purchased Shares in consideration of the contribution of the Contributed Entities and the Cash Consideration, together with the Cash Dividend hereinafter described, as the “Business Combination Transaction.”Certain Legal Matters

As a condition to closing the Business Combination Transaction (the “Closing”), immediately before Closing, cogint will contribute its data and analytics operations and assets (the “IDI Business”) into its wholly-owned subsidiary, Red Violet, Inc. (“Red Violet”). The shares of Red Violet will be distributed as a stock dividend (the “Spin-Off”) to cogint stockholders of record as of the record date (the “Record Date”) and to holders of derivative securities who are entitled to participate in such a dividend in accordance with the terms of their securities. Before the Company effects the Spin-Off, Red Violet will file with the SEC a Registration Statement on Form 10 (the “Form 10”), registering under the Securities Exchange Act of 1934, the shares of Red Violet to be distributed in the Spin-Off. As a result, upon completion of the Spin-Off, cogint stockholders will hold shares of two public companies, cogint and Red Violet. We expect cogint common stock to continue trading on the NASDAQ Stock Market (the “NASDAQ”) and we intend to apply for listing the Red Violet shares on NASDAQ.

The Cash Consideration, after deductions for certain transaction expenses and an amount up to $20.0 million to capitalize Red Violet at the time of the Spin-Off, will be distributed pro rata as a cash dividend or payment (the “Cash Dividend”) to the holders of cogint common stock and the holders of certain warrants of the Company. The Cash Dividend is contingent on Closing.

Before the Record Date, cogint expects to accelerate the vesting of all outstanding RSUs and deliver all shares of common stock underlying such RSUs so that such shares will participate in the Spin-Off and Cash Dividend pro rata. Also, before the Record Date, cogint expects to vest all outstanding stock options, and any options not exercised before the Record Date will terminate on the Record Date, except for options issued under the 2015 Plan, which will terminate immediately before the Closing. Options outstanding but unexercised on the Record Date will not be equitably adjusted in respect of the Spin-off, the Cash Dividend, or otherwise. Shares issued pursuant to any option exercised before the Record Date will participate in the Spin-off and Cash Dividend pro rata. In addition, before the Record Date, cogint expects to vest all outstanding shares of restricted stock, so that such shares will participate in the Spin-off and Cash Dividend pro rata, and holders of warrants to purchase cogint common stock will participate in the Spin-off and Cash Dividend pro rata, in accordance with the terms of their warrants.

There are certain conditions to the Closing and the other transactions contemplated by the Business Combination Agreement, which include the receipt of the required Company stockholders’ approval, the consent under ~~the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (~~the “HSR Act”) and the Committee on Foreign Investment in the United States (“CFIUS”) approval, the effectiveness of the Form 10 and consummation of the Spin-Off, the approval by NASDAQ of the listing of the Purchased Shares, and others.

On October ~~17, 2017,~~26, 2018, the Company ~~entered into certain amendment agreements (collectively,~~received a subpoena from the ~~“Intracoastal~~New York Attorney General’s Office (“NY AG”) regarding compliance with New York Executive Law § 63(12) and Anson Warrant Amendments”) with warrant holders, representing a total of 861,769 warrants to purchase the Company’s common stock, previously granted to Intracoastal Capital, LLC (“Intracoastal”) and Anson Investments Master Fund LP (“Anson”). PursuantNew York General Business Law § 349, as they relate to the ~~Warrant Amendments, the Company agreed to reduce the exercise price~~collection, use, or disclosure of ~~all common stock warrants described above to $3.00 per share, and Intracoastal and Anson separately agreed to exercise all common stock warrants held by them. The proceeds~~information from ~~the exercise were approximately $2.6 million, which were received in October 2017.~~

The Intracoastal and Anson Warrant Amendments also provide that the Company deliver to each of Anson and Intracoastal an additional warrant for common stock equal to 25% of the number of shares exercised, at an exercise price of $5.35 per share (collectively, the “Additional Warrants”). The Additional Warrants provided to Intracoastal and Anson are exercisable into 184,193 shares and 31,250 shares of common stock, respectively. The Additional Warrants are exercisable from the date of issuance and expire on the earlier of the close of business on the two-year anniversary of (i) the date the registration statement registering the resale of the underlying shares is declared effective by the SEC, or ~~(ii) the commencement date that~~about consumers or individuals, as such ~~Additional Warrant may be exercised by means of a “cashless exercise.”~~ ~~These Additional Warrants do not participate in the Cash Dividend or Spin-Off of the Business Combination Transaction.~~

On November 3, 2017, the Company entered into warrant amendments (the "Whitehorse Warrant Amendments") with H.I.G. Whitehorse SMA ABF, L.P., H.I.G. Whitehorse SMA Holdings I, LLC and Whitehorse Finance, Inc., regarding an aggregate of 300,000 Whitehorse Warrants to purchase the Company’s common stock (the “Whitehorse Shares”), at an original exercise price of $5.0829 per share. Pursuantinformation was submitted to the Whitehorse Warrant Amendments, the Company agreed to reduce the exercise price of all common stock warrants described above to $3.00 per share, and each warrant holder set forth above separately agreed to exercise all common stock warrants held by them within 30 days. Pursuant to the terms of the Whitehorse Warrant Amendments, the warrant holders are prohibited from engaging or otherwise agreeing to any sale, pledge, or other transfer of the Whitehorse Shares for a period of 120 days (the “Whitehorse Lock-Up Period”) following the exercise of such warrants in full. Following the Whitehorse Lock-Up Period, (i) the warrant holders may only sell such number of shares underlying the warrants representing up to 5% of the Company’s daily trading volume on the immediately prior trading day prior to a sale and (ii) the warrant holders may not transfer any of the Whitehorse Shares for less than $4.50 per share, provided that the warrant holders may not transfer any Whitehorse Shares unless the Company has an effective registration statement permitting the resale of the Whitehorse Shares. Provided that such warrant holders have exercised the Whitehorse Warrants, upon either the Record Date or the termination of the Business Combination Agreement, such warrant holders can require the Company to purchase from them all the Whitehorse Shares at a price of $4.50 per share.

In relation to the Q Interactive Acquisition, Selling Source, LLC (“Selling Source”), the seller, was entitled to receive additional consideration as it was concluded that the earn-out target (the “Q Interactive Earn-out Target”) specified in the purchase agreement had been met. As of September 30, 2017 and December 31, 2016, after certain measurement period adjustments, the net balance of acquisition consideration payable in stock of $10,225 was recognized. ~~We used the probability-weighted method to determine the fair value of the acquisition consideration payable in stock,~~ and this fair value assessment represents Level 3 measurements. It is classified as a non-current liability in the condensed consolidated balance sheets because this liability will be settled with the Company’s common stock. On November 3, 2017, the Company issued a total of 2,750,000 shares of common stock to settle the acquisition consideration payable in stock.

~~Item 2. Management's Discussion and Analysis of~~ ~~Financial Condition and Results of Operations.~~

You should read the following discussion in conjunction with our condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), about our expectations, beliefs, or intentions regarding our business, financial condition, results of operations, strategies, the outcome of litigation, or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those contained in this Quarterly Report on Form 10-Q, as well as the disclosures made in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed on March 14, 2017 (“2016 Form 10-K”), and other filings we make with the Securities and ExchangeFederal Communication Commission ~~(the “SEC”~~(“FCC”). We do not undertake any obligation to update forward-looking statements, except as required by law. We intend that all forward-looking statements be subject to the safe harbor provisions of PSLRA. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance.

Cogint, Inc. (“we,” “us,” “our,” “cogint,” or the “Company”), a Delaware corporation, is a data and analytics company providing cloud-based mission-critical information and performance marketing solutions to enterprises in a variety of industries. cogint’s mission is to transform data into intelligence utilizing our proprietary technology platforms to solve complex problems for our clients. Harnessing the power of data fusion and powerful analytics, we transform data into intelligence, in a fast and efficient manner, so that our clients can spend their time on what matters most, running their organizations with confidence. Through our intelligent platforms, CORE^TM ~~and Agile Audience Engine~~^TM, we uncover the relevance of disparate data points to deliver end-to-end, ROI-driven results for our customers. Our analytical capabilities enable us to build comprehensive datasets in real-time and provide insightful views of people, businesses, assets and their interrelationships. We empower clients across markets and industries to better execute all aspects of their business, from managing risk, identifying fraud and abuse, ensuring legislative compliance, and debt recovery, to identifying and acquiring new customers. With the goal of reducing the cost of doing business and enhancing the consumer experience, our solutions enable our clients to optimize overall decision-making and to have a holistic view of their customers.

We provide unique and compelling solutions essential to the daily workflow of organizations within both the public and private sectors. Our cloud-based data fusion and customer acquisition technology platforms, combined with our massive database consisting of public-record, proprietary and publicly-available data, as well as a unique repository of self-reported information on millions of consumers, enables the delivery of differentiated products and solutions used for a variety of essential functions throughout the customer life cycle. These essential functions include customer identification and authentication, investigation and validation, and customer acquisition and retention.

~~The Company operates through two reportable segments: (i) Information Services and (ii) Performance Marketing.~~

~~Information Services~~—Leveraging leading-edge technology, proprietary algorithms, and massive datasets, and through intuitive and powerful analytical applications, we provide solutions to organizations within the risk management and consumer marketing industries. CORE is our next generation data fusion platform, providing mission-critical information about individuals, businesses and assets to a variety of markets and industries. Through machine learning and advanced analytics, our Information Services segment uses the power of data fusion to ingest and analyze data at a massive scale. The derived information from the data fusion process ultimately serves to generate unique solutions for banking and financial services companies, insurance companies, healthcare companies, law enforcement and government, the collection industry, law firms, retail, telecommunications companies, corporate security and investigative firms. In addition, our data acquisition solutions enable clients to rapidly grow their customer databases by using self-declared consumer insights to identify, connect with, and acquire first-party consumer data and multi-channel marketing consent at massive scale.

Built in a secure Payment Card Industry (PCI) compliant environment, our cloud-based next generation technology delivers greater than four 9s of service uptime. By leveraging our proprietary infrastructure design within the cloud, we currently operate in six datacenters spread geographically across the U.S. and are able to dynamically and seamlessly scale as needed. Using our intelligent framework and leveraging a micro services architecture where appropriate, we reduce operational cost and complexity, thus delivering superior performance at greatly reduced costs compared to traditional datacenter architectures. Since the release of our CORE platform in May 2016, we have added billions of data records and continue to add approximately over a billion records per month on average. Our average query response time for a comprehensive profile is less than 250 milliseconds versus competitive platforms that measure comprehensive profile response times in seconds.

~~Performance Marketing~~—Our Agile Audience Engine drives our Performance Marketing segment, which provides solutions to help brands, advertisers and marketers find the right customers in every major business-to-consumer (B2C) vertical, including internet and telecommunications, financial services, health and wellness, consumer packaged goods, career and education, and retail and entertainment. We deterministically target consumers across various marketing channels and devices, through the user- supplied acquisition of personally identifiable information on behalf of our clients, such as email addresses, other identifying information and responses to dynamically-populated survey questions. Additionally, 80% of our consumer interaction comes from mobile, a highly-differentiated characteristic compared to our competitors whose platforms are not mobile-first.

We own hundreds of media properties, through which we engage millions of consumers everyday with interactive content, such as job postings, cost savings, surveys, promotions and sweepstakes that generate on average over 850,000 consumer registrations and over 8.8 million compiled survey responses daily, with a recent record high of over 1.0 million registrations and over 10.3 million compiled survey responses in a single day. Our owned media properties alone have created a database of approximately 130 million U.S. adults with detailed profiles, including 224 million unique email addresses, across over 75 million households. With meaningful, people-based interaction that focuses on consumer behavior and declared first-party data, leveraged on a mobile-centric platform that provides seamless omni-channel capabilities, we have the ability to target and develop comprehensive consumer profiles that redefine the way advertisers view their most valuable customers.

In order for the Company to continue to develop new products, grow its existing business and expand into additional markets, we must generate and sustain sufficient operating profits and cash flow in future periods. This will require us to generate additional sales from current products and new products currently under development. We continue to build out our sales organization to drive current products and to introduce new products into the market place. We will incur ~~increased compensation expenses for our sales and marketing, executive and administrative, and infrastructure related persons as we increase headcount in the next 12 months.~~

As a condition to closing the Business Combination Transaction (the “Closing”), immediately before Closing, cogint will contribute its data and analytics operations and assets (the “IDI Business”) into its wholly-owned subsidiary, Red Violet, Inc. (“Red Violet”). The shares of Red Violet will be distributed as a stock dividend (the “Spin-Off”) to cogint stockholders of record as of the record date (the “Record Date”) and to holders of derivative securities who are entitled to participate in such a dividend in accordance with the terms of their securities. Before the Company effects the Spin-Off, Red Violet will file with the SEC a Registration Statement on Form 10 (the “Form 10”), registering under the Exchange Act, the shares of Red Violet to be distributed in the Spin-Off. As a result, upon completion of the Spin-Off, cogint stockholders will hold shares of two public companies, cogint and Red Violet. We expect cogint common stock to continue trading on the NASDAQ Stock Market (the “NASDAQ”) and we intend to apply for listing the Red Violet shares on NASDAQ.

The Cash Consideration, after deductions for certain transaction expenses and an amount up to $20.0 million to capitalize Red Violet at the time of the Spin-Off, will be distributed pro rata as a cash dividend or payment (the “Cash Dividend”) to the holders of company common stock and the holders of certain warrants of the Company. The Cash Dividend is contingent on Closing.

Management’s discussion and analysis of financial condition and results of operations are based upon cogint’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”). The preparation of these financial statements requires cogint to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, cogint evaluates its estimates, including those related to bad debts, income taxes, and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For additional information, please refer to our 2016 Form 10-K, filed with the SEC on March 14, 2017. There have been no material changes to Critical Accounting Policies and Estimates disclosed in the 2016 Form 10-K.

~~See Note 1(b), “Recently issued accounting standards,”~~ ~~in the Notes to Condensed Consolidated Financial Statements.~~

~~For the three months ended September 30, 2017, as compared to the three months ended September 30, 2016:~~

Management evaluates the financial performance of our business on a variety of key indicators, including adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure equal to net loss, the most directly comparable financial measure based on US GAAP, adding back interest expense, income tax benefit, depreciation and amortization, share-based compensation expense, non-recurring legal and litigation costs, acquisition and restructuring costs, write-off of long-lived assets, and other adjustments, as noted in the tables below.

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2017

2016

2017

2016

Net loss

$
(14,095
)

$
(9,744
)

$
(47,229
)

$
(23,700
)
Interest expense, net

2,426

1,880

7,098

5,561

Income tax benefit

-

(4,493
)

-

(11,519
)
Depreciation and amortization

3,585

3,507

10,460

9,112

Share-based compensation expense

11,071

7,318

27,702

21,941

Non-recurring legal and litigation costs

340

633

9,170

1,493

Acquisition and restructuring costs

2,474

-

4,792

431

Write-off of long-lived assets

-

4,055

3,626

4,055

Non-cash loss on exchange of warrants

-

-

-

1,273

Adjusted EBITDA

$
5,801

$
3,156

$
15,619

$
8,647

We present adjusted EBITDA as a supplemental measure of our operating performance because we believe it provides useful information to our investors as it eliminates the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. In addition, we use it as an integral part of our internal reporting to measure the performance of our reportable segments, evaluate the performance of our senior management and measure the operating strength of our business.

Adjusted EBITDA is a measure frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours and is an indicator of the operational strength of our business. Adjusted EBITDA eliminates the uneven effect across all reportable segments of considerable amounts of non-cash depreciation and amortization, share-based payments and write-off of long-lived assets.

Adjusted EBITDA is not intended to be a performance measure that should be regarded as an alternative to, or more meaningful than, either operating income or net income as indicators of operating performance or to cash flows from operating activities as a measure of liquidity. The way we measure adjusted EBITDA may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in our various agreements.

~~Three and nine months ended September 30, 2017 compared to three and nine months ended September 30, 2016~~

~~Revenue.~~ Total revenue increased $5.1 million or 10% to $57.2 million, and $28.4 million or 21% to $161.0 million for the three and nine months ended September 30, 2017, respectively, from $52.2 million and $132.6 million for the three and nine months ended September 30, 2016, respectively. This increase was driven by strong growth in our Information Services segment. Revenue generated from our Information Services segment was $22.8 million and $57.8 million for the three and nine months ended September 30, 2017, respectively, versus $14.8 million and $39.3 million for the three and nine months ended September 30, 2016, respectively. Revenue generated from our Performance Marketing segment was $34.4 million and $103.2 million for the three and nine months ended September 30, 2017, versus $37.4 million and $93.4 million for the three and nine months ended September 30, 2016, respectively.

~~Gross profit.~~ Gross profit margin was 34% and 32% for the three and nine months ended September 30, 2017, respectively, as compared to 24% and 26% for the three and nine months ended September 30, 2016, respectively. The increase in gross profit margin was mainly attributed to scaling of our Information Services segment, producing higher gross margin relative to the consolidated business.

Historically, the relative mix of revenue derived from our Information Services and Performance Marketing segments produces a consolidated average gross margin between 26% and 32%. At scale, the Information Services segment will trend with average gross margins between 70% and 85%. As a result of our continued focus on scaling the Information Services segment, our consolidated average gross margin has increased to between 30% and 34%. We continue to expect our consolidated gross margin to increase over the next twelve months as our Information Services revenue continues to scale.

As a result of the increase in revenue and gross profit margin, gross profit increased $7.1 million or 56% to $19.6 million for the three months ended September 30, 2017, from $12.5 million for the three months ended September 30, 2016; while gross profit increased $16.6 million or 48% to $51.5 million for the nine months ended September 30, 2017, from $34.9 million for the nine months ended September 30, 2016.

~~Sales and marketing expenses.~~ Sales and marketing expenses increased $2.6 million or 70% to $6.3 million, and $6.6 million or 66% to $16.6 million for the three and nine months ended September 30, 2017, respectively, from $3.7 million and $10.0 million for the three and nine months ended September 30, 2016, respectively. The increase was mainly the result of increased headcount as we continue to invest in the expansion of our sales organization, increased fulfillment costs, and increased bad debt expenses. Sales and marketing expenses consist of advertising and marketing, salaries and benefits, traveling expenses incurred by our sales team, share-based compensation expenses, provision for bad debts, and fulfillment costs. Included in sales and marketing expenses was non-cash share-based compensation expenses of $0.9 million and $2.4 million for the three and nine months ended September 30, 2017, respectively, as compared to $0.6 and $1.8 million for the three and nine months ended September 30, 2016, respectively.

~~General and administrative expenses.~~ General and administrative expenses increased $7.8 million or 57% to $21.4 million, and $20.8 million or 52% to $60.9 million for the three and nine months ended September 30, 2017, respectively, from $13.6 million and $40.1 million for the three and nine months ended September 30, 2016, respectively. The increase was mainly the result of increased non-cash share-based payments, employee salaries and benefits, non-recurring legal and litigation costs, and acquisition and restructuring costs. For the three months ended September 30, 2017 and 2016, ~~the amounts consisted mainly of~~ non-cash share-based payments of $10.2 million and $6.7 million, non-recurring legal and litigation costs of $0.3 million and $0.6 million, acquisition and restructuring costs of $2.4 million and $0 million, other professional fees of $0.8 million and $1.0 million, and employee salaries and benefits of $4.2 million and $3.2 million, respectively. For the nine months ended September 30, 2017 and 2016, ~~the amounts consisted mainly of~~ ~~non-cash share-based payments of $25.3 million and $20.2 million, non-recurring legal and litigation costs of $9.2 million, including $7.0 million~~ in connection with the ~~TRADS Litigation Settlement,~~FCC’s rulemaking proceeding captioned “Restoring Internet Freedom,” WC Docket No. 17-108. On May 6, 2021, the Company and ~~$1.4~~the NY AG executed an Assurance of Discontinuance (the “AOD”) to resolve this matter. The AOD imposed injunctive provisions on the Company’s practices with regard to political advocacy campaigns, most of which the Company had already implemented, and imposed a $3.7 million ~~acquisition~~penalty, which was in line with the Company's accrual and ~~restructuring costs~~was paid in full as of ~~$4.8 million and $0.4 million, other professional fees~~June 30, 2021.

On December 13, 2018, the Company received a subpoena from the United States Department of ~~$2.2 million and $3.8 million, and employee salaries and benefits~~Justice (“DOJ”) regarding the same issue. On March 12, 2020, the Company received a subpoena from the Office of ~~$11.7 million and $8.4 million, respectively.~~the Attorney General of the District of Columbia ("DC AG") regarding the same issue. The Company ~~expects a significant reduction in litigation costs going forward.~~

~~Depreciation and amortization.~~ ~~Depreciation and amortization expenses increased $0.1 million~~has not received any communications from either the DOJ or ~~2% to $3.6 million, and $1.3 million or 15% to $10.5 million for~~ the three and nine months ended September 30, 2017, respectively, from $3.5 million and $9.1 million for the three and nine months ended September 30, 2016, respectively. For the nine months ended September 30, 2017, the increase in depreciation and amortization was mainly due to the amortization of intangible assets resulting from the Q Interactive Acquisition effective on June 8, 2016 and the launch of software developed for internal use inDC AG since the second quarter of ~~2016.~~2020. At this time, it is not possible to predict the ultimate outcome of this matter or the significance, if any, to our business, results of operations or financial position.

~~Write-off~~On June 27, 2019, as a part of ~~long-lived assets.~~ ~~During~~two sales and use tax audits covering the ~~nine months ended September~~period from December 1, 2010 to November 30, ~~2017,~~ 2019, the New York State Department of Taxation and Finance (the “Tax Department”) issued a letter stating its position that revenue derived from certain of the Company’s customer acquisition and list management services are subject to sales tax, as a result of being deemed information services. The Company disputed the ~~Q Interactive Integration, we wrote off $3.6~~Tax Department's position on several grounds, but on January 14 and 15, 2020, the Tax Department issued Statements of Proposed Audit Adjustment totaling $8.2 million, ~~primarily relating to the remaining balance~~including $2.0 million of ~~the~~ ~~acquired proprietary technology and trade names, acquired in the Q Interactive Acquisition. We included it in the operating expenses as a write-off of long-lived assets~~. During the nine months ended September 30, 2016, the write-off of intangible assets of $4.1 million represented the write-off of the remaining balance of the intellectual property pursuant to the Intellectual Property Purchase Agreement dated October 14, 2014 (“Purchased IP”) and capitalized litigation costs as a result of an unfavorable ruling in relation to the Purchased IP litigation.

~~Interest expense, net.~~ ~~Interest expense, net, represented the interest expense and amortization of debt issuance costs associated~~interest. The Company formally disagreed with ~~(i) the term loan in~~ the amount of ~~$45.0 million (“Term Loan”) pursuant to a credit agreement entered in December 2015 (“Credit Agreement”), (ii) promissory notes payable to certain stockholders in~~ the ~~amount~~Proposed Audit Adjustments and notices of ~~$10 million (“Promissory Notes”) pursuant to agreements with certain stockholders in December 2015, and (iii)~~determination subsequently issued by the incremental term loan in the amount of $15.0 million (“Incremental Term Loan”, together with Term Loan, collectively, “Term Loans”), pursuant to the amendment No. 3 to the Credit Agreement effective in January 2017 (the “Amendment No. 3”). Interest expense, net, increased $0.5 million or 29% to $2.4 million, and $1.5 million or 28% to $7.1 million for the three and nine months ended September 30, 2017, respectively, from $1.9 million and $5.6 million for the three and nine months ended September 30, 2016, respectively. The increase was mainly attributable to the addition of the Incremental Term Loan. The long-term debt balance, including the current portion of long-term debt and net of unamortized debt issuance costs, was $62.8 million as of September 30, 2017.

~~Loss before income taxes. For the three months ended September 30, 2017 and 2016,~~ ~~we had a loss before income taxes of $14.1 million and $14.2~~Tax Department totaling $3.0 million, including ~~non-cash share-based payments~~$0.7 million of $11.1 million and $7.3 million, depreciation and amortization of $3.6 million and $3.5 million, non-recurring legal and litigation costs of $0.3 million and $0.6 million, acquisition and restructuring costs of $2.5 million and $0, and one-time write-off of long-lived assets of $0 and $4.1 million, respectively. ~~For~~interest. After a Conciliation Conference, the ~~nine months ended September 30, 2017 and 2016,~~ ~~we had~~Company reached a loss before income taxes of $47.2 million and $35.2 million, including non-cash share-based payments of $27.7 million and $21.9 million, depreciation and amortization of $10.5 million and $9.1 million, non-recurring legal and litigation costs of $9.2 million and $1.5 million, acquisition and restructuring costs of $4.8 million and $0.4 million, one-time write-off of long-lived assets of $3.6 million and $4.1 million, and non-cash loss on exchange of warrants of $0 and $1.3 million, respectively.

~~Income taxes.~~ ~~Income tax benefit of $0 was recognized~~settlement with the Tax Department for the three and nine months ended September 30, 2017, as compared to $4.5 million and $11.5 million for the three and nine months ended September 30, 2016, respectively. A full valuation allowance on the net deferred tax assets was recognized for the three and nine months ended September 30, 2017. See Note 6, “Income Taxes,” for details.

~~Net loss~~. A net loss of $14.1 million and $47.2 million was recognized for the three and nine months ended September 30, 2017, respectively, as compared to $9.7 million and $23.7 million for the three and nine months ended September 30, 2016, respectively, as a result of the foregoing.

The rates of inflation experienced in recent years have had no material impact on our financial statements. We attempt to recover increased costs by increasing prices for our services, to the extent permitted by contracts and competition.

~~Cash flows (used in) provided by operating activities. For the nine months ended September 30, 2017, net cash used in operating activities was $2.9~~$1.7 million which was ~~mainly~~ paid on April 1, 2022.

On January 28, 2020, the ~~result~~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. Since receipt of the ~~operating loss of $0.8 million, after~~CID, the ~~adjustments of non-cash items of $46.4 million. For~~Company has provided information and documentation and fully cooperated with the ~~nine months ended September 30, 2016, net cash provided by operating activities was $4.4 million, which was mainly~~FTC. On October 18, 2022, the ~~result~~FTC sent the Company a draft complaint and proposed consent order seeking injunctive relief and a civil monetary penalty and invited settlement negotiations. A substantial majority of the ~~operating income $3.6 million, after~~injunctive provisions contained in the ~~adjustments of non-cash items of $27.3 million.~~

~~Cash flows used in investing activities. Net cash used in investing activities for~~consent order are consistent with the ~~nine months ended September 30, 2017~~Company’s current business practices. The FTC and 2016 was $6.7 million and $9.5 million, respectively, which was mainly due to capitalized costs included in intangible assets of $5.5 million and $8.0 million, for the corresponding periods, respectively.

~~Cash flows provided by financing activities.~~ Net cash provided by financing activities for the nine months ended September 30, 2017 was $9.8 million, which was mainly the result of net proceeds from the Incremental Term Loan of $14.0 million in February 2017, partially offset by repayments of long-term debt of $3.5 million. Net cash provided by financing activities for the nine months ended September 30, 2016 was $2.0 million, which was mainly due to the net proceeds from the registered direct offering of $4.7 million in May 2016, partially offset by the repayments of long-term debt of $1.7 million.

~~As of September 30, 2017,~~ the Company had material commitments under non-cancellable data licensing agreements of $24.3 million. For the nine months ended September 30, 2017, the Company funded its operations using available cash and proceeds from the Incremental Term Loan.

have commenced settlement negotiations. The Company reported net loss of $14.1 million and $47.2 million for the three and nine months ended September 30, 2017, respectively, as compared to $9.7 million and $23.7 million for the three and nine months ended September 30, 2016, respectively. As of September 30, 2017, the Company had an accumulated deficit of $161.5 million.

As of September 30, 2017, the Company had cash and cash equivalents of approximately $10.3 million, of which, $9.4 million was held by Fluent, an increase of $0.2 million from $10.1 million as of December 31, 2016. A portion of this cash held by Fluent may be used by Fluent only for general operating purposes. Based on projections of growth in revenue and operating results in the coming year, the proceeds of $2.6 million from the exercise of certain warrants in October 2017, and other potential financings, the Company believes that it will have sufficient cash resources to finance its operations and expected capital expenditures for the next twelve months. Subject to revenue growth, the Company may have to continue to raise capital through the issuance of additional equity and/or debt, which, if the Companya loss from these matters is able to obtain, could have the effect of diluting stockholders. Any equity or debt financings, if available at all, may be on terms which are not favorable to the Company. If the Company’s operations do not generate positive cash flow in the upcoming year, or ifprobable but it is not ~~able~~yet possible to ~~meet~~reasonably estimate the debt covenants specified in the Credit Agreement, as amended, or if it is not able to obtain additional equity or debt financing on terms and conditions acceptable to it, if at all, it may be unable to implement its business plan, or even continue its operations.

The Company may explore the possible acquisition of businesses, products and/or technologies that are complementary to its existing business. The Company is continuing to identify and prioritize additional technologies, which it may wish to develop internally or through licensing or acquisition from third parties. While the Company may engage from time to time in discussions with respect to potential acquisitions, there can be no assurances that any such acquisitions will be made or that the Company will be able to successfully integrate any acquired business. In order to finance such acquisitions and working capital, it may be necessary for us to raise additional funds through public or private financings. Any equity or debt financings, if available at all, may be on terms which are not favorable to us and, in the case of equity financings, may result in dilution to stockholders.

As of September 30, 2017, we had financed approximately $70.0 million, for the cash portion of the purchase price of the Fluent Acquisition and other general operating purposes, with the proceeds from the Term Loans and Promissory Notes described herein. The Term Loans have an outstanding principal balance, plus paid-in-kind (“PIK”) interest, of $56.2 million, and the Promissory Notes have an outstanding principal balance, plus PIK interest, of $10.9 million. All obligations under the Term Loans mature on December 8, 2020 and our Promissory Notes are due six months after payment in full of our Term Loans. The Credit Agreement governing the Term Loans contains restrictive covenants which impose limitations on the way we conduct our business, including limitations on the amount of additional debt we are able to incur and restricts our ability to make certain investments and other restricted payments, including certain intercompany payments of cash and other property. The restrictive covenants in the Credit Agreement, as amended, may limit our strategic and financing options and our ability to return capital to our stockholders through dividends or stock buybacks. Furthermore, we still may need to incur additional debt to meet future financing needs.

The Term Loans are guaranteed by the Company and the other direct and indirect subsidiaries of the Company, and are secured by substantially all of the assets of the Company and its direct and indirect subsidiaries, including Fluent, in each case, on an equal and ratable basis. The Term Loans accrue interest at the rate of: (a) either, at Fluent's option, LIBOR (subject to a floor of 0.50%) plus 10.5% per annum, or base rate plus 9.5% per annum, payable in cash, plus (b) 1% per annum, payable, at Fluent's option, in either cash or in-kind. Principal amortization of the Term Loans is $0.7 million per quarter, payable at the end of each calendar quarter, which commenced on March 31, 2017. The Term Loans mature on December 8, 2020.

The Credit Agreement, as amended, requires us to maintain and comply with certain financial and other covenants. We cannot assure you that we will be able to maintain compliance with such financial or other covenants. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness, which would materially adversely affect our financial health if we are unable to access sufficient funds to repay all the outstanding amounts. Moreover, if we are unable to meet our debt obligations as they come due, we could be forced to restructure or refinance such obligations, seek additional equity financing or sell assets, which we may not be able to do on satisfactory terms, or at all. In addition, the Credit Agreement includes certain mandatory prepayment provisions, including annual prepayments of the Term Loans with a portion of our excess cash flow. As long as the Term Loans remain outstanding, the restrictive covenants and mandatory prepayment provisions could impair our ability to expand or pursue our business strategies or obtain additional funding. On August 7, 2017, the Company and its subsidiaries entered into Amendment No. 4 to the Credit Agreement (“Amendment No. 4”). Amendment No. 4 provides that there shall be no requirement that the Company and its subsidiaries meet any minimum EBITDA threshold for the twelve-month period ended June 30, 2017. The requirement that Fluent and its subsidiaries meet the required minimum EBITDA threshold for the twelve-month period ended June 30, 2017 was not impacted by Amendment No. 4. As of June 30, 2017, the Company was in compliance with the covenants under the Credit Agreement, after giving effect to Amendment No. 4. On November 3, 2017, the Company and its subsidiaries entered into Amendment No. 5 to the Credit Agreement (“Amendment No. 5”). Amendment No. 5 provides for certain amendments to the definition of EBITDA by adding back acquisition and restructuring costs resulting from the Business Combination Transaction, and non-recurring costs relating to litigation with TRADS that we settled on July 22, 2017. Amendment No. 5 also amends the minimum EBITDA threshold for the Company and its subsidiaries beginning with the quarter ended September 30, 2017. In addition, Amendment No. 5 allows for additional transfer of cash from Fluent to the Company, provided that Fluent maintains a minimum cash balance. As of September 30, 2017, the Company was in compliance with the covenants under the Credit Agreement, after giving effect to Amendment No. 5.

~~As of September 30, 2017,~~ ~~the Company has the following future contractual obligations~~:

(In thousands)

Remainder of 2017

2018

2019

2020

2021

2022 and
thereafter

Total

Lease agreements

$
427

$
1,961

$
686

$
705

$
724

$
2,127

$
6,630

Data licensing agreements

1,074

4,990

5,930

6,250

4,775

1,302

24,321

Debt

2,526

8,905

9,597

55,667

15,782

-

92,477

Acquisition consideration payable in stock

10,225

-

-

-

-

-

10,225

Litigation settlement

1,500

3,500

-

-

-

-

5,000

Employment agreements

638

1,145

905

301

-

-

2,989

Total

$
16,390

$
20,501

$
17,118

$
62,923

$
21,281

$
3,429

$
141,642

The lease agreements represent future minimum rental payments under non-cancellable operating leases having initial or remaining lease terms of more than one year. The data licensing agreements of $24.3 million represent material data purchase commitments under non-cancellable data licensing agreements. Debt of $92.5 million represents the payment of principal and interest of the Term Loans and Promissory Notes. Acquisition consideration payable in stock mainly represents the fair value of earn-out shares associated with the Q Interactive Acquisition, payable in 2017. Litigation settlement represents payments, ~~over the course of one year, in connection with the TRADS Litigation Settlement~~. Employment agreements represent related agreements reached with certain executives, including our Chief Executive Officer and Chief Financial Officer, etc., which provide for compensation and certain other benefits and for severance payments under certain circumstances. The total future contractual obligations as of September 30, 2017 increased by $28.1 million from December 31, 2016, which was primarily due to the increase in data licensing agreements of $7.6 million, debt of $12.7 million, and litigation settlement of $5.0 million.

~~As of September 30, 2017, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.~~

We are exposed to market risk for the effect of interest rate changes. To date, we have not used derivative instruments to mitigate the impact of our market risk exposures. We have also not used, nor do we intend to use, derivatives for trading or speculative purposes.

We are exposed to market risk related to changes in interest rates. Our investments are considered cash equivalents and primarily consist of money market mutual funds. As of September 30, 2017, we had cash and cash equivalents of $10.3 million. The carrying amount of our cash and cash equivalents reasonably approximates fair value, due to the fact that we can redeem such investment freely. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. Our investments are exposed to market risk due to a fluctuation in interest rates, which may affect our interest income and the fair market value of our investments. Due to the short-term nature of our investment portfolio, we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.

As of September 30, 2017, we have the principal amount of long-term debt, plus PIK interest, in the aggregate of $67.1 million, including current portion of long-term debt. Our Term Loans accrue interest at LIBOR (with a floor of 0.5%) plus 10.5% per annum, payable in cash, plus an additional 1.0% per annum payable, at Fluent’s election, in-kind or in cash. Interest under the Term Loans is payable monthly, including monthly compounding of PIK interest. Our Promissory Notes have a rate of interest of 10% per annum, which interest is capitalized monthly by adding to the outstanding principal amountmagnitude of such ~~Promissory Notes. The fair value~~loss. An unfavorable outcome of ~~our debt will generally fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest.~~

A hypothetical 10% increase in interest rates relative to our current interest rates would not have a material impact on the fair value of all of our outstanding long-term debt, net. Changes in interest rates would, however, affect operating results and cash flows, because of the variable rate nature of the Term Loans. A hypothetical 10% increase or decrease in overall interest rates as of September 30, 2017 would result in an impact to interest expense for the next twelve months by $0.8 million.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2017. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, nothis matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2017.

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

On July 22, 2017, the Company entered in a settlement agreement with TransUnion and TransUnion Risk and Alternative Data Solutions, Inc. (“TRADS”), settling all litigation with TransUnion and TRADS. Company subsidiary, IDI Holdings, LLC (“IDI Holdings”), will pay $7.0 million to TRADS over the course of one year to settle all matters (the “TRADS Litigation Settlement”). The terms of the settlement agreement are confidential. The Company recorded an expense of $7.0 million in general and administrative expenses during the three months ended June 30, 2017. For a description of the legal proceedings settled in the TRADS Litigation Settlement, see Part I, Item 3 of the Company’s 2016 Form 10-K and Part II, Item 1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.

~~Following the TRADS Litigation Settlement, the Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to~~could have a material adverse effect on the Company’s business, results of operations and/or financial position.

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. § 2241 et. seq., and the Telemarketing Sales Rule, 16 C.F.R. 310 et seq. 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.

Our business, financial condition, results of operations, or cash flows. Legal fees associated with such legal proceedings, are expensed as incurred. We review legal proceedings and claims on an ongoing basis and follow appropriate accounting guidance, including ASC 450, when making accrual and disclosure decisions. We establish accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. We do not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated.

~~Our business, financial condition, operating results,~~ and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our ~~Annual Report on~~2021 Form 10-K, ~~for the year ended December 31, 2016 (“2016 Form 10-K”), filed on March 14, 2017,~~ the occurrence of any one of which could have a material adverse effect on our actual results.

Except as set for the below, there have been no material changes to the Risk Factors previously disclosed in our ~~2016~~2021 Form 10-K.

The outcome of litigation, inquiries, investigations, examinations or other legal proceedings in which we are involved, in which we may become involved, or in which our clients or competitors are involved could distract management, increase our expenses or subject us to significant monetary damages or restrictions on our ability to do business.

Due to the complex regulatory scheme in which we operate and the heightened scrutiny on our business, legal proceedings arise periodically in the normal course of our business. These may include individual consumer cases, class action lawsuits and inquiries, investigations, examinations, regulatory proceedings or other actions brought by federal (e.g., the Federal Trade Commission ("FTC") or state (e.g., state attorneys general) authorities. We are currently subject to various pending governmental and regulatory investigations and we could be subject to more in the future. Any negative outcomes from regulatory actions or litigation or claims, including monetary penalties or damages or injunctive provisions regulating or restricting how can we conduct our business could have a material adverse effect on our business, financial condition, results of operations and reputation.

For example, on October 26, 2018, the Company received a subpoena from the New York Attorney General’s Office (“NY AG”) regarding compliance with New York Executive Law § 63(12) and New York General Business Law § 349, as they relate to the collection, use, or disclosure of information from or about consumers or individuals, as such information was submitted to the Federal Communication Commission (“FCC”) in connection with the FCC’s rulemaking proceeding captioned “Restoring Internet Freedom,” WC Docket No. 17-108. The Company also received subpoenas from the United States Department of Justice (“DOJ”) on December 13, 2018, and the Office of the Attorney General of the District of Columbia ("DC AG") on March 12, 2020, regarding the same issue. On May 6, 2021, the Company and the NY AG executed an Assurance of Discontinuance (the “AOD”) to resolve this matter which imposed injunctive provisions on the Company’s practices with regard to political advocacy campaigns, most of which the Company had already implemented, and imposed a $3.7 million penalty.

Additionally, on January 28, 2020, we received a Civil Investigative Demand (“CID”) from the FTC regarding compliance with the FTC Act and the TSR, 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. We have been fully cooperating with the FTC and completed our initial discovery submissions to the FTC in 2020. On October 18, 2022, the FTC sent the Company a draft complaint and proposed consent order seeking injunctive relief and a civil monetary penalty and invited settlement negotiations. 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.

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. § 2241 et. seq., and the Telemarketing Sales Rule, 16 C.F.R. 310 et seq. The Company has been responsive and is fully cooperating with the PA OAG. 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 . See Item 3, Legal Proceedings for more information on each of these matters.

Regardless of whether any current or future claims in which we are involved have merit, or whether we are ultimately held liable or subject to payment of penalties or consumer redress, such investigations and claims have been and may continue to be expensive to defend, may divert management’s time away from our operations and may result in changes to our business practices that adversely affect our results of operations.

The scope and outcome of these proceedings is often difficult to assess or quantify. Plaintiffs in lawsuits may seek recovery of large amounts, and the cost to defend such litigation may be significant. There may also be adverse publicity and uncertainty associated with investigations, litigation and orders (whether pertaining to us, our clients or our competitors) that could diminish consumers' view of our services and/or result in material discovery expenses. In addition, a court-ordered injunction or an administrative cease-and-desist order or settlement may require us to modify our business practices or prohibit conduct that would otherwise be legal and in which our competitors may engage. Many of the complex and technical statutes to which we are subject, including state and federal financial privacy requirements, may provide for civil and criminal penalties and may permit consumers to bring individual or class action lawsuits against us and obtain statutorily prescribed damages. Additionally, our clients might face similar proceedings, actions or inquiries which could affect their businesses and, in turn, our ability to do business with those clients.

Such events are inherently uncertain and adverse outcomes could result in significant monetary damages, penalties or injunctive relief against us, any of which could have a material adverse effect on our business, results of operations and/or financial position.

~~On November 3, 2017, the Company and its subsidiaries entered into Amendment No. 5 to the Credit Agreement (“Amendment No. 5”). Amendment No. 5 provides for certain amendments to the definition~~None.

~~Amendment No. 5 is~~ ~~filed as Exhibits 10.9 to this quarterly report on Form 10-Q and incorporated herein by reference.~~

On November 3, 2017, the Company entered into warrant amendments (the "Whitehorse Warrant Amendments") with (i) H.I.G. Whitehorse SMA ABF, L.P. regarding 46,667 warrants to purchase common stock of the Company, ~~par value $0.0005 per share,~~ at an exercise price of $5.0829 per share; (ii) H.I.G. Whitehorse SMA Holdings I, LLC regarding 66,666 warrants to purchase common stock of the Company at an exercise price of $5.0829 per share; and (iii) Whitehorse Finance, Inc. regarding 186,667 warrants to purchase common stock of the Company at an exercise price of $5.0829 per share; pursuant to which the Company agreed to reduce the exercise price of all common stock warrants described above to $3.00 per share, and each warrant holder set forth above separately agreed to exercise all common stock warrants held by them within 30 days. Pursuant to the terms of the Whitehorse Warrant Amendments, the warrant holders are prohibited from engaging or otherwise agreeing to any sale, pledge, or other transfer of the shares of common stock underlying the warrants for a period of 120 days following the exercise of such warrants in full (the “Whitehorse Lock-Up Period”). Following the Whitehorse Lock-Up Period, (i) the warrant holders may only sell such number of shares underlying the warrants representing up to 5% of the Company’s daily trading volume on the immediately prior trading day prior to a sale and (ii) the warrant holders may not transfer any of the shares underlying the warrants for less than $4.50 per share, provided that the warrant holder may not transfer any shares underlying the warrants unless the Company has an effective registration statement permitting the resale of the shares underlying the warrants.

The Company has also agreed to register the resale of the shares underlying the warrants, if exercised in full as set forth in the Whitehorse Warrant Amendments, during the Whitehorse Lock-Up Period. The issuance of the shares of such common stock upon exercise of the above-described warrants is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”), in accordance with Section 4(a)(2) of the Act, as a transaction by an issuer not involving a public offering.

The description of the Whitehorse Warrant Amendments does not purport to be complete and is qualified in its entirety by reference to each respective Whitehorse Warrant Amendment, which are filed as Exhibits 4.6, 4.7, and 4.8 to this quarterly report on Form 10-Q and incorporated herein by reference.

On November 3, 2017, in connection with the terms of that certain Membership Interest Purchase Agreement (the “Purchase Agreement”) entered into on June 8, 2016 between the Company and Selling Source, LLC (“Selling Source”) pursuant which Selling Source sold to the Company all of Selling Source’s right, title, and interest in all of the issued and outstanding membership interests in Q Interactive, LLC, the Company issued 2,750,000 shares (the “Shares”) of the Company’s common stock, representing the earn-out shares and certain other adjustments, including the monetized shares and the net working capital adjustment.

Within 10 business days following the issuance of the Shares, the Company shall file a registration statement registering the resale of the Shares and shall use commercially reasonable best efforts to cause such registration statement to become effective no later than 30 days thereafter.

The Shares issued in connection with the Purchase Agreement are exempt from the registration requirements of the Act, in accordance with Section 4(a)(2) of the Act, as a transaction by an issuer not involving a public offering.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

				Page
PART I - FINANCIAL INFORMATION

Item 1.		Financial Statements (unaudited)
		~~Condensed~~ Consolidated Balance Sheets as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021		2
		~~Condensed~~ Consolidated Statements of Operations ~~and Comprehensive Loss~~ for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021		3
		~~Condensed~~ Consolidated ~~Statement~~Statements of Changes in Shareholders' Equity for the three and nine months ended September 30, ~~2017~~2022 and 2021		4
		~~Condensed~~ Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2022 and ~~2016~~2021		5
		Notes to ~~Condensed~~ 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		2831
Item 4.		Controls and Procedures		2931

PART II - OTHER INFORMATION

Item 1.		Legal Proceedings		3032
Item 1A.		Risk Factors		3033
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		3033
Item 3.		Defaults Upon Senior Securities		3033
Item 4.	Mine Safety Disclosures	~~Mine Safety Disclosure~~33s		30
Item 5.		Other Information		3133
Item 6.		Exhibits		3234
Signatures		35	34

	*Three Months Ended September 30,*				*Nine Months Ended September 30,*
	*2022*		*2021*		*2022*		*2021*
Restricted stock units		1,220,790		2,814,788		1,780,022		2,814,788
Stock options		2,139,000		2,204,000		2,139,000		2,204,000
Warrants		—		833,333		—		833,333
Total anti-dilutive securities		3,359,790		5,852,121		3,919,022		5,852,121

Year	*September 30, 2022*
Remainder of 2022	$	3,098
2023		7,182
2024		6,574
2025		5,184
2026		1,277
2027 and thereafter		7,399
Total	$	30,714

	*Fluent*	*All Other*	*Total*
Balance as of December 31, 2021	160,922	4,166	165,088
True North acquisition	1,092	—	1,092
Fluent goodwill impairment	(55,400)	—	(55,400)
Balance as of September 30, 2022	106,614	4,166	110,780

Issuance Date	February 1, 2019			December 20, 2019			March 1, 2020			March 1, 2021
Fair value lower range	$	2.81		$	1.58		$	1.46		$	4.34
Fair value higher range	$	2.86		$	1.61		$	1.49		$	4.43
Exercise price	$	4.72		$	2.56		$	2.33		$	6.33
Expected term (in years)		1.0 - 1.3			1.0 - 1.6			1.0 - 1.5			1.0 - 1.3
Expected volatility		65	%		70	%		70	%		80	%
Dividend yield		—	%		—	%		—	%		—	%
Risk-free rate		2.61	%		1.85	%		1.05	%		1.18	%

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue	$	57,248		$	52,176		$	161,038		$	132,643
Cost of revenues (exclusive of depreciation and amortization)		37,687			39,658			109,509			97,709
Gross profit		19,561			12,518			51,529			34,934
Operating expenses:
Sales and marketing expenses		6,280			3,699			16,636			10,004
General and administrative expenses		21,365			13,614			60,938			40,148
Depreciation and amortization		3,585			3,507			10,460			9,112
Write-off of long-lived assets		-			4,055			3,626			4,055
Total operating expenses		31,230			24,875			91,660			63,319
Loss from operations		(11,669	)		(12,357	)		(40,131	)		(28,385	)
Other income (expense):
Interest expense, net		(2,426	)		(1,880	)		(7,098	)		(5,561	)
Other expenses, net		-			-			-			(1,273	)
Total other expense		(2,426	)		(1,880	)		(7,098	)		(6,834	)
Loss before income taxes		(14,095	)		(14,237	)		(47,229	)		(35,219	)
Income taxes		-			(4,493	)		-			(11,519	)
Net loss	$	(14,095	)	$	(9,744	)	$	(47,229	)	$	(23,700	)
Loss per share:
Basic and diluted	$	(0.25	)	$	(0.19	)	$	(0.86	)	$	(0.56	)
Weighted average number of shares outstanding:
Basic and diluted		55,390,247			50,654,690			54,665,776			42,100,504
Comprehensive loss:
Net comprehensive loss	$	(14,095	)	$	(9,744	)	$	(47,229	)	$	(23,700	)

	Common stock				Treasury stock					Additional paid-in			Accumulated			Total Shareholders'
	Shares		Amount		Shares		Amount			capital			deficit			equity
Balance as at December 31, 2016		53,717,996	$	27		160,235	$	(531	)	$	344,384		$	(114,231	)	$	229,649
Vesting of restricted stock units and issuance of restricted stock		2,700,140		1		-		-			(1	)		-			-
Increase in treasury stock resulting from shares withheld to pay statutory taxes in connection with the vesting of restricted stock units		-		-		192,288		(743	)		-			-			(743	)
Share-based compensation		-		-		-		-			28,704			-			28,704
Net loss		-		-		-		-			-			(47,229	)		(47,229	)
Balance as at September 30, 2017		56,418,136	$	28		352,523	$	(1,274	)	$	373,087		$	(161,460	)	$	210,381

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except share data)	2017			2016			2017			2016
Numerator:
Net loss	$	(14,095	)	$	(9,744	)	$	(47,229	)	$	(23,700	)
Denominator:
Weighted average shares outstanding - Basic and diluted		55,390,247			50,654,690			54,665,776			42,100,504
Loss per share:
Basic and diluted:	$	(0.25	)	$	(0.19	)	$	(0.86	)	$	(0.56	)

	12% term loan,		12% incremental term loan,		10% promissory notes,
(In thousands)	due 2020		due 2020		due 2021		Total
Principal amount	$	41,203	$	14,485	$	10,000	$	65,688
Less: unamortized debt issuance costs		3,156		783		330		4,269
Add: PIK interest accrued to the principal balance		546		10		873		1,429
Long-term debt, net		38,593		13,712		10,543		62,848
Less: Current portion of long-term debt		2,062		688		-		2,750
Long-term debt, net (non-current)	$	36,531	$	13,024	$	10,543	$	60,098

	*September 30, 2022*			*December 31, 2021*
New Credit Facility due 2026 (less unamortized discount and financing costs of $720 and $921, respectively)	$	41,780		$	45,329
Less: Current portion of long-term debt		(5,000	)		(5,000	)
Long-term debt, net (non-current)	$	36,780		$	40,329

	Number of options		Weighted average exercise price per share		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding as of December 31, 2016		352,000	$	10.25	4.4 years	$	-
Outstanding as of September 30, 2017		352,000	$	10.25	3.6 years	$	-
Options vested and expected to vest as of September 30, 2017		352,000	$	10.25	3.6 years	$	-
Options exercisable as of September 30, 2017		294,500	$	8.36	2.7 years	$	-

	*Number of options*			*Weighted average exercise price per share*		*Weighted average remaining contractual term (in years)*		*Aggregate intrinsic value*
Outstanding as of December 31, 2021		2,204,000		$	4.41		7.1	$	—
Granted		—			—		—		—
Exercised		—			—		—		—
Expired		(65,000	)		1.10		—		—
Outstanding as of September 30, 2022		2,139,000		$	4.37		6.6	$	—
Options exercisable as of September 30, 2022		1,242,000		$	3.98		6.6	$	—

	*Number of stock options*		*Weighted average exercise price per share*		*Weighted average remaining contractual term (in years)*
Unvested as of December 31, 2021		897,000	$	4.91		7.3
Granted		—		—		—
Vested		—		—		—
Unvested as of September 30, 2022		897,000	$	4.91		6.6

	Number of units			Weighted average grant-date fair value
Unvested as of December 31, 2016		12,407,029		$	8.40
Granted⁽¹⁾		2,732,000		$	5.61
Vested and delivered		(2,357,852	)	$	6.58
Withheld as treasury stock ⁽²⁾		(192,288	)	$	6.86
Vested not delivered ⁽³⁾		(1,660,001	)	$	3.36
Forfeited		(172,416	)	$	5.80
Unvested as of September 30, 2017		10,756,472		$	8.94

	*Number of units*			*Weighted average grant-date fair value*
Unvested as of December 31, 2021		3,111,321		$	8.03
Granted		200,000		$	1.89
Vested and delivered		(977,550	)	$	3.79
Withheld as treasury stock ⁽¹⁾		(208,329	)	$	4.56
Vested not delivered ⁽²⁾		—		$	3.30
Forfeited		(345,419	)	$	3.80
Unvested as of September 30, 2022		1,780,023		$	10.90

	*September 30,*		*December 31,*
	*2022*		*2021*
Total assets:
Fluent	$	236,215	$	297,768
All Other		16,803		20,414
Total assets	$	253,018	$	318,182

Below is a summary of the purchase price allocation of the True North Acquisition:
Cash	$	29
Accounts receivable, net		3
Prepaid expenses and other current assets		84
Intangible assets:
Customer list		182
Developed technology		1,180
Goodwill		1,092
Other non-current assets		7
Liabilities assumed		(256	)
Consideration transferred	$	2,321

•	Revenue increased 4% to $89.0 million, compared to $85.9 million
•	Net income was $3.1 million, or $0.04 per share, compared to net loss of $2.5 million or $0.03 per share
•	Gross profit (exclusive of depreciation and amortization) was $23.8 million, an increase of 8% as compared to the three months ended September 30, 2021, and representing 27% of revenue for the three months ended September 30, 2022
•	Media marginincreased 16% to $28.1 million, compared to $24.2 million, representing 31.5% of revenue for the three months ended September 30, 2022
•	Adjusted EBITDA decreased to $5.9 million representing 6.6% of revenue, based onnet income of $3.1 million, compared to $6.4 million, based on net loss of $2.5 million
•	Adjusted net income was $5.0 million, or $0.06 per share, compared to adjusted net income of $2.8 million, or $0.03 per share

•	Revenue increased 21% to $276.5 million, compared to $229.4 million
•	Net loss was $55.8 million, or $0.69 per share, compared to net loss of $13.9 million or $0.17 per share
•	Gross profit (exclusive of depreciation and amortization) was $73.6 million,an increaseof 27% as compared to the nine months ended September 30, 2021, and representing 27% of revenue for the nine months ended September 30, 2022
•	Media margin increased 25% to $86.3 million, compared to $69.2 million, representing 31.2% of revenue for the nine months ended September 30, 2022
•	Adjusted EBITDA increased to $20.1 million, representing 7.3% of revenue, based on net loss of $55.8 million,compared to $12.9 million, based on net loss of $13.9 million
•	Adjusted net income was $6.6 million, or $0.08 per share, compared to adjusted net income of $1.2 million, or $0.01 per share

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenue	$	89,046		$	85,858		$	276,470		$	229,406
Less: Cost of revenue (exclusive of depreciation and amortization)		65,270			63,784			202,859			171,379
Gross profit (exclusive of depreciation and amortization)	$	23,776		$	22,074		$	73,611		$	58,027
Gross profit (exclusive of depreciation and amortization) % of revenue		27	%		26	%		27	%		25	%
Non-media cost of revenue ⁽¹⁾		4,290			2,088			12,713			11,141
Media margin	$	28,066		$	24,162		$	86,324		$	69,168
Media margin % of revenue		31.5	%		28.1	%		31.2	%		30.2	%

⁽¹⁾	~~Corporate primarily represents corporate administrative costs that are not allocated~~Includes compensation expense related to ~~individual segments. The segment information for~~non-competition agreements entered into as a result of acquisitions (Note 11. Business acquisition, in the Notes to the Consolidated Financial Statements)
(2)	Included in the three and nine months ended September 30, ~~2016 was reclassified to conform~~2021, is a net expense of $2,796 related to the ~~current period presentation.~~ Full Winopoly Acquisition.

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except share and per share data)	2022			2021			2022			2021
Net income (loss)	$	3,113		$	(2,452	)	$	(55,844	)	$	(13,889	)
Share-based compensation expense		801			1,145			2,652			3,577
Loss on early extinguishment of debt		—			—			—			2,964
Accrued compensation expense for Put/Call Consideration		—			586			—			3,213
Goodwill impairment		—			—			55,400			—
Write-off of intangible assets		—			144			128			343
Loss on disposal of property and equipment		(2	)		—			19			—
Acquisition-related costs⁽¹⁾⁽²⁾		536			2,906			1,673			3,406
Restructuring and other severance costs		—			133			38			230
Certain litigation and other related costs		504			295			2,502			1,322
Adjusted net income	$	4,952		$	2,757		$	6,568		$	1,166
Adjusted net income per share:
Basic	$	0.06		$	0.03		$	0.08		$	0.01
Diluted	$	0.06		$	0.03		$	0.08		$	0.01
Weighted average number of shares outstanding:
Basic		81,592,316			80,133,406			81,327,639			79,753,662
Diluted		81,699,966			80,514,650			81,327,639			80,755,776

(1)	Includes compensation expense related to non-competition agreements entered into as part of an acquisition (Note 11. Business acquisition, in the Notes to the Consolidated Financial Statements).
(2)	Included in the three and nine months ended September 30, 2021, is a net expense of $2,796 related to the Full Winopoly Acquisition.

(In thousands)	Remainder of 2017		2018		2019		2020		2021		2022 and thereafter		Total
Lease agreements	$	427	$	1,961	$	686	$	705	$	724	$	2,127	$	6,630
Data licensing agreements		1,074		4,990		5,930		6,250		4,775		1,302		24,321
Debt		2,526		8,905		9,597		55,667		15,782		-		92,477
Acquisition consideration payable in stock		10,225		-		-		-		-		-		10,225
Litigation settlement		1,500		3,500		-		-		-		-		5,000
Employment agreements		638		1,145		905		301		-		-		2,989
Total	$	16,390	$	20,501	$	17,118	$	62,923	$	21,281	$	3,429	$	141,642

~~Exhibit No.~~		~~Description~~

~~2.1~~		Business Combination Agreement dated September 6, 2017, by and among Cogint, Inc., and BlueFocus International Limited (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed September 7, 2017).

~~4.1~~		First Amendment to Common Stock Purchase Warrant and Notice of Exercise with Intracoastal Capital, LLC - $3.75 Warrants (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed October 17, 2017).

~~4.2~~		First Amendment to Common Stock Purchase Warrant and Notice of Exercise with Intracoastal Capital, LLC - $8.00 Warrants (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed October 17, 2017).

~~4.3~~		First Amendment to Common Stock Purchase Warrant and Notice of Exercise with Intracoastal Capital, LLC - $10.00 Warrants (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed October 17, 2017).

~~4.4~~		First Amendment to Common Stock Purchase Warrant and Notice of Exercise with Anson Investment Master Fund LP - $8.00 Warrants (incorporated by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K filed October 17, 2017).

~~4.5~~		~~Form of Additional Warrants (incorporated by reference to Exhibit 4.5 to the Company's Current Report on Form 8-K filed October 17, 2017).~~

~~4.6~~		Amendment to Warrants and Agreement to Exercise with H.I.G. Whitehorse SMA ABF, L.P. dated November 3, 2017.*

~~4.7~~		Amendment to Warrants and Agreement to Exercise with H.I.G. Whitehorse SMA Holdings I, LLC dated November 3, 2017.*

~~4.8~~		Amendment to Warrants and Agreement to Exercise with Whitehorse Finance, Inc. dated November 3, 2017.*

~~10.1~~		Written Consent and Voting Agreement dated September 6, 2017, by and among certain Consenting Stockholders and Blue Focus International Limited (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed September 7, 2017).

~~10.2~~		Stockholders’ Agreement dated September 6, 2017, by and among certain Consenting Stockholders and BlueFocus International Limited (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed September 7, 2017).

~~10.3~~		Separation and Distribution Agreement dated September 6, 2017, by and among Cogint, Inc. and Red Violet, Inc. (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed September 7, 2017).

~~10.4~~		Tax Matters Agreement dated September 6, 2017, by and among Cogint, Inc. and Red Violet, Inc. (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed September 7, 2017).

~~10.5~~		Employee Matters Agreement dated September 6, 2017, by and among Cogint, Inc. and Red Violet, Inc. (incorporated by reference to Exhibit 10.5 to the Company's Current Report on Form 8-K filed September 7, 2017).+

~~10.6~~		Third Amendment to Employment Agreement dated September 6, 2017, by and between Cogint, Inc. and James Reilly (incorporated by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K filed September 7, 2017).+

~~10.7~~		Consulting Services Agreement, effective as of June 23, 2017, by and between Cogint, Inc. and Michael Brauser (incorporated by reference to Exhibit 10.7 to the Company's Current Report on Form 8-K filed September 7, 2017).

~~10.8~~		Amendment No. 4 to Credit Agreement, dated as of August 7, 2017, by and among Cogint, Inc., Fluent, LLC, the other borrowers party thereto, Whitehorse Finance, Inc., as administrative agent, and the other lenders party thereto.*

~~10.9~~		Amendment No. 5 to Credit Agreement, dated as of November 3, 2017, by and among Cogint, Inc., Fluent, LLC, the other borrowers party thereto, Whitehorse Finance, Inc., as administrative agent, and the other lenders party thereto.*
~~31.1~~		Certification of Chief Executive Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

~~31.2~~		Certification of Chief Financial Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

~~32.1~~		Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

~~32.2~~		Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

~~101.INS~~		XBRL Instance Document*
~~101.SCH~~		XBRL Taxonomy Extension Schema Document*
~~101.CAL~~		XBRL Taxonomy Extension Calculation Linkbase Document*
~~101.DEF~~		XBRL Taxonomy Extension Definition Linkbase Document*
~~101.LAB~~		XBRL Taxonomy Extension Label Linkbase Document*
~~101.PRE~~		XBRL Taxonomy Extension Presentation Linkbase Document*

+		~~Management contract or compensatory plan or arrangement~~
*		~~Filed herewith~~
**		~~Furnished herewith~~

		~~Cogint,~~Fluent, Inc.


November 7, 2022	By:	/s/ Sugandha Khandelwal

~~November 8, 2017~~	~~By:~~	~~/s/ Daniel MacLachlan~~
		~~Daniel MacLachlan~~Sugandha Khandelwal
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

	~~By:~~	~~/s/ Jacky Wang~~
		~~Jacky Wang~~
		~~Chief Accounting Officer~~
		~~(Principal Accounting Officer)~~