flnt20230820_8ka.htm
Form 8-K/A date of report 08-14-23 true 0001460329 0001460329 2023-08-14 2023-08-14
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
FORM 8-K/A
Amendment No. 1
 

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): August 14, 2023
 

FLUENT, INC.
(Exact name of Registrant as Specified in Its Charter)
 

 
 
         
Delaware
 
000-37893
 
77-0688094
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
     
300 Vesey Street, 9th Floor
New York, New York
     
10282
(Address of Principal Executive Offices)
     
(Zip Code)
 
Registrants Telephone Number, Including Area Code: (646) 669-7272
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol
 
Name of exchange
on which registered
Common Stock, Par Value $0.0005
 
FLNT
 
The NASDAQ Stock Market LLC
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
 
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. ☐
 
 

 
EXPLANATORY NOTE
 
This Current Report on Form 8-K/A amends and supplements the Current Report on Form 8-K of Fluent, Inc. (the “Company”), originally furnished by the Company to the Securities and Exchange Commission on August 14, 2023 (the “Initial Form 8-K”). The sole purpose for filing this Form 8-K/A is to correct certain information contained in the Company’s press release furnished with the Initial Form 8-K as Exhibit 99.1, which announced the financial results of the Company for the fiscal quarter and six months ended June 30, 2023 (the “Earnings Release”).
 
The information contained herein is being furnished pursuant to Item 2.02 of Form 8-K, “Results of Operations and Financial Condition.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, (the “Securities Act”) or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
 
Item 2.02
Results of Operations and Financial Condition.
 
Subsequent to the Company’s second fiscal quarter earnings call on August 14, 2023 and during the preparation of the Company’s unaudited consolidated financial statements to be included in the Company’s Form 10-Q for the second fiscal quarter ended June 30, 2023 (the “Form 10-Q”), the Company determined that (a) an agreed prepayment on August 21, 2023 of $5.0 million of outstanding indebtedness under the Company’s term loan with Citizens Bank, N.A. as administrative agent, lead arranger and bookrunner, should be classified as a current liability on the Company’s condensed consolidated balance sheet at June 30, 2023; and (b) $4.0 million of insurance proceeds that the Company was informed it would receive on July 31, 2023, to reimburse the Company for certain legal defense costs incurred in connection with the Federal Trade Commission investigation and the Pennsylvania Office of the Attorney General matter should have been classified as a current asset with an offsetting contra-expense to general and administrative expenses, with an associated additional income tax expense of $0.9 million for the three and six months ended June 30, 2023 and an increase of $0.9 million of current liabilities at June 30, 2023. The contra-expense and associated income tax expense are each excluded from the Company’s calculations of Adjusted EBITDA and adjusted net income (loss). Adjusted EBITDA and adjusted net income (loss) are non-GAAP financial measures defined in the Earnings Release.
 
Therefore, the consolidated balance sheet, consolidated income statements and consolidated statements of cash flows, and the reconciliations of Adjusted EBITDA and adjusted net income (loss) and to net income (loss) included in the Earnings Release do not reflect the final versions of these statements included in the Form 10-Q, and the statements in the Earnings Release stating net income (loss) for the three and six months ended June 30, 2023 do not reflect the reported information contained in the Form 10-Q.
 
Corrected versions of the affected financial statements and reconciliations appearing in the Earnings Release are attached hereto as Exhibit 99.1 and are also available in the Form 10-Q filed with the Securities and Exchange Commission on August 21, 2023.  
 
 

 
Item 9.01
Financial Statements and Exhibits.
 
(d) Exhibits.
 
Exhibit
Number
Description
   
99.1
   
104
Cover Page Interactive Data File - the cover page iXBRL tags are embedded within the Inline XBRL document
 
 

 
SIGNATURES
 
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 hereunto duly authorized.
 
Date: August 21, 2023
Fluent, Inc.
By:
/s/ Don Patrick
Don Patrick
Chief Executive Officer
 
 
ex_562812.htm

Exhibit 99.1

 

FLUENT, INC.

CONSOLIDATED BALANCE SHEETS

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

(unaudited)

 

   

June 30, 2023

   

December 31, 2022

 

ASSETS:

               

Cash and cash equivalents

  $ 20,983     $ 25,547  

Accounts receivable, net of allowance for doubtful accounts of $209 and $544, respectively

    58,120       63,164  

Prepaid expenses and other current assets

    9,941       3,506  

Total current assets

    89,044       92,217  

Property and equipment, net

    783       964  

Operating lease right-of-use assets

    4,278       5,202  

Intangible assets, net

    28,525       28,745  

Goodwill

    30,966       55,111  

Other non-current assets

    1,486       1,730  

Total assets

  $ 155,082     $ 183,969  

LIABILITIES AND SHAREHOLDERS' EQUITY:

               

Accounts payable

  $ 13,303     $ 6,190  

Accrued expenses and other current liabilities

    27,469       35,626  

Deferred revenue

    895       1,014  

Current portion of long-term debt

    10,000       5,000  

Current portion of operating lease liability

    2,309       2,389  

Total current liabilities

    53,976       50,219  

Long-term debt, net

    27,989       35,594  

Operating lease liability

    2,734       3,743  

Other non-current liabilities

    2,248       458  

Total liabilities

    86,947       90,014  

Contingencies (Note 10)

               

Shareholders' equity:

               

Preferred stock — $0.0001 par value, 10,000,000 Shares authorized; Shares outstanding — 0 shares for both periods

           

Common stock — $0.0005 par value, 200,000,000 Shares authorized; Shares issued — 85,751,226 and 84,385,458, respectively; and Shares outstanding — 81,139,657 and 80,085,306, respectively (Note 7)

    43       42  

Treasury stock, at cost — 4,611,569 and 4,300,152 Shares, respectively (Note 7)

    (11,407 )     (11,171 )

Additional paid-in capital

    425,491       423,384  

Accumulated deficit

    (345,992 )     (318,300 )

Total shareholders' equity

    68,135       93,955  

Total liabilities and shareholders' equity

  $ 155,082     $ 183,969  

 

 

 

FLUENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2023

   

2022

   

2023

   

2022

 

Revenue

  $ 82,145     $ 98,361     $ 159,399     $ 187,424  

Costs and expenses:

                               

Cost of revenue (exclusive of depreciation and amortization)

    59,540       70,026       117,812       137,589  

Sales and marketing

    4,215       4,484       9,028       8,336  

Product development

    4,615       4,802       9,553       9,357  

General and administrative

    3,941       11,688       16,266       22,975  

Depreciation and amortization

    3,095       3,332       5,454       6,639  

Goodwill impairment and write-off of intangible assets

          55,400       25,700       55,528  

Loss on disposal of property and equipment

          21             21  

Total costs and expenses

    75,406       149,753       183,813       240,445  

Income (loss) from operations

    6,739       (51,392 )     (24,414 )     (53,021 )

Interest expense, net

    (795 )     (430 )     (1,484 )     (814 )

Income (loss) before income taxes

    5,944       (51,822 )     (25,898 )     (53,835 )

Income tax expense

    (1,693 )     (5,122 )     (1,794 )     (5,122 )

Net income (loss)

    4,251       (56,944 )     (27,692 )     (58,957 )
                                 

Basic and diluted income (loss) per share:

                               

Basic

  $ 0.05     $ (0.70 )   $ (0.34 )   $ (0.73 )

Diluted

  $ 0.05     $ (0.70 )   $ (0.34 )   $ (0.73 )
                                 

Weighted average number of shares outstanding:

                               

Basic

    82,727,971       81,493,821       82,323,854       81,193,107  

Diluted

    82,752,646       81,493,821       82,323,854       81,193,107  

 

 

 

FLUENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(unaudited)

 

   

Six Months Ended June 30,

 
   

2023

   

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (27,692 )   $ (58,957 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

               

Depreciation and amortization

    5,454       6,639  

Non-cash loan amortization expense

    133       135  

Share-based compensation expense

    1,997       1,851  

Goodwill impairment

    25,700       55,400  

Write-off of intangible assets

          128  

Loss on disposal of property and equipment

          21  

Provision for bad debt

    (92 )     158  

Deferred income taxes

           

Changes in assets and liabilities, net of business acquisitions:

               

Accounts receivable

    5,136       (7,913 )

Prepaid expenses and other current assets

    (6,435 )     488  

Other non-current assets

    244       (25 )

Operating lease assets and liabilities, net

    (165 )     (85 )

Accounts payable

    7,113       913  

Accrued expenses and other current liabilities

    (9,147 )     (451 )

Deferred revenue

    (119 )     (177 )

Other

    (76 )     (72 )

Net cash provided by (used in) operating activities

    2,051       (1,947 )

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Capitalized costs included in intangible assets

    (2,370 )     (2,199 )

Business acquisitions, net of cash acquired

    (1,250 )     (971 )

Acquisition of property and equipment

    (22 )     (6 )

Net cash used in investing activities

    (3,642 )     (3,176 )

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Repayments of long-term debt

    (2,500 )     (2,500 )

Debt financing costs

    (237 )      

Taxes paid related to net share settlement of vesting of restricted stock units

    (236 )     (448 )

Net cash used in financing activities

    (2,973 )     (2,948 )

Net decrease in cash and cash equivalents

    (4,564 )     (8,071 )

Cash and cash equivalents at beginning of period

    25,547       34,467  

Cash and cash equivalents at end of period

  $ 20,983     $ 26,396  

 

 

 

Definitions, Reconciliations and Uses of Non-GAAP Financial Measures

 

The following non-GAAP measures are used in this release:

 

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) goodwill impairment, (6) write-off of intangible assets, (7) acquisition-related costs, (8) restructuring and other severance costs, and (9) certain litigation and other related costs.

 

Adjusted net income (loss) is defined as net income (loss) excluding (1) share-based compensation expense, (2) goodwill impairment, (3) write-off of intangible assets, (4) acquisition-related costs, (5) restructuring and other severance costs, and (6) 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 adjusted EBITDA from net loss for the three and six months ended June 30, 2023 and 2022, respectively, which we believe is the most directly comparable GAAP measure.

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 
   

2023

   

2022

   

2023

   

2022

 

Net income (loss)

  $ 4,251     $ (56,944 )   $ (27,692 )   $ (58,957 )

Income tax expense

    1,693       5,122       1,794       5,122  

Interest expense, net

    795       430       1,484       814  

Depreciation and amortization

    3,095       3,332       5,454       6,639  

Share-based compensation expense

    936       863       1,997       1,851  

Goodwill impairment

          55,400       25,700       55,400  

Write-off of intangible assets

                      128  

Loss on disposal of property and equipment

          21             21  

Acquisition-related costs(1)(2)

    562       579       1,185       1,137  

Restructuring and other severance costs

          38       480       38  

Certain litigation and other related costs

    (5,736 )     596       (4,358 )     1,998  

Adjusted EBITDA

  $ 5,596     $ 9,437     $ 6,044     $ 14,191  

 

(1)

Balance includes compensation expense related to non-competition agreements entered into as a result of certain acquisitions.

(2)

Balance includes earn-out expense of $24 and $110 for the three and six months ended June 30, 2023, respectively, as a result of certain acquisitions.

 

 

 

Below is a reconciliation of adjusted net income (loss) and adjusted net income (loss) per share from net loss for the three and six months ended June 30, 2023 and 2022, respectively, which we believe is the most directly comparable GAAP measure.

 

   

Three Months Ended June 30,

   

Six Months Ended June 30,

 

(In thousands, except share and per share data)

 

2023

   

2022

   

2023

   

2022

 

Net income (loss)

  $ 4,251     $ (56,944 )   $ (27,692 )   $ (58,957 )

Share-based compensation expense

    936       863       1,997       1,851  

Goodwill impairment

          55,400       25,700       55,400  

Write-off of intangible assets

                      128  

Loss on disposal of property and equipment

          21             21  

Acquisition-related costs(1)(2)

    562       579       1,185       1,137  

Restructuring and other severance costs

          38       480       38  

Certain litigation and other related costs

    (5,736 )     596       (4,358 )     1,998  

Adjusted net income (loss)

  $ 13     $ 553     $ (2,688 )   $ 1,616  

Adjusted net income (loss) per share:

                               

Basic

  $ 0.00     $ 0.01     $ (0.03 )   $ 0.02  

Diluted

  $ 0.00     $ 0.01     $ (0.03 )   $ 0.02  

Weighted average number of shares outstanding:

                               

Basic

    82,727,971       81,493,821       82,323,854       81,193,107  

Diluted

    82,752,646       81,575,329       82,323,854       81,233,586  

 

(1)

Balance includes compensation expense related to non-competition agreements entered into as a result of certain acquisitions.

(2)

Balance includes earn-out expense of $24 and $110 for the three and six months ended June 30, 2023, respectively, as a result of certain acquisitions.

 

We present 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:

 

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. 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 in this Quarterly Report on Form 10-Q.

 

Adjusted net income (loss), as 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 our overall financial performance as compared to adjusted EBITDA and the GAAP measure of net income (loss).

 

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 condensed 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 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.