FLNT 10-K & 10-Q changes, risk factors and insider trading

If our currentexpected plansfacility arebecomes limited by the lender or our business does not successful,perform to expectations, we may need to consider other strategic alternatives, including restructuring or refinancing our debt, seeking additional equity or debt financing, reducing or delaying our business activities and strategic initiatives, selling assets, and other strategic transactions and/or other measures. We have relied upon financing provided by our officers, directors and largest stockholders, and such holders may be unwilling or unable to continue providingprovide financing should additional financing be required. Other financing sources may be unwilling to provide such funding to usus, onespecially commercially reasonable terms, or at all. If we seek additional financing to fund our operations andif there remains substantial doubt about our ability to continue as a going concern, we may find it especially difficult to raise funds on commercially reasonable terms, or at all. Furthermore, the perception that we may not be able to continue as a going concern may cause publishers, vendors, advertisers and other clients (current and potential) to review their business relationships and terms with us. The reaction of investors to the inclusion of a going concern statement in the accompanying financial statement,statements, and our potential inability to continue as a going concern, could materially adversely affect our share price, which could negatively impact our ability to obtain stock-based financing or enter into strategic transactions.

We compete for advertiser clients against other digital marketing companies and online and traditional media companies based on many factors, including ROAS, price,scale, and client service. Our clients may curtail their advertising spend with us or stop using our services altogether if we fail to meet their expectations in terms of their ROAS or the quality and convertibility of leads we provide or otherwise fail to compete effectively against other online marketing and advertising companies. Conversion rates for leads can be impacted by factors outside our control, such as competition in our clients' industries and our clients' sales practices. Lower conversion rates couldmay be evenbecome more likely as we expand our services and relationships with our clients by moving our conversion point further "down the funnel," closer to where our clients are able to monetize the users we provide. To the extent we cannot meet the challenges from existing or new competitors or develop new product offerings to meet client preferences or needs, our revenues and profitability could be materially and adversely affected.

InAs response to declining resultspart of our ownedstrategic and operated business,evolution, we launched Commerce Media Solutions in the first quarter of 2023. While Commerce Media Solutions has already become an important part of our future strategy, thisit isrepresents an expansion of our business into a relativelyhighly newcompetitive businesssegment forof Fluent.the digital advertising industry. There are many established dominant players in commerce media and entry into the commerce media businessmarket has its own challenges and risks as further discussed below.

Additionally, we haverely begun introducing some new technologies, includingon AI and machine learning.learning Weto haveoptimize the performance of our digital marketing campaigns and performance analytics. Our platforms also transitionedoperate toon cloud-based technology and migrated our database to a new environment.infrastructure. These new technologies may contain design or performance defects that are not readily apparent. If the new proprietary technologiestechnologies, wecloud implementinfrastructure, or related systems fail to achieveoperate theiras intendedintended, purposedo not scale effectively, or are less effective than technologies used by our competitors, our business could be harmed.

With the growth of online advertising and e-commerce, there is increasing awareness and concern regarding online marketing, advertising, and telecommunications, particularly as they relate to individual privacy interests. Our ability to attract potential users, and thereby clients, depends in part on users trusting us enough to provide self-declared registration data and other personal information. If we fail to maintain the quality and user acceptance and expectations of our O&O Sites and Commerce Media Solutions, or our advertiser clients misuse consumer data or fail to comply with applicable marketing and privacy requirements, our reputation could be harmed, damaging our ability to attract and retain users, media partners, and advertiser clients, which could adversely affect our business, financial condition, and results of operations.

An increasing regulatory burden relating to data privacy may lead to general distrust of our industry, consumer reluctance to share and permit use of personal data and increased consumer opt-out rates, any of which could negatively influence, change, or reduce our current and prospective clients' demand for our products and services. There can be no assurance that we will be able to maintain or enhance our reputation, and failure to do so would harm our business growth prospects and operatingresults results.of operations.

Additionally, because of the performance-based nature of many of our agreements with our owned and operated media partners, our O&O Sites bear the costs of purchasing media without the assurance of advertising spend by any particular advertiser client. To be profitable, we must be able to generate more revenue from our users than our costs to acquire such users. Our ability to do so is dependent on many factors, including having the right media sources to drive users who engage with our O&O Sites and providing contentcontent, experiences and experiencesadvertisements that retain users' attention.

Conversely, althoughWhile the majority of our commerce media business operates on a revenue share basis, somecertain media partners haveinclude guaranteed minimum arrangements. There are several factors that determine theThe performance of a deployment of our commerce media solutionplacements thatdepends includeon several factors, including the quality and scale of the e-commerce site owners we partnercontract with, the placement of our solution on their post-transaction confirmation page and their users’ receptivity to the offers we select to deploy. If we are unable to achieve the optimal mix of these and other factors, we may not be able to generate sufficient revenue to achieve profitability from our Commercecommerce Mediamedia Solutionspartners business.with minimum guarantee arrangements.

Our results are also subject to fluctuation from seasonality and cyclicality in ours and our clients' businesses. For example,Specifically, most of our Commerce Media Solutions media partners operate e-commerce websites that experience the heaviest consumer traffic during the fourth quarter holiday season.season, Ourwhich Callcan Solutionsaffect business experiences greateradvertiser demand forand Healthcampaign Plansperformance. duringIn openaddition, enrollmentadvertiser periodsmarketing ("OEPs"),budgets may fluctuate throughout the year based on seasonal spending patterns, economic conditions, and other factors, which arecan typically duringimpact the firsttiming and fourthvolume quarters,of whenadvertising thespend costs to acquire media are higher. We can provide no assurance thatacross our Call Solutions business will be able to buy media effectively during the Health Plan OEPs, which would adversely affect our operations for Call Solutions.platform.

We regularly extend payment terms to our clients, which exposes us to risk of bad debt. Some of our clients are thinly capitalized and pose credit risks, and some of our clients may challenge the determination of amounts we believe they owe or may refusedispute payments, including due to payperformance-based becausepricing ofarrangements, performance-relatedattribution determinations, or other claims. In these circumstances, we may have difficulty collecting on amounts we believe are owed to us. Many of our advertising agency and broker clients are not required to pay us unless and until they are paid by the underlying client. We are particularly exposed in certain verticals where there is a risk of tightening regulations or restrictions on sourcing consumer traffic. For example, if new regulations affect our clients such that their businesses are no longer viable, our clients may become insolvent or otherwise unable to pay amounts owed to us. In such circumstances, we may be exposed to risks of significant bad debt, which could have a material adverse effect on our results of operations.

Risks Related to Our Commerce Media Solutions Business

We attract hundreds of thousands of consumers to our O&O Sitessites on a daily basis and havemaintain overa 8large, billionproprietary piecesdatabase of first-party user information, which we believe differentiates us from our competitors.information. This database, coupled with user information from our media partners and third-party data sources, enables us to provide robust user profiles to our AI-enabled technology to enhance our solutions’ performance. However, there are other factors, some of which are outside of our control, that can impact performance, such as the types and preferences of users of our media partners, how and when they interact with our solution, how quickly our solution is displayed, and how to display the right mix of offers to users. There can be no assurance that we will have the resources and be able to invest sufficient capital to continue developing and improving our technology to meet our partners' or advertiser clients' demand or keep pace with our competitors.

Given that we will need to rely on internal and external developers to continue to develop our technology, we will need to have sufficient cash resources to fund our continued investment in technology at desired levels. Many of our competitors have greater resources and may be part of larger organizations through which they could deploy their solutions across affiliated media properties. There can be no assurance thatShould we willfail to have the required resources to be able to invest sufficient capital to continue to further develop and improve our technology to keep pace with our competitors. Should we fail to do so,technology, our competitive position could suffersuffer, and our results of operationoperations could be adversely affected.

Our O&O Sites have experienced declining user traffic over the last fiveseveral years. We believe this decline is primarily attributable to our TQI,various launched in 2020, which ledinitiatives to theremove removal of a substantial number of our affiliate traffic sources which we had identified as having unacceptably lowlower quality levels or a higher incidence of fraud or botconsumer traffic. In addition, the FTC Consent Order (as defined herein) necessitated a heightened level of vigilance in monitoring our publishers, manywhich of whom optedcontributed to discontinue their partnership with us and also reduced registrations.consumer traffic sources and, as a result, lower registration volume.

This decline in traffic volume has negatively impacted our owned and operated business, while other reward site operators with more lenient standards have seen increased traffic, often sourced from our former publishers. We have not, andcurrently do not expect to, increase our registration volume backto return to levels prior to 2020 when we first implemented the TQI.levels. Although we have sought to improve the quality and monetization of our users and pursue other traffic sources to counteract this decline, our owned and operated business may not return to the same level of profitability. These challenges to our owned and operated business have had, and are expected to continue to have, a material adverse effect on our business and may negatively impact our results of operations and liquidity.liquidity, particularly if registration volume declines more significantly or more rapidly than we currently expect.

A decline in the supply of media available to us through third parties or an increase in the price of this media couldwould increase the cost of attracting consumers and reduce our profitability.

OurThe success of our O&O Sites depends on our ability to attract users to oursuch O&O Sitessites and generate revenue from their activities in a cost-effective manner. There is substantial competition for web traffic among both established media buyers and smaller operators, and we expect this competition to continue to increase, given the limited barriers to entry into the market. A portion of our revenue on our O&O Sites is from to visitor traffic originating from third-party publishers, including ad networks, social media platforms, and search engines.

We rely more heavily onobtain a meaningful portion of our user traffic through "walled garden" social media platforms for users.platforms. These platforms change their algorithms and rules on acceptablethe acceptability of ads frequently and without notice. We may lose access to a platform without knowing the reasons for such loss or knowledge how to regain access. The platforms adjust their pricing based on market demand as well as many other factors, known and unknown, most of which are outside of our control. If we lose access to a platform or the pricing increases, our results of operations maywould be adversely affected.

Our media spend on social media platforms,platforms includes the use of affiliates and influencers, many of whom use Instagram, YouTube and TikTok to buy ads or post content in an effort to drive traffic to our sites. DueSocial media platforms are subject to theevolving ongoingregulatory, regulatorypolitical, concerns,and TikTokbusiness continuesenvironments to face the potential for a U.S. ban unless an acceptable buyer is found. If TikTok is restricted, influencersthat may shift to other platforms, but interruptions could reduce traffic to our sites and adversely affect ourtheir operatingavailability, results.operations, or advertising policies.

Mobile devices are now the primary means by which people access online content, increasingly through mobile applications rather than mobile browsers. While our O&O Sites are designed with a "mobile first" approach, weour doconsumer-facing notexperiences are currently havedelivered primarily through mobile applicationsweb, forand our O&Omobile Sites,application whichofferings couldare placemore uslimited atthan athose competitiveof disadvantagecertain to competitive rewarded sites that have app versions.competitors.

Moreover, the mobile ecosystem is controlled by two operating systems, Apple iOS and Google Android. More than 90% of our users access our O&O Sites from mobile devices, and we believe a similar percentage access our Commerce Media Solutions from mobile devices as well. The dependence on two operating systems makessubjects our operations subjectus to their powercontrol over the mobile ecosystem,over, pricing, policies and terms which impacts thea vastsubstantial majorityportion of our business including our O&O Sitesbusiness, as well as thosethe businesses of our advertisers, app developers, e-commerce sites, mobile carriescarriers and othersother on whom we rely which poses a significant risk to us and our business.partners. If our advertiser clients or partners experience difficulties developing or promoting their apps, our revenue and growth may be impaired.

We and our third-party publishers use email, text messages, and telephonepush calls,notifications, among other channels, to reach users for re-engagement and other marketing purposes. Email service providers ("ESPs") or, internet service providers and mobile carriers may implement new or more restrictive email or content delivery or accessibility policies. If ESPs materially limit or halt the delivery of emails advertising our O&O Sites, or if we fail to deliver emails to users in a manner compatible with email providers' handling or authentication technologies, our ability to contact users through email could be significantly restricted.

Moreover, with a heightened aversion to marketing calls and emails, consumers increasingly screen or block their incoming telephone calls, texts, and emails, so users may not reliably receive our messaging. If we are unable to contact users effectively by email, telephone, text, or other means, our business, operatingresults results,of operations, and financial condition would be harmed.

Our future success depends in part on the efficient performance of our ad serving consumer data collection platforms and technology infrastructure used in our O&O Sites and Commerce Media Solutions. As we shift focus to Commerce Media Solutions,Solutions represents a growing and increasingly significant component of our business, we are adaptingcontinuing to enhance and scale our technology infrastructure to meet the evolving needs of this business. To address the growing volume of data privacy requests, we rearchitected our consumer information database to ensure compliance with new data privacy and data protection laws. However, unexpected performance issues, such as increased session or user volume or technical challenges with our systems and infrastructure could lead to latency delivering our solutions and user responses. This maycould significantly affect performance, resulting in slower response times or system failures of our O&O Sites or Commerce Media Solutions, potentially affecting our revenue and profits.

WeIn haveaddition, now begun to incorporate AI capabilities into our business, either directly or through third-party provided information technology systems or software. Asas with many innovations, the use of AI presents risks, challenges, and unintended consequences that could affect its adoption, and therefore our business. AI algorithms and training methodologies may be flawed, ineffective or inadequate. AI development or deployment practices by us or third-party providers could result in incidents that could increase the resources we need to implement cybersecurity measures to protect the security of our data. These deficiencies and other failures of any potential AI and systems enhancements could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm as well adversely affecting the results of our operations.

Our results of operations could be adversely affected by general conditions in the global economy, including events or factors that are outside of our control. Such events or factors could include war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the U.S. or elsewhere. Additionally,Changes thein Federalinterest Reserverates, inflationary pressures, and broader macroeconomic conditions may further raise the Federal Funds Rate. These rate increases, coupled withcause reduced consumer confidence, result in uncertainty, and may cause our customers and/or clients to be cautious in their ad spending.

Many of our advertisers and media partners areoperate basedinternationally, outsideincluding in regions that have experienced military conflict or geopolitical instability. Escalation or expansion of thesuch U.S.,conflicts includingcould manydisrupt appour andpartners’ gamingoperations, advertisersreduce basedadvertising in Israel. While the Israel-Hamas conflict and Ukraine-Russia conflict have not, of yet, been disruptive to their businessspend, or operations,impair ifpayment hostilities resume or intensify, our Ukraine and/or Israeli partners could be affected,collections, potentially having a negative impact on our operations.

We currently operate our O&O Sites in the U.S., UK, Canada, and Australia from servers in the Cloud. WeAs planwe continue to expand our Commerce Media Solutions internationallyinternationally, as well and maywe need to reassess the locations of our servers to mitigate potential latency issues that could impact the performance of these solutions. Continued international expansion will require us to invest significant funds and other resources and may subject us to additional risks, including those related to cross-border data transfers; retooling our consumer facing product offerings to better align with local customs, practices, and consumer preferences; compliance with anti-bribery laws; recruiting, training, managing, and retaining contractors and service providers in foreign countries; increased competition from local providers; economic and political instability; and less protective or restrictive intellectual property laws.

AcquisitionsFrom havetime historicallyto beentime, anwe importantevaluate elementstrategic transactions, including acquisitions, investments, or divestitures, as part of our overallcapital corporate strategyallocation and usebusiness ofstrategy. capital. However, weWe have experienceddivested mixedcertain resultsunderperforming from these acquisitionsassets and havebusinesses recentlyand divestedmay acontinue fewto underperformingevaluate assets,additional whilestrategic considering divesting others.alternatives. In addition, we regularly review and assess strategic alternatives in the ordinary course of business, including potential acquisitions, investments, or divestitures. These potential strategic alternatives may result in many strategic transactions that could be material to our financial condition and results of operations.

In addition to risks associated with purchasing online media from third-party publishers discussed above, we utilize numerous third-party service providers in our operations such as cloud-based hosting services, enterprise resource planning systems and other software as a service ("SaaS") platforms and services. As with all software and web applications and systems, there may be occasional technical malfunctions that arise with some of these third-party providers. A failure by a third-party service provider could prevent us from operating our websites, connecting our advertiser clients with users, providing online marketing and advertising services, or tracking the performance and results of our online marketing activities and our operations in general. Remedying any such situation could require substantial time, resources, and technical knowledge that we may not have or be able to acquire in a timely fashion. If any of these platforms or applications malfunctions for an extended time period, we may lose clients and/or incur significant costs to either internalize some of these services or find suitable alternatives, which could have a material adverse effect on our business or results of operations.

We, our third-party publishers', and our clients' businesses operate in highly regulated industries, subject to many federal, state, and local laws and regulations regardinggoverning telemarketingdata privacy, consumer protection, advertising, telemarketing, text messaging, and otherpersonal consumer media channels.information. In addition to the TCPA and "mini TCPAs" of various states, we are subject to,to the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM) and the California Business and Professions Code Sec. 17529.5, among others. Many of these laws and regulations are frequently changing and can be subject to various interpretations, and the extent and evolution of future government regulation is uncertain. AsEvolving discussedprivacy above,laws, forincluding example,state thecomprehensive futureprivacy of the Proposed FCC Rules is currently in flux,statutes and thatinternational leveldata ofprotection uncertaintyregulations, makesmay long-termimpose planningadditional extremelyrestrictions difficult.on Keepingdata collection, processing, sharing, and cross-border transfers. As such, keeping our business in compliance with new and evolving laws and regulations, therefore, may be costly,costly and affect our ability to generate revenue and harm our financial results.

Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company") is a commerce media solutions provider connecting top-tier brands with highly engaged consumers. Leveraging diverse ad inventory, robust first-party data, and proprietary machine learning, Fluentwe unlocksunlock additional revenue streams for partners and empowersempower advertisers to acquire their most valuable customers at scale. We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with consumerstargeted they are seeking to reach.consumers.

We access these consumers through both our commerce media solutions marketplace ("Commerce Media Solutions"), which delivers targeted advertising within e-commerce and digital media transaction flows on partner sites and mobile apps, and our owned and operated digital media properties ("O&O Sites"). SinceIn the beginning of 2024,2025, we have delivered data and performance-based customer acquisition services for overapproximately 500400 consumer brands, direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment.

We operate our Commerce Media Solutions on partner sites and mobile apps where we embed our proprietary ad-serving technology to identify and acquire consumers for our advertiser clients. Our technology is integrated at key moments in the consumer experience to capitalize on high engagement and improve conversion.conversion; Forfor example, our post-transaction solution connects our advertisers to consumers on e-commerce websites and apps after a purchase or similar transaction. These syndicated Commerce Media Solutions generategenerates meaningful incomerevenue for our media partners, while driving high-quality customer acquisition for our advertiser clients. We signenter into exclusive agreements with our media partners with one to fiveone-to-five year terms, typically remunerating them on a revenue share and/or impression basis.

We also attract consumers at scale to our O&O Sites primarily through promotional offerings, through which consumers are rewarded for completing activities on our sites. WhenUpon registering on our sites,registration, consumers provide their name, contact information, and opt-in permissionconsent for telemarketing and email marketing. ApproximatelyOver 90% of these users engage with our media on their mobile devices or tablets.

Once users have registered onconsumers ourare sites,engaged we integratethrough our proprietary direct marketing technologies and analytics to engage them with surveys, polls, and other experiences, through which we learncapture information about their lifestyles, preferences, and purchasing histories, among other matters.attributes. Based on these insights, we serve users targeted, relevant offers on behalf of our clients. As new users register and engage with our sites and existing registrants re-engage, the enrichment of our database expandsis our addressable advertiser client baseenriched and improves the effectiveness of our performance-based campaigns.campaigns, thus expanding our addressable advertiser client base.

Since our inception, we have amassed a large, proprietary database of first-party, self-declared user information and preferences. We solicit our users' consent to be contacted by us and/or our advertisers via various contact methodschannels including email, telephone, SMS/text, and push messaging. We then leverage their self-declared data in our array of performance offerings primarily in two ways: (1) to serve advertisements that we believe will be relevant to users based on the information they provide when they engage on our O&O Sites or other partner sites throughand our commerceCommerce mediaMedia marketplaceSolutions, and (2) to provide our clients with users' contact information sofor thatdirect such clients may communicate with them directly.outreach. We may also leverage our existing technology and database to drive newnon-core revenue streams, including utilization-based models (e.g., programmatic advertising).

Additionally, we operateoperated a call center-supported performance marketplace ("Call Solutions") that providesprovided live, call-based performance campaigns to help clients increase engagement.customer Inacquisition. some cases, we have sold products and services directly on behalf of our clients. TheOur Call Solutions business servesserved clients across an array of industries but has hadwith a heavyparticular focus on the health insurance sector. On January 31, 2026, we completed the sale of our Call Solutions business through the sale of all the membership interests of Winopoly, LLC, an indirect subsidiary. For additional information, see Note 16, Subsequent Events, in the Notes to the consolidated financial statements.

WeAcross our business we generate revenue by delivering measurable marketing results to our clients. We differentiate ourselves from other marketing alternatives bythrough our ability to provide clients with a cost-effective and measurable return on advertising spend ("ROAS"), a measure of profitability of sales compared to the money spent on ads, and to manage highly targeted and highly fragmented online media sources. We are predominantly paidcompensated on a negotiated or market-driven "per click," "per lead," or other "per action" basis that alignsaligned with the customer acquisition cost targets of our clients. For our O&O Sites andand, prior to its sale, our Call Solutions business, we bear the responsibility and cost of acquiring consumers from media partners that ultimately generate qualified clicks, leads, calls, app downloads, or customers for our clients. Our Commerce Media Solutions business operates under exclusive long-term contracts with media partners that generally remunerate the partner on a revenue share basis. Notwithstanding occasional minimum guarantees, Commerce Media Solutions does not bear significant media inventory risk.

Through AdParlor, LLC ("AdParlor"), our wholly ownedwholly-owned subsidiary, we conductoperate our non-core business which offers advertiser clients a managed service for creator marketing and media buying onservices differentacross social media platforms.

For the years ended December 31, 20242025 and 2023,2024, we recorded revenue of $254.6$208.8 million and $298.4$254.6 million, net loss of $29.3$27.2 million and $63.2$29.3 million, and adjusted EBITDA of negative $5.6$9.0 million and positive $6.8$5.6 million, respectively. Adjusted EBITDA is a non-GAAP financial measure equal to net income (loss), the most directly comparable financial measure based on U.S. GAAP, adding back income taxes, interest expense, depreciation and amortization, share-based compensation expense, and other adjustments. See our audited consolidated financial statements and accompanying notes thereto appearing elsewhere in this 20242025 Form 10-K for further discussion and analysis of our results of operations. For a further discussion of adjusted EBITDA, including a reconciliation from net income (loss), see "Definitions, Use and Reconciliation of Non-GAAP Financial Measures" below.

In 2023, weWe launched our Commerce Media Solutions businessin the first quarter of 2023 to access additional high valuehigh-value consumers for our advertiser clients and help media owners and ecommercee-commerce businesses generate additional revenue frommonetize their existing consumer traffic. Fluent’s Commerce Media Solutions embeds proprietary ad-serving technology in the post-action and post-transaction inventory on partner sites and mobile apps across a range of industries, including retail, ticketing and quick service restaurants. In 2024,2025, we served ads to over 100200 million consumers in the post-action and post-transaction moment for top-tier publishersmedia owners and brands. These consumers are among the highest intenthighest-intent consumers in digital advertising and drivehave driven significantly higher ROAS for our advertiser clients than those from our O&O Sites. The mix and profitability of our media channels, strategies, and partners is likelycompared to continueother to be dynamic and reflect evolving market trends and the regulatory environment.channels.

Trends & Seasonality

Our performance is subject to fluctuations related to seasonality and cyclicality in our clients' businesses and fluctuations in media sources. Specifically, our retail specific media partners in our Commerce Media Solutions marketplace are highly seasonal based on fourth quarter consumer spending which can affect advertiser demand and campaign performance. In addition, advertiser marketing budgets may fluctuate throughout the year based on seasonal spending patterns, economic conditions, and other factors, which can impact the timing and volume of advertising spend across our Call Solutions business that benefits from Medicare open enrollment periods ("OEPs") experiencing increased volume in the first and fourth quarters.platform. 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.

TheWhile firstwe were not directly impacted by the changes to U.S. tariff and trade policies, the second half of 2025 was characterized by continued media supply uncertainty in the O&O Sites marketplaces that has depressed gross profit in recent quarters. To confront these headwinds, we have made continued progress in driving the adoption of Commerce Media Solutions among enterprise media partners during the current period and anticipate securing additional long-term contracts as the market continues to expand. We observed an expansion in gross margin for Commerce Media Solutions in the third quarter of 2025 hasthat continued through the fourth quarter of 2025. The fourth quarter of 2025 continued to be characterized by tepid economic conditions and media supply uncertainty in the O&O Sites marketplaces and rising media costs in the Call Solutions businessbusiness. thatIn haveresponse depressed gross profit in recent quarters. To confrontto these headwinds,conditions, we are continuing to invest in securing additional media partners for our Commerce Media Solutions marketplace and by diversifying our client base. We also continue to develop ourROAS-focused "ROAS program"initiatives across additional segments of advertisers in an effort to gain additional allocations and pricing increases to further improve our user monetization.

We have continued to be affected by slowed economic conditions and the impacts of the FTC Consent Order (as described in Note 15, Contingencies, in the Notes to the consolidated financial statements) on our O&O Sites and programmatic advertising business. The industry-leading compliance measures we implemented on our O&O Sites in response to such FTC Consent Order, in addition to the TQI,Order continue to negatively impact our revenues and gross profit.

We are subject to risks and uncertainties caused by events with significant macroeconomic impacts. Inflation, rising interest rates, global hostilities, and reduced consumer confidence have caused our clients and their customers 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. Considering the slowed macro-economicmacroeconomic environment, we continue to prioritize strategic investments that have near-term benefits to revenue while also streamlining our organization through targeted workforce reductions.

Please see "Results of Operations" below, and "Item 1A. Risk Factors — "Economic or political instability could adversely affect our business, financial condition, and results of operations," and "We are exposed to credit risksrisk from our clients, and we may not be able to collect on amounts owed to us." for further discussion of current economic conditions.

Media margin is defined as that 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. Gross profit (exclusive of depreciation and amortization) represents revenue minus cost of revenuerevenue, and one-time items (exclusive of depreciation and amortization). Media margin is also presented as a 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 Put/Call Consideration, (7) goodwill impairment, (87) impairment of intangible assets, (9) loss (gain) on disposal of property and equipment, (108) fair value adjustment of Convertible Notes (as defined herein) with related parties, (119) acquisition-related costs, (1210) restructuring and other severance costs, and (1311) certain litigation and other related costs.costs, and (12) one-time items.

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 Put/Call Consideration, (4) goodwill impairment, (54) impairment of intangible assets, (6) loss (gain) on disposal of property and equipment, (75) fair value adjustment of Convertible Notes with related parties, (86) acquisition-related costs, (97) restructuring and other severance costs, and (108) certain litigation and other related costs.costs, and (9) one-time items. Adjusted net income (loss) is also presented on a per share (basic and diluted) basis.

We present media margin, media margin as a percentage of revenue, adjusted EBITDA, adjusted net income,income (loss), and adjusted net income 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 U.S. 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 described above under Part I, Item 3 — 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.business.

For the year ended December 31, 20242025 and 2023,2024, revenue was comprised of owned and operated marketplaces of $168.4$94.5 million and $235.7$168.4 million, Commerce Media Solutions of $41.3$82.3 million and $10.7$41.3 million, and other streams of $44.9$32.0 million and $52.0$44.9 million, respectively. The decrease in owned and operated marketplaces revenue was primarilymainly attributable to a challenging macro-economic environment and a decrease in media supply resulting from changes in our business practices to comply with the FTC Consent Order, which drove a reduction in spend from key clients inacross thea Mediavariety & Entertainment and Staffing & Recruitmentof sectors. Revenue in owned and operated marketplaces was further negatively impacted by the enormous social media advertising spend driven by the US Presidential election, which started in late August 2024 and impacted our ability to buy media at acceptable margins for existing advertiser demand. Partially offsetting that decline, our Commerce Media Solutions business added long-term contracts with new media partners which drove up revenue from advertiser clients in the Media & Entertainment and Retail & Consumer sector.sectors aligned with the continued focus on growing this revenue stream. Within our other streams, we experienced a decrease related to the TrueCall NorthSolutions business wedriven exitedby lower fourth quarter results related to competitive pressure in the secondhealthcare quarter of 2024.sector. We expect year-over-year declines in the owned and operated marketplace to continue; however, we expect such declines and decreases to be more than offset by the continued growth of Commerce Media Solutions in the second half of 2025.Solutions.

For the year ended December 31, 20242025 and 2023,2024, cost of revenue (exclusive of depreciation and amortization) consisted mainly of owned and operated mediamedia, fulfillment, and fulfillmenthosting costs of $130.6$74.5 million and $173.6$130.6 million, Commerce Media Solutions mediamedia, costfulfillment, and hosting costs of $27.0$61.2 million and $9.9$27.0 million, and media hosting and enablementother costs related to our other revenue streams of $31.8$21.8 million and $32.5 million, and indirect costs of revenue of $4.4 million and $3.9$36.2 million, respectively. Our owned and operated marketplaces cost of revenue (exclusive of depreciation and amortization) primarily consists of media and related hosting costs associated with acquiring traffic from third-party publishers, digital media platforms, and influencers for our O&O Sites and fulfillment costs related to rewards earned by consumers. The decrease in O&O Sites media cost was largely attributable to the continued challenges in acquiring media due to changes in our business practices to comply with the FTC Consent Order. SuchCost costsof revenue (exclusive of depreciation and amortization) for O&O Sites increased as a percentage of revenue. Our Commerce Media Solutions cost of revenue consists of fees and revenue share payments made to media partners for ads served on their digital properties. The increase in cost of revenue (exclusive of depreciation and amortization) in the Commerce Media Solutions was driven by increased impressions from new media partners added over the period. The increase was partly offset by the one-time benefit of $4.3 million related to an early termination settlement with a media partner. Cost of revenue (exclusive of depreciation and amortization) for Commerce Media Solutions decreasedincreased as a percentage of revenue. The decrease in cost of revenue (exclusive of depreciation and amortization) for other revenue streams, which includes, in addition toincludes media costs, enablement costs and tracking costs related to our consumer data associated with our call centers, was attributable to these addedminimal costs to support the ACAAffordable Care Act business that ceased as of the third quarter of 2024 offset by aan decreaseincrease in costs related to our exit from the TrueCall NorthSolutions business as a result of changes in the secondregulatory quarterenvironment ofand 2024.competitive pressure in the healthcare sector. Cost of revenue (exclusive of depreciation and amortization) for other revenue streams increaseddecreased as a percentage of revenue. Indirect costs of revenue increased as a result of escalated hosting costs.

For the year ended December 31, 2024,2025, overall cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue increaseddecreased to 76.1%,75.5%, compared to 73.7%76.1% for the year ended December 31, 2023.2024.

In the normal course of executing paid media campaigns to source consumer traffic for our O&O Sites, we regularly evaluate new channels, strategies, and partners. For the year ended December 31, 2024,2025, O&O Sites digital media spend continued to be a mix of affiliate traffic, paid media from major digital platforms, influencer activations, and inventory from strategic media partners. Traffic acquisition costs incurred with the major digital media platforms have historically been higher than affiliateother traffic sources and the mix and profitability of our media channels, strategies, and partners reflect evolving market dynamics, the impact of our Traffic Quality Initiative,dynamics and the increased compliance obligations from the FTC Consent Order. 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 modify the practices of, such sources, which could reduce profitability further. Commerce Media Solutions media partners are generally renumerated on a per impression or rev share basis, leading to more consistent profitability. Ultimately, we believe improved traffic quality is the foundation to support sustainable long-term growth and position us as an industry leader and Commerce Media Solutions is key to that goal. Although past levels of cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue are not necessarily indicative of future percentages in the owned and operated and Call Solutions businesses, we expect revenue share agreements in the Commerce Media Solutions to create more stability in the long-term. Our cost of revenue related to the other business streams will decrease significantly in 2026 as a percentage of revenue as the Company sold the Call Solutions business as of January 31, 2026 and the remaining businesses that comprise other business streams operate at much higher margin.

For the years ended December 31, 20242025 and 2023,2024, sales and marketing expense consisted primarily of employee salaries and benefits of $14.8$11.4 million and $15.8$14.8 million, restructuring costs of $0.6$0.4 million and $0.1$0.6 million, advertising costs of $0.6$1.0 million and $0.9$0.6 million, professional fees of $0.5$0.6 million and $0.4$0.5 million, travel and entertainment expense of $0.4$0.3 million and $0.4 million, and non-cash share-based compensation expense of $0.2$0.5 million and $0.5$0.2 million, respectively. The decrease was primarily due to lower salaries and other employee relatedemployee-related costs driven by a decline in headcountheadcount, partly offset by an increase in advertising costs as a result of attending more conferences and lowerseminars to grow Commerce Media Solutions and non-cash share-based compensation as a result of lowernew grants, partly offset by an increase in restructuring costs driven by the current year reductions in workforce, as described below.grants.

For the years ended December 31, 20242025 and 2023,2024, product development expense consisted primarily of employee salaries and benefits of $12.7$8.3 million and $13.6 million, professional fees of $1.6 million and $1.7$12.7 million, software license and maintenance costs of $1.5$1.4 million and $1.9$1.5 million, professional fees of $1.2 million and $1.6 million, non-cash share-based compensation expense of $0.3 million and $0.2 million and restructuring and severance costs of $0.7 million and $0.1 million, and non-cash share-based compensation expense of $0.2 million and $0.6$0.7 million, respectively. The decrease was primarily due to a decline in salaries driven by lower headcount and lower spend on IT-related vendorsvendors, and a decline in non-cash share-based compensation due to lower grants, partly offset by an increase in restructuring and severance costs inas a result of the currentprior year period due to the reductions in workforce, as described below.

For the years ended December 31, 20242025 and 2023,2024, general and administrative expense consisted mainly of employee salaries and benefits of $17.1$15.3 million and $18.5$17.1 million, professional fees of $6.3$6.6 million and $6.6$6.3 million, office overhead of $4.2$3.7 million and $4.3$4.2 million, software license and maintenance costs of $3.1$3.2 million and $2.6 million, acquisition-related costs of $2.1 million and $2.7$3.1 million, non-cash share-based compensation expense of $1.5$1.4 million and $2.6$1.5 million, acquisition-related costs of $1.1 million and $2.1 million, restructuring and severance costs of $0.6$0.8 million and $0.3$0.6 million,million and certain litigation and related costs of $0.0$0.3 million and a credit of ($6.3)$0.0 million, respectively. The increasedecrease in general and administrative expenses was primarily related to the absencereduction ofin the credit for certain litigationsalaries and benefits due to lower headcount, a decrease in acquisition related costs mainly due to insurancethe reimbursementsrestructuring of certain non-compete agreements related to the Call Solutions business and a decline in office overhead due to the amended lease agreement for previouslythe incurredNYC headquarters as of April 2025. This was partially offset by an increase in professional fees associated with legal fees and loweraccounting than expected regulatory settlement in the prior year, along withservices, an increase in restructuring orand severance costs, based on the reduction in workforce as described below.below, Thisand wasan partially offset by a reductionincrease in salaries and benefits due to lower headcount, a decline in share-based compensation expense due to lower grants, and a decrease in acquisition relatedlegal costs mainlyoutside due toof the conveyancenormal course of True North, LLC and its direct and indirect subsidiaries.business.

DuringIn each of the first quarterthree quarters of 20232024 and the first, second,first and thirdfourth quartersquarter of 2024,2025, we implementedreduced reductions in theour workforce that resulted in the termination of 20,by 20, 19, 29, 24, and 299 employees, respectively, following management's determination to more effectivelybetter align resources with our strategic initiatives. In connection with the first quarter 2023 reductions, we incurred $0.5 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, fully settled in cash by March 31, 2024. In connection with the first quarter 2024 reductions, we incurred $0.7 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, fully settled in cash by September 30, 2024. In connection with the second quarter 2024 reductions, we incurred $0.6 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, fully settled in cash by December 31, 2024. In connection with the third quarter 2024 reductions, we incurred $0.5 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, to be fully settled in cash by March 15, 2025. Subsequently,In weconnection implemented an additional reduction in workforce inwith the first quarter of 2025,2025 resultingreductions, we incurred $1.3 million in the termination of 24 employees. The exit-related restructuring costs are expected to be approximately $1.3 million,costs, consisting primarily of one-time termination benefits and associated costs, to be fully settled in cash by March 31, 2026. In connection with the fourth quarter of 2025 reductions, we incurred $0.1 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs fully settled in cash by December 31, 2025. Apart from these exit-related restructuring costs, these reductions in workforce arehave expected to resultresulted in corresponding reductions in future salary and benefits within sales and marketing, product development, and general and administrative expenses.

The decrease in depreciation and amortization expense was mainlyrelatively dueconsistent tofor the fullyears amortization of certain intangible assets as compared to the year-endedended December 31, 2023.2025 and 2024.

WeThe recognizeddecrease was a result of different one-time write-offs and impairments in each of the reporting periods. In the current year period, the Fluent reporting unit recorded write-offs, which primarily consisted of software related to the cessation of a business unit. Whereas in the prior year period there was a $1.3 million goodwill impairment in the current year period related to the All Other reporting unit and a $1.0 million impairment on itsour software developed for internal use related to the Fluent reporting unit and customer relationships related to the All Other reporting unit in the current year period, compared to the goodwill impairment of $55.4 million for the Fluent and All Other Reporting Unit for the prior year period.

The changedecrease was due to a $1.7 millionnominal unrealized loss related to the fair value of Convertible Notes entered into in the current year as compared to none in the prior year.year, generally due to the change in share price within those periods.

The changeincrease was due to a $1.0$3.8 million loss on early extinguishment of debt related to the SLR Credit Facility on November 25, 2025 due on April 2, 2029, as compared to a $1.0 million loss on debt extinguishment related to the Citizens Credit Agreement on April 2, 2024 due on September 30, 2025, as compared to no loss on debt extinguishment2025 in the prior year.

Income tax (loss) benefit.

For the twelve months ended December 31, 2024,2025, the effective income tax rate of 5.8%0.0% differed from the statutory federal income tax rate of 21% primarily due to losses for which no tax benefit is recognized and is fully offset with a valuation allowance. For the twelve months ended December 31, 2024, our effective income tax rate of 5.8% was primarily due to losses for which no tax benefit is recognized and is fully offset with a valuation allowance, which was partly offset by the benefit of the reversal of uncertain tax positions from the prior year. For the twelve months ended December 31, 2023, our effective income tax rate of 0.2% was primarily driven by 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.

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. Forward-looking statements are those that do not relate strictly to historical or current matters, but instead relate to anticipated or expected events, activities, trends, or results as of the date they are made. These forward-looking statements can be identified by the use of terminology such as "anticipate," "believe," "estimate," "expect," "intend," "project," "will," or the negative thereof or other variations thereon or comparable terminology. 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 ,statements, including, without limitation, those discussed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission (the "SEC") on March 31, 2026, as amended on April 30, 2026 (as amended the "2025 Form 10-K"), those contained in our Quarterly Reports on Form 10-Q (including this one), and such other factors contained in our other filings we make with the SEC. We do not undertake any obligation to update forward-looking statements, except as required by law and intend that all forward-looking statements be subject to the safe harbor provisions of the PSLRA.

Fluent, Inc. ("we," "us," "our," "Fluent," or the "Company") is a commerce media solutions provider connecting top-tier brands with highly engaged consumers. Leveraging diverseexclusive ad inventory, robust first-party data, and proprietary machine learning, we unlock additional revenue streams for partners and empower advertisers to acquire their most valuable customers at scale. We primarily perform customer acquisition services by operating highly scalable digital marketing campaigns, through which we connect our advertiser clients with targeted consumers.

We access these consumers through both our commerce media marketplace ("Commerce Media Solutions"), which delivers targeted advertising within e-commerce and digital media transaction flows on partner sites and mobile apps, and our owned and operated digital media properties ("O&O Sites"). Over the last twelve12 months, we provided data and performance-based customer acquisition services for over 300 350 consumer brands, direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment.

Across our business, we generate revenue by delivering measurable marketing results to our clients. We differentiate ourselves from other marketing alternatives by our ability to provide clients with a cost-effective and measurable return on advertising spend ("ROAS"), a measure of profitability of sales compared to the money spent on ads, and to manage highly targeted and fragmented online media sources. We are predominantly compensated on a negotiated or market-driven "per click," "per lead," or other "per action" basis that aligns with the customer acquisition cost targets of our clients. For our O&O Sites and our prior Call Solutions business,Sites, we bear the responsibility and cost of acquiring consumers from media partners that ultimately generate qualified clicks, leads, calls, app downloads, or customers for our clients. Our Commerce Media Solutions business operates under exclusive long-term contracts with media partners that generally remunerate the partner on a revenue share basis. Notwithstanding occasional minimum guarantees, the business does not take significant media inventory risk.

Through AdParlor, LLC d/b/a Trevant ("AdParlorTrevant"), our wholly owned subsidiary, we conduct our non-core business, which offers advertiser clients a managed service for creator marketing and media buying on different social platforms.

FirstSecond Quarter Financial Summary

Three months ended MarchJune 31,30, 2026, compared to three months ended MarchJune 31,30, 2025:

The commerce media sector has experienced significant growth in recent years, driven by the expansion of e-commerce, increasing demand for privacy-compliant first-party data solutions, and the ability of media owners to generate incremental revenue from their existing consumer traffic. According to McKinsey & Company,eMarketer, the commerce media market is expected to grow at a CAGR of 21% from 2023 to 2027 and reach a total market value of $100more than $140 billion by 2027.2030. These industry tailwinds, combined with the media supply challenges affecting our owned and operated business were the basis for the strategic shift to Commerce Media.

Because Commerce Media Solutions operates on media partner-owned inventory under exclusive long-term contracts, the business typically does not require us to source consumer traffic directly, resulting in a more predictable cost structure and reduced exposure to the media supply challenges that have affected our O&O Sites. Since its launch, Commerce Media Solutions has delivered year-over-year revenue growth in every quarter. For the quarter ended MarchJune 31,30, 2026, Commerce Media Solutions represented approximately 58%63% of consolidated revenue, compared to approximately 23%36% for the prior year period. Based on current performance trends, we expect Commerce Media Solutions to represent a majority of consolidated revenue foron thean remainderongoing ofbasis 2026 and continue to grow as we onboard additional media partners and expand into new verticals.verticals and other key moments in the consumer experience.

The mix and profitability of Commerce Media Solutions will be influenced by the pace of new partner onboarding, the terms of revenue share arrangements with media partners, and advertiser demand across the verticals we serve. For the firstsecond quarter of 2026, we saw gross margin at a lower level for Commerce Media Solutions asgross wemargins builtimprove upover the prior quarter and the same quarter of the prior year due to improved monetization on placements with newcertain media partners, however, we expect gross margin to improve the remainder of 2026.partners.

Our primary revenue channel haswas historically been our O&O Sites. This business depends on our ability to identify and access high-quality media sources and attract targeted users to our offers. As the business grew, we attracted larger and more sophisticated advertiser clients to our marketplaces. In response to evolving client expectations, to increase our value proposition, and strengthen our compliance posture within the evolving regulatory landscape, we implemented various initiatives to improve traffic quality.

In recent years, however, we experienced challenges maintaining traffic volume to our O&O Sites due to changes in our ad serving and media sourcing standards following the Federal Trade Commission ("FTC") inquiryinquiry. and subsequent  Joint Motion for Entry of Proposed Stipulated Order (the "FTC Consent Order") filed by the FTC and the Company in the United States District Court for the Southern District of Florida on July 17, 2023, . In response, weWe have since taken steps to diversify our traffic sources and expand our ad network beyond our O&O Sites.Sites, Inincluding addition, we have made athe strategic transition to our Commerce Media Solutions business, which has not yet fully offset the decrease in revenue to our O&O Sites.business.

Our performance is subject to fluctuations related to seasonality and cyclicality in our clients' businesses and fluctuations in media sources.partners' businesses. Specifically, our retail specific media partners in our Commerce Media Solutions marketplace are highly seasonal based on fourth quarter consumer spending which can affect advertiser demand and campaign performance. In addition, advertiser marketing budgets may fluctuate throughout the year based on seasonal spending patterns, economic conditions, and other factors, which can impact the timing and volume of advertising spend across our platform. Other factors affecting our business may include macroeconomic conditions that impact the digital advertising industry, the various advertiser client verticals we serve, and general market conditions.

We have continued to be affected by uncertain economic conditions and the impacts of the previously disclosed FTC inquiry and subsequent 2023 Joint Motion for Entry of Proposed Stipulated Order (the "FTC Consent Order, as previously disclosed.Order"). In response to the FTC Consent Order in 2023,Order, we enhanced our compliance standards and processes across our O&O Sites and programmatic advertising business. These changes have affected our ability to source traffic at historical levels and have contributed to declines in revenue and gross profit in these channels.

Below is a reconciliation of media margin from gross profit (exclusive of depreciation and amortization) for the three and six months ended MarchJune 31,30, 2026 and 2025, which we believe is the most directly comparable U.S. GAAP measure:

Below is a reconciliation of adjusted EBITDA from net loss for the three and six months ended MarchJune 31,30, 2026 and 2025, which we believe is the most directly comparable U.S. GAAP measure:

Below is a reconciliation of adjusted net loss and adjusted net loss per share from net loss for the three and six months ended MarchJune 31,30, 2026 and 2025, which we believe is the most directly comparable U.S. GAAP measure.

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 U.S. 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 Note 10, Contingencies, in the notes to the consolidated financial statements).business.

Comparison of Our Results of Operations for the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

For the three months ended MarchJune 31,30, 2026 and 2025, revenue was comprised of Commerce Media Solutions of $30.5 million and $16.1 million, owned and operated of $15.7$16.3 million and $31.1 million, Commerce Media Solutions of $25.9 million and $12.7$21.4 million, and other streams of $3.3$1.6 million and $11.4$7.2 million, respectively. The increase in our Commerce Media Solutions business reflected both the addition of long-term contracts with new media partners signed since the prior year period and growth from existing media partners which in turn drove revenue from advertiser clients in the Media & Entertainment and Retail & Consumer sectors. The decrease in our owned and operated marketplaces revenue was primarily driven by the ongoing strategic transition of our business, as we continue to reallocate resources and advertiser demand to the scaling Commerce Media Solutions. Consistent with this transition, our Commerce Media Solutions business added long-term contracts with new media partners which drove up revenue from advertiser clients in the Media & Entertainment and Retail & Consumer sectors aligned with our continued focus on growing this revenue stream. Within our other streams, the decrease was relateddue to the divestiture of our Call Solutions business as of January 31, 2026.

For the three months ended MarchJune 31,30, 2026 and 2025, cost of revenue (exclusive of depreciation and amortization) consisted mainly of O&O Sites media and related costs of $12.5 million and $24.8 million, Commerce Media Solutions media and related costs of $20.9$22.3 million and $9.8$13.2 million, owned and operated media and related costs of $11.7 million and $16.7 million, and media enablement and other indirect costs related to our other revenue streams of $1.4$0.4 million and $9.2$4.5 million, respectively. Our O&O Sites cost of revenue (exclusive of depreciation and amortization) primarily consists of media and related costs associated with acquiring traffic from third-party publishers, digital media platforms, influencers for our O&O Sites, fulfillment costs related to rewards earned by consumers, and web hosting costs. The decrease in O&O Sites media cost was largely attributable to the challenges in acquiring media related to business practices following the FTC Consent Order. Such costs remained consistent as a percentage of revenue. Commerce Media Solutions cost of revenue consists of fees and revenue share payments made to media partners for ad inventory on their digital properties, web hosting costs, and fulfillment costs related to incentives earned by consumers. The increase in cost of revenue (exclusive of depreciation and amortization) in Commerce Media Solutions was driven by increased revenue share payments generated from impressions from new media partners added oversince the prior year period. Cost of revenue (exclusive of depreciation and amortization) for Commerce Media Solutions increaseddecreased as a percentage of revenue, due to the growthimproved ofmonetization with certain lower margin commerce media placementspartners that do not operate on revenue share agreements. Our owned and operated cost of revenue (exclusive of depreciation and amortization) primarily consists of media and related costs associated with acquiring traffic from third-party publishers, digital media platforms, and influencers for our O&O Sites, fulfillment costs related to rewards earned by consumers, and web hosting costs. The decrease in O&O Sites media cost was largely attributable to the decline in the media acquired for the business following the FTC Consent Order. There was a decrease in cost of revenue as a percentage of revenue driven by increased prevalenceactivity ofin consumerthe incentivesrelated toprogrammatic drivebusiness engagement.that generates revenue without media cost. The decrease in cost of revenue (exclusive of depreciation and amortization) for other revenue streams, which includes media costs, enablement costs and tracking costs related to our consumer data associated with our call centers, was attributable to the decreased cost of media related to the Call Solutions that was divested on January 31, 2026. Cost of revenue (exclusive of depreciation and amortization) for other revenue streams decreased materially as a percentage of revenue largely related to the divestiture of Call Solutions.

For the three months ended MarchJune 31,30, 2026, the total cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue decreased to 78%71% compared to 79%77% for the three months ended MarchJune 31,30, 2025. The change was primarily driven by the aforementioned reasons and shifts in revenue mix.mix to Commerce Media Solutions.

For the three months ended MarchJune 31,30, 2026 and 2025, sales and marketing expenses consisted mainly of employee salaries and benefits of $2.6$3.7 million and $3.1 million, advertising costs of $0.5$0.4 million and $0.3 million, and professional fees of $0.2 million and $0.1 million, and severance costs of $0.1 million and $0.4 million, respectively. The decreaseincrease was primarily due to lowerhigher salaries and other variable employee-related costs driven by aimproved declineresults in headcount and a decline in restructuring and severance costs induring the current yearquarter period,related partly offset byto the CMS business and an increase in advertising costs driven by the increase in fees to attend conferences and seminars expenses to growpromote Commerce Media Solutions.

For the threesix months ended MarchJune 31,30, 2026 and 2025, productsales developmentand marketing expenses consisted mainly of employee salaries and benefits of $1.9$6.9 million and $2.3$6.5 million, softwareadvertising licensecosts of $0.9 million and maintenance$0.6 million, professional fees of $0.5 million and $0.3 million, travel and entertainment costs of $0.3 million and $0.4$0.2 million, andshared professionalbased feescompensation expense of $0.2 million and $0.5$0.1 million, and severance costs of $0.1 million and $0.4 million, respectively. The decreaseincrease was primarily due to an increase in salaries and benefits driven by variable compensation related to the improved results and higher sales and marketing costs associated with the fees to attend conferences and seminars to promote Commerce Media Solutions, partly offset by a decline in salaries driven by lower headcountrestructuring and lowerseverance spendcosts onin IT-relatedthe vendors.current year period.

For the three months ended MarchJune 31,30, 2026 and 2025, generalproduct and administrativedevelopment expenses consisted mainly of employee salaries and benefits of $3.8 million and $3.5 million, professional fees of $1.3$2.1 million and $1.6 million, office overhead of $0.8 million and $1.0 million, software license and maintenance costs of $0.8$0.3 million and $0.9$0.2 million, restructuringprofessional and severance costsfees of $0.1 million and $0.8 million, non-cash share-based compensation expense of $0.5$0.3 million and $0.3 million, and acquisition-relatedshared-based costscompensation expense of ($2.4)$0.1 million and ($0.1)$0.0 million, respectively. GeneralThe andincrease administrative expenses decreasedwas primarily due to the non-cash gain on the divestiture of Call Solutions in the current year period, along with lower professional fees and restructuring and severance costs, partially offset by an increase in headcountsalaries due to an overall increase in headcount, along with higher variable compensation due to the improved results and relatedincreased share-based compensation expense.as a result of the new plans.

The decrease in depreciation and amortization costs during the three and six months ended June 30, 2026 was due to the overall decline in intangibles due to cessation or sales of businesses, along with full amortization on certain intangibles since the prior period.

The decrease in interest expense during the three and six months ended June 30, 2026 was driven by lower average outstanding balances in our debt as well as lower amortization fees associated with the Financing Agreement (as defined herein).

The change in the fair value adjustment of Convertible Notes with related parties during the three and six months ended June 30, 2026 was driven by the fair value calculation inputs, including discount rate and stock price.

The decrease in loss before income taxes of $2.7$1.2 million was a result of the foregoing.factors discussed above.

As of MarchJune 31,30, 2026 and 2025, we recorded full valuation allowances against our U.S. net deferred tax assets. We intend to continue maintaining a full valuation allowance on our U.S. net deferred tax assets until there is sufficient evidence to support the release of all or some portion of the allowance. 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 the Company is able to achieve and the net deferred tax assets available.

For the three months ended MarchJune 31,30, 2026 and 2025, net loss was $5.4$6.2 million and $8.3$7.2 million, respectively, as a result of the foregoing.factors discussed above.

Cash provided by operating activities. For the threesix months ended MarchJune 31,30, 2026, net cash provided by operating activities was $5.1$0.3 million, compared to net cash provided by operating activities of $2.1$3.0 million for the threesix months ended MarchJune 31,30, 2025. Net loss in the current year period of $5.4$11.5 million represents an improvement of $2.9$4.0 million, compared with net loss of $8.3$15.5 million in the prior period. Adjustments to reconcile net loss to net cash provided by operating activities of $1.2$5.9 million in the current year period decreased by $1.8$0.4 million, compared with net cash provided by operating activities of $3.0$6.3 million in the prior period. The decrease was primarily due to a $2.4 million non-cash gain on divestiture andin the current year, lower depreciation and amortization,amortization and prior year non-cash loss on an asset write-off where there were none this year, partly offset by the increased share-based compensation expense and change in fair value adjustment of Convertible Notes with related parties of $0.8$1.8 million and increased share-based compensation expense.million. Changes in assets and liabilities generated cash of $9.3$5.9 million in the current year period, compared with generated cash of $7.3$12.3 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 threesix months ended MarchJune 31,30, 2026 and 2025, net cash used in investing activities was $1.5$3.0 million and $1.6$3.2 million, respectively. The change was primarily due to payments received on the note receivable related to the Winopoly divestiture in the current year period.

Cash used in financing activities. For the threesix months ended MarchJune 31,30, 2026, net cash used in financing activities was $6.3$3.4 million, compared to $5.2$3.2 million for the threesix months ended MarchJune 31,30, 2025. This was mainly due to the net repayments of $6.3$3.4 million on the Financing Agreement in the current year, compared to the net repayments of $10.0$12.0 million on the term loan and revolving credit facility entered into on April 2, 2024 with Crystal Financial LLC d/b/a SLR Credit Solutions, as administrative agent (the "SLR Credit Facility"), partly offset by proceeds received in the prior year period from the issuance of pre-funded and common stock warrants.

As of MarchJune 31,30, 2026, we had noncancelable operating lease commitments of $3.4$3.1 million and debt with a $26.8$30.1 million principal balance.

As of MarchJune 31,30, 2026, we had cash, cash equivalents, and restricted cash of $11.0$7.6 million, a decrease of $2.6$6.0 million from $13.6 million as of December 31, 2025.

With the continuing difficulties in sourcing traffic for our O&O Sites, we have shifted our strategic focus toward scaling our Commerce Media Solutions business. While Commerce Media Solutions has demonstrated growth and operates under a different economic model that reduces exposure to certain media sourcing risks,risks. However, it representscontinues ato relativelyrepresent new andan evolving component of our business.business Further,and the continued success of the Commerce Media Solutions transition depends on our ability to continue to onboard and retain media partners, achieve favorable economics under long-term agreements, and maintain advertiser demand, andof which there can be no assurance that this strategy will be successful.assurance.

Based on our forecast, management expects to have sufficient liquidity over the next twelve12 months from the date of filing. However,Although, we have aachieved historyor ofoverperformed against our forecasts over the trailing three quarters, we did not meetingmeet our forecastforecasts, at times, over the prior three years and any substantial deviations from such forecasts could adversely affect our liquidity and ability to access funding.

Our material cash requirements from known contractual and other obligations consist of our termFinancing loanAgreement and obligations under operating leases for office space. For more information regarding our Financing Agreement, refer to Note 4, Debt, net, in the notes to our consolidated financial statements included in this Form 10-Q.

On November 25, 2025, the Company, and its affiliates Fluent, LLC, Fluent Media Labs, LLC and AdParlor, LLC, each a wholly owned subsidiary of the Company (together with the Company, the "Borrower"), entered into an Accounts Receivable Finance Agreement (the "Financing Agreement") with CSNK Working Capital Finance Corp. d/b/a Bay View Funding ("Bay View")., a portion of the proceeds of which were used to repay and terminate the Company's prior credit facility.

Under the Financing Agreement, Bay View may extend financing to the Company based on eligible domestic and foreign accounts receivable, provided that the amount of advances thereon shall not exceed the lesser of  a maximum credit of $30 Millionmillion (the “Maximum Credit”) or an amount equal to the sum of all advances less any funds received by Bay View pursuant to the Financing Agreement over the collection amounts adjusted for fees that is maintained in a reserve account. All collections of the financed receivables go directly to Bay View and are applied to the Company’s obligations.  The transfer of the receivables was recorded as secured borrowings in accordance with ASC 860, Transfers and Servicing (“ASC 860”), with the receivables remaining on the balance sheet as a current asset.  As of MarchJune 31,30, 2026, the Financing Agreement had a balance of $24,053,$27.5 million, which was recorded within current liabilities as the underlying receivables are typically due within 120-days and Bay View may require repayment of amounts outstanding beyond that period. In addition, the Company had $506$0.2 million in its reserve accounts with Bay View as of MarchJune 31,30, 2026, which was recorded within prepaids and other current assets. The net unused advance as of MarchJune 31,30, 2026 was $6,453.$2.6 million.