Fluent, Inc.
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 31, 2025
FLNT$3.84+6.1%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-04-02.
0001437749-24-010639
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001437749-25-010194
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 151 previous paragraphs and 137 current paragraphs.
27 unchanged; 69 reworded; 38 added; 51 removed; 4 previous and 3 current paragraphs rearranged.
Tables are not compared: 13 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (38)
Current report
We have experienced a continued decline in the number of users who register on our O&O Sites starting in 2020 when we initiated the traffic quality initiative ("TQI") which eliminated a large portion of our third-party affiliate traffic. In 2023, the FTC Consent Order (as defined herein) imposed more rigorous standards and vetting of our third-party publishers, many of whom elected not to work with us, which also negatively impacted the registration volume on our O&O Sites. These issues, coupled with intermittent difficulties sourcing traffic from social media sites have resulted in declining revenue and profitability.
Current report
As of December 31, 2024, we were not in compliance with our financial covenants under the SLR Credit Agreement (as defined below), which we had to report by January 31, 2025, and which would have resulted in an event of default. However, we entered into two letter agreements pursuant to which SLR extended the deadline for delivery of the compliance certificate required for the fiscal month ended December 31, 2024, and the related notice of event of default to March 10, 2025.
Current report
On March 10, 2025, we entered into the Fourth Amendment to the SLR Credit Agreement (as defined below), which required us to raise at least $5.0 million of additional capital, net, by March 20, 2025. In addition, the Fourth Amendment waived non-compliance with the financial covenants as of December 31, 2024, extended the duration of the call protection applicable to the loans, and modified the financial covenants, among other things. On March 20, 2025, we raised $5.0 million in aggregate net proceeds from the sale of pre-funded warrants, satisfying the capital raising conditions of the Fourth Amendment. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Sales of securities.
Current report
The financial covenants under the SLR Credit Agreement (as defined below) were reset based on our twelve month projections. However, we have not met our projections for certain recent quarters and are currently trending below our 2025 first quarter projections. If during any fiscal quarter, we do not comply with any of our financial covenants, such non-compliance would result in an event of default that would give SLR (as defined below) the right to accelerate maturities. In such case, we would not have sufficient funds to repay the SLR Term Loan (as defined below) under the SLR Credit Agreement and any outstanding balance on the SLR Revolver (as defined below). Furthermore, even with the additional capital raise completed in March 2025, there is no assurance that the available cash, plus borrowing base on the SLR Revolver will be sufficient to fund operations over the next twelve months and we expect to raise additional capital. We will consider implementing cost-saving measures, but there is no guarantee that such plans would be successfully executed or have the expected benefits. Based upon the foregoing, management concluded that there exists a substantial doubt about our ability to continue as a going concern, and our independent registered public accounting firm included in its opinion for the year ended December 31, 2024 an explanatory paragraph expressing substantial doubt in our ability to continue as a going concern. Our financial statements as of December 31, 2024 did not include any adjustments that might result from the outcome of this uncertainty.
Current report
If our current plans are not successful, 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 providing financing should additional financing be required. Other financing sources may be unwilling to provide such funding to us on commercially reasonable terms, or at all. If we seek additional financing to fund our operations and 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, 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.
Current report
In response to declining results of our owned and operated business, 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, this is a relatively new business for Fluent. There are many established dominant players in commerce media and entry into the commerce media business has its own challenges and risks as further discussed below.
Current report
Conversely, although the majority of our commerce media business operates on a revenue share basis, some media partners have guaranteed minimum arrangements. There are several factors that determine the performance of a deployment of our commerce media solution that include the e-commerce site owners we partner 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 Commerce Media Solutions business.
Current report
Our results are also subject to fluctuation from seasonality and cyclicality in ours and our clients' businesses. For example, most of our Commerce Media Solutions media partners operate e-commerce websites that experience the heaviest consumer traffic during the fourth quarter holiday season. Our Call Solutions business experiences greater demand for Health Plans during open enrollment periods ("OEPs"), which are typically during the first and fourth quarters, when the costs to acquire media are higher. We can provide no assurance that 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.
Current report
Risks Related to Commerce Media Solutions Business
Current report
We are a relatively new entrant to the post-transaction commerce media business, which is currently dominated by a major player.
Current report
We have been in the commerce media business for about two and a half years and have developed our own proprietary ad serving technology. We have invested substantial financial and human capital into this business and plan to continue to do so, but there may be technological, implementation, and acceptance challenges on both our part and the part of prospective media partners. While we have gained a foothold in the U.S. and are starting to expand internationally, this space is highly competitive, with new entrants entering the field and existing e-commerce site owners building their own commerce media solutions. Rokt, the established player in the post-transaction sector of the industry, has been in the commerce media business for over a decade and has a large market share both in the U.S. and internationally, particularly with respect to its e-commerce post-transaction solution (Rokt places their ad unit on the page that is displayed after the user completes their purchase). As we expand our service offerings, we expect there to be challenges to our continued growth and profitability as new services tend to be less reliable and less profitable initially.
Current report
While we plan to use our technology and experience as a long-term player in the digital marketing space and leverage our stable of world-class advertisers and our established database of unique users to grow our commerce media business, there can be no assurance that we will be able to effectively compete with our competitors and continue to grow our business profitably. We may find it difficult to compete with companies with greater resources, more developed technology and those with a built-in stable of e-commerce media partners on which to deploy their solutions.
Current report
We will need to continue to invest in technology for our Commerce Media Solutions business.
Current report
The performance of Commerce Media Solutions is typically measured on a revenue per session or on an impression basis, both of which are dependent on access to user information and the performance of our ad serving technology. We have invested in developing our solutions and plan to continue to invest in our technology to maintain and grow our business. We use a combination of internal and third parties to do this and will need sufficient capital and resources to develop the capabilities, reliability, and enhancements the market demands to remain competitive.
Current report
We attract hundreds of thousands of consumers to our O&O Sites on a daily basis and have over 8 billion pieces of user information, which we believe differentiates us from our competitors. 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.
Current report
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 that we will have the 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, our competitive position could suffer and our results of operation could be adversely affected.
Current report
We are at a competitive disadvantage to other rewards sites because we are more selective in our traffic sources.
Current report
Our O&O Sites have experienced declining user traffic over the last five years. We believe this decline is primarily attributable to our TQI, launched in 2020, which led to the removal of a substantial number of our affiliate traffic sources which we had identified as having unacceptably low quality levels or a higher incidence of fraud or bot traffic. In addition, the FTC Consent Order (as defined herein) necessitated a heightened level of vigilance in monitoring our publishers, many of whom opted to discontinue their partnership with us and also reduced registrations.
Current report
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, and do not expect to, increase our registration volume back to levels prior to 2020 when we first implemented the TQI. 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 results of operations and liquidity.
Current report
Our success depends on our ability to attract users to our O&O Sites 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.
Current report
We rely more heavily on a "walled garden" social media platforms for users. These platforms change their algorithms and rules on acceptable 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 may be adversely affected.
Current report
Our media spend on social media 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. Due to the ongoing regulatory concerns, TikTok continues to face the potential for a U.S. ban unless an acceptable buyer is found. If TikTok is restricted, influencers may shift to other platforms, but interruptions could reduce traffic to our sites and adversely affect our operating results.
Current report
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 makes our operations subject to their power over the mobile ecosystem, pricing, and terms which impacts the vast majority our business including our O&O Sites as well as those of advertisers, app developers, e-commerce sites, mobile carries and others on whom we rely which poses a significant risk to us and our business. If our advertiser clients or partners experience difficulties developing or promoting their apps, our revenue and growth may be impaired.
Current report
Ouruse of CRM may be hindered, which in turn could harm our business. *** ***
Current report
Risks Associated with our Call Solutions Business
Current report
We have become increasingly reliant upon inbound calls, particularly in the Health Plan vertical, which we may be unable to obtain cost effectively obtain in the future.
Current report
In the past, our Call Solutions business relied on our O&O Sites to provide Telephone Consumer Protection Act ("TCPA")-consented leads obtained from O&O Site users. As the traffic to our O&O Sites began to decline, Call Solutions looked to third parties to supply TCPA-consented leads and inbound and outbound dialed call transfers.
Current report
Beginning in 2024, many of our call transfer buyers stopped buying outbound dialed calls in anticipation of the implementation of the more stringent rules on obtaining prior express written consent for purposes of the TCPA proposed by the Federal Communications Commission (the " Proposed FCC Rules") and the marketing rules applicable to Medicare and Medicare Advantage plans (collectively, the "Health Plans") promulgated by the Centers for Medicare & Medicaid Services (the "CMS" and such rules, the "CMS Rules"). Because the CMS Rules were not affected by the delay in the implementation of the Proposed FCC Rules, which delayed the implementation of the Proposed FCC Rules until at least January 26, 2026, the CMS one-to-one rule has and will continue to apply to Health Plan marketing. Importantly, we cannot use historical leads of users who provided TCPA consent without complying with the CMS one-to-one rules due to the Proposed FCC Rules and CMS Rules. Accordingly, we pivoted our Health Plan marketing business to focus the vast majority of our Call Solutions business on transfers of inbound calls. Many of our competitors also transitioned to inbound calls, such that when open enrollment period ("OEP") began on October 7, 2024, the market for inbound calls tightened. The price of inbound calls rose dramatically to the point where we were unable to maintain historical profitability levels during the OEP, and the risk of future price increases and/or limited supply remains.
Current report
While we have developed strategies for generating leads and calls that comply with the CMS one-to-one consent rules applicable in the Health Plan vertical, there can be no assurance that we will be able to profitably market Health Plans as we did in the past. Because a substantial majority of our Call Solutions business is in Health Plan marketing, if we are unable to develop more business in other sectors or cost effectively buy inbound calls for Health Plans, our Call Solutions business may be adversely affected.
Current report
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, we are adapting 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 may 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.
Current report
Many of our advertisers and media partners are based outside of the U.S., including many app and gaming advertisers based in Israel. While the Israel-Hamas conflict and Ukraine-Russia conflict have not, of yet, been disruptive to their business or operations, if hostilities resume or intensify, our Ukraine and/or Israeli partners could be affected, potentially having a negative impact on our operations.
Current report
The regulatory landscape in which we and our clients operate is constantly evolving and subject to significant change.
Current report
In the last five years, for example, we have been involved in regulatory actions with the FTC and the PAAG and in numerous litigations and claims. Such actions have adversely impacted our results of operations and could adversely affect our future results of operations and financial position.
Current report
The SLR Credit Agreement generally prohibits additional debt financings without SLR's consent and requires proceeds from equity financings to be used to prepay indebtedness to SLR. Accordingly, we will not be able to raise capital for uses other than prepayment of SLR indebtedness without SLR's consent. In addition, the SLR Credit Agreement contains various financial and other covenants, and any non-compliance with those covenants could result in an acceleration of the repayment of the amounts outstanding thereunder. While we had $18.5 million available under the SLR Revolver as of December 31, 2024, our use of such funds is subject to certain conditions, including borrowing base requirements, as discussed above.
Current report
In addition to revenue from business operations and proceeds from the SLR Credit Agreement, the Company's primary source of working capital to date has been through the sale of equity and subordinated debt securities to officers, directors and a principal stockholder. Equity or debt financings may have a dilutive effect on the holdings of our existing stockholders, and debt financings may subject us to restrictive covenants, operational restrictions, or security interests in our assets. If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue certain operations. Any of these events could significantly harm our business and results of operations.
Current report
We are currently listed on The Nasdaq Capital Market (“Nasdaq”). If we are unable to maintain listing of our securities on Nasdaq or any stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and it may be more difficult for our stockholders to sell their securities.
Current report
Although our common stock is currently listed on Nasdaq, we may not be able to continue to meet the exchange’s minimum listing requirements or those of any other national exchange. The Listing Rules of Nasdaq require listing issuers to comply with certain standards in order to remain listed on its exchange. If, for any reason, we should fail to maintain compliance with these listing standards and Nasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our stockholders:
Current report
Additionally, any future equity or debt financing may have a dilutive effect on the holdings of our existing stockholders.
Removed paragraphs (51)
Previous report
Investing in our common stock involves a high degree of risk. The following summary identifies certain material risks and uncertainties facing our business, many of which are beyond our control. A more complete discussion of each these and other risks and uncertainties is set forth under "Risk Factors." Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, including those set forth below and elsewhere in this 2023 Form 10-K, the occurrence of any one of which could have a material adverse effect on our actual results.
Previous report
Additionally, the introduction of new technologies and services, including voice assistance, artificial intelligence, internet-of-things and machine learning, and the emergence of new industry standards and practices related to these technological developments could render our existing technologies and services obsolete and unmarketable or require unanticipated investments in technology. In particular, as we continue to transition to cloud-based technology and migrate our database to a new environment, we may face new and additional costs to operate our business.
Previous report
Our results are also subject to fluctuation from seasonality and cyclicality in our and our clients' businesses. The Adflow business unit, which places ad modules on third-party e-commerce websites' transaction confirmation pages, and our call solutions business, which relies on Medicare open enrollment periods for a material portion of its revenue, are both subject to seasonality, with the fourth quarter being both units' strongest quarter. The costs to acquire media from our publishers are also subject to seasonal variability with media cost typically increasing in the fourth quarter. Our results of operations have in the past been adversely affected when we were unable to respond to the fluctuations in the price and availability of media, and similar effects may occur in the future.
Previous report
Beyond these budgetary constraints and buying patterns of clients, macroeconomic conditions affecting the digital media industry and the various market verticals we serve may result in a decrease of our clients' advertising spending and, thereby, have a material adverse effect on our business and results of operations.
Previous report
A small portion of our client business is sourced through advertising agencies and brokers. In many cases, agencies are not required to pay us unless and until they are paid by the underlying client. In addition, many agencies and brokers are thinly capitalized and have or may develop high-risk credit profiles. If an agency or broker becomes insolvent, or if an underlying client does not pay the agency or broker, we may be required to write off accounts receivable as bad debt.
Previous report
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. As we have limited the volume of affiliate traffic to our websites as a result of the Traffic Quality Initiative ("TQI"), we have had to find other traffic sources that meet our quality standards at a cost and volume that meets our requirements. We have not, and do not expect, to increase our registration volume back to levels prior to 2020 when we first implemented the TQI.
Previous report
We increasingly focus our media spend on social media platforms, which includes the use of influencers. Many of the influencers who drive users to our sites post their content on TikTok, which has been banned on federal and public sector employees' phones and on state employees' phones in the majority of states and on some college campuses in the U.S. Were the ban to become more widespread, our TikTok influencers would need to post their content on other social media platforms, which may not reach as many users as TikTok does and may come at a higher cost, thereby adversely affecting our results of operations.
Previous report
Our business could be harmed if we or our third-party publishers are unable to contact users through specific channels.
Previous report
We and our third-party publishers use email, text messages, telephone calls, push notifications, and social media, among other channels, to reach users for marketing purposes. The laws, rules, and regulations governing such usage continue to evolve, and changes in technology, the marketplace, or consumer preferences may lead to the adoption of or changes in laws, rules, or regulations. The Federal Communications Commission (the "FCC") recently adopted rules amending the Telephone Consumer Protection Act ("TCPA"), which will likely require us to alter our process for obtaining TCPA consent, which could limit our and our marketing partners' ability to contact users in a cost-effective manner. We use third parties, including mobile operating systems, internet service providers ("ISPs"), wireless carriers, aggregators, and internet browsers, to contact users via text messaging and to a lesser extent push notifications. These third-party providers or the wireless carriers may block our text messages or shut down our text message service providers' ability to send text messages. Some carriers will not approve our applications to lease short codes for our internal messaging campaigns, hampering our ability to re-engage with our users.
Previous report
Limitations on our or our third-party publishers' ability to collect and use data derived from user activities or deliver internet-based advertising could increase the cost of media and significantly diminish the value of our services.
Previous report
The use of personal information provided by a consumer, including transactional data, is subject to evolving laws and regulations, regulatory scrutiny, litigation, and industry self-regulatory activities. We collect personal information and user survey responses in our targeted ad serving, lead generation and consumer data offerings. Interruptions, failures, or defects in our data collection systems or restrictions on collection could limit our ability to analyze and optimize data from our clients' marketing campaigns. If our or our clients' access to data is limited in the future, we may be unable to provide effective services to clients and may lose clients and revenue.
Previous report
Moreover, the development and adoption of technologies, tools, software, and applications that can block online advertising or mask users' location could reduce the number of display and search advertisements that we or our third-party publishers are able to deliver, which could adversely affect our business and results of operations. Major web browsers such as Google Chrome and Apple Safari either block by default or permit users to block third-party cookies and user-level tracking. In general, while we rely on internally created identifiers to associate returning users with their user profile, we and our third-party advertisers use cookies to track user attributes and conversions. While the digital advertising industry has sought to mitigate the impact of the elimination of cookies by using other conversion tracking technologies, the impact of these changes on our business is uncertain.
Previous report
More significantly, companies and new laws and regulations are moving to limit online user-level tracking including conversion data as part of the push for enhanced data privacy protection. Use of conversion data such as whether a user downloads and installs an app, may be limited, which may inhibit our clients' and our respective operations. For example, Apple's 2021 update to iOS defaults to blocking ad tracking, making it difficult for us and our advertiser clients to track conversions and ROAS. Google also plans to eliminate the use of third-party cookies for ad tracking, which may lead some advertisers to curtail their ad spend or other clients to stop online advertising altogether.
Previous report
The move away from user level tracking may also adversely impact the efficiency of ad platforms such as those operated by Alphabet and Meta and other social media platforms which could lead to publishers reducing their spend on social media platforms or increases in the cost of media. Many of our publishers buy media on these platforms and may seek to pass along their increased media costs to us or be unable to supply us with media at the volume and price we require, either of which could adversely affect our results.
Previous report
Our rewards fulfillment costs fluctuate, and we could lose clients if we fail to adequately detect fraud on advertisements.
Previous report
Our rewards sites generate a large portion of our revenues and gross profit. Users who complete the program requirements and are verified during the claims process can earn valuable rewards such as gift cards and cash equivalents. However, we are exposed to the risk of fraudulent clicks or actions on our websites or our third-party publishers’ websites, which could lead our clients to become dissatisfied with our campaigns and lead to a loss of clients and related revenue. Click-through fraud occurs when automated systems (sometimes called "bots") are used to create an individual click on an ad displayed on a website, rather than an individual user actually viewing the underlying content, with the intent of generating a payment to the publisher. Alternatively, publishers may seek to increase compensable actions by using bots or other fraudulent means to complete online forms with false or fictitious information. Our results could be adversely affected if users are successful in claiming rewards they are not entitled to or we deny rewards to users who we believe are not entitled to claim them. These users may seek to damage our reputation by filing complaints or posting negative online reviews, which could adversely affect our results of operations.
Previous report
The risk of fraud may increase as bots become more sophisticated and difficult to detect. We do not charge our clients for fraudulent clicks or actions when they are detected, and we have terminated and may, in the future, terminate our relationships with publishers who we believe have engaged in fraud. However, we may not be able to replace them with new publishers, which could result in a reduction in traffic to our sites and registrations.
Previous report
Our future success depends in part on the efficient performance of our ad serving and lead generation platforms and technology infrastructure. As the number of websites and internet users and the amount of data collected increases, we have begun to revamp our technology infrastructure to accommodate this increased volume. For example, we rearchitected our database of consumer information to accommodate users' exercise of their privacy rights under new data privacy and data protection laws. Unexpected constraints on our technology infrastructure could lead to slower website response times or system failures and adversely affect the availability of our websites and the level of user responses received, which could result in the loss of clients or revenue.
Previous report
The full extent to which these factors may negatively affect our business and operations, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and cannot be predicted, including the scope, severity and duration of the Hamas-Israel and Russia-Ukraine conflicts, other areas of geopolitical tension around the world and any economic downturns and the actions taken by governmental authorities and other third parties in response. In particular, our revenue is susceptible to developments in the Hamas-Israel conflict, as a significant portion of our customers in the Media & Entertainment industry are located in Israel.*** ***
Previous report
We have transitioned to a hybrid in-office/remote model, which may adversely affect our ability to attract and retain employees***.***
Previous report
We implemented a company-wide work-from-home policy beginning on March 13, 2020. During the pandemic, many employees relocated away from our New York City headquarters. As was the case with many organizations, we experienced higher levels of turnover during the pandemic, and hiring became increasingly difficult as new hires commanded higher salaries.
Previous report
While we have adapted to a work-from-home environment, we believe it is preferable to have our workforce on premises. Having a large part of our workforce working remotely creates challenges to our technological capacity and cybersecurity capabilities, as well as causes operational inefficiencies and may lead to the diminution in the loyalty and goodwill of our employees. In September 2022, we modified the policy to now require that employees be in the office at least two days a week, and we have recently begun hosting events to bring our employees together. Despite not utilizing our offices at pre-pandemic levels, we have not yet been able to reduce our occupancy costs, and we may not be able to do so prior to the expiration of our current lease in October 2025.
Previous report
If we are unable to maintain our corporate culture as we grow, our business, financial condition, and results of operations could be harmed. The failure to maintain the key aspects of our culture as our organization grows could result in decreased employee satisfaction and increased difficulty in attracting and retaining top talent, which in turn could compromise the quality of our client service and adversely affect our operations.
Previous report
Our business is subject to a significant number of telemarketing laws and regulations. Compliance with these laws and regulations may cause us to incur significant expenses or reduce the availability or effectiveness of our solutions, and failure to comply with them could subject us to civil or criminal penalties or other liabilities.
Previous report
We are subject to various state and federal laws regulating telemarketing communications (including SMS or text messaging), including the federal TCPA, Telemarketing Sales Rule ("TSR"), and state telemarketing laws. We use our data to manage internal text messaging campaigns to re-engage with our users and supply it to third-party call center clients for their telemarketing and text messaging campaigns. TCPA regulations have resulted in an increase in individual and class action litigation against marketing companies for alleged TCPA violations. TCPA violations can result in significant financial penalties, including penalties or criminal fines imposed by the FCC or state authorities or through private litigation. Recently, for example, we contributed $3.1 million to settle a TCPA class action, which may increase the risk of additional claims under the TCPA.
Previous report
Changes in the interpretation of the TCPA or TSR could also have a material adverse effect on our business. For example, the FCC recently adopted rules which, among things, modified how companies may obtain consumer consent under the TCPA. If implemented, these rules would ban marketers from obtaining a single consumer consent as grounds for delivering calls and text messages from multiple marketers on subjects beyond the scope of the original consent. This portion of the new rules takes effect in January 2025. There are many aspects of the new rules that are unclear and will be subject to interpretation by the courts and regulatory authorities, and it is likely that there will be legal challenges to the new rules. Because of the uncertainty surrounding the application of the revised TCPA rules to our business, we are unable to predict the impact on our business. If the new rules take effect, we expect that they will impact the sale of telemarketing data and our call solutions business unit, which may adversely affect our revenue and results of operations.
Previous report
In addition, we promote Medicare Supplement plans by supplying call transfers and contract information of interested users to insurance agencies, brokers and other parties participating in the sale of these policies, as well as selling policies using our own agents. The Centers for Medicare & Medicaid Services ("CMS") has regularly issued rules tightening the acceptable marketing practices of these plans and we expect CMS to continue to issue new rules. Depending on the rules adopted our ability to market and sell these plans may be curtailed which may adversely affect the results of our operations in this space.
Previous report
For example, Fluent, LLC recently settled investigations by the FTC and PAAG. As a result of these settlements, we made several changes to our employment opportunities marketplace and programmatic advertising businesses and implemented industry-leading compliance measures across the entire business which had and may continue to have a negative impact on our revenues and media margin. While in the medium term, we expect that our industry-leading compliance protocols will be a competitive advantage that will enable us to recapture market share from our competitors, we cannot assure that the adverse impact on our revenues and media margin will not continue longer than expected. Despite resolving the FTC and PAAG matters, we could be subject to additional regulatory actions from other state attorneys general. We also recently agreed to participate in the settlement of a TCPA class action and are involved in other active TCPA class action litigations. Such actions could have a substantial adverse impact on our reputation and ability to continue to buy media cost effectively and the willingness of our advertiser clients to continue to do business with us, which could in turn materially and adversely affect our results of operations and financial position.
Previous report
There may also be adverse publicity and uncertainty associated with investigations, litigation, and orders (whether pertaining to us, our clients, or our competitors) that could diminish consumers' view of our services and/or result in material discovery expenses. A court-ordered injunction or an administrative cease-and-desist order or settlement may require us to modify our business practices or prohibit conduct in which our competitors may engage. Additionally, our clients might face similar proceedings, actions or inquiries which could affect their businesses and, in turn, our ability to do business with those clients. Any negative outcomes from regulatory actions or litigation or claims, including monetary penalties or damages or injunctive provisions regulating or restricting how we conduct our business could have a material adverse effect on our business, financial condition, results of operations and reputation.
Previous report
Because the techniques used to obtain unauthorized access, disable, or degrade service, or sabotage systems change frequently, often are not recognized until launched against a target, and may originate from less regulated and remote areas around the world, we may be unable to proactively address these techniques or to implement adequate preventative measures.
Previous report
We may voluntarily prepay the Term Loan, in whole or in part, at any time, subject to a premium payable on the aggregate principal amount of any such voluntary prepayments within the first three years following the closing date. There is no principal amortization prior to maturity under the SLR Credit Agreement, except for certain mandatory prepayments to be made with the net cash proceeds of certain asset sales, casualty events, and other extraordinary receipts and upon the occurrence of certain other events, in each case, subject to certain reinvestment rights, thresholds and other exceptions. Unfunded commitments under the Revolving Facility will be subject to an unused facility fee, which will be payable monthly in arrears, as of the month following the closing, at a rate of 0.50% per annum. All amounts owed under the Credit Facilities will be due and payable on the Maturity Date, or earlier following a change in control or other event of default, unless otherwise extended in accordance with the terms of the SLR Credit Agreement. Borrowings under the SLR Credit Agreement bear interest at a rate per annum equal to a 3-month term SOFR plus 0.26161%, subject to a 1.50% floor, plus 5.25% (the "Applicable Margin"). The Applicable Margin will be reduced to 5.0% when our fixed charge coverage ratio is greater than 1.10 to 1. The anticipated opening interest rate of the SLR Credit Facility is 10.81% (SOFR + CSA + 5.25%).
Previous report
The SLR Credit Facility is guaranteed by us and certain of our direct and indirect subsidiaries and is secured by substantially all of our assets and those of certain of our direct and indirect subsidiaries, including Fluent, LLC.
Showing the first 40 of 51 passages. Open the source sections for the rest.
Reworded paragraphs (69)
Previous wording
Covenants in our Credit Agreement impose restrictions that may limit our operating and financial flexibility.
Current wording
Covenants in our SLR Credit Agreement impose restrictions that may limit our operating and financial flexibility.
Previous wording
On April 2, 2024, Fluent, LLC entered into a credit agreement (the "SLR Credit Agreement") by and among Fluent, LLC, as Borrower, Fluent, Inc. and certain subsidiaries of the Borrower as guarantors, Crystal Financial LLC D/B/A SLR Credit Solutions, as administrative agent, lead arranger and bookrunner ("SLR"), and the lenders from time to time party thereto. The SLR Credit Agreement provides for a $20.0 million term loan (the "Term Loan") and a revolving credit facility of up to $30.0 million (the "Revolving Facility" and, together with the Term Loan, the "SLR Credit Facility"). As of April 2, 2024, the SLR Credit Facility has an outstanding principal balance of $32.7 million and will mature on April 2, 2029 (the "Maturity Date"). We used $30.0 million of the proceeds to repay our prior credit facility with Citizens Bank, N.A., as administrative agent, lead arranger and bookrunner, and the other lenders thereto.
Current wording
On April 2, 2024 Fluent, LLC, as Borrower, entered into a credit agreement (as amended, the "SLR Credit Agreement") with the Company and certain subsidiaries of the Borrower as guarantors, Crystal Financial LLC D/B/A SLR Credit Solutions, as administrative agent, lead arranger and bookrunner ("SLR"), and the lenders from time to time party thereto. The SLR Credit Agreement provides for a $20.0 million term loan (the "SLR Term Loan") and a revolving credit facility of up to $30.0 million (the "SLR Revolver" and, together with the SLR Term Loan, the "SLR Credit Facility"). For further information on the SLR Credit Agreement, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – SLR Credit Agreement.
Previous wording
The SLR Credit Agreement contains restrictive covenants which impose limitations on the way we conduct our business, including limitations on the amount of additional debt we are able to incur and our ability to make certain investments or to pay dividends or other restricted payments. The restrictive covenants may limit our strategic and financing options and our ability to return capital to our shareholders through dividends or stock buybacks. In addition, the SLR Credit Agreement requires us to maintain and comply with certain financial covenants.
Current wording
The SLR Credit Agreement contains restrictive covenants which impose limitations on the way we conduct our business, including, but not limited to, limitations on the amount of additional debt we are able to incur and our ability to make certain investments or to pay dividends or other restricted payments. The SLR Credit Agreement also contains certain affirmative covenants and customary events of default provisions, including, subject to grace periods, among others, payment default, covenant default and judgment default. These covenants limit our operating and financial flexibility, and to the extent we are not able to comply with them, SLR can declare an event of default and that would give SLR the right to accelerate maturities. In such case, we would not have sufficient funds to repay the $20 million term loan under the SLR Credit Agreement and the additional amount on the SLR Revolver, and SLR could foreclose on all of the assets securing the SLR Credit Facility, which in turn could lead to our inability to able to continue as a going concern and a total loss of investment for holders of our common stock. See also risk factor "There is substantial doubt about our ability to continue as a going concern"*** *above.
Previous wording
We operate in a competitive, rapidly evolving industry, which makes it difficult to evaluate our business and prospects.
Current wording
We operate in a competitive, rapidly changing industry, which makes it difficult to evaluate our business and prospects.
Previous wording
We derive substantially all of our revenue from digital marketing services, which is an intensely competitive industry characterized by rapidly changing internet media and advertising technology, evolving industry standards, regulatory uncertainty, and changing user and client demands. Our future success depends on our ability to effectively respond to this constant change and cost effectively acquire media from our publishers.
Current wording
We derive substantially all of our revenue from digital marketing services, which is an intensely competitive industry characterized by rapidly evolving industry standards, user and client demands, laws and regulations, and technology.
Previous wording
We compete for advertiser clients against other digital marketing companies and online and traditional media companies based on many factors, including return on advertising spend ("ROAS"), price, 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 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 could be even 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 leads 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.
Current wording
We compete for advertiser clients against other digital marketing companies and online and traditional media companies based on many factors, including ROAS, price, 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 could be even 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.
Current wording
Recent changes to the regulatory landscape have resulted in substantial changes and thus subjected our industry to added uncertainty. Our future success depends on our ability to effectively respond to the constant changes in our industry and our ability to develop new products and strategies to navigate the changing regulatory landscape so we can remain competitive. See risk factor "The regulatory landscape in which we and our clients operate is constantly evolving and subject to significant change" within Risks Relating to Legal and Regulatory Matters for additional information.
Previous wording
To remain competitive, we have invested in developing new products, markets, services, and technologies and expanded our workforce to enable us to upgrade our systems. However, based on our experience, new websites, systems, products, and services may be less predictable and have lower margins than more established websites, products and services and may be more prone to technological instability or failure. If we are unsuccessful in enhancing and upgrading our websites, products, services, and back-end systems, we may fail to maintain our profitability, attract new clients, or grow our revenue, or we may suffer service disruptions.
Current wording
We have also invested in developing new products, markets, and services to enable us to upgrade our systems. However, based on our experience, new websites, systems, products, and services may be less predictable and have lower margins than more established websites, products and services and may be more prone to technological instability or failure. If we are unsuccessful in enhancing and upgrading our websites, products, services, and back-end systems, we may fail to maintain our profitability, attract new clients, or grow our revenue, or we may suffer service disruptions.
Previous wording
While we continually make enhancements and other modifications to our proprietary technologies, such changes may contain design or performance defects that are not readily apparent. If our proprietary technologies fail to achieve their intended purpose or are less effective than technologies used by our competitors, our business could be harmed.
Current wording
Additionally, we have begun introducing some new technologies, including AI and machine learning. We have also transitioned to cloud-based technology and migrated our database to a new environment. These new technologies may contain design or performance defects that are not readily apparent. If the new proprietary technologies we implement fail to achieve their intended purpose or are less effective than technologies used by our competitors, our business could be harmed.
Previous wording
A material percentage of our consolidated revenue is derived from gaming (apps) advertisers, sowe are exposed to risks associated with the gaming industry in general and one gaming client in particular.
Current wording
A material percentage of our consolidated revenue is derived from gaming (apps) advertisers, sowe are exposed to risks associated with the gaming industry in general.
Previous wording
Approximately 38% of our consolidated revenue was derived from gaming advertisers in 2023. This revenue derives from app installations and app-related user actions. The stability and potential growth of this client base depends in part on the state of the app-based gaming industry, which is subject to numerous risks including:
Current wording
Approximately 35% and 38% of our consolidated revenue was derived from gaming advertisers in 2024 and 2023, respectively. This revenue derives from app installations and app-related user actions. The stability and potential growth of this client base depends in part on the state of the app-based gaming industry, which is subject to numerous risks including:
Previous wording
Moreover, one of our gaming advertiser clients accounted for 18.1% of consolidated revenue in 2023, a decrease from 22.1% of consolidated revenue in 2022. This client materially reduced its advertising spend in the second half of 2023, and there can be no assurance that we will be able to regain the pricing and performance levels that we had prior to this shift. If pricing and performance were to degrade further, our results of operations may continue to be adversely affected.
Current wording
One of our gaming advertiser clients, which accounted for 7.1% of consolidated revenue in 2024, experienced a steep decline from 18.1% of consolidated revenue in 2023. There is no expectation that we will be able to regain the pricing and performance levels that we had with this client prior to this shift but if the pricing and performance across all of our gaming clients were to degrade, our results of operations may be adversely affected.
Previous wording
With the growth of online advertising and e-commerce, there is increasing awareness and concern regarding online marketing, advertising, telecommunications, and privacy matters, 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 expectations of our owned and operated websites, our reputation could be harmed and damage our ability to attract and retain users, which could adversely affect our business. 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 operating results.
Current wording
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, 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.
Previous wording
Heightened scrutiny on the part of the public or regulators and an increasing regulatory burden especially 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, and adversely affect our business, financial condition, and results of operations. As a large player in our niche of the industry, smaller competitors frequently design their websites to look like they are owned and operated by us. If these competitors engage in non-compliant activities, it could have a particularly damaging impact on all participants in our industry and on our relationships with our users and/or clients who are unaware that the non-compliant websites are not ours.
Current wording
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 operating results.
Previous wording
Because the majority of our contracts with our advertiser clients do not require fixed commitments, these clients can unilaterally terminate their agreements with us, pause their campaigns, or materially reduce the amount of business they conduct with us at any time, with little or no prior notice. There is no guarantee that we will be able to retain or renew existing agreements with any of our clients on acceptable terms, or at all.
Current wording
Because the majority of our advertiser clients can unilaterally terminate their agreements with us, pause their campaigns, demand changes to the campaign pricing or terms or materially reduce the amount of business they conduct with us at any time, with little or no prior notice, there is no guarantee that we will be able to retain or renew existing agreements with any of our advertisers on acceptable terms, or at all.
Previous wording
Additionally, because of the performance-based nature of our agreements, we typically 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 sites, providing content and experiences that retain users' attention and displaying relevant advertisements and other content to users.
Current wording
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 content and experiences that retain users' attention.
Previous wording
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 refuse to pay because of performance-related or other claims. In these circumstances, we may have difficulty collecting on amounts we believe are owed us. 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.
Current wording
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 refuse to pay because of performance-related 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.
Previous wording
Our success depends on our ability to attract users to our owned and operated websites and generate revenue from their activities thereon in a cost-effective manner. A substantial majority of our revenue on our websites is attributable to visitor traffic originating from third-party publishers, including ad networks, social media platforms, and search engines. Our ability to maintain the number of users who come to our and our third-party publishers' websites is not entirely within our control. If a third-party publisher decides not to make media inventory available to us, decides to demand higher pricing or a higher revenue share, or places significant restrictions on the use of such inventory, we may not be able to find media inventory from other media sources that satisfies our requirements in a timely and cost-effective manner.
Current wording
Our ability to maintain the number of users who come to our O&O Sites and our third-party publishers' websites is not entirely within our control. For example, if a third-party publisher decides not to make media inventory available to us, decides to demand higher pricing or a higher revenue share, or places significant restrictions on the use of such inventory, we may not be able to find media inventory from other media sources that satisfies our quality requirements in a timely and cost-effective manner.
Previous wording
An increasing number of people are accessing content on their mobile devices through mobile applications, and our ability to remain competitive with the shift to mobile apps is critical to maintaining our revenue and profitability.
Current wording
More people are accessing content on their mobile devices through mobile applications, and we have not successfully deployed mobile app versions of our O&O Sites, which hinders our ability to remain competitive.
Previous wording
Mobile devices are now the primary means by which people access online content, increasingly through mobile applications rather than browsers. While our websites are designed with a "mobile first" approach, mobile applications are not a primary driver of our business, which could place us at a competitive disadvantage in the marketplace. We may experience difficulties developing mobile apps or making them available in the Google Play and Apple App stores, and consumers may not install and use our apps. If we experience these difficulties or problems promoting our apps on social media platforms, our consumer acquisition capabilities and our growth may be impaired, making it more difficult for our mobile app initiatives to achieve profitability.
Current wording
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, we do not currently have mobile applications for our O&O Sites, which could place us at a competitive disadvantage to competitive rewarded sites that have app versions.
Previous wording
Additionally, email service providers ("ESPs") or ISPs may implement new or more restrictive email or content delivery or accessibility policies. For example, Google and Yahoo! have recently introduced new guidelines restricting senders from sending bulk emails and requiring the provision of one-click unsubscribe options. If ESPs materially limit or halt the delivery of emails advertising our websites, 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.
Current wording
We and our third-party publishers use email, text messages, and telephone calls, among other channels, to reach users for re-engagement and other marketing purposes. Email service providers ("ESPs") or internet service providers 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.
Previous wording
With a heightened aversion to calls, 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 because of legislation, regulatory rules or interpretive positions, blockage, screening technologies or otherwise, our business, operating results and financial condition would be harmed. See also risk factor entitled "Our business is subject to a significant number of telemarketing laws and regulations."
Current wording
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, operating results, and financial condition would be harmed.
Previous wording
We are continuously upgrading our systems, procedures, processes, and controls to support our future operations as we grow. We have incurred significant expenditures and have been forced to reallocate valuable management resources to facilitate these upgrades. We have incurred substantial costs to secure hosting, other technical services, and additional data storage and to upgrade our technology and network infrastructure to handle increased traffic on our owned-and-operated websites. We have also deployed new products and services and third-party solutions to respond to an increasing volume of data privacy requests. However, these upgrades and expansion in our technical capabilities are costly and complex and could result in inefficiencies or operational failures which could damage our reputation and cause us to lose current and potential users and clients and harm our operating results.
Current wording
We are continuously upgrading our systems, procedures, processes, and controls to support our future operations as we adjust our business priorities. We have made significant investments and reallocated valuable management resources to support these upgrades. This includes substantial costs for secure hosting services, additional technical support, expanding data storage, and upgrading our technology and network infrastructure to accommodate the traffic on our O&O Sites and the growing user interactions with Commerce Media Solutions. These interactions increase with each new media partner and higher user session volume. We have also deployed new products, services, and third-party solutions addressing the rising volume of data privacy requests. However, these upgrades and expansions are both costly and complex and could result in inefficiencies or operational challenges that could damage our reputation, result in the loss of current and potential users and clients, and/or harm our operating results.
Previous wording
In the future, we directly or through our third-party provided information technology systems or software may incorporate artificial intelligence ("AI") capabilities into our business. As with many innovations, 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 systems could subject us to competitive harm, regulatory action, legal liability, and brand or reputational harm.
Current wording
We have now begun to incorporate AI capabilities into our business, either directly or through third-party provided information technology systems or software. As 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.
Previous wording
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 those resulting from such events, or the prospect of such events, including 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 United States or elsewhere. Such events or factors could decrease the spending of our existing and potential new customers, adversely affect demand for our products, cause one or more of our customers, vendors, and partners to file for bankruptcy protection or go out of business, impact expected spending and pricing levels from existing and potential new customers, and negatively impact collections of accounts receivable.
Current wording
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, the Federal Reserve may further raise the Federal Funds Rate. These rate increases, coupled with reduced consumer confidence, result in uncertainty, and may cause our customers and/or clients to be cautious in their ad spending.
Previous wording
The expansion of our international operations subjects us to increased challenges and risks.
Current wording
Our international operations subject us to increased challenges and risks.
Previous wording
We have website offerings beyond the U.S., in the United Kingdom (the "UK"), Canada, and Australia, and we may expand further into additional countries. 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, such as the Foreign Corrupt Practices Act; 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. Currently, we operate our owned-and-operated websites in the UK, Canada, and Australia from servers in the Cloud and in the U.S., which may lead to latency in the performance of our websites located outside the U.S., diminishing their performance.
Current wording
We currently operate our O&O Sites in the U.S., UK, Canada, and Australia from servers in the Cloud. We plan to expand our Commerce Media Solutions internationally as well and may 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.
Previous wording
Our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, legal and regulatory systems, taxation regimes, and commercial infrastructures. If our revenue from our international operations does not exceed the expense of establishing and maintaining these operations, our business and operating results could suffer, and we may decide to make changes to our business or exit certain jurisdictions to mitigate losses. If we are unable to successfully manage the risks and costs associated with international operations, our business and/or results of operations could be adversely affected.
Current wording
Our ability to manage our business and conduct our operations internationally requires considerable management attention and resources and is subject to the challenges of supporting a growing business in an environment of multiple languages, cultures, legal and regulatory systems, taxation regimes, and commercial infrastructures. If our revenue from our international operations does not exceed the expense of establishing and maintaining these operations, our business and operating results could suffer, and we may decide to make changes to our business or exit certain countries to mitigate losses. If we are unable to successfully manage the risks and costs associated with international operations, our business and/or results of operations could be adversely affected.
Previous wording
Acquisitions, investments, and divestitures could complicate operations, or could result in other harmful consequences that may adversely impact our business and results of operations.
Current wording
Our evaluation of strategic alternatives could complicate operations, or could result in other harmful consequences that may adversely impact our business and results of operations.
Previous wording
Acquisitions have historically been, and continue to be, an important element of our overall corporate strategy and use of capital. 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.
Current wording
Acquisitions have historically been an important element of our overall corporate strategy and use of capital. However, we have experienced mixed results from these acquisitions and have recently divested a few underperforming assets, while considering divesting others. 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.
Previous wording
The process of evaluating strategic alternatives involves a number of risks and uncertainties and may distract management from our other businesses or result in significant expenses. Moreover, we may invest significant resources towards evaluating and negotiating strategic alternatives that do not ultimately result in a strategic transaction. The success of our acquisitions and other investments will depend in part on our ability to successfully integrate and leverage them to enhance our existing products and services or develop compelling new ones. It may take longer than expected to realize the full benefits from these acquisitions or investments, such as increased revenue, enhanced efficiencies, or increased market share, or the benefits may ultimately be smaller than we expected. Our failure to address these risks or other problems encountered in connection with our acquisitions and investments could cause us to fail to realize the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities and harm our business generally.
Current wording
The process of evaluating strategic alternatives involves a number of risks and uncertainties and may distract management from our other businesses or result in significant expenses. Moreover, we may invest significant resources towards evaluating and negotiating strategic alternatives that do not ultimately result in a strategic transaction. The success of our investments will depend in part on our ability to successfully integrate and leverage them to enhance our existing products and services or develop compelling new ones. It may take longer than expected to realize the full benefits from these transactions, or the benefits may ultimately be smaller than we expected because of performance and/or market conditions. Our failure to address these risks or other problems encountered in connection with any strategic alternatives could cause us to incur unanticipated liabilities and harm our business generally.
Previous wording
Our future success depends, in part, on our ability to attract and retain key personnel, including Donald Patrick, our Chief Executive Officer, Ryan Schulke, our Chief Strategy Officer, and Matthew Conlin, our Chief Customer Officer. It also depends upon our ability to hire and retain highly skilled managerial, technical, and operational personnel in all areas of our organization, each of whom is important to the management of certain aspects of our business and operations and the development of our strategic direction and may be difficult to replace. The loss of the services of these key individuals and the process to replace these individuals could involve significant time and expense and could significantly delay or prevent the achievement of our business objectives.
Current wording
Our future success depends, in part, on our ability to attract and retain key personnel, including our Chief Executive Officer, Chief Financial Officer, Chief Strategy Officer, and Chief Customer Officer. It also depends upon our ability to hire and retain highly skilled managerial, technical, and operational personnel in all areas of our organization, each of whom is important to the management of certain aspects of our business and operations and the development of our strategic direction and may be difficult to replace. The loss of the services of these key individuals and the process to replace these individuals could involve significant time and expense and could significantly delay or prevent the achievement of our business objectives.
Previous wording
We are dependent upon third-party service providers in our operationsand may be adversely affected if any of their platforms malfunction.
Current wording
We are dependent upon third-party service providers in our operations and may be adversely affected if any of their platforms malfunction.
Previous wording
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 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. 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. 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. 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.
Current wording
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.
Previous wording
We, our third-party publishers', and our clients' businesses operate in highly regulated industries, subject to many laws and regulatory requirements, including federal, state, and local laws and regulations regarding telemarketing. Many of these laws and regulations are frequently changing and can be subject to vagaries of interpretation, and the extent and evolution of future government regulation is uncertain. Keeping our business in compliance or bringing our business into compliance with new laws and regulations, therefore, may be costly, affect our revenue and harm our financial results.
Current wording
We, our third-party publishers', and our clients' businesses operate in highly regulated industries, subject to many federal, state, and local laws and regulations regarding telemarketing and other consumer media channels. In addition to the TCPA and "mini TCPAs" of various states, we are subject 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. As discussed above, for example, the future of the Proposed FCC Rules is currently in flux, and that level of uncertainty makes long-term planning extremely difficult. Keeping our business in compliance with new laws and regulations, therefore, may be costly, affect our ability to generate revenue and harm our financial results.
Previous wording
We may also face liability for any failure of our third-party publishers, strategic partners, or vendors to comply with legal and regulatory requirements. Users or clients may complain about the content of publisher ads or the methods by which ads are delivered by third-party publishers, who may use unapproved marketing channels, such as text messaging, to drive users to our sites, which may expose us to liability under the TCPA and other laws regulating telemarketing and text messaging.
Current wording
We may also face liability for any failure of our third-party publishers, strategic partners, or vendors to comply with legal and regulatory requirements. The FTC Consent Order (as defined herein) requires us to monitor and discipline our publishers. Users or clients may raise concerns about the content of publisher ads or the methods used by third-party publishers to deliver ads. These publishers might use unapproved creative or marketing channels, such as text messaging, to drive users to our sites, potentially exposing us to liability under the TCPA and other laws regulating advertising, telemarketing, and text messaging. If we are unable to cause our third-party publishers and strategic partners to monitor their affiliates and enforce our clients’ contractual restrictions on such affiliates, our clients may terminate their relationships with us or decrease their marketing budgets with us.
Previous wording
If we are unable to cause our third-party publishers and strategic partners to monitor and enforce our clients’ contractual restrictions on such affiliates, our clients may terminate their relationships with us or decrease their marketing budgets with us. In addition, we may also face liability for any failure of our third-party publishers, strategic partners, vendors, or their respective affiliates to comply with regulatory requirements. The law is unsettled on the extent of liability that an advertiser in our position has for the activities of third-party publishers, strategic partners, or vendors. In addition, certain of our contracts impose liability on us, including indemnification obligations, for the acts of our third-party publishers, strategic partners, or vendors. Despite our efforts to monitor and deter unauthorized or unlawful actions by these third-party publishers, and to contractually limit our liability in such instances, we may be held responsible for this behavior. As a result, we could be subject to costly litigation and, if we are unsuccessful in defending ourselves, could incur damages for the unauthorized or unlawful acts of third-party publishers, strategic partners, or vendors.
Current wording
Many of our contracts also expose us to liability, including indemnification obligations, for the acts of our third-party publishers or vendors. Despite our efforts to monitor and deter unauthorized or unlawful actions by these third-party publishers, and to contractually limit our liability in such instances, we may be held responsible for this behavior. As a result, we could be subject to costly litigation and, if we are unsuccessful in defending ourselves, could incur damages for the unauthorized or unlawful acts of third-party publishers, strategic partners, or vendors.
Previous wording
We operate internal email campaigns to promote our owned and operated websites and utilize third party publishers who use email to generate traffic for our websites and to promote our advertisers' products. As a result of these activities, we and our email publishers are subject to various state and federal laws regulating commercial email communications, including the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act of 2003 and the California Business and Professions Code Sec. 17529.5. If we or any of our third-party publishers fail to comply with any provisions of these laws or regulations, we could be subject to regulatory investigation, enforcement actions, litigation, or claims. In addition, the FTC Consent Order requires us to obtain "affirmative express consent" for e-mail marketing, a more stringent level of consent than is required of other companies in our industry. This may inhibit our ability to cost- effectively generate email data for our clients.
Current wording
We operate internal email campaigns to promote our O&O Sites and utilize third party publishers who use email to generate traffic for our O&O Sites and to promote our advertisers' products. As discussed above, we are subject to CAN-SPAM and the California Business and Professions Code Sec. 17529.5 on our domestic email marketing activities. In addition, the FTC Consent Order (as defined herein) required us to obtain "affirmative express consent" for e-mail marketing, a more stringent level of consent similar to the consent required under the existing TCPA. Our competitors are not subject to this enhanced consent requirement and we may not be able to cost-effectively generate email data for our clients.
Previous wording
The outcome of litigation, inquiries, investigations, examinations, or other legal proceedings in which we are involved, in which we may become involved, or in which our clients or competitors are involved could distract management, increase our expenses, or subject us to significant monetary damages or restrictions on our ability to do business.
Current wording
The outcome of litigation, inquiries, investigations, examinations, or other legal proceedings in which we are or may become involved, or in which our clients or competitors are involved, could distract management, increase our expenses, or subject us to significant monetary damages or restrictions on our ability to do business.
Previous wording
Regardless of whether any current or future claims in which we are involved have merit, or whether we are ultimately held liable or subject to payment of penalties or consumer redress, such investigations and claims have been and may continue to be expensive to defend, may divert management's time away from our operations and may result in changes to our business practices that adversely affect our results of operations.
Current wording
There may also be adverse publicity and uncertainty associated with investigations, litigation, and orders (whether pertaining to us, our clients, or our competitors) that could impact our ability to buy media and source advertisers and/or diminish consumers' view of our services. Regardless of whether any current or future claims in which we are involved have merit, or whether we are ultimately held liable or subject to payment of penalties or consumer redress, such investigations and claims have been and may continue to be expensive to defend, may divert management's time away from our operations and may result in changes to our business practices that adversely affect our results of operations.
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Current report — wording carried from elsewhere
Risks Related to Our Financial Position
Current report — wording carried from elsewhere
Such events or factors could decrease the spending of our existing and potential new customers, adversely affect demand for our products, cause one or more of our customers, vendors, and partners to file for bankruptcy, impact expected spending and pricing levels from existing and potential new customers, or negatively impact our collections of accounts receivable. The full extent to which these factors may negatively affect our business and operations, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and cannot be predicted.
Current report — wording carried from elsewhere
Currently, we are a "smaller reporting company," meaning that our outstanding common stock held by nonaffiliates had a value of less than $250 million at the end of our most recently completed second fiscal quarter. We are also a non-accelerated filer because we had a public float of less than $75 million as of the last business day of our most recently completed second quarter. As a non-accelerated filer, we are not required to comply with the auditor attestation requirements of Section 404 of the** **Sarbanes-Oxley Act, meaning our auditors are not required to attest to the effectiveness of our internal control over financial reporting.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Risks Related to Our Owned and Operated Media Properties
Previous report — wording carried elsewhere
Additionally, the Federal Reserve may further raise the Federal Funds Rate. These rate increases, coupled with a strong labor market and reduced consumer confidence, result in uncertainty, and may cause our customers and/or clients to be cautious in their ad spending.
Previous report — wording carried elsewhere
Risks Relating to Data Security and Intellectual Property
Previous report — wording carried elsewhere
Risks Related to Our Common Stock and the Securities Markets