Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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

Overview

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

We access these consumers through both our commerce media solutions marketplace ("Commerce Media Solutions"), and our owned and operated digital media properties ("O&O Sites"). Since the beginning of 2024, we have delivered data and performance-based customer acquisition services for over 400 consumer brands, direct marketers, and agencies across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment.

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

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

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

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

Additionally, we operate a call center-supported performance marketplace ("Call Solutions") that provides live, call-based performance campaigns to help clients increase engagement. The Call Solutions business serves clients across an array of industries but has had a heavy focus on the health insurance sector.

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

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

Third Quarter Financial Summary

Three months ended September 30, 2025, compared to three months ended September 30, 2024:

•	Revenue decreased 27% to $47.0 million, compared to $64.5 million
•	Net loss was $7.6 million, or $0.27 per share, compared to net loss of $7.9 million or $0.48 per share
•	Gross profit (exclusive of depreciation and amortization) decreased 31% to $10.9 million, representing 23% of revenue for the three months ended September 30, 2025, from $15.7 million, representing 24% of revenue for the three months ended September 30, 2024
•	Media margin decreased 30% to $12.8 million, representing 27% of revenue for the three months ended September 30, 2025, from $18.2 million, representing 28% of revenue for the three months ended September 30, 2024
•	Adjusted EBITDA was negative $3.4 million, compared to negative $0.1 million
•	Adjusted net loss was $6.5 million, or $0.23 per share, compared to $3.7 million, or $0.22 per share

Nine months ended September 30, 2025, compared to nine months ended September 30, 2024:

•	Revenue decreased 22% to $146.9 million, compared to $189.2 million
•	Net loss was $23.0 million, or $0.94 per share, compared to net loss of $25.8 million or $1.75 per share
•	Gross profit (exclusive of depreciation and amortization) decreased 31% to $32.6 million, representing 22% of revenue for the nine months ended September 30, 2025, from $46.9 million, representing 25% of revenue for the nine months ended September 30, 2024
•	Media margin decreased 31% to $38.5 million, representing 26% of revenue for the nine months ended September 30, 2025, from $56.0 million, representing 30% of revenue for the nine months ended September 30, 2024
•	Adjusted EBITDA was negative $9.2 million, compared to negative $3.9 million
•	Adjusted net loss was $19.0 million, or $0.78 per share, compared to $15.2 million, or $1.03 per share

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

Trends Affecting our Business

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

Our legacy O&O Sites business depends on identifying and accessing high quality media sources and on our ability to attract targeted users to our offers. As our business grew, we attracted larger and more sophisticated advertiser clients to our marketplaces. To further increase our value proposition to clients and to fortify our leadership position in the evolving regulatory landscape of our industry, we implemented a Traffic Quality Initiative ("TQI") in 2020 and established our Commerce Media Solutions business in 2023 to access more high-value consumers. Sourcing high quality traffic will remain a focus and part of a broader initiative to improve customer acquisition for our clients.

Additionally, we have pursued strategic initiatives that enable us to grow revenue per consumer with existing user traffic volume by attracting users to our O&O Sites using email and SMS messages. We have also focused on improved monetization of consumer traffic through improved customer relationship management that allows us to re-engage consumers who have registered on our O&O Sites. Through these initiatives, our business has become less dependent on the volume of users to generate revenue growth.

We believe that significant value has been, and will continue to be, created by improving the quality of consumers driven to our advertiser clients' offers. Better quality users lead to increased user participation rates and higher conversion rates for our clients, resulting in increased monetization, and ultimately increased revenue and media margin per consumer. Media margin, a non-GAAP measure, is the portion of gross profit (exclusive of depreciation and amortization) reflecting variable costs paid for media and related expenses and excluding non-media cost of revenue.

Since 2022, however, we have experienced challenges acquiring and maintaining traffic volume to our O&O Sites, primarily due to the Federal Trade Commission ("FTC") inquiry and resulting Joint Motion for Entry of Proposed Stipulated Order (the "FTC Consent Order") that mandated that we tighten our standards for ad serving media sourcing. This put us at a competitive disadvantage to our competitors in the performance marketing market. Other factors that affected our traffic volume have included the volatility and attrition of affiliate supply sources, changes in search engine algorithms, social media pricing and policies, and email and text message blocking algorithms. In response to these challenges, we have invested in strategic and internal efforts to secure additional traffic from the growing influencer sector and to expand our media network beyond our O&O Sites. However, these efforts have not fully offset the decrease in revenue to our O&O Sites and increasing costs for acquiring that traffic, and as a result we have seen lower revenue and lower gross profit in our owned and operated business.

In 2023, we launched our Commerce Media Solutions business to access additional high-value consumers for our advertiser clients and help media owners and ecommerce businesses generate additional revenue from their existing consumer traffic. Fluent's Commerce Media Solutions embeds proprietary ad-serving technology in the post-action and post-transaction inventory on partner sites and mobile apps across a range of industries, including retail, ticketing, and quick-service restaurants. In 2024, we served ads to over 100 million consumers in the post-action and post-transaction moment for top-tier publishers and brands. These consumers are the highest intent consumers and drive significantly higher ROAS for our advertiser clients than those from our O&O Sites. Because Commerce Media Solutions does not require us to source traffic to partner sites, it is not subject to the sourcing challenges that resulted from the FTC Consent Order. The mix and profitability of our media channels, strategies, and partners is likely to continue to be dynamic and reflect evolving market trends and the regulatory environment.

Trends & Seasonality

We deliver data and performance-based marketing executions to our clients across a wide range of industries, including Media & Entertainment, Financial Products & Services, Health & Life Sciences, Retail & Consumer, and Staffing & Recruitment. In 2024 and the first nine months of 2025, both data and performance-based spend were challenged by general economic uncertainty, but revenue declined largely due to media supply challenges in our O&O Sites, an ongoing effect of the FTC Consent Order on our owned and operated business, and declines related to the divestiture of the Company's subscription business in May 2024 and the discontinuation of our Affordable Care Act business in September 2024. For the full year ending December 31, 2025, we expect that the growth of our Commerce Media Solutions business will partially offset the aforementioned year-over-year revenue decline in our O&O Sites divested subscription business and discontinued Affordable Care Act business.

We continue to work with advertiser clients to define high performing consumer segments on both our O&O Sites and Commerce Media Solutions and strategically price paid conversions accordingly. This initiative has helped clients drive higher ROAS and has driven increased spend from clients across the Media & Entertainment industry, which represents a large component of our revenue mix.

Our performance is subject to fluctuations related to seasonality and cyclicality in our clients' businesses and in media sources. Specifically, our retail-specific media partners in our Commerce Media Solutions experience high seasonality based on fourth quarter consumer spending and our Call Solutions business benefits from Medicare open enrollment periods in the first and fourth quarters. Other factors affecting our business may include macroeconomic conditions that impact the digital advertising industry, the various client verticals we serve, and general market conditions.

While we were not directly impacted by the changes to U.S. tariff and trade policies, the third quarter of 2025 was characterized by continued media supply uncertainty in the O&O Sites marketplaces that has depressed gross profit in recent quarters. To confront these headwinds, we have made continued progress in driving the adoption of Commerce Media Solutions among enterprise media partners during the current quarter and anticipate securing additional long-term contracts as the market continues to expand. We observed an expansion in gross margin for Commerce Media Solutions in the third quarter of 2025 after experiencing contractions in each of the first and second quarters of 2025 as we ventured into placements beyond post-transaction and offered early-term contract incentives on some longer-term contracts. The expansion of margin was driven by improved monetization of newer placements, and we expect that as we continue to move beyond early-term incentives, gross margin will improve in Commerce Media Solutions and lift consolidated gross margin over time. We also continue to develop our ROAS program across additional segments of advertisers in an effort to gain additional allocations and pricing increases to help further improve our user monetization. While we do believe that a prolonged period of economic downturn could negatively influence both our advertiser spend and our commerce media traffic volumes, conversely, we believe it would drive accelerated media partner adoption of our Commerce Media Solutions.

Business Practices & Compliance

We have continued to be affected by uncertain economic conditions and the impacts of the FTC Consent Order (as described in Note 10, Contingencies, in the notes to the consolidated financial statements) on our O&O Sites and programmatic advertising business. The industry-leading compliance measures we implemented on our O&O Sites in response to such FTC Consent Order continue to negatively impact our revenues and gross profit.

Current Economic Conditions

We are subject to risks and uncertainties caused by events with significant macroeconomic impacts. Inflation, rising interest rates, the U.S. government shutdown, recently imposed tariffs, and reduced consumer confidence have caused our clients and their customers to be cautious in their spending. The full impact of these macroeconomic events and the extent to which these macro factors may impact our business, financial condition, and results of operations in the future remains uncertain. Considering the uncertain macroeconomic environment, we continue to prioritize strategic investments that have near-term benefits to revenue while also streamlining our organization through cost saving initiatives.

Please see Item 1A. Risk Factors in the 2024 Form 10-K -"Economic or political instability could adversely affect our business, financial condition, and results of operations," and "We are exposed to credit risks from our clients, and we may not be able to collect on amounts owed to us" for further discussion of the possible impact of unfavorable conditions on our business.

Definitions, Reconciliations and Uses of Non-GAAP Financial Measures

We report the following non-GAAP measures:

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

Adjusted EBITDA is defined as net income (loss), excluding (1) income taxes, (2) interest expense, net, (3) depreciation and amortization, (4) share-based compensation expense, (5) loss on early extinguishment of debt, (6) goodwill impairment, (7) impairment of intangible assets, (8) fair value adjustment of Convertible Notes with related parties (see Note 4, Long-term debt, net), (9) acquisition-related costs, (10) restructuring and other severance costs, and (11) certain litigation and other related costs.

Adjusted net income (loss) is defined as net income (loss), excluding (1) share-based compensation expense, (2) loss on early extinguishment of debt, (3) goodwill impairment, (4) impairment of intangible assets, (5) fair value adjustment of Convertible Notes with related parties, (6) acquisition-related costs, (7) restructuring and other severance costs, and (8) certain litigation and other related costs. Adjusted net income (loss) is also presented on a per share (basic and diluted) basis.

Below is a reconciliation of media margin from gross profit (exclusive of depreciation and amortization) for the three and nine months ended September 30, 2025 and 2024, which we believe is the most directly comparable U.S. GAAP measure:

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands, except percentages)		2025				2024				2025				2024
Revenue		$	47,029			$	64,516			$	146,945			$	189,216
Less: Cost of revenue (exclusive of depreciation and amortization)			36,155				48,861				114,356				142,318
Gross profit (exclusive of depreciation and amortization)		$	10,874			$	15,655			$	32,589			$	46,898
Gross profit (exclusive of depreciation and amortization) % of revenue			23	%			24	%			22	%			25	%
Non-media cost of revenue(1)			1,923				2,505				5,882				9,066
Media margin		$	12,797			$	18,160			$	38,471			$	55,964
Media margin % of revenue			27	%			28	%			26	%			30	%

(1)	Represents the portion of cost of revenue (exclusive of depreciation and amortization) not attributable to variable costs paid for media and related expenses.

Below is a reconciliation of adjusted EBITDA from net loss for the three and nine months ended September 30, 2025 and 2024, which we believe is the most directly comparable U.S. GAAP measure:

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands)		2025				2024				2025				2024
Net loss		$	(7,556	)		$	(7,944	)		$	(23,048	)		$	(25,847	)
Income tax (benefit) expense			(12	)			(35	)			114				98
Interest expense, net			711				1,281				2,293				3,711
Depreciation and amortization			2,478				2,369				7,418				7,507
Share-based compensation expense			478				460				1,144				1,490
Loss on early extinguishment of debt			-				-				-				1,009
Goodwill impairment			-				-				-				1,261
Impairment of intangible assets			-				-				-				980
Loss (gain) on disposal of property and equipment			-				-				-				-
Fair value adjustment of Convertible Notes with related parties			554				2,810				156				2,810
Acquisition-related costs(1)			(20	)			443				1,074				1,250
Restructuring and other severance costs			-				545				1,325				1,821
Certain litigation and other related costs			-				-				300				-
Adjusted EBITDA		$	(3,367	)		$	(71	)		$	(9,224	)		$	(3,910	)

(1)

Balance includes write-off of intangibles and prepaid expense related to the write-off of TAPP Influencers Corp. ("TAPP") in May 2025 (refer to Note 11, Variable interest entity in the notes to our consolidated financial statements included in this Form 10-Q) in the amount of $698 for the nine months ended September 30, 2025. Balance also includes compensation expense related to non-compete agreements and earn-out expense incurred as a result of business combinations; earn-out expenses were in the amount of ($20) and $30 for the three months ended September 30, 2025 and 2024, respectively, and ($148) and $167 for the nine months ended September 30, 2025 and 2024, respectively, while non-compete agreements were in the amount of $0 and $413 for the three months ended September 30, 2025 and 2024, respectively, and $412 and $1,238 for the nine months ended September 30, 2025 and 2024, respectively; there were other amounts of acquisition-related costs of $112 and ($155) for the nine months ended September 30, 2025 and 2024, respectively.

Below is a reconciliation of adjusted net loss and adjusted net loss per share from net loss for the three and nine months ended September 30, 2025 and 2024, which we believe is the most directly comparable U.S. GAAP measure.

		Three Months Ended September 30,								Nine Months Ended September 30,
(In thousands, except share and per share data)		2025				2024				2025				2024
Net loss		$	(7,556	)		$	(7,944	)		$	(23,048	)		$	(25,847	)
Share-based compensation expense			478				460				1,144				1,490
Loss on early extinguishment of debt			-				-				-				1,009
Goodwill impairment			-				-				-				1,261
Impairment of intangible assets			-				-				-				980
Fair value adjustment of Convertible Notes with related parties			554				2,810				156				2,810
Acquisition-related costs(1)			(20	)			443				1,074				1,250
Restructuring and other severance costs			-				545				1,325				1,821
Certain litigation and other related costs			-				-				300				-
Adjusted net loss		$	(6,544	)		$	(3,686	)		$	(19,049	)		$	(15,226	)
Adjusted net loss per share:
Basic		$	(0.23	)		$	(0.22	)		$	(0.78	)		$	(1.03	)
Diluted		$	(0.23	)		$	(0.22	)		$	(0.78	)		$	(1.03	)
Weighted average number of shares outstanding:
Basic			28,097,016				16,452,273				24,497,510				14,783,253
Diluted			28,097,016				16,452,273				24,497,510				14,783,253

(1)

Balance includes write-off of intangibles and prepaid expense related to the write-off of TAPP Influencers Corp. ("TAPP") in May 2025 (refer to Note 11, Variable interest entity in the notes to our consolidated financial statements included in this Form 10-Q) in the amount of $698 for the nine months ended September 30, 2025. Balance also includes compensation expense related to non-compete agreements and earn-out expense incurred as a result of business combinations; earn-out expenses were in the amount of ($20) and $30 for the three months ended September 30, 2025 and 2024, respectively, and ($148) and $167 for the nine months ended September 30, 2025 and 2024, respectively, while non-compete agreements were in the amount of $0 and $413 for the three months ended September 30, 2025 and 2024, respectively, and $412 and $1,238 for the nine months ended September 30, 2025 and 2024, respectively; there were other amounts of acquisition-related costs of $112 and ($155) for the nine months ended September 30, 2025 and 2024, respectively.

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

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

Adjusted EBITDA, as defined above, is another primary metric by which we evaluate the operating performance of our business, on which certain operating expenditures and internal budgets are based and by which, in addition to media margin and other factors, our senior management is compensated. The first three adjustments represent the conventional definition of EBITDA, and the remaining adjustments are items recognized and recorded under U.S. GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded. These adjustments include certain litigation and other related costs associated with legal matters outside the ordinary course of business, including costs and accruals related to matters as described below (see Note 10, Contingencies, in the notes to the consolidated financial statements). We consider items one-time in nature if they are non-recurring, infrequent, or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules.

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

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

Comparison of Our Results of Operations for the Three and Nine Months Ended September 30, 2025 and 2024

Revenue

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Revenue		$	47,029			$	64,516				(27	%)		$	146,945			$	189,216				(22	%)

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

For the three months ended September 30, 2025 and 2024, revenue was comprised of O&O Sites of $20.7 million and $43.5 million, Commerce Media Solutions of $18.8 million and $10.4 million, and other streams of $7.5 million and $10.6 million, respectively. The decrease in O&O Sites revenue was primarily attributable to a decrease in media supply resulting from business practices enacted to comply with the FTC Consent Order that challenge our ability to maintain consistent volume on social media platforms. The decline in traffic drove a reduction in ad spend from key clients in the Media & Entertainment and Staffing & Recruitment sectors. Partially offsetting that decline, our Commerce Media Solutions business continued to add long-term contracts with new media partners which increased revenue from advertiser clients in the Media & Entertainment and Financial Products & Services sectors. Within our other streams, we experienced a decrease related to the Call Solutions business primarily due to shift in the business's supply sourcing strategy and the cessation of our Affordable Care Act ("ACA") business in the third quarter of 2024.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

For the nine months ended September 30, 2025 and 2024, revenue was comprised of O&O Sites of $73.2 million and $130.2 million, Commerce Media Solutions of $47.5 million and $24.0 million, and other streams of $26.2 million and $35.0 million, respectively. The decrease in O&O Sites revenue was primarily attributable to a decrease in media supply resulting from business practices enacted to comply with the FTC Consent Order that challenge our ability to maintain consistent volume on social media platforms. The decline in traffic drove a reduction in ad spend from key clients in the Media & Entertainment and Staffing & Recruitment sectors. Partially offsetting that decline, our Commerce Media Solutions business continued to add long-term contracts with new media partners which increased revenue from advertiser clients in the Media & Entertainment, Retail & Consumer, and Financial Products & Services sectors. Within our other streams, we experienced a decrease related to the True North business we exited in the second quarter of 2024, the cessation of our ACA business in the third quarter of 2024 and the loss of a key retail customer of the AdParlor business in the third quarter of 2024.

Cost of revenue (exclusive of depreciation and amortization)

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Cost of revenue (exclusive of depreciation and amortization)		$	36,155			$	48,861				(26	%)		$	114,356			$	142,318				(20	%)

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

For the three months ended September 30, 2025 and 2024, cost of revenue (exclusive of depreciation and amortization) consisted mainly of O&O Sites media and related fulfillment costs of $16.7 million and $34.7 million, Commerce Media Solutions media and related costs of $14.7 million and $7.1 million, and media enablement and other indirect costs related to our other revenue streams of $4.8 million and $7.1 million, respectively. Our O&O Sites cost of revenue (exclusive of depreciation and amortization) primarily consists of media and related costs associated with acquiring traffic from third-party publishers, digital media platforms, and influencers for our O&O Sites, fulfillment costs related to rewards earned by consumers, and associated hosting costs. The decrease in O&O Sites media cost was largely attributable to the challenges in acquiring media related to business practices enacted to comply with the FTC Consent Order. Such costs increased as a percentage of revenue. Commerce Media Solutions cost of revenue consists of fees and revenue share payments made to media partners for ad inventory on their digital properties and associated hosting costs. Commerce Media Solutions media partners are generally remunerated on a per impression or revenue share basis, leading to higher and more predictable profitability. The increase in cost of revenue (exclusive of depreciation and amortization) in Commerce Media Solutions was driven by increased revenue share payments generated from impressions from new media partners added over the period. Cost of revenue (exclusive of depreciation and amortization) for Commerce Media Solutions increased as a percentage of revenue, due to the growth of certain lower margin commerce media placements and renegotiation of a key media partner agreement. The decrease in cost of revenue (exclusive of depreciation and amortization) for other revenue streams, including media costs, enablement costs and tracking costs related to our consumer data associated with our call centers, was attributable to a decreased cost of media related to the modified supply strategy for our Call Solutions business and the cessation of our ACA business in the third quarter of 2024. Cost of revenue (exclusive of depreciation and amortization) for other revenue streams decreased materially as a percentage of revenue largely related to the aforementioned exit from the ACA business.

For the three months ended September 30, 2025, the total cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue increased to 77% compared to 76% for the three months ended September 30, 2024. The increase was primarily driven by the aforementioned reasons and shifts in revenue mix related to the discontinuation of certain businesses in 2024.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

For the nine months ended September 30, 2025 and 2024, cost of revenue (exclusive of depreciation and amortization) consisted mainly of O&O Sites media and related fulfillment costs of $58.2 million and $103.2 million, Commerce Media Solutions media and related costs of $37.8 million and $17.0 million, and media enablement and other indirect costs related to our other revenue streams of $18.4 million and $22.1 million, respectively. The decrease in O&O Sites media cost was largely attributable to the challenges in acquiring media related to business practices enacted to comply with the FTC Consent Order. Such costs increased as a percentage of revenue. The increase in cost of revenue (exclusive of depreciation and amortization) in Commerce Media Solutions was driven by increased revenue share payments generated from impressions from new media partners added over the period. Cost of revenue (exclusive of depreciation and amortization) for Commerce Media Solutions increased as a percentage of revenue, due to the growth of certain lower margin commerce media placements and renegotiation of a key media partner agreement. The decrease in cost of revenue (exclusive of depreciation and amortization) for other revenue streams, including media costs, enablement costs, and tracking costs related to our consumer data associated with our call centers, was attributable to our exit from the True North business in the second quarter of 2024 and cessation of our ACA business in the third quarter of 2024, partly offset by an increase in the cost of acquiring media for our Call Solutions business in the first quarter of 2025 due to increased market demand in anticipation of regulations that were expected to go into effect during the quarter. Cost of revenue (exclusive of depreciation and amortization) for other revenue streams increased materially as a percentage of revenue.

For the nine months ended September 30, 2025, the total cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue increased to 78% compared to 75% for the nine months ended September 30, 2024. The increase was primarily driven by the aforementioned reasons and shifts in revenue mix related to the discontinuation of certain businesses in 2024.

In the normal course of executing paid media campaigns to source consumer traffic for our O&O Sites, we regularly evaluate new channels, strategies, and partners. For the nine months ended September 30, 2025, O&O Sites digital media spend continued to be a mix of affiliate traffic, paid media from major digital platforms, influencer activations, and inventory from strategic media partners. Traffic acquisition costs incurred with the major digital media platforms have historically been higher than affiliate traffic sources and the mix and profitability of our media channels, strategies, and partners reflect evolving market dynamics and the increased compliance obligations from the FTC Consent Order. As we evaluate and scale new media channels, strategies, and partners, we may determine that certain sources initially able to provide us profitable quality traffic may not be able to maintain our quality standards over time, and we may need to discontinue, or modify the practices of, such sources, which could reduce profitability further.

Although past levels of cost of revenue (exclusive of depreciation and amortization) as a percentage of revenue are not indicative of future percentages in the O&O Sites and Call Solutions businesses, we expect revenue share agreements in Commerce Media Solutions to create more gross margin stability in the long-term.

Sales and marketing

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Sales and marketing		$	3,513			$	3,983				(12	%)		$	10,801			$	13,400				(19	%)

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

For the three months ended September 30, 2025 and 2024, sales and marketing expenses consisted mainly of employee salaries and benefits of $2.7 million and $3.3 million, restructuring and severance costs of $0.1 million and $0.2 million, advertising costs of $0.3 million and $0.2 million, and professional fees of $0.2 million and $0.1 million, respectively. The decrease was primarily due to lower salaries and other employee-related costs driven by a decline in headcount, along with the decrease in restructuring and severance costs in the current year period.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

For the nine months ended September 30, 2025 and 2024, sales and marketing expenses consisted mainly of employee salaries and benefits of $8.4 million and $11.3 million, restructuring and severance costs of $0.5 million and $0.6 million, advertising costs of $0.8 million and $0.4 million, and professional fees of $0.4 million and $0.4 million, respectively. The decrease was primarily due to lower salaries and other employee-related costs driven by a decline in headcount, partly offset by an increase in advertising costs due to increased spend on conferences as the Company further invests in the growth of Commerce Media Solutions.

Product development

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Product development		$	2,623			$	4,124				(36	%)		$	8,962			$	13,681				(34	%)

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

For the three months ended September 30, 2025 and 2024, product development expenses consisted mainly of salaries and benefits of $1.9 million and $3.1 million, professional fees of $0.1 million and $0.4 million, software license and maintenance costs of $0.4 million and $0.3 million, and restructuring and severance costs of $0.1 million and $0.1 million, respectively. The decrease was primarily due to a decline in salaries driven by lower headcount and lower spend on IT-related vendors, along with the decrease in restructuring and severance costs in the current year period due to the timing of the reductions in product development workforce.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

For the nine months ended September 30, 2025 and 2024, product development expenses consisted mainly of salaries and benefits of $6.2 million and $9.8 million, professional fees of $1.0 million and $1.4 million, software license and maintenance costs of $1.1 million and $1.2 million, and restructuring and severance costs of $0.2 million and $0.7 million, respectively. The decrease was primarily due to a decline in salaries driven by lower headcount and lower spend on IT-related vendors, along with the decrease in restructuring and severance costs in the current year period due to the timing of the reductions in product development workforce.

General and administrative

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
General and administrative		$	8,563			$	9,067				(6	%)		$	25,893			$	28,288				(8	%)

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

For the three months ended September 30, 2025 and 2024, general and administrative expenses consisted mainly of employee salaries and benefits of $3.6 million and $3.9 million, professional fees of $2.2 million and $1.5 million, office overhead of $0.7 million and $1.1 million, software license and maintenance costs of $0.8 million and $0.8 million, restructuring and severance costs of $0.5 million and $0.2 million, non-cash share-based compensation expense of $0.3 million and $0.4 million, provision for bad debt of $0.0 million and $0.3 million, and acquisition-related costs of $0.0 million and $0.4 million, respectively. General and administrative expenses decreased primarily due to lower provision for bad debt, lower office overhead and lower acquisition related costs, partially offset by higher professional fees due to higher restructuring and severance costs.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

For the nine months ended September 30, 2025 and 2024, general and administrative expenses consisted mainly of employee salaries and benefits of $10.6 million and $12.8 million, professional fees of $4.9 million and $4.9 million, office overhead of $2.9 million and $3.1 million, software license and maintenance costs of $2.4 million and $2.3 million, restructuring and severance costs of $1.3 million and $0.6 million, non-cash share-based compensation expense of $0.8 million and $1.1 million, acquisition-related costs of $1.1 million and $1.2 million, provision for bad debt of $0.0 and $0.4 million, and certain litigation and related costs of $0.3 million and $0.0 million, respectively. General and administrative expenses decreased primarily due to lower salary and benefits from reduced headcount, lower provision for bad debt, and decreased share-based compensation from fewer grants. This was partially offset by higher restructuring and severance costs due to timing of the reduction in workforce, as described below, and higher litigation and related costs incurred in the current period.

In each of the first three quarters of 2024 and the first quarter of 2025, we reduced our workforce by 20, 19, 29, and 24 employees, respectively, to better align resources with our strategic initiatives. In connection with the first quarter 2024 reductions, we incurred $0.7 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, fully settled in cash by September 30, 2024. In connection with the second quarter 2024 reductions, we incurred $0.6 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, fully settled in cash by December 31, 2024. In connection with the third quarter 2024 reductions, we incurred $0.5 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, fully settled in cash by March 15, 2025. In connection with the first quarter of 2025 reductions, we incurred $1.3 million in exit-related restructuring costs, consisting primarily of one-time termination benefits and associated costs, to be fully settled in cash by March 31, 2026. Apart from these exit-related restructuring costs, these reductions in workforce have resulted in corresponding reductions in future salary and benefits within sales and marketing, product development, and general and administrative expenses.

Depreciation and amortization

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Depreciation and amortization		$	2,478			$	2,369				5	%		$	7,418			$	7,507				(1	%)

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

Depreciation and amortization costs were relatively consistent compared to the prior period.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

Depreciation and amortization costs were relatively consistent compared to the prior period.

Goodwill impairment and write-off of intangible assets

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Goodwill impairment and impairment of intangible assets		$	-			$	-				-			$	-			$	2,241				(100	%)

During the nine months ended September 30, 2024, we recognized a $1.3 million goodwill impairment related to the All Other reporting unit and a $1.0 million impairment of our software developed for internal use related to the Fluent reporting unit and customer relationships related to the All Other reporting unit, compared to no impairment in the 2025 periods.

Interest expense, net

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Interest expense, net		$	711			$	1,281				(44	%)		$	2,293			$	3,711				(38	%)

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

The decrease in interest expense was driven by lower average outstanding balances and lower interest rates on the SLR Credit Facility.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

The decrease in interest expense was driven by lower average outstanding balances and lower interest rates on the SLR Credit Facility.

Fair value adjustment of Convertible Notes with related parties

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Fair value adjustment of Convertible Notes with related parties		$	(554	)		$	(2,810	)			80	%		$	(156	)		$	(2,810	)			94	%

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

The Company recognized $ (554) and $ (2,810) for the three months ended September 30, 2025 and 2024, respectively, of an unrealized loss related to the fair value of Convertible Notes entered into in the prior period.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

The Company recognized $ (156) and $ (2,810) for the nine months ended September 30, 2025 and 2024, respectively, of an unrealized loss related to the fair value of Convertible Notes entered into in the prior period.

Loss on early extinguishment of debt

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Loss on early extinguishment of debt		$	-			$	-				-			$	-			$	1,009				(100	%)

In the nine months ended September 30, 2024, we recognized a $1.0 million loss on early extinguishment of debt related to the Citizens Bank credit agreement in the 2024 period, compared to no loss on debt extinguishment in the 2025 periods.

Loss before income taxes

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Loss before income taxes		$	(7,568	)		$	(7,979	)			5	%		$	(22,934	)		$	(25,749	)			11	%

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

The decrease in loss before income taxes of $0.4 million was primarily driven by the decrease in revenue of $17.5 million over the prior year period, offset by a decline in cost of revenue of $12.7 million, a decrease in operating expenses of $2.5 million, a decrease of $2.3 million unrealized loss for the fair value adjustment of the convertible notes and the decrease in interest expense of $0.6 million.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

The decrease in loss before income taxes of $2.8 million was primarily due to a decrease in revenue of $42.3 million over the prior year period offset by a decline in cost of revenue of $28.0 million, a decline in operating expenses of $9.9 million, along with a $2.6 million decline related to the unrealized loss for the fair value adjustment of the convertible notes, $2.2 million decline in impairment loss, $1.4 million decline in interest expense and a $1.0 million decline on the early extinguishment of debt.

Income tax benefit (expense)

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Income tax benefit (expense)		$	12			$	35				(66	%)		$	(114	)		$	(98	)			(16	%)

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

For the three months ended September 30, 2025, the effective income tax rate of 0.2% differed from the statutory federal income tax rate of 21%, primarily due to state and local tax expense and losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance. For the three months ended September 30, 2024, the Company's effective income tax rate of 0.4% differed from the statutory federal income tax rate of 21% primarily due to state and local tax expense and losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

For the nine months ended September 30, 2025 and 2024, the effective income tax rate of 0.5% and 0.4%, respectively, differed from the statutory federal income tax rate of 21%, primarily due to state and local tax expense and losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

As of September 30, 2025 and 2024, the Company recorded full valuation allowances against its net deferred tax assets. The Company intends to maintain full valuation allowances against the net deferred tax assets until there is sufficient evidence to support the release of all or some portion of such valuation allowances. Release of some or all of the valuation allowance would result in the recognition of certain deferred tax assets and an increase in deferred tax benefit for any period in which such a release may be recorded; however, the exact timing and amount of any valuation allowance release are subject to change, depending upon the level of profitability that the Company is able to achieve and the net deferred tax assets available.

Net loss

		Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)		2025				2024				% Change				2025				2024				% Change
Net loss		$	(7,556	)		$	(7,944	)			5	%		$	(23,048	)		$	(25,847	)			11	%

Three months ended September 30, 2025 compared to the three months ended September 30, 2024

For the three months ended September 30, 2025 and 2024, net loss was $7.6 million and $7.9 million, respectively, as a result of the foregoing.

Nine months ended September 30, 2025 compared to the nine months ended September 30, 2024

For the nine months ended September 30, 2025 and 2024, net loss was $23.0 million and $25.8 million, respectively, as a result of the foregoing.

Liquidity and Capital Resources

Cash used in operating activities. For the nine months ended September 30, 2025, net cash used in operating activities was $4.3 million, compared to net cash used in operating activities of $12.0 million for the nine months ended September 30, 2024. Net loss in the current year period of $23.0 million represents an improvement of $2.8 million, compared with net loss of $25.8 million in the prior period. Adjustments to reconcile net loss to net cash used in operating activities of $10.0 million in the current year period decreased by $6.4 million, compared with net cash used in operating activities of $16.4 million in the prior period, primarily due to a goodwill impairment of $1.3 million, impairment of intangible assets of $1.0 million, and a loss on early extinguishment of debt of $1.0 million in the prior period that did not occur in the current year period, a change in fair value adjustment of Convertible Notes with related parties of $2.7 million compared to the prior year period, and lower amortization of debt and share-based compensation expense in the current year period compared to prior year period, partially offset by a non-cash loss on asset write-off of $0.7 million in the current year period. Changes in assets and liabilities generated cash of $8.8 million in the current year period, compared with consuming cash of $2.5 million in the prior period, primarily due to ordinary-course changes in working capital, largely involving the timing of receipt of amounts owing from clients and disbursements of amounts payable to vendors.

Cash used in investing activities. For the nine months ended September 30, 2025 and 2024, net cash used in investing activities was $4.9 million and $4.7 million, respectively. The increase was primarily due to an increase in investment in capitalized software in the current year period.

Cash provided by financing activities. For the nine months ended September 30, 2025, net cash provided by financing activities was $8.4 million, compared to $8.7 million for the nine months ended September 30, 2024.

As of September 30, 2025, we had noncancelable operating lease commitments of $3.9 million and long-term debt with a $25.7 million principal balance.

As of September 30, 2025, we had cash, cash equivalents, and restricted cash of $10.0 million, a decrease of $0.7 million from $10.7 million as of December 31, 2024.

Going concern

Although the financial covenants under the SLR Credit Agreement were reset in the third quarter of 2025 based on the Company's twelve month projections, the Company has not met its projection for certain recent quarters. If during any future quarter the Company does not comply with any of its financial covenants, such non-compliance would result in default and therefore give SLR the right to accelerate maturities. In such case, the Company would not have sufficient funds to repay the borrowings under the SLR Credit Agreement. As a result of the foregoing, management has concluded that there is substantial doubt about the Company's ability to continue as a going concern for one year after the date of issuance of this Quarterly Report on Form 10-Q.

Workforce reductions and divestitures

Given the continued challenges we have faced achieving profitability, we have made reductions in workforce, including during the first quarter of 2025 and will continue to further consider cost reduction measures and focus resources on opportunities that will enable us to meet our projected budget and cash flow requirements. Additionally, we have restructured certain long-term contracts to better align with our results and needs. We will continue to review additional other business units to determine the impact of potential divestments.

Capital resources and cash requirements

Our sources of capital include cash on hand, cash from operations to the extent available and borrowings from the SLR Credit Facility (as defined below) to the extent available. We have no other committed sources of capital.

Our material cash requirements from known contractual and other obligations consist of our term loan and obligations under operating leases for office space. For more information regarding our SLR Credit Facility, refer to Note 4, Long-term debt, net, in the notes to our consolidated financial statements included in this Form 10-Q.

Our future cash requirements will depend on many factors, including changes in cash flows from our O&O Sites, employee-related expenditures, costs to support the growth in our client and partner accounts and continued client expansion of the Commerce Media Solutions business, and the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced solutions, features, and functionality. We may, in the future, enter into arrangements to acquire or invest in complementary businesses, services, technologies, and intellectual property rights. In order to finance such acquisitions or investments, it may be necessary for us to raise additional funds through public or private financings or draw upon our revolving facility. If we do not meet the conditions to draw, or additional financing is not accessible from outside sources, we may not be able to raise additional capital on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected.

SLR Credit Agreement

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"). We used a portion of the net proceeds of the SLR Credit Facility to repay our then-outstanding obligations under the Citizens Credit Agreement dated March 31, 2021, prior to its maturity. As of September 30, 2025, the SLR Credit Facility had an outstanding principal balance of $22.6 million (none of which related to the SLR Revolver) and matures on April 2, 2029 (the "Maturity Date").

The SLR Credit Facility is secured by substantially all of our assets and those of certain of our direct and indirect subsidiaries, including Fluent, LLC. 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 on 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, payment default, covenant default and judgment default.

We may voluntarily prepay the SLR 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 SLR Revolver 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 SLR Credit Facility 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 currently bear interest at a rate per annum equal to a 3-month term SOFR plus 0.26161%, subject to a 1.50% floor, plus 5.75% (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 opening interest rate of the SLR Credit Facility was 10.81% (SOFR + CSA + 5.25%), which changed to 10.18% (SOFR + CSA + 5.75%) as of September 30, 2025.

On March 10, 2025, we entered into the Fourth Amendment to the SLR Credit Agreement, which, among other things, required that we raise at least $5.0 million of additional capital by March 20, 2025. On March 19, 2025, we entered into securities purchase agreements with certain officers and/or directors and other existing stockholders of the Company, including our largest stockholder and an institutional investor, pursuant to which we raised gross proceeds of $5.1 million, before deducting offering expenses payable by us of $0.1 million. 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 August 15, 2025, we entered into the Fifth Amendment to the SLR Credit Agreement, which, among other things, required that we raise at least $8.5 million of additional capital by August 19, 2025. On August 19, 2025, we entered into securities purchase agreements for approximately $10.3 million in equity capital (see Note 7, Equity, in the notes to the consolidated financial statements). In addition, the Fifth Amendment waived non-compliance with the financial covenants as of June 30, 2025 and modified the financial covenants for the periods through August 31, 2026 (see Note 4, Long-term debt, net, in the notes to the consolidated financial statements).

As of September 30, 2025, we were in compliance with the financial covenants under the SLR Credit Agreement, as discussed above.

Sales of securities

On August 19, 2025, the Company issued (i) 3,542,856 shares of common stock, (ii) pre-funded warrants to purchase up to 2,328,571 shares of the Company's common stock, and (iii) common stock warrants to purchase up to 5,871,427 shares of the Company's common stock. The aggregate gross proceeds totaled $10.3 million before deducting offering expenses payable by the Company. See Note 7, Equity, in the notes to the consolidated financial statements.

Critical Accounting Estimates

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

Further details of the Company's accounting policies are available in Item 1, Financial Statements, Note 1, Summary of significant accounting policies, to the consolidated financial statements.

For additional information, please refer to our 2024 Form 10-K. There have been no additional material changes to Critical Accounting Estimates disclosed in the 2024 Form 10-K.

Recently issued and adopted accounting standards

See Note 1(b), "Recently issued and adopted accounting standards," in the notes to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.