Fluent, Inc. — 2015 Q2 Form 10-Q summary
Filing identity: The supplied filing is for IDI, Inc., formerly Tiger Media, Inc.; it does not identify Fluent, Inc. as the registrant. Verify that this is the intended filing. The quarter ended June 30, 2015. Amounts below are in thousands of dollars unless noted. No prior-year comparative results are presented, and the merger accounting makes period-to-period comparisons difficult.
Business context and reporting period
IDI’s continuing business provides data analytics and data-fusion services, principally for risk management applications. Following its March 21, 2015 merger with TBO, IDI Holdings was the accounting acquirer. On June 30, the board approved discontinuing the China-focused advertising business and reporting it as discontinued operations, to concentrate resources on data fusion.
Financial results and liquidity
| Metric | Three months ended June 30, 2015 | Six months ended June 30, 2015 |
|---|---|---|
| Data-fusion revenue | $994 | $2,252 |
| Gross profit / margin | $570 / 57% | $1,274 / 57% |
| Sales and marketing expense | $472 | $1,005 |
| General and administrative expense | $3,814 | $5,548 |
| Operating loss | $(3,716) | $(5,279) |
| Loss from continuing operations | $(3,981) | $(5,544) |
| Loss from discontinued operations | $(41,489) | $(41,563) |
| Net loss | $(45,470) | $(47,107) |
| Basic and diluted loss per share | $(3.28) | $(4.40) |
The discontinued-operations loss includes a $41,471 disposal charge, mainly non-cash, including a $35,472 goodwill write-off and a $4,080 intangible-asset write-off. Continuing operations’ Q2 loss included $1,900 of non-cash share-based compensation; six-month general and administrative expense also included $300 of merger-related professional fees.
For the six months, operating cash use was $4,509, investing activities provided $1,593, and financing activities provided no cash. Cash declined $2,916 from $5,996 at year-end to $3,080 at June 30. At quarter-end, total assets were $13,397, current assets $5,125, current liabilities $2,723, and shareholders’ equity $10,674. The balance sheet reports no borrowings or other debt; the filing text does not provide a separate debt facility balance. Operating lease commitments were $1,792, with a further $371 material commitment under non-cancellable data licensing.
Material changes, outlook, and risks
- Management said it expects data-fusion revenue to grow as it expands sales, enters additional markets, and launches products. It also expected higher compensation and infrastructure costs as headcount increased. No quantified operating guidance was provided.
- Management stated that cash, projected growth, and the financing completed July 28 were expected to fund operations and planned capital expenditures for the next 12 months. It cautioned that additional financing may be needed if growth or cash generation falls short; future financing may be unavailable or dilutive.
- After quarter-end, IDI received approximately $9,365 net proceeds from a $10 million registered stock offering and concurrent warrant placement. It sold 1,280,410 shares at $7.81 and issued warrants for 640,205 shares at $10.00 exercise price. A separate shelf registration permits offerings of up to $160 million; it is not itself a completed financing.
- Customer and supplier concentration is notable: one customer represented 23% of six-month data-fusion revenue and 17% of receivables at June 30. Three data suppliers represented 34%, 19%, and 11% of six-month purchases; one supplier accounted for 35% of accounts payable.
- Ongoing TransUnion-related disputes involve purchased intellectual property and alleged noncompetition violations. The filing warns that adverse rulings in two employment-related matters could affect financial position, results, and liquidity. A securities class action was filed in July; management considered it not then a material risk but could not predict the outcome.
- Management reported disclosure controls effective at June 30 after revising reporting procedures to address a prior-quarter material weakness related to filing before the auditor’s pre-issuance review was complete.
Most important facts for investors to verify
- Whether this IDI, Inc. filing is actually the intended filing for Fluent, Inc.
- The status and terms of the post-quarter $10 million financing, warrant dilution, and any further capital needs.
- Whether data-fusion revenue growth and margins can support the company’s operating cost base and cash runway.
- Developments in the intellectual-property, employment, and securities litigation, including potential financial or operational effects.
- Completion and financial consequences of the advertising-business disposal, including the carrying value and settlement of held-for-sale assets and liabilities.