Long-term debt, net

Long-term debt, net, as of September 30, 2018, consists of the following:



	Refinanced Term Loan
(In thousands)	due 2023
Principal amount	$	64,921
Less: Unamortized debt issuance costs	(5,231		)
Long-term debt, net	59,690
Less: Current portion of long-term debt	(7,227		)
Long-term debt, net (non-current)	$	52,463

Long-term debt, net, including promissory notes payable to certain shareholders, net, as of December 31, 2017, consisted of the following:



	Term Loan			Incremental Term Loan			Promissory Notes
(In thousands)	due 2020			due 2020			due 2021			Total
Principal amount	$	40,688		$	14,312		$	10,000		$	65,000
Less: Unamortized debt issuance costs	(2,753		)	(672		)	(312		)	(3,737		)
Add: PIK interest accrued to the principal balance	542			9			1,149			1,700
Long-term debt, net	38,477			13,649			10,837			62,963
Less: Current portion of long-term debt	(2,062		)	(688		)	—			(2,750		)
Long-term debt, net (non-current)	$	36,415		$	12,961		$	10,837		$	60,213

Term Loans

On December 8, 2015, Fluent LLC entered into an agreement ("Credit Agreement") with certain financial institutions and the administrative agent (collectively, "Whitehorse") for a term loan in the amount of $45.0 million ("Term Loan").

The Credit Agreement provided for certain customary mandatory prepayments upon certain events as well as certain prepayment premiums during the first four years of the Term Loan, provided that the prepayment premiums were not applicable to scheduled payments of principal, the required excess cash flow payments (as defined in the Credit Agreement) and certain other required prepayments.

On January 19, 2017, Fluent LLC entered into Amendment No. 3 to Credit Agreement ("Amendment No. 3"), amending the Term Loan. Amendment No. 3, among other things, provided for a new term loan in the principal amount of $15.0 million ("Incremental Term Loan"), subject to the terms and conditions of Amendment No. 3, and modified certain other Credit Agreement provisions, including certain financial covenants and related definitions. The entire Incremental Term Loan of $14,039, net of debt issuance costs of $961, was received on February 1, 2017.

The Term Loan and Incremental Term Loan (collectively, the "Term Loans") were guaranteed by the Company and all of its direct and indirect subsidiaries and were secured by substantially all of the assets of the Company and its direct and indirect subsidiaries, including Fluent LLC, in each case, on an equal and ratable basis. The Term Loans accrued interest at the rate of: (a) either, at Fluent's option, LIBOR (subject to a floor of 0.50%) plus 10.5% per annum, or base rate (generally equivalent to the U.S. prime rate) plus 9.5% per annum, payable in cash, plus (b) 1% per annum, payable, at Fluent's option, either in cash or in-kind. Payments of principal on the Term Loans were $688 per quarter, payable at the end of each calendar quarter, commencing on March 31, 2017. The Term Loans were scheduled to mature on December 8, 2020.

On March 26, 2018, the remaining principal amount of the Term Loans was prepaid through the Refinancing, as defined below, in connection with the Spin-off of red violet.

Promissory Notes

On December 8, 2015, the Company entered into and consummated the promissory notes financing (the "Promissory Notes") with each of Frost Gamma Investment Trust ("Frost Gamma"), an affiliate of Phillip Frost, M.D., the Vice Chairman of the Company's Board of Directors prior to the Spin-off, Michael Brauser, the then Executive Chairman of the Board of Directors, and another investor, pursuant to which the Company issued Promissory Notes of $5.0 million to Frost Gamma, $4.0 million to Michael Brauser, and $1.0 million to another investor, for an aggregate financing in the amount of $10.0 million. The Promissory Notes carried an interest rate of 10% per annum, which was capitalized monthly and added to the outstanding principal amount of such Promissory Notes.

Under the terms of the Promissory Notes, the Company was required to repay the principal and all accrued interest six months after the repayment of all amounts due under the Credit Agreement, except that the Company had the option to repay the Promissory Notes earlier from the proceeds of a public equity financing. During the first quarter of 2017, the Company made a cash payment of accrued paid-in-kind ("PIK") interest of $533, $426, and $107 to Frost Gamma, Michael Brauser and another investor, respectively.

The net balance of Promissory Notes was presented as promissory notes payable to certain shareholders, net, on the condensed consolidated balance sheet as of December 31, 2017. On March 26, 2018, the remaining principal amount plus accrued PIK interest of the Promissory Notes was fully repaid through the Refinancing, as discussed below, in connection with the Spin-off of red violet. The unamortized debt costs of $284 pertaining to the Promissory Notes as of March 26, 2018 were written off into loss on disposal of discontinued operations. See Note 3, "Discontinued operations," for details.

Refinanced Term Loan

In connection with the Spin-off of red violet, Fluent LLC refinanced and fully repaid the Term Loans and Promissory Notes with a new term loan in the amount of $70.0 million ("Refinanced Term Loan"), pursuant to a Limited Consent and Amendment No. 6 to the Credit Agreement effective on March 26, 2018 (the "Amendment No. 6") (the "Refinancing").

The Refinanced Term Loan is guaranteed by the Company and its direct and indirect subsidiaries, and secured by substantially all of the assets of the Company and its direct and indirect subsidiaries, including Fluent LLC, in each case, on an equal and ratable basis. The Refinanced Term Loan accrues interest at the rate of either, at Fluent's option, (a) LIBOR (subject to a floor of 0.50%) plus 7.00% per annum, or (b) base rate plus 6.0% per annum, payable in cash. Interest under the Refinanced Term Loan is payable monthly. The fair value of the Company's debt will generally fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of rising rates of interest. Scheduled principal amortization of the Refinanced Term Loan is $875 per quarter, commencing with the fiscal quarter ended June 30, 2018. The Refinanced Term Loan matures on March 26, 2023.

On March 26, 2018, the Refinanced Term Loan was utilized to repay in full the outstanding principal amount plus accrued PIK interest of the Term Loans and Promissory Notes of $55,586 and $11,425, respectively. Prepayment premiums and unamortized debt costs associated with the Term Loans of $2,818 and $3,136, respectively, were capitalized in the balance of the Refinanced Term Loan and are being amortized over the remaining period of the Refinanced Term Loan. In addition, refinancing costs paid to third parties of $193 were recognized in loss on disposal of discontinued operations. See Note 3, "Discontinued operations," for details.

The Credit Agreement, as amended, requires the Company to maintain and comply with certain financial and other covenants, commencing with the fiscal quarter ended June 30, 2018. In addition, the Credit Agreement, as amended, includes certain prepayment provisions, including mandatory quarterly principal prepayments of the Refinanced Term Loan with a portion of the Company's excess cash flow, as defined in the Credit Agreement. For the three months ended September 30, 2018, the quarterly prepayment resulting from excess cash flow was $3,727. As of September 30, 2018, this amount was reclassified to the current portion of long-term debt and will be paid during the fourth quarter. As long as the Refinanced Term Loan remains outstanding, the restrictive covenants, including prepayment penalties, and mandatory quarterly prepayment provisions could impair the Company's ability to expand or pursue its business strategies or obtain additional funding. As of September 30, 2018, the Company was in compliance with all of the financial and other covenants under the Credit Agreement.

Maturities

Including the required principal prepayment on the Refinanced Term Loan based on a portion of the Company's quarterly excess cash flow of $3,727 for the third quarter of 2018 and excluding potential future additional principal prepayments, scheduled future maturities of total debt as of September 30, 2018 were as follows:



(In thousands)
Year
Remainder of 2018	$	4,602
2019	3,500
2020	3,500
2021	3,500
2022	3,500
2023 and thereafter	46,319
Total maturities	$	64,921

Fair value

The Refinanced Term Loan accrues interest at the rate of either, at Fluent's option, (a) LIBOR (subject to a floor of 0.50%) plus 7.00% per annum, or (b) base rate (generally equivalent to the U.S. prime rate) plus 6.0% per annum, payable in cash. As the Refinanced Term Loan was effective on March 26, 2018 and has a variable interest rate, the fair value of long-term debt is considered to approximate its carrying amount as of September 30, 2018. This fair value assessment represents Level 2 measurements.