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Item 1A. Risk Factors

2024-03-21 compared with 2023-03-30 · 113 added, 111 removed, 196 unchanged (53% of the section changed)

ITEM 1 A RISK FACTORS   

Our business involves a high degree of risk.

In evaluating our business, you should carefully consider the specific risks described below, and any risks described in our other filings with the Securities and Exchange Commission, pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934.

In evaluating our business, you should carefully consider the specific risks described below, and any risks described in our other filings with the Securities and Exchange Commission (the “SEC”), pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act.

Any of the risks we describe below could cause our business, financial condition, results of operations or future prospects to be materially adversely affected.

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We have incurred historical net losses, and we have had negative cash flows from operations.

While we have been able to achieve profitability in 2021 and 2022, it is uncertain whether we will be able to sustain or increase our profitability in successive periods.

While we have been able to achieve net income in 2021 and 2022, we incurred a net loss in 2023 and it is uncertain whether we will be able to sustain or increase our profitability in successive periods.

We have formulated our business plans and strategies based on certain assumptions regarding the acceptance of our business model and the marketing of our products and services.

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Our future success will depend upon many factors, including factors beyond our control and those that cannot be predicted at this time.

The ongoing COVID-19 pandemic has also caused a significant increase in suspended, delayed, and cancelled customer projects, initiatives, and capital expenditures, and it is not known when these opportunities will be revived for the Company, if at all.

Our digital marketing business is evolving in a rapidly changing market, and we cannot ensure the long-term successful operation of our business or the execution of our business plan.

Our digital marketing technology and solutions are an evolving business offering and the markets in which we compete are rapidly changing. As a result, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies in new and rapidly evolving markets.

Digital marketing technology and solutions are evolving and the markets in which we compete are rapidly changing.

As a result, our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies in new and rapidly evolving markets.

We may be unable to accomplish any of the following, which would materially impact our ability to implement our business plan:

timely and successfully developing new technology, solution, service, and platform features, including but not limited to the utilization of artificial intelligence, and increasing the functionality and features of our existing technology, solution, service, and platform offerings;

establishing and maintaining broad market acceptance of our technology, solutions, services, and platforms, and converting that acceptance into direct and indirect sources of revenue;

establishing and maintaining adoption of our technology, solutions, services, and platforms in and on a variety of environments, experiences, and device types;

timely and successfully developing new technology, solution, service, and platform features, and increasing the functionality and features of our existing technology, solution, service, and platform offerings;

developing technology, solutions, services, and platforms that result in a high degree of customer satisfaction and a high level of end-customer usage;

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identifying, attracting and retaining talented engineering, network operations, program management, technical services, creative services, and other personnel at reasonable market compensation rates in the markets in which we employ such personnel;

integration of operations, personnel and technology from our acquisitions, including our acquisition of Reflect Systems, Inc.

integrating operations, personnel and technology from our acquisitions.

Our business strategy may be unsuccessful and we may be unable to address the risks we face in a cost-effective manner, if at all.

If we are unable to successfully accomplish these tasks, our business will be harmed.

Adequate funds for our operations may not be available, requiring us to raise additional financing or else curtail our activities significantly.

During February of 2022, the Company completed a Debt Financing and Equity Financing (as further described in this Annual Report), which resulted in gross proceeds to the Company, prior to deducting placement agent and other offering fees, of approximately $20,000.

The net proceeds from the forgoing financings were used to pay the cash portion of the merger consideration payable to former stockholders of Reflect in connection with our acquisition of Reflect in February 2022.

As a result, we may be required to raise additional funding through public or private financings, including equity financings, through 2022 and beyond.

We have an “at-the-market”

offering in place, pursuant to which we may direct Roth Capital Partners, our sale agent, to sell shares of our common stock to investors in the market, subject to the terms and conditions of a sales agreement.

These sales will dilute the percentages of ownership interest of then-current holders of our capital stock and may dilute our book value per share.

Any additional equity financings may also be dilutive to shareholders and may be completed at a discount to the then-current market price of our securities.

Our success and longevity depend on our ability to generate profits from future operations and obtain sufficient capital through financing transactions to refinance our debt obligations, pay any contingent consideration owed to former Reflect stockholders, and meet our other business obligations .

The report of our independent registered public accounting firm on our Consolidated Financial Statements for the fiscal year ended December 31, 2023 included an explanatory paragraph indicating that there is substantial doubt as to our ability to continue as a going concern within one year after that date that the Consolidated Financial Statements are issued.

At December 31, 2023, the Company has an accumulated deficit of $53,346, negative working capital of $1,587, including current debt obligations of $3,690, and cash of $2,910.

For the year ended December 31, 2023, the Company generated operating income of $1,346 and generated positive net cash flows from operations of $5,167.

Pursuant to the Second Amended and Restated Credit and Security Agreement (the "Credit Agreement") between the Company and Slipstream, the Company is required and began to make monthly repayments of principal on the Consolidation Term Loan on September 1, 2023.

The monthly principal payment is approximately $370 and will continue on the first day of each month thereafter until the Maturity Date on February 17, 2025, with total principal repayments of $4,037 during the twelve months subsequent to the reporting date of our Consolidated Financial Statements.

In addition, the Company is required to repay the principal balance on the Acquisition Term Loan of $10,000 at maturity and resolve the contingent consideration (described below), currently estimated for accounting purposes at $11,208, each of which mature on February 17, 2025 and collectively raises substantial doubt about the Company's ability to continue as a going concern under the technical framework within ASU 205-40.

See “ Note 1:

Nature of Organization of Organization and Operations- Liquidity and Financial Consideration “ to the Company’s Consolidated Financial Statements contained in this Report for a description of our payment obligations under the Credit Agreement.

The merger agreement in which we acquired Reflect requires us to pay to former Reflect stockholders additional contingent cash consideration after February 17, 2025 (subject to a six-month extension under certain circumstances), if the closing price of our shares of common stock on such date is less than $6.40 per share (the "Guaranteed Price").

The actual amount of such contingent consideration cannot be determined until such time, but our financial statements reflect $11,208 as the amount of such payment as of December 31, 2023, which include an increase in the Guaranteed Price to reflect the Company’s 1-for-3 reverse stock split that occurred on March 23, 2023.

See “ Note 5 Business Combinations ” to the Company’s Consolidated Financial Statements contained in this Report for a description of our obligations to pay the contingent consideration.

We do not anticipate that we will have adequate funds from our operations to satisfy these obligations in February 2025.

In response to these conditions, the Company plans to evaluate its available options for refinancing, via recapitalization, debt financing or equity financing, its upcoming obligations associated with the Acquisition Term Loan, Consolidation Term Loan, and contingent consideration.

However, these plans have not been finalized, are subject to market conditions, and are not within the Company’s control, and therefore cannot be deemed probable.

As a result, the Company has concluded that management's plans do not alleviate substantial doubt about the Company's ability to continue as a going concern.

Any equity financings will likely be dilutive to shareholders and may be completed at a discount to the then-current market price of our securities.

Debt financing, if available, may involve restrictive covenants on our operations or pertaining to future financing arrangements.

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The variable sales cycle of our products will likely make it difficult to predict operating results.

Our revenues in any quarter depend substantially upon contracts signed and the related shipment and installation or delivery of hardware and software products in that quarter.

Although we are focusing on increasing our revenues from SaaS services to our customers, our overall revenues in any quarter depend substantially upon contracts signed and the related shipment and installation or delivery of hardware and software products in that quarter.

It is therefore difficult for us to accurately predict revenues and this difficulty also will affect the Company.

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If we receive any significant cancellation or deferral of customer orders, or it is unable to conclude license negotiations by the end of a fiscal quarter, our operating results may be lower than anticipated.

In addition, any weakening or uncertainty in the economy may make it more difficult for the Company to predict quarterly results in the future, and could negatively impact our business, operating results and financial condition for an indefinite period of time.

We are reliant on the continued support of a related party for adequate financing of our operations.

As of March 29, 2023, our largest shareholder and investor, Slipstream Communications LLC (“Slipstream”) is the holder of 93% of our outstanding debt instruments, including three term loans, and has beneficial ownership of approximately 38% of our common stock (on an as-converted, fully diluted basis including conversion of outstanding warrants, and assuming no other convertible securities, options and warrants are converted or exercised by other parties).

Slipstream has also provided us with a continued support letter through March 31, 2024.

If we are unable to extend the maturity or replace our existing financing agreements in the future, our plans to operate our business may be adversely affected and we could be required to curtail our activities significantly and/or cease operating.

In addition, any weakening or uncertainty in the economy may make it more difficult for the Company to predict quarterly results in the future, and could negatively impact our business, financial condition, and results of operations for an indefinite period of time.

There has been, and we expect that there will continue to be, significant consolidation in our industry.

Our failure or inability to lead that consolidation would have a severe adverse impact on our access to financing, customers, technology, and human resources.

Our industry is currently composed of a large number of relatively small businesses; no single business dominates or provides integrated solutions and product offerings incorporating much of the available industry technology.

Accordingly, we believe that substantial consolidation may occur in our industry in the near future.

Our failure or inability to either lead or participate in that consolidation would have a severe adverse impact on our access to financing, customers, technology, and human resources.

Our industry is currently composed of a large number of relatively small businesses;

no single business dominates or provides integrated solutions and product offerings incorporating much of the available industry technology.

We believe that substantial consolidation is occurring in our industry and will continue to do so in the near future.

We believe that our prior acquisitions of Allure and Reflect illustrate acquisition opportunities that exist in our industry.

If we do not play a positive role in that consolidation, either as a leader or as a participant whose capability is merged in a larger entity, we may be left out of this process, with product offerings of limited value compared with those of our competitors.

Moreover, even if we lead the consolidation process, we may incur unknown liabilities in such consolidations, fail to fully integrate the operations, personnel or technology from such consolidations, and the market may not validate the decisions we make in that process. 

If we are not active participants in consolidation, either as a consolidator or as a target, we may be left out of this process, with product offerings of limited value compared with those of our consolidated competitors.

Moreover, even if we lead the consolidation process, we may incur unknown liabilities in such consolidations, fail to fully integrate the operations, personnel, or technology from such consolidations, and the market may not validate the decisions we make in that process.

Unpredictability in financing markets could impair our ability to grow our business through acquisitions.

We anticipate that opportunities to acquire similar businesses will materially depend on, among other things, the availability of financing alternatives with acceptable terms.

As a result, poor credit and other market conditions or uncertainty in financial markets could materially limit our ability to grow through acquisitions since such conditions and uncertainty make obtaining financing more difficult.

We anticipate that opportunities to acquire similar businesses will materially depend on, among other things, the availability of financing options for us with acceptable terms.

Poor credit and other market conditions or uncertainty in financial markets could adversely affect our ability to obtain such financing, and as a result, materially limit our ability to grow through acquisitions.

Our success depends on our interactive marketing technologies achieving and maintaining widespread acceptance in our targeted markets.

Our success will depend to a large extent on broad market acceptance of our interactive marketing technologies among our current and prospective customers.

Our success will depend to a large extent on market acceptance of our interactive marketing technologies among our current and prospective customers.

Our prospective customers may still not use our solutions for a number of other reasons, including preference for static advertising, lack of familiarity with our technology, preference for competing technologies or perceived lack of reliability.

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Because we do not have long-term purchase commitments from our customers, the failure to obtain anticipated orders or the deferral or cancellation of commitments could have adverse effects on our business.

Our business is characterized by short-term purchase orders and contracts that do not require that purchases be made by our customers.

Our business is characterized by short-term purchase orders, contracts that do not require that purchases be made by our customers, and monthly subscription contracts (SaaS) that may be terminated with minimal notice.

This makes forecasting our sales difficult.

The failure to obtain anticipated orders and deferrals or cancellations of purchase commitments because of changes in customer requirements, or otherwise, could have a material adverse effect on our business, financial condition and results of operations.

The failure to obtain anticipated orders and deferrals or cancellations of purchase commitments or SaaS services because of changes in customer requirements, or otherwise, could have a material adverse effect on our business, financial condition, and results of operations.

We have experienced such challenges in the past and may experience such challenges in the future.

Our continued growth and financial performance could be adversely affected by the loss of several key customers.

We had three (3) and two (2) customers that accounted for 44.0% and 41.1% of revenue for the years ended December 31, 2022 and 2021, respectively.

No customer accounted for more than 10% of revenue for the year ended December 31, 2023.

We had three customers that accounted for 44% of revenue for the years ended December 31, 2022.

Decisions by one or more of these key customers to not renew, terminate, or substantially reduce their use of our products, technology, services, and platform could substantially slow our revenue growth and lead to a decline in revenue.

Our business plan assumes continued growth in revenue, and it is unlikely that we will become profitable without a continued increase in revenue.

Most of our contracts are terminable by our customers with limited notice and without penalty payments, and early terminations could have a material adverse effect on our business, operating results and financial condition.

Most of our contracts are terminable by our customers following limited notice and without early termination payments or liquidated damages due from them.

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We cannot assure you that one or more of our customers will not terminate a material contract or materially reduce the scope of a large project.

The delay, cancellation or significant reduction in the scope of a large project or a number of projects could have a material adverse effect on our business, operating results and financial condition.

It is common for our current and prospective customers to take a long time to evaluate our products, most especially during economic downturns that affect our customers ’

businesses, as we saw during the COVID-19 pandemic.

The delay, cancellation or significant reduction in the scope of a large project or a number of projects could have a material adverse effect on our business, financial condition and results of operations.

It is common for our current and prospective customers to evaluate our products over an extended period of time, most especially during economic downturns that affect our customers ’ businesses, as we saw during the COVID-19 pandemic.

The lengthy and variable sales cycle makes it difficult to predict our operating results.

It is difficult for us to forecast the timing and recognition of revenue from sales of our products and services because our actual and prospective customers often take significant time to evaluate our products before committing to a purchase.

Even after making their first purchases of our products and services, existing customers may not make significant purchases of those products and services for a long period of time following their initial purchases, if at all.

Even after making their first purchases of our products and services (or "pilot program" purchases), existing customers may not make significant purchases of those products and services for a long period of time following their initial purchases, if at all.

The period between initial customer contact and a purchase by a customer may be years with potentially an even longer period separating initial purchases and any significant purchases thereafter.

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changes in budgets and purchasing priorities.

Our prospective customers routinely require education regarding the use and benefit of our products.

This may also lead to delays in receiving customers’

Our prospective customers routinely require education regarding the use and benefit of our products and solutions.

This may also lead to delays in receiving customers’ orders.

Our industry is characterized by frequent technological change.

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We may not be successful in using new technologies, developing new products and services or enhancing existing products and services in a timely and cost-effective manner.

Furthermore, even if we successfully adapt our products and services, these new technologies or enhancements may not achieve market acceptance.

A portion of our business involves the use of software technology that we have developed or licensed.

Industries involving the ownership and licensing of software-based intellectual property are characterized by frequent intellectual-property litigation, and we could face claims of infringement by others in the industry.

Furthermore, even if we successfully adapt our products and services, these new technologies or enhancements may not achieve sufficient market acceptance.

We operate in an intensely competitive industry, and our competitors are developing products and solutions that incorporate AI and ML .

We may not be as successful as our competitors in incorporating AI and ML into our products and solutions .

Our competitors may be larger, more diversified, better funded, and have access to more advanced technology, including AI and ML.

These competitive advantages may enable our competition to innovate their products and solutions faster or better than we can, or to provide increased competition on quality and price, which could adversely affect our business and profitability.

Burgeoning interest in AI and ML may increase competition and disrupt the Company’s business model.

AI and ML may lower barriers to entry in our industry and the Company may be unable to effectively compete with the products or services offered by new competitors.

Changes to the products and services we offer related to AI and ML may affect customer expectations, requirements, or tastes in ways that the Company cannot adequately anticipate or adapt to, causing its business to lose revenues.

Issues relating to the use of new and evolving technologies in our offerings, such as AI and ML, may result in increased regulation and costs to comply with such regulations .

We are exploring manners to integrate AI and ML into many of our offerings.

We may need to increase our operational, research and development and compliance costs, or divert resources from other research and development efforts, to address potential issues related to AI and ML in a quickly evolving social, legal, and regulatory environment.

As with many cutting-edge innovations, AI and ML present new risks and challenges, and existing laws and regulations may apply to us in new ways, the nature and extent of which are difficult to predict.

Potential government regulation related to AI, including relating to ethics and social responsibility, may also increase the burden and cost of compliance and research and development.

We use developed and licensed software technology, and we could face claims of infringement by others in the industry.

Such claims are costly and add uncertainty to our operational results .

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Our business may be adversely affected by malicious applications that interfere with, or exploit security flaws in, our products and services.

Our business may be adversely affected by malicious applications that make changes to our customers’

computer systems and interfere with the operation and use of our products or products that impact our business.

These applications may attempt to interfere with our ability to communicate with our customers’

Our business may be adversely affected by malicious applications that make changes to our customers’ computer systems and interfere with the operation and use of our products or products that impact our business.

These applications may attempt to interfere with our ability to communicate with our customers’ devices.

The interference may occur without disclosure to or consent from our customers, resulting in a negative experience that our customers may associate with our products and services.

These applications may be difficult or impossible to uninstall or disable, may reinstall themselves and may circumvent other applications’

efforts to block or remove them.

These applications may be difficult or impossible to uninstall or disable, may reinstall themselves and may circumvent other applications’ efforts to block or remove them.

The ability to provide customers with a superior interactive marketing technology experience is critical to our success.

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We compete with other companies that have more resources, which puts us at a competitive disadvantage.

The market for interactive marketing technologies is generally highly competitive and we expect competition to increase in the future.

Some of our competitors or potential competitors may have significantly greater financial, technical and marketing resources than us.

These competitors may be able to respond more rapidly than we can to new or emerging technologies or changes in customer requirements.

They may also devote greater resources to the development, promotion and sale of their products than us.

We expect competitors to continue to improve the performance of their current products and to introduce new products, services and technologies.

The market for interactive marketing technologies is highly competitive and we expect competition to increase in the future.

Many competitors have significantly greater financial, technical, and marketing resources than us.

These competitors may be able to respond more rapidly than we can to new or emerging technologies or changes in customer preferences or requirements.

They may also devote greater resources to the development, promotion and sale of their products and services than us.

We expect competitors to continue to improve the performance of their current products, services, and technologies and to introduce new products, services, and technologies as well.

Successful new product and service introductions or enhancements by our competitors could reduce sales and the market acceptance of our products and services, cause intense price competition, or make our products and services obsolete.

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Our key personnel include:

Rick Mills, our Chief Executive Officer;

Rick Mills, our Chief Executive Officer and Chairman;

Will Logan, our Chief Financial Officer.

Lee Summers, our President of Media.

If we fail to retain our key personnel or to attract, retain, and motivate other qualified employees, our ability to maintain and develop our business may be adversely affected.

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We may be unable to retain our employees or to attract, assimilate and retain other highly qualified employees who could migrate to other employers who offer competitive or superior compensation packages.

We are subject to cyber security risks and interruptions or failures in our information technology systems and will likely need to expend additional resources to enhance our protection from such risks.

We risk losing directors, officers, and employees, or paying more cash compensation, if our shareholders do not approve our 2023 Stock Incentive Plan.

Our ability to issue incentive awards under our 2014 Stock Incentive Plan expired in 2023.

Nasdaq’s listing rules require us to obtain our shareholder’s approval of a stock incentive plan before we may issue any shares under the plan or any option issued under the plan may be exercised.

On November 8, 2023, our Board of Directors adopted a 2023 stock incentive plan (the “2023 Plan”), and we intend to seek shareholder approval of such plan at our 2024 annual shareholder meeting.

As a company with limited capital resources, we have historically relied upon our ability to issue incentives from our stock incentive plans to our directors, officers and employees in lieu of cash-based compensation.

Currently, we may only issue options under the 2023 Plan that cannot be exercised unless shareholder approval of the 2023 Plan is obtained in advance of the exercise of any option.

We cannot issue restricted stock awards or stock awards, which we have issued in the past to incentivize our directors, officers and employees and to mitigate the cash compensation that would otherwise be payable to such persons.

This limited use of the 2023 Plan limits the value of these incentives, and will require us to use cash in place of incentives under the 2023 Plan until shareholder approval is obtained, or we risk losing the services of our officers, directors and employees.

We cannot guarantee that we will be able to obtain shareholder approval of the 2023 Plan.

Our shareholders failed to approve at our 2023 annual shareholder meeting a 2023 equity incentive plan that authorized the issuance of up to 1,500,000 shares under such plan.

We are subject to cyber security risks and interruptions or failures in our information technology systems and those of third party partners with whom our applications are integrated, and will likely need to expend additional resources to enhance our protection from such risks.

Notwithstanding our efforts, a cyber incident could occur and result in information theft, data corruption, operational disruption, and/or financial loss .

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At the same time, cyber incidents, including deliberate attacks, have increased.

government has issued public warnings that indicate that energy assets might be specific targets of cyber security threats.

Our technologies, systems and networks and those of our vendors, suppliers, and other business partners may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of business operations.

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The failure of any of our information technology systems may cause disruptions in our operations, which could adversely affect our revenues and profitability.

Additionally, we engage third-party service providers to assist us in providing products and services for our customers.

Those third-party services providers also subject to the foregoing risks to their systems.

We do not have a process to oversee and identify risks from cyber security threats associated with our use of such third-party service providers, and any such incidents occurring on their system could similarly affect us, our revenues and profitability.

Our reliance on information management and transaction systems to operate our business exposes us to cyber incidents and hacking of our sensitive information if our outsourced service provider experiences a security breach.

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and our own infrastructure and equipment.

Collectively, this infrastructure, equipment, and capacity must be sufficiently robust to handle all of our customers’

web-traffic, particularly in the event of unexpected surges in high-definition video traffic and network services incidents.

Collectively, this infrastructure, equipment, and capacity must be sufficiently robust to handle all of our customers’ web-traffic, particularly in the event of unexpected surges in high-definition video traffic and network services incidents.

We (and our service providers) may not be adequately prepared for unexpected increases in bandwidth and related infrastructure demands from our customers.

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For example, the COVID-19 pandemic resulted in authorities implementing numerous preventative measures to contain or mitigate the outbreak of the virus, such as travel bans and restrictions, limitations on business activity, quarantines, and shelter-in-place orders.

These measures caused business slowdowns and shutdowns in certain affected areas, both regionally and worldwide, which significantly adversely impacted our business and results of operations.

We are vulnerable to the following potential problems when events beyond our control arise, including, among others:

These measures caused business slowdowns and shutdowns in certain affected areas, both regionally and worldwide, which significantly adversely impacted our business and results of operations.

We are vulnerable to potential problems when events beyond our control arise, including, among others:

our platform, technology, products, and services and underlying infrastructure, or that of our key suppliers, may be damaged or destroyed by events beyond our control, such as fires, earthquakes, floods, power outages, or telecommunications failures;

we and our customers and/or partners may experience interruptions in service as a result of the accidental or malicious actions of Internet users, hackers, or current or former employees;

we may face liability for transmitting viruses to third parties that damage or impair their access to computer networks, programs, data or information.

Eliminating computer viruses and alleviating other security problems may require interruptions, delays or cessation of service to our customers;

we may transmit viruses to third parties that damage or impair their access to computer networks, programs, data or information, and eliminating computer viruses and alleviating other security problems may require interruptions, delays or cessation of service to our customers and cause us to face liability;

failure of our systems or those of our suppliers may disrupt service to our customers (and from our customers to their customers), which could materially impact our operations (and the operations of our customers), adversely affect our relationships with our customers and lead to lawsuits and contingent liability;

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significant volatility and disruption of global financial markets, which could negatively impact our ability to access capital in the future;

our inability to recognize revenue, collect payment, or generate future revenue from customers, including from those that have been or may be forced to close their businesses or are otherwise impacted by any resulting economic downturn;

negative impact on our workforce productivity, product development, and research and development due to difficulties resulting from our personnel working remotely

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Our competitors are constantly evolving, and we may be unable to compete successfully against existing or future competitors to our business.

The market in which we operate is becoming increasingly competitive.

 Our current competitors generally include general digital signage companies, specialized digital signage operators targeting certain vertical markets (e.g., financial services), content management software companies, or integrators and vertical solution providers who develop single implementations of content distribution, digital marketing technology, and related services.

These competitors, including future new competitors who may emerge, may be able to develop a comparable or superior solution capabilities, software platform, technology stack, and/or series of services that provide a similar or more robust set of features and functionality than the technology, products and services we offer.

The market in which we operate is increasingly competitive.

Our current competitors generally include general digital signage companies, specialized digital signage operators targeting certain vertical markets (e.g., financial services, retail, or food services), content management software companies, or integrators and vertical solution providers who develop single implementations of content distribution, digital marketing technology, and related services.

These competitors, including future new competitors who may emerge, may be able to develop comparable or superior solution capabilities, software platform, technology stack, and/or series of services that provide a similar or more robust set of features and functionality than our technology, products and services.

If this occurs, we may be unable to grow as necessary to make our business profitable.

Whether or not we have superior products, many of these current and potential future competitors have a longer operating histories in their current respective business areas and greater market presence, brand recognition, engineering and marketing capabilities, and financial, technological and personnel resources than we do.

Existing and potential competitors with an extended operating history, even if not directly related to our business, have an inherent marketing advantage because of the reluctance of many potential customers to entrust key operations to a company that may be perceived as new, inexperienced or unproven.

In addition, our existing and potential future competitors may be able to use their extensive resources to:

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RISKS RELATED TO OUR SECURITIES AND OUR COMPANY

Our largest shareholder and senior lender possesses significant voting power with respect to our common stock and  has proposed a transaction to purchase all of our common stock that is not beneficially owned by such shareholder and its affiliates.

Slipstream has also provided us with a continued support letter through March 31, 2024.  

On February 2, 2023, we received an unsolicited proposal from Pegasus Capital Advisors, L.P., on behalf of itself and certain of its affiliates, including Slipstream (collectively, “Pegasus”), to acquire all of the outstanding shares of common stock of the Company that are not owned by Pegasus for a purchase price of $0.83 per share in cash (or, as a result of our recent reverse stock split $2.49 per share).

Pegasus is the beneficial owner of our common stock owned of record by Slipstream. The Special Committee of the Company’s Board of Directors (the “Special Committee”) has concluded that such proposal undervalues the Company based on the Special Committee’s views of the intrinsic value of the Company’s existing business and current and future prospects, and is not in the best interests of the Company’s existing shareholders. Consequently, the Special Committee has advised Pegasus that it has rejected the proposal.

Pegasus may or may not determine to revise its proposal. The Special Committee remains available to evaluate and respond to a revised proposal by Pegasus.

There can be no assurance that any revised proposal or definitive offer will be made or accepted, that any agreement will be executed, or that any transaction will be consummated.

Our largest shareholder and senior lender possesses significant voting power with respect to our common stock, which will limit your influence on our management and affairs, and may discourage parties from initiating potential merger, takeover, or other change-of-control transactions.

As of March 20, 2024, our largest shareholder and investor, Slipstream is the holder of all of our outstanding debt instruments, including two term loans, and has beneficial ownership of approximately 26% of our common stock (on an as-converted, fully diluted basis including conversion of outstanding warrants, and assuming no other convertible securities, options and warrants are converted or exercised by other parties).

Slipstream has significant influence on our management and affairs, including the election and removal of our Board of Directors and all other matters requiring shareholder approval, including the future merger, consolidation or sale of all or substantially all of our assets.

This stockholder position, especially in light of Pegasus' proposal, may discourage others from initiating any potential merger, takeover or other change-of-control transaction that may otherwise be beneficial to our shareholders.

This stockholder position, especially in light of Pegasus' prior proposals described below, may discourage others from initiating any potential merger, takeover, or other change-of-control transaction that may otherwise be beneficial to our shareholders.

Furthermore, this concentrated ownership will limit the practical effect of your participation in Company matters, through shareholder votes and otherwise.

On February 2, 2023 and May 1, 2023, we received unsolicited proposals from Pegasus Capital Advisors, L.P., on behalf of itself and certain of its affiliates, including Slipstream (collectively, “Pegasus”), to acquire all of the outstanding shares of common stock of the Company that are not owned by Pegasus for purchase prices of $0.83 per share in cash (or, as a result of our 1-for-3 reverse stock split effectuated in March 2023, $2.49 per share), and $2.85 per share in cash, respectively.

Pegasus is the beneficial owner of our common stock owned of record by Slipstream.

The Special Committee of the Company’s Board of Directors (the “Special Committee”) concluded that each proposal undervalued the Company based on the Special Committee’s views of the intrinsic value of the Company’s existing business and current and future prospects, and was not in the best interests of the Company’s existing shareholders.

Consequently, the Special Committee advised Pegasus that it rejected each proposal, and since such time, Pegasus has not made any subsequent acquisition proposal.

Our Articles of Incorporation grant our Board of Directors the power to issue additional shares of common and preferred stock and to designate other classes of preferred stock, all without shareholder approval.

Our authorized capital consists of 116,666,666 shares of capital stock, 50,000,000 of which is undesignated preferred stock.

Pursuant to authority granted by our Articles of Incorporation, our Board of Directors, without any action by our shareholders, may designate and issue shares in such classes or series (including other classes or series of preferred stock) as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights, provided such designation is consistent with Minnesota law.

Our authorized capital consists of 116,666,666 shares of capital stock, 50,000,000 of which is undesignated preferred stock.

The rights of holders of other classes or series of stock that may be issued could be superior to the rights of holders of our common shares.

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Furthermore, any issuances of additional stock (common or preferred) will dilute the percentage of ownership interest of then-current holders of our capital stock and may dilute our book value per share.

We do not intend to pay dividends on our common stock for the foreseeable future.

We do not plan to pay dividends on our common stock for the foreseeable future.

Earnings of the business will be reinvested in future growth strategies or utilized to repay outstanding debt.

We have never paid dividends on our capital stock and we do not anticipate paying dividends in the foreseeable future.

We have never paid dividends on any of our capital stock and currently intend to retain any future earnings to fund the growth of our business.

Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our Board of Directors may deem relevant.

As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.

We do not have significant tangible assets that could be sold upon liquidation.

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If we fail to comply with the continuing listing standards of the Nasdaq, our securities could be delisted.

On April 14, 2022, the Company received a letter (the “Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) advising the Company that for 30 consecutive trading days preceding the date of the Notice, the bid price of the Company’s common stock had closed below the $1.00 per share minimum required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). 

The Notice stated that the Company had 180 days, or until October 11, 2022, to demonstrate compliance by maintaining a minimum closing bid price of at least $1.00 for a minimum of 10 consecutive trading days.

On October 12, 2022, Nasdaq notified the Company that while the Company had not regained compliance with the Minimum Bid Price Requirement, it was eligible for an additional 180-day grace period, or until April 10, 2023, to regain compliance with the Minimum Bid Price Requirement.

Nasdaq’s determination was based on the Company having met the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and on the Company’s written notice to Nasdaq of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

Effective March 27, 2023, we effectuated a one-for-three reverse stock split of the shares of the Company’s common stock seeking to regain compliance with the Minimum Bid Price Requirement.

There is no guarantee that we will be successful in satisfying the Minimum Bid Price Requirement by April 10, 2023.

If the Company does not regain compliance with the Minimum Bid Price Requirement by April 10, 2023, Nasdaq will provide written notification to the Company that its common stock will be delisted.

At that time, the Company may appeal Nasdaq’s delisting determination to a Hearings Panel (the “Panel”).

The Company’s common stock would remain listed pending the Panel’s decision.

There can be no assurance that if the Company does appeal such a delisting determination by Nasdaq to the Panel, that such appeal would be successful.

In such event, the liquidity of our common stock would likely be impaired, not only in the number of shares which could be bought and sold, but also through delays in the timing of the transactions, and there would likely be a reduction in our coverage by security analysts and the news media, thereby resulting in lower prices for our common stock than might otherwise prevail.

The impact of our 1-for-3 reverse stock split on the future market price of our common stock, and our ability to maintain the listing of our common stock on Nasdaq, is uncertain.

On March 23, 2023, we filed Articles of Amendment with the Secretary of State of the State of Minnesota to effectuate, effective March 27, 2023, a one-for-three reverse stock split of the shares of the Company’s common stock, par value $0.01 per share.

The Company’s common stock began trading on a split-adjusted basis on March 27, 2023. In connection with the reverse stock split, the total number of shares of common stock authorized for issuance was reduced from 200,000,000 shares to 66,666,666 shares in proportion to the reverse stock split.

We cannot assure shareholders that the reverse stock split will sufficiently increase our stock price by April 10, 2023, the deadline for the Company to comply with the Minimum Bid Requirement.

The effect of the reverse stock split on our stock price cannot be predicted with any certainty, and the history of reverse stock splits for us and other companies, is varied, particularly since some investors may view a reverse stock split negatively.

It is possible that our stock price after a reverse stock split will not increase in the same proportion as the reduction in the number of shares outstanding, causing a reduction in our overall market capitalization.

Further, our stock price may decline due to various factors, including our future performance and general industry, market and economic conditions.

This percentage decline, as an absolute number and as a percentage of our overall market capitalization, may be greater than would occur in the absence of the reverse stock split.

If we continue to fail to meet Nasdaq’s listing requirements, Nasdaq may suspend trading and commence delisting proceedings.

In addition, the reverse stock split may decrease the liquidity of our common stock and result in higher transaction costs.

The liquidity of our common stock may be negatively impacted by the reduced number of shares outstanding after the reverse stock split, which would be exacerbated if the stock price does not increase following the reverse stock split.

In addition, the reverse stock split increased the number of stockholders owning “odd lots”

of fewer than 100 shares, which generally means that trading our stock results in higher transaction costs.

Accordingly, the reverse stock split may not achieve the desired results of increasing marketability and liquidity.

The implementation of the reverse stock split did not have an effect on the actual or intrinsic value of our business or a shareholder’s proportional ownership interest (subject to the treatment of fractional shares as a result of the reverse stock split).

However, should the overall value of our common stock decline after the reverse stock split, then the actual or intrinsic value of shares held by shareholders will also proportionately decrease as a result of the overall decline in value.

In 2022, the bid price of the Company’s common stock closed for 30 consecutive trading days below the $1.00 per share minimum required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).

Although the Company cured such noncompliance as a result of its 1-for-3 reverse stock split in March 2023, the trading price of the Company’s common stock has been subject to large movement in the past, especially in light of historically low trading volumes.

We cannot be certain that the Company will be able to comply with the Minimum Bid Price Requirement and the other continued listing requirements of Nasdaq in the future, in which case the Company’s common stock may be delisted from the Nasdaq Capital Market.

In the event our common stock is delisted from The Nasdaq Capital Market and we are also unable to maintain listing on another alternate exchange, trading in our common stock could thereafter be conducted in FINRA’s OTC Bulletin Board or in the over-the-counter markets in the so-called “pink sheets.” In such event, the liquidity of our common stock would likely be further impaired, not only in the number of shares which could be bought and sold, but also through delays in the timing of the transactions, and there would likely be a reduction in our coverage by security analysts and the news media, thereby resulting in lower prices for our common stock than might otherwise prevail.

Significant issuances of our common stock, or the perception that significant issuances may occur in the future, could adversely affect the market price for our common stock.

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It is also unclear whether or not the market for our common stock could absorb a large number of attempted sales in a short period of time, regardless of the price at which they might be offered.

Sales of a substantial number of shares of our common stock in the public market by certain of our stockholders could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

There may not be an active market for shares of our common stock.

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As a result, we may not have in place systems, processes, and protections that many of our competitors have or that may be essential to protect against various risks.

For example, we have in place only limited resources and processes addressing human resources, timekeeping, data protection, business continuity, personnel redundancy, and knowledge institutionalization concerns. As a result, we are at risk that one or more adverse events in these and other areas may materially harm our business, financial condition, and results from operations.

As a result, we are at risk that one or more adverse events in these and other areas may materially harm our business, financial condition, and results of operations.

General global market and economic conditions may have an adverse impact on our operating performance and results of operations.

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Flat or worsening economic conditions may harm our operating results and financial condition.

In addition, our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including another outbreak of COVID-19 or another respiratory illness.

In addition, our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including another outbreak of COVID-19 or another illness.

A significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products, our ability to collect against existing trade receivables and our operating results.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors