Item 1A. Risk Factors
Item 1A. Risk Factors.
Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our 2023 Form 10-K, the occurrence of any one of which could have a material adverse effect on our actual results.
Except as set forth below, there have been no material changes to the risk factors previously disclosed in our 2023 Form 10-K. The risk factors below supplement or update the risk factors in our 2023 Form 10-K.
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We are currently listed on The Nasdaq Capital Market (" Nasdaq " ). If we are unable to maintain listing of our securities on Nasdaq or any stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and it may be more difficult for our stockholders to sell their securities.
Although our common stock is currently listed on Nasdaq, we may not be able to continue to meet the exchange's minimum listing requirements or those of any other national exchange. The Listing Rules of Nasdaq require listing issuers to comply with certain standards in order to remain listed on its exchange. For example, while we currently meet the required listing standards of Nasdaq, if, in the future, the closing bid price for our common stock falls below $1.00 per share for 30 consecutive business days, we will not be in compliance with the $1.00 minimum bid price requirement for continued listing on Nasdaq under Rule 5550(a)(2) of the Nasdaq Listing Rules. We can provide no assurance that the trading price of our common stock will not fall below $1.00 per share for a period of 30 consecutive trading days or that if it does, we will be able to regain compliance with the minimum bid price requirement, even if we maintain compliance with the other listing requirements. If, for any reason, we should fail to maintain compliance with the listing standards of Nasdaq, Nasdaq should delist our securities from trading on its exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:
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the liquidity of our common stock;
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the market price of our common stock;
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our ability to obtain financing for the continuation of our operations;
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the number of investors that will consider investing in our common stock;
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the number of market makers in our common stock;
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the availability of information concerning the trading prices and volume of our common stock; and
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the number of broker-dealers willing to execute trades in shares of our common stock.
There is substantial doubt about our ability to continue as a going concern
On April 2, 2024, the Company entered into the SLR Credit Agreement. The SLR Credit Agreement requires the Company to maintain and comply with certain financial covenants and the borrowings under the SLR Revolver are limited to a borrowing base which fluctuates as regularly as weekly based on the Company's eligible accounts receivable. As a result of a decline in financial performance of the Company's owned and operated digital media properties in April 2024, the Company's accounts receivable were insufficient to support the borrowing base needed to fund operations through the end of the second quarter of 2024. As a result, the Company raised $10 million in gross proceeds from the Private Placement and updated its projections to reflect the continued decline in its operating results. While the revised projections indicate that the Company will be in compliance with all financial covenants under the SLR Credit Agreement for each of the quarters in the twelve months following the issuance date of this Quarterly Report on Form 10-Q, if these projections are not met, the Company will not be in compliance with such covenants. As of the date of this Quarterly Report on Form 10-Q, the Company's results have been trending below its forecast. The Company's decline in operating results could lead to declines in the borrowing base, which could lead to the Company's inability to draw on the SLR Revolver in order to fund its operations as well as, potentially, require repayment of a portion of its current borrowings under the SLR Credit Facility.
While management believes the proceeds from the Private Placement and other cost reduction measures such as divesting business units will be adequate to cover a decline in the borrowing base under the SLR Revolver and fund its current operations, there is no guarantee that the Company's plans will be successfully executed or have the expected benefits. Furthermore, if an event of default under the SLR Credit Agreement were to occur and the maturity date thereunder accelerated, the Company likely would not have sufficient funds to repay the SLR Term Loan and the SLR Revolver. As there can be no assurance that the Company will be able to effectively implement its plans within one year after the date of this Quarterly Report on Form 10-Q, management concluded that there is substantial doubt about the Company's ability to continue as a going concern through such one - year period.
If the Company's current plans are not successful, it may need to consider other strategic alternatives, including restructuring or refinancing its debt, seeking additional equity or debt financing, reducing or delaying our business activities and strategic initiatives, selling assets, and other strategic transactions and/or other measures. If the Company seeks additional financing to fund its operations and there remains substantial doubt about the Company's ability to continue as a going concern, financing sources may be unwilling to provide such funding to the Company on commercially reasonable terms, or at all. Furthermore, the perception that the Company may not be able to continue as a going concern may cause publishers, vendors, advertisers and other clients (current and potential) to review their business relationships and terms with the Company. Uncertainty regarding the Company's ability to continue as a going concern could also have a material and adverse impact on the price of the Company's common stock, which could negatively impact its ability to obtain stock-based financing or enter into strategic transactions.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.