What changed in this filing

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Item 1A. Risk Factors

2025-05-16 compared with 2024-11-15 · 32 added, 24 removed, 22 unchanged (72% of the section changed)

4 unchanged sentences

There is substantial doubt about our ability to continue as a going concern.

We have experienced a continued decline in our operating results, driven primarily by the continued impact of the imposed regulatory requirements on our owned and operated digital media properties.

The SLR Credit Agreement requires us to maintain and comply with certain financial covenants.

Moreover, the borrowings under the SLR Revolver under the SLR Credit Agreement are limited to a borrowing base that fluctuates as regularly as weekly based on our eligible accounts receivable.

As a result of the continued decline in financial performance of our owned and operated digital media properties throughout the third quarter of 2024, our accounts receivable were insufficient to support the borrowing base needed to fund operations through the end of the third quarter of 2024.

We therefore entered into convertible subordinated notes in August 2024, further updated our projections to reflect the continued decline in our operating results, and entered into the Second Amendment with SLR on August 19, 2024.

As of September 30, 2024, we were not in compliance with our financial covenants under the SLR Credit Agreement, which we had to report by October 31, 2024, and which would have resulted in an event of default.

However, we entered into a letter agreements pursuant to which SLR extended the deadline for delivery of the compliance certificate required for the fiscal month ended September 30, 2024, and the related notice of event of default, to November 19, 2024.

On November 15, 2024, we entered into the Third Amendment to the SLR Credit Agreement, which, among other things, required us to raise at least $7.5 million of additional capital by November 29, 2024.

In addition, the Third Amendment waived non-compliance with the financial covenants as of September 30, 2024, extended the duration of the call protection applicable to the loans, and modified the cash dominion provisions to remain in effect on an indefinite basis.

We will seek to raise additional capital through equity, equity-linked, or subordinated debt financings;

however, whether and when we can effect such financings and how much capital we can raise depend on a variety of factors, including, among others, market conditions, the trading price of our common stock, and our determination as to the appropriate sources of funding for our operations.

There can be no assurance that additional capital will be available by November 29, 2024.

Based on current projections, we expect to be in compliance with the new financial covenants for each of the quarters in the twelve months following the issuance date of this Quarterly Report on Form 10-Q.

However, we have not met our projections for certain recent quarters, so there can be no assurance that we will meet our projections in the future.

I f during any fiscal quarter, we do not comply with any of our financial covenants, such non-compliance would result in an event of default that would give SLR the right to accelerate maturities.

Additionally, if we fail to raise capital in at least the amount required under the Third Amendment by November 29, 2024, such failure would also result in an event of default.

In such case, we would not have sufficient funds to repay the SLR Term Loan and the SLR Revolver.

In addition, even if we are able to raise additional capital as required by the Third Amendment, there is no assurance that such capital plus the available cash plus borrowing base on the SLR Revolver will be sufficient to fund operations over the next twelve months.

If needed, we will consider implementing other cost-saving measures, but there is no guarantee that such plans would be successfully executed or have the expected benefits.

As a result, management concluded that there is substantial doubt about our ability to continue as a going concern for one year after the date of this Quarterly Report on Form 10-Q.

We have experienced a continued decline in the number of users registering on our owned and operated digital media properties ("O&O Sites") starting in 2020, following our implementation of the TQI, which eliminated a large portion of our third-party affiliate traffic.

In 2023, the FTC Consent Order resulting from an investigation by the FTC imposed more rigorous standards and vetting of our third-party publishers, some of whom elected not to work with us, which negatively impacted our registration volume on our O&O Sites.

These issues, coupled with intermittent difficulties sourcing traffic from social media sites have resulted in declining revenue and profitability.

Borrowings under the SLR Revolver of up to $30.0 million pursuant to the April 2, 2024 SLR Credit Agreement are limited to a borrowing base, that fluctuates weekly, based on eligible accounts receivable.

As a result of the borrowing base limit and the above performance issues, the available borrowing capacity has the potential to be insufficient to fund operations and meet the Company's needs.

Given the continued challenges we have faced achieving profitability, we have made reductions in workforce, including during the first quarter of 2025, and restructured certain long-term contracts to better align with our results and cash flow requirements.

We will continue to monitor the performance of our business units to determine the impact of potential divestments and consider further cost reduction measures and reallocation of resources that will enable us to meet our projected budget and cash flow requirements.

As of March 31, 2025, we were in compliance with our financial covenants under the SLR Credit Agreement.

However, our current forecasts indicate that compliance with our financial covenants may be at risk in the next twelve months.

If, during any fiscal quarter, we do not comply with any of our financial covenants, such non-compliance would result in an event of default that would give SLR the right to accelerate maturities.

In such case, we would not have sufficient funds to repay the SLR Term Loan of $20.0 million under the SLR Credit Agreement and any outstanding balance on the SLR Revolver.

On May 15, 2025, we entered into securities purchase agreements with certain officers and/or directors of the Company, the Company's largest stockholder, and institutional investors or others for whom they have or share beneficial ownership, pursuant to which we expect to raise gross aggregate proceeds of $4.0 million for the purchase of pre-funded warrants and other warrants to purchase common stock.

Even with the proceeds from such raise, there is no assurance that the available cash, plus availability under the borrowing base on the SLR Revolver will be sufficient to fund operations over the next twelve months, and, if needed, we would expect to raise additional capital.

If we are not able to raise sufficient capital to fund operations at their current levels, we will consider implementing cost-saving measures, but there is no guarantee that such plans will be successfully executed or have the expected benefits.

As a result, management has concluded that there is substantial doubt about our ability to continue as a going concern for one year after the date of issuance of this Quarterly Report on Form 10-Q.

If our current plans are not successful, we may need to consider other strategic alternatives, including restructuring or refinancing our 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.

3 unchanged sentences

Furthermore, the perception that we 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 us.

Uncertainty regarding our ability to continue as a going concern could also have a material and adverse impact on the price of our common stock, which could negatively impact our ability to obtain stock-based financing or enter into strategic transactions.

The reaction of investors to the inclusion of a going concern statement in the accompanying financial statement, and our potential inability to continue as a going concern, could materially adversely affect our share price, which could negatively impact our ability to obtain stock-based financing or enter into strategic transactions.

We require additional capital in the future to pursue our business objectives and respond to business opportunities, challenges, or unforeseen circumstances.

1 unchanged sentence

We intend to continue to make investments to support our growth and may require additional capital to pursue our business objectives and respond to business opportunities, challenges, or unforeseen circumstances.

While the SLR Credit Agreement includes an undrawn revolving credit facility of up to $30 million that we can use subject to certain conditions, we require additional capital to satisfy the requirements of the Third Amendment to SLR Credit Agreement and we may require additional capital not available under the SLR Credit Agreement due to limitations in the borrowing base.

In addition to revenue from business operations and proceeds from the SLR Credit Agreement, the Company's primary source of working capital to date has been through the sale of equity and subordinated debt securities to officers, directors and a principal stockholder.

While the SLR Credit Agreement includes an undrawn revolving credit facility of up to $30 million that we can use subject to certain conditions, we may require additional capital not available under the SLR Credit Agreement due to limitations in the borrowing base.

We may seek to raise additional capital through equity, equity-linked, or subordinated debt financings;

however, when we can effect such financings and how much capital we can raise depends on a variety of factors, including, among others, market conditions, the trading price of our common stock and our determination as to the appropriate sources of funding for our operations.

however, when we can effect such financings and how much capital we can raise depends on a variety of factors, including, but not limited to, market conditions, the trading price of our common stock and our determination as to the appropriate sources of funding for our operations.

The SLR Credit Agreement generally prohibits debt financings without SLR's consent and requires proceeds from equity financings to be used to prepay indebtedness to SLR.

6 unchanged sentences

Any of these events could significantly harm our business and results of operations.

Economic or political instability, including the potential impact of tariffs, could adversely affect our business, financial condition, and results of operations.

Our results of operations could be adversely affected by general conditions in the global economy, including events or factors that are outside of our control.

Such events or factors could include war, terrorism and other international conflicts, tariffs and international trade disputes, public health issues including health epidemics or pandemics, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the U.S.

or elsewhere.

Additionally, the Federal Reserve may further raise the Federal Funds Rate.

These rate increases, coupled with reduced consumer confidence, result in uncertainty, and may cause our customers and/or clients to be cautious in their ad spending.

Many of our advertisers and media partners are based outside of the U.S., including many app and gaming advertisers based in Israel.

While the Israel-Hamas conflict and Ukraine-Russia conflict have not, of yet, been disruptive to their business or operations, if hostilities resume or intensify, our Ukraine and/or Israeli partners could be affected, potentially having a negative impact on our operations.

While our operations have not been directly affected by U.S.

tariff and trade policies under the current Presidential administration, the current environment is dynamic and uncertain, creating uncertainty for many of our brand and retailer partners, affecting their purchasing decisions for our performance marketing services.

tariff and trade policies, and responsive measures from other countries, cause higher inflation, higher interest rates and slower economic growth or recession in the U.S, our results of operations, financial condition and cash flows would likely be adversely affected.

More generally, general conditions in the global economy could decrease the spending of our existing and potential new customers, adversely affect demand for our products, cause one or more of our customers, vendors, and partners to file for bankruptcy, impact expected spending and pricing levels from existing and potential new customers, or negatively impact our collections of accounts receivable.

The full extent to which these factors may negatively affect our business and operations, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain and cannot be predicted.

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-Q

Item 1A. Risk Factors