What changed in this filing

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Item 1A. Risk Factors

2023-03-10 compared with 2022-03-17 · 42 added, 31 removed, 165 unchanged (31% of the section changed)

10 unchanged sentences

We reported an operating loss of approximately $12.6 million in 2022 as compared to an operating loss of approximately $7.8 million in 2021.

The lower gross margin in 2021 was primarily due to the change of revenue mix.

Though we have a credit facility dependent upon receivables, the negative cash flows generated from operating activities introduces potential risk of an interruption to operating activities.

The COVID-19 pandemic could have a material adverse impact on our business, results of operations and financial condition .

In December 2019, a novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, China.

Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a pandemic—the first pandemic caused by a coronavirus.

The outbreak has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines and travel bans, intended to control the spread of the virus.

The COVID-19 outbreak has already caused severe global disruptions.

Beginning in late April 2020, we experienced a significant reduction in demand (marketing budgets) within the ValidClick platform and a modest decline in demand within the IntentKey platform, the combination of which resulted in a significant reduction in our revenue run rate.

Generally, marketing budgets tend to decline in times of a recession.

During 2020, we curtailed expenses, including compensation and travel and issued a work from home policy to protect our employees and their families from virus transmission associated with co-workers and we began to experience interruptions in our daily operations, as a result of these policies.

During 2021, we changed our policies and reopened our offices on a limited basis and our revenue has returned to growth on a year over year basis.

We maintain long-standing relationships with Yahoo!

and Google that provide access to hundreds of thousands of advertisers from which most of our ValidClick and digital publishing revenue originates.

Any adverse impact on the operations of those companies would have a correspondingly adverse impact on our revenues in future periods.

We will continue to assess the impact of the COVID-19 pandemic on our Company, however, at this time we are unable to predict all possible impacts on our Company, operations and

Should revenues turn downwards or fail to return to historical levels on a consistent basis, we may not be able to offset expenses quickly enough which could have a material adverse effect on our business, results of operations, financial condition and cash flows and adversely impact the trading price of our common stock.

As of December 31, 2022, we have approximately $4.5 million in cash, cash equivalents and short-term marketable securities.

Our net working capital was $2.8 million.

We have encountered recurring losses and cash outflows from operations, which historically we have funded through equity offerings and debt facilities.

In addition, our investment in internally developed software consists primarily of labor costs which are of a fixed nature.

Through December 31, 2022, our accumulated deficit was $157.1 million.

See Liquidity and Capital Resources under ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS for a more thorough discussion.

We rely on three customers for a significant portion of our revenues.

We are reliant upon Google, Yahoo!

and Sovrn for a significant portion of our revenue.

We are reliant upon three customers for a significant portion of our revenue.

During 2022 these customers accounted for 29.1%, 24.1% and 12.9% of our revenues, respectively.

In 2020, Yahoo!

and Google accounted for 33.3% and 27.2% of our revenues, respectively.

The amount of revenue we receive from these customers is dependent on a number of factors outside of our control, including the amount they charge for advertisements, the depth of advertisements available from them, and their ability to display relevant ads in response to end-user queries.

We would likely experience a significant decline in revenue and our business operations could be significantly harmed if these customers do not approve our new websites and applications, or if we violate their guidelines or they change their guidelines.

In addition, if any of these preceding circumstances were to occur, we may not be able to find a suitable alternate paid search results provider or otherwise replace the lost revenues.

The loss of any of these customers or a material change in the revenue or gross profit they generate would have a material adverse impact on our business, results of operations and financial condition in future periods.

In 2021, three separate customers accounted for 14.3%, 15.6% and 33.0% of our revenues, respectively.

The amount of revenue

we receive from these customers is dependent on a number of factors outside of our control, for InDirect customers this includes the amount they charge for advertisements, the depth of advertisements available from them, and their ability to display relevant ads in response to end user queries and for Direct customers this includes changes in advertising budgets resulting from their own business circumstances.

In 2021 and throughout 2022 we onboarded several Direct clients that contributed to revenue growth.

We have experienced churn in our Direct customer base where some Direct clients that were material to 2021 were not served or only partially served in 2022 and some Direct clients that were material to 2022 are no longer being served.

Historically, we have been able to replace lost clients with new clients or by expanding our relationship with existing clients, however, we would likely experience a significant decline in revenue and our business operations could be significantly harmed if we continue to lose material customers or are unable to replace lost clients.

The loss of material customers or a material change in the revenue or gross profit they generate would have a material adverse impact on our business, results of operations and financial condition in future periods.

We are exposed to credit risk on our accounts receivable and this risk is heightened during periods when economic conditions worsen .

17 unchanged sentences

These partners may experience difficulty in attracting and maintaining users for a number of reasons, including competition, rapidly changing markets and technology, industry consolidation and changing consumer preferences.

We have experienced a decrease in the number of supply partners and quantity of Internet traffic from supply partners within ValidClick beginning in late April 2020.

We have experienced a decrease in the number of supply partners and quantity of Internet traffic from supply partners within CampSight beginning in late April 2020.

Additionally, we are experiencing turnover in our supply partner network and there can be no assurance traffic levels will increase to prior levels or that we will be able to replace supply partners that have left our network.

12 unchanged sentences

In the technology industry, there is substantial and continuous competition for engineers with high levels of experience in designing, developing and managing software and Internet-related services, as well as competition for executives and sales and operations personnel.

Many of our competitors have substantially more resources than we do and have the ability to compensate highly skilled personnel at higher levels than we can.

Many of our competitors have substantially more resources than we do and have the ability to compensate highly skilled personnel at higher levels than

We may not be successful in attracting and retaining qualified highly skilled personnel.

3 unchanged sentences

If we fail to attract new personnel or fail to retain and motivate our current personnel, our business and future growth prospects could be severely harmed.

The COVID-19 pandemic could have a material adverse impact on our business, results of operations and financial condition .

In December 2019, a novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, China.

Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a pandemic—the first pandemic caused by a coronavirus.

The outbreak has resulted in the implementation of significant governmental measures, including lockdowns, closures, quarantines and travel bans, intended to control the spread of the virus.

The COVID-19 outbreak has already caused severe global disruptions.

Beginning in late April 2020, we experienced a significant reduction in demand (marketing budgets) within the CampSight platform and a modest decline in demand within the IntentKey platform, the combination of which resulted in a significant reduction in our revenue run rate.

Generally, marketing budgets tend to decline in times of a recession.

During 2021, we changed our policies and reopened our offices on a limited basis and our revenue has returned to growth on a year over year basis.

We maintain long-standing relationships with Yahoo!

and Google that provide access to hundreds of thousands of advertisers from which most of our CampSight and digital publishing revenue originates.

Any adverse impact on the operations of those companies would have a correspondingly adverse impact on our revenues in future periods.

We will continue to assess the impact of the COVID-19 pandemic on our Company, however, at this time we are unable to predict all possible impacts on our Company, operations and revenues.

Technological Risks

27 unchanged sentences

For example, recently there have been Congressional hearings and increased attention to the capture and use of location-based information relating to users of smartphones and other mobile devices, and internationally the European Union’s General Data Protection Regulation (GDPR) went into effect in May 2018.

Additionally, multiple legislative proposals concerning privacy and the protection of user information are being considered by the U.S.

Congress and various U.S.

state legislatures.

state legislatures have already enacted privacy legislation, one of the strictest and most comprehensive of which is the California Consumer Privacy Act of 2018, which became effective on January 1, 2020 (the “CCPA”).

The CCPA provides data privacy rights for California consumers, and restricts the ability to use personal California user.

The CCPA also provides consumers with a private right of action for security breaches, as well as provides for statutory damages.

We have posted privacy policies and practices concerning the collection, use and disclosure of subscriber data on our websites and applications.

The existing and soon to be enacted privacy and data security related laws and regulations are evolving and subject to potentially differing

interpretations.

The existing and soon to be enacted privacy and data security related laws and regulations are evolving and subject to potentially differing interpretations.

Several Internet companies have incurred penalties for failing to abide by the representations made in their privacy policies and practices.

In addition, several states have adopted legislation that requires businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event of a security breach.

Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders or other federal, state or international privacy or consumer protection-related laws, including the GDPR, regulations or industry self-regulatory principles could result in claims, proceedings or actions against us by governmental entities or others or other liabilities, which could adversely affect our business.

Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders or other federal, state or international privacy or consumer protection-related laws, including the GDPR and CCPA, regulations or industry self-regulatory principles could result in claims, proceedings or actions against us by governmental entities or others or other liabilities, which could adversely affect our business.

We are subject to the continued listing standards of the NYSE American and our failure to satisfy these criteria may result in delisting of our common stock .

65 unchanged sentences

If we raise additional capital by issuing additional equity securities or use equity securities for acquisitions, existing shareholders may be diluted.

If our capital resources are insufficient at any time in the future, we may be unable to fund acquisitions, take advantage of business opportunities or respond to competitive pressures, any of which could harm our business.

If our capital resources are insufficient at any time in the

future, we may be unable to fund acquisitions, take advantage of business opportunities or respond to competitive pressures, any of which could harm our business.

Any usage of capital to fund an acquisition could lead to a decrease in liquidity.

10 unchanged sentences

If we are unsuccessful in completing acquisitions of other operations or assets, our financial condition could be adversely affected and we may be unable to implement an important component of our business strategy successfully.

In addition, if we

are unsuccessful in integrating our acquisitions in a timely and cost-effective manner, our financial condition and results of operations could be adversely affected.

In addition, if we are unsuccessful in integrating our acquisitions in a timely and cost-effective manner, our financial condition and results of operations could be adversely affected.

UNRESOLVED STAFF COMMENTS.

1 unchanged sentence

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