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You should not rely upon future bookings we may announce or revenue growth as indicative of our future performance.
−Removed: We cannot assure you that we will reach profitability in the future or at any specific time in the future or that, if and when we do become profitable, we will sustain profitability.
+Added: We cannot assure you that we will reach profitability in the future or at any specific time in the future or that, if and when we do become profitable, that we will sustain profitability.
If we are ultimately unable to generate sufficient revenue to meet our financial targets, become profitable and have sustainable positive cash flows, investors could lose their investment.
−Removed: Our consolidated financial statements include an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.
−Removed: The notes accompanying our consolidated financial statements contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern due to our recurring losses from operations and substantial decline in our working capital.
−Removed: If we are unsuccessful in our efforts to raise outside financing, we may be required to significantly reduce or cease operations.
−Removed: The report of our independent registered public accounting firm on our audited financial statements for the year ended December 31, 2022 included a "going concern" explanatory paragraph.
−Removed: We current have an effective registration statement on Form S-3 filed with the SEC.
−Removed: We may use the shelf registration statement on Form S-3 to offer from time to time any combination of common stock, preferred stock, warrants and units.
−Removed: Contained therein, is a prospectus supplement in which we may sell up to $100 million of our common stock in an “at the market" offering pursuant to a sales agreement we entered into with H.C.
−Removed: Wainwright & Co., LLC on January 31, 2022.
−Removed: As of the date of this Annual Report on Form 10-K, a total of $95.4 million of shares of our common stock remains issuable pursuant to the sales agreement.
−Removed: There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all.
−Removed: A “going concern” qualification could impair our ability to finance our operations through the sale of equity, to incur debt or to pursue other financing alternatives.
−Removed: Our ability to continue as a going concern will depend upon the availability and terms of future funding, growth in revenue, improved operating margins and our ability to profitably meet our after-sale service
−Removed: commitments with existing customers.
−Removed: If we are unable to achieve these goals, our business could be jeopardized and may not be able to continue.
−Removed: If we ceased operations, it is likely that all of our investors would lose their investment.
Our future performance will depend on the successful transition of our Chief Executive Officer (CEO).
−Removed: In October 2022, our co-founder and CEO, Alan Knitowski, submitted notice of resignation to the Company effective upon the expiration of his employment contract on December 26, 2022.
−Removed: In November 2022, we announced the hiring of Russell Buyse to serve as our Chief Executive Officer effective as of December 28, 2022.
+Added: On October 25, 2023, the Company and Russell Buyse, the Company’s CEO, entered into a separation agreement which provided that Mr.
+Added: Buyse’s employment with the Company terminated.
+Added: On the same day, our board of directors appointed the Company’s Chief Revenue Officer, Michael Snavely, as CEO.
If we are unable to execute a timely and orderly transition and successfully integrate our new CEO into our leadership team, revenue, operating results and our financial condition may be adversely impacted.
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Further, if our new CEO formulates different or changed views, the future strategy and plans of our business may differ materially from those of the past.
−Removed: We are currently operating in a period of significant macro-economic uncertainty, including supply-chain disruptions, COVID-related disruptions and inflationary pressures.
+Added: We are currently operating in a period of significant macro-economic uncertainty, including supply-chain disruptions and inflationary pressures.
Weakened economic conditions may have an adverse impact on our business and results of operations.
Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations could materially adversely affect demand for our products and services.
−Removed: Inflationary pressures and supply chain disruptions could impact the price at which we acquire components required in the assembly of Lyte computer systems.
Our principal operating expense is compensation related costs.
−Removed: Inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation may result in decreased demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital.
+Added: Inflation rates, particularly in the United States, have increased recently to levels not seen in years, and increased inflation
+Added: may result in decreased demand for our products and services, increases in our operating costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital.
The effects of inflation on customer and consumer budgets could result in the reduction of our customers’ spending plans.
These and other economic factors could materially adversely affect our business, results of operations and financial condition.
−Removed: In addition, the effects of macro-economic uncertainty, including, but not limited to the COVID-19 pandemic, may heighten many of the other risks described in this “ Risk Factors ” section.
If we are unable to expand or renew sales to existing customers, or attract new customers, our growth could be slower than expected and our business may be harmed.
−Removed: Our future growth depends upon expanding sales and renewals of sales of our technology, products and services to existing customers and expansion of our personal computer offerings.
+Added: Our future growth depends upon expanding sales and renewals of sales of our technology, products and services to existing customers.
Our customers may not continue to purchase our technology offerings and services, or our customers may reduce their purchase rate of services, if we do not demonstrate the value proposition for their investment and we may not be able to replace existing customers with new customers.
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An organization may be reluctant or unwilling to invest in new technology offerings and services.
−Removed: If we fail to attract new
−Removed: customers and maintain and expand those customer relationships, our revenue may grow more slowly than expected, may not grow at all, or may decline and our business may be harmed.
−Removed: We have incurred a goodwill impairment charge and goodwill continues to comprise a significant portion of our total assets.
−Removed: In the future, we could incur additional impairment charges, which could result in a material, non-cash write-down and could have a material adverse effect on our results of operations, financial condition and our future operating results.
−Removed: The carrying value of our goodwill was $31.1 million, or approximately 57% of our total assets, as of December 31, 2022.
−Removed: We perform an analysis on our goodwill balances to test for impairment on an annual basis or whenever events occur that may indicate impairment possibly exists.
−Removed: Goodwill is deemed to be impaired if the net book value of a reporting unit exceeds the estimated fair value.
−Removed: We periodically review the carrying values of goodwill and intangible assets to determine whether such carrying values exceed their fair market values.
−Removed: Declines in the profitability of the Company, due to economic or market conditions or otherwise, as well as adverse changes in financial, competitive and other conditions, could adversely affect the values of our reporting units, resulting in an impairment of goodwill or intangible assets.
−Removed: In addition, adverse changes to the key valuation assumptions contributing to the fair value of our reporting units could result in an impairment of goodwill or intangible assets.
+Added: If we fail to attract new customers and maintain and expand those customer relationships, our revenue may grow more slowly than expected, may not grow at all, or may decline and our business may be harmed.
+Added: We have incurred a goodwill impairment charge.
We completed our annual goodwill impairment analysis during the fourth quarter of 2023, and we concluded goodwill was impaired.
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For additional details, refer to Note 6 " Goodwill " of the notes to the consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further discussion on our goodwill impairment.
−Removed: We cannot be certain that a future downturn in our business, changes in market conditions or a longer-term decline in the quoted market price of our stock will not result in future impairments of goodwill and the recognition of resulting expenses in future periods, which could adversely affect our results of operations for those periods.
Current and future litigation could adversely affect us.
−Removed: We, along with certain of our former and current executive officers and certain former and current board members, are parties to litigation with Wild Basin Investments, LLC as further described on our Current Report on Form 8-K filed with the SEC on January 10, 2020.
+Added: We, along with certain of our former executive officers and certain former board members, are parties to litigation with Wild Basin Investments, LLC as further described on our Current Report on Form 8-K filed with the SEC on January 10, 2020.
We, along with our officers and directors, may also become subject to other legal proceedings in our ordinary course of business.
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Our success depends on our ability to continue to develop and implement technology, product and service offerings that anticipate or timely respond to rapid and continuing changes in technology and industry developments and offerings by new technology providers to serve the evolving needs of our customers.
−Removed: Examples of areas of significant change in the industry include cloud, software defined infrastructure, virtualization, security, mobility, data analytics and IoT, the continued shift from maintenance to managed services and ultimately to cloud based services, as-a-service solutions, security and information technology automation.
+Added: Examples of areas of significant change in the industry include cloud, software defined
+Added: infrastructure, virtualization, security, mobility, data analytics and IoT, the continued shift from maintenance to managed services and ultimately to cloud based services, as-a-service solutions, security and information technology automation.
In addition, enterprises are continuing to shift from on-premise, hardware infrastructure to software centric hosted solutions.
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In addition, if we are unable to keep up with changes in technology and new hardware, software and services offerings, for example, by providing the appropriate training to our customer solutions team, sales directors, program management team, channel partners and software development and product engineers to enable them to effectively sell and deliver such new offerings to customers, our business, results of operations, or financial condition could be adversely affected.
−Removed: Demand for our technology, product and service offerings could be adversely affected by volatile, negative, or uncertain economic conditions, including, but not limited to those caused by the COVID-19 pandemic, and the effects of these conditions on our customers’ businesses.
+Added: Demand for our technology, product and service offerings could be adversely affected by volatile, negative, or uncertain economic conditions and the effects of these conditions on our customers’ businesses.
Our revenue and profitability depend on the demand for our technology, product and service offerings, which could be negatively affected by numerous factors, many of which are beyond our control.
−Removed: Volatile, negative, or uncertain economic conditions, including those caused by the COVID-19 pandemic affect our customers’ businesses and the markets we serve.
+Added: Volatile, negative, or uncertain economic conditions affect our customers’ businesses and the markets we serve.
Such economic conditions in our markets have undermined and could in the future undermine business confidence in our markets and cause our customers to reduce or defer their spending on new technology offerings and services, or may result in customers reducing, delaying or eliminating spending under existing contracts with us, which would negatively affect our business.
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Changing demand patterns from economic volatility and uncertainty could have a significant negative impact on our business, results of operations, or financial condition.
−Removed: If we fail to maintain the efficiency of our supply chain as we respond to changes in customer demand for our products, our business could be materially adversely affected.
−Removed: Our ability to meet customer demand for our products depends, in part, on our ability to deliver the products our customers want on a timely basis.
−Removed: For example, we rely on our supply chain for the manufacturing, distribution and fulfillment of Lyte personal computers.
−Removed: As we continue to grow Lyte, expand to international markets and acquire new customers, the efficiency of our supply chain will become increasingly important because many of our customers tend to have specific requirements for Lyte products, and specific time-frames in which they require delivery of these products.
−Removed: If we are unable to consistently deliver the right personal computers to our customers on a timely basis in the right locations, our customers may not order computers from us, which could have a material adverse effect on our business.
Global political conditions may adversely affect demand for our products.
Global political conditions may create uncertainties that could adversely affect our business.
−Removed: The United States has been and may continue to be involved in armed conflicts that could have a further impact on our sales and our supply chain related to acquiring necessary inventory to assemble Lyte computers.
+Added: The United States has been and may continue to be involved in armed conflicts that could have a further impact on our sales.
The consequences of armed conflict, political instability or civil or military unrest are unpredictable, and we may not be able to foresee events that could have a material adverse effect on us.
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Some of our competitors are larger and have greater name recognition, much longer operating histories, larger marketing budgets and significantly greater resources than we do.
−Removed: We also face competition from custom-built software vendors and from vendors of specific applications, some of which offer cloud-based solutions, as well as custom-built personal computer hardware vendors.
+Added: We also face competition from custom-built software vendors and from vendors of specific applications, some of which offer cloud-based solutions.
We may also face competition from a variety of vendors of software and products that address only a portion of our platform.
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We continue to invest in new services and technologies, including adding additional vertical solutions to our product offerings and blockchain.
−Removed: We have expanded our Lyte computer offerings into Canada and may plan additional international expansion.
The complexity of these solutions, our learning curve in developing and supporting them and significant competition in the markets for these solutions could make it difficult for us to market and implement these solutions successfully.
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We may choose to expand by making additional acquisitions that could be material to our business.
−Removed: We have in the past made several acquisitions of complementary businesses, including acquisitions of Odyssey, Simplikate, Digby, Tapit!, GoTV and our most recently completed acquisition of Lyte.
+Added: We have in the past made several acquisitions of complementary businesses, including acquisitions of Odyssey, Simplikate, Digby, Tapit!, GoTV and Lyte.
Acquisitions involve many risks, including the following:
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• changes in spending on subscriptions, services and application transactions media offerings and services by our current or prospective customers;
−Removed: • our ability to scale and expand the Lyte business;
−Removed: • pricing our technology, product, and services effectively so that we are able to attract and retain customers without compromising our operating results;
+Added: • pricing our technology, products, and services effectively so that we are able to attract and retain customers without compromising our operating results;
• one-time, non-recurring revenue events;
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• customer renewal rates and the amounts for which agreements are renewed;
−Removed: • seasonality and its effect on customer demand for Lyte personal computers;
• awareness of our brand;
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We could be held liable for damages or our reputation could suffer from security breaches or disclosure of confidential information or personal data.
−Removed: In the normal course of business as a seller of personal computers via the internet, we obtain large amounts of personal data, including credit and debit card information.
We are also dependent on technology networks and systems to process, transmit and securely store electronic information and to communicate among our locations and with our customers.
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Our technology offerings and services could infringe upon the intellectual property rights of others or we might lose our ability to use intellectual property of others.
−Removed: We cannot be sure that our brand, software solution and personal computing products and services do not infringe upon the intellectual property rights of third parties, who could claim that we or our customers are infringing upon their intellectual property rights.
+Added: We cannot be sure that our brand, software solution and products and services do not infringe upon the intellectual property rights of third parties, who could claim that we or our customers are infringing upon their intellectual property rights.
These claims could harm our reputation, cause us to incur substantial costs or prevent us from offering some products or services in the future, or require us to rebrand.
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Labor related costs represent a significant portion of our expenses and we have experienced increases compensation related expenses.
−Removed: Additional increases in labor costs, for example, as a result of increased competition for skilled labor, or
−Removed: employee benefit costs, such as healthcare costs or otherwise, could further impact our business, results of operations or financial condition.
+Added: Additional increases in labor costs, for example, as a result of increased competition for skilled labor, or employee benefit costs, such as healthcare costs or otherwise, could further impact our business, results of operations or financial condition.
Our global operations are subject to complex risks, some of which might be beyond our control.
−Removed: Although international revenue currently represents a small portion of our revenue, our business from outside of the United States may expand in the future as we expand our international presence, including but not limited to our subscription, application transaction, Lyte personal computing, services and digital asset offerings.
+Added: Although international revenue currently represents a small portion of our revenue, our business from outside of the United States may expand in the future as we expand our international presence, including but not limited to our subscription, application transaction, services and digital asset offerings.
As a result, we may be subject to risks inherently associated with international operations, including risks associated with foreign currency exchange rate fluctuations, difficulties in enforcing intellectual property and/or contractual rights, the burdens of complying with a wide variety of foreign laws and regulations, potentially adverse tax consequences, tariffs, quotas and other barriers, potential difficulties in collecting accounts receivable, international hostilities, terrorism and natural disasters.
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A significant amount of our development and ad operations work is also located in California.
−Removed: We also have corporate offices in Texas and Florida, both of which are susceptible to floods, hurricanes and extreme temperatures and Texas is an area that is vulnerable to heavy winds, ice, snow and tornadoes.
+Added: We also have corporate offices in Texas, which is susceptible to floods, extreme temperatures, heavy winds, ice, snow and tornadoes.
In addition, acts of terrorism, which may be targeted at metropolitan areas that have higher population density than rural areas, could cause disruptions in our or our advertisers’ businesses or the economy as a whole.
Our servers may also be vulnerable to computer viruses, break-ins, denial-of-service attacks and similar disruptions from unauthorized tampering with our computer systems, which could lead to interruptions, delays, loss of critical data.
−Removed: We may not have sufficient protection or recovery plans in some circumstances, such as natural disasters affecting California, Texas or Florida.
−Removed: In late 2019, a strain of the coronavirus was reported to have surfaced and spread to the United States.
−Removed: The ongoing extent to which COVID-19 and its variants impact on our results is unknown.
+Added: We may not have sufficient protection or recovery plans in some circumstances, such as natural disasters affecting California or Texas.
As we rely heavily on our data centers, computer and communications systems and the internet to conduct our business and provide high-quality customer service, such disruptions could negatively impact our ability to run our business and either directly or indirectly disrupt our customers’ business, which could have a material adverse effect on our business, results of operations and financial condition.
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Future sales or issuances of our common stock, or the perception that such sales could occur, could depress the trading price of our common stock.
−Removed: In February 2022, we filed a registration statement on Form S-3, which was subsequently declared effective by the SEC, pursuant to which we may issue up to $200 million in common stock, preferred stock, warrants and units, and contained therein was a prospectus supplement in which we may sell up to $100 million in sales of our common stock deemed to be an “at the market" offering.
−Removed: During 2022, we issued common stock in various sales of our common stock via at-the-market offerings.
+Added: In February 2022, we filed a shelf registration statement on Form S-3, which was subsequently declared effective by the SEC, pursuant to which we may issue up to $200 million in common stock, preferred stock, warrants and units, and contained therein was a prospectus supplement in which we may sell up to $100 million in sales of our common stock deemed to be an “at the market" offering.
+Added: During 2023, we issued common stock in various sales of our common stock via at-the-market offerings, purchase commitments and public offerings under our shelf registration statement.
+Added: We also issued shares of common stock to settle outstanding debt obligations and upon exercise of warrants.
Additional capital may be needed in the future to continue our planned operations, and we may seek additional funding through a combination of equity offerings, debt financings, strategic alliances, licensing and collaboration arrangements, or other third-party business arrangements.
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Furthermore, additional equity or debt financing might not be available to us on reasonable terms, if at all.
−Removed: Shares of our common stock may be issued pursuant to the terms of an outstanding warrant, which could cause the price of our common stock to decline.
−Removed: On July 15, 2020 we issued a Series A Senior Convertible Note (a "Series A Note") and a Series B Senior Convertible Note (a "Series B Note," and together with the Series A Note, the "2020 Convertible Notes") to an institutional investor.
−Removed: We paid the 2020 Convertible Notes in full in April 2021.
−Removed: However, in connection with the issuance of the 2020 Convertible Notes, we issued a warrant to the holder.
−Removed: As of December 31, 2022, 2,811,315 shares may be issued under the warrant at an exercise price of $1.4246 per share.
−Removed: The issuance of these shares will dilute our other equity holders, which could cause the price of our common stock to decline.
The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations and our financial condition and results of operations.
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Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions in a timely fashion or at all.
−Removed: Although we do not have any funds deposited with SVB and Signature Bank, we regularly maintain cash balances with other financial institutions in excess of the FDIC insurance limit.
+Added: Although we did not have any funds deposited with SVB or Signature Bank, we regularly maintain cash balances with other financial institutions in excess of the FDIC insurance limit.
Access to our cash and cash equivalents in amounts adequate to finance our operations could be significantly impaired by the financial institutions with which we have arrangements directly facing liquidity constraints or failures.
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Any material decline in available funding or our ability to access our cash and cash equivalents could adversely impact our ability to meet our operating expenses, result in breaches of our contractual obligations or result in violations of federal or state wage and hour laws, any of which could have material adverse impacts on our operations and liquidity.
−Removed: Furthermore, should our customers have relationships with financial institutions that fail, this may result in a delay of collecting outstanding receivables, if at all, which could have a material adverse affect on our business.
−Removed: The SBA may review our Paycheck Protection Program (“PPP”) forgiveness application and if the SBA disagrees with our certification we could be subject to penalties and the repayment of our PPP loan, which could negatively impact our business, financial condition and results of operations and prospects.
−Removed: During 2021, we received notification of forgiveness of our $2.85 million PPP loan received in calendar year 2020.
−Removed: We must retain PPP loan documentation in our files for six years after the date of forgiveness.
−Removed: We believe we met the SBA’s certification requirement based on our weakened business operations during the COVID-19 pandemic and small market value.
−Removed: However, no assurance can be given as to the outcome if the SBA re-evaluates our loan certification.
−Removed: The SBA could determine we did not qualify in whole or in part for loan forgiveness.
−Removed: In addition, it is unknown what type of penalties could be assessed against us if the SBA disagrees with our certification.
−Removed: We could be required to repay the PPP loan.
−Removed: Any penalties in addition to the potential repayment of the PPP loan could negatively impact our business, financial condition and results of operations and prospects.
+Added: Furthermore, should our customers have relationships with financial institutions that fail, this may result in a delay of collecting outstanding receivables, if collectible at all, which could have a material adverse affect on our business.
The price of our common stock and warrants has been, and may continue to be, volatile, and you could lose all or part of your investment.
Technology stocks have historically experienced high levels of volatility.
−Removed: The trading price and volume of our common stock and warrants have fluctuated, and may continue to fluctuate, substantially due to a variety of factors, including those described in this “ Risk Factors ” section, many of which are beyond our control and may not be related to our operating performance.
+Added: The trading price and volume of our common stock have fluctuated, and may continue to fluctuate, substantially due to a variety of factors, including those described in this “ Risk Factors ” section, many of which are beyond our control and may not be related to our operating performance.
These fluctuations could cause you to lose all or part of your investment in our common stock.
In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock and/or warrants could decline for reasons unrelated to our business, results of operations or financial condition.
−Removed: The trading price of our common stock and warrants might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us.
+Added: The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us.
In the past, following periods of volatility in the trading price of a company’s securities, securities class action litigation has often been brought against that company.
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• "flash crashes,” “freeze flashes” or other glitches that disrupt trading on the securities exchange on which we are listed;
−Removed: • major catastrophic events in our domestic and foreign markets, such as, but not limited to, natural disasters, terrorist attacks, cyber-attacks or disease outbreak, epidemic or pandemic, including the ongoing effects of COVID-19 and its variants.
+Added: • major catastrophic events in our domestic and foreign markets, such as, but not limited to, natural disasters, terrorist attacks, cyber-attacks or disease outbreak, epidemic or pandemic.
Furthermore, the trading price of our Common Stock has recently been volatile during relatively short time periods.
−Removed: For example, on December 28, 2022 our Common Stock traded at an intraday low of $0.75, whereas on February 2, 2023 our Common Stock traded at an intraday high of $1.15.
+Added: For example, on January 12, 2024 our Common Stock traded at an intraday low of $0.08, whereas on January 16, 2024 our Common Stock traded at an intraday high of $0.49.
We believe the volatility in the trading price and price range of our Common Stock may be the result of a number of factors, many of which are outside our control.
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In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to be listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq listing requirements.
+Added: On April 13, 2023, we received notice from the Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company was not in compliance with the $1.00 minimum bid requirement for continued listing on Nasdaq.
+Added: Although we have until April 8, 2024 to regain compliance with the minimum bid requirement, there can be no assurance that we will regain such compliance and Nasdaq could make a determination to delist our common stock.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, the price and trading volume of our common stock could decline.
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Risks Related to our Digital Asset Holdings
−Removed: Our bitcoin acquisition strategy exposes us to various risks associated with bitcoin.
−Removed: During the fourth quarter of 2021, our board of directors approved certain purchases by the Company of bitcoin, which we currently hold.
+Added: We may acquire additional digital assets in the future, which may expose us to various risks associated with bitcoin and other digital assets.
We are continually examining the risks and rewards of our bitcoin acquisition strategy.
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If the price of bitcoin falls or our bitcoin acquisition strategy otherwise proves unsuccessful, it would adversely impact our financial condition, results of operations, and the market price of our common stock.
−Removed: As of December 31, 2022, we held approximately 605 bitcoins that were acquired at an aggregate purchase price of approximately $35 million and an average purchase price of approximately $57,804 per bitcoin, inclusive of fees and expenses.
−Removed: As part of our overall corporate strategy, we may purchase additional bitcoin in future periods, and may also sell bitcoin in future periods as needed to generate cash for operating purposes.
−Removed: While our bitcoin is currently owned directly by us, we may investigate other potential approaches to holding our bitcoin assets.
−Removed: If we change the means by which we hold our bitcoin assets, the accounting treatment for our bitcoin may correspondingly change.
−Removed: A change in the accounting treatment of our bitcoin holdings could have a material impact on our results of operations in future periods and could increase the volatility of our reported results of operations as well as affect the carrying value of our bitcoin on our balance sheet, which in turn could have a material adverse effect on our financial results and the market price of our common stock.
+Added: In connection with owning bitcoin, we may investigate other potential approaches to holding our bitcoin assets.
+Added: If we change the means by which we have historically held bitcoin assets, the accounting treatment for our bitcoin may correspondingly change.
+Added: A change in the accounting treatment could have a material impact on our results of operations in future periods and could increase the volatility of our reported results of operations as well as affect the carrying value of our bitcoin on our balance sheet, which in turn could have a material adverse effect on our financial results and the market price of our common stock.
Bitcoin is a highly volatile asset that has traded below $17,000 and above $44,000 per bitcoin during 2023.
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deny banking services to businesses that hold digital assets, provide digital asset-related services or accept digital assets as payment, which could also decrease the price of our digital asset holdings.
−Removed: Our historical financial statements do not reflect the potential variability in earnings that we may experience in the future relating to our digital asset holdings.
−Removed: Our historical financial statements do not fully reflect the potential variability in earnings that we may experience in the future from holding or selling significant amounts of digital assets.
−Removed: The prices of bitcoin and ethereum have historically been subject to dramatic price fluctuations and are highly volatile.
−Removed: As explained more fully in Note 2 to our consolidated financial statements for the year ended December 31, 2022 included in this Annual Report on Form 10-K, as required by current accounting standards, we determine the fair value of our digital assets based on quoted (unadjusted) prices.
−Removed: We perform an analysis each quarter to identify whether events or changes in circumstances, principally decreases in the quoted (unadjusted) prices of digital assets on an active exchange, indicate that it is more likely than not that any of our digital assets are impaired.
−Removed: In determining if an impairment has occurred, we consider the lowest price of one digital asset quoted on an active exchange at any time since acquiring the specific asset.
−Removed: If the carrying value exceeds that lowest price at any time during the quarter, an impairment loss is deemed to have occurred with respect to that digital asset in the amount equal to the difference between its carrying value and such lowest price, and subsequent increases in the price will not be adjusted upward.
−Removed: Gains (if any) are not recorded until realized upon sale.
−Removed: In determining the gain to be recognized upon sale, we calculate the difference between the sale price and carrying value of the specific digital asset sold immediately prior to sale.
−Removed: As a result, any decrease in the fair value of our digital assets below their respective carrying value for such assets at any time since their acquisition requires us to incur an impairment charge, and such charge could be material to our financial results for the applicable reporting period, which may create significant volatility in our reported earnings and decrease the carrying value of our digital assets, which in turn could have a material adverse effect on the market price of our common stock.
−Removed: As of December 31, 2022, we held $10.1 million of digital assets on our balance sheet and recognized $22.9 million digital asset impairment losses during the year ended December 31, 2022, which represented 45% of our net losses.
−Removed: We have purchased and may purchase from time to time additional digital assets, and we may engage in other non-traditional treasury strategies in future periods.
−Removed: As a result, the proportion of our total assets represented by digital asset holdings may increase in the future, and volatility in our earnings in future periods may be significantly more than what we experienced in prior periods.
Due to the unregulated nature and lack of transparency surrounding the operations of many digital asset trading venues, they may experience fraud, security failures or operational problems, which may adversely affect the value of our digital asset holdings.
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These events are continuing to develop, and it is not possible to predict at this time all of the risks that they may pose to us, our service providers or on the digital asset industry as a whole.
−Removed: A perceived lack of stability among digital asset exchanges and the closure or temporary shutdown of any significant digital asset exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce
−Removed: confidence in digital asset networks and result in greater volatility in digital asset values.
+Added: A perceived lack of stability among digital asset exchanges and the closure or temporary shutdown of any significant digital asset exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce confidence in digital asset networks and result in greater volatility in digital asset values.
To the extent investors view our common stock as linked to the value of our digital asset holdings, particularly bitcoin, these potential consequences of a trading venue’s failure could have a material adverse effect on the market price of our common stock.
2 unchanged sentences
We cannot say with certainty whether bitcoin held in custody by a bankrupt custodian would be treated as property of a bankruptcy estate and, accordingly, whether the owner of that bitcoin would be treated as a general unsecured creditor.
−Removed: The concentration of our digital asset holdings enhances the risks inherent in our digital asset treasury strategy.
−Removed: As of December 31, 2022, the carrying value of our digital asset holdings represented approximately 18% of our total assets, a majority of which is held in bitcoin and ethereum.
−Removed: We may purchase additional digital assets and increase our overall holdings of bitcoin and ethereum in the future, as well as, accept bitcoin and ethereum as payment for PhunToken and our products and services.
−Removed: The concentration of our digital asset holdings limit the risk mitigation that we could take advantage of by purchasing a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent of a traditional treasury strategy.
−Removed: If there is a significant decrease in the price of bitcoin or ethereum, we will experience a more pronounced impact on our financial condition than if we used our cash to purchase a more diverse portfolio of assets.
−Removed: We have sold a portion of our bitcoin holdings as a source of liquidity and may be required to continue this in the future during a time of market volatility, which may result in selling our digital assets at a significant loss.
−Removed: We have currently adopted bitcoin as our primary treasury reserve asset.
−Removed: During 2022, we sold some of our bitcoin holdings as a source of liquidity to fund operations.
−Removed: Historically, the digital asset markets have been characterized by more price volatility, a relative anonymity, a developing regulatory landscape, susceptibility to market abuse and manipulation, and various other risks inherent in its entirely electronic, virtual form and decentralized network.
−Removed: During times of market instability, we may not be able to sell our bitcoin or other digital asset holdings at reasonable prices or at all.
−Removed: If we are unable to sell our digital assets, or if we are forced to sell our digital assets at a significant loss in order to meet our working capital requirements, our business and financial condition could be negatively impacted.
−Removed: If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our digital asset holdings, we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.
+Added: If we or third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our digital asset holdings, we may lose some or all of our digital assets and our financial condition and results of operations could be materially adversely affected.
Security breaches and cyberattacks are of particular concern with respect to digital assets.
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Further, any actual or perceived security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks or exchanges, whether or not we are directly impacted, could lead to a general loss of confidence in the broader digital asset ecosystem or in the use of networks to conduct financial transactions, which could negatively impact us.
−Removed: Attacks upon systems across a variety of industries, including industries related to digital assets, are increasing in frequency, persistence and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors.
+Added: Attacks upon systems across a variety of industries, including industries related to digital assets, are increasing in frequency, persistence and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized
+Added: groups and individuals, including state actors.
The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target.
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In particular, unauthorized parties have attempted, and we expect that they will continue to attempt, to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud.
−Removed: Threats can come from a variety of sources, including criminal hackers,
−Removed: hacktivists, state-sponsored intrusions, industrial espionage and insiders.
+Added: Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage and insiders.
In addition, certain types of attacks could harm us even if our systems are left undisturbed.
46 unchanged sentences
Some of our Token Ecosystem code and protocols rely on open-source code publicly available.
−Removed: The open-source structure of some of the Token Ecosystem protocols means that the Token Ecosystem may be susceptible to developments by users or contributors that could damage the Token Ecosystem and our reputation and could affect the sale and utilization of PhunCoin, PhunToken and he Token Ecosystem.
+Added: The open-source structure of some of the Token Ecosystem protocols means that the Token Ecosystem may be susceptible to developments by users or contributors that could damage the Token Ecosystem and our reputation and could affect the sale and utilization of PhunCoin, PhunToken and the Token Ecosystem.
The open-source nature of the Token Ecosystem protocol also means that it may be difficult for the Company or contributors maintain or develop the Token Ecosystem and the Company may not have adequate resources to address emerging issues or malicious programs that develop within the Token Ecosystem or expand functionality of the Token Ecosystem adequately or in a timely manner.
55 unchanged sentences
federal, state and foreign jurisdictions and is subject to significant uncertainty at this time.
−Removed: Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of tokens generally and the technology behind them or digital asset trasnactions.
+Added: Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the permissibility of tokens generally and the technology behind them or digital asset transactions.
In addition, any violations of laws and regulations relating to the safeguarding of private information in connection with PhunCoin and PhunToken could subject us to fines, penalties or other regulatory actions, as well as to civil actions by affected parties.
29 unchanged sentences
• expectations among the Token Ecosystem or other digital asset market participants that the value and/or utility of certain digital assets will soon change.
−Removed: Unresolved Staff Comments.
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.