What changed in this filing

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Item 1A. Risk Factors

2024-09-20 compared with 2023-09-15 · 51 added, 43 removed, 209 unchanged (31% of the section changed)

8 unchanged sentences

Historically, we have relied upon cash from financing activities to fund substantially all of the cash requirements of our activities and have incurred significant losses and experienced negative cash flow.

For our fiscal years ended June 30, 2023 and 2022, we earned a net income of $571,623 and incurred a net loss of $1,632,384, respectively.

For our fiscal years ended June 30, 2024 and 2023, we incurred a net loss of $3,786,597 and earned a net income of $571,623, respectively.

As of June 30, 2024, we had an accumulated deficit of $26,309,246.

9 unchanged sentences

Approximately 44% and 43% of our content cost for the years ended June 30, 2024 and 2023, respectively, was derived from our three largest suppliers of content.

Loss of any or all of these suppliers of content would significantly reduce the attractiveness of our services and our revenue, which would have a material adverse effect on our results of operations.

Loss of any or all of these suppliers of content would significantly

reduce the attractiveness of our services and our revenue, which would have a material adverse effect on our results of operations.

We can provide no assurance that these suppliers of content will continue to supply us with content in the future.

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In addition, our licenses are generally non-exclusive, and therefore our competitors may have access to the same content licensed to us.

Furthermore, a successful claimant could secure a judgment or we may agree to a settlement that prevents us from providing certain content or that requires us to pay substantial damages, including treble damages if we are found to have willfully infringed the claimant’s copyrights, royalties or other fees.

willfully infringed the claimant’s copyrights, royalties or other fees.

Any of these events could seriously harm our business, operating results and financial condition.

Artificial intelligence-based platforms present new risks and challenges to our business.

Enterprise use of generative artificial intelligence (GenAI) technologies may result in access to and processing of sensitive information, intellectual property, source code, trade secrets, and other data, through direct user input or the API, including customer or private information and confidential information.

Sending confidential and private data outside of our own servers could trigger legal and compliance exposure, as well as risks of information exposure, including unauthorized acquisition, use, or other processing.

Such exposure can result from contractual (for example, with customers) or regulatory obligations (such as CCPA, GDPR, HIPAA).

Furthermore, if the GenAI platform's own systems and infrastructure are not secure, data breaches or incidents may occur and lead to the exposure of sensitive information such as customer data, financial information, and proprietary business information, or it may be believed or asserted that one or more of these has occurred.

Threat actors could also use GenAI for malicious purposes, increasing the frequency of their attacks and the complexity level some are currently capable of, e.g.

phishing attacks, fraud, social engineering, and other possible malicious use, such as with writing malware.

Code generated by GenAI could potentially be used and deployed without a proper security audit or code review to find vulnerable or malicious components.

This could cause widespread deployment of vulnerable code within the organization systems.

The use of GenAI by our business partners with access to our confidential information, including trade secrets, may continue to increase and could lead to the release of such information, which could negatively impact us, including our ability to realize the benefits of our intellectual property.

Such use may lead to novel and urgent cybersecurity risks, which could have a material adverse effect on our operations and reputation as well as the operations of any of our business partners.

We may also face increased competition from other companies that are using GenAI platforms, some of whom may develop more effective methods than we and any of our business partners have, which could have a material adverse effect on our business, results of operations, or financial condition.

In addition, uncertainties regarding developing legal and regulatory requirements and standards may require significant resources to modify and maintain business practices to comply with U.S.

laws concerning the use of AI and AI systems, the nature of which cannot be determined at this time.

We have developed policies governing the use of GenAI to help reasonably ensure that such GenAI systems are used in a trustworthy manner by our employees, contractors, and authorized agents and that our assets, including intellectual property, competitive information, personal information we may collect or process, and customer information, are protected.

Any failure by our personnel, contractors, or other agents to adhere to our established policies could violate confidentiality obligations or applicable laws and regulations, jeopardize our intellectual property rights, cause or contribute to unlawful discrimination, or result in the misuse of personally identifiable information or the injection of malware into our systems.

Our industry is subject to intense competition and rapid technological change, which may result in products or new solutions that are superior to our products or solutions under development.

6 unchanged sentences

Many of our competitors have or may have greater corporate, financial, operational, sales and marketing resources, and more experience in research and development than we have.

We cannot assure you that our competitors will not succeed in developing or marketing technologies or products that are more effective or commercially attractive than our products or that would render our solutions and related technologies obsolete.

technologies obsolete.

We may not have or be able to raise or develop the financial resources, technical expertise, or support capabilities to compete successfully in the future.

18 unchanged sentences

Similarly, we rely on our websites, online networks, and email systems to obtain content and deliver customer orders, and provide timely, relevant and dependable business information to our customers.

Therefore, network or system shutdowns caused by events such as computer hacking, sabotage, dissemination of computer viruses, worms and other destructive or disruptive software, denial of service attacks and other malicious activity, as well as loss of service from third parties, power outages, natural disasters and similar events, could affect our ability to store,

handle and deliver data and services to our customers.

Any such interruption of our operations could negatively impact customer satisfaction and revenue.

3 unchanged sentences

We process, store, and transmit data, including personally identifiable information and payment card industry data of our customers, and it is critical that this data remains secure and is perceived by the marketplace to be secure.

Disruptions or security compromises of our systems could result in large expenditures to repair or replace such systems, to remedy any security breaches and protect us from similar events in the future.

We also could be exposed to negligence claims or other legal proceedings brought by regulators, our customers or their clients, and we could incur significant legal expenses and our management’s attention may be diverted from our operations in defending ourselves

against and resolving lawsuits or claims.

In addition, if we were to suffer damage to our reputation as a result of any system failure, security compromise, or personal data breach, our revenue and profitability could be adversely affected.

Personal data is increasingly subject to legal and regulatory protections around the world, which vary widely in approach and which possibly conflict with one another.

In recent years, for example, U.S.

legislators and regulatory agencies, such as the Federal Trade Commission, as well as U.S.

states, have increased their focus on protecting personal data by law and regulation, and have increased enforcement actions for violations of privacy and data protection requirements.

In May 2018, The European Commission approved and adopted the General Data Protection Regulation (“GDPR”) in the European Union, a new data protection law.

For example, in the U.S., there are numerous federal, state, and local privacy, data protection, and cybersecurity laws, rules, and regulations governing the collection, storage, transmission, use, and other processing of personal data and Congress has considered, and continues to consider, many proposals for additional comprehensive national data privacy and cybersecurity legislation.

At the state level, we may be subject to laws, rules, and regulations, such as the California Consumer Privacy Act (“CCPA”) and/or similar laws that have been enacted and gone into effect in Virginia, Colorado, Connecticut, Utah, Oregon, and Texas, or laws that will soon go into effect in Montana, Iowa, Delaware, New Hampshire, Nebraska and New Jersey.

These laws impose various obligations, including disclosure requirements, access and opt-out rights, and the right to request deletion of personal data.

Outside of the United States, an increasing number of laws, rules, regulations, and industry standards apply to privacy, data protection, and cybersecurity, including the General Data Protection Regulation (“GDPR”) in the European Union, the United Kingdom’s Data Protection Act 2018 as supplemented by the GDPR and implemented into UK law (collectively, “UK GDPR”), and China’s Personal Information Protection Law.

These data protection laws and regulations are intended to protect the privacy and security of personal data, including credit card information, that is collected, processed and transmitted in or from the relevant jurisdiction.

1 unchanged sentence

Our business could be materially adversely affected by our inability, or the inability of our vendors who receive personal data from us, to comply with legal obligations regarding the use of personal data, new data handling requirements that conflict with or negatively impact our business practices.

In addition, our agreements with customers may also require that we indemnify the customer for liability arising from data breaches under the terms of our agreements with these customers.

We also could be exposed to negligence claims or other legal proceedings brought by our customers or their clients, and we could incur significant legal expenses and our management’s attention may be diverted from our operations in defending ourselves against and resolving lawsuits or claims.

In addition, if we were to suffer damage to our reputation as a result of any system failure or security compromise, our revenue and profitability could be adversely affected.

In addition, our agreements with customers may also require that we indemnify the customer for liability arising from personal data breaches under the terms of our agreements with these customers.

Disruptions and other damages to our information technology and breaches in data security or cybersecurity attacks could have a negative financial impact and damage our reputation.

6 unchanged sentences

We are exposed to risks associated with PCI compliance.

The PCI Data Security Standard (“PCI DSS”) is a specific set of comprehensive security standards required by credit card brands for enhancing payment account data security, including but not limited to requirements for security management, policies, procedures, network architecture, and software design.

PCI DSS compliance is required in order to

maintain credit card processing services.

The Payment Card Industry Data Security Standard (“PCI DSS”) is a specific set of comprehensive security standards required by credit card brands for enhancing payment account data security, including but not limited to requirements for security management, policies, procedures, network architecture, and software design.

PCI DSS compliance is required in order to maintain credit card processing services.

Compliance does not guarantee a completely secure environment and notwithstanding the results of this assessment there can be no assurance that payment card brands will not request further compliance assessments or set forth additional requirements to maintain access to credit card processing services.

2 unchanged sentences

Our failure to comply with the covenants contained in our loan agreement could result in an event of default that could adversely affect our financial condition and ability to operate our business as planned.

We currently have a line of credit with Silicon Valley Bank, maturing on February 28, 2024, under which there were no outstanding borrowings as of June 30, 2023.

We currently have a line of credit with PNC Bank, National Association, maturing on April 15, 2025, under which there were no outstanding borrowings as of June 30, 2024.

Our loan agreement contains, and any agreements to refinance our debt likely will contain, financial and restrictive covenants.

15 unchanged sentences

Accordingly, we may need to undertake equity, equity-linked or debt financings to secure additional funds.

If we raise additional funds through future issuances of equity or convertible debt

securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.

Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, including the ability to pay dividends.

2 unchanged sentences

If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and respond to business challenges could be significantly impaired, and our business may be adversely affected.

In addition, our failure to successfully manage our growth could result in our sales not increasing commensurately with our capital investments.

In addition, our failure to successfully manage our growth could result in our sales not increasing

commensurately with our capital investments.

If we are unable to successfully manage our growth, we may be unable to achieve our goals.

48 unchanged sentences

If we do not pay dividends, our common stock may be less valuable because a return on your investment might only occur if the market price of our common stock appreciates.

Voting power of a significant percentage of our common stock is held by our Executive Chairman, and his brother-in-law, who together are able to exert significant influence over the outcome of matters to be voted on by our stockholders.

As of September 8, 2023, Peter Victor Derycz, our Executive Chairman, had voting power equal to approximately 11.2% of votes eligible to be cast at a meeting of our stockholders.

Voting power of a significant percentage of our common stock is held by our former Executive Chairman, and his brother-in-law, who together are able to exert significant influence over the outcome of matters to be voted on by our stockholders.

As of September 13, 2024, Peter Victor Derycz, our former Executive Chairman, had voting power equal to approximately 8.3% of votes eligible to be cast at a meeting of our stockholders.

Paul Kessler, the brother-in-law of Mr.

Derycz, exercises investment and voting control over the shares held by Bristol Investment Fund, Ltd., and had, as of September 13, 2024, voting power equal to approximately 3.8% of votes eligible to be cast at a meeting of our stockholders.

As of September 8, 2023, Mr.

Derycz, Bristol Investment Fund, Ltd.

(“Bristol Fund”), Bristol Capital Advisors, LLC, Paul Kessler, Janice Peterson and Andrew Ritter (collectively, the “Group”) were party to a Joint Filing and Solicitation Agreement pursuant to which the Group agreed, to the extent required by applicable law, to the joint filing of statements on Schedule 13D with respect to the securities of the Company, to solicit proxies for the election of nominees nominated by the Group at the Corporation’s annual meeting of stockholders, not to transact in securities of the Company without the prior written consent of Bristol Fund and Mr.

Derycz, subject to certain exceptions, that any SEC filing, press release, public shareholder communication or Company communication proposed to be made or issued by the Group or any member of the Group in connection with the Group’s activities shall be mutually agreeable to Bristol Fund and Mr.

Derycz, and that Mr.

Derycz and Bristol Fund agree to jointly pay all out-of-pocket costs and expenses incurred in connection with the Group’s activities based on Mr.

Derycz’s and Bristol Fund’s pro rata share of their aggregate ownership of shares of the Company’s common stock, which shall be advanced by Bristol Fund and repaid by Mr.

Derycz pursuant to the terms of the Joint Filing and Solicitation Agreement.

As a result of their significant ownership interests, Mr.

Derycz and Mr.

Kessler together currently have the ability to exert significant influence over the election of directors, and other matters submitted to a vote of all of our stockholders, and have submitted an alternate slate of nominees for consideration at the Company’s 2023 annual meeting of stockholders.

Kessler together currently have the ability to exert significant influence over the election of directors, and other matters submitted to a vote of all of our stockholders.

They may also have interests that differ from yours and may vote in a manner that is adverse to your interests.

2 unchanged sentences

Under the terms of our outstanding options and warrants to purchase our common stock issued to employees and others, the holders are given an opportunity to profit from a rise in the market price of our common stock that, upon the exercise of the options and/or warrants, could result in dilution in the interests of our other stockholders.

The market price of our common stock and the value of your investment could substantially decline if our warrants or options are exercised and our common stock is issued and resold into the market, or if a perception exists that a substantial number of shares will be issued upon exercise of our warrants and option and then resold into the market.

If the exercise prices of our warrants or options are lower than the price at which you made your investment, immediate dilution of the value of your investment will occur.

In addition, sales of a substantial number of shares of common stock issued upon exercise of our warrants and options, or even the perception that such sales could occur, could adversely affect the market price of our common stock.

You could, therefore, experience a substantial decline in the value of your investment as a result of both the actual and potential exercise of our warrants or options.

The market price of our common stock and the value of your investment could substantially decline if our options are exercised and our common stock is issued and resold into the market, or if a perception exists that a substantial number of shares will be issued upon exercise of our warrants and option and then resold into the market.

If the exercise prices of our options are lower than the price at which you made your investment, immediate dilution of the value of your investment will occur.

In addition, sales of a substantial number of shares of common stock issued upon exercise of our options, or even the perception that such sales could occur, could adversely affect the market price of our common stock.

You could, therefore, experience a substantial decline in the value of your investment as a result of both the actual and potential exercise of our options.

Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could result in a restatement of our financial statements, cause investors to lose confidence in our financial statements and our company and have a material adverse effect on our business and stock price.

1 unchanged sentence

Effective internal controls are necessary for us to provide reliable financial reports to help mitigate the risk of fraud and to operate successfully as a publicly traded company.

As a public company, we are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404.

As a public company, we are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of

2002, or Section 404.

Further, Section 404 requires annual management assessments of the effectiveness of our internal controls over financial reporting.

16 unchanged sentences

Our articles of incorporation, bylaws and Nevada law contain provisions which could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders.

We are currently

authorized to issue up to 20,000,000 shares of “blank check” preferred stock.

We are currently authorized to issue up to 20,000,000 shares of “blank check” preferred stock.

This preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by stockholders.

6 unchanged sentences

In particular, our articles of incorporation, our bylaws and Nevada law, as applicable, among other things, provide our board of directors with the ability to alter our bylaws without stockholder approval, and provide that vacancies on our board of directors may be filled by a majority of directors in office, although less than a quorum.

We may become subject to Nevada’s control share acquisition laws (Nevada Revised Statutes 78.378 -78.3793), which prohibit an acquirer, under certain circumstances, from voting shares of a corporation’s stock after crossing specific threshold ownership percentages, unless the acquirer obtains the approval of the issuing corporation’s stockholders.

threshold ownership percentages, unless the acquirer obtains the approval of the issuing corporation’s stockholders.

We are also subject to Nevada’s Combination with Interested Stockholders Statute (Nevada Revised Statutes 78.411 -78.444) which prohibits an interested stockholder from entering into a “combination” with the corporation, unless certain conditions are met.

1 unchanged sentence

These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our common stock to decline.

Unresolved Staff Comments

Not applicable.

We operate in a virtual environment and do not have a physical office space or headquarters.

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