CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS;
RISK FACTOR SUMMARY
The information in this Annual Report on Form 10-K (“Report”) contains various forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Although we believe that, in making any such statements, our expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Forward-looking statements may include, but are not limited to, statements about:
| ● | the adequacy of funds for future operations; |
| ● | future expenses, revenue and profitability; |
| ● | trends affecting financial condition and results of operations; |
| ● | the ability to convert proposals into customer orders, including our ability to realize the revenues included in our future guidance; |
| ● | general economic conditions and outlook, including those as a result of the COVID-19 pandemic; |
| ● | the ability of customers to pay for products and services received; |
| ● | the ability to satisfy our upcoming debt obligations and other liabilities; |
| ● | the impact of changing customer requirements upon revenue recognition; |
| ● | the availability and terms of additional capital; |
| ● | the ability of the Company to continue as a going concern; |
| ● | industry trends and the competitive environment; |
| ● | the impact of the Company’s financial condition upon customer and prospective customer relationships; |
| ● | potential litigation and regulatory actions directed toward our industry in general; |
| ● | the influence of our largest shareholder, Slipstream Communications, LLC; |
| ● | our reliance on certain key personnel in the management of our businesses; |
| ● | employee and management turnover; |
| ● | the existence of material weaknesses in internal controls over financial reporting; |
| ● | the inability to successfully integrate the operations of acquired companies; and |
| ● | our ability to remain listed on the Nasdaq Capital Market. |
ii
Certain statements included in this Report and the documents incorporated into this document by reference are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Report, the words “anticipates,” “believes,” “expects,” “intends,” “plans,” “estimates,” “projects,” “should,” “may,” “propose,” and similar expressions (or the negative versions of such words or expressions), are intended to identify such forward-looking statements.
These forward-looking statements involve known and unknown risks, uncertainties, and other factors, many of which are beyond our control, that may cause the actual results, performance, or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be achieved. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements, as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.
Readers should carefully review our financial statements and the notes thereto, as well as the section entitled “Risk Factors” in Item 1A of this Report and the other documents we file from time to time with the Securities and Exchange Commission (“SEC”). All forward-looking statements, expressed or implied, included in this Report are expressly qualified in their entirety by this cautionary note. This cautionary note should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this Report.
A summary of the principal risk factors that make investing in our securities risky and might cause our actual results to differ is set forth below. The following is only a summary of the principal risks that may materially adversely affect our business, financial condition, results of operations and cash flows. This summary should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth in the section entitled “Risk Factors” in this Report.
| ● | We have generally incurred losses, and may never become or remain profitable. |
| ● | Our digital marketing business is evolving in a rapidly changing market, and we cannot ensure the long-term successful operation of our business or the execution of our business plan. |
| ● | Our success and longevity depend on our ability to generate profits from future operations and obtain sufficient capital through financing transactions to refinance our debt obligations, pay any contingent consideration owed to former Reflect stockholders, and meet our other business obligations. |
| ● | We do not have sufficient capital to engage in material research and development, which may harm our long-term growth. |
| ● | The variable sales cycle of some of our products make it difficult to predict operating results. |
| ● | There has been, and we expect that there will continue to be, significant consolidation in our industry. Our failure or inability to either lead or participate in that consolidation would have a severe adverse impact on our access to financing, customers, technology, and human resources. |
| ● | Unpredictability in financing markets could impair our ability to grow our business through acquisitions. |
| ● | Our success depends on our interactive marketing technologies achieving and maintaining widespread acceptance in our targeted markets. |
| ● | Our financial condition and potential for continued net losses may negatively impact our relationships with customers, prospective customers and third-party suppliers. |
| ● | Because we do not have long-term binding purchase commitments from our customers, the failure to obtain anticipated orders or the deferral or cancellation of commitments could have adverse effects on our business. |
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| ● | Our continued growth and financial performance could be adversely affected by the loss of several key customers. |
| ● | Most of our contracts are terminable by our customers with limited notice and without penalty payments, and terminations could have a material adverse effect on our business, financial condition, and results of operations. |
| ● | It is common for our current and prospective customers to evaluate our products over an extended period of time, most especially during economic downturns that affect our customers’ businesses, as we saw during the COVID-19 pandemic. The lengthy and variable sales cycle makes it difficult to predict our operating results. |
| ● | Our industry is characterized by frequent technological change. If we are unable to adapt our products and services and develop new products and services to keep up with these rapid changes, we will not be able to obtain or maintain market share. |
| ● | We operate in an intensely competitive industry, and our competitors are developing products and solutions that incorporate artificial intelligence (“AI”) and machine learning (“ML”). We may not be as successful as our competitors in incorporating AI and ML into our products and solutions. |
| ● | Issues relating to the use of new and evolving technologies in our offerings, such as AI and ML, may result in increased regulation and costs to comply with such regulations. |
| ● | We use developed and licensed software technology, and we could face claims of infringement by others in the industry. Such claims are costly and add uncertainty to our operational results. |
| ● | Our proprietary platform architectures and data tracking technology underlying certain of our services are complex and may contain unknown errors in design or implementation that could result in system performance failures or inability to scale. |
| ● | Our business may be adversely affected by malicious applications that interfere with, or exploit security flaws in, our products and services. |
| ● | We compete with other companies that have more resources, which puts us at a competitive disadvantage. |
| ● | Our future success depends on key personnel and our ability to attract and retain additional personnel. |
| ● | We are subject to cyber security risks and interruptions or failures in our information technology systems and those of third-party partners with whom our applications are integrated and will likely need to expend additional resources to enhance our protection from such risks. Notwithstanding our efforts, a cyber incident could occur and result in information theft, data corruption, operational disruption and/or financial loss. |
| ● | Our reliance on information management and transaction systems to operate our business exposes us to cyber incidents and hacking of our sensitive information if our outsourced service provider experiences a security breach. |
| ● | Because our technology, products, platform, and services are complex and are deployed in and across complex environments, they may have errors or defects that could seriously harm our business. |
| ● | We may have insufficient network or server capacity, which could result in interruptions in our services and loss of revenues. |
| ● | Our business operations are susceptible to interruptions caused by events beyond our control. |
| ● | Corporate social responsibility, specifically related to ESG, may impose additional costs and expose us to new risks. |
| ● | Anticipated changes in the U.S. political environment, including those resulting from the change in Presidential Administration and control of Congress, and to regulatory agencies, may result in significant changes to regulatory framework and enforcements. |
| ● | Our competitors are constantly evolving, and we may be unable to compete successfully against existing or future competitors to our business. |
iv
Risks Related to our Securities and our Company
| ● | Our largest shareholder possesses significant voting power with respect to our common stock, which will limit your influence on our management and affairs, and may discourage parties from initiating potential merger, takeover or other change-of-control transactions. |
| ● | Our Articles of Incorporation grant our Board of Directors the power to issue additional shares of common and preferred stock and to designate other classes of preferred stock, all without shareholder approval. |
| ● | We do not have significant tangible assets that could be sold upon liquidation. |
| ● | We can provide no assurance that our securities will continue to meet Nasdaq listing requirements. If we fail to comply with the continuing listing standards of the Nasdaq, our securities could be delisted. |
| ● | Sales of a substantial number of shares of our common stock in the public market by certain of our shareholders, including Slipstream, could cause our stock price to fall. |
| ● | There may not be an active market for shares of our common stock. |
General Risk Factors
| ● | Because of our limited resources, we may not have in place various processes and protections common to more mature companies and may be more susceptible to adverse events. |
| ● | Inflation and price volatility in the global economy could hurt our business and results of operations. |
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EXPLANATORY NOTE
All currency is rounded to the nearest thousand, except share and per share amounts. On March 27, 2023, the Company effectuated a l-for-3 reverse stock split of its outstanding common stock. This Report and the Consolidated Financial Statements and Notes to Consolidated Financial Statements herein, give retroactive effect to the reverse stock split for all periods presented. The shares of common stock retained a par value of $0.01 per share.
