CAUD Collective Audience Inc

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ________________

Commission File Number: 001-40723

Collective Audience, Inc.

(Exact Name of Registrant as Specified in its Charter)

85 Broad Street 16-079

New York, NY 10004

(Address of principal executive offices including Zip Code)

(808) 829-1057

(Registrant’s telephone number, including area code)

(Former Name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 14, 2024, the registrant had 19,665,363 shares of common stock (par value $0.0001) outstanding.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

In our opinion, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations, and cash flows for the interim periods presented. We have presented financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these unaudited consolidated financial statements, management has evaluated events and transactions for potential recognition or disclosure through the date the unaudited consolidated financial statements were issued by filing with the SEC.

This Quarterly Report on Form 10-Q for the three month period ended June 30, 2024 (this “Quarterly Report”), should be read in conjunction with our audited financial statements for the year ended December 31, 2023, included in our Annual Report on Form 10-K, filed with the SEC on July 10, 2024.

The results of operations for the three month period ended June 30, 2024, are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2024.

COLLECTIVE AUDIENCE, INC.

CONSOLIDATED BALANCE SHEETS

The accompanying footnotes are an integral part of these audited consolidated financial statements.

COLLECTIVE AUDIENCE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying footnotes are an integral part of these audited consolidated financial statements.

COLLECTIVE AUDIENCE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

COLLECTIVE AUDIENCE, INC.

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the Three and Six Months Ended June 30, 2024

COLLECTIVE AUDIENCE, INC.

UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For the Three and Six Months Ended June 30, 2023

The accompanying footnotes are an integral part of these audited consolidated financial statements.

COLLECTIVE AUDIENCE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to unaudited consolidated financial statements

COLLECTIVE AUDIENCE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the Six Month Period Ended June 30, 2024

NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION (cont.) 

NOTE 1 — ORGANIZATION AND BUSINESS DESCRIPTION (cont.)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

NOTE 4 — REVENUE RECOGNITION (cont.)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and operating results together with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). This discussion and analysis contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this Quarterly Report. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on July 10, 2024. Readers are cautioned not to place undue reliance on these forward-looking statements.

Overview

We were blank check company incorporated on March 18, 2021 as a Delaware corporation and formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or similar Business Combination with one or more businesses or IPO and the sale of the Private Placement Units, our capital stock, debt or a combination of cash, stock and debt.

Recent Developments

BeOp Acquisition and License Agreement

On February 29, 2024, the Company entered into two agreements with The Odyssey SAS (dba BeOp) (“BeOp”), a company organized under the laws of France specializing in conversational advertising: (i) the parties entered into a binding Letter of Intent (the “Binding LOI”) whereby the Company is bound to acquire 100% of the ownership of BeOp, subject to certain closing conditions (the “Acquisition”) and (ii) an interim exclusive joint venture and software license agreement (the “Interim License Agreement”) pursuant to which the Company obtained an exclusive license to commercialize the BeOp software in North America during the period between signing the Binding LOI and the expected closing (the “BeOp Closing”).

BeOp has developed a new integrated and simplified media-independent advertising system, designed to (i) increase the performance of advertising campaigns, and (ii) bring advertisers and media agencies closer together, by considerably simplifying the value chain and thus better remunerating publishers. BeOp’s SAAS software suite offers modern programmatic advertising, behavioral and audience data enhancing engagement while increasing advertising spend.

On August 1, 2024, the Company entered into a Share Exchange Agreement (the “Purchase Agreement”) by and among the Company, BeOp, and all shareholders of BeOp, as set forth in exhibit A of the Purchase Agreement (the “Sellers” and each a “Seller”), pursuant to which the Company purchased one hundred percent (100%) of the outstanding equity interests in BeOp, resulting in BeOp becoming a subsidiary of the Company (the “Acquisition”). The Acquisition closed concurrently on August 1, 2024 (the “Closing Date”).

In consideration for the Acquisition, the Company issued a total of 3,006,667 shares of restricted Company common stock (the “Exchange Consideration”), however, the Company retained 666,667 shares of the Exchange Consideration to be held for a period of twelve (12) months following the Closing Date, to the extent not reduced by any indemnification claims as defined in the Purchase Agreement. (the “Holdback Shares”).

As further consideration for the Purchase Agreement, at the end of December 31, 2025, and upon BeOp reaching its currently forecasted gross revenue and EBITDA for 2024 and 2025, taking into account and including the Company’s sales under the Interim License Agreement, as set forth on Exhibit F in the Purchase Agreement, the Company shall pay to Sellers, in accordance with the pro rata allocations designated in Exhibit A, an amount equal to €200,000 worth of Company common stock based on as 20-Day VWAP as of December 31, 2025. (the “Earnout Payment”).

As previously disclosed, the closing of the Acquisition was conditioned, in part on BeOp’s debt restructuring proceedings with the Commercial Court of Paris, France(the “Restructured Debt”). As part of the Binding LOI, the Company had contributed to an escrow account (at the direction of the Commercial Court of Paris) €350,000 (the “Debt Escrow”). As of the Closing Date, the Debt Escrow, at the direction of the Commercial Court of Paris, was released to the Company. Furthermore, as of the Closing Date, the Sellers and BeOp (within the limits of their respective powers and positions in BeOp prior to the Closing), will continue their role in managing the insolvency procedure before the commercial Court of Paris until its completion to facilitate the orderly completion of such proceedings, at no additional cost to Company. BeOp and the Sellers agree to cooperate in good faith following the closing of the Purchase Agreement to effectuate the completion of said court proceedings before the commercial Court of Paris. The Interim License Agreement was terminated as of the Closing Date.

The Purchase Agreement contains standard representations, warranties, covenants, indemnification and other terms customary in similar transactions.

DSL Acquisition

On June 28, 2024, the Company entered into an Equity Exchange Agreement (the “DSL Exchange Agreement”) with DSL Digital, LLC, a Utah limited liability company (“DSL”) and Gregg Greenberg, the sole member of DSL (“Seller”) wherein Seller 51% of the total issued and outstanding membership interests of DSL to the Company in exchange for 3,242,875 shares of Company common stock, (“DSL Exchange Consideration”) 10% of which are held (the “Holdback Shares”) to be released 18 months from the closing date. The DSL Exchange Consideration shall be subject to a lock-up for 2 years from the closing date. As a result, DSL became a majority-owned subsidiary of the Company.

During the prior quarter, the Company completed the acquisition of DSL. The financial consolidation resulting from this acquisition has been reflected in the change in the balance sheet. Specifically, the consolidated net income, which includes the results from the acquired company revenue and operating expenses, has been appropriately recorded, assessing the income statement into the consolidated balance sheet which improved APIC and overall Stockholders’ Equity for the period from prior quarter. This adjustment ensures that the acquisition's impact on Collective Audience’s financial position is accurately represented in the consolidated financial statements.

DSL, a global marketing platform with proprietary artificial intelligence technology that enables it to triple the performance of its competitors (for Fortune 500 companies such as SAP and Accenture). DSL’s fast-growing B2B and DTC advertising channels are now able to create unique, never-before-seen programs for brands and publishers using the BeOp platform, forming the basis for the launch of Collective Audience, Inc’s “Audience Service” offering and its expansion into B2B advertising and media.

Business Combination

As previously announced, on September 9, 2022, we entered into a Merger Agreement with Abri Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Abri (“Merger Sub”), Logiq, Inc., a Delaware corporation (“Logiq” or “DLQ Parent”) whose common stock is quoted on OTCQX Market under the ticker symbol “LGIQ” and, DLQ, Inc., a Nevada corporation and wholly owned subsidiary of DLQ Parent (“DLQ”). On November 2, 2023, the Business Combination, including the Merger, was completed. In connection with the Closing, the registrant changed its name from Abri SPAC I, Inc. to Collective Audience, Inc. As a result of the Business Combination, our operations are primarily through DLQ.

Recent Developments 

We continue to evaluate the impact of the Russia-Ukraine war, on the industry and have concluded that, while it is reasonably possible that such could have negative effects on our financial position, results of operations, and/or search for a target company, the specific impacts are not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

On December 9, 2022, we held a special meeting of stockholders at which such stockholders voted to amend our amended and restated certificate of incorporation and investment trust agreement, giving us the right to extend the date by which we must complete our Initial Business Combination up to six times for an additional one month each time, from February 12, 2023 to August 12, 2023, by depositing $87,500 into the Trust Account for each one-month extension. In connection with the special meeting, 4,481,548 shares of common stock were tendered for redemption, resulting in redemption payments of $45,952,279 out of the Trust Account. On August 7, 2023, we held a second special meeting of stockholders at which such stockholders voted to amend our amended and restated certificate of incorporation and investment trust agreement, giving us the right to extend the date by which we must complete our Initial Business Combination from August 12, 2023 to February 12, 2024 with no additional payment to the Trust Account. In connection with the special meeting, 570,224 shares were tendered for redemption. As a result, $6,055,325 ($10.62 per share), after deducting allowable taxes, was removed from our Trust Account to pay such holders. We have 682,148 shares of common stock subject to possible redemption outstanding as of June 30, 2024.

Nasdaq Listing

Nasdaq Delisting Notification

On June 24, 2024, the Company received a notice (the “Delisting Notice”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market, LLC (“Nasdaq”) advising the Company that it had initiated the process to delist the Company’s securities from Nasdaq because the Company has not yet regained compliance with either the MVLS Rule or the MVPHS Rule (each defined below). Additionally, the Company’s failure to timely file its Form 10-K for the fiscal year ended December 31, 2023, and its Form 10-Q for the period ended March 31, 2024, served as additional and separate basis for delisting. The Company appealed and requested a hearing on July 1, 2024, and appeared before the panel on August 8, 2024. The Company expects to receive a determination within 30 days. However, there can be no assurance that such appeal would be successful. In such event, the Company may also seek to apply for a transfer to The Nasdaq Capital Market if it meets the requirements for continued listing thereon.

MVLS and MCPHS

We received two written notices (the “Nasdaq Notices”), dated December 22, 2023, from the Nasdaq Stock Market (“Nasdaq”) indicating that (i) for the preceding 30 consecutive business days, the market value of our listed securities (“MVLS”) did not maintain a minimum market value of $50,000,000 (the “Minimum MVLS Requirement”) as required by Nasdaq Listing Rule 5450(b)(2)(A), and (ii) for the preceding 30 consecutive business days, the market value of our publicly held shares (“MVPHS”) did not maintain a minimum market value of $15,000,000 (the “Minimum MVPHS Requirement”) as required by Nasdaq Listing Rule 5450(b)(2)(C).

In accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company has a compliance period of 180 calendar days, or until June 19, 2024, to regain compliance with the Minimum MVLS Requirement. Compliance may be achieved if the Company’s MVLS closes at $50,000,000 or more for a minimum of ten consecutive business days at any time during the 180-day compliance period, in which case Nasdaq will notify the Company of its compliance and the matter will be closed.

In accordance with Nasdaq Listing Rule 5810(c)(3)(D), we have a compliance period of 180 calendar days, or until June 19, 2024, to regain compliance with the Minimum MVPHS Requirement. Compliance may be achieved if our MVPHS closes at $15,000,000 or more for a minimum of ten consecutive business days at any time during the 180-day compliance period, in which case Nasdaq will notify us of our compliance and the matter will be closed.

As discussed above, on June 24, 2024 Nasdaq issued the Company the Delisting Notice stating that its common stock is subject to delisting. The Company intends to appeal the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that such appeal would be successful. In such event, the Company may also seek to apply for a transfer to The Nasdaq Capital Market if it meets the requirements for continued listing thereon. The Company is presently evaluating potential actions to regain compliance with all applicable requirements for continued listing on the Nasdaq Global Market. There can be no assurance that the Company will be successful in maintaining the listing of its common stock on the Nasdaq Global Market.

Bid Price

Further, on April 19, 2024, we received a notification letter (the “Bid Price Notice”) form the Listing Qualifications Department of Nasdaq notifying us that because the closing bis price for the Company’s comment stock was below $1.00 per share for 32 consecutive trading days, the Company is not currently in compliance with the minimum bid price requirement for continued listing on the Nasdaq Global Market as set forth in Nasdaq Marketplace Rules 5450(a)(1) (the “Minimum Bid Price Requirement”). In accordance with Nasdaq Marketplace Rule 5810(c)(3)(A), the Company has a period of 180 calendar days from April 19, 2024, or until October 16, 2024, to regain compliance with the Minimum Bid Price Requirement. If at any time before October 16, 2024, the closing bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that the Company has achieved compliance with the Minimum Bid Price Requirement, and the matter would be resolved. If the Company does not regain compliance during the compliance period ending on October 16, 2024, then (i) the Company may transfer to The Nasdaq Capital Market, provided that it meets the applicable market value of publicly held shares requirement for continued listing and all other applicable requirements for initial listing on the Nasdaq Capital Market (except for the bid price requirement) and (ii) Nasdaq may grant the Company a second 180 calendar day grace period to regain compliance, provided the Company (a) meets the continued listing requirement for market value of publicly-held shares and all other initial listing standards for The Nasdaq Capital Market, other than the minimum closing bid price requirement, and (b) the Company notifies Nasdaq of its intent to cure the deficiency.

The Company intends to continue actively monitoring the closing bid price for the Company’s common stock between now and October 16, 2024, and will consider available options to resolve the deficiency and regain compliance with the Minimum Bid Price Requirement. As discussed above, the Company received the Delisting Notice stating that its common stock is subject to delisting. The Company intends to appeal the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules.

Annual Report

On April 24, 2024, the Company received a notification letter (the “Annual Report Notice”) from Nasdaq advising the Company that it was not in compliance with Nasdaq’s continued listing requirements under Nasdaq Listing Rule 5250(c)(1) (the “Filings Rule”) as a result of its failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Form 10-K”). The Annual Report Notice has no immediate effect on the listing of the Company’s common stock on The Nasdaq Global Market, and, therefore, the Company’s listing remains fully effective.

Pursuant to the Rule, the Company has 60 calendar days from receipt of the Notice, or until June 24, 2024, to submit a plan to regain compliance with the Rule. As discussed above, the Company received the Delisting Notice on June 24, 2024 stating that its common stock is subject to delisting. The Company subsequently filed its Form 10-K on July 10, 2024. The Company appealed the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules, on August 8, 2024. The Company expects to receive a determination within 30 days. However, there can be no assurance that such appeal would be successful. In such event, the Company may also seek to apply for a transfer to The Nasdaq Capital Market if it meets the requirements for continued listing thereon.

Quarterly Report

On May 23, 2024, the Company received a notification letter (the “Quarterly Report Notice”) Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) which requires listed companies to timely file all required periodic financial reports with the Securities and Exchange Commission, due to the Company’s failure to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 (the “Form 10-Q”). The Notice has no immediate effect on the listing of the Company’s common stock on The Nasdaq Global Market, and, therefore, the Company’s listing remains fully effective.

Pursuant to the Rule, the Company had 60 calendar days from receipt of the Annual Report Notice, or until June 24, 2024, to submit the Reports or a plan to regain compliance with the Rule. As discussed above, the Company received the Delisting Notice stating that its common stock is subject to delisting. The Company appealed the relevant delisting determination and appeared before a hearings panel on August 8, 2024. The Company expects to hear a determination within 30 days. However, there can be no assurance that such appeal would be successful. In such event, the Company may also seek to apply for a transfer to The Nasdaq Capital Market if it meets the requirements for continued listing thereon.

The Company filed the Form 10-Q for the period ended March 31, 2024 on August 7, 2024.

If Nasdaq delists the Company’s securities from trading on its exchange, we could face significant material adverse consequences, including:

Results of Operations

Three Months Ended June, 2024 Compared to Three Months Ended June, 2023 (in thousands):

Our only activities from March 18, 2021 (inception) through June 30, 2024 were organizational activities, those necessary to consummate the IPO and identify a target company for a Business Combination and restructuring post-acquisition deals. Prior to the Business Combination, we have generated non-operating income in the form of interest income on marketable securities held in the Trust Account. We are incurring expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. On November 2, 2023, we closed the Business Combination, at which time our operations became based primarily on those of our wholly-owned subsidiary, DLQ Inc.

Revenue

The decrease in Revenue was primarily due to the organization’s focus on completing the Initial Business Combination as announced on October 31, 2023.

Operating Expenses- Platform Operations

The decrease in Platform Operations was primarily due to the organization’s focus on completing the Initial Business Combination as announced on October 31, 2023.

Selling and Marketing Expenses

The increase in Sales and Marketing expenses was primarily due to the organization’s PR post business combination.

General and Administrative Expenses

The increase in general and administrative expenses is primarily due to legal costs post business combination and SEC filings.

Total Other Expense, Net

Total other income, net, for the three months ended June 30, 2024 primarily for amortization.

Liquidity and Capital Resources

As of June 30, 2024, we had cash of $838,225 and a working capital deficiency of $2,528,595. As of June 30, 2024, post close of the Initial Business combination, the Trust account was closed. After the Business Combinations, the remaining funds held in the Trust Account was used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our Business Combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses.

Cash used in operating activities for the three and six months ended June 30, 2024 was $607,238 and $1,167,333. We expect that we will need additional capital to satisfy our liquidity needs.

As such, DLQ, DLQ Parent, Abri, and the Sponsor have agreed that Sponsor shall be the exclusive financing source of capital up to $30 million, and will use commercially reasonable efforts to enter into a mutually acceptable agreement for that purpose. Currently, while still undetermined and subject to further negotiation and change, the expected terms of an equity investment outlined in such agreement would include a 5% discount to the average 3 lowest VWAPs for the 20 days immediately preceding a funding, but limited to $1,000,000 per month and no more than $500,000 in any 14 day period. Shares underlying such agreement would be registered and could have up to two (2)warrants attached for each share at the then market price. Absent the aforementioned $30 million financing from the Sponsor, and if the Sponsor is unable fund or secure financing up to $30 million, the Company could otherwise be under-capitalized and obliged to seek financing from alternative sources, which it may or may not be able to obtain. Although certain of our initial stockholders, officers and directors or their affiliates have committed to loan us funds from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, there is no guarantee that we will receive such funds.

As of June 30, 2024, we had $838,225 in cash and a working capital deficit of $2,528,595. This cash on hand was mainly due to business combination of newly acquired company DSL that certain investment we received on June 28, 2024 whereby we entered into a securities purchase agreement (the “Purchase Agreement”) with certain investors (the “Investors”), pursuant to which the Company agreed to issue and sell to the Investors in a private placement (i) 3,242,875 shares (the “Shares”) of common stock of the Company.

Our operating revenues are insufficient to found our operations through the next twelve months. Our losses from operations, negative operating cash flows, working capital deficit and accumulated deficit, as well as the additional capital needed to fund operations within one year of the unaudited consolidated financial statement issuance date, raise substantial doubt about our ability to continue as a going concern. The consolidated financial statements included elsewhere in this Quarterly Report have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The unaudited consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

In the event that we are not able to raise capital on terms described above or otherwise, it will have a significant, impact on our financial condition and our ability to continue as a going concern. It will also have an impact on our business and ability to execute according to management’s plans.

We have received letters from Nasdaq regarding our compliance with the exchange’s continued listing requirements.

Summary Statements of Cash Flows

The following table sets forth a summary of the net cash flow activity for the six months ended June 30, 2024 and 2023 (in thousands):

Cash Flows from Operating Activities. During the six months ended June 30, 2024 and 2023, the primary use of cash, cash equivalents and restricted cash was legal costs.

Cash Flows from Investing Activities. During the six months ended June 30, 2024 and 2023, the change in net cash, cash equivalents and restricted cash used in investing activities was due entirely to Goodwill acquired through the DSL acquisition.

Cash Flows from Financing Activities. During the six months ended June 30, 2024, the primary source of cash, cash equivalents and restricted cash was due to APIC from the DSL acquisition.

Operating and Capital Expenditure Requirements

Our specific future operating and capital expense requirements are difficult to forecast. However, we can anticipate the general types of expenses and areas in which they might occur. In 2024, while we expect to maintain a lean operating structure at approximately the same level as 2023, should resources become available we may increase marketing spend to drive further sales growth.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2024 and 2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Contractual Obligations

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an agreement to pay our Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support. As of June 30, 2024, and 2023, we owed the Sponsor $0 and $0, respectively, under this agreement, which is included in accounts payable and accrued expenses in the accompanying condensed balance sheets. We began incurring these fees on August 9, 2021 and stopped upon the completion of the Business Combination.

In connection with our initial business combination, we are obligated to pay our expenses relating thereto, including the deferred underwriting commissions payable to our underwriter in an amount equal to 3.0% of the total gross proceeds raised in the offering, or $1,500,000, upon consummation of our initial business combination.

Upon consummation of our IPO, we sold to our underwriters, for $100, an option to purchase up to a total of 300,000 units (or up to 345,000 if the over-allotment is exercised in full) exercisable, in whole or in part, at $11.50 per unit, commencing on the consummation of our initial business combination. The purchase option may be exercised for cash or on a cashless basis, at the holder’s option, and expires five years from the commencement of sales in our IPO. The option and the 300,000 units, as well as the 300,000 shares of common stock, and the warrants to purchase 300,000 shares of common stock that may be issued upon exercise of the option have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the effective date of our registration statement, or August 9, 2021.

Critical Accounting Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting estimates.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements. 

Known Trends or Uncertainties

In the current quarter, the media company has observed several notable trends and uncertainties impacting its operations and financial performance. A significant trend is the continued shift towards digital streaming platforms, leading to increased investments in original content and technology upgrades to enhance user experience. However, uncertainties persist due to fluctuating advertising revenues, which are influenced by broader economic conditions and shifts in consumer behavior. Additionally, regulatory changes and the competitive landscape pose potential challenges, requiring adaptive strategies to maintain market share and profitability. The company remains vigilant in monitoring these factors to navigate the dynamic media environment effectively.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4. Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As described in our Annual Report on Form 10-K for the year ended December 31, 2023, we identified material weaknesses in our internal control over financial reporting. As a result of these material weaknesses, our Chief Executive Officer (CEO) and Chief Financial Officer (CFO) have concluded that our disclosure controls and procedures are not effective to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities and Exchange Act is recorded, processed, summarized and reported as and when required.

Notwithstanding the conclusion by our CEO and CFO that our Disclosure Controls as of June 30, 2024 were not effective, and notwithstanding the material weaknesses in our internal control over financial reporting described more fully under Item 9A in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, management believes that the consolidated financial statements and related financial information included in this Quarterly Report on Form 10-Q fairly present in all material respects our financial condition, results of operations and cash flows as of the date presented, and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

Remediation Activities

Management continues to evaluate the material weaknesses discussed above and is implementing its remediation plan. However, we cannot provide assurance as to when our remediation efforts will be complete and the material weaknesses cannot be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses.

This quarterly report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting because that requirement under Section 404 of the Sarbanes-Oxley Act of 2002 was permanently removed for smaller reporting company filers pursuant to the provisions of Section 989G(a) set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted into federal law in July 2010.

Changes in Internal Control over Financial Reporting

Except for ongoing remediation activities, there were no changes in our internal control over financial reporting during the quarter ended June 30, 2024, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

Inherent Limitations of Internal Controls

Management recognizes that a control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of our material pending legal proceeding, please see Note 11, Legal, to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

Item 1A. Risk Factors.

Please carefully consider the information set forth in this Quarterly Report on Form 10-Q and the risk factors discussed in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition, or future results. In evaluating our business, you should carefully consider the risk factors discussed in our Annual Report on Form 10-K, as updated by our subsequent filings under the Exchange Act. The occurrence of any of the risks discussed in such filings, or other events that we do not currently anticipate or that we currently deem immaterial, could harm our business, prospects, financial condition and results of operations. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities

During the quarter ended June 30, 2024, there were no unregistered sales of our securities that were not reported in a Current Report on Form 8-K.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

Rule 10b5-1 Trading Plans 

During the three months ended March 31, 2024, none of our directors or officers entered into, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” that were intended to satisfy the affirmative defense conditions of Rule 10b5-1, in each case as defined in Item 408 of Regulation S-K.

Item 6. Exhibits.

Exhibit Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

34