Vado Corp. [VADP] Filings

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

☒ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2023

OR

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

COMMISSION FILE NUMBER: 000-56616

VADO CORP.

(Exact Name of Registrant as Specified in Its Charter)

73 Market St.

Venice, CA 90291

(Address of Principal Executive Offices)

(888) 545-0009

(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, $0.001 PAR VALUE PER SHARE

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 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, a 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of the voting and non-voting stock held by non-affiliates was approximately $46,785,102 as of June 30, 2023, based upon a closing price of $1.70 per share for the registrant’s common stock on such date.

On April 9, 2024, a total of 182,492,221 shares of our common stock were outstanding.         

DOCUMENTS INCORPORATED BY REFERENCE

None.

VADO CORP.

TABLE OF CONTENTS

TO ANNUAL REPORT ON FORM 10-K

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K (this ‘Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business and operations following our acquisition of a digital marketing and services company, future trends of such business, the planned expansion of those operations into new markets and applications, our efforts to implement and offer new technology and efficient resource allocation and the anticipated future benefits and results thereof on our operating results, characteristics and trends in the digital marketing industry and the demand for products and services we offer, our plan to search for and acquire complementary businesses and the objectives and potential impacts of those efforts, the need for and use of proceeds from one or more financings for strategic arrangements and partnerships, our future capital needs and ability to obtain financings and liquidity. All statements other than statements of historical facts contained in this Report, including statements that relate to our future financial performance, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements. These forward-looking statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate,” “should,” “intend,” “could,” “potential,” “is likely,” “plan,” "continue," and similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include those summarized in the “Summary of Risk Factors” below and more particularly described below in “Risk Factors”. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

Summary of Risk Factors

Our business is subject to numerous risks and uncertainties that you should consider before investing in our common stock. Some of the principal risk factors that make an investment in the Company speculative or risky are summarized as follows:

These and other material risks we face are described more fully in Item 1A. – Risk Factors, which investors should carefully review prior to making an investment decision with respect to the Company or its securities.

PART I

ITEM 1. Business

Our History

In 2013 co-founders Reeve Benaron and Jason Wulfsohn formed Socialcom Inc (“Socialcom”) by bringing together three businesses they held: a creative agency, a digital performance agency, and a demand side platform (DSP) or programmatic media-buying platform. The core areas of expertise represented by each of these companies - creative and brand building, performance marketing and ad tech - still defines Socialcom’s unique competitive advantage today, as it continues to lean into full-funnel and omnichannel performance solutions for independent agencies and brands. During the last 10 years Socialcom has experienced significant achievements in terms of growth, market relevance, and product innovation, evidenced by an array of prestigious industry awards, including being named one of the fastest-growing companies in America by Deloitte, The Financial Times and the Los Angeles Business Journal, as well ranking on the Inc. 5000 list for four consecutive years, starting in 2019 and most recently in 2022. In 2021 Socialcom was an AdExchanger finalist for Best Programmatic Capabilities, a W3 Silver Award winner for best integrated campaign and in 2022 Socialcom VP of Partnership Solutions, Danielle Gale, was honored by Cynoposis as one of the Top Women in Media. Socialcom is the operating subsidiary of Vado Corp (the “Company,” “Vado,” “we,” “our” and “us”), which we acquired in the share exchange described below. Since 2023 the Company has been focused on developing powerful data science and predictive analytics solutions, through AXi, it’s proprietary suite of audience intelligence tools, that can help deliver significantly improved performance outcomes for their brand and agency clients, driving differentiation for their tech stack and competitive advantage for their clients.

Share Exchange

On February 24, 2023 the Company completed the share exchange (the “Exchange”) contemplated by the Share Exchange Agreement (the “Exchange Agreement”) dated January 30, 2023 with Socialcom and the stockholders of Socialcom signatory thereto (the “Closing”). Pursuant to the Closing of the Exchange, the Company issued the Socialcom stockholders signatory thereto a total of 169,434,640 shares of the Company’s common stock, representing approximately 96% of the shares of the Company’s outstanding common stock after giving effect to such issuance, in exchange for all of the shares of Socialcom common stock held by such Socialcom stockholders. As a result of the Closing of the Exchange, Socialcom became an approximately 96.6% owned subsidiary of the Company.

In connection with the Exchange, the Company also agreed to the following: (i) the cancellation of 93 million shares of common stock held by David Lelong, a director of the Company who at that time was also the Company’s sole officer, which cancellation was effected at the Closing, (ii) the issuance 22,793,540 options to purchase common stock of the Company to Socialcom directors, officers, employees and consultants under the Company’s 2023 Equity Incentive Plan in exchange for the cancellation of 2,604,976 outstanding Socialcom stock options held by such persons, and (iii) execution of the Stock Purchase Agreement (the “SPA”) for a financing resulting in gross proceeds to the Company of $1,500,000 (the “Secondary Financing”). The first tranche of the Secondary Financing, in which the Company sold 25,000 shares of Series A Convertible Preferred Stock (the “Series A”) for $750,000, closed simultaneously with the Closing of the Exchange. The second tranche of the Secondary Financing in which the Company sold an additional 25,000 shares of Series A for an additional $750,000 closed on May 25, 2023.

Effective at the Closing, the number of directors of the Company was fixed at three, and Jason Wulfsohn and Reeve Benaron were appointed to serve on the Board of Directors. Effective upon the Closing, David Lelong tendered his resignation as the sole officer of the Company, and Jason Wulfsohn and Ryan Carhart were appointed as the Company’s Chief Executive Officer and Chief Financial Officer, respectively. Mr. Lelong remains as a director.

Our Industry

Digital advertising is a rapidly growing industry that is constantly evolving, in a highly competitive, increasingly complex marketplace. Magna forecasts a 6.4% increase in total U.S. ad spending in 2024 with digital formats expected to increase by 10.0%, while non-digital formats decrease by 5.9%. According to Statista, advertisers in 2022 in the United States spent nearly 127 billion U.S. dollars on programmatic digital display advertising with expenditures expected to increase to nearly 168 billion U.S. dollars by 2024.

In its 10 years of operations Socialcom has been a leader in providing complete end-to-end solutions for digital marketing, during which time our industry has experienced major changes that are expected to continue to transform our industry. These include:

Reduced access to third-party data: Beginning in 2024, Google began the process of phasing out the system of third-party “cookies’’ that has dominated the addressable advertising industry for over a decade. While third-party data is already significantly weakened by evolving privacy policies, this full deprecation is expected to create significant opportunities for next-generation technology companies that can provide media buying solutions and minimize performance disruption for advertisers and agencies. As increasingly savvy audiences grow fatigued with the proliferation of “ad noise” in the ecosystem, concerned with data privacy and more likely to opt out of tracking when given the option, it becomes more challenging for marketers to reach their audiences and accurately track performance metrics. Socialcom thrives in delivering actionable solutions and tactics that help our customers stay ahead of this rapidly accelerating curve.

Increased use of artificial intelligence (AI) and machine learning: These technologies allow for more targeted and personalized advertising, as well as improved ad placement and optimization.

Shift to mobile: With more and more people using mobile and multiple devices to access the internet, mobile advertising is becoming increasingly important.

Growth of omnichannel advertising: Amid the rise of over-the-top (OTT), CTV and social media platforms continue to rival and in many cases overtake traditional linear broadcast, advertisers and audiences have embraced an omnichannel, “Everything, Everywhere, All at Once” expectation.

Increased focus on privacy and data protection: With growing concerns about data privacy and security, companies are investing in new technologies and practices to protect consumer data and ensure compliance with regulations.

Emergence of new ad formats: From augmented reality to interactive video, innovative ad formats offer new ways for brands to engage with consumers, and for customers to engage with brands.

Growth of Programmatic Advertising: Accurate audience segmentation with more efficient targeting and measurable results facilitates more sophisticated digital content delivery across multiple platforms. This results in more personalized content, and greater customer engagement, which in turn translates into higher retention and extended customer lifecycles, representing additional opportunities to sell and upsell customers.

Results for small- and mid-sized businesses: While large companies have been able to deploy massive, expensive, enterprise solutions, the rise of highly targeted, measurable and efficient advertising technologies, powered by programmatic expertise, has enabled small and mid -sized businesses to effectively harness the same power of digital media in equally meaningful ways. Localized campaigns, yielding measurable results and higher advertising return on investment (ROI), means these companies can deploy marketing dollars and make decisions on their digital spend based on measurable success metrics linked to their digital campaigns.

Audience segmentation means delivering for traditionally underserved sectors: Granular dissection of audience profiles allows for significant audiences that may have been ignored or overlooked to be served. The definition of underserved audiences may include multi-cultural, minority and LGBTQ+ which combined, according to some estimates, make up an increasing percentage of the U.S. population, a trajectory that some expect to continue. Advertisers increasingly want to connect with these segments of the population in their natural media consumption environment and to learn from the insights gathered from these consumers.

Industry fragmentation: There are clear indicators that the fragmentation of the digital advertising landscape will continue to accelerate with more destinations, more suppliers, more measurement and more data. The resulting complexity and friction places an even greater premium on the tools, products, interfaces and expertise to navigate the fragmented landscape. Simply put, when everything is broken into pieces that do not talk to each other, the need for connective tissue is greatest. This need for a new interoperability presents a sizable opportunity for an integrated and unified solution.

Our Market Opportunity

We identify our core market opportunity as small to medium sized businesses that comprise the mid-market sector, often defined as companies reporting up to $1 to 3 billion in annual revenue. These companies combined, are generally considered to represent a majority of U.S. GDP. In addition, we also support medium to large sized brands, including those that would be categorized as light enterprise and enterprise level, as well as larger independent ad agencies, along with publicly owned agencies within holding company structures.

Socialcom is highly effective at serving these core groups of marketers in three ways, through direct-to-consumer (D2C), business-to-business (B2B) and business-to-consumer (B2C), and across multiple verticals, from retail and ecommerce, health and wellness, to financial services, higher education, governmental agencies and consumer electronics to name just a few. We engage both directly with performance-oriented brands and also with the independently owned and operated digital ad agencies who service them. Estimates suggest there are over 48,000 digital advertising agency businesses in the U.S. as of 2023, an increase of over 16% from 2022.

Since the COVID-19 pandemic, and in a down economy, there is often greater pressure on ad spend performance. This has only grown the market reliance on digital performance tactics that are more measurable, more targeted and can be more directly linked to measurable business goals. As marketers move more of their advertising budgets from brand to performance, this can drive an increasing and frequently unmet need for an integrated omnichannel solution that achieves improved performance and return on advertising spend (ROAS) outcomes, by effectively targeting audiences wherever they are, on any device, with the message they want, and at the moment they want to receive it.

As we continue to see a certain amount of macro-economic volatility, as well regulatory and technology-related shifts within the ad tech ecosystem, we have significantly evolved and expanded our omnichannel performance tech-stack, ensuring that we can help marketers achieve scalable and sustainable performance outcomes in a post cookie ecosystem, in particular through the development of powerful data science and predictive analytics tools that help level the playing-field for performance and challenger based marketers.

Our Solution

We are a performance-first omnichannel programmatic advertising company that partners with challenger brands and independent agencies to exponentially increase their revenues and lower their cost of customer acquisition through our powerful combination of integrated platform solution, advanced data science tools and seasoned and strategic talent.

Our mission is to imbue every audience interaction across the digital ecosystem with measurable performance and bring those interactions together to deliver better business outcomes for our customers, while helping marketers lean into next-gen technology solutions that can help them level the playing field in competitive categories.

We work with our customers to deliver effective and flexible media plans built around digital strategies focused on the unique key performance indicators (KPIs) of every campaign, leveraging the widest available range of platforms and tactics from across the full-breadth of the digital and also linear or traditional media landscape. We deliver a suite of products and tools that allow marketers to engage and convert their desired audience segments with data-powered precision, driven by personalized messaging crafted to an exact moment within the often non-linear conversion journey of today’s consumer. This is achieved with an array of specialized products, along with a unified tech stack that powers the journey from start to finish, from audience targeting to bespoke creative to powerful reporting, measurement and attribution tools.

We believe that our company is exceptionally well positioned to continue to deliver results for both agency and brand direct customers, and we have built integrated, future-first products, platforms and services to drive successful end-to-end campaigns:

For agencies, we offer strategic, omnichannel programmatic solutions using a combination of innovative technology, targeted media buying, data-driven analytics and high-impact creative to ensure better campaign performance. Our seamless omnichannel reporting tools can also be clear-labeled for customers, typically ad agencies, to quantify and visualize performance and attribution data for their end customer.

For brands, our expert strategic teams leverage the latest programmatic and machine learning technologies to analyze and optimize across 24 real time ad platforms, using a suite of tools designed to maximize any ad spend, all continuously optimized with real-time data, actionable insights, and omnichannel performance tracked in one seamless, unified dashboard. Analyzing millions of historical data points with our machine learning technology, every campaign’s unique goals and KPIs are considered to ensure we recommend and deploy the optimal blend of platforms and channels that will deliver meaningful and ideally scalable performance results.

Our business intelligence tools collect data across the entire user journey, reporting trends on channel, tactic, platform, audience, media type and creative. Comprehensive access to this data, both first and third party data sets, including by activating an array of post-cookie solutions, puts relevant insights and learnings directly into the hands of our buyers and also our customers, offering clear ways to understand which campaigns are most effective and why, while also providing the insights for our seasoned buying team and traders to continuously optimize media plans to drive growth. Although anticipated cookie restrictions pose challenges to our industry, as described below under “Risk Factors,” we believe they also pose opportunities to digital ad enterprises like ours willing to dynamically adapt to the industry changes that will result.

In particular our suite of emerging data science tools, known in-market as AXi, is built around AI-enabled, performance-first solutions that leverage multiple disparate data sets that deliver holistic and integrated performance impact throughout the digital ecosystem, seeking to engage high-intent audiences through the deployment of custom algorithms and automated cross-channel optimization to help drive scalable performance throughout the purchase funnel, and across channels and devices.

Our award-winning in-house creative studio crafts captivating and high-performing digital ad content, often powered by the latest creative technologies, from landing pages to animated and often immersive ad units, as well as photo shoots, video production and post -production. We offer a full range of capabilities in branding, design and production across the spectrum of app, web, photo and video, including user generated content, as well as influencer and creator content. With this ability to deliver a full end-to-end creative service for our performance customers, combined with our omnichannel solutions and expertise, we not only drive multiple revenue streams for our company, but we integrate each of our core service solutions to help ensure successful, sustainable and scalable campaigns for our customers, taking direct responsibility for their campaign success and ROI throughout every step of the campaign and customer journey.

Products and Services

Omnichannel Platform

Socialcom’s key technology which enables it to provide digital advertising services to customers is tdX, an innovative omnichannel trading desk platform providing unified buy-side access at scale to the digital media ecosystem, including 24 performance platforms across programmatic, display, CTV, DOOH, and audio, along with search and social. tdX offers a holistic performance solution, unified by Socialcom’s robust data infrastructure, delivering real-time campaign learnings and cross-channel performance optimizations, along with sophisticated insights and predictive analytics demonstrated to drive scalable and sustainable campaign outcomes. Tech-enabled creative services, available from the Company’s internal creative team, Socialcom Studio, provides performance-oriented brand and product ad creative and other digital content for deployment within customer campaigns.

The 24 channels and platforms represented within tdX are comprised of multi-use web companies such as Google and Amazon, social media sites such as Facebook and TikTok, and programmatic advertising platforms such as theTradeDesk and AdsWizz, to name just a few. Socialcom uses tdX to prepare, analyze, execute and monitor digital ad campaigns that are tailored to a customer’s specific digital advertising needs and desires.

By providing marketers comprehensive access to the digital advertising activities of each of these platforms within a single integrated system, Socialcom is able to deliver digital advertising solutions to its customers in a manner designed to more effectively execute and deploy their marketing strategies and locate, engage and convert target audiences. Through their managed service solution Socialcom is able to support their customers’ campaigns by leveraging the Company’s ability to deploy programmatic omnichannel advertising campaigns on the channels that can be accessed through tdX. Programmatic advertising refers to using software to purchase digital advertising space for distribution over the Internet. Programmatic advertising makes the purchasing of digital ads more efficient by employing computer technology to provide for a more streamlined and efficient ad space selection, purchasing and deployment process when compared to more traditional approaches such as contacting website operators directly and negotiating terms on an individualized basis. In this respect, we and our platform, together with the channels accessible on it, serve as an intermediary between customers seeking to execute an effective ad campaign, and the appropriate channels of digital communication on which to display digital advertisements to prospective consumers of the products and services being advertised.

Unlike non-digital advertising, digital advertising allows for more data-driven ad campaigns and can give real-time performance details of advertising campaigns and outcomes. The availability of user data and rich targeting capabilities makes digital advertising an effective and important tool for businesses to connect with their audiences. Socialcom’s software offers data analytics and makes strategic recommendations that assist users in making decisions to allocate their available advertising budgets and other resources towards platforms and ads that may better position their advertising campaign for success. In one key innovation, the platform evaluates over 250 specific campaign criteria, implementing up to 50 filters to help identify the best combination of platforms and channel combination to optimally deliver against a campaign’s unique KPIs, powered by a review of millions of historical campaign data points. As described below under “Competition” some of the DSPs and platforms available on tdX are both key partners as well as being our competitors.

Self-Service Platform

In 2022 Socialcom launched Admatx, a powerful self-serve DSP built on The Trade Desk DSP, centered around the principle of democratizing access to enterprise-level adtech by placing control into the hands of the customer without requiring a prohibitive minimum spend or a long-term subscription commitment. Unlike tdX which is built to serve the needs of the middle-market, Admatx is focused entirely on the small-to-midsize businesses (SMB) marketer, looking for an easy-to-use performance DSP without any spend minimums. As discussed above, the scale of this addressable market is considerable, covering both smaller independent digital agencies and also brand direct relationships, representing a substantial portion of the U.S. economy.

Because of its recent launch, to-date Admatx has only accounted for a small percentage of our revenue, with the balance remaining attributable to our digital ad solutions and managed-services provided through our operation of the tdX platform, however we anticipate continued robust growth moving forward.

Audience Intelligence Tools

In 2023 the company launched AXi, a suite of privacy-safe, AI-powered, advanced data science and performance tools built to address today’s challenges and drive real results. Holistically leveraged throughout the digital landscape by our expert teams with deep experience across verticals, AXi helps identify, model and target the right audiences efficiently, driving revenue growth and optimizing spend towards a greater ROAS, at scale. The solution maximizes budget efficiency via expansive data access, custom bidding algorithms, and continuous optimization based on real-time performance. Our solution is also privacy-safe, built from the ground up for compliance with evolving privacy regulations, with no personally identifiable data being handled or stored, and data sets opted-in and consented. In addition our solution is built with a cookieless-first approach, ensuring that campaigns will perform today and is also expected to perform in tomorrow’s post-cookie landscape. Each of the tools in the AXi suite can be activated individually or alongside one another, to meet the specific needs and goals of any campaign.

Creative Services

To supplement and enhance our omnichannel media offerings, customer success teams and marketing capabilities, we also offer clients access to our award-winning creative team, which designs and develops targeted brand and product messaging to customers – in the form of static, animated and high-impact ad units, organic social content, including video, as well as landing pages and complete websites - with a view to strengthening performance outcomes through the production of engaged and targeted ad creative and organic content designed to resonate powerfully with precisely defined target audiences.

Our Growth Strategy

We advise our customers to learn and iterate using data driven strategies to drive growth. If it’s good for our customers, it’s good for us too. For this reason, we have developed a multi-pronged strategy designed to build on the momentum we have generated over the last 10 years and take advantage of significant strategic growth opportunities moving forward.

Our strategic focus on underserved middle-market agencies and brands has enabled us to develop sizable market share for our offerings. However, although we have been consistently ranked as one of the fastest growing ad tech companies over four consecutive years by Inc. 5000, we have still only penetrated a fraction of our total addressable market. So while we continue to build on our momentum, delivering exceptional performance outcomes for our customers and driving sustainable repeat business, we are also evolving our sales and marketing strategies to drive improved outcomes, by expanding our internal and external lead generation solutions, plus improving efficiencies and streamlining both departments to strengthen impact and our ability to grow our customer base through more robust access to our targeted addressable markets.

That includes successfully expanding geographically into relatively underserved, potential high growth, international markets including the Middle East and in particular the GCC region, as well as Southern Africa, along with newer growth initiatives in South East Asia and Latin America.

That also means product development and innovation in three key areas:

Predictive Analytics: our data science team can leverage powerful machine learning to produce statistical representations of customer behavior, without sacrificing privacy or quality, ensuring that our customers understand performance projections from the very start of every campaign. In addition, through a combination of advanced machine learning technology with high quality behavioral data, we can more accurately identify prospective customers across the full omnichannel landscape, driving improved performance outcomes throughout the campaign lifecycle. This end-to-end predictive model is intended to improve upon the performance of standard audience segments and native DSP targeting, enabling a dynamic bid-optimization solution that automatically adjusts bids based on the model's prediction about a customer's propensity to act. Ultimately this allows advertisers to allocate more budget to the ads and impressions that are most likely to perform, while also deploying campaigns faster based on recommendations that anticipate campaign performance pre-launch.

Supply Optimization: our technology team is developing solutions to ensure that our ad operations (ad ops) and buying teams are able to find the optimal route to the best performing programmatic and digital performance inventory, removing any redundant intermediaries and streamlining access to the best performing supply. We also anticipate the results of these tech powered innovations to include improved business processes for the company, in part by replacing unprofitable bids with those that ensure customers receive optimal value and improved outcomes for their digital media budgets.

Creative Automation: through industry partnerships our creative team is developing creative automation tools to remove design repetition tasks for the production of high-volume campaigns, reducing the need to manually crop, resize, and lay out image ads. Beyond this we are developing dynamic optimization solutions that create hyper-personalized ads based upon real-time data about the viewer at the moment of ad serving to ensure ads are both more relevant and better optimized toward performance. Our tools are able to interpret an array of meaningful targeting variables to ensure the most personalized ad is served.

That means continuing to expand into new channels and finding the customer where they are, from CTV to DOOH to programmatic audio.

And that means developing new and next generation opportunities for customers in emerging technologies, including augmented reality (AR) and virtual reality (VR), web3, non-fungible tokens (NFT) programs and metaverse integrations.

Moving forward we intend to advance our industry leading, data-driven approach to the next level, incorporating additional layers of AI, predictive analytics, and automation in the application of data science, audience insights and tech-powered creative, an integrated and holistic system designed to optimize performance in real time for our brand and agency customers.

Finally, we are constantly assessing the M&A landscape to identify potential acquisition targets, whether creative or media agencies, with stable customers and revenues, that can drive stronger business outcomes through integrated access to the Socialcom media services solution. With a proven track record of executing this model, through our prior purchase of Big Buzz Marketing Group, this is an approach that can drive revenue growth and expanded market share, plus enable us to improve operational and cost efficiencies by integrating teams and implementing other efficiency solutions.

In the furtherance of these efforts, in March 2024 we obtained the customer base of another enterprise, consisting of 11 customers and one prospective customer, plus the 14 employees of that enterprise. Included in this transaction is approximately $4.1 million of prepaid amounts on customer arrangements, which we will receive from the enterprise on a monthly basis subject to that party’s offset rights with respect to employee compensation, and to our performance of the related services under the customer arrangements. Within this expanded customer portfolio, across multiple categories where we possess comparable expertise, there are significant opportunities for upselling and cross selling, especially in light of the expanded set of media capabilities, including extensive expertise with traditional and linear channels like broadcast and cable TV, radio, print and out-of-home advertising.

Roll-up M&A Strategy

We are engaged in a sustained effort to execute an ongoing roll-up strategy, by identifying and potentially acquiring relevant agency and marketing focused companies that together can deliver expanded market relevance through the integration of each company’s respective capabilities, as well as the opportunity to cross-sell and upsell into the combined portfolio of customers. The larger goal is to help drive revenue scale through inorganic growth, improve operating efficiencies within the acquired entity through potentially streamlining operations, and explore how to improve performance outcomes through an expanded and integrated suite of performance solutions, including newer areas such as traditional media buying, influencer marketing and public relations.

Customers

The digital advertising industry is undergoing significant expansion, replacing traditional models and constantly refreshing newer models. In this evolving landscape we serve many of the constituents on the demand-side of the ecosystem, from performance-oriented brands that we work with directly, to middle-market ad agencies which we assist in providing services to third party businesses, with our revenue streams maintaining a split between D2C, B2B and B2C marketers, and across numerous verticals, reflecting our resilience in the face of temporary market fluctuations in specific sectors. Our customers represent a large range of business types, sectors and audiences.

In recent years, high-growth verticals for Socialcom have included, but are not limited to, ecommerce, financial services, health and wellness, higher education, travel and hospitality, apparel, D2C and government agencies. During this same period independent agencies, looking to leverage our technical and strategic expertise and access the broadest possible range of available performance channels - and without having to recruit and retain large internal teams or meet costly monthly minimum spend requirements on specific platforms - have also represented a significant opportunity for the Company.

We have a material amount of customer concentration with respect to our cumulative revenue. In the fiscal year ended December 31, 2023 (“FY 2023”), 5 customers accounted for approximately 45% of our revenue, and 10 customers accounted for approximately 65%.

Competition

The digital advertising industry in general, and buy-side digital advertising industry in particular, is a highly competitive, technology-driven and constantly evolving industry with new market entrants frequently emerging, in part due to relatively few barriers to entry when compared to certain other industries. Overall digital advertising spending historically has been highly concentrated in a small number of very large companies that have their own inventory, including Google, Facebook and Amazon, as well as Internet and cellular service providers, all of which with which we compete for digital advertising space and demand. We also compete with larger publicly traded digital ad platform operators, such as theTradeDesk, Viant Technology, Inc. and Direct Digital Holdings, Inc., which have greater financial and other resources than we do, and smaller digital ad and related businesses with a specialized focus such as in serving a particular industry or geographic reach. Further, because of the online nature of our operations, the channels we offer access to on our platform are sometimes also our competitors, and customers may elect to terminate us as an intermediary and go directly to those platforms for their ad campaign with relative ease, with any obstacles to access including spend minimums and some technical knowledge.

Furthermore, there has been rapid evolution and consolidation in the advertising technology industry, and we expect these trends to continue, thereby increasing the capabilities and competitive posture of competitive enterprises, particularly those that are already dominant in the industry in various ways, and enabling new or stronger competitors to emerge. Based on the current focus of our competitors, there is even more opportunity for engagement in the underserved and multicultural markets on which we focus, although this may be coupled with an increase of competitive offerings in response to this trend.

Human Capital

As of March 15, 2024, we have 56 employees, including 52 full-time and four independent contractors.

We seek to hire the very best talent in the U.S. and since the COVID-19 pandemic in 2020 we also now hire internationally, and we endeavor to maintain exceptional relations with a diverse workforce built upon the goal of delivering the optimal employee experience, from ongoing learning to professional growth to purpose and community and purpose-led outreach. Our longstanding policy of inclusiveness is designed to foster an environment that promotes innovation and a wide range of perspectives. Our work practices are founded on a fundamental respect for equity and inclusion and a commitment to ethical business conduct that extends to our relations with our employees, customers and other stakeholders. We also actively measure employee engagement and satisfaction on an ongoing basis, as we believe a happy workforce leads to a more innovative, productive and ultimately more successful enterprise.

Our culture leans into the core principles of passion, purpose and performance with multiple opportunities for team members to participate in purpose-led projects, from pro-bono campaigns for impact organizations and nonprofits, to contributing to ongoing campaigns on behalf of various purpose-driven customers, covering advocacy, politics and sustainability. From a performance standpoint we seek to foster a working environment that consistently delivers learning and growth opportunities for each of our employees, while closely tying compensation, and specifically bonus payments, to the measurable performance of customer campaigns. Simply put, we endeavor to create a workplace environment where employees treat our customers’ success as linked directly to their own success, thereby producing high levels of professional drive and engagement throughout the entirety of the Company’s workforce.

Sales and Marketing

We focus on maintaining effective sales and marketing teams, with the goal of robust out-bound market penetration and driving a high volume of high-quality in-bound leads. The sales team leverages leading enterprise tools for prospecting and lead generation, with powerful customer relationship management (CRM) and full-customer lifecycle management systems, and with sales leaders located in key markets across the United States, including Los Angeles, New York, Dallas, Chicago and Detroit, along with sales contractors in London, San Francisco and the GCC region in the Middle East. Our marketing team, which works in close partnership with our strategy, ad ops and creative teams, leverages paid media, content marketing, organic content, webinars, events and public relations to drive awareness and visibility for our brand and ensure we are driving strong in-bound lead generation. Team members have often been quoted and published in trade publications that include Entrepreneur, Forbes, Digiday, Adweek, AdExchanger, Modern Retail, MarTech Series and AW360.

Government Regulation

In the United States, both federal and state legislation govern activities such as the collection and use of data and privacy issues in the advertising technology industry. International regulations also exist and are addressed only generally herein. As to the United States, federal and states laws may limit the ability to collect, augment, analyze, use and share data. Applicable laws and regulations may change from time to time, including those relating to the level of consumer notice, consent, and/or choice required when a company employs cookies or other electronic tools to collect data about interactions with users online. Thus, the below constitutes a general summary of the applicable legal and regulatory environment at this time, as well as some notable laws on the horizon.

In June 2022, the American Data and Privacy Protection Act (“ADPPA”) was introduced in the U.S. House of Representatives (the “House”) with bipartisan support and, if enacted, would give consumers certain rights over their data and require that businesses process data under a fiduciary obligation. While data collected to provide a service unrelated to advertising would remain a permitted use, under ADPPA, a business could not collect data simply for the purpose of targeting ads. The bill does carve out one exception related to advertising by permitting data collection to measure the performance of advertisements. Additionally, ADPPA would also empower the Federal Trade Commission (“FTC”) to regulate privacy in a more explicit manner.

As of the date of this Report, the House has not yet voted on the ADPPA. In November 2023, the Digital Accountability and Transparency to Advance Privacy Act (the “DATA Privacy Act”) was introduced in the Senate and subsequently referred to the Committee on Commerce, Science, and Transportation. If enacted, the DATA Privacy Act would require the FTC to promulgate new regulations relating to data processing procedures and consumer rights to access, correct, and delete data stores by a covered entity. As of the date of this Report, debate surrounding a federal regulatory regime for data privacy remains ongoing.

Additionally, the Children’s Online Privacy Protection Act (“COPPA”) imposes restrictions on the collection and use of data provided by children under the age of 13 by child-directed websites or online services, such as apps, directed to children or any website if the collection of such data is known to the website or app operator. In January 2024 the FTC released a notice of proposed rulemaking, proposing to amend COPPA’s definitions, modifying the parental consent requirements and methods, creating a school authorization exception to the parent consent requirement, and modifying the data retention and deletion requirements, among other proposed changes.

The FTC and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. In addition, federal and state governmental authorities continue to evaluate the privacy implications inherent in the use of third-party “cookies” and other methods of online tracking for behavioral advertising and other purposes. Generally, the U.S. government has enacted legislation and regulations, and may enact further legislation or regulations in the future, that could significantly restrict the ability of companies and individuals to utilize online behavioral tracking, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools. This is also occurring with states laws, as discussed below.

In addition to potential federal laws on the horizon, numerous states have enacted their own privacy regulations. The California Privacy Rights Act (the “CCPA”), which took effect in 2020 and was subsequently amended in 2020 by Proposition 24, the California Privacy Rights Act, requires informed consent on the part of consumers whose data is collected. Under the CCPA consumers can opt-out of the sale of their data and the CCPA provides California residents with the right to know who is collecting their information, how it is being used, and to whom it is disclosed. Further, under the CCPA, contracts to sell data to third parties have to contain certain provisions defining how the third party may use that data, and it must include caveats about consumers being able to opt-out and thus prohibiting the transfer of such data. California law also requires data brokers to register with, and provide certain information to, the California Privacy Protection Agency. The registration requirement applies to any business that knowingly collects and sells any consumer information to third parties with which that business has no direct relationship.

Other states like Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, New Hampshire, New Jersey, Oregon, Tennessee, Texas, Utah, and Virginia have enacted comprehensive consumer data privacy laws. Maine, Michigan, Minnesota, Nevada, New York, Vermont, and Washington have enacted narrower consumer privacy laws.

As for outside the United States, there is an evolving concert of both national laws and regulatory bodies which should be considered. The European Union’s “GDPR” is considered the most restrictive privacy and security law in the world. The GDPR defines “personal data” broadly, and it enhances data protection obligations for controllers of such data and for service providers processing the data. The GDPR requires companies to have a legal basis for data processing, which shall be lawful only under specific conditions, such as to fulfil a contract, gain consent, and or some other legitimate interest. In a recent notable ruling by the GDPR’s “board of protection”, it held that META Ireland and Facebook Norway engaged in ongoing infringements of the GDPR because of an inappropriate use of the legal bases of contract and legitimate interest for processing personal data for behavioral advertising purposes.

Generally, the GDPR applies to any company established in the European Economic Area (“EEA”) and to companies established outside the EEA that process personal information in connection with the offering of goods or services to data subjects in the EEA or the monitoring of the behavior of data subjects in the EEA. More specifically, these obligations may include limiting personal information processing to only what is necessary for specified, explicit, and legitimate purposes; requiring a legal basis for personal information processing; requiring the appointment of a data protection officer in certain circumstances; increasing transparency obligations to data subjects; requiring data protection impact assessments in certain circumstances; limiting the collection and retention of personal information; increasing rights for data subjects; formalizing a heightened and codified standard of data subject consents; requiring the implementation and maintenance of technical and organizational safeguards for personal information; mandating notice of certain personal information breaches to the relevant supervisory authority(ies) and affected individuals; and mandating the appointment of representatives in the UK and/or the EU in certain circumstances.

ITEM 1A. Risk Factors

RISK FACTORS

Risks Related to Our Business and Financial Condition

Following our recent assumption of certain customer accounts and employees of another business, we may not be successful in integrating these accounts and employees into our existing operations or maintaining the customer relationships derived therefrom.

In March 2024 we obtained 11 customer accounts and 14 employees from another company in the digital ad space. Included in this transaction are customer prepayments held by the counterparty totaling $4,164,269 for future services to be rendered on customer accounts, subject to performance of the services on such accounts and on the counterparty’s right to offset transferred employee compensation. While this provided a potential source of substantial additional revenue for our business, we may not be able to integrate the employees and customers obtained into our business without difficulty, which could reduce the benefit anticipated from the transaction, and onboarding these added operations could have a material adverse impact on our existing operations. Further, the additional employees come with added costs, which may not be offset from anticipated additional revenue from the new customers in future periods. If we are unable to integrate the new customer accounts and employees efficiently or within a reasonable time period, we could lose some of the potential benefits of this transaction, and could experience other adverse consequences impacting our business and financial condition.

The loss of customers could significantly harm our business, financial condition and results of operations, particularly given our customer concentration.

Our customer base consists primarily of small-to-mid-sized advertising agencies and businesses, including businesses that advertise their products and services directly to consumers and advertising agencies that assist other businesses in advertising to consumers, over a wide variety of industries. As disclosed under “Item 1. – Business –Customers,” our operating results are subject to a material amount of customer concentration, with five customers accounting for approximately 45% of our revenue and 10 customers accounting for approximately 65% of our revenue in FY 2023. In the majority, but not every instance, we do not have exclusive relationships with customers, and we depend on sales and service focused personnel to work with our existing and prospective customers to build and maintain advertiser and advertising agency relationships and prepare and implement effective advertising campaigns. When they are not long term Master Service Agreements (MSA) or Agency of Record (AOR) relationships, our agreements with customers generally allow them to terminate their relationship with us on short notice. The loss of our customers, or the personnel in charge of establishing or maintaining relationships with them could potentially significantly harm our business, financial condition and results of operations.

Further, a significant proportion of our customers are advertising agencies. In our relationships with these agency customers, Socialcom is contracted to develop and execute digital ad campaigns, and therefore such agency customer could be terminated by its own client, resulting in a loss of revenue to us by reducing that agency’s spending on our platform and services. In addition, due to the often non-exclusive nature of our relationships with customers and the fact that some advertising agencies have strong relationships with our competitors in the industry, such agencies may direct their advertisers to competitors rather than to us in the future.

In cases where we work with advertising agencies, there is a risk that the agency does not collect from their own advertiser customer and subsequently may be unable to remit payment to us. Further, we sometimes work growth-stage advertisers, who have inherent credit risk profiles that can subject us to greater credit risk in seeking repayment. In addition, typically, we are generally contractually required to pay advertising inventory and data suppliers within a negotiated period of time, regardless of whether our customers pay us on time, or at all. In addition, we can experience slow payment cycles by advertising agencies, which can sometimes be common in our industry. While we attempt to negotiate long payment periods with our suppliers and shorter periods from our customers, we are not always successful. We also often institute a provision known as sequential liability when can mitigate this risk by requiring advertising agency customers to pay Socialcom regardless of whether they are paid by their customer or not.

In addition, our customers may change budget allocations or their own internal technology infrastructure, or otherwise experience changes to their business or operations that encourages or results in them reducing or ceasing the use of our platform and services, in which event we may lose revenue from those customers. In addition, some customers have or could develop their own relationships with suppliers of advertising inventory, channels and technologies, rendering our offerings less advantageous or less impactful, or impose downward pricing pressure on us. Our business may suffer to the extent that customers and other third parties with which we do business, and on which our operations rely, purchase and sell advertising inventory directly from one another or through intermediaries other than us. If we lose key customers or any key customers reduce their use of our platform or services, it could materially adversely affect us and our operating results, and in turn your investment in us could be harmed.

Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our financial condition and results of operations.

We have experienced and may in the future experience significant growth in a relatively short period of time. To manage our growth effectively, we must continually evaluate and evolve our organization. We must also manage our employees, operations, finances, technology and development and capital investments efficiently. Our efficiency, productivity and the quality of our platform and customer service may be adversely impacted if we do not train our new personnel, particularly our sales and support personnel, quickly and effectively, or if we fail to appropriately coordinate across our organization. Additionally, our rapid growth may place a strain on our resources, infrastructure and ability to maintain the quality of our platform and services. Our financials trends experienced in prior periods should not be considered as indicative of future performance. In future periods, our revenue or profitability could decline or grow more slowly than we expect. Failure to manage our growth effectively could cause our business to suffer and have an adverse effect on our financial condition and results of operations.

Our ability to continue as going concern is in doubt absent obtaining adequate new financing.

In FY 2023, we incurred a net loss of approximately $8.5 million (with an Adjusted EBITDA loss of $3,391,556 which is comparable to FY 2022 – see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations at page 34) and used approximately $3.9 million in net cash in operations. Based on cash on hand as of April 8, 2024 of approximately $ 646,160, the Company does not have the capital to finance operations for the next 12 months. This raises substantial doubt about our ability to be a going concern. Our auditors issued an audit opinion for FY 2023 which contained what is referred to as a “going concern” opinion. Our continued existence is dependent upon obtaining adequate new financing. Because of our continuing losses, we may have to continue to reduce our expenditures, without new financing. Working capital limitations may impinge on our day-to-day operations, including causing us to reduce our sales efforts to the extent maintain adequate workforce and technology.

The terms of Socialcom’s loan facility could result in the loss of the Socialcom business or result in a change of control of Vado were a default to occur, or cause other material adverse consequences.

As more fully described under “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources”, Socialcom and Vado are party to a loan facility with a secured lender pursuant to which Socialcom may borrow up to $2,000,000. As of April 8, 2024, $381,141.88 has been borrowed under this facility, and the facility requires that at least 20% of the maximum amount, or $400,000, be utilized at any given time. The loan facility, which was extended twice in 2024 to its current termination date of April 31, 2024, is secured by the assets of Socialcom and the Company, and Vado has pledged the Socialcom common stock it holds as collateral. As a result, should an event of default occur or the lender call for full payment of outstanding amounts under the loan documents, the lender could seek to enforce these rights in which case Vado could lose the Socialcom business and become a shell company with no business or operations. In addition, Jason Wulfsohn, our Chief Executive Officer and a principal stockholder, agreed to pledge his 74,311,816 shares of Vado, representing approximately 41% of the outstanding shares of Vado, to secure payment of the loan facility. Therefore, should a default occur the lender could obtain a significant portion of the Company’s outstanding ownership interest and gain control over us.

Further, the loan documents contain provisions restricting our and Socialcom’s ability to take certain actions, including making intercompany advances, which could prevent or delay us from taking a course of action which our Board of Directors deems advisable and have a material adverse effect on our operations and ability to pay expenses at the parent company level, including Vado’s expenses in connection with filing reports with the SEC.

Because of the foregoing terms of the loan facility, if we fail to raise sufficient proceeds in our capital raising efforts or otherwise raise or generate the capital required to repay the loan in a timely manner, we could lose the Socialcom business which constitutes all of our operations or experience a change of control, and we are also subject to the limitations imposed under the loan facility while it remains in effect. If we are unable to access the necessary capital as necessary to avoid such an outcome, you could lose all or part of your investment.

Because we have limited capital, we need to raise additional capital in the future by issuing debt or equity securities, the terms of which may dilute our current investors and/or reduce or limit their liquidation or other rights.

We need additional capital to operate our business and execute our strategic plans and growth initiatives. We may not be able to obtain additional capital when required. Future business development activities, as well as administrative expenses such as salaries, insurance, general overhead, legal and compliance expenses and accounting expenses will require a substantial amount of additional capital which our contemplated or future securities offerings may not fully provide depending upon our success in selling securities in such offerings. For example while our Offering Statement on Form 1-A for an up to $8 million offering of our common stock was qualified by the SEC in November 2023, as of the date of this Report we have not raised any funds in that offering.

In addition, because we are in default under a Financing Agreement, which is discussed in more detail under “Management’s Discussion and Analysis of Liquidity and Capital Resources.”

The terms of securities we issue in future capital raising transactions may be more favorable to new investors, and may include liquidation preferences, superior voting rights or the issuance of other derivative securities, which could have a further dilutive effect on or subordinate the rights of existing investors. Any additional capital raised through the sale of equity securities will likely dilute the ownership percentage of our stockholders. Additionally, any debt securities we issue would have priority on our assets compared to holders of our common stock and, if convertible into shares of common stock, would also pose the risk of dilution.

We may be unable to obtain necessary financing if and when required.

Our ability to obtain financing, if and when necessary, may be impaired by such factors as the capital markets (both in general and in the particular industry in which we operate), the national and global economies and the condition of the market for microcap securities. Further, factors such as high inflation, the geopolitical conflict in Ukraine and the Middle East and potential economic downturns including the recession we may be entering combined with high inflation and investor uncertainties may increase our requirements for capital, particularly if such economic downturn persists for an extended period of time, and may limit or hinder our ability to obtain the funding we require. If the amount of capital we are able to raise from financing activities, together with any revenues we may generate from future operations, is not sufficient to satisfy our capital needs, we may be required to reduce or cease our operations, divest our assets at unattractive prices or obtain financing on unattractive terms. If any of the foregoing should happen, our stockholders could lose some or all of their investment.

We saw a decline in revenue and gross profits in the fiscal year ended December 31, 2023 compared to the prior year, and if this trend continues, our results of operations and prospects will be materially hindered.

In 2023, we experienced a decline in revenue and gross profits when compared to 2022, in part due to reduced customer campaign volume, along with increased in-housing of media buying by clients in 2023 when compared to 2022 shifting trends and expectations from our customers and macro-economic factors. This trend may or may not persist or intensify in future periods, which would materially adversely affect us. Because we focus on small-to-medium size advertising agencies and businesses which can sometimes be relatively more susceptible to market downturns and sensitivities to budgetary constraints than larger companies, this risk may be particularly relevant to us relative to some of our larger competitors in the digital ad space.

Socialcom also experienced turnover in members of its customer-facing personnel during the same period, which directly impacted certain customer relationships and likely contributed to this trend. Another potentially contributing factor has been an increasing focus by customers on transitioning toward in-housing of media buying by advertisers as well as growing widespread access to enterprise technology and data-powered buying solutions by agencies, representing a competitive threat to Socialcom’s value proposition and ability to continue to generate and grow its revenue streams. Other suspected reasons for the decline in demand for Socialcom’s products and services include macro-economic factors such as inflationary pressures, high interest rates and recessionary fears, and diminished consumer spending, all of which are likely contributing factors to reduced advertising budgets from customers in general to some degree. Any of these or other factors resulting in declined customer spending on our product and services offerings, and thereby revenue to us, could materially adversely affect our business and our results of operations and financial condition, and thereby your investment in us.

Risks Related to our Operations and the Digital Advertising Industry

If we fail to maintain and grow our customer base and spending through our technology and services, our revenue and business may be negatively impacted.

To maintain or increase our revenue, we must regularly add new customers and/or encourage existing customers to maintain or increase the amount of advertising and services purchased from us. If our customers reduce spending on our products or services, or competitors introduce lower cost or differentiated offerings that compete with or are perceived to compete with our offerings, our ability to sell our services to new or existing customers could be impaired. We have expended significant resources and effort in cultivating our relationships with customers, and it is possible but unlikely that we reach a point of saturation at which we cannot continue to grow our revenue from such customers because of internal limits that advertisers may place on the allocation of their advertising budgets to digital media to a particular provider or otherwise. Further, some of our agreements with customers allow, and agreements we enter into in the future may allow, our customers to change the amount they spend through our platform and for our services or terminate our services with limited notice. Further, we do not typically have exclusive relationships with our customers, and there is limited cost, although it can be technically challenging, to move their media spend to our competitors. As a result, we have limited visibility into our future advertising revenue streams. We cannot assure you that our customers will continue to use our solutions or that we will be able to replace, in a timely or effective manner, departing customers with new customers that generate comparable revenue. If a major customer representing a significant portion of our business decides to materially reduce its use of our services or to cease using us altogether, it is possible that our revenue or revenue growth rate could be significantly reduced, and our business negatively impacted.

We may fail to adopt to technological change, and may experience outages and disruptions to our technology and infrastructure on which our operations depend if we fail to maintain adequate security and supporting systems, which may harm our reputation and negatively impact our business, financial condition and results of operations.

As we grow our business, we expect to continue to invest in technology to operate and potentially expand upon our offerings proportionally with increased revenue and demand, and which may require us to commit substantial financial, operational and technical resources, with no assurance our business will increase at a commensurate rate. Further, although we activate client campaigns across a significant number of platforms and partnerships our operations and industry are nonetheless subject to rapid and unpredictable changes in technology, including advanced by third parties that could pose significant risk to the continued economic viability of the technology on which we depend, Without the timely introduction of new products, services and enhancements, our offerings could become technologically or commercially obsolete over time, in which case our revenue and operating results would suffer. If new or existing competitors have more attractive offerings, we may lose customers or customers may decrease their use of our technology and services offerings. New customer demands, superior competitive offerings or new industry standards could require us to make unanticipated and costly changes to our technology and services offerings or business model. If we fail to enhance our current products and services, or fail to develop new products and services to adapt to our rapidly changing industry or to evolving customer needs, demand for our solutions could decrease and our business, operating results and financial condition may be materially adversely affected.

Technological advances developed by third parties such as artificial intelligence may be deployed by competitors and customers, creating an adverse competitive environment and limiting our ability to compete or the advantages of our offerings.

In recent years, a large amount of time and resources across firms and economies have been contributed towards developing artificial intelligence technology (“AI”) designed to circumvent the need for human input and interaction in a variety of different contexts. In the short-to-medium term, the applications of AI are expected to focus on computer-centric tasks and activities, which includes digital marketing on which our business and operations focus. The race towards developing AI has intensified to such a degree that many members of the tech industry have called for the suspension of these efforts given the “dangerous” consequences they may bring. Regardless of the merit of these claims, the push for AI could harm our business by enabling our competitors to overcome any competitive advantage we have in the digital ad space, allowing customers to develop their own internal means of advertising online, or otherwise reducing our competitive position and/or the advantages of using our technology. Therefore, while the adoption of AI could provide us with opportunities to the extent we can adopt and adapt such technology for our business, we may fail to do so without undue costs or other burdens, as needed to remain competitive or at all, in which case the adoption of AI by competitors or customers could materially adversely harm our competitive position and ability to maintain or grow our revenue.

The market for programmatic buying for advertising campaigns is relatively new and evolving, and if this market develops slower or differently than we expect, our business, growth prospects and financial condition would be adversely affected.

In part we generate revenue by purchasing omnichannel programmatic digital advertising impressions on third party media sites and other sources for our customers. While we provide certain ancillary services in relation to these digital ads, particularly strategy, content creation and data analytics, as well as non-programmatic channels like paid search and paid social, we expect that spending on programmatic ad buying will continue to be our primary source of revenue for the foreseeable future and that our revenue growth will largely depend on increasing programmatic spend. The market for programmatic ad buying is an emerging market, and our current and potential customers may not shift to programmatic ad buying from other advertising methods as quickly as we expect or anticipate, which would reduce our operating results and growth potential. If the market for programmatic ad buying deteriorates or does not develop or grow as rapidly as we anticipate, or develops or grows more slowly than we expect, it could reduce demand for our solutions, and our business, growth prospects and financial condition would be adversely affected.

If customer demand shifts around specific channel mix needs or expectations due to a shift in customer demand, such as customers shifting their usage more quickly or more extensively than expected to channels in which we have relatively less functionality, features, or inventory, then demand for our solutions could decrease, and our business, financial condition, and results of operations could be adversely affected. As the Internet and cellular technology continues to evolve, trends and newly emerging sites and applications often gain popularity quickly, sometimes shifting users’ focus away from existing platforms and technologies. This trend is prevalent for example in social media, where new mobile phone applications have in the past diverted attention away from existing applications. While we believe we can adapt our solutions as needed to address these changes in the short- and medium term, due to the multi-platform nature of our trading desk solution, if we are unable to do so quickly enough to meet shifting consumer or customer demand for certain channels, we may fail to adequately meet our customers’ needs and keep up with competitor offerings, and could lose customers or revenue as a result.

In addition, our revenue or profitability may not necessarily grow at the same rate as spending on our offerings. As the market for programmatic buying for advertising matures, growth in spend may outpace growth in our profitability due to a number of factors, including pricing competition, quantity discounts and shifts in product, media, customer and channel mix. Similarly, to the extent heightened cost of revenue increases at a greater rate than revenue growth in future periods, our ability to achieve or maintain profitability or the levels thereof would decline. A significant change in revenue as a percentage of spend could reflect a material adverse change in our business, operating results and growth prospects.

The digital ad industry in which we participate is intensely competitive, and we may not be able to compete successfully with our current or future competitors.

We operate in a highly competitive and rapidly changing industry, with a focus on technology and consumer behaviors that frequently and rapidly evolve and requires constant attention and adaptation to these changing market conditions. We expect competition to persist and intensify in the future, which could harm our ability to increase revenue and maintain profitability. New technologies and methods of buying advertising present a dynamic competitive challenge, as market participants develop and offer new products and services aimed at capturing advertising spend or disrupting the digital marketing landscape, such as analytics, automated media buying and exchanges. See “Item 1. – Business – Competition” for more information on our main competitors and the competitive environment we face generally.

As computer technology continues to advance and become more affordable, the barriers to entry within our industry decline, opening the door for newer participants who can compete with us, including potentially smaller operations that may not have been able to operate in our industry in an economically feasible way in the past. These new entrants pose a risk of loss of market share to our business in particular, given our focus on relatively smaller businesses that are more cost conscious. If existing or new ventures develop and market comparable competitive products or services at prices that compete with ours, that can result in additional competition for advertising spend. Further, if a competitor acquires one of our other existing competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our results of operations could be harmed. In addition, some of the 24 channels we access on our tdX platform in the provision of our services and other offerings to customers are also sometimes our competitors in the digital ad space, and customers sometimes aspire to establish in-house marketing capabilities, either of which could reduce or eliminate a customer’s relationship with or allocation of expenditures towards our offerings.

Many of our current and potential competitors have, and new competitors which could arise in the future may have, significantly more financial, technical, marketing, and other resources than we have, which may allow them to devote greater resources to the development, promotion, sale and support of their products and services. They may also have more extensive advertiser bases and broader publisher relationships than we have, and may be better positioned to execute on advertising conducted over certain channels, such as programmatic display, social media, mobile, and video. Some of our competitors may have a longer operating history and greater name recognition. As a result, these competitors may be better able to respond quickly to new technologies, develop deeper advertiser relationships or offer services at lower prices. Any of these developments would make it more difficult for us to sell our solutions and could result in increased pricing pressure, increased sales and marketing expense, or the loss of market share.

Changes in laws or regulations, or a failure to comply with the laws and regulations applicable to us, may adversely affect our business, ability to negotiate and complete a business combination, and results of operations.

We and our industry are subject to laws and regulations enacted and enforced by federal, state and local governments and agencies. In addition to the data privacy laws described or referenced in the risk factor titled “If unauthorized access to sensitive or personally identifiable information is obtained, or our platform is compromised, our services may be disrupted or perceived as insecure, and we may be subject to reputational harm and legal and financial liabilities, including as a result of date privacy laws and regulations,” we and the customers we serve are or may become subject to laws and regulations relating to monitoring and enforcing employment and labor, consumer protection, anti-bribery, import and export controls, and tax laws and regulations. For example, we and the customers we serve have to deal with possible regulation by the FTC and states that regulate unfair trade practices, among other laws and regulations. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application by courts and administrative judges may also change from time to time, and any such changes could be unfavorable to us and could have a material adverse effect on our business and results of operations. These laws and regulations impose added costs on our business and could require us to make changes to our business or solutions. Noncompliance with applicable regulations or requirements could subject us to investigations, enforcement actions, sanctions, fines, damages, penalties, injunctions or termination of contracts. Any such matters could have a material adverse effect on our business, results of operations and financial condition.

Any decrease in the use of the advertising channels that we are primarily dependent upon, failure to expand the use of emerging channels, or unexpected shift in use among the channels in which we operate, could harm our growth prospects, financial condition and results of operations.

We generate revenue by purchasing mobile, display and video ads for our customers, along with paid search and social. Any decrease in the use of these forms of advertising, whether due to customers losing confidence in the value or effectiveness of such channels, regulatory restrictions or other causes, or any inability to further penetrate social, native, audio or CTV, or enter new and emerging advertising channels, could harm our growth prospects, financial condition and results of operations. Each advertising channel presents distinct and substantial risk and, in many cases, requires us to continue to develop additional functionality or features to address the particular requirements of the channel. Our ability to provide capabilities across multiple advertising channels, which we refer to as “omnichannel,” may be constrained if we are not be able to maintain or grow advertising offerings for such channels, and some of our omnichannel offerings may not gain market acceptance. If we fail to maintain a diversified channel mix, a decrease in the demand for any channel or channels that we become primarily dependent upon could harm our business, financial condition and results of operations. We may not be able to accurately predict changes in overall advertiser demand for the channels in which we operate and cannot assure you that our investment in channel development will correspond to any such changes. Furthermore, if our channel mix changes due to a shift in customer demand, such as customers shifting their spending more quickly or more extensively than expected to channels in which we have relatively less functionality, features, or offerings, then demand for our solutions could decrease, and our business, financial condition, and results of operations could be materially adversely affected.

Our revenue and operating results are highly dependent on the overall demand for advertising, and factors that affect the amount of advertising spending, such as economic downturns and seasonality, can make it difficult to predict our revenue and could adversely affect our business.

Our business depends on the overall demand for advertising and on the economic health of our current and prospective customers. If advertisers reduce their overall advertising spending, our revenue and results of operations are directly negatively affected. Many advertisers devote a disproportionate amount of their advertising budgets to specific periods within the calendar year, such as retailers targeting the Fall months to coincide with the Christmas holidays. If any events occur to reduce the amount of advertising spending during a particular period or in general, or reduce the amount of inventory available to advertisers, it could have a disproportionate adverse effect on our revenue and operating results for the fiscal period in which such event occurs. Economic downturns or instability in political or market conditions generally may cause current or new customers to reduce their advertising budgets. A growing number of analysts and others in the investment community have predicted a recessionary period, which could be prolonged in duration, in the near term as the Federal Reserve continues to maintain high interest rates to combat high inflation. Such an event will have the effect of reducing consumer demand, which could in turn result in a reduction in customer spending on our offerings. Such a development could make our solutions less robust and attractive, and could cause advertisers to delay, decrease or cancel purchases of our solution, and expose us to increased credit risk on advertiser orders. Moreover, any changes in the favorable tax treatment of advertising expenses and the deductibility thereof would likely cause a reduction in advertising demand.

We often have long sales cycles, which can result in significant time between initial contact with a prospect and execution of a customer agreement, making it difficult to project when, if at all, we will obtain new customers and when we will generate revenue from those customers.

Our sales cycle, from initial contact to contract execution and implementation, can take significant time, and concentrated dedication towards a particular sales lead when one is identified. Similarly, following the procurement of our services, our customer relationships require constant attention and dedication of resources, tailored to their particular needs. Some of our customers undertake an evaluation process that frequently involves not only our solutions but also the offerings of our competitors. As a result, it is difficult to predict when we will obtain new customer and begin generating revenue from these new customers. As a result, we may not be able to add customers or generate revenue as quickly as we may expect, which could harm our revenue growth rates.

We may face challenges collecting payments for our product and service offerings, including a customer’s inability to make payments or disputes over such payments.

Because we often rely on repeat payments from ongoing customer relationships, we sometimes encounter difficulties collecting amounts due to us. One downside to targeting to small and middle sized businesses which offsets the advantage of targeting a large market is that such businesses may sometimes struggle to establish or maintain adequate revenue streams or capital through financing as necessary to meet their payment obligations to third party vendors such as us. Due to prolonged contract cycles and reliance on third party digital ad suppliers, we may incur long-term or continued expenditures in supplying our products and services to our customers, only to fail to achieve the revenue reward of that investment. This is especially true if a customer’s particular ad campaign is unsuccessful in generating sales for that customer. As a result, we sometimes face a timing issue with our accounts payable on shorter cycles than our accounts receivables requiring us to remit payments from our own funds, and accept the risk of credit loss.

This collections and payments cycle may increasingly consume working capital and harm our ability to grow our business. If we are unable to borrow on commercially acceptable terms, our working capital availability could be reduced, and as a consequence, our financial condition and results of operations would be materially adversely impacted.

Our customers consist of a mixture of mid-market agencies and advertiser-direct relationships. In cases where we work with agencies, there is a risk that the agency does not collect from the advertiser and subsequently remit payment to us. Further, working with growth-stage advertisers has inherent credit risk profiles that subject us to greater credit risk in seeking repayment. In addition, typically, we are contractually required to pay advertising inventory and data suppliers within a negotiated period of time, regardless of whether our customers pay us on time, or at all. In addition, we sometimes experience slow payment cycles by advertising agencies as is common in our industry. While we attempt to negotiate long payment periods with our suppliers and shorter periods from our customers, we are not always successful.

We may also be involved in disputes with customers. If we are unable to resolve disputes with our customers, we may lose customers or customers may decrease their use of our solutions and our financial performance and growth may be adversely affected. If we are unable to collect or make adjustments to bills or invoicing to customers, we could incur write-offs for credit loss, which could harm our results of operations. In the future, credit loss may exceed reserves for such contingencies and our credit loss exposure may increase over time. Any increase in write-offs for credit loss could harm our business, financial condition and results of operations. Even if we are not paid by our customers on time or at all, we are still obligated to pay for the advertising inventory we purchase to meet the customers’ needs, third-party data and other add-on features that customers purchase on our solutions, and as a consequence, our business, financial condition and results of operations would be adversely impacted.

We may experience fluctuations in our results of operations, which could make our future results of operations difficult to predict or cause our results of operations to fall below analysts’ and investors’ expectations.

Our quarterly and annual results of operations have fluctuated in the past and we expect our future results of operations to fluctuate due to a variety of factors, many of which are beyond our control. Fluctuations in our results of operations could cause our performance to fall below the expectations of investors and other stakeholders, and adversely affect the price of our common stock. Because our business is changing and evolving rapidly, our historical results of operations may not be necessarily indicative of our future results of operations. Factors that may cause our results of operations to fluctuate include the following:

Based upon the factors above and others beyond our control, we have a limited ability to forecast our future revenue, costs and expenses. If we fail to meet or exceed the operating results expectations of investors or other stakeholders, the market price of our common stock could decline. Further, sustained volatility or unpredictability in our operating results could pose challenges in continuing and growing our operations as planned or accessing capital needed to sustain our operations and execute our business plan.

If our access to quality advertising content and channels is diminished or fails to expand, our revenue could decline and our growth could be impeded.

We must maintain a consistent supply of ad content and access to channels that are sufficient to attract customers and meet their campaign goals over the long-term. Our success depends on our ability to secure quality content on reasonable terms across a relatively broad range of advertising networks and exchanges and social media platforms, including video, display, CTV, audio and mobile inventory. The amount, quality and cost of these resources available to us can change at any time. A few digital ad suppliers and digital content channels hold a significant portion of the programmatic inventory either generally or concentrated in a particular channel, such as audio and social media. In addition, we compete with companies with which we have business relationships. If any of these third party suppliers limits our access to the advertising content and channels on which we rely to provide our offerings to customers, our business could be adversely affected. If our relationships with certain of our suppliers were to cease, or if the material terms of these relationships were to change unfavorably, our business would be negatively impacted. Our suppliers are generally not bound by long-term contracts. As a result, there is no guarantee that we will have access to a consistent supply of quality inventory on favorable terms. If we are unable to compete favorably for advertising inventory available on real-time advertising exchanges, or if real-time advertising exchanges decide not to make their advertising inventory available to us, we may not be able to place advertisements or find alternative sources of inventory with comparable traffic patterns and consumer demographics in a timely manner. Furthermore, the inventory that we access through real-time advertising exchanges may be of low quality or misrepresented to us, despite attempts by ourselves and our suppliers to prevent fraud and conduct quality assurance checks.

Inventory suppliers control the bidding process, rules and procedures for the inventory they supply, and their processes may not always work in our favor. For example, suppliers may place restrictions on the use of their inventory, including prohibiting the placement of advertisements on behalf of specific advertisers. Through the bidding process, we may not win the right to deliver advertising to the inventory that is selected through our buying process and may not be able to replace inventory that is no longer made available to us. Further, if we or our customers fail to comply with the rules and policies enforced by these suppliers, we could be restricted or excluded from future access to that content or channels, which would materially harm our business moving forward.

If we are unable to maintain a consistent supply of and access to quality content and channels at reasonable cost to us for any reason, customer retention and loyalty, and our financial condition and results of operations could be materially harmed.

Economic downturns and market conditions beyond our control could adversely affect our business, financial condition and results of operations.

Our business depends on the overall demand for advertising and on the economic health of advertisers that benefit from our solutions. Economic downturns or unstable market conditions may cause advertisers to decrease or pause their advertising budgets, which could reduce spend on our solutions and adversely affect our business, financial condition and results of operations. In recent times, certain events have begun to affect the global and United States economy including continued inflation, the Federal Reserve implementing and maintaining high interest rates in response, substantial increases in the prices of certain products and services, declines in the capital markets. The duration of Ukrainian war and its impact are at best uncertain, and continuation may result in Internet access issues if Russia, for example, began illicit cyber activities. The economy appears to be headed into a recession with uncertain and potentially severe impacts upon public companies and us. We cannot predict how this will affect the market for digital ad products and services such as those that we offer, but the impact may be adverse. Among other adverse consequences, our customers, in response to a reduced access to capital or anticipated or actual reduction and consumer spending, could elect not to commence or proceed with ad campaigns on which our revenue primarily relies, which would materially adversely harm our operating results and financial condition.

Operational or performance issues with our solutions and the technology on which they depend may adversely affect our business, financial condition and results of operations.

We depend upon the sustained and uninterrupted performance on the technology on which our offerings depend to provide digital advertising services to our customers and thereby to generate revenue and protect and expand our brand. If our workforce or technology infrastructure cannot scale to meet demand, if there are errors in the performance or operability of these elements of our business, even if temporary, or if our platform and service offerings otherwise fails to meet customer expectations, then our business may be harmed. We may also face material delays in introducing new offerings, including enhancements to the services technology we offer our customers access to. If competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our existing offerings may become less attractive or useful or become altogether obsolete.

Errors, failures, vulnerabilities and bugs in our technology infrastructure may be found in the future. Our solutions also depend upon third-party technology and systems to perform properly and enable us to perform our obligations to customers, and the channels our platform deploys digital ads on behalf of customers are often used in connection with computing environments utilizing different operating systems, system management software, equipment and networking configurations, which may cause errors in, or failures of, our solutions or such other computing environments. Our services also rely on using human interaction, which can also result in errors and inefficiencies that could adversely impact us or our customers and their campaigns. Operational and performance issues with our services and the technology on which they depend could include the, outages, errors during upgrades or patches, discrepancies in costs billed versus costs paid, failure of user interface, unanticipated volume overwhelming our databases, issues in accessing or interacting with one or more channels for ad distribution, access to or distribution of content in err, server failure, or other adverse events.

Any of the foregoing operational or performance issues with our offerings could also result in negative publicity, damage to our brand and reputation, loss of customers, loss of or delay in market acceptance of our solutions, increased costs or loss of revenue, loss of the ability to access our solutions, loss of competitive position, claims by customers for losses sustained by them and loss of investor confidence in us. Alleviating problems resulting from such issues, if possible, could require significant expenditures of capital and other resources and could cause interruptions, delays or the cessation of our business, any of which may adversely affect our business, financial condition and results of operations.

If unauthorized access to sensitive or personally identifiable information is obtained, or technology infrastructure on which we depend is compromised, our services may be disrupted and we may be subject to reputational harm and other adverse consequences.

Our products and services and the technology infrastructure on which they depend involve the storage and transmission of significant amounts of data from users, customers and data providers, a large volume of which is hosted by third-party service providers. Our services and data could be exposed to unauthorized access due to activities that breach or undermine security measures, including: negligence or malfeasance by internal or external actors; attempts by outside parties to fraudulently induce personnel, customers or vendors to disclose sensitive information in order to gain access to our data; or errors or vulnerabilities in our systems, products or processes or in those of our service providers, customers, and vendors. Accordingly, we or others may be unable to anticipate or detect these techniques or to implement adequate preventative measures. A breach of our security and/or our failure to respond sufficiently to a security incident could disrupt our services and result in theft, misuse, loss, corruption, or improper use or disclosure of data. Of particular concern, the operation of our solutions in the provision of services to our customers and the steps we take to maintain or enhance customer experience and campaign results are subject to potential operational failures and increased vulnerability to cyberattacks. Such cyberattacks could include denial-of-service attacks impacting service availability (including the ability to deliver ads) and reliability, tricking company personnel into releasing control of their systems to a hacker, or the introduction of computer viruses or malware into our systems with a view to steal confidential or proprietary data. Cyberattacks of increasing sophistication may be difficult to detect and could result in the theft of our intellectual property and data, including personal information, from our solutions. We are also vulnerable to unintentional errors or malicious actions by persons with authorized access to our systems that exceed the scope of their access rights, distribute data erroneously, or, unintentionally or intentionally, interfere with the intended operations of our solutions. These events could also result in the misappropriation or access of sensitive or protected information of third parties, and liabilities and legal violations for which we could face litigation and accompanying costs, distraction of management’s time and attention, and adverse publicity and reputational harm. Moreover, we could be adversely impacted by outages and disruptions in the online platforms of our inventory and data suppliers, such as real-time advertising exchanges. Outages and disruptions of technology infrastructure on which we depend, including due to cyberattacks, may subject us to substantial liabilities or losses, and/or harm our reputation and negatively impact our business, financial condition and results of operations.

Additionally, a cyberattack or data breach could expose us to regulatory action under privacy and data protection laws, as are more fully described under “Item 1. – Business – Government Regulations.” Privacy and data protection laws to which we are subject may cause us to incur additional or unexpected costs, subject us to enforcement actions for compliance failures, or cause us to change our solutions or business model, which may have a material adverse effect on our business. As that section discloses, information relating to individuals and their devices (sometimes called “personal information” or “personal data”) is regulated under a wide variety of local, state, national and international laws and regulations that apply to the collection, use, retention, protection, disclosure, transfer (including transfer across national boundaries) and other processing of such data, and the global regulatory landscape regarding the protection of personal information is evolving, and U.S. (state and federal) and foreign governments are considering enacting additional legislation related to privacy and data protection and we expect to see an increase in, or changes to, legislation and regulation in this area. These laws and other obligations may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our solutions. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our products, which could have an adverse effect on our business. We may be unable to make such changes and modifications in a commercially reasonable manner or at all, and our ability to develop new products and features could be limited. All of this could impair our or our customers’ ability to collect, use, or disclose information relating to consumers, which could decrease demand for our solutions, increase our costs, and impair our ability to maintain and grow our customer base and increase our revenue.

Any of the forgoing developments arising with respect to our operations and the technology on which we rely, including the activities and technology of our vendors, customers, and strategic partners, could result in government investigations, enforcement actions and other legal and financial liability, and/or loss of confidence in the availability and security of our products and services, all of which could seriously harm our reputation and brand and impair our ability to attract and retain customers.

Third parties control our access to unique identifiers, and if the use of third-party “cookies” or other technology is rejected by Internet users or is otherwise subject to unfavorable regulation or action, our performance or prospects may decline and we may lose advertisers and revenue.

Our ability to successfully leverage user data and generate revenue from opportunities to provide digital advertisement solutions could be impacted by restrictions imposed by third parties, including restrictions on our ability to use or read “cookies,” device identifiers, or other tracking features or our ability to use real-time bidding networks or other bidding networks. Digital advertising and in turn our operations largely rely on the ability to uniquely identify devices across websites and applications, and to collect data about user interactions with those devices for purposes such as serving relevant ads and measuring the effectiveness of ads. Devices are identified through unique identifiers stored in cookies, provided by device operating systems for advertising purposes, or generated based on statistical algorithms applied to information about a device, such as the IP address and device type.

Digital advertising, including our solutions, makes significant use of cookies to store device identifiers for the advertising activities described above. When we use cookies, they are generally considered third-party cookies, which are cookies owned and used by parties other than the owners of the website visited by the Internet user. The most commonly used Internet browsers—Google Chrome, Firefox, Internet Explorer and Safari—allow Internet users to modify their browser settings to prevent some or all cookies from being accepted by their browsers. Internet users can delete cookies from their computers at any time. Additionally, some browsers currently, or may in the future, block or limit some third-party cookies by default or may implement user control settings that algorithmically block or limit some cookies. Today, three major web browsers—Apple’s Safari, Mozilla’s Firefox and Microsoft’s Edge—block third-party cookies by default. Google’s Chrome has introduced new controls over third-party cookies and began its previously announced plan to eliminate third-party cookies entirely and reduce support for user agent strings in 2024. In addition, also in 2024 Google agreed pursuant to a settlement of a class action lawsuit filed in 2020 to delete a large number of browser data reflecting millions of users. These recent and any future developments could adversely impact our ability to provide digital marketing services, or the utility of such services, to customers. Some Internet users also download free or paid ad blocking software that not only prevents third-party cookies from being stored on a user’s computer, but also blocks all interaction with a third-party ad server. In addition, Google has introduced ad-blocking software in its Chrome web browser that will block certain ads based on quality standards established under a multi-stakeholder coalition. While some of these recent or anticipated developments could provide opportunities to our operations and industry, we may be unable to adapt effectively or quickly enough to capitalize on these developments and remain competitive, and the developments could post significant challenges or impediments to our operations and business that materially harm us, rather than benefits, notwithstanding actions we take to address these risks. If such a feature either intentionally or inadvertently blocks our customers’ ads, or if such capabilities become widely adopted and we or the advertising technology industry collectively does not develop alternative technologies to address these developments, our business could be materially harmed.

Our future success depends on the continuing efforts of our key employees, and our ability to attract, hire, retain and motivate highly skilled personnel in the future.

Our future success depends on the continuing efforts of our executive officers and other key employees, including Jason Wulfsohn, our Chief Executive Officer, Steve Dang, our Vice President of Finance and Garrett MacDonald, our Chief Commercial Officer. We rely on the leadership, knowledge and experience in our business and industry that our executive officers provide. We also rely on a relatively small number of employees to establish, maintain and enhance our relationships with customers. The loss of any of these individuals could materially harm our business and prospects.

We also rely on our ability to hire and retain qualified and motivated employees and consultants, including in the areas of product development, support, and sales teams that attract and keep key customers. For example, we are substantially dependent on our sales and support teams to obtain new customers and to increase procurement of our services and other offerings by our existing customers, and our ability to achieve revenue growth will depend, in large part, on our success in recruiting, training, integrating and retaining sufficient numbers of sales personnel to support our growth. Due to the complexity of our solutions, a significant time lag exists between the hiring date of sales and support personnel and the time when they become fully productive. New hires may not become productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals in the digital advertising space.

The market for skilled labor in general, and in the aforementioned areas in particular, as well is in California where we are headquartered, is fiercely competitive, and we may struggle to procure the assistance needed to continue and grow our business on economically favorable terms or at all. As a result, we may incur significant costs to attract and retain personnel, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees or consultants to our competitors or other companies before we realize the benefit of our investment in recruiting and training them. Newly hired personnel often require significant training and, in many cases, take significant time before they achieve full productivity.

Employee turnover, including changes in our management team, could disrupt our business. None of our founders or other key employees have an employment agreement for a specific term, and all of our employees may terminate their employment with us at any time. The loss of one or more of our executive officers, including our two co-founders, or our inability to attract and retain highly skilled employees could have an adverse effect on our business, financial condition and results of operations.

If we fail to offer sufficient customer support, our business and reputation would suffer.

Because we offer digital ad campaign services and deploy strategies and communications through our and third party technology, customer support is important for the successful marketing and continued use of our services and solutions and for maintaining and increasing spend from existing and new customers. Providing this support requires that our sales and operational personnel have specific technical and industry knowledge and expertise along with the ability to communicate what are often complicated concepts and processes to others, such as the algorithms and channels on which a customer’s ad campaign strategy is designed and deployed, which makes it more difficult for us to hire qualified personnel and to scale up our support operations due to the extensive training required. The importance of high-quality customer service will increase as and to the extent we expand our business and pursue new customers. If we are not responsive and proactive regarding our customers’ advertising needs, or do not provide effective support for our customers’ advertising campaigns, our ability to retain our existing customers would suffer and our reputation with existing or potential customers would be harmed, which would negatively impact our business.

If any of the technology, software, products and services that we use are unavailable, have future terms we cannot agree to, or do not perform as we expect, our business, financial condition and results of operations could be harmed.

We depend on various technology, software, products and services from third parties or available as open source, some of which are critical to the features and functionality of our solutions through which we provide our services to customers. Failure by third-party providers to maintain, support or secure their technology either generally or for our accounts specifically, or downtime, errors or defects in their products or services, could adversely impact our solutions, our administrative obligations or other areas of our business. Having to replace any third-party providers or their technology, products or services could result in outages or difficulties in our ability to provide our services. If we are unsuccessful in establishing or maintaining our relationships with our third-party providers or otherwise need to replace them, internal resources may need to be diverted and our business, financial condition and results of operations could be harmed.

In the event that the third-party providers on which we rely to operate our technology infrastructure or that of third parties on which we depend experience any interruption in operations or cease business for any reason, or if we are unable to agree on satisfactory terms for continued relationships, we would be forced to enter into a relationship with other service providers or assume some responsibilities ourselves. Even a disruption as brief as a few minutes could have a negative impact on marketplace activities and could result in a loss of revenue. These facilities may be located in areas prone to natural disasters and may experience catastrophic events such as earthquakes, fires, floods, power loss, telecommunications failures, public health crises and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism, cyber-attacks and similar misconduct. Although we have made certain business continuity arrangements, such events could cause damage to, or failure of, our systems generally, or those of the third-party cloud computing and hosting providers, which could result in disruptions to our service.

Due to a relative lack of intellectual property protection and proprietary rights for our operations and the technology infrastructure on which they depend, competitors or other third parties could gain access to and copy or use aspects of our technology infrastructure or other elements of our business, or those of third parties on which we depend, that are critical to our continued operations and competitive position, thereby eroding our competitive advantages and harming our business.

Because our success depends, in large part, on our ability to continue to operate the systems, methods and technologies that we deploy in our operations and the solutions we offer, we lack intellectual protection so that we can prevent others from using such proprietary information and thereby depleting our competitive advantage. If we fail to adequately protect our intellectual property rights or those of third parties on which we rely, our competitors might gain access to our technology and our business might be adversely affected. We, either directly or through the third parties with which we do business, rely upon a combination of trademark and trade secret protections, as well as third-party confidentiality and non-disclosure agreements, to establish and protect our proprietary rights. Establishing trade secret, trademark, and domain name protection can be difficult and expensive, and the laws, procedures and restrictions may provide only limited protection. It may be possible for unauthorized third parties to copy or reverse engineer aspects of our technology or otherwise obtain and use information that we regard as proprietary, or to develop technologies similar or superior to our technology or design around our proprietary rights, despite the steps we have taken to protect our proprietary rights. Despite our efforts to prevent unauthorized access and use of propriety information and technology, the theft or misuse of such proprietary information and technology could occur by employees, contractors or others who have or gain access to such information and technology. Further, we do not have patent protection for our solutions or any related technology that we utilize in our operations, which further exposes us to the risk of competitors reverse engineering or otherwise deploying similar technology to ours, and thereby potentially reducing our market share and prospects.

Maintaining intellectual property protection and policing unauthorized use of our technology can be challenging, time-consuming and expensive. In addition, the laws of some foreign countries may not be as protective of intellectual property rights as those of the United States, and mechanisms for enforcement of proprietary rights in such countries may be inadequate. If we are unable to establish, maintain and protect our proprietary rights (including in particular, the proprietary technology used in our solutions) we may find ourselves at a competitive disadvantage despite the expense, time and effort deployed by us to create and protect our propriety information, processes and technology.

Because California where we are based does not permit non-compete agreement for employees, we are susceptible to an employee resigning or being terminated and then competing with us.

We do not have our employees sign non-competition agreements, since they are not enforceable in California where we are based. A growing number of states have followed California in refusing to enforce non-compete provisions in employment contracts, and early in 2023, the FTC proposed a rule which would ban non-compete in the employment context. While employees may compete against us, they cannot use our trade secrets and other confidential information. If that were to occur, we would have to proof such activities. Intellectual property litigation is expensive, diverts management time and the results are uncertain.

We or third parties on which we rely may be sued by third parties for alleged infringement of their proprietary rights, which would harm our business, or result in additional expense and potential damages.

There is significant intellectual property development activity in the digital advertising industry. Third-party intellectual property rights may cover significant aspects of our technologies or business methods or those of other third parties with which we do business or on which we rely in our operations, or block us from expanding our offerings. Our success depends on the continual development and enhancement of our technology infrastructure and the services we provide through it. From time to time, we may receive claims from third parties that our solutions and underlying technology infringe or violate such third parties’ intellectual property rights. To the extent we gain greater public recognition, we may face a higher risk of being the subject of intellectual property claims. The cost of defending against such claims, whether or not the claims have merit, is significant, regardless of whether we are successful in our defense, and could divert the attention of management, technical personnel and other employees from our business operations. Litigation regarding intellectual property rights is inherently uncertain due to the complex issues involved, and we may not be successful in defending ourselves in such matters. Additionally, we may be required to indemnify our customers or suppliers in connection with certain intellectual property claims. If we are found to infringe the intellectual property rights of others, we could potentially be required to cease utilizing portions of our solutions or performing certain functions or services thereon. We or third party collaborators may also be required to develop alternative non-infringing technology, which could require significant time and expense and limit our operating capabilities and results. Additionally, we could be required to pay royalty payments, either as a one-time fee or ongoing, as well as damages for past use that was deemed to be infringing. If we cannot license or develop technology for any allegedly infringing aspect of our business, we would be forced to limit our service and may be unable to compete effectively. Any of these results could harm our business.

We face potential liability and harm to our business based on the nature of our business and the content deployed in the provision of the solutions we offer.

Advertising often results in litigation relating to misleading or deceptive claims, copyright or trademark infringement, public performance royalties or other claims based on the nature and content of advertising that is distributed through the solutions we offer. Though we contractually require customers to generally represent to us that their advertisements comply with our ad standards and our inventory providers’ ad standards and that they have the rights necessary to serve advertisements through our solutions, we do not independently verify whether we are permitted to deliver, or review the content of, such advertisements. If any of these representations are untrue, we may be exposed to potential liability and our reputation may be damaged. While our customers are typically obligated to indemnify us, such indemnification may not fully cover us, or we may not be able to collect. In addition to settlement costs, we may be responsible for our own litigation costs, which can be expensive.

Our inability to successfully execute our strategy to search for and potentially enter into acquisitions and strategic transactions may have an adverse impact on our financial condition, operating results and growth and on your investment in us.

Our business strategy contemplates potentially expanding our presence in the digital ad industry we serve, including through strategic acquisitions of companies or assets that complement or enhance our business. We will be reliant on our ability to raise sufficient capital, and/or on the issuance of securities, to achieve these goals and resultant growth in our business. Even if we raise sufficient capital to be positioned to enter into strategic acquisitions or transactions as desired, we may be unable to find suitable acquisition candidates or strategic partners, or to complete for these transactions on favorable terms, if at all. The number of candidates that meet our criteria may be limited. We may also face competition for opportunities, and other competitors may offer more favorable terms or have greater financial resources available for potential acquisitions. This competition may further limit our acquisition opportunities or raise the prices of acquisitions and make them less accretive, or possibly not accretive, to us. Failure to consummate future acquisitions could negatively affect our growth strategies.

The success of our acquisition strategy also depends on our ability to successfully integrate the operations of the acquired businesses with our existing operations and realize the anticipated benefits from the acquired businesses, such as the expansion of our existing operations, elimination of redundant costs and capitalizing on cross-marketing opportunities. Our ability to integrate and realize benefits can be negatively impacted by, among other things:

There can be no assurance that we will be able to complete any acquisitions or strategic transaction or, if we do, successfully complete the integration process for such transactions without substantial costs, delays, disruptions or other operational or financial problems. We may not have access in the future to sufficient capital on favorable terms or at all. We require additional capital in order to pursue acquisitions, fund capital expenditures, and to meet our working capital needs, or to respond to changing business conditions. In addition, if we seek to incur indebtedness in the future, we may be required to agree to covenants that limit our operational and financial flexibility. If we pursue future debt or equity financings, we cannot be certain that such funding will be available on terms acceptable to us, or at all. Our inability to access additional capital could adversely affect our liquidity and may limit our growth and ability to execute our business strategy. Failure to successfully locate or acquire suitable businesses or integrate acquired businesses could adversely impact our business and prospects, and your investment in us could be harmed.

Risks Related to Our Common Stock

We may undertake additional equity or debt financing that would dilute the shares currently outstanding.

We may need to raise additional capital to fund our operations and execute our business plan. Any future offering the Company may undertake further equity or debt financing, which may be dilutive to existing shareholders, including you, or result in an issuance of securities whose rights, preferences and privileges are senior to those of existing shareholders, including you, and also reducing the value of shares held by our current shareholders.

We may not be able to obtain additional financing.

We may require additional funds to continue and grow our business. We may not be able to obtain additional financing as needed, on acceptable terms, or at all, which would force us to delay our plans for growth and implementation of our strategy which could seriously harm our business, financial condition and results of operations. If we need additional funds, we may seek to obtain them primarily through additional equity or debt financings. Those additional financings could result in dilution to our current shareholders.

An investment in the shares is speculative and there can be no assurance of any return on any such investment.

An investment in the Company's shares is speculative, and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment.

We have not paid dividends in the past and do not expect to pay dividends in the future, so any return on investment may be limited to the value of our shares.

We have never paid cash dividends on our shares and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our shares will depend on earnings, financial condition and other business and economic factors affecting it at such time that management may consider relevant. If we do not pay dividends, our shares may be less valuable because a return on your investment will only occur if its stock price appreciates.

There can be no assurance that our common stock will ever be approved for listing on a national securities exchange which could negatively affect the value of our common stock and make it difficult or impossible for investors to sell their shares in a timely manner.

There is currently very limited trading of our common stock, and an active trading market may never develop. Our common stock is quoted on the OTC Pink Market. The OTC Pink Market is a thinly traded market and lacks the liquidity of certain other public markets with which some investors may have more experience. While we remain determined to work towards getting our securities listed on a leading national securities exchange, there can be no assurance that this will occur. Further, we cannot apply to the Nasdaq Capital Market until 2024 at the earliest unless we complete a $40 million firm commitment underwritten public offering. As a result, we may never develop an active trading market for our securities which may limit our investors’ ability to liquidate their investments.

If we are not successful, you may lose your entire investment.

Prospective investors should be aware that if we are not successful in our business, their entire investment in the Company could become worthless. Even if the Company is successful, we can provide no assurances that investors will derive a profit from their investment. We need additional capital to meet our obligations and achieve our business objectives, and we cannot guarantee we will be successful in locating additional required capital as and when needed or that any such amounts will be sufficient for us to establish material revenue growth. If we are not successful, you may lose your entire investment.

Because our common stock rarely trades, investors should not rely upon the prices at which our common stock may be or have been sold.

Our common stock trades sporadically on the OTC Pink Market. Accordingly, the market price of our common stock at any given time may not be representative of its intrinsic value, and investors should not rely upon the public prices in deciding whether to buy our shares. The lack of liquidity may also result in an investor seeking to purchase our common stock in paying more than the reported price.

Due to factors beyond our control, our stock price may be volatile.

There is currently a limited market for our common stock, and there can be no guarantee that an active market for our common stock will develop. As of March 21, 2024, there were only 41 record holders of our common stock, and trading is very limited and sporadic. Further, even if an active market for our common stock develops, it will likely be subject to significant price volatility when compared to more seasoned issuers. We expect that the price of our common stock will continue to be more volatile than more seasoned issuers for the foreseeable future. Fluctuations in the price of our common stock can be based on various factors in addition to those otherwise described in this Report, including:

Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of whether we can successfully operate Socialcom post-Exchange or achieve and maintain favorable operating performance and financial condition. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.

The market price of our common stock may decline if a substantial number of shares of our common stock are sold at once or in large blocks.

Presently the market for our common stock is limited. If an active market for our shares develops in the future, some or all of our stockholders may sell their shares of our common stock which may depress the market price. Further, because until the Closing of the Exchange were a “shell” company, Rule 144 will not be available until November 21, 2024 and the Company remains current in its periodic reporting obligations with the SEC. Any sale of a substantial number of these shares in the public market, or the perception that such a sale could occur, could cause the market price of our common stock to decline, which could reduce the value of the shares held by our other stockholders.

Because we have issued and may in the future issue preferred stock without the approval of our stockholders, and the vast majority of our common stock outstanding is held by a small number of stockholders some of which are also executive officers and directors, it may be more difficult for a third-party to acquire us and could depress our stock price.

Our Board may issue, without a vote of our stockholders, one or more series of preferred stock that have voting rights, liquidation preferences, dividend rights and other rights that are superior to those of our common stock. Any issuance of preferred stock could adversely affect the rights of holders of our common stock in that such preferred stock could have priority over the common stock with respect to voting, dividend or liquidation rights. For example, the Series A as amended, of which we issued 25,000 shares to the investor in the Secondary Financing and agreed to issue an additional 25,000 shares 90 days following the closing, in addition to the 170,000 shares of Series A that were previously outstanding, provide the holders with a liquidation preference in the event of the merger or consolidation of the Company in which the Company is not the surviving entity, the sale of all of the assets of the Company in a transaction which requires stockholder approval or the dissolution or winding up of the Company. Further, because we can issue preferred stock having voting rights per share that are greater than the equivalent of one share of our common stock, our Board could issue preferred stock to investors who support us and our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our common stock. This could make it more difficult for stockholders to sell their common stock and/or cause the market price of our common stock to drop significantly, even if our business is performing well.

Further, the Series A also provides the holders with senior ranking with respect to the Company’s capital stock upon the occurrence of a liquidation, dissolution or winding up, and a liquidation preference in the event of the merger or consolidation of the Company in which the Company is not the surviving entity, the sale of all of the assets of the Company in a transaction which requires stockholder approval or the dissolution or winding up of the Company, in each case at a stated value of $30 per share of Series A. This means that the Series A holders are entitled to receive the liquidation preference before any payment or other distribution of assets to holders of our common stock, and the amount of any such payment or other distribution will be reduced by the amount paid to Series A holders.

Even absent such an issuance of preferred stock, as a result of the Closing of the Exchange the majority of our common stock outstanding is held by former Socialcom stockholders, three of whom are also executive officers and/or directors as a result of the Closing of the Exchange Agreement. Specifically, as a result of the Exchange the combined beneficial ownership of our common stock among directors and officers exceeds 50% of our outstanding shares of common stock as of March 25, 2024. If such stockholders act together, they may have the ability to have a substantial influence on matters submitted to our stockholders for approval, including the election and removal of directors and the approval of any merger, consolidation or sale of all or substantially all of our assets. As a result, our other stockholders may have little or no influence over matters submitted for stockholder approval. In addition, the ownership of such stockholders could preclude any unsolicited acquisition of us, and consequently, adversely affect the price of our common stock. Some or all of our current or future principal stockholders may have a conflict of interest with respect to one or more actions or transactions involving the Company, and these stockholders may make decisions that are adverse to the interests of our other stockholders.

ITEM 1C. Cybersecurity

Like all companies that utilize technology, we are subject to threats of breaches of our technology systems. To mitigate the threat to our business, we take a comprehensive approach to cybersecurity risk management. Our Board and our management actively oversee our risk management program, including the management of cybersecurity risks. We have established policies, standards, processes and practices for assessing, identifying, and managing material risks from cybersecurity threats, including those discussed in our Risk Factors. We have devoted financial and personnel resources to implement and maintain security measures to meet regulatory requirements and shareholder expectations, and we intend to continue to make investments to maintain the security of our data and cybersecurity infrastructure. While there can be no guarantee that our policies and procedures will be properly followed in every instance or that those policies and procedures will be effective, we believe that the Company’s sustained investment in people and technologies have contributed to a culture of continuous improvement that has put the Company in a position to protect against potential compromises, and we do not believe that risks from prior cybersecurity threats have materially affected our business to date. We can provide no assurance that there will not be incidents in the future or that past or future attacks will not materially affect us, including our business strategy, results of operations, or financial condition.

Risk Management and Strategy

At a high level, the key objectives for the Company’s cybersecurity program are to implement and sustain effective security controls to stop intrusion attempts and to maintain and continuously improve its ability to respond to attacks and incidents. Success in achieving these objectives relies upon using quality technology solutions, cultivating and maintaining a team of skilled professionals, and improving processes continuously. Our cybersecurity program in particular focuses on the following key areas:

Risk Assessment: At least annually, we conduct a cybersecurity risk assessment that takes into account information from our employees, known information security vulnerabilities, and information from external sources, including reported security incidents that have impacted other companies, industry trends, and evaluations by third parties and consultants. The results of the assessment, which also includes findings from our automated vulnerability scanning tools, are used to regularly update our security protocols, develop initiatives to enhance our security controls, make recommendations to improve processes, and inform a broader Company-wide risk assessment. These updates and initiatives are then reported to our Board and members of management. While there is no documented process for cataloging all digital assets and data, all information is backed up and saved automatically in our Google Suite.

Technical Safeguards: We regularly assess and deploy technical safeguards designed to protect our information systems from cybersecurity threats. Such safeguards are regularly evaluated and improved based on vulnerability assessments, cybersecurity threat intelligence and incident response experience.

Incident Response and Recovery Planning: We have established comprehensive incident response and recovery plans that guide our response in the event of a cybersecurity incident.

Third Party Risk Management: We have implemented a third party risk management program, which is designed to identify and mitigate cybersecurity threats associated with our use of third party collaborators. Such collaborators are subject to security risk assessments at the time of onboarding and contract renewal, based on established cybersecurity standards that both parties review to ensure an industry-standard level of security is achieved. However, there is no periodic review process in place for assessing vendor compliance with our cybersecurity standards. We use a variety of inputs in such risk assessments, including information supplied by collaborators in response to detailed questionnaires and meetings as well as information from third parties. In addition, we require our providers to meet appropriate security requirements, controls and responsibilities and investigate security incidents that have impacted our third-party collaborators, as appropriate.

Education and Awareness: Our policies encourage each of our employees to contribute to our data security efforts. We provide comprehensive training resources, ensuring that each team member is equipped with the knowledge to protect our organization against cyber threats. However, the completion and understanding of this training is not mandatory for all employees. We regularly remind employees of the importance of handling and protecting data, including through annual privacy and security training to enhance employee awareness of how to detect and respond to cybersecurity threats. In this regard, the Company has implemented policies and procedures for all employees including: (i) information security/cybersecurity policies, which are internally available for all employees, (ii) information security/cybersecurity awareness training; (iii) a clear escalation process which employees can follow in the event an employee notices something suspicious; and (iv) ensuring that information security/cybersecurity is part of the employee performance evaluation and/or disciplinary process.

ITEM 2. Properties

The Company does not own or lease any real property. The Company utilizes a co-working space on an as-needed basis.

ITEM 3. Legal Proceedings

Socialcom is subject to the following material litigation:

Zeta Global Corp. (“Zeta”) filed a complaint against Socialcom arising from a contract dispute for outstanding accounts payable of approximately $1.3 million. Socialcom filed a cross-complaint against the plaintiff seeking breach of contract and business tort damages. Zeta Global Corp. v Socialcom, Inc., Los Angeles Superior Court Case No. 19SMCV01066. The Court rendered a final decision in January 2023 following a bench trial, with the plaintiff entitled to recover $2,144,652 on its complaint ($1.2 million plus interest), and Socialcom entitled to recover $562,000 on its cross-complaint as an offset, with a final judgment entered by the Court against Socialcom in February 2023. Later in February 2023 we appealed, and our principal stockholder has lent $800,000 to act as an appeal bond which stayed enforcement of the adverse judgement. See “Related Party Transactions” for more information. As of the date of this Report, the appeal process remains ongoing.

From time to time, the Company has become and may become involved in certain lawsuits and legal proceedings which arise in the ordinary course of business, or as the result of current or previous investments, or current or previous subsidiaries, or current or previous employees, or current or previous directors, or as a result of acquisitions and dispositions or other corporate activities. The Company intends to vigorously defend its positions. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our financial position or our business, and the outcome of these matters cannot be ultimately predicted.

ITEM 4. Mine Safety Disclosure

Not Applicable.

PART II

ITEM 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The following table reflects the high and low closing sales information for our common stock for each fiscal quarter during FY 2023 and 2022. This information was obtained from www.nasdaq.com and reflects inter-dealer prices without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Holders

As of March 21, 2024, there were 41 stockholders of record of the Company’s common stock based upon the records of the stockholders provided by the Company’s transfer agent. 3,061,360 shares are held at CEDE. The Company’s transfer agent is Equity Stock Transfer, 237 W 37^th Street, Suite 601, New York, NY 10018.

Dividends

We have never paid or declared any dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The declaration, amount and payment of any future dividends on shares of our common stock, if any, will be at the sole discretion of our Board, which may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, the implications of the payment of dividends by us to our shareholders or by our subsidiaries to us, and any other factors that our Board may deem relevant.

Recent Sales of Unregistered Securities

None.

Equity Compensation Plan Information

In connection with the Socialcom Exchange, on January 30, 2023, David Lelong, in his capacity as sole director and majority shareholder of the Company, approved the 2023 Equity Incentive Plan (the “2023 Plan”) of the Company. Under the Exchange Agreement, the Company agreed to issue a total of 22,793,540 options to purchase common stock of the Company to Socialcom directors, officers, employees and consultants under the 2023 Plan in exchange for the cancellation of a total of 2,604,976 outstanding Socialcom stock options held by such persons. As of the date of this Report, such exchange has not yet occurred. During the year ended December 31, 2023, an additional 5,318,863 options were granted, 56,324 options were exercised, and 4,004,254 options expired. At December 31, 2023, 24,051,825 options to purchase common stock of the Company were outstanding.

ITEM 6. [Reserved]

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Socialcom, the Company’s operating subsidiary through which we provide digital ad solutions, was incorporated in the State of California on March 8, 2013, for the purpose of delivering advanced integrated advertising and technology services to independent agencies and brands. Socialcom’s integrated tech solution, both self-service (whereby the Socialcom customer fully manages their own campaign utilizing the company’s platform solutions) and managed service (whereby the company acts on behalf of the Socialcom customer to fully manage their campaign), is built to deliver end-to-end omnichannel performance, including advertising technology, data-driven campaign optimization, reporting and insights, as well as creative services. Since its inception the strategic focus of the company has been oriented toward mid-market businesses, a significant and often underserved segment of the larger U.S. economy, especially with respect to their need for powerful enterprise advertising technology solutions to drive improved business outcomes. Socialcom continues to embrace future-first solutions, recognizing ongoing changes in the ad tech space, from data usage and privacy, to emerging technologies and platforms.

During FY 2022, the Company partnered with the industry’s leading DSP to launch Admatx its self-serve demand side platform (DSP) centered around the principle of democratizing access to enterprise-level adtech by placing control into the hands of the customer without requiring a prohibitive minimum spend or a long-term subscription commitment. Admatx is focused on SMB marketers, looking for an easy-to-use performance DSP without any spend minimums.

During FY 2022, the Company lost certain key customers and saw decreased spend for certain existing customers, which had a material impact on revenue. We experienced turnover in members of our customer support team during the period, which directly impacted certain client relationships. We also saw an increasing trend toward in-housing of media buying by advertisers as well as increased access to enterprise technology and data-powered buying solutions by agencies, representing a competitive threat to the Company’s value proposition. Other reasons for the decline in revenue include macro-economic factors such as inflationary pressures, the lingering impact of COVID-19 and diminished consumer spending, all contributing to reduced advertising budgets from customers in general.

During FY 2023, the Company saw the trend of reduced revenue continue, although the decrease was far less dramatic than that experienced in FY 2022. The revenue reduction in FY 2023 arose in part as a result of lower overall volume of work (partially offset by larger campaign sizes for certain customers), along with increased in-housing of media buying by clients. The Company’s net loss increased by approximately $3.4 million year over year, due to the decline in revenue as well as an increase in operating expenses and interest expense, as described further below.

In response, management has taken steps to (i) improve the employee experience and in turn improve employee retention; and (ii) enhance our product offerings and strengthen our core solutions to the middle market. More specifically, in order to drive increased customer acquisition, the Company is focused on improved market differentiation related to product development and innovation in the key three areas of: (i) predictive analytics, (ii) supply optimization, and (iii) creative automation. In 2023 we developed an industry leading, data-driven addition to our tech stack, successfully incorporating several layers of artificial intelligence (AI), predictive analytics, and automation in the application of data science, audience insights and tech-powered creative, an integrated and holistic system designed to optimize performance in real time for our brand and agency customers. We have successfully taken our new AI-powered data science solutions to market through various ongoing sales and marketing activities and are currently activating campaigns and delivering impact for both existing and new customers.

In addition, in March 2024 we obtained 11 customer accounts and 14 employees from a very large company, which includes over $4 million in prepaid amounts (and thereby potential additional revenue), in addition to the continued good will, subject to our provision of services to the new customers and to that party’s right to offset for personnel expenses.

Moving forward, we are actively assessing the mergers and acquisitions (M&A) landscape to identify potential acquisition targets, whether creative, media or technology companies, with stable customers and revenues, that can drive improved business outcomes through integrated access to the Socialcom media services solution.

Trends and Uncertainties

Our operations and industry are subject to the following trends and uncertainties:

Seasonality

In the advertising industry, companies commonly experience seasonal fluctuations in revenue. For example, some advertisers may allocate the largest portion of their budgets to the fourth quarter of the calendar year in order to coincide with increased holiday purchasing. Historically, the fourth quarter of the year reflects our highest level of advertising activity and the first quarter reflects the lowest level of such activity. We expect our revenue to continue to fluctuate based on seasonal factors that affect the advertising industry as a whole.

Developments in the Programmatic Advertising Market

Our operating results and prospects will be impacted by the overall adoption of programmatic advertising by inventory owners and content providers, as well as advertisers and the agencies and service providers that represent them. Programmatic advertising has grown rapidly in recent years, and any acceleration or slowing of this growth may affect our operating and financial performance. In addition, even if the programmatic advertising market continues to grow at its current rate, our ability to position ourselves within the market will impact the future growth of our business.

In addition, technological and other changes and developments in the digital ad space will also affect our operations and operating results. For example, many websites including Google have began the process of or are expected to update or alter their privacy settings and practices, including by eliminating “cookies” and the collection of personal identifiable information and website browser data about users, for which we and our industry will need to adjust in order to maintain and grow our operations.

Growth in and Retention of Customers

Our ability to generate and maintain revenue depends on retaining our existing customers and adding new customers. Our customers consist of small-to-medium sized businesses, with spending patterns that can be inconsistent or unpredictable. We also depend on a relatively small number of customers for a large proportion of our revenue streams. As a result, future revenue and growth depends upon our ability to retain our existing customers and to gain a larger amount of their advertising spend through our platform and related services.

Our customer base and, related, our employee base and infrastructure, may also be influenced by our potential entrance into M&A or strategic transactions, which is a continued focal point of management as we seek to grow our operations and establish consistent revenue streams. With these developments comes challenges with respect to integration and due diligence of target business and strategic partners, but also potential for upside to the extent these efforts are successful in achieving their business objectives.

Labor Shortages

Because of our focus on digital advertisements and the underlying technology and infrastructure involved in those processes, as well as providing a wide variety of businesses with their digital marketing needs, our operations depend on procuring, training and maintaining skilled personnel to assist us and our customers in fulfilling these demands. In recent periods, macroeconomic factors have contributed to labor shortages in the U.S. across industries. As a result of this and other factors, in FY 2022 the loss of certain personnel, including members of our sales and customer support team, adversely impacted our operating results in that period. If the tightened labor market trend continues in general or for our business in particular, this trend could persist. In FY 2023, we made significant strides in optimizing our operations, which not only reduced our operating expenses but also strategically positioned us for sustained incremental growth in the upcoming year. Through a combination of streamlining initiatives and technological advancements, we have enhanced our efficiency and productivity across all departments. These efforts resulted in a notable positive impact on our financial performance and operational agility. As we enter FY 2024, we are building on the momentum from the previous year's achievements. Our team is now more agile, our cost structure more efficient, and our business model has been refined to capitalize on emerging opportunities in digital advertising and marketing services. We are confident that the measures taken to strengthen our workforce and operational practices will continue to yield beneficial results and drive growth in FY 2024.

Omnichannel Access

Because we assist in the selection and purchase of advertising inventory across a wide variety of formats for our customers, such as display, mobile, video, audio, social and native, our future growth will depend on our ability to maintain and grow the inventory of, and customer spend on, advertising channels. For instance, as we proceed further into the digital age, new channels can arise rapidly and gain popularity within relatively short periods, diverting attention from existing channels and forcing stakeholders in the industry, including us, to adapt quickly. Further, each channel we now or may in the future access to service our customers has its own policies in terms of content and use, and we must continually monitor and adhere to these requirements to continue to access those channels for our customers. We believe that our ability to integrate and offer access to new means of digital communication, such as Connected Television (CTV), digital out-of-home (DOOH), and digital radio advertising inventory and to manage the increased costs that will accompany these developments, will impact the operating results and future growth of our business.

RESULTS OF OPERATIONS

This discussion may contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from the forward-looking statements discussed in this Report. This discussion should be read in conjunction with our consolidated financial statements, the notes thereto and other financial information included elsewhere in this Report and to the “Risk Factors” disclosed in Item 1A of this Report.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Revenue

Revenue was $16,033,823 for the year ended December 31, 2023, a decrease of $1,585,681, or 9.0% compared to revenue of $17,619,504 for the year ended December 31, 2022. The decrease in revenue was primarily due to larger campaigns that ran during the period, thereby reducing the overall number of customer projects, as well as certain brands moving their campaigns to internal house buying teams, a trend experienced by others in our same industry. In addition, certain macro-economic pressures produced a reduction in consumer confidence and consumer spending which in turn led to a reduction in media spending by brands and agencies, as experienced by others in our same category.

Costs of Revenue

Cost of revenue was $11,293,442 for the year ended December 31, 2023, a decrease of $203,097, or 1.8% compared to $11,496,539 during the year ended December 31, 2022. The decrease was driven primarily by a lower number of customer campaigns, partially offset by larger campaign sizes, along with increased in-housing of media buying by clients in in the 2023 period.

Our gross profit margins were 30% during the year ended December 31, 2023 compared to 35% during the year ended December 31, 2022. The decrease was driven primarily by an increase in lower margin revenue delivered in the year ended December 31, 2023.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses were $10,066,408 for the year ended December 31, 2023, a decrease of $252,548, or 2.4%, compared to $10,318,956 during the year ended December 31, 2022. The decrease was driven primarily by a decrease in headcount. expenses during the period.

Cost of Legal Settlement

Cost of legal settlement was $894,274 for the year ended December 31, 2023; there were no comparable costs in the prior year. Cost of legal settlement were in connection with of liability claimed by a vendor in a legal dispute and to court costs.

Other Expense, Net

Other expense consisted of interest expense net of interest income, which was $2,329,809 and interest income – restricted investment of $28,470 during the year ended December 31, 2023.  This represents an increase of $1,694,661, or 279%, compared to interest expense, net of interest income of $606,678 during the year ended December 31, 2022. There was no interest income- restricted investment in the prior year. The increase was driven primarily by the amortization of the discount on the Decathlon loan and to increased principal balances under our notes payable.

Cash Flows from Operating Activities

Our cash flows from operating activities are primarily influenced by growth or decline in operations, increases or decreases in collections from our customers and related payments to suppliers for advertising media and data. Cash flows from operating activities are typically affected by changes in the components of working capital, particularly changes in accounts receivable, accounts payable, and accrued liabilities. Timing differences from cash receipts from customers and payments to suppliers have a significant impact on our cash flows from operating activities. We often pay suppliers in advance of collections from our customers. Our collection and payment cycles can vary from period to period, and we additionally expect seasonality to impact cash flows from operating activities on a quarterly basis during the year.

For the year ended December 31, 2023, net cash used in operating activities of ($3,584,218) resulted primarily from a net loss of $8,521,640 adjusted for non-cash items totaling $4,684,576 and a net decrease of $17,154 in the components of working capital. The $4,684,576 in non-cash adjustments to net income are attributable to primarily to charges of $1,674,771 in connection with a minimum interest liability on the Decathlon Loan; $1,428,099 related to employee stock-based compensation, $581,352 for amortization of our office lease, $302,909 for the amortization of discounts on notes payable, $226,791 of depreciation and amortization, and provision for doubtful accounts of $499,124. The decrease in cash resulting from changes in the components of working capital of $17,154 was due primarily to a $1,371,863 increase  in accounts receivable and a $1,237,189 increase in accounts payable, with the remaining change attributable to normal operational fluctuations in current assets and current liabilities.

For the year ended December 31, 2022, net cash used in operating activities of ($4,360,072) resulted primarily from a net loss of ($4,802,699) adjusted for non-cash items totaling $1,327,302 and a net decrease of ($884,705) in the components of working capital. The $1,327,302 in non-cash adjustments to net income are attributable primarily to charges of $549,570 for amortization of our office lease, $431,817 related to employee stock-based compensation, $206,947 of depreciation and amortization, and $138,968 in the provision for doubtful accounts. The change in the components of working capital of ($884,705) during the period was due primarily to a $1,246,928 decrease in accounts receivable and a $1,237,034 increase in accounts payable, with the remaining change attributable to normal operational fluctuations in current assets and current liabilities.

Cash Flows Used in Investing Activities

Our primary investing activities consist primarily of the purchase of fixed assets and costs paid for the development of software to improve our platform. As our business grows, we expect our capital expenditures and our investment activity to continue to increase.

For the year ended December 31, 2023, we used $1,044,786 of cash in investing activities, consisting of $1,000,786 invested into securities related to the funding of the surety bond described in Notes 13 and 16, $31,619 invested in capitalized software and $12,283 to purchase fixed assets.

For the year ended December 31, 2022, we used $108,834 of cash in investing activities, consisting of $89,094 of cash for the development of software and $19,740 of cash used to purchase fixed assets.

Cash Flows Provided by Financing Activities

Our financing activities consisted primarily of the sale of common and preferred stock, borrowings and repayments of our debt, proceeds from forgiveness on borrowings, proceeds from the exercise of options issued under our equity compensation plan.

For the year ended December 31, 2023, cash provided by financing activities of $4,547,035 was due to $2,724,000 in proceeds from the issuance of convertible notes payable to related parties, $1,500,000 in proceeds from the sale of preferred stock, $500,000 in proceeds from the sale of common stock, $310,000 in proceeds from a note payable to a related party, and $5,071 from the exercise of stock options, partially offset by $492,036 in principal payments on loans.

For the year ended December 31, 2022, cash provided by financing activities of $1,417,575 was due to $1,000,000 in proceeds from the sale of common stock, $500,000 in proceeds from the issuance of notes payable to related parties, and $50,000 in proceeds from a loan, partially offset by $132,530 in principal payments on loans.

Non-GAAP Measures

EBITDA & Adjusted EBITDA

EBITDA is a non-GAAP financial measure defined as net income (loss) before interest, tax, and depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure that we define as net income (loss) before (a) certain stock-based compensation expense, (b) costs attributable to non-recurring settlement expense, legal activity, professional fees, and other transaction and offering costs, (c) interest, (d) tax, and (e) depreciation and amortization. We use Adjusted EBITDA to evaluate the performance of our core business operations. We believe that information about Adjusted EBITDA assists investors by allowing them to evaluate changes in the operating results of our business separate from non-operational factors that affect net income (loss), thus providing insights into both operations and the other factors that affect reported results. Adjusted EBITDA is not calculated or presented in accordance with GAAP. Accordingly, Adjusted EBITDA should be considered in addition to, and not as a substitute for, operating income (loss), net income (loss), and other measures of financial performance reported in accordance with GAAP. Furthermore, this measure may vary among other companies; thus, Adjusted EBITDA as presented herein may not be comparable to similarly titled measures of other companies.

The following table sets forth the reconciliation of Adjusted EBITDA to net loss, the most comparable GAAP financial measure for the years ended December 31, 2023 and 2022:

Liquidity and Capital Resources

As of April 8, 2024, we have unrestricted cash on hand of approximately $646,160. Management believes this amount is not sufficient to meet our operating needs for the next 12 months, and in order to meet our working capital requirements, we will need to either raise sufficient capital or reduce our expenditures. We will rely on our ability to improve operating cash flow or raise additional capital through the sale of debt or equity securities and draw on our existing credit facility, in addition to our existing cash and cash equivalents to meet our working capital requirements for at least the next 12 months.

The Company’s ability to continue as a going concern is dependent upon its ability to improve cash flow and the ability to obtain additional financing, including potentially through proceeds raised from its Regulation A offering. These and other factors substantial doubt about the Company’s ability to continue as a going concern in the following 12-month period.

Our recent and potential future financing transactions, outstanding indebtedness and other developments which will potentially impact our liquidity are summarized below.

During the year ended December 31, 2023, we recorded an increase in the minimum interest liability due on our Decathlon Loan in the amount of $900,000.

Series A Financings

On February 24, 2023, the Company sold 25,000 shares of Series A Preferred Stock at a price of $30.00 per share for cash proceeds of $750,000 in the first tranche of a Securities Purchase Agreement originally entered into on January 30, 2023. In the second tranche, which closed on May 25, 2023, the Company sold an additional 25,000 shares of Series A Preferred Stock for an additional $750,000.

Financing Agreements

On June 13, 2019, Socialcom entered into an accounts receivable financing and security agreement (the “Financing Agreement”) with SLR Digital Finance, LLC as the secured lender which was amended on September 18, 2023, January 31, 2024 and April 1, 2024. The Financing Agreement as amended has a current maximum amount of $2,000,000 and an interest rate per annum equal to 5% plus the “prime rate”, which is defined as the higher of the highest rate as reported by the Wall Street Journal or 8.5%. The Financing Agreement provided for an initial financing fee equal to 1/12th of the facility interest rate and additional monthly financing fees of 1/12th of the facility interest rate. The Financing Agreement is subject to an early termination fee equal to 2% of the maximum amount available under the Financing Agreement. Further, the Financing Agreement provides that Socialcom shall at all times use at least 20% of the maximum amount. The revolving credit facility under the Financing Agreement is secured by the trade accounts receivable of Socialcom and guaranteed by its assets and the assets of Vado, including the Socialcom common stock Vado holds representing 100% of the outstanding Socialcom common stock. Upon any event of default, the lender may, among other things, immediately demand repayment of all advanced amounts thereunder. The Financing Agreement provides, among other things, that the lender can immediately terminate the Financing Agreement and demand payment. In addition, Jason Wulfsohn, our Chief Executive Officer and a principal stockholder, guaranteed the loan and pledged his shares of Vado common stock to secure payment.

On December 31, 2019, Socialcom borrowed $3,000,000 (the “Decathlon Loan”). The Decathlon Loan is due June 30, 2024 and is secured by all the assets of Socialcom. The Decathlon Loan accrues interest at a variable rate based upon internal rate of return targets, which interest multiple is subject to increase by 0.015 upon an event of default. The effective rate of interest for the years ended December 31, 2023 and 2022 was approximately 17%. Repayments are required based upon a fixed percentage of our earned revenue. If not repaid prior the final balance is due on June 30, 2024. The Decathlon Loan is subject to minimum interest that escalates over the term of the loan. At December 31, 2023 and 2022, the potential liability for unearned minimum interest was $886,733 and $1,661,504, respectively. During the year ended December 31, 2023, the Company made principal and interest payments in the amount $112,179 and $381,384, respectively, on the Decathlon loan. During the year ended December 31, 2022, the Company made principal and interest payments in the amount $132,530 and $402,648, respectively, on the Decathlon loan.

Related Party Indebtedness

As disclosed in “Related Party Transactions” and in footnote 11 and 12 to our financial statements, Socialcom has a total of $3,824,000 in outstanding related party indebtedness payable to our officers and directors or affiliated entities. $600,000 of this indebtedness accrues interest at 15% and matures in March 2024 (for which we intend to seek a waiver and extension from the holders), $800,000 of this indebtedness accrues interest at 7.25%, matures December 31, 2024, and is convertible into our common stock at a conversion price of approximately $0.233 per share. $500,000 of this indebtedness accrues interest at the rate of 8.25% and matures in December 2025, with the remaining $1,924,000 accruing interest at 7.25% and maturing in December 2025. Additional details concerning certain of these loans are provided in the paragraphs that immediately follow.

On February 7, 2023, in connection with the Zeta litigation described under “Legal Proceedings,” Socialcom borrowed $800,000 from Kahala19 LLC, an entity controlled by Reeve Benaron, the Company’s director and a principal shareholder. In March 2023, we issued Kahala 19 LLC an identical note and it cancelled the Socialcom note. The principal and accrued interest on this note is convertible into the Company’s common stock at a conversion price of approximately $0.233 per share. The note as amended accrues interest at 7.25% per annum and matures on December 31, 2024. The interest rate is subject to increase to 18% upon the occurrence of an event of default.

On May 12, 2023, also in connection with the Zeta litigation, Socialcom borrowed $1,300,000 from an entity affiliated to Jason Wulfsohn, the Company’s CEO and a director. The note accrued interest at 7.25% per annum and matures on December 31, 2025. This note is convertible into common stock of the Company at a price of $0.32 per share.

On December 29, 2023 the Company borrowed $310,000 from Jason Wulfsohn, the Company’s CEO and a director. The note accrues interest at the rate of 7.25% and matures on December 29, 2024.

These loans are included in the related party indebtedness described above.

General

Historically, we have financed the Company through a combination of debt and equity transactions, including significant loans from our principal stockholders. To meet future capital requirements, we plan to raise additional capital through the sale of equity securities or through equity-linked or debt-financing arrangements, to the extent our operating cash flow is insufficient to fund our operations in future periods.

There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives. In addition, if our operating performance during the next 12 months is below our expectations, our liquidity and ability to operate our business could be adversely affected. We continue to monitor macro-economic factors such as inflationary pressures, continued Federal Reserve interest rate hikes and recessionary fears, as well as trends within our industry, all of which may affect our working capital requirements.

Critical Accounting Policies and Estimates

Use of Estimates in the Preparation of Financial Statements

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These estimates include certain assumptions related to, among others, doubtful accounts receivable, valuation of stock-based services, operating right of use assets and liabilities, and income taxes. On an on-going basis, we evaluate these estimates, including those related to revenue recognition and concentration of credit risk. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Accounts subject to estimate and judgements are accounts receivable reserves, income taxes, intangible assets, contingent liabilities, and equity-based instruments. Actual results may differ from these estimates under different assumptions or conditions. We believe our estimates have not been materially inaccurate in past years, and our assumptions are not likely to change in the foreseeable future.

(b) Stock options:

The Company accounts for options in accordance with FASB ASC 718-40. Options are valued upon issuance utilizing the Black-Scholes valuation model. Option expense is recognized over the requisite service period of the related option award. The following table illustrates certain key information regarding our options and option assumptions at December 31, 2023 and 2022:

The Company valued warrants and options using the Black-Scholes valuation model utilizing the following variables:

Provision for Doubtful Accounts Receivable

The Company maintained an allowance in the amount of $184,629 and $224,974 for doubtful accounts receivable at December 31, 2023 and 2022, respectively. The Company has an operational relationship of several years with our major customers, and we believe this experience provides us with a solid foundation from which to estimate our expected losses on accounts receivable. Should our sales mix change or if we develop new lines of business or new customers, these estimates and our estimation process will change accordingly. These estimates have been accurate in the past.

Income Taxes

The Company uses the liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. The measurement of deferred tax assets and liabilities is based on provisions of applicable tax law. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, is not expected to be realized. At December 31, 2023, the Company has a net operating loss carryforward of approximately $12,626,177 for Federal and $13,569,860 for California.

ITEM 8. Financial Statements

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Vado Corp.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Vado Corp. (the Company) as of December 31, 2023 and 2022, and the related statements of operations, stockholders’ equity, and cash flows for each of the two-year periods ended December 31, 2023 and 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023 and 2022 in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered net losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

As discussed in Note 2, the Company recognizes revenue upon transfer of control of promised services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company offers customers the ability to acquire multiple services. Significant judgment is exercised by the Company in determining revenue recognition for these customer agreements. Given these factors and due to the volume of transactions, the related audit effort in evaluating management’s judgments in determining revenue recognition for these customer agreements was extensive and required a high degree of auditor judgment.

We tested the Company’s allocation of the transaction price and other variables that impact revenue recognition.

/s/ M&K CPAS, PLLC

We have served as the Company’s auditor since 2022

The Woodlands, TX

April 16, 2024

VADO CORP.

BALANCE SHEETS

The accompanying notes are an integral part of these financial statements.

VADO CORP.

STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements.

VADO CORP.

STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements.

VADO CORP.

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

VADO CORP.

NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022