ABRI SPAC I(ASPA) - 2023 Q4 - Annual Report

PART I Business Collective Audience, Inc., formerly Abri SPAC I, Inc., operates primarily through its subsidiary DLQ, Inc. following a business combination on November 2, 2023, providing digital marketing and data management services through its Push and BattleBridge units - The company was formed through a business combination between Abri SPAC I, Inc. and DLQ, Inc. on November 2, 2023, with DLQ becoming a wholly-owned subsidiary. The company's name was changed to Collective Audience, Inc[19][21][22] - The business operates through two primary units: the Push Business Unit for lead generation and performance marketing, and the BattleBridge Business Unit, a full-service digital marketing agency[30][31][37] - A key proprietary technology is the 'Marble' platform, which ingests and processes consumer data from owned and operated brands to create unified consumer profiles for a live data auction[32][43] - Recent strategic moves include a binding Letter of Intent to acquire French conversational advertising company BeOp and the acquisition of a 51% stake in DSL Digital, LLC, a global marketing platform with proprietary AI technology[99][101] Revenue by Business Area (Fiscal Years 2023 vs. 2022) | Revenue Source | 2023 | 2022 | | :------------------- | :------------- | :-------------- | | Lead Generation | $2,411,478 | $11,540,265 | | Affiliate Management | $9,730,621 | $6,441,775 | | Reengagement | - | $2,253,496 | | Total Revenue | $12,142,099| $20,235,536 | Risk Factors The company faces significant risks, including substantial doubt about its ability to continue as a "going concern" due to a working capital deficit and recurring losses, high customer concentration, material weaknesses in internal financial reporting controls, and potential delisting from Nasdaq - The independent registered public accounting firm's report expresses substantial doubt about the company's ability to continue as a "going concern" due to a working capital deficit of $2.88 million and recurring losses as of December 31, 2023[104][106] - The company has substantial customer concentration, with two customers (Quinstreet and Regal Nutra) accounting for approximately 87% of revenues in 2023[82][137] - Nasdaq has issued multiple notices of deficiency and a delisting notice (June 24, 2024) for failure to meet minimum market value, bid price, and timely filing requirements. The company intends to appeal the delisting[104][194][195] - Management identified material weaknesses in internal control over financial reporting as of December 31, 2023, primarily related to limited finance and accounting staffing levels[113][117] - The company faces risks related to cybersecurity and data privacy, as its business relies on the secure transmission and storage of sensitive consumer information and is subject to regulations like the CCPA and CPRA[156][157][162] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - Not applicable[263] Cyber Security The company has established policies for managing cybersecurity threats, which are integrated into its overall risk management, with Board oversight and no material impact from previous incidents - The company has processes to assess, identify, and manage material risks from cybersecurity threats, which are integrated into its overall risk management framework[264] - The Board's Audit Committee has formal oversight of enterprise risk matters, including cybersecurity, while day-to-day management and monitoring are handled by company management[270][271] - The company reports that it has not been materially impacted by any previous cybersecurity incidents[268] Properties The company's principal executive office is located at 85 Broad Street 16-079, New York, NY 10004 - The Company's principal executive office is located in New York, NY[272] Legal Proceedings The company is involved in two notable legal matters: a $35,240 judgment against its subsidiary Push Interactive, LLC, and an arbitration demand from a former DLQ, Inc. employee - A judgment of $35,240 was entered against subsidiary Push Interactive, LLC on June 12, 2024, for an unpaid balance from a settlement agreement with a creditor[274] - A former employee of DLQ, Inc. filed an AAA arbitration demand on February 26, 2024, alleging breach of contract and statutory wage payment violations. The matter is proceeding to arbitration[275] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[276] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under "CAUD", with 16.2 million shares outstanding as of June 26, 2024, and no history or future plans for cash dividends, while a December 2023 private placement raised approximately $600,000 - The company's common stock is traded on The Nasdaq Global Market under the symbol "CAUD"[278] - As of June 26, 2024, there were 16,222,488 shares of common stock outstanding held by approximately 579 holders of record[281] - The company has never declared cash dividends and does not anticipate paying them in the foreseeable future, expecting to retain earnings for business growth[282] - On December 19, 2023, the company closed a private placement raising approximately $600,000 through the sale of 465,118 shares of common stock at $1.29 per share and warrants to purchase 697,678 shares[285] Management's Discussion and Analysis of Financial Condition and Results of Operations For the year ended December 31, 2023, revenue decreased by 40% to $12.1 million, leading to a significant working capital deficiency and substantial doubt about the company's ability to continue as a going concern, while the company pursues financing and acquisitions but faces Nasdaq delisting Results of Operations (2023 vs. 2022) | Metric | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $12,142,099 | $20,235,536 | ($8,093,437) | (40)% | | Platform Operations | $11,139,900 | $16,370,316 | ($5,230,416) | (32)% | | General & Administrative | $6,147,913 | $6,729,611 | ($518,698) | (9)% | - As of December 31, 2023, the company had a working capital deficit of $2,875,377 and cash of $612,183. These conditions raise substantial doubt about the company's ability to continue as a going concern[320][321] - The company is facing delisting from Nasdaq due to non-compliance with market value, bid price, and timely filing rules. A delisting notice was received on June 24, 2024, which the company plans to appeal[299][300][304] Summary of Cash Flows (2023 vs. 2022) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,933,011) | ($2,586,812) | | Net cash used in investing activities | $0 | ($50,000) | | Net cash provided by financing activities | $4,128,120 | $2,227,734 | Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the company - Not Applicable[334] Financial Statements and Supplementary Data This section refers to the company's financial statements, which are included at the end of the Annual Report, beginning on page F-1 - The company's financial statements and supplementary data are included in the report starting from page F-1[335] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure On June 11, 2024, the company dismissed Frazier & Deeter, LLC ("FD") and appointed Yusufali & Associates, LLC ("Yusufali") as its new auditor, with no reported disagreements, though FD's prior reports included a going concern explanatory paragraph - On June 11, 2024, the company dismissed Frazier & Deeter, LLC (FD) and appointed Yusufali & Associates, LLC as its new independent registered public accounting firm[336][339] - The company had no disagreements with FD on accounting principles, financial statement disclosure, or auditing scope during the period from November 29, 2023, through June 11, 2024[338] - FD's audit reports on the financial statements of DLQ, Inc. for the years ended December 31, 2022 and 2021, contained an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern[337] Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2023, due to material weaknesses in internal control over financial reporting, primarily related to limited finance and accounting staffing levels, for which a remediation plan is being implemented - Management concluded that disclosure controls and procedures were not effective as of December 31, 2023[341] - Material weaknesses were identified in internal control over financial reporting, primarily due to limited finance and accounting staffing levels and organizational changes[345] - The company is implementing a remediation plan that includes hiring additional resources to address the identified material weaknesses[347] Other Information There is no other information to report in this section - None[353] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[354] PART III Directors, Executive Officers and Corporate Governance As of June 28, 2024, the company's executive team includes Peter Bordes as CEO and Chris Andrews as COO and Interim CFO, with a five-member Board of Directors, four of whom are independent, overseeing Audit, Compensation, and Nominating committees, and adhering to a code of business conduct Executive Officers and Directors | Name | Position | | :--- | :--- | | Peter Bordes | Chief Executive Officer | | Chris Andrews | Chief Operating Officer and Interim Chief Financial Officer | | Joseph Zawadzki | Chairman of the Board | | Christopher Hardt | Director | | Nadine Watt | Director | | Elisabeth DeMarse | Director | | Denis Duncan | Director | - The Board of Directors has determined that Joseph Zawadzki, Elisabeth DeMarse, Nadine Watt, and Denis Duncan are independent directors according to Nasdaq listing requirements[365] - The board has three standing committees: Audit, Compensation, and Nominating and Corporate Governance, each with a written charter[366] - The company has adopted a Code of Business Conduct and Ethics, which is available on its corporate website[379] Executive Compensation Executive compensation for 2023 was minimal, with CEO Peter Bordes receiving a salary of $10,000, while the company adopted the 2024 Equity Incentive Plan (EIP) with an initial reserve of 2,500,000 shares for equity awards, and no cash compensation was paid to non-employee directors - CEO Peter Bordes' employment agreement includes an annual base salary of $250,000, which is subject to an initial reduced rate of $10,000 per month until a capital raise of at least $1.5 million occurs[384][388] - COO & Interim CFO Christopher Andrews' agreement provides for an annual base salary of $120,000 for the first ten months, increasing to $216,000 annually thereafter[386][389] - The company adopted the 2024 Equity Incentive Plan (EIP) on January 1, 2024, reserving an initial 2,500,000 shares for equity awards. The reserve will increase annually by up to 5% of outstanding shares[391][392][415] - Non-employee directors did not receive any cash compensation for their service in 2023[411][412] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of June 24, 2024, the company's directors and executive officers as a group beneficially owned 9.94% of the 16,222,488 outstanding common shares, with CEO Peter Bordes holding 7.22% and COO Christopher Andrews holding 2.72%, and the 2024 Stock Option Plan having 2,460,000 securities available for future issuance Beneficial Ownership of Directors & Executive Officers (as of June 24, 2024) | Name | Shares of Common Stock | % of Common Stock | | :--- | :--- | :--- | | Peter Bordes | 1,171,429 | 7.22% | | Christopher Andrews | 440,500 | 2.72% | | All directors and executive officers as a group (7 individuals) | 1,751,929 | 9.94% | - The applicable percentage of ownership is based on 16,222,488 shares of common stock outstanding as of June 24, 2024[427] Equity Compensation Plan Information (as of Dec 31, 2023) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | 2024 Stock Option Plan | 40,000 | $1.24 | 2,460,000 | Certain Relationships and Related Transactions, and Director Independence The company has entered into indemnification agreements with its directors and executive officers, maintains D&O liability insurance, and has a written policy for reviewing and approving related-person transactions exceeding $120,000 - The company has entered into indemnification agreements with all directors and executive officers and maintains D&O liability insurance[434] - A written related person transaction policy is in place for the review and approval of transactions exceeding $120,000 where a related person has a material interest[437] Principal Accountant Fees and Services The company paid its current auditor, Yusufali & Associates, LLC, $15,000 in audit fees for 2023, while its former auditor, Frazier & Deeter, LLC, received $257,500 in 2023 and $265,000 in 2022, with all services pre-approved by the Audit Committee Accountant Fees (Yusufali & Associates, LLC) | Fee Type | 2023 | 2022 | | :--- | :--- | :--- | | Audit Fees | $15,000 | - | | Total Fees | $15,000 | - | Accountant Fees (Frazier & Deeter, LLC) | Fee Type | 2023 | 2022 | | :--- | :--- | :--- | | Audit Fees | $140,000 | $265,000 | | Other Fees | $117,500 | - | | Total Fees | $257,500 | $265,000 | - All auditing and non-audit services provided by the independent registered public accounting firm were pre-approved by the Audit Committee[447] PART IV Exhibit and Financial Statement Schedules This section indicates that the company's financial statements are included in the report, all financial statement schedules are omitted as they are not applicable, and a list of exhibits is provided in the Exhibit Index - The financial statements of Collective Audience, Inc. are included in the Annual Report[449] - All financial statement schedules have been omitted because they are not applicable or the required information is already present in the financial statements or notes[451] Form 10-K Summary This item is not applicable - Not applicable[453] Financial Statements and Notes Consolidated Financial Statements The consolidated financial statements for the year ended December 31, 2023, show total assets of $12.2 million, a net loss of $4.6 million, and an accumulated deficit of $40.0 million, with net cash used in operating activities of $3.9 million offset by $4.1 million from financing activities Consolidated Balance Sheet Highlights (as of Dec 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Assets | $12,230,013 | $18,555,206 | | Total Liabilities | $9,354,635 | $12,249,276 | | Total Stockholders' (Deficit) Equity | $2,875,377 | $6,305,930 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Revenue | $12,142,099 | $20,235,536 | | Loss from Operations | ($6,656,588) | ($5,480,585) | | Net Loss | ($4,575,314) | ($5,565,317) | | Net Loss Per Share | ($0.33) | ($0.49) | Consolidated Statement of Cash Flows Highlights (Year Ended Dec 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($3,933,011) | ($2,586,812) | | Net cash provided by financing activities | $4,128,120 | $2,227,734 | Notes to Consolidated Financial Statements The notes detail the company's organization, reverse merger, and accounting policies, highlighting substantial doubt about its going concern ability due to losses and negative cash flows, significant customer concentration, and subsequent events including new financing and acquisitions - The business combination on November 2, 2023, was treated as a reverse acquisition of Abri by DLQ for accounting purposes, with DLQ as the accounting acquirer[496][506] - The financial statements were prepared with the assumption of the company as a going concern, but operating losses and negative cash flows raise substantial doubt about this ability. The company's future viability depends on securing outside funding[516][517] - The company has significant customer concentration risk. In 2023, two customers accounted for 87% of revenues. As of year-end 2023, one customer represented 99% of accounts receivable[539][540] - Subsequent to year-end, the company entered into several key agreements, including a binding LOI to acquire BeOp, an agreement to acquire 51% of DSL Digital, and new financing arrangements through promissory notes and warrant repricing[588][592][593]