Filed pursuant to Rule 424(b)(4)
 Registration No. 333-262416
PROSPECTUS
2,400,000 Shares of Common Stock
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We are offering 2,400,000 shares of our common stock pursuant to this prospectus, at the public offering price of $5.00 per share. Our common stock was previously quoted on the Pink Open Market operated by OTC Markets Group Inc. (the “Pink Open Market”) under the symbol “LPTV.” The last reported sale price of our common stock on the Pink Open Market on September 21, 2022, was $9.20 per Share, giving effect to the reverse stock split of one-for-three completed on September 20, 2022.
Our common stock has been approved for listing on the NYSE American LLC (the “NYSE American”) under the symbol “LPTV” and will begin trading on the NYSE American on September 22, 2022, subject to meeting all applicable listing standards upon completion of the offering. There is no assurance that an active trading market for our common stock will develop or be maintained.
In connection with this offering, on September 20, 2022, we effected a one-for-three reverse stock split pursuant to which every three shares of our common stock were reclassified as one share of common stock. Unless otherwise indicated, the share and per share information in this prospectus is adjusted to reflect the reverse stock split.
We are a “smaller reporting company” under applicable Securities and Exchange Commission rules and are subject to reduced public company reporting requirements for this prospectus and future filings.
Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 22 and elsewhere in this prospectus for a discussion of information that should be considered in connection with an investment in shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these shares or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Per
Share
Total
Public offering price
$ 5.00 $ 12,000,000
Underwriting discounts and commissions(1)(2)
$ 0.40 $ 960,000
Proceeds, before expenses, to us(2)
$ 4.60 $ 11,040,000
(1)
Does not include additional compensation payable to the underwriter. We have agreed to reimburse the underwriter for certain expenses. In addition, we have agreed to issue warrants to the underwriter to purchase a number of shares of our common stock equal to 8% of the number of shares sold in this offering. We refer you to “Underwriting” for additional information regarding underwriting compensation.
(2)
The underwriter is not receiving underwriting discounts and commissions with respect to proceeds from one of our stockholders purchasing shares in this offering. As a result, the total underwriting discounts and commissions is expected to be $800,000 and the total proceeds, before expenses, to us is expected to be $11,200,000.
Certain of our existing stockholders, including a stockholder affiliated with one of our directors, have committed to purchase an aggregate of at least $5.0 million of shares of our common stock in this offering at the public offering price.
The offering is being underwritten on a firm commitment basis. We have granted the underwriter an option to buy up to an additional 360,000 shares of common stock from us at the public offering price, less the underwriting discounts and commissions, to cover over-allotments. The underwriter may exercise this option at any time and from time to time during the 30-day period from the date of this prospectus.
The underwriter expects to deliver the shares of common stock to the purchasers on or about September 26, 2022.
Roth Capital Partners
The date of this prospectus is September 21, 2022

 
TABLE OF CONTENTS
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F-1
We have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our securities and the distribution of this prospectus outside of the United States.
Copies of some of the documents referred to herein have been filed as exhibits to the registration statement of which this prospectus forms a part, and you may obtain copies of those documents as described in this prospectus under the heading “Where You Can Find More Information.”
Unless the context indicates otherwise, as used in this prospectus, “we,” “us,” “our,” “the Company,” “Loop Media,” means Loop Media, Inc., a Nevada corporation. As used herein, “Loop” means the business of the Company as operated by Loop Media, Inc., a Delaware corporation (“Predecessor Loop”) or Loop Media, as the case may be, unless otherwise indicated.
 
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus and may not contain all of the information that you should consider before investing in the shares. You are urged to read this prospectus in its entirety, including the information under “Risk Factors” and our financial statements and related notes included elsewhere in this Prospectus.
As used herein, “we,” “us,” “our,” “the Company,” “Loop Media,” means Loop Media, Inc., a Nevada corporation, unless otherwise indicated. As used herein, “Loop” means the business of the Company as operated by Predecessor Loop or Loop Media, as the case may be, unless otherwise indicated.
Company Overview
Overview
We are a multichannel digital video platform media company that uses marketing technology, or “MarTech,” to generate our revenue and offer our services. Our technology and vast library of videos and licensed content enable us to curate and distribute short-form videos to out-of-home (“OOH”) dining, hospitality, retail, convenience stores, and other locations and venues to enable them to inform, entertain and engage their customers. Our technology provides third-party advertisers with a targeted marketing and promotional tool for their products and services and, in certain instances, allows us to measure the number of potential viewers of such advertising and promotional materials. We also allow OOH customers to access our service without advertisements by paying a monthly subscription fee. In addition to providing services to OOH venue operators, we currently provide our services direct to consumers (“D2C”) in their homes on connected TVs (“CTVs”) and on their mobile devices. We moved to a primarily advertising-based model starting in early 2021.
We offer self-curated music video content licensed from major and independent record labels, as well as movie, television and video game trailers, trivia, kid-friendly videos, viral videos, drone footage, news headlines, and lifestyle and atmospheric channels. We distribute our content and advertising inventory to digital screens located in OOH locations primarily through (i) our owned and operated platform (“O&O Network”) of Loop Media-designed “small-box” streaming Android media players (“Loop Players”) and legacy ScreenPlay (defined below) computers and (ii) through screens on digital networks owned and operated by third parties (“Partner Network”, and together with the O&O Network, the “Loop Network”). As of the date of this prospectus, we have expanded to over 43,000 OOH screens across the Loop Network. As of June 30, 2022, we had 12,584 quarterly active units (“QAUs”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Key Performance Indicators.” We launched our Partner Network business beginning in May 2022 with one partner on approximately 17,000 of the partner’s screens, and we have since added an additional 13,500 screens in a second partner’s network, for a total of 30,500 screens as of the date of this prospectus in our Partner Network. Our legacy businesses, including our content subscription-based business and our CTV business, complement these newer businesses.
Industry
Consumer Adoption of Streaming Services
In recent years, the video streaming services industry experienced, and is expected to continue to experience, significant growth as entertainment is delivered to consumers across an increasing array of digital platforms and services. According to data from Statista, Inc. (“Statista,” and such data, the “Statista Data”), revenue from the transmission and sale of video content over the internet (“VCOI”) is projected to reach $76.7 billion in 2021 and rise to $113.9 billion by 2025, a 10.4% compounded annualized growth rate (“CAGR”), with free (ad-supported) over-the-top (“OTT”) users expected to increase from 213.2 million users in 2020 to a projected 225.4 million users in 2025. According to Statista Data, based on information sourced from eMarketer, the number of ad-supported video-on-demand viewers in the United States is expected to grow from 140.1 million viewers in 2022 to 171.5 million viewers in 2026. The image that follows this paragraph illustrates this. According to the Statista Data, the largest revenue segment for VCOI is revenue derived from OTT video advertising (all advertising-financed moving image content, from premium to user-generated), with revenue of $34.3 billion in 2020, and projected revenue of $40.6 billion in 2021, $46.5 billion
 
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in 2022 and $63.3 billion in 2025, representing a CAGR of 13.0% over that period. According to Activate (based on information from Statista), the number of connected TV households (households for which at least one person of any age used the internet through a CTV at least once per month) in the United States is expected to increase from 85 million in 2017 to 113 million in 2024.
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Digital-Out-of-Home Advertising
In 2020, we primarily began using a free, ad-supported revenue model for our OOH business and believe our ad-supported services will be the primary driver of our revenue growth as demand for digital-out-of-home advertising is expected to grow. According to Statista Data, overall advertising spend in the United States was $268.9 billion in 2011 and is expected to grow to $294.1 billion in 2021 and $364.4 billion in 2025. 80% of digital advertising (in 2020) was delivered to media outlets through programmatic advertising. Programmatic advertising is a system that automates the processes and transactions involved with purchasing and dynamically placing ads on websites, apps or other digital delivery systems. Programmatic advertising makes it possible to purchase and place ads, including targeted advertising content, in seconds. According to the Statista Data, ad spending in the OOH space in the United States was $6.5 billion in 2020 and is expected to increase to $7.2 billion in 2021 and $9.0 billion in 2025. Digital out-of-home advertising spending in the United States is expected to grow from $2.7 billion in 2019 to $3.8 billion in 2023, according to Statista Data, based upon information sourced from eMarketer. The image below illustrates this:
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Our Revenue Model
Our revenue currently consists primarily of advertising revenue from advertising demand partners (including “demand-side platforms” and “supply-side platforms”), to whom we sell advertising inventory across the Loop Network. In our O&O Network business, we operate an advertising revenue share model in which third party licensors of our curated content are provided with a share of the advertising revenue. In our Partner Network business, we operate an advertising revenue share model in which the third-party owners and operators of the Partner Network are provided with a share of the advertising revenue. Where possible, in our Partner Network, we seek to use content that is not subject to a third-party license to avoid the necessity to share advertising revenue with third-party content providers.
 
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Our ad-supported and subscription-based services are separate offerings but work together to support our business. Given the expected growth in the digital OOH advertising market, coupled with the preferable economics to the Company of an ad-supported business model, we encourage our customers to choose our ad-supported services over our subscription services. While our ad-supported service is generally associated with higher margins, we provide our subscription service for OOH customers that are seeking an ad-free content offering on our O&O Network. We do not have a subscription service for our Partner Network, as the primary services we provide in this business are advertising sales services, along with our content licensing services.
MarTech
MarTech, the intersection of marketing and technology, leverages data and analytics to expand our points of distribution and advertising revenue.
Distribution
Owned & Operated Network (O&O).   We moved to an advertising-based model and ramped up distribution of Loop Players for our O&O Network starting in early 2021. Our customer acquisition strategy for our O&O Network is focused on marketing and distributing our Loop Player to businesses through social media and other online mediums, using our internal enterprise sales team and our affiliate marketing programs. We seek to optimize our social media and online customer acquisition and the distribution of our Loop Players by analyzing various data, including our return on marketing investments. When analyzing the success of our marketing investments, we examine the number of sales leads obtained from online platforms and the conversion of leads into high quality customers. We regularly analyze the engagement with, and success of, our creative advertising content and modify our messaging to improve customer acquisition for our O&O Network. Our enterprise sales team targets multi-location retail businesses or franchised chains in key markets and industries in the United States that are attractive to OOH advertisers. Our affiliate marketing program incentivizes third parties that have pre-existing connections with retail venues or otherwise qualify for our program to market and distribute our Loop Players and help ensure that they remain active and are servicing advertisements. As of June 30, 2022, we had 12,584 QAUs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Key Performance Indicators.”
 
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Partner Network.   Through our Partner Network business, we offer curated content and programmatic advertising sales expertise and technology to third parties looking to optimize advertising revenue on their existing distribution platforms. We work directly with programmatic advertising demand companies to sell advertising inventory on the Partner Network. We collect revenues from the demand partners and pass along a percentage of such revenues to our partner in the Partner Network. We launched our Partner Network business beginning in early May 2022 with one partner on approximately 5,000 of the partner’s screens, and we rolled out to the remaining 12,000 screens in that network as of mid-May 2022. In mid-August 2022, we entered into an agreement with a second partner, which partner has the United States’ largest in-airport TV network, adding 13,500 screens to our Partner Network, for a total of 30,500 screens as of the date of this prospectus. We currently have two partners in our Partner Network and are looking to continue to expand our partner base for this line of business over time. Our cost of revenue for advertising sales on our Partner Network is higher than our cost of revenue for advertising sales on our O&O Network due to our significant revenue share with our Partner Network customers, even though we are able to share typical transaction costs associated with the related programmatic advertising sales and server costs with such customers. Our ability to monetize our Partner Network screens will differ from partner network to partner network, as certain screens will be more desirable than others for advertisers, depending on the type of venues or locations in which the screens are located, the concentration of screens, the expected or actual number of consumers, dwell time of those consumers and other factors. As a result, the average revenue per screen for individual
 
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partners and individual screens in our Partner Network is expected to be more varied than our ARPU for our O&O Network business.
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Advertising Revenue
Our revenue is primarily driven by programmatic advertising, an automated measurement process that manages the sales of our advertising inventory. Today, most digital advertising is programmatic advertising, with digital OOH advertising comprising a small portion of the overall market. While we look to establish direct advertising and sponsorship opportunities with advertisers, almost all of our current advertising revenue is purposely secured through programmatic advertising. Our yield optimization strategies look to leverage data analytic and other techniques to maximize the value of our digital advertising inventory. We intend to optimize the combination of our ad impressions, cost per impression and the percentage of our ad inventory filled by advertisers, while balancing our O&O Network’s and our Partner Network’s customers’ experience by limiting the number of ads delivered during any given period. Our Loop Player is designed to allow us to multiply OOH revenue in certain locations in the event that the advertising industry recognizes, and is
 
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willing to pay for, multiple advertising impressions for a single Loop Player for venues with multiple persons who may be in a position to view the relevant advertisement as outlined below:
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Loop Player
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The Loop Player is at the heart of our O&O Network revenue model and its technology enables us to communicate and interact with OOH locations, advertisers, and OOH customers:

OOH Locations.   The Loop Player allows OOH customers to program their in-store monitors and audio systems to schedule playlists depending on the time of day, promote their products or services through digital signage and deliver company-wide messages to staff in back-office locations. Business owners can filter content based on ratings or explicit language and can control the genres of videos in their programs. The Loop Player caches and encrypts our content, thereby supplying uninterrupted play for up to 12 hours in the event of an internet disruption.

Advertising and Content Partners.   Our Loop Player works with our technology, software and servers to determine the number of ad impressions available for programmatic advertising, which can be filled in real-time, seconds before ads are played. Our Loop Player delivers content and advertising to venues and our technology allows us to record and report video content played (for reporting to content providers) and advertising content played (for reporting to our advertising demand partners and advertisers). In particular, our technology allows us to track when, where and how long content is played, and, in certain instances, measure approximately how many consumers were in position to view the content or advertisement. The Loop Player’s Wi-Fi and Bluetooth capabilities allow us to
 
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determine the number of potential viewers at a given location, which can provide us with a revenue multiplier, as we expect to be able to increase advertising revenue at high-volume locations in the event that the advertising industry recognizes, and is willing to pay for, multiple advertising impressions for a single Loop Player for venues with multiple persons who may be in a position to view the relevant advertisement. This “multiplier effect” is possible due to the Loop Player’s ability to detect, using Bluetooth and Wi-Fi technology, the number of consumer mobile devices within reach of a Loop Player in an OOH location which provides advertisers with a proxy for the number of potential viewers of a particular ad at any given time. The digital advertising market for out of home locations is still developing and the multiplier effect is not yet available in all locations and with all advertising demand partners or advertisers and there is no assurance that it will become more widely available in the short term or at all.

OOH Customers.   We are seeking to develop further the interactivity between the Loop Player and the customers in OOH locations. This may take different forms, such as offering a simple thumbs up or thumbs down function, displaying the number of customer votes for a given piece of content, answering trivia questions and downloading of OOH venue menus and other helpful consumer information from the screens and other functions. This will require further development of our mobile application in the future.

Loop Media.   We are able to consistently monitor the preferences of the customers of our OOH customers and venue operators through our Loop Player. Our Loop Player allows us to collect specific information and data on content played, views, location, and location type, enabling us to effectively measure demand. These capabilities allow us to make informed decisions around which type of content to acquire or develop, as well as identify new market opportunities.
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Our Platform
The following table sets forth our O&O Network platform customer targets, delivery method, preferred revenue model and the associated content for our services:
CUSTOMER
DELIVERY
METHOD
PREFERRED
REVENUE MODEL
CONTENT
OOH Location Loop Player
Ad-supported service

All forms of content, including music video and other content

Curated playlists and channels
Consumer Connected TV OTT Platforms and Loop App
Ad-supported service

Primarily music videos

Not all of our music content can be streamed

Non-music video content is currently limited but we intend to expand this category
Consumer Mobile Devices Loop App Subscription service

Music videos and kid-friendly content only

Curated playlists and channels

Videos on demand for subscription service
Our Partner Network platform targets third parties with existing distribution platforms that have a significant number of screens in desirable OOH locations and venues. None of our Partner Network partners have requested the installation of Loop Players to deliver our streaming content and advertisements, but some may do so in the future. Our revenue model for the Partner Network is all ad-supported and the content delivered may be content sourced by our Partner Network partners or by Loop.
OOH Locations
The foundation of our business model is built around the OOH experience, with a focus on distributing licensed music videos and other content to public-facing businesses and venues. Our OOH offering has supported hospitality and retail businesses for over 20 years, originally through ScreenPlay, which we acquired in 2019. Since our acquisition of ScreenPlay, we have primarily focused on acquiring OOH customers throughout the United States.
Most OOH locations in the United States deliver visual content to their customers by using cable TV boxes and computer-based audio video equipment, which requires significant investment and cost to the venue operator. Capital investment in equipment has historically been a barrier for many businesses to provide visual entertainment to their customers. Unlike consumers in their homes, who have been more willing in recent years to invest in CTVs and streaming services, businesses generally have been slower in adopting lower-cost streaming options.
To gain greater access to, and expand our business with, OOH venue operators, we developed our proprietary Loop Player. The Loop Player is easy to set up and allows content to be streamed on multiple television sets. We believe our Loop Player and free, ad-supported service has significantly reduced the cost of specialty equipment and visual entertainment for venue operators.
We began rolling out the Loop Player in the fourth calendar quarter of 2020. We believe the COVID-19 pandemic, which caused many businesses to shut down or reduce capacity, has accelerated business owners’ demand for CTVs and streaming services to reduce their costs. For this reason, we believe the introduction of our Loop Player, coupled with our switch to a free ad-supported business model, has contributed to the growth in calendar 2021 and into 2022 of our OOH business customers. In 2021, our customer base expanded beyond our typical hospitality-based customers to smaller venues, franchisees and venues that service non-hospitality industries, like pet stores, doctors’ offices and other non-traditional venues. This trend has continued into 2022.
 
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We expect revenue from our digital out-of-home (“DOOH”) ad-supported service to increase to a greater extent than our revenue from our other services. This is partly due to our ongoing efforts to add new OOH locations to our distribution network, which increases the number of Loop Players in the market and, in turn, the number of ad impressions available for advertisers to fill with paid advertisements and sponsorships. Our new Partner Network business has expanded and is expected to further expand our OOH ad-supported business. In addition, our OOH ad-supported service using the Loop Player allows us, in certain circumstances, to present a greater number of ad impressions per OOH location to an advertiser than would typically be associated with a single OOH location. This “multiplier effect” is possible due to the Loop Player’s ability to detect, using Bluetooth and Wi-Fi technology, the number of consumer mobile devices within reach of a Loop Player in an OOH location which provides advertisers with a proxy for the number of potential viewers of a particular ad at any given time. This contrasts with other OOH technology that is not capable of providing data on the number of persons in an OOH location and in which advertisers pay for one ad impression per ad in an OOH location, regardless of the number of potential viewers in that location. The digital advertising market for out of home locations is still developing and the multiplier effect is not yet available in all locations and with all advertising demand partners or advertisers and there is no assurance that it will become more widely available in the short term or at all. This also contrasts with our D2C services, where advertisements are considered to be viewed by one person on their individual mobile device or on a CTV in their home.
D2C
Consumer Connected TVs
Our OTT business provides our OTT platform customers, such as Roku and Peacock, with music videos and other video content, providing their subscribers and customers with access to certain videos in our library. Our service to OTT platform providers has been ad-supported as many of the providers run a free ad-supported television, or FAST, business model for channels on their services. Not all of our music video content is available to our OTT customers. We also have a consumer CTV app that can be downloaded on CTVs and on which consumers can view certain of our content. Almost all of the viewers of our content on CTVs view our content on our channels delivered through OTT platforms rather than on our CTV consumer app.
Consumer Mobile Devices
We developed the Loop App for the distribution of our music videos and kid-friendly content. The Loop App allows our users to interact directly with our channels and playlists on their smart phones, tablets, and other digital devices, providing advertisers with additional mediums to reach consumers. Subscription service users are provided enhanced features to search for titles of music videos and artists, request music videos and create personalized playlists. Additionally, through our subscription service, we provide social features that allow users to follow each other, share their locations and playlists, view activity, signal support for a particular music video, and listen to other users’ “Loops.” We initially launched the Loop App in mid-2020; however, we have not promoted or advertised our Loop App in any meaningful way. As we continue to grow our OOH business and distribute additional Loop Players, we believe the Loop App may in the future enhance our interactivity with businesses and their customers, and in turn, influence the content we develop and acquire.
Our Competitive Strengths
Diversified Content Library, including Music Videos
We believe our music video library is one of the largest in the world and gives us an advantage over many of our competitors. Our music video library contains videos dating back to the 1950s, appealing to generations of music-lovers, with the newest videos directly obtained from Universal Music Group (“Universal”), Sony Music Entertainment (“Sony”), and Warner Music Group (“Warner” and collectively with Universal and Sony, the “Music Labels”). Older music video libraries are more difficult to obtain, as there is generally no central database from which to acquire such videos. Additionally, the individual music labels who have rights over portions of such videos do not easily and readily provide them to those
 
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seeking to acquire them. We have strategically secured access to monetize our music video content through our license agreements with the individual Music Labels. We have licenses with all three major Music Labels to provide music video content in the OOH market and licenses with two of the three for the D2C market. We have also developed a large non-music video library of content, primarily through revenue share license agreements, which generally do not require any upfront payments. Our non-music video library consists of movie, television and video game trailers, trivia, kid-friendly videos, viral videos, drone footage, news headlines, and lifestyle and atmospheric channels.
Efficient Content Curation
We believe we are able to produce engaging video content by curating our own and third party-content at relatively low production costs. We do not currently produce a meaningful amount of original video content, which can be expensive and time consuming. In contrast to many streaming platforms, we curate existing content from our video library and content licensed from third parties. The curation of our video content from our owned and leased libraries eliminates the costly and lengthy production process associated with creating original video content. Therefore, we are able to consistently innovate, update, and enhance our content offerings in a cost-effective and timely manner.
National Distribution and Reach
We distribute our services across thousands of OOH locations, audio and video streaming platforms, and mobile and connected TV applications. The entire Loop Network has expanded to over 43,000 out-of-home screens across the United States. We had 12,584 quarterly active units (“QAU”) across North America for the quarter ended June 30, 2022, and our channels are available to millions of consumers on OTT platforms and are currently accessible in over 400,000 hotel rooms, serving both the OOH and D2C markets, respectively. We have recently hired salespeople to engage in direct marketing for our OOH business across various regions, including the East Coast, West Coast and South. We launched our Partner Network business beginning in May 2022 with one partner on approximately 17,000 of the partner’s screens, and we have since added an additional 13,500 screens in a second partner’s network, for a total of 30,500 screens as of the date of this prospectus in our Partner Network. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Performance Indicators” for a description of QAUs.
Technology Based Business Model
All of our key software and the design of our Loop Player and consumer apps has been developed in-house by us. We have built our services and platform with a view to the future, focusing on where we believe the digital OOH and consumer streaming and mobile devices markets are and will be for the foreseeable future. The Loop Player is ideal for OOH location operators looking to “cut the cord” from their old business models. This allows our OOH customers to save costs and provides them with a greater ability to customize and schedule content to fit their venues. We use digital marketing technology or “MarTech” to generate revenue, market our services and fuel our business. Our experience and technological capabilities in digital marketing has allowed us to expand our business into our Partner Network business, where we offer programmatic advertising sales expertise and technology to third parties looking to optimize advertising revenue on their existing distribution platforms and screens. Additionally, we believe we can attract key employees from across geographies as we operate almost entirely remotely in support of our culture of technology and efficiency. Our use of technology in most aspects of our business, including marketing, distribution, content curation, sales, customer service and other areas, allows us to leverage our existing employees as we continue to scale up our business.
Established Foundation Supported by Industry Tailwinds
Our technology stack, ad-supported revenue model and vast content library are the backbone of our business. We believe this established foundation places us in a better position than many peers to benefit from the industry tailwinds in the digital OOH advertising market. Because our foundation has been built with a view to where we believe the OOH content delivery and digital marketing trends are headed, we believe we are better positioned than many of our competitors who might have to re-work their existing technology
 
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and revenue models to better align with these trends. We believe our programmatic advertising in the OOH market will support our revenue infrastructure into the future. See “Business — Industry.”
Passionate and Experienced Management Team
Our seasoned management team is founder-led and has more than 100 years of combined media and technology experience. Our executive team has previous experience at some of the most well recognized entertainment companies in the world, including Walt Disney, Universal Music, MTV, VH1, CBS, Sony, Viacom, Time Warner, Electronic Arts, among others.
Our Growth Strategies
Our growth strategies are focused on monetizing and growing our content library and are guided by the following six pillars:
Increase Marketing of Loop Player for our O&O Network.   We have found online digital advertising to be a successful customer acquisition strategy and believe there is a direct correlation between digital marketing spend and business demand for the Loop Player in our O&O Network. In addition to digital advertising viewed by individual businesses, we also intend to leverage our internal sales team to increase our direct marketing efforts to promote our Loop Player and services to large, national or regional, franchisee or corporate owned businesses. We have established an affiliate program whereby we incentivize third parties that have connections with OOH venues or otherwise qualify for our program to market and distribute our Loop Players and help ensure that they remain active and are servicing advertisements.
Expand our Partner Network.   We believe we are at the forefront of digital programmatic advertising distribution and monetization in the DOOH industry. This has resulted in the expansion of our business to include our Partner Network business, which allows us to offer our advertising sales services and curated content to third parties looking to distribute our content and advertising to screens on digital networks owned and operated by such third parties. We launched our Partner Network business beginning in May 2022 with one partner on approximately 17,000 of the partner’s screens, and we have since added an additional 13,500 screens in a second partner’s network, for a total of 30,500 screens as of the date of this prospectus in our Partner Network. We are looking to expand our customer base for this line of business over time.
Diversify Customer Base.   We believe the introduction of our Loop Player and shift towards an ad-supported service model has contributed to the growth of our OOH customers and related revenues. Our customer base has expanded beyond our typical hospitality, food and beverage and gym customers, as we have experienced an increase in business engagement from smaller venues, franchisees, and businesses that service other industries. This expansion has given us greater insight into the viewing habits of a diverse customer base and the demand for some of our non-music video content thereby enabling us to develop and curate content that continues to respond to consumer demand.
Expand our Non-Music Video Content.   Our music video library is the foundation of our business but, in certain instances, OOH locations are looking for a broader or more targeted content offering than pure music videos. Since the acquisition of ScreenPlay’s music video library in 2019, we have sought to expand our non-music video content through licensing, acquisitions and our own development, which includes content in entertainment, lifestyle, and information channels. We recently introduced a Trivia channel on our service, which we developed internally, and which is not subject to a revenue share agreement with any third parties for the use of the content. We will look to develop additional channels with no or limited licensing fees to help grow our business and, where possible, enhance our operating margins.
Optimize Advertising Sales and Sponsorships.   We aim to optimize our advertising sales by using technology and short-term, third-party consultants to collect data and employ analytics. Similarly, we will seek to continue to optimize our programmatic revenue through MarTech data and analytics. In addition to these efforts, we have expanded our advertising sales team to focus on advertising sales directly to companies that seek to advertise on our platform and to companies that are interested in providing sponsorship of our content. Through such arrangements, we may receive payments from a company in return for allowing such company to be associated with one of our channels, playlists, other content or company events.
 
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International Expansion.   We are exploring international expansion, as we believe the provision of video content in the non-U.S. OOH markets is underserved. In 2021 we began pursuing these growth initiatives by acquiring EON Media, which produces a weekly syndicated radio program targeted across Asia. Over time, we plan to be opportunistic in exploring ways to potentially expand in Asia, certain countries in South America, Canada and Europe.
Financial Guidance — Year Ending September 30, 2022
Cautionary Note Regarding Annual Financial Guidance
Annual projections should not be viewed as a substitute for full historical financial statements prepared in accordance with U.S. GAAP. Estimated forecasts are subject to change. Our financial statements and related notes as of and for the year ending September 30, 2022 will not be filed with the Securities and Exchange Commission (the “SEC”) until after this offering is completed. Marcum LLP, our independent registered public accounting firm, has not audited, reviewed, compiled or performed any procedures with respect to our financial guidance. Accordingly, Marcum LLP does not express an opinion or any other form of assurance with respect thereto.
The following annual guidance disclosure includes forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance, but instead are based on current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, macroeconomic conditions and other future conditions. Forward-looking statements are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict, many of which are outside of our control. Our actual results for the year ending September 30, 2022 may differ materially from those indicated below and you should not place undue reliance upon any of these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” on page 47 for further information regarding risks that may cause our actual results or financial condition to materially differ from those indicated in the forward-looking statements made herein.
For the year ended September 30, 2021, our total revenue was approximately $5.1 million, cost of revenue was approximately $4.2 million and loss from operations was approximately $30.6 million. We estimate total revenue of approximately $30.6 million to $32.6 million, cost of revenue of approximately $19.9 million to $21.2 million and loss from operations of approximately $18.2 million to $18.8 million for the year ending September 30, 2022.
See “Risk Factors” on page 22 of this prospectus for risks, uncertainties and other factors that may impact our annual financial guidance.
Corporate Information
We were incorporated in Nevada on May 11, 2015. On February 6, 2020, pursuant to the Agreement and Plan of Merger, dated January 3, 2020 (the “Merger Agreement”), by and among the Company, the Company’s wholly owned subsidiary, Loop Media Acquisition, Inc., a Delaware corporation (“Merger Sub”), and Loop Media, Inc., a Delaware corporation incorporated on May 18, 2016 (“Predecessor Loop”), Merger Sub merged with and into Predecessor Loop, with Predecessor Loop surviving the merger and becoming a wholly-owned subsidiary of the Company (the “Merger”). Prior to the Merger, our business was comprised of two main business segments: (i) travel agency assistance services and (ii) convention services. Upon completion of the Merger, we sold this business and its related assets to one of our stockholders and we became an early-stage media company by acquiring Predecessor Loop’s video streaming business and management team. Predecessor Loop’s business is based on the business of ScreenPlay, Inc., a Washington corporation (“ScreenPlay”), which Predecessor Loop acquired in 2019. ScreenPlay operated a business-focused, computer-based, video service providing music video and other content to business venues. See “Business — Corporate History & Business Development.”
On November 12, 2021, our Board of Directors approved a change in our fiscal year from the twelve months beginning January 1 and ending December 31 to the twelve months beginning October 1 and ending September 30. This change in our fiscal year end resulted in a nine-month transition period from January 1, 2021, to September 30, 2021. On January 21, 2022, we filed a transition report on Form 10-KT
 
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for the period from January 1, 2021, to September 30, 2021, with the SEC, which form includes the audited financial statements as of and for the nine-month transition period ended September 30, 2021. All subsequent fiscal years for the Company will be from October 1 to September 30.
Our principal executive offices are located at 700 N. Central Avenue, Suite 430, Glendale, California, and our telephone number is (213) 436-2100. Our website is www.loop.tv. Information on, or accessible through, our website or any other website is not incorporated by reference herein and does not constitute a part of this prospectus.
Reverse Stock Split
In connection with this offering, on September 20, 2022, we effected a one-for-three reverse stock split pursuant to which every three shares of our common stock were reclassified as one share of common stock. No fractional shares of common stock were issued in connection with the reverse stock split, and all such fractional interests were rounded up to the nearest whole number. Issued and outstanding stock options and common warrants were split on the same basis and exercise prices adjusted accordingly. Unless otherwise indicated, the share and per share information in this prospectus is adjusted to reflect the reverse stock split.
NYSE American Listing
Our common stock has been approved for listing on the NYSE American under the symbol “LPTV” and will begin trading on the NYSE American on September 22, 2022, subject to meeting all applicable listing standards upon completion of the offering.
Summary of Risk Factors
In addition to the other information contained in this prospectus, including the matters addressed under the heading “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider all of the risks and uncertainties described in the section of this prospectus captioned “Risk Factors.” These risks include, but are not limited to, the following:
Risks Related to Our Financial Condition

We have a limited operating history on which you can evaluate our business and prospects.

We have generated minimal revenues under our current business model, which makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.

We have incurred significant operating losses in the past, and we may not be able to generate sufficient revenue to be profitable, or to generate positive cash flow on a sustained basis. In addition, our revenue growth rate may decline.

We have entered into debt arrangements, including non-revolving and revolving lines of credit secured by all of our assets; as of August 31, 2022, we owed an aggregate of $15,053,730 in principal and accrued interest on our debt arrangements.
Risks Related to Our Business

If our efforts to attract prospective OOH customers and direct-to-customer users and to retain existing customers and users of our services are not successful, our growth prospects and revenue will be adversely affected.

We depend upon third-party licenses for substantially all of the content we stream and an adverse change to, loss of, or claim that we do not hold necessary licenses may materially adversely affect our business, operating results, and financial condition.

We face and will continue to face competition for ad-supported users, subscribers to our subscription services, and user listening time.
 
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We have no control over third-party providers of our content. The concentration of control of content by our major providers means that even one entity, or a small number of entities working together, may unilaterally affect our access to music video and other content.

We are a party to many license agreements that are complex and impose numerous obligations upon us that may make it difficult to operate our business and provide all the functionality we would like for our services, and a breach of such agreements could adversely affect our business, operating results, and financial condition.

Our royalty payment scheme is complex, and it is difficult to estimate the amount payable under our license agreements. We may underpay or overpay royalty amounts payable to others, which may harm our business.

Minimum guarantees and advances required under certain of our license agreements may limit our operating flexibility and may adversely affect our business, operating results, and financial condition.

Difficulties in obtaining accurate and comprehensive information necessary to identify the compositions embodied in music video sound recordings on our service and the ownership thereof may impact our ability to perform our obligations under our licenses, affect the size of our catalog that can be offered to customers and end-users, impact our ability to control content acquisition costs, and lead to potential copyright infringement claims.

Our business emphasizes rapid innovation and prioritizes long-term customer and user engagement over short-term financial condition or results of operations. That strategy may yield results that sometimes do not align with the market’s expectations. If that happens, our stock price may be negatively affected.

If we fail to accurately predict, recommend, curate and play content that our customers and users enjoy, we may fail to retain existing customers and users and attract new customers and users in sufficient numbers to meet investor expectations for growth or to operate our business profitably.

Expansion of our operations to deliver content beyond music videos subjects us to increased business, legal, financial, reputational, and competitive risks.

Streaming depends on effectively working with operating systems, online platforms, hardware, networks, regulations, and standards we do not control. Changes in our services or those operating systems, hardware, networks, regulations, or standards, and our limitations on our ability to access those platforms, operating systems, hardware, or networks may seriously harm our business.

User metrics and other estimates could be subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may seriously harm and negatively affect our reputation and our business.

Various regulations as well as self-regulation related to privacy and data security concerns pose the threat of lawsuits, regulatory fines and other liability, require us to expend significant resources, and may harm our business, operating results, and financial condition.

We rely on advertising revenue to monetize our services, and any failure to convince advertisers of the benefits of advertising on our services in the future could harm our business, operating results, and financial condition.

We depend on highly skilled key personnel to operate our business, and if we are unable to attract, retain, and motivate qualified personnel, our ability to develop and successfully grow our business could be harmed.
Risks Related to Our Intellectual Property

Assertions by third parties of infringement or other violations by us of their intellectual property rights could harm our business, operating results, and financial condition.

Failure to protect our intellectual property could substantially harm our business, operating results, and financial condition.
 
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Risks Related to Owning Our Common Stock and this Offering

There is a limited public market for our securities.

Our failure to meet the continued listing requirements of the NYSE American could result in a delisting of our common stock.

The trading price of our common stock has been and will likely continue to be volatile.

Because of their significant ownership of our common stock, our founders and other large investors have substantial control over our business, and their interests may differ from our interests or those of our other stockholders.

You may experience future dilution as a result of future equity offerings.

Exercise of warrants, and issuance of incentive stock grants may have a dilutive effect on our stock, and negatively impact the price of our common stock.

Our management might apply the net proceeds from this offering in ways with which you do not agree and in ways that may impair the value of your investment.

The conversion of the 2022 Notes and 2023 Notes (each as defined below) upon the closing of this offering will result in substantial dilution to holders of our common stock.

If you purchase shares of common stock in this offering, you will experience immediate and substantial dilution in your investment. You will experience further dilution if we issue additional equity or equity-linked securities in the future.
 
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THE OFFERING
Common stock offered by us
2,400,000 shares (2,760,000 shares if the underwriter exercises its option to purchase additional shares in full)
Common stock outstanding immediately before this offering
51,179,865 shares
Common stock to be outstanding after this offering(1)
56,696,251 shares (57,056,251 shares if the underwriter exercises its option to purchase additional shares in full)
Option to purchase additional shares offered to the underwriter
We have granted the underwriter a 30-day option to purchase up to an additional 360,000 shares from us at the public offering price per share less the underwriting discounts and commissions, to cover over-allotments, if any, on the same terms as set forth in this prospectus.
Use of proceeds
We intend to use the net proceeds we receive from this offering for marketing, new customer development, payment of offering-related bonuses to certain of our officers, working capital and other general corporate purposes. See “Use of Proceeds” for more information.
Risk Factors
An investment in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 22 of this prospectus.
Proposed NYSE American symbol for our shares of common stock
“LPTV”
Existing Stockholder Participation
Certain of our existing stockholders, including a stockholder affiliated with one of our directors, have committed to purchase an aggregate of at least $5.0 million of shares of our common stock in this offering at the public offering price.
(1)
The number of shares of common stock outstanding immediately following this offering is based on 153,539,596 shares (pre-split) actually outstanding as of August 31, 2022, and additionally gives effect to:

the one-for-three (1:3) reverse stock split of our outstanding common stock on September 20, 2022, resulting in 51,179,865 shares (post-split) outstanding immediately before this offering;

the conversion of all of the senior secured promissory notes due December 1, 2022 (the “2022 Notes”), simultaneously with the closing of this offering, into an aggregate of 783,140 shares, based on the outstanding principal and interest of $3,132,565 as of August 31, 2022, and a conversion price of $4.00 per share (which is 80% of $5.00, the public offering price in this offering);

the conversion of all of the unsecured convertible debentures due December 1, 2023 (the “2023 Notes”), simultaneously with the closing of this offering into an aggregate of 1,189,031 shares, based on the outstanding principal and interest of $2,140,257 as of August 31, 2022, and the conversion price of $1.80 per share;

the automatic cashless exercise of outstanding warrants (the “Automatic Warrants”) to purchase an aggregate of 1,950,236 shares of common stock as of August 31, 2022, having a weighted average exercise price of $2.07, simultaneously with the closing of this offering, pursuant to the terms thereof into an aggregate of 1,144,215 shares of common stock, based on the public offering price in this offering of $5.00 per share and assuming none of the Automatic Warrants are exercised prior to the closing of this offering;
 
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but excludes:

4,322,771 shares of common stock issuable upon the exercise of outstanding warrants (excluding the Automatic Warrants) at a weighted average exercise price of $6.39 per share as of August 31, 2022;

6,337,101 shares of common stock issuable upon the exercise of outstanding options at a weighted average exercise price of $3.40 per share as of August 31, 2022, which options were issued under the Loop Media, Inc. Amended and Restated 2020 Equity Incentive Compensation Plan (the “2020 Equity Incentive Plan”, and as amended and restated on September 18, 2022, the “Amended and Restated 2020 Equity Incentive Plan”) or the Loop Media, Inc. Amended and Restated 2016 Equity Incentive Plan, as amended (the “2016 Equity Incentive Plan”);

4,200,339 additional shares of common stock reserved for issuance under our Amended and Restated 2020 Equity Incentive Plan as of September 18, 2022, not accounting for the retention awards discussed immediately below;

retention awards in the aggregate amount of 1,780,000 shares issuable upon exercise of options, with an assumed exercise price of $5.00 per share, and 890,000 restricted stock units (“RSUs”), having an aggregate value of $8.9 million, based on the public offering price in this offering of $5.00 per share, to be granted on the first day of trading after the pricing of this offering under the Amended and Restated 2020 Equity Incentive Plan to senior management; and

192,000 shares (220,800 shares if the underwriter exercises its option to purchase additional shares in full) of common stock issuable upon the exercise of warrants to be issued to the underwriter upon the completion of this offering in an amount equal to 8% of the shares sold in this offering, with an exercise price equal to 120% of the public offering price per share, as described in “Underwriting.”
In addition, unless we specifically state otherwise, the information in this prospectus (i) does not include the exercise of the underwriter’s option to purchase additional shares and (ii) reflects the 1-for-3 reverse stock split of our common stock which was effected on September 20, 2022.
 
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Summary Historical Consolidated Financial Information
You should read the following summary selected financial data together with our audited financial statements for the year ended September 30, 2021 and unaudited financial statements for the nine months ended June 30, 2022 and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this prospectus.
We have derived the balance sheet and statement of operations data as of and for the years ended, September 30, 2021, and September 30, 2020, respectively from our audited financial statements for the year ended September 30, 2021 appearing at the end of this prospectus. We have derived the balance sheet and statement of operations data as of and for the nine months ended June 30, 2022, from our unaudited financial statements for the nine months ended June 30, 2022 appearing at the end of this prospectus. The unaudited financial statements were prepared on a basis consistent with that used in preparing our audited financial statements and include all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of our financial position and results of operations for the unaudited periods. Our historical results are not necessarily indicative of results that should be expected in any future period.
Nine Months Ended June 30,
Twelve Months Ended
September 30,
2022
2021
2021
2020
(unaudited)
Selected Income Statement Data:
Revenue
$ 18,679,956 $ 2,660,004 $ 5,069,149 $ 2,966,454
Gross profit
$ 6,701,479 710,025 904,084 1,880,401
Selling, general and administrative
$ 19,354,942 15,211,751 20,333,216 7,466,047
Impairment of goodwill and intangibles
2,390,799 11,206,523 6,350,000
Loss From Operations
(12,653,463) (16,892,525) (30,635,655) (11,935,646)
Net Loss
$ (14,921,110) $ (17,847,682) $ (30,974,496) $ (17,105,294)
Net Loss per Common Share:
Basic and diluted net loss per common
Share (post-split)
$ (0.32) $ (0.44) $ (0.76) $ (0.59)
As of June 30, 2022
As of September 30,
(unaudited)
2021
2020
Selected Balance Sheet Data:
Total Current Assets
$ 14,440,250 $ 8,469,928 $ 3,456,805
Total Assets
$ 18,132,558 $ 11,818,705 $ 5,779,100
Total Current Liabilities
$ 16,005,767 $ 4,365,402 $ 2,491,711
Total Liabilities(1)
$ 20,561,716 $ 8,823,002 $ 4,830,522
Common stock, par value $0.0001
$ 15,352 $ 13,345 $ 11,432
Additional paid-in capital
$ 79,319,016 $ 69,824,754 $ 36,669,899
Accumulated Deficit
$ (81,763,526) $ (66,842,416) $ (35,867,920)
Total stockholders’ equity (deficit)
$ (2,429,158) $ 2,995,703 $ 948,578
(1)
Subsequent to June 30, 2022, we entered into the Revolving Loan Agreement, which provides for a revolving loan credit facility for the principal sum of up to $4.0 million, and through the exercise of an accordion feature, a total sum of up to $10 million (see “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Future Capital Requirements”).
 
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Key Performance Indicators
We review our quarterly active units (“QAUs”) and average revenue per unit player (“ARPU”), among other key performance indicators, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Quarterly Active Units
We define an “active unit” as (i) an ad-supported Loop Player (or DOOH location using our ad-supported service through our “Loop for Business” application or using a DOOH venue-owned computer screening our content) that is online, playing content, and has checked into the Loop analytics system at least once in the 90-day period or (ii) a DOOH location customer using our subscription service at any time during the 90-day period. We use “QAU” to refer to the number of such active units during such period. Beginning October 1, 2021, we began to pre-activate almost all of our Loop Players prior to delivery to customers, in response to feedback from customers and in order to further streamline the installation process and simplify the use of the Loop Players in DOOH locations. Pre-activated Loop Players are ordered by third-party DOOH locations and represent potential revenue for us when the Loop Players are installed in the DOOH locations. As a result of these operational changes, for any period following September 30, 2021, we will include in our definition of “active unit” any Loop Player that has been pre-activated and shipped by us to a DOOH location customer for a period of 90 days post shipment, regardless of whether such customer utilizes the Loop Player in their DOOH location. After the 90-day period, these Loop Players will drop out of the QAU definition, unless they are otherwise online, playing content, and checked into the Loop analytics system at least once in any subsequent 90-day period. Prior to October 1, 2021, if a Loop Player was not activated by the DOOH location operator it would not be counted as an active unit. Accordingly, our QAUs for periods subsequent to September 30, 2021 will not be strictly comparable to our September 30, 2021, or prior period, QAUs. Increases or decreases in our QAU may not correspond with increases or decreases in our revenue, and QAU may be calculated in a manner different than any similar key performance indicator used by other companies.
For the quarter ended June 30, 2022, QAU was 12,584, compared to 10,530 for the quarter ended March 31, 2022, a 20% increase. The growth in QAUs is almost entirely the result of a growth in our ad-supported Loop Players. QAU was 8,156 for the quarter ended December 31, 2021 and 5,791 for the quarter ended September 30, 2021.
Average Revenue Per Unit
We define a “unit player” as (i) an ad-supported Loop Player (or a DOOH location using our ad-supported service through our “Loop for Business” application or using a DOOH location-owned computer screening our content) or (ii) a DOOH location customer using our subscription service at any time during the 90-day period. A unit player that is supported by our advertising-based revenue model is an ad-supported unit player and a unit player that is supported by a subscription-based revenue model is a subscription unit player. We calculate advertising ARPU (“AD ARPU”) by dividing quarterly revenues from our DOOH ad-supported service for the period by QAUs for our ad-supported unit players. We calculate subscription ARPU (“SUB ARPU”) by dividing quarterly revenues from our DOOH subscription supported service for the period by QAUs for our subscription supported unit players.
Our AD ARPU fluctuates based on a number of factors, including the length of time in a quarter that a unit player is activated and operating, the cost per thousand advertisements (“CPMs”) we are able to achieve for our advertising impressions, and the ratio of advertising impressions that are filled with advertisements to the number of overall advertising impressions (“fill rate”) that we are able to achieve. Our SUB ARPU fluctuates based on a number of factors, including the timing of the start of a customer subscription for a subscription supported unit player, the number of ad-supported unit players we have, and the price customers pay for those subscriptions. An increase in the number of unit players over the course of a quarterly period may have the effect of decreasing quarterly ARPU, particularly if such players are added towards the end of the quarterly period. Increases or decreases in ARPU may not correspond with increases or decreases in
 
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our revenue, and ARPU may be calculated in a manner different than any similar key performance indicator used by other companies.
For the quarter ended June 30, 2022, AD ARPU was $526, compared to $435 for the quarter ended March 31, 2022, a 21% increase, primarily resulting from our efforts to optimize our CPMs and increase fill rates. AD ARPU was $236 for the quarter ended December 31, 2021. For the quarter ended June 30, 2022, SUB ARPU was $235, compared to $429 for the quarter ended March 31, 2022, a (45.2)% decrease. SUB ARPU was $410 for the quarter ended December 31, 2021.
 
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision with regard to our common stock. The statements contained herein that are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition, or results of operations could be harmed. In that case, you may lose all or part of your investment. In addition to the other information provided in this prospectus, you should carefully consider the following risk factors in evaluating our business before purchasing our common stock. Although it is not possible to identify or predict all of the risks and uncertainties we face, we believe the discussion below includes all of the risks that are material to our business.
Risks Related to Our Financial Condition
We have a limited operating history on which you can evaluate our business and prospects.
We have a limited operating history on which you can evaluate our business and our prospects. Although our company has existed since 2015, we have only operated as a public early-stage media company since our Merger in February 2020. The likelihood of success of our business plan must be considered in light of the risks, substantial expenses, difficulties, complications and delays frequently encountered in connection with developing and expanding early-stage businesses and the competitive environment in which we operate.
Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face. In particular, potential investors should consider that we cannot assure you that we will be able to, among other things:

successfully implement or execute our current business plan, and we cannot assure you that our business plan is sound;

attract and retain experienced management and advisors;

secure acceptance of our products and services within the industry;

raise sufficient funds in the capital markets or otherwise to effectuate our business plan; and

utilize the funds that we do have and/or raise in this offering or in the future to efficiently execute our business strategy.
If we cannot successfully execute any one of the foregoing, our business may not succeed and your investment will be adversely affected.
We have generated minimal revenues under our current business model, which makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.
For the fiscal year ended September 30, 2021, the majority of our revenues were derived from the historical business of ScreenPlay, which we acquired in 2019, which relies on a paid subscription service-based model in OOH locations. However, our current business plan focuses on the ad-supported service provided through our proprietary Loop Player, which we began rolling out in the fourth calendar quarter of 2020. In addition, our Partner Network business was more recently introduced, beginning in early May 2022. As a consequence, our past results may not be indicative of our expected future business results. Because of the related uncertainties, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in sales, revenues, or expenses. If we make poor budgetary decisions as a result of unreliable data, if our business model does not continue to be accepted by the market or if we are not able to build out our new Partner Network business, we may never become profitable and may continue to incur losses, which may result in a decline in our stock price.
 
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We have incurred significant operating losses in the past, and we may not be able to generate sufficient revenue to be profitable, or to generate positive cash flow on a sustained basis. In addition, our revenue growth rate may decline.
We have incurred significant operating losses in the past and, as of June 30, 2022, had an accumulated deficit of $81.8 million. For the nine months ended June 30, 2022 and for the years ended September 30, 2021, and 2020, our operating losses were $12.7 million, $30.6 million and $11.9 million, respectively. We have incurred significant costs to license content and continue to pay royalties or minimum guarantees to record labels, publishers, and other copyright owners for such content. We cannot guarantee that we will generate sufficient revenue from our efforts to monetize our services, including our paid subscription service and our free or unpaid ad-supported service, to offset the cost of our content, these royalty expenses and our other operating costs. If we cannot successfully earn revenue at a rate that exceeds the operational costs, including royalty expenses and guarantee payments to the largest three music labels, associated with our service, we will not be able to achieve or sustain profitability or generate positive cash flow on a sustained basis.
Additionally, we also expect our costs to increase in future periods, which could negatively affect our future operating results and ability to achieve profitability. We expect to continue to expend substantial financial and other resources on:

securing top quality video content from leading record labels, distributors, and aggregators, as well as the publishing rights to any underlying musical compositions;

creating new forms of original content;

our technology infrastructure, including website architecture, development tools, scalability, availability, performance, security, and disaster recovery measures;

research and development, including investments in our research and development team and the development of new features;

sales and marketing, including a significant expansion of our field sales organization;

international expansion to increase our member base, engagement, and sales;

capital expenditures, including costs related to our technology development; and

general administration, including legal and accounting expenses.
These investments may not result in increased revenue or growth in our business. If we fail to continue to grow our revenue and overall business, our business, operating results, and financial condition would be harmed.
There is substantial doubt about our ability to continue as a going concern and if we are unable to generate significant revenue or secure additional financing, we may be unable to implement our business plan and grow our business.
We are a small and emerging media company that is in the early stages of rolling out a new business plan as our re-focused products and services have only recently been fully operational and ready for delivery to our customers. In particular, our historical sales have relied on our subscription service provided by the business we acquired from Screenplay, but our current business plan focuses on the ad-supported service provided through our proprietary Loop Player, which we began rolling out in the fourth calendar quarter of 2020, and our recently introduced Partner Network business. We have not generated sufficient revenues to operate our business. We have a significant accumulated deficit and have incurred operating losses for years and expect losses to continue during the remainder of our fiscal year ending September 30, 2022, and beyond. Our independent registered public accounting firm has indicated in their report that these conditions raise substantial doubt about our ability to continue as a going concern for a period of 12 months from the issuance date of our financial statements for the year ended September 30, 2021. The continuation of our business as a going concern is dependent upon the continued financial support from our current and potential stockholders. The Company’s primary source of operating funds since inception has been cash proceeds from debt and equity financing transactions. The ability of the Company to continue as a going concern is dependent upon its ability to generate sufficient revenue and its ability to raise additional funds by
 
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way of its debt and equity financing efforts. There can be no assurance that adequate financing will be available in a timely manner, on acceptable terms, or at all.
We believe that the net proceeds of this offering, together with our existing cash, will enable us to fund our operations for at least 12 months from the date of this prospectus. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect.
There is uncertainty regarding our ability to grow our business or to continue as a going concern without additional financing. We have no agreements, commitments, or understandings to secure additional financing at this time. Our long-term future growth and success are dependent upon our ability to continue selling our services, generate cash from operating activities and obtain additional financing. We may be unable to continue selling our products and services, generate sufficient cash from operations, sell additional shares of common stock or borrow additional funds. Our inability to obtain additional cash could have a material adverse effect on our ability to grow our business to a greater extent than we can with our existing financial resources.
We will require additional capital to support our business and objectives, and this capital might not be available on acceptable terms, if at all.
We intend to continue to make investments to support our business and will require additional funds, in addition to the net proceeds from this offering, to respond to business challenges, including the need to develop new features or enhance our existing services, expand into additional markets around the world, improve our infrastructure, or acquire complementary businesses and technologies. Accordingly, we have in the past engaged, and may in the future engage, in equity and debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our stockholders, including investors in this offering, could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. Any debt financing we secure in the future could also contain restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business, acquire or retain users, and to respond to business challenges could be significantly impaired, and our business may be harmed.
We have entered into debt arrangements, including non-revolving and revolving lines of credit secured by all of our assets; indebtedness thereunder could adversely affect our financial position and our ability to raise additional capital and prevent us from fulfilling our obligations.
As of August 31, 2022, we owed an aggregate of $15,053,730 in principal and accrued interest on debt arrangements. This debt includes an aggregate of $5,272,822 in principal and accrued interest under the 2022 Notes and 2023 Notes, which will convert into shares of common stock simultaneously with the closing of this offering, $6.2 million under our Non-Revolving Line of Credit Loan Agreements (the “Loan Agreements”) with certain lenders (which will remain outstanding following this offering) and $2.0 million under our Loan and Security Agreement (the “Revolving Loan Agreement”) with a third party lender for a revolving loan credit facility (which will remain outstanding following this offering). The Revolving Loan Agreement provides for an initial eligible extension of credit in the principal sum of up to $4.0 million, and through the exercise of an accordion feature, a total sum of up to $10 million. The Loan Agreements mature on October 25, 2023 and November 13, 2023 and provide for interest, payable semi-annually in arrears, at a fixed rate equal to 12% per year. The loan under the Revolving Loan Agreement matures July 29, 2024 and accrues interest on the unpaid principal balance of advances, payable monthly in arrears, beginning on September 7, 2022, at an annual rate equal to the greater of (I) the sum of (i) the “Prime Rate” as reported in the “Money Rates” column of The Wall Street Journal, adjusted as and when such Prime Rate changes, plus (ii) zero percent (0.00%), and (II) four percent (4.00%). Under the Revolving Loan Agreement, we have granted to the lender (the “Senior Lender”) a first-priority security interest in all of our present and future property and assets, including products and proceeds thereof. In connection with the Revolving Loan
 
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Agreement, our existing secured lenders under the Loan Agreements delivered subordination agreements to the Senior Lender. We are permitted to make regularly scheduled payments, including payments upon maturity, to such subordinated lenders and potentially other payments subject to a measure of cash flow and receiving certain financing activity proceeds, in accordance with the terms of such subordination agreements. We also may incur additional indebtedness in the future.
Our indebtedness may:

limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, or other general business purposes in some circumstances;

require us to use a portion of our cash flow from operations to make debt service payments instead of other purposes, thereby reducing the amount of cash flow available for future working capital, capital expenditures, acquisitions, or other general business purposes;

increase our vulnerability to the impact of adverse economic, competitive and industry conditions; and

increase our cost of borrowing.
In addition, the Revolving Loan Agreement has restrictive covenants, including covenants preventing us from effecting a change of control, disposing of our assets outside of the ordinary course of business, incurring additional debt (subject to certain exceptions), changing our business as currently conducted, paying dividends or settling claims involving the collateral under the Revolving Loan Agreement. These covenants have the potential to prevent us from pursuing beneficial opportunities, or raising additional funds through debt financing. Further, the amount of our indebtedness under our debt arrangements compared to the size of our company, or other factors, may limit our ability to borrow additional funds or take other actions. In addition, we may be unable to repay the indebtedness incurred under our debt arrangements at maturity and, in such situation, may not be able to refinance such debt on favorable terms or at all. Any inability to repay or refinance the indebtedness under our loan agreements at maturity may cause us to be in default, which would allow the holders of such indebtedness to exercise remedies as a secured lender and, in such event, would have a material adverse effect on our business and financial results.
Risks Related to Our Business
If our efforts to attract prospective customers and advertisers and to retain existing customers and users of our services are not successful, our growth prospects and revenue will be adversely affected.
Our ability to grow our business, including DOOH, and generate revenue depends on retaining, expanding, and effectively monetizing our customer base, including by increasing the number of OOH venues that have adopted our services and increasing advertising revenue on our DOOH ad-supported service delivered through our Loop Player and our Partner Network and monetizing content across our DOOH business. We must convince prospective DOOH and Partner Network customers of the benefits and value of our services. Our ability to attract new customers, retain existing customers, and convert users of our DOOH subscription service to our DOOH ad-supported service depends in large part on our ability to continue to offer compelling curated content, leading technologies and products like the Loop Player, superior functionality, and an engaging customer experience.
In addition, in order for us to increase our advertising revenue, we also seek to increase the viewing time that our ad-supported DOOH customers spend on our ad-supported service and find new opportunities to deliver advertising to users on the services. The more content customers stream on the ad-supported service, the more advertising inventory we generally are able to sell. Further, growth in our ad-supported user base increases the size and scope of user pools targeted by advertisers, which improves our ability to deliver relevant advertising to those users in a manner that maximizes our advertising customers’ return on investment and that ultimately allows us to better demonstrate the effectiveness of our advertising solutions and justifies a pricing structure that is advantageous for us. If we fail to grow our ad-supported DOOH customer base, the amount of content streamed, and the viewing time spent by our ad-supported DOOH customers, we may be unable to grow ad-supported revenue.
 
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In order to increase our ad-supported O&O Network and Partner Network customers, we will need to address a number of challenges, including:

improving our ad-supported service;

providing users with a consistently high-quality and user-friendly experience;

continuing to curate a catalog of content that consumers want to engage with on our services; and

continuing to innovate and keep pace with changes in technology and our competitors.
Failure to overcome any one of these challenges could have a material adverse effect on our business, operating results, and financial condition.
Our Partner Network business began in May 2022, and as of the date of this prospectus is composed of two partner relationships and serving an aggregate of 30,500 screens. While we are looking to expand this line of business, there can be no assurance that we will be able to grow this business as planned, increase the number of customers we service in this business or maintain our current level of activity with our current partner relationships, particularly in light of our limited operating history in this line of business. If we lose our relationship with the current partners, or such relationships are scaled back significantly, such loss would be material to our results of operations.
We must operate our business in compliance with the licenses that we require to provide our services.
The provisions of certain of our license agreements may require consent to implement improvements to, or otherwise change, our services. We may not be able to obtain consent from our rights holders to add additional features and functionality to our services or our rights holders may be delayed in providing such consent, which may hinder our ability to be responsive to our users’ tastes and preferences and may make us less competitive with other services. For example, we may need to obtain consent of rights holders to add the ability for customers of DOOH locations to interact with certain of our content and determine which music videos might play next. In many instances, improvements to the functionality of our services may require the consent of rights holders and, in some such instances, increases in fee payments to such rights holders. We cannot ensure that any such additional required fees will be on financially feasible terms for the Company and, as a result, we may be required to develop alternative options or forego functionality improvements to our services which could negatively impact our business and financial results.
We face and will continue to face competition for ad-supported users, premium subscribers, and user listening time.
We compete for the time and attention of consumers who view our content with other content providers based on a number of factors, including quality of experience, relevance, diversity of content, ease of use, price, accessibility, perception of advertising load, brand awareness, and reputation.
We compete with providers of music videos and other short-form unscripted video content, which is purchased or available for free and playable on mobile or other connected devices, including CTVs in OOH locations and venues. These forms of media may be downloaded or accessed by content streams from other online services, including YouTube and Vevo. Many of our current or future competitors are already entrenched or may have significant brand recognition, existing user bases, and/or ability to bundle with other goods and/or services, both globally and regionally, and/or markets which we seek to penetrate.
We also compete with providers of non-music content that offer an on-demand catalog of differing content that is similar to certain of our content, such as the “fail” videos, pet videos and drone footage that we offer in the DOOH market. We face increasing competition from a growing variety of content providers that seek to differentiate their service by content offering and product features, and they may be more successful than us in predicting user preferences, providing popular content, and innovating new features.
We believe that companies with a combination of technical expertise, brand recognition, financial resources, and digital media experience also pose a significant threat of developing competing music video and other video content, as well as other video distribution technologies. If known incumbents in the digital media or entertainment space choose to offer competing services, they may devote greater resources than
 
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we have available, have a more accelerated time frame for deployment, and leverage their existing user base and proprietary technologies to provide services that our users and advertisers may view as superior. Our current and future competitors may have higher brand recognition, more established relationships with content licensors and mobile device manufacturers, greater financial, technical, and other resources, more sophisticated technologies, and/or more experience in the markets in which we compete. Our current and future competitors may also engage in mergers or acquisitions with each other to combine and leverage their customers and audiences, making them larger and potentially providing them a competitive advantage in negotiations with counter parties or in marketing to potential customers that we also target. Our current and future competitors may innovate new features or introduce new ways of consuming or engaging with content that cause our users to use or switch to another product, which would negatively affect our user retention, growth, and engagement.
We compete for a share of advertisers’ overall marketing budgets with other content providers on a variety of factors, including perceived return on investment, effectiveness, and relevance of our advertising products; our pricing structure; and our ability to deliver large volumes or precise types of advertisements to targeted user demographic pools. We also compete for advertisers with a range of internet companies, including major internet portals, search engine companies, social media sites, and mobile applications, as well as traditional advertising channels such as terrestrial radio and television.
Large internet companies with strong brand recognition, such as Facebook, Google, Amazon, and Twitter, have significant numbers of sales personnel, substantial advertising inventory, proprietary advertising technology solutions, and traffic across web, mobile, and connected devices that provide a significant competitive advantage and have a significant impact on pricing for reaching these user bases. Failure to compete successfully against our current or future competitors could result in the loss of current or potential advertisers, a reduced share of our advertisers’ overall marketing budget, the loss of existing or potential users, or diminished brand strength, which could adversely affect our pricing and margins, lower our revenue, increase our research and development and marketing expenses, and prevent us from achieving or maintaining profitability.
We depend upon third-party licenses for substantially all of the content we stream and an adverse change to, loss of, or claim that we do not hold necessary licenses may materially adversely affect our business, operating results, and financial condition.
To secure the rights to stream content, we enter into license agreements to obtain licenses from rights holders such as record labels, recording artists, music publishers, performance rights organizations, collecting societies, and other copyright owners or their agents, and we pay royalties or other consideration to such parties or their agents. We cannot guarantee that our efforts to obtain all necessary licenses to stream content will be successful, nor that the licenses available to us now will continue to be available in the future at rates and on terms that are favorable or commercially reasonable or at all. The terms of these licenses, including the royalty rates that we are required to pay pursuant to them, may change as a result of changes in our bargaining power, the industry, laws and regulations, or for other reasons. Increases in royalty rates or changes to other terms of these licenses may materially impact our business, operating results, and financial condition.
We enter into music license agreements to obtain rights to stream music videos, including from the major record labels who hold the rights to stream a significant number of sound recordings — Universal Music Group (“Universal”), Sony Music Entertainment (“Sony”), and Warner Music Group (“Warner” and collectively with Universal and Sony, the “Music Labels”). Our current license agreements with the Music Labels for our DOOH business have been in effect (or have been renewed) for several years, and the Music Labels have requested a review and update of those licenses. Although the basic outlines of these licenses are standardized by the licensors and we do not anticipate any issue in the timely renewal of these licenses, the updating of such licenses may increase our license costs associated with such rights, including the percentage of revenue attributable to the record labels and our minimum guaranteed payment obligations. A significant majority of our DOOH business relies upon these licenses, and if we fail to maintain and renew these licenses our business, operating results, and financial condition could be materially harmed. With respect to our D2C business, the licenses with the Music Labels are similarly standardized, and although we do not anticipate any issue in the timely renewal of these licenses as needed, any future updates of such licenses
 
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similarly may increase our license costs associated with such rights, including the percentage of revenue attributable to the record labels and our minimum guaranteed payment obligations.
Our business model requires that we also obtain two additional types of licenses with respect to musical compositions: mechanical and public performance rights. Mechanical licenses are required to distribute recordings written by someone other than the person or entity conducting the distribution. Such licenses ensure that the music publisher, and ultimately the songwriter, receive compensation for the use of their work. A public performance license is an agreement between a music user and the owner of a copyrighted composition (song) that grants permission to play the song in public, online, or on radio.
We have obtained direct licenses for mechanical rights with the three largest publishers, which are respective affiliates of each of the Music Labels for our OOH business and for two of the Music Labels for our D2C business. As a general matter, once music licenses are obtained from the Music Labels, their affiliate publishing companies enter into agreements with respect to the mechanical licenses. If our business does not perform as expected or if the rates are modified to be higher than the proposed rates, our music video content acquisition costs could increase, which could negatively impact our business, operating results, and financial condition, hinder our ability to provide interactive features in our services, or cause one or more of our services not to be economically viable due to an increase in content acquisition costs.
In the United States, public performance rights are generally obtained through intermediaries known as performance rights organizations (“PROs”), which negotiate blanket licenses with copyright users for the public performance of compositions in their repertory, collect royalties under such licenses, and distribute those royalties to music publishers and songwriters. The royalty rates available to us today may not be available to us in the future. Licenses provided by two of these PROs: the American Society of Composers, Authors and Publishers (“ASCAP”) and Broadcast Music, Inc. (“BMI”) cover much of the music we stream. ASCAP and BMI are governed by consent decrees relating to decades-old litigations. These agreements typically have one-to-two-year terms, and some have continuous renewal provisions, with either party able to terminate for convenience within 30 to 60 days prior to the end of the applicable term (or commencement of the subsequent term) and are limited to the territory of the United States and its territories and possessions. An increase in the number of compositions that must be licensed from PROs that are not subject to the consent decrees could likewise impede our ability to license public performance rights on favorable terms and may increase the cost of our operations.
In other parts of the world, including Latin America, we obtain reproduction and performance licenses for musical compositions either through local collecting societies representing publishers or from publishers directly, or a combination thereof. We cannot guarantee that our licenses with collecting societies and our direct licenses with publishers provide full coverage for all of the musical compositions we make available to our users in such countries.
With respect to non-music content, we obtain distribution rights directly from rights holders. We then negotiate licenses directly with individuals or entities in return for providing such licensors with a share of revenue derived from the licensed content distributed through our services. We are dependent on those who provide the content that appears on our services complying with the terms and conditions of our license agreements. However, we cannot guarantee that rights holders or content providers will comply with their obligations, and such failure to do so may materially impact our business, operating results, and financial condition.
There is also no guarantee that we have all of the licenses we need to stream content, as the process of obtaining such licenses involves many rights holders, some of whom are unknown, and a myriad of complex legal issues across many jurisdictions, including open questions of law as to when and whether particular licenses are needed. Additionally, there is a risk that rights holders, creators, performers, writers and their agents, or societies, unions, guilds, or legislative or regulatory bodies will create or attempt to create new rights or regulations that could require us to enter into license agreements with, and pay royalties to, newly defined groups of rights holders, some of which may be difficult or impossible to identify.
Even when we are able to enter into license agreements with rights holders, we cannot guarantee that such agreements will continue to be renewed indefinitely. For example, from time to time, our license agreements with certain rights holders and/or their agents expire while we negotiate their renewals and, per
 
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industry custom and practice, we may enter into brief (for example, month-, week-, or even days-long) extensions of those agreements or provisional licenses and/or continue to operate on an at-will basis as if the license agreement had been extended, including by our continuing to make content available. During these periods, we may not have assurance of long-term access to such rights holders’ content, which could have a material adverse effect on our business and could lead to potential copyright infringement claims. It is also possible that such agreements will never be renewed at all. License agreements are generally restrictive as to how the licensed content is accessed, displayed, and manipulated, as licensors seek to protect the use of their content. In order to provide the highest level of services and best experience for our customers and end-users, we may from time to time seek expansion of our licenses to provide us with greater functionality of our services as it relates to the relevant content. The inability to expand our licenses, or the lack of renewal, or termination, of one or more of our license agreements, or the renewal of a license agreement on less favorable terms, could have a material adverse effect on our business, operating results, and financial condition.
We have no control over third-party providers of our content. The concentration of control of content by our major providers means that even one entity, or a small number of entities working together, may unilaterally affect our access to music video and other content.
We rely on various rights holders, over whom we have no control, for the content we make available on our services. We cannot guarantee that these parties will always choose to license to us or license to us on terms that are acceptable to us.
The music industry has a high level of concentration, which means that one or a small number of entities may, on their own, take actions that adversely affect our business. For example, with respect to music video content, the audio/visual (“A/V”) recordings licensed to us under our agreements with Universal, Sony, and Warner make up the vast majority of the music currently consumed on our services. Our business may be adversely affected if our access to music is limited or delayed because of deterioration in our relationships with one or more of these significant rights holders or if they choose not to license to us for any other reason. In addition, rights holders also may attempt to take advantage of their market power (including by leveraging their publishing affiliate) to seek onerous financial or other terms from us or otherwise impose restrictions that hinder our ability to further innovate our services and content offerings. This may be of particular concern in markets where local content is important and such local content is held by local major labels or even individual artists, making it difficult to obtain such local content at all or on economically favorable terms. As a result, the loss of rights to a major publisher catalog would force us to take down a significant portion of popular repertoire in the applicable territory or territories, which would significantly disadvantage us in such territory or territories. The lack of complete metadata with respect to publisher ownership may also present challenges in taking down all the tracks of a given publisher. Even if we can secure rights to music video content from record labels and other copyright owners, recording artists may object and may exert public or private pressure on those record labels or copyright owners or other third parties to discontinue licensing rights to us, hold back content from us, or increase royalty rates. As a result, our ability to continue to license rights to music video content is subject to convincing a broad range of stakeholders of the value and quality of our services. To the extent that we are unable to license a large amount of content or the content of certain popular artists, our business, operating results, and financial condition could be materially harmed.
We are a party to many license agreements that are complex and impose numerous obligations upon us that may make it difficult to operate our business and provide all the functionality we would like for our services, and a breach of such agreements could adversely affect our business, operating results, and financial condition.
Many of our license agreements are complex and impose numerous obligations on us, including obligations to, among other things:

calculate and make payments based on complex royalty structures, which requires tracking usage of content on our services that may have inaccurate or incomplete metadata necessary for such calculation;

provide periodic reports on the exploitation of the content;

represent that we will obtain all necessary publishing licenses and consents and pay all associated fees, royalties, and other amounts due for the licensing of musical compositions;
 
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provide advertising inventory at discounted rates or on other favorable terms;

comply with certain service offering restrictions;

comply with certain marketing and advertising restrictions; and

comply with certain security and technical specifications.
Many of our license agreements grant the licensor the right to audit our compliance with the terms and conditions of such agreements. Some of our license agreements also include steering, non-discrimination, and so-called “most favored nations” provisions, which require that certain material terms of such agreements are no less favorable than those provided in our agreements with any other similarly situated licensor. If triggered, these provisions could cause our payments or other obligations under those agreements to escalate substantially. Additionally, some of our license agreements require consent to undertake certain business initiatives and, without such consent, our ability to undertake or continue operating new business initiatives may be limited. This could hurt our competitive position.
If we materially breach any of these obligations or any other obligations set forth in any of our license agreements, or if we use content in ways that are found to exceed the scope of such agreements, we could be subject to monetary penalties, and/or rights holders could impede our business by withholding content, discounts, and bundle approvals and the rights to launch new service offerings, and could ultimately terminate our rights under such license agreements, any of which could have a material adverse effect on our business, operating results, and financial condition.
We are dependent on key distributors. The loss of any such key distributor or any delay or interruption in the distribution of our products or services could adversely impact our revenue and operations.
We rely on third-party distributors and affiliates to distribute our Loop Player and promote our services. These third parties may have varying expertise in marketing and selling our products and services and may also sell other devices and services that could result in less focus on our products and services.
If these distributors and affiliates terminate their relationships with us or under-perform, we may be unable to maintain or increase our active Loop Players and our level of revenue. We will also need to engage additional distributors and affiliates to grow our business and expand our OOH client base. These third parties may not commit the necessary resources to market and sell our products and services to the level of our expectations. If current or future distributors and affiliates do not perform adequately, our revenue and operations will be adversely affected.
If there is a delay or interruption in the distribution of our products or services or if these third parties damage our products or mischaracterize our services, it could negatively impact our revenue and operations and may require significant management attention. In addition, any negative impact these third parties may have on our services, could expose us to potential liability, damage our reputation and the reputation of our products, services or brands or otherwise harm our business.
The coronavirus COVID-19 pandemic or the widespread outbreak of any other communicable disease could materially and adversely affect our business, financial condition and results of operations.
The spread of COVID-19 around the world affected the United States and global economies and has affected our operations and those of third parties on which we rely, including by causing disruptions in staffing, order fulfillment, and demand for product. In addition, the COVID-19 pandemic has and may continue to affect our revenue. In particular, certain DOOH locations have closed or limited their public capacity, which may impact their willingness to invest in on-site entertainment, such as our services. The continuing impact of the COVID-19 pandemic in 2022 is highly uncertain and subject to change.
As COVID-19 continues to evolve, the extent to which COVID-19 impacts operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of any additional outbreak, and the actions that may be required to try and contain COVID-19 or treat its impact. We continue to monitor the pandemic and, the extent to which the continued spread of the virus adversely affects our customer base and therefore revenue. As the COVID-19 pandemic
 
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is complex and rapidly evolving, our plans as described above may change. At this point, we cannot reasonably estimate the duration and severity of this pandemic, which could have a material adverse impact on our business, results of operations, financial position and cash flows.
Our royalty payment scheme is complex, and it is difficult to estimate the amount payable under our license agreements. We may underpay or overpay royalty amounts payable to others, which may harm our business.
Under our license agreements and relevant statutes, we must pay all required royalties to record labels, music publishers, and other copyright owners in order to stream content. The determination of the amount and timing of such payments is complex and subject to a number of variables, including the type of content streamed, the country in which it is streamed, the service tier such content is streamed on, the amount of revenue generated by the streaming of the content, the identity of the license holder to whom royalties are owed, the current size of our user base, our current ratio of ad-supported users to premium subscribers in each of our DOOH and D2C businesses, the applicability of any most favored nations provisions, and any applicable advertising fees and discounts, among other variables. Additionally, we have certain arrangements whereby royalty costs are paid in advance or are subject to minimum guaranteed amounts. An accrual is estimated when actual royalty costs to be incurred during a contractual period are expected to fall short of the minimum guaranteed amount. Additionally, we also have license agreements that include so-called “most favored nations” provisions that require that the material terms of such agreements are the most favorable material terms provided to any music licensor, which, if triggered, could cause our royalty payments under those agreements to escalate substantially. As we have only recently introduced our D2C service and have yet to recognize substantial revenue from such services and may not do so during the initial term of our licenses, we expect that any minimum guaranteed payments on licenses required for that service will be the maximum we will need to pay out under those licenses for the relevant time period.
We cannot assure you that the internal controls and systems we use to determine royalties payable will always be effective. We have in the past identified material weaknesses in our internal control over financial reporting that related to, among other things, accounting for rights holder liabilities and may identify additional material weaknesses in the future. If we fail to implement and maintain effective controls relating to rights holder liabilities, we may underpay/under-accrue or overpay/over-accrue the royalty amounts payable to record labels, music publishers, and other copyright owners. Underpayment could result in (i) litigation or other disputes with record labels, music publishers, and other copyright owners; (ii) the unexpected payment of additional royalties in material amounts; and (iii) damage to our business relationships with record labels, music publishers, other copyright owners, and artists and/or artist groups. If we overpay royalties, we may be unable to reclaim such overpayments, and our profits will suffer. Failure to accurately pay our royalties may adversely affect our business, operating results, and financial condition.
Minimum guarantees and advances required under certain of our license agreements may limit our operating flexibility and may adversely affect our business, operating results, and financial condition.
Certain of our license agreements contain significant minimum guarantees or advanced payments. Such minimum guarantees related to our content acquisition costs are not always tied to our revenue and/or user growth forecasts (e.g., number of users, active units, premium subscribers) or the number of video music sound recordings and musical compositions used on our services. Accordingly, our ability to achieve and sustain profitability and operating leverage on our services in part depends on our ability to increase our revenue through increased sales of our services and advertising sales on terms that maintain an adequate gross margin. The duration of our license agreements for sound recordings and musical compositions that contain minimum guarantees is frequently two years, but we do not currently have enough customers and do not anticipate acquiring enough customers whose revenue could cover such minimum guarantees and any existing customers may cancel their services at any time. Our forecasts of customer acquisition or retention and advertising sales during the term of our license agreements do not meet the number of customers required to cover our minimum guaranteed payments. To the extent our services revenue growth or advertising sales do not materially increase during the term of our license agreements, our business, operating results, and financial condition will be adversely affected as a result of such minimum guarantees. In addition, the fixed cost nature of these minimum guarantees may limit our flexibility in planning for, or reacting to, changes in our business and the market segments in which we operate.
 
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We rely on estimates of the market share of streaming content owned by each content provider, as well as our own user growth and forecasted advertising revenue, to forecast whether such minimum guarantees could be recouped against our actual content acquisition costs incurred over the duration of the license agreement. As we have not seen significant growth in our D2C business, we expect the minimum guarantees for related licenses not to be recouped for the foreseeable future.
Difficulties in obtaining accurate and comprehensive information necessary to identify the compositions embodied in music video sound recordings on our services and the ownership thereof may impact our ability to perform our obligations under our licenses, affect the size of our catalog that can be offered to customers and end-users, impact our ability to control content acquisition costs, and lead to potential copyright infringement claims.
Comprehensive and accurate ownership information for the musical compositions embodied in music videos is often unavailable to us or difficult or, in some cases, impossible for us to obtain, sometimes because it is withheld by the owners or administrators of such rights. We currently rely on the assistance of third parties to determine certain of this information. If the information provided to us or obtained by such third parties does not comprehensively or accurately identify the ownership of musical compositions, or if we are unable to determine which musical compositions correspond to specific sound recordings, it may be difficult or impossible to identify the appropriate rights holders from whom to obtain licenses or to whom to pay royalties. This may make it difficult to comply with the obligations of any agreements with those rights holders. This may also make it difficult to identify content for removal from the services if we lose the rights to such musical compositions. These challenges, and others concerning the licensing of musical compositions embodied in sound recordings and music videos on our services, may subject us to significant liability for copyright infringement, breach of contract, or other claims.
We face many risks associated with our international expansion, including difficulties obtaining rights to stream content on favorable terms.
We are considering the further expansion of our operations into additional international markets. However, offering our services in a new geographical area involves numerous risks and challenges. For example, the licensing terms offered by rights organizations and individual copyright owners in countries around the world are currently relatively expensive. Addressing licensing structure and royalty rate issues in any new geographic market requires us to make very substantial investments of time, capital, and other resources, and our business could fail if such investments do not succeed. There can be no assurance that we will succeed or achieve any return on these investments.
In addition to the above, expansion around the world exposes us to other risks such as:

lack of well-functioning copyright collective management organizations that are able to grant us music video licenses, process reports, and distribute royalties in certain markets;

fragmentation of rights ownership in various markets and lack of transparency of rights coverage, which may lead to overpayment or underpayment to record labels, music publishers, artists, performance rights organizations, and other copyright owners;

difficulties in obtaining license rights to local content;

increased risk of disputes with and/or lawsuits filed in foreign jurisdictions by rights holders in connection with our expansion into new markets;

difficulties in achieving market acceptance of our services in different geographic markets with different tastes and interests;

difficulties in achieving viral marketing growth in certain other countries where we commit fewer sales and marketing resources;

difficulties in managing operations due to language barriers, distance, staffing, user behavior and spending capability, cultural differences, business infrastructure constraints, and laws regulating corporations that operate internationally;
 
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application of different laws and regulations of other jurisdictions, including privacy, censorship, data protection and liability standards and regulations, as well as intellectual property laws;

potential adverse tax consequences associated with foreign operations and revenue;

complex foreign exchange fluctuation and associated issues;

increased competition from local websites and audio content providers, some with financial power and resources to undercut the market or enter into exclusive deals with local content providers to decrease competition;

credit risk and higher levels of payment fraud;

political and economic instability in some countries;

restrictions on international monetary flows; and

reduced or ineffective protection of our intellectual property rights in some countries.
As a result of these obstacles, we may find it impossible or prohibitively expensive to enter additional markets, or entry into foreign markets could be delayed, which could hinder our ability to grow our business.
If we fail to effectively manage our expected growth, our business, operating results, and financial condition may suffer.
Our growth in 2021 and 2022 has placed, and will continue to place, significant demands on our management and our operational and financial infrastructure. In order to attain and then maintain profitability, we will need to recruit, integrate, and retain skilled and experienced personnel who can demonstrate our value proposition to users, advertisers, and business partners and who can increase the monetization of the content streamed on our services, particularly in OOH locations and on CTVs and mobile devices. Continued growth could also strain our ability to maintain reliable service levels for our users, effectively monetize the video content streamed, develop and improve our operational and financial controls, and recruit, train, and retain highly skilled personnel. As we seek to grow our operations in size, scope, and complexity, we will need to improve and upgrade our systems and infrastructure, which will require significant expenditures and allocation of valuable technical and management resources. If we fail to maintain efficiency and allocate limited resources effectively in our organization as it grows, our business, operating results, and financial condition may suffer.
Our business emphasizes rapid innovation and prioritizes long-term customer and user engagement over short-term financial condition or results of operations. That strategy may yield results that sometimes do not align with the market’s expectations. If that happens, our stock price may be negatively affected.
Our business is expected to grow and become more complex, and our success depends on our ability to quickly develop and launch new and innovative products. Our approach to the development of our business could result in unintended outcomes or decisions that are poorly received by our customers, users, advertisers, or partners. We have made, and expect to continue to make, significant investments to develop and launch new products, services, and initiatives, which may involve significant risks and uncertainties, including the fact that such offerings may not be commercially viable for an indefinite period or at all, or may not result in an adequate return of capital on our investments. No assurance can be given that such new offerings will be successful and will not adversely affect our reputation, operating results, and financial condition. In certain instances, we prioritize our long-term customer and user engagement over short-term financial condition or results of operations. We may make decisions that reduce our short-term revenue or profitability if we believe that the decisions benefit the aggregate customer and user experience and will thereby improve our financial performance over the long term. These decisions may not produce the long-term benefits that we expect, in which case our user growth and engagement, our relationships with advertisers and partners, as well as our business, operating results, and financial condition could be seriously harmed.
If we fail to accurately predict, recommend, curate and play content that our customers and users enjoy, we may fail to retain existing customers and users and attract new customers and users in sufficient numbers to meet investor expectations for growth or to operate our business profitably.
We believe that a key differentiating factor between Loop Media and other streaming content providers in the DOOH and D2C markets is our ability to curate content and deliver that content to customers and
 
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users for them to enjoy. We have invested, and will continue to invest, significant resources in our content curation and technologies that help predict what customers and users will enjoy. However, such investments may not yield an attractive return and such refinements may not be effective. The effectiveness of our ability to predict user preferences and curate content tailored to our customers and users’ individual tastes depends in part on our ability to gather and effectively analyze large amounts of customer and user data. While we have a large catalog of music videos and other content available to stream, we must continuously identify, analyze, and curate additional content that our customers request and that our users will enjoy, and we may not effectively do so. Failure to do so could materially adversely affect our ability to adequately attract and retain users, increase content hours consumed, and sell advertising to meet investor expectations for growth or to operate the business profitably.
Expansion of our operations to deliver more non-music video content subjects us to increased business, legal, financial, reputational, and competitive risks.
Expansion of our operations to deliver more non-music video content beyond music videos involves numerous risks and challenges, including increased capital requirements, new competitors, and the need to develop new strategic relationships. Growth in these areas may require additional changes to our existing business model and cost structure, modifications to our infrastructure, and exposure to new regulatory, legal, and reputational risks, including infringement liability, any of which may require additional expertise that we currently do not have. We may not be able to generate sufficient revenue from additional non-music video content to offset the costs of creating or acquiring this content. Further, we have initially established a reputation as a music video streaming service and our ability to gain acceptance and listenership for other non-music video content, and thus our ability to continue to attract customers, users and advertisers to this content, is not certain. Failure to successfully monetize and generate revenues from such content, including failure to obtain or retain rights to non-music video content on acceptable terms, or at all, or to effectively manage the numerous risks and challenges associated with such expansion could adversely affect our business, operating results, and financial condition.
Streaming content to our D2C users depends on effectively working with operating systems, online platforms, hardware, networks, regulations, and standards we do not control. Changes in our services or those operating systems, hardware, networks, regulations, or standards, and our limitations on our ability to access those platforms, operating systems, hardware, or networks may seriously harm our business.
We rely on a variety of operating systems, online platforms, hardware, and networks to reach our D2C users. These platforms range from desktop and mobile operating systems and application stores, to wearables and OTT distribution platforms and services. The owners or operators of these platforms and services may not share our interests and may restrict our access to them or place conditions on access that would materially affect our ability to access those platforms and services. In particular, where the owner of a platform is also our direct competitor, the platform may attempt to use this position to affect our access to users and ability to compete. For example, an online platform might arbitrarily remove our services from its platform, deprive us of access to business-critical data, or engage in other harmful practices. Online platforms also may unilaterally impose certain requirements that negatively affect our ability to convert users of our Loop App to the subscription service, such as conditions that limit our freedom to communicate promotions and offers to our users. Similarly, online platforms may force us to use the platform’s payment processing systems that may be inferior to, and more costly than, other payment processing services available in the market. Online platforms frequently change the rules and requirements for services like ours to access the platform, and such changes may adversely affect the success or desirability of our services. To maintain certain elements of the services on a platform, we may need to make additional concessions to the platform operator that may adversely affect other aspects of the business or require us to invest significant expenses. Online platforms may limit our access to information about users, limiting our ability to convert and retain them. Online platforms also may deny access to application programming interfaces or documentation, limiting the functionality of our services on the platform.
Because devices providing access to our D2C services are not manufactured and sold by us, these devices may not perform reliably, and any faulty connection between these devices and our services may result in consumer dissatisfaction toward us, which could damage our brand. We may not be able to comply
 
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with the requirements of various operating systems, online platforms, hardware, networks, regulations, and standards on which our services depend, and failure to do so could result in serious harm to our business.
If our security systems are breached, we may face civil liability and/or statutory fines, and/or enforcement action causing us to change our practices, and public perception of our security measures could be diminished, either of which would negatively affect our ability to attract and retain OOH customers, premium subscribers, Ad-Supported users, advertisers, content providers, and other business partners.
Techniques used to gain unauthorized access to data and software are constantly evolving, and we may be unable to anticipate or prevent unauthorized access to data pertaining to our users, including credit card and debit card information and other personal data about our users, business partners, and employees. Like all internet services, our services, which are supported by our own systems and those of third parties that we work with, are vulnerable to software bugs, computer viruses, internet worms, break-ins, phishing attacks, attempts to overload servers with denial-of-service, or other attacks and similar disruptions from unauthorized use of our and third-party computer systems, any of which could lead to system interruptions, delays, or shutdowns, causing loss of critical data or unauthorized access to personal data. Computer malware, viruses, and computer hacking, and phishing attacks have become more prevalent in our industry and may occur on our systems in the future. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security, and availability of our products and technical infrastructure to the satisfaction of our users may harm our reputation and our ability to retain existing users and attract new users. The systems and processes that we have designed to protect our data and our users’ data, to prevent data loss, to disable undesirable accounts and activities on our platform, and to prevent or detect security breaches, may not prevent security breaches, and we may incur significant costs in protecting against or remediating cyber-attacks.
In addition, if an actual or perceived breach of security occurs to our systems or a third party’s systems, we may face regulatory or civil liability and public perception of our security measures could be diminished, either of which would negatively affect our ability to attract and retain users, which in turn would harm our efforts to attract and retain advertisers, content providers, and other business partners. We also would be required to expend significant resources to mitigate the breach of security and to address matters related to any such breach.
Certain of our license agreements, including those with the Music Labels, have provisions that allow for the termination of such agreements in the case of an uncured data security breach. Any failure, or perceived failure, by us to maintain the security of data relating to our users, to comply with our posted privacy policy, laws and regulations, rules of self-regulatory organizations, industry standards, and contractual provisions to which we may be bound, could result in the loss of confidence in us, or result in actions against us by governmental entities, data protection authorities, or others, all of which could result in litigation and financial losses, and could potentially cause us to lose users, advertisers, and revenues. Any of these events could have a material adverse effect on our business, operating results, and financial condition and could cause our stock price to drop significantly.
Changes in how network operators handle and charge for access to data that travel across their networks could adversely impact our business.
We rely upon the ability of our customers to access our service through the internet. If network operators block, restrict or otherwise impair access to our service over their networks, our service and business could be negatively affected. To the extent that network operators implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks by data providers, we could incur greater operating expenses and our customer acquisition and retention could be negatively impacted. Furthermore, to the extent network operators create tiers of internet access service and either charge us for or prohibit us from being available through these tiers, our business could be negatively impacted.
Our services and software may contain undetected software bugs or vulnerabilities, which could manifest in ways that could seriously harm our reputation and our business.
Our services and products like the Loop Player or any other product we may introduce in the future, may contain undetected software bugs, hardware errors, and other vulnerabilities. These bugs and errors
 
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can manifest in any number of ways in our products, including through diminished performance, security vulnerabilities, malfunctions, or even permanently disabled products. We plan to update our products from time to time, and as a result some errors in our products may be discovered only after a product has been used by users and may in some cases be detected only under certain circumstances or after extended use. Additionally, many of our products are available on multiple operating systems and/or multiple devices offered by different manufacturers, and changes or updates to such operating systems or devices may cause errors or functionality problems in our products, including rendering our products inoperable by some users. Any errors, bugs, or other vulnerabilities discovered in our code or backend after release could damage our reputation, drive away users, allow third parties to manipulate or exploit our software (including, for example, providing mobile device users a means to suppress advertisements without payment and gain access to features only available to the ad-supported service on tablets and desktop computers), lower revenue, and expose us to claims for damages, any of which could seriously harm our business. Additionally, errors, bugs, or other vulnerabilities may — either directly or if exploited by third parties — affect our ability to make accurate royalty payments.
We could also face claims for product liability, tort, or breach of warranty. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention and seriously harm our reputation and our business. In addition, if our liability insurance coverage proves inadequate or coverage is unavailable, our business could be seriously harmed.
Interruptions, delays, or discontinuations in service arising from our own systems or from third parties could impair the delivery of our services and harm our business.
We rely on systems housed in our own facilities and upon third parties, including bandwidth providers and third-party “cloud” data storage services, to enable our users to receive our content in a dependable, timely, and efficient manner. We have experienced, and may in the future experience, periodic service interruptions and delays involving our own systems and those of third parties that we work with. Both our own facilities and those of third parties are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures, and similar events. They are also subject to break-ins, sabotage, intentional acts of vandalism, the failure of physical, administrative, technical, and cyber security measures, terrorist acts, natural disasters, human error, the financial insolvency of third parties that we work with, and other unanticipated problems or events. The occurrence of any of these events could result in interruptions in our services and unauthorized access to, or alteration of, the content and data contained on our systems that these third parties store and deliver on our behalf.
Any disruption in the services provided by these third parties could materially adversely impact our business reputation, customer relations, and operating results. Upon expiration or termination of any of our agreements with third parties, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition from one third party to another could subject us to operational delays and inefficiencies until the transition is complete.
User metrics and other estimates could be subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may seriously harm and negatively affect our reputation and our business.
We expect to regularly internally review key metrics related to the operation of our business, including metrics related to our active units, premium revenue per user, subscriber numbers, OOH venue locations, and other metrics to evaluate growth trends, service levels, measure our performance, and make strategic decisions. These metrics use or will use internal Company data and will not be validated by an independent third party. While these metrics are expected to be based on reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring how our services are used across large populations of users and customers. The calculations of our active units may not reflect the actual number of people using our services (if one user has more than one account or if one account is used by multiple users). Errors or inaccuracies in our metrics or data could result in incorrect business decisions and inefficiencies, including expending resources to implement unnecessary business measures or failing to take required actions to attract enough users to satisfy our growth strategies.
 
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In addition, advertisers generally rely on third-party measurement services to calculate metrics related to our advertising business, and these third-party measurement services may not reflect our true audience. Some of our demographic data also may be incomplete or inaccurate because users self-report their names and dates of birth or because we receive them from other third parties. Consequently, the personal data we have may differ from our users’ actual names and ages. If advertisers, partners, or investors do not perceive our user, geographic, or other demographic metrics to be accurate representations of our user base, or if we discover material inaccuracies in our user, geographic, or other demographic metrics, our reputation may be materially harmed.
We face risks, such as unforeseen costs, and potential liabilities in connection with content we license and/or distribute through our services.
As a distributor of content, we face potential liability for defamation, negligence, copyright or trademark infringement, right of publicity or privacy claims, misinformation, personal injury torts or other claims based on the nature and content of materials that we license and/or distribute. We also face potential liability for content used in promoting our service, including marketing materials and features on our platforms such as user reviews. Allegations of impropriety, even if unfounded, could have a material adverse effect on our reputation and our business.
To the extent we do not accurately anticipate costs or mitigate risks, or if we become liable for content we license and/or distribute, our business may suffer. Litigation to defend these claims could be costly and the expenses and damages arising from any liability or unforeseen production risks could harm our results of operations. We may not be indemnified to cover claims or costs of these types, and we may not have insurance coverage for these types of claims.
Various regulations as well as self-regulation related to privacy and data security concerns pose the threat of lawsuits, regulatory fines and other liability, require us to expend significant resources, and may harm our business, operating results, and financial condition.
As we collect and utilize personal data about our customers and users as they interact with our services, we are subject to new and existing laws and regulations that govern our use of user data. We are likely to be required to expend significant capital to ensure ongoing compliance with these laws and regulations. Claims or allegations that we have violated laws and regulations relating to privacy and data security could result in negative publicity and a loss of confidence in us by our users and our partners. We may be required to make significant expenditures to resolve these matters and we could be subject to civil liability and/or fines or other penalties, including by government and data protection authorities.
Existing privacy-related laws and regulations in the United States, and in other countries are evolving and are subject to potentially differing interpretations, and various U.S. federal and state or other international legislative and regulatory bodies may expand or enact laws regarding privacy and data security-related matters. Laws coming into effect in various states, adoption of a comprehensive federal data privacy law, and new legislation in international jurisdictions may continue to change the data protection landscape globally and could result in us expending considerable resources to meet these requirements.
In the United States, laws and regulations applicable to personal information include industry specific federal legislation, federal and state privacy and consumer protection laws and industry self-regulatory initiatives and frameworks. The California Consumer Privacy Act (CCPA), which came into effect in January 2020, establishes disclosure and transparency rules, and creates new data privacy rights for California residents, including the ability to control how we share their personal information with third parties. The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. The impact of this legislation may require us to modify our data processing practices and policies and incur substantial costs and expenses in an effort to comply. The California Privacy Rights Act (CPRA), which amends the CCPA by enhancing such data privacy rights of California residents and expanding such disclosure and transparency rules, was enacted in November 2020 and goes into full effect in January of 2023. Nevada also enacted a data privacy law in 2020 granting Nevada residents the right to opt out of the sale of their personal information. On March 2, 2021, Virginia enacted the Virginia Consumer Data Protection Act (CDPA) which will go into full effect in January of 2023. We may also be subject to new data protection laws including legislation currently pending in other states
 
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including Washington, and New York. We may also from time to time be subject to, or face assertions that we are subject to, additional obligations relating to personal information by contract or due to assertions that self-regulatory obligations or industry standards apply to our practices. Our failure to comply with these data protection laws or any action or suspected security incident may result in governmental actions, fines and non-monetary penalties, or civil liability, which may harm our business. Any expansion of our operations into new markets could result in increased compliance costs to the Company with respect to data privacy regulatory regimes in such other markets.
We may find it necessary or desirable to join self-regulatory bodies or other privacy-related organizations that require compliance with their rules pertaining to privacy and data security. We also may be bound by contractual obligations that limit our ability to collect, use, disclose, share, and leverage user data and to derive economic value from it. New laws, amendments to, or reinterpretations of existing laws, rules of self-regulatory bodies, industry standards, and contractual obligations, as well as changes in our users’ expectations and demands regarding privacy and data security, may limit our ability to collect, use, and disclose, and to leverage and derive economic value from user data. Restrictions on our ability to collect, access and harness user data, or to use or disclose user data, may require us to expend significant resources to adapt to these changes, and would in turn limit our ability to stream personalized content to our users and offer advertising and promotional opportunities to users on the services.
We have incurred, and will continue to incur, expenses to comply with privacy and security standards and protocols imposed by law, regulation, self-regulatory bodies, industry standards, and contractual obligations. Any failure to comply with privacy laws could result in litigation, regulatory or governmental investigations, enforcement action requiring us to change the way we use personal data, restrictions on how we use personal data, or significant regulatory fines. In addition to statutory enforcement, a data breach could lead to compensation claims by affected individuals (including consumer advocacy groups), negative publicity, and a potential loss of business as a result of customers losing trust in us. Such failures could have a material adverse effect on our financial condition and operations.
We rely on advertising revenue to monetize our services, and any failure to convince advertisers or advertising demand partners of the benefits of advertising on our services in the future could harm our business, operating results, and financial condition.
Our ability to attract and retain advertisers or advertising demand partners, and ultimately to generate advertising revenue, depends on our ability to, for instance:

increase the number of hours our ad-supported customers and users spend playing or watching our video content or otherwise engaging with content on our ad-supported service;

increase the number of ad-supported customers and users;

keep pace with changes in technology and our competitors;

compete effectively for advertising dollars with other online and mobile marketing and media companies;

maintain and grow our relationships with marketers, agencies, and other demand sources who purchase advertising inventory from us;

implement and maintain an effective infrastructure for order management; and

continue to develop and diversify our advertising platform and offerings, which currently include delivery of advertising products through multiple delivery channels, including traditional computers, mobile, and other connected devices, and multiple content types.
We may not succeed in capturing a greater share of our advertisers’ or advertising demand partners’ core marketing budgets, particularly if we are unable to achieve the scale, reach, products, and market penetration necessary to demonstrate the effectiveness of our advertising solutions, or if our advertising model proves ineffective or not competitive when compared to other alternatives and platforms through which advertisers choose to invest their budgets. Our advertising demand partners are generally not bound by long-term contracts.
 
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Failure to grow the ad-supported customer and user base and to effectively demonstrate the value of our ad-supported service and other similar offerings on the services to advertisers could result in loss of, or reduced spending by, existing or potential future advertisers or advertising demand partners, which would materially harm our business, operating results, and financial condition.
Selling advertisements requires that we demonstrate to advertisers and advertising demand partners that our offerings on the services are effective. For example, we need to show that our ad-supported service has substantial reach and engagement by relevant demographic audiences. Some of our demographic data may be incomplete or inaccurate. For example, because ad-supported users self-report their personal data, which may include their genders and dates of birth, the personal data we have may differ from our ad-supported users’ actual genders and ages. If our ad-supported users provide us with incorrect or incomplete information regarding their personal data, such as genders, age, or other attributes we use to target advertisements to users, or the data are otherwise not available to us, then we may fail to target the correct demographic with our advertising. Advertisers often rely on third parties to quantify the reach and effectiveness of our ad products. These third-party measurement services may not reflect our true audience or the performance of our ad products, and their underlying methodologies are subject to change at any time. In addition, the methodologies we apply to measure the key performance indicators that we use to monitor and manage our business may differ from the methodologies used by third-party measurement service providers, who may not integrate effectively with our ad-supported service. Measurement technologies for mobile devices may be even less reliable in quantifying the reach and usage of our ad-supported service, and it is not clear whether such technologies will integrate with our systems or uniformly and comprehensively reflect the reach, usage, or overall audience composition of our ad-supported service. If such third-party measurement providers report lower metrics than we do, there is wide variance among reported metrics, or we cannot adequately integrate with such services that advertisers require, our ability to convince advertisers of the benefits of our ad-supported service could be adversely affected.
The market for programmatic advertising in the digital out-of-home market is evolving. If this market develops slower or differently than we expect, our business, operating results and financial condition could be adversely affected.
We derive the vast majority of revenue from programmatic advertising directed at the DOOH market. We expect that programmatic advertising will continue to be a major source of our revenue for the foreseeable future. If the market for programmatic advertising in the DOOH market deteriorates or develops more slowly or differently than we expect, it could reduce demand for our platform and our business, growth prospects and financial condition could be adversely affected.
We derive a significant portion of our revenues from advertisements. If we are unable to continue to compete for these advertisements, or if any events occur that negatively impact our relationships with advertising networks, our advertising revenues and operating results would be negatively impacted.
We generate advertising revenue from the sale of digital video advertising delivered through advertising impressions across the Loop Network. We engage with advertising demand partners and advertising agencies to monetize our inventory of advertising impressions by filling such advertising impressions with advertising from companies seeking to advertise in the DOOH market. We need to maintain good relationships with these advertising demand partners to provide us with a sufficient number of advertisements and to ensure they understand the value of our advertising impressions on our Loop Network. Online advertising is an intensely competitive industry. Many large companies, such as Amazon, Facebook and Google, invest significantly in data analytics to make their websites and platforms more attractive to advertisers. Our advertising revenue is primarily a function of the number of free users and hours of engagement of such free users and our ability to maintain or increase user engagement and satisfaction with our services and enhance returns for our advertising partners. If our relationship with any advertising demand partners terminates for any reason, or if the commercial terms of our relationships are changed or do not continue to be renewed on favorable terms, or if we cannot source high-quality advertisements consistent with our brand or product experience, our business, growth prospects and financial condition could be adversely affected.
 
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We depend on highly skilled key personnel to operate our business, and if we are unable to attract, retain, and motivate qualified personnel, our ability to develop and successfully grow our business could be harmed.
We believe that our future success is highly dependent on the talents and contributions of our senior management, including Jon Niermann, our Chief Executive Officer, members of our executive team, and other key employees, such as the key technology, product, content, engineering, finance, research and development, marketing, and sales personnel. Many of our employees have unique skills required for and/or historical knowledge of our business. Our future success depends on our continuing ability to attract, develop, motivate, and retain highly qualified and skilled employees. All of our employees, including our senior management, are free to terminate their employment relationship with us at any time, and their knowledge of our business and industry may be difficult to replace. Qualified individuals are in high demand, particularly in the digital media industry, and we may incur significant costs to attract and retain them. We use equity awards to attract talented employees. If the value or liquidity of our common stock declines significantly and remains depressed, that may prevent us from recruiting and retaining qualified employees. If we are unable to attract and retain our senior management and key employees, we may not be able to achieve our strategic objectives, and our business could be harmed. In addition, we believe that our key executives have developed highly successful and effective working relationships. We cannot assure you that we will be able to retain the services of any members of our senior management or other key employees. If one or more of these individuals leave, we may not be able to fully integrate new executives or replicate the current dynamic and working relationships that have developed among our senior management and other key personnel, and our operations could suffer.
We have acquired and invested in, and may continue to acquire or invest in, other companies or technologies, which could divert management’s attention and otherwise disrupt our operations and harm our operating results. We may fail to acquire or invest in companies whose market power or technology could be important to the future success of our business.
We acquired substantially all of the assets of Spkr in the fourth calendar quarter of 2020 and acquired all of the outstanding equity of EON Media Group Pte. Ltd. (“EON Media”) in the second calendar quarter of 2021. In the future, we may seek to acquire or invest in, other companies or technologies that we believe could complement or expand our services or enhance our capabilities or content offerings, or otherwise offer growth opportunities. Pursuit of future potential acquisitions or investments may divert the attention of management and cause us to incur various expenses in identifying, investigating, and pursuing suitable opportunities, whether or not they are consummated. In addition, we have limited experience acquiring and integrating other businesses. We may be unsuccessful in integrating our acquired businesses or any additional business we may acquire in the future, and we may fail to acquire companies whose market power or technology could be important to the future success of our business.
We also may not achieve the anticipated benefits from any acquisition or investment due to a number of factors, including:

unanticipated costs or liabilities associated with the acquisition or investment, including costs or liabilities arising from the acquired companies’ failure to comply with intellectual property laws and licensing obligations they are subject to;

incurrence of acquisition- or investment-related costs; inability to effectively integrate the assets, operations or personnel related to such acquisitions;

diversion of management’s attention from other business concerns;

regulatory uncertainties;

harm to our existing business relationships with business partners and advertisers as a result of the acquisition or investment;

harm to our brand and reputation;

the potential loss of key employees;

use of resources that are needed in other parts of our business; and

use of substantial portions of our available cash to consummate the acquisition or investment.
 
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If we acquire or invest in other companies, these acquisitions or investments may reduce our operating margins for the foreseeable future. In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill, which must be assessed for impairment at least annually. In the future, if our acquisitions or investments do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process. Acquisitions or investments could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. In addition, if a business we acquire or invest in fails to meet our expectations, our business, operating results, and financial condition may suffer.
If our acquired intangible assets become impaired in the future, we may incur significant impairment charges.
At least annually, or whenever events or circumstances arise indicating impairment may exist, we review goodwill for impairment as required by generally accepted accounting principles in the United States (GAAP). In 2020, we recorded an impairment charge of $6.4 million related to the impairment of intangible assets acquired in 2019. Additionally, during the 12 months ended September 30, 2021, we recorded an impairment charge of $11.2 million, a portion of which was related to a $1.4 million write-off of intangible assets related to our acquisition of SPKR, Inc and an intangible asset impairment of $2.6 million and a goodwill impairment of $4.4 million related to our EON Media acquisition. As of June 30, 2022, we had remaining goodwill of approximately $2.0 million.
In the future, we may need to further reduce the carrying amount of goodwill and incur additional non-cash charges to our results of operations. Such charges could have the effect of reducing goodwill with a corresponding impairment expense and may have a material effect upon our reported results. The additional expense may reduce our reported profitability or increase our reported losses in future periods and could negatively affect the value of our securities, our ability to obtain other sources of capital, and may generally have a negative effect on our future operations.
Our operating results may fluctuate, which makes our results difficult to predict.
Our revenue and operating results could vary significantly from quarter to quarter and year to year because of a variety of factors, many of which are outside our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Factors that may contribute to the variability of our quarterly and annual results include:

our ability to grow our DOOH business beyond historic levels through our Loop Player and across our Partner Network, the expansion into more OOH locations, and the further development of our ad-supported business model;

changes in the license payments we are required to make;

our ability to maintain licenses required for our business at a commercial price to us;

changes in the mix of content that is streamed by our customers, which results in varying license payment amounts being owed;

our ability to monetize our services more effectively, particularly as the number of OOH customers grow;

our ability to effectively manage our anticipated growth;

our ability to attract user and/or customer adoption of and generate significant revenue from new products, services, and initiatives;

our ability to attract and retain existing advertisers and prove that our advertising products are effective enough to justify a pricing structure that is profitable for us;

the effects of increased competition in our business;

our ability to keep pace with changes in technology and our competitors;

lack of accurate and timely reports and invoices from our rights holders and partners;
 
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interruptions in service, whether or not we are responsible for such interruptions, and any related impact on our reputation;

our ability to pursue and appropriately time our entry into new geographic or content markets and, if pursued, our management of this expansion;

costs associated with defending any litigation, including intellectual property infringement litigation;

the impact of general economic conditions on our revenue and expenses; and

changes in regulations affecting our business.
We have identified material weaknesses in our internal control over financial reporting as of September 30, 2021, and if we fail to implement and maintain effective internal control over financial reporting, our ability to accurately and timely report our financial results could be adversely affected.
We are required to maintain internal control over financial reporting and to report any material weaknesses in those controls. The following material weaknesses in our internal control over financial reporting were identified in the normal course as of September 30, 2021:

our management had insufficient oversight of the design and operating effectiveness of our disclosure controls and internal controls over financial reporting;

we failed to maintain effective controls over the period-end financial reporting process, including controls with respect to preparation and disclosure of provision for income taxes, valuation and presentation of asset acquisition, content assets and liabilities, and investments; and

we failed to maintain effective controls over journal entries, both recurring and nonrecurring, and account reconciliations and did not maintain proper segregation of duties. Journal entries were not always accompanied by sufficient supporting documentation and were not adequately reviewed and approved for validity, completeness and accuracy. In most instances, persons responsible for reviewing journal entries and account reconciliations for validity, completeness and accuracy were also responsible for preparation.
We have concluded that these material weaknesses arose because we did not have the necessary business processes, systems, personnel, and related internal controls. We began to undertake measures to address material weaknesses in our internal controls with the help of an outside firm, retained in July 2021. We will continue to take steps to remediate these material weaknesses, and we expect improvement in fiscal year 2022.
If we continue to have material weaknesses in our internal control over financial reporting, we may be unable to accurately report our financial results or report them within the timeframes required by law or stock exchange regulations, and we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline. Under Section 404 of the Sarbanes-Oxley Act, we are required to evaluate and determine the effectiveness of our internal control over financial reporting and provide a management report as to internal control over financial reporting. Failure to maintain effective internal control over financial reporting also could potentially subject us to sanctions or investigations by the SEC, or other regulatory authorities, or stockholder lawsuits, which could require additional financial and management resources. We may be unable to fully remediate previously identified material weaknesses, or we may identify additional material weaknesses in the future, which could materially adversely affect our business, operating results, and financial condition.
Risks Related to Our Intellectual Property
Assertions by third parties of infringement or other violations by us of their intellectual property rights could harm our business, operating results, and financial condition.
Third parties may assert that we have infringed, misappropriated, or otherwise violated their copyrights, patents, trademarks, and other intellectual property rights, and as we face increasing competition, the possibility of intellectual property rights claims against us grows. Our ability to provide our services is dependent upon our ability to license intellectual property rights to audio content, including video music
 
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recordings, any musical compositions embodied therein, as well as other visual content and any other media assets that content providers, artists, and/or labels can add or provide. Various laws and regulations govern the copyright and other intellectual property rights associated with audio and visual content, including video music and sound recordings and musical compositions. Existing laws and regulations are evolving and subject to different interpretations, and various legislative or regulatory bodies may expand current or enact new laws or regulations. Although we seek to comply with applicable statutory, regulatory, and judicial frameworks by, for example, entering into license agreements, we may unknowingly be infringing or violating any third-party intellectual property rights, or may do so in the future. Moreover, while we may often be able to seek indemnities from our licensors with respect to infringement claims that may relate to the content, they provide to us, such indemnities may not be sufficient to cover the associated liability if the licensor at issue does not have adequate financial resources.
In addition, music, internet, technology, and media companies are frequently subject to litigation based on allegations of infringement, misappropriation, or other violations of intellectual property rights. Many companies in these industries have substantially larger patent and intellectual property portfolios than we do, which could make us a target for litigation. We may not be able to assert counterclaims against parties that sue us for patent, or other intellectual property infringement. In addition, various “non-practicing entities” that own patents and other intellectual property rights often attempt to aggressively assert claims in order to extract value from technology companies. Further, from time to time we may introduce new products and services, including in territories where we currently do not have an offering, which could increase our exposure to patent and other intellectual property claims from competitors and non-practicing entities. Assertions of third-party intellectual property rights or any infringement or misappropriation claims arising from such assertions could substantially harm our business, operating results, and financial condition. If we are forced to defend against any infringement or misappropriation claims, whether they are with or without merit, are settled out of court, or are determined in our favor, we may be required to expend significant time and financial resources on the defense of such claims, and such claims also would divert management time and attention from our business operations. Furthermore, an adverse outcome of a dispute may require us to pay significant damages, which may be even greater if we are found to have willfully infringed upon a party’s intellectual property; cease exploiting copyrighted content that we have previously had the ability to exploit; cease using solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to redesign our solutions; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies, content, or materials; indemnify our partners and other third parties; and/or take other actions that may have material effects on our business, operating results, and financial condition.
Failure to protect our intellectual property could substantially harm our business, operating results, and financial condition.
The success of our business depends on our ability to protect and enforce our patents, trade secrets, trademarks, copyrights, and all of our other intellectual property rights, including our intellectual property rights underlying our services. We attempt to protect our intellectual property under patent, trade secret, trademark, and copyright law through a combination of intellectual property registration, employee, third-party assignment and nondisclosure agreements, other contractual restrictions, technological measures, and other methods. These afford only limited protection, and we are still continuing to develop our processes for securing our intellectual property rights. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy aspects of our product and brand features or obtain and use our trade secrets and other confidential information. Moreover, policing our intellectual property rights is difficult and time-consuming. We cannot assure you that we would have adequate resources to protect and police our intellectual property rights, and we cannot assure you that the steps we take to do so will always be effective.
We have filed, and may in the future file, patent applications on certain of our innovations. It is possible, however, that these innovations may not be patentable. In addition, given the cost, effort, risks, and downside of obtaining patent protection, including the requirement to ultimately disclose the invention to the public, we may choose not to seek patent protection for some innovations. Furthermore, our patent applications may not issue as granted patents, the scope of the protection gained may be insufficient, or an issued patent may be deemed invalid or unenforceable. Any of our present or future patents or other
 
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intellectual property rights may lapse or be invalidated, circumvented, challenged, or abandoned. Our intellectual property rights also may not provide competitive advantages to us. Our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes could be limited by our relationships with third parties, and any of our pending or future patent applications may not have the scope of coverage originally sought. Our intellectual property rights may not be enforced in jurisdictions where competition may be intense or where legal protection may be weak. We could lose both the ability to assert our intellectual property rights against, or to license our technology to, others and the ability to collect royalties or other payments.
We currently own the www.loop.tv internet domain name and various other related domain names. Internet regulatory bodies generally regulate domain names. If we lose the ability to use a domain name in a particular country, we may be forced either to incur significant additional expenses to market our services within that country or, in extreme cases, to elect not to offer our services in that country. Either result could harm our business, operating results, and financial condition. The regulation of domain names in the United States and in foreign countries is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. As a result, we may not be able to acquire or maintain the domain names that utilize our brand names in the United States or other countries in which we may conduct business in the future.
Litigation or proceedings before governmental authorities and administrative bodies may be necessary in the future to enforce our intellectual property rights, to protect our patent rights, trademarks, trade secrets, and domain names and to determine the validity and scope of the proprietary rights of others. Our efforts to enforce or protect our proprietary rights may be ineffective and could result in substantial costs and diversion of resources and management time, each of which could substantially harm our operating results. Additionally, changes in law may be implemented, or changes in the interpretation of such laws may occur, that may affect our ability to protect and enforce our patents and other intellectual property.
Risks Related to Owning Our Common Stock and this Offering
There is a limited public market for our securities.
Our common stock is currently quoted on the Pink Open Market and there has been a limited public market for our common stock. The daily trading volume of our common stock has been limited. We cannot predict the extent to which investor interest in us following this offering and our listing on the NYSE American will lead to the development of an active trading market or how liquid that trading market might become. The lack of an active trading market may reduce the value of shares of our common stock and impair the ability of our stockholders to sell their shares at the time or price at which they wish to sell them. An inactive trading market may also impair our ability to raise capital by selling our common stock and may impair our ability to acquire or invest in other companies, products, or technologies by using our common stock as consideration.
Our failure to meet the continued listing requirements of the NYSE American could result in a delisting of our common stock.
We have been authorized to list our common stock on the NYSE American under the symbol “LPTV”, subject to meeting all applicable listing standards upon completion of the offering. If accepted for listing on the NYSE American, we are required to meet certain listing requirements to maintain the listing of our common stock on the NYSE American. If we fail to satisfy the continued listing requirements of the NYSE American, such as minimum financial and other continued listing requirements and standards, including those regarding minimum stockholders’ equity, minimum share price, and certain corporate governance requirements, the NYSE American may take steps to delist our common stock, which could have a materially adverse effect on our ability to raise additional funds as well as the price and liquidity of our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a notice of or ultimate delisting, we would expect to take actions to restore our compliance with the NYSE American’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to remain listed or become listed again.
 
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The trading price of our common stock has been and will likely continue to be volatile.
The trading price of our common stock has been and is likely to continue to be volatile. The market price of our common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including:

the number of shares of our common stock publicly owned and available for trading;

quarterly variations in our results of operations or those of our competitors;

the accuracy of any financial guidance or projections;

our actual or anticipated operating performance and the operating performance of similar companies in the music video, OOH entertainment, or digital media spaces;

our announcements or our competitors’ announcements regarding new services, enhancements, significant contracts, acquisitions, or strategic investments;

general economic conditions and their impact on advertising spending;

the overall performance of the equity markets;

threatened or actual litigation;

changes in laws or regulations relating to our services; and

sales or expected sales of our common stock by us, and our officers, directors, and stockholders.
In addition, the stock market in general, and the market for small media companies, have experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to the operating performance of those companies. Securities class action litigation has often been instituted against companies following periods of volatility in the overall market and in the market price of a company’s securities. Such litigation, if instituted against us, could result in very substantial costs, divert our management’s attention and resources and harm our business, operating results, and financial condition.
Because of their significant ownership of our common stock, our founders and other large investors have substantial control over our business, and their interests may differ from our interests or those of our other stockholders.
As of August 31, 2022, our two co-founders (Jon Niermann and Liam McCallum) and a member of our Board of Directors (Bruce Cassidy) beneficially owned or controlled, directly or indirectly, common stock representing 34.2% of the combined voting power of all our outstanding voting securities. Assuming the closing of this offering and taking into account the conversion of the 2022 Notes and 2023 Notes into common stock, as well as the automatic cashless exercise of the Automatic Warrants, it is expected that such individuals collectively will own an aggregate of 32.1% of the combined voting power of all our outstanding voting securities (or 31.9% if the underwriter exercises its option to purchase additional shares in full), based on the sale of our common stock at the public offering price in this offering of $5.00. A stockholder affiliated with one of our directors has committed to purchase an aggregate of approximately $2.3 million of shares of our common stock in this offering at the public offering price. To the extent this investor is allocated and purchases shares in this offering, such purchase would increase the percentage ownership and control that our executive officers, directors and principal stockholders who currently beneficially own more than 5% of our common stock would have after this offering. As a result of their ownership or control of our voting securities, if our founders and/or significant stockholders act together, they will have significant control over the outcome of substantially all matters submitted to our stockholders for approval, including the election of directors. This may delay or prevent an acquisition or cause the trading price of our common stock to decline. Our founders may have interests different from yours. Therefore, the concentration of voting power among our founders may have an adverse effect on the price of our common stock.
Sales of substantial amounts of our common stock in the public markets by our co-founders or other stockholders, or the perception that such sales might occur, could reduce the price that our common stock might otherwise attain.
Sales of substantial amounts of our common stock in the public market by our founders, affiliates, or non-affiliates, or the perception that such sales could occur, could adversely affect the trading price of our
 
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common stock, and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate. We are unable to predict the effect that such sales may have on the prevailing price of our common stock.
We, our directors and our executive officers, and stockholders who own more than 5% of our common stock, have entered into or will enter into lock-up agreements with the underwriter of this offering pursuant to which they and we have agreed, or will agree, that, subject to certain exceptions, we will not issue, and they will not sell or transfer or hedge any shares or any securities convertible into or exchangeable for shares of our common stock for a period of 90 days after the date of this prospectus. See the section titled “Underwriting” for more information. Sales of a substantial number of such shares upon expiration of, or the perception that such sales may occur, or early release of the securities subject to, the lock-up agreements, could cause our stock price to fall or make it more difficult for you to sell your common stock at a time and price that you deem appropriate. A decline in the price of our common stock might impede our ability to raise capital through the issuance of additional common stock or other equity securities.
If securities or industry analysts publish inaccurate or unfavorable research about our business or cease publishing research about our business, our share price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that securities or industry analysts publish about our Company, if any do so in the future. If one or more of the analysts who may cover us in the future downgrade our common stock or publish inaccurate or unfavorable research about our Company, our common stock price would likely decline. If no securities or industry analysts commence coverage of our Company, the trading price of our shares would likely be negatively impacted. Further, if one or more of these analysts, once they cover us, cease coverage of our Company or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and trading volume to decline.
The requirements of being a public company with its common stock listed on the NYSE American may strain our resources and divert management’s attention.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act, and other applicable securities rules and regulations. Compliance with these rules and regulations incurs substantial legal and financial compliance costs, makes some activities more difficult, time-consuming, or costly, and places increased demand on our systems and resources. The Exchange Act requires, among other things, that we file annual and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. To maintain disclosure controls and procedures and internal control over financial reporting that meet this standard, significant resources and management oversight are required. As a result, management’s attention may be diverted from other business concerns, which could harm our business and operating results.
In addition, in connection with this offering, our common stock will be listed on the NYSE American, and thus we will be subject to various continued listing standards, which will require our ongoing compliance and attention, as well as various corporate governance and other rules, which will impact the way we raise capital, govern ourselves and otherwise run our business. Failing to comply with any NYSE American rules could result in the delisting of our common stock from the NYSE American, which could have a material impact on the price of our common stock.
You may experience future dilution as a result of future equity offerings.
In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may not be the same as the price per share in this offering. We may sell shares or other securities in any other offering at a price per share that is less than the price per share paid by the investors in this offering, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in future transactions may be higher or lower than the price per share paid by investors in this offering. If any of the above should occur, our stockholders, including investors who
 
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purchase shares of common stock in this offering, will experience additional dilution, and any such issuances may result in downward pressure on the price of our common stock.
We do not expect to declare any dividends in the foreseeable future.
We have never declared or paid any cash dividends on our share capital. The continued operation of our business will require substantial cash, and we currently intend to retain any future earnings for working capital and general corporate purposes. Accordingly, we do not anticipate paying any cash dividends to holders of our common stock at any time in the foreseeable future. Any determination to pay future dividends will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, contractual restrictions, indebtedness, restrictions imposed by applicable law and other factors our Board of Directors deems relevant. There is no guarantee that your shares of common stock will appreciate in value or even maintain the price at which you purchased your shares of common stock, and you may lose the entire amount of your investment.
Exercise of warrants, and issuance of incentive stock grants may have a dilutive effect on our stock, and negatively impact the price of our common stock.
As of August 31, 2022, we had 6,273,007 shares issuable upon exercise of warrants outstanding at a weighted average exercise price of $5.04 per share. With respect to such warrants outstanding, 1,950,236 shares issuable under the Automatic Warrants are expected to convert into 1,144,215 shares simultaneously with the closing of this offering (based on the public offering price in this offering of $5.00 per share). As of August 31, 2022, an aggregate of 6,337,101 shares were issuable upon the exercise of outstanding options under all of our equity incentive plans, at a weighted average exercise price of $3.40 per share. We are able to grant stock options, restricted stock, restricted stock units, stock appreciation rights, bonus stocks, and performance awards under the Amended and Restated 2020 Equity Incentive Plan. As of September 18, 2022, an additional 4,200,329 shares were available for issuance under the Amended and Restated 2020 Equity Incentive Plan; excluding the retention awards to be granted on the first day of trading after the pricing of this offering under the Amended and Restated 2020 Equity Incentive Plan in the aggregate amount of 1,780,000 shares issuable upon exercise of options, with an assumed exercise price of $5.00 per share, and 890,000 RSUs, having an aggregate value of $8.9 million, based on the public offering price in this offering of $5.00 per share.
To the extent that any of the outstanding warrants and options described above are exercised, dilution to the interests of our stockholders may occur. For the life of such warrants and options, the holders will have the opportunity to profit from a rise in the price of the common stock with a resulting dilution in the interest of the other holders of common stock. The existence of such warrants and options may adversely affect the market price of our common stock and the terms on which we can obtain additional financing, and the holders of such warrants and options can be expected to exercise them at a time when we would, in all likelihood, be able to obtain additional capital by an offering of our unissued capital stock on terms more favorable to us than those provided by such warrants and options.
Our management might apply the net proceeds from this offering in ways with which you do not agree and in ways that may impair the value of your investment.
We currently intend to use the net proceeds from this offering for marketing, new customer development, working capital and other general corporate purposes. Our management has broad discretion as to the use of these proceeds and you will be relying on the judgment of our management regarding the application of these proceeds. We might apply these proceeds in ways with which you do not agree, or in ways that do not yield a favorable return. If our management applies these proceeds in a manner that does not yield a significant return, if any, on our investment of these net proceeds, it could compromise our ability to pursue our growth strategy and adversely affect the market price of our common stock.
The conversion of the 2022 Notes and 2023 Notes, and automatic exercise of certain warrants, upon the closing of this offering will result in substantial dilution to holders of our common stock.
As of August 31, 2022, there were 51,179,865 shares of common stock issued and outstanding. Upon the closing of this offering, (i) all of the 2022 Notes will convert into an aggregate of 783,140 shares, based
 
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on the outstanding principal and interest of $3,132,565 as of August 31, 2022, and a conversion price of $4.00 per share (which is 80% of $5.00 (the public offering price in this offering)), (ii) all of the 2023 Notes will convert into an aggregate of 1,189,031 shares, based on the outstanding principal and interest of $2,140,257 as of August 31, 2022, and the conversion price of $1.80 per share, and (iii) the Automatic Warrants, exercisable for an aggregate of 1,950,236 shares of common stock as of August 31, 2022, having a weighted average exercise price of $2.07, unless previously exercised for cash, will be automatically exercised on a cashless/net basis pursuant to the terms thereof into an aggregate of 1,144,215 shares of common stock, based on the public offering price in this offering of $5.00 per share and assuming none of the Automatic Warrants are exercised prior to the closing of this offering (the events described in the foregoing (i), (ii) and (iii), collectively, the “Conversions”). The Conversions will result in substantial dilution to other holders of our common stock and other securities. See the section entitled “Dilution” for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.
If you purchase shares of common stock in this offering, you will experience immediate and substantial dilution in your investment. You will experience further dilution if we issue additional equity or equity-linked securities in the future.
Because the price per share of our common stock being offered is substantially higher than the as adjusted net tangible book value per share of our common stock, you will suffer immediate and substantial dilution with respect to the net tangible book value of the common stock you purchase in this offering. Based on the public offering price of $5.00 per share, and our pro forma net tangible book value as of June 30, 2022 (taking into account the Conversions), if you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of $4.838 per share with respect to the as adjusted net tangible book value of the common stock. See the section entitled “Dilution” for a more detailed discussion of the dilution you will incur if you purchase common stock in this offering.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except for historical information, this prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such forward-looking statements include, among others, those statements including the words “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans” and words of similar import. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Forward-looking statements are based on our current expectations and assumptions regarding our business, potential target businesses, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. You should understand that many important factors, in addition to those discussed in this prospectus, could cause our results to differ materially from those expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include changes in local, regional, national, or global political, economic, business, competitive, market (supply and demand) and regulatory conditions and the following:

Our ability to raise capital when needed and on acceptable terms and conditions;

Our ability to attract and retain management with experience in digital media including digital video music streaming, and similar emerging technologies;

Our ability to negotiate, finalize and maintain economically feasible agreements with the major and independent music labels, publishers and performance rights organizations;

Our expectations regarding market acceptance of our services in general, and our ability to penetrate the digital video music streaming market in particular;

The scope, validity and enforceability of our and third-party intellectual property rights;

Our ability to comply with governmental regulations and changes in legislation or governmental regulations affecting us;

The intensity of competition in the markets in which we operate and those that we may seek to enter;

The effects of the ongoing pandemic caused by the spread of COVID-19 and our business customers ability to service their customers in out of home venues, especially considering government-imposed business shutdowns and capacity limitations;

Changes in the political and regulatory environment and in business and fiscal conditions in the United States and overseas;

Our ability to attract prospective users and to retain existing users;

Our dependence upon third-party licenses for sound recordings and musical compositions;

Our lack of control over the providers of our content and the providers’ ability to limit our access to music and other content;

Our ability to comply with the many complex license agreements to which we are a party;

Our ability to accurately estimate the amounts payable under our license agreements;

The limitations on our ability to reduce operating costs due to the minimum guarantees required under certain of our license agreements;

Our ability to obtain accurate and comprehensive information about music compositions in order to obtain necessary licenses or perform obligations under our existing license agreements;

Potential breaches of our security systems;
 
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Assertions by third parties of infringement or other violations by us of their intellectual property rights;

Competition for users and user listening time;

Our ability to generate sufficient revenue to be profitable or to generate positive cash flow on a sustained basis;

Our ability to accurately estimate our user metrics;

the manipulation of stream counts and user accounts and unauthorized access to our services;

Our ability to hire and retain key personnel;

Our ability to maintain, protect and enhance our brand;

Risks associated with our international expansion, including difficulties obtaining rights to stream music on favorable terms;

Risks relating to the acquisition, investment and disposition of companies or technologies;

Dilution resulting from additional share issuances;

Tax-related risks;

The concentration of voting power among our founders who have and will continue to have substantial control over our business;

International, national, or local economic, social or political conditions, and

Risks associated with accounting estimates, currency fluctuations and foreign exchange controls.
Other sections of this prospectus describe additional risk factors that could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time, and it is not possible for our management to predict all risk factors and uncertainties, nor are we able to assess the impact of all of these risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements. These risks and others described under the section “Risk Factors” above are not exhaustive.
Given these uncertainties, readers of this registration statement on Form S-1 are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
 
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USE OF PROCEEDS
We expect to receive net proceeds of approximately $10.4 million from this offering (or approximately $12.0 million if the underwriter’s option to purchase additional shares is exercised in full), after deducting the estimated underwriting discounts and commissions and offering expenses payable by us.
We currently intend to use the net proceeds we receive from this offering for marketing, new customer development, payment of offering-related bonuses (in the aggregate amount of approximately $1,100,000) to certain of our officers, working capital and other general corporate purposes.
Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition. As of the date of this prospectus, we cannot currently allocate specific percentages of the net proceeds that we may use for the purposes specified above, and we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual expenditures will depend upon numerous factors, including our sales and marketing efforts, demand for our services, our operating costs and the other factors described under “Risk Factors” in this prospectus. Accordingly, our management will have flexibility in applying the net proceeds from this offering. An investor will not have the opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the proceeds.
Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.
 
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MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Market for Common Stock
Our common stock was previously quoted on the Pink Open Market under the symbol “LPTV.” Quotations on the Pink Open Market reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. On September 21, 2022, the last reported sale price of our common stock on the Pink Open Market was $9.20 per share, giving effect to the reverse stock split of one-for-three completed on September 20, 2022.
Our common stock has been approved for listing on the NYSE American under the symbol “LPTV” and will begin trading on the NYSE American on September 22, 2022, subject to meeting all applicable listing standards upon completion of the offering. The last reported sale price of our common stock on the Pink Open Market may not be indicative of the market price of our common stock on the NYSE American if our common stock trades thereon.
As of August 31, 2022, there were approximately 316 holders of record of our common stock.
Dividend Policy
We have never declared or paid cash dividends on our common stock. We intend to retain all available funds and any future earnings, if any, to fund our business and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to dividend policy will be made at the discretion of our Board of Directors and will depend upon our results of operations, financial condition, contractual restrictions, indebtedness, restrictions imposed by applicable law and other factors our Board of Directors deems relevant.
 
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and our capitalization as of June 30, 2022:

on an actual basis;

on a pro forma basis to give effect to (i) the conversion of all of the 2022 Notes, simultaneously with the closing of this offering, into an aggregate of 770,612 shares, based on the outstanding principal and interest of $3,082,455 as of June 30, 2022, and a conversion price of $4.00 per share (which is 80% of $5.00 (the public offering price in this offering)), (ii) the conversion of all of the 2023 Notes, simultaneously with the closing of this offering, into an aggregate of 1,171,849 shares, based on the outstanding principal and interest of $2,109,329 as of June 30, 2022, and the conversion price of $1.80 per share and (iii) the automatic cashless exercise of the Automatic Warrants, simultaneously with the closing of this offering, pursuant to the terms thereof into an aggregate of 1,144,215 shares of common stock, based on the public offering price in this offering of $5.00 per share and assuming none of the Automatic Warrants are exercised prior to the closing of this offering; and

on a pro forma as adjusted basis to give effect to our sale of 2,400,000 shares of common stock in this offering at the public offering price of $5.00 per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
The following information of our cash and cash equivalents and capitalization following the completion of this offering is illustrative only and will change based on the actual public offering price and other terms of this offering determined at pricing. You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes appearing elsewhere in this prospectus.
As of June 30, 2022
(in thousands except share data)
Actual
Pro Forma
Pro
Forma as
Adjusted
Cash and cash equivalents
$ 710 710 11,060
Convertible debt, net (2022 Notes; all current)
2,606
Convertible debt, net (2023 Notes; including current portion of $72)
215
Non-revolving lines of credit
3,519 3,519 3,519
Total Debt
6,340 3,519 3,519
Stockholders’ equity:
Common stock, $0.0001 par value, 105,555,556 authorized and 51,179,865 shares issued and outstanding, actual; 54,266,542 shares issued and outstanding, pro forma; 56,666,542 shares issued and outstanding, pro forma as adjusted
5 5 6
Additional paid-in-capital
79,329 84,520 94,870
Accumulated deficit
(81,764) (83,079) (83,079)
Total stockholders’ equity (deficit)
(2,429) 1,446 11,796
Total Capitalization
3,910 4,965 15,315
The number of shares of our common stock to be outstanding upon completion of this offering is based on 51,179,865 shares, actual and 54,266,542 shares, pro forma, of our common outstanding as of June 30, 2022, and excludes, in each case:

4,026,439 shares of common stock issuable upon the exercise of outstanding warrants (excluding the Automatic Warrants) at a weighted average exercise price of $6.47 per share as of June 30, 2022;

6,322,101 shares of common stock issuable upon the exercise of outstanding options at a weighted average exercise price of $3.39 per share as of June 30, 2022, which options were issued under our 2020 Equity Incentive Plan or our 2016 Equity Incentive Plan;
 
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482,000 additional shares of common stock reserved for issuance under our 2020 Equity Incentive Plan as of June 30, 2022;

retention awards in the amount of 1,780,000 shares issuable upon exercise of options, with an assumed exercise price of $5.00 per share, and 890,000 RSUs, having an aggregate value of $8.9 million, based on the public offering price in this offering of $5.00 per share, to be granted on the first day of trading after the pricing of this offering under the Amended and Restated 2020 Equity Incentive Plan to senior management; and

192,000 shares (220,800 shares if the underwriter exercises its option to purchase additional shares in full) of common stock issuable upon the exercise of warrants to be issued to the underwriter upon the completion of this offering in an amount equal to 8% of the shares sold in this offering, with an exercise price equal to 120% of the public offering price per share, as described in “Underwriting.”
Except as indicated otherwise, the discussion and table above assume no exercise of the underwriter’s option to purchase additional shares.
 
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DILUTION
If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering. We calculate net tangible book value per share by dividing the net tangible book value (tangible assets less total liabilities) by the number of outstanding shares of our common stock.
Our historical net tangible book value (deficit) as of June 30, 2022, was $(5,017,923), or $(0.098) per share of common stock.
Our pro forma net tangible book value (deficit) as of June 30, 2022, was $(1,142,432), or $(0.021) per share of common stock. Pro forma net tangible book value gives effect to (i) the conversion of all of the 2022 Notes, simultaneously with the closing of this offering, into an aggregate of 770,612 shares, based on the outstanding principal and interest of $3,082,455 as of June 30, 2022, and a conversion price of $4.00 per share (which is 80% of $5.00 (the public offering price in this offering)), (ii) the conversion of all of the 2023 Notes, simultaneously with the closing of this offering, into an aggregate of 1,171,849 shares, based on the outstanding principal and interest of $2,109,329 as of June 30, 2022, and the conversion price of $1.80 per share and (iii) the automatic cashless exercise of the Automatic Warrants, simultaneously with the closing of this offering, pursuant to the terms thereof into an aggregate of 1,144,215 shares of common stock, based on the public offering price in this offering of $5.00 per share and assuming none of the Automatic Warrants are exercised prior to the closing of this offering.
After giving effect to our sale of 2,400,000 shares of our common stock by us in this offering at the public offering price of $5.00 per share, after deducting the estimated underwriting discounts and commissions and the estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2022, would be $9,207,662, or $0.162 per share. This represents an immediate increase in the pro forma net tangible book value of $0.183 per share to existing shareholders and an immediate dilution of $4.838 per share to investors purchasing shares in this offering. The following table illustrates this per share dilution:
Public offering price
$ 5.00
Historical net tangible book value (deficit) per share as of June 30, 2022
$ (0.098)
Increase in historical net tangible book value per share attributable to pro forma
events
0.077
Pro forma net tangible book value (deficit) per share as of June 30, 2022
(0.021)
Increase in pro forma net tangible book value per share attributable to this offering
0.183
Pro forma as adjusted net tangible book value per share after this offering
0.162
Pro forma net tangible book value dilution per share to investors in this offering
$ 4.838
If the underwriter exercises its option in full, the pro forma as adjusted net tangible book value per share after giving effect to this offering would be approximately $0.191 per share, and the dilution in pro forma net tangible book value per share to investors in this offering would be approximately $4.809 per share.
The total number of shares reflected in the discussion and tables above is based on 51,179,865 shares, actual and 54,266,542 shares, pro forma, of our common outstanding as of June 30, 2022, and excludes, in each case:

4,026,439 shares of common stock issuable upon the exercise of outstanding warrants (excluding the Automatic Warrants) at a weighted average exercise price of $6.47 per share as of June 30, 2022;

6,322,101 shares of common stock issuable upon the exercise of outstanding options at a weighted average exercise price of $3.39 per share as of June 30, 2022, which options were issued under our 2020 Equity Incentive Plan or our 2016 Equity Incentive Plan;

482,000 additional shares of common stock reserved for issuance under our 2020 Equity Incentive Plan as of June 30, 2022;
 
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retention awards in the amount of 1,780,000 shares issuable upon exercise of options, with an assumed exercise price of $5.00 per share, and 890,000 RSUs, having an aggregate value of $8.9 million, based on the public offering price in this offering of $5.00 per share, to be granted on the first day of trading after the pricing of this offering under the Amended and Restated 2020 Equity Incentive Plan to senior management; and

192,000 shares (220,800 shares if the underwriter exercises its option to purchase additional shares in full) of common stock issuable upon the exercise of warrants to be issued to the underwriter upon the completion of this offering in an amount equal to 8% of the shares sold in this offering, with an exercise price equal to 120% of the public offering price per share, as described in “Underwriting.”
Except as indicated otherwise, the discussion and table above assume no exercise of the underwriter’s option to purchase additional shares.
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a multichannel digital video platform media company that uses marketing technology, or “MarTech,” to generate our revenue and offer our services. Our technology and vast library of videos and licensed content enable us to curate and distribute short-form videos to out-of-home (“OOH”) dining, hospitality, retail, convenience stores and other locations and venues to enable them to inform, entertain and engage their customers. Our technology provides third-party advertisers with a targeted marketing and promotional tool for their products and services and, in certain instances, allows us to measure the number of potential viewers of such advertising and promotional materials. We also allow OOH customers to access our service without advertisements by paying a monthly subscription fee. In addition to providing services to OOH venue operators, we currently provide our services direct to consumers (“D2C”) in their homes on connected TVs (“CTVs”) and on their mobile devices. We moved to a primarily advertising-based model starting in early 2021.
We offer self-curated music video content licensed from major and independent record labels, as well as movie, television and video game trailers, trivia, kid-friendly videos, viral videos, drone footage, news headlines, and lifestyle and atmospheric channels. We distribute our content and advertising inventory to digital screens located in OOH locations primarily through (i) our owned and operated platform (“O&O Network”) of Loop Media-designed “small-box” streaming Android media players (“Loop Players”) and legacy ScreenPlay computers and (ii) through screens on digital networks owned and operated by third parties (“Partner Network”, and together with the O&O Network, the “Loop Network”). As of the date of this prospectus, we have expanded to over 43,000 OOH screens across the Loop Network. As of June 30, 2022, we had 12,584 QAUs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Key Performance Indicators.” We launched our Partner Network business beginning in May 2022 with one partner on approximately 17,000 of the partner’s screens, and we have since added an additional 13,500 screens in a second partner’s network, for a total of 30,500 screens as of the date of this prospectus in our Partner Network. Our legacy businesses, including our content subscription-based business and our CTV business, complement these newer businesses.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Key Performance Indicators
We review our quarterly active units (“QAUs”) and average revenue per unit player (“ARPU”), among other key performance indicators, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Quarterly Active Units
We define an “active unit” as (i) an ad-supported Loop Player (or DOOH location using our ad-supported service through our “Loop for Business” application or using a DOOH venue-owned computer screening our content) that is online, playing content, and has checked into the Loop analytics system at least once in the 90-day period or (ii) a DOOH location customer using our subscription service at any time during the 90-day period. We use “QAU” to refer to the number of such active units during such period.
 
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Beginning October 1, 2021, we began to pre-activate almost all of our Loop Players prior to delivery to customers, in response to feedback from customers and in order to further streamline the installation process and simplify the use of the Loop Players in DOOH locations. Pre-activated Loop Players are ordered by third-party DOOH locations and represent potential revenue for us when the Loop Players are installed in the DOOH locations. As a result of these operational changes, for any period following September 30, 2021, we will include in our definition of “active unit” any Loop Player that has been pre-activated and shipped by us to a DOOH location customer for a period of 90 days post shipment, regardless of whether such customer utilizes the Loop Player in their DOOH location. After the 90-day period, these Loop Players will drop out of the QAU definition, unless they are otherwise online, playing content, and checked into the Loop analytics system at least once in any subsequent 90-day period. Prior to October 1, 2021, if a Loop Player was not activated by the DOOH location operator it would not be counted as an active unit. Accordingly, our QAUs for periods subsequent to September 30, 2021 will not be strictly comparable to our September 30, 2021, or prior period, QAUs. Increases or decreases in our QAU may not correspond with increases or decreases in our revenue, and QAU may be calculated in a manner different than any similar key performance indicator used by other companies.
For the quarter ended June 30, 2022, QAU was 12,584, compared to 10,530 for the quarter ended March 31, 2022, a 20% increase. The growth in QAUs is almost entirely the result of a growth in our ad-supported Loop Players. QAU was 8,156 for the quarter ended December 31, 2021 and 5,791 for the quarter ended September 30, 2021.
Average Revenue Per Unit
We define a “unit player” as (i) an ad-supported Loop Player (or a DOOH location using our ad-supported service through our “Loop for Business” application or using a DOOH location-owned computer screening our content) or (ii) a DOOH location customer using our subscription service at any time during the 90-day period. A unit player that is supported by our advertising-based revenue model is an ad-supported unit player and a unit player that is supported by a subscription-based revenue model is a subscription unit player. We calculate advertising ARPU (“AD ARPU”) by dividing quarterly revenues from our DOOH ad-supported service for the period by QAUs for our ad-supported unit players. We calculate subscription ARPU (“SUB ARPU”) by dividing quarterly revenues from our DOOH subscription supported service for the period by QAUs for our subscription supported unit players.
Our AD ARPU fluctuates based on a number of factors, including the length of time in a quarter that a unit player is activated and operating, the CPMs we are able to achieve for our advertising impressions, and the advertising fill rates that we are able to achieve. Our SUB ARPU fluctuates based on a number of factors, including the timing of the start of a customer subscription for a subscription supported unit player, the number of ad-supported unit players we have, and the price customers pay for those subscriptions. An increase in the number of unit players over the course of a quarterly period may have the effect of decreasing quarterly ARPU, particularly if such players are added towards the end of the quarterly period. Increases or decreases in ARPU may not correspond with increases or decreases in our revenue, and ARPU may be calculated in a manner different than any similar key performance indicator used by other companies.
For the quarter ended June 30, 2022, AD ARPU was $526, compared to $435 for the quarter ended March 31, 2022, a 21% increase, primarily resulting from our efforts to optimize our CPMs and increase fill rates. AD ARPU was $236 for the quarter ended December 31, 2021.
For the quarter ended June 30, 2022, SUB ARPU was $235, compared to $429 for the quarter ended March 31, 2022, a (45.2)% decrease. SUB ARPU was $410 for the quarter ended December 31, 2021.
Seasonality
We have seen seasonality in our revenue and business related to advertising sales and the distribution of our Loop Player. This seasonality may not be reflected in our results of operations as we experienced overall growth in revenue in recent quarters and expect to continue to do so, which may obscure underlying seasonal trends. The underlying seasonality, nonetheless, may act to slow our revenue growth in any given period.
 
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The first quarter of the calendar year (our second fiscal quarter) is traditionally the least profitable quarter in terms of revenue generation for ad publishers (such as us), as advertisers are holding and planning their budgets for the year and consumers tend to spend less after the winter holiday season. This results in fewer ad demands and lower CPMs. The second quarter of the calendar year, from April to June (our third fiscal quarter), typically experiences increased ad demand and higher CPMs over the first quarter, as advertisers start to spend their budgets in greater amounts. The third quarter of the calendar year, from July to September (our fourth fiscal quarter), typically sees a slight increase in CPMs and ad demands compared to the second quarter, even though consumers spend more time outdoors and less time online in the summer months. The fourth quarter of the calendar year, from October to December (our first fiscal quarter), is typically the most profitable quarter for publishers, as companies want their brands and products to be seen in the run up to the holidays season. This generally results in publishers receiving the highest CPMs and the greatest ad demand for their ad impressions during the fourth quarter. As a result of these market trends for digital advertising we generally expect to receive higher CPMs and greater ad fill rates during the fourth quarter of a calendar year (our first fiscal quarter) and lower CPMs and reduced ad fill rates during the first quarter of a calendar year (our second fiscal quarter). We seek to offset the reduction in CPMs and ad fill rates with increased Loop Player distribution and ad impressions across our ad-supported services.
See “Business — Seasonality” for a more detailed discussion regarding the seasonality of our business and results of operations.
Components of results of operations
Revenue
Revenue generated from content and streaming services, including content encoding and hosting, are recognized over the term of the service based on bandwidth usage. Revenue generated from content subscription services in customized formats is recognized over the term of the service.
Cost of Revenue
Cost of revenue consists of expenses related to licensing, content delivery and customer support. Cost of revenue represents the amortized cost of ongoing licensing and hosting fees, which is recognized over time based on usage patterns. The depreciation expense associated with the Loop Players is not included in cost of sales.
Operating Expenses
Operating expenses support the general overhead related to all the products and services that we provide to our customers and, as a result, they are presented in an aggregate total.
Sales, General and Administrative Expenses
Sales and marketing expenses consist primarily of employee compensation and related costs associated with our sales and marketing staff, including salaries, benefits, bonuses, commissions as well as costs relating to our marketing and business development. We intend to continue to invest resources in our sales and marketing initiatives to drive growth and extend our market position. In light of the salary increases and bonuses for fiscal year 2022 approved by our Board of Directors in September 2022, as described in “Executive Compensation — Employment Agreements”, selling, general and administrative expenses are expected to materially increase.
General and administrative expenses consist of employee compensation and related costs for executive, finance, legal, human resources, recruiting, and employee-related information technology and administrative personnel, including salaries, benefits, bonuses and, depreciation, facilities, recruiting and other corporate services.
Goodwill Impairment
Goodwill impairment occurs when the carrying amount of a goodwill asset is greater than its fair value. The amount of the impairment is the difference between the two figures. Goodwill is recorded as part
 
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of a corporate acquisition, representing the excess of the price paid over the value of the underlying assets and liabilities of the acquiree.
Other Income/Expense
Interest expense
Interest expense consists of interest expense on our outstanding indebtedness and amortization of debt issuance costs.
Income taxes
We account for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. We have no material uncertain tax positions for any of the reporting periods presented.
Consolidated Results of Operations
For the nine months ended June 30, 2022, compared to the nine months ended June 30, 2021
Nine months ended June 30,
2022
2021
$ variance
% variance
Revenue
$ 18,679,956 $ 2,660,004 $ 16,019,952 602%
Cost of revenue
11,978,477 1,949,979 10,028,498 514%
Gross profit
6,701,479 710,025 5,991,454 844%
Total operating expenses
19,354,942 17,602,550 1,752,392 10%
Loss from operations
(12,653,463) (16,892,525) 4,239,062 (25)%
Other income (expense):
Interest income
200 8,653 (8,453) (98)%
Interest expense
(1,976,941) (1,443,917) (533,024) 37%
Income from equity investment
1,551 (1,551) (100)%
Change in fair value of derivatives
164,708 164,708 N/A%
Gain/(Loss) on extinguishment of debt, net
(454,563) 578,386 (1,032,949) (179)%
Total other income (expense)
(2,266,596) (855,327) (1,411,269) 165%
Provision for income taxes
(1,051) (99,830) 98,779 (99)%
Net loss
$ (14,921,110) $ (17,847,682) $ 2,926,572 (16)%
Total revenue
Our revenue increased for the nine months ended June 30, 2022, from the same period in 2021 by $16,019,952, or 602%, primarily due to an increased DOOH player count and increased revenue per player. Subscription revenue also increased due to more active users from additional DOOH locations.
 
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Cost of revenue
Cost of revenue increased for the nine months ended June 30, 2022, from the same period in 2021 by $10,028,498, or 514%, primarily a result of increased usage of royalty content stemming from the increase in advertising revenue.
Gross profit
Gross profit increased for the nine months ended June 30, 2022, from the same period in 2021 by $5,991,454 or 844%, primarily due to increased sales and a change in our revenue mix.
Total operating expenses
Operating expenses increased for the nine months ended June 30, 2022, from the same period 2021 by $1,752,392 or 10%, primarily as a result of increased corporate expenses due to increased revenue.
Total other income (expense)
Other income and expenses increased for the nine months ended June 30, 2022, from the same period in 2021 by $1,411,269 or 165%, primarily due to an increase in interest expense and a loss of gain on extinguishment of debt, net.
Year Ended September 30, 2021, Compared with Year Ended September 30, 2020
For the twelve months ended
September 30,
2021
For the twelve months ended
September 30,
2020
Revenue
$ 5,069,149 $ 2,966,454
Cost of revenue
4,165,066 1,086,053
Gross profit
904,084 1,880,401
Operating expenses
Selling, general and administrative
20,333,216 7,466,047
Impairment of goodwill and intangibles
11,206,523 6,350,000
Total operating expenses
31,539,739 13,816,047
Loss from operations
(30,635,655) (11,935,646)
Other income (expense)
Interest income
10,123 4,688
Interest expense
(1,690,552) (1,002,799)
Change in fair value of derivative
159,017
Gain/(loss) on extinguishment of debt, net
564,481 (105,266)
Gain on settlement of obligation
13,900 192,557
Loss on settlement of obligation
(15,000) (473,822)
Inducement expense
(3,793,406)
Other income
4,279 10,000
Total other income (expense)
(953,752) (5,168,048)
Income tax (expense) / benefit
614,912 (1,600)
Net loss
$ (30,974,496) $ (17,105,294)
Deemed dividend
(3,800,000)
Net loss attributable to common stockholders
$ (30,974,496) $ (20,905,294)
Basic and diluted net loss per common share
$ (0.25) $ (0.20)
Weighted average number of common shares outstanding
122,422,335 105,929,876
 
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Total revenue
Revenue increased 71% from $3.0 million in FY 2020 to $5.1 million in FY 2021. The $2.1 million increase in revenue year over year was primarily due to an advertising revenue share increase of $1.8 million because of the adoption of our ad-supported OOH business strategy. Loop subscription revenue increased $104,000 year over year due to an increase in the number of players installed.
Cost of revenue
Cost of revenue increased 284% from $1.1 million in FY 2020 to $4.2 million in FY 2021. The $3.1 million increase in cost of revenue year over year was primarily due to an increase in licensing costs of $2.7 million as a result of increased use of royalty content and usage. In addition, our network infrastructure and server hosting costs rose $484,000 year over year due to the increased use of all products.
Total operating expenses
Operating expenses increased 128% from $13.8 million in 2020 to $31.5 million in 2021. The $17.7 million increase in operating expenses year over year was due to the following factors:
Sales, General and Administrative Expenses
Stock compensation (non-cash) increased year over year by $6.3 million; payroll costs increased by $2.3 million over the same period due to increased headcount; marketing costs increased by $798,000 year over year; professional fees increased by $110,000 due to legal, consultant and auditor costs captured in the twelve months ending September 2021.
Impairment of goodwill and intangibles
Impairment at the end of 2020 was $6.4 million due to impairment of intangible assets acquired in 2019. The impairment charge for the twelve months ended September 30, 2021, was $11.2 million, a portion of which was related to a $1.4 million write-off of intangible assets related to our acquisition of SPKR, Inc and an intangible asset impairment of $2.6 million and a goodwill impairment of $4.4 million related to our EON Media acquisition.
Total other income (expense)
Other expenses decreased 82% from $5.2 million in 2020 to $1.0 million in 2021. The $4.2 million decrease in the period was primarily the result of the non-recurrence in 2021 of the inducement expense taken in 2020 described below. For the twelve months ended September 30, 2020, we recognized an inducement expense equal to the excess of the allocated fair value of the Series B Convertible preferred stock and the carrying value of the loan payable as of the date the inducement offers were accepted. The excess of the fair value of the Series B Convertible preferred stock over the carrying value of the loan payable was $3.8 million. There was no inducement expense in 2021. This amount was offset by a $1.2 million interest expense increase year over year as a result of the additional $2.95 million debt raised by us in connection with the 2022 Notes during the fiscal ended September 30, 2021.
EBITDA and Adjusted EBITDA
We believe that the presentation of EBITDA and Adjusted EBITDA, financial measures that are not part of U.S. Generally Accepted Accounting Principles, or U.S. GAAP, provides investors with additional information about our financial results. EBITDA and Adjusted EBITDA are important supplemental measures used by our board of directors and management to evaluate our operating performance from period-to-period on a consistent basis and as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations.
We define EBITDA as earnings before interest expense (income), income tax (expense)/benefit, depreciation and amortization.
 
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We define Adjusted EBITDA as earnings before interest expense (income), income tax (expense)/benefit, depreciation and amortization, adjusted for stock-based compensation and other non-recurring income and expenses, if any.
EBITDA is not measured in accordance with, or an alternative to, measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. As a non-GAAP measure, EBITDA has limitations in that it does not reflect all of the amounts associated with our results of operations as determined in accordance with U.S. GAAP. In particular:

EBITDA does not reflect the amounts we paid in interest expense on our outstanding debt;

EBITDA does not reflect the amounts we received in interest income on our investments;

EBITDA does not reflect the amounts we paid in taxes or other components of our tax provision;

EBITDA does not include depreciation expense from fixed assets; and

EBITDA does not include amortization expense.
Because of these limitations, you should consider EBITDA alongside other financial performance measures including net income (loss) and our financial results presented in accordance with U.S. GAAP.
The following table provides a reconciliation of net loss to EBITDA for each of the periods indicated:
Nine months ended June 30,
2022
2021
GAAP net loss
$ (14,921,110) $ (17,847,682)
Adjustments to reconcile to EBITDA:
Interest expense
1,976,941 1,443,917
Interest income
(200) (8,653)
Depreciation and Amortization expense*
1,128,702 1,855,475
Income Tax expense/(benefit)
1,051 99,830
EBITDA
$ (11,814,616) $ (14,457,113)
*
Includes amortization of license contract assets and depreciation and amortization expense.
The following table provides a reconciliation of net loss to EBITDA for each of the years indicated:
12 months ended
September 30, 2021
12 months ended
September 30, 2020
GAAP net loss
(30,974,496) (17,105,295)
Adjustments to reconcile to EBITDA:
Interest expense
1,690,552 1,002,799
Interest income
(10,123) (4,688)
Amortization and depreciation expense*
2,557,959 439,418
Income tax expense / (benefit)
(614,912) 1,600
EBITDA
$ (27,351,020) $ (15,666,170)
*
Includes amortization of license contract assets and depreciation and amortization expense.
Adjusted EBITDA
Adjusted EBITDA is not measured in accordance with, or an alternative to, measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles. As a non-GAAP measure, Adjusted EBITDA has limitations in that it does
 
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not reflect all of the amounts associated with our results of operations as determined in accordance with U.S. GAAP. In particular:

Adjusted EBITDA does not reflect the amounts we paid in interest expense on our outstanding debt;

Adjusted EBITDA does not reflect the amounts we paid in taxes or other components of our tax provision;

Adjusted EBITDA does not include depreciation expense from fixed assets;

Adjusted EBITDA does not include amortization expense;

Adjusted EBITDA does not include the impact of stock-based compensation;

Adjusted EBITDA does not include the impact of the impairment of intangible assets;

Adjusted EBITDA does not include the impact of the gain on extinguishment of debt;

Adjusted EBITDA does not include the impact of the loss on settlement of obligation; and

Adjusted EBITDA does not include the impact of the change in fair value of derivative.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures including net income (loss) and our financial results presented in accordance with U.S. GAAP.
The following table provides a reconciliation of net loss to Adjusted EBITDA for each of the periods indicated:
Nine months ended June 30,
2022
2021
GAAP net loss
$ (14,921,110) $ (17,847,682)
Adjustments to reconcile to Adjusted EBITDA:
Interest expense
1,976,941 1,443,917
Interest income
(200) (8,653)
Depreciation and Amortization expense*
1,128,702 1,855,475
Income tax expense (benefit)
1,051 99,830
Stock-based compensation
3,948,272 7,036,799
Impairment of intangible assets
(2,390,799)
Gain (loss) on extinguishment of debt, net
454,563 (578,386)
Change in fair value of derivative
(164,708)
Adjusted EBITDA
$ (7,576,489) $ (10,389,499)
*
Includes amortization of license contract assets and depreciation and amortization expense.
 
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The following table provides a reconciliation of net loss to Adjusted EBITDA for each of the years indicated:
12 months ended
September 30, 2021
12 months ended
September 30, 2020
GAAP net loss
(30,974,496) (17,105,295)
Adjustments to reconcile to Adjusted EBITDA:
Interest expense
1,690,552 1,002,799
Interest income
(10,123) (4,688)
Amortization and Depreciation expense*
2,557,959 439,418
Income Tax expense / (benefit)
(614,912) 1,600
Stock-based compensation
8,374,265 1,816,034
Impairment of intangible assets
11,206,523 6,350,000
Gain on extinguishment of debt
Loss on settlement of obligation
Change in fair value of derivative
Adjusted EBITDA
$ (7,770,232) $ (7,500,132)
*
Includes amortization of license contract assets and depreciation and amortization expense.
Liquidity and Capital Resources
As of June 30, 2022, we had cash of approximately $709,725. The following table provides a summary of our net cash flows from operating, investing, and financing activities.
Nine months ended June 30,
2022
2021
Net cash used in operating activities
$ (8,832,956) $ (7,040,035)
Net cash used in investing activities
(956,889) (1,495,708)
Net cash provided by (used in) financing activities
6,337,022 7,493,223
Change in cash
(3,452,823) (1,042,520)
Cash, beginning of period
4,162,548 1,971,923
Cash, end of period
$ 709,725 $ 929,403
As of September 30, 2021, we had cash of $4.2 million. The following table provides a summary of our net cash flows from operating, investing, and financing activities.
Year ended September 30,
2021
2020
Net cash used in operating activities
$ (9,529,061) $ (4,408,232)
Net cash used in investing activities
(1,522,186) (12,408)
Net cash (used in) provided by financing activities
13,241,871 6,093,536
Change in cash and cash equivalents
2,190,625 1,672,897
Cash, beginning of period
1,971,923 299,026
Cash, end of period
$ 4,162,548 $ 1,971,923
Cash flows for the nine months ended June 30, 2022 and 2021
Net cash used in operating activities
Net cash flows used in operating activities for the nine months ended June 30, 2022, were $8,832,956 primarily due to the net loss of $(14,921,110) offset by amortization of debt discount of $1,532,792,
 
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depreciation and amortization of $195,666, amortization of license content assets of $933,036, amortization of right-of-use assets of $118,719, stock-based compensation expense of $3,948,272, write off of bad debt $20,000, gain on extinguishment of debt of $(490,051), loss on early extinguishment of convertible debt of $944,614, change in fair value of derivatives of $(164,708), warrants issued for consulting services of $254,014, payment in kind for interest stock issuance of $177,000 and net decrease in operating assets and liabilities of $(1,381,200).
Net cash flows used in operating activities for the nine months ended June 30, 2021, were $(7,040,035) primarily due to the net loss of $(17,847,682) offset by amortization of debt discount of $954,080, depreciation and amortization expense of $1,452,799, amortization of license content assets of $402,676, amortization of right-of-use assets of $107,248, stock-based compensation expense of $7,528,800, warrants issued for severance of $82,000, write off of bad debt expense $208,791, gain on extinguishment of debt of $(579,486), impairment of intangible assets of $2,390,799, loss on settlement of obligations of $15,000, gain on settlement of obligations of $(13,900), equity method investment income of $(1,551) and net decrease in operating assets and liabilities of $(1,739,609).
Net cash used in investing activities
Net cash flows used in investing activities for the nine months ended June 30, 2022, related to the purchase of property and equipment of $(956,889).
Net cash flows used in investing activities for the nine months ended June 30, 2021, were $(1,495,708) for acquisition of fixed assets, net of cash acquired of $(750,000), cash paid for acquisition of EON Media Group, net of cash acquired of $(749,937), purchase of equipment of $2,752 and collection of note receivable of $1,477.
Net cash flow from financing activities
Net cash provided by financing activities for the nine months ended June 30, 2022, was $6,337,022 due to receipt of proceeds of $1,250,000 from the issuance of common stock, proceeds of $6,222,986 from a non-revolving lines of credit, proceeds of $2,079,993 from convertible debt, offset by $(2,715,865) repayment of convertible debt and $(500,092) of deferred offering costs.
Net cash provided by financing activities for the nine months ended June 30, 2021, was $7,493,223 primarily due to cash proceeds of $4,385,000 from issuance of common stock, cash proceeds of $486,637 from PPP loan, cash proceeds of $1,000,000 from issuance of preferred stock, cash proceeds of $2,950,000 from issuance of convertible debt, offset by principal payment of $(36,078) for convertible debt, repayment of $(292,336) for stockholder loans, $(1,000,000) for shares issued for cash, $(80,134) for share issuance costs and $80,134 for reverse merger costs.
As a result of the above activities, we recorded a net decrease in cash of $(3,452,823) for the nine months ended June 30, 2022. We reported a cash balance of $709,725 at June 30, 2022.
Cash flows for the years ended September 30, 2021 and 2020
Net cash flow from operating activities
Net cash used for operating activities during the year ended September 30, 2021, was $9,529,061 compared to $4,408,232 for the year ended September 30, 2020. The increase was primarily the result of an impairment charge on intangible assets of $11,206,523 and stock-based compensation expense of $8,292,265 in 2021 as compared to an impairment charge on intangible assets of $6,350,000 and stock-based compensation expense of $1,816,034 in 2020, partially offset by a change in non-cash working capital items from $862,788 during the year ended September 30, 2020, to $1,507,246 during the year ended September 30, 2021.
Net cash flow from investing activities
Net cash used in investing activities during the year ended September 30, 2021, was $1,522,186 as compared to $12,408 for the year ended September 30, 2020. The increase was primarily due to a $1,499,937 equity investment in an unconsolidated entity in the fourth calendar quarter of 2021.
 
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Net cash flow from financing activities
Net cash provided by financing activities during the year ended September 30, 2021, was $13,241,871 as compared to $6,093,536 for the year ended September 30, 2020. In the year ended September 30, 2021, we raised an aggregate of $9,455,233 through the sale of our common stock and warrants to purchase shares of our common stock to support and build our operations. We also issued convertible debt in the principal amount of $2,950,000 in fiscal 2021. We also received loan proceeds from the Paycheck Protection Program (“PPP”) loan program in the amount of $486,638 during the year ended September 30, 2021. During the year ended September 30, 2020, we also raised capital through the sale of our common stock, warrants and debt, including the proceeds of a PPP loan.
Future Capital Requirements
We have generated limited revenue, and as of June 30, 2022, our cash totaled $709,725, and we had an accumulated deficit of ($81,763,526). We believe that the net proceeds of this offering, together with our existing cash, will enable us to fund our operations for at least 12 months from the date of this prospectus. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect. We anticipate that we will continue to incur net losses for the foreseeable future. However, changing circumstances may cause us to expend cash significantly faster than we currently anticipate, and we may need to spend more cash than currently expected because of circumstances beyond our control.
Historically, our principal sources of cash have included proceeds from the issuance of common stock, preferred stock and warrants and proceeds from the issuance of debt. Our principal uses of cash have included cash used in operations, payments for license rights and payments relating to purchases of property and equipment. We expect that the principal uses of cash in the future will be for continuing operations, and general working capital requirements. We expect that as our operations continue to grow, we will need to raise additional capital to sustain operations and growth.
On February 23, 2022, we entered into a Non-Revolving Line of Credit Loan Agreement (the “Prior Loan Agreement”) with Excel Family Partnership, LLLP (“Excel”), an entity managed by Bruce Cassidy, a member of our board of directors, for aggregate principal amount of $1.5 million, which was amended on April 13, 2022, to increase the aggregate principal amount to $2.0 million (the “$2m Loan”). Effective as of April 25, 2022, we entered into a Non-Revolving Line of Credit Loan Agreement (the “Loan Agreement”) with Excel for an aggregate principal amount of $4,022,986 (the “Loan”). The Loan matures eighteen (18) months from the date of the Loan Agreement and accrues interest, payable semi-annually in arrears, at a fixed rate of interest equal to twelve (12) percent per year. On April 25, 2022, we used $2.0 million of the proceeds of the Loan to prepay all of the remaining outstanding principal and interest of the $2m Loan and the Prior Loan Agreement was terminated in connection with such prepayment. Under the Loan Agreement, we granted to the lender a security interest in all of our present and future assets and properties, real or personal, tangible or intangible, wherever located, including products and proceeds thereof (which was subsequently subordinated in connection with our Revolving Loan Agreement (as defined below)). In connection with the Loan, on April 25, 2022 we issued a warrant for an aggregate of up to 383,142 shares of our common stock. The warrant has an exercise price of $5.25 per share, expires on April 25, 2025 and shall be exercisable at any time prior to the expiration date.
Effective as of May 13, 2022, we entered into a Non-Revolving Line of Credit Loan Agreement (the “RAT Loan Agreement”) with several institutions and individuals and RAT Investment Holdings, LP, as administrator of the loan (the “Loan Administrator”) for aggregate principal amount of $2.2 million (the “RAT Loan”). The RAT Loan matures eighteen (18) months from the effective date of the RAT Loan Agreement and accrues interest, payable semi-annually in arrears, at a fixed rate of interest equal to twelve (12) percent per year. Under the RAT Loan Agreement, we granted to the lenders under the RAT Loan Agreement a security interest in all of our present and future assets and properties, real or personal, tangible or intangible, wherever located, including products and proceeds thereof, which security interest is pari passu with the Loan Agreement with Excel (which was subsequently subordinated in connection with our Revolving Loan Agreement). In connection with the RAT Loan Agreement, on May 13, 2022, we issued a warrant (each a “Warrant” and collectively, the “Warrants”) to each lender under the RAT Loan Agreement
 
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for an aggregate of up to 209,525 shares of our common stock (the “Warrant Shares”). Each Warrant has an exercise price of $5.25 per share, expires on May 13, 2025, and shall be exercisable at any time prior to the expiration date.
Effective as of July 29, 2022, we entered into a Loan and Security Agreement (the “Revolving Loan Agreement”) with Industrial Funding Group, Inc. (the “Initial Lender”) for a revolving loan credit facility for the principal sum of up to $4.0 million, and through the exercise of an accordion feature, a total sum of up to $10 million, evidenced by a Revolving Loan Secured Promissory Note, also effective as of July 29, 2022. Availability for borrowing under the Revolving Loan Agreement is dependent upon our assets in certain eligible accounts and measures of revenue, subject to reduction for reserves that the Senior Lender (as defined below) may require in its discretion, and the accordion feature is a provision whereby we may request that the Senior Lender increase availability under the Revolving Loan Agreement, subject to its sole discretion. As of August 2, 2022, we borrowed approximately $2.0 million under the Loan, and the Initial Lender assigned the Revolving Loan Agreement, and the loan documents related thereto, to GemCap Solutions, LLC (the “Senior Lender”). The loan matures on July 29, 2024 and accrues interest on the unpaid principal balance of advances, payable monthly in arrears, beginning on September 7, 2022, at an annual rate equal to the greater of (I) the sum of (i) the “Prime Rate” as reported in the “Money Rates” column of The Wall Street Journal, adjusted as and when such Prime Rate changes, plus (ii) zero percent (0.00%), and (II) four percent (4.00%). Under the Revolving Loan Agreement, we have granted to the Senior Lender a first-priority security interest in all of our present and future property and assets, including products and proceeds thereof. In connection with the loan, our existing secured lenders (the “Subordinated Lenders”) delivered subordination agreements (the “Subordination Agreements”) to the Senior Lender. We are permitted to make regularly scheduled payments, including payments upon maturity, to such subordinated lenders and potentially other payments subject to a measure of cash flow and receiving certain financing activity proceeds, in accordance with the terms of the Subordination Agreements. In connection with the delivery of the Subordination Agreements by the Subordinated Lenders, on July 29, 2022, we issued warrants to each Subordinated Lender on identical terms for an aggregate of up to 296,333 shares of our common stock. Each warrant has an exercise price of $5.25 per share, expires on July 29, 2025 (the “Expiration Date”), and shall be exercisable at any time prior to the Expiration Date. One warrant for 191,571 warrant shares was issued to Eagle Investment Group, LLC, an entity managed by Bruce Cassidy, a member of our board of directors, as directed by its affiliate, Excel Family Partners, LLLP (“Excel”), one of the Subordinated Lenders. The Subordinated Lenders receiving warrants for the remaining 104,762 warrant shares also will receive a cash payment of $22,000 six months from the date of the Subordination Agreements, representing one percent (1.00%) of the outstanding principal amount of the loan held by such Subordinated Lenders.
The 2023 Notes
We have borrowed funds for business operations from two of our stockholders, Dreamcatcher, LLC and Running Wind, LLC, each of which is a beneficial holder of more than 5% of our common stock, through convertible debt agreements (the “Convertible Promissory Notes”). Each Convertible Promissory Note was originally issued on December 5, 2018, on identical terms in the principal amount of $1,500,000, and each was amended and restated October 31, 2019, and October 23, 2020. The Convertible Promissory Notes carried interest at 10% per annum beginning on November 1, 2020, with monthly payments of unpaid interest accrued at 12.5% per annum to be paid in arrears through March 31, 2021, and were set to mature on December 1, 2023. Beginning April 1, 2021, we began paying equal monthly installments of principal and interest on the Convertible Promissory Notes at 10% per annum. The Convertible Promissory Notes were convertible at any time prior to the maturity in whole or in part into shares of our common stock at a price of $1.80 per share.
On May 9, 2022, we completed a refinancing of the Convertible Promissory Notes, then having the aggregate principal amount of $2,068,399 by prepaying the principal and interest owed on such Convertible Promissory Notes in full under the terms of the notes and issuing new substantially identical unsecured convertible debentures in the aggregate principal amount of $2,079,993 (the “2023 Notes”) to LM Note Acquisition LLC. Jeremy Boczulak, a beneficial holder of more than 5% of our common stock, has a 75.72 percentage ownership interest in LM Note Acquisition LLC. The 2023 Notes, like the Convertible Promissory Notes, mature on December 1, 2023, require monthly installments of principal and interest at 10% per annum and are convertible at any time prior to the maturity in whole or in part into shares of our
 
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common stock at a price of $1.80 per share. We had previously sought, but did not receive, certain concessions from the holders of the Convertible Promissory Notes related to ongoing monthly principal and interest payments and the conversion of the Convertible Promissory Notes into shares of our common stock in connection with any significant public equity capital raise by us. In connection with the issuance of the 2023 Notes, the holder thereof (the “2023 Noteholder”) has agreed to a cessation of principal and interest payments on the 2023 Notes until December 1, 2022, at which time accrued interest would be paid in a lump sum in cash and monthly principal and interest payments would resume. The 2023 Noteholder has further agreed to convert the 2023 Notes into shares of our common stock upon any significant public equity capital raise by us, including the offering contemplated by this prospectus. Accordingly, the 2023 Notes will be converted simultaneously with the closing of this offering into an aggregate of 1,189,031 shares, based on the outstanding principal and interest of $2,140,257 as of August 31, 2022 and the conversion price of $1.80 per share.
The 2023 Notes had aggregate remaining balances, including accrued interest, amounting to approximately $2.1 million and $3.0 million as of June 30, 2022, and 2021, respectively. We incurred interest expense for the Convertible Promissory Notes in the amounts of approximately $0.1 million and $0.4 million for the nine months ended June 30, 2022 and 2021, respectively, and $0.4 million and $0.3 million for the fiscal years ended September 30, 2021, and 2020, respectively.
In connection with an amendment to the Convertible Promissory Notes, in November 2019, we also issued warrants to purchase 591,784 shares of our common stock to Dreamcatcher, LLC and warrants to purchase 591,785 shares of our common stock to Running Wind, LLC, for an aggregate of 1,183,569 shares of our common stock, exercisable at $2.55 per share for a period of 10 years.
The 2022 Notes
From December 1, 2020, to June 1, 2021, we sold in a private placement, (i) $3,000,000 in aggregate principal amount of Senior Secured Promissory Notes and (ii) warrants to purchase 90,909 shares of our common stock at an exercise price of $8.25 per share. The investors in this private placement included entities controlled by Mr. Cassidy, who is a member of our board of directors. In connection with the offering, the entities controlled by Mr. Cassidy purchased an aggregate of $2,350,000 principal amount of the 2022 Notes and warrants to purchase an aggregate of 71,212 shares of our common stock at $8.25 per share. The warrants have a term of 10 years. The 2022 Notes mature on December 1, 2022. The 2022 Notes accrue interest in two different ways: (A) at the rate of 4% per annum, payable in cash, from the date of issuance of each note as follows: (1) interest from the issue date to November 30, 2021, is payable in advance on the date the note was executed; (2) six months of cash interest is payable in arrears on June 1, 2022; and (3) six months of cash interest is payable in arrears on the maturity date; and (B) at the rate of 6% per annum, payable in shares of our common stock in arrears on June 1, 2021, December 1, 2021, June 1, 2022, and the maturity date. As of August 31, 2022, a total of $3,132,565 in principal and interest was outstanding on the 2022 Notes. The 2022 Notes will be converted simultaneously with the closing of this offering into an aggregate of 783,140 shares, based on the outstanding principal and interest of $3,132,565 as of August 31, 2022 and a conversion price of $4.00 per share (which is 80% of $5.00, the public offering price in this offering).
The 2020 and 2021 Share Offering
In 2020 and 2021, we offered and sold in a private placement to accredited investors, $6,705,000 of shares of common stock at a price of $3.75 per share. The investors in this private placement included an entity controlled by Mr. Cassidy, who is a member of our board of directors, which invested $1.2 million for a total of 320,000 shares of common stock.
The 2021 Share and Warrant Offering
On September 30, 2021, we entered into securities purchase agreements with accredited investors pursuant to which we sold, in a private offering (i) an aggregate of 1,924,486 shares of our common stock and (ii) warrants to purchase up to an aggregate of 2,191,153 shares of common stock. Each investor was entitled to purchase one share of common stock and one warrant to purchase one share of common stock for an aggregate purchase price of $3.75. The warrants were immediately exercisable, have a three-year term
 
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and an exercise price of $8.25 per share. The investors in the offering included an entity controlled by Mr. Cassidy, who is a member of our board of directors. The entity controlled by Mr. Cassidy purchased 106,666 shares of common stock and warrants to purchase 106,666 shares of common stock in the offering, for gross proceeds of $400,000. Other investors in this offering were entities controlled by Jeremy Boczulak, who, as a result of these investments, became a beneficial holder of more than 5% of our common stock. Pursuant to the terms of this offering, an investor who purchased more than 50% of the total offering amount was entitled to receive warrants to purchase to purchase an additional 266,666 shares of common stock. That investor was an entity controlled by Mr. Boczulak. In total, the entities controlled by Mr. Boczulak purchased 1,817,520 shares of common stock and warrants to purchase 2,084,486 shares of common stock in the offering, for gross proceeds of $6,816,825.
Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:

Our ability to attract and retain management with experience in digital media including digital video music streaming, and similar emerging technologies;

Our ability to negotiate, finalize and maintain economically feasible agreements with the major and independent music labels, publishers and performance rights organizations;

Our expectations regarding market acceptance of our products in general, and our ability to penetrate digital video music streaming in particular;

The scope, validity and enforceability of our and third-party intellectual property rights;

The intensity of competition;

The effects of the ongoing pandemic caused by the spread of COVID-19 and our business customers ability to service their customers in out of home venues, especially considering government-imposed business shutdowns and capacity limitations;

Changes in the political and regulatory environment and in business and fiscal conditions in the United States and overseas;

Our ability to attract prospective users and to retain existing users;

Our dependence upon third-party licenses for sound recordings and musical compositions;

Our lack of control over the providers of our content and their effect on our access to music and other content;

Our ability to comply with the many complex license agreements to which we are a party;

Our ability to accurately estimate the amounts payable under our license agreements;

The limitations on our operating flexibility due to the minimum guarantees required under certain of our license agreements;

Our ability to obtain accurate and comprehensive information about music compositions in order to obtain necessary licenses or perform obligations under our existing license agreements;

Potential breaches of our security systems;

Assertions by third parties of infringement or other violations by us of their intellectual property rights;

Our ability to generate sufficient revenue to be profitable or to generate positive cash flow on a sustained basis;

Our ability to accurately estimate our user metrics;

Risks associated with manipulation of stream counts and user accounts and unauthorized access to our services;

Our ability to maintain, protect and enhance our brand;

Risks relating to the acquisition, investment and disposition of companies or technologies;
 
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Dilution resulting from additional share issuances;

Tax-related risks;

The concentration of voting power among our founders who have and will continue to have substantial control over our business; and

Risks associated with accounting estimates, currency fluctuations and foreign exchange controls.
We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or license and develop additional products and services to augment our current business operations. Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, services or companies to expand our operations, or for general corporate purposes. Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement. We have no arrangements, agreements, or understandings in place at the present time to enter into any acquisition, licensing or similar strategic business transaction.
If we raise additional funds by issuing equity securities, our stockholder will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our stockholder.
PPP Loan Round 1
On April 27, 2020, we received a loan in the aggregate amount of $573,500 from the U.S. Small Business Association (the “SBA”) in connection with the Paycheck Protection Program of the CARES Act (“PPP”). On May 10, 2021, we received a notification from the SBA that such PPP loan, including $573,500 of principal and $5,986 of accrued interest, was fully forgiven by the SBA.
PPP Loan Round 2
On April 26, 2021, we received the proceeds from an additional PPP loan in the amount of $486,638 from the SBA. On December 28, 2021, we received a notification from the SBA that such PPP loan was fully forgiven by the SBA.
Going Concern
For the nine months ended June 30, 2022, we had a net loss of $(14,921,110), had net cash used in operating activities of $(8,832,956), had working capital of $(1,565,517), and accumulated deficit of $(81,763,526). We have incurred net losses since inception. These conditions raise substantial doubt about our ability to continue as a going concern within one year from the issuance date of these consolidated financial statements.
Our primary source of operating funds since inception has been cash proceeds from debt and equity financing transactions. Our ability to continue as a going concern is dependent upon our ability to generate sufficient revenue and our ability to raise additional funds by way of its debt and equity financing efforts. There can be no assurance that adequate financing will be available in a timely manner, on acceptable terms, or at all.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or classification of the liabilities that might be necessary should we be unable to continue as a going concern. Our ability to continue as a going concern is dependent on management’s
 
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further implementation of our on-going and strategic plans, which include continuing to raise funds through equity and/or debt raises. Should we be unable to raise adequate funds, certain aspects of the on-going and strategic plans may require modification.
The outcome of these matters cannot be predicted at this time and there are no assurances that if achieved, we will have sufficient funds to execute our business plan or generate positive operating results.
Critical Accounting Policies and Use of Estimates
Use of estimates and assumptions
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions used in the revenue recognition of performance obligations, fair value of stock-based compensation awards, fair value measurements, right-of-use assets (“ROU”), lease liabilities, and allowance for doubtful accounts.
Revenue recognition
ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for us on January 1, 2018. Our revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. We applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. As sales are and have been primarily from delivery of streaming services, delivery of subscription content services in customized formats, and delivery of hardware and ongoing content delivery through software and we have no significant post-delivery obligations, this new standard did not result in a material recognition of revenue on our consolidated financial statements for the cumulative impact of applying this new standard. Therefore, there was no cumulative effect adjustment required.
We recognize revenue when it satisfies a performance obligation by transferring control over a product to a customer. Revenue is measured based on the consideration we expect to receive in exchange for those products. In instances where final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. Revenues are recognized under Topic 606 in a manner that reasonably reflects the delivery of our products and services to customers in return for expected consideration and includes the following elements:

executed contracts with our customers that we believe are legally enforceable;

identification of performance obligations in the respective contract;

determination of the transaction price for each performance obligation in the respective contract;

allocation the transaction price to each performance obligation; and

recognition of revenue only when we satisfy each performance obligation.
Performance obligations and significant judgments
Our revenue streams can be categorized into the following performance obligations and recognition patterns:

delivery of streaming services including content encoding and hosting; we recognize revenue over the term of the service based on bandwidth usage;

delivery of subscription content services in customized formats; we recognize revenue over the term of the service; and

delivery of hardware for ongoing subscription content delivery through software; we recognize revenue at the point of hardware delivery; and

revenue share arrangements, where platform providers distribute our licensed content and providers pay us a portion of the usage-based advertising revenues.
 
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Transaction prices for performance obligations are explicitly outlined in relevant contractual agreements; therefore, we do not believe that significant judgments are required with respect to the determination of the transaction price, including any variable consideration identified.
Cost of revenue
Cost of revenue represents the amortized cost of ongoing licensing and hosting fees, which is recognized over time based on usage patterns. The depreciation expense associated with the Loop players is not included in cost of sales.
Stock-based compensation
Stock-based compensation awarded to employees is measured at the award date, based on the fair value of the award, and is recognized as an expense over the requisite vesting period. We measure the fair value of the share-based compensation issued to non-employees using the stock price observed in the trading market (for stock transactions) or the fair value of the award (for non-stock transactions), which were more reliably determinable measures of fair value than the value of the services being rendered. The measurement date is the earlier of (1) the date at which commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.
Fair value measurements
We determine the fair value of its assets and liabilities using a hierarchy established by the accounting guidance that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The three levels of valuation hierarchy are defined as follows:

Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets;

Level 2 inputs to the valuation methodology included quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and

Level 3 inputs to the valuation methodology is one or more unobservable inputs which are significant to the fair value measurement.
The carrying amount of our financial instruments, including cash, accounts receivable, deposits, short-term portion of notes receivable and notes payable, and current liabilities approximate fair value due to their short-term nature. We do not have financial assets or liabilities that are required under the U.S. GAAP to be measured at fair value on a recurring basis. We have not elected to use fair value measurement option for any assets or liabilities for which fair value measurement is not presently required.
We record assets and liabilities at fair value on a non-recurring basis as required by the U.S. GAAP. Assets recognized or disclosed at fair value in the consolidated financial statements on a nonrecurring basis include items such as property and equipment, operating lease assets, goodwill, and other intangible assets, which are measured at fair value if determined to be impaired.
Leases
We determine if an arrangement is a lease at inception. ROU assets represent our right to use an underlying asset for the lease term and the lease obligations are recorded as liabilities and represent an obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use an incremental borrowing rate based on the information available at the commencement date to determine the present value of the lease payments.
 
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The ROU asset arrangement also consists of any prepaid lease payments and deferred rent liabilities. The lease terms used to calculate the ROU asset and related lease liability include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense. We have lease agreements that require payments for both lease and non-lease components and have elected to account for these as a single lease component.
License Content Asset
On January 1, 2020, we adopted the guidance in ASU 2019-02, Entertainment — Films — Other Assets — Film Costs (Subtopic 926-20) and Entertainment — Broadcasters — Intangibles — Goodwill and Other (Subtopic 920-350): Improvements to Accounting for Costs of Films and License Agreements for Program Materials, on a prospective basis. We capitalize the fixed content fees and our corresponding liability when the license period begins, the cost of the content is known, and the content is accepted and available for streaming. If the licensing fee is not determinable or reasonably estimable, no asset or liability is recorded, and licensing costs are expenses as incurred. We amortize licensed content assets into cost of revenue, using the straight-line method over the contractual period of availability. The liability is paid in accordance with the contractual terms of the arrangement.
Allowance for doubtful accounts
We assess the collectability of receivables on an ongoing basis. A provision for the impairment of receivables involves significant management judgment and includes the review of individual receivables based on individual customers, current economic trends, and analysis of historical bad debts.
Recent Accounting Pronouncements
See our discussion under Note 2-Summary of Significant Accounting Policies in our financial statements.
 
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BUSINESS
Overview
We are a multichannel digital video platform media company that uses marketing technology, or “MarTech,” to generate our revenue and offer our services. Our technology and vast library of videos and licensed content enable us to curate and distribute short-form videos to out-of-home (“OOH”) dining, hospitality, retail, convenience stores and other locations and venues to enable them to inform, entertain and engage their customers. Our technology provides third-party advertisers with a targeted marketing and promotional tool for their products and services and, in certain instances, allows us to measure the number of potential viewers of such advertising and promotional materials. We also allow OOH customers to access our service without advertisements by paying a monthly subscription fee. In addition to providing services to OOH venue operators, we currently provide our services direct to consumers (“D2C”) in their homes on connected TVs (“CTVs”) and on their mobile devices. We moved to a primarily advertising- based model starting in early 2021.
We offer self-curated music video content licensed from major and independent record labels, as well as movie, television and video game trailers, trivia, kid-friendly videos, viral videos, drone footage, news headlines, and lifestyle and atmospheric channels. We distribute our content and advertising inventory to digital screens located in OOH locations primarily through (i) our owned and operated platform (“O&O Network”) of Loop Media-designed “small-box” streaming Android media players (“Loop Players”) and legacy ScreenPlay (defined below) computers and (ii) through screens on digital networks owned and operated by third parties (“Partner Network”, and together with the O&O Network, the “Loop Network”). As of the date of this prospectus, we have expanded to over 43,000 OOH screens across the Loop Network. As of June 30, 2022, we had 12,584 quarterly active units (“QAUs”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Key Performance Indicators.” We launched our Partner Network business beginning in May 2022 with one partner on approximately 17,000 of the partner’s screens, and we have since added an additional 13,500 screens in a second partner’s network, for a total of 30,500 screens as of the date of this prospectus in our Partner Network. Our legacy businesses, including our content subscription-based business and our CTV business, complement these newer businesses.
Industry
Consumer Adoption of Streaming Services
In recent years, the video streaming services industry experienced, and is expected to continue to experience, significant growth, as entertainment is delivered to consumers across an increasing array of digital platforms and services. According to data from Statista (the “Statista Data”), revenue from the transmission and sale of video content over the internet (“VCOI”) is projected to reach $76.7 billion in 2021 and rise to $113.9 billion by 2025, a 10.4% compounded annualized growth rate (“CAGR”), with free (ad-supported) OTT users expected to increase from 213.2 million users in 2020 to a projected 225.4 million users in 2025. According to Statista Data, based on information sourced from eMarketer, the number of ad-supported video-on-demand viewers in the United States is expected to grow from 140.1 million viewers in 2022 to 171.5 million viewers in 2026. The image that follows this paragraph illustrates this. According to the Statista Data, the largest revenue segment for VCOI is revenue derived from OTT video advertising (all advertising-financed moving image content, from premium to user-generated), with revenue of $34.3 billion in 2020, and projected revenue of $40.6 billion in 2021, $46.5 billion in 2022 and $63.3 billion in 2025, representing a CAGR of 13.0% over that period. According to Activate (based on information from Statista), the number of connected TV households (households for which at least one person of any age used the internet through a CTV at least once per month) in the United States is expected to increase from 85 million in 2017 to 113 million in 2024.
 
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Digital-Out-of-Home Advertising
In 2020, we primarily began using a free, ad-supported revenue model for our OOH business and believe our ad-supported services will be the primary driver of our revenue growth as demand for digital-out-of-home advertising is expected to grow. According to Statista Data, overall advertising spend in the United States was $268.9 billion in 2011 and is expected to grow to $294.1 billion in 2021 and $364.4 billion in 2025. 80% of digital advertising (in 2020) was delivered to media outlets through programmatic advertising. Programmatic advertising is a system that automates the processes and transactions involved with purchasing and dynamically placing ads on websites, apps or other digital delivery systems. Programmatic advertising makes it possible to purchase and place ads, including targeted advertising content, in seconds. According to the Statista Data, ad spending in the OOH space in the United States was $6.5 billion in 2020 and is expected to increase to $7.2 billion in 2021 and $9.0 billion in 2025. Digital out-of-home advertising spending in the United States is expected to grow from $2.7 billion in 2019 to $3.8 billion in 2023 (according to Statista Data, based upon information sourced from eMarketer). The image below illustrates this:
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Our Revenue Model
Our revenue currently consists primarily of advertising revenue from advertising demand partners (including “demand-side platforms” and “supply-side platforms”), to whom we sell advertising inventory across the Loop Network. In our O&O Network business, we operate an advertising revenue share model in which third party licensors of our curated content are provided with a share of the advertising revenue. In our Partner Network business, we operate an advertising revenue share model in which the third-party owners and operators of the Partner Network are provided with a share of the advertising revenue. Where possible, in our Partner Network, we seek to use content that is not subject to a third-party license to avoid the necessity to share advertising revenue with third-party content providers.
Our ad-supported and subscription-based services are separate offerings but work together to support our business. Given the expected growth in the digital OOH advertising market, coupled with the preferable economics to the Company of an ad-supported business model, we encourage our customers to choose our ad-supported services over our subscription services. While our ad-supported service is generally associated with higher margins, we provide our subscription service for OOH customers that are seeking an ad-free content offering on our O&O Network. We do not have a subscription service for our Partner Network, as the primary services we provide in this business are advertising sales services, along with our content licensing services.
MarTech
MarTech, the intersection of marketing and technology leverages data and analytics to expand our points of distribution and advertising revenue.
Distribution
Owned & Operated Network (O&O).   We moved to an advertising-based model and ramped up distribution of Loop Players for our O&O Network starting in early 2021. Our customer acquisition strategy for our O&O Network is focused on marketing and distributing our Loop Player to businesses through social media and other online mediums, using our internal enterprise sales team and our affiliate marketing programs. We seek to optimize our social media and online customer acquisition and the distribution of our Loop Players by analyzing various data, including our return on marketing investments. When analyzing the success of our marketing investments, we examine the number of sales leads obtained from online platforms and the conversion of leads into high quality customers. We regularly analyze the engagement with, and success of, our creative advertising content and modify our messaging to improve customer acquisition for our O&O Network. Our enterprise sales team targets multi-location retail businesses or franchised chains in key markets and industries in the United States that are attractive to OOH advertisers. Our affiliate marketing program incentivizes third parties that have pre-existing connections with retail venues or otherwise qualify for our program to market and distribute our Loop Players and help ensure that they remain active and are servicing advertisements. As of June 30, 2022, we had 12,584 QAUs. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Key Performance Indicators.”
 
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Partner Network.   Through our Partner Network business, we offer curated content and programmatic advertising sales expertise and technology to third parties looking to optimize advertising revenue on their existing distribution platforms. We work directly with programmatic advertising demand companies to sell advertising inventory on the Partner Network. We collect revenues from the demand partners and pass along a percentage of such revenues to our partner in the Partner Network. We launched our Partner Network business beginning in early May 2022 with one partner on approximately 5,000 of the partner’s screens, and we rolled out to the remaining 12,000 screens in that network as of mid-May 2022. In mid-August 2022, we entered into an agreement with a second partner, which partner has the United States’ largest in-airport TV network, adding 13,500 screens to our Partner Network, for a total of 30,500 screens as of the date of this prospectus. We currently have two partners in our Partner Network and are looking to continue to expand our partner base for this line of business over time. Our cost of revenue for advertising sales on our Partner Network is higher than our cost of revenue for advertising sales on our O&O Network due to our significant revenue share with our Partner Network customers, even though we are able to share typical transaction costs associated with the related programmatic advertising sales and server costs with such customers. Our ability to monetize our Partner Network screens will differ from partner network to partner network, as certain screens will be more desirable than others for advertisers, depending on the type of venues or locations in which the screens are located, the concentration of screens, the expected or actual number of consumers, dwell time of those consumers and other factors. As a result, the average revenue per screen for individual
 
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partners and individual screens in our Partner Network is expected to be more varied than our ARPU for our O&O Network business.
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Advertising Revenue
Our revenue is primarily driven by programmatic advertising, an automated measurement process that manages the sales of our advertising inventory. Today, most digital advertising is programmatic advertising, with digital OOH advertising comprising a small portion of the overall market. While we look to establish direct advertising and sponsorship opportunities with advertisers, almost all of our current advertising revenue is purposely secured through programmatic advertising. Our yield optimization strategies look to leverage data analytic and other techniques to maximize the value of our digital advertising inventory. We intend to optimize the combination of our ad impressions, cost per impression and the percentage of our ad inventory filled by advertisers, while balancing our O&O Network’s and our Partner Network’s customers’ experience by limiting the number of ads delivered during any given period. Our Loop Player is designed to allow us to multiply OOH revenue in certain locations in the event that the advertising industry recognizes, and is willing to pay for, multiple advertising impressions for a single Loop Player for venues with multiple persons who may be in a position to view the relevant advertisement, as outlined below:
 
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Loop Player
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The Loop Player is at the heart of our O&O Network revenue model and its technology enables us to communicate and interact with OOH locations, advertisers, and OOH customers:

OOH Locations.   The Loop Player allows OOH customers to program their in-store monitors and audio systems to schedule playlists depending on the time of day, promote their products or services through digital signage and deliver company-wide messages to staff in back-office locations. Business owners can filter content based on ratings or explicit language and can control the genres of videos in their programs. The Loop Player caches and encrypts our content, thereby supplying uninterrupted play for up to 12 hours in the event of an internet disruption.

Advertising and Content Partners.   Our Loop Player works with our technology, software and servers to determine the number of ad impressions available for programmatic advertising, which can be filled in real-time, seconds before ads are played. Our Loop Player delivers content and advertising to venues and our technology allows us to record and report video content played (for reporting to content providers) and advertising content played (for reporting to our advertising demand partners and advertisers). In particular, our technology allows us to track when, where and how long content is played, and, in certain instances, measure approximately how many consumers were in position to view the content or advertisement. The Loop Player’s WiFi and Bluetooth capabilities
 
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allow us to determine the number of potential viewers at a given location, which can provide us with a revenue multiplier, as we expect to be able to increase advertising revenue at high-volume locations in the event that the advertising industry recognizes, and is willing to pay for, multiple advertising impressions for a single Loop Player for venues with multiple persons who may be in a position to view the relevant advertisement. This “multiplier effect” is possible due to the Loop Player’s ability to detect, using Bluetooth and WiFi technology, the number of consumer mobile devices within reach of a Loop Player in an OOH location which provides advertisers with a proxy for the number of potential viewers of a particular ad at any given time. The digital advertising market for out of home locations is still developing and the multiplier effect is not yet available in all locations and with all advertising demand partners or advertisers and there is no assurance that it will become more widely available in the short term or at all.

OOH Customers.   We are seeking to develop further the interactivity between the Loop Player and the customers in OOH locations. This may take different forms, such as offering a simple thumbs up or thumbs down function, displaying the number of customer votes for a given piece of content, answering trivia questions and downloading of OOH venue menus and other helpful consumer information from the screens and other functions. This will require further development of our mobile application in the future.

Loop Media.   We are able to consistently monitor the preferences of the customers of our OOH customers and venue operators through our Loop Player. Our Loop Player allows us to collect specific information and data on content played, views, location, and location type, enabling us to effectively measure demand. These capabilities allow us to make informed decisions around which type of content to acquire or develop, as well as identify new market opportunities.
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Our Platform
The following table sets forth our O&O Network platform customer targets, delivery method, preferred revenue model and the associated content for our services:
CUSTOMER
DELIVERY
METHOD
PREFERRED
REVENUE MODEL
CONTENT
OOH Location Loop Player Ad-supported service

All forms of content, including music video and other content

Curated playlists and channels
Consumer Connected TV OTT Platforms and Loop App Ad-supported service

Primarily music videos

Not all of our music content can be streamed

Non-music video content is currently limited, but we intend to expand this category
Consumer Mobile Devices Loop App Subscription service

Music videos and kid-friendly content only

Curated playlists and channels

Videos on demand for subscription service
Our Partner Network platform targets third parties with existing distribution platforms that have a significant number of screens in desirable OOH locations and venues. None of our Partner Network partners have requested the installation of Loop Players to deliver our streaming content and advertisements, but some may do so in the future. Our revenue model for the Partner Network is all ad-supported and the content delivered may be content sourced by our Partner Network partners or by Loop.
OOH Locations
The foundation of our business model is built around the OOH experience, with a focus on distributing licensed music videos and other content to public-facing businesses and venues. Our OOH offering has supported hospitality and retail businesses for over 20 years, originally through ScreenPlay, which we acquired in 2019. Since the acquisition of ScreenPlay, we have primarily focused on acquiring OOH customers throughout the United States.
Most OOH locations in the United States deliver visual content to their customers by the use of cable TV boxes and computer-based audio video equipment, which requires significant investment and cost to the venue operator. Capital investment in equipment has historically been a barrier for many businesses to provide visual entertainment to their customers. Unlike consumers in their homes, who have been more willing in recent years to invest in CTVs and streaming services, businesses generally have been slower in adopting lower cost streaming options.
To gain greater access to, and expand our business with, OOH venue operators, we developed our proprietary Loop Player. The Loop Player is easy to set up and allows content to be streamed on multiple television sets. We believe our Loop Player and free, ad-supported service has significantly reduced the cost of specialty equipment and visual entertainment for venue operators.
We began rolling out the Loop Player in the fourth calendar quarter of 2020. We believe the COVID-19 pandemic, which caused many businesses to shut down or reduce capacity, has accelerated business owners’ demand for CTVs and streaming services to reduce their costs. For this reason, we believe the introduction of our Loop Player, coupled with our switch to a free ad-supported business model, has contributed to the growth in calendar 2021 and into 2022 of our OOH business customers. In 2021, our customer base expanded beyond our typical hospitality-based customers to smaller venues, franchisees and venues that
 
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service non-hospitality industries, like pet stores, doctors’ offices and other non-traditional venues. This trend has continued into 2022.
We expect revenue from our DOOH ad-supported service to increase to a greater extent than our revenue from our other services. This is partly due to our ongoing efforts to add new OOH locations to our distribution network, which increases the number of Loop Players in the market and, in turn, the number of ad impressions available for advertisers to fill with paid advertisements and sponsorships. Our new Partner Network business has expanded and is expected to further expand our OOH ad-supported business. In addition, our OOH ad-supported service using the Loop Player allows us, in certain circumstances, to present a greater number of ad impressions per OOH location to an advertiser than would typically be associated with a single OOH location.
This “multiplier effect” is possible due to the Loop Player’s ability to detect, using Bluetooth and Wi-Fi technology, the number of consumer mobile devices within reach of a Loop Player in an OOH location, which provides advertisers with a proxy for the number of potential viewers of a particular ad at any given time. This contrasts with other OOH technology that is not capable of providing data on the number of persons in an OOH location and in which advertisers pay for one ad impression per ad in an OOH location, regardless of the number of potential viewers in that location. The digital advertising market for out of home locations is still developing and the multiplier effect is not yet available in all locations and with all advertising demand partners or advertisers and there is no assurance that it will become more widely available in the short term or at all. This also contrasts with our D2C services, where advertisements are considered to be viewed by one person on their individual mobile device or on a CTV in their home.
D2C
Consumer Connected TVs
Our OTT business provides our OTT platform customers, such as Roku and Peacock, with music videos and other video content, providing their subscribers and customers with access to certain videos in our library. Our service to OTT platform providers has been ad-supported as many of the providers run a free ad-supported television, or FAST, business model for channels on their services. Not all of our music video content is available to our OTT customers. We also have a consumer CTV app that can be downloaded on CTVs and on which consumers can view certain of our content. Almost all of the viewers of our content on CTVs view our content on our channels delivered through OTT platforms rather than on our CTV consumer app.
Consumer Mobile Devices
We developed the Loop App for the distribution of our music videos and kid-friendly content. The Loop App allows our users to interact directly with our channels and playlists on their smart phones, tablets, and other digital devices, providing advertisers with additional mediums to reach consumers. Our subscription service users are provided enhanced features to search for titles of music videos and artists, request music videos and create personalized playlists. Additionally, through our subscription service, we provide social features that allow users to follow each other, share their locations and playlists, view activity, signal support for a particular music video, and listen to other users’ “Loops.” We initially launched the Loop App in mid-2020; however, we have not promoted or advertised our Loop App in any meaningful way. As we continue to grow our OOH business and distribute additional Loop Players, we believe the Loop App may in the future enhance our interactivity with businesses and their customers, and in turn, influence the content we develop and acquire.
Our Competitive Strengths
Diversified Content Library, including Music Videos
We believe our music video library is one of the largest in the world and gives us an advantage over many of our competitors. Our music video library contains videos dating back to the 1950s, appealing to generations of music-lovers, with the newest videos directly obtained from the Music Labels. Older music video libraries are more difficult to obtain, as there is generally no central database from which to acquire such
 
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videos. Additionally, the individual music labels who have rights over portions of such videos do not easily and readily provide them to those seeking to acquire them. We have strategically secured access to monetize our music video content through our license agreements with the individual Music Labels. We have licenses with all three major Music Labels to provide music video content in the OOH market and licenses with two of the three for the D2C market. We have also developed a large non-music video library of content, primarily through revenue share license agreements, which generally do not require any upfront payments. Our non-music video library consists of movie, television and video game trailers,trivia, kid-friendly videos, viral videos, drone footage, news headlines, and lifestyle and atmospheric channels.
Efficient Content Curation
We believe we are able to produce engaging video content by curating our own and third party-content at relatively low production costs. We do not currently produce a meaningful amount of original video content, which can be expensive and time consuming. In contrast to many streaming platforms, we curate existing content from our video library and content licensed from third parties. The curation of our video content from our owned and leased libraries eliminates the costly and lengthy production process associated with creating original video content. Therefore, we are able to consistently innovate, update, and enhance our content offerings in a cost-effective and timely manner.
National Distribution and Reach
We distribute our services across thousands of OOH locations, audio and video streaming platforms, and mobile and connected TV applications. The entire Loop Network has expanded to over 43,000 out-of-home screens across the United States. We had 12,584 QAUs across North America for the quarter ended June 30, 2022, and our channels are available to millions of consumers on OTT platforms and are currently accessible in over 400,000 hotel rooms, serving both the OOH and D2C markets, respectively. We have recently hired salespeople to engage in direct marketing for our OOH business across various regions, including the East Coast, West Coast and South. We launched our Partner Network business beginning in May 2022 with one partner on approximately 17,000 of the partner’s screens, and we have since added an additional 13,500 screens in a second partner’s network, for a total of 30,500 screens as of the date of this prospectus in our Partner Network. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Key Performance Indicators” for a description of QAUs.
Technology-Based Business Model
All of our key software and the design of our Loop Player and consumer apps has been developed in-house by us. We have built our services and platform with a view to the future, focusing on where we believe the digital OOH and consumer streaming and mobile devices markets are and will be for the foreseeable future. The Loop Player is ideal for OOH location operators looking to “cut the cord” from their old business models. This allows our OOH customers to save costs and provides them with a greater ability to customize and schedule content to fit their venues. We use digital marketing technology, or “MarTech,” to generate revenue, market our services and fuel our business. Our experience and technological capabilities in digital marketing has allowed us to expand our business into our Partner Network business, where we offer programmatic advertising sales expertise and technology to third parties looking to optimize advertising revenue on their existing distribution platforms and screens. Additionally, we believe we can attract key employees from across geographies as we operate almost entirely remotely in support of our culture of technology and efficiency. Our use of technology in most aspects of our business, including marketing, distribution, content curation, sales, customer service and other areas, allows us to leverage our existing employees as we continue to scale up our business.
Established Foundation Supported by Industry Tailwinds
Our technology stack, ad-supported revenue model and vast content library are the backbone of our business. We believe this established foundation places us in a better position than many peers to benefit from any industry tailwinds in the digital OOH advertising market. Because our foundation has been built with a view to where we believe the OOH content delivery and digital marketing trends are headed, we believe we are better positioned than many of our competitors who might have to re-work their existing technology
 
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and revenue models to better align with these trends. We believe our programmatic advertising in the OOH market will support our revenue infrastructure into the future. See “Business — Industry.”
Passionate and Experienced Management Team
Our seasoned management team is founder-led and has more than 100 years of combined media and technology experience. Our executive team has previous experience at some of the most well recognized entertainment companies in the world, including Walt Disney, Universal Music, MTV, VH1, CBS, Sony, Viacom, Time Warner, Electronic Arts, among others.
Our Growth Strategies
Our growth strategies are focused on monetizing and growing our content library and are guided by the following six pillars:
Increase Marketing of Loop Player for our O&O Network.   We have found online digital advertising to be a successful customer acquisition strategy and believe there is a direct correlation between digital marketing spend and business demand for the Loop Player in our O&O Network. In addition to digital advertising viewed by individual businesses, we also intend to leverage our internal sales team to increase our direct marketing efforts to promote our Loop Player and services to large, national or regional, franchisee or corporate owned businesses. We have established an affiliate program whereby we incentivize third parties that have connections with OOH venues or otherwise qualify for our program to market and distribute our Loop Players and help ensure that they remain active and are servicing advertisements.
Expand our Partner Network.   We believe we are at the forefront of digital programmatic advertising distribution and monetization in the DOOH industry. This has resulted in the expansion of our business to include our Partner Network business, which allows us to offer our advertising sales services and curated content to third parties looking to distribute our content and advertising to screens on digital networks owned and operated by such third parties. We launched our Partner Network business beginning in May 2022 with one partner on approximately 17,000 of the partner’s screens, and we have since added an additional 13,500 screens in a second partner’s network, for a total of 30,500 screens as of the date of this prospectus in our Partner Network. We are looking to expand our customer base for this line of business over time.
Diversify Customer Base.   We believe the introduction of our Loop Player and shift towards an ad-supported service model has contributed to the growth of our OOH customer base and related revenues. Our customer base has expanded beyond our typical hospitality, food and beverage and gym customers, as we have experienced an increase in business engagement from smaller venues, franchisees, and businesses that service other industries. This expansion has given us greater insight into the viewing habits of a diverse customer base and the demand for some of our non-music video content thereby enabling us to develop and curate content that continues to respond to consumer demand.
Expand our Non-Music Video Content.   Our music video library is the foundation of our business but, in certain instances, OOH locations are looking for a broader or more targeted content offering than pure music videos. Since the acquisition of ScreenPlay’s music video library in 2019, we have sought to expand our non-music video content through licensing, acquisitions and our own development, which includes content in entertainment, lifestyle, and information channels. We recently introduced a Trivia channel on our service, which we developed internally, and which is not subject to a revenue share agreement with any third parties for the use of the content. We will look to develop additional channels with no or limited licensing fees to help grow our business and, where possible, enhance our operating margins.
Optimize Advertising Sales and Sponsorships.   We aim to optimize our advertising sales by using technology and short-term, third-party consultants to collect data and employ analytics. Similarly, we will seek to continue to optimize our programmatic revenue through MarTech data and analytics. In addition to these efforts, we have expanded our advertising sales team to focus on advertising sales directly to companies that seek to advertise on our platform and to companies that are interested in
 
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providing sponsorship of our content. Through such arrangements, we may receive payments from a company in return for allowing such company to be associated with one of our channels, playlists, other content or company events.
International Expansion.   We are exploring international expansion, as we believe the provision of video content in the non-U.S. OOH markets is underserved. In 2021 we began pursuing these growth initiatives by acquiring EON Media, which produces a weekly syndicated radio program targeted across Asia. Over time, we plan to be opportunistic in exploring ways to potentially expand in Asia, certain countries in South America, Canada and Europe.
Our Content
Content Acquisition
Music Videos.   Although we own copies of the music videos that we deliver to our customers, we must secure the rights to stream the video, the sound recordings, and the musical compositions embodied therein (i.e., the musical notes and the lyrics). To do so we enter into license agreements to obtain licenses from rights holders such as record labels, music publishers, performance rights organizations, collecting societies, and other copyright owners or their agents, and pay royalties to such parties or their agents.
We currently have licenses and agreements with multiple parties to distribute our music videos for our consumer customers in the United States, Canada, and Mexico. We also have longstanding limited, non-exclusive licenses to digitally distribute certain music videos and related materials owned or controlled by the three Music Labels to our OOH customers in the United States. In 2020, we entered into agreements with the Music Labels, pursuant to which we were also provided limited, non-exclusive licenses to digitally distribute certain music video recordings and related materials owned or controlled by the Music Labels in connection with our D2C business, one of which licenses has since expired. We entered into the last of these agreements in December 2020, which ultimately allowed us to provide a more complete offering of music video content to our D2C customers beginning in 2021.
Trailers.   Our film, game and TV trailer library is one of our largest video libraries. Similarly, to our music video library, it includes a back catalog of old videos, dating back to the early 1900s. More recent trailers are secured from the relevant production companies, at no cost to us, and are added to our growing library. Our back catalogue of older trailers was obtained with the acquisition of ScreenPlay.
Other.   In addition to music videos and movie trailers, we have obtained other video content for curation and distribution to our customers. This content includes, college sports highlights, viral videos, atmospheric, travel, and kid-friendly videos.
We continue to explore opportunities to secure other forms of video content to add to our growing content library.
Content Curation
In November 2020, we created a new business division at Loop, called Loop Media Studios (“Loop Studios”), to lead the acquisition, curation, production, and branding of our video content. Based on management’s knowledge of the industry and discussions with OTT platform providers, we believe Loop Studios was instrumental to our success in releasing more channels on OTT platforms for distribution on CTVs in 2021 than any other media company.
Loop Studios works to curate content to create a compelling user experience by, among other things, curating Playlists by genre, mood, or time periods. Additionally, Loop Studios creates streaming channels, delivered under our “watch live tv” product feature on our Loop Player and Loop App. We currently have over 80 music video channels for OOH customers, 23 non-music video channels for OOH customers, and 10 music video channels for consumer end-users delivered through the Loop App on CTVs or mobile devices.
Through Loop Studios we seek to produce our own content “in-house” that can be packaged separately or as part of our third-party content offerings, and we plan to deliver this content through our existing and future channels.
 
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Content Distribution
We aim to make our content available virtually anywhere at any time. To achieve this objective, we currently leverage our existing content across thousands of OOH locations, audio and video streaming services and mobile and connected TV apps. The entire Loop Network has expanded to over 43,000 out-of-home screens across the United States. We had 12,584 quarterly active units (“QAU”) across North America for the quarter ended June 30, 2022, and our channels are available to millions of consumers on OTT platforms and are currently accessible in over 400,000 hotel rooms, serving both the OOH and D2C markets, respectively. We have recently hired salespeople to engage in direct marketing for our OOH business across various regions, including the East Coast, West Coast and South. We launched our Partner Network business beginning in May 2022 with one partner on approximately 17,000 of the partner’s screens, and we have since added an additional 13,500 screens in a second partner’s network, for a total of 30,500 screens as of the date of this prospectus in our Partner Network.
License Agreements
In order to stream video content to our users, we generally secure intellectual property rights to such content by obtaining licenses from, and paying royalties or other consideration to, rights holders or their agents. Below is a summary of certain provisions relating to our license agreements for music videos, the musical compositions embodied therein, as well as other non-music video content.
Music Video and A/V Recordings License Agreements with Major and Independent Record Labels
We enter into license agreements to obtain rights to stream music videos, including from the Music Labels. These agreements require us to pay royalties and make minimum guaranteed advanced payments, and they include marketing commitments, advertising inventory and financial and data reporting obligations. Rights to A/V recordings granted pursuant to these agreements is expected to account for the vast majority of our music video use for the foreseeable future. Generally, these license agreements have a short duration and are not automatically renewable. The license agreements also allow for the licensor to terminate the agreement in certain circumstances, including, for example, our failure to timely pay sums due within a certain period, our breach of material terms and certain situations involving a “change of control” of Loop. These agreements generally provide that the licensors have the right to audit us for compliance with the terms of these agreements. Further, they contain “most favored nations” provisions, which require that certain material contract terms be at least as favorable as the terms we have agreed to with any other similarly situated licensor. Our current license agreements with the Music Labels for our OOH business have been in effect (or have been renewed) for several years, and the Music Labels have requested a review and update of those licenses. Although the basic outlines of these licenses are standardized by the licensors and we do not anticipate any issue in the timely renewal of these licenses, the updating of such licenses may increase our license costs associated with such rights, including the percentage of revenue attributable to the record labels and our minimum guaranteed payment obligations. A significant majority of our OOH business relies upon these licenses, and if we fail to maintain and renew these licenses our business, operating results, and financial condition could be materially harmed. With respect to our D2C business, the licenses with the Music Labels are similarly standardized, and although we do not anticipate any issue in the timely renewal of these licenses as needed, any future updates of such licenses similarly may increase our license costs associated with such rights, including the percentage of revenue attributable to the record labels and our minimum guaranteed payment obligations. See “Risk Factors — Risks Related to Our Business — Minimum guarantees and advances required under certain of our license agreements may limit our operating flexibility and may adversely affect our business, operating results, and financial condition.”
Musical Composition License Agreements
Our business model requires that we also obtain two additional types of licenses with respect to musical compositions: mechanical and public performance rights. Mechanical licenses are required to distribute recordings written by someone other than the person or entity conducting the distribution. Such licenses ensure that the music publisher, and ultimately the songwriter, receive compensation for the use of their work. A public performance license is an agreement between a music user and the owner of a copyrighted composition (song) that grants permission to play the song in public, online, or on radio. We have obtained
 
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direct licenses for mechanical rights with the three largest publishers, which are respective affiliates of each of the Music Labels for our OOH business and for two of the Music Labels for our D2C business. As a general matter, once music licenses are obtained from the Music Labels, their affiliate publishing companies enter into agreements with respect to the mechanical licenses. If our business does not perform as expected or if the rates are modified to be higher than the proposed rates, our music video content acquisition costs could increase, which could negatively impact our business, operating results, and financial condition, hinder our ability to provide interactive features in our services, or cause one or more of our services not to be economically viable due to an increase in content acquisition costs.
In the United States, public performance rights are generally obtained through PROs, which negotiate blanket licenses with copyright users for the public performance of compositions in their repertory, collect royalties under such licenses and distribute those royalties to music publishers and songwriters. We have obtained public performance licenses from, and pay license fees to, the PROs in the United States: ASCAP, BMI, the SESAC, LLC and Global Music Rights, LLC. These agreements impose music usage reporting obligations on Loop and grant audit rights in favor of the PROs. In addition, these agreements typically have one-to-two-year terms, and some have continuous renewal provisions, with either party able to terminate for convenience within 30 to 60 days prior to the end of the applicable term (or commencement of the subsequent term), and are limited to the territory of the United States and its territories and possessions.
License Agreements with Non-Music Video Content
With respect to non-music content, we obtain distribution rights directly from rights holders. We then negotiate licenses directly with individuals or entities in return for providing such licensors with a share of revenue derived from the licensed content distributed through our services. We are dependent on those who provide the content that appears on our services complying with the terms and conditions of our license agreements. However, we cannot guarantee that rights holders or content providers will comply with their obligations, and such failure to do so may materially impact our business, operating results, and financial condition.
License Agreement Extensions, Renewals, and Expansions
From time to time, our various license agreements described above expire while we negotiate their renewals. In accordance with industry custom and practice, we may enter into brief (for example, month-, week-, or even days-long) extensions of those agreements or provisional licenses and/or continue to operate on an at will basis as if the license agreement had been extended. It is also possible that such agreements will never be renewed at all, which could be material to our business, financial condition and results of operations. License agreements are generally restrictive as to how the licensed content is accessed, displayed and manipulated, as licensors seek to protect the use of their content. We may from time to time seek expansion of our licenses to provide us with greater functionality of our services as it relates to the relevant content. The inability to expand our licenses, or the lack of renewal, or termination, of one or more of our license agreements, or the renewal of a license agreement on less favorable terms, could have a material adverse effect on our business, financial condition, and results of operations. If any of the above were to occur, our ability to provide any particular content that our customers favor or are seeking would be limited, which would result in those customers going elsewhere. See “Risk Factors — Risks Related to Our Business — We depend upon third-party licenses for substantially all of the content we stream and an adverse change to, loss of, or claim that we do not hold any necessary licenses may materially adversely affect our business, operating results, and financial condition.”
Competition
Our competitive market is made up of a variety of small to large companies, depending upon the area that we are competing in.
In the OOH market, we compete with several small, fragmented companies. Our direct competitors include Atmosphere, Stingray, and Rockbot. We believe that the major competitive factors in the OOH marketplace are price, technology, quality music video content and other entertainment content.
 
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In the OTT market, we compete with a significant number of large and small companies to secure our service on OTT devices and, once on the service, we compete for individual viewers of our product. Our competitors include Vevo, Jukin Media, and Stingray. We believe that the major competitive factors in the OTT marketplace are quality content and revenue share splits.
In the consumer application market, we compete with a large number of audio-only companies for music but very few for music videos. Our direct competitors include Xcite and YouTube Music.
Marketing and Sales
Our sales and marketing efforts are primarily focused on reaching our OOH customers. Historically, our sales cycle from first contact with a potential customer to adoption of our services was relatively long and met with varying degrees of success, as the A/V equipment required to run our services was often considered expensive by many of the venues looking to acquire it. Our sales and marketing efforts historically have depended almost entirely on direct marketing by our internal sales representatives, including multiple contacts, onsite demonstrations of our services and potentially on-site installation and technical support, when needed. The introduction of our Loop Player for OOH locations has enabled us to adopt a digital marketing strategy, in addition to our direct marketing.
Following the introduction of our proprietary Loop Player, our sales and marketing strategy for OOH customers has consisted of a bottom-up and top-down approaches. Our bottom-up approach markets our Loop Player and our OOH business through digital marketing to potential business customers for use at their individual venues. The marketing reaches these businesses through the Internet, mobile devices, social media, search engines and other digital channels. Our digital marketing campaign targets businesses in certain industries that are more likely to use our services and become a customer, as determined by our past experience and by analyzing and identifying leads sourced from our online marketing channels. We are able to mail a physical Loop Player to individual businesses that sign up for our services online upon verification of the business venue. We then utilize our team of customer service personnel, digital prompts, including text messages, and promotional rewards to ensure activation of the Loop Player after receipt by the potential customer. For our subscription services, a sales representative will call the potential business customer to better communicate the various subscription services pricing and availability.
Our top-down approach for OOH marketing and sales relies on our internal sales team targeting large, national or regional, franchisee or corporate-owned, businesses, to promote our Loop Player and services in multiple venues controlled by them. We often will obtain a lead for these businesses from individual venues in such business’ network of venue operators and owners. The top-down approach has a longer sales cycle, but often results in a greater reach and distribution of our Loop Player and services, since we are able to enter multiple venues at a single time, once adopted.
Our sales and marketing efforts in our D2C consumer business is more limited and relies on our internal direct marketing and sales team to approach various Smart TV and CTV operators, distributors, and manufacturers. We seek to meet their needs by providing compelling content for their networks and platforms through our Loop App or otherwise.
We also seek to cross-promote our OOH and D2C businesses on each respective platform and believe greater penetration of our OOH business will help drive exposure to the public consumers of our D2C products.
Seasonality
We have seen seasonality in our revenue and business related to advertising sales and the distribution of our Loop Player. This seasonality may not be reflected in our results of operations as we experienced overall growth in revenue in recent quarters and expect to continue to do so, which may obscure underlying seasonal trends. The underlying seasonality, nonetheless, may act to slow our revenue growth in any given period.
Our revenues are largely reliant on digital advertising sales. Revenue associated with such sales is dependent on our ability to fill our ad inventory for our OOH locations using our ad-supported services and the price, or CPMs, at which such inventory can be sold. Advertisers usually manage their budgets on a
 
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quarterly basis, which results in lower CPMs at the beginning of a quarter and an increase at the end of a quarter. Similarly, for advertisers that manage budgets monthly, there is often lower CPMs at the beginning of a month. The first quarter of the calendar year ( our second fiscal quarter) is traditionally the least profitable quarter in terms of revenue generation for ad publishers (such as us), as advertisers are holding and planning their budgets for the year and consumers tend to spend less after the winter holiday season. This results in fewer ad demands and lower CPMs. The second quarter of the calendar year, from April to June (our third fiscal quarter), typically experiences increased ad demand and higher CPMs over the first quarter, as advertisers start to spend their budgets in greater amounts. The third quarter of the calendar year, from July to September (our fourth fiscal quarter), typically sees a slight increase in CPMs and ad demands compared to the second quarter, even though consumers spend more time outdoors and less time online in the summer months. The fourth quarter of the calendar year, from October to December (our first fiscal quarter), is typically the most profitable quarter for publishers, as companies want their brands and products to be seen in the run up to the holidays season. This generally results in publishers receiving the highest CPMs and the greatest ad demand for their ad impressions during the fourth quarter. As a result of these market trends for digital advertising we generally expect to receive higher CPMs and greater ad fill rates during the fourth quarter of a calendar year (our first fiscal quarter) and lower CPMs and reduced ad fill rates during the first quarter of a calendar year (our second fiscal quarter). We seek to offset the reduction in CPMs and ad fill rates with increased Loop Player distribution and ad impressions across our ad-supported services.
Our customer acquisition cost is largely influenced by the cost of our digital marketing, as a significant portion of our Loop Player distribution is reliant on OOH locations responding to our on-line advertisements. We see a direct correlation between the number of digital advertisements we run and the growth in our on-line customer acquisitions. The cost of the digital ads we run fluctuates from quarter to quarter and month to month and is generally based upon the overall market CPMs and the market demand for digital ad impressions. We continuously monitor CPMs and ad demand with a view to balancing our desire to grow our distribution of Loop Players and the cost of acquisition associated with such growth. As a result, we generally look to reduce our digital marketing spend during times of peak demand and highest cost of digital advertising and look to increase our digital marketing spend during times of lower demand and lower cost. We also moderate our digital marketing spend during periods where our OOH customers may be less likely to sign up for our ad-supported OOH services (e.g., the winter holiday periods). A reduction in digital advertising spend by us during a particular period could slow our Loop Player distribution growth figures for that period, even as we continue to grow our overall distribution of Loop Players. We look to offset any slowed growth by, among other things, using data and analytics to make our individual digital ads more effective at acquiring customers.
Our Technology and Intellectual Property
We have developed all of our own software, computer code and related items to provide our service and do not materially rely on any third-party providers. Our Loop Player is a proprietary device, designed by us and mostly built in-house. We do rely on third-party partners to provide services such as payment systems and server hosting platforms, all of which are industry-standard support systems, none of which have proprietary information and for which alternative providers can easily be found.
Our intellectual property rights are important to our business. We rely on a combination of patent, copyright, trademark, service mark, trade secret, and other rights in the United States and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our proprietary technology, processes and other intellectual property. We protect our intellectual property rights in a number of ways including entering into confidentiality and other written agreements with our employees, customers, consultants and partners in an attempt to control access to and distribution of our documentation and other proprietary technology and other information. Despite our efforts to protect our proprietary rights, third parties may, in an unauthorized manner, attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights or technology.
U.S. patent filings are intended to provide the holder with a right to exclude others from making, using, selling or importing in the United States the inventions covered by the claims of granted patents. Our patents, including our pending patents, if granted, may be contested, circumvented, or invalidated. Moreover, the
 
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rights that may be granted in those issued and pending patents may not provide us with proprietary protection or competitive advantages, and we may not be able to prevent third parties from infringing those patents. Therefore, the exact benefits of our issued patents and our pending patents, if issued, and the other steps that we have taken to protect our intellectual property cannot be predicted with certainty. See “Risk Factors — Risks Related to Our Intellectual Property — Failure to protect our intellectual property could substantially harm our business, operating results, and financial condition.”
Government Regulation
Our business and our devices and platform are subject to numerous domestic and foreign laws and regulations covering a wide variety of subject matters. These include general business regulations and laws, as well as regulations and laws specific to providers of Internet-delivered streaming services and Internet-connected devices. New or modified laws and regulations in these areas may have an adverse effect on our business. The costs of compliance with these laws and regulations are high and are likely to increase in the future. We anticipate that several jurisdictions may, over time, impose greater financial and regulatory obligations on us. If we fail to comply with these laws and regulations, we may be subject to significant liabilities and other penalties. Additionally, compliance with these laws and regulations could, individually or in the aggregate, increase our cost of doing business, impact our competitive position relative to our peers, and otherwise have an adverse impact on our operating results.
Data Protection and Privacy
We are subject to various laws and regulations covering the privacy and protection of users’ data. Because we handle, collect, store, receive, transmit, transfer, and otherwise process certain information, which may include personal information, regarding our users and employees in the ordinary course of business, we are subject to federal, state and foreign laws related to the privacy and protection of such data. These laws and regulations, and their application to our business, are increasingly changing and expanding. Compliance with these laws and regulations, such as the California Consumer Privacy Act could affect our business, and their potential impact is unknown. Any actual or perceived failure to comply with these laws and regulations may result in investigations, claims and proceedings, regulatory fines or penalties, damages for breach of contract, or orders that require us to change our business practices, including the way we process data.
We are also subject to breach notification laws in the jurisdictions in which we operate, and we may be subject to litigation and regulatory enforcement actions as a result of any data breach or other unauthorized access to or acquisition or loss of personal information. Any significant change to applicable laws, regulations, interpretations of laws or regulations, or market practices, regarding the processing of personal data, or regarding the manner in which we seek to comply with applicable laws and regulations, could require us to make modifications to our products, services, policies, procedures, notices, and business practices, including potentially material changes. Such changes could potentially have an adverse impact on our business.
Corporate History & Business Development
We were incorporated in Nevada on May 11, 2015, as Interlink Plus, Inc.
The business we operated prior to February 2020 was sold and is no longer part of our business. The following discussion of the history of the “Loop” business includes our business as operated by Predecessor Loop prior to February 2020 and as operated by us thereafter.

2016 — Founding of Loop — Loop was founded in 2016 by Jon Niermann (our Chief Executive Officer), Liam McCallum (our Chief Product and Technical Officer), and Shawn Driscoll (our Head of Investor Relations) with the intention of developing and then delivering a streaming video music service to consumers on their mobile devices.

2016 — Loop Acquires 20% of ScreenPlay — In 2016, Loop acquired 20% of the outstanding shares of ScreenPlay, which operated a business-focused computer-based video service providing music video and other content to business venues. ScreenPlay owned a vast short-form video content library that contained over 500,000 videos, including music videos and movie and TV trailers.
 
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2019 — Loop Acquires Remaining 80% of ScreenPlay — In 2019, Loop acquired the remaining 80% of outstanding shares of ScreenPlay, and ScreenPlay’s content became the foundation of the Loop business. Loop acquired ScreenPlay to obtain access to and ownership of ScreenPlay’s vast video content, which could then be delivered to Loop’s target retail customers, and to benefit from ScreenPlay’s relationships with the major music label companies whose licenses would be required to provide music video content to such retail customers. We also sought to leverage our technology and innovation to gain greater access to, and expand ScreenPlay’s business with OOH locations, which relied on costly computer hardware, long lead times for customer acquisition and high monthly subscription fees. Since the acquisition of ScreenPlay, we have continued to procure additional content, through acquisitions and licenses, to further grow our video library.

February 2020 — Loop Business Becomes Part of a Public Reporting Company — In February 2020, as a result of the Merger with Predecessor Loop, we became an early-stage media company and acquired Predecessor Loop’s video streaming business and the management team of Predecessor Loop became our management team. We subsequently changed our name to “Loop Media, Inc.” and our trading symbol for our shares quoted on the over-the-counter market operated by OTC Markets to “LPTV.”

March 2020 — Present — COVID 19 — The spread of COVID-19 around the world beginning in early 2020 adversely affected the United States and global economies and adversely impacted our customer base with the shutdown of most OOH locations in the United States beginning in March 2020 and subsequent limitations on OOH venue capacity in many States later in 2020 and into 2021. The impact of COVID-19 pandemic has adversely impacted our revenue for 2020. We believe, however, that the COVID-19 pandemic has accelerated the consideration by OOH operators of lower cost solutions to providing visual content in their venues.

December 2019 — October 2020 — Loop Player — We introduced the Loop Player in 2019 as a subscription service but didn’t experience substantive growth of our OOH business until the fourth quarter of 2020 when we made the Loop Player available for free to OOH locations. Coupled with our on-line marketing campaign and the introduction of our ad-supported service model, we experienced more significant growth in our OOH business starting in late 2020 and into 2021.

October 2020 — Spkr, Inc. — In October 2020, we acquired from Spkr, Inc., a Delaware corporation, Spkr’s website and Internet domain name, Spkr.com, a mobile application that Spkr developed, available in the Apple Inc. IOS Store as Spkr: Curated Podcast Radio, and related assets. Spkr is a free audio platform that presents highly curated and editorialized long and short-form content. We believe the Spkr platform will help us further enhance our content and provide the basis for the creation and production of our own proprietary podcast-based video content.

November 2020 — Loop Media Studios — In November 2020, we formed, and appointed Andy Schuon as Head of, Loop Media Studios. The formation of Loop Media Studios was intended to set the foundation for strong content expansion we expect will allow our DOOH and consumer platforms scale more efficiently. Loop Media Studios is responsible for all of our content and programming creation and acquisitions for both the OOH and D2C businesses. It is charged with bringing more structure to our content, underpinned by creation, curation, editorial and execution workstreams.

December 2020 — Loop Acquires 20% of EON Media — In December 2020, we acquired from Ithaca EMG Holdco LLC, a Delaware limited liability company (“Ithaca”), approximately 20% of the issued and outstanding shares of EON Media. EON Media is headquartered in Singapore and operates at the Asian intersection of music, media, entertainment and brand marketing. EON Media’s operations include syndicated content creation, music publishing, supervision and synchronization, as well as artist agency services. EON Media is also the producer and syndicator of Asia Pop 40, Asia’s first locally produced, multi-language weekly radio chart programs, heard every week in over 100 markets in the Asia-Pacific and the Middle East. EON Media is the first step in our expansion into Asia and we believe it will help us market our services in the region.

April 2021 — Loop Acquires Remaining 80% of EON Media — In April 2021, we acquired the remaining outstanding shares of EON Media from Far West Entertainment HK Limited, a company incorporated in Hong Kong, and hired Robert John Graham full time, the founder of EON Media.
 
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May 2021 — Loop’s Advertising Revenue Model More Fully Implemented — In May 2021, we completed the first stages of integrating our advertising revenue business model into our operations to allow for greater delivery of programmatic advertising and the sale of our advertising inventory. In May 2021, we also hired Bob Gruters as Chief Revenue Officer to drive our revenue through increased sponsorship of our content, prioritizing programmatic advertising revenue.

June 2020 — October 2021 — Leadership Team — Between June 2020 and October 2021, we added a Head of Loop Media Studios, Chief Revenue Officer, General Counsel, Chief Content & Marketing Officer, Head of Music and Controller to our leadership team and two independent members to our Board of Directors. To complement our management team and Board of Directors, we have engaged a group of experienced advisors whom we refer to as our “Advisory Board.” We believe the Advisory Board will further enhance our credibility and provide strategic guidance to our business.

May 2022 — Partner Network — We launched our Partner Network business beginning in May 2022 with one partner on approximately 17,000 of the partner’s screens, and we have since added an additional 13,500 screens in a second partner’s network, for a total of 30,500 screens as of the date of this prospectus in our Partner Network. We are looking to expand our customer base for this line of business over time.
Suppliers
We source our proprietary Loop Player from a third-party manufacturer. We believe the components and raw materials required for our Loop Player are readily available from a variety of sources. We have no long-term contracts or commitments for the supply of Loop Players.
Employees
We employed approximately 73 people as of August 31, 2022, 62 of whom were full-time employees and 11 of whom were hourly contract workers. None of our employees are represented by a union in collective bargaining with us. We believe that our employee relations are good.
Properties
Our principal executive offices are located at 700 N. Central Avenue, Suite 430, Glendale, California, and our telephone number is (213) 436-2100. We currently lease approximately 1,976 square feet of office space at this location. The lease term is 43 months, from November 14, 2019, to May 31, 2023.
We also have an office located at 150 Nickerson Street, Suite 305, Seattle, WA 98109. We currently lease approximately 3,776 square feet of office space at this location. The lease term is 60 months, from January 1, 2018, to December 31, 2022.
We believe that our leased facilities are adequate to meet our needs at this time. We do not currently own any real property.
Legal Proceedings
We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry, or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company, threatened against or affecting our Company, or our common stock, in which we believe an adverse decision could have a material adverse effect on our financial condition or results of operations.
 
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MANAGEMENT
Directors and Executive Officers
The following table sets forth the names, ages, and positions of our executive officers and directors as of the date of this prospectus:
Name
Age
Position
Jon M. Niermann
56
Chief Executive Officer, Chairman & Director
Neil Watanabe
68
Chief Financial Officer
Liam McCallum
41
Chief Product and Technical Officer
Andy Schuon
58
Head of Loop Media Studios
Bob Gruters
53
Chief Revenue Officer
Bruce A. Cassidy
72
Director
Denise M. Penz
53
Director
Sonya Zilka
53
Director
David Saint-Fleur
37
Director(1)
(1)
David Saint-Fleur has been appointed to our Board of Directors effective upon the pricing of this offering.
The business address of each of Mr. Cassidy, Ms. Penz, Ms. Zilka, Mr. Niermann, Mr. Watanabe, Mr. McCallum, Mr. Schuon and Mr. Gruters is 700 N. Central Avenue, Suite 430, Glendale, California 91203. The following is a brief biography of each of our executive officers and directors:
Executive Officers
Jon M. Niermann is our Co-Founder and has been Chairman and Chief Executive Officer since May 2016. Mr. Niermann is responsible for guiding the vision and strategy of the Company and leading the management team. Prior to founding Loop Media in 2016, Mr. Niermann founded FarWest Entertainment, a global platform bridging the Asia-Pacific region and the West through multimedia entertainment and strategic partnerships, and served as its Chief Executive Officer and Executive Producer from 2010 to 2015. From 2008 to 2011, Mr. Niermann was a Late Night Talk Show Host for the Fox International Channel’s “Asia Uncut.” He served as President of Electronic Arts Asia from 2003 to 2010, where he helped move the company’s game portfolio into online gaming, and spent fifteen years, from 1988-2003, with The Walt Disney Company, including as Managing Director and President, Asia Pacific, of Walt Disney International from 2001 to 2003. Mr. Niermann holds a Bachelor of Science and Arts in Finance and Marketing from the University of Denver, and an MBA from UCLA’s Anderson School of Management. Mr. Niermann was chosen to serve as a member of our Board of Directors due to his extensive experience in the entertainment industry, as well as the perspective he brings as our Co-Founder and CEO.
Neil Watanabe has served as our Chief Financial Officer since September 2021. He is responsible for overseeing the Company’s financial affairs. Prior to joining the Company, Mr. Watanabe was most recently Principal of Watanabe Associates where he provided senior financial and accounting leadership to various companies, including Value Village Inc. (d.b.a “Savers”) and High Times Holding Corp. From 2015 to 2019, Mr. Watanabe was Chief Financial Officer of CarParts.com, Inc., (NASDAQ: PRTS), a publicly traded American online retailer of automotive parts and accessories for cars, vans, trucks, and sport utility vehicles. Mr. Watanabe also served as EVP & Chief Financial Officer of PetSmart Inc. (NASDAQ: PETM). Mr. Watanabe also worked in various financial and operational leadership roles at National Stores, Inc. and Shoe Pavilion (previously listed on Nasdaq while Mr. Watanabe was employed), and Mac Frugal’ s Bargains — Closeouts Inc. (d.b.a. “Pic N’ Sav”), (previously listed on NYSE while Mr. Watanabe was employed). Mr. Watanabe served as EVP and Chief Financial Officer of Anna’s Linens from June 2006 until April 2014, when he voluntarily resigned. Anna’s Linens filed a petition under Chapter 11 of the U.S. Bankruptcy Code on June 13, 2015. Mr. Watanabe is currently a board member of the National Corvette Museum and Reality Venture International and received his CPA certification in the State of Illinois.
 
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Mr. Watanabe holds a Bachelor of Arts from University of California, Los Angeles and a CPA Certification from University of Illinois at Urbana-Champaign.
Liam McCallum is our Co-Founder and has been Chief Product and Technical Officer since May 2016. He oversees our product strategy, design, and development across mobile, TV and out-of-home, along with our technical operations. Mr. McCallum founded Encoder Farm, a video encoding Software-as-a-Service platform for developers, in 2017, and served as its Chief Executive Officer from 2017 to 2020. He served as an advisor to Motorola Outdoor from 2015 to 2016; he was the Founder and Chief Technology Officer of cloud media company Hive Cloud Ltd from 2014 to 2015 and was a Senior Advisor to FarWest Entertainment from 2010 to 2015. Prior to 2015, Mr. McCallum was the Founder and Chief Executive Officer of QVIVO, a global enterprise cloud media platform backed by SingTel Innov8 from 2010 to 2014, and from 2000 to 2010, was at Electronic Arts, eventually becoming Asia Pacific’s Head of Online Technology.
Andy Schuon has served as the Head of Loop Media Studios since November 2020. He is responsible for all video and audio content, programming creation and acquisitions at Loop for both the B2B and consumer platforms. Prior to joining Loop in 2020, in 2018, Mr. Schuon co-founded Spkr (acquired by Loop in 2020) and served as its Chief Executive Officer, where he conceived and launched a platform to solve discovery and time-related issues with podcasting. Before forming Spkr, in 2011, Mr. Schuon co-founded and was the Founding President of Revolt Media & TV, a music-focused television network. From 2011 to 2015, Mr. Schuon was Chief Digital Officer and President, Artist Services for LiveNation. He founded the International Music Feed Network for Universal Music Group in 2007 and served as its President and Chief Executive Officer. From 2002 to 2004, Mr. Schuon was President of Programming and Marketing for CBS Radio. Prior to that, in 2001, he founded and served as the Chief Executive Officer of the Sony Music Group/Universal joint venture PressPlay, the first music subscription service which was subsequently acquired and renamed Napster. Mr. Schuon was Executive Vice President and General Manager for Warner Bros Records from 1988 to 2000, and from 1992 to 1998, the Executive Vice President of Programming and Production for MTV, the music television cable channel, in the early days of its success. He is currently a member of the boards of directors for Teach for America and CoFoundersLab.
Bob Gruters has served as our Chief Revenue Officer since May 2021. As our Chief Revenue Officer, he is responsible for the monetization of proprietary Loop assets across digital out-of-home, connected television and mobile app activities. Additionally, Mr. Gruters is also responsible for the growth and expansion of our overall revenue and Loop player network. In addition to his role as Chief Revenue Officer at Loop Media, Mr. Gruters also concurrently serves as a strategic advisor for MetaVRSE, a universal interactive web-based platform. Prior to this, from 2018 to 2021, Mr. Gruters was the Chief Revenue Officer of the Digital Trends Media Group, leading all on-platform and off-platform revenue creation initiatives with a high-performing sales and marketing team. Mr. Gruters also held P&L oversight and directed sales function, corporate development, marketing, pricing, and revenue management. From 2014 to 2018, Mr. Gruters served as Facebook’s Group Head of Sales Emerging Entertainment & Technology where he led the rapid growth and sustainable development of multiple vertical industries. Mr. Gruters served as EVP Sales & Marketing of REVOLT MEDIA & TV from 2013 to 2014, and spent four years, from 2009-2013, as SVP of Client Development at Univision Communications. From 2005 to 2009, Mr. Gruters served as Vice President of Business Development for MTV Networks’ Entertainment Group, which included Comedy Central, CMT, Spike TV, and TV Land. From 2002 to 2005, Mr. Gruters was the Director of Marketing Services for The New Yorker and spent three years as a Media Director of Sony Electronics from 1999 to 2002. Prior to 2002, Mr. Gruters led sales & marketing for JC Decaux’s airport advertising division in the US. Mr. Gruters holds a Bachelor of Arts in Communications, Advertising from Rowan University.
Non-Employee Directors
Bruce A. Cassidy is a member of our Board of Directors. He has been a member of our Board of Directors since early 2020. In addition to his role on our Board of Directors, Mr. Cassidy currently serves on the boards for various companies, including as Chairman of the Board of each of Ultimate Gamer, Assisted 4 Living, Inc., and Segmint. He serves as Chairman of the Sarasota Green Group, the Executive Chairman of each of CelebYou LLC and CelebYou Productions, and is on the board of directors of Selinsky Force LLC. He was also the founding investor and served on the board of directors of Ohio Legacy Corp. Previously, Mr. Cassidy was the founder and CEO of Excel Mining Systems from 1991 until its sale
 
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in 2007 to Orica Mining Services, and from 2008 to 2009, served as the President and CEO of one of its subsidiaries, Minora North & South Americas. He is currently the President of The Concession Golf Club in Sarasota, Florida. Mr. Cassidy was chosen to serve as a member of our Board of Directors due to his extensive leadership and business experience in the entertainment and media industry and as a CEO of a large company, as well as his service on other boards of directors.
Denise M. Penz is a member of our Board of Directors. She has been a member of our Board of Directors since October 2021. In addition to her role on our Board of Directors, Ms. Penz concurrently serves as the President and Chief Executive Officer of The Preferred Legacy Trust Company, a state-chartered trust company which Ms. Penz also founded. Ms. Penz served as Founder, Executive Vice President, Chief Operating Officer and Wealth Manager of Premier Bank & Trust / Ohio Legacy Corp for nine years from 2010 to 2019. In this role, Ms. Penz was responsible for four major sales divisions in retail banking, mortgage banking, private banking, and wealth services (including trust and investments). From 2008 to 2010, Ms. Penz founded Excel Financial / Excel Bancorp and led a group of private equity investors to create a community bank and trust company. Lastly, Ms. Penz was the Senior Vice President & Trust and Investment Services Director of the Belmont National Bank / Sky Bank / Huntington Bank from 1996 to 2008, where she managed the trust and investment departments, developed strategic planning initiatives and was directly responsible to the CEO and Board of Directors. Ms. Penz holds a Bachelor of Science in Management and Accounting from West Liberty State College, and an MBA from Wheeling Jesuit University. Ms. Penz was chosen to serve as a member of our Board of Directors due to her considerable leadership experience in the financial sector along with proven success in raising capital, strategic planning and organizational growth.
Sonya Zilka is a member of our Board of Directors. She has been a member of our Board of Directors since October 2021. In addition to her role on our Board of Directors, Ms. Zilka currently serves as the President & Chair of The Beyond Benefits Life Sciences Board of Trustees, a position she has held since 2020. Furthermore, since 2019, Ms. Zilka has served as the Senior Vice President of Human Resources at Chan Zuckerberg Biohub where she leads HR functions and spearheads internal communications. From 2013 through 2015, and again in 2018, Ms. Zilka was an Executive Coach and Organizational Development/Human Resource consultant at ZHR Consulting, a firm specializing in independent organizational development and human capital consulting. From 2013 to 2015, and again in 2018, Ms. Zilka served as Vice President of Human Resources at Actelion Pharmaceuticals, where she led human resources, corporate communications and facilities for the United States. Ms. Zilka holds a Bachelor of Science in Psychology from Washington State University, and a Master’s Degree in Organizational Psychology from Columbia University. Ms. Zilka was chosen to serve as a member of our Board of Directors for her proven leadership and extensive experience in human capital consulting and human resources.
David Saint-Fleur was appointed to serve as a member of our Board of Directors in September 2022, effective upon the pricing of this offering. In addition to his role on our Board of Directors, Mr. Saint-Fleur currently serves in a senior role in Global Artists & Repertoire (“A&R”) at Atlantic Records, a position he has held since June 2021. Prior to this, Mr. Saint-Fleur was in a senior role in Global A&R at Warner Music Group from 2017 to 2021. Mr. Saint-Fleur also serves as a music producer and songwriter at Saint Productions, LLC, his own production company, which he started in 2007. In his role at Saint Productions LLC, Mr. Saint-Fleur has produced and written for various notable artists, including (but not limited to) David Guetta, Bebe Rexha, Dolly Parton, Jason Derulo and Little Mix. Mr. Saint-Fleur was chosen to serve as a member of our Board of Directors for his considerable experience in the music industry, particularly in artist relations, and his proven track record in producing and developing emerging and established talent.
Family Relationships
There are no family relationships among our directors or executive officers.
Director Independence
We intend to list our common stock on the NYSE American in connection with this offering. Under the rules of the NYSE American, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with
 
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the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 of the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries.
Our Board of Directors has determined that Mr. Cassidy, Ms. Penz, Ms. Zilka and Mr. Saint-Fleur are “independent directors” as such term is defined under the applicable rules of the NYSE American.
We have established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Our Board of Directors has determined that Ms. Penz is an “audit committee financial expert,” as defined under the applicable rules of the SEC, and that all members of the Audit Committee are “independent” within the meaning of the applicable NYSE American rule and the independence standards of Rule 10A-3 of the Exchange Act. Each of the members of the Audit Committee meets the requirements for financial literacy under the applicable rules and regulations of the SEC and the NYSE American.
Board Leadership Structure and Role in Risk Oversight
The Chief Executive Officer and Chairman of the Board positions are both held by Mr. Niermann. Periodically, our Board of Directors assesses these roles and the Board of Directors leadership structure to ensure the interests of our Company and our stockholders are best served. Our Board of Directors has determined that its current leadership structure is appropriate. Mr. Niermann, as one of our founders and as our chief executive officer and Chairman, has extensive knowledge of all aspects of Loop, our business and risks.
While management is responsible for assessing and managing risks to Loop, our Board of Directors is responsible for overseeing management’s efforts to assess and manage risk. This oversight is conducted primarily by our full Board of Directors, which has responsibility for general oversight of risks, and standing committees of our Board of Directors. Our Board of Directors satisfies this responsibility through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within our Company. Our Board of Directors believes that full and open communication between management and the Board of Directors is essential for effective risk management and oversight.
Committees of the Board of Directors
Our Board of Directors has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Our Board of Directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our Board of Directors. Each of these committees operates under a charter that has been approved by our Board of Directors, which is available on our website.
Audit Committee.   Our Audit Committee consists of Denise Penz, Sonya Zilka, and Bruce Cassidy, with Denise Penz serving as the Chair of the Audit Committee. Our Board of Directors has determined that the directors that serve on our Audit Committee are independent within the meaning of the NYSE American listing rules and Rule 10A-3 under the Exchange Act. In addition, our Board of Directors has determined that Denise Penz qualifies as an “audit committee financial expert” within the meaning of SEC regulations and the NYSE American rules.
The Audit Committee oversees and monitors our financial reporting process and internal control system, reviews and evaluates the audit performed by our registered independent public accountants and reports to the board of directors any substantive issues found during the audit. The Audit Committee is directly responsible for the appointment, compensation and oversight of the work of our registered independent public accountants. The Audit Committee reviews and approves all transactions with affiliated parties.
 
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Compensation Committee.   Our Compensation Committee consists of Denise Penz and Sonya Zilka, with Sonya Zilka serving as the Chairman of the Compensation Committee. Our Board of Directors has determined that the directors that serve on our Compensation Committee are independent under the listing standards, are “non-employee directors” as defined in rule 16b-3 promulgated under the Exchange Act and are “outside directors” as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended.
The Compensation Committee provides advice and makes recommendations to the Board of Directors in the areas of employee salaries, benefit programs and director compensation. The Compensation Committee also reviews and approves corporate goals and objectives relevant to the compensation of our President, Chief Executive Officer, and other officers and makes recommendations in that regard to the Board of Directors as a whole.
Nominating and Corporate Governance Committee.   Our Nominating and Corporate Governance Committee consists of Denise Penz and Bruce Cassidy, with Bruce Cassidy serving as the Chairman of the Nominating and Corporate Governance Committee. David Saint-Fleur will also be appointed to the Nominating and Corporate Governance Committee upon becoming a member of our Board of Directors. The Nominating and Corporate Governance Committee nominates individuals to be elected to the Board of Directors by our stockholders. The Nominating and Corporate Governance Committee considers recommendations from stockholders if submitted in a timely manner in accordance with the procedures set forth in our Amended and Restated Bylaws (the “Bylaws”) and will apply the same criteria to all persons being considered. All members of the Nominating and Corporate Governance Committee are independent directors as defined under the NYSE American rules.
Board Composition
Our Board currently consists of four members, to be increased to five upon the effectiveness of the appointment of Mr. Saint-Fleur. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal.
We have no formal policy regarding board diversity. Our priority in selection of board members is identification of members who will further the interests of our stockholders through his or her established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge of our business and understanding of the competitive landscape.
 
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EXECUTIVE COMPENSATION
Executive and Director Compensation
All decisions regarding compensation for our executive officers and executive compensation programs are reviewed, discussed and approved by the Compensation Committee. Prior to the establishment of the Compensation Committee in December 2021, decisions regarding executive compensation were made by the full Board. All compensation decisions are determined following a detailed review and assessment of the executive’s leadership and operational performance and contributions to our success; any significant changes in role or responsibility; our financial resources, results of operations and financial projections; the nature, scope and level of the executive’s responsibilities; and internal equity of pay relationships.
The Compensation Committee determines each element of compensation for our CEO. When making determinations about each element of compensation for our other executive officers, the Compensation Committee also considers recommendations from our CEO. Additionally, at the Compensation Committee’s request, our executive officers may assess the design of, and make recommendations related to, our compensation and benefit programs, including recommendations related to the performance measures used in our incentive programs. The Compensation Committee is under no obligation to implement these recommendations.
The following table summarizes information concerning the compensation awarded to, earned by, or paid to, our Chief Executive Officer (“Principal Executive Officer”) and our two most highly compensated executive officers other than the Principal Executive Officer (collectively, the “Named Executive Officers”) during fiscal years ended September 30, 2021, and 2020.
Name & Principal Position
Fiscal
Year End
Salary ($)
Bonus ($)
Option
Awards
($) (1)
Total ($)
Jon M. Niermann
2021
476,990(2) 2,625,000 3,101,990
Chief Executive Officer, Chairman & Director
2020
268,700 268,700
Liam McCallum
2021
216,875 1,050,000 1,266,875
Chief Product and Technical Officer
2020
111,750 111,750
Andy Schuon(3)
2021
261,050 28,660 6,621,333 6,911,043
Head of Loop Media Studios
2020