ITEM 1A. Risk Factors

Our business, financial condition and operating results can be affected by several factors, whether currently known or unknown, many of which are not exclusively within our control, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our financial condition and operating results to differ materially from historical or anticipated future financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price. We urge investors to carefully consider the risk factors described below in evaluating our stock and the information in this report.

Risk Factors That May Affect Our Business

We need to raise capital to meet our debt service obligations to Avidbank and to fund our working capital needs. Our inability to raise sufficient capital would have a material adverse effect on our financial condition and business.

As of December 31, 2019, we had cash, cash equivalents and restricted cash of $3,409,000. As of December 31, 2019, $2,750,000 was outstanding under our term loan with Avidbank, which is gross of any unamortized debt issuance costs that are recorded as a reduction of long-term debt. Since January 1, 2020, we paid $750,000 of the principal amount of our term loan, thereby reducing the principal amount outstanding as of March 19, 2020 to $2,000,000. The maturity date of our term loan is December 31, 2020 and we are required to make monthly principal payments ranging from $125,000 to $300,000 plus accrued interest beginning in April 2020. Subject to limited exceptions, our loan and security agreement with Avidbank prohibits us from borrowing additional amounts from other lenders.

We need to raise capital to meet our debt service obligations to Avidbank and fund our working capital needs. We currently have no arrangements for such capital and no assurances can be given that we will be able to raise such capital when needed, on acceptable terms, or at all. The effects of the recent COVID-19 pandemic on macroeconomic conditions and the capital markets will likely make it more challenging to raise capital. If we are unable to raise sufficient capital, we will need to implement additional measures to reduce operating expenses and to preserve capital, any of which may further adversely affect our operations. The going concern explanatory paragraph included in the report of our independent registered public accounting firm on our consolidated financial statements as of and for the year ended December 31, 2019 could also impair our ability to raise capital. See also, “The measures we recently implemented and may implement in the future to reduce operating expenses and to preserve capital could adversely affect our business and we may not realize the operational or financial benefits from such actions,” “If we fail to comply with our debt service obligations or with our financial covenants to Avidbank, it may declare a default, which could lead to all payment obligations becoming immediately due and payable and have a material adverse effect on our financial condition and business,” and “Raising additional capital may cause dilution to our existing stockholders and may restrict our operations,” below.

Due to the termination of our relationships with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees in November 2019, we expect our future revenue to materially decrease and, for at least the foreseeable future, our operating results and cash flows to be adversely effected. In addition, the recent COVID-19 pandemic could further decrease our revenues and our operating results and cash flows could be further adversely effected.

For the year ended December 31, 2019, Buffalo Wild Wings corporate-owned restaurants and its franchisees accounted for approximately 34%, or $6,820,000, of our total revenue. We continue to seek to add network subscribers and other sources of revenue to offset the revenue we lost as a result of the termination of our relationships with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees in November 2019, however, we have not yet been successful in doing so and there is no assurance that we will be.

In addition, the effect of the recent COVID-19 pandemic on the restaurant and bar industry has been rapid and its scope and magnitude is uncertain at this time. Various levels of governmental authorities have recommended or mandated restrictions on the business operations of restaurants and bars across the United States. The extent to which the effects of the COVID-19 pandemic adversely affects our business and operating results is uncertain at this time and will depend on many factors and future developments, including the scope and nature of future governmental guidelines, recommendations, restrictions or orders. The businesses of restaurants and bars that subscribe to our service or of those considering subscribing to our service will likely be adversely affected by the effects of the COVID-19 pandemic, which could result in such restaurants and bars deciding to terminate or suspend our service or to not subscribe to it, any of which would, at a minimum, adversely affect our near-term revenues and could result in a material adverse effect on our business or results of operations.

If we fail to comply with our debt service obligations or with our financial covenants to Avidbank, it may declare a default, which could lead to all payment obligations becoming immediately due and payable and have a material adverse effect on our financial condition and business.

As of March 19, 2020, the outstanding principal balance of our term loan with Avidbank is $2,000,000. Under our loan and security agreement with Avidbank, as amended, the maturity date of our term loan is December 31, 2020, we are required to make monthly principal payments ranging from $125,000 to $300,000 plus accrued interest beginning in April 2020, our asset coverage ratio must be no less than 1.25 to 1.00 as of the last day of each calendar month and at all times our minimum liquidity must be not less than the outstanding principal of our term loan. See “PART II—ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Avidbank Term Loan,” below. There can be no assurance we will be able to meet our term loan debt service obligations and fund our working capital needs or that we will be in compliance with our financial covenants in the future or that Avidbank will waive any non-compliance in the future. Among other factors, fluctuations in our operating results, could result in violation of these covenant. See “Due to the termination of our relationships with Buffalo Wild Wings corporate-owned restaurants and most of its franchisees in November 2019, we expect our future revenue to materially decrease and, for at least the foreseeable future, our operating results and cash flows to be adversely effected. In addition, the recent COVID-19 pandemic could further decrease our revenues and our operating results and cash flows could be further adversely effected,” above.

If we default on our monthly payment obligations to Avidbank or if we fail to comply with our financial covenants, Avidbank may declare a default, which could lead to all payment obligations becoming immediately due and payable, which would have a material adverse effect on our financial condition and business. Avidbank has a first-priority security interest in all our personal property and may foreclose on our personal property to satisfy our payment obligations.

The measures we recently implemented and may implement in the future to reduce operating expenses and to preserve capital could adversely affect our business and we may not realize the operational or financial benefits from such actions.

We recently implemented measures to reduce operating expenses and to preserve capital. For example, since January 1, 2020, we reduced our headcount from 74 to 39 employees, and we eliminated certain capital expenditures and investments in our business that we planned to make during 2020. We may implement additional measures and further eliminate planned capital expenditures and investments in our business in the future. In addition to distracting management from the core operations of our business, any of these actions may negatively impact our ability to effectively manage, operate and grow our business, to introduce new offerings to our customers, to increase market awareness and encourage the adoption of the Buzztime brand and our Buzztime network, to retain customers, and to generate revenue. For example, the reduction in headcount resulted in the loss of a number of long-term employees, the loss of institutional knowledge and expertise and the reallocation and combination of certain roles and responsibilities across the organization, all of which could adversely affect our operations. In addition, we may not be able to effectively realize all the cost savings anticipated by the reductions in operational costs and we may incur unanticipated charges or make cash payments as a result that were not previously contemplated which could result in an adverse effect on our business or results of operations.

The effects of the COVID-19 pandemic on the operating results of our Canadian business could result in a goodwill impairment charge in 2020, which could adversely affect our future operating results.

We have goodwill resulting from the excess of costs over the fair value of assets we acquired in 2003 related to our Canadian business.  As of December 31, 2019, that goodwill was $696,000. Goodwill and intangible assets acquired in a purchase combination that are determined to have an indefinite useful life are not amortized, but instead are assessed annually, or at interim periods, for impairment based on qualitative factors, such as macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events, to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the Reporting Unit is less than its carrying amount. If there are indications of impairment, then we perform a quantitative impairment test.

If the impact of the COVID-19 pandemic is significant to the operating results of our Canadian business, the recorded goodwill relating to our Canadian business may be impaired, which would result in a non-cash impairment charge in future periods. We cannot accurately predict the amount and timing of any impairment charge at this time, however, any such impairment charge could have an adverse effect on our financial results.

Our success depends on our ability to recruit and retain skilled professionals.

The success of our business depends on our ability to identify, hire, and retain knowledgeable and experienced programmers, creative designers, application developers, and sales and marketing personnel. If we cannot motivate and retain knowledgeable and experienced professionals, our business, financial condition, and results of operations will suffer. There is significant competition from other businesses for individuals with the experience and skills required to successfully operate our business and the recent reductions in headcount and other measures we recently implemented to reduce operating expenses may decrease the morale of our remaining employees and make retaining them more challenging. Moreover, in light of the small number of employees on our staff to manage our key functions, we may not be able to adequately support current and future business initiatives or attract or retain customers, which risk could be increased if we are unable to retain existing personnel.

We cannot assure you that our exploration of strategic alternatives will result in us pursuing a transaction or that any such transaction would be successfully completed, and there may be negative impacts on our business and stock price as a result of the process of exploring strategic alternatives.

In December 2018, we announced that our board of directors was exploring and evaluating strategic alternatives focused on maximizing shareholder value, and that we engaged a financial advisor to assist in the process. Although our engagement with the financial advisor has ended, the strategic process is ongoing. Our board of directors has not set a timetable for the strategic process nor has it made any decisions relating to any strategic alternatives at this time. No assurance can be given as to the outcome of the process, including whether the process will result in a transaction or that any transaction that is agreed to will be completed. Whether the process will result in a transaction, and our ability to complete a transaction, if our board of directors decides to pursue one, will depend on numerous factors, some of which are beyond our control, including the interest of potential acquirers or strategic partners in a potential transaction with our company, the value potential acquirers or strategic partners attribute to our business and its prospects, market conditions, and industry trends. Our stock price may be adversely affected if the process does not result in a transaction or if a transaction is not completed. Even if a transaction is completed, there can be no assurance that it will be successful or have a positive effect on shareholder value. Our board of directors may also determine that no transaction is in the best interest of our stockholders.

In addition, our financial results and operations have been and may continue to be adversely affected by the strategic process and by the uncertainty regarding its outcome. The attention of management and of our board of directors has been diverted from our core business operations to the process and we have diverted capital and other resources to the process that otherwise could have been used in our business operations, and we will continue to do so until the process is completed. We could incur substantial expenses associated with identifying and evaluating potential strategic alternatives, including those related to employee retention payments, equity compensation, severance pay and legal, accounting and financial advisor fees. In addition, the process could lead us to lose or fail to attract, retain and motivate key employees, and to lose or fail to attract customers or business partners, and could expose us to litigation. The public announcement of a strategic alternative may also yield a negative impact on operating results if prospective or existing service providers are reluctant to commit to new or renewal contracts or if existing customers decide to move their business to a competitor.

We do not intend to disclose developments or provide updates on the progress or status of the strategic process until our board of directors deems further disclosure is appropriate or required. Accordingly, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of our company could cause our stock price to fluctuate significantly.

We have experienced significant losses and expect to incur significant losses in the future.

We have a history of significant losses, including net losses of $2,047,000 and $259,000 for the years ended December 31, 2019 and 2018, respectively, and have an accumulated deficit of $131,457,000 as of December 31, 2019. We expect to incur future operating and net losses, due in part to expenditures required to continue to implement our business strategies, including the continued development and implementation of our technology platform and product line. Despite significant expenditures, we may not achieve or maintain profitability. Even if we achieve profitability, the level of profitability cannot be predicted and may vary significantly from quarter to quarter and year to year. See also “—Risks Relating to the Market for Our Common Stock— Our common stock could be delisted or suspended from trading on the NYSE American if we are determined to be non-compliant with any of the NYSE American continued listing standards,” below.

We may not compete effectively within the highly competitive and evolving interactive games, entertainment and marketing services industries.

We face intense competition in the markets in which we operate. For example, we face significant competition in the hospitality market from companies offering services that compete with ours. Our services also compete with games, apps and other forms of entertainment offerings available directly to consumers on their mobile devices. See “ITEM 1. Business—Competition,” above. Many of our current and potential competitors enjoy substantial competitive advantages, including greater financial resources that they can deploy for content development, research and development, strategic acquisitions, alliances, joint ventures, and sales and marketing. As a result, our current and potential competitors may respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, or consumer preferences.

With the rapid pace of change in product and service offerings, we must also be able to compete in terms of technology, content, and management strategy. If we fail to provide competitive, engaging, quality services and products, it will be challenging to gain new customers and we will lose customers to competitors. Increased competition may also result in price reductions, fewer customer orders, reduced gross margins, longer sales cycles, reduced revenue, and loss of market share.

New products and rapid technological change may render our operations obsolete or noncompetitive.

The emergence of new entertainment products and technologies, changes in consumer preferences, the adoption of new industry standards, and other factors may limit the life cycle and market penetration of our technologies, products, and services. Our future performance depends on our ability to:

Our inability to succeed in one or more of the above areas would have a material adverse effect on our financial condition and business.

In addition, we have to incur substantial costs to modify or adapt our products or services to respond to developments, customer needs, and changing preferences. We must be able to incorporate new technologies into the products we design and develop to address the increasingly complex and varied needs of our customer base. Any significant delay or failure in developing new or enhanced technology, including new product and service offerings, would have a material adverse effect on our financial condition and business.

A disruption in the supply of equipment or in our advertising exchange network could negatively impact our revenue.

An unaffiliated third party manufactures an Android-based tablet customized to our specifications and our tablet equipment—tablet charging trays and tablet cases. We have no alternative manufacturing source for our customized tablet or tablet equipment or alternatives for the tablet equipment.

If our sole manufacturer is delayed in delivering tablets to us, becomes unavailable, has product quality issues, or shortages occur, besides not realizing the benefits of having a tablet manufactured to our specifications, we would need to return to third-party tablets or find an alternative device. Similarly, if our sole manufacturer is delayed in delivering the tablet equipment to us, becomes unavailable, has product quality issues, or shortages occur, we may not timely obtain replacement tablet equipment. Delays, unavailability of the tablet or tablet equipment, product quality issues and shortages could damage our reputation and customer loyalty, cause subscription cancellations, increase our expense and reduce our revenue. See also “Our business could be adversely impacted if the sole manufacturer of our customized tablet and tablet equipment is not able to meet our manufacturing quality standards.”

If our sole manufacturer and/or suppliers were to go out of business or otherwise become unable to meet our needs for reliable equipment, locating and qualifying alternate sources could take months, during which time our production could be delayed, and may, in some cases, require us to redesign our products and systems. Such delays and potentially costly re-sourcing and redesign could have a material adverse effect on our business, operating results, and financial condition.

In addition, the revenue we receive from the sale of advertisements that are shown on the screens throughout our network depends on the advertisements being properly aired in our network. We rely on the technology of an unaffiliated third party to air the advertisements on the screens in our network. If that third party technology has interruptions in service or if the advertisements are otherwise not properly airing on our network, the revenue we receive from the sale of advertisements will decrease.

Our business could be adversely impacted if the sole manufacturer of our customized tablet and tablet equipment cannot meet our manufacturing quality standards.

As discussed above, one unaffiliated third-party manufactures our customized tablet and tablet equipment. Continued improvement in supply-chain management and in manufacturing of our customized tablet and tablet equipment and manufacturing quality and product testing are important to our business. Flaws in the design and manufacturing of our customized tablet or tablet equipment or both (by us or our supplier) could result in substantial delays in shipment and in substantial repair, replacement or service costs, could damage our reputation and customer loyalty, could cause subscription cancellations, and could increase our expense and reduce our revenue. Costs associated with tablet or tablet equipment defects due to, for example, problems in our design and manufacturing processes, could include: (a) writing off the value of inventory; (b) disposing of items that cannot be fixed; (c) recalling items that have been shipped; and (d) providing replacements or modifications. These costs could be significant and may increase expenses and lower gross margin. There can be no assurance that our efforts to monitor, develop, modify and implement appropriate test and manufacturing processes for our tablet and related equipment will be sufficient to permit us to avoid quality issues. Significant quality issues could have a material adverse effect on our business, results of operations or financial condition.

In addition, the third-party manufacturer of our customized tablet and tablet equipment manufactures in China using a significant number of Chinese-sourced parts. While our inventory is currently robust, we are experiencing delays from suppliers who have been affected by the COVID-19 pandemic. A disruption in the supply chain for our tablet and tablet equipment for whatever reason, including resulting from the effects of the COVID-19 pandemic, could adversely impact our ability to deliver our products and services. It may not be possible to find replacement products or supplies and significant delays could adversely affect our business. We are experiencing delays from suppliers who have been affected more directly by the outbreak.

If we do not adequately protect our proprietary rights and intellectual property or we are subjected to intellectual property claims by others, our business could be seriously damaged.

We rely on a combination of trademarks, copyrights, patents, and trade secret laws to protect our proprietary rights in our products. We have a few patents and patent applications pending in jurisdictions related to our business activities. Our pending patent applications and any future applications might not be approved. Moreover, our patents might not provide us with competitive advantages. Third parties might challenge our patents or trademarks or attempt to use infringing technologies or brands which could harm our ability to compete and reduce our revenues, as well as create significant litigation expense. In addition, patents and trademarks held by third parties might have an adverse effect on our ability to do business and could likewise result in significant litigation expense. Furthermore, third parties might independently develop similar products, duplicate our products or, to the extent patents are issued to us, design around those patents. Others may have filed and, in the future may file, patent applications similar or identical to ours. Such third-party patent applications might have priority over our patent applications. To determine the priority of inventions, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office, which could result in substantial cost to us.

We believe that the success of our business also depends on such factors as the technical expertise and innovative capabilities of our employees. It is our policy that all employees and consultants sign non-disclosure agreements and assignment of invention agreements. Our competitors, former employees, and consultants may, however, misappropriate our technology or independently develop technologies that are as good as or better than ours. Our competitors may also challenge or circumvent our proprietary rights. If we have to initiate or defend against an infringement claim to protect our proprietary rights, the litigation over any such claim, with or without merit, could be time-consuming and costly to us.

From time to time, we hire or retain employees or consultants who may have worked for other companies developing products similar to those that we offer. These other companies may claim that our products are based on their products and that we have misappropriated their intellectual property. Any such claim, with or without merit, could be time-consuming and costly to us, adversely affecting our financial condition.

We may be liable for the content and services we make available on our Buzztime network and the internet.

We make content and entertainment services available on our Buzztime network and the internet which includes games and game content, software, and a variety of other entertainment content. The availability of this content and services and our branding could result in claims against us based on a variety of theories, including defamation, obscenity, negligence, or copyright or trademark infringement. We could also be exposed to liability for third-party content accessed through the links from our websites to other websites. Federal laws may limit, but not eliminate, our liability for linking to third-party websites that include materials that infringe copyrights or other rights. We may incur costs to defend against claims related to either our own content or that of third parties, and our financial condition could be materially adversely affected if we are found liable for information that we make available. Implementing measures to reduce our exposure may require us to spend substantial resources and may limit the attractiveness of our services to users which would harm our business.

Our products and services are subject to government regulations that may restrict our operations or cause demand for our products to decline significantly.

In addition to laws and regulations applicable to businesses generally, we are also subject to laws and regulations that apply specifically to the interactive entertainment and product marketing industries. In addition, we operate games of chance and skill, and we award nominal cash prizes to winners of certain games and may provide items of nominal value (e.g., key chains, etc.) to venues who may award such items to consumers. These games are regulated in many jurisdictions and the laws and regulations vary from jurisdiction to jurisdiction. See “ITEM 1. BUSINESS—Government Regulations.” We may find it necessary to eliminate, modify, suspend, or cancel certain features of our offerings (including the games we offer) in certain jurisdictions based on the adoptions of new laws and regulations or changes in law or regulations or the enforcement thereof, which could result in additional development costs and/or the loss of customers and revenue.

Communication or other system failures could result in customer cancellations and a decrease in our revenues.

We rely on the continuous operation of our information technology and communications systems and those of third parties to communicate with and to distribute our services to the locations of our network subscribers. We currently transmit our data to our customers via broadband internet connections including telephone and cable TV networks. Our systems and those of third parties on which we rely are vulnerable to damage or interruption from many causes, including earthquakes, terrorist attacks, floods, storms, fires, power loss, telecommunications and other network failures, equipment failures, computer viruses, computer denial of service or other attacks. These systems are also subject to break-ins, sabotage, vandalism, and to other disruptions, for example if we or the operators of these systems and system facilities have financial difficulties. Some of our systems are not fully redundant, and our system protections and disaster recovery plans cannot prevent all outages, errors, or data losses. In addition, our services and systems are highly technical and complex and may contain errors or other vulnerabilities. Any errors or vulnerabilities in our products and services, damage to or failure of our systems, any natural or man-made disaster, or other unanticipated problems at our facilities or those of a third party, could result in lengthy interruptions in our service to our customers, which could reduce our revenues and cash flow, and damage our brand. Any interruption in communications or failure of proper hardware or software function at our or our customers’ venues could also decrease customer loyalty and satisfaction and result in a cancellation of our services.

We have incurred significant net operating loss carryforwards that we will likely be unable to use.

At December 31, 2019, we had net operating loss (“NOL”) carryforwards of approximately $63,354,000 available for federal income tax purposes, which will continue expiring in 2020, and of approximately $29,195,000 available for state income tax purposes, which will continue expiring in 2020. We believe that our ability to utilize our NOL carryforwards may be substantially restricted by the passage of time and the limitations of Section 382 of the Internal Revenue Code, which apply when there are certain changes in ownership of a corporation. To the extent we begin to realize significant taxable income, these Section 382 limitations may result in our incurring federal income tax liability notwithstanding the existence of otherwise available NOL carryforwards. We performed a Section 382 analysis through December 31, 2018 to determine the impact of any changes in ownership. This analysis indicated that no ownership change occurred that would limit the use of the NOLs. We do not believe there has been a material change in our ownership between the Section 382 analysis completed through December 31, 2018 and the year ended December 31, 2019 that would indicate a limit on the use of the NOLs. We established a full valuation allowance for substantially all of our deferred tax assets, including the NOL carryforwards, since we do not believe we are likely to generate future taxable income to realize these assets.

Risks Relating to the Market for Our Common Stock

Our common stock could be delisted or suspended from trading on the NYSE American if we are determined not to be in compliance with any of the NYSE American continued listing standards.

After the filing of this report, the NYSE Regulation may notify us that we are not in compliance with Section 1003(a)(iii) of the NYSE American Company Guide because our stockholders’ equity was less than $6 million as of December 31, 2019 (it was $5,091,000) and because we had net losses in five of our most recent fiscal years ended December 31, 2019. If we are determined not to be in compliance with Section 1003(a)(iii) of the NYSE American Company Guide or any other NYSE American continued listing standard, we will become subject to the procedures and requirements of Section 1009 of the Company Guide or the NYSE Regulation may immediately initiate delisting proceedings.

If we receive a notice of non-compliance from NYSE Regulation, we can give no assurances that we will be able to address it successfully, or even if we do, that we will be able to maintain the listing of our common stock on the NYSE American. In addition, we may determine to pursue business opportunities or grow our business at levels or on timelines that further reduces our stockholders’ equity below the level required to maintain compliance with NYSE American continued listing standards. The delisting of our common stock for whatever reason could, among other things: substantially impair our ability to raise additional capital; result in a loss of institutional investor interest and fewer financing opportunities for us; result in claims for breaches of representations or covenants in agreements relating to our compliance with applicable listing requirements; materially impair our stockholders’ ability to buy and sell shares of our common stock; and have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock.

If our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock in the secondary market.

If our common stock were delisted or suspended from trading on the NYSE American, it may be subject to the so-called “penny stock” rules. The SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange. For any transaction involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock.

The market price of our common stock historically has been and likely will continue to be highly volatile and our common stock is thinly traded.

The market price for our common stock historically has been highly volatile, and the market for our common stock has from time to time experienced significant price and volume fluctuations, based both on our operating performance and for reasons that appear to us unrelated to our operating performance. Our stock is also thinly traded, which can affect market volatility, which could significantly affect the market price of our common stock without regard to our operating performance. In addition, the market price of our common stock may fluctuate significantly in response to several factors, including:

The realization of any of the foregoing could have a dramatic and adverse impact on the market price of our common stock.

Future sales of substantial amounts of our common stock in the public market or the anticipation of such sales could have a material adverse effect on then-prevailing market prices.

As of December 31, 2019, there were approximately (1) 142,000 shares of common stock reserved for issuance upon the exercise of outstanding stock options at exercise prices ranging from $2.43 to $30.50 per share, (2) 57,000 shares of common stock reserved for issuance upon the settlement of outstanding restricted stock units, and (3) 156,000 shares of our Series A Preferred Stock outstanding which, based on their current conversion price, would convert into approximately 11,000 shares of common stock. Registration statements registering the shares of common stock underlying the outstanding options and restricted stock units are currently effective. Generally, the shares of common stock issuable upon conversion of the Series A Preferred Stock, which the holders may do at any time, may be sold under Rule 144 of the Securities Act of 1933. Accordingly, a significant number of shares of our common stock could be sold at any time. Depending upon market liquidity at the time our common stock is resold by the holders thereof, such resales could cause the trading price of our common stock to decline. In addition, the sale of a substantial number of shares of our common stock, or anticipation of such sales, could make it more difficult for us to obtain future financing. To the extent the trading price of our common stock at the time any of our outstanding options are exercised exceeds their exercise price or at the time any of our outstanding shares of Series A Preferred stock are converted exceeds their conversion price, such exercise or conversion will have a dilutive effect on our stockholders.

Raising additional capital may cause dilution to our existing stockholders and may restrict our operations.

We may raise additional capital at any time and may do so through one or more financing alternatives, including public or private sales of equity or debt securities directly to investors or through underwriters or placement agents. See also “Our ability to raise capital may be limited by applicable laws and regulations,” below. Raising capital through the issuance of common stock (or securities convertible into or exchangeable or exercisable for shares of our common stock) may depress the market price of our stock and may substantially dilute our existing stockholders. In addition, our board of directors may issue preferred stock with rights, preferences and privileges senior to those of the holders of our common stock. Debt financings could involve covenants that restrict our operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of our assets, as well as prohibitions on our ability to create liens or make investments and may, among other things, preclude us from making distributions to stockholders (either by paying dividends or redeeming stock) and taking other actions beneficial to our stockholders. In addition, investors could impose more one-sided investment terms on companies that have or are perceived to have limited remaining funds or limited ability to raise additional funds. The lower our cash balance, the more difficult it is likely to be for us to raise additional capital on commercially reasonable terms, or at all.

Our ability to raise capital may be limited by applicable laws and regulations.

Over the past few years we have raised capital through the sale of our equity securities. The offerings we completed in April 2014, November 2016, March 2017, April 2017 and June 2018 were equity offerings conducted under a “shelf” registration statement on Form S-3. Using a shelf registration statement on Form S-3 to raise additional capital generally takes less time and is less expensive than other means, such as conducting an offering under a Form S-1 registration statement. However, our ability to raise capital using a shelf registration statement may be limited by, among other things, SEC rules and regulations. Under SEC rules and regulations, we must meet certain requirements to use a Form S-3 registration statement to raise capital without restriction as to the amount of the market value of securities sold thereunder. One such requirement is that we periodically evaluate the market value of our outstanding shares of common stock held by non-affiliates, or public float, and if, at an evaluation date, our public float is less than $75.0 million, then the aggregate market value of securities sold by us or on our behalf under the Form S-3 in any 12-month period is limited to an aggregate of one-third of our public float. Based on the closing price of our common stock on March 16, 2020, the highest closing price of our common stock within the past 60 days, our public float is approximately $7.6 million and therefore we are currently subject to the one-third of our public float limitation. Assuming our public float remains the same amount the next time we must evaluate it, we will only be able to sell up to approximately $2.5 million if we seek to use a shelf registration statement. If our ability to use a shelf registration statement for a primary offering of our securities is limited to one-third of our public float, we may conduct such an offering pursuant to an exemption from registration under the Securities Act or under a Form S-1 registration statement, and we would expect either alternative to increase the cost of raising additional capital relative to utilizing a Form S-3 registration statement.

In addition, under SEC rules and regulations, our common stock must be listed and registered on a national securities exchange in order to utilize a Form S-3 registration statement (i) for a primary offering, if our public float is not at least $75.0 million as of a date within 60 days prior to the date of filing the Form S-3 or a re-evaluation date, whichever is later, and (ii) to register the resale of our securities by persons other than us (i.e., a resale offering). While currently our common stock is listed on the NYSE American, there can be no assurance we can maintain such listing. See also “Our common stock could be delisted or suspended from trading on the NYSE American if we are determined to be non-compliant with any of the NYSE American continued listing standards,” above.

Our ability to timely raise sufficient additional capital also may be limited by the NYSE American’s stockholder approval requirements for transactions involving the issuance of our common stock or securities convertible into our common stock. For instance, the NYSE American requires that we obtain stockholder approval of any transaction involving the sale, issuance or potential issuance by us of our common stock (or securities convertible into our common stock) at a price less than the greater of book or market value, which (together with sales by our officers, directors and principal stockholders) equals 20% or more of our then outstanding common stock, unless the transaction is considered a “public offering” by the NYSE American staff. In addition, certain prior sales by us may be aggregated with any offering we may propose in the future, further limiting the amount we could raise in any future offering not considered a public offering by the NYSE American staff and involves the sale, issuance or potential issuance by us of our common stock (or securities convertible into our common stock) at a price less than the greater of book or market value. The NYSE American also requires that we obtain stockholder approval if the issuance or potential issuance of additional shares will be considered by the NYSE American staff to result in a change of control of our company.

Obtaining stockholder approval is a costly and time-consuming process. If we must obtain stockholder approval for a potential transaction, we would expect to spend substantial additional money and resources. In addition, seeking stockholder approval would delay our receipt of otherwise available capital, which may materially and adversely affect our ability to execute our business strategy, and there is no guarantee our stockholders ultimately would approve a proposed transaction. A public offering under the NYSE American rules typically involves broadly announcing the proposed transaction, which often depresses the issuer’s stock price. Accordingly, the price at which we could sell our securities in a public offering may be less, and the dilution existing stockholders experience may in turn be greater, than if we were able to raise capital through other means.

Our charter contains provisions that may hinder or prevent a change in control of our company, which could result in our inability to approve a change in control and potentially receive a premium over the current market value of your stock.

Certain provisions of our certificate of incorporation could make it more difficult for a third party to acquire control of us, even if such a change in control would benefit our stockholders, or to make changes in our board of directors. For example, our certificate of incorporation (i) prohibits stockholders from filling vacancies on our board of directors, calling special stockholder meetings, or taking action by written consent, and (ii) requires a supermajority vote of at least 80% of the total voting power of our outstanding shares, voting together as a single class, to remove our directors from office or to amend provisions relating to stockholders taking action by written consent or calling special stockholder meetings.

Additionally, our certificate of incorporation and restated bylaws contain provisions that could delay or prevent a change of control of our company. Some provisions:

These provisions could discourage third parties from taking control of our company. Such provisions may also impede a transaction in which you could receive a premium over then current market prices and your ability to approve a transaction that you consider in your best interest.

In addition, we are governed by Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our certificate of incorporation, restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors, including delaying or impeding a merger, tender offer, or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.