UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FormFORM 10-Q
(Mark One)
þ
xQUARTERLY REPORT UNDERPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2015June 30, 2023


OR
or
o
oTRANSITION REPORT UNDERPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to                     _________ to_________

COMMISSION FILE NUMBER 0-126213
logo
ROOMLINX, INC.
(Exact Name of registrant as specified in its charter)
Commission File Number: 001-40329
Nevada83-0401552
Troika Media Group, Inc.
(Exact name of registrant as specified in its charter)
Nevada83-0401552
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer Identification
Identification No.)
25 West 39th Street, 6th Floor, New York, NY10018
(Address of principal executive offices)(Zip Code)
433 Hackensack Avenue, 6th Floor, Hackensack, New Jersey 07601(212) 213-0111
(Address of principal executive offices) (Zip Code)
Registrant’s telephone Number,number, including area code:  (201) 968-9797

code)
N/A
(Former name, Formerformer address and Former fiscalformer fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
 on which registered
Common Shares, $0.001 par valueTRKAThe Nasdaq Capital Market
Redeemable warrants to acquire Common StockTRKAWThe Nasdaq Capital Market
Indicate by check mark whether the issuerregistrant (1) filedhas filed all reports required to be filedfiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to filefile such reports), and (2) has been subject to such filingfiling requirements for the past 90 days. oYes ox Nox

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)files). oYes ox Nox

Indicate by check mark whether the registrant is a large accelerated filer,filer, an accelerated filer,filer, a non-accelerated filer, orfiler, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,filer,” “accelerated filer,filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ofilero
Accelerated filer o
filer		o
Non-accelerated Filer
Non-accelerated filer o
x
Smaller reporting company
x
Emerging growth company(Do not check if a smaller reporting company)o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ox Noþ
ClassOutstanding at October 20, 2023
Common Stock, $.001 par value16,676,762
As of November 27, 2015 the issuer had 135,741,571 outstanding shares of Common Stock




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TABLE OF CONTENTS
Page
3
Item 1.
3
Condensed Consolidated Balance Sheets – March 31, 2015 (unaudited) and  December 31, 2014Financial Statements (Unaudited)
3
3
4
5
6
7 to 33
Item 2.
34
28
Item 3.
43
37
Item 4.
43
36
44
Item 1.
44
37
Item 1A.
45
38
Item 2.
46
38
Item 3.
47
38
Item 4.
47
38
Item 5.
47
Item 6.
Exhibits38
47
SignaturesItem 6.
48
39
SIGNATURES
40

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Troika Media Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
June 30,
2023		December 31,
2022
ASSETS 
Current assets:  
Cash and cash equivalents$18,325,055 $28,403,797 
Restricted cash447,285 — 
Accounts receivable, net15,197,469 10,801,299 
Prepaid expenses and other current assets2,313,242 1,388,084 
Total current assets36,283,051 40,593,180 
Other assets675,729 702,750 
Property and equipment, net323,850 618,699 
Right-of-use lease assets2,696,108 3,029,785 
Amortizable intangible assets, net60,686,111 64,761,111 
Goodwill45,518,505 45,518,505 
Total assets$146,183,354 $155,224,030 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Accounts payable$25,475,164 $14,270,063 
Accrued and other current liabilities6,031,766 8,390,196 
Accrued billable expenses7,510,508 7,810,126 
Deferred revenue9,316,686 6,209,442 
Current portion of long term debt, net of deferred financing costs1,611,444 1,551,211 
Convertible note payable60,006 60,006 
Note payable - related party, current— 30,000 
Operating lease liabilities, current1,598,693 1,506,534 
Acquisition liabilities9,346,504 9,293,402 
Contingent liability939,224 3,385,000 
Total current liabilities61,889,995 52,505,980 
Long-term liabilities:  
Long-term debt, net of deferred financing costs64,013,064 64,833,844 
Operating lease liabilities, non-current6,399,369 7,192,662 
Other long-term liabilities13,425 212,432 
Total liabilities132,315,853 124,744,918 
Commitments and Contingencies (Note 10)  
Stockholders’ equity:  
Preferred stock, $0.01 par value: 25,000,000 shares authorized— — 
Series E Preferred Stock ($0.01 par value: 500,000 shares authorized, 14 and 310,793 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively); redemption amount and liquidation preference $0.0 million and $31.1 million , as of June 30, 2023 and December 31, 2022, respectively— 3,107 
Common stock, ($0.001 par value: 32,000,000 shares authorized; 16,676,762 and 5,572,089 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)16,677 5,572 
Additional paid-in-capital269,350,052 265,806,976 
Accumulated deficit(255,499,228)(235,336,543)
Total stockholders’ equity13,867,501 30,479,112 
Total liabilities and stockholders’ equity$146,183,354 $155,224,030 
The accompanying notes are an integral part of these unaudited condensedconsolidated financial statements.
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Troika Media Group, Inc. and Subsidiaries
TableCondensed Consolidated Statements of Contents

Operations and Comprehensive Loss
(Unaudited)
PART I.   FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
Roomlinx Inc. and Subsidiaries 
Condensed Consolidated Balance Sheets
 
As of March 31, 2015 and December 31, 2014 
       
       
       
  March 31, 2015  December 31, 2014 
  (unaudited)    
Assets      
Current assets      
Cash $1,452,010  $2,510,800 
Accounts receivable, net  1,880,482   1,051,262 
Leases receivable, current portion  460,968   - 
Prepaid expenses and deferred cost  809,803   581,518 
Equipment purchased for resale  1,211,618   1,069,521 
Other current assets  424,628   62,173 
Total current assets  6,239,509   5,275,274 
Property, equipment and software, net  503,050   446,256 
Intangible assets, net  2,079,167   2,104,167 
Goodwill  4,121,284   4,121,284 
Security deposits  1,102,950   1,031,136 
Other assets  1,472,558   1,008,519 
Total Assets $15,518,518  $13,986,636 
         
Liabilities and Deficit        
Current liabilities        
Accounts payable $10,247,902  $6,502,278 
Line of credit, net of debt discount, current portion  1,018,978   - 
Customer deposits  1,417,846   - 
Current maturities of notes payable, related party  1,468,933   832,030 
Accrued expenses  1,241,761��  912,061 
Leases payable  2,833,342   2,425,043 
Note payable and other obligations, current portion  12,573   - 
Deferred revenue and customer prepayments  1,532,046   756,463 
Other current liabilities  36,305   - 
Current liabilities of discontinued operations  3,255,629   3,138,056 
Total current liabilities  23,065,315   14,565,931 
Non-current liabilities        
Line of credit, net of debt discount, less current portion  2,607,308   - 
Long-term portion of notes payable, related party  1,846,169   2,067,601 
Note payable and other obligations, less current portion  5,658   - 
Non-current lease obligations  5,138,705   5,040,948 
Other non-current liabilities  144,807   - 
Nonconvertible Series A prefered stock, related party  10   10 
Total non-current liabilities  9,742,657   7,108,559 
Total liabilities  32,807,972   21,674,490 
Commitments and contingencies  -   - 
Roomlinx, Inc. stockholders' deficit        
Preferred stock, par value $0.20 per share, 5,000,000 shares authorized:        
Class A - 720,000  and nil shares authorized, issued and outstanding (liquidation preference of $144,000 at March 31, 2015 and December 31, 2014)  144,000   - 
Preferred stock, par value $0.01 per share, 10,000,000 shares authorized and 1,010 shares designated and outstanding at March 31, 2015 and December 31, 2014 
Series A preferred stock, par value $0.01 per share, 1,000 shares designated, 1,000 shares issued and outstanding at March 31, 2015 and December 31, 2014  -   - 
Series B preferred stock, par value $0.01 per share, 10 shares designated, 10 shares issued and outstanding at March 31, 2015 and December 31, 2014  -   - 
Common stock, par value $0.001 per share, 400,000,000 shares authorized, 135,040,720 and 115,282,137 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively  135,040   115,282 
Additional paid-in capital  84,401,944   45,179,249 
Accumulated deficit  (101,970,106)  (52,982,385)
Total Roomlinx, Inc. stockholders' deficit  (17,289,122)  (7,687,854)
Non-controlling interest  (332)  - 
Total deficit  (17,289,454)  (7,687,854)
Total Liabilities and Deficit $15,518,518  $13,986,636 

 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Revenue$58,689,147 $85,381,703 $117,727,485 $101,066,703 
Cost of revenue52,945,735 67,969,498 103,229,453 79,707,498 
Gross profit5,743,412 17,412,205 14,498,032 21,359,205 
Operating expenses:   
Selling, general and administrative expenses12,114,352 13,991,857 23,051,346 31,174,857 
Depreciation and amortization2,065,753 2,267,780 4,129,048 2,696,780 
Restructuring and other related charges(324,907)5,590,932 (98,584)5,590,932 
Impairment and other losses (gains), net— 8,937,677 — 8,937,677 
Total operating expenses13,855,198 30,788,246 27,081,810 48,400,246 
Operating loss(8,111,786)(13,376,041)(12,583,778)(27,041,041)
Other income (expense):
Interest expense(3,449,052)(2,796,367)(6,889,708)(2,896,367)
Miscellaneous expense(680,087)(1,937,673)(632,199)(2,527,673)
Total other expense(4,129,139)(4,734,040)(7,521,907)(5,424,040)
Loss from operations before income taxes(12,240,925)(18,110,081)(20,105,685)(32,465,081)
Income tax (expense) benefit(21,030)54,075 (57,000)21,075 
Net loss(12,261,955)(18,056,006)(20,162,685)(32,444,006)
Foreign currency translation adjustment— (605,438)— (569,438)
Comprehensive loss$(12,261,955)$(18,661,444)$(20,162,685)$(33,013,444)
Loss per share:    
Basic$(0.73)$(6.60)$(1.51)$(13.41)
Weighted average number of shares outstanding:
Basic16,738,384 2,735,084 13,395,164 2,420,262 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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- 3 -

Troika Media Group, Inc. and Subsidiaries
TableCondensed Consolidated Statements of Contents


Stockholders’ Equity
For the Three and Six Months Ended June 30, 2023 and 2022
(Unaudited)
Roomlinx Inc. and Subsidiaries 
Condensed Consolidated Statements of Operations
 
For the three months ended March 31, 2015 and 2014 
(unaudited) 
       
       
       
  2015  2014 
       
Revenues $3,202,861  $3,125,314 
Cost of sales, excluding depreciation and amortization which is included in selling, general and administrative expense  2,808,154   2,291,982 
Gross margin  394,707   833,332 
Operating Expenses        
Selling, general and administrative expense  5,958,727   2,485,604 
Impairment of goodwill  42,847,066   - 
Total operating Expenses  48,805,793   2,485,604 
Operating loss  (48,411,086)  (1,652,272)
Other (expense) income        
Interest expense, net  (457,605)  (531,064)
Other income, net  30,638   36,246 
Total other (expense) income  (426,967)  (494,818)
Loss from continuing operations before income taxes  (48,838,053)  (2,147,090)
Income tax expense (benefit)  -   - 
Loss from continuing operations  (48,838,053)  (2,147,090)
Loss from discontinued operations, net of tax  -   (77,910)
Net loss  (48,838,053)  (2,225,000)
Net loss attributable to the non-controlling interest  332   - 
 Net loss attributable to the Company  (48,837,721)  (2,225,000)
Less: Dividends on preferred stock  150,000   150,000 
Net loss attributable to common shareholders $(48,987,721) $(2,375,000)
         
Loss per share        
Basic and diluted loss per common share from        
Continuing operations, attributable to commons shareholders $(0.42) $(0.02)
Discontinued operations, attributable to commons shareholders  -   (0.00)
Net loss attributable to common shareholders $(0.42) $(0.02)
Weighted average number of common shares outstanding        
Basic and diluted  116,160,298   108,689,546 



Preferred Stock Series APreferred Stock Series E
Common Stock
Additional
Paid In
Capital
Accumulated
Deficit
Accumulated Comprehensive
Income (Loss)
 Stockholders’
Equity
AmountAmount
Amount
Balance - December 31, 2022$— $3,107 $5,572 $265,806,976 $(235,336,543)$— $30,479,112 
Stock-based compensation expense— — — 547,197 — — 547,197 
Cashless exercise of warrants for common shares— — 5,646 (5,646)— — — 
Conversion of Preferred Series E shares to common shares— (3,048)4,877 (1,829)— — — 
Partial liquidated damages settled in common shares— — 428 2,672,748 — — 2,673,176 
Net loss— — — — (7,900,730)— (7,900,730)
Balance - March 31, 2023$— $59 $16,523 $269,019,446 $(243,237,273)$— $25,798,755 
Rounding adjustment resulting from one (1) for twenty-five (25) reverse stock split— — 31 (31)— — — 
Stock-based compensation expense— — — 330,580 — — 330,580 
Conversion of Preferred Series E shares to common shares— (59)2 57 — — — 
Issuance of common stock via At-the-Market offering, net— — 121 — — — 121 
Net loss— — — — (12,261,955)— (12,261,955)
Balance - June 30, 2023$— $— $16,677 $269,350,052 $(255,499,228)$— $13,867,501 
Balance — December 31, 2021$7,000 $— $1,760 $208,127,240 $(193,138,000)$(386,000)$14,612,000 
Record vested deferred compensation relating to Redeeem employees— — — 805,000 — — 805,000 
Issuance of common stock related to Converge acquisition— — 480 14,874,520 — — 14,875,000 
Record preferred stock issued to PIPE— 5,000 — (5,000)— — — 
Stock-based compensation— — 320 9,095,680 — — 9,096,000 
Foreign currency translation reclassification— — — — — 36,000 36,000 
Net loss— — — — (14,388,000)— (14,388,000)
Balance - March 31, 2022$7,000 $5,000 $2,560 $232,897,440 $(207,526,000)$(350,000)$25,036,000 
Stock-based compensation— — — 4,204,534 — — 4,204,534 
Acquisition adjustments— — — 257,849 — — 257,849 
Redemption of Preferred Series A(7,000)— — (439,200)— — (446,200)
Foreign currency translation reclassification— — — — — (605,438)(605,438)
Net loss— — — — (18,056,006)— (18,056,006)
Balance - June 30, 2022$— $5,000 $2,560 $236,920,623 $(225,582,006)$(955,438)$10,390,739 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Roomlinx Inc. and Subsidiaries 
Condensed Consolidated Statements of Changes in Deficit
 
For the three months ended March 31, 2015 
(unaudited) 
                                     
                                     
                                     
  Class A  Series A  Series B        Additional        Total 
  Preferred Stock  Preferred Stock  Preferred Stock  Common Stock  Paid-in  Accumulated  Non-Contolling  Stockholders' 
  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  Interest  Deficit 
                                                 
                                                 
Balance at December 31, 2014 - As adjusted for stock reverse split and recapitalization  -  $-   1,000  $-   10  $-   115,282,137  $115,282  $45,179,249  $(52,982,385) $-  $(7,687,854)
Shares retained by Roomlinx' shareholders in connection with the shares exchange merger transaction  720,000   144,000   -   -   -   -   19,758,619   19,758   35,545,756   -   -   35,709,514 
Preferred stock dividends of Series A  -   -   -   -   -   -   -   -   -   (150,000)  -   (150,000)
Contributed capital from a shareholder  -   -   -   -   -   -   -   -   65,004   -   -   65,004 
Stock based compensation  -   -   -   -   -   -   -   -   3,167,653   -   -   3,167,653 
Warrants issued to lenders  -   -   -   -   -   -   -   -   444,282   -   -   444,282 
Effect of rounding  -   -   -   -   -   -   (16)  -   -   -   -   - 
Net loss for the period  -   -   -   -   -   -   -   -   -   (48,837,721)  (332)  (48,838,053)
Balance at March 31, 2015  720,000  $144,000   1,000  $-   10  $-   135,040,740  $135,040  $84,401,944  $(101,970,106) $(332) $(17,289,454)
Troika Media Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows
(Unaudited)


Six Months Ended
June 30,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net loss$(20,162,685)$(32,444,006)
Adjustments to reconcile net loss to net cash used in operating activities:  
Depreciation and amortization4,129,048 2,696,780 
Amortization of right-of-use assets333,677 728,455 
Amortization of deferred financing costs1,151,953 791,292 
Impairments and other losses (gains), net— 8,937,677 
Stock-based compensation877,778 13,300,534 
Accretion of interest on acquisition liabilities53,102 — 
Gain on derivative liabilities— (626,145)
Provision for bad debt(135,705)243,524 
Partial liquidated damages expense227,400 3,615,000 
Change in operating assets and liabilities:  
Accounts receivable(4,260,465)(10,612,057)
Prepaid expenses(925,158)(954,183)
Accounts payable and accrued expenses8,838,694 9,247,500 
Other assets27,021 17,269 
Operating lease liability(701,134)(2,904,470)
Due to related parties— (7,000)
Deferred revenue3,107,244 4,345,159 
Other long-term liabilities(199,009)(121,361)
Net cash used in operating activities(7,638,239)(3,746,032)
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchase of property and equipment(50,839)(70,638)
Net cash paid for acquisition of Converge— (82,730,000)
Net cash used in investing activities(50,839)(82,800,638)
CASH FLOWS FROM FINANCING ACTIVITIES:  
Principal payments made for bank loan(1,912,500)(956,250)
Payments for note payable to related party(30,000)(50,000)
Proceeds from at-the-market offering, net121 — 
Proceeds from the issuance of preferred stock, net of offering costs— 44,405,000 
Proceeds from bank loan, net of debt issuance cost— 69,717,960 
Payments made for the redemption of Series A preferred stock— (446,400)
Payment of stimulus loan programs— (435,000)
Net cash (used in) provided by financing activities(1,942,379)112,235,310 
Effect of exchange rate on cash— 1,003,161 
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH$(9,631,457)$26,691,801 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — beginning of period28,403,797 5,982,000 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — end of period$18,772,340 $32,673,801 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:  
Cash paid during the period for:  
Interest expense$5,714,032 $1,998,958 
Income taxes$— $— 
Noncash investing and financing activities:
  
Conversion of Series E Preferred shares to common shares$31,078,000 $— 
Cashless exercise of warrants for common shares$34,690,000 $— 
Settlement of contingent liability in common shares$2,673,176 $— 
Write-off of property and equipment$291,641 $— 
Fair value of common stock issued relating to the Converge Acquisition$— $14,875,000 
Warrants issued relating to debt financing$— $2,232,000 
Warrants issued relating to equity financing$— $28,407,000 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
- 5 -

Roomlinx Inc. and Subsidiaries 
Condensed Consolidated Statements of Cash Flows
 
For the three months ended March 31, 2015 and 2014 
(unaudited) 
       
  2015  2014 
       
Cash flow from operating activities:      
Net loss $(48,838,053) $(2,225,000)
Adjustment to reconcile loss to net cash used in operating activities -        
Depreciation and amortization  22,013   44,942 
Amortization of debt discount and deferred financing costs  50,548   122,694 
Amortization of intangible asset  25,000   25,000 
Bad debt expense  32,529   (28,877)
Stock based compensation  3,167,653   - 
Impairment of goodwill  42,847,066   - 
Non-cash expenses  15,469     
Loss from discontinued operations    -   77,910 
Changes in operating assets and liabilities:        
Decrease (increase) in accounts receivable  1,558   (83,425)
Increase in prepaid expenses and other current assets  (309,481)  (103,094)
Decrease (increase) in other assets  42,359   (72,547)
Increase in assets held for sale  (142,097)  - 
Decrease in accounts payable and accrued expenses  (297,567)  (525,923)
Increase in deferred revenue and customer prepayments  656,766   418,314 
Cash used in discontinued operations, net  -   (158,463)
Net cash used in operating activities  (2,726,237)  (2,508,469)
Cash flows from investing activities        
Cash acquired from the reverse acquisition  812,756   - 
Payment of software development costs  -   (4,267)
Purchase of machinery and equipment  -   (12,055)
Net cash provided by (used in) investing activities  812,756   (16,322)
Cash flows from financing activities        
Contributed capital from principal shareholder  65,004   5,583,500 
Payment of related party loans  (114,529)  (62,130)
Proceeds from notes payable - related party, net  520,000   (130,794)
Proceeds from capital lease transactions, net  534,216   196,125 
Payment of Series A preferred stock dividend  (150,000)  (150,000)
Net cash provided by financing activities  854,691   5,436,701 
Net  (decrease) increase  in cash  (1,058,790)  2,911,910 
Cash, beginning of period  2,510,800   152,520 
Cash, end of period $1,452,010  $3,064,430 
         
Supplementary disclosure of of cash flow information        
Cash paid during the period for —        
Interest $275,815  $343,021 
Income taxes $-  $- 
         
Supplemental disclosure of non-cash investing and financing activities:        
Commons stock issued in connection with the merger $35,565,514  $- 
Fixed assets purchased under capital lease obligation $-  $88,000 
Equipment purchased under financed lease payable for resale $-  $95,560 
Repayment of capital leases payable made by customer $28,160  $30,499 
Conversion of the Robert DePalo Special Opportunity Fund debt into equity $-  $3,053,121 
Conversion of the Brookville Special Purpose fund debt into equity $-  $3,098,416 
Conversion of the Veritas High Yield Fund debt into equity $-  $774,073 
Software development capitalized cost against accounts payable balance $18,258  $- 
Equipment purchased for resale against accounts payable balance $171,661  $- 
Class A Preferred Stock assumed in connection with the reverse acquisition $144,000  $- 
TROIKA MEDIA GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. Description of Business and Basis of Presentation

Description of Business

Troika Media Group, Inc. (“Company”, “our” or “we”) is a professional services company that architects and builds enterprise value in consumer facing brands to generate scalable performance driven revenue growth. The Company delivers three solutions pillars that CREATE brands and experiences and CONNECT consumers through emerging technology products and ecosystems to deliver PERFORMANCE based measurable business outcomes.

Unaudited Interim Financial Statements

The accompanying notes are an integral part of these unauditedinterim condensed consolidated unaudited financial statements.
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Roomlinx, Inc. and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
(unaudited)

1. Organization

Description of Business - Roomlinx, Inc. (the “Company” or “RMLX’ or the “Registrant”) was incorporated under the laws of the state of Nevada.  The Company, through its subsidiaries, provides high speed wired and wireless broadband services to customers located throughoutstatements have been prepared in accordance with generally accepted accounting principles in the United States turnkey services including(“GAAP”) for interim financial information and the instructions to Rule 10-01 of Regulation S-X, and should be read in conjunction with the Company’s Transition Report on Form 10-K/T (as amended by Form 10-KT/A) for the six month transition period ended December 31, 2022. The financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 presented in this Quarterly Report on Form 10-Q are unaudited; however, in the opinion of management such financial statements reflect all technology, infrastructure and expertiseadjustments, consisting solely of normal recurring adjustments, necessary to construct both temporary and permanent broadband wireless networks at large event forums, such as stadiums and concert venues and sells, installs, and services in-room media and entertainment solutions for hotels, resorts, and time share properties; including its proprietary Interactive TV platform, internet, and free to guest and video on demand programming.  The Company also sells, installs and services telephone, internet, and television services for residential consumers.  The Company develops software and integrates hardware to facilitate the distribution of Hollywood, adult, and specialty content, business applications, national and local advertising, and concierge services.  The Company also sells, installs and services hardware for wired networking solutions and wireless fidelity networking solutions, also known as Wi-Fi, for high-speed internet access to hotels, resorts, and time share locations. The Company installs and creates services that address the productivity and communications needs of hotel, resort and time share guests, as well as residential consumers. The Company may utilize third party contractors to install such hardware and software.

Merger - On March 14, 2014, the Company entered into an Agreement and Plan of Merger (“Merger Agreement”) with Signal Point Holdings Corp. (“SPHC” or "Holdings") and Roomlinx Merger Corp., a wholly-owned subsidiaryfair presentation of the Company (“Merger Subsidiary” or “RMLX Merger Corp.”).  On February 10, 2015, the Company and SPHC terminated a prior Merger Agreement due to unexpected delays in meeting the closing conditions by the then extended termination date almost one year after the original agreement was entered into.  On March 27, 2015, the Company and SPHC agreed upon new termsresults for the transaction and simultaneously signed and completed the Subsidiary Merger Agreement (the “SMA”) described in Note 16.  Upon the terms and subject to the conditions set forthinterim periods presented. The condensed consolidated balance sheet as of December 31, 2022, was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the SMA, RMLX Merger Corp. was merged with and into SPHC, a providerUnited States of domestic and international telecommunications services, with SPHC continuing asAmerica. The results of operations for the surviving entity in the merger as a wholly-owned subsidiaryperiods presented are not necessarily indicative of the Companyresults that might be expected for future interim periods or for the full year.

Reverse Stock Split

On June 1, 2023, we effected a reverse stock split (the “Subsidiary Merger”"Reverse Split").  The existing business of the Company was transferred into a newly-formed, wholly-owned subsidiary named SignalShare Infrastructure, Inc. (“SSI”).  See Notes 12 and 16 for additional information. 

SPHC is comprised of its wholly owned subsidiaries; Signal Point Telecommunication Corp (“SPTC”), SignalShare LLC (“SignalShare”), SignalShare Software Development Corp. (“SignalShare Software”our Common stock, par value $.001 par share ("Common Stock") and Signal Point Corp. (“SPC”)  (see “discontinued operations” Note 6)

SignalShare Infrastructure, Inc. (“SSI”) is comprisedsuch that each stockholder received 1 share of its wholly owned subsidiaries Canadian Communications LLC (“CCL”), Cardinal Connect, LLC (“Connect”), Cardinal Broadband, LLC (“CBL”), and Arista Communications, LLC (“Arista”), a 50% owned subsidiary controlled by SSI and Cardinal Hospitality, Ltd. (“CHL”) (see “discontinued operations” Note 6).

The Company is registered to transact businesses within various states throughout the United States.

2. Reverse Acquisition
On March 27, 2015, the Company entered into and completed a Subsidiary Merger Agreement (“SMA”) (more fully discussed in note 16) with SPHC (a private company). Upon closing of the transaction, SPHC’s Shareholders transferred their 100% ownership in SPHC’s common stock and Series A Preferred Stock in exchange for an aggregate of 115,282,137 shares of the common stock of RMLX (approximately 85.4% of voting control of RMLX)  for one to one basis plus the assumption of the Class A Preferred Stock of RMLX.  As part of the agreement, RMLX's existing shareholders retained 19,758,619 shares of the  Company’s Common Stock and 720,000for every 25 shares of class A Preferred Stock (representing approximately 14.6% of voting control of RMLX upon consummation ofowned by such stockholder before the reverse acquisition)Reverse Split. All historical share amounts disclosed in exchange for 100% of SPHC common stock and Series A Preferred Stock.


For financial accounting purposes, this transaction was treated as a reverse acquisition by SPHC, and resulted in a recapitalization with SPHC being the accounting acquirer and RMLX as the acquired company. The consummation of this reverse acquisition resulted in a change of control. Accordingly, the historical financial statements prior to the acquisition are those of the accounting acquirer, SPHC andquarterly report on Form 10-Q have been prepared to give retroactive effect to the reverse acquisition completed on March 27, 2015, and represent the operations of SPHC The consolidated financial statements after the acquisition date, March 27, 2015 include the balance sheets of both companies at historical cost, the historical results of SPHC and the results of the Company from the acquisition date. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect the recapitalization.


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The following table summarizes the assets acquiredReverse Split and liabilities assumed from the reverse acquisition transaction:
Property and equipment $78,807 
Cash in bank  812,756 
Account receivable  856,282 
Leases receivable  575,471 
Prepaid expenses  151,604 
Inventory  129,665 
Other assets  83,215 
Current liabilities  (5,922,133)
Debt  (3,640,839)
Liabilities of discontinued operations  (117,573)
Other liabilities  (144,807)
Class A preferred stock  (144,000)
Goodwill  42,847,066 
Total $35,565,514 

The fair valuesubsequent share exchange. No fractional shares were issued as a result of the consideration effectively transferred by SPHC andReverse Split, as fractional shares of Common Stock were rounded up to the group’s interest in RMLX is $35,565,514 (19,758,619 shares, the remaining 14.6% of ownership with a per share fair value of $1.80).  Managementnearest whole share.

Going Concern

The accompanying unaudited condensed consolidated financial statements of the Company followedhave been prepared assuming the guidanceCompany will continue as a going concern and in accordance with GAAP. The going concern basis of presentation assumes that the reverse acquisitions on fair valueCompany will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of the consideration transferred pursuant tobusiness.

Under ASC 805-40-55-9 to 55-12 and concluded that SPHC’s per share fair valueSubtopic 205-40, Presentation of $1.80 is deemed the most reliable measure.

3.  Financial Statements—Going Concern, Matters

At March 31, 2015, the Company had approximately $1.4 million in cash on hand, had incurred a net loss of approximately $48.8 million (includinghas the impairment of goodwill of approximately $42.8 million) and used approximately $2.7 million in cash for operating activities for the quarter ended March 31, 2015.  In addition, the Company had negative working capital (current liabilities exceeded current asset) of approximately $16.8 million. The negative working capital was primarily comprised of approximately $10.2 million of accounts payable, approximately $1.5 million of deferred revenue and customer prepayment, approximately $1.5 million of related party debt and approximately $3.3 million of current liabilities of discontinued operations that is substantially all relatedresponsibility to accounts payable.

The Company’s cash balance and revenues generated are not currently sufficient and cannot be projectedevaluate whether conditions or events raise substantial doubt about its ability to cover operating expenses for the next twelve monthsmeet its obligations as they become due within one year from the date that financial statements are issued. In performing this evaluation as of the date of the filing of this report.  These matters raise10-Q, the Company has determined there is substantial doubt that the Company will have sufficient liquidity under its cash flow forecasts to fund commitments for the twelve months following the date of the filing of this 10-Q.

The costs of and distractions caused by restructuring, pursuing a Potential Transaction, negotiating amendments to the Financing Agreement, and servicing the Blue Torch debt, have materially depleted liquidity and negatively impacted performance of the Company. Consequently, management has concluded that there is substantial doubt about the Company’s ability to continuefund ongoing operations and meet debt service obligations over the ensuing twelve month period. To preserve operating liquidity and maintain optionally, the Company chose not to make the principal and interest payment due to Blue Torch on September 30, 2023 and negotiated a wavier of that default and other specified events of default through October 20, 2023. The Company is currently in negotiations to extend that date.

As has been previously reported and as summarized below in Note 8. Credit Facilities, the Company agreed with its senior lender, Blue Torch Finance LLC ("Blue Torch"), to undertake a process with an investment banker to facilitate the repayment in full of Blue Torch debt either through an acquisition or disposition involving the Company, a refinancing, or
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some combination thereof (a “Potential Transaction”).As a result, in December 2022, the Company engaged Jefferies LLC (“Jefferies”), a leading global full-service investment banking and capital markets firm, and the Board of Directors of the Company (the "Board")formed a Special Committee to, among other things, oversee a Potential Transaction. In the absence of a Potential Transaction, the Company and Blue Torch have, in good faith, continued to negotiate to resolve ongoing issues. However, the Company can provide no assurance that it will be able to execute a Potential Transaction, or reach a final agreement with Blue Torch default. However, the Company will request additional waivers and seek further extensions, if required.

The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

NOTE 2. Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements of the Company include the accounts of Troika Media Group, Inc. and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amount of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amount of revenues and expenses. Such estimates include the valuation of accounts receivable and the determination of the allowance for doubtful accounts, the valuation and useful life of capitalized equipment costs and long-lived assets, valuation of warrants and options, the determination of the useful lives and any potential impairment of long-lived assets such as intangible assets and goodwill, the allocation of purchase consideration to assets and liabilities due to the Converge Acquisition, stock-based compensation, and deferred tax assets. Management believes its use of estimates in the condensed consolidated financial statements to be reasonable.

Restricted cash

The Company defines restricted cash as cash that is legally restricted as to withdrawal or usage. Restricted cash of approximately $0.4 million as of June 30, 2023, consists of cash deposits received from the at-the-market ("ATM") issuance held by B.Riley Securities, Inc., our agent for sale of Common Stock under the ATM ("ATM Agent") and must be paid to Blue Torch in accordance with the terms of the Financing Agreement. There was no restricted cash balance as of December 31, 2022.

Recently Adopted Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Subtopic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” ("ASU 2021-08”), which is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency. The Company has adopted the guidance effective January 1, 2023. The adoption of the pronouncement did not have a material impact on the financial statements when adopted.

Recently Issued Accounting Pronouncements Not Yet Adopted

Not Applicable.

NOTE 3 – Converge Direct Acquisition

On the March 22, 2022 (the "Closing Date"), the Company and CD Acquisition Corp. ("CD"), as purchasers, and Thomas Marianacci, Maarten Terry, Sadiq ("Sid") Toama and Michael Carrano, as sellers (the "Converge Sellers") closed on the acquisition of all the equity of Converge Direct LLC (together with its affiliates, "Converge") and 40% of the equity of Converge Marketing Services, LLC ("CMS") an affiliated entity, for a notional aggregate purchase price of $125.0 million,
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valued for accounting purposes at approximately $114.9 million pursuant to the Membership Interest Purchase Agreement, dated November 22, 2021 (the "MIPA").

Purchase Price

The cash portion of the purchase price consisted of $65.9 million paid on the date of the acquisition, $29.1 million held in escrow payable upon satisfaction of certain conditions, and another $5.0 million payable 12 months after the acquisition date contingent on the Company satisfying its bank covenants and at the option of the payee payment will be in the form of cash or common stock of the Company valued at $2.00 per share. The remaining $25.0 million was paid in the form of 12.5 million shares of the Company’s restricted common stock at a price of $2.00 per share, which for accounting purposes was valued at $1.19 per share for $14.9 million. All 12.5 million shares were subject to a nine (9) month lock-up period. Pursuant to the provisions of the MIPA dated as of November 22, 2021, as amended, an aggregate of $2.5 million (10%) or 1,250,000 shares of the Common Stock issued to the Sellers are held in escrow to secure against claims for indemnification. The escrowed shares will be held until the later of (a) one year from the Closing Date, or (b) the resolution of indemnification claims. The escrowed shares have not yet been released. The Company is accounting for the transaction under the purchase method of accounting in accordance with the provisions of ASC Topic 805 Business Combinations (ASC 805). On the Closing Date, Converge became a wholly-owned subsidiary.

At March 22, 2022 the Company recorded the $5.0 million payable due March 21, 2023, at its then net present value of $4.7 million. Further, pursuant to the MIPA, the Company recorded an additional liability totaling $4.3 million which represents the excess net working capital value received by the Company at the purchase date. Per the terms of the MIPA, this amount was to be repaid within 120 days of closing. As of June 30, 2023, a total of $9.3 million is included within acquisition liabilities on the condensed consolidated balance sheets.

On March 21, 2022, the Company entered into employment agreements with Mr. Toama and Mr. Marianacci, two (2) of the Converge Sellers. Mr. Toama was appointed President of TMG and Mr. Marianacci was appointed as President of the Converge entities.

On February 13, 2023, the Company and Mr. Toama entered into a letter agreement (the "Toama Letter Agreement") amending certain terms of Mr. Toama’s employment agreement, including by appointing him Chief Executive Officer of the Company. See the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on February 16, 2023, the contents of which are incorporated by reference herein.

On May 26, 2023, the Company and Mr. Toama entered into a new employment agreement and a new restrictive covenant agreement (together, the “New Agreements”). The New Agreements supersede Mr. Toama’s prior Executive Employment Agreement with the Company effective March 21, 2022, as the same was amended by the Toama Letter Agreement. For a description of the material terms of the New Agreements, see the Company’s Current Report on Form 8-K filed with the SEC on June 2, 2023, the contents of which are incorporated by reference herein.

On August 14, 2023, the Company terminated the employment of Mr. Toama for “Cause,” pursuant to the terms of the New Agreements. See the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on August 13, 2023, the contents of which are incorporated by reference herein. Mr. Marianacci resigned his employment with the Company on September 28, 2023. See "Subsequent Events" of this Quarterly Report on Form 10-Q for more information on the termination of the employment of Mr. Toama for "Cause" and the resignation of Mr. Marianacci.

Purchase Price Allocation

The Company negotiated the purchase price based on the expected cash flows to be derived from their operations after integration into the Company’s existing distribution, production, and service networks. The acquisition purchase price is allocated based on the fair values of the assets acquired and liabilities assumed, which are based on management estimates and third-party appraisals. The Company engaged a valuation expert to provide guidance to management which was considered and in part relied upon in completing its purchase price allocation. The excess of the purchase price over the aggregate estimated fair value of net assets acquired was allocated to goodwill.

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The following table summarizes the allocation of the purchase price of the assets acquired related to the acquisition as of the closing date:

Current assets$33,856,000 
Fixed assets233,000 
Other non-current assets4,340,000 
Intangible assets71,100,000 
Goodwill45,519,000 
Current liabilities(34,904,000)
Other non-current liabilities(5,506,000)
Consideration$114,638,000 

Intangible Assets

The estimated fair values of the identifiable intangible assets acquired were calculated using an income valuation approach which requires a forecast of expected future cash flows either through the use of relief-from-royalty method or multi-period excess earnings methods ("MPEEM"). The estimated useful lives are based on the Company’s experience and expectations as to the duration of the time the Company expects to realize benefits of the assets.

The estimated fair values of the identifiable intangible assets acquired, estimated useful lives and related valuation methodology are as follows:

Intangible Assets:Preliminary Fair Value Life in YearsDiscount Rate Valuation Method
Customer relationships$53,600,000 1017.8%Income (MPEEM)
Technology10,400,000 517.8%Income (Relief-from-Royalty)
Tradename7,100,000 1018.8%Income (Relief-from-Royalty)
 $71,100,000    

The Company will amortize the intangible assets above on a straight line basis over their estimated useful lives.


UNAUDITED PRO FORMA OPERATING RESULTS

The following unaudited pro forma information presents the combined results of operations as if the acquisition of Converge had been completed on January 1, 2022.
For the six months ended
June 30, 2022
 Revenue$155,924,997 
 Cost of revenue128,643,653 
 Gross profit27,281,344 
 Operating expenses(50,638,734)
 Operating loss(23,357,390)
 Other expenses(6,668,896)
 Net loss$(30,026,286)



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NOTE 4. Revenue and Accounts Receivable

The Company generates revenues primarily by delivering both managed services and performance based marketing services to customers. The Company’s revenue recognition policies describe the nature, amount, timing and uncertainty associated with each major source of revenue from contracts with customers are summarized below.

Managed and Professional Services

The Company provides managed and professional services (such as, but not limited to, media planning, media buying, media ROI measurement, and media or marketing performance reporting). The Company is compensated for the delivery of services and/or goods to a client and the revenue includes both the anticipated costs to deliver the product or service as well as the Company’s margin, which is arranged in one of three ways (i) a predetermined fixed fee amount (ii) cost plus margin or (iii) a predetermined commission percentage based on the total media spend executed by the Company on a client’s behalf.

As per ASC 606-10-25-31, the Company recognizes managed and professional service fees over time by measuring the progress toward complete satisfaction of a performance obligation by measuring its performance in transferring control of the services contractually delivered to a client by applying the input method. Revenue is recognized based on the extent of inputs expended toward satisfying a performance obligation and it was determined that the best judge of inputs is the costs consumed by a project in relation to its total anticipated costs.

Consultative service engagements typically do not incur a significant amount of direct costs; however, any costs are recognized as incurred. Professional services fees are recognized evenly throughout the term of the agreement.

Performance Solutions (“Pay Per Event”)

The Company provides to its clients the ability to pay for a marketing or sales event rather than incurring the media and services expense in a managed service engagement. The Company utilizes the same functions that it delivers in its managed services offering, but only charges a client for a predetermined marketing or sales outcome. The fees in this situation will typically be tied to a (i) cost per phone call, (ii) cost per web form lead, (iii) cost per consumer appointment, (iv) cost per qualified lead, and (v) cost per sale. There is a premium that is charged to the client for the Performance Solutions service due to the fact that the Company is taking on the cost risk associated with the services and media that it is executing without knowing that revenue will be generated. The risk is mitigated by the fact that the client has agreed to purchase the “work product” (lead, call, etc.) at a predetermined cost and the Company charges higher margins associated with the service.

The Company recognizes revenues for performance advertising when a user engages with the advertisement, such as a going concern.  Management's plansclick, view, call, or purchase. The Company’s payment terms vary by the type of customer. Generally, payment terms range from prepayment to sixty (60) days after revenue is earned.

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Principal versus Agent Revenue Recognition

Our customers reimburse us for expenses relating to the out-of-pocket costs associated with the provision of Managed Services engagements. This includes third party expenses such as media costs and administrative fees, technology fees, production expenses, data costs, and other third-party expenses that the Company incurs on behalf of a client that is needed to deliver the services. In accordance with ASC 606-10-25-31, the Company recognizes reimbursement income over time by measuring the progress toward complete satisfaction of a performance obligation by measuring its performance in transferring control of the services contractually delivered to a client by applying the input method. The revenue is recognized based on the extent of inputs expended toward satisfying a performance obligation and it was determined that the best judge of input is the costs incurred to date in relation to the anticipated costs. As a result, unless an overage or saving is identified, the reimbursement income equates to the reimbursement costs incurred. Given that the Company contracts directly with the majority of the vendors, the Company is deemed a principal in this revenue transaction as they have control over the asset and transfer the asset themselves. As a result, this transaction is recorded gross rather than net. Accruals for costs incurred but not yet billed by third parties are recorded in accrued billable expenses on the condensed consolidated balance sheets.

Generally, advertising revenues are reported on a gross basis, that is, the amounts billed to our customers are recorded as revenues, and amounts paid to suppliers are recorded as cost of revenues. Where we are the principal, we control the advertising and services before they are transferred to our customers. Our control is evidenced by our being primarily responsible to our customers and having a level of discretion in establishing pricing.

Contract Balances from Contracts with Customers

An account receivable is recorded when there is an unconditional right to consideration based on a contract with a customer. For certain types of contracts with customers, the Company may recognize revenue in advance of when the customer is issued the invoice. Once the Company has an unconditional right to consideration under these contracts, the contract assets are recorded to accounts receivable on the condensed consolidated balance sheets.

When consideration is received from a customer prior to transferring services to the customer under the terms of a contract, a contract liability (deferred revenue) is recorded. Deferred revenue is recognized as revenue when, or as, control of the services is transferred to the customer and all revenue recognition criteria have been met.

The Company’s customer base is highly concentrated. Revenue may significantly decline if the Company were to lose one or more of its significant customers, or if the Company were not able to obtain new customers. For the six months ended June 30, 2023 and June 30, 2022 five (5) customers accounted for 82% and 67% of our revenues, respectively.

The following table provides information about current contract balances from contracts with customers:

June 30,December 31,
20232022
Accounts receivable$15,197,469 $10,801,299 
Deferred revenue$9,316,686 $6,209,442 

Accounts receivable is presented net of allowance for doubtful accounts. The Company analyzes receivables aging, customer specific risks, and other factors to estimate its allowance. The Company’s allowance for doubtful accounts was approximately $0.9 million and $1.0 million as of June 30, 2023, and December 31, 2022, respectively.

The amount of revenue recognized during the three and six months ended June 30, 2023, relating to the deferred revenue recorded as of December 31, 2022, was approximately $0.3 million and $0.4 million, respectively.

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NOTE 5. Property and Equipment

Property and equipment consist of the following as of June 30, 2023, and December 31, 2022:

 June 30,
2023		December 31,
2022
Computer equipment$318,968 $820,000 
Website design— 6,000 
Office machine & equipment— 109,000 
Furniture & fixtures18,609 338,000 
Leasehold improvements154,383 436,000 
Total Property and equipment491,960 1,709,000 
Less: accumulated depreciation(168,110)(1,090,000)
Property and equipment, net$323,850 $619,000 

During the three months ended June 30, 2023, and 2022, depreciation expense was approximately $28 thousand and $56 thousand, respectively.

During the six months ended June 30, 2023 and 2022, depreciation expense was approximately $54 thousand and $89 thousand, respectively.

During the six months ended June 30, 2023, the Company wrote-off approximately $0.3 million of property and equipment related to the legacy Troika and Mission entities. The write-off of the property and equipment was recorded against the restructuring liabilities. There were no write-offs in the three months ended June 30, 2023.

NOTE 6. Amortizable Intangible Assets & Goodwill

The Company's intangible assets subject to amortization are as follows:
 June 30,
2023		December 31,
2022
Customer relationship$53,600,000 $53,600,000 
Technology10,400,000 10,400,000 
Tradename7,100,000 7,100,000 
Total intangible assets71,100,000 71,100,000 
Less: accumulated amortization(10,413,889)(6,339,000)
Total amortizable intangible assets, net$60,686,111 $64,761,000 

Purchased intangible assets with finite useful lives are amortized over their respective estimated useful lives (using an accelerated method for customer relationships and trade names) to their estimated residual values, if any. The Company’s finite-lived intangible assets consist of customer relationships, contractor and resume databases, trade names, and internal use software and are being amortized over periods ranging from two to ten years. Purchased intangible assets are reviewed annually to determine if facts and circumstances indicate that the useful life is shorter than originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, recoverability is assessed by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts.

During the three months ended June 30, 2023 and 2022, amortization expense was approximately $2.0 million and $2.2 million, respectively.

During the six months ended June 30, 2023 and 2022, amortization expense was approximately $4.1 million and $2.6 million, respectively.

As of June 30, 2023, estimated amortization expense related to the Company's intangible assets is as follows:

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Fiscal year ending December 31:
Remaining 2023$4,075,000 
20248,150,000 
20258,150,000 
20268,150,000 
20276,532,222 
Thereafter25,628,889 
Total$60,686,111 

Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life is shorter than originally estimated, the rate of amortization is accelerated and the remaining carrying value is amortized over the new shorter useful life. The Company completed its quarterly triggering events assessments for the six months ended June 30, 2023, during which there was no impairment, and June 30, 2022, during which there were impairments of approximately $0.4 million.

Goodwill

As of June 30, 2023 and June 30, 2022, the balance of goodwill was approximately $45.5 million and $45.5 million, respectively. For the three months ended June 30, 2022, the Company recorded goodwill impairment charges of approximately $6.7 million and $2.0 million related to the Mission U.K. and Redeeem subsidiaries, respectively, as a result of the Company's annual impairment testing. There were no goodwill impairment charges recorded in the three and six months ended June 30, 2023.

Although the Company's next annual measurement date for testing for impairment to goodwill and intangible assets is not required until October 31, 2023, the Company believes that there is a significant likelihood that once tested there could be a substantial adjustment to both goodwill and intangibles.

NOTE 7. Restructuring

Initiated in the fourth quarter of the fiscal year ended June 30, 2022, the Company underwent organizational changes to further streamline operations. This restructuring program includes workforce reductions, closure of excess facilities, and other charges. The restructuring program resulted in costs incurred primarily for (1) workforce reduction of 113 employees across certain business functions and operating units, (2) abandoned or excess facilities relating to lease terminations and non-cancelable lease costs and (3) other charges, which include attemptingbut are not limited to improvelegal fees, regulatory/compliance expenses, and contractual obligations.

Company management performed an analysis of the certain Troika, Mission, and Redeeem companies to determine whether discontinued operation classification was appropriate. In the evaluation, the Company considered ASC 205 Presentation of Financial Statements and specifically ASC 205-20 Discontinued Operations. Under that guidance, a disposal shall be reported in discontinued operations if the disposal represents a strategic shift that will have a major impact on an entity’s operations and financial results. The Troika, Mission, and Redeeem subsidiaries did not have a major impact on the Company's operations, and management did not consider them to be separate segments or geographic areas in our reported results. The subsidiaries were consolidated, operated within the same geographical areas, and provided similar professional services as the Converge business, which are marketing and advertising consultative services. Therefore, the Company does not believe this represented a strategic shift in business operations but a strategic overhaul in cost reduction, operating efficiencies and establishing a stable baseline for future scalable growth. Further, the Company considered if the abandonment of these subsidiaries had a major effect on the entities’ operations and financial results. We noted that the guidance does not provide any “bright lines” when evaluating the quantitative factors that would represent a strategic shift.  The Company does believe that these changes will deliver significant future cost savings to the consolidated entity in the form of selling, general and administrative costs as a result of the workforce reductions and excess facilities costs.

Based on the quantitative analysis of the six months ended December 31, 2022 results, the Company noted that the total revenues from these certain subsidiaries only constituted three point six (3.6%) percent of total consolidated revenues, one (1%) percent of the total consolidated assets, and seven percent (7%) of total consolidated liabilities. Based on this analysis the Company determined there was not a significant impact on the Company’s operations and financial results. Therefore, discontinued operations reporting was not required. 
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For the three months ended June 30, 2023 and 2022, the Company recorded approximately $0.3 million of net restructuring credits and $5.6 million in costs, respectively. Net restructuring credits for the three months ended June 30, 2023 primarily consisted of approximately $0.6 million of credits related to favorable settlements of executive and employee severance and benefit payments and the reclassification of approximately $0.3 million, of liabilities recorded in the first quarter 2023 related to potential severance payments, to accrued and other liabilities. These credits were partially offset by associated legal fees of approximately $0.6 million, which did not have a restructuring reserve liability.

For the six months ended June 30, 2023 and 2022, the Company recorded approximately $0.1 million of net restructuring credits and $5.6 million in costs, respectively. Net restructuring credits for the six months ended June 30, 2023 primarily consisted of approximately $0.3 million in credits related to favorable settlements of executive and employee severance and benefit payments and the reclassification of approximately $0.3 million of restructuring liabilities related to potential severance payments to accrued and other liabilities. These credits were partially offset by associated legal fees of approximately $0.6 million, which did not have a restructuring reserve liability.

The restructuring reserve liability is presented within the accrued and other current liabilities line within the consolidated balance sheets. The change in the restructuring reserve liability for the three and six months ended June 30, 2023 was as follows:
Severance and termination costsOther exit costsTotal
Balance as of December 31, 2022$496,599 $401,260 $897,859 
Charges327,000 — 327,000 
Payments(69,968)— (69,968)
Credits— (296,264)(296,264)
Balance as of March 31, 2023753,631 104,996 858,627 
Charges— — — 
Payments(135,435)— (135,435)
Credits(605,232)4,791 (600,441)
Balance as of June 30, 2023$12,964 $109,787 $122,751 

There was no restructuring reserve as of June 30, 2022.

NOTE 8. Credit Facilities

Debt related to the Senior Secured Credit Facility, Convertible Note Payable, and Related Party Note Payable consisted of the following:
Effective Interest RateJune 30, 2023December 31, 2022
Senior Note due 2026 (1)
17.1 %$65,624,508 $66,385,055 
Convertible Note60,006 60,006 
Related Party Note— 30,000 
Total debt65,684,514 66,475,061 
Less: current portion1,671,450 1,641,217 
Long-term debt, excluding current portion$64,013,064 $64,833,844 
(1) Includes unamortized discount and issuance costs of approximately $6.1 million and $7.2 million, as of June 30, 2023 and December 31, 2022, respectively.

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Senior Secured Credit Facility

On March 21, 2022, the Company entered into the Financing Agreement with Blue Torch in connection with the Converge Acquisition. This $76.5 million First Lien Senior Secured Term Loan (the “Credit Facility”) was used in part to fund the purchase price of the Converge Acquisition, as well as, for working capital and general corporate purposes.

The Credit Facility provides for: (i) a term loan in the amount of $76.5 million; (ii) an interest rate of the LIBOR Rate Loan of three (3) months; (iii) a four-year maturity amortized 5.0% per year, payable quarterly; (iv) a one (1.0%) percent commitment fee and an upfront fee of two (2.0%) percent ($1.5 million) of the Credit Facility paid at closing, plus an administrative agency fee of $250,000 per year; (v) a first priority perfected lien on all property and assets including all outstanding equity of the Company’s subsidiaries; (vi) one point five (1.5%) fully-diluted penny warrant coverage in the combined entity; (vii) mandatory prepayment for fifty (50%) percent of excess cash flow and 100% of proceeds from various transactions; (viii) customary affirmative, negative and financial covenants; (ix) delivery of audited financial statements of Converge; and (x) customary closing conditions. The Company agreed to customary restrictive covenants in the Credit Facility and leverage ratios, fixed charge coverage ratios, and maintaining liquidity of at least $6.0 million at all times.

On September 22, 2023, the Company and Blue Torch entered into the First Amendment to Financing Agreement by adding provisions for the use of secured overnight financing rate loans in place of LIBOR rate loans. See the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on September 27, 2023, the contents of which are incorporated by reference herein.

The Company and each of its subsidiary Guarantors entered into a Pledge and Security Agreement (the “Security Agreement”) dated as of March 21, 2022, as a requirement with the Credit Facility. Each Guarantor pledged and assigned to the Collateral Agreement and granted the Collateral Agent with a continuing security interest in all personal property and fixtures of the Guarantors (the “Collateral”) and all proceeds of the Collateral. All equity of the Guarantors was pledged by the Borrower.

On March 21, 2022, each of the Company’s Subsidiaries, as Guarantors, entered into an Intercompany Subordination Agreement (the “ISA”) with the Collateral Agent. Under the ISA, each obligor agreed to the subordination of such indebtedness of each other obligor to such other obligations.

On March 21, 2022, the Company entered into an Escrow Agreement with Blue Torch and Alter Domus (US) LLC, as Escrow Agent. The Escrow Agreement provides for the escrow of $29.1 million of the $76.5 million proceeds, under the Credit Facility to be held until the audited financial statements of Converge Direct LLC and affiliates for the years ended December 31, 2020 and 2019, are delivered to Blue Torch, which were delivered during fourth quarter of fiscal year 2022. As of June 30, 2023, Blue Torch has not authorized the release of the funds in escrow.

Although the Company believes that the Converge Sellers’ recourse is solely to the escrow account, it is possible that the Converge Sellers could make claims against the Company for the deferred amount. In the event that the Converge Sellers were to make and be successful in such claims, the Company believes that a court would likely order Blue Torch to release the escrowed funds to satisfy such claims

In connection with the Credit Facility, the Company recorded debt discount and issuance costs totaling approximately $9.2 million. The discount and issuance costs will be amortized over the life of the note using the effective interest rate method. For the three and six months ended June 30, 2023, amortization of deferred financing costs was approximately $0.6 million and $1.2 million, respectively. For the three and six months ended June 30, 2022, amortization of deferred financing costs were approximately $0.6 million and $0.8 million, respectively.

For the three and six months ended June 30, 2023 the Company made principal payments totaling approximately $1.0 million and $1.9 million, respectively. For the three and six months ended June 30, 2022 the Company made principal payments totaling approximately $1.0 million and $1.0 million, respectively.

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At June 30, 2023, the principal payments required under the Term Loan Facility are as follows:
Fiscal year ending December 31:
Remaining 2023$1,912,500 
20243,825,000 
20253,825,000 
202662,156,250 
Total maturities$71,718,750 
At any time on or after March 21, 2022, and on or prior to March 21, 2026, the Lenders have the right to subscribe for and purchase from the Company, up to initially 77,178 shares of Common Stock, subject to adjustment. During the six months ended December 31, 2022, the number of shares increased to 177,178. The exercise price per share of Common Stock under this Warrant shall be $0.01 per share. If at any time when this Warrant becomes exercisable and a related Registration Statement is not in effect, the Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise”. The shares have been adjusted to reflect the one (1) for twenty-five (25) reverse stock split.
As ofJune 30, 2023, the fair value of long-term debt is considered to approximate its stated value of $71.7 million.

Blue Torch Extensions, Waivers and Amendments

On October 14, 2022, Blue Torch and the Company entered into a Limited Waiver of events of default under the Financing Agreement that related to the Company’s failure to satisfy certain financial and non-financial covenants (as amended, the "Original Limited Waiver"). The Original Limited Waiver was initially scheduled to expire on October 28, 2022, if not terminated earlier by Blue Torch (“Original Waiver Period”), but the Original Waiver Period was subsequently extended through February 10, 2023 by the First Amendment to Limited Waiver to Financing Agreement dated as of October 28, 2022, the Second Amendment to the Limited Waiver to Financing Agreement dated as of November 11, 2022, the Third Amendment to the Limited Waiver to Financing Agreement dated as of November 25, 2022, the Fourth Amendment to the Limited Waiver to Financing Agreement dated as of December 9, 2022, the Fifth Amendment to the Limited Waiver to Financing Agreement dated as of December 23, 2022, the Sixth Amendment to the Limited Waiver to Financing Agreement dated as of January 13, 2023, and the Seventh Amendment to the Limited Waiver to the Financing Agreement dated January 31, 2023, and the Eight Amendment to the Limited Waiver to the Financing Agreement dated as of February 7, 2023.

On February 10, 2023, Blue Torch and the Company entered into an Amended and Restated Limited Waiver (the “First A&R Limited Waiver”) of certain events of default (such events of default, the “Specified Events of Default”) under the Financing Agreement, which amended and restated the Original Limited Wavier. The First A&R Limited Waiver provided that, among other things, during the First A&R Waiver Period (defined below), the Company would comply with certain sale and refinancing milestones and refrain from engaging in any “Permitted Acquisition” under the Financing Agreement or making certain post-closing payments to Converge Sellers. The First A&R Limited Waiver would have expired on the earliest of (x) the occurrence of an Event of Default under the Financing Agreement that is not a Specified Event of Default, (y) a failure by the Company to comply with certain sale and refinancing milestones set forth in a side letter agreed by the Company and the Lenders and (z) June 30, 2023, subject to potential extension of up to sixty 60 days to obtain regulatory and/or shareholder approval in the event the Company is pursuing a sale transaction (the “First A&R Waiver Period”, and the date referenced in subclause (z) above, the “Outside Date”).

On April 14, 2023 and April 28, 2023, Blue Torch and the Company entered into letter agreements (the “Extension Letters”, collectively with the First A&R Limited Waiver and associated side letter, the “Prior Waiver Documents”) that extended the Applicable Milestones (as defined below). The “Applicable Milestones” included (i) the date for which potential acquirers (collectively, “bidders” and each a “bidder”) would be required to submit binding bids to acquire the Company, (ii) the date by which the Company would be required to select a winning bidder, and (iii) the date by which the winning bidder and the Company would be required to enter into definitive documentation providing for an acquisition of the Company or a refinancing of its indebtedness with Blue Torch, in each case subject to the terms and conditions of the Extension Letters and the First A&R Limited Waiver.

On May 8, 2023, the Company and Blue Torch entered into a first amendment to the First A&R Limited Waiver (the “First Amendment to First A&R Limited Waiver”) and an amended and restated letter agreement that, in each case, superseded
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the Prior Waiver Documents, and pursuant to which the Company affirmed its commitment to work in good faith to consummate a sale of the Company’s business or assets or a refinancing transaction before the expiration of the First A&R Waiver Period, and Blue Torch agreed to remove the Applicable Milestones and to extend the Outside Date from June 30, 2023 to July 14, 2023, subject to a potential extension if a definitive written agreement is delivered on or prior to July 14, 2023 that provides for cash repayment in full of all obligations owed to Blue Torch or which is otherwise acceptable to Blue Torch. In addition, under the First Amendment to the First A&R Limited Waiver, the Company agreed to pay Blue Torch an “exit fee” equal to five (5%) percent of the aggregate outstanding principal balance of the Company’s indebtedness with Blue Torch as of the date of the First Amendment to the First A&R Limited Waiver, plus accrued interest, subject to reduction or waiver if such Blue Torch indebtedness is repaid in full in cash by the dates specified therein. The foregoing summary does not purport to be complete and is subject to, and qualified in its entirety by, Amendment No. 1 to the A&R Limited Waiver attached as Exhibit 10.2 to this Quarterly Report on Form 10-Q. See also "Subsequent Events" of this Quarterly Report on Form 10-Q for a description of Amendments Two, Three, and Four to the First A&R Limited Waiver, the First Amendment to the Financing Agreement, the Second A&R Limited Waiver and the First Amendment to the Second A&R Limited Waiver.

NOTE 9. Leases

The Company has various operating leases for office space. Some leases include options to extend the lease term, generally at the Company's discretion. The leases generally provide for fixed annual rentals plus certain other costs. The Company's lease agreements do not include any material residual value guarantees or material restrictive covenants. Since the Company's leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate as of the lease commencement date to determine the present value of future lease payments. Upon the adoption of ASC Topic 842, Leases, the Company used the incremental borrowing rate on July 1, 2019 for all operating leases that commenced prior to that date.

During the three months ended June 30, 2023, and 2022, lease expense was approximately $0.3 million and $0.4 million, respectively.

During the six months ended June 30, 2023, and 2022, lease expense was were approximately $0.6 million and $0.8 million, respectively.

The following table summarizes the weighted-average remaining lease term and discount rate for operating leases:
 Undiscounted Cash Flows
Weighted average remaining lease term in years2.7 years
Weighted average discount rate5.50%
As of June 30, 2023, the maturities of the Company's operating lease liabilities are as follows:
 
Remainder of fiscal year ending December 31, 2023$1,016,167
20241,954,575
20251,449,060
20261,453,734
20271,117,060
Thereafter2,354,471 
Total undiscounted operating lease payments9,345,067
Less: Imputed interest(1,347,005)
Total operating lease liabilities7,998,062
Less: current portion of operating lease liabilities(1,598,693)
Non-current operating lease liabilities$6,399,369

NOTE 10 – Commitments and Contingencies

Commitments
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As of June 30, 2023, commitments of the Company in the normal course of business in excess of one year are as follows:

Payments Due by Period
Remaining 2023Years 2-3Years 4-5>5 YearsTotal
Operating lease obligations (a)
$1,016,167 $3,403,635 $2,570,794 $2,354,471 $9,345,067 
Debt repayment (b)
1,912,500 7,650,000 62,156,250 — 71,718,750 
Restructuring liabilities (c)
122,751 — — — 122,751 
Acquisition liabilities (d)
9,346,504 — — — 9,346,504 
Total$12,397,922 $11,053,635 $64,727,044 $2,354,471 $90,533,072 
(a) Operating lease obligations primarily represent future minimum rental payments on various long-term noncancellable leases for office space. Lease obligations related to excess facilities associated with the Company wide restructuring plan are included within the operating lease obligations line.
(b) Debt repayments consists of principal repayments required under the Company's Credit Facility.
(c) Restructuring liabilities relate primarily to future severance payments and other exit costs
(d) Acquisition liabilities recorded on the balance sheet consist of the Company's obligations to the Converge Sellers arising from the Converge Acquisition. See Note 3 - Converge Direct Acquisition

Contingencies

In the ordinary course of business, the Company is subject to loss contingencies that cover a range of matters. An estimated loss from a loss contingency, such as a legal proceeding or claim, is accrued if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. In determining whether a loss should be accrued, the Company evaluates, among other factors, the degree of probability and the ability to reasonably estimate the amount of any such loss.

Partial Liquidated Damages

For the three months ended June 30, 2022, approximately $3.6 million of partial liquidated damages charges were recorded and there were no such charges recorded for the three months ended June 30, 2023. For the six months ended June 30, 2023 and June 30, 2022, the Company recorded approximately $0.2 million and $3.6 million, respectively, of partial liquidated damages expense which was recorded within miscellaneous expenses on the condensed consolidated statements of operations and comprehensive loss. As of June 30, 2023 and December 31, 2022, the Company had approximately $0.9 million and $3.4 million, respectively, related to the outstanding partial liquidated damages, which is presented within the line contingent liability on the condensed consolidated balance sheets. As of June 30, 2023, approximately $3.6 million of liquidated damages were paid in cash and approximately $2.7 million was settled in common shares.

On March 21, 2023, the Company disclosed on Form 8-K its intent to engage in negotiations with stockholders ("Series E Holders") of the Company's Series E Convertible Preferred Stock, par value $.01 per share ("Series E Preferred Stock") to waive certain provisions of the Securities Purchase Agreement (the "Series E Purchase Agreement') and the related Registration Rights Agreement each entered into on March 16, 2022 with the Series E Holders (the "Series E Registration Rights Agreement"), and to settle Series E Holders' claims for liquidated damages owed, if any, under the Series E Registration Rights Agreement. The Company provided each Series E Holder the same opportunity to enter into Settlement Agreements (the "Series E Settlement Agreements") on substantially identical terms. However, certain Series E Holders elected not to enter into Series E Settlement Agreements, notwithstanding the effective termination of the Series E Purchase Agreement and related documents (other than certain rights surviving under the Series E Registration Rights Agreement, to which all Series E Holders continue to be equally entitled). The maximum liquidated damages before interest was capped at $7.0 million. See Note 11 to the condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for more information related to the partial liquidated damages.

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401K Matters

In the calendar year 2022, the Company discovered that it had not made the safe harbor non-elective employer contributions to the Troika Design 401k plan in 2017 pursuant to its 3% formula under plan terms, and the Company corrected that contribution for the affected participants, with earnings, in 2022.

The Company also discovered that it did not make the three (3%) percent safe harbor non elective employer contributions to the 401k plan for plan years 2018 through 2022. When the error was discovered in 2022, the Company attempted to correct the error by performing the applicable non-discrimination tests and by making qualified non-elective contributions ("QNECs") to affected participant accounts. However, as the administration of the 401k plan did not conform to the plan terms with respect to the three (3%) percent employer contribution, additional correction is required. Although the Company is evaluating the appropriate corrective approach, the Company has accrued approximately $1.2 million related to the safe harbor 2018 – 2022 contributions, as of June 30, 2023.

Legal Matters

We may become a party to litigation in the normal course of business. In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon our financial condition, results of operations or cash flows.

Machinist Litigation

On February 7, 2023, Robert Machinist, the former Chief Executive Officer and Chairman of the Board, filed a Complaint against the Company in the Supreme Court of the State of New York in a case styled Robert Machinist v. Troika Media Group, Inc., No. 650728/2023. Mr. Machinist alleged that the Company breached a Separation Agreement between Mr. Machinist and the Company, dated May 19, 2022, by not paying certain severance and other benefits. The Complaint sought damages with interest, a declaration that Mr. Machinist is entitled the payments sought by the Complaint (and an injunction compelling the Company to pay them), and an award of Mr. Machinist’s costs incurred in connection with the litigation. On May 15, 2023, the Company entered into a settlement agreement with Mr. Machinist pursuant to which Mr. Machinist dismissed his claims against the Company with prejudice in exchange for a cash settlement payment which was paid on May 17, 2023.

See also "Subsequent Events" of this Quarterly Report on Form 10-Q for a description of additional Legal Matters, which such matters in the opinion of management if a final outcome was negative could have a material adverse effect upon our financial condition, results of operations or cash flows.


NOTE 11. Equity

Common Stock

The Company filed a shelf registration statement on Form S-3 (referred to herein as the “Shelf Registration Statement”) (file no. 333-271189) with the SEC on April 7, 2023 which was amended on April 28, 2023 and declared effective by the SEC on May 23, 2023. Under the Shelf Registration Statement, the Company may from time to time sell any combination of securities described therein in one or more offering up to a total dollar amount of $150 million.

The Company also filed a registration statement on Form S-3 (File no. 333-271889) with the SEC on May 12, 2023, which was declared effective on May 26, 2023, to register the resale of 427,708 shares of Common Stock issued to certain current and former Series E Holders under the Series E Settlement Agreements.

On May 24, 2023, the Company entered into an At Market Issuance Sales Agreement ("ATM Sales Agreement"), with B. Riley Securities, Inc., to sell shares of our Common Stock, with aggregate gross proceeds of $70 million through an "at-the-market" equity offering program under which the ATM Agent agreed to act as sales agent or principal from time to time. Under the ATM Sales Agreement, the ATM Agent may sell shares of Common Stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended. The ATM Agent will use commercially reasonable efforts to sell the shares of Common Stock from time to time, based upon instructions from the Company. Any shares of Common Stock sold under the ATM Sales Agreement will be issued pursuant to the Company’s Shelf Registration Statement (file no. 333-271189), as supplemented by the prospectus
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supplement dated May 24, 2023. A copy of the prospectus supplement may be obtained on the SEC’s website at www.sec.gov. The foregoing description of the material terms of the ATM Sales Agreement is qualified in its entirety by reference to the full ATM Sales Agreement, a copy of which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q and which is incorporated herein by reference.

For the period ended June 30, 2023, the Company sold a total of 120,628 shares of Common Stock under the ATM Sales Agreement for aggregate gross proceeds of approximately $0.5 million at an average selling price of $4.19 per share, resulting in net proceeds of approximately $0.0 million after deducting commissions and other transaction costs of approximately $0.5 million. The cash deposits received from the ATM issuance are held by the ATM Agent and must be paid to Blue Torch in accordance with the terms of the Financing Agreement.

On June 20, 2023, the Nasdaq staff notified the Company that the Company had regained compliance with the Minimum Bid Price Rule based on the closing bid price of Common Stock having been at $1.00 per share or greater for 10 consecutive business days. For additional detail, see the Company’s Current Reports on Form 8-K filed with the SEC on May 18, 2023 and June 21, 2023.

Reverse stock split

On June 1, 2023, we effected the Reverse Split. All historical share amounts disclosed in this quarterly report on Form 10-Q have been retroactively restated to reflect the Reverse Split and subsequent share exchange. No fractional shares were issued as a result of the Reverse Split as fractional shares of Common Stock were rounded up to the nearest whole share. The number of authorized shares of Common Stock before the Reverse Split was 800,000,000. After the Reverse Split, the number of authorized shares of common Stock was 32,000,000. There was no change in par value as result of the Reverse Split.

Stock Compensation

See Note 15 to the consolidated financial statements included in the Company’s Transition Report on Form 10-KT (as amended by Form 10-KT/A) for the six months ended December 31, 2022 for more information regarding (i) 2021 Employee, Director & Consultant Equity Incentive Plan (the “2021 Plan”), and (ii) Troika Media Group, Inc. 2015 Employee, Director and Consultant Equity Incentive Plan, as amended (the “2017 Equity Plan” and together with the 2021 Plan, the "Equity Incentive Plan"). Share-based compensation expense, presented within selling, general and administrative expenses and direct operating expenses, was approximately $0.3 million and $0.6 million for the three months ended June 30, 2023 and 2022, respectively. Share-based compensation expense was approximately $0.9 million and $13.3 million for the six months ended June 30, 2023 and 2022, respectively.

See also "Subsequent Events" of this Quarterly Report on Form 10-Q for a description of the 2023 Troika Employee Incentive Plan.

Non-Qualified Stock Options (“NQSOs”) Award Activity

Under the Equity Incentive Plan the Company grants options to purchase shares of the Common Stock to employees and affiliates of the Company. These options are time based and vest over the contractual term. The options granted are approved by the Company's Compensation Committee. The Company accounts for forfeitures as they occur; therefore, stock-based compensation expense has been calculated based on actual forfeitures in the Company's consolidated statements of comprehensive loss.

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The following table summarizes activity relating to holders of the Company’s NQSOs for the six months ended June 30, 2023:
Number of:
Nonperformance based vesting NQSO'sWeighted average exercise priceWeighted Average remaining contractual term (in years)Aggregate Intrinsic value
Balance:
December 31, 2022198,849 $23.28 1.14$— 
June 30, 2023102,517 $20.05 0.97$— 
Exercisable at:
December 31, 2022127,013 $24.26 0.30$— 
June 30, 202343,675 $18.74 0.44$— 

For the three and six months ended June 30, 2023 the Company recognized stock compensation expense for options of approximately $0.0 million and $0.1 million, respectively.For the three and six months ended June 30, 2022 the Company recognized stock compensation expense for options of approximately $0.2 million and $0.5 million, respectively. For the three months ended June 30, 2023, approximately eighty thousand options were forfeited.

As of June 30, 2023, total unrecognized share-based compensation related to unvested options was approximately $0.4 million, and the weighted-average remaining vesting period for these awards was approximately one year and eleven months.

Restricted Share Units Award Activity

Pursuant to the Company’s 2021 Plan the Company issues Restricted Share Units ("RSUs") in consideration for employee and consultant services. RSUs issued under the Plan may be exercised in accordance with the applicable grant notice. The Company has also issued RSUs outside of the Plan in accordance with the Converge transaction to certain Converge Sellers, these RSUs may also be exercised in accordance with the applicable grant notice. The Company records stock-based compensation based on the grant date fair value of the awards. The Company recognizes the fair value of restricted stock awards that do not contain a performance condition as expense using the straight-line method over the requisite service period of the award. The Company accounts for forfeitures as they occur; therefore, stock-based compensation expense has been calculated based on actual forfeitures in the Company's consolidated statements of comprehensive loss.
The following table summarizes activity relating to holders of the Company’s RSUs issued under the Plan for the six months ended June 30, 2023:
Number of:
Nonperformance based vesting RSU'sWeighted-Average
Fair Value Per Share
At Date of Grant
Outstanding award balance at December 31, 202242,000 $23.75 
Granted— — 
Exercised— — 
Forfeited— — 
Outstanding award balance at June 30, 202342,000 $23.75 
Vested32,000 $25.84 
Unvested10,000 $37.40 

During the three and six months ended June 30, 2023 the Company recognized stock compensation expense related to restricted stock units of approximately $0.3 million and $0.7 million, respectively. For the three and six months ended June 30, 2022 the Company recognized stock compensation expense related to restricted stock units of approximately $0.4 million and $8.5 million, respectively. Further, during the six months ended June 30, 2023, certain executives of Converge vested 46,667 restricted stock units that were issued outside of the 2021 Equity Incentive Plan. As of June 30, 2023, there was 93,333 unvested restricted stock units associated with the Converge executives who were issued restricted
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stock units outside of the 2021 Equity Incentive Plan. As of June 30, 2023, total unrecognized share-based compensation related to unvested restricted stock units was approximately $2.2 million, and the weighted-average remaining vesting period for the awards is approximately one year and one month.

Earnings per Share

Net income (loss) per common share is calculated in accordance with ASC Topic: 260 Earnings per Share. Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of Common Stock outstanding during the period. The computation of diluted net loss per share does not include dilutive Common Stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. In periods where the Company has a net loss, all dilutive securities are excluded.

The following are dilutive Common Stock equivalents as of June 30, 2023 and 2022, which were not included in the calculation of loss per share, since the Company had a net loss from continuing operations and a net loss:

June 30, 2023June 30, 2022
Convertible preferred stock224 15,253 
Stock options43,675 144,673 
Stock warrants163,213 270,849 
Financing warrants4,600 2,810,801 
Restricted stock units135,333 178,000 
Total347,045 3,419,576 

Series E Preferred Shares
On March 16, 2022, the Company entered into the Series E Purchase Agreement with certain institutional investors to issue and sell in a private offering an aggregate of $50.0 million of securities, consisting of shares of Series E Preferred Stock and warrants to purchase (100% coverage) shares of Common Stock ("Series E Warrants"). Under the terms of the Series E Purchase Agreement, the Company agreed to sell 500,000 shares of its Series E Preferred Stock and Series E Warrants to purchase up to 1,333,333 shares of the Common Stock. Each share of the Series E Preferred Stock has a stated value of $100 per share and is convertible into shares of Common Stock at a conversion price of $37.5 per share subject to adjustment. The Series E Preferred Stock is perpetual and has no maturity date. The Series E Preferred Stock is not subject to any mandatory redemption or other similar provisions. All future shares of other Company preferred tock shall rank junior to the Series E Preferred Stock, except if at least a majority of the Series E Preferred Stock expressly consent, to the creation of the parity stock of senior preferred stock.

The Conversion Price of the Series E Preferred Stock and the exercise price of the Series E Warrants is subject to adjustment for: (a) stock dividends and stock distributions; (b) subsequent rights offerings; (c) pro rata distributions; and (d) certain fundamental transactions.

The Conversion Price is also subject to downward adjustment (the “Registration Reset Price”) to the greater of (i) eighty (80%) percent of the average of the ten (10) lowest daily VWAPs during the forty (40) trading day period beginning on and including the Trading Day immediately follow the effective date of the initial Registration Statement in July 2022, and (ii) the Floor Price of $6.25 per share.

The Company issued accompanying Common Stock Purchase Warrants (the “Warrants”) exercisable for five (5) years at $50.0 per share, to purchase an aggregate of 1,333,333 shares of Common Stock. The exercise price is subject to the same Registration Reset Price, as described above. The Floor Price is $6.25 per share.

At the time of the closing of the Purchase Agreement, using the Black-Scholes model, the Company recorded a fair value of approximately $28.4 million on the balance sheet within derivative liabilities - financing warrants. At June 30, 2022, the fair value of such warrants was $28.4 million and a resultant gain on change in fair value of derivative liabilities was recorded for approximately $0.6 million. At December 9, 2022, the date of the mark to market revaluation, the fair value of such warrants was approximately $10.2 million and a resultant gain on change in fair value of derivative liabilities was recorded for approximately $20.0 million.

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The Series E Preferred Stock and Series E Warrants include certain reset and anti-dilution provisions that could reduce the conversion prices and exercise prices thereof down to $6.25 (the “Floor Price”) which was a significant discount to the then current market price. For purposes of complying with Rule 5635(d) of the Nasdaq Stock Market rules, the shareholders approved the issuance of more than 19.99% of the current total issued and outstanding shares of Common Stock upon conversion of the Series E Preferred Stock and exercise of the Warrants, including, but not limited to, reducing the conversion price to the Floor Price.

In addition, as reported pursuant to the Information Statement field on Schedule 14C on March 14, 2022 with the SEC, the Majority Stockholders approved the amendment to Article Three of the Articles of Incorporation to reflect an increase in the number of authorized shares of all classes of stock which the Company shall have the authority to issue from 36,600,000 shares to 57,000,000 shares, such shares being designated as follows: (i) 32,000,000 shares of Common Stock, and (ii) 25,000,000 shares of preferred stock, par value $0.01 per share. The foregoing does reflect changes to the authorized and issued shares from the Reverse Stock Split which occurred on June 1, 2023.

On September 26, 2022, we entered into an Exchange Agreement (the “Exchange Agreement”) with each holder of our Series E Preferred Stock (each a “Series E Holder”), pursuant to which (i) each Series E Holder exchanged its existing warrant to purchase our Common Stock, dated March 16, 2022 (the “Old Warrants”), for new warrants to purchase our Common Stock (the “New Warrants”), and (ii) each Series E Holder consented to changes in the terms of the private investment in public equity (“PIPE”) placement effected by the Company on March 16, 2022 (the “New PIPE Terms”), including an amendment and restatement of the terms of our Series E convertible preferred stock, par value $0.01 per share (the “Series E Preferred Stock”).

In consideration for the issuance of the New Warrants and the other New PIPE Terms, we will filed an amended and restated certificate of designation for the Series E Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Nevada on September 27, 2022 to effect certain changes contemplated by the Exchange Agreement.

The New PIPE Terms effected the following changes, among others, to the rights Series E Holders:

•New Warrant Exercise Price: The New Warrant exercise price per share of Common Stock is $13.75, provided that if all shares of Series E Preferred Stock issued pursuant to the Certificate of Designation are not repurchased by the Company on or prior to November 26, 2022, on such date, the exercise price per share of the New Warrants will revert to $50.00, subject to further adjustment as set forth in the New Warrant. In general, such further adjustments provide that, subject to acceleration by the holder thereof, after the Subsequent Adjustment Period, the exercise price is adjusted to the lesser of the exercise price then in effect or the greater of (i) the average of the ten (10) lowest daily volume-weighted average prices ("VWAPs") during the Subsequent Adjustment Period and (ii) $6.25.

•Series E Conversion Price: The conversion price for the Series E Preferred Stock shall initially equal $10.00 per share, and so long as the arithmetic average of the daily VWAPs of the Common Stock for the calendar week prior to each of the following respective dates is lower than the Conversion Price at that time, the Conversion Price shall be downwardly adjusted by $6.25 on each of October 24, 2022, October 31, 2022, November 7, 2022, November 14, 2022, and November 21, 2022. The conversion price is subject to further adjustments upon conclusion of the Subsequent Adjustment Period, subject to acceleration by the holder thereof, to the lesser of the conversion price then in effect or the greater of (i) the average of the ten (10) lowest daily VWAPs during the Subsequent Adjustment Period and (ii) $6.25.

•Standstill Period: The Series E Holders agreed to a 60-day standstill period ending on November 26, 2022 (the “Standstill Period”), during which each Series E Holder may convert not more than fifty (50%) percent of the Series E Preferred Stock held by such holder at the beginning of the Standstill Period.

•Series E Buyout. During the Standstill Period the Company will use commercially reasonable efforts to raise funds to repurchase all outstanding shares of Series E Preferred Stock held by the Series E Holders at a purchase price of $100 per share, subject to the provisions of the Certificate of Designation.

•Limitation on Sales: During the Standstill Period, the Purchasers agreed not to sell shares of the Common Stock for a price less than $7.50 per share.

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•Liquidated Damages: The Company agreed to pay to the Purchasers all liquidated damages owed through September 21, 2022 (including any pro-rated amounts), which totaled approximately $3.6 million, all of which was paid during the three months ended June 30, 2022. The Company accrued an additional $0.2 million for the six months ended June 30, 2023 which is recorded in miscellaneous income (expense) on the statements of operations and comprehensive income (loss). See below for additional detail.

The Company paid to the Series E Holders all liquidated damages owed through September 21, 2022 (including any pro-rated amounts), which totaled approximately $3.6 million, all of which has been paid.

On March 31, 2023, the Company entered into Settlement Agreements (the “Settlement Agreements”) with certain former holders of its Series E Preferred Stock (the “Purchasers”) who constituted the registered or beneficial owners of more than 50.1% of the Registrable Securities under, and defined in, the Registration Rights Agreement, and more than 50.1% of the Series E Preferred Stock originally purchased under the Purchase Agreement. As such, in accordance with the terms of the Registration Rights Agreement and thePurchase Agreement, as applicable, as of March 31, 2023 (the “Effective Date”), each such agreement and all rights and obligations thereunder were terminated and deemed of no further force and effect as of such date. In addition, effective as of the Effective Date, the Settlement Agreements contain a release of any and all claims against the Company and its subsidiaries that such Purchaser (or its affiliates) may have purported to have against the Company or its subsidiaries under such agreements; provided, however, that the Purchasers will maintain their respective “Piggy-Back Registration Rights” under Section 6(d) of the Registration Rights Agreement.In exchange for the release by the Purchasers of any and all claims for liquidated damages under the Registration Rights Agreement, the Company delivered to each Purchaser a number of shares of Common Stock equal to the dollar amount of liquidated damages purportedly owed to each such Purchaser multiplied by four (4). The Company agreed to prepare and file with the SEC a resale registration statement on Form S-3 covering such Common Stock (the “Resale Registration Statement”),which was declared effective on May 26, 2023 (file no. 333-271889).

As of June 30, 2023, the Company had settled with the Purchasers and issued common shares. For the six months ended June 30, 2023, 304,838 shares of Series E Preferred Stock were converted into approximately 4.9 million shares of Common Stock, at a conversion price of $6.25. The Company recorded the $2.7 million share settlement as equity within its condensed consolidated balance sheets. The foregoing reflects changes to the authorized and issued shares from the Reverse Stock Split which occurred on June 1, 2023.

Some Series E Holders have not settled with the Company and continue to advocate for payment of liquidated damages under the Registration Rights Agreement. As of June 30, 2023, fourteen (14) shares of Series E Preferred Stock were issued and outstanding. The Company accrued an additional $0.2 million of interest related to the liquidated damages during the six months ended June 30, 2023 for Series E Holders who have not entered into a Settlement Agreement.

All Other Preferred shares

During the period beginning on May 12, 2023 and ending May 15, 2023, the Company filed with the Secretary of the State of Nevada, Certificates of Withdrawal (the “Certificates of Withdrawal”) of the Certificates of Designation of Preferences, Rights and Limitations previously filed with Secretary of State of Nevada with respect to the Company’s (i) Series B Preferred Stock, (ii) Series C Preferred Stock, and (iii) Series D Preferred Stock (together, the “Previously Designated Series”). At the time of the filing of the Certificate of Withdrawal, no shares of any of the Previously Designated Series were outstanding. The Certificates of Withdrawal were effective upon filing, and eliminated from our Articles of Incorporation all matters set forth in the previously-filed Certificates of Designation of Preferences, Rights and Limitations with respect to the Previously Designated Series. As a result, the only designated series of preferred stock is the Series E Preferred Stock. The foregoing descriptions of the Certificates of Withdrawal are qualified in their entirety by reference to the Certificates of Withdrawal, copies of which are filed as Exhibits 4.3, 4.4 and 4.5 hereto and each of which is incorporated herein by reference.

NOTE 12. Related Party
Converge Sellers

During the quarter ended June 30, 2022, in connection with the Converge Acquisition, the Company incurred amounts due to the Converge Sellers totaling $9.3 million. The Converge Sellers include Mr. Toama and Mr. Marianacci, Mike Carrano, Head of Supply Solutions of the Converge subsidiaries, and Maarten Terry, employee and sixty (60%) percent
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owner of CMS, all are party to the amounts due. The Converge subsidiaries are wholly owned subsidiaries of the Company. As of June 30, 2023, and December 31, 2022, $9.3 million was outstanding and included on the balance sheet under acquisition liabilities.

Media Resource Group ("MRG")

Mr. Marianacci, who is an employee of the Company and one of the Converge Sellers, serves as an owner and executive director of Media Resource Group (“MRG”) company that entered into a service agreement with the Company, dated January 1, 2007, under which MRG agreed to provide certain media services to the Company. On September 29, 2023, Mr. Marianacci submitted his resignation to the Company. See also "Subsequent Events" of this Quarterly Report on Form 10-Q for further information.

For the three months ended June 30, 2023, and June 30, 2022, the Company incurred approximately $0.4 million and $0.5 million, respectively, for services performed by MRG. For the six months ended June 30, 2023 and 2022 the Company incurred approximately $0.8 million and $0.5 million, respectively, for services performed by MRG.

Additionally, amounts due to MRG as of June 30, 2023, and December 31, 2022, were approximately $0.2 million and are reflected within the accounts payable line on its condensed consolidated balance sheets.

On July 26, 2023, the Company informed MRG of its intent to cease all future business with MRG.

See also "Subsequent Events" of this Quarterly Report on Form 10-Q for further information on future business with MRG and Mr. Marianacci.

Converge Marketing Services ("CMS")

The Company has an Exclusive Services Agreement with CMS, a 40% owned entity, to provide advertising and related services. CMS and the Company operate with a managed service relationship whereby the expenses incurred by the Company relating to the out-of-pocket costs associated with media campaigns are reimbursed by CMS and the Company receives management fee income.

The Company recognizes revenue on a gross basis as the principal since it controls the marketing services before delivery to the customer and is primarily responsible for fulfilling the promise to provide the services to the customer. According to ASC 606-10-55-37A, which explains the principal versus agent guidance for when another party is involved in providing goods or services to a customer, a principal obtains control when the right to a service to be performed by the other party (vendor), which gives the entity the ability to direct that party to provide the service to the customer on the entity’s behalf. Given that the Company has discretion of how media spend is allocated and optimized and can direct a third party to provide media services, the Company is deemed to be the principal.

For the three months ended June 30, 2023, and 2022, the Company generated gross managed service revenue of approximately $7.7 million and $10.7 million, respectively, of which $0.8 million and $1.2 million was management fee revenue. For the six months ended June 30, 2023 and 2022, the Company generated gross managed service revenue of approximately $20.5 million and $10.7 million, respectively, of which $2.0 million and $1.3 million was management fee revenue. For the six months ended June 30, 2022, activity from CMS was for the period March 22, 2023 to June 30, 2023.

As of June 30, 2023, and December 31, 2022, the Company recorded approximately $2.6 million and $3.7 million, respectively, as amounts due from CMS within the accounts receivable line on its condensed consolidated balance sheets.

At the acquisition date and as of June 30, 2023, the Company's carrying amount of the investment was insignificant. The Company reflects its share of gains and losses of the investment in other income and expenses in the condensed consolidated statements of operations and comprehensive loss using the most recently available earnings data at the end of the period.

Union Ventures Limited purchase of Mission-Media Holdings Limited

On August 1, 2022, Troika-Mission Holdings, Inc., (“TM Holdings"), a subsidiary of the Company, entered into an Equity Purchase Agreement with Union Ventures Limited, a company organized under the law of England and Wales ("UVL"). UVL is a company owned by Union Investments Management Limited, which is a stockholder of the Company and
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affiliated with Daniel Jankowski, a former director of the Company, and Thomas Ochocki, a current Director of the Company. UVL purchased from TM Holdings, all of TM Holdings’ right, title, and interest in and to the shares (the "Mission UK Shares") of Mission-Media Holdings Limited, a private limited company incorporated under the laws of England and Wales (“Mission Holdings”), including Mission UK’s subsidiary, Mission-Media Limited, a company organized under the laws of England and Wales (“Mission Media UK”). As consideration for all the Mission UK Shares, UVL paid TM Holdings an aggregate purchase price of $1,000 USD. Mr. Ochocki recused himself from the decision to sell the Mission UK Shares to UVL.

Union Eight Limited and Mission Media Limited

On July 1, 2021 Mission Media UK entered into a Consultancy Agreement with Service Company (the “U8L Consultancy Agreement”) with Union Eight Limited (“U8L”) in which U8L agreed to interface with investors and provide strategic advice related to Mission Media UK in exchange for a start-up fee of £150,000 and a monthly retainer of £25,000. In 2022, the U8L Consultancy Agreement was terminated prior to the expiration of its 2-year term in exchange for a termination payment. U8L is a current stockholder of the Company and is affiliated with Thomas Ochocki, a current director of the Company and former director of Mission Media UK. Daniel Jankowski, a former director of the Company and Mission Media UK, is also affiliated with U8L. U8L was also granted Company Restricted Stock Units.

Ochocki Director Letter

In connection with the subscription for Company shares by Mr. Peter Coates, the Company executed an agreement with Mr. Coates dated May 5, 2017 agreeing that for so long as Mr. Coates (or any of his family members, trusts, or investment vehicles) or Mr. Ochocki owns any shares in the Company, Mr. Ochocki will serve as a director of the Company as Mr. Coates’ designee.

See also "Subsequent Events" below for a discussion on the Areté Engagement Letter (as defined below).

NOTE 13. Income Taxes

On each of June 30, 2023, and December 31, 2022, the accompanying condensed consolidated balance sheets include a tax liability of $0.1 million included on the condensed consolidated balance sheets within accrued expenses. The Company recorded income tax expense of $0.1 million for the three and six months ended June 30, 2023 and 2022.

The Company's tax rate differs from the statutory rate of 21.0% due to the effects of state taxes, effects of permanent nondeductible expense, and valuation allowance. The Company's utilization of its NOL generated post December 31, 2017 is expected to be limited to eighty (80%) percent of taxable income.

See Note 17 to the consolidated financial statements for the transition period ended December 31, 2022, included in Item 8. Financial Statements and Supplementary Data of the Company’s Transition Report on Form 10-KT.
NOTE 14. Subsequent Events
Senior Secured Facility
On July 14, 2023, the Company and Blue Torch entered into a second amendment to the First A&R Limited Waiver (the “Second Amendment to First A&R Limited Waiver”) pursuant to which Blue Torch agreed to extend the Outside Date from July 14, 2023, to July 28, 2023, subject to potential extension if a definitive written agreement was delivered on or prior to July 28 2023 providing for cash repayment in full of all obligations owed to Blue Torch or which was otherwise acceptable to Blue Torch.

On July 28, 2023, the Company and Blue Torch entered into the third amendment to the First A&R Limited Wavier (the “Third Amendment to First A&R Limited Waiver”) pursuant to which Blue Torch agreed to extend the Outside Date from July 28, 2023, to August 28, 2023, subject to potential extension if a definitive written agreement was delivered on or prior to August 28, 2023 providing for cash repayment in full of all obligations owed to Blue Torch or which was otherwise acceptable to Blue Torch.

On August 22, 2023, the Company and Blue Torch entered into a fourth amendment to the First A&R Limited Waiver effective as of August 18, 2023 (the “Fourth Amendment to First A&R Limited Waiver”) pursuant to which Blue Torch agreed to extend the Outside Date from August 28, 2023 to September 29, 2023, subject to potential extension if a
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definitive written agreement is delivered on or prior to September 29, 2023 providing for cash repayment in full of all obligations owed to Blue Torch or which is otherwise acceptable to Blue Torch.

On September 22, 2023, the Company and Company Subsidiaries entered into the First Amendment to Financing Agreement (the "First Amendment to Financing Agreement”) with Blue Torch and the Lenders. The First Amendment to Financing Agreement amends the Financing Agreement by adding provisions for the use of secured overnight financing rate loans in place of LIBOR rate loans.

On September 29, 2023, Blue Torch and the Company entered into a Second Amended and Restated Limited Waiver (the “Second A&R Limited Waiver”) of certain Specified Events of Default under the Financing Agreement, as amended by the First Amendment. The Second A&R Limited Waiver amends and restates the First A&R Limited Waiver. The Company and Blue Torch entered into the Second A&R Limited Wavier to, among other things, (i) waive certain Specified Events of Default including any failure of the Company to make the quarterly principal and interest payments due to be paid on or about September 30, 2023 under the Financing Agreement; and (ii) extend the Outside Date. The Second A&R Limited Waiver will expire on the earliest of (x) the occurrence of an Event of Default under the Financing Agreement that is not a Specified Event of Default, (y) a failure by the Company to comply with certain sale and refinancing milestones set forth in a side letter agreed by the Company and the Lenders and (z) a revised Outside Date of October 13, 2023 (the “Current Waiver Period”).

On October 13, 2023, the Company and Blue Torch entered into the first amendment to the Second A&R Limited Waiver effective as of October 13, 2023 (the “First Amendment to Second A&R Limited Waiver”) pursuant to which Blue Torch agreed to extend the Outside Date from October 13, 2023 to October 20, 2023. The Company is currently in negotiations with Blue Torch to extend the Outside Date.

The Second A&R Limited Waiver concerns events of default that relate to the Company’s existing and anticipated failures to satisfy certain financial and non-financial covenants under the Financing Agreement. If the Company is unsuccessful in curing the continuing events of default by the expiration of the Current Waiver Period, the Company intends to seek further extensions of the Current Waiver Period with Blue Torch and the Lenders, although we cannot assure you that Blue Torch and the Lenders would be willing to grant extensions. If the Company failed to obtain an extension, the Company would be in default under the Financing Agreement and the Lenders would be able to exercise remedies available to them under the Financing Agreement. Any such action would likely have a material adverse effect on the Company and its financial condition.

The foregoing summaries do not purport to be complete and is subject to, and qualified in its entirety by, the Second Amendment to First A&R Limited Waiver, the Third Amendment to First A&R Limited Waiver and Fourth Amendment to A&R Limited Waiver filed with our Current Reports on Form 8-K filed with the SEC on July 17, 2023, July 28, 2023 and August 28, 2023, respectively, the First Amendment to Financing Agreement filed with our Current Reports on Form 8-K filed with the SEC on September 27, 2023, the Second A&R Limited Waiver filed with our Current Reports on Form 8-K filed with the SEC on October 4, 2023 the First Amendment to Second A&R Limited Waiver filed with our Current Reports on Form 8-K with the SEC on October 18, 2023.

Converge Sellers

On July 17, 2023, the Converge Sellers in their capacities as the sellers of Converge filed a complaint (the “Complaint”) under the caption Carrano et al. v. Troika Media Group, Inc. and CD Acquisition Corporation,Case No. 653449/2023 (the “Action”) in the Supreme Court of the State of New York, New York County against the Company and CD (together, the “Defendants”). On August 8, 2023, Mr. Toama, who was Chief Executive Officer of the Company, withdrew from the Action without prejudice. Mr. Toama recused himself from all deliberations by the Board concerning the Action. The Board also formed a Special Litigation Committee composed of Board members Randall Miles, Grant Lyon, Jeffrey Stein, and Wendy Parker with delegated full power to evaluate, investigate, review, and analyze the facts and circumstances surrounding the Action.

The Complaint generally alleges that the Defendants owe sums to the Converge Sellers under the MIPA. The Complaint seeks, among other things, a judgment that the Defendants breached the MIPA and damages relating to the purported breach.

Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that a negative final outcome of this matter could have a material adverse effect on its business, profitability,operating results, financial
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condition or cash flow. Nothing in this Quarterly Report on Form 10-Q shall be deemed an admission of liability in respect of the Action.

Departure of Chief Executive Officer and Chief Financial Officer and appointment of Interim Chief Executive Officer and Interim Chief Financial Officer

On August 14, 2023, the Company terminated the employment of Mr. Toama, its abilityformer Chief Executive Officer, for “Cause,” pursuant to generate sufficient cash flowthe terms of his employment agreement. Mr. Toama was deemed to have resigned from the Board immediately upon his termination, pursuant to the terms of his employment agreement. The Company has also terminated the employment of Erica Naidrich, its operationsformer Chief Financial Officer, for “Cause,” pursuant to meetthe terms of her employment agreement. The Board determined that “Cause” existed to terminate the employment of Mr. Toama and Ms. Naidrich pursuant to the terms of their respective employment agreements, including, among other things, for engaging in acts of gross misconduct that are materially injurious to the Company.

Effective August 14, 2023, the Company appointed Grant Lyon, a current member of the Board, as the Company’s Interim Chief Executive Officer and Eric Glover as the Company’s Interim Chief Financial Officer. The Company entered into an engagement letter (the “Areté Engagement Letter”) with Areté Capital Partners, LLC (“Areté”), a consulting firm founded and owned by Mr. Lyon pursuant to which Areté will make Messrs. Lyon and Glover available to serve as the Interim Chief Executive Officer and Interim Chief Financial Officer, respectively. The foregoing summary of the Areté Engagement Letter does not purport to be complete and is subject to, and qualified in its operating needsentirety by the Areté Engagement Letter filed with our Current Reports on Form 8-K filed with the SEC on August 15, 2023.

Both Mr. Toama and Ms. Naidrich have disputed whether they were properly terminated for "Cause".

Notice of Non-Compliance

On August 22, 2023, the “Company received a delinquency notification letter from Nasdaq stating that the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) because it had not timely basis, obtain additional working capital funds through equity and debt financing arrangements, and restructure on-going operations to eliminate inefficiencies to raise cash balance in order to meetfiled its anticipated cash requirementsQuarterly Report on Form 10-Q for the next twelve monthsquarter ended June 30, 2023 (the “Q2 2023 Form 10-Q”). Nasdaq has informed the Company that the Company must submit a plan of compliance (the “Plan”) within sixty (60) days (the "Plan Deadline") addressing how it intends to regain compliance with Nasdaq’s listing rules or otherwise file the Q2 2023 Form 10-Q before the expiration of such sixty (60) day period. Because the Company has filed this Quarterly Report on 10-Q for the quarter ended June 30, 2023 before the Plan Deadline, the Company will not be required to submit a Plan to Nasdaq by the Plan Deadline.
MRG
On July 26, 2023, the Company informed MRG of its intent to cease all future business with MRG. It is expected that the Company will be able to source the same services from alternative vendors and that current orders with MRG will be completed by mid-October 2023.
Resignation of Thomas Marianacci
On September 28, 2023, Thomas Marianacci submitted his resignation to the Company. Mr. Marianacci claims to have resigned with "Good Reason" under the terms of his employment agreement. The Company does not agree and views Mr. Marianacci's resignation as voluntary.
2023 Incentive Plan
On October 18, 2023 the Company approved the 2023 Incentive Plan, which is designed to provide financial and equity incentives to reward employees for performance that will be critical to build a profitable business and drive value to shareholders. As of the date of this report.  However, therereport, no equity has been granted under the plan.


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

The following management’s discussion and analysis should be read in conjunction with the Company’s condensed consolidated financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q. The management’s discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made. These forward-looking statements can be identified by the use of terminology such as “anticipate,” “believe," "estimate," "expect," "intend," "project," "will," or the negative thereof or other variations thereon or comparable terminology. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those contained in this and our other Quarterly Reports on Form 10-Q, as well as the disclosures made in the Company's Transition Report on Form 10-KT for the transition period ended December 31, 2022 filed on March 7, 2023 (as amended, the "2022 Form 10-KT") including without limitation, those discussed in Item 1A. "Risk Factors." in part I. of the 2022 Form 10-KT, and other filings we make with the Securities and Exchange Commission (the "SEC"). We do not undertake any obligation to update forward-looking statements, except as required by law. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance.

Factors Affecting Results of Operations

Seasonality

The revenue in our three and six months ended June 30, 2023, is reflective of the seasonality in the business which is driven by our sector and revenue stream mix where we typically see lower customer acquisition investments (in relative terms) by our clients in Q1 and Q4.

Restructuring Programs

During the year ended June 30, 2022 the Company initiated an intensive, what was expected to be a year long organizational restructuring program in order to fully optimize the operations of the post-acquisition consolidated company. The restructuring program resulted in costs not expected to recur that were incurred primarily for (1) workforce reductions of over 100 employees across multiple business functions and subsidiaries, (2) abandoned or excess facilities relating to lease terminations and non-cancelable lease costs and (3) other charges, which include but are not limited to legal fees, regulatory/compliance expenses, and contractual obligations. See Note 7 to the condensed consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions on restructuring charges.

During the six months ended June 30, 2023 the Company leveraged the previously completed restructuring effort to begin the latter phases of its organizational restructuring which included various efforts related to the recapitalization of its Balance Sheet. On February 22, 2023 the Company announced that it retained leading Investment Banking firm Jefferies to assist in optimizing its capital structure and to explore strategic alternatives. Last quarter, the Company announced that it had executed the First A&R Limited Waiver with Blue Torch to provide the Company with time to explore different avenues and opportunities to enhance stockholder value. We continue to explore our options with Blue Torch and have extended the waiver through October _20, 2023. See Note 8 to the condensed consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions on the Blue Torch financing.

Additionally, on March 31, 2023, the Company and certain former Series E Holders entered into the Series E Settlement Agreements. Under the terms of the Series E Settlement Agreements, the parties thereto agreed to terminate the Series E Registration Rights Agreement and the Series E Purchase Agreement and all rights respectively thereunder (other than certain rights surviving under the Series E Registration Rights Agreement, to which all Series E Holders continue to be equally entitled) and to release any and all claims for liquidated damages under the Series E Registration Rights Agreement, in exchange for shares of Common Stock in the amounts set forth in the Settlement Agreements. See “Item 1A Risk Factors” of the 2022 Form 10-KT for additional detail on certain risks associated with the Settlement Agreements and the Resale Registration Statement filed in connection therewith.
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The Corporate restructuring program, the Blue Torch financing matters, and the Series E Equity matters have contributed to additional expenses for the Company such as costs for professional fees, legal and financial experts, special board committee members and other costs that are not in the ordinary course of business. These costs will continue to be incurred until the Company concludes a suitable transaction to reduce its debt service and stabilize its capital structure. These costs are primarily recorded within selling, general and administrative costs, unless otherwise specified, within the Condensed Consolidated Statements of Operations.
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RESULTS OF OPERATIONS
Comparison of the three months ended June 30, 2023 to the three months ended June 30, 2022.
The table below sets forth, for the periods presented, certain historical financial information (in thousands):
Three Months Ended June 30,
20232022Change ($)Change (%)
Revenue$58,689 $85,381 $(26,692)(31)%
Cost of revenue52,946 67,969 (15,023)(22)%
Gross profit5,743 17,412 (11,669)(67)%
Operating expenses:
Selling, general and administrative expenses12,114 13,992 (1,878)(13)%
Depreciation and amortization2,066 2,268 (202)(9)%
Restructuring and other related charges(325)5,591 (5,916)(106)%
Impairment and other losses (gains), net— 8,937 (8,937)(100)%
Total operating expenses13,855 30,788 (16,933)(55)%
Operating loss(8,112)(13,376)5,264 (39)%
Other income (expense):
Interest expense(3,449)(2,796)(653)23 %
Miscellaneous income (expense)(680)(1,938)1,258 (65)%
Total other expense(4,129)(4,734)605 (13)%
Loss from operations before income taxes(12,241)(18,110)5,869 (32)%
Income tax (expense) benefit(21)54 (75)(139)%
Net loss$(12,262)$(18,056)$5,794 (32)%

Revenue

Three Months Ended June 30,
20232022Change ($)Change (%)
Managed Services$28,466,605 $45,782,516 $(17,315,911)(38)%
Performance Solutions30,222,542 34,372,526 (4,149,984)(12)%
Other— 5,226,661 (5,226,661)(100)%
Total$58,689,147 $85,381,703 $(26,692,556)(31)%

Revenues for the three months ended June 30, 2023 were approximately $58.7 million, a decrease of approximately $26.7 million from the comparable prior year period. The decrease in the current year period was attributable to a decrease in the managed services and performance solutions revenue streams, and the absence of other revenue.

The decrease in managed services revenue of approximately $17.3 million was primarily the result of decreased spending by the Company’s insurance clients, due to an increase in their costs, including car repair and insurance claims costs, which resulted in lower advertising spend. The decrease in performance solutions revenue of approximately $4.1 million was the result of a decline related to legal services clients of approximately $2.7 million and a net decrease in home services clients of approximately $1.3 million. The decrease in legal services clients was driven by an increase in competition to acquire leads, which drove down response rates from certain tort campaigns. As compared to the prior period, legal services clients experienced higher borrowing costs, which also led to a decline in their overall marketing spend. The decline related to home services clients was driven by a decline in response rates in media campaigns as compared to the prior year period. During the quarter, client retention was not an issue and management believes future revenues could increase if budget and inflationary pressures become more favorable.

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Costs of revenue

For the three months ended June 30, 2023, cost of revenues was approximately $52.9 million, a decrease of approximately $15.0 million, as compared to the comparable prior year period. The cost of revenues decline is related to decreases in spend from managed services revenue stream of approximately $16.5 million and was partially offset by increased spend in performance solutions revenue stream of approximately $2.5 million and the absence of approximately $0.6 million of other cost of revenues. The decrease in spend as it related to managed services is discussed above in the revenue discussion. The net increase in performance solutions spend is due to an increase in competition to acquire leads, which lead to higher media costs by the Company.

Gross profit

For the three months ended June 30, 2023, gross profit was approximately $5.7 million, a decrease of approximately $11.7 million, as compared to the prior year period. Gross profit of approximately $5.7 million was comprised of approximately $2.3 million and $3.4 million, related to the managed services and performance solutions revenue streams, respectively. As performance solutions require spend commitments by the company with no assuranceguarantee on the amount of revenue generated, underperformance in a certain campaign or medium can cause a disproportionate decline to gross profit. Managed services gross profit is derived on a fixed fee and/or commission basis and does not have a direct correlation to decreases or increases in revenue.

The decline in gross profit generated from the performance solutions revenue stream of approximately $4.1 million was primarily attributable to legal and home services clients. The decrease in gross profit amongst legal clients was a result of increased competition to acquire leads, which increased our spend on a cost per lead basis and compressed margin as compared to the prior period. The decrease in gross profit related to home services clients was driven by a decline in response rates and higher customer acquisition costs, which were partially offset by our ability to diversify home services revenues with more stable margins.

The decline in gross profit generated from the managed services revenue stream of approximately $2.3 million was primarily attributable to the decreased spend by the insurance sector clients.

Selling, general, and administrative expenses

For the three months ended June 30, 2023, selling, general, and administrative expenses decreased approximately $1.9 million, to $12.1 million, as compared to the prior year period. The decrease in selling, general, and administrative expenses was primarily driven by a decrease in personnel costs of approximately $2.1 million, a decrease in miscellaneous selling, general, and administrative expenses of approximately $1.1 million, a decrease in travel and entertainment costs of approximately $0.2 million, a decrease in information technology costs of approximately $0.1 million, and a decrease in facilities and occupancy costs of approximately $0.1 million. These decreases were offset by an increase in professional fees of approximately $1.4 million and an increase in public company costs of approximately $0.3 million.

Selling, general, and administrative expenses during the three months ended June 30, 2023, contained certain non-recurring, one-time costs associated with the Company's efforts in reducing its debt service and stabilizing its capital structure. These one-time costs included approximately $2.7 million related to bonuses, approximately $3.4 million related to legal and consulting fees, approximately $0.3 million related to other financing matters, approximately $0.1 million related to the reverse stock split, and approximately $0.2 million related to Board of Director fees for the Special Committee. These amounts were included in the adjusted EBITDA calculation below.

The decrease in personnel costs of approximately $2.1 million was primarily driven by a decrease in employee compensation and benefits of approximately $1.2 million, related to the decrease in headcount since the prior year, the decrease of approximately $0.8 million in stock-based compensation expense, and the decrease of approximately $0.1 million in non-recurring bonuses during the quarter.

The decrease in miscellaneous selling, general, and administrative expenses of approximately $1.1 million was primarily driven by the absence of approximately $0.7 million in business acquisition costs and other miscellaneous costs related to the Converge Acquisition in the prior year period. Additionally, there was a decrease of approximately $0.4 million in corporate tax expenses, which was mainly driven by a decrease in sales tax costs.

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The increase in professional fees of approximately $1.4 million as compared with the prior period was primarily driven by an increase in legal and consulting fees of approximately $1.9 million. These increased fees were driven by the Company's efforts in organizational restructuring, optimization of its capital structure, and exploration of strategic alternatives. This increase was offset by a decrease of approximately $0.5 million in audit and accounting fees as a result of higher audit and advisory fees in the prior year period related to the Converge Acquisition.

The increase in public company costs of approximately $0.3 million as compared to the prior period were primarily driven by the increase in Board of Director fees.

Depreciation and amortization

For the three months ended June 30, 2023, depreciation and amortization expense decreased approximately $0.2 million, to approximately $2.1 million, as compared to the prior year period. The decrease was primarily attributable to the absence of depreciation and amortization expense of the Troika, Mission, and Redeeem entities as a result of the impairment of their intangible assets and write-off of fixed assets during the fiscal year ending June 30, 2022 and transition period ending December 31, 2022.

Restructuring and other related charges

For thethree months ended June 30, 2023, the Company recorded credits of approximately $0.3 million, a decrease of approximately $5.9 million as compared to the prior year period. The decrease was primarily driven by the absence of severance related charges of approximately $3.2 million, which was inclusive of credits related to employee severance and benefit payments of approximately $0.3 million and $0.3 million related to a reclassification of future severance payments to selling, general, and administrative expenses, and driven by settlement charges of approximately $3.3 million in the prior year period, partially offset by legal fees of approximately $0.6 million in the current year period. See Note 7 to the condensed consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions on the restructuring program.
Impairment and other (losses) gains, net

For the three months ended June 30, 2022, impairment and other (losses) gains, net of approximately $8.9 million were a result of impairment charges of approximately $9.2 million, offset by other gains of approximately $0.3 million. The impairment charges of $9.2 million included goodwill impairment charges of approximately $6.7 million from Mission UK as a result of the Sale Agreement entered into on August 1, 2022, goodwill impairment charges of approximately $2.0 million related to the Redeeem entity, and impairment charges of intangible assets of approximately $0.4 million related to the Redeeem entity. The other gains of approximately $0.3 million consisted of a gain on rent abatement. There were no such amounts recorded for the three months ended June 30, 2023.

Interest expense

For the three months ended June 30, 2023, interest expense increased approximately $0.7 million to approximately $3.4 million, as compared to the prior year period. The increase during the three month period is related to rising interest rates (15.83% compared to 9.50% as of June 30, 2023 and June 30, 2022, respectively and the addition of a two (2%) percent default interest fee that began October 2022) primarily related to the Company's Senior Secured credit facility, which was entered into in March 2022 to finance the Converge Acquisition (see "Liquidity and Capital Resources - Financing Agreements"). See Note 8 – Credit Facilities to the condensed consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for more information on the Company's Credit Facility.
Miscellaneous expense

For the three months ended June 30, 2023, miscellaneous expense decreased approximately $1.3 million to approximately $0.7 million, as compared to the prior year period. The decrease in expense during the three months ended was primarily related to the absence of approximately $3.6 million in liquidated damages expense, the absence of approximately $1.3 million in other gains, the absence of approximately $0.4 million related to the gain on the remeasurement of derivative liabilities, offset by an increase of approximately $0.6 million in other expenses.

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Comparison of the six months ended June 30, 2023 to the six months ended June 30, 2022.

The table below sets forth, for the periods presented, certain historical financial information. The six months ended June 30, 2022, includes Converge activity from the acquisition date March 22, 2022 to June 30, 2022 (in thousands):

Six Months Ended June 30,
20232022Change ($)Change (%)
Revenue$117,727 $101,067 $16,660 16 %
Cost of revenue103,229 79,707 23,522 30 %
Gross profit14,498 21,360 (6,862)(32)%
Operating expenses:
Selling, general and administrative expenses23,051 31,175 (8,124)(26)%
Depreciation and amortization4,129 2,697 1,432 53 %
Restructuring and other related charges(99)5,591 (5,690)(102)%
Impairment and other losses (gains), net— 8,938 (8,938)(100)%
Total operating expenses27,081 48,401 (21,320)(44)%
Operating loss(12,583)(27,041)14,458 (53)%
Other income (expense):
Interest expense(6,890)(2,896)(3,994)138 %
Miscellaneous income (expense)(632)(2,528)1,896 (75)%
Total other expense(7,522)(5,424)(2,098)39 %
Loss from operations before income taxes(20,105)(32,465)12,360 (38)%
Income tax (expense) benefit(57)21 (78)(370)%
Net loss$(20,162)$(32,444)$12,282 (38)%


Revenue
Six Months Ended June 30,
20232022Change ($)Change (%)
Managed Services$64,229,389 $50,076,258 $14,153,131 28 %
Performance Solutions53,498,096 40,178,974 13,319,122 33 %
Other— 10,811,471 (10,811,471)(100)%
Total$117,727,485 $101,066,703 $16,660,782 16 %

Revenues for the six months ended June 30, 2023, were approximately $117.7 million, an increase of approximately $16.7 million as compared to the prior year period. The net increases in managed services and performance solutions revenues were driven primarily by the timing of the Converge Acquisition on March 21, 2022 in the prior year period. These increases were partially offset by decreased reimbursable revenue in our managed services revenue stream generated by our insurance sector customers, coupled with a decrease in other revenue related to Troika and Mission subsidiaries.

Costs of revenue

For the six months ended June 30, 2023, cost of revenue increased by approximately $23.5 million to approximately $103.2 million, as compared to the prior year period. The increase was driven by the timing of the Converge Acquisition on March 21, 2022 in the prior year period. This increase was slightly offset by a decrease in spend related to certain managed service customers and in other cost of revenue related to Troika and Mission subsidiaries.

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Gross profit

For the six months ended June 30, 2023, gross profit decreased approximately $6.9 million to approximately $14.5 million, as compared to the prior year period. The decrease is primarily due to margin compression as a result of lower response rates, higher customer acquisition costs and the absence of other revenue and cost of revenues as discussed above. The absence of gross profit on the legacy Troika subsidiaries also had an impact in the current year periods. The decrease in margin related to managed service was less impactful despite the significant decrease in managed services revenue during the three and six month periods, due to the proportion of revenue generated that is largely reimbursable costs.

Selling, general, and administrative expenses

For the six months ended June 30, 2023, selling, general, and administrative expenses decreased approximately $8.1 million, to approximately $23.1 million, as compared to the prior year period. The decrease in selling, general, and administrative expenses was primarily driven by decreases from the prior year period in personnel costs of approximately $10.0 million, decrease in miscellaneous selling, general, and administrative costs of approximately $1.0 million, and a decrease in travel and entertainment costs of approximately $0.2 million. These decreases were offset by an increase from the prior period in professional fees of approximately $2.1 million, an increase in public company costs of approximately $0.9 million, and an increase in office expenses of $0.1 million.

The decrease of approximately $10.0 million in personnel costs was primarily driven by a $10.2 million decrease in stock-based compensation expense related to the Redeeem disposition and restricted stock units granted to executives during 2022, coupled with a decrease of approximately $0.7 million in employee compensation, inclusive of employee-related benefits, taxes and fees related to the decrease in headcount from the prior year. These decreases were offset by non-recurring employee and executive retention bonuses granted during the current period of approximately $0.9 million.

The decrease in miscellaneous selling, general, and administrative expenses of approximately $1.0 million was primarily driven by a decrease of approximately $0.8 million in business acquisition costs and other miscellaneous costs related to the Converge Acquisition and a decrease of approximately $0.2 million in corporate tax expenses.

The increase in professional fees of approximately $2.1 million was driven by increases of approximately $2.6 million in consulting fees, and approximately $0.4 million in legal fees, related primarily to the Company's efforts in organizational restructuring, optimization of its capital structure, and exploration of strategic alternatives. These increases were partially offset by a decrease of approximately $0.9 million in audit and accounting fees as a result of higher audit and advisory fees related to the Converge Acquisition in the prior year period.

The increase of approximately $0.9 million in public company costs were partially driven by the increase in Board of Director fees of approximately $0.4 million. The remaining increase in public company costs was driven by an increase in legal fees related to public company compliance matters of approximately $0.3 million and an increase in other public company costs, including software costs, of approximately $0.2 million.

Selling, general, and administrative expenses during the six months ended June 30, 2023, contained certain non-recurring, one-time costs associated with the Company's efforts in reducing its debt service and stabilizing its capital structure. These one-time costs included approximately $2.8 million related to personnel costs, approximately $5.8 million related to legal and consulting fees, approximately $0.6 million related to other financing matters, approximately $0.1 million related to the reverse stock split costs, and approximately $0.5 million related to additional Board of Director fees for the Special Committee. These amounts were included in the adjusted EBITDA calculation below.

Depreciation and amortization

For the six months ended June 30, 2023, depreciation and amortization expense increased approximately $1.4 million to approximately $4.1 million, as compared to the prior year period. The increase was primarily attributable to higher amortization expense in the current six month period related to intangible assets purchased through the Converge Acquisition.

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Restructuring and other related charges

For thesix months ended June 30, 2023, the Company recorded restructuring credits of approximately $0.1 million, a decrease of approximately $5.7 million as compared to the prior year period. The decrease was primarily driven by decreases in severance related charges of approximately $3.0 million, which was inclusive of credits related to employee severance and benefit payments of approximately $0.3 million and approximately $0.3 million related to a reclassification of future severance payments to selling, general, and administrative expenses and settlement charges of approximately $3.3 million. These decreases were partially offset by approximately $0.6 million in charges for legal expenses. See Note 7 to the condensed consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for discussions on the restructuring program.

Impairment and other (losses) gains, net

For the six months ended June 30, 2022, impairment and other (losses) gains, net of approximately $8.9 million were a result of impairment charges of approximately $9.2 million, partially offset by other gains of approximately $0.3 million. The impairment charges of approximately $9.2 million included goodwill impairment charges of approximately $6.7 million from Mission UK as a result of the Sale Agreement entered into on August 1, 2022, goodwill impairment charges of approximately $2.0 million related to the Redeeem entity, and impairment charges of intangible assets of approximately $0.4 million related to the Redeeem entity. The other gains consisted of approximately a $0.2 million gain on rent abatement. There were no such amounts recorded for the six months ended June 30, 2023.

Interest expense

For the six months ended June 30, 2023, interest expense increased approximately $4.0 million to approximately $6.9 million, as compared to the prior period. The increase during the six month period is related to rising interest rates during the six month period ending June 30, 2023 compared to June 30, 2022 (15.83% compared to 9.50% and the addition of a two (2%) percent default interest fee that began in October 2022) primarily related to the Company's Senior Secured credit facility, which was entered into in March 2022 to finance the Converge Acquisition (see "Liquidity and Capital Resources - Financing Agreements"). See Note 8 – Credit Facilities to the condensed consolidated financial statements included in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for more information on the Company's Credit Facility.

Miscellaneous expense

For the six months ended June 30, 2023, miscellaneous expense decreased approximately $1.9 million to approximately $0.6 million, as compared to the prior period. The decrease in expense during the six months ended June 30, 2023, was primarily related to a decrease of approximately $3.4 million in liquidated damages expenses, partially offset by the absence of approximately $0.6 million of a gain on derivative liabilities, and the absence of approximately $0.6 million in other income.

Adjusted Earnings Before Interest, Tax, Depreciation, and Amortization (“Adjusted EBITDA”)

The Company evaluates its performance based on several factors, of which the key financial measure is Adjusted Earnings Before Interest Taxes Depreciation & Amortization ("Adjusted EBITDA"). Adjusted EBITDA is defined as our net income (loss) before (i) interest expense, net (ii) income tax expense, (iii) depreciation, amortization, and impairments of property and equipment, goodwill and other intangible assets, (iv) stock-based compensation expense or benefit, (v) restructuring charges or credits, (vi) gains or losses on dispositions of businesses and associated settlements, and (vii) certain other non-recurring or non-cash items.

Management believes that the exclusion of stock-based compensation expense or benefit allows investors to better track the performance of the Company's business without regard to the settlement of an obligation that is not expected to be made in cash. Adjusted EBITDA and similar measures with similar titles are common performance measures used by investors and analysts to analyze the Company's performance. The Company uses revenues and Adjusted EBITDA measures as its most important indicators of its business performance, and evaluates managements effectiveness with specific reference to these plansindicators. Adjusted EBITDA should be viewed as a supplement to and arrangementsnot a substitute for net income (loss), cash flows from operating activities, and other measures of performance and/or liquidity presented in accordance with GAAP. Since Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP, this measure may not be
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comparable to similar titles used by other companies. The Company has presented the components that reconcile net loss, the most directly comparable GAAP financial measure, to adjusting operating income (loss).

The following table sets forth the reconciliation of Net Income/(Loss), a GAAP measure, to Adjusted EBITDA:

Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Net loss$(12,261,955)$(18,056,006)$(20,162,685)$(32,444,006)
Depreciation and amortization2,065,753 2,267,780 4,129,048 2,696,780 
Interest expense3,449,052 2,796,367 6,889,708 2,896,367 
Income tax expense (benefit)21,030 (54,075)57,000 (21,075)
EBITDA(6,726,120)(13,045,934)(9,086,929)(26,871,934)
Stock-based compensation expense330,580 1,184,000 877,778 13,300,534 
Non-recurring expenses related to debt financing matters (1)
5,777,344 — 9,256,168 — 
Non-recurring expenses related to equity matters (2)
72,888 — 155,159 — 
Reverse stock split charges53,744 — 53,744 
Restructuring and other related charges(324,907)5,590,932 (98,584)5,590,932 
Partial liquidated damages expense3,615,000 227,400 3,615,000 
Related acquisition & related professional costs— 320,000 — 1,683,000 
Impairments and other (gains) losses, net— 8,937,677 — 8,937,677 
Adjusted EBITDA$(816,471)$6,601,675 $1,384,736 $6,255,209 

1)Costs primarily relate to Blue Torch financing matters. Costs are recorded in selling, general, and administration expenses.
2)Costs primarily relate to the Preferred Series E equity matters.
Adjusted EBITDA of approximately negative $0.8 million for the three months ended June 30, 2023, decreased by approximately $7.4 million as compared with the prior year period of approximately $6.6 million. The decrease of approximately $7.4 million is primarily attributable to the decrease in gross profit of approximately $11.7 million. The Company improved its operating loss and net loss by approximately $5.3 million and $5.8 million, respectively, in the current period. These improvements are offset by the absence of one-time charges related to acquisition activities in the prior year period.

Adjusted EBITDA of approximately $1.4 million for the six months ended June 30, 2023, decreased by approximately $4.9 million from approximately $6.3 million, in the prior year period. The decrease of approximately $4.9 million is primarily attributable to a decrease in gross profit of approximately $6.9 million. The Company improved its operating loss and net loss by approximately $14.5 million and $12.3 million, respectively, in the current period. These improvements are offset by the decrease in restructuring activities, coupled with the absence of prior year period impairment charges, and partial liquidated damages costs incurred.

LIQUIDITY & CAPITAL RESOURCES

Overview

Our primary sources of liquidity are cash, cash equivalents, and cash flows from the operations of our businesses. Our principal uses of cash include working capital-related items (including funding our operations), debt service, investments, and related loans and advances that we may fund from time to time, and liabilities from prior acquisitions. The Company’s use of its available liquidity will be sufficientbased upon the ongoing review of the funding needs of the business, its view of a favorable allocation of cash resources, and the timing of cash flow generation.

At the present time, we do not have arrangements to fund the Company’s ongoing capital expenditures, workingraise additional capital, and other requirements.  Management intends to make every effortwe may need to identify potential investors and develop sources of funds.  The outcome of these matters cannotnegotiate appropriate arrangements with them. We may not be predicted at this time.  There can be no assuranceable to arrange enough investment within the time the investment is required or that any additional financingsif it is arranged, that it will be on favorable terms. If we cannot obtain the needed
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capital, we may not be able to become profitable and may have to curtail or cease our operations. Additional equity financing, if available, may be dilutive to the Company on satisfactory termsholders of our capital stock. Debt financing may involve significant cash payment obligations, covenants and conditions, if at all.financial ratios that may restrict our ability to operate and grow our business.


Going Concern

The abilityaccompanying unaudited condensed consolidated financial statements of the Company tohave been prepared assuming the Company will continue as a going concern is dependent uponand in accordance with GAAP. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern, the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to raise additional capitalmeet its obligations as they become due within one year from the date that financial statements are issued. In performing this evaluation as of the date of the filing of this 10-Q, the Company has determined that the Company may not have sufficient liquidity under its cash flow forecasts to fund commitments for the twelve months following the date of the filing of this 10-Q.

The costs of and continue profitable operations. distractions caused by restructuring, pursuing a Potential Transaction, negotiating amendments to the Financing Agreement, and servicing the Blue Torch debt, have materially depleted liquidity and negatively impacted performance of the Company. Consequently, management has concluded that there is substantial doubt about the Company’s ability to fund ongoing operations and meet debt service obligations over the ensuing twelve month period.

The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amountsassets and classification of liabilities that may resultmight be necessary should the Company be unable to continue as a going concern.in operation.


4. Summary of Significant Accounting Policies and Principles of ConsolidationCash Flow Discussion


Six Months Ended
June 30,
20232022
(unaudited)(unaudited)
Net cash used in operating activities$(7,638,239)$(3,746,032)
Net cash used in investing activities$(50,839)$(82,800,638)
Net cash (used in) provided by financing activities$(1,942,379)$112,235,310 
These unaudited condensed consolidated financial statements have been prepared
Operating Activities

Net cash used in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial reporting and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and include Roomlinx, Inc. and its wholly-owned subsidiaries, SPHC and SSI. SPHC consists of its wholly-owned subsidiaries, SPTC, SignalShare, SignalShare Software and SPC. SSI consists of its wholly-owned subsidiaries CCL, Connect, CBL, CHL, and 50% owned subsidiary of Arista. CCL and Connect are non-operating entities. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in quarterly financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to those rules and regulations. Therefore, these interim unaudited condensed financial statements should be read in conjunction with SPHC’s, the accounting acquirer’s December 31, 2014 audited consolidated financial statements and related notes.
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In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the Company’s results of operations, financial position and cash flows have been included. The results for interim periods are not necessarily indicative of the results that may be expected for any other interim period oroperating activities for the full year.six months ended June 30, 2023, increased approximately $3.9 million to approximately $7.6 million, as compared to the prior period. The December 31, 2014 condensed consolidated balance sheet data was derived fromincrease in operating cash used is largely attributable to an increase in payments for professional services related to exploring strategic alternatives partially offset by a decrease in net loss of approximately $12.3 million.This lead to positive cash flow of net $8.5 million.

Investing Activities

Net cash used in investing activities for the December 31, 2014 audited financial statements, but does not include all disclosures requiredsix months ended June 30, 2023, decreased by US GAAP.

Discontinued Operations - Duringapproximately $82.7 million to approximately $0.1 million as compared with the year ended December 31, 2013, the Company closed down the operations of SPC. This decision was made as a result of a continuing decline in revenues, increasing costs and Federal and state regulatory environment that continued to pressure margins in the SPC businesses. Asprior period. The decrease is a result of the decision to shut down SPC, all applicable employees were terminated, as were leases for facilities and office space. Meeting the definition under applicable accounting standards of a discontinued operation, all periods presented have been reclassified to present these operations as discontinued operations. Financial information in the consolidated financial statements and related notes have also been revised to reflect the resultsabsence of the discontinued operations for all periods presented (See Note 6).

SPC operated in the communications services industry providing voice, data, and Internet services through residential and commercial telephone service, Voice over Internet Protocol (“VoIP”) enabled services, prepaid and post-paid calling cards, conference calling, and wholesale carrier terminations. It was a registered and certified competitive local exchange carrier (“CLEC”) providing local exchange services primarily in the New England region, and was also a licensed and registered interexchange carrier (“IXC”) or “long distance” carrier, providing domestic and international long distance services. SPC marketed its services to customers either directly or through reseller channels.

During the year ended December 31, 2013, SSI terminated all hotel contracts serviced by Cardinal Hospitality, Ltd. (see Note 4) meeting the definition under applicable accounting standards for discontinued operations.  The liabilities assumed in connection with the reverse acquisition included $117,573 related to Cardinal Hospitalility, Ltd., which has been included in the accompanying unaudited condensed consolidated balance sheet as of March 31, 2015 under the line item of “Current liabilities of discontinued operations”.

Reclassification - Certain amountscash paid in the prior year period financial statements have been reclassified to conformrelated to the current year presentation.Converge acquisition.


UseFinancing Activities

Net cash used in financing activities for the six months ended June 30, 2023, was approximately $1.9 million compared to net cash provided by financing activities of estimates -approximately $112.2 million for the prior period. The preparationdecrease of consolidated financial statementsapproximately $114.2 million in conformity with accounting principles generally acceptedcash provided by financing activities in the United States requires managementcurrent period was primarily due to make estimatesthe absence of net proceeds received from bank loan of $69.7 million and assumptions that affectpreferred stock of $44.4 million related to the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atConverge Acquisition.

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Financing Agreements

On March 21, 2022, the dateCompany entered into the Financing Agreement. This $76.5 million Credit Facility was used in part to fund the purchase price of the financial statementsConverge Acquisition, as well as, for working capital and the reported amounts of revenue and expenses during the reporting period. The accounting estimates that require management’s most significant and subjective judgments include revenue recognition, the valuation of long-lived assets, goodwill, the valuation and recognition of stock-based compensation expense and acquired indefinite-lived intangible assets. In addition, the Company has other accounting policies that involve estimates such as the allowance for doubtful accounts, revenue reserves, the determination of the useful lives of long-lived assets, the recognition of the fair value of assets acquired and liabilities assumed in business combinations, accruals for estimated tax and legal liabilities, valuation allowance for deferred tax assets, and cost of revenue disputes for communications services. Actual results may differ from these estimates under different assumptions or conditions and such differences could be material.general corporate purposes.

Cash and Cash Equivalents - For purposes of financial statements presentation, the Company considers all highly liquid investments with maturities of three months or less to be cash and cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts - The Company extends credit to certain customers in the normal course of business, based upon credit evaluations, primarily with 30 – 60 day terms. The Company’s reserve requirements are based on the best facts available to the Company and are reevaluated and adjusted as additional information is received.  The Company’s reserves are also based on amounts determined by using percentages applied to certain aged receivable categories. These percentages are determined by a variety of factors including, but not limited to, current economic trends, historical payment and bad debt write-off experience. Accounts are written off when they are deemed uncollectible. Further, during 2014, SignalShare entered into an agreement with one of its customers, whereby the collections would be made in 36 monthly installments. As of March 31, 2015 and December 31, 2014, $167,820 and $209,775 and $167,820 and $335,640 were accounted as “Accounts Receivable Short Term Direct” and “Accounts Receivable Long Term Direct” was included in “Other assets” in the accompanying consolidated balance sheets, respectively.


The Company evaluated outstanding customer invoices for collectability. The assessment and related estimates are based on current credit-worthiness and payment history.  As of March 31, 2015 and December 31, 2014, the Company recorded an allowance for doubtful accountsCredit Facility provides for: (i) a Term Loan in the amount of approximately $71,000$76.5 million; (ii) an interest rate of the LIBOR Rate Loan of three months; (iii) a four-year maturity amortized 5.0% per year, payable quarterly; (iv) a one (1.0%) percent commitment fee and $-0-, respectively.an upfront fee of two (2.0%) percent of the Credit Facility paid at closing, plus an administrative agency fee of $250,000 per year; (v) a first priority perfected lien on all property and assets including all outstanding equity of the Company’s subsidiaries; (vi) 1.5% fully-diluted penny warrant coverage in the combined entity; (vii) mandatory prepayment for fifty (50%) percent of excess cash flow and 100% of proceeds from various transactions; (viii) customary affirmative, negative and financial covenants; (ix) delivery of audited financial statements of Converge; and (x) customary closing conditions. The Company agreed to customary restrictive covenants in the Credit Facility and leverage ratios, fixed charge coverage ratios, and maintaining liquidity of at least $6.0 million at all times.


Inventory - Inventory, principally large order quantity itemsOn September 22, 2023, the Company and Blue Torch entered into the First Amendment to Financing Agreement by adding provisions for the use of secured overnight financing rate loans in place of LIBOR rate loans. See the Company’s Current Report on Form 8-K filed with the SEC on September 27, 2023, the contents of which are required for the Company’s media and entertainment installations, is stated at the lower of cost (first-in, first-out) basis or market.  The Company generally maintains only the inventory necessary for contemplated installations.  Work in process represents the cost of equipment related to installations which were not yet completed.incorporated by reference herein.
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The Company performs an analysisand each of slow-moving or obsolete inventory periodically,its subsidiary Guarantors entered into the Security Agreement dated as of March 21, 2022, as a requirement with the Credit Facility. Each Guarantor pledged and any necessary valuation reserves,assigned to the Collateral Agreement and granted the Collateral Agent with a continuing security interest in all Collateral and all proceeds of the Collateral. All equity of the Guarantors was pledged by the Borrower.

On March 21, 2022, each of the Company’s Subsidiaries, as Guarantors, entered into the ISA with the Collateral Agent. Under the ISA, each obligor agreed to the subordination of such indebtedness of each other obligor to such other obligations.

On March 21, 2022, the Company entered into the Escrow Agreement with Blue Torch and Alter Domus (US) LLC, as Escrow Agent. The Escrow Agreement provides for the escrow of $29.1 million of the $76.5 million proceeds, under the Credit Facility to be held until the audited financial statements of Converge Direct LLC and affiliates for the years ended December 31, 2020 and 2019, are delivered to Blue Torch, which could potentially be significant, are included in the period in which the evaluations are completed.were delivered during fourth quarter of fiscal year 2022. As of March 31, 2015 and December 31, 2014,June 30, 2023, Blue Torch has not authorized the inventory obsolescence reserve of $120,000 and $-0-, respectively, was mainly related to raw materials, and results in a new cost basis for accounting purposes.

Leases Receivable - Leases receivable represent direct sales-type lease financing to cover the cost of installation.  These transactions result in the recognition of revenue and associated costs in full upon the customer’s acceptancerelease of the installation project and give rise to a lease receivable equalfunds in escrow.

Although the Company believes that the Converge Sellers’ recourse is solely to the gross lease paymentsescrow account, it is possible that the Converge Sellers could make claims against the Company for the deferred amount. In the event that the Converge Sellers were to make and unearned income representingbe successful in such claims, the implicitCompany believes that a court would likely order Blue Torch to release the escrowed funds to satisfy such claims.

At any time on or after March 21, 2022, and on or prior to March 21, 2026, the Lender have the right to subscribe for and purchase from the Company, up to 77,178 shares of Common Stock, subject to adjustment. The number was adjusted to 177,178 of common shares effective December 9, 2022. The exercise price per share of Common Stock under this Warrant shall be $.01 per share. If at any time when this Warrant becomes exercisable and a related Registration Statement is not in effect the Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise”.

The Company has made principal repayments aggregating to approximately $4.8 million through June 30, 2023, under the Financing Agreement. As of June 30, 2023, there was approximately $71.7 million principal and accrued interest in these lease payments.  Unearned income isoutstanding under the Credit Facility's term loan.

In connection with the Credit Facility, the Company recorded deferred financing and issuance costs totaling approximately $9.2 million, including a $1.5 million upfront fee. The costs will be amortized over the life of the lease to interest income on a monthly basis.  The carrying amounts of leases receivable are reduced by a valuation allowance that reflects the Company's best estimate of the amounts that may not be collected. This estimate is based on an assessment of current creditworthiness and payment history.  As of March 31, 2015 and December 31, 2014 no valuation allowance was necessary.
Property, equipment, and software - Property, equipment, and software are recorded at cost,note using the straight-line method over the estimated useful life of the related assets as shown below.

Telephone equipment5 – 9.5 years
Machinery and equipment3 – 10 years
Furniture and fixtures5 – 7 years
Vehicles4 – 5 years
Leasehold improvements3 years
Computer software3 years
Leasehold improvements are depreciated over the shorter of their estimated useful lives or their reasonably assured lease terms.
Major improvements that extend the useful life or add functionality to property are capitalized.
Expenditures for repairs and maintenance are charged to expense as incurred.

At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in the consolidated statements of operations.

The Company performs periodic internal reviews to determine depreciable lives of its property, equipment and software based on input from Company personnel, actual usage and the physical condition of the Company’s property, equipment and software.

Software Development - At March 31, 2015 and December 31, 2014, SignalShare had incurred and capitalized $462,476 and $444,218, respectively, in software development costs related to its Live-Fi software system. The amounts capitalized represent the costs incurred for the use of outside vendors and do not include the capitalization of internal software development costs.  The Live-Fi software amount is included in the accompanying consolidated balance sheets under the line item “Other assets.” It is anticipated that the Live-Fi software will be fully developed in 2015 and a useful life will be determined at that time. The software will be amortized over its useful life beginning in the second half of 2015.

Accounts Payable Claims and Disputes - The Company has established a systematic approach to record accounts payable based on invoice amount, net of claims filed and acknowledged by vendors, as well as any additional credits received. Billings from carriers frequently require adjustment to reflect the Company’s correct usage of those carrier services. All claims by the Company against vendors are netted against payables to those vendors and expect to be settled through credits issued by vendors. Any additional credits received such as late fees usually waived by vendors, are generally insignificant.

Revenue Recognition - SPTC derives the majority of its revenue from monthly recurring fees and usage-based fees that are generated principally by sales of its network, carrier and subscription services and SignalShare derives revenues from the construction of both temporary and permanent broadband installation services at large event forums.

Monthly recurring fees include the fees paid by SPTC’s network and carrier services customers for lines in service and additional features on those lines. SPTC primarily bills monthly recurring fees in advance, and recognizes the fees in the period in which the service is provided.

Usage-based fees consist of fees paid by SPTC’s network and carrier services customers for each call made. These fees are billed in arrears and recognized in the period in which the service is provided.
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Subscriber fees include monthly recurring fees paid by SPTC’s end-user subscribers for lines in service, additional features on those lines, and usage-based per-call and per-minute fees. Subscriber fees also consist of provision of access to data, wireless, and VoIP services. These fees are billed in advance for monthly recurring items and in arrears for usage-based items, and revenues are recognized in the period in which service is provided.

SignalShare product sales are only recognized as revenue at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery or service is completed, no other significant obligations of the Company exist and collectability is reasonably assured.

SPTC and SignalShare also recognize revenue on the basis of the milestone method for revenue recognition for services delivered related to the installation of temporary or permanent wireless Internet solutions as per the contract arrangement and when the performance and acceptance criteria have been met and agreed to by the customer.

Revenue arises from setting up a Wi-Fi network for an event, an equipment sales contract, an equipment rental contract, consulting services and support and maintenance contracts. The table below describes the accounting for the various components of SignalShare’s revenues.

ProductRecognition Policy
Event Services (Setting up a Wi-Fi network) Workshops and Workshop CertificatesDeferred and recognized upon the completion of the event
Equipment salesRecognized at the time delivered and installed at the customer location
Equipment rental contractDeferred and recognized as services are delivered, or on a straight-line basis over the initial term of the rental contract
Consulting services (on Wi-Fi networks, installation, maintenance)Recognized as services are delivered
Support and Maintenance contractDeferred and recognized on a straight-line basis over the term of  the arrangement
SSI derives its revenue from the installation and ongoing services of in-room media, entertainment, and HD television programming solutions in addition to wired networking solutions and WiFi Fidelity networking solutions. Revenue is recognized when all applicable recognition criteria have been met, which generally include a) persuasive evidence of an existing arrangement; b) fixed or determinable price; c) delivery has occurred or service has been rendered and; d) collectability of the sales price is reasonably assured.
Installations and service arrangements are contractually predetermined and such contractual arrangements may provide for multiple deliverables, revenue is recognized in accordance with ASC Topic 650, Multiple Deliverable Revenue.  The application of ASC Topic 650 may result in the deferral of revenue recognition for installations across the service period of the contract and the re-allocation and/or deferral of revenue recognition across various service arrangements.  Below is a summary of such application of the revenue recognition policy as it relates to installation and service arrangements SSI has with its customers.
SSI enters into contractual arrangements to provide multiple deliverables which may include some or all of the following - system installations and a variety of services related to high speed internet access, free-to-guest, video on demand and iTV systems as well as residential phone, internet and television.  Each of these elements must be identified and individually evaluated for separation. The term “element” is used interchangeably with the term “deliverable” and SSI considers the facts and circumstances as it relates to its performance obligations in the arrangement and includes product and service elements, a license or right to use an asset, and other obligations negotiated for and assumed in the agreement.  Analyzing an arrangement to identify all of the elements requires the use of judgment.  In the determination of the elements included in Roomlinx agreements, embedded software and inconsequential or perfunctory activities were taken into consideration.
Once the Deliverables have been identified, we determine the relative fair value of each element under the concept of Relative Selling Price (“RSP”) for which SSI applied the hierarchy of selling price under ASC Topic 605 as follows:
VSOE - Vendor specific objective evidence (“VSOE”) is still the most preferred criteria with which to establish fair value of a deliverable. VSOE is the price of a deliverable when a company sells it on an open market separately from a bundled transaction.
TPE - Third party evidence (“TPE”) is the second most preferred criteria with which to establish fair value of a deliverable. The measure for the pricing of this criterion is the price that a competitor or other third party sells a similar deliverable in a similar transaction or situation.
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RSP - RSP is the price that management would use for a deliverable if the item were sold separately on a regular basis which is consistent with company selling practices. The clear distinction between RSP and VSOE is that under VSOE, management must sell or intend to sell the deliverable separately from the bundle, or has sold the deliverable separately from the bundle already. With RSP, a company may have no plan to sell the deliverable on a stand-alone basis.
Hospitality Installation Revenues
Hospitality installations include High Speed Internet Access (“HSIA”), Interactive Television (“iTV”), Free to Guest (“FTG”) and Video on Demand (“VOD”).  Under the terms of these typical product sales and equipment installation contracts, a 50% deposit is due at the time of contract execution and is recorded as deferred revenue.  Upon the completion of the installation process, deferred revenue is realized.  However, in some cases related to VOD installations or upgrades, the Company extends credit to customers and records a receivable against the revenue recognized at the completion of the installation.
Additionally, SSI may provide the customer with a lease financing arrangement provided the customer has demonstrated its credit worthiness to the satisfaction of SSI.  Under the terms and conditions of the lease arrangements, these leases have been classified and recorded as Sale-Type Leases under ASC Topic 840-30 and accordingly, revenue is recognized upon completion and customer acceptance of the installation which gives rise to a lease receivable and unearned income.
Hospitality Service, Content and Usage Revenues
SSI provides ongoing 24/7 support to both its hotel customers and their guests, content and maintenance as applicable to those products purchased, installed and serviced under contract.  Generally, support is invoiced in arrears on a monthly basis with content and usage, which are dependent on guest take rates and buying habits.  Service maintenance and usage revenue also includes revenue from meeting room services, which are billed as the events occur.
 At times, SSI will enter into arrangements with its customers in which a minimum revenue amount earned from content in a specific hotel will be agreed to by both parties. If the revenue earned by the Company exceeds this minimum revenue amount for a defined period (“Revenue Overage”), SSI may be required to pay to the customer an amount up to the Revenue Overage. The related Revenue Overage amount is recorded as a reduction of the hospitality services revenue.
Residential Revenues
Residential revenues consist of equipment sales and installation charges, support and maintenance of voice, internet, and television services, and content provider residuals, installation commissions, and management fees.  Installations charges are added to the monthly service fee for voice, internet, and television, which is invoiced in advance creating deferred revenue to be realized in the appropriate period.  SSI’s policy prohibits the issuance of customer credits during the month of cancelation. SSI earns residuals as a percent of monthly customer service charges and a flat rate for each new customer sign up.  Residuals are recorded monthly. Commissions and management fees are variable and therefore revenue is recognized at the time of payment.
The Company recognizes revenue in accordance with accounting principles generally accepted in the United States (“US GAAP”), specifically Accounting Standards Codification (“ASC”) 605 “Revenue Recognition,” which requires satisfaction of the following four basic criteria before revenue can be recognized:
a.There is persuasive evidence that an arrangement exists;
b.Delivery has occurred or services have been rendered
c.The fee is fixed and determinable; and
d.Collectability is reasonably assured.

The Company bases its determination of the third and fourth criteria above on the Company’s judgment regarding the fixed nature of the fee it has charged for the services rendered and products delivered, and the prospects that those fees will be collected. If changes in conditions should cause it to determine that these criteria likely will not be met for some future transactions, revenue recognized for any reporting period could be materially adversely affected.

Company management continually reviews and evaluates the collectability of revenues. For further information please see “Accounts Receivable and Allowance for Doubtful Accounts.” The Company’s management makes estimates of future customer credits and settlements due to various disputes on pricing and other terms of the contracts, through the analysis of historical trends and known events. Provisions for customer credits and settlements are recorded as a reduction of revenue when incurred and estimable. Since any revenue allowances are recorded as an offset to revenue, any future increases or decreases in the allowances will positively or negatively affect revenue by the same amount.
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Deferred Revenue and Customer Prepayments - SPTC bills customers in advance for certain of its telecommunications services. If the customer makes payment before the service is rendered to the customer, SPTC records the payment in a liability account entitled customer prepayments and recognizes the revenue related to the communications services when the customer receives and utilizes that service, at which time the earnings process is complete.

SignalShare, from time to time, enters into leasing transactions to finance certain customer projects. In these leasing transactions, SignalShare receives payment from the third-party leasing company and uses the cash received to fund the project. All revenues related to these types of projects are deferred until the project is completed and the customer has approved the installation. At that time, SignalShare records the revenue previously deferred as it has no further obligation to the customer and the earnings process is complete. As of March 31, 2015 and December 31, 2014, SignalShare recorded $526,919 and $737, respectively, in deferred revenue and $507,090 and $398,732, respectively, in prepaid expenses for incomplete customer projects.

Advertising Costs - Advertising costs are expensed as incurred. Advertising expense for the three months ended March 31, 2015 and 2014 were approximately $ $285,000  and $1,000, respectively.

Prepaid Expenses and Other Current Assets - Prepaid expenses and other current assets consist of services, insurance, maintenance contracts and refundable deposits. Other than refundable deposits, prepayments are expensed on a straight-line basis over the corresponding life of the underlying agreements.

Cost of sales - Cost of sales consists primarily of leased transport charges and usage costs for local and long distance calls. Leased transport charges are the payments the Company makes to lease the telephone and data transmission lines it uses to connect customers to the Company’s network and to connect the Company’s network to the networks of other carriers. Usage costs for local and long distance calls are the costs incurred to connect the calls made by customers that are terminated on the networks of other carriers. These costs may include an estimate of charges for which invoices have not yet been received, and may be based upon the estimated number of transmission lines and facilities in service, estimated minutes of use, estimated amounts accrued for pending disputes with other carriers, as well as upon the contractual rates charged by the Company’s service providers. Subsequent adjustments to these estimates may occur after the bills are received for the actual costs incurred, but these adjustments generally are not expected to have a   material impact on the operating results based on management’s historical experience.

Judgment is required in estimating the ultimate outcome of the dispute resolution process, as well as any other amounts that may be incurred to conclude the negotiations or settle any litigation. Actual results may differ from estimates and such differences could be material.

Selling, General and Administrative Expenses - The Company’s selling, general and administrative expenses are defined as expenses incurred by the Company that relate directly to the day-to-day operations and the administration of the Company. These costs consist primarily of, but are not limited to, compensation, depreciation and amortization, commissions, selling and marketing, customer service, billing, corporate administration, engineering, personnel and other costs.

Concentration of Credit Risk - Financial instruments that potentially subject the Company to credit risk consist of cash, cash equivalents and accounts receivable. Exposure to losses on accounts receivable is principally dependent on each customer’s financial condition. The Company monitors its exposure for customer credit losses and maintains allowances for anticipated losses. The Company places its cash and cash equivalents in financial institutions insured by the Federal Depository Insurance Corporation, to the maximum amount of that coverage. Additionally, the Company limits its amount of credit exposure to any one institution. The Company has never experienced any losses in these accounts and believes that its credit risk exposure with respect to cash balances held by depository institutions is limited.

Concentrations - The Company currently leases its transport capacity from a limited number of suppliers and is dependent upon the availability of transmission facilities owned by the suppliers. The Company is vulnerable to the risk of renewing favorable supplier contracts and timeliness of the supplier in processing the Company’s orders for customers, and is at risk related to regulation and regulatory developments that govern the rates to be charged to the Company and, in some instances, whether certain facilities are required to be made available to the Company. The Company has three major suppliers: Verizon Communications, Inc. and Alteva LLC that account for a combined 47% of its carrier cost of services for the three months ended March 31, 2015 and  Verizon Communications, Inc. and Level 3 that account for a combined 54% of its carrier cost of services for the year ended March 31, 2014. Verizon and Alteva LLC accounted for a combined 24% of the balance in accounts payable at March 31, 2015. Verizon and Alteva LLC accounted for a combined 28% of the balance in accounts payable at December 31, 2014.
The Company has no other supplier that accounts for greater than 10% of the Company’s costs of services.

Goodwill - Goodwill represents the excess of cost over the fair value of net assets of businesses acquired. In accordance with the provisions of ASC 350 “Intangibles — Goodwill and Other” (“ASC 350”), the Company does not amortize goodwill or other acquired intangible assets with indefinite useful lives. The Company has identified two reporting units as defined in ASC 350. Goodwill is assessed for impairment at least annually, based upon the Company’s estimate of the fair value of the reporting units.

The Company assesses the carrying value of its goodwill at December 31 of each fiscal year. In accordance with the Intangibles - Goodwill and Other Topic, goodwill of a reporting unit will also be tested for impairment between annual tests if a triggering event occurs, as defined by the “Intangibles – Goodwill  and Other Topic,” that could potentially reduce the fair value of the reporting unit below its carrying value.
Testing for impairment of goodwill per US GAAP follows a two-step impairment test model and, an additional, initial qualitative assessment related to goodwill impairment. In accordance with the relevant accounting standards, the Company has chosen not to implement this initial qualitative assessment in making its impairment decision with respect to goodwill recorded in its accounts and has proceeded directly to step 1 as explained below:
Step 1.   The carrying amount of the asset is compared with the undiscounted cash flows it is expected to generate. If the carrying amount is lower than the undiscounted cash flows, no impairment loss is recognized and Step 2 is not necessary. If the carrying amount is higher than the undiscounted cash flows, then Step 2 quantifies the impairment loss.
Step 2.   An impairment loss is measured as the difference between the carrying amount and fair value. Fair value is defined as the price that would be received to sell an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date.
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The Company determined that at March 31, 2015 the goodwill created through the Company’s reverse acquisition in connection with the SMA could not be supported through the projected future cash flows of the Company. Accordingly, the Company determined that the goodwill arising from the March 27, 2015 reverse acquisition transaction was impaired and an impairment charge of $42,847,066 was included in the operating loss during the three months ended March 31, 2015.
Impairment of Long Lived Assets - In accordance with ASC 360 “Property, Plant, and Equipment” (the “PP&E Topic”), long-lived assets are periodically evaluated for potential impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. In the event that periodic assessments determine that the carrying amount of the asset exceeds the sum of the undiscounted cash flows (excluding interest on any borrowings used to fund the assets) that are expected to result from the use and eventual disposition of the asset, the Company would recognize an impairment loss to the extent the carrying amount exceeded the fair value of the property. The Company estimates the fair value using available market information or other industry valuation techniques such as present value calculations. In connection with the “Section 363 Sale,” property, plant and equipment acquired from the Predecessor Company were valued at its then fair value.
There has been no indication since then that the fair value of that property, plant and equipment has declined.

Other Assets - Other assets consist primarily of security deposits and deposits made to suppliers.
Fair Value of Financial Instruments - We adopted the guidance of ASC 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
Level 2 — Inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.
Level 3 — Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the consolidated balance sheets for cash, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses, loans payable, deferred revenue and other current liabilities approximate their fair market value based on the short term maturity of these instruments. ASC 825-10 “Financial Instruments,” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding financial instruments.

Foreign Currency Translation and Comprehensive Income (Loss) - The US Dollar is the functional currency of the Company. Assets and liabilities denominated in foreign currencies are re-measured into US Dollars at each reporting period-end exchange rates. Income and expenses are translated at an average exchange rate for the reporting periods, equity is translated at historical rates and the resulting translation gain (loss) adjustments are accumulated as a separate component of shareholders’ deficit.

Foreign currency gains and losses from transactions denominated in other than respective local currencies are included in other income (expense) in the consolidated statements of operations and comprehensive loss.

Noncontrolling Interest - The Company recognizes non-controlling interest as equity in the consolidated financial statements separate from the parent company’s equity (deficit).  Non-controlling interest results from a partner in Arista Communications, LLC (“Arista”), which the Company owned 50% of Arista. The amount of net income (loss) attributable to non-controlling interests is included in consolidated net income (loss) on the consolidated statements of operations and comprehensive loss.  For the Quarter ended March 31, 2015, the non-controlling interests’ share of net loss totaled $332 (for the period from the reverse acquisition consummation date, March 27, 2015 through March 31, 2015). Additionally, operating losses are allocated to non-controlling interests even when such allocation creates a deficit balance for the non-controlling interest member.

Earnings Per Share - The Company computes earnings per share by dividing net income (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company's stock options and warrants.  Potentially dilutive securities, purchase stock options and warrants, are excluded from the calculation when their inclusion would be anti-dilutive, such as periods when a net loss is reported or when the exercise price of the instrument exceeds the fair market value. Accordingly, the weighted average shares outstanding have not been adjusted for dilutive shares. Outstanding stock options and warrants are not considered in the calculation as the impact of the potential common would be anti-dilutive.

Income Taxes - The Company accounts for income taxes using the asset/liability method prescribed by ASC 740, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
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The Company applied the provisions of ASC 740-10-50, “Accounting for Uncertainty in Income Taxes,” which provides clarification related to the process associated with accounting for uncertain tax positions recognized in our financial statements. Audit periods remain open for review until the statute of limitations has passed. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the Company’s liability for income taxes. Any such adjustment could be material to the Company’s results of operations for any given quarterly or annual period based, in part, upon the results of operations for the given period. As of March 31, 2015, the Company had no uncertain tax positions, and will continue to evaluate for uncertain positions in the future.

Legal and Contingency Reserves - The Company accounts for legal and other contingencies in accordance with ASC 450 “Contingencies.” Loss contingencies are accrued by a charge to income if two conditions are met. The first condition is that information existing prior to the issuance of the consolidated financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the consolidated financial statements. It is implicit in this condition that it must be probable that one or more future events will occur confirming the fact of the loss. The second condition is that the amount of the loss can be reasonably estimated. There were no legal or contingency reserves that met the requirements to be recorded. See Note 21 for discussion of legal and contingency matters.

Recent Accounting Pronouncements
ASU 2015-15
In August 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) 2015-15, “Interest - Imputation of Interest (Subtopic 835-30).” ASU 2015-15 provides guidance as to the presentation and subsequent measurement of debt issuance costs associated with line of credit arrangements. We do not expect the adoption of ASU 2015-15 to have a material effect on our financial position, results of operations or cash flows.
ASU 2015-14
In August 2015, the FASB issued ASU No. 2015-14, Revenue From Contracts With Customers (Topic 606)." The amendments in this ASU defer the effective date of ASU 2014-09. Public business entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We are still evaluating the effect of the adoption of ASU 2014-09.
ASU 2015-11
In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory (Topic 330)." ASU 2015-11 simplifies the accounting for the valuation of all inventory not accounted for using the last-in, first-out ("LIFO") method by prescribing that inventory be valued at the lower of cost and net realizable value. ASU 2015-11 is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. We do not expect the adoption of ASU 2015-11 to have a material effect on our financial position, results of operations or cash flows.
ASU 2015-05
In April 2015, the FASB issued ASU 2015-05, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)." ASU 2015-05 provides guidance regarding the accounting for a customer's fees paid in a cloud computing arrangement; specifically about whether a cloud computing arrangement includes a software license, and if so, how to account for the software license. ASU 2015-05 is effective for public companies' annual periods, including interim periods within those fiscal years, beginning after December 15, 2015 on either a prospective or retrospective basis. Early adoption is permitted. We do not expect the adoption of ASU 2015-05 to have a material effect on our financial position, results of operations or cash flows.
ASU 2015-03
In April 2015, the FASB issued ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance. We do not expect the adoption of ASU 2015-03 to have a material effect on our financial position, results of operations or cash flows.  There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.
- 15 -

5. Acquisitions

Acquisition of Assets of Incubite, Inc. – On December 9, 2014, SPHC and its wholly-owned subsidiary, SignalShare Software Development Corp. and Incubite, Inc. (“Incubite”) and its members entered into an Agreement and Plan of Reorganization whereby Incubite exchanged the assets of Incubite for interest in Holdings that were distributed to the Incubite Members. The acquisition of Incubite has been accounted for as an asset acquisition.

Holdings paid consideration to the members of Incubite of $1,800,000 comprised of 1,000,000 shares of Common Stock of Holdings issued to the Incubite Members at the Closing.

The following table summarizes the recognized amounts of assets acquired.

Identifiable intangible assets. $1,800,000 
Total consideration $1,800,000 

6. The Shutdown of SPC and CHL and their Presentation as Discontinued Operations

Shutdown of SPC
On June 30, 2013, SPHC closed down the operations of SPC. This decision was made as a result of a continuing decline in revenues, increasing costs and Federal and state regulatory environment that continued to pressure margins in the SPC businesses. As a result of the decision to shut down SPC, all applicable employees were terminated, as were leases for facilities and office space.

Shutdown of CHL
On December 20, 2013, SSI closed down the operations of CHL. This decision was made as a result of a continuing decline in revenues SSI’s decision to not invest in upgrading old technology and the hotels not willing to purchase newer technology.

Discontinued Operations Presentation
As disclosed above, SPC was closed on June 30, 2013 and all operations at that subsidiary ceased and CHL was closed on December 20, 2013 and all operations at that subsidiary ceased. Therefore, at March 31, 2015 and December 31, 2014, these subsidiaries are presented in the condensed consolidated financial statements as discontinued operations and their financial results are summarized as one-line items in the consolidated financial statements.
The primary components of the amounts reported as discontinued operations are summarized in the following table.

Loss from Discontinued Operations
(unaudited)

  For the Quarter Ended March 31, 
       
  2015  2014 
       
Revenues $-  $- 
Cost of sales  -   - 
Gross profit  -   - 
Selling, general and administrative expenses  -   77,910 
Other expenses.  -   - 
Other income.  -   - 
Loss from discontinued operations before income taxes  -   (77,910)
Income taxes.  -   - 
Loss from discontinued operations, net of tax. $-  $(77,910)
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Assets and Liabilities of Discontinued Operations

  Balance at 
       
  March 31, 2015  December 31, 2014 
  (unaudited)    
Assets      
Cash $-  $- 
Total current assets  -   - 
  Other assets  -   - 
    Total assets of discontinued operations $-  $- 
         
Liabilities        
  Accounts payable and accrued expenses $3,255,629  $3,138,056 
  Other liabilities  -   - 
    Total liabilities of discontinued operations $3,255,629  $3,138,056 
Accounts payable and accrued expenses of discontinued operations as of March 31, 2015 included $117.573 assumed from CHL in connection with the reverse acquisition transaction completed on March 27, 2014.

7. Leases Receivable

As of March 31, 2015, the Company had approximately $658,695 in leases. These leases have terms of 60 months and an average interest rate of 9.5%. The Company did not enter into any new leases in the three months ended March 31, 2015. The long term portion in included in other assets.

Future minimum receipts on leases receivable are as follows:

Years Ended March 31, Minimum Receipts 
    
2016 $460,968 
2017  185,822 
2018  11,905 
  $658,695 

8. Property, Equipment and Software, net
Property, equipment and software consist of the following:

  Balance at 
       
  March 31, 2015  December 31, 2014 
  (unaudited)    
       
Property, Equipment and Software      
     Machinery and equipment $5,977,393  $5,146,279 
     Equipment offsite  121,808   121,808 
     Furniture, fixtures and equipment  773,520   145,154 
     Software.  268,867   127,060 
    Trucks and autos  36,040   36,040 
        Total property, equipment and software  7,177,628   5,576,341 
    Less: accumulated depreciation  (6,674,578)  (5,130,085)
        Property, equipment and software, net $503,050  $446,256 
         
Depreciation and amortization expense was $22,013 and $44,942 for the quarter ended March 31, 2015 and 2014, respectively. Depreciation and amortization expense for all periods was included in the selling, general and administrative expense caption in the accompanying consolidated statements of operations.
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9. Capital Lease Obligations
The Company had several capital lease obligations. Property under those capital lease obligations (included in property, equipment and software) at March 31, 2015 and December 31, 2014 consist of the following:

  March 31, 2015  December 31, 2014 
  (unaudited)    
Capital Lease Property      
   Machinery & equipment $490,353  $564,228 
   Software  125,587   125, 587 
   Less: Accumulated depreciation    (219,172)  (274,815)
   Net capital lease property $396,768  $415,000 
Depreciation and amortization expense of leased property under capital lease obligations amounted to $18,231 and $15,298 for the three months ended March 31, 2015 and 2014, respectively.
SignalShare Lease Transactions - Capital
Future minimum lease obligations under the capital leases consist of the following at March 31:

Year Amount 
     
2016 $3,475,157 
2017  3,411,173 
2018  2,072,759 
2019  29,516 
Total    8,988,605 
Less – amounts representing interest  (1,341,641)
Present value of net minimum lease payments  7,646,964 
Less: Current portion  (2,681,160)
Net long-term portion $4,965,804 

SignalShare Lease Transactions – Finances
SignalShare finances certain sales to customers through a third-party leasing company on their behalf. Once the equipment installation is complete, SignalShare recognizes the revenues and costs related to these transactions. Payments to the third-party leasing company are made directly by SignalShare’s customer and, if applicable, the customer has the option to purchase the equipment at the end of the lease for an additional payment.

At the inception of the lease, the third-party leasing company remits cash to SignalShare in an amount equal to the amount of the lease, less finance costs to be collected over the lease term. SignalShare purchases the equipment and completes the installation. The equipment is immediately expensed, as are the costs of the installation and the finance component of the lease is charged to cost of goods sold. Thus all of the revenue and costs are recorded immediately upon completion of the installation.

SignalShare is the lessee and is ultimately responsible for the payments under the lease. Since the equipment is installed on the customer’s property, the customer controls the equipment and the ultimate decision with regard to purchasing the equipment at the end of the lease term, SignalShare records an accounts receivable and a lease liability in its accounting books and records. The accounts receivable and lease liability are offset each month as the customer makes payments directly to the third-party leasing company. Where leases extend beyond twelve months, the related accounts receivable and payable are discounted at the imputed interest rate in the lease. In effect, SignalShare is a guarantor of the lease in the event that its customer does not make the required lease payments. Since the inception of this program in mid-2013, SignalShare has not had to make any lease payments on behalf of any customer.
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The lease related accounts receivable and the lease obligations, together with the balance sheet caption that contains each amount are as follows:

  Balance at 
       
  March 31, 2015  December 31, 2014 
  (unaudited)    
Lease accounts receivable      
     Current portion (accounts receivable) $156,532  $149,507 
     Long-term portion (other assets)  172,901   208,086 
        Total lease accounts receivable $329,433  $357,593 
         
Lease obligations        
     Current portion (capital leases payable) $152,182  $149,507 
     Long-term portion (non-current lease obligations).  172,901   208,086 
         Total lease obligations $325,083  $357,593 
There were no leases payable incurred on behalf of customers during the quarters ended March 31, 2015 and 2014. Repayment of capital lease payable made by customers directly to the third party leasing company during the quarters ended March 31, 2015 and 2014 amounted to $28,160 and $30,499, respectively.
Below is the summary of SignalShare lease transactions at March 31, 2015:
  Capital Leases  
 
Finance Leases
  
Total as of
March 31, 2015
 
          
Leases payable - current portion $2,681,160  $152,182  $2,833,342 
Leases payable - long tern portion  4,965,804   172,901   5,138,705 
Total leases payable $7,646,964  $325,083  $7,972,047 

10. Line of Credit


On June 5, 2009, RMLX entered into a Revolving Credit, Security and Warrant Purchase Agreement (the “Credit Agreement”) with Cenfin, LLC (“Cenfin”), an entity principally owned by significant shareholders of the Company.  The Credit Agreement permits us to borrow up to $25 million until June 5, 2017.  On May 3, 2013, the Company and Cenfin executed a fourth amendment to the Credit Agreement which provided Cenfin sole and absolute discretion related to funding any advance requested by Roomlinx.  Advances must be repaid at the earlier of five years from the date of borrowing or at the expiration of the Credit Agreement. The principal balance may be repaid at any time without penalty.  Borrowings accrue interest, payable quarterly on the unpaid principal at a rate equal to the Federal Funds Rate at July 15 of each year plus 5% (approximately 5.09% per annum at March 31, 2015).  The Credit Agreement is collateralized by substantially all of our assets, and requires us to maintain a total outstanding indebtedness to total assets ratio of less than 3 to 1.
The amount outstanding under the Credit Agreement was $3,962,000 at March 31, 2015, which is part of the liabilities assumed in connection with the reverse acquisition transaction completed on March 27, 2015.  These advances will be repaid at various dates between 2015 and 2017.  
The Credit Agreement requires that, in conjunction with each advance, RMLX issue Cenfin warrants to purchase shares of our common stock equal to 50% of the principal amount funded divided by (i) $120.00 on the first $5,000,000 of borrowings on or after July 15, 2010 ($4,712,000 as of December 31, 2012) or (ii) thereafter the fair market value of the Company’s common stock on the date of such draw for advances in excess of $5,000,000.  The exercise price of the warrants is $120.00 for the warrants issued on the first $5,000,000 of borrowings made after July 15, 2010 and, thereafter, the average of the high and low market price for the Company’s common stock on the date of issuance. The exercise period of these warrants expires three years from the date of issuance.

The fair value of warrants issued under of the Credit Agreement using the Black-Scholes pricing model was approximately $2,760,000 which is being amortized to earnings as additional interest expense over the term of the related indebtedness. The unamortized balance of the debt discount was $335,714 at March 31, 2015.method. During the three months ended March 31, 2015June 30, 2023, the Company amortized $3,677 (forrecorded approximately $0.6 million in amortization expense and made principal payments totaling approximately $1.0 million. During the period from March 27, 2015 through March 31, 2015) as debt discount expense. Borrowings outstanding are reported net ofthree months ended June 30, 2022, the debt discount.
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Future minimum payments under the line of credit are as follows:

Years ended March 31, Minimum Payments 
    
2016 $1,254,521 
2017  2,707,479 
  $3,962,000 
11. Notes Payable — Related Parties

A summary of the outstanding balance of the various notes payable is as follows:

  Balance at 
       
  March 31, 2015  December 31, 2014 
  (unaudited)    
         
Brookville Special Purpose Fund $2,233,753  $2,284,161 
Veritas High Yield Fund, net of $31,567 and $43,258 unamortized debt discount at March 31, 2015 and December 31, 2014, respectively   551,349    615,470 
Allied International Fund, Inc.  530,000   - 
    Total notes payable – related parties  3,315,102   2,899,631 
Less: current portion of notes payable – related parties  (1,468,933)  ( 832,030)
Long-term portion of notes payable, related party $1,846,169  $2,067,601 
         
On March 31, 2014, the Brookville Special Purpose Fund maturity date was extended to January 1, 2016 and the Veritas High Yield Fund maturity date was extended to April 1, 2016. The notes have been converted to a payment schedule that will fully amortize the existing balances of the notes payable by the maturity dates of the notes. The interest rates for these two notes payable remain at the originally negotiated 14% interest rate per annum.

Accrued interestCompany did not recognize amortization expense related to the Brookville Special Purpose Fund, the Veritas High Yield Fund and the Robert DePalo Special Opportunity Fund was capitalized as part of the balance of these notes payable at December 31, 2013 and are included in the repayment obligations of the Brookville Special Purpose Fund and the Veritas High Yield Fund. The capitalized interest on the Robert DePalo Special Opportunity Fund was included in the conversion of that note payable to Holdings’ common equity on March 14, 2014 described in Note 12.and did not make any principal payments.


-40-

On March 27, 2015October 14, 2022, Blue Torch and March 30, 2015, the Company entered into two notes with Allied International Fund, Inc. (“Allied”) for $255,000the Original Limited Waiver. The Original Limited Waiver was initially scheduled to expire on October 28, 2022, if not terminated earlier by Blue Torch, but the Original Waiver Period was subsequently extended through February 10, 2023 by the First Amendment to Limited Waiver to Financing Agreement dated as of October 28, 2022, the Second Amendment to the Limited Waiver to Financing Agreement dated as of November 11, 2022, the Third Amendment to the Limited Waiver to Financing Agreement dated as of November 25, 2022, the Fourth Amendment to the Limited Waiver to Financing Agreement dated as of December 9, 2022, the Fifth Amendment to the Limited Waiver to Financing Agreement dated as of December 23, 2022, the Sixth Amendment to the Limited Waiver to Financing Agreement dated as of January 13, 2023, and $275,000, respectively,the Seventh Amendment to the Limited Waiver to the Financing Agreement dated January 31, 2023, and the Eight Amendment to the Limited Waiver to the Financing Agreement dated as of February 7, 2023.

On February 10, 2023, Blue Torch and the First A&R Limited Waiver of the Specified Events of Default under the Financing Agreement, which were dueamended and payable on April 3, 2015 and April 15, 2015, respectively. Both notes carry interest at twenty percent (20%) per year.

Forrestated the three months ended March 31, 2015 and 2014,Original Limited Wavier. The First A&R Limited Waiver provided that, among other things, during the First A&R Waiver Period, the Company amortized $5,561would comply with certain sale and $40,710, respectively, of deferred financing costs of $11,691refinancing milestones and debt discount of $81,984, respectively.

A schedule of principal payments for the Brookville Special Purpose Fund, the Veritas High Yield Fund and the Allied International Fund Inc. notes payable, by year, is set forth below.

Year Amount 
     
2016 $1,500,500 
2017  1,846,169 
Total  2,346,669 
Less:        unamortized debt discount  (31,567)
Total        notes payable – related parties $3,315,102 
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12. Note Payable

As of March 31, 2015, the Company had the following outstanding note payable:

  Amount 
     
Note payable to the FCC; monthly principal and interest payment of $1,188; interest at 11% per annum; and matures in August 2016. $18,231 
Less: current portion  (12,573)
  $5,658 

Future minimum paymentsrefrain from engaging in any “Permitted Acquisition” under the note payable are as follows:

Years ended March 31, Minimum Payments 
     
2016 $12,573 
2017  5,658 
  $18,231 


13. Related Party Transactions — Stockholders

Financing Agreement or making certain post-closing payments to Converge Sellers. The First A significant shareholder&R Limited Waiver would have expired on the earliest of (x) the Company managesoccurrence of an Event of Default under the Brookville Special Purpose Fund, the Veritas High Yield Fund and the Robert DePalo Special Opportunity Fund.
The SPHC Series A preferred stockFinancing Agreement that is ownednot a Specified Event of Default, (y) a failure by Allied International Fund, Inc. (“Allied”), a company whose president is the wife of a major shareholder. The SPHC Series A preferred stock was issued to Allied for certain guarantees and other consideration. SPHC recognized Series A Preferred Stock dividends in the amount of $150,000 for each of the three months ended March 31, 2015 and 2014. Preferred stock dividends payable amounted to $50,000 and $25,000 as of March 31, 2015 and December 31, 2014, respectively, which has been included in accrued expenses and was paid in April 2015and January 2015, respectively.  See Note 16.

14. Accrued Expenses

Accrued expenses consist of the following:
  Balance at 
  March 31, 2015  
December 31, 2014
 
  (unaudited)    
       
Cost of service $473,763  $498,193 
Selling, general and administrative expense  400,371   278,852 
Compensation  367,627   135,016 
Total $1,241,761  $912,061 
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15. Operating Lease Commitments

The Company leases office space in New Jersey and North Carolina under operating leases that expire at various dates through 2020. The office leases require the Company to pay escalating rental payments over the terms of the leases. The Company accounts for rent expensecomply with certain sale and refinancing milestones set forth in accordance with ASC 840, “Leases” that requires rentals to be charged to income on a straight-line basis. The Company performs a deferred rent analysis when a new lease is entered into and when the current leases have been renewed or amended. Rent expense was $99,287 and $76,996 for the three months ended years ended March 31, 2015 and 2014, respectively.

The following table summarizes the future minimum lease commitments under non-cancelable operating office leases as of March 31, 2015.

March 31, Amount 
     
2016 $454,142 
2017  373,335 
2018  341,216 
2019  348,355 
2020  84,319 
Total $1,601,367 
16. Equity

On March 27, 2015,side letter agreed by the Company and SPHC signedthe Lenders and completed(z) June 30, 2023, subject to potential extension of up to sixty 60 days to obtain regulatory and/or shareholder approval in the “SMA”. Pursuant to the terms and conditions of a SMA by and amongevent the Company SPHC, SSIis pursuing a sale transaction.

On April 14, 2023 and RMLX Merger Corp.April 28, 2023, Blue Torch and the Company completedentered into the merger with SPHC (the “Closing”).  FollowingExtension Letters that extended the February 10, 2015 termination of a prior Merger Agreement, the SMA was negotiated based upon, among other things, significantly revised settlement agreements with the Company’s major creditors.  These included, among other things, Cenfin LLC, the Company’s secured lender, obtaining 5% of the approximately 15% of the issued and outstanding fully diluted common stock of the Company following the Merger.  Under the SMA, the Company’s wholly-owned subsidiary RMLX Merger Corp., a Delaware corporation, was merged with and into SPHC, with SPHC and its operating subsidiaries surviving as a wholly-owned subsidiary of the Company (the “Merger”).  The existing business of Roomlinx was transferred into a newly-formed, wholly-owned subsidiary named SSI.  The Company’s President and Chief Executive Officer, Michael S. Wasik, resigned from all positions with the parent Company and was named President and Chief Executive Officer of SSI.  As a result of the Merger, the shareholders of SPHC, a privately-owned Delaware corporation, received an aggregate of approximately 85% of the Fully Diluted (as defined therein) common stock of the Company in exchange for 100% ownership interest in SPHC’s common stock and Series A Preferred Stock.  The merger consideration was determined by the Company, after a thorough review of prospective acquisitions, the benefits of the transaction, including access to capital, increased market opportunities and reach, perceived synergies, efficiencies and other financial considerations, as well as a strategic growth plan contemplated by management of the combined entity.  This transaction has been accounted for as a reverse acquisition where SPHC is the accounting acquirer and RMLX is the acquired company or the accounting acquiree.  Accordingly, the historical financial statements prior to the consummation of the reverse acquisition transaction are those of SPHC.Applicable Milestones.


Upon the Closing, the accounting acquirer, SPHC, acquired all the assets and assumed all the liabilities ofOn May 8, 2023, the Company and immediately transferred such assetsBlue Torch entered into the First Amendment to First A&R Limited Waiver and liabilities  into SSI,an amended and restated letter agreement that, in each case, superseded the Prior Waiver Documents, and pursuant to which the Company affirmed its commitment to work in good faith to consummate a newly-formed Nevada corporation wholly owned by the Company.  As a resultsale of the foregoing, SSI and SPHC and their respective subsidiaries are nowCompany’s business or assets or a refinancing transaction before the principal operating subsidiariesexpiration of the Company.
PursuantFirst A&R Waiver Period, and Blue Torch agreed to remove the terms ofApplicable Milestones and to extend the SMA, the Company made a $750,000 cash paymentOutside Date from June 30, 2023 to Cenfin, reducing the amount of the Revolving Loan with Cenfin to $3,962,000, bearing interest at approximately 5% per annum, and Cenfin received 7,061,295 shares of common stock.  This revolving loan is secured by the assets of SSI, but not those of the parent company (except to the extent not assigned to SSI) and not by any assets of SPHC.

Pursuant to the terms and conditions of the SMA, the Board of Directors of the Company declared a dividend of 12,590,317 shares of common stock to existing stockholders who held 107,007 shares of Common Stock or an aggregate of 12,697,324 shares (9.41% of the fully diluted shares) prior to the consummation of the reverse acquisition transaction.  Cenfin was issued 7,061,295 (5.23% of the fully diluted shares) shares and at consummation, the SPHC shareholders were issued 115,282,137 (85.36% of the fully diluted shares) exclusive of 4,160,000 option shares for one to one basis.  All of the dividend shares and Cenfin shares areJuly 14, 2023, subject to a nine month lock-uppotential extension if a definitive written agreement is delivered on or prior to July 14, 2023 that provides for cash repayment in full of all obligations owed to Blue Torch or which is otherwise acceptable to Blue Torch. In addition, under the First Amendment to the First A&R Limited Waiver, the Company agreed to pay Blue Torch an “exit fee” equal to five (5%) percent of the aggregate outstanding principal balance of the Company’s indebtedness with Blue Torch as of the date of the First Amendment to the First A&R Limited Waiver, plus accrued interest, subject to certain registration rights.
reduction or waiver if such Blue Torch indebtedness is repaid in full in cash by the dates specified therein. The foregoing summary of the terms and conditions of the SMA does not purport to be complete and is subject to, and qualified in its entirety by, referenceAmendment No. 1 to the full text of the SMA, which isA&R Limited Waiver attached as an exhibitExhibit 10.2 to the Company’s Form 8-K filed on April 2, 2015.  

As of the closing date, all outstanding shares of the Company’s preferred stock described below shall continue to be outstanding until such time as determined by the Company’s Board of Directors.  All outstanding Company options exercisable for at least $36.00 per share, as well as all outstanding warrants, continue to be exercisable for the same number of shares at the same exercise price, each as adjusted for the Reverse Stock Split.

In addition to the 115,282,137 shares of common stock issued to the former SPHC shareholders, the 4,160,000 options held by the SPHC option holders and 250,000 warrants held by warrant holders will be exchanged on a one for one basis for options and warrants in the Company.  In addition, pursuant to the terms of the SMA, which have not been implemented, within fourteen days after the closing date (the “Post-Closing Date”):  (a) following Roomlinx Stockholders Approval and Board of Directors approval, the Company shall (i) amend and restate its articles of incorporation to change its name to SignalShare Media Group, Inc.; and (ii) create serial preferred stock with substantially identical Series A and Series B (see Note 22) designations to that existing for SPHC at the time of the Subsidiary Merger.  The Company’s restated articles of incorporation shall conform to the certificate of incorporation currently in effect for SPHC (except that the dividend payable for Series A Preferred Stock shall exclude revenues of up to $6 million per annum for both SSI and revenues of the Company attributable to contracts that have not been assigned to Roomlinx Subsidiaries because the applicable consents have not been obtained), and reflect the new name of the parent as “SignalShare Media Group, Inc.”
As of March 31, 2015, the Company’s equity consists of the following:
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Class A Preferred Stock
 The Company has authorized 5,000,000 preferred shares with a $0.20 par value, of which 720,000 shares have been designated as Class A Preferred Stock.  The Class A Preferred Stock has a liquidation preference of $0.20 per share and is entitled to receive cumulative annual dividends at the rate of 9%, payable in either cash or additional shares of Class A Preferred Stock, at the option of the Company.  As of March 31, 2015, there were 720,000 shares of Class A Preferred Stock issued and outstanding.  Undeclared Class A Preferred Stock dividends accumulated and unpaid as of March 31, 2015 and December 31, 2014, were $214,320 and $211,080, respectively; these dividends are not included in accrued expenses.

Series A Preferred Stock
Pursuant to the SMA the Company contracted to adopt series A preferred stock of SPHC, which was subsequently redeemed by SPHC. The Preferred Stock ranked senior to all of the Common Stock of SPHC, par value $0.001 per share; in each case as to distributions of assets upon liquidation, dissolution or winding up whether voluntary or involuntary. The Preferred Stock had a liquidation value of $5,000 per share.  As of the date of this report, the holder of the Series A Preferred Stock still has a security interest and agreement and a UCC financing statement outstanding with a lien of $2,700,000 reduced from $3,200,000 as the preferred stock was exchanged for debt.

Series B Preferred Stock
In July 2013, SPHC authorized the issuance of 10 shares of Series B preferred stock (“Series B Preferred Stock”) to its majority shareholder. There are no cash and/or cumulative dividends authorized for the Series B Preferred Stock, but the provisions of the Series B Preferred Stock permitted the holder to exercise control over a broad range of the Company actions.

Dividends payable on the shares of Preferred Stock were initially an aggregate amount equal to one percent (1%) of the aggregate gross revenues per month of the Company and any of its consolidated subsidiaries, joint ventures, partnerships and/or licensing arrangements. Subsequent to entering into the Allied Preferred Stock transaction, the dividend terms were amended such that the amount of the monthly dividend was changed to 1% of revenue or $50,000 per month, whichever calculation produces a higher dividend (See Note 22).
See Note 22, subsequent events for information covering the cancellation of the Series B preferred stock.

Common Stock
Common Stock:    The Company had authorized 400,000,000 shares of $0.001 par value common stock As of March 31, 2015, there were 135,040,720 shares of Common Stock issued and outstanding.

Contributions by Shareholder
     During the first three months of 2015, the majority shareholder of SPHC contributed $65,004 which amount was recorded as additional paid-in capital and was allocated to contributed capital from the majority shareholder.

17. Warrants, Stock Option Plans and Stock Appreciation Rights

Warrants:

As of March 31, 2015, the Company had 261,213, of warrants outstanding, which were issued in connection with the line of credit (see Note 10) and other lender relationship of SignalShare.  No warrants were issued during the quarter ended March 31, 2015, however RMLX assumed the outstanding warrants of SPHC at the date of the Merger.
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The following is a summary of warrant activity for the quarter ended March 31, 2015:
  
Shares
Underlying
Warrants
  
Weighted
Average
Exercise
Price
 
Weighted
Remaining
Contractual
Life
(in years)
 
 
Aggregate
Intrinsic
Value
            
Outstanding at January 1, 2015  -  $-    
Issued  250,000   1.80    
Warrants assumed through reverse acquisition  15,380   203.88    
Expired/Cancelled  (4,167)  141.12    
Outstanding and exercisable at March 31, 2015   261,213  $11.48 4.46 $   -

Stock Options:
In 2004, the Company adopted a long term incentive stock option plan (the “Stock Option Plan”) which covers key employees, officers, directors and other individuals providing bona fide services to the Company. On December 27, 2012, subject to stockholder approval, the board of directors voted to amend the Stock Option Plan to (i) adjust the maximum allowable shares of common stock upon exercise of options which may be granted from 1,200,000 to 2,000,000 shares of common stock and (ii) remove the provision from the Stock Option Plan which provided that any shares that are surrendered to or withheld by the Company in connection with any award or that are otherwise forfeited after issuance shall not be available for purchase pursuant to incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended. As of March 31, 2015, options to purchase 5,689,953 shares were outstanding. The options vest as determined by the Board of Directors and are exercisable for a period of no more than 10 years. 
A summary of stock option activity under the Stock Option Plan is presented below:
  
Shares
Underlying
Options
  
Weighted
Average
Exercise
Price
  
Weighted
Remaining
Contractual
Life
(in years)
  
 
Aggregate
Intrinsic
Value
 
               
Outstanding at January 1, 2015  795,000  $1.80       
Granted and Issued  4,885,000   1.80       
Options assumed through reverse acquisition  14,221   97.92       
Expired/Cancelled  (4,269)  76.06       
Outstanding at March 31, 2015  5,689,953  $1.98   4.94  $- 
Exercisable at March 31, 2015  1,637,710  $2.41   4.95  $- 
Un-exercisable at March 31, 2015  4,052,243  $1.81   4.93  $- 

Stock Appreciation Right Agreements
On August 12, 2014, the Board of Directors authorized the Company to enter into a Stock Appreciation Right Agreement (the “Agreement”) by and between the Company and two current officers and a consultant for the Company (the “Recipients”). The Agreements granted stock appreciation rights (“SARs”) as an inducement for the Recipients to promote the best interests of the Company and its stockholders. The spread between the then fair market value of the Company’s common stock, par value $0.001 per share (“Common Stock”) on the grant date and the then fair market value of the stock on the date of exercise shall be payable to the Recipients, less applicable tax withholdings.

Set forth below is information with regard to the individuals, number of shares and exercise price of the SARs issued as of October 30, 2014.
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The SARs are subject to graded vesting provisions and may only be exercised when the Recipients SARs have vested. The SARs will vest 50% on January 10, 2015 and 50% on January 10, 2016 and the SARs may only be exercised in the year in which they vest. Vested SARs that remain unexercised at the end of a vesting year will expire at that time. Any unvested SARs will be immediately forfeited and canceled in the event that a Recipient’s employment or other service with the Company is terminated for any reason.

●Aaron Dobrinsky, President or an entity of his choosing, SARs were authorized for 3,500,000 shares of Common Stock at $0.50 per share, provided Mr. Dobrinsky remains employed by the Company.
●Christopher Broderick, Chief Operating Officer, or an entity of his choosing SARs were authorized for 3,500,000 shares of Common Stock at $0.50 per share, provided Mr. Broderick remains employed by the Company.
●SAB Management LLC, an entity owned by Andrew Bressman, Managing Director and his wife, SARs were authorized for 8,500,000 shares of Common Stock at $0.10 per share, provided Mr. Bressman remains employed by the company.

  The following are the assumptions utilized in the estimation of stock-based compensation related to the SARs granted for the year ended December 31, 2014:
2014
Expected term2 years
Expected volatility221%
Risk free interest rate0.48%
Dividend yield0%

Set forth below is information with regard to the individuals, number of shares and exercise price of the SARs issued as of March 20, 2015:

The SARs are subject to graded vesting provisions and may only be exercised when the Recipients SARs have vested. The SARs will vest on January 10, 2017 and the SARs may only be exercised in the year in which they vest. Vested SARs that remain unexercised at the end of a vesting year will expire at that time. Any unvested SARs will be immediately forfeited and canceled in the event that a Recipient’s employment or other service with the Company is terminated for any reason.

●Aaron Dobrinsky, President or an entity of his choosing, SARs were authorized for 1,750,000 shares of Common Stock at $0.50 per share, provided Mr. Dobrinsky remains employed by the Company.
●Christopher Broderick, Chief Operating Officer, or an entity of his choosing SARs were authorized for 1,750,000 shares of Common Stock at $0.50 per share, provided Mr. Broderick remains employed by the Company.
●SAB Management LLC, an entity owned by Andrew Bressman, Managing Director and his wife, SARs were authorized for 4,250,000 shares of Common Stock at $0.10 per share, provided Mr. Bressman remains employed by the company.

  The following are the assumptions utilized in the estimation of stock-based compensation related to the SARs granted for the Quarter ended March 31, 2015:
2015
Expected term3 years
Expected volatility221%
Risk free interest rate0.95%
Dividend yield0%
Set forth below is information with regard to the individuals, number of shares and exercise price of the SARs issued as of March 27, 2015:

The SARs are subject to graded vesting provisions and may only be exercised when the Recipients SARs have vested. The SARs will vest 50% on January 10, 2017 and 50% on January 10, 2018 and the SARs may only be exercised in the year in which they vest. Vested SARs that remain unexercised at the end of a vesting year will expire at that time. Any unvested SARs will be immediately forfeited and canceled in the event that a Recipient’s employment or other service with the Company is terminated for any reason.

●Two executives of SignalShare, SARs were authorized for 2,000,000 shares of Common Stock at $1.80 per share, provided they remain employed by the Company.
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  The following are the assumptions utilized in the estimation of stock-based compensation related to the SARs granted for the three months ended March 31, 2015:
2015
Expected term3 years
Expected volatility216%
Risk free interest rate0.92%
Dividend yield0%
  A summary of SAR activity is presented below:

  
Shares
Underlying
SARs
  
Weighted
Average
Exercise
Price
  
Weighted
Remaining
Contractual
Life
(in years)
  
 
Aggregate
Intrinsic
Value
 
               
Outstanding at January 1, 2015   15,500,000  $0.28       
Granted and Issued  9,750,000   0.59       
SARs Assumed through reverse acquisition  -   -       
Expired/Cancelled  -   -       
Outstanding at March 31, 2015  25,250,000  $0.40   2.22  $- 
Exercisable at March 31, 2015  7,750,000  $0.28   1.76  $- 
Un-exercisable at March 31, 2015  17,500,000  $0.45   2.43  $- 
The Company recorded stock-based compensation expense of $3,167,653 and $-0- for the three months ended March 31, 2015 and 2014, respectively. The amounts are recorded in selling, general and administrative expense in the unaudited condensed consolidated statements of operations and comprehensive loss. At March 31, 2015, there was approximately $35.7 million in unrecognized compensation cost related to options and SARs that will be recorded over future periods of approximately three years.

18. Arista Communications, LLC.

SSI has a 50% joint venture ownership in, and manages the operations for Arista Communications, LLC (“Arista”).  The other 50% of Arista is owned by Wiens Real Estate Ventures, LLC, a Colorado limited liability company (“Weins”).  SSI acquired its 50% interest in Arista through its acquisition of Canadian Communications, LLC, on October 1, 2010.

Arista provides telephone, internet, and television services to residential and business customers located in the Arista community in Broomfield, Colorado.  As the operations manager for Arista, in accordance with ASC 810, Consolidation, the Company determined that Arista is a variable interest entity that must be consolidated. Roomlinx reports 100% of Arista revenues and expenses in its consolidated statements of operations and comprehensive loss and 100% of Arista assets, liabilities, and equity transactions on its consolidated balance sheets.  Roomlinx then records the non-controlling interest allocation.

Financial information for Arista Communications, LLC, for the period from March 27, 2015 (date of Acquisition) to March 31, 2015 is as follows:
Revenue $778 
Direct Costs  (1,082)
Operating expenses  (360)
Net loss $(664)

Weins’ share of the net loss is $332 for the three months ended March 31, 2015.
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19. Segment Information

Financial information for our segment as of and for the three months ended March 31, 2015 and 2014, is as follows:

  
Broadband
and VOIP
  WiFi  Hospitality  Corporate  Totals 
                
Three months ended March 31, 2015               
     Revenues $2,768,392  $346,174  $88,298  $-  $3,202,861 
     Operating loss $(589,451) $(1,712,328) $8,566  $(46,117,873) $(48,411,086)
     Net loss attributable to common shareholders
 
 $(589,451) $(1,864,972) $8,898  $(46,542,196) $(48,987,721)
                     
Three months ended March 31, 2014                    
     Revenues $2,892,223  $233,091  $-  $-  $3,125,314 
     Operating loss $(1,036,346) $(529,556) $-  $(86,370) $(1,652,272)
     Net loss attributable to common shareholders
 
 $(1,036,346) $(500,750) $-  $(837,904) $(2,375,000)
                     
As of March 31, 2015                    
     Total Assets $1,410,910  $10,727,918  $2,612,737  $766,953  $15,518,518 

20. Pro-forma Financial Information
The following presents the unaudited pro-forma combined results of operations of the Company in connection with the reverse acquisition transaction was completed on March 27, 2015 for the three months ended March 31, 2015 and 2014, after giving effect to certain pro-forma adjustments and assuming the reverse acquisition transaction completed as of the beginning of 2014.
These unaudited pro-forma results are presented in compliance with the adoption of Accounting Standards Update ("ASU") 2010-29, Business Combinations (Topic 805), Disclosure of Supplementary Pro Forma Information for Business Combinations, and are not necessarily indicative of the actual consolidated results of operations had the acquisitions actually occurred on January 1, 2014 or of future results of operations of the consolidated entities:
  
For the Quarter Ended March 31,
(unaudited)
 
       
  2015  2014 
       
Revenues $5,013,010  $4,755,471 
Cost of sales  3,895,937   3,343,799 
     Gross profit  1,117,073   1,411,672 
Selling, general and administrative expenses  7,350,694   3,492,593 
Operating loss  (6,233,621)  (2,080,921)
Interest expense, net  650,911   651,061 
Other income, net  (30,638)  (45,514)
Loss from continuing operations before income taxes  (6,853,894)  (2,686,468)
Income taxes.  -   - 
Net loss from continuing operations  (6,853,894)  (2,686,468)
Loss from discontinued operations  (669)  (77,910)
Net loss  (6,854,563)  (2,764,378)
Net loss attributable to the non-controlling interest  1,671   2,174 
Net loss attributable to the Company  (6,852,892)  (2,762,204)
Currency translation (loss) gain  14,410   1,208 
Comprehensive loss  (6,838,482)  (2,760,996)
Dividends on preferred stock  150,000   150,000 
Net loss attributable to common shareholders $(6,988,482) $(2,910,996)
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21. Commitments and Contingencies

Non-Income Taxes
The Company remits state excise tax on various telecommunication services, as it is the Company’s position that the telephone service originates in the states where the equipment or customers are located or the services are rendered. State taxing authorities are constantly revising the laws and regulations with regard to telecommunication services and therefore, the Company is subject to potential excise tax in other jurisdictions based upon these constantly changing laws and regulations. However, the Company cannot determine such potential amount as of March 31, 2015.

Litigation
The Company is party to various legal proceedings and claims related to its normal business operations. In the opinion of management, the Company has substantial and meritorious defenses for these claims and proceedings in which it is a defendant, and believes these matters will be ultimately resolved without a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. The aggregate provision for losses related to contingencies arising in the ordinary course of business is not material, individually or in the aggregate, to the consolidated operating results for the three months ended March 31, 2015 and 2014.

El Dorado Offices 2, LP
The Company received notice that El Dorado Offices 2, LP (“Landlord”) had filed suit against the Company and SignalShare Infrastructure, Inc. (“SSII”) associated with amounts due under a terminated office space lease and an associated promissory note.  The Landlord seeks approximately $326,000, plus costs, associated with the failure to repay the promissory note.  The Company was served with the complaint on November 24, 2015 and must answer within 21 days.  The Company is reviewing the complaint and weighing its options at present.

CLC Networks and Skada
The Company is in receipt of a District Court Civil Summons, dated May 29, 2012, in the matter of “CLC Networks, Inc. and Skada Capital, LLC v. Roomlinx, Inc.”, commenced in the District Court of Boulder County, Colorado (the “Action”).  The plaintiffs in the Action claimed that the Company owed them certain unpaid sales commissions, including with respect to Hyatt Corporation in connection with that certain Master Services and Equipment Purchase Agreement, as described in the Company’s CurrentQuarterly Report on Form 8-K, as filed with the Securities10-Q. See also "Subsequent Events" of this Quarterly Report on Form 10-Q for a description of Amendments Two, Three, and Exchange Commission on March 13, 2012.   The Company and the plaintiffs executed a settlement agreement in February 2014 for $106,528 to be paid in 19 even monthly installments commencing March of 2014. As of March 31, 2015 the Company has a liability of approximately $50,500 remaining in accounts payable.

TIG
The Company is in receipt of a letter from Technology Integration Group ("TIG") demanding payment of approximately $2,430,000 with respect to inventory and services which the Company purchased from TIG, of which approximately $2,088,000 remains in accounts payable at December 31, 2014.  TIG subsequently filed the Action.  On September 23, 2014, the Company entered into a Settlement Agreement and Mutual General Release with TIG.  The Settlement Agreement was conditioned on the SPHC merger taking place.

On March 24, 2015, the Company, Michael S. Wasik, Anthony DiPaolo and SSI entered into the Settlement Agreement and Mutual General Release with PC Specialists Inc. (d/b/a TIG), replacing the agreement signed in the fourth quarter of 2014. As of March 23, 2015, the Company owed TIG $3,003,267, consisting of $2,064,223 for equipment purchased and stored, $879,998 of interest on such amount and $59,046 of attorneys’ fees and costs. Under the settlement agreement, the Company agreed to pay a settlement amount of $1,919,239, of which $400,000 was paid by SPHC upon the closing of the SMA. As a result, the Company, Wasik and DiPaolo were released from the Action and TIG consentedFour to the transfer of rights and obligations under the Settlement Agreement to SSI with no recourse to the Company or SPHC. As of March 31, 2015 the Company has the entire liability due TIG recorded in accounts payable.

ScanSource
The Company received a District Court Civil Summons, dated August 23, 2013, in the matter of “ScanSource v. Roomlinx, Inc.”, commenced in the District Court of Greenville County, South Carolina.  The plaintiffs in such action claimed that the Company owed them approximately $473,000 with respect to inventory purchased by the Company. The amount is recorded in accounts payable in the condensed consolidated balance sheets as of March 31, 2015 and December 31, 2014.   On March 31, 2015, the Company and ScanSource entered into a settlement agreement with respect to such action in which Roomlinx agreed to pay ScanSource a total of $471,000 plus interest as follows: (a) payment of $100,000 on or before June 1, 2015, (b) beginning June 1, 2015, interest accruing on the outstanding balance of 12% per annum until the balance is paid in full, (c) beginning July 1, 2015 and continuing for 12 months thereafter, payment of $8,000 per month, and (d) following the initial 12 month payment schedule set forth in (b), payment of $316,715 in 24 monthly payments according to an amortization schedule agreed to by the Company and ScanSource.

BSA
The Company is in receipt of a letter from the BSA Software Alliance (“BSA”) in connection with copyright infringement of computer software products alleging the unauthorized duplication of various computer software products.  BSA has threatened to file an action against the Company if it does not timely respond to its request for an internal audit.  The Company is currently reviewing BSA’s claims, however, believes there is no merit.
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Arrow
The Company is in receipt of a District Court Civil Summons, dated July 21, 2014, in the matter of “Arrow Electronics, Inc. v. Roomlinx, Inc., d/b/a Cardinal Broadband, d/b/a Roomlinx,” commenced in the District Court of Broomfield County, Colorado.  The plaintiff in such action claims that the Company owes it approximately $85,000 with respect to goods sold and delivered and/or services rendered to the Company by the plaintiff.  The Company settled the claim in May 2015 by agreeing to pay Arrow a total of $57,000 over the next 9 months. At March 31, 2015, the Company has the total amount of the settlement recorded in accounts payable.

Wi-Fi Guys
The Company is in receipt of a letter dated November 10, 2014 on behalf of Wi-Fi Guys, LLC (“WFG”) demanding payment from the Company for amounts relating to development and software services in the amount of $297,000.  The Company evaluated all of its options, including legal options, with respect to the validity of the WFG letter and the alleged grounds for demanding payment and formally responded in a letter dated December 1, 2014 in which the Company denied WFG’s claims and additionally made separate counter-claims against WFG.

Hyatt
The Company received a request for indemnification from Hyatt Corporation (“Hyatt”) dated July 3, 2013 in connection with a case brought in US Federal Court in California by Ameranth, Inc., against, among others, Hyatt.  In connection with such case, the plaintiffs have identified the Company’s e-concierge software as allegedly infringing Ameranth’s patents.  The Company licenses the e-concierge software from a third party and accordingly has made a corresponding indemnification request to such third party.  The Company believes that any such claim may also be covered by the Company’s liability insurance coverage and accordingly the Company does not expect that this matter will result in any material liability to the Company.

On March 12, 2012, the Company and Hyatt Corporation (“Hyatt”) entered into a Master Services and Equipment Purchase Agreement (the “MSA”) pursuant to which the Company has agreed to provide in-room media and entertainment solutions, including its proprietary Interactive TV (or iTV) platform, high speed internet, free-to-guest, on-demand programming and related support services, to Hyatt-owned, managed or franchised hotels that are located in the United States, Canada and the Caribbean.  Under the MSA, Hyatt will use its commercially reasonable efforts to cause its managed hotels to order the installation of the Company’s iTV product in a minimum number of rooms in Hyatt hotels within certain time frames.

In December 2012, the Company and Hyatt mutually agreed to suspend certain Hyatt obligations under the MSA that had not been met; including the suspension of the obligations of Hyatt to cause a certain number of rooms in both Hyatt owned and managed properties to place orders for the Company’s iTV products within certain time frames. At the time of the December 2012 suspension of these Hyatt obligations, the Company had installed certain services and products in approximately 19,000 rooms (including approximately 9,000 installs of its iTV product) in Hyatt hotels.  During the year ended December 31, 2013, the Company completed the installation of approximately 1,000 additional rooms.  As of March 31, 2015 and December 31, 2014, deposits received on statements of work for Hyatt properties are recorded as customer deposits in the condensed consolidated balance sheets in the amounts of approximately $1,262,000.

In connection with the Merger Agreement, the Company and Hyatt entered into aFirst A&R Limited Waiver, and Consent Agreement dated as of March 11, 2014 (the “Hyatt Consent Agreement”), pursuant to which Hyatt provided its conditional consent and approval to the transactions contemplated by the Merger Agreement and any assignment of the Company’s assets contemplated thereunder, including the assignment to SSI of the Company’s right, title and interest under the MSA and under the Hotel Services & Equipment Purchase Agreements (the “HSAs”) entered into by the Company with individual hotel owner entities.

On September 29, 2014, the Company received a letter from Hyatt (the “September 29th Letter”) notifying the Company that Hyatt is terminating the HSAs with respect to the following five hotels in which the Company has yet to install any equipment or provide any services – the Hyatt Regency Indianapolis, the Hyatt Regency Greenwich, the Grand Hyatt New York City, the Hyatt Regency Coconut Point and the Hyatt Regency Lake Tahoe (collectively, the “Hotels”). Hyatt’s September 29th Letter does not affect any Hyatt hotels under the MSA currently being serviced by the Company.  Hyatt's termination of the HSAs is based on alleged noncompliance by the Company and SSH with certain provisions of the Hyatt Consent Agreement. The Company evaluated the validity of the Hyatt Letter and the alleged grounds for terminating the HSAs for the Hotels, and believes such grounds are without merit.

Hyatt’s September 29th Letter also requested repayment of deposits in the aggregate amount of $966,000 paid to the Company by the Hotels in connection with the HSAs.  A second letter dated November 14, 2014 (the “November 14th Letter”) received by the Company from Hyatt demanded repayment of such deposits by November 21, 2014.  Upon evaluating the validity of Hyatt’s November 14th Letter and again determining that Hyatt’s grounds for terminating the HSA and demanding the return of the aforementioned deposits are without merit, the Company formally responded in a letter to Hyatt dated March 3, 2015 wherein the Company denied Hyatt’s claims.  The Company subsequently received a third letter from Hyatt dated March 26, 2015 (the “March 26th Letter”) in which Hyatt again demanded the repayment of the aforementioned deposits.  The Company has evaluated the validity of the March 26th Letter and the alleged grounds for terminating the HSAs for the Hotels, and believes such grounds are without merit. The Company has not made any such repayment to Hyatt. On May 4, 2015, the Company received a letter from Hyatt alleging that the Hyatt Consent Agreement did not apply to the merger between Signal Point Holdings Corporation and the Company and further contends that such merger triggered Hyatt’s right to terminate the MSA.  The Company believes Hyatt’s arguments and conclusion are without merit.

The Parties began negotiations to rectify the disputes between them and entered into a Settlement Agreement on November 17, 2015 providing for the orderly termination of iTV services at Hyatt locations.  The Settlement Agreement also provided for the extension of high speed internet services for 36 months in retained Hyatt locations and gave the Company the right to bid on all future Wi-Fi installations at hotels and business center locations. The Settlement Agreement also provided that the deposit would be used to fund transitional services and future installation costs. Finally, the Settlement Agreement provided for mutual releases.

AGC

The Company is in receipt of a letter dated April 10, 2015 on behalf of America’s Growth Capital, LLC d/b/a AGC Partners (“AGC”) demanding payment from the Company for amounts relating to the occurrence of a strategic transaction between the Company and Signal Point Holdings Corp in the amount of $300,000. The Company has evaluated all of its options, including legal options, with respect to the validity of the AGC letter and the alleged grounds for demanding payment and formally responded in a letter dated April 16, 2015 in which the Company denied AGC’s claims.
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Guarantees and Indemnities:
The Company indemnifies its directors, officers and certain executives to the maximum extent permitted under the laws of the State of Nevada, and its lessor in connection with its facility lease for certain claims arising from such facility or lease. Additionally, the Company periodically enters into contracts that contain indemnification obligations. These indemnification obligations provide the contracting parties with the contractual right to have the Company pay for the costs associated with the defense and settlement of claims, typically in circumstances where the Company has failed to meet its contractual performance obligations in some fashion.

The maximum amount of potential future payments under such indemnifications is not determinable. The Company has not incurred significant costs related to these guarantees and indemnifications, and no liability has been recorded in the consolidated financial statements for guarantees and indemnifications as of March 31, 2015.

Other
The Company is dependent on the use of incumbent local exchange carriers’ local and transport networks and access services to provide telecommunications services to its customers. Charges for leasing local and transport network components and purchasing special access services historically have made up a significant percentage of both the Company’s and the Predecessor Company’s overall cost of providing telecommunications services to its customers. These network components and services are purchased in each market through interconnection agreements, special access contracts, commercial agreements or a combination of such agreements from the incumbent local exchange carrier, or, where available, from other wholesale network service providers. These costs are recognized in the period in which the services are delivered and are included as a component of the Company’s cost of sales.

Other than the foregoing, no material legal proceedings to which the Company (or any officer or director of the Company, or any affiliate or owner of record or beneficially of more than five percent of the Common Stock, to management’s knowledge) is party to or to which the property of the Company is subject is pending, and no such material proceeding is known by management of the Company to be contemplated.

22. Subsequent Events

Amendment and default of Roomlinx debt

On June 30, 2015, Roomlinx entered into the First Amendment to the AmendedFinancing Agreement and Restated Revolving Credit Agreement, dated asthe Second A&R Limited Waiver and the First Amendment to the Second A&R Limited Waiver.

Contractual Obligations

As of June 30, 2015 (the “Amendment”), by and among Roomlinx, SSI and CenFin.

The material terms2023, we had non-cancelable operating lease commitments of the Amendment provided that CenFin would be entitled to 33% of the gross proceeds raised in any equity orapproximately $8.0 million, long-term debt financing activities by either Roomlinx or SSI, not including operational leases, for so long as there is any outstandingwith a $71.7 million principal balance, under the Credit Agreement (the “CenFin Equity Payment Obligation”).

The terms of the Amendment required Roomlinx to enter an Account Control Agreement reflecting the modifications set forth in the Amendment. In consideration of the Amendment, Roomlinx and SSI released the Lender from all claimsacquisition liabilities related to the loan documents.

On September 30, 2015, RoomlinxConverge sellers of $9.3 million, liquidation damages related to the Preferred Series-E holders of $0.9 million, and its affiliate SSI, received a noticerestructuring liabilities of default under$0.1 million. For the Amended and Restated Revolving Credit and Security Agreement datedthree months ended June 30, 2015 (Agreement).  The notice alleges that2023, the RoomlinxCompany funded its operations using available cash.

In addition, see Notes 7. Credit Facilities and SSI were in default of the Agreement due8. Leases to the failure to make payments equaling $252,250.00 and seeks to enforce its rights under the Agreement.
On October 7, 2015, in settlement of the default, Roomlinx and SSI entered into a Forbearance Agreement with Cenfin upon the following terms:

●The interest rate on each Revolving Loan (as defined) was increased to the Federal Funds Rate plus 13%, from 5%.
●Subject to compliance by Roomlinx and SSI with the terms and conditions of the Second Amendment and the Loan Agreement, Cenfin agreed to forebear from exercising its rights and remedies against SSI with right to the default which occurred as a result of non-payment on September 29, 2015 until the earlier of November 7, 2015 or a Forbearance Default (as defined) occurs (the “Forbearance Period”).  SSI also agreed during the Forbearance Period not to make any payments to creditors or lenders of SSI without Cenfin’s prior written consent, except for contractual payments, in the ordinary course of business to vendors of SSI.
●Roomlinx agreed during the Forbearance Period not to make any payments to creditors or lenders of Roomlinx (other than NFS Leasing) without first giving Cenfin two (2) business days prior written notice, except for contractual payments to vendors in the ordinary course of business.
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Amendment and default of SignalShare debt
On July 31, 2015, certain wholly owned subsidiaries of Roomlinx identified below entered into the following agreements in connection with the conversion of certain equipment leases into secured loans (collectively referenced as the “NFS Loan Documents”):
●Lease Schedule Termination Loan and General Release Agreement (the “Termination Agreement”), by and between SignalShare and NFS Leasing, Inc. (“NFS”);
●Security Agreement by and between Holdings and NFS;
●Promissory Note issued by SignalShare to NFS in the principal amount of $4,946,212.91 (the “Note”);
●Corporate Guaranty Agreement by and between Holdings and NFS; and
●First Amendment to the Security Agreement by and between SignalShare and NFS.

The NFS Loan Documents provided that amounts owed by SignalShare to NFS pursuant to certain equipment leases would be converted into secured debt as evidenced by the Note. The Note provides for SignalShare to make seventy five consecutive weekly payments of $71,207.24 with a final payment of $18,886.83 due upon maturity of the Note on December 19, 2016 (the “Maturity Date”). The Note is secured by subordinated security interests in all of the assets of SignalShare and Holdings. The Note is also guaranteed by Holdings. In addition to the payment obligations under the Note, the Termination Agreement provides that SignalShare will make concurrent weekly payments of $28,792.76 for payments due pursuant to the Master Equipment Lease Number: 2013-218 dated as of March 11, 2013 through the Maturity Date.

In connection with the NFS Loan Documents, Roomlinx issued to NFS a Warrant to purchase 1,111,111 shares of Common Stock at an exercise price of $1.80 per share with an exercise period of five years.

On September 22, 2015, NFS notified SignalShare of a default for non-payment. On September 28, 2015 NFS withdrew the default. In exchange for the default being withdrawn, NFS, SignalShare and Holdings agreed that unless NFS, on or before Friday, October 2, 2015, is in receipt of payment in the amount of $389,415.54 or alternatively, if a forbearance arrangement satisfactory to NFS is not executed between the parties by the close of business (5:00 P.M.) on that day,  NFS shall be entitled to issue a new Notice of Default directed to both SignalShare and Holdings (with respect to its guaranty), in which event SignalShare and Holdings each waive all applicable cure periods with respect to such default.

On October 2, 2015, NFS gave notice of Default to SignalShare and simultaneously gave notice to Holdings that NFS would be seeking payment under the SignalShare note pursuant to the corporate guarantee given NFS by Holdings as security for the converted SignalShare loans.   The parties negotiated a settlement upon the following material terms:

●SignalShare shall pay NFS via wire transfer the sum of $150,000 within one business day of its receipt of the final payment from one of its customers, which was expected to be received approximately October 30, 2015.
●SignalShare will pay NFS the amount of $28,792.76 via wire transfer on each Monday, commencing October 12, 2015 through Monday November 16, 2015, on account of the Master Lease. SignalShare has made it first three payment under these terms on October 12, 19 and 26, 2015.
●SignalShare shall on or before October 23, 2015 cause UCC termination statements to be filed by each of Brookville and Veritas.
●On or before November 16, 2015 SignalShare and Holdings shall close a bridge loan funding, or any other similar funding event NFS on or before said date, will receive a $500,000 payment which NFS will apply against the outstanding Term Note in accordance with the provisions of the Note.
●Upon NFS’s receipt of the foregoing $500,000 payment, NFS, in its sole discretion, may choose to restructure the remaining balance of the Term Note. In such event the $28,792.76 weekly Master Lease payments will remain in effect until the leases are paid in full.
●SignalShare shall make a payment to NFS in the amount of $20,000 on or before December 1, 2015 which will be accepted by NFS’ as reimbursement of its attorneys’ fees and other expenses.
●SignalShare shall pay the past due Personal Property tax due NFS of $50,217.15 on or before December 15, 2015.
●One million shares in Roomlinx will be issued to NFS upon, and subject to, NFS’ execution of a mutually agreeable Roomlinx’s Investment Intent Letter confirming that the shares are being acquired for lawful investment purposes under applicable law.

In the event SignalShare or Holdings fails to timely pay to NFS any amounts set forth above, or otherwise fails to timely perform any other obligation set forth above, NFS shall have the right to immediately, upon e-mail notice to SignalShare reinstate the default, with no cure rights.
On November 18, 2015, NFS gave notice of Default to SignalShare and simultaneously gave notice to SPHC that NFS would be seeking payment under the SignalShare note pursuant to the corporate guarantee given NFS by SPHC as security for the converted SignalShare loans.  The parties entered in negotiations in order to remove the default and restructure the obligations. On November 19, 2015, the parties agreed to restructure the loan and make certain payments to NFS and are presently working on a formal withdrawal of the defaults and formalizing the agreement.  In the meantime NFS is not pursuing its defaults.
Allied
On March 27, 2015 and March 30, 2015, the Company entered into two notes with Allied for $255,000 and $275,000, respectively, which were due and payable on April 3, 2015 and April 15, 2015, respectively. Both notes carry interest at twenty percent (20%) per year. As of October 22, 2015, a balance of $205,000 of principal is outstanding plus accrued interest of approximately $35,000 on these notes. In addition, Allied is the holder of the Company’s Series A Preferred Stock for which Allied claims dividends are due.   On October 9, 2015, the Company received a notice of default.  On October 12, 2015, the default was withdrawn.  On November 24, 2015, Allied issued a default regarding the march 23, 2015 note with the SPHC in the amount of $240,000.  SPHC has three (3) business days to cure the default, or November 30, 2015.  If the default is not cured, Allied will have the right to the receivables of Signal Point Telecommunications Corp. until the note is repaid. The Parties are currently in negotiations to remove the default and Allied is not pursuing its rights at this time.

See October 26, 2015 transactions below for further discussion.
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Brookville, Varitas, and Robert Depalo Defaults
The Company has relationships with various entities related to and controlled by Robert DePalo.  These include Brookville, Veritas and Mr. DePalo personally in the form of a consulting agreement.  Brookville and Veritas are both senior secured lenders of the Company.  Mr. DePalo as a consultant under the aforementioned consulting agreement, claims payments of $17,500 per month are due for the last five (5) months. Each of these entities claim that the Company is in breach of its obligations and on October 9, 2015 each entity sent notice of default.  The parties negotiated the defaults and on October 12, 2015 the defaults were withdrawn.

See October 26, 2015 transactions below for further discussion.

Leasing Irregularities and Management Controls
On September 17, 2015, the Company received an allegation by Robert DePalo, the former board member, CEO and substantial shareholder of the Company, alleging misappropriation of funds by two members of the Company’s management team.  The Company investigated these allegations and found them to be false and without merit.

In July 2015, the Company became aware of irregularities in leasing arrangements between SignalShare and NFS related to leases entered into prior to the date of the Merger.  During an audit of the leases, it was determined that certain leases were under collateralized. As a result, SignalShare and NFS converted those leases into a loan guaranteed by the Company.  In addition, management evaluated controls over execution of leases at its subsidiary and implemented additional controls. These additional controls include SignalShare’s management and financial personnel’s powers being substantially curtailed and all major decision making matters are now required to be approved by management of the Company.  Moreover, two of the officers of SignalShare were required to personally guaranty the new loan.

SignalShare payroll tax matter
SignalShare is in default of its payment obligations for payroll taxes to the IRS for the first and second quarter of 2015. The amount of trust fund taxes outstanding as of September 30, 2015 is $375,814.56 which does not include penalties and interest.  SignalShare is in negotiations with the IRS regarding payment of this amount.  The IRS intends to file liens against SignalShare and may pursue personal action against the responsible SignalShare management team members if payment of the trust fund balance is not made within 90 days of September 30, 2015.  As a result of this matter, the Company has moved SignalShare’s payroll process to its corporate offices in order to strengthen the controls over the payroll functions.

Series A Preferred Stock
In light of the Company’s negative net asset position, absence of surplus, and lack of current or prior year earnings, the Company reviewed carefully its contractual and other obligations, including those purporting to require Holdings to make dividend payments on its Series A Preferred Stock, which was subsequently terminated.  There can be no assurances that the Company’s review will result in a favorable outcome for the Company or that negotiations with preferred stockholders and related party consultants will be successful. If the Company is unable to reach such agreements on terms favorable to it, results of operations and financial condition may be materially adversely affected.

SPHC has issued to Allied International Fund, shares of its Signal Point Holdings Corp. Series A Preferred Stock.  The stock provided for the payment of dividends calculated as the greater of 1% of gross revenue or $50,000 per month, whichever is more.  SPHC has paid $1,550,000 since inception in dividends to Allied authorized by the Company’s former sole director Robert DePalo, an affiliate. 

See October 26, 2015 transactions below for further discussion.

SignalShare Office Lease
SignalShare received notice on October 1, 2015 that its lease with Aerial Realty Corp. for office space in Morrisville, NC was being terminated due to non-payment and that the office location locks were changed.  The Landlord expressed its intention to avail itself of all remedies under the lease including the collection of waived rent (equal to $21,875.00), attorney’s fees, brokerage fees and any other amounts due under the Lease which was under term until March 31, 2020 and approximate $287,000.00.  The Company is reviewing its options and the Landlord’s claims and cannot determine the ultimate outcome at this time.
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October 26, 2015 Transactions
On October 26, 2015, Roomlinx, Holdings and all of Holdings’s subsidiaries (the “Subsidiaries”) entered into the following transactions with certain preferred stock holders of Holdings and senior secured debt holders of Roomlinx and Holdings in accordance with the following documents (the “Debt and Preferred Stock Restructuring Documents”). The purpose of the transaction was to reduce the overall financial exposure of Roomlinx and give Roomlinx the maximum flexibility in management and raising additional capital for Roomlinx, while eliminating the preferences and certain controls of the Preferred Stock holders.

●Series A Preferred Termination, Loan and General Release Agreement (the “Series A Agreement”), by and among Holdings, Allied and Roomlinx solely with respect to the mutual releases described therein;
●Series B Preferred Termination, Consulting Agreement Modification and Settlement Agreement (the “Series B Agreement”), by and among Roomlinx, Holdings, the Subsidiaries and Robert DePalo (“DePalo”);
●Secured Promissory Note, issued by Holdings and all of its subsidiaries to Allied in the principal amount of $2,700,000 (the “Allied Note”), which is secured by the existing Security Agreement by and between Holdings and Allied, dated as of July 31, 2015.
●First Allonge and Amendment to the March 23, 2015 Promissory Note issued by Holdings to Allied, dated October 27, 2015 (the “Allied Allonge”) for a $240,000 loan.
●Loan Modification Letter Agreement, by and among Roomlinx, Holdings and Allied, dated as of October 27, 2015 (the “Allied Secured Modification”); extending the payment of the past due amounts and
●Loan Modification Letter Agreement, by and among Roomlinx, Holdings and Brookville Special Purpose Fund, LLC (“Brookville”), dated as of October 27, 2015 (the “Brookville Senior Secured Modification”), extending the payment of the past due amounts.
●Subject to the terms and conditions of the Series A Agreement and the Series B Agreement, each of Allied and DePalo agreed to the cancellation of the Series A and Series B Preferred Stock, respectively, issued by Holdings. In exchange for the cancellation the parties agreed to the following:
a)  Mutual releases of all claims between Roomlinx, Holdings, the Subsidiaries and each of Allied and DePalo (and certain affiliated and related parties).
b)  The secured debt of $3,200,000 owed by Holdings to Allied was reduced by $500,000, to $2,700,000 and payable over six and one-half years, in accordance with provisions described in the attached agreement.
c)  In connection with the cancellation of the Holdings Series B Preferred Stock, Roomlinx agreed that (subject to shareholder approval and the applicable laws and regulations) it would amend its charter and other relevant documents to provide for the following:
(i)  Roomlinx will not approve any reverse stock splits without the affirmative vote of the holders of at least fifty one percent (51%) of the issued and outstanding common stock;
(ii)  for a period of two (2) years Roomlinx will not issue any class of stock with supermajority voting rights;
(iii)  DePalo will have the right to appoint one member to the Board of Directors of Roomlinx, subject to such person not being a relative of DePalo and independent of DePalo; and
(iv)  Until the expiration of the Consulting Agreement, by and between Roomlinx and DePalo, DePalo will be entitled to a monthly payment of $17,500 that shall not be paid, but shall accrue, until Roomlinx and DePalo agree or Roomlinx obtains funding in the amount of $8,000,000 and thereafter payments of accrued arrears and regular payments will continue on a monthly basis for the term of the Consulting Agreement.
d)  Pursuant to the Allied Allonge and associated documents, Allied agreed to lend an additional $240,000 to Holdings, accruing interest at twenty percent (20%) per annum and shall be repaid no later than November 23, 2015. The obligations under the Note (as amended) are secured by an assignment of all the receivables of Signal Point Telecommunications Corp, a wholly owned subsidiary of Holdings in the event of a default Allied will take procession of all receivables and liquidate them to satisfy its loan and expenses including, but not limited to, legal fees.
e)  Pursuant to the Brookville Senior Secured Modification, Roomlinx, Holdings and all of its Subsidiaries agreed to a new payment schedule for the debt owed by Holdings in accordance with the terms set forth in the attached agreement.
f)   Pursuant to the Brookville Senior Secured Modification, Roomlinx and Holdings agreed to a new payment schedule in accordance with the terms set forth in the attached agreement:
Subsequent stock issuances
From March 31, 2015 through December 1, 2015 the Company has issued an additional 700,815 shares of common stock through private placement memorandum at $1.80 per share.




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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and thecondensed consolidated financial statements and related notes thereto included in our December 31, 2014, as amended, Annual Report on Form 10K, filed with the SEC and with the unaudited interim financial statements and related notes thereto presented in“Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10Q, as well as our reports on Form 8K10-Q for the principal repayments required under the Company’s Term Loan Facility and other SEC filings.

FORWARD-LOOKING STATEMENTS

This report contains or incorporates forward-looking statements within the meaningmaturities of the federal securities laws that involve risksCompany's operating lease liabilities, respectively.

Recently Issued Accounting Pronouncements Not Yet Adopted and uncertainties. Statements regarding future events, developments, the Company's future performance, as well as management's expectations, beliefs, intentions, plans, estimates or projections relating to the future are forward-looking statements within the meaning of these laws. We develop forward-looking statements by combining currently available information with our beliefs and assumptions. These statements relate to future events, including our future performance, and management’s expectations, beliefs, intentions, plans or projections relating to the future and some of these statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “seeks,” “future,” “continue,” “contemplate,” “would,” “will,” “may,” “should,” and the negative or other variations of those terms or comparable terminology or by discussion of strategy, plans, opportunities or intentions. As a result, actual results, performance or achievements may vary materially from those anticipated by the forward-looking statements. These statements include, among others:
-  statements concerning the benefits that we expect will result from our business activities and results of exploration that we contemplate or have completed, such as increased revenues; and
-  statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.

Among the factors that could cause actual results, performance or achievements to differ materially from those indicated by such forward-looking statements are:
-  the continued suspension of certain obligations of the Company and Hyatt pursuant to the MSA or the removal of such obligations from the MSA and the restructure or release of the obligations of certain Hyatt hotels to install the Company’s iTV product;
-  the Company’s successful implementation of new products and services (either generally or with specific key customers);
-  the Company’s ability to satisfy the contractual terms of key customer contracts; the risk that we will not achieve the strategic benefits of the acquisition of Canadian Communications;
-  demand for the new products and services, the volume and timing of systems sales and installations, the length of sales cycles and the installation process and the possibility that our products will not achieve or sustain market acceptance;
-  unexpected changes in technologies and technological advances and ability to commercialize and manufacture products;
-  the timing, cost and success or failure of new product and service introductions, development and product upgrade releases;
-  the Company's ability to successfully compete against competitors offering similar products and services;
-  the ability to obtain adequate financing in the future;
-  the Company’s ability to establish and maintain strategic relationships, including the risk that key customer contracts may be terminated before their full term;
-  general economic and business conditions;
-  errors or similar problems in our products, including product liabilities;
-  the outcome of any legal proceeding that has been or may be instituted against us and others and changes in, or failure to comply with, governmental regulations;
-  our ability to attract and retain qualified personnel;
-  maintaining our intellectual property rights and litigation involving intellectual property rights;
-  legislative, regulatory and economic developments; risks related to thirdparty suppliers and our ability to obtain, use or successfully integrate third party licensed technology;
-  breach of our security by third parties; and
-  those factors discussed in “Risk Factors” in our periodic filings with the Securities and Exchange Commission (the“SEC”).
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We make these statements under the protection afforded by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Because forward-looking statements are subject to assumptions and uncertainties, actual results, performance or achievements may differ materially from those expressed or implied by such forward-looking statements. Stockholders are cautioned not to place undue reliance on such statements, which speak only as of the date such statements are made. Except to the extent required by applicable law or regulation, Roomlinx undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

GENERAL
Overview
Roomlinx, Inc., a Nevada corporation ("we," "us" or the "Company"), through its subsidiaries it provides three core products and services using the following operating entities:
-Hotel Hospitality Services provided by Signal Share Infrastructure, Inc. (“Hospitality”)
-High Density Wi-Fi Services provided by SignalShare, LLC. (“HDWF”)
-Enterprise Voice, Data and Wireless Services provided by Signal Point Telecommunications Corp (“Communications Services”) and Residential Media Communications Services provided by Cardinal Broadband, LLC.
Hotel Hospitality Services
The Hospitality business segment provides the following services to customers:
In-room media and entertainment
Hospitality services provide a suite of in-room media and entertainment products and services for hotels, resorts, and time share properties.  Products and services included within our in-room media and entertainment offering include our proprietary Interactive TV platform (“iTV”) and on-demand movies.
The Company develops proprietary software and integrates hardware to facilitate the distribution of its Interactive TV platform.  The Company provides proprietary software, a media console and an extended USB port for the hotel guest, a proprietary wireless keyboard with built-in mouse, and a proprietary remote control with a built in mouse. The Company installs and supports these components. iTV guests will have access to a robust feature set through the HDTV such as:
●Internet Apps including Netflix, Pandora, Hulu, YouTube, Facebook, and many more
●International and U.S. television programming on demand
●Web Games
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●MP3 player and thumb drive access
●Ability to send directions from the iTV system to a mobile device
●Video-on-demand services; including first non-theatrical release Hollywood motion pictures, adult, and specialty content.
●Ability to order room service, interact with hotel associates, make restaurant reservations, edit and print documents as well as gain direct access to local dining, shopping, nightlife, cultural events or attractions all through a dynamic user interface on the TV
The Company provides proprietary software, a media console and an extended USB port for the hotel guest, a proprietary wireless keyboard with built-in mouse, and a proprietary remote control with a built in mouse. The Company installs and supports these components.
Hotel properties sign long-term service agreements, where we provide the maintenance for the networks, as well as the right to provide value added services over the network.
The Company generates revenue through:

·  Ongoing connectivity service and support contracts
·  Network design and installation services
·  Delivery of content and advertising
·  Delivery of business and entertainment applications
·  E-commerce
·  The customization of API interfaces and its software
·  Software licensing
·  Delivery of pay-per-view content
·  Sale of video-on-demand systems
Free-To-Guest Television Programming (“FTG”).
Our hotel satellite television programming services provide for delivery and viewing of high definition and standard definition television programming for hotels, resorts, and time share properties.  \We specialize in providing advanced high definition equipment for delivering digital television programming such as ESPN, HBO, Starz, and other specialty and local channels. Customers typically pay a one-time fee for the installation of the equipment and then pay monthly programming fees for delivery of a specific TV channel lineup.
The Company generates revenue through:
·  The design and installation of FTG systems
·  Delivery of television programming fees and/or commissions
Wired Networking Solutions and Wireless Fidelity Networking Solutions.
We provide wired networking solutions and wireless fidelity networking solutions, also known as Wi-Fi, for high speed internet access at hotels, resorts, and timeshare locations. The Company installs and creates services that address the productivity and communications needs of hotel, resort, and timeshare guests. We specialize in providing advanced Wi-Fi wireless services.
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Hotel customers sign long-term service agreements, where we provide the maintenance for the networks, as well as the right to provide value added services over the network. Customers typically pay a one-time fee for the installation of the network and then pay monthly maintenance fees for the upkeep and support of the network.
The Company generates revenue through:
·  Ongoing connectivity service and support contracts
·  Network design and installation services
High Density Wi-Fi Services
Our HDWF affiliate provides turnkey services including all technology, infrastructure expertise and data aggregation necessary to construct and monetize both temporary and permanent broadband wireless networks at large event forums, such as stadiums, arenas and concert venues. Our HDWF solutions have provided services to the 2014 Super Bowl Champion New England Patriots, 2015 NBA Champion Golden State Warriors, Jacksonville Jaguars and various other professional sports teams and events. HDWF solutions for sports stadiums, concert and festival venues and convention centers, while helping monetize those networks with the sale of advertising and sponsorship opportunities. The services for permanent installation in stadiums, arenas and convention centers, including such customers as the Sands Venetian Hotel in Las Vegas, the Toyota Center (Houston Rockets), the Sleep Train Arena (Sacramento Kings), the Joe Louis Arena (Detroit Red Wings), and the University of Michigan football stadium. Temporary installations in venues for concerts and festivals has in the past provided these services for such events as Black Eyed Peas, Jay Z, Dave Mathews Band and U.S. Open Tennis. Moreover, as part of its media offering to its customers, the HDWF network has the ability to provide data analytics through their Live-Fi system for the networks they monitor allowing advertisers to better target their advertisement placements and providing additional revenue opportunities.

The Company has launched its Fan and Guest Engagement platform to enable teams, venues and entertainers to share in ad, splash page, banners and sponsorship through a delivery system to individual handheld devices during events.

The Company generates revenue through:

·  Ongoing connectivity service and support contracts
·  Network design and installation services
·  Delivery of content and advertising
·  Software licensing
·  User analytics and reporting

Enterprise and Residential Media Services

We provide residential and business customers telecommunication services including telephone, satellite television, and wired and wireless internet access. Our SPTC affiliate provides enterprise level broadband and digital voice over internet protocol (“VoIP”) services to business customers primarily in New York, New Jersey and Chicago.  SPTC utilizes point to point W connections as well as leased facilities from other telecommunications provides to offer its services.
Our Cardinal Broadband, LLC. affiliate (“Cardinal”) provides residential and business telephone service through traditional, analog “twisted pair” lines, as well as VoIP.  Analog phone service is typically provided via an interconnection agreement with CenturyLink, Inc., which allows the Company to resell CenturyLink service through their wholesale and retail accounts with CenturyLink.  VoIP service is provided at properties where the Company maintains a broadband internet service to the end customer, allowing the Company to provide digital phone service (VoIP) over the same lines as their internet service.
Cardinal also provides television service utilizing agreements with DISH Network and DirecTV.  Most television service to customers is provided via a head-end distribution system, or an L-Band digital distribution system.   Television service is offered in high definition whenever possible.

Cardinal only provides services in Colorado.
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The Company generates revenue through:

·  Network design and installation services
·  Delivery of telephone service (billed monthly)
·  Delivery of Internet service  (billed monthly)
·  Delivery of television service (billed by the satellite provider with monthly commissions paid to the Company)
·  Management fees for the management of affiliated communication systems

Critical Accounting Policies


Recently Issued Accounting Pronouncements Not Yet Adopted
Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our financial statements, which have been prepared in accordance with accounting policies generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, the allowance for doubtful accounts, property, plant and equipment valuation and goodwill impairment. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements.

Accounts Receivable and Allowance for Doubtful Accounts - The Company extends credit to certain customers in the normal course of business, based upon credit evaluations, primarily with 30 – 60 day terms. The Company’s reserve requirements are based on the best facts availableSee Note 2 to the Company and are reevaluated and adjusted as additional information is received.  The Company’s reserves are also based on amounts determined by using percentages applied to certain aged receivable categories. These percentages are determined by a variety of factors including, but not limited to, current economic trends, historical payment and bad debt write-off experience. Accounts are written off when they are deemed uncollectible. Further, during 2014, SignalShare entered into an agreement with one of its customers, whereby the collection would be made in 36 monthly installments. As of March 31, 2015 and December 31, 2014, $167,820 was accounted as “Accounts Receivable Short Term Direct” and $209,775 and $335,640 “Accounts Receivable Long Term Direct”, respectively, was included in “Other assets” in the accompanying consolidated balance sheets, respectively.

The Company evaluated outstanding customer invoices for collectability. The assessment and related estimates are based on current credit-worthiness and payment history.  As of March 31, 2015 and December 31, 2014, the Company recorded an allowance for doubtful accounts in the amount of approximately $71,000 and $-0-, respectively.

Inventory - Inventory, principally large order quantity items which are required for the Company’s media and entertainment installations, is stated at the lower of cost (first-in, first-out) basis or market.  The Company generally maintains only the inventory necessary for contemplated installations.  Work in process represents the cost of equipment related to installations which were not yet completed.

The Company performs an analysis of slow-moving or obsolete inventory periodically, and any necessary valuation reserves, which could potentially be significant, are included in the period in which the evaluations are completed.  As of March 31, 2015 and December 31, 2014, the inventory obsolescence reserve of $120,000 and $-0-, respectively, was mainly related to raw materials, and results in a new cost basis for accounting purposes.

Revenue Recognition - SPTC derives the majority of its revenue from monthly recurring fees and usage-based fees that are generated principally by sales of its network, carrier and subscription services and SignalShare derives revenues from the construction of both temporary and permanent broadband installation services at large event forums.

Monthly recurring fees include the fees paid by SPTC’s network and carrier services customers for lines in service and additional features on those lines. SPTC primarily bills monthly recurring fees in advance, and recognizes the fees in the period in which the service is provided.

Usage-based fees consist of fees paid by SPTC’s network and carrier services customers for each call made. These fees are billed in arrears and recognized in the period in which the service is provided.

Subscriber fees include monthly recurring fees paid by SPTC’s end-user subscribers for lines in service, additional features on those lines, and usage-based per-call and per-minute fees. Subscriber fees also consist of provision of access to data, wireless, and VoIP services. These fees are billed in advance for monthly recurring items and in arrears for usage-based items, and revenues are recognized in the period in which service is provided.

SignalShare product sales are only recognized as revenue at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery or service is completed, no other significant obligations of the Company exist and collectability is reasonably assured.

SPTC and SignalShare also recognize revenue on the basis of the milestone method for revenue recognition for services delivered related to the installation of temporary or permanent wireless Internet solutions as per the contract arrangement and when the performance and acceptance criteria have been met and agreed to by the customer.

Revenue arises from setting up a Wi-Fi network for an event, an equipment sales contract, an equipment rental contract, consulting services and support and maintenance contracts. The table below describes the accounting for the various components of SignalShare’s revenues.
ProductRecognition Policy
Event Services (Setting up a Wi-Fi network) Workshops and Workshop CertificatesDeferred and recognized upon the completion of the event
Equipment salesRecognized at the time delivered and installed at the customer location
Equipment rental contractDeferred and recognized as services are delivered, or on a straight-line basis over the initial term of the rental contract
Consulting services (on Wi-Fi networks, installation, maintenance)Recognized as services are delivered
Support and Maintenance contractDeferred and recognized on a straight-line basis over the term of  the arrangement
SSI derives its revenue from the installation and ongoing services of in-room media, entertainment, and HD television programming solutions in addition to wired networking solutions and WiFi Fidelity networking solutions. Revenue is recognized when all applicable recognition criteria have been met, which generally include a) persuasive evidence of an existing arrangement; b) fixed or determinable price; c) delivery has occurred or service has been rendered; and d) collectability of the sales price is reasonably assured.
Installations and service arrangements are contractually predetermined and such contractual arrangements may provide for multiple deliverables, revenue is recognized in accordance with ASC Topic 650, Multiple Deliverable Revenue.  The application of ASC Topic 650 may result in the deferral of revenue recognition for installations across the service period of the contract and the re-allocation and/or deferral of revenue recognition across various service arrangements.  Below is a summary of such application of the revenue recognition policy as it relates to installation and service arrangements SSI has with its customers.
SSI enters into contractual arrangements to provide multiple deliverables which may include some or all of the following - system installations and a variety of services related to high speed internet access, free-to-guest, video on demand and iTV systems as well as residential phone, internet and television.  Each of these elements must be identified and individually evaluated for separation. The term “element” is used interchangeably with the term “deliverable” and SSI considers the facts and circumstances as it relates to its performance obligations in the arrangement and includes product and service elements, a license or right to use an asset, and other obligations negotiated for and assumed in the agreement.  Analyzing an arrangement to identify all of the elements requires the use of judgment.  In the determination of the elements included in Roomlinx agreements, embedded software and inconsequential or perfunctory activities were taken into consideration.
Once the Deliverables have been identified, we determine the relative fair value of each element under the concept of Relative Selling Price (“RSP”) for which SSI applied the hierarchy of selling price under ASC Topic 605 as follows:
VSOE - Vendor specific objective evidence (“VSOE”) is still the most preferred criteria with which to establish fair value of a deliverable. VSOE is the price of a deliverable when a company sells it on an open market separately from a bundled transaction.
TPE - Third party evidence (“TPE”) is the second most preferred criteria with which to establish fair value of a deliverable. The measure for the pricing of this criterion is the price that a competitor or other third party sells a similar deliverable in a similar transaction or situation.
RSP - RSP is the price that management would use for a deliverable if the item were sold separately on a regular basis which is consistent with company selling practices. The clear distinction between RSP and VSOE is that under VSOE, management must sell or intend to sell the deliverable separately from the bundle, or has sold the deliverable separately from the bundle already. With RSP, a company may have no plan to sell the deliverable on a stand-alone basis.
Hospitality Installation Revenues
Hospitality installations include High Speed Internet Access (“HSIA”), Interactive Television (“iTV”), Free to Guest (“FTG”) and Video on Demand (“VOD”).  Under the terms of these typical product sales and equipment installation contracts, a 50% deposit is due at the time of contract execution and is recorded as deferred revenue.  Upon the completion of the installation process, deferred revenue is realized.  However, in some cases related to VOD installations or upgrades, the Company extends credit to customers and records a receivable against the revenue recognized at the completion of the installation.
Additionally, SSI may provide the customer with a lease financing arrangement provided the customer has demonstrated its credit worthiness to the satisfaction of SSI.  Under the terms and conditions of the lease arrangements, these leases have been classified and recorded as Sale-Type Leases under ASC Topic 840-30 and accordingly, revenue is recognized upon completion and customer acceptance of the installation which gives rise to a lease receivable and unearned income.
Hospitality Service, Content and Usage Revenues
SSI provides ongoing 24/7 support to both its hotel customers and their guests, content and maintenance as applicable to those products purchased, installed and serviced under contract.  Generally, support is invoiced in arrears on a monthly basis with content and usage, which are dependent on guest take rates and buying habits.  Service maintenance and usage revenue also includes revenue from meeting room services, which are billed as the events occur.
 At times, SSI will enter into arrangements with its customers in which a minimum revenue amount earned from content in a specific hotel will be agreed to by both parties. If the revenue earned by the Company exceeds this minimum revenue amount for a defined period (“Revenue Overage”), SSI may be required to pay to the customer an amount up to the Revenue Overage. The related Revenue Overage amount is recorded as a reduction of the hospitality services revenue.
Residential Revenues
Residential revenues consist of equipment sales and installation charges, support and maintenance of voice, internet, and television services, and content provider residuals, installation commissions, and management fees.  Installations charges are added to the monthly service fee for voice, internet, and television, which is invoiced in advance creating deferred revenue to be realized in the appropriate period.  SSI’s policy prohibits the issuance of customer credits during the month of cancelation. SSI earns residuals as a percent of monthly customer service charges and a flat rate for each new customer sign up.  Residuals are recorded monthly. Commissions and management fees are variable and therefore revenue is recognized at the time of payment.
The Company recognizes revenue in accordance with accounting principles generally accepted in the United States (“US GAAP”), specifically Accounting Standards Codification (“ASC”) 605 “Revenue Recognition,” which requires satisfaction of the following four basic criteria before revenue can be recognized:
a.  There is persuasive evidence that an arrangement exists;
b.  Delivery has occurred or services have been rendered
c.  The fee is fixed and determinable; and
d.  Collectability is reasonably assured.

The Company bases its determination of the third and fourth criteria above on the Company’s judgment regarding the fixed nature of the fee it has charged for the services rendered and products delivered, and the prospects that those fees will be collected. If changes in conditions should cause it to determine that these criteria likely will not be met for some future transactions, revenue recognized for any reporting period could be materially adversely affected.

Company management continually reviews and evaluates the collectability of revenues. For further information please see “Accounts Receivable and Allowance for Doubtful Accounts.” The Company’s management makes estimates of future customer credits and settlements due to various disputes on pricing and other terms of the contracts, through the analysis of historical trends and known events. Provisions for customer credits and settlements are recorded as a reduction of revenue when incurred and estimable. Since any revenue allowances are recorded as an offset to revenue, any future increases or decreases in the allowances will positively or negatively affect revenue by the same amount.

Deferred Revenue and Customer Prepayments - SPTC bills customers in advance for certain of its telecommunications services. If the customer makes payment before the service is rendered to the customer, SPTC records the payment in a liability account entitled customer prepayments and recognizes the revenue related to the communications services when the customer receives and utilizes that service, at which time the earnings process is complete.

SignalShare, from time to time, enters into leasing transactions to finance certain customer projects. In these leasing transactions, SignalShare receives payment from the third-party leasing company and uses the cash received to fund the project. All revenues related to these types of projects are deferred until the project is completed and the customer has approved the installation. At that time, SignalShare records the revenue previously deferred as it has no further obligation to the customer and the earnings process is complete. As of March 31, 2015 and December 31, 2014, SignalShare recorded $118,817 and $737, respectively, in deferred revenue and $507,090 and $398,732, respectively, in prepaid expenses for incomplete customer projects.

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 COMPARED TO THE THREE MONTHS ENDED March 31, 2014

Revenues

Our revenues for the three months ended March 31, 2015 and 2014 were approximately $3.20 million and $3.13 million, respectively, an increase of $0.77 million, or approximately 2.5%, reflecting a decrease in Broadband revenue of approximately $124,000 and an increase in Wi-Fi revenue of approximately $113,000. The decrease in Broadband revenue was primarily attributable to the movement of some of our large Chicago based customers to low latency networks and the loss of broadband customers in our New York market. The Increase in Wi-Fi broadband revenue was primarily attributable to slightly higher event revenue. Included in the first quarter 2015 was 4 days of revenue attributed to our hospitality services of approximately $88,000.

Wi-Fi
The Wi-Fi product line includes our installations in professional sports stadiums, arenas, convention centers and concert / festival venues. Revenue for this product line for the three months ended March 31, 2015 was approximately $346,000 and for the three months ended March 31, 2014 was approximately $233,000. The increase in revenue is primarily attributable to timing of the completion of various installations.

Broadband and VoIP
The Broadband and VoIP product line includes our installations primarily in the New York Tri-state area of wired and wireless broadband, with a variety of VoIP telephone service offerings.  Revenue for these product lines for the three months ended March 31, 2015 and 2014 was approximately $2.76 million and approximately $2.89 million, respectively, a decrease of approximately $0.13 million or 4.5%. This decrease primarily relates to a change in the mix of customer services to slightly lower priced products and the loss of some broadband customers due to extremely competitive pricing in the Company’s largest market.

Cost of Sales
For the three months ended March 31, 2015 and 2014, the cost of sales, excluding depreciation and amortization expenses, which is included in selling, general and administrative expense, were approximately $2.80 million and $2.29 million, respectively; a decrease of approximately $516,000 or 22.5%, for the three months ended March 31, 2015. The increase was primarily related to costs of our Wi-Fi broadband installations of approximately $639,000 related to various unprofitable installations. This increase was partially offset by a decrease in costs related to our Broadband services of approximately $169,000. Included in the first quarter 2015 was 4 days of cost of sales attributed to our hospitality services of approximately $46,000 in connection with the reverse acquisition transaction completed on March 27, 2015.

Selling, General and Administrative Expense

Total selling, general and administrative expense for the three months ended March 31, 2015 (excluding non-cash stock based compensation of approximately $3.17 million in the three months ended March 31, 2015) was approximately $2.79 million compared to approximately $2.44 million for the three months ended March 31, 2014, for a net increase of approximately $328,000, or an increase of approximately 13.5% between the periods. The net increase is primarily attributable to increased payroll associated with the addition of software developers to help support our live-fi product.

Operating Loss
Our operating loss increased to approximately $48.41 million for the three months ended March 31, 2015 (included non-cash stock based compensation of approximately $3.17 million and impairment of goodwill of approximately $42.8 million in the three months ended March 31, 2015) compared to approximately $1.65 million for the three months ended March 31, 2014, for an increase of approximately $46.75 million. This increase is primarily attributable to the impairment of goodwill recognized in connection with the reverse acquisition transaction as of March 27, 2015, increase in additional payroll costs associated with the addition of software developers to help support our live-fi product and by the decrease in operating margins between the three month periods as described above.

Non-Operating

Interest expense decreased from approximately $531,000 for the three months ended March 31, 2015, to approximately $457,000 for the three months ended March 31, 2015. This decrease in interest expense was primarily attributable to the effect of the partial conversions of the Brookville Special Purpose Fund and the Veritas High Yield Fund into equity at the end of March 2014. This decrease was offset by interest incurred by SignalShare related to lease transactions.

For the three months ended March 31, 2015 and 2014, the Company recognized other income, net of $31,000 and $36,000, respectively as included in other (expenses) income in the accompanying unaudited condensed consolidated statements of operations.

Discontinued Operations

Discontinued operations are the result of the termination of our wholesale telecom business unit in June 2013, resulting in a loss on discontinued operations of approximately $78,000 for the three months ended March 31, 2014.


Net Loss

For the three months ended March 31, 2015 and 2014, the Company experienced net losses attributable to common shareholders of approximately $49.0 million and $2.4 million, respectively, a net increase of approximately $46.6 million. This increase includes a loss on impairment of goodwill and stock based compensation recorded in 2015 of approximately $42.8 million and $ 3.2 million, respectively. Net loss attributable to common shareholders increase by of approximately $0.6 million with exclusion of impairment of goodwill and stock based compensation, which is primarily attributable to the increased payroll costs associated with the addition of software developers to help support our live-fi product and the decrease in operating margins between the three month periods as described above.
LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2015, the Company had approximately $1.5 million in cash on hand, had incurred a net loss of approximately $48.8.0 million (included the impairment of goodwill of approximately $42.8 million) and used approximately $2.7 million in cash for operating activities for the quarter ended March 31, 2015.  In addition, the Company had negative working capital (current liabilities exceeded current asset) of approximately $16.8 million. The negative working capital was primarily comprised of approximately $10.2 million of accounts payable, approximately $1.5 million of deferred revenue and customer prepayment, approximately $1.5 million of related party debt and approximately $3.3 million of current liabilities of discontinued operations that is substantially all related to accounts payable.

The Company’s cash balance and revenues generated are not currently sufficient and cannot be projected to cover operating expenses for the next twelve months from the date of this report.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  Management's plans include attempting to improve its business profitability, its ability to generate sufficient cash flow from its operations to meet its operating needs on a timely basis, obtain additional working capital funds through equity and debt financing arrangements, and restructure on-going operations to eliminate inefficiencies to raise cash balance in order to meet its anticipated cash requirements for the next twelve months from the date of this report.  However, there can be no assurance that these plans and arrangements will be sufficient to fund the Company’s ongoing capital expenditures, working capital, and other requirements.  Management intends to make every effort to identify and develop sources of funds.  The outcome of these matters cannot be predicted at this time.  There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.

The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital and continue profitable operations. The accompanying unaudited condensed consolidated financial statements doincluded in “Part I — Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for information regarding recently issued accounting pronouncements not include any adjustments relatedyet adopted.

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Critical Accounting Policy & Estimates

There have been no material changes to the recoverability or classification of asset-carrying amounts orCompany’s critical accounting policies from those set forth in our Transition Report on Form 10-K/T (as amended by Form 10-KT/A) for the amountssix month transition period ended December 31, 2022.

Item 3. Quantitative and classification of liabilities that may result shouldQualitative Disclosures about Market Risk.

The Issuer is not required to provide the Company be unableinformation called for in this item due to continueits status as a going concern.

Statements of Cash Flows March 31, 2015 Compared With March 31, 2014

The Company had a working capital deficit (current liabilities exceed current assets) of approximately $16.8 million at March 31, 2015, as compared with a working capital deficit of approximately $9.3 million at December 31, 2014. There were decreases in cash of approximately $1.1 million and offset by an increase in accounts receivable and leases receivable of approximately $1.3 million, prepaid expenses and other current assets of approximately $0.6 million, and equipment purchased for resale of approximately $0.14 million.

Net cash used in operating activities was approximately $2.7 million for the three months ended March 31, 2015, as compared to net cash used in operating activities of approximately $2.5 million for the three months ended March 31, 2014. 

Net cash provided by investing activities during the three months ended March 31, 2015 totaled approximately $813,000 which and was related to the cash acquired from the reverse acquisition transaction completed on March 27, 2015.

Net cash provided by financing activities was approximately $855,000 and $5.4 million for the three month periods ended March 31, 2015 and 2014, respectively. In 2015 the majority of cash provided was from funds received related to capital lease transactions of approximately $534,000, proceeds from notes payable received from a related party and contributed capital received from a principal shareholder of approximately $65,000, offset by repayment of related party debt of approximately $115,000 and payment of dividends to Series A Preferred Stock shareholder of $150,000. In 2014, the majority of the net cash provided was provided by the sale by the former Chief Executive Officer of the Company and principal shareholder, of shares of his personal Common Stock holdings with net proceeds of approximately $5.6 million paid to the Company in the three months ended March 31, 2014.

During each of the three month periods ended March 31, 2015 and 2014, the Company did not pay any income taxes as a result of the operating losses incurred by theSmaller Reporting Company.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
N/A
ITEMItem 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures. Under

Evaluation of disclosure controls and procedures

An evaluation was carried out under the supervision and with the participation of ourthe Company’s management, including our PrincipalChief Executive Officer and PrincipalChief Financial Officer, we evaluatedof the effectiveness of the design and operation of our disclosure controls and procedures (as defined in RuleRules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow time decisions regarding required disclosure.  Based upon that evaluation, our Principalthe Company’s Chief Executive Officer and PrincipalChief Financial Officer concluded that our disclosuredisclosures, controls and procedures as of the end of the period covered by this report were not effective as of March 31, 2015effective.

Changes in ensuring that material information we are required to discloseInternal Control over Financial Reporting

There were no changes in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Management assessed the effectiveness of the Company’s internal control over its financial reporting as of March 31, 2015.  In undertaking this assessment, management used the criteria established by the Committee of the Sponsoring Organization (COSO) of the Treadway Commission containedor in the Internal Control - Integrated Framework (1992).  As of March 31, 2015, based on management’s assessment as described above, we have determinedany other factors that the Company did not maintain effective controls over financial reporting.  Specifically, due to the limited number of individuals within our accounting functions and department turn-over in the fourth quarter, we had a lack of segregation of duties and a lack of adequate resources, including headcount, to ensure timely identification, resolution and recording of accounting matters.  Sincecould significantly affect these controls have a pervasive effect acrossduring the organization, management has determined that these circumstances constitute a material weakness in internal control over financial reporting.  We did not effectively implement comprehensive entity-level internal controls that were properly designed to meet the control objectives or address all risks of the processes or the applicable assertions of the significant accounts.  Due to material weaknesses identified at our entity level controls we did not test whether our financial activity level controls or our information technology general controls were operating sufficiently to identify a deficiency, or combination of deficiencies, that may result in a reasonable possibility that a material misstatement of the consolidated financial statements would not be prevented or detected on a timely basis.  As of March 31, 2015, the Company has implemented certain internal control procedures related to the purchase order cycle and review procedures to address timely identifications of accounting matters.  We will continue to implement appropriate processes and measures to remediate this material weakness.
Changes in Internal Control Over Financial Reporting. During the most recent quarterthree months ended March 31, 2015, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act)June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


Management has continued to take steps to improve its controls and procedures, including but not limited to, formalizing policies and procedures, and enhancing month-end close processes and account reconciliations. Upon their implementation, these internal controls will dramatically improve in the near future our ability to prevent and detect mistakes, noncompliance and potential fraud.

Limitations on Effectiveness of Control and Procedures


In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Inherent limitations to any system of disclosure controls and procedures include, but are not limited to, the possibility of human error and the circumvention or overriding of such controls by one or more persons. In addition, we have designed our system of controls based on certain assumptions, which we believe are reasonable, about the likelihood of future events, and our system of controls may therefore not achieve its desired objectives under all possible future events.

PART II.II. OTHER INFORMATION

ITEMItem 1. LEGAL PROCEEDINGS.Legal Proceedings

TheFrom time to time the Company ismay become involved in legal proceedings or may be subject to the various legal proceedings and claims discussed below as well as certain other non-material legal proceedings and claims that have not been fully resolved and that have arisenarising in the ordinary course of its business.
Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that a negative final outcome of matter listed below could have a material adverse effect on its business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. To estimate whether a loss contingency should be accrued by a charge to income, we evaluate, among other factors, the probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. We do not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated The Company receivedis not a letter from Technology Integration Group ("TIG") demanding payment of approximately $2,430,000 with respectparty to inventory and services that the Company purchased from TIG.  TIG subsequently filed an action in California State Court (Case No. 37-2012-00046436-CU-BC-NC (the “Action”).  On September 23, 2014, the Company entered intoany material pending legal proceedings or a Settlement Agreement and Mutual General Release with TIG.  The Settlement Agreement was conditioned on the SPHC merger taking place.  The Company was provided withproceeding being contemplated by a default on November 2, 2015 regarding the settlement agreement payment obligations.  On November 5, 2015, TIG withdrew the default. See Note 17 of Notes to Consolidated Financial Statements for the terms and conditionsgovernmental authority nor is any of the Settlement Agreement with TIG.
The Company receivedCompany’s property the subject of any pending legal proceedings or a request for indemnification from Hyatt Corporation (“Hyatt”) dated July 3, 2013 in connection withproceeding being contemplated by a case brought in US Federal Court in California by Ameranth, Inc., against, among others, Hyatt.  In connection with such case, the plaintiffs have identified the Company’s e-concierge softwaregovernmental authority except as allegedly infringing Ameranth’s patents.  The Company licenses the e-concierge software from a third party and accordingly has made a corresponding indemnification request to such third party.  The Company believes that any such claim may also be covered by the Company’s liability insurance coverage and accordingly the Company does not expect that this matter will result in any material liability to the Company.
The Company received a District Court Civil Summons, dated August 23, 2013, in the matter of “ScanSource v. Roomlinx, Inc.”, commenced in the District Court of Greenville County, South Carolina.  The plaintiffs in such action claimed that the Company owed them approximately $473,000 with respect to inventory purchased by the Company. The amount is recorded in accounts payable in the accompanying consolidated balance sheets as of December 31, 2014 and December 31, 2013.   On March 31, 2015, the Company and ScanSource entered into a settlement agreement with respect to such action in which Roomlinx agreed to pay ScanSource a total of $471,000 plus interest as follows: (a) payment of $100,000 on or before June 1, 2015, (b) beginning June 1, 2015, interest accruing on the outstanding balance of 12% per annum until the balance is paid in full, (c) beginning July 1, 2015 and continuing for 12 months thereafter, payment of $8,000 per month, and (d) following the initial 12 month payment schedule set forth in (b), payment of $316,715 in 24 monthly payments according to an amortization schedule agreed to by the Company and ScanSource.
The Company is in receipt of a letter from an attorney representing a past employee claiming retaliation and discrimination in connection with the termination of his employment seeking damages approximating $85,000.  No claim has been file with the District Court.  The Company and the employee settled the matter for a non-material amount in 2014.
The Company is in receipt of a District Court Civil Summons, dated July 21, 2014, in the matter of “Arrow Electronics, Inc. v. Roomlinx, Inc., d/b/a Cardinal Broadband, d/b/a Roomlinx,” commenced in the District Court of Broomfield County, Colorado.  The plaintiff in such action claims that the Company owes it approximately $85,000 with respect to goods sold and delivered and/or services rendered to the Company by the plaintiff.  The Company settled the claim in May 2015 by agreeing to pay Arrow a total of $57,000 over the next 9 months.
The Company is in receipt of a letter dated November 10, 2014our Transition Report on behalf of Wi-Fi Guys, LLC (“WFG”) demanding payment from the Company for amounts relating to development and software services in the amount of $297,000.  The Company evaluated all of its options, including legal options, with respect to the validity of the WFG letter and the alleged grounds for demanding payment and formally responded in a letter dated December 1, 2014 in which the Company denied WFG’s claims and additionally made separate counter-claims against WFG.
On March 12, 2012, the Company and Hyatt Corporation (“Hyatt”) entered into a Master Services and Equipment Purchase Agreement (the “MSA”) pursuant to which the Company has agreed to provide in-room media and entertainment solutions, including its proprietary Interactive TV (or iTV) platform, high speed internet, free-to-guest, on-demand programming and related support services, to Hyatt-owned, managed or franchised hotels that are located in the United States, Canada and the Caribbean.  Under the MSA, Hyatt will use its commercially reasonable efforts to cause its managed hotels to order the installation of the Company’s iTV product in a minimum number of rooms in Hyatt hotels within certain time frames.
In December 2012, the Company and Hyatt mutually agreed to suspend certain Hyatt obligations under the MSA that had not been met; including the suspension of the obligations of Hyatt to cause a certain number of rooms in both Hyatt owned and managed properties to place ordersForm 10-K/T for the Company’s iTV products within certain time frames. At the time of the December 2012 suspension of these Hyatt obligations, the Company had installed certain services and products in approximately 19,000 rooms (including approximately 9,000 installs of its iTV product) in Hyatt hotels.  During the yeartransition period ended December 31, 2013,2022.

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On July 17, 2023, the Converge Sellers in their capacities as the sellers of Converge filed the Complaint in the Supreme Court of the State of New York, New York County against the Defendants. The Defendants have not yet been served with a Summons or the Complaint. On July 28, 2023, Mr. Toama, who was Chief Executive Officer of the Company, completed the installation of approximately 1,000 additional rooms.  As of March 31, 2015 and December 31, 2014, deposits received on statements of work for Hyatt properties are recorded as customer deposits in the accompanying consolidated balance sheet in the amount of approximately $1,262,000.
In connection with the Merger Agreement, the Company and Hyatt entered into a Waiver and Consent Agreement dated as of March 11, 2014 (the “Hyatt Consent Agreement”), pursuant to which Hyatt provided its conditional consent and approval to the transactions contemplated by the Merger Agreement and any assignment of the Company’s assets contemplated thereunder, including the assignment to SSI of the Company’s right, title and interest under the MSA and under the Hotel Services & Equipment Purchase Agreements (the “HSAs”) entered into by the Company with individual hotel owner entities.
On September 29, 2014, the Company received a letter from Hyatt (the “September 29th Letter) notifyinginformed the Company that Hyatt is terminatinghe intended to withdraw from the HSAsAction without prejudice. Mr. Toama recused himself from all deliberations by the Board concerning the Action. The Board also formed a Special Litigation Committee composed of Board members Randall Miles, Grant Lyon, Jeffrey Stein, and Wendy Parker with respectdelegated full power to evaluate, investigate, review, and analyze the facts and circumstances surrounding the Action.

The Complaint generally alleges that the Defendants owe sums to the following five hotels in which the Company has yet to install any equipment or provide any services – the Hyatt Regency Indianapolis, the Hyatt Regency Greenwich, the Grand Hyatt New York City, the Hyatt Regency Coconut Point and the Hyatt Regency Lake Tahoe (collectively, the “Hotels”). Hyatt’s September 29th Letter does not affect any Hyatt hotelsConverge Sellers under the MSA currently being serviced by the Company.  Hyatt's termination of the HSAs is based on alleged noncompliance by the Company and SSH with certain provisions of the Hyatt Consent Agreement.MIPA. The Company evaluated the validity of the Hyatt Letter and the alleged grounds for terminating the HSAs for the Hotels, and believes such grounds are without merit.
Hyatt’s September 29th Letter also requested repayment of deposits in the aggregate amount of $966,000 paid to the Company by the Hotels in connection with the HSAs.  A second letter dated November 14, 2014 (the “November 14th Letter”) received by the Company from Hyatt demanded repayment of such deposits by November 21, 2014.  Upon evaluating the validity of Hyatt’s November 14th Letter and again determining that Hyatt’s grounds for terminating the HSA and demanding the return of the aforementioned deposits are without merit, the Company formally responded inComplaint seeks, among other things, a letter to Hyatt dated March 3, 2015 wherein the Company denied Hyatt’s claims.  The Company subsequently received a third letter from Hyatt dated March 26, 2015 (the “March 26th Letter”) in which Hyatt again demanded the repayment of the aforementioned deposits.  The Company has evaluated the validity of the March 26th Letter and the alleged grounds for terminating the HSAs for the Hotels, and believes such grounds are without merit. The Company has not made any such repayment to Hyatt. On May 4, 2015, the Company received a letter from Hyatt allegingjudgment that the Hyatt Consent Agreement did not apply toDefendants breached the merger between Signal Point Holdings CorporationMIPA and the Company and further contends that such merger triggered Hyatt’s right to terminate the MSA.  The Company believes Hyatt’s arguments and conclusion are without merit.
The Parties began negotiations to rectify the disputes between them and entered into a Settlement Agreement on November 17, 2015 providing for the orderly termination of iTV services at Hyatt locations.  The Settlement Agreement also provided for the extension of high speed internet services for 36 months in retained Hyatt locations and gave the Company the right to bid on all future Wi-Fi installations at hotels and business center locations. The Settlement Agreement also provided that the deposit would be used to fund transitional services and future installation costs. Finally, the Settlement Agreement provided for mutual releases.
The Company is in receipt of a letter dated April 10, 2015 on behalf of America’s Growth Capital, LLC d/b/a AGC Partners (“AGC”) demanding payment from the Company for amountsdamages relating to the occurrencepurported breach. Nothing in this Quarterly Report on Form 10-Q shall be deemed an admission of a strategic transaction between the Company and Signal Point Holdings Corpliability in the amount of $300,000.  The Company has evaluated all of its options, including legal options, with respect to the validity of the AGC letter and the alleged grounds for demanding payment and formally responded in a letter dated April 16, 2015 in which the Company denied AGC’s claims.Action.

The Company received notice that El Dorado Offices 2, LP (“Landlord”) had filed suit against the Company and SignalShare Infrastructure, Inc. (“SSII”) associated with amounts due under a terminated office space lease and an associated promissory note.  The Landlord seeks approximately $326,000, plus costs, associated with the failure to repay the promissory note.  The Company has been served with the complaint and is reviewing its options.
Other than the foregoing, no material legal proceedings to which the Company (or any officer or director of the Company, or any affiliate or owner of record or beneficially of more than five percent of the Common Stock, to management’s knowledge) is party to or to which the property of the Company is subject is pending, and no such material proceeding is known by management of the Company to be contemplated.
ITEMItem 1A. RISK FACTORS.Risk Factors

Except asOur business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth below, there have been no material changes from risk factors previously reported in the Company'sour Transition Report on Form 10-K for December 31, 2014.
Risks Related to Our Company
History of significant losses and risk of losing entire investment.
The Company’s financial statements reflect that it has incurred significant net losses of $10,493,157, $11,996,546 and $48,838,053 (including impairment of goodwill of $42,847,066)10-KT (as amended by Form 10-KT/A) for the yearssix month transition period ended December 31, 2013 and 2014, and2022, the three-month period ended March 31, 2015, respectively, and an accumulated deficitoccurrence of $101,970,106any one of which could have a material adverse effect on our actual results.

We have concluded that there is substantial doubt about the Company's ability to meet its obligations as they become due.

Under ASC Subtopic 205-40, Presentation of Financial Statements—Going Concern, the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its obligations as they become due within one year from the date that financial statements are issued. In performing this evaluation as of March 31, 2015.  Thethe date of the filing of this 10-Q, the Company expects to continue to have losses and negative cash flows for the foreseeable future, and it is possiblehas determined that the Company may never reach profitability.  Therefore,not have sufficient liquidity under its cash flow forecasts to fund commitments for the twelve months following the date of the filing of this 10-Q.

The costs of and distractions caused by restructuring, pursuing a Potential Transaction, negotiating amendments to the Financing Agreement, and servicing the Blue Torch debt, have materially depleted liquidity and negatively impacted performance of the Company. Consequently, management has concluded that there is a significant risk that public investors may lose some or all of their investment.
Our financial statements have been prepared assuming that the Company will continue as a going concern.
Our audited financial statements for the fiscal year ended December 31, 2014 have been prepared assuming the Company will continue as a going concern.  As discussed in Note 3 to the accompanying financial statements for the period ended March 31, 2015, the Company had approximately $1.4 million in cash on hand, had incurred a net loss of approximately $48.8 million (including the adjustment for impairment of goodwill of approximately $42.8 million) and used approximately $2.7 million in cash for operating activities during the quarter ended March 31, 2015.  In addition, the Company had negative working capital of approximately $16.8 million.  The continuation of the Company as a going concern is dependent uponsubstantial doubt about the Company’s ability to raise additional capitalfund ongoing operations and meet debt service obligations over the attainment of profitable operations.  Our independent registered public accounting firm has included an explanation paragraph expressing substantial doubt about our abilityensuing twelve month period. If we are not able to continue as a going concern, or if there is continued doubt about our ability to do so, the value of your investment would be materially and adversely affected.

We require additional capital to implement our business plan, and it may not be available on acceptable terms, if at all, creating substantial doubt as to perform.

The growth and health of our Performance Solutions business depends on our ability to take risks by investing in their audit report fornew lead generation activities. Given the fiscal year ended December 31, 2014.
Substantial Dependence on Our Contract with Hyatt
As previously reported on September 29, 2014, the Company receivedCompany's inability to consummate a letter from Hyatt (the “September 29th Letter) notifying the Company that Hyatt is terminating the HSAs with respectPotential Transaction to, among other things, add additional capital to the following five hotels in which the Company has yetCompany's balance sheet to install any equipment or provide any services – the Hyatt Regency Indianapolis, the Hyatt Regency Greenwich, the Grand Hyatt New York City, the Hyatt Regency Coconut Pointfund operations and the Hyatt Regency Lake Tahoe (collectively,uncertainty about the “Hotels”). Hyatt’s September 29th Letter does not affect any Hyatt hotels under the MSA currently being serviced by the Company.  Hyatt's termination of the HSAs is based on alleged noncompliance by the Company and SSH with certain provisions of the Hyatt Consent Agreement. The Company evaluated the validity of the Hyatt Letter and the alleged grounds for terminating the HSAs for the Hotels, and believes such grounds are without merit.
Hyatt September 29th Letter also requested repayment of deposits in the aggregate amount of $966,000 paid to the Company by the Hotels in connection with the HSAs.  A second letter dated November 14, 2014 (the “November 14th Letter”) received by the Company from Hyatt demanded repayment of such deposits by November 21, 2014.  Upon evaluating the validity of Hyatt’s November 14th Letter and again determining that Hyatt’s grounds for terminating the HSA and demanding the return of the aforementioned deposits are without merit, the Company formally responded in a letter to Hyatt dated March 3, 2015 wherein the Company denied Hyatt’s claims.  The Company subsequently received a third letter from Hyatt dated March 26, 2015 (the “March 26th Letter”) in which Hyatt again demanded the repayment of the aforementioned deposits.  On May 4, 2015, the Company received a letter from Hyatt alleging that the Hyatt Consent Agreement did not apply to the merger between Signal Point Holdings Corporation and the Company and further contends that such merger triggered Hyatt’s right to terminate the MSA.
The Parties began negotiations to rectify the disputes between them and entered into a Settlement Agreement on November 17, 2015, providing for the orderly termination of iTV services at Hyatt locations.  The Settlement Agreement also provided for the extension of high speed internet service for 36 months in retained Hyatt locations and gave the Company the right to bid on all future Wi-Fi installations at hotels and business center locations.  The Settlement Agreement also provided that the deposit would be used to fund transitional services and future installation costs.  Finally, the Settlement Agreement provided for mutual releases.
Prepaid calling card services may be subject to additional disclosure requirements and access change disputes.
The Company is no longer operating in this segment and this risk factor is hereby deleted.
Risks Related to Capital Structure

As described in Note 22 “Subsequent Events” on October 26, 2015, the Company entered into Debt and Preferred Stock Restructuring Documents, under which the Series B Preferred Stock of SPHC was terminated.  While there are certain limitations upon the Company, Robert DePalo’s, the Company’s principal stockholder, ability to control the operations of the Company was effectively terminated, although Mr. DePalo still has the ability to influence most of the Company’s corporate affairscontinue to operate as a result of his approximate 30% ownership of our common stock. 
Because the Reverse Acquisition may be characterized as a “reverse merger,”going concern, we may not be able to attractinvest in these opportunities which may have a material adverse effect on the attention of brokerage firms.Company and its financial condition.

The reverse acquisition mayCompany is currently operating under a Limited Waiver of certain Events of Default under the Financing Agreement. Failure to comply with the terms of the Limited Waiver or to cure the Events of Default could have a material adverse effect on the Company.

On September 29, 2023, Blue Torch and the Company entered into the Second A&R Limited Waiver of certain Specified Events of Default under the Financing Agreement, as amended by the First Amendment. The Company and Blue Torch entered into the Second A&R Limited Wavier to, among other things, (i) waive certain Specified Events of Default including any failure of the Company to make the quarterly principal and interest payments due to be characterized as a “reverse merger.” Accordingly, additional risks may exist as a resultpaid on or about September 30, 2023 under the Financing Agreement; and (ii) extend the Outside Date. The Second A&R Limited Waiver will expire at the end of such characterization. For example, securities analyststhe Current Wavier Period.

The Second A&R Limited Waiver concerns events of brokerage firms may not provide coveragedefault that relate to the Company’s existing and anticipated failures to satisfy certain financial and non-financial covenants under the Financing Agreement. If the Company is unsuccessful in curing the continuing events of us since there is little incentivedefault by the expiration of the Current Waiver Period, the Company intends to brokerage firmsseek further extensions of the Current Waiver Period with Blue Torch and the Lenders, although we cannot assure you that Blue Torch and the Lenders would be willing to recommendgrant extensions. If the purchase of our Common Stock. No assurance can Company failed to obtain an extension, the Company would
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be given that brokerage firms will want to conduct any secondary offerings on our behalf in default under the future.

We cannot provide assurance that we willFinancing Agreement and the Lenders would be able to maintainexercise remedies available to them under the statusFinancing Agreement. Any such action would likely have a material adverse effect on the Company and its financial condition and the value of a public reporting company.your investment.
While Roomlinx is currently a public reporting company, the continuation of such status will depend on various factors such as continuous and timely filing of audited financial statements and other required periodic reports with the SEC, satisfying the internal control and assessment requirements of the Sarbanes-Oxley Act of 2002, and instituting and monitoring procedures to control the unauthorized use of company information and prevent inside trading violations.  The Company is required to file its Quarterly Reports on Form 10-Q for the periods ended June 30, 2015 and September 30, 2015, before it will be current in its SEC filings.
ITEMItem 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.Unregistered Sale of Equity Securities and Use of Proceeds

On March 24, 2015, Roomlinx, Inc. (the “Company”) authorized a dividend of 12,603,473 shares of Common Stock to its existing shareholders.  The dividend shares are restricted and may not be transferred without the prior written consent of the Company prior to December 31, 2015.  The dividend shares were exempt from registration pursuant to Section 2(a)(3) under the Act as not involving a “sale,” as such term is defined under the Act.
PursuantNote 11 to the terms and conditionscondensed consolidated financial statements included in Item 1 of a Subsidiary Merger Agreement dated as of March 27, 2015 (the “SMA”)this Quarterly Report on Form 10-Q is incorporated by and among Roomlinx, Inc., Signal Point Holdings Corp. (“SPHC”), SignalShare Infrastructure, Inc. and RMLX Merger Corp. (“RMLX”), the Company’s wholly-owned subsidiary, RMLX, a Delaware corporation, was merged with and into SPHC, with SPHC and its operating subsidiaries surviving as a wholly-owned subsidiary of the Company (the “Merger”).  As a result of the Merger, the shareholders of SPHC, a privately-owned Delaware corporation, received an aggregate of restricted shares, or approximately 85% of the Fully Diluted (as defined therein) common stock of the Companyreference herein.
The shares of Common Stock issued to the SPHC shareholders, as well as shares of Common Stock underlying options and warrants to be issued to SPHC shareholders, are exempt from registration pursuant to Section 4(a)(2) under the Securities Act of 1933, as amended (the “Act”) and Rule 506 of Regulation D promulgated thereunder and/or Rule 903 of Regulation S promulgated under the Act.  The Company is relying upon the representations and warranties of the SPHC shareholders contained in exchange agreements that they are either accredited investors or Non-U.S. Persons, as such terms are defined under the Act.
As a result of the Company entering into the above-described SMA and pursuant to the terms and conditions of an Amended and Restated Revolving Credit and Security Agreement dated as of March 24, 2015, the Company issued to CenFin, LLC, its senior lender, an aggregate of 7,061,245 shares of common stock representing 5.07% of the Company’s Fully Diluted Shares (as defined).  The shares of Common Stock issued to CenFin are exempt from registration pursuant to Section 4(a)2) under the Act.  The Company relied upon the representations and warranties contained in the Amended and Restated Revolving Credit and Security Agreement.
No commissions were paid and no underwriter or placement agent was involved in the above described transactions.
ITEMItem 3. DEFAULTS UPON SENIOR SECURITIES.Defaults Upon Senior Securities
None.
None
ITEMItem 4. MINE SAFETY DISCLOSURESMine Safety Disclosure
Not Applicable.
None
ITEMItem 5. OTHER INFORMATION.Other Information

NoneNot Applicable.
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ITEMItem 6. EXHIBITS.
Exhibits
Exhibit
Exhibit
Number		Description of Exhibit Title
31.1
31.2
32.1
31.1*
Certification of Principal Executive Officer, andpursuant to 18 U.S.C. Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

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101.SCH*Inline XBRL Taxonomy Extension Schema Document.
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
*Filed or furnished herewith.

†    Management contract or compensatory plan or arrangement.
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ROOMLINX, INC.
Troika Media Group, Inc.
(Registrant)
/s/ Eric Glover
(Signature)
Date: December 1, 2015 October 20, 2023By:  Name:  /s/  Aaron Dobrinsky                                                         Eric Glover
Title:        Aaron Dobrinsky
        Chief Executive Officer
         (Principal Executive Officer) 
Date:  December 1, 2015 By:    /s/   Steven Vella                                                                 
          Steven Vella
Chief Financial Officer
          (Principal
(Principal Financial and Accounting Officer)

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