UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20172022
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________________ to _______________________
Commission file number 1-12471
THEMAVEN,THE ARENA GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 68-0232575 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
200 Vesey Street, 24th Floor New York, New York | 10281 | |
(Address of principal executive offices) | (Zip Code) |
(775) 600-2765(212)321-5002
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:None
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.01 par value | AREN | NYSE American |
Securities registered pursuant to Section 12(g) of the Act:Common Stock $0.01 par value
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ ☒ No¨☐
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). Yesþ ☒ No¨ ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”company, or an emerging growth company (as defined in Rule 12b-2 of the Exchange Act. (Check one):Act).
Large accelerated filer | Accelerated filer | |
Non-accelerated filer | Smaller reporting company |
Emerging growth company | ☐ |
If an emerging growth company, indicated 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(b)13(a) of the Exchange Act¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨☐ or Noþ☒
As of November 13, 2017,August 9, 2022, the Registrant had 28,516,009 shares of common stock outstanding.
Form 10-Q
For the quarter ended September 30, 2017
Table of Contents
2 |
Cautionary Statement Regarding Forward-Looking InformationStatements
This report by theMaven,Quarterly Report on Form 10-Q (this “Quarterly Report”) of The Arena Group Holdings, Inc. (“Parent”), which includes information for its wholly owned subsidiary theMaven Network, Inc. (“Subsidiary”) (collectively “theMaven,(the “Company,” “Company” or “we”“we,” “our,” and “us”) contains “forward-lookingcertain forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to future events or future performance and include, without limitation, statements concerning the Company’sour business strategy, future revenues, market growth, capital requirements, product introductions, and expansion plans and the adequacy of the Company’sour funding. Other statements contained in this Quarterly Report that are not historical facts are also forward-looking statements. The Company hasWe have tried, wherever possible, to identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates”“estimates,” and other comparable terminology.stylistic variants denoting forward-looking statements.
The Company cautionsWe caution investors that any forward-looking statements presented in this report,Quarterly Report, or that the Companywe may make orally or in writing from time to time, are based on the beliefs of, assumptions made by, and information currently available, to, the Company. Such statements are based on assumptions,as well as our beliefs and theassumptions. The actual outcome related to forward-looking statements will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond the Company’sour control or ability to predict. Although the Company believeswe believe that itsour assumptions are reasonable, they are not guarantees of future performance, and some will inevitably prove to be incorrect. As a result, the Company’sour actual future results can be expected to differ from itsour expectations, and those differences may be material. Accordingly, investors should use caution in relying on forward-looking statements, which are based only on known results and trends at the time they are made, to anticipate future results or trends. CertainWe detail other risks are discussed in this Report and also from time to time in the Company’s otherour public filings with the Securities and Exchange Commission (the “SEC”)., including in Item 1A., Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2021. The discussion in this Quarterly Report should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2021.
This reportQuarterly Report and all subsequent written and oral forward-looking statements attributable to the Companyus or any person acting on itsour behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. The Company doesWe do not undertake any obligation to release publicly any revisions to itsour forward-looking statements to reflect events or circumstances after the date of this Report.Quarterly Report except as may be required by law.
3 |
PartPART I - Financial Information– FINANCIAL INFORMATION
ItemITEM 1. FINANCIAL INFORMATION
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
Index to Condensed Consolidated Financial Statements
Consolidated Balance Sheets
September 30, 2017 | December 31, 2016 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 1,699,061 | $ | 598,294 | ||||
Accounts receivable | 3,482 | - | ||||||
Deferred contract costs | 15,986 | - | ||||||
Prepayments and other current assets | 102,265 | 121,587 | ||||||
Total current assets | 1,820,794 | 719,881 | ||||||
Fixed assets, net | 2,515,930 | 547,804 | ||||||
Intangible assets | 20,000 | 20,000 | ||||||
Total assets | $ | 4,356,724 | $ | 1,287,685 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 51,568 | $ | 154,361 | ||||
Accrued expenses | 442,061 | 54,789 | ||||||
Deferred revenue | 31,634 | - | ||||||
Conversion feature liability | 130,238 | 137,177 | ||||||
Total current liabilities | 655,501 | 346,327 | ||||||
Commitments and contingencies | ||||||||
Redeemable convertible preferred stock, $0.01 par value, 1,000,000 shares authorized; 168 shares issued and outstanding ($168,496 aggregate liquidation value) | 168,496 | 168,496 | ||||||
Stockholders’ equity: | ||||||||
Common stock, $0.01 par value, 100,000,000 shares authorized; 26,005,140 and 22,047,531 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 260,051 | 220,475 | ||||||
Common stock to be issued in private placement | 1,566,000 | 9,375 | ||||||
Additional paid-in capital | 8,265,925 | 2,730,770 | ||||||
Accumulated deficit | (6,559,249 | ) | (2,187,758 | ) | ||||
Total stockholders’ equity | 3,532,727 | 772,862 | ||||||
Total liabilities and stockholders’ equity | $ | 4,356,724 | $ | 1,287,685 |
See accompanying notes to consolidated financial statements.
4 |
theMaven, Inc. and SubsidiaryTHE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
Revenue | $ | 6,064 | $ | - | $ | 6,064 | $ | - | ||||||||
Expenses: | ||||||||||||||||
Service Costs | 449,567 | - | 641,606 | - | ||||||||||||
Research and development | 30,776 | 374,944 | 104,095 | 374,944 | ||||||||||||
General and administrative | 1,300,767 | 1,110,461 | 3,639,204 | 1,110,461 | ||||||||||||
Loss from operations | (1,775,046 | ) | (1,485,405 | ) | (4,378,841 | ) | (1,485,405 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest and dividend income, net | 61 | - | 411 | - | ||||||||||||
Interest expense | - | (4,044 | ) | - | (4,044 | ) | ||||||||||
Change in fair value of conversion feature | (3,311 | ) | - | 6,939 | - | |||||||||||
Total other income (expense) | (3,250 | ) | (4,044 | ) | 7,350 | (4,044 | ) | |||||||||
Net loss | $ | (1,778,296 | ) | $ | (1,489,449 | ) | (4,371,491 | ) | (1,489,449 | ) | ||||||
Basic and diluted net loss per common share | $ | (0.11 | ) | $ | (0.35 | ) | $ | (0.33 | ) | $ | (0.35 | ) | ||||
Weighted average number of shares outstanding – basic and diluted | 16,367,424 | 4,243,607 | 13,091,231 | 4,243,607 |
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2022 (unaudited) | December 31, 2021 | |||||||
($ in thousands, except share data) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 14,839 | $ | 9,349 | ||||
Restricted cash | 502 | 502 | ||||||
Accounts receivable, net | 34,450 | 21,660 | ||||||
Subscription acquisition costs, current portion | 28,603 | 30,162 | ||||||
Royalty fees | 3,750 | 11,250 | ||||||
Prepayments and other current assets | 4,863 | 4,748 | ||||||
Total current assets | 87,007 | 77,671 | ||||||
Property and equipment, net | 832 | 636 | ||||||
Operating lease right-of-use assets | 455 | 528 | ||||||
Platform development, net | 10,240 | 9,299 | ||||||
Subscription acquisition costs, net of current portion | 7,651 | 8,235 | ||||||
Acquired and other intangible assets, net | 56,221 | 57,356 | ||||||
Other long-term assets | 626 | 639 | ||||||
Goodwill | 23,416 | 19,619 | ||||||
Total assets | $ | 186,448 | $ | 173,983 | ||||
Liabilities, mezzanine equity and stockholders’ deficiency | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 19,733 | $ | 11,982 | ||||
Accrued expenses and other | 18,579 | 24,011 | ||||||
Line of credit | 7,808 | 11,988 | ||||||
Unearned revenue | 60,907 | 54,030 | ||||||
Subscription refund liability | 2,394 | 3,087 | ||||||
Operating lease liabilities | 400 | 374 | ||||||
Liquidated damages payable | 5,497 | 5,197 | ||||||
Current portion of long-term debt | 5,873 | 5,744 | ||||||
Total current liabilities | 121,191 | 116,413 | ||||||
Unearned revenue, net of current portion | 12,591 | 15,277 | ||||||
Operating lease liabilities, net of current portion | 579 | 785 | ||||||
Liquidating damages payable, net of current portion | - | 7,008 | ||||||
Other long-term liabilities | 7,108 | 7,556 | ||||||
Deferred tax liabilities | 389 | 362 | ||||||
Long-term debt | 65,179 | 64,373 | ||||||
Total liabilities | 207,037 | 211,774 | ||||||
Commitments and contingencies (Note 16) | - | |||||||
Mezzanine equity: | ||||||||
Series G redeemable and convertible preferred stock, $168; Series G shares issued and outstanding: ; common shares issuable upon conversion: at June 30, 2022 and December 31, 2021 | par value, $ per share liquidation value and shares designated; aggregate liquidation value: $168 | 168 | ||||||
Series H convertible preferred stock, $14,556 and $15,066; Series H shares issued and outstanding: and ; common shares issuable upon conversion: and at June 30, 2022 and December 31, 2021, respectively | par value, $ per share liquidation value and shares designated; aggregate liquidation value: $13,207 | 13,718 | ||||||
Total mezzanine equity | 13,375 | 13,886 | ||||||
Stockholders’ deficiency: | ||||||||
Common stock, $ | par value, authorized shares; issued and outstanding: and shares at June 30, 2022 and December 31, 2021, respectively178 | 126 | ||||||
Common stock to be issued | - | - | ||||||
Additional paid-in capital | 258,727 | 200,410 | ||||||
Accumulated deficit | (292,869 | ) | (252,213 | ) | ||||
Total stockholders’ deficiency | (33,964 | ) | (51,677 | ) | ||||
Total liabilities, mezzanine equity and stockholders’ deficiency | $ | 186,448 | $ | 173,983 |
See accompanying notes to condensed consolidated financial statements.
5 |
theMaven, Inc. and SubsidiaryTHE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders’ Equity (Unaudited)
Nine Months Ended September 30, 2017CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Common Stock | To Be Issued | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||
Balance at January 1, 2017 | 22,047,531 | $ | 220,475 | 8,929 | $ | 9,375 | $ | 2,730,770 | $ | (2,187,758 | ) | $ | 772,862 | |||||||||||||||
Common stock to be issued in private placement, net of issuance costs | - | - | 1,521,739 | $ | 1,566,000 | - | - | $ | 1,566,000 | |||||||||||||||||||
Common stock to be issued | 8,929 | 89 | (8,929 | ) | (9,375 | ) | 9,286 | - | - | |||||||||||||||||||
Issuance of common stock, net of offering costs | 3,765,000 | 37,650 | - | - | 3,281,014 | - | 3,318,664 | |||||||||||||||||||||
Shares issued for investment banking fees | 162,000 | 1,620 | - | - | 199,260 | - | 200,880 | |||||||||||||||||||||
Exercise of stock options | 21.680 | 217 | (217) | - | ||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 2,045,812 | - | 2,045,812 | |||||||||||||||||||||
Net loss | - | - | - | - | (4,371,491 | ) | (4,371,491 | ) | ||||||||||||||||||||
Balance at September 30, 2017 | 26,005,140 | $ | 260,051 | 1,521,739 | $ | 1,566,000 | $ | 8,265,925 | $ | (6,559,249 | ) | $ | 3,532,727 |
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
($ in thousands, except share data) | ||||||||||||||||
Revenue | $ | 65,075 | $ | 34,746 | $ | 113,318 | $ | 68,361 | ||||||||
Cost of revenue (includes amortization of developed technology and platform development for three months ended 2022 and 2021 of $2,375 and $2,157, respectively and for the six months ended 2022 and 2021 of $4,686 and $4,324, respectively) | 46,729 | 25,307 | 75,226 | 51,049 | ||||||||||||
Gross profit | 18,346 | 9,439 | 38,092 | 17,312 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling and marketing | 19,307 | 16,202 | 36,523 | 31,340 | ||||||||||||
General and administrative | 15,964 | 12,535 | 29,478 | 23,030 | ||||||||||||
Depreciation and amortization | 4,444 | 3,964 | 8,646 | 7,927 | ||||||||||||
Loss on impairment of assets | - | - | 257 | - | ||||||||||||
Total operating expenses | 39,715 | 32,701 | 74,904 | 62,297 | ||||||||||||
Loss from operations | (21,369 | ) | (23,262 | ) | (36,812 | ) | (44,985 | ) | ||||||||
Other (expense) income | ||||||||||||||||
Change in valuation of warrant derivative liabilities | - | 360 | - | (305 | ) | |||||||||||
Interest expense, net | (2,506 | ) | (2,363 | ) | (5,326 | ) | (5,183 | ) | ||||||||
Liquidated damages | (128 | ) | (1,109 | ) | (300 | ) | (1,364 | ) | ||||||||
Gain upon debt extinguishment | - | 5,717 | - | 5,717 | ||||||||||||
Total other (expense) income | (2,634 | ) | 2,605 | (5,626 | ) | (1,135 | ) | |||||||||
Loss before income taxes | (24,003 | ) | (20,657 | ) | (42,438 | ) | (46,120 | ) | ||||||||
Income taxes | 1,796 | - | 1,782 | - | ||||||||||||
Net loss | $ | (22,207 | ) | $ | (20,657 | ) | $ | (40,656 | ) | $ | (46,120 | ) | ||||
Basic and diluted net loss per common share | $ | (1.22 | ) | $ | (1.88 | ) | $ | (2.41 | ) | $ | (4.30 | ) | ||||
Weighted average number of common shares outstanding – basic and diluted | 18,258,890 | 11,012,866 | 16,847,920 | 10,737,555 |
See accompanying notes to condensed consolidated financial statements.statements.
6 |
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
theMaven, Inc. and Subsidiary
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(unaudited)
Consolidated Statement of Cash Flows
Nine Months Ended | ||||||||
September 30, 2017 | September 30, 2016 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (4,371,491 | ) | $ | (1,489,449 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Change in fair value of conversion feature | (6,939 | ) | - | |||||
Stock based compensation | 1,357,510 | 935,058 | ||||||
Depreciation and amortization | 233,990 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepayments and other current assets | 19,322 | (5,222 | ) | |||||
Accounts receivable | (3,482 | ) | - | |||||
Deferred costs | (15,986 | ) | - | |||||
Accounts payable | (102,793 | ) | 30,600 | |||||
Deferred revenue | 31,634 | - | ||||||
Accrued expenses | 203,271 | 36,992 | ||||||
Net cash used in operating activities | (2,654,964 | ) | (492,021 | ) | ||||
Cash flows from investing activities: | ||||||||
Website development costs and fixed assets | (1,513,813 | ) | - | |||||
Net cash used in investing activities | (1,513,813 | ) | - | |||||
Cash flows from financing activities: | ||||||||
Proceeds from common stock to be issued in private placement | 1,750,000 | - | ||||||
Proceeds from notes payable | - | 638,351 | ||||||
Net proceeds from issuance of common stock | 3,519,544 | 2,952 | ||||||
Net cash provided by financing activities | 5,269,544 | 641,303 | ||||||
Net increase in cash | 1,100,767 | 149,282 | ||||||
Cash at beginning of period | 598,294 | - | ||||||
Cash at end of period | $ | 1,699,061 | $ | 149,282 | ||||
Supplemental disclosures of noncash investing and financing activities: | ||||||||
Reclassification of stock-based compensation to website development costs | 688,302 | - | ||||||
Accrual of stock issuance costs | 184,000 | - | ||||||
Shares issued for investment banking fees | 200,880 | - |
Six Months Ended June 30, 2022
See accompanying notes to consolidated financial statements
�� | ||||||||||||||||||||||||||||
Common Stock | Common Stock to be Issued | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Capital | Deficit | Deficiency | ||||||||||||||||||||||
($ in thousands, except share data) | ||||||||||||||||||||||||||||
Balance at January 1, 2022 | 12,632,947 | $ | 126 | 49,134 | $ | - | $ | 200,410 | $ | (252,213 | ) | $ | (51,677 | ) | ||||||||||||||
Issuance of restricted stock in connection with the acquisition of The Spun | ||||||||||||||||||||||||||||
Issuance of restricted stock in connection with the acquisition of The Spun, shares | ||||||||||||||||||||||||||||
Cashless exercise of common stock | ||||||||||||||||||||||||||||
Cashless exercise of common stock, shares | ||||||||||||||||||||||||||||
Common stock withheld for taxes | ||||||||||||||||||||||||||||
Common stock withheld for taxes, shares | ||||||||||||||||||||||||||||
Issuance of common stock upon conversion of series H preferred stock | 70,380 | 1 | - | - | 510 | - | 511 | |||||||||||||||||||||
Issuance of common stock for restricted stock units in connection with an acquisition | 16,760 | - | - | - | - | - | - | |||||||||||||||||||||
Issuance of common stock in connection with professional services | 14,617 | - | - | - | 184 | - | 184 | |||||||||||||||||||||
Issuance of common stock in connection with settlement of liquidated damages | 505,671 | 5 | - | - | 6,680 | - | 6,685 | |||||||||||||||||||||
Gain upon issuance of common stock in connection with settlement of liquidated damages | - | - | - | - | 323 | - | 323 | |||||||||||||||||||||
Issuance of common stock for restricted stock units | 155,211 | 2 | - | - | (2 | ) | - | - | ||||||||||||||||||||
Common stock withheld for taxes upon issuance of underlying shares for restricted stock units | (67,023 | ) | (1 | ) | - | - | (555 | ) | - | (556 | ) | |||||||||||||||||
Repurchase restricted stock classified as liabilities | (8,064 | ) | - | - | - | - | - | - | ||||||||||||||||||||
Issuance of common stock in connection with public offering | 4,181,603 | 42 | - | - | 30,448 | - | 30,490 | |||||||||||||||||||||
Stock-based compensation | - | - | - | - | 8,054 | - | 8,054 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (18,449 | ) | (18,449 | ) | |||||||||||||||||||
Balance at March 31, 2022 | 17,502,102 | 175 | 49,134 | - | 246,052 | (270,662 | ) | (24,435 | ) | |||||||||||||||||||
Issuance of common stock in connection with the acquisition of Athlon | 314,103 | 3 | - | - | 3,138 | - | 3,141 | |||||||||||||||||||||
Issuance of common stock for restricted stock units | 21,600 | - | - | - | - | - | - | |||||||||||||||||||||
Repurchase of restricted stock classified as liabilities | (18,150 | ) | - | - | - | - | - | - | ||||||||||||||||||||
Issuance of common stock in connection with Say Media merger | 7,851 | - | (7,851 | ) | - | - | - | - | ||||||||||||||||||||
Issuance of common stock upon cashless exercise of stock option | 20 | - | - | - | - | - | - | |||||||||||||||||||||
Issuance of common stock in connection with private placement | ||||||||||||||||||||||||||||
Issuance of common stock in connection with private placement, shares | ||||||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 9,537 | - | 9,537 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (22,207 | ) | (22,207 | ) | |||||||||||||||||||
Balance at June 30, 2022 | 17,827,526 | $ | 178 | 41,283 | $ | - | $ | 258,727 | $ | (292,869 | ) | $ | (33,964 | ) |
7 |
theMaven, Inc. and SubsidiaryTHE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
Notes
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(unaudited)
Six Months Ended June 30, 2021
Common Stock | Common Stock to be Issued | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Capital | Deficit | Deficiency | ||||||||||||||||||||||
($ in thousands, except share data) | ||||||||||||||||||||||||||||
Balance at January 1, 2021 | 10,412,963 | $ | 104 | 49,134 | $ | - | $ | 141,856 | $ | (162,273 | ) | $ | (20,313 | ) | ||||||||||||||
Issuance of restricted stock awards to the board of directors | 36,599 | - | - | - | - | - | - | |||||||||||||||||||||
Repurchase restricted stock classified as liabilities | (6,049 | ) | - | - | - | - | - | - | ||||||||||||||||||||
Issuance of common stock for restricted stock units in connection with an acquisition | 11,667 | - | - | - | - | - | - | |||||||||||||||||||||
Issuance of common stock in connection with professional services | 14,205 | - | - | - | 125 | - | 125 | |||||||||||||||||||||
Stock-based compensation | - | - | - | - | 5,408 | - | 5,408 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (25,463 | ) | (25,463 | ) | |||||||||||||||||||
Balance at March 31, 2021 | 10,469,385 | $ | 104 | 49,134 | - | $ | 147,389 | $ | (187,736 | ) | $ | (40,243 | ) | |||||||||||||||
Beginning balance, value | 10,469,385 | $ | 104 | 49,134 | - | $ | 147,389 | $ | (187,736 | ) | $ | (40,243 | ) | |||||||||||||||
Issuance of restricted stock in connection with the acquisition of The Spun | 194,806 | 2 | - | - | (2 | ) | - | - | ||||||||||||||||||||
Issuance of restricted stock awards to the board of directors | 3,735 | - | - | - | - | - | - | |||||||||||||||||||||
Cashless exercise of common stock | 3,859 | - | - | - | - | - | - | |||||||||||||||||||||
Common stock withheld for taxes | (2,226 | ) | - | - | - | (41 | ) | - | (41 | ) | ||||||||||||||||||
Repurchase of restricted stock classified as liabilities | (6,049 | ) | - | - | - | - | - | - | ||||||||||||||||||||
Issuance of common stock in connection with private placement | 1,299,027 | 13 | - | - | 19,825 | - | 19,838 | |||||||||||||||||||||
Stock-based compensation | - | - | - | - | 8,666 | - | 8,666 | |||||||||||||||||||||
Net loss | - | - | - | - | - | (20,657 | ) | (20,657 | ) | |||||||||||||||||||
Balance June 30, 2021 | 11,962,537 | $ | 119 | 49,134 | $ | - | $ | 175,837 | $ | (208,393 | ) | $ | (32,437 | ) | ||||||||||||||
Ending balance, value | 11,962,537 | $ | 119 | 49,134 | $ | - | $ | 175,837 | $ | (208,393 | ) | $ | (32,437 | ) |
See accompanying notes to Consolidated Financial Statementscondensed consolidated financial statements.
September 30, 2017
(Unaudited)
1. Nature of Operations
theMaven, Inc. (“Parent”) and theMaven Network, Inc. (“Subsidiary”) (collectively “theMaven” or the “Company”) are developing an exclusive network of professionally managed online media channels, with an underlying technology platform. Each channel will be operated by a “invite only” “Channel Partner” drawn from subject matter experts, reporters, group evangelists and social leaders. Channel Partners will publish content and oversee an online community for their respective channels, leveraging a proprietary, socially-driven, mobile-enabled, video-focused technology platform to engage niche audiences within a single network.
During the second quarter of 2017 the Company’s platform and media channel operations were launched in beta stage and by the end of the third quarter there were a total of 23 channel partners operating on theMaven Network. Internet users since the launch of our channels are able to utilize the platform on desktop, laptop and mobile devices for these channels. We expect that during the fourth quarter additional channels will be launched. As of November 13, 2017, we have over sixty signed channel partners and 28 channel partners operating on theMaven Network. We do not expect to have significant revenue during the fourth quarter as we continue development of our technology and the commencement of business operations establishing a media audience.
2. Basis of Presentation
theMaven Network, Inc. was incorporated in Nevada on July 22, 2016, under the name “Amplify Media, Inc.” On July 27, 2016, the corporate name was amended to “Amplify Media Network, Inc.” and on October 14, 2016, the corporate name was changed to “theMaven Network, Inc.”.
theMaven, Inc. was formerly known as Integrated Surgical Systems, Inc., a Delaware corporation (“Integrated”). From June 2007 until November 4, 2016, Integrated was a non-active “shell company” as defined by regulations of the Securities and Exchange Commission (SEC). On August 11, 2016, Integrated entered into a loan to Subsidiary that provided initial funding totaling $735,099 for the Subsidiary’s operations. Integrated’s Board of Directors structured the loan to the Subsidiary as fully secured so that Integrated would receive cash at maturity of the loan if negotiations for a combination did not result in the consummated Recapitalization transaction. If the loan was not repaid then the remedies in the event of default were to pursue (a) the personal guarantee and/or (b) the mortgaged real estate collateral. The loan was not secured by the intellectual property of the Subsidiary, but there was a covenant that the Subsidiary would not, without prior written consent, sell or assign the business or intellectual property. This negative covenant did not give Integrated control or rights other than as a creditor. The loan did not provide Integrated with an equity interest or other ownership or control rights in the Subsidiary. The loan did not have any rights to conversion into equity in the Subsidiary. The note, and the associated payable, was cancelled as part of the Recapitalization and the proceeds from the borrowing from Integrated was considered as cash received due to the Recapitalization in addition to the net assets acquired.
On October 14, 2016, Integrated entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Subsidiary and the shareholders of Subsidiary holding all of the issued and outstanding shares of Subsidiary (collectively, “Subsidiary Shareholders”). The Share Exchange Agreement was amended on November 4, 2016, to include certain newly issued shares of Subsidiary in the transaction and make related changes to the agreement and the Share Exchange was consummated. The transaction resulted in Parent acquiring Subsidiary by the exchange of all of the outstanding shares of Subsidiary for 12,517,152 newly issued shares of the common stock, $0.01 par value (the “Common Stock”) of Parent, representing approximately 56.7% of the issued and outstanding shares of Common Stock of Parent immediately after the transaction.
In determining the accounting treatment for the Share Exchange Agreement, the primary factor was determining which party, directly or indirectly, holds greater than 50 percent of the voting shares has control and is considered to be the acquirer. Because the former shareholders of the Subsidiary received 56.7 percent voting control of the issued and outstanding shares of the Company after the transaction, the transaction was considered to be a reverse recapitalization for accounting purposes. Other factors that indicated that the former stockholders of the Subsidiary had control of the Company after the transaction included, (1) fully diluted equity interests, (2) composition of senior management, (3) former officers of the Parent ceded day-to-day responsibilities to officers of the Subsidiary, and (4) composition of Board of Directors. On a fully diluted basis, the former shareholders of the Subsidiary received 53.5 percent of the equity interests in the Company. All the members of senior management of the Company, other than the part-time Chief Financial Officer, were former shareholders of the Subsidiary. The former officers of the non-active shell ceded day-to-day management to officers of the Subsidiary. The Board of Directors, immediately after the Recapitalization included three members from the Parent and two members from the Subsidiary. Because the former shareholders of the Subsidiary could vote to make changes in the Board composition, the conclusion was that control of the Board, in substance, was vested in the former shareholders of the Subsidiary.
8 |
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
($ in thousands) | ||||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (40,656 | ) | $ | (46,120 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation of property and equipment | 245 | 220 | ||||||
Amortization of platform development and intangible assets | 13,087 | 12,031 | ||||||
Gain upon debt extinguishment | - | (5,717 | ) | |||||
Amortization of debt discounts | 934 | 1,001 | ||||||
Loss on impairments of assets | 257 | - | ||||||
Change in valuation of warrant derivative liabilities | - | 305 | ||||||
Noncash and accrued interest | 69 | 3,632 | ||||||
Liquidated damages | 300 | 1,364 | ||||||
Stock-based compensation | 16,466 | 13,215 | ||||||
Deferred income taxes | (1,782 | ) | - | |||||
Other | 469 | (759 | ) | |||||
Change in operating assets and liabilities net of effect of business combination: | ||||||||
Accounts receivable | 5 | 4,375 | ||||||
Subscription acquisition costs | 2,143 | (13,784 | ) | |||||
Royalty fees | 7,500 | 7,500 | ||||||
Prepayments and other current assets | 264 | (4,060 | ) | |||||
Other long-term assets | 13 | (121 | ) | |||||
Accounts payable | 335 | 4 | ||||||
Accrued expenses and other | (7,131 | ) | 1,714 | |||||
Unearned revenue | 945 | 14,934 | ||||||
Subscription refund liability | (693 | ) | 737 | |||||
Operating lease liabilities | (107 | ) | (404 | ) | ||||
Other long-term liabilities | (128 | ) | - | |||||
Net cash used in operating activities | (7,465 | ) | (9,933 | ) | ||||
Cash flows from investing activities | ||||||||
Purchases of property and equipment | (379 | ) | (182 | ) | ||||
Capitalized platform development | (2,784 | ) | (1,971 | ) | ||||
Proceeds from sale of equity investment | 2,450 | - | ||||||
Payments for acquisition of business, net of cash acquired | (9,481 | ) | (7,057 | ) | ||||
Net cash used in investing activities | (10,194 | ) | (9,210 | ) | ||||
Cash flows from financing activities | ||||||||
Borrowings (repayments) under line of credit | (4,180 | ) | (2,249 | ) | ||||
Proceeds from common stock public offering, net of offering costs | 32,058 | - | ||||||
Payments of issuance costs from common stock public offering | (1,568 | ) | - | |||||
Payment of The Spun deferred cash payment | (453 | ) | - | |||||
Proceeds from common stock private placement | - | 20,005 | ||||||
Payments of issuance costs from common stock private placement | - | (167 | ) | |||||
Payment for taxes related to repurchase of restricted common stock | (556 | ) | (41 | ) | ||||
Payment of restricted stock liabilities | (2,152 | ) | (716 | ) | ||||
Net cash provided by financing activities | 23,149 | 16,832 | ||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | 5,490 | (2,311 | ) | |||||
Cash, cash equivalents, and restricted cash – beginning of period | 9,851 | 9,535 | ||||||
Cash, cash equivalents, and restricted cash – end of period | $ | 15,341 | $ | 7,224 | ||||
Cash, cash equivalents, and restricted cash | ||||||||
Cash and cash equivalents | $ | 14,839 | $ | 6,723 | ||||
Restricted cash | 502 | 501 | ||||||
Total cash, cash equivalents, and restricted cash | $ | 15,341 | $ | 7,224 | ||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid for interest | $ | 4,323 | $ | 289 | ||||
Cash paid for income taxes | - | - | ||||||
Noncash investing and financing activities | ||||||||
Reclassification of stock-based compensation to platform development | $ | 1,125 | $ | 859 | ||||
Issuance of common stock in connection with settlement of liquidated damages | 7,008 | - | ||||||
Issuance of common stock in connection with professional services | - | 125 | ||||||
Common stock issued in connection with acquisition of Athlon | 3,141 | - | ||||||
Deferred cash payments in connection with acquisition of Athlon | 1,889 | - | ||||||
Assumption of liabilities in connection with acquisition of Athlon | 12,642 | - | ||||||
Deferred cash payments in connection with acquisition of The Spun | - | 1,639 | ||||||
Assumption of liabilities in connection with acquisition of The Spun | - | 2 | ||||||
Conversion of Series H convertible preferred stock into common stock | 511 | - |
See accompanying notes to condensed consolidated financial statements.
9 |
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
($ in thousands, unless otherwise stated)
1.Summary of Significant Accounting Policies
Basis of Presentation
The transaction is referred tocondensed consolidated financial statements include the accounts of The Arena Group Holdings, Inc. (formerly known as the “Recapitalization.” The Recapitalization was consummated on November 4, 2016, as a result of which theMaven Network,TheMaven, Inc. became a) and its wholly owned subsidiary of Integrated (the “Closing”). subsidiaries (“The note payable between IntegratedArena Group” or the “Company”), after eliminating all significant intercompany balances and Subsidiary was an interdependent transaction with the Recapitalization and was cancelled upon closing of the Recapitalization. On December 2, 2016, Integrated amendedtransactions. The Company does not have any off-balance sheet arrangements. The Company changed its Certificate of Incorporationcorporate name to change its nameThe Arena Group Holdings, Inc. from “Integrated Surgical Systems,TheMaven, Inc.” to “theMaven, Inc.” on February 8, 2022.
From June 2007 until the closing of the Recapitalization, Integrated was a non-active “shell company” as defined by regulations of the SEC and, accordingly, the Recapitalization was accounted for as a reverse recapitalization rather than a business combination. As the Subsidiary is deemed to be the purchaser for accounting purposes under reverse recapitalization accounting, the Company’s financial statements are presented as a continuation of Subsidiary, and the accounting for the Recapitalization is equivalent to the issuance of stock by Subsidiary for the net monetary assets of Parent as of the Closing accompanied by a recapitalization. See Note 9 Stockholders’ Equity for summary of the assets acquired, transaction costs and the consideration exchanged in the Recapitalization.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance withpursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for Form 10-Q. The Balance Sheet at December 31, 2016 has been derived from the Company’scomplete audited financial statements.
In the opinion of management, these financial statements reflect all normal recurring, and other adjustments, necessary for a fair presentation. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements, which are included in the Company’sThe Arena Group’s Annual Report on Form 10-K for the year ended December 31, 2016. Operating2021, filed with the SEC as of April 1, 2022.
The condensed consolidated financial statements as of June 30, 2022, and for the three and six months ended June 30, 2022 and 2021, are unaudited but, in management’s opinion, include all adjustments necessary for a fair presentation of the results of interim periods. All such adjustments are of a normal recurring nature. The year-end condensed consolidated balance sheet as of December 31, 2021, was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for interim periods are not necessarily indicative of operatingthe results to be expected for anthe entire fiscal year.
The novel coronavirus (“COVID-19”) pandemic impacted the Company less during the second quarter of 2022 than it did in 2021. During the initial onset of COVID-19, the Company faced significant change in its advertisers’ buying behavior. Since May 2020, however, there has been a steady recovery in the advertising market in both pricing and volume. This coupled with the return of professional and college sports yielded steady growth in revenues. Given that the Sports Illustrated media business relies on sporting events to generate content and comprises a material portion of the Company’s revenues, the cash flows and results of operations are susceptible to a widespread cancellation of sporting events or a general limitation of societal activity akin to what is widely known to have occurred in the Unites States and elsewhere during the 2020 calendar year or any other future periods.
Comparative Period from Inceptionand, to a lesser extent, during the 2021 calendar year. Future widespread shutdowns of in-person economic activity could have a material impact on July 22, 2016 to September 30, 2016
theMaven Network, Inc. was incorporated on July 22, 2016 and initially issued shares of its common stock on August 1, 2016 in exchange for cash at par value. Through September 30, 2016, the previously reported financial statements of Integrated did not include the operations of theMaven Network, Inc. However, unaudited financial statements of theMaven Network, Inc. for the three months ended September 30, 2016 were previously issued.Company’s business. As a result of the accounting forCompany’s advertising revenue declining in early 2021 caused by the Recapitalizationwidespread cancellations of sporting events, the Company is vulnerable to a risk of loss in the near term and it is at least reasonably possible that events or circumstances may occur that could cause an impact in the near term, depending on the actions taken to prevent the further spread of COVID-19.
The Company operates in one reportable segment.
Reverse Stock Split
The Company effected a 1-for-22 reverse stock split as of the November 4, 2016 effective date of the transaction, theFebruary 9, 2022. The condensed consolidated financial statements of theMaven Network, Inc. becameand the financial statements of Integratednotes thereto give effect to such reverse stock split for all periods previously presented. Subsequently, in conjunction with the preparation of audited consolidated financial statements of the Company for the year ended December 31, 2016, the Company recorded certain stock-based compensation adjustments to reflect the accounting for the fair value of theThe shares of common stock retained a par value of $0.01 per share. Accordingly, stockholders’ deficiency reflects the reverse stock split by reclassifying from “common stock” to “additional paid-in capital” in an amount equal to the par value of the decreased shares resulting from the reverse stock split. Any fractional shares that would otherwise be issued by theMaven Network, Inc. in August 2016 that were subject to vesting and redemption provisions (see Note 9). Asas a result the accompanying consolidated unaudited statements of operations for the three months ended September 30, 2016 include stock-based compensation costs of $935,058, of which $67,842 was allocated to research and development expense and $867,216 was allocated to general and administrative expense. These stock-based compensation adjustments did not have any effect on cash flows from operating activities for the three months ended September 30, 2016 or on total stockholders’ equity as of September 30, 2016.
3. Going Concern
The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company’s activities are subject to significant risks and uncertainties, including the need for additional capital, as described below.
The Company has not generated significant revenues since July 22, 2016 (Inception) and has financed its operations through (a) the Recapitalization transaction with Parent, (b) a loan from Parent that was cancelled upon closing of the Recapitalization and (c) two private placements of commonreverse stock in April 2017 and in October 2017. The Company has incurred operating losses and negative operating cash flows, and it expectssplit were rounded up to continue to incur operating losses and negative operating cash flows for at least the next few years. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern, and the Company’s independent registered public accounting firm, in its report on the Company’s 2016 consolidated financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.nearest whole share.
As fully described in Note 9 Stockholders’ Equity, in April 2017, the Company completed a private placement of its common stock, raising proceeds of $3.5 million net of cash offering costs. As described in Note 13 Subsequent Events the Company completed a second private placement raising gross proceeds of $2.75 million in October 2017, of which $1.75 million had been received as of September 30, 2017. The Company believes that it does not have sufficient funds to support its operations through the end of the first quarter of 2018. In order to continue business operations past that point, the Company currently anticipates that it will need to raise additional debt and/or equity capital in the first quarter of 2018.
There can be no assurances that the Company will be able to secure any such additional financing on acceptable terms and conditions, or at all. If cash resources become insufficient to satisfy the Company’s ongoing cash requirements, the Company will be required to scale back or discontinue its technology development programs, or obtain funds, if available (although there can be no certainty), or to discontinue its operations entirely.
10 |
4. Significant Accounting Policies and Estimates
Principles of Consolidation
The accompanying consolidated financial statements include the financial position, results of operations and cash flows for the three and nine months ended September 30, 2017 and the three months ended September 30, 2016. All intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparationPreparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of AmericaGAAP requires management to make estimates and assumptions that affect the amounts reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date ofdisclosed in the financial statements and revenues and expenses for the reporting period.accompanying notes. Actual results could differ materially differ from these estimates. On an ongoing basis, the Company evaluates its estimates, including those estimates.
Digital Media Content
related to the allowance for credit losses, fair values of financial instruments, capitalization of platform development, intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, fair value of assets acquired and liabilities assumed in the business acquisitions, determination of the fair value of stock-based compensation and valuation of derivatives liabilities and contingent liabilities, among others. The Company intends to operate a network of online media channelsbases its estimates on assumptions, both historical and will provide digital media (text, audio and video) over the Internet that users may access on demand. As a broadcaster that transmits third party content owned by our channel partners via digital media, the Company applies ASC 920, “Entertainment – Broadcasters”. The channel partners generally receive variable amounts of considerationforward looking, that are dependent upon the calculation of revenue earned by the channel in a given month, referred to as a “revenue share”, that are payable in arrears. In certain circumstances, there is a monthly fixed fee minimum or a fixed yield (“revenue per 1000 impressions”) based on the volume of advertising impressions served. We disclose fixed dollar commitments for channel content licenses in Note 12 Commitments and Contingencies. Channel partner agreements that include fixed yield based on the volume of impressions served are not included in Note 12 because they cannot be quantified, but are expectedbelieved to be significant. The expense relatedreasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Recently Adopted Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which updates various codification topics to channel partner agreements are reportedsimplify the accounting guidance for certain financial instruments with characteristics of liabilities and equity, with a specific focus on convertible instruments and the derivative scope exception for contracts in “Service Costs” inan entity’s own equity and amends the Statement of Operations. The cash payments related to channel partner agreements are classified within “Net cash used in operating activities” on the Statement of Cash Flows. Also under ASC 920, if channel partner agreements are structured such that the fee paid precedes the right to use the content because the broadcasts will occur in future periods, the Company will record a Content Asset and a related Content Obligation when all of the following conditions are met, (1) the cost of the content is known or reasonably determinable, (2) the content has been accepted and (3) the content is availablediluted earnings per share computation for broadcasting under the terms of the channel partner agreement. Capitalized content cost will be amortized on a systematic basis over the agreement term on a straight-line method or an accelerated method depending on the economic and agreement terms. Capitalized content costs will be evaluated for impairment at least annually or whenever circumstances indicate that Content Assets may be impaired.
Revenue Recognition
During the third quarter of 2017,these instruments. On January 1, 2022, the Company adopted ASC 606, “RevenueASU 2020-06 with no material impact to its condensed consolidated financial position, results of operations or cash flows.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, a consensus of the Emerging Issues Task Force (EITF), to provide explicit guidance on accounting by issuers for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange. On January 1, 2022, the Company adopted ASU 2021-04 with no material impact to its condensed consolidated financial position, results of operations, cash flows or disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”Customers, which requires an acquirer to account for revenue contracts acquired in a business combination in accordance with Topic 606 as if it had originated the contracts. The acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired contracts. This update should lead to recognition and measurement consistent with what’s reported in the acquiree’s financial statements, provided that the acquiree prepared financial statements in accordance with GAAP. The new standard marks a change from current GAAP, under which assets and liabilities acquired in a business combination, including contract assets and contract liabilities arising from revenue contracts, are generally recognized at fair value at the acquisition date. On January 1, 2022, the Company adopted ASU 2021-08 with no material impact to its condensed financial position, results of operations or cash flows. This new accounting standard for revenue recognition. Since the Company had not previously generated revenue from customers the Company did not havewill be applied prospectively to transition its accounting method from ASC 605, “Revenue Recognition”.business combinations.
Revenues are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company generates all of its revenue from contracts with customers. The following is a description of the principal activities from which the Company generates revenue:
11 |
Advertising
The Company enters into contracts with advertising networks to serve display or video advertisements on the digital media pages associated with our various channels. In accordance with ASC 606 the Company recognizes revenue from advertisements at the point in time when each ad is viewed as reported by our advertising network partners. The quantity of advertisements, the impression bid prices and revenue are reported on a real-time basis. Although reported advertising transactions are subject to adjustment by the advertising network partners, any such adjustments are known within a few days of month end. The Company owes our independent publisher channel partners a revenue share of the advertising revenue earned and this is recorded as service costs in the same period in which the associated advertising revenue is recognized.
Membership
The Company enters into contracts with Internet users that subscribe to premium content on the digital media channels. These contracts provide Internet users with a subscription to access the premium content for a given period of time, which is generally one year. In accordance with ASC 606 the Company recognizes revenue from each membership subscription over time based on a daily calculation of revenue during the reporting period. Subscribers make payment for a subscription by credit card and the amount of the subscription collected in cash is initially recorded as deferred revenue on the balance sheet. As the Company provides access to the premium content over the subscription term the Company recognizes revenue and proportionately reduces the deferred revenue balance. The Company owes our independent publisher channel partners a revenue share of the membership revenue earned and this is initially deferred as deferred contract costs. The Company recognizes deferred contract costs over the subscription term in the same pattern that the associated membership revenue is recognized.
Disaggregation of Revenue
The following table provides information about disaggregated revenue by product line, geographical market and timing of revenue recognition:
Three months ended September 30, 2017 | Nine months ended September 30, 2017 | ||||||
Advertising | Membership | Total | Advertising | Membership | Total | ||
By Product Lines: | $2,146 | $3,918 | $6,064 | $2,146 | $3,918 | $6,064 | |
United States | Other | Total | United States | Other | Total | ||
By Geographical Markets: | $6,064 | $- | $6,064 | $6,064 | $- | $6,064 | |
At a Point in Time | Over Time | Total | At a Point in Time | Over Time | Total | ||
By Timing of Revenue Recognition: | $2,146 | $3,918 | $6,064 | $2,146 | $3,918 | $6,064 |
Contract Balances
The following table provides information about contract balances as of September 30, 2017:
Advertising | Membership | Total | |||||
Accounts receivables | $2,074 | $1,408 | $3,482 | ||||
Short-term contract assets (deferred contract costs) | - | $15,986 | $15,986 | ||||
Short-term contract liabilities (deferred revenue) | - | $31,634 | $31,634 |
The Company receives payments from advertising customers based upon contractual payment terms; accounts receivable are recorded when the right to consideration becomes unconditional and generally collected within 90 days. The Company generally receives payments from membership customers at the time of sign up for each subscription; accounts receivable from merchant credit card processors are recorded when the right to consideration becomes unconditional and generally collected weekly. Contract assets include contract fulfillment costs related to revenue shares owed to channel partners, which are amortized along with the associated revenue. Contract liabilities include payments received in advance of performance under the contract and are recognized as revenue over time. The Company had no asset impairment charges related to contract assets in the period.
Contract acquisition costs and practical expedients
For contracts that have a duration of less than one year, the Company follows ASC 606 practical expedients and expenses these costs when incurred; for contracts with life exceeding one year, which did not apply during the current period, the Company records these costs in proportion to completion of each completed performance obligation. The Company generally expenses sales commissions when incurred because the amortization period would have been less than one year. The Company records these costs within general and administrative expenses.
Fixed Assets
Fixed assets are recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in income and expense when realized. Depreciation and amortization are provided using the straight-line method over the following estimated useful lives:
Intangible Assets
The intangible assets consist of the cost of a purchased website domain name with an indefinite useful life.
Impairment of Long-Lived Assets
The long-lived assets, consisting of fixed assets and intangible assets, held and used by the Company are reviewed for impairment no less frequently than annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. Management has determined that there was no impairment in the value of long-lived assets during the period ended September 30, 2017.
Website Development Costs
The Company capitalizes internal labor costs, including compensation, benefits and payroll taxes, incurred for certain capitalized website and software development projects related to the Company’s technology platform. The Company’s policy with respect to capitalized internal labor stipulates that labor costs for employees working on eligible internal use capital projects are capitalized as part of the historical cost of the project when the impact, as compared to expensing such labor costs, is material.
Research and Development
Research and development costs are charged to operations in the period incurred and amounted to $30,776 and $104,095 for the three and nine months ended September 30, 2017. Research and development costs are amounted to $374,944 for the three months ended September 30, 2016.
Fair Value Measurements
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820“Fair Value Measurements and Disclosures” clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, FASB ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
In accordance with FASB ASC 820, the Company measures its derivative liability at fair value. The Company’s derivative liability is classified within Level 3.
The carrying value of other current assets and liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments.
Concentrations of Credit Risk
Cash
The Company maintains cash at a bank where amounts on deposit may exceed the Federal Deposit Insurance Corporation limit throughout the year. The Company has not experienced losses in such accounts and believes it is not exposed to significant credit risk regarding its cash.
Stock-based Compensation
The Company provides stock-based compensation in the form of (a) restricted stock awards to employees, (b) vested stock grants to directors, (c) stock option grants to employees, directors and independent contractors, and (d) common stock warrants to Channel Partners and other independent contractors.
The Company applies FASB ASC 718, “Stock Compensation,” when recording stock based compensation to employees and directors. The estimated fair value of stock based awards is recognized as compensation expense over the vesting period of the award. The Company has adopted ASU 2016-09 in 2016 with early application and account for actual forfeitures of awards as they occur.
The fair value of restricted stock awards by Subsidiary at Inception was estimated on the date of the award using the exchange value used by Integrated and the Subsidiary to establish the relative voting control ratio in the Recapitalization.
Restricted stock that was subject to an escrow arrangement and/or a performance condition in conjunction with the Recapitalization was remeasured and fair value was estimated using the quoted price of our common stock on the date of the Recapitalization. The Company uses a Monte Carlo simulation model to determine the number of shares expected to be released from the performance condition escrow. Each quarter the Company reevaluates the number of shares expected to be released from the performance condition escrow until the final determination is made as of December 31, 2017.
The fair value of fully vested stock awards is estimated using the quoted price of our common stock on the date of the grant. The fair value of stock option awards is estimated at grant date using the Black-Scholes option pricing model that requires various highly judgmental assumptions including expected volatility and option life.
The Company accounts for stock issued to non-employees in accordance with provisions of FASB ASC 505-50, “Equity Based Payments to Non-Employees.” FASB ASC 505-50 states that equity instruments that are issued in exchange for the receipt of goods or services should be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliability measurable. The measurement date occurs as of the earlier of (a) the date at which a performance commitment is reached or (b) absent a performance commitment, the date at which the performance necessary to earn the equity instruments is complete (that is, the vesting date). Equity grants with performance conditions that do not have sufficiently large disincentive for non-performance may be measured at fair value that is not fixed until performance is complete. The fair value of common stock warrants is estimated at grant date using the Black-Scholes option pricing model that requires various highly judgmental assumptions including expected volatility and option life. The Company recognizes expense for equity based payments to non-employees as the services are received. The Company has specific objective criteria, such as the date of launch of a Channel on the Company’s platform, for determination of the period over which services are received and expense is recognized.
The Company uses a Monte Carlo simulation model to determine the number of shares expected to be earned by Channel Partners based on performance obligations to be satisfied over a defined period which will commence at the launch of a Channel on the Company’s platform.
The Company issues common stock upon exercise of equity awards and warrants.
Income Taxes
The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements to give effect to the temporary differences which may arise from differences in the bases of fixed assets, depreciation methods and allowances based on the income taxes expected to be payable in future years. Deferred tax assets arising primarily as a result of net operating loss carry-forwards, and research and development credit have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.
The Company recognizes interest accrued relative to unrecognized tax benefits in interest expense and penalties in operating expense. During the three and nine months ended September 30, 2017 and the three months ended September 30, 2016, the Company recognized no income tax related interest and penalties. The Company had no accruals for income tax related interest and penalties at September 30, 2017.
Basic and Diluted Loss per Common Share
Basic income or loss per share is computed using the weighted average number of common shares outstanding during the period and excludes any dilutive effects of common stock equivalent shares, such as stock options, restricted stock, and warrants. RestrictedAll restricted stock isawards are considered outstanding andbut are included in the computation of basic income or loss per common share only when underlyingthe restrictions expire, and the shares are no longer forfeitable.forfeitable, and are thus vested. Restricted stock units are included in the computation of basic loss per common share only when the restrictions expire, the shares are no longer forfeitable, and are thus vested. Contingently issuable shares are included in basic loss per common share only when there are no circumstances under which those shares would not be issued. Diluted incomeloss per common share is computed using the weighted average number of common shares outstanding and common stock equivalent shares outstanding during the period using the treasury stock method.
Schedule of Net Income (Loss) Per Common Share
As of June 30, | ||||||||
2022 | 2021 | |||||||
Series G convertible preferred stock | 8,582 | 8,582 | ||||||
Series H Preferred Stock | 2,008,728 | 2,699,312 | ||||||
Restricted Stock Awards | 97,402 | 202,003 | ||||||
Financing Warrants | 116,118 | 131,003 | ||||||
ABG Warrants | 999,540 | 999,540 | ||||||
AllHipHop warrants | 5,682 | 5,682 | ||||||
Publisher Partner Warrants | 16,174 | 35,889 | ||||||
Equity Plans | 7,890,027 | 7,601,168 | ||||||
Outside Options | 138,644 | 138,644 | ||||||
Total | 11,280,897 | 11,821,823 |
Reclassifications
Certain prior quarter amounts have been reclassified to conform to current period presentation. These reclassifications were immaterial, both individually and in the dilutedaggregate. These changes did not impact previously reported loss per sharefrom operations or net loss.
2.Acquisitions
2022 Acquisitions
Athlon Holdings, Inc. – On April 1, 2022, the Company acquired 100% of the issued and outstanding capital stock of Athlon Holdings, Inc., a Tennessee corporation (“Athlon”), for a preliminary purchase price of $17,115, as adjusted for the estimated working capital adjustment as of the closing date of the transaction. The purchase price is computedpending finalization of a working capital adjustment and deferred taxes and could be subject to further revision if additional information related to the fair value of the identifiable net assets become available. As a part of the closing consideration, the Company also acquired cash of $1,840, that was further adjusted post-closing for the working capital adjustment. The preliminary purchase price of $17,115, as discounted, is comprised of (i) a cash portion of $14,181, with $11,840 paid at closing and $2,341 estimated to be paid post-closing (as further described below) and (ii) the issuance of shares of the Company’s common stock with a fair market value of $3,141. The number of shares of the Company’s common stock issued was determined based on a $3,000 value using the basic share count. At September 30, 2017, potentially dilutive shares outstanding amounted to 14,737,558, of which 13,417,951 are not currently registered and/or subject to future vesting conditions. Included in these totals are 6,663,244 common stock equivalents that musttrading price for the 10 trading days preceding the April 1, 2022 closing date. Certain of Athlon’s key employees entered into either advisory agreements or employment agreements with the Company. Athlon operates in the United States.
The amount estimated to be exercised which would result in aggregatepaid post-closing of $2,341 will be paid as follows: (i) $2,096 will be paid on the nine-month anniversary of the closing date, or January 1, 2023 (consisting of $3,000 for the deferred cash payments, as discounted, less a $904 cash adjustment); and (ii) $245 will be paid within two business days from the date the Company receives proceeds from the sale of stock to the Company of $6,735,000.
Risks and Uncertainties
The Company hasall or a limited operating history and has not generated revenue to date. The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets and the general conditionportion of the U.S. and world economies. A hostequity interest in Just Like Falling Off a Bike, LLC that was held by Athlon as of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse developments in these general business and economic conditions could have a material adverse effectclosing date (this was paid on the Company’s financial condition and the results of its operations.April 7, 2022).
In addition, the Company will compete with many companies that currently have extensive and well-funded projects, marketing and sales operations as well as extensive human capital. The Company may be unable to compete successfully against these companies. The Company’s industry is characterized by rapid changes in technology and market demands. As a result, the Company’s products, services, and/or expertise may become obsolete and/or unmarketable. The Company’s future success will depend on its ability to adapt to technological advances, anticipate customer and market demands, and enhance its current technology under development.
Recently Adopted Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (ASC 606) - Revenue from Contracts with Customers (“ASU 2014-09”), which provides guidance for revenue recognition. This ASU will supersede the revenue recognition requirements in Topic 605, and most industry specific guidance. The standard’s core principle is that revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The guidance in ASU 2014-09 also specifies the accounting for some costs to obtain or fulfill a contract with a customer. ASC 606 requires the Company to make significant judgments and estimates. ASC 606 also requires more extensive disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
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The FASB has also issued several additional ASUs which amend ASU 2014-09. The amendments do not change the core principlecomposition of the guidance in ASC 606.preliminary purchase price is as follows:
Schedule of Preliminary Purchase Price
Cash | $ | 12,085 | ||
Common stock | 3,141 | |||
Deferred cash payments, as discounted | 1,889 | |||
Total purchase consideration | $ | 17,115 |
Public business entities are required to apply the guidance of ASC 606 to annual reporting periods beginning after December 15, 2017 (2018 for calendar year end reporting companies), including interim reporting periods within that reporting period. Early adoption is permitted.
The Company has adopted ASC 606incurred $200 in transaction costs related to the acquisition, which primarily consisted of legal and accounting expenses. The acquisition related expenses were recorded within general and administrative expense on the consolidated statements of operations.
The preliminary purchase price allocation resulted in the current quarter ended September 30, 2017following amounts being allocated to the assets acquired and began recognition of revenue from contracts with customers as a resultliabilities assumed at the closing date of the launchacquisition based upon their respective fair values as summarized below:
Summary of its network operations. Since thePrice Allocation for Acquisition
Cash | $ | 2,604 | ||
Accounts receivable | 13,033 | |||
Other current assets | 379 | |||
Equity investment | 2,450 | |||
Fixed assets | 62 | |||
Advertiser relationships | 6,630 | |||
Trade names | 2,611 | |||
Goodwill | 3,797 | |||
Accounts payable | (7,416 | ) | ||
Accrued expenses and other | (1,483 | ) | ||
Unearned revenue | (3,200 | ) | ||
Other long-term liabilities | (543 | ) | ||
Deferred tax liabilities | (1,809 | ) | ||
Net assets acquired | $ | 17,115 |
The Company had not previously generated revenue from customers the Company did not haveutilized an independent appraisal firm to transition its accounting method from ASC 605, “Revenue Recognition”.
In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (ASU 2015-17), Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of ASU 2015-17 did not have any impact on Company’s financial statement presentation or disclosures.
Recent Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes all existing guidance on accounting for leases in ASC Topic 840. ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. ASU 2016-02 will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognitionassist in the statement of income. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company is currently assessing the potential impact of adopting ASU 2016-02 on its financial statements and related disclosures.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 refines how companies classify certain aspectsdetermination of the cash flow statement in regards to debt prepayment, settlement of debt instruments, contingent consideration payments, proceeds from insurance claims and life insurance policies, distribution from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. No early adoption is permitted. Management is currently assessing the potential impact of adopting ASU 2016-15 on the financial statements and related disclosures.
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change in terms or conditions of a share-based payment award. The amendments in this ASU are effective for public entities for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted. The ASU should be applied prospectively on and after the effective date. The Company is evaluating the impact of this ASU.
5. Fixed Assets
At September 30, 2017 and December 31, 2016, fixed assets, net consistedfair values of the following:
September 30, 2017 | December 31, 2016 | |||||||
Office equipment and computers | $ | 29,871 | $ | 8,048 | ||||
Furniture and Equipment | 21,220 | - | ||||||
Website development costs | 2,699,219 | 540,146 | ||||||
2,750,310 | 548,194 | |||||||
Accumulated depreciation and amortization | (234,380 | ) | (390 | ) | ||||
Fixed assets, net | $ | 2,515,930 | $ | 547,804 |
In June 2017, the Company launchedassets acquired and liabilities assumed, which required certain elements of its websitesignificant management assumptions and began amortization of capitalized website development costs, and accordingly, $173,000 and $226,000 of amortization expense was recorded during the three and nine months ended September 30, 2017, respectively. In the nine months ended September 30, 2017, depreciation expense of approximately $8,000 was recorded.
6. Investments in Available-for-Sale Securities
estimates. The Company maintained an investment portfolio consisting of available-for-sale-securities during the period ended December 31, 2016, which it had acquired through the Recapitalization. All available-for-sale-securities either matured or were liquidated prior to December 31, 2016.
7. Redeemable Convertible Preferred Stock
The Company’s Certificate of Incorporation authorized 1,000,000 shares of undesignated, serial preferred stock. Preferred stock may be issued from time to time in one or more series. The Board of Directors is authorized to determine the rights, preferences, privileges, and restrictions granted to and imposed upon any wholly unissued series of preferred stock and designation of any such series without any further vote or action by the Company’s stockholders.
As of September 30, 2017, the Company’s only outstanding series of convertible preferred stock is the Series G Convertible Preferred Stock (“Series G”).
The Series G stock has a stated value of $1,000 per share, and is convertible into common stock at a conversion price equal to 85%fair values of the lowest sale priceadvertiser relationships were determined by projecting the acquired entity’s cash flows, deducting notional contributory asset charges on supporting assets (working capital, tangible assets, trade names, and the assembled workforce) to compute the excess cash flows associated with the advertiser relationships. The fair values of the common stock on its listed market over the five trading days preceding the date of conversion (“Beneficial Conversion Feature”), subject to a maximum conversion price. The number of shares of common stock that may be converted istrade names were determined by dividingprojecting revenue associated with each trade name and applying a royalty rate to compute the stated valueamount of the number of shares of Series Groyalty payments the company is relieved from paying due to be converted by the conversion price. The Company may elect to pay the Series G holder in cash at the current market price multiplied by the number of shares of common stock issuable upon conversion.
For the three and nine months ended September 30, 2017, no shares of Series G were converted into shares of common stock. At September 30, 2017, the outstanding Series G shares were convertible into a minimum of 172,374 shares of common stock.
Upon a change in control, sale or similar transaction, as defined in the Certificate of Designation for the Series G, each holderits ownership of the Series G has the option to deem such transaction as a liquidation and may redeem his or her shares at the liquidation value of $1,000, per share, for an aggregate amount of $168,496.trade names. The sale of all the assets on June 28, 2007 triggered the preferred stockholders’ redemption option. As such redemption is not in the controlestimated weighted average useful lives of the Company, the Series G stock has been accounted for as if it was redeemable preferred stockadvertiser relationships are eight point seventy-five years (8.75 years) and is classified on the balance sheet between liabilities and stockholders’ equity.trade names are fourteen point six years (14.60 years).
The conversion featureexcess of the preferred stock is considered a derivative according to ASC 815 “Derivatives and Hedging”, therefore,purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents goodwill from the acquisition. Goodwill is recorded as a non-current asset that is not amortized but is subject to an annual review for impairment. No portion of the derivative is reflected in the financial statements as a liability, which was determined togoodwill will be $130,238 and $137,177 as of September 30, 2017 and December 31, 2016, respectively and has been included as “conversion feature liability” on the accompanying balance sheets.deductible for tax purposes.
The fair value of the conversion feature liability is calculated under a Black-Scholes Model, using the market price of the Company’s common stock on each of the balance sheet dates presented, the expected dividend yield, the expected life of the redemption and the expected volatility of the Company’s common stock.2021 Acquisitions
The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and considering factors specific to the conversion feature liability. Since some of the assumptions used byCollege Spun Media Incorporated – On June 4, 2021, the Company are unobservable, the conversion feature liability is classified within the level 3 hierarchy in the fair value measurement.
The expected volatility of the conversion feature liability was based on the historical volatility of the Company’s common stock. The expected life assumption was based on the expected remaining life of the underlying preferred stock redemption. The risk-free interest rate for the expected term of the conversion feature liability was based on the average market rate on U.S. treasury securities in effect during the applicable quarter. The dividend yield reflected historical experience as well as future expectations over the expected term of the underlying preferred stock redemption. Therefore, the fair value of the conversion feature liability is sensitive to changes in above assumptions and changes of the Company’s common stock price.
The table below shows the quantitative information about the significant unobservable inputs used in the fair value measurement of level 3 conversion feature liability at September 30, 2017:
The changes in the fair value of the derivative are as follows:
Beginning as of January 1, 2017 | $ | 137,177 | ||
Decrease in fair value | (6,939 | ) | ||
Ending balance as of September 30, 2017 | $ | 130,238 |
8. Recapitalization
As described in Note 2 Basis of Presentation, the Company has accounted for the Recapitalization, which closed on November 4, 2016, as a reverse recapitalization. Because Integrated was a non-operating public shell corporation the transaction is considered to be a capital transaction in substance rather than a business combination. The transaction is equivalent to the issuance of stock by the Subsidiary for the net monetary assets of the Parent accompanied by a recapitalization.
Prior to the Recapitalization, Integrated had 9,530,379 issued and outstanding shares of common stock. In the Recapitalization, holders of Subsidiary’s common stock received 4.13607 shares of Parent common stock for each Subsidiary share, totaling 12,517,152 shares. After the Recapitalization a total of 22,047,531 shares of Parent common stock were outstanding.
As of September 30, 2017, as a result of other equity transactions described in Note 9 Stockholders’ Equity, a total of 26,005,140 shares of Parent common stock are issued and outstanding.
Integrated and Subsidiary agreed to the terms of Recapitalization to reflect the arms-length negotiated fair value of the Subsidiary as $2.5 million relative to the fair value of Integrated’s cash and available for sale investment securities. This resulted in the former shareholders of Subsidiary obtaining 56.7% voting control of the Company’s issued and outstanding common stock. The intent of the Recapitalization was to provide funding for Subsidiary’s operations initially under a loan that was canceled upon closing of the Recapitalization.
In determining the accounting treatment for the Share Exchange Agreement, the primary factor was determining which party, directly or indirectly, held greater than 50 percent of the voting shares has control and is considered to be the acquirer. Because the former shareholders of the Subsidiary received 56.7 percent voting controlacquired all of the issued and outstanding shares of capital stock of College Spun Media Incorporated, a New Jersey corporation (“The Spun”), for an aggregate of $11,830 in cash and the Company afterissuance of an aggregate of restricted shares of the transaction,Company’s common stock, with one-half of the transaction was consideredshares vesting on the first anniversary of the closing date and the remaining one-half of the shares vesting on the second anniversary of the closing date, subject to a customary working capital adjustment based on cash and accounts receivable as of the closing date. The cash payment consists of: (i) $10,830 paid at closing (of the cash paid at closing, $830 represents adjusted cash pursuant to the working capital adjustments), and (ii) $500 to be a reverse recapitalization for accounting purposes. Other factors that indicated thatpaid on the former stockholdersfirst anniversary of the Subsidiary had controlclosing and $500 to be paid on the second anniversary date of the Company after the transaction included, (1) fully diluted equity interests, (2) compositionclosing. The vesting of senior management, (3) former officersshares of the Parent ceded day-to-day responsibilitiesCompany’s common stock is subject to officersthe continued employment of the Subsidiary, and (4) composition of Board of Directors. On a fully diluted basis, the former shareholders of the Subsidiary received 53.5 percent of the equity interestscertain selling employees. The Spun operates in the Company. All the members of senior management of the Company, other than the part-time Chief Financial Officer, were former shareholders of the Subsidiary. The former officers of the non-active shell ceded day-to-day management to officers of the Subsidiary. The Board of Directors, immediately after the Recapitalization included three members from the Parent and two members from the Subsidiary. Because the former shareholders of the Subsidiary could vote to make changes in the Board composition, the conclusion was that control of the Board, in substance, was vested in the former shareholders of the Subsidiary.United States.
The following table summarizes the calculation of the relative voting control at the time of the Recapitalization:
Shares | Per Share | Fair Value | Voting % | |||||||||||||
Integrated shareholders pre-Recapitalization | 9,530,379 | $ | 0.20 | $ | 1,903,464 | 43.3 | % | |||||||||
Integrated options pre-Recapitalization | 175,000 | - | 0.0 | % | ||||||||||||
Warrant issued to MDB Capital Group | 1,169,607 | - | 0.0 | % | ||||||||||||
TheMaven Network, Inc. shareholders | 12,517,152 | $ | 0.20 | 2,500,000 | 56.7 | % | ||||||||||
Total fully diluted shares | 23,392,138 | $ | 4,403,464 | 100.0 | % | |||||||||||
Shares issued and outstanding as of Closing | 22,047,531 |
In accordance with the Investment Banking Advisory Agreement more fully described in Note 11 Related Parties, Integrated issued warrants to MDB Capital Group, LLC (“MDB”) to purchase 1,169,607 shares of Parent common stock. The warrants have an exercise price of $0.20 per share and expire on November 4, 2021. Integrated incurred transaction costs of $921,698 consisting of $744,105 for the fair value of warrants issued to MDB and $177,593 in cash for legal and related transaction costs. The costs incurred by Integrated were recorded in financial statements of the Parent prior to Recapitalization and reduced the net monetary assets acquired. The aggregate intrinsic value of the warrants issued to MDB at September 30, 2017 is $1,111,000.
The Recapitalization resulted in the acquisition of gross assets of $1,447,000 consisting primarily of cash and available for sale investment securities and the assumption of $470,000 of liabilities. Included in the total liabilities assumed was 168 shares of Class G Preferred Stock, which is reported as a liability at aggregated liquidation value of $168,496 because it is a redeemable instrument at the option of the holder (see Note 7 Redeemable Convertible Preferred Stock).
Prior to the closing of the Recapitalization, the Subsidiary had received $735,099 in multiple borrowings from Integrated on a note payable beginning on August 11, 2016 and ending on November 4, 2016. Integrated’s Board of Directors structured the loan to the Subsidiary as a loan that was fully secured so that Integrated would receive cash at maturity of the loan if the negotiations did not result in the consummated Recapitalization transaction. If the loan was not repaid then the remedies in the event of default were to pursue (a) the personal guarantee and/or (b) the mortgaged real estate collateral. The loan was not secured by the intellectual property of theMaven, but there was a covenant that theMaven would not, without prior written consent, sell or assign the business or intellectual property. This negative covenant did not give Integrated control or rights other than as a creditor. The loan did not provide Integrated with an equity interest or other ownership or control rights in theMaven. The Note did not have any rights to conversion into equity in theMaven. The note payable was cancelled as part of the Recapitalization and the proceeds from the borrowing from Integrated is considered as cash received due to the Recapitalization in addition to the net assets acquired. Legal and transaction costs incurred by Subsidiary of $50,000 related to the capital transaction were expensed and charged to General and Administrative expense in 2016.
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9. Stockholders’ EquityThe composition of the purchase price is as follows:
Schedule of Preliminary Purchase Price
Cash | $ | 10,830 | ||
Deferred cash payments, as discounted | 905 | |||
Total purchase consideration | $ | 11,735 |
The Company has authorized 100,000,000 sharesincurred $128 in transaction costs related to the acquisition, which primarily consisted of common stock, $0.01 par value,legal and accounting expenses. The acquisition related expenses were recorded in general and administrative expense in the condensed consolidated statements of which 26,005,140 sharesoperations.
After the June 30, 2021 condensed consolidated financial statements were issued, the Company received a final valuation report from a third-party valuation firm. After considering the results of that valuation report, the Company estimated the fair values for the brand name of $5,175, along with a decrease for working capital accounts of $1,932 (consisting of adjusted amounts for cash, accounts receivable, accrued expenses and outstanding asdeferred tax liabilities) resulting in a corresponding decrease to goodwill of September 30, 2017. As of September 30, 2017,$3,977.
The purchase price allocation resulted in the Company’s Directorsfollowing amounts being allocated to the assets acquired and Officers held 12,202,885 or 45.33%liabilities assumed at the closing date of the issuedacquisition based upon their respective fair values as summarized below:
Summary of Price Allocation for Acquisition
Cash | $ | 3,214 | ||
Accounts receivable | 1,772 | |||
Other current assets | 5 | |||
Brand name | 5,175 | |||
Goodwill | 3,479 | |||
Accrued expenses and other | (85 | ) | ||
Deferred tax liabilities | (1,825 | ) | ||
Net assets acquired | $ | 11,735 |
The Company utilized an independent appraisal firm to assist in the determination of the fair values of the assets acquired and outstanding shares.
Restricted Stock Awards
On August 11, 2016,liabilities assumed, which required certain significant management assumptions and employees of Subsidiary in conjunction with the incorporation on July 22, 2016, received 12,209,677 shares of common stock as adjusted for the Recapitalization exchange ratio of 4.13607. These shares are subject to a Company option to buy back the shares at the original cash consideration paid, which totaled $2,952 or approximately $0.0002 per share. A total of 7,966,070 shares were subject to the Company buy back right as of August 1, 2016, and 4,094,708 were made subject to the Company buy back right on November 4, 2016, in conjunction with the Recapitalization. The employees vest their ownership in these shares over a three-year period beginning August 1, 2016, with one-third vesting on August 1, 2017, and the balance monthly over the remaining two years.estimates. The fair value of these sharesthe brand name was determined by projecting the acquired entity’s cash flows, deducting notional contributory asset charges on supporting assets (working capital and the assembled workforce) to compute the excess cash flows associated with the brand with a useful life of Subsidiary stock was estimated onten years (10.0 years).
The excess of purchase price over the datefair value amounts assigned to the assets acquired and liabilities assumed represents goodwill from the acquisition. Goodwill is recorded as a non-current asset that is not amortized but is subject to an annual review for impairment. No portion of the award using the exchange value used by Integrated and the Subsidiary to establish the relative voting control ratio in the Recapitalization (See Note 8 Recapitalization). Because these shares require continued service to the Company the estimated fair value is recognized as compensation expense over the vesting period of the award.
On October 13, 2016, Subsidiary granted 62,041 shares of common stock to an employee. On October 16, 2016, an additional 245,434 shares of Subsidiary common stock were granted to a director. The fair value of these shares of Subsidiary stock was estimated on the date of the awards based on the quoted closing stock price on November 4, 2016, since the Recapitalization was pending. These shares are subject to a Company option to buy back the shares at the original cash consideration paid.
As a condition of the Recapitalization, a total of 4,094,708 shares were required to be placed into an escrow arrangement for purposes of enforcement of the Company option to buy back shares for the balance of the three-year service period. A total of 4,381,003 shares, which includes 35% of the 4,094,708 shares added to the buyback option, are escrowed and subject to a performance condition requiring the Company to achieve certain operating metrics regarding monthly unique users by December 31, 2017. Pursuant to a negotiated schedule the performance condition can be satisfied in partial increments up to the full number of shares escrowed. The Company uses a Monte Carlo simulation model to determine the number of shares expected to be released from the performance condition escrow.
Pursuant to FASB ASC 718, escrowed share arrangements in a capital raising transaction are considered to be compensatory, as such, the shares subject to these escrow provisions were re-measured as of November 4, 2016, the date of the Recapitalization. The estimated fair value of these shares was determined based on the quoted closing stock price on November 4, 2016. Because these shares require continued service to the Company the estimated fair value is recognized as compensation expense over the vesting period of the award.
At December 31, 2016, it was estimated that 72.5% of the shares subject to the performance conditiongoodwill will be released. At September 30, 2017, the expected achievement of the performance condition was reevaluated and it was determined that the shares estimated to be released had increased to 100%.deductible for tax purposes.
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Restricted stock award3.Balance Sheet Components
The components of certain balance sheet amounts are as follows:
Accounts Receivable – Accounts receivable are presented net of allowance for doubtful accounts. The allowance for doubtful accounts as of June 30, 2022 and December 31, 2021 was $1,862 and $1,578, respectively.
Subscription Acquisition Costs – Subscription acquisition costs include the incremental costs of obtaining a contract with a customer, paid to external parties, if it expects to recover those costs. The current portion of the subscription acquisition costs as of June 30, 2022 and December 31, 2021 was $28,603 and $30,162, respectively. The noncurrent portion of the subscription acquisition costs as of June 30, 2022 and December 31, 2021 was $7,651 and $8,235, respectively. Subscription acquisition costs as of June 30, 2022 presented as current assets of $28,603 are expected to be amortized over a one year period, or through June 30, 2023 and $7,651 presented as long-term assets are expected to be amortized after the one year period ending June 30, 2023.
Property and Equipment – Property and equipment are summarized as follows:
Schedule of Property and Equipment
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Office equipment and computers | $ | 1,724 | $ | 1,345 | ||||
Furniture and fixtures | 63 | 1 | ||||||
Property and equipment, gross | 1,787 | 1,346 | ||||||
Less accumulated depreciation and amortization | (955 | ) | (710 | ) | ||||
Net property and equipment | $ | 832 | $ | 636 |
Depreciation and amortization expense for the three months ended June 30, 2022 and 2021 was $131 and $110, respectively. Depreciation and amortization expense for the six months ended June 30, 2022 and 2021 was $245 and $220, respectively. Depreciation and amortization expense is included in selling and marketing expenses and general and administrative expenses, as appropriate, on the condensed consolidated statements of operations.
Platform Development – Platform development costs are summarized as follows:
Summary of Platform Development Costs
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Platform development | $ | 18,339 | $ | 21,997 | ||||
Less accumulated amortization | (8,099 | ) | (12,698 | ) | ||||
Net platform development | $ | 10,240 | $ | 9,299 |
Amortization expense for the three months ended June 30, 2022 and 2021, was $1,413 and $1,060, respectively. Amortization expense for the six months ended June 30, 2022 and 2021, was $2,757 and $2,129, respectively.
A summary of platform development activity for the period from July 22, 2016 (Inception)six months ended June 30, 2022 is as follows:
Summary of Platform Development Cost Activity
Platform development beginning of year | $ | 21,997 | ||
Payroll-based costs capitalized during the period | 2,784 | |||
Less dispositions | (7,356 | ) | ||
Total capitalized costs | 17,425 | |||
Stock-based compensation | 1,125 | |||
Impairments | (211 | ) | ||
Platform development end of period | $ | 18,339 |
For the three and six months ended June 30, 2022, impairment charges of $0 and $211, respectively, have been record for platform development. NaNimpairment charges have been recorded for the three and six months ended June 30, 2021.
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Intangible Assets – Intangible assets subject to September 30, 2017, including the reevaluationamortization consisted of the shares estimatedfollowing:
Schedule of Intangible Assets Subjects to be release,Amortization
As of June 30, 2022 | As of December 31, 2021 | |||||||||||||||||||||||
Carrying Amount | Accumulated Amortization | Net Carrying Amount | Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
Developed technology | $ | 17,333 | $ | (13,167 | ) | $ | 4,166 | $ | 17,579 | $ | (11,465 | ) | $ | 6,114 | ||||||||||
Trade name | 5,939 | (966 | ) | 4,973 | 3,328 | (782 | ) | 2,546 | ||||||||||||||||
Brand name | 5,175 | (556 | ) | 4,619 | 5,175 | (298 | ) | 4,877 | ||||||||||||||||
Subscriber relationships | 73,459 | (39,881 | ) | 33,578 | 73,459 | (32,623 | ) | 40,836 | ||||||||||||||||
Advertiser relationships | 8,870 | (879 | ) | 7,991 | 2,240 | (570 | ) | 1,670 | ||||||||||||||||
Database | 2,397 | (1,503 | ) | 894 | 2,397 | (1,104 | ) | 1,293 | ||||||||||||||||
Subtotal amortizable intangible assets | 113,173 | (56,952 | ) | 56,221 | 104,178 | (46,842 | ) | 57,336 | ||||||||||||||||
Website domain name | - | - | - | 20 | - | 20 | ||||||||||||||||||
Total intangible assets | $ | 113,173 | $ | (56,952 | ) | $ | 56,221 | $ | 104,198 | $ | (46,842 | ) | $ | 57,356 |
Amortization expense for the three months ended June 30, 2022 and 2021 was as follows:$5,275 and $4,951, respectively. Amortization expense for the six months ended June 30, 2022 and 2021 was $10,330 and $9,902, respectively. For the three and six months ended June 30, 2022, impairment charges of $0 and $46, respectively, have been recorded for the intangible assets. NaN impairment charges have been recorded for the three and six months ended June 30, 2021.
Shares | Shares Remeasured | Weighted- Average Price | ||||||||||
Stock awards granted at Inception | 12,209,677 | $ | 0.20 | |||||||||
Granted October 13, 2016 | 62,041 | 0.70 | ||||||||||
Granted October 16, 2016 | 245,434 | 0.70 | ||||||||||
Remeasurement at November 4, 2016 | - | 5,837,788 | * | 0.43 | ||||||||
Vested | - | - | ||||||||||
Reevaluation of shares expected to be released as of March 31, 2017 | - | 1,007,633 | * | 0.06 | ||||||||
Reevaluation of shares expected to be released as of June 30, 2017 | - | 197,145 | * | 0.01 | ||||||||
Total at September 30, 2017 | 12,517,152 | $ | 0.48 | |||||||||
Vested at September 30, 2017 | 4,504,180 | $ | 0.48 | |||||||||
Expected to vest after September 30, 2017 | 8,012,972 | $ | 0.48 |
4.Leases
The Company’s real estate lease for the use of office space was subleased during the year ended December 31, 2021 (as further described below). The Company’s current lease is a long-term operating lease with a remaining fixed payment term of 2.26 years.
The table below presents supplemental information related to operating leases:
Schedule of Supplemental Information Related to Operating Leases
Six Months Ended | Year Ended | |||||||
June 30, 2022 | December 31, 2021 | |||||||
Operating lease costs during the period (1) | $ | 453 | $ | 2,718 | ||||
Cash payments included in the measurement of operating lease liabilities during the period | $ | 234 | $ | 2,787 | ||||
Weighted-average remaining lease term (in years) as of period-end | 2.26 | 2.75 | ||||||
Weighted-average discount rate during the period | 9.90 | % | 9.90 | % |
(1) |
The Company generally utilizes its incremental borrowing rate based on information available at the commencement of the lease in determining the present value of future payments since the implicit rate for the Company’s leases is not readily determinable.
Variable lease expense includes rental increases that are not fixed, such as those based on amounts paid to the lessor based on cost or consumption, including maintenance and utilities.
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The components of operating lease costs were as follows:
Schedule of Operating Lease Costs
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Operating lease costs: | ||||||||||||||||
Cost of revenue | $ | - | $ | 630 | $ | - | $ | 1,261 | ||||||||
Selling and marketing | - | 181 | - | 362 | ||||||||||||
General and administrative | 328 | 148 | 562 | 297 | ||||||||||||
Total operating lease costs (1) | 328 | 959 | 562 | 1,920 | ||||||||||||
Sublease income | (54 | ) | - | (109 | ) | - | ||||||||||
Total | $ | 274 | $ | 959 | $ | 453 | $ | 1,920 |
(1) |
|
Maturities of the operating lease liability as of June 30, 2022 are summarized as follows:
Summary of Maturity of Lease Liabilities
Years Ending December 31, | ||||
2022 (remaining six months of the year) | $ | 238 | ||
2023 | 486 | |||
2024 | 373 | |||
Minimum lease payments | 1,097 | |||
Less imputed interest | (118 | ) | ||
Present value of operating lease liability | $ | 979 | ||
Current portion of operating lease liability | $ | 400 | ||
Long-term portion of operating lease liability | 579 | |||
Total operating lease liability | $ | 979 |
Sublease Agreement – In November 2021, the Company entered into an agreement to sublease its leased office space for the duration of its operating lease through September 2024. As of June 30, 2022, the Company is entitled to receive total sublease income of $567.
At September
Business Membership – Effective October 1, 2021, the Company entered into a business membership agreement with York Factory LLC, doing business as SaksWorks, that permits access to certain office space with furnishings, referred to as SaksWorks Memberships (each membership provides a certain number of accounts that equate to the use of the space granted). The term of the agreement was for 27 months, with 18 months remaining at $57 per month for 110 accounts.
5.Line of Credit
On December 6, 2021, the Company entered into an amendment to its financing and security agreement for its line of credit with FPP Finance LLC (“FastPay”) that was originally entered into on February 27, 2020, pursuant to which (i) the maximum amount of advances available was increased to $25,000 from $15,000 (subject to eighty-five (85%) of eligible accounts receivable), (ii) the interest rate on the facility applicable margin was decreased to 6.0% per annum from 8.5% per annum (the facility bears interest at the LIBOR rate plus the applicable margin), and (iii) the maturity date was extended to February 28, 2024 from February 6, 2022. The line of credit is for working capital purposes and is secured by a first lien on all the Company’s cash and accounts receivable and a second lien on all other assets. As of June 30, 2017, total compensation cost related to2022 and December 31, 2021, the balance outstanding under the FastPay line of credit was $7,808 and $11,988, respectively.
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6.Restricted Stock Liabilities
On December 15, 2020, the Company entered into an amendment for certain restricted stock awards but not yet recognized was $3,372,000. This cost will be amortized onand units that were previously issued to certain employees in connection with a straight-line method over a period of approximately 1.85 years.
Stock Options
On December 19, 2016, the Company’s Board of Directors approved the 2016 Stock Incentive Plan (“Plan”previous merger (the “HubPages merger”) and reserved 1,670,867 shares of common stock for issuance under the Plan, including options and restricted performance stock awards. On June 28, 2017, the Board of Directors approved an increase in the total number of shares reserved from 1,670,867 to 3,000,000. The Plan is administered by the Board of Directors, and there were no grants prior. Pursuant to the formation ofamendment, the Plan. Shares of common stock that are issued under the Plan or subjectCompany committed to outstanding incentive awards will be applied to reduce the maximum number of shares of common stock remaining available for issuance under the Plan, provided, however, that that shares subject to an incentive award that expire will automatically become available for issuance. Options issued under the Plan may have a term of up to ten years and may have variable vesting provisions.
The estimated fair value of stock-based awards is recognized as compensation expense over the vesting period of the award. The fair value ofrepurchase vested restricted stock awards is determinedas of December 31, 2020 at a price of $ per share in 24 equal monthly installments on the second business day of each calendar month beginning January 4, 2021, subject to certain conditions.
The following table presents the components of the restricted stock liabilities:
Schedule of Components of Restricted Stock Liabilities
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Restricted stock liabilities (before imputed interest) | $ | 2,307 | $ | 3,801 | ||||
Less imputed interest | (155 | ) | (177 | ) | ||||
Present value of restricted stock liabilities | 2,152 | 3,624 | ||||||
Less principal payments during the period | (2,152 | ) | (1,472 | ) | ||||
Restricted stock liabilities at end of period (reflected in accrued expenses and other) | $ | - | $ | 2,152 |
The Company recorded the repurchase of 2,307 in cash for the repurchase, including interest of $155. ( during the three months ended June 30, 2022 and during the six months ended June 30, 2022) and 6,049 shares of the Company’s restricted common stock during the six months ended June 30, 2022 and 2021, respectively, on the condensed consolidated statements of stockholders’ deficiency. Effective April 4, 2022, there are no longer any shares of the Company’s common stock subject to repurchase. During the six months ended June 30, 2022, the Company paid $
7.Liquidated Damages Payable
Liquidated damages were recorded as a result of the following: (i) certain registration rights agreements provide for damages if the Company does not register certain shares of the Company’s common stock within the requisite time frame (the “Registration Rights Damages”); and (ii) certain securities purchase agreements provide for damages if the Company does not maintain its periodic filings with the SEC within the requisite time frame (the “Public Information Failure Damages”).
Obligations with respect to the liquidated damages payable are summarized as follows:
Summary of Liquidated Damages
As of June 30, 2022 | ||||||||||||||||
Registration Rights Damages | Public Information Failure Damages | Accrued Interest | Balance | |||||||||||||
MDB common stock to be issued (1) | $ | 15 | $ | - | $ | - | $ | 15 | ||||||||
Series H convertible preferred stock | 618 | 625 | 494 | 1,737 | ||||||||||||
Convertible debentures | - | 704 | 237 | 941 | ||||||||||||
Series J convertible preferred stock | 932 | 932 | 412 | 2,276 | ||||||||||||
Series K convertible preferred stock | 95 | 379 | 54 | 528 | ||||||||||||
Total | $ | 1,660 | $ | 2,640 | $ | 1,197 | $ | 5,497 |
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As of December 31, 2021 | ||||||||||||||||
Registration Rights Damages | Public Information Failure Damages | Accrued Interest | Balance | |||||||||||||
MDB common stock to be issued (1) | $ | 15 | $ | - | $ | - | $ | 15 | ||||||||
Series H convertible preferred stock | 1,164 | 1,172 | 792 | 3,128 | ||||||||||||
Convertible debentures | - | 873 | 242 | 1,115 | ||||||||||||
Series I convertible preferred stock | 1,386 | 1,386 | 613 | 3,385 | ||||||||||||
Series J convertible preferred stock | 1,560 | 1,560 | 490 | 3,610 | ||||||||||||
Series K convertible preferred stock | 180 | 722 | 50 | 952 | ||||||||||||
Total | $ | 4,305 | $ | 5,713 | $ | 2,187 | $ | 12,205 |
(1) | Consists of shares of common stock issuable to MDB Capital Group, LLC (“MDB”). |
As of June 30, 2022, the short-term and long-term liquidated damages payable were $5,497 and $0, respectively. The Company will continue to accrue interest on the liquidated damages balance at 1.0% per month based on the numberbalance outstanding as of June 30, 2022 until paid. There is no scheduled date when the unpaid liquidated damages become due.
As of December 31, 2021, the short-term and long-term liquidated damages payable were $5,197 and $7,008, respectively. The long-term portion was converted into shares granted andof the quotedCompany’s common stock on January 24, 2022, as further described below.
On January 24, 2022, the Company entered into several stock purchase agreements with several investors, where the Company was liable to for liquidated damages, pursuant to which the Company issued an aggregate of datesixty (60) previous trading days), to the investors in lieu of grant. an aggregate of $7,008 owed in liquidated damages. In connection with the stock purchase agreements, the Company filed a registration statement covering the resale of the shares of the Company’s common stock. The Company recorded $6,685 in connection with the issuance of shares of the Company’s common stock and recognized a gain of $323 on the settlement of the liquidated damages, which was recorded within additional paid-in capital on the condensed consolidated statement of stockholders’ deficiency. shares of its common stock at a price equal to $ per share (determined based on the volume-weighted average price of the Company’s common stock at the close of trading on the
8.Fair Value Measurements
The Company estimates the fair value of financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts the Company would realize upon disposition.
The fair value hierarchy consists of stock option awardsthree broad levels of inputs that may be used to measure fair value, which are estimateddescribed below:
Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2. Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
Level 3. Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which result in the use of management estimates.
The Company accounted for certain warrants (as described under the heading Common Stock Warrants in Note 10) as derivative liabilities, which required the Company to carry such amounts on its condensed consolidated balance sheets as a liability at fair value, as adjusted at each reporting period-end. As of December 31, 2021, the grant date as calculated using the Black-Scholes option-pricing model. The Black-Scholes model requires various highly judgmental assumptions including expected volatilityStrome Warrants and option life. The fair values of our stock option grantsB. Riley Warrants (as described in Note 11) were estimated with the following average assumptions:classified within equity.
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The fair valueFor the three months ended June 30, 2021, the change in valuation of stock options granted duringwarrant derivative liabilities of $360 was recognized as other income on the period ended September 30, 2017 were estimated with the following assumptions:
First Quarter | Second Quarter | Third Quarter | ||||||||||
Expected life in years | 6.0 | 5.9 | 6.0 | |||||||||
Risk-free interest rate | 2.13 | % | 1.97 | % | 2.01 | % | ||||||
Expected annual volatility | 114.20 | % | 117.87 | % | 115.13 | % | ||||||
Dividend yield | 0.00 | % | 0.00 | % | 0.00 | % |
condensed consolidated statement of operations. For the six months ended SeptemberJune 30, 2017 stock option activity2021, the change in valuation of warrant derivative liabilities of $305 was recognized as follows:other expense on the condensed consolidated statement of operations.
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | |||||||||||||
Outstanding at January 1, 2017 | 275,137 | $ | 0.48 | 5.15 | ||||||||||||
. | ||||||||||||||||
Granted | 1,914,000 | 1.28 | 9.04 | |||||||||||||
Exercised | (25,000 | ) | .17 | 1.62 | ||||||||||||
Forfeited | (95,000 | ) | 1.41 | 9.64 | ||||||||||||
Outstanding at September 30, 2017 | 2,069,137 | $ | 1.24 | 9.02 | $ | 170,218 | ||||||||||
Vested and expected to vest at September 30, 2017 | 2,069,137 | $ | 1.24 | 9.02 | $ | 170,218 | ||||||||||
Exercisable at September 30, 2017 | 309,967 | $ | 0.85 | 5.83 | $ | 147,000 |
9.Long-term Debt
Senior Secured Note
As of SeptemberJune 30, 2017,2022 and December 31, 2021, the Company has granted 1,914,000 optionsCompany’s outstanding obligation under its senior secured note with BRF Finance Co., LLC, an affiliated entity of B. Riley Financial, Inc. (“B. Riley”), in its capacity as agent for the Plan, of which 159,967purchasers and as purchaser, is summarized as follows:
● | On March 24, 2020, the Company entered into a second amended and restated note when the principal balance outstanding under its note issued on June 19, 2019 was $51,336 (including accrued interest), due on June 14, 2022 (as further amended). The terms of the note also permitted the Company to enter into a Delayed Draw Term Note (as described below), in the aggregate principal amount of $12,000; | |
● | On October 23, 2020, the Company entered into a first amendment to second amended and restated note issued on March 24, 2020 (“Amendment 1”), where the maturity date was changed to December 31, 2022 (as further amended) from June 14, 2022, subject to certain acceleration conditions and interest payable on the note on September 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021, and December 31, 2021 will be payable in-kind in arrears on the last day of such fiscal quarter. Alternatively, at the option of the holder, such interest amounts originally could have been paid in shares of previously designated Series K convertible preferred stock (the “Series K Preferred Stock”); however, after December 18, 2020, the date the Series K Preferred Stock converted into shares of the Company’s common stock, such interest amounts can be converted into shares of the Company’s common stock based upon the conversion rate specified in the Certificate of Designation for the Series K Preferred Stock, subject to certain adjustments; | |
● | On May 19, 2021, the Company entered into a second amendment to the second amended and restated note issued March 24, 2020 (“Amendment 2”), pursuant to which: (i) the interest rate on the Senior Secured Note, as defined below, decreased from a rate of 12.0% per annum to a rate of 10.0% per annum; and (ii) the Company agreed that within one (1) business day after receipt of cash proceeds from any issuance of equity interests, it will prepay the certain obligations in an amount equal to such cash proceeds, net of underwriting discounts and commissions; provided, that, this mandatory prepayment obligation does not apply to any proceeds that the Company received from shares of the Company’s common stock issued pursuant to a certain securities purchase agreement during the 90-day period commencing on May 20, 2021; | |
● | On December 6, 2021, the Company entered into a third amendment to the second amended and restated note issued March 24, 2020 (“Amendment 3”), where the Company was permitted to increase the FastPay line of credit in an aggregate principal amount not to exceed $25,000; and | |
● | On January 23, 2022, the Company entered into a fourth amendment to the second amended and restated note issued March 24, 2020 (“Amendment 4”), where the maturity date on the note was extended to (i) December 31, 2023 from December 31, 2022 upon the consummation of the equity financing on February 15, 2022 (further details are provided below), or (ii) the date accelerated pursuant to certain terms of Amendment 4. |
Collectively, the second amended and restated note and Amendment 1, Amendment 2, Amendment 3 and Amendment 4 thereto are vested. Inreferred to as the three and nine months ended September 30, 2017, the Company recorded stock-based compensation of $259,508 and $508,635, respectively related to the options granted under the Plan. Of the total stock-based compensation in the three months, $216,920 was expensed in General and Administrative expenses and $42,588 was capitalized as Website Development Costs. Of the total stock-based compensation in the nine months, $440,268 was expensed in General and Administrative expenses and $68,367 was capitalized as Website Development Costs.
At September 30, 2017, total compensation cost related to stock options granted under the Plan but not yet recognized was $1,574,000. This cost will be amortized on a straight-line method over a period of approximately 1.67 years. The aggregate intrinsic value represents the difference between the exercise price“Senior Secured Note,” with all borrowings collateralized by substantially all assets of the underlying options and the quoted price of our common stock for the number of options that were in-the-money at September 30, 2017.Company.
In addition, the Company assumed 175,000 fully-vested options in connection with the Recapitalization with an exercise price of $0.17 per share which expire on May 15, 2019. During the quarter ended September 30, 2017, 25,000 of these options were cashless exercised into 21,680 common shares and 150,000 options are outstanding.
20 |
After the date of Amendment 4, interest on the note will be payable, at the agent’s sole discretion, either (a) in cash quarterly in arrears on the last day of each fiscal quarter or (b) by continuing to add such interest due on such payment dates to the principal amount of the note. Interest on the Senior Secured Note will accrue for each calendar quarter on the outstanding principal amount of the note at an aggregate rate of 10.0% per annum, subject to adjustment in the event of default. Further, interest that was payable during fiscal years 2020 and 2021 and added to the principal amount under the note remains subject to the conversion election under Amendment 1.
The following table summarizes certain information about stock options
Delayed Draw Term Note
As of June 30, 2022 and December 31, 2021, the Company’s outstanding obligation under its delayed draw term note with B. Riley is summarized as follows:
● | On March 24, 2020, the Company entered into a delayed draw term note (the “Delayed Draw Term Note”) with an interest rate of 15.0% per annum, pursuant to the second amended and restated note purchase agreement, in the aggregate principal amount of $12,000. The terms of the note provided that up to $8,000 in principal amount was due on March 31, 2021; | |
● | On March 24, 2020, the Company drew down $6,914 under the Delayed Draw Term Note, with interest payable in-kind in arrears on the last day of each fiscal quarter; | |
● | On October 23, 2020, pursuant to the terms of Amendment 1, the maturity date of the Delayed Draw Term Note was changed to March 31, 2022 (as further amended) from March 31, 2021. Amendment 1 also provided that the holder, could originally elect, in lieu of receipt of cash for payment of all or any portion of the interest due or cash payments up to a certain conversion portion of the Delayed Draw Term Note, to receive shares of Series K Preferred Stock; however, after December 18, 2020, the date the Series K Preferred Stock converted into shares of the Company’s common stock, the holder may elect, in lieu of receipt of cash for such amounts, shares of the Company’s common stock at the price the Company last sold shares of the Company’s common stock; | |
● | On October 23, 2020, $3,367, including principal and accrued interest of the Delayed Draw Term Note, converted into shares of the Company’s Series K Preferred Stock, which shares were further converted into shares of the Company’s common stock; | |
● | On May 19, 2021, pursuant to Amendment 2, the interest rate on the Delayed Draw Term Note decreased to a rate of 10.0% per annum from a rate of 15.0% per annum; | |
● | On December 28, 2021, the Company drew down $5,086 under the Delayed Draw Term Note, and after payment of commitment and funding fees paid of $509, the Company received net proceeds of $4,578; and | |
● | On February 15, 2023, pursuant to Amendment 4, the maturity date on the Delayed Draw Term Note was extended to (i) December 31, 2022 from March 31, 2022 for $5,925 of principal due and (ii) December 31, 2023 from March 31, 2022 for $4,000 of principal due, subject to certain acceleration terms. |
Amendment 4 also provided that interest will be payable, at the agent’s sole discretion, either (a) in cash quarterly in arrears on the last day of each fiscal quarter or (b) in kind quarterly in arrears on the last day of each fiscal quarter, and will accrue for each fiscal quarter on the nine months ended September 30, 2017:principal amount outstanding under the note at an aggregate rate of 10.0% per annum, subject to adjustment in the event of default.
21 |
Weighted average grant-date fair value for options granted during the year | $ | 1.28 | ||
Vested options in-the-money at September 30, 2017 | 150,000 | |||
Aggregate intrinsic value of options exercised during the year | $ | 27,750 |
The following table summarizes the common shares reserved for future issuance under the Plan:long-term debt:
Schedule of Long Term Debt
As of June 30, 2022 | As of December 31, 2021 | |||||||||||||||||||||||
Principal Balance (including accrued interest) | Unamortized Discount and Debt Issuance Costs | Carrying Value | Principal Balance (including accrued interest) | Unamortized Discount and Debt Issuance Costs | Carrying Value | |||||||||||||||||||
Senior Secured Note, as amended, matures December 31, 2023 | $ | 62,691 | $ | (1,360 | ) | $ | 61,331 | $ | 62,691 | $ | (1,935 | ) | $ | 60,756 | ||||||||||
Delayed Draw Term Note, as amended, matures December 31, 2023 | 9,928 | (207 | ) | 9,721 | 9,928 | (567 | ) | 9,361 | ||||||||||||||||
Total | $ | 72,619 | $ | (1,567 | ) | $ | 71,052 | $ | 72,619 | $ | (2,502 | ) | $ | 70,117 | ||||||||||
Carrying value | ||||||||||||||||||||||||
Current portion | $ | 5,873 | $ | 5,744 | ||||||||||||||||||||
Long-term portion | 65,179 | 64,373 | ||||||||||||||||||||||
Total | $ | 71,052 | $ | 70,117 |
Common Stock Warrants – Channel Partner Program
OnAs of June 30, 2022 and December 19, 2016,31, 2021, the Company’s BoardDelayed Draw Term Note, as amended, carrying value of Directors approved a program to be administered by management that authorized$9,721 and $9,361, respectively, was as follows: (1) $5,873 and $5,744 for the Company to issue up to 5,000,000 common stock warrants to provide equity incentive to its Channel Partners to motivatefirst draw (including accrued interest and reward themless unamortized discount and debt issuance costs of $52 and $180), respectively; and (2) $3,848 and $3,617 for their services to the Companysecond draw (including accrued interest and to alignless unamortized discount and debt issuance costs of $155 and $387), respectively. As of June 30, 2022, the interestseffective interest of the Channel Partners with those of stockholders of the Company.Senior Secured Note, Delayed Draw Term Note first draw and second draw was 11.4%, 11.7% and 12.5%, respectively.
The following table summarizes the activity in Channel Partner Warrants during the nine months ended September 30, 2017:principal maturities of long-term debt:
Schedule of Principal Maturities of Long-term Debt
Years Ending December 31, | ||||
2022 | $ | 5,924 | ||
2023 | 66,695 | |||
Total | $ | 72,619 |
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value | |||||||||||||
Outstanding at January 1, 2017 | 350,000 | $ | 1.05 | 4.75 | ||||||||||||
Granted | 3,074,500 | 1.33 | 4.51 | |||||||||||||
Exercised | - | - | - | |||||||||||||
Forfeited | - | - | - | |||||||||||||
Outstanding at September 30, 2017 | 3,424,500 | $ | 1.30 | 4.48 | $ | 120,000 | ||||||||||
Vested and expected to vest at September 30, 2017 | 1,556,000 | $ | 1.30 | 4.48 | $ | 55,000 | ||||||||||
Exercisable at September 30, 2017 | - | - | - | - |
10.Preferred Stock
In the nine months ended September 30, 2017, the Company issued 3,074,500 common stock warrants to Channel Partners. The warrants have a performance condition and vest over three years and expire in five years from issuance. The exercise prices range from $1.05 to $1.90 with a weighted average of $1.33. The performance conditions are generally based on the average number of unique visitors on the Channel operated by the Channel Partner generated during the period from July 1, 2017, to December 31, 2017, or the revenue generated during the period from issuance date through September 30, 2019. Equity grants with performance conditions that do not have sufficiently large disincentive for non-performance may be measured at fair value that is not fixed until performance is complete. The Company recognizes expense for equity based payments to non-employees as the services are received. The Company has specific objective criteria, suchthe authority to issue shares of preferred stock, $ par value per share, which as of June 30, 2022 has been designated and issued as follows:
● | authorized shares designated as “Series G Convertible Preferred Stock”, of which shares are outstanding. | |
● | authorized shares designated as “Series H Convertible Preferred Stock” (as further described below), of which shares are outstanding. |
Series H Preferred Stock
The Company recorded the dateissuance of launch shares of a Channelthe Company’s common stock upon conversion of shares of the Company’s series H convertible preferred stock (the “Series H Preferred Stock”) during the six months ended June 30, 2022, as reflected on the Company’s platform, for determinationcondensed consolidated statements of the period over which services are received and expense is recognized.stockholders’ deficiency.
22 |
The Company usesSeries L Preferred Stock
On May 4, 2021, a Monte Carlo simulation model to determinespecial committee of the numberBoard declared a dividend of shares expectedone preferred stock purchase right to be earned by Channel Partners based on performance obligationspaid to be satisfied over a defined period which will commencethe stockholders of record at the launchclose of business on May 14, 2021 for (i) each outstanding share of the Company’s common stock and (ii) each share of the Company’s common stock issuable upon conversion of each share of the Company’s Series H Preferred Stock. Each preferred stock purchase right entitles the registered holder to purchase, subject to a rights agreement (the “Rights Agreement”), from the Company one one-thousandth of a Channel onshare of the Company’s platform. Asthen-newly created Series L Junior Participating Preferred Stock, par value $ per share (the “Series L Preferred Stock”), at a price of September 30, 2017,$4.00, subject to certain adjustments. The Series L Preferred Stock was entitled, when, as and if declared, to a preferential per share quarterly dividend payment equal to the Company has estimated that 1,556,000greater of Channel Partner Warrants will be earned. The Company recorded(i) $1.00 per share or (ii) 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in Service Costs a totalkind) of $35,000 and $115,000all non-cash dividends or other distributions paid to the holders of stock-based compensation related to Channel Partner warrants in the three and nine months ended September 30, 2017, respectively.
Other Warrants
In accordance with the Investment Banking Advisory Agreement more fully described in Note 11 Related Parties, Integrated issued warrants to MDB Capital Group, LLC to purchase 1,169,607 shares of ParentCompany’s common stock. The warrants haveSeries L Preferred Stock was entitled to 1,000 votes on all matters submitted to a vote of the stockholders of the Company. In the event of any merger, consolidation or other transaction in which shares of the Company’s common stock are converted or exchanged, the Series L Preferred Stock was entitled to receive 1,000 times the amount received per one share of the Company’s common stock.
The Rights Agreement was set to expire on May 3, 2022; however, on May 2, 2022, the Board elected to extend the expiration date by an exerciseamended and restated rights agreement (the “Extended Rights Agreement”), which was ratified by the Company’s stockholders on June 2, 2022.
Further details subsequent to the date of these condensed consolidated financial statements are provided under the heading Series L Preferred Stock in Note 17.
11.Stockholders’ Equity
Common Stock
The Company has the authority to issue shares of common stock, $ par value per share.
On February 15, 2022 and March 11, 2022, the Company raised gross proceeds of $34,498 pursuant to a firm commitment underwritten public offering of shares of the Company’s common stock (on February 15, 2022 the Company issued shares and on March 11, 2022 the Company issued shares pursuant to the underwriter’s overallotment that was exercised on March 10, 2022), at a public offering price of $0.20$ per shareshare. The Company received net proceeds of $32,058, after deducting underwriting discounts and expire on November 4, 2021. The aggregate intrinsic value ofcommissions and other offering costs payable by the warrants at September 30, 2017, is $1,111,000
Common Stock – Private Placement of Common Stock
On April 4, 2017,Company. In addition, the Company completed a private placementdirectly incurred offering costs of $1,568 and recorded $30,490 upon the issuance of its common stock, selling 3,765,000as reflected on the condensed consolidated statements of stockholders’ deficiency.
On April 27, 2022, the Company issued shares of the Company’s common stock in connection with a previous merger with Say Media, Inc. (the “Say Media merger”). These shares were previously classified as common stock to be issued on the condensed consolidated statements of stockholders’ deficiency.
On May 20, 2021 and May 25, 2021, the Company entered into securities purchase agreements with several accredited investors, pursuant to which the Company sold an aggregate of $1.00a per share price of $ for totalaggregate gross proceeds of $3,765,000. In connection with the offering,$15,005 in a private placement. On June 2, 2021, the Company paid $188,250 and issued 162,000entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold an aggregate of shares of the Company’s common stock, at a per share price of $ for gross proceeds of $5,000 in a private placement that was in addition to the closings that occurred on May 20, 2021 and May 25, 2021. After payment of legal fees and expenses the investors of $167, of which $100,000 was paid in cash to B. Riley, the Company received net proceeds of $19,838. The Company used the proceeds for general corporate purposes. shares of the Company’s common stock, at
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Common Stock Warrants
The Company issued warrants to purchase shares of the Company’s common stock to MDB Capital Group, LLC which acted(the “MDB Warrants”), L2 Capital, LLC (the “L2 Warrants”), Strome Mezzanine Fund LP (the “Strome Warrants”), and B. Riley Financial, Inc. (the “B. Riley Warrants”) in connection with various financing transactions (collectively, the “Financing Warrants”).
The Financing Warrants outstanding and exercisable as placement agent. of June 30, 2022 are summarized as follows:
Schedule of Common Stock Financing Warrants Outstanding and Exercisable
Exercise Price | Expiration Date | Total Outstanding and Exercisable Shares | ||||||||
Strome Warrants | $ | 11.00 | June 15, 2023 | 68,182 | ||||||
B. Riley Warrants | 7.26 | October 18, 2025 | 39,773 | |||||||
MDB Warrants | 25.30 | October 19, 2022 | 5,435 | |||||||
MDB Warrants | 55.00 | October 19, 2022 | 2,728 | |||||||
Total | 116,118 |
The transaction costsintrinsic value of $446,000, including $201,000exercisable but unexercised in-the-money stock warrants as of non-cash expenses, have been recorded asJune 30, 2022 was $ , based on a reduction in paid-in capital.fair market value of the Company’s common stock of $ per share on June 30, 2022.
The impact on our results of operations of recordingCompany provides stock-based compensation expense forin the three months ended September 30, 2017 wasform of (a) restricted stock awards to certain employees (referred to as follows:the “Restricted Stock Awards”), (b) stock option grants to employees, directors and consultants under the 2016 Stock Incentive Plan (the “2016 Plan”), (c) stock option awards, restricted stock awards and units, unrestricted stock awards, and stock appreciation rights to employees, directors and consultants under the 2019 Equity Incentive Plan (the “2019 Plan”), (d) stock option awards, restricted stock awards and units, unrestricted stock awards, and stock appreciation rights to employees, directors and consultants under the Equity Incentive Plan (the “2022 Plan”) (collectively, the 2016 Plan, 2019 Plan and 2022 Plan are referred to as the “Equity Plans”), (e) stock option awards outside of the 2016 Plan, 2019 Plan and 2022 Plan to certain officers, directors and employees (referred to as the “Outside Options”), (f) common stock warrants to the Company’s publisher partners (referred to as the “Publisher Partner Warrants”), and (g) common stock warrants to ABG-SI, LLC (referred to as the “ABG Warrants”). Effective with the adoption of the 2022 Plan, the Company will not issue new awards under the 2016 Plan and 2019 Plan.
Restricted | Channel | |||||||||||||||||||
Stock at | Stock | Partner | ||||||||||||||||||
Inception | Options | Warrants | Warrants | Total | ||||||||||||||||
Service Costs | $ | - | $ | - | $ | 35,000 | $ | - | $ | 35,000 | ||||||||||
Research and development | - | - | - | - | - | |||||||||||||||
General and administrative | 261,749 | 216,920 | - | 478,669 | ||||||||||||||||
$ | 261,749 | $ | 216,920 | $ | 35,000 | $ | - | $ | 513,669 |
In addition, during the three months ended September 30, 2017, stock-based compensation totaling $243,484 during the application and development stage was capitalized for website development.
The impact on our results of operations of recording stock-based compensation expense for the nine months ended September 30, 2017, was as follows:
Restricted | Channel | |||||||||||||||||||
Stock at | Stock | Partner | ||||||||||||||||||
Inception | Options | Warrants | Warrants | Total | ||||||||||||||||
Service Costs | $ | - | $ | - | $ | 115,000 | $ | - | $ | 115,000 | ||||||||||
Research and development | - | - | - | - | - | |||||||||||||||
General and administrative | 801,743 | 408,432 | - | 32,335 | 1,242,510 | |||||||||||||||
$ | 801,743 | $ | 408,432 | $ | 115,000 | $ | 32,335 | $ | 1,357,510 |
In addition, during the nine months ended September 30, 2017, stock-based compensation totaling $688,302 during the application and development stage was capitalized for website development.
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Summary of Stock-based Compensation
Restricted | ||||||||||||||||||||
Stock | Equity | Outside | ABG | |||||||||||||||||
Awards | Plans | Options | Warrants | Totals | ||||||||||||||||
During the Three Months Ended June 30, 2022 | ||||||||||||||||||||
Cost of revenue | $ | 404 | $ | 2,269 | $ | - | $ | - | $ | 2,673 | ||||||||||
Selling and marketing | - | 739 | - | - | 739 | |||||||||||||||
General and administrative | - | 5,207 | - | 480 | 5,687 | |||||||||||||||
Total costs charged to operations | 404 | 8,215 | - | 480 | 9,099 | |||||||||||||||
Capitalized platform development | - | 438 | - | - | 438 | |||||||||||||||
Total stock-based compensation | $ | 404 | $ | 8,653 | $ | - | $ | 480 | $ | 9,537 | ||||||||||
During the Three Months Ended June 30, 2021 | ||||||||||||||||||||
Cost of revenue | $ | 25 | $ | 1,728 | $ | 1 | $ | - | $ | 1,754 | ||||||||||
Selling and marketing | - | 1,513 | 74 | - | 1,587 | |||||||||||||||
General and administrative | 142 | 4,237 | - | 396 | 4,775 | |||||||||||||||
Total costs charged to operations | 167 | 7,478 | 75 | 396 | 8,116 | |||||||||||||||
Capitalized platform development | 4 | 544 | 2 | - | 550 | |||||||||||||||
Total stock-based compensation | $ | 171 | $ | 8,022 | $ | 77 | $ | 396 | $ | 8,666 |
Restricted | ||||||||||||||||||||
Stock | Equity | Outside | ABG | |||||||||||||||||
Awards | Plans | Options | Warrants | Totals | ||||||||||||||||
During the Six Months Ended June 30, 2022 | ||||||||||||||||||||
Cost of revenue | $ | 834 | $ | 3,996 | $ | - | $ | - | $ | 4,830 | ||||||||||
Selling and marketing | - | 1,339 | - | - | 1,339 | |||||||||||||||
General and administrative | - | 9,196 | 105 | 996 | 10,297 | |||||||||||||||
Total costs charged to operations | 834 | 14,531 | 105 | 996 | 16,466 | |||||||||||||||
Capitalized platform development | - | 1,125 | - | - | 1,125 | |||||||||||||||
Total stock-based compensation | $ | 834 | $ | 15,656 | $ | 105 | $ | 996 | $ | 17,591 | ||||||||||
During the Six Months Ended June 30, 2021 | ||||||||||||||||||||
Cost of revenue | $ | 49 | $ | 3,146 | $ | 3 | $ | - | $ | 3,198 | ||||||||||
Selling and marketing | - | 2,489 | 149 | - | 2,638 | |||||||||||||||
General and administrative | 145 | 6,481 | - | 753 | 7,379 | |||||||||||||||
Total costs charged to operations | 194 | 12,116 | 152 | 753 | 13,215 | |||||||||||||||
Capitalized platform development | 9 | 846 | 4 | - | 859 | |||||||||||||||
Total stock-based compensation | $ | 203 | $ | 12,962 | $ | 156 | $ | 753 | $ | 14,074 |
25 |
Unrecognized compensation expense and expected weighted-average period to be recognized related to the stock-based compensation awards and equity-based awards as of June 30, 2022 was as follows:
Schedule of Unrecognized Compensation Expense
Restricted | ||||||||||||||||||||
Stock | Equity | Outside | ABG | |||||||||||||||||
Awards | Plans | Options | Warrants | Totals | ||||||||||||||||
Unrecognized compensation cost | $ | 1,521 | $ | 43,337 | $ | - | $ | 1,508 | $ | 46,366 | ||||||||||
Expected weighted-average period expected to be recognized (in years) | - |
Further details as of the date these condensed consolidated financial statements were issued are provided under the heading Compensation Plans in Note 17.
Stock Option Repricing
On March 18, 2022, the Company approved a repricing of certain outstanding stock options (the “Stock Option Repricing”) granted under the Company’s 2016 Plan and the 2019 Plan that had an exercise price above $ per share, including certain outstanding stock options held by senior management of the Company. The Stock Option Repricing also included certain outstanding stock options granted outside of the 2016 Plan and 2019 Plan. The Stock Options Repricing was approved by the Board and stockholders. As a result of the Stock Option Repricing, the exercise prices were set to $ per share, which was the closing sale price of the Company’s common stock as listed on the NYSE American exchange on March 18, 2022. Except for the repricing of the stock options under the 2019 Plan, all terms and conditions of each stock option remains in full force and effect. For the repricing of the stock options under the 2019 Plan, the Company (i) modified the exercise price; (ii) will allow cashless exercise as a method of paying the exercise price, and (iii) will waive a lock-up provision in the stock option agreements. All other term and conditions of each of the stock options under the 2019 Plan remains in full force and effect.
The Stock Option Repricing of 5,918 will be recognized over the remaining vesting term of the original award at the repricing date. stock option grants (for 340 employees) that were issued to employees of the Company, including senior management, resulted in incremental cost of $ , of which $ was recognized at the time of the Stock Option Repricing for the fully vested awards and included in the condensed consolidated statement of operations, and $
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13.Revenue Recognition
Disaggregation of Revenue
The following table provides information about disaggregated revenue by product line, geographical market and timing of revenue recognition:
Schedule of Disaggregation of Revenue
2022 | 2021 | 2022 | 2021 | |||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenue by category: | ||||||||||||||||
Digital revenue | ||||||||||||||||
Digital advertising | $ | 24,693 | $ | 11,532 | $ | 46,339 | $ | 21,072 | ||||||||
Digital subscriptions | 5,490 | 7,690 | 11,951 | 14,775 | ||||||||||||
Other revenue | 4,880 | 867 | 8,345 | 1,613 | ||||||||||||
Total digital revenue | 35,063 | 20,089 | 66,635 | 37,460 | ||||||||||||
Print revenue | ||||||||||||||||
Print advertising | 13,788 | 2,015 | 15,156 | 3,548 | ||||||||||||
Print subscriptions | 16,224 | 12,642 | 31,527 | 27,353 | ||||||||||||
Total print revenue | 30,012 | 14,657 | 46,683 | 30,901 | ||||||||||||
Total | $ | 65,075 | $ | 34,746 | $ | 113,318 | $ | 68,361 | ||||||||
Revenue by geographical market: | ||||||||||||||||
United States | $ | 63,172 | $ | 33,360 | $ | 110,493 | $ | 65,888 | ||||||||
Other | 1,903 | 1,386 | 2,825 | 2,473 | ||||||||||||
Total | $ | 65,075 | $ | 34,746 | $ | 113,318 | $ | 68,361 | ||||||||
Revenue by timing of recognition: | ||||||||||||||||
At point in time | $ | 59,585 | $ | 27,056 | $ | 101,367 | $ | 53,586 | ||||||||
Over time | 5,490 | 7,690 | 11,951 | 14,775 | ||||||||||||
Total | $ | 65,075 | $ | 34,746 | $ | 113,318 | $ | 68,361 |
Contract Balances
The timing of the Company’s performance under its various contracts often differs from the timing of the customer’s payment, which results in the recognition of a contract asset or a contract liability. A contract asset is recognized when a good or service is transferred to a customer and the Company does not have the contractual right to bill for the related performance obligations. A contract liability is recognized when consideration is received from the customer prior to the transfer of goods or services.
The following table provides information about contract balances:
Schedule of Contract with Customer, Asset and Liability
June 30, 2022 | December 31, 2021 | |||||||
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Unearned revenue (short-term contract liabilities): | ||||||||
Digital subscriptions | $ | 22,469 | $ | 14,693 | ||||
Print revenue | 38,438 | 39,337 | ||||||
Total unearned revenue (short-term contract liabilities) | $ | 60,907 | $ | 54,030 | ||||
Unearned revenue (long-term contract liabilities): | ||||||||
Digital subscriptions | $ | 1,058 | $ | 1,446 | ||||
Print revenue | 11,533 | 13,831 | ||||||
Total unearned revenue (long-term contract liabilities) | $ | 12,591 | $ | 15,277 |
Unearned Revenue – Unearned revenue, also referred to as contract liabilities, include payments received in advance of performance under the contracts and are recognized as revenue over time. The Company accountsrecords contract liabilities as unearned revenue on the condensed consolidated balance sheets.
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14.Income Taxes
The provision for income taxes under FASB ASC 740 “Accountingin interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for Income Taxes.” Deferreddiscrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of its annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The quarterly provision for income taxes, and estimate of the Company’s annual effective tax rate, are subject to variation due to several factors, including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how the Company conducts business, and tax law developments.
The effective tax rate benefit for the six months ended June 30, 2022 and 2021 was 4.3% and 0.0%, respectively. The deferred income tax benefit for the six months ended June 30, 2022 was primarily due to discrete items.
The realization of deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, andis dependent upon a variety of factors, including the generation of future taxable income, the reversal of deferred tax liabilities, are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities intax planning strategies. Based upon the Company’s financial statementshistorical operating losses and their tax bases. Deferred tax assets are reduced bythe uncertainty of future taxable income, the Company has provided a valuation allowance when, in the opinion of management, it is more likely than not that all or some portionagainst most of the deferred tax assets will not be realized. Deferred tax assetsas of June 30, 2022 and liabilities are adjusted for2021.
15.Related Party
For the effects of changes in tax lawssix months ended June 30, 2022 and rates on the date of enactment.
The Parent’s net operating loss carryforwards (NOL) and credit carryforwards are subject to limitations on the use of the NOLs by the Company in consolidated tax returns after the Reverse Recapitalization. Where there is a “change in ownership” within the meaning of Section 382 of the Internal Revenue Code, the Parent’s net operating loss carryforwards and credit carryforwards are subject to an annual limitation. The Company believes that such an ownership change occurred because the shareholders of the Subsidiary acquired 56.7 percent of the Parent’s stock. Because the Parent’s value at the date of recapitalization was attributable solely to non-business assets, the utilization of the carryforwards is limited such that the majority of the carryforwards will never be available. Accordingly, the Company has not recorded those NOL carryforwards and credit carryforwards in its deferred tax assets.
The Parent is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2012. The Company currently is not under examination by any tax authority.
As of September 30, 2017,2021, the Company had deferred tax assets primarily consisting of net operating losses, stock-based compensationseveral transactions with B. Riley, a principal stockholder, where it paid fees associated with the common stock public offering totaling approximately $2,440 and accrued liabilities not currently deductible. However, because of$0, respectively.
For the current loss since Inception,three months ended June 30, 2022 and 2021, the Company has recordedpaid in cash or accrued interest that was added to the principal on the Senior Secured Note and Delayed Draw Term Note due to B. Riley, a full valuation allowance suchprincipal stockholder, of $1,836 (paid in cash) and $1,763 (accrued interest that its net deferred tax asset is zero.
Deferred tax assets consist ofwas added to the following components:
September 30, 2017 | December 31, 2016 | |||||||
Deferred tax assets: | ||||||||
Accrued liabilities not currently deductible | $ | 80,520 | $ | 64,210 | ||||
Deferred revenue net of deferred costs | 5,320 | - | ||||||
Stock-based compensation | 137,936 | - | ||||||
Net operating loss and capital loss carryforwards | 1,906,109 | 506,259 | ||||||
Gross deferred tax assets | 2,129,885 | 570,469 | ||||||
Valuation allowance | (1,553,776 | ) | (417,581 | ) | ||||
Gross deferred tax assets net of valuation allowance | 576,109 | 152,888 | ||||||
Deferred tax liabilities | ||||||||
Stock-based compensation | 16,625 | 16,625 | ||||||
Website development costs and fixed assets | 559,484 | 136,263 | ||||||
Net deferred tax asset | $ | - | $ | - |
The Company must make judgments as to whetherprincipal), respectively. For the deferred tax assets will be recovered from future taxable income. To the extent thatsix months ended June 30, 2022 and 2021, the Company believespaid in cash or accrued interest that recovery is not likely, it must establishwas added to the principal on the Senior Secured Note and Delayed Draw Term Note due to B. Riley, a valuation allowance. A valuation allowance has been established for deferred tax assets whichprincipal stockholder, of $3,651 (paid in cash) and $3,618 (accrued interest that was added to the principal), respectively.
Consulting and Service Contracts
For the three months ended June 30, 2022 and 2021, the Company does not believe meetpaid James C. Heckman, its former Chief Executive Officer, consulting fees of $99 and $52, respectively, in connection with a consulting agreement, as amended from time to time. For the “more likely than not” criteria. The Company’s judgments regarding future taxable income may change duesix months ended June 30, 2022 and 2021, the Company paid James C. Heckman, its former Chief Executive Officer, consulting fees of $264 and $104, respectively, in connection with a consulting agreement, as amended from time to changestime. For the three and six months ended June 30, 2022, the Company paid an entity affiliated with Mr. Heckman, Roundtable Media, L.L.C., a net revenue share amount of $52 and $82, respectively, in market conditions, changes in tax laws, tax planning strategies or other factors. If the Company’s assumptions and consequently its estimates change in the future, the valuation allowances it has established may be increased or decreased, resulting inconnection with a respective increase or decrease in income tax expense.partner agreement.
28 |
At September 30, 2017,Repurchases of Restricted Stock
On December 15, 2020, the Company had net operating loss carryforwards of approximately $5.6 million for federal income tax purposes. The NOL carryforward may be used to reduce taxable income, if any, in future years through their expiration in 2036 and 2037.
The provision for income taxes on the consolidated statement of operations differs from the amount computed by applying the statutory Federal income tax rate to income before the provision for income taxes for the nine months ended September 30, 2017 and three months ended September 30, 2016, as follows:
September 30, 2017 | September 30, 2016 | |||||||||||||||
Federal expense (benefit) expected at statutory rate | $ | (1,486,307 | ) | 34.0 | % | $ | (506,413 | ) | 34.0 | % | ||||||
Permanent differences | 331,628 | -7.6 | % | 317,920 | -21.3 | % | ||||||||||
Change in valuation allowance | 1,154,679 | -26.4 | % | 188,493 | -12.7 | % | ||||||||||
Tax benefit and effective tax rate | $ | - | 0 | % | $ | - | 0 | % |
The Company recognizes tax benefits from an uncertain position only if it is “more likely than not” that the position is sustainable, based on its technical merits. The Company’s policy is to include interest and penalties in general and administrative expenses. There were no interest and penalties recorded for the nine months ended September 30, 2017. The Company has evaluated and concluded that there are no uncertain tax positions requiring recognition in the Company’s financial statements for the nine months ended September 30, 2017.
11. Related Party Transactions
The Parent entered into an Investment Banking Advisory Services agreement in November 2007 with MDB Capital Group LLC (“MDB”),amendment for certain restricted stock awards and the parties extended the agreement indefinitely in April 2009. The agreement terminated on completion of the Recapitalization. Under the agreement, MDB acted as an advisorunits that were previously issued to the Parentcertain employees in connection with the Recapitalization. AtHubPages merger (as further described in Note 6), pursuant to which the closingCompany agreed to repurchase from certain key personnel of HubPages, including Paul Edmondson, one of the Recapitalization,Company’s officers, and his spouse, an aggregate of shares of the Parent paid MDBCompany’s common stock at a cash feeprice of $54,299 (including $4,299$per share each month for a period of 24 months, for aggregate proceeds to reimburse MDB’s expensesMr. Edmondson and his spouse of $67,000 per month. For the six months ended June 30, 2022, the Company repurchased shares of the Company’s common stock for $874.
16.Commitments and Contingencies
Contingent Liability
In connection with the Company’s underwritten public offering in February 2022, the Company may have a contingent liability arising out of possible violations of the Securities Act of 1933, as amended (the “Securities Act”) in connection with an investor presentation, which the Recapitalization)Company publicly filed. Specifically, the furnishing of the investor presentation publicly may have constituted an “offer to sell” as described in Section 5(b)(1) of the Securities Act and issuedthe investor presentation may be deemed to MDB and its designees, Mr. Christopher A. Marlett, Robert Levande, and Mr. Schuman,be a 5-year warrants to purchase an aggregateprospectus that did not meet the requirements of 1,169,607 sharesSection 10 of Common Stock, with an exercise pricethe Securities Act, resulting in a potential violation of $0.20 per share, representing 5%Section 5(b)(1) of the Securities Act. Any liability would depend upon the number of shares purchased by investors who reviewed and relied upon the investor presentation. If a claim were brought by any such investor and a court were to conclude that the public disclosure of such investor presentation constituted a violation of the Parent on a fully diluted basis immediately afterSecurities Act, the Closing.Company could be required to repurchase the shares sold to the investors at the original purchase price, plus statutory interest. The fair valueCompany could also incur considerable expense in contesting any such claims. As of the warrants using Black Scholes Option Pricing model was determined to be $744,105. These amounts were recorded in theissuance date of these consolidated financial statements, no legal proceedings or claims have been made or threatened by any investors. The likelihood and magnitude of the Parent prior to the Recapitalization.this contingent liability, if any, is not determinable at this time.
Prior toClaims and interdependent upon the closing of the Recapitalization, the Parent provided a series of advances for an aggregated amount of approximately $735,000 to the Subsidiary under a promissory note (the “Term Note”). The Term Note was guaranteed by MDB in the amount of $150,000 and Mr. Heckman in the amount of $350,000 and secured by a mortgage held by the Parent on certain properties owned by Mr. Heckman located in the State of Washington and the Province of British Columbia (“Mortgage”). At the Closing of the Recapitalization, the Term Note was cancelled and the Personal Guarantee, the Mortgage and the MDB Guarantee were terminated.Litigation
On August 17, 2016 the Subsidiary borrowed $35,000 from a shareholder on demand. This loan was non-interest bearing and repaid on September 16, 2016 with proceeds from a loan from Integrated.
On April 4, 2017, the Company completed a private placement of its common stock, selling 3,765,000 shares at $1.00 per share, for total gross proceeds of $3,765,000. In connection with the offering, the Company paid $188,250 and issued 162,000 shares of common stock, valued at $201,000, to MDB Capital Group LLC, which acted as placement agent.
Mr. Christopher Marlett, a director of the Company, is also the Chief Executive Officer of MDB. Mr. Gary Schuman, who was the Chief Financial Officer of the Company until May 15, 2017, is also the Chief Financial Officer and Chief Compliance Officer of MDB. The Company compensated Mr. Schuman for his services at the rate of $3,000 per month totaling $18,000 until June 30, 2017.
Effective on September 20, 2017, the Company entered into a six-month contract, with automatic renewals unless cancelled, with a company located in Nicaragua that is owned by Mr. Christopher Marlett, a director of the Company to provide content conversion services. The estimated monthly costs are expected to be less than $5,000 per month.
12. Commitments and Contingencies
From time to time, the Company may be subject to claims and litigation arising in the ordinary course of business. The Company is not currently a party to any pending or threatened legal proceedings that it believes would reasonably be expected to have a material adverse effect on the Company’s business, financial condition, or results of operations.operations or cash flows.
17.Subsequent Events
The Company may have a liability for additional state franchise taxes payableperformed an evaluation of subsequent events through the date of filing of these condensed consolidated financial statements with the SEC. Other than the below described subsequent events, there were no material subsequent events which affected, or could affect, the amounts or disclosures on the condensed consolidated financial statements.
Series L Preferred Stock
As of July 18, 2022, the Company eliminated the Series L Preferred Stock.
As disclosed in Note 10, the amountCompany entered into an Extended Rights Agreement, which extended the term of approximately $44,000, plus interest at 18% per annum, for the years 2008-2014. Because of state statutory provisions,Rights Agreement originally adopted on May 4, 2021. Even though the underpaid amount will only be due once assessed and demanded bystockholders ratified the state. The tax liability and associated interest has not been included as an accrued liability because management hasExtended Rights Agreement, the Board determined that the likelihoodRights Agreement was no longer necessary or in the best interest of the state makingCompany and its stockholders. The Board thus determined to terminate the assessment is low. Depending on circumstances, management may changeRights Agreement by accelerating its estimate ofexpiration date from May 3, 2024 to July 15, 2022 pursuant to an amendment to the probability of an assessmentExtended Rights Agreement. The amendment effectively terminated all preferred share purchase rights under the Rights Agreement such that they are no longer issued or outstanding.
Compensation Plans
From July 1, 2022 through the date these condensed consolidated financial statements were issued, the Company granted common stock options and establish either an accrual or record a payment for the tax liability if assessed.
The Company’s officesrestricted stock units totaling ( are leased with a term that expires January 31, 2018, with approximately$25,000 commitment, subject to renewal with 30 days advance notice.Board consent) all which remain outstanding.
On a select basis, the Company has provided revenue share guarantees to certain independent publishers that transition their publishing operations from another platform to theMaven.net. These arrangements generally guarantee the publisher a monthly amount of income for a period of 12 to 24 months from inception of the publisher contract that is the greater of (a) fixed monthly minimum, or (b) the calculated earned revenue share. To the extent that the fixed monthly minimum paid exceeds the earned revenue share (defined as an Over Advance) in any month during the first 12 to 24 months (“the Guarantee Period”), then the Company may recoup the aggregate Over Advance that was expensed in the Guarantee Period during the 12 months following the Guarantee Period of the publisher contract to the extent that the earned revenue share exceeds the monthly minimum in those future months. As of September 30, 2017, the aggregate commitment is $1,215,000 and the Over Advance contingent amount that the Company may recoup is $264,000. The following table shows the aggregate commitment by year:
Commitment | ||||
2017 | $ | 300,000 | ||
2018 | 775,000 | |||
2019 | 140,000 | |||
$ | 1,215,000 |
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The Company may have a liability for additional state franchise taxes in the amount of approximately $44,000, plus interest at 18% per annum for certain annual periods prior to 2014. Because of state statutory provisions, the underpaid amount will only be due once assessed and demanded by the state. The tax liability and associated interest has not been included as an accrued liability because management has determined that the likelihood of the state making the assessment is low. Depending on circumstances, management may change its estimate of the probability of an assessment and establish either an accrual or record a payment for the tax liability if assessed.
13. Subsequent Events
On October 19, 2017, the Company completed a private placement of its common stock, selling 2,391,304 shares at $1.15 per share, for total gross proceeds of $2,750,000. In connection with the offering, the Company issued 119,565 shares of common stock and 119,565 warrants to acquire common stock at a price of $1.15 per share to MDB Capital Group LLC, which acted as placement agent. The estimated transaction costs of $320,000, including $282,000 of non-cash expenses, have been recorded as a reduction in paid-in capital. MDB Capital Group LLC is a related party as discussed in Note 11 Related Parties.
Related to the private placement completed on October 19, 2017, the Company filed a registration statement on Form S-1 to register the shares issued in the common stock offering. The Securities and Exchange Commission declared the registration effective on November 6, 2017.
ItemITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations for the three and six months ended June 30, 2022 and 2021 should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and in conjunction with the Company’saudited consolidated financial statements including theand notes thereto appearing elsewherefor the year ended December 31, 2021 included in this report. Thisthe Form 10-K filed with the SEC on April 1, 2022. The following discussion may contain certain forward-looking statements based on current expectationscontains “forward-looking statements” that involve risksreflect our future plans, estimates, beliefs and uncertainties. Actualexpected performance. Our actual results and timing of certain events may differ significantlymaterially from those projectedcurrently anticipated and expressed in such forward-looking statements due toas a result of a number of factors, including those set forth elsewhereabove. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see the section above under the heading “Forward-Looking Statements.”
All dollar figures are presented in this Report.thousands unless otherwise stated.
Overview
The Company was incorporated underWe are a tech-powered media company that focuses on building deep content verticals powered by a best-in-class digital media platform (the “Platform”) empowering premium publishers who impact, inform, educate, and entertain. Our strategy is to focus on key verticals where audiences are passionate about a topic category (e.g., sports and finance), and where we can leverage the namestrength of Integrated Surgical Systems,our core brands to grow our audience and increase monetization both within our core brands as well as our media publishers (each, a “Publisher Partner”). Our focus is on leveraging our Platform and iconic brands in targeted verticals to maximize audience reach, improve engagement, and optimize monetization of digital publishing assets for the benefit of our users, our advertiser clients, and our 40 owned and operated properties as well as properties we run on behalf of independent Publisher Partners. We operate the media businesses for Sports Illustrated (“Sports Illustrated”), own and operate TheStreet, Inc. (“Integrated”TheStreet”), College Spun Media Incorporated (“The Spun”), and Athlon Holdings, Inc. (“Athlon”), and power more than 200 independent Publisher Partners, including Biography, History, and the many sports team sites that comprise FanNation, among others. Each Publisher Partner joins the Platform by invitation-only and is drawn from premium media brands and independent publishing businesses with the objective of augmenting our position in Delaware in 1990. It was founded to design, manufacture, sellkey verticals and service image-directed, computer-controlled robotic software and hardware products for use in orthopedic surgical procedures. On June 28, 2007, Integrated sold substantially all of its operating assets, and Integrated no longer engaged in any business activities other than seeking to locate a suitable acquisition target to complete a business combination. From June 2007 untiloptimizing the closingperformance of the Recapitalization (as definedPublisher Partner. Publisher Partners incur the costs in Note 2 Basis of Presentation of Item 1. Financial Statements)content creation on November 4, 2016, Integrated wastheir respective channels and receive a non-active “shell company” as defined by regulationsshare of the SEC. As a resultrevenue associated with their content. Because of the Recapitalization, on a going forward basis, the Company continued to file its public reports with the SEC on an operating company basis. On December 2, 2016, the corporate name was changed from “Integrated Surgical Systems, Inc.” to “theMaven, Inc.”
In determining the accounting treatment for the Share Exchange Agreement, the primary factor was determining which party, directly or indirectly, holds greater than 50 percentstate-of-the-art technology and large scale of the voting shares has controlPlatform and our expertise in search engine optimization (SEO), social media, subscription marketing and ad monetization, Publisher Partners continually benefit from our ongoing technological advances and bespoke audience development expertise. Additionally, we believe the lead brand within each vertical creates a halo benefit for all Publisher Partners in the vertical while each of them adds to the breadth and quality of content. While they benefit from these critical performance improvements they also may save substantially in costs of technology, infrastructure, advertising sales, and member marketing and management.
Our growth strategy is considered to becontinue to expand by adding new premium publishers with high quality brands and content either as independent Publisher Partners or by acquiring publishers as owned and operated entities.
Liquidity and Capital Resources
Cash and Working Capital Facility
As of June 30, 2022, our principal sources of liquidity consisted of cash of $14,839. In addition, as of June 30, 2022, available for additional use was $17,192, subject to eligible accounts receivable, we had the acquirer. Becauseuse of additional proceeds from our working capital facility with FPP Finance LLC (“FastPay”). As of June 30, 2022, the former shareholdersoutstanding balance of the Subsidiary received 56.7 percent voting controlFastPay working capital facility was $7,808. We also had accounts receivable, net of our advances from FastPay of $26,642 as of June 30, 2022. Our cash balance as of the issued and outstanding sharesissuance date of the Company after the transaction, the transaction was considered to be a reverse recapitalization for accounting purposes. Other factors that indicated that the control of the Company after the transaction included, (1) fully diluted equity interests, (2) composition of senior management, (3) former officers of the Parent ceded day-to-day responsibilities to officers of the Subsidiary, and (4) composition of Board of Directors. On a fully diluted basis, the former shareholders of the Subsidiary received 53.5 percent of the equity interests in the Company. All the members of senior management of the Company, other than the part-time Chief Financial Officer, were former shareholders of the Subsidiary. The former officers of the non-active shell ceded day-to-day management to officers of the Subsidiary. The Board of Directors, immediately after the Recapitalization included three members from the Parent and two members from the Subsidiary. Because the former shareholders of the Subsidiary could vote to make changes in the Board composition, the conclusion was that control of the Board, in substance, was vested in the former shareholders of the Subsidiary.
theMaven Network, Inc. was incorporated in Nevada on July 22, 2016, under the name “Amplify Media, Inc.” On July 27, 2016, the corporate name was amended to “Amplify Media Network, Inc.” and on October 14, 2016, the corporate name was changed to “theMaven Network, Inc.” theMaven Network, Inc. is a 100% owned subsidiary of the theMaven, Inc.
Going Concern
The Company’sour accompanying condensed consolidated financial statements is $16,224.
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Material Contractual Obligations
We have been presented on the basismaterial contractual obligations that it is a going concern, which contemplates the realization of assets and satisfaction of liabilitiesarise in the normal course of business. The Company’s activitiesbusiness primarily consisting of employment contracts, consulting agreements, leases, liquidated damages, debt and related interest payments. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are subject to significant risks and uncertainties, including the need for additional capital, as described below.
The Company has not generated significant revenues since July 22, 2016 (Inception) and has financed its operations through (a) the Recapitalization transaction with Parent, (b) a loan from Parent that was cancelled upon closing of the Recapitalization and (c) two private placements of common stockdue in April 2017 and in October 2017. The Company has incurred operating losses and negative operating cash flows, and it expects to continue to incur operating losses and negative operating cash flows for at least the next few years. As a result, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern,12 months. See Notes 4, 7 and the Company’s independent registered public accounting firm,9 in its report on the Company’s 2016our accompanying condensed consolidated financial statements has raised substantial doubt aboutfor amounts outstanding as of June 30, 2022, related to leases, liquidated damages and long-term debt, respectively. There have been no material changes from the Company’s abilitydisclosures in our Form 10-K.
Contingent Liability
We may have a contingent liability arising out of possible violations of the Securities Act in connection with an investor presentation, which we furnished as Exhibit 99.2 to continueour Current Report on Form 8-K and Current Report on Form 8-K/A filed on January 31, 2022 and February 1, 2022, respectively. Specifically, the furnishing of the investor presentation publicly may have constituted an “offer to sell” as a going concern.
As fully described in Note 9 Stockholders’ Equity, in April 2017,Section 5(b)(1) of the Company completedSecurities Act and the investor presentation may be deemed to be a private placement of its common stock, raising proceeds of $3.5 million net of cash offering costs. As described in Note 13 Subsequent Events and completed a second private placement raising $2.75 million in October 2017, of which $1.75 million has been received as of September 30, 2017. The Company believesprospectus that it does not have sufficient funds to support its operations throughmeet the endrequirements of Section 10 of the first quarterSecurities Act, resulting in a potential violation of 2018. In orderSection 5(b)(1) of the Securities Act. Any liability would depend upon the number of shares purchased by investors who reviewed and relied upon such investor presentation that may have constituted a potential violation of Section 5 of the Securities Act. If a claim were brought by any such ‘recipients’ of such investor presentation and a court were to continueconclude that the public disclosure of such investor presentation constituted a violation of Section 5 of the Securities Act, we could be required to repurchase the shares sold to the investors who reviewed such investor presentation at the original purchase price, plus statutory interest. We could also incur considerable expense in contesting any such claims. As of the date of the filing of this Quarterly Report, no legal proceedings or claims have been made or threatened by any investors in our offering. Such payments and expenses, if required, could significantly reduce the amount of working capital we have available for our operations and business plan, delay or prevent us from completing our plan of operations, past that point, the Company currently anticipates that it will needor force us to raise additional debt and/or equity capital in the first quarter of 2018.
There canfunding, which funding may not be no assurances that the Company will be able to secure any such additional financingavailable on acceptablefavorable terms, and conditions, orif at all. If
Working Capital
We have financed our working capital requirements since inception through issuances of equity securities and various debt financings. Our working capital deficit as of June 30, 2022 and December 31, 2021 was as follows:
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Current assets | $ | 87,007 | $ | 77,671 | ||||
Current liabilities | (121,191 | ) | (116,413 | ) | ||||
Working capital deficit | (34,184 | ) | (38,742 | ) |
As of June 30, 2022, we had a working capital deficit of $34,184, as compared to $38,742 as of December 31, 2021, consisting of $87,007 in total current assets and $121,191 in total current liabilities. As of December 31, 2021, our working capital deficit consisted of $77,671 in total current assets and $116,413 in total current liabilities.
Our cash resources become insufficient to satisfyflows during the Company’s ongoing cash requirements,six months ended June 30, 2022 and 2021 consisted of the Company will be required to scale back or discontinue its technology development programs, or obtain funds, if available (although there can be no certainty), or to discontinue its operations entirely.following:
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Net cash used in operating activities | $ | (7,465 | ) | $ | (9,933 | ) | ||
Net cash used in investing activities | (10,194 | ) | (9,210 | ) | ||||
Net cash provided by financing activities | 23,149 | 16,832 | ||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | $ | 5,490 | $ | (2,311 | ) | |||
Cash, cash equivalents, and restricted cash, end of period | $ | 15,341 | $ | 7,224 |
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Results of Operations
Because the Company was founded in July 2016, the operating results in the three-month period ended September 30, 2016 are not directly comparable to the results in the 2017 three- and nine-month periods ended September 30, 2017. The 2016 period was primarily focused on the initial planning and design phase of technology development, Company organization and negotiation of the terms of the Recapitalization transaction completed on November 4, 2016 with Integrated. The 2017 period was primarily focused on the actual software development of the Company’s technology, the recruitment and selection of independent publisher channel partners and the development of advertising network business relationships.
For the three and ninesix months ended SeptemberJune 30, 2017, total loss from operations was:
Three Months | Nine Months | |||||||
Revenue | $ | 6,064 | $ | 6,064 | ||||
Expenses: | ||||||||
Service Costs | 449,567 | 641,606 | ||||||
Research and development expenses | 30,776 | 104,095 | ||||||
General and administrative expenses | 1,300,767 | 3,639,204 | ||||||
Loss from operations | $ | (1,775,046 | ) | $ | (4,378,841 | ) | ||
Basic and diluted net loss per share | $ | (0.11 | ) | $ | (0.33 | ) |
During the second quarter of 2017 the Company’s platform and media channel operations were launched in beta stage and by the end of the third quarter there were a total of 23 channel partners operating on theMaven Network. Internet users since the launch of our channels are able to utilize the platform on desktop, laptop and mobile devices for these channels. We expect that during the fourth quarter additional channels will be launched. As of November 13, 2017, we have over sixty signed channel partners and 28 channel partners operating on theMaven Network. We do not expect to have significant revenue during the fourth quarter as we continue development of our technology and the commencement of business operations establishing a media audience.
Service Costs
Service costs are the costs incurred to operate and maintain the Company’s technology platform and exclusive network of professionally managed online media channels. Service costs include hosting and bandwidth costs, amortization of website development costs, revenue share or guaranteed minimum payments to independent publishers for licensed content, advertising network costs and other operational costs. During the three and nine months ended September 30, 2017, the Company incurred $449,567 and $641,606 of Service Costs, respectively. The following table provides detail of service costs for the three and nine months ended September 30, 2017:
Three Months | Nine Months | |||||||
Amortization of website development costs | $ | 173,000 | $ | 226,000 | ||||
Channel partner guarantees – See Note 12 | 164,000 | 203,000 | ||||||
Stock-based compensation - Channel Partner warrants | 35,000 | 115,000 | ||||||
Hosting and bandwidth costs | 49,000 | 65,000 | ||||||
Other cost of service | 29,000 | 33,000 | ||||||
$ | 450,000 | $ | 642,000 |
As described in Note 4 – Significant Accounting Policies and Estimates, the Company capitalizes the costs incurred to develop theMaven Network technology platform, and these costs are amortized to service costs over a period of 36 months. As described in Note 12 – Commitments and Contingencies, the Company has agreed to pay revenue share guarantees to certain independent publisher channel partners for a finite period of time. It is expected these costs will be significant in the next few quarters prior to network operations reaching full scale. As revenue increases the Company will have an expense for revenue share payments to Channel Partners that will be approximately 30 to 50% of revenue. In the periods ended September 30, 2017, revenue share payments to Channel Partners, other than guarantees, were not material.
As described in Note 9 – Stockholders’ Equity, the Company has a common stock warrant program to provide equity incentives to its Channel Partners to motivate and reward them for their service to the Company and align the interests of Channel Partners with those of stockholders of the Company. The stock-based compensation expense associated with Channel Partner warrants is estimated each quarter and is subject to a significant degree of variability since these are performance based equity awards with the value determined as a function of the Company’s stock price (using Black-Scholes option pricing model) and the relative performance to the criteria established for each Channel Partner at the time that they complete the performance conditions. The estimated value of the awards are expensed over the services period which is approximately three years. We expect that by December 31, 2017 the majority of Channel Partners will have completed the performance conditions and we will be able to complete the final calculation of the value of these awards. Hosting and bandwidth costs during the periods ended September 30, 2017 reflect that the Company’s network was in beta launch stage and not at full scale. As the number of Channel Partners launch in the fourth quarter the hosting and bandwidth costs will increase.
Research and development expenses
Research and development costs are charged to operations in the period incurred and amounted to $30,776 and $104,095 for the three and nine months ended September 30, 2017. The costs charged to research and development costs are primarily certain compensation expenses and expenses for computer software and supplies. Note that during 2017, the majority of the Company’s engineering team was devoted to developing theMaven Network technology with the associated costs capitalized as website development costs.
Research and development costs amounted to $374,944 for the three months ended September 30, 2016 because the Company was in the planning and design phase of developing theMaven Network technology and these costs were expensed as incurred. There were no costs incurred for website development that were capitalized in the three months ended September 30, 2016.
General and administrative expenses
General and administrative expenses for the three and nine months ended September 30, 2017, were $1,300,767 and $3,639,204, respectively. Included in general and administrative expenses is stock based compensation of $478,669 and $1,242,510 for the three and nine -month periods, respectively. Our general administrative expenses of carrying on our business consist of a variety of costs that are primarily compensation related for employees and professional resources and consultants. The following table provides detail of general and administrative expenses for the three and nine months ended September 30, 2017:
Three Months | Nine Months | |||||||
Stock-based compensation | $ | 479,000 | $ | 1,243,000 | ||||
Wages of employees | 447,000 | 1,074,000 | ||||||
Professional and consulting fees | 105,000 | 512,000 | ||||||
Travel, meals and conferences | 85,000 | 336,000 | ||||||
Insurance and payroll and other taxes | 85,000 | 249,000 | ||||||
Board of Directors stipends | 34,000 | 101,000 | ||||||
Rent | 18,000 | 51,000 | ||||||
Other | 48,000 | 73,000 | ||||||
$ | 1,301,000 | $ | 3,639,000 |
Liquidity and Capital Resources
Working Capital
The Company had working capital of approximately $1.49 million as of September 30, 2017, excluding liabilities that will not be settled in cash. This was an increase of approximately $1.1 million is due to the receipt of net proceeds of $5.3 million received during the year from two private placements, net of stock issuance costs and cash used in operations of $2,7 million and cash used for investment of $1.5 million during the nine months ended September 30, 2017.
September 30, 2017 | December 31, 2016 | |||||||
Current Assets | $ | 1,820,794 | $ | 719,881 | ||||
Current Liabilities | $ | (330,338 | ) | $ | (346,327 | ) | ||
Working Capital, net of liabilities that will not be settled in cash | $ | 1,490,456 | $ | 373,554 |
The following table summarizes the Company’s cash flows during the nine months ended September 30, 2017 and the three months ended September 30, 2016:
September 30, 2017 | September 30, 2016 | |||||||
Net Cash Used in Operating Activities | $ | (2,654,964 | ) | $ | (492,021 | ) | ||
Net Cash Used in Investing Activities | (1,513,813 | ) | - | |||||
Net Cash Provided by Financing Activities | 5,269,544 | 641,303 | ||||||
Increase in Cash during the Period | $ | 1,100,767 | $ | 149,282 | ||||
Cash at Beginning of Period | 598,294 | - | ||||||
Cash at End of Period | $ | 1,699,061 | $ | 149,282 |
For the nine months ended September 30, 2017,2022, net cash used in operating activities was $2,654,964 which was$7,465, consisting primarily dueof $119,144 of cash paid to employees, Publisher Partners, expert contributors, suppliers, and vendors, and for revenue share arrangements, advance of royalty fees and professional services; and $4,323 of cash paid for interest, offset by $116,002 of cash received from customers. For the net loss of $4,371,491 reduced by non-cash expenses for stock-based compensation of approximately $1,358,000 and amortization and depreciation of $234,000 and increased by working capital changes of approximately $125,000. The Company used cash of $1,514,000 for investment in website development costs and fixed assets. Operating activities and investment expenditures were funded by the beginning cash of hand as of January 1, 2017 of approximately $600,000 and primarily by two private placements completed in April and October 2017 that raised approximately $5.3 million net of stock issuance expenses in the ninesix months ended SeptemberJune 30, 2017.
For the three months ended September 30, 2016,2021, net cash used in operating activities was $492,021 which$9,933, consisting primarily of $84,267 of cash paid to employees, Publisher Partners, expert contributors, suppliers, and vendors, and for revenue share arrangements, advance of royalty fees and professional services; and $289 of cash paid for interest, offset by $74,623 of cash received from customers.
For the six months ended June 30, 2022, net cash used in investing activities was $10,194, consisting primarily dueof $9,481 for the acquisition of a business; $2,784 for capitalized costs for our Platform; and $379 for property and equipment, offset by $2,450 from the sale of an equity investment. For the six months ended June 30, 2021, net cash used in investing activities was $9,210 consisting primarily of $7,057 for the acquisition of businesses; $1,971 for capitalized costs for our Platform; and $182 for property and equipment.
For the six months ended June 30, 2022, net cash provided by financing activities was $23,149, consisting primarily of $30,490 (net of issuance costs paid of $1,568) in net proceeds from the public offering of common stock; less $4,180 from repayments of our FastPay line of credit; $2,152 related to payments of restricted stock liabilities; offset by a $453 payment for The Spun deferred cash payment and $556 for tax payments relating to the withholding of shares of common stock for certain employees. For the six months ended June 30, 2021, net losscash provided by financing activities was $16,832 consisting primarily of $1,489,449 reduced by non-cash expenses for stock-based compensation$19,838 (net of approximately $935,000 and increased by working capital changesissuance cost paid of approximately $62,000. Operating activities were funded primarily by$167) in net proceeds from notes payable from Integrated prior to the completion of the Recapitalization on November 4, 2016.
We anticipate needing a substantial amount of additional capital to sustain our current operations and implement the current business plan of the Company as now budgeted. We do not believe that the proceeds of the private placement of common stock; offset by $2,249 from repayments of our FastPay line of credit, $716 related to payments of restricted stock completed on October 19, 2017, will be sufficient to allow us to implement our business planliabilities and $41 for tax payments relating to the point where our revenues will cover ourwithholding of shares of common stock for certain employees.
Results of Operations
Three Months Ended June 30, 2022 and 2021
Three Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Revenue | $ | 65,075 | $ | 34,746 | $ | 30,329 | 87.3 | % | ||||||||
Cost of revenue | 46,729 | 25,307 | 21,422 | 84.6 | % | |||||||||||
Gross profit | 18,346 | 9,439 | 8,907 | 94.4 | % | |||||||||||
Operating expenses | ||||||||||||||||
Selling and marketing | 19,307 | 16,202 | 3,105 | 19.2 | % | |||||||||||
General and administrative | 15,964 | 12,535 | 3,429 | 27.4 | % | |||||||||||
Depreciation and amortization | 4,444 | 3,964 | 480 | 12.1 | % | |||||||||||
Total operating expenses | 39,715 | 32,701 | 7,014 | 21.4 | % | |||||||||||
Loss from operations | (21,369 | ) | (23,262 | ) | 1,893 | -8.1 | % | |||||||||
Total other (expense) income | (2,634 | ) | 2,605 | (5,239 | ) | -201.1 | % | |||||||||
Loss before income taxes | (24,003 | ) | (20,657 | ) | (3,346 | ) | 16.2 | % | ||||||||
Income taxes | 1,796 | - | 1,796 | 100.0 | % | |||||||||||
Net loss | $ | (22,207 | ) | $ | (20,657 | ) | $ | (1,550 | ) | 7.5 | % | |||||
Basic and diluted net loss per common share | $ | (1.22 | ) | $ | (1.88 | ) | $ | 0.66 | -35.1 | % | ||||||
Weighted average number of common shares outstanding – basic and diluted | 18,258,890 | 11,012,866 | 7,246,024 | 65.8 | % |
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Net Loss
For the three months ended June 30, 2022, as referenced in the above table, net loss was $22,207, as compared to $20,657 for the three months ended June 30, 2021, which represents an increase of $1,550. The primary driver for the increase in net loss, despite an increase of $30,329 in revenue, was an increase in operating costsexpenses of $7,014 during the three months ended June 30, 2022.
Revenue
The following table sets forth revenue by product line and the expansioncorresponding percent of our business offerings. Without additional funding, we will have to modify our longer-term business plan. The funds that we will need may be raised through equity financing, debt financing, or other sources, which may result in further dilutiontotal revenue:
Three Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Digital revenue | ||||||||||||||||
Digital advertising | $ | 24,693 | $ | 11,532 | $ | 13,161 | 114.1 | % | ||||||||
Digital subscriptions | 5,490 | 7,690 | (2,200) | -28.6 | % | |||||||||||
Other revenue | 4,880 | 867 | 4,013 | 462.9 | % | |||||||||||
Total digital revenue | 35,063 | 20,089 | 14,974 | 74.5 | % | |||||||||||
Print revenue | ||||||||||||||||
Print advertising | 13,788 | 2,015 | 11,773 | 584.3 | % | |||||||||||
Print subscriptions | 16,224 | 12,642 | 3,582 | 28.3 | % | |||||||||||
Total print revenue | 30,012 | 14,657 | 15,355 | 104.8 | % | |||||||||||
Total revenue | $ | 65,075 | $ | 34,746 | $ | 30,329 | 87.3 | % |
For the three months ended June 30, 2022, as referenced in the equity ownershipabove table, total revenue increased $30,329 or 87.3% from $34,746 to $65,075. Total digital revenue increased $14,974 and 74.5% primarily due to an increase in digital advertising revenue of $13,161 and 114.1%. The increase in digital advertising revenue was mainly due to additional revenue of $4,493 generated as a result of The Spun, which was acquired during the second quarter of 2021; $2,545 generated as a result of Athlon, which was acquired during the second quarter of 2022; $1,550 generated as a result of The Street; $872 generated as a result of the Sports Illustrated media business; and $1,844 in revenue generated from our shares. We anticipate thereafter thatlegacy business. Other revenue increased by $4,013 primarily related to licensing revenue primarily from Sports Illustrated Swim magazine (“SI Swim”) and the Sports Illustrated media business. Total print revenue increased $15,355 a 104.8% increase from $14,657 to $30,012 primarily related to $14,968 from Athlon magazine circulations, which we will need additional capitalacquired during the second quarter of 2022; and $387 from the Sports Illustrated media business.
Cost of Revenue
The following table sets forth cost of revenue by category:
Three Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Publisher Partner revenue share payments | $ | 4,729 | $ | 5,596 | $ | (867 | ) | -15.5 | % | |||||||
Technology, Platform and software licensing fees | 4,536 | 2,404 | 2,132 | 88.7 | % | |||||||||||
Royalty fees | 3,750 | 3,750 | - | 0.0 | % | |||||||||||
Content and editorial expenses | 15,855 | 7,154 | 8,701 | 121.6 | % | |||||||||||
Printing, distribution and fulfillment costs | 12,687 | 2,391 | 10,296 | 430.6 | % | |||||||||||
Amortization of developed technology and platform development | 2,375 | 2,157 | 218 | 10.1 | % | |||||||||||
Stock-based compensation | 2,673 | 1,754 | 919 | 52.4 | % | |||||||||||
Other cost of revenue | 124 | 101 | 23 | 22.8 | % | |||||||||||
Total cost of revenue | $ | 46,729 | $ | 25,307 | $ | 21,422 | 84.6 | % |
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For the three months ended June 30, 2022, as referenced in the firstabove table, we recognized cost of revenue of $46,729, as compared to $25,307 for the three months ended June 30, 2021, which represents an increase of $21,422 or 84.6%. Cost of revenue for the second quarter of 20182022, was impacted by increases in printing, distribution, and fulfillment costs of $10,296, primarily due to the Athlon acquisition, which was acquired in the second quarter of 2022 and the SI Swim magazine that was issued in June 2022 versus July 2021 of the prior year; content and editorial expenses of $8,701, partially generated as a result of the Athlon acquisition and SI Swim; technology, Platform and software licensing fees of $2,132; stock-based compensation of $919; amortization of developed technology and platform development of $218; partially offset by a decrease in Publisher Partner revenue share payments of $867.
The improvement in gross profit percentage was driven by our strategic shift to eliminate most Publisher Partner guarantees near the end of fiscal 2020 as well as growth in our owned and operated digital properties. As a result, our Publisher Partner revenue share payments represent 19.2% of digital advertising revenue for the three months ended June 30, 2022, as compared to 48.5% for the six months ended June 30, 2021. In addition, we expandcontinue to experience high contributions from our operations,digital advertising.
Operating Expenses
Selling and do not anticipate that our income will cover our fullMarketing
The following table sets forth selling and marketing by category:
Three Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Payroll and employee benefits of selling and marketing account management support teams | $ | 4,970 | $ | 2,748 | $ | 2,222 | 80.9 | % | ||||||||
Stock-based compensation | 739 | 1,587 | (848 | ) | -53.4 | % | ||||||||||
Professional marketing services | 1,223 | 642 | 581 | 90.5 | % | |||||||||||
Circulation costs | 1,022 | 828 | 194 | 23.4 | % | |||||||||||
Subscription acquisition costs | 8,962 | 7,764 | 1,198 | 15.4 | % | |||||||||||
Advertising costs | 1,807 | 1,795 | 12 | 0.7 | % | |||||||||||
Other selling and marketing expenses | 584 | 838 | (254 | ) | -30.3 | % | ||||||||||
Total selling and marketing | $ | 19,307 | $ | 16,202 | $ | 3,105 | 19.2 | % |
For the three months ended June 30, 2022, as referenced in the above table, we incurred selling and marketing costs of $19,307 as compared to $16,202 for the three months ended June 30, 2021, an increase of $3,105 or19.2%. The increase in selling and marketing costs of $3,105 is primarily due to payroll and employee benefits of selling and marketing account management support teams of $2,222; subscription acquisition costs of $1,198; and professional and marketing service costs of $581; partially offset by a decrease in stock-based compensation of $848.
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General and Administrative
The following table sets forth general and administrative by category:
Three Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Payroll and related expenses for executive and administrative personnel | $ | 4,954 | $ | 3,721 | $ | 1,233 | 33.1 | % | ||||||||
Stock-based compensation | 5,687 | 4,775 | 912 | 19.1 | % | |||||||||||
Professional services, including accounting, legal and insurance | 3,239 | 2,849 | 390 | 13.7 | % | |||||||||||
Other general and administrative expenses | 2,084 | 1,190 | 894 | 75.1 | % | |||||||||||
Total general and administrative | $ | 15,964 | $ | 12,535 | $ | 3,429 | 27.4 | % |
For the three months ended June 30, 2022, as referenced in the above table, we incurred general and administrative costs of $15,964 as compared to $12,535, an increase of $3,429 or 27.4%. The increase is primarily related to payroll and related expenses of $1,233; stock-based compensation of $912; professional services of $390; and other general and administrative expenses of $894.
Other (Expenses) Income
The following table sets forth other (expense) income:
Three Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Change in valuation of warrant derivative liabilities | $ | - | $ | 360 | $ | 360 | -100.0 | % | ||||||||
Interest expense | (2,506 | ) | (2,363 | ) | (143 | ) | 6.1 | % | ||||||||
Liquidated damages | (128 | ) | (1,109 | ) | 981 | -88.5 | % | |||||||||
Gain upon debt extinguishment | - | 5,717 | (5,717 | ) | -100.0 | % | ||||||||||
Total other (expenses) income | $ | (2,634 | ) | $ | 2,605 | $ | (5,239 | ) | -201.1 | % |
Change in Valuation of Warrant Derivative Liabilities. The change of $360 in the valuation of warrant derivative liabilities for the three months ended June 30, 2021 was the result no longer having any warrant derivative liabilities as of June 30, 2022.
Interest Expense. We incurred interest expense of $2,506 for the three months ended June 30, 2022, as compared to $2,363 for the three months ended June 30, 2021. The increase in interest expense of $143 is primarily from $1,873 increase in cash interest paid; less a decrease of $1,697 from accrued interest.
Liquidated Damages. We recorded liquidated damages of $128 for the three months ended June 30, 2022, as compared to $1,109 for the three months ended June 30, 2021. The decrease of $981 is primarily from no further liquidated damages assessed under the corresponding agreements and only recording interest expense related to the previous liquidated damages assessed.
Gain Upon Debt Extinguishment. We recorded a gain upon debt extinguishment of $5,717 (including accrued interest) pursuant to the forgiveness of the Paycheck Protection Program Loan for the six months ended June 30, 2021.
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Six Months Ended June 30, 2022 and 2021
Six Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Revenue | $ | 113,318 | $ | 68,361 | $ | 44,957 | 65.8 | % | ||||||||
Cost of revenue | 75,226 | 51,049 | 24,177 | 47.4 | % | |||||||||||
Gross profit | 38,092 | 17,312 | 20,780 | 120.0 | % | |||||||||||
Operating expenses | ||||||||||||||||
Selling and marketing | 36,523 | 31,340 | 5,183 | 16.5 | % | |||||||||||
General and administrative | 29,478 | 23,030 | 6,448 | 28.0 | % | |||||||||||
Depreciation and amortization | 8,646 | 7,927 | 719 | 9.1 | % | |||||||||||
Loss on impairment of assets | 257 | - | 257 | 100.0 | % | |||||||||||
Total operating expenses | 74,904 | 62,297 | 12,607 | 20.2 | % | |||||||||||
Loss from operations | (36,812 | ) | (44,985 | ) | 8,173 | -18.2 | % | |||||||||
Total other (expense) | (5,626 | ) | (1,135 | ) | (4,491 | ) | 395.7 | % | ||||||||
Loss before income taxes | (42,438 | ) | (46,120 | ) | 3,682 | -8.0 | % | |||||||||
Income taxes | 1,782 | - | 1,782 | 100.0 | % | |||||||||||
Net loss | $ | (40,656 | ) | $ | (46,120 | ) | $ | 5,464 | -11.8 | % | ||||||
Basic and diluted net loss per common share | $ | (2.41 | ) | $ | (4.30 | ) | $ | 1.89 | -44.0 | % | ||||||
Weighted average number of common shares outstanding – basic and diluted | 16,847,920 | 10,737,555 | 6,110,365 | 56.9 | % |
Net loss
For the six months ended June 30, 2022, as referenced in the above table, net loss was $40,656, as compared to $46,120 for the six months ended June 30, 2021, which represents an improvement of $5,464. The primary driver for the improvement in net loss is due to an $44,957 increase in revenue, which was partially offset by an increase in operating expenses of $12,607 during the six months ended June 30, 2022.
Revenue
The following table sets forth revenue by product line and the corresponding percent of total revenue:
Six Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Digital revenue | ||||||||||||||||
Digital advertising | $ | 46,339 | $ | 21,072 | $ | 25,267 | 119.9 | % | ||||||||
Digital subscriptions | 11,951 | 14,775 | (2,824 | ) | -19.1 | % | ||||||||||
Other revenue | 8,345 | 1,613 | 6,732 | 417.4 | % | |||||||||||
Total digital revenue | 66,635 | 37,460 | 29,175 | 77.9 | % | |||||||||||
Print revenue | ||||||||||||||||
Print advertising | 15,156 | 3,548 | 11,608 | 327.2 | % | |||||||||||
Print subscriptions | 31,527 | 27,353 | 4,174 | 15.3 | % | |||||||||||
Total print revenue | 46,683 | 30,901 | 15,782 | 51.1 | % | |||||||||||
Total revenue | $ | 113,318 | $ | 68,361 | $ | 44,957 | 65.8 | % |
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For the six months ended June 30, 2022, as referenced in the above table, total revenue increased $44,957 or 65.8% from $68,361 to $113,318. Total digital revenue increased $29,175 and 77.9% primarily due to an increase in digital advertising revenue of $25,267 and 119.9%. The increase in digital advertising revenue was mainly due to additional revenue of $10,511 generated as a result of The Spun, which was acquired during the second quarter of 2021; $2,545 generated as a result of Athlon, which was acquired during the second quarter of 2022; $2,541 generated as a result of the Sports Illustrated media business; $2,387 generated as a result of The Street; and $3,203 in revenue generated from our legacy business. Other revenue increased by $6,732 primarily related to licensing revenue primarily from SI Swim and the Sports Illustrated media business. Total print revenue increased $15,782 a 51.1% increase from $30,901 to $46,683 primarily related to $14,968 from Athlon magazine circulations, which was acquired during the second quarter of 2022; and $814 from the Sports Illustrated media business.
Cost of Revenue
The following table sets forth cost of revenue by category:
Six Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Publisher Partner revenue share payments | $ | 9,771 | $ | 10,846 | $ | (1,075 | ) | -9.9 | % | |||||||
Technology, Platform and software licensing fees | 7,710 | 5,216 | 2,494 | 47.8 | % | |||||||||||
Royalty fees | 7,500 | 7,500 | - | 0.0 | % | |||||||||||
Content and editorial expenses | 25,047 | 13,921 | 11,126 | 79.9 | % | |||||||||||
Printing, distribution and fulfillment costs | 15,544 | 5,931 | 9,613 | 162.1 | % | |||||||||||
Amortization of developed technology and platform development | 4,686 | 4,324 | 362 | 8.4 | % | |||||||||||
Stock-based compensation | 4,830 | 3,198 | 1,632 | 51.0 | % | |||||||||||
Other cost of revenue | 138 | 113 | 25 | 22.1 | % | |||||||||||
Total cost of revenue | $ | 75,226 | $ | 51,049 | $ | 24,177 | 47.4 | % |
For the six months ended June 30, 2022, as referenced in the above table, we recognized cost of revenue of $75,226, as compared to $51,049 for the foreseeable future. We have no contractssix months ended June 30, 2021, which represents an increase of $24,177 or arrangements47.4%. Cost of revenue for any additional funding at this time. There can be no assurancethe six months ended June 30, 2022 was impacted by increases in content and editorial expenses of $11,126, primarily due to the Athlon acquisition, which was acquired in the second quarter of 2022 and the SI Swim magazine that was issued in June 2022 versus July 2021 of the prior year; printing, distribution and fulfillment costs of $9,613, partially generated as a result of the Athlon acquisition and SI Swim; technology, Platform and software licensing fees of $2,494; stock-based compensation of $1,632; and amortization of developed technology and platform development of $362; partially offset by a decrease in Publisher Partner revenue share payments of $1,075.
The improvement in gross profit percentage was driven by our strategic shift to eliminate most Publisher Partner guarantees near the end of fiscal 2020 as well as growth in our owned and operated digital properties. As a result, our Publisher Partner revenue share payments represent 21.1% of digital advertising revenue for the six months ended June 30, 2022, as compared to 51.5% for the six months ended June 30, 2021. In addition, we will be ablecontinue to raise any funding or will be able to meet our accrued obligations. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations. These estimates may change significantly depending on the nature of our business activities and our ability to raise capitalexperience high contributions from our shareholders or other sources.digital advertising.
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There are no assurances that we will be able to obtain further funds required for our continued operations. We will pursue various financing alternatives to meet our immediate
Operating Expenses
Selling and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtainMarketing
The following table sets forth selling and marketing by category:
Six Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Payroll and employee benefits of selling and marketing account management support teams | $ | 8,251 | $ | 5,514 | $ | 2,737 | 49.6 | % | ||||||||
Stock-based compensation | 1,339 | 2,638 | (1,299 | ) | -49.2 | % | ||||||||||
Professional marketing services | 1,840 | 1,013 | 827 | 81.6 | % | |||||||||||
Circulation costs | 1,805 | 1,775 | 30 | 1.7 | % | |||||||||||
Subscription acquisition costs | 18,685 | 15,526 | 3,159 | 20.3 | % | |||||||||||
Advertising costs | 3,117 | 3,159 | (42 | ) | -1.3 | % | ||||||||||
Other selling and marketing expenses | 1,486 | 1,715 | (229 | ) | -13.4 | % | ||||||||||
Total selling and marketing | $ | 36,523 | $ | 31,340 | $ | 5,183 | 16.5 | % |
For the additional financing on a timely basis, we will be unable to conduct our operationssix months ended June 30, 2022, as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
Contractual Obligations
As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements, including any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Seasonality
Once we are actively providing services to our customer base, we expect to experience typical media company ad and sponsorship sales seasonality, which is strongreferenced in the fourth quarterabove table, we incurred selling and slowermarketing costs of $36,523, as compared to $31,340 for the six months ended June 30, 2021, an increase of $5,183 or 16.5%. The increase in selling and marketing costs of $5,183 is primarily related to subscription acquisition costs of $3,159; payroll of selling and marketing account management support teams of $2,737; and professional and marketing services of $827; partially offset by a decrease in stock-based compensation of $1,299.
General and Administrative
The following table sets forth general and administrative by category:
Six Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Payroll and related expenses for executive, sales and administrative personnel | $ | 8,928 | $ | 7,432 | $ | 1,496 | 20.1 | % | ||||||||
Stock-based compensation | 10,297 | 7,379 | 2,918 | 39.5 | % | |||||||||||
Professional services, including accounting, legal and insurance | 6,877 | 6,035 | 842 | 14.0 | % | |||||||||||
Other general and administrative expenses | 3,376 | 2,184 | 1,192 | 54.6 | % | |||||||||||
Total general and administrative | $ | 29,478 | $ | 23,030 | $ | 6,448 | 28.0 | % |
For the six months ended June 30, 2022, as referenced in the first quarter.above table, we incurred general and administrative costs of $29,478, as compared to $23,030 for the six months ended June 30, 2021, an increase of $6,448 or 28.0%. The increase is primarily related to stock-based compensation of $2,918; payroll and related expenses for executive and administrative personnel of $1,496; professional services, including accounting, legal and insurance of $842; and other general and administrative expenses of $1,192.
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Effects
Other (Expenses) Income
The following table sets forth other (expense) income:
Six Months Ended June 30, | 2022 versus 2021 | |||||||||||||||
2022 | 2021 | $ Change | % Change | |||||||||||||
Change in valuation of warrant derivative liabilities | $ | - | $ | (305 | ) | $ | 305 | -100.0 | % | |||||||
Interest expense | (5,326 | ) | (5,183 | ) | (143 | ) | 2.8 | % | ||||||||
Liquidated damages | (300 | ) | (1,364 | ) | 1,064 | -78.00 | % | |||||||||
Gain upon debt extinguishment | - | 5,717 | (5,717 | ) | -100.0 | % | ||||||||||
Total other expenses | $ | (5,626 | ) | $ | (1,135 | ) | $ | (4,491 | ) | 395.7 | % |
Change in Valuation of InflationWarrant Derivative Liabilities. The change of $305 in the valuation of warrant derivative liabilities for the six months ended June 30, 2021 was the result no longer having any warrant derivative liabilities as of June 30, 2022.
To date inflation has not hadInterest Expense. We incurred interest expense of $5,326 for the six months ended June 30, 2022, as compared to $5,183 for the six months ended June 30, 2021. The increase in interest expense of $143 is primarily from $3,773 increase in cash interest paid; less a material impact on our business or operating results.decrease of $3,563 from accrued interest.
Significant Accounting PoliciesLiquidated Damages. We recorded liquidated damages of $300 for the six months ended June 30, 2022, as compared to $1,364 for the six months ended June 30, 2021. The decrease of $1,064 is primarily from no further liquidated damages assessed under the corresponding agreements and Estimatesonly recording interest expense related to the previous liquidated damages assessed.
The Company’s discussion and analysisGain Upon Debt Extinguishment. We recorded a gain upon debt extinguishment of $5,717 (including accrued interest) pursuant to the forgiveness of the Paycheck Protection Program Loan for the six months ended June 30, 2021.
Use of Non-GAAP Financial Measures
We report our financial condition and results of operations is based upon the Company’s audited financial statements included elsewhere in this Report, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The Company; however, management believes that certain non-GAAP financial measures provide users of our financial information with useful supplemental information that enables a better comparison of our performance across periods. We believe Adjusted EBITDA provides visibility to the following critical accounting policies affectunderlying continuing operating performance by excluding the Company’s more significant judgmentsimpact of certain items that are noncash in nature or not related to our core business operations. We calculate Adjusted EBITDA as net loss, adjusted for (i) interest expense, (ii) income taxes, (iii) depreciation and estimatesamortization, (iv) stock-based compensation, (v) change in derivative valuations, (vi) liquidated damages, (vii) gain upon extinguishment of debt, (viii) loss on impairment of assets, (ix) professional and vendor fees, and (x) employee restructuring payments.
Our non-GAAP Adjusted EBITDA may not be comparable to a similarly titled measure used by other companies, has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Additionally, we do not consider our non-GAAP Adjusted EBITDA as superior to, or a substitute for, the preparationequivalent measures calculated and presented in accordance with GAAP. Some of the financial statements. Actual results may differ from these estimates under different assumptions or conditions.limitations is that Adjusted EBITDA:
● | does not reflect interest expense, or the cash required to service our debt, which reduces cash available to us; | |
● | does not reflect deferred income taxes, which is a noncash expense; | |
● | does not reflect depreciation and amortization expense and, although this is a noncash expense, the assets being depreciated may have to be replaced in the future, increasing our cash requirements; | |
● | does not reflect stock-based compensation and, therefore, does not include all of our compensation costs; | |
● | does not reflect the change in derivative valuations and, although this is a noncash expense, the change in the valuations each reporting period are not impacted by our actual business operations but is instead strongly tied to the change in the market value of our common stock; | |
● | does not reflect liquidated damages and, therefore, does not include future cash requirements if we repay the liquidated damages in cash instead of shares of our common stock (which the investor would need to agree to); |
39 |
● | does not reflect any gains upon debt extinguishment, which we do not consider in our evaluation of our business operations | |
● | does not reflect any losses from the impairment of assets, which is a noncash operating expense; | |
● | does not reflect the professional and vendor fees incurred by us for services provided by consultants, accountants, lawyers, and other vendors, which services were related to certain types of events that are not reflective of our business operations; and | |
● | does not reflect payments related to employee restructuring charges for the former Chief Financial Officer of Athlon and our former Chief Executive Officer. |
PrinciplesThe following table presents a reconciliation of Consolidation
The accompanying consolidated financial statements includeAdjusted EBITDA to net loss, which is the financial position, results of operations and cash flowsmost directly comparable GAAP measure, for the three and nine months ended September 30, 2017 and the three months ended September 30, 2016. All intercompany transactions and balances have been eliminated in consolidation.periods indicated:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net loss | $ | (22,207 | ) | $ | (20,657 | ) | $ | (40,656 | ) | $ | (46,120 | ) | ||||
Add: | ||||||||||||||||
Interest expense (1) | 2,506 | 2,363 | 5,326 | 5,183 | ||||||||||||
Deferred income taxes | (1,796 | ) | - | (1,782 | ) | - | ||||||||||
Depreciation and amortization (2) | 6,819 | 6,121 | 13,332 | 12,251 | ||||||||||||
Stock-based compensation (3) | 9,099 | 8,116 | 16,466 | 13,215 | ||||||||||||
Change in derivative valuations | - | (360 | ) | - | 305 | |||||||||||
Liquidated damages (4) | 128 | 1,109 | 300 | 1,364 | ||||||||||||
Gain upon debt extinguishment (5) | - | (5,717 | ) | - | (5,717 | ) | ||||||||||
Loss on impairment of assets (6) | - | - | 257 | - | ||||||||||||
Professional and vendor fees (7) | - | 1,719 | - | 2,124 | ||||||||||||
Employee restructuring payments (8) | 505 | 66 | 679 | 241 | ||||||||||||
Adjusted EBITDA | $ | (4,946 | ) | $ | (7,240 | ) | $ | (6,078 | ) | $ | (17,154 | ) |
Use of Estimates
(1) | Represents interest expense (net of interest income) of $2,506 and $2,363, for the three months ended June 30, 2022 and 2021, respectively, and interest expense (net of interest income) of $5,326 and $5,183, for the six months ended June 30, 2022 and 2021, respectively. Interest expense is related to our capital structure. Interest expense varies over time due to a variety of financing transactions. Interest expense includes $274 and $307 for amortization of debt discounts for the three months ended June 30, 2022 and 2021, respectively, and $934 and $1,001 for amortization of debt discounts for the six months ended June 30, 2022 and 2021, as presented in our condensed consolidated statements of cash flows, which are a noncash item. Investors should note that interest expense will recur in future periods. | |
(2) | Represents depreciation and amortization related to our developed technology and Platform included within cost of revenues of $2,375 and $2,157, for the three months ended June 30, 2022 and 2021, respectively, and depreciation and amortization included within operating expenses of $4,444 and $3,964 for the three months ended June 30, 2022 and 2021, respectively. Represents depreciation and amortization related to our developed technology and Platform included within cost of revenues of $4,686 and $4,324, for the six months ended June 30, 2022 and 2021, respectively, and depreciation and amortization included within operating expenses of $8,646 and $7,927 for the six months ended June 30, 2022 and 2021, respectively. We believe (i) the amount of depreciation and amortization expense in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired tangible and intangible assets. Investors should note that the use of tangible and intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation and should also note that such expense will recur in future periods. | |
(3) | Represents noncash costs arising from the grant of stock-based awards to employees, consultants and directors. We believe that excluding the effect of stock-based compensation from Adjusted EBITDA assists management and investors in making period-to-period comparisons in our operating performance because (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations, and (ii) such expenses can vary significantly between periods as a result of the timing of grants of new stock-based awards, including grants in connection with acquisitions. Additionally, we believe that excluding stock-based compensation from Adjusted EBITDA assists management and investors in making meaningful comparisons between our operating performance and the operating performance of other companies that may use different forms of employee compensation or different valuation methodologies for their stock-based compensation. Investors should note that stock-based compensation is a key incentive offered to employees whose efforts contributed to the operating results in the periods presented and are expected to contribute to operating results in future periods. Investors should also note that such expenses will recur in the future. |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses for the reporting period. Actual results could materially differ from those estimates.
Digital Media Content
The Company intends to operate a network of online media channels and will provide digital media (text, audio and video) over the Internet that users may access on demand. As a broadcaster that transmits third party content owned by our channel partners via digital media, the Company applies ASC 920, “Entertainment – Broadcasters”. The channel partners generally receive variable amounts of consideration that are dependent upon the calculation of revenue earned by the channel in a given month, referred to as a “revenue share”, that are payable in arrears. In certain circumstances, there is a monthly fixed fee minimum or a fixed yield (“revenue per 1000 impressions”) based on the volume of advertising impressions served. We disclose fixed dollar commitments for channel content licenses in Note 12 Commitments and Contingencies. Channel partner agreements that include fixed yield based on the volume of impressions served are not included in Note 12 because they cannot be quantified, but are expected to be significant. The expense related to channel partner agreements are reported in “Service Costs” in the Statement of Operations. The cash payments related to channel partner agreements are classified within “Net cash used in operating activities” on the Statement of Cash Flows. Also under ASC 920, if channel partner agreements are structured such that the fee paid precedes the right to use the content because the broadcasts will occur in future periods, the Company will record a Content Asset and a related Content Obligation when all of the following conditions are met, (1) the cost of the content is known or reasonably determinable, (2) the content has been accepted and (3) the content is available for broadcasting under the terms of the channel partner agreement. Capitalized content cost will be amortized on a systematic basis over the agreement term on a straight-line method or an accelerated method depending on the economic and agreement terms. Capitalized content costs will be evaluated for impairment at least annually or whenever circumstances indicate that Content Assets may be impaired.
Revenue Recognition
During the third quarter of 2017, the Company adopted ASC 606, “Revenue from Contracts with Customers” as the accounting standard for revenue recognition. Since the Company had not previously generated revenue from customers the Company did not have to transition its accounting method from ASC 605, “Revenue Recognition”.
Revenues are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company generates all of its revenue from contracts with customers. The following is a description of the principal activities from which the Company generates revenue:
Advertising
The Company enters into contracts with advertising networks to serve display or video advertisements on the digital media pages associated with our various channels. In accordance with ASC 606 the Company recognizes revenue from advertisements at the point in time when each ad is viewed as reported by our advertising network partners. The quantity of advertisements, the impression bid prices and revenue are reported on a real-time basis. Although reported advertising transactions are subject to adjustment by the advertising network partners, any such adjustments are known within a few days of month end. The Company owes our independent publisher channel partners a revenue share of the advertising revenue earned and this is recorded as service costs in the same period in which the associated advertising revenue is recognized.
Membership
The Company enters into contracts with Internet users that subscribe to premium content on the digital media channels. These contracts provide Internet users with a subscription to access the premium content for a given period of time, which is generally one year. In accordance with ASC 606 the Company recognizes revenue from each membership subscription over time based on a daily calculation of revenue during the reporting period. Subscribers make payment for a subscription by credit card and the amount of the subscription collected in cash is initially recorded as deferred revenue on the balance sheet. As the Company provides access to the premium content over the subscription term the Company recognizes revenue and proportionately reduces the deferred revenue balance. The Company owes our independent publisher channel partners a revenue share of the membership revenue earned and this is initially deferred as deferred contract costs. The Company recognizes deferred contract costs over the subscription term in the same pattern that the associated membership revenue is recognized.
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Disaggregation of Revenue
The following table provides information about disaggregated revenue by product line, geographical market and timing of revenue recognition:
Three months ended September 30, 2017 | Nine months ended September 30, 2017 | ||||||
Advertising | Membership | Total | Advertising | Membership | Total | ||
By Product Lines: | $2,146 | $3,918 | $6,064 | $2,146 | $3,918 | $6,064 | |
United States | Other | Total | United States | Other | Total | ||
By Geographical Markets: | $6,064 | $- | $6,064 | $6,064 | $- | $6,064 | |
At a Point in Time | Over Time | Total | At a Point in Time | Over Time | Total | ||
By Timing of Revenue Recognition: | $2,146 | $3,918 | $6,064 | $2,146 | $3,918 | $6,064 |
Contract Balances
The following table provides information about contract balances as of September 30, 2017:
Advertising | Membership | Total | |||||
Accounts receivables | $2,074 | $1,408 | $3,482 | ||||
Short-term contract assets (deferred contract costs) | - | $15,986 | $15,986 | ||||
Short-term contract liabilities (deferred revenue) | - | $31,634 | $31,634 |
The Company receives payments from advertising customers based upon contractual payment terms; accounts receivable are recorded when the right to consideration becomes unconditional and generally collected within 90 days. The Company generally receives payments from membership customers at the time of sign up for each subscription; accounts receivable from merchant credit card processors are recorded when the right to consideration becomes unconditional and generally collected weekly. Contract assets include contract fulfillment costs related to revenue shares owed to channel partners, which are amortized along with the associated revenue. Contract liabilities include payments received in advance of performance under the contract and are recognized as revenue over time. The Company had no asset impairment charges related to contract assets in the period.
Contract acquisition costs and practical expedients
For contracts that have a duration of less than one year, the Company follows ASC 606 practical expedients and expenses these costs when incurred; for contracts with life exceeding one year, which did not apply during the current period, the Company records these costs in proportion to completion of each completed performance obligation. The Company generally expenses sales commissions when incurred because the amortization period would have been less than one year. The Company records these costs within general and administrative expenses.
Fixed Assets
Fixed assets are recorded at cost. Major improvements are capitalized, while maintenance and repairs are charged to expense as incurred. Gains and losses from disposition of property and equipment are included in income and expense when realized. Depreciation and amortization are provided using the straight-line method over the following estimated useful lives:
(4) | Represents damages (or interest expense related to accrued liquidated damages) we owe to certain of our investors in private placements offerings conducted in fiscal years 2018 through 2020, pursuant to which we agreed to certain covenants in the respective securities purchase agreements and | ||||
(5) | |||||
(6) | Represents our impairment of certain assets that no longer are useful. | ||||
Intangible Assets
The intangible assets consist of the cost of a purchased website domain name with an indefinite useful life.
Impairment of Long-Lived Assets
The long-lived assets, consisting of fixed assets and intangible assets, held and used by the Company are reviewed for impairment no less frequently than annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. Management has determined that there was no impairment in the value of long-lived assets during the period ended September 30, 2017.
Website Development Costs
In accordance with authoritative guidance, the Company begins to capitalize website and software development costs for internal use when planning and design efforts are successfully completed and development is ready to commence. Costs incurred during planning and design, together with costs incurred for training and maintenance, are expensed as incurred and recorded in research and development expense within the consolidated statement of operations. The Company places capitalized website and software development assets into service and commences depreciation/amortization when the applicable project or asset is substantially complete and ready for its intended use. Once placed into service, the Company capitalizes qualifying costs of specified upgrades or enhancements to capitalized website and software development assets when the upgrade or enhancement will result in new or additional functionality. Certain website and software development assets are placed into service and amortized and the Company continues to capitalize costs associated with other website and software development assets that are still in the development stage.
(7) |
The Company capitalizes internal labor costs, including compensation, benefits and payroll taxes, incurred for certain capitalized website and software development projects related to the Company’s technology platform. The Company’s policy with respect to capitalized internal labor stipulates that labor costs for employees working on eligible internal use capital projects are capitalized as part of the historical cost of the project when the impact, as compared to expensing such labor costs, is material.
Research and Development
Research and development costs are charged to operations in the period incurred and amounted to $30,776 and $104,095 for the three and nine months ended September 30, 2017. Research and development costs amounted to $374,944 for the three months ended September 30, 2016.
Fair Value Measurements
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820“Fair Value Measurements and Disclosures” clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, FASB ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
(8) | Represents severance payments to the former Chief Financial Officer of Athlon and our former Chief Executive Officer for the three and six months ended June 30, 2022 and 2021. |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
In accordance with FASB ASC 820, the Company measures its derivative liability at fair value. The Company’s derivative liability is classified within Level 3.
The carrying value of other current assets and liabilities are considered to be representative of their respective fair values because of the short-term nature of those instruments.
Concentrations of Credit Risk
Cash
The Company maintains cash at a bank where amounts on deposit may exceed the Federal Deposit Insurance Corporation limit throughout the year. The Company has not experienced losses in such accounts and believes it is not exposed to significant credit risk regarding its cash.
Stock-based Compensation
The Company provides stock-based compensation in the form of (a) restricted stock awards to employees, (b) vested stock grants to directors, (c) stock option grants to employees, directors and independent contractors, and (d) common stock warrants to Channel Partners and other independent contractors.
The Company applies FASB ASC 718, “Stock Compensation,” when recording stock based compensation to employees and directors. The estimated fair value of stock based awards is recognized as compensation expense over the vesting period of the award. The Company has adopted ASU 2016-09 in 2016 with early application and account for actual forfeitures of awards as they occur.
The fair value of restricted stock awards by Subsidiary at Inception was estimated on the date of the award using the exchange value used by Integrated and the Subsidiary to establish the relative voting control ratio in the Recapitalization.
Restricted stock that was subject to an escrow arrangement and/or a performance condition in conjunction with the Recapitalization was remeasured and fair value was estimated using the quoted price of our common stock on the date of the Recapitalization. The Company uses a Monte Carlo simulation model to determine the number of shares expected to be released from the performance condition escrow. Each quarter the Company reevaluates the number of shares expected to be released from the performance condition escrow until the final determination is made as of December 31, 2017.
The fair value of fully vested stock awards is estimated using the quoted price of our common stock on the date of the grant. The fair value of stock option awards is estimated at grant date using the Black-Scholes option pricing model that requires various highly judgmental assumptions including expected volatility and option life.
The Company accounts for stock issued to non-employees in accordance with provisions of FASB ASC 505-50, “Equity Based Payments to Non-Employees.” FASB ASC 505-50 states that equity instruments that are issued in exchange for the receipt of goods or services should be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliability measurable. The measurement date occurs as of the earlier of (a) the date at which a performance commitment is reached or (b) absent a performance commitment, the date at which the performance necessary to earn the equity instruments is complete (that is, the vesting date). Equity grants with performance conditions that do not have sufficiently large disincentive for non-performance may be measured at fair value that is not fixed until performance is complete. The fair value of common stock warrants is estimated at grant date using the Black-Scholes option pricing model that requires various highly judgmental assumptions including expected volatility and option life. The Company recognizes expense for equity based payments to non-employees as the services are received. The Company has specific objective criteria, such as the date of launch of a Channel on the Company’s platform, for determination of the period over which services are received and expense is recognized.
The Company uses a Monte Carlo simulation model to determine the number of shares expected to be earned by Channel Partners based on performance obligations to be satisfied over a defined period which will commence at the launch of a Channel on the Company’s platform.
The Company issues common stock upon exercise of equity awards and warrants.
Income Taxes
The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements to give effect to the temporary differences which may arise from differences in the bases of fixed assets, depreciation methods and allowances based on the income taxes expected to be payable in future years. Deferred tax assets arising primarily as a result of net operating loss carry-forwards, and research and development credit have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods.
The Company recognizes interest accrued relative to unrecognized tax benefits in interest expense and penalties in operating expense. During the three and nine months ended September 30, 2017 and the three months ended September 30, 2016, the Company recognized no income tax related interest and penalties. The Company had no accruals for income tax related interest and penalties at September 30, 2017.
Basic and Diluted Loss per Common Share
Basic income or loss per share is computed using the weighted average number of common shares outstanding during the period, and excludes any dilutive effects of common stock equivalent shares, such as options, restricted stock, and warrants. Restricted stock is considered outstanding and included in the computation of basic income or loss per share when underlying restrictions expire and the shares are no longer forfeitable. Diluted income per share is computed using the weighted average number of common shares outstanding and common stock equivalent shares outstanding during the period using the treasury stock method. Common stock equivalent shares are excluded from the computation if their effect is anti-dilutive. Unvested but outstanding restricted stock (which are forfeitable) are included in the diluted income per share calculation. In a period where there is a net loss, the diluted loss per share is computed using the basic share count. At September 30, 2017, potentially dilutive shares outstanding amounted to 14,737,558, of which 13,417,951 are not currently registered and/or subject to future vesting conditions. Included in these totals are 6,663,244 common stock equivalents that must be exercised which would result in aggregate proceeds from the sale of stock to the Company of $6,735,000.
Risks and Uncertainties
The Company has a limited operating history and has not generated revenue to date. The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets and the general condition of the U.S. and world economies. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse developments in these general business and economic conditions could have a material adverse effect on the Company’s financial condition and the results of its operations.
In addition, the Company will compete with many companies that currently have extensive and well-funded projects, marketing and sales operations as well as extensive human capital. The Company may be unable to compete successfully against these companies. The Company’s industry is characterized by rapid changes in technology and market demands. As a result, the Company’s products, services, and/or expertise may become obsolete and/or unmarketable. The Company’s future success will depend on its ability to adapt to technological advances, anticipate customer and market demands, and enhance its current technology under development.
Recently Adopted Standards
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (ASC 606) - Revenue from Contracts with Customers (“ASU 2014-09”), which provides guidance for revenue recognition. This ASU will supersede the revenue recognition requirements in Topic 605, and most industry specific guidance. The standard’s core principle is that revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The guidance in ASU 2014-09 also specifies the accounting for some costs to obtain or fulfill a contract with a customer. ASC 606 requires the Company to make significant judgments and estimates. ASC 606 also requires more extensive disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
The FASB has also issued several additional ASUs which amend ASU 2014-09. The amendments do not change the core principle of the guidance in ASC 606.
Public business entities are required to apply the guidance of ASC 606 to annual reporting periods beginning after December 15, 2017 (2018 for calendar year end reporting companies), including interim reporting periods within that reporting period. Early adoption is permitted.
The Company has adopted ASC 606 in the current quarter ended September 30, 2017 and began recognition of revenue from contracts with customers as a result of the launch of its network operations. Since the Company had not previously generated revenue from customers the Company did not have to transition its accounting method from ASC 605, “Revenue Recognition”.
In November 2015, the FASB issued Accounting Standards Update No. 2015-17 (ASU 2015-17), Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The adoption of ASU 2015-17 did not have any impact on Company’s financial statement presentation or disclosures.
Recent Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes all existing guidance on accounting for leases in ASC Topic 840. ASU 2016-02 is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. ASU 2016-02 will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statement of income. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. ASU 2016-02 is required to be applied with a modified retrospective approach to each prior reporting period presented with various optional practical expedients. The Company is currently assessing the potential impact of adopting ASU 2016-02 on its financial statements and related disclosures.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 refines how companies classify certain aspects of the cash flow statement in regards to debt prepayment, settlement of debt instruments, contingent consideration payments, proceeds from insurance claims and life insurance policies, distribution from equity method investees, beneficial interests in securitization transactions and separately identifiable cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. No early adoption is permitted. Management is currently assessing the potential impact of adopting ASU 2016-15 on the financial statements and related disclosures.
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718 to a change in terms or conditions of a share-based payment award. The amendments in this ASU are effective for public entities for fiscal years and interim periods beginning after December 15, 2017, with early adoption permitted. The ASU should be applied prospectively on and after the effective date. The Company is evaluating the impact of this ASU.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable to a “smaller reporting company” as defined in Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required10(f)(1) of smaller reporting companies.SEC Regulation S-K.
ItemITEM 4. Controls and ProceduresCONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
DisclosureOur management is responsible for establishing and maintaining a system of disclosure controls and procedures are(as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports filedwe file or submittedsubmit under the Securities and Exchange Act of 1934, as amended (“Exchange Act”) is recorded, processed, summarized, and reported, within the time periodperiods specified in the SEC’s rules and forms. 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 filedthat it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Chief Executive Officerits principal executive officer(s) and Chief Financial Officer. We carried outprincipal financial officer(s), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
In accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was completed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2017 (the “Evaluation Date”). Based upon the evaluation of our disclosure controls and procedures asend of the Evaluation Date, theperiod covered by this Quarterly Report. Based on that evaluation, conducted in accordance with SEC’s guidance in Release No. 34-55929, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective becauseas of the identification of material weaknessessuch date in providing reasonable assurance that information required to be disclosed in our internal control over financial reporting that were disclosedreports filed or submitted under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in Item 9A. Controlsthe SEC’s rules and Procedures in our 2016 annual report on Form 10-K.forms.
Changes in Internal Control over Financial Reporting
In connection with our continued monitoring and maintenance of our controls procedures as part of the implementation of Section 404 of the Sarbanes, we continue to review, test, and improve the effectiveness of our internal controls. There were nohave not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the threesix months ended SeptemberJune 30, 2017,2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PartPART II – Other Information- OTHER INFORMATION
ItemITEM 1. Legal ProceedingsLEGAL PROCEEDINGS
From time to time, the Companywe may be subject to other claims and litigation arising in the ordinary course of business. The Company isWe are not currently a partysubject to any pending or threatened legal proceedings that it believeswe believe would reasonably be expected to have a material adverse effect on the Company’sour business, financial condition, or results of operations.operations or cash flows.
ItemITEM 1A. Risk FactorsRISK FACTORS
There have been no material changes in theare numerous factors that affect our business and operating results, many of which are beyond our control. The risk factors set forthdescribed in Part I, Item 1A, “Risk“Item IA. Risk Factors” in our Annual Report on Form 10-K, for the periodyear ended December 31, 2016.2021, should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report and in our other filings with SEC in connection with evaluating us, our business and the forward-looking statements contained in this Quarterly Report. Additional risks and uncertainties not known to us at present, or that we currently deem immaterial, may affect us. The occurrence of any of these known or unknown risks could have a material adverse impact on our business, financial condition and results of operations.
ItemITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended June 30, 2022, we issued or repurchased unregistered securities to the extent identified in this Item 2.
Unregistered Sales of Equity Securities and Use of ProceedsIssuances
On October 19, 2017,April 1, 2022, we closed on securities purchase agreements with 13 purchasers (the “Investors”), which provided for the sale by us of an aggregate of 2,391,304issued 314,103 restricted shares of our common stock at a pricein connection with our acquisition of $1.15 per share. The proceeds from this private placement offering will be used for general working capital purposes to support the business operationsAthlon Holdings, Inc. Such issuance comprised $3,141 of the Company.purchase price. The Securities and Exchange Commission declarednumber of restricted shares issued was based on the registration effective on November 6, 2017.
The Company also issued to MDB Capital Group LLC, in partial consideration for its services as placement agentcorresponding merger agreement, which called for the offering, 119,565 shares ofprice per share to be determined based on our common stock and 119,565 warrants to purchase common stock at $1.15 per share.price on each of 10 trading days preceding the April 1, 2022 closing date. The shares of common stock issued in the offering and to the placement agent were offered and sold exclusively to accredited investors in a transactionissuance was exempt from registration under the Securities Act of 1933, as amended, as a transaction not involving a public offering, pursuantoffering.
On April 27, 2022, we issued 7,851 shares of our common stock in connection with the Say Media merger. These shares were previously classified as common stock to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
On December 19, 2016, the Registrant’s Board of Directors approved the ability of management to issue warrants to Channel Partners that would allow the warrant holders to purchase up to a maximum of 5,000,000 warrants in the aggregate. The warrants will be issued to individual Channel Partners with individualized vesting criteria under a program designed to encourage the Channel Partner to drive user traffic and generate new Channel Partner participants on TheMaven Platform. The warrants have a composition of vesting that is time based and performance based. The Registrant has granted since inception of the program an aggregate of 3,024,500 warrants through June 30, 2017 at exercise prices ranging from $0.95 to $1.90 per share, with expiration periods ending from December 19, 2021 to June 30, 2022. These Channel Partner warrants have no registration rights, and vest over three years. None of the Channel Partner warrants are yet vested. The warrants were issued on the basiscondensed consolidated statements of beingstockholders’ deficiency. The issuance was exempt from registration as a private placement under Section 4(a)(2)transaction not involving a public offering.
On May 31, 2022 and June 30, 2022, we issued 18,000 and 3,600, respectively, shares of our common stock in connection with the Securities Exchange Actvesting of 1933,restricted stock units as amended.payment for services rendered. The issuance was exempt from registration as a transaction not involving a public offering.
Repurchases
Period | Total number of shares (or units) purchased (1) | Average price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs | Maximum number of shares (or units) that may yet be purchased under the plans or programs | ||||||||||||
April 1 – 30, 2022 | 18,150 | $ | 88.00 | - | - | |||||||||||
May 1 – 31, 2022 | - | $ | - | - | ||||||||||||
June 1 – 30, 2022 | - | $ | - | - | ||||||||||||
Total | 18,150 | $ | - | - |
(1) | The shares disclosed in this column were not repurchased in connection with a publicly announced plan or program, and no such plan or program has been announced. Such repurchases were made in connection with the HubPages merger as consideration for an amendment to a true-up provision. There are no remaining shares to be repurchased. |
ItemITEM 3. DEFAULTS UPON SENIOR SECURITIESDefault Upon Senior Securities
None.
ItemITEM 4. Mine Safety DisclosureMINE SAFETY DISCLOSURES
Not applicable.
ItemITEM 5. Other InformationOTHER INFORMATION
None.
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The following documents are filed as part of this Quarterly Report:
* Filed herewith.
** In accordance with Regulation S-T, the XBRL related information on Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” herewith but not “filed”.
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Pursuant toIn accordance with the requirements of the Securities and Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 9, 2022 | By: | ||
Ross Levinsohn | |||
Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: August 9, 2022 | By: | ||
Spiros Christoforatos | |||
Chief | |||
(Principal Accounting Officer) |
Dated: November 14, 2017
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