Arena (AREN)

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Arena (AREN) - 2022 Q2 - Earnings Call Transcript
2022-08-13 01:16
The Arena Group Holdings, Inc. (NYSE:AREN) Q2 2022 Results Conference Call August 9, 2022 4:30 PM ET Company Participants Jeff Stanlis - Investor Relations Ross Levinsohn - Chairman and Chief Executive Officer Douglas Smith - Chief Financial Officer Conference Call Participants Mark Argento - Lake Street Capital Markets Daniel Wolfe - 180 Degree Capital Corporation Daniel Day - B. Riley Securities Operator Good day, ladies and gentlemen, thank you for standing by. Welcome to The Arena Group Second Quarter 2 ...
Arena (AREN) - 2022 Q1 - Earnings Call Transcript
2022-05-08 09:19
Arena Group Holdings, Inc. (NYSE:AREN) Q1 2022 Earnings Conference Call May 4, 2022 4:30 PM ET Company Participants Rob Fink - IR, FNK IR Ross Levinsohn - Chairman & CEO Doug Smith - CFO Conference Call Participants Dan Day - B. Riley Securities Mark Argento - Lake Street Capital Markets Operator Good day, ladies and gentlemen, and welcome to The Arena Group first-quarter 2022 earnings call. [Operator Instructions]. It is now my pleasure to turn the floor over to your host, Rob Fink of FNK IR. Sir, the floo ...
Arena (AREN) - 2021 Q4 - Earnings Call Transcript
2022-03-29 20:58
Arena Group Holdings Inc (The) (NYSE:AREN) Q4 2021 Earnings Conference Call March 28, 2022 4:30 PM ET Company Participants Rob Fink - Managing Partner, FNK IR Ross Levinsohn - Chairman and Chief Executive Officer Doug Smith - Chief Financial Officer Conference Call Participants Mark Argento - Lake Street Dan Day - B. Riley Kevin Rendino - 180 Degree Capital John Fichthorn - Dialectic Capital Management Operator Good day, ladies and gentlemen, and welcome to The Arena Group Holdings Fourth Quarter Full Year ...
Arena (AREN) - 2021 Q3 - Earnings Call Transcript
2021-11-16 02:44
TheMaven, Inc. (MVEN) Q3 2021 Earnings Conference Call November 15, 2021 5:00 PM ET Company Participants Jeff Stanlis – FNK Investor Relations Ross Levinsohn – Chairman and Chief Executive Officer Doug Smith – Chief Financial Officer Conference Call Participants Mark Argento – Lake Street Dan Day – B. Riley Operator Good afternoon, ladies and gentlemen, and welcome to The Arena Group Third Quarter 2021 Earnings Conference and Webcast. At this time, all participants are on a listen-only mode and the floor wi ...
Arena (AREN) - 2021 Q3 - Quarterly Report
2021-11-14 16:00
[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [ITEM 1. Condensed Consolidated Financial Statements](index=4&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the period ended September 30, 2021 - The financial statements are unaudited and prepared according to SEC rules, not including all GAAP disclosures[28](index=28&type=chunk) - The impact of COVID-19 in 2021 was less severe than in 2020, with **increased traffic and advertising revenue** due to lifted restrictions and resumed events[29](index=29&type=chunk) [Index to Condensed Consolidated Financial Statements](index=4&type=section&id=Index%20to%20Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Total Assets | $190,163,854 | $214,204,316 | | Total Liabilities | $219,456,970 | $216,101,784 | | Total Stockholders' Deficiency | $(47,659,108) | $(20,313,460) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Revenue | $59,573,508 | $32,089,993 | $27,483,515 | 85.6% | | Gross Profit | $27,399,649 | $7,381,052 | $20,018,597 | 271.2% | | Loss from Operations | $(22,391,859) | $(13,773,208) | $(8,618,651) | 62.6% | | Net Loss | $(24,706,654) | $(21,397,094) | $(3,309,560) | 15.5% | | Basic & Diluted Net Loss per Common Stock | $(0.10) | $(0.55) | $0.45 | -81.8% | Condensed Consolidated Statements of Operations (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Revenue | $127,935,501 | $85,593,786 | $42,341,715 | 49.5% | | Gross Profit | $43,957,451 | $9,271,833 | $34,685,618 | 374.1% | | Loss from Operations | $(67,377,264) | $(55,556,230) | $(11,821,034) | 21.3% | | Net Loss | $(70,826,517) | $(67,202,384) | $(3,624,133) | 5.4% | | Basic & Diluted Net Loss per Common Stock | $(0.29) | $(1.72) | $1.43 | -83.1% | [Condensed Consolidated Statements of Stockholders' Deficiency](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficiency) Stockholders' Deficiency Summary | Metric | Jan 1, 2021 | Sep 30, 2021 | Change | | :----- | :---------- | :----------- | :----- | | Total Stockholders' Deficiency | $(20,313,460) | $(47,659,108) | $(27,345,648) | | Common Shares Outstanding | 229,085,167 | 264,246,777 | 35,161,610 | - Net loss for the nine months ended September 30, 2021, was **$(70,826,517)**, contributing to the increased deficiency[18](index=18&type=chunk) - Proceeds from common stock private placement contributed **$19,837,757** to additional paid-in capital[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | | :----- | :--- | :--- | :--------- | | Net Cash Used in Operating Activities | $(8,261,324) | $(20,273,407) | $12,012,083 | | Net Cash Used in Investing Activities | $(10,673,872) | $(4,286,469) | $(6,387,403) | | Net Cash Provided by Financing Activities | $18,129,164 | $20,821,378 | $(2,692,214) | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(806,032) | $(3,738,498) | $2,932,466 | | Cash, Cash Equivalents, and Restricted Cash – End of Period | $8,728,649 | $5,734,592 | $2,994,057 | - Cash received from customers for the nine months ended September 30, 2021, was approximately **$125.1 million**, an increase from $82.1 million in the prior year[132](index=132&type=chunk) - Approximately **$7.4 million** was used for business acquisitions in investing activities during the nine months ended September 30, 2021[133](index=133&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Summary of Significant Accounting Policies](index=12&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of presentation for the unaudited condensed consolidated financial statements and details recently adopted accounting standards - The financial statements are unaudited and do not include all disclosures required by U.S. GAAP for complete financial statements[28](index=28&type=chunk) - The Company adopted ASU 2019-12, ASU 2020-06, ASU 2020-08, and ASU 2020-10 on January 1, 2021, with **no material impact** on its financial statements[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - ASU 2021-08, effective for fiscal years after December 15, 2022, will change how revenue contracts acquired in business combinations are accounted for[37](index=37&type=chunk) [2. Acquisitions](index=15&type=section&id=2.%20Acquisitions) The Company completed two acquisitions in 2021, resulting in the recognition of a database asset and goodwill - On July 15, 2021, the Company acquired Fulltime Fantasy Sports, LLC for a total purchase consideration of **$1,256,887**, which included cash, restricted stock, and deferred payments[42](index=42&type=chunk)[43](index=43&type=chunk) - The Fulltime Fantasy acquisition resulted in **$1,256,887** being assigned to a database with a three-year useful life[43](index=43&type=chunk) - On June 4, 2021, the Company acquired College Spun Media Incorporated for **$11,735,002**, consisting of cash and 4,285,714 restricted shares[45](index=45&type=chunk)[46](index=46&type=chunk) - The College Spun Media acquisition resulted in **$6,722,495** being allocated to goodwill[47](index=47&type=chunk) [3. Balance Sheet Components](index=17&type=section&id=3.%20Balance%20Sheet%20Components) This note details changes in key balance sheet accounts, including receivables, intangible assets, and long-term liabilities Key Balance Sheet Components | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Accounts Receivable, net | $19,519,147 | $16,497,626 | | Total Subscription Acquisition Costs | $49,939,813 | $41,505,480 | | Net Property and Equipment | $668,663 | $1,129,438 | | Net Platform Development | $8,011,707 | $7,355,608 | | Net Acquired & Other Intangible Assets | $57,817,905 | $71,501,835 | | Other Long-term Liabilities | $8,072,442 | $753,365 | - Other long-term liabilities increased significantly due to lease termination payments of **$7,269,469** as of September 30, 2021[61](index=61&type=chunk) [4. Leases](index=19&type=section&id=4.%20Leases) The Company terminated an office lease, resulting in a net loss of $7.3 million and a penalty of $9.6 million - Operating cash flows for operating leases were **$2,901,529** for the nine months ended September 30, 2021[63](index=63&type=chunk) - On September 30, 2021, the Company terminated an office lease, resulting in a **net loss upon termination of $7,344,655**[65](index=65&type=chunk) - The lease termination included a penalty of **$9,606,121** and cash payments totaling **$10,000,000** scheduled through October 2024[65](index=65&type=chunk) [5. Line of Credit](index=20&type=section&id=5.%20Line%20of%20Credit) The Company is negotiating to increase and extend its $15 million line of credit, which matures in February 2022 Line of Credit Outstanding Balance | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Line of Credit Outstanding Balance | $6,705,391 | $7,178,791 | - The line of credit bears interest at **LIBOR Rate plus 8.50%** and matures on February 6, 2022[67](index=67&type=chunk) - The Company is in negotiations with FastPay to **increase, extend, and improve the terms** of the facility[67](index=67&type=chunk) [6. Restricted Stock Liabilities](index=20&type=section&id=6.%20Restricted%20Stock%20Liabilities) The Company is repurchasing vested restricted stock awards, with liabilities decreasing as payments are made Restricted Stock Liabilities | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Total Restricted Stock Liabilities | $2,458,355 | $3,623,309 | - The Company committed to repurchase **1,064,549** vested restricted stock awards at **$4.00 per share**[68](index=68&type=chunk)[69](index=69&type=chunk) [7. Fair Value Measurements](index=20&type=section&id=7.%20Fair%20Value%20Measurements) The change in valuation of warrant derivative liabilities resulted in a noncash income of $496,812 for the nine-month period - Warrant derivative liabilities are classified as **Level 3** in the fair-value hierarchy and valued using the Black-Scholes option-pricing model[73](index=73&type=chunk)[75](index=75&type=chunk) Change in Valuation of Warrant Derivative Liabilities (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change | | :----- | :--- | :--- | :----- | | Change in Valuation | $496,812 | $(134,910) | $631,722 | - The change in valuation of embedded derivative liabilities for the nine months ended September 30, 2021, was **$0**, compared to **$2,173,000 income** in 2020[78](index=78&type=chunk) [8. Long-term Debt](index=22&type=section&id=8.%20Long-term%20Debt) The Company's long-term debt decreased following the full forgiveness of its $5.7 million Paycheck Protection Program Loan - The interest rate on the 12% Second Amended Senior Secured Notes and the Delayed Draw Term Note was **reduced from 12% to 10%** and **15% to 10%** respectively, in May 2021[82](index=82&type=chunk)[87](index=87&type=chunk) - The Paycheck Protection Program Loan of **$5,702,725** was fully forgiven on June 22, 2021, resulting in a gain upon debt extinguishment of **$5,716,697**[89](index=89&type=chunk) Long-term Debt Summary | Debt Type | Sep 30, 2021 Carrying Value | Dec 31, 2020 Carrying Value | | :-------- | :-------------------------- | :-------------------------- | | 12% Second Amended Senior Secured Note | $58,718,289 | $52,556,401 | | Delayed Draw Term Note | $4,565,982 | $3,935,146 | | Paycheck Protection Program Loan | $0 | $5,702,725 | | **Total Long-term Debt (Carrying Value)** | **$63,284,271** | **$62,194,272** | [9. Preferred Stock](index=24&type=section&id=9.%20Preferred%20Stock) The Company converted Series H preferred stock and created a new Series L Junior Participating Preferred Stock with significant voting rights - **50 shares** of Series H convertible preferred stock were converted into **151,515 shares** of common stock on August 17, 2021[93](index=93&type=chunk) - The Company created Series L Junior Participating Preferred Stock, with each right entitling holders to purchase **1/1000th of a share at $4.00**[94](index=94&type=chunk) - Series L Preferred Stock carries **1,000 votes per share** and preferential dividend payments[94](index=94&type=chunk) [10. Stockholders' Equity](index=25&type=section&id=10.%20Stockholders'%20Equity) The Company raised $19.8 million in net proceeds from private placements of common stock in May and June 2021 - The Company sold **28,578,575 shares** of common stock in private placements in May and June 2021, generating aggregate net proceeds of **$19,837,757**[95](index=95&type=chunk) - The Company is obligated to register these shares and maintain periodic SEC filings, with potential liquidated damages for non-compliance[96](index=96&type=chunk)[98](index=98&type=chunk) Financing Warrants Outstanding and Exercisable (Sep 30, 2021) | Warrant Type | Exercise Price | Expiration Date | Total Exercisable (Shares) | | :----------- | :------------- | :-------------- | :------------------------- | | MDB Warrants | $0.20 / $1.15 / $2.50 | Nov 4, 2021 / Oct 19, 2022 | 507,055 | | Strome Warrants | $0.50 | June 15, 2023 | 1,500,000 | | B. Riley Warrants | $0.33 | Oct 18, 2025 | 875,000 | | **Total** | | | **2,882,055** | [11. Compensation Plans](index=27&type=section&id=11.%20Compensation%20Plans) Total stock-based compensation increased significantly to $23.0 million for the nine months ended September 30, 2021 Total Stock-Based Compensation (Nine Months Ended Sep 30) | Category | 2021 | 2020 | Change ($) | Change (%) | | :------- | :--- | :--- | :--------- | :--------- | | Total costs charged to operations | $21,688,226 | $11,185,953 | $10,502,273 | 93.9% | | Capitalized platform development | $1,347,624 | $1,259,163 | $88,461 | 7.0% | | **Total Stock-Based Compensation** | **$23,035,850** | **$12,445,116** | **$10,590,734** | **85.1%** | - Unrecognized compensation expense as of September 30, 2021, was **$60,930,080**, with an expected weighted-average recognition period of **2.08 years**[107](index=107&type=chunk) - The exercise price for ABG Warrants for **10,994,922 shares** was changed to **$0.42 from $0.84** per share on June 4, 2021[107](index=107&type=chunk) [12. Revenue Recognition](index=29&type=section&id=12.%20Revenue%20Recognition) Total revenue increased by 49.5% to $127.9 million for the nine-month period, driven by advertising and magazine circulation growth Revenue by Product Line (Nine Months Ended Sep 30) | Product Line | 2021 | 2020 | Change ($) | Change (%) | | :----------- | :--- | :--- | :--------- | :--------- | | Advertising | $46,300,974 | $28,788,631 | $17,512,343 | 60.8% | | Digital Subscriptions | $22,472,951 | $20,096,640 | $2,376,311 | 11.8% | | Magazine Circulation | $53,325,894 | $34,041,272 | $19,284,622 | 56.6% | | Other | $5,835,682 | $2,667,243 | $3,168,439 | 118.8% | | **Total Revenue** | **$127,935,501** | **$85,593,786** | **$42,341,715** | **49.5%** | - Revenue recognized at a point in time increased by **60.9% to $105.5 million**, while revenue recognized over time increased by **11.8% to $22.5 million** for the nine months ended September 30, 2021[110](index=110&type=chunk) [13. Income Taxes](index=30&type=section&id=13.%20Income%20Taxes) The Company maintains a valuation allowance against most deferred tax assets due to historical operating losses - The effective tax rate benefit for the nine months ended September 30, 2021, was **0.29%**, compared to 0.00% in 2020[114](index=114&type=chunk) - A valuation allowance is maintained against most deferred tax assets due to **historical operating losses** and uncertain future taxable income[115](index=115&type=chunk) [14. Commitments and Contingencies](index=30&type=section&id=14.%20Commitments%20and%20Contingencies) Revenue share guarantees to independent publishers decreased significantly for the nine months ended September 30, 2021 Publisher Partner Guarantees (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Publisher Partner Guarantees | $3,781,240 | $7,541,619 | $(3,760,379) | -49.9% | - The Company is not currently a party to any pending or threatened legal proceedings that would reasonably be expected to have a **material adverse effect**[117](index=117&type=chunk) [15. Subsequent Events](index=31&type=section&id=15.%20Subsequent%20Events) Subsequent to the reporting period, the Company granted new equity awards and entered into a new office space agreement - From October 1, 2021, the Company granted approximately **90,000 restricted stock awards** and **910,000 common stock options** to employees[120](index=120&type=chunk) - The outstanding balance of the 12% Second Amended Senior Secured Notes was approximately **$61.7 million**, and the Delayed Draw Term Note was approximately **$4.7 million** as of the filing date[121](index=121&type=chunk) - Effective October 1, 2021, the Company entered a 27-month business membership agreement with SaksWorks for office space, with monthly payments starting at **$25,000**[122](index=122&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition for the periods ended September 30, 2021 - The Company rebranded to **"The Arena Group"** on September 20, 2021[126](index=126&type=chunk) - The Company operates a digital media platform empowering premium publishers, including **Sports Illustrated, TheStreet, and The Spun**, and over 200 independent media publishers[125](index=125&type=chunk) - The growth strategy focuses on expanding Publisher Partners in key verticals and acquiring publishers with premium branded content[126](index=126&type=chunk) [Overview](index=32&type=section&id=Overview) The Company operates a digital media platform, rebranded as "The Arena Group," empowering premium publishers and iconic brands - The Company operates a digital media platform, empowering premium publishers and iconic brands such as **Sports Illustrated, TheStreet, and The Spun**[125](index=125&type=chunk) - The platform supports **over 200 independent media publishers**, aiming to augment its position in key verticals and optimize performance[125](index=125&type=chunk) - The Company rebranded to **"The Arena Group"** on September 20, 2021[126](index=126&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The Company faces a working capital deficit and upcoming debt maturities, necessitating negotiations for facility extensions Liquidity and Working Capital | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Cash | $8,227,840 | $9,033,872 | | Working Capital Deficit | $(51,006,516) | $(33,716,360) | - The Company generated approximately **$1.7 million in positive cash flows** from operations during the three months ended September 30, 2021[127](index=127&type=chunk) - The FastPay line of credit expires in Q1 2022, and a **$4.6 million principal payment** is due on the Term Note on March 31, 2022, prompting negotiations for extensions[127](index=127&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) The Company experienced substantial revenue growth and improved gross profit margins, though net losses increased due to higher operating expenses [Three Months Ended September 30, 2021 and 2020](index=34&type=section&id=Three%20Months%20Ended%20September%2030%2C%202021%20and%202020) For Q3 2021, revenue surged by 85.6%, but net loss increased by 15.5% due to a lease termination charge and higher stock-based compensation Financial Performance (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Revenue | $59,573,508 | $32,089,993 | $27,483,515 | 85.6% | | Gross Profit | $27,399,649 | $7,381,052 | $20,018,597 | 271.2% | | Net Loss | $(24,706,654) | $(21,397,094) | $(3,309,560) | 15.5% | | Basic & Diluted Net Loss per Common Stock | $(0.10) | $(0.55) | $0.45 | -81.8% | - The increase in net loss was primarily due to a **$7.3 million lease termination charge** and a **$4.6 million increase in stock-based compensation**[136](index=136&type=chunk) - Weighted average common stock outstanding increased by **545.1% to 252,811,058 shares**, significantly impacting EPS[136](index=136&type=chunk) Revenue Revenue by Product Line (Three Months Ended Sep 30) | Product Line | 2021 | 2020 | Change ($) | Change (%) | | :----------- | :--- | :--- | :--------- | :--------- | | Advertising | $21,678,480 | $9,409,031 | $12,269,449 | 130.4% | | Digital Subscriptions | $7,698,359 | $8,469,943 | $(771,584) | -9.1% | | Magazine Circulation | $25,973,853 | $12,874,574 | $13,099,279 | 101.7% | | Other | $4,222,816 | $1,336,445 | $2,886,371 | 216.0% | | **Total Revenue** | **$59,573,508** | **$32,089,993** | **$27,483,515** | **85.6%** | - Advertising revenue growth was attributed to a doubling of **Sports Illustrated Swim sponsorships ($6.8 million)** and the acquisition of **The Spun ($5.5 million)**[141](index=141&type=chunk) Cost of Revenue Cost of Revenue & Gross Profit Percentage (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Cost of Revenue | $32,173,859 | $24,708,941 | $7,464,918 | 30.2% | | Gross Profit Percentage | 46.0% | 23.0% | 23.0% | 100.0% | - The improvement in gross profit percentage was due to a decrease in partner revenue shares from **61% to 27%** of digital advertising revenue[142](index=142&type=chunk) - Capitalized costs related to the Platform increased to **$1.5 million** in Q3 2021, including **$1.0 million in payroll** and **$0.5 million in stock-based compensation**[143](index=143&type=chunk) Operating Expenses Total Operating Expenses (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Total Operating Expenses | $49,791,508 | $21,154,260 | $28,637,248 | 135.4% | Selling and Marketing Selling and Marketing Costs (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Selling and Marketing Costs | $22,712,193 | $9,928,901 | $12,783,292 | 128.7% | - Primary drivers were increases in **circulation costs ($9.4 million)**, **advertising costs ($1.4 million)**, and **payroll/stock-based compensation ($1.3 million)**[146](index=146&type=chunk) General and Administrative General and Administrative Costs (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | General and Administrative Costs | $23,023,883 | $7,172,175 | $15,851,708 | 221.0% | - Key increases included a **$7.3 million lease termination charge**, **$5.5 million in payroll/stock-compensation**, and **$2.2 million in professional services**[147](index=147&type=chunk) Other (Expenses) Income Total Other (Expense) (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Total Other (Expense) | $(2,544,494) | $(7,491,223) | $4,946,729 | -66.0% | Change in Valuation of Warrant Derivative Liabilities - Noncash income from warrant derivative liabilities increased by approximately **$1.3 million** in Q3 2021 compared to the prior year[148](index=148&type=chunk) Change in Valuation of Embedded Derivative Liabilities - Noncash income from embedded derivative liabilities increased by approximately **$2.4 million** in Q3 2021 compared to the prior year period[149](index=149&type=chunk) Interest Expense Interest Expense (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Interest Expense | $(2,512,637) | $(4,253,180) | $1,740,543 | -40.9% | - The decrease was primarily due to a **$0.8 million decrease** in accrued interest and a **$1.2 million decrease** in amortization of debt discount[149](index=149&type=chunk) Liquidated Damages Liquidated Damages (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Liquidated Damages | $(833,612) | $(319,903) | $(513,709) | 160.6% | - Damages were incurred due to delays in registration statements and periodic report filings for convertible debentures and preferred stock[151](index=151&type=chunk) [Nine Months Ended September 30, 2021 and 2020](index=37&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202021%20and%202020) For the nine-month period, revenue grew 49.5% and gross profit surged 374.1%, but net loss increased slightly due to higher operating expenses Financial Performance (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Revenue | $127,935,501 | $85,593,786 | $42,341,715 | 49.5% | | Gross Profit | $43,957,451 | $9,271,833 | $34,685,618 | 374.1% | | Net Loss | $(70,826,517) | $(67,202,384) | $(3,624,133) | 5.4% | | Basic & Diluted Net Loss per Common Stock | $(0.29) | $(1.72) | $1.43 | -83.1% | - The increase in net loss was primarily due to a **$7.3 million lease termination charge** and a **$10.5 million increase in stock-based compensation**[152](index=152&type=chunk) - Weighted average common stock outstanding increased by **523.3% to 244,209,151 shares**, significantly impacting EPS[152](index=152&type=chunk) Revenue Revenue by Product Line (Nine Months Ended Sep 30) | Product Line | 2021 | 2020 | Change ($) | Change (%) | | :----------- | :--- | :--- | :--------- | :--------- | | Advertising | $46,300,974 | $28,788,631 | $17,512,343 | 60.8% | | Digital Subscriptions | $22,472,951 | $20,096,640 | $2,376,311 | 11.8% | | Magazine Circulation | $53,325,894 | $34,041,272 | $19,284,622 | 56.6% | | Other | $5,835,682 | $2,667,243 | $3,168,439 | 118.8% | | **Total Revenue** | **$127,935,501** | **$85,593,786** | **$42,341,715** | **49.5%** | - Advertising revenue growth was driven by the **Sports Illustrated media business ($10.0 million)** and **The Spun acquisition ($6.5 million)**[157](index=157&type=chunk) Cost of Revenue Cost of Revenue & Gross Profit Percentage (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Cost of Revenue | $83,978,050 | $76,321,953 | $7,656,097 | 10.0% | | Gross Profit Percentage | 34.4% | 10.8% | 23.6% | 218.5% | - The improvement in gross profit percentage was due to a **decrease in partner revenue shares**[158](index=158&type=chunk) - Capitalized costs related to the Platform increased to **$4.4 million**, including **$3.0 million in payroll** and **$1.3 million in stock-based compensation**[159](index=159&type=chunk) Operating Expenses Total Operating Expenses (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Total Operating Expenses | $111,334,715 | $64,828,063 | $46,506,652 | 71.7% | Selling and Marketing Selling and Marketing Costs (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Selling and Marketing Costs | $55,122,357 | $27,698,182 | $27,424,175 | 99.0% | - Key increases included **circulation costs ($22.4 million)**, **payroll/stock-based compensation ($3.3 million)**, and **advertising costs ($1.8 million)**[161](index=161&type=chunk) General and Administrative General and Administrative Costs (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | General and Administrative Costs | $44,230,360 | $24,852,891 | $19,377,469 | 78.0% | - Key increases included **$8.4 million in payroll/stock-compensation**, **$7.1 million in facilities costs (lease termination)**, and **$3.1 million in professional services**[162](index=162&type=chunk) Other (Expenses) Income Total Other (Expense) (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Total Other (Expense) | $(3,678,952) | $(11,646,154) | $7,967,202 | -68.4% | Change in Valuation of Warrant Derivative Liabilities - Noncash income from warrant derivative liabilities increased by approximately **$0.6 million** for the nine months ended September 30, 2021, compared to the prior year[163](index=163&type=chunk) Change in Valuation of Embedded Derivative Liabilities - Noncash income from embedded derivative liabilities decreased by approximately **$2.2 million** for the nine months ended September 30, 2021, compared to the prior year period[165](index=165&type=chunk) Interest Expense Interest Expense (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Interest Expense | $(7,695,317) | $(12,169,315) | $4,473,998 | -36.8% | - The decrease was primarily due to a **$1.6 million decrease** in accrued interest and a **$3.4 million decrease** in amortization of debt discount[165](index=165&type=chunk) Liquidated Damages Liquidated Damages (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Liquidated Damages | $(2,197,615) | $(1,487,577) | $(710,038) | 47.7% | - Damages were incurred due to delays in registration statements and periodic report filings for convertible debentures and preferred stock[166](index=166&type=chunk) Gain Upon Debt Extinguishment Gain Upon Debt Extinguishment (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | | :----- | :--- | :--- | :--------- | | Gain Upon Debt Extinguishment | $5,716,697 | $0 | $5,716,697 | - The gain resulted from the **full forgiveness of the Paycheck Protection Program Loan**[166](index=166&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This disclosure is not applicable as the Company is a "smaller reporting company" as defined by SEC Regulation S-K - The Company is a **"smaller reporting company"** and is not required to provide quantitative and qualitative disclosures about market risk[167](index=167&type=chunk) [ITEM 4. Controls and Procedures](index=40&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective due to material weaknesses, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of September 30, 2021[169](index=169&type=chunk) - Remediation measures include updating internal control documentation, formal risk assessment, implementing segregation of duties, and hiring additional resources[171](index=171&type=chunk)[172](index=172&type=chunk) - Remediation of material weaknesses is expected to be fully complete by **December 31, 2021**[172](index=172&type=chunk) [PART II - OTHER INFORMATION](index=42&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=42&type=section&id=ITEM%201.%20Legal%20Proceedings) The Company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - The Company is not currently a party to any pending or threatened legal proceedings that would reasonably be expected to have a **material adverse effect**[175](index=175&type=chunk) [ITEM 1A. Risk Factors](index=42&type=section&id=ITEM%201A.%20Risk%20Factors) This section refers readers to the risk factors detailed in the Company's Annual Report on Form 10-K and other SEC filings - Readers should refer to the risk factors in the **Annual Report on Form 10-K** for the year ended December 31, 2020, and other SEC filings[176](index=176&type=chunk) - The occurrence of known or unknown risks could have a **material adverse impact** on the Company's business, financial condition, and results of operations[176](index=176&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[177](index=177&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=42&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[177](index=177&type=chunk) [ITEM 4. Mine Safety Disclosures](index=42&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[177](index=177&type=chunk) [ITEM 5. Other Information](index=42&type=section&id=ITEM%205.%20Other%20Information) There is no other information to report for the period - No other information to report[177](index=177&type=chunk) [ITEM 6. Exhibits](index=42&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed as part of this Quarterly Report on Form 10-Q - Exhibits include Certificates of Elimination for **Series F, I, J, and K Convertible Preferred Stock**[178](index=178&type=chunk)[179](index=179&type=chunk) - Key agreements filed include an **Asset Purchase Agreement** with Fulltime Fantasy Sports, LLC and amendments to compensation plans[178](index=178&type=chunk) - **CEO and CFO certifications** (Sarbanes-Oxley Act Sections 302 and 906) are included[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) [SIGNATURES](index=44&type=section&id=SIGNATURES) [Signatures Details](index=44&type=section&id=SIGNATURES_Details) This section contains the signatures of the Company's CEO and Chief Accounting Officer, certifying the report filing - The report was signed by **Ross Levinsohn, Chief Executive Officer**, and **Spiros Christoforatos, Chief Accounting Officer**, on November 15, 2021[182](index=182&type=chunk)