Arena (AREN) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements of The Arena Group Holdings, Inc. and its subsidiaries, including balance sheets, statements of operations, stockholders' deficiency, and cash flows for the periods ended June 30, 2025 and 2024, along with detailed notes explaining significant accounting policies, discontinued operations, acquisitions, balance sheet components, debt, equity, revenue recognition, income taxes, related party transactions, commitments, contingencies, and segment reporting Condensed Consolidated Balance Sheets Balance Sheet Data | Metric | June 30, 2025 (Unaudited) ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :-------------------------------------- | :------------------------------------ | | Assets | | | | Cash and cash equivalents | $6,771 | $4,362 | | Accounts receivables, net | $40,077 | $31,115 | | Total current assets | $51,413 | $40,234 | | Total assets | $127,781 | $116,352 | | Liabilities | | | | Accounts payable | $3,366 | $4,844 | | Accrued expenses and other | $15,906 | $10,990 | | Total current liabilities | $28,211 | $122,256 | | Total liabilities | $144,941 | $246,512 | | Total stockholders' deficiency | $(17,328) | $(130,328) | - The Company's total assets increased by $11.4 million from December 31, 2024, to June 30, 2025, while total liabilities decreased significantly by $101.5 million, primarily due to the resolution of liabilities from discontinued operations[18] Condensed Consolidated Statements of Operations Statements of Operations Data | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Revenue | $45,012 | $27,183 | $76,827 | $56,124 | | Gross profit | $25,435 | $10,718 | $41,104 | $19,651 | | Income (loss) from operations | $16,412 | $(2,578) | $23,774 | $(10,529) | | Income (loss) from continuing operations | $12,412 | $(6,938) | $16,409 | $(19,658) | | Income (loss) from discontinued operations, net of tax | $96,227 | $(1,249) | $96,250 | $(91,887) | | Net income (loss) | $108,639 | $(8,187) | $112,659 | $(111,545) | | Basic net income (loss) per common share | $2.29 | $(0.28) | $2.38 | $(3.97) | | Diluted net income (loss) per common share | $2.28 | $(0.28) | $2.38 | $(3.97) | - The Company reported significant net income for the three and six months ended June 30, 2025, primarily driven by a substantial income from discontinued operations due to the derecognition of liabilities related to the Sports Illustrated business[21][49] Condensed Consolidated Statements of Stockholders' Deficiency Stockholders' Deficiency Data | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :---------------------------- | :---------------------------- | | Total Stockholders' Deficiency | $(17,328) | $(130,328) | | Accumulated Deficit | $(366,704) | $(479,363) | | Common Stock Shares Outstanding | 47,564,607 | 47,556,267 | - The total stockholders' deficiency significantly improved from $(130,328) thousand at December 31, 2024, to $(17,328) thousand at June 30, 2025, largely due to the net income reported, which reduced the accumulated deficit[18][22] Condensed Consolidated Statements of Cash Flows Cash Flow Data | Cash Flow Activity | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Net cash provided by (used in) operating activities | $13,970 | $(5,161) | | Net cash used in investing activities | $(3,545) | $(1,512) | | Net cash (used in) provided by financing activities | $(8,016) | $3,474 | | Net change in cash and cash equivalents | $2,409 | $(3,199) | | Cash and cash equivalents — end of period | $6,771 | $6,085 | - The Company generated $13,970 thousand in net cash from operating activities for the six months ended June 30, 2025, a significant improvement from the $(5,161) thousand used in the prior year period, primarily driven by the net income and adjustments related to discontinued operations[25] Notes to Condensed Consolidated Financial Statements 1. Summary of Significant Accounting Policies - Management concluded that conditions previously raising substantial doubt about the Company's ability to continue as a going concern no longer exist, citing improved financial performance, revenue growth, cost reduction, and resolution of liabilities[38][39] - The Company operates in the media industry with four reportable segments: Sports & Leisure, Finance, Lifestyle, and Platform, with performance evaluated based on segment gross profit[33][34][35] - New accounting standards ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) will require additional disclosures, effective for fiscal years beginning after December 15, 2024, and December 15, 2026, respectively[41][42][43] 2. Discontinued Operations - The Company discontinued the Sports Illustrated media business on March 18, 2024, following the termination of its licensing agreement with ABG, classifying it as a discontinued operation[47][122] - On April 29, 2025, legal matters with the ABG Group were resolved through a confidential settlement, releasing outstanding liabilities and forfeiting ABG Warrants[48][125] Discontinued Operations Financials | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Revenue | $45,107 | $404 | $45,107 | $22,252 | | Net income (loss) from discontinued operations | $96,227 | $(1,249) | $96,250 | $(91,887) | - Revenue for the three and six months ended June 30, 2025, from discontinued operations includes the derecognition of $45,107 thousand in SI-related subscription liabilities for which the Company has no remaining obligations[49] 3. Acquisitions and Dispositions - On May 12, 2025, the Company acquired 100% of TravelHost LLC from Simplify Inventions LLC for $1,000 thousand, allocating the full purchase price to the intangible asset brand names[53] 4. Balance Sheet Components Balance Sheet Components Data | Asset Category | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :---------------------------- | :---------------------------- | | Accounts receivable, net | $40,077 | $31,115 | | Allowance for credit losses - end of period | $1,660 | $1,458 | | Net platform development | $9,300 | $8,115 | | Total intangible assets | $22,090 | $22,789 | | Total accrued expenses and other | $15,906 | $10,990 | - Accounts receivable, net, increased by $8,962 thousand, and net platform development increased by $1,185 thousand from December 31, 2024, to June 30, 2025[18][54][57] - Accrued expenses and other increased by $4,916 thousand, primarily due to increases in accrued payroll, publisher expenses, and liabilities from acquisitions[61] 5. Leases Lease Metrics | Lease Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Operating lease costs | $281 | $159 | | Weighted-average remaining lease term (years) | 5.67 | 6.01 | | Weighted-average discount rate | 10.90% | 10.85% | | Present value of operating lease liabilities | $2,342 (as of June 30, 2025) | N/A | - The Company has a real estate lease for office space with a weighted-average remaining lease term of 5.67 years and a weighted-average discount rate of 10.90% as of June 30, 2025[62][63] 6. Goodwill Goodwill Carrying Value | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :----------------------- | :---------------------------- | :---------------------------- | | Carrying value of Goodwill | $42,575 | $42,575 | - Goodwill remained constant at $42,575 thousand as of June 30, 2025, and December 31, 2024, with no impairment charges recorded[66] 7. Liquidated Damages Payable - Liquidated damages arise from registration rights agreements and securities purchase agreements due to the Company's failure to meet certain filing and registration deadlines[67] Liquidated Damages Payable Details | Category | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :-------------------------------- | :---------------------------- | :---------------------------- | | Total Liquidated Damages Payable | $3,381 | $3,230 | | Accrued Interest | $1,542 | $1,391 | - The Company continues to accrue interest on the liquidated damages balance at 1.0% per month, with no scheduled due date for payment[69] 8. Fair Value - The Company's financial instruments include Level 1 assets (cash and cash equivalents) and Level 2 and Level 3 assets/liabilities, with cash and cash equivalents totaling $6,771 thousand as of June 30, 2025[74] - The Fexy Put Option, previously accounted for as a derivative liability, was fully paid during the six months ended June 30, 2024, resulting in a loss of $379 thousand on common stock repurchase and a $313 thousand loss in change in valuation of contingent consideration[75][76][77] 9. Simplify Loan - The Simplify Loan, an amended promissory note with Simplify (a related party), provides up to $50,000 thousand at a 10.0% annual interest rate, maturing on December 1, 2026[79][80] Simplify Loan Financials | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :---------------- | :---------------------------- | :---------------------------- | | Simplify Loan Balance | $2,651 | $10,651 | | Cash Paid Interest | $308 (Six Months Ended June 30, 2025) | $0 (Six Months Ended June 30, 2024) | - The outstanding balance on the Simplify Loan decreased by $8,000 thousand from $10,651 thousand at December 31, 2024, to $2,651 thousand at June 30, 2025, with repayments during the six months ended June 30, 2025[25][80] 10. Term Debt - The Company's Term Debt includes Senior Secured Notes, Delayed Draw Term Notes, 2022 Bridge Notes, and 2023 Notes, with a total carrying value of $110,499 thousand as of June 30, 2025[82][85] Term Debt Carrying Values | Debt Type | June 30, 2025 Carrying Value ($ thousands) | December 31, 2024 Carrying Value ($ thousands) | | :-------------------------- | :----------------------------------------- | :----------------------------------------- | | Senior Secured Notes | $62,555 | $62,510 | | Delayed Draw Term Notes | $3,984 | $3,979 | | 2022 Bridge Notes | $35,960 | $35,947 | | 2023 Notes | $8,000 | $8,000 | | Total Term Debt | $110,499 | $110,436 | - An event of default on the Term Debt interest payment in December 2023 was cured, and all interest was paid as of December 31, 2024, with a forbearance period extended to September 30, 2024[87] 11. Interest Expense Interest Expense Breakdown | Interest Expense Category | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total interest expense | $2,945 | $4,249 | $5,949 | $8,588 | | Cash paid interest | $2,914 | $1,069 | $5,886 | $2,033 | | Noncash and accrued interest | $0 | $3,120 | $0 | $5,959 | | Amortization of debt costs | $31 | $60 | $63 | $596 | - Total interest expense decreased by $1,304 thousand for the three months and $2,639 thousand for the six months ended June 30, 2025, compared to 2024, primarily due to lower amortization of debt costs and reduced interest charges on the Simplify loan[89][192][216] 12. Preferred Stock - The Company has 1,800 authorized shares designated as Series G Convertible Preferred Stock, with 168 shares outstanding, and 23,000 authorized shares designated as Series H Convertible Preferred Stock, with no shares outstanding[91] 13. Stockholders' Deficiency - The Company has authorized 1,000,000,000 shares of common stock, with 47,564,607 shares issued and outstanding as of June 30, 2025[18][22][90] - Simplify, a related party, owns approximately 71.4% of the Company's outstanding common stock following a common stock purchase agreement in August 2024 and a private placement in February 2024, resulting in a change of control[94][95][117] 14. Compensation Plans Stock-based Compensation Data | Stock-based Compensation Category | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total stock-based compensation | $161 | $519 | $357 | $1,640 | | Capitalized platform development | $10 | $20 | $24 | $228 | | Unrecognized compensation cost (as of June 30, 2025) | $516 | N/A | N/A | N/A | | Weighted-average period to be recognized (years) | 2.52 | N/A | N/A | N/A | - Total stock-based compensation decreased significantly for both the three and six months ended June 30, 2025, compared to 2024. The ABG Warrants, which vested in January 2024 due to a default, were forfeited as part of the ABG settlement[97][99] 15. Revenue Recognition Revenue by Category | Revenue Category | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Total digital revenue | $44,767 | $26,430 | $76,375 | $55,098 | | Digital advertising | $31,693 | $20,718 | $53,510 | $43,466 | | Performance Marketing | $5,730 | $1,537 | $10,520 | $2,209 | | Publisher revenue | $5,621 | $2,282 | $8,725 | $4,385 | | Total revenue | $45,012 | $27,183 | $76,827 | $56,124 | | Revenue recognized from existing unearned revenue | $1,541 | $4,204 | $3,739 | $11,352 | - Total revenue increased by 65.6% for the three months and 36.9% for the six months ended June 30, 2025, driven by significant growth in digital advertising, performance marketing, and publisher revenue[100][175][198] - Unearned revenue (short-term contract liabilities) decreased from $6,349 thousand at December 31, 2024, to $4,793 thousand at June 30, 2025[104] 16. Income Taxes Income Tax Metrics | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision ($ thousands) | $979 | $35 | $1,265 | $76 | | Effective Tax Rate (ETR) | 7.31% | (0.51)% | 7.16% | (0.39)% | - The effective tax rate increased significantly for the three and six months ended June 30, 2025, primarily due to higher federal and state income taxes resulting from pre-tax income, compared to losses in the prior year[106] - The ETR remained below the U.S. federal statutory rate due to a full valuation allowance against deferred tax assets, as management deemed recent profitability insufficient to overcome cumulative losses[107] 17. Related Party Transactions - The Company acquired TravelHost LLC from Simplify, a related party, for $1,000 thousand on May 12, 2025[110] - Simplify, an affiliated entity, holds approximately 71.4% of the Company's common stock, giving it control over stockholder approvals[117] Related Party Transaction Details | Transaction | Three Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | | :-------------------------- | :--------------------------------------------- | :------------------------------------------- | | Interest paid to Renew (Term Debt) | $2,798 | $5,565 | | Interest paid to Simplify (Simplify Loan) | $114 | $308 | | Digital advertising revenue from Living Essentials (Simplify affiliate) | $880 | $1,830 | | Outstanding accounts receivable from Living Essentials (as of June 30, 2025) | N/A | $1,905 | 18. Commitments and Contingencies - The Company is involved in various legal proceedings, including a lawsuit filed by a former CEO and Chairman seeking $20,000 thousand in damages, which the Company intends to vigorously defend[120][121] - Legal matters with the ABG Group related to the Sports Illustrated business termination were resolved through a confidential settlement on April 29, 2025, releasing previously accrued liabilities of $48,750 thousand and forfeiting ABG Warrants[123][125] 19. Segment Reporting - The Company operates in four reportable segments: Sports & Leisure, Finance, Lifestyle, and Platform, with performance evaluated based on segment gross profit[128] Segment Revenue Performance | Segment | Three Months Ended June 30, 2025 Revenue ($ thousands) | Three Months Ended June 30, 2024 Revenue ($ thousands) | Six Months Ended June 30, 2025 Revenue ($ thousands) | Six Months Ended June 30, 2024 Revenue ($ thousands) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Sports & Leisure | $16,723 | $9,784 | $29,186 | $23,012 | | Finance | $13,097 | $5,690 | $21,195 | $11,959 | | Lifestyle | $12,275 | $8,347 | $20,154 | $14,742 | | Platform | $2,917 | $3,362 | $6,292 | $6,411 | | Total Revenue | $45,012 | $27,183 | $76,827 | $56,124 | - All segments except Platform showed significant revenue growth for both the three and six months ended June 30, 2025, driven by increased digital advertising, performance marketing, and publisher revenues, largely due to the competitive publishing model and network expansion[182][183][184][206][207][208] 20. Subsequent Events - On July 31, 2025, the Company announced a share repurchase program to buy back up to 3 million shares of its common stock through July 31, 2026, funded by operating cash flow[138][139] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations for the three and six months ended June 30, 2025 and 2024, covering an overview of the business, recent developments, macroeconomic impacts, key operating metrics, liquidity and capital resources, and a detailed analysis of revenue, costs, and expenses, including segment performance, non-GAAP financial measures, and critical accounting estimates Overview - The Arena Group is a media company leveraging its digital media platform to build content verticals (sports & leisure, lifestyle, finance) powered by anchor brands and over 150 independent Publisher Partners[141][143] - The strategy focuses on maximizing audience reach, enhancing engagement, and optimizing monetization of digital publishing assets for users, advertisers, and partners, who benefit from the Platform's scale and expertise in SEO, social media, and ad monetization[141][142] Recent Developments - On May 12, 2025, the Company acquired 100% of TravelHost LLC from Simplify, a related party, for $1.0 million, a transaction approved by the Audit Committee[144] Impact of Macroeconomic Conditions - The Company faces significant risks from global economic uncertainty, including inflation, banking instability, geopolitical conflicts (Ukraine, Israel), and tariffs affecting print production and advertising markets[145] - The ultimate impact of these macroeconomic conditions on the business remains highly uncertain and depends on future developments beyond the Company's control[145][146] Key Operating Metrics - Key operating metrics include Revenue per page view (RPM) and Monthly average page views, which provide insights into digital advertising revenue and overall business performance[147][150] Key Operating Metrics Overview | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | RPM | $25.12 | $22.90 | $23.85 | $21.22 | | Monthly average page views | 423,358,110 | 295,011,396 | 375,434,097 | 347,347,690 | - RPM increased by 10% (3 months) and 12% (6 months) YoY, reflecting strong traffic with premium content. Monthly average page views increased by 44% (3 months) and 8% (6 months) YoY, indicating growth in traffic, demand, and audience[151] Liquidity and Capital Resources - Management concluded that substantial doubt about the Company's ability to continue as a going concern no longer exists, citing consecutive profitable quarters, revenue growth, cost reduction, and resolution of liabilities[156][157] Liquidity and Capital Resources Summary | Metric | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :---------------- | :---------------------------- | :---------------------------- | | Cash on hand | $6,771 | $4,362 | | Working capital | $23,202 | $(82,022) | | Available under Simplify loan | $47,349 | N/A | - Working capital improved significantly from a deficit of $82,022 thousand at December 31, 2024, to a surplus of $23,202 thousand at June 30, 2025, primarily due to the reversal of accruals related to discontinued operations[165] - Net cash generated $13,970 thousand from operating activities for the six months ended June 30, 2025, a substantial increase from the $5,161 thousand used in the prior year period[166] Results of Operations Three Months Financial Performance Summary | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | % Change | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------- | | Revenue | $45,012 | $27,183 | 65.6% | | Gross profit | $25,435 | $10,718 | 137.3% | | Income (loss) from operations | $16,412 | $(2,578) | -736.6% | | Net income (loss) | $108,639 | $(8,187) | -1427.0% | Six Months Financial Performance Summary | Metric | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | % Change | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | :------- | | Revenue | $76,827 | $56,124 | 36.9% | | Gross profit | $41,104 | $19,651 | 109.2% | | Income (loss) from operations | $23,774 | $(10,529) | -325.8% | | Net income (loss) | $112,659 | $(111,545) | -201.0% | - Income from continuing operations improved significantly for both periods, driven by increased revenues and decreased operating expenses due to headcount and consulting spend reductions[171][194] Three Months Ended June 30, 2025 and 2024 - Total revenue increased by 65.6% to $45,012 thousand, primarily driven by a 69.4% increase in digital revenue, including digital advertising (+53.0%), performance marketing (+272.8%), and publisher revenue (+146.3%)[175][176] - Gross profit increased by 137.3% to $25,435 thousand, with the gross profit percentage rising to 56.5% from 39.4%, attributed to the competitive publishing model and brand expansion[172][173] - Operating expenses decreased by 32.1%, with selling and marketing down 48.2% and general and administrative down 28.2%, mainly due to reductions in direct sales workforce, payroll, and professional services[171][179][180] Six Months Ended June 30, 2025 and 2024 - Total revenue increased by 36.9% to $76,827 thousand, with digital revenue growing by 38.6%, driven by digital advertising (+23.1%), performance marketing (+376.2%), and publisher revenue (+99.0%)[198][199] - Gross profit increased by 109.2% to $41,104 thousand, with the gross profit percentage rising to 53.5% from 35.0%, due to the expansion of the competitive publishing model and affiliate partner network[196][197] - Operating expenses decreased by 42.6%, with selling and marketing down 51.0% and general and administrative down 38.8%, primarily due to reductions in payroll, employee benefits, and professional services[194][202][203] Use of Non-GAAP Financial Measures - Adjusted EBITDA is used by management to provide supplemental information on underlying operating performance by excluding non-cash or non-core business items such as interest expense, income taxes, depreciation, amortization, stock-based compensation, and discontinued operations[218][219][221] Adjusted EBITDA Reconciliation | Metric | Three Months Ended June 30, 2025 ($ thousands) | Three Months Ended June 30, 2024 ($ thousands) | Six Months Ended June 30, 2025 ($ thousands) | Six Months Ended June 30, 2024 ($ thousands) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net income (loss) | $108,639 | $(8,187) | $112,659 | $(111,545) | | Adjusted EBITDA | $18,552 | $3,669 | $28,262 | $2,821 | - Adjusted EBITDA increased significantly to $18,552 thousand for the three months and $28,262 thousand for the six months ended June 30, 2025, compared to $3,669 thousand and $2,821 thousand in the prior year periods, reflecting improved operational performance[220] Critical Accounting Estimates - The Company's financial statements rely on estimates and judgments affecting reported amounts, including allowance for credit losses, capitalization of platform development, goodwill, intangible assets, accruals for liabilities, stock-based compensation, and deferred tax assets[40][222] - No material changes to critical accounting policies and estimates were reported compared to the Annual Report on Form 10-K for the year ended December 31, 2024, except as described in Note 1[223] Recently Issued Accounting Standards Updates - This section refers to Note 1 for details on recently issued accounting standards updates, including ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures)[41][42][43][225] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable to the Company as it qualifies as a "smaller reporting company" under SEC Regulation S-K - The Company is exempt from providing quantitative and qualitative disclosures about market risk as it is a "smaller reporting company"[226] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and internal control over financial reporting. Management concluded that disclosure controls were not effective as of June 30, 2025, due to identified material weaknesses, and outlines a remediation plan Evaluation of Disclosure Controls and Procedures - Management concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[228] Material Weaknesses in Internal Control over Financial Reporting and Remediation Plan - Material weaknesses identified include inadequate finance and accounting policies documentation and insufficient internal controls to validate data from certain third-party service providers (print subscription, advertising, ad serving)[231][232] - Remediation plans include hiring resources to develop comprehensive policies, obtaining and reviewing SOC 1 Type 2 reports from third-party providers, and implementing additional controls for reviewing amendments to third-party agreements[233] - Despite the material weaknesses, management believes the unaudited condensed consolidated financial statements fairly present the Company's financial position and results[234] Changes in Internal Control over Financial Reporting - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025, other than those related to the identified material weaknesses and remediation efforts[235] Inherent Limitations on the Effectiveness of Controls - The effectiveness of any internal control system is subject to inherent limitations, including judgment in design and operation, resource constraints, and the inability to eliminate misconduct completely[236] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 18 for details on legal proceedings, stating that the Company is not currently subject to any pending or threatened legal proceedings expected to have a material adverse effect on its business, financial condition, results of operations, or cash flows, beyond what is already disclosed - The Company is not currently involved in any legal proceedings expected to have a material adverse effect on its business, beyond those disclosed in Note 18[239] Item 1A. Risk Factors This section supplements and, where inconsistent, supersedes the risk factors from the Company's 2024 Form 10-K, highlighting new risks related to the share repurchase program, including potential volatility, impact on cash reserves, and no assurance of long-term shareholder value enhancement - The Company's share repurchase program, announced on July 31, 2025, carries risks such as increased stock price volatility, diminished cash reserves, and no guarantee of enhancing long-term shareholder value[241] - The Company is not obligated to repurchase any specific number of shares and may suspend, modify, or terminate the program at any time[241] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item indicates that there were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[242] Item 3. Defaults Upon Senior Securities This item states that there were no defaults upon senior securities to report during the period - There were no defaults upon senior securities during the reporting period[243] Item 4. Mine Safety Disclosures This item is not applicable to the Company's operations - Mine safety disclosures are not applicable to the Company[244] Item 5. Other Information This item indicates that there is no other information to report during the period - No other information is required to be reported under this item[245] Item 6. Exhibits This section lists all exhibits filed as part of this Quarterly Report, including various agreements, certificates of incorporation, bylaws, warrants, and certifications required by the Sarbanes-Oxley Act - The report includes various exhibits such as merger agreements, asset purchase agreements, certificates of incorporation, bylaws, common stock purchase warrants, and Sarbanes-Oxley Act certifications[246][247][248] SIGNATURES This section contains the required signatures of the Company's authorized officers, including the Chief Executive Officer and Principal Financial Officer, certifying the report's submission - The report is signed by Paul Edmondson, Chief Executive Officer, and Geoffrey Wait, Principal Financial Officer, on August 14, 2025[254]