Arena (AREN) - 2021 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1. Condensed Consolidated Financial Statements 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] - 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 to Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets 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) | $(20,313,460) | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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 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] - Proceeds from common stock private placement contributed $19,837,757 to additional paid-in capital[18] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | | :----- | :--- | :--- | :--------- | | 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] - Approximately $7.4 million was used for business acquisitions in investing activities during the nine months ended September 30, 2021[133] Notes to Condensed Consolidated Financial Statements 1. Summary of Significant Accounting Policies 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] - 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][35][36] - ASU 2021-08, effective for fiscal years after December 15, 2022, will change how revenue contracts acquired in business combinations are accounted for[37] 2. Acquisitions 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][43] - The Fulltime Fantasy acquisition resulted in $1,256,887 being assigned to a database with a three-year useful life[43] - 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][46] - The College Spun Media acquisition resulted in $6,722,495 being allocated to goodwill[47] 3. Balance Sheet Components 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] 4. Leases 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] - On September 30, 2021, the Company terminated an office lease, resulting in a net loss upon termination of $7,344,655[65] - The lease termination included a penalty of $9,606,121 and cash payments totaling $10,000,000 scheduled through October 2024[65] 5. Line of Credit 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] - The Company is in negotiations with FastPay to increase, extend, and improve the terms of the facility[67] 6. Restricted Stock Liabilities 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][69] 7. Fair Value Measurements 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][75] 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] 8. Long-term Debt 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][87] - 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] 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 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] - 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] - Series L Preferred Stock carries 1,000 votes per share and preferential dividend payments[94] 10. Stockholders' Equity 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] - The Company is obligated to register these shares and maintain periodic SEC filings, with potential liquidated damages for non-compliance[96][98] 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 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] - 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] 12. Revenue Recognition 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 $22.5 million for the nine months ended September 30, 2021[110] 13. Income Taxes The Company maintains a valuation allowance against most deferred tax assets due to historical operating losses - The effective tax rate benefit for the nine months ended September 30, 2021, was 0.29%, compared to 0.00% in 2020[114] - A valuation allowance is maintained against most deferred tax assets due to historical operating losses and uncertain future taxable income[115] 14. Commitments and Contingencies Revenue share guarantees to independent publishers decreased significantly for the nine months ended September 30, 2021 Publisher Partner Guarantees (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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] 15. Subsequent Events 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] - 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] - 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] 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 performance and condition for the periods ended September 30, 2021 - The Company rebranded to "The Arena Group" on September 20, 2021[126] - The Company operates a digital media platform empowering premium publishers, including Sports Illustrated, TheStreet, and The Spun, and over 200 independent media publishers[125] - The growth strategy focuses on expanding Publisher Partners in key verticals and acquiring publishers with premium branded content[126] 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] - The platform supports over 200 independent media publishers, aiming to augment its position in key verticals and optimize performance[125] - The Company rebranded to "The Arena Group" on September 20, 2021[126] Liquidity and Capital Resources 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] - The FastPay line of credit expires in Q1 2022, and a $4.6 million principal payment is due on the Term Note on March 31, 2022, prompting negotiations for extensions[127] Results of Operations The Company experienced substantial revenue growth and improved gross profit margins, though net losses increased due to higher operating expenses Three Months Ended September 30, 2021 and 2020 For Q3 2021, revenue surged by 85.6%, but net loss increased by 15.5% due to a lease termination charge and higher stock-based compensation Financial Performance (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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 $4.6 million increase in stock-based compensation[136] - Weighted average common stock outstanding increased by 545.1% to 252,811,058 shares, significantly impacting EPS[136] Revenue Revenue by Product Line (Three Months Ended Sep 30) | Product Line | 2021 | 2020 | Change ($) | 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 ($5.5 million)[141] Cost of Revenue Cost of Revenue & Gross Profit Percentage (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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] - Capitalized costs related to the Platform increased to $1.5 million in Q3 2021, including $1.0 million in payroll and $0.5 million in stock-based compensation[143] Operating Expenses Total Operating Expenses (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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 ($1.3 million)[146] General and Administrative General and Administrative Costs (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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 $2.2 million in professional services[147] Other (Expenses) Income Total Other (Expense) (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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] Change in Valuation of Embedded Derivative Liabilities - Noncash income from embedded derivative liabilities increased by approximately $2.4 million in Q3 2021 compared to the prior year period[149] Interest Expense Interest Expense (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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 $1.2 million decrease in amortization of debt discount[149] Liquidated Damages Liquidated Damages (Three Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Liquidated Damages | $(833,612) | $(319,903) | $(513,709) | 160.6% | - Damages were incurred due to delays in registration statements and periodic report filings for convertible debentures and preferred stock[151] Nine Months Ended September 30, 2021 and 2020 For the nine-month period, revenue grew 49.5% and gross profit surged 374.1%, but net loss increased slightly due to higher operating expenses Financial Performance (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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 $10.5 million increase in stock-based compensation[152] - Weighted average common stock outstanding increased by 523.3% to 244,209,151 shares, significantly impacting EPS[152] Revenue Revenue by Product Line (Nine Months Ended Sep 30) | Product Line | 2021 | 2020 | Change ($) | 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 ($6.5 million)[157] Cost of Revenue Cost of Revenue & Gross Profit Percentage (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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] - Capitalized costs related to the Platform increased to $4.4 million, including $3.0 million in payroll and $1.3 million in stock-based compensation[159] Operating Expenses Total Operating Expenses (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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 ($1.8 million)[161] General and Administrative General and Administrative Costs (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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 $3.1 million in professional services[162] Other (Expenses) Income Total Other (Expense) (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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] Change in Valuation of Embedded Derivative Liabilities - Noncash income from embedded derivative liabilities decreased by approximately $2.2 million for the nine months ended September 30, 2021, compared to the prior year period[165] Interest Expense Interest Expense (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | 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 $3.4 million decrease in amortization of debt discount[165] Liquidated Damages Liquidated Damages (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Liquidated Damages | $(2,197,615) | $(1,487,577) | $(710,038) | 47.7% | - Damages were incurred due to delays in registration statements and periodic report filings for convertible debentures and preferred stock[166] Gain Upon Debt Extinguishment Gain Upon Debt Extinguishment (Nine Months Ended Sep 30) | Metric | 2021 | 2020 | Change ($) | | :----- | :--- | :--- | :--------- | | 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] ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 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] ITEM 4. Controls and Procedures 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] - Remediation measures include updating internal control documentation, formal risk assessment, implementing segregation of duties, and hiring additional resources[171][172] - Remediation of material weaknesses is expected to be fully complete by December 31, 2021[172] PART II - OTHER INFORMATION ITEM 1. Legal Proceedings 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] ITEM 1A. Risk Factors 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] - 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] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] ITEM 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[177] ITEM 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[177] ITEM 5. Other Information There is no other information to report for the period - No other information to report[177] ITEM 6. Exhibits 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][179] - Key agreements filed include an Asset Purchase Agreement with Fulltime Fantasy Sports, LLC and amendments to compensation plans[178] - CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906) are included[178][179][180] SIGNATURES 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]