UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
Commission
file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company (as defined in Rule 12b-2 of the Exchange Act).
Large accelerated filer ☐ | Accelerated filer ☐ | |
Smaller
reporting company | ||
Emerging
growth company |
If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ or
As of August 9, 2022, the Registrant had shares of common stock outstanding.
2 |
Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Quarterly Report”) of The Arena Group Holdings, Inc. (the “Company,” “we,” “our,” and “us”) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to future events or future performance and include, without limitation, statements concerning our business strategy, future revenues, market growth, capital requirements, product introductions, and expansion plans and the adequacy of our funding. Other statements contained in this Quarterly Report that are not historical facts are also forward-looking statements. We have tried, wherever possible, to identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and other stylistic variants denoting forward-looking statements.
We caution investors that any forward-looking statements presented in this Quarterly Report, or that we may make orally or in writing from time to time, are based on information currently available, as well as our beliefs and assumptions. The actual outcome related to forward-looking statements will be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance, and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences may be material. Accordingly, investors should use caution in relying on forward-looking statements, which are based only on known results and trends at the time they are made, to anticipate future results or trends. We detail other risks in our public filings with the Securities and Exchange Commission (the “SEC”), including in Item 1A., Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2021. The discussion in this Quarterly Report should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2021.
This Quarterly Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Quarterly Report except as may be required by law.
3 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
Index to Condensed Consolidated Financial Statements
4 |
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2022 (unaudited) | December 31, 2021 | |||||||
($ in thousands, except share data) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash | ||||||||
Accounts receivable, net | ||||||||
Subscription acquisition costs, current portion | ||||||||
Royalty fees | ||||||||
Prepayments and other current assets | ||||||||
Total current assets | ||||||||
Property and equipment, net | ||||||||
Operating lease right-of-use assets | ||||||||
Platform development, net | ||||||||
Subscription acquisition costs, net of current portion | ||||||||
Acquired and other intangible assets, net | ||||||||
Other long-term assets | ||||||||
Goodwill | ||||||||
Total assets | $ | $ | ||||||
Liabilities, mezzanine equity and stockholders’ deficiency | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued expenses and other | ||||||||
Line of credit | ||||||||
Unearned revenue | ||||||||
Subscription refund liability | ||||||||
Operating lease liabilities | ||||||||
Liquidated damages payable | ||||||||
Current portion of long-term debt | ||||||||
Total current liabilities | ||||||||
Unearned revenue, net of current portion | ||||||||
Operating lease liabilities, net of current portion | ||||||||
Liquidating damages payable, net of current portion | ||||||||
Other long-term liabilities | ||||||||
Deferred tax liabilities | ||||||||
Long-term debt | ||||||||
Total liabilities | ||||||||
Commitments and contingencies (Note 16) | ||||||||
Mezzanine equity: | ||||||||
Series G redeemable and convertible preferred stock, $ | par value, $ per share liquidation value and shares designated; aggregate liquidation value: $||||||||
Series H convertible preferred stock, $ | par value, $ per share liquidation value and shares designated; aggregate liquidation value: $||||||||
Total mezzanine equity | ||||||||
Stockholders’ deficiency: | ||||||||
Common stock, $ | par value, authorized shares; issued and outstanding: and shares at June 30, 2022 and December 31, 2021, respectively||||||||
Common stock to be issued | ||||||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ deficiency | ( | ) | ( | ) | ||||
Total liabilities, mezzanine equity and stockholders’ deficiency | $ | $ |
See accompanying notes to condensed consolidated financial statements
5 |
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three
Months Ended | Six
Months Ended | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
($ in thousands, except share data) | ||||||||||||||||
Revenue | $ | $ | $ | $ | ||||||||||||
Cost of revenue (includes amortization of developed technology and platform development for three months ended 2022 and 2021 of $ | ||||||||||||||||
Gross profit | ||||||||||||||||
Operating expenses | ||||||||||||||||
Selling and marketing | ||||||||||||||||
General and administrative | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Loss on impairment of assets | ||||||||||||||||
Total operating expenses | ||||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other (expense) income | ||||||||||||||||
Change in valuation of warrant derivative liabilities | ( | ) | ||||||||||||||
Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Liquidated damages | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Gain upon debt extinguishment | ||||||||||||||||
Total other (expense) income | ( | ) | ( | ) | ( | ) | ||||||||||
Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Income taxes | ||||||||||||||||
Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Basic and diluted net loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Weighted average number of common shares outstanding – basic and diluted |
See accompanying notes to condensed consolidated financial statements.
6 |
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(unaudited)
Six Months Ended June 30, 2022
Common Stock | Common Stock to be Issued | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Capital | Deficit | Deficiency | ||||||||||||||||||||||
($ in thousands, except share data) | ||||||||||||||||||||||||||||
Balance at January 1, 2022 | $ | | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
Issuance of common stock upon conversion of series H preferred stock | - | |||||||||||||||||||||||||||
Issuance of common stock for restricted stock units in connection with an acquisition | - | |||||||||||||||||||||||||||
Issuance of common stock in connection with professional services | - | |||||||||||||||||||||||||||
Issuance of common stock in connection with settlement of liquidated damages | - | |||||||||||||||||||||||||||
Gain upon issuance of common stock in connection with settlement of liquidated damages | - | - | ||||||||||||||||||||||||||
Issuance of common stock for restricted stock units | - | ( | ) | |||||||||||||||||||||||||
Common stock withheld for taxes upon issuance of underlying shares for restricted stock units | ( | ) | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||
Repurchase restricted stock classified as liabilities | ( | ) | - | |||||||||||||||||||||||||
Issuance of common stock in connection with public offering | - | |||||||||||||||||||||||||||
Stock-based compensation | - | - | ||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance at March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
Issuance of common stock in connection with the acquisition of Athlon | - | |||||||||||||||||||||||||||
Issuance of common stock for restricted stock units | - | |||||||||||||||||||||||||||
Repurchase of restricted stock classified as liabilities | ( | ) | - | |||||||||||||||||||||||||
Issuance of common stock in connection with Say Media merger | ( | ) | ||||||||||||||||||||||||||
Issuance of common stock upon cashless exercise of stock option | - | |||||||||||||||||||||||||||
Stock-based compensation | - | - | ||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) |
7 |
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(unaudited)
Six Months Ended June 30, 2021
Common Stock | Common Stock to be Issued | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Capital | Deficit | Deficiency | ||||||||||||||||||||||
($ in thousands, except share data) | ||||||||||||||||||||||||||||
Balance at January 1, 2021 | $ | | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
Issuance of restricted stock awards to the board of directors | - | |||||||||||||||||||||||||||
Repurchase restricted stock classified as liabilities | ( | ) | - | |||||||||||||||||||||||||
Issuance of common stock for restricted stock units in connection with an acquisition | - | |||||||||||||||||||||||||||
Issuance of common stock in connection with professional services | - | |||||||||||||||||||||||||||
Stock-based compensation | - | - | ||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance at March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
Issuance of restricted stock in connection with the acquisition of The Spun | - | ( | ) | |||||||||||||||||||||||||
Issuance of restricted stock awards to the board of directors | - | |||||||||||||||||||||||||||
Cashless exercise of common stock | - | |||||||||||||||||||||||||||
Common stock withheld for taxes | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||
Repurchase of restricted stock classified as liabilities | ( | ) | - | |||||||||||||||||||||||||
Issuance of common stock in connection with private placement | - | |||||||||||||||||||||||||||
Stock-based compensation | - | - | ||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
Balance June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) |
See accompanying notes to condensed consolidated financial statements.
8 |
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
($ in thousands) | ||||||||
Cash flows from operating activities | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation of property and equipment | ||||||||
Amortization of platform development and intangible assets | ||||||||
Gain upon debt extinguishment | ( | ) | ||||||
Amortization of debt discounts | ||||||||
Loss on impairments of assets | ||||||||
Change in valuation of warrant derivative liabilities | ||||||||
Noncash and accrued interest | ||||||||
Liquidated damages | ||||||||
Stock-based compensation | ||||||||
Deferred income taxes | ( | ) | ||||||
Other | ( | ) | ||||||
Change in operating assets and liabilities net of effect of business combination: | ||||||||
Accounts receivable | ||||||||
Subscription acquisition costs | ( | ) | ||||||
Royalty fees | ||||||||
Prepayments and other current assets | ( | ) | ||||||
Other long-term assets | ( | ) | ||||||
Accounts payable | ||||||||
Accrued expenses and other | ( | ) | ||||||
Unearned revenue | ||||||||
Subscription refund liability | ( | ) | ||||||
Operating lease liabilities | ( | ) | ( | ) | ||||
Other long-term liabilities | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash flows from investing activities | ||||||||
Purchases of property and equipment | ( | ) | ( | ) | ||||
Capitalized platform development | ( | ) | ( | ) | ||||
Proceeds from sale of equity investment | ||||||||
Payments for acquisition of business, net of cash acquired | ( | ) | ( | ) | ||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Cash flows from financing activities | ||||||||
Borrowings (repayments) under line of credit | ( | ) | ( | ) | ||||
Proceeds from common stock public offering, net of offering costs | ||||||||
Payments of issuance costs from common stock public offering | ( | ) | ||||||
Payment of The Spun deferred cash payment | ( | ) | ||||||
Proceeds from common stock private placement | ||||||||
Payments of issuance costs from common stock private placement | ( | ) | ||||||
Payment for taxes related to repurchase of restricted common stock | ( | ) | ( | ) | ||||
Payment of restricted stock liabilities | ( | ) | ( | ) | ||||
Net cash provided by financing activities | ||||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | ( | ) | ||||||
Cash, cash equivalents, and restricted cash – beginning of period | ||||||||
Cash, cash equivalents, and restricted cash – end of period | $ | $ | ||||||
Cash, cash equivalents, and restricted cash | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash | ||||||||
Total cash, cash equivalents, and restricted cash | $ | $ | ||||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid for interest | $ | $ | ||||||
Cash paid for income taxes | ||||||||
Noncash investing and financing activities | ||||||||
Reclassification of stock-based compensation to platform development | $ | $ | ||||||
Issuance of common stock in connection with settlement of liquidated damages | ||||||||
Issuance of common stock in connection with professional services | ||||||||
Common stock issued in connection with acquisition of Athlon | ||||||||
Deferred cash payments in connection with acquisition of Athlon | ||||||||
Assumption of liabilities in connection with acquisition of Athlon | ||||||||
Deferred cash payments in connection with acquisition of The Spun | ||||||||
Assumption of liabilities in connection with acquisition of The Spun | ||||||||
Conversion of Series H convertible preferred stock into common stock |
See accompanying notes to condensed consolidated financial statements.
9 |
THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
($ in thousands, unless otherwise stated)
1. Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements include the accounts of The Arena Group Holdings, Inc. (formerly known as TheMaven, Inc.) and its wholly owned subsidiaries (“The Arena Group” or the “Company”), after eliminating all significant intercompany balances and transactions. The Company does not have any off-balance sheet arrangements. The Company changed its corporate name to The Arena Group Holdings, Inc. from TheMaven, Inc. on February 8, 2022.
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete audited financial statements. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements, which are included in The Arena Group’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC as of April 1, 2022.
The condensed consolidated financial statements as of June 30, 2022, and for the three and six months ended June 30, 2022 and 2021, are unaudited but, in management’s opinion, include all adjustments necessary for a fair presentation of the results of interim periods. All such adjustments are of a normal recurring nature. The year-end condensed consolidated balance sheet as of December 31, 2021, was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire fiscal year.
The novel coronavirus (“COVID-19”) pandemic impacted the Company less during the second quarter of 2022 than it did in 2021. During the initial onset of COVID-19, the Company faced significant change in its advertisers’ buying behavior. Since May 2020, however, there has been a steady recovery in the advertising market in both pricing and volume. This coupled with the return of professional and college sports yielded steady growth in revenues. Given that the Sports Illustrated media business relies on sporting events to generate content and comprises a material portion of the Company’s revenues, the cash flows and results of operations are susceptible to a widespread cancellation of sporting events or a general limitation of societal activity akin to what is widely known to have occurred in the Unites States and elsewhere during the 2020 calendar year and, to a lesser extent, during the 2021 calendar year. Future widespread shutdowns of in-person economic activity could have a material impact on the Company’s business. As a result of the Company’s advertising revenue declining in early 2021 caused by the widespread cancellations of sporting events, the Company is vulnerable to a risk of loss in the near term and it is at least reasonably possible that events or circumstances may occur that could cause an impact in the near term, depending on the actions taken to prevent the further spread of COVID-19.
The Company operates in one reportable segment.
Reverse Stock Split
10 |
Use of Estimates
Preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, the Company evaluates its estimates, including those related to the allowance for credit losses, fair values of financial instruments, capitalization of platform development, intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, fair value of assets acquired and liabilities assumed in the business acquisitions, determination of the fair value of stock-based compensation and valuation of derivatives liabilities and contingent liabilities, among others. The Company bases its estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Recently Adopted Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which updates various codification topics to simplify the accounting guidance for certain financial instruments with characteristics of liabilities and equity, with a specific focus on convertible instruments and the derivative scope exception for contracts in an entity’s own equity and amends the diluted earnings per share computation for these instruments. On January 1, 2022, the Company adopted ASU 2020-06 with no material impact to its condensed consolidated financial position, results of operations or cash flows.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, a consensus of the Emerging Issues Task Force (EITF), to provide explicit guidance on accounting by issuers for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange. On January 1, 2022, the Company adopted ASU 2021-04 with no material impact to its condensed consolidated financial position, results of operations, cash flows or disclosures.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to account for revenue contracts acquired in a business combination in accordance with Topic 606 as if it had originated the contracts. The acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired contracts. This update should lead to recognition and measurement consistent with what’s reported in the acquiree’s financial statements, provided that the acquiree prepared financial statements in accordance with GAAP. The new standard marks a change from current GAAP, under which assets and liabilities acquired in a business combination, including contract assets and contract liabilities arising from revenue contracts, are generally recognized at fair value at the acquisition date. On January 1, 2022, the Company adopted ASU 2021-08 with no material impact to its condensed financial position, results of operations or cash flows. This new accounting standard will be applied prospectively to business combinations.
11 |
Basic loss per share is computed using the weighted average number of common shares outstanding during the period and excludes any dilutive effects of common stock equivalent shares, such as stock options, restricted stock, and warrants. All restricted stock awards are considered outstanding but are included in the computation of basic loss per common share only when the restrictions expire, the shares are no longer forfeitable, and are thus vested. Restricted stock units are included in the computation of basic loss per common share only when the restrictions expire, the shares are no longer forfeitable, and are thus vested. Contingently issuable shares are included in basic loss per common share only when there are no circumstances under which those shares would not be issued. Diluted loss per common share is computed using the weighted average number of common shares outstanding and common stock equivalent shares outstanding during the period using the treasury stock method.
As of June 30, | ||||||||
2022 | 2021 | |||||||
Series G convertible preferred stock | ||||||||
Series H Preferred Stock | ||||||||
Restricted Stock Awards | ||||||||
Financing Warrants | ||||||||
ABG Warrants | ||||||||
AllHipHop warrants | ||||||||
Publisher Partner Warrants | ||||||||
Equity Plans | ||||||||
Outside Options | ||||||||
Total |
Reclassifications
Certain prior quarter amounts have been reclassified to conform to current period presentation. These reclassifications were immaterial, both individually and in the aggregate. These changes did not impact previously reported loss from operations or net loss.
2. Acquisitions
2022 Acquisitions
Athlon
Holdings, Inc. – On April 1, 2022, the Company acquired
12 |
The composition of the preliminary purchase price is as follows:
Cash | $ | |||
Common stock | ||||
Deferred cash payments, as discounted | ||||
Total purchase consideration | $ |
The
Company incurred $
The preliminary purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the closing date of the acquisition based upon their respective fair values as summarized below:
Cash | $ | |||
Accounts receivable | ||||
Other current assets | ||||
Equity investment | ||||
Fixed assets | ||||
Advertiser relationships | ||||
Trade names | ||||
Goodwill | ||||
Accounts payable | ( | ) | ||
Accrued expenses and other | ( | ) | ||
Unearned revenue | ( | ) | ||
Other long-term liabilities | ( | ) | ||
Deferred tax liabilities | ( | ) | ||
Net assets acquired | $ |
The
Company utilized an independent appraisal firm to assist in the determination of the fair values of the assets acquired and liabilities
assumed, which required certain significant management assumptions and estimates. The fair values of the advertiser relationships were
determined by projecting the acquired entity’s cash flows, deducting notional contributory asset charges on supporting assets (working
capital, tangible assets, trade names, and the assembled workforce) to compute the excess cash flows associated with the advertiser relationships.
The fair values of the trade names were determined by projecting revenue associated with each trade name and applying a royalty rate
to compute the amount of the royalty payments the company is relieved from paying due to its ownership of the trade names. The estimated
weighted average useful lives of the advertiser relationships are eight point seventy-five years (
The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents goodwill from the acquisition. Goodwill is recorded as a non-current asset that is not amortized but is subject to an annual review for impairment. No portion of the goodwill will be deductible for tax purposes.
2021 Acquisitions
College
Spun Media Incorporated – On June 4, 2021, the Company acquired all of the issued and outstanding shares of capital stock of
College Spun Media Incorporated, a New Jersey corporation (“The Spun”), for an aggregate of $
13 |
The composition of the purchase price is as follows:
Cash | $ | |||
Deferred cash payments, as discounted | ||||
Total purchase consideration | $ |
The
Company incurred $
After
the June 30, 2021 condensed consolidated financial statements were issued, the Company received a final valuation report from a third-party
valuation firm. After considering the results of that valuation report, the Company estimated the fair values for the brand name of $
The purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the closing date of the acquisition based upon their respective fair values as summarized below:
Cash | $ | |||
Accounts receivable | ||||
Other current assets | ||||
Brand name | ||||
Goodwill | ||||
Accrued expenses and other | ( | ) | ||
Deferred tax liabilities | ( | ) | ||
Net assets acquired | $ |
The
Company utilized an independent appraisal firm to assist in the determination of the fair values of the assets acquired and liabilities
assumed, which required certain significant management assumptions and estimates. The fair value of the brand name was determined by
projecting the acquired entity’s cash flows, deducting notional contributory asset charges on supporting assets (working capital
and the assembled workforce) to compute the excess cash flows associated with the brand with a useful life of ten years (
The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents goodwill from the acquisition. Goodwill is recorded as a non-current asset that is not amortized but is subject to an annual review for impairment. No portion of the goodwill will be deductible for tax purposes.
14 |
3. Balance Sheet Components
The components of certain balance sheet amounts are as follows:
Accounts
Receivable – Accounts receivable are presented net of allowance for doubtful accounts. The allowance for doubtful accounts
as of June 30, 2022 and December 31, 2021 was $
Subscription
Acquisition Costs – Subscription acquisition costs include the incremental costs of obtaining a contract with a customer, paid
to external parties, if it expects to recover those costs. The current portion of the subscription acquisition costs as of June 30, 2022
and December 31, 2021 was $
Property and Equipment – Property and equipment are summarized as follows:
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Office equipment and computers | $ | $ | ||||||
Furniture and fixtures | ||||||||
Less accumulated depreciation and amortization | ( | ) | ( | ) | ||||
Net property and equipment | $ | $ |
Depreciation
and amortization expense for the three months ended June 30, 2022 and 2021 was $
Platform Development – Platform development costs are summarized as follows:
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Platform development | $ | $ | ||||||
Less accumulated amortization | ( | ) | ( | ) | ||||
Net platform development | $ | $ |
Amortization
expense for the three months ended June 30, 2022 and 2021, was $
A summary of platform development activity for the six months ended June 30, 2022 is as follows:
Platform development beginning of year | $ | |||
Payroll-based costs capitalized during the period | ||||
Less dispositions | ( | ) | ||
Total capitalized costs | ||||
Stock-based compensation | ||||
Impairments | ( | ) | ||
Platform development end of period | $ |
For
the three and six months ended June 30, 2022, impairment charges of $
15 |
Intangible Assets – Intangible assets subject to amortization consisted of the following:
As of June 30, 2022 | As of December 31, 2021 | |||||||||||||||||||||||
Carrying Amount | Accumulated Amortization | Net Carrying Amount | Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
Developed technology | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
Trade name | ( | ) | ( | ) | ||||||||||||||||||||
Brand name | ( | ) | ( | ) | ||||||||||||||||||||
Subscriber relationships | ( | ) | ( | ) | ||||||||||||||||||||
Advertiser relationships | ( | ) | ( | ) | ||||||||||||||||||||
Database | ( | ) | ( | ) | ||||||||||||||||||||
Subtotal amortizable intangible assets | ( | ) | ( | ) | ||||||||||||||||||||
Website domain name | ||||||||||||||||||||||||
Total intangible assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ |
Amortization
expense for the three months ended June 30, 2022 and 2021 was $
4. Leases
The
Company’s real estate lease for the use of office space was subleased during the year ended December 31, 2021 (as further described
below). The Company’s current lease is a long-term operating lease with a remaining fixed payment term of
The table below presents supplemental information related to operating leases:
Six Months Ended | Year Ended | |||||||
June 30, 2022 | December 31, 2021 | |||||||
Operating lease costs during the period (1) | $ | $ | ||||||
Cash payments included in the measurement of operating lease liabilities during the period | $ | $ | ||||||
Weighted-average remaining lease term (in years) as of period-end | ||||||||
Weighted-average discount rate during the period | % | % |
(1) |
The Company generally utilizes its incremental borrowing rate based on information available at the commencement of the lease in determining the present value of future payments since the implicit rate for the Company’s leases is not readily determinable.
Variable lease expense includes rental increases that are not fixed, such as those based on amounts paid to the lessor based on cost or consumption, including maintenance and utilities.
16 |
The components of operating lease costs were as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Operating lease costs: | ||||||||||||||||
Cost of revenue | $ | $ | $ | $ | ||||||||||||
Selling and marketing | ||||||||||||||||
General and administrative | ||||||||||||||||
Total operating lease costs (1) | ||||||||||||||||
Sublease income | ( | ) | ( | ) | ||||||||||||
$ | $ | $ | $ |
(1) |
Maturities of the operating lease liability as of June 30, 2022 are summarized as follows:
Years Ending December 31, | ||||
2022 (remaining six months of the year) | $ | |||
2023 | ||||
2024 | ||||
Minimum lease payments | ||||
Less imputed interest | ( | ) | ||
Present value of operating lease liability | $ | |||
Current portion of operating lease liability | $ | |||
Long-term portion of operating lease liability | ||||
Total operating lease liability | $ |
Sublease
Agreement – In November 2021, the Company entered into an agreement to sublease its leased office space for the duration
of its operating lease through September 2024. As of June 30, 2022, the Company is entitled to receive total sublease income of
$
Business
Membership – Effective October 1, 2021, the Company entered into a business membership agreement with York Factory LLC, doing
business as SaksWorks, that permits access to certain office space with furnishings, referred to as SaksWorks Memberships (each membership
provides a certain number of accounts that equate to the use of the space granted). The term of the agreement was for 27 months, with
18 months remaining at $
5. Line of Credit
On
December 6, 2021, the Company entered into an amendment to its financing and security agreement for its line of credit with FPP
Finance LLC (“FastPay”) that was originally entered into on February 27, 2020, pursuant to which (i) the maximum amount
of advances available was increased to $
17 |
6. Restricted Stock Liabilities
On December 15, 2020, the Company entered into an amendment for certain restricted stock awards and units that were previously issued to certain employees in connection with a previous merger (the “HubPages merger”). Pursuant to the amendment, the Company committed to repurchase vested restricted stock awards as of December 31, 2020 at a price of $ per share in 24 equal monthly installments on the second business day of each calendar month beginning January 4, 2021, subject to certain conditions.
The following table presents the components of the restricted stock liabilities:
As of | ||||||||
June 30, 2022 | December 31, 2021 | |||||||
Restricted stock liabilities (before imputed interest) | $ | $ | ||||||
Less imputed interest | ( | ) | ( | ) | ||||
Present value of restricted stock liabilities | ||||||||
Less principal payments during the period | ( | ) | ( | ) | ||||
Restricted stock liabilities at end of period (reflected in accrued expenses and other) | $ | $ |
The
Company recorded the repurchase of
7. Liquidated Damages Payable
Liquidated damages were recorded as a result of the following: (i) certain registration rights agreements provide for damages if the Company does not register certain shares of the Company’s common stock within the requisite time frame (the “Registration Rights Damages”); and (ii) certain securities purchase agreements provide for damages if the Company does not maintain its periodic filings with the SEC within the requisite time frame (the “Public Information Failure Damages”).
Obligations with respect to the liquidated damages payable are summarized as follows:
As of June 30, 2022 | ||||||||||||||||
Registration Rights Damages | Public Information Failure Damages | Accrued Interest | Balance | |||||||||||||
MDB common stock to be issued (1) | $ | $ | $ | $ | ||||||||||||
Series H convertible preferred stock | ||||||||||||||||
Convertible debentures | ||||||||||||||||
Series J convertible preferred stock | ||||||||||||||||
Series K convertible preferred stock | ||||||||||||||||
Total | $ | $ | $ | $ |
18 |
As of December 31, 2021 | ||||||||||||||||
Registration Rights Damages | Public Information Failure Damages | Accrued Interest | Balance | |||||||||||||
MDB common stock to be issued (1) | $ | $ | $ | $ | ||||||||||||
Series H convertible preferred stock | ||||||||||||||||
Convertible debentures | ||||||||||||||||
Series I convertible preferred stock | ||||||||||||||||
Series J convertible preferred stock | ||||||||||||||||
Series K convertible preferred stock | ||||||||||||||||
Total | $ | $ | $ | $ |
(1) |
As
of June 30, 2022, the short-term and long-term liquidated damages payable were $
As
of December 31, 2021, the short-term and long-term liquidated damages payable were $
On
January 24, 2022, the Company entered into several stock purchase agreements with several investors, where the Company was liable to
for liquidated damages, pursuant to which the Company issued an aggregate of
8. Fair Value Measurements
The Company estimates the fair value of financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts the Company would realize upon disposition.
The fair value hierarchy consists of three broad levels of inputs that may be used to measure fair value, which are described below:
Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2. Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and
Level 3. Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which result in the use of management estimates.
The Company accounted for certain warrants (as described under the heading Common Stock Warrants in Note 10) as derivative liabilities, which required the Company to carry such amounts on its condensed consolidated balance sheets as a liability at fair value, as adjusted at each reporting period-end. As of December 31, 2021, the Strome Warrants and B. Riley Warrants (as described in Note 11) were classified within equity.
19 |
For
the three months ended June 30, 2021, the change in valuation of warrant derivative liabilities of $
9. Long-term Debt
Senior Secured Note
As of June 30, 2022 and December 31, 2021, the Company’s outstanding obligation under its senior secured note with BRF Finance Co., LLC, an affiliated entity of B. Riley Financial, Inc. (“B. Riley”), in its capacity as agent for the purchasers and as purchaser, is summarized as follows:
● | On March 24, 2020, the
Company entered into a second amended and restated note when the principal balance outstanding under its note issued on June 19,
2019 was $ | |
● | On October 23, 2020, the Company entered into a first amendment to second amended and restated note issued on March 24, 2020 (“Amendment 1”), where the maturity date was changed to December 31, 2022 (as further amended) from June 14, 2022, subject to certain acceleration conditions and interest payable on the note on September 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021, September 30, 2021, and December 31, 2021 will be payable in-kind in arrears on the last day of such fiscal quarter. Alternatively, at the option of the holder, such interest amounts originally could have been paid in shares of previously designated Series K convertible preferred stock (the “Series K Preferred Stock”); however, after December 18, 2020, the date the Series K Preferred Stock converted into shares of the Company’s common stock, such interest amounts can be converted into shares of the Company’s common stock based upon the conversion rate specified in the Certificate of Designation for the Series K Preferred Stock, subject to certain adjustments; | |
● | On May 19, 2021, the Company
entered into a second amendment to the second amended and restated note issued March 24, 2020 (“Amendment 2”), pursuant
to which: (i) the interest rate on the Senior Secured Note, as defined below, decreased from a rate of | |
● | On December 6, 2021, the
Company entered into a third amendment to the second amended and restated note issued March 24, 2020 (“Amendment 3”),
where the Company was permitted to increase the FastPay line of credit in an aggregate principal amount not to exceed $ | |
● | On January 23, 2022, the Company entered into a fourth amendment to the second amended and restated note issued March 24, 2020 (“Amendment 4”), where the maturity date on the note was extended to (i) December 31, 2023 from December 31, 2022 upon the consummation of the equity financing on February 15, 2022 (further details are provided below), or (ii) the date accelerated pursuant to certain terms of Amendment 4. |
Collectively, the second amended and restated note and Amendment 1, Amendment 2, Amendment 3 and Amendment 4 thereto are referred to as the “Senior Secured Note,” with all borrowings collateralized by substantially all assets of the Company.
20 |
After
the date of Amendment 4, interest on the note will be payable, at the agent’s sole discretion, either (a) in cash quarterly in
arrears on the last day of each fiscal quarter or (b) by continuing to add such interest due on such payment dates to the principal amount
of the note. Interest on the Senior Secured Note will accrue for each calendar quarter on the outstanding principal amount of the note
at an aggregate rate of
Delayed Draw Term Note
As of June 30, 2022 and December 31, 2021, the Company’s outstanding obligation under its delayed draw term note with B. Riley is summarized as follows:
● | On March 24, 2020, the
Company entered into a delayed draw term note (the “Delayed Draw Term Note”) with an interest rate of | |
● | On March 24, 2020, the
Company drew down $ | |
● | On October 23, 2020, pursuant to the terms of Amendment 1, the maturity date of the Delayed Draw Term Note was changed to March 31, 2022 (as further amended) from March 31, 2021. Amendment 1 also provided that the holder, could originally elect, in lieu of receipt of cash for payment of all or any portion of the interest due or cash payments up to a certain conversion portion of the Delayed Draw Term Note, to receive shares of Series K Preferred Stock; however, after December 18, 2020, the date the Series K Preferred Stock converted into shares of the Company’s common stock, the holder may elect, in lieu of receipt of cash for such amounts, shares of the Company’s common stock at the price the Company last sold shares of the Company’s common stock; | |
● | On October 23, 2020, $ | |
● | On May 19, 2021, pursuant
to Amendment 2, the interest rate on the Delayed Draw Term Note decreased to a rate of | |
● | On December 28, 2021, the
Company drew down $ | |
● | On February
15, 2023, pursuant to Amendment 4, the maturity date on the Delayed Draw Term Note was extended to (i) December 31, 2022 from March
31, 2022 for $ |
Amendment
4 also provided that interest will be payable, at the agent’s sole discretion, either (a) in cash quarterly in arrears on the last
day of each fiscal quarter or (b) in kind quarterly in arrears on the last day of each fiscal quarter, and will accrue for each fiscal
quarter on the principal amount outstanding under the note at an aggregate rate of
21 |
The following table summarizes the long-term debt:
As of June 30, 2022 | As of December 31, 2021 | |||||||||||||||||||||||
Principal Balance (including accrued interest) | Unamortized Discount and Debt Issuance Costs | Carrying Value | Principal Balance (including accrued interest) | Unamortized Discount and Debt Issuance Costs | Carrying Value | |||||||||||||||||||
Senior Secured Note, as amended, matures | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
Delayed Draw Term Note, as amended, matures | ( | ) | ( | ) | ||||||||||||||||||||
Total | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
Carrying value | ||||||||||||||||||||||||
Current portion | $ | $ | ||||||||||||||||||||||
Long-term portion | ||||||||||||||||||||||||
Total | $ | $ |
As
of June 30, 2022 and December 31, 2021, the Company’s Delayed Draw Term Note, as amended, carrying value of $
The following table summarizes principal maturities of long-term debt:
Years Ending December 31, | ||||
2022 | $ | |||
2023 | ||||
$ |
10. Preferred Stock
The Company has the authority to issue shares of preferred stock, $ par value per share, which as of June 30, 2022 has been designated and issued as follows:
● | authorized shares designated as “Series G Convertible Preferred Stock”, of which shares are outstanding. | |
● | authorized shares designated as “Series H Convertible Preferred Stock” (as further described below), of which shares are outstanding. |
Series H Preferred Stock
The Company recorded the issuance of shares of the Company’s common stock upon conversion of shares of the Company’s series H convertible preferred stock (the “Series H Preferred Stock”) during the six months ended June 30, 2022, as reflected on the condensed consolidated statements of stockholders’ deficiency.
22 |
Series L Preferred Stock
On
May 4, 2021, a special committee of the Board declared a dividend of one preferred stock purchase right to be paid to the stockholders
of record at the close of business on May 14, 2021 for (i) each outstanding share of the Company’s common stock and (ii) each share
of the Company’s common stock issuable upon conversion of each share of the Company’s Series H Preferred Stock. Each preferred
stock purchase right entitles the registered holder to purchase, subject to a rights agreement (the “Rights Agreement”),
from the Company one one-thousandth of a share of the Company’s then-newly created Series L Junior Participating Preferred Stock,
par value $
The Rights Agreement was set to expire on May 3, 2022; however, on May 2, 2022, the Board elected to extend the expiration date by an amended and restated rights agreement (the “Extended Rights Agreement”), which was ratified by the Company’s stockholders on June 2, 2022.
Further details subsequent to the date of these condensed consolidated financial statements are provided under the heading Series L Preferred Stock in Note 17.
11. Stockholders’ Equity
Common Stock
The Company has the authority to issue shares of common stock, $ par value per share.
On
February 15, 2022 and March 11, 2022, the Company raised gross proceeds of $
On April 27, 2022, the Company issued shares of the Company’s common stock in connection with a previous merger with Say Media, Inc. (the “Say Media merger”). These shares were previously classified as common stock to be issued on the condensed consolidated statements of stockholders’ deficiency.
On
May 20, 2021 and May 25, 2021, the Company entered into securities purchase agreements with several accredited investors, pursuant to
which the Company sold an aggregate of
23 |
Common Stock Warrants
The Company issued warrants to purchase shares of the Company’s common stock to MDB Capital Group, LLC (the “MDB Warrants”), L2 Capital, LLC (the “L2 Warrants”), Strome Mezzanine Fund LP (the “Strome Warrants”), and B. Riley Financial, Inc. (the “B. Riley Warrants”) in connection with various financing transactions (collectively, the “Financing Warrants”).
The Financing Warrants outstanding and exercisable as of June 30, 2022 are summarized as follows:
Exercise Price | Expiration Date | Total Outstanding and Exercisable Shares | ||||||||
Strome Warrants | $ | |||||||||
B. Riley Warrants | ||||||||||
MDB Warrants | ||||||||||
MDB Warrants | ||||||||||
Total |
The intrinsic value of exercisable but unexercised in-the-money stock warrants as of June 30, 2022 was $ , based on a fair market value of the Company’s common stock of $ per share on June 30, 2022.
The Company provides stock-based compensation in the form of (a) restricted stock awards to certain employees (referred to as the “Restricted Stock Awards”), (b) stock option grants to employees, directors and consultants under the 2016 Stock Incentive Plan (the “2016 Plan”), (c) stock option awards, restricted stock awards and units, unrestricted stock awards, and stock appreciation rights to employees, directors and consultants under the 2019 Equity Incentive Plan (the “2019 Plan”), (d) stock option awards, restricted stock awards and units, unrestricted stock awards, and stock appreciation rights to employees, directors and consultants under the Equity Incentive Plan (the “2022 Plan”) (collectively, the 2016 Plan, 2019 Plan and 2022 Plan are referred to as the “Equity Plans”), (e) stock option awards outside of the 2016 Plan, 2019 Plan and 2022 Plan to certain officers, directors and employees (referred to as the “Outside Options”), (f) common stock warrants to the Company’s publisher partners (referred to as the “Publisher Partner Warrants”), and (g) common stock warrants to ABG-SI, LLC (referred to as the “ABG Warrants”). Effective with the adoption of the 2022 Plan, the Company will not issue new awards under the 2016 Plan and 2019 Plan.
24 |
Restricted | ||||||||||||||||||||
Stock | Equity | Outside | ABG | |||||||||||||||||
Awards | Plans | Options | Warrants | Totals | ||||||||||||||||
During the Three Months Ended June 30, 2022 | ||||||||||||||||||||
Cost of revenue | $ | $ | $ | $ | $ | |||||||||||||||
Selling and marketing | ||||||||||||||||||||
General and administrative | ||||||||||||||||||||
Total costs charged to operations | ||||||||||||||||||||
Capitalized platform development | ||||||||||||||||||||
Total stock-based compensation | $ | $ | $ | $ | $ | |||||||||||||||
During the Three Months Ended June 30, 2021 | ||||||||||||||||||||
Cost of revenue | $ | $ | $ | $ | $ | |||||||||||||||
Selling and marketing | ||||||||||||||||||||
General and administrative | ||||||||||||||||||||
Total costs charged to operations | ||||||||||||||||||||
Capitalized platform development | ||||||||||||||||||||
Total stock-based compensation | $ | $ | $ | $ | $ |
Restricted | ||||||||||||||||||||
Stock | Equity | Outside | ABG | |||||||||||||||||
Awards | Plans | Options | Warrants | Totals | ||||||||||||||||
During the Six Months Ended June 30, 2022 | ||||||||||||||||||||
Cost of revenue | $ | $ | $ | $ | $ | |||||||||||||||
Selling and marketing | ||||||||||||||||||||
General and administrative | ||||||||||||||||||||
Total costs charged to operations | ||||||||||||||||||||
Capitalized platform development | ||||||||||||||||||||
Total stock-based compensation | $ | $ | $ | $ | $ | |||||||||||||||
During the Six Months Ended June 30, 2021 | ||||||||||||||||||||
Cost of revenue | $ | $ | $ | $ | $ | |||||||||||||||
Selling and marketing | ||||||||||||||||||||
General and administrative | ||||||||||||||||||||
Total costs charged to operations | ||||||||||||||||||||
Capitalized platform development | ||||||||||||||||||||
Total stock-based compensation | $ | $ | $ | $ | $ |
25 |
Unrecognized compensation expense and expected weighted-average period to be recognized related to the stock-based compensation awards and equity-based awards as of June 30, 2022 was as follows:
Restricted | ||||||||||||||||||||
Stock | Equity | Outside | ABG | |||||||||||||||||
Awards | Plans | Options | Warrants | Totals | ||||||||||||||||
Unrecognized compensation cost | $ | $ | $ | $ | $ | |||||||||||||||
Expected weighted-average period expected to be recognized (in years) | - |
Further details as of the date these condensed consolidated financial statements were issued are provided under the heading Compensation Plans in Note 17.
Stock Option Repricing
On March 18, 2022, the Company approved a repricing of certain outstanding stock options (the “Stock Option Repricing”) granted under the Company’s 2016 Plan and the 2019 Plan that had an exercise price above $ per share, including certain outstanding stock options held by senior management of the Company. The Stock Option Repricing also included certain outstanding stock options granted outside of the 2016 Plan and 2019 Plan. The Stock Options Repricing was approved by the Board and stockholders. As a result of the Stock Option Repricing, the exercise prices were set to $ per share, which was the closing sale price of the Company’s common stock as listed on the NYSE American exchange on March 18, 2022. Except for the repricing of the stock options under the 2019 Plan, all terms and conditions of each stock option remains in full force and effect. For the repricing of the stock options under the 2019 Plan, the Company (i) modified the exercise price; (ii) will allow cashless exercise as a method of paying the exercise price, and (iii) will waive a lock-up provision in the stock option agreements. All other term and conditions of each of the stock options under the 2019 Plan remains in full force and effect.
The
Stock Option Repricing of
26 |