SEC Filing - The Arena Group

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 1-12471

THE ARENA GROUP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		68-0232575
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

200 Vesey Street, 24^thFloor New York, New York		10281
(Address of principal executive offices)		(Zip Code)

(212) 321-5002

(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
Common Stock, par value $0.01		AREN		NYSE American

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate 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 No ☒

As of August 19, 2024, the Registrant had 29,591,630 shares of common stock outstanding.

TABLE OF CONTENTS

	Page Number

PART I - FINANCIAL INFORMATION	4

Item 1. Condensed Consolidated Financial Statements	4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33

Item 3. Quantitative and Qualitative Disclosures About Market Risk	46

Item 4. Controls and Procedures	47

PART II - OTHER INFORMATION	48

Item 1. Legal Proceedings	48

Item 1A. Risk Factors	48

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 3. Defaults Upon Senior Securities	50

Item 4. Mine Safety Disclosures	51

Item 5. Other Information	51

Item 6. Exhibits	51

SIGNATURES	53

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, the timing, outcome or financial impacts of the pending Business Combination (as described in Note 18 and Note 20 of the Notes to Condensed Consolidated Financial Statements included in Part 1, Item 1 herein) and related transactions, 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 Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 1, 2024. The discussion in this Quarterly Report should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report and our consolidated financial statements and notes thereto included in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023.

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.

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL INFORMATION

THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES

Index to Condensed Consolidated Financial Statements

	PAGE
Condensed Consolidated Balance Sheets – June 30, 2024 (Unaudited) and December 31, 2023	5
Condensed Consolidated Statements of Operations (Unaudited) - Three Months and Six Months Ended June 30, 2024 and 2023	6
Condensed Consolidated Statements of Stockholders’ Deficiency (Unaudited) - Three Months and Six Months Ended June 30, 2024 and 2023	7
Condensed Consolidated Statements of Cash Flows (Unaudited) - Three Months and Six Months Ended June 30, 2024 and 2023	9
Notes to Condensed Consolidated Financial Statements (Unaudited)	10

THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2024 (unaudited)			December 31, 2023
	($ in thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	6,085		$	9,284
Accounts receivable, net		22,698			31,676
Prepayments and other current assets		5,555			5,791
Current assets from discontinued operations		1,014			43,648
Total current assets		35,352			90,399
Property and equipment, net		225			328
Operating lease right-of-use assets		2,565			176
Platform development, net		7,380			8,723
Acquired and other intangible assets, net		24,489			27,457
Other long-term assets		773			1,003
Goodwill		42,575			42,575
Noncurrent assets from discontinued operations		-			18,217
Total assets	$	113,359		$	188,878
Liabilities, mezzanine equity and stockholders’ deficiency
Current liabilities:
Accounts payable	$	4,977		$	7,803
Accrued expenses and other		27,270			28,903
Line of credit		-			19,609
Unearned revenue		10,719			16,938
Subscription refund liability		131			46
Operating lease liabilities		122			358
Contingent consideration		-			1,571
Liquidated damages payable		3,076			2,924
Simplify loan		12,748			-
Bridge notes		8,000			7,887
Debt		102,372			102,309
Current liabilities from discounted operations		97,516			47,673
Total current liabilities		266,931			236,021
Unearned revenue, net of current portion		530			542
Operation lease liabilities, net of current portion		2,101			-
Other long-term liabilities		169			406
Deferred tax liabilities		661			599
Noncurrent liabilities from discontinued operations		-			10,137
Total liabilities		270,392			247,705
Commitments and contingencies (Note 19)		-			-
Mezzanine equity:
Series G redeemable and convertible preferred stock, $0.01 par value, $1,000 per share liquidation value and 1,800 shares designated; aggregate liquidation value: $168; Series G shares issued and outstanding: 168; common shares issuable upon conversion: 8,582 at June 30, 2024 and December 31, 2023		168			168
Total mezzanine equity		168			168
Stockholders’ deficiency:
Common stock, $0.01 par value, authorized 1,000,000,000 shares; issued and outstanding: 29,573,932 and 23,836,706 shares at June 30, 2024 and December 31, 2023, respectively		295			237
Common stock to be issued		-			-
Additional paid-in capital		332,702			319,421
Accumulated deficit		(490,198	)		(378,653	)
Total stockholders’ deficiency		(157,201	)		(58,995	)
Total liabilities, mezzanine equity and stockholders’ deficiency	$	113,359		$	188,878

See accompanying notes to condensed consolidated financial statements

THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	2024			2023			2024			2023
	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
	($ in thousands, except share data)
Revenue	$	27,183		$	34,072		$	56,124		$	62,490
Cost of revenue (includes amortization of platform development and developed technology for the three months ended June 30, 2024 and 2023 of $1,507 and $2,323, respectively and for the six months ended June 30, 2024 and 2023 of $3,056 and $4,692, respectively)		16,465			20,855			36,473			38,945
Gross profit		10,718			13,217			19,651			23,545
Operating expenses
Selling and marketing		3,751			6,904			8,315			12,751
General and administrative		8,632			11,601			18,767			24,576
Depreciation and amortization		913			1,065			1,900			2,161
Loss on impairment of assets		-			-			1,198			119
Total operating expenses		13,296			19,570			30,180			39,607
Loss from operations		(2,578	)		(6,353	)		(10,529	)		(16,062	)
Other (expense) income
Change in fair value of contingent consideration		-			90			(313	)		(409	)
Interest expense		(4,249	)		(5,001	)		(8,588	)		(9,183	)
Liquidated damages		(76	)		(177	)		(152	)		(304	)
Total other expenses		(4,325	)		(5,088	)		(9,053	)		(9,896	)
Loss before income taxes		(6,903	)		(11,441	)		(19,582	)		(25,958	)
Income tax provision		(35	)		(86	)		(76	)		(93	)
Loss from continuing operations		(6,938	)		(11,527	)		(19,658	)		(26,051	)
Loss from discontinued operations, net of tax		(1,249	)		(7,957	)		(91,887	)		(12,810	)
Net loss	$	(8,187	)	$	(19,484	)	$	(111,545	)	$	(38,861	)
Basic and diluted net loss per common share:
Continuing operations	$	(0.24	)	$	(0.52	)	$	(0.70	)	$	(1.27	)
Discontinued operations		(0.04	)		(0.36	)		(3.27	)		(0.62	)
Basic and diluted net loss per common share	$	(0.28	)	$	(0.88	)	$	(3.97	)	$	(1.89	)
Weighted average number of common shares outstanding – basic and diluted		29,399,365			22,074,500			28,110,331			20,509,676

See accompanying notes to condensed consolidated financial statements.

THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

(unaudited)

Three and Six Months Ended June 30, 2024

	Shares			Par Value		Shares		Par Value		Paid-in Capital			Accumulated Deficit			Stockholders’ Deficiency
	Common Stock					Common Stock to be Issued				Additional						Total
	Shares			Par Value		Shares		Par Value		Paid-in Capital			Accumulated Deficit			Stockholders’ Deficiency
	($ in thousands, except share data)
Balance at April 1, 2024		29,513,563		$	294		2,701	$	-	$	332,165		$	(482,011	)	$	(149,552	)
Issuance of common stock for restricted stock units		68,975			1		-		-		(1	)		-			-
Common stock withheld for taxes		(8,606	)		-		-		-		(7	)		-			(7	)
Stock-based compensation		-			-		-		-		545			-			545
Net loss		-			-		-		-		-			(8,187	)		(8,187	)
Balance at June 30, 2024		29,573,932		$	295		2,701	$	-	$	332,702		$	(490,198	)	$	(157,201	)

	Common Stock						Common Stock to be Issued				Additional						Total
	Shares			Par Value			Shares		Par Value		Paid-in Capital			Accumulated Deficit			Stockholders’ Deficiency
	($ in thousands, except share data)
Balance at January 1, 2024		23,836,706		$	237			2,701	$	-	$	319,421		$	(378,653	)	$	(58,995	)
Issuance of common stock in connection with private placement		5,555,555			56			-		-		11,944			-			12,000
Issuance of common stock for restricted stock units		747,140			8			-		-		(8	)		-			-
Common stock withheld for taxes		(290,777	)		(3	)		-		-		(483	)		-			(486	)
Repurchase of common stock for Fexy put option		(274,692	)		(3	)		-		-		(376	)		-			(379	)
Stock-based compensation		-			-			-		-		2,204			-			2,204
Net loss		-			-			-		-		-			(111,545	)		(111,545	)
Balance at June 30, 2024		29,573,932		$	295			2,701	$	-	$	332,702		$	(490,198	)	$	(157,201	)

THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

(unaudited)

Three and Six Months Ended June 30, 2023

	Common Stock				Common Stock to be Issued				Additional						Total
	Shares		Par Value		Shares		Par Value		Paid-in Capital			Accumulated Deficit			Stockholders’ Deficiency
	($ in thousands, except per share data)
Balance at April 1, 2023		21,773,078	$	217		41,283	$	-	$	289,532		$	(342,448	)	$	(52,699	)
Issuance of common stock in connection with settlement of Series H convertible preferred stock		207,000		2		-		-		1,498			-			1,500
Issuance of common stock in connection with settlement of liquidated damages		11,766		-		-		-		45			-			45
Gain upon issuance of common stock in connection with settlement of liquidated damages		-		-		-		-		84			-			84
Issuance of common stock for restricted stock units		23,083		-		-		-		-			-			-
Costs incurred upon issuance of common stock in connection with registered direct offering		-		-		-		-		(67	)		-			(67	)
Stock-based compensation		-		-		-		-		6,430			-			6,430
Net loss		-		-		-		-		-			(19,484	)		(19,484	)
Balance at June 30, 2023		22,014,927	$	219		41,283	$	-	$	297,522		$	(361,932	)	$	(64,191	)

	Common Stock						Common Stock to be Issued				Additional						Total
	Shares			Par Value			Shares		Par Value		Paid-in Capital			Accumulated Deficit			Stockholders’ Deficiency
	($ in thousands, except per share data)
Balance at January 1, 2023		18,303,193		$	182			41,283	$	-	$	270,743		$	(323,071	)	$	(52,146	)
Issuance of common stock in connection with settlement of Series H convertible preferred stock		207,000			2							1,498						1,500
Issuance of common stock in connection with the acquisition of Fexy Studios		274,692			3			-		-		1,997			-			2,000
Issuance of common stock in connection with settlement of liquidated damages		47,252			-			-		-		369			-			369
Gain upon issuance of common stock in connection with settlement of liquidated damages		-			-			-		-		130			-			130
Issuance of common stock for restricted stock units		420,459			4			-		-		(4	)		-			-
Common stock withheld for taxes		(202,382	)		(2	)		-		-		(1,421	)		-			(1,423	)
Issuance of common stock in connection with the exercise of stock options		795			-			-		-		-			-			-
Issuance of common stock in connection with registered direct offering		2,963,918			30			-		-		11,114			-			11,144
Reclassification to liability upon modification of common stock option		-			-			-		-		(68	)		-			(68	)
Stock-based compensation		-			-			-		-		13,164			-			13,164
Net loss		-			-			-		-		-			(38,861	)		(38,861	)
Balance at June 30, 2023		22,014,927		$	219			41,283	$	-	$	297,522		$	(361,932	)	$	(64,191	)

See accompanying notes to condensed consolidated financial statements.

THE ARENA GROUP HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	2024			2023
	Six Months Ended June 30,
	2024			2023
	($ in thousands)
Cash flows from operating activities
Net loss	$	(111,545	)	$	(38,861	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment		130			197
Amortization of platform development and intangible assets		7,227			13,996
Amortization of debt discounts		596			1,645
Noncash and accrued interest		5,959			602
Loss on impairment of assets		40,589			119
Change in fair value of contingent consideration		313			409
Liquidated damages		152			304
Stock-based compensation		1,976			12,616
Deferred income taxes		62			73
Bad debt expense		672			54
Other		(21	)		-
Change in operating assets and liabilities net of effect of business combination:
Accounts receivable, net		20,458			2,213
Subscription acquisition costs		6,131			(7,273	)
Prepayments and other current assets		1,043			(7,327	)
Other long-term assets		230			8
Accounts payable		(3,645	)		742
Accrued expenses and other		41,155			(800	)
Unearned revenue		(14,304	)		5,526
Subscription refund liability		105			45
Operating lease liabilities		(524	)		(114	)
Contingent consideration		(1,683	)		-
Other long-term liabilities		(237	)		(574	)
Net cash used in operating activities		(5,161	)		(16,400	)
Cash flows from investing activities
Purchases of property and equipment		(27	)		-
Capitalized platform development		(1,485	)		(2,132	)
Payments for acquisition of business, net of cash acquired		-			(500	)
Net cash used in investing activities		(1,512	)		(2,632	)
Cash flows from financing activities
Payment of Fexy put option		(561	)		-
(Repayments) proceeds under line of credit, net borrowing		(20,027	)		815
Proceeds from common stock private placement		12,000			-
Proceeds from Simplify loan		12,748			-
Proceeds from common stock registered direct offering		-			11,500
Payments of issuance costs from common stock registered direct offering		-			(167	)
Payment of deferred cash payments		(200	)		(75	)
Payment of taxes from common stock withheld		(486	)		(1,423	)
Net cash provided by financing activities		3,474			10,650
Net decrease in cash, cash equivalents, and restricted cash		(3,199	)		(8,382	)
Cash, cash equivalents, and restricted cash – beginning of period		9,284			14,373
Cash, cash equivalents, and restricted cash – end of period	$	6,085		$	5,991
Cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	6,085		$	5,489
Restricted cash		-			502
Total cash, cash equivalents, and restricted cash	$	6,085		$	5,991
Supplemental disclosure of cash flow information
Cash paid for interest	$	2,033		$	7,140
Cash paid for income taxes		85			85
Noncash investing and financing activities
Reclassification of stock-based compensation to platform development	$	228		$	548
Issuance cost of registered direct offering recorded in accrued expenses and other		-			189
Repurchase of common stock for Fexy put option		379			-
Issuance of common stock in connection with settlement of liquidated damages		-			499
Issuance of common stock upon conversion of Series H convertible preferred stock		-			1,500
Issuance of common stock in connection with acquisition		-			2,000
Deferred cash payments recorded in connection with acquisitions		-			246
Reclassification to liability upon common stock modification		-			68

See accompanying notes to condensed consolidated financial statements.

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. and its wholly owned subsidiaries (“The Arena Group” or the “Company”), after eliminating all significant intercompany balances and transactions.

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, 2023, filed with the SEC on April 1, 2024.

The condensed consolidated financial statements as of June 30, 2024, and for the three months ended June 30, 2024 and 2023, 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, 2023, 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 Company’s business and operations are sensitive to general business and economic conditions in the United States and worldwide. These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets and the general condition of the United States and world economy. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse developments in these general business and economic conditions could have a material adverse effect on the Company’s financial condition and the results of its operations.

In addition, the Company will compete with many companies that currently have extensive and well-funded projects, marketing and sales operations as well as extensive human capital. The Company may be unable to compete successfully against these companies. The Company’s industry is characterized by rapid changes in technology and market demands. As a result, the Company’s products, services, or expertise may become obsolete or unmarketable. The Company’s future success will depend on its ability to adapt to technological advances, anticipate customer and market demands, and enhance its current technology under development.

Uncertainty in the global economy presents significant risks to the Company’s business. Increases in inflation, increasing and continued elevated interest rates, instability in the global banking system, geopolitical factors, including the ongoing conflicts in Ukraine and Israel and the responses thereto, and the remaining effects of the COVID-19 pandemic may have an adverse effect on the Company’s business. While the Company is closely monitoring the impact of the current macroeconomic conditions on all aspects of its business, the ultimate extent of the impact on its business remains highly uncertain and will depend on future developments and factors that continue to evolve. Most of these developments and factors are outside of the Company’s control and could exist for an extended period of time. As a result, the Company is subject to continuing risks and uncertainties.

The Company operates in one reportable segment.

Going Concern

The Company’s condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company’s condensed consolidated financial statements do not include any adjustments that might be necessary if it is unable to continue as a going concern.

For the six months ended June 30, 2024, the Company incurred a net loss from continuing operations of $19,658, and as of June 30, 2024, had cash on hand of $6,085 and a working capital deficit of $231,579. The Company’s net loss from continuing operations and working capital deficit have been evaluated by management to determine if the significance of those conditions or events would limit its ability to meet its obligations when due. Management also evaluated the Company’s 2023 Notes (see Note 11), Senior Secured Notes, Delayed Draw Term Notes and 2022 Bridge Notes (see Note 12) (collectively its “current debt”) that are subject to a forbearance period through the earlier of the following: (a) September 30, 2024, as further extended on July 12, 2024 to December 31, 2024 (as further described under the heading Arena Loan Agreement in Note 20); (b) the occurrence of the closing of the Business Combination (as further described in Note 18); or (c) the termination of the Business Combination prior to closing. In addition to the forgoing, management evaluated the August 2, 2024 shut down all of the operations and layoff of substantially all of the employees of Bridge Media Networks, LLC (“Bridge Media”), an affiliated entity of Simplify Inventions, LLC (“Simplify”), and both parties to the Business Combination. Unless the Company is able to refinance or modify the terms of its current debt it runs the risk that its debt could be called, therefore, it may not be able to meet its obligations when due.

In its evaluation, management determined that substantial doubt exists about the Company’s ability to continue as a going concern for a one-year period following the financial statement issuance date. The plans to seek refinancing or modification of the terms of its current debt, complete the Business Combination or enter into possible alternative structures or options to the transactions contemplated under the Business Combination which are discussed below are outside of management’s control.

The Company plans to refinance or modify the terms of its current debt, complete the Business Combination or enter into possible alternative structures or options to the transactions contemplated under the Business Combination based on its continuing discussions with Simplify (as further discussed under the heading Business Combination in Note 20) to alleviate the conditions that raised substantial doubt about its ability to continue as a going concern. However, there can be no assurance that the Company will be able to refinance or modify the terms of its current debt, complete the Business Combination or enter into possible alternative structures or options to the transactions contemplated under the Business Combination.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported results of operations during the reporting period. Significant estimates include: reserves for bad debt; capitalization of platform development costs and associated useful lives; goodwill and other acquired intangible assets and associated useful lives; assumptions used in accruals for potential liabilities; revenue recognition and estimates of standalone selling price of performance obligations for revenue contracts with multiple performance obligations; stock-based compensation and the determination of the fair value; valuation allowances for deferred tax assets and uncertain tax positions; accounting for business combinations; and assumptions used to calculate contingent liabilities. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from management’s estimates.

Recently Adopted Accounting Standards

In June 2022, the Financial Accounting Standards Board (the “FASB”) issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This update also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction and requires certain disclosures for equity securities subject to contractual sale restrictions. The adoption of ASU 2022-03 on January 1, 2024 did not have a material impact on the Company’s condensed consolidated financial statements.

Loss per Common Share

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 underlying restrictions expire, the shares are no longer forfeitable, and are thus vested. All restricted stock units are included in the computation of basic loss per common share only when the underlying 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.

The Company excluded the outstanding securities summarized below (capitalized terms are described herein), which entitle the holders thereof to acquire shares of the Company’s common stock, from its calculation of net loss per common share, as their effect would have been anti-dilutive. Common stock equivalent shares are excluded from the diluted calculations when a net loss is incurred as they would be anti-dilutive.

	2024		2023
	As of June 30,
	2024		2023
Series G convertible preferred stock		8,582		8,582
Series H convertible preferred stock		-		1,774,128
Financing warrants		39,774		39,774
ABG Warrants		999,540		999,540
AllHipHop warrants		5,682		5,682
Publisher Partner Warrants		9,800		9,800
Restricted stock units		194,212		878,706
Common stock options		3,840,700		5,878,838
Total		5,098,290		9,595,050

2. Discontinued Operations

On March 18, 2024, the Company discontinued the Sports Illustrated media business (the “SI Business”) that was operated under the Licensing Agreement with ABG-SI, LLC (“ABG”) dated June 14, 2019 (as amended to date, the “Licensing Agreement”). This discontinuation of the SI Business (i.e., discontinued operations) followed the termination of the Licensing Agreement by ABG on January 18, 2024. The last date of any obligation of the Company to perform under the Licensing Agreement was March 18, 2024. In connection with the termination, certain ABG Warrants vested (further details are provided under the heading Vesting of Warrants in Note 15).

The table below sets forth the loss from discontinued operations:

Schedule of Discontinued Operations

	2024			2023			2024			2023
	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
	($ in thousands, except share data)
Revenue	$	404		$	24,734		$	22,252		$	47,696
Cost of revenue		865			16,287			14,846			28,232
Gross profit (loss)		(461	)		8,447			7,406			19,464
Operating expense
Selling and marketing		499			12,599			12,002			24,721
General and administrative (1)		301			121			45,493			199
Depreciation and amortization		-			3,670			2,401			7,340
Loss on impairment of assets (2)		-			-			39,391			-
Total operating expenses		800			16,390			99,287			32,260
Loss from discontinued operations		(1,261	)		(7,943	)		(91,881	)		(12,796	)
Income tax benefit		12			(14	)		(6	)		(14	)
Net loss from discontinued operations	$	(1,249	)	$	(7,957	)	$	(91,887	)	$	(12,810	)

	(1)	General and administrative expenses for the six months ended June 30, 2024, includes a $45,000 termination fee liability.
	(2)	Loss on impairment of assets for the six months ended June 30, 2024 of $39,391, includes $8,601 for the impairment of intangible assets and $30,790 for the impairment of subscription acquisition costs.

The table below sets forth the major classes of assets and liabilities of the discontinued operations:

	June 30, 2024		December 31, 2023
	As of
	June 30, 2024		December 31, 2023
Assets
Accounts receivable, net	$	1,014	$	13,135
Subscription acquisition costs, current portion		-		29,706
Prepayments and other current assets		-		807
Current assets from discontinued operations		1,014		43,648
Subscription acquisition costs, net of current portion		-		7,215
Acquired and other intangibles assets, net		-		11,002
Noncurrent assets from discontinued operations		-		18,217
Total assets from discontinued operations	$	1,014	$	61,865
Liabilities
Accounts payable	$	1,735	$	2,554
Accrued expenses and other		1,665		1,868
Subscription refund liability		423		403
Royalty fee liability⁽¹⁾		3,750		-
Termination fee liability⁽¹⁾		45,000		-
Subscription liability, current portion		44,943		42,848
Current liabilities from discontinued operations		97,516		47,673
Subscription liability, net of current portion		-