Filed Pursuant to Rule 424(b)(3)

Registration No. 333-260597

 

PROSPECTUS

 

THEMAVEN, INC.

 

UP TO 259,752,977 SHARES OF COMMON STOCK

 

This prospectus relates to the resale by certain selling stockholders named in this prospectus (each, a “Selling Stockholder” and, collectively, the “Selling Stockholders”) of up to 259,752,977 shares (the “Shares”) of our common stock, par value $0.01 per share (our “common stock”). The Shares consist of (i) up to 203,226,131 shares of our common stock issued in connection with (1) the 2018 PIPE Investment (as defined below), (2) the Debenture Conversions (as defined below), (3) the Preferred Stock Conversions (as defined below), (4) the 2021 PIPE Investment (as defined below) and (5) the Piggy-back Shares (as defined below); (ii) up to 2,375,000 shares of our common stock issuable upon the exercise of outstanding Warrants (as defined below); and (iii) up to 54,151,846 shares of our common stock issuable upon the conversion of outstanding shares of our Series H Convertible Preferred Stock (“Series H Preferred Stock”).

  

Our common stock is quoted on the OTC Markets Group, Inc.’s (the “OTCM”) OTCQX® Best Market (the “OTCQX”) under the symbol “MVEN.” The Shares covered by this prospectus may be sold at prevailing market prices or privately negotiated prices. For additional information on the possible methods of sale that may be used by the Selling Stockholders, you should refer to the section entitled “Plan of Distribution” beginning on page 23 of this prospectus. We do not know when or in what amount the Selling Stockholders may offer these Shares. The Selling Stockholders may sell some, all, or none of the Shares offered by this prospectus. The last sales price of our common stock was $0.56 on November 15, 2021.

 

We will receive the proceeds from any exercise of the Warrants for cash. The Selling Stockholders will receive all proceeds from the sale of the Shares hereunder, and we will not receive any of the proceeds from their sale of the Shares hereunder.

 

We will bear all costs, expenses, and fees in connection with the registration of the Shares. The Selling Stockholders will bear all commissions and discounts, if any, attributable to their respective sales of the Shares.

 

Investing in shares of our common stock involves significant risks. You should read the section entitled “Risk Factors” beginning on page 6 for a discussion of certain risk factors that you should consider before investing in our common stock.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is November 19, 2021.

 

 

 

 

TABLE OF CONTENTS

 

  Page
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS i
PROSPECTUS SUMMARY 1
THE OFFERING 5
RISK FACTORS 6
USE OF PROCEEDS 19
DETERMINATION OF OFFERING PRICE 19
SELLING STOCKHOLDERS 20
PLAN OF DISTRIBUTION 23
DESCRIPTION OF OUR SECURITIES 25
MARKET PRICE AND DIRECTOR INFORMATION 37
BUSINESS 39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 47
MANAGEMENT 67
EXECUTIVE COMPENSATION 74
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 84
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS 89
LEGAL MATTERS 95
EXPERTS 95
WHERE YOU CAN FIND ADDITIONAL INFORMATION 95
FINANCIAL STATEMENTS F-1

 

You should rely only on the information contained in this prospectus. We have not, and the Selling Stockholders have not, authorized anyone to provide you with different information. If anyone provides you with different information, you should not rely on it. We are not, and the Selling Stockholders are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information contained in this prospectus is accurate only as of the date on the front cover of this prospectus. Neither the delivery of this prospectus nor any sale made in connection with this prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this prospectus or that the information contained in this prospectus is correct as of any time after its date. Information contained on our website, or any other website operated by us, is not part of this prospectus.

 

This prospectus incorporates by reference market data and industry statistics and forecasts that are based on independent industry publications and other publicly available information. Although we believe these sources are reliable, we do not guarantee the accuracy or completeness of this information and we have not independently verified this information. Although we are not aware of any misstatements regarding the market and industry data presented in this prospectus and the documents incorporated herein by reference, these estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” contained in this prospectus and under similar headings in other documents that are incorporated by reference into this prospectus. Accordingly, investors should not place undue reliance on this information.

 

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains statements that may constitute “forward-looking statements.” 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 prospectus 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 comparable terminology.

 

Forward-looking statements in this prospectus and in any document incorporated by reference in this prospectus may include, for example, statements about:

 

  the impact of the novel coronavirus (“COVID-19”) pandemic;
     
  our ability to attract new subscribers and to persuade existing subscribers to renew their subscriptions;
     
  our ability to attract new advertisers and to persuade existing advertisers to continue to advertise on our digital media platform;
     
  our ability to manage our growth effectively, including through strategic acquisitions;
     
  our ability to maintain an effective system of internal control over financial reporting;
     
  our ability to grow market share in our existing markets or any new markets we may enter;
     
  our ability to recruit and retain qualified personnel;
     
  our ability to respond to general economic conditions;
     
  our ability to attract, develop, and retain capable publisher partners and expert contributors;
     
  our ability to achieve and maintain profitability in the future;
     
  the success of strategic relationships with third parties; and
     
  other factors detailed under the section entitled “Risk Factors.”

 

These forward-looking statements are based on information available as of the date of this prospectus and current expectations, forecasts, and assumptions, and involve a number of judgments, risks, and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

 

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PROSPECTUS SUMMARY

 

This summary highlights selected information from this prospectus and may not contain all of the information that is important to you in making an investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” See also the section entitled “Where You Can Find Additional Information.”

Unless context otherwise requires, references in this prospectus to “The Arena Group,” the “Company,” “we,” “us,” or “our” refer to theMaven, Inc. and our subsidiaries.

 

Our Company

 

We operate a best-in-class digital media platform (the “Platform”) empowering premium publishers who impact, inform, educate and entertain. Our focus is on leveraging the Platform and iconic brands in targeted verticals to maximize the audience, improve engagement and optimize monetization of digital publishing assets for the benefit of our users, our advertiser clients, and our owned and operated properties as well as properties we run on behalf of independent publisher partners. We operate the media businesses for Sports Illustrated (as defined below), own and operate TheStreet, Inc. (“TheStreet”) and College Spun Media, Inc. (“The Spun” and, collectively, Sports Illustrated, TheStreet and The Spun are hereinafter referred to as our “Owned and Operated Businesses”), and power more than 200 independent media publishers (each a “Publisher Partner”). Our strategy is to focus on key verticals where audiences are passionate about a topic category (e.g., sports, finance) and where we can leverage the strength of our core brands to grow audience and monetization both within our core brands as well as our Publisher Partners. Each Publisher Partner joins the Platform by invitation-only and is drawn from premium media brands and independent publishing businesses with the objective of augmenting our position in key verticals and optimizing the performance of the Partner. Because of the state-of-the-art technology and large scale of the Platform and our expertise in search engine optimization (SEO), social media, subscription marketing and ad monetization, Publisher Partners benefit from improved traffic and increased monetization. Additionally, we believe the lead brand within each vertical creates a halo benefit for all Publisher Partners in the vertical while each of them adds to the breadth and quality of content. While they benefit from these critical performance improvements they also may save substantially in costs of technology, infrastructure, advertising sales, and member marketing and management.

 

Our Corporate History and Background

 

We were originally incorporated in Delaware as Integrated Surgical Systems, Inc. (“Integrated”) in 1990. On October 11, 2016, Integrated and TheMaven Network, Inc. (“Maven Network”) entered into a share exchange agreement (the “Share Exchange Agreement”), whereby the stockholders of Maven Network agreed to exchange all of the then-issued and outstanding shares of common stock for shares of common stock of Integrated. On November 4, 2016, the parties consummated a recapitalization pursuant to the Share Exchange Agreement and, as a result, Maven Network became a wholly owned subsidiary of Integrated. Integrated changed its name to theMaven, Inc. on December 2, 2016.

 

On September 20, 2021, we re-branded to “The Arena Group.”

 

Registrable Shares

 

This prospectus relates to an offering of up to 259,752,977 Shares that were previously issued to the Selling Stockholders or are issuable to the Selling Stockholders upon exercise or conversion of certain securities held by them. The following sets forth descriptions of the various private placements pursuant to which the Selling Stockholders obtained the Shares we are registering herein.

 

 

1

 

 

 

Common Stock Issuances – 2018 PIPE Investment and 2021 PIPE Investment

 

On January 4, 2018, we entered into a securities purchase agreement with The Mark and Tammy Strome Family Trust (“Strome Trust”), pursuant to which we issued 1,200,000 shares of our common stock at a price of $2.50 per share (the “January 2018 SPA”). In addition, we entered into a registration rights agreement, dated January 4, 2018, with Strome Trust (the “January 2018 Registration Rights Agreement”), pursuant to which we agreed to register the 1,200,000 shares of our common stock for resale. On March 30, 2018, we entered into another securities purchase agreement with Strome Trust, pursuant to which we issued 500,000 shares of our common stock at a price of $2.50 per share (the “March 2018 SPA” and, together with the January 2018 SPA, the “2018 PIPE Investment”). In addition, we entered into a registration rights agreement, dated March 30, 2018, with Strome Trust (the “March 2018 Registration Rights Agreement”), pursuant to which we agreed to register the 500,000 shares of our common stock for resale.

 

On May 20 and 25, 2021, we entered into securities purchase agreements with several accredited investors (the “May 2021 SPAs”), pursuant to which we sold an aggregate of 21,435,718 shares of our common stock, at a per share price of $0.70, for aggregate gross proceeds of approximately $15.0 million in a private placement. On June 2, 2021, we entered into a securities purchase agreement with an accredited investor (the “June 2021 SPA”), pursuant to which we sold an aggregate of 7,142,857 shares of our common stock at a per share price of $0.70, for gross proceeds of approximately $5.0 million in a private placement. In connection with the 2021 PIPE Investment, we also entered into registration rights agreements with such investors (the “2021 PIPE Registration Rights Agreements”), pursuant to which we agreed to register the shares of our common stock for resale on behalf of such investors.

 

Accordingly, we are registering an aggregate of 29,564,288 shares of our common stock in connection with the 2018 PIPE Investment and the 2021 PIPE Investment.

 

Common Stock Issuances – Debenture Conversions

 

On December 12, 2018, we entered into securities purchase agreements (the “December 2018 SPAs”) with three accredited investors, pursuant to which we issued to the investors the 12% Senior Secured Subordinated Debentures (the “Debentures”) in the aggregate principal amount of approximately $13.1 million, which included (i) the roll-over of approximately $3.6 million, in the aggregate, in principal and interest of those certain 10% original issue discount (“OID”) senior secured convertible debentures previously issued to two of the investors in October 2018 and (ii) a placement fee of $540,000 to B. Riley FBR, Inc. (“B. Riley FBR”), our placement agent in the offering. After taking into account legal fees and expenses of the investors, we received net proceeds of approximately $9.0 million. On March 18 and 27, 2019, we entered into securities purchase agreements (the “March 2019 SPAs”) with accredited investors, including our former Executive Chairman, John Fichthorn, pursuant to which we issued to the investors the Debentures in the aggregate principal amount of approximately $2.0 million, which included placement fees of $114,000 payable to B. Riley FBR for acting as our placement agent in the offering. After taking into account legal fees and expenses, we received net proceeds of approximately $1.9 million. On April 8, 2019, we entered into a securities purchase agreement (the “April 2019 SPA”) with an accredited investor, pursuant to which we issued to the investor the Debenture in the aggregate principal amount of $100,000. The Debentures were due and payable on December 31, 2020, and interest accrued on the Debentures at the rate of 12% per annum, payable on the earlier of conversion or the maturity date. The Debentures issued pursuant to the December 2018 SPAs had conversion prices of $0.33 per share, subject to adjustment. The Debentures issued pursuant to the March 2019 SPAs and the April 2019 SPA had conversion prices of $0.40 per share, subject to adjustment. In connection with the December 2018 SPAs, the March 2019 SPAs, and the April 2019 SPA, we entered into registration rights agreements with the investors (collectively, the “Debenture Registration Rights Agreements”), pursuant to which we agreed to register for resale the shares of our common stock issuable upon conversion of the Debentures by the investors.

 

On December 31, 2020, noteholders converted the Debentures representing an aggregate of approximately $18.1 million of the then outstanding principal and accrued but unpaid interest into 53,887,470 shares of our common stock at effective conversion per-share prices ranging from $0.33 to $0.40 (collectively, the “Debenture Conversions”). We are registering an aggregate of 53,887,470 shares of common stock that were issuable upon the Debenture Conversions.

 

 

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Common Stock Issuances – Preferred Stock Conversions

 

On June 28, 2019, we issued shares of our Series I Convertible Preferred Stock (the “Series I Preferred Stock”), pursuant to securities purchase agreements entered into with certain accredited investors (the “Series I SPAs”). In accordance with the Series I SPAs, we issued an aggregate of 23,100 shares of Series I Preferred Stock at a stated value of $1,000, initially convertible into 46,200,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.50 per share, for aggregate gross proceeds of approximately $23.1 million. In connection with the Series I SPAs, we entered into registration rights agreements with the accredited investors (the “Series I Registration Rights Agreements”), pursuant to which we agreed to register for resale the shares of our common stock issuable upon conversion of the Series I Preferred Stock.

 

On October 7, 2019, we issued shares of our Series J Convertible Preferred Stock (the “Series J Preferred Stock”), pursuant to securities purchase agreements entered into with certain accredited investors (the “2019 Series J SPAs”). In accordance with the 2019 Series J SPAs, we issued an aggregate of 20,000 shares of Series J Preferred Stock at a stated value of $1,000, initially convertible into 28,571,428 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.70 per share, for aggregate gross proceeds of approximately $20.0 million. On September 4, 2020, we issued additional shares of our Series J Preferred Stock pursuant to securities purchase agreements entered into with two accredited investors (the “2020 Series J SPAs” and, together with the 2019 Series J SPAs, the “Series J SPAs”). In accordance with the 2020 Series J SPAs, we issued an aggregate of 10,500 shares of Series J Preferred Stock at a stated value of $1,000 per share, initially convertible into 15,000,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.70, for aggregate gross proceeds of approximately $6.0 million. In connection with the Series J SPAs, we entered into registration rights agreements with the accredited investors, pursuant to which we agreed to register for resale the shares of our common stock issuable upon conversion of the Series J Preferred Stock.

 

Between October 23, 2020 and November 11, 2020, we entered into several securities purchase agreements with accredited investors (the “Series K SPAs”), pursuant to which we issued an aggregate of 18,042 of Series K Convertible Preferred Stock (the “Series K Preferred Stock”) at a stated value of $1,000 per share, initially convertible into 45,105,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.40 per share, for aggregate gross proceeds of approximately $18.0 million. In connection with the Series K SPAs, we entered into registration rights agreements with the accredited investors (the “Series K Registration Rights Agreements”), pursuant to which we agreed to register for resale the shares of our common stock issuable upon conversion of the Series K Preferred Stock.

 

On December 18, 2020, we filed a Certificate of Amendment to our Certificate of Incorporation (the “Certificate of Amendment”), to increase the number of authorized shares of our common stock. Upon the filing of the Certificate of Amendment, all of our then issued and outstanding shares of Series I Preferred Stock, Series J Preferred Stock, and Series K Preferred Stock automatically converted into shares of our common stock (the “Preferred Stock Conversions”). Accordingly, we are registering for resale 45,200,000 shares of our common stock that were issued upon conversion of the Series I Preferred Stock, 40,562,165 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, and 29,917,500 shares of our common stock that were issued upon conversion of the Series K Preferred Stock.

  

Common Stock Issuances – Piggy-back Shares

 

We previously granted a stockholder piggy-back registration rights with respect to 4,094,708 shares of our common stock in connection with a settlement and release (the “Piggy-back Shares”). Accordingly, we are registering for resale all 4,094,708 shares.

 

Common Stock Issuable Upon Exercise of Warrants

 

On June 15, 2018, we modified the January 2018 SPA and the March 2018 SPA, to eliminate a make-whole provision under which we were committed to issue up to 1,700,000 shares of our common stock in certain circumstances. The modification removed the prior uncertainty of our obligation under these agreements. In exchange for the modification, we issued to a designee of Strome Trust a common stock purchase warrant to purchase up to 1,500,000 shares of our common stock (the “Strome Warrant”). The Strome Warrant is exercisable for a period of five years at an initial exercise price of $1.19 per share, which has been adjusted to $0.50 per share. Pursuant to the March 2018 Registration Rights Agreement entered into with Strome Trust, we agreed to register for resale the 1,500,000 shares of our common stock underlying the Strome Warrant.

 

 

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On October 18, 2018, we entered into securities purchase agreements with two accredited investors, pursuant to which we issued warrants exercisable for up to 875,000 shares of our common stock (the “2018 Warrants” and, together with the Strome Warrant, the “Warrants”), among other securities. The 2018 Warrants are exercisable for a period of seven years at an initial exercise price of $1.00 per share, subject to customary anti-dilution and other adjustments. The 2018 Warrants also provide that upon the consummation of a subsequent financing, the $1.00 exercise price will be adjusted to (i) in the event that the security issued in such subsequent financing is shares of our common stock, 125% of the effective per share purchase price of our common stock in such subsequent financing, (ii) in the event that the security issued in such subsequent financing is a common stock equivalent, 100% of the effective per-share purchase price of our common stock underlying the common stock equivalent issued in such subsequent financing, or (iii) in the event that the primary securities issued in such subsequent financing includes a combination of shares of our common stock and common stock equivalents, the greater of (a) 125% of the effective per share purchase price of shares of our common stock issued in such subsequent financing or (b) 100% of the effective per share purchase price of the shares of our common stock underlying the common stock equivalents. The securities purchase agreements granted the investors piggyback registration rights, pursuant to which we agreed that if we file with the Securities and Exchange Commission (the “SEC”) a registration statement relating to an offering of our common stock of our own account or the account of others under the Securities Act of 1933, as amended (“Securities Act”), other than on a Form S-4 or a Form S-8, we would notify the investors and provide them with the opportunity to have the shares of our common stock underlying the 2018 Warrants registered for resale. If at any time after the six-month anniversary of the issuance of the 2018 Warrants, there is no effective registration statement covering the resale of the shares of our common stock underlying the 2018 Warrants, the 2018 Warrants may be exercised on a cashless basis. The current exercise price of the 2018 Warrants is $0.33 per share.

 

Accordingly, we are registering an aggregate of 2,375,000 shares of our common stock that may be issuable upon the exercise of outstanding Warrants.

 

Common Stock Issuable Upon Conversion of Series H Preferred Stock

 

On August 10, 2018, we entered into securities purchase agreements (“2018 Series H SPAs”) with certain accredited investors pursuant to which we issued an aggregate of 19,399 shares of Series H Preferred Stock at a stated value of $1,000, initially convertible into 58,784,848 shares of our common stock, at the option of the holder subject to certain limitations, at a conversion right equal to the stated value divided by the conversion price of $0.33 per share, for aggregate gross proceeds of approximately $19.4 million.

 

Between August 14, 2020 and August 20, 2020, we entered into several securities purchase agreements (“2020 Series H SPAs”) for the sale of additional shares of Series H Preferred Stock with certain accredited investors, pursuant to which we issued an aggregate of 2,253 shares, at a stated value of $1,000 per share, initially convertible into 6,825,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share, for aggregate gross proceeds of approximately $2.7 million. On October 28, 2020, we entered into a mutual rescission agreement with two of the investors, pursuant to which the securities purchase agreements associated with 2,145 shares of Series H Preferred Stock were rescinded and deemed null and void. All the shares of Series H Preferred Stock automatically convert into shares of our common stock on the fifth anniversary of the closing date at the then-conversion price. Finally, on October 31, 2020, we entered into an exchange agreement with a former executive officer pursuant to which he agreed to convert the outstanding principal amount, plus accrued but unpaid interest, owed to him pursuant to promissory notes into 389 shares of Series H Preferred Stock, at a stated value of $1,000 per share, initially convertible into 1,178,788 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share.

 

In connection with the issuance of the Series H Preferred Stock, we also entered into registration rights agreements with the investors, pursuant to which we agreed to register the shares issuable upon conversion of the Series H Preferred Stock for resale. Accordingly, we are registering up to 54,151,846 shares of our common stock issuable upon the conversion of issued and outstanding shares of Series H Preferred Stock.

 

See “Description of Our Securities – Registrable Shares” for a more detailed description of the transactions.

 

Corporate Information

 

We are a Delaware corporation. Our principal executive office is located at 200 Vesey Street, 24th Floor, New York, New York, 10281. Our telephone number is (212) 321-5002. Our website address is www.thearenagroup.net. Information on or accessed through our website is not incorporated into this prospectus and is not a part of this prospectus.

 

 

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THE OFFERING

 

Issuer   theMaven, Inc.
     
Securities Being Offered by the Selling Stockholders:  

Up to 259,752,977 Shares, including: (i) up to 203,226,131 shares of our common stock issued in connection with (1) the 2018 PIPE Investment, (2) the Debenture Conversions, (3) the Preferred Stock Conversions, (4) the 2021 PIPE Investment and (5) the Piggy-back Shares; (ii) up to 2,375,000 shares of our common stock issuable upon the exercise of outstanding Warrants; and (iii) up to 54,151,846 shares of our common stock issuable upon the conversion of outstanding shares of our Series H Preferred Stock.

     
Offering Price:   The Selling Stockholders may offer, sell, or distribute all or a portion of their Shares registered on their behalf hereby either through public or private transactions at prevailing market prices or privately negotiated prices.
     
Risk Factors:   The Shares offered hereby involve a high degree of risk and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors” for a discussion of the factors you should consider carefully before making an investment decision.
     
Shares of Our Common Stock Issued and Outstanding Prior to the Offering:   264,202,421 shares (1)
     
Use of Proceeds:   We will not receive any proceeds from the sale of the Shares by the Selling Stockholders. However, we will receive proceeds from any exercise of the Warrants; provided, that such exercise is not on a cashless basis. We have agreed to bear the expenses relating to the registration of the Shares of the Selling Stockholders. See “Use of Proceeds.”
     
Trading Symbol:   Our common stock is currently quoted on the OTCQX under the symbol “MVEN.”

 

(1) Unless we indicate otherwise, the number of shares of our common stock outstanding prior to this offering is based on 264,202,421 shares of our common stock outstanding on November 9, 2021, and excludes the following: (i) 24,871,899 shares of our common stock issuable upon exercises of outstanding warrants, including the Warrants; (ii) 59,243,926 shares of our common stock issuable upon conversions of the Series H Preferred Stock; (iii) 127,078,476 shares of our common stock issuable upon exercises of outstanding option awards; (iv) 40,177,275 shares of our common stock issuable upon vesting of outstanding restricted stock units and restricted stock awards; (v) 188,791 shares of our common stock issuable upon conversion of Series G Preferred Stock, and (vi) 22,403,810 shares of our common stock reserved for issuance under the 2019 Equity Incentive Plan (the “2019 Plan”).

 

 

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RISK FACTORS

 

An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.

 

In the course of conducting our business operations, we are exposed to a variety of risks. Any of the risk factors we describe below have affected or could materially adversely affect our business, financial condition, and results of operations. The market price of shares of our common stock could decline, possibly significantly or permanently, if one or more of these risks and uncertainties occurs. Certain statements in “Risk Factors” are forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.”

 

RISKS RELATED TO OUR BUSINESS AND OUR FINANCIAL CONDITION

 

Our business operations have been and may continue to be materially and adversely affected by the outbreak of COVID-19. An outbreak of respiratory illness caused by COVID-19 emerged in late 2019 and has spread globally. In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic based on the rapid increase in global exposure. COVID-19 continues to spread throughout the world. Many national governments and sports authorities around the world made the decision to postpone/cancel high attendance sports events in an effort to reduce the spread of the COVID-19 virus. In addition, many governments and businesses limited non-essential work activity, furloughed, and/or terminated many employees and closed some operations and/or locations, all of which has had a negative impact on the economic environment.

 

Beginning in March 2020, as a result of the COVID-19 pandemic, our revenue and earnings began to decline largely due to the cancellation of high attendance sports events and the resulting decrease in traffic to the Platform and advertising revenue. This initial decrease in revenue and earnings were partially offset by revenues generated by TheStreet, as well as some recovery of sporting events (including, in some cases, limited in-person attendance) that have generated content for the media business (the “Sports Illustrated Licensed Brands”) of Sports Illustrated (“Sports Illustrated”) that we have the right to operate pursuant to the licensing agreement, as amended by Amendment No. 1 dated September 1, 2019, Amendment No. 2 dated April 1, 2020, Amendment No. 3 dated July 28, 2020, Amendment No. 4 dated June 4, 2021, and side letter dated June 4, 2021 (collectively, the “Sports Illustrated Licensing Agreement”), we previously entered into with ABG-SI LLC (“ABG”). Through 2021, we have increasingly seen sports leagues and events return to pre-pandemic scheduling, as well as additional lifting of restrictions on in-person attendance at sporting events, which have continued to result in some recovery of our operational and financial performance. Despite this initial recovery, the future impact, or continued impact, from the COVID-19 pandemic remains uncertain.

 

The extent of the impact on our operational and financial performance will depend, in part, on future developments, including the duration and spread of the COVID-19 pandemic, related group gathering and sports event advisories and restrictions, and the extent and effectiveness of containment actions taken, all of which remain uncertain at the time of issuance of our accompanying consolidated financial statements.

 

These and other impacts of the COVID-19 pandemic, or other pandemics or epidemics, could have the effect of heightening many of the other risks described in this Annual Report under this “Risk Factors” section.

 

Because of the effects of COVID-19 pandemic and the uncertainty about their persistence, we may need to raise more capital to continue operations. At September 30, 2021, we had cash of approximately $8.2 million. We have seen stabilization in our markets since May 2020 and believe that based on our current assessment of the impact of COVID-19, we have sufficient resources to fully fund our business operations through 12 months from the filing date of this registration statement. However, due to the continuing uncertainty regarding the duration of the impact of COVID-19 and its effect on our financial performance and the potential that our traffic and advertising revenue becomes destabilized again, we may require additional capital. We have not had difficulties accessing the capital markets during 2020 and 2021, however, due to the continuing uncertainty surrounding COVID-19, we may experience difficulties in the future.

 

6

 

 

As market conditions present uncertainty as to our ability to secure additional capital, there can be no assurances that we will be able to secure additional financing on acceptable terms, or at all, as and when necessary to continue to conduct operations. Our future liquidity and capital requirements will depend upon numerous factors, including the success of our offerings and competing technological and market developments. We may need to raise funds through public or private financings, strategic relationships, or other arrangements. There can be no assurance that such funding will be available on terms acceptable to us, or at all. Furthermore, any equity financing may be dilutive to existing stockholders, and debt financing, if available, may involve restrictive covenants that may limit our operating flexibility with respect to certain business matters. Strategic arrangements may require us to relinquish our rights or grant licenses to some or substantial parts of our intellectual property. If funds are raised through the issuance of equity securities, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution in net book value per share, and such equity securities may have rights, preferences, or privileges senior to those of the holders of our existing capital stock. If adequate funds are not available on acceptable terms, we may not be able to continue operating, develop or enhance products, take advantage of future opportunities, or respond to competitive pressures, any of which could have a material adverse effect on our business, operating results, and financial condition.

 

We have incurred losses since our inception, have yet to achieve profitable operations, and anticipate that we will continue to incur losses for the foreseeable future. We have had losses from inception, and as a result, have relied on capital funding or borrowings to fund our operations. Our accumulated deficit as of December 31, 2020 was approximately $162.1 million. Our accumulated deficit as of September 30, 2021 was approximately $233.1 million. While we anticipate generating positive cash flow in fiscal 2021, the uncertainty surrounding the COVID-19 pandemic yields some doubt as to our ability to do so and could require us to raise additional capital. We cannot predict whether we will be able to continue to find capital to support our business plan if the negative effects of the COVID-19 pandemic continue longer than anticipated.

 

We identified material weaknesses in our internal control over financial reporting. If we do not adequately address these material weaknesses or if other material weaknesses or significant deficiencies in our internal control over financial reporting are discovered, our financial statements could contain material misstatements and our business, operations and stock price may be adversely affected. As disclosed under Item 9A, Controls and Procedures, of our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Annual Report”), our management identified material weaknesses in our internal control over financial reporting at December 31, 2020. We continued to have material weaknesses in our internal controls over financial reporting at March 31, 2021, June 30, 2021, and September 30, 2021. We expect to have remediated our material weaknesses in our internal control over financial reporting by December 31, 2021, of which there can be no assurance. Under standards established by the Public Company Accounting Oversight Board, a material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis. Although no material misstatement of our historical financial statements was identified, the existence of these material weaknesses or significant deficiencies could result in material misstatements in our financial statements and we could be required to restate our financial statements. Further, significant costs and resources may be needed to remediate the identified material weaknesses or any other material weaknesses or internal control deficiencies. If we are unable to remediate, evaluate, and test our internal controls on a timely basis in the future, management will be unable to conclude that our internal controls are effective and our independent registered public accounting firm will be unable to express an unqualified opinion on the effectiveness of our internal controls. If we cannot produce reliable financial reports, investors may lose confidence in our financial reporting, the price of our common stock could be adversely impacted and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which could negatively impact our business, financial condition, and results of operations.

 

As of the date of filing this registration statement, we currently lack certain internal controls over our financial reporting. While we have six independent directors serving on our board of directors (our “Board”), have added to our accounting staff, and have hired a Chief Technology Officer, we are still implementing such internal controls at this time. The lack of such controls makes it difficult to ensure that information required to be disclosed in our reports filed and submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported as and when required.

 

7

 

 

We cannot assure you that we will be able to develop and implement the necessary internal controls over financial reporting. The absence of such internal controls may inhibit investors from purchasing our shares and may make it more difficult for us to raise debt or equity financing.

 

If we fail to retain current users or add new users, or if our users decrease their level of engagement with the Platform, our business would be seriously harmed. The success of our business heavily depends on the size of our user base and the level of engagement of our users. Thus, our business performance will also become increasingly dependent on our ability to increase levels of user engagement in existing and new markets. We are continuously subject to a highly competitive market in order to attract and retain our users’ attention. A number of factors could negatively affect user retention, growth, and engagement, including if:

 

  users increasingly engage with competing platforms instead of ours;
     
  we fail to introduce new and exciting products and services, or such products and services do not achieve a high level of market acceptance;
     
  we fail to accurately anticipate consumer needs, or we fail to innovate and develop new software and products that meet these needs;
     
  we fail to price our products competitively;
     
  we do not provide a compelling user experience because of the decisions we make regarding the type and frequency of advertisements that we display;
     
  we are unable to combat spam, bugs, malwares, viruses, hacking, or other hostile or inappropriate usage on our products;
     
  there are changes in user sentiment about the quality or usefulness of our existing products in the short-term, long-term, or both;
     
  there are increased user concerns related to privacy and information sharing, safety, or security;
     
  there are adverse changes in our products or services that are mandated by legislation, regulatory authorities, or legal proceedings;
     
  technical or other problems frustrate the user experience, particularly if those problems prevent us from delivering our products in a fast and reliable manner;
     
  we, our Publisher Partners, or other companies in our industry are the subject of adverse media reports or other negative publicity, some of which may be inaccurate or include confidential information that we are unable to correct or retract; or
     
  we fail to maintain our brand image or our reputation is damaged.

 

Any decrease in user retention, growth, or engagement could render our products less attractive to users, advertisers, or our Publisher Partners, thereby reducing our revenues from them, which may have a material and adverse impact on our business, financial condition, and results of operations. In addition, there can be no assurance that we will succeed in developing products and services that eventually become widely accepted, that we will be able to timely release products and services that are commercially viable, or that we will establish ourselves as a successful player in a new business area. Our inability to do so would have an adverse impact on our business, financial condition, and results of operations.

 

8

 

 

The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed. The digital media industry is fragmented and highly competitive. There are many players in the digital media market, many with greater name recognition and financial resources, which may give them a competitive advantage. Some of our current and potential competitors have substantially greater financial, technical, marketing, distribution, and other resources than we do. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, customer, and user requirements and trends. In addition, our customers and strategic partners may become competitors in the future. Certain of our competitors may be able to negotiate alliances with strategic partners on more favorable terms than we are able to negotiate. Pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses, or the failure of the Platform to achieve or maintain more widespread market acceptance, any of which could adversely affect our revenues and operating results. With the introduction of new technologies, the evolution of the Platform, and new market entrants, we expect competition to intensify in the future.

 

We may have difficulty managing our growth. We have added, and expect to continue to add, Publisher Partner and end-user support capabilities, to continue software development activities, and to expand our administrative operations. In the past two years, we have entered into multiple strategic transactions. These strategic transactions, which have significantly expanded our business, have and are expected to place a significant strain on our managerial, operational, and financial resources. To manage any further growth, we will be required to improve existing, and implement new, operational, customer service, and financial systems, procedures and controls and expand, train, and manage our growing employee base. We also will be required to expand our finance, administrative, technical, and operations staff. There can be no assurance that our current and planned personnel, systems, procedures, and controls will be adequate to support our anticipated growth, that management will be able to hire, train, retain, motivate, and manage required personnel or that our management will be able to successfully identify, manage and exploit existing and potential market opportunities. If we are unable to manage growth effectively, our business could be harmed.

 

The strategic relationships that we may be able to develop and on which we may come to rely may not be successful. We will seek to develop strategic relationships with advertising, media, technology, and other companies to enhance the efforts of our market penetration, business development, and advertising sales revenues. These relationships are expected to, but may not, succeed. There can be no assurance that these relationships will develop and mature, or that potential competitors will not develop more substantial relationships with attractive partners. Our inability to successfully implement our strategy of building valuable strategic relationships could harm our business.

 

We rely heavily on our ability to collect and disclose data and metrics in order to attract new advertisers and retain existing advertisers. Any restriction, whether by law, regulation, policy, or other reason, on our ability to collect and disclose data that our advertisers find useful would impede our ability to attract and retain advertisers. Our advertising revenue could be seriously harmed by many other factors, including:

 

  a decrease in the number of active users of the Platform;
     
  our inability to create new products that sustain or increase the value of our advertisements;
     
  our inability to increase the relevance of targeted advertisements shown to users;
     
  adverse legal developments relating to advertising, including changes mandated by legislation, regulation, or litigation; and
     
  difficulty and frustration from advertisers who may need to reformat or change their advertisements to comply with our guidelines.

 

The occurrence of any of these or other factors could result in a reduction in demand for advertisements, which may reduce the prices we receive for our advertisements or cause advertisers to stop advertising with us altogether, either of which would negatively affect our business, financial condition, and results of operations.

 

9

 

 

The sales and payment cycle for online advertising is long, and such sales, which were significantly impacted by the COVID-19 pandemic during 2020 and the beginning of 2021, may not occur when anticipated or at all. The decision process is typically lengthy for brand advertisers and sponsors to commit to online campaigns. Some of their budgets are planned a full year in advance. The COVID-19 pandemic significantly impacted the amount and pricing of advertising throughout the media industry during 2020 and it is uncertain when and to what extent advertisers will return to more normal spending levels. The decision process for such purchases, even in normal business situations, is subject to delays and aspects that are beyond our control. In addition, some advertisers and sponsors take months after the campaign runs to pay, and some may not pay at all, or require partial “make-goods” based on performance.

 

We are dependent on the continued services and on the performance of our key executive officers, management team, and other key personnel, the loss of which could adversely affect our business. Our future success largely depends upon the continued services of our key executive officers, management team, and other key personnel. The loss of the services of any of such key personnel could have a material adverse effect on our business, operating results, and financial condition. We depend on the continued services of our key personnel as they work closely with both our employees and our Publisher Partners. Such key personnel are also responsible for our day-to-day operations. Although we have employment agreements with some of our key personnel, these are at-will employment agreements, albeit with non-competition and confidentiality provisions and other rights typically associated with employment agreements. We do not believe that any of our executive officers are planning to leave or retire in the near term; however, we cannot assure that our executive officers or members of our management team will remain with us. We also depend on our ability to identify, attract, hire, train, retain, and motivate other highly skilled technical, managerial, sales, operational, business development, and customer service personnel. Competition for such personnel is intense, and there can be no assurance that we will be able to successfully attract, assimilate, or retain sufficiently qualified personnel. The loss or limitation of the services of any of our executive officers, members of our management team, or key personnel, including our regional and country managers, or the inability to attract and retain additional qualified key personnel, could have a material adverse effect on our business, financial condition, or results of operations.

 

We are dependent on the continued services and on the performance of key third party content contributors, the loss of which could adversely affect our business. We rely on content contributed by third party providers, which has in turn attracted users that drive advertising and subscription revenue. The loss of the services of any of such key contributors could have a material adverse effect on our business, operating results, and financial condition. Although we have service agreements with some of our key contributors, many are short term in nature or have cancelation clauses in the agreements. We also depend on our ability to identify, attract, and retain, other highly skilled third-party content contributors. Competition for such contributors is intense, and there can be no assurance that we will be able to successfully attract, assimilate, or retain them. The loss or limitation of the services of any of our key third party contributors, or the inability to attract and retain additional qualified key contributors, could have a material adverse effect on our business, financial condition, or results of operations.

 

Our revenues could decrease if the Platform does not continue to operate as intended. The Platform performs complex functions and is vulnerable to undetected errors or unforeseen defects that could result in a failure to operate or inefficiency. There can be no assurance that errors and defects will not be found in current or new products or, if discovered, that we will be able to successfully correct them in a timely manner or at all. The occurrence of errors and defects could result in loss of or delay in revenue, loss of market share, increased development costs, diversion of development resources and injury to our reputation or damage to our efforts to expand brand awareness.

 

Interruptions or performance problems associated with our technology and infrastructure may adversely affect our business and operating results. Our growth will depend in part on the ability of our users and Publisher Partners to access the Platform at any time and within an acceptable amount of time. We believe that the Platform is proprietary and we rely on the expertise of members of our engineering, operations, and software development teams for their continued performance. It is possible that the Platform may experience performance problems due to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due to an overwhelming number of users accessing the Platform software simultaneously, denial of service attacks, or other security related incidents. We may not be able to identify the cause or causes of any performance problems within an acceptable period of time. It may be that it will be difficult to maintain and/or improve our performance, especially during peak usage times and as the Platform becomes more complex and our user traffic increases. If the Platform software is unavailable or if our users are unable to access it within a reasonable amount of time or at all, our business would be negatively affected. Therefore, in the event of any of the factors described above, or certain other failures of our infrastructure, partner or user data may be permanently lost. Moreover, the partnership agreements (“Partnership Agreements”) with our Publisher Partners include service level standards that obligate us to provide credits or termination rights in the event of a significant disruption in the Platform. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be adversely affected.

 

10

 

 

We operate our exclusive coalition of professional-managed online media channels on third party cloud platforms and data center hosting facilities. We rely on software and services licensed from, and cloud platforms provided by, third parties in order to offer our digital media services. Any errors or defects in third-party software or cloud platforms could result in errors in, or a failure of, our digital media services, which could harm our business. Any damage to, or failure of, these third-party systems generally could result in interruptions in the availability of our digital media services. As a result of this third-party reliance, we may experience the aforementioned issues, which could cause us to render credits or pay penalties, could cause our Publisher Partners to terminate their contractual arrangements with us, and could adversely affect our ability to grow our audience of unique visitors, all of which could reduce our ability to generate revenue. Our business would also be harmed if our users and potential users believe our product and services offerings are unreliable. In the event of damage to, or failure of, these third-party systems, we would need to identify alternative channels for the offering of our digital media services, which would consume substantial resources and may not be effective. We are also subject to certain standard terms and conditions with Amazon Web Services and Google Cloud related to data storage purposes. These providers have broad discretion to change their terms of service and other policies with respect to us, and those changes may be unfavorable to us. Therefore, we believe that maintaining successful partnerships with Amazon Web Services, Google Cloud, and other third-party suppliers is critical to our success.

 

Real or perceived errors, failures, or bugs in the Platform could adversely affect our operating results and growth prospects. Because the Platform is complex, undetected errors, failures, vulnerabilities, or bugs may occur, especially when updates are deployed. Despite testing by us, errors, failures, vulnerabilities, or bugs may not be found in the Platform until after they are deployed to our customers. We expect from time to time to discover software errors, failures, vulnerabilities, and bugs in the Platform and anticipate that certain of these errors, failures, vulnerabilities, and bugs will only be discovered and remediated after deployment to our Publisher Partners and used by subscribers. Real or perceived errors, failures, or bugs in our software could result in negative publicity, loss of or delay in market acceptance of the Platform, loss of competitive position, or claims by our Publisher Partners or subscribers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem.

 

Malware, viruses, hacking attacks, and improper or illegal use of the Platform could harm our business and results of operations. Malware, viruses, and hacking attacks have become more prevalent in our industry and may occur on our systems in the future. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware, or other computer equipment, and the inadvertent transmission of computer viruses could harm our business, financial condition, and operating results. Any failure to detect such attack and maintain performance, reliability, security and availability of products and technical infrastructure to the satisfaction of our users may also seriously harm our reputation and our ability to retain existing users and attract new users.

 

Our information technology systems are susceptible to a growing and evolving threat of cybersecurity risk. Any substantial compromise of our data security, whether externally or internally, or misuse of agent, customer, or employee data, could cause considerable damage to our reputation, cause the public disclosure of confidential information, and result in lost sales, significant costs, and litigation, which would negatively affect our financial position and results of operations. Although we maintain policies and processes surrounding the protection of sensitive data, which we believe to be adequate, there can be no assurances that we will not be subject to such claims in the future.

 

11

 

 

If we are unable to protect our intellectual property rights, our business could suffer. Our success significantly depends on our proprietary technology. We rely on a combination of copyright, trademark and trade secret laws, employee and third-party non-disclosure and invention assignment agreements and other methods to protect our proprietary technology. However, these only afford limited protection, and unauthorized parties may attempt to copy aspects of the Platform’s features and functionality, or to use information that we consider proprietary or confidential. There can be no assurance that the Platform will be protectable by patents, but if they are, any efforts to obtain patent protection that is not successful may harm our business in that others will be able to use our technologies. For example, previous disclosures or activities unknown at present may be uncovered in the future and adversely impact any patent rights that we may obtain. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as do the laws of the United States. There can be no assurance that the steps taken by us to protect our proprietary rights will be adequate or that third parties will not infringe or misappropriate our trademarks, copyrights, and similar proprietary rights. If we resort to legal proceedings to enforce our intellectual property rights, those proceedings could be expensive and time-consuming and could distract our management from our business operations. Our business, profitability and growth prospects could be adversely affected if we fail to receive adequate protection of our proprietary rights.

 

We could be required to cease certain activities and/or incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights. Some of our competitors, and other third parties, may own technology patents, copyrights, trademarks, trade secrets and website content, which they may use to assert claims against us. We cannot assure you that we will not become subject to claims that we have misappropriated or misused other parties’ intellectual property rights. Any claim or litigation alleging that we have infringed or otherwise violated intellectual property or other rights of third parties, with or without merit, and whether or not settled out of court or determined in our favor, could be time-consuming and costly to address and resolve, and could divert the time and attention of our management and technical personnel.

 

The results of any intellectual property litigation to which we might become a party may require us to do one or more of the following:

 

  cease making, selling, offering, or using technologies or products that incorporate the challenged intellectual property;
     
  make substantial payments for legal fees, settlement payments, or other costs or damages;
     
  obtain a license, which may not be available on reasonable terms, to sell or use the relevant technology; or
     
  redesign technology to avoid infringement.

 

If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us, such payments or costs could have a material adverse effect upon our business and financial results.

 

We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our business, including privacy, data protection, and personal information, rights of publicity, content, intellectual property, advertising, marketing, distribution, data security, data retention and deletion, personal information, electronic contracts and other communications, competition, protection of minors, consumer protection, telecommunications, employee classification, product liability, taxation, economic or other trade prohibitions or sanctions, securities law compliance, and online payment services. The introduction of new products, expansion of our activities in certain jurisdictions, or other actions that we may take may subject us to additional laws, regulations, monetary penalties, or other government scrutiny. In addition, foreign data protection, privacy, competition, and other laws and regulations can impose different obligations or be more restrictive than those in the United States. Many of these laws and regulations are still evolving and could be interpreted or applied in ways that could limit or harm our business, require us to make certain fundamental and potentially detrimental changes to the products and services we offer, or subject us to claims. For example, laws relating to the liability of providers of online services for activities of their users and other third-parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright, and trademark infringement, and other theories based on the nature and content of the materials searched, the ads posted, or the content provided by users. In addition, there have been calls by members of Congress, from both parties, to limit the scope of the current immunities and safe harbors afforded online publishers with regard to user content and communications under the federal Digital Millennium Copyright Act and the federal Communications Decency Act. Any material reduction of those protections would make us more vulnerable to third party claims arising out of user content published by our online services.

 

12

 

 

United States federal and state and foreign laws and regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change, which could adversely affect our business. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. Any change in legislation and regulations could affect our business. For example, regulatory or legislative actions affecting the manner in which we display content to our users or obtain consent to various practices could adversely affect user growth and engagement. Such actions could affect the manner in which we provide our services or adversely affect our financial results.

 

Furthermore, significant penalties could be imposed on us for failure to comply with various statutes or regulations. Violations may result from:

 

  ambiguity in statutes;
     
  regulations and related court decisions;
     
  the discretion afforded to regulatory authorities and courts interpreting and enforcing laws;
     
  new regulations affecting our business; and
     
  changes to, or interpretations of, existing regulations affecting our business.

 

While we prioritize ensuring that our business and compensation model are compliant, and that any product or income related claims are truthful and non-deceptive, we cannot be certain that the Federal Trade Commission (“FTC”) or similar regulatory body in another country will not modify or otherwise amend its guidance, laws, or regulations or interpret in a way that would render our current practices inconsistent with the same.

 

Our services involve the storage and transmission of digital information; therefore, cybersecurity incidents, including those caused by unintentional errors and those intentionally caused by third parties, may expose us to a risk of loss, unauthorized disclosure or other misuse of this information, litigation liability and regulatory exposure, reputational harm and increased security costs. We and our third-party service providers experience cyber-attacks of varying degrees on a regular basis. We expect to incur significant costs in ongoing efforts to detect and prevent cybersecurity-related incidents and these costs may increase in the event of an actual or perceived data breach or other cybersecurity incident. The COVID-19 pandemic has increased opportunities for cyber-criminals and the risk of potential cybersecurity incidents, as more companies and individuals work online. We cannot ensure that our efforts to prevent cybersecurity incidents will succeed. An actual or perceived breach of our cybersecurity could impact the market perception of the effectiveness of our cybersecurity controls. If our users or business partners, including our Publisher Partners, are harmed by such an incident, they could lose trust and confidence in us, decrease their use of our services or stop using them in entirely. We could also incur significant legal and financial exposure, including legal claims, higher transaction fees and regulatory fines and penalties, which in turn could have a material and adverse effect on our business, reputation and operating results. While our insurance policies include liability coverage for certain of these types of matters, a significant cybersecurity incident could subject us to liability or other damages that exceed our insurance coverage.

 

Prior employers of our employees may assert violations of past employment arrangements. Our employees are highly experienced, having worked in our industry for many years. Prior employers may try to assert that our employees are breaching restrictive covenants and other limitations imposed by past employment arrangements. We believe that all of our employees are free to work for us in their various capacities and have not breached past employment arrangements. Notwithstanding our care in our employment practices, a prior employer may assert a claim. Such claims will be costly to contest, highly disruptive to our work environment, and may be detrimental to our operations.

 

13

 

 

Our products may require availability of components or known technology from third parties and their non-availability can impede our growth. We license/buy certain technology integral to our products from third parties, including open-source and commercially available software. Our inability to acquire and maintain any third-party product licenses or integrate the related third-party products into our products in compliance with license arrangements, could result in delays in product development until equivalent products can be identified, licensed, and integrated. We also expect to require new licenses in the future as our business grows and technology evolves. We cannot provide assurance that these licenses will continue to be available to us on commercially reasonable terms, if at all.

 

Government regulations may increase our costs of doing business. The adoption or modification of laws or regulations relating to online media, communities, commerce, security, and privacy could harm our business, operating results, and financial condition by increasing our costs and administrative burdens. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, security, libel, consumer protection, and taxation apply. Laws and regulations directly applicable to Internet activities are becoming more diverse and prevalent in all global markets. We must comply with regulations in the United States, as well as any other regulations adopted by other countries where we may do business. The growth and development of Internet content, commerce and communities may prompt calls for more stringent consumer protection laws, privacy laws and data protection laws, both in the United States and abroad, as well as new laws governing the taxation of these activities. Compliance with any newly adopted laws may prove difficult for us and may harm our business, operating results, and financial condition.

 

We may face lawsuits or incur liabilities in the future in connection with our businesses. In the future, we may face lawsuits or incur liabilities in connection with our businesses. For example, we could face claims relating to information that is published or made available on the Platform. In particular, the nature of our business exposes us to claims related to defamation, intellectual property rights and rights of publicity and privacy. We might not be able to monitor or edit a significant portion of the content that appears on the Platform. This risk is enhanced in certain jurisdictions outside the United States where our protection from liability for third-party actions may be unclear and where we may be less protected under local laws than we are in the United States. We could also face fines or orders restricting or blocking our services in particular geographies as a result of content hosted on our services. If any of these events occur, our business could be seriously harmed.

 

RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES

 

There may be no liquid market for our common stock. We provide no assurances of any kind or nature whatsoever that an active market for our common stock will ever develop. There has been no sustained activity in the market for our common stock. Investors should understand that there may be no alternative exit strategy for them to recover or liquidate their investments in our common stock. Accordingly, investors must be prepared to bear the entire economic risk of an investment in us for an indefinite period of time. Even if an active trading market develops over time, we cannot predict how liquid that market might become. Our common stock is quoted on the OTCM’s OTCQX. Trading in stock quoted on over-the-counter markets is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include:

 

  Quarterly variations in our results of operations or those of our competitors;
     
  Announcements by us or our competitors of acquisitions, new products and services, significant contracts, commercial relationships, or capital commitments;
     
  Disruption or substantive changes to our operations, including the impact of the COVID-19 pandemic;
     
  Variations in our sales and earnings from period to period;
     
  Commencement of, or our involvement in, litigation;
     
  Any major change in our board or management;

 

  Changes in governmental regulations or in the status of our regulatory approvals; and
     
  General market conditions and other factors, including factors unrelated to our own operating performance.

 

14

 

 

We are subject to the reporting requirements of the United States securities laws, which will require expenditure of capital and other resources, and may divert management’s attention. We are a public reporting company subject to the information and reporting requirements of the Exchange Act, the Sarbanes-Oxley Act (“Sarbanes”), and other applicable securities rules and regulations. Complying with these rules and regulations have caused us and will continue to cause us to incur additional legal and financial compliance costs, make some activities more difficult, be time-consuming or costly, and continue to increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. The cost of maintaining current financial reporting has been, and will continue to be, a financial burden for us. If we fail to or are unable to comply with Sarbanes, we will not be able to obtain independent accountant certifications that Sarbanes requires publicly traded companies to obtain. Further, by complying with public disclosure requirements, our business and financial condition are more visible, which we believe may result in the likelihood of increased threatened or actual litigation, including by competitors and other third parties. Compliance with these additional requirements may also divert management’s attention from operating our business. Any of these may adversely affect our operating results.

 

We may not be able to attract the attention of major brokerage firms or securities analysts in our efforts to raise capital. In due course, we plan to seek to have our common stock quoted on a national securities exchange in the United States. There can be no assurance that we will be able to garner a quote for our common stock on an exchange. Even if we are successful in doing so, security analysts and major brokerage houses may not provide coverage of us. We may also not be able to attract any brokerage houses to conduct secondary offerings with respect to our securities.

 

Our common stock is categorized as “penny stock,” which may make it more difficult for investors to sell their shares of our common stock due to suitability requirements. Our common stock is categorized as “penny stock.” The SEC adopted Rule 15g-9, which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Historically, the price of our common stock has been significantly less than $5.00 per share and we did not qualify for any of the other exceptions; therefore, our common stock is considered “penny stock.” This designation imposes additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5.0 million or individuals with a net worth in excess of $1.0 million or annual income exceeding $200,000, or $300,000 jointly with his or her spouse. The penny stock rules require a broker-dealer buying our securities, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability and/or willingness of broker-dealers to trade our securities, either directly or on behalf of their clients, may discourage potential investor’s from purchasing our securities, or may adversely affect the ability of our stockholders to sell their shares.

 

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In addition to the “penny stock” rules promulgated by the SEC, the Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our common stock.

 

Our Board is authorized to issue additional shares of our common stock that would dilute existing stockholders. We are authorized to issue up to 1,000,000,000 shares of our common stock and 1,000,000 shares of preferred stock, par value $0.01 per share (our “Preferred Stock”) of which 264,202,421 shares of our common stock and 19,714 shares of our Preferred Stock, consisting of 19,546 shares of Series H Preferred Stock and 168 shares of Series G Convertible Preferred Stock (the “Series G Preferred Stock”) are issued and outstanding as of November 9, 2021. The number of shares of our common stock issued and outstanding as of November 9, 2021 excludes 127,078,476 shares of our common stock issuable upon exercise of outstanding option awards, 40,177,275 shares of our common stock issuable upon vesting of restricted stock units and restricted stock awards, 24,871,899 shares of our common stock issuable upon exercise of outstanding warrants, including the Warrants, 59,243,926 shares of our common stock issuable upon conversion of Series H Preferred Stock, 188,791 shares of our common stock issuable upon conversion of Series G Preferred Stock, and 22,403,810 shares of our common stock reserved for issuance under the 2019 Plan. We expect to seek additional financing in order to provide working capital to our business in the future. Our Board has the power to issue any or all such authorized but unissued shares of our common stock at any price and, in respect of our Preferred Stock, at any price and with any attributes our Board considers sufficient, without stockholder approval. The issuance of additional shares of our common stock in the future will reduce the proportionate ownership and voting power of current stockholders and may negatively impact the market price of our common stock.

 

We may issue additional securities with rights superior to those of our common stock, which could materially limit the ownership rights of our stockholders. We may offer additional debt or equity securities in private and/or public offerings in order to raise working capital or to refinance our debt. Our Board has the right to determine the terms and rights of any debt securities and Preferred Stock without obtaining the approval of our stockholders. It is possible that any debt securities or Preferred Stock that we sell would have terms and rights superior to those of our common stock and may be convertible into shares of our common stock. Any sale of securities could adversely affect the interests or voting rights of the holders of our common stock, result in substantial dilution to existing stockholders, or adversely affect the market price of our common stock.

 

The elimination of monetary liability against our directors, officers, and employees under Delaware law and the existence of indemnification rights for our obligations to our directors, officers, and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers, and employees. Our Amended and Restated Certificate of Incorporation (our “Certificate of Incorporation”) and our Second Amended and Restated Bylaws (our “Bylaws”) contain provision permitting us to eliminate the personal liability of our directors and officers to us and our stockholders for damages for the breach of a fiduciary duty as a director or officer to the extent provided by Delaware law. We may also have contractual indemnification obligations under any future employment agreements with our officers. The foregoing indemnification obligations could result in us incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and the resulting costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even through such actions, if successful, might otherwise benefit us and our stockholders.

 

We are not subject to the rules of a national securities exchange requiring the adoption of certain corporate governance measures and, as a result, our stockholders do not have the same protections. We are quoted on the OTCQX and are not subject to the rules of a national securities exchange, such as the New York Stock Exchange, the NYSE-American, or the Nasdaq Stock Market. National securities exchanges generally require more rigorous measures relating to corporate governance that are designed to enhance the integrity of corporate management. The requirements of the OTCQX afford our stockholders fewer corporate governance protections than those of a national securities exchange. We have taken steps to institute greater corporate governance measures, even though such compliance is not required by the OTCM for quotations of shares of our common stock on the OTCQX; however, because such measures are not required, our stockholders will have fewer protections, such as those related to director independence, stockholder approval rights, and governance measures that are designed to provide oversight of a corporation’s management by its board of directors.

 

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Because we are a “smaller reporting company,” we will not be required to comply with certain disclosure requirements that are applicable to other public companies and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors. We are a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K. As a smaller reporting company, we are eligible for exemptions from various reporting requirements applicable to other public companies that are not smaller reporting companies, including, but not limited to:

 

  reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements, and registration statements;
  not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002; and
  reduced disclosure obligations for our annual and quarterly reports, proxy statements, and registration statements.

 

We will remain a smaller reporting company until the end of the fiscal year in which (1) we have a public common equity float of more than $250 million, or (2) we have annual revenues for the most recently completed fiscal year of more than $100 million plus we have any public common equity float or public float of more than $700 million. We also would not be eligible for status as smaller reporting company if we become an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company.

 

Sales by our stockholders of a substantial number of shares of our common stock in the public market could adversely affect the market price of our common stock. A substantial portion of the total outstanding shares of our common stock may be sold into the market at any time. Some of these shares are owned by our executive officers and directors, and we believe that such holders have no current intention to sell a significant number of shares of our stock. If all of the major stockholders were to decide to sell large amounts of stock over a short period of time, such sales could cause the market price of our common stock to drop significantly, even if our business were doing well.

 

Provisions in our Certificate of Incorporation and Bylaws and Delaware law may discourage a takeover attempt even if a takeover might be beneficial to our stockholders. Provisions contained in our Certificate of Incorporation and Bylaws could make it more difficult for a third party to acquire us. Provisions in our Certificate of Incorporation and Bylaws impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions. For example, our Certificate of Incorporation authorizes our Board to determine the rights, preferences, privileges, and restrictions of unissued series of our Preferred Stock without any vote or action by our stockholders. Thus, our Board can authorize and issue shares of our Preferred Stock with voting or conversion rights that could dilute the voting power of holders of other series of our capital stock. These rights may have the effect of delaying or deterring a change of control of us. Additionally, our Certificate of Incorporation and/or Bylaws establish limitations on the removal of directors and include advance notice requirements for nominations for election to our Board and for proposing matters that can be acted upon at stockholder meetings.

 

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the DGCL, which prohibits an “interested stockholder” owning in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which such stockholder acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

 

See “Description of Securities – Certain Provisions of our Certificate of Incorporation, our Bylaws, and the DGCL.” These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock.

 

The terms of our Rights Agreement, dated May 4, 2021 (the “Rights Agreement”) and Series L Junior Participating Preferred Stock may discourage a takeover attempt even if a takeover might be beneficial to our stockholders. Features of our Rights Agreement will make it difficult for a party to acquire control of our Company in a transaction not approved by our Board.  On May 4, 2021, we adopted a Rights Agreement, which provided for a dividend distribution of a right to purchase from us one-thousandth of a share of our Series L Junior Participating Preferred Stock for: (i) each outstanding share of our common stock and (ii) each share of our common stock issuable upon conversion of each share of our Series H Preferred Stock. The description of such rights are set forth in the Rights Agreement, between America Stock Transfer & Trust Company, LLC as Rights Agent and us.  The Rights Agreement is set to expire on May 3, 2022; however, our Board may elect to extend the termination date at any time, subject to ratification by our stockholders.

 

See “Description of Securities – Rights Agreement and Series L Junior Participating Preferred Stock.”  This Rights Agreement could limit the price that certain investors might be willing to pay in the future for shares of our common stock.

 

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Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us. Our Certificate of Incorporation provides that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. In addition, Section 145 of the DGCL or our Certificate of Incorporation provides that:

 

  We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person’s conduct was unlawful.
  We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.
  We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
  The rights conferred in our Certificate of Incorporation are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees, and agents and to obtain insurance to indemnify such persons.
  We may not retroactively amend our Certificate of Incorporation or indemnification agreement, if any, to reduce our indemnification obligations to directors, officers, employees, and agents.

 

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USE OF PROCEEDS

 

All of the Shares offered by the Selling Stockholders will be sold by them for their respective accounts. We will not receive any of the proceeds from these sales.

 

The Selling Stockholders will pay any underwriting fees, discounts, selling commissions, stock transfer taxes, and certain legal expenses incurred by such Selling Stockholders in disposing of their Shares, and we will bear all other costs, fees and expenses incurred in effecting the registration of such Shares covered by this prospectus, including, without limitation, all registration and filing fees, listing fees, and fees and expenses of our counsel and our independent registered public accountants.

 

We will receive any proceeds from the exercise of the Warrants for cash, but not from the sale of the Shares issuable upon such exercise.

 

DETERMINATION OF OFFERING PRICE

 

The Selling Stockholders will determine at what price they may sell the Shares offered by this prospectus, and such sales may be made at fixed prices, prevailing market prices at the time of sale, varying prices determined at the time of sale, or at privately negotiated prices.

 

19

 

 

SELLING STOCKHOLDERS

 

The Shares registered hereunder are being offered by the Selling Stockholders. For additional information regarding the issuances of the Shares, see “Description of Our Securities – Registrable Shares.” We are registering the Shares in order to permit the Selling Stockholders to offer the Shares for resale from time to time. Except (i) as disclosed under the section titled “Certain Relationships and Related Person Transactions,” (ii) as disclosed under the section titled “Management,” and (iii) for the ownership of shares of our common stock, the Selling Stockholders have not had any material relationship with us within the past three years.

 

The table below lists the Selling Stockholders and other information regarding the beneficial ownership of our common stock by each of the Selling Stockholders. The second column lists the number of shares of our common stock beneficially owned by each Selling Stockholder, based on its ownership of our common stock, as of November 9, 2021. The third column lists the Shares being offered by this prospectus by the Selling Stockholders. The fourth column assumes the sale of all the Shares offered by the Selling Stockholders pursuant to this prospectus.

 

The Selling Stockholders may sell all, some, or none of their Shares in this offering. See “Plan of Distribution.”

 

Name of Selling Stockholders   Number of Shares our Common Stock Beneficially Owned Prior to Offering (1)     Maximum Number of Shares of our Common Stock to be Sold Pursuant to this Prospectus (2)     Number of Shares of our Common Stock Beneficially Owned After Offering    

Percentage of Shares of our Common Stock Beneficially

Owned After Offering (1)

 
                         
Invenire Equity Opportunities, LP     285,715        285,715 (3)     -       -  
Invenire Select Fund I, LP     625,000       625,000 (4)     -       -  
Invenire Partners, LP     6,608,000       6,608,000 (5)     -       -  
Athletes First Media, LLC     15,000,000       15,000,000 (6)     -       -  
Webb Mulligan     150,000       150,000 (7)     -       -  
Casey Hunt     71,429       71,429 (8)     -       -  
Daniel H. Crow     910,714       910,714 (9)     -       -  
Davin P. Hunt     142,857       142,857 (10)     -       -  
Lyda Hunt – Herbert Trusts – Barbara Ann Hunt     714,286       714, 286 (11)     -       -  
Pangea Capital, L.L.C.     285,714       285,714 (12)     -       -  
Pledge Resources, L.L.C.     714,286       714,286 (13)     -       -  
Taylor F. Hunt     71,429       71,429 (14)     -       -  
David Shelton Hunt     1,750,150       1,750,150 (15)     -       -  
Hassie Hunt – Douglas H. Hunt Trust     839,286       839,286 (16)     -       -  
Hunt Technology Ventures, L.P.     1,250,000       1,250,000 (17)     -       -  
Kingdom Investments, Limited     1,250,000       1,250,000 (18)     -       -  
Lyda Hunt – Herbert Trusts – Bruce William Hunt     1,964,286       1,964,286 (19)     -       -  
Lyda Hunt – Herbert Trusts – Douglas Herbert Hunt     839,286       839,286 (20)     -       -  
William Herbert Hunt Trust Estate     12,267,857       12,267,857 (21)     -       -  
Allred 2002 Trust – NLA     857,365       857,365 (22)     -       -  
Lyda Hunt – Herbert Trusts – Lyda Bunker Hunt     1,964,286       1,964,286 (23)     -       -  
MACABA Holdings, L.L.C.     1,178,571       1,178,571 (24)     -       -  
Redcap Investments, LP     1,324,875       1,324,875 (25)     -       -  
Herbert Hunt Allred     227,325       227,325 (26)     -       -  
Allred 2002 Trust – HHA     857,365       857,365 (27)     -       -  
180 Degree Capital Corp.     22,932,170       22,932,170 (28)     -       -  
Julie Bamburg and Michael Bamburg TTEE Julie Bamburg dtd 12/5/2007     285,800       285,800 (29)     -       -  
Manatuck Hill Scout Fund, LP     545,580       545,580 (30)     -       -  
Emancipation Capital Master Ltd.     714,500       714,500 (31)     -       -  
Denman Street, LLC     1,559,392       1,559,392 (32)     -       -  
Richard J. Reisman     148,616       148,616 (33)     -       -  
Bradley Silver     111,500       111,500 (34)     -       -  
TCS Capital Management, LLC     20,714,286       5,714,286 (35)     15,000,000       *  
Reiss Capital Management LLC     769,983       769,983 (36)     -       -  
John Aaron Fichthorn     1,379,920       320,395 (37)     1,059,525       *  
Voss Value Master Fund, LP     3,097,672       2,911,975 (38)     185,697       *  
Choice Equities Fund, LP     200,060       200,060 (39)       -     -  
BRC Partners Opportunity Fund, LP     13,476,326     15,439,589 (41)     -       -  
B. Riley Principal Investments, LLC     75,537,691 (40)     4,428,118 (42)         -       -  
BRF Investments, LLC     75,537,691 (40)     74,689,798 (43)     -       -  
Pegasus Capital II, L.P.     4,546,500       4,546,500 (44)     -       -  
Manatuck Hill Navigator Master Fund, LP     212,170       212,170 (45)     -       -  
Warlock Partners, LLC     36,450,516       36,450,516 (46)     -       -  
Parity Capital, L.P.     625,000       625,000 (47)     -       -  
Placid Ventures, L.P.     1,250,000       1,250,000 (48)     -       -  
Robert Nathaniel Crow 2015 Revocable Trust     500,000       500,000 (49)     -       -  
Jon D. and Linda W. Gruber Trust     1,886,210       1,886,210 (50)     -       -  
Michael Ray Crawford     495,596       495,596 (51)     -       -  
The Mark and Tammy Strome Family Trust    

27,404,330

(52)    

1,700,000

(53)     -       -  
Strome Mezzanine Fund LP    

27,404,330

(52)    

16,048,800

(54)     -       -  
Mark E. Strome Living Trust U/A dtd 01/15/1997    

27,404,330

(52)    

4,849,600

(55)     -       -  
Strome Mezzanine Fund II, LP    

27,404,330

(52)    

4,805,930

(56)      -       -  
Dan Weirich     192,496       192,496 (57)      -       -  
Scott Gaffield     200,000       200,000 (58)      -       -  
Luke E. Fichthorn III Trust dated 8/24/2005     1,297,875       1,297,875 (59)      -       -  
Todd Sims     318,591       318,591 (60)      -       -  
George Christian Heckman     30,310       30,310 (61)      -       -  
Laila Opal Bleumner     30,310       30,310 (62)      -       -  
Mr. and Mrs. James C. Heckman II     30,310       30,310 (63)      -       -  
Sofia Grace Heckman     30,310       30,310 (64)      -       -  
William Arthur Heckman     30,310       30,310 (65)      -       -  
James C. Heckman, Sr.     303,100       303,100 (66)      -       *  
Heckman Maven Investment Fund LP     606,200       606,200 (67)      -       -  
James C. Heckman, Jr.     5,751,849       390,999 (68)      5,360,850       *  

 

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* Less than 1%.
(1) The number and percentage of shares beneficially owned includes any securities that such person has the right to acquire within sixty (60) days of November 9, 2021 pursuant to options, warrants, conversion privileges, or other rights based on 264,202,421 shares of our common stock outstanding as of such date.
(2) The amounts set forth in this column are the number of shares of our common stock that may be offered by such Selling Stockholder using this prospectus. These amounts do not represent any other shares of our common stock that the Selling Stockholder may own beneficially or otherwise.
(3) Consists of 285,715 shares of our common stock obtained in the 2021 PIPE Investment, the voting and investment control of which belongs to Mr. Chad M. Nelson and David G. Kern as managing members.
(4) Consists of 625,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock, the voting and investment control of which belongs to Chad M. Nelson and David G. Kern, as managing members.
(5) Consists of (i) 2,858,000 shares of our common stock that were issued upon conversion of the Series J Preferred Stock and (ii) 3,750,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock, the voting and investment control of which belongs to Chad M. Nelson as managing partner.
(6) Consists of 15,000,000 shares of our common stock that were issued upon conversion of the Series I Preferred Stock, the voting and investment control of which belongs to Brian G. Murphy.
(7) Consists of 150,000 shares of our common stock obtained in the 2021 PIPE Investment.
(8) Consists of 71,429 shares of our common stock obtained in the 2021 PIPE Investment.
(9) Consists of (i) 625,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock and (ii) 285,714 shares of our common stock obtained in the 2021 PIPE Investment.
(10) Consists of 142,857 shares of our common stock obtained in the 2021 PIPE Investment.
(11) Consists of 714,286 shares of our common stock obtained in the 2021 PIPE Investment, the voting and investment control of which belongs to John L. Zogg, as trustee.
(12) Consists of 285,714 shares of our common stock obtained in the 2021 PIPE Investment, the voting and investment control of which belongs to Casey H. Hunt, as manager.
(13) Consists of 714,286 shares of our common stock obtained in the 2021 PIPE Investment, the voting and investment control of which belongs to Carter W. Hunt, as president.
(14) Consists of 71,429 shares of our common stock obtained in the 2021 PIPE Investment.
(15) Consists of (i) 500,150 shares of our common stock that were issued upon conversion of the Series J Preferred Stock and (ii) 1,250,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock.
(16) Consists of (i) 625,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock and (ii) 214,286 shares of our common stock obtained in the 2021 PIPE Investment, the voting and investment control of which belongs to Margaret F. Hunt, as trustee.
(17) Consists of 1,250,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock, the voting and investment control of which belongs to David S. Hunt, president of D.S. Hunt Corp., its general partner.
(18) Consists of 1,250,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock, the voting and investment control of which belongs to Gage A. Prichard, Sr., Trustee of the William Herbert Hunt Trust Estate, its general partner.
(19) Consists of (i) 1,250,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock and (ii) 714,286 shares of our common stock obtained in the 2021 PIPE Investment, Ronald D. Hurst, as trustee.
(20) Consists of (i) 625,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock and (ii) 214,286 shares of our common stock obtained in the 2021 PIPE Investment, J.M. Mason, as trustee.
(21) Consists of (i) 5,125,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock and (ii) 7,142,857 shares of our common stock obtained in the 2021 PIPE Investment, Gage A. Prichard, Sr., as trustee.
(22) Consists of (i) 500,115 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock and (ii) 357,250 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, the voting and investment control of which belongs to Brittny Allred, as trustee. Mr. Herbert Hunt Allred, one of our directors, is a beneficiary
(23) Consists of (i) 1,250,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock and (ii) 714,286 shares of our common stock obtained in the 2021 PIPE Investment, Davin P. Hunt, as trustee.
(24) Consists of (i) 750,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock and (ii) 428,571 shares of our common stock obtained in the 2021 PIPE Investment, Carter W. Hunt, as president.
(25) Consists of (i) 681,975 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, (ii) 142,900 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, and (iii) 500,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock, the voting and investment control of which belongs to Herbert Hunt Allred.
(26) Consists of 227,325 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock.
(27) Consists of (i) 500,115 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock and (ii) 357,250 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, the voting and investment control of which belongs to Brittny Allred, as trustee.  Mr. Herbert Hunt Allred, one of our directors, is a beneficiary.

 

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(28) Consists (i) 10,000,000 shares of our common stock that were issued upon conversion of the Series I Preferred Stock, (ii) 1,429,000 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, and (iii) 4,000,920 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, the voting and investment control of which belongs to Kevin M. Rendino.  Also consists of 7,502,250 shares of our common stock that were issued upon conversion of the Series J Preferred Stock that are registered in the name of B&W Pension Trust, but for which 180 Degree Capital Corp. serves as the investment manager and the voting and investment control of which belongs to Kevin M. Rendino.
(29) Consists of 285,800 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, the voting and investment control of which belongs to Michael Lee Bamburg.
(30) Consists of 545,580 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, the voting and investment control of which belongs to Thomas Scalia.
(31) Consists of 714,500 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, the voting and investment control of which belongs to Charles Frumberg.
(32) Consists of (i) 1,309,392 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock and (ii) 250,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock, the voting and investment control of which belongs to John B. Berding.
(33) Consists of 148,616 shares of our common stock that were issued upon conversion of the Series J Preferred Stock.
(34) Consists of (i) 75,775 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock and (ii) 35,725 shares of our common stock that were issued upon conversion of the Series J Preferred Stock.
(35) Consists of 5,714,286 shares of our common stock obtained in the 2021 PIPE Investment, the voting and investment control of which belongs to H. Eric Semler.  Mr. H. Eric Semler previously served as a director of ours.
(36) Consists of 769,983 shares of our common stock that were issued upon conversion of the Debentures, the voting and investment control of which belongs to Richard Reiss.
(37) Consists of 320,395 shares of our common stock that were issued upon conversion of the Debentures.  Mr. John A. Fichthorn previously served as a director of ours.
(38) Consists of (i) 714,500 shares of our common stock that were issued upon conversion of the Series J Preferred Stock and (ii) 2,197,475 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, the voting and investment control of which belongs to Travis Cocke.
(39) Consists of 200,060 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, the voting and investment control of which belongs to Peter Mitchell Scott IV.
(40) B. Riley Principal Investments, LLC and BRF Investments, LLC are affiliated entities.  Reflects shares beneficially owned by each entity but does not include 2,955,225 shares of our common stock that are issuable upon conversion of Series H Preferred Stock and 625,000 issuable upon the exercise of the 2018 Warrants due to beneficial ownership blockers, all of which are being registered hereunder.
(41) Consists of (i) 7,577,500 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, (ii) 250,000 shares of our common stock that are issuable upon exercise of the 2018 Warrants, (iii) 1,780,534 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, and (iv)  5,831,555 shares of our common stock that were issued upon conversion of the Debentures, the voting and investment control of which belongs to Bryant Riley.  
(42) Consists of (i) 4,094,708 Piggy-back Shares and (ii) 333,410 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, the voting and investment control of which belongs to Bryant Riley
(43) Consists of (i) 2,621,815 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, (ii) 625,000 shares issuable upon exercise of the 2018 Warrants, (iii) 21,792,250 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, (iv) 8,417,500 shares of our common stock that were issued upon conversion of the Series K Preferred Stock, (v) 38,376,090 shares of our common stock issued upon conversion of the Debentures, and (vi) 2,857,143 shares of our common stock issued in the 2021 PIPE Investment, the voting and investment control of which belongs to Bryant Riley.
(44) Consists of 4,546,500 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, the voting and investment control of which belongs to John Lanier.
(45) Consists of 212,170 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, the voting and investment control of which belongs to Thomas Scalia.
(46) Consists of (i) 6,668,200 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, (ii) 20,000,000 shares of our common stock that were issued upon conversion of the Series I Preferred Stock, (iii) 714,500 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, (iv) 1,924,959 shares of our common stock upon conversion of the Debentures, and (v) 7,142,857 shares of our common stock that were issued in the 2021 PIPE Investment, the voting and investment control of which belongs to Brock Pierce.
(47) Consists of 625,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock, the voting and investment control of which belongs to Bruce W. Hunt, as president of its general partner.
(48) Consists of 1,250,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock, the voting and investment control of which belongs to David S. Hunt, as president of its general partner.
(49) Consists of 500,000 shares of our common stock that were issued upon conversion of the Series K Preferred Stock, the voting and investment control of which belongs to Robert Nathaniel Crow, as trustee.
(50) Consists of (i) 1,000,230 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock and (ii) 885,980 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, the voting and investment control of which belongs to Jon D. Gruber, as trustee.
(51) Consists of (i) 303,100 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock and (ii) 192,496 shares of our common stock that were issued upon conversion of the Debentures.
(52) Consists of 27,404,330 shares of our common stock beneficially owned by The Mark and Tammy Strome Family Trust, Strome Mezzanine Fund LP, Mark E. Strome Living Trust U/A dtd 01/15/1997, and Strome Mezzanine Fund II, LP.
(53) Consists of 1,700,000 shares of our common stock that were issued in the 2018 PIPE Investment, the voting and investment control of which belongs to Mark Strome.
(54) Consists of (i) 1,500,000 shares of our common stock that are issuable upon exercise of the Strome Warrant and (ii) 14,548,800 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, the voting and investment control of which belongs to Mark Strome.
(55) Consists of 4,849,600 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, the voting and investment control of which belongs to Mark Strome.
(56) Consists of 4,805,930 shares of our common stock that were issued upon conversion of the Debentures, the voting and investment control of which belongs to Mark Strome.
(57) Consists of 192,496 shares of our common stock that were issued upon conversion of the Debentures.
(58) Consists of 200,000 shares of our common stock that were issued upon conversion of the Series I Preferred Stock.
(59) Consists of (i) 142,900 shares of our common stock that were issued upon conversion of the Series J Preferred Stock and (ii) 1,154,975 shares of our common stock that were issued upon conversion of the Debentures, the voting and investment control of which belongs to Luke E. Fichthorn.
(60) Consists of 318,591 shares of our common stock that were issued upon conversion of the Debentures.
(61) Consists of 30,310 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock.
(62) Consists of 30,310 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock.
(63) Consists of 30,310 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock.
(64) Consists of 30,310 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock.
(65) Consists of 30,310 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock.
(66) Consists of 303,100 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock.
(67) Consists of 606,200 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock, the voting and investment control of which belongs to James C. Heckman, Jr.
(68) Consists of 390,999 shares of our common stock that are issuable upon conversion of the Series H Preferred Stock.

 

 

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PLAN OF DISTRIBUTION

 

The Selling Stockholders of the Shares and any of their pledgees, assignees, and successors-in interest may, from time to time, sell, transfer, distribute, or otherwise dispose of any or all of their Shares covered hereby on any stock exchange, market, or trading facility on which shares of our common stock are traded or in private transactions. The Shares covered by this prospectus may be sold at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, at fixed prices, or at negotiated prices.

 

The Selling Stockholders may use any one or more of the following methods when disposing of their Shares:

 

  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
     
  block trades in which the broker-dealer will attempt to sell the Shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
     
  purchases by a broker-dealer as principal and resale by the broker-dealer for its accounts;
     
  an exchange distribution in accordance with the rules of the applicable exchange;
     
  privately negotiated transactions;
     
  settlement of short sales;
     
  through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
     
  in market transactions, including transactions on a national securities exchange or quotations service or over-the-counter market;
     
  directly to one or more purchasers;
     
  through agents;
     
  in transactions through broker-dealers that agree with the Selling Stockholders to sell a specified number of such Shares at a stipulated price per share;
     
  a combination of any such methods of sale; or
     
  any other method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell the Shares under Rule 144 or any other exemption from registration under the Securities Act, if available, rather than under this prospectus.

 

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of the Shares, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

 

In connection with the sale of the Shares or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Shares in the course of hedging the positions they assume. The Selling Stockholders may also sell the Shares short and deliver these Shares to close out their short positions, or loan or pledge the Shares to broker-dealers that in turn may sell these Shares. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of the Shares offered by this prospectus, which Shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

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The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the Shares.

 

We are required to pay all fees and expenses incident to the registration of the Shares to be offered and sold pursuant to this prospectus, which we expect to be approximately $185,385. We have agreed to indemnify the Selling Stockholders against certain losses, claims, damages, and liabilities, including liabilities under the Securities Act.

 

We agreed to keep this prospectus effective until all of the Shares have been sold pursuant to this prospectus or Rule 144 under the Securities Act. The resale Shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale Shares covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with. We intend to amend this registration statement to register the resale Shares on Form S-3 as soon as reasonably practicable after August 16, 2022, the one-year anniversary date of we became current in our Exchange Act periodic filings; provided, that, we remain current in our Exchange Act filing obligations, of which there can be no assurance.

 

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale Shares may not simultaneously engage in market making activities with respect to our common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of our common stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

 

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DESCRIPTION OF OUR SECURITIES

 

The following is a summary of all material characteristics of our capital stock as set forth in our Certificate of Incorporation and our Bylaws. The summary does not purport to be complete and is qualified in its entirety by reference to our Certificate of Incorporation and our Bylaws, each of which are incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and to the provisions of the Delaware General Corporation Law (the “DGCL”). We encourage you to review complete copies of our Certificate of Incorporation and our Bylaws, and the applicable provisions of the DGCL for additional information.

 

General

 

Our authorized capital stock consists of 1,001,000,000 shares, divided into 1,000,000,000 shares of our common stock and 1,000,000 shares of Preferred Stock. Under our Certificate of Incorporation, our Board has the authority to issue such shares of our common stock and Preferred Stock in one or more classes or series, with such voting powers, designations, preferences and relative, participating, optional or other special rights, if any, and such qualifications, limitations or restrictions thereof, if any, as shall be provided for in a resolution or resolutions adopted by our Board and filed as designations.

 

Common Stock

 

As of November 9, 2021, 264,202,421 shares of our common stock were outstanding.

 

Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders, including the election of directors, and are entitled to receive dividends when and as declared by our Board out of funds legally available therefore for distribution to stockholders and to share ratably in the assets legally available for distribution to stockholders in the event of the liquidation or dissolution, whether voluntary or involuntary, of the Company. We have not paid any dividends and do not anticipate paying any dividends on our common stock in the foreseeable future. It is our present policy to retain earnings, if any, for use in the development of our business. Our common stockholders have cumulative voting rights in the election of directors and have no preemptive, subscription, or conversion rights. Our common stock is not subject to redemption by us.

 

The transfer agent and registrar for our common stock is American Stock Transfer and Trust Company, LLC.

 

Preferred Stock

 

Of the 1,000,000 shares of Preferred Stock authorized, our Board has previously designated:

 

  1,800 shares of Preferred Stock as Series G Convertible Preferred Stock (“Series G Preferred Stock”); of which approximately 168 shares remain outstanding as of November 9, 2021;
     
  23,000 shares of Preferred Stock as Series H Preferred Stock; of which 19,546 shares remain outstanding as of November 9, 2021; and
     
  600,000 shares of Preferred Stock as Series L Junior Participating Preferred Stock, none of which is currently outstanding.

 

Of the 1,000,000 shares of Preferred Stock, 375,200 shares of Preferred Stock remain available for designation by our Board as of November 9, 2021. Accordingly, our Board is empowered, without stockholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of Preferred Stock could have the effect of restricting dividends on our common stock, diluting the voting power of our common stock, impairing the liquidation rights of our common stock, or delaying or preventing a change in control of us, all without further action by our stockholders.

  

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Series G Preferred Stock

 

The Series G Preferred Stock is convertible into shares of our common stock, at the option of the holder, subject to certain limitations. We may require holders to convert all (but not less than all) of the Series G Preferred Stock or buy out all outstanding shares of Series G Preferred Stock at the liquidation value of approximately $168,500. Holders of Series G Preferred Stock are not entitled to dividends and have no voting rights, unless required by law or with respect to certain matters relating to the Series G Preferred Stock.

 

Upon a change in control, sale of or similar transaction, as defined in the Certificate of Designation for the Series G Preferred Stock, the holder of the Series G Preferred Stock has the option to deem such transaction as a liquidation and may redeem the approximately 168 shares outstanding at the liquidation value of $1,000 per share, or an aggregate amount of approximately $168,500. The sale of all our assets on June 28, 2007 triggered the redemption option.

 

Series H Preferred Stock

 

The Series H Preferred Stock has a stated value of $1,000, convertible into shares of our common stock, at the option of the holder subject to certain limitations, at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share. In addition, if at any time prior to the nine month anniversary of the closing date, we sell or grant any option or right to purchase or issue any shares of our common stock, or securities convertible into shares of our common stock, with net proceeds in excess of $1.0 million in the aggregate, entitling any person to acquire shares of our common stock at an effective price per share that is lower than the then conversion price (such lower price, the “Base Conversion Price”), then the conversion price will be reduced to equal the Base Conversion Price. All the shares of Series H Preferred Stock automatically convert into shares of our common stock on the fifth anniversary of the closing date at the then-conversion price. The number of shares issuable upon conversion of the Series H Preferred Stock will be adjusted in the event of stock splits, stock dividends, combinations of shares, and similar transactions. Each share of Series H Preferred Stock is entitled to vote on an as-if-converted to common stock basis, subject to beneficial ownership blocker provisions and other certain conditions.

 

Rights Agreement and Series L Junior Participating Preferred Stock

 

On May 4, 2021, the Special Finance & Governance Committee of our Board declared a dividend of one preferred stock purchase right (each, a “Right”) for (i) each outstanding share of our common stock and (ii) each share of our common stock issuable upon conversion of each share of our Series H Preferred Stock. The dividend was paid to stockholders of record as of May 14, 2021. Each Right entitles the registered holder, subject to the terms of the Rights Agreement to purchase from us one one-thousandth of a share of our Series L Junior Participating Preferred Stock at a price of $4.00, subject to certain adjustments (the “Exercise Price”).

 

In general terms, and subject to certain exceptions, the Rights Agreement works by significantly diluting the stock ownership of any person or group of affiliated or associated persons who, at any time after the date of the Rights Agreement, acquires, or obtains the right to acquire, beneficial ownership of 15% or more of the outstanding shares of our common stock, on a fully diluted basis without the approval of our Board.

 

Subject to certain exceptions, the Rights will not be exercisable until the earlier to occur of (i) the close of business on the tenth business day after a public announcement or filing that a person has, or group of affiliated or associated persons have, become an Acquiring Person (as defined below) or (ii) the close of business on the tenth business day after the commencement by any person of, or the first public announcement of the intention of any person to commence, a tender offer or exchange offer the consummation of which would result in any person becoming an Acquiring Person (the earlier of such dates being called the “Distribution Date”). “Acquiring Person” is a person or group of affiliated or associated persons who, at any time after the date of the Rights Agreement, have acquired, or obtained the right to acquire, beneficial ownership of 15% or more of our outstanding shares of our common stock, including through such person’s ownership of the Preferred Stock. No such person or group of affiliated or associated persons having beneficial ownership of 15% or more of such outstanding shares at the time of the first announcement of adoption of the Rights Agreement will be deemed an Acquiring Person until such time as such person or group becomes the beneficial owner of additional shares of our common stock (other than by reason of a stock dividend, stock split or other corporate action effected by us in which all holders of our common stock are treated equally).

 

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Each share of Series L Junior Participating Preferred Stock will be entitled, when, as and if declared, to a preferential per share quarterly dividend payment equal to the greater of (i) $1.00 per share or (ii) 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, in each case, paid to holders of our common stock during such period. Each share of Series L Junior Participating Preferred Stock will entitle the holder thereof to 1,000 votes on all matters submitted to a vote of our stockholders. In the event of any merger, consolidation, or other transaction in which shares of our common stock are converted or exchanged, each share of Series L Junior Participating Preferred Stock will be entitled to receive 1,000 times the amount received per one share of our common stock.

 

Because of the nature of the Series L Junior Participating Preferred Stock’s dividend, liquidation and voting rights, the value of the one one-thousandth interest in a share of Series L Junior Participating Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.

 

In the event that any person or group of persons becomes an Acquiring Person, each holder of a Right, other than the Rights beneficially owned by the Acquiring Person, affiliates and associates of the Acquiring Person and certain transferees thereof (which will thereupon become null and void), will thereafter have the right to receive upon exercise of a Right that number of shares of common stock (or at our option, other of our securities) having a market value of two times the Exercise Price, unless the Rights were earlier redeemed or exchanged.

 

Our Board may amend or supplement the Rights Agreement without the approval of any holders of Rights, including, without limitation, in order to (a) cure any ambiguity, (b) correct inconsistent provisions, (c) alter time period provisions, including, without limitation, the expiration date, or (d) make additional changes to the Rights Agreement that our Board deems necessary or desirable. However, from and after the time when any person or group of persons becomes an Acquiring Person, the Rights Agreement may not be supplemented or amended in any manner that would adversely affect the interests of the holders of Rights (other than the holders of Rights that have become null and void in accordance with the Rights Agreement).

 

Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as one of our stockholders, including, without limitation, the right to vote or to receive dividends.

 

Registrable Shares

 

This prospectus relates to an offering of up to 259,752,977 Shares that were previously issued to the Selling Stockholders or are issuable to the Selling Stockholders upon exercise or conversion of certain securities held by them. The following sets forth descriptions of the various private placements pursuant to which the Selling Stockholders obtained the Shares we are registering herein.

 

Common Stock Issuances – 2018 PIPE Investment, 2021 PIPE Investment, and Piggy-back Shares

 

We are registering an aggregate of 33,658,996 shares of our common stock in connection with the 2018 PIPE Investment and the 2021 PIPE Investment as more fully described below.

 

January 2018 SPA

 

On January 4, 2018, we entered into the January 2018 SPA with Strome Trust, pursuant to which we issued 1,200,000 shares of our common stock at a price of $2.50 per share. We received net proceeds after estimated issuance costs of approximately $3.0 million. In connection with this offering, MDB Capital Group, LLC (“MDB”) served as placement agent and was entitled to receive an aggregate of 60,000 shares of our common stock, as well as warrants to purchase an additional 60,000 shares of common stock. To date, neither the 60,000 shares of common stock nor the warrants have been issued. In addition, we entered into the January 2018 Registration Rights Agreement, pursuant to which we agreed to register the 1,200,000 shares of our common stock for resale. Pursuant to the January 2018 Registration Rights Agreement, we committed to file a registration statement no later than 200 days after the closing of the private placement and to cause the registration statement to become effective no later than the earlier of (i) seven business days after the SEC informs us that no review of the registration statement will be made or that the SEC has no further comments on the registration statement. The January 2018 Registration Rights Agreement also provides for liquidated damages upon the occurrence of certain events, including our failure to file the registration statement or cause it to become effective by the deadlines set forth above. The amount of liquidated damages payable to Strome Trust would be 1% of the aggregate amount invested by Strome Trust (or the value of the placement agent shares, as applicable) for each 30-day period, or pro rata portion thereof, during which the default continues, up to a maximum amount of 5.0% of the aggregate amount invested by Strome Trust pursuant to the January 2018 SPA, in the case of Strome Trust, or the value of the securities registered by the placement agent. We were not able to meet these deadlines. Accordingly, as of November 9, 2021, we have incurred approximately $15,000 in liquidated damages expenses.

 

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The shares of our common stock issued pursuant to the January 2018 SPA were offered and sold exclusively to Strome Trust, an accredited investor, in a transaction exempt from registration under the Securities Act, as a transaction not involving a public offering, pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

 

March 2018 SPA

 

On March 30, 2018, we entered into the March 2018 SPA, pursuant to which we issued and sold 500,000 shares at a price per share of $2.50 to Strome Trust, for total gross proceeds of approximately $1.3 million. In addition, we entered into the March 2018 Registration Rights Agreement, pursuant to which we agreed to register the 500,000 shares of our common stock for resale. Pursuant to the March 2018 Registration Rights Agreement, we committed to file the registration statement no later than 270 days after the closing and to cause the registration statement to become effective no later than the earlier of (i) 7 business days after the SEC informs us that no review of the registration statement will be made or (ii) when the SEC has no further comments on the registration statement. The March 2018 Registration Rights Agreement also provides for liquidated damages upon the occurrence of certain events, including our failure to file the registration statement or to cause it to become effective by the deadlines set forth above. The amount of liquidated damages payable to Strome Trust is 1.0% of the aggregate amount invested for each 30-day period, or pro rata portion thereof, during which the default continues, up to a maximum amount of 5.0% of the aggregate amount invested. Strome Trust waived the liquidated damages when it converted certain notes payable into Series H Preferred Stock in August 2018.

 

The shares of our common stock issued pursuant to the March 2018 SPA were offered and sold exclusively to Strome Trust, an accredited investor, in a transaction exempt from registration under the Securities Act, as a transaction not involving a public offering, pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

 

May 2021 SPAs and June 2021 SPA

 

On May 20 and 25, 2021, we entered into the May 2021 SPAs, pursuant to which we sold an aggregate of 21,435,718 shares of our common stock, at a per share price of $0.70, for aggregate gross proceeds of approximately $15.0 million in a private placement. On June 2, 2021, we entered into the June 2021 SPA, pursuant to which we sold an aggregate of 7,142,857 shares of our common stock at a per share price of $0.70, for gross proceeds of approximately $5.0 million in a private placement.

 

In connection with the 2021 PIPE Investment, we also entered into the 2021 PIPE Registration Rights Agreements with such investors, pursuant to which we agreed to register the shares of our common stock for resale on behalf of such investors. Pursuant to the 2021 PIPE Registration Rights Agreements, we committed to file the registration statement on the earlier of (i) in the event we do not obtain a waiver from the holders of the shares of our common stock that were issued upon the conversion of the Series K Preferred Stock (the “Waiver”), within ten (10) calendar days following the date our registration statement(s) on Form S-1, registering for resale shares of our common stock that were issued in connection with offerings prior to the dates of the 2021 PIPE Registration Rights Agreements (the “Prior Registration Statements”), is declared effective by the SEC and (ii) in the event we do obtain the Waiver, the earliest practicable date on which we are permitted by SEC guidance to file the initial registration statement following the filing of the Prior Registration Statements (the “Filing Date”). We are also committed to cause the registration statement to become effective by no later than 90 days after the Filing Date (or, in the event of a full review by the staff of the SEC, 120 days following the Filing Date). The 2021 PIPE Registration Rights Agreements provides for liquidated damages upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested by such purchaser pursuant to the May 2021 SPAs or June 2021 SPA, as applicable.

 

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The shares of our common stock issued pursuant to the 2021 PIPE Investment were offered and sold exclusively to accredited investors, in transactions exempt from registration under the Securities Act, as transactions not involving a public offering, pursuant to Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.

 

Common Stock Issuances – Piggy-back Shares

 

We previously granted a stockholder piggy-back registration rights with respect to 4,094,708 shares of our common stock in connection with a settlement and release. Accordingly, we are registering for resale all 4,094,708 shares.

 

Common Stock Issuances – Debenture Conversions

 

On December 12, 2018, we entered into the December 2018 SPAs with three accredited investors, pursuant to which we issued to the investors the Debentures in the aggregate principal amount of approximately $13.1 million, which included (i) the roll-over of an aggregate of approximately $3.6 million in principal and interest of those certain 10% OID senior secured convertible debentures previously issued to two of the investors in October 2018 and (ii) a placement fee of $540,000 for our placement agent in the offering. After taking into account legal fees and expenses of the investors, we received net proceeds of approximately $9.0 million. On March 18 and 27, 2019, we entered into the March 2019 SPAs with accredited investors, including our former Executive Chairman, John Fichthorn, pursuant to which we issued to the investors the Debentures in the aggregate principal amount of approximately $2.0 million, which included placement fees of $114,000 payable to B. Riley FBR for acting as our placement agent in the offering. After taking into account legal fees and expenses, we received net proceeds of approximately $1.9 million. On April 8, 2019, we entered into the April 2019 SPA with an accredited investor, pursuant to which we issued to the investor the Debenture in the aggregate principal amount of $100,000. The Debentures were due and payable on December 31, 2020, and interest accrued on the Debentures at the rate of 12% per annum, payable on the earlier of conversion or the maturity date. The Debentures issued pursuant to the December 2018 SPAs had conversion prices of $0.33 per share, subject to adjustment. The Debentures issued pursuant to the March 2019 SPAs and the April 2019 SPA had conversion prices of $0.40 per share, subject to adjustment.

 

In connection with the December 2018 SPAs, the March 2019 SPAs, and the April 2019 SPA, we entered into the Debenture Registration Rights Agreements with the investors, pursuant to which we agreed to register for resale the shares of our common stock issuable upon conversion of the Debentures by the investors. Pursuant to the Debenture Registration Rights Agreements, we committed to file a registration statement by no later than the 30th calendar day following the date we filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 with the SEC, but in no event later than May 15, 2019, but after satisfaction of other outstanding registration rights provisions, and to cause the registration statement to become effective by no later than 90 days after the filing date (or, in the event of a full review by the staff of the SEC, 120 days following the filing date). The Debenture Registration Rights Agreements provides for liquidated damages upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested by such investor pursuant to the December 2018 SPAs, the March 2019 SPAs, or the April 2019 SPA, as applicable. We were not able to meet these deadlines. Accordingly, as of November 9, 2021, we had incurred approximately $1.1 million in liquidated damages expenses.

 

The offer and sale of the Debentures, including the shares of our common stock underlying the Debentures, were not registered under the Securities Act. The Debentures, including the shares of our common stock underlying the Debentures, were sold in reliance upon the exemption from registration afforded by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.

 

On December 31, 2020, noteholders converted the Debentures representing an aggregate of approximately $18.1 million of the then-outstanding principal and accrued but unpaid interest into 53,887,470 shares of our common stock at effective conversion per-share prices ranging from $0.33 to $0.40. We are registering 53,887,470 shares of our common stock hereunder.

 

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Common Stock Issuances – Preferred Stock Conversions

 

Series I Preferred Stock Issuances

 

On June 28, 2019, we issued shares of the Series I Preferred Stock, pursuant to the Series I SPAs entered into with certain accredited investors. In accordance with the Series I SPAs, we issued an aggregate of 23,100 shares of Series I Preferred Stock at a stated value of $1,000, initially convertible into 46,200,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.50 per share, for aggregate gross proceeds of approximately $23.1 million. B. Riley FBR acted as placement agent for the financing and earned a fee of approximately $1.4 million in consideration for its services plus approximately $73,900 in reimbursement of legal fees and other transaction costs.

 

In connection with the Series I SPAs, we entered into the Series I Registration Rights Agreements with the accredited investors, pursuant to which we agreed to register for resale the shares of our common stock issuable upon conversion of the Series I Preferred Stock. Pursuant to the Series I Registration Rights Agreements, we committed to file the registration statement by no later than the 30th calendar day following the date we filed with the SEC our (i) Annual Report on Form 10-K for the fiscal year ended December 31, 2018, (ii) all of our required Quarterly Reports on Form 10-Q since the quarter ended September 30, 2018, through the quarter ended September 30, 2019 and our refiling of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, and (iii) Current Report on Form 8-K in connection with the acquisitions of The Street and our license with ABG, but in no event later than December 1, 2019. We also committed to cause the registration statement to become effective by no later than 90 days after the filing date (or, in the event of a full review by the staff of the SEC, 120 days following the filing date). The Series I Registration Rights Agreements provides for liquidated damages upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested by such investor pursuant to the Series I SPAs. We were not able to meet these deadlines. Accordingly, as of November 9, 2021, we had incurred approximately $3.3 million in liquidated damages expenses.

 

The Series I Preferred Stock, and the shares issuable upon conversion of the Series I Preferred stock, were not registered under the Securities Act pursuant to an exemption under Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder for transactions not involving a public offering.

 

Series J Preferred Stock Issuances

 

On October 7, 2019, we issued shares of the Series J Preferred Stock, pursuant to the 2019 Series J SPAs entered into with certain accredited investors. In accordance with the 2019 Series J SPAs, we issued an aggregate of 20,000 shares of Series J Preferred Stock at a stated value of $1,000, initially convertible into 28,571,428 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.70 per share, for aggregate gross proceeds of approximately $20.0 million. B. Riley FBR acted as placement agent for the financing and earned a fee of approximately $525,200 in consideration for its services plus approximately $43,000 in reimbursement of legal fees and other transaction costs.

 

In connection with the 2019 Series J SPAs, we entered into a registration rights agreement with the accredited investors (the “Series J 2019 Registration Rights Agreements”), pursuant to which we agreed to register for resale the shares of our common stock issuable upon conversion of the Series J Preferred Stock. Pursuant to the Series J 2019 Registration Rights Agreements, we committed to file the registration statement by no later than the 30th calendar day following the date we filed our (i) Annual Report on Form 10-K for the fiscal year ended December 31, 2018, (ii) all our required Quarterly Reports on Form 10-Q since the quarter ended September 30, 2018, through the quarter ended September 30, 2019, and (iii) Current Reports on Form 8-K in connection with the acquisitions of The Street, Say Media, Inc. (“Say Media”) and HubPages, Inc. (“HubPages”), and our license with ABG, with the SEC, but in no event later than March 31, 2020. We also committed to cause the registration statement to become effective by no later than 90 days after the filing date (or, in the event of a full review by the staff of the SEC, 120 days following the filing date). The Series J 2019 Registration Rights Agreement provides for liquidated damages upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested by such investor pursuant to the 2019 Series J SPAs. We were not able to meet these deadlines. Accordingly, as of November 9, 2021, we had incurred approximately $2.8 million in liquidated damages expenses.

 

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On September 4, 2020, we issued additional shares of our Series J Preferred Stock pursuant to the 2020 Series J SPAs. In accordance with the 2020 Series J SPAs, we issued an aggregate of 10,500 shares of Series J Preferred Stock at a stated value of $1,000 per share, initially convertible into 15,000,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.70, for aggregate gross proceeds of approximately $6.0 million.

 

In connection with the 2020 Series J SPAs, we entered into a registration rights agreement with the accredited investors (the “Series J 2020 Registration Rights Agreements”), pursuant to which we agreed to register for resale the shares of our common stock issuable upon conversion of the Series J Preferred Stock. Pursuant to the Series J 2020 Registration Rights Agreements, we agreed to register the shares issuable upon conversion of the Series J Preferred Stock for resale by the investors. We committed to file the registration statement by no later than the 30th calendar day following the date we filed our (i) Annual Reports on Form 10-K for the fiscal years ended December 31, 2018 and December 31, 2019, (ii) all our required Quarterly Reports on Form 10-Q since the quarter ended September 30, 2018, through the quarter ended September 30, 2020, and (iii) any Form 8-K Reports that may be required through the last of the aforementioned filings with the SEC, but in no event later than April 30, 2021. We have also committed to cause the registration statement to become effective by no later than 60 days after the filing date (or, in the event of a full review by the staff of the SEC, 120 days following the filing date). The Series J 2020 Registration Rights Agreement provides for liquidated damages upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested by the investors pursuant to the 2020 Series J SPAs. We were not able to meet these deadlines. Accordingly, as of November 9, 2021, we had incurred approximately $754,440 in liquidated damages expenses.

 

The Series J Preferred Stock, and the shares issuable upon conversion of the Series J Preferred Stock, were not registered under the Securities Act pursuant to an exemption under Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder for transactions not involving a public offering.

 

Series K Preferred Stock

 

Between October 23, 2020 and November 11, 2020, we entered into the Series K SPAs with accredited investors, pursuant to which we issued an aggregate of 18,042 of Series K Preferred Stock at a stated value of $1,000 per share, initially convertible into 45,105,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.40 per share, for aggregate gross proceeds of approximately $18.0 million. B. Riley FBR acted as placement agent for the financing and earned a fee of $560,500 in consideration for its services.

 

In connection with the Series K SPAs, we entered into the Series K Registration Rights Agreements with the accredited investors, pursuant to which we agreed to register for resale the shares of our common stock issuable upon conversion of the Series K Preferred Stock. Pursuant to the Series K Registration Rights Agreements, we committed to file the registration statement by no later than the 30th calendar day following the date we filed our (i) Annual Reports on Form 10-K for the fiscal year ended December 31, 2018 and December 31, 2019, (ii) all its required Quarterly Reports on Form 10-Q since the quarter ended September 30, 2018, through the quarter ended September 30, 2020, and (iii) any Form 8-K Reports that the Company is required to file with the SEC; provided, however, if such 30th calendar day is on or after February 12, 2021, then such 30th calendar date will be tolled until the 30th calendar day following the date that we file our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. We also committed to cause the registration statement to become effective by no later than 90 days after the filing date (or, in the event of a full review by the staff of the SEC, 120 days following the filing date). The Series K Registration Rights Agreements provides for liquidated damages upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested by such investor pursuant to the Series K SPAs. We were not able to meet these deadlines. Accordingly, as of November 9, 2021, we had incurred approximately $756,690 in liquidated damages expenses.

 

Conversions

 

On December 18, 2020, we filed the Certificate of Amendment, to increase the number of authorized shares of our common stock. Upon the filing of the Certificate of Amendment, all of our issued and outstanding shares of Series I Preferred Stock, Series J Preferred Stock, and Series K Preferred Stock automatically converted into shares of our common stock. Accordingly, we are registering for resale 45,200,000 shares of our common stock that were issued upon conversion of the Series I Preferred Stock, 40,562,165 shares of our common stock that were issued upon conversion of the Series J Preferred Stock, and 29,917,500 shares of our common stock that were issued upon conversion of the Series K Preferred Stock.

 

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Common Stock Issuable Upon Exercise of Warrants

 

We are registering an aggregate of 2,375,000 shares of our common stock that may be issuable upon the exercise of the Warrants as more fully described below.

 

Strome Warrant

 

On June 15, 2018, we modified the January 2018 SPA and the March 2018 SPA, to eliminate a make-whole provision under which we were committed to issue up to 1,700,000 shares of our common stock in certain circumstances. The modification removed the prior uncertainty of our obligation under these agreements. In exchange for the modification, we issued to a designee of Strome Trust, the investor, the Strome Warrant to purchase up to 1,500,000 shares of our common stock. The Strome Warrant is exercisable for a period of five years at an initial exercise price of $1.19 per share, which has been adjusted to $0.50 per share. We agreed to register for resale the 1,500,000 shares of our common stock underlying the Strome Warrant, and the parties agreed that such registration rights would be as set forth in the March 2018 Registration Rights Agreement (which is described in more detail above). If the underlying shares are registered, the Strome Warrant is exercisable for cash only. If the underlying shares are not registered, the Strome Warrant may be exercised on a cashless basis.

 

2018 Warrants

 

On October 18, 2018, we entered into securities purchase agreements with two accredited investors, pursuant to which we issued the 2018 Warrants exercisable for up to 875,000 shares of our common stock, among other securities. The 2018 Warrants are exercisable for a period of seven years at an initial exercise price of $1.00 per share, subject to customary anti-dilution and other adjustments. The 2018 Warrants also provide that upon the consummation of a subsequent financing, the $1.00 exercise price will be adjusted to (i) in the event that security issued in such subsequent financing is shares of our common stock, 125% of the effective per share purchase price of our common stock in such subsequent financing, (ii) in the event that the security issued in such subsequent financing is a common stock equivalent, 100% of the effective per-share purchase price of our common stock underlying the common stock equivalent issued in such subsequent financing, or (iii) in the event that the primary securities issued such subsequent financing includes a combination of shares of our common stock and common stock equivalents, the greater of (a) 125% of the effective per share purchase price of shares of our common stock issued in such subsequent financing or (b) 100% of the effective per share purchase price of the shares of our common stock underlying the common stock equivalents. The securities purchase agreements granted the investors piggyback registration rights, pursuant to which we agreed that if we file with the SEC a registration statement relating to an offering of our common stock of our own account or the account of others under the Securities Act, other than on a Form S-4 or a Form S-8, we would notify the investors and provide them with the opportunity to have the shares of our common stock underlying the 2018 Warrants registered for resale. If at any time after the six-month anniversary of the issuance of the 2018 Warrants, there is no effective registration statement covering the resale of the shares of our common stock underlying the 2018 Warrants, the 2018 Warrants may be exercised on a cashless basis. The current exercise price of the 2018 Warrants is $0.33 per share.

 

Common Stock Issuable Upon Conversion of Series H Preferred Stock

 

On August 10, 2018, we entered into the 2018 Series H SPAs with certain accredited investors pursuant to which we issued an aggregate of 19,399 shares of Series H Preferred Stock at a stated value of $1,000, initially convertible into 58,784,848 shares of our common stock, at the option of the holder subject to certain limitations, at a conversion right equal to the stated value divided by the conversion price of $0.33 per share, for aggregate gross proceeds of approximately $19.4 million. B. Riley FBR acted as placement agent for the financing. In consideration for its services as placement, we paid B. Riley a fee of $575,000 (including a previously paid retainer of $75,000) and issued to B. Riley 669 shares of Series H Preferred Stock. In addition, entities affiliated with B. Riley purchased 5,592 shares of Series H Preferred Stock in the financing.

 

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Between August 14, 2020 and August 20, 2020, we entered into the 2020 Series H SPAs for the sale of additional shares of Series H Preferred Stock with certain accredited investors, pursuant to which we issued an aggregate of 2,253 shares, at a stated value of $1,000 per share, initially convertible into 6,825,000 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share, for aggregate gross proceeds of approximately $2.7 million. On October 28, 2020, we entered into a mutual rescission agreement with two of the investors, pursuant to which the securities purchase agreements associated with 2,145 shares of Series H Preferred Stock were rescinded and deemed null and void.

 

All the shares of Series H Preferred Stock automatically convert into shares of our common stock on the fifth anniversary of the closing date at the then-conversion price.

 

Finally, on October 31, 2020, we entered into an exchange agreement with a former executive officer pursuant to which he agreed to convert the outstanding principal amount, plus accrued but unpaid interest, owed to him pursuant to promissory notes into 389 shares of Series H Preferred Stock, at a stated value of $1,000 per share, initially convertible into 1,178,788 shares of our common stock at a conversion rate equal to the stated value divided by the conversion price of $0.33 per share. We granted the former executive officer piggyback registration rights with respect to these shares of our common stock pursuant a General Release and Continuing Obligations Agreement dated June 3, 2021 (“GRCOA”).

 

In connection with the issuances of the Series H Preferred Stock, we also entered into registration rights agreements with the investors, pursuant to which we agreed to register the shares issuable upon conversion of the Series H Preferred Stock for resale. We committed to file the registration statement by no later than 75 days after the closing date and to cause the registration statement to become effective by no later than 120 days after the closing date (or, in the event of a full review by the staff of the SEC, 150 days following the Closing Date). The registration rights agreement provides for liquidated damages upon the occurrence of certain events up to a maximum amount of 6% of the aggregate amount invested by such investor. We were not able to meet these deadlines. Accordingly, as of November 9, 2021, we had incurred approximately $3.1 million in liquidated damages expenses.

 

Accordingly, we are registering up to 54,151,846 shares of our common stock issuable upon the conversion of issued and outstanding shares of Series H Preferred Stock.

 

Certain Provisions of our Certificate of Incorporation, our Bylaws, and the DGCL

 

Certain provisions in our Certificate of Incorporation and Bylaws, as well as certain provisions of the DGCL, may be deemed to have an anti-takeover effect and may delay, deter, or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premium being paid over the market price of the shares held by stockholders. These provisions contained in our Certificate of Incorporation and Bylaws include the items described below.

 

  Special Meetings of Stockholders. Our Bylaws provide that special meetings of our stockholders may be called only by a majority of our Board, the Chairman of our Board, our Chief Executive Officer, or President (in the absence of our Chief Executive Officer).
     
  Stockholder Advance Notice Procedures. Our Bylaws provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide timely notice in writing and also specify requirements as to the form and content of a stockholder’s notice. These provisions may delay or preclude stockholders from bringing matters before a meeting of our stockholders or from making nominations for directors at a meeting of stockholders, which could delay or deter takeover attempts or changes in our management.

 

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  Exclusive Forum. Our Bylaws provide that unless we consent in writing to the selection of an alternative forum, the courts in the State of Delaware are, to the fullest extent permitted by applicable law, the sole and exclusive forum for any claims, including claims in the right of the Company, any action asserting a claim arising pursuant to any provision of the DGCL, our Certificate of Incorporation, or our Bylaws, any action to interpret, apply, enforce, or determine the validity of our Certificate of Incorporation or our Bylaws, or any action asserting a claim governed by the internal affairs doctrine.
     
  No Action by Written Consent. Our Certificate of Incorporation provides that any action required or permitted to by taken by our stockholders must be effected at a duly constituted annual or special meeting of the stockholders.
     
  Amendments to our Certificate of Incorporation. Any amendments to our Certificate of Incorporation requires a supermajority vote unless our Board recommends to our stockholders that they approve such amendment.
     
  Undesignated Preferred Stock. Because our Board has the power to establish the preferences and rights of the shares of any additional series of Preferred Stock, it may afford holders of any Preferred Stock preferences, powers, and rights, including voting and dividend rights, senior to the rights of holders of our common stock, which could adversely affect the holders of our common stock and could discourage a takeover of us even if a change of control of the Company would be beneficial to the interests of our stockholders.

 

These, other provisions contained in our Certificate of Incorporation and Bylaws, and the Rights are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our Board. However, these provisions could delay or discourage transactions involving an actual or potential change in control of us, including transactions in which stockholders might otherwise receive a premium for their shares over then current prices. Such provisions could also limit the ability of stockholders to remove current management or approve transactions that stockholders may deem to be in their best interests.

 

In addition, we are subject to the provisions of Section 203 of the DGCL. Section 203 of the DGCL prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the person became an interested stockholder, unless:

 

  The board of directors of the corporation approved the business combination or other transaction in which the person became an interested stockholder prior to the date of the business combination or other transaction;
     
  Upon consummation of the transaction that resulted in the person becoming an interested stockholder, the person owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding, shares owned by persons who are directors and also officers of the corporation and shares issued under which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
     
  on or subsequent to the date the person became an interested stockholder, the board of directors of the corporation approved the business combination and the stockholders of the corporation authorized the business combination at an annual or special meeting of stockholders by the affirmative vote of at least 66-2/3% of the outstanding voting stock of the corporation that is not owned by the interested stockholder.

 

A “business combination” includes mergers, asset sales, and other transactions resulting in a financial benefit to the interested stockholder. Subject to certain exceptions, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within the prior three years did own, 15% or more of a corporation’s voting stock.

Section 203 of the DGCL could depress our stock price and delay, discourage, or prohibit transactions not approved in advance by our Board, such as takeover attempts that might otherwise involve the payment to our stockholders of a premium over the market price of our common stock.

 

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Limitation of Liability and Indemnification Matters

 

Our Certificate of Incorporation provides that to the fullest extent permitted by the DGCL, a director cannot be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty. DGCL provides that such a provision may not limit the liability of directors:

 

  for any breach of their duty of loyalty to us or to our stockholders;
     
  for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
     
  for unlawful payment of a dividend or unlawful stock repurchase or redemption, as provided under Section 174 of the DGCL; or
     
  for any transaction from which the director derived an improper personal benefit.

 

Any amendment, repeal, or modification of these provisions will be prospective only and would not affect any limitation on liability of a director for acts or omissions that occurred prior to any such amendment, repeal, or modification.

 

Further, our Bylaws provide that we will indemnify, to the fullest extent permitted by the DGCL, as now or hereinafter in effect, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in our right to procure a judgment in our favor by reason of the fact that such person is or was a director or officer of our, or is or was a director or officer of ours serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interests; except that no indemnification will be made in respect of any claim, issue, or matter as to which such person will have been adjudged to be liable to us unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Subject to the requires in our Bylaws and the DGCL, we are not obligated to indemnify any person in connection with any action, suit, or proceeding:

 

  for which payment has actually been made to or on behalf of such person under any statute, insurance policy, indemnity provision, vote, or otherwise, except with respect to any excess beyond the amount paid;
     
  for an accounting or disgorgement of profits pursuant to Section 16(b) of the Exchange Act, or similar provision of federal, state, or local statutory law, or common law, if such person is held liable therefor (including pursuant to any settlement arrangements);
     
  for any reimbursement by such person or any bonus or other incentive-based or equity-based compensation or of any profits realized by such person from the sale of our securities, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement pursuant to Section 304 of Sarbanes, or the payment to us of profits arising from the purchase and sale by such person or securities in violation of Section 306 of Sarbanes, if such is held liable therefor (including pursuant to any settlement arrangements);
     
  initiated by such person, including any proceeding (or any part of any proceeding) initiated by such person against us or our directors, officers, employees, agents, or other indemnitees, unless (i) our Board authorized the proceeding or the relevant part of the proceeding) prior to its initiation, (ii) we provide indemnification, in our sole discretion, pursuant to the powers vested in us under appliable law, (iii) otherwise required to be made pursuant to our Bylaws, or (iv) otherwise required by applicable law; or

 

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  if prohibited by applicable law; provided, however, that if any provision or provisions of our Bylaws be held to be invalid, illegal, or unenforceable for any reason whatsoever: (i) the validity, legality, and enforceability of the remaining provisions of our Bylaws (including, without limitation, each portion of any paragraph or clause containing any such provisions held to be invalid, illegal, or unenforceable, that is not itself held to be invalid, illegal, or unenforceable) will not in any way be affected or impaired thereby; and (ii) to the fullest extent possible, the provisions of our Bylaws (including, without limitation, each such portion of any paragraph or clause containing any such provision held to be invalid, illegal, or unenforceable) will be construed so as to give effect to the intent manifested by the provisions held invalid, illegal, or unenforceable.

 

Our Bylaws also requires us to pay any expenses incurred by any director or officer in defending against any such action, suit, or proceeding in advance of the final disposition of such matter upon receipt of a written request to the fullest extent permitted by law, subject to the receipt of an undertaking by or on behalf of such person to repay all amounts so advanced if it shall ultimately be determined that such person is not entitled to be indemnified as authorized by our Bylaws or otherwise. We believe that the limitation of liability provision in our Bylaws facilitates our ability to continue to attract and retain qualified individuals to serve as directors and officers.

 

Transfer Agent

 

The transfer agent for our common stock is American Stock Transfer and Trust Company, LLC at 6201 15th Avenue, Brooklyn, New York 11219. The transfer agent’s telephone number is (800) 937-5449.

 

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MARKET PRICE AND DIVIDEND INFORMATION

 

Market Information

 

Beginning on December 1, 2016 until September 20, 2021, our common stock was quoted on the OTCM’s Pink Open Market trading under the symbol “MVEN.” Beginning on September 21, 2021, our common stock began to be quoted on the OTCM’s OTCQX. Despite being quoted on the OTCM’s OTCQX, our common stock is still experiencing limited or sporadic quotations; thus, we do not consider the OTCM’s OTCQX an established trading market for purposes of this disclosure.

 

The following table sets forth the high and low bid prices during the periods indicated, as reported by the OTCM. Such prices reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

 

   Common Stock 
   High   Low 
2021          
First Quarter  $3.00   $0.42 
Second Quarter  $1.04   $0.56 
Third Quarter  $0.81   $0.40 
Fourth Quarter (1)  $0.55   $0.31 
2020          
First Quarter  $0.99   $0.31 
Second Quarter  $0.80   $0.30 
Third Quarter  $1.12   $0.50 
Fourth Quarter  $0.90   $0.50 
2019          
First Quarter  $0.75   $0.40 
Second Quarter  $0.70   $0.37 
Third Quarter  $1.00   $0.50 
Fourth Quarter  $0.94   $0.56 

 

  (1) Through November 9, 2021.

 

Holders

 

As of November 9, 2021, there were approximately 252 holders of record of our common stock. We believe that there are additional holders of our common stock who have their stock in “street name” with their brokers. Currently, we cannot determine the approximate number of those street name holders. As of such date, 264,202,421 shares of our common stock were issued and outstanding.

 

Dividends

 

We have never paid cash dividends on our common stock, and our present policy is to retain any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our Board.

 

Rule 144 - Generally

 

In general, under Rule 144 of the Securities Act, as currently in effect, a person (or persons whose shares are required to be aggregated), who is not our affiliate at any time during the preceding three months, and who has beneficially owned the relevant shares of our common stock for at least six months, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell an unlimited number of shares of our common stock into the public markets; provided, that current public information about us is available and, after owning such shares for at least one year, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell an unlimited number of shares of our common stock into the public markets without restriction.

 

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A person who may be deemed an “affiliate” of us or who was our affiliate at any time during the preceding three months, and who has beneficially owned restricted securities for at least six months, including the affiliates, is entitled to sell within any three-month period, a number of shares that does not exceed the greater of: (1) 1% of the then-outstanding shares of our common stock, which equals approximately 2,642,024 shares based on the number of shares of our common stock outstanding as of November 9, 2021, or (2) if and when our common stock is listed on a national securities exchange, the average weekly trading volume of our common stock during the four calendar weeks preceding the date on which notice of such sale was filed under Rule 144.

 

Sales of shares held by our affiliates that are not “restricted” are subject to such volume limitations, but are not subject to the holding period requirement. Sales under Rule 144 by our affiliates are also subject to certain requirements as to the manner of sale, notice, and availability of current public information about us. A person who is not deemed to have been an affiliate of ours at any time during the 90 days preceding a sale by such person, and who has beneficially owned the restricted shares for at least one year, is entitled to sell such shares under Rule 144 without regard to any of the restrictions described above. We cannot estimate the number of shares of our common stock that our existing stockholders will elect to sell under Rule 144.

 

Rule 144 – Restrictions on the Use of Rule 144 by Shell Companies or Former Shell Companies

 

Because we may be deemed previously to have been a “shell company,” under such circumstances sales of our securities pursuant to Rule 144 under the Securities Act may not be made unless, among other things, at the time of a proposed sale, we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and have filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 8-K reports. Because, as a possible former shell company, the reporting requirements of Rule 144(i) will apply regardless of holding period, restrictive legends on certificates for shares of our common stock cannot be removed except in connection with an actual sale that is subject to an effective registration statement under, or an applicable exemption from the registration requirements of, the Shares. Because under such circumstances our unregistered securities may not be sold pursuant to Rule 144 unless we continue to meet such requirements, any unregistered securities we issue will have limited liquidity unless we continue to comply with such requirements.

 

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BUSINESS

 

General

 

We operate a best-in-class digital media platform empowering premium publishers who impact, inform, educate and entertain. Our focus is on leveraging our Platform and iconic brands in targeted verticals to maximize the audience, improve engagement and optimize monetization of digital publishing assets for the benefit of our users, our advertiser clients, and our owned and operated properties as well as properties we run on behalf of independent publisher partners. We operate the media businesses for Sports Illustrated, own and operate TheStreet and The Spun, and power more than 200 independent Publisher Partners. Our strategy is to focus on key verticals where audiences are passionate about a topic category (e.g., sports, finance) and where we can leverage the strength of our core brands to grow audience and monetization both within our core brands as well as our Publisher Partners. Each Publisher Partner joins the Platform by invitation-only and is drawn from premium media brands and independent publishing businesses with the objective of augmenting our position in key verticals and optimizing the performance of the Partner. Because of the state-of-the-art technology and large scale of the Platform and our expertise in search engine optimization (SEO), social media, subscription marketing and ad monetization, Publisher Partners benefit from improved traffic and increased monetization. Additionally, we believe the lead brand within each vertical creates a halo benefit for all Publisher Partners in the vertical while each of them adds to the breadth and quality of content. While they benefit from these critical performance improvements they also may save substantially in costs of technology, infrastructure, advertising sales, and member marketing and management.

 

Corporate History

 

We were originally incorporated in Delaware as Integrated in 1990. On October 11, 2016, Integrated and Maven Network entered into the Share Exchange Agreement, whereby the stockholders of Maven Network agreed to exchange all of the then-issued and outstanding shares of common stock for shares of common stock of Integrated. On November 4, 2016, the parties consummated a recapitalization pursuant to the Share Exchange Agreement and, as a result, Maven Network became a wholly owned subsidiary of Integrated. Integrated changed its name to theMaven, Inc. on December 2, 2016.

 

In 2018, we acquired HubPages and Say Media. In 2019, we acquired TheStreet. In connection with this acquisition, we entered into a letter agreement with Jim Cramer, a finance and stock market expert who co-founded TheStreet, pursuant to which Mr. Cramer and a production company owned and controlled by Mr. Cramer agreed to provide certain services. Mr. Cramer and his production company ceased providing services in September 2021.

 

Also, in 2019, we entered into the Sports Illustrated Licensing Agreement with ABG, pursuant to which we have the exclusive right and license in the United States, Canada, Mexico, United Kingdom, Republic of Ireland, Australia, and New Zealand to operate the Sports Illustrated media business (in the English and Spanish languages), including to (i) operate the digital and print editions of Sports Illustrated (including all special interest issues and the swimsuit issue) and Sports Illustrated for Kids, (ii) develop new digital media channels under the Sports Illustrated brands, and (iii) operate certain related businesses, including without limitation, special interest publications, video channels, bookazines, and the licensing and/or syndication of certain products and content under the Sports Illustrated brand.

 

In 2020, we acquired substantially all the assets of Petametrics Inc., doing business as LiftIgniter, a Delaware corporation (“LiftIgniter”). In 2021, we acquired all of the issued and outstanding shares of capital stock of The Spun.

 

On September 20, 2021, we re-branded to “The Arena Group.”

 

The Platform

 

We developed the Platform, a proprietary online publishing platform that provides our owned and operated media businesses, Publisher Partners, whom are third parties producing and publishing content on their own domains, and individual creators contributing content to our owned and operated sites (“Expert Contributors”), the ability to produce and manage editorially focused content through tools and services provided by us. We have also developed proprietary advertising technology, techniques and relationships that allow us, our Publisher Partners and Expert Contributors to monetize online, editorially focused content through various display and video advertisements and tools and services for driving a subscription or membership based business and other monetization services (the “Monetization Solutions” and, together with the Platform, the “Platform Services”).

 

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The Platform comprises state-of-the-art publishing tools, video platforms, commenting features, social distribution channels, newsletter technology, machine learning content recommendations, notifications and other technology, that deliver a complete set of features to drive a digital media business in an entirely cloud-based suite of services. Our software engineering and product development teams are experienced at delivering these services at scale. We continue to develop the Platform software by combining proprietary code with components from the open-source community, plus select commercial services as well as identifying, acquiring, and integrating other platform technologies, where we see unique long-term benefits to us.

 

The Platform Services include:

 

  1. Content management, machine learning driven content recommendations, traffic redistribution, hosting and bandwidth;
     
  2. Video publishing, hosting, and player solution via an integrated set of third-party providers;
     
  3. Dashboards for our Publisher Partners as well as integration with leading analytics services like Google Analytics;
     
  4. Digital subscriptions and membership with paywalls, exclusive member access, and metering, credit card processing and reporting;
     
  5. User account management;
     
  6. User account migration to platform, including emails and membership data;
     
  7. Technical support team to train and support our Publisher Partners and staff (if applicable) on the Platform;
     
  8. Advertising serving, trafficking/insertion orders, yield management, and reporting and collection;
     
  9. Dedicated customer service and sales center to assist our Publisher Partners with customer support, sign-ups, cancellations, and “saves”;
     
  10. Services for maintaining evergreen content to Expert Contributors;
     
  11. Various syndication integrations (e.g., Apple News, Facebook Instant Articles, Google AMP, Google news, and RSS feeds);
     
  12. Structured data objects (i.e., structured elements such as recipes or products); and
     
  13. Other features, as they may be added to the Platform from time to time.

 

Our Platform partners use the Platform Services to produce, manage, host and monetize their content in accordance with the terms and conditions of partner agreements between each of our Publisher Partners and us (the “Partnership Agreements”). Pursuant to the Partnership Agreements, we and our Publisher Partners split revenue generated from the Platform Services used in connection with the Publisher Partner’s content based on certain metrics such as whether the revenue was from direct sales, was generated by our Publisher Partner or us, was generated in connection with a subscription or a membership, was based on standalone or bundled subscriptions or whether the revenue was derived from affiliate links.

 

Subject to the terms and conditions of each Partnership Agreement and in exchange for the Platform Services, our Publisher Partners grant us, for so long as our Publisher Partner’s assets are hosted on the Platform, (i) exclusive control of ads.txt with respect to our Publisher Partner’s domains and (ii) the exclusive right to include our Publisher Partner’s website domains and related URLs in our coalition in a consolidated listing assembled by third party measurement companies such as comScore, Nielsen and/or other similar measuring services selected by us. As such, the Platform serves as the primary digital media and social platform with respect to each of our Publisher Partners’ website domains during the applicable term of each Partnership Agreement.

 

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Our Brands and Growth Strategy

 

Our growth strategy is to continue to expand the coalition by adding new Publisher Partners in key verticals that management believes will expand the scale of unique users interacting on the Platform. In each vertical, we seek to build around a leading brand, such as Sports Illustrated (for sports) and TheStreet (for finance), surround it with subcategory specialists, and further enhance coverage with individual expert contributors. The primary means of expansion is adding independent Publisher Partners and/or acquiring publishers that have premium branded content and can broaden the reach and impact of the Platform.

 

The Arena Group

 

We operate a best-in-class digital media platform empowering premium publishers who impact, inform, educate, and entertain. We operate the media businesses for Sports Illustrated and TheStreet, and power more than 250 independent brands. These brands range from niche media businesses to world-leading independent publishers, operating on the Platform, a shared digital publishing, monetization, and distribution platform.

 

Sports Illustrated

 

We assumed management of certain Sports Illustrated media assets (pursuant to the Sports Illustrated License Agreement) on October 4, 2019. Sports Illustrated is owned by ABG, a brand development, marketing, and entertainment company that owns a global portfolio of media, entertainment, and lifestyle brands. Since assuming management of the Sports Illustrated media assets, we have implemented significant changes to rebuild the historic brand and beacon of sports journalism, to evolve and expand the business, and to position it for growth and continued success going forward.

 

TheStreet

 

TheStreet is a leading financial news and information provider to investors and institutions worldwide and has produced business news and market analysis for individual investors. TheStreet brings its editorial tradition, strong subscription platform, and valuable membership base to us, and benefits from our mobile-friendly CMS, social, video, and monetization technology.

 

HubPages

 

We acquired HubPages to enhance the user’s experience by increasing content, including from Expert Contributors. HubPages operates a network of 28 premium content channels that act as an open community for writers, explorers, knowledge seekers, and conversation starters to connect in an interactive and informative online space. HubPages operates in the United States.

 

Say Media

 

We acquired Say Media to enhance the user’s experience by increasing content. Now fully integrated into the Platform, Say Media’s technology provides a comprehensive online media publishing platform and enables brand advertisers to engage today’s social media consumer through rich advertising experiences across its network of web properties. Say Media operated in the United States and previously maintained subsidiaries located in the United Kingdom, Canada, and Australia.

 

LiftIgniter

 

LiftIgniter provides a distribution and recommendation engine for premium publishers. The LiftIgniter platform connects users efficiently to hundreds of professional content creators, with custom recommendations of content aligned with users’ personal passions. Aided by machine-learning technology, publishers can identify and target those interested in their content. LiftIgniter activates the value of hosting hundreds of premium journalists on a single platform by interconnecting them through unified content distribution.

 

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The Spun

 

The Spun (thespun.com), founded in September of 2012, is an independent sports publication that brings readers the most interesting athletic stories of the day. The Spun reaches approximately 15 million unique readers per month and focuses on the social media aspect of the industry.

 

Intellectual Property

 

We have seven patent registrations in the United States in connection with our technology. All of our patent registrations are owned by our wholly-owned subsidiary, Maven Coalition, Inc. (“Maven Coalition”).

 

Maven and Key Design

 

We currently have trademark registrations directed to our key design logo and the MAVEN name in the United States, Australia, China, the European Union (the “EU”), the United Kingdom, India, Japan, and New Zealand, as well as international Madrid Protocol registrations. We have trademark applications directed to our key design logo and the MAVEN name pending in Canada.

 

Moreover, we have a United States trademark registration for the word mark MAVEN COALITION, trademark registrations in the EU and the United Kingdom for the word mark THEMAVEN, and a United States trademark registration for the word mark A MAVEN CHANNEL. We have trademark registrations for the work mark A MAVEN CHANNEL in Australia, New Zealand, the EU, and the United Kingdom, and applications for the word mark A MAVEN CHANNEL pending in Canada, Mexico, and New Zealand, as well as an international Madrid Protocol registration.

 

Other Marks

 

We have trademark registrations for the word marks ACTION ALERTS PLUS, ALPHA RISING, BANKING MY WAY, BULL MARKET FANTASY, INCOME SEEKER, MAIN ST. (logo), REAL MONEY, REALMONEY, STREETLIGHTNING, THE SPUN, THESTREET, THESTREET.COM, THE STREET (logo), and TEMPEST in the United States and a trademark application for BULL MARKET FANTASY pending in Canada.

 

We have trademark applications for the marks THE ARENA, THE ARENA GROUP, and THE ARENA GROUP (logo) pending in the United States. 

 

We have a United States trademark registration for the word mark HUBPAGES, and trademark registrations for the HUBPAGES mark in Argentina, Australia, Brazil, Canada, China, Colombia, the EU, Hong Kong, India, Indonesia, Japon, Mexico, New Zealand, Peru, Philippines, South Korea, South Africa, and the United Kingdom, as well as an international Madrid Protocol registration.

 

We continue to file updated trademark applications to reflect our branding evolution and intend to continue strengthening our trademark portfolio as financial resources permit.

 

Our Publisher Partners and Licensing

 

In connection with our Partnership Agreements and any other applicable agreements between us and our Publisher Partners, (i) we and our affiliates own and retain (a) all right, title, and interest in and to the Platform, Monetization Solutions and data collected by us, and (b) we and our licensors’ trademarks and branding and all software and technology we use to provide and operate the Platform and Monetization Solutions, and (ii) each Publisher Partner owns and retains (a) all right, title, and interest in and to the Publisher Partner’s assets, content, and data collected by Publisher Partner and (b) each Publisher Partner’s trademarks and branding.

 

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Seasonality

 

We expect to experience typical media company advertising and membership sales seasonality, which is strong in the fiscal fourth quarter and slower in the fiscal first quarter.

 

Competition

 

Currently, we believe that there are dozens of competitors delivering niche media content on the web and on mobile devices and an even broader array of general media companies and major media brands. All those competitors use mobile alerts, invest heavily in video, and leverage social media. We believe that we have developed distribution, production, and technology tactics that are superior because our management team’s tactics in the past with prior companies have proven to be highly engaging and effective for our particular model, which organizes channels into interest groups, led by key brands, such as Sports Illustrated in the sports vertical and TheStreet in the finance vertical.

 

The web provides unlimited access to the market by niche or general media companies, so there are a large number and variety of direct competitors of ours competing for audience and ad and membership dollars. The general business of online media, combined with some level or method of leveraging community attracts many potential entrants, and in the future, there may be strong competitors that will compete with us in general or in selected markets. These and other companies may be better financed and be able to develop their markets more quickly and penetrate those market more effectively. The following is a list of possible competitors and their respective categories:

 

  Vice, Buzzfeed, Business Insider, et al. – niche content, leverages social, mobile, and video, and competes for ad dollars;
  Fortune, CNN, ESPN, Yahoo!, Google, et al. – general content, major media companies, and competes for ad dollars;
  WordPress, Medium, RebelMouse, Arc – content management software, open to all including experts and professionals, and competes for publishers;
  Leaf Group Ltd. and Future PLC – competes for partners and ad dollars;
  YouTube, Twitter, Facebook, Reddit – social platforms open to all including experts and professionals; and
  Affiliate networks such as Liberty Alliance – competes for ad dollars.

 

We believe that we compete on the basis of our technology, substantial scale in traffic, ease of use, recognized lead media brands, and platform evolution through a continuing development and acquisition program. We believe that our scale, methods, technology and experience enable us to compete for a material amount of market share of media dollars and membership revenue.

 

Government Regulations

 

Our operations are subject to a number of United States federal and state laws and regulations that involve privacy, rights of publicity, data protection, content regulation, intellectual property, or other subjects. Many of these laws and regulations are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate.

 

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A number of government authorities, both in the United States and abroad, and private parties are increasing their focus on privacy issues and the use of personal information. All states have enacted some form of data privacy legislation, including data security and breach notification laws in all 50 states, and some form of regulation regarding the collection, use and disclosure of personal information at the federal level and in several states. California has been the most active in the area of consumer privacy legislation, including passing a comprehensive law requiring transparency, access, and choice known as the California Consumer Privacy Act of 2018 (the “CCPA”), which was amended in November 2020 by a ballot measure known as the California Privacy Rights Act (the “CPRA”). The CCPA went into effect January 1, 2020, with enforcement having begun in June 2020. The CPRA goes into effect over time, with enforcement to begin July 2023. Other states are also considering comprehensive consumer privacy legislation. Certain states have also enacted legislation requiring certain encryption technologies for the storage and transmission of personally identifiable information, including credit card information, and more states are considering laws for or have enacted laws about information security, which may require the adoption of written information security policies that are consistent with state laws if businesses have personal information of residents of those states. Data privacy and information security legislation is also being considered at the federal level, concerning the privacy of individuals and use of internet and marketing information. In the United States, the Federal Trade Commission (“FTC”) and attorneys general in several states have oversight of business operations concerning the use of personal information and breaches of the privacy laws under existing consumer protection laws. In particular, an attorney general or the FTC may examine privacy policies to ensure that a company discloses all material practices and fully complies with representations in the policies regarding the manner in which the information provided by consumers and other visitors to a website is used and disclosed by it, and the failure to do so could give rise to a complaint under state or federal unfair competition or consumer protection laws. The California Attorney General has begun aggressively investigating companies, especially those with websites, with respect to CCPA compliance and these investigations reportedly include inquiries into issues for which there has not yet been clear guidance issued by the state, such as regarding third party cookies that collect personal information from users when they visit our and other websites.

 

We review our privacy policies and overall operations on a regular basis to ensure compliance with applicable United States federal and state laws, and to the extent applicable, any foreign laws. We launched a CCPA compliance program in January 2020 and at the end of 2020 reviewed the program and made adjustments to our privacy notice and compliance program practices to account for our evolving practices and the new CCPA regulations, which were promulgated in July 2020 and continue to be subject to ongoing rulemaking. We believe the position we take regarding various CCPA issues, including third party cookies, is based on sound and good faith interpretations of the law based on consultation with legal counsel. However, there are conflicting interpretations of the law that have been adopted by various parties in the digital media industry, and given the lack of guidance to date on many of these issues, our compliance posture on some issues might not be accepted by the State of California.

 

In addition to the laws of the United States, we may be subject to foreign laws regulating web sites and online services, and the laws in some jurisdictions outside of the United States are stricter than the laws in the United States. For instance, in May 2018, the General Data Protection Regulation (the “GDPR”) went into effect in the EU and European Economic Area and Switzerland. The GDPR includes operational requirements for companies that receive or process personal data of residents of the EU that include significant penalties for non-compliance. In addition, some EU countries are considering or have passed legislation implementing additional data protection requirements or requiring local storage and processing of personal data or similar requirements that could increase the cost and complexity of delivering our services. How the GDPR will be fully applied to online services, including cookies and digital advertising, is still being determined through ongoing rulemaking and evolving interpretation by applicable authorities. We operate a GDPR compliance program that we believe, based on our good faith interpretation of the GDPR in consultation with counsel, is consistent with our obligations under that law. The highest court in the EU recently ruled that the United States/EU Privacy Shield was inadequate under GDPR and questioned the viability or legality of any EU to United States personal data transfer methods. We are working to address this issue, for instance, including standard contractual clauses as part of our Data Processing Agreements, and we continue to monitor the development of EU to United States personal data transfer methods and the law relating thereto.

 

Social networking websites are under increasing scrutiny. Legislation has been introduced on the state and federal level that could regulate social networking websites. Some rules call for more stringent age-verification techniques, attempt to mandate data retention or data destruction by Internet providers, and impose civil and/or criminal penalties on owners or operators of social networking websites.

 

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The FTC regularly considers issues relating to online behavioral advertising (a/k/a interest-based advertising), which is a significant revenue source for us, and Congress and state legislatures are frequently asked to regulate this type of advertising, including requiring consumers to provide express consent for tracking purposes, so that advertisers may know their interests and are, therefore, able to serve them more relevant, targeted ads. Targeted ads generate higher per impression fees than non-targeted ads. New laws, or new interpretations of existing laws, could potentially place restrictions on our ability to utilize our database and other marketing data (e.g., from third parties) on our own behalf and on behalf of our advertising clients, which may adversely affect our business.

 

Legislation concerning the above described online activities has either been enacted or is in various stages of development and implementation in other countries around the world and could affect our ability to make our websites available in those countries as future legislation is made effective. It is possible that state and foreign governments might also attempt to regulate our transmissions of content on our website or prosecute us for violations of their laws. United States law offers limited safe harbors and immunities to publishers for certain liability arising out of user-posted content, but other countries do not. Further, there are a number of legislative proposals in the United States, and internationally, that could impose new obligations in areas affecting our business, such as liability for copyright infringement by third parties and liability for defamation or other claims arising out of user-posted content. Our business could be negatively impacted if applicable laws subject us to greater regulation or risk of liability.

 

Our business could also be adversely affected if regulatory enforcement authorities, such as the California Attorney General or EU/EEA data protection authorities, take issue with any of our approaches to compliance, or if new laws, regulations or decisions regarding the collection, storage, transmission, use and/or disclosure of personal information are implemented in such ways that impose new or additional technology requirements on us, limit our ability to collect, transmit, store and use or disclose the information, or if government authorities or private parties challenge our data privacy and/or security practices that result in liability to, or restrictions, on us, or we experience a significant data or information breach which would require public disclosure under existing notification laws and for which we may be liable for damages and/or penalties.

 

Furthermore, governments of applicable jurisdictions might attempt to regulate our transmissions or levy sales or other taxes relating to our activities even though we do not have a physical presence and/or operate in those jurisdictions. As our platforms, products and advertisement activities are available over the Internet anywhere in the world, multiple jurisdictions may claim that we are required to qualify to do business as a foreign corporation in each of those jurisdictions and pay various taxes in those jurisdictions. We address state and local jurisdictions where we believe we have nexus, however, there can be no assurance that we have complied with all jurisdictions that may assert that we owe taxes.

 

Employees

 

Our total number of employees as of October 8, 2021 was 362, of which 333 were full-time employees, 20 were part-time employees, and nine were interns.

 

Available Information

 

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed or furnished pursuant to Section 13 of the Exchange Act, are available free of charge after we electronically file or furnish them to the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically.

 

Properties

 

On April 25, 2018, we entered into an office sublease agreement (the “1500 Fourth Ave Sublease”) to sublease a portion of the “master premises” consisting of 7,457 rentable square feet of office space for our then-executive offices at 1500 Fourth Avenue, Suite 200, Seattle, Washington 98101. The 1500 Fourth Ave Sublease commenced on June 1, 2018 with an expiration date of October 31, 2021. The amount of monthly rent payable per square foot under the 1500 Fourth Ave Sublease was $25.95 for the first year, $35.00 for the second year, $36.00 for the third year, and $37.00 for the remainder of the term. On March 1, 2020, we assumed the entire lease for the remaining term of 20 months.

 

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Effective October 1, 2019, we entered into an office lease (the “Santa Monica Lease”) of approximately 5,258 rentable square feet at 301 Arizona Avenue, 4th Floor, Santa Monica, California 90401. The Santa Monica Lease has a term of 5 years, expiring on September 30, 2024. The initial monthly rent was approximately $36,800 and increased to approximately $37,900 in October 2020.

 

On January 14, 2020, we entered into an office sublease agreement (the “Liberty Street Sublease”) of approximately 40,868 rentable square feet at 225 Liberty Street, 27th Floor, New York, New York 10281, with an effective date of February 1, 2020 with lease payments commencing November 1, 2020 and expiring on November 30, 2032. Monthly lease payments from November 1, 2020 through October 31, 2025 are approximately $252,000. On September 1, 2021, we entered into a termination and surrender agreement (the “Liberty Surrender Agreement”) pursuant to which we agreed, as of October 1, 2021, to surrender the premises. Pursuant to the Liberty Surrender Agreement, we agreed to pay approximately $11.5 million to the sublandlord over a period of four years.

 

We have begun to re-evaluate our property leases and, to the extent feasible and in our best interests, have either surrendered leased properties to the landlord prior to the expiration of such leases or not renewed certain leases. We expect that we will continue this trend of not leasing properties and, instead, continue to encourage our work force to work remotely, provided, that it continues to be feasible to do so in the future. To the extent we need to lease physical properties in the future, we believe we would be able to find suitable properties at market rates.

 

Legal Proceedings

 

From time to time, we may be subject to claims and litigation arising in the ordinary course of business. We are not currently subject to any pending or threatened legal proceedings that we believe would reasonably be expected to have a material adverse effect on our business, financial condition, results of operations or cash flows.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of the results of operations and financial condition for the three and nine months ended September 30, 2021 and 2020 and the years ended December 31, 2020 and 2019 should be read in conjunction with the financial statements and related notes and the other financial information that are included elsewhere in this prospectus. This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation to update forward-looking statements. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” and “Business” sections in the registration statement, of which this prospectus forms a part. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. We and our representatives may from time to time make written or oral statements that are “forward-looking,” including statements contained in this prospectus and other filings with the SEC, reports to our stockholders, and news releases. All statements that express expectations, estimates, forecasts, or projections are forward-looking statements. In addition, other written or oral statements which constitute forward-looking statements may be made by us or on our behalf. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “project,” “forecast,” “may,” “should,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in or suggested by such forward-looking statements. The following discussion should be read in conjunction with the financial statements and the notes thereto that are included in this prospectus.

 

Liquidity and Capital Resources

 

As of September 30, 2021, our principal sources of liquidity consisted of cash of approximately $8.2 million. In addition, we had the use of additional proceeds from our working capital facility with FPP Finance LLC (“FastPay”) in the amount of approximately $8.3 million. During the three months ended September 30, 2021, we generated positive cash flows from operations in the amount of approximately $1.7 million.  We experience seasonality with respect to our revenues, with the fourth quarter typically generating a significant portion of our revenues; thus, we expect the fourth quarter to continue to build upon our generation of positive cash flows from operations. The FastPay line of credit expires in the first quarter of 2022 and there is approximately a $4.6 million principal payment due on the Term Note on March 31, 2022. We are in negotiations with FastPay to increase, extend and improve the terms of the facility, of which there can be no assurances that these negotiations will result in any increase, extension, or improvement in the terms of the facility. Historically, we have relied on equity and debt offerings, to the extent available and, to a lesser extent, cash from operations to satisfy our liquidity needs. If we are unable to continue to generate positive cash flows, or otherwise extend the maturity date of our line of credit and the 15% delayed draw term note (“Term Note”), we may need to seek additional capital. Should capital not be available to us at reasonable terms, other actions may become necessary in addition to cost control measures and continued efforts to increase revenue.

 

In addition, we continue to be focused on growing our existing operations and seeking accretive and complementary strategic acquisitions as part of our growth strategy. We believe, that with additional sources of liquidity and the ability to raise additional capital or incur additional indebtedness to supplement our internal projections, we will be able to execute our growth plan and finance our working capital requirements.

 

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We have financed our working capital requirements since inception through issuances of equity securities and various debt financings. Our working capital deficit as of September 30, 2021 and December 31, 2020 was as follows:

 

   As of 
   September 30, 2021   December 31, 2020 
Current assets  $79,380,241   $73,846,465 
Current liabilities   (130,386,757)   (107,562,825)
Working capital deficit   (51,006,516)   (33,716,360)

 

As of September 30, 2021, we had a working capital deficit of approximately $51.0 million, as compared to approximately $33.7 million as of December 31, 2020, consisting of approximately $79.4 million in total current assets and approximately $130.4 million in total current liabilities. Included in current assets as of September 30, 2021 was approximately $0.5 million of restricted cash. Also included in our working capital deficit are noncash current liabilities, consisting of approximately $0.7 million of warrant derivative liabilities, leaving a working capital deficit that requires cash payments of approximately $50.9 million.

 

Our cash flows during the nine months ended September 30, 2021 and 2020 consisted of the following:

 

   Nine Months Ended September 30, 
   2021   2020 
Net cash used in operating activities  $(8,261,324)  $(20,273,407)
Net cash used in investing activities   (10,673,872)   (4,286,469)
Net cash provided by financing activities   18,129,164    20,821,378 
Net decrease in cash, cash equivalents, and restricted cash  $(806,032)  $(3,738,498)
Cash, cash equivalents, and restricted cash, end of period  $8,728,649   $5,734,592 

 

For the nine months ended September 30, 2021, net cash used in operating activities was approximately $8.3 million, consisting primarily of: approximately $125.1 million of cash received from customers (including payments received in advance of performance obligations); less (i) approximately $132.5 million of cash paid (a) to employees, Publisher Partners, expert contributors, suppliers, and vendors, and (b) for revenue share arrangements and professional services; and (ii) approximately $0.9 million of cash paid for interest; as compared to the nine months ended September 30, 2020, where net cash used in operating activities was approximately $20.3 million, consisting primarily of: approximately $82.1 million of cash received from customers (including payments received in advance of performance obligations); less (y) approximately $102.0 million of cash paid (a) to employees, Publisher Partners, suppliers, and vendors, and (b) for revenue share arrangements, advance of royalty fees and professional services; and (z) approximately $0.4 million of cash paid for interest.

 

For the nine months ended September 30, 2021, net cash used in investing activities was approximately $10.7 million, consisting primarily of: (i) approximately $7.4 million used to acquire a business; (ii) approximately $0.3 million for property and equipment; and (iii) approximately $3.0 million for capitalized costs for our Platform; as compared to the nine months ended September 30, 2020, where net cash used in investing activities was approximately $4.3 million consisting primarily of: (x) approximately $0.3 million used for the acquisition of a business; (y) approximately $1.1 million for property and equipment; and (z) approximately $2.9 million for capitalized costs for our Platform.

 

For the nine months ended September 30, 2021, net cash used by financing activities was approximately $18.1 million, consisting primarily of: (i) approximately $19.8 million in net proceeds from the private placement issuance of common stock; less (ii) approximately $0.5 million from repayment under our line of credit; and (iii) approximately $1.2 million in payments of restricted stock liabilities; as compared to the three months ended September 30, 2020, where net cash provided by financing activities was approximately $20.8 million, consisting primarily of: (i) approximately $6.1 million in net proceeds from the issuance of Series H Preferred Stock and Series J Preferred Stock”); (ii) approximately $11.7 million in net proceeds from the Term Note and the Payroll Protection Program Loan; and (iii) approximately $3.3 million in borrowings of our line of credit; less (iv) approximately $0.3 million in payments for taxes relating to repurchase of restricted shares.

 

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Results of Operations

 

Three Months Ended September 30, 2021 and 2020

 

   Three Months Ended September 30,   2021 versus 2020 
   2021   2020   $ Change   % Change 
Revenue  $59,573,508   $32,089,993   $27,483,515    85.6%
Cost of revenue   32,173,859    24,708,941    7,464,918    30.2%
Gross profit   27,399,649    7,381,052    20,018,597    271.2%
Operating expenses                    
Selling and marketing   22,712,193    9,928,901    12,783,292    128.7%
General and administrative   23,023,883    7,172,175    15,851,708    221.0%
Depreciation and amortization   4,055,432    4,053,184    2,248    0.1%
Total operating expenses   49,791,508    21,154,260    28,637,248    135.4%
Loss from operations   (22,391,859)   (13,773,208)   (8,618,651)   62.6%
Total other (expense)   (2,544,494)   (7,491,223)   4,946,729    -66.0%
Loss before income taxes   (24,936,353)   (21,264,431)   (3,617,922)   17.3%
Income taxes   229,699    -    229,699    100.0%
Net loss   (24,706,654)   (21,397,094)   (3,442,223)   16.2%
Deemed dividend on Series H convertible preferred stock   -    (132,663)   132,663    -100.0%
Net loss attributable to common stockholders  $(24,706,654)  $(21,397,094)  $(3,309,560)   15.5%
Basic and diluted net loss per common stock  $(0.10)  $(0.55)  $0.45    -81.8%
Weighted average number of common stock outstanding – basic and diluted   252,811,058    39,186,432    213,624,626    545.1%

 

For the three months ended September 30, 2021, the total net loss was approximately $24.7 million. The total net loss increased by approximately $3.3 million as compared to the three months ended September 30, 2020, which had a net loss of approximately $21.4 million. The primary reasons for the increase in the total net loss is a lease termination charge of approximately $7.3 million and an increase in stock-based compensation of approximately $4.6 million during the three months ended September 30, 2021. The basic and diluted net loss per common share for the three months ended September 30, 2021 of $0.10 decreased from $0.55 for the three months ended September 30, 2020, primarily because of our net loss per common share decreased along with the increase of the daily weighted average shares outstanding to 252,811,058 shares from 39,186,432 shares.

 

Revenue

 

The following table sets forth revenue, cost of revenue, and gross profit:

 

   Three Months Ended September 30,   2021 versus 2020 
   2021   2020   Change   % Change 
   (percentages reflect cost of revenue as a percentage of total revenue)         
Revenue  $59,573,508    100.0%  $32,089,993    100.0%  $27,483,515    85.6%
Cost of revenue   32,173,859    54.0%   24,708,941    77.0%   7,464,918    30.2%
Gross profit  $27,399,649    46.0%  $7,381,052    23.0%  $20,018,597    271.2%

 

For the three months ended September 30, 2021, we had revenue of approximately $59.6 million, as compared to revenue of approximately $32.1 million for the three months ended September 30, 2020.

 

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The following table sets forth revenue by product line and the corresponding percent of total revenue:

 

   Three Months Ended September 30,   2021 versus 2020 
   2021   2020   Change   % Change 
   (percentages reflect product line as a percentage of total revenue)         
Advertising  $21,678,480    36.4%  $9,409,031    29.3%  $12,269,449    38.2%
Digital subscriptions   7,698,359    12.9%   8,469,943    26.4%   (771,584)   -2.4%
Magazine circulation   25,973,853    43.6%   12,874,574    40.1%   13,099,279    40.8%
Other   4,222,816    7.1%   1,336,445    4.2%   2,886,371    9.0%
Total revenue  $59,573,508    100.0%  $32,089,993    100.0%  $27,483,515    85.6%

 

For the three months ended September 30, 2021, the primary sources of revenue were as follows: (i) advertising of approximately $21.7 million; (ii) digital subscriptions of approximately $7.7 million; (iii) magazine circulation of approximately $26.0 million; and (iv) approximately $4.2 million from other revenue. Our advertising revenue increased by approximately $12.3 million, due to additional revenue of approximately $6.8 million generated as a result of a doubling of advertising sponsorships of the Sports Illustrated Swim (“SI Swim”) business and other growth in the Sports Illustrated media business, and approximately $5.5 million generated as a result of The Spun, which was acquired during the second quarter of 2021. Our digital subscriptions decreased by approximately $0.8 million. Our magazine circulation increased by approximately $13.1 million reflecting a drive to increase subscribers in the fourth quarter of 2020 and the diminishing effect of acquisition accounting adjustments on the subscribers that existed when we began operating the Sports Illustrated media business. Our other revenue, primarily consisting of licensing and e-commerce revenue, increased by approximately $2.9 million due to additional revenue primarily for certain licensing agreements related to SI Swim and other Sports Illustrated media businesses.

 

Cost of Revenue

 

For the three months ended September 30, 2021, we recognized cost of revenue of approximately $32.2 million, which represented a 46% gross profit percentage, compared to approximately $24.7 million in the three months ended September 30, 2020, representing a 23% gross profit percentage. The increase in the cost of revenue of approximately $7.5 million during the three months ended September 30, 2021 is primarily from increases in: (i) printing, distribution, and fulfillment costs of approximately $3.4 million; (ii) payroll, stock-based compensation, and related expenses for customer support, technology maintenance, and occupancy costs of related personnel of approximately $2.6 million; (iii) other costs of revenue related to SI Swim of approximately $1.3 million; and (iv) amortization of our platform of approximately $0.2 million. The improvement in gross profit percentage was due to a decrease in partner revenue shares from 61% of digital advertising revenue in the third quarter of 2020 to 27% in the third quarter of 2021 as a result of the elimination of most partner guarantees near the end of last year.

 

For the three months ended September 30, 2021, we capitalized costs related to our Platform of approximately $1.5 million, as compared to approximately $1.2 million for the three months ended September 30, 2020. For the three months ended September 30, 2021, the capitalization of our Platform consisted of: (i) approximately $1.0 million in payroll and related expenses, including taxes and benefits; and (ii) approximately $0.5 million in stock-based compensation for related personnel.

 

Operating Expenses

 

The following table sets forth operating expenses and the corresponding percentage of total revenue:

 

   Three Months Ended September 30,   2021 versus 2020 
   2021   2020   Change   % Change 
   (percentages reflect expense as a percentage of total revenue)         
Selling and marketing  $22,712,193    38.1%  $9,928,901    30.9%  $12,783,292    60.4%
General and administrative   23,023,883    38.6%   7,172,175    22.4%   15,851,708    74.9%
Depreciation and amortization   4,055,432    6.8%   4,053,184    12.6%   2,248    0.0%
Total operating expenses  $49,791,508        $21,154,260        $28,637,248    135.4%

 

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Selling and Marketing. For the three months ended September 30, 2021, we incurred selling and marketing costs of approximately $22.7 million, as compared to approximately $9.9 million for the three months ended September 30, 2020. The increase in selling and marketing costs of approximately $12.8 million is primarily from increases in circulation costs of approximately $9.4 million; advertising costs of approximately $1.4 million; professional and marketing service costs of approximately $0.7 million; payroll of selling and marketing account management support teams, along with the related benefits and stock-based compensation of approximately $1.3 million; office and occupancy costs of approximately $0.1 million; less a decrease in other selling and marketing related costs of approximately $0.1 million.

 

General and Administrative. For the three months ended September 30, 2021, we incurred general and administrative costs of approximately $23.0 million from payroll and related expenses, professional services, occupancy costs, stock-based compensation of related personnel, depreciation and amortization, and other corporate expense, as compared to approximately $7.2 million for the three months ended September 30, 2020. The increase in general and administrative expenses of approximately $15.9 million is primarily from an increase in our payroll, along with the related benefits and stock-compensation of approximately $5.5 million; an increase in professional services, including accounting, legal and insurance of approximately $2.2 million; an increase in facilities costs related to the lease termination of approximately $7.3 million and an increase in other general corporate expenses of approximately $0.9 million.

 

Other (Expenses) Income

 

The following table sets forth other (expense) income:

 

   Three Months Ended September 30,   2021 versus 2020 
   2021   2020   Change   % Change 
   (percentages reflect other (expense) income as a percentage of the total)         
Change in valuation of warrant derivative liabilities  $801,755    -31.5%  $(517,405)   6.9%  $1,319,160    -17.6%
Change in valuation of embedded derivative liabilities   -    0.0%   (2,370,000)   31.6%   2,370,000    -31.6%
Interest expense   (2,512,637)   98.7%   (4,253,180)   56.8%   1,746,556    -23.3%
Interest income   -    0.0%   1,116    0.0%   (7,129)   0.0%
Liquidated damages   (833,612)   32.8%   (319,903)   4.3%   (513,709)   6.9%
Other income   -    0.0%   (31,851)   0.4%   31,851    -0.4%
Total other (expense)  $(2,544,494)   100.0%  $(7,491,223)   100.0%  $4,946,729    -66.0%

 

Change in Valuation of Warrant Derivative Liabilities. There was approximately $1.3 million increase in noncash income related the change in the valuation of the warrant derivative liabilities for the three months ended September 30, 2021, as compared to the prior year period.

 

Change in Valuation of Embedded Derivative Liabilities. There was approximately $2.4 million increase in noncash income related the change in the valuation of the embedded derivative liabilities for the three months ended September 30, 2021, as compared to the prior year period.

 

Interest Expense. We incurred interest expense of approximately $2.5 million for the three months ended September 30, 2021, as compared to approximately $4.3 million for the three months ended September 30, 2020. The decrease in interest expense of approximately $1.8 million is primarily from an increase of approximately $0.2 million of other interest; less a decrease of accrued interest of approximately $0.8 million and a decrease from the amortization of debt discount on notes payable of approximately $1.2 million.

 

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Liquidated Damages. We recorded liquidated damages of approximately $0.8 million for the three months ended September 30, 2021, an increase of approximately $0.5 million as compared to the three months ended September 30, 2020, primarily from issuance of our 12% Convertible Debentures, Series H Preferred Stock, Series I convertible preferred stock (the “Series I Preferred Stock”), Series J Preferred Stock, and Series K Preferred Stock. The liquidated damages were recognized because we determined that: (i) registration statements covering the shares of common stock issuable upon conversion under the aforementioned instruments would not be declared effective within the requisite time frame; and (ii) that we would not be able to file our periodic reports in the requisite time frame with the SEC in order to satisfy the public information requirements under the securities purchase agreements.

 

Nine Months Ended September 30, 2021 and 2020

 

   Nine Months Ended September 30,   2021 versus 2020 
   2021   2020   $ Change   % Change 
Revenue  $127,935,501   $85,593,786   $42,341,715    49.5%
Cost of revenue   83,978,050    76,321,953    7,656,097    10.0%
Gross profit   43,957,451    9,271,833    34,685,618    374.1%
Operating expenses                    
Selling and marketing   55,122,357    27,698,182    27,424,175    99.0%
General and administrative   44,230,360    24,852,891    19,377,469    78.0%
Depreciation and amortization   11,981,998    12,276,990    (294,992)   -2.4%
Total operating expenses   111,334,715    64,828,063    46,506,652    71.7%
Loss from operations   (67,377,264)   (55,556,230)   (11,821,034)   21.3%
Total other (expense)   (3,678,952)   (11,646,154)   7,967,202    -68.4%
Loss before income taxes   (71,056,216)   (67,202,384)   (3,853,832)   5.7%
Income taxes   229,699    -    229,699    100.0%
Net loss  $(70,826,517)  $(67,202,384)  $(3,624,133)   5.4%
Deemed dividend on Series H convertible preferred stock   -    (132,663)   132,663    -100.0%
Net loss attributable to common stockholders   (70,826,517)   (67,335,047)   (3,491,470)   5.2%
Basic and diluted net loss per common share  $(0.29)  $(1.72)  $1.43    -83.1%
Weighted average number of shares outstanding – basic and diluted   244,209,151    39,177,864    205,031,287    523.3%

 

For the nine months ended September 30, 2021, the total net loss was approximately $70.8 million. The total net loss increased by approximately $3.5 million as compared to the nine months ended September 30, 2020, which had a net loss of approximately $67.3 million. The primary reasons for the increase in the total net loss is a lease termination charge of approximately $7.3 million and an increase in stock-based compensation of approximately $10.5 million during the nine months ended September 30, 2021. The basic and diluted net loss per common share for the nine months ended September 30, 2021 of $0.29 decreased from $1.72 for the nine months ended September 30, 2020, primarily because our net loss per common share decreased along with the increase of the daily weighted average shares outstanding to 244,209,151 shares from 39,177,864 shares.

 

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Revenue

 

The following table sets forth revenue, cost of revenue, and gross profit:

 

   Nine Months Ended September 30,   2021 versus 2020 
   2021   2020   Change   % Change 
   (percentages reflect cost of revenue as a percentage of total revenue)         
Revenue  $127,935,501    100.0%  $85,593,786    100.0%  $42,341,715    49.5%
Cost of revenue   83,978,050    65.6%   76,321,953    89.2%   7,656,097    10.0%
Gross profit  $43,957,451    34.4%  $9,271,833    10.8%  $34,685,618    374.1%

 

For the nine months ended September 30, 2021, we had revenue of approximately $127.9 million, as compared to revenue of approximately $85.6 million for the nine months ended September 30, 2020.

 

The following table sets forth revenue by product line and the corresponding percent of total revenue:

 

   Nine Months Ended September 30,   2021 versus 2020 
   2021   2020   Change   % Change 
   (percentages reflect product line as a percentage of total revenue)         
Advertising  $46,300,974    36.2%  $28,788,631    33.6%  $17,512,343    20.5%
Digital subscriptions   22,472,951    17.6%   20,096,640    23.5%   2,376,311    2.8%
Magazine circulation   53,325,894    41.7%   34,041,272    39.8%   19,284,622    22.5%
Other   5,835,682    4.6%   2,667,243    3.1%   3,168,439    3.7%
Total revenue  $127,935,501    100.0%  $85,593,786    100.0%  $42,341,715    49.5%

 

For the nine months ended September 30, 2021, the primary sources of revenue were as follows: (i) advertising of approximately $46.3 million; (ii) digital subscriptions of approximately $22.5 million; (iii) magazine circulation of approximately $53.3 million; and (iv) approximately $5.8 million from other revenue. Our advertising revenue increased by approximately $17.5 million due to additional revenue of approximately $10.0 million generated as a result of the Sports Illustrated media business, approximately $6.5 million generated as a result of The Spun, which was acquired during the second quarter 2021, and approximately $1.0 million in revenue generated from our other business. Our digital subscriptions increased by approximately $2.4 million due to additional revenue generated by TheStreet. Our magazine circulation increased by approximately $19.3 million as a result of the Sports Illustrated media business. Our other revenue, primarily consisting of licensing and e-commerce revenue, increased by approximately $3.2 million, due to additional revenue of approximately $3.6 generated as a result of the Sports Illustrated media business, offset by an approximately $0.4 million decrease in revenue from our other business.

 

Cost of Revenue

 

For the nine months ended September 30, 2021, we recognized cost of revenue of approximately $84.0 million, a 34% gross profit percentage, compared to approximately $76.3 million in the nine months ended September 30, 2020, representing a 11% gross profit percentage. The increase of approximately $7.7 million in cost of revenue during the nine months ended September 30, 2021 is primarily from increases in: (i) our Publisher Partner guarantees and revenue share payments of approximately $1.7 million; (ii) payroll, stock-based compensation, and related expenses for customer support, technology maintenance, and occupancy costs of related personnel of approximately $4.2 million; (iii) printing, distribution, and fulfillment costs of approximately $0.4 million; (iv) other costs of revenue of approximately $1.1 million; and (v) amortization of our Platform of approximately $0.2 million.

 

For the nine months ended September 30, 2021, we capitalized costs related to our Platform of approximately $4.4 million, as compared to approximately $4.1 million for the nine months ended September 30, 2020. For the nine months ended September 30, 2021, the capitalization of our Platform consisted of: (i) approximately $3.0 million in payroll and related expenses, including taxes and benefits; and (ii) approximately $1.3 million in stock-based compensation for related personnel.

 

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Operating Expenses

 

The following table sets forth operating expenses and the corresponding percentage of total revenue:

 

    Nine Months Ended September 30,     2021 versus 2020  
    2021     2020     Change     % Change  
    (percentages reflect expense as a percentage of total revenue)              
Selling and marketing   $ 55,122,357       43.1 %   $ 27,698,182       32.4 %   $ 27,424,175       42.3 %
General and administrative     44,230,360       34.6 %     24,852,891       29.0 %     19,377,469       29.9 %
Depreciation and amortization     11,981,998       9.4 %     12,276,990       14.3 %     (294,992 )     -0.5 %
Total operating expenses   $ 111,334,715             $ 64,828,063             $ 46,506,652       71.7 %

 

Selling and Marketing. For the nine months ended September 30, 2021, we incurred selling and marketing costs of approximately $55.1 million, as compared to approximately $27.7 million for the nine months ended September 30, 2020. The increase in selling and marketing costs of approximately $27.4 million is primarily from an increase in circulation costs of approximately $22.4 million; payroll of selling and marketing account management support teams, along with the related benefits and stock-based compensation of approximately $3.3 million; an increase in advertising costs of approximately $1.8 million; an increase in professional and marketing service costs of approximately $1.2 million; an increase in office, travel, conferences and occupancy costs of approximately $0.3 million; less a decrease in other selling and marketing related costs of approximately $1.0 million.

 

General and Administrative. For the nine months ended September 30, 2021, we incurred general and administrative costs of approximately $44.2 million from payroll and related expenses, professional services, occupancy costs, stock-based compensation of related personnel, depreciation and amortization, and other corporate expense, as compared to approximately $24.9 million for the nine months ended September 30, 2020. The increase in general and administrative expenses of approximately $19.4 million is primarily from an increase in our payroll, along with the related benefits and stock-compensation of approximately $8.4 million; an increase in professional services, including accounting, legal and insurance of approximately $3.1 million; an increase in facilities costs related to the lease termination of approximately $7.1 million; and an increase in other general corporate expenses of approximately $0.8 million.

 

Other (Expenses) Income

 

The following table sets forth other (expense) income:

 

    Nine Months Ended September 30,     2021 versus 2020  
    2021     2020     Change     % Change  
    (percentages reflect other (expense) income as a percentage of the total)              
Change in valuation of warrant derivative liabilities   $ 496,812       -13.5 %   $ (134,910 )     1.2 %   $ 631,722       -5.4 %
Change in valuation of embedded derivative liabilities     -       0.0 %     2,173,000       -18.7 %     (2,173,000 )     18.7 %
Interest expense     (7,695,317 )     209.2 %     (12,169,315 )     104.4 %     4,480,011       -38.4 %
Interest income     471       0.0 %     4,499       0.0 %     (10,041 )     0.0 %
Liquidated damages     (2,197,615 )     59.7 %     (1,487,577 )     12.8 %     (710,038 )     6.1 %
Other expense     -       0.0 %     (31,851 )     0.3 %     31,851       -0.3 %
Gain upon debt extinguishment     5,716,697       -155.4 %     -       0.0 %     5,716,697       -49.1 %
Total other (expense)   $ (3,678,952 )     100.0 %   $ (11,646,154 )     100.0 %   $ 7,967,202       -68.4 %

 

Change in Valuation of Warrant Derivative Liabilities. There was approximately $0.6 million increase in noncash income related the change in the valuation of the warrant derivative liabilities for the nine months ended September 30, 2021, as compared to the prior year period.

 

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Change in Valuation of Embedded Derivative Liabilities. There was approximately $2.2 million decrease in noncash income related the change in the valuation of the embedded derivative liabilities for the nine months ended September 30, 2021, as compared to the prior year period.

 

Interest Expense. We incurred interest expense of approximately $7.7 million for the nine months ended September 30, 2021, as compared to approximately $12.2 million for the nine months ended September 30, 2020. The decrease in interest expense of approximately $4.5 million is primarily from an increase of approximately $0.5 million of other interest; less a decrease of approximately $1.6 million of accrued interest and a decrease of the amortization of debt discount on notes payable of approximately $3.4 million.

 

Liquidated Damages. We recorded liquidated damages of approximately $2.2 million for the nine months ended September 30, 2021, primarily from issuance of our 12% Convertible Debentures, Series H Preferred Stock, Series I Preferred Stock, and Series J Preferred Stock issued during 2020. The liquidated damages were recognized because we determined that: (i) registration statements covering the shares of common stock issuable upon conversion under the aforementioned instruments would not be declared effective within the requisite time frame; and (ii) that we would not be able to file our periodic reports in the requisite time frame with the SEC in order to satisfy the public information requirements under the securities purchase agreements.

 

Gain Upon Debt Extinguishment. We recorded a gain upon debt extinguishment of approximately $5.7 million (including accrued interest) pursuant to the forgiveness of the Paycheck Protection Program Loan for the nine months ended September 30, 2021.

 

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Comparison of Fiscal 2020 to Fiscal 2019

 

   Years Ended December 31,   2020 versus 2019 
   2020   2019   $ Change   % Change 
Revenue  $128,032,397   $53,343,310   $74,689,087    140.0%
Cost of revenue   103,063,445    47,301,175    55,762,270    117.9%
Gross profit (loss)   24,968,952    6,042,135    18,926,817    313.2%
Operating expenses                    
Selling and marketing   43,589,239    12,789,056    30,800,183    240.8%
General and administrative   36,007,238    29,511,204    6,496,034    22.0%
Depreciation and amortization   16,280,475    4,551,372    11,729,103    257.7%
Total operating expenses   95,876,952    46,851,632    49,025,320    104.6%
Loss from operations   (70,908,000)   (40,809,497)   (30,098,503)   73.8%
Total other (expenses) income   (18,113,131)   (17,232,999)   (880,132)   5.1%
Loss before income taxes   (89,021,131)   (58,042,496)   (30,978,635)   53.4%
Income taxes   (210,832)   19,541,127    (19,751,959)   -100.1%
Net loss   (89,231,963)   (38,501,369)   (50,730,594)   131.8%
Deemed dividend on convertible preferred stock   (15,642,595)   -    (15,642,595)   0.0%
Net loss attributable to common stockholders  $(104,874,558)  $(38,501,369)  $(66,373,189)   172.4%
Basic and diluted net loss per common share  $(2.28)  $(1.04)  $(1.22)   119.2%
Weighted average number of shares outstanding – basic and diluted   45,981,029    37,080,784    8,900,245    24.0%

 

For the year ended December 31, 2020, the net loss attributable to common stockholders was approximately $104.9 million. The total net loss attributable to common stockholders increased by approximately $66.4 million from the year ended December 31, 2019 net loss of approximately $38.5 million. The primary reasons for the increase in the total net loss is that our operations continued to rapidly expand during the year ended December 31, 2020 as they did in 2019. In particular, during the year ended December 31, 2020 we operated our Sports Illustrated Licensed Brands that we acquired during the fourth quarter of 2019. The basic and diluted net loss per common share for the year ended December 31, 2020 of $2.28 increased from $1.04 for the year ended December 31, 2019 primarily because of: (i) the weighted average basic and diluted shares increased as the net loss per common share increased along with the calculation of the daily weighted average shares outstanding increase to 45,981,029 shares from 37,080,784 shares; (ii) the deemed dividend on the convertible preferred stock of approximately $15.6 million; and (iii) the other expenses of approximately $18.1 million.

 

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Our growth strategy is principally focused on adding new publisher partners to our Platform. In addition, if the right opportunity exists, we may also acquire related online media, publishing, and technology businesses. This combined growth strategy has expanded the scale of unique users interacting on our Platform with increased revenues during 2020. We expect revenues increases in subsequent years will come from organic growth in operations, addition of more publisher partners, and mergers and acquisitions.

 

Revenue

 

The following table sets forth revenue, cost of revenue, and gross profit:

 

    Years Ended December 31,     2020 versus 2019  
    2020     2019     Change     % Change  
    (percentage reflect cost of revenue as a percentage of total revenue)              
Revenue   $ 128,032,397       100.0 %   $ 53,343,310       100.0 %   $ 74,689,087       140.0 %
Cost of revenue     103,063,445       80.5 %     47,301,175       88.7 %     55,762,270       117.9 %
Gross profit   $ 24,968,952       19.5 %   $ 6,042,135       11.3 %   $ 18,926,817       313.2 %

 

For the year ended December 31, 2020, we had gross profit of approximately $25.0 million, as compared to gross profit of approximately $6.0 million for year ended December 31, 2019.

 

The following table sets forth revenue by product line and the corresponding percent of total revenue:

 

    Years Ended December 31,     2020 versus 2019  
    2020     2019     Change     % Change  
    (percentages reflect product line as a percentage of total revenue)              
Advertising   $ 44,359,822       34.6 %   $ 35,918,370       67.3 %   $ 8,441,452       15.8 %
Digital subscriptions     28,495,676       22.3 %     6,855,038       12.9 %     21,640,638       40.6 %
Magazine circulation     50,580,213       39.5 %     9,046,473       17.0 %     41,533,740       77.9 %
Other     4,596,686       3.6 %     1,523,429       2.9 %     3,073,257       5.8 %
Total revenue   $ 128,032,397       100.0 %   $ 53,343,310       100.0 %   $ 74,689,087       140.0 %

 

For the year ended December 31, 2020, the primary sources of revenue were as follows: (i) advertising of approximately $44.4 million; (ii) digital subscriptions of approximately $28.5 million; (iii) magazine circulation of approximately $50.6 million; and (iv) other revenue of approximately $4.6 million. Our advertising revenue increased by approximately $8.4 million, due to additional revenue of approximately $3.2 million generated as a result of TheStreet, which we acquired during the second quarter of 2019, and approximately $11.5 million generated as a result of the Sports Illustrated Licensed Brands, which we acquired during the fourth quarter of 2019, offset by an approximately $6.2 million decrease in revenue from our legacy business. Our digital subscriptions increased by approximately $21.6 million due to additional revenue of approximately $16.8 million generated as a result of TheStreet, which we acquired during the second quarter of 2019 and approximately $4.3 million generated as a result of the Sports Illustrated Licensed Brands, which we acquired during the fourth quarter of 2019. Our magazine circulation contributed approximately $41.5 million as a result of the Sports Illustrated Licensed Brands acquired during the fourth quarter of 2019. Our other revenue increased by approximately $3.1 million due to additional revenue of approximately $0.3 million generated as a result of TheStreet, which we acquired during the second quarter of 2019, approximately $0.4 million generated as a result of the Sports Illustrated media business, which we acquired during the fourth quarter of 2019, and approximately $2.3 million generated by our legacy business.

 

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Cost of Revenue

 

For the years ended December 31, 2020 and 2019, we recognized cost of revenue of approximately $103.1 million and approximately $47.3 million, respectively. The increase of approximately $55.8 million in cost of revenue is primarily from: (i) our Publisher Partner guarantees and revenue share payments of approximately $4.8 million; (ii) payroll, stock based compensation, and related expenses for customer support, technology maintenance, and occupancy costs of related personnel of approximately $19.1 million; (iii) amortization of our Platform of approximately $2.4 million (which includes our Platform spending and amortization related to acquired developed technology from our acquisitions); (iv) royalty fees of approximately $11.3 million; (v) hosting, bandwidth, and software licensing fees of approximately $1.3 million; (vi) printing, distribution, and fulfillment costs of approximately $9.5 million; (vii) fees paid for data analytics and to other outside services providers of approximately $3.7 million and (viii) other costs of revenue of approximately $3.8 million.

 

For the year ended December 31, 2020, we capitalized costs related to our Platform of approximately $5.4 million, as compared to approximately $3.8 million for the year ended December 31, 2019. In fiscal 2020, the capitalization of our Platform development consisted of approximately $3.8 million in payroll and related expenses, including taxes and benefits, approximately $1.6 million in stock-based compensation for related personnel, and amortization of approximately $8.6 million. In fiscal 2019, the capitalization of our Platform development consisted of approximately $2.5 million in payroll and related expenses, including taxes and benefits, approximately $1.3 million in stock-based compensation for related personnel, and amortization of approximately $6.2 million.

 

Operating Expenses

 

The following table sets forth operating expenses and the corresponding percentage of total revenue:

 

   Years Ended December 31,   2020 versus 2019 
   2020   2019   Change   % Change 
   (percentages reflect expense as a percentage of total revenue)         
Selling and marketing  $43,589,239    34.0%  $12,789,056    24.0%  $30,800,183    65.7%
General and administrative   36,007,238    28.1%   29,511,204    55.3%   6,496,034    13.9%
Depreciation and amortization   16,280,475    12.7%   4,551,372    8.5%   11,729,103    25.0%
Total operating expenses  $95,876,952        $46,851,632        $49,025,320    104.6%

 

Selling and Marketing. For the year ended December 31, 2020, we incurred selling and marketing costs of approximately $43.6 million, as compared to approximately $12.8 million for the year ended December 31, 2019. The increase in selling and marketing cost of approximately $30.8 million is primarily from payroll costs for the selling and marketing account management support teams, along with the related benefits and stock based compensation of approximately $8.2 million; circulation costs of approximately $14.2 million; office and occupancy costs of approximately $0.7 million; advertising costs of approximately $5.9 million; and other selling and marketing related costs of approximately $1.7 million.

 

General and Administrative. For the year ended December 31, 2020, we incurred general and administrative costs of approximately $36.0 million from payroll and related expenses, professional services, occupancy costs, stock based compensation of related personnel, depreciation and amortization, and other corporate expense, as compared to approximately $29.5 million for the year ended December 31, 2019. The increase in general and administrative expenses of approximately $6.5 million is primarily from our increase in professional services, including accounting, legal and insurance of approximately $4.8 million; facilities costs of approximately $1.1 million; and other general corporate expenses of approximately $2.0 million.

 

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Other (Expenses) Income

 

The following table sets forth other (expenses) income:

 

   Years Ended December 31,   2020 versus 2019 
   2020   2019   Change   % Change 
   (percentages reflect other expense (income) as a percentage of the total)         
Change in valuation of warrant derivative liabilities  $496,305    -2.7%  $(1,015,151)   5.9%  $1,511,456    -8.8%
Change in valuation of embedded derivative liabilities   2,571,004    -14.2%   (5,040,000)   29.2%   7,611,004    -44.2%
Loss on conversion of convertible debentures   (3,297,539)   18.2%   -    0.0%   (3,297,539)   19.1%
Interest expense   (16,497,217)   91.1%   (10,463,570)   60.7%   (6,033,647)   35.0%
Interest income   381,026    -2.1%   13,976    -0.1%   367,050    -2.1%
Liquidated damages   (1,487,577)   8.2%   (728,516)   4.2%   (759,061)   4.4%
Other (expense) income   (279,133)   1.5%   262    0.0%   (279,396)   1.6%
Total other expenses  $(18,113,131)   100.0%  $(17,232,999)   100.0%  $(880,132)   5.1%

 

Change in Valuation of Warrant Derivative Liabilities. The change in valuation of warrant derivative liabilities for the year ended December 31, 2020 was the result of the decrease in the fair value of the warrant derivative liabilities as of December 31, 2020, as compared to the change in the valuation for the year ended December 31, 2019 where the change was from an increase in the fair value of the warrant derivative liabilities as of December 31, 2019.

 

Change in Valuation of Embedded Derivative Liabilities. The change in valuation of embedded derivative liabilities for the year ended December 31, 2020 was the result of the decrease in the fair value of the embedded derivative liabilities as of December 31, 2020, as compared to the change in the valuation for the year ended December 31, 2019 where the change was from an increase in the fair value of the embedded derivative liabilities as of December 31, 2019.

 

Interest Expense. We incurred interest expense of approximately $16.5 million during the year ended December 31, 2020, as compared to approximately $10.5 million for the year ended December 31, 2019, primarily consisting of approximately $6.6 million from amortization of debt discount on notes payable; approximately $9.2 million of accrued interest; and approximately $0.6 million of other interest. In fiscal 2019, interest expense primarily consisted of approximately $4.5 million of amortization of accretion of original issue discount and debt discount on notes payable; $3.1 million of accrued interest; and $2.9 million of other interest.

 

Liquidated Damages. We recorded approximately $1.5 million of liquidating damages, including the accrued interest thereon, during the year ended December 31, 2020 primarily from the issuance of the Debentures, Series H Preferred Stock, Series I Preferred Stock and Series J Preferred Stock in fiscal 2020 since we determined that: (1) the registration statements registering for resale the shares of common stock issuable upon conversion of the Debentures, Series I Preferred Stock and Series J Preferred Stock would not be declared effective within the requisite time frame; and (2) that we would not be able to become current in our periodic filing obligations with the SEC in order to satisfy the public information requirements under the applicable securities purchase agreements. We recorded liquidated damages, including the accrued interest thereon, of approximately $0.7 million in fiscal 2019 primarily from issuance of Debentures, Series H Preferred Stock, Series I Preferred Stock, and Series J Preferred Stock, which liquidated damages were based upon the reasons set forth above.

 

Deemed Dividend on Convertible Preferred Stock

 

Series H Preferred Stock. During fiscal 2020, in connection with the issuance of 108 shares (issued on August 19, 2020) and 389 shares (issued on October 31, 2020) of our Series H Preferred Stock, we recorded a beneficial conversion feature of approximately $0.1 million and approximately $0.4 million, respectively (totaling approximately $0.7 million), for the underlying shares of our common stock since the nondetachable conversion feature was in-the-money (the conversion price of $0.33 was lower than our common stock trading price of $0.86 and $0.77 at the issuance dates of August 19, 2020 and October 31, 2020, respectively). The beneficial conversion feature was recognized as a deemed dividend.

 

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Series I Preferred Stock. On December 18, 2020, all of the shares of our Series I Preferred Stock converted automatically into shares of our common stock as a result of the increase in the number of authorized shares of our common stock. Upon conversion, we recognized a beneficial conversion feature for the underlying shares of our common stock since the nondetachable conversion feature was in-the-money (the conversion price of $0.50 was lower than our common stock trading price of $0.61 at the conversion date). The beneficial conversion feature was recognized as a deemed dividend.

 

Series J Preferred Stock. On December 18, 2020, all of the shares of our Series J Preferred Stock converted automatically into shares of our common stock as a result of the increase in the number of authorized shares of our common stock. Upon conversion, we recognized a beneficial conversion feature for the underlying shares of our common stock since the nondetachable conversion feature was in-the-money (the effective conversion price of $0.40 for the issuance of our Series J Preferred Stock on September 4, 2020 (these shares were issued at a discount) was lower than our common stock trading price of $0.61 at the conversion date). The beneficial conversion feature was recognized as a deemed dividend.

 

Series K Preferred Stock. On December 18, 2020, all of the shares of our Series K Preferred Stock converted automatically into shares of our common stock as a result of the increase in the number of authorized shares of our common stock. Upon conversion, we recognized a beneficial conversion feature for the underlying shares of our common stock since the nondetachable conversion feature was in-the-money (the conversion price of $0.40 was lower than our common stock trading price of $0.61 at the conversion date). The beneficial conversion feature was recognized as a deemed dividend.

 

Off-Balance Sheet Arrangements

 

As of December 31, 2020, the following transactions, obligations, or relationships represent our off-balance sheet arrangements:

 

Strome Warrants. On June 15, 2018, we modified the January 2018 SPA and the March 2018 SPA with Strome Trust. Strome Trust was also granted observer rights on our Board. As consideration for such modification, we issued the Strome Warrants to purchase up to 1,500,000 shares of our common stock, exercisable at price of $0.50 per share (as amended) (as further described in Note 21, Stockholders’ Equity, in our consolidated financial statements for the year ended December 31, 2020), which are carried on our consolidated balance sheets as a derivative liability at fair value, as adjusted at each period-end since, among other criteria, delivery of unregistered shares is precluded upon exercise. The Strome Warrants are exercisable for a period of five years, subject to customary anti-dilution adjustments, and may, in the event there is no effective registration statement covering the resale of the warrant shares, be exercised on a cashless basis in certain circumstances. Strome Warrants exercisable for up to 1,500,000 shares of our common stock were outstanding as of December 31, 2020, with a derivative liability fair value of $704,707. In the event Strome Trust or its designee decided to exercise the Strome Warrants, since shares of our common stock were available to settle the instrument, there would be no impact to our cash resources.

 

B. Riley Warrants. On October 18, 2018, we issued the 2018 Warrants to B. Riley FBR and one of its affiliates to purchase up to 875,000 shares of our common stock, with an initial exercise price of $1.00 per share (as further described in Note 21, Stockholders’ Equity, in our consolidated financial statements for the year ended December 31, 2020), which exercise price was subsequently adjusted to $0.33, and which are carried on the consolidated balance sheets as a derivative liability at fair value, as adjusted at each period-end since, among other criteria, delivery of unregistered shares is precluded upon exercise. The 2018 Warrants are exercisable for a period of seven years, subject to customary anti-dilution adjustments, and may, if at any time after the six-month anniversary of the issuance of the warrants there is no effective registration statement covering the re-sale of the shares of common stock underlying the 2018 Warrants, be exercised on a cashless basis. The 2018 Warrants exercisable for up to 875,000 shares of our common stock were outstanding as of December 31, 2020, with a derivative liability fair value of $443,188. In the event B. Riley FBR or its affiliate decided to exercise the 2018 Warrants (which are subject to certain contractual exercise limitations), since shares of our common stock were available to settle the instrument after considering the contractual exercise limitations, there would be no impact to our cash resources.

 

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Contractual Obligations

 

The following table sets forth our principal cash operating obligations and commitments as of December 31, 2020, aggregating to approximately $49.5 million.

 

       Payments due by Year 
   Total   2021   2022   2023   2024   2025   Thereafter 
Operating leases  $41,948,685   $3,804,853   $3,525,158   $3,528,696   $3,526,406   $3,740,591   $23,822,981 
Employment contracts   2,375,000    1,461,842    913,158    -    -    -    - 
Consulting agreement   5,146,499    4,554,399    592,100    -    -    -    - 
Total  $49,470,184   $9,821,094   $5,030,416   $3,528,696   $3,526,406   $3,740,591   $23,822,981 

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, platform development, impairment of long-lived assets, and stock-based compensation. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements for the year ended December 31, 2020.

 

Our discussion and analysis of the financial condition and results of operations is based upon our consolidated financial statements included elsewhere in this prospectus, which have been prepared in accordance with GAAP. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements. Actual results may differ from these estimates under different assumptions or conditions.

 

Revenue

 

In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, revenues are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We generate all of our revenue from contracts with customers. We account for revenue on a gross basis, as compared to a net basis, in our statement of operations. We made this determination based on our taking the credit risk in our revenue-generating transactions and because we are also the primary obligor responsible for providing the services to the customer. Cost of revenues is presented as a separate line item in the statement of operations.

 

The following is a description of the principal activities from which we generate revenue:

 

Advertising Revenue

 

Digital Advertising. We recognize revenue from digital advertisements at the point when each ad is viewed. The quantity of advertisements, the impression bid prices, and revenue are reported on a real-time basis. We enter into contracts with advertising networks to serve display or video advertisements on the digital media pages associated with its various channels. Although reported advertising transactions are subject to adjustment by the advertising network partners, any such adjustments are known within a few days of month end. We owe our independent Publisher Partners a revenue share of the advertising revenue earned, which is recorded as service costs in the same period in which the associated advertising revenue is recognized.

 

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Advertising revenue that is comprised of fees charged for the placement of advertising on the websites that we own and operate, is recognized as the advertising or sponsorship is displayed, provided that collection of the resulting receivable is reasonably assured.

 

Print Advertising. Advertising related revenues for print advertisements are recognized when advertisements are published (defined as an issue’s on-sale date), net of provisions for estimated rebates, rate adjustments, and discounts.

 

Subscription Revenue

 

Digital Subscriptions. We enter into contracts with internet users that subscribe to premium content on our owned and operated media channels and facilitate such contracts between internet users and our Publisher Partners. These contracts provide internet users with a membership subscription to access the premium content. For subscription revenue generated by our independent Publisher Partners’ content, we owe our Publisher Partners a revenue share of the membership subscription revenue earned, which is initially deferred and recorded as deferred contract costs. We recognize deferred contract costs over the membership subscription term in the same pattern that the associated membership subscription revenue is recognized.

 

Digital subscription revenue generated from our websites that we own and operate are charged to customers’ credit cards or are directly billed to corporate subscribers, and are generally billed in advance on a monthly, quarterly or annual basis. We calculate net subscription revenue by deducting from gross revenue an estimate of potential refunds from cancelled subscriptions as well as chargebacks of disputed credit card charges. Net subscription revenue is recognized ratably over the subscription periods. Unearned revenue relates to payments for subscription fees for which revenue has not been recognized because services have not yet been provided.

 

Circulation Revenue

 

Circulation revenues include magazine subscriptions and single copy sales at newsstands.

 

Print Subscriptions. Revenue from magazine subscriptions are deferred and recognized proportionately as products are distributed to subscribers.

 

Newsstand. Single copy revenue is recognized on the publication’s on-sale date, net of provisions for estimated returns. We base our estimates for returns on historical experience and current marketplace conditions.

 

Licensing Revenue

 

Content licensing-based revenues are accrued generally monthly or quarterly based on the specific mechanisms of each contract. Generally, revenues are accrued based on estimated sales and adjusted as actual sales are reported by partners. These adjustments are typically recorded within three months of the initial estimates and have not been material. Any minimum guarantees are typically earned evenly over the fiscal year.

 

Contract Modifications

 

We occasionally enter into amendments to previously executed contracts that constitute contract modifications. We assess each of these contract modifications to determine:

 

  if the additional services and goods are distinct from the services and goods in the original arrangement; and
     
  if the amount of consideration expected for the added services or goods reflects the stand-alone selling price of those services and goods.

 

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A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract, or a cumulative catch-up basis.

 

Cost of Revenue

 

Our cost of revenue represents the cost of providing our digital media network channels and advertising and membership services. The cost of revenue that we have incurred in the periods presented primarily include:

 

  Publisher Partner guarantees and revenue share payments;
  amortization of developed technology and platform development;
  royalty fees;
  hosting, bandwidth and software license fees;
  printing, distribution, and fulfillment costs;
  payroll and related expenses for customer support, technology maintenance, and occupancy costs of related personnel;
  fees paid for data analytics and to other outside service providers; and
  stock-based compensation of related personnel.

 

Platform Development

 

For the years presented, substantially all of our technology expenses are development costs for the Platform that were capitalized as intangible costs. Technology costs are expensed as incurred or capitalized into property and equipment in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles – Goodwill and Other. This ASC requires that costs incurred in the preliminary project and post-implementation stages of an internal use software project be expensed as incurred and that certain costs incurred in the application development stage of a project be capitalized.

 

We capitalize internal labor costs, including compensation, benefits and payroll taxes, incurred for certain capitalized platform development projects. Our policy with respect to capitalized internal labor stipulates that labor costs for employees working on eligible internal use capital projects are capitalized as part of the historical cost of the project when the impact, as compared to expensing such labor costs, is material. Platform development capitalized during the application development stage of a project include:

 

  payroll and related expenses for personnel; and
  stock-based compensation of related personnel.

 

Selling and Marketing

 

Selling and marketing consist primarily of expenses incurred in selling and marketing our products. Our selling and marketing expenses include:

 

  payroll and employee benefits of selling and marketing account management support teams;
  professional marketing services;
  office and occupancy costs;
  circulation costs;
  advertising costs; and
  stock-based compensation of related personnel.

 

General and Administrative

 

General and administrative expenses consist primarily of:

 

  payroll and employee benefits for executive and administrative personnel;
  professional services, including accounting, legal and insurance;
  office and occupancy costs;
  conferences;
  other general corporate expenses; and
  stock-based compensation of related personnel.