As filed with the Securities and Exchange Commission on January 11, 2022
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
THE SECURITIES ACT OF 1933
(Exact Name of Registrant as Specified in Its Charter)
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Chief Executive Officer
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Jeffrey P. Berg, Esq.
Baker & Hostetler LLP
11601 Wilshire Boulevard, Suite 1400
Los Angeles, California 90025-0509
Alissa K. Lugo, Esq.
Baker & Hostetler LLP
200 South Orange Avenue, Suite 2300
Orlando, Florida 32801
Julie R. Fenster, Esq.
200 Vesey Street
New York, New York 10281
Sara L. Terheggen, Esq.
The NBD Group, Inc.
350 N. Glendale Avenue,
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement is declared effective
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 (the “Securities Act”) check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|Large accelerated filer||☐||Accelerated filer||☐|
|☒||Smaller reporting company|
|Emerging growth company|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
Title of each class of
securities to be registered
registration fee (3)
|Common stock, par value $0.001 per share (4)||$||30,000,000||$||2,781.00|
|Preferred Stock Purchase Rights (4)(5)||-||-|
|(1)||In accordance with Rule 457(o) under the Securities Act of 1933, as amended (the “Securities Act”), the number of shares being registered and the proposed maximum offering price per share are not included in this table.|
|(2)||The proposed maximum aggregate offering price has been estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act, and includes shares of common stock, $0.001 per share, (the “Common Stock”) of theMaven, Inc. (the “Company”), issuable upon the exercise of the Underwriter option to purchase additional shares.|
|(3)||Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price of the securities registered hereunder.|
|(4)||Pursuant to Rule 416(a) of the Securities Act, there are also being registered an indeterminable number of additional securities as may be issued to prevent dilution resulting from stock splits, stock dividends, or similar transactions.|
|(5)||The Common Stock currently includes certain preferred stock purchase rights issued pursuant to that certain Rights Agreement, dated May 4, 2021 (the “Rights Agreement”), between the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent. Until the occurrence of certain events specified in the Rights Agreement, none of which have occurred, the preferred stock purchase rights are not exercisable, are evidenced by the certificate for the common stock and will be transferred along with and only with and are not severable from, the common stock. The value attributable to the preferred stock purchase rights, if any, is reflected in the market price of the common stock. No separate consideration will be payable for the preferred stock purchase rights.|
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this registration statement shall become effective on such date as the Securities Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. The securities described herein may not be sold until the registration statement filed with the Securities and Exchange Commission is declared effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
|PRELIMINARY PROSPECTUS||SUBJECT TO COMPLETION||DATED JANUARY 11, 2022|
SHARES OF COMMON STOCK
We are offering shares of common stock, $0.001 par value per share (our “common stock”), of theMaven, Inc. (the “Company”), in a firm commitment underwritten public offering for whom B. Riley Securities, Inc. (“B. Riley Securities”) is acting as representative of the underwriters in the offering (collectively, the “Underwriter”).
Our common stock is quoted on the OTC Markets Group Inc.’s OTCQX® Best Market (the “OTCQX”) under the symbol “MVEN.” As of , 2022, the last sale price of our common stock as reported on the OTCQX was $ per share ($ pre-reverse stock split). There is a limited public trading market for our stock. We have assumed a public offering price of $ , which represents the last reported bid price of our common stock as reported on the OTCQX on , 2022. The final public offering price of our common stock in this offering will be determined through negotiation between us and the Underwriter and may be issued at a discount to the then-current per share market price of our common stock. Further, the assumed public offering price of our common stock used through this prospectus may be not be indicative of the final offering price. We have applied to list our common stock on the NYSE American (the “NYSE American”) under the symbol “AREN”; however, we have not yet received approval to list our common stock on the NYSE American and there is no assurance that our common stock will ever be listed on the NYSE American. The approval of our listing on the NYSE American is a condition of closing this offering.
Unless otherwise noted, and except in our financial statements and the notes thereto, the share and per-share information in this prospectus reflects a proposed reverse stock split of our outstanding common stock at an assumed one-for- (1-for- ) ratio (the “Reverse Stock Split”), the midpoint of an anticipated range of reverse stock split ratios between 1-for- and 1-for- , to occur prior to the closing of the offering.
This prospectus contains or incorporates by reference summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed or have been incorporated by reference as exhibits to the registration statement of which this prospectus forms a part, and you may obtain copies of those documents as described in this prospectus under the heading “Where You Can Find Additional Information.”
Investing in shares of our common stock involves significant risks. You should read the section entitled “Risk Factors” beginning on page 4 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.
|Per Share||Total Without Exercise of Underwriter Option|
|Public offering price||$||$||$|
|Underwriting discounts and commissions (1)||$||$||$|
|Offering proceeds, before expenses, to us||$||$||$|
|(1)||See “Underwriting” on page 79 for additional information on the compensation payable to the Underwriter|
We have granted to the Underwriter an option to purchase up to a maximum of additional shares of our common stock from us at the public offering price above, less underwriting discounts and commissions, within 30 days of the date of the prospectus.
The Underwriter expects to deliver the shares of our common stock to purchasers on or before _______, 2022.
B. Riley Securities
The date of this prospectus is ________________, 2022.
TABLE OF CONTENTS
|CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS||i|
|USE OF PROCEEDS||18|
|Market Price and Dividend Information||19|
|MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS||29|
|SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT||62|
|CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS||65|
|Description of Securities||69|
|Shares Available for Future Sales||74|
|Material U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders||75|
|WHERE YOU CAN FIND ADDITIONAL INFORMATION||86|
You should rely only on the information contained in this prospectus. Neither we nor the Underwriter have 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 Underwriter is 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.
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.
We are a data-driven media company that focuses on building deep content verticals powered by a best-in-class digital media platform (the “Platform”), empowering premium publishers who impact, inform, educate and entertain. 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 our audience and monetization both within our core brands as well as our media publishers (each, a “Publisher Partner”). 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, Incorporated (“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 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 Publisher 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 continually benefit from our ongoing technological advances and bespoke audience development expertise. Additionally, we believe the lead brand within each vertical creates a halo benefit for all Publisher Partners in the vertical on both the content and technology sides. While they benefit from these critical performance improvements, they also may save substantially in technology, infrastructure, advertising sales, member marketing, and management costs.
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.”
NYSE American Listing, Reverse Stock Split, and Name Change
We have applied to list our common stock on the NYSE American. If our application to the NYSE American is not approved, or we otherwise determine that we will not be able to secure the listing of our common stock on the NYSE American, we will not complete this offering.
In order to obtain NYSE American listing approval, we intend to implement a Reverse Stock Split of our common stock at an assumed 1-for- ratio following approval of the Reverse Stock Split by the Financial Industry Regulatory Authority (“FINRA”). The Reverse Stock Split, when effective, will combine each shares of our outstanding common stock into one share of common stock, without any change in the par value per share, and the Reverse Stock Split correspondingly will, among other things, reduce the number of shares of our common stock subject to outstanding options, warrants, and convertible securities by a factor of , and increase the exercise price or conversion price by a factor of . No fractional shares will be issued in connection with the Reverse Stock Split, and any fractional shares resulting from the Reverse Stock Split will be rounded up to the nearest whole share. Except as other indicated, and except in our financial statements and the notes thereto, all historical share and per-share amounts in this prospectus have been adjusted to reflect the assumed 1-for- Reverse Stock Split, the midpoint of an anticipated range of reverse stock split ratios between 1: and 1: , until final determination by our board of directors (our “Board”) as if it was effective and as if it had occurred at the beginning of the earliest period presented.
Finally, we intend to also effect a corporate name change in conjunction with obtaining FINRA’s approval of the Reverse Stock Split.
Stock Purchase Agreements
Between January ___ and ____, 2022, we entered into several Stock Purchase Agreements with certain of our current stockholders (collectively, the “Stock Purchase Agreements”), pursuant to which we agreed to issue an aggregate of _____ shares at a price equal to $___ per share, or the market-weighted average price of our common stock at the close of trading on the thirty (30) previous trading days, to such stockholders in lieu of an aggregate of $___ million owed in liquidated damages, which includes accrued but unpaid interest, for our failure to meet certain covenants in prior Registration Rights Agreements and related Securities Purchase Agreements with such stockholders. We also granted registration rights to these stockholders with respect to the shares of our common stock issued in lieu of these liquidated damages.
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.
|Securities Being Offered by Us:||shares of our common stock (or shares of our common stock if the Underwriter exercises their option to purchase additional shares in full).|
|Offering Price:||Assumed offering price of $ per share (which represents the last reported bid price of our common stock as reported on the OTCQX on , 2022). The actual offering price will be determined between the Underwriter and us at the time of pricing and may be issued at a discount to the current market price of our common stock.|
|Risk Factors:||The shares of our common stock 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:||shares (277,924,445 pre-Reverse Stock Split shares) (1)|
|Shares of Our Common Stock to be Outstanding After the Offering:||shares (or shares if the Underwriter exercises its option to purchase additional shares in full).|
|Underwriter Option:||We have granted the Underwriter a 30-day option to purchase up to an additional shares of our common stock at the public offering price, less estimated underwriting discounts and commissions.|
|Use of Proceeds:|
We estimate the net proceeds to us from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $ million ($ million if the Underwriter’s option to purchase additional shares of our common stock is exercised in full), assuming a public offering price of $ per share, which was the last reported sale price of our common stock on the OTCQX on , 2022.
We intend to use the net proceeds from this offering for our working capital and general corporate purposes and to partially refinance our existing indebtedness. For a more complete description of our intended use of the net proceeds from this offering, see “Use of Proceeds.”
|Conflicts of Interest:||Affiliates of B. Riley Securities, representative of the Underwriter in this offering, beneficially own 27.18% of our outstanding common stock. As a result, B. Riley Securities is deemed to have a “conflict of interest” within the meaning of FINRA Rule 5121. Accordingly, this offering will be made in compliance with the applicable provisions of Rule 5121. Rule 5121 requires that no sale be made to discretionary accounts by underwriters having a conflict of interest without the prior written approval of the account holder and that a “qualified independent underwriter,” as defined in the rule, has participated in the preparation of the registration statement and prospectus and exercised the usual standards of due diligence with respect thereto. is assuming the responsibilities of acting as the “qualified independent underwriter” in this offering. will not receive any additional compensation for acting as a qualified independent underwriter.|
|Lock-Ups:||We and our executive officers, directors, and certain holders of outstanding shares of our common stock have agreed with the Underwriter, subject to certain exceptions, not to dispose of or hedge any of their shares of our common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 90 days, in the case of certain stockholders, or 120 days, in the case of us and our executive officers and directors, after the date of this prospectus.|
|Reverse Stock Split:||In order to obtain NYSE American listing approval, we have obtained approval of our Board and stockholders of a reverse stock split of the outstanding shares of our common stock in the range from one for-two (1-for-2) to one-for-hundred (1-for-100), which ratio is to be selected by our Board. Our Board anticipates setting the ratio of the Reverse Stock Split, and the Reverse Stock Split becoming effective following approval by FINRA of the Reverse Stock Split, prior to the effective date of the registration statement (of which this prospectus forms a part). Except as otherwise indicated, and except in our financial statements and notes thereto, all references to our common stock, share data, per share data, and related information depict an assumed Reverse Stock Split ratio of 1-for- , the midpoint of an anticipated range of reverse stock split ratios between 1: and 1: , until final determination by our Board, as if it was effective and as if it had occurred at the beginning of the earliest period presented.|
|Trading Symbol:||Our common stock is currently quoted on the OTCQX under the symbol “MVEN.” We have applied for the listing of our common stock on NYSE American under the symbol “AREN”. The approval of our listing on the NYSE American is a condition of closing this offering.|
|(1)||Unless we indicate otherwise, the number of shares of our common stock outstanding prior to this offering is based on 277,924,445 shares of our common stock outstanding on December 31, 2021, which does not reflect our anticipated Reverse Stock Split, and excludes the following: (i) 25,458,950 shares of our common stock issuable upon exercises of outstanding warrants; (ii) 45,665,046 shares of our common stock issuable upon conversions of the Series H Convertible Preferred Stock (“Series H Preferred Stock”); (iii) 128,809,239 shares of our common stock issuable upon exercises of outstanding option awards; (iv) 39,658,945 shares of our common stock issuable upon vesting of outstanding restricted stock units; (v) 188,791 shares of our common stock issuable upon conversion of Series G Convertible Preferred Stock (“Series G Preferred Stock”), (vi) 23,636,934 shares of our common stock reserved for issuance under the 2019 Equity Incentive Plan (the “2019 Plan”), and (vii) 3,180,409 shares of our common stock reserved for issuance under the 2016 Stock Incentive Plan (the “2016 Plan”). The number of shares of our common stock outstanding prior to this offering includes 4,285,714 shares of our common stock issued pursuant to restricted stock awards that remain subject to forfeiture.|
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 increasingly saw 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 the registration statement of which this prospectus forms a part 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 did not have 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.
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 $162.3 million. Our accumulated deficit as of September 30, 2021 was approximately $233.1 million. While we anticipate generating positive cash flow in fiscal 2022, 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, which would be determined and disclosed in our Annual Report on Form 10-K for the year ended 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, 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.
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.
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.
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 to a lesser extent in 2021. It is still uncertain when and to what extent advertisers will return to pre-pandemic 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.
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.
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 collection, use, retention and sharing of personal information by us and our third-party service providers is subject to international, federal, state, and local data privacy, protection and security laws and regulations, which have become increasingly stringent, are rapidly evolving, and are likely to remain uncertain for the foreseeable future. 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. These laws are not consistent and compliance in the event of a widespread data breach could be costly. 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. Finally, 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.
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. The application, interpretation, and enforcement of federal, state, and foreign 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.
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.|
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.
Once our common stock is listed on the NYSE American, there is no assurance that we will be able to maintain compliance with the NYSE American’s continued listing standards. As a condition to consummating this offering, our common stock offered in this prospectus must be listed on the NYSE American or another national securities exchange. Accordingly, in connection with the filing of the registration statement of which this prospectus forms a part, we have applied to list our common stock on the NYSE American under the symbol “AREN.” Assuming our common stock is listed and after the consummation of this offering, and assuming we are able to maintain such listing, 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. Neither we nor the Underwriter can provide any assurance that an active and liquid trading market in our securities will develop or, if developed, that such markets will continue.
If the NYSE American approves our application to list our common stock and we are not able to comply with the applicable continued listing standards of the NYSE American, the NYSE American could delist our common stock. We applied to list our common stock on the NYSE American. Should our common stock be listed on the NYSE American, in order to maintain that listing, we must satisfy minimum financial and other continued listing standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. There can be no assurances that we will be able to comply with such applicable continued listing standards.
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. In the past (including immediately prior to this offering), our common stock was 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.” While our common stock will not be considered “penny stock” following this offering since it will listed on the NYSE American, if we are unable to maintain that listing and our common stock is no longer listed on the NYSE American, unless we maintain a per-share price above $5.00, our common stock will become “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.
In addition to the “penny stock” rules promulgated by the SEC, 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. Thus, FINRA requirements historically has made 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.
We anticipate effecting the Reverse Stock Split of our outstanding common stock prior to the effective date of the registration statement of which this prospectus forms a part. However, the Reverse Stock Split may not increase our stock price sufficiently while the stock is trading, and we may not be able to list our common stock on the NYSE American, or another national securities exchange, in which case we will not be able to close this offering. We expect that the Reverse Stock Split will increase the market price of our common stock while our stock is trading and enable us to meet the minimum market price requirement of the listing rules of the NYSE American, or another national securities exchange. However, the effect of the Reverse Stock Split upon the market price of our common stock cannot be predicted with certainty, and the results of reverse stock splits by companies in similar circumstances have been varied. It is possible that the market price of our common stock following the Reverse Stock Split will not increase sufficiently for us to be in compliance with the minimum market price requirement of the NYSE American, or another national securities exchange, in which case we will not be able to consummate this offering, or if it does, that such price will be sustained. If we are unable to meet the minimum market price requirement prior to this offering and we are unable to list our shares on the NYSE American, or another national securities exchange, we will not be able to complete this offering. Further, if following the listing, we are unable to maintain our stock price such that it falls below the minimum stock price required by the NYSE American, our shares may be delisted.
Even if the Reverse Stock Split achieves the requisite increase in the market price of our common stock, there can be no assurance that we will be approved for listing on the NYSE American, or another national securities exchange, or able to comply with other continued listing standards of the NYSE American, or such other national securities exchange. Even if the market price of our common stock increases sufficiently so that we comply with the minimum market price requirement, we cannot assure you that we will be able to comply with the other standards that we are required to meet in order to be approved for listing on the NYSE American, or another national securities exchange, or maintain a listing of our common stock on such exchange. Our failure to meet these requirements prior to listing will result in this offering not occurring and our failure to meet these requirements following listing may result in our common stock being delisted from the NYSE American, or another national securities exchange.
The Reverse Stock Split may decrease the liquidity of the shares of our common stock. The liquidity of the shares of our common stock may be affected adversely by the Reverse Stock Split given the reduced number of shares that will be outstanding following the Reverse Stock Split. In addition, the Reverse Stock Split may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting such sales.
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 277,924,445 shares of our common stock and 15,234 shares of our Preferred Stock, consisting of 15,066 shares of Series H Preferred Stock and approximately 168 shares of Series G Preferred Stock are issued and outstanding as of December 31, 2021. The number of shares of our common stock issued and outstanding as of December 31, 2021 excludes 128,809,239 shares of our common stock issuable upon exercise of outstanding option awards, 39,658,945 shares of our common stock issuable upon vesting of restricted stock units, 25,458,950 shares of our common stock issuable upon exercise of outstanding warrants, 45,665,046 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, 3,180,409 shares of our common stock reserved for issuance under the 2016 Plan, and 23,636,934 shares of our common stock reserved for issuance under the 2019 Plan. The number of shares of our common stock outstanding prior to this offering includes 4,285,714 shares of our common stock issued pursuant to restricted stock awards that remain subject to forfeiture. 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, as amended (our “Certificate of Incorporation”), and our Second Amended and Restated Bylaws (our “Bylaws”) contain provisions 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 yet 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. We have applied to have our common stock listed on the NYSE American. If our application is approved, of which there can be no assurances, we will become subject to more stringent corporate governance measures and will need to continue to comply with such measures or risk our common stock becoming delisted.
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 businesses 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 is 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.
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.|
USE OF PROCEEDS
We estimate that the net proceeds from our issuance and sale of shares of our common stock in this offering will be approximately $ million, or approximately $ million if the Underwriter exercises its option to purchase additional shares in full, assuming an offering price of $ per share, the last reported sale price of our common stock as quoted on the OTCQX on , 2022, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
A $0.50 increase or decrease in the assumed offering price of $ per share (which was the last reported sale price per share of our common stock on , 2022) would increase or decrease, respectively, the net proceeds to us by approximately $ . A ten percent (10%) increase or decrease in the assumed number of shares of our common stock sold in this offering would increase or decrease, respectively, the net proceeds to us by approximately $ million.
We currently intend to use the net proceeds from the sale of shares under this prospectus to fund our working capital and general corporate purposes and to partially refinance our existing indebtedness.
Our expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition, which could change in the future as our plans and business conditions evolve. As of the date of this prospectus, we cannot specify with certainty all of the particular uses of the proceeds from this offering. Accordingly, we will retain broad discretion over the use of such proceeds.
MARKET PRICE AND DIVIDEND 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. We have applied to list our common stock on the NYSE American under the symbol “AREN.” There can be no assurance that our listing application will be approved by the NYSE American. The approval of our listing is a condition of closing this offering.
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. Prices in the table below have been presented to reflect the assumed Reverse Stock Split of our outstanding shares of common stock as well as the pre-Reverse Stock Split prices.
As of December 31, 2021, there were approximately 265 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, 277,924,445 shares of our common stock were issued and outstanding.
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.
The following table sets forth our capitalization assumed as of September 30, 2021:
|●||On an actual basis; and|
|●||On an as-adjusted basis, giving effect to this offering of shares of our common stock at an assumed public offering price of $ per share, after deducting the estimated underwriting discounts and commissions and estimate offering expenses payable by us.|
The as-adjusted information below is illustrative only, and our capitalization following the closing of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. You should read this information in conjunction with “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our audited financial statements and the related notes appearing elsewhere in this prospectus.
|As of September 30, 2021|
|Cash and Cash Equivalents||$||8,227,840|
|Series G redeemable and convertible preferred stock, $0.01 par value, $1,000 per share liquidation value and 1,800 shares designated; aggregate liquidation value: $168,496; Series G shares issued and outstanding: 168.496; common shares issuable upon conversion: 188,791 at December 31, 2020||$||168,496|