# Paradium.AI, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Paradium.AI, Inc.](/companies/paai.md) (CIK 894871)
- Form: 10-Q
- Filed: 2024-11-14
- Accepted by EDGAR: Nov 14, 2024, 16:05 ET
- Period: 2024-09-30
- Accession: 0001493152-24-045851
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/894871/000149315224045851/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/894871/000149315224045851/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $33.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $89.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $16.6m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $53.0m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $17.0m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $36.6m | us-gaap:GrossProfit |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $8.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$2.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $3.2m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $11.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $40.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $116.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $4.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$107.6m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.11 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$3.44 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.11 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$3.44 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 37,610,058 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 31,291,641 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$7.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $54.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $5.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $37.8m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $114.2m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $247.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $251.5m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $102.4m | us-gaap:LongTermDebt |
| Current portion of debt | at 2024-09-30 | $102.4m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2024-09-30 | $102.4m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-09-30 | −$137.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 48,876 characters.

*The following discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2024 and* 2023 *should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023 included in the Annual Report on Form 10-K filed with the SEC on April 1, 2024. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see “Forward-Looking Statements.”*

### Overview

We are a media company that leverages technology to build deep content verticals powered by anchor brands and a best-in-class digital media platform (the “Platform”) empowering publishers who impact, inform, educate, and entertain. Our strategy is to focus on key subject matter verticals where audiences are passionate about a topic category (e.g., sports and finance) where we can leverage the strength of our core brands to grow our audience and increase monetization both within our core brands as well as for our media publisher partners (each, a “Publisher Partner”). Our focus is on leveraging our Platform and brands in targeted verticals to maximize audience reach, enhance engagement, and optimize monetization of digital publishing assets for the benefit of our users, our advertiser clients, and our greater than 40 owned and operated properties as well as properties we run on behalf of independent Publisher Partners. We own and operate *Athlon Sports, TheStreet, The Spun, Parade, and Men’s Journal* and power more than 360 independent Publisher Partners, including the many sports team sites that contribute to Athlon Sports.

Each Publisher Partner joins the Platform by invitation only with the objective of improving our position in key verticals while optimizing the performance of the Publisher Partner. Publisher Partners incur the costs in content creation on their respective channels and receive a share of the revenue associated with their content. Because of the state-of-the-art technology and large scale of the Platform and our expertise in search engine optimization, social media, ad monetization and subscription marketing, Publisher Partners continually benefit from our ongoing technological advances and audience development expertise. Additionally, we believe the lead brands within our verticals create a halo benefit for all Publisher Partners while each of them adds to the breadth and quality of content. While the Publisher Partners benefit from these critical performance improvements they may also save substantial technology, infrastructure, advertising sales, member marketing and management costs.

Of the more than 360 Publisher Partners, a large majority of them publish content within one of our four verticals of sports, finance, lifestyle and men’s lifestyle, and oversee an online community for their respective sites, leveraging our Platform, monetization operation, distribution channels and data and analytics offerings and benefiting from our ability to engage the collective audiences within a single network. Generally, Publisher Partners are independently owned, strategic partners who receive a share of revenue from the interaction with their content. Audiences expand and advertising revenue may improve due to the scale we have achieved by combining all Publisher Partners into a single platform and a large and experienced sales organization. They also benefit from our membership marketing and management systems, which we believe will enhance their revenue.

Our growth strategy is to continue adding new Publisher Partners in key verticals that management believes will expand the scale of unique users interacting on the Platform.

### Recent Developments

On July 12, 2024, we entered into a Third Amendment to the Third Amended and Restated Note Purchase Agreement (“Amendment No. 3”), pursuant to which interest that was, or will be, due on December 31, 2023, March 31, 2024, June 30, 2024 and September 30, 2024 will now be due on or before December 31, 2024, as well as the interest otherwise due on December 31, 2024. The deferral is contingent on, among other things, no events of default occurring under its Bridge Notes and Debt (both as further described in the accompanying condensed consolidated financial statements in Note 10 and Note 11, and referred to as the “Loan Documents”) during the deferral period. On November 6, 2024, we received a letter from Renew Group Private Limited (“Renew”) confirming the Company is not currently in default under the Loan Documents due to the cure of the default identified in the forbearance letter.

Effective August 19, 2024, the Business Combination Agreement, dated November 5, 2023, as amended (the “Business Combination Agreement”), among us, Simplify, Bridge Media Networks, LLC, New Arena Holdco, Inc., Energy Merger Sub I, LLC and Energy Merger Sub II, LLC was terminated by mutual agreement. The Business Combination Agreement was terminated as a result of previously disclosed negotiations between us and Simplify around alternative structures or options to the transactions contemplated by the Business Combination Agreement. We incurred no penalties as a result of the early termination of the Business Combination Agreement.

On August 19, 2024, we entered into the Amended Promissory Note, in connection with an amendment to our March 13, 2024 working capital loan agreement with Simplify, pursuant to which we have available up to $50,000 (originally $25,000) at ten percent (10.0%) interest rate per annum (the “Applicable Interest Rate”), payable monthly in arrears, with a maturity on December 1, 2026 (originally March 13, 2026). In connection with the Amended Promissory Note, on August 19, 2024, we and Simplify also entered into a common stock purchase agreement (the “Common Stock Purchase Agreement”), whereby $15,000 of outstanding indebtedness under the Simplify Loan was exchanged shares of our common stock.

### Impact of Macroeconomic Conditions

Uncertainty in the global economy presents significant risks to our business. Increases in inflation, instability in the global banking system, geopolitical factors, including the ongoing conflicts in Ukraine and Israel and the responses thereto may have an adverse effect on our business. While we are closely monitoring the impact of the current macroeconomic conditions on all aspects of our business, the ultimate extent of the impact on our business remains highly uncertain and will depend on future developments and factors that continue to evolve. Most of these developments and factors are outside of our control and could exist for an extended period of time. As a result, we are subject to continuing risks and uncertainties. For additional information, see the sections titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 1, 2024 and in this Quarterly Report.

### Key Operating Metrics

Our key operating metrics are:

- Revenue per page view (“RPM”) – represents the advertising revenue earned per 1,000 pageviews. It is calculated as our advertising revenue during a period divided by our total page views during that period and multiplied by $1,000; and
- Monthly average pageviews – represents the total number of pageviews in a given month or the average of each month’s pageviews in a fiscal quarter or year, which is calculated as the total number of page views recorded in a quarter or year divided by three months or 12 months, respectively.

We monitor and review our key operating metrics as we believe that these metrics are relevant for our industry and specifically to us and to understanding our business. Moreover, they form the basis for trends informing certain predictions related to our financial condition. Our key operating metrics focus primarily on our digital advertising revenue, which has experienced significant growth in recent periods. As indicated in the Results of Operations section below, for the three months ended September 30, 2024, digital advertising revenue decreased by approximately 19%, as compared to the same period in fiscal 2023. For the nine months ended September 30, 2024, digital advertising revenue decreased by approximately 6%, as compared to the same period in 2023. Management monitors and reviews these metrics because such metrics are readily measurable in real time and can provide valuable insight into the performance of and trends related to our digital advertising revenue and our overall business. We consider only those key operating metrics described here to be material to our financial condition, results of operations and future prospects.

For pricing indicators, we focus on RPM as it is the pricing metric most closely aligned with monthly average pageviews. RPM is an indicator of yield and pricing driven by both advertising density and demand from our advertisers.

Monthly average pageviews are measured across all properties hosted on the Platform and provide us with insight into volume, engagement and effective page management and are therefore our primary measure of traffic. We utilize a third-party source, Google Analytics, to confirm this traffic data.

As described above, these key operating metrics are critical for management as they provide insights into our digital advertising revenue generation and overall business performance. This information also provides feedback on the content on our website and its ability to attract and engage users, which allows us to make strategic business decisions designed to drive more users to read or view more of our content and generate higher advertising revenue across all properties hosted on the Platform.

For the three and nine months ended September 30, 2024, our RPM was $24.69 and $22.27, respectively. For the three and nine months ended September 30, 2023, our RPM was $23.41 and $19.60, respectively. The 5% and 14% increases in RPM for the three and nine months reflect a significant increase in video advertising as a percentage of total digital advertising as digital video advertising is sold at a significantly higher price than digital display advertising.

For the three and nine months ended September 30, 2024, our monthly average pageviews were 301,721,996 and 332,312,606, respectively, as compared to 388,410,170 and 380,578,813 for the three and nine months ended September 30, 2023. The 22% and 13% decreases in monthly average pageviews reflect algorithmic changes at Google, Facebook and other platforms which subdued user click-throughs to the original content.

All dollar figures presented below are in thousands unless otherwise stated.

### Liquidity and Capital Resources

### Going Concern

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

For the nine months ended September 30, 2024, we incurred a net loss from continuing operations of $14,880, and as of September 30, 2024, had cash on hand of $5,773 and a working capital deficit of $209,596. Management has evaluated our net loss from continuing operations and working capital deficit to determine if the significance of those conditions or events would limit our ability to meet our obligations when due, including under the Loan Documents and Simplify Loan (further details are provided in the accompanying condensed consolidated financial statements in Notes 10 and 12). In our evaluation, management determined that substantial doubt exists about our ability to continue as a going concern for a one-year period following the financial statement issuance date due to the net loss from continued operations and working capital deficit.

Our financial results have improved in recent periods due to restructuring activities and implementation of a new operating structure. In addition, we plan to continue improving monthly financial performance through the reduction of costs and monthly cash requirements, maintain compliance with the terms of all outstanding debt agreements, and take actions to resolve current and potential future liabilities to alleviate the conditions that raise substantial doubt about its ability to continue as a going concern, such as resolving pending litigation. However, there can be no assurance that we will be able to execute these plans. If we are unable to execute these plans, it could lead to selling assets and further reducing costs and cash requirements.

### Cash and Working Capital Facility

As of September 30, 2024, our principal sources of liquidity consisted of cash of $5,773 and accounts receivable from continuing operations, net of our allowance for credit losses, of $25,858. In addition, as of September 30, 2024, we had $48,900 available for additional use under our working capital loan with Simplify. As of September 30, 2024, the outstanding balance of the Simplify working capital loan was $1,100. Our cash balance as of the issuance date of our accompanying condensed consolidated financial statements is $7,085.

### Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

### Material Contractual Obligations

We have material contractual obligations that arise in the normal course of business primarily consisting of employment contracts, consulting agreements, leases, liquidated damages, debt and related interest payments. Purchase obligations consist of contracts primarily related to merchandise, equipment, and third-party services, the majority of which are due in the next 12 months. See Notes 5, 8, 10, 11 and 12 in our accompanying condensed consolidated financial statements for amounts outstanding as of September 30, 2024, related to leases, liquidated damages, working capital loan, bridge notes and debt, respectively. During 2022, we assumed the lease from Men’s Journal for office space in Carlsbad, California, that expires in March 2025, and we remain responsible for $720 over the lease term. The lease provides for fixed payments ranging from $89 to $94 over the remainder of the lease term, with an estimate of common expenses per month of $25 through the end of the lease term. Other than with respect to leases, as described in Note 5, *Leases*, in our accompanying condensed consolidated financial statements, there have been no material changes from the disclosures in our Annual Report on Form 10-K for the year ended December 31, 2023.

### Discontinued Operations

In connection with our discontinued operations from the discontinuance of the Sports Illustrated media business, we recorded the termination fee liability of $45,000 and recognized a loss on impairment of assets of $39,391 for the nine months ended September 30, 2024. As a result of this discontinuance, our total liabilities from the discontinued operations were $98,378, partially offset by our total assets from discontinued operations of $528 as of September 30, 2024.

Loss from our discontinued operations, net of tax, was $92,709 and $15,204 for the nine months ended September 30, 2024 and 2023, respectively.

Further details are provided in our accompanying condensed consolidated financial statements in Note 2, *Discontinued Operations,* related to our discontinued operations and Note 19, *Commitments and Contingencies,* regarding our legal matters and an action filed by ABG Group against the Company and Manoj Bhargava on April 1, 2024.

### Working Capital Deficit

We have financed our working capital requirements since inception through issuances of equity securities and various debt financings. Our working capital deficit as of September 30, 2024 and December 31, 2023 was as follows:

|  | As of September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Current assets | $37,834 | $90,399 |
| Current liabilities | (247,430) | (236,021) |
| Working capital deficit | $(209,596) | $(145,622) |

As of September 30, 2024, we had a working capital deficit of $209,596, as compared to $145,622 as of December 31, 2023, consisting of $37,834 in total current assets and $247,430 in total current liabilities. As of December 31, 2023, our working capital deficit consisted of $90,399 in total current assets and $236,021 in total current liabilities.

Our cash flows for the nine months ended September 30, 2024 and 2023 consisted of the following:

|  | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(7,507) | $(22,265) |
| Net cash used in investing activities | (2,819) | (3,467) |
| Net cash provided by financing activities | 6,815 | 18,649 |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | $(3,511) | $(7,083) |
| Cash, cash equivalents, and restricted cash, end of period | $5,773 | $7,290 |

For the nine months ended September 30, 2024, net cash used in operating activities was $7,507, consisting primarily of $124,161 of cash paid to employees, Publisher Partners, expert contributors, suppliers, and vendors, and for revenue share arrangements, professional services, and $2,698 of cash paid for interest, offset by $119,352 of cash received from customers. For the nine months ended September 30, 2023, net cash used in operating activities was $22,265, consisting primarily of $179,166 of cash paid to employees, Publisher Partners, expert contributors, suppliers, and vendors, and for revenue share arrangements, advance of royalty fees and professional services, and $10,835 of cash paid for interest, offset by $167,736 of cash received from customers.

For the nine months ended September 30, 2024, net cash used in investing activities was $2,819 consisting of (i) $54 for purchase of property and equipment and (ii) $2,765 for capitalized costs for our Platform. For the nine months ended September 30, 2023, net cash used in investing activities was $3,467, consisting of $2,967 for capitalized costs for our Platform and $500 for the acquisition of a business.

For the nine months ended September 30, 2024, net cash provided by financing activities was $6,815, primarily consisting of (i) $561 for the payment of the contingent consideration, (ii) $20,027 from repayment of our line of credit with SLR Digital Finance LLC (“SLR”) and (iii) $497 for tax payments relating to the withholding of shares of common stock for certain employees, less (iv) $12,000 in net proceeds from the common stock private placement, and (v) $16,100 in net proceeds from our working capital loan with Simplify. For the nine months ended September 30, 2023, net cash provided by financing activities was $18,649, consisting primarily of $11,500 (before a reduction for accrued offering costs of $167) in net proceeds from the public offering of common stock and $3,211 from borrowings under our SLR line of credit, $5,703 (excluding debt issuance costs of $100) in net proceeds from issuance of notes; offset by $1,423 tax payments relating to the withholding of shares of common stock for certain employees, and $75 payment of deferred cash payments.

### Results of Continuing Operations

#### Three Months Ended September 30, 2024 and 2023

|  | Three Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $33,555 | $36,996 | $(3,441) | -9.3% |
| Cost of revenue | 16,562 | 23,046 | (6,484) | -28.1% |
| Gross profit | 16,993 | 13,950 | 3,043 | 21.8% |
| Operating expenses |  |  |  |  |
| Selling and marketing | 2,011 | 6,422 | (4,411) | -68.7% |
| General and administrative | 6,023 | 10,940 | (4,917) | -44.9% |
| Depreciation and amortization | 905 | 1,055 | (150) | -14.2% |
| Total operating expenses | 8,939 | 18,417 | (9,478) | -51.5% |
| Income (loss) from operations | 8,054 | (4,467) | 12,521 | -280.3% |
| Total other expenses | (3,236) | (4,253) | 1,017 | -23.9% |
| Income (loss) before income taxes | 4,818 | (8,720) | 13,538 | -155.3% |
| Income taxes | (40) | (52) | 12 | -23.1% |
| Net income (loss) from continuing operations | $4,778 | $(8,772) | $13,550 | $-154.5% |
| Net income (loss) from discontinued operations, net of tax | (822) | (2,394) | 1,572 | $-65.7% |
| Net income (loss) | $3,956 | $(11,166) | $15,122 | $-135.4% |

For the three months ended September 30, 2024, the net income from continuing operations improved $13,550 to $4,778 as compared to our prior period net loss of $8,772. This improvement was primarily due to a $9,478 decrease in operating expenses and an increase in gross profit of $3,043.

### Revenue

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

|  | Three Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $33,555 | $36,996 | $(3,441) | -9.3% |
| Cost of revenue | 16,562 | 23,046 | (6,484) | -28.1% |
| Gross profit | $16,993 | $13,950 | $3,043 | 21.8% |

For the three months ended September 30, 2024 we had gross profit of $16,993, as compared to $13,950 for the three months ended September 30, 2023, an increase of $3,043. Gross profit percentage for the three months ended September 30, 2024 was 50.6%, as compared to 37.7% for the three months ended September 30, 2023.

The increase in gross profit percentage was driven by a higher mix of revenue from sports partners, which receive a revenue share, resulting in Publisher Partner revenue share as a percentage of digital advertising revenue increasing to 20.8% for the three months ended September 30, 2024, as compared to 26.8% for the three months ended September 30, 2023.

The following table sets forth revenue by category:

| Digital revenue: | Three Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Digital advertising | $23,067 | $28,251 | $(5,184) | -18.3% |
| Digital subscriptions | 1,807 | 2,962 | (1,155) | -39.0% |
| Licensing and syndication revenue | 1,837 | 2,230 | (393) | -17.6% |
| Other digital revenue | 6,320 | 1,088 | 5,232 | 480.9% |
| Total digital revenue | 33,031 | 34,531 | (1,500) | -4.3% |
| Print revenue: |  |  |  |  |
| Print advertising | - | 813 | (813) | -100.0% |
| Print subscriptions | 524 | 1,652 | (1,128) | -68.3% |
| Total print revenue | 524 | 2,465 | (1,941) | -78.7% |
| Total revenue | $33,555 | $36,996 | $(3,441) | -9.3% |

For the three months ended September 30, 2024, total revenue decreased $3,441, or a 9.3% decrease, to $33,555 from $36,996 for the three months ended September 30, 2023. This reflected a decrease in print revenue of $1,941 due primarily to the shutdown of Athlon Outdoor print operations, which was further reduced by a decrease of 4.3% in digital revenue of $1,500, primarily from decreases in our digital advertising of $5,184, and digital subscriptions of $1,155.

The primary driver of the decrease in our digital revenue is an 18.3% decrease in our digital advertising revenue from $28,251 for the three months ended September 30, 2023 to $23,067 in the current year period. Other digital revenue increased by $5,232 to $6,320 for the three months ended September 30, 2024 driven by the expansion in our e-commerce revenue.

### Cost of Revenue

The following table sets forth cost of revenue by category:

|  | Three Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Publisher Partner revenue share payments | $4,799 | $7,568 | $(2,769) | -36.6% |
| Technology, Platform and software licensing fees | 3,938 | 5,059 | (1,121) | -22.2% |
| Content and editorial expenses | 6,169 | 6,882 | (713) | -10.4% |
| Printing, distribution and fulfillment costs | 45 | 665 | (620) | -93.2% |
| Amortization of developed technology and platform development | 1,474 | 2,191 | (717) | -32.7% |
| Stock-based compensation | 131 | 724 | (593) | -81.9% |
| Other cost of revenue | 6 | (43) | 49 | -114.0% |
| Total cost of revenue | $16,562 | $23,046 | $(6,484) | -28.1% |

For the three months ended September 30, 2024, we recognized cost of revenue of $16,562 as compared to $23,046 for the three months ended September 30, 2023, which represents a decrease of $6,484. Cost of revenue was impacted by decreases in technology, Platform and software licensing fees of $1,121, Publisher Partner revenue share payments of $2,769, amortization of developed technology and platform development of $717, printing, distribution and fulfillment costs of $620 and stock-based compensation costs of $593.

### Operating Expenses

#### Selling and Marketing

The following table sets forth selling and marketing expenses from continuing operations by category:

|  | Three Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Payroll and employee benefits of selling and marketing account management support teams | $901 | $3,692 | $(2,791) | -75.6% |
| Stock-based compensation | 34 | 289 | (255) | -88.2% |
| Professional marketing services | 166 | 1,027 | (861) | -83.8% |
| Circulation costs | 55 | 446 | (391) | -87.7% |
| Advertising costs | 441 | 551 | (110) | -20.0% |
| Other selling and marketing expenses | 414 | 417 | (3) | -0.7% |
| Total selling and marketing | $2,011 | $6,422 | $(4,411) | -68.7% |

For the three months ended September 30, 2024, we incurred selling and marketing costs of $2,011 as compared to $6,422 for the three months ended September 30, 2023. The decrease in selling and marketing costs of $4,411 is primarily related to decreases in payroll and employee benefits costs of $2,791, due to restructuring activities and reduction in direct sales workforce. In addition, decreases were noted in professional marketing services of $861, circulation costs of $391, and stock-based compensation of $255.

#### General and Administrative

The following table sets forth general and administrative expenses by category:

|  | Three Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Payroll and related expenses for executive and administrative personnel | $1,580 | $3,297 | $(1,717) | -52.1% |
| Stock-based compensation | 567 | 2,749 | (2,182) | -79.4% |
| Professional services, including accounting, legal and insurance | 3,220 | 3,216 | 4 | 0.1% |
| Other general and administrative expenses | 656 | 1,678 | (1,022) | -60.9% |
| Total general and administrative | $6,023 | $10,940 | $(4,917) | -44.9% |

For the three months ended September 30, 2024, we incurred general and administrative costs of $6,023 as compared to $10,940 for the three months ended September 30, 2023. The $4,917 decrease in general and administrative expenses is primarily due to decreases in stock-based compensation of $2,182, payroll and related expenses of $1,717, and other general and administrative expenses of $1,022.

### Other Expenses

The following table sets forth other expenses:

|  | Three Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of contingent consideration | $- | $(60) | $60 | -100.0% |
| Interest expense, net | (3,159) | (4,042) | 883 | -21.8% |
| Liquidated damages | (77) | (151) | 74 | -49.0% |
| Total other expenses | $(3,236) | $(4,253) | $1,017 | -23.9% |

40

Change in Fair Value of Contingent Consideration. The change in fair value of contingent consideration for three months ended September 30, 2024 of $0, is due to the put option on our common stock in connection with the Fexy Studios acquisition no longer being outstanding as of September 30, 2024.

Interest Expense. We incurred interest expense of $3,159 and $4,042 for the three months ended September 30, 2024 and 2023, respectively, a decrease of $883 from the prior period, as a result of our decrease in debt.

Liquidated Damages. We recorded $77 of accrued interest on our liquidated damages payable for the three months ended September 30, 2024 primarily from the issuance of our convertible debentures, Series H convertible preferred stock, Series I convertible preferred stock, Series J convertible preferred stock and Series K convertible preferred stock in prior years. We recorded $151 of accrued interest on our liquidated damages payable for the three months ended September 30, 2023 primarily from issuance of the same securities as described above.

#### Nine Months Ended September 30, 2024 and 2023

|  | Nine Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $89,679 | $99,486 | $(9,807) | -9.9% |
| Cost of revenue | 53,035 | 61,991 | (8,956) | -14.4% |
| Gross profit | 36,644 | 37,495 | (851) | -2.3% |
| Operating expenses |  |  |  |  |
| Selling and marketing | 10,326 | 19,173 | (8,847) | -46.1% |
| General and administrative | 24,790 | 35,516 | (10,726) | -30.2% |
| Depreciation and amortization | 2,805 | 3,216 | (411) | -12.8% |
| Loss on disposition of assets | 1,198 | 119 | 1,079 | 906.7% |
| Total operating expenses | 39,119 | 58,024 | (18,905) | -32.6% |
| Loss from operations | (2,475) | (20,529) | 18,054 | -87.9% |
| Total other expenses | (12,289) | (14,149) | 1,860 | -13.1% |
| Loss before income taxes | (14,764) | (34,678) | 19,914 | -57.4% |
| Income taxes | (116) | (145) | 29 | -20.0% |
| Net loss from continuing operations | (14,880) | (34,823) | 19,943 | -57.3% |
| Net loss from discontinued operations, net of tax | (92,709) | (15,204) | (77,505) | 509.8% |
| Net loss | $(107,589) | $(50,027) | $(57,562) | 115.1% |

For the nine months ended September 30, 2024, the net loss from continuing operations improved $19,943 to $14,880, as compared to our prior period of $34,823. This improvement was primarily due to a $18,905 decrease in operating expenses that was partially offset by a decrease in gross profit of $851.

### Revenue

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

|  | Nine Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Revenue | $89,679 | $99,486 | $(9,807) | -9.9% |
| Cost of revenue | 53,035 | 61,991 | (8,956) | -14.4% |
| Gross profit | $36,644 | $37,495 | $(851) | -2.3% |

For the nine months ended September 30, 2024 we had gross profit of $36,644, as compared to $37,495 for the nine months ended September 30, 2023, a decrease of $851. Gross profit percentage for the nine months ended September 30, 2024 was 40.9%, as compared to 37.7% for the nine months ended September 30, 2023.

The increase in gross profit percentage was driven by a higher mix of revenue from sports partners, which receive a revenue share, resulting in Publisher Partner revenue share as a percentage of digital advertising revenue increasing to 23.0% for the nine months ended September 30, 2024, as compared to 24.6% for the nine months ended September 30, 2023.

The following table sets forth revenue by category:

| Digital revenue: | Nine Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Digital advertising | $66,533 | $70,363 | $(3,830) | -5.4% |
| Digital subscriptions | 5,511 | 9,809 | (4,298) | -43.8% |
| Licensing and syndication revenue | 6,758 | 8,681 | (1,923) | -22.2% |
| Other digital revenue | 9,327 | 2,858 | 6,469 | 226.3% |
| Total digital revenue | 88,129 | 91,711 | (3,582) | -3.9% |
| Print revenue: |  |  |  |  |
| Print advertising | - | 2,529 | (2,529) | -100.0% |
| Print subscriptions | 1,550 | 5,246 | (3,696) | -70.5% |
| Total print revenue | 1,550 | 7,775 | (6,225) | -80.1% |
| Total revenue | $89,679 | $99,486 | $(9,807) | -9.9% |

For the nine months ended September 30, 2024, total revenue decreased $9,807, or a 9.9% decrease, to $89,679 from $99,486 for the nine months ended September 30, 2023. This reflected a decrease in total print revenue of $6,225 due primarily to the shutdown of Athlon Outdoor print operations and a 3.9% decrease in digital revenue from $91,711 for the nine months ended September 30, 2023 to $88,129 for the nine months ended September 30, 2024.

The primary drivers of the decrease in our digital revenue are a decrease in our digital subscriptions of $4,298, a $3,830 decrease in our digital advertising revenue, and a $1,923 decrease in licensing and syndication revenue. In addition, other digital revenue increased by $6,469 to $9,327 for the nine months ended September 30, 2024 driven by the expansion in our e-commerce revenue.

### Cost of Revenue

The following table sets forth cost of revenue by category:

|  | Nine Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Publisher Partner revenue share payments | $15,291 | $17,291 | $(2,000) | -11.6% |
| Technology, Platform and software licensing fees | 11,996 | 13,825 | (1,829) | -13.2% |
| Content and editorial expenses | 19,728 | 18,217 | 1,511 | 8.3% |
| Printing, distribution and fulfillment costs | 641 | 2,560 | (1,919) | -75.0% |
| Amortization of developed technology and platform development | 4,530 | 6,883 | (2,353) | -34.2% |
| Stock-based compensation | 787 | 3,515 | (2,728) | -77.6% |
| Other cost of revenue | 62 | (300) | 362 | -120.7% |
| Total cost of revenue | $53,035 | $61,991 | $(8,956) | -14.4% |

For the nine months ended September 30, 2024, we recognized cost of revenue of $53,035, as compared to $61,991 for the nine months ended September 30, 2023, which represents a decrease of $8,956. Cost of revenue for the nine months ended September 30, 2024 was impacted by decreases in printing, distribution and fulfillment costs of $1,919, stock-based compensation costs of $2,728, amortization of developed technology and platform development costs of $2,353, technology, Platform and software licensing fees of $1,829, and Publisher Partner revenue share payments of $2,000; partially offset by increases in content and editorial expenses of $1,511.

### Operating Expenses

#### Selling and Marketing

The following table sets forth selling and marketing expenses from continuing operations by category:

|  | Nine Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Payroll and employee benefits of selling and marketing account management support teams | $6,410 | $10,790 | $(4,380) | -40.6% |
| Stock-based compensation | 181 | 953 | (772) | -81.0% |
| Professional marketing services | 406 | 3,050 | (2,644) | -86.7% |
| Circulation costs | 255 | 987 | (732) | -74.2% |
| Subscription acquisition costs | - | 1 | (1) | -100.0% |
| Advertising costs | 1,609 | 2,101 | (492) | -23.4% |
| Other selling and marketing expenses | 1,465 | 1,291 | 174 | 13.5% |
| Total selling and marketing | $10,326 | $19,173 | $(8,847) | -46.1% |

For the nine months ended September 30, 2024, we incurred selling and marketing costs of $10,326, as compared to $19,173 for the nine months ended September 30, 2023. The decrease in selling and marketing costs of $8,847 is primarily related to decreases in payroll and employee benefits costs of $4,380 due to restructuring activities and reduction in direct sales workforce. In addition, decreases were noted in professional marketing services of $2,644, advertising costs of $492, circulation costs of $732, and stock based compensation of $772; partially offset by other selling and marketing expenses of $174.

#### General and Administrative

The following table sets forth general and administrative expenses by category:

|  | Nine Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Payroll and related expenses for executive and administrative personnel | $9,561 | $10,819 | $(1,258) | -11.6% |
| Stock-based compensation | 1,176 | 10,649 | (9,473) | -89.0% |
| Professional services, including accounting, legal and insurance | 10,142 | 9,001 | 1,141 | 12.7% |
| Other general and administrative expenses | 3,911 | 5,047 | (1,136) | -22.5% |
| Total general and administrative | $24,790 | $35,516 | $(10,726) | -30.2% |

For the nine months ended September 30, 2024, we incurred general and administrative costs of $24,790 as compared to $35,516 for the nine months ended September 30, 2023. The $10,726 decrease in general and administrative expenses is primarily due to decreases in stock-based compensation of $9,473, payroll and related expenses of $1,258, and other general and administrative expenses of $1,136; partially offset by an increase in professional services, including accounting, legal and insurance of $1,141.

### Other Expenses

The following table sets forth other expenses:

|  | Nine Months Ended September 30, 2024 | 2023 | 2024 versus 2023 $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of contingent consideration | $(313) | $(469) | $156 | -33.3% |
| Interest expense, net | (11,747) | (13,225) | 1,478 | -11.2% |
| Liquidated damages | (229) | (455) | 226 | -49.7% |
| Total other expenses | $(12,289) | $(14,149) | $1,860 | -13.1% |

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Change in Fair Value of Contingent Consideration. The change in fair value of contingent consideration for the nine months ended September 30, 2024 of $313, represents the change in the put option on our common stock in connection with the Fexy Studios acquisition.

Interest Expense. We incurred interest expense of $11,747 and $13,225 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $1,478 from the prior period, as a result of interest rate changing.

Liquidated Damages. We recorded $229 of accrued interest on our liquidated damages payable for the nine months ended September 30, 2024 primarily from the issuance of our convertible debentures, Series H convertible preferred stock, Series I convertible preferred stock, Series J convertible preferred stock and Series K convertible preferred stock in prior years. We recorded $455 of accrued interest on our liquidated damages payable for the nine months ended September 30, 2023 primarily from issuance of the same securities as described above.

### Use of Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles in the United States of America (“GAAP”); however, management believes that certain non-GAAP financial measures provide users of our financial information with useful supplemental information that enables a better comparison of our performance across periods. We believe Adjusted EBITDA provides visibility to the underlying continuing operating performance by excluding the impact of certain items that are noncash in nature or not related to our core business operations. We calculate Adjusted EBITDA as net loss as adjusted for net loss from discontinued operations, with additional adjustments for (i) interest expense (net), (ii) income taxes, (iii) depreciation and amortization, (iv) stock-based compensation, (v) change in valuation of contingent consideration; (vi) liquidated damages, (vii) loss on impairment of assets, (viii) employee retention credit, and (ix) employee restructuring payments.

Our non-GAAP Adjusted EBITDA may not be comparable to a similarly titled measure used by other companies, has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Additionally, we do not consider our non-GAAP Adjusted EBITDA as superior to, or a substitute for, the equivalent measures calculated and presented in accordance with GAAP. Some of the limitations are that Adjusted EBITDA:

- does not reflect interest expense, or the cash required to service our debt, which reduces cash available to us;
- does not reflect income tax provision, which is a noncash expense;
- does not reflect depreciation and amortization expense and, although this is a noncash expense, the assets being depreciated may have to be replaced in the future, increasing our cash requirements;
- does not reflect stock-based compensation and, therefore, does not include all of our compensation costs;
- does not reflect the change in valuation of contingent consideration, and, although this is a noncash income or expense, the change in the valuations each reporting period are not impacted by our actual business operations but is instead strongly tied to the change in the market value of our common stock;
- does not reflect liquidated damages and, therefore, does not include future cash requirements if we repay the liquidated damages in cash instead of shares of our common stock (which the investor would need to agree to);
- does not reflect any losses from the impairment of assets, which is a noncash operating expense;
- does not reflect the employee retention credits recorded by us for payroll related tax credits under the CARES Act; and
- does not reflect payments related to employee severance and employee restructuring changes for our former executives.

44

The following table presents a reconciliation of Adjusted EBITDA to net loss, which is the most directly comparable GAAP measure, for the periods indicated:

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $3,956 | $(11,166) | $(107,589) | $(50,027) |
| Net loss from discontinued operations | 822 | 2,394 | 92,709 | 15,204 |
| Net income (loss) from continued operations | 4,778 | (8,772) | (14,880) | (34,823) |
| Add (deduct): |  |  |  |  |
| Interest expense, net (1) | 3,159 | 4,042 | 11,747 | 13,225 |
| Income tax provision | 40 | 52 | 116 | 145 |
| Depreciation and amortization (2) | 2,379 | 3,246 | 7,335 | 10,099 |
| Stock-based compensation (3) | 732 | 3,762 | 2,144 | 15,117 |
| Change in fair value of contingent consideration (4) | - | 60 | 313 | 469 |
| Liquidated damages (5) | 77 | 151 | 229 | 455 |
| Loss on impairment of assets (6) | - | - | 1,198 | 119 |
| Employee retention credit (7) | - | - | - | (3,890) |
| Employee restructuring payments (8) | (8) | 605 | 5,776 | 3,253 |
| **Adjusted EBITDA** | $11,157 | $3,416 | $13,978 | $4,169 |

(1) Interest expense is related to our capital structure and varies over time due to a variety of financing transactions. Interest expense includes $30 and $533 for amortization of debt discounts for the three months ended September 30, 2024 and 2023, respectively, as presented in our condensed consolidated statements of cash flows, which are noncash items. Interest expense includes $626 and $2,178 for amortization of debt discounts for the nine months ended September 30, 2024 and 2023, respectively. Investors should note that interest expense will recur in future periods.

(2) Depreciation and amortization related to our developed technology and Platform is included within cost of revenues of $1,474 and $2,191 for the three months ended September 30, 2024 and 2023, respectively, and depreciation and amortization is included within operating expenses of $905 and $1,055 for the three months ended September 30, 2024 and 2023, respectively. Depreciation and amortization related to our developed technology and Platform is included within cost of revenues of $4,530 and $6,883 for the nine months ended September 30, 2024 and 2023, respectively, and depreciation and amortization is included within operating expenses of $2,805 and $3,216 for the three months ended September 30, 2024 and 2023, respectively. We believe (i) the amount of depreciation and amortization expense in any specific period may not directly correlate to the underlying performance of our business operations and (ii) such expenses can vary significantly between periods as a result of new acquisitions and full amortization of previously acquired tangible and intangible assets. Investors should note that the use of tangible and intangible assets contributed to revenue in the periods presented and will contribute to future revenue generation and should also note that such expense will recur in future periods.

(3) Stock-based compensation represents noncash costs arise from the grant of stock-based awards to employees, consultants and directors. We believe that excluding the effect of stock-based compensation from Adjusted EBITDA assists management and investors in making period-to-period comparisons in our operating performance because (i) the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations, and (ii) such expenses can vary significantly between periods as a result of the timing of grants of new stock-based awards, including grants in connection with acquisitions. Additionally, we believe that excluding stock-based compensation from Adjusted EBITDA assists management and investors in making meaningful comparisons between our operating performance and the operating performance of other companies that may use different forms of employee compensation or different valuation methodologies for their stock-based compensation. Investors should note that stock-based compensation is a key incentive offered to employees whose efforts contributed to the operating results in the periods presented and are expected to contribute to operating results in future periods. Investors should also note that such expenses will recur in the future.

(4) Change in fair value of contingent consideration represents the change in the put option on our common stock in connection with the Fexy Studios acquisition.

(5) Liquidated damages (or interest expense related to accrued liquidated damages) represents amounts we owe to certain of our investors in private placements offerings conducted in fiscal years 2018 through 2020, pursuant to which we agreed to certain covenants in the respective securities purchase agreements and registration rights agreements, including the filing of resale registration statements and becoming current in our reporting obligations, which we were not able to timely meet.

(6) Loss on impairment of assets represents certain assets that are no longer useful.

(7) Employee retention credit represents payroll related tax credits under the CARES Act.

(8) Employee restructuring payments represents severance payments to employees under employer restructuring arrangements and payments for the three and nine months ended September 30, 2024 and 2023, respectively.

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### Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the condensed consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders’ equity, revenue, expenses, and related disclosures. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Because of the uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions or conditions.

Except as described in Note 1, *Summary of Significant Accounting Policies*, of the notes to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 that was filed with the SEC on April 1, 2024.

### Recent Accounting Pronouncements

See Note 1, *Summary of Significant Accounting Policies*, of the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion about new accounting pronouncements adopted as of the date of this report.

## Controls and procedures

As filed, 3,628 characters.

### Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule13a-15(e) and 15d-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer(s) and principal financial officer(s), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In accordance with Exchange Act Rules 13a-15 and 15d-15, an evaluation was completed under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on that evaluation, our management, including our Chief Executive Officer and Principal Financial Officer, concluded that our disclosure controls and procedures were effective as of September 30, 2024 in providing reasonable assurance that the information required to be disclosed in our reports filed or submitted under the Exchange Act was recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

### Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Inherent Limitations on the Effectiveness of Controls

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

## Risk factors

As filed, 16,367 characters.

There are numerous factors that affect our business and operating results, many of which are beyond our control. The risk factors described in Part I, “Item IA. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 1, 2024 should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with SEC in connection with evaluating us, our business and the forward-looking statements contained in this Quarterly Report on Form 10-Q. Additional risks and uncertainties not known to us at present, or that we currently deem immaterial, may affect us. The occurrence of any of these known or unknown risks could have a material adverse impact on our business, financial condition and results of operations. All dollar figures presented below are in thousands unless otherwise stated.

***Our license agreement to operate the Sports Illustrated media business was terminated by the licensor, which may materially harm our business, operating results and financial condition.***

As alleged in ABG’s notice of termination, ABG claims that we failed to make a quarterly payment due to ABG pursuant to the Licensing Agreement of $3,750, on January 18, 2024, ABG notified us of the termination of the Licensing Agreement, effective immediately, in accordance with its rights under the Licensing Agreement. As stated in the notice of termination, ABG believes that a fee of $45,000 became immediately due and payable by us to ABG pursuant to the terms and conditions of the Licensing Agreement. In addition, upon termination of the Licensing Agreement, all outstanding and unvested warrants to purchase shares of our common stock issued to ABG in connection with the Licensing Agreement became immediately vested and exercisable.

On March 18, 2024, ABG announced it had reached an agreement in principle with a third party to become the new operator of the Sports Illustrated media business. On April 1, 2024, ABG Group filed an action against us and Manoj Bhargava, the former interim CEO of the Company and a principal stockholder, alleging, among other things, breach of contract in the United States District Court of the Southern District of New York seeking damages in the amount of $48,750 ($3,750 royalty fee liability and $45,000 termination fee liability as reflected in current liabilities from discontinued operations). On June 7, 2024, we filed a response denying ABG Group’s alleged breach of contract action and filed a counterclaim against ABG Group and Minute Media, Inc. alleging, among other things, unfair competition, misappropriation of trade secrets, unjust enrichment, breach of contract and tortious interference with contract. On August 2, 2024, ABG Group filed an amended complaint which we responded to on August 22, 2024 and subsequently filed counterclaims against ABG Group and Sportority, Inc. d/b/a Minute Media. A settlement conference is scheduled for December 4, 2024.

The loss of the rights to operate the SI Business, in addition to the alleged and disputed termination payments that are due following termination of the Licensing Agreement, could harm our competitiveness in our industry, damage any goodwill we may have generated, and otherwise have a material adverse effect on our business, operating results and financial condition. Any subsequent rebranding efforts we may undertake may require significant resources and expenses and may affect our ability to attract and retain customers, all of which may have a material adverse effect on our business, contracts, financial condition, operating results, liquidity and prospects.

***We defaulted on certain covenants included in our debt agreements that could result in the acceleration of the related debt or the exercise of other remedies.***

On December 29, 2023, we failed to make the interest payment due pursuant to the Loan Documents in the amount of $2,797, resulting in a default under the Loan Documents. On January 5, 2024, we entered into the forbearance letter (as updated from time-to-time the “forbearance letter”) with Renew, the lender under the Loan Documents, pursuant to which Renew agreed to a forbearance period through March 29, 2024, subsequently extended to September 30, 2024, while reserving its rights and remedies.

The default under the Loan Documents, as well as Arena’s alleged failure to make a quarterly payment due to ABG pursuant to the Licensing Agreement, resulted in an Event of Default under the Arena Credit Agreement with SLR. On March 13, 2024, Arena entered into the Loan Documents, with Simplify which provided for up to $25,000 of borrowings to be used for working capital and general corporate purposes. Upon the closing of the Simplify Loan (as further described in Note 12, *Simplify Loan*, in our accompanying condensed consolidated financial statements), Arena borrowed $7,748, of which $3,448 was used to repay the outstanding loan balance, accrued interest, certain fees and contingency reserves under the Arena Credit Agreement. On August 19, 2024, we entered into the Amended Promissory Note which increased available borrowings to $50,000 and extended the maturity date of the promissory note to December 1, 2026 (as further described in Note 12, *Simplify* Loan, in our accompanying condensed financial statements). On July 12, 2024, we entered into Amendment No. 3 which further deferred the accrued interest due date to December 31, 2024 (as further described under the heading *Loan Documents* in Note 18). On November 6, 2024, we received a letter from Renew confirming we are not currently in default under the Loan Documents due to the default identified in the forbearance letter (as further described under the heading *Update to Renew Forbearance* in Note 20). The outstanding principal on the Loan Documents was $110,691 as of September 30, 2024. The indirect owner of Renew also has an indirect non-controlling interest in Simplify.

Borrowings under the Loan Documents are secured by substantially all of our assets. Upon an event of default, Renew can declare all outstanding borrowings under the Loan Documents, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, Simplify could declare all outstanding borrowings under the Loan Documents together with accrued and unpaid interest and fees, to be immediately due and payable and, subject to the terms of the intercreditor agreement between Renew and Simplify, foreclose on our assets. Any of these actions would have a material adverse effect on our business, financial condition, or results of operations and could lead to selling assets, cutting costs, reducing cash requirements, filing bankruptcy or ceasing 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. The general business of online media, combined with some level or method of leveraging community attracts many potential entrants, and in the future, there may be strong competitors that will compete with us in general or in selected markets. These and other companies may be better financed and be able to develop their markets more quickly and penetrate those markets more effectively. We expect competition to intensify in the future. All of this could adversely affect our revenues and operating results.

***Our financial condition raises substantial doubt about our ability to continue as a “going concern” through one year from the date of the issuance of the financial statements contained herein if we are unable to rectify the recurrence of our net losses and reduce our working deficit.***

For the nine months ended September 30, 2024, we incurred a net loss from continuing operations of $14,880, and as of September 30, 2024, had cash on hand of $5,773 and a working capital deficit of $209,596. Management has evaluated our net loss from continuing operations and working capital deficit to determine if the significance of those conditions or events would limit our ability to meet our obligations when due, including under the Loan Documents and Simplify Loan. In its evaluation, management determined that substantial doubt exists about our ability to continue as a going concern for a one-year period following the financial statement issuance date due to the net loss from continued operations and working capital deficit.

Our financial results have improved in recent periods due to restructuring activities and implementation of a new operating structure. In addition, we plan to continue improving monthly financial performance through the reduction of costs and monthly cash requirements, maintain compliance with the terms of all outstanding debt agreements, and take actions to resolve current and potential future liabilities to alleviate the conditions that raise substantial doubt about our ability to continue as a going concern, such as resolving pending litigation. However, there can be no assurance that we will be able to execute these plans. If we are unable to execute these plans, it could lead to selling assets and further reducing costs and cash requirements.

***Cyber-attacks and other security threats and disruptions could have a material adverse effect on our business.***

As a tech-powered media company, we face cybersecurity threats, such as ransomware and denial-of-service, and attacks on technical infrastructure. Our customers and suppliers face similar cybersecurity threats, and a cybersecurity incident impacting us or any of these entities could materially adversely affect our operations, performance and results of operations.

The sophistication of threats continues to evolve and grow, including the risk associated with the use of emerging technologies, such as artificial intelligence and quantum computing, for nefarious purposes. In addition to cybersecurity threats, we face threats to the security of our systems and employees from terrorist acts, sabotage or other disruptions, any of which could adversely affect our business. The improper conduct of our employees or others working on behalf of us who have access to confidential or sensitive information could also adversely affect our business and reputation. Our customers (including sites that we operate for our customers) and suppliers experience similar security threats.

If we are unable to protect sensitive information, including complying with evolving information security, data protection and privacy regulations, our customers or governmental authorities could investigate the adequacy of our threat mitigation and detection processes and procedures; and could bring actions against us for noncompliance with applicable laws and regulations. Moreover, depending on the severity of an incident, our customers’ data, our employees’ data, our intellectual property (including trade secrets and research, development and engineering know-how), and other third party data (such as suppliers) could be compromised, which could adversely affect our business. Products and services we provide to customers also carry cybersecurity risks, including risks that they could be breached or fail to detect, prevent or combat attacks, which could result in losses to our customers and claims against us, and could harm our relationships with our customers and financial results.

Given the persistence, sophistication, volume and novelty of threats we face, we may not be successful in preventing or mitigating an attack that could have a material adverse effect on us and the costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.

Our suppliers face similar security threats and an incident at one of these entities could adversely impact our business. These entities are typically outside our control and may have access to our information with varying levels of security and cybersecurity resources, expertise, safeguards and capabilities. Adversaries actively seek to exploit security and cybersecurity weaknesses in our supply chain. Breaches in our supply chain could in the future compromise our data and adversely affect customer deliverables. We also must rely on our supply chain for adequately detecting and reporting cyber incidents, which could affect our ability to report or respond to cybersecurity incidents effectively or in a timely manner. Failures by our suppliers could result in damages to you and have an adverse effect on our business and operations.

***We are currently out of compliance with the continued listing standards of the NYSE American. Our failure to regain compliance with the continued listing standards may result in the delisting of our common stock.***

Our common stock is listed on the NYSE American and such listing is contingent on our compliance with the NYSE American’s standards for continued listing, including requirements relating to maintaining minimum stockholders’ equity. On October 2, 2024, we received a notification (“Letter”) from the NYSE American stating that we are not in compliance with the minimum stockholders’ equity requirements of Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide (the “Company Guide”) requiring stockholders’ equity of (i) $2.0 million or more if we have reported losses from continuing operations and/or net losses in two of its three most recent fiscal years, (ii) $4.0 million or more if we have reported losses from continuing operations and/or net losses in three of the four most recent fiscal years and (iii) $6.0 million or more if we have reported losses from continuing operations and/or net losses in its five most recent fiscal years, respectively. As of June 30, 2024, we had a stockholders’ deficit of $157.2 million and has had losses in the most recent five fiscal years ended December 31, 2023.

As a result of this non-compliance, we became subject to the procedures and requirements set forth in Section 1009 of the Company Guide and had until November 1, 2024 to submit a plan (the “Plan”) of actions we have taken or will take to regain compliance with the continued listing standards by April 2, 2026, which is 18-months from receipt of the Letter (“Cure Period”). The Plan we submitted on November 1, 2024 is under review by the NYSE American as of the date of filing. If the NYSE American accepts the Plan, we will be able to continue our NYSE American listing during the Plan period and will be subject to periodic reviews including quarterly monitoring for compliance with the Plan until we have regained compliance. If the Plan is not accepted by the NYSE American, the Letter states that delisting proceedings will commence. We may appeal a staff delisting determination in accordance with Section 1010 and Part 12 of the Company Guide.

We intend to regain compliance and the Letter has no immediate effect on the listing or trading of our common stock on the NYSE American and if the Plan is approved and adhered to, during the Cure Period. Our receipt of the Letter from the NYSE American does not affect our business, operations or reporting requirements with the U.S. Securities and Exchange Commission.

Although we intend to regain compliance with the continued listing requirements prior to the end of the Cure Period, we may be unable to do so. If delisting proceedings are commenced, the NYSE American rules permit us to appeal a staff delisting determination; however, there can be no assurance that the outcome of any such appeal would be in our favor.

If NYSE American delists our common stock from trading on its exchange due to our failure to meet the NYSE American’s continued listing standards, we and our security holders could face significant material adverse consequences, including, but not limited to, a lack of trading market for our common stock, reduced liquidity, decreased analyst coverage of our common stock and an inability for us to obtain additional financing to fund our operations.

Filed Nov 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001493152-24-045851. Last ingested by Listed: Nov 10, 2026, 02:06 ET. No prices; not investment advice.