Arena Group Holdings, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this Annual Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. All dollar figures are presented in thousands unless otherwise stated. Overview For an overview of the Company, see the information above presented under the section labeled “Item 1. Business,” which is in “Part I” of this Annual Report. Key Operating Metrics We monitor and review the key operating metrics described below 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. 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. Our key operating metrics are identified below: ● 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. 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 years ended December 31, 2022 and 2021 our RPM was $17.24 and $15.24, respectively. For the years ended December 31, 2022 and 2021 our monthly average pageviews were 516,129,297 and 350,761,233, respectively. 31 Impact of Current Global Economic Conditions Uncertainty in the global economy presents significant risks to our business. We are subject to continuing risks and uncertainties in connection with the current macroeconomic environment, including inflation, rising interest rates and contraction in the availability of credit in the market place, geopolitical factors, including the ongoing conflict between Russia and Ukraine and the responses thereto, and the remaining effects of the COVID-19 pandemic. We are closely monitoring the impact of these factors on all aspects of our business, including the impacts on our users, customers, employees, Publishers Partners, vendors and business partners. In particular, with the initial onset of COVID-19, we faced significant change in our advertisers’ buying behavior. Since May 2020, there has been a steady recovery in the advertising market in both pricing and volume, which coupled with the return of professional and college sports yielded steady growth in revenues. However, given that our sports vertical business relies on sporting events to generate content and comprises a material portion of our revenues, our cash flows and results of operations are susceptible to a widespread cancellation of sporting events or a general limitation of societal activity akin to what occurred in the United States and elsewhere during 2020. Future widespread shutdowns of in-person economic activity could have a material impact on our business. In addition, the COVID-19 pandemic has also caused supply chain inefficiencies, negatively impacting our production and distribution costs in our print operations. The ultimate extent of the impact of global economic conditions 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 and continue to closely monitor the impact of the current conditions on our business. For more information regarding these risks and uncertainties, see the section titled “Risk Factors” in Part 1, Item 1A of this Annual Report on Form 10-K. Liquidity and Capital Resources Cash and Working Capital Facility As of December 31, 2022, our principal sources of liquidity consisted of cash of $13,871. In addition, as of December 31, 2022, we had $25,908 available for additional use, subject to eligible accounts receivable, under our working capital line of credit with SLR Digital Finance LLC (formerly FPP Finance LLC) (“SLR”). As December 31, 2022, the outstanding balance of the SLR working capital line of credit was $14,092. We also had accounts receivable, net of our advances from SLR of $19,858 as of December 31, 2022. Our cash balance as of the issuance date of our accompanying consolidated financial statements is $8,203. Our accompanying consolidated financial statements have been presented on the basis that we are a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We had revenues of $220,935 during fiscal 2022 and have experienced recurring net losses from operations and negative operating cash flows. Consequently, we were dependent upon continued access to funding and capital resources from both new investors and related parties. If continued funding and capital resources are unavailable at reasonable terms, we may not be able to implement our growth plan and plan of operations. These financings may include terms that may be highly dilutive to existing stockholders. We continue to be focused on growing our existing operations and seeking accretive and complementary strategic acquisitions as part of our growth strategy. We believe, that with additional sources of liquidity and the ability to raise additional capital or incur additional indebtedness to supplement our internal projections, we will be able to execute our growth plan and finance our working capital requirements both in the short-term and long-term. 32 Going Concern Management performed an annual reporting period going concern assessment. We are required to assess our ability to continue as a going concern. Our accompanying 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 accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Most recently, for the year ended December 31, 2022, we incurred a net loss from continuing operations of $67,388, had cash on hand of $13,871 and a working capital deficit of $137,669. Our net loss from continuing operations and working capital deficit have been evaluated by management to determine if the significance of those conditions or events would limit our ability to meet our obligations when due. Furthermore, since our Bridge Notes of $36,000, Senior Secured Notes of $62,691 and Delayed Draw Term Notes of $4,000, totaling $102,691 (collectively “our current debt”) are due by December 31, 2023 (see Note 19, Bridge Notes , and Note 20, Long-term Debt , in our accompanying consolidated financial statements), unless we are able to refinance or extend our current debt beyond its current maturity, we may not be able to meet our obligations when due. In our evaluation, management determined there is substantial doubt about our ability to continue as a going concern for a one-year period following the financial statement issuance date, unless we are able to refinance or extend the maturities of our current debt. We plan to refinance or extend the maturities of our current debt to alleviate the conditions that raise substantial doubt about our ability to continue as a going concern. 33 Debt Financings and Obligations Net proceeds from our debt financings (see Note 15, Line of Credit , Note 19, Bridge Notes and Note 20, Long-term Debt , in our accompanying consolidated financial statements for additional information) consisted of the following: SLR Credit Facility . We are party to a financing and security agreement with SLR, pursuant to which SLR extended a $25,000 line of credit for working capital purposes secured by a first lien on all our cash and accounts receivable and a second lien on all other assets. On December 15, 2022, pursuant to an amendment, the line of credit was increased to $40,000. Borrowings under the facility bear interest at the prime rate plus 4% per annum of the amount advanced and have a maturity date of December 31, 2024; provided that the maturity date will be December 31, 2023 if we have not refinanced, repaid or extended all of our Senior Secured Notes (as defined below) due December 31, 2023 by August 31, 2023, and provided further, that SLR will be entitled to accelerate the obligations if we have not refinanced, repaid or extended all of our Senior Secured Notes due December 31, 2023 by September 30, 2023. In the event that our line of credit is accelerated, we will be obligated to pay SLR a termination fee of $900. The amendment also permitted us to enter into the Bridge Notes (as defined below). The aggregate principal amount outstanding, plus accrued and unpaid interest as of December 31, 2022 was $14,092. Bridge Notes . On December 15, 2022, we issued $36,000 aggregate principal amount of senior secured notes (the “Bridge Notes”) pursuant to a Third A&R NPA with BRF Finance Co., LLC (“BRF Finance”), an affiliated entity of B. Riley Financial, Inc. (“B. Riley”), in its capacity as agent for the purchasers and as purchaser. We received net proceeds of $34,728, after the payment of $1,000 to B. Riley for an advisory fee and $272 for other legal costs, from the issuance of the Bridge Notes. Interest on the Bridge Notes is payable in cash at a rate of 12% per annum quarterly in arrears on March 31, 2023, June 30, 2023, September 30, 2023 and December 31, 2023; provided that, on March 1, 2023, May 1, 2023 and July 1, 2023, the interest rate on the Bridge Notes will increase by 1.5% per annum, with maturity on December 31, 2023. The Bridge Notes are subject to certain mandatory prepayment requirements, including, but not limited to, a requirement that we apply the net proceeds from certain debt incurrences or equity offerings to repay the Bridge Notes. We may elect to prepay the Bridge Notes, at any time, at our option at 100% of the principal amount. The Bridge Notes are secured by liens on the same collateral that secures indebtedness under our outstanding Senior Secured Notes (as defined below) and are guaranteed by our subsidiaries that guarantee the Third A&R NPA. The Note Purchase Agreement contains covenants and events of default substantially similar to those contained in the note purchase agreement that governed the Third A&R NPA. The proceeds received were used for the acquisition of Men’s Journal and to repay $5,928 of our existing Delayed Draw Term Notes (as defined below). The aggregate principal amount outstanding under the Bridge Notes as of December 31, 2022 was $36,000. Senior Secured Notes . We are party to a third amended and restated note purchase agreement (the “Third A&R NPA”), with one accredited investor, BRF Finance, an affiliated entity of B. Riley. The senior secured notes bears interest at a rate of 10% per annum. Interest payments are payable at BRF Finance’s discretion either in cash quarterly in arrears on the last day of each quarter or by adding the interest to the outstanding principal amount. The senior secured notes has a final maturity date of December 31, 2023, at which time the outstanding principal and all accrued but unpaid interest will be due. The balance outstanding under our senior secured notes as of December 31, 2022 was $62,691, which included outstanding principal of $48,791 and payment of in-kind interest of $13,900 that we were permitted to add to the aggregate outstanding principal balance. Delayed Draw Term Notes . Pursuant to the Third A&R NPA, we agreed to issue, at BRF Finance’s option, a delayed draw term notes (the “Delayed Draw Term Notes”), in the aggregate principal amount of $12,000 to BRF Finance, of which $9,928 was outstanding on December 31, 2021. The Delayed Draw Term Notes bear interest at a rate of 10% per annum. Interest payments are payable, at BRF Finance’s discretion, either in cash quarterly in arrears on the last day of each fiscal quarter or in kind in arrears on the last day of each fiscal quarter. The Delayed Draw Term Notes have a final maturity date of December 31, 2023, at which time the outstanding principal and accrued but unpaid interest will be due. We paid $5,928 in principal that was due on December 31, 2022, with the remaining principal balance due on December 31, 2023. The aggregate principal amount outstanding under the Bridge Notes as of December 31, 2022 was $4,000. 34 Acquisition On January 11, 2023, we entered into an asset purchase agreement with Teneology, Inc., pursuant to which we acquired certain assets (consisting of the RoadFood media business, including digital and television assets; the Moveable Feast media business, including digital and television assets; the Fexy-branded content studio business; and the MonkeySee YouTube Channel media business), for a purchase price of $2,956. The purchase price consisted of the following: (1) $500 cash paid at closing; (2) $75 cash payments due in three equal installments of $25 on March 1, 2023, April 1, 2023 and May 1, 2023; (3) $200 deferred cash payment due on the first anniversary of the closing date, subject to certain indemnity provisions; and (4) the issuance of 274,692 shares of our common stock, subject to certain lock-up provisions, on the closing date with a fair value of $2,181 (fair value was determined based on our common stock trading price of $7.94 per share on the closing date). The number of shares of our common stock issued was determined based on a $2,225 value using our common stock trading price on the day immediately preceding the January 11, 2023 closing date. Off-Balance Sheet Arrangements As of December 31, 2022, pursuant to our line of credit with SLR, as disclosed above, in the event that our line of credit is accelerated, we will be obligated to pay SLR a termination fee of $900. 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 Note 8, Leases, Note 16, Liquidated Damages Payable, Note 19 , Bridge Notes , and Note 20, Long-term Debt , in our accompanying consolidated financial statements for amounts outstanding as of December 31, 2022, related to leases, liquidated damages, bridge financing and long-term debt. 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 $3,189 over the lease term. The lease provides for fixed payments of $89 for three months, $92 for twelve months and $94 for twelve months, with an estimate of common expenses per month of $25 through the end of the lease term. With respect to leases, we subleased our office space in Santa Monica, California in November 2021 and remain responsible to the original lessor for $948 through October 2024. Pursuant to the sublease, the sublessee will pay us an aggregate of $477 through October 2024. During 2021, we entered into a termination agreement of our sublease agreement for a property located in New York, New York and remain responsible for $8,000 in cash payments to the sublandlord through October 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 December 31, 2022 and 2021 was as follows: As of December 31, 2022 2021 Current assets $ 78,695 $ 77,671 Current liabilities (216,364 ) (116,413 ) Working capital deficit (137,669 ) (38,742 ) As of December 31, 2022, we had a working capital deficit of $137,669, as compared to $38,742 as of December 31, 2021, consisting of $78,695 in total current assets and $216,364 in total current liabilities. As of December 31, 2021, our working capital deficit consisted of $77,671 in total current assets and $116,413 in total current liabilities. 35 Our cash flows during the years ended December 31, 2022 and 2021 consisted of the following: Years Ended December 31, 2022 2021 Net cash used in operating activities $ (11,304 ) $ (14,729 ) Net cash used in investing activities (38,590 ) (13,146 ) Net cash provided by financing activities 54,416 28,191 Net (decrease) increase in cash, cash equivalents, and restricted cash $ 4,522 $ 316 Cash, cash equivalents, and restricted cash, end of year $ 14,373 $ 9,851 For the year ended December 31, 2022, net cash used in operating activities was $11,304, consisting primarily of $219,282 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 $9,528 of cash paid for interest, offset by $219,407 of cash received from customers. For the year ended December 31, 2021, net cash used in operating activities was $14,729, consisting primarily of $184,932 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 $1,393 of cash paid for interest, offset by $171,596 of cash received from customers. For the year ended December 31, 2022, net cash used in investing activities was $38,590, consisting primarily of $35,331 for the acquisition of a business; $5,179 for capitalized costs for our Platform; and $530 for property and equipment, offset by $2,450 from the sale of an equity investment. For the year ended December 31, 2021, net cash used in investing activities was $13,146, consisting primarily of $7,950 for the acquisition of businesses; $4,819 for capitalized costs for our Platform; and $377 for property and equipment. For the year ended December 31, 2022, net cash provided by financing activities was $54,416, consisting primarily of $30,490 (net of issuance costs paid of $1,568) in net proceeds from a public offering of common stock; $28,800 (net of issuance costs paid of $1,272 and payments of $5,928) in proceeds from long term-debt; $2,104 from advancements of our SLR line of credit; and $95 from exercises of common stock options, offset by $4,468 for tax payments relating to the withholding of shares of common stock for certain employees; $2,152 related to payments of restricted stock liabilities; and $453 payment for The Spun deferred cash payment. For the year ended December 31, 2021, net cash provided by financing activities was $28,191 consisting primarily of $19,838 (net of issuance cost paid of $167) in net proceeds from a private placement of common stock; $5,086 in proceeds from long term-debt; $4,809 from advancements of our SLR line of credit, offset by $1,472 related to payments of restricted stock liabilities; and $70 for tax payments relating to the withholding of shares of common stock for certain employees. 36 Results of Operations Comparison of Fiscal 2022 to Fiscal 2021 Years Ended December 31, 2022 versus 2021 2022 2021 $ Change % Change Revenue $ 220,935 $ 189,140 $ 31,795 16.8 % Cost of revenue 132,923 110,530 22,393 20.3 % Gross profit 88,012 78,610 9,402 12.0 % Operating expenses Selling and marketing 72,489 81,929 (9,440 ) -11.5 % General and administrative 53,499 55,612 (2,113 ) -3.8 % Depreciation and amortization 17,650 16,345 1,305 8.0 % Loss on disposition of assets 257 1,192 (935 ) -78.4 % Loss on impairment of lease - 466 (466 ) -100.0 % Loss on termination of lease - 7,345 (7,345 ) -100.0 % Total operating expenses 143,895 162,889 (18,994 ) -11.7 % Loss from operations (55,883 ) (84,279 ) 28,396 -33.7 % Total other expenses (12,568 ) (7,335 ) (5,233 ) 71.3 % Loss before income taxes (68,451 ) (91,614 ) 23,163 -25.3 % Income tax benefit 1,063 1,674 (611 ) -36.5 % Net loss from continuing operations (67,388 ) (89,940 ) 22,552 -25.1 % Net loss from discontinued operations, net of tax (3,470 ) - (3,470 ) 100.0 % Net loss $ (70,858 ) $ (89,940 ) $ 19,082 -21.2 % Basic and diluted net loss per common share: Continued operations $ (3.82 ) $ (7.87 ) $ 4.05 -51.5 % Discontinued operations (0.20 ) - (0.20 ) 100.0 % Basic and diluted net loss per common share $ (4.02 ) $ (7.87 ) $ 3.85 -48.9 % Weighted average number of shares outstanding – basic and diluted 17,625,619 11,429,740 For the year ended December 31, 2022, the net loss was $70,858, as compared to $89,940 in the prior year which represents an improvement of $19,082 or 21.2%. The primary reasons for the improvement in net loss are a $9,402 improvement in gross profit and a $18,994 reduction in operating expenses. The increase in gross profit reflected a $31,795 increase in total revenues, which was principally driven by the continuing growth of our digital advertising business which grew $46,452 or 73.9% in the year ended December 31, 2022 as compared to the prior year. Revenue The following table sets forth revenue, cost of revenue, and gross profit from continuing operations: Years Ended December 31, 2022 versus 2021 2022 2021 $ Change % Change Revenue $ 220,935 $ 189,140 $ 31,795 16.8 % Cost of revenue 132,923 110,530 22,393 20.3 % Gross profit $ 88,012 $ 78,610 $ 9,402 12.0 % For the year ended December 31, 2022, we had gross profit of $88,012, as compared to gross profit of $78,610 for year ended December 31, 2021. 37 The following table sets forth revenue from continuing operations by category: Years Ended December 31, 2022 versus 2021 2022 2021 $ Change % Change Digital revenue: Digital advertising $ 109,317 $ 62,865 $ 46,452 73.9 % Digital subscriptions 21,156 29,629 (8,473 ) -28.6 % Licensing and syndication revenue 18,173 8,471 9,702 114.5 % Other digital revenue 1,166 43 1,123 2611.6 % Total digital revenue 149,812 101,008 48,804 48.3 % Print revenue: Print advertising 10,214 9,051 1,163 12.8 % Print subscriptions 60,909 79,081 (18,172 ) -23.0 % Total print revenue 71,123 88,132 (17,009 ) -19.3 % Total revenue $ 220,935 $ 189,140 $ 31,795 16.8 % For the year ended December 31, 2022 we recognized revenue from continuing operations of $220,935, as compared to $189,140 for the year ended December 31, 2021, which represents an increase of $31,795 or 16.8%. Our digital advertising revenue increased by $46,452 or 73.9%, primarily due to a 47.1% increase in monthly average pageviews and a 13.1% increase in RPM for the year ended December 31, 2022, as compared to the prior year with 76.0% of the total increase driven by organic growth. Licensing and syndication revenue increased by $9,702 or 114.5% as we added new relationships during the year and expanded existing ones to leverage our content with increased monetization. Other digital revenue, primarily consisting of e-commerce and sponsorship revenue, increased by $1,123 largely attributable to the expansion of our e-commerce business. Our print subscriptions decreased by $18,172 or 23.0% principally related to our Sports Illustrated media business which reflected our planned rate base reduction of 29.0% from 1.7 million fiscal 2021 to 1.2 million in fiscal 2022 to focus on more profitable subscriptions. Cost of Revenue The following table sets forth cost of revenue from continuing operations by category: Years Ended December 31, 2022 versus 2021 2022 2021 $ Change % Change Publisher Partner revenue share payments $ 20,108 $ 21,568 $ (1,460 ) -6.8 % Technology, Platform and software licensing fees 18,294 9,970 8,324 83.5 % Royalty fees 15,000 15,000 - 0.0 % Content and editorial expenses 44,669 32,850 11,819 36.0 % Printing, distribution and fulfillment costs 14,835 14,757 78 0.5 % Amortization of developed technology and platform development 9,459 8,829 630 7.1 % Stock-based compensation 10,235 7,478 2,757 36.9 % Other cost of revenue 323 78 245 314.1 % Total cost of revenue $ 132,923 $ 110,530 $ 22,393 20.3 % For the year ended December 31, 2022, as referenced in the above table, we recognized cost of revenue from continuing operations of $132,923, as compared to $110,530 for the year ended December 31, 2021, which represents an increase of $22,393 or 20.3% from the prior period. Cost of revenue for the year ended December 31, 2022 was impacted by increases in content and editorial expenses of $11,819; technology, Platform and software licensing fees of $8,324, consisting of costs incurred for the Parade acquisition and other investments made to our Platform; and stock-based compensation of $2,757; partially offset by a decrease in Publisher Partner revenue share payments of $1,460. The increase in content and editorial expense was primarily due to significant investments made in the second half of fiscal 2021 to expand our audience development and social media capabilities, in addition to the acquisition of Parade which occurred in the second quarter of 2022. Publisher Partner revenue share payments have decreased despite a growth in our digital advertising revenue due primarily to a favorable change in the terms of certain of our Publisher Partner agreements. This resulted in a more favorable revenue share structure for us, especially as we continue to grow our premium programmatic and direct advertising revenue as a percentage of total digital revenue. In addition, the decrease was also in part due to the expiration of our agreement with Jim Cramer in September 2021. 38 Operating Expenses Selling and Marketing The following table sets forth selling and marketing expenses from continuing operations by category: Years Ended December 31, 2022 versus 2021 2022 2021 $ Change % Change Payroll and employee benefits of selling and marketing account management support teams $ 14,467 $ 12,746 $ 1,721 13.5 % Stock-based compensation 2,772 5,376 (2,604 ) -48.4 % Professional marketing services 4,528 3,100 1,428 46.1 % Circulation costs 5,006 4,144 862 20.8 % Subscription acquisition costs 37,190 46,264 (9,074 ) -19.6 % Advertising costs 5,987 6,962 (975 ) -14.0 % Other selling and marketing expenses 2,539 3,337 (798 ) -23.9 % Total selling and marketing $ 72,489 $ 81,929 $ (9,440 ) -11.5 % For the year ended December 31, 2022, as referenced in the above table, we incurred selling and marketing expenses from continuing operations of $72,489 as compared to $81,929 for the year ended December 31, 2021, a decrease of $9,440 or 11.5% from the prior period. The decrease in selling and marketing expenses of $9,440 was primarily due to decreases in subscription acquisition costs of $9,074 and stock-based compensation of $2,604. Partially offsetting these decreases, payroll and employee benefits of selling and marketing account management support teams increased $1,721 and circulation costs grew by $862, both of which were a result of the addition of the Parade properties, which were acquired in the second quarter of 2022. The decrease in subscription acquisition costs was due to the previously mentioned 29.0% decrease in the Sports Illustrated rate base. General and Administrative The following table sets forth general and administrative expenses from continuing operations by category: Years Ended December 31, 2022 versus 2021 2022 2021 $ Change % Change Payroll and related expenses for executive and administrative personnel $ 15,800 $ 17,521 $ (1,721 ) -9.8 % Stock-based compensation 18,338 17,639 699 4.0 % Professional services, including accounting, legal and insurance 13,364 13,548 (184 ) -1.4 % Other general and administrative expenses 5,997 6,904 (907 ) -13.1 % Total general and administrative $ 53,499 $ 55,612 $ (2,113 ) -3.8 % For the year ended December 31, 2022, as referenced in the above table, we incurred general and administrative expenses from continuing operations of $53,499 as compared to $55,612 for the year ended December 31, 2021, a decrease of $2,113 or 3.8% from the prior period. The decrease is primarily related to $1,721 of payroll and related expenses which reflected a decrease in certain personnel costs offset by the acquisition of Parade which occurred in the second quarter of 2022. 39 Other (Expenses) Income The following table sets forth other (expenses) income: Years Ended December 31, 2022 versus 2021 2022 2021 $ Change % Change Change in valuation of warrant derivative liabilities $ - $ 34 $ (34 ) -100.0 % Interest expense, net (11,428 ) (10,449 ) (979 ) 9.4 % Liquidated damages (1,140 ) (2,637 ) 1,497 -56.8 % Gain upon debt extinguishment - 5,717 (5,717 ) -100.0 % Total other expenses $ (12,568 ) $ (7,335 ) $ (5,233 ) 71.3 % Interest Expense . We incurred interest expense, net of $11,428 for the year ended December 31, 2022, as compared to $10,449 for the year ended December 31, 2021. The increase in interest expense of $979 was primarily from additional cash paid for interest from our debt. Liquidated Damages . We recorded liquidated damages of $1,140 for the year ended December 31, 2022, as compared to $2,637 for the year ended December 31, 2021. The liquidated damages recorded of $1,140 for the year ended December 31, 2022 primarily resulted from additional liquidated damages assessed under certain agreements as a result of filing a registration statement outside of the agreed upon filing deadline and recording interest expense on the balance that remains outstanding. Gain Upon Debt Extinguishment . We recorded a gain upon debt extinguishment (including accrued interest) of $5,717 for the year ended December 31, 2021 pursuant to the forgiveness of the Payroll Protection Program Loan. Income Tax Benefit Income Tax Benefit . For the year ended December 31, 2022, we recorded a deferred income tax benefit of $1,063 primarily related to our acquired deferred tax liabilities from an acquisition during the year and change in valuation allowance as of year-end that was, in part, offset by the book to tax basis differences related to goodwill from certain prior year acquisitions. For the year ended December 31, 2021, we recorded a deferred income tax benefit of $1,674 primarily related to our acquired deferred tax liabilities from an acquisition during the year and change in valuation allowance as of year-end that was, in part, offset by the book to tax basis differences related to goodwill from certain prior year acquisitions. For further details refer to Note 25, Income Taxes , in our accompanying consolidated financial statements. 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 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 derivative valuations, (vi) liquidated damages, (vii) gain upon debt extinguishment, (viii) loss on impairment of assets; (x) loss on impairment of lease, (ix) loss on lease termination, (xi) professional and vendor fees, and (xii) employee restructuring payments. 40 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 is that Adjusted EBITDA: ● does not reflect interest expense and financing fees, or the cash required to service our debt, which reduces cash available to us; ● does not reflect deferred income tax benefit or provision, which is a noncash income or 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 derivative valuations 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 gains upon debt extinguishment, which we do not consider in our evaluation of our business operations; ● does not reflect any losses from the impairment of assets, which is a noncash operating expense; ● does not reflect any losses on impairment of leases, which is a noncash operating expense; ● does not reflect any losses on termination of our leases, which is a noncash operating expense; ● does not reflect the professional and vendor fees incurred by us for services provided by consultants, accountants, lawyers, and other vendors, which services were related to certain types of events that are not reflective of our business operations; and ● does not reflect payments related to employee severance, which were a cash expense but are not reflective of our business operations. The following table presents a reconciliation of Adjusted EBITDA to net loss, which is the most directly comparable GAAP measure, for the periods indicated: Years Ended December 31, 2022 2021 Net loss $ (70,858 ) $ (89,940 ) Loss from discontinued operations, net of tax 3,470 - Loss from continuing operations (67,388 ) (89,940 ) Add (deduct): Interest expense, net (1) 11,428 10,449 Income tax benefit (1,063 ) (1,674 ) Depreciation and amortization (2) 27,109 25,174 Stock-based compensation (3) 31,345 30,493 Change in derivative valuations - (34 ) Liquidated damages (4) 1,140 2,637 Gain upon debt extinguishment (5) - (5,717 ) Loss on impairment of assets (6) 257 1,192 Loss on impairment of lease (7) - 466 Loss on lease termination (8) - 7,345 Professional and vendor fees (9) - 6,901 Employee restructuring payments (10) 273 645 Adjusted EBITDA $ 3,101 $ (12,063 ) (1) Interest expense is related to our capital structure and varies over time due to a variety of financing transactions. Interest expense includes $1,581 and $2,106 for amortization of debt discounts for the year ended December 31, 2022 and 2021, respectively, as presented in our condensed consolidated statements of cash flows, which are a noncash item. Investors should note that interest expense will recur in future periods. 41 (2) Represents depreciation and amortization related to our developed technology and Platform included within cost of revenues of $9,459 and $8,829, for the years ending December 31, 2022 and 2021, respectively, and depreciation and amortization included within operating expenses of $17,650 and $16,345 for the years ending December 31, 2022 and 2021, 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) Represents noncash costs arising 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) Represents damages (or interest expense related to accrued liquidated damages) 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. (5) Represents a gain upon extinguishment of the Paycheck Protection Program Loan. (6) Represents our impairment of certain assets that are no longer useful. (7) Represents our impairment of certain leased property that is no longer being used. (8) Represents our loss related to the surrender and termination of our lease of office space located in New York based on our decision to no longer lease office space. (9) Represents one-time, non-recurring third party professional and vendor fees recorded in connection with services provided by consultants, accountants, lawyers, and other vendors (these fees are collectively referred to as “Professional Fees”) related to (i) the preparation of periodic reports in order for us to become current on our Exchange Act reporting obligations, (ii) up-list to a national exchange, (iii) contemplated and completed acquisitions, (iv) public and private offerings of our securities and other financings, and (v) stockholder disputes and the implementation of our Rights Agreement (the Rights Agreement is further described in Note 21, Preferred Stock, in our accompanying consolidated financial statements). 42 The table below summarizes the costs defined above that we incurred during fiscal 2022 and 2021: Years Ended December 31, Category 2022 2021 (i) Catch-up periodic reports $ - $ 4,096 (ii) Up-list - 231 (iii) Mergers and acquisitions - 1,034 (iv) Public and private offerings and other financings - 444 (v) Stockholder disputes and Rights Agreement - 1,096 Totals $ - $ 6,901 (10) Represents severance payments to our former Chief Executive Officer for the years ending December 31, 2022 and 2021. Critical Accounting Policies and Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition, platform development, impairment of long-lived assets, and stock-based compensation. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2, Summary of Significant Accounting Policies , in our accompanying consolidated financial statements. Our discussion and analysis of the financial condition and results of operations is based upon our consolidated financial statements included elsewhere in this Annual Report, which have been prepared in accordance with GAAP. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements. Actual results may differ from these estimates under different assumptions or conditions. Revenue In accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers , revenues are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We generate all of our revenue from contracts with customers. We account for revenue on a gross basis, as compared to a net basis, in our statement of operations. We have made this determination based on our control of the advertising inventory and the ability to monetize the advertising inventory or publications before transfer to the customer and because we are also the primary obligor responsible for providing the services to the customer. Cost of revenues is presented as a separate line item in the statement of operations. The following is a description of the principal activities from which we generate revenue: Advertising Revenue Digital Advertising . We recognize revenue from digital advertisements at the point when each ad is viewed. The quantity of advertisements, the impression bid prices, and revenue are reported on a real-time basis. We enter into contracts with advertising networks to serve display or video advertisements on the digital media pages associated with its various channels. Although reported advertising transactions are subject to adjustment by the advertising network partners, any such adjustments are known within a few days of month end. We owe our independent Publisher Partners a revenue share of the advertising revenue earned, which is recorded as service costs in the same period in which the associated advertising revenue is recognized. Advertising revenue that is comprised of fees charged for the placement of advertising on the websites that we own and operate, is recognized as the advertising or sponsorship is displayed, provided that collection of the resulting receivable is reasonably assured. Print Advertising . Advertising related revenues for print advertisements are recognized when advertisements are published (defined as an issue’s on-sale date), net of provisions for estimated rebates, rate adjustments, and discounts. 43 Subscription Revenue Digital Subscriptions . We enter into contracts with internet users that subscribe to premium content on our owned and operated media channels and facilitate such contracts between internet users and our Publisher Partners. These contracts provide internet users with a membership subscription to access the premium content. For subscription revenue generated by our independent Publisher Partners’ content, we owe our Publisher Partners a revenue share of the membership subscription revenue earned, which is initially deferred and recorded as deferred contract costs. We recognize deferred contract costs over the membership subscription term in the same pattern that the associated membership subscription revenue is recognized. Digital subscription revenue generated from our websites that we own and operate are charged to customers’ credit cards or are directly billed to corporate subscribers, and are generally billed in advance on a monthly, quarterly or annual basis. We calculate net subscription revenue by deducting from gross revenue an estimate of potential refunds from cancelled subscriptions as well as chargebacks of disputed credit card charges. Net subscription revenue is recognized ratably over the subscription periods. Unearned revenue relates to payments for subscription fees for which revenue has not been recognized because services have not yet been provided. Print Revenue Print revenue includes magazine subscriptions and single copy sales at newsstands. Print Subscriptions . Revenue from magazine subscriptions is deferred and recognized proportionately as products are distributed to subscribers. Newsstand . Single copy revenue is recognized on the publication’s on-sale date, net of provisions for estimated returns. We base our estimates for returns on historical experience and current marketplace conditions. Licensing and Syndication Revenue Content licensing-based revenues and syndication revenues are accrued generally monthly or quarterly based on the specific mechanisms of each contract. Generally, revenues are accrued based on estimated sales and adjusted as actual sales are reported by partners. These adjustments are typically recorded within three months of the initial estimates and have not been material. Any minimum guarantees are typically earned evenly over the fiscal year. Contract Modifications We occasionally enter into amendments to previously executed contracts that constitute contract modifications. We assess each of these contract modifications to determine: ● if the additional services and goods are distinct from the services and goods in the original arrangement; and ● if the amount of consideration expected for the added services or goods reflects the stand-alone selling price of those services and goods. A contract modification meeting both criteria is accounted for as a separate contract. A contract modification not meeting both criteria is considered a change to the original contract and is accounted for on either a prospective basis as a termination of the existing contract and the creation of a new contract, or a cumulative catch-up basis. 44 Platform Development For the years presented, substantially all of our technology expenses are development costs for our Platform that were capitalized as intangible costs. Technology costs are expensed as incurred or capitalized into property and equipment in accordance with the Financial Accounting Standards Board (“FASB”) ASC Topic 350, Intangibles – Goodwill and Other . ASC Topic 350 requires that costs incurred in the preliminary project and post-implementation stages of an internal use software project be expensed as incurred and that certain costs incurred in the application development stage of a project be capitalized. We capitalize internal labor costs, including compensation, benefits and payroll taxes, incurred for certain capitalized platform development projects. Our policy with respect to capitalized internal labor stipulates that labor costs for employees working on eligible internal use capital projects are capitalized as part of the historical cost of the project when the impact, as compared to expensing such labor costs, is material. Our Platform development capitalized during the application development stage of a project include: ● payroll and related expenses for personnel; and ● stock-based compensation of related personnel. Business Combinations We account for business combinations using the acquisition method of accounting. The acquisition method of accounting requires that the purchase price, including the fair value of contingent consideration, of the acquisition be allocated to the assets acquired and liabilities assumed using the estimated fair values determined by management as of the acquisition date. Goodwill is measured as the excess of consideration transferred and the net fair values of the assets acquired, and the liabilities assumed at the date of acquisition. While we use best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, we record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent we identified adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period, which may be up to one year from the acquisition date, or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. Additionally, we identify acquisition-related contingent payments and determine their respective fair values as of the acquisition date, which are recorded as accrued liabilities on the consolidated balance sheets. Subsequent changes in fair value of contingent payments are recorded on the consolidated statements of operations. We expense transaction costs related to the acquisition as incurred. Goodwill Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets of businesses acquired in a business combination. Goodwill is not amortized but rather is tested for impairment at least annually on December 31, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. We adopted ASU 2017-04 (as further described in Note 2, Summary of Significant Accounting Policies, in our accompanying consolidated financial statements) during the first quarter of 2020 which eliminated Step 2 from the goodwill impairment test. We operate as one reporting unit, therefore, the impairment test is performed at the consolidated entity level by comparing the estimated fair value of the Company to its carrying value. We have elected to first assess the qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying amount as a basis of determining whether it is necessary to perform the quantitative goodwill impairment test. If we determine that it is more likely than not that our fair value is less than its carrying amount, then the quantitative goodwill impairment test will be performed. The quantitative goodwill impairment test identifies goodwill impairment and measures the amount of goodwill impairment loss to be recognized by comparing the fair value of our single reporting unit with its carrying amount. If the fair value exceeds the carrying amount, no further analysis is required; otherwise, any excess of the goodwill carrying amount over the implied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. 45 Stock-Based Compensation We provide stock-based compensation in the form of (a) stock awards to employees and directors, comprised of restricted stock awards and restricted stock units, (b) stock option grants to employees, directors and consultants, (c) common stock warrants to Publisher Partners (no warrants were issued during the years ended December 31, 2022, 2021 or 2020) (as further described in Note 23, Stock-Based Compensation, in our accompanying consolidated financial statements), and (d) common stock warrants to ABG (as further described in Note 23, Stock-Based Compensation, in our accompanying consolidated financial statements). We accounts for stock awards and stock option grants to employees, directors and consultants, and non-employee awards to certain directors and consultants by measuring the cost of services received in exchange for the stock-based payments as compensation expense our consolidated financial statements. Stock awards and stock option grants to employees and non-employees which are time-vested, are measured at fair value on the grant date, and charged to operations ratably over the vesting period. Stock awards and stock option grants to employees and non-employees which are performance-vested, are measured at fair value on the grant date and charged to operations when the performance condition is satisfied or over the service period. The fair value measurement of equity awards and grants used for stock-based compensation is as follows: (1) restricted stock awards and restricted stock units which are time-vested, are determined using the quoted market price of our common stock at the grant date; (2) stock option grants which are time-vested and performance-vested, are determined utilizing the Black-Scholes option-pricing model at the grant date; (3) restricted stock units and stock option grants which provide for market-based vesting with a time-vesting overlay, are determined through consultants with our independent valuation firm using the Monte Carlo model at the grant date; (4) Publisher Partner Warrants are determined utilizing the Black-Scholes option-pricing model; and (5) ABG warrants are determined utilizing the Monte Carlo model (as further described in Note 23, Stock-Based Compensation, in our accompanying consolidated financial statements). Fair value determined under the Black-Scholes option-pricing model and Monte Carlo model is affected by several variables, the most significant of which are the life of the equity award, the exercise price of the stock option or warrants, as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock over the term of the equity award. Estimated volatility, prior to the Up-List (as described below), was based on the historical volatility of our common stock and is evaluated based upon market comparisons, thereafter, by evaluating the average historical volatility of a group of peer companies that are publicly traded. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of common stock is determined by reference to the quoted market price of our common stock. Fair value determined under the Black-Scholes option-pricing model and Monte Carlo model is affected by several variables, the most significant of which are the life of the stock award, the exercise price of the stock option or warrants, as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock over the term of the stock award. Estimated volatility was determined under the (1) “Probability Weighted Scenarios” where one scenario assumes that our common stock will be up-listed on a national stock exchange (the “Exchange”) on a certain listing date (the “Up-list”) where the estimated volatility was based on evaluating the average historical volatility of a group of peer companies that are publicly traded and the second scenario assumes our common stock is not up-listed on the Exchange prior to the final vesting date of the grants (the “No Up-list”) where the historical volatility of our common stock was evaluated based upon market comparisons; and the (2) “Up-list Scenario” where our estimated volatility is based on evaluating the average historical volatility of a group of peer companies that are publicly traded after we up-listed to the NYSE American. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The fair market value of common stock is determined by reference to the quoted market price of our common stock. We have elected to recognize forfeitures as they occur and to recognize stock-based compensation cost on a straight-line basis over the total requisite service period for awards with graded vesting. We classify stock-based compensation cost on our consolidated statements of operations in the same manner in which the award recipient’s cash compensation cost is classified. Recently Issued Accounting Pronouncements Note 2, Summary of Significant Accounting Policies, in our accompanying consolidated financial statements appearing elsewhere in this Annual Report includes Recently Issued Accounting Pronouncements. 46 Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. Item 8. Financial Statements and Supplementary Data All information required by this item is listed in the Index to Financial Statements in Part IV, Item 15(a)(1) of this Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.