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Acquisitions

12 Months Ended

Dec. 31, 2019

3. Acquisitions

The Company uses the acquisition method of accounting, which is based on ASC, Business Combinations (Topic 805), and uses the fair value concepts which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.

2019 Acquisitions

TheStreet, Inc. – On June 11, 2019, the Company, TST Acquisition Co., Inc., a Delaware corporation (“TSTAC”), a newly-formed indirect wholly owned subsidiary of the Company, and TheStreet, entered into an agreement and plan of merger, as amended (the “TheStreet Merger Agreement”), pursuant to which TSTAC merged with and into TheStreet, with TheStreet continuing as the surviving corporation in the merger and as a wholly owned subsidiary of the Company (“TheStreet Merger”). TheStreet Merger Agreement provided that all issued and outstanding shares of common stock of TheStreet would be exchanged for an aggregate of $16,500,000 in cash. Pursuant to the terms of TheStreet Merger Agreement, on June 10, 2019, the Company deposited $16,500,000 into an escrow account pursuant to an escrow agreement.

On August 7, 2019, the Company acquired all of the outstanding shares of TheStreet for total cash consideration of $16,500,000, pursuant to TheStreet Merger Agreement. The results of operation of the acquired business and the estimated fair market values of the assets acquired and liabilities assumed have been included in the consolidated financial statements as of the acquisition date. TheStreet’s addition to the Company’s premium media coalition highlights its strategic growth and adds a flagship to the portfolio of major media brands. The Company acquired TheStreet to enhance the user’s experience by increasing content through the Company’s industry-leading technology, distribution and monetization platform. TheStreet is a digital financial media company that provides reporting on investment trends and analysis and operates a network of 27 premium content channels that act as an open community for writers, explorers, knowledge seekers and conversation starters to connect in an interactive and informative online space. In connection with TheStreet Merger, the Company entered into an arrangement with a co-founder to continue certain services (further details are provided under the heading Cramer Digital, Inc. Agreement in Note 25). TheStreet operates primarily in the United States.

The Company funded the cash consideration pursuant to TheStreet Merger from the net proceeds from the 12% Senior Secured Note financing (as described in Note 18).

The Company incurred $199,630 in transaction costs related to the acquisition, which primarily consisted of banking, legal, accounting and valuation-related expenses. The acquisition related expenses were recorded within general and administrative expense on the consolidated statements of operations.

The purchase price allocation resulted in the following amounts being allocated to the assets acquired and liabilities assumed at the closing date of the acquisition based upon their respective fair values as summarized below:

Accounts receivable	$	1,586,031
Prepaid expenses		1,697,347
Restricted cash		500,000
Other current assets		53,001
Other long-term assets		689,512
Property and equipment		718,475
Operating right-of-use assets		1,395,474
Developed technology		4,388,104
Trade name		2,580,000
Subscriber relationships		2,150,000
Advertiser relationships		2,240,000
Database		1,140,000
Goodwill		8,815,090
Accounts payable		(1,313,223	)
Accrued expenses		(1,129,009	)
Other current liabilities		(373,836	)
Unearned revenues		(6,242,335	)
Operating lease liabilities		(2,394,631	)
Net assets acquired	$	16,500,000

The Company utilized an independent appraisal, as well as other available market data, to assist in the determination of the fair values of the assets acquired and liabilities assumed, which required certain significant management assumptions and estimates. The fair value of the intangible assets were determined as follows: developed technology was determined under the cost approach with a useful life of three years (3.0 years); trade name was determined using the relief from royalty method of the income approach with a useful life of twenty years (20.0 years); subscriber relationships and advertising relationships were determined using the multi-period excess earnings method of the income approach with a useful life of eight and four tenths years (8.4 years) and nine and four tenths years (9.4 years), respectively; and data base was determined using the replacement cost method of the cost approach with a useful life of fifteen years (15.0 years). The weighted-average useful life for the intangible assets is eight and six tenths years (8.6 years). The fair value of the unearned revenues was determined with the following inputs: (1) projection of when deferred revenue will be earned; (2) expense necessary to fulfill the subscriptions; (3) gross up of the fulfillment costs to include a market participant level of profitability; (4) slight premium to the fulfillment-costs plus a reasonable profit metric; and (5) reduce projected future cash flows to present value using an appropriate discount rate.

The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents goodwill from the acquisition. Goodwill is recorded as a non-current asset that is not amortized but is subject to an annual review for impairment. The Company believes the factors that contributed to goodwill include the acquisition of a talented workforce that expands the Company’s expertise and synergies that are specific to the Company’s consolidated business and not available to market participants.

Licensing Agreement with ABG-SI LLC – On June 14, 2019, the Company and ABG, a Delaware limited liability company and indirect wholly owned subsidiary of Authentic Brands Group, entered into the Sports Illustrated Licensing Agreement, pursuant to which the Company has the exclusive right and license in the United States, Canada, Mexico, United Kingdom, Republic of Ireland, Australia, and New Zealand to operate the Sports Illustrated media business (in the English and Spanish languages), including to (i) operate the digital and print editions of Sports Illustrated (including all special interest issues and the swimsuit issue) and Sports Illustrated for Kids, (ii) develop new digital media channels under the Sports Illustrated brands, and (iii) operate certain related businesses, including without limitation, special interest publications, video channels, bookazines and the licensing and/or syndication of certain products and content under the Sports Illustrated brand (collectively, the “Sports Illustrated Licensed Brands”).

The initial term of the Sports Illustrated Licensing Agreement commenced on October 4, 2019 upon the termination of the Meredith License Agreement (as defined below) and continues through December 31, 2029. We have the option, subject to certain conditions, to renew the term of the Sports Illustrated Licensing Agreement for nine consecutive renewal terms of 10 years each (collectively with the initial term, the “Term”), for a total of 100 years. The Sports Illustrated Licensing Agreement provides that we will pay to ABG annual royalties in respect of each year of the Term based on gross revenues (“Royalties”) with guaranteed minimum annual amounts. On the execution of the Sports Illustrated Licensing Agreement, the Company prepaid ABG $45,000,000 against future Royalties upon (see Note 5). In addition, ABG will pay to the Company a share of revenues relating to certain Sports Illustrated business lines not licensed to the Company, such as all gambling-related advertising and monetization, events, and commerce. The Company funded the prepaid Royalties from the net proceeds from the 12% Senior Secured Notes financing (as described in Note 18). The Company entered into the Licensing Agreement as part of its growth strategy to serve as a cornerstone of vertical content.

Pursuant to a publicly announced agreement, dated May 24, 2019, between ABG and Meredith, Meredith previously operated the Sports Illustrated Licensed Brands under license from ABG (the “Meredith License Agreement”). On October 3, 2019, Maven and Meredith entered into a Transition Services Agreement and an Outsourcing Agreement (collectively, the “Transition Agreement”), whereby the parties agreed to the terms and conditions under which Meredith continued to operate certain aspects of the business, and provide certain services during the fourth quarter of 2019 as all activities were transitioned over to Maven. Through these agreements, Maven took over operating control of the Sports Illustrated Licensed Brands, and the Transition Agreement was terminated.

In connection with the Sports Illustrated Licensing Agreement, the Company issued ABG warrants to acquire common stock of the Company (the “ABG Warrants”) for performance of future services (see Note 21).

As consideration for entering into the Licensing Agreement, the Company agreed to retain the responsibility and lead the negotiations with Meredith to provide for the transfer of the Sports Illustrated Licensed Brands from Meredith, including an arrangement where Meredith retains responsibility for producing and distributing the physical publications Sports Illustrated and Sports Illustrated for Kids (the “Magazines”) and subscriber marketing, as well as to retain responsibility for paying the deferred subscription revenue, described in the Sports Illustrated Licensing Agreement, as the total liability to subscribers to fulfill unfulfilled subscriptions to the print and electronic editions of the Magazines, accrued as of October 4, 2019, and the obligation to issue to each subscriber requesting a refund in connection therewith the amount of such liability owing to that subscriber. No cash was paid to ABG in connection with the Sports Illustrated Licensing Agreement.

The Company concluded that the Sports Illustrated Licensing Agreement entered into to conduct the licensed brands was an asset acquisition in accordance with ASC 805, Business Combinations, Subtopic 50, Related Issues (ASC 805-50), as substantially all of the fair value of the gross assets acquired by the Company is concentrated in a group of similar identifiable assets. All direct acquisition related costs of $331,026 are assigned to the assets in relation to the relative fair value of the acquired assets and recorded as part of the consideration transferred.

In accordance with the above guidance, the fair value of the assets acquired and liabilities assumed at the effective date of the acquisition based upon their respective fair values are summarized below:

Accounts receivable	$	337,481
Prepaid expenses		1,534,922
Subscriber relationships		71,308,799
Other current liabilities		(632,056	)
Unearned revenues		(47,249,470	)
Subscription refund liability		(5,427,523	)
Deferred tax liabilities		(19,541,127	)
Net assets acquired	$	331,026

The Company utilized an independent appraisal, as well as other available market data, to assist in the determination of the fair values of the assets acquired and liabilities assumed, which required certain significant management assumptions and estimates. The fair value of the intangible asset was determined by an independent appraisal in accordance with ASC 805-50 by allocating the fair value of an assumed liability to the individual assets acquired based on their relative fair values, with the fair value of the assumed liabilities (or unearned revenues and subscription refund liability) assigned to the subscriber relationships asset as the subscribers are sufficiently similar and can be valued together as a single identifiable asset acquired. The fair value of the unearned revenues was determined with the following inputs: (1) projection of when deferred revenue will be earned; (2) expense necessary to fulfill the subscriptions; (3) gross up of the fulfillment costs to include a market participant level of profitability; (4) slight premium to the fulfillment-costs plus a reasonable profit metric; and (5) reduce projected future cash flows to present value using an appropriate discount rate. The fair value of the subscription refund liability was established based upon the historical return rates for specific products. The subscriber relationships (the customer-based intangible assets) useful life was determined by establishing the average term of the issues served taking into account expected subscription renewals, which is five years (5 years).

The Company concluded and recognized deferred tax liabilities, consistent with the guidance for an asset acquisition, at the Licensing Agreement effective date in accordance with ASC 740, Income Taxes, based on the difference between the book and tax basis of the assets acquired calculated under the simultaneous equation model using the initial measurement guidance in accordance with ASC 805.

Supplemental Pro Forma Information

The following table summarizes the results of operations of TheStreet from the date of TheStreet Merger included in the consolidated results of operations and the unaudited pro forma results of operations of the combined entity had the date of the acquisition been January 1, 2018:

	Revenue			Net Income (Loss)
From TheStreet Merger date until December 31, 2019	$	7,857,587		$	538,339
Combined entity supplemental pro forma from January 1, 2019 to December 31, 2019 (unaudited):
TheStreet	$	16,218,388		$	(14,498,524	)
Maven		45,485,723			(39,039,708	)
Adjustments		2,494,667			6,409,464
Total supplemental pro forma from January 1, 2019 to December 31, 2019	$	64,198,778		$	(47,128,768	)
Combined entity supplemental pro forma from January 1, 2018 to December 31, 2018 (unaudited):
TheStreet	$	27,511,107		$	(3,131,639	)
Maven		5,700,199			(26,067,883	)
Adjustments		(4,858,046	)		(8,847,598	)
Total supplemental pro forma from January 1, 2018 to December 31, 2018	$	28,353,260		$	(38,047,120	)

The following summarizes earnings per common share of the combined entity had the date of TheStreet Merger been January 1, 2018:

	Supplemental Pro Forma from January 1, 2019 to December 31, 2019 (unaudited)			Supplemental Pro Forma from January 1, 2018 to December 31, 2018 (unaudited)
Net income (loss)	$	(47,128,768	)	$	(38,047,120	)
Net income (loss) per common share – basic and diluted	$	(1.27	)	$	(1.46	)
Weighted average number of common shares outstanding – basic and diluted		37,080,784			26,128,796

The information presented above is for illustrative purposes only and is not necessarily indicative of results that would have been achieved if the acquisition had occurred as of the beginning of the Company’s 2018 reporting period.

The adjustments to the supplemental pro forma revenue for the years ended December 31, 2019 and 2018 represent the estimated adjustment to decrease the assumed deferred revenue obligation to a fair value at the acquisition date of approximately $6.24 million, representing a reduction from the carrying value of approximately $5.30 million. The fair value was determined based on the cost to fulfill the remaining subscription obligations plus a reasonable profit margin. For the year ended December 31, 2019, the adjustment of $2,494,667 reflects an increase in revenue representing the pro forma revenue as if the fair value adjustment would have occurred in the 2018 reporting period. For the year ended December 31, 2018, the adjustment of $4,858,046 reflects a decrease in revenue representing the pro forma revenue that would have been recognized to record the revenue based on the fair value of the assumed deferred revenue obligation during the reporting period.

For the year ended December 31, 2019, supplemental pro forma net income adjustment of $6,409,464 related to the following: (1) elimination of the acquisition related costs and nonrecurring transaction costs of $5,579,762; (2) recording of interest expense and related debt issuance cost amortization of $1,245,534; (3) recording of depreciation and amortization expense of the acquired fixed assets and intangible assets of $419,431; and (4) adjustment of $2,494,667 for an increase in revenue representing the pro forma revenue as if the fair value adjustment would have occurred in the 2018. For the year ended December 31, 2018, supplemental pro forma net loss adjustment of $8,847,598 related to the following: (1) recording of interest expense and related debt issuance cost amortization of $2,811,321; (2) recording of depreciation and amortization expense of the acquired fixed assets and intangible assets of $1,178,231; and (3) adjustment of $4,858,046 for a decrease in revenue representing the pro forma revenue that would have been recognized to record the revenue based on the fair value of the assumed deferred revenue obligation during the reporting period.

2018 Acquisitions

For the 2018 acquisitions, the Maven was considered the accounting acquirer and HubPages and Say Media merged with Maven’s wholly owned subsidiary HPAC and SMAC (both a further described below), respectively. The consolidated financial statements of Maven for the period prior to the mergers are considered to be the historical financial statements of the Company.

HubPages, Inc. – On March 13, 2018, the Company and HubPages, together with HP Acquisition Co, Inc. (“HPAC”), a wholly owned subsidiary of the Company incorporated in Delaware on March 13, 2018 in order to facilitate the acquisition of HubPages by the Company, entered into an Agreement and Plan of Merger (the “Agreement and Plan of Merger”), and as amended by the Amendment to Agreement and Plan of Merger, dated April 25, 2018 (the “First Amendment”), the Second Amendment to Agreement and Plan of Merger, dated June 1, 2018 (the “Second Amendment”), the Third Amendment to Agreement and Plan of Merger, dated May 31, 2019 (the “Third Amendment”), and the Fourth Amendment to Agreement and Plan of Merger, dated December 15, 2020 (the “Fourth Amendment” and, collectively with the Agreement and Plan of Merger, the First Amount, the Second Amendment, and the Third Amendment, the “HubPages Merger Agreement”), pursuant to which HPAC merged with and into HubPages, with HubPages continuing as the surviving corporation in the merger and as a wholly owned subsidiary of the Company (the “HubPages Merger”). The parties also agreed, among other things, that on or before June 15, 2018, the Company would (i) pay directly to counsel for HubPages the legal fees and expenses incurred by HubPages in connection with the transactions contemplated by the HubPages Merger Agreement as of the date of such payment (the “Counsel Payment”); and (ii) deposit into escrow the sum of (x) $5,000,000 minus (y) the amount of the Counsel Payment. On June 15, 2018, the Company made the requisite payment of $5,000,000 under the HubPages Merger Agreement.

On August 23, 2018, the Company acquired all the outstanding shares of HubPages for total cash consideration of $10,569,904, pursuant to the HubPages Merger. The results of operation of the acquired business and the estimated fair market values of the assets acquired and liabilities assumed have been included in the consolidated financial statements as of the acquisition date. The Company acquired HubPages to enhance the user’s experience by increasing content. HubPages is a digital media company that operates a network of 27 premium content channels that act as an open community for writers, explorers, knowledge seekers and conversation starters to connect in an interactive and informative online space. HubPages operates in the United States.

The Company paid cash consideration of $10,000,000 to the stockholders and holders of vested options of HubPages, including a $5,000,000 deposit paid on June 15, 2018, as well as additional cash consideration of $569,904, which consists of legal fees and costs incurred by HubPages, for total cash consideration of $10,569,904. The Company also issued a total of 2,399,997 shares of the Company’s common stock, subject to vesting and a true-up provision (as described in Note 20), to certain key personnel of HubPages who agreed to continue their employment with HubPages subsequent to the closing of the transaction. The shares issued are for post combination services (see Note 20).

The Company incurred $218,981 in transaction costs related to the acquisition, which primarily consisted of banking, legal, accounting and valuation-related expenses. The acquisition related expenses were recorded in general and administrative expenses on the consolidated statements of operations.

Cash	$	1,537,308
Current assets		50,788
Accounts receivable and unbilled receivables		1,033,080
Other assets		25,812
Developed technology		6,740,000
Trade name		268,000
Goodwill		1,857,663
Current liabilities		(851,114	)
Deferred tax liability		(91,633	)
Net assets acquired	$	10,569,904

The Company funded the closing of the HubPages Merger from the net proceeds from the Series H Preferred Stock financing (as described in Note 19).

The fair value of the intangible assets was determined as follows: developed technology was determined under the income approach; and trade name was determined by employing the relief from royalty approach. The useful life for the intangible assets is five years.

Say Media, Inc. – On October 12, 2018, the Company, Say Media, SM Acquisition Co., Inc. (“SMAC”), a Delaware corporation, which is a wholly owned subsidiary of the Company incorporated on September 6, 2018 to facilitate a merger, and Matt Sanchez, solely in his capacity as a representative of the Say Media security holders, entered into an Agreement and Plan of Merger, which was amended October 17, 2018, (collectively, the “Say Media Merger Agreements”), pursuant to which SMAC merged with and into Say Media, with Say Media continuing as the surviving corporation in the merger as a wholly owned subsidiary of the Company (the “Say Media Merger”).

On December 12, 2018, the Company acquired all the outstanding shares of Say Media, for total consideration of $12,257,022, pursuant to the Say Media Merger Agreements. The results of operation of the acquired business and the estimated fair market values of the assets acquired and liabilities assumed have been included in the consolidated financial statements as of the acquisition date. The Company acquired Say Media to enhance the user’s experience by increasing content. Say Media is a digital media company that enables brand advertisers to engage today’s social media consumer through rich advertising experiences across its network of web properties. Its corporate headquarters is located in San Francisco, California. Say Media operates in the United States and has subsidiaries located in the United Kingdom, Canada, and Australia.

In connection with the consummation of the Say Media Merger, total cash consideration of $9,537,397 was paid, including the following: (1) $6,703,653 to a creditor of Say Media; (2) $250,000 transaction bonus to a designated employee of Say Media; (3) $2,078,498 advanced prior to the closing for the execution payments in connection with the acquisition (certain promissory notes treated as advance against purchase price, see Note 22); and (4) $505,246 for legal fees ($450,000 was advanced for acquisition related legal fees of Say Media paid on August 27, 2018 (certain amount of the promissory notes treated as advance against purchase price, see Note 22) and additional cash consideration of $55,246 was paid at the closing for acquisition related legal fees incurred). Pursuant to the Say Media Merger Agreements, the Company agreed to issue 5,500,002 (825,000 held in escrow to be released in two equal tranches over next two years) shares of its common stock at the common stock trading price at the acquisition date of $0.35 (total common shares to be issued of 3,878,287, refer to Note 20 for additional information) to the former holders of Say Media’s preferred stock. Subsequent to the consummation of the Say Media Merger, the Company also issued a total of 2,000,000 restricted stock awards to acquire shares of the Company’s common stock to key personnel for continuing services with Say Media, subject to vesting, and repurchase rights under certain circumstances (see Note 20). The shares issued are for post combination services (see Note 20). The composition of the purchase price is as follows:

Cash	$	9,537,397
Issued shares of common stock		1,636,251
Indemnity shares of common stock		288,750
Net settlement of preexisting relationship		552,314
Noncompete agreement		242,310
Total purchase consideration	$	12,257,022

In connection with the Say Media Merger Agreements, the Company entered into a noncompete agreement with a certain former executive, whereby the Company will be obligated to pay such executive $416,378 at the end on the restrictive non-competition period of two year (2 years). The Company recorded the fair value of the noncompete agreement of $242,310 at the date of the Say Media Merger classified as other long-term liability on the consolidated balance sheets. The noncompete agreement is collateralized by a note receivable from the certain former executive (as further described below).

The Company incurred $479,289 in transaction costs related to the acquisition, which primarily consisted of banking, legal, accounting and valuation-related expenses. The acquisition related expenses were recorded in general and administrative expense on the consolidated statement of operations.

The Company funded the closing of the Say Media Merger from the net proceeds from the 10% OID Convertible Debenture and 12% Convertible Debenture financings (as described in Note 17).

Cash	$	534,637
Accounts receivable and unbilled receivables		4,624,455
Prepaid expenses		172,648
Note receivable		41,638
Fixed assets		11,392
Other assets		65,333
Developed technology		8,010,000
Trade name		480,000
Noncompete agreement		480,000
Goodwill		5,466,624
Accounts payable		(3,618,112	)
Accrued expenses		(1,470,749	)
Contract liabilities		(513,336	)
Other liabilities		(2,027,508	)
Net assets acquired	$	12,257,022

In connection with the Say Media Merger, the Company acquired a note receivable dated May 29, 2015 of $416,378 from a certain former executive, bearing interest of 1.53% compounded annually and due May 29, 2024, whereby the Company agreed to deem all amounts due under the note following the restrictive non-competition period of two years as paid providing the certain former executive does not violate the noncompete agreement. The Company recorded the fair value of the note receivable of $41,638 at the date of the Say Media Merger within other long-term assets on the consolidated balance sheets.

The fair value of the intangible assets was determined as follows: developed technology was determined under the income approach; tradename was determined by employing the relief from royalty approach; and noncompete was determined under the with and without approach. The weighted-average useful life for the intangible assets is four-and-three-quarter years (4.75 years).