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Balance Sheet Components | 3 Months Ended
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Mar. 31, 2022
Accounting Policies [Abstract] |
Balance Sheet Components |
1. | Summary of Significant Accounting Policies
Basis of Presentation The condensed consolidated financial statements include the accounts of The Arena Group Holdings, Inc. (formerly known as TheMaven, Inc.) and its wholly owned subsidiaries (“The Arena Group” or the “Company”), after eliminating all significant intercompany balances and transactions. The Company does not have any off-balance sheet arrangements. The Company changed its corporate name to The Arena Group Holdings, Inc. from TheMaven, Inc. on February 8, 2022. The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements, which are included in The Arena Group’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on April 1, 2022. The condensed consolidated financial statements as of March 31, 2022, and for the three months ended March 31, 2022 and 2021, are unaudited but, in management’s opinion, include all adjustments necessary for a fair presentation of the results of interim periods. All such adjustments are of a normal recurring nature. The year-end condensed consolidated balance sheet as of December 31, 2021, was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire fiscal year. The Company’s impact during the first quarter of 2022 by the novel coronavirus (“COVID-19”) pandemic has been to a lesser extent than in 2021. With the initial onset of COVID-19, the Company faced significant change in its 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. Given that the Sports Illustrated media business relies on sporting events to generate content and comprises a material portion of the Company’s revenues, the 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 is widely known to have occurred in the Unites States and elsewhere during the 2020 calendar year and, to a lesser extent, during the 2021 calendar year. Future widespread shutdowns of in-person economic activity could have a material impact on the Company’s business. As a result of the Company’s advertising revenue declining in early 2021 caused by the widespread cancellations of sporting events, the Company is vulnerable to a risk of loss in the near term and it is at least reasonably possible that events or circumstances may occur that could cause an impact in the near term, that depend on the actions taken to prevent the further spread of COVID-19. The Company operates in one reportable segment. Reverse Stock Split The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give effect to the reverse stock split for all periods presented that was effective on February 9, 2022. The shares of common stock retained a par value of $0.01 per share. Accordingly, stockholders’ deficiency reflects the reverse stock split by reclassifying from “common stock” to “additional paid-in capital” in an amount equal to the par value of the decreased shares resulting from the reverse stock split. Any fractional shares that would otherwise be issued as a result of the reverse stock split were rounded up to the nearest whole share. Use of Estimates Preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, the Company evaluates its estimates, including those related to the allowance for credit losses, fair values of financial instruments, capitalization of platform development, intangible assets and goodwill, useful lives of intangible assets and property and equipment, income taxes, fair value of assets acquired and liabilities assumed in the business acquisitions, determination of the fair value of stock-based compensation and valuation of derivatives liabilities and contingent liabilities, among others. The Company bases its estimates on assumptions, both historical and forward looking, that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Recently Adopted Accounting Standards In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which updates various codification topics to simplify the accounting guidance for certain financial instruments with characteristics of liabilities and equity, with a specific focus on convertible instruments and the derivative scope exception for contracts in an entity’s own equity and amends the diluted EPS computation for these instruments. On January 1, 2022, the Company adopted ASU 2020-06 with no material impact to its condensed consolidated financial position, results of operations or cash flows. In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, a consensus of the Emerging Issues Task Force (EITF), to provide explicit guidance on accounting by issuers for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange. On January 1, 2022, the Company adopted ASU 2021-04 with no material impact to its condensed consolidated financial position, results of operations, cash flows or disclosures. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an acquirer to account for revenue contracts acquired in a business combination in accordance with Topic 606 as if it had originated the contracts. The acquirer may assess how the acquiree applied Topic 606 to determine what to record for the acquired contracts. This update should lead to recognition and measurement consistent with what’s reported in the acquiree’s financial statements, provided that the acquiree prepared financial statements in accordance with GAAP. The new standard marks a change from current GAAP, under which assets and liabilities acquired in a business combination, including contract assets and contract liabilities arising from revenue contracts, are generally recognized at fair value at the acquisition date. On January 1, 2022, the Company adopted ASU 2021-08 with no material impact to its condensed financial position, results of operations or cash flows. This new accounting standard will be applied prospectively to business combinations. Loss per Common Share Basic loss per share is computed using the weighted average number of common shares outstanding during the period and excludes any dilutive effects of common stock equivalent shares, such as stock options, restricted stock, and warrants. All restricted stock awards are considered outstanding but are included in the computation of basic loss per common share only when the underlying restrictions expire, the shares are no longer forfeitable, and are thus vested. All restricted stock units are included in the computation of basic loss per common share only when the underlying restrictions expire, the shares are no longer forfeitable, and are thus vested. Contingently issuable shares are included in basic loss per common share only when there are no circumstances under which those shares would not be issued. Diluted loss per common share is computed using the weighted average number of common shares outstanding and common stock equivalent shares outstanding during the period using the treasury stock method. The Company excluded the outstanding securities summarized below (capitalized terms are described herein), which entitle the holders thereof to acquire shares of the Company’s common stock, from its calculation of net loss per common share, as their effect would have been anti-dilutive. Common stock equivalent shares are excluded from the diluted calculations when a net loss is incurred as they would be anti-dilutive. Schedule of Net Income (Loss) Per Common Share
|  | 2022 |  |  | 2021 |
|  | As of March 31, |
|  | 2022 |  |  | 2021 |
Series G convertible preferred stock |  |  | 8,582 |  |  |  | 8,582 |
Series H Preferred Stock |  |  | 2,004,971 |  |  |  | 2,699,312 |
Restricted Stock Awards |  |  | 194,806 |  |  |  | 14,394 |
Financing Warrants |  |  | 116,118 |  |  |  | 131,003 |
ABG Warrants |  |  | 999,540 |  |  |  | 999,540 |
AllHipHop warrants |  |  | 5,681 |  |  |  | 5,681 |
Publisher Partner Warrants |  |  | 26,893 |  |  |  | 35,889 |
2016 Plan |  |  | 286,151 |  |  |  | 321,761 |
2019 Plan |  |  | 6,326,538 |  |  |  | 7,179,349 |
Outside Options |  |  | 138,637 |  |  |  | 138,637 |
Total |  |  | 10,107,917 |  |  |  | 11,534,148 |
2. | Balance Sheet Components
The components of certain balance sheet amounts are as follows: Accounts Receivable – Accounts receivable are presented net of allowance for doubtful accounts. The allowance for doubtful accounts as of March 31, 2022 and December 31, 2021 was $1,578. Subscription Acquisition Costs – As of March 31, 2022 and December 31, 2021, subscription acquisition costs were $32,247 (short-term of $24,940 and long-term of $7,307) and $38,397 (short-term of $30,162 and long-term of $8,235), respectively. Subscription acquisition costs as of March 31, 2022 presented as current assets of $24,940 are expected to be amortized over a one year period, or through March 31, 2023 and $7,307 presented as long-term assets are expected to be amortized after the one year period ending March 31, 2023. Property and Equipment – Property and equipment are summarized as follows: Schedule of Property and Equipment
|  | March 31, 2022 |  |  | December 31, 2021 |
|  | As of |
|  | March 31, 2022 |  |  | December 31, 2021 |
Office equipment and computers |  | $ | 1,407 |  |  | $ | 1,341 |
Furniture and fixtures |  |  | 1 |  |  |  | 1 |
Gross property and equipment |  |  | 1,408 |  |  |  | 1,342 |
Less accumulated depreciation and amortization |  |  | (815 | ) |  |  | (706 | )
Net property and equipment |  | $ | 593 |  |  | $ | 636 |
Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was $114 and $110, respectively. Platform Development – Platform development costs are summarized as follows: Summary of Platform Development Costs
|  | March 31, 2022 |  |  | December 31, 2021 |
|  | As of |
|  | March 31, 2022 |  |  | December 31, 2021 |
Platform development |  | $ | 16,699 |  |  | $ | 21,997 |
Less accumulated amortization |  |  | (6,686 | ) |  |  | (12,698 | )
Net platform development |  | $ | 10,013 |  |  | $ | 9,299 |
A summary of platform development activity for the three months ended March 31, 2022 is as follows: Summary of Platform Development Cost Activity
Platform development beginning of period |  | $ | 21,997 |
Payroll-based costs capitalized |  |  | 1,582 |
Less dispositions |  |  | (7,356 | )
Total capitalized costs |  |  | 16,223 |
Stock-based compensation |  |  | 687 |
Impairments |  |  | (211 | )
Platform development end of period |  | $ | 16,699 |
Amortization expense for the three months ended March 31, 2022 and 2021, was $1,344 and $1,069, respectively. Amortization expense for platform development is included in cost of revenues on the condensed consolidated statements of operations. For the three months ended March 31, 2022 and 2021, impairment charges of $211 and $0, respectively, have been record for platform development. Intangible Assets – Intangible assets subject to amortization consisted of the following: Schedule of Intangible Assets Subjects to Amortization
|  | As of March 31, 2022 |  |  | As of December 31, 2021 |
|  | Carrying Amount |  |  | Accumulated Amortization |  |  | Net Carrying Amount |  |  | Carrying Amount |  |  | Accumulated Amortization |  |  | Net Carrying Amount |
Developed technology |  | $ | 17,333 |  |  | $ | (12,214 | ) |  | $ | 5,119 |  |  | $ | 17,579 |  |  | $ | (11,465 | ) |  | $ | 6,114 |
Trade name |  |  | 3,328 |  |  |  | (851 | ) |  |  | 2,477 |  |  |  | 3,328 |  |  |  | (782 | ) |  |  | 2,546 |
Brand name |  |  | 5,175 |  |  |  | (427 | ) |  |  | 4,748 |  |  |  | 5,175 |  |  |  | (298 | ) |  |  | 4,877 |
Subscriber relationships |  |  | 73,459 |  |  |  | (36,252 | ) |  |  | 37,207 |  |  |  | 73,459 |  |  |  | (32,623 | ) |  |  | 40,836 |
Advertiser relationships |  |  | 2,240 |  |  |  | (629 | ) |  |  | 1,611 |  |  |  | 2,240 |  |  |  | (570 | ) |  |  | 1,670 |
Database |  |  | 2,397 |  |  |  | (1,304 | ) |  |  | 1,093 |  |  |  | 2,397 |  |  |  | (1,104 | ) |  |  | 1,293 |
Subtotal amortizable intangible assets |  |  | 103,932 |  |  |  | (51,677 | ) |  |  | 52,255 |  |  |  | 104,178 |  |  |  | (46,842 | ) |  |  | 57,336 |
Website domain name |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 20 |  |  |  | - |  |  |  | 20 |
Total intangible assets |  | $ | 103,932 |  |  | $ | (51,677 | ) |  | $ | 52,255 |  |  | $ | 104,198 |  |  | $ | (46,842 | ) |  | $ | 57,356 |
Amortization expense for the three months ended March 31, 2022 and 2021 was $5,055 and $4,951, respectively, of which amortization expense for developed technology of $967 and $1,098, respectively, is included in cost of revenues on the condensed consolidated statements of operations. For the three months ended March 31, 2022 and 2021, impairment charges of $46 and $0, respectively, have been recorded for the intangible assets.

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