| Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Principles
of Consolidation The
accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) and include the financial statements of The Arena Group and its wholly owned subsidiaries,
Arena Media, Arena Platform, TheStreet, The Spun and Parade. Intercompany balances and transactions have been eliminated in consolidation. Use
of Estimates The
preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make certain estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of
the date of the consolidated financial statements and the reported results of operations during the reporting period. Significant estimates
include: reserves for bad debt; capitalization of platform development and associated useful lives; goodwill and other acquired intangible
assets and associated useful lives; assumptions used in accruals for potential liabilities; revenue recognition and estimates of standalone
selling price of performance obligations for revenue contracts with multiple performance obligations; stock-based compensation and the
determination of the fair value; valuation allowances for deferred tax assets and uncertain tax positions; accounting for business combinations;
and assumptions used to calculate contingent liabilities. These estimates are based on information available as of the date of the consolidated
financial statements; therefore, actual results could differ from management’s estimates. Risks
and Uncertainties The
Company’s business and operations are sensitive to general business and economic conditions in the United States and worldwide.
These conditions include short-term and long-term interest rates, inflation, fluctuations in debt and equity capital markets and the
general condition of the United States and world economy. A host of factors beyond the Company’s control could cause fluctuations
in these conditions. Adverse developments in these general business and economic conditions could have a material adverse effect on the
Company’s financial condition and the results of its operations. In
addition, the Company will compete with many companies that currently have extensive and well-funded projects, marketing and sales operations
as well as extensive human capital. The Company may be unable to compete successfully against these companies. The Company’s industry
is characterized by rapid changes in technology and market demands. As a result, the Company’s products, services, or expertise
may become obsolete or unmarketable. The Company’s future success will depend on its ability to adapt to technological advances,
anticipate customer and market demands, and enhance its current technology under development. Uncertainty
in the global economy presents significant risks to the Company’s business. Increases in inflation, rising interest rates,
instability in the global banking system, geopolitical factors, including the ongoing conflicts in Ukraine and Israel and the
responses thereto, and the remaining effects of the COVID-19 pandemic may have an adverse effect on the Company’s business.
While the Company is closely monitoring the impact of the current macroeconomic conditions on all aspects of its business, the
ultimate extent of the impact on its 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 the Company’s control and could exist for an
extended period of time. As a result, the Company is subject to continuing risks and uncertainties. Effective
December 1, 2023, B. Riley FBR, Inc. (“B. Riley FBR”), a registered broker-dealer owned by B. Riley Financial, Inc., a diversified
publicly traded financial services company (“B. Riley”) that was instrumental in providing investment banking services to
the Company and in raising debt and equity capital for the Company, and Renew Group Private Limited (“Renew”) entered into
agreement where Renew purchased $ 110,691
in aggregate principal amount of the notes outstanding
with B. Riley, including the 2023 Notes (as described in Note 18), Senior Secured Notes, Delayed Draw Term Notes and 2022 Bridge Notes
(as described in Note 19), which constitute all of the notes outstanding with B. Riley and also assumed the role of agent under the Note
Purchase Agreement, as further described in Note 26. The indirect owner of Renew also has an indirect non-controlling interest in Simplify
Inventions, LLC (“Simplify”), a principal stockholder (as further described in Note 26). Segment
Reporting The
Company operates in one reportable segment which focuses on a publishing platform. The Company’s business offerings have similar
operating characteristics and similar long-term operating performance, including the types of customers, nature of product or services,
distribution methods and regulatory environment. The chief operating decision maker (the “CODM”) of the Company reviews specific
financial and operational data and other key metrics to make resource allocation decisions and assesses performance by review of profit
and loss information on a consolidated basis. The CODM does not review specific financial or operational data on a disaggregated basis
or by aggregating operating segments into one reportable segment. The consolidated financial statements reflect the financial results
of the Company’s one reportable segment. Revenue
Recognition In
accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers The
following is a description of the principal activities from which the Company generates revenue: Advertising
Revenue Digital
Advertising – Advertising
revenue that is comprised of fees charged for the placement of advertising, on the Company’s flagship website, TheStreet.com,
Print
Advertising – Subscription
Revenue Digital
Subscriptions Subscription
revenue generated from the Company’s flagship website TheStreet.com Print
Revenue Print
revenue includes magazine subscriptions and single copy sales at newsstands. Print
Subscriptions – Newsstand
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. Nature
of Performance Obligations At
contract inception, the Company assesses the obligations promised in its contracts with customers and identifies a performance obligation
for each promise to transfer a good or service or bundle that is distinct. To identify the performance obligations, the Company considers
all the promises in the contract, whether explicitly stated or implied based on customary business practices. For a contract that has
more than one performance obligation, the Company allocates the total contract consideration to each distinct performance obligation
on a relative standalone selling price basis. Revenue is recognized when, or as, the performance obligations are satisfied, and control
is transferred to the customer. Digital
Advertising Print
Advertising – Digital
Subscriptions Print
Subscriptions Newsstand
Licensing
and Syndication – Timing
of Satisfaction of Performance Obligations Point-in-Time
Performance Obligations – Over-Time
Performance Obligations – For
performance obligations related to digital advertising, the Company satisfies its performance obligations on some flat-fee digital advertising
placements over time using a time-elapsed output method. Determining
a measure of progress requires management to make judgments that affect the timing of revenue recognized. The Company has determined
that the above method provides a faithful depiction of the transfer of goods or services to the customer. For performance obligations
recognized using a time-elapsed output method, the Company’s efforts are expended evenly throughout the period. Performance
obligations related to subscriptions to premium content on the digital media channels provides access for a given period of time, which
is generally one year. The Company recognizes revenue from each membership subscription over time based on a daily calculation of revenue
during the reporting period. Transaction
Price and Amounts Allocated to Performance Obligations Determining
the Transaction Price – Subscription
revenue generated from the flagship website TheStreet.com The
Company typically does not offer any type of variable consideration in standard magazine subscription contracts. For these contracts,
the transaction price is fixed upon establishment of the contract that contains the final terms of the sale including description, quantity
and price of each subscription purchased. Therefore, the Company does not estimate variable consideration or perform a constraint analysis
for these contracts. A
right of return exists for newsstand contracts. The Company has sufficient historical data to estimate the final amount of returns and
reduces the transaction price at contract inception for the expected return reserve. There
is no variable consideration related to functional licenses. Estimating
Standalone-Selling Prices – Measuring
Obligations for Returns and Refunds As
of December 31, 2023 and 2022, a subscription refund liability of $ 449 845 Contract
Modifications The
Company occasionally enters into amendments to previously executed contracts that constitute contract modifications. The Company assesses
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 (further details are provided under the headings Contract Balances
Subscription Acquisition Costs Disaggregation
of Revenue The
following table provides information about disaggregated revenue by category, geographical market and timing of revenue recognition: Schedule
of Disaggregation of Revenue
2023 2022
Years Ended December 31,
2023 2022
Revenue by category:
Digital revenue
Digital advertising $ 135,376 $ 109,317
Digital subscriptions 12,764 21,156
Licensing and syndication revenue 18,482 18,173
Other digital revenue 5,384 1,166
Total digital revenue 172,006 149,812
Print revenue
Print advertising 9,881 10,214
Print subscriptions 62,316 60,909
Total print revenue 72,197 71,123
Total revenue $ 244,203 $ 220,935
Revenue by geographical market:
United States $ 234,012 $ 218,110
Other 10,191 2,825
Total revenue $ 244,203 $ 220,935
Revenue by timing of recognition:
At point in time $ 231,439 $ 199,779
Over time 12,764 21,156
Total revenue $ 244,203 $ 220,935 Cost
of Revenue Cost
of revenue represents the cost of providing the Company’s digital media channels and advertising and membership services. The cost
of revenue that the Company has incurred in the periods presented primarily include: Publisher Partner guarantees and revenue share payments;
amortization of developed technology and platform development; royalty fees; hosting and bandwidth and software license fees; printing
and distribution costs; payroll and related expenses for customer support, technology maintenance; fees paid for data analytics and to
other outside service providers; and stock-based compensation of related personnel (as described in Note 22). Contract
Balances The
timing of the Company’s performance under its various contracts often differs from the timing of the customer’s payment,
which results in the recognition of a contract asset or a contract liability. A contract asset is recognized when a good or service is
transferred to a customer and the Company does not have the contractual right to bill for the related performance obligations. An asset
is recognized when certain costs incurred to obtain a contract meet the capitalization criteria (further details are provided under the
heading Subscription Acquisition Costs The
following table provides information about contract balances: Schedule
of Contract with Customer, Asset and Liability
2023 2022
As of December 31,
2023 2022
Unearned revenue (short-term contract liabilities):
Digital revenue $ 14,397 $ 18,571
Print revenue 45,389 40,132
Total short-term contract
liabilities $ 59,786 $ 58,703
Unearned revenue (long-term contract liabilities):
Digital revenue $ 542 $ 1,118
Print revenue 10,137 18,583
Total long-term contract
liabilities $ 10,679 $ 19,701 Unearned
Revenue 68,985 During
January 2020, February 2020 and December 2021, the Company modified certain digital and print subscription contracts that prospectively
changed the frequency of the related issues (or magazines) required to be delivered on a yearly basis (the “Contract Modifications”).
The Company determined that the remaining digital content and magazines to be delivered are distinct from the digital content or magazines
already provided under the original contract. As a result, the Company in effect established a new contract that included only the remaining
digital content or magazines. Accordingly, the Company allocated the remaining performance obligations in the contracts as consideration
from the original contract that has not yet been recognized as revenue. For the years ended December 31, 2023 and 2022, the Company recognized
revenue of $ 554 2,986 Cash,
Cash Equivalents, and Restricted Cash The
Company maintains cash, cash equivalents, and restricted cash at banks where amounts on deposit may exceed the Federal Deposit Insurance
Corporation limit during the year. Cash and cash equivalents represent cash and highly liquid investments with an original contractual
maturity at the date of purchase of three months. As of December 31, 2023 and 2022, cash and cash equivalents consist primarily of checking,
savings deposits and money market accounts. These deposits exceeded federally insured limits. The Company has not experienced any losses
in such accounts and believes it is not exposed to significant credit risk regarding its cash and cash equivalents. The
following table reconciles total cash, cash equivalents, and restricted cash: Schedule
of Cash and Restricted Cash
2023 2022
As of December 31,
2023 2022
Cash and cash equivalents $ 9,284 $ 13,871
Restricted cash - 502
Total cash, cash equivalents, and restricted cash $ 9,284 $ 14,373 As
of December 31, 2023 and 2022, the Company had restricted cash of $ 0 502 Accounts
Receivable and Allowance for Doubtful Accounts The
Company receives payments from advertising customers based upon contractual payment terms; accounts receivable is recorded when the right
to consideration becomes unconditional and are generally collected within 90 days. The Company generally receives payments from digital
and print subscription customers at the time of sign up for each subscription; accounts receivable from merchant credit card processors
are recorded when the right to consideration becomes unconditional and are generally collected weekly. Accounts receivable have been
reduced by an allowance for doubtful accounts. The Company maintains the allowance for estimated losses resulting from the inability
of the Company’s customers to make required payments. The allowance represents the current estimate of lifetime expected credit
losses over the remaining duration of existing accounts receivable considering current market conditions and supportable forecasts when
appropriate. The estimate is a result of the Company’s ongoing evaluation of collectability, customer creditworthiness, historical
levels of credit losses, and future expectations. Accounts receivable are written off when deemed uncollectible and collection of the
receivable is no longer being actively pursued. Accounts receivable as of December 31, 2023 and 2022 of $ 44,811 33,950 The
following table summarizes the allowance for doubtful accounts activity: Schedule
of Allowance For Doubtful Accounts
2023 2022
Years Ended of December 31,
2023 2022
Allowance for doubtful accounts beginning of year $ 2,236 $ 1,578
Additions 315 658
Deductions - write-offs (1,570 ) -
Allowance for doubtful accounts end of year $ 981 $ 2,236 Subscription
Acquisition Costs Subscription
acquisition costs include the incremental costs of obtaining a contract with a customer, paid to external parties, if the Company
expects to recover those costs. The Company has determined that sales commissions paid on all third party agent sales of
subscriptions are direct and incremental costs of obtaining a contract with a customer and, therefore, meet the capitalization
criteria. The Company has elected to apply the practical expedient to amortize these costs at the portfolio level. The sales
commissions paid to third party agents are amortized as the magazines are sent to the subscriber on an issue-by-issue basis. The
Company determined that commissions paid for subscriber renewal contracts to all third party agents are not from a specifically
anticipated future contract, therefore, the commissions paid on renewals are amortized as the magazines are sent to the subscriber
over the renewal term on an issue-by-issue basis. Direct mail costs for renewal subscriptions are expensed as incurred since they do
not meet the capitalization criteria. Amortization
of subscription acquisition costs of $ 38,112 37,190 The
Contract Modifications resulted in subscription acquisition costs to be recognized on a prospective basis in the same proportion as the
revenue that has not yet been recognized. The
current portion of the subscription acquisition costs as of December 31, 2023 and 2022 was $ 29,706 25,931 7,215 14,133 29,706 7,215 Concentrations Significant
Customers Revenue from significant customers
as a percentage of the Company’s total revenue represent approximately 10.0% 13.9 Significant
Vendors Significant
accounts payable balances as a percentage of the Company’s total accounts payable represent 12.2 14.1 Leases The
Company has lease arrangements for its offices. Leases are recorded as an operating lease right-of-use assets and
operating lease liabilities on the consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on
the consolidated balance sheets. At inception, the Company determines whether an arrangement that provides control over the use of an
asset is a lease. When it is reasonably certain that the Company will exercise the renewal period, the Company includes the impact of
the renewal in the lease term for purposes of determining total future lease payments. Rent expense is recognized on a straight-line
basis over the lease term. Property
and Equipment Property
and equipment is stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred. Gains and
losses from disposition of property and equipment are included on the consolidated statements of operations when realized.
Depreciation and amortization are provided using the straight-line method over the following estimated useful lives: Schedule
of Depreciation and Amortization, Useful Lives of Assets
Office equipment and computers 1 3
Furniture and fixtures 1 5 Platform
Development The
Company capitalizes platform development costs for internal use when planning and design efforts are successfully completed, and development
is ready to commence. The Company places capitalized platform development assets into service and commences amortization when the applicable
project or asset is substantially complete and ready for its intended use. Once placed into service, the Company capitalizes qualifying
costs of specified upgrades or enhancements to capitalized platform development assets when the upgrade or enhancement will result in
new or additional functionality. The
Company capitalizes internal labor costs, including payroll-based and stock-based compensation, benefits and payroll taxes, that are
incurred for certain capitalized platform development projects related to the Platform. The Company’s 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. Platform
development costs are amortized on a straight-line basis over three years, which is the estimated useful life of the related asset and
is recorded in cost of revenue on the consolidated statements of operations. Business
Combinations The
Company accounts 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 the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets
acquired and liabilities assumed at the acquisition date, the Company’s estimates are inherently uncertain and subject to refinement.
As a result, during the measurement period, the Company records adjustments to the assets acquired and liabilities assumed, with the
corresponding offset to goodwill to the extent the Company identifies 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, the Company identifies acquisition-related contingent payments and determines 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. The Company expenses transaction costs related
to the acquisition as incurred. Intangible
Assets Intangible
assets with finite lives, consisting of developed technology and trade names, are amortized using the straight-line method over the estimated
economic lives of the assets. A finite lived intangible asset is tested for recoverability whenever events or changes in circumstances
indicate that its carrying amount may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future
cash flows resulting from the use of the asset and its eventual disposition. Intangible assets with an indefinite useful life are not
amortized. Long-Lived
Assets The
Company periodically evaluates the carrying value of long-lived assets to be held and used when events or circumstances warrant such
a review. The carrying value of a long-lived asset to be held and used is considered impaired when the anticipated separately identifiable
undiscounted cash flows from such an asset are less than the carrying value of the asset. In that event, a loss is recognized based on
the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily by reference
to the anticipated cash flows discounted at a rate commensurate with the risk involved. 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. The Company operates as one
reporting unit, therefore, the impairment test is performed at the consolidated entity level. Recoverability of goodwill is determined
by comparing the fair value of Company’s reporting unit to the carrying value of the underlying net assets in the reporting unit.
If the fair value of the reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired,
and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value
of the reporting unit and the fair value of its other assets and liabilities. Debt
Costs Debt
costs consist of cash and noncash consideration paid to lenders and third parties with respect to debt and other financing transactions,
including legal fees and placement fees. Such costs are deferred and amortized over the term of the related debt. Upon the settlement
of debt the pro rata portion of any related unamortized debt costs are charged to operations. Additional
consideration in the form of warrants and other derivative financial instruments issued to lenders are accounted for at fair value utilizing
information determined by consultants with the Company’s independent valuation firm. The fair value of warrants and derivatives
are recorded as a reduction to the carrying amount of the related debt and amortized to interest expense over the term of such debt,
with the initial offsetting entries recorded as a liability on the balance sheet. Upon the settlement of the debt the pro rata portion
of any related unamortized debt cost is charged to operations. Liquidated
Damages The
Company incurred liquidated damages when: (i) a registration rights agreement provides for damages if the Company does not register the
shares of the Company’s common stock within the requisite time frame (the “Registration Rights Damages”), which, in
general, provides for a cash payment equal to 1.0% per month of the amount invested, on a daily pro rata basis for any portion of a month,
as partial liquidated damages per month, upon the occurrence of certain events, up to a maximum amount of 6.0% of the aggregate amount
invested, subject to interest at the rate of 1.0% per month until paid in full; and (ii) a securities purchase agreement provides for
damages if the Company fails for any reason to satisfy a public information requirement within the requisite time frame with the Securities
and Exchange Commission (“SEC”) (the “Public Information Failure Damages”), which, in general, provides for a
cash payment equal to 1.0% of the aggregate amount invested for each 30-day period, or pro rata portion thereof, as partial liquidated
damages per month, up to a maximum of 6 months, subject to interest at the rate of 1.0% per month until paid in full. Selling
and Marketing Selling
and marketing expenses consist of compensation, employee benefits and stock-based compensation of selling and marketing, account management
support teams, as well as commissions, travel, trade show sponsorships and events, conferences and advertising costs. The Company’s
advertising expenses relate to direct-mail costs for magazine subscription acquisition efforts, and print and digital advertising that
are expensed when an advertisement takes place. During the years ended December 31, 2023 and 2022, the Company incurred advertising expenses
of $ 4,372 5,987 General
and Administrative General
and administrative expenses consist primarily of payroll for executive personnel, technology personnel incurred in developing conceptual
formulation and determination of existence of needed technology, and administrative personnel along with any related payroll costs; professional
services, including accounting, legal and insurance; facilities costs; conferences; other general corporate expenses; and stock-based
compensation of related personnel. Derivative
Financial Instruments The
Company accounts for freestanding contracts that are settleable in the Company’s equity securities, including the put option
on the Company’s common stock, to be designated as an equity instrument, generally as a liability. A contract so
designated is carried at fair value on the consolidated balance sheets, with any changes in fair value recorded as a gain or loss
on the consolidated statements of operations, with no impact on cash flows. At
the date of settlement of a freestanding equity contract, the pro rata fair value of the related liability is transferred to additional
paid-in capital. Fair
Value of Financial Instruments The
authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed
in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair
value measurements, is also required. Level
1 Level
2 Level
3 The
Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the
lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company
performs an analysis of the assets and liabilities at each reporting period end. The
carrying amount of the Company’s financial instruments comprising of cash, restricted cash, accounts receivable, accounts payable
and accrued expenses and other approximate fair value because of the short-term maturity of these instruments. Preferred
Stock Preferred
stock (the “Preferred Stock”) (as described in Note 20) is reported as a mezzanine obligation between liabilities and stockholders’
deficiency. If it becomes probable that the Preferred Stock will become redeemable, the Company will re-measure the Preferred Stock by
adjusting the carrying value to the redemption value of the Preferred Stock assuming each balance sheet date is a redemption date. Stock-Based
Compensation The
Company provides 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 year ended December 31, 2022) (further details are provided under the headings Publisher Partner
Warrants New Publisher Partner Warrants ABG Warrants The
Company 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
in the Company’s 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 stock 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 the Company’s 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 the Company’s independ |
