The following discussion and analysis of our financial condition and results of operations for the three months endedMarch 31, 2021 and 2020 should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report and in conjunction with the audited consolidated financial statements and notes thereto for the year endedDecember 31, 2020 included in the Company's Annual Report on Form 10-K filed with theSEC onAugust 16, 2021 . The following discussion contains "forward-looking statements" that reflect our future plans, estimates, beliefs and expected performance. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors, including those set forth above. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary from actual results and the differences can be material. Please see "Forward-Looking Statements." Overview We operate a best-in-class technology platform empowering premium publishers who impact, inform, educate and entertain. We operate a significant portion of the media businesses for Sports Illustrated ("Sports Illustrated"), own and operateTheStreet, Inc. (the "TheStreet"), and power more than 250 independent brands. The Maven technology platform (the "Maven Platform") provides digital publishing, distribution, and monetization capabilities for the Sports Illustrated and TheStreet businesses as well as a coalition of independent, professionally managed, online media publishers (each a "Publisher Partner"). Each Publisher Partner joins the media-coalition by invitation-only and is drawn from premium media brands and independent publishing businesses. Publisher Partners publish content and oversee an online community for their respective sites, leveraging our proprietary technology platform to engage the collective audiences within a single network. Generally, Publisher Partners are independently owned, strategic partners who receive a share of revenue from the interaction with their content. When they join, we believe Publisher Partners will benefit from the proprietary technology of the Maven Platform, techniques and relationships. Advertising revenue may improve due to the scale we have achieved by combining all Publisher Partners onto a single platform and a large and experienced sales organization. They may also benefit from our membership marketing and management systems, which we believe will enhance their revenue. Additionally, we believe the lead brand within each vertical creates a halo benefit for all Publisher Partners in the vertical while each of them adds to the breadth and quality of content. While they benefit from these critical performance improvements they also may save substantially in costs of technology, infrastructure, advertising sales, and member marketing and management. 22 Our growth strategy is to continue to expand by adding new premium publishers with high quality brands and content either as independent Publisher Partners or by acquiring publishers as owned and operated entities. By adding premium content brands, we will further expand the scale of the Maven Platform, improve monetization effectiveness in both advertising and subscription revenues, and enhance the attractiveness to consumers and advertisers.
Liquidity and Capital Resources
As ofMarch 31, 2021 , our principal sources of liquidity consisted of cash of approximately$4.5 million . As of the issuance date of our accompanying condensed consolidated financial statements for the three months endedMarch 31, 2021 , we had also raised funds from the issuance of common stock of approximately$20.0 million , in addition to the use of additional proceeds from our working capital facility with FastPay, all of which are discussed in greater detail below in the section entitled "Future Liquidity." During the three months endedMarch 31, 2021 , we continued to be focused on growing our existing operations and seeking accretive and complementary strategic acquisitions as part of our growth strategy. We believed, that with additional sources of liquidity and the ability to raise additional capital or incur additional indebtedness to supplement our then internal projections, we would be able to execute our growth plan and finance our working capital requirements.
We have financed our working capital requirements since inception through
issuances of equity securities and various debt financings. Our working capital
deficit as of
As of March 31, 2021 December 31, 2020 Current assets$ 71,709,304 $ 73,846,465
Current liabilities (115,605,281 ) (107,562,825 ) Working capital deficit (43,895,977 )
(33,716,360 ) As ofMarch 31, 2021 , we had a working capital deficit of approximately$43.9 million , as compared to approximately$33.7 million as ofDecember 31, 2020 , consisting of approximately$71.7 million in total current assets and approximately$115.6 million in total current liabilities. Included in current assets as ofMarch 31, 2021 was approximately$0.5 million of restricted cash. Also included in our working capital deficit are non-cash current liabilities, consisting of approximately$1.8 million of warrant derivative liabilities, leaving a working capital deficit that requires cash payments of approximately$42.6 million . Our cash flows during the three months endedMarch 31, 2021 and 2020 consisted of the following: Three Months Ended March 31, 2021 2020 Net cash used in operating activities$ (1,511,242 ) $ (10,153,653 ) Net cash used in investing activities (965,492 ) (2,028,294 ) Net cash (used in) provided by financing activities (2,032,404 )
11,246,433
Net decrease in cash, cash equivalents, and restricted cash$ (4,509,138 ) $ (935,514 ) Cash, cash equivalents, and restricted cash, end of period$ 5,025,543 $ 8,537,576 For the three months endedMarch 31, 2021 , net cash used in operating activities was approximately$1.5 million , consisting primarily of: approximately$38.0 million of cash received from customers (including payments received in advance of performance obligations); less (i) approximately$39.2 million of cash paid (a) to employees, Publisher Partners, expert contributors, suppliers, and vendors, and (b) for revenue share arrangements and professional services; and (ii) approximately$0.3 million of cash paid for interest; as compared to the year endedMarch 31, 2020 , where net cash used in operating activities was approximately$10.2 million , consisting primarily of: approximately$29.2 million of cash received from customers (including payments received in advance of performance obligations); less (y) approximately$39.1 million of cash paid (a) to employees, Publisher Partners, suppliers, and vendors, and (b) for revenue share arrangements, advance of royalty fees and professional services; and (z) approximately$0.2 million of cash paid for interest. 23 For the three months endedMarch 31, 2021 , net cash used in investing activities was approximately$1.0 million , consisting primarily of: (i) approximately$0.1 million for property and equipment; and (ii) approximately$0.9 million for capitalized costs for our Maven Platform; as compared to the three months endedMarch 31, 2020 , where net cash used in investing activities was approximately$2.0 million consisting primarily of: (x) approximately$0.3 million for the acquisition of a business; (y) approximately$0.9 million for property and equipment; and (z) approximately$0.9 million for capitalized costs for our Maven Platform. For the three months endedMarch 31, 2021 , net cash used by financing activities was approximately$2.0 million , consisting primarily of: (i) approximately$1.8 million from repayment under our line of credit; and (ii) approximately$0.3 million in payments of restricted stock liabilities; as compared to the three months endedMarch 31, 2020 , where net cash provided by financing activities was approximately$11.2 million , consisting primarily of: (x) approximately$6.0 million in net proceeds from the Delayed Draw Term Note; (y) approximately$5.4 million from borrowing under our line of credit; and less (z) approximately$0.2 million in payments for tax withholdings on the net settlement of share awards. Future Liquidity FromApril 1, 2021 to the issuance date of our accompanying consolidated financial statements for the three months endedMarch 31, 2021 , we continued to incur operating losses and negative cash flow from operating and investing activities. We raised approximately$20.0 million in net proceeds duringMay 2021 pursuant to the sale and issuances of shares of our common stock in a private placement offering. Our cash balance as of the date our accompanying consolidated financial statements for the three months endedMarch 31, 2021 were issued or were available to be issued was approximately$6.8 million . 24 Results of Operations
Three Months Ended
Three Months Ended March 31, 2021 versus 2020 2021 2020 $ Change % Change Revenue$ 33,615,481 $ 30,412,853 $ 3,202,628 10.5 % Cost of revenue 28,208,372 26,738,833 1,469,539 5.5 % Gross profit 5,407,109 3,674,020 1,733,089 47.2 % Operating expenses Selling and marketing 17,528,709 9,359,938 8,168,771 87.3 % General and administrative 5,638,830 10,410,205 (4,771,375 ) -45.8 % Depreciation and amortization 3,963,234 4,096,680 (133,446 ) -3.3 % Total operating expenses 27,130,773 23,866,823 3,263,950 13.7 % Loss from operations (21,723,664 ) (20,192,803 ) (1,530,861 ) 7.6 % Total other (expense) (3,739,641 ) (2,583,821 ) (1,155,820 ) 44.7 % Loss before income taxes (25,463,305 ) (22,776,624 ) (2,686,681 ) 11.8 % Income taxes - - - 0.0 % Net loss$ (25,463,305 ) $ (22,776,624 ) $ (2,686,681 ) 11.8 % Basic and diluted net loss per common share $ (0.11 )$ (0.59 ) $ 0.48 -81.4 % Weighted average number of common shares outstanding - basic and diluted 230,033,140 38,643,277 191,122,262 495.3 % For the three months endedMarch 31, 2021 , the total net loss was approximately$25.5 million . The total net loss increased by approximately$2.7 million as compared to the three months endedMarch 31, 2020 , which had a net loss of approximately$22.8 million . The primary reasons for the increase in the total net loss is that our operations continued to expand during the three months endedMarch 31, 2021 . The basic and diluted net loss per common share for the three months endedMarch 31, 2021 of$0.11 decreased from$0.59 for the three months endedMarch 31, 2020 , primarily because of our net loss per common share decreased along with the increase of the daily weighted average shares outstanding to 230,033,140 shares from 38,643,277 shares. Our growth strategy is principally focused on adding new publisher partners to our Maven Platform. In addition, if the right opportunity exists, we would consider also acquiring related online media, publishing and technology businesses by merger or acquisition transactions. This combined growth strategy expanded the scale of unique users interacting on our Maven Platform with increased revenues during the three months endedMarch 31, 2021 . We expect revenues increases in subsequent periods will come from organic growth in operations, addition of more publisher partners, and mergers and acquisitions. 25 Revenue
The following table sets forth revenue, cost of revenue, and gross profit:
Three Months Ended March 31, 2021 versus 2020 2021 2020 Change % Change (percentage reflect cost of revenue as a percentage of total revenue) Revenue$ 33,615,481 100.0 %$ 30,412,853 100.0 %$ 3,202,628 10.5 % Cost of revenue 28,208,372 83.9 % 26,738,833 87.9 % 1,469,539 5.5 % Gross profit$ 5,407,109 16.1 %$ 3,674,020 12.1 %$ 1,733,089 47.2 % For the three months endedMarch 31, 2021 we had revenue of approximately$33.6 million , as compared to revenue of approximately$30.4 million for the three months endedMarch 31, 2020 . The following table sets forth revenue by product line and the corresponding percent of total revenue: Three Months Ended March 31, 2021 versus 2020 2021 2020 Change % Change (percentages reflect product line as a percentage of total revenue) Advertising$ 11,074,425 32.9 %$ 11,837,984 38.9 %$ (763,559 ) -2.5 % Digital subscriptions 7,084,481 21.1 % 5,537,247 18.2 % 1,547,234 5.1 % Magazine circulation 14,710,023 43.8 % 12,537,532 41.2 % 2,172,491 7.1 % Other 746,552 2.2 % 500,090 1.6 % 246,462 0.8 % Total revenue$ 33,615,481 100.0 %$ 30,412,853 100.0 %$ 3,202,628 10.5 % For the three months endedMarch 31, 2021 , the primary sources of revenue were as follows: (i) advertising of approximately$11.1 million ; (ii) digital subscriptions of approximately$7.1 million ; (iii) magazine circulation of approximately$14.7 million ; and (iv) approximately$0.8 million from other revenue. Our advertising revenue decreased by approximately$0.8 million in the three months endedMarch 31, 2021 due to decreased revenue in our legacy business. Our digital subscriptions increased by approximately$1.5 million in the three months endedMarch 31, 2021 due to additional revenue of approximately$2.5 million generated by TheStreet offset by approximately$1.0 million decrease in our Sports Illustrated media business. Our magazine circulation increased by approximately$2.2 million in the three months endedMarch 31, 2021 generated by our Sports Illustrated media business. Our other revenue increased by approximately$0.2 million in the three months endedMarch 31, 2021 due to additional revenue of approximately$0.1 million generated by our Sports Illustrated media business and approximately$0.1 million by our legacy business. Cost of Revenue For the three months endedMarch 31, 2021 and 2020, we recognized cost of revenue of approximately$28.2 million and approximately$26.7 million , respectively. The increase of approximately$1.5 million in cost of revenue during the three months endedMarch 31, 2021 is primarily from: (i) our Publisher Partner guarantees and revenue share payments of approximately$1.0 million ; (ii) payroll, stock-based compensation, and related expenses for customer support, technology maintenance, and occupancy costs of related personnel of approximately$2.6 million ; (iii) hosting, bandwidth, and software licensing fees of approximately$0.1 million ; and (iv) amortization of our Maven Platform of approximately$0.1 million ; less (y) printing, distribution, and fulfillment costs of approximately$2.2 million , and (z) other costs of revenue of approximately$0.1 million . For the three months endedMarch 31, 2021 , we capitalized costs related to our Maven Platform of approximately$1.2 million , as compared to approximately$0.6 million for the three months endedMarch 31, 2020 . For the three months endedMarch 31, 2021 , the capitalization of our Maven Platform consisted of: (i) approximately$0.9 million in payroll and related expenses, including taxes and benefits; (ii) approximately$0.3 million in stock-based compensation for related personnel, and (iii) amortization of approximately$2.2 million . 26 Operating Expenses
The following table sets forth operating expenses and the corresponding percentage of total revenue:
Three Months Ended March 31, 2021 versus 2020 2021 2020 Change % Change (percentages reflect expense as a percentage of total revenue) Selling and marketing$ 17,528,709 52.1 %$ 9,359,938 30.8 %$ 8,168,771 26.9 % General and
administrative 5,638,830 16.8 % 10,410,205 34.2 % (4,771,375 ) -15.7 % Depreciation and amortization 3,963,234 11.8 % 4,096,680 13.5 % (133,446 ) -0.4 % Total operating expenses$ 27,130,773 $ 23,866,823 $ 3,263,950 13.7 % Selling and Marketing. For the three months endedMarch 31, 2021 , we incurred selling and marketing costs of approximately$17.5 million , as compared to approximately$9.4 million for the three months endedMarch 31, 2020 . The increase in selling and marketing costs of approximately$8.2 million is primarily from payroll of selling and marketing account management support teams, along with the related benefits and stock-based compensation of approximately$2.4 million ; circulation costs of approximately$6.7 million ; less (i) advertising costs of approximately$0.5 million ; and (ii) other selling and marketing related costs of approximately$0.4 million . General and Administrative. For the three months endedMarch 31, 2021 , we incurred general and administrative costs of approximately$5.6 million from payroll and related expenses, professional services, occupancy costs, stock-based compensation of related personnel, depreciation and amortization, and other corporate expense, as compared to approximately$10.4 million for the three months endedMarch 31, 2020 . The decrease in general and administrative expenses of approximately$4.8 million is primarily from our decrease in payroll, along with the related benefits and stock-compensation of approximately$4.4 million ; facilities costs of approximately$0.2 million ; conferences costs of approximately$0.2 million ; and other general corporate expenses of approximately$0.3 million ; and an increase in professional services, including accounting, legal and insurance of approximately$0.2 million . Other (Expenses) Income
The following table sets forth other (expense) income:
Three Months Ended March 31, 2021 versus 2020 2021 2020 Change % Change (percentages reflect other expense (income) as a percentage of the total) Change in valuation of warrant derivative liabilities$ (665,036 ) 17.8 %$ 139,219 -5.4 %$ (804,255 ) 31.1 % Change in valuation of embedded derivative liabilities - 0.0 % 1,621,000 -62.7 % (1,621,000 ) 62.7 % Interest expense (2,819,971 ) 75.4 % (3,799,728 ) 147.1 % 979,757 -37.9 % Interest income - 0.0 % 1,743 -0.1 % (1,743 ) 0.1 % Liquidated damages (254,634 ) 6.8 % (546,055 ) 21.1 % 291,421 -11.3 % Total other (expense)$ (3,739,641 ) 100.0 %$ (2,583,821 ) 100.0 %$ (1,155,820 ) 44.7 % Change in Valuation of Warrant Derivative Liabilities. The change in valuation of warrant derivative liabilities for the three months endedMarch 31, 2021 was the result of the increase in the fair value of the warrant derivative liabilities as ofMarch 31, 2021 , as compared to the change in the valuation for the three months endedMarch 31, 2020 where the change was from a decrease in the fair value of the warrant derivative liabilities as ofMarch 31, 2020 . Change in Valuation of Embedded Derivative Liabilities. There was no change in valuation of embedded derivative liabilities for the three months endedMarch 31, 2021 since the underlying instrument related to the embedded derivative liabilities was settled in 2020, as compared to the change in the valuation for the three months endedMarch 31, 2020 where the change was from a decrease in the fair value of the embedded derivative liabilities as ofMarch 31, 2020 .
27 Interest Expense. We incurred interest expense of approximately$2.8 million for the three months endedMarch 31, 2021 , as compared to approximately$3.8 million for the three months endedMarch 31, 2020 . The decrease in interest expense of approximately$1.0 million is primarily from an approximately$0.9 million decrease from the amortization of debt discount on notes payable; approximately$0.2 million decrease of accrued interest; and an increase of approximately
$0.1 million of other interest. Liquidated Damages. We recorded approximately$0.3 million in liquidating damages, including the accrued interest thereon, during the three months endedMarch 31, 2021 , primarily from the issuance of our 12% Convertible Debentures, Series H Preferred Stock, Series I convertible preferred stock (the "Series I Preferred Stock"), and Series J convertible preferred stock (the "Series J Convertible") in fiscal 2020 since we determined that: (1) the registration statements registering for resale the shares of common stock issuable upon conversion of the 12% Convertible Debentures, Series H Preferred Stock, Series I Preferred Stock and Series J Preferred Stock would not be declared effective within the requisite time frame; and (2) that we would not be able to become current in our periodic filing obligations with theSEC in order to satisfy the public information requirements under the applicable securities purchase agreements. We recorded liquidated damages, including the accrued interest thereon, of approximately$0.5 million in fiscal 2020 primarily from issuance of our 12% Convertible Debentures, Series H Preferred Stock, Series I Preferred Stock and Series J Preferred Stock, which liquidated damages were based upon the reasons set forth above.
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