Arena Group Holdings, Inc.

ITEM 1A. RISK FACTORS 

There are numerous factors that affect our business and operating results, many of which are beyond our control. The risk factors described in Part I, Item IA. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 1, 2024 should be carefully considered, together with the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q and in our other filings with SEC in connection with evaluating us, our business and the forward-looking statements contained in this Quarterly Report on Form 10-Q. Additional risks and uncertainties not known to us at present, or that we currently deem immaterial, may affect us. The occurrence of any of these known or unknown risks could have a material adverse impact on our business, financial condition and results of operations. All dollar figures presented below are in thousands unless otherwise stated.

Our license agreement to operate the Sports Illustrated media business was terminated by the licensor, which may materially harm our business, operating results and financial condition.

As alleged in ABGs notice of termination, ABG claims that the Company we failed to make a quarterly payment due to ABG pursuant to the Licensing Agreement of $3,750, on January 18, 2024, ABG notified us of the termination of the Licensing Agreement, effective immediately, in accordance with its rights under the Licensing Agreement. As stated in the notice of termination, ABG believes that a fee of $45,000 became immediately due and payable by us to ABG pursuant to the terms and conditions of the Licensing Agreement. In addition, upon termination of the Licensing Agreement, all outstanding and unvested warrants to purchase shares of our common stock issued to ABG in connection with the Licensing Agreement became immediately vested and exercisable.

On March 18, 2024, ABG announced it had reached an agreement in principle with a third party to become the new operator of the Sports Illustrated media business. On April 1, 2024, ABG Group filed an action against the Company anus and Manoj Bhargava, the former interim CEO of the Company and a principal stockholder, alleging, among other things, breach of contract in the United States District Court of the Southern District of New York seeking damages in the amount of $48,750 ($3,750 royalty fee liability and $45,000 termination fee liability as reflected in current liabilities from discontinued operations). On June 7, 2024, Arenawe filed a response denying ABG Groups alleged breach of contract action and denying its obligation to pay the termination fee, and ffiled a counterclaim against ABG Group and Minute Media, Inc. alleging, among other things, unfair competition, misappropriation of trade secrets, unjust enrichment, breach of contract and tortious interference with contract. AOn August 2, 2024, ABG Group filed an amended complaint on August 1, 2024, and which we are requireresponded to respond by on August 22, 2024, with motions to dismiss due on Augu and subsequently filed counterclaims against 30, 2024ABG Group and oppositions/responses due on October 14, 2024. In addition, a Sportority, Inc. d/b/a Minute Media. A settlement conference is scheduled for SeptDecember 254, 2024.

The loss of the rights to operate the SI Business, in addition to tehe alleged and disputed termination payments that are due following termination of the Licensing Agreement, could harm our competitiveness in our industry, damage any goodwill we may have generated, and otherwise have a material adverse effect on our business, operating results and financial condition. Any subsequent rebranding efforts we may undertake may require significant resources and expenses and may affect our ability to attract and retain customers, all of which may have a material adverse effect on our business, contracts, financial condition, operating results, liquidity and prospects.

We defaulted on certain covenants included in our debt agreements that could result in the acceleration of the related debt or the exercise of other remedies.

On December 29, 2023, we failed to make the interest payment due pursuant to the Arena Note Purchase AgreeLoan Documents in the amount of $2,797, resulting the Arena Notes Defaultin a default under the Loan Documents. On January 5, 2024, we entered into the Fforbearance Agreementletter (as updated from time-to-time the forbearance letter) with Renew, the lender under the Arena Note Purchase AgreeLoan Documents, pursuant to which Renew agreed to a forbearance period through March 29, 2024, while reserving its rights and remedies. On March 27, 2024, the forbearance period was esubsequently extended through the earlier of the following: (a) o September 30, 2024; as further extended on July 12, 2024 to December 31, 2024 (as further described under the head, while reserving Arena Loan Agreement in Note 20 of the notes in our accompanying condensed consolidated financial statements), (b) the occurrence of the closing of the Business Combination and (c) the termination of the Business Combination prior to closing. its rights and remedies.

The outstanding principal on the Arena Notes was $110,691 as of December 31, 2023.

The Arena Notes Defaultdefault under the Loan Documents, as well as Arenas alleged failure to make a quarterly payment due to ABG pursuant to the Licensing Agreement, resulted in an Event of Default under the Arena Credit Agreement with SLR. On March 13, 2024, Arena entered into the Arena Loan AgreeDocuments, with Simplify which providesd for up to $25,000 of borrowings to be used for working capital and general corporate purposes. Upon the closing of the Simplify Loan (as further described in Note 102, Simplify Loan, in our accompanying condensed consolidated financial statements), Arena borrowed $7,748, of which $3,448 was used to repay the outstanding loan balance, accrued interest, certain fees and contingency reserves under the Arena Credit Agreement. On August 19, 2024, we entered into the Amended Promissory Note which increased available borrowings to $50,000 and extended the maturity date of the promissory note to December 1, 2026 (as further described in Note 12, Simplify Loan, in our accompanying condensed financial statements). On July 12, 2024, we entered into Amendment No. 3 which further deferred the accrued interest due date to December 31, 2024 (as further described under the heading Loan Documents in Note 18). On November 6, 2024, we received a letter from Renew confirming we are not currently in default under the Loan Documents due to the default identified in the forbearance letter (as further described under the heading Update to Renew Forbearance in Note 20). The inoutstanding principal on the Loan Documents was $110,691 as of September 30, 2024. The indirect owner of Renew also has an indirect non-controlling interest in Simplify.

Borrowings under the Arena Loan AgreeDocuments are secured by substantially all of our assets. Upon the terminationan event of the forbearance period under the Forbearance Agreementdefault, Renew can declare all outstanding borrowings under the Arena NoteLoan Documents, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, Simplify could declare all outstanding borrowings under the Arena Loan AgreeDocuments together with accrued and unpaid interest and fees, to be immediately due and payable and, subject to the terms of the intercreditor agreement between Renew and Simplify, foreclose on our assets. Any of these actions would have a material adverse effect on our business, financial condition, or results of operations and could lead to selling assets, cutting costs, reducing cash requirements, filing bankruptcy or ceasing operations.

The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be harmed. 

The digital media industry is fragmented and highly competitive. There are many players in the digital media market, many with greater name recognition and financial resources, which may give them a competitive advantage. The general business of online media, combined with some level or method of leveraging community attracts many potential entrants, and in the future, there may be strong competitors that will compete with us in general or in selected markets. These and other companies may be better financed and be able to develop their markets more quickly and penetrate those markets more effectively. We expect competition to intensify in the future. All of this could adversely affect our revenues and operating results.

Our financial condition raises substantial doubt about our ability to continue as a going concern through one year from the date of the issuance of the financial statements contained herein if we are unable to refinance or modctify the terms of our recurrent debt, complete the Business Combination or enter into a pce of our net lossible alternative structures or options to the transactions contemplated under the Business Combinationes and reduce our working deficit.

For the sixnine months ended JuneSeptember 30, 2024, we incurred a net loss from continuing operations of $19,6584,880, and as of JuneSeptember 30, 2024, had cash on hand of $6,0855,773 and a working capital deficit of $231,579. Ou09,596. Management has evaluated our net loss from continuing operations and working capital deficit have been evaluated by management tto determine if the significance of those conditions or events would limit our ability to meet our obligations when due. Management also evaluated our current debt (as defined in Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity , including under the Loan Documents and Capital Resources - Going Concern) and the August 2, 2024 shut down of all of the operations and layoff of substantially all of the employees of Bridge Media.

As a resultSimplify Loan. In its evaluation, management determined that substantial doubt exists about our ability to continue as a going concern for a one-year period following the date of thefinancial statement issuance of the financial statements date due to the net loss from containinued herein. We plan to roperations and working capital deficit.

Our finance or modify the terms of our current debt, complete the Business Combial results have improved in recent periods due to restructuring activities and implementation of a new operating structure. In addition, we plan to continue improving monthly fination or enter into possible alternative structures or options toncial performance through the reduction of costs and monthly cash requirements, maintain compliance with the transaerms of all outstanding debt agreements, and take actions contemplated under Business Combinationto resolve current and potential future liabilities to alleviate the conditions that raised substantial doubt about our ability to continue as a going concern. The plans to seek refinancing or modification of our current debt, complete the Business Combination or enter into possible alternative structures or options to the transactions contemplated under the Business Combination are outside of managements control, such as resolving pending litigation. However, there can be no assurance that we will be able to refinance or modify the terms of our current debt, complete the Business Combination or enter into possiexecute these plans. If we are unable alternative structures or options to the trto execute these plansactions, it contemplated under Business Combination. Our financial statemenuld lead to selling assets contained and furtherein do not include any adjustments that might result from the outcome of this uncertainty reducing costs and cash requirements.

Cyber-attacks and other security threats and disruptions could have a material adverse effect on our business.

As a tech-powered media company, we face cybersecurity threats, such as ransomware and denial-of-service, and attacks on technical infrastructure. Our customers and suppliers face similar cybersecurity threats, and a cybersecurity incident impacting us or any of these entities could materially adversely affect our operations, performance and results of operations.

The sophistication of threats continues to evolve and grow, including the risk associated with the use of emerging technologies, such as artificial intelligence and quantum computing, for nefarious purposes. In addition to cybersecurity threats, we face threats to the security of our systems and employees from terrorist acts, sabotage or other disruptions, any of which could adversely affect our business. The improper conduct of our employees or others working on behalf of us who have access to confidential or sensitive information could also adversely affect our business and reputation. Our customers (including sites that we operate for our customers) and suppliers experience similar security threats.

If we are unable to protect sensitive information, including complying with evolving information security, data protection and privacy regulations, our customers or governmental authorities could investigate the adequacy of our threat mitigation and detection processes and procedures; and could bring actions against us for noncompliance with applicable laws and regulations. Moreover, depending on the severity of an incident, our customers data, our employees data, our intellectual property (including trade secrets and research, development and engineering know-how), and other third party data (such as suppliers) could be compromised, which could adversely affect our business. Products and services we provide to customers also carry cybersecurity risks, including risks that they could be breached or fail to detect, prevent or combat attacks, which could result in losses to our customers and claims against us, and could harm our relationships with our customers and financial results.

Given the persistence, sophistication, volume and novelty of threats we face, we may not be successful in preventing or mitigating an attack that could have a material adverse effect on us and the costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means.

Our suppliers face similar security threats and an incident at one of these entities could adversely impact our business. These entities are typically outside our control and may have access to our information with varying levels of security and cybersecurity resources, expertise, safeguards and capabilities. Adversaries actively seek to exploit security and cybersecurity weaknesses in our supply chain. Breaches in our supply chain could in the future compromise our data and adversely affect customer deliverables. We also must rely on our supply chain for adequately detecting and reporting cyber incidents, which could affect our ability to report or respond to cybersecurity incidents effectively or in a timely manner. Failures by our suppliers could result in damages to you and have an adverse effect on our business and operations.

We are currently out of compliance with the continued listing standards of the NYSE American. Our failure to regain compliance with the continued listing standards may result in the delisting of our common stock.

Our common stock is listed on the NYSE American and such listing is contingent on our compliance with the NYSE Americans standards for continued listing, including requirements relating to maintaining minimum stockholders equity. On October 2, 2024, we received a notification (Letter) from the NYSE American stating that we are not in compliance with the minimum stockholders equity requirements of Sections 1003(a)(i), 1003(a)(ii) and 1003(a)(iii) of the NYSE American Company Guide (the Company Guide) requiring stockholders equity of (i) $2.0 million or more if we have reported losses from continuing operations and/or net losses in two of its three most recent fiscal years, (ii) $4.0 million or more if we have reported losses from continuing operations and/or net losses in three of the four most recent fiscal years and (iii) $6.0 million or more if we have reported losses from continuing operations and/or net losses in its five most recent fiscal years, respectively. As of June 30, 2024, we had a stockholders deficit of $157.2 million and has had losses in the most recent five fiscal years ended December 31, 2023.

As a result of this non-compliance, we became subject to the procedures and requirements set forth in Section 1009 of the Company Guide and had until November 1, 2024 to submit a plan (the Plan) of actions we have taken or will take to regain compliance with the continued listing standards by April 2, 2026, which is 18-months from receipt of the Letter (Cure Period). The Plan we submitted on November 1, 2024 is under review by the NYSE American as of the date of filing. If the NYSE American accepts the Plan, we will be able to continue our NYSE American listing during the Plan period and will be subject to periodic reviews including quarterly monitoring for compliance with the Plan until we have regained compliance. If the Plan is not accepted by the NYSE American, the Letter states that delisting proceedings will commence. We may appeal a staff delisting determination in accordance with Section 1010 and Part 12 of the Company Guide.

We intend to regain compliance and the Letter has no immediate effect on the listing or trading of our common stock on the NYSE American and if the Plan is approved and adhered to, during the Cure Period. Our receipt of the Letter from the NYSE American does not affect our business, operations or reporting requirements with the U.S. Securities and Exchange Commission.

Although we intend to regain compliance with the continued listing requirements prior to the end of the Cure Period, we may be unable to do so. If delisting proceedings are commenced, the NYSE American rules permit us to appeal a staff delisting determination; however, there can be no assurance that the outcome of any such appeal would be in our favor.

If NYSE American delists our common stock from trading on its exchange due to our failure to meet the NYSE Americans continued listing standards, we and our security holders could face significant material adverse consequences, including, but not limited to, a lack of trading market for our common stock, reduced liquidity, decreased analyst coverage of our common stock and an inability for us to obtain additional financing to fund our operations.