Discontinued Operations |
2.
Discontinued Operations
On
March 18, 2024, the Company discontinued the Sports Illustrated media business (the “SI Business”) that was operated under
the Licensing Agreement with ABG-SI, LLC (“ABG”) dated June 14, 2019 (as amended to date, the “Licensing Agreement”).
This discontinuation of the SI Business (i.e., discontinued operations) followed the termination of the Licensing Agreement by ABG on
January 18, 2024. The last date of any obligation of the Company to perform under the Licensing Agreement was March 18, 2024. In connection
with the termination, certain ABG Warrants vested (further details are provided under the heading Vesting of Warrants in Note
15).
The
table below sets forth the loss from discontinued operations:
Schedule of Discontinued Operations
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
Three
Months Ended September
30, | | |
Nine
Months Ended September
30, | |
| |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| |
($ in thousands,
except share data) | |
Revenue | |
$ | 45 | | |
$ | 26,422 | | |
$ | 22,297 | | |
$ | 74,118 | |
Cost of revenue | |
| 160 | | |
| 12,199 | | |
| 15,006 | | |
| 40,431 | |
Gross profit (loss) | |
| (115 | ) | |
| 14,223 | | |
| 7,291 | | |
| 33,687 | |
Operating expense | |
| | | |
| | | |
| | | |
| | |
Selling and marketing | |
| 140 | | |
| 12,849 | | |
| 12,142 | | |
| 37,570 | |
General
and administrative (1) | |
| 567 | | |
| 88 | | |
| 46,060 | | |
| 287 | |
Depreciation and amortization | |
| - | | |
| 3,671 | | |
| 2,401 | | |
| 11,011 | |
Loss
on impairment of assets (2) | |
| - | | |
| - | | |
| 39,391 | | |
| - | |
Total
operating expenses | |
| 707 | | |
| 16,608 | | |
| 99,994 | | |
| 48,868 | |
Loss from discontinued operations | |
| (822 | ) | |
| (2,385 | ) | |
| (92,703 | ) | |
| (15,181 | ) |
Income tax provision | |
| - | | |
| (9 | ) | |
| (6 | ) | |
| (23 | ) |
Net loss from discontinued
operations | |
$ | (822 | ) | |
$ | (2,394 | ) | |
$ | (92,709 | ) | |
$ | (15,204 | ) |
(1) |
General and administrative
expenses for the nine months ended September 30, 2024, includes a $45,000 termination fee liability. |
(2) |
Loss on impairment of assets
for the nine months ended September 30, 2024 of $39,391, includes $8,601 for the impairment of intangible assets and $30,790 for the
impairment of subscription acquisition costs. |
The
table below sets forth the major classes of assets and liabilities of the discontinued operations:
| |
September
30, 2024 | | |
December
31, 2023 | |
| |
As
of | |
| |
September
30, 2024 | | |
December
31, 2023 | |
Assets | |
| | |
| |
Accounts
receivable, net | |
$ | 528 | | |
$ | 13,135 | |
Subscription acquisition
costs, current portion | |
| - | | |
| 29,706 | |
Prepayments
and other current assets | |
| - | | |
| 807 | |
Current assets from discontinued operations | |
| 528 | | |
| 43,648 | |
Subscription acquisition
costs, net of current portion | |
| - | | |
| 7,215 | |
Acquired
and other intangibles assets, net | |
| - | | |
| 11,002 | |
Noncurrent assets from
discontinued operations | |
| - | | |
| 18,217 | |
Total assets from
discontinued operations | |
$ | 528 | | |
$ | 61,865 | |
Liabilities | |
| | | |
| | |
Accounts payable | |
$ | 1,994 | | |
$ | 2,554 | |
Accrued expenses and
other | |
| 1,927 | | |
| 1,868 | |
Subscription refund
liability | |
| 423 | | |
| 403 | |
Royalty
fee liability (1) | |
| 3,750 | | |
| - | |
Termination
fee liability (1) | |
| 45,000 | | |
| - | |
Subscription
liability, current portion | |
| 45,284 | | |
| 42,848 | |
Current liabilities
from discontinued operations | |
| 98,378 | | |
| 47,673 | |
Subscription
liability, net of current portion | |
| - | | |
| 10,137 | |
Noncurrent liabilities
from discontinued operations | |
| - | | |
| 10,137 | |
Total liabilities
from discontinued operations | |
$ | 98,378 | | |
$ | 57,810 | |
(1) |
Further details related to
the alleged and disputed royalty fee liability of $3,750 and termination fee liability of $45,000 are described under the heading ABG
Group Legal Matters in Note 19. |
The
table below sets forth the cash flows of the discontinued operations:
| |
2024 | | |
2023 | |
| |
Nine
Months Ended September
30, | |
| |
2024 | | |
2023 | |
Cash flows from operating
activities from discontinued operations | |
| | | |
| | |
Net loss
from discontinued operations | |
$ | (92,709 | ) | |
$ | (15,204 | ) |
Adjustments to reconcile
net loss to net cash used in operating activities: | |
| | | |
| | |
Amortization of intangible
assets | |
| 2,401 | | |
| 11,011 | |
Loss on impairment of
assets | |
| 39,391 | | |
| - | |
Stock-based compensation | |
| 592 | | |
| 1,861 | |
Bad debt expense | |
| 561 | | |
| - | |
Change in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable,
net | |
| 12,046 | | |
| 2,770 | |
Subscription acquisition
costs | |
| 6,131 | | |
| (1,631 | ) |
Prepayments and other
current assets | |
| 807 | | |
| 422 | |
Accounts payable | |
| 3,190 | | |
| (3,739 | ) |
Accrued expenses and
other | |
| 59 | | |
| 707 | |
Subscription refund
liability | |
| 20 | | |
| (371 | ) |
Subscription liability | |
| (7,701 | ) | |
| (276 | ) |
Termination
fee liability | |
| 45,000 | | |
| - | |
Net
cash provided by operating activities from discontinued operations | |
$ | 9,788 | | |
$ | (4,450 | ) |
Further
details regarding legal matters in connection with the discontinued operations are provided under the heading ABG Group Legal Matters
in Note 19.
|